Power Lunch - Dow, S&P 500 slip from record highs, Tesla’s Next Driving Force? 10/10/24

Episode Date: October 10, 2024

Stocks are on the decline, with the S&P 500 and Dow falling from records, as economic data pointed to stubborn inflation. We’ll tell you what it means for you and your money.Plus, Tesla is set to unveil details of its Robotaxi and autonomous rideshare strategy at an event tonight. We’ll preview all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Matheson. Glad you could be with us today. Stocks are lower today following the CPI numbers this morning. Inflation remaining a little bit sticky. Now, we're talking about one-tenth of one percentage point over the forecast. This is adding to concerns nonetheless that the Fed will maybe not cut as aggressively as some thought. Especially after a Bostic didn't interview with the Wall Street Journal hit the wires about an hour ago and he said he'd be open to skipping the November rate cut. So that, we had a 30-year auction. We've got a lot of things buffeting the markets. And we've got Delta missing on earnings. CEO Ed Bastion saying the quarter was hurt by the crowd strike outage. He also said the impact from Hurricane Helene hurt results by a couple of pennies

and said he thinks there could be softness around the election that consumers' tie may even pull back on traveling. And of course, Helene was one factor in this Hurricane Milton has disrupted lots of flights in Orlando, Tampa, Tampa, St. Pete, Sarasota, and so forth. So that could trickle into results for that company and others as well. And Tesla's big robotaxy event is tonight in Hollywood. Many people, including seemingly Elon Musk, have said figuring out fully autonomous driving is key to the company's future. Good luck with that, I say. I had the autonomous driving version of a Tesla. I stopped it.

I didn't trust it. Oh, you used FSD. I did indeed. Or whatever it's called, autonomous driving. Perhaps, but you had the hardware installation so that the car could drive itself? It's a software. It's a software down there. So you can put in a, I can say go from home to work and it'll drive me there.

Right. But it gets a little afraid sometimes. I don't know. We'll see. Call me a skeptic. That's all I'm saying. No, there's plenty of people who would normally think, well, you know, we're going to wait for this technology, be ready for prime time.

But there are way most driving themselves around right now. Yeah. And so in an interesting way, they've had the first mover advantage now. They've stolen a little. I'm sorry, that keeps happening. That's Elon Musk on line to saying, give me Atheson, because he talked trash about me there. You know, Waymo should offer free rides to the Tesla event tonight. That's a way of saying, let's see what you got.

There you go. All right, let's dig deeper into the inflation number, shall we? The Consumer Price Index rose by 2.4% annualized last month, which was slightly higher than economists that we're expecting by about a tenth of a percent, maybe two. Breaking down some of the individual categories, now you've got food prices up 2.4%. 3% compared with last year. Energy prices drop nearly 7% year over year. Gasoline down 15%. But those two categories are volatile, which is why they are stripped out of the core rate. The core rate rising 3.3% led higher by services up 4.7% and shelter prices. They rose just shy of 5%. There are all the numbers you need, folks. So what impact is this going to have on the consumer and how does this change the Fed's

rate cut plan? Joining us now is Brent Shuddy. He is the chief investment officer at Northwestern Mutual Wealth Management. And our own Michael Santoli, CNBC's Senior Markets Commentator. Michael, why don't you sum it up for us today? Taken by itself, these inflation numbers indicate sort of the continuing or the non-disruption of a trend lower in inflation, even though the number may not have been as perfect as maybe some market swamis would have liked. Yeah, exactly, Tyler.

A not ideal number, but one that is certainly digestible and one that fits in with the overall trend and the presumption of where we're headed with inflation. I think one of the reasons, too, that the market didn't have too much of an adverse reaction to it is the move in the bond market has been so dramatic since the jobs report last Friday yields up so much that we were not exactly caught off sides by the idea that maybe the Fed is going to be doing less. And you do have a Fed here that clearly is going to modulate exactly the nature and the magnitude of its next. move based on the incoming data. But what Bostick said, as Kelly was referring to, look, he's just telling you where his dot was in the dot plot. And essentially, we knew somebody was there, and it turns out he was one of them. The other piece of it, though, is the Fed is the Fed has shown it's much more sensitive and attentive to labor market indicators and deterioration, potential deterioration in jobs. Therefore, to me, that's what the market wants

to see. The market wants to see a Fed that's a little more responsive to the prospect of a downside scenario in the economy rather than being extra vigilant at this stage of the game, you know, with the Fed funds rate still just under 5% and inflation in the low twos. Brent, let me ask you, you seem a little concerned about what you describe, and this goes way back in the lexicon of economics, to a wage price spiral. You point to the fact that a couple of large employers, Amazon, Walmart, and, of course, now the longshoremen, are going to get major wage increases over the next few days and that this could continue, this could feed into more inflation. How worried should we be? How worried are you? I think there's a delicate balancing

act the Fed has to try to navigate, which historically they haven't done a very good job. They do tend to wait to the labor market shows signs of weakening. And unfortunately, because they do that, it tends to trend and then it's too late. I think this time is a bit different just because there is still inflation. The embers are still burning. This is a late cycle economy. We have fewer workers still, even though we have a bit more unemployed than we did. But if demand picks up, where are the people going to come to create this supply to keep inflation lower? At the end of every economic cycle, wages rise. That's what happens. And that typically is the final frontier for the Fed to begin cutting. They had to this time, even though they're still

above the Fed's target, because they did see signs the labor market is weakening. And since they cut now, you've seen a jobs report that taking at face value is stronger, and now CPI that I just disagree a bit with the context there. If you look at the median CPI, which the Fed does take a look at, it rose about 0.4%. So did SuperCore X services. Inflation is not burned out. And so I think the path forward to the Fed is a bit more difficult than investors are currently thinking about. Interesting point. Yeah, Mike, what would you add to that? And for the weeks to come, what's really going to dominate? Is it going to be the data? Is it going to be odds of what the Fed does or is it going to be the election?

Well, I mean, you got earnings thrown in there too, Kelly. And earnings, that's right. Earnings would perhaps be a welcome distraction if, in fact, it did come into more sharp focus. Look, PPI tomorrow, I guess it's going to matter for the PCE. I mean, we're going to be reading through all these things. And I don't disagree that at some point in this process, stickier inflation becomes a problem for the Fed. I just don't know that it's right now with the Fed funds between, you know, four and three

quarters in five and a lot of room between now and neutral. I also don't think that the stock market would mind less fed easing or less fed accommodation if it were combined with a more solid economy. I think it is the election in terms of, you know, a lot of hedging going on, a lot of people expecting some more choppiness in October, but it not really showing up at this point. And I see these surveys, the retail investor survey, lowest number of bears in the AAI survey since late last year. So people are generally. about how this year ends, they just feel like there might be a little bit of static between, you know, here and November that they might have to navigate.

Brent, you seem a little bit also concerned about valuations, particularly for large cap stocks, and think because, as you said, a moment ago, we were in sort of a late cycle phase here, that maybe the turn is coming eventually to smaller caps. We've been hearing that a long time, and so far it really hasn't materialized. You heard it a long time back in 1999-2000, which was a very similar market, where the market became very narrow because the economy became very narrow. What's holding up the economy right now is a smaller slice of it. Think about manufacturing.

Think about the lower-end consumer, the middle-income consumer that has been harmed by interest rate hikes. And it doesn't appear to me that the Fed is going to be able to aggressively alleviate that. I guess the question is what happens next? Look, I think one way or the other for investors who are more interested in returns over a three-to-five-year period, I think small and mid-cap stocks, regardless of a soft landing or not, offer value because they have been priced somewhat for recession. On days like today, when rates are up, you see the MAG 7 doing well in carrying the S&P 500,

while more economically sensitive parts of the market sell out, like small caps. At some point, that is going to flip, and I think that's near rather than further away. But Brent, isn't inflation and sticky inflation a much bigger issue for them, stickier rates? The Russell earnings were flat for three years as rates spiked. So wouldn't this be the worst-case scenario now? How much of that has already priced in? take a look at their performance and tell me who doesn't know that they're economically sensitive and hasn't been buying the Mag 7 at whatever levels because they're less economically sensitive

or believed to be. And that's where I just think it's about looking forward and thinking about what the likely outcome is. And I don't think the Fed's going to be able to cut aggressively, which is a headwind until it isn't. And that's when I think it's too late to try to time owning those. And so we continue to think about being investors and we continue to position towards what's cheap and where there is less optimism, which I remind you, optimism is a contrarian indicator and you've seen a large amount of optimism in the AAI sentiment survey. You've seen it in the conference board, people thinking that stocks are going higher. That's a contrarian indicator, not an indicator. Usually that's associated with further strength in the future.

You know, really interesting points of view, Brent. Thank you so much for your perspective today. Michael Santoli, thanks to you as well. And for more on today's inflation number, what it could mean for the path of those interest rates. Let's go to Rick Santelli in Chicago with the guest, Rick. Yes, thank you. Kelly, Ashok Batia, Newberger Berman. Welcome to the CBO. Oh, thank you. Well, I guess let's start out at 8.30 Eastern.

Would you think of today's CPI and initial jobless claims? It's a disappointing number and it's a stronger number that's going to cause probably a little bit of consternation for the Fed. And I think the biggest takeaway is, you know, the headline number, 3-3, we're just having slower progress towards the Fed objective. But then you look internally to the number, we're starting to see a little bit of upward pressure on goods prices. And then the biggest one is that core services at shelter.

That's an inflation rate that's still right around 5%. And I think it's just as speaking to the next 12 months, getting more progress on inflation, it's just gonna be harder. And that's gonna put the Fed in a little bit more of a bind. Now, Helene hit on the 26th. I doubt if much of that was in this number, wouldn't you agree with that?

Yeah, I think that that's probably something that we'll see over the next month. And like, obviously the hurricanes are gonna impact some of the job data, but you know, it's hard not to reach conclusion, you know, we looked at last payroll number. We were talking about this. The economy's in pretty good shape, and it's now being coupled with inflation. It's a little harder for it to get back down to the Fed's card. Now, many have talked today about, hey, if we see weather-related

inflation, you can't adjust monetary policy to that. And I would agree with that. It hasn't shown up yet. But if the Fed has already committed that they believe inflation is slayed, they've switched to labor, when those numbers come up, whether they should be that relevant or not, while they're already in the box with hot inflation, that's not going to be an easy issue to deal with, is it? No, I think, you know, we've been talking about this, right? The bond market is priced already for the Fed to take the policy rate down to the low three. Well, not anymore so much.

It's around, yeah, it's around 3-3, 3-4s where we're going to end up pricing for the Fed. Yeah, how you look at it a little bit. But there's still, like, we agree, there's a lot of easings still priced in. And I think it's unlikely, and we think it's unlikely, this is going to be a straight-line easing cycle for the Fed. And that will, you know, whether it's the next few months or early next year, there's probably going to be a decision point where the Fed will think about taking a pause on this cycle. Now, having said that, and I'm listening to you saying this, October 1st, if you look at every session, second, third, all the way on, 10s, 20s, 30s have closed higher and yield every day.

And every single session, today being the seventh, they've had a higher yield in the previous day's highs. What do you think the market's trying to say here? I think there are two things. One is, you know, the data, you know, more the inflation, what it means for the Fed. And the second is the election. I think the market is now starting to refocus on fiscal and what that's going to mean and some of the impact it could have on long-end yield. Yeah, because neither of the candidates is focusing on fiscal. That's for sure. A choke. Thank you for joining me today. Tyler, back to you. Rick, thank you very much. And as we had to break, let's do a quick power check.

On the positive side of the S&P 500, you got CrowdStrike rallying, despite the Delta CEO blaming the tech firm's recent outage as the reason for the airline's earnings miss. Now, on the negative side, first solar getting burned along with the rest of the solar names currently on track for its worst day since back in July, mid-July the 15th. Jeffreys lowering its price target. When we return, we'll dig into some key movers with three-stock lunch. Plus, further ahead, Elon Musk set to hold. told his long-awaited premiere of Tesla's robotaxie.

What is the Musk's strategy to disrupt the ride sharing space? We'll discuss that when Power Lunch returns in a couple of minutes. Welcome back to Power Lunch. It's time for a deluxe three-stock lunch today. We're going to get the stories on three stocks in the news and get trading advice on each one of them. Our trader is Will McGough. He's Director of Investments with Prime Capital Financial. Will welcome.

We appreciate you joining us for this. And we'll start with Delta Airlines, which is down about 2% today. after an earnings miss. They blame Crowdstrike, Helene, and even the election. Actually, let's turn to Phil Lebo for more details on this report now. Phil. And Kelly, when you look at the third quarter, I'd call it what a noisy quarter is really the term that Ed Bastian used when we talked to him this morning at the company's headquarters. Basically, it comes down to this. They did miss on the top of the bottom line in the third quarter. There was a three-cent impact from Hurricane Helene that they believe many analysts probably didn't factor into their models when they were putting their estimates

together. And they do expect choppy bookings around election day. Here's Ed Bastian explaining why they will see a slight hit to revenue in early November. A temporary pause for consumer activity. People like to be home during the election period. They don't want to be out traveling. I don't think they want to be spending money until they understand what's going to happen. So as you take a look at shares of Delta in the fourth quarter, they are expecting revenue to be up. Two to four percent. And by the way, they expect record fourth quarter revenue with a growing two to four percent. And earnings of between a buck 60 and a buck 85 a share. Just for some point of context, Kelly, the estimate going into this morning was for 171. That's where the street was at. And again, their guide is between a buck 60 and a buck 85.

So they could still hit it, but they've just got a margin of error potentially there or upside. Phil, thank you. Will, what's your trade with Delta? about it and nailed it. It's kind of a messy, disappointing earnings announcement. Guidance wasn't that great on soft Q for profit and sales. It's down 5% pre-market. It got back to flat. It's down a little bit now. Listen, I love Delta. I live outside of Atlanta. I'm an exclusive customer there. It's all I've ever flown. But airlines are very tough long-term investments. You just have to look at the 10-year chart of Delta. It's gone nowhere. We prefer investments with long-term value, stability, better pricing power, and more predictable growth.

And Delta can't really have predictable growth with their antiquated technology that shuts them down every four or five years. So I'm a seller here looking for better investments. All right. We've got next up, Advanced Micro Devices, CEO Lisa Sue, announcing plans for several new AI processors and other chips at an event in San Francisco today. But the real news, the real news is that Christina Parts of Nevelas is back. Christina, welcome. I'm back for only one day, though. I'm taking the full six months of maternity leave.

But let's talk about the news. Even if demand for NVIDIA's latest AI chips are, quote, insane. I know you guys heard this from Jensen Wong earlier this week. Or crazy, as Foxcon's chairman said also earlier this week, AMD wants you to know there is room for them to compete. And CEO Lisa Sue just finishing up her keynote in San Francisco, where I am today, announcing a new AI chip, the MI325X, which actually competes directly with NVIDIA's H-200 chip, according to AMD,

with availability as soon as this year. You can see it's the third chip. on the screen if it's confusing to you on there. That means that right now, AMD will have two AI chips in direct competition with Nvidia, and that's a lot of the conversation, that it could be an alternative. Sue also announcing the overall market for AI chips

will go from 400 billion in 2027 to about 500 billion in 2028, so a big increase in just one year. The company also previewed their fifth-generation CPU chip, which is really doing the general tasks on a computer, and they claim that they own about a third third of the CPU market, which was one solely owned by Intel. So you can see how the competition is really ramped up between those two companies.

Much of this news, though, was largely expected by the analyst community. If you read any of their notes, you saw them talking about this. Could be a reason why the stock is selling off down 4%. Also, no new customers announced here today. And especially, you had this stock run up, what, double digits just over the last since September first, neck and neck with InVIDIA. So you can maybe assume a lot of this news was already. priced in. If you're wondering, how is AMD going to compete with

NVIDIA? What's the cost structure for it? What about AI PCs? I'm hoping to get all answers to those questions with Lisa Sue at 4 p.m. Eastern Time only, or first on CNBC. All right, Christina, great to see you. We'll see you next time. Will, your trade now on Advance Micro. Yeah, I like what Christina was saying. It's going to be a buy here. Advancing AI conference today. CEO Sue said to look at the five-year arc and how it fundamentally changes everything we do. I use AI daily on a basis daily. There's a lot of risk with it, with big price moves either direction. There's a lot of risk, but a lot of return. As she just talked about, AMD's taking a third of Intel's chip market is now coming after Nvidia.

I think the market is aggressively looking for ways to invest in AI chips outside of Nvidia. Even though it's up 16% year-to-date, AMD, that is, Nvidia is up 160. So you can diversify your risk a little bit away from Nvidia. here, but I will caution, just like Nvidia, AMD is relying upon production of chips from China. So any geopolitical tensions between U.S. and China could be a drag

on performance here, which would be the only piece of caution I have to go with the buy rating, I'd give it. All righty, thank you, well. Well, let's turn then to the big banks, because they get set to report quarterly results, and we want to know how the Fed cut could affect their earnings, but also

how the backup and rates since then might change the story. Leslie Picker is standing by with more. Hi, Leslie. Hey, Kelly. Yeah, that's the number one question analysts have about the outlook. Rate cuts can be a headwind for banks' profitability in the near term because floating rate loans tend to reprise downward more quickly than rates paid out on deposits, such as CDs. And that gap is expected for Q3, but most analysts are urging investors to focus on the medium-term trajectory, in part because of what you mentioned with regard to rates moving upward, for the last week and a half or so.

Morgan Stanley Research said specific commentary on deposit pricing is likely to drive, quote, outsized reactions during earnings driving higher bank stock volatility, so pay attention to that. But on the flip side, a lower recession likelihood, coupled with cheaper financing, should bode well for the M&A pipeline. And of course, the election a few weeks away, corporates will also get more regulatory clarity that may help C-Suite confidence for doing bigger transactions.

Even though estimates indicate a little choppiness in those three-Q reports, it appears the markets, already looking past that with the financial sector hitting a record high yesterday, although slightly in the red down about half a percentage point today. We'll get the first read on all of this tomorrow when J.P. Morgan and Wells Fargo report their earnings first thing in the morning. All right, Leslie, thank you. Will, we asked you for a bank name you do like. You gave us PNC, which reports on Tuesday, the big regional often looked to as a barometer. We're showing the big banks there, but what would you do with both of these trades?

Thanks, Kelly. I'm really enjoying this superstock lunch with the lead-ins here because your team is nailing some of the thesis. We like regional banks, but this space also because PNC has an asset management business and capital markets. They've got a good long-term trend, stable earnings growth above average relative to sector yield and dividend growth, a strong balance sheet. And the reason that we like regional banks is they're not the big national banks that are about the report, and they're not the local banks. They're going to benefit from their loan base being more variable in nature. And as rates come down, that should perk up interest and lead to more activity for them. They've also seen strong fee income growth off the capital markets operations, which should help them meet their guidance. We'll find out next Tuesday to see how that's going to look.

And they're also investing in their card business to increase penetration in the consumer. business there as well. So we look for a very well-diversified regional bank that's got all the potential to continue to have stable earnings growth going forward, which we would be a buyer of here, and our team out of Overland Park, Kansas is a big fan of. Well, I guess the final comment then is, what about the big banks? I mean, do you take that as a benchmark, a barometer here, anything you want to own there or no? So big banks are tough just because they're dealing with, you know, regulatory issues. you highlighted. They've got a lot, I mean, just big national banks are kind of bloated, in my opinion.

So I would just be careful here. As investors, we're looking for more targeted exposure and, you know, more stability with regards to our positioning and the earnings growth, which we really see in the regional bank space here versus the big banks. All right. All right. Thank you very much. Will McGough. We appreciate it. Over in the bond market, investors are detecting a disconnect in the Fed rate cycle. The central bank cutting rates, yet yields a right. We'll explore the reasons why in today's market navigator when Power Lunch returns in two minutes. All right, welcome back to Power Lunch, everybody. You see the industrials off 156 points.

The S&P down about 18. Minor losses here about a third of 1%. Dom Chu, what is in today's market navigator? We're going to go deep into the rate side of things, Ty, and that's what we're going to do here. As exemplified by today's big economic data, the CPI, the markets may be at least getting a little bit too ahead of themselves in terms of the Fed rate expectations. But our trader here thinks that the disconnect could offer an opportunity to capitalize with a kind of trade idea. So joining us today is Manjou Baraya, the head of systematic edge fixed income with all spring global investments. Manju, thank you for being

with us today. Let's talk a little bit about this notion of the CPI and what it means for the rate picture. Why do we think that the markets have gotten ahead of themselves with regard to projecting rate cuts down the line? Yeah, it's a great point. Thanks for having me. So if you look at what came out of the Fed meeting last week, right, or last month, rather, the forward guidance they gave us was like two rate cuts for this year and about six rate cuts for the by the end of next year. But the stellar jobs data that came out on Friday and the CPI data that it came out today kind of shows that there's still risks to inflation, right? So if you look at the inflation number itself, the super core inflation is super sticky. still rising. The wages are still rising 4% year over year. So that actually still poses risk for inflation. U.S. economy is still on a strong footing, right? So the jobs data has been stellar. The PMI data last week was awesome. So to me, when you put it all together, the risks to inflation are still high. So to me, in using Alan Greenspan's words, right, so the irrational exuberance

of the rates investors, the Fed Fund Futures is actually pricing in two rate cuts for this year. and then about six rate cuts overall by the next 12 months. So to me, there's a disconnect, to your point, between what the Fed is saying in terms of them being data-driven versus what the rates investors think the markets need to do. All right, we got that kind of confirmation with the Bostic headlines, about maybe it's the idea that we don't have to go. We might pause.

We might actually pause the rate cuts. So take us through the trade. How exactly would you then capitalize on this notion that maybe the rate cutting picture has got to? gotten too aggressive? Yeah, so given the surprises here that we have seen in the last week or so, I think there's potential for more surprises in growth inflation and employment numbers over the next few weeks. So I think the best way for investors to play this is to really pay rates outright in the

long end of the curve. Or the best option, in my view, is to really position for a curve flattening, right? And if you look at the curve, the three-year, 20-year part of the curve is actually pretty optimal for putting on a curve flattener. So what you essentially would be doing is you would be paying the three-year rates, receiving the 20-year rates, and positioning yourself for what we call as a bare flattener,

meaning that the short-end rates would rise higher, much faster than the longer rates. So that is the best way to position for any potential upside surprises we would see in growth inflation or employment numbers in the next few weeks to months. All right, so let's just be clear. One quick point before we let you go.

This is this notion that you see basically long-end rates either moving slower to the upside or even perhaps a little lower versus the low-end rates or the shorter-term rates moving up a little bit higher, there is that flattening. That's the flattening. That's the flattening. That's exactly right. That's exactly right. So if you look at the curve, it was pretty flat in June, right?

So what has happened, the 3-20-year part of the curve was actually steepened in the last two months or so. So there's potential for it to actually go back to the kind of the flattened structure it had about two months ago. So again, the risks from inflation and growth are kind of the key drivers there. All right. Manjou Baray, at Allspring, thank you very much for that. We appreciate it. We'll see you again soon. So flatter does not necessarily mean inverted.

No, it doesn't. But I think the point that Manju was making is that some traders are betting on that flattening aspect. But I will say, Thai, some traders retail-wise are actually playing it with ETFs. So what you can, in essence, do is sell or short, shorter-term bond ETFs to use that money to then buy longer term bond ETFs, right, and that plays that flattening as well. All right. That's above my pay, Gras. Tom, thanks. Here's what's still on the menu for Power Lunch.

A fracture at Pfizer. The activist battle taking place within the biotech giant, growing even more divided, and a starboard is at the center of it all. We have those details further ahead. Plus, Florida's battle against Mother Nature. A calmer for now, but we'll take a look at the damage so far from the storm and lay out what still could be to come. Power Lunch will be right back. Welcome back to Power Lunch. We are seeing red arrows here on the trading session. The S&P

and the Dow down about a third of a percent, quarter percent decline for the NASDAQ. And in the meantime, let's turn our attention back to Hurricane Milton, which blew through Florida last night and this morning. The process of cleaning up and restoring life begins now as millions of people are without power. NBC's Priscilla Thompson joins us now from Fort Pierce on. Florida's East Coast. And Priscilla, thanks for joining us. What can you tell us? Yeah, Kelly, so I'll give you a look at what we're seeing in some of these neighborhoods where those tornadoes tore through. You've got huge uprooted trees just like this one. Folks have been out all morning throughout this neighborhood trying to cut down some of these

trees and assess the damage. But this is what it looks like up and down this block right now. You've got blue tarps on a lot of these cars because the windows are busted out. And so you can just see really the devastation that happened here. One person here described it as he walked out of his door and it was like the entire neighborhood had been annihilated. But I will tell you that in the neighborhood just next to this one, it is even worse. That is where Governor DeSantis has confirmed that a number of those deaths occurred. The deaths from tornadoes alone now up to five. And we were able to get a drone up in that neighborhood to look at some of the destruction there. We're not showing that material because it does appear that there are search and rescue teams.

working in that area still. And right now, police are not allowing any people who do not live there back there. But it is just homes that are completely gone back there. And so truly devastating. And one other thing I want to point out here, you see the windows covered here. People here did their best to prepare for the hurricane, to prepare for hurricane force winds, for rain, for potential flooding. What they were not prepared for was when they started getting these tornado alerts.

And then the tornado sirens started going off. And many of them described just, hunkering down in their homes and doing the best they could, but of course coming out to see devastation that looks like this. But I will tell you throughout the day today, we have seen neighbors coming out to help neighbors remove some of this debris. And many people here just saying that they are grateful to be alive after what they experienced over the past 12 hours. Tyler? Priscilla, thank you very much. It was an incredible scene last night. I had a friend send me a

photograph of a dumpster, an industrial size, Priscilla, dumpster, deposit. on the top of a house by one of those tornadoes. Just crazy what nature can do. Anyhow, thank you very much, Priscilla. Let's get over to Bertha Coombs now for a CNBC News update. Tyler, Sean Combs, also known as Diddy, will go to trial in May on sex trafficking charges. His family showed up to court today for his first appearance before the trail judge who set the timeline this afternoon for the proceedings.

The hip-hop moguls lawyers asked for the trial to begin this spring. A federal indictment accuses the Grammy Award-winning artist of orchestrating and recording coerced sex acts. Combs has pleaded not guilty. Kate Middleton is officially back in the public eye. The Princess of Wales accompanied her husband, Prince William, to Southport in Northwest England today to meet with the bereaved families of three children killed during a knife attack in a dance class in July. It was her first public appearance since she completed chemotherapy. And you can now test for COVID-19 and the flu at home with a single swab. The FDA granting authorization of healgens combination rapid test this week.

The agency says it can be used independently for those 14 years or older and with supervision for kids starting at age two. And no prescription is needed and just in time for what is likely to be a really, really busy respiratory virus season, Tyler. Bertha, thank you very much. Bertha Coombs reporting. All right, coming up, Tesla's next driving force, the EV giant, holding the long away in unveiling of its robotaxy on autonomous ride share strategy and an event tonight in California. But how much will CEO Elon Musk actually reveal and how might investors respond? We'll get a preview when Power Lunch return.

To Power Lunch, tonight is Tesla's highly anticipated Robotaxy event. 10 p.m. Eastern time, something Elon Musk and others have pointed to as key for the companies future. Let's bring in Phil a beau for more on what exactly to expect. Hi, Phil. Kelly, there's two things that people shall be focused on tonight. First of all, let's talk about the Robotaxy Unvail and the discussion about the Tesla Robotaxy Network, Rideshare Network. Maybe they have a different name for it, but at the event tonight, Robotaxy will get most of the attention. Three things that analysts are looking for. And this tells us whether or not this is Elon really giving us something or Elon putting on a show. specific operational details, something like cost per mile.

This is our estimate. This is how we're going to build the vehicle, what stands out about it. The timeline for a rollout, is it going to be specifically tied to, I don't know, the first half of 2026, early 2027? There's got to be some timeline there for people to say, okay, now we can start to game this out. And the types of autonomous models, we've been told there's going to be a two-seat model that they will put a demonstration on with. We've also heard that there may be more of a community ride model, if you will. Those are what the guts of what people really want to see in terms of the robotaxy. Keep in mind the other part of the story that Wall Street's probably more focused on is if Elon Musk makes reference to a lower priced model that will be coming perhaps in the first or second quarter of next year.

Remember, in the first quarter, they said, hey, we're going to start work on a lower priced version, maybe a decontinent. or a stripped-down version of the Model 3. What do they tell us about that this evening? If they tell us something, that could have real implications for Tesla shares tomorrow. Remember, the company delivered 1.81 million vehicles last year. As you look at their annual delivery growth, it's been growing steadily from the beginning. I don't think they've had a down year, if I'm not mistaken. Well, that may change this year because right now the estimate is for 1.78 million vehicles to be delivered.

And by the way, to get to that point, they're at 1.29 million deliveries. through the third quarter, they're going to have to have a record number of deliveries in the fourth quarter. Can that happen? Sure, it could happen. But that is really what people are going to be focused on tonight, guys. I know people get caught up in these events. They focus on the Elon Musk show, but it's really the details about Robotaxie as well as the lower price model. That's what Wall Street's going to be looking at. All right, Phil. Hang on for just a minute as we switch our conversation to talk a little bit more about Elon Musk, injecting himself further into the 2024 election cycle. He has, as you probably know, been stumping for former President Trump, and aggressively so. So is it alienating Democrats who might buy cars from Tesla?

Let's explore that with Steve Kovac with that piece of the Musk puzzle. What do you say, Steve? Is it showing up in sales? I mean, Phil just said that sales aren't as high as they were. Could politics have something to do with that? Yeah, it's hard to really make a strong correlation there. But look, Tyler, ahead of that big robotaxia event tonight, Musk has been spending the first part of his week campaigning for Trump for president.

On Saturday, of course, he was at that Trump rally in Butler, Pennsylvania. That was his first formal appearance with Trump on the campaign trail. And according to NBC News, Musk also called Pennsylvania Governor Josh Shapiro while he was at the Steelers game in Pittsburgh on Sunday. Now, Shapiro told NBC News the call was about Musk investing in the state, not about politics, but it is notable. Musk initiated that conversation with the governor of perhaps the most important swing state in this election.

He also gave an interview with Tucker Carlson on next. You can kind of guess how that one went. And he's been offering $47 payments to people registering to vote. All of this ahead of that robotaxy event, something Musk and Tesla need the public to believe in to justify its massive valuation. And the Wall Street Journal had a story on this earlier this year. of Musk political behavior and recent statements have kind of created a negative sentiment around him at a time when Tesla is struggling to grow its vehicle deliveries, just like Phil mentioned. And an NBC poll

from last month, only 6% of Democrats had a favorable view of Musk. Seventy-nine percent of them had negative feelings, but, as you can imagine, guys, nearly the opposite with Republicans, 62 percent have positive feeling about Musk guys. Phil, let me turn back to you. You mentioned earlier that they're on pace, now to deliver something like 1.7, I forget what you said, 1.79 million cars this year. 7.8. 1.78 million cars this year. Is there any thought in your mind or in the numbers that that slowing of the growth rate is attributable at all to Musk and his political positions? I don't buy it at all, Tyler. I think that there's no correlation between a slower growth rate for Tesla.

and actually sales would be declining slightly this year, and his political leanings, work, whatever you want to call it. Look, I have plenty of friends who are very, very liberal, very democratic, and they are still Tesla fans. And it's because Tesla dominates the electric vehicle market. While people may not like some of what he does with Donald Trump, I have as many friends who are Democrats as who are hardcore MAGA Trump supporters who believe in.

Tesla because it is the best electric vehicle out there in terms of sales and in terms of they set the table for everybody else. I never have somebody come up to me and say, I'm thinking about buying an electric vehicle. Should I trust Tesla? I do have that question about other brands. And that still says something regardless of his political leanings. And Steve, in what in what you collected, was there any evidence that people were shying away from purchasing Teslas? Yeah, it's really hard to make that correlation to Phil's point. And I'll go back that Wall Street Journal story that tried to connect those dots a little bit. It's impossible to say necessarily.

I mean, we have that polling data from NBC about the favorability about Musk himself. What I will say is he's the only major CEO, in fact, just the only one of the magnificent seven companies that we talk about so often that's out there actively and explicitly campaigning for one candidate or the other. So I think that's just also interesting to see how he's spending his time in context of this incredibly. important event that has been, he's been teasing for, I don't know, the last five or six years, that this is really what the future of the company hinges on. And we're expecting to get at least

some more details about that tonight. So, you know, as questions kind of come up about how he's spending his time among so many companies, not just Tesla and SpaceX, but what he's doing with X and his various other companies, it's also his political activities taking up much of his time. And by the way, he's also said, and along with Trump, that he could have some kind of informal role about government spending in a future Trump administration next year, guys. All right. Very interesting, guys. Thank you very much.

I appreciate it, Phil and Steve. And still ahead, we'll get the latest on Pfizer's activist drama. The shares are down nearly 3% today and down 11% over the past year. Details after this. Well, that proxy battle between Starboard and Pfizer taking a new turn to former Pfizer executives who we thought would work with the activist fund now say they support Pfizer's current CEO Albert Borla. And the really interesting part is why.

Angelica Peoples has that side of the story. Angelica. That's right, Tyler. Just days into the fight between Pfizer and Starboard, we're seeing this about face from Pfizer's former CEO, Ian Reed, and former CFO, Frank DiMilio. Starboard claiming that people within or representing Pfizer have, quote, purportedly threatened to commence

costly litigation against them, clawback prior compensation, and cancel unvested performance stock units unless they publicly release a statement supporting the current CEO Albert Borla. Pfizer declining to comment on those allegations, but a person familiar with the interactions between Pfizer and the former executives telling me that the risk of legal liability was a driving factor in the reversal. Now, it's been a messy few days, Tyler.

It was only Sunday that we first learned of Starboard's $1 billion stake in Pfizer. Biopharma publication endpoints reporting this whole thing started with an email that was probably an accident. The former CFO DiMilia reportedly sent a blank email to Borla with a Starboard representative copied on it. That email is signaling to Pfizer that something was brewing and bringing Starboard's stake into the spotlight. Now, we still don't know what changes Starboard's looking for, and they're set to meet with Borla, the chair of Pfizer's board, and possibly other members next Wednesday. That's docked down almost 3% today. And remember, it's down more than 50% from its pandemic peak. This is an ongoing story.

I know you'll be following it for us, Angelica. you very much. Sorry we're out of time. We have questions, but we'll get you next time. Incredible detail there, too. Thanks for watching, Power Launch, everybody. Closing bell starts right now, and I'll see you at 5. Yes.