Power Lunch - Rally Regains Steam, Corporate Conflicts 8/8/24

Episode Date: August 8, 2024

Stocks are climbing after new labor market data boosted confidence in the economy again. We’ll track all of the action for you.Plus, as inflation lingers, politicians are joining customers in pushing companies to cut their prices. We’ll get the ‘view’ from the c-suite. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us on this, pulling our Pneck of the Woods, we're at a soggy Thursday. Coming up as inflation fury lingers, politicians are joining consumers in pushing companies to cut prices. We will get the view from the boardroom further ahead. Plus, some signs of life in New York City real estate. Office demand finally improving in Manhattan and around the country. We'll talk to Douglas Ellman's Noble Black to see how the luxury space is holding up. Before that, a check on the markets. A sharp rally today. We actually gathered steam after the bad 30-year auction last hour.

Go figure. But the better jobless claims data have the Dow up 647 points, than the NASDAQ up nearly 3%. Another big step toward clawing back those losses from earlier in the week. And Eli Lilly, a key mover today, blowing past expectations, hiking its outlook as sales of its blockbuster diabetes drugs surge. More on that further ahead, Kelly. And some other earnings movers, including under.

armor sharply higher on the top and bottom line beat. Warner Brothers Discovery going the other way and sinking on a miss. Bumble plummeting on their guidance. The shares are down 31% to 5.5. And software supply chain stock JF. Frog also dropping double digits on worse than expected results. It is down 30%. We'll have more on those movers further ahead. All righty. We start today with the comeback rally weekly jobless claims data, giving a bit of a positive sign for the labor market, so let's bring in Ava Ados, COO and Chief Investment Strategist with ER shares.

Ava, welcome. Good to have you with us. You know, earlier this week, there was a tremendous amount of concern over maybe three things. One was the job numbers that came out last Friday. Two, was Warren Buffett selling half his stake in Apple. Three was the unwinding

of what's called the carry trade in Japan. Those things now seem to be sort of rearview mirror-ish as the market stabilizes. Hopefully. I'm optimistic. We think there was an overreaction, and with especially yesterday with a weak treasury sales, we see this today. It's being reversed. We had good news today. The jobless claims came better than expected. That supports our thesis that we have been

maintaining for a long time now, that we're not heading into a recession. We believe unemployment is going to remain lower than the historical average. And we need to remember we have four. 4.4 million baby boomers that are eligible to retire, and that will help maintain unemployment low in the near future and in the next year, too. Let's talk a little bit, just to push back just a tad there. We see today Eli Lilly coming out and blowing things away. Well, we know why. They've got a blockbuster suite of products.

But earlier this week, and over the past couple of weeks, we've begun to see more and more companies getting tentative, warning. guiding downwards or guiding to the lower end of ranges. Does that concern you? Because in the end, the stock market is a pricing mechanism for the stream of future profits. And if those profits aren't going to be what was anticipated, neither will stock prices be. I agree. It's definitely not going to be the best earnings seasons we've had.

We do have a 77% earnings beat rate, which is consistent with historical rates. But what's different, as you mentioned, is the profits beat. Companies are beating on average by 4% rates, whereas historically that has been 8%. So this is half what we used to see in the past and historical average in the last five years. So this is a concern. It is a stock pickers market.

We did see some companies perform well, like exact sciences and DoorDash. And we had extreme bad examples like Airbnb. So it's a stock pickers market, and it's definitely a play of, to look specifically at the fundamentals of the companies and see which ones are using, for example, AI and are able to deal with the situation. App, Levin, Arista, those are some places you'd look, Ava.

Maybe you could tell us about those for a moment if there's any others. These are our favorite right now, and I know AI is so much of a Q1 play, but specifically looking at their fundamentals, these companies are extraordinary, very unusual. In both cases, we have companies using AI to cut their technology. costs, widen their margins, which is very unusual. And in the case of uploving, this is a company that has an increase in its gross margin by 10%. It cut its SG&A by 10%, widened their EBITDA by 20%, while at the same time they're growing revenues by 44%. This is so extraordinary. There are no companies, other than Nvidia, showing such a great momentum, and they're maintaining their

sector dominance, no matter the market conditions. Scott Clemens of Brown Brothers, Aaron and joins us now. Scott, welcome. I want you to explain to this layman what the hell the carry trade is, why it matters, and what's been happening with it and why? It has sort of an ominous overtone to it, doesn't it? It's pretty simple. It's just borrowing and investing in different currencies and arbitraging the different cost of borrowing and return opportunities. The carry trade at present takes advantage of the fact that borrowing in yen is very cheap, has been very cheap. The dollar has strengthened against the yen. And of course, dollar assets like the ones we've been talking about up until the recent market stumble have done quite well. So there are three ways to win in the carry trade, but there are also three ways to lose. And we've been reminded over the past five or six trading sessions that all of those trends can go in the opposite direction as well. In other words, interest rates in Japan can go up.

The yen can strengthen and so forth. And that would work against the sort of easy money that's been made. made in the carry trade. Have I got that right? That's right. That's right, Tyler. Easy money rarely stays that way for long, although the carry trade has been very effective going all the way back to the beginning of

2023. But then the Bank of Japan raised interest rates last week. Of course, our own central bank is talking about cutting interest rates. Stocks have stumbled. The dollar has weakened a little bit against the yen. So it's just a healthy reminder that those trends can go in two different directions. All right, Scott, glad you were able to join us there for the very tail end. We had a little technical issue.

Ava Ados, thank you. well. And we're turning now to the bond market where we have seen some big moves today. Treasury yields, seeing the tenure going back above 4%. That was especially after that auction I mentioned last hour. Rick Santelli's in Chicago with more. Rick, what can you tell us? Well, let's start chronologically, shall we? You know, this morning when I brought out the numbers, $249,000 for last week's initial claims moved to $250, but it doesn't matter. In either case, those were one-year highs. We haven't been at those levels since August. of 23. So to see the big 17,000 drop really had an impact on the markets. Look at the charts.

There's twos, tens, thirties. They all gap tired. It didn't matter whether it was short, medium, or long maturities. And as you moved chronologically through the clock, Kelly is absolutely right. Yesterday, we had a D-plus 10-year auction. Today we had a D-30-year auction. They had something in common. Besides lousy demand, they both had three basis point tails. Tales mean that basically the when issued market, the pricing mechanism, demonstrates that there wasn't an intensity to the bidders that were coming in for those maturities being offered. Now, if you look at a chart going back to jobs, jobs, jobs Friday, what's interesting is you look at those three maturities once again is we're getting back in that range.

We've jumped right back into where we left off after that big drop. And, of course, when you add in Monday, the following day, the lows on that chart, we have really done nothing but move higher in yields. Now, the interesting thing, and we've been talking about it all day on CNBC, look at a Dow against the tenure for one month. They correlate indirectly until very recently. Basically, in the phrasing of equity traders, good news is good news at this point.

Bad news is bad news. And what was so good about it? Well, to see, jobless claims moved lower, demonstrated the labor market might not be as weak as last fron. Friday. Stocks cheered that and the flight to safety reversal in certain ways with interest rates being higher could be considered a good thing. Kelly, back to you. All right, Rick, thank you, Rick Santelli. Coming up another earnings mover on our radar, the cloud and security firm's CyberArc, up 8% after a nice earnings beat. We'll talk earnings cyber and AI with the company's

CEO next. Don't go anywhere. Welcome back to Power Lunch shares of CyberArk are jumping today up 8.5% after the company beat earnings and revenue estimates for the second quarter. Here to break things down and give his take on the state of the cybersecurity space. As Matt Cohen, he is the CEO. It's been a high-profile quarter for cybersecurity, Matt. Welcome. Thanks, Kelly. Thanks for having me. What has been the fallout for your company from everything that happened?

With the, who is it? Who was the big? With CloudStrike. Thank you. Cloudflare, CrowdStrike. With the CrowdStrike outage, what kind of response did you get from that is one of the other major players in the cyber world? Yeah, I think what we saw with Crowdstrike, right, was that it was more of an IT outage than a cyber attack or a cyber incident.

But it certainly mimicked what a severe cyber attack would look like. And it helped, I think, captivate the public on how risky the current environment is with the interconnectedness of all of our technology, that when it goes down, it can really have an impact in our industries across the region, across the whole world. So for us, it's really brought back a focus within industry, within organizations, on what can we do together to prevent these type of incidents from happening, whether they're an IT outage and how do we become more resilient or more likely if they were an actual cyber attack? How do we as organizations help each other prepare to come back and make sure we're successful? Could your clients ever be susceptible to an issue that you would have similar to what happened with them? or are your systems structured differently? So we take pains to make sure that our quality is strong, that our ability to be able to roll out updates is more in a phased approach.

And actually, we give clients and customers permission to be able to accept those releases. But we all are learning from this to make sure that we're not the cause of something like this in the future and that we all can come together to make sure that we can keep our IT systems up and running. Well, I'd like to ask a broad question, Matt, if I might. And I guess it goes something like this. In cybersecurity, are the good guys beating the bad guys, number one. And how are good guys and bad guys using artificial intelligence to gain an edge? So I think it depends on the day, to be honest, there, Tyler.

I think the good guys are doing everything they can and they're forwarding a lot of attacks. And the bad guys are innovating and trying to. to figure out ways around those attacks. And we see the threat landscape continue to elevate. We see bad actors and cybercriminals going after health care. You've seen some recent health care breaches because those are areas where ransomware seems to work. People have to pay or do something because loss of life is on the table. So we see kind of this elevation of attacks happening and we on the good side are trying our best to keep up with it. The way we keep up with it is by making sure that we have core security controls in place,

that we're focused on an assume breach mindset, given that environment, and then ultimately that we're using technology to make sure that we're more able to spot and respond, identify and respond to the threats that are out there. But what you do see out there, Tyler, is the bad actors using technology like AI to make their attacks more effective, and also to make them more pervasive, to be able to go after more targets, and you don't actually have to have a better hit rate if you're going after more targets on the end.

Your point on them attacking health care is absolutely hits really close to home. My son works for a mental health and recovery, drug and alcohol recovery program, small company in South Florida. Two Saturdays ago, they were ransomware attacked and completely cut off. And as you can well imagine, there is a lot of very, sensitive personal data in those files there. Yeah, Tyler, I think it's both, right?

It's the extraction of information that we're afraid of, but more importantly, it's the ceasing of operation. And again, to bring it back to the... Paralysis. Complete paralysis. Complete paralysis where you can't deliver care, you see hospitals being shut down, and you really want to avoid these situations. And the only way to do that is to make sure that you have the controls in place.

So if the bad actors get in, they can't expansively take over the entire environment and shut down an organization like you just saw. And Matt, not to get into the boring EPS and revenue stuff, but what do you expect kind of going into the back half of the year now? Yeah, I mean, so we're really excited by our results. You know, you can see it in the market's reaction today. We grew AR by 33% in the quarter, grew revenue by 28% in the quarter, kind of beat on all metrics. And as we look towards the back half, we're seeing a strong second half as well. What we offer into the market is this technology called identity security. And really, it's the ability to be able to secure the human credentials that you or I use,

as well as machine credentials or machine identities that more and more applications use. And ultimately, that's where the bad actors are trying to get to. And we feel like there's a robust market for our solutions and our software. And we look forward to actually strong performance for the rest of the year. Very good. Thanks for joining us today. We appreciate going over all of this. Matt Cohen, thanks for your time. Thank you. CEO of CyberArc. Well, the Dow has jumped 722 points as the rally regains some steam, thanks in part to a weaker Japanese yen versus the dollar as the so-called carry trade, which we talked about a moment ago, unwinds further. We'll dive into that. Yes, we will. Oh, boy, we'll dive into that in the market navigator segment. And remember, you can always hear us on our podcast.

Be sure to follow and listen to Power Lunch wherever you go. I mean wherever you go. We'll be right back. Welcome back to Power Lunch with Stocks near session highs. And according to J.P. Morgan, the Yen-Carrie trade that wreaked havoc with the markets this week is already about three quarters unwound. So while it's mostly over, well, it's not completely over, but are we far enough out of the woods? Domchew here with today's market navigator.

So what's interesting about this, Kelly, is if you take a look at the reasons why it's so important, What if the Japanese yen was giving us the investors overall, this kind of signal about whether it's all clear to run headlong right back into where we ran into before, which is that mega-cap growth, magnificent seven, large-cap trade? We've got Todd Gordon, the founder of New Age wealth advisors, and he thinks just that. And he was previously right in the middle of that 2008 yen carry trade calamity. Todd, you're looking at the Vanguard growth ETF. and what exactly are you seeing about this ETF and the yen that gives you an idea for how to play it and how to position? Hey, guys, how you doing? And, Dom, shout out to you because I know you have an FX background as well. But, yeah, I think it's a big August thin summer swoon. I don't think this is the start of something catastrophic.

I think this is a buying opportunity. I rush back from vacation here this week to make sure when I saw the NICA was down. down 12%. I said, oh, what are we doing? But things have stabilized. I like growth. I like individual growth names VUG if you want to play it. Pull back into the old 2021 high, uptrend, moving average, about 340. But I think growth is stable here, Dom. All right. So the Vanguard growth ETF is something you're looking at. You've also got an interesting chart back from 2008 to kind of 2024 to give us some perspective on just how much, Kelly, that carry trade severity was then and now. Right, right. It's, you know, it's, people are saying the Yen-Carrie unwind is similar to that in 08. And if you look at the severity, as you said, it's not even close. I mean, that back, that was a, that was a bloodbath back then. And it was, of course, spurred from the GFC in housing crisis. This is a thin summer. This is more of a reaction to, I would say, a July, August pushed through the 4% in yields, caused the rotation into small and Mibs. People decided there was large,

growth had run too far too fast. And then the year the yen carry unwind was a result, I think more so of domestic interest rates. But again, this is much smaller in scale compared to what we saw in 08. Todd, the thing that makes me uncomfortable about that comparison is I don't think of 08 as a yen carry trade issue. I think of the global financial crisis. So why do these things tend to go hand in hand? Is it telling me that there's some kind of macro trouble lurking or that they just tend to kind of reprice at the same time? You're so, yeah, you're so right. It was interesting because It was the housing crisis of origin of the U.S. that spread everywhere. We had highly leveraged mortgage instruments that were being traded everywhere.

But so many macro traders were borrowing cheaply in Japan and investing overseas, say, on Australia at 5% bonds because China was on the other end of their development. So it's more of a reaction to the cause, which was housing, right? In this case, Kelly, I think is on a much smaller scale. I really think some force kind of push the market through 4% U.S. yields. The yield differential that you can make was narrow, and they said, oh, we got to take that trade off. So I don't think it's the cause. I think it's the symptom. And it creates buying opportunities, I think, in the growth stocks, which I think the AI story is still very strong.

We have interest rates below four. We have a yield curve coming out inversion. We have Nvidia coming up. It looks scary for a minute, but it's August. It's thin. I think it creates a good buying opportunity. If I'm wrong, we're going to. adjust, but I don't think so.

Very good. All right. Todd, thanks very much. All right. Just to kind of put a point on this thing, Teller. He mentioned my FX background. There was a time when many of the traders I talked to used yen and yen crosses like CAD yen,

Aussie yen, Euro yen as a gauge for risk appetite. So it's certainly one of those navigator things you're going to want to walk. Oh, absolutely. And I think it's been a good proxy along with interest rates here about kind of the next leg of this. Tom, thanks. Coming up, the view from the C-suite. We'll speak to conference board CEO, Steve. about their latest executive survey, including whether or not they see U.S. recession on the horizon.

Power Lunge is back after this. Welcome back to Power Lunch. I'm Kate Rooney with your CNBC news update at this hour. The International Atomic Energy Agency says it's monitoring the situation around Russia's Kersk nuclear plant as Ukrainian troops battle Russian troops for a third straight day in that border region where the plant is right now. It is a surprise offensive by Ukraine that's forced Moscow to call up. more troops. Meanwhile, Amazon's multi-billion dollar investment in AI firm Anthropic, drawing scrutiny from British regulators, the Competition and Markets Authority, said today that it has begun a phase one investigation into whether that investment and partnership could harm competition in the UK. Amazon responded by saying the collaboration does not raise any competition concerns. And false or

misleading posts by Elon Musk about the upcoming election have generated nearly 1.2 billion views on social media. That's according to the nonprofit center for countering digital hate. Researchers said they identified 50 debunk claims from Musk that spread and then did not include a community note to correct them. Musk has yet to comment on that report. Kelly, back over to you. All right. Kate, thank you very much. Turning now to the election, which is sure to have a huge impact on the direction of the economy, while former President Trump's two-point lead over Kamala Harris is the same margin he had over President Biden, CNBC's latest All-America Survey, or Economic survey found out there's still plenty of uncertainty around the outcome in November.

Steve Leasman is here with those findings. Steve? Thanks, Kelly. This is what makes polling so interesting. These latest survey shows remarkable stability when you look at the head-to-head competition on the top line between former President Trump and Vice President Harris. That obscures big changes going on underneath that could ultimately, as Kelly said, affect the outcome. It may explain why former President Trump is looking for debates now. Okay, here's the head-to-head. It was plus two for Trump in our. in the NBC News July survey, it's still plus two for Trump.

By the way, other surveys show Harris with a slight lead, but they both kind of consolidate their bases, but still a two-point lead for Trump within the 3.1% margin of error. Now, look what's happened, though. Big changes here on this next one. We ask people, are you satisfied with your nominee?

Now, for Biden, it was just 33%. Look at this. For Harris, 81% of Democrats, now satisfied with the nominee. But there's an offsetting change because the Republican satisfaction with their nominee, i.e. President Trump, went up as well. So it's 80, 81. They're both bringing their gangs to the knife fight here when it comes to politics here. The biggest improvements for Harris, young people, women, suburban and suburban and white voters as well.

Now, take a look here at that's the slide we just did there. Now we're going to the next slide here. How about the approval ratings? You can see. Biden, minus 15 in our survey here. Harris improved by 10 points, but then look at the offset for Trump here, improving again by about seven points here, six points to minus nine. So about even as we go into this. So big changes, but offsetting changes when it comes to this. Now, looking at who is voting for or against. Take a look here. In January, 31% were voting for the Democratic nominee, sorry, Democratic nominee, that was Biden,

and 62% were voting for Biden more against Trump. That's changed a bit for Harris. 54% are now voting for Harris. But you can see, relative to Trump over here, there's scope for Harris to improve and have more people be into her candidacy versus voting for her as a vote against Trump. This is a snapshot in time the races early yet

between Harris and Trump. Big question becomes, how much more can Harris make people enthusiastic about her can. to see rather than opposing Trump. And for Trump, the question is whether he can break through some of the favorability ceilings that we've seen in his numbers in the past. Both sides are going to need more help to get to the White House because they can't do it necessarily when there's that two-point advantage.

But it would seem that the voters who are favorably inclined to former President Trump are really solidifying behind him. They really like what he's stance. That is true. It has been true. It's more true now. The big story, though, is the third. solidification, is that a word, underneath

Vice President Harris. All right. Steve Leasman, thank you very much. My pleasure. We'll go to another, Steve. While the election is a key focus, the recent market volatility is grabbing the attention of investors and corporate executives alike. The conference board out with its quarterly survey, and it found that

CEO confidence declined slightly in the third quarter. Here to discuss the results in a couple of other corporate stories, Steve Adland, president and CEO of the conference board. He's also a CNBC contributor. Steve, welcome. Good to have you with us. Let's say, why don't you give us the top lines on the CEO's survey? They seem reasonably positive. CEOs do, but maybe not as positive as they were a quarter or so ago.

Well, CEOs generally are in neutral, Tyler, and it's the same thing as consumers right now. They're waiting for inflation rates to come down, and they're waiting for the Fed rates to come down. So the CEO Confidence Index is done on zero to 100, with 100 being perfect. We're sitting at 52. So it's marginally positive. People are saying, hey, things look pretty good, but, you know, they're still waiting here. And this is a huge change from a year ago. A year ago, people were predicting that we were going to have a big recession. And that is no longer the case. That has diminished now. You have still a few people, and it depends on the industry. But for the most part, CEOs are not predicting a recession here, a big change. So you look at what's happening

in the marketplace. You've got inflation rates coming down. You've got wages still kind of going up. You've got CEOs hoarding their labor, not huge layoffs. And the market's still pretty, you know, pretty good here, a few points from an all-time high. This is what a soft landing looks like, Tyler. It's interesting. The CEO's assessment of current business conditions. That is, what they're seeing today is worse than six months ago. But their expectations about the short-term outlook improved. 32% expect economic conditions to improve over the next six months up from 30% in the second quarter. So you see them looking forward in a more positive way than they assess the current landscape.

Yeah, it's exactly right. And it's tied directly to their expectations that the Fed will reduce interest. discount rates between 25 and 50 basis points between now and the end of the year. That means that their borrowing costs will come down. Consumers will be able to borrow. Sales should pick up. So there's some optimism here in these numbers, and it's all tied to the Fed. I guess the sort of, as you say, it's all tied to the Fed. So if the Fed doesn't cut, then is this out the window? Yeah, it is because, you know, then we're going to be stuck in neutral longer and, you know, you've got the status quo. But nobody's saying,

that the Fed is not going to cut. They think they're going to start here. Now, you know, the Fed is under a lot of pressure from both parties. It's an election year. They're looking, you know, there's political pressure. But there's also good signs and they're saying that they're going to move. So I think that CEOs are taking them at their word. Let's talk for a second, Steve. And what are companies going to do about these increased calls for them to cut prices? Well, look, you know, it's an election year and you have to take it with a grain of salt. Politicians should not be calling for a state-directed economy. Okay, so they should not, they shouldn't be telling companies to lower prices.

What they should be talking about is their policies that they will champion in order to make business conditions better, that will allow inflation rates to come down. Companies aren't out there charging usurious rates. Their fees, their costs are going up. The cost of labor is going up. And companies are having to pass some of that on to consumers. and, you know, the politicians here need to adjust to that. I mean, we do, we say it's all talk, but it's talk until everyone's talking about it,

and then, you know, someone feel, they feel like they have to do something. I don't know. How have they typically handled? And listen, it's not just that politicians are calling for this. A lot of companies are finding they have to do this because consumers are balking at what they're charging. So it feels like it's coming from both sides, yeah. Well, that's the market, Kelly, and we've got to let the market work.

That's, you know, that's what we're all about. and companies will, you know, cut their margins and they'll take profit declines if they need to. They're trying to work to back up. Our CEOs are telling us that they're doing everything they can back up through the supply chain to make sure costs can come down. But, you know, look, you've got to take it all with a grain of salt because of the election season. You know, if you look back a couple of years, or maybe even less than a couple of years ago, Steve, CEOs would have said that one of their main concerns was the inability to find qualified workers.

Is that still at the same level of concern as it was a year, 18 months, 24 months ago? It's not. And that's a big thing that we're hearing in our survey as well, Tyler. There was a big skills shortage. Now, there still are shortages, particularly in the trades and in some of the tech classifications from a skills standpoint. But the job market has eased, and we're hearing that, you know, wage increases are not as as tough as they were. And people are staying in their positions longer. It's not this happy feat

that we saw during, during COVID, where everybody was changing jobs. So that seems to be solidifying, which is, I think, helping to buoy the CEO confidence level. All right, Steve, we appreciate your time today. We'll be in touch soon. Steve Adeline, conference support. Coming up, a tale of two weight loss drug makers, OZempic maker Nova Nordisk, falling on disappointing results yesterday. While rival Eli Lilly is up almost 10% on a blockbuster second quarter report, we'll discuss those weight loss wars when we return. Welcome back to Power Lunch as markets continue their rally. The doubt was up 700. We're just off that right now. The NASDAX up 2.7%. One of the many names on the rise today is Eli Lilly, the drug maker crushing earnings estimates, hiking guidance

as diabetes drug Zepbound and Monjarro soar. Here to discuss is Evan Siegerman, biotech analyst at Bimo Capital Markets. It's not like the stock was, you know, undervalued going into this, Evan. Welcome. Welcome. Thank you for having you, man. I mean, the stock has been under pressure during July because of some competitive data and a broader market unwind. But this was a much needed relief. And, you know, as you know, Novo's results yesterday weren't great. And it was fantastic to see Lily really knock out of the park with today's print. What gives with Novo? What's the difference? Why did that report come across and see a sell off and this one, the shares were rallying?

So I think the bifurcation between these two names is that Lily is really getting a handle on supply. They've invested, you know, $10 plus billion in really, you know, making sure that they can supply the market with Zephan and Manjaro. Right now, all doses are available on the FDA website. So it's getting out of shortage. Whereas Novo is still struggling supplying Wagovi to the U.S. market. They missed Wagovi results by 14%. half of that was due to one-time kind of price adjustment, but the other half due to a supply issue, right? The demand's there, and if they can't supply it, they're not going to receive the revenue.

So I think that that's, sorry, what we're going to say? Well, I was going to ask you, what do you see is the ceiling for Zepbound and Mungaro? In terms of revenue potential? I mean, we're, just remember, Zepound was only launched back in December of last year, so we're not even a year into the launch. I mean, our estimates for, you know, this franchise, so Zepound and Mujaro for Lili, 70 plus billion dollars at the end of the decade. We have very high numbers for Novo as well. But if we see more supply kind of easing with Lilly, we could see a market share shift towards the Lilly products. And then where do we go now? Do people try to snuff out,

okay, maybe Pfizer's oral one is going to be the next big one or, you know, and I've heard people say, hey, hey, pull in your horns on even what these drugs can do if we start to reach more of a consumer slowdown. So in other words, do we go to the next. round of who may have an underpriced stock that could benefit from this trend? Or do you just stick kind of like we do in tech with what's working? Well, I'd stick with Lily and Nova because they are working, and they have a huge moat in this market. They have the products. They have the manufacturing capabilities, which is a clear challenge, even for these stalwarts. They have the data, and they even have a pipeline of products beyond Wago, Zempegmojaro Zepound. You know,

you asked about Pfizer and Daniel Glypron. That's years away. Remember, Lily has their oral data coming next year, so they're poised to take share in that space. So I still love Lily and Noble when it comes to obesity. That doesn't mean there aren't other names in pharma that you can still play. Pfizer's undervalue. They've had kind of a steady eddy quarters from Q1 to Q2, which is great after the turbulent year. So we'll see what happens there. But again, Lily is becoming the goat in obesity. That's a great line. Let's talk a little bit about the potential. of these drugs to be helpful in other areas like cardiovascular health, maybe even Alzheimer's. For sure.

How do you factor that in there? I mean, these are all related diseases. So if you have cardiovascular disease and you can benefit from Zepbound, you're probably overweight, so you're kind of getting that benefit there. What it does is it shows how it's not just aesthetic. You're looking at kind of other organ systems that could be under pressure because of someone's weight or other cardiometabolic health. I'd also highlight things like sleep apnea. And the sleep apnea data that Lilly presented is fantastic.

And that just expands the market. What's important there, Medicare currently doesn't pay for obesity medications, but they will pay for a cardiovascular drug or a sleep apnea drug, which opens the door to access for Wagovi and Zepound. Very interesting. Evan, thank you very much. Evan Seagerman, we appreciate your time. And signs of improvement are emerging over in the real estate sector, namely with office demand. Let's bring in Diana Oleg with more. Diana, what do we know? Well, Kelly, several new reports point to improvement and a potential bottom in office demand.

Manhattan office buildings in June had an average visitation rate of 77% of 2019 levels. That is the highest monthly total since the Real Estate Board of New York began tracking this early last year. visits were up from 72% of those levels one year ago, and class A plus buildings saw a 91% visitation rate, also the highest since tracking began. And some B&C buildings, particularly the lows with access to transit, also registered improved visitation. Looking at a national picture, in Q2, the office market posted its first quarter of positive net absorption since 2022, according to CBRE. Net absorption is the total amount of office space that has been leased minus the amount of space that has been vacated during a specific period. Now, leasing activity improved year over year and space offered for sub-lease declined to 4.2% of total inventory from 4.7% a year earlier. Manhattan leasing was actually the third strongest in the nation just behind Atlanta and D.C.

And finally, the VTS Office Demand Index. What's that? It measures the amount of new square footage requested by employers each. month, and it rose 17% year over year in Q2 and has now seen annual growth for one full year. And experts at BTS say that if you have a year of growth behind you, you can now say that office demand has reached a bottom last year. Guys, back to you. A lot of numbers there. What do they say explains why demand is coming back in Manhattan the way it is?

Well, it's partially that some employers are just pulling people back into the office and insisting that they return at least three times a week. that's pulling more people into the office. More demand is, you know, if the economy is improving, and then you also have that some of these vacant buildings are actually being transitioned into something else. We've done the stories on transitioning them into residential apartment buildings,

so if there's less supply, then you have those vacancies start to come back a bit. All right, Diana, thank you very much. Diana Oleg. Let's turn to another slice of the real estate market. That would be luxury residences. According to Redfin, luxury home sales were flat in the second quarter of this year,

while non-luxury home sales fell 3.4% to the lowest level in a decade. This is because high-end buyers tend to be less dependent on the direction of mortgage rates, more inclined to pay cash. For more, let's bring in Noble Black, a top real estate agent at Douglas Element with more than $3 billion worth of individual sales. Noble, welcome. Good to have you with us. What are you seeing in the sort of bespoke markets in terms of price action and transactions. New York, Hamptons, Miami. We're seeing it very busy in the luxury segment,

especially in the Hamptons and in Miami. New York has been busy. We had a very good end to the spring. It's always a little slow for us in the summer, but we're seeing a busier June, July, and early August than what we saw last year. And I think all of the indications are that we're going to have a good third quarter, but especially fourth quarter once some things are settled. Some things are settled, namely the election, maybe? The election, yeah, chiefly. I mean, Miller-Samuels did a study going back to the 90s, and then every year for basically the last 35, every election year, excuse me,

there's just a bunch of ton of demand, and people kind of sit on the sidelines. They seem to be waiting until the election is settled. It doesn't really matter who wins the election, but once that's settled, people come back into the market. And then I think this year with what's going on with rates, we're going to see an especially kind of energized dose of that happening. I thought that some of the areas in Florida, like the Palm Beach, were slowing down a little bit.

Maybe you can walk me through that. And more broadly, is Florida still benefiting from tax flight out of New York, New Jersey, maybe even California? Yeah, I think it is. And I think that's something that the blue states, you know, keeping politics out of it. But they've got to figure that out. I think New York is going to be somewhat, New York real estate is going to be somewhat immune to that in the sense that. the wealthy are still going to want to have properties here. But a lot of people are definitely going to either the low or the no income tax stays. And that's certainly affecting the tax

bases. And certainly outside of the luxury markets, a lot of those people do have to sell their homes when they move. Again, I think Manhattan real estate is going to be a little less directly affected by that. And then answering your question about Palm Beach and Florida, Palm Beach is still, again, the time of year when they're always slow. But their market's holding up very well. I think they're expecting the rate cut, even though those buyers are not really rate sensitive to help choose that market. Miami is still doing well, particularly single family waterfront and like large penthouses.

You know, the kind of run of the mill new development has definitely slowed somewhat, but it's still not like it's dead. It's not that it's going down. It's just not doing what it's been doing for the last few years. Noble, I'm curious, and I forget which CEO said it a year or so ago. And he said Fridays are dead forever and Mondays are touch and go or something to that effect. We're talking a lot about this as if it's, you know, five days in or zero, but what do we know about kind of the hybrid work? The idea that people still may not be going in on Fridays and

that sort of thing. I think even for New York, if you kind of zoom out, there's still questions about the economy and some of the small businesses and the transit system that are nowhere near where they used to be. I think that's right. I mean, I think certainly it's we've benefited from the fact that people have returned the office at least, you know, three days a week, four days a week, some cases, five days, but certainly it's not five days in general, as you say, it's for a lot of people. It's three or four at most. I think that seems to have done enough that from our standpoint, it's brought New York back. It's still a place that people want to be. When you look at the culture and the shows and the restaurants and all of that, there's still no place to compete with

New York. So the office sector in Midtown being busy, I mean, just try to get across town. It's impossible these days, walk on any sidewalk and the restaurants are packed. Try to get a reservation at of a 30, you can't do it. So we're all seeing that we're in the right place and certainly going in the right direction with that. We need more of that, but I think we're certainly well off of the bottoms of where it was and certainly not nearly where people feared or projected it would be. In New York City particularly, what are the hot neighborhoods? Is it still the ones we know about Williamsburg and Brooklyn, Dumbo, maybe downtown Tribeca, or is it more broad than that? You want to come work with me?

Because you got it. You got the answer. So you know everything. You don't need me here for it. Wait, tell me. I don't know any of this. Go, go. OK.

No, it's it's downtown. So in Manhattan, downtown still doing very well. So that is going to be certainly the West Village, Tribeca Soho, in Brooklyn. You know, it's prime Brooklyn. So Brooklyn Heights, Dumbo Williamsburg. That said, you know, prime upper east side, if it's the product that people are wanting, then those are moving very well. The Armani building is all sold out.

They only had two. 10 units. They didn't have a model. They didn't have anything to show when the prices, you know, going up to $8,000 a foot. And they've sold all of the apartments. It's a great location. It's a great name and a great product. So, you know, it's not necessarily just the location. It's still a matter of product. It also goes back into people still absolutely don't want to do work. So if something's in need of a renovation, if something's dated, then buyers are just kind of passing on that. Yeah. We didn't get to that idea of companies like Armani and others. branding residences. It's very interesting. We will do that on our next visit with you, Noble Black.

Thank you. Sure. Thanks for having me. Appreciate it. And as we had to break, it's a tale of two beverage stocks. Shares of Celsius are higher, despite a downgrade to underperform at B of A today. They're up one and a half percent. The bank's noting an outsized impact from a broad slowdown in energy drinks. But Monster beverage, well, that's also sinking on disappointing Q2 results. It's down 11 percent, and it's now missed revenue estimates in three of the past four quarters. We will highlight some more movers of the day after a quick break.

Time for today's power check. Grab bag of stock stories you need to know about. Let's begin with the overall markets. The Dow rallying along with the other three major indexes we follow. The industrials up 1 and 2 thirds percent, 600 points, S&P, 2%, and NASDAQ, pressing in on a 3% gain. Small caps participating as well if you're keeping track. Next, the restaurants reporting lackluster sales, Papa Johns, down 3.5%, citing a more value. citing a more value-conscious consumer.

Restaurant brands, BK, I think, and Arby's missing estimates. Their shares are up a little bit, though. So is Papa Johns for what it's worth. And Yum, Wendy, Starbucks, all reporting disappointing sales lately as well. Next, Under Armour beating on the top and bottom line. Shares a little bit higher there.

Sales fell in North America, but we're better than fear. Up 19%, but still we're talking $7. And Warner Brothers Discovery, oh boy, taking a big hit, missing on revenue, reporting a $9.1 billion write down on its TV networks. These shares are below $7 on a 9% slide. A big challenge there at Warner Brothers.

And dating app Bumble issuing some seriously weak guidance, signaling sluggish discretionary spending by users on its dating apps. The stocks is down 31%. Today alone, that would be a fumble by Bumble. A lot of people asking if the dating apps are officially over, and my sister said she sometimes uses something. task rabbit. What is that? Because you get the guys to help you move like your your furniture, but they're burly and they're good with, you know. All right. Thanks for watching. Power Lunch,

everybody.