Power Lunch - End Of The Record Rally?, Musk See It To Believe It 5/29/24

Episode Date: May 29, 2024

Remember all of the excitement when the Dow closed above 40K for the first time? It’s down about 1,500 points since, with stocks lower again today. We’ll dive into the markets. Plus, Elon Musk is offering the chance to win a Tesla factory tour to any $TSLA shareholder who votes on his $56 billion pay package. We’ll bring you the key details. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon and welcome to Power Lunch, everybody. Alongside Kelly Evans, I am Tyler Matheson. Welcome, everyone. Stocks are lower across the board. The Dow is down, as you see there, by 350 points or thereabouts. The S&P 500 by about a half percent and the NASDAQ off by a quarter percent or thereabouts 45 points. Remember all the excitement when the Dow closed, excuse me, above 40,000 for the first time. That was May 17th. It's down about 1,500 points, nearly 4 percent since then. And every S&P sector is lower right now. Old economy, the worst performers, energy, utilities, materials, and industrials. We do have some retail winners on the back of earnings. Abercrombie and Fitch, most notably, up another 25% after its report. And this was already being up 200% in a year. Dick's sporting goods up 15% chewy rocketing as well. That was heavily shorted. We'll get the trade on these names a little bit later on in three stock lunch. And the Fed just released its latest beige. book. Steve Leesman is digging in. He'll join us shortly with all the details. Remember, this is all the

anecdotes from regional Fed banks about the economy. We'll meanwhile take a look at that 10-year yield of a 4.6%. 4-618 after a week, seven-year auction last hour. All right, as we await those beige book headlines, let's dive deeper into today's market action. And to do that, we're joined by Keith Fitzgerald, Fitzgerald Group Principal. Keith, welcome. Good to have you with us. As you look at this sell-off that we've been seeing and the rise in yields that we've been seeing, I guess the two are somehow connected. But what do you make of the sell-off that has taken us down 1,500 points or so from Dow 40,000? Well, honestly, you know, not a whole heck of a lot. This is just de-leveraging. It's classic. It's highly technical. There are a lot of people, Tyler, that missed out on the NVIDIA run,

along with a lot of other AI. So some nasty grams, some nastiness wouldn't be unexpected because they want to buy back in at lower prices. So you think this is sort of a technical pullback, I guess is how I would describe it. I do. I think it's very much a technical pullback. It's something that should be talked about a lot more, but it's not. And, you know, the average retail investor is left wondering what happened. But really, this is the big guys just scrumming around in the middle of the field, stay on the sidelines, let it work itself out, but buy intelligently, continue to play offense. So you see this as basically a buying opportunity. And you see it continuously and have, to your credit, as a buying opportunity in NVIDIA, which you think can go much higher from here.

Oh, you're very kind to remember that. Thank you. Yeah, we've been tracking that one for a long time. This is a tough business. I'm kind of remember it because you reminded me. Well, we started tracking this thing. It's all fair, man. Everybody thought we were bananas to say it's going to go to a thousand and split.

But, yeah, I think it goes to 2,3, and here's why. You know, we've got 60, 70 percent margin. they're trading a Ford P.E. of 30. I think the company's going to track the 45-50 on that side. So it's not hard to get to that $2,000 number. Now, post-split, that's $200, 230. But this is unprecedented in human history. And demand is just scorching everything we know about how supply chain works. Every company on the planet will adapt, adopt, or die. They're the clear band leader here. You're right to take a victory lap here. Keith, absolutely. You were talking about this. At some point, I'm going to say, why are you even, just, you must have enough to go to a desert island somewhere, enjoy a margarita, and just call it a day.

You don't have to come talk to us. But what I was going to say about sort of speaking of incredible moves, if you're right that Nvidia goes to 2000 or 2300 from here, it's going to be a $5 or $6 trillion company. Do you think that's plausible? Yeah, I do. I not only think it's plausible, I think it's absolutely possible and likely. You know, again, the thing that is amazing to me, and we talk to investors all over the world about this, is people continue to think about AI as a technology. It is potentially the greatest technology of all time. In companies like, it's not just Nvidia, it's, you know, it's AMD, it's Apple, it's Microsoft.

You know, Apple in particular, I think we're going to find out very shortly has been far more involved in AI than the public knows, and they're getting ready to unleash what I think is going to be another iPhone moment. So it's not just Nvidia, but we've got to be careful here. All right. That would be interesting because both of them neck and neck with market cap if you think they're both going to take a leg higher. I mean, multiple $3 trillion companies. All right there, Keith. We're going to get the details on the beige book from Mr. Steve Lee Smith. Steve. Thank you, Kelly. The Fed's beige book says the economy continues to expand with varying conditions across industries and across districts. Now, most district reported slight or modest growth. So not really any barn burners being reported out there. Retail spending was flat to slightly. up. Discretionary spending was set to be mostly lower with heightened price sensitivity among

consumers. That's a theme throughout this Bayesbook. Manufacturing was flat to up. Tight credit standards and higher interest rates were constraining lending growth. Housing demand, however, rose modestly. Overall, the outlook was somewhat more pessimistic than the prior Bayesbook. Unemployment, it was rising at a slight pace. Atheristic said the negligible, just modest gains, and four saw no change in employment, but there was better labor availability, and along with that, wage growth was mostly moderate. Now, several districts did see wage growth moderating and coming back to sort of normal or pre-pandemic levels. On prices, consumers were pushing back against new price increases, but profit margins were under pressure because input costs continue to increase. Overall,

price growth will expect it to continue at a modest base. So, guys, kind of a lukewarm, a beige book here, not so great on growth. A little bit interesting that you have this price pressure on the input side, but an inability of companies to raise prices on the consumer side. Does this all add up? We're going to bring Keith Fitzgerald back into the discussion. So Keith, listen, because I may ask you the similar question, but Steve, let me begin with you. Does the fact that the Fed saw discretionary spending slowing, price sensitivity increasing, and moderate wage growth tell you anything? about where inflation should be expected to be in the reports that will come up in over the next

couple of weeks. I mean, I think overall what they're describing is the contours of the dynamic the Fed is looking for, which is a slowdown in the economy that helps bring a slowdown in both wage growth and a slowdown in price growth. And I think this dynamic here, which I'm listening for Tyler in the earnings reports, in our interviews with executives, of consumers. is pushing back, then you have this margin issue and what companies do with their margins, do they eat it a little bit on the margins, and do they push back on the input costs?

Is it start, let's just say that the stone rolling downhill rather than way it's been going uphill when it comes to prices, that, hey, guys, pushing back from the consumer to the producer to the supplier of raw materials that, hey, these price increases won't stand. This, I think, is along the contours of what the Fed is looking for. So, Keith, we had a guest on yesterday who, I guess, framed the Fed's issue or the economy's issue this way. Which will crack first? Inflation or the economy. Is that an oversimplified way to look at things?

No, I don't think. So I think it's spot on. And I love how Steve summarized this. I think the pressure that he's driving at and highlighting is at stake here. I think there's actually a third element to what your guest should have mentioned. And that is that the Fed has a fiscal problem. because as long as it's looking in the rearview mirror, it can't be looking down the road. So it's not a matter of which cracks first, in my mind.

It's a question of how you play your cards. Again, not all companies are the same, and they're going to be able to protect margins differently. Manufacturing, not so much. Tech, all kinds of protection, particularly if it's a must-have product. All right. Well, thank you, Keith Fitzgerald. We appreciate it. Steve Leasman, thanks to you as well.

There's a look at the 10-year Treasury, and bond yields are moving higher. today, or at least they were before the warm beige book. Let's get to Rick Santelli in Chicago. Rick, any reaction since then? You know, the biggest reaction today was that we stopped going up after the seven-year note auction, which was not pretty, but it makes sense. When the last auctions completed, the market always takes a breath. And especially when the auctions underscore all the fiscal insanity going on and the debt

issues that are associated with all the issuance, yes, it's focus. investors. That's now all gone, at least for a couple of weeks. Rates are coming down the beige book. Slight growth. I don't think there was any surprise there. Look at an interest seven. You can see how we basically peaked when the results came out and we've been drifting a little lower since. If you look at a two-day, what's notable, today's yields are higher in yesterday's highest yields, and yesterday's highest yields were higher than the previous day's highest yields. That's building momentum, and it's true of pretty much every maturity on the Treasury curve. If you look at tens, and we should, because it's the

long end you want to pay attention to. We're going to landlock that two year around 5%. If you look at the tens, basically four-week high yield close on pace for. Boone's already closed. There is six and a half month high, just a whisker under 2.70%. And who wins on the comp right now? Well, it would be the Japanese government bond market, the tens. And even though it's only approaching 1.10, only a little over 1%. It's still the highest yield close in 13 years going back to the summer of 2011. Pay attention here. I'm not saying that the Japanese market is going to be the conductor that basically is sticking the baton to all world fixed income markets, but it definitely has been the weakest link with respect to their stimulative policies. And when they start to

remove them more aggressively, there may be ripples on what is known as the carry tree. which could be one of the biggest trades in financial history. Tyler, back to you. All right. Rick Santelli, thank you very much. Coming up, an unheard-of tactic to encourage shareholders to vote. Elon Musk offering the chance to win a Tesla factory tour to any shareholder of the company who votes on his $56 billion pay package. Doesn't care how you vote, just wants you to vote. Power lunch you be right back. Kelly, it depends on your interpretation. Right now, investors are generally taking that negativity and applying it to most of the airline stocks. I don't say all of the airline stocks because you take a look at the big four right now. Take a look at United. It is higher after affirming its guidance for the second quarter. The CEO, Scott Kirby, was talking at the Bernstein conference today, generally reiterating a lot of what he said previously in this quarter about what they're seeing in the market. So what's the story with American? Well, late yesterday, the company, dropped an 8K, a warning about what to expect for Q2, lowering its expectations in terms of

EPS, revenue and margin. A couple of issues here. One, softness in the short haul domestic routes. But another issue, a far bigger issue in the eyes of many, is the fact that they went to a more direct sales route away from the travel management companies, away from the agencies when it came to corporate sales. And guess what? They lost a lot of corporate sales. So as you take a look at shares of American over the last year. A couple of things have happened here. Chief Commercial Officer has left the company. He's going to be leaving the company, I should say. And they basically came out today. Robert Eisen, the CEO said, we're going to get back to blocking and tackling the basics of winning over customers, especially corporate customers. Not enough for Jeffries,

which cut the stock to a hold. And as you take a look at passenger levels, the reason we're showing you this is this question keeps coming up. Are we seeing a crack in consumer demand? Are Are there fewer people interested in flying? That is not being borne out by the statistics. The busiest day the TSA has ever seen was last week. They expect to cross over 3 million daily passengers sometime in the next month or two, depending on where we are, maybe the 4th of July weekend. Bottom line, the demand is still there.

Now, there may be some softness in terms of fares, but the demand is still there in terms of travel, guys. Well, let's pivot here a little bit while we have you to discuss the, well, let's call it rather unusual situation taking place over at Tesla. Wouldn't be a day without a Tesla check-in. As we covered yesterday, there has been pushback surrounding CEO Elon Musk's $56 billion. Yes, you heard me right, $56 billion pay package, external proxy firms advising shareholders to vote against the package, pointing to the stock's poor performance this year. year. So now Musk is working to sweeten the pot, offering any investor who votes on the measure the chance to win a Tesla gigafactory tour. The winner will be shown the factory by Musk himself

touring the cyber truck and Model Y assembly lines down in Texas, also receive a reserve seat at the shareholding meeting on June 13th. Now, this doesn't mean they have to vote in favor of the measure. They just have to show they did in fact vote, quote, you should only submit proof that you voted, you voted. You do not need to vote for or against any proposals to be eligible for entry. So says Tesla. But the action is raising some red flags and criticism here, Phil. I mean, as you were explaining yesterday, this $56 billion package was voted on with it tied to the meeting or making of certain specific benchmarks, apparently all of which Mr. Musk has met. Yeah. That was set back in 2018 by the board. And I remember at the time when we reported on that, Tyler, everybody said the same thing. They were like, oh, my goodness, look at the amount of money that Elon Musk could make. However, at the same time, almost everybody, even those who were critical of it at the time said, look at the benchmarks he has to hit. If he hits those benchmarks, the shareholders of Tesla will be richly rewarded, which you can argue, and I don't know if we have a chart right now, go back to 2000.

2018. Tesla shares are far higher now than they were back then. I'm sure they are. And so the argument from the supporters of Elon Musk and this pay package is, wait a second, we didn't just give him this money. He hit the metrics that were laid out there. And if you were a Tesla shareholder, you were richly rewarded. Phil, as I understand it, one of the obvious questions to ask is how could Tesla as a company afford a $56 billion pay package? But it would only, they'd only have to pay him out if he vests this. Is that right? Right. Right. And that's the argument that he's made, which is, look, my skin in the game is my commitment to the company. And I'm not just asking for $56 billion. I am committing to stay here and we will work to grow the company in the future. So I understand people who

look at that pay package and will say no individual should be worth $56 billion. That's a separate discussion. The question here is he has delivered, and he is saying to shareholders, I've delivered in the past, I will deliver in the future. Now, if you don't believe that he's going to deliver in the future, or if you think this is an outrageous package, you can vote no. But bear in mind, you run the risk that at some point Elon Musk could say, all right, you didn't like what I did before. And I should have exercise not vest. I'll take the marbles and go home. Yeah, go ahead. So let me ask you this question. Let's say the shareholders vote yes. We think he deserves this $56 billion. Yeah. There's the not insignificant matter of a Delaware

Chancery Court judge who has said no. It's too much. Right. So what happens then? Well, remember, there's a second vote there, Tyler. There's a second vote about whether or not to reincorporate in the state of Texas. So that would allow them incorporate in the state of Texas, and then we could go forward with this. So then the Delaware judges, if they incorporate in the, reincorporating the state of Texas, then the Delaware judge's ruling is basically, abrogated, it wouldn't apply. And you, unless there's a separate action in Texas, which presumably

there would not be, he could go ahead and collect the money. Right. Well, Phil, we'll be watching. I know you'll be watching Tesla and Musk, endlessly fascinating. Appreciate it. Always is. Yes, sir. As we had to break, let's get a power check on the energy space. Overall, it's the worst performing sector in the S&P, leading the declines ConocoP Phillips down around 4%. And the plus-side Marathon Petroleum up 7%. Both of those moves are tied to buyout news. More next. Welcome back to Power Lunch with a quick glance at the markets. As mentioned, we're down about 1,500 points from first crossing above 40,000, 384 of that today, down 1% on the Dow, which continues to underperform. Broad Market S&P down half a percent. Nasdaq outperforming as well.

We're watching stocks under pressure from rising yields as well. And another big deal in the energy sector today. This time Conoco is buying Marathon. That has Conoco shares. down. Marathon up. Pippa Stevens is here to break it all down, Pippa. Another deal here, building on the record MNA, we've seen so far this year in the energy patch. So as you said, Conoco buying Marathon for about 17 billion, including debt, it's 22 and a half billion. That's about a 15% premium to yesterday's close. Now, this is about, you know, Marathon is about 10% of Conoco's sides. So Dan Pickering over at Pickering Energy Partners said it's more of a bolt-on transaction rather than a truly transformative deal. But there are several ways in which it

resembles the deals we've been seeing over the last year. It's financially accretive. It's additive in terms of inventory. And then it's also an all-stock deal, meaning that it doesn't need to leverage and stretch the balance sheet for Conoco. But Andrew Ditmar over at Enver has said that there's one key difference. This is a multi-basin deal. So both Marathon Oil and Conoco have operations in the Eagleford, the Bakken, and the Permian. And so this deal will meaningfully increase the combined company's footprint in the Eagleford and the Bakken. So that's different to the other deals we've seen like Exxon and Pioneer that was really solely focused on the Permian Basin. And so now we will become a key player in those, which means that the FTC, of course, taking a harsher stance on some of these mergers,

but that might help the case here in the sense that it's two different basins rather than becoming one big player in one basin. Well, the Hess deal that you were talking about yesterday, which was basically an acquisition of existing assets. And what they want to avoid is new drilling in new areas. Because they want to buy what's already there, where they already know there's stuff in the ground that they can pull out. Exactly. And these are more mature assets in both the Bakken and the Eagleford. So it's also not a deal that's going to lead to exponential growth. It's more kind of keeping operations, keeping production at the same level. And so, you know, it's more attractive, as you noted, to go with assets that are already producing and already proven rather than spending all that money to explore. Remind me what Eagle Ford is. It's in Texas. Oh, it's in Texas. Yeah, yeah. It's part of the Texas.

Yeah, so it's not part of the perman. Yeah, exactly. It's a little bit south and east. Yeah, exactly. Bakken is what Midwest? That's North Dakota. Okay. Yeah, so further north. I need a map every time. I, you know, I almost fell one next time tomorrow. Pippa, thank you. Appreciate it. All right. Let's get to Julia Borson now for a CNBC News update, Julia. Tyler, Supreme Court Justice Samuel Alito, refused to recuse himself today from any cases involving Donald Trump, the 2020 election or the January 6th insurrection. Democrats demanded the recusal following a New York Times report claiming flags carried by January 6th rioters were flown outside of his homes. Alito said today his wife, who he calls an independently minded private citizen, made the decision to fly the flags and he had no involvement. The man sentenced to 30 years in federal prison for bludgeoning then-speaker Nancy Pelosi's husband with a hammer is back in court today to face state charges, opening statements in David DePapes,

trial on attempted murder and other charges are expected to begin today in San Francisco. And India issued a red alert for several parts of the country's northwest today as Delhi reached an all-time high of 127 degrees. Authorities are imposing water restrictions as the city faces a shortage brought on by low water levels and disruptions to water deliveries. Conditions are expected to cool down tomorrow. Tyler, back over to you. Thank you very much, Julia Borsden. Argentine. Argentina's controversial president, Javier Milley, meeting with major tech CEOs here in the U.S. Companies like Apple have been facing more scrutiny lately over the indirect role they play in geopolitics.

But what is Argentina's president looking to get from these meetings? That is next. Argentina's controversial libertarian president Javier Millet meeting with major tech CEOs, including Elon Musk, Mark Zucker, Tim Cook, Sundar Pichai, meta, alphabet, Apple, other big tech companies have been in the spotlight lately over the indirect role they play in geopolitics. So what's the reason for the visit and what does the Argentina president hope to accomplish? Let's bring in CNBC contributor and counsel on foreign relations member Michelle Carusa Cabrera, also with a CNBC technology correspondent, Steve Kovac. Michelle, welcome, good to see you as always. What does Malay want to get out of these meetings? He's got a polarized society.

The peso has been cut 50%. Inflation is still running high, though maybe showing some signs of improving. What's his goal here? He loves technology. I mean, loves it, and very much wants Argentina to be what he says is the Silicon Valley of Latin America

or the Israel of Latin America in terms of technology. He wants to burnish his image. I mean, he's getting very, very impressive meetings, which many other foreign leaders would like to get. And he'd also love to get a lot more foreign direct investment into Argentina because he desperately needs the dollars to be invested in Argentina to address a lot of the issues that you're talking about, Tyler, and the things that he's trying to change about Argentina.

Steve, can he get what he wants? He might be able to. And let's add one more name to that list because last night he met with OpenAI CEO Sam Waltman and they posted some pictures on X. But beyond that, let's look at what's going on with the AI world right now. We're seeing Microsoft especially just make these huge investments all that we're showing that picture right now. by the way. All around the world, billions of dollars being invested in AI data centers. Part of that is to protection against China. Part of that is cultivating talent in these other areas. And part of that

is it just AI applications in the cloud run better and run faster when they're closer to where people are actually using them. So you can obviously see or imagine that this would be an area of investment. And I know we were talking before that Michelle would point out, Apple, has had problems selling iPhones in Argentina because of some strict policy. So you can see that as something they might want to do. It seems like the president definitely wants to open up the economy more. So I can definitely see that as kind of a low-hanging fruit that they can achieve in the Tim Cook meeting. That's exactly the phrase, Michelle, I was going to ask you about. As we look at Argentina so far under his leadership, how much more opportunity is there to make changes, whether it's iPhone policy or with tech, broadly speaking?

I mean, how much impact can he have in the very near term? If he's successful, it will be dramatic. He's already actually been quite successful in combating inflation. The central bank's been able to lower interest rates from 133% from when he took office to now only 50%. But the situation with the iPhone in Argentina is emblematic of what Miele is trying to accomplish. It's almost impossible to get an iPhone. Why? Because back in 2009, a very leftist president passed a law that said all electronics must be manufactured in Argentina. Well, we all know where an iPhone is manufactured and it's not going to be in

Argentina. Oh, you still want to buy that iPhone? Well, we're going to put a 50% import tax on that phone. And if you still want to pay that even higher price, we're going to make it very difficult for you to convert to dollars to buy it. It's a very, very closed economy. That's why it's suffering so much. And all of those things are what he is trying to undo right now. He doesn't control the legislature, so he's struggling with that. But he does control the central bank. That's been more successful with interest rates and with inflation. How receptive would you think, Michelle, his audiences with these tech execs will be? Oh, if they can sell more stuff anywhere, they're going to be very, very happy about it, right?

Also, I'd say, you know, he's an hardcore libertarian, and there's always been a libertarian bent within Silicon Valley. I'm not saying that all the CEOs that he's meeting with are libertarian, certainly Eon Musk would be that way. But there's always been this, and he's a very interesting character in geopolitics at the moment. One of the most interesting, he ran on cutting government spending. No one in Argentina had ever done that for 70 years, and he won by the equivalent of a landslide by 12 points. Politicians don't run on cutting spending.

So it's very intriguing, and Argentina could be an amazing place. It used to have the same GDP per capita of the United States. Not that long ago. It's doable if they could just fix the place. And Steve, what else should we expect that these executives might want to talk to him about? Yeah, let's go back to Apple for a second because part of the story there is, and this isn't going to solve all their problems, but part of the story there is also manufacturing and growing iPhone sales again. Selling the iPhone again in China is not going to fix that. Putting a plant down there in South America is not going to fix that.

But we've seen Apple over the last couple years after we witnessed what happened in China throughout the pandemic. We've witnessed Apple kind of make these moves in India. and Tim Cook was just in Southeast Asia just a couple months ago, making these moves for small investments to kind of spread the wealth, so to speak, in order to not rely so much in China. So you can see him doing something like that thing. Is there another part of South America that they are currently using as that go-to place, Brazil? They're pretty active in Brazil, but beyond, it's still a smaller market for Apple overall. You said, Michelle, that Malay had almost a landslide victory.

Where is his popularity right now, given the austerity measures that he has imposed, including the cutting of government subsidies on such things as public transportation and education and other things? Shockingly, still as good as when he came into office, if not higher. You survey people, and absolutely their economic situation has gotten worse, and yet they're still very optimistic about the future. Keep in mind, nearly 60% of the population was getting some kind of subsidy, and yet 40 to 60%. 60% of the population, depending on how you counted, were living in poverty, right? You can do all that. They've been spending so much money in Argentina for decades, and yet the population continued to suffer more and more and more, lost more and more and more purchasing power. So for them to suffer more, I'm not sure that they noticed it as much, considering how bad

things had gotten for so long. That's remarkable. All right. Fascinating story there. Appreciate it. It's Michelle Caruso Cabrero. Good to see you. Steve Covack. Thank you as well. Thank you both. Coming up. Representation of Asians in Hollywood has risen dramatically in the past few decades. We'll look at the gains made and where the gaps also remain. And as we had to break, we're celebrating Asian-American, Native Hawaiian and Pacific Islander Heritage Month. Here is Arum Kong, the Coffee Meets Bagel, co-founder and Chief David Spencer.

One of the most important lessons I learned in this journey as an Asian-American is the importance of fully embracing myself. We grow up watching corporate leaders, politicians, Hollywood movie characters that don't look and act like us. So when I finally embraced characteristics that I value, authenticity, kindness, consideration, being open and curious, that's when I really started shining as a business leader. Welcome back this month. We're honoring Asian American and Pacific Islander Heritage. And our Julia Borson joins us now to look at their representation in Hollywood and where things stand nowadays. Julia? Well, Kelly, Asian American and Pacific Islanders,

representation in film has increased. In 2022, nearly 20% of film actors were Asian or Pacific Islander. That's up from just 2% in 2002, according to a McKinsey study. But gaps still remain, and that's an opportunity for Hollywood to better serve API customers. Now, that same McKinsey study found that Asian Americans spend significantly less of their income on film and TV than other groups. And half of API consumers would be willing to spend more money on film. and TV if their experiences were more authentically represented. In fact, McKinsey estimates that API consumers could generate up to $4 billion in incremental annual spending if they spent the same share of their income on film and TV as white consumers do.

Another study finds representation gaps in streaming content as well. UCLA's Hollywood Diversity Report found that in the top 100 streaming films last year, just 4% of the leads were Asian actors. Now, the Oscars and Emmys are increasingly paying note to API-led content. The movie Everything Everywhere all at once won Best Picture last year, and the show Beef won six Emmys, and both of those pieces of content had the first Asian woman to win best actor in her category. Media companies are also paying note to opportunity in closing representation gaps.

For example, stars host the Cape Showrunner's incubator to provide API TV writers with mentorship, training, and education to help train the next generation of showrunners. Guys, back over to you. So you point, among other things, to the dearth of relatable actors and performers in Hollywood product as one reason why Asian-Pacific people may not consume as much sort of Western media. I guess I overuse that word. But are there other reasons here that could be at play? I mean, I think the key reason to really hone in on here, Tyler, is that that question of representation and not just any representation, but authentic representation.

And people want to see movies or TV shows or whether it's streaming or going to movie theater where they see people like themselves represented in an authentic way. And that seems like the key way that Hollywood could generate more revenue from moviegoers, which is obviously a big concern right now with the box office in decline. and also really make sure that people are engaged with streaming services. So, you know, the audience of people who watch his content is diverse, and the more diverse the content on the screen is, the more viewers will be able to connect with it. All right, Julia Borsden, thank you very much. And still ahead, we will trade three key earnings movers in a fresh,

straight from the produce aisle three-stock lunch. And don't miss the next CNBC Investing Club monthly meeting happening tomorrow, noon, eastern time. Join the club for members-only access to Jim Kramer's next big portfolio moves. He'll reveal them tomorrow at 12 p.m. The monthly meeting, we'll be right back. Join the club. All right, time today. For today is three-stock lunch. We are going to look at three stocks making big moves on earnings over the last day or so. Here with our trades is Will McGoff, Director of Investments with Prime Capital Investment Advisors. First up, Bill, let's, Will, excuse me, let's look at Dick's sporting goods. The stock,

way up today, raising its full year outlook. The retailer says shoppers are spending more on sneakers, check, apparel, check, athletic gear. Your trade on Dix, Will. Hey, guys, thanks for having me. I agree. Dix is a buy. It's an impressive beat. You have margins up, guidance up.

So, of course, the stock is going to be up. They do a great job of balancing national and local brands. I travel a lot for work and go into some Dix, and they've got all the local college and pro teams. They also balance premium and value brands. So you can get discount goods versus higher-end goods there, too. So it's a really good stock that we like and would have a buy. On top of that, Nike's strategic decision to de-emphasize direct-the-consumer directly benefits Dix. And so lastly, I'll say out on the Summer Olympics, and you've got a good storm for Dix to move higher over the intermediate term.

Interesting. The Olympics coming into play in your thinking there. interesting. And impressive, given how much that stock had run up during COVID. All right, let's move along to Kava Group, which posted first quarter results. They did top estimates on the top and bottom line. And the shares have turned around today. They're now up more than 6%.

They were earlier under pressure. Will lamb meatballs. What's your trade? Another buy here. You got a couple fun ones today for me. When I saw Kava, I was excited to see a small cap, small and midcap stock here. Private markets have sucked a lot of those premium out of the public market. markets. And here you have a pretty good quality Kava group that's going to grow. When

the IPO last summer, they said they have plans for a thousand stores. They have 338. Currently, they're going to add 50. They're about 10% of the size of Chipotle. And you can just do the math there. It's going to go higher. And it's going to be a smaller and midcap name stock that can actually participate in in a public market, which makes this enticing buy to me as well. Very interesting. My son, who's my telltale on all these things, the Kava is right next to the Dix at the shopping center he goes to, and believe me, he goes to both of them. Finally, Chewy, he does not consume Chewy's products, but it reported first quarter earnings and revenues at top estimates. Buyback plans here. Stock up nearly 30% today. Best day since it went public five years ago, Chewy, Chewy, Chewy, Chewy. Yeah, this is probably the toughest of the three that y'all gave me. technically I like it. It's almost falling knife territory after getting crushed in 2022 and then 2023 was down even more. It's down year to date. It's got a little bit of room to

run, I think, higher. So I would cautiously be a buyer here. And it's really on the back, on the trend of the humification of our pets. I know there's a lot of people that still think the dog should be in the doghouse out in the back. But unfortunately, there's a whole other cohort of folks that are feeding their animals, organic food and letting them sleep inside. So Chewy is definitely poised to benefit from that. They've got an auto ship service to make it easy to get your pet goods. They send flowers and cards to pet owners who have recently lost a pet, which I think's good for their consumer loyalty.

And other than that, it's just demographic trends at play. Younger adults are getting married later in life, which means they're having kids later in life. So who's filling that void? It's our pets. We also have a retiring baby boomer population. Who's going to fill the void when you're at home all day and enjoying retirement? It's pets.

So the pet trend is here to stay. This one is dangerous, though, because it's down so much. So you have to listen to the market there. You have Amazon is a huge competitor, but Amazon could also be a potential suitor for getting into the more in-depth into the pet food game. So I'll have to kind of watch and see there. I'd buy it strategically, I mean, tactically, with... watchful eye on it for sure. Yeah, I was going to say that the story, the thesis works for the

category broadly the humanification, but the stock has been struggling for some time. So maybe, like you said, trade cautiously. Well, we appreciate it today. Thanks for joining us for all these trades. Thanks for having me. Will McGoff Prime Capital. Remember, you can always hear us on our podcast. Follow and listen to Power Lunch wherever you go. We'll be right back with more. Welcome back. Markets are under a bit of pressure with higher yields today. The Dow is the worst performer down 1% about 400 points a moment ago at those session lows. The NASDAQ, though, Tyler, down less than half a percent. All righty. Let's move on to McDonald's, which is defending itself now after getting some bad press online over its prices. Kate Rogers is here with this story. Last we heard

about McDonald's, Kate, they were introducing a low-priced value meal, super value. Yeah, an upcoming $5 value bundle. That's right, Tyler. And we all know there's been a lot of talk and focus on both inflation and value in the fast food space in recent weeks. Now McDonald's U.S. President Joe Erlinger speaking out in an open letter shared this afternoon. Erlinger says the company has seen viral social posts and poorly sourced reports that it has raised prices, quote, significantly beyond inflationary rates, which he says is inaccurate. Erlinger says, I can tell you that it frustrates me and worries me in many of our franchisees when I hear about an $18 Big Mac meal being sold, even if it was at one location in the U.S. out of more

than 13,700. More worrying, though, is when people believe that this is the rule and not the exception, or when folks start to suggest that the prices of a Big Mac have risen 100 percent since 2019, which he says is not true. But in the same letter, Erlinger did acknowledge that higher costs and growing wages have caused McDonald's menu prices to rise. In 2019, a Big Mac cost $4.39. Now it's 529 on average, up 21%. In 2019, an egg McMuffin cost $3.49. That's now. Now 429 on average, that's a 23% increase. And 2019, a 10-piece McNugget meal average 719. That's now 919.

That's a 28% jump. Earlier, it says these increases are on par with the industry's rates. But the fact that McDonald's is addressing it at all kind of speaks to the narrative out there right now that fast food has gotten really expensive. It's really rare to kind of see an executive come out and say this is not true. These are the facts. This is how much costs have actually gone up. Here's why. 919 for a 10%.

piece. Yeah, I mean, so was there, was there not an $18 Big Mac meal? This is the question for the jury, ladies and gentlemen. I hope I'm not on trial here, but my recollection is that this was at one location, as Erlinger mentioned. I believe in New York Post had it, and I want to say it was in Connecticut, but I could be wrong. Yeah. Yes, exactly, but it was at a rest stop location. It was one location. Reminder franchisees do have the ability here to set their own prices. There are different wage factors, supply chain factors, etc.

that go into some of these costs. But now, this $5 value platform will be offered at all locations because the franchisees agreed to it that's going to run for a month. And Burger King, don't forget, has its own competing $5 bundle coming as well. Are the franchisees happy about this $5 meal? Are they not going to be able to make any money off it? It's a month-long promotion, Tyler, and I did report last week that an independent advocacy group of McDonald's franchisees was pushing for corporate to kick in once the one-month timeline was up to keep this on the menu for lunch. because they do argue in order for this to be sustainable and affordable, rather for customers, it needs to be affordable for them as well. So we'll see if it sticks around.

Thank you very much and thanks for giving me another reason to stay off the Merit Parkway. I appreciate it. All right, we just got... It could be just as bad on the Garden State. It could be just as bad on the Garden State. All right, just a few moments left in the program. Though there is a chick-fil-a at the rest stop near my house. But see, that's worth the money.

Yeah, all right. Several more stories you need to know about the Cleveland Fed announcing that Goldman Sachs executive, Beth Hammock, will take over as its new president, replacing Loretta Mesta. She's leaving at the end of June. After reaching the Fed's mandatory retirement age, Mester has been at the helm of the Cleveland Fed for a decade. Hammock will officially take office on August 21st. He'll be in her first FOMC meeting in September, where she will be a voting member. Interesting.

She'll be replacing Mester, who is known as a bit of a hawk. And she, this new one, is a bond market specialist. So in September, she will be in the meeting with a vote. That's going to be very... I think financial markets will feel like, okay, there's something. someone here who at least understands. Who is a bond person. Yes. And we'll see if that pushes her in a different direction. The world, speaking of which has rich $315 trillion of debt officially, according to a new report from IIF, the biggest, fastest, most wide-ranging

rise in debt for the global economy since World War II, two-thirds of it coming from mature economies like the U.S. and Japan. They do note the debt-to-GDP ratio for mature economies, which is kind of better health of ability to pay, has been falling overall. But the fact that yields are now backing up will have people a bit nervous. Yeah, absolutely. Do we have time for one more? I guess we don't. But we were going to tell you that weekly mortgage demand has been falling. Maybe we'll get to that tomorrow. But there are you. Now you know something you didn't know five seconds ago.

Here's another one. If you go to Chipotle, $4.80, you can get a kid's meal. With the chips and the drink and three sides. That's what makes McDonald's, I think, under pressure right now. I'm leaving right now for it. Thanks for watching, Power Lines.