Power Lunch - Power Lunch 5/15/25

Episode Date: May 15, 2025

CNBC’s Brian Sullivanand 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.

Another big hit for one of America's largest companies has investors in that stock on edge. Welcome to Power Lunch, everybody, alongside Kelly. I am Brian Sullivan. Topping your headlines today is a lot of stuff. An alleged DOJ investigation into United Health. Two massive retailers that you know may be merging. Oh, and Apple getting a bit of a warning from President Trump, Kelly. Wow.

First, a quick market check and a slow climb back. Things starting off a little rocky today, but all three major averages are in the green, although only by four points for the NASDAQ. And retail is a big gainer. The S&P XRT retail ETF is up more than 6% this week, on pace for its fifth positive week and leading the way is Foot Locker after a blockbuster deal. You can also see shares of boot barn up 15%,

coals and five below, they're fractionally higher as well. The key laggard today is UNH on that reported DOJ investigation. We'll have more on those names in just a minute, but the UNA shares are down about 14%. Joining us now, and for the hour is Surat SETI. He's CNBC contributor and managing partner at DCLA. It's great to have you. Thank you.

A lot of different corporate stories to dig into, but top level just lay out for us. What do you think of this market comeback? I mean, I think once President Trump said, hey, we're going to slow down the tariffs, the market started digesting that pretty quickly. And then you saw earnings actually better than what people expected.

And now he's on this trip where things are happening, more purchases are happening, whether it's Nvidia chips or agreement. So I think we're getting through that, and then you're also seeing the tax bill coming through. Do you, I will get into this later, but there are so many high profile guests or long-time investors who have come on and

said, you know, like Steve Cohen for an example, all kind of more warning to the downside. And I just wonder if you share that concern or not. Well, I think because if you look through, we don't know where earnings are going to be for the next couple quarters. And everything that we've heard now is backward looking. So I think on an earnings cash flow,

that's where some of the, at least the short-term investors or the traders are little scared because you're going to get some bad data in there, especially if tariff prices come through even though they're not going to be at zero. You're going to have companies not, you know. Walmart, they're saying price hikes are coming to the next couple of weeks. So what's that going to affect their margins? Yeah. Use an iPhone.

You guys ever use that GIF, that little short video, that little chubby kid, the little baby that runs in a room, sees something and runs back out. People out there know what I'm... We need to start playing them on air. We should. Because that's how I feel like the White House has been with tariffs. Right. I'm not just bringing that up because it's cute.

It's this idea that lets tariff, tariff, tariff, April 2nd, quote, Liberation Day, whatever, markets collapse. I've talked to people in the White House on and off the air and on and off the record. And I know there are people in the presidents here saying you don't want to be the guy that brought the Dow down by 20%. Right. It's not a good look for the White House. And I feel like there's been that amazing reversal on the tariffs, which has led to Kelly's point, an amazing reversal on the equity market. And then also we'll see what happens, right? We're going to talk about more with Apple, but I think they're testing the waters.

They're testing the band of what the market's going to do. And the key thing they're trying to do is the tenure. But the tenure really hasn't moved. So I think the equity markets have responded first, but the bond market still is saying, hey, where are you going to pay down the debt? Where are we going to see the growth? And I think that's going to be kind of the next leg to this market if we get one. All right.

Sit tight. Much more to come? Yeah, we've got a lot more to do. All right. So let's kick things off here. turning out really to be what could be one of the biggest stock stories of the last few years or decades, that of course the ongoing and seem to be accelerating problems at Dow component United Health. United Health is selling off today.

Now, it's well off its lows of the day, but it is down another, what, 14 percent? This down move on a report from the Wall Street Journal alleging the health care giant is under possible Medicare fraud criminal investigation. We obviously reached out to United Health for a response. And they said this to us, and this is also on their website, which I will also post. They have not been notified of any investigation by the Department of Justice, and they also called the Wall Street Journal reporting, quote, deeply irresponsible. This is on their website and their response to us. Of course, yesterday we talked extensively about this story and this company with an analyst,

really before this Wall Street Journal's story broke. And we spoke with United Health analyst John Ransom. Here's what he had to say. Do you feel like there's fraud at the company? I think that, you know, Helmsley's an accountant, right? And so his fingerprints are on the strategy. He's been on the board. He led the strategy.

I think the earnings test this year is going to be very interesting because I think it's going to have to survive a lot of scrutiny from, certainly from insiders, but also from outsiders. No, I know there are many of you that own the stock. Maybe you own the Dow ETF. Maybe you work there or have friends that work there. We get it.

We hope it turns out well. But let's be clear, the stock has lost half its value since its all-time high last November. It's about $337 billion in market value lost. Basically, Kelly, United Health Group has lost effectively a Bank of America in a month in value. The companies faced a series of issues, criticism from billionaire Bill Ackman, an unexpected public outcry against the company. And of course, obviously, and we cannot forget this, the murder of one of its executives on the streets of New York City. You also have the CEO stepping down and it withdrawing guidance. Our next guest is part of the DOJ until last December.

Joining us now to sort of roll into this conversation is Jonathan Cantor. He is former Assistant Attorney General under the Biden administration, also a CBC contributor. and I want to make this very clear, Jonathan, that United Health Group calling the Wall Street Journal story irresponsible. They say they have not been notified. There is a chance that the journal story is incorrect. I want to make sure and highlight that very aggressively. But I don't think any of us on this desk here and get your response have seen this kind of a market value loss on a Dow component ever. Yeah. So the consequences here, if the story is true and if the investigation results in charges could be catastrophic for a company like United. The penalty of a criminal conviction

here for United would be debarment. That means United would be out of business with respect to serving the federal government. And so Medicare Advantage and all of its work throughout its business that contracts with the U.S. government would be debarred, would be banned. And that would have a massive effect here. So it is not surprising to me that upon these reports, the market is taking this news very seriously. Yeah, and I don't think the move down, respectfully to the Wall Street Journal, is all on that story. It's kind of to your point. I've talked to some people about this exact thing, and I want to be very, very careful with the language.

United Health will likely say this is not accurate. They sit on their statement that they believe deeply or something like this in their Medicare Advantage program, and this may not happen, but I think your point is well taken, Jonathan. then this is not some fly-by-not operation. This is the largest health care insurance company in the United States. Do you think there's a chance that actually occurs? Well, we are facing an environment where people are talking about tax cuts, fraud, waste, and abuse, and deficit spending.

And so one of the biggest expenditures in the United States government is on health care. And so if it turns out that there is waste or hopefully not, but if fraud or other kinds of abuse, then it not only relevant to the question about whether United has engaged in wrongdoing, but the consequences here, the victims here would be taxpayers and not just in terms of higher health care costs, but death threats, it's better. Sorry to jump in here. I want to ask you this, though. We know there's fraud in Medicare.

That's not our opinion. The general accounting office has said it. It's $125 billion per year. But that doesn't mean that these companies, United Health or anybody else, had anything to do with it, right? It should be bad actors who scam the system, erroneous payments, somebody in, you know, Russia, who's a hacker, who, you know, whatever it might be. Let's be clear, there is fraud in the system. The government admits that, but that doesn't mean it's the companies. Well, that's right.

And I think that the reason why that perhaps the market is reacting the way it is, is a suggestion, again, whether it's true or not to be determined, that the largest health care company in the United States might be engaging in this conduct. And one of the reasons, one of the areas that generates a lot of interest here is a practice in the industry more broadly called upcoding. That means making people look sicker than they are or overworking them from a health care perspective and then billing back taxpayers for that work. So on that point, Jonathan, and if there are others under investigation here, what should we expect for the timeline and the discovery process and what else might come out of this? So this can take a long time. And so if the story's true, it could take years to investigate. And there will have to be disclosure obligations to companies that are under investigations. It will involve individuals as well as companies. But for the reasons I mentioned before that this is top of mind for tax purposes, for budget purposes,

there's going to be a pressure if there is indeed an investigation to move it quickly and reach a conclusion quickly. Yeah, exactly. And so, look, we've seen instances of this before, but I think when the word criminal is used, that people just kind of snap up with a level of seriousness to it. What could the company, you know, you worked in this department, what can the company do? You mentioned kind of try to quickly address the issues. What else can they, can some of the other major healthcare players do to try to get ahead of this? Well, first and foremost, if they believe that they have not engaged in wrongdoing and there is an investigation, cooperate and bring it to a conclusion quickly. So when I was at the Department of Justice, if companies genuinely believe they are not engaged in wrongdoing, they would come in, they would open up the books and they would explain. And so that is ultimately the best thing that they can do to resolve this as quickly as possible. Remove any doubt among enforcers that there's been criminal conduct if indeed there is an investigation. Yeah, and, you know, listening to guys like Sarat Setti, oh, Sarat Setti, hi, good to see you again. And listening to a lot of people at halftime, I know Scott and the gang have been doing a great job on this as well, is if this goes away, I mean, if it turns out that there's nothing really bad and systemic going on, the investigation is not happening or it finds nothing.

This is a company that five months ago people loved. Right. Right. It was printing money. So is there an opportunity? opportunity here. So I think you have to look at it in a different lens. You have to say, what do they do yesterday? They took guidance away. So when you take, now you've created a level of uncertainty. Now you've created another level of uncertainty today. So a lot of investors will say,

hey, why don't I just wait because I can give up the downside on this because it's trading at earnings, we don't know. So when they do come out and they kind of stabilize, it might be better now. You can't put a multiple on the stock because we have no idea. with the multiple based off of because part of the denominator or numerator is just missing. Right. So it's at 11 times forward earnings now, whatever that ultimately. But what are those earnings? But what are those earnings when you've got a new CEO that's going to kitchen sink it and you don't know kind of where this is going to go?

You don't know what the regulatory issues are going to be as well. So I think if you're looking at that through that lens, a lot of, I would say, short-term traders, investors will say, I don't want to do this. Now, if you're looking and it's part of a very big diversified portfolio, you might say, hey, I'm going to do something in value. Maybe I'll kind of dip my toe in. Or listen, I've already lost half my value owning this. Maybe I don't want to sell it. I probably still have a gain. Maybe I don't. So I think you've got a lot of issues around that as well. And I think what we would call the stock is a no man's land, right? There's no value buyer. There's no growth buyer. It's kind of what Stephanie Link was saying as well. It's going to be in the penalty box for a long time. Do we still have Jonathan Cantor? Is Jonathan still there? I'm here. Oh, hi, Jonathan.

Thank you. Sorry about that. Didn't know. What's the best possible outcome here? Not the worst. We know that. What's the best? The best possible outcome from United is they're clear of wrongdoing, and they've absolved concerns,

and as you was just discussing, they can move on. I think the other thing that they will have to do, though, is this has exposed the resiliency risk and of our health care system and of our markets of being so dependent on one company for our health care. United is not just the largest health insurance company in the country, it's actually the largest health care provider in the country as well, while owning a lot of other infrastructure, including change health care, PBMs and pharmacies. So one question that they're going to have to resolve coming out of this, regardless of whether there's an investigation, is whether we have too many eggs in one basket and whether United

has created resiliency risk for our health care system and our health care economy. Yeah, no, I think that's a very apt point and touches so many different parts of the economy as well. Jonathan, thanks. Appreciate you joining us today. Jonathan Cantor. And shares of United is mentioned down 13% today and about 30% this week. Meantime, kind of going the other way, our shares of Foot Locker after Dix is planning to acquire their much smaller rival for $24 a share and a deal worth about $2.5 billion. You can see Foot Locker shares soaring there, but their 52-week high was around 33, so this is a little under 24. And Dix is down 15%. They're hoping for international presence, win over a new set of consumers,

maybe even corner the Nike sneaker market, as what Dix is hoping for. The news has Foot Locker Shares on pace for their best day ever with this 85% pop, while Dix are dropping nearly 14%. TD Cowan says the deal would be a strategic mistake. What does Sarat think? You know, this is all about scale, right? I mean, it's retail, it's not in favor, so what do you do? You try and grow bigger, you try and get better distribution, you try and cut costs.

So it's not an offensive move. It's a defensive move to say, how are we both going to survive together? But this has done so well. The shares are up so much the past few years, post-COVID, which is extraordinary. Does that give them more benefit of the doubt? Is it more offense than defense? I think it's more defense because they're all seeing kind of their top line slow down because you've got the Internet, you've got direct-to-consumer, you've got potential tariffs coming.

So what do we need? We need scale. Let's get bigger buying power. let's be the behemoth in the house, kind of like what Amazon does. So as you get bigger, more scale, cut costs, etc. Cut costs, meaning close stores. Close stores.

Right? You walk through the mall. You want to get cleats for your kid, right? So nationally, there's a few options. You've got Academy sports. We can bring that stock up. That's public. That's the Midwest.

Let's say you want cleats for your kids. You go to Foot Locker or Dix, really. Maybe you go Academy. Now you've owned Foot Locker. Maybe you shut it down in certain malls, so they have to go to things. Right. Don't forget, instead of going to full luck, you go to Dixon, you see everything else there too, right? So you're not just going to say, hey, I'm going to buy shoes, I'm going to get my lacrosse equipment or whatever equipment, something else to that effect.

But, yes, because you're seeing so much pressure on retail margins and we're about to see even more, why not get better buying power? Maybe that helps offset some of the margin compression. That's theory. We were speaking with analysts last hour as well. He said, look, it's going to give them almost 40% share of Nike. So that makes them a huge partner for that with a lot of leverage. It's just interesting to talk about how big United is, how big is you getting, but United's a different area. And I was thinking in my mind, too big to fail, right?

It doesn't matter to the retail side. But when you've got health care or you've got banks, at what point do you have an issue with how they're serving the general public? It's a great point. You don't think Dix is a head. I don't think we're having an issue now. I think Amazon would be very happy to take whatever they could do over. But Amazon doesn't sell out of the name brand. I mean, that's the big not.

We just canceled. My wife, we just canceled. We just cancel our Amazon Prime subscription. I mean. I did it for a couple years. We did. We went to Walmart Plus. We've transparent.

Because part of Amazon's issue is that there's some brands. No, I've never heard of. Yeah. But it is, that is a reward for Dix. If you want Nike cleats, you just go there. You go there now because you're not finding it elsewhere. Then you go to one website and you say, I'm just going to go to Dix and I'll have all these other things to go. Oh, you go to Nike?

dot com and you can do it direct as well they hoped they tried that for a while maybe that that still will be the case but um so you would be not a buyer of shares and dicks here no does it strike you so we've had sketchers go private we've had now footlocker taken out by dicks which may know more about it than we do i mean is the retail etf is now actually having a great week is there is this a reason to maybe have more exposure to other names that might be so beaten down that they're you know well i think you had a huge rebound once the tariff issue was kind of kicked down the road. But until we really know, some of these products are made in Asia, whether it's China, Vietnam, et cetera, that that's the issue, right? So you've got this kind of dead cat bounce and

a relief, but the question is, what's sustainable? And what are the sustainable margins? And nobody knows. But you're getting kind of some short covering and maybe some short-term trading in there saying, hey, we can see kind of where we're going to get some margin expansion. All right. Sarat, thank. Not piling in to that trade just yet. Coming up, our tensions growing between the president and the CEO of one of the world's biggest companies. Biggest tech companies, big companies of any kind. We'll discuss the, quote, little problem he has with Tim Cook next. Welcome back to Power Lunch. Our tensions growing between President Trump and Apple's CEO Tim Cook. The president says India is offering a new trade deal with the U.S. that includes no tariffs.

That would be good news for companies like Apple looking to build products there. But Trump is telling Cook, he doesn't want that to happen. India is another manufacturing competitor to the U.S., just like China. Mark Mobius told us yesterday, India is the most exciting market right now, and it's outperforming the U.S. this year in stock performance. So how serious is Trump's problem with Tim Cook and which tech firms are in his good graces? Joining us by phone is Chamber of Progress CEO Adam Kovacovic. He is a pro-tech Democrat who previously led Google's U.S. policy strategy. Steve Kovac is here on set with us as well. Adam, welcome to you. And let's begin with what we thought was a very smooth relationship the first term and now not so much?

Well, I think Apple has handled their relationship with Trump pretty well. I think this is a challenging issue. If you just zoom out for a minute, one thing that policymakers from both parties have been pointing out for years is the perils of becoming overly dependent on Chinese supply chains when we have shortages or pandemic, that's a problem. But it's also just strategically smart to diversify. As a result, I think one of the things you've seen is companies like Apple's Apple in recent years embark on something called friend shoring.

Let's diversify production to countries where we have a friendly relationship, India, Vietnam, places like that. Now, even in those countries, there's a learning curve for training those workers to produce things like iPhones and iPads. But the reality is that, like, there aren't enough American engineers or workers with the relevant skills to do that production in the United States. So Apple's strategy makes a lot of sense here. And I think that's where the competing goals of Trump's tariffs really clash.

If we're trying to reduce our dependence on China, then it would, make sense to have an allegiance to alliance of non-China allies we could have. But if we're trying to reinvigorate U.S. manufacturing, we just need to be more pragmatic about which of the types of manufacturing we can more realistically bring back the United States. And I don't think it's iPhone production. Right. See, we were talking about this, you know, moment ago. But, you know, is that the president's goal or not? I mean, or is it simply the idea that he thinks they're being a little too convenient by just shifting from China to India. We thought that maybe that was part of the goal here. It sounds like it's not. The goal is to build stuff here.

I mean, he's said again and again and again that he wants to see iPhones built here. We've had a number of people from the Trump administration, whether it be Peter Navarer or Howard Lutnik, come on our air and say that's the vision for these tariffs, is to encourage companies like Apple to bring their manufacturing over here. They also, by the way, this tidy relationship between Tim Cook and Trump did win Apple those exemptions from the worst of the Liberation Day tariffs, still subject to the fentanyl tariffs, which is why they're still moving forward. with these plans to build in India. And by the way, in those comments today that Trump made, he also said that we're going to have no terrorists with India, which makes it even more appealing for Apple to build there because it's going to be even cheaper to build there and get them out.

They got to be able to build there and get them out. They got to be, exactly. And I love India. I love the story, but they're not China. They don't have the infrastructure yet. They meaning India? India. Yeah.

They don't have it. It takes time. And I think one of the things he also said was it's okay for Apple to build them in India if they're going to sell them in India. Which is why they started in the first place. Which is what they were doing. And I do think it's what our president does, right? It's a signal to Apple to say, you're being watched and let's see where this goes.

And it's all part of that grand negotiation. So we'll see where it goes. And I'm sure there'll be something that will be built here. Maybe it's not. But I think that that was the way that the message was. Yeah. No, I just think as we were talking about yesterday, India was one of the big winners, it seems, in all of this. And I think might still be.

but that's not going to be the whole story. It's certainly not going to be the end of the story. Does that put any other company, I think, like, of an on or companies with big Vietnam, India's supply chain exposure, that kind of thing? And it's interesting, yes, India is really great with manufacturing, but it's also services also. So it's going to be a combination of both those where I think companies are going to benefit using smarter, cheaper labor in India.

Adam, very quickly, do we have the ability to do this, you think, in India full scale? Well, I don't know, but you're absolutely right. We don't have that ability today. And I think, you know, the reality is that, like, China has made it really easy for Apple to do, to produce iPhones there. And you said it, Apple would love a U.S. trade deal with India. Anything that makes it easier and smoother to produce phones in other countries, in which I think a trade deal could do that. That's absolutely true.

I think it speaks to the fact that, like, the tariffs have multiple goals, which are contradictory to each other. If it's trying to reinvigorate U.S. manufacturing, then you would provide no exemptions. the tariff at all, right? But that's clearly not the case. So, you know, I think that, you know, friend-shoring is a good strategy for achieving the goal of isolating China, but it's not clear there's any consistency around that goal. All right, Adam, thanks for joining us today. Appreciate it. Adam Kovac, with the Chamber of Progress. Steve, thank you as well. Our Steve Kovac. All right, still to come. So the major tariff threat, the 145 percent, whatever, delayed for now. Recession fears shrinking a little bit, but they have not

gone away completely. So your next guy says to bet on the companies that could swoop in during these difficult times. We'll name names next. Crypto watch is sponsored by crypto.com. Crypto.com is America's premier crypto platform. All right, this market rebound just continues. Not a lot. Listen, the NASDAX down a little bit, but it can't go up every single day. It's been up pretty much every single day for the last two weeks. The S&B is higher. The Dow is up 4 tenths of 1%.

And Dom Chu, I know nobody, no professional investors look at the Dow, but the Dow is still the thing that makes the headline. Lester Holt talks about the Dow. I have always, and as a former market professional, I've understood the hatred for the Dow, but I never really understood it, right? Because it is still a pretty good barometer or gauge of just market sentiment in general.

Except for one company the last few days. Yes, for sure. Anyway. Okay, so worries about the health of the economy, are continuing to ripple across Wall Street, but whether or not we end up in a recession or not, our next guest thinks that one overlooked part of the market could become right with opportunity in any event.

So joining us now is Eric Luton, who's the chief investment officer at sound income strategies, and that might be a hint here. Eric, you are looking at a part of the market that we don't often talk about or don't feature as much, and that is the business development company. What exactly is it, and why are you, you looking at it as an income investor?

Correct. Well, thank you for having me, gentlemen. Basically, we focus on income here. And some non-traditional income plays like READs or at business development companies, which fall into the financial sector, they really can produce their floating rate loans that produce double B to single B levels, you know, what you would find, the double B and single B credit spread level returns. So 8, 9, 10% plus and yield. So we like that.

It also helps out with adding it to fixed income. income portfolios, because as you know, rates go up, you know, fixed income will go down. And Eric, business development companies are an interesting part of the market because they're structured in a way where there's a sponsor like a private equity firm that puts these things in place oftentimes as a closed-end fund format. And these companies are supposed to be there to help small and medium-sized businesses out of distress situations or grow. What exactly do you mean when you say these can thrive opportunistically if there is or isn't, recession? Well, if there is a slow down in recession, BDCs will fall under cyclicals,

like financials. So you will see dips like we saw in early April where spreads widened out, BDCs got punished. But it was an opportunity because, you know, obviously the spread, we've had, you know, I think it's a 90-day now pause on the tariff war. So we're not, we're not absolutely sure we're going to go into recession. So these got overly punished in early April along with the market. So it was a great buying opportunity. Some of the names were down to, 10, 11%. Now most of them are back to break even or close. So names like Aries and Blackstone and Blueout, these are some larger, well-known BDCs that are well-run. They have a lot of first-lean debt. Aries has a little bit less because they can get by without their management, but most of them

have high first-lean debt. So it's just a way to play the market. And in case recession, we look for dips because we know they're going to get overly punished. And if we don't go into recession, which I think some economists are looking towards now, they should do very well. It will be back to risk on trades, and we could see the BDCs go from slightly negative to back up to an 8, 9, 10% area. All right. Business development companies from Blue Wow, Ares, Blackstone, among the top picks. Eric, thank you very much. We'll see you again soon, sir.

You know what I love about this job? You know what I love about this job? What's that? I mean, besides getting to work with you and Kelly. There's so much I love. Is that every day I learn something new. And I just learned that private equity firms are now rebranded as business development companies. Well, no.

Because he just highlighted a bunch of private equity companies. I've been doing this 30 years. I've never heard the term business development company. They are created by Congress in order to help facilitate the growth of small and medium-sized businesses. So it's not that you're buying Ares or you're buying Blackstone. These are companies in private equity firms that have now put in place companies or capital vehicles to do this kind of lending. Because private equity is very happy to lend you money. Private credits huge.

And then make sure that management executes on the strategy. There you go. Business development companies, BDCs. That's often the hard part. Gentlemen, thanks. As we head to break, shares of five serve among the worst performers on the S&P today. After the fintech firm's CFO gave a stark warning about growth expectations in Q2. It's down 15%.

That and more coming up on Power Lunch. All right, time for a quick power check. Some of the movies and shakers that we are watching. Okay, we got another, we talked on shoes earlier, Dix, you mentioned, Skechers. Yep. Boot Barn. Boot Barn's up 16% right now. They had a $200 million.

stock buyback, boot barn is up to, or 64, 66% in one month. Wild. And this is also. Boot bar. They sell boots. And earnings. I mean, again, we've spoken with the CEO. We've spoken with companies who have been short over the past couple of years. So could be a little bit of a short squeeze here as well, but still a strong performer in what's been a tough environment. Yeah. And you see that they're buying back shares. So anytime you have companies buying back shares is a floor in their stock. And that gets your short sellers. off really quickly, which means you get this huge short covering balance, and then it's really based on kind of where the earnings are going to be going forward. So you know, you announce these

buybacks and you do them, it really does support your stock. We don't have to talk about whether Western wear continues to be a trend for how much longer. I mean, that was the early narrative on the stock, but to your point, now it becomes more kind of this game back and forth. Yeah. Meanwhile, let's check on yesterday's big IPO of E. Toro. It was lower by about 3% today, but still way above their starting price. the IPO price of $52 a share. It opened at 69. So if you bought it on the open, all right, you're underwater by $5.

But both, what do you think of the stock? And what do you think of the performance of the IPO? I mean, look, you've got some support there. It's down today, but it opened it a higher price than it was expected. And I think it's an important indicator. If this stock can stay in the mid-60s and higher, then other companies can follow because the IPO window were shut. And that's what we kind of need for the capital markets to open up.

And that's the whole- Corleave, too. I mean, nothing to sneeze at. Corrieve, I think it hung in there, moving around a little bit on earnings, but up, you know, 60% going into them. And that would be good for the whole markets because you've got companies that can actually have real cash full of real earnings, and I think that allows

a lot more liquidity in the market as well. And all the private equity firms and all the other things that are going on. Business development companies, Sarat. They're lending to the private. Oh, sorry. Can both E. Toro and Robin Hood win? Because, like, E. Toro is just like a Robin Hood clone. Yeah, look, I think they won't like that.

The market is big enough for that. Okay. Because more and more people are investing or even kind of playing in the market per second. Okay, and by the way, let's do a little RBI, random bit interesting, interesting on Amazon. Amazon, did you guys know when public 28 years ago, it's up 272,000 percent. If you bought Amazon at the IPO price of 18, you put $1,000, $1,000. Now you have to write out, what, an 80% decline at the beginning, so you had to be super-brose. or just forgot you bought it. But if you put $1,000 in Amazon,

you'd have $3 million in unrealized gains today. I think what you said is the story. How many people, remember when Amazon was the poster child of the dot-com era? You know, we all forget once these companies become massively successful, the winters that they've been through, the massive resets that they go through. I mean, that's a huge part of the story. I mean, you see the down, if you remember, I think Amazon was the one that the price target was the first one, where the $1,000.

And yes, then it retracts. And the same things happened within VDL, also, when it was down 50%, three years ago. So you do get these. And, you know, as part of a diversified portfolio, you have to kind of be careful also because we're talking about the home runs, right? This is a cocktail party. It's easy to spot the winners, to Kelly's point. I think after the fact. I have a picture of me at the NASDAQ in 1999.

Right. And I'm standing in front of a wall with Witt Capital, Commerce One, Ariba, CMGI, ICG. They're all gone. Wow. Pets.com. Lycos, like a whole bunch of this. site at home. You know, so you've got to ask Jeeves. How far down you want to go. Exactly. But, you know, you have a basket of them and Amazon, Google, some of these survive.

And then if you own Cisco, you didn't go anywhere for 15 years or even Microsoft. But Intel. Exactly. Right. Intel didn't go anywhere either. So you're going to have to diversify portfolio, look at what you own. And, you know, if you've got conviction, you write it out. But, you know, Tesla is the same thing, too. Look at the ups and downs on those. Oh, my gosh. Even more so. Well, Tesla's an interesting segment since the car used no oil, but oil prices are falling. President Trump raising hopes of a U.S.-Iran nuclear deal. In Doha Qatar, the president said that we're in very serious negotiations with Iran for long-term peace. I want them to succeed. I want them to end up being a great country, frankly, but they can't have a nuclear weapon.

That's the only thing. It's very simple. It's not like I have to give you 30 pages worth of details. There's only one sentence. They can't have a nuclear weapon. And I think, I think, I think, we're getting close. Now, that comes after a top advisor to Iran's supreme leader told NBC news that the OPEC producer was ready to sign a nuclear deal with certain conditions in exchange for the lifting of economic sanctions. Now, of course, Sarat, as you know, if we get a deal, it's possible the United States eases off some of the harsher sanctions about Iran selling oil that we're talking about.

More oil, of course, could mean prices go down if the sanctions do get kicked in or enforced because the sanctions are on, but they just weren't really. We kind of looked the other way for a couple years there. We'll see what happens. Same thing with Russian oil, right, flooding the market too. But the key part here is what the administration wants is oil to be in the 40s and 50s. And that by itself is a lower tax on the consumer brings down inflation, could offset some of the tariffs going forward too. So I think that's, you know, if you impute that into kind of our economy, that's going to be helpful, especially when 70% of our economy is run by consumers.

And that helps manufacturing here as well. So I think there is a good tailwind, maybe not as good for the oil and gas industry, but then again, the biggers will survive. The Exxon Chevrons will probably start doing more consolidation or just really cut back and you'll see some of the smaller players than no longer exist. Yeah. All right. Let's get to Kate Rune. Now for the CNBC News Update. Kate, what can you tell us?

Hi, Kelly. So let's start with the Federal Aviation Administration saying today it's investigating an incident over the Denver airport where traffic control lost communication for 90 seconds. On Monday, according to the FAA, both transmitters that cover a segment of the airspace went down and controllers had to use another frequency to relay instructions to pilots. That incident at the country's third busiest airport comes after Norke Airport has experienced some similar outages. And the man accused of killing four Idaho college students back in 2022 was in court today for what is expected to be his final hearing before his long-awaited trial in August. The judge determined Brian Koberger's trial would be live streamed except when the surviving roommates testify. And finally, Florida governor Ron DeSantis, signed into bill a law moments ago, banning the addition of fluoride and other additives into the state's water systems.

Utah was the first to implement a statewide ban on the mineral earlier this year. fluoride has been added to public water supplies in the U.S. for decades to prevent tooth decay. But DeSantis has said that addition amounts to, quote, Forced medication, Kelly. Back over to you. It's like one of the things I haven't had the time to sit down and study it. But I'm still getting my kids fluoride treatments

at the dentist and I'm like, wait, is this? I know, I was Googling this. Are we now not doing this? Yeah. Arm and hammer toothpaste, I have to say. Oh, really? Yeah. Is it the strawberry?

For kids strawberry. Okay. It's like baking soda, but it is a runy tradition. See, got it. Drop in Church and Dwight. Youwing New Jersey based Church and Dwight, right off 295, you have the Trenton Airport.

Brian's got a full supply in his booker. More than you know. As we had to break, don't miss the next Fast Money live event on Thursday, June 5th. Over at the NASDAQ, it's your chance to meet Melissa Lee and the Fast Money traders face to face for some personal investing advice and maybe a special cocktail mixer or two. Just scan that QR code on your screen or head to CNBCEvents.com slash Fast Money. We'll be right back. Welcome back to Power Lunch. The WNBA is back with the new season tipping off tomorrow.

The league is coming off its most watched. regular season in its 28-year history with an average of 1.2 million viewers across ESPN platforms. That's a 170% increase from the year prior. Kathy Engelbert is the commissioner of the WNBA. She's also a 2024 CNBC changemaker. Congratulations. Surat Setti is also still here with us as we've all been chatting so many times in recent months and over the years. Kathy, just watching the WNBA try to take this traction that it has from some of these players coming out of college now.

really running with that. So what are your expectations for this season? Well, this season, given the growth you just mentioned last season, my mantra is sustain and gain, sustain the momentum and gain on it. I think we have a lot more upside. We just had a record-breaking preseason where we brought, did a little college tour. We went to the University of Iowa where Caitlin Clark had played. We went to LSU where Angel Reese and Haley Van Liff played. We went to Notre Dame, where a couple of our players played and went to Oregon where Sabrina Yanescu. So that was like record-breaking for the first time ever all of our preseason games. We're either on broadcast or streamed so our fans could find them. So we're really looking forward to this

year. We have our first expansion team in 17 years, the Golden State Valkyries, who tip off tomorrow in your chain center. I'm going down. I'll be headed to San Francisco tomorrow. And then we give out the rings on Saturday to the Liberty at Barclay Center. So a big opening weekend coming up. And just an incredible new rookie class coming in led by Paige Beckers who won a national champion. You know, we were talking to you. Alexis O'Haney this morning who has just made a big investment in the women's Chelsea football team over in the UK. And he said the way that they look at fan engagement, social media being one proxy for that, that women's sports, he still thinks, are undervalued. And obviously,

you guys get a ton of fan engagement and interaction. So is that part of how you're growing the ecosystem? Does there need to be more still done to kind of communicate a lot of the stories about these players? Is it still very, like, kind of hit-driven, in other words? Well, there's a couple angles. One is the economic model that drives valuation, so your revenue and our media rights deal, and our corporate partnership revenue, and obviously fandom in arena, and on digital and social platforms.

And then there's a player storytelling, which is more the marketing angle, where we've hired a lot of expertise around that in-house at the WMBA to drive storytelling, short-form, medium-form content, in addition to obviously our games. So it was a great playoff last year. I mean, you guys did a great job with that.

What are you looking forward to for this year? That's going to be a little bit different or more exciting that you could tell the VIII? to say, hey, we're ready for this. This is going to be more fun or, et cetera. I think our free agency that just occurred in January into February, there was a lot of player movement in free agency. So there's a lot more parity in the league this year.

There'll be teams that are competing in the runoff to the playoff, Surat. And then we have our first ever seven game series for our WMBA finals. Can you imagine last year's final between Minnesota and New York going seven instead of five, which is what it was. We're also playing the most games ever in our history this year, 44 games. So each team will have 22 home games. Teams are moving to bigger arenas. So there's a confluence of a lot of positive elements that we're looking forward to this year.

And where do things stand on the collective bargaining agreement for player salaries? I know that they feel like now with the success of this league that they want to participate in that and kind of have an equal footing. Yeah, absolutely. I feel really optimistic of where we are. Obviously, we're meeting often with the Players Association. We'll be chipping away over the course of the summer. And I think we'll do something transformational when we get into the fall to the end of the year. Is it, are there sticking points?

I mean, we've sort of seen some of this reported in and out of the media as it goes on. But how would you describe overall kind of your philosophy? And I remember the story you always telling about how they were only able to kind of get commercial air flights, you know, a couple of years ago. I mean, this league has come a very, very long way in a very short period of time. So give us a glimpse, like kind of what's next? And what should the players explain? When I joined the league four days in, I was in my first collective bargaining meeting in the last round. And we have come a long way.

But we all said we're going to invest, the owners are going to invest, and we're actually going to build an economic model to be able to set this league up for decades and to set these players up for generations. And we have so many great rookie classes to come. Even if you look at the U-17 players, they're amazing. So we want to set this model up to be sustainable. We did give charter for the entire season and playoffs last year. That'll continue.

That obviously is on the list as well as higher player pay. And now we have a media rates deal that will help us really intern. a deal, right? You're part of that. Return a lot of that to the players. How are you looking at expansion? I know you've got this one. What is kind of the league's view for the next five, ten years, and how is international fit into that as well? Yeah, it's a great question. Obviously, we've already announced team 14 and 15. 13 is the Golden State Valky's 1450, the Toronto Tempo and now the Portland, who have yet to be named. And so we're trying to evaluate that now. We have a lot of demand for people who want WMBA franchises and some great cities where we're not. We need to

across the U.S. Obviously, we're making a foray into Canada. And then we have a huge opportunity globally just to bring our game there, whether it's through events or actually preseason games or regular season games. So we're evaluating all that now

and the capital it takes to go globalize your platform is not cheap. Yeah, and there's a lot of hurrah around women's sports now, finally, but a lot of the naysairs will still say, look, you know, financially the leagues

are not where the men's are. Viewership-wise, they're not where the men's leagues What can you tell us about sort of the financial situation today or the situation for a lot of the teams now with all of these momentum that you're describing? How is that translating today? And how do you expect it to look in the next three, five years? Especially for those who are considering investments, whether it's the Connecticut Sons or otherwise. Yeah, hypergrowth.

Like, we've been in hypergrowth mode the last couple years. We were the first to raise capital. Now capital's flowing into women's sports like you described. So we did it in February of 22. That's allowed us to do a lot of things for the players, for the league. and to grow it. And again, it comes down to the economic model, Kelly, to sustain that over time. You have to do things with a 10, 20 year in mind, not just a 3 to 5.

So that's what we've been working on. So I feel really good and optimistic about where we are. But we have to make sure because women's sports are sometimes undervalued. And I think we're getting to the point where our valuations are rising precipitously. I mean, even what we might have sold an expansion team for a year ago has vastly changed. And it might be four times, five times. what it is today. And I think that there's a lot of upside there as well. Yeah, I know we have to leave it there, but the timing of this season start could have been worse, maybe a few weeks ago, and you say,

we had all of this, the markets down without, you know, and people are talking about consumers pulling back and sentiment being, any hiccup you're seeing in terms of sales and that kind of thing? Thankfully, our corporate partners are devoted. They like the platform. If 80% of every consumer purchasing decision is made or influenced by a woman, woman, why wouldn't you support women's sports? that's laying into it where we're not seeing softness. That could happen with a significant recession or something, but we don't see it today, thankfully. All right. Kathy, thanks.

Really appreciate it. Kathy Inglebert is commissioner of the WNBA. And stocks are still well off the lows of the day with the major averages positive on the week. We'll get some parting thoughts. No, so soon from our guest host, Sarat Setti, when we return. It's time for some deep final thoughts, Sarat. Can you please provide? In 20 seconds?

Yeah. We talked about here how you're still a little cautious now about what goes on, you know, with the market, but but bullish. I am bullish long term, but I think we're going to be, we're past the really core earning season. So what is the market going to kind of be moving on? Well, tariffs still have to be resolved. What's going on with the tax bill? Where's deregulation? So these are the kind of catalyst that can move the market either way.

That's your favorite stocker sector right now? I like the financial still. I mean, I like the Morgan Stanley's and Blackstones of the world. I think they have a lot more upside. More so than the BDCs. A lot more than the BDCs. I think the balance sheets are all better. Thank you, Sirot.

Thank you for being here. Thank you for having me. Thank you for having me. Sirot Setti. Yeah, thanks everybody. And thank you for watching. Power Lunch. Closing bell starts right now.