Power Lunch - Dow Rallies, Consumer Cracks, ‘Deadpool’ & Disney 7/26/24

Episode Date: July 26, 2024

Stocks are jumping as Wall Street looks to cap off a turbulent week on a positive note, and investors weigh fresh inflation data. The Dow is up about 2%, led to the upside by 3M. But despite today’s gains, we’ve seen more than a few cracks forming in both the consumer and the broader markets. We’ll discuss what that means for you and your money. Plus, Deadpool & Wolverine’ is hitting theaters, and shattering some records along the way. We’ll discuss what this means for the box office, as well as Disney and the media giants behind the IP.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch on this Friday afternoon alongside Kelly Evans. I'm Dominic Chu. Coming up on the show, first a sell off and now a rally. It's been a volatile week for stocks, but despite today's gains, we've seen a few cracks forming in the consumer and the market overall. We'll discuss that next. And Deadpool and Wolverine hitting theaters and shattering some records along the way. We'll discuss what it means for the box office and the media giants behind the IP.

But first, a check on the markets, the Dow rallying more than 600 points right now. change from earlier this week. At one point, we were kind of pushing that 800 point mark as well. Shares of 3M and United Health Group are leading the charge on the blue chip side of things. You can see there, 3M up 20%. Kind of unheard of for a blue chip multi-billion dollar company, but United Health shares up 2.5% on their own, Kel. Incredible story for 3M there. Coinbase, another mover we're watching, up 4.5% getting a boost from a rise in Bitcoin.

And medical device maker Dexcom down a staggering, get this, 41. percent missing on its revenues and cutting guidance for the year. Kelly, those shares again, down 41 percent. Going the other way is online course provider, Coursera, surging 46 percent to nearly $11 after a revenue beat, even though it missed on earnings. So it's such a shocking twist in turn, so many earnings movers. A tale of two different stocks for sure. We're going to start today with the Fed's key inflation gauge rising from a year ago to 2.5 percent in June. All the data was in line with expectations easing the path to an interest rate cut hypothetically. For more, let's bring in Megan Shoe, the head of investment strategy with Wilmington Trust.

Megan, this is yet another data point. Is it enough, though, for the Fed to act by that market predicting September timeframe? Yeah, Dominic, thank you for having me. I do think it is. What we've gotten this week has definitely been a threading of the needle that we've been looking for, that Goldilocks scenario where you have growth coming in still solid. GEP surprise to the upside and some of that was swinging around of inventories, but underlying that data was really solid consumer spending as well as CAPX.

And then on the inflation front, we are getting continued disinflation, housing, that lag that we expected to kick in is finally starting to show itself in the data. I think that definitely opens the door for Chair Powell, to very clearly telegraph an upcoming rate cut when he speaks in July, but that rate cut to first occur in September, most likely they probably could and maybe even should cut in July, but I think there's not a big difference between July and September, and we think the first cut will happen in September. And then more importantly, we think the Fed will be in a position to cut by 25 basis points at almost every meeting thereafter looking out about a year from now. So that sets

up very favorably for the soft landing and for stocks to continue the bull market. You know what it does set up for as well, Megan, this idea that we're seeing some of the muscle memory, perhaps rightfully playing certain parts of the market. I wonder if you've watched the price action that we've seen over the last week, and specifically between the first part of this week and the last two days, it has been a resurgence in mega cap technology, media, and telecom stocks, despite the fact that we've been talking so much about this. broadening of the rally, small and mid-cap stocks and the value parts of the market. Do you think the overweight should happen from here on out still in technology and comm services?

Well, we are being very careful to spread our bets out. That's not maybe the most exciting answer, but I think in this type of a market, diversification is really critical because what we've seen early on in the past, and I say early on, it's really just been a couple weeks of this rotation, but it was really a flow of funds out of the high momentum stocks into the laggards, namely small cap and some of the cyclicals. So that was kind of more of a almost a bearish rotation, but it doesn't have to play out that way. Today we're really seeing a rising tide lifting all boats with nice participation from mega cap tech as well as small cap. So we actually have an evenly placed overweight on U.S. large cap and U.S. small cap. So we're going to pay.

pick up some of that momentum and mega cap tech trade, but also hopefully benefit from some of the broadening. And I think that that can occur with both being winners, maybe not on the same day. But if you look out over nine to 12 months, we think large cap and small cap will both do well. Small cap should continue to close the valuation gap between large cap. I don't think it gets all the way back to par relative to history. I think there's some real structural. advantages happening in large cap today over small cap, but the rate cut story is definitely benefiting those smaller companies that carry more leverage. I think what's really unique is that we don't have too many data points where the Fed cuts as we expect into a soft landing. Typically a rate cut cycle

benefits small cap, but that's also wrapped up in a recession story and a bouncing off the bottom. So this is a little bit of a different scenario, and I think that's why diversification is really key. Amen to all of that. Megan, and I just want to pick up on what you said there because as more and more people are talking favorably about small caps, I feel like I'm picking up a bit more caution in your comments, which is underpinned by earnings growth. When you have 84% earnings growth with the fab 5 and 5% for the rest of the market in Q1, you can understand why they've been outperforming. So just if you would expand a little bit more on that, I'm curious. Yeah, we do expect the rest of the market to pick up some of the slack when it comes to earnings growth. And you're probably going to see mega cap tech. continue to deliver the best earnings growth, but at a slower pace. The rest of the market should deliver earnings growth at a better pace than they have been. But, Kelly, you're absolutely right. When we look at small cap, we cannot ignore the fact that about half of the Russell 2000 earns no profits. And we are talking about the Fed cutting rates because of a softening economy.

So within small cap, we are still tilted and biased towards higher quality stocks. That tends to play out a little bit better when you lean on active management in the small cap space. I mean, that's not necessarily what we've seen on some of these really big days for small cap. You tend to see a little bit of a junkier rally. But again, over a nine to 12-month investment horizon, we want to be in the higher quality companies that have a little bit lower leverage and really good profits. All right. Junkier.

Rally. Megan Shue at Wilmington Trust. Thank you very much. Have a nice weekend. Thank you, too. This week we also saw some significant cracks forming in the consumer, especially in the restaurant and retail space. Food chains took a hit Wednesday after supplier Lamb West and the French fry maker reported a slowdown in U.S. traffic and sales. Over in retail, luxury names like LVMH had similar warning signs saying Europe, the U.S. and China were most affected by lower consumer demand.

It comes as short bets against retail are on the rise. Coles has 37% short interest, guest 36, and other names lead the market as well. Let's dive deeper into why with Simeon. Segal. He's a retail analyst at Bimo Capital Markets, and Nick Setyan is restaurant analyst over at Wedbush. It's great to have you both here. Simian, it's kind of a one nervous point after it. I mean, it's not everything, and we don't think retail sales broadly are breaking down. So why are so many stock-specific names not working? Hey, Kelly, great to see you. So listen, you and I always love this conversation because this

is a conversation where there's uniformity of fear, uniformity of narrative, maybe even uniformly of stock performance, but there is not uniformity of actual performance. We're seeing a distinction. You had LVMH up there. Hermes reported this week as well. It looked very different. And so I think it's clear that we have these fears. It's clear that we have the consumer environment as we see it. It's no longer as healthy as it seemed to be. But you're actually an environment where execution matters and we're seeing distinction when it comes to actual company specifics. And so right now with the election, with all the macro, obviously, that's taking a little bit of a backseat in terms of the stock market today. But what you and I are supposed to do is look out beyond and say, are there

businesses that are doing better than others? And I think unlike in the last three, four years since the pandemic with the rising and receding tide, the answer to that right now is yes. So you think this kind of goes back to pandemic and a mirror of what we've seen in other industries where there were areas that worked really well. And Steve mentioned as well in the GDP numbers, we've seen inventory de-stocking and then restocking. And I hear it could be a bad back-to-school season or a tough Christmas, you just unpack that for us a little bit more. The beauty of this sector, it's so easy to create these stories, it's so easy to just effectively round everything up in the one narrative. But to your point, beginning of COVID, there was no

inventory at all. And there was stimulus. So everyone spent and retail looked great. The next year there was too much inventory and we were on the other side, so everything looked bad. It didn't matter how good of an operator were. Everyone was winning. And now what you're seeing is a complete distinction there. And so last quarter, we'll see what happens in the next three weeks, so to speak. But in the last quarter, you watched Coach Duel, Michael Cores not. Walmart, yes, Target, not. Air, yes, Victoria Secret, not. Companies that sell the exact same thing to the exact same people saw a completely different results. And that's what you want to see if you're, A, a really good operator, and be a really good stock picker. And so I think when everything clumps together, that's when

these things get difficult. But if we take a step back, we're actually seeing that Delta in performance. And so to your point about luxury, we just saw this week, it looks. It looks. like because the largest companies are telling us there's a problem, it looks like there's a problem. But one step deeper, and you're actually seeing different results from different companies, and that's what I think is worth keeping an eye on. Simeon, it's Dom. If you look at the chart for stocks like TJX companies, it lends you maybe to believe that that kind of value orientation that tilt towards value spending, the lower end of the consumer

income spectrum has been where the momentum has been so far this year. Does it continue? And if it is to be true, what exactly does that then say about the huge fourth quarter retail season that we have coming up at the end of this year? Right. Hey, Dom. Yeah. No, I think it makes total sense. TJ's a fantastic business, the amazing part of TJ.

And I'm going to very sad for what I'm about to say because it's such a lazy comment, TJ wins in all environments. Because the chart looks great now. It also looked great if we cycle backwards for a little bit as all the luxury businesses, we're doing well as well. TJ is very important to vendors. TJ is obviously important to consumers. We get the trade down you're talking about. But on top of that, these vendors that need to move a lot of units all of a sudden can do it invisibly with TJX. You and I've talked about this before. I really believe TJ wins because they don't have e-commerce, not in spite of it. I think that's a very, you drop all your pallets off at TJX and no one knows that you get it, it just moves.

And so I think that you will see in a trade-down environment, TJ do well, but I think they do well on the other side too. And I think that's a TJ specific thing. But I think your overarching point makes a lot of sense. In an environment where we are belt tightening, you will see that trade down. My point, though, is to say, there will be winners at the high end as well, and they'll be losers at the low end as well. You have to be a good operator. And that's what this environment leads into. And that's a good thing. Yeah, you've got to buy. I think people are familiar with the names that you like in this environment, Simeon, but just a reminder of those executors and those who have good niches and those who don't. Simian Siegel, we appreciate it from BMO. Let's move along to

the restaurant space then, shall we? All right, let's do it, because shares of Texas Roadhouse are higher today after the company topped second quarter earnings expectations and reported a year over year same store sales increase of, get this, 9.3%. However, cautious forecasts are emerging across the entire space. Here with his insight is Nick Settian. Nick, you cover many of these restaurants. Texas Roadhouse is just one of them, but is Texas Roadhouse indicative of where we could see the rest of the industry go from here to the balance of the year? No, Texas Roadhouse is a unicorn within restaurants. Texas Roadhouse is probably the most unique restaurant out there.

And that state category benefits from grocery inflation over and above what restaurant inflation has been. So the state category, you know, including names like Longhorn within Darden, have been exceptions to the rule. Because what's really happening within restaurants is that, lower and consumer those lower income households, they make up about a third of transactions within the quick service category. And historically, including in a 2016 and 2018 period, which is the most recent period where we had, you know, grocery inflation that was below restaurant inflation. So basically grocery prices that are lower than restaurant prices, that you tend to see a third

of those transactions that are direct meal replacement, they go to the grocery store. And then vice versa when, you know, restaurant prices are lower than grocery. prices. So right now we're just in an extended period of when, you know, grocery prices are lower than restaurant prices. So you're seeing those customers, you know, on the margin, go to grocery, particularly value grocery. And so now that USR is responding, including the $5 meal that you saw, you know, McDonald's, everyone else is responding to the McDonald's. So you're seeing weakness across the borders. You're seeing it kind of contained, you're seeing the contamination of the price war within restaurant, but the root cause is simply those.

third, you know, the third of that traffic shifting to grocery. Nick, the vast majority of the publicly traded universe for these types of restaurant operations are more towards the quick service restaurant and mid-scale value type part of the spectrum for shoppers and diners. There are very few pure play luxury ends that are not private or held in some kind of conglomerate format. What exactly then leads you to believe that there is a broader consumer theme that develops looking just at the companies that you can look at and which ones are the best positioned for the coming six to 12 months. So look, there's literally, you know, five names that you can confidently say can have positive

transaction growth, which is really what's going to drive valuations within restaurants. And those five companies are Wingstock, Chipotle, Texas Roadhouse, Kava, and Domino's. You know, literally those five. You know, there's a couple that also are having near terms and positive transactions. Structurally, those are the winners, and they're going to continue to be winners. Now, you can have, you know, arguments around valuation on those names, whether those transactions are going to slow down. But essentially, those five, you can count on having positive transactions a year from there. Dick, pick up on this, it was where we left off with Simeon.

So for those who say, okay, wait a minute, we have individual names who are really struggling, but we're told the consumer overall is still holding up. okay. Do you broadly think that statement is accurate? Yeah, I mean, when you look at, you know, essentially the median to, you know, the highest income brackets, they're holding it fine. And even, you know, the very luxury is the highest end when you think about like Capital Grill, when you think about STK, staycast, again, publicly traded names, we have data on, you know, we saw a lot of weakness, you know, starting a little over a year ago. And that was just a normalization, right? You had a lot of aspirational spending, you know, coming up.

to those categories when stimulus checks were going out across income brackets, and when that normalized, you saw weakness in fine dining. And so, you know, that was a different normalization last year we had to deal with. Now those actual, you know, the fine dining categories actually starting to normalize a little bit as we go over those year-of-year numbers. And now we're having to contend with this sort of, you know, competition with grocery. And I think that takes care of itself by the first half of 25, when grocery prices more or less end up normalizing versus restaurant prices. All right. Interesting trade for sure between the consumer there on the eating side of things and this retail spend side of things. Nick Satchian, thank you very much for ending the

conversation out. Have a nice weekend, sir. Thank you, Brian. All right, let's turn your attention now to another sector that's not getting a lot of attention, but has been lately, and that's the material sector. It's the second smallest sector in the entire S&P 500. It's only worth about two percent of the overall index compared to the near 30 for technology, Kelly. It's practically immaterial. Now take a-Eagest, though, look at this. I see what you did there. Now, take a look at this chart because you can see the underperformance in the blue line,

which is the Spider Materials ETF versus the orange line, the broader S&P 500, Spider-ETF. With regard to valuations, we had brought it up in our previous conversation. Let's take a look at some of the ones that are trading at the biggest premium to where they have over the medium term. The data team and analytics team over at Y charts crunch the numbers about the current forward price to earnings ratio for the sector and looked at which ones have the biggest premium

to where they've traded on average since December of 2020. Steel dynamics, new core, so on the steel side of things, CF industries, all trading at between a 30 to 72% premium over their one year forward price to earnings ratio valuations since December 2020. Meanwhile, the other side of the spectrum, take a look at these particular names that are trading at a bigger discount.

to where they've been. And that's Newmont, gold, right? FMC Corporation, Alvamar. We've talked a lot about the lithium trade and electric vehicles and batteries and that sort of thing, trading at a 45% discount to where it has, on average, from a forward valuation basis going back to 2020. So an interesting move there or look at just where the relative valuations are with the materials. Or just the fact that the sector itself is so small, you wonder, you know, if you don't think that's warranted, could be an interesting opportunity. There you go. Thanks, Dom. Still to come, regardless of who wins the presidential race, we know what's likely to be the first battleground in Washington for the next next next. And that is taxes. We will have more on that next.

Welcome back. One of the major issues either one faces if they're elected in November is what to do about taxes. As many of those 10-17 provisions are getting set to expire, Emily Wilkins has more for us. And Emily, the focus shifts now to how Kamala Harris could handle this issue potentially. Yeah, Kelly, I mean, everyone's kind of digging into it. Because, of course, if Harris wins the White House in November, she will become a key player in this tax battle next year, as major provisions of yes, that 2017 tax law are set to expire. And, of course, as we've seen, Harris is more progressive on taxes than Biden. As a senator, she introduced a bill to provide low and middle-income families with up to $6,000 per year.

She also proposed a tax credit for renters who spent 30% of their income on rent and utilities and made less than $100,000. $100,000. On the campaign trail in 2020, she proposed a financial transaction tax on certain Wall Street trades. And look, while her progressive street could show up in some of these negotiations, those who have worked with Harris said that she's probably going to adopt Biden's tax stances. That includes things like not raising taxes for those, making $400,000 or less, and a corporate tax rate of 28%. Of course, it's 21% right now, so they'd raise it, but perhaps not as far as bringing it all the way back to where it was before. Now, Harris has called for a full repeal of the 2017 tax law, but letting it expire completely

would lead to higher income and higher taxes for most Americans. Democratic lawmakers are already gearing up for negotiations over what goes and what stays. Members are planning to focus on increasing taxes for corporations and the wealthy and bringing back tax credits for parents, as well as assistance with housing, child care, and paid leave. Now, most of these proposals probably won't be possible if there is a divided government next year. But a few items like the tax credit for kids have gotten by Porterston support in the past. And Kelly, Democrats will be shaping up to push for those again if they are able to control either the White House or one of the chambers in Congress. We spoke with James Pethacucas, Emily, about this yesterday.

And as people try to ascertain what it could mean, let's say, for instance, she won but didn't have a Democratic Congress. Maybe you get some compromise where there's a little bit on the child tax credit or on. on taxes and a little bit of the inflation reduction actors or what have you. What are you hearing about how, if it has to be bipartisan in some way, shape, or form, that kind of compromise could shape up. Yeah, for a certain extent, you are seeing some agreement right now in Congress. I mean, you have seen things like the child tax credit get bipartisan support. When paired with a number of provisions, tax credits, tax deductives, things that would help businesses with research and development as well as others, that package wound up moving with strong bipartisan.

and support through the House. And for the most part, it's not like you're talking, hearing Republicans talk about raising taxes on low and middle income Americans. So there definitely seems to be agreement there. I think there's a huge question of what happens with the corporate tax rate and a huge question what happens with some of these other loopholes and taxes that are on Wall Street's and businesses and exactly how those go forward. And of course, with Democrats, it's very important for them to hold on to at least one chamber or the White House because if there is a Republican can sweep, then they can use that wonky process of budget reconciliation and really be able to move most of the bill through just like they did in 2017.

Yep, I think that makes sense. Emily, thanks so much. We appreciate it. Emily Wilkins. All right, coming up on the show, Elon Musk's daughter responding to his controversial comments about her and her transgender identity in an exclusive interview with NBC News. We'll get a live report from that reporter when we return after this break. Welcome back over the last few days we've seen Elon Musk wade into an emotional battle over California's new transgender law.

The law which bars school districts in California from requiring parents to be notified of a child's gender identification drove him to announce he'll move the headquarters of both SpaceX and Axe from California to Texas. A multi-billion dollar decision with consequences on both the corporate and state level. Musk went on to say in an interview that he was tricked into authorizing his own child's transition and as a result his son is dead or at least dead to him. NBC's David Ingram is getting a rare look into what drives the psyche of a powerful billionaire, speaking with the controversial CEO's transgender daughter, and he joins us now to discuss. David? Hello, it's a pleasure to join you. What did you learn from this discussion?

So I spoke yesterday with Elon Musk's daughter, Vivian Jenna Wilson, and she has quite a bit to say about growing up as Elon Musk's daughter. She came out twice in life, first as gay in eighth grade, and then several years later she came out as trans. And I think that this relationship between Vivian and Elon Musk really is, I think, one of the under-told stories of the broader Elon Musk story from the past several years. We've all seen how Elon Musk has taken on certain campaigns, political campaigns and social campaigns, including on X and his purchase of X. And this, I think, helps to explain some of the motivation. I mean, he said on Monday that after this experience with his daughter transitioning, that this

is what pushed him to attack what he called the woke mind virus. And so I think that really gave her an opportunity and I think in her mind a requirement that she speak out and address this allegation from him that he was tricked into approving her hormone treatments. It's the development here. We're talking about Vivian Jenna Wilson, who's generally a relatively private person. We haven't heard too much with regard to the story from that perspective. what exactly would have to happen for this kind of a response for her to want to talk to you and perhaps be viewed as trying to set a record straight? Clearly she had been thinking for quite some time about whether she wanted to tell her story.

You know, I think she's someone who does value her privacy and didn't seek this spotlight. I think what had to happen was Musk speaking really in very personal, ways in talking and revealing some personal family details on Monday and doing so in a way that she thought was just untrue. He spoke about what it was like when she was growing up, when Vivian was growing up, and she says that those weren't true and that he also probably wouldn't really know much about what she was like growing up because he was largely an absent father. And that's, was one of her main points is that Musk and she, they haven't spoken in a

four years and he was not really present when she was young. So I think that's what pushed her to come out and sort of tell her her side of the story, the fact that he was telling what she thought was a one-sided story. Yeah, and now in many ways the struggle of one family becomes the struggle of the many companies and states, really. David, thanks for bringing that to us. We appreciate it. NBC's David Ingram. All right, let's get over now to Bertha Coombs for a CNBC News Update, Bertha. Hey, Dom, former President Donald Trump pledged this afternoon to work for Middle East peace and combat anti-Semitism. The promise came as he sat down with Israeli Prime Minister Benjamin Netanyahu in Florida, who posted a video of the meeting to social media. Alleged Mexican cartel drug lord Ismail El Mio Sambada pleaded not guilty to U.S. drug trafficking charges today.

He's being held without bond following his arrest last night. Texas alongside the son of jailed cartel boss Joaquin Guzman or El Chapo. Sources tell NBC news investigators are looking into whether he may have fooled Zambada into getting onto the plane to El Paso where they were taken into custody. And Hollywood video game performers began a strike today after negotiations over artificial intelligence broke down. The union claims the studios refused to agree to protect, performers from things like using AI to replicate their likeness or voices.

A representative for the studios, which include Disney, Activision, and Electronic Arts, say they are disappointed the union chose to walk away when a deal was so close. But, some actors are being allowed to work at other studios that have already signed such agreement. So it's one of those situations where not all games are stopping down. AI and labor continues to be in the headlines right now. Bertha Coombs, thank you very much for the headlines there. We appreciate it. Coming up on the show here, Inside Out 2's record run has been a big boon for the box office,

Twisters putting some fans in their seats as well. So could Deadpool and Wolverine keep the sequel surge going this year? We're going to dive into that trend when Power Lunch returns after this break. Welcome back to Power Lunch. Ever since the Marvels flopped in the fall, studios have been concerned about superhero fatigue. Disney CEO Bob Eiger even admitted to the deluded quality of the Marvel Cinematic Universe, the MCU. But Disney is taking another crack at their comic book heroes with the release of Deadpool and Wolverine this weekend.

The movie is projected to be the biggest opening of the year so far, beating Disney's record-breaking inside-out too. Bandango says it's the top pre-cellar so far of 2024 and the most anticipated movie of the year. So are superheroes back? and what about the cinemas themselves? Joining us now to discuss is Laura Martin, Needham's senior internet and media analysts, also Paul DeGarabedian, senior media analyst over at Comscore.

Thank you both for being here. Let's talk about the macro big picture first, Paul to you. Is the box office back? We've heard from CEOs, executives at movie theater companies that it kind of feels like we're back to pre-pandemic. Is that the case? And does that mean people are going to go back to the theaters in mass? It is. And, you know, really, we had a first quarter of the year that was really quite slow and compared to 2023 at the same time when Avatar the Way of Water was doing great business.

We were heading into the summer down year-to-date versus last year, about 26%. And then we had a terrible month of May at the box office, lacking a Marvel movie to kick off the summer this year. We had a historic low-grossing Memorial weekend, but then everything turned around in June and July, and we've knocked down, according to our comp score numbers, the year-to-day deficit about 10 percentage points, which is quite astounding in just a short amount of time. So it's a very fragile ecosystem. Every movie that underperforms, that affects things very profoundly. And likewise, having many movies in a row overperforming from bad, ride or die in early June, inside out to an absolute juggernaut, now the highest grossing animated

film of all time, Quiet Place Day 1, Despicable Me 4, and Twisters most recently, and now Deadpool and Wolverine movie theaters are on a roll, and if you compare the headlines now to what they were in May, totally different story, that's for sure. Much more positive story right now, but I think Deadpool is, it could even surpassed. those expectations that you put up there. If it pushes in on $200 million in its domestic opening, I wouldn't be surprised, given the buzz and the tail wins for this movie. All right, Laura, let's talk about these companies that make the content

and then distribute them in theaters. I have a kind of loose rule of thumb. I only go to the theaters to watch Blockbuster Action and Special Effects Superhero Flicks because I think it's worth it. I, though, did take my kids to see Inside Out, too, at their request. It is still a matinee, $15 ticket. You factor in popcorn, a family of four is spending about $110 by the time it was done. What is it about these movies that it's going to be trendworthy to get these studios and their owners back into some feeling of return on investment?

So I think what we're trying to do is break the consumer habit of sitting home, which he created that habit during COVID. You got big screen TVs, and people want to. to stay in the stay at home. But it's probably not true what you just said about yourself, because I bet you went to see Barbie, which is not, and you probably saw it in a theater, Oppenheimer 2, not sort of an otherworldly action adventure. So you are going to go probably see Deadpool. Most people will, according to these box office projections. And it does happen to fit that mold you just said. But people are going back to the Bach office for fabulous content, even if it's a quiet place, which you don't really need to see on a big screen, but the shared

experience of everybody gasping in horror is actually part of the experience of going to the box office. So I think what we're trying to do with these big films is get people to go back to the boff closet and do things with shared emotion in a big screen environment. He, Dom's shaking his head. He didn't see Barbie or Oppenheimer in the theaters. I waited for them to come out on streaming before I watched either of those movies. So it was inside out too. I thought all of the world saw them on their release date. I would. No, no.

And this is no commentary because, you know, Oppenheimer was released by NBC Universal's, you know, Universal Studios. But Deadpool and Wolverine, Kelly, I would go see that in theaters. And Dom, you have to go see it in a theater. That's your homework for me. You have to go see Deadpool and Wolverine. If you were to miss out on that, and Laura is totally right, it's the experiential part, the communal part of going to the movement. movies that's so appealing. And I always say the movie theater will never go the way of the pay

telephone. Why? Because there's nothing like it. And even though it's sort of a old-fashioned, old-timey kind of experience, that's the appeal of it. You can go into a theater for a couple of hours, you know, just turn off your phone and enjoy a movie like this. By the way, Deadpole Wolverine is getting great reviews. I think with Twisters and Deadpool Wolverine this weekend, maybe a Barbenheimer-style double feature in the, you know, in the makings? I don't know. We'll have to wait and see. I don't know what you would call maybe Twisterine.

I don't know. That's not a great thing. Laura, it's very interesting. Make this investable for us. What are the takeaways? So this is going to, if this is a big film for Disney, it will help their earnings because they're what's pulling down their earnings performance right now is their box office. So with Inside Out and if this movie is again big, it will help their earnings.

for share and it will offset some of their, they're driving to break even on streaming, it will help their earnings for share growth if the box office sort of pulls more of its own weight. So it's important for the Walt Disney company. And if it can actually break the back of people staying home, like your co-anchor, we don't want them staying home. We want them coming to the box office and eating popcorn.

So we want to get those people back permanently into the box office, like they probably were pre-COVID. $15 popcorn. I'm hearing that $110 for family and four and thinking, You know, a little bit. That's $15 for a matinee. If I went prime time, it's $20 plus. I agree.

Maybe a little bit of a deal, kind of get people back in the sea. Little disinflation. The companies don't want to hear that. Dom, if you took the family on a vacation, it would cost a lot more than that. Yes. Yes, sir, it would. Thank you both. Paul Derribideon and Laura Martin.

Meanwhile, disappointing results from Tesla and Alphabet are ramping up the pressure on the other Max 7 names when they report next week. We will break down what to watch after this. So what we've learned this week is that big technology names are facing pressure as earnings season rolls out and especially going into next week. Steve Kovac, with what to watch in today's tech check on that earnings preview for the busiest week of earnings next week, Steve. Yeah, that's an understatement, Dom. And look, Tesla and Alphabet, they set a pretty ugly tone ahead of the magnificent savings that we have earnings that we have on debt next week. That puts enormous pressure on Microsoft, Meta, Apple, and Amazon to just smash XP.

Now, the big concern that Alphabet's results showed the massive spending it has to build out AI capabilities. Outgoing CFO, Ruth Porat said CapEx spend will be at least $12 billion each quarter. And while that's helping Google's cloud unit grow, it still has quite a long way to go to catch up to the leaders, Amazon and Microsoft. Plus, CEO Sudderbichai did not help sentiment when he said he'd rather overspend than underspend on AI Capx. And then for Microsoft and Amazon, those are the two. companies to really pay attention to on the hyper-scaler side of things. Microsoft said last quarter it cannot meet the AI demanded seeing, and it later cut a deal with Oracle to offload some of that. And Amazon may have a similar story to tell.

It has deals with major AI companies like Anthropic and Hugging Face. And by the way, meta is spending a ton on CapEx as well. As for Apple, it's kind of the outlier of the group, a different strategy. We saw what that looks like last month. And by the way, Raymond James analyst this morning called it a more stable AI investment after what we saw this week with Alphabet, Dom. I think I'll pick it up, Steve. I think it's going to be a fun ride to see if they can kind of find a sweet spot for investors that we didn't seem to get this time around.

Steve Kovac, remember, you can always hear us on our podcast as well to follow those earnings and so much more, our movie-going habits, you know, anything you want to know, just find Power Lunch on any platform, and we'll be right back. Welcome back to the show. The Dow climbing more than 600 points at this point, and that's off session highs. We're up towards 800 at one point. Treasury yields are lower after the release of the Fed's preferred inflation gauge, the PCE, which matched economists' expectations. Rick Santelli is tracking all the action from Chicago.

Rick, this is a situation where is it a green light for September? It certainly looks that way, Dom. And, you know, Fed Fund Fut futures is. utilized for many things maybe beyond its real reach, but for the next meeting, especially when you move within that two-week window, the accuracy is infallible, and July, obviously not priced in. Well, we're not two weeks from September, but September is heavily priced in, unless something extreme happens. I can't imagine that the Fed would deny the market something it's already priced in because it's a form of the best way it communicates its ideas and its

strategies with all the investors around the globe. What a week. So you pointed out, basically PCE inflation roughly as expected. Michigan sentiment remains challenged, and we saw huge moves in short maturities. Look at one week of twos. As it sits right now at 438, that's down 13 basis points on the week. 420 for 10 is only down four basis points on the week, as you see on the weekly charts, which means that 2's 10 spreads moved roughly 10 basis points. Open it up to one month, one month. And you see we've gone from basically minus 50 to minus 18. That is a dramatic move, and it really underscores the dynamic of the Fed.

And dollar yen? Well, the dollar's closing at a three-month low versus the yen. Bank of Japan next week. And remember, just three weeks ago, the dollar was at the 38-year high against that currency. Back to you. All right. Thank you very much. Rick Santelli with the update there.

Now, imagine if a restaurant used personal data. data, like your income or your zip code, to charge you more than another customer. Well, the FTC claims that could actually be happening right now. We'll get that story about surveillance coming up next. Over the last few months, we've seen a wedge being driven between companies and consumers, as we saw with both brands like Chipotle, the price hikes also have the FTC red hot as well about those issues. and this week it launched an investigation, the FTC, into the use of AI to rapidly change pricing,

and some of them are now firing back. Contessa Brewer has the details on surveillance pricing. What exactly does this mean? Yeah, well, basically, they're demanding information from the likes of Chase and MasterCard and Revionics saying that they want more information about the way that these companies can aggregate lots of data, and then tell their customers how to change pricing depending on who's buying. So the worry is that you could be sitting next to somebody at a fancy restaurant and you're getting charged more because this restaurant knows you frequent nice restaurants a lot

based on, say, your phone number, where the other person is known for fast casual and may get a different price point, different menus based on what's a QR code. So at this point, the FTC says we're looking for information. Since I first reported this story, I've gone out. to all eight companies where the FTC is demanding information and I asked them for a response. Chase, MasterC, they, Bloomreech, they all said to me, look, we're looking forward to working with the FTC and helping enlighten them. But I got another more enlightening response from Revionics for which Home Depot and the grocery chain, Hanford, are customers. And they say the

FTC says, this isn't it. Let's go to the, here it is. The revianlixt. The Reviant Spokesperson said Revionics does not develop software that recommends pricing targeted to specific individuals. It does not in any manner use individual consumer data. It does not in any way conduct operations related to the surveillance of customers. So really pushing back there and saying, Dom, that they are looking forward to educating the FTC about what they actually do. All right. Contessa, Verra, a crazy story there for sure. Thank you, Contessa. If Dom and I walked into a restaurant, would we pay different? They look at the time they say yes. Thanks for watching PowerLunch.

Have a great weekend.