Power Lunch - Geopolitical Tensions Weigh on Wall Street 4/15/24

Episode Date: April 15, 2024

Stocks are falling as rising yields overshadowed strong Goldman Sachs earnings, hot retail sales data and hopes that the conflict in the Middle East will not escalate further following Irans’s weekend air assault on Israel. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Contessa Brewer. I'm Tyler Matheson. Welcome. We begin this hour with a check on the market. Stocks have turned lower after some early gains. The NASDAQ now down nearly one and a half percent. And oil is lower, too. Not seeing the spike one might have expected after the events of this past weekend. We will discuss all the market implications of Iran's attack on Israel. Defense names are mostly higher right now, but the gains, they're small. We are seeing some gains in bank stocks, though. Goldman Sachs leading the way following results.

There it's at 3%. You've got Charles Schwab up 2% and M&T Bank up almost 5%. Which markets are more focused on earnings here? Are they more focused on tension in the Middle East? Mike Santoli joins us with more from the New York Stock Exchange. Hi, Mike. Hi, contestant. Well, I think the markets are kind of trying to take it all in.

So it's obviously the back-and-forth headlines on the Middle East. earnings as they come in are definitely, you know, getting a lot of attention, simply because they are giving a decent indication of where we are in terms of a snapshot at the end of the first quarter. So far, a better reception to the bank earnings today than on Friday. But really, I think the animating factor today is Treasury yields in response to the strong retail sales data we got, which really was just an extra push in the direction we were headed already. Yields higher, obviously repricing how much the Fed might be able to ease rates later this year. if, I guess, is the question too, and in fact, whether the data is going to line up for the Fed to do that.

So all the issues that the market was trying to wrestle with on the way to Friday, when it really sort of became captivated more by the geopolitical issues, I think are now reasserting themselves. And this is where we are. We're in a 3.5% pullback in the S&P 500. We clearly have a little bit of a broken momentum situation on the uptrend line from the October low was broken. It doesn't mean that therefore the market is in worse shape. It does mean, though, that the momentum players are out. We have to actually see probably rates settle around at some point before you get a lot of more fundamental buyers in there.

You've got a little more competition, don't you, from fixed income investments. We had a guest on last week. Maybe it was Sarat Sethi. I think maybe it was who was saying if you can get 6, 7% in a good quality corporate bond, why wouldn't you put some of your money there? Well, and it's absolutely happening. I mean, you have inflows into fixed income. I think that the place I would stop in terms of making that argument is to say that somehow it's a zero-sum game and therefore stocks can't perform in that environment. The biggest bubble in anybody's memory happened with yields at six or seven percent in the late 90s. The market was up 28 percent in five months, the S&P 500. So a lot of people are going to look at that and say maybe my six or seven percent doesn't look so great. I do think that it's definitely more of a, of a market where multiple asset classes have their merits and it's not going to be an all-in market. I don't see massive crazy flows coming into equities.

In fact, what I'm looking for now is to see some of the overextended optimism that we saw into the end of the first quarter really burn off and start to develop fear. The market gets short-term oversold. Then maybe you see if you get a bounce. All right. Mike Santoli, there from the floor of the New York Stock Exchange. Mike, thank you. As stocks are not holding onto these early gains that we saw in the earlier session, how worried is the market? What's the best way to position your portfolio? Our next guest says despite elevated valuations, these dips seem viable.

Let's show you right now what's happening in the Dow Jones, the S&P, and the NASDAQ right now. Brian, we're seeing the S&P off by a percent. You've got the NASDAQ down by a percent and a half, and the Dow Jones industrials off by a half a percent. as the chief economist with annex wealth management, where do you see the threat from the geopolitical situation and the escalating tension between Israel and Iran? And how much of this do you see, as Mike was pointing out, as yields and earnings and other factors that are weighing? Yeah, thank you for having me. So when we were discussing it in our investment committee, we were thinking that today's moves were more related to the move-up

yields as opposed to anything going on with Iran and Israel. If anything, maybe we were starting off the day with a little bit of that relief rally, that things weren't escalating and spreading. And so we think that right now the story is more about the strong retail sales report and what that then means for Fed policy, the move up in yields. And it's interesting how tech stocks have once again become really strongly sensitive to the movement in yields. For a while, they seemed like they could move their own way, but now we're back to the future, back to the old days, where higher yields, lower tech stocks because of when you're discounting those future earnings of those big growth companies.

Does that argument extend to non-tech growth companies as well? So you would therefore favor other kind of categories of equities? Yeah, we really do think so. You know, obviously in an environment in which growth seems pretty good, there isn't a lot of scarcity of growth, and so investors might not feel like they really need to pay up for growth. And instead, you're seeing the moves, let's say, with the financials today, Goldman Sachs, M&T, Charles Schwab doing quite well because of those earnings beats. So those aren't exactly your growth companies, right?

Those are more related to financials, more cyclical. We actually think that it's a pretty favorable environment for on these dips, as Mike was talking about before, three and a half percent off with the S&P 500. maybe it goes down a total of 5% peak to trough. That becomes to us a very buyable dip opportunity for more cyclicals, let's say for small-cap, mid-cap, more on the value side of the spectrum as opposed to looking at the large-cap growth. You've got a lot of duct tape in your research. You're saying that the consumers spending on services is duct tape holding the economy together.

Why do you think that? And where does the duct tape start to fray? That's right. Yeah. So kind of using that analogy about why is it that the economy has been doing so well. And it's really two sources for that. One is if you think back to last year with the Silicon Valley bank failure, the Federal Reserve stepping in with the FDIC, basically using some sort of monetary duct tape to kind of keep things together. But then also for the broader economy with growth, it's really been about consumer-led. And especially on the services side of thing, that's been the duct tape keeping things together. Now, we do think that we're likely to see the service sector activity begin to slow a little bit. Maybe we got an early indicator of that with the retail sales data. The food service and with the spending at bars and restaurants was up only 0.4% month on month. So that was a fairly tame increase. So if service sector spending slows, maybe business spending and investment spending can really pick up the baton,

as we already did have an earnings recession in 2022 and part of 2023. So maybe business spending is the thing that needs to take up the baton now. You know, it's interesting, though, you point out that insurance costs and shelter costs, but insurance costs are helping push inflation higher. That's true for businesses as well, that it's becoming a bigger, bigger drag. And, you know, I just talked to a global CEO of a big insurer who said the issue in the Middle East could actually fuel more inflation because shipping costs and supply chains are likely to be impacted even more. How much are you still eyeballing inflation and where that goes in terms of investments

and what to anticipate? Yeah, that's a really good observation about the problems with insurance and this resurgence of insurance. I think a lot of people, when we look at history, you see that there's that initial increase in inflation, then it comes down, and then there's oftentimes a bit of a rebound. The question is, is how much of a rebound do we get? And we believe that we are going through that rebound phase of inflation, very unlikely to revisit the previous peak. But with three months in a row of rather hot CPI numbers, that does suggest to us that we are sort of riding that wave higher with inflation, likely to then go down as the year goes on. But we could be at these levels for a few months yet. And then that then pushes the Fed to maybe not consider cutting rates until perhaps September,

maybe even December at this point. So it is something that enters into our calculus that we are going through that rebound. But it is probably, you know, three steps forward, two steps back. And then we will get to the point where it's two steps forward and one step back instead. Quick, quick final question, if I might. And you mentioned the idea of monetary duct tape to hold things. together. What is that monetary duct tape? I mean, you think of that would mean the Fed's cutting race, but it isn't. No, not right now. It's not, but it has used it in the past. If you think

about the extraordinary actions that it took during the failure of Silicon Valley Bank, right, the bank term lending facility, that was a way to deal with that very particular issue. And so if we are going to encounter another issue, let's say related to if things blow up between Iran and Israel, hopefully not literally, then the federal reserve might decide that they do need to act. It could be through quantitative easing or it could be through an accelerated time frame for those rate cuts. I think that they would look through any increase in oil prices if coming out of that type of situation. So you're not really saying they're using duct tape right now. That's correct. Yeah, not right now. They're not. But they have in the past. And I do

think that that is something in their toolbox. They do have a big roll of duct tape that they can bust out if they need it. I use a lot of it at home. Do you? I do. So handy. Brian Jacobson, thank you, my friend. Appreciate it. Thank you. All right, turning out of oil, which we just talked about and the Iran-Israel conflict, it is pulling back oil amid hopes that international efforts to calm the escalating tensions in the Middle East may help. WTI crude and Brent still well above $80 a barrel, but if the situation worsens in the Middle East following Iran's weekend attack on Israel, could we see oil rise? to more than $100 a barrel, say.

Let's bring in Amrita Sen, founder and director of research at energy aspects. What do you say, Amrita, what is the risk that an escalation would cause oil prices to rise a great deal? And conversely, if things seem to simmer down a little bit, that oil might lose what bid has been bought into it. I mean, look, you can obviously never say never to a number. I mean, $100 is a number. If you start losing significant volumes of oil and gas supplies in the Middle East, of course we will be going up quite materially, even though that's not our base case right now.

The market will be looking for Israel's response, which we are expecting overnight today and tomorrow and so on. So that needs to be monitored carefully. A lot of what's going on between Israel and Iran has been priced in, which is precisely why you've seen prices pull back. overall the situation is a little bit more de-escalatory, then we think prices are going to hold. I actually don't think prices are going to fall substantially. You can pull back a little bit because ultimately physical fundamentals is why we are here today,

right? The physical market was telling us crude is very, very tight, well before futures prices kind of climbed to where we are today. And yes, there's a bit of geopolitical risk premium, but not a lot. But the flip side is, if things do get out of control, then yes, yes, we can rally quite a bit. Would the specific risk to oil prices going up be twofold? Number one would be if Israel decided to directly attack the oil infrastructure of Iran. That would be one. Number two would be a blockage of the Straits of Hormuz, that narrow area through which a lot of oil transits. Are those the ways that oil would be at risk to a major disruption?

Oh, absolutely. I think you've hit the nail on the head, and the notes we've put out have said exactly that. Look, if Israel were to target any Iranian oil infrastructure, then absolutely yes. I mean, Iran still produces well over 2 million barrels per day. And most of that oil, I mean, call it about a million and a half-ish, goes to China. And that's the only buyer of Iranian crude. But of course, if for whatever reason, Iranian oil was to not go to China, China would have to find alternatives. And that's a big volume to find alternatives for. The Straits of Formos would be an Iranian reaction to the escalation and if they were to shut it. Now, remember, Iran sends its own oil via the straits, right? So it's not necessarily something they'll want to do if they need the revenue.

So there is a bit of a, you know, they need to kind of weigh up their options. But of course, with geopolitics, it's always about miscalculations, right? If things were to get out of hand, then they may not care about the straits and shut in. But again, like I said, that's definitely not our base case right now. a clear signal from Israel that it will not retaliate against Iran. And right now that seems to be a big question. There seems to be some indication that there should be a response. Is the market getting ahead of itself in watching the price of oil come down and thinking of this as settled and done and we can move on? I think that's a very, very fair question. I think to your point, yes,

so far, Israel's taken its time, but even the headlines that's just come out very clearly says there will be a response. We absolutely believe there will be a response. But that's not the same as saying that oil and gas supplies will be lost, right? The responses could be different and the scale will be very important to monitor as well, because I think G7 leaders and just overall, even regional leaders are trying to call for a de-escalation because I don't think anybody really wants a regional conflict to get out of hand. So I think that's where the market is. at least thinking right now, whether rightly or wrongly, that this could actually get prices to stabilize. And like I said, I actually don't think there's a lot of downside because ultimately the fundamental basis is very strong.

But yes, I think it's a very, very fair question. Maybe the market's almost been blindsided. Very quickly, if I might. You've referred a couple of times to it not being your base case. What is your base case quickly? Our base case, look, we've called for $85 price forecast for this year for a few months now. we expect prices to stay in the 90s and, yeah, just based on fundamentals. If there were to be a geopolitical escalation, then we will go materially higher.

Okay, fantastic. And that was quick. That was good. And Rita Sen, thank you. Appreciate it. Coming up, Samsung receiving more than $6 billion in the new CHIP Act funding to build semiconductors at its Texas plant. We'll speak exclusively with Commerce Secretary, Tina Romando, about that and much more

when Power Lunch returns. Welcome back to Power Lunch. the United States doling out another $6.4 billion from the Chips Act, Samsung will use that money to expand chip production at its plant in central Texas. And that's where our Megan Casella is alongside Commerce Secretary Gina Romando. Megan? Contessa, thanks so much. And Secretary Ramondo, thanks so much for being with us.

Great to be here. Officials have said that this award for Samsung today, along with the recent awards for TSM and Intel, completes that three-legged stool of advanced chip manufacturing in the U.S. So can you put that in context for us? What does it mean for the US semiconductor industry and the companies depending on those semiconductors? Yeah, so we're on a role. This is our third huge announcement in a month, first Intel, then TSM and now Samsung. Our goal is to go for making 0% of leading edge semiconductors in this country to 20% by the

end of the decade. And with this announcement, I feel confident we're going to get there. And in the process, create hundreds of thousands of jobs for Americans. What's unique about this award specifically? I know you've called it an ecosystem of manufacturing. Yes. So what they're doing here is millions and millions of square feet of new development. It's unbelievable.

It's going to be twice as big as their signature facility in Korea. And it will be manufacturing, but also packaging, also research and development. And they're going to have a workforce training center right on the campus. And I think they're also going to have a child care center right on the campus. So it's like a little city of manufacturing, and around it will come suppliers. So when I say the whole ecosystem, it's research and development, packaging, manufacturing, job training, and all of the upstream suppliers, which will make America stronger and more secure. With such a massive facility like you've been talking about, are you concerned at all about hiring challenges? I think you said this is supposed to create some 21,000 jobs.

But Taylor, Texas, where we are, I think population is about 17,000. It is a challenge. You know, it is a challenge. I would say under President Biden's leadership, we have a low unemployment rate, which is a great thing. But if you're trying to hire 10,000 workers, it's a challenge. Samsung is working very closely with my office. Part of their grant, we gave them $40 million to build a job training facility

and semiconductor job training curriculum. And that's what we need to do. We need to train folks, train folks in local high schools. After this, I'm going to a local community college. They're going to be starting a new semiconductor training initiative at the community college. So it's a challenge, but it's an exciting challenge, and I think we'll meet the challenge. In Japan, we saw a TSM plant go from planning to production in less than two years. In the US, we saw TSM announce some delays and other companies have as well.

What's your response to criticism that the speed with which the Chips Act is moving is still hurting our competitiveness globally. We're going as fast as we can and I think it's actually an unbelievable pace. In this facility right here, for example, they've built over four and a half million square feet from nothing to what you see in 18 months. It's extraordinary. And other companies are doing the same. So, you know, we're committed to safety. We're committed to safety of the construction workers and safety of the folks working inside the fabs and also speed. Of course, once you do what once, the second time gets easier. And I think they're learning that here.

I'd say we're right on path, and we're going to hit our goal by 20% leading edge capacity made in America by 2030. We're still a few years away from production here. And some of the folks in industry have talked to who have concerns about this say that what they call red tape, providing child care, for example, is part of what's slowing things down.

How do you respond to critics like that? You know, that's just ridiculous. If you talk to the senior executives of Samsung, as I have done to and you ask them, what are they concerned about? They will say, workforce, exactly what you said. They need workers to build the fabs and be inside the fabs, which means you need to do investments in job training. You need to do investments in worker training.

You need to make sure people have childcare so women can work. You know, I just had an occasion to meet with a young woman who's the engineering construction manager. She's going to be on the site at six in the morning and work all day. Child care is something that's a young woman. matters so I think it's not a social program it's smart investments to make sure this is successful you've got about 16 billion dollars left in the award pot where should we expect money going next well I can't give you the inside scoop

now but more investments like this I mean well not this was huge and in some way singular but we're on a roll we've done three of these in the past month we'll be doing more in the coming weeks I expect all of the money in the Chips Act will be allocated by the end of this year. Should we expect money for upstream suppliers? And I'm curious how far upstream do we need more raw materials in the U.S., for example, more mining, that kind of thing? Yes. So I have my team on a plan to invest all of the chips money, including for supply chain, including for research and development by the end of this calendar year. So the process is, first, the very biggest, like this, and next you will start to see investments in memory chips

and investments in suppliers, waifers, chemicals, et cetera. One thing that I think is very exciting is that when a place like Samsung or TSM makes an investment of this magnitude, suppliers are automatically coming, even without our incentive. You know, last week, TSMC,

when they made their announcement, 12 suppliers, chemical companies, material companies, announced they were moving to the United States with no taxpayer incentive. So I would say it's working. That's a plan and it's working. Is it enough money? I know you've talked in the past about a CHIPS 2. So curious if you talked with lawmakers about that if there's support in Washington for it.

I have my hands full now and I think that the team's doing a fantastic job. But this is long term. You know, this is long term. I think it's very likely that a CHIPS 2 or something like that. Further investments in America's supply chain will be necessary. It might be a bit premature to start doing that now. that now, but I have talked to lawmakers, and by and art, there's bipartisan receptivity to something like that. Secretary Romando, thank you so much. Tyler, back to you guys. All right, Megan, thank you very much. Secretary Romando, thank you as well. Be sure to join our CNBC Financial Advisors Summit on Wednesday, May 22nd. You'll hear from top investing experts about the current bull market, whether it can last and what it means for both advisors and investors.

Scan, please, the QR code on the screen to register or visit CNBC Events.com to learn more. Welcome back to Power Lunch. I'm Bertha Coombs with your CNBC News Update. The armorer on the set of the Western film Rust was sentenced to 18 months at a correctional facility today in the death of a cinematographer on the set. That's the maximum sentence she faced in the manslaughter case.

A jury convicted Hannah Gutierrez-Reed last month in the 2021 tragedy. The jury found she erroneously loaded a live round into Alec Baldwin's revolver, which later went off killing Helena Hutchins. The ship that hit the Francis Scott Key Bridge in Baltimore, causing it to collapse, reportedly had electrical issues, according to an unnamed source cited by the Associated Press, who said the issues were known before the ship left port that morning. That follows an NBC news report that the FBI has opened a criminal investigation into the disaster.

The State Department warning today, the U.S. will now renew a temporary license that eases sanctions on Venezuela's oil and gas sector. That license is expected to expire on Thursday. U.S. officials say the renewal won't not come until Venezuelan President Nicholas Maduro makes commitments to free and fair elections in his country this year. Kentsessa, back already. Bertha, thank you. Still ahead, geopolitical tensions on the rise following Iran's weekend air assault.

against Israel. Wall Street weighing what could happen next. We'll ask retired four-star general Barry McCaffrey for his take, including how a full-scale conflict can be avoided on Power Lunch returns. Welcome back to Power Launch, everybody. World leaders calling on Israel not to retaliate after it was attacked by hundreds of Iranian drones and missiles over the weekend. And this group includes the U.S. with President Biden telling Prime Minister Benjamin Netanyahu, he will not support a military counteroffensive on Iran. But Israel has vowed to, quote, exact a price and is still weighing its response. So what could be next in the course of this conflict? Joining us now to discuss is General Barry McCaffrey, retired four-star U.S. Army General and NBC News and MSNBC, military

analysts. General McCaffrey, welcome. Good to have you back. I guess one can take some solace in the fact that all or virtually all of the missiles, projectiles, drones were taken care of by Israel and its partners, but the fact remains that more than 300 missiles and objects were fired from one country into Israel. That's a serious change and escalation. Yeah, no question. And, you know, there's been a lot of discussion on they telegraphed, it was slow-moving. They didn't really intend to cause casualties. That's utter nonsense. This was a massive attack from one homeland to another. a complete change in the way the shadow war has been conducted. There were over 120 ballistic missiles

fired. You know, that's a 12-minute flight time from Iran to hit targets in Israel. They were after the F-35 aircraft fleet out in the Negev Desert, and they were after military targets, include some in Jerusalem. So look, the good news, you're right, is General Eric Carilla CENTCOM was able to pull together a regional defensive response. The U.S. Navy, guided missile destroyers, and aircraft played a huge role, as did apparently the Jordanians and the Saudis. So it was a magnificent defensive effort, but Israel must maintain deterrence. So, General, does it speak more to the effectiveness of the defense or to the defense or

to the, I'm searching for the word, not incompetence, but the flaws in the offensive mission. Well, I think their offense is very capable. Those ballistic missiles are very tough to hit. I think the Patriot missile system is about the only thing that effectively gets that. By the way, Israel is a tiny country, so it's much easier than, for example, in Ukraine or in Iraq to defend against it. But there's no question of my mind. This was an attempt to deal a devastating blow. The Israelis have demonstrated now to the region. They're sort of invulnerable. They've also are aware that Iran is terribly naked to an Israeli attack by F-35 stealth fighters. But right now, Israel has got to sort out how do we maintain deterrence? And it's

obviously unacceptable to have a major attack on the nation, whether it was stopped in progress or not. And in the meantime, it diverts attention away from what's happening in Gaza and some of the really serious criticism that has been aimed at Israel, including from the White House right now, about the war in Gaza. So, General, how do you see the next 24 to 72 hours playing out? Well, I'd sort of hope that the Israelis would find some way to back. back off, let some time pass, try and respond in a less publicly discernible manner. It doesn't look like they're going to do that. So I do believe that there's a strong feeling on both the Iranian part and the Israelis.

They don't want a major war. Hopefully, Hizbullah in Lebanon, the threat to Israel from the north, feels the same way. But you're quite correct. Gaza is still a festering sword. The Israelis have lost the information war. cause catastrophic damage, they've simply got to bring an end to that conflict. Most of them contests are out of Gaza now. They had 60,000 IDF troops in there, four divisions. They're probably down to five or 10,000 now. So they're actually backing out. The question is, who's next?

When the fighting stops, where's a pan-Arab peacekeeping force that will be in receivership of Gaza? None of this is on the table. General, you mentioned at the beginning that and Tyler as well, that there's been a change in this war by proxy. I'm just curious. Can Iran and Israel go back to those sort of covert operations that were still aimed at each other, but in ways that, you know, could be excused? By the way, Israel has not claimed responsibility for what happened on April 1st in Syria with Iran's general there. And does Israel need the United States to keep backing up whatever it does next? How crucial is the U.S. to Israel's next move?

Well, probably the next move, not much. But at the end of the day, Israel simply cannot, in a strategic sense, lose to support the United States. And there's been a growing, obvious public diplomacy rift between Netanyahu and President Biden and his senior people. They've got to repair that. They cannot ignore the United States. In the long run, they can't survive without our backing. By the way, I think, Kedeshi raised another point, that strike against, that killed 12 Kuds Force officers, including two generals.

In retrospect, they should understand was a big mistake. I mean, you can kill a general and replace them in 30 minutes. So it was a huge provocative move that wouldn't necessarily change the shadow war. They invited a response. I think everyone was astonished at the scale of the Iranian response. I would have expected them to go after one Israeli embassy. And don't you think? It's out of time.

Well, General, I'm just, the other thing is Iran, I'm sure, anticipated that many of its missiles and its drones would be shot down. Do you think that there was any calculation it would be that many, that it would be like, you know, only 1% successful? No, I think all of us have been assured that the multi-layered defensive system in Israel is the world's best. And it's also a small target area. It's easier to do.

But having said that, it was really a triumphant reaction, including in the U.S. Navy, I might add, and U.S. aird-air fighters. But Israel can't live with that possibility. You know, I've been under a lot of 122 millimeter rocket fire. Giant warhead didn't get killed. And still, I was concerned enough to know they were trying to kill me. So the Israelis simply have to respond in some fashion and reestablished deterrence. That's probably best done by back channel diplomacy, not off the front lawn of the White House.

Yeah. General, I think until we all know what that response will be, it leaves the threat of something catastrophic still out there. General Barry McCaffrey, it's good to see you, sir. Thank you for your time. Coming up, the not-so-magnificent seven, both Tesla and Apple, two of those so-called MagS7 names, turning from Darling, just to dogs, each in the red for 2024, will compare each of the stock struggles when we return. Welcome back. We started the year with the Magnificent Seven leading the markets, but shares of Tesla and Apple have continued to struggle both in the red on the year. Deirdre Bosa joins us for today's tech check with a look at why Deirdre, why it's not only the stock. stock declines that have those tech darlings seeing some common ground. Yeah, Contessa, there's fundamental parallels as well.

Now, the big glaring one, it is China, competition, sewing sales. That's hurting both Tesla and Apple, and it's being reflected in their stock prices. For Tesla, it's Neo-X-Pung, B-Y-D, among others. Today's layoffs, they're in response to that, following sales and price wars. The share decline today suggests also that Wall Street is seeing layoffs, as a response to shrinking business rather than a positive push for efficiency that has helped other mega caps when they've announced sort of similar measures. Meanwhile, you've also got new numbers from IDC this morning showing that Apple's global market share of smartphones is giving up ground to Chinese players like Shaan. Okay, well, it seems like we've lost Deirdre's audio, but there you're seeing how the other technologies have taken some ground from Apple.

And so we'll see if we can get her back in the meantime. Yeah. Sometimes these things, it's still the power of television. It happens. It happens sometimes. All right. Speaking to the magnificent seven, our three. Oh, she's back. She's back. She's back. She's back. Cut the music. Let's go back to Deerevon. Forget three stock lunch. We'll get that at later. Let's go back to Dee. As you were saying. I'm back. That was strange. Okay. Well, it's exciting. I told you the first parallel. Let me tell you the other. They both have major products. We're talking about Apple and Tesla.

and sort of these increasing parallels that we've seen between the two of them. Remember, in recent weeks, we've got news, reported news that both of them are pushing back major projects. For Tesla, it's its lower-end mass model for Apple. It's the EV car that it was working on. Of course, these are reports. Musk has denied that it's not going to do that mass market car. And Apple gave us a no comment.

But here's the important thing, guys, okay? No shot going out here. Both companies have set high expectations going forward, what they could reveal later this year. Apple's chance. That's going to come first, June 10th, with WWDC. AI is going to take center stage there. The stakes are high. And then you've got Tesla's catalyst.

It could be its event in August when it's going to talk about the RoboTaxi Reveal, guys. But the point is that no longer we don't have the Magnificent 7, we don't have the Fab 4. We've got the fantastic 5 because Google's back and Tesla and Apple they're out. We're keeping name

makers in business, right? Coming up with the, what's today's It's all about the branding. This one ties to the Marvel universe, right? The Fantastic Five. I had to think about that for a second. But we're going into Marvel with this one. But how big a problem is it for Apple to be losing ground?

And what could be the catalyst, Deirdre, there about turning that tide? So turning the tide, a lot of investors and analysts have said that they just don't know what Apple's AI strategy is. In Silicon Valley, there's a few people who doubt that. Apple is working on something and going to present their own strategy that may be different, that may involve something like edge computing, which is kind of having AI right on your phone. And so that is really the catalyst that everyone's looking at, that WWDC event, which Apple has teased, that it's going to be about AI in some way. Is it going to be enough?

That's the next catalyst. All right, Deiter, thank you very much. Deirdre Bosa, reporting. Speaking of the magnificent 7 or the Fab 5 or whatever it is, our three-stock lunch, Trader still loves one of those stocks will reveal the name when Power Lunch comes right back. All right, time now for today's three stock lunch. We asked our trader to give us three names to buy or steer clear of. And here with the trades is Quint Taitro, founder and president of Jule Financial. Up first, Quint is Alphabet, up nearly 500 percent in the past 10 years. This is one you have on your buy list. Tell us why.

Yeah, thanks for having me, Tyler. It's great to be back. So the long-awaited pullback might be upon us, finally. right? And there's a lot of stocks out there. I think people need to be putting on their list. Google should be at the top. This is a stock that is trading 20 times forward. Those earnings are set to grow at 15%. So it's not a cheap stock. However, we don't think the AI story is truly baked in here. And the news that Apple's set to possibly bring Gemini onto the iPhone is huge. And it also alleviates the concern regarding the search function within iPhone, in our opinion. Technically speaking, however, the stock is breaking out to all-time highs, catching up. with some of those other magnificent seven and blue sky territory from here. Teflon balance sheet, almost no debt, $52 billion in cash. So this pullback that we're seeing in the market in this stock, this is a buy in our opinion. Okay, next up, Disney. This stock is up nearly 30% this year after bottoming out at 60% off its all-time high last year. So Quint you say this one you also like and would buy, why? Hi, Contessa. Yeah, Disney's our turnaround play, despite the run-up off the

lows. It's still got a long, long way to go towards highs. But this is a value play, trading 20 times forward. And this year, those earnings are set to grow 25%. They've got $7 billion in cash, a decent balance sheet, you know, about 0.4, I think, debt to equity. We like the investment in Epic games in Fortnite. We like that play. We also think the Parx, the rebound in the parks have staying power. And the win here, the proxy win recently against the activist pelts, that, in our shows a lot of focus on the side of the board and shareholders. And we think that they've really righted the ship. This is a, this is a name we like. Great American company getting a pullback here in this recent tape is another buy in our in our wheelhouse.

All right. Let's move on to Salesforce, which you say stay away from. Stock on the decline today after reports the company is in talks to acquire informatica. This one is in the cell column. Why? Now, Tyler, I'm going to say I've been notoriously wrong. on Salesforce. So, you know, this is a tough one because I continue to say it's a sell and the stock continues to go higher. But I've just not been a fan here. I mean, this stock is trading 20 times forward earnings, 25 times forward earnings. Those earnings are set to grow at 19% this year and declined to 14% next year, a rich stock. I've still been a little stung since the Slack acquisition

a couple of years ago, the real rich premium they paid for this. And so the informatics, acquisition, it just doesn't excite me. I think the acquisition strategy on the part of the company, I think, is yet to be determined if that's going to be successful here or not. So it's had a huge run off the lows. And if you've been in this name, I would take this opportunity. Despite today's weakness, I would still be a seller of this name. Yeah, look at that down 7% though on the day. All right, Quint, Taitro, thank you so much for your perspective. Remember, you can always hear us on our podcast. Be sure to download and listen to Power Lunch on your favorite, streaming service. We'll be right back.

Welcome back to Power Lunch, everybody. The WNBA draft is tonight, and you know who is guaranteed to be the number one pick. Oh, but Caitlin Clark, the draft pick goes to the Indiana fever next door to Iowa. Clark bringing a lot of interest to the WNBA. Actually, I don't think it is next door to Iowa. I think there's Illinois is in there in between. And coming up Thursday, we're going to talk to WNBA Commissioner Kathy Englebird from our CNBC chains, event in New York City, she will appear along with Drew Barrymore and others to learn more. Once again, get out your phones. Scan that QR code or visit CNBC Events.com slash changemakers to see that lineup and more. MGM Resorts is suing the Federal Trade Commission over the agency's investigation into the massive cyber intrusion

the disrupted business at the casino last fall across the company. MGM argues that the FTC is violating its right to do process. and specifically that chair Lena Kahn should recuse herself. She reportedly was caught up in the meltdown when she was trying to check in in Las Vegas. MGM argues that she's a potential plaintiff and a potential witness, and MGM says it's already defending itself in 15 consumer class action suits. It previously estimated the total economic damage from that intrusion to be about $100 million, though the company expects much of that to be covered by insurance.

The FTC has gotten back to CNBC and it says it doesn't have a comment on it. And I have reached out to MGM for comment as well. But clearly, this is a big deal. Yeah, that's a bit. What a strange, tangled web we weave. You just happened to be there checking in. And apparently did not take kindly, according to published reports, about being asked to write down her credit card number in the moment because the systems were down

and they were trying to head off this real threat. Wow. Amazing. Good to be with you. Thank you. Nice to be here. Good to have you all with us. Stocks near session lows.

The Dow down 226 points right now.