Power Lunch - Recession Obsession, The Wegovy Effect and the Live Entertainment Boom 9/5/23

Episode Date: September 5, 2023

Markets no longer seem obsessed about the possibility of recession.  Goldman Sachs cuts its recession probability to 15% and consumer staples stocks continue to sell off.Plus, Wegovy helps make Novo Nordisk the most valuable company in Europe, passing LVMH.And Taylor Swift and Beyonce sell out shows, but what about the circus, and motocross and monster trucks? Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody. Welcomeing back, Kelly Evans. Thank you. I'm Tyler Mattson. Good to have you back home with us at the table. Coming up, what are the odds the U.S. economy ends up in a recession? Goldman Sachs cutting those chances now to just 15%. And the market seemed to think we can avoid the worst, too.

So consumer staples keep falling. Plus, no signs of recession and ticket sales for live events. And it's not just Taylor Swift or Beyonce. We will talk to the head of the company that puts on Monster Dam, Disney on ice. the circus about the strong demand for experience. But first, let's get a check on these markets. And in the past hour, we went to fresh session lows with the Dow down more than 150 points. But we're off that somewhat.

Blue chips are down 108. S&P is down 11 points today. And the NASDAQ is back into positive territory by just about five points. But the homebuilders are getting hit hard today as interest rates rise. Pulte is having its worst day in nearly a year. The XHB Home Builders ETF is down. And the 10-year yield at last check was up around 425. And shares of United Airlines falling sharply midday as the company issued a nationwide ground stop due to computer issues.

That stop, Tyler, has now been lifted. All righty. Settlement on Wall Street seems to be that the Fed has threaded the needle well enough to avoid tightening the U.S. economy into a recession. Goldman's tax today cutting its recession expectation. And Steve Leesman joins us now with more. What can you tell us? Well, the call, what they bring is down to 15 percent, five points lower than they would be. that makes the probability, Tyler, about average, at least so they say, that is no greater or lesser

chance of recession than, hey, in any normal year, it stands well below the average in the most recent CNBC Fed survey that was back in July, which was at 48 percent and had in that survey fallen below 50 percent for the first time in a while. Also backs up the call of Fed Governor Chris Waller, who told CNBC in an exclusive interview today, he sees the odds increasing for a soft landing for the U.S. economy. That was a hell of a good week of data we got last week. And the key thing out of it is it's going to allow us to proceed carefully, as Chair Powell said, of Jackson Hole. There's nothing that is saying we need to do anything imminent anytime soon so we can just sit there, wait for the data, see if things continue. Waller went on to say that inflation remains the Fed's top issue.

He's going to determine what it does next. He would not rule out an additional rate hike saying he doesn't think one more hike would tip the economy into recession and was not yet ready to declare inflation victory. He's just one of the first in the series of Fed speakers this week. We have Collins from Boston, Harker from Philly, Gouldsby from Chicago, Williams from New York, Bostic from Atlanta, Logan from Dallas, and Bowman and Barr from the border. He did it all from memory, just so you know. The U.S. economy still faces considerable challenges, including rising energy prices of potential government shutdown, the restarting of student loan payments, and, of course, the lagged impacts of rate hikes and bank credit hiding. But so far, the data suggests Goldman and others, to government and others that recession may yet be avoided. guys. And as for an interest rate hike at the September meeting, that probability is declining,

declining, declining. Yeah, feeling off the table, I think we've now heard from a bunch of folks. And I think you can take that from Powell's remarks, that September is going to be a not one to remember, perhaps when it comes to rate hikes. And, you know, that's going to give them a whole lot more data and makes a lot of sense to me. Because one of the things Waller said today is, hey, we were burned a couple times, thinking inflation was transitory. And then if you remember, the beginning of this year, Tyler, January looked really good inflation-wise, until they went back and revised the success they thought they had, and then created two more lousy inflation reports. So I used to think, you know, as a reporter, three is a trend.

It may be five for the Fed. Yeah, yeah. But then that leaves open potentially a hike in November, right? It's still on the table. It's in the 40-ish percentile before Powell spoke in Jackson Hole. It was north of 50 percent. So it's in the kind of range of flip a coin, and it depends on your inflation outlook. And then soon after that, we're going to start having more conversations about when and if cuts are coming.

Yeah. All right, Steve, thank you very much. Steve Leesman. Good to have you with us. Meanwhile, the consumer staples sector is down over the past month. Maybe, as the markets agree, a recession is less and less likely. Look at General Mills and Kellogg and Campbell Soup. Staples, all.

They are all near 52. two-week lows. Here to discuss the Staples' struggle and tell us which ones are best positioned for a potential downturn or maybe no potential downturn is Nick Modi, an RBC Capital Markets analyst. Nick, let's tackle the obvious one first. If you look at the stocks I mentioned there, Campbell's, General Mills, and what was the other one, Kellogg, all down. Do you attribute that to the fact that the likelihood of a recession seems to be fading?

or is there something unique about these companies that is causing them to come down? I think there are a few things going on here, Tyler. First, I do think, obviously, the macro is having an impact that tends to impact the consumer staple sector quite a bit, given it's more defensive. And so when people feel better about what's happening and the go-forward economy, the sector tends to underperform. Well, let's not forget that this sector had incredible performance. I mean, I think 1,800 basis points of outperformance in 2022.

When we walked into the year, they were trading at almost all-time relative highs versus the market. So our call coming into the year was, listen, that can't sustain itself. We saw a lot of pricing going to the marketplace, but at some point, it's going to start affecting the consumer. And that's kind of what we're seeing right now. And so I think not only do we have the macro dynamic, but I do think you're starting to see volumes kind of lag expectations as we start. to lapse some of the big price increases we took a year ago. And I think we're going to start seeing more of that weakness over the coming months and quarters. How bad could it get, Nick, because I'm persuaded by what Nancy Lazar over at Piper Sandler is arguing that after we've seen

these massive price hikes go through, there's no reason to think deflation should be off the table. You know, just because we all think, oh, Campbell's has never cut prices doesn't mean they might not be forced to this time. Correct. I mean, I think we should all be bracing for a promotional kind of environment that is maybe greater than what the managements have guided to. So that's number one. The second point, and this is more of a package food comment, we're seeing a lot of shifting of consumption from the center of the store where pricing still remains very sticky to the perimeter of the store where you're seeing disinflation and deflation happen at a much greater rate. So consumers are starting to identify that there's value in, hey, look, look at the price of

eggs and what has happened the last several months. And so they're making some choices like, of the breakfast occasion, maybe instead of buying cereal, they're buying fresh fruit or yogurt or eggs. And so that is something that we're seeing right now. In your coverage universe, Nick, what is your favorite stock right now? And which one is the one that you would advise our viewers to sort of stay away from? Yeah. So our top idea for the whole year is Constellation Brands. It continues to be our top idea. They have a lot of momentum with their brands, Modella Special and Corona, and certainly some of these bud light dynamics that we've been seeing is coughing up a little bit of extra volume to consolation. So I still like that story.

That sounds like, you know, Nick, if I might interrupt, that sounds like a really good stock for a recession and a really good stock for good times. I mean, why not? I mean, it works both ways, doesn't it? Hey, sometimes you can have your cake and eat it too. And in case of consolation, that's exactly what you're getting. And, Tyler, in terms of names that we're still very cautious on, Look, we're cautious on Kimberly Clark because of the private label exposure. We're cautious on the packaged food names for the dynamics we discussed earlier. But I have to acknowledge these stocks have really performed badly to your earlier comments starting off this segment. And so you've got to be careful.

Don't get too greedy on the downside. I think right now what you have to find is relative outperformance. And so we tend to prefer beverages over packaged food at this point. And finally, Nick, what would you say to those, you know, just last hour we were talking to Chris Seneca at Wolf Research, well, but okay, maybe there's a Mondalese. Valuations are lower than they've been historically. What would you say about that? Well, Mondaliz is actually one of the very few names across packaged food

that's trading above where it had been in 2022. So Mondalese is seeing some very good results. And look, they have a portfolio that tends to be a lot more kind of sticky, right? When you think about snacking and chocolate and confection. And they have some global exposure, too, where economies are doing well, especially in the emerging markets because of all the inflation that we're seeing. So look, whether we walk into a recession or not, I don't know. All I can tell you is the consumers definitely behaving like there's some challenges coming down the pike.

And that's what we're seeing a lot of trade down right now in the market. Very interesting. A warning perhaps on multiple levels. Nick, thanks for joining us today. We appreciate it. Thank you. Nick Modi. Well, we've been discussing the possibility, probability of recession and the stock impact of all of that.

Let's turn to Rick Santelli now, Rick, as yield seem to be dominating the narrative today and certainly parts of the market like home builders. Yes, absolutely. And I suspect it's going to remain hard for quite a while. New studies continue to come out that show that when the central banks raise rates, there's a long lasting effect. It just doesn't disappear quickly. Maybe as long as eight to 10 years, I believe it was San Francisco Fed, something to pay attention to. And if you look at rates today after what I consider a weak employment report, after what I consider a lot of weak PMIs around the globe, what you see is that long-dated came in with a wallop. Ten-year, 20-year-year-year yields were higher. Two-year-no- yields were basically somewhat flat early in the session.

But that all changed. We see that rates are almost a parallel shift. There's very little curve action going on. If you look at the twos versus tens, it's virtually unchanged, as the 10-year hovers very near 16-year high yields. And the real spread for recessions, three month to 10 year. Okay? In May it was at minus 186.

Right now it's at minus 119. That's almost 70 basis points less inverted. I heard everybody go, whoo, see? Well, maybe you're not having a recession. First of all, when those reverse, it doesn't mean you're not going to have recession, but the point I want to make here is that even at minus 119, that's more inverted than it's been. My chart goes back to 82.

There's nothing really more inverted than minus 100. The point being is that everything that normally points to recessions are still pointing to recessions. And if you look at the onshore dollar versus yuan, for a brief period today, the dollar would have closed at a 16-year high. It was only because on the close, the wand came up a little bit, but it's very near. The best levels on the dollar, worst levels on onshore wand since 2007. And finally, listen, if you look at the administration when it was sworn in in February of 2020, and look at our Bob gas on top of 10 year yields, you'd be hard-pressed to say that those charts aren't shadowboxing each other to the upside.

Tyler, back to you. Mr. Santelli, thank you very much. Good to have you here. Coming up, Airbnb shares higher today as the stock gets added to the S&P 500, but now the company is facing what could amount to a ban in New York City. Details of that fight coming up. And energy the best performing sector today is oil prices rise again. oil now up 8% in a week and climbing toward $90 a barrel.

We will get the latest coming up on Power Lunch. Welcome back and check out shares of Airbnb. They are soaring today on news that they are what. Oh, yes, joining the S&P 500. We have seen this before with Tesla and some other hot stocks. But even as that door opens, another one may be closing for the company. New York beginning its crackdown on rentals today. And this could be a biggie.

Robert Frank is here to discuss. Yeah, Kelly, maybe. Maybe it's 10,000 doors closing when you talk about Airbnb. They have about 40,000 listings. Some say it's going to be 10,000, maybe over 20,000 listings that disappear after today. Because today marks the first day that New York will start enforcing this new law, which Airbnb says is a de facto ban on Airbnb. So what it says is you have to be present if you're renting out your apartment. You can't just rent out a whole apartment and not be there.

And so that's what a lot of people do. So you can't do that. New York, you get an Airbnb, and the owner's not there. The owner's not there. That's what makes it great. The other problem is that you have to register with the city. Now, so far, the city has only approved 250 applications. There are tens of thousands of listings out there.

So just to get it approved is difficult. The city doesn't have the staff to approve them. But also, there are all these building regulations that you have to go through to get approval. So many people say this is the end of many of the Airbnb listings in New York. New York and some say 70% of the listings could disappear after. When you say building regulations, you're talking about city regulations affecting city codes affecting buildings. And you have to comply with all of these things. And there's a bureaucrat somewhere in the downtown. And another big part of this is many buildings, co-op boards, condo boards have prevented forbid people from doing

this. And once you call the city and say, our building doesn't allow it, even if you apply, you can't get it because the building, the city now has that record of your building not participating in Airbnb, not allowing it. Have other cities put in place similar regulations, and what has the experience been there? This is among the most stringent in the country, but there's been a whole escalating series of regulations. Dallas, Philadelphia, New Orleans just passed recent regulations. And the good news for Airbnb is that people have found a lot of loopholes, a lot of way around it, and they're just not enforced. I mean, is New York City really going to send someone to an apartment

and say, oh, you weren't there when this Airbnb. To the owner. But a neighbor might report. A neighbor, and that's what started this. A lot of neighbors were complaining about this. And you could say, well, I was at the store or whatever. So they're really difficult to enforce. And I think you're going to see a big decline initially and a big decline of revenue for Airbnb.

But eventually it'll creep back. And that'll be people that are just sort of working, finding loopholes, finding ways around it. Is the argument part of this that, I mean, as we talk about a lot, rents have been at record highs in Manhattan? and there's some concern. People are buying up properties just to rent them out for Airbnb. They're sitting vacant 80 to 90% of the time, and maybe somebody would like that property as a rental themselves. I mean, is that part of the reason why they're moving in this direction or no?

It is now the reason they're moving in this direction. Rents were not a big part of this legislation when it was sort of bubbling up 2020-200. Now with rents hitting an all-time high in July, $5,600 for the average rental of Manhattan. What people say is all these Airbnbs have sucked. inventory out of the rental market into Airbnbs. This could bring that inventory back and lower rents. That's the hope. We'll see whether it works. All right. That's fascinating stuff. Robert, thank you. As always, good to see you. All right, coming up, weight loss, bringing huge gains, the maker of Wagovi, No-Go Nordisk, becoming Europe's most valuable company. We've got the details on that

next. Welcome back to Power Launch, everybody. Oil trading wrapping up for the day with another big gain, And then Pippa Stevens has the details. Hi, Pippa. Hello. Well, Brent is back above $90 for the first time since November, and that comes after Saudi Arabia. So they will extend their one million barrel per day voluntary production cut through the end of the year. Russia also said that it will reduce exports by 300,000 barrels per day through the end of the year. So what took the market by surprise here was that the extending it through October wasn't so much of a surprise traders were largely expecting that. But the fact that Saudi Arabia preemptively cut that prolonged,

along to the cut through the end of the year was what people were not expecting. Also, the coordination between Saudi Arabia and Russia speaks to that alliance still being very much intact. And there had been some worries earlier this year that perhaps there was some competition there. The relationship wasn't on this most solid footing. And so the fact that both of them announced this together means that they are in this together and they do see a floor for oil prices. Were the Russian barrels already being withheld from the market? In other words, they said they're going to cut. Is this an additional cut of $300?

or just the continuation? It's a continuation. So it's a little bit smaller. It was initially 500,000 barrels per day. So they're going to extend that export cut by 300,000 barrels per day. So they're just extending it. It's not additional, but that is on top of the cuts already in place by OPEC and its allies. And so once again, it is this coordination, and it shows that Saudi Arabia is willing to do whatever it takes.

They said they will reevaluate these cuts every month. They could deepen it or they could lessen it depending on how the market looks. Is there any failure here by the Biden administration? In other words, if the key linchpin for the price of oil right now, we know they've done everything else possible over the past year. You're going to have the empty the SPR they've done. You know, is to get the price down, then was there some alternate universe in which they were able to come in and leverage them to not go this route, right? To kind of increase production. I don't know what we have to offer at this point.

Well, and doing business with Saudi Arabia is never an easy thing for any administration, particularly now. And so I think that it just shows that this market is global and that while U.S. production is at about 12. 12.8 million barrels per day. We are pumping. We are pumping a whole lot. We're almost at peak output. That was 13 million barrels per day prior to the pandemic. So we are pumping a whole lot. But of course, every administration is watching gas prices very closely ahead of an election cycle

because that is the thing that resonates most with American consumers. Where do the Saudis want the price? Probably north of 100. I think 80 is probably the lowest that they can withstand their operations with because they have some very, very aggressive projects that they need to fund. and their output is oil. They're buying only soccer players. I mean, they've got all these projects that got a fun.

I mean, start there, huh? And, I mean, and, you know, the lower prices have really hurt and lower volumes have hurt their GDP, which has been down on a quarterly basis. But this is a longer term bet that they're saying, if we take this pain in the short term by lower volumes, but the price is above 80, ultimately will come out on top. It's clearly the gamble that they're going with.

Pippa, thanks. We appreciate it today. Pippa Stevens reporting. Let's get over to Steve Kovack now for the CNBC News update, Steve. Hey, Kelly, yeah, United flights were once again cleared for departure after a technology issue led to a brief nationwide ground stop this afternoon. United officials told CNBC it held all departing flights at the airport because of the issue. Flights already in the air were not affected. The issue was resolved in about an hour. Also, lawyers for convicted murderer, Alex Murdof filed a motion today seeking a new trial in the killings of his wife and his youngest son.

They claimed they uncovered evidence that the clerk of the court tampered with the jury by telling them not to believe Murdoz's testimony or evidence presented by the defense. The once prominent South Carolina lawyer is serving two consecutive life sentences without parole. And for the first time in 18 years, the Rolling Stones are releasing new music. The band's new album called Hackney Diamonds will debut on Wednesday during a YouTube live stream. It is their first since 2005's A Bigger Bang. Nick Jagger's still going strong at 80, guys. Wow. Yeah, they're amazing, the stones.

It is amazing that the stones are still rolling, particularly Keith Richards. There's a lot of miles on him, I tell you, but good for them. All right. Thanks, Steve. Thanks. Some kind of scientific research project in the making. Another story we're watching today is in the weight loss space,

where Wego v. Maker Novo Nordisk is now Europe's most valuable company. Joining us to discuss the CNBC's new farmer reporter, Angelica Peebles. Round of applause, everybody. Welcome back. Thank you, Kelly. Great to be here with both of you. My favorite story of the last couple of weeks was when Novo was doing so well that the Danish central bank had to cut rates or something because it was driving up their currency as a result. So massive influence. Yeah, it's amazing just how well this company has done as a result of the weight loss drug phenomenon.

And not only is it people, you know, just this initial demand people who are getting it here in the U.S., but now in the U.K., they're launching this week. And because the supply or the demand has been so strong, the company actually has to limit the quantities and the supply that they're offering. And it'll be interesting to see just how that drug does in the U.K. Because it has been so successful here in the U.S. already. How much does Wagovi cost? In the U.S., it's about $1,300 a month. And in the U.K., from what we've seen so far at pharmacies, people who are paying with private insurance as well as out-of-pocket, it's about $300 a month. So a pretty steep discount.

Drugs are always more expensive here in the U.S. Yeah. But, I mean, when they say that it's $300 there, it's $1,300 here, is that apples to apples? I mean, is $1,300 the list price, but people here are actually paying less per month? Or is in the UK is someone subsidizing that $1,000 a month? Well, so it's interesting here.

A lot of people are paying out of pocket because few insurers are paying it right now or covering it. Or it's very limited circumstances. So it's a lot of these people in the U.S. are paying it out of the month or out of pocket. But in the UK, you can actually get it for free if you are part of a weight loss program through the NHS. And so you can get it for free. And the 300 a month is for what is for what? It's for people in the UK who are not getting it under the health service?

Yes, who are. It's private pay. Private pay or out of pocket. So private pay to private pay. It's a thousand dollar difference. But would ours be if you're not? If you have insurance in the U.S., like, so $1,300 is the list price. If you and I just walked in without insurance to buy it,

what would the price be if I, okay, if United Health or one of these major companies? It depends on your plan. As we know, things are coming. And whether they would cover it. Whether they would cover it. For whatever it's being. Is it prescribed for anything besides Wagovi, for anything besides weight loss? Right now it's weight loss because Wigobi is specifically for weight loss.

However, there has been enthusiasm that more people will get access to the drug because a trial last month showed that people with heart disease may also benefit from the drug. So we have to see whether that opens up the door for more people to get the drug. And Lily's competing drug is Munjaro? And where does that stand in terms of getting approval for payments and so on and so? It's awaiting FDA approval for obesity, and then we'll have to see how insurance follows. But now it is being prescribed for diabetes, diabetes for lowering your A1C or whatever it is. that I hear on all the commercials.

Yes. I'm sure you've heard a lot of them. I'm just thinking through if Lily's headquartered at what is Indiana now, maybe Indianapolis, what's that going to do for their GDP? I mean, this is what it's doing for Denmark. What's it doing for Indiana or, you know, for the rest of the country? That company is worth $500 billion now. And they've got Alzheimer's as well.

I mean, it's an incredible success story. All right, welcome. Thank you. Thank you. Thank you. Still to come on Power Lunch. Consumers are still consuming live events. Or are they?

We've been hearing a lot about Titan spending. yet artists like Taylor Swift are still selling out huge shows. Is it just her? Is the whole industry booming? We'll talk to an insider next. Stay with us here on Power Lunch. Welcome back to Power Lunch, everybody. While concert goers have been rolling out big money for Beyonce and Taylor this summer, what about the rest of the live event business?

Our next guest has a good pulse on the industry and the state of the consumer. Kenneth Feld is the chairman and CEO of Feld Entertainment. It includes properties like Ringling Brothers and Barnum and Bailey, Disney on Ice. monster jam and super motocross world championships, which is starting its playoffs on U.S. and Peacock on Saturday. Mr. Feld, welcome. Good to have you with us. Thank you for having me.

What are the strong points of the business now? People do seem to want to go out and have experiences and spend money to do so. Yeah, the business has been great post-COVID. And I think a lot of it is for us, we have all family entertainment. There's a great demand, and we bring it to them. So we're constantly touring. We have between 16 and 18 tours out on the road now, and we're very excited about Super Motor Cross

and the first playoff at the ZMAX dragway right outside of Charlotte, North Carolina. And so we started Supercross in January. in January and it ran through May and then pro motocross starts. And they're two different sports, but there is an overlap in the riders, the teams, the disciplines are slightly different. So what we decided to do was create this league, which is Super Motor Cross, and we have the finals and the World Championship to really define who is the best rider in the world.

So the top 30 riders will compete for the biggest prize in off-road motorcycleing. And we're thrilled to open it this week. As we're looking at video of one of the motocross events, are the events indoors mostly, or stadium events outdoors, or are they on tracks that are designed, outdoor tracks that are designed for this kind of racing? For Supercross, they are in stadiums, and some are in stadiums. indoor stadium, some are outdoor stadiums, and that's 17 events. And then pro motocrosses in these moto parks all over the country, and they do 11 events,

and that's the 28, and then we have the two playoffs and the World Championship, which will be at the L.A. Coliseum in Los Angeles on the 23rd. Tell us about the relaunching of Ringling Brothers Barnum and Bailey, which I see is to begin sort of later this month. It has been dormant for several years now. What is going to be different about it and why do you think now is the time to bring it back? Ringling Brothers Born and Bailey is the icon of all entertainment in the world, really. And we took a hiatus in 2017.

We've now brought it back, completely reimagined. And it's going to be incredible. We're in rehearsals. We open the 29th of the month in Bojure, Louisiana, and then we go on a two-and-a-half-year tour. But it's something different, and there is a great need for family entertainment. All I can say is Ringling Brothers Barnum Bailey is simple fun. You'll be amazed. Every generation enjoys it, and we're thrilled to be back.

I'm looking at what appear to be some of the performers there dressed, not in what I would call what I would call circus regalia. They looked like you're trying to hip it up a little bit, make it a little more casual, a little more relatable, or is this just rehearsal footage? Actually, what you're

seeing is rehearsal footage, and they are in whatever they work out in on a daily basis. Yeah, they look like they're in Lou Lemon and so forth. Yeah. I kind of dig it. I kind of like it. I kind of like it. It's kind of their dress as they are, as opposed to

you know, more spangly costumes or whatever. You know, it's amazing. We have over, we have 18 nationalities represented from literally all over the world doing some of the most amazing things. And what we've been able to do with 75 performers brought them all together as unified groups. So you'll see a lot of people not only doing what their main specialty is, but working in a lot of other different acts.

So it's got a whole new spirit, a whole new feature. and it is truly the greatest on earth. All right. Well, we look forward to seeing it come through this part of the country. And Kenneth Feld, thank you very much. Thank you. All right, a quick programming note. You can catch the $1 million Super Motocross World Championship playoffs

starting this Saturday at 3 p.m. Eastern on USA Network and our streaming cousin Peacock. And still to come, Disney is playing hardball the company urging Spectrum users and viewers to switch to a Hulu live plan. As the media companies remain at odds over a new distribution deal, we'll talk about the implications after the break. Welcome back, Disney,

budding heads with Spectrum, encouraging their cable subscribers to switch to Hulu TV if they want ESPN programming. And Julia Borson has more. Julia, everyone seems to think this time is different, and maybe it's going to show

that Disney doesn't have the leverage it once had. What do you think? Well, this is quite a standoff here, Kelly. Disney and Charter are continuing their negotiation, which has been going on all weekend. And now Charter's nearly 15 million subscribers, they do remain without access to Disney's channels, including ABC and ESPN. Missing college football in the U.S. Open right now, Jokovic is playing on ESPN,

and Charter's customers cannot watch. Now, last night, Disney launched a new consumer-focused campaign to push consumers to its own TV bundle, Hulu with Live TV, which includes ESPN and ABC. Meanwhile, Charter tells us that Spectrum is also working with its customers to find alternative ways to watch Disney programming. Spectrum is offering customers 30% off Fubo TV for two months. That's a package that includes the NFL Red Zone and ESPN. That offer sending Fubu shares spiking today. Now, the pressure is building on both sides to settle this in time for the return of Monday night football, which is on ESPN on ABC.

And that starts Monday. Bank of America writing, quote, there's a significant urgency for these negotiations. As the longer it drags out, the more customers' charter will lose, and the less likely they are to come to terms with Disney. Meanwhile, Charter's CEO saying the company is open to giving up ABC and ESPN for good. Of course, that's what makes this time feel really different, Kelly, and that would, of course, have massive implications for Disney's licensing revenues. And it would really call into question the business model for all the media giants and Charter, could lose a meaningful number of pay TV subscribers if that happens. Kelly? That's fascinating. So if they call Disney's bluff this time, you know, if Spectrum does that,

it basically says, you know, no, we are, you can either take the rate we're giving you or you can, you can, you know, leave. Then what do you think would happen? Well, I think what will happen is that Charter would basically be saying that we're going to offer our subscribers to the pay TV bundle a lower fee. And, um, and They won't have to pay for ESPN, but they're also not going to get ESPN or any of the other Disney channels. And what they would basically be saying there is that we're going to be prioritizing the margins we get as a broadband provider. We're not going to be offering pay TV at a lower margin. Now, of course, they would like to make a deal, right?

They hope it does not come to that. Both sides say they want to make a deal here. And I think that ultimately it would be better for both of them to make a deal. But what Charter is saying is that they don't see it as being worthwhile to offer this at such a low margin. if Disney is offering much of the same content directly to consumers, really as an alternative and competing directly with them. So that's why one of the key negotiating points for Charter is Charter wants Disney Plus to be offered for free to their subscribers. And Disney's saying, hey, there's a ton of other content on Disney Plus, including a massive library of films and TV.

Why would we give that away for free? That's devaluing our content. So that's one of the key sticking points right now. But I would say a lot hangs in the balance. Yeah, fascinating stuff. Julia, thanks very much. A changing landscape. All right, new data showing, despite an economic slowdown in China, the fast food market there could be thriving. That story is next. Welcome back, everybody. Even as some are expressing concern about the economy in China, fast food companies there staying the course, projecting major opportunity. And Kate Rogers has more. Hi, Kate. Hey, Tyler. Fast food companies are really playing the long game in China. Starbucks has been in China since 1999. It calls it the coffee giant's second

home market with nearly 6,500 stores. Same store sales increased 46% in the most recent quarter as it laughed. Last year's COVID lockdowns, executives have talked about their long-term plans in China as Starbucks continues to convert consumers from tea to coffee drinkers and also battle some local rivals there. Yum China's CEO Joey Watt talked about, quote, abundant white space in China this past quarter with nearly 10,000 KFC locations in 800 cities without one. Watt also called out the opportunity for Pizza Hut to continue to grow from its more than 3,000 locations today. Three other players have announced more recent expansion plans. Popeye's planning to open 1,700 stores in China in the next decade, Papa John's and Fountainvest partners to open more than

1,300 stores in South China by 2040. And finally, Subway on a local developer plan to open 4,000 stores in the next 20 years. Euromonitor data show, Owe, overall the food market is still below pre-pandemic levels. Separate data from Ubo Z-Z-high information technology show nearly 70% projected growth from 2017 to 2024 with that projected market size hitting more than 200 billion in China. Cowan's Andrew Charles talks about the allure in Americana of these iconic U.S. brands expanding there, along with a growing middle class and younger consumers eager to dine, although, of course, the current economic climate could have some headwinds for those diners in the near term.

Back over to you. So, Kate, a lot of these companies seem to be. to want to add stores, which is another way to say they want to expand in China. What are the obstacles they face for doing so? Certainly obstacles, Tyler. So biggest challenge can be, of course, making sure you're working well with the government there. But there's also a lot of competition. There's a low barrier to entry. So Andrew Charles did warn there's a lot of competition. We saw this with Starbucks and Luckin, but Starbucks is a very different experience than its competitor, analysts have said. And there have also been, of course, geopolitical tensions over the years,

as he mentions, where companies have gotten caught up in that. But one thing to remember just on the growth opportunity, much like the U.S. fast food, often a more attainable luxury for people. An analyst talk about here in the U.S., it's often kind of the last place to cut back in a downturn because you still have to eat. So I think that's something important to consider here because, remember, the price point for a lot of these companies is quite low for the consumer. All right. Kate, thanks very much. Good to see you. Kate Rogers.

Thank you. And speaking of fast food, it's time for today's three-stock lunch. And we'll begin with Oracle today, a bullish AI cloud outlook, prompting an upgrade there from Barclays. They say it's a multi-year growth story. Here with our trades is David Katz. He is chief investment officer with Matrix Asset Advisors. Good to see you, David. Oracle, what would you do with the stock here? Well, we generally agree with that upgrade.

The stock has been one of the cheaper technology companies for the last few years. It's really been the wallflower of the group. They're finally getting some excitement with AI. And we think that that's real. The stock has gone from cheap to probably about $4. fairly value, but we think it's going to have good business momentum. Earnings estimates are coming up for this year and next year. We're very, very comfortable holding the stock, and if you like the stock, we'd also

be comfortable buying it. We prefer Amazon and Qualcomm, but again, Oracle is a good company right now. All righty. Let's turn to Papa John's Pizza. It's being moved from the mid-cap index to the small-cap index. The stock also getting an upgrade recently from Wedbush, which said the stock is just too cheap. What's the trade here, David? So in Papa John's, we'd be a seller. We think that the stock has done poorly this year. The business trends have been difficult this year. So they're going to have down earnings, down comp store sales. Yet it does sell a 29 times earning. So this is one that would be taking money off the table. If you want to have money in this space, we greatly prefer Domino's, which has earnings growth and much better long-term potential. So if you want the space, Domino's is a better choice.

It's interesting how they've been able to do that for so long now. All right, so what about United Healthcare, which sold off last week, but is rallying a little bit today? Are they poised for a better back half? We think they're poised for a really good back half. Healthcare has done very poorly this year. United Healthcare has done poorly within the group. There are some expense concerns. They have a great management team.

They are part of a health care solution. They're about 19 times earnings, which is cheaper than it's been for the last few years. think that if you have a six to 12 month time horizon, this is a really good business at a very attractive price. We like the group. We like this one best within the group. What do you think is going on with the market overall here? I mean, yields, the move today is striking. The impact on the home builders, the rotation we've seen so far in the back half where energy's outperforming tech. Now, I mean, what's really going on here, do you think? Well, you had a great rally for about five or six months. The market is treading water over the last month. We think it's going to be a

pause that refreshes and you're going to have a good last work. five months of the year. We do think there's going to be rotation. We think the things that did best like technology that melt it up are going to slow down. And we think some things that have done really poorly like health care, like financials, like utilities, are poised for a much better second half. We think right now yields are at the higher end of where they're going to be. So we do like three to seven year bonds at this point. And we expect yields ultimately to trend lower. And we think oil prices are probably at the higher end of their range right here. Interesting. Well, that would be some nice news. Yields are going down. Oil prices are going down. David, thanks so much for your time today.

We appreciate it. Thanks a lot. Have a great day. You bet. Same to you, too. Closing time is next. Welcome back. Wow, Tyler, four and a half minutes. This is a luxury. How are we going to do this? Four and a half minutes here? We might have to get through 10 stories. And there are a bunch more headlines that you need to know about right now. So let's get right to it, starting with that live entertainment theme we discussed earlier in the show. Today, Wolf Research upgraded Formula One Series C, the stock, highlighting the value. of monetizing luxury global sports. Their conviction is about the magnitude of F1's opportunities to upgrade race, productivity, media rights, sponsorships, and the Concord Agreement.

Wow. I don't know the Concord Agreement, but what I do know is that F1 and TV viewing are just going like this. And they have the Big Vegas race this year that everyone's been talking about for months and months and months. It is an incredibly valuable global property and obviously something that everybody wants to be a part of or lots of people. That said, there is an interesting tieback to the Disney story we were just discussing with Julia,

which is who is ultimately the payor for all of these sexy media properties, whether that's ESPN or whether that's, you know, Formula One or something like that. You know, I feel like it's still ultimately going to end up in the hands of big tech somehow, YouTube or some of the other. Like, they just have the pockets. And if we're going in that direction, this could be an interesting moment, both for Formula One and also for Disney. I'm kind of an interesting marker a lot of the way. Yeah, the money has to come from somewhere. And if it's not going to come from cable subscribers, it may well come from the likes of Amazon or Apple. All right, slowing inflation is hitting corporate profits.

When inflation goes up, it can do wonders for companies' profits. But when it starts to cool, as it has been over the past year, the wonder goes away. The Commerce Department last week reporting that after-tax U.S. corporate profits were down 9.4% from a year earlier. It's kind of axiomatic. When inflation rises, companies are raising their prices. and that can help boost their profits. I love this because it's one of these wonky data points that doesn't get a lot of day-to-day attention, but tells you. You like the won't you?

You know, some of these really tell you where the employment trends are going. When Challenger job cuts were $75,000 last week, triple what we saw a year ago and things like that, corporate bankrupties are on the rise. I mean, this is the leading edge, so-called, that you want to watch. So are higher mortgage rates, which are creating a golden handcuff effect with nearly 82% of homeowners feeling locked in by their existing. low rate mortgage, according to data from Realtor. With most saying the magic number to move in terms of the mortgage rate for them would be 5%. And that is a far cry from where we are right now.

Driving around my town, which is a good real estate market, there is nothing for sale. There is no inventory. Now, we're going into a seasonally slow period. People generally like to get into their house in the summertime, when they have kids, especially, and so forth. Our town has sent a mailer around. Here's on the properties we've sold. The average days on the market this year has been 19.

The average home is selling for 105% of list price. And home prices are on the way back up. It's crazy. All right, Warner Brothers Discovery adjusted its full year of 2023 expectations. And as the writer's strike keeps production halted, the company expecting its adjusted earnings to take a hit of $300 million to $500 million as productions have really come ground to a halt. And obviously it makes it for a much tougher in mind.

for the entertainment companies to do business. It showed up in the jobs report last week, that those kind of positions were in decline last month. This has gone on so much longer, certainly than I expected. But I understand the stakes now when they look at the headlines every day and see the auto workers and all of these different people getting these huge pay increases, but also with what's it saying? What we just talked about? Who ultimately, if you have a hot new property, a show on, you know, Netflix, how are you

measuring who watches it? How are you getting a cut of that? I mean, they have to figure this out. It's a really tough issue. And like Julia said, Labor Day was a big day. deadline, and now that's come and gone. And women are fueling China's box office. It's not just the Barbie effect here. A morning consult survey finds that women are showing up to movies there in big numbers. It marks a cultural shift for the country and a new entry point for maybe some

Hollywood studios. Women account for less than half the region's population, but 52% of China's monthly moviegovers. Oh, that's very interesting. Do not deny. What did you learn while you you were off? What did you learn? I still didn't get everything done. There's never enough time in the day. No, there's not. You know, back to school is, I didn't have any supplies this morning. Yeah. And then the bus didn't show up.

You know, it's good to be back. It's good to have you here. Thank you all for watching Power Lines. Closing bell starts right now.