Power Lunch - Power Lunch 10/9/23

Episode Date: October 9, 2023

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. 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 Morgan Brennan, I'm Tyler Matheson. Coming up, stocks are now higher highs of the day after initially falling to start the week after Hamas attacks Israel and Israel declares war in response. We will get the latest news on this conflict and look at the many ways this is affecting the world and the markets. Morgan. All right. Well, let's check in on the markets because we've seen a major midday Monday reversal. As you can see, all the major averages are trading higher today with the S&P. half a percent, the Dow up half a percent, and the NASDAQ even higher as well. We're seeing a big reaction in the price of oil today, too. That is up 4 percent. We've got more on that coming up. We also want to take a look at the defense stocks specifically, because those are leading industrials higher. The moves today in defense stocks, they're huge. As you can see, North of Grumman, up 11 percent right now. General Dynamics, Lockheed RTX as

well. Major moves really across the sector, as we expect to see more demand for their defense products and more demand for defense dollars now, both in the U.S. and abroad. Also take a look at companies that are based in Israel because those are mostly lower today, as you can see on this board as well. Tyler. All right, Morgan, thank you very much. Let's begin today with a bit more now on the human impact of this war. NBC News is Josh Letterman is in London for us with all of the latest. Josh. Well, the death toll among Israelis has now climbed to at least 800, according to.

to Israeli officials, including those nine American citizens that the United States confirmed earlier today were among those that have been killed. And on the Palestinian side, the Gaza health authorities are now saying that at least 560 people have been killed with some 2,900 people injured. Now, throughout the day, we've seen the Israeli military conducting strikes within the Gaza Strip, demolishing various buildings, including homes that they say are associated with Hamas leaders. And just in the last few minutes, we heard from the United States. the Al-Kasem brigades. This is the militant wing of Hamas responding to those Israeli strikes.

And they say from now on, every time Israel strikes a home in Gaza without warning, Hamas is going to kill one of the Israeli hostages that is taken. So that is a warning, essentially, from Hamas, not for Israel not to conduct any strikes in Gaza without warning or they're going to kill one of those American hostages. We are also awaiting a speech any moment from Prime Minister Netanyahu that is expected to lay out a bit more about how Israel is going to respond. Because while we've seen those airstrikes, we have not yet seen an Israeli ground incursion into the Gaza Strip, which is widely anticipated. Earlier today, the Defense Minister of Israel saying that they are conducting a full siege

of the Gaza Strip, meaning no food, no water, no electricity going into that strip. He says they are fighting against human animals and they are going to behave as such. All right, Josh, thank you very much. Josh Letterman reporting for us from London. Thank you. And the war in Israel having a huge impact on oil. Let's bring in Pippa Stevens now. Pippa. Yeah, so up 4% today, although still below that $90 level on WTI. Now, it's important to note here that neither Israel or Palestine is a major producer of oil. So we're not going to see any type of short-term supply disruption. However, the risk here is that there's escalation in the Middle East and especially when it comes to Iran. Now, Iran has increased its economic. sports by about a half a million, 500,000 barrels per day over the last year, and the U.S. has largely turned a blind eye as they brought more oil back to the market. A lot of that's going

to China. However, if Iran is seen to be involved in the attacks over the weekend, which U.S. officials have not yet confirmed, then it becomes increasingly difficult for the U.S. to turn a blind eye. And so then, of course, there's also the Strait of Hormuz, which about a little bit less than 20 percent of global oil passes through that every single day. And so the risk here is that we could see if this escalates and if we see more fighting, this could ultimately disrupt oil supplies. How much Iranian oil is reaching the market today? It is still under sanctioned, but that is not to say that it does not get out and get to people who are willing to trade for. Yes, they produce about 3.2 million barrels per day, and about 2 million barrels per day of that

is exported primarily to China. But as we've seen over the last year, these markets are very global. And so even if that is sanctioned, even though it's not going to the U.S., the U.S. will still see our prices increase because if then it's not going to China, China's going to be buying from somewhere else and it reduces global supply. And so this is a global threat that then if the U.S. does come down harder on Iranian exports, then oil prices could rise to the tune of, you know, more than $10, according to Andy LaBow. Okay. And of course, we know supplies already, arguably tight right now. Pippa, stay right there because we're going to also bring in for more reaction on the oil market. Kevin Book, he's the managing director of research at Clearview Energy Partners.

Kevin, great to have you on. Is the bottom in now for oil? Well, I think it would be a bad time to assume that prices are going to keep falling when you have a war breaking out in the Middle East. Generically, that tends to be bullish. Okay. So we were just talking about it with PIPA, but the role that Iran may or may not be playing in all of this, the fact that we had seen this potential normalization of relations between Israel and Saudi Arabia, there was an expectation perhaps that Saudi was going to reverse some of its cuts in the oil market as well. Game out for me how this could play from a supply side when we know the demand, at least right now currently, is there.

There's at least three different ways. The one you mentioned, of course, was a distant one, the possibility that normalization could bring a Saudi chappo, or at least some leniency, answering the call when Washington rang for more supply. But more imminently, the discretionary enforcement or alleged discretionary enforcement of sanctions on Iran seems like it's going to be a lot harder. White House losing political space for that in the wake of even just tangential involvement from Iran. Second, the opportunity for this to spread, of course, could include the pressure that we bring on Iran, if we do bring pressure, that plays out in the form of attacks on regional transportation and production. So as Pippa mentioned, the straight,

but also producing facilities, other tanker traffic in the region. And then third, there's, of course, there's the high-end escalation risks, attacks on Iran itself, attacks on producing sovereigns. We're going to talk about that a little bit with our next guest, but let me ask you this. Back in 1973 during the Yom Kippel War, or in the aftermath of that, that became the time when oil embargoes and oil production freezes affected the world. Is there a possibility that we could relive that moment in time? Or is the market so dynamically different today than it was then,

that that is not the risk it was then? Well, the market is still susceptible to all kinds of perturbations. So I don't think we should be complacent about any of those things. History has changed a little bit. The Abraham Accords have aligned to or at least partially aligned some of the producers who might otherwise be part of an embargo. there are questions, yes, about how the Arab Street reads, a muscular Israeli attack on the Gaza Strip.

And that, too, brings back some historical questions. But the other side of that, too, I think, is that when we look at the dynamism of the market, we also have producers who are funding big transition and domestic funding programs at home, probably looking at interoperability with the West, security guarantees. There's a lot of other issues here besides just talking about oil. Yeah, and that's actually where I want to turn with you, Pippa, and that is the role that domestic players play on the global stage now, because unlike the 1970s, we're now a net exporter when it comes to some of these energy and resources. So any sort of sense on how this could play out with U.S. production, maybe even potentially being able to step in and fill the void if we see prices higher for longer? Well, for many years, we were the swing producer after the shale boom, but a lot of that has now shifted over to Saudi Arabia, and they're really the ones that can fill the gap these days.

Because when it comes to U.S. production, even if prices do get higher enough to incentivize companies to start pumping again, shareholders don't want it. And so that really ties the hands, particularly of the major publicly traded companies. There is, of course, the question of the private names and whether or not they'll bring back production. But I think that we've seen in the last year that Saudi Arabia's influence in this global market has grown. And so perhaps the U.S. can't boost production in a way that maybe once it could. Okay. Kevin, I have to ask, is $100 oil back in play here? Strategic, strategists earlier today noted that we saw $100 oil in August of 2008 when Russia attacked Georgia. We saw in February 2013 when Russia attacked Crimea, $100 oil.

And it was $100 for the third time in February of 2022 when Russia attacked Yugosurial. Ukraine, is there a pattern here, or is there a reason to not believe that we don't get triple digits? We're looking at a fourth quarter where demand could be ahead of supply by 1.1 million barrels per day. That would, again, take us all things being equal upwards rather than downwards with geopolitical risk on top of it. Of course, $100 is a different number depending on which $100 and which dollar you're using, inflation being a factor. but it's psychologically very important.

All right, Kevin Buck and Pippa Stevens. Thank you for kicking off the hour with us. Thanks for having. Yes. As the conflict enters his third day, President Biden vows unwavering support to Israel, sending an aircraft carrier and military aid into the area. Our next guest knows the Middle East region very well. He lived in Israel, served in the Israeli Defense Forces,

and Ariel Cohen is now a senior fellow at the Atlantic Council. Mr. Cohen, welcome. Good to have you with us. We just heard from Josh Leverett. in London of NBC News, that Hamas' al-Qasim brigades have claimed that for every house that Israel hits in the Gaza area, a hostage will be killed. How does the fact that Hamas now has hostages, including apparently American hostages, how does that change the calculus on what Israel can do and how?

I just talked to a senior officer in the Israeli what they call the homeland front, the civil defense system, and also touch base with some friends and family. The morale is high. The decision to shift the battlefield in Gaza is there. And I am afraid, and it's a harsh thing to say, that Israel is going to fight Hamas and Gaza, probably not taking into account the future of these hostages after horrible ma'am that went on on Saturday when up to a thousand Israelis were murdered, including parents being killed in front of their children, including old people, as old as 80 and 85 in wheelchairs, killed or taken to Gaza as hostages. This is an atrocity that we do not remember.

It's in the Holocaust, and I'm not saying it lightly. So even the murder of hostages will not stall or stop in your view, Mr. Cohen, the Israeli defense force from going after Hamas in the Gaza Strip. I do believe, and I'm not private to any confidential war plans or information, but I do believe that the Israeli defense forces do not want to lose the lives of their soldiers unnecessarily. Enough lives were lost already. So they're going to soften the targets in Gaza, the Hamas targets. They're not going after the civilian population deliberately, like Hamas did, in the villages

and towns around Gaza. But at the same time, Israel is watching like a hawk the northern border with Lebanon, which is warming up, unfortunately. And that is actually a bigger problem for Israel than Gaza, because Chisbalah, the fully owned subsidiary of Iran lodged in southern Lebanon, has over 100,000 missiles and rockets with longer range and bigger warheads than. than what Hamas has. So, if that does, may I interrupt for just a second, if that does come into play, in other words,

if there is a two-front assault on Israel, with Hezbollah in the north and Hamas and its affiliates in the south, does that make it all but certain, all but certain, that Israel will not merely be attacking in Gaza, but will perforce have to attack, Iraq, Iran directly?

Well, this is a $150 barrel question, isn't it? Because if Hezbollah opens with all its arsenal, which is massive, and hits the big port city of Haifa in the north with its refinery, hits Tel Aviv and other cities in the center of Israel with longer range missiles that they have tries to hit the air bases, then Tehran is in play. The Iranian top leadership, including the Ayatollah, are in play. As the head of the Mossad, the Israeli Foreign Intelligence Agency, David Barner, mentioned a couple of weeks ago. And I would add the Bandarabas oil terminal in the Persian Gulf. As a retaliation, Iran may mine the Straits of Hormuz, further driving the oil prices up

and disrupting the global energy supply chain. But this is a war that Iran has initiated. We saw a detailed publication in the Wall Street Journal the other day where it said that a series of meeting in Beirut, capital of Lebanon, with Hamas Islamic Jihad, Hezbollah, and others were undertaken by the Iranian leadership to prepare this war. So it sounds like as you lay this out, it sounds like the risk is not only very real, but growing, that this becomes a larger conflict through the region. Yes, and if you think about this globalism trying to do, Russia is interested in taking American

attention of Ukraine. China is interested in taking American attention of Taiwan. They have a partner, Iran, and they have another partner, North Korea. So these four actors in the international system are playing against the U.S. and our allies in Europe, in the Middle East, and in Asia. And this, I see as another theater opening to distract America, but also in case the United States is going to spend its ammo in Europe or the Middle East, there is less ammo, less material for Asia. And I think the lessons from the Middle East already and from Ukraine are that we do not have the sufficient military-industrial potential, as strange as it may sound, to sustain large-scale theater wars in the Middle East and Europe as well as Asia.

It is a very key point that you're making right now. It's something that analysts and industry experts have been talking about. Bank of America just this morning included it in their note as well. The fact that the U.S. has a strategic stockpile of U.S. weapons housed in Israel. What's unclear is how large that stockpile is and how much it's been drawn down, to your point, to bring munitions to and support to Ukraine and how quickly U.S. defense contractors can ramp up production to replenish all of those stockpiles. My question to you, then, is if this becomes a broader conflict in the region, is there a point at which the U.S. directly

becomes involved? Yes. I was thinking about this before this broadcast, and if Israel feels that its very existence is at stake, it doesn't feel that now. It's horrified. As I said, probably close to a thousand Israelis were murdered in cold blood, in their homes, including children. Women were raped, maybe not only women. But the survival of Israel is not at stake. If Hezbollah burns down large Israeli cities like Tel Aviv and Haifa, my guess is, Israeli government has a sort of a baseline beyond which it may consider unconventional responses, nuclear, against Iran.

And at that point, the United States has a choice. Either we step in or we let Israelis escalate. And Israelis have the escalation domination on the escalation ladder. They can dominate all the way to unconventional, which Iranians. don't have yet. You raised a very interesting point there, Ariel, and let me follow up if I might very quickly. Hezbollah is clearly owned by Iran. I believe that was the term you used earlier today.

Iran must understand. They must understand that if Hezbollah, and they would require Iran's approval, wouldn't they, to do the attack on Haifa, on Tel Aviv that you described. as the transformative moment. So what are the odds that Iran gives them that authority to do that kind of attack, knowing that, in your view, that would unleash potentially what you described

as the unconventional war, possibly involving nuclear devices, on Iran itself? Look, Iran is ruled by a man who, I believe, I don't remember the exact number. Eight is 83 or 84 years old and ailing. The 12 branch of Shia Islam, we're getting into theology very quick. There's a branch of Shia Islam that believes that the believers have to bring the apocalypse by their action,

as horrible as it sounds. they need to speed up the coming of the of the Messiah, their version of Messiah. And I do believe that some of the Iranian leaders, maybe not all of them, belong to that sect of Shia Islam. There is a very different and very serious confrontation between Sunni Islam as represented by Saudi Arabia, for example, and the Iranians who fight. all over the Middle East. It's not just Israel and Lebanon. It's Yemen. It's Iraq. It's Syria. The Iranian power projection is all the way from the Red Sea to the Mediterranean, from Yemen to Lebanon. And in that context, Iranians must understand. And we need to make it very clear that the survival of their regime is at stake here.

Hariel, thank you very much. Fascinating conversation. We hope you'll join us again as these events unfold. Thank you very much, Ariel Cohen. All right, coming up, how to invest in these treacherous times? Is it time to play it safe? We'll get technical support on some defensive names, and we're going to kick off five-star fund manager week. We'll talk with top-rated managers of several different types of funds today. The head of a financials focus fund will join us. Stay with us. Welcome back to Power Lunch. Stocks higher today after starting off the session in the red. Today is one year since we hit a bottom.

Well, this week is. The Dow up 14% since then. Let's bring in Mike Santoli for more. Mike. Yeah, Morgan, Thursday, the closing low anniversary from the October 22 bottom. And, you know, I don't get too caught up in the labeling of markets, but if this is a bull market, if this has been the first year of one, it's been relatively unimpressive one as these things go. Up about 20 plus percent for the S&P 500. But the equal weighted version of that same index up only around, let's say, 9 and a half percent.

gap there. It's that narrowness of the market in favor of megacast we've been talking about for a long time. And I think it's one of the reasons investors are kind of keeping this market on a bit of a shorter lease, a perception that maybe the economic expansion is in the latter stages, whether that's true or not. That is the psychology out there. I guess I would say, where it leaves us is a lot of stocks having already discounted not so great economic times, especially a lot of the consumer cyclicals and earnings estimates for the 12-month forward from here have finally regained their highs from the middle of 2022 with the S&P 10% lower. So it may not have been a real impressive first year. It's an underachieving bull if that's what it is.

But it also has taken at least some of the fundamental risks out of stocks relative to that time. All right. Thank you very much. Mike Santoli. We appreciate it. And now for more on the market and the impact of these world events. Let's bring in Jack Ablin, Crescent Capital's founding partner and CIO. Jack, welcome. Good to have you with us. Does this sort of turn of events over the weekend change how you look at portfolios that you manage in any material way? Are you doing anything today in response? No, it really hasn't changed anything fundamentally the way we look at things. Obviously, we want to continue to watch ongoing developments.

I think there's a general sense among the investment. community that all of the warring activity will likely stay contained in and around Israel and the Gaza Strip area. If, on the other hand, it does spill over, let's say, into Iran or other parts of the Middle East, then I think there's going to be a recalculation going on among investors. The bond market is closed today because of Columbus Day. when that reopens tomorrow, how key is that going to be to this entire conversation about the true impact of geopolitical risk on the markets? Well, based from what I can glean, if you just look at TLT trading, it would suggest that interest rates are headed lower, which I would suspect in this kind of environment would be the case.

that's obviously an offset to the higher crude oil prices and likely helping give equities a bit of a bid today. So we just heard Mike Santoli talk about this market bottom a year ago this week. Do you see this as an underachieving bull market? I do. In fact, you know, it's funny. I'm glad that Mike talked about the difference between the cap-weighted S&P and the equal-weighted S&P because the fact is that if you look at the cap-weighted S&P on a forward PE basis, it really is extended. It's about between 12 and call it 18% overvalued if you look at it on a multiple basis. However, if you look at the average stock in the S&P, the equal-weighted S&P, the forward PE multiple is really right on target.

So I think that the average stock is in good shape. It's just that magnificent seven, the very, very tip-top stocks that are really pushing those metrics higher are somewhat vulnerable, at least on a valuation basis. If I want to put money into an S&P-based index fund today, do I hear you correctly, you would recommend an equal-weighted index fund as opposed to a cap-weighted index fund? Yes. In many respects, yes. The only problem, the only difference is you are giving up a lot of technology exposure, which in general, I would say tech is not a bad place to be. It's just there are a handful of names that are somewhat overvalued and that could make that S&P trade a little more vulnerable. What we're doing at Crescent is we built an SMA based on quality, based on dividends. then growers. So we still have the tech exposure, but we're looking at the highest quality companies, companies that have the lowest, or I'm sure I should say the highest multiple of interest coverage. Yeah. And among those, you name Chevron, Gen Dynamics and Atmos Energy

Corp. Those were the three that you wanted to highlight. We're out of time, Jack. Thanks very much. Good as always to see you. Thank you. Further head, Nelson Peltz, looking to dance with Disney. Again, the activist investor's firm is reigniting a potential proxy fight, increasing its stake in Disney. We've got those details from power lunch returns. Welcome back. The bond market is closed today, but we are getting a sense of where things will go tomorrow when trading opens. Let's go to Rick Santelli in Chicago.

Rick, we got another big week of issuance, right? Yes, yes. It's not only the issuance. Of course, we're going to start tomorrow with three. year, three year, 10 year, and 30 year, it's going to be an important trio of supply. But even though the markets are close today for Columbus Day, the Treasury market, cash that is, as Jack just pointed out, many are watching the TLT, I'm watching the futures contracts. We can glean a lot. So here's a two-day of the two-year note futures, and you can see they're a bit higher than yesterday. And if we go

towards the 10-year, you can see a two-day of 10-year futures also higher on the day. And what we know is the futures give us price. The cash market always gives us. yield. So they should be exactly mere image opposites. So let's look at a week and a half of that 10-year future on top of 10-year cash, even though it's closed today, and you'll see what I mean. And the reason I put that chart up is to give you an idea that I could look at futures and tell you roughly where the cash market would be. Now, does that mean that it's going to be there tomorrow? Probably 50-50 chance. Right now I see roughly around a 5% yield in two-year and roughly a 460 yield and tenure. Now, the basis changing in a relationship between cash and futures is very much

a fluid process, so these are guesses at best. But they're good guesses, and they give us an idea like the TLT, that rates would be lower and prices higher. And for the dollar index, it has been trending slightly lower, and if you see today on that chart of one week, it continues to trend slightly lower. You can't tell anything different from that chart. And finally, gold. Gold did pop and it always seems to pop, but it isn't necessarily a great diviner of what happens on a geopolitical issue. And I'll give you a personal example. In 1980, when the Iraq-Iran war started, if you look at a chart of gold, it peaked a little bit, but basically it went down for years after that. It didn't represent a holding period for some of the geopolitical issues, even though on a knee-jerk reaction.

He usually always see a pop in the gold contract. Tyler, Morgan, back to you. Thank you very much. And ahead on Power Lunch, five days, five fund managers, five stars. After the break, the first installment of our five-star fund week, we will be right back. All right, welcome back to Power Launch. As global risks rise, we kick off a special series this week, looking at five-star morning star-rated funds. To help you navigate during these difficult times, we will zero in on a different sector each day. And first up is a focus on financials as banks get ready to report third quarter results starting Friday. IAN LAPE is portfolio manager of the Gbelli Global Financial Services Fund. It is up 9% this year, 45% over the past three years.

I'll take that, Ian. Nice. Oh, thank you. Thanks for having me on. Congratulations. Are you by charter restricted or guided to invest in mid and smaller size banks, or could you, if you wanted to invest in the granddaddies? It's all cap. It's all cap.

And global. So I also... And yet, your... Your biggest holdings typically are smaller banks. Well, City is in my top five. Okay. But First Citizens is my largest holding. That's about a $20 billion market cap.

It really is a mix. And I really try to find undervalued securities with strong balance sheets and great management. And that bank, Furt's Citizens, is up something like 79% this year. What did you see or when did you get in? And why do you like it so much? I actually was a shareholder of CIT, and First Citizens bought CIT at sort of the depth of the pandemic, and they paid only 40% a tangible book. I was very upset, obviously, with that price, but upon doing more research on First Citizens, realized that I would be getting a better management team, so I elected to hold. So I've been a shareholder now for a few years.

And you put an emphasis on management teams that act like actual. owners, like they run the business like they own the business, not like they're hired folks to come in and just manage it. How do you identify that quality? Well, you're absolutely right. And I've been doing this for 26 years. And the more I do it, the more important I realize management is ultimately in the outcome. I have a long-term investor. I look a lot of track record. So in the case of First Citizens, for example, since Frank Holden Jr. became CEO in 2000. and eight, tangible book value per share has grown at 17% a year, which is phenomenal compared to really any other bank.

And then also insider ownership. You want management teams. I think they will tend to be much more focused on risk if they actually have significant skin in the game. So again, for citizens, they own 13% of the economic ownership, which is about $2.5 billion. So clearly they have skin in the game, and they're not going to do stupid things. We talk about Cabelli. I mean, you're a value house. The KRE has just been slammed. It's on almost 30% year-to-date. The selling's been pretty broad-based. There's a lot of concern, especially now that we've seen longer-duration bonds spike and yields to multi-decade highs that we're going to see more unreal losses, unrealized losses coming into this earnings season. Where do you see value here? I would imagine there's been a lot of baby out with the bathwater and there are opportunities. Well, you're right. I think, unfortunately, in the U.S., a lot of banks during the pandemic

reached for yield. They bought agency mortgage-backed securities to try to get a little bit better net interest margin than if they had just kept it in cash. And now they're sitting there with securities that are significantly underwater and likely to be even more underwater when they report earnings starting Friday. So I've been very cognizant of this, adjusting the capital ratios for the unrealized losses, whether banks are including them in available for sale as they should be, or many are holding them as held to maturity, which is debatable whether they should be. But to your question, in terms of value, there's lots of value.

I mean, almost all bank stocks are down this year. Not all banks have been poorly managed. Not all banks are undercapitalized. So I'm looking for ones that are strongly financed and undervalued. So one of my top holdings that everyone knows is Citigroup. It really has been the case of the shrinking multiple. If you go back to the end of 2019, they had a tangible book of 70. That's actually grown to 85 now, even after paying about $7 in dividends.

The stock has gone from 80 to 40. So it's just massively undervalued. And their capital position has actually increased over that period. So at about 50% of tangible book, I think it's a great value. Ian, we have to leave it there. Alas, congratulations on the good record. We hope you'll come back and join us soon.

Thank you, my pleasure. Thank you. Thank you very much. Ian Leapie. Well, up next, if at first you don't succeed, try and try again. Nelson Peltz, potentially reigniting a proxy fight with Disney, will tell you everything you need to know on the other side of this break. Welcome back to Power Lunch.

Activist investor Nelson Peltz and his firm Tri-An Fund management are reigniting a potential proxy. War with Disney less than a year after dropping the initial battle. Julia Borson has the details. Julia. That's right. Morgan Nelson Peltz's Tri-Anne Fund Management is now one of Disney's largest investors with a stake of 30 million shares worth more than $2.5 billion and reportedly plans to

push for multiple board seats. This is according to sources familiar with the situation. Now, this comes after Disney shares just last week hit their lowest level since 2014. It also comes after Triand launched. a proxy fight against Disney back in January, criticizing the company's acquisition of Fox and failed succession planning. Nelson Peltz dropped the battle after CEO Bob Eiger unveiled a corporate reorganization and meaningful job cuts. So the question now is, other than a board seat, what will Peltz push for? When calling off the proxy battle, Peltz said that Iger needed to

execute on his promises. Now, since then, Iger has not only done those job cuts, he's also announced that he's looking to take ESPN direct to consumer and that he's exploring selling the company's linear networks. He also said, and also reportedly they're looking at options for the company's struggling Star India business and ESPN made a big move into gaming. And Disney just last month announced it is doubling its investment in its parks division. Now, Disney says it has no comment on this news and we are waiting for an official announcement from Tri-in. Guys? Julie, I mean, this is incredible to me. First of all, that proxy fight ended, I don't know if that's my mic, ended on our air on the heels of that Iger interview. But the stock, to your point, has been an underperformer. It's down 2%, 2.5% since the start of the year, 13% over the last 12 months. What is it actually going to take from a market perspective to see shares of Disney reignited here in the market? Do we know yet?

Well, look, I think there were two things at play here. What will it take to make Nelson Peltz satisfied that Iger is following through on his promises? And I think the reality is Iger has done everything he said he would do. And he's also done all of these other things to unlock value at the company. The one piece of this that has not been fully revealed is the succession piece. Because we know that Iger has extended his term at the company. So the question is who would succeed him after that. And that is something that Nelson Pelt was concerned about.

In terms of Disney's, the share price and the market cap, just in general, I think there are so many different pressures that are at play here. And one of them is the fact that we have to remember that there was a writer's strike that really shut down Hollywood for months. The Screen Actors Guild strike is still ongoing. You've all these questions about the future of Hulu right now. Disney and CNBC's parent company Comcast are in negotiations about how much Disney's going to have to pay to buy out that stake in Hulu. So there's still a lot of questions looming over this company. Okay. Well, watch and see if there's an announcement. Julia Borsden. Thank you. Thanks, Julia.

Thanks, Julia. Yeah. Coming up, growing uncertainty in the markets and around the globe, should investors be avoiding any risks and going all defensive with their portfolios? We'll get some technical support next. Welcome back to Power Lunch. Time for some technical support. Today we are looking at some defensive stocks for a risky market at a time when we have conflict in the Middle East. CNBC Pro ran a screener to find defensive plays for a volatile market. These are steady stocks with low debt, dividend payers. They're also higher this year.

So here to chart is Ari Wald. He's managing director and head of technical analysis at Oppenheimer. First, Ari, is Kota Energy. That stock is seeing a big move up today. Recently seeing a few analysts reiterate their buy rating. What's your take? I'll be honest with you, Morgan. We don't want defensive.

We want to step into risk here on this market pullback. I think market's going to go higher. So from this screen, what they do, all have in common is price momentum, which is a good thing. And we want to side on with more of the cyclical stocks, like a Cotera energy in the energy cyclical, cyclical value over defensive value. And the key with this chart, it's been a great Q3 trade energy. It's not a super cycling energy, but it's working. A lot of these stocks, they broke out in the third quarter. They came back, they tested the breakout. You have the base, the test of the base turning up from support and the

200-day average. I think that's a resumption of strength. a stock like Oterra. Cyclical defensive. Cycical value over defensive value. There we go. Okay. All right. Okay, so also from the screener, we have CME Group. This is a stock that is on track for its best five-day stretch since March of 2022. What's your take on this, Erie?

Another area. You can own pockets of energy. You can own pockets of financials. Security exchanges showing relative strength. It started in CBOE. Now we're seeing it in CME Group. It's another one that reversed its base. A lot of stocks coming out of bare markets in 2022. They broke higher. Here's a stock that's been flat for the last two months and now breaking through this consolidation

pattern. Fresh highs in this tape. That's an indication of relative strength. I think that longer term turnaround continues for our CME group. Interesting. Of course, we're talking about CME. We actually go back to the whole business of trading commodities as well. So is there any kind of tailwind from that going back to the point you just made earlier?

There could be because it's. It's not just a one-off here. You're seeing it across the board. You're seeing it in CBOE, which has moved out to a five-year high. CME group intercontinental exchanges getting close, holding the 200 days. So that's what we like to see, a broadening theme playing out in the charts. Okay. So lastly, you picked a name that you brought to us.

That's Z-scaler. What do you like about this chart? This is what we're recommending on this pullback. High beta, long duration, high momentum, technology. stocks. Through this rate rise since the September 20th FOMC meeting, technology, long duration has been the best performing sector with interest rates up 50 basis points on the 10 year. So you get a name like Z-scaler. It's in the cybersecurity ETF, which you're seeing a breakout across the board there. Another stock, 18-month downtrend, reversed in July. Excuse me,

that was even in the June period. Four months of sideways, fresh breakout to the upside. We're seeing that long-term turnaround play out in Z-scaler, broadening rotation in the technology sector really hits a lot of the checkbox we're looking for it. So now, of course, I'm going to ask you, why are we seeing broadening rotation in the tech sector when we have the 10-year hovering near 16-year highs? That's a great, great point through this. And this is the big difference from the rate rise now and the rate rise going into 2022. This time around, it's high dividend, low volatility defensive's weighing on the market. Yields up, bond prices down, unlike sectors underperforming, while long-duration technology is showing relative strength.

Mr. Market is telling you a signal, whether it's a lot of the bad news being priced in. But when you see that type of relative strength, to me, something's going on across the board. And that's a sector that we want to be involved with. All right. Harry Wald. Thank you for taking us through the technicals. Thanks, folks. More on the markets and Israel and the changing geopolitical landscape when we return after this.

Welcome back to Power Lynch. stocks at session highs after starting in the red following the events of this weekend in Israel. The Dow is up 218 points right now. The S&P right now is up three quarters of 1% 43-41. It's been a very volatile day to start the week, Tyler, and quite the rally here into the afternoon. Quite a move higher here. And as you follow the defense stocks and several of them are up with gains, the likes of which we just don't see in that sector very often at all.

That's right. Energy is leading the sectors in the S&P, and number two right behind it is industrials. That is because of those defense names, the more pureplay defense names like Lockheed Martin, Northrop Grumman, L3 Harris, General Dynamics. You're seeing very big moves in aerospace and defense today, perhaps unsurprisingly, given the events that are playing out in Israel right now, what that is going to mean not only for demand for more munitions and more weapons in an fraught geopolitical landscape, but also what it means here in the U.S., and, yes, we have the whole speaker situation in the House right now, but what this means in terms of potentially rallying support for more defense spending in the fiscal 2024 budget and getting that appropriations across the line. And you had a line of questioning earlier this hour with one of our guests about oil, and you went back and looked at other moments in history where we went past $100 in oil price,

and many of those were tied to the kinds of crises that we're seeing. right now in Gaza. That's right. And geopolitics, the oil market is typically where you see this play out in a major way, whether it's long term or whether it's short term. That's what we're seeing happen here again today. It's not just oil today either. Nat gas is trading at its highest level since January. Part of the reason is what we're seeing in the Middle East. There's some other factors with Nat Gas, too. We actually have Bill Perkins on in closing bell overtime. He's going to break down what we're seeing in the energy sector more broadly. A few other names for you, former defense secretary, Mark Esper, on the defense side and national security side,

and Rashir Sharma, on what this means in terms of the geopolitical risk premium for investors more broadly right now. Ask Mark Esper, if you wouldn't mind. On 60 minutes last night, they interviewed General Millie, who said, if we allow Putin to win, defense spending in the United States will double at least as a result of that. Interesting question. Thank you all for watching, Power Lunch. Closing bell starts right now.