Power Lunch - Fast Food Fights For Value, Inflation Blueprint: Home Furnishings 9/12/24

Episode Date: September 12, 2024

McDonald’s just announced it’s extending its $5 value meal into December for most of its U.S. markets. Will this keep the fast food value wars raging into the new year? We’ll discuss.Plus, it’s day 2 of our Powerhouse Blueprint series, highlighting inflation throughout all the parts of your home. Today we’ll highlight home furnishings, and the cooling of the DIY boom. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Mathis. Glad you could join us. We've got lots of bees on the menu today, starting with burgers as McDonald's extends its $5 meal promotion. I guess, Kelly, I would say why not. It looks like it has improved guest counts, improving same-source sales. And the competition is doing the same-same-sore sales. Are the franchisees upset about it or no? I don't know whether they're upset about it, but if it improves same-store sales, they'll be happy about it. Second day of our blueprint series as well. As we look inside your home for what you're paying for things, today we'll talk about home furnishings, just as people are still dealing with inflation, trying to figure out where it's receding. Some of these categories are actually where it has been,

but also how do you invest around it? You really don't get, I think, home furnishing sales growth unless you have a really roll, lots of houses changing hands. Exactly. We don't really have that. That's probably, it's the vix of home sales. Yeah, that's right. It's your tell.

If house sales are going up, then you're going to see a lot more renovation and the people like that are going to win. All right, also watching biotech. Moderna has been a sort of problem child, down more than 10% after it cut its 2025 revenue guidance. This is a company that hadn't been below $60 some dollars since 2020 or 20, since October 2020.

Wow. And now it is obviously struggling. They're cutting HR, not HR. They're cutting. Research and the R&D expense. Exactly. And not just that. more focused now, not on anything COVID-related, not even on the flu, a combo vaccine or anything

like that. It's about this cancer franchise that the Bulls would say they hope now can pay off, but you're seeing the stock today, which a lot of people think still needs a bigger reprice. Basketball billions, by the way, will also be on the menu today because the Milwaukee Bucks are now dealing with a new valuation of around $4 billion. I think we're going to talk about this a little bit later on. Well, there's a new television contract that is going to really help the NBA. It's still under some dispute, but a new partner has been brought into the management or the ownership group with the Bucs, junior Bridgman, a very successful entrepreneur. He has Coca-Cola bottling

plants and other things that he's going to have, I forget what percentage. But don't you, I always think about the sellers and go, it's kind of like Agit Jane selling out of Berkshire. He's sort of like, well, why are Wes Eden's help? Why are they selling? Why did Mark Cuban pair back his steak? You know, things like that. Because they've made their money. Plenty. They got in. And will the next generation be able, probably. You think about, you think about, what Jerry Jones paid about 200 million, something like that for the Cowboys. Now it's worth 11 billion or something like that. That's how the rich get richer.

Boeing, the latest company to deal with labor unrest, the CEO, their warning of consequences of a strike, even though the union representing workers said on Sunday they have struck a deal with the company that may be the best deal that the union has ever made, workers are still sore over a deal that the union made a couple of years ago under which they lost pensions and had to pay more for health care benefits. It's a good point about the longer term ramifications, even when you get it in the mere term. Could be as soon as Friday, as my understanding.

Boeing doesn't need another headache. No, they certainly do not. Before we get to all of those stories, let's take a broader look at the markets, which have been improving throughout the session. And some would even cite the Wall Street Journal's report from Nick Timrose about an hour ago, saying that there could be a close call next week between 25 and 50, maybe rekindling some hopes for that bigger-sized rate hike. The Dow is up half a percent, the S&P 810s, the NASDAQ, up 1.2 percent. Yes, inflation data this morning a little bit hot, but also the core PCI, it kind of implied measures from that still tame, Tyler.

So, again, is it 25 or is it 50 is kind of the overarching question for these markets. My guess is it'll be 25. It'll be more incremental than bold. And 25 now, 25 in November, maybe 25. in December. But what do I know? That's what Loretta Mester said as well, last hour from the Cleveland Fed formerly. Let's start with today's special on the consumer as McDonald's announced they're extending the $5 value meal into December in most of its U.S. markets. One of our next guests says this will keep the fast food valuers raging till year end. While quick service restaurants battle internally, our other guest says another group of restaurants could be winning in terms of

stock value. Joining us are Jonathan Mays, editor-in-chief at Restaurant Business Magazine, and Andrew Charles, he's an analyst at TD Cowan. Welcome to both of you. Jonathan, starting with you, to Tyler's point earlier, is this an offering that has worked well all around? Or are there any who will be hurt by this, the franchisees, namely? You're going to have franchisees in some markets, particularly high-cost markets that could have some issues with this particular deal. but it's kind of the reality that we're in right now is restaurant operators probably have to donate some margin over the next year or so because consumers really need this sort of value today. But yeah, I mean, you could see some, certainly some franchisees in California or some high-cost markets

that could be heard by something like this for sure. Andrew, what do you think of McDonald's, the stock? Hey, Tyler. So, yeah, we think that with McDonald's the stock, there's better opportunities elsewhere in the sector. You know, I think the call for McDonald's is really that as we look at the value environment that Jonathan was just touching on, frankly, we view it as noise. You know, we think this is going to drive some market share gains within quick service, but not really lead to trade down otherwise in the industry from Fast Casual. And so for McDonald's, it really comes down to how much can they pump out these on-brand marketing and menu innovations.

So what I mean by that is we had the collector's cups in August that seemed to resonate and drive some success there. Going back over the brand's success from 2020 through 2023, they were just a machine, you know, pumping out things like famous orders, the adult happy meals, the grimace shake, we need more of those. And so on tap, we've got chicken big Mac, we've got McRib, frankly comes down to how quickly and how much marketing can't budget they can put on these to really help drive and overpower the underlying softness and quick service that they're not immune from. Andrew, I take your point broadly speaking. Obviously that's what's going to work. But to me, almost the poster image of the inflation, a lot of consumers have experienced in recent years,

was the $9.19, I think, 10-count McNugget meal. I mean, nobody wants to pay almost $10 for chicken nuggets, fries, and a soda. And McDonald's, to me, clearly has to dial that way back if they want to just be perceived as a place where people can go for that everyday meal. Yes, so, Kelly, I agree with you that, you know, look, within quick service, it's always about a three-legged stool between value, menu innovation, and operations. You know, our concern is that McDonald's is going way too deep on value while ignoring some of the other big things out there. And so we're most excited about chicken strips that our checks are telling us are becoming sometime in middle of 2025. We think that's certainly on brand. It's something that

said their competitors they could use more of. And so I think they're going too deep on value to solve this problem that I think is probably more detrimental for the franchisee profitability. I mean, if you look at our model, we think the McDonald's franchisee profitability probably down this year really not boating well for their narrative, try to get development accelerated in the U.S. So, Jonathan, take us through the discussion of quick serve versus fast casual, and who's winning there and why? Well, I mean, it's a pretty fine line between quick serve and fast casual, but what we would consider to be fast casual is absolutely winning right now, without any question. You've got wingstop is doing 45 percent, same

or sales on a two-year basis. Wow. To put that into perspective, that is higher than the two-year number that Popeyes did in the fourth quarter of 2019, which, if you recall, was the quarter they introduced their chicken sandwich. Wingstop just vested that. You've got Chipotle, which despite all of this noise about its serving sizes, still did 11%.

You've got Kava is really killing it. I was on fire, the stock. Yeah, they're completely on fire. The privately held Raising Cains. Raising Cains. My son's favorite place now. I hadn't heard of Raising Cain two years ago. They're ridiculous.

They do six plus million dollars per store, and all they do is sell chicken fingers. That is it. It's all about the sauces. It's all about the sauces. Even Sweet Green, a salad concept, and it's more niche. But, Jonathan, to your point, there are. are a lot of concepts that are winning right now. But I come back to the price. Why would I pay $10 for chicken nuggets, fries, and a soda when I could go pay $15 for Chipotle, Kava, or

sweet grain? Well, I think that's exactly what's happening. I think a lot of customers are saying, well, I'm not going to pay these prices. And so either I'm not going to eat out at a fast food restaurant. I'm going to go to a convenience store or I'm going to just eat at home with food I bought from Walmart, which is definitely happening, or they're saying, I'm going to get something a little bit more. They're going to go to, they're going to go to Chipotle, they're going to go to Sweet Green. They're going to go to Chili's. Chilies did 14.48% same source sales by essentially telling customers that they are a better value than fast food. By the way, Chili's has never done a 14.8% same source sales. Andrew, react to what Jonathan just said. Do you see it the way he does?

Yeah, I'd go one step further. I mean, we have survey work that suggests that, you know, as John mentioned, the well-documented trade-down amongst lower-income consumers to food at home, we're seeing amongst middle-income consumers, their value perceptions of fast-casual, better than what it is a quick service. And so said differently, sure, while it may be more expensive, Kelly, as you mentioned, to go to a fast-cassual restaurant relative to quick service, the value of what you get there, the higher-quality experience is something that, you know, consumers are placing a lot more emphasis on now. And we think this will continue. You know, we think that fast casual is the place to be as we have buy ratings on sweet green, on Kava, on wingstop, as well as Chipotle. And we think this is going to continue that while quick service continues the race towards the bottom, you know, that fast casual is on this island that we think will persist. I kind of take both of your points here, Jonathan and Andrew. And that is, among other things, apart from, you can mimic a really good, you know, Joe.

Oh, your wife is amazing. And she can make a really good bowl with kinoa and avoccur. and chicken and the whole thing. Yeah. And do it at home. Jonathan, thank you. Andrew, thank you as well. I'm going to her kitchen any time.

You just be delighted to hear you. Name in place. All righty. A meeting of top AI executives and administration officials at the White House today. Among them, Open AI's Sam Altman, Anthropics Dario Amadee, and the biggest name in AI,

NVIDIA's Jensen Wong. Our Megan Kinsella grabbed Wong for an exclusive interview. She joins us from Washington. to. Hi, Megan. Hey, Tyler, that's right. So this was a meeting between Biden cabinet officials and AI leaders, including those you mentioned, to talk about building out AI infrastructure across the U.S. They were discussing specifically how to meet the energy needs for AI.

And the focus was really on building a public-private partnership on this front and finding ways to ensure that the U.S. is addressing even the more technical issues, things like workforce and permitting, so that it can remain a global leader on AI. And then when we caught up with Huang after the meeting, he told us everyone is grapple, with really the size of the task at hand. And he said he absolutely sees a role for federal investment to work alongside private investment in building out this infrastructure.

Take a lesson. The beginning of a new industrial revolution, and this industry is going to be producing intelligence. And what it takes is energy, and of course a lot of great computer science and large computing systems that NVIDIA makes. And so we've got to make sure that everybody understands the needs coming,

the opportunities of it, the challenges of it, and do it in the most efficient and scalable way we can. Huang told us he believes the Biden demonstration is determined, in his words, to meet the needs at hand. And when I asked whether there was enough money behind the effort at this point, he told me that if the U.S. doesn't have the money, then he doesn't see any other country that could take advantage of the AI industry. Guys? All right, Megan, thank you very much. We appreciate it. Let's talk a little bit about his response, though, to corporate tax rates? Absolutely.

I asked him about that, about the various proposals between the two candidates. And what he said was that Enidia is happy to support whatever the tax policy is in the U.S. He said that the company had really benefited from U.S. infrastructure, from the intellectual capital that he said is here in this country. And so they're happy to pay it back through taxes.

He didn't want to commit to one candidate or the other in this presidential race. I tried to get him to talk a little bit about that. But on taxes specifically, he said, you know, whatever it is, we'll support it. Probably wise not to commit because I suspect that Republicans and Democrats by NVIDIA's chips. All right, thanks very much, Megan. Appreciate it.

And coming up, how close to home is inflation hitting yesterday? We looked at the overall cost of lumber and material used for construction. Today we look at what fills the home out, furnishings. Our powerhouse blueprint continues when we return. Welcome back to Power Lunch, everybody. Inflation data continue to roll in. And today we've got producer prices which showed slowing inflation but still hot in some areas. Over the next few days, we're going to zoom into each part of your home,

breaking down how inflation is impacted each particular section of the house and laying out the potential stocks to play. Today we look at some furnishings companies like RH, which used to be called restoration hardware, William Sonoma, Wayfair. According to the CPI, it reports that prices for bedroom and living room furniture are down. three and six percent respectively compared with last year some disinflation or deflation there for a change. Anthony Chacomba is managing director and senior analyst at Loop Capital Markets. Anthony, I assume that this decline in prices is that housing turnover has slowed.

That is certainly a big part of it. I mean, housing turnover has been quite weak. We got a bit of a head fake at the beginning of this year. We thought that numbers were going to get significantly better. that has not happened. The other thing that I think is reflecting those numbers is I think that the home furnishings retailers got a little to, I guess probably the right word is greedy during the pandemic when they just couldn't keep items on the shelves. And they probably raised prices a little bit too high. And now they're having to kind of roll those back as well,

you know, because demand has weakened so much. I'm curious because it's come up in the in the context of the campaign, this idea of price gouging. And I'm frankly suspicious that many companies literally engaged in price gouging. But during the pandemic, you had two things happening at once. You had supply chain issues that were constricting the supply of goods on the one hand, and you had money flowing into the economy in the form of stimulus packages and lower interest rates. So more dollars chasing a restricted number of goods or a constricted number of goods is an obvious recipe for inflation. And I guess companies just took advantage of that cover after years where they had no pricing power whatsoever, really.

I think you're 100% right. And my freshman year economics professor would be very proud of what you just said. I mean, buy and demand, you know, basically dictates price. And so when supply is constrained as it was and demand is elevated as it was, prices are going to go up. And I'm not sure, I agree with you. I'm not sure if that's necessarily getting. That did come straight from Ken Elzinga at the University of Virginia. Anthony, I'm just envisioning Elizabeth Warren going after R.H.

Because she said they raised furniture prices, you know, 43% instead of 20%. I mean, when we're talking about something that's not a grocery item, how do we know what the right prices? I think they're still in the process of finding out. And the answer can sometimes be that it depends. I think that's 100% right. And you know, I mean, you talked about specifically about R.H. I mean, it's hard to gauge what the right price is because they don't really sell like commodity products that you can find at other retail. So to some extent, the right price is what someone's willing to pay for it.

And R.E. specifically has talked about the fact that they probably took too much price and they are in the process of bringing prices down. because once again, supply and demand, you know, has kind of gone the other way. There's plenty of supply now, demand, not so much. This is an interesting echo of the discussion we were just having about McDonald's cutting prices. And I, you know, the question on the furniture piece of things would be, and classically speaking, can you own companies which are cutting prices? That's a tough thing to do to raise revenues and to increase earnings when your top line numbers are potentially coming down because your prices are falling and your sales are falling.

Well, I mean, look, I mean, certainly, if the demand is there. In other words, if the volume more than offsets the price declines, I mean, that can still work. I mean, we're not seeing that right now, that's for sure. So, you know, not only is there pressure on prices, there is pressure on just unit volume. That leaves you where, briefly on, you know, positive across the board on these stocks, negative, where, you know, a couple of favored names just real quickly. Yeah, I'm on the sidelines on all these stocks.

If I had to pick one, I would say William Snowman, because they've done a great job, even with demand being weak at maintaining their margins. And so if demand gets better, I can't even imagine how much money these guys are going to earn. Operating leverage or whatever they call it. We've been through a lot of kind of 101 here of stock picking and macro. This is a good case study. Anthony, thanks for your time. We appreciate it. I'll just observe that there are a couple of furnishing retailers like Ethan Allen where I see their stores closing.

Oh, absolutely. That's stickly on Route 4. There's pressure on that. We drive the same route. Yes, we do. And, you know, again, two years ago it was the best of times and how quickly that can change. People were nesting. People were using money from the stimulus packages that went into their pockets.

And they're outspending and refreshing their homes because that's where they were. Yep. Still a headwind for Home Depot lows as well. Gold prices, that's a different story. They're hitting an all-time high today. Getting close now to $2,600 an ounce. Is there more upside to come ahead of the Fed meeting? Market Navigator is next.

Welcome back to Power Lunch with a quick check on the markets turning higher this afternoon, perhaps on rekindled hopes of a bigger Fed rate cut after some reporting in the Wall Street Journal. The NASDAX up more than 1%. In today's market navigator, we're focusing on gold futures and the bullish case for this commodity, which continues to make new highs. Phil Strebel is chief market strategist at Blue Line Futures. And Phil Gold's run, which is of 25% this year. has caught many people's attention who are now wondering a la invidia a year ago.

Is it too late to get in? Oh, I don't believe so at all. I think that gold futures, you know, being one of the best performing commodity classes this year, it's got strong central bank buying, and we expect this trend to continue. It's a great hedge against geopolitical risks. You know, these occur unexpectedly. And the net speculative fund buying is back near four-year highs. So any correction we get should be shallow in nature as more participants coming to the market.

The current economic environment is ideal for owning an asset class like gold. The economy, we have a soft landing. There's no apparent signs of recession. Inflation is trending towards the Fed's 2% target. Growth's declining, but not crashing. And Jerome Powell said that time has come for the Fed to adjust policy. So gold is the asset class you want to own. Is there any risk that retail investors start piling in right at the moment that central

banks purchasing declines? We know that's been a huge source of demand for gold, really over the past couple of years. You know, that has happened. And China's taken a step back on some of their central bank purchases, but they tend to, you know, revamp and repurchase again. We think that central banks broadly are going to continue to divest themselves from other currencies and focus on hard assets building those reserves. So we think that this is more of a longer-term trend that will take place.

What is the trading range that you foresee, if you wanted to get really super specific and tactical about this, how exactly would you play it? Okay. So if you look at since 1980, historically, gold futures have rallied 6% on average within the first 30 days of an interest rate cut after the Fed has transitioned from a hiking cycle to a cutting cycle. Secondly, we do have seasonal strength where 13 out of the last 15 years, gold futures have rallied from September 30th on up to October 25th. We really believe that any kind of pullback on the gold market should be shallow. So we're looking at purchasing at 2540 an ounce. The stop loss would just be below the 50 day moving.

average at 2490, and then we would target 2750 by the year end. So we prefer to have a stop loss right at the 50-day moving average, just to simplify things, which is a $60 range, and it's two times the average true range for volatility purposes. All right. So you think, again, the downside, you kind of keep that tight, maybe hope for more upside as you continue to ride this out into year end. Phil, thanks for joining us. We appreciate your time today. Phil Strebel, bullish on gold. Ty? All right, Cal, still to come to Miami condo market, at least part of it, is crashing. On the other hand, new luxury builds are on fire. So what's working, what isn't, and why? We'll discuss that one next. Welcome back to Power Launch, everybody. Shares with a

sharp move downward this afternoon. Let's go to Kate Rooney for an explanation of which company it is and why. Hey, Tyler. So this is Wells Fargo. It has to do with a regulatory enforcement action. Wells Fargo saying today that it has signed an agreement with the Office of the Comptroller of the currency, the OCC, which would require the bank to enhance its anti-money laundering management practices, also known as AML. It does not include a monetary penalty. So it's a formal agreement. It's a type of enforcement action, not a consent order, to be clear. Well, as Fargo out with a statement today saying, quote, we have been working to address a substantial portion of what's required in the formal agreement, and we are committed to completing the work with the same sense of urgency as our other

regulatory commitments. The OCC, for its part, saying the agreement requires the bank to now take comprehensive corrective actions to enhance its bank secrecy, Act in Anti-Money Laundering, and U.S. sanctions compliance program. You can see shares down sharply on this news, guys. Back over to you. Interesting drop there. Kate, thank you very much, Kate Rune. Meantime, condo craziness is taking place right now in Miami. While the bottom end of the market is struggling, luxury is holding in just fine. A condo building going up in Ultra-exclusive Fisher Island just broke around last week and the two penthouses, penthouses already sold, she said, for some stunning numbers. Let's bring in Diana Oleg with all the details. Diana?

Hi, Kelly. Yeah, hold on to your wallet. The two penthouses, which don't exist yet because they just broke ground, sold for a collective $150 million, and that's cash. The 10-story building will have just 50 residences from three to eight bedrooms and indoor, outdoor spaces. Of course, all of the five-star amenities come with. The building is now nearly 60% sold and should be delivered in 2026. I spoke with the developer, George Perez, CEO of Related Group, also known as the condo king of Miami, about the current state of the market. Look, I'm paid to worry, right? In 45 years, I have seen many ups and downs. I think the South Florida economy in particular will continue to have ups and downs. Those people that tell you it's going to go straight ahead. I have up, up, up, up.

It doesn't. And why doesn't it? because developers are a little bit of cowboys, right? They, they react, they overreact to the increases in demand. The demand's still there, but the competition, I think, is going to be brutal. Luxury condos are selling, but older buildings are facing big new expenses following the collapse of the tower and surfside. That's creating a huge divide.

Take a look. Sales of Miami condos priced below $300,000 were down 9% annually in August, with new listings up 83% and the bulk of those are older condos. Sales of condos priced above $5 million, mostly new product, were up 100% and new listings up 37%. I asked Perez what he thinks will happen to those older buildings. We're going to be seeing more and more of the older buildings being demolished. and new buildings, probably more high-rises, you know, being built in South Florida. And related group is breaking ground on five new luxury buildings in just the next three months.

Back to you guys. So part of this, Diana, is driven by, as I understand, we're going to talk about this a little bit more with our next guest. Part of this, as I understand it, is driven by revisions to building codes following that collapse in Surfside, where older buildings now have to bring their products up to newer code. Yes, exactly. And that can cost millions of dollars. And so you have the owners of these condos who are looking at higher fees to their condo associations now, trying to unload these properties.

I spoke with another expert in Miami who told me, if you have an older condo pre the year 2000, you just can't unload it. Those were his words. And people are trying to, obviously, you see that inventory of sales so high. but it's those new fees that are costing the condo board, the condo owners, of course, that really want them getting out. Diana, thanks very much. And let's pick up where Diana just left off on the Miami condo market and turn to someone who has firsthand knowledge and experience in luxury real estate in Miami. Back with us is Stefania Magoland.

She's a real estate agent and Kona real estate. Stefania, welcome. Good to have you back with us. Let's address that question. You've got older buildings, lower market prices. and so forth that may now be hit with very high, the owners may be hit with very, very high assessments to bring those buildings up to the current code and avoid a tragedy like we had in Surfside in 2021. Are those buildings going to be able to do that, or ultimately are many of them going to go into receivership,

get bought by, let's call them opportunistic investors, that's a nice way to put it, and demolished and replaced by luxury high rises? Well, that's the big dilemma. It is already happening. It's not something that we will see in the future. It is already happening. Condos are selling for around $120,000 with an HOA of $1,800 a month. So it's not sustainable.

These buildings have to keep up with the new recertification law that came about after the collapse, and they don't have enough reserve. They don't have enough capacity to put the building structurally sound and up to code. So the homeowners either have to cope with the expenses, which is, as I said, very unrealistic for a person that can only afford a hundred, two hundred, three hundred thousand dollar condo. How are they going to be able to pay two and three thousand dollars a month on top of insurance, on top of taxes and the regular maintenance of their property? And so what will happen to these people, many of whom may have been in their condos for, since they were built in the 1990s or 1980s or earlier? Where do they go? As they are forced now to sell into a depressed market where buyers are going to say,

hey, I don't want any part of one of these buildings where I may be, I can't get it insured, I may be subject to rising HOA costs. Well, they have a few alternative, either sell at a loss and hopefully somebody can cope with these expenses or leave in the property and see what happened. The bank may take it back. They may lose it. if they don't have the funds to cope with these assessments, there is not much they can do. And I'll say if there is nobody willing to purchase these properties and cope with these expenses,

there's not much you can do. So there's twice as many lower-priced condos on the market now than there were a year ago. What does that mean, Stefania, for the housing market in Miami more broadly? Well, sellers don't have the upper hand anymore for a little long, like for a little while. 60 to 70% increase in inventory compared to last year. Sellers need to be more flexible in pricing in terms. They may be willing to pay the entire assessment before closing, depending of how much the assessment is.

They may walk away with $0. So that is what's happening in the condo market. On the seller side, they need to be flexible. On the buyer side, I urge buyers to not only look at the view floor plan and square footage, but also do due diligence in check what is the financial state of each condominium, of each building. You may not be hit with an assessment today, but you need to be prepared for what's coming. So buildings that are 40 years, they already are handling that, but why if the building is only 20 years old, 30 years old? You need to know that this is coming.

So prepare for that. Ideally, choose a condo that have enough financial reserve. That's also happening. It's a new law that it's requiring condos to. have a certain amount of financial reserve, be wise, and they have more options. For sure, they have more. If you wouldn't mind, Stefania, indulge my conspiratorial side here. And my conspiratorial side says that these new building codes are partly, but only partly

being driven by an effort on the part of municipal officials to protect the public. But that they may, in fact, also be driven by. very wealthy developers who would like nothing more than to be able to snap up these buildings at low prices, tear them down, and build new luxury condos, displacing people who have been residents of these buildings for a long time. Am I all wet on that? And you are free to say yes, Stefania. I won't say anything in regards to a conspiracy because I don't have the facts, right? I will say that if this is happening, this is definitely an opportunity for people with wealthier pockets to come in and demolish and redo the buildings.

I don't know about conspiracy. It's a sad, sad situation for a lot of homeowners that don't have the capacity to cope with this. And this is the only property that they ever had in their lifetime. Some of them are actually planning to retire in these condominium units. And what do they do now? That's the big question. It's a very unfortunate situation.

I think that's right. We'll leave it there. Yes. And I was just thinking, you know, of what, where's motive? Where's the motive here? And I like you. Or why not provide some subsidy for those who have, who are effective? If it's that urgent to implement, you don't just throw people out of the ledge like this.

You've been hurt by the fact that these buildings were not up to any kind of modern code and needed to be maintained better. Stefania, thank you so much. We'll have you back soon. We appreciate it. You're welcome. Thank you. You got it. And let's get over to Julia Borson now for a CNBC news update. Julia. New York's top court upheld a judge's gag order on Donald Trump today in his criminal hush money case.

Trump's attorneys had argued the restrictions violated his right to free speech. But the New York Court of Appeals did not agree. The court dismissed the appeal today and said no substantial constitutional question is involved. Trump, who was convicted on 34 felony counts in the case, is scheduled to be sentenced at the end of November. A North Dakota judge struck down the state's ban on abortion today. He said the law violates the state constitution because it's too vague. Even though the ruling clears the way for abortions to become legal in the state, North Dakota currently has no clinics performing them.

An appeal is expected. American Airlines flight attendants approved a five-year labor deal today, ending one of the industry's most contentious contract negotiations. It comes with a more than 20% raise at the start of October. 87% of the workers voted to ratify the contract, which represents 28,000 cabin crew members. Kelly, back over to you. So many of these labor deals, we obviously mentioned the Boeing one as well. It could be an issue this week.

Julia, thanks. Join the CNBC AI Opportunity event in New York City on October 1st. You can hear from leaders of a multitude of industries about how AI is changing their business for the long term. Just scan that QR code or visit CNBCEvents.com slash evolve. Power lunch is back after this. Okay, folks, welcome back to Power Lund. Stocks are higher across the board this afternoon by between a half percent and more than 1% for the NASDAQ. Bond yields are also higher after this morning's PPI report and some others,

indicating that maybe a half-point interest rate cut might still be on the table at next week's Fed meeting, where Kelly and I will be. Let's get to Rick Santelli in Chicago for more on the bond market. Hi, Rick. Hi, Tyler. Yeah, I don't know that I'd be placed in any serious. money on 50 basis point cut, but that's just me. Look at PPI. Now, this is year over year, X food, X energy, X trade services. At 3.3%, it remains warm. As a matter of fact, out of the six

components today for PPI, after last month revisions, only one out of six, one out of six, was sequentially lower, and that was headline year over year. All the other metrics, definitely warm. And if we look at a two day of 30s, and by the way, we had a 30-year auction, it was not the strongest of the three auctions. It came in rather average. But every maturity today, including that 30 year, has traded above yesterday's yields below yesterday's low prices. Belink's a momentum to higher yields, as Tyler just pointed out. Now, if you look at the 30-year bond in particular, it's basically unchanged on the year, hovering at the highest yield close of the year. And finally, it isn't only 2s to 10 spread that's had a lot of

steepening. Here's a 3's to 30 spread it. 52 basis points. It's the steep. It's the steep. deepest in two and a half years. Kelly, back to you. Much Rick Santelli. Zales owner, Signet Jewelers shining bright today after reporting better than expected two Q results and a rebound in engagements. Engagements. We have a wedding here next weekend. But that engagement was probably a long time ago. Anyway, we'll trade at the stocks up 12%. It's next and three stock lunch. All right. Welcome back. It's time now for today's three stock lunch where we highlight three stocks making moves today. Up first, shares of Moderna under pressure on plans to cut more than a

billion in R&D costs. The CEO joining Squawk this morning and discussing plans to seek approval for the company's COVID-flu combination shot. Here's what he said. We are around six times higher than the average of the biopharma industry in terms of phase one to phase three success. And this is leading us to announce two new positive phase three data. this morning. We also announcing that we're going to file up to three new products to the FDA before the end of the year, including the COVID flu combo, RSV for the 18 to 59, and also the next-gen COVID. So the platform is working extremely well thanks to the signs that we have. All right. Here with our trades is Ava Otto, CR shares chief investment strategist.

Your trade on Moderna after hearing in part what Mr. Bancel said. So we have it as a sell. Unfortunately, the company went from a boom to bust. Once the COVID-darlane, the stock has now dropped by 85%. As you mentioned, they're cutting R&D budget by $1.1 billion. And their sales have come down from $18 billion to $5 billion in just three years. And so their profits have gone from $13 billion to negative to a loss of $4.2 billion. They might at some point turn things around, but we don't see light at the end of the time.

right now based on the data we have. All right. Well, let's, Ava, move along to Delta Airlines, which adjusted and outlined its Q3 guidance to address the crowd strike outage from July. The shares, though, had moved higher in this session. They're hanging on to an ever so slight gain, maybe a boost from lower fuel prices playing into that. What would you do with this one? It's another sell to Denver Barish. This is, in general, the Ireland industry has been losing money to investors for years.

There are many problems, unions, labor costs, energy costs, crashes, lawsuits, regulations. So there are many things that can go wrong in this sector, and they usually do. It's not a coincidence that the price to earnings ratio, the average of the sector is only five, and that's a very low P.E ratio compared to other sectors. It shows that people are not very enthusiastic with the sector. We don't see, we think there are many, many more places to put your money in to generate better returns. Let's go to shares of Cigna Jewelers, hire. Same store sales upbeat, good outlook, rebounding engagement sales, Ava.

What do you think? So, unfortunately, diamonds are not forever when it comes to Cigna. And I think there's a new trend coming up with lab-grown diamonds. We do see today 18% up the stock, but that's because of better than expected news. However, to us, it's a long-term sales. The stories about lab-grown diamonds are taking. taking away market share from classic diamond providers. And the reason is that the diamond prices actually have dropped by 30% in the last years.

That's a significant drop. And the market share of lab-grown diamonds have increased from 0 to 40% in the same amount of period of time. And so we think that's going to be the trend in the future. Very interesting. Eva Ados, thank you very much. And we will be right back. Welcome back. turning now to the aptly named Milwaukee Bucks, the NBA team now valued at $4 billion after it sold 10% of the franchise to a former player, Junior Bridgman.

If that's what the Bucks would go for, just imagine what the Celtics might command as they shop a stake in their team. Mike Ozanian, CNBC's senior sports reporter joins us now. These franchise values just keep rising and rising and rising. Yeah, and I think this deal in particular speaks to the NBA's new TV deal. which is going to kick in for the 25, 26 season, $76 billion over 11 years. You look at what the Haslums paid when they came in as about a 25% ownership group in April of 2023. That was a $3.2 billion valuation. A year ago.

So it's up 25% just in that short period. And I think a lot of that has to do with the league's new media deal. Where is the – well, let's talk about what private assets. equity may mean, now that it has sort of been welcomed into the NFL for the first time. How much is that going to give a lift to those prices? I factored in when we were due our valuations, although private equity had not been approved yet, roughly speaking, 5% or so, because it's mostly going to be funding the limited partnership, or all limited partnership money, because no private equity could have a controlling ownership

stake. Private equity has been in the NBA for a few years now. It's been a significant part of, they've had big interest there. It's helped boost valuations. But again, it's limited partnership stakes. What is the sort of philosophy or rules about foreign ownership of NBA teams? They allow foreign ownership. But I think the key is, with the bucks in particular, what we're seeing,

because the big control stake sale was the Sons at $4 billion. And then right after that last year were the Mavs at about $3.6. billion. The sons and the bucks have something in common. As do the maps, they control the arena economics. I was wondering after we talked with the NFL part of that. Yeah. And the bucks also have a dynamite team. They're going to be contending for the title. So Junior Bridge. But they're in the hole because of the salary cap. Are they not? They're losing money because of that. They could opt out. They have three high-priced stars, but they're going for the title. All right, sir. Thank you very much. Thank you. It takes money to make money.

I think that's what they say. Thanks for watching Power Lunch, everybody. Closing bell starts right now.