Power Lunch - Jobs Report Reaction, Software Surge, Back-to-School Stock Picks 8/7/26

Episode Date: August 7, 2026

The major averages are moving higher across the board despite the dismal jobs report as investors believe the Fed will be forced to keep rates on hold for now. Dominic Chu and Kelly Evans break down the odds of a September rate hike with Wells Fargo’s Tom Porcelli and recap software’s recent rally with Citi analyst, Fatima Boolani. Later on, Telsey Advisory Group CEO, Dana Telsey, joins the show to lay out some of her top stock picks for the back-to-school shopping season as the NRF expects a record-setting stretch of spending this year. Meanwhile, CNBC’s Phil LeBeau chats with the anchors about the latest car buying trends as more consumers shift to more mainstream brands. 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 Dominic Chu. I'm Kelly Evans. Brian will be back on Monday. And stocks are in the green today. Yields are also lower following that week July jobs report. And expectations for the Fed's next move are shifting. Well, Spargo's chief economist Tom Porcelli is here. All right. And a portfolio power check investor Nancy Tangler with her big portfolio rebalance. What she's buying and what she's selling. That's coming up. But we start with software. Remember that SaaSpacola. That's looking like a distant memory these days. Take a look at Atlassian soaring more than 30% after beating on quarterly earnings on pace for its best day ever historical. It's not alone. Twilio 5-9, also up double digits, helping send the IGVETF higher, stronger earnings, upbeat guidance, assuaging some investor fears of the AI disruption in the total industry. Let's bring in Fatima Bulani, co-head of U.S. Software Equity Research at Citigroup, This is an interesting move because it wasn't that long ago we spoke to you about maybe some of the gyrations that were happening. But now it seems like sentiment has shifted not wholesale.

There's still a way to go to catch up. But what exactly is, at least in your mind, more definitive about this turn in sentiment versus what we've seen over the course of the past six to nine months? Thanks for having me. Look, I think the theme and the word of the date is acceleration. We saw acceleration in very important KPIs out of both class. Flair and Atlassian. And really, that is starting to turn the tide and effectively creating a vibe and perception shift, especially for Atlassian around AI displacement fears. So we're seeing a little bit of that unwind and maybe a little bit of evaporation of that terminal risk and

terminal concern fears that, you know, AI natives or the frontier labs are going to vibe code their way into disrupting Atlassian's core business proposition and competitive mode. What have you seen fundamentally from these earnings reports, from the company commentary, their outlooks that is supportive in your mind as a fundamental analyst that these at least moves can be justified in the coming months and quarters? Well, there's the beaten raise. So on the back of the business is accelerating and reporting, accelerating, revenue growth and accelerating backlog and bookings growth with confidence that businesses

that are engaging with and procuring the software are signing larger deals, are signing larger commitments, and are doing this on a multi-year basis. That is a huge confidence check in undergirding what we think are probably more resilient fundamentals for enterprise software. So really, it's delivering on accelerating metrics in quarter and talking to better guidance and better outlooks with beat and raises effectively. Fatima, who's next? To see these pops, it is kind of exciting, especially for an area that was so under pressure.

And yes, look at what's happening. It's helping the alternative asset managers, anybody with software exposure, which is not to say that everywhere is coming up roses, but who else do you think is kind of in the sweet spot right now? And it'd be nice to have more, you know, you wake up in days like this and see more big movers like that. You know, I'd love to give you.

a controversial answer, but what we've seen in enterprise software has generally been a tale of two cities, right? You've seen the infrastructure software stocks of which Cloudflare would be a part, of which cybersecurity names would be a part, relatively insulated from a lot of the fear and loathing with respect to AI disruption. So, you know, the message is really you have to stick to those infrastructure software players, right? Now, are there gems within that neighborhood? We think so. Datadog is a name that reported this week. The stop closed off pretty materially, closed down pretty materially. And that was largely on the basis of some of their commentary around a very large nine-figure customer, you know, reducing their usage, right? And we generally think that's a red herring because

the rest of the business, the entirety of Datadog's business, accelerated, right? So we think that the focus has been misplaced, and this is a name, whilst not cheap, on a relative basis to a crowd strike, to a cloud flare, growing at comparable, if not better rates, you're getting a little bit of a valuation arbitrage for a very high-quality business. And we've had a number of people talking about how they think they are well positioned with momentum for, you mentioned that they had a big customer who was kind of pulling back, which is exactly what we heard from IBM, different business, but same kind of idea. Why, is this a coincidence that? two different companies have told us now, you know what, a big customer, is it because they're

spending those AI budgets elsewhere? And if so, how do you kind of protect yourself from that? So, data dogs interesting, right? They are at the right place at the right time, providing value to the most consequential next generation of companies. But at the same time, they have a pretty remarkable, stable, and actually accelerating enterprise customer base, right? So I'm bifurcating between these labs and these AI natives, these Neo Clouds, versus your typical Fortune 500 organization, their core proposition around bringing you insights directly to your table to think about and very visibly and clearly see what your IT environment is doing, that is a tremendous value proposition in an environment where the average company is ingesting so much innovation and trying to

modernize and reach their AI modernization and AI enablement goals. And Datadog is an absolute enabler of that. And they're straddling both these spheres. So they're in a lot of ways pretty hedged in terms of customers spending patterns. And I think the last point I'll make is, you know, both Cloudflare and Datadog and even Atlassian, in this era where we vacillated between token maxing and token minimizing, you know, all these companies play a very important role in driving better efficiency, better ROI, and, you know, streamlining tokenomics for the average organization. So there is absolutely a play for all these companies, all three of these companies, to articulate and express that view with their portfolio.

Hey, Fatima, I know you've named a lot of names, which is what we love, because we are now focusing on specific companies. But if we were to pull back slightly to a slightly higher level view, from your standpoint, if you look at all the channel checks you do, you look at all of the kind of projections that you have, if there was an industry or a sub-industry group, I guess within software, thematically speaking, that you would key on as your favorite part

of where corporate spending is going to go, where the fundamentals are the strongest, where would it be? Would it be in some place like cybersecurity? Would it be in neocloud? How does that work? So within infrastructure, if you had me really choose just one,

it would be cybersecurity. Your risk surface as an average organization has gone parabolic. We've seen the news flow in the last couple of weeks with agents and AIs and models going rogue. And so for the average organization, the impetus is that much higher to batten down the hatches.

And look, cybersecurity has been such a Teflon area of spend as a general matter, but we generally think there's going to be more upward pressure as the attack landscape morphs materially as attackers and defenders are going to have to move to a new nexus of how to tackle novel threats and novel attacks. So really the terminal value of the cyber businesses is just higher. And you've seen a lot of concentration, both in terms of capital

and market cap agglomeration with the bigs, which are crowdstrike and Paulo. And we continue to like those names as being most favorably exposed to these broader trends and consolidation of tools and capabilities, they've got the most fulsome portfolios in the confines of our coverage for the cyber exposure. All right, Fatima, thanks. Appreciate it on a kind of exciting day for software for Tima Boulani. Before we go and check on shares of SpaceX, those are blasting higher today after the lockup on the first batch of shares expired yesterday. You know, Don, we call that the wall of worry. It's climbed up a couple more feet, I think.

Sure thing. The shares are up 11% today, still under the 135 IPO price, but are pacing for an 18% gain this week. which would be its best week yet in its short time as a public company. And we are just getting started later this hour. We've got the latest buys and sells from a top money manager, plus picks in the retail space, and the latest on Open AIs reported new device. But first, what does this morning's jobs report mean for Warsh and for the Fed?

We'll talk about that next. Big surprise from today's jobs report when the U.S. economy said it unexpectedly lost 23,000 jobs in July. The unemployment rate also ticked lower. This miss is quickly reshaping expectations for what the Fed will do in September. Take a look at the CME Group's Fed Watch tool. Before the report, which you can see on the left there, markets saw better than a 50% chance of a hike. After the numbers, on the right side of your screen, that flipped,

only 42% chance of a hike. Markets now see a 58% chance. The rates are unchanged in September. We're seeing the same shift, by the way, over on Kalshi, which is also looking at the odds for the rest of the year in terms of rate hikes and the odds of the feds leaving rates unchanged, jumped 16 percentage points after the report. Now that is in the lead. And check this out, the odds of a hike. Oh, that was for September. And for the hike all year, about a coin flip,

54%, but it was as high as 67% earlier this month. Joining us now is Tom Porcelli, the chief economist at Wells Fargo. That was hard for you to say, right? She was very deliberate about it, very deliberate about it. It's great to see you. Good to see you both. And remind me which camp you were in coming into the report. We're on the hold. The hold camp. Yeah, we've been there. We've been there. We still expect it. Earlier this week, we were taking people saying three hikes couldn't be ruled out. And you still think none. No, yeah. I look, I think the argument for hiking seems to obviously rest on the shoulders of inflation. And we would argue that this is not the kind of inflation

that the Fed could actually impact. And so in that context, raising rate, we've said this many times. Raising rates is on a costless endeavor. Right. Like, I get it. Yes, you'll hit inflation to some extent, though the impact is actually modest, but you also hit growth. But why do you see the impact? So I'm going to quote Diane Swank for last hour, and she's been very hawkish, and she's saying this is ridiculous, inflation is too bad, the Warsh himself says the Fed has to do something about it. So why, how can you? Yeah, no, it's the right discussion point. So what we would say is think about the things that's actually doing a driving from an inflation perspective, right? It's tariffs, supply shock, and it is energy, which is

also supply shop. If you want to go back like even two and a half or three years, you can then throw in auto insurance and auto repair, which I know sound like inconsequential categories for most people. But they were massive. We're only down to tariffs and oil. Yeah. That's it. So if you look at it, this to me is, I think, a conversation that people should be having in a bigger way. If you look at something like core CPI and you look at core PCE, do you know that they've diverged? There's been actually a pretty sizable divergence between the two. And I would actually argue if you ask people, hey, what's core CPI running at? I think most people actually don't know. It's actually running at a 2.5% pace. I would have said 3-1. Yeah. And if you actually

look at it on a three-month annualized basis, which is a really fair way of getting a sense for short-term trends, it's running at a 2.2% pace. So pretty much on target. Yeah, exactly. So, again, I think people have to ask, it's not enough to say inflation is elevated. I think you actually need to ask the why. And the why in terms of the divergence between CPI and PCE is because the weights are different. Right. Like, there's just less weight on housing. And they're about to change it again. This whole thing, so the conspiracy theory is the Fed's going to change PCE in order to justify not hiking. What would you say? No, I think that these are actually changes that they should be making, right?

Like portfolio management fees, they're going after tech. You know, they're going to alter the weights there to some extent. I would actually argue that these are changes that are actually warranted at this point. It's also interesting as well, because if you look at the way the markets are interpreting all of this, an interesting point stood out to me. Richard Bernstein advisors had kind of put out there in the ether. in social media, this kind of chart that showed the prices of copper, right, and then vis-a-vis the target Fed funds rate. And this is what we're showing you right now. And the argument that

RV advisors is making is that if you look at this, the price of copper, copper futures, suggests that you need to hike interest rates in order to kind of catch things up to where certain parts of the macro market are. Is this true in your mind? Do you think that we need to have this kind of a reaction from rates to accommodate for price movements like this in certain parts of the market? So here's, I think, the right way of thinking about this. I think, one, you need to ask what problem are we solving for. And if it's supply shock, you actually really can't affect it, then I think we need to sort of keep that in mind. And by the way, as an aside, I would say, if you think about tariff prices and where it actually flows through two, it obviously hits

durable goods, durable goods prices. Durable goods prices are in a perennial state of deflation, Not disinflation, deflation always, except for May of last year when they started to rise, and now they're plus three. But for the prior 35 years, right, outside of the COVID window, they've been in a perennial state of deflation. Now ask yourself this, what has actual durable good spending done in the wake of that? And by the way, I'm talking about real spending, which everyone knows that means inflation adjusted.

But I would actually argue it also means the volume of spending. And the volume of spending on the back of that has actually slowed. And it's not so so the consumer was self-correcting, which I think is fascinating in and of itself. And sort of tells you there's not a broader inflationary impulse because you can't just keep, let me ask you this. That's exactly right. We've heard from a, there were three dissenters who wanted to raise rates. They gave us their statements. Yes.

We hear, I mean, look at Waller and how vociferous he is. And that was a little bit, I think, before the meeting, but saying like, it's time to hike. When you explain all this, I'm persuaded. I think, yeah, you're right. This core, what's the problem? And then I go, well, why is every other feeling? Fed official. It feels like out there saying we have to hike. I think the Fed actually has to be cognizant of they have a mandate, right? One of the mandates is inflation. So I think it's actually

right for them to go out there and say, hey, look, we're really keeping your eye on inflation. It's obviously been elevated. You know, it's been elevated for five years. Now again, I think that that's, that again, is not in and of itself compelling. Because if you think about, you know, back to the 1980s when Volker slayed the inflation dragon, inflation was, you know, incredibly elevated for way more than five years. It was like 10 or 15 years. Yeah, exactly. So I get it.

It's not improving to the pace that people wanted, but it was improving before we had these supply shops. And if you adjust for these supply shocks, inflation actually is not nearly as bad as I think people think. I think in the coming months, I think inflation will actually start to look better. You know what I'm curious about is if we do see inflation really start to come down, normalize maybe more,

what parts of the consumer goods spectrum, or the services spectrum. We'll see the correction the fastest. Where will we, as consumers, start to feel like things are getting better quickly? It'll definitely be on the durable good side. I mean, that's the sector that has experienced most of the increase that we've seen. The thing that's done most of the damage is that if you look at services, services inflation, if I asked you, what was services inflation running at pre-COVID?

I think most people would probably guess, and it's been 3%. Most people don't know that answer. I mean, Kelly obviously knows what? Well, what would they guess? You think higher or lower? No, I think they would guess much lower. Yeah, but it's like we're there. Like it's running out of between a three to three and a half percent pace right now.

So it's not the services side because the services side is almost where it was at the pre-COVID run rate. It's really the durable side. And that would mean things like washing. These are items that are supposed to last three years or one. Refrigerators. Yeah, right. Washing machine stoves. That's 100% right.

I want to come back to something if we have a second just to address something you mentioned because I think is a super important idea. I'm not, I don't find the argument for raising rates today compelling at all. because of inflation. But I think a much more sort of like intellectually honest or at least a more interesting conversation around raising rates is what is trend growth going to do? Trend growth, I can easily make an argument that trend growth is going to rise over the coming years. Given in the 2010s, we thought trend growth was basically zero.

Yeah, exactly. So that to me is a much more compelling argument for why you might want to consider raising rates. Again, I'm not arguing that you should do it right now. But then you get into the whole thing where you go, well, but which. economic model are we using? Are we using the model which says you don't have to worry if growth is strong because it can be non-inflationary? Do you believe in- No, I think that's actually wrong. So if you look at, there are certain mathematical identities that just exist in the world of economics. If you're going to lift productivity, then trend growth

is going to rise. That is a mathematical identity. Here's another mathematical identity. If you lift trend, if you lift trend growth, you know what else rises? Our star. With the natural rate of interest. Yes, always, right? So you can make an argument that the neutral rate of interest. Yeah, exactly. So just stronger GDP means the Fed funds rate has to go up just so that they don't end up stimulating the economy. Yeah, and look, the reality is the Fed chopped their long run estimate, right? I mean, you think back to 2012, which is the first time the Fed really started to produce these long run estimates.

It was 4.5%. It got as low as 2.5% stated through most of COVID, and now it's 3.1. I would argue that that is actually ripe to keep on increasing. Can we talk about whether or not consumer goods on the discretionary but non-fully durable, side. We'll start to see improvement there. So I'm talking about things that are not like washing machines, but are things that we buy at the store that could be like wares or, you know, pots and pans or whatever that kind of thing is, because maybe that's where people will see some of the impact the most. They'll feel it a little bit. Yeah, I think that's that. And that I would argue as part of the

sort of the durable goods component of this. Yeah. So you would see more improvement there, for sure. I'm going to keep this in mind. When Dom and I go to Costco, I want better deals. Or I'm going to say, Tom told me, this is where I'm going to see the relief. You want me to give you a quick little bit of input? One of my sons, or actually, both of my children, took this cooking class at Zwillings. Go to Zwillings. Put your kids in this class. They literally give you like 25% off everything.

Knives and everything included. I don't think that's the kind of disinflation we're talking about. You'll see it. By the way, we'll save the conversation for golf equipment for some other time down the line. Absolutely. All right. Tom Porcelli, thank you so much for the time. We appreciate it.

All right, well, Treasuries are rallying right now after data showed employers are unexpectedly cutting jobs in July suggesting labor market challenges that could impact the Fed's willingness to raise interest rates, the discussion we just had. Rick Santelli, you've been listening in on Tom Porcelli. He joins us now. What do you think? I don't think they're going to raise rates in September, that's for sure. And I also think things like copper might not be very strong arguments to raise rates when you consider over a third of the world's copper comes from countries that have political unrest and geopolitical instability like Peru and Chile. Now, let's look at average hourly earnings year over year.

Down 3.2 percent, actually down 3.15, but they round it to 3.2. That chart goes back basically to COVID era. You could see how it all turns out. That line going down, you certainly don't want that to be returned on your 401K. Now, if we look at twos and tens together, especially on the percentage chart, we can see what's dropping the most. And this is significant, the short end, most closely aligned with, yes, you guessed it, the Federal Reserve. And as you pointed out, we've gone from in the 60s to in the 50s to in the 40s on the probability of a September rate hike. And today, the driving force underscores what the big motivation has been.

Since the day after the war started, interest rates have moved up from very low levels. Look at the tenure against crude oil, and it seems pretty easy to see why. the tug of war happened. 8.30 Eastern Week job reports, boom. You swan dive on interest rates. Oil, the meantime goes up. Boom, we follow it on the bounce in front of a weekend with lots of capital risk. And I think that dynamic's going to stay in place for a while,

although I'd look forward to the inflation data next week. Dom Kelly, back to you. All right, always watching the headlines there. Rick Santelli with the bond report. Thank you very much for that. Coming up on the show, it's been a very busy earnings season, and that's meant a lot of moves for our next. guest. Nancy Tangler will join us now with what she's buying and maybe more importantly, what she's

selling. That story's coming up next. Welcome back. Our next guest has been making some big moves to her portfolio. Getting out of some well-known names and she's here to break it all down. Nancy Tangler is CIO and CEO of Laffer Tangler investments. It's great to see you, Nancy. I see you bought some Starbucks, some deer. A lot of the names like Vernova and Nextera, you sold some IB. What to you is kind of the one that you had to go, all right, you know, it's, it's time. It's time to make a change. Yeah, good to see you too, Kelly. I, IBM was a name that we think we'll work over the long term, but opportunity cost is a thing, and it's something that investors should pay attention to. So we left it in our thematic portfolio as a quantum play, but in our growth and value strategies,

we exited it. We also exited L3 Harris, but maintained our position in our TX, And we use those proceeds, particularly in the value strategy, to add to Nvidia, which we initiated at the end of May and then added to at the end of July. And then Amazon, both of which are traditional growth stocks. You could call them Fallen Angel growth stocks. And we moved them into our value portfolios. We owned them in our 12 best and our growth strategies. But they were, it was opportunistic. We got lucky.

Apple went down. Amazon went up and the same thing for Nvidia. It's been a workhorse in the last couple of months. It is fascinating to talk about how a lot of these tech names have become value plays to some extent, even as well. So this might be a good chance to get your thoughts on the market more broadly. Let's just kind of say it again. The memory stocks are down 40%.

DRAM is down 40% from its June highs. Not a problem for the broader markets, by the way. We have software, certain areas taking off cyber. Even the semis were up 7%. this week you talked about. How would you describe, our guests yesterday said this year will be remembered is the year of these big rotations, while overall the water's fine. How would you describe what's going on here? Yeah, we wrote a piece in the middle of July when we were all just kind of pulling our hair out and described the market as a ping pong ball and a lot of machine, because you've

got these huge movements and reversals within days of each other. But I think that is indicative of a market that is, sorry, an economy that is in transition. And that is what we are. This is, call it the fourth industrial revolution or technological revolution. But the themes that we are hearing from companies across sectors are, you know, using AI for product development, but we're not adding to headcount, cutting costs via headcount and growing revenues. And you're seeing it, you know, Starbucks is a great example.

We heard it from Goldman Sachs and from, and Sheppel. They're going to improve their drilling results with 25% less, less CAPEX. This is like the 90s, and I started talking about this on your show about four years ago, productivity-driven growth, which we think will be disinflationary. And that's one of the reasons why we don't think the Fed is going to hike in the near term, if at all, because he understands and is focused on productivity-driven growth. Hey, Nancy, it's Dom. There has been a shift in the way people are viewing cash flows, right? And we saw it this earning season for sure. If you spend too much money, you kind of go cash flow negative. Things are a little bit more dicey from a sentiment in stock perspective. In the past, there's been this kind of accommodation for people spending money for future growth. What exactly is your view on just how much kind of cash flow, free cash flow overall is going to play into how traders and investors view these types of companies in the company. quarters? Well, traders are always going to trade against the headlines, and that's what creates

short-term volatility, and that's an opportunity for us. But if you look at the companies, the quality of the companies that are going into momentary negative free cash flow, their balance sheets are stellar. That was not the case in the 90s, and their growing earnings at a much faster pace. Back then, it was really growing revenues. Remember, the market was up like 220 percent. from 95 to 99, but the earnings growth was 60%. We're in an environment where earnings growth is keeping up with price performance. So today's focus is free cash flow. It will shift to something else.

I want these companies to invest for the future and spend money on CAPEX. And what we learned from Microsoft DOM and from Amazon is that they are beginning to monetize the CAPX spend. That was the worry. That should be the worry. And now it's been taken off the table. All right. Nancy Tangler of Laffer Tangler investments. Have a great weekend. Thank you so much for the thoughts.

Thank you. All right, shares of the trade desk, meanwhile, they're getting crushed, absolutely crushed today. After reporting earnings last night, it's really an exclamation point on what's been a brutal run over the course of the past 12 months or so, maybe last year and a half for the company. Since its all-time high of almost $69 billion worth of market cap, back on December 4th, 2004, those shares have slid now 90%. and the company has a market cap of less than $7 billion. The charts really tell the story. But you wonder whether or not some of these names will ever find a way to try to kind of get things back going again. They've got a huge task in front of them.

At 11, Kryteo, also under pressure. Not the whole space, but there are some pockets. All right. Well, it's back to school time, and that means it's time for us to check in on the retailers and get a top industry watchers' top picks for the back-to-school season. Don't go anywhere. Those picks are coming up after this break. Welcome back. Summer is flying by, and the latest data from the National Retail Federation expects total back-to-class spending to hit a record $146.8 billion this season, including a near 10% growth and back-to-school buying.

The Tulsi Advisory Group is also pointing to a healthy but value-driven back-to-school shopping season. So joining us now is none other than Dana Telsey, the CEO and chief research officer over at the Telsey Advisory Group. Dana, this is one of those scenarios where it's all about the picks. Who's outperforming, underperforming, who's executing the best? So who is going to be the primary beneficiary or beneficiaries of the season? Thank you very much for having me. Yes, it is all about value and also innovation. The early reads so far are newness matters.

Look at Steve Madden, who's basically seeing strength. You're taking a look also at Victoria's Secret with some of their new collections that have been coming out that's been very exciting. Look at value with TJX and Ross stores. I think that's very compelling. And let's talk about denim, whether it's wide leg, high rise, low rise, you name it. There's something for everyone at Levi's. And you'll see the Abercrombie and Fitches benefit too. Look at their Hollister and Target collaboration that's going on for the first ever home decor launch. Those are all, again, value-oriented or kind of mid-scale picks. What happened to the luxury stuff? What about Ralph Lauren? What about all those brands?

Ralph Lauren, AUR was up 15%. I think Ralph Lauren is doing terrific and there's more to come. I think there's opportunity in Ralph because keep in mind, they can scale the spectrum. You can have lower priced, mid-tier, you can have upper end with the purple label of Ralph. So we like that. I think also on the luxury and you've seen North America be the strength, that's where the strength is. You've seen other types of companies like figs have terrific. average order value increases for health care professionals. So we have a lot of winners because we've got a lot of newness. It's driving interest and consumers are very resilient. All right. And what about then the flip side of that coin? If you look at where the weakness

is going to be, what exactly is going to be the key for that? I think the weakness is where you're not competitive, where you're having to promote, where you're not managing your inventory, and where I believe there's a theme of legacy modernizing. If you have old legacy brands that aren't modernizing, you're not going to be in demand. So I think that's the headwinds. And frankly, we've seen some of that from some brands that are still in the early stages of needing to reinvigorate, like what we've seen out of Michael Coors lately. We still need an uptick there to see.

I think we're going to see that uptick at Coach. I think they've been very strong in terms of growth momentum. interested to see when they report next week. We've also had some active wear not do as well, and athletic footwear needs a kick up while you're seeing fashion work, and that's why you're seeing that strength at Steve Madden. All right.

I've got my shopping list. Do you have a shopping list? If I remember the lunchbox, it's been a good back-to-school season. I've always been value-oriented, so I know exactly where I'm going for those months. And school starting earlier these days, so that's good for you, Kelly.

Unless you live in New York City. That is very true. I'm lucky I'm not one of them. Dana, thank you very much. Really good to see you. Dana, Chelsea, CEO at Tulsi Advisory Group. Let's get over to Kate Rooney now for the CNBC News Update. Hi, Kate. Hi, there, Kelly. The Senate today passed legislation with overwhelming bipartisan support to impose sanctions on Russia and Iran. This was named in honor of the late Senator Lindsey Graham. It is designed to punish major buyers of Russian oil. This is after a last minute demand as well from the president. It also extends. sanction authority to limit funding toward Iran's weapons and energy sectors. It now moves onto the House. Lake Meade, meanwhile, I should say, is the largest reservoir in America is now

at its lowest level on record as the West now faces growing water crisis. It's brought on by a drought right now. That is according to the Bureau of Reclamation. Lake Mead is the drinking water source for about 25 million Americans and supplies water for irrigation to about 5.5.5 million Americans. And supplies water for irrigation to about 5 million acres of agricultural land, including in California, where a large portion of the country's fruits and vegetables are grown. And finally, President Trump vowed that the 4th of July fireworks show for America's 250th birthday would be the largest in history.

It appears it was. The Guinness Book of World Records says that the 840,537 fireworks, to be exact, that were set off during that celebration makes it the biggest show ever got. Where was that? Happy Birthday America. Washington, D.C. Because there was the New York one that also seemed like it maybe hit a record if you saw it in Manhattan

over the rivers. But it seems like a D.C. one was the winner. As it should be. I mean, come on. Maybe Philly. Kate, thank you. Kate Rooney. We are seeing a reversal in consumer sentiment in the auto industry. We'll tell you what types of cars are hot right now and which or not, nobody is going to guess this. We'll be right back.

We are seeing a shift in buyer preferences and the auto. This is like the value show just for Dom to be here. This shift could prove costly for luxury auto brands that have seen a big surge in their market share in recent years because there's a reversal going on. Phila Bow is here to explain. Phil? Kelly, there is definitely a reversal or at least an erosion in terms of the market share for premium or luxury auto brands. This is the data from JD Power looking at sales in the first half of the year from here in the United States. And look at the share of the market that the premium auto brands have. It's 13.3%. That is the lowest since 2020. I think it was 13.6% last

year. It's been steadily moving a little bit lower. What's the issue here? People are increasingly shifting from premium or luxury autos towards mainstream autos. Now, this doesn't mean everybody is getting rid of their BMW or their Mercedes or their Audi and they're moving into a Honda. or a Toyota. But increasingly, J.D. Powers has said, these people who are trading out, what are they trading into? And the data is pretty clear here that they are looking first for a compact car, then they're looking at a mid-size SUV, and then a compact SUV. Of the people who are switching out of premium brands, those are the models that they're going into from mainstream brands. And you might be saying to yourself, well, is this because of high

auto prices? Well, they're still high. They haven't come down dramatically. It's that, you you have the gap between luxury brands and mainstream brands, it's becoming smaller. It's closing. In other words, people who are now considering perhaps buying a Chevy or a Ford are getting the higher trim levels, and they're saying, now wait a second, how much of a difference is there between this and perhaps a lower trim level for a luxury brand? And increasingly, they're saying, I kind of like what I'm seeing here with the mainstream brands.

They're not completely abandoning luxury, but they are saying the mainstream brands, they're worth looking at and increasingly buying. And that's why you're seeing this shift going on. It makes sense that sticker shock on some, I mean, the price, we've talked about the prices, Phil, for any baseline car and how they've gone up and up and up. So, okay, maybe that's driving. But it's not completely sticker shock, Kelly. But it's not completely sticker shock because you look at the higher trim levels for the mass market brands. Those sales are red hot. Sure.

This started during the chip crisis. You know, Ford F-150 or whatever. Well, yes, you probably can find a lower-priced option. There's no doubt about that if you go to a mainstream brand versus a luxury brand. But let's be clear here. When people are going into the mainstream brands out of a luxury model, I don't have the data on this, but I know this from talking with dealers. People are saying, I want it tricked out. I want the top trim level.

I want all the tech features. They really are. And I've said this for years. and I know people always say to me, well, come on, there are some people. Nobody buys a base model. That just doesn't happen anymore. It's used for advertising. It's used for marketing.

But that price that you see if somebody says, we're selling at $35,000. Good luck. Go to a dealer. I agree. Try to find a vehicle at $35,000. You won't be able to find it. Ford, speaking of Phil, speaking of Ford, she said. Did you see this news about they're doing a four-door Mustang?

I don't know if we have pictures of this. It's a Wall Street Journal report. How does this fit into this discussion if it does? Well, that's definitely not it. Look, if you're Ford, you have two Halo brands. You have the F-Series pickup trucks and you have the Mustang. Those are the two really Halo brands there that when people say Ford, they think of those brands. It's smart to leverage the Mustang.

And I think there will be people who will want a four-door version of this. The journal report, they're citing a dealer meeting where dealers were told by Ford executives that there would be a four-door version of the Mustang coming out. Ford hasn't commented yet on this. And look, if you are Ford and you can make one that looks good, and that's the key here, that looks good and performs well, then you should do well with it. I mean, Phil, the EV version of the Mustang is Ford-or, just saying,

so there's a kind of precedent for it, right? Well, come on. Well, sure. You know what? You and I both know. There's nobody, nobody who is a Ford owner who says, I've got the electric Mustang. Nobody.

When you mentioned Mustang to people in the auto business, they do not think about the Maki. They just don't. That is, you know, I understand why they did it. Everybody understands why they did it. But it's not part of the Mustang heritage, truly part of the Mustang heritage. All right.

It's always a big deal. If you're a Mustang kind of guy or a Camero kind of guy, it's a thing. All right, Phil, thanks very much for that. We appreciate it. All right, is your next piece of AI hardware going to be shaped like a pastry? from your local bakery. More on that story coming up next. Open AI's next big bet could be in hardware. The company is reportedly cooking up a portable

donut-shaped smart speaker in a push to take on Amazon and Google for control of the next-gen tech platform, but will consumers take a bite? Our next guest has spent decades putting the latest tech to the test and just published an op-ed about this very idea. Joining us for more is Lance Yulinoff, editor-at-large at Tech Radar. Lance, it's been a while. It's great to see you. It's great to have you here. Good to see you. Good to be here. So you asked Chat Chapti, we don't know for sure yet, but what does you, what rendering did it give you of what this might look like? So basically, I fed the same prompt to both Gemini and ChatGPT, which was based on some rumors about what we're thinking is going to happen with a donut-shaped device that has movable parts, cameras, sensors, palm-sized donut-shaped.

I got, honestly, I got some very good renders of some. interesting looking devices. I mean, imagine a donut that was made out of technology. That's kind of how it looks. But it's going to be so much more than that. I mean, they're talking about, because you'll notice like, you know, in the render, and this is purposeful, it kind of is in segments because Open AI is apparently making something that will move to indicate that it's sort of listening or reacting to you. To the lights that would be built in. Yeah, I know. Like, imagine a donut squirming in your hands. This is not what people want. But, I kind of like it. I kind of like it. I'm looking at these right now. So I know everyone's going to, and again, these are AI generated images. Someone's wearing it across their neck right now.

Yes. I think this could be a great form factor, Lance. Believe it or not, because for instance, I'm going to tell you an anecdote about my friend who was driving to a meeting the other day and had not done their research. Okay. So what this friend did was put Gemini on talking mode. And while driving, got all the research for the meeting, walked into. fully prepared, it went wonderfully, and this donut-type device could be perfect.

Why deal, especially when driving, why deal with the screen? You're trying to look. It's trying to unlock. It's a whole different thing. Look, I kind of feel like you prove my point. The phone has all of these capabilities. And you can do it hands-free. You can summon Gemini with just your voice.

You don't have to look at it because it can talk to you. But, of course, if you want it to see a world, you can. And yes, this device potentially will have a camera, so it's constantly aware and can always see what's going on. And by the way, we just, we don't know that even it's going to be a wearable device. We do know that it's supposed to be sort of the anti-iPhone. It's supposed to be like a cabin by the lake. And that's not my words. That's Sam Altman's words. That's his idea of how we're supposed to interpret this thing, which we don't know. It's going to release sometime before, maybe by 2027, maybe right before then. But I just, the, okay, the road to the perfect AI device is

littered with corpses right now. We have human AI. We have the Rabid R1. I didn't even know we had any yet, but yes, I think it's going to be hard to disintermediate the iPhone for sure. That's, yeah, and it's going to be hard to really turn people onto these devices, whether they're supposed to wear them, like a pendant or have it with them constantly. Do you want something else in your pocket that's, you know, in addition to the phone? Could now, there is to kind of talk to your point, yes, some people want step away from the phone, step away from the screens. We're seeing a lot of wearable fitness devices without screens. So there may be something to that, but this shape that it may be and this movement it might have, I just think there might be too much for consumers. And finally, I would just say that

consumers are a little bit split on AI right now. I don't know if this is the right moment for this kind of device to arrive. I was just going to say, because a lot of folks maybe don't want that kind of, if they thought they were under 24-hour surveillance now, this is like that on steroids, right? right? Well, yeah. So, you know, the more you tell ChatGPT, your Gemini, or one of these AIs, the more they know about you, and the more they can help you. But that is really the idea that they know your world, it can be proactive, can be an assistant, can be by your side. But some people are starting to feel like maybe that's too much. I mean, look, we've got AI slop. There's a lot of garbage AI is producing. We've got concerns about the energy and resources that AI is eating. We've got concerns about data centers. So is this a moment to say to consumers, How about some more AI in your life? They're not certain that they want that. And I want to make clear, though. I'm actually AI positive because I think it's going to be so powerful in the future, but maybe not for this.

All right. Well, I'm open to the donut, to the AI donut. Or do you just like donuts? Yeah, maybe I'm just hungry. Lance Yulinov joining us there. All right, everyone. Again, markets trying to close out a fairly constructive week here. Thanks very much for watching Power Lunch.

Have a great weekend. for being here. Closing bell starts right now.