Power Lunch - Dow rebounds by 500 points after Trump tariff auto delay

Episode Date: March 5, 2025

Stocks are staging a recovery rally after back-to-back losses, as an exemption for automakers on President Trump’s tariffs offers hope for more concessions. We’ll cover all of the market angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, as stocks take a turn based on another potential turn in tariffs. We're going to tell you who said what and why it matters. Plus, as oil and bond yields fall, will it force the Fed's hand will have breaking news from the Fed. And why one biotech analyst, Kelly, says we may not need most biotech. I don't know if he would go that far, but we'll see. The major averages have turned around on that news that auto tariffs on Canada and Mexico will be delayed by a month. That's got the Dow, the S&P, up nearly 1%. It's a little bit more than that for the NASDAQ.

For GM and Solantis, all nicely higher building on gains that we've seen throughout the session as these rumors ahead of the actual announcement, Brian, we're building. Yeah, and by the way, we've got a pretty fired up Canadian in-house in moments to talk just about this. All right, let's begin with some maybe good news for Detroit and its investors, a reprieve even temporarily for the automakers. Kelly just talked about it. Let's talk about tariffs. and trucks. We've got Megan Casella in D.C. Philibault as well. Megan, let's start with you. On again,

off again. What is the latest that we are hearing and what do we know about potential tariffs slash non-tariffs? A little bit of firmer news now, Brian, just a few minutes ago we heard from White House Press Secretary Caroline Levitt. She's the one who confirmed that rumor that we've been talking about for about 24 hours saying there would be this one-month reprieve for the automakers. She worded it as Cars that are associated with the USMCA would not see tariffs for another month. She also said the president is open to hearing more about exemption. She said this exemption came about because Ford GM and Stylantis asked for it when the president spoke with them yesterday and that he's open to hearing from other industries.

That's the good news. The bad news is that she says it's only one month because these reciprocal tariffs, which they call the big ones, those are the ones set to take effect on April 2nd and that the president is very firm on those and will have no exemptions there. So it's this temporary reprieve. The other bad news I would say, guys, is that steel and aluminum tariffs have already been signed into law, and those take effect next week. They'll hit Canada and Mexico, and they'll hit the automakers as of now. So it's good news, but it might be brief.

And copper prices are jumping today because that was called out last night. That could be a place we go to next. Phil, so the automakers, look at the results they're getting from these phone calls. That's good news. That's a one-month reprieve. But in the end game, Kelly, when you look at this, they're still behind the eight ball, because they have to make a decision in terms of production within the next month, what are they going to do? And they're likely because I'm just guessing that they're probably going to say, look, they're going to go into effect on April 2nd. We have to plan for that.

And as a result, what are they going to do in terms of production for vehicles made in Canada and in Mexico? And the expectation is you're not going to be able to bring much of that production back to the United States. When you look at the daily production of vehicles, the overwhelming production, the volume is overwhelmingly in the United States, followed by Mexico, and then followed by Canada in terms of daily production. They'll be able to bring some of that, not much of it, back to the United States quickly. To bring it back in a large amount, you would need to build more plants and more assembly lines. That takes years. You're not going to do that within the next 30 days, 60 days, 90 days. Well, you're also, Phil, not going to make major and long-term, I mean, these auto-plant,

it's not just about buying parts from Canada or Mexico to put into a car, is it? It's about long-term investment. You look at the Ford Superduty pickup truck. Their Ford is planning to expand an already large plant in Ontario, Canada, and those kinds of decisions are up for grabs. These are billions of dollars, and I would imagine, to your point, to not going to change or waiver based on something that may or may not happen for a month. Correct.

And that's the decision that they're facing is, okay, if we know that this is going to be the trade policy, let's say for the next five years, four years at least, what can we do realistically within the next four years? You cannot build a plant, retool it, get it up to speed, and start cranking out models in less than three and a half years. And that's lightning speed. the auto industry. So they have to make a choice in terms of, okay, if this is what it's going to be, how much can we bring back here, which is nibbling at the edges, and then how much do we have to

just, we're going to have to make these vehicles in these countries and bring them back here. What's the cost going to be? So you will see prices go up, incentives come down, and it's going to cut into the margins for the automakers. All right, Megan and Phil, thank you very much. We appreciate it. Our Philobo and Megan Casella, take a quick glance back at the markets. Major averages are sharply higher now as the Trump administration gives automakers of one-month exemption from tariffs. The Dow's up 442 points. The NASDAQ now about 1.1%. We're also awaiting the beige book. Give us a little more color about the regional economies from the Federal Reserve. In fact, let's get to Steve Leesman with those headlines. Hi, Steve.

Yeah, lots of tariffs, Kelly, in the beige book here. What we're seeing is, excuse me, one second, economic activity rose slightly in the 12 Federal Reserve districts. Six reported no change, four said moderate growth, two said even a slight contraction. Consumer spending was said to be lower on balance. Increased price sensitivity for discretionary items among consumers, especially low-income consumers. Now, some we've been talking about there was unusual weather that was set to weaken demand for leisure and hospitality. We've also seen that maybe across different other sectors. vehicle sales were said to be modestly lower.

Now, a lot of tariff stuff in here. Manufacturers expressed concern over the impact of trade policy changes. Real estate was hurt by something Diana Olegh talks about all the time. Inventory constraints. Contacts expressed nervousness over tariff on lumber and other materials when it came to housing. But overall expectations were slightly optimistic, maybe a bit of a downgrade from prior reports. Jobs growth nudge slightly higher. You saw that week at EP report today did show 77,000 growth.

Job growth was seen as healthy in health care and in finance. Labor availability improved in many sectors and districts, quote, rising uncertainty over immigration influenced labor demand, according to the base book. Wage growth was moderate with wage pressures easing. Now, on prices as a part of the basebook, the Fed follows closely. They were modestly in most districts. Several districts reported an uptake in the pace of,

price increases with higher egg prices and other food ingredients impacting food processors and restaurants. We talked a lot about that. So there were increases seen in insurance and freight costs, and they were set to be pretty widespread. Finally, firms were noting a difficulty in passing along higher input costs to consumers, but they said when these tariffs come along, they're going to lead them to raise prices. And some firms even said they have raised prices preemptively. Guys? All right. Steve, thank you. Trying to pour some cold water there, but the market is shaking it off with the Dow up 500 points. We take your points, though, about the impact. This is all having Steve Leasman. Francis Donald of RBC Capital Markets

is here on set with us alongside Adam Phillips of EP Wealth Advisors. Francis, to you, busy day here. We just heard from the Bege Book. We heard about the tariff reprieve. We were talking about economic uncertainty just a little while ago. What are the big points for you? Another example that the uncertainty around tariffs is already in the data. We saw it with a surge of imports. We've seen it with consumer confidence. We've seen it with inflation expectations. And now the Fed getting incremental information that companies are already increasing prices. So we may be getting news today that, hey, you know, we may get a one month for pre-von autos. That's good. That's probably the sector economists were most worried about. But this uncertainty

in and of itself is a tax on the U.S. economy. And I bet you every economist across America right now is downgrading growth and upgrading inflation expectations. It feels, Adam, like a tax on the American investors' cycle. because CNBC in the morning on Squawk Box will say tariffs are back on, the markets tank, then you got Lutnik or somebody comes out or we get this headline, the tariffs are off or they're delayed, and the markets, to Kelly's point, are soaring. What's our long-term strategy? How do we get through?

I'm not going to say it's noise. It's bigger than that. But I think you get what I'm going. I do get it. And look, they're playing with our emotions as investors, right? And so I think it'll be interesting to see if we could hold on to these gains into the close this time since we couldn't yesterday. I think we will this time, but this is the environment we're going to be in for the foreseeable future.

We know that tariffs, the topic of tariffs aren't going away. We know that March 12th is coming up, April 2nd with the reciprocal tariffs. Beyond that, it's called the second half of the year. We believe that volatility could subside and we can actually get this catalyst to move higher. That could come in the form of tax reform. Now, ultimately, we've got to get through this period first. And I equated to what I tell my kids, you have to finish it. your vegetables before you can have dessert, right? And this is some of that near-term pain that we're

going to have to deal with. How can you get your pudding if you don't eat? I was going to say, I'd give it up. I just say you can just have dessert. It's a battle. It's a battle. I'm going to quote Francis Donald to Francis Donald. This is what you wrote. As much as we expect the U.S. to remain the leader of the economic pack. Thank you. We have raising concerns, a rise of concerns about the downside risk for growth. So how much downside risk for growth is there in the United States? If these tariffs actually happen. What matters is how long they're in place for. If we get three days of tariffs, hey, I'm not downgrading everything.

Around the three-month mark is when you're going to start to see material downgrades to growth. But you know what, Brian, I'm more worried about the inflation side for the United States right now because we were already running too hot on inflation. There's room on growth. We had 2% growth for 2025. Hey, if we get down to 1.5, it's not going to break anything. But 3% inflation or higher that puts the Fed in. a real difficult situation, especially with the unemployment rate wrong. Watch the inflation side

here, not the growth side. You know what we've been talking about? And the narrative that's going around, and you can dodge this question on him, don't worry. Okay. Is there a part of you, any just, you know, quiet little part of you that thinks Scott Besson's smart guy, Howard Lottnick's extremely smart guy? Like, they know, I think, what they're doing. They're not amateurs at this game. Is there any part of you that thinks that this is being done on purpose? Try to force the Fed's hands, slow things down. Do it now when you've just started your presidency. Look, I think that speaks to the idea of, is there, there may not be a Trump put.

Maybe there is, but is there a Fed put? And is that strike price a little bit higher? But just, I want to jump in on my own self. Because a lot of our listeners and viewers may think Sullivan's finally lost it. He's finally gone insane. No, no, no. We talk about, when you're a new CEO, you're a CEO of a company you take over. you know what new CEOs often do?

They dump all the stuff out at the beginning of their term, right? It's painful. It's ugly. It's stupid. But they get it all out of the way so that down the road, that detritus. And I just, there's a part of me that wonders is the White House doing the same thing? They very well could be. It'll be really interesting.

We've already seen expectations for Fed cuts to move up. So now we're looking at possibly mid-year, potentially three this year. I would defer to Francis on this, but I think that as we're talking more and more about stagflation, that obviously if you force the Fed's hand, that that brings the stagflation risk even higher and creates an additional risk of a policy here. So on that point, just I don't know if we can pull up the 10-year tips in the back. France, I think it's ironic that the market is less worried about inflation. I mean, it's fallen from 230 to 190.

It's a pretty big drop year to date. So they're showing less of an inflation concern, but your point is, what if the Fed goes, well, we got to be careful. You know, they are so reluctant to take market signals that they may end up just saying, look, it's going to increase, you know, the PCE by four tenths. And so we better, we better hold Pat. And that could be a real problem. That's a big issue. And that's why I think the sequencing of policy here is so important. We talked about vegetables versus dessert.

Well, this market was really focused on corporate tax cuts, reflationary deregulation, and all the positives that came with that. we're getting the difficult elements of this first. We're talking about a Fed put here with respect to the stock market, but the big focus from our view is, is there an element of looking for tariff revenue so that we can compensate and offset the extension of tax cuts? They're looking for some sort of revenue in order to allow us to be able to eat our dessert too. So for me, I'm looking less. Is the stock market going to provide that Fed put? And what is the bond market looking at with respect to the path of fiscal? And at the end of the day, we're more concerned that the 10-year yield, the 30-year yield, is going to end up acting as the breaks on this government

and its policy versus the stock. Well, you know, we had another RBC person here yesterday. Helima. Her name is Halima, a very wonderful woman, who I'm sure you know well. We have this chart, and it's a chart I asked to make, and it's oil versus the 10-year bond you. Oil appears to lead borrowing costs. Oil goes up, borrowing costs go up. Oil kind of is the bond market in a weird way. Oil is falling. It's at 65 in change. And, and that, and that's a lot. And That's the blue line, and then the orange line is the 10-year Treasury yield. It's rolling over. How much are you, Francis, watching things like commodities in the price of oil as like an inflation tell?

Well, Brian, you're going to make a chart for me, along with my colleague Halima Croft, which is look at inflation expectations amongst consumers. They're almost always driven by gasoline. Gasoline prices are down 8% in a year. My goodness, I don't think a lot of Americans are worried about the price of energy right now, Except last month, inflation expectations spiked, and they spiked without an increase in gasoline prices. Why is that? It's because inflation is creeping into the psyche of the consumer without oil prices in play.

That's something to watch very closely because it's a break in the way that we think about those relationships, an area to watch, absolutely. Adam lives in L.A. I mean, so gas is now under six bucks a gallon, I think, there. I mean, what are you going to do with all your extra money? Well, I'll be buying maybe one more egg. I can afford with it. Yeah, thanks to this food inflation, right? Yeah.

But it's so true. And as we think about where prices are heading, I was asked recently, where do we go from here? And much to Francis's point, it depends how long this actually lasts. But I think back to 2018 when we were dealing with the tariffs the first time around, and we saw 10% correction, that was a very different environment in terms of valuations, at 22 times PE today versus 18 times then, and inflation, which is much different back then as well,

down at below 2% versus, I think, of course, CPI has been above 3% for 46 straight months, so still very, very elevated. I know we have to go, but if you had to buy one thing, stocks or bonds right now? I'd still be putting money to work in equities. You would? Just more upside? Look, we're long-term investors at EP wealth advisors, and I think that when you get an opportunity like this, you're probably not going to hit the bottom. We expect this volatility to continue, but we'd be putting money to work.

France, we have a new tariff boss. That's you. A new tariff boss. Because not only are you an economist, but you're Canadian economist. So you were the fired up Canadian whom I referred to earlier. I am a proud Canadian, but it doesn't matter what your passport color is. The information is in the data, and the data tells us this is going to be a tricky. Yeah, but what are your family and friends saying privately to you about the potential for terrorism? The same thing that anyone understands trade, which is the Canada and the United States,

incredibly well linked together. A trade war benefits nobody, especially in the next two to three years. and something I feel passionately about U.S. exceptionalism is real. The upside for the United States is massive. Canadians can help U.S. achieve its Boulder mandate. That is something that all Canadians agree with, and we'd like to help. Next Premier of Quebec right there. I mean, that was a stump speech.

Thank you both. Really appreciate it. Francis Donald and Adam Phillips. All right, so coming up, last night, the president said he wants to, quote, take back the Panama Canal. What exactly does that mean? I want to talk about that, tariff some more, with insider Mick Mulvaney. Coming up.

All right, welcome back, President Trump addressing Congress in his address last night. It was long. It was powerful at points. It was mocked by some Democrats with paddles for some reason. But it also did touch on a number of topics critical to you, the CNBC viewer and listener, things like tariffs and inflation, even talk about taking back the Panama Canal. Joining us now to talk about it all.

Actum Consulting, co-chair, and Donald Trump's former chief of staff, Mick Mulvaney. Mick, great to see you on Power Lunch from a CNBC perspective. Inflation, tariffs, economy, et cetera. What was the one or two main takeaways for Mick Mulvaney last night? It wasn't the Panama Canal. It wasn't even Ukraine. It was the tariffs. And I think what you're going to see now, Brian, is what I call sort of a strategic ambiguity on tariffs.

There's going to be a group of tariffs that are relatively stable. Those are going to be tariffs to protect American domestic industries. There's going to be a group of tariffs that are relatively stable. Those are the ones that are going to sort of rain in China. And then there's going to be another group of tariffs. And so once you're talking about earlier in the show, that I think is where the strategic ambiguity comes in, and it's going to be chaotic. Any time for the next four years that Donald Trump gets an answer from a foreign nation that he doesn't like on whatever the topic is, you are going to hear about tariffs on that particular nation. and it's just sort of the uncertainty that the markets are going to have to deal with.

So I did notice, by the way, that if you watch the interaction between the president and his party last night, my party, the Republican Party, the enthusiasm for the tariffs was not nearly as broad on the floor of the House last night as it was for some of the other things. A lot of those men and women on that floor have to run for reelection in about 18 months, and they don't like the impact that tariffs are going to have on prices in the short term. So tariffs will continue to be a focus. I don't think that's going away anytime soon. That's interesting. I didn't catch that in listening.

Mickets Kelly here, so I appreciate making that point. We were talking to Godheimer, Congressman Gottheimer last hour. He said a lot of what he's hearing from constituents is cost of living, cost of living, and concern about cuts, cuts to the VA, cuts to different programs that might be directly or indirectly funded by the government. What do you say sort of from your point of view about those concerns? Yeah, the cost of living stuff is real. Keep in mind, I have full faith of what the Trump team is doing writ large as a package is going to have downward pressure on prices just like it did in the first term. Look, we were running huge deficits. We had no unemployment and we had tariffs in the first term, but inflation was under control. That's because the other things the Trump team is going to put into place over the course of this first term, we'll have a downward pressure on price. I'm thinking specifically about deregulation, which still doesn't get enough. attention even on this network. But that being said, tariffs are going first and they are immediate. It takes a while for the deregulatory agenda to flow through to prices. Tariffs will

have an immediate impact on prices. In fact, as you've just pointed out in the previous segment, some prices are going up in anticipation of the tariff. So cost of living is real. Look, people say they care about spending. They don't. They might care about cuts to government programs. They don't. They care about their own pocketbooks. And if prices are still up in 18 months. weird thing because this president ran on killing inflation. I mean, I did road trip to eerie and to not fancy places. I actually talked to gasp, real voters. And they all talked about the twin eyes, as I call them, immigration and inflation. All right. So let's focus on inflation. We have a president who said, I'm going to, you know, if you elect me, I will crush inflation.

Fine. But now we've got tariffs, which, as we just heard from a leading economist, are inflation where's the, what am I, what are we missing here? Yeah, you're missing the other half of the equation. You're looking at it as an all other things being equal. If you simply raise tariffs and don't anything else, prices are going to go up, at least in the short term. But you're not talking about the DRIG agenda. You're not talking about energy prices. You're not talking about it. He did get, you know, huge response last night on drill baby drill. All the Republicans are lined up behind that. I expect to see some decent legislation maybe on that even. And that's a rare thing in Washington, D.C. these days. But it's writ large. It's the, it's the, it's the, it's the,

that I think will have a downward impact on prices over the long term. The issue is a lot of those men and women on the floor last night don't get elected over the long term. They get elected in about 18 months. Yeah, there's also a bill to pass with a very slim majority and a lot of costs associated with it, a big wish list. Sure. And the taxes, look, there's a lot to be done. The taxes are probably the legislative agenda. My guess is not much is going to get done legislatively. Maybe there's an energy bill, but really what you're going to focus on is the tax bill.

That's where all the emphasis is from the Trump administration. These are the Trump tax cuts, and he wants them to be extended. I expect them to be extended in some fashion. I expect them to be to increase the deficit. I don't think they're going to be able to find the spending reductions. You're already seeing on Capitol Hill the pushback on a case-by-case basis against what Doge is doing. Why is that?

Everybody loves spending, and every program that is in a spending bill has somebody who absolutely loves it. And if Elon Musk's and Doge and OMB go after it, it's going to upset somebody, and sometimes those are Republicans. So I expect the spending to continue. I do expect the tax bill to pass. And if I got a concern long term on the impact on inflation,

it's from spending much more so than it is from tariffs. I'm going back to the Panama Canal. Okay, and don't give me that. Don't look. Don't, this is real. Can you see this? I'm sorry. I can't see you.

You can see me. That's not fair. But go ahead. Well, I look exactly the same, just younger and handsomer that I looked a couple months ago. Mick, the president, we're going to play a soundbite. The president said this about the Panama Canal last night. To further enhance our national security, my administration will be reclaiming the Panama Canal. And we've already started doing it.

Just today, a large American company announced they are. buying both ports around the Panama Canal and lots of other things having to do with the Panama Canal and a couple of other canals. The Panama Canal was built by Americans for Americans, not for others, but others could use it. Then he went on to say, we're going to take back the Panama Canal. Listen, I'm not making a joke here. The Panama Canal is one of the most important commerce transit points in the world. world along with the other canals, route and the Delaware canal, apparently. Mick, what was your

take on, what does that mean? Take back the Panama Canal. Yeah, I remember the reclaiming thing, the part you just played. I don't remember the take back, so I apologize. Right after he was, we're going to take back the Panama Canal. I believe you. What I'm saying is that I'd have to hear it because, and here's why, I know when Donald Trump is speaking off of the teleprompter and when he is ad-libbing. What you've just heard about reclaiming was off the teleprompter. And so that's the, that's sort of the official policy. I can't tell if take back was also teleprompter if that was ad-libbed. But look, step back for a second. I don't think anybody would deny the fact that the Panama canals of strategic importance to the United States. Does that mean we're going to send troops down to

Panama to invade the country and physically take control of the canal again? No, I think you're going to continue to see what you saw when Marco Rubio went down there a couple weeks ago, which is to try and figure out a way to reestablish the close connection between us and Panama, to circumvent China who has been trying to get a told in that part of the world. So we sort of extend or renew in a 21st century way, the Monroe Doctrine, which is the stuff that's here, the stuff that's close to us, we're going to be a lot more involved with than we have been in the last couple of years. I do not think we're sending troops down to Panama anytime soon. All right. What do you think, Kelly? I don't know. Take back the, what does that mean? Take back the Panama

I like his point about was it on prompt or not. Go ahead. Let me be, well, let me be more serious. company buys the canal, is that taking it back? I think that's probably yes. I mean, that's that's, that's not the same as having the military do it, but if it's controlled by American interests, or at least folks who are more aligned with us than they're aligned with China, doesn't that sort of reclaim it? Doesn't that take it back? I think you're, I think you're focusing too much on the, on the actual verbiage as opposed to the concept, which is that we want to be more involved in the canal and we want China out. And it looks like it's heading that way. One way or the other. Very, very, very.

Interesting. Mick, thanks. Really appreciate it today. Thanks, y'all. Great to see you. Of Actum. Reminds me, I got to get the ashes later today. Further ahead, cyber insecurity. This name down big on a weak outlook, and the reveal is coming up in Thriftstock Lange. All right, welcome back. I do not know how to say let's talk about Germany in German. But if I did, this is where I would put it, because the German stock market and other parts of Europe, they are soaring. Now, Germany, if you're not paying attention, close to a green to a massive new stimulus, about $500 billion in Germany.

Folks, based on GDP ratios, that would be about, I don't know, $2 trillion of stimulus here in the United States. And that expected stimulus making an already hot stock market even hotter. The German Dax Index is up 16% this year. So to the stock markets of Austria and Poland, France and Spain, their stock markets, not far behind. In fact, on some measures, we're showing them to you right now. They're actually doing better than Germany. Now, I wrote about this two years ago, and part of my prediction saying a combination of sky high energy costs and a weak economy, Kelly, would lead to likely stimulus in Europe.

But even in my wildest dreams, again, however you say that in German, $500 billion, not approved yet, is a lot of money. Yes. So transformative, people think this has legs for the stocks. involved, they can keep going. There's still a lot of reforms that need to happen for the European economy overall. Draghi has been very eloquent on this issue. So here we are, a place where very few, myself included, foresaw a few months ago. We all saw the charts, though, about U.S. exceptionalism, about what percentage America was of the global stock market, and you know a line can't go straight up to 100. So this is a big reset that's happening. Emerging markets doing pretty

well lately also. Coming up, a doctor's Hippocratic Oath saying, do no harm. But what about the CEO that owns the hospital or the drug maker. A hot take from Azuhos, Jared Holtz, about that next. Welcome back to Power Lunch. I'm Kate Rooney with your CNBC News Update. The United States and Israel have rejected an Egyptian-led plan for rebuilding Gaza that was approved yesterday at an Arab emergency summit. It called for the rebuilding of that territory without displacing Palestinians.

That plan in stark contrast to President Trump's proposal to transform Gaza into the so-called Riviera of the Middle East. A national security spokesman says the Egypt plan doesn't address the reality that Gaza is currently uninhabitable. And in Los Angeles, Los Angeles County and the city of Pasadena, both filing lawsuits today against Southern California Edison, alleging the utility's equipment sparked that deadly eaten fire back in January. Company officials haven't commented on those lawsuits but did say last month they were still investigating the possible causes. And the badigan updated the Pope's condition today, saying he remains stable and hasn't had any new breathing problems and spent the day seated in an armchair and resumed some of his work activity.

The 88-year-old Pontiff has been in the hospital for weeks battling double pneumonia guys. Brian, back over to you. All right. Best question to him. Okay, thank you. All right, so folks, we've got a big biotech deal. Camerix is being bought by jazz pharmaceuticals for about a billion dollars. Comerick shares are up 70, 70% right now.

A good day today. But it's far from all wine and roses. If you go back 10 years, look at that chart. Comerick's has crushed investors losing about 80% of its total value. It's just one example of how hard it can be to make money in biotech. Stocks, they may seem cheap. But if a drug trial fails, the company can sometimes fail right along with it. So are there any safe or good places to put your money in biotech with us, Jared Holes?

He's a healthcare strategist, Mizzouho, some of the best research notes on Wall Street. Jared, thanks for joining us. I mean, your notes, your firebomb, I love it. You wrote this. You said, why don't we do this? Count all the number of, and I'm reading, count all the number of biotech stocks with enterprise values below zero, combine them all, then dissolve them, give shareholders back a ton of cash, billions, maybe keep around a couple for fun, the ones with the clever tickers.

What point were you trying to make to investors with that? Well, great to see you. First of all, thanks for having me. Yeah, I mean, when you look at the denominator of biotech stocks in the public market, we're kind of like in the 700 to 800 range given or depending on the day. There are, you know, a quarter of those almost have enterprise values in negative territory. That basically means that, you know, investors have kind of, not only investors, but the companies in some respects have exhausted options. And in order for, you know, any value to be created, they're going to have to either shift their focus, you know, come up with another plan of attack, buy an asset that they don't currently own,

resuscitate the company. And so in some respects, we're always looking for, you know, some clear pathway for biotech as a sector to perform better. But if a quarter of the index is filled with companies that have more cash than market cap, I think we're in a tough place. So that's why I kind of suggested, and obviously some is hyperbolic, of course, but let's get rid of a lot of the tail here. There's just, there are too many assets out of it. But it's so attractive to some investors or traders or gamblers, whatever you want to call them, Jared. Is it not because let's say there's a stock. It's, you know, is it five? And somebody tells somebody who tells somebody, I think that company is going to cure cancer.

Right. And it's five bucks a share. And you're like, all right, you know what? If they do have a great drug trial result, the stock may go to 100. Right. Maybe it's the next MGen or whatever. But if it doesn't, it could go to zero. It's a very tempting scenario sometimes.

It's incredibly, incredibly tempting. You know, there are thousands of investors that are, you know, putting their careers on the line every day to try to figure this stuff out. I would kind of characterize biotech as one of the only sectors in all of equities where single stock picking is pretty much the only way to make money. I mean, I've been covering the space for a while. Over the past decade, the index is barely up. I mean, it's essentially flat. Meanwhile, every other index that I can find has doubled or more. So there's an obvious issue with the broader complex, but like you alluded to, if you find the right asset, you can kill it. So, Jared, just back up here, we're at an ironic juncture.

We have investors who are back in love with health care stocks for like the steadiness and some of the dividends and kind of unclear economic period of time. Biotechs, no one wants to kind of go out on the risk curve there right now. Okay, so these companies are still trying to hope, you know, that they find the diamond in the rough. But the big takeaway from you is don't own the broad index. Don't look for a big kind of turn and catalyst point here. Are there any names you want to leave us with that you do feel more confident about? Well, I think you're right. I mean, so much of the moves this year are, in my opinion or sense of the market,

you know, rotational with tech selling off and the market looking for defensive assets. And so you've got many names in the pharma complex up 15 to 20 percent. biotech has not followed suit. I think there are some attractive opportunities. I think M&A is a big driver of single stock selection. And then you've got to kind of look at, you know, the catalyst pathway. So I think when you look at, you know, the Inzimed and the blueprints, these are assets that, these are assets that I think the street is looking for in exit by large cap pharma.

and then we're dealing with a bunch of, you know, catalysts that have data readouts over the next couple of months. I think you've got to kind of place a bet here and there. But M&A for single stock selection and then otherwise catalysts. That's the way to make money here. Yeah. No, it reminds me of the shale boom, right? It was great for consumers. It was terrible for investors. And you're kind of, would you say it's largely because VCs have propped up these business models? I think that's the perfect analogy. I've used it before, Kelly. So I think that's spot on. A lot of the companies that are publicly traded are still science projects at the end of the day. They're not proven out. So I would, you know, if I'm a company and I'm looking to create value,

I think staying private longer works. And yes, I think the VC, you know, the VC industry has propped up a lot of this for sure. All right. Maybe next for the science fair when I'm looking for ideas. I'll just turn to this space. Jared, really appreciate it. Thanks for your time. Jared Holton. Thank you. Thank you. And if you ever miss an episode of Power Lunch, No problem. You can catch the podcast version anytime. Just listen to Power Lunch. Follow it on any of your favorite streaming platforms. And we'll be right back. Welcome back to Power Lunch. Stocks are higher across the board. Dow is up 1.1 percent, about 500 points now as autos from Canada and Mexico are getting a month-long delay on tariffs. And meanwhile, in the bond market, we're seeing a wide range of yield moves of the German bond market making all of the headlines, yields soaring there, on some major headlines. and a wild day. Let's bring in Rick Santelli with the latest from Chicago. Rick?

You know, let's start out with the U.S. We had a major reversal in rates in the U.S. Consider, we're at $3.99 now in a two-year unchanged. You know what its low yield was? 389. And a 10-year right now, we're at 426, up one on the day, excuse me, up about, yeah, about a half base point, one base point. But the point is the low yield was 418. So whether it was data or the, excuse me, up about, yeah, about a half base point. And, you know, the German stimulus. Remember, on the data side, other than ADP, the ISMs were strong, the PMIs, they were all great. We saw very solid durable goods, very solid factory orders. And back to the German scenario. Remember, this is debt-funded stimulus, hundreds of billions of dollars, potentially. Constitution has to be amended to be able to do this. It's such a counterculture

issue for the Germans. They're usually fiscally, very stubborn. And another point that is big that I talked about during a credit crisis. Globally, all stimulus is fungible. Fungible, meaning whatever happens on the other side of the world, if it's a positive stimulus, it will have effects around the globe. Of course, the major effect has been in Germany. Now, let's go to the board, shall we? German two-year today was up 21 basis points to a yield of 224. That's the highest closing yield since the end of January. Now, granted, it's just this year. But it's very important to pay attention to this because if you consider that the

euro currency right now, closer to four-month high dollar index, by the way, the four-month low, the DAX was up 754 points, up 3.4% today alone. Now, let's continue to look at German rate. Let's look at the German tenure, shall we? They are now at the highest yield going back to the end of October of 23. Two 78s where they close. That is up a whopping 30 basis points. And, you know, 30 basis points at our markets is big. In the German market, it's absolutely huge.

And from what I've been reading, that is the biggest jump in yields going back to the early 1990s. Now, finally, how did all that figure in to the spread? We love to look at spreads. So we look at German two-year versus the 10-year. That spread today is at 55 and a half basis points. That is the steepest. This yield curve has been going all the way back to the summer of 22. So we really need to pay attention to all these variables.

Now, a couple asteris, none of this with the debt spending is done, but the framework is done. And the Germans seem to be totally committed, of course. And we know they have a new government. And all of this, of course, is not only, for security, but it's also for Ukraine and their domestic economy. So we need to continue to look at rates, especially our neighbor's rates and how much higher they could possibly go. Brian, back to you. I believe it was the largest single-day move in the German bond market since 1990,

Rick. I was 19 years old. Kelly was 14 years from being born. We're back right after this. I would. Welcome back. It's time for three-stock lunch, where we're We hit three different movers and what you should do with them. Here with our trades is Timothy Chubb. He's CIO at Girard. Timothy, it's good to have you here. Welcome aboard.

We'll start with Citigroup today, which is getting dragged down with the other big banks, feeling the pressure from the impact of the president's tariffs. Of course, now it's rebounded to a 1% gain as the broader market has. Do you buy it here on this dip this week? We're not quite yet. Ultimately, we had a pretty nice run for Citigroup, you know, towards the end of last year. really pricing in some of the expectations for the Trump administration as relates to deregulation.

And although we think that'll likely be a pretty strong tailwind for banks, not just in 2025, but moving forward. City really is sort of the, you know, maybe the third, fourth, fifth, best bank, you know, we would look at. And they're going through a lot of issues as it relates to just, you know, streamlining efficiency within their business. I was a bit surprised about the announcement with Apollo Group in particular, ultimately on the private credit side of things. And here, you know, we really think a lot about owning the right asset class and the right vehicle. And I just wonder, you know, the ability for an ETSA have to really be that right vehicle for a lot of investors for such an illic lax asset class. And if maybe Citigroup or Apollo are potentially appreciating or excuse me, underappreciating some of the risks associated with that.

So, you know, overall, they're buying back some stock. It's trading close to tangible bulk value. And I would expect, you know, those buybacks to prevent it from trading, you know, below tangible book value. but overall, we're much more attracted some other areas within the financials, especially those who are going to be a bit more exposed to M&A activity of valuations continue to fall. Right. No, that's interesting. And I hadn't thought through it. I didn't realize they were a part of that private credit launch. So that's a sell for you. What about CrowdStrike? That one, of course, had weaker than expected earnings guidance, continued pressure from that outage last July, and the shares are now down about 7%.

Yeah, it was one of those good quarters. I mean, ultimately, EPS and revenue beat, you know, subscription revenue. ARR being ahead of expectations. I thought the guide was pretty strong, but with a name that's gone up as much as it has, you know, coming out of the news last July and ultimately recovering quite a bit from the cyber outage.

Really, you know, it's a wonderful business with a lot of stability with that subscription model, but really one, what doesn't have that attractive of evaluation. And so I think when you look at some of the other names within the space, such as a Fortinet, ultimately they're more well-rounded, platform and not just, you know, endpoint detection and ultimately will benefit, I think, from, you know,

potentially seeing enterprises, you know, shift spending here as potentially streamline things a little bit further. So just a tough valuation. Look at it maybe a fortinet over a crowd strike for this play. So then let's move along to Uber, which is our last name. It's offering customers in Austin driverless rides through that Waymo partnership. The shares are up 2%. It's been a chopy year for them. What do you do? Yeah, it's one I really like. Uber's one of our highest conviction. names right now. And, you know, here we're investors, not traders. And so we're constantly thinking about, you know, how does the core business ultimately enhance the mode or the reinvestment runway for the business? And I think Uber's a perfect example where the fundamentals of the core business

are doing extremely well. They have this two-sided network, which is really creating these flywheel effects where more drivers, more riders, more drivers, better pricing, more riders, more riders. And, you know, flywheel effect takes hold. But I think the market's still really underappreciating just how much more activity they're having with their users on the platform as compared to a Lyft, for example. And with how much free cash flow they're generating, it's trading like 15 times our estimates for 2026. We think it's going to be a company that certainly gets over 100 in near term at some point

next year or so. Uber, I was going to say, is it by? Maybe a table pounding buy if you think it's going to 100. Timothy, thanks for your time. We appreciate it. Thank you. Remember, if you want more three-stock lunch, you can recap it anytime you want by scanning that QR code or heading over to CNBC.com. All right. In the meantime, we do have some breaking news that involves Elon Musk, Doge, and federal spending cuts. Emily Wilkins, what's going on? Hey, Brian. So Elon Musk just got done with about two-hour meeting with Republican senators. And one of their main messages to him is that while they appreciate everything he is doing with cutting a wait,

and spending in the U.S. government that the senators will need, Congress will need, to go ahead and sign off on those spending cuts. And they discussed a process actually known as rescission where the White House basically sends the Congress request and says, hey, we want you to claw back this funding, and then the Senate and the House would have 45 days to go ahead and either approve or deny the White House request. So that was something that was discussed. It seems like a lot of senators are on board with this. Senator Lindsey Graham told me as he was coming out of the room that there's momentum right now and that Congress needs to capitalize on it. And he said that Elon Musk was on board as well. It's been very interesting seeing, of course,

the cuts that Doge has been bringing about and wondering exactly what Congress's role here. Obviously, they are the ones constitutionally who have the power of the purse. And it looks like now senators are stepping up and saying, hey, all these cuts are fine, but they're not finalized until we vote on them. And then, of course, that is a question, once senators actually have to vote on eliminating some of these programs, what are actually going to be the lines to do so? Are there going to be some Republicans who are hesitant to eliminate certain programs that Musk has? Once again, the executive branch learns the hard way that Congress controls the power of the person.

They will remind anybody who gets their way that they, not the president, is the one in charge of spending Emily Wilkins at the White House. Emily, thank you very much. Interestingly, this also comes as the Trump administration has been ordered to reinstate thousands of fired USDA workers. and on a day when the Supreme Court, with that scathing dissent by Alito, has told them that they have to move forward with the funding for U.S. aid. It's amazing when you've got all this sort of storm and drang, more German, about all these cuts. It comes back to Congress and the court. It's amazing what people might have thought about with the Division of Powers. Thank you, founders.

They were pretty smart eyes. And look at the markets, by the way, saying thank you for the delay in auto tariffs. Dow's up 507. Thank you for watching Power Lod.