Power Lunch - Reacting to June Jobs Report, Looking to Oversea Opportunities, and Testing the U.S. Power Grid 7/2/26

Episode Date: July 2, 2026

The Dow rises to another record high heading into the extended holiday weekend as chipmakers continue to struggle. Kelly Evans is joined by Wells Fargo’s Darrell Cronk and MJP Wealth Advisor’s Brian Vendig to break down their initial reaction to the June jobs report and look ahead to their strategy for the second half of the year. Meanwhile, Harris Oakmark’s David Herro joins the show to explain where he is investing overseas and AccuWeather’s Bernie Rayno gives the July 4th weekend forecast as millions of Americans are under a heat advisory. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Kelly Evans. Brian Sullivan will be back on Monday. A record run for the Dow in this shortened holiday week. The Blue Chip Index rallying more than 300 points to another all-time high today, even after the big miss and the job support today. So what's driving the move? Industrials and health care breaking out to new highs. And we're looking overseas. South Korea has been the can't-miss trade of the year, soaring more than 80%. But Harris-Oakmark's David Harrow says the best opportunities now lie elsewhere. he'll reveal the two countries at the top of his buy list. Plus, the summer heat wave is putting America's power grid to the test. Triple-digit temps are driving electricity demand higher as millions crank up the air conditioning, raising questions about grid reliability, and one wave to be the heat is minions and monsters. The seventh installment in the Despicable Me franchise hits theaters,

and we'll look at what that means for the summer box office. But let's begin with these markets with the Dow hitting a new all-time high, while the NASDAQ and S&P come under some more pressure as the chip stocks and memory names struggle. This all follows the weaker than expected jobs report. 57,000 jobs in June versus the 115,000 forecast. Let's bring in our panel for more on what this means for the economy, the Fed, the markets, your money.

Daryl Kronk is CIO for wealth at investment management at Wells Fargo, and Brian Vendig is CIO of MJP wealth advisors. Daryl, I'll start with you. I'm glad you could be here. And, I mean, look, a lot of today's trade you could argue, goes back to Apple looking for other Chinese memory suppliers and just kind of a loss of momentum in the AI infrastructure and those hot parts of the market. What do you think is going on here? Yeah, obviously there is loss of momentum. If you look at momentum as a factor, right, it's been getting hit pretty hard here, I would say, in the last week. It seems to be this kind of durable rotation under the surface where you're starting to fade some of the build stocks of the fate called phase one AI.

and people are migrating into and towards more of the kind of monetize and implement stocks. So things like storage, memory, equipment, those type of things instead of just the semis and hyperscalers. We still like tech. We actually took tech to a favorable in mid-April and used proceeds at the time from energy, when you'll recall we were about at a peak of energy stocks, to fund that overweight. And that trade so far since mid-April on a Paris trade basis has been a plus 35% for us. So it's been incredibly good. We still think tech kind of powers through this.

But we do think, you know, you take a little froth off here through the summer months. So if you've got that next marginal dollar to invest, I think you can be patient through July and August as some of this churn and the repositioning happens. He's like, I'm Daryl. This is Brian. Brian, same question to you. What are your thoughts about the kind of rotation here, if we can call it that? Yeah, sure. I mean, I think you have to appreciate what got us to this point, Kelly, which is earnings. And the power of earnings and the fact that in the second half of the year, you look at the earnings outlooks and you're actually seeing contributions coming from areas outside of tech. So I think as investors are being really focused on how much they want to pay up on growth. And they're taking a look at that earnings story and saying, okay, let me pair a little bit of these winners. Like today, we see memory stocks trading off, but you see health care industrials. And also consider that the same. second half of the year, we're not out of the forest of volatility. Midterm elections, concerns about

Fed communication style, wondering about, is this AI spending going to continue? We're really at a critical crossroads. So people are looking for some places to hide out as this plays out over the course of the summer into the fall. Can health care be a leadership group? In other words, usually we think about it as a defensive part of the market and now when that's outperforming, be careful and that's a defensive position. Is that all true? Or could it have growthy things going? Why do you think it's breaking out here? Well, there's a couple of things. One, when you look back at history going into a midterm election cycle, health care is actually one of the more prominent defensive sectors, as you mentioned, that has done well for investors to avoid volatility. But two, if you

look under the surface, there's a lot of innovation happening in big pharma, in biotech, expanding pipelines, new therapies coming. And at the end of the day, it's a little bit of a catch-up trade because first half of the year, it was AI and tech, second half the year. it looks like it's value in cyclicals to start. And Darrell, let's revisit that kind of paratrade you were talking about between tech and energy. What do you do now? Well, actually, so what you do now is, I mentioned the tech, favorable, the energy unfavorable. The other place that I think you can still find good value here is, you know, most people don't realize the industrial space is the best performing sector year to date.

Wow. We think materials still does well. We think utility still does do well. So a lot of the, call it, manufacturing resurgence, industrial resurgence, and AI trade we think is intact right here. And what we would fade or what we'd pair with that, Kelly, on the other side, is what we've been fading for quite some time, which is the consumer, right? Consumer discretionary is the worst performing sector year to date. It's the only sector negative year to date. We put that on last summer.

It continues to be accretive to the portfolio. I would throw staples in there as well, and then I already mentioned energy. So stay favorable tech, materials, industrials, utilities, stay unfavorable, energy, and anything consumer. Anything consumer? You're the second person to say this now. Anything consumer. What's going on there? Is the K-shaped economy over?

I don't think the K-shaped economy is over. But when you think about the headwinds the consumer faces, like, you know, we talk about interest rates staying higher for longer here with what the Fed wants to do. We talk about sticky inflation. We saw the PCE deflator at 4.1% headline, and the core, even fading the energy effects and the oil shock effects, the core at 3.4%. That's pushing almost double where the Fed wants that to be. So it's really hard on the consumer, right? Tell your consumer to go buy their steak for their 4th of July grill out this weekend and see what they pay at the grocery store for steak per pound these days, right? It's really hard on the consumer and the consumer's losing that disposable income. And those names are not, they don't have the pricing power to push that through to the consumer. So the consumer names are eating it at the margin level. Yeah, Brian, feel free to jump in there. Yeah, sure.

I mean, the one thing I will say about this rotation and people are concerned about valuations to the market is you still have 60% of S&P 500 companies trading above their 200-day moving average. And even if you go into the small cap space, I know they're taking a little bit of a pause today, you see about 70% of those names trading above the 200-day moving average. So I still think the market's healthy, and this is a rotation. I don't disagree at all regarding Darrell's points on allocation. But I think at the end of the day, earning still is the major theme. And some of those policy measures from last year, which were viewed as growth accelerators for this year, has been a gross cushion to get us to that point. So if we get some renewed hope around AI innovation spending, expansion of margins,

and also the fact that today's labor number, even though payroll numbers went down, We're still seeing that businesses, private services sector was actually one of the leading sectors for hiring. So I'm going back to the consumer, I agree. No one likes to pay higher prices. But as long as we have stability in the job market, I think the services economy can continue to grow. You have a couple of names in particular that you like. Merck is up 22 percent year-to-date. Casey's General, 43 percent.

You also like Ibridrola, the Spanish utility, up 13 percent. But your top holdings are still largely kind of. of MAG 7 types of names. When we look to the end of the year, do you think that will still be the case? For our portfolios in the way that we manage client assets, we are trying to be market cap-driven, right? So as those things change in the market, so will our portfolios. But the reason why I call out those three names there is goes back to some of your earlier

points, Kelly. The innovation that Merck is showing under the hood and expanding pipelines in oncology and other type of therapies, and also the stock traded down off. its last report, even though I think the investors are too concerned about patent expirations that next wave of therapies coming should propel. Casey's is a great point about value. A company that's been around since 1959, mid to southern states, prepared foods, gasoline, people looking for a great experience but at an appropriate price. And again, energy, to Daryl's point, you know, look at who is receiving the AI spending and the power generation, industrial

utilities and also a little bit of play on Europe from a currency exchange perspective. I see. And Darrell, same final comment to you. Where are your highest areas other than the ones that we've kind of talked about, the strongest areas of conviction? Yeah, you still have to stay domestic over international. You still have to stay large over small. It's interesting, you know, I mean, last Friday when the Russell did the rebalance

of the Russell 2000, right, which is your small cap industry, 43 names graduated out of there. That's a big chunk. and that's over half the year-to-day performance in the Russell, too. So you had dilution of quality and everything else. So we would fade small cap. We'd stay up in the quality and the large-cap spectrum. And then the sectors that I mentioned, and we still think you've got a favor, obviously,

equities over fixed income. And we like commodities here with gold back down around 4,000, oil prices down around 70. I mean, I think you can put commodities right back in the portfolio again. It's just weird, but you say you can like commodities in the consumer at the same time. I mean, I'm not trying to be a zero-sum person, but usually, you know, one goes up and the other goes down and vice versa. Yeah, I would say commodity prices can go up, but that hurts the consumer, right? Because food prices, energy prices, everything else.

So if we believe commodity prices are going up, which we think that they will here over time, you would want to fade the consumer because it's going to be a headwin for them. I see. All right. Gentlemen, thanks. A lot of different points of you there. We'll let the viewers over their cookouts. They can decide.

Daryl Kronk, Brian Vendig, really appreciated. you. Meantime, the bond markets are closing in less than an hour ahead of the holiday. The 10-year yield reacting to that jobs report. It's trading off the lows around 4-4-8%. The U.S. dollar also on the move, initially sold off, still under some pressure, down about half a percent. Rick Santell, you think that's the right interpretation probably takes us a little bit away from higher odds of a rate hike. Yeah, it takes a little away from the odds, but I think the odds have been over their skis on that possibility anyway. The market in Fed Fund futures, especially the back months, is not good in transitional periods.

When you go from thinking you're going to be an easing cycle to not in an easing cycle, it tends to overcompensate that adjustment. And to that end, of course, we did see the jobs report. You see the bar chart. U3, the unemployment rate dropped. Lowest level at 4.2. You'd have to go back to June of last year. But look at twos and tens how they dropped. Then look at how tens came back.

Tens are still adjusting to the fact that inflation is like. than it needs to be. Tues are answering your question. Their yields kept going up to take out the easing cycle. I think they went too far. So now you're re-steapening the curve. Dollar index initially went down. And finally, the yen moved up a bit. That charts the dollar yen, so the dollar moving lower. All right. And Rick, by the way, last hour, we were talking to Adam Posen, and he said, look, the yen's up through 161. That was supposed to be a line in the sand. He thinks because this, you know, weaker, overseas currency, stronger dollar, he thinks Bessent might actually come out next week and try to jawbone or do something to get the dollar, you know, back down a little bit for trade purposes, maybe help those currency strength.

And just curious for your response to that. You know, listen, I can't speak for the Treasury Secretary, but I think exactly as you were talking about your last guest, if we want the average American to be able to do better in this inflationary environment, a weaker dollar isn't the way to go. A stronger dollar lets them buy some of these imports with a little bit more. horsepower. And in terms of what's going on with the Japanese in the end, I really think intervention doesn't work. I think the Bank of Japan now understands that. I think the only way to combat some of the ills that they're going through is for the central bank to actually raise rates. And I think that's going to be the ultimate chapter. To raise rates, we will see if that chapter is coming. Rick, thank you. Rick Santelli. And we are just getting started. The chip

trade has gone global. But after South Korea's monster run, is it time to look elsewhere? We'll debate the next international opportunity, and one of the biggest AI companies in the world potentially has a new top shareholder. After the break, how OpenAI's reported talks with the Trump administration could reshape the landscape and its upcoming IPO. A big headline that intersects the worlds of tech and politics. Open AI is in talks to give the Trump administration a stake in the company. That's according to a source familiar. The news comes as the AI giant works to overcome some political hurdle. Ashley Capu joins me now here on set. Ashley, it's good to see you.

Thanks for having me. So there's skeptical, cynical, a lot of takes on this. What would be the best way, the best possible light to put this deal in? Sure. So Open AI has repeatedly said here that they want to make sure the American public has a stake in the benefits of AI-driven growth in the economy. So they're trying to position this technology, which they obviously really believe in, as this thing that everybody can share in. They believe it's going to cure diseases and lower costs for Americans. But the other thing I would call out here is that for OpenAI, this could help them earn some goodwill with the Trump administration, which has taken a much more heavy-handed role in AI regulation since President Trump signed the AIEO in June.

Right. And that is one area where we talked to Alex Cantorowitz last hour. He said, how can the government regulate a firm that it also owns? Like, isn't that a conflict of interest? Yeah, absolutely. I mean, Open AI is navigating its own bout of challenges with the administration. right now. It had to limit the rollout of its GPT 5.6 series of models, and it's really looking to broaden that release. So they have some agendas that they are hoping to clear here as well.

And if they earn some goodwill along the way, they're going to be happy with that. The irony is there is a way for the public to own a piece of Open AI. It's called going public. I don't know how this time, if they said we're never going public for some reason, and therefore this would be the only way for the public to kind of benefit from that upside. Okay, that's one thing. They are still planning to IPO. Maybe it's in 2020. So I'm just curious how these timelines would overlap. Absolutely. So we've heard from the beginning here at CNBC that they were angling for Q4 at the earliest for an IPO.

So if this happens next year, it's not that big of a change in their timelines. But certainly these stakes from the Trump administration have been a boon for other companies like Intel. So it could be some good news for investors who are watching this as well. The line is that Sam Altman looks at Intel and says, look how the president talks about how well they're doing and kind of wants the same halo effect. Others also cynically say they need regulatory capture, which in plain English means when the company's struggling and firm rules are set about a fast-growing industry,

it usually benefits the incumbents who can kind of get themselves a big piece of that pie. It seems obvious to me that that is playing a role here. Sure. I mean, they've been watching their chief rival Anthropic go head to head with the Trump administration on multiple occasions this year. It's not a fun position to be in, and it's tricky to navigate.

So Altman's really trying to play his cards right here and set his company up for success as much as possible. Yeah, and he wants other companies to be in this fund as well, as I think you said. So it would be a slew of different AI companies in something like an Alaska permanent fund where, to Sam, Lesson's point last hour, these companies don't actually pay dividends yet. So maybe that's down the road. It's a little bit easier with a mature oil company to do something like that. Interestingly, though, we haven't heard that Anthropic is in talks with the Trump administration about anything similar at this point. So who eventually would participate in that is very up in the air at the moment. Would you, do you think it's fair to say that OpenAI, do we use the word struggling?

I mean, it's a little weird to use the word struggling with a company worth $800-some billion. But Sebastian Maliby, who's been pointing out what he sees as the problems with the business model, said even SoftBank when they had to kind of re-up their investment in Open AI saw the shares sell off as a result. There seemed to be a lot of questions in the marketplace about how well this company is really doing. It's a race, and there's no doubt about that. they're also facing growing pressure from competitors like Google and Microsoft and Amazon who are offering cheaper offerings than they are. So anything they can do to maintain their edge and keep a little bit ahead in this race is going to be a big advantage for them. Yeah, I see that they're kind of taking this different tack than obviously than Anthropic has so far.

Speaking of which, Anthropic is now reportedly in talks with Samsung for a custom AI chip. What does that mean? What can you tell us about that? We're also hearing from a source that those talks are very preliminary at this point, but I would just call out Samsung is named as a strategic infrastructure partner who participated in Anthropics' $65 billion series-age funding round in May. Anthropic kind of hinted that there are some plans in the works there by saying that they're going to help leverage their compute and scale it.

So some undertones in that release, but Anthropics had a pretty distributed and diversified compute strategy at this point, inking deals with lots of partners, including SpaceX and Broadcom and Google this year. Is this an effort to diversify past Nvidia or who would typically be the partner for something like a CUS? Is that a Marvell kind of thing for a custom AI chip? We're seeing demand for compute still astronomical right now, so they're kind of looking for anything they can get their hands on. I don't know that they're necessarily trying to move away from Nvidia in that sense, but they want all their options available to them.

We've seen meta doing the same thing, striking deals with so many different companies. It's a scramble still. Thanks. Thank you so much. Appreciate it. We have a market flash on Oracle on track for its ninth straight negative session, which is now its longest losing streak since 2021 when it dropped 11 days in a row. Oracle has a race about a quarter of its value just over this recent stretch.

Meantime, the heat is on, and not just on Oracle. Triple-digit temperatures are gripping much of the country into the holiday weekend. We'll break down the impact on electricity demand, your power bill, and the utility stocks right after this. An extreme heat wave is hitting parts of the country. About 150 million people across the eastern half of the U.S. are under heat alerts. Accuweather's chief meteorologist Bernie Rayno is tracking how hot is it getting, Bernie? It's like a sun outside already, Kelly. It's going to continue to get worse.

Take a look at the heat. It's all the way back toward Chicago, where temperatures are in the 90s. But see, it's the I-95 corridor, the core of the heat today from Boston, New York City, Washington, D.C., down toward the Raleigh. area where we're going to be challenging records. So this is historic from that standpoint. The other problem is it's widespread. When you look at high temperatures today, look at the cities of 95 degrees or better, Chicago, Dallas, Boston, New York City, Washington, D.C., Raleigh and Charlotte, and when you factor in this, and this is the stunning thing about this air mask, look at the dew point temperatures. Half of the country, you could say it's humid,

DuPard temperature of 60 would be humid for most, but we're looking at dew points in the 70s. So when you factor in the heat, the humidity, and the strong sun, this is even more stunning right now. Your acque weather, real field temperatures, 100 or 5 or better, from Portland all the way down toward the Dallas area. And then here's the problems with the power grid. You have the widespread heat during the day, but also because of the humidity, temperatures at night don't drop, they stay in the 70s, it never really cools off, and then tomorrow, don't expect anything better. Accuatherer of real-field temperatures across a lot of the country will be 100 degrees or better,

from New England, all the way down into the southeastern United States. The only thing that will start to help, thunderstorms start firing up Friday afternoon and over the weekend, and that's when the heat wave gets broken. But Kelly, unfortunately, the humidity stays with us the entire weekend. This is going to put problems on the power grid because of the long nature, the widespread nature of the heat wave as well. And as you know, you walk outside today. It feels like a sauna. I was trying, Bernie, to look at that map behind you, squinting there.

Is it hotter here than it is in Phoenix today? It looks like it's almost hotter today here in New York than it is down in Texas. Well, it is. Actually, the core of this heat wave today is going to be the I-95 core. door and tomorrow. That's where temperatures are going to be triple digits or better. So yes, it's going to be hotter in New York City, Philadelphia, Washington, D.C. as we head to today and tomorrow. And as I mentioned, these real field temperatures for today are stunning when you're talking about 100 to 5 degrees or better from Portland all the way down in the Texas. And by the way,

this what you see here, Kelly, that's actually where the real field temperatures of 110. 110. Ouch. Stay cool out there, everybody. Get out the sprinklers. Get out whatever. It can help you cool down. Bernie, thanks very much.

Really appreciate it. Bernie Raynow. For more, the pressure the heat is putting on the power grid and what the fallout might be. Let's welcome in Kevin Phillips. He's managing partner of PEI global partners. Kevin, because there's so much population here, because these areas aren't used to it being quite so hot, what are the implications for the power grid? Yeah, I mean, it's unquestionably.

Scott and Kelly, thanks for having me on. Look, I think the nation's largest power grid, PJM, which is kind of smack dab in the middle of the map Bernie put up earlier, is expecting to set a record demand day today, all-time record demand day. And New York is pretty close to a record, but I don't know if it's going to hit a record. And it sounds like tomorrow is not going to get a lot better. So on a day like this, it's natural to wonder about grid reliability. And grid operators plan for days like this by maintaining a generation reserve, but, you know, certainly days like this test the limits. Yeah. We, New York City, Mayor of Zoramemdani said folks should set their ACs to 78 degrees to help to help some of that pressure. I imagine that would have to help. I don't know how many people

will actually do that, but do you know what the differentials are for kind of every degree that your thermostat goes up, how much pressure that takes off the grid? It's a good question. I mean, AC demand, and certainly in like Texas, you know, air conditioning demand is, you know, a huge piece of the load, especially on a day like today. And in New York City, I don't, I mean, it's a, AC demand is probably a little less of the load, but a little less of the load, but it's still pretty significant, obviously. So, but I don't know off the top of my head how many megawatts that would shave off the peak load demand.

Right. Nevertheless, it's going to help, I'm sure. I mean, to the, if people do it. I think some will. You say that the PJM, that's the, isn't the Pennsylvania, the stands for something like that. Brian's not here, so I got to do my best. But you say these plants are less efficient and have higher operating costs.

So what are the implications that's going to have? Are people going to end up with huge power bills? Because, look, we want to avoid brownouts, first of all. And then even if you get through it, you want to make sure you're not going to get hit in a month or six weeks or a couple months time with massive bills. Right, right. Look, I think in PJM and in, you know, in New York, I know what you may be thinking about is some of the massive bills that happen during Winterstorm Uri and Texas, for example. But I think in PJM and in New York, yeah, I mean, there's certainly an impact on your power bill when you have an all-time record demand day like today.

I think the price per megawatt hour of power on a typical, you know, afternoon, maybe in the summer, say it's $80 or $100 a megawatt hour today. And PJM, from what I understand, it's already over 600. So it will have an impact on the power bill, but it's not going to be as extreme as it would be in somewhere like Texas where the caps on pricing are, you know, are much greater than they are in PJM and certainly in New York. If we get through this without incident, without, you know, a major brownout or something like that, how were we able to do that? because with the energy transition and the unprecedented demand on the grid from electrical supplies and data centers and everything else, how are we able to make sure that there is no significant problematic event? Yeah, it's a great question. And look, I mean, that's really at the core of what everyone who's, you know, in our space and thinking about the grid has been worried about really for the last few years.

as you've seen this huge uptick in demand for power coming from, you know, EV charging, data centers, you know, AI, the reserve margin that we talked about at the outset gets stretched. And so, you know, making it through days like today is what it's all about. And in order to do that, we need to build more generation and not retire some of the, you know, generation that we would have liked to retire from a policy standpoint. I mean, some of that older generation that's less efficient, maybe lives a lot longer than what we were expecting two or three years ago. True. Because you know, if there's a problem and it turns out there was a data center, you know, you know what I'm saying, there's going to be outrage.

Sure, sure. And look, I mean, I think regulators are, you know, and I think on the political side, people are very focused on making sure that, you know, data centers, that AI aren't, aren't. really as much of burden on the grid as what we would have thought because, you know, what we call kind of bring your own power is starting to become in vogue. So I think there's, you know, there's starting to be a lot more focus on making sure that new data center or, you know, hyperscaler development actually develops its own power generation to go along with the load. Yeah. So that you're not just soaking it off of the grid and, you know, causing, you know, real world groundout type problems as you're referring to. Absolutely. And we've been

hearing firsthand from some of those companies doing so. Kevin, thanks very much. Appreciate it. Absolutely. Thanks, Kelly. Kevin Phillips with P-E-I. Speaking of heat, South Korea's Cospy has been on fire, soaring more than 80% year-to-date. Is it finally time to cool off? David Harrow of Harris Oakmark joins us next. The chip rip has gone global. South Korea's Cospy surging 81% this year, crushing the S&P's 9% gain. And that's largely because, because of massive jumps in two companies, two memory companies, S.K. Heinex and Samsung. Those two names now account for nearly half the index. So concentration risk is front and center. So where should international investors look next? Let's ask David Harrow. He's the deputy chairman and

CIO of International at Harris Oakmark. David, it's great to see you. We were just sitting down with Bill Nygren in Chicago last week. So we've been making the rounds for sure. Curious when you look at international stocks, do you worry about people have having exposure to the Korean market right now? No, I mean, the thing is, is that you've had this wave of money going to narrow areas. And since South Korea does have a very strong chip sector in SK Iex. And in Samsung, they've been the recipients of part of this wave of money. So you have to look at not only where the money went, but where it's coming from.

And there are other areas within the global equity markets. there are other regions and industries that have been absolutely flattened as a result of the wave of money going into these very, very narrow areas. So if you look at, you mentioned that South Korea is up 70% year to date. Well, France and Germany are barely up one or two percent in U.S. dollar terms. So it kind of tells you that maybe tomorrow's winners will not be what's already been blown up in terms of price, but maybe some of those areas which have been ignored by the global investor. So it doesn't worry me because it actually provides opportunity for those who have a good, medium, long-term investment time horizon, which I define as being an investor.

Right. And so then I'd love to know. And it was interesting because at the beginning of the show, we had on Daryl Swank, who said he would still stick with U.S. over international. So maybe convince us to look international and convince us where? Well, there are certain areas in the U.S., which have also missed this massive buildup, and we'll call it generically the AI trade. But outside the U.S., I mean, certain sectors which the U.S. really doesn't possess much of, for instance, a luxury goods sector, companies like Richemont and LVMH and Kering, I mean, these are very unique industries, luxury goods, that are local.

almost exclusively in two or three small areas, France and Italy, in particular with a little bit of Great Britain when you look at Burberry. So these companies have been hit quite hard because, A, of the Chinese general economic slowdown, and B, because everyone feared rising energy prices would hit the consumer and therefore consumer discretionary stocks will be hit. But we think if you look at over the long term, and especially given the number of newly minted millionaires every day and the growth in Southeast Asia, these companies will do very well. Meanwhile, they've been very, very poor performers over the short term, but over the medium and long term, these types of businesses should do quite well. But today, no one's interested in Louis Vuitton. Maybe they want to buy the handbags, but they don't want to buy the stock. They should be buying the stock and putting that in their handbakes. So you think that Japan and Korea are looking a little frothy.

Germany and France, which have been weak, you're saying, maybe a little bit more attractive. The dollar you also think looks stretched again, which is interesting, because we've heard this a couple of times now. If the dollar starts weakening again, that would favor some of these international markets. Do you think all of this will start to regain the kind of traction that it had at the beginning of the year when it seemed like international was outperforming the U.S.

by multiple percentage points? Yeah, that's what happened last year. You might remember, Kelly, last year you had a little bit of dollar weakness. You had a little bit of strength in foreign markets. And the world X, the U.S., outperformed the S&P 500, and it started off that way. You're exactly right in the beginning of the year. And then we got that whole AI thing, and then we got the whole war thing. And that kind of took the wind out of the sales of the foreign markets.

But again, if what we're looking at buying are investable assets, a company with cash flow streams, and we as fundamental value investors, judge a company what it should be selling at based on those cash flow streams, pricing in particularly outside the U.S. and probably in Europe, and we all know about the European malaise and all this stuff, but we don't realize there's some really good global companies based there that have been completely ignored by the wave of money going into this really, really narrow area called the AI trade. Well, it's just now making people wonder, okay, maybe I should be looking somewhere else.

Interestingly enough, China, which should be a beneficiary of the AI trade and all of this, has not really been so in a broad way in terms of its stock market. Do you have anything to add there? Yeah, it's a little puzzling because Chinese might not have direct AI beneficiaries because, you know, there's trade controls and it gets them very difficult to have cutting-edge technology. But they have businesses like Tencent and Wheel Process,

which in a way is a surrogate for Tencent, almost 80% of its value, but it's listed in the Netherlands. And a company like Alibaba, these companies have really been hit hard, aren't performing well, but they're wonderful businesses. And incidentally, they're very shareholder-oriented, meaning if they have excess cash and their stock prices low, they don't have to be talked into buying back their own stock to increase value per share, which other companies around the world, you may have to explain, notably in Japan,

where you have the general case of Japanese managements, as exemplified by the average ROIVA Japanese company is just 8 or 9 percent, they have to be talked into building shareholder value per share. Some of these Chinese companies, on the other hand, really don't, you don't have an issue with them. They know how to build value and they're not afraid to do it. So I think Tencent via process is how we own it or Alibabaabor are two names in China that have really missed out on this rally. Some of it's probably because of geopolitical reasons,

but they do represent very good economic value. Well, it's fascinating to hear the case for them when they're out of favor to maybe look for an opportunity that could be next when it's not. not just the USAI trade. David, thanks very much. Appreciate it today. Thank you for the invite. David Harrow.

And say hi to Brian for me. Tell him I missed him. He's got to cool off. He'll be back on Monday. Tell him he should come to Wisconsin. It's a nice 86, 87 degrees. He's there. I don't know if I'm a lot.

He's there. Just give him a call. Okay, Brian. Give him a call. You'll be meeting up after the show. I'm watching. Thanks. Let's get to Brandon Gomez now for the CNBC News Update.

Brandon. Hey, there, Kelly. Iran's joint military. The military command today issued a warning to oil tankers moving through the Strait of Hormuz, saying they must use its approved routes or face a, quote, forceful response. The warning came after both U.S. and Iranian diplomats met with mediators Wednesday in Qatar. U.S. Central Command released a statement saying leaders there underscored their shared commitment to the free flow of commerce through the strait.

The Social Security Administration just announced it will issue limited edition social security cards to babies born between today and the end of the year. The cards will be stamped with the Freedom 250 logo, the committee created by President Trump and not from America 250, the nonprofit established by Congress to organize events around the holiday. And Fourth of July fireworks on the National Mall in D.C. will reportedly cause hazardous levels of pollution in quote, very unhealthy conditions in the city. That's according to the Washington Post, citing internal documents from the National Park Service. The show is being built as the largest in history with 850,000 fireworks over roughly 40,000. minutes, Kelly. So enjoy, but maybe proceed with a little bit more caution. Yeah, I want to see they're,

they're apparently doing like a ship, what do they call a flotilla up the Hudson? Yep. There's going to be jets, but I think it's going to be super packed. I don't know how it would and usually shows like 15, 20 minutes, 40 minutes. I mean, it's bound to be a spectacle for sure. A lot of bang for your buck. Yeah. Brendan, thanks. Thanks. Up next, healthcare climbing to new highs as investors look beyond tech, market navigator takes its pulse after the break. It's time now for our market navigator segment. I'm sort of dressed the part today.

Our next guest is eyeing health care. The sector is rebounding nicely as part of this great rotation trade to kick off the quarter. And he says it's not too late to get in. Let's bring in Jeff Kilberg. He's the founder and CEO of KKM Financial. The XLV, Jeff, is outperforming. You like UNH and Lilly. Let's start with UNH, which is at all-time highs today.

Why would you still own it here? Well, I think you have to look at health care, Kelly, just in general. It has been hotter than any temperature here in the Midwest. We saw the last week of June, it outperformed the S&P 500. Healthcare to S&P 500 outperformance relatively the SEP 500 by 10%. That's the largest on record. So I like UNH. It's been a workforce.

Also, I like Lilly. Those are two names. We own the essential 40. But as you see this great rotation, Kelly, you're going to continue to see Mag 7A and health care get owned via XLV. AbV, all-time highs. J&J, all-time highs, UNH. So you're saying, while you like UNH and Lilly,

that you can basically own the entire space? You can, but you have to be considered, Kelly, XLV, nearly 50% of that ETF exposure is in those five names that you talk about, Lily, Abbey, J&J, UNH, as well as Merck. So that type of exposure is heavy to those five names, but I really like the two names in United Healthcare as well as Lily, just due to the fact that we've seen really United Healthcare

Health Care come back from where it was down at 240 up to 430. So it's been a great comeback story for United Healthcare. All right. And we'll see if the early trend proves the rest of the quarter. Jeff, thanks very much. Good to see you. Happy fourth. Happy fourth, Jeff Kilberg.

Coming up, a blockbuster holiday weekend. We'll break down who is stealing the show at the summer box office and who's profiting from the biggest hits. Right on the heels of NBC Universals announced a split from Comcast, the seventh movie and the Despicable Me franchise hits theaters this week, Julia Borsden has all the details. Julia? Yes, this movie is the seventh of the franchise over 16 years and the ratings. The reviews are actually the strongest,

88% positive critic score on Rotten Tomatoes, expectations that this film will do about $110 million at the box office over the long holiday weekend. And I think what's really important to point out here, Kelly, is putting this film in the context of Universal, which has the number one and number five biggest film so far this year with the Super Mario movie in number one spot and also obsession in number five spot. It really speaks to the diversity

of the types of films that Universal has. And also it speaks to the fact that the studio is really a crown jewel of NBC Universal as it prepares to be split off from Comcast. And this IP, this electrical property, is really an engine for the rest of the business as well with the theme parks in particular.

If it's that well reviewed, I might consider taking the kiddos. But Julia, my attention Everyone, is this true? Okay, so I didn't realize this wedding might happen tomorrow. Now the Associated Press is saying that the Taylor-Travs wedding might happen. Is it tonight or is it tomorrow night? What are the Kalshiads doing?

Are they soaring? The Kalshiads are soaring. I've seen about $5 million has been traded on this topic of the Taylor Swift wedding on Kalshi. And yeah, the reports seem to say that it's going to happen tomorrow evening. at Madison Square Garden, seen lots of fascinating reports about boxes of branches and lobster getting brought in. You could only imagine what it's going to look like inside there. So many people have asked me, why MSG? I don't have the answers here, Kelly, but I can only speculate because of the amount of control and security you could have around that particular venue. But

quite a choice. And I know a lot of people, including myself, are curious to see the photos. Oh, so many. I mean, look, they've got Cal She Betts on what kind of wedding dress she wears, who the guests will be, Mahomes, Selena Gomez. I mean, it's a great Blake, like Justin Trudeau, by the way, makes the list, I assume because of Katie Perry. It feels like it could kind of be like a big concert, like a celebration of music. There have been rumored that Paul McCartney and Stevie Nix and other people might show up, which is kind of cool. Yeah, I mean, there are elements of it that sound like it's going to be like a big concert, but it's also been compared to a royal wedding. This is America's royal wedding, Kelly. I honestly, I'm all four. I just wish we could watch in live time.

Because it's a royal wedding. You can watch. It's a TV event. Yeah, it'll be really interesting to see how they choose to release photos or video from the event. Lots of reports about how attendees have had to sign NDAs. There's been some speculation that if they sell the photos, they might donate the money to charity. So we'll see how that all plays out. It's just a lot happening. You've got all the July 4th things happening in New York and then the wedding on top of it. So I can't wait to find that more. I wish them all the best. They didn't even have to hike the Empire State Building to do it, just an MSG. Yeah, they didn't have to risk their life and limb for this. But a lot of people are watching and certainly betting a lot of money, speculating about everything possible.

You could imagine on Kalshi in the prediction markets. But yeah, I wish them well as well, Kelly. All right. Should be a fun event. Julia, thanks. Julia Borson. More power lunch after the break. Quick programming note before we go. A big interview happening tonight on fast money. Our own Joe Kernan sitting down exclusively with President Donald Trump at 5 p.m. Eastern time definitely don't. That almost as big as the Taylor Swift wedding, honestly. Now let's get to today's trending ticker. Palant here heading for its best week in nearly a year. D.A. Davidson upgrading the stock to buy with a 175 price target today, saying the valuation is the most attractive it's been in a while. The shares are currently around 130.

Bending spoons, the IPO this week, also getting some love. So a few areas that aren't just the usual AI names. Kind of nice to change it up. Happy 250th America and to my son, Paul. Well, he'll be eight. And thanks for watching, Power Lunch. Closing bell starts now.