Power Lunch - Earnings Parade, Social Cues 7/23/24

Episode Date: July 23, 2024

The earnings parade is in full swing on Wall Street, with a ton of key names moving on results and some even bigger ones on deck. We’ll tell you all you need to know.Plus, how did President Biden choose to announce he wouldn’t seek re-election? With a post on X. we’ll discuss why this could forever transform the social media landscape. 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 Along. Show on side. Kelly Evans. I'm John Ford. And coming up, the earnings parade is in full swing. It's a swing band in the parade. A ton of names moving on results with even bigger ones on deck, and we're going to hit them all. And we're taking social cues. The event on everyone's mind, President Biden, choosing to not seek re-election. And how did he mark this historic announcement? An Oval Office address? Not yet. A written statement? No, it was a post on X of a written statement. But we'll discuss why this could forever transform the social media space later in the show. First, a check on the markets. Now, despite all of the movers today, stocks are in the green. It's light green though. Little change.

Yeah, and the one drag could be the semis. Broadly lower with NXP, the worst performer, down big after its earnings. Lots of movers here. Spotify beating estimates, surging 11%. It's a still up to 11.5%. General Motors down 6.5% saying it's going to

restructure its struggling autonomous vehicle business. UPS tumbling on a big miss, down 13 plus percent. LVMH, also missing thanks to slowing global demand down about 4%. More on that name in just a bit. And Zion's Bank Corp on the rise after beating estimates. We're going to take a look at the regional bank comeback. That whole ETF is up later in this hour. We also have some heavy hitters still to report.

Alphabet, Tesla, Visa, Mattela, and Texas Instruments all on deck after the bell. And we're going to begin with this earning season. More signs pointing to that rotation we've been talking about the last few days. More signs pointing to smaller earnings growth this and next quarter for Mag 7 names. Our next guest believes this earning season is going to determine market leadership going forward. Let's bring in Jeremy Bryan. He's portfolio manager at gradient investments. Jeremy, welcome.

So I'm looking at your picks here, and the consumer plays big into this, whether we're talking about housing overall or just discretionary consumption. I'm thinking specifically about Sherwin Williams and Coca-Cola. Sherman Williams did well in its last report. It's up 6% today, but it's also getting back up to recent highs. So why are you sticking with it here? And what does this say about what you believe the consumer is going to do in the back half of the year? Yeah, I think it lends to both of what we talked about with regard to the consumer is these are resilient companies. These are companies that still get spent, even if the consumer,

starts to soften a little bit. And you saw that in this earnings results for Sherman Williams, is that, you know, their competitors were down more than that. And there was a lot of fear that this quarter was going to be a reset quarter, if you will, and then a potential acceleration going forward. And while the revenue was still a little soft, the earnings came in significantly better than expected. And I think the overall guidance and the thoughts on the stock itself seems to be relatively positive to where they can recapture some of that, let's say, loss from from the interest rates that have been so high here recently that if rates come down, we could see more housing transaction velocity, and that could lead more painting, obviously, as a result of

that. And so that's why we really like the execution of Sherwin Williams. And we're going to stay the course here on that name. But that brings me to the real question for me about the consumer, which is, if rates come down a bit, show we see a little pickup in mortgage activity, refi activity, people getting some cash in hand, needing to do stuff. But if they stay generally higher for longer, doesn't that keep a bit of a break on the economy? And, you know, there's only so many cost cuts that companies can do before they have to either restructure or just say, hey, see us when you got, we got some top line growth, right? Yeah. You know, we've often said here, you can't cost, cut yourself to prosperity. You just can't do it. You got to have growth at the end of the day. So in

that side, if the consumer, now again, in rate cuts, if it's 25 basis points, does that really do anything for the consumer? We would argue not a whole lot. 50, if you're talking about two and three by the end of the year, could have a little bit of an impact. But for us, it's much more the reason of why we're cutting. Are we cutting because inflation has, we've done the job in inflation and the consumer remains resilient? Or are we cutting because economic and earnings growth is starting to show some cracks. Now, our best case and base case scenario right now is that it's the former, that we're cutting because inflation is getting normalized, if you will, while the consumer is still relatively

resilient, even if they're starting to slow a little bit. If we see a change in that to where an earning season will be, frankly, a large determinant of our thoughts on this, is if we start to see enough of these companies saying, we need to start adjusting our growth metrics because the consumer is weakening, then we'll pay more attention and we'll have to pivot as a result. Yeah, and we spoke last hour with Chris Grisanti, who is convinced that this is kind of the happy kind of rotation and that it's not a sign of a market that's kind of ending its run. It's really a sign that it's broadening out.

And a lot of other kinds of stocks can do well, the kinds that haven't done as well in the past 18 months. Yeah, we're in a massively concentrated market, right? I mean, 37% of the top 10 was, of the S&P 500 was in the top 10. We certainly have been calling for a broadening out for a while. Frankly, we were early on that. What we still think, in our best case scenario, is that a little bit of both doesn't hurt, is that you don't have to assure that, you know, the companies that got you here, if you will, but you probably want to think about their revenue and their earnings profiles. decelerating. I'm not saying declining by any stretch of the imagination. Those top 10, those Mag 7 companies are still phenomenal growth companies and I still think they will grow. The question is, as they decelerate, are there other companies that have more reasonable valuations that are better long-term opportunities? And that's what we've been looking for. For the better part of

three months, we think Coke and Sherwin-Williams kind of fit that group. All right. Jeremy, thank you. Jeremy Bryant. Yeah. Let's get to today's three-stock lunch. Now we are diving into three-name set to report after the bell. Chad Morgan Lander joins us. He's senior portfolio manager with Washington Crossing Advisors. Chad, it's going to be a busy and an interesting session. So Alphabet is first up reporting Q2 this afternoon. AI ad spending front and center. Obviously, they are no longer going after Wix. What's your trade here? So we own this in our rising dividend, or actually our all-cap value portfolio, and I personally own it. We'd be buyers of it. Overall, it's got a reasonable price of a value.

valuation 21 times, 2025 numbers, 10% kind of revenue growth rate. It's attractively valued high-quality properties regarding YouTube, as well as its position. We believe exceptionally well when it comes to artificial intelligence and able to push that out to all of their broader applications. So we think they have a competitive advantage for the long run. Okay, up next, Tesla also reporting Q2 results after the bell. The EV maker is lower. by about a percent and a half today. During the first quarter, Tesla reported its biggest revenue declined since 2012, but deliveries were actually better than feared for the second quarter. So, Chad, what do you think about this one?

So this is a valuation issue. Multibles of over 50 for 2025 when it comes to EBITDA multiples. We'd be somewhat more cautious on this. This is an photo company. The hope is that they can move up the application spectrum to higher profit margin businesses like Robotaxi. But look, I mean, Waymo, which is owned by Google, already has an operating functional network that they're rolling out. So we believe that they may be somewhat behind their competitor at this inflection point. So we would be a hold at best. Which competitor? Waymo, that's their competitor, which is owned by Google. Right, exactly. That brings us back to Alphabet.

Okay, let's move along to Visa then, Chad, which analysts are expecting the company to report higher Q3 results. But the shares are down a percent today. They're up 10 percent or so over the past year. You're kind of steady, Eddie. What do you think about this one? So this is the perfect steady, Eddie. It's actually owned in our rising dividend portfolio. We've owned it for many years.

We think it's attractively priced. The multiple has come down a bit over the last several years. We believe that still that transition from cash to debit and credit is happening. It's about 75% penetration here in the United States, which is mature, but it's nearly about 50% within the European Union. So we think that they have still a positive tailwind behind them over the next three or five years. It has a high margin business, 70% EBITDA margins, and we believe that they'll have top line growth of roughly about 10%. And then if I'm kind of reading between the lines here, Chad, would you agree with Jeremy Brian, who we were just speaking with, who says this is a rally that, you know, inflation's

coming down for good reasons, expansion can keep going, rally can keep going, and maybe the stocks that were left behind start to play catch up? You know, my partner, Kevin Corrine, just published a piece about this regarding that. The concentration of the large-cap tech names was so out of whack with historic norms that you can see a broadening out overall. And that will give a positive tailwind to all stocks across the board. In particular, high-quality stocks. Yeah, that makes sense.

Chad, thanks so much. Appreciate it today. Chad Morgan. Keep having. Yep. Well, coming up, climbing the social ladder, should public figures or companies, for that matter, allow intermediaries to speak on their behalf on social platforms?

Well, you can get a positive reaction like we saw with Vice President Harris's Brat Summer, but on the other hand, it can lead to issues around authenticity and accountability. We will discuss next. Welcome back. Welcome back to Power Lunch, I should say. President Biden's move to withdraw from the 2024 election via a post on X has got a lot of people buzzing about the weight social media carries these days. We spoke yesterday about Harris's team reaping the benefits by hopping on the viral brat trend. And don't, we're not going to get into that again. But there are also big risk.

Just take a look at the impact of Bud Light's controversial online marketing collaboration last year. The brand ended up losing its spot as the top U.S. beer. It also leads to the question, do companies and public figures generally need to be more careful with their social media accounts and personas? One of our next guests says it's taking companies way too long to realize just how important running a successful social media page really is. For more, let's bring in Tony Ponturo, CEO of Ponturo management. And Tony, what did it tell you? I mean, we all thought Twitter in some ways was a platform somewhat dormant, maybe a little bit off its heyday, although they always insistent engagement was still at all-time highs. Then the president uses the platform to put out his notice that he won't be seeking reelection.

And now it feels like it's as or more essential than ever. Yeah, I think, you know, it's sort of unfiltered media. You know, I mean, social media has become sort of the people's platform. it's sort of a direct message. What he did was sort of be non-political in a way, even though ex-you-the-old Twitter can sometimes have controversy, but it was sort of, let me get this message out without sort of picking sides of a traditional broadcaster, if you will.

Right. And I think we've all seen the power of the social media and how it sort of takes a life of its own and really has this everlasting life in many respects, which is what happened with my old company in Bud Light is they sort of didn't anticipate the breath and reach and continue conversation that it brings on social media. Are joining the conversation as well, Lulu Cheng, Missouri,

founder of Rostra. No pressure, Lulu. I don't know if this is your first TV appearance, but I think you've captured it better than many and pointing out the importance of feeling like social media is your first and most important and direct presence and contact with the audience and with the broader public?

Well, now that everybody, thanks for having me, not that everybody lives in their own separate bubbles, social media is one way to make sure that your message doesn't get refracted through someone else's bubble. I think one complaint consumers of news have often is they feel like they're hearing different stories depending on what outlet they go to.

And so this is a way to hear it from the whole, horse's mouth. I think that's one reason why the Biden team chose to post first on X with the big news on Sunday. Now, Lulu, you put out your opinion about leaders needing to take the job of posting to platforms like X. I still want to call it Twitter. More seriously, Elon Musk, I think, responded saying leaders should post directly and not have an intermediary do it. But I'm not sure CEOs should be taking social media advice from Elon Musk, right? Because he's kind of a singular person. He gets in trouble or has gotten in trouble a lot for the way he posts. But what do you think? What did you think of that response? Can and should other leaders, whether they're CEOs or

government leaders, just, you know, tweet stuff out on their phones without anybody else looking at it or strategizing around it? It's a really good question. And I think absolutely yes, because what we're seeing is the mistakes and the gaffs, and we pay a lot of attention to that. But if we consider the entire package, on one side is occasional mistakes and gaffs, and they can be very painful, they can be embarrassing in the moment. On the other side, if you take someone like Elon, he has grown an absolutely massive following. With that comes leverage, with that comes power, with that comes freedom. And the other thing to note is when people get mad at him, they're getting mad at him now for things he's actually said. I would rather, maybe this is a personal preference, I would

rather people get mad at me for my own mistakes and own those than to have people get mad at me for something that isn't accurate and that I didn't actually say and was paraphrased wrong. And so I think the two factors are the leverage and the power that he's gotten, even at the expense of some of those mistakes, makes it all worth it. And secondly, the mistakes are at least his own and not some other persons. Right. But Tony, way in here. I would rather not make mistakes. I would rather not say things that piss people off unless I really intend to do it. And isn't that why people, often leaders, have somebody who's buffering in between them and actually letting that thing come out of their mouth that tanks the stock price? Totally. CEOs and even top

marketing executives are petrified mostly of PR because in their mind, all they can do is mess it up. And it's one thing for Elon Musk to be critical and have people, you know, criticize him in a, in a case of X, a private company. In the case of Anheiser Bush, they lost billions and billions of shareholder value by mismanaging the process. So you have to get executives comfortable. I think that's going to take a bit. But clearly, as Lulu says, the opportunity of messaging and where certainly anyone 35 to below is spending time on the social media, and they trust it. Even though it's themselves talking to each other, they may actually trust that media more than they may, you know, the major broadcasters. No, I think that's a great point. Lulu, and how should companies be thinking about this when they're looking to get a message out?

Often the social media manager is someone who's more junior, in part because they seem to, be more native to the platform and understand it. And there are some messages that are maybe a little less impactful that they can be responsible for putting out. But in other ways, if social media is now the tip of the spear for any engagement with the public, that message that's going out there needs to be vetted through every level of the organization. So I would say that's often a mistake, because what we're not considering here is that omission can be a mistake in itself. And being overly corporate and overly sanitized and coming off as tone deaf and insincere can be a mistake in itself. So there are times when a mistake made by a CEO saying the wrong thing is actually not

as bad as a mistake made by being too slow, too insincere, too corporate, or too out of touch. And so I think it's worth weighing these things against each other. You might choose to do the latter, but you might choose to do the former. And the way you would try to get the best of both world's is the CEO has to at least own the message. I think great CEOs take advice from people. Elon takes advice from people, too. I think we picture it's just tap, tap, tap, tap, hit post, but a lot of times he does consult with people and does get input. So I think one is a lot of people should be involved in the process, but the CEO has to also be involved. Because I've seen situations in companies where the CEO literally doesn't know what he just tweeted and doesn't know

what the company is saying. So that's one. Two is the person who gets post, you do need someone who's overqualified, who seems more senior than you would think. Tony, last word here. It strikes me that all really good marketing is planned, and comms and marketing aren't the same, but they are cousins. Good speeches tend to be written down first, not just sort of freestyled up from behind a lectern. So is social media fundamentally different? I think it's socially, it's definitely different. It has to be prepared like a good speech or a good advertising campaign. I think it in some cases can be a little loose because it's let me just get something out. Let me make a comment. Let me say something. But I think if it's going to go up to a senior level, it has to be prepared,

thought out, and strategize no differently than any other communication that that company does. It's so difficult because you know that it's like death by committee, but at the same time, it's so important that it needs that touch throughout the organization. Well, thank you both very much for now. We'll leave it there. And we appreciate your time today for joining us, Lulu Cheng, Meservi, and Tony Ponturo. Well, coming up, Spot Ether ETFs making their trading debut. So could this open the floodgates for more crypto funds to come?

We will get the details when Power Lunch returns. Welcome back to Power Lunch. U.S. Spot Ether ETFs are making their market debut today, and what could be another major win for the crypto industry. Our Bob Pisani is here with more. Bob. John, good to see you. Nine spot Ethereum ETFs begin trading today.

These ETFs invests directly in Ether. Ether is the cryptocurrency that's used in the Ethereum network. It follows the very successful launch of Spot Bitcoin ETFs seven months ago, which have already seen roughly $17 billion in inflows. That's a lot of money for a new asset class. But Ethereum is very different from Bitcoin. Both utilize the blockchain, but, Bitcoin uses the blockchain as a digital currency.

Ethereum is a platform for building smart contracts, which are self-executing programs that enforce a pre-existing contract or agreement. The most common use is for decentralized finance. It's called defy. It's a fancy term for using financial services on the blockchain. So you can send, lend, or borrow money. You can trade stocks or derivatives or even other cryptocurrencies. Ethereum enthusiasts are hopeful the ETF launch will broaden the base of investors

and educate those investors about the differences between Bitcoin and Ethereum. The big argument is Ethereum is really a tech play different than Bitcoin, which is a digital gold play. So will this open the floodgates for more crypto ETFs outside of these two? You will still need to show that the underlying market was not subject to manipulation. There's legal requirements here. And the SEC may want to see regulated futures markets for other crypto assets developed. But if there's a regime change in Washington, it is quite possible you'll see a lot more crypto

ETFs coming. Back to you. I thought it was interesting Mike Novagrats' comments this morning about how some people in the Bitcoin community are hoping former President Trump would announce a Bitcoin National Reserve or something to that effect, which would go much further than I think many are contemplating. I'll tell you how big this has become. The big Bitcoin conference is happening in Nashville in a few weeks. And former, President Trump is speaking at that. Now, that would never have happened under any circumstances a couple of years ago. And it goes to how big the potential audience is for. I personally find Ethereum intellectually much more interesting as a smart contract and D5 platform than Bitcoin.

But overall, there's no doubt that there's a lot of momentum behind cryptocurrencies in general. Is there any kind of supply demand issue here? I mean, I notice it looks to me like Bitcoin is down a bit more than Ether is down. down today, anything to that? So this is a question about whether the flows will be the same. Bitcoin is $1.3 trillion in assets. Ethereum about $440 billion. So Ethereum is about, in terms of AUM, it's about one-third the size of Bitcoin.

And most of the people I'm talking to think that we're going to see proportionally smaller flows going into it. But again, it may not be just, oh, can you take money away from my Bitcoin account and put it in ether? and I'll put 30% in ether. The Ethereum enthusiasts really are hoping to sell the Ethereum platform as a distinct intellectual concept, different from Bitcoin and sort of broaden the pace out. I think intellectually they have a very good point.

I don't know if they can succeed, but all I can tell you is $17 billion inflows into Bitcoin, that's a big success. And if they get $5 billion in a couple of months, that would be extremely successful as well. All right. Bob, thank you. We appreciate it for now. Bonnie to the bond market now after a mega record breaking nearly, two-year auction top of last hour and with key GDP and inflation data this week. Rick Santelli, what does that tell you?

Well, it tells me that yields probably are close to an area they're going to hold because we had super weak data. Philly Fed non-manufacturing the service side, the lowest level since D's of 2020. Everything we had today, including existing home sales was weak. We had a super strong auction. All those should push. deals down. And granted, they pushed a bit more on short maturities, like twos, three, fives. If you look at an intraday of twos, then open it up to a two-day, we're trading below yesterday's lows on that maturity all the way out to the seven year. But down three basis

points in a two, 30 years are almost unchanged. The point is that these dynamics are not only built into the market, they're built in plus when you account for the Fed. And there's another central bank whose meeting's coming up, the Bank of Japan, and that's next week. Now look at a dollar yen chart. The yen is on pace to have its best close since the 6th of June. We'll call it one and a half months. Why? Well, because there's a significant amount of nervousness that should the Bank of Japan raise rates, we know what that does to currencies. So you're seeing a bit of the shorts getting out putting a bid back in the yen. We want to pay close attention to all central bank meetings next week, especially the Japanese

with the big Asian carry trade. John Fort, back to you. Rick Santelli, thank you. And turning now to the energy market with crude prices falling to their lowest levels in six weeks. Are Pippa Stevens here with more? Pippa, what's going on? Yeah, that's right. So WTI is at the lowest level

in six weeks. It is off the worst levels of the day, which had it down more than 2%, but it's still around the 77 per barrel level. Much of this is thanks to the ceasefire talks and the sense that maybe there has been some progress there. We've also seen very weak numbers out of Asia. Industry Vermeuvre d'Exta says that the Asian refining nations have decreased their imports by about 900,000 barrels per day so far this month relative to last

month, and so that is having an impact. Then that gas down another two and a half percent, hovering around its lowest since May. So with that, energy stocks are the worst group today, down more than 1%. But there are some movers ahead of earnings later today, including EQT. Well, in Enphase, you came back just in time. I know. So let's start here, though. Let's get to end phase next, but EQT, so JPMorgan actually upgraded the stock to overweight ahead of that report. They said that they've really underperformed their peers so far this year. You see, we have another chart that shows that they're the only name in the red so far with their competitors like Chesapeake, Arontero, Southwestern, all in the green. So maybe a little bit of a catch-up trade there.

They also completed their acquisition of Equitrans yesterday. That's the Mountain Valley Pipeline, of course, ahead of schedule. So other names to watch are Matador Resources and Range Resources, as well as Neighbors Industry. they provide drilling equipment. And then finally, Enphase has traditionally swung a lot the day after earnings in both directions. And, of course, the solar industry has been so challenged. So their guidance will be watched very closely. Energy impact of U.S. politics and Vice President Harris, looking like she's going to be the nominee, though we don't know.

Yeah, I mean, we saw the stocks rise yesterday, so clearly some optimism there. But I do think that the IRA, which has been so instrumental for clean energy, has had bipartisan support. And when you look at what elements of the IRA could be at risk, people I've spoken to so far say that it really comes down to things like the EV incentives. The bigger things like the solar ITC and then the PTC are not really quite as much at risk. Also, if you look at where the majority of the funding has gone to build these factories, well more than 50% is in red jurisdictions. And so it's a little bit of a tougher stance to want to repeal it when you're getting a lot of benefits there. I'm a Gen XR. So when I hear IRA, I think about Ireland. The terminology PIPA has to know.

I'm like PTC. It was a poor name-name choice. Pippa, thank you. Let's get to Julia Borsden now for a CNBC News update. Julia? Convicted Senator Bob Menendez will reportedly resign from office. Sources tell NBC News, the New Jersey Democrat informed some of his staff today he was stepped down, effective August 20th. A jury found Menendez guilty of bribery corruption charges one week ago.

Finding he accepted bribes from three. three businessmen to derail several criminal investigations and act as a foreign agent for the Egyptian government. Two powerful Democrats just offered their endorsement of Kamala Harris. Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries held an afternoon press conference to formally back her for the presidential nomination. She already received a flood of endorsements yesterday on her first full day of her campaign, including from former House Speaker Nancy Pelosi and former president, Bill Clinton. And former President Donald Trump says he will meet with Israeli Prime Minister Benjamin Nottingahu on Wednesday at his Mar-a-Lago resort in Florida. This comes the same day the Israeli

prime minister is due to deliver a speech to Congress. And one day before, he's scheduled to sit down with President Joe Biden. Kelly, back over to you. All right, Julia, thank you very much. Still to come, China's economy and turmoil, a real estate collapse and its biggest single-day stock market drop in six months. We will dig into it when Power Lunch returns. Welcome back to Power Lunch. Chinese stocks taking a beating on economic pressures, the country's blue chip index closing down more than 2% today, which is the biggest single day drop in six months. Now, our next guest has been warning that China's economy is in trouble due in part to the real estate collapse. And Dennis Unkavik is a partner at Meyer Unkavik and Scott. And he advises U.S. companies

doing business in China. with a new book this week called The Fragility of China, Breaking Points of an Invincible Regime. Dennis Grape to meet you and have you here. I know you and Kelly know each other well, but tell me, is this China thing going to get that much worse? Yes. You like long answers, but the answer is yes. China has been in a declining position for at least four years. It wasn't just COVID. There were a whole bunch of things that came together. And in my opinion, the economy that they have is really going to continue to deteriorate for the foreseeable future. Because a third of the economy is based upon real estate, and real estate is essentially in the tank.

Can they thread this needle somehow? I mean, a lot of people thought when the U.S. started raising interest rates that our real estate market was going to go through something very different than it has. So is there a way that the hyperplanned Chinese Communist Party can figure out a way out of this? Xi Jinping is a control freak, and so is the CCP. There's nothing they have done really in the last two years. What they did over the weekend is they decreased the bank rate that would be charged by 0.1 percent or 1 tenth of 1%. That's essentially nothing. And I think that because this happened, the markets in the U.S. are the same as the markets in China.

People see something and they don't like it and they react. And as you said a few minutes ago, their economy is down the worst. I mean, the stock markets sound the worst as it's been in the last six to eight months. And it's going to get worse. I'm sorry, Kelly. No, no, no. I was going to kind of build on that. They had the plenum last week.

I didn't honestly, with everything going on here, whatever people were expecting, it sounds like China didn't deliver. And I don't know why we keep being surprised that Xi Jinping is sticking to this centrally planned model where there's not going to be movements towards any real liberation that would kind of revive a market economy. Kelly, Xi Jinping does not want. anything that will disrupt his overall plan. And as a result, I think you're going to see him in the long run sticking with security, what is China, as opposed to what could I do to help the economy? Otherwise, they would have done much more recently. But he need, listen, at the end of the day, we're all fighting with GDP. I mean, you need to be able to fund, even if you have,

you know, myopic global aspirations. You need to fund that somehow. And I just want to I wonder if he realizes at some point he needs that dry powder to come from somewhere. And a market economy is still the best way to deliver it. It is the best way to deliver it. But to use the GDP statistic, in the U.S., we owe about 129% versus our annual GDP. In China, you know what it is? It's about 300%. So they have borrowed money again and again and again for the last 20 or 30 years.

But all the more reason why they need GDP. So why not nudge towards the market economy? that can service that debt, support military spending, and all the rest of it? Because he's spending too much in the military. And I think that's one of the reasons they're seven or eight percent above what they really should be. And as a result, he's in a position where what's going to happen to the economy? I don't care. I want to be in control.

Dennis, does this make China, you think, more or less likely to rattle sabers over the next year or two? Because it seems to me, sure you want to project strength, but you also want those iPhone factories to continue cranking things out if the real estate sector isn't doing well. John, all I can tell you is for the last 18 months, Xi Jinping has continued to heighten the pressures that are being put on Taiwan. At the same time, he's brought China and Russia closer together tying in Iran. So if the past is any suggestion for what's coming in the future, that's my answer. What would be any signs to watch for that perhaps this is moving in a friendlier way. And what is the takeaway for U.S. corporations who still rely on it for supply chain,

and we're hoping to have it as a big market? U.S. companies, I think, are naive in thinking that the relationship from a financial standpoint are going to be the same in the future as they have been in the past. We're going to continue to buy things that are from China. But China is now essentially offloading their overcapacity on the world market. EVs is one good example. And they are desperate for money. And so as a result, Calais, I just don't think there's a lot that they can do. I think they could do things.

But how do they maintain control over the Chinese consumer? Because basically the Chinese consumers said, I'm not going to spend my money. That's why you have their economy at 4.7% last month. 10 years ago, it was 8 to 10%. Yeah, no, it's been a big slowdown in that shift, not quite materializing, at least for now. Dennis, thanks so much for your time.

Appreciate it. Well-timed book, by the way. Thank you. Dennis Uncovick. Coming up, regional banks rallying in a big, big way with the KRE springing up 20% in just the past month. Can it continue? More on that when Power Lunch returns. Welcome back. Take a look at the comeback we're seeing in the regional bank space. A huge chunk of names hired today. And some by significant amounts, NBT Enterprise of double digits.

And the S&P Regional Banking ETF is up 20%, actually 23% in just a month. Leslie picker is here to explain. I mean, this is a big move, Leslie. It's a really big move. And think about it, Kelly. This was a sector that was all but left for dead, just little more than a year ago with the regional banking turmoil. Interestingly, if you look back to when that presidential debate happened at the end of June, that KRE is outperforming the S&P 500 over that time period by more than 20 percentage points. And a lot of that has to do with the prospect of deregulation among the banking system if President Trump were elected. And all of that has created this spur, this spur to rally in the sector. In the current administration, a more active consumer financial protection bureau, coupled with proposed capital rules and a lack of MNA appetite, have limited the upside in many regional bank stocks, analysts say. But the KRE has also gained more than 4 percent in the last two days since President Biden took himself out of the race, although that may have more to do with earnings than with politics.

Regional banks have largely put up stronger than expected numbers, particularly as it pertains to credit quality and net chargeoffs. Those two areas have been in focus ever since the Fed began hiking interest rates and especially after last year's regional bank turmoil. The outlook for net interest income, the profitability metric for loanmaking has generally been stronger than expected as deposit trends stabilized. And that's what you're seeing with names like Zion's First Bank Corp and Northwest Bank shares today. And I'd be remiss not to mention that regional banks are also benefiting from just this overall sentiment shift in the market with the broadening out of small and midcat names, of which regional banks. are among them. Well, Leslie, I'm no chartist, but if we can put up a five-year chart of the KRE, right around here, 58, between, you know, close to 60, we're at this level that looks really interesting over time and is right around where the KRE was before the Silicon Valley Bank

collapse. And so does that suggest that if you think there's still some turmoil, consolidation, office reckoning to come that things might have gotten a little rich here. I mean, the question is, basically, if you're a regional bank investor and you're kind of participating in this market during a historic interest rate hike, at first, that's actually really good for regional banks because they can charge more on the loans that they make to companies and make to individuals, then at some point that kind of changes because you have to pay your depositors more, but it doesn't all happen at the same time. So you get these kind cycle effects. And then, you know, at the same time, higher interest rates also have an impact

on the balance sheet, which is what we saw back in March of last year throughout the spring of last year. And then it starts to trickle into credit quality. So a lot of the pressure that was, you know, that had to befallen, the KRE had to do with concerns surrounding credit quality. But you haven't really seen major, major systemic issues with credit quality. And in fact, in a lot of these banks, it's getting better. So that's kind of lifting this cloud that's been existing for a long time of uncertainty. I thought John was going to say, is it going to be a breakout? You know, I don't know if you were, you were seeing ceiling.

I was like, is it a floor? I mean, you know what we have to do? We have to do a technical support segment. Ask our chart us what they think. You're right, though, a very significant level that we've reached. Leslie, thank you very much, Leslie Picker. Well, remember, you can always hear us on our podcast. If you don't want to look at us, you can just hear us.

And be sure to follow and listen to the Power Lunch podcast wherever you go, decide what you like better. We'll be right back. Welcome back. It's time for today's power check. And we'll start with UPS, tumbling 13% on those disappointing earnings, signaling its freight business, still in the midst of a downturn, lower shipping volumes, weaker pricing, higher labor costs weighing on profits. Their margins are down four points from their high in 2022. Meantime, META unveiling its newest AI model, Lama 3.0 comes in three different versions, with one variant being the biggest and most capable from meta to date. The announcement also highlights a close and growing part.

partnership with NVIDIA. Then GE Aerospace, we don't talk about it a lot, but it reported better than expected results, making more money servicing engines than on selling original equipment. That business paying off nicely with a nearly 7% game right now. And Wiz has walked away from a $23 billion deal to be bought by Google in what would have been their largest ever acquisition. Wizz telling employees, they'll now pursue an IPO as had been previously planned. It would have been a boost to Alphabet's cloud segment, which has faced more competition from the frontrunner's Microsoft and Amazon. Alphabet stock is higher, however, though, and we'll hear from them after the bell today. Speaking of earnings, NBC's parent company Comcasts lower by 2%. Beating on earnings, but revenue coming up

short and the main drag was actually its film studio business. Revenue in that segment tumbling 27% from a year ago, which some say could be a negative read-through for Disney. Both company's shares are down about 3% today. John, that's your power check. Kelly, thanks. Well, still ahead. Hackers now duping folks out of the down payment on their homes. That's a lot of money. We will get the details when we return. Welcome back. Cybercrime continues to rise around the globe and the real estate sector has been an extremely lucrative target for fraudsters. CNBC's banking reporter Hugh Sine out with the story of one Silicon Valley executive that had nearly $400,000 stolen by cybercriminals while she was attempting to put a down payment on a house. He was here now with all of the details.

I think the sophistication of the person this happened to is what also grabs everybody's Right. This is a 25-year veteran of tech companies, including cybersecurity companies, getting taken by the scam. So this is a case of essentially a person who's going through the process of buying a home, believes they're sending a down payment, in this case about $400,000 back in January, to a title company when in reality it was to a cybercriminal. And so the category for this is deemed real estate wire fraud. And in real estate wire fraud, essentially, you have a hacker penetrating the systems of a lawyer, you know, a real estate agent, a mortgage broker, any one of the professionals in this industry, and essentially lurking

and waiting for the right time to inject their email into this conversation, which is, hey, send me the wire for the down payment. This is the account. And in this case, because the hacker was already in the mortgage broker's system and she had been having this conversation with them, it really appeared to come from that company saying, hey, here's the J.P. Morgan account to wire it to, right? So, I mean, this wasn't something where it was coming from at XYZ.com. It really flowed into the conversation. And Ronald Roblard, who's the Tachian executive, obviously would be attuned to a weird email with a bunch of letters and numbers. This was actually, and I eyed the email itself, it was indistinguishable from the other emails in this chain. And so

one of the takeaways from this is an eye-opening one, which is you can never really trust what an email says that hackers can impersonate anybody over email. In other words, the send URL that, you know, the address can be anything. And so you should really disregard that in cases when you're about to send large sums, in this case, $400,000 to a title company. You have to confirm that. You've got to tell all your banks. They got to do something about this wire process because there's no conference. You send this money out, these massive sums. There's no real paper trail. I mean, this goes into some of the Bitcoin and crypto stuff. But like, they've invited this with some of the way the systems work, I feel. Well, well, take quick step back.

Fires, faster than ACH, almost instantaneous clothes within 24 hours. Much larger sums than Zell, which is only a few thousand dollars. This is ideal for criminals or cyber criminals. They love real estate. In the real estate deal, you're overwhelmed with the papers. Speaking of instantaneous close, you got one in about 10 seconds. You have to close to Power Lunch. I got a big word.

I'd warn you there. Catch more of that story. We appreciate it. We appreciate it.