Power Lunch - Dow rallies, S&P 500 flat as investors rotate out of tech to start new quarter 7/1/25

Episode Date: July 1, 2025

The Dow is climbing today, as investors rotate out of tech stocks to kick off the second half of 2025. We’ll tell you all that 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.

Good afternoon and welcome to Power Lunch. She's Kelly Evans. I'm Dominic Chu. The president's big budget bill clearing a new hurdle today. The Senate narrowly passes its version of the spending bill after days and days of tense negotiations, Kelly. It goes back to the House now where it faces an uncertain future amid firm GOP holdouts on issues like deficit and Medicaid cuts. And that's where we start today. Emily Wilkins is on Capitol Hill with all the details and maybe the timeline, Emily, of what's next. Hey guys, as you said, Senate narrowly passed Trump's megabille and that multi-trillion dollar tax package. It now, of course, heads to the House. Now, leaders are teeing up a potential vote tomorrow. That's when they want to get it done. That's when members are coming back. But before that happens, there's likely going to be a little bit of negotiation and a little bit of arm twisting going on because we're already seeing opposition in the House to what the Senate just passed.

You know, lawmakers, they're also trying to process everything that would. just passed as far as this $3.3 trillion package. That includes some last minute changes made just hours ago. Those include a number of things with those clean energy tax credits. Number one, it scraps a proposed tax on wind and solar projects that source parts from China. Then it also allows these wind and solar projects to access tax credits so long as they begin construction a year after the bill is enacted. But those two changes, as well as a couple others, are already angering some of the

fiscal hawks here in the House. Congressman Chip Roy tweeted that the changes that were made in the Senate for the Green Energy tax credits are a deal killer of what he said was an already bad deal. Congressman Ralph Norman also told me that he's a no, and he tweeted that the spending provisions in this thing are massive and will blow up the deficit. We can't keep mortgaging our future. So definitely keep an eye on the fiscal hawks, but also go ahead and keep an eye on Republicans from more moderate districts. Remember, in the Senate, two of the three senators who ultimately voted no, the Republican senators, were more moderates. Tom Tillis and Susan Collins, they had concerns over Medicaid. So definitely another group to keep an eye on in the House. But for Speaker

Mike Johnson, really the goal here is that whatever negotiations he does over the next day or days to not change any of the text in the Senate, because if he does make changes, then the text has to go back to the Senate and then there's no way that they're getting this done by July 4th. So still a process to go in the House. Senors I talk to fully expect the House to have a rigorous debate on this. We'll see if we get a final vote tomorrow and what it's going to take to get there. Guys? Emily, I just have a question and I know that it's one that you can't really answer, but I just want to get some context for our viewers and listeners. What exactly would a reconciliation, what exactly could a reconciliation look like? With all of that rhetoric,

coming from the fiscal hawks, is this a deal that is just not going to get done or are there possible concessions and just how long could that possibly take to reconcile Senate with House? You know, Dom, I think what Mike Johnson might need to do here is kind of look into his wider arsenal of things that he can negotiate, that he can promise, that he can do with members. I mean, really, again, if Johnson makes any potential changes to what the Senate just passed, then it needs to go back to the Senate. If the Senate changes, then you get into this ping pong. That's the last thing that any of the GOP leaders here want to see.

So if there are negotiations, it's going to have to be on something that's not bill text. Promises for votes, promises for other things. Johnson's already started talking potentially about a second reconciliation package and getting other things done here. But I think his goal is really to not going to be changing the text. All right, Emily, thank you. Emily Wilkins, we appreciate it for now. Quick programming note, Office of Management, and budget director Russell Vote will join closing bell overtime this afternoon to discuss

what's next for the bill as far as he's concerned, and that's at 4 p.m. Eastern time. Meantime for the markets, we can recap a little bit of the performance in the first half, with the Dow finishing more than 3.5% higher, the NASDAQ, the S&P, up 5.5% ending at record highs, of course, and the small cap Brussels the loan year to date index still in the red, although all four averages ended the first two quarters well off their April lows. Our next guest says that rally, this recent one, may not last as he is on the lookout for slowing economic signs in the weeks to come. Joining us with all of his predictions is Chris Grissanti, the chief market strategist and senior portfolio manager at MAI. All right, Chris, it's great to see you.

What are some ideas? What comes to mind in this crazy market? So you've got to celebrate the second quarter comeback, even if you're a skeptic like me. I mean, the market soared 25% off of its lows. The question is, where does that put us? So we're back to 24 times forward earnings on the S&P. That's more than one standard deviation above the 30-year average. And that's okay if earnings continue to grow, but estimates for this year are 11% and next year, 12%,

that's are pretty aggressive. You add the tariff headwinds in, and I think it's a good time to be cautious rather than to reach for more performance. What does that look like for you? So for me, it looks like not going to cash, but there are, this has been a tale of two markets. Healthcare, for example, has been the whipping boy of this market. It's got terrific cash flows, investment grade balance sheet, and the lowest valuations it's had in a decade. And in fact, healthcare is now the lowest percentage of the S&P that it's been in at least 25 years. So that's a value section.

It certainly has some near-term headwinds, but I think that gives us the opportunity to make investments at decent prices and plant some seeds. Also, Chris, I mean, one of the other value sectors that's getting a lot more attention these days is the financials more broadly, not even just the big banks, but also some of the insurance companies as well. The financial sector has over the last couple of years been that sector that people have pointed to as being the one that could lead this kind of broadening out type rebound. Do you see some of this momentum continuing for the banks, especially given what we're seeing on the regulatory framework? I do, Dom. I think that's a great question. You've got financials, you've got industrials.

You've got economically sensitive sectors that are doing just great right now. So you'd say, well, that would push back against my be cautious. But I really do think. So you had a kind of crummy first quarter. You had a terrific second quarter. I like to say the third quarter is going to be the tie break. And I think the tie gets broken in favor of a more difficult economy. I think that that will prevent the financials from continuing to leave the way.

So I would skate to where the puck is going to be. And I think that's more cautious, more economically immune stocks, again, like health care. Any thoughts on the big beautiful bill, Chris? Whether either it's short term or very long termification. I think it passes, Kelly. I think there's a lot of drama. I think there's too much momentum behind it now. And I think they're going to be wrapping the things up.

And again, I think this is, again, a short-term positive for the markets. It will add to the momentum we've seen. But I do think that this rally since April has been a gift. And so let's not look the gift horse in the mouth. And then let's reposition for what might be a more difficult second half of the year. Chris, is this a market? And I say this in light of in context, Fedshire Jerome Powell's comments out of Cintra today in Portugal, where he said, in essence, we would have cut interest rates by now had it not been for tariff policies being put into place.

Is this a market that needs the Fed to ease in order for it to continue higher? Yeah, I mean, we get asked that a lot from our clients and others. And I think be careful what you wish for, because I think the Fed only eases when it sees signs of economic deterioration. And once we're there, you know, the market doesn't necessarily do all that well once the Fed starts easing, not because they don't like low interest rates, we love it. But because they're easing because the economy's slowing, because unemployment is rising. So I unfortunately think the Fed will hold on until that starts to happen. So I wouldn't look to Jerome Powell or lower rates to save the market. And finally, Chris, just to bring it back to kind of positioning for the second half, is today a microcosm of that?

We have the Dow's of 400 points because you've got UNH, Amgen, and Merck leading the way. The NASDAX underperforming and you've got Nvidia and MicroStraight, some of those names under pressure. Is this giving us a glimpse of what the second half is going to look like? Could be. Or, you know, and it's also a lot like what the first quarter was like. So maybe the second quarter was the aberration killing. But as you know, last time I was on at the end of May, my pair trade for 2025 is long UNAH short Tesla. It's certainly been working since then and today.

But we've got a long six months ahead of us. But I do think that's where the buck is going. Yeah. Well, see, no one wants to hear that right now, which probably tells you something, you know, as ever. I still remember his Verizon Tesla pair trade no one wanted to hear about, and that worked out quite well. Chris worked out pretty well for that.

I'm not you guys. Nobody wants to listen. I get it. Chris, thanks for the time. Chris Grisanti with N. Good to see you guys. Joining us with his second half portfolio. All right.

Well, a new read on the job market today. latest report showed a significant increase in the number of job vacancies exceeding its forecast and marking its highest level in six months now. And this has bond traders closely watching tomorrow's big employment data as strength in the labor market could impact the Fed's next meeting later on this month. With all of that, Rick Santelli joins us now with the bond report and how it's playing out on that macro trade. Rick. Yeah, and Dom, there's a lot of moving parts here and they all look pretty good for equities and potentially higher rates. Seven hundred seven million seven hundred and sixty nine thousand job openings look at the

chart there and believe me the right hand side of that chart doesn't look aggressive but it doesn't look weak and that's the point the labor market isn't rolling over. It's somewhat moving sideways at least based on that particular economic fundamental and that is enough to make traders nervous. Just consider twos and tens both close at the lowest yields yesterday since the 1st of May. We'll call it two months. And this was in front of, of course, Chairman Powell in Portugal. But what happened is, as you look at the intraday charts, two things I want you to notice.

First of all, when rates reversed higher. When did they reverse higher? Almost the second, right around 9.30 Eastern when Jay Powell's headlines hit, and that was the end of it. Rates started to move back up. Then at 945 and 10 o'clock, we had S&P Global, better on the manufacturing side in terms of PMI's, and, of course, the Joltz number out. You can see about in the middle of that chart, all that volatility moving to the upside. That's a good thing. And it even had enough horsepower to stabilize the dollar, which for the most part, for the last eight trading days, has been going down.

So you can see the dollar chart looks a lot like the tenure chart. It turned around the same time, and it's moving up. One thing I forgot to tell you all, and that is viewers, major flattening today. Two-year yields are up much stronger than 10 and 30-year yields. Why is that? It's what Dom was talking about. The labor market not rolling over really has an impact on less tightening, and that is showing up by two-year yields being more stubbornly to the upside than the rest of the curve.

Dom, back to you. And consumer equities following suit as well for that trade. Thanks very much, Rick Santelli. Lots more show to come here. But up next, Tesla in the Doge House, the feud between Musk and President Trump reigniting that stock having a seriously rough year so far. But how does it compare to the rest of the overall tech space? We're going to lay it all out when Power Lunch returns after this commercial break. All right, welcome back to Power Lunch.

Fighting over the big, beautiful bill is coming to close to an end, at least in Congress. But the war of wars between President Trump and Elon Musk made, major. just be getting started again. Musk heavily criticizing the bill on X, President Trump hitting back. He will direct Doge and its former chief in this way. We might have to put Doge on Elon. You know, doge is?

Doge is the monster that might have to go back and eat Elon. Wouldn't that be terrible? He gets a lot of subsidies, Peter. But Elon's very upset that the EV mandate is going to be terminated. And you know what? When you look at it, who wants, not everybody wants an electric car. All right, some dramatic words here from the president. Tesla shares are under pressure today down nearly 12% since the feud began back in early June. overtaking Apple, by the way, as the worst performing Mag 7 stock on a year-to-day basis. But our next guest expects the weakness to be temporary, transitory, if you want to use that word, and has Tesla among his top picks for the second half of the year. So joining us now, is Dan Ives, global head of technology research at Wedbush Securities, a man who's been a noted

Tesla bull for quite some time now, and for the most part, the dip buying has yielded results. But is it a point now where this feud could be boiling over? Look, I mean, the few, it's the last thing is the Tesla investor you want to see. Because it's essentially, it's almost like a junior high school situation, best friends, now, potential enemies. You don't want Trump as an enemy. Because ultimately, when it comes to autonomous, the regulatory framework so important, you know, for Tesla, especially what we're seeing with Austin. Look, in my view, it's going to settle out.

And it was like, I don't expect that this thing is going to, you know, cascade into something much worse. But it's going to be an overhang in the stock. You need Musk to stop getting into the political arena. And I think that's the frustration that you're seeing in shares. What exactly then do you think is the outlook for not just Tesla, but Elon Musk's very high-profile and vocal role as its CEO, vis-a-vis the relationship with Trump. Is this a situation where he now needs to solely focus on Tesla

and stay out of that political arena? Look, look, we've talked about it. I mean, the last thing you want to see must do is just get into this political arena. Because ultimately for Tesla, that's been the overhang now. Doge took a huge step back in terms of Trump administration. But I think the worry here is that when it comes to, the most important thing is about the federal autonomous roadmap.

And I think at the end, of the day, Trump needs Musk, must need Trump. They'll continue to be a little war of words here, but I do think things will settle down. And I think this is something that for Tesla, you need to navigate the volatility, because it's our view, the autonomous value. It's a trillion dollars a loan to Tesla, despite obviously a lot of, you know, the worries that you're seeing today with Trump. But I do not believe Trump becomes an enemy number one for Tesla and Musk. Do you think it's, okay, so Tesla, Apple, Apple's down 25%. I think Tesla 17 or vice versa.

Maybe it's the opposite. What happens in the back half? Mean reversion? I mean, do things start to turn in their favor? Or is it more of the same until the fundamentals change? What does it all mean for the Mag 7? Tech is actually underperforming today to kick off the second half of the year. And health care is boosting the Dow.

Look, I think tech stocks, I think it's going to be a huge rally, continues in the second half. I mean, we believe 10% on the low end, potentially 15% higher. for tech stock second half of the year, led by Godfather of AI, Jensen, Nvidia, Microsoft, Pallenteer, you know, among others, when you look at Tesla, I mean, my view is that it's going to start to reverse, because as you start to see the autonomous vision take holds, you're going to have delivery tomorrow that are not good numbers, but I think that starts to rebound in terms of China. And I think Tesla, I think this is a stock that could be up 30, 40%, percent as we go into the next six, nine months. When it comes to Apple, look, I mean, we were at WWDC.

I mean, that was kind of a yawner. You need them to make a move. It just comes down to like the treadmill approach has ended. You want a big splashing move, like a big partnership or a bunch of... Perplexity, anthropic. So you said it. So this was interesting because during our first ever CNBC Pro live event, you were one of the guest presenters.

And during that conference, you told the participants that Apple needed to make a splash. And you named perplexity by name during that conference. Does Apple need to do an acquisition in order for the story to turn? Or can Tim Cook and Apple turn it by themselves internally, which they've always had a track record of doing? Yeah, and we talked about it at the event. Look, it's a matter of when, not if. In other words, Apple needs to make a move, and it's clear to me. I mean, look, perplexity to me seems like the no-brainer relative to how it fit.

But look, it's about the developers. It's not necessarily investors. Developers, if you look at OpenAI, you look at Google, You look at Microsoft, they need to get in the game. That's something that can't be done in Cupertino. And it's my view. The reason the stock, and Kelly, to your question, and the reason the stock has, I think, a strong move into the second half of the year

is I think Apple's going to make a move. I know historically they haven't done acquisition, Beats being the biggest one, but now is the time for Cook and Cupertino. The treadmill approach, I think, is that ended. We might have some news on this front, actually. A news lord on Anthropic. Pippa Stevens is back in the newsroom with those details.

Pipel, what's happening? Hey, Kelly. So Anthropics' revenue is accelerating as companies amid strong demand for its clawed AI model. So according to the information, it has reached a $4 billion annual revenue run rate. That's $333 million per month. That's almost four times, up almost four times from the start of the year. And that is according to people familiar with the matter. Now, of course, Anthropic was most recently valued in the spring at $61.5 billion. We have reached out to the company for comment.

but the information is reporting they now reached $4 billion annually in revenue. Kelly? All right, PIPA thanks. Dan, you can pick up on that. It speaks to, I mean, it's a fourth industrial revolution. Apple can't be on the outside looking in. And I think it just comes down to whether it's perplexity, whether it's from outside changes in terms of leadership,

that they're going to have to bring in from an AI perspective. They're going to have to do something. That's what the market's starting. The market's reading through. It's pushing them. Here's the problem, though. And it's weird how, you know, over time I come to sympathize more and more with the decision makers behind this who might say, okay, even if we agree we have to do something splashy, how do we know what is the right thing to do? How do we know if it's anthropic or if it's

perplexity or if it's to do something even bigger in Boulder? You know, how do we know, especially as all this talent is now being drained and taken over to meta, like how do you know what exactly is the right next move? Sure, but I think at this point, left lane and Ferrari, you got meta, you got Microsoft, you got in the black weather jacket, Jensen, invidia. On the right, you can't have Apple 45 miles in the right lane, just doing nothing. But, but it's just, but And to me, perplexity, it's a no-brainer. That is the one... Is it good enough?

And I think it's a start that ultimately is going to change, because it comes down to the install. It's the golden install base of Cooper Tina. But it's also, I mean, with these reports, that Apple is evaluating the use of anthropic and open AI to power Siri as opposed to just outright going after something else. So to Kelly's point, this is a choose-your-on adventure that doesn't just two or three-hour. There's maybe six or seven different ways that you can do this.

No doubt. But in that Choose Your Own Adventure, it's not status quo. So they're doing something that I think is out of the typical DNA of Cupertino because it just came down. That WWDC, that was a shrugged shoulders. Every developer came out of there being like, what, what are they doing? And I think they, the clock struck midnight. They need to do something.

And that's what the stock's telling me. I like that. Did you write that already? The clock struck midnight? No, it's right here. That is a bold statement. And I love it. Dan, thanks. Appreciate it.

Always good to have you on. Dan Ives. A pharmacy flip, CVS dropping coverage for one weight loss drug in favor of another could lead to a major power shuffle in the space. We're back with that story next. CryptoWatch is sponsored by Crypto.com. Crypto.com is America's premier crypto platform. Welcome back to Power Lunch. A new development in the growing weight loss war with.

with so many competitors in the space, any advantage could make the difference, and that's what's happening today. CVS Caremark is dropping Eli Lilly's Zepbound in favor of Novo's week. Is it Wigovi? Angelica? Okay, Wigovi. Wagovi. Wagovi. Approximately 200,000 people are expected to lose coverage of Zepound as a result of this.

We'll have to switch to Wagoe. Could boost Novo, which is down nearly 20% this year and has been trying to regain some of the ground. It's losing to Lily. Of course, it also just had that kind of pulled out of that Hymns partnership, too. Our farmer reporter, Angelica Peebles, is here for more. So when we say CVS, we're talking about the pharmacy part of this. We're talking about the pharmacy benefits. The PBM.

CARE. So, for example, we have CAREMark as our PBM. Ah, we do. We do. I'm pretending like, but I thought we had you and whatever. I don't know how all this works. Just explain to us why this shift is happening and why it's such a big deal. So this is happening because these drugs, of course, are very expensive.

Both Wigobi and Zepbound cost about $1,000 a month. And so CVS is saying that they made the determination that these drugs are basically interchangeable, and they're going to use their leverage as a PBM that covers millions of lives to pit them against each other. And therefore, they are preferring Wagovi over Zepbound. They're just getting a better economic deal is what you're saying. That's what they're telling us. Now, Novo has been very vocal that they say they're not giving some massive deal. This is not the start of a price for.

But of course, these prices are all secrets. We don't know exactly what it is, but there is surely some discount going into that. They're all up for negotiation, right? That's the whole idea of a pharmacy benefits manager. They do this in bulk by the millions and then say, hey, we got this many people paying for this stuff. This is what we want to pay. Exactly.

And that's how you bring the prices down. And so that's what they're saying here. Now, they're talking about the numbers of potentially tens of millions of lives covered by these plans that are affected. Lily, of course, is downplaying it. They're saying that only about 200,000 patients will be affected by it. And people are still trying to figure out exactly what this means for. for them because this just happened today.

So we knew about this two months ago, and patients have been kind of scrambling, bracing, seeing if they can refill, maybe get a 90-day prescription. And just today, people are trying to figure out whether they're still covered, whether they can get it maybe at a still discounted price, but lower than that list price. And also if they can get a medical exemption. So I talked to one doctor yesterday who said that she's been working,

their whole office has been working around the clock to try to get these letters ready to appeal so that their patients can stay on Zepbound. So, yeah, I mean, for consumers, you'd hope it's the start of a price war, right? If Novo's been underperforming and now they're cutting the price and that's smoke gets passed along, that's great for investors, different story, obviously, but it would make sense if it's coming from a place of desperation. Are these drugs perceived to be basically the same, or is Lily's perceived to be superior? So CVS will tell you that in their minds, it is the same.

However, Lily does have head-to-head data showing that its drug is more effective. People lost about 20% of their body weight versus 13% with Wagoe, and there do seem to be more. side effects with Wagobe. However, you're talking about, you know, a marginal difference. It's especially depending on how much weight you want to lose. In the grand scheme of things, is it really that big of a difference? And when you're talking about factoring cost and hopefully driving down that price, that's where some of those discussions come into play. 7%. What would that be? I would just say this. The next big question is what happens when other competitors come in with orals and everything else. Sure. Are we anywhere close to that point

of them being as effective? I remember some of these studies you've referenced, but in terms of coming to the market? We are expecting Lily to bring forth their pill next year. So they're hoping that that will get approved and they can launch that. And you would think that it would be priced at a lower price point just because it's much easier to make pills. You don't need the shot and all the difficult manufacturing that goes into it. But again, you know, they're also lily. They have both the pill and the shot. So we'll have to see exactly where they come in and how they want to price that. They're not going to self-cannibalize. Yeah. All right. Angelica, thanks. Appreciate it. All right. Let's now get over to Kate Rogers for a CNBC News Update.

Good afternoon, Kate. Hi, Dom. Sixteen states sued the Trump administration today, claiming it unconstitutionally ended more than $1 billion for mental health-related grants to help students after mass school shootings. The lawsuit asks a federal court to reinstate the grants and determine their termination was unlawful. The Education Department began cutting the funds in April, claiming that schools were seeking to bring in diverse psychologists or misusing the money. Secretary of St. Marco Rubio said today the U.S. Agency for International Divorbiton, development has officially ceased its operations. The comments came as what remained of the gutted agency was absorbed today into the State Department. A study published yesterday in the Lancet Medical Journal suggested the U.S. aid cuts could result in more than 14 million additional deaths by 2030.

And soccer's English Premier League is bringing AI to its app in a new partnership with Microsoft. The EPL announced the five-year agreement today saying it will provide fans with an AI companion to provide quick facts and stats about matches, the terms of the deal were not disclosed. Dom, back over to you. All right, thank you very much, Kate Rogers for the news update there. Coming up next on the show, the read on retail, Target lagging behind its competitors, is it due for a bounce back to catch up? We're going to explore in the market navigator coming up next.

All right, welcome back to Power Lunch after shedding half its value over the course of the past year. Target has been basically flat for the past three months. retailer is making some strides today, but it's still very much underperforming its retail rivals. Still, given all of that, our next guest thinks it is set for a bounce. So joining us now as Tony Zhang, the chief strategist over at Options Play, Tony, when we talk about the retail landscape, Target has been beaten up so much over the course of the last, maybe now few years. What makes you think that this is the inflection point for a potential sustained bounce higher? Yeah, that's a great question. I think there's a few different components to it. Target

certainly has struggled here over the last few years to find its footing. You know, the revenue growth is just not there yet, but I think there are some signs that investors are starting to pay attention to. As you said, the stocks down 50% this year alone. But, you know, over the last three months, it's starting to make a little bit of progress here. And just today, it managed to break out above an important psychological level, that $100 level. And I think this could potentially be the start of what could be the recovery for target. I mean, if you look at the underlying fundamentals, contrast that to Walmart, Costco, and Amazon, it's basically the exact opposite.

You know, with Walmart and Costco, you have stock trading near its 52-week highs, but also very bloated valuations. Walmart's at 37, 38 times forward earnings. Costco's at 50 times forward earnings. Those are valuations very hard to get my arms around. especially when you operate on such razor-thin margins of 2 to 3% when you look at the net margins. Target, on the other hand, trading at 14 times forward earnings looks a lot more attractive. Not to mention, Target actually has the highest net margins of any defensive retailer in the S&P 500 at north of 4% here.

And then you add on top of that the nearly 5% dividend yield, you know, that 13, 14 times forward earnings looks a lot more attractive in this landscape where, you know, with tariff uncertainty, with inflation, you know, with that type of market, with this type of environment, I think I'd much be a much more comfortable as investor looking at Target at 14 times forward earnings versus Walmart or Costco at much, much higher valuations. Whether you look at on a forward earnings basis or on a revenue basis, you know, Target looks a lot more compelling. And I think the market is starting to pay attention. So I think you have a case where the technicals and fundamentals align quite well here right now for Target. All right. So if that is the case, no doubt you're unabashedly bullish on

this. What is the way that you play it if you are as bullish as you are using the options market? Yeah, I think you can do this very simply by just going out to August and buying a call option. So I'm going out to the August and I'm looking at buying a $100 call option. Earlier today, you could spend a little over $7 to buy that call option. And that gives you a leveraged way to play for upside with unlimited upside potential because it's a call option while only risking about 7% of the stock's value to the downside. This way you have an asymmetrical risk or reward ratio protected to the downside while you have leveraged upside using a simple call option. All right. Tony Zhang with a call on target owing outright long a call option at a hundred bucks strike for Target.

Interesting. We'll talk to you soon. Callie back over to you. Bold move. Thank you so much. Thank you both. Coming up, extreme weather exposing critical vulnerabilities in our infrastructure. We'll drill down on what needs to change and how much it could cost to fix next. Welcome back to Power Lunge. Country's infrastructure is under pressure, not just from age or overuse, but a growing threat that's putting roads, bridges, and airport at risk, climate change. Extreme weather, exposing some critical vulnerabilities in the systems we use every day and fixing it, well, that could be extremely costly. Diana Ollick has a closer look at the rising risks of climate change. At Fort Lauderdale International Airport, historic rainfall,

turned runways into rivers, shutting it down and stranding passengers. And in New York City, extreme heat caused metal on this bridge to expand so much that the bridge got stuck open. U.S. infrastructure can't handle climate change. That's a recent finding by the American Society of Civil Engineers, which trains engineers and informs federal, state, and local building codes. According to that report, climate-related challenges are widespread, affecting even regions. previously resistant to these events. The ASCE's overall grade for the nation's infrastructure, a sea. We continue to see more extreme weather events,

so our infrastructure many times was not designed for these types of activities. Executive Director Tom Smith says it will only get worse. Whether it's ice, snow, drought, heat, obviously hurricanes, tornadoes, we have to design for all of that. And we have to anticipate, you know, not just where the puck is now, but where we think it's going. Sectors with the worst grades include airports, power, and telecommunications infrastructure.

We asked First Street, a climate risk firm, to overlay its risk modeling on these specific locations nationally. It found that 19% of all power, 17% of telecommunications, and 12% of airports have a major risk from flood, wind, or fire. And those numbers will rise. It was built decades ago. And so it was built for a climate, that no longer exists.

Sarah Kappnick was chief scientist at the National Oceanic and Atmospheric Administration, but was lured away by J.P. Morgan, whose clients were asking more and more questions about the climate impacts to their investments. How should I change and invest in my infrastructure? How should I think about differences in my infrastructure, my infrastructure construction?

Should I be thinking about insurance, different types of insurance? How should I be accessing the capital markets to do this type of work? For both KAPNIC and Smith, making infrastructure climate resilient all comes back to the science. Climate and science is something that we take very, very seriously, working with the science, connecting it with the engineering to protect the public health, safety, and welfare. But that science is seeing deep cuts from the Trump administration.

It fired hundreds of employees at NOAA, FEMA, and NIST, key government agencies that advance climate science. There's going to be this adjustment period as people figure out where they're going to get the information that they need, because many market decisions or financial decisions are based on certain data sets that people thought would always be there. In addition to science, the nation's infrastructure also needs funding. ASCE estimates there is a $3.7 trillion gap over the next 10 years to get U.S. infrastructure to a state of good condition. The Trump administration cuts to spending so far include ordering FEMA to cancel the nearly $1 billion building resilient infrastructure and communities program, which was specifically aimed at reducing damage from future natural disasters. Back to you guys. Diana, thank you very much. Diana Oleg.

All right, still ahead on the show, a new era for the NCAA, a landmark settlement changing the way college athletes can be compensated. It's NIL, the next chapter. We'll get the full detail. coming up next. Welcome back to Power Lunch. A new era is beginning for college sports. Effective today, colleges and universities are now permitted to directly compensate their student athletes. Just outright pay them with a paycheck. Let's bring in Alex Sherman to discuss just how much money is actually on the table, as well as what the competitive implications are, not just for each team, but for amateur slash pro sports and pro sports outright. Right. It's hard to know what's amateur and what's pro these days.

There's not anything anymore. They're all just, everyone gets paid. So what we know now is that really what's going to happen is the big time college sports, you know, whether that's mainly football and basketball. And obviously there's a slew of Power 5 schools that will pay up to $20.5 million per year for their athletes. It is at their discretion, how they divvy up that money. but broadly speaking, most of it will go to football. There are certain schools, obviously, that are big-time college basketball programs

that don't have football programs. So those schools will be at an advantage to compete in basketball because that's where they'll skew their funds. But you can spend up to $20.5 million. You don't have to spend all of the money, but obviously to compete at the highest levels, you will spend all of it because otherwise you will be at a disadvantage competitively. How complicated do you think this makes the calculation, not just for the schools, running the programs themselves, for boosters and everybody else in the ecosystem?

Because now that you have, in essence, what is a salary cap, right? If you wanted to spend the, if you were Alabama football and you want to spend a lot of this $20.5 million on football, you also have a very decent D1 college basketball program. So are you doing, this is a resource allocation decision at this point? Yeah, look, I mean, theoretically, this should, I don't know, simplify is the right word, but it should at least flatten the playing field among the major schools so that you're moving out of this system of NIL collectives, where it was really the Wild West. It was just however much money you could raise, great. All of that money can be then thrown to these athletes, and there would be these major bidding wars.

Now that there's a cap, in essence, you're saying, okay, of all of the schools that are going to pay up to that, At least they can all kind of compete fairly against each other because they can only spend up to a certain amount of money. That said, you're right. It will be up to the schools to figure out, you know, is it worth it for us to throw a few million dollars at a certain sport because we feel like there's some sort of added benefit to doing that? The economics tend to skew toward the big ones. So my guess is that the bulk of the money will just go to the football programs at all of these schools. And the smaller sports will be left at a relative disadvantage. Because the other major news item, the big change here, is that all of the NIL stuff now has to go through a clearinghouse. Is that right?

Right. So the clearinghouse could potentially, and we don't know what's going to happen. If the clearinghouse ends up denying nine out of ten deals or something like that, or saying, in order for you to receive this compensation, there has to be an endorsement product that really goes with it and really, you know, kind of stepping down on that, okay, fine, then the $20 million is the whole pot. But if that's not what happens, and they're just basically rubber stamping. stuff. Then the $20 million to Dom's point is just a floor. And then those NIL numbers continue to be with there. Do we have any sense yet just how stringent and strict the clearinghouse is going to be? So the idea behind the clearinghouse, the numbers that, so Deloitte sort of is the enforcement agency of the clearinghouse. And then there's also another commission called the College Sports Commission, which is an enforcement of this sort of college spending. So there's kind of two ways of looking at NIL. There's the 20. $1.5 million. That's the money that the colleges will pay the players. Then the outside NIL money will then run through this clearing house that Deloitte will basically say, is this a fair deal? And the purpose of the clearing house is so that you can't, in essence, go over the $20.5 million cap and come up with some ridiculous number and say like, oh, yeah, you know, we're just paying for NIL rights for some video game. And here's $8 million. And that would give certain schools in advance.

and not others. Then there's sort of another category of NIL, which is this direct endorsement branding deals. That's where the system wants things to go. They want to move away from the NIL collective. And that's why they're bringing in Deloitte to be sort of the armed force, you know, the agency here and say, look, do a deal directly with a brand. Because we know a public company, we know those deals are probably fine. And that's what Deloitte has said that 90% of the public company deals will probably become unchanged. It's these private company deals. It was always weird to me that by allowing the athletes to receive it compensation,

that somehow it was coming from alumni instead of from the companies themselves. Right. Like, shouldn't the whole point be if the company wants to pay to endorse? Well, there are some companies, well, some companies do. I mean, Roebuck just as an a legislature wear company, was a pioneer in this. They had signed their student athletes and some high profile ones over the course of the last few years. I don't exactly know what the payment profile or parameters were, but these athletes were wearing their gear.

and if you use like a certain code or you buy it through them, I don't know how they get paid, but they got paid by a company. Yeah, that's right. So Kelly's point, the donors, that money will move toward the colleges. So you will donate to the college. The college will then push that money toward the players. The NIL collectives, many of them will shut down. Smaller schools will probably keep them open because they won't pay up to that $20.5 million. So they'll need every penny they can get from outside donors if they can get it. And then there will be these third category of deals, which will be between the company and the athlete direct. and those deals will probably be more or less unchanged. Sounds insane.

Forget about it. You need college guidance counselors. That's why I was like, simplify. It's probably not the right word here. No, probably not. Oh, gosh. Anyway. Thank you for staying on top of it all.

Thanks, Alex Sherman. And by the way, if you want to, please be sure to sign up for Alex's newsletter. Just visit cnbc.com slash sport newsletter. You can get all those insights right there on that QR code. And as we head to break, be sure to follow and download the Power Lunch podcast as well. You can catch audio-only versions of the show anywhere and any time you want. We'll be right back. Before we go, today a new article on Amazon's move towards automation.

Company is on the cusp of using more robots than humans in its warehouses. You've probably seen these headlines. The e-commerce giant has spent years automating tasks that humans previously did and has deployed more than a million robots in these warehouses and workplaces. A million robots versus the, I want to say it's, I think, 1.5, 6 million actual human being. employees. So that means a 50% gap between them, but still, it's a huge move. And all of this in the context of what Amazon CEO, Andy Jassy, just told our own Jim Kramer last night. And then what he said weeks ago in stat to staff about how AI could then just replace some of the

jobs that are in place at Amazon. Amazon, Nvidia, all these companies are looking more and more to robotics as the next chapter to this, which is just interesting to look at the stock performance as we kick off the back half. Invidia is lagging today. You know, some of these tech name some of the winners from the first half. There's a clear rotation. Healthcare, some of the laggards, those are where we're seeing the outperformance. Autonomy, I mean, we had Dan Nives here. He claims autonomy is going to be one of those big, big thematic elements going forward. I mean, it probably will be. All right. There you go. All right, thanks very much for watching Power Lunch. We're still not robotic. Closing bell starts right now.