Power Lunch - Dow jumps as investors move past tariff turmoil 02/05/25

Episode Date: February 5, 2025

Stocks are rallying, pushing the Dow and S&P 500 higher for the second day in a row, as Wall Street looks past the trade turmoil that weighed on the market earlier this week. We’ll cover all of the angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch alongside Kelly Evans. I am Brian Sullivan. Your money, hopefully moving higher again today as the big rotation rolls on. Small caps looming large and, oh boy, do we have a bevy of bottom line news for you right now, including housing and where it may be headed, why Disney may be showing the end of streaming growth and where the wealthy are investing their money. And if you can follow, there is a lot going on with all of that and big tech. Kelly. All right. Let's start there. In fact, as you mentioned, the NASDAQ Brian is close to a break-even here. But shares of AMD and Alphabet are still down about 7, 7.5% today after those earnings last night. Apple and the red as well report that Chinese regulators are considering whether to open a formal probe into app store fees.

It's a pairing its declines, though. It's down about 1%. Are these warning signs of bigger issues in the tech space? Let's ask Jeremy Bryan. He's a portfolio manager at gradient investments. And Scott Nations is president at Nations indexes. Jeremy, you got any thought. I know Apple must, Alphabet must be at least a near-term disappointment. What are you doing here with the shares? Oh, we're not selling a dime. In fact, we'd be likely to be buying more. You know, I know that there was a little bit of disappointment

with regard to the cloud spend and the cloud revenue that came in, and the Kappax number was certainly bigger than we had anticipated. I didn't think they would up Zuckerberg from 65 to even going to $75 billion. But, you know, from the side of what we're actually in this stock for, nothing changed. So from our side, this is getting a little bit cheaper. It's already been a relatively cheap stock compared to its other universe. We like this name. We're not, we're not trading to share right now. Scott, what would you add on that? Well, earnings are always important, but guidance in these AI names become just absolutely critical, because let's face it,

if you're paying for growth, you don't really care what Google did last quarter. You're all consumed with how they're going to change the world in the coming quarter. And the problem for both Google and AMD is that guidance was disappointing. For AMD, it seems that nobody is spending money, at least on data centers. So a stock that was already down 17 percent, down another 7 percent today. Google has a very different problem. Guidance was also bad. But again, 75 billion versus expectations of about 60 billion. That's a shock for Wall Street. street. And the interesting thing between these two is that AMD seems to be getting hurt because nobody is spending money. And Google is getting hurt because it's spending a ton of money.

Well, now, wait a minute. We also, Scott, have Nvidia up today. This, to me, smells a little bit more like it, Nvidia is winning and AMD is struggling at the time when there's this gold rush to, you know, big investment spend. And their shares were already down, what, 33% over the past year? Well, and the problem for NVIDIA is it's nearly in bare market territory. So maybe up a little bit today. I meant AMD. Yes, but it's still down a bunch. Right.

AMD is down, I think, you know, significantly over the past year while NVIDIA is up even today. So if that was a read-through to the whole industry, you think, well, then they're selling off. Instead, Jeremy, it seems like they're sitting in the prime position here. Yeah, I think the market's picking a winner, right? And they're saying that in video, if 75 billion is accurate, again, because these are guidance and forecasts. And we've seen this movie before, right, is that Mark Zuckerberg, during the Metaverse area, couldn't talk about enough how much CAPX they were going to spend. And then once it started to get hit into the stock, where that number changed really fast. And so those numbers

are just guidance numbers that, hey, what we could expect. Those numbers could get, if Deepseek ends up being something where there's efficiencies to be made, those numbers of CAPX numbers are going to come down pretty fast. So I think from NVIDIA, AMD point of view, I think, yeah, I think they're just picking a winner and saying AMD is not gaining share against NVIDIA. Invita is maintaining a lead, and the companies that are buying those chips are still saying they're buying them. Jeremy, everybody wants to talk about the same thing. I get it.

Invidia, big tech. It's, you know, it's sexy. It's made people a lot of money. You know what I think is unsexy is trash? But guess what? There's a lot of money in trash. The one thing I've learned, and you're going to learn a lot from your next guest as well on topic is that people get really rich by investing in stuff that other people either aren't or don't want. And you look at trash. Nobody wants to talk about it. We all produce it. Bring it up for a reason. Waste connections. This is not Nvidia. This is not Google, but it is a stock and a company that you like. How come? Exactly what you said. I think we're still going to

throw things away if we have tariffs, right? I think we're still going to throw things away if the economy starts to have a little bit of difficulty. I still think, there's going to be the necessity to pick up garbage. It's a company that has massive recurring revenue and essential and also pricing power, right? Is that if your waste company tells you they're probably going to increase by three, four percent, you might look elsewhere, but you're probably just going to end up paying it. So from that side, I think that those are the systems and the models and the companies that we want to be involved in right now are those highly recurring revenue stories. I think that there's value in just staying in those to try to

honestly to just avoid being in the noise of all the tariff, who's affected, who's not, all that. If you're finding good companies that have solid recurring revenue, you can somewhat ignore that and go through and probably still come out better on the other side. Or solid waste, whatever it may be. Jeremy Bryant of Grading Investments, Scott Nations as well, guys, really appreciate it. Thank you very much. All right. So one way to get rich is to follow what other rich people are doing with their money. And that is where Tiger 21 comes in. Now, Tiger calls itself an exclusive group of ultra high net worth, entrepreneurs, investors, and executives. But what I found, it's also a great group of people and families who've mostly built their fortunes,

one brick or one self-storage unit at a time. I was at their annual U.S. Global Exchange last week in Florida, where I gave a speech, and now on set is the founder of Tiger 21 Michael Sonna, felt with their exclusive annual look at where their members are putting their money right now. And before we get to that survey, I think my point that I was trying to make with Jeremy, I hope it's well taken, which is when I meet your great members, right? Many of them have gotten, and you yourself got rich by investing and building out Harborside in Jersey City before it was Jersey City, before it was anything.

People getting rich doing stuff that other people don't necessarily want to do, I think is just an amazing thing that we never talk about. Meat and potatoes. That's it. It's it. Yeah. And the waste that they provide. We got garbage that we got to deal.

with? It's all the basics that aren't the high value sizzle that tech has, but it really adds up. And I meet your members, and I'll say, you know, you always say, what's your name and how are you, Kelly, and all this other stuff. And then you often get into what do you do and where do you live? And all of your members from all your chapters in Dallas, the Tampa to Canada, you've got some in Dubai, Singapore, etc. A lot of them will say that they got rich by investing or starting garbage companies, self-storage companies. It is a lot of them. that kind of meat and potatoes. It's not NVIDIA. It's not super sexy, but it is really important. And it's a good way, I think, to get rich. Well, we have a lot of high-tech members as well.

Today, we're 1,600 members around the globe managing $200 billion. So these are the top entrepreneurs from all over the globe, and they've made it in technology, and they've made it in basic services, and that's what we're all about. And we're talking about how they made their money. What are they doing with it now? So we're at an amazing moment. Our asset allocation survey just out has 79% in long-only risk-on assets. Wow. Public real estate, private real estate, and private equity. The amazing thing, though, for the first time in 17 years, we're below 10% in cash. We just dipped to 9%. This had been the most constant 12% over 15 years.

So while we're risk-one and pretty exuberant, the last time we had this level of cash was right before the great financial crisis. That's where I thought this was going. I'm like, no. See, just when we're all feeling like, okay, everyone gets around to the position. And then there's no one left to get into the market, no one left to get into risk. Where do we go from here, Michael? So our members, even though it's 79 percent, a majority of that is in private assets, private real estate, just what you were talking about. It's not just self-storage.

It's every business across the globe. but it's when you can own it. Roll up your shirt sleeves, make a difference. That's where the real value is created. I mean this with affection for all of your members. I've made a lot of friends over the decade or so that I've been coming to your events. That makes me nervous.

I think to follow up on Kelly's point, when I hear 79% everybody seems excited, that's great. But when I hear the cash level is the lowest since right before the financial crisis, I'm not sure that's great. Is the exuberance to coin a phrase, irrational? So that's what makes our meeting so exciting because the majority of our members are exuberant, but many have lived through the problems we're talking about. You know, if you look at

the Russell 3,000 from last year, 46% of the companies lost money. Only the average would have been a 3% return. It's the magnificent 7 that distorted or obscured. So when you have that kind of diversion or dispersion, sometimes that's a harbinger of some concerns ahead. What else jumped out to you from kind of what's what they're doing lately? You know, obviously the areas of digital currencies remain really exciting. We have some members who are all in. It's become a gold substitute. Gold isn't an inflation hedge.

It's an instability hedge. There's a lot of instability around the world, and people think that in America, they're concerned about it. But if you live in Argentina or Lebanon or any of countries that are under risk, Bitcoin is taking on a new role. So we have about 1 to 3% of 200 billion in assets, so about 6 billion in assets in digital currencies. And regular gold, because I do a speech. I talk for about a half an hour,

and then I take questions about a half an hour. And a lot of the questions this year were about Bitcoin. They were about gold. They were about debts and deficits. I would say it's interesting that the data, the 79% number doesn't belie. There isn't underlying nervousness. And I think it's, by the way, warranted.

And if you start and build a company from scratch, as a lot of your members have, there's a natural level of nervousness, right? One of the best business books I've ever read is called Only the Paranoid Survive by Andy Grove, who founded the then-great Intel. Then-great. Well, that's a different topic. But I think it's right to be a little paranoid all the time. So gold is for traditionalists, and Bitcoin is of little new age,

but they often play the same role. They're perceived as storehouses of value that are not subject to government fiat. When you get out of that, when you have a truly global market like that, people feel like there's some real refuge there to be found. I also wonder if one of the other reasons why everyone's kind of long on risk is not just because we're max bullish, but because they've seen kind of the quiet degrading of the dollar, right? Like the only real hedge in the long run against that currency losing its value over time is to own real assets. Only working assets. Exactly. That's how you get to real estate. That's how you get to stocks. You look over a

20, 30, 50 year period like a lot of your people do. And if you don't put that in something that's going to keep up with the times, gold and Bitcoin, even, at least they can hold their purchasing power. You are going to end up with nothing the way things are going. You know, when interest rates were low, you were forced to get risk earning assets. And so there's a whole tradition now of doing that. Fortunately, rates are up a little bit. But our members are entrepreneurs. And when they have to seek refuge, it's in earning assets, not in passive assets. You know, first off, I love you coming in hot from the levy. You're like, you know, it's going to be that quiet dollar debasement. That's been going on for a few decades.

I know Kelly Evans, folks, ladies and gentlemen. No one, everyone who owns real estate goes, oh, my house didn't go up in value. It just requires a lot more dollars to buy the same piece of land now than it used to. And that's the only way to kind of keep up. I was happy until just now. You know, this guy at 25 years old, developed Harborside in Jersey City, when it was literally warehouses falling into the water, and you worked in one of the warehouses at 17 years old,

and you said, we're so close to Wall Street, why isn't this valuable? Yeah, you know. What was it like taking on that level of risk at 25 years old? I thought it was the natural order of things that I would take on the largest commercial renovation in the country for my first project. Now it would scare the bejesus out of me. Isn't that the great thing about being 25? Yeah, it was amazing.

What an exciting time. And now you look at the New Jersey Waterfront. When we did it, the first year, there was a million dollars of work done ours. Then there was $10 billion of work done. She'd get royalties. I wish. Who do I talk to about that? That damn dollar wasn't being so debased.

I don't know. Michael Zonanfeld, founder of Tiger 21. Really appreciate you. And thanks for having CNBC at these events. I don't mind going. Yeah, it's great to have you. Michael, thank you. You come next.

I was going to say I don't mind him going either. She's going to be a little busy. Okay. A lot more still to come here on Power Lunch. But first, six more weeks of a real estate winter. A troubling sign for the spring housing market, and it's not the groundhog. We'll tell you what it is next. Welcome back.

The big spring housing market season is just around the corner, and some worrying signs are emerging. Let's get to Diane Oleg for those details. Diana, what can you tell us? Well, Kelly, let's start with mortgage demand. It was mixed last week as rates didn't move very much. applications from home buyers dropped 4% compared with the previous week and was flat compared with the same week a year ago. The average rate on the 30-year fixed for conforming loans decrease a little bit to 6.97 from 7.02. That's for loans with 20% down.

That was the lowest in six weeks, but again, not a huge move, and rates have been moving in a very narrow range recently. Applications to refinance a home loan, they were up 12% for the week and 17% higher than the year before. But remember, the percentage increases are that big only because the volume itself is so, so low. Most borrowers today have rates well below what is being offered. But back to buyers, demand from them is now 39% lower than any than this time in 2019, or that is pre-pandemic. Home sales, they're running at around a 30-year low, while home prices nationally continue to hate record highs. There was a small gain in sellers offering price cuts, but it's still just under 16. of them, according to Realtor.com. Now, the supply of homes for sale is up 25% from a year ago,

but it's still 25% below those pre-pandemic levels. New listings are only up 11%. So a lot of that gain in supply is that the homes are just sitting on the market longer. The average time to sell a home at the end of January, 54 days. That is the longest since March of 2020, just when the pandemic was hitting. And that's according to Redfin. So, Kelly, I compare all this to the start of the pandemic and pre-pandemic because that was when things were normal before and still just haven't gotten back to normal yet. Diana, I'm glad you mentioned this and I've noticed something similar, although maybe you can help me understand what's going on. We still are undersupplied, but in those segments of the market that are not quite the sweet spot, maybe a little bit

pricier homes or homes that need a lot of work, they do seem to be sitting there. How can both of these things be true at the same time? Because people can't afford them. Look, it has to do with price. There may be a lot of demand out there, but if the price point is too high, you're just not going to be able to get into it. And if you look at the higher end of the market, you have homes sitting longer. You hear these stories about, oh, it was a well-priced home that was moving and then it has 15 offers and people are offering 100 or 150 over-asking price. So it's this kind of bifurcated market. If you can afford to get into it and you want to get into a pricey market, then there is supply for you. But again, for most buyers out there who are still,

you know, having to save for a down payment when their rents are high and when inflation is still high and when they're still paying for a lot, it's a very tough market to get into. All right, Diana, thanks. Appreciate it. Diane Oleg. All right, for more on housing and real estate and rates and money, let's bring in our friend Best Friedman.

She's CEO at Brown Harris Stevens. Best, great to see you during the daylight hours. Okay, I don't know if you heard our previous conversation with Michael Sonnafeld to Tiger 21, but I'm going to, just between us and Kelly, don't tell anybody, let's talk about the dirty secret of high-end real estate that nobody wants to talk about. I understand that mortgage rates matter to most people in America.

I get that. They would matter to me. But for a lot of your buyers and a lot of people in towns like where we live, they pay cash. They don't care what mortgage rates are. How has cash changed the real estate market? Yeah, first of all, Sally, it's so nice to see you and Kelly as well. But yeah, like cities like New York, it's a big cash market. And so that's not really having the same impact that the rest of the country is having because rates deeply impact them.

And there was a discussion about things getting back to normal. I'm here to tell you, Sully, that this is the new normal, that we are in a different time, that rates are going to be in the 6% range for quite some time. They may dip a little bit lower. Things are unaffordable. First-time home buyers today are now closer to 40 years old when 10 years ago they were like 28 or 20. So we have a lot of issues here. And so, yes, New York City, Miami, Palm Beach, certain parts of Connecticut, very expensive places or cash. But most of the country, most people are looking to buy their dream home, their first time home. And we have to make that a possibility again. We have failed the American people because it's become affordable. Yeah, I mean, outside of the Crocker Mansion in Ramapo, New Jersey, that you're repping, by the way, $33 million. Let's talk about things. that most people can get to.

Yeah, I look. Okay, Beth, I check these things out. Okay, I would like to live there. I know one thing about you. You are a very smart guy and always prepared. Well, thank you for that. Beth, I'm kidding. So here's the reality, though.

People are waiting. They buy a home based on the monthly payment, not on the value, right? So they don't look at the price and say, what can I afford, for the most part every month. They're waiting, they're waiting. You just said this is the new normal. So it doesn't sound like Best Friedman. who's forgotten more about real estate than a lot of us ever known, is expecting lower mortgage rates

anytime, any soon. Well, look, January was a better month. There was more activity. And I don't know. I feel like this is a whiplash environment. I don't know what's happening. Could rates go down a little bit? Could we start to see more activity? It's possible. But I will tell you this, that the progress is going to be incremental. We've been at a standstill with buyers and sellers. But I do think that it will improve. There is optimism. Bonuses are up 20 percent on Wall Street, you know, and the economy is doing well, and maybe some wars are ending, which could be a good thing. And so the American people are potentially in a very good position. So I'm pretty

bullish on housing. I just think we need to get back to a place where young people can buy their first home. That's the America that we know and love, and we need to get back to that. Bess, what does it mean for all the real estate agents, you know, the last, I remember that stat. There was at one point there were more real estate agents than like houses in the U.S. or something like that. Also, I'm looking at shares of Compass. They were down at two bucks in 20, 23, 2024. They're up at $7. I mean, they're actually having a nice run year to date. Maybe that's company specific. But I'm just trying to figure out, you know, what the trends might be here. Yeah, I mean, it's hard to say, I mean, Compass is a really big company, and they have spent a lot

of money to build what they have and acquire, and that's great. You know, they do things a little bit differently. But I think in real estate, it's always been about putting your client's interest first, about transparency, about representing them. It's an information and service business. And the real estate agents that you see on TV, Kelly, those reality shows are not reality. That's a bunch of fluff and ridiculousness. It's a clown car. What people do, what agents do, they're professionals. And they're working really hard and they only get paid for results. And so the agents that are not really working or just like on TV or doing different things aren't going to last in this business. It will take time. It's a test of insurance and persistence. Well, you don't, because to Kelly's point,

like the rules have changed in a lot of places. You don't have to pay a buyer's agent anymore, Beth. So how do you convince your team and other realtors that may be watching right now that if they're a buyer's agent, give them the pitch that they say to customers that say, listen, I'm not going to drive you around for two or three freaking months and not get paid. Listen, Sally, you know, things were misconstrued. The narrative was misconstrued. Commissions were always negotiable. And you have to show your value.

When you're working with a buyer, if you're looking to buy an apartment or whatever it is, you want to work with someone who has a knowledge about the neighborhood, the building, whatever it is, that can help you. And then they'll want to pay you. So it's up to each agent to prove that and explain it. And so I think agents that are good at what they do are having no problem. And transparency is important, and we should always be clear about what things cost. This is a good thing.

Some of them, we've put it through for years. But I always say we're not interested, but maybe we see that, we're just curious. Best, thanks. Appreciate it. Thanks for joining us today. Thank you, guys. Have a great day. You see you soon.

By the way, can you break some new? Are you and Eric, are you thinking about bidding on the Crocker Mansion in New Jersey? What's the Crocker Mansion? So it's a 46-room mansion that best represents. It's like the biggest house in New Jersey. Yeah, we'll put it in a $2 bid and see if there's, you know. Well, hey, it's a bid. It's got to cost a lot to maintain.

Maybe they're looking to offload it. Maybe it's Betty Crocker. I have somebody did something right. They were Tiger 21 members. Don't touch that remote. No channel surfing. Remember those old concepts? Well, we're going to do it for you in a new segment.

Three Stories Worth Watching is next. Welcome back. You can see we're trying to. something new. Why not? Right? And thank you very much. The stock market, I think it's fair to say, is better than any streaming show. So we wanted to do what we're going to call a little chart surfing. Chart surfing. I do like that term. All right, what's on? Will you throw that to me? There we go. Thank you. Xfinity is the service we use. All right. Disney, let's start with there. Disney beating on profit,

but a little bit of a worrying sign emerging and the stock is down one and a half percent. Here's the question, Kelly. Are consumers getting tired of having to pay? for pretty much everything. Well, I asked followers on X. Have you canceled a streaming service lately? And guess what? A couple thousand responses. Thank you.

Guess what? 70% said they have, and you should see the comments. So here's my issue. I've gone years where I canceled Disney Plus and then I resubscribe two months later. And then I canceled this and then we read. And maybe not everybody does that. But when I look at that Netflix earnings report

and they cross 300 million subscribers and they're just getting started in sports, I think this is not about streaming, capping out its market share. I think the strong are going to survive and we'll see what happens to the rest of the field. Everybody spend the weekend going through their credit card statements to see what stuff you're paying for that you don't even realize. It's unbelievable. I surrender the X-Finity. Thank you.

It is a lot. I'm used to the voice control. So Nick Jr., please. No, let's see what else is on. Eric, turn the channel. And we'll talk some eggs because it's not, by the way, this is now the target of thiefery in Pennsylvania. People are stealing eggs? stealing 100,000 eggs were stolen from Pete and Jerry's distribution trailer.

The larger story here, and I've joked, but not joked about this with Steve Leasman, is how much of an issue are the high price of eggs and a lot of food for the Federal Reserve? Right now, the needs versus wants inflation difference is crazy right now. Cal Main is an egg producer. Now, its shares are up 90% in a year because higher prices, obviously, are going to flow through. Even some of the grocers have benefited from this. Everyone can take a little bit of margin during inflation. Waffle House is now adding an egg.

surcharge. When it gets to that point, friends, I'm telling you the Federal Reserve has a messaging problem. It needs inflation is very high in this country. It's back to the Fed now. We talk about health insurance and eggs, all of these things. Okay, the price of imported apparel may be down. That's not giving consumers a real break here. Well, first off, Cal Main doesn't produce eggs. It's hardworking hens. Thank you. Yes, that's important. They're the ones doing all the work. I want to throw that out there. And listen, chop, smothered, covered, and diced. And now with a 50 cent egg, thing. I think these are the, but by the way, these are the kind of inflationary stories. Yes.

That really hit most Americans. When we talk about inflation expectations at a recent high, which they have been, this is why I seed control. Finally, we are watching a peculiar back and forth at the United States Postal Service is the world's shortest suspension ever. Last night, they suspended service incoming packages from China and Hong Kong. This morning, they unsuspended the suspension. Okay?

So we can make all kinds of post office jokes about the world's short of suspension. I could make a joke about the fact that every media organization went crazy talking about it. Well, and it didn't last. We should ask what the real story is. Why would this have moved forward seemingly and then be halted a few hours later? What's really going on here? Some industry insiders think it could hurt Amazon, Alibaba. But I think it's telling us they have a real problem to contend with.

And so however they're going to figure out what to do. The de minimis exemption is a logistical one as much as anything. right? When a package comes in, how are you going to put imposed tariffs on that? If it's just coming across the border from China, Canada, Mexico, some of these other places. So they've still, I think, got a lot of logistics to figure out. I still am amazed. There's like 50 major news organizations that wrote a story about something that lasted like 12 hours. A few hours, absolutely.

We've got some breaking news from the Fed speaking of. Let's get out to Steve Leesman. Steve, what's happening? Austin Goolsby, the Chicago Fed President Kelly, making some pointed and cautionary remarks about tariffs in a speech he's giving. in Detroit. He's saying the Fed will take into account anything that raised prices in the making a monetary policy says the Fed will be in a potentially difficult position trying to figure out if price increases are from overheating or from tariffs as the source of inflation. The latter,

the former you would not look through, the latter you might. Tariff effects, he says, could be larger and longer impacting than in 2018 because things about the economy are different, He says, because many U.S. imports, by the way, are intermediate goods, inflationary impact of tariffs could be more widespread. It's possible. He says, and this is something you guys have talked a lot about, to stack tariffs on top of tariffs. There's something that goes back and forth over the border several times.

Supply change, she says, are more fragile in the short run. And if you want to talk at the end of this about what he says about the increase and the absence of toilet paper during the pandemic, we can have that. But first, let me tell you what he says. says about tariffs and inflation. One is they can, this question is how much consumers can substitute for a product. Intermediate goods are more difficult to substitute for. Is the easy China substitution, for example, from the impact of 2018, is that gone?

And so it's harder to substitute this time around. And did companies diversify their supply chains? And then he talks about differing views from automakers that he's talking to about the possibility of passing along tariffs. So, Brian, very interesting comments, and maybe one of these days we'll talk about why there was the toilet paper apocalypse, as Gouldsby mentions it in his speech. Yeah, and I don't think it had to do with demand outpacing supply. I think demand for toilet paper remains fairly steady. Did it really? I thought, so demand went.

Yeah. How does toilet paper demand go up, Steve? Don't answer that. Don't answer that. This speech is worth reading just for that anecdote. economic anecdote. What happened is the location of the demand changed, Brian, is that people started being at home rather than in the office. And the supply of toilet paper to the office is different from the supply of toilet paper to the home. They're different grades, different

distributors, different retailers. We all should have rated the office supply. So they were in the wrong place. That would have solved it in the moment. That makes, can you spare a square, but you needed two squares because depending on where the square might be, because I was thinking physically, uses my supply, my demand area doesn't change. Right, right, exactly. But your location may change.

And he uses this whole anecdote as an explanation to be careful about tariffs because of how difficult it can be for supply change to adjust. Now I'm going to read it. Aren't we all, Steve begs? All right. Well, I guess you should. not touch that remote, or if you're watching us on CNBC Plus, your Apple TV remote. Either way, think about this during the break. Which stock is the best in that? What is the best performing Dow stock,

Kelly, in the last three months? I don't know. I don't either, but the answer's coming up. Welcome back to Power Lunch. I'm Kate Rooney with your CNBC News Update. The president of Guatemala says his country will accept migrants from other countries being deported from the U.S. came after a meeting with Secretary of State Marco Rubio during his five-country tour of Central America. As part of the deal, the U.S. will agree to foot the bill for returning deportees to their home countries once they arrive in Guatemala. French Prime Minister, Routhe, Francois Bayru, survived a no-confidence vote in Parliament today after he invoked special constitutional powers to force through the country's contentious budget for 2025. it is likely that the government will face more tests in the coming days, as Byru plans to push

through other measures on health care spending and social security. And in an unprecedented move, Fox News is adding Lara Trump to its lineup. The network announced a new weekend primetime show called My View with Laura Trump. That happened today. It will air on Saturdays at 9 p.m. Eastern guys. Kelly, back over to you. All right, Kate, thank you very much. Time now for three stock lunch where we hit three different stories and why they matter to you.

And we're highlighting three companies who we've heard from on CNBC in the past 24 hours. Scott Nations also is back with us to do our trades. He's president of nation's indexes. Scott, appreciate it. Let's start with IBM. The CEO told closing bell overtime after their investor day yesterday that AI will be a big part of its business now and in the future. And this was our mystery chart, friends, best stock in the Dow the past three months. Take a listen.

Absolutely, as our clients are facing the need for all these investments, they cut back on some discretionary labor spending. And we saw that in our business. But if I was to look at our book of business, the signings we just did, as well as what our clients are asking, it's going to be people plus AI for the next many years. That means every one of our consultant is going to be helped by an AI assistant that is doing part of their work and making them more productive

and making them faster, lowering risk for the client, and all in all, giving our client a better experience. And again, this is the one, number one on the Dow Scout, the past three months. What do you do with the name? Yeah, this is a hold, in part because of the run that we've seen up 43% over the last 52 weeks. There are some worries, despite the really nice earnings announcement that had late last month. CEO just commented on consulting. That was, is actually disappointing. And they're approaching AI differently than some of the other big names that are taking more of the deep seek approach. We're going to have to see if that works for them. That is, they're not like InVideo or Google or some of these other names. We'll have to see if

that works. And so I'm holding until we get a little bit more clarity. All right. All right. Next up is Uber Scott, the CEO telling CNBC he sees the self-driving taxi business as a trillion-dollar opportunity. Listen. I think Autonomous introduces both uncertainty and a huge opportunity for us. If we look at the U.S. market, for example, we think Autonomous alone in the U.S. can be a trillion-dollar market. And the tech is definitely getting there, but the commercialization is going to be much more challenging. Now, Uber stock right now is down after it missed earnings estimates for the fourth quarter and

issued softer than expected guidance. What is your take on Uber? technologies, Scott. Yeah, this is an accumulate, and the company is doing a really interesting partnership with Waymo. They're going to partner with Waymo in Austin now in Atlanta later this year, but results were disappointing, disappointing guidance on Q1 bookings. Their guidance is now below most of what the street thinks it should be for Q1. forward PE of over 23 means it's not particularly cheap.

They are accelerating stock repurchases. It's in the bottom half of the 52-week range. So not great news today, but that's why it is an accumulate. Accumulate. All right. Let's move along to Mattel. One of the big earnings winners and surprises last night, the shares rocketing 14%. They talked about maybe price hikes to deal with tariffs.

The CEO is also on and told Jim Kramer, they're seeing big momentum. for their brands and for IP in the entertainment space. We have great momentum in our entertainment strategy. We currently have two movies in production, Masters of the Universe and Matchbox currently in production. And this is not including the 14 other movies we are developing right now with major studios that we're already announced and more to come.

What do you do with this, Doc, Scott? I buy it if we can get it back below 20. Yes, nice, earn. earnings beat. But what really gets people interested are the stock buybacks, $600 million in 23 and 24 combined, another $600 million this year. But the trader in me just cannot buy the stock of a toy company. It's up 15% in a day. Toy company. See it's so disparagingly. It's intellectual property, Scott. Great earnings report. Congratulations, guys. Scott, thanks for joining us. Scott Nations. We appreciate it today.

On a much more serious note, the yield on the 10-year note is falling today. Wall Street trying to digest this morning's private payroll data. But what is the real state of the job market? Rick Sandtellie knows, and he's next. All right, welcome back to Power Lunch. All right, a little bit of good news, bad news going on. All right, the bad news is that the job market continues to weaken. If you're looking for a job, many of you are, it's harder and harder.

The good news, and I'm doing air quotes if you're on the radio, is that is bringing down borrowing costs. Rick Santellies in Chicago with more. Rick. Yeah, you know, what you say is absolutely true. But the issue is that especially if you look at longer maturities, well, look at all maturities, the borrowing costs were less before the Fed started easing. So even though that is correct, in today's service sector information, we see that even though all categories are still an expansion mode, meaning above 50, we see that sequentially there are issues. And tomorrow's going to be a great test of the labor market because initial claims last week were 207,000. We're getting close to very historic levels. You know, once you start

to get under 200,000, boy, you're looking at some of the better numbers going back to the 60s. So there's no doubt the labor market's cooling joltz dropped over 500,000 openings. But it's not about that it's cooling, it's about how long it's going to take before that ice cube in the glass is completely melted, and we don't know. The Fed doesn't know either. But today, well, we learned a couple of things. If you look at the first chart, this is the trade balance, which is a deficit, going back to the all-time beginning of record-keeping in 92. And that red line is COVID. Everything to the right of that red line, this is historic. The trade deficit today, $98.4 billion, Brian, was the second biggest on record.

And pre-COVID, the biggest was like a little over $60 billion. These are huge numbers. And I know that part of the recent December Reed is probably getting ready for tariffs that might not materialize. But you can't blame everything on that chart from Trump. Look at what's after that red line. That red line's March of 2020.

Now, if we move along, you could see two-day chart. I want you to concentrate on this. Every maturity today is trading below yesterday. Yesterday's low yields. That's a momentum builder. And if you look at the next chart, we're on pace in a two-year for the lowest yield close going back to the 11th of December for a 10 year, the 17th of December. So lowest yield closes of the year. So you're right, Brian, rates are going down a bit. The problem is that mortgage rates don't seem to be going down a lot. Why? Because 10-year yields are still hovering just below 4.5%. They're at 366 when the Fed started easy. Back to you. Rick, thanks. We appreciate it. Rick Santelli. Coming up, a whole new perspective. We'll get the story on a tech startup, promising football fans, an immersive game day experience for a fraction of stadium prices. And you don't have to drive there. We're back in two. Welcome back. We're just days away from Super Bowl 59 in New Orleans on Sunday. If you want to go see that, now it'll still cause a small fortune. If you can't get there in person, one company says it has a solution to make you feel like you're right on the side. lines. CNBC Media and Sports Reporter Alex Sherman is live in New Orleans with more. Hi, Alex.

Hi, Kelly. Yeah, this company, Cosm has designed venues kind of like the sphere almost in Las Vegas, but for televised viewings of events. So there's two of these already in existence. One's in Los Angeles and ones in Dallas. Two more are coming in this country in 2026 in Detroit and Atlanta. But I sat down with the CEO of Cosm and I said, look, what is the great? grand plan for this company. Take a listen to what he told me. We want to have Cosm as a brand name known globally. Wherever we are, we went from pitching this thing over Zoom and people going, what are you talking about? Right? As you can imagine, it's like, oh, it's a big dome, it's immersive, it's crazy, it's going to be. Yeah, it's so awesome.

But we've been able to get a lot of great brand recognition this year just five months after launch. I would love to see in the next three years, everyone just knows what a Cosm is. And as the market evolves, people might say, oh, that's like Cosm or when is Cosm coming to my city. So, Kelly, this is like an immersive experience. If you go to one of these venues, you feel like you're at the game. It's hard to really talk about it in words. It's a lot easier. I think if you experience it.

Jeb Terry, the CEO, told me that he's even getting calls now from Europe and other countries that want to bring these Cosm venues into their city to give fans. a unique way to watch their favorite live sports. Weird. So it's almost like going to a movie theater or something. It's like another venue. You know, I asked him, would you think about branching out beyond sports?

And he said to me, you know, this could also be a cinematic experience. So they may even move into movies and other types of broadcast entertainment. Right now there's sort of a bar that's attached to the venue. So you can get concessions. That's one way they make money. He said they're on their way to profitability.

He wouldn't really get into the specifics of how much these venues cost or exactly the finances of his company. It's still a startup. But they have raised $300 million. Appreciate it. Alex Sherman. See tomorrow.