Power Lunch - Dow rallies on hopes for trade war de-escalation 4/22/25

Episode Date: April 22, 2025

Stocks rallied Tuesday on hopes that U.S.-China trade tensions could ease soon, as investors recovered the steep declines suffered in the previous session. We’ll tell you all you need to know. 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 Lunge alongside Kelly Evans. I'm John Ford. And stocks are soaring today, but they've given back a lot of the ground after popping on comments from Treasury Secretary Scott Besson about potentially de-escalating with China. Yeah, we'll bring in Amin to recap that shortly. But get a look at the major averages with the Dow's up 639 points. At the session highs, we're up about 1,100. The S&P's still up 1.5% similar for the NASDAQ. Names with the heaviest China exposure like Nike and Apple, that's still where we're seeing some gains today. Apple up 2.5%. Notably, when we first got reports about Besson's comments yesterday, Hewlett-Packard Enterprise is another clear gainer as it makes 30% of its products in China. Again, those shares off session highs, they're up about 1.5%. And got to end with a mention of gold,

especially with Fort Knox here on set with me. See, if only you had bought some gold as like a branding play. It's a conflict of interest. That's right. $3,500 announced for the first time today. We've backed off of that. We're up nearly 30% year-to-date, and J.P. Morgan is saying next stop, 4K. Well, let's start though with some breaking news out of Washington, some trade talk updates from the White House. Amen Jabbers has the details.

Hey, John, that's right. Caroline Leavitt, the White House press secretary just wrapped up her press briefing here, talking about the state of play with the White House and countries around the world in terms of trade negotiations. Here's what she said, particularly regarding China. Take a listen. He wanted me to share with all of you that we're

doing very well in respect to a potential trade deal with China. As I mentioned, there have now been 18 proposals in more than 100 countries around the world who are wanting to make a deal with the United States of America, and the president and the administration are setting the stage for a deal with China. So we feel everyone involved wants to see a trade deal happen, and the ball is moving in the right direction. So the White House there is saying they're setting the stage for a deal with China. No specifics on what exactly that means, but they feel the ball is rolling in the right direction. And they wanted to send an encouraging message out to folks who are watching this very carefully, as everyone on Wall Street certainly is.

Also, we have the Treasury Secretary Scott Bessent making some comments earlier to a closed-door meeting. Those comments moving markets, let me give you a section here of what the Treasury Secretary had to say. The Treasury Secretary speaking to a J.P. Morgan event saying a short time ago, the next steps with China are, no one thinks this current status quo is sustainable at $1,500,000. 45 and 125 percent. So I would posit that over the very near future, there will be de-escalation. And I think that should give the world the market's a sigh of relief. We have an embargo now on both sides, right? The Treasury Secretary is saying behind closed doors. So the Treasury Secretary suggesting they are that both sides, China and the United States, don't see the current situation

as sustainable and that ultimately the tariff levels that are in place now amount to an effective embargo and if things cannot stay the way they are, they're going to have to change. And he's suggesting that there's incentive on both sides now for de-escalation of those trade talks. We'll see what happens next. The White House is simply saying the ball is rolling in the right direction. Okay. I guess we'll see how long the bowling alley is. Amen Javers, thank you. Now turning to Tesla kicking off earnings for Big Tech's Magnificent 7, reporting after the bell today, shares higher today along with the broader market rally, but still, the worst performing Mag 7 stock this year, down 40%, erasing more than $500 billion in market cap value,

thanks to market uncertainty, and Elon Musk's political impact in the White House, pushing sales to their lowest in nearly three years. So what should investors expect after the bell? Let's get to our panel, the Wall Street Journal's Tim Higgins, Wells Fargo, Securities, Colin Langen, and KKM Financial NCNBC contributor, Jeff Kilberg, all join us now. Jeff, I think you're optimistic on this one. You think Elon Musk can shake the Doge reputation and sell more Tesla's from here? Well, John, it's a lonely view, right?

But I am optimistic. I am long here. I've actually added my position. I think it is time for Elon to take a step back from Doge. And I think when you look at Tesla, it's just become a high beta, highly emotional stock. And unfortunately, this stock is now politicized. So you are owning it or not owning it due to a political view, which I think is the wrong way to approach. in my opinion, the purest AI play.

And I know Colin's going to talk about stock going lower, and I know he had a price target back in 2022 of over $900, but that really underscores the bifurcated or bipolar approach people have taken to Tesla. But I look at the way Tesla is moving. I look at the way their margins specifically in Megapak may contribute to the stock moving higher. And I want to be an owner here,

but you have to have the stomach, John. You have to have the stomach to take this volatility. Tim, I actually want to go to you before we get to the other side of this. Tell me about your observations of Elon Musk and Tesla. This isn't a stock that has traded like a traditional car company already. So a question of how much the fundamentals matter in this earnings report and whether Elon Musk cares that much what people think about him since he seems to be a gambler. Yeah, it's been a long time since this stock has traded based upon the fundamentals. It's largely about tone. It's largely about Elon Musk's vision for the future

and the market's belief in this ability to pull it off. And right now, there's a lot of question about his commitment. There's a lot of question about the product lineup. There's a lot of question about how the company is going to bring out those robot taxis, which have fueled so much excitement in the past, but have been many, many years in the making. Maybe we'll get some more nuggets on that today ahead of possibly a June or this summer initial launch of something that's been teased, but I think the market's looking for more details

about those robo taxis. How much of it, Colin, is about cheap rides, whether we're talking about robotaxies or the seemingly delayed lower cost models that investors have been expecting, and this Chinese competition that, especially on a global stage, could cause, is causing Tesla some headaches. I mean, I think a third of the valuation of Tesla maybe is the auto business. The rest is is CyberCab and Optimus. I do think the fundamentals in any stock matter. And I think they particularly matter now versus history because the growth is negative, right? So it's a different story than in the past when deliveries were rising. Now we have a core business where deliveries were down 30% sequentially. We're going to see pricing pressure probably already start. The Model Y refresh isn't

off to a great start. We're already seeing you could order it right now and get delivery fairly quickly in the United States. We're seeing financing promos in China. We're seeing pretty severely bad numbers out of the fundamentals. And that has to matter at some point. And you know, you have to talk about what is cyber cab. They already put a pretty aggressive date out there for Austin in June. You know, a lot of the experts I talk to still have huge challenges which with a vision only approach. And, you know, I think the progress will see how much progress they could do, how much supervision they'll be in that demo. I actually think today there's going to be a pivot, probably a continued pivot toward optimist. And I still think that's many years away.

Jeff, how much China exposure, and I mean like headline exposure, does Tesla have here, given their huge manufacturing presence there? It seems like the Chinese consumer has been willing perhaps to stick with Tesla for a while, but there's a lot of competition, cheaper competition coming up. And, you know, are they as an American company really facing some danger here on the headlines? It's a huge risk, no doubt about it. And that's where I think Scott Besson's comments about de-escalation in finding a trade. tariff deal with China is really important to Tesla. 30% of their income comes from Tesla. Yes, John, they're the number three car company there, but that's due to the fact they have a premium offering and by doing all these other companies have a lower lesser car offering.

So will they have another option, the lower costs? Yes, that's important. But I also look at India. If we can get a deal with India, is that can allow them to penetrate and you see EVs across the world obviously have been moving lower in price margins as well as adoption. but I think we're going to see a revival of that if we can find a way to get Elon Musk out of the White House and back into Texas into that gigafactory. And Tim, what would you add? I'm interested in hearing Elon today talk about supply chain risk because of the trade war. Clearly, Tesla, when you look at the U.S. made vehicles, they rank very highly. But nevertheless, they are a global automaker.

And when you start messing with supply chains, the smallest part can derail a lot of things. as Elon Musk has talked about over the years, as we've seen supply chain shakeups, whether it was through COVID or other things. So this is, I think, a key question as well. Right. And Colin, you've mentioned kind of the problem here is fundamentally on demand, and that maybe some of the cyber cab is already priced in. So what could they say today that would help the market turn a page from being down 50% year-to-date?

Or is there nothing that he could say? I mean, Elon is sort of known for a razzle-dazzle and sort of distraction. As I said earlier, I do think, if you look at the last earnings call, he talked almost 40 times about Optimus, about a dozen times on full self-driving and only seven times about the Model Y, which was the refresh product that was coming. I wouldn't be surprised if some of the news today we continue to see a pivot toward Optimus, really as a distraction for the fact that the core business seems to be under a lot of pressure. Jeff, what happens to Tesla if we do experience not just an expected slowdown in growth overall, but some of the company? something in or close to a recession. It's a premium brand. It's a little bit different from the other car brands out there. Now it's got these, at least for now, political overtones attached to it. Do you have a particular expectation as an investor here in a slower economy?

What happens? Well, I think every S&P 500 company is contingent or dependent upon if we go into recession or not. I don't see that waning strength in the consumer. I still see strength in the U.S. economy. This is 100% American-made car. And I think one thing that's being underrated is the megapact. That story, which gets no illumination. We are seeing that year-over-year growth, John, about 80%. And that's a $15 billion revenue stream that no one's really calculating at a much

higher margin rate, about 26%. So that should offset that margin compression in the actual auto sales. But all we need is a little optimism. That's moved markets. It had no being above $400 just a couple months ago, in my opinion. But right here, right now, I think there's an opportunity to own this longer term. And we are seeing if it's a robotaxie, the autonomous driving that's collecting eight million miles a day. That is the Trojan horse into AI.

And artificial intelligence, no matter what comes out of the White House in the next couple of weeks, AI is not a theme that's going away anytime soon. Big report out this afternoon in overtime here on CNBC. Jeff, Tim, Colin, thanks to all of you. And to start this hour, the major averages are perking up. The Dow now back up about 2% more than 770. After the break, rave reviews for Netflix hitting an all-time intraday high, likely closing above 1,000 for the first time since February 1st. We're going to discuss that name and the overall market climb next. Welcome back to Power Lunch.

Stocks are rallying today across the board. The down now back up more than 800, 810 points after pairing some of the recent losses on hopes that the trade fight is going to de-escalate between the U.S. and China. and P now up just about 2% the NASDAQ leading the major averages up two and a quarter. Major averages still, though, sharply lower over the past month as the markets continue to navigate the uncertainty around tariffs and the state of global trade. So where can investors turn with all this volatility? Joining us now with his take is David Spika. He is the chief market strategist at Turtle Creek Wealth Advisors.

David, you know, bonds aren't doing what they typically do in this sort of environment. So a lot of investors probably wondering, how do you balance things out? Where do you go for relief from all of this equity volatility? What do you say? Well, I still think that bonds offer a nice opportunity. Clearly, the spike we had in rates was a bit of a shock, but rates seemed to have settled down now. Municipal bonds are very cheap today for high net worth investors.

But ultimately, I think you have to look at where is the economy heading. So today, with the S&P down about 15. If we don't have a recession, stocks look very attractive. We do go into recession and probably have more downside. Ultimately, what we need is a win. We're like a baseball team on a losing streak. We just need a win to restore confidence in the clubhouse. And right now, confidence, whether it's businesses or consumers, is very low.

They want to see some clarity on the tariff front. We get that. I think we can avoid recession. And I think we can see the market go higher. And bonds and stocks are performed well in that environment. Okay, you mentioned municipal bonds, which is like catnip for me. I got to admit it. I love the topic because I think it also speaks to a longer term perspective and thinking about tax equivalent yield, particularly for those who are making a lot of money and maybe in some higher tax brackets. What are the sorts of things that investors maybe who are on the higher end of the income scale can do to think longer term beyond just the day-to-day volatility and make some smart decisions in this environment? Well, you said it.

The municipal bonds are for high net worth investors. And here at Turtle Creek, our clients are ultra high net worth. So avoiding taxes and minimizing taxes is a big part of their strategy. And municipal bonds fits well into that. Right now, we rarely see an opportunity to buy municipal bonds this cheap at this high taxable equivalent yield. So investors need to be considering that. And again, it really depends on your own personal risk tolerance what you're trying to achieve.

If you're younger, you still want to be more investing in the equity market. If you're a little bit older approaching retirement, increasing that fixed income exposure, that lower risk exposure makes a lot of sense. And municipal bonds are a great way to play that right now and again, a once in a multiple year opportunity to get in at these valuations. I just think John is too young of a young. How can he be in Munis? He's in love with Munis, David.

And now he's laughing all the way to the bank. I mean, I know they've underperformed in recent weeks, but if you're holding it till maturity, I guess you don't care. And you get in now, maybe you get some even better yields. But I just, you know, I just think he's got, he's got decades, right? The stock market will do. Maybe he's making too much money. And that's why he needs the muni bonds.

That could be the thing. As a tax shield. So what is your outlook for stocks, though? I mean, broadly speaking, is it, you know, what do we do? You like Netflix? You like EOG? I mean, there's some idea. Netflix makes me worried because everybody loves it here.

And it's done so well. but maybe it's just got just the right mix of things for a difficult environment. Well, Kelly, because there's so much uncertainty, we want to own companies with visible earnings growth that have limited to no impact on the tariffs. And I really think Netflix fits squirrel into that. Look at their last quarterly report just last week. When they had the gall to go out and raise guidance for earnings, revenues, and margins for the second quarter, nobody's doing that right now. Nobody has a confidence to do that. They also reiterated full year earnings growth of over 20. So clearly, the metrics are very strong.

And I would argue Netflix is a very defensive name right now. Who's giving up their Netflix account even if we go into recession? I don't think people are going to do that. That's going to be one of the last things that do. That's very cheap entertainment. And today, with their growth growing 20%, 300 million global users, I think it's an excellent place to be hiding out to a degree at this point. I just moisturized, Kelly.

I guarantee you I'm not as young as I look. And David, let's put some numbers here. here. We talk about tax equivalent yield. You know, typical investor might not be thinking about this, but we could be talking 7, 8 percent, pretty much guaranteed. I mean, nothing in the market is guaranteed, but defaults across a portfolio of munis, very, very rare. Talk about how rare it is to be able to lock in 7 or 8 percent for decades on top of all this volatility that we see in stocks. extraordinarily rare. Our munibone expert here a few years ago said this is a once-in-a-lifetime opportunity to buy the last time we saw munibonds get this cheap. We're seeing it again.

A second once-in-a-lifetime opportunity in a span of four or five years, that's pretty unusual. But the thing you have to understand is who issues munibones? It's state and local governments. Well, you consider the fiscal health of the U.S. government not great, but state and local governments continue to be in very strong fiscal health. So not only you're getting that great use, you're getting it from an issuer who's in great shape where the risk of default is extremely low. Even with Medicaid. Again, it's a very much a win-win. Even with the tide going out on Medicaid, even with the cuts that we might have to make to services and so on?

Absolutely. I mean, Kelly, you've kind of got to look across the landscape of things. There's a lot of risk out there right now. Where is the place I can be where I can get my best risk-adjusted return? I think a name like Netflix falls in that category. And I think municipal bonds issued by state and local governments with solid fundamental, solid budgets is another place. Nothing's risk-free.

Heck, are U.S. Treasury's even risk-free anymore? We saw a little bit of concern about that in last couple weeks. But at the end of the day, it's about maximizing risk-adjusted return in a very uncertain environment. And mutie bonds fit well within that category. Pull back the curtain for us, finally, David. You talked about your clients being ultra-high net worth. what are the biggest questions that they're calling you with over the last few weeks as we've seen all of these violent moves in the markets?

Well, ultra-high net worth investors can get a little bit nervous just like regular investors can when we see the market drop 19% on a tariff plan that could completely upend global trade. But at the end of the day, our investors are mostly focused on managing taxes and on gifting those. assets to the next generation in an efficient way. So family governance and tax management and estate planning are the big issues for them. And that tends to be where they're focused. Ultimately, though, we are in line with what others tend to believe is that we've got to get clarity around this tariff issue, particularly with China. I hope what Scott Besson said today comes to fruition, because that would be the most enormous, that would be one in the World Series in my mind. We need to win. That's a World Series walk off Grand Slam if we can get something known as China.

He did say two to three years, but we'll see. Take your point. David, thanks so much for joining us today. Thank you. David Spika, Turtle Creek wealth advisors. Betting on uncertainty, our next guest says you have to look long term. Where they're putting their money is coming up in Market Navigator next. Welcome back.

You can see the markets there. We're off session highs, but we are climbing back towards those levels with the Dow up nearly 900 points. Right now, the S&P up 2%. The NASDAQ up 2 and a half, all on optimism. They might at least get some trade talks going with China after comments from Secretary Besson yesterday. Here to talk more about where to find opportunity amid these wild markets is Jan Szilagi. He's the CEO and co-founder of Reflexivity. That's an AI market research firm.

So, Jan, the AI, can tell us where they're looking right now. And REITs are coming up. What else is popping up for you? Hi. Thanks for having me on the show. Yeah, so REITs are obviously the focus currently primarily because we are seeing quite a lot of movement on the interest trade side. So can dig deeper into that. But in addition to this, we're seeing quite a lot of interest in and exposure and opportunities in things like, for example, consumer staples. So anything

that is less sensitive to interest rates moving higher is currently being highlighted as the place to be. And on the other hand, as a way to protect against those things, really long volatility, either in the equity space or in fixed income space. And the last couple of weeks, I think, have made it obvious why that is. Yeah, this is why, you know, the AI is going to replace all this. So because I think about some of those areas, you mentioned staples and rates, and I think, well, they could be under pressure if yields keep going higher. You see it differently.

Well, actually, you know, there's a distinction here that the system is highlighting between equity reeds and mortgage reeds. So one of the things that makes more. mortgage rates particularly sensitive to higher interest rates is that they are, one, very highly levered, but also because they pay fixed coupons, they invest in mortgage securities. They tend to perform relatively poorly in a rising interest environment. With equity rates, in contrast, the underlying asset are actual properties where you could over time see increases in rents, increases in property prices. So there's an implied hedge in the actual, in the actual security.

Yeah, in consumer staples, what's the idea there? And is it the sector broadly or any of these kind of queuing up specific names? This is, I think, a little bit in reaction to the fact that up to this point and even now, although probably people are a lot less excited about the tech sector at the moment, in contrast to a tech company where a lot of the expected cash flows are really back-end loaded, when you look at something like consumer staples, not only do they hold up well in a downturn because they sell things that people need regardless of the cycle, they also tend to have more their cash flows front-end loaded.

And so this is really just saying, okay, I would rather have something that is maybe smaller now as opposed to wait how these predictions for high growth turn out in two, three years from now. Yeah, and I'm just curious, yeah, and before we go, because AI is such a new phenomenon in the markets, what are some of the different kind of technological pieces you're using to put this all together, you know, how do you backtest it and how are clients using it in real time in a market environment like this? Yeah, so our primary audience is hedge fund clients, as you won't be surprised to hear. And the main use is that the system's ability to do very, very quick

calculations and communicate with you in a natural language just makes an environment like this particularly apt for using a system because there are so many things that are changing literally day-to-day, things that we're not used to changing quite so quickly. And so when you have to run a number of fast scenarios and get the answers, but you still want to rely on the data, it's really hard to replicate something like this unless you have thousands of analysts at your disposal. All right. I do try with chat GPT and grog. But, you know, I can understand that maybe your audience needs something a little bit more sophisticated. We'll set you up with an account on reflexivity. I think you'll find that it's quite an upgrade. I would love that. This is a perk of the job, maybe.

Thanks very much. It's good to see you today. Likewise. Thanks for me. Jan Salagi with reflexivity. John? After the break, the word of a CEO can mean a lot. It could influence whether you buy or bail on their stock. Several big-name CEOs on CNBC today. We'll recap their comments and ask a trader what to do with their stocks. We'll be right back.

Welcome back to Power Lunch. I'm Julia Borsden with your CNBC News Update. The U.S. will hold talks in London tomorrow with Ukrainian and European officials as President Trump pushes for a deal to end the war. The State Department says Secretary Rubio will lead the U.S. delegation. The Washington Post reports that recognizing the illegally annexed region of Crimea as Russian territory is on the table. Ukraine has been steadfastly against that outcome.

60 Minutes, executive producer Bill Owens said today that he will resign from the program because he has lost his journalistic independence. That's according to a memo to staffers obtained by the New York Times. The resignation comes as 60 minutes in CBS have been sued by President Trump for $20 billion. And parent company Paramount is also looking to get administration approval for the sale of the company to Skydance. And Instagram is taking aim at TikTok, launching its edits video creation app that offers features similar to what's already offered by TikTok's Capcut app. The edits app for Instagram includes AI and other tools for short form video production. John back over to you.

All right. Kelly just downloaded it. I did. I feel very special. That's impressive. I don't know if I'm going to, I don't know if I need it, but. We'll see. I expect big things from you. Time now for our three stock lunch, where we hit three different stories and why they matter to you. Today we've got three CEOs who were on CNBC earlier today. Here with our trades is strategy asset manager, CEO Tom Hulik. Up first, Goldman Sachs, CEO David Solomon, not sounding the alarm bells on the markets.

markets tend to overreact in the short term. We've all been through stress. You know, in markets, they overreact, but you get to a different place. When you look forward, six, 12, 18 months, you get to a different place where the market has digested that change in the macro environment. It will be no different here. So Tom, how should investors react to Goldman Sachs? Well, this is how we approach our thinking. You know, for the overall markets to regain strength, you want to see the financials to participate. And Goldman is very, very strong financially. We prefer JPMorgan, but, you know, they had strong trading revenues and their investment banking is having challenges, but who wouldn't in this environment?

So if you look at Goldman's earnings, they reported 4.74 billion in net income. Their earnings per share were very solid, but the headwinds from the tariffs and the global M&A softness are caution for us. So we see an opportunity in Goldman, but we prefer JPMorgan right now. All right, Goldman up 3 percent today. Let's move on to Chevron with the CEO also on Squawk earlier. what oil prices in the low 60s could mean for their capital spending. We can't really swing our capital spending based on the price of today.

It has to be based on our view of price out into the future. And our fundamental views on longer-term supply, demands, technology, policy are really unchanged. And so our longer-term view of prices are what drive our capital spending. So on Chevron, Tom, what do you do? You buyer? You know, we are. So we own Chevron. they're positioned to benefit from the U.S. policy support for offshore development.

In any uncertain environment, dividend-paying stocks are the way to go, and Chevron offers stability and cash flow for our clients. And as a forward-thinking manager, we just don't like to ride trends. But there's a strategic viewpoint of this. I mean, right now, if you look at Chevron's yield, 5%, 38 years of consecutive increases, this is exactly the type of shareholder discipline we prioritize. And Chevron's a really good company to own in the long term with the exposure across the oil, natural gas, chemicals, refining and renewable space. This is a diversification that smooths out revenue cycles for us. Last trade today, Home Builder Pulte Group shares popping after posting a beat on earnings and revenue in its first earnings report this morning. In its earnings report, I should say, not its first.

Here's CEO Ryan Marshall on what he's seeing from the consumer. As we moved into April, we saw a little more volatility and choppiness. And I think it's to be understood that the consumer was dealing with a lot, whether it was stock market volatility or concerns around the interest rate or fears about tariff-induced inflation. There was a lot for the consumer to deal with. We saw a lot of consumers continue to move forward. There were some that have elected to take a pause.

Tom, can you buy home builders, even Pulte? You know, we don't own Pulte. This is a very well-run company, but we've got to have greater conviction out there in the mortgage affordability area, and we need interest rates to come down. And housing demand remains structurally strong right now. If you come out to California where we're from, there's not enough homes for people. Pulte reported very, very strong earnings, but we believe the stocks too dependent on declining interest rates, and we want to see that for further upside. Zoom out for a moment. The Dow is now up around 935 points.

the S&P 2 and a quarter plus, a NASDAQ, two and a half. This is after a rough day yesterday. How should investors use discipline to navigate these markets? You know, we continue to favor kind of a mix of high-quality dividend stocks, and so investors should just be patient right now. We need to see more clarity on the trade tariff talks. We want to see interest rates come down. We can manage through this uncertainty with discipline and optimism. And I'm very hopeful. hopeful that we're going to have a very strong year end. All right.

Tom Hewlett, thank you. Also, remember, you can recap every three-stock lunch any time you want. Got to scan that QR code on the screen, though. It's there right now. Or you can head over to CNBC.com for more also, I guess. And the 10-year Treasury yield slipping, as tariff uncertainty remains, we'll dive into the bond market with Rick Santelli after this. Welcome back to Power Lunch stocks are still up nicely this hour.

Two plus percent gains across the cost. the board here and the 10-year yield only a hair lower despite weak economic data this morning. Let's get out to Rick Santelli in Chicago for more. Hi, Rick. Hi, Kelly. I'll tell you, if you try to apply the old rules of treasuries and how they line up with the economy or equities, good luck with that because not only is it shifting right under our feet almost every session, well, today's pretty much exactly the opposite of yesterday. I'll show you what I mean. Look at a two-year note yield for the last 24 hours. And you'll see that yields are elevated.

As a matter of fact, after the week two-year note auction, we made the high yield of the session. Now contrasts that with a 10-year where yields have been going down for the most part. And as Kelly just pointed out, we're well off our lowest yields of the day, but yields are still a bit lower, which is the exact opposite of yesterday.

Yesterday we saw a steepening of the spread Tuesdays to tens. Today we're seeing some of that get taken back. As a matter of fact, the difference between two's and tens today, which is measured by that spread, is almost seven basis points of difference between the higher two year and the lower 10 year. Now, this is important. The two year has been shadowboxing the equity markets, which is a bit different. Usually it's a longer maturity. And as you look at the S&P for two days on top of the two year, you can see what I'm talking about. And it actually makes perfect sense because what's going on in equities is a nervousness of some.

certain volatility, and obviously over the last three weeks, we've had a lot of red ink as well. So that puts the two-year in the role of kind of the Fed maturity. When things get nasty in equities, whether it happens or not, investors look for the Fed to ride to the rescue. And that's why that relationship exists. Now, if we look at what's going on with respect to the dollar index, this is very fascinating. Because the dollar index, with interest rates, for the most part somewhat elevated. It's not helping the dollar index at all. The dollar index really is suffering from a sell from a global perspective, but don't get too crazy over this because last week we learned from Treasury International Capital Flows, always two months in arrears, that foreigners

were not selling treasuries. As a matter of fact, they were like buyers of treasuries in February, which would take the dollar index out of that selling role should they have been liquidating. I do think there is something going on around the globe that's causing that relationship between a weak dollar and strong gold, but we don't know how long it's going to last. John Ford, back to you. All right. Rick Santelli, thank you. Well, despite the big drop in defense stocks are racing here today, Gaines our next guest is going to explain why he still sees Northrop and RTX, maybe because of those drops, as buys here. Stay tuned.

Welcome back to Power Lunge. We want to show you now. NBC's newest subscription streaming product, CNBC Plus. What you're currently experiencing on our air right now is the CNBC Plus data feed. It displays an enhanced view and the latest headlines during our live business news lineup. Looks pretty nice. Indeed. Let's drill down on the defense stocks, which are under some heavy pressure.

And among the biggest losers today in the S&P 500, Northrop missed analyst expectations on the top line, lowered its full-year profit outlook. and RTF mourned of an $850 million hit from tariffs this year. You can see both stocks down. But our next guest sees a buying opportunity there. Ron, up seen as a senior aerospace analyst at BFA Securities. Ron, first of all, what happened with Northrop? Let's start there. Welcome.

Yeah, hey, thank you. So Northrop today reported, and they took a charge on their B-21 bomber. You know, the charge was $477 million. That wasn't expected. That weighed heavy on the quarter. And Northrop had been seen, as a relative safe place to go. And I think that's surprise rattled investors.

You know, that charge was related to some things they said were some material costs, but a lot of it has to do with they're making a bet on ramping up production. And the question really becomes, the key to Northrop is, you know, the bet to ramp up production, they're betting that the Department of Defense

is gonna want more B-21s than the current program of record. The current program of record is 100 of these airplanes. And if they up that to 150, maybe two, 200 airplanes, they're putting everything in place to get there. So we'll learn soon, you know, the fiscal 26th defense budget or the fiscal 26 federal budget, which will have the defense budget in it, that request should come out sometime, probably, you know, mid-May, maybe early May, so just a matter of weeks away. And we'll see there if they placed the right chips. My guess is, I think they probably did or they wouldn't have done it. But you never know until we see the

budget itself. So you think this is a buying opportunity? Yeah, I do. I mean, you know, having the shares all. off. Last I looked, they were off maybe 12 or 13%. That's way overdone on a program. And even if they got the bet wrong, the program's only about 12% of their revenue in total. And over the life of the program, worst case is they break even, but most likely they'll make some money. And the way the program is structured, there's a low rate initial production of the airplane, the first 21 airplanes. They're going to lose money there. But the next of the program record, the next 80, 79 airplanes, they're going to make money on. Somewhere, you know, low, call it low, low, low,

double-digit margins, low teen margins. So when you roll it all up, they probably will make some money on this program, but it's just going to take some time. And that's probably the worst case. But like I said, if there's more of these things in the budget, then they place the right bet, and you can see the stock go the other way. Ron, European countries, Germany in particular, poised to ramp up defense spending, but likely with European defense companies. Any risk there for the likes of RTX? And Northrop? Yeah, so it's a great question. Europe is spending a lot more on defense.

You kind of look across the Europe, you know, Europe writ large. You know, their countries are moving from, you know, one and a half to two or three or maybe four percent of GDP. The country's right on the kind of the front line with Russia are spending a lot more than that. You look at Poland, they're spending somewhere of six to eight percent of GDP.

The European industrial base is building itself out, but that's going to take time to do. And until that happens, there's going to be, you know, continuing demand for U.S. So if you look at a company like RTX, RTX makes Patriot missiles and things like that, and there's going to be more demand for munitions and missiles and that sort of stuff.

So I'm expecting there's going to be a continued good market for foreign military sales, both direct commercial sales and FMS sales to the US government into the European market, given where their industrial base is, they're going to need it. How much of a sentiment risk, evaluation risk, valuation risk might there be for these companies? Yeah, so, I mean, from Europe, I don't think it's too much, right?

I mean, a company like RTX, they're all over the world, right? So Europe is a place where they sell stuff, but they sell stuff into the Asia Pacific. You know, India is another place where they sell equipment. So could you see, you know, increased demand in other parts of the world if the European demand slows? I think there's a broader, you know, kind of maybe, how do you call it, technical trade around flights to safety and, you know, risk on, risk off, tariffs on, tariffs off. That's kind of an impact impacted the defense group. Year to date, if you look at defense names,

they've generally done pretty well, given all the volatility in the market. So I think even with the big sell-off today, year-to-date, Northrop's roughly flat. All right. Ron Epstein, BFA securities. Thank you. Well, the Dow is rallying now up about 990 points on hopes for an end to the U.S.-China trade tensions. We will get a final check on the markets when power lunch,

terms. Welcome back. It's been a bit of an up and down ride for the markets here the past couple of hours, but we're back towards session highs with the Dow up more than a thousand points. That brings us back to what we would call the Bessent highs, John, I think from this afternoon, when word first crossed that the Treasury Secretary in a closed-door meeting yesterday had expressed some optimism about a resolution with China basically saying the current situation is unsustainable. Which is different from the position that the administration have been putting forth, that, boy, this is plenty sustainable and it's worth sustaining for the long term. market's not exactly looking forward to that short-term pain.

Also, after the bell, in overtime, we've got Tesla earnings, which are hotly anticipated. Now, Tesla toward mid-late December, topped out right at around $480 a share. It's about half that close to $2.40. These earnings results seen as being a pretty interesting signal. Also, whether Elon Musk is on the call, whether Elon Musk indicates that he's going to leave Washington, D.C., maybe, and spend some more time focused on Tesla? Still trading around 100 times on the forward PE. So we've talked to a lot of value investors here on the programs lately who will look and say, okay, an Amazon or, you know, an alphabet or an Apple, our names that look interesting. Tesla kind of still remains in its own boat. We're mentioning

golden. Let's show that on the screen real quickly. Last couple of days, we've had a couple of superlatives in a row. First, 3,400 an ounce fell. This morning, 3,500 an ounce fell. But that said, some of the, Even the diehard, the longtime bowls are just saying, be a little bit cautious here. It's starting to act parabolic. And today's reversal could be emblematic of that. So you see a little bit better market tone. You see gold coming off the highs. You know, nobody ever knows if this is the turning point.

But it's a reversal that's worth paying attention. Are the rules changing, though, to the safety trade? You know, the dollar used to be a part of that. You know, U.S. debt used to be a part of that. Maybe it still is. we've got questions on whether there's this flight away from the U.S., but if there is, might these unusual moves flight to things like gold be part of, well, if I'm not investing in the U.S., maybe I'm buying gold.

Look, central bank demand has been a huge portion of that. But as Rick said, when the Treasury data came out, there was still buying buy foreigners by the Chinese. So a lot of this could also be an inflation story. It goes back to the announcement of those extra tariffs. That's probably going to be the fulcrum point to watch. But you're absolutely right. So there we see about a two-thirds percent rebound in the dollar index still below 99. If this language from the Treasury Secretary from this closed-door meeting is what we think it is the idea that he's acknowledging what we have effectively now is a trade embargo.

Right. Trade is basically on the verge of halting and that's not sustainable. Well, I guess that is heartening. Despite America first, maybe not America only, maybe globalism isn't doing well, but maybe. Maybe global trade isn't dead. All right, that's the hope at least. One also quickly mentioned we got some numbers for, I don't know if you've been watching the playoffs, NBA playoffs, have you?

I've been watching clips of Stefan Curry shooting crazy threes while like flipping over. Did you know that there are 37 three-point attempts on average for a game? Now up from 22 when Curry was first doing his thing. That's why it's become. So let's see, I don't know what. Go, do, Paul, what is the number? Tell me the number. Most watch opening weekend in 25 years, so I guess it doesn't, the three-point contest can continue.

People occasionally still drive to the hoop, though, I hear. I hear that's true. John, thanks so much for joining us today. A lot to cover.