Power Lunch - Fed minutes point to ‘likely’ rate cut in September 8/21/24

Episode Date: August 21, 2024

Fed officials moved closer to a long-awaited interest rate cut at their July meeting, but stopped short while indicating that a September cut had grown increasingly probable, according to minutes released today. We’ll tell you all you need to know ahead of tomorrow’s Jackson Hole summit. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi and welcome to Power Lunch. I'm Kelly Evans, Joe Kernan, joining me today. I am. Welcome. And no lunch, right? We'll see if we can get a little salad. I saw some pretzels. I go by that same desk where they have all that stuff. The snack bar. That's how they get me out here. That's right. That's how they entice you. It's a little bit of a mixed day for markets. I mean, we have the Dow up barely. We have the S&M. And by the way, Amex is a headwind there. We have the S&P up a third of 1%. The NASDAQ up half a percent, but the Rassels are also up about 1% today as they finally take a leadership.

position the 10-year Treasury, you'll be sinking to about 3.77% down a little bit after those revised payroll numbers this morning. But let's start with the Fed Minutes being released top of the hour. Emily Wilkins in Washington. Emily? Hey, Kelly. Well, yeah, from the Fed Minutes, we're seeing that for the Fed governors, they saw that inflation was eased over the last year, but it remained elevated. All of them supported maintaining the current target range. But there was some support for a quarter point cut in that July meeting an increased confidence that inflation was going towards that 2% goal, but they needed greater confidence before reducing that rate. Of course, jobs numbers, a huge interest

today. And the Fed did say that the labor market was in a better place, but there were concerns that payroll was overstated. They said the monthly pace of payroll, they moderated from the first quarter, and it was solid in recent months, but they did say that there were increased risks to employment. Of course, that comes as you're seeing decreased risks to inflation, although they said in their minutes that inflation pressures might persist for some time. But overall, there was a sense from the Fed that there was a better balance for inflation and employment objectives. And some said they were more or less balanced than that July meeting. They also took a look at consumers, consumer spending, and they found that lower and moderate

households had rising credit card delinquency rates. They noted that consumers were shifting away from discretionary spending and buying lower cost food items and brands. So certainly setting up a lot there in those meeting minutes. You can kind of see some of that confidence emerging on inflation. Certainly will be very interesting to hear from Powell this Friday. Great. Thank you, Emily. Let's get some reaction to the Fed minutes and to that.

I'm talking about it all morning we did on Squawk Box too, waiting for that BLS revision, which happens every year. It was like 1030 by the time I came out. It was. It was a half hour late, which is not. supposed to happen. I mean, how long does it take? You're already revising numbers that are screwed up. Now, you're screwing up the screw up? It wasn't a screw up, actually. Bill Lee was an incredible pitcher, Spaceman, but he's also chief economist at the Milken Institute. Bill, it's good to see you.

I almost said good morning. Old Habits die hard. Can we just start and put that to bed this morning? Every year it's done. This was one of the larger revisions, I think the largest since 2009. it was still a solid job market, whether it's 240 or 170, give or take, still pretty solid. I didn't know this morning whether it would be bullish or bearish for the markets, because if it's not as hot as we thought, it gives a Fed more leeway, doesn't it? Was it a disappointment this morning that we lost some private sector? It wasn't even losing them. We just counted it differently.

Exactly. In fact, it's a sigh of relief to most economists that that number came down and came down with a hefty number because 200 plus 240, $250,000 a month average is way too hot for the normal economy that's slowing down to a more steady state pace. Closer to normal is actually not just 175, but closer maybe to 100 to 125. Because that's what's needed to just keep the people who are coming into the labor force employed. And so we're looking for numbers that kind of converge down to that eventually. So even at 175, it's still a pretty strong economy, especially when you compare to the other series that the labor puts out, which is about unemployment. When they ask how many people have gotten new jobs, that has average from January to July, something like 90,000. So we knew that these two series had to converge, and the fact that it did is a side of relief because we can't have this kind of divergence because that's clearly a miscounty that.

Chair Powell told us about. Someone said, you know, you have 160 million jobs or 159.2 million jobs. That probably doesn't in the country. That probably doesn't push the Fed one way or another. But given that brief growth scare that we had a month ago and the, you know, the VIX spiked and suddenly the soft landing narrative was in question, does this do anything to either allay those fears or rekindle those fears that maybe the Fed is late? Not at all. In fact, those fears had me scratching my head. How can you have as recession

when there are no layoffs? And how can you have a recession when the unemployment rate went up because people thought, gee, this is a good time to look for a job. I shouldn't stay home anymore because jobs are plentiful. So it really is a sign that with a high participation rate and increase in the labor force, that people are perceiving the economy as doing quite well. Now, Emily did say that in the minutes, the FOMC did talk about the slowing discretionary consumption and how it is that the consumer might be slowing. That is a concern because right now, all of us have been thinking, well, where is the consumer finding the income? Since January this year, the pace of consumption has outpaced income growth.

And right now, the gap is several percentage points. So it's clearly dividend the savings. But when you look at households, who's got the savings? The stock market wealth that people have talked about and the real estate wealth and pension wealth, that's in the top 50% of the population. When you talk about the lower 50%, they hold maybe 2% of all stock market and pension wealth. So it's really the top earners that have been doing the consumption. And even they are starting to blow down. That has got the Fed concerned about where it is that consumption may gravitate toward.

Bill, Goldman is finally out with its take it. I think this is going to just extra confuse people, but they think that the downward revision and payrolls is overstated, basically, because the QCW is based on jobless claims unauthorized workers don't qualify for those. And also because QCW itself has then subsequently been revised higher. Point being, and here's their take, it's not probably that we need to go down by $818K, but they think maybe by $2 or $300, about $25K per month, it's not moving the needle, in other words, on what continues to be a growing economy. Seeing that even now, as you mentioned a moment ago, in labor force participation is at all-time highs, which you don't usually see if you're going into recession. What it really means, getting back to my stratification of the two America's story, is that more and more people, especially in that lower 80% of the income distribution, are finding it

harder and harder to make ends meet. They're having to find a second job, which is why the household survey shows almost no increase in number of people getting employed from unemployed. But the huge payroll growth means that more and more people are having to find side gigs, second jobs in order to make ends meet. Now, making ends meet seem to have a wide spectrum of definitions here. If you're a Gen Xer and maybe millennial, necessities include meaningful travel, right? Whereas for boomers like me, necessities mean, you know, housing, food, and shelter.

So the definition of what is really needed is varying. but there's a lot of second and third jobs that are in the payroll survey and not in the household survey. A hoverboard or a bunch of apps, you know, for your iPhone. Millennials and generations. What are you? Millennial. You're okay. Bill, I should have known not to talk about that Arcane. She is a nerd. And I've known that forever. And why do I, you got in the weeds, the QK, what? The QC double, but here, there's actually a much larger effect going on.

You love this. I don't know if Bill wants to weigh in on this. I want to hear about the Psalm rule, which you didn't talk about. But this is part of it. But it didn't, it's supposed to be a recession when it goes up this much. Exactly. But to what extent are unauthorized migrants affecting all of these measures of the labor force? So it's affecting this downward revision, which maybe shouldn't be revised downward that much. In other words, the labor market is stronger than is assumed.

But yes, a lot of that captures jobs that are going unauthorized migrants. It's just the size of the labor force keeps expanding. And it's, we're not seeing enough hiring to fully abuse. absorb all of that right now. And that's why the unemployment rate in part is going up. The real nerdy part of the question is, is the income being earned by these extra payrolls enough to push inflation back up again? And is there a danger that it'll reignite inflation? And as I said, most of these second and third side gigs are in the late leisure hospitality industries where average wages are pretty low. So it doesn't seem like it's generating the kind

of spending power you think that would traditionally push inflation back up again. So as far as the that's concern, as far as what Jay Paul's going to say at Jackson Holt's concern, you know, the economy is doing well. The labor market is still strong, and we're on our way to lowering rates because we're convinced inflation is on its way down to 2%. And I think that's the message. You say that loud and you say it proud. That is not a disparaging. The nerd. Remember, I'm not cool enough to be a nerd. You're not even cool enough to be a nerd.

And Bill, you work at the milk and do you ever say, do you ever use the words I'm highly confident in what you're talking about? Like, you remember when you needed debt financing back in the good old days of Drexel? Do you remember that? Do you remember that phrase highly confident? Do you ever use that? Yes, I do.

I rarely use that. I used it now because I'm pretty confident. And when I was at Citibank, when we taught the clients, where hedge fund people had nanoseconds of attention, unless you say you were confident, they weren't listening to you. Okay, good.

Bill, enjoyed it. Thank you. You still got the fastball or, you don't? People don't know what I'm talking about. I'd never go to Canada. Don't forget. This is me. I'm going to do it.

Our live coverage from Jackson Hole kicks off tomorrow with Steve Leesman, interviewing the president of the Kansas City and Philadelphia Fed. That begins tomorrow at 7.30 a.m. Eastern time on Squawk box kind of serendipitous to have this happening when it's such an important time it seems like. I know. You always think August supposed to be the quiet month, but never. It's usually the catastrophic month. The change in direction on an interest rate cycle is rare, and it's years. And we've been, so we weren't in a hiking mode for a long time. Then we get a, what, 500 basis? But it seems like we've been in this for how long is it? The hiking? Yeah. Two years since June of 2022. Well, a little over. Yeah. A lot has happened. Which day in June. I mean, I should have known. It was after the CPI and the inflation expectations on that Friday. And then Monday they went 75.

Nerd. Let's turn to the markets now after that non-form payrolls number was revised downward. The major averages are on pace for back-to-back weekly gains. For more insight on what's next, Rebecca Patterson is the former chief strategist at Bridgewater Associates. She joins us from the DNC in Chicago. And Mark Lachine is chief investment strategist at Janney Montgomery. Scott. Rebecca, welcome to you. I think we kind of got into the weeds there on the payrolls a little bit. Kind of take us back to the big view of the markets here and what you think is going on.

I mean, it's been fascinating to me how investors and the markets and even very credible economists are sea-sign on the back of every data print or earnings release we get, whether retail sales are up or some earnings suggest retail sales is slowing. Because as Bill Lee just said, it is really all about the consumer. And will the consumer keep spending enough that we can generate the soft landing and have a handoff from demand-driven earnings to Fed cutting supporting equity valuations? And to me, that's the question mark. And I don't have a lot of confidence, Joe, to your earlier point, on this particular point. So I prefer to approach this with a diversified portfolio. The one thing that I have been confident about for the last year and change and remain confident about is gold, interestingly, and large-cap stocks. Those are two areas that I think, regardless of which way we go, that's where I want to be.

Gold. She's taking another victory lap on gold. I wish I had been more. Rebecca, I wish I had bought those gold bars that are now worth a million dollars on the gold front. I noticed you didn't mention crypto there. I'm not going to go. But it's interesting that you say that's one of your highest conviction things right now. Well, gold to me for most of the last year and a half or so hasn't had anything to do with the U.S. economy, U.S. politics. It's really been a China story. And the Chinese Central Bank and a few other central banks diversifying reserves.

away from U.S. Treasuries, but also the Chinese consumer who feels really stuck. There is nowhere for them to put their money as a storehold of wealth or a way to grow their wealth. So we've seen Chinese retail demand very strong. And when you look at what's happening in China, even just the last couple of days, it just keeps reinforcing that view to me. Now, maybe their buying will slow from here because they've already been buying for a while, but I don't think they're about to start selling anything. This is their storehold of wealth for now. This is where they're going when they don't know where else to go. It's not housing. It's not Chinese stocks.

And now it's not Chinese bonds with the Chinese government threatening to intervene a push yield higher, which is completely nonsensical given where their economy is. Mark, what would you add to that? Well, I concur with Rebecca, quite frankly. We've been quite constructive on gold. We're long a position in gold bullion in our portfolios. I had initially established a price target at $2,500 for gold, and we've met that. And I've raised now subsequently the price target, did something closer to 3,000.

for the reason certainly Rebecca mentioned. We wrote about that a couple of months ago, the massive amount of central bank buying, even in the absence of retail buying for instruments like GLD, we're seeing massive flows into gold, even if it's not in the form of the ETF. Having said that, I also think obviously looser central bank policies, which I think we're about to embark on here in the United States, is also helping to put a bid into gold prices as the dollar has suddenly weakened down to one or one or so on the Dixie. And we think the path of least resistance is forward to work lower. And of course, typically a stronger dollar is kryptonite for gold prices. So obviously, he's helping to stiffen that tailwind for gold in the midst of everything else that is transpiring, not only with regard. to central bank buying, but obviously geopolitical tensions. Yeah. No, and I, even though I know we're talking about China and central bank demand for gold and all the rest of it, Mark, I do wonder what kind of signal. Like, is it a worrisome signal when gold breaks out like this, or not necessarily?

Well, if you look at it in conjunction, Kelly, with other sectors, so we've seen a rotation over the last 30 days to where leadership has really been those classic defensive sectors like consumer staples, healthcare, utilities, and even the beleaguered, really. estate investment trust. And even though they've seen that leadership usurped in the last week by the tech-related companies that got a bit of a bid, I think it does suggest that perhaps investors are positioning a little bit more cautiously. You know, seasonality probably plays a role as does a very tight now presidential race with just 75 days left to the election. And I think gold is a part of that defensive posturing. And it fits the context in which, again, Rebecca mentioned, which is to say the barbell that she suggested, which is large caps of gold, seemed like a defensive posturing for a portfolio that is, you know, long, if you will, risk assets.

Rebecca, I asked someone this morning on the show about whether the overhead resistance on gold were through it, because it's an all-time high, you know, trying to get to what the next resistance could say, I don't know. I mean, I could see much higher. And he told me it was the future. So we're at 2548, and I said, what's the next resistance? He told me at 2550. I go, thank you. Thank you.

That's really helpful. But then he was talking spot. He was talking spot. Joe, I'll tell you one thing you and Kelly can keep an eye on and your viewers can keep an eye on during Jackson Hole. It's not just about Powell and interest rates, although that is important. But over the next few days, we also have central bank speakers from Japan, the UK, and Europe. And as you all know, we've talked about this for years, currencies are two-way, right?

You have the euro and the dollar, and who's cutting rates faster. That's going to matter for the dollar. The dollar's fallen about 2.2% against the DXY. Just recently, it's still up year-to-date against a lot of peers, but it's given back a lot of gains. Where the dollar goes next is going to matter for gold. It's also going to matter for a lot of stock choices. So I think watching those central bank comments from overseas is going to matter a lot to the dollar's next direct. It's not just about Powell, although Powell is the most important factor.

The currency might be more important than they've been in a long time. That's why you don't stay on your phone a lot, Rebecca. I think we're going to be bringing you back, I think, more for it's affecting all the different, and look what happened with the yen. That was a whole reason, right? Absolutely, right? Totally. Yes, yes.

I would love to come back more, Joe. I miss you. Yeah, good. In the morning. We'll do that. Okay. Oh, now I'm poaching. I was, now I'm poaching. Poaching guests again.

We have more time in the morning, Rebecca. Yeah, just keep going. Just keep going. We got to go. Rebecca, I'll text you. No, I'm kidding. Rebecca Patterson, Mark Lacheney. Mark, you two.

You too? Oh, no. Come on. I'm sorry. I'm sorry. I appreciate you. I'm sorry. What to do.

Thank you both. Mother, your sister. I don't know which way. Still to come. Is bad news, good news, target shares, spiking. even as the discounter gives some cautious sales outlook. Huge move, though, and we had Brian on this morning.

He was, like, statesman-like. You didn't see that. You're sleeping. Actually, you're dealing. I wish I was sleeping. You're dealing. Oh, the lady in the shoe. Plus, Ford cancelling its electric, three-row SUV, and shifting its EV strategy.

The stock is higher. We're going to break down all these moves when we return. And welcome back to Power Lunch. They never served food. Shares of Target, do they? Well, how do they lure you in here? Shares of target up 12% following its results. But were the numbers good or just not as bad as feared?

Let's bring in Melissa Repco. Now for more. We talked about that this morning. Great move today. But while Walmart's hitting all-time highs, targets still in catch-up mode. Yes. So shares are rising today after the retailer topped Wall Street's earnings and revenue expectations for the quarter and hiked its profit outlook for the year.

Same store sales rose 2%, snapping a four-quarter streak and declines. Company leaders credited a few factors for the stronger quarter. Traffic across Target's website and stores jumped 3%. Shoppers bought more discretionary merchandise, such as clothing and home decor, and customers responded to Target's price cuts. The discounted recently reduced prices on about 5,000 every day in seasonal items, including milk, paper towels and pool noodles. Still, Target struck a cautious note with sales outlook.

stuck by its previous forecast, which calls for same store sales to range from flat to up 2%, but it said it now expects those sales to be in the lower half of that range, Kelly and Joe. So, and this is where, again, I agree, backing up for a second, it's like, yes, the stock's up 12%. Yes, some are up as a halo effect, but it's full year outlook is not exactly all that thrilling. Just give us some context. Exactly. This is really part of a broader pattern. We're hearing this from Walmart. We're hearing this from Home Depot. I mean, we're hearing it across the board. Macy's joined the chorus today. Pretty lackluster back half of the year they're expecting. So if sales are up at Target, then why didn't they increase their forecast for both sales and

for profit? Can I ask you a question? Have you ever said pool noodles on the air before? Have you ever said pool? You mean pool noodles? You mean the pool noodles? We have those. Yes. And you use them to kick. And they're one dollar at Target. And that was, do you know what they are? Now that I know I need them as bedrails, so actually I needed to throw it up. What did you think she was talking about something you eat in the pool? No, I just thought, I wonder why. Pool noodles. Now that I know they're a buck.

You meant those Siref, those little things. Yes, I do. Different color. And Target cut them as part of its price cuts because it was looking at what do people buy this time of year. You just glossed over that, but I love hearing it. I can't believe that. I need like 10 of them. That made the news.

Two on each side of it, maybe three for a bed. Yeah, it's a good idea, too. Except for the little kids. You've got to do all kinds of improvising. You have to get. How old is the oldest? Six. That is, do not do this.

A lot of peanut butter, which is also one of the everyday items they cut price on. What's up? Really? Yeah. Don't try this at home. Do not try this. Just filling my shopping card for me. Full of cheap target goodies. Melissa, thank you.

Let's shift gears now to Ford, which itself is shifting gears on prioritizing the development of hybrid models instead of electric ones. Big story. Philabo has the details. Hi, Phil. Hey, Kelly. This is a move that investors are cheering, largely because this is Ford's saying, if we can't make money right out of the gate on an EV, we're not going to make it or

we're going to delay it or we're going to shift our strategy. And that's what they've decided to do today announcing that as part of their new approach when it comes to making electric vehicles over the next several years, they're going to delay production at a Tennessee plant that will be coming online over the next couple of years. They're going to scrap making an electric three row SUV, but they will have three new models, three new electric models, including a couple of pickup trucks in 2026 and 2027. This is not a move that doesn't come without cost. Ford has been working hard to bring down their cost. And in this case, this change is going to cost them $400 million. That'll be a charge immediately. And then their EV costs are going to be up about $1.5 billion over

the next couple of years. Their sales, when you look at them compared to their competitors in the United States, they've been increasing them at a pretty healthy clip. They are number three in terms of EV sales up 71% year to date, but EVs are just 4.4% of Ford's total sales. And they're losing money on these vehicles. They're losing on average $44,000 for every EV that they sell. So for Ford, the idea here is clearly we're doing much better in hybrids. That's Ford strategy. Let's prioritize those and deprioritize EVs while the market A is slow and B while Ford is racking up high costs in terms of making these EVs. Yeah, it's really an incredible validation in many ways of what Toyota has done and where the market is.

So anyway, Phil, Phil, Phil Lowe. After the break is crude oil's recent sell-off overdone. We'll discuss that in Market Navigator when Power Lunch comes right back. Welcome back to Power Lunch as you get a look at the markets. The Dallas sub about 49 points. Amex is a headwind as it's an underperformer. The NASDAQ up 6 tenths of a percent. up about 1% today. And in Market Navigator, one trader thinks the recent sell-off has left crude oil

two weak in an economy that's still relatively strong. Scott Nations, President of Nations indexes, joins us now. Scott, it's good to see you. So how would you play oil here with futures? Yeah, I would be buying crude oil in the E-Mini futures contract, the October contract at $71.50. And Kelly, we were there just a few minutes ago. It's rallied 45 cents. $0.45 cents. then, but $71.50, again, in the October contract would be my entry. We're still at the bottom of the year-to-date low, the 52-week low, so I want to get back into the middle of that range. Target, therefore, would be $74.25. And the stop, we're always going to trade futures with a stop. $70.75. Again, crude oil has been hurt by fears of economic weakness. It was down more than 2%

early today on the revision to the jobless number. But economic growth is still decent, if not great. Growth was 1.5% in Q1, nearly double that in Q2. Specifically with crude oil inventories were down 4.5 million barrels last week that more than reverses the surprise build in the week before that. And again, if you look at the chart, you'll see that crude oil near the bottom of the year to date and 52-week lows. And given the fact, decent economic growth and the potential for geopolitical problems, fruit oil is a buy here. Although what's interesting about that is, and we've talked to Emm Rita Sen and other analysts about this issue,

demand has been weak. In fact, the oil markets have been flashing weakness in the industrial economy and in China in particular. And so even if you like the better U.S. potential, don't you have those headwinds still to fight? China is the issue. Economic weakness in China is certainly the problem, because as I've said, it's not that bad here. In fact, economic growth is pretty good here. China is certainly the problem, but I think that's outweighed by the fact that we're now looking past the likelihood of geopolitical problems. And so I think those two balance each other, and we get to look more or less at what's going on, the U.S. economy as far as what's going to drive crude oil. All right, Scott, thank you. We appreciate it. As you said, kind of bearing fruit right before your eyes turning bullish on crude oil, Scott Nations. Still to come, luxury king Bernard Arnaud, betting big on AI. The LvMH chief using his full and likely designer wallet to shop around for tech companies to invest in. We have that story next. Welcome back to Power Lunch. The NASDAQ and the Russell 2000 are leading the way today, although the Dow is still up 38 as we try to string together blue, sorry, green across the board. board. Let's turn our attention to the bond market as well, where yields are down significantly.

We also got those Fed minutes with Jackson Hole and hearing from Powell Friday morning on the way. Rika, what do we make of it all? Well, I'll tell you what, I think that today's big revision of $818,000 on jobs is going to make the Fed's job both easier and more complicated. Look at the charts. You know, a two year was at $3.95 at 1033 Eastern, one and a half hour and three minute delay. and the information hit the wires. 10s were at 385. You can see how much further down they've moved. We have indeed seen the dollar index also reflect

the big moving interest rates lower as it's hovering on the lowest close of the year. Actually, lowest close since December. Listen, all I know is garbage in garbage out on date. I don't care how old it is. Let's go talk to a trader. Shane. Hey, Rick. All right.

There's so much going on here. Let's start at the top. At 933 Central, 1033 Eastern. and we learned 818,000 jobs that were counted from April of 23 to March of 24. Well, we're not counting them anymore. Did that make a difference to you, your traders or the market or volatility? Well, Rick, what we see in this number is it's the biggest revision since 2009, I believe. What we saw in the marketplace here is sort of a repricing of volatility and a slighter demand for risk.

We think it was maybe oversold a bit last week on the heels of Japanese news reverting and markets getting back to a sensible place kind of in the range. that they've been recently, but may have gotten oversold a little bit, and this number could add a little bit more uncertainty of the market is what we're sort of viewing here at SBX. I got you. Now, as we get further into the week, even tomorrow, we're going to see Jackson Hole be a bigger issue.

Is Jackson Hole, the timing of Jackson Hole, affecting any of the plays or positions with respect to volatility or hedging? Because, of course, there could be some tape bombs, as we used to call them. Rick, I believe it might be a little bit of muted volumes through the option market. place until Friday because we do have a lot of customers in a wait and see pattern to see what Powell has to say about rates in the path of the Fed going forward on Friday afternoon. So where we see in a difference between a differential between like zero days to expiration options and the VIX, you know, where there's more of a time issue, the shorter or no time

issue options over that period, they're just a little lazier than the rest? Perhaps for this week, but there is always a lot of interest in the zero-day options. Really where we see the vol move is in the back part of the curve. Gotcha. All right. Now, let's go to Jackson Hole in its entirety. We're probably going to see a Fed that's going to really jive into today's headlines. Do you see in the grand scheme of things that any of the news today, $818,000,

is it going to change the long-term view of those that use your option markets for hedging purposes? I don't know if it's going to change the long-term view per se, but when the rate cut path starts to get into play. So I think this number that we've seen this week might give the Fed an opportunity, another feather in their cap to go ahead and start that revision and move rates where they see fit. The downside to the Fed and their path might be in delaying further rather than the risk to go too soon. I got you. I got you. Not necessarily higher for longer, but coming down slower than they normally would. All right, you know, I know I'm supposed to kick this back to Joe Kernan, but Joe, I'm going to have to ask you.

You know, everybody said that minus 800 and 18,000 means nothing. I haven't heard anybody say it means anything. I think it's important. They built a foundation at the Fed of their strategy based on the strength of the labor market. What do you think, Joe? I knew you probably did think that, Rick. And out of everything I've tweeted today, all I did was just update it, because we talked about it earlier on Squawk Box.

I've never seen more stuff coming in that kind of might be taking your side of things, Rick. I would never weigh in on anything as far as a personal opinion. No, no. No. Far be it from me to say anything. Well, I'm going to be talking more about this on Fast Money tonight, so I hope everybody

tunes in. Joe, good seeing you in the afternoon. Thanks, Rick. Good seeing you. And that's 5 p.m. Eastern. See? Probably. Someone said that in my ear? No, I just do that. shares of Netflix near all-time highs I can't believe that it's made the round trip from under 200 you believe that wild it's unbelievable after tautic yeah when you say

only bitcoin does things that one 700 under 200 back which would you rather own now I don't know I'm not the future's hard to predictions are hard especially about the future it's successful push into the ad market where trade trade it in three stocks lunch after a quick break Welcome back. Time for today's three-stock lunch. And David Wagner is here to do the honors today. He's a portfolio manager, aptest capital advisors. It's great to see you, Dave. Let's start with Netflix. We were just talking about this, but what an incredible run for the shares all the way back up to nearly 700. It's an all-time high yesterday after they reported a huge jump in advertising sales. You jumping on this one and taking it higher? I'm not jumping on this one, Kelly. I mean, you're right. It's a great technical and fundamental momentum right now. There's no denying that. at $700, but given the current valuation, I wouldn't be adding to the position. Honestly, I love the company's announcement that they no longer disclose subscriber growth. I mean, many

investors, they hated that, but the reality is that the stock was way more volatile than it should be just off of one data point. And Kelly, we know that Netflix, you know, they're morphing more from a pure growth stock into more of a garpy stock. And today, investors care more about durable growth, margin expansion, free cash flow generation than just subscriber growth. I mean, the situation reminds me of Apple when they stopped reporting iPhone unit sales back in late 18, when it too was evolving more to a capital return story. And Apple investors, they adapted, which I expect Netflix investor to do the same. But the name feels overcrowded. So I'm not adding to the position. I'm just kind of right in the wave. I have no idea what would happen if we didn't do

all three, David. So we got to go quick. I mean, it's like anti-matter meeting matter. Maybe the world might end. T. JX, also at an all-time high, raised its full-year guidance. Another quarter of strong, Sam, what about this one? Yeah, I'm not sure if I can call myself a contrarian when a consumer stock is traded at 29 times for earnings. But I get the notion, you know, that there's a lot of naysayers out there that they simply write this stock off due to its cyclicality and the expectation of a consumer slowdown. But Joe, you buy the stock for its growth. I mean, the company's opportunity to broaden its addressable market and structurally improve its margins. You know,

that means the company that can deliver earnings growth of 14%, which is well above the 10% earnings growth that you had pre-COVID. And a market that continues to see slowing growth. You know, Joe, come by a stock that's actually seeing accelerating growth. This guy's a talker. I like him. I'm telling you. You ever see Squawk Box?

That's like the third person you've tried to. Okay, go ahead. Dave, do you got to stay loyal, man. We're going to, speaking of both. Amex. I know. I know. I know.

Down 3% today. I actually love the downgrade here. I love it. We talked to the analyst last hour. So we're going to throw in one toot of the horn. He was great. And he had a kind of interesting. Go ahead.

What would you do with the stock? You know, it's a contrary to play by the back of America. It's up 30% year to date. I love it. They're skating where the puck is growing, going part of me. You know, I believe that revenue guidance needs to come down from that 9 to 11% range. And, you know, if essence need to come down, I just don't care how cheap the stock is, especially relative to the bellwethered of Visa and MasterCard.

So I'm staying on the sidelines right now. Oh, we have third. All right, good. Go ahead. You thank him. David, thank you. I wouldn't want to, you know, step on you. I really appreciate it. David Wagner with Aptus advisors. Don't take any calls that come from other numbers, yeah.

Well, it's been real and it's been fun. Thank you for coming. You are welcome. The lunch will be served shortly after this, so don't. We just had a three-stock lunch. That's true. And thank you, everybody, for watching Power Lunch. Yeah, closing bell starts right now, I think.

Like, four seconds.