Power Lunch - Dow Tops 42,000 After Big Fed Rate Cut 9/19/24

Episode Date: September 19, 2024

Stocks are surging as traders digest the Fed’s decision to lower interest rates by a half percentage point. The Dow and S&P 500 both advanced to new intraday highs, while the Nasdaq surged nearly 3%. Traders also got further validation that the Fed was engineering a “soft landing” for the economy as weekly jobless claims fell by 12,000 to 219,000, which was far below estimates. We’ll cover the market action from all angles. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Mattson. Nice to be back at home at our main anchor desk after day in Washington yesterday. Rally day on Wall Street and across the world after yesterday's Big Fed decision. Stocks are sitting right around session highs right now. The doubt more than 600 points. What struck me was as we kind of went throughout the afternoon yesterday, the tone appeared to be one of the markets initially excited about the rate cut and then rethinking it. And then you wake up this morning and we're off to the races. Off to the races. And it certainly seems. seems to bolster the argument that the Fed sees a bit of a soft landing. The market seems to think the same way. And one of our first guests is going to say, everything is stacking up pretty nicely for continued growth in the market. And I'm hearing Steve now, Steve Leesman, talking to people about,

is it going to be a series of 50s? That is not a discussion we were having recently. And the 10 years up, I mean, that's what the three in three quarters now, maybe on brighter growth prospects, hopefully that more than inflation. And we'll, of course, talk about the impact it's having on real estate. is the drop in rates enough to get buyers off the sidelines. But here's the funny thing. The 10 year is higher.

The 10 years higher. It doesn't matter what the Fed Fund's rate is. And the other argument that we heard I think heard yesterday down in Washington was the idea that when rates start a slow move down, people sometimes hold off thinking, hey, I'm going to wait a little longer because those rates are going to come down even more. The J curve. I'm not seeing, yeah, the J curve. I'm not seeing the house I want. Right. So I'll wait a little longer and maybe rates will come down a little more.

They tend to come down mortgage rates in the winter months anyway. So maybe I'll get a better deal if I wait. Plus, oil prices are down 20% this year, despite geopolitical tension. You can go to the gas station and you will see how much gas prices have come down. The U.S. has increased its production of oil and especially natural gas. So is the industry ready for even more production? Who knows? we're going to chat it a little bit later on, but right now, the United States is, as we pointed out several times, producing record amounts of oil domestically, record amounts of natural gas.

We are the number one producer in the world of both of those things. Yeah. Let's see how much it might go up from here or if it will. And again, go back to that competitiveness report from Mario Draghi about Europe. One of the key challenges it faces is structurally higher energy costs. It's a huge structural advantage for the U.S. right now. All right, as we mentioned, markets, where am I supposed to look right now? Right there is where I'm going to look.

Markets are rallying today. The Dow and the S&P hitting intraday record highs. They are on pace to close at all-time highs. But will the market be able to keep up this momentum and how long will the rally last? Joining us to break it all down is Hugh Johnson. Chief economist at Hugh Johnson Economics and Kevin Karon. He's a senior portfolio manager at Washington, Crossing Advisors, and our very own Michael Santoli.

Johnson, let me begin with you because you strike a fairly optimistic tone, but you think that the market is relatively close to fully valued. And if you're looking for an entry point, it might not be here. Am I summarizing your view correctly? You're hitting it right on the, you're nailing it right. Perfect. Yeah, this is great. You know, the Fed has done a great thing. I think they set the stage for an extremely good 2025, whether we're taking a look at the economy earnings, S&P 500 earnings, have a shot now at being up 15%. The Fed will be cutting rates. Long-term interest rates are likely to come down some and mortgage rates also.

Be patient. That, I think, is in the cards, and stock prices should do well. That's the good news. The bad news, or not so bad news, or not so good news anyway, is just as you say, is, Tyler, is that the market's had a big move to the upside. And as I do the numbers, as I crunch the numbers, we're over. or, interestingly enough, the S&P is almost exactly where I had forecast with some statistics, where it would be at the end of 2025.

So the market, stock market has gotten ahead of itself. It's overvalued. And that, along with some other things, such as widespread optimism, makes me very concerned about the near term. We need a good entry point, and this is not it. So, Kevin, let me turn to you and your reference to your WCA, which I assume is Washington, crossing advisory barometer and what it has been saying and if I'm reading right it has been saying that the economy has been slowing more abruptly than maybe some of the backward looking

measures would indicate and that you you see that continued slowing into the fall in next year. Am I reading that right or is my barometric pressure long? Tyler, that's that's yeah, Tyler, that's spot on. We just published this piece on our website at Washington Crossing Advisors.com, and we walked through a comparison of what our analysis of the data sees with the Fed. And we'd point out that the data really peaked in the spring and has been decelerating since then. And that was a main reason why the Fed needed to move. But the other reason why the Fed needed to move was because in traditional academic policy thinking,

if the unemployment rates moving down and the, I'm sorry, if the inflation rates moving down and unemployment rates moving up, the Fed is not standing pat. They're actually getting tighter relative to conditions. So the fact that our data seems to have cooled off in the spring, we cut our equity exposure a little bit earlier this year. In accordance with that, we would agree that the Fed did the right thing by cutting rates yesterday, but there are some contradictions in what was, what was said yesterday. Let's tease those out a little bit, those contradictions, Kevin, and see if they can tell us what the Fed might do next. Yeah, so for example, in the press conference, Jerome Powell talked about that the committee was in no rush to cut. Well, it raised an obvious question. Well,

if you're in no rush to cut, then why go with 50? If you look at the vote, this is the first vote that involved a dissent since 2005. So that raises some questions for us. If you look at what they're doing with the balance sheet, they're still running off the balance sheet to some extent while they're cutting rates. And then lastly, when you look at our own barometer, our own forecast of where things are headed, what's happening is the degree of uncertainty around the four past path is actually getting wider. So there are a number of points here that suggest that maybe we are at a turning point and you're getting some confusion, if you will, in the story because the data isn't just clearly moving in one direction anymore.

Right. Michael Santoli, what's the market saying to you? Well, it sort of run out of things in the short term to complain about or to quibble with about the environment. I mean, if you go back to mid-July, July 16th, we made our prior peak in the S&P 500 before today. We're only up 1% since then. What do we spend the last two months doing? going from maximum confidence in the soft landing to questioning at every data point, is it still intact? Is the Fed behind the curve? Are they willingly behind the curve? We all know that 5.5% and a quarter percent on the Fed funds rate and above, which is where we were until yesterday, was just offside.

So no matter where you think it has to go to, and yes, Powell said we're in no hurry to get down to our target neutral rate, but they're in a hurry to get started, probably tacitly admitting they probably should have gone in July or would have if they had the data that they soon thereafter did get. So I do think you have an embrace of this idea that it was an optional 50 basis point cut, but one that was happening for generally the right reasons and not because of an economic emergency. It's a soft landing preservation plan, not a resuscitation plan. All that's to the good.

The issue is, I think, and, you know, Hughes getting to this to a degree, obviously you're starting from a point where the market wasn't cheap. We've already been on this big eight-day wind streak in the S&P 500. you already were kind of pretty well priced for a soft landing. So the question from here is just incrementally how much better it can get in this environment, even if we've now restored this idea that the Fed is a buffer to any potential economic weakening down the road. We're still in that late cycle psychology, but for now in a more comfortable spot within it. And Hugh, just to circle back, you said, you know, you thought we'd be around 5720 for the S&P at the end of next year

and we're kind of there today. So as positive as you're feeling about the outlook right now, going to take for stocks to keep rising? It's going to take a lot for stocks to keep rising. First of all, I tell everybody, remember, it's time, not timing. It's the secret to success in this. So you probably should ignore what I'm telling you. But right now, we're overvalued. And as I mentioned, there's a lot of other things that are very problematic. One is there's widespread optimism. That's not a good thing for the markets. The second thing is, as Mike has gotten to or suggested, really when you take a look at sector performance and lots of other things, the market has been acting very defensive. So I think you put that all together, and it says to me on a short-term basis, and again, this is more timing,

on a short-term basis, we're likely to give up this big surge and we're likely to go down and go down to, and this is the good news, down to levels that are much more rational or give us some upside potential for 2025. Right now, unfortunately, as I do the number crunching, we don't have a lot of upside potential from this point to the end of 2025, and that's not very good news for stock buyers. Wait until we get to a better entry point. And yet you say we could not ask for a better set of variables or outcome for 2025. The outlook is good. Yeah, the outlook. If you look at the economy, the prospects for the earnings, obviously Federal Reserve policy, long-term interest rates, you'd say this is a perfect setup for 2025. I totally agree with

that. The problem is is valuation. The problem is we're overvalued or we're just, we've really discounted all, are priced in, all of 2025. I want to get to a level where it's not all priced in and we have some upside potential. We don't have that. Gentlemen, thank you so much. You, Kevin, Michael, appreciate it. Thank you. And the NASDAQ is the best performing of the major averages today. Unlike the Dow and the S&P, it didn't hit a record, but still the chip stocks are leading this rally, helping to erase some of their month-date declines. The NVIDIA in particular, Sima Modi has more. Cima?

Kelly, that's right. The Fed's rate cuts sparking a rally in Chips, the SMH ETF now on pace for its best day since early August. Worth noting the sector does tend to outperform in a lower rate environment. Among the biggest gainers at this hour is Arm Holdings. J.P. Morgan just had a meeting with management, and their takeaway is that the chip designer can drive 20% plus revenue growth in the next few years as AI workloads from data centers will require higher levels of CPU compute.

Elsewhere, NVIDIA up another 5% and now up about 10% from just a couple weeks ago. The stock's rebound has coincided with NVIDIA CEO Jensen Wong's media blitz, recently touting the promise of accelerated computing at a number of conferences just this week at Dreamforce with Salesforce CEO Mark Beniof. And then take a look at Intel, higher after clarifying that it will not sell down its stake in Mobili, the Israeli company that it bought and then took public. That's also providing some relief for shares of MobileE as well. Currently up about 17% on the day. This, as the semiconductor industry is awaiting earnings from Micron next week, TD Security is cutting its price target on the

stock following a recent challenge check that does suggest pricing softness. The stock is up today, but I would point out, it's been one of the key laggards so far this month, down about 16% from its high. Ty and Kelly. Thank you very much. President Trump indicating he wants to put a cap on credit card interest rates. Amon Javers has the details. Amen? Tyler, that's right. We're now getting a response here from the American Bankers Association to this new proposal from former President Trump last night in which he said he wants to put a cap, as you say, on the interest rates that credit card companies can charge to consumers.

Here's what the former president said at a rally last night. While working Americans catch up, we're going to put a temporary cap. on credit card interest rates. We're going to cap it at around 10%. We can't let them make 25 and 30%. And here's the response now from the American Bankers Association. They say, while we don't know the specific details of this proposal, ABA has opposed similar interest rate cap proposals in the past, including one from Senator Bernie Sanders and Congresswoman Alexandra Ocasio-Cortez during the 2020 campaign because they would result in the loss of credit for the very consumers who need it the most. They say instead these consumers would be forced to use less regulated,

more risky alternatives, including payday lenders and loan sharks. So Tyler, this is an interesting one because this continues the former president's economic populist streak here. A number of proposals over the past couple of weeks aimed at working class voters designed to appeal to that group. This is a Republican Party that's very different than it was four or eight years ago. The Republican Party here saying that this would be a temporary patch, that is, a temporary proposal to cap these interest rates by the credit card companies. But of course, if you had the votes to get that passed in Congress, you would really, in practical terms, never be able to get the votes to undo that in Congress, right? Because you can't imagine

a Congress in a world where credit card interest rates were capped, voting then to unleash them on their own voters. So if this were to happen, if they could get the votes in Congress, Congress, it would be the kind of thing that would be very hard to undo. Tyler, back over you. It's very interesting that a GOP nominee would be calling for a form of price caps, something that, as you point out, Representative Ocasio Cortez and Bernie Sanders called for. I mean, that's, politics does make strange bedfellows, as the saying goes. I mean, what we're seeing is this populist thrust in both of these parties now out on the campaign

trail, as they each try to match each other, populist proposal for populist proposal. That is where this election is going. That's where the political debate on the economy is going. And it's all about the battle for the union vote in particular and for the working-class white vote. I mean, we saw this decision by Teamsters and others to participate or not participate in the election. This is all about winning those voters. And you can see the former president here as he goes through his proposal on not taxing social security benefits, for example. Also on not taxing tips.

He's going after those working-class voters that the Republican. The Republican Party has concluded they need to win. It really is a question of who can put the most cheese on the table, I suppose, is what's going on. Absolutely. And you can see the bankers, they don't like it. You bet they don't. Amen Javvers, thanks. You bet.

Keep an eye on those related stocks. And also here's our power check as we head into break. On the negative side today is progeny, the fertility benefits provider plummeting after the firm lost a, quote, significant client. Analysts are worried about retention rates moving forward. On the plus side, darned restaurants, the Olive Garden Parent, partnering, with Uber for deliveries starting later this year. That and better guidance is offsetting its week fiscal Q1. That's your power check. Power Lunch. We'll be right back. So welcome back to Power Lunch. So what does a half point cut in the Fed funds rate mean for mortgage rates? Let's get to Diana

Oleg for the numbers. Hey, Di. Hey, Ty. Yeah, look, the average rate on the 30-year fix actually rose again today. Yes, rose to 6.17 percent. It also rose yesterday. So why did rates go up after the Fed cut? It will be. because mortgage rates don't follow the Fed funds rate exactly. They loosely follow the yield on the 10-year Treasury, which went up. But more importantly, the mortgage market has been expecting a cut and pricing it into mortgage rates for more than a month. Rates have also been reacting to economic data, showing inflation moderating. So take today's rate and compare it to the rate on July 1st, just a few months ago, which was 7.14%. That is a full percentage point drop. So what does that

mean to today's homebuyer? Well, if you're buying a $400,000 home with 20% down, on a 30-year fix, your monthly payment today, not including taxes and insurance, is $210 less than it was on July 1st. And that's why we saw existing home sales in August dropped 2.5% from July to the lowest August reading since 2010 because those sales are based on contract signed in late June and July when rates were higher. Sales fell, even though inventory improved slightly. Now, most agents will tell you the potential buyers are still waiting for mortgage. rates to go even lower. We've seen that in the mortgage demand to buy a home. It's still lower than it was a year ago, even though rates are so much lower than they were last year at this time.

Kelly? I just think it's worth emphasizing this maybe 10 times, Diana, the Fed cut rates and mortgage rates are going higher. Yes, in fact, six basis points higher since the Fed cut the rate. And again, it's because they were already priced in. And a lot of people in the mortgage market expected rates to go up a little bit. But the trajectory, at least, is somewhat lower. It's lower than it was, obviously, as I said in July, far lower than it was in a year ago. We hit 8% last October. And the expectation is that rates will continue to come down very slowly, but again, not some dramatic drop after the Fed. It's a great point that probably, you know, the anticipation that this was coming is what helped to lower the curve, you know, for quite

some time. Diana, thank you for now, Diana Ollick. Let's get more insight now on the impact of rates on housing from a top-selling broker in New York City. Noble Black is back with us of Douglas Ellman, and it's great to see you, and it's the perfect time to check in. Welcome. Thank you for having me. So the irony is the fall in mortgage rates going into today. Forget the fact that they backed up a little bit. Call it 610, 615, wherever they are. I had already heard that wasn't doing a lot, a lot to stimulate activity in the market, buyer interest in that sort of thing. But you tell me, how would you describe? I think Dinah was spot on. I think we're talking about the anticipation, right?

So we started seeing particularly in New York, but I think nationally in hot markets, we started seeing that buyers were coming back into the market getting busier in July and August. Our signed contracts in July and August were well up over last year for Manhattan. I think Manhattan in August was 30% higher than last year. Brooklyn was 50% higher. So again, it's not that people were jumping in because of lower rates. They see that it's coming. And I think the big news from yesterday, which we were thrilled with, right, is that all of a sudden it's now here.

Last year, when we thought the Fed was going to be cutting, people were starting to come back in. It was a busy fourth quarter, first quarter, and then it just went flat. So we started seeing that again in anticipation of this, and now it's here. I think it's going to be a continual. Are these new buyers paying cash? Are they taking out mortgages? How's that changed? So the bulk of the market for this past year or 18 months has been cash by far.

You're starting to see people start tiptoeing back into financing. Not that those deals are financing yet, but they will be. And I think even the people that could be cash will start choosing again to finance once it gets a little bit lower. One of the things that's interesting to me is the idea that mortgage rates are kind of, well, they're kind of like. bonds. When the interest rates fall, the price or value of the bond goes up. So doesn't that kind of happen in housing, too? When interest rates fall, doesn't that allow the seller maybe to raise the asking price a little bit? Because... Theoretically, could, but I think the larger point is a very well-made one, which is any buyer that's waiting for it to be cheaper down the road with

rates coming down, affordability couldn't end up being worse for them if they're six or 12 months, Because the rates are going to be lower on their mortgage, but you're going to have more demand for more properties, right? And so prices will be a demand thing. It's not the seller asking more necessarily. But this is an important thing and a very curious one. If you are trying to kind of make housing affordable again because you think that's best for the economy and this is arguably one that pushes prices higher, I mean, how much higher can they go? So I don't think that this is pushing them higher, right? But I think the short-term immediate effect could be that they go a little bit higher. Long term, this is still the right direction, right? Lower rates are going to mean that more people are going to build houses, more builders get back in. I mean, we have...

More inventory, presumably. Right. I mean, we have a housing crisis in the sense that nationally there's not enough of that, right? So we need people building more houses. We need it to be easier for them to build more houses. Long term, I think this is the right direction. But short term, if buyers are sitting waiting, it's the wrong move, I think. Go ahead. Jinks.

No, I have to you. So more buyers may be coming in. What is the tail effect of lower interest rates on builders? Will they be more likely to go out? They can get loans at a better price. So they're going to be able to build, presumably, at a better price. Sure, and this is all marginal, right? So the lower they go, then you get some coming on, some, and some and some, right?

And then eventually when you have more inventory, then the prices do kind of stabilize, or hopefully, I don't know when they go down, but go to a more market rate level with buyers, and affordability certainly gets better. What do you see? I mean, if you were advising the presidential candidates on what they ought to do in terms of creating more housing so that this mismatch is fixed, what would you suggest they do? You know, I really think the biggest thing is red tape, right? Like what people have to go through and the hurdles that they have to go through in order to build, all of the regulations and the different, you know, just different things you have to satisfy, whether it's state or national level, there's so many impediments. besides the fact that it's really hard

to make money doing this, right? Like you've got the rage, you've got all of this, you're taking a big gamble, but they almost add a different layer or an additional unnecessary layer on top of that. They say they want more housing, but in some sense they make it... Very hard for the builders to build. Yeah. Go next door where they're putting in 600

town homes, I saw that. I believe. It's a big, big deal. Years and years and years in the making. As soon as they get the go-ahead, they sprung up overnight just like that. If you want to go, let me know, I'll take you down. All right. Hey, say, you'll show us. You'll sell us what.

Noble, thanks so much for joining us. Thanks for having me. Always good to have you. Thank you. Thank you. All right, tech stocks leading the market rally, the sector hitting a three-week high. But our technician says the NASDAQ still has a major hurdle to clear before she'd invest. Your latest market navigator is next.

Welcome back to Power Lunch with stocks just off session highs, but still up nicely across the board. 568 points for the Dow, 1.9% for the S&P, 2.8% for the NASDAQ. Our trader believes the technical support a move higher, but they're not quite signaling and all clear just yet. Let's bring in Jessica Inskip, Director of Investor Research at Stockbrokers.com. Jessica, good to see you. What don't you see that you're looking for? Yeah, absolutely. There is a beautiful bullish setup that I see on the daily chart for SPX, where we formed what's called a cup and handle.

This is important development because this type of formation is actually what formed on the weekly view for the S&P 500 and the NASDAQ 100 to give us our larger rally last year. We were looking at those July pullbacks and then subsequent hires that we made into that ripping rally, if you will. What I'm very concerned with is actually the NASDAQ 100. Technology is not leading the rally. We're seeing participation today as we had a catalyst that's pushing us higher. But as you know, Kelly, I like to look at the 1326 and 40 weekly moving averages. The S&P 500 is making a higher high, but the NASDAQ 100, it's not. We are actually acting that for one quarter of prices.

The 13 weekly is acting as support right now, which is a hurdle to overcome. So you want to see not just today's nearly 3% rally and we're kind of conflating NASDAQ and NASDAQ 100, but you want to see much stronger price action, more of a catch-up, more of a leadership. Let me ask you this. Hugh Johnson, top of the hour, said he doesn't think technology is going to be the leadership now. Could it be that there's a new source of leadership? Yeah.

I mean, I think technology is actually going to be a participation. But the leadership now is within the equal weight. I'm looking at broader participation, and that's good. That's reflective from a fundamental perspective, even as we have a quarter of positive growth, finally from the other 493, less the magnificent seven. And the technicals certainly reflect that, which is interesting. If we have the equal weight making higher highs, then we see strength with the S&P 500 making higher highs. Now that rally isn't as narrow, it's broadening, it's strengthening, and that's a really, really good sign.

However, the AI narrative is very, very real. That leads into productivity. And from a charting perspective, we could hit a major area of resistance within the NASDAQ 100, which could cause us to get into consolidation, perhaps with uncertainty that seasonality we'll see in the election cycle gets closer. and closer. And then post-election, as long as we overcome those hurdles, we're set up for a really good, really good rally. Very interesting. I'll be watching that to see, Jessica, if the NASDAQ kind of goes back into that role or not. And if so, if the equal weight in the broader markets can kind of chug along. That tension is a great point. Thanks for joining us today. We appreciate it.

Always good to see you. Thank you, Kelly. Jessica and Skip. Tyler, over to you. All right, Cal, U.S. energy production has been booming lately. Can it keep up the pace? That's the question. Our own Brian Sullivan is in Houston to try and find out. What do you say, Brian? Well, Ty, I'm going to find out, but then I thought I'd leave you guys with like a tease or a quiz. Maybe you got you and Kelly can Google it during the commercial break. The U.S. is the largest producer of natural gas in the world. But how much gas are we actually producing?

And for bonus points, which country is number two? The answer for 400, Tyler, after this break. All right, let's take our eye off stocks for just a second with the Dowellup 5. and look at the energy market. Vice presidential candidate J.D. Vance telling Squawk box last week that the U.S. could double or even triple its natural gas output. Our own Brian Sullivan is in Houston with more on that story. Brian, is that even possible given that we are producing, and I look, we cheated here, a thousand billion cubic meters of gas per year.

Sounds like Carl Sagan describing the universe. A billion billion, yes, 155 billion cubic meters, 125 BCF. We are the biggest natural gas producer in the world. By far, by far, Russia number two. Then you go down the line, got Qatar, Iran, and a few others. But you look at the chart, I mean, we are way, way ahead. So when I heard the vice presidential candidate, J.D. Vance, say that to Joe and Andrew and Becky. I thought, oh, my God, I know.

Here we go. Hi. I saw that one coming. He's a fan. What's your favorite TV network? Anyway, all right, so here's the thing. When I heard JD Vance say that on camera, I thought, wow, I know we're a lot. Is that even possible?

Okay, theoretically we have learned it is possible that you could physically get that much gas out of the ground. We've already raised it by 50% over the last 10 years. Tyler, but here's the thing. If you and Kelly owned a restaurant and you want to expand it, you're going to need customers. And the big question is, is there enough global demand for more U.S. gas given that Qatar and, yes, Russia, still producing a ton of LNG? And that's really the question. So can we do it? Yes. Do we have the customers? Maybe just today and tomorrow venture global, which is a private firm. They've got their first

cargoes leaving to go to Europe that are on ships that they built. Built themselves in record time. trying some of it may end up in Ukraine because as you might know they're having some some gas issues there with this pipeline being cut off as well so can we do it yes do we have the demand and the permitting that's the question do we have one fan yes apparently i have one fan well i'd like to meet him or her but uh how what accounts for the uh what accounts for the growth in our natural gas production is it fracking uh yes it does because Because when you take oil out of the ground, you get the natural residue for the most part of gas. In fact, we had so much gas until the LNG boom, Tyler, the gas was almost worthless.

I mean, we literally burned it. In fact, we still burn a lot. The technical term is flaring. You see these walls of fire going up because if you have to burn it off. You don't want it just to go nowhere. That gas now has value. Is the price at $2.30? Yes, at $6 to and a half years ago.

But even at $2.30, we're able to, if we can freeze it, put it on giant ships. You've seen those funky looking ships that we've showed you. One just went by. Unfortunately, we missed it by a couple of minutes. Then you can unfreeze it when it gets to its destination. It's called regasification. And then, of course, sell it. I'll give you this.

I'll just leave you with this little RBI. One LNG tanker, average-sized tanker, is enough to produce heat and light electricity for one million average-sized homes in Europe for a month. One ship equals a million homes in Germany, heat and light for one month. Well, here comes a ship around the bend, but it's just a little bit too slow. But yeah, that's amazing how much gas we're actually producing, guys. All right, Brian, thank you very much, Brian Sullivan.

And a surprise guest who stopped by. Yes. Thank you very much. I knew that was coming. Yeah, you can see it, right? Oh, look at that. There's a boat. Yep.

Here's somebody. Okay, cool. Thanks, Brian. Let's get to Kate Rooney now for a CNBC news update. Kate? Hi there, Kelly. Hezbollah's leader today called the two days of pager and walkie-talkie attacks across Lebanon. An act of war comes as the Israeli military, which has not commented on the detonations, launched a wave of attacks on Lebanon today. And Israeli official tells NBC News, a involved airstrikes and artillery, but the ground forces didn't cross into Lebanon. Hezbollah has vowed retaliation for those pager attacks.

Brazil's Supreme Court, meanwhile, fined Elon Musk's ex platform, about $900,000 after some users were able to briefly access X yesterday, despite a nationwide ban. The company says the brief access was unintentional, but the presiding justice accused the company of committing a, quote, trick. X has been banned there since last month for ignoring judicial orders. And finally, JetBlue is planning its first airport lounges as it chases high-spending travelers. The airline says the lounges will open at its hub in New York next year. And then in Boston, customers who have the highest tier of JetBlue's loyalty program and those booked in its mint business class are going to have access to those lounges. Kelly, back over you.

Maybe following Delta's lead here. They're all going to jump in. Kate, thanks so much. We appreciate it. It's not just stocks ripping higher today. Gold also hitting a record high above $2,600 an ounce. It's up 26% so far this year. And we'll check out the moves in the bond space.

after this. Welcome back to Power Lunch. Sox are up nicely today with the Dow and S&P hitting record highs after the Fed's 50 basis point rate cut yesterday. But bond yields are higher as well. Let's get to Rick Santelli for more on the reaction here. Rick, we pointed out the 10-year yield is higher. So mortgage rates are actually higher today than they were a few days ago. Oh my God, yes. This is the unintended consequence when everybody at the Federal Reserve and throughout the government tries to massage the economy. We still have a Fed with a huge balance sheet and what you're describing are yield curves.

Let's look at a variety of yield curves. Let's look at tens versus twos versus fives, 30s versus fives. And you look at how each one is steeper. That's year to date. These are dramatic moves. What does it mean in English? Exactly what you're saying, Kelly, that the Fed lowered rates and you might see mortgages rise.

As a matter of fact, there's no might here. If tens, 20, 30, 7s start to rise, mortgage rates will correlate with that, and they will move higher. Commercial real estate. My guess is, like in some of the sales recently in states like Minnesota, you're going to see more sales. If commercial real estate was hanging on for the betterment of lower rates in their financial situation, there might not be anything better in there. Let's go talk to Jason. Jason, most of the issues with interest rates outside of a two-year that brief,

is in positive territory not by much. Mostly rates have gone up. What do you see it in your complex, especially given the notion of how stocks have soared? Yeah, initially on the 50 basis point cut, which surprised a lot of people. We saw that snap rally up. And then as we usually do see on Fed days,

is fade the first move. So while we had the move up, 30 minutes later, the market sold off. We want to being down on the day. It really took the entire overnight session to take in what the Fed was trying to do because we woke up this morning and saw up 2%. Oh, yeah, stock's soaring. Now, volatility, VIX is dropping as well.

What's going on with the puts? Yeah, it sure seemed like it was a risk-off thing. VIX came in over a point and a half, and normally we'd think that people are less worrisome about what's going on in the overall market. That's not what we're seeing today. We're seeing lots of put buyers. We're seeing lots of people trying to protect, whether it's this rally or just thinking they don't believe in it.

and we might see a retrace lower. The last two weeks of September tend to be very poor historically performing weeks. So it might be a combination of things, but there are people that don't believe this rally. You know, I believe in the rally. The issue with the rally is that, you know, when I hear the current Biden administration bragging about how the stock market is up and 50 basis pointies this close to an election, there's so many cross currents going on. Are you hearing these things among traders being talked about? Yeah, you know, the Fed is supposed to be, you know, not political and not take any, you know, party stances into consideration.

But it is odd timing for this to happen. And the next Fed meeting happens to be two days after the election. So that could be a very intriguing week for the market overall with the election and then the next FOMC. Excellent. Jason, thank you. And Tyler, before I throw up back to you, there's a couple of issues. You know, Fed Fund futures pretty much Monday and Tuesdays this week are well over 60. So my hat's off to that contract.

It always seems to be 100% accurate when you're within three weeks of a meeting. Back to you. Very interesting thing to point out. As you pointed out, I believe earlier this week as well. Rick Santelli, thank you. Meantime, candy makers, Hershey, Mondalese, and Tutsi roll are lower today as sugar futures are on pace for their best week since 2018. Halloween, right around the corner, of course, but those food stocks are outperforming the broader markets over the past three months. coming up. We'll trade some names that could benefit from a lower rate environment.

All that and more when we come back in two minutes. Well, we didn't have it yesterday, but we're bringing it back today by popular demand. Three-stock lunch, ladies and we don't want you to go 48 hours and begin twitching without a three-stock lunch. On the heels of the Fed's half-point cut, we're going to take a look at a few names that could benefit from lower rates. First up, let's talk about Pepsi. Shares have struggled a bit over the past year, but our trader, bank, on a comeback story. Doug Butler is our guy today,

Rockland Trust SVP, and Director of Research. You are high on Pepsi. I am high on Pepsi. Not because it's been a great story of late, but really because this is as attractively valued as Pepsi has been in probably a good decade and a half. We think that this stock has maybe been oversold a bit, and we think it has really a great chance to run here.

We think their fears in North America are a little overblown. All right. Pepsi has come up a lot lately, by the way, as a potential play here. Let's move along then to Nextera, whose shares are up a 35% year-to-date. This name, you think, has even more potential now. Why? I think they actually, look, they're the biggest clean energy producer in the country. So they're a play on that.

They're still one of the largest regulated utilities. So they're a play on safety, but also, with upside growth. Again, growing electrification. And again, as we're seeing today in the markets, if AI, the AI buildout still remains strong into next year, there's going to be much more data center power usage and we think next term is a beneficiary of that. And another one, sort of in an allied area, EOG resources, shares up about 6% over the past three months. And you say this is the most attractive high quality name in the E&P space, Doug. Yeah, we really like it. They've got a really strong balance sheet. They've got about 1.6 billion in net cash. And that gives them flexibility.

If oil goes back down into the 50s or 60s, it allows them to preserve their dividend, but also will probably allow them to go and make a play for an acquisition target. But if things remain strong, they still have that capacity to continue to pay back and even buyback shares if things continue on this front. All right, Doug, thank you so much for your. insights today. We appreciate them. Doug Butler. Thanks, Tyler. Thanks, Helen. You got it. And for more, and every three-stock lunch we've ever done, go, still find that Power Lunch podcast wherever you go on any platform you listen to. We'll be right back. Welcome back today marks the last day of the most successful WNBA regular season in the league's history.

Those rookie superstars, Caitlin Clark and Angel Reese, fueling a massive surge in popularity. CNBC Sport is out with a new documentary called WNBA Rising. offering a rare look at how the league is growing and managing some of its challenges too. In 2024, the WMBA is estimated to bring in $200 million in revenue. Just for comparison, the NBA earns $10 billion per season. The WMBA has historically lost around $10 million per season. Some estimates have said that the league is going to lose about $50 million. Is there a scenario that you will try to raise more money right now?

Probably not. We probably don't need to raise capital. like we did back in when I came in in 2020, started assessing raising capital. But I think it's more about the impact we're able to have on bringing in corporate partners at valuations that are worthy of now our viewership, our attendance. And I think corporates are seeing that, wow, if I want to get with a consumer brand and a growth property and I want to get to women and women of color, we're 80% women of color, WMBA might be a place where I would allocate my discretionary capital.

I'm not sure if we didn't raise that capital. I'm not sure we would have been ready for this moment. To watch the entire documentary, go to CNBC.com slash sport. It's one of the really great stories in sport this year, I think, is the rise of interest in women's basketball, driven by Caitlin Clark, Angel Reese, and others, and really it's a compelling product. Let's give you a check on the market, shall we?

Why not? Because they're up 570 points. Okay, so we're just off. 42,000. We're about 70 points below the highs of the day. Indeed. And by the way, if you're looking for any red in what's basically been a sea of green, take a quick look at shares of Skechers,

which have turned sharply lower intraday. They're down 11%. Company executives are presenting at the Wells Fargo Consumer Conference, and they said China is experiencing severe consumer discretionary pressures worse than anticipated into the back half of the year. Other footwear makers like Nike, Decker's, some others there. Crocs are selling off in sympathy. Nike's actually fractionally higher.

right now. Decker's have. Decker's has Ugs. They have Ugs. Do they have Hoka? And what's that one with Mr. Oh, Ufuss? Hello, dude. Oh, and yes. They have Ufus? Yeah, I think. Oh, Krocco and say, dude. What do I know? We're going to leave you now.

Thanks for watching, PowerMine.