Power Lunch - Is The Fed Done?, Fee Fight 11/2/23

Episode Date: November 2, 2023

Stocks are jumping, as the markets continue to react to the Fed’s decision to hold rates steady. And yields are tumbling as Wall Street seems to think they’re done hiking.We’ll break down what that all means for stocks, and will also look ahead to the next big market event on deck: Apple’s earnings report.Plus, rising rates made buying a house a lot more expensive, and very quickly. We’ll discuss that, plus the ongoing fight over brokers’ fees, with the CEO of Doug Elliman. 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 alongside Kelly Evans. I'm John Ford, and stocks are jumping today as market continue to react to the Fed decision and the chairman's press conference. Yields tumbling as markets seem to think the Fed is done hiking. We'll break down what that means for stocks and look ahead to the next big event, Apple earnings. Plus, rising rates have made buying a house a lot more expensive very quickly. We're going to look at what that's done to the real estate market and discuss the current battle over broker's fees. Kelly. And that's a juicy one. Let's first get a check on the markets, though. Speaking of juicy, the Dow's up 503 points right now. Apple reports after the bell. It's up 1.5% while the S&P is up one in three quarters to 4312 now. And the NASDAQ up 1.6%. All of this on the back of lower bond yields. One of the many big earnings movers today, look at shares of Starbucks after sales and profit beat estimates. It's up almost 11% now. Its guidance above the current estimate that's been a rare thing lately. The CEO saying demand remains strong. and the pumpkin spice latte is helping boost sales. Yields I mentioned, let's get a quick check on the 10-year, where we see that yield dropping all the way down to about 4.65% today from a recent high above 5%.

And investors are betting the Federal Reserve could be done raising rates this year. What's driving the action today? Well, it's that. The Dow and the S&P, both pacing for a fourth straight day higher, the NASDAQ on pace for its fifth day higher, all while we see not just the 10-year but the fives, the two, I guess maybe the two is a different story, and the 30s, the 10-year hitting its lowest level in three weeks, the two-year hitting its lowest level in almost two months.

Our next guest is seeing a once-in-a-generation opportunity in everything except the magnificent seven stocks. Let's bring in Richard Bernstein, Chief Investment Officer of Richard Bernstein advisors and our very own Steve Leesman. Welcome to both of you. Rich, all right, so I guess you're not super excited about Apple after the bell then. No, Kelly. That's not going to have my my attention. I think, look, I think there's a couple of really bullish things that are going on today. Number one is that small stocks are outperforming large stocks, right? In your little opening, you did not mention the Russell 2000. The Russell 2000 is outperforming the Mag 7 quite a bit today, outperforming the S&P. I think that's a very bullish sign, right? Because we know that profits are

starting to reaccelerate, says the market is starting to pay attention to fundamentals again. Second thing I would point to that's very bullish is that non-U.S. is outperforming U.S. That's similarly based on fundamentals. It's actually quite bullish. The third thing I would point to is that cryptos are under pressure. There's absolutely nothing fundamental about the crypto markets and the fact that we have stocks based on fundamentals going up on a day when cryptos are going down. These are all fundamentally based observations. I think that is very bullish.

So it's not, so Steve, I'll turn to you because I hear Rich saying it's not just the back of a, you know, Fed pivot or anything like that. And I would add, though, it does seem, Steve, like people are running off with the conclusion that they're done hiking here. Yeah, you know what I like about today, Kelly, is sometimes the market on Fed day or the day after the Fed is like a college kid that wakes up in the morning and say, wait a second, what did I do last night? The market's not doing that today.

Sometimes they'll rally into what I think is a really hawkish thing. And I'll be like, what were you guys doing? and they'll reverse it the next day or sometimes the opposite of that. The follow-through, I think, is interesting. I do think there was, it's a little bit complicated, Kelly, but my take on Powell yesterday was I asked him the direct question, is your bias still to hike? And he said, yes.

He went on in the rest of the press conference to suggest, to me at least, that they're really in neutral. When he said, you know, the risks are becoming way more two-sided. Doesn't mean they won't hike. The question is, do they have to be convinced to hike. And that's where I think they are right now, as opposed to being convinced not to hike. And that would be a bias to hike. I don't think they're really there anymore. I think they're at this place where, look, if the inflation data deteriorate, if it doesn't cooperate, if the economy

doesn't slow down, yeah, they'll hike again. But they need to be convinced to do that. And when I look at the probabilities, I'm not alone. That's the way the market is trading. They really don't have much of a probability at all right now on any kind of hike going into tomorrow. March and then you look at the probabilities of cuts, they're starting to get a little bit bold. They're June, 58, 60 percent somewhere in there, may not so much, but then they start to get a little bit bolder. So that's where the market is right now, but twixt in between, not thinking the Fed is going to hike, not thinking they're going to cut, just waiting to see.

But I think that bias may be right in the middle right now in neutral. Okay. Well, it's somewhat encouraging for folks who want to be long equities. But Rich Bernstein, the Russell, which you mentioned, is up two percent. so far today, the Russell 2000, but it has been punished this year and had been at lows of the year before now. How safe is it? How patient do investors have to be prepared to be if they're going to be excited about the opportunities here? Oh, I think there's two ways to think about it. One, let's talk about short term and the kind of cyclical opportunity. The profit cycle is

troughing here in the United States. And as long as the profit cycle accelerates, that argues for more in a portfolio, we know that small caps are more cyclical. That's what's been scaring everybody are some of the debt issues in small caps and things like that. Those are cyclical concerns. If corporate profits and corporate cash flows start to heat up here, those concerns will subside. And so I think there's a huge cyclical opportunity here in terms of the broader market. Longer term, though, we know that long-term returns are defined by valuation. And the Russell 2000 is less, if I'm I'm mistaken, less than half the valuation of the Magnificent 7. So that would argue that longer term, small stock should outperform the Magnificent 7. And I think that's very, very likely over

the next five to 10 years. What about Rich, the regional banks? The KRE has been in really rough territory, was under 40 for a while. Now it's perked up. It's up almost 5% today, but still concerns about commercial real estate, particularly office, is the good news? Does the good news extend, you think, to those smaller and medium-sized banks as well? Right. Well, John, you know, it's a little bit funny, and I'm sure Steve would agree with me on this, that people always forget how the Fed injects monetary policy into the economy. They either try to slow down or accelerate the banking system. They either want the banks to expand or contract their balance sheets. People always forget that. So what do we see? We saw a tightening session, and margin.

banks, smaller regional banks, got in trouble. There's nothing unusual about that. That's what the Fed, I don't say, wants to have happen, but that's the effect of monetary policy. I don't believe the Fed's about to ease, but the more that one believes that the curve is going to re-steepen, where maybe in the future the Fed is going to ease, the more the Fed wants regional bank balance sheets and large-cap balance sheets to expand in the banking system. They want to, they want to stimulate the banking sector. So the more you think that the Fed is going to be on the side of the banks, the more you'd want to look at that.

I'm a little kind of skeptical of that right now. I actually think to some of what Steve said in terms of the bias is still the tightening. I think if profits heat up, employment will heat up. I think that it'll make it much harder for the Fed going forward. But if one believes that the Fed is actually going to ease, you know, small, marginal banks would make a lot of sense. What if profits are cooling down, Rich, which is the other way to kind of tell this story, especially with some of the fourth quarter projections and guidance that have been coming in. Well, Kelly, I can tell you, it's not, people tend to look at the absolute dollar value of earnings.

And really the important thing to watch is the growth rate. And the growth rate actually troughed probably around mid-year, to be honest, and has solely been accelerating. It's still negative year-on-year. But by our forecast at our firm, we think we're going to go from minus 10 to 15% S&P earnings growth to plus 10% to plus 10 to 15. during 2024. And if that happens, obviously cyclicality is going to be very beneficial in a portfolio because this sounds stupid, but it's true. The cycle is determined by cyclicals. Well, we'll leave it there. And I'm not going to say, going to a tangent about ISM manufacturing, Steve, they tell you we got to move on.

Okay. I want to hear about Steve's collegial escapades. That's what I want to hear about. We'll leave it for another time. How is that? Thank you both, Steve Leesman. Our Rich Bernstein, we really appreciate it today. Thanks. Well, to extend Leasman's metaphor, if the equities have continued to party today post-fed, yields have been mixing the punch for more on the yields. Let's get-out to Chicago and Rick Santelli.

Rick. Yes, John Ford, how do you make a 466 yield and Treasury tenure look cheap? Start out in an intraday high of 502. That seems to be the case. Look at a two-day of twos and tens on top of each other. You know, if you looked at where the two-year was yesterday before jolts, it was 505. It's 497 now, down eight basis points. At that same time, look at a two-week chart of twos and tens.

Yesterday at 10 o'clock Eastern, we were at 490 on a 10-year, which is currently at 466. That's down 24 basis points. So we've had huge moves on the long end, and as you look at a two-day-of-the-dollar index, it certainly seems to be following the drop-in yields, of course, as it falls. from rather lofty levels above 107. And the notion of how this affects the future, well, you could read it quite easily in Tuesdays, which has re-inverted 15 basis points since Tuesday's closed.

And ultimately, the Federal Reserve may have been the catalyst, but what's going on with long rates certainly seems to be following how much it costs to service are huge and ever-growing deficits. John Fort, back to you. Rick Santelli, thank you. Kelly, do you like apples? Yeah, I do. Oh, honey, Chris.

Let's see how we like these apples. The shares are higher today in Apple as a company is set to report its fourth quarter results after the bell, while the street is expecting an overall decline in revenue. Investors are closely watching the latest on iPhone sales and how demands faring in China. Our next guest downgraded his rating on the stock to sector weight last month, continues to be neutral. Joining us now is Brandon Nispoil, senior analyst at Key Bank Capital Markets. Brandon, do revenues really matter that much to Apple now, or is it more about vertical integration

driving loyalty and profits? What would get you off neutral? You know, I think the bears will tell you that it is about sort of the user base and the user growth, but I do think revenues do matter. From our expectation, you know, we see Apple setting up for sort of an in-line quarter. But when we see various shapes of hockey sticks for growth, that's where it causes alarm from our perspective. And so we think from a guidance perspective, that that's really where the risk is for the quarter. How much of this is hanging on China, specifically, the post-COVID boost in that economy didn't really materialize the way many hoped. And right now, there's a resurgence in anti-U.S. sentiment. Tim Cook was just over there,

probably trying to smooth some things over. Should we watch that line as well? You know, it's not only, you know, Chinese sentiment shifting back towards some nationalism, it's competition, right? Huawei is launching a new phone. And on our estimates, Huawei's going to produce, you know, 10 to 11 million phones this year. But next year, they're supposed to produce closer to 60 million. You know, it's hard to imagine that Apple from a competitive landscape is immune from that perspective. One sort of area of focus, too, Brandon, as we know that the top line might not be anything,

think to get excited about profit margins? You know, is there, can we get excited there or no? You know, it really depends. I mean, this is a overall story where services are growing faster than the hardware is, and services are much higher margins. So I think you could expect with some softness and services, gross margins will be just fine. Right, just fine, though. I guess my question would be what ignites the enthusiasm, maybe top line growth would be enough if we could kind of bring that back. But what would what would the growth metrics be that would re-excite investors, do you think? You know, I think it has to be something better than where the consensus is. So the consensus expectation going into, you know, the December quarter is for about 5% growth. That's up from

a minus number in their fiscal fourth quarter. So I think they have to get closer towards that expectation. But from our perspective, you know, we see Apple accelerating, but only just barely back to positive growth. There's far faster growing companies that trade at. cheaper multiples from our perspective. So I think from at least this point on, that's part of the reason that we're sector weighed up, but we just don't see the value in the stock that's this low growth with that high of a multiple. All right. Brendan, for now, thank you, and we'll see what happens after the bell today. Thanks for having me. Brendan Nispo. Coming up, some huge moves in the media space. Look at Roku up more than 30% to have its best one-day move, third best one-day move ever,

I should say. And green flags, Ferrari up 6%, raising guidance and seemingly navigating around some macro concerns. We'll get details on both of those names when Power Lunch returns. Welcome back. We have some big movers in the media space today, most specifically Roku, up 31% after better than expected revenue and guidance. Even Disney up more than 2% after announcing they'll buy the rest of Hulu from Comcast. Warner Brothers Discovery up 8.5%. despite finding itself in the middle of some criticism. Julia Borset here to break it all down for us. I'm curious about this criticism, Julia, but let's start with Roku.

That's the biggest mover. Huge mover here. I'm talking about a 30% jump in the stock after the company reported better than expected results after the bell yesterday. But the key thing here, Kelly, is the fact that Roku not only beat expectations in Q3, but guided to continuing and ongoing advertising revenue growth in the fourth quarter.

I'm just going to read you the key quote here. that I believe is driving all of these media companies higher. They said we had a solid rebound in video ads in the third quarter. We expect the year-over-year growth rate of video ads in the fourth quarter to be similar. This idea that the concern that we've seen for the social media stocks, that perhaps the conflict in the Middle East would be causing a pause and brand spending that's just not happening when it comes to the TV ad market. And it does indicate that the overall ad economy is continuing to strengthen. So really key piece of that here. Interesting. Next up, we've got Disney buying up our parent company Comcast share of Hulu.

That's not a surprise, but this is sort of a weird process where they're in the next four weeks going to deliver that first, what, $8 billion, and then they're going to argue over whether they owe more. What incentive is there for Bob Eager to say, yeah, I'll give you a couple billion more? I mean, this is going to end up in arbitration, right? They're contractually obligated to. I would say, think about this 8.6 billion. million dollars that Disney is paying Comcast. It's like a down payment. They made a deal years ago that set the sort of the base price that this asset would be worth. 27.5 billion dollars is the base price for what they would pay for Hulu. So this is Disney paying their percentage of that base price. Now, they did agree to have their lawyers and their bankers figure out how much of a premium to that base price they were going to have to pay. So the bankers and the lawyers,

are working on that right now. And there is an expectation that there will be some sort of premium paid. So Rich Greenfield, he, well, because that was the deal they, they arranged. But valuations were so high back then. I mean, isn't Bob I, you're going to say, well, you know, times a dip. Look at what's happened immediately. Look what's happened to our stock. John, valuations were high then, but you have to look at the fact that Hulu has grown so dramatically since then, specifically when it comes to the user count. Now, Rich Greenfield, who watches this space very closely, he is saying that $35 billion seems like a fair starting point for these negotiations. So there is a consensus that there would be some sort of premium pay. The question

is just how much. Now, the other thing that's really complicated here when you're coming to valuing an asset like Hulu is we've never seen a huge streamer like this ever be sold outright before. And you also have to consider how much Hulu's value is tied into the fact that is part of this this sort of bundle that Disney has put together with ESPN Plus and Disney Plus as well. But we're looking at some of these analysts saying that sort of look in the $35 billion range and look the fact that all of these streamers have reported so much growth in the quarter. We just had Netflix beat expectations by a lot. Now there's some optimism coming out of Roku.

That may impact how much this asset is valued at as well. Yeah, I mean, I guess the only thing they could do to get more leverage would be to say we're not going to buy it. you know, but that's a whole other story. Let's move on. That chip has sailed. They already said they're going to buy it. That's what today's down or the news yesterday about the down payment was about. Exactly, exactly. Julia, let's move on to this final story, which is something I've kind of always wanted to do, a wild story out of HBO. A new reports emerging that the former president of original programming ordered the creation of fake social media accounts to troll negative critics. What do we make of this? Well, he acknowledged it today. He was doing a present. This is Casey Blois.

He was doing a presentation today. He said in the midst of the darkest point of the pandemic. He was spending too much time on Twitter. And he said, it was just a handful of tweets that he had gotten one employee to send to critics. And this is not a widespread thing. But he said it was a dumb mistake and sort of in the depths of pandemic. Did he just offer this up? Did people know and call him out on it? Or did he just randomly interrupt this presentation? So this was all, this was all reported by Rolling Stone. And it was first reported reported by Rolling Stone and then this sort of prompt him to acknowledge it in an event today that was previously scheduled to go through some of the highlights of HBO's programming coming next

year. But the idea of a fake Twitter account to troll out there, or to respond to critics who were maybe criticizing HBO, it's a lot of media noise, but ultimately really does not impact these Warner Discovery shares or anything like that for involving the employee. I mean, the fact that he acknowledged it today makes me think that this is this sort of water under the bridge. But I just want to point out these shares that are up 8% ahead of Warner Brothers Discovery reporting next week. I do think a lot of that is on the momentum from Roku. But the fact that Casey Boy is acknowledged it today, he said it was a dumb mistake, I think means that he's ready to move on from it and get to those results that are coming next week. He might be ready to move on. I think the employee who

they made tweet that stuff is suing. And that's part of the reason why it came out. That is how this all came out. So, yeah, so an employee sued saying that this employee had been pushed by Casey Bloy's to send these tweets, but then Rolling Stone picked up on this lawsuit, which is how we get to this story today. Maybe we haven't heard the end of this. I don't know. But for our audience right now online at the ad spend coming back is probably the biggest thing. Julia, thank you. We appreciate it. Our Julia Borson. Well, coming up, a big opportunity for small businesses. Amazon unveiling its first Buy Now Pay Letter checkout options for small business owners. Those details coming up next.

Shares of a firm near the highs of the day up almost 19% as it strikes a new deal with Amazon. Hughes, Sun, writing this story for CNBC.com. Amazon unveils Buy Now Pay Later option from a firm for small business owners. Hughes here on set, is this a big deal or is this just kind of the Amazon effect of, hey, boy, they like a firm? Okay, it's a big deal for a firm for a couple of reasons. If you recall in 2020 and 2021, there was all this hype about BNPL, perhaps overhype. And what happened here, basically, you know, the stock collapsed essentially from, you know,

it's still trading below their IPO price. That's because Peloton was their biggest anchor tenant. And as people stopped buying Pelotons, that business collapsed. And they needed to find growth. And they found it with Amazon and they found it with Shopify. And those two together account for about 75% of the U.S. e-commerce market, Cornwall Fargo. So by doing this and really proving that they have embedded in Amazon, for instance, in this

case, in this deal, I add basically approximately 35 billion, potentially, 35 billion in total sales volume on the Amazon platform, 6 million users, and I think perhaps you understand why they're up about 18% today after our scoop. Yeah, it's a big move for them. I mean, the stock's still well off the highs, though. You know, it's come down significantly in recent years. The affirm bear, and so they're up 100% this year, the affirm bears will say,

look at the impact on rising rates, look at the impact on defaults, and the rising defaults on their user base. There is perhaps the increasing appreciation by the analyst community that, look, their default rates aren't that bad. If you actually looked at that, they're about 2% or 3%,

which for essentially a subprime lender, is actually really fantastic. They've actually gone down this year in terms of defaults. So you're getting some reasons to kind of believe their story because they believe, and they professed, that they built a better credit mousetrap. So is there the equivalent of a small business credit card play here for a firm?

Is there some different kind of loyalty lock-in versus what they're getting from consumers? Because we've tended to think of BNPL as a consumer thing, but if there's a small business, bigger spending loyalty play, maybe that's significant in a different way. Well, one of their growth drivers has to be their debit card. And so that's one leg of it. The other, it happens to be these partnerships.

And that's kind of, it looks as low, you know, the way that they're going to win is potentially just by embedding themselves in these other players. All right. Hugh, thanks. We appreciate it. Our Hugh Sun reporting. Now let's get over to Morgan Brennan for the CNBC News Update.

Morgan. Hi, Kelly. Well, Secretary of State Anthony Blinken just left the U.S. to head to Israel and Jordan. Before departing, Blinken reiterated Israel's right to self-defense, but also said Tel Aviv has a responsibility to protect civilians. And he said the U.S. will focus on getting humanitarian aid into Gaza as well as setting conditions for a sustainable peace in the region. Meanwhile, a senior Biden administration official

tells NBC News at least 79 Americans and their family members have exited Gaza through the Rafa crossing in Egypt. The crossing opened to injured civilians and foreign nationals yesterday. After Egypt, Israel and Hamas agreed to up to 500 people may exit Gaza daily. Donald Trump's son Eric took the stand this afternoon in the $250 million civil fraud trial against the former president's family and the Trump organization. He testified he didn't know anything about the company's financial statements, but later acknowledged he was aware of them as far back as 2013 when presented with evidence. Both of Trump's adult sons previously said they relied on accountants to ensure financial records were correct. Kelly, back to you. All right, Morgan, thank you very much, Morgan Brennan.

Still to come on Power Lunge, going for brokers. A federal jury in Kansas City finding brokers liable for inflating prices. This says New York lawmakers are working to get high fees under control. We'll talk to the CEO of Douglas Elman about this and more next here on Power Lunch. Don't go anywhere. Welcome back to Power Lunge. The real estate market is dealing with a host of headwinds, especially as mortgage rates hover right around 8%.

And while the high end is holding up better, the lack of inventory combined with high rates are creating a lot of challenges for homebuyers. Here on said to discuss that is Scott Durkin. He's the CEO of Douglas Ellman. He's joined by our CNBC wealth reporter, Robert Frank. Welcome to both of you, first of all, Scott. Thanks for coming in. Robert, just kind of said the scene a little bit here for us.

So, Scott, the number that popped out for me is the October sales contracts. If you look at apartments sold for $10 million or more, that was triple the number of last year. And it doesn't feel like that kind of market. It feels like a very stagnant housing market. What's going on at the top? The top is always sort of different from everything else. But why is that more so now? Well, I think the $10 million market is strong because that market's not affected really by anything that's going on, whether it be interest rates or lack of inventory.

Because they're all cash buyers? They're all cash buyers, mainly. And they buy when they need to or when they don't. They're just, they're a different kind of buyer. And in Manhattan, we have so much new development now that hasn't been sold before. they want brand new. I want to ask you about new development because that's been fueling a lot of the sales for a lot of

this year because if you are in a 3% mortgage, you don't want to put your house on the market. But because of the lending crisis we're in now, there's not a lot of new development in the pipeline or getting started. They can't get financing. Is that all going to run out next year? And what's that going to look like for the market?

Well, I think you're absolutely right, but a buyer might not realize that. But there's not going to be supply. Right. And so prices will go up again. So I think without that inventory and that pipeline, I would start looking now. Wow, that's a nice thing to be able to tell people

is hurry up. Can we ask you about this lawsuit about real estate commissions? And what was your reaction to this? And what do you think the significance could potentially be? Well, I mean, it certainly was a curveball in many ways. I've been licensed

30 years. And I've been doing the same contracts and my agents and our buyers and our sellers, we've all been disclosing everything that they pay for and we pay for. But what would happen, for instance, if they say, you know, whether or not that model fundamentally changes that in order to get access to MLS or some, you know, they have to kind of open things up that way and it's no longer exclusive. I mean, Zillow's out there arguing today, it would be a huge benefit for them.

Maybe it would benefit the big technology players or something like that. I don't know. I don't see the benefit. I think it will hurt the housing market in a way in terms of the sellers and the prices could drop dramatically. Your stock is down on the expectation that broker fees, especially for the buyer fee, will be lower. Therefore, income to Douglas Ellman will be lower because of this. Is that the case? Investors have that right?

I think income for every agent in the entire United States. This is just not here. This is the entire country. And is what? Income's going to what? Well, if this, if it does not, when the appeal is not won, yeah, you're right. Whatever, the listing agent will have the power and also being paid the commission. But I think you can't just send buyers to 1990. No, but turning 3% if you can find your own house online and go there yourself to,

To pay a broker 3% as a buyer's agent doesn't make sense. Right? Well, you need something to negotiate it for you. That's the piece that for me has always been tricky about the housing markets. If I'm buying dinner on DoorDash, you know, that's one thing. I know what I'm getting. I want some fries, whatever. Even then you get some surprises.

Well, but homes are the biggest purchases that most people make. And so saving a little bit on commissions versus getting the best deal you possibly can and feeling like there's trust, I don't know where that factors in in this decision. I think if you're going to go it alone, you're going to pay more. You might not be getting the home you wanted. I mean, at Douglas Sellman, we equally represent sellers and buyers. So for us, it's hugely important. We've hired the best legal counsel that you can get, and we're going to fight this.

But let me ask you this. If you look overseas, even develop markets like the UK, the average commission for a broker in the UK is about 1% to 2%. Correct. Here it's 5.5% to 6%. Why is it? Well, let's not forget. The UK doesn't allow a second agent to come in with a buyer. It takes longer to sell because you're paying such little commission.

Here we split those commissions. We don't take it all for one side. Got it. We've always disclosed that. It's in every agreement. It's not like we deliberately did this. This is the way the business has been run the last 40 years. But don't you think a lot of people weren't aware that the buyer's agent is paid by the seller's agent?

And therefore, it's not really representing the buyer. They're kind of in the interest of the sale. Do you think more transparency is good for people to understand just who's paying what and who's representing what and what everyone's incentive is? Isn't that a good thing? Well, the transparency is already there. You've all bought and sold. You see the sheet. You see the final closing sheet.

It's there. There's no secret. There's no hiding it. So it's sort of like this is a curveball. I guess my last question to you, Scott, would be. What do you foresee taking place in your market over the next six to 12 months? Whichever wait, whatever happens with brokers fees, but just in terms of supply and demand in the economy, what's the outlook? We are finally seeing the needle move in the right direction.

So October for us was in some markets 20% higher than last year, and as well as for 19 and 20. 21 was a year that was one of those years that was phenomenal. But we're seeing the market creep up. listings come on the market. We're seeing sellers that were not wanting to give up their cheap money that they had finally decide to move on and we're being creative. And I think there's a lot of deals out there right now. And October for us was, our last two weeks was incredible in closings and in what we call written. And we'll see if even moves and rates today make November equally so. Scott, thanks so much for coming and today. We appreciate it. Scott Durkin and Robert,

we'll see you next block. Robert Frank. Still ahead, Ferrari is racing higher. The luxury automaker shares surging after a beat and raised third quarter will get the key highlights when Power Lunch comes right back. Welcome back. Shares of Ferrari are up 5% on a big jump in profit in the third quarter, also raising full year guidance.

Robert Frank is back with the key highlights from the report. Robert. Well, John, Ferrari's market cap topping $60 billion. So Ferrari is now worth 50% more than Ford or GM. it's up 46%, delivery's up 9%. They're actually making more money per car, and that's because of those limited addition cars. They sell for $4 to $5 million.

And a lot of customization, that's where customers can choose their own paint colors, their fabrics, that boosts the profit. Their margins now over 26%, which for a car company is amazing. But it was the guidance that investors really loved here. Ferrari raising both the sales and profit guidance for 2023, CEO Benedetto Vinyas, saying he is seeing no slowdown. whatsoever in demand. He said, quote, the order book remains at the highest level across all geographies and across all models covering the entire 2025. So that means they're sold out for the next two years. Hybrid cars actually outsold combustion engines for the first time at Ferrari. Vinya saying they now have a prototype for the first ever all electric Ferrari. That's going to be launched in 2025.

Robert, this reminds me of what we were just hearing about homes above 10 million still selling quite well. Ferraris, too. But when this does slow down, does it happen suddenly? It's already happening with Porsche and Aston Martin. So the question on the call by analysts is Ferrari, we've heard from Aston, they're cutting production targets for this year. Porsche has said they're seeing a decline. Why is Ferrari different? To your point, it's that Ferrari said, look, in so many words,

our customers are wealthier, so they're more immune to these economic shocks or rising rates. And also, Ferrari is a very special brand, the people who are bonded with that brand are really bonded to Ferrari. But I think it's really the level of customer, especially for these limited addition, four to five million dollars cars. These are billionaires or people worth hundreds of millions that really don't care about rising rates. The question from analysts is if you're sold out for two to three years, what do you do as a company for the next two to three years?

You have no more cars. That was the question on the call. You just hold events. Just hold events and you win a lot of F1 races, hopefully. So is it the size of their customer base expanding? That's the growth play for them? It's really increasing production. They're building a new EV factory that will come on board in 2025.

That's going to be the first of what will allow them to make more cars. They make less than 15,000 cars a year. In order to please Wall Street, they're going to have to keep increasing that number while remaining exclusive. And that's going to be the balance. All right. Robert, thank you. Thank you, again, Robert Frank. Still to come, drugs, delivery, and discounts.

Eli Lilly, Doordash and Target are all moving today. We're going to get the trades on each stock in three-stock lunch after the break. Welcome back. It's time for today's three-stock lunch, and we're looking at three-big movers today and hearing from their CEOs. We'll start with Eli Lilly, which reported a third-quarter earning speed on strength in Mangaro, and that was just for diabetes. The company waiting for the approval for the drug for weight loss. Here's what CEO David Ricks had to say about that. People who are using Mangaro are now using. using it for type 2 diabetes. We have an application at a review at the FDA. We expect action on

this quarter for obesity. And when they're on the medication, we know from our studies, people do eat less. That's how you lose so much weight. And in our studies, again, reminder, people lost on average 48 pounds of weight in a little over a year. That's a life-changing and health-changing event for people. So we're focused on getting that application out. And here with our trades today is Ava Ados. She is the CIO over at ER shares. Ava, it's good to see you again. Lily's been a beast. Would you be a buyer?

You stick with the stock here? I would have it as a whole. The reason is overall the company has flat growth. In fact, last year it grew by 1.5%. So the overall company is flat. However, the key bright spot is Mungaro, the recent diabetes drug that's also used for obesity. And we believe even though they have two key competitors in the market from Nova Nordis, the market is big enough for all.

The drug became the second biggest drug overnight. It actually contributes, has contributed $3 billion this year so far. And so we believe that will continue to contribute to their revenues in the future in a big way. However, we have it as a fold because, as I said before, overall, the company has been flat in terms of revenue growth. And also their relative valuation is three to four times their peers. But we will continue to monitor their sales when it comes to Mongero. Okay, Eva, next up is DoorDash shares jumped more than 16% at the moment. The company saw its food orders increase more than 100 million year over year.

Analysts say the company's guidance shows solid growth. Here's what DoorDash's CEO, Tony Shue, had to say about the impact of inflation on the business. We've certainly seen the rise of inflation, both on commodity goods, whether it be grocery items or convenience goods. We've also seen that on input prices when it comes to the food that restaurants have to use to sell their product. And we've seen for certain segments some trade down effect where they're purchasing fewer items, but actually still continuing the same number of purchases. And when you kind of add in the increased prices because of the inflation as well as the reduced number of items, it kind of nets out to be a one. And yet DoorDash still doing well. So Eva, is it worth ordering in DoorDash still? Yeah, definitely. I order a person almost every day. But this is a buy for us. In fact,

it's one of our major holdings. We think it's a buy. I think the company has proved itself in the last three years. He has tripled the revenues to $8.3 billion. They also went from half a billion in losses to $600 million in years. in revenues. And so that happened in the last two years alone. And so I think the company has turned the corner. It has proved itself. It's a big development for a company to be, to turn cash flow positive while also maintaining a 30%, 33% actually revenue growth. So I think this growth story is only going to get better in the near future. And I think there's clear sailing ahead. All right. Loving it. All right. Let's get to Target then. CEO Brian Cornell.

Speaking as part of the CNBC Evolve Global Summit today, explaining what he is seeing and hearing from the target customer looks at. We are seeing signs of cautions. I think the most prevalent term we hear from consumers, they're looking at their budgets really carefully right now. And while we've certainly seen inflation starting to decline, lots of progress on that front, when you look at the impact over the last few years,

in a category like food and beverage, those household essential items, food and beverage inflation and costs are up 25 to 30 percent. All right. So that brings us to shares, which are actually up about 1% off a tough stretch. Ava, what do you do here? I would have it as a hold to a sell, actually, because this is a sluggish company. They have their profits are below where they were in the last few years.

They had negative revenue growth. of minus 5% in the last year. And so their SG&A costs had actually rise in the last year, too. And so overall, I think it is a bureaucratic company. It's a sluggish company. And given yesterday's Fed announcement, which was quite encouraging, actually,

in today's announcement that shows that labor costs are coming down, I think that growth companies will outperform stables. And so it might be a good decision for an investor who is optimistic about the future to reallocate funds for, stable such as target to growth companies, given the fact that the Israeli and Hamas tension doesn't escalate? Oh, well, it hangs over so much, doesn't it?

Ava, for now, thank you. We appreciate your time and thanks for joining us today. Ava Ados for three-stock lunch. Well, the Beatles come together to release a new song with a little help from their friend, AI. We'll discuss that and much more on Power Lunch Return. Welcome back, just about three minutes left in the show and several more stories to run through, so let's get right to it, starting with the fact that it's been a rocky restart for

federal student loan payments. A Department of Education memo published last night details thousands of errors made in just the past few weeks, including one borrower being told they owe $108,000 just for the month of October, John. The problem here, I think, is that to the government, that's not a lot of money to owe in a month. I mean, look how much the government owes. I think you have to answer them in their language if that happens to you say, my house doesn't have a speaker, we can't pass a budget, sorry, we're showing. I will be issuing more treasury bills to help cover that cost. And the hot new seat on the plane is not at the very front.

Not quite business class, definitely not coach. Pre-em economy cabins are hooking travelers who are willing to treat themselves to extra comfort for about twice the price of a normal coach seat on some flights. You get the alcohol. I was going to say, do you get more a bigger seat, more foot space? Yeah, you get that. Do you? And the alcohol, yes. And you get a better meal.

For some of us, the leg space is more important at this point. Yes. I'm a short man. So, you know, around 5'8. But you can drink. I'll see you in free of economy. According to bank rate, 92% of young professionals now want a four-day work week

and would give up a lot to make it happen. Among what they'd give up, working longer hours, working nights or weekends, and even cutting their pay. And I kind of get that. Again, I know I'm beating the drum on this whole work-from-home thing especially for people in their 30s and that sort of thing. But the quality of life that you get from having a day at home,

everyone realized during COVID, it's really hard when you can't get that back. I don't believe in it, Kelly. I mean, maybe this is the Gen Xer in me talking. But if I'm trying to get ahead of my career, I'm not working four days a week. Like, what are you? Agreed, but there's a difference between the beginning of a career

or maybe that stretch where you're really, or maybe it's even a little bit of a caretaker thing, right? Like when you have primary responsibilities in both parents working, the ability to have that extra day for doctor's appointments and going to the dentist, all the rest of it, you know? I don't know. I live ambitiously, Kelly. All right, a new song from the Beatles just dropped with a little help from AI.

Now and then was 45 years in the making, starting as a demo recorded by John Lennon back in 1978. The remaining three Beatles tried to finish it in the 90s, but technology didn't exist to separate Lennon's voice from his piano part until new advancements in AI helped get it over the finish. The song's now streaming on Spotify and Apple Music with CD and vinyl versions available tomorrow. This isn't generative AI.

They're just isolating his voice. So what we're hearing is not the song. This is that you're hearing his voice and the other instrument. It's just not you're not hearing the piano part from the way back then. I haven't, but it's like erasing something in Photoshop. It's not like generating something that wasn't there before. Are you a beetle? I don't know.

I love the Beatles. Thanks for watching Power Lange. And we'll see John on overtime for Apple Earnings. Closing Bell starts now. Thank you.