Power Lunch - Inside Intel, Meta’s Momentum 9/23/24

Episode Date: September 23, 2024

Shares of Intel climbed 2.4% after Bloomberg News reported that Apollo Global Management proposed to make a multibillion-dollar investment in the struggling chipmaker. We’ll discuss the details.Plus, shares of Meta Platforms are soaring to all-time highs, with at least 2 analysts making very bullish calls on the stock ahead of the company’s big event next week. We’ll trade it in Three Stock Lunch.  Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Mathes. And welcome back from the weekend. Stocks are higher across the board right now. And Intel is one of the big gainers right now as Apollo is apparently considering investing in the company. This, of course, Kel, coming after the report Friday evening in the Wall Street Journal that Qualcomm and Intel may have been talking. Apollo is already an investor in this company. That's right. For the CEO, we were just talking about Pat Gelsinger, who was brought back in to try to fix some of the problems. at the company several years ago. Huge existential questions to address. Do you keep the two units together? Do you separate them off? Do you sell one? And there's big national security implications

in anything they do. And big, yeah, big antitrust implications as well. Absolutely. They try to do a deal. Meantime shares of meta are soaring to an all-time high. We have two bullish analyst notes ahead of its big event next week. This has been the sleeper beneficiary of AI. All they're doing is using it to optimize ad load.

And it turns out because people are engaged with reels. They're seeing more ads. It's getting this big lift in terms of price that's outperforming its spears. Sort of the comeback of meta, after people sort of pooed it as so old school. They should have changed the ticker again. Right. They became meta to do this whole metaverse thing. And then AI came to its rescue and has really helped give them a second win. They've been smart about it. Plus, the Biden administration proposing a ban on Chinese and Russian software in cars on roads in the United States. Clearly, again, a national security concern here that by bringing in perhaps components or software, which almost all cars are connected to the internet one way or another

today, might make drivers vulnerable, the transportation system vulnerable to the kind of mischief that China and Russia are famous for. And I just said that Meadow was outperforming the Mag 7, but today it is Tesla on this news. You also have to think of GM had just given warning of a few layoffs because it's retooling one of the plants. But I I can't help but read a little bit of election politics into this as well. It's a big advantage for the U.S. carmakers. The biggest threat they face existentially is Chinese autos coming into the U.S., and this is another guarantee that that's not happening in the near.

That's not going to happen anytime soon, you wouldn't think. All right, but first, we heard from Federal Reserve Bank of Chicago President Austin Gouldsby today, saying more rate cuts are needed over the next year and our next guest agrees, saying rate cuts will continue to help smaller businesses and consumers who are buying or banking on higher interest rates. Let's bring in Michael Cantorwitz. Chief Investment strategist with Piper Sandler in the House today. Michael, good to have you with us. Thanks for having me.

You know, I think it's hard to underestimate the impact that lower rates can have on the consumer economy because there's an awful lot of debt that is tied, is floating rate debt, whether it's a credit line or a credit card line. These numbers will come down of adjustable rate mortgages will come down as rates fall. This is helpful. Exactly. Yeah. And up until last week, we had, we'd seen plenty of financial conditions easing for large corporations, public companies.

You know, if you look at SMP 500, they don't need a rate cut. But up until last week, you didn't see any easing for those consumers and small businesses that are tied to something called the prime rate, which is what banks lend on. In fact, the last NFIB small business report, they told us in August they were borrowing for three month borrowing. They were paying nine and a half percent. So this is really the first easing for Main Street, at least direct one, and I do think we're, we need more, we're going to see more. Did you read into Powell's statements afterwards that he thinks inflation is vanquished?

Well, I think he, I think for confidence he kind of should have and did lean into the, not a victory lap, but pretty close to it, to ensure that I think markets would feel like he was doing this because inflation, he's so confident. inflation has gone. In fact, he pounded his fist a few times when he talked about his own confidence. So I think he did the right thing by cutting 50 and focusing more on inflation than the labor market. One observation from Richard Bernstein, I'm curious to run by you. He said, look, you look at the way that crypto's outperforming, the big caps have been outperforming the small caps, the rustles are down again today. Does that suggest that the Fed went too far, that this is only kind of exciting frothiness and markets and momentum and not really broadening out the gains everyone was hoping to experience? Well, we had definitely seen a lot of broadening out in the market from that July 11th CPI report,

where small caps had a big run up. And since then, we've seen bond yields fall on the long end quite a lot. Seeing commercial real estate, that sector being one of the best sectors this quarter, followed by utilities and other rate-sensitive like regional banks. So we have to remember the Fed cutting rates doesn't necessarily help those areas that have benefited from lower tenure rates as directly. And of course... Especially because it's steep in the curve.

Exactly. So now the market's still in the soft landing world where unemployment's not going to go up that much. And if unemployment does not go up much from here, 10-year bond yields are going higher. So for parts of the market like small caps that have been trading better on lower long-term interest rates, a lot of the benefit may be behind us. That's interesting. Let's talk about what you see going forward for interest rates. Do you think how low do they go a year from now?

Are they in the threes? In the short policy rate, I think so in a year from now. Yeah, I think the market's a little too aggressive, but we do expect the unemployment rate to continue grinding higher. And I think what will ultimately be paramount for equity markets and financial markets in general is really not how high they go, but the pace at which the unemployment rate rises from here. I think if it's a slow and steady pace, which it's been for the last nine months, I think markets can contend with that. Yeah. And again, there's so many ifs. But so far, we've confounded all of the expectations of kind of a bigger break in the cycle. And it hasn't happened yet. Hang tight, Michael, on Friday, we did get those reports that Qualcomm supposedly made a takeover approach to Intel in recent weeks. As the does settled over the weekend, neither company has commented and no deal is in place. Bernstein is out with a new note saying they find it hard to see a deal working out financially for both companies, given the number of risks and uncertain returns. Joining us, the author behind that note, Stacey Razgon is Bernstein's U.S. semi-senior analyst. And Daniel Newman is here as well.

He's the CEO of the Futurum Group. It's great to have you both along. Stacey, your thoughts here. If not Qualcomm, then what for Intel? What I said, by the way, was I don't see a deal working out if it includes the fabs. That's the issue because the fabs by themselves, I mean, they're losing a bunch of money. They require a ton of capax. If you have to support those investments, I don't see a deal getting done with

cash that doesn't drive leverage to, like, unsustainable levels. And if you do a deal with stock, it's massively dilutive. I just don't see it working out. And I don't know that I see a deal without the FABs is the problem, because what do you do with them? They can't stand on their own. I guess that becomes its own question. Well, and this is, this is the issue that they have, that the factories, like, people have always considered that Intel might split them off at some point, which maybe they will, but you can't do it now. They're losing $12 billion a year. They can't stand on their own. At the same time, I don't think. you can sell them to somebody else to operate like a TSM. I don't think TSM or any of else

wants to run their factories. And while hypothetically, I think you could have a scenario where you just scrap them. Like you sell the tools for whatever they're worth. You go a whole hog into outsourcing. I don't think that's a politically viable situation right now and you'd have to scrap the entire roadmap the way it stands. And like long story short, Intel's having enough issues with a white, why would Qualcomm be the one to make the fab issues better if they're going to keep them? I just don't see it working out. I'll be honest, for Qualcomm's sake, I would would not want to see them do a deal with Intel that includes these factories. I would not want to say it. Daniel, let's turn to you and get your take on whether a deal is

plausible here. Do you agree with Stacey or not? And number two, the question of the FABs, well, isn't that what the Chips Act and the government says they want? They want the ability to manufacture semiconductors here in the United States? Yeah, I agree with Stacey. This is not a probable deal. I think I said it in many ways and the note that I put out, I just don't see how this works. I do think there's a bit of darkest before dawn going on with Intel. I think they had their darkest moment. I think the lip boo exit. I think the rumors on 18A were somewhat, they got a turnaround last week when you got the AWS win, when they got the $3 billion from the DOD, when they did make the decision to separate the P&L fully and actually spin off a subsidiary,

I called that a step function towards a possible spin out in the long run. But I think these are the steps that Intel need to make. And I think they may have actually seen the worst. And I know maybe this makes me an optimist. And Stacey, you and I've had this debate before. But I actually think this could be the darkest moment. It's actually moving in the right direction, Tyler. And somewhat, I think this has been good news.

Now the Apollo news becomes much more realistic to me. Gentlemen, not to forestall that debate, but we're getting some breaking news out of Boeing and its latest offer to end their worker strike. Phila Bow has the details, Phil. Kelly, Boeing says this is their best and final offer to the machinist union that they have now advanced four point points here. First of all, the wage increase, which was 25% over four years. The company is now increasing that offer to 30% over the next four years.

They will also restore the annual bonus. That was not in the previous offer. They will have a signing bonus that doubles to $6,000. previous offered was for a $3,000 signing bonus, and Boeing will increase its 401k contribution to the machinists. There is one last note. This offer is contingent upon ratification by 1159 Pacific Time on Friday. So there you have it. Boeing says this is their best and final offer.

The main point here, 30% over the next four years, as you guys know from our time out in Seattle, we heard time and again from people on the picket lines. We want 40%. Is 30% enough to get it over the threshold? We'll find out. Back to you guys. And Phil, just quickly on that note, some analysts are watching Textron, where they offered 26% wage hikes, $3,000 bonuses, $1,000 cola, health insurance, 401K enhancements, and just over the weekend, employees rejected the contract and voted to strike.

Look, a lot of organized labor unions, the unions, whether it's in aerospace, whether it's in automotive, they believe that this is their time. to push the companies as far as they can. And in the case of Boeing, they believe it's 40% over the next four years that they deserve, not 25%. We'll see what they have to say about 30%. Just for some context, guys, 95% of the workers rejected the last contract. So if you're Boeing, you've got to go from 5% who accepted it, up to 50% who accepted it. That's a high threshold relative to where they were a week, a little over a week ago. Let's see what happens now that the machinists have this offer. All right, Phil, thank you very much. Phila Bow reporting the latest on Boeing there as we turn to kind of its troubled sister or cousin in tech, which is Intel. And Stacey, I don't know if you

want to respond to what Daniel said that maybe it is darkest before the dawn for Intel. And maybe Apollo does now come in with a much-needed cash infusion. Well, again, I don't think they need the cash infusion. Maybe I'm an optimist here, but I actually don't think they're desperate for cash. if he add up the CAPEX cuts and the OPEX cuts and the dividend suspension and the private equity, they've already got to deal with Apollo. They sold half their Ireland FAP to them for $11 billion and the Brookfield money and the government subsidies. It's like $40 billion of incremental cash onto the balance sheet by the internet share. I think their cash balance is actually okay.

So I don't know. And I'll be honest, I may just be pessimistic here to Daniel's optimism, but I don't think you want to take private equity money unless you absolutely have to. right? Like you're not those guys are not billionaires for no reason, right? Like you're not going to get the best thing for them. You don't want to do that sort of thing, I think, unless you have no choice. So I understand the whole idea. It's a vote of confidence.

I mean, fine. I'd rather see them get along without actually having to take funding from private equities. I don't actually know how good of news that actually is. Michael, your thoughts here on Intel in a possible combination? Well, it's a bit more in the weeds than I focus on.

But I think, you know, when we have this backdrop of a soft landing plus rates coming down, I think you'll start to see more opportunistic value searching investors look for deals. And I think there's opportunities there. And I think some of the banks that are doing those businesses can also benefit as well. Daniel, does Intel and its current plight remind you at all of General Electric some years ago? I think it's got some similarities. I think what Intel is going to be able to do is focus now, and that's been the key. I think they were way too distributed. They got into way too many businesses. They had so many spinoffs. They've slowly, and now by force of the performance of the business, they've moved to a

much more rapid path towards getting focused. They have a better part with their newest AIPC, and it was fabbed with TSM. So there's some proof that still needs to come there. But I think overall, Intel has gone through a lot of these dark moments, and now we're as a public starting to see it. But I've had the chance to talk to Pat Gelsinger, and I've had the chance to look at these parts, evaluate them. And I think they're directionally in a better place. And if you're a value investor, to Michael's point, it could be interesting, but you have to have the horizon. This isn't going to be a turnaround in weeks or months. This is years. All right, gentlemen, thank you very much. Stacey, Daniel, Michael, appreciate your time today.

And coming up, an exclusive interview with Bank of America's CEO, Brian Moran, Moynihan will get his thoughts on the Fed's rate cut, Berkshire Hathaway, continuing to trim its B of a stake and much more. Power Lunch returns in two minutes. Welcome back to Power Lunch, everybody. When last we spoke to Bank of America's Brian Moynihan, the markets were waiting and wondering what the Fed would do. Well, now that we've gotten a half-point rate cut, let's talk again to Brian Moynihan, bring him back, discuss what lies ahead for his bank, for the economy. He's standing by with our Leslie Picker in Boston today.

Hey, Tyler, good morning, and thank you, Brian, so much for being here. When you were on CNBC a few weeks ago, you said you worried the Fed could be late in cutting, but you know more after the fact. So I'm curious now that we've seen that 50 basis point cut, that move last week, are your concerns assuaged? Well, it's a good start, as the word saying. And I think our team increased their rate cuts early on. At the end point, our team was 3.5.

Now they're down to 3%, 275 to 3%. So they moved it down a little bit, but they sped up the pace. So they added 75 more basis points this year for a total 125. So they went from basically 75 to 125, largely due to the feeling that the Fed's ready to move faster. Interestingly enough, what we're seeing like really real-time and consumer data in the month of September is a stabilizing of the spending rate around 4.5%, which is a good place for it to be, consistent with a low-growth, low-inflation environment, where it was in 17, 18, 19, So we feel good about the equilibrium being there, but they've got to be mindful that, you know, they've got to, if they really want a soft landing, which we all want, they've got to keep making sure they stay ahead and get the real rate structure down.

And the real beneficiary that is business, frankly, the instantaneously change in rates to borrowing bases that, you know, borrowing bases that it goes through small and medium-sized businesses will be a big benefit to them. That 50-basement point goes right through the index last week, and they'll get the benefit up this week. And that helps them then feel a little bit better about the future. help distill down this idea of 75 basis points in the fourth quarter because the Fed has the appetite to do so, not necessarily it sounds like because the economy demands it. Yeah, I think there's going to be a lot of debate. This is as we go through this cycle and get to the other end of it. But I think the real perspective is start and finish, five and a quarter, five and a half, three percent. That's a pretty big change. But it's all about getting the rate environment to not

be too restrictive. The ebbs and flows of that, you and your colleagues will get up and, you really get excited about it on a given day. But the reality is you have to think about it across six-quarter five-six-quarters, really moving the rate to a much more fundamental place. And the good news is the experts think at the end of that we'll have a real rate, you know, a nominal rate structure in the U.S., which we didn't have for almost 15 years. And that's important because that's a much healthier place for the economy to be. Maybe a little more inflation, not four or five percent, but two, two and a half percent. Maybe a higher rate structure. And then, frankly, the biggest economy in the world can

continue to progress as opposed to trying to lower rates and lower rates to shore it up. And so what's good about what's going on is you feel that thing. So the Fed may move and ebb and flow on a given meeting and people get really wound up with a 50% chance over 50 base, all that stuff. But the route is where they're starting and where they're ending and what's the impact. And that's what they really got to make sure. They can't tip the labor market over. They can't tip the stock market over.

They've got to balance enthusiasm for lower rates for businesses, customers being, consumers being okay, credit being fine with if they go too fast they can incite inflation again and that's the balance they have to have but the end point they what's interesting is everybody has them at a higher rate structure we've seen for the last 15 20 years so it sounds like you think that inflation at least should not be at the forefront anymore it should be much more on the side of cutting rates preventing a deeper recession make sure they kind of stick that soft landing if you're trying to average 2% across time you're gonna have to run a little hotter for times now we had a very unusual set of

circumstances in 2021 and 22 that may never be repeated, hopefully not from the COVID sense and the pandemic sense, but never repeated. We had expansion of the federal debt. We had all those things going on. We were fighting a war worldwide against the disease. It appears we won the war and run the other side. Now we've got to bring things back to normal. And so the issues of long-term debt management by our country and others learned a fiscal balance. Those questions are the big questions. They'll ultimately determine what the infrastructure and things look like. But the idea of running inflation, slowing, drop in the rates as inflation comes into it, as opposed to ensuring you get below it and then you can't get back up. So speaking of the deficit, you recently told Axios that we, quote,

need our eyes and stomach aligned as a country and getting the deficit under control. What happens if we don't, given that both presidential candidates have presented plans that would add trillions to the deficit if they were passed? You know, I don't want to contemplate that. We have to be ready for it. we worry about it, but we don't want to contemplate that. This country is so critical of the world to be fiscally responsible because it sets a benchmark for the whole world to react to. And so getting ourselves aligned. We have a wonderful economy. It's grown from the pre-financial crisis

to now almost to twice the size. It's outgrown its issues. It's restructured its issues. It deals with capitalism as the best with pluses and some minuses and all that stuff. If we forget that in the strength that we have to show the world, that's the problem. And show we have to show the world how to have a glide path to bring the debt, keep the debt where it should be and not let it get out of control. Because if it does, the whole benchmark for the world starts to go out of sorts, right? I mean, everybody looks to the U.S. Treasury yield bonds and notes as being the benchmark for the world and we've got to keep that in check. And ultimately that's going to come down to a fiscal management practice that has to be resident

in any government. I think the realities when you get in there always bring you more to the I've got to figure out how to balance this thing. So I wouldn't take the political process today to what happens afterwards. But, you know, we need better tax policy, better spending, all the things are on the table. But if we don't get in control, that is a real pressure point. And ultimately, the leadership of the United States could be called the question. One thing that's on the table. Former President Trump said he wants to create a 10% cap on credit card interest rates.

He said that last week. The average rate is currently around 21.5%. And it hasn't been sub 10% in at least 30 years. What would that mean for you? What would that mean for your customers if such a cap were enacted? I think that's brought it out to, you know, the caps on pricing and stuff like that. That tends not to work out in a long run. And there's been proposed to cap food prices, the pharmaceutical prices.

So if you go back, you know, Richard Nixon cap prices and wage and price controls, it's hard to control this wonderful dynamic economy U.S. has. So we'll, if something happens, we'll deal with it in the future. But the reality is, from a policy standpoint across all this, is let capitalism have. What you're seeing today is prices are coming down because businesses need to keep generating revenue and they're cutting price to generate revenue. And so you're seeing restaurant prices and a month spent there. The numbers of times people are spending is up for travel, but the dollar amount in total

it's up 4% dollar amounts flat. What does that mean prices came down 4%. And so you're starting to see the impacts of a slower inflation rate through spending. And so prices will take care of themselves because it's a big open market, lots of competition, lots of products and services, almost in any industry, and you just have to let it run. It just takes, it ebbs and flows, and it'll be periods where it feels like it's high and low, but the reality is, we'll deal with it whatever comes up, but the route is that good policies, let capitalism work, let pricing work, let the market work, and it'll drive you towards a good outcome for all customers.

Warren Buffett's Berkshire Hathaway has been selling a lot of Bank of America stock, a lot of headlines surrounding this. I know you said at the Barclays Conference last week that you can't ask him why he's selling, and he's not going to likely answer you on that. And the firm is still your largest shareholder with about $34 billion worth of stock. But do you see any reason? Because the market is wondering,

does Berkshire maybe see Bank of America as being overvalued from here? I don't think we're overvalued, but I think, and I don't know why. It scurries rules and others. It stopped me from asking the question. And he made an original investment and then made another investment.

And so, which totaled basically 900 odd million shares in stock. And he's sold down. And so I don't know what he should tell. You should ask him, have one of your colleagues asking the question. But if you look at it more broadly, I think the market speculates on what he does. He has an investment strategy, investment theory, and he sold a lot of different companies and a lot of talk about it. But at the same time, he's buying companies. And I'll let the market decide it.

From our standpoint, our stock is a great buy, and we're buying it every day. All right. Brian Mornahan, we will leave it there. Thank you very much for joining us from the World Medical Innovation Forum, partnering with Mass General Brigham here in Boston. Really appreciate your time today. Thank you. All right, guys, I'll send it back to you.

All right, Leslie, thank you very much. Leslie Picker with Brian Moynihan there. Coming up, we'll talk good as gold. The precious metal briefly hitting another all-time high. Whether it's too late to buy some or not, we explore in Market Navigator next. Welcome back to Power Lunch. Here's a quick scan on the markets, have gone back into positive territory for the most part.

Although the rustle, the lower couple of factors there, there's rumors about China stimulus. Some dovish comments from Fed's Austin Goolsby earlier in the day. Nevertheless, Dow was briefly at a new record high. And Dom Chu is here for today's market navigator, Don. All right. So, Kelly, what we have right now is a gold trade. Even as it hits another record high today,

there are some converging signs right now of potential. And this is the key, potential weakness. It's been a juggernaut so far. But joining us not to explain, suggest a trade to stay ahead of this possible decline to Scott Nations, the president of nations indexes. And Scott, it was another day, another record price for gold. Gold miners are doing well, but what makes you think that this particular trade is going to run out of steam? And then how do you capitalize on that?

Well, let's talk about how you might capitalize on it first. I'm going to short the gold micro e-mini futures. I can sell the December contract or I want to sell the December contract 2655, just a couple of dollars above where it's at right now. My target, once we're short, is going to be 2550. That was a multi-day top in the middle of August when it looked like the economy and the stock market, we're going to come unspooled. So that's an important level. My stop, and we're always going to trade these with a stop. Once I'm short, my stop is going to be 2675, fairly tight stop down, but that's because we'd be at another new all-time high. And I'm I'm not going to go out on a limb and just keep selling as we move higher.

If we profit at those levels, we're making $1,000. If we get stopped out at those levels, we'll be losing $200. That would be our risk. So why? Well, gold's now overbought with a relative strength index just above 70. It's overbought. It's come a long way very fast. It's up 2.5%, actually 2.6% over the last trading days.

But if you look at its sibling silver, silver is just in horrible shape. And I think that that's telling us what's going to happen for gold, at least in the near future. Silver's 5% below the high it made in May. Silver is showing a series of lower highs. It's about ready to show some lower lows, too. So I think all of the precious metals are in a little bit of trouble as interest rates stabilized. And gold has just come so far, so fast. And if you look at silver, you have to think that it's going to roll over it.

That's interesting. I didn't realize the way silver. Now, year to date, they look kind of the same. But again, since May, as you say, the charts do look different there. And what's also interesting about this trade is using the micro e-minis. So e-minis are already a lower cost, smaller way to play that gold trade. But the micro is taking even more fractional size of trade to that. So it lets people have a little bit more latitude and not have to commit a lot to that kind of a trade. Great point.

Scott, thanks for joining us. We appreciate it, Scott, Nations. Dom, thank you as well. Dom Choo. Tyler. All right, Kelly, the White House proposing a ban on Chinese vehicles and car technology on American roads. We'll get the key details when Power Lunch return. Welcome back to Power Lunch, everybody.

Chinese-made cars could be banned from U.S. roads. The Biden administration proposing such a ban on concerns over Chinese companies collecting data from cars that are connected. Eunice is live in Beijing with more. details. Hi, Eunice. Hey, Tyler. Well, the Commerce Department has described the threat to U.S. national security as, quote, very real. The new rule targets the sale and import of Chinese software and hardware for connected vehicles. That would go also for similar Russian technology. Now, the software band would impact vehicles model for the year 2027. And for

hardware, the band would hit cars designed for 2030 or January. of 2029 if there is no model year. Now the regulation would effectively bar Chinese companies that make these connected cars such as Neo-X-Peng, Li Auto, B-YD, and Zeker from the U.S. market. Chinese startups that had been experimenting a lot in California with self-driving technologies, such as a company called Weiride, which had recently filed for a U.S. IPO, would have to stop. as well as other car makers that have been using and cooperating with a lot of Chinese companies would have to review their supply chains

and potentially change their import policies. They have about 30 days to take part in the public commentary period. Before the announcement, the Chinese government still was quite critical of the idea of this type of action, saying that it's protectionist. But so far, Tyler, I think one of the big questions is going to be what happens with Tesla because Tesla has been pushing so aggressively to roll out its fully automated technology out here in China.

All right, Eunice, thank you very much. Eunice Yunn, reporting live from Beijing for us. And meanwhile, Chicago Fed President Austin Gulby says many more rate cuts may be needed over the next year. While the economy is showing some weakness in manufacturing with some new data this morning, Rick Santelli has the latest and the reaction. the bond markets. Hi, Rick. Hi. Yeah, you know, that's an interesting comment because if you look over the past couple of years, manufacturing has been in a rut. But you could even argue maybe it's starting to come out a little bit. The last industrial production number was up eight-tenths percent. And maybe Mr. Goolsby ought to read today's Wall Street Journal op-ed by our

Treasury Secretary, Janet Yellen. And I will give you a few quotes. We are near historic lows on the unemployment rate. Economic growth is very strong and, well, robust consumer spending. That's our Treasury Secretary. And I guess the market speak, Dow Jones Industrial

average at all-time highs. Now, we could debate as to maybe Austin Gouldsby's looking at something different than the rest of us, but the currency market seemed to agree with them pretty much. If you look at the pound versus the dollar, the dollars at the lowest level pound

at the strongest level since March of 22. If you look at the pound versus the euro, pounds at the strongest level versus the euro since April of 22. And that chart is screaming Germany. German manufacturing is just a shadow of its previous self. And as far as what's going on with interest rates? Well, since Tuesday's close and the Fed eased Wednesday, two-year note yields are down about three basis points,

10-year-note yields are up about nine basis points. So you've seen about a dozen basis point shift in twos to tens. We need to continue to monitor that because in many ways it whitewashes any of the significant benefits, for example, in housing, which is concentrating more on tenure note correlations. Tyler, back to you. All right, Rick Santelli. Thank you. Meantime, let's go to Contessa Brewer for a CNBC News update.

Contessa. Tyler, Robert F. Kennedy Jr. is out of the presidential race, of course. But he wants his name back on the ballot in New York. He filed an emergency appeal to the U.S. Supreme Court. RFK Jr. suspended his campaign last month and then vowed to support former president Donald Trump, pledged to remove his own name from ballots in battleground states where he might take votes from Trump while keeping his name on ballots in non-competitive states. Japan scrambled fighter jets today and used flares to get a Russian reconnaissance plane to leave Japanese airspace.

Japan has growing concerns over the close relationship between Russia and China. Yesterday, those two countries sailed warships around Japan's northern coast in a joint military exercise. And private equity giant Blackstone announced it is selling the Motel 6 business to Indian hospitality company, Oyo. It's a $525 million transaction, according to Blackstone. Motel 6 and its sister brand, Studio 6, have roughly 1,500 hotels across the U.S. and Canada. Tyler, that's the news. I'll send it back to you. Contessa, thank you very much.

The global agriculture industry is great for food and plant life, but it's also one of the world's biggest climate offenders. We will highlight some startups trying to change that when we were turning two minutes. Welcome back. Last year, the Federal Reserve had the nation's six largest banks perform a pilot climate stress test on their portfolios. The results released were less than conclusive as the banks reported data gaps and modeling challenges. And now a new report is filling in some of those gaps with pretty striking. results. Diana Oleg is here with more. Diana? Well, Kelly, climate risk firm First Street ran all of the nation's banks through a climate stress test, specifically focused on risk to real estate assets and the loans associated with them, so potential losses from delinquencies and defaults due to

climate-related events. Now, using the locations of the bank's physical branches, which would indicate each bank's lending footprint, First Street found that roughly 30% of banks had risk high enough to hit the risk threshold level set by the securities and exchange commission. That is a potential 1% loss or more of the bank's portfolio value. Now, 57 banks with a total of $627 billion in real estate loans, that's nearly 11% of all commercial and residential real estate loans in the country, could face, quote, material financial risk as defined by the SEC. Of the nation's largest banks, Citibank, Capital One, Fifth Third, Huntington National Bank,

Citizens Bank and Key Bank crossed that threshold. The report also found that regional and community banks were particularly vulnerable because their lending portfolios are so concentrated geographically. Some of those banks had potential net losses of up to 14 percent of their portfolios. Now, the problem with the Fed tests was that banks mostly looked at individual hazards in isolation, and they didn't factor in climate change going forward. This report looked at multiple hazards at the same time. and did account for climate change.

Back to you. All right, Dai, stay that right there. As we transition, agriculture, one of the world's biggest carbon offenders, releasing about 11% of global carbon emissions. It's a big problem, but what if it could also be a solution? And Diana has the details on that.

Take it away, Dai. That's right, Tyler. In our Clean Start series, ever since the Industrial Revolution, we've been emitting ever more harmful greenhouse gases. There are natural processes that mitigate these emissions, but they're no longer able to keep up,

and that's why new companies are trying new ways of using nature to save itself. Farmers have long spread crushed lime on their fields to balance soil acidity, improve its structure, and increase the nutrients available for crops. But what if another rock could do the same and, at the same time, remove carbon permanently from the atmosphere?

Startups like lithos, undo, and California-based ion are experimenting with several carbon-absorbing rocks, doing so-called enhanced rock weathering. Ion uses a volcanic rock called olivine. We apply a rock dust onto farms, and that helps farmers condition the soil or make the soil better for improvements. And then over time, that manages to secure and sequester carbon,

removing it from the atmosphere. Olivine is similar to agricultural lime in terms of improving the soil, but when it rains, olivine goes through a chemical process that causes it to absorb carbon dioxide from the air permanently. To give you an idea of the order of magnitude, by 2030, Ion will be removing about 2 million cars, the equivalent of 2 million cars of carbon from the atmosphere every year.

Ion gets its olivine from Norway, and that makes it slightly more expensive. But by using different types of tax credits and carbon removal purchases, they're able to subsidize the cost for farmers like Dan Prevost, who operates Prevost Farms in Mississippi. What I get is a discounted product that shows up on my farm at a 50 to 60% cost reduction over what I would pay for an equivalent product. So it's immediate financial benefit to me that has positive impacts to my bottom line.

Ion is backed by Exelon, Gromark, Sebelko, AgFunder, Trailhead, and Ridgeline. Total funding to date, $20 million. dollars. Ion operates mainly in Mississippi now, but Pavlovak says this year she expects to expand into Illinois and more of the Midwest and Mid-Atlantic. She said now that they're out of the seed stage, they expect to reach, quote, hundreds of millions of dollars in revenue over the next five years. Back to you guys. A lot of people looking at this technology. Diana, thanks. Wake up and smell the coffee. City upgrading Kerouac Dr. Pepper to abide for its Java business. We'll trade those shares in three-stock lunch, and CNBC is celebrating

Hispanic heritage this month. Here is Tata Harper, founder of Tata Harper Skin Care, sharing her story. I grew up with my grandparents, most of my childhood, and my grandmother was obsessed with beauty, so she would host beauty parties. I just learned the power of doing self-care together with other women and how amazing that feels, and I had brought that into my company since the beginning. It's not something that it's boring that we'll all have to do, but that we all enjoy this aspect of self-care and taking care of ourselves that makes us feel good. All right, time for today's three-stock lunch, everybody. Here with our trades is

Will McGoff. He's Director of Investments with Prime Capital Investment Advisors. First up, well, we got Meta shares are trading higher after two bullish analyst notes, City, raising its price target to 645, B of A, reiterating its buy rating ahead of its Connect conference later this week. Your trade will on meta. Yeah, you know they have their conference coming up this week. Zuckerberger is a leader in virtual reality. Combined that with AI. You're talking about it. You probably 30 minutes together. They're kind of a stealth AI play here. I think they're a pretty powerful combination, especially in health care with VR and AI, put on top of a strong technical pattern of breakout over 550 is a lot of strength. It's going to be a buy in my opinion.

You've got to play the wave higher here. All righty. There you go. Yeah, a lot of of optimism around this name, that's for sure. Let's move on to General Motors, which is lowered today. They announced plans to lay off about 1,700 workers at its Kansas plant. Bernstein also lowered its rating on the stock. They're warning about earnings, headwinds, and capital markets risk. It might be some financing needs coming up here. It's a little bit tougher one. Will, what do you do with GM? Yeah, I'm going to go ahead and say this one's a sell. It's really tough, as you all just mentioned. You have the Chinese software hardware ban. connected vehicles from the Biden administration that is being proposed, which is a good thing for us

here in America, bad thing for that type of software using these cars. Layoffs in Kansas at one of their plants, signs of a weakening economy. They're stuck in a multi-decade range. The stock hasn't going anywhere in years, and by years, I mean decades, combined with a huge company, a lot of issues with balance sheet, pensions, massive workforce, just it's not really going to get to go anywhere. So play the range, sell here. It's up, you know, 50-some-a-percent year-to-date, so it's an outperformer. And so I like selling it, wait, and maybe buy it at the lower to the range, if when that ever happens. But opportunity costs here, so move on from it and sell it.

All right, let's talk about Currig, Dr. Pepper, getting an upgrade to a buy from neutral at City, which says valuation is attractive on this one, saying U.S. coffee volumes are poised to rebound. Shares of KDP higher today, your trade on this one. one. Yeah, so I like Curig, Dr. Pepper here. I'm going to go along with City with the upgrade and go for buy. It's about a $50 billion market cap stock pays, you know, a dividend is growing at 7.5 percent, so it's very well positioned there. It's a good company with a diversified portfolio from Curig to Dr. Pepper, Ginger Ale Shweps and stuff. So I like the diversification here. If you think about the economy weakening and the consumer reining in and their spending

with savings having been eat up, they're going to go to cheaper alternatives. And the K-Cups is a cheaper alternative to Starbucks. So I like that theme there. And you nail on the head with the earnings or with the valuation. It's about 18 times earnings, cheaper than Pepsi, cheaper than Coke, cheaper than Starbucks. That's a slow and steady growth opportunity here. So I would buy it, especially for those long-term portfolios, where you want to own just good household names in a portfolio. I would certainly be a buyer there.

fast money. All right, Dr. Pepper Curry is a buy from Will McGoff. Bill, thank you very much. We appreciate it. We're going to take a quick break. We'll be right back. Welcome back. Dow's up 56 points.

So we've briefly flirted with negative territory. A couple of things pushing us higher. Tyler, we've had some rumors about Chinese stimulus. At one point, we did hit a record high on the Dow up at 42 190. Some doveish comments from Austin Goolsby, but we're struggling. Struggling, but we're trying to hold those games. Yeah, hold those games. Let's see if we can get another record high there at 42.

190 or thereabouts. Meantime, thanks everybody for watching Power Lunch. Glad you could be with us today. And closing bell starts right now.