Power Lunch - Power Lunch 5/13/26

Episode Date: May 13, 2026

CNBC’s Kelly Evans and Brian Sullivan 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.

inflation is up, borrowing costs are up, and tech stocks just keep going up. Welcome to Power Lunch. I'm Kelly. I'm Kelly. I'm Kelly. She's Brian Hyde. It's Wednesday. Trump touching down in China for a high-stakes summit, trade, tariffs, and tech all on the table. But the fate of the Iran war may be the real market mover in the room, Brian. Plus, Kelly, the future of the Fed. The Senate is set for a final vote this afternoon on Kevin Warsh to chair the Federal Reserve, clearing the way for him to succeed Jerome Powell, whose eight-year stint at the helm will officially end on Friday, and we'll bring you that vote as soon as it happens.

All right, hi, everybody. We have got a lot to get to on this very busy and somewhat crazy Wednesday. But with stocks at new highs, let's begin with the markets and your money. The drawdown in the chip stocks lasted all of one day. InVIDIA, Marvell, and Texas instruments all at new highs today. And guess what? The street continues to grow more bullish with Morgan Stanley, the latest firm upping its year-end S&P target from 7,800 to 8,000,

and 8% upside from current level. But the skeptics out there, the ones that are left, warning the AI-fueled rally is starting a little bit like the speculative fervor of the late 1990s. Let's talk about that and more, joining us one of our favorite guests, Peter Malook, Creative Planning, founder and CEO. Call us whatever names you'd like, Peter. Great to have you back on the program. Thank you very much. I appreciate that, Paul. Where's Mary? Thank you for getting. I just dated myself.

What's amazing about this rally is that even as the numbers go up, the valuation remains fairly constant, does it not? Because earnings are going up with it. You're exactly right. Everyone's worried about the new highs and, you know, as I love to talk about all the time. The market hits a new high every 19 days on average. You know, we're shocked when a can of Diet Coke or a Hershey's Bar costs more five years from now. We're not shocked when that happens, but we're shocked when their stocks follow. You know, the stock market's been at a 21 to 22 PE ratio now for over five years, and that is definitely on the richer end, but it's not on the richer end for tech stocks, and this has been, for the most part, a tech-driven long, long, long, bull market. And so now at 21 PE, we're right in the middle of where we've been for a long time.

And this growth is because of expected earnings. It's not really a speculative bubble. And it's funny you mentioned that, Peter, because we were talking to Vivek Ariya Bank of America last hour. He's up to his price targets on a lot of the chip stocks. And he says, you know, three of them, I believe it was Nvidia, Broadcom, and Micron, all trade below the market multiple in the hottest part of the market with some of the strongest price gains. Yeah, it's been interesting to watch what's happening with tech,

because for the longest time, just everything was on fire. and we've started to see some separation with the SaaS-based stocks, the sales forces, and the oracles of the world, you know, getting punished. And I think rightfully so. I mean, I actually have a client that runs a publicly traded Fortune 100 company that is going to, is in the process of using AI to replace Salesforce for their 13,000 employees. I think that's a real trend in that direction. And I think the chipmakers are actually undervalued as a group because that's a megatrend. Yes, there will be others that come into the space that is a business that's more commoditized than people that control the end user. But it seems like we've got so much demand

ahead of the supply trying to meet it that it's got a lot of room to run. That's a pretty interesting antidote. I mean, a massive company dumping Salesforce for AI. Are you bearish on all software then, or maybe just parts of it that like maybe your client's company might be able to disrupt certain things? I think anything that's subscription-based is very dangerous. I mean, the idea before was, hey, you know, I'm in this software. I've got all my users and my company have to use the software. Every year I get more invested in this.

The price goes up every year. And every time I hire a new person, they go into this software and you become trapped there, right? The employees don't want to switch because it's a hassle. And it's so expensive to create an alternative, you don't bother. Well, if you remove that barrier of how expensive it is to create the alternative and you take it from $30 million to $3 million, well, a lot of business owners start to go, well, wait a second, maybe I'll spend that $3 million, we'll go through the pain of the move, because not only am I getting away from this recurring cost that keeps growing every year, but I'm actually making

something exactly the way I want it. And I think that's just one example. It doesn't matter if it's tax, software, legal, whatever it is. If it's a recurring expense, any rational group of people running a business is going to go, those are the ones we want to attack the most. We need to have you and Sarat Sari debate each other, because as you just heard, he's much more constructive. I don't want to overstate it on Salesforce workday, a few of these names. And if I'm not mistaken, Salesforce is trading it around a 12 times forward PE. So it's got some, I don't know if I'd say margin of safety, but it's, it's got, it's conservative in terms of what's built into it. Yeah, I mean, I think it's priced right. I mean, before companies like that,

you looked at those and said, well, this is as safe as it gets. You know, tech, recurring revenue, dominating the space. And, you know, the calculus now is, I mean, just, have I got to go pay 20 times? Something is a company going to keep it for 20 years or somewhere in that 20 years? Are they going to go, hey, maybe it's worth the cost of replacement? I just think, to your point, it's not about one or two names. It's about rational decision-making at big businesses. I mean, you're basically want to attack your growing, recurring costs. And so what was the safest part of the market, now it's the most dangerous to pay a premium for. And that's the most dangerous to pay a premium for. And the premium has been wiped out, to your point, Kelly. It's a discount now,

and I think rightfully so. And I really don't see a path back to the premium world. You know, maybe people like me are too skeptical or too negative on this, but the days of the 25-b-be ratio for this type of stock, I think, is gone. I'll tell you where there is a lot of negativity, Peter, and you're in Kansas City. So you're right there in the heartland. Here on the coast, the coastal media, of which we are apart, but there's a lot of part. It's the media. You know what I'm talking about. It's the blame the media part of the show, which is saying that high gas prices are going to destroy the American economy. They're going to crush consumers. And I'm not taking away from the fact that high gas prices will hurt many lower

income consumers. We all acknowledge that, just like high food, high insurance, whatever. Are you seeing any indication with your team and all the data that you guys are running or whatever that the domestic American economy, where you are, wherever it is, is being damaged because the small cap stocks, which are purely sort of attached to the domestic economy, seem to be telling a pretty good story. You know, I think it's really interesting because as you talk a lot about on your show, there's always multiple narratives and real issues happening at the same time. You know, right now we have Iran, Ukraine, AI, oil, tariffs, and then whatever Trump is going to tweet next and the midterms. Those are all the narratives happening. And I think small caps are

are rallying, not really factoring in oil. I think the way that they're looking at it is, and I think the way most people are looking at this, is oil prices are going to normalize one way or the other. We're either going to get a resolution with Iran that brings the supply and demand back down, or we're going to make sure that there's access in other ways, or Trump is going to do something to make sure this isn't the case heading into the midterms, which will be extremely negative. I can tell you, like, for most of our clients, you know, it could care less, right? Just to be really, frank, these are people that are doing pretty well, they're saving and so on. But I can tell you the business owners, many of them that are in spaces that are impacted by the price of oil,

they are really feeling it. They are really frustrated. You know, first they were dealing, some of them were dealing with tariffs. Now they're dealing with oil. I think they are frustrated that they think these are disasters that didn't really need to happen. But I think if we were looking at oil prices being this high for good, I think the market, including small, caps would be behaving very, very differently. I think the reality is the markets don't believe it's going to be sustained this way. What about emerging markets? International stocks. Emerging markets. So I mean, if you were ever looking for a time to be diversified, I mean, this is it. I mean, who would have thought six months ago that tech stocks would enter a bare market,

oil stocks would rally before anything was happening with Iran and the most boring stocks of the world would do well? We're seeing this incredible rotation. I don't know how sustained it is, from the U.S. to overseas international emerging markets, small caps having their day. I think that the average investor is looking at this and going, I can't just be, I can't be big tech anymore. I can't be all S&P 500 anymore.

And you're starting to see very, for my experience, large, wealthy families really getting into the spread my eggs out in the multiple baskets territory in a way I haven't seen them in over a decade. And do those eggs include things like real estate and another thing? Or are you just talking about international stocks? I think just more taking a global approach and spreading out from more from large cap and smaller cap stocks to really making sure all those parts in the market. People have had at least in my experience enough real estate exposure through all of this. People generally have bought into that as being a small part of their portfolio, but a substantive

but small part of the portfolio. But really there was a very large cap U.S. bias that you're seeing start to dissolve. All right. Peter, thanks so much. Really appreciate you joining us today. Thanks, Kelly. Thanks, Brian. Good to see you. Peter Malook. Let's get over to the bond markets now. We're a big auction in the 30-year wrapped up last hour. The auction yield was above 5% for the first time since 2007. Rick Santelli is here for more. Hi, Rick. Hi, indeed. If you look at a week-to-date chart, you can see that 30-year like all yields are moving out. Nothing big and shocking, but pretty much every day this week, we're up 10 basis points on the week. Kelly just pointed out, having had an auction result in a 30-year sector above 5% since 2007.

But yesterday was actually the first close above 5% since July of last year. And if you open the chart up, what we are looking at now should we close at this level, will be the highest yield close pretty much in about one year. Finally, let's look at what's going on in the 10-year sector on an international perspective. and see who's winning and who's losing in terms of basis points. Well, the boon here to date up 25 basis points. U.S. 10 year, up 30 basis points. The winner, or in my case, I would say the loser is the U.K.

Guilt up 60 basis points on the year. That's the maturity, and that's the country you want to pay closest attention to for rates that are surging. Brian Kelly, back to you. All right, Rick, thank you very much. Coming up, what are both sides hoping to get out of President Trump's trip to China? Amon Javers is live in Beijing right after this. Welcome back, President Trump arriving in Beijing earlier today for his highly anticipated two-day summit with Chinese leader Xi Jinping.

The president says he'll be talking with Xi about the war with Iran, but their meetings will focus largely on trade as well. Amon Javers joins us live from Beijing with the very latest. Hi, Amin. Yeah, hey there, Kelly. It absolutely will focus on trade. And remember, when this summit was originally put on the books, the war in Iran hadn't even started yet, right? I mean, this follows from the Busan meeting in Korea between the United States and China back in October. They said they would do another one early in the year. They had scheduled it for about a month ago. And then the war in Iran came up, got in the way of that. They pushed it to this date. But they did not cancel this summit, even though the war is going on. So this is a summit that was designed to solve the trade war, and now it's got to solve the trade war and an actual hot war in Iran. That's a lot of expectation on one summit. And the folks I've been talking to back in the U.S. in terms of the expectations for this are trying to keep it really minimal in terms of whether this is going to have a breakthrough on either front. The idea is maybe there could be some kind of extension of the trade truce and maybe some way for the president to

lean on the Chinese, to lean in turn on their allies in Iran to try to get some kind of a deal there. But expectations are, I would say, pretty low here, Kelly, that there's going to be a breakthrough on either front. So we've got Iran, we've got trade, you got Taiwan. Do we have an idea what the tick-by-tick-a-man is going to be? I understand it's, I would say it's very late there, but it might also be very early there because it's almost the middle of the night. What will be sort of the run of show, for lack of a better term? Yeah. So what we're going to to see tomorrow is the bilateral meeting between the two leaders. That's the big sit down and we'll see that on camera. We're also going to see at some point tomorrow a state dinner with all of the leaders

and all the CEOs. A really big contingent of CEOs ended up coming on this trip. We didn't get a lot of information early on that, but in the end, a really robust contingent are here. All of those folks will be at the state dinner. We're also going to see a T, between Xi Jinping and President Trump on the last day before he departs. The first thing we'll see tomorrow, though, Brian, is the official greeting at the Great Hall of the People. That will be sort of the ceremonial welcome for the President of the United States. What we saw tonight was just literally a toe touch as he got off the plane and headed it for his overnight. It is a long and grueling flight.

They're giving him some time off here for a couple of hours before they start with everything in the morning in a couple of hours time. Putting you on the spot just a bit here, Eamon. Do we know what the CEOs are going to be doing? I assume the Boeing CEO is going to try to sell more Boeing jets. Tim Cook's going to try to sell more iPhones. Musk is going to try to sell more Teslas. Yeah. And, you know, there are a lot of Teslas on the street here in Beijing.

I've been surprised just looking around and trying to get a sense of, you know, what the auto fleet is here these days. I haven't been to Beijing in 25 years. Last time I was here was 2001. It's really changed a lot. There are quite a few Teslas. That is far and away. the biggest American brand of vehicle that you see on the streets here in Beijing.

You also see a few Buicks, and that's really it. I would say nearly half, maybe 40% of the vehicles on the road here are Chinese manufactured brands. It gives you a sense of the kind of competition that Elon Musk is facing trying to sell Tesla's into this market. But all of those CEOs that you mentioned have business here, extensive business here, and they're all going to want to have meetings on the sideline to try to push their individual issues. They've all had difficulty in their particular industries with the Chinese government. And so maybe having the sort of the halo of this visit might help them push their issues a little bit. But we're not expecting major breakthroughs for many of those companies.

The exception possibly being Boeing, which has not sold aircraft here in a number of years, there is an expectation that there will be a large purchase order of Boeing jets. Just how large is an open question right now. The soybean industry is expecting. The whisper number there is about 8 million tons of soybeans. The Chinese committed to 12 million back in Busan. They've largely lived up to that commitment, even though it wasn't put down in writing. The industry is hoping for another 8 million to get them to 20 for the year,

which would sort of get them back to a more normal year of soybean exports. Anything more than that would be a big win for that industry. So everybody's got something they want to sell here. Amen. Thank you. Good luck. Long days, but appreciate you there. Thank you. You bet. So will President Trump and his Chinese president counterpart, Xi Jinping, be able to accomplish, well, anything? Let's get now to our panel from one. What is the State? Gary Locke's his former U.S. Ambassador to China. Michelle Cruz-C. Cabrera is CEO of MCC Global Enterprise, a CBC contributor, and is currently in Caracas, Venezuela. We'll get to that in a moment. But Gary Locke, Ambassador, I want to start with you. What would be the one or two best thing?

most important things that President Trump can accomplish in Beijing? Well, President Trump is really there for optics. He'll want to announce some of these Chinese purchases of beef, soybeans, Boeing airplanes. The Boeing airplanes were actually negotiated several years ago, but have not been authorized by the Chinese government until such a summit like we're going to have over the next few days. But for the president, he really wants those. headlines as he goes into the midterm elections and to really shore up his domestic standing in the polls. On the Chinese side, they obviously want to flatter President Trump, but they don't want to go

overboard because they want to convey to their constituents a position of strength. And obviously, they have a lot of cards. They're going to want to make sure that some of the export controls on advanced chips are relaxed. That's why I think Jensen Wong and Navidia is there to hopefully announced relaxation or at least the sale of some of these advanced chips to China. China, of course, is actually catching up. Within a few years, they won't need American advanced chips because they are moving so rapidly with respect to artificial intelligence. The other thing that President Trump will want to emphasize is getting China to pressure Iran to open up the Strait of Hormuz. China, of course, gets only about 6 percent of their energy supply for.

from the Gulf, whether from the Gulf states, which are now cut off because of the closure of the strait by Iran or even the blockade by the United States of Iranian oil. But nonetheless, the other countries in the region are feeling the pinch of the lack of oil, and that, of course, affects the economy of China. China has an ace card. They control the rare earths and the critical minerals that are necessary for all the cruise missiles, the Patriot missiles, fighter jets, and even Ford automobiles. And so they want an extension of this trade truce, although a lot of the tariffs that America has imposed have been struck down by the courts. So China is actually feeling that they're in a position of strength. They're also going to try to pressure the United States

to say they're not going to sell as many military equipment or arms to Taiwan. The United States is not going to retreat from its commitment to Taiwan, but privately, President Trump may be pressured or urge to slow down the sales of advanced weaponry to Taiwan. Michelle, I was also fascinated to read a chart recently that showed our U.S. exports to China went from, you know, 8 to north of 20, 25 percent at their peak about 10 years ago. They've since come all the way back down to 8 percent, I think it's in the Wall Street Journal. In other words, there has been a big sea change. even just in the past few years, we've seen lots of other products rerouted, not rerouted, but coming from places like Vietnam instead of China. And I just wonder underpinning all of this,

how much that changes the dynamic. Yeah, you're talking about trans shipments, Kelly. I think what's important to know about this summit in particular is that it reflects, I think, the first time that there's a major change in attitude by the U.S. towards dealing with China and trade. For nearly 20 years, the U.S. leadership, economists all over the world, even Chinese economists, told the Chinese Communist Party, you need to stop intervening in the economy so much. You need to stop state subsidies. You need to stop relying so heavily on investment to the point that your consumers, despite being such a rich country, are such some of the poorest in the world. And why doesn't anybody like that? Because they

produce so many things, but they flood markets all over the world, and they can't sell to their own consumers because they're poor. So what ends up happening? We end up deindustrializing in the United States. Now with Trump putting on all these tariffs, taking a very strong attitude, what are the Chinese done? They've now started to flood Europe with their exports. And now we're watching Germany deindustrialize before our eyes as well. So instead of trying to convince the Chinese Communist Party to change its ways, what this administration has decided to do is try to manage the trade relationship. We keep hearing whispers at Jamesing Greer, U.S. Trade Representative, talking about perhaps a board of trade, something that acknowledges that getting the Chinese to follow the rules

of the WTO are not, is never going to work. And the Europeans slowly, surely are coming on board to this idea as well, because they are now suffering from this influx. That's the core of what this meeting is about. Gary, what would you add to that? Well, obviously, both sides would like some clear on what type of trade is permissible, what types of items, commodities might be subject to high tariffs, and which ones might be not subject to tariffs, and that's what this Board of Trade might do. The Chinese are very interested in this because they want to know what type of investments they can make into the United States, whether building solar factories or battery factories, etc., etc., because the U.S. policy keeps changing. So the Chinese would like some certainty.

At the same time, the United States companies would like to know how they will be received in China. Will Tesla, for instance, have to keep paying these huge tariffs, which were in retaliation to the tariffs that President Trump imposed on Chinese goods? So both sides would like a little bit of clarity. But I think that the consensus is people should not expect too much from this particular summit. Obviously, President Trump wants to have the headlines of major sales of Boeing airplanes and soybeans and beef. The Chinese want to impress upon President Trump to back off on his support or go softer on his support for Taiwan. Yeah. Michelle, on that quickly on that last question, do you expect any change? Eunice Yuni Un last hour reported that they were hoping the Chinese might be hoping the president would even go so far as to say they would oppose Taiwan's independence.

Would that you imagine that ever being on the table? I think the president would want to see some action from China first. That's a very, very big step to take, on short, he's aware that Shizheng desperately wants that. That is a huge ass. That would be a huge, huge win for Xi Jinping if the president were to do that. So he would demand something very, very large in exchange for that. And also, I think you would probably want to see them to actually do, commit to something and then do them first before we ever get to that point. because the first time President Trump was in office,

there was a huge range of commitments that the Chinese did not meet. And so therefore, they're going to want to see the goods before they actually commit to something else. Gary and Michelle, thank you both very much. And Michelle, good luck in Caracas. Look forward to hearing about that trip when you get back. Thank you very much. See you later.

All right. Is $100 per barrel crude oil the lowest you are going to see for the foreseeable future? The keyword is now inventories, and we'll have more on what you need to know. Next. Let's talk oil, because the important new topic in oil is where inventories are headed in the weeks and the months ahead. Inventories in the oil storage world is basically how much oil is in storage around the world, and that storage is being depleted as volumes through the Strait of Hormuz stay low.

J.P. Morgan's Star commodity analyst, Natasha Keneva, has an interesting look at where we stand now relative to the past. This big, beautiful chart here next to me shows global oil inventories each year from 2020 until today. You can see this sort of yellowish orange line, a huge build during COVID lockdowns. The gray line under it here, that is last year when there was also a big inventory build. And all of that extra oil is one reason oil prices were relatively low last year. But, as you know, things are changing quickly. This dark blue line here, this is this year.

And you could see that inventories are draining every day. And the team at J.P. Morgan says that unless we see this trade-ofor moves fully reopened next month, the global markets could hit what they call operational stress levels. And that would add more strain on supplies and supply chains. The IEA is out with a similar take today as well. And OPEC also on the tape saying it sees slower demand growth this year, as OPEC member oil production dropped more than 30% since the war began. Folks, that's simply 10 million barrels per day, gone from global markets.

So oil hovering right around $100 a barrel. But as all of that oil storage goes down, it is probable that oil and gasoline prices will go up. I hit this topic and more in my weekly energy intelligence piece called Power Insider, the latest issue out today. go to CNBC.com to read it or have a delivered straight to your inbox to sign up. Go to CNBC.com slash Power Insider or hit that QR code at the bottom of your screen. Really appreciate all the subscribers and positive comments that have already occurred.

Kelly. It's a lot of work, Brian, thanks. There's more power lunch right after the break. Stay with us. All right, welcome. The AI chipmaker that has tied ties to Open AI is scheduled to go public tomorrow. Pricing is set to take place. after the bell today. The range has already been raised several times. It's bringing Christina Ports and Evelas. We got a lot of questions. The first question that you probably just heard us

going back and forth on was how do you pronounce the name? Cerebris. Cerebris. Cerebris. Cerebris. Cerebris. Cerebris. Cerebris. Cerebris. No, yesterday it's not Sarah Braes. In my mind, I was like, Sarah Brae, Sarah Braes. Stop thinking of bras. It's subrebris. Subrebris. Like cerebris. There's an extra be in there now? No, cerebris. You guys are just making me fumble like I did the last hour. So Cerebris is set to be the biggest chip IPO of the year, but investors are also taking a really close look at its ties to OpenAI and Sam Altman. Court documents from the Musk v. OpenA.I trial just this past week revealed that Altman and OpenAI co-founder Greg Brockman have been personal investors in Cerebris since 2017. Altman also testified that OpenAI once even discussed a potential merger with the company without telling Musk.

Those connections have only grown stronger. In January, OpenAI signed a $20 billion compute deal with Cerebris, loaning the company also a billion dollars, and also received warrants for 33 million shares, giving Open AI the right to buy stock at a set price in the future. So Open AI isn't just a customer. It's also a lender, a potential equity holder, and its top executives were early backers of the company. Cerebris is now targeting a big valuation of up to $49 billion, could be up to $50 to $60 billion, I was just told about 10 minutes ago, would demand reportedly more than 20 times oversubscribed with a price range of roughly $150 to $160 a shares. So as investors really rush into AI deals, the ties between Open AI and Cerebus are also coming into focus, guys. Yeah, and I think we, you know, you mentioned a few times, Christina, there's a little bit of pushback. look, obviously the technology that they have is fantastic.

You know, Nvidia copied them because, you know, they were so innovative. But the question is really how big a piece of the market ultimately could they have? And this is already a highly valued IPO. We asked throughout SETI last hour. He said, ah, valuation might not have me on the sidelines here. I understand the valuation part just because the customer concentration is highly saturated with two customers from the UAE. The open AI deal will, you know, change some of that concentration risk.

AWS is a potential customer, but they're still working through the forms of the deal. But to your point about whether this is a potential, you know, big market, inference market is huge, right? And memory is going to be an incredible constraint in the next few years. The offering with Cerebrus is that they have memory on the actual silicon. So it's a little bit bigger. It's not like the GPUs. They're saying that they can offer the silicon with the entire system and the software included.

And even if they get a small portion of that inference market, it's quite large, which is why NVIDIA also spent roughly $20 billion to buy GROC IP for that exact same reason, putting the memory on the chip so they can compete in the inference market at lower latency, higher speeds, lower memories, so they don't have to deal with all this high bandwidth memory supply problems. Indeed. That's the idea anyway. It's going to be an exciting one to watch tomorrow for sure.

Christina, thanks. Appreciate it. Thanks. Christina Partsenevilis. Let's get to Angelica Peebles now for the CNBC News Update. Angelica? Hey, Kelly. Prosecutors in South Carolina said they will retry a disgraced lawyer Alex Murdof for the shooting deaths of his wife and son. This morning, the state Supreme Court overturned the convictions, ruling that the conduct of the court clerk, quote, egregiously attacked Murdoz's credibility by suggesting to the trial jurors that his testimony couldn't be trusted. The CDC reported today that overdose deaths fell for the third straight year.

with about 70,000 Americans dying last year. That's a 14% drop from the previous year, and it marks the longest decline in decades. There were some places where overdose deaths did increase. The CDC figures show increases of 10% or more in Arizona, Colorado, and New Mexico. And in the latest state redistricting push ahead of the midterms, Louisiana, early today, advanced a new map

that would give the GOP in another seat. Missouri's top court also upheld a new map, which could give Republicans an additional seat. Meanwhile, last night, South Carolina, Senate Republicans rejected a plan to redraw the state's maps, including the state's only majority black district held by powerful Democratic lawmaker Jim Clyburn. Brian, back over to you. All right, Angelica, thank you very much. We got more power lunch with record highs in the markets right after this. All right, welcome back.

Kelly slash Brian. We have to talk about it. If you missed the top of the show, there's your reference. We have to talk about Ford. Ford stock is up 14. And we have no idea why. There is a Morgan Stanley report out this morning that comments on an announcement that Ford made earlier this week around Ford energy. Basically, it's like the battery storage piece of the business.

They took the batteries from their Maches and their F-150 lightnings and they converted it to like a Ford Energy data. We talked about it yesterday. That's genius. Energy storage. But that was a couple days ago. The Morgan Stanley note was today, but the reality is there's nothing really new in it. Ford is the best performing stock in the S&P 500 today. Wow. And to your point, its relationship with China's cattle is underappreciated.

That's what the analyst is saying. And they've made moves that they can to strategically reposition themselves. It reminds me a little bit of what's been going on, whether it's a generac caterpillar. We talked about yesterday about Tesla's power walls and the role that they play in solar storage as Sun Run is trying to kind of build that out. So, yeah, a repositioning there for sure. And by the way, more broadly, the NASDAQ, the S&P 500, those are the areas. of the market that we're seeing all-time highs again today. Just put the S&P broadly back on the screen. I know the Dow's down 106, but April 15th, I believe it was,

was the first time the S&P crossed and closed above 7,000. And today the S&P 500 is on a journey towards 7,500, and it's May 13th, if this calendar is correct. That's almost 500 points of upside to the S&P 500 that we have added in just about the past. Those are great stats. They're like RBI's, and I'll add this layer it on. The NASDAQ 100. which is at a record high today. Bring up the triple Q's, please.

They call this in TV vamping and or stalling because we're waiting on the Kevin Warstuff, but this is relevant information. The NASDAQ triple Qs are up 16.5% this year. We're on pace for one of the best years ever for the QQQ, assuming this pace holds. Now, is it going to hold? I don't know if it did. Be unbelievable. But look at that boom. If you ask most people, they might think the market is down this year. And it's actually doing that. By the way, the software stocks have been going a little bit of both ways, having a better run lately.

Let's bring in Sima Modi for more on that, Sima. Nice run off the lows. But as we are talking about last hour and the debate at the top of the hour about Salesforce shows as well, people aren't yet sure if this one has staying power. That's right. The IGV software sector under pressure again today down about 1%. And I would draw your attention to also shares of Zoom info. The company reported earnings yesterday and in the company's press release

And on the earnings call, the CEO talked about how there is AI agenetic confusion amongst customers as they try to decide what they can actually build in-house with AI models versus contract out to a supplier like Zoom Info. So that stock was under significant pressure yesterday and is one we are focused on today. As well as cybersecurity, which is one subsector within software that remains under pressure, Paula Alto. One bright spot I would point to is Oracle Wedbush securities raising their price target on the stock. 25, maintaining their outperform waning, saying that they are confident based on their channel checks around the company's strategic positioning

and that company is set to report earnings in a couple weeks, Kelly. That's all I'm going to say. See, all I'm going to say is, Seema, thank you very much. More parallel to after the break. Welcome back. The Senate has just confirmed Kevin Warsh as the next chair of the Federal Reserve. Emily Wilkins is on Capitol Hill.

Emily? Hey, Kelly. Well, yes, the Senate. wrapping up, Warsh's confirming him to both through the Fed Board and as Fed Chair before that May 15th deadline. That means he is in place now. It is, as we expected, fairly smooth sailing. All Republicans voting for Warsh, they were joined by one Democrat, John Federman. All other Democrats voted against. We should know, in terms of a Fed chair, this has been a pretty partisan process. It's not something we've historically seen when it comes to the chair, but obviously given the

partisan atmosphere up here, as well as concerns about Fed independence did lead a lot of Democrats to vote no. But despite that opposition, Warsh has now been voted in by the Senate and confirmed. And of course, there's a lot more analysis about what that is going to mean. But for at least for now, we can say that the action is done on Capitol Hill. And of course, plenty of things for us to move on to next. Guys. Emily, really appreciate Emily Wilkins. Thank you very much for bringing us that official update. For more on what a war sled Fed could look like and mean for the U.S. economy, let's bring in CNBC senior economics reporter Steve Leasman and Peter Bookvar, who's here on set with us. He's one point BFG wealth partner, CIO, and a CNBC contributor.

Steve just set this up for us a little bit. Obviously, this comes right after a couple days of hot inflation readings and rising global bond yields. Yeah, he has his work cut out for him. And a lot of times these Fed shares are tested by the markets and tested pretty quickly, where the want to know his resolve for fighting inflation or even his resolve for backing up the market in times of stress. So he has his work coming out from it, I think, on two fronts. The first is the economic one when it comes to high inflation. And what I hear is growing concern on the committee about the Fed missing the target for five years and now another ballot of inflation that's coming from the energy price surge. The other is on the political side. This is the most partisan vote for

a chair, at least going back to Allen Greenspan, the prior one. was Ben Bernanke, 30 votes against him then. Now I'm thinking, what is the number? Something like 45 or 46 votes against Kevin Warsh. The difference, even though with Bernanke is Bernanke had bipartisan opposition. Democrats and Republicans both voted against him. This is largely Democratic. And I think the key here, Kelly, is this.

When Fed Chair Powell needed friends in the wake of that criminal prosecution, he had them. And he had them on the Republican side, and he probably had them on the Republican side. and he probably had him on the Democratic side if he needed him. So Kevin Warsh, he's got time to do it, but he's a 14-year governor now, a four-year term chair, and he'll probably be a chair that could be potentially during a Democratic administration. So he's got time to mend fences and to get supporters over there, but he has work to do. Peter, jump in here with your thoughts. I think a lot of people have said we're still not quite sure who the real Kevin Warsh is.

And in a weird way, I wonder if it matters. I mean, all that matters right now is what he's most likely to get to work doing right away and how likely he is to kind of take the economy and say, this is my assessment of it. Here's I'm going to build consensus and off we go. And you're definitely implying, is it going to be pressured to cut interest rates regardless of the macro circumstance? I think Kevin is unique in that he brings this incredible resume experience as a governor and also tremendous market experience working for Stan Drucken Miller for as long as he has. but to your point, he's still subject to circumstance, and the circumstance he walks into is

extraordinarily difficult with inflation where it is, and with the constraint that that causes on not just the Fed, but all central banks. When inflation is low, central banks have license to do what they want to deal with any externality. They can cut rates to wherever they want. They can do whatever they want the balance sheet. When inflation is a problem, they are much less able to deal with things. So there is just inherently handcuffs on the Fed under the current circumstances. Yeah, I got a couple questions, Steve. I mean, forget about the political side. I guess this is to be expected in this day and age. I doubt the Republicans, they'd probably all vote no for a Democratic appointed candidate either, right? Just out of whatever. They probably don't

even know what it's about, but they would just vote no because that's the world that we live in. What you know, Kevin Warsh? Like, what can we expect? Who is he? What can we expect him to do? Well, I kind of like what Kelly said about waiting for the real Kevin War. So I know Kevin I've known for many, many years. I think he's a very, very smart person. But he said a bunch of stuff kind of leading up to the kind of campaigning for this job. And what one particular observer said to me is he's going to find out that you can say things in the lead up to it. And then reality hits you. I think Peter was sort of alluding at this. He wants to cut the balance sheet. But right now is an interesting.

time to be thinking about cutting the balance sheet when yields are quite so high and whether or not there be a negative effect on yields already from that. He thinks that inflation is a choice for the Fed, and he's criticized Powell for not responding to that inflation from the pandemic and criticizing him for making the choice to have higher inflation. At the same time, we have these high oil prices coming through right now. And Kevin has suggested that his framework would be the same as Powell's in terms of looking through the one-off issue. So there's a lot to be seen here. We also know he has sweeping plans and ideas. I mean, he's used the term regime change at the Fed, Brian, in terms of communication strategy, what data is used. So he's very ambitious. He's

very smart. He's got a lot of ideas, but a lot of his ideas are not at the center of where the committee is. So we're going to see, I know you wanted to forget the politics, but there's another level of politics here, and that's the politics within the committee. He's got to make some friends over there, too. Yeah, we just saw Peter at the last meeting this eight to four descent, but that was kind of in favor towards moving back to a recognition that the economy is on normal or stronger footing. We were having this discussion with Tom Simon's last hour. Jeffries is still calling for two rate cuts this year, although he acknowledges the jobs report

have been way better than expected in the last few months. So, again, this productivity issue is I think probably going to be Warsh's centerpiece to talk about. Yeah, but that will take time to play out. I mean, according to the dots, and we can quibble with the dots, but they believe that the long-term interest rate, the real long-term interest rate should be 1%. Well, inflation is running three and a half to four, and the Fed funds rate is 364 right now. So you're essentially having real interest rates that are less than 50 basis points. You can argue the Fed is already easy with policy in the face of what will likely be further increases in inflation. I'm sympathetic to this idea that so much of this is a supply shock. And I don't even know what core is anymore and how many things you have to strip out. But it feels like what if core is more in the twos and then all the sudden policy rate is at 1% in real terms?

I'm fearful that core is not going to stay at two and it's only going to increase. But I think the prudent thing to do if I was in that C was just sit and wait until that straight reopens and to see how prices settle out. I agree. I don't think they should be raising in the face of this. unlike other central banks that are doing that, I think that is off the table. But in terms of cutting, to me, inflation is the disease and the pain point of the economy right now. A weak labor market is a symptom. Then how do you cut into that? I agree. The 30-year auction, as Rick just told us and Steve can jump in, is above 5%. I know we focus on the tenure these days, but the 30-year still exists.

Its yield on the new auction, the new notes that just came out, is over 5%. bond yields are going up, not going down. And inflation is hot. How do you cut into that? And by the way, I know it's in the past. I still don't understand the cut from two years ago, but I guess that was two years ago. Nobody cares anymore.

Well, what you're saying is the long end of the yield curve is tightening monetary policy for the Fed. The long end of the yield curve in Europe has tightened policy before the ECB has gotten around to it. And we know that the long end of the yield curve in Japan has been hiking for. all year in the face of a BOJ that's not really doing anything. So the bond market, in a way, has taken over monetary policy from central banks right now. Steve, go ahead, jump in on that.

Yeah, I think, Brian, there could be a piece of uncertainty about Warsh's policies in bond yields right now. If you don't know how tough he's going to be on inflation and with rates, well, you might want to sell before you figure it out. So it's something that Warsh can control. And I think his first comments out of his mouth about his view on inflation right now and the path of rates will be very, very, the bond market will react very dramatically to that. Because I think at least some of what's in there right now is some uncertainty about how Warsh will deal with the current situation. Will he still try to cut rates? Will he hold or will he even threaten a hike and move back to that balance point that some of the

the committee members wanted to do when they dissented, which is to say we're not saying which way the next cut will, the next move. But I feel like, Steve, it's like the scene from the movie Captain Phillips. So the guy says, I'm the captain now. And I feel like that's the bond market, right? And Warsh is Captain Phillips. She's the Tom Hanks character. And the bond market's saying, we're the captain and we're going to do what we want. Yeah, quickly, I don't, I don't necessarily buy that. I think it's a give and take. There are some people who have a theory, Jeffrey Gunlack and others who say the bond market leads the Fed. I think it's much more of a given. take. And I think also they come to the same conclusion about where policy ought to go almost

independently of each other. And they generally agree on it. It's when we get to big differences that we really have interesting stories to tell here. Stephen, 30 seconds. What's next for Warsh? There's some kind of paperwork that needs to be done. And then there's a swearing-in ceremony. And then there's a fake swearing instrument. Well, we'll get some pictures from that. And then I guess he takes office on Monday, I guess it would be. And as you know, as you know, No, another discussion we might have is that some other day is that Jay Powell will move along to become a governor at least for a period of time. And we're still waiting for the Supreme Court to rule on Lisa Cook. All right. And maybe we'll see you all in Washington for that first meeting by

Washington. Thank you, Peter Bookfar. Steve, thank you as well, Steve Leasman. By the way, we have a big show tomorrow. Bobby Flay and the CEO of NASCAR all on set. Forgot about that. And record highs for the markets. Thanks for watching Power Lodge, everybody. We'll see you tomorrow.