Power Lunch - Hot Summer Rally, Truck Stop 7/31/23

Episode Date: July 31, 2023

The only thing hotter than the weather in July has been the stock market. The Dow has only had 4 down days this month. Can the red hot summer rally continue into August and beyond? We’ll explore. Plus, trucking company Yellow has shut down operations and filed for bankruptcy. With a key player out of the game, are shipping costs going to rise? We’ll look at the inflationary pressure this could cause. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hey, everybody. Welcome to Power Lunch. Last Day of July alongside Kelly Evan. She's back. I'm Tyler Matheson coming up. The only thing hotter than the weather in July has been the stock market. The Dow has had only four down days this month, only one in the past three weeks. So can this red hot rally continue into August and maybe beyond? Plus, the trucking company, yellow. Nothing to do with the cold play song. Shuts down operations, files for bankruptcy. With one player out of the game, are shipping costs going to rise? Guys, we're going to take a look at the inflationary pressure, Kelly. This could cause. Looking forward to it. Hi, everyone. First, let's get a check on the markets as we wrap up a good month. Overall, the major average is up between 3 and 4%. Dow hanging on to a 24 point gain today.

NASDAQ has gotten back into positive territory by 6. S&P down about a point. And Johnson & Johnson is actually a head win for the Dow today. It could be headed for its worst day in more than three years with this 4% decline. A judge blocked the company's attempt to use that Chapter 11's bankruptcy protection for its company unit to deal with lawsuits related to the tel-based baby powder. This has been going on for a while. Again, a setback for investors there today. Meanwhile, shares of Adobe are rising as Morgan Stanley's upgrading the stock on AI potential. Salesforce is

falling about a fraction of a percent there on a downgrade. We'll talk to the analyst shortly behind both of these calls. And check out Shark Ninja. Make appliances, including the Ninja Foodie, trading as a standalone company today following its spinoff from the parent. 30% from the list price at just under $39 a share, Tyler. All right. Now the question on everybody's mind on Wall Street. Can the markets possibly keep this up, not just Wall Street? Of course, Main Street as well.

Even though the gains are not huge on a percentage basis, the Dow has been higher practically every day now for three weeks. Let's get to Bob Bizani for a look at the market as we head into August. Seven months down, Bob five to go. That's right. And we're up 19%. And this has been some remarkable momentum. Let me just show you some stats on what we've been seeing in the last few weeks here.

There's been no down 1% day for two months. That is very unusual in the S&P 500. We're going to close higher, unless we have some disaster in the last couple hours, five straight months. Also extremely unusual. And July, the big story is the rally is broadening out. It's not just tech stocks. In fact, tech are lagging. We're seeing energy stocks, material stocks, industrial stocks, industrial stocks, bank stocks, bank stocks, all rallying.

That's the rally broadening out all 11 sectors of the SEP. up in the month of July. What's driving things? Number one, the triumph of the soft landing. What's the soft landing? It's three things. Lower inflation, slower, but still strong jobs growth and rates stabilizing. The other major driver here is earnings are stabilizing. Earnings estimates were dropping in the first half of the year. They're not anymore. In fact, the trough is going to be the second quarter, or that's the hope for the Bulls. After that, we start going up in the third, fourth, and into 2024, double-digit growth expected in 2024 for earnings. So we've seen prices up and earnings not really going up much.

That means the PE ratio has been expanding. We're pushing the limits of that. So the final five months, what do we expect here? Well, the market is really expecting this soft land, and we better get the data to support that. Earnings, we need a U-shaped recovery in earnings. We need them to start ramping up rather notably, particularly starting in the fourth quarter.

Rates, that's going to be of issue remaining stable. And Tyler, I had one thing to comment on. Watch the jobs report later this week. If we're expecting in the area of 200,000, it's been a slow, gentle move down. If we get a huge up number, I mean 300,000, for example, we're going to see some problems. You'll see rates moving up again, and that's going to be an issue for the market. Every time, Tyler, we went over 4% on the 10-year in the last few months. It's been a problem for stocks.

There's the weak spot in the market. Tyler? All right, Bob, stay right there as we continue the conversation into what will drive stocks for the remainder of the year. We want to bring in Peter Anderson, Chief Investment Officer at Anderson Capital Manager. Peter, welcome. Good to have you with us. Okay, you heard what Bob just said. Stocks good, consumer good. Economy, fewer recession worries today than there were six months or a year ago. Inflation coming down. Looks like last innings of the rate hike regime here. So why is Peter Anderson raising cash to the highest level in a decade or so? Well, first off, I agree with all the points you mentioned. So I remain an optimist. So this is going to sound a little.

bit contradictory, but I do think we have to get a little bit sober that only four of the 11 rate hikes are a year old, Tyler. So that's about two and a quarter percent rate hikes that we're seeing impacting the economy. We still have three percent to play to work itself through. So I'm a little bit hesitant to see if the Fed has done such a great job that this soft landing will actually happen. I do put a high probability on it, but I'm just a little bit cautious as we go into the second half of the year. But you've been in the no recession camp for a long time. You're not changing your tune here, are you? Not at all. The main reason is, and thank you for crediting that to me, because I have been in the no recession camp for over a year on this program. And I'm glad I've been in that position because as we see, I think that's actually going to happen.

However, artificial intelligence, you know, names like NVIDIA, which has been my top holding, it got to be almost 20% of the portfolio. So I don't like to take that much risk on that kind of one single name. So I've halfed that position just because it is so dominant right now in the world of artificial intelligence. And if we make, if the company makes any little mistake, you know, there is a vulnerability there. So the main reason is I love artificial intelligence. I think I'm very optimistic about it. But let's take a little speed off the ball and say it's not going to be the cure-all for the rest of society.

I want to sneak in one more question before I bring Kelly into the conversation here. I take your point that maybe only 2.5% of the interest rate hikes are 12 months old, have reached the yearling stage or older, and that interest rate hikes do affect the economy at, some lag. But a lot of the effects of interest rate hikes are pretty doggone immediate. Mortgage rates go up when rates go up. Credit lines go up when rates go up. Auto loans go up immediately when rates go up. And so the effects on those fronts are not at a lag. They're pretty doggone immediate, aren't they? They are. But I think on a secondary level, on a more

subtle level, you start to see things like yellow, the truck company, banks fail. There is a lag in like the secondary effects. And I think that's what we worry about is, has everything been demonstrated to respond to these rate hikes. And history will show you that it does usually take about a year to be fully complete. And remember, we're not even halfway through in terms of. of the amount of percentages, there's still 3% of hikes. That need to hit that year point, that year.

Yes, that are less than a year old. So I'm hoping the Fed is looking at this. I think what everybody's thinking is, okay, we're almost there. We still have more rate hikes to season, so to speak. So we're hoping that the Fed is seeing it that way, too. And maybe this last meeting they had was the last of the hikes. Peter, you mentioned NVIDIA, which is, of course, you know, probably one of the best known names in investing, she said. But I'm looking at your favorite stocks now. Schrodinger, Super Micro, Shockwave, Medical.

I mean, these are a lot different. What attracts you to these? And do you think they could have NVIDIA-like returns? Well, yes, Kelly. And even though that is wonderful that you observe that they're different from NVIDIA, because in reality, they actually support all of artificial intelligence. So super micro computer for instance actually works almost hand in hand with NVIDIA to implement their designs to clients. So it's very much connected with artificial intelligence.

Schrodinger is a drug discovery company that is using artificial intelligence to streamline the drug discovery process. It normally takes about five years to test compounds. With artificial intelligence and with other quantitative processes, they've reduced that to two and a half. half years and shockwave medical probably will say it uses artificial intelligence, but as of now, it doesn't. It's just a simple medical procedure that uses a mechanical process to reduce calcium deposits and arteries. Bob, you get the last word here. You've listened to the conversation.

What are your reactions, thoughts as we now head into the last five months of the year? I like to think of the markets in terms of the pain trade. What would cause the greatest discomfort to the greatest number of people? Earlier in the year, the pain trade was the market was going to be going up because no one was in the soft landing camp. Everyone was in the recession camp. Rates were going to go through the roof. The inflation was going to be high. That proved to be true.

Now the pain trade is actually the opposite. The pain trade is the market actually goes down because everyone's positioned on the soft landing side. What could sour that whole game? Well, rates going up. The economy is so strong the Fed has to continue to push on interest rates and try to keep the economy down. Not many people are positioned like that.

That's what I would watch out for in August and September. All right, Peter Anderson, Bob Bazani. Thanks very much. We appreciate it. You're welcome. Let's get to Steve Leasman now for the senior loan officer. Survey the sluice. Steve, how's it sluising? Not so great, Kelly.

Banks and Gann are tightening their standards. We're tightening them for commercial loans and for consumer loans. This is the concern that was out there, has been out there for a long time about, especially in the wake of the Silicon Valley Bank and other failures that were out there. Banks indeed are tightening their credit standards. And one of the ways they're doing that is they're increasing the spread of their loans over the cost of their funds. That's, I guess, good for bank earnings, not necessarily good for consumers, borrowers, or the economy overall. They are reporting reduced demand for commercial industrial loans.

Also, not much demand for commercial real estate loans. And demand for residential mortgages remains weak. hard to sort of project this forward into how big or bad a thing this is for the U.S. economy. If you look at a long-term trend, we're up near the areas where there would be commensurate with a recession, these kind of tight credit standards. But, of course, we are registering and have registered relatively strong growth in the past quarter. This is covering the second quarter. And last week, they reported GDP growth of 2.4%.

So at least this time, Kelly, or not yet, corresponding with the recession. Yeah. I mean, I still think it's, Steve, if you took this by itself as the only data point, and it's an important one, it predicts, you know, default rates on high yield and how the economy, and in and of itself, you'd say, well, you know, a little more worrisome than, uh, than maybe the forecasters we discussed earlier are expecting. It could be. And the notion of your last guess that they're still tightening in train for the economy. What was the concept that they're not necessarily, uh, uh, uh, yearlings yet, that there is something. to come that is possible. I do like the idea. I do note the idea that these spreads are over their cost of funds or have been increasing. It means there's room for them to come down over time if we remove some of the uncertainty over the economy. All right, Steve, thank you very much. Steve Leesman reporting on the Sleuze report. All right, shares of Tupperware up another 30% today, soaring 400% in July. But the market cap is still small, just around.

$200 million, really tiny. Kate Rooney joins us now with more on how Tupperware, Tupperware, became the latest meme stock, Kate. Hey, Tyler, yes, that Tupperware, it's looking like the latest meme stock. You remember those, those wildly popular on social media. They tend to be struggling core businesses, and they're usually the target of short sellers. You wouldn't know it by looking at that chart, but Tupperware has had a pretty tough year. It's got a heavy debt load, could have problems meeting those payments. The company's falling market cap may get it delisted from the New York Stock Exchange. Their preliminary results back in March showed an 18% drop in sales. But there was news that BlackRock

was stepping in as an investment partner likely to help reduce its debt. We reached out to BlackRock, no comment, but a big name like that getting involved, even if it is just a headline can often light a fuse on some of these highly shorted names. That litany of bad news is a natural draw for short sellers and those betting that the stock is going down. So 27, of outstanding shares are sold short right now. That's roughly four times, almost five times, the average stock. But that's part of the fun for some of the momentum chasing meme stock investors who might hope right now to really spark a short squeeze.

That's where the traders who bet the stock would go down or forced to then buy it back, cover their positions. The stock then shoots up. And Tupperware, guys, is not the only meme stock doing relevant right now. The meme ETF is up 18% or so this month. Best month since January, while Tupperware is not in that particular fund. You've got names in there like Carvana and Coinbase, but these stocks do tend to be incredibly volatile prone to some of these large swings. So buyer beware on Tupperware.

Fascinating. Just to jump in here, Kate, you know, you would have thought with all the liquidity, you know, what does it just tell us about the, I don't know whether it's psychological or it's the liquidity? It's just amazing to see this kind of renaissance and a trend that we thought was so over, you know, years ago. It could speak to some of the risk appetite, Kelly, returning to the market. You've seen the same phenomenon playing out with cryptocurrencies, actually. Some of the alt coins are the smaller, more speculative segment of that market also spiking. So it does speak to some of the risk appetite. Some have called this gambling. So it's a small subset of the market. It is sort of subjective on what makes a meme stock. You tend to see a lot of mentions on social media. If anything,

I think it speaks to the risk appetite. Some people feel like. more confident chasing momentum here, but very small market cap, really a momentum name. And we've seen it with GameStop and AMC. The stocks tend to go shooting up. You see these short squeezes, but also crash down. So it's one of those you really got to be careful. And the fundamentals, like I laid out, really do not suggest that this might be a long-term investment. It seems like it's a lot of momentum chasing here. Yeah. Kate, thank you. Kate Rooney reporting. We appreciate it. Coming up, a trucking company hits the road. Yellow filing for bankruptcy, shutting down operations, a huge amount of layoffs. What this latest supply chain snag could mean for the supply chain and inflation.

And Ron DeSantis trailing former President Trump in the polls and by quite a margin, another area he's also lacking behind in could be of even greater concern. We have the latest fundraising numbers when Power Lunch returns. Welcome back to Power Lunch. A tentative labor deal has been reached in the ongoing Canadian port negotiations that followed. as UPS striking a deal with the Teamsters to avoid a strike last week. But this weekend, cash strap trucking company Yellow shut down operations and is filing for bankruptcy. 30,000 jobs could be affected. What impact will it have on the supply chain more broadly? And on shipping prices, Tom Nightingale is CEO of AFS Logistics.

It's a privately held firm that manages $11 billion of freight sped annually. And Tom, it's good to have you here with us to break this down today. Welcome. Thank you. Pleasure to be here. What's the immediate effect you think of yellow, shutting down? Well, thankfully, the industry's had some time to prepare for it because it's been coming for a while. So a lot of that freight has been absorbed into other systems. And the less than

truckload sector, which is where yellow participates, has been one of the smaller sectors historically. So the overall supply chain will be fine. However, there obviously will be near-term impacts, particularly in the pricing and matching supply and demand in the less than truckload sector. Right, although I'm not sure we should jump to the conclusion that will suddenly be short on trucking supply. My understanding was during the pandemic when demand and prices absolutely soared, you had a ton of new entrance. Yellow was financially vulnerable from the debt load over the years, a bunch of different kind of expansions that tried to go on. It was ailing even before the taxpayer loan to get through COVID. The taxpayer still owned 30% of this company now, which I presume is worthless. So are we

still in the situation of having a glut and freight capacity? Yeah, and that's a relatively recent turn. Obviously, during the pandemic, people were cooped up at home and purchasing quite a bit. So the supply and demand situation was very different during the pandemic, but certainly when it turned, more recently, yellow and that debt load that you mentioned really came to bear the burden of that, unfortunately. So you lose a competitor in the space, not necessarily. an unexpected loss.

But that means there's one less competitor that would suggest that prices might go up a little bit among those remaining competitors. Who's going to be most affected if there are price increases? And then do those price increases get passed along, say, to the consumer who is buying goods from, let's say, Dollar General or whomever is using these companies? Yeah, it's a great question, Tyler. the reality is that the competitors out there are relatively concentrated. So across the entire less than truckload sector, you're really only looking at about 80 competitors and really only about 20 of any significance. Certain competitors will benefit more because their freight networks tend to align and their value proposition tends to align a little bit better.

Those competitors would be XPO, transforce or T-Force, and ABF, 4. freight should benefit the most from this situation. There are, however, others that on a regional basis will benefit because Yellow had a fairly substantial regional business. And those are not necessarily the household names and certainly not the publicly traded names that we would come to know from watching your shows. Can I pivot you now to UPS? And there, I think, if I'm reading my notes correctly, you think there will be price increases because there's no other way that UPS can really pass along the extra cost or cut costs sufficiently to blunt the impact of the labor deal they made last week. Yeah, that's correct. The UPS network has been very officially run for a very

long time. And what we saw in the tentative labor agreement that was reached last week is a fairly astronomical wage increase. And a wage increase of that magnitude, when wages and benefits occupy as much of UPS's cost to serve as they do, have to be passed along or compensated for. And passing them along really equates to a broad-based increase in prices, both for shippers and for us as consumers. Yeah, they were downgraded at Credit Suisse today as well, saying the financial impact is going be an immediate dilution, whatever you call it, hit to earning. So everyone's taking notice

here across the industry and the analysts on Wall Street as well. Tom, thanks for your time today. My pleasure. Thanks for having me. Tom Nightingale with AFS. All right. Ahead on the broadcast, Hasbro's Magic Moment, one of the best performers on the S&P after Bank of America upgraded the shares to a buy, bullish on demand for magic sets. We'll trade Hasbro and other calls of the day in three-stock lunch. We'll be right back. Welcome back. Crude oil has suddenly made a pretty big, I noticed $81 per barrel. Even while you're on vacation, you're watching. The nerve that it happened while I wasn't here. It's up 15% in January, Pippa Stevens.

Tell us what's going on. Yeah, 15% in July for the best months since January of 2022, today hitting the highest level since April. And it really does feel like in the last month, there has been this turn in the oil market where there is now some optimism that we will finally start to see that. tightening in the second half of the year. We had the output cuts from Saudi Arabia and Russia. We have the end to the destocking that we'd seen given the higher cost of keeping oil on hand. And then we also have just optimism around China having more stimulus measures to jumpstart their economy. Now within this backdrop, I do want to take a look at S&P energy earnings because they have, of course, been well below their high watermark from the second quarter of last year

when oil was comfortably above that $100 level. But things are still looking pretty good. As you can see on this graphic from FACSED, their earnings are right around their 2021 and into 2022 levels and well below their pre-well above, I should say, their pre-pandemic levels. And so maybe, you know, maybe this will be what re-engages investors in the space and calls them back to the energy sector. Yeah. Very interesting. And demand, maybe China, maybe issues having to do with the war in Ukraine could, could, and as we

going to winter, we got off easy last winter, right? Wasn't that cold in Europe or in the U.S.? Exactly. And it's not just winter. One thing to watch coming up is hurricane season and any refinery outages. The national average is now at an eight-month high at 375 per AAA. And so, you know, as we enter that difficult hurricane season, if any of the refiners are knocked offline, we could see prices reflected much sooner than next winter. Very cool. Pippa, thanks. Great to have you with us. Let's get to Contessa Brewer now for a CNBC News update. Contessa. Hello there, Tyler. The State Department is now urging Americans to stay away from Haiti after a

humanitarian organization reported an American nurse and her child were kidnapped there. A State Department spokesperson says U.S. officials are aware of these reports. Days after it issued the highest possible travel alert and evacuated embassy staff. The Haiti nonprofit says Alex Dorsanville and her young daughter were taken from their campus near the country's capital last Thursday. Details of the abduction are still unclear. Churchill Downs is making changes following the deaths of 12 horses before and after the running of the Kentucky Derby,

the iconic venue will implement new safety measures that include new track surface maintenance equipment and additional monitoring and careful horses running there all before racing resumes in the fall. And the US Air Force struck a $142 million deal with Archer Aviation to purchase six of its electric midnight aircraft. The Air Taxi Company says the aircraft has a range of 100 miles and can carry four passengers and a pilot, Tyler,

And Kelly, this is all, of course, that vertical airlift that is so innovative in this particular industry. And I would think they would use that to maybe insert people into hostile areas quietly. I mean, it's a small, it only has four people capacity, right? Yeah, and so then you don't need the infrastructure of an airport with a runway and all of that, that it can take off and land, you know, in some ways like a helicopter does. All right, Contessa, thank you very much. ahead on Power Lunch, we are setting the table for a deluxe, a deluxe three-stock lunch. We will give you the trades on some bold calls of the day when Power Lunch comes back after this.

Welcome back, everybody. Time for Three Stock Lunch, Deluxe Edition. Three key stock stories on our radar. Our team of reporters will give us the news and the moves, and then our trader Danielle Shea of simpler trading will give us the trades from her perspective. Let's start, Why Not, with G. Sima Modi here with the story. Hi, Sima. Tyler and Kelly, General Electric Story has. has been heavily tied to the outperformance, right?

It's been seeing in the aerospace business. But the progress that it is making and turning around its renewable energy division got the attention of Wall Street analysts following the Industrial Giants report last week. RBC Capital sees strong operation momentum being sustained ahead of the spinoff slated for early 2024. It's a business that has struggled for years. But CEO Larry Culpe telling me, GE will see its onshore wind and grid business turn a profit in the second half of this. this year. I guess the downside risk may just be valuation. The stock is up 72% year-to-date on pace for its seventh monthly gain in a row, rivaling the gains of big tech stocks like Google

and Apple. Another risk analyst say, Tyler, is the weakening that we're seeing in China. All right. Thank you. Seema. Let's go to Danielle now. What do you think of GE? So when you look at GE, I love the performance this year. I think that the trend in the short term is bullish and that looks great, especially if you're already on. for this ride. However, it does make it challenging, especially if you want to come in and make a long-term buy here because of the move that it's already had. So when I'm looking at this stock, I would prefer a pullback into about 110 or so. That would give you a much better entry with an edge, especially if you're trying to place some short-term trades along with this trend. So I think,

you know, wait for a pullback after this breakway gap, see if you can get a better entry and trade it up into about 120 or so. All right. Let's move on to Ford then. Downgraded, to hold by Jeffries today. Lags behind rivals in the EV space. Let's turn to our Phil Leboe. How low is the bar here, Phil? You mean how low can the stock go? Is that what you're asking? Well, maybe has expectations for earnings come down somewhat. They have. Oh, absolutely. And we'll show you in a little bit how much the analyst estimates, they've brought in their estimates for the second half of this year. Look, when you're talking about this downgrade from Jeffries, it's a couple of things. One, they cut it to hold, and they've also

lowered the price target from $17 to $15. So you're not seeing a huge difference in the price target, but it's the fact that they're going to be spending more, and it's going to be a slower ramp when it comes to their EV business. How much more are they spending? Their guidance for how much they're going to spend on EVs this year has gone up $1.5 billion in just three months. It's now expected to be over, what, $4.5 billion for the entire year. And that's much greater than they were spending last year. Bottom line is this. Their EV development is coming along at a slower pace. Look, they're knocking it out of the park when it comes to internal combustion engine vehicles, as well as to their commercial vehicle division, gangbusters. There's no argument about how great those businesses are. The EV business, not living up to expectations nor the guidance that they gave not too long ago. And that's why you see a number of analysts much more cautious on Ford. Danielle, what's the trade on Ford as far as you're concerned?

So when you're looking at Ford, I completely agree as it relates to the EV business. and I do think that's why we're seeing it come down. I don't like the way that it's traded lower post earnings. Typically, that's not a very positive sign. I think that right here, you can look for it to stick around this level, perhaps trade down into about the $11 price point, where we have a pretty key area of support. I think in this zone, especially with ongoing economic circumstances,

we can look for forward to trade sideways. However, in the long term, as long as it can hold $11 a share, I think we're still going to see this stock trade higher. I think that the deal that they made with Tesla surrounding the charging standard is very positive for Ford. And I think ultimately this company will start to rise again when the economy improves. All right. There you go. Ford looked a little stuck in the mud on that chart, but we'll see.

Finally, let's go to Hasbro. The Toymaker up about 3.5% upgrade. Bank of America, B of A, saying Hasbro should beat expectations for earnings when it reports on Thursday. High hopes for Hasbro's new magic, the gathering. cards. Let's bring in Dom Chu on this one. Everybody's paying attention to Mattel these days with Barbie, but Hasbro. Oh, absolutely. So if you take a look at the overall picture, Magic the Gathering represents, and I was shocked to hear about this, it is 15% of Hasbro's total revenue and 35% of their pre-tax operating profit. Magic the Gathering. I wish I thought was a thing in 1995. Cards. Cards.

role playing game cards. Now, the reason why you have this is because there is a change in sentiment, say the analyst over at B of A, around this Magic the Gathering franchise. A lot of it has to do with this Lord of the Rings co-branding franchise that they have with Magic the Gathering. So you have Lord of the Rings cards, right, to play with Magic the Gathering. They've already got a co-branded one with Doctor Who in that movie franchise and show franchise. So there is a kind of renewed sentiment around this whole Magic the Gathering franchise.

And by the way, if you tack on that with some of the more bullish Hollywood stuff that's going on right now, writers strike and actors strike aside. Transformers Rise of the Beasts, Spider-Man into the Spider-Verse have done pretty well at the box office. They could propel toy sales tied to those franchises as well. So role-playing card games, better box office for certain franchises tied to Hasbro toys, and you have yourself a bullish thesis. So we're getting our geek and our nerd on. And that's the reason why B of A likes Magic the Gathering in Hasbro.

All righty, Daniel, what do you think? Get your geek on and your nerd. So when you look at Hasbro, I think there's several reasons to be cautiously optimistic. I like the way that it's gapped higher the last three quarters post earnings. However, I will note that this quarter, we've seen many companies beat EPS estimates and fall lower. So I would keep that in mind. But when you look at the shorter term trend, we're in a shorter term up trend. we have some consolidation and we have a market maker expected move of a little bit over $4.

When I look at the stock, I have key resistance between 66 and 69. So I think with a bullish move post earnings, if we could break through the resistance, the stock could continue its up trend. But just keep in mind, there is resistance at that zone. So if it fails, I would have a stop below 62. All right. Very interesting. Danielle, thank you for your insights today.

We appreciate it. Thank you. Danielle Shea. I was going to ask if our kids played Magic together. I think, you know, maybe the older one. Anyway, coming up, better late than never. Morgan Stanley upgrading shares of Adobe to overweight, saying it's in line for a big boost from AI,

despite being a little late to the party. We will speak to the analyst behind the call. Adobe shares up 3%. That's when Power Lunch comes right back. Welcome back to Power Lunch. In today's Tech Check, two big calls we want to highlight. Adobe upgraded to overweight. Salesforce hit with the downgrade to equal.

and they're both by Morgan Stanley. Keith Weiss is the analyst behind those calls. He is joining us now. Keith, welcome. We appreciate your time. Thank you for having me. Which one are you more excited about? I'm always more excited about the upgrades than the downgrades. Very excited about Adobe in what we're seeing there,

in terms of their innovation around generative AI. We think there's going to be a lot more product coming from the company, selling that product into an installed base where you can improve the productivity of the that installed base. And if they capture just 2% of that productivity gain, that's our value capture framework, we think that could add $2 billion in revenues to the stock in their FY25. That's a pretty exciting forecast way above what consensus is looking for, about 7% above what consensus is looking for right now, and something that could actually accelerate the overall revenue growth at Adobe. All of that's pretty exciting. Sure. And then maybe the one, you know, less fun to talk

about, but maybe a reality check for Salesforce. What do you see going on there? Yeah, when it comes to Salesforce, I mean, we like the company longer term, but at this point, with the stock up over 70% on a year-to-date basis, what investors really want to see is evidence that they can participate, evidence that their revenue growth has a potential of accelerating as well. The problem that we see with Salesforce is really their business model. They have what we call like a large subscription model of where they have three, five-year contracts, annual invoicing, So even when they do get the generative AI product into the marketplace, it's going to take a really long time to see that in their results. Compare that to Adobe.

We measure Adobe on something called ARR, annual recurring revenues. As soon as subscribers start signing on, we're going to see that in ARR, and it's going to let investors get more excited about Adobe sooner. Let's go back to Adobe and just get you to walk me through, if you don't mind, where Adobe would fit in this new AI universe. In other words, what will it either help me do or what will AI help it do better? Yeah. So when it comes to Adobe, it really comes down to, it's less so you or I, it's more so the creative professionals.

The men and women out there who are creating content for our websites, for advertising campaigns, for emails, and what Adobe has is a solution they're calling Firefly. It's a generative AI model that enables you to actually create new content. vis-a-vis text prompts. And this is going to be a major productivity enhancer for these creative professionals. It's going to let them start with a much more robust

starting image along with what they're trying to kind of put out there, whether it's the advertisement, whether it's the email or the Facebook campaign or whatnot. It just gives them a head start. And we think it could add 20 to 30 percent to the productivity of these creative professionals. Very interesting. So it will enable those creative professionals to do what they do, but do it better, more efficiently, quicker, more creatively. Exactly, exactly.

Like, it is a simple example. Say, I'm a bakery and I want to do a advertising campaign around some new cupcakes that I'm coming out with. Rather than having to outsource to a photographer or try to find some stock images, now I could go into their firefly and say, hey, listen, I want a photograph of a cupcake that has Christmas trees on top because it's the holiday season. and the firefly, the generative AI behind it, is going to show me multiple choices. And it's all licensed.

That was their point earlier. It said, we'll cover any legal costs you incur because we license this content from Getty and it's not just scraped off the internet. It's a very fast... Oh, no, no. They license it from themselves. From themselves. I'm sorry.

Thank you. Yeah. So that's a real differentiator is because they can indemnify their end customer. They could tell their customer, we know the source of all these images. You don't have to worry about those lawsuits. over time, which for large companies is very important. Absolutely. Keith, thanks so much. We appreciate it today. Excellent. Thank you for having me on. All righty. Coming up, poll position, former President Trump now holding a 37 point advantage over

second place Florida Governor Ron DeSantis in the Republican race, according to the latest 2024 GOP polls. And it is apparently much the same when it comes to fundraising. We'll get the latest figures when power lunch continue. Welcome back to Power Lunch. Donald Trump is continuing to lead the polls in the race for the 2024 Republican nominee for president. According to the latest New York Times-Cena College poll, the former president has a 37-point lead over Florida Governor Ron DeSantis. DeSantis now struggling and more than just the polls. He's having a tough time fundraising as well.

Let's turn to CNBC.com's Brian Schwartz. He's here with the details. What are you learning, Brian? Same time, because right now there are filings becoming public. that really reflects, actually, with the poll show, which are groups of very wealthy people are starting to shy away from Ron DeSantis and go toward other candidates.

So these are filings that reflect Super PAC money and PAC money. And we reported, I just report we came in your air, that Nelson Peltz is giving big to a Super PAC supporting Senator Tim Scott, as is Stanley Drunken Miller. Drunken Miller and a few other Wall Street executives are hosting Tim Scott in the Hamptons this coming month in August.

And then there's some of the similar names who are also getting behind Chris Christie and his super PAC. That's his new finally just came out, moments before I just came on air. These are some of the same kind of bigger, wealthier players, some on Wall Street, some elsewhere, are starting to kind of put their money and position themselves with candidates that not necessarily are Donald Trump, but they may not be Ron DeSantis either.

Ron DeSantis has plenty of big money, but there's certainly big money donors who are kind of moving on from him right now. As the poll show, he's kind of struggling to get any traction against Donald Trump, as are the other candidates. And where, by contrast, does former president, Trump stand in terms of monies, money's raised? Well, right now, you know, really Donald Trump's campaign, I'm pretty sure after at the end of

the second quarter raised the most out of the other candidates. I'm pretty confident of that. That I've got to look back in the numbers, but most of that money was from small dollar donors. It was not from kind of these wealthier financiers that we see supporting the other candidates, the Tim Scots of the world, the Chris Christie's of the world, and you name it and others. And so, you know, this is kind of how Donald Trump's going to play this game. Now, on the other hand, right, we've read that Donald Trump's leadership pack has been spending $40-plus million on some of his legal fees. So he's been raising money, that pack, that is, in the idea being that that money's going toward his legal fees. And meanwhile, his campaign, a separate entity is raising millions of dollars also from similar small dollars.

It's not really a surprise, should it be that the financial establishment would be not raising money for Donald Trump. Donald Trump has campaigned forever, it seems to me, as an anti-establishment candidate, and therefore you would expect that probably his donor base would be small dollar donors. Yeah, I think so. But there's another piece of this, right? Because when you look at what happened in 2020, we look at what happened in 2016, there were a growing group of Republican mega donors who did surround, get close to Donald Trump and support him. And then what happened was January 6, 2021. And that was basically the end for many of them, as they said at the time. Now, does that mean they're jumping in and helping all these candidates with millions and millions of dollars of checks?

Not necessarily, right? But they're definitely not going back to help Trump, at least not right now. That could change down the road. And, you know, again, it comes down to where do these guys, what do these guys really want to see of the Republican primary election? And I'm going to tell you right now, many of them do not want to see Donald Trump become the GOP nominee and then become president. Why has DeSantis lost whatever traction he had if he ever had it? Well, I think that, you know, he came into this race with a lot of fanfare, right? I mean, remember that.

There was its whole buildup to him coming into this race. And then, you know, look, he launched his campaign. And I think people just, you know, if you look at the polls, it reflects that some, a growing group of the GOP primary voters, just it just hasn't gotten a lot of traction yet with that key voting block. And I think that's really important, right? Because, again, DeSantis and these other candidates have to appeal to those primary voters. And when you look at the New York Times poll, it just suggests that some of the things he's been pushing out there, including these, these culture wars against corporate America, may not be gaining enough traction for him to rise up in the polls against Donald Trump. Sure, there might be some geopolitical primary voters who support this. Of course there are. But is it enough to really position himself versus Trump and overtaken, which is what some, by the way, wealthy donors hoped he was going to do? Not as of today, according to the polling. All right, Brian. Brian, thank you very much, Brian Schwartz, reporting for us on the money race.

up. We've got a little time left and a lot of stories you want to talk to you about. We'll be right back. All right. We've got about three minutes left in the program. A bunch of more stories you need to know about. So let's get right to it starting with, of course, Barbenheimer Mania. Continuing now for a second straight weekend, Barbie took in $93 million at the North American box office this past weekend. One of the best second weekend performances in Hollywood history, while Oppenheimer claimed the second spot earning 46 million in North America. I was among those who went to see Barbie this weekend. Just Barbie? I didn't see Oppenheimer.

And I have a really embarrassing, humiliating thing to admit. Barbie was a little over my head. I had a hard time following it. I lost the plot. I really lost the plot. And for me, I couldn't understand Barbie. is really humbling. I don't think this is about you, Ty.

The recap, the plot recaps I read on Twitter were all completely different from each other. I'm going, did people see a different movie here? Fun. It was the set direction, the costume design, the art direction. The actors, Margot Robbie and Ryan Gosling, were both really delighted. It was eye candy. It was great, but I admit.

I noticed you're wearing pink today. You've absorbed at least some. Are you going to go see Oppenheimer? Sure. Okay. Well. Absolutely. All right. Quest Diagnostics releasing the first direct-to-consumer blood test for Alzheimer's. The test retails for about $400. It tests for abnormal levels of a key protein marker, which can appear years before dementia symptoms come. The same test first became available in doctor's offices in 2022. Scary thought, I think, a little bit that you can just kind of do a quickie test and know that something of that significance is the case. But this also feels like a breakthrough in terms of early awareness, early intervention, that kind of thing. Yeah, and couple that with the Alzheimer's, the Alzheimer's drug that helps in early stage. This might be something that is really bears watch. Finally, we're getting some traction in this area, it seems. Let's turn to Amazon, which says it has delivered 1.8 billion orders to U.S. Prime members,

same day or next day, so far this year. That is four times what it delivered in the same period back in 2019. Also achieved its fastest prime speeds ever last quarter. Amazon says it is finally seeing the fruits of a multi-year effort to revamp its distribution network. It is getting faster. I suppose we shouldn't be surprised that it is getting faster, but it is really happening. You know, I quit Prime a couple of years ago because I was just like, this is getting too tires. But it's gotten so fast now.

All the time, oh, I have a birthday party tomorrow. Oh, I need a tie-dye shirt for tour. I literally just did that. So it's redeemed itself. I want to squeeze this in, guys, skip ahead to Elon Musk because his rebrand of Twitter had the huge flashing X-Tiler. The X-Sign. This is, I can't tell you, I go to Twitter.com, but on my phone, the app has changed. He tried to put it on the company's headquarters and had to dodge, you know, police activity.

Police were, yeah, the police, yeah, they're watching the sign guys. All right, we got to go. Thanks for watching Power Lunch.