Power Lunch - Record Rally Rolls On, Red Sea Attacks 12/18/23

Episode Date: December 18, 2023

Markets are starting the week off with gains, following 7 straight positive weeks from the major averages. We’ll talk to a market watcher about the biggest thing to watch in 2024.Plus, oil prices are rising as tensions heat up in the Red Sea. BP now says it will stop sending tankers there. We’ll get the key details, including all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good day, everyone, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson Markets, starting off the week with some gains following seven straight up weeks from the major averages. Wow. We will talk to one market watch about the big thing to watch for in 2024. We are also watching oil prices very closely today. Up 3% as tensions heat up in the Red Sea. BP will now stop sending its tankers there. We'll have more on the fallout from that coming up.

Plus, U.S. steel is being sold to a Japanese steelmaker for nearly 15 billion. U.S. steel at its highest levels now since 2011. This is a stock that had been in the Dow Industrials for 90 years now being sold. And we'll see if that all goes through. But let's also check out shares of VF Corp. The clothing company behind vans, North Face, they say they've been hacked and it will have a material impact. They are as a result right now unable to fulfill some orders. The shares are down 7%.

Amon Javers will have more on this latest cyber attack. All righty, let's start with the markets. Our next guest says the economy will continue to face a tug of war between a golly lock scenario and an impending financial reckoning. And that now is the time to buy stocks that can address societal challenges. Turning us now is Nimret Kong, Chief Investment Officer at North Star Asset Management, which the firm is listed among CNBC's latest top 100 financial advisory firms of 2023. Nimret, welcome. Good to have you with us.

Thank you. in the house. What do you mean by an impending financial reckoning? That doesn't sound so good. And implicit in the idea that, you know, it's a time to buy stocks, there's a goalie locks, is the idea that maybe market participants are being a little naive about investing conditions. Right. I mean, since 2020, we've continued to see elevated uncertainty in the market. We think we're in the age of a poly crisis. A poly crisis? Yes.

What does that mean? That means that there are a number of secular forces, monetary, economic, environmental, social, all of these factors are coming together in ways that are often complicated and we cannot anticipate them ahead of time. So these forces come together and create unexpected shocks and volatility in the market. I mean, it might seem really far-fetched, Tyler, but just in the last three years, you know, we've had a global pandemic, geopolitical crises, you know, monetary cycle that's shifted from 40 years of easing to normalization. So we don't really know where the next natural disaster is going to come from or how this all plays out. You have climate concerns.

You have sort of a lack of social cohesion, if I might use that term. I don't know whether that figures in their political divide. in many countries, lots of stresses there. And you think that that is part of the reckoning that is going to come in 2024 and beyond. But does that mean trouble for the markets ahead necessarily or just more volatility ahead? We think more volatility.

You know, the tug of war continues on. 2023, the constant tug of war between what is Fed's next move and is it going to lead to a recession or is it not? We see that continuing on, but the medium turn, the point is that we have all these forces that keep coming together, and we don't know how really all this plays out. Just today, the news around Red Sea and how that's going to impact the supply chains. So just elevated uncertainty. You have some picks here that make me think of my local municipality, especially on a day like this.

You've got Xylem, obviously, the water, they make pumps and valves. I think you've got Badger Meter. You've got Veralto. So, I mean, tell us why these companies and what's the strategy behind kind of looking here for 2024 for your clients. Yes, Kelly, definitely not your household names, not the most exciting, sexy part of the market. But these stocks play a vital role in our water infrastructure and are critical. They provide products and solutions that are so important to making sure we have access to safe, clean water. You know, just EPA estimates that over the next 20 years, U.S. needs a major water upgrade cycle.

And there's going to be somewhere between 600 to 700 billion of infrastructure spent. These companies benefit because they play in every part of the value chain. When we talk about xylem, that's pumps and valves and used in wastewater treatment and by municipalities. So they're playing that role. And then you get into a badger meter, which is a small cap company. less than $5 billion, but they make water meters that are used by utilities. And there's a major upgrade cycle moving from your old mechanical meters that somebody needed to come and check and take the reading to smart meters, where you're real-time monitoring and understanding

what that looks like. And it's kind of an interesting day to talk about that when we're having record rains and floods here, right? And then all the way to Viralto, which is the latest spin hop from Danaher, and is involved in monitoring the water testing, monitoring the quality of water. How does you mentioned what has been going on in the Red Sea with the Houthis firing on merchant ships, oil, not necessarily oil tankers, but merchant ships, containerships, and others. Do you perceive that to be an ongoing threat to commerce and something that the markets really need to pay attention to? Or is it sort of all already factored in to where prices are?

Tyler, it's not just any one incidents. Yes, the incidents today is about the Red Sea. Maybe tomorrow will be something else. There'll be, you know, other natural disasters we have to contend with. It's about the fragility of the supply chains. And being very focused on what we own. We are getting exposed to companies that over the long term are playing in vital part in solving these societal challenges. Yeah, and if these ships have to go around a longer route, it actually.

add something like 6,300 extra kilometers, which means crew costs, the transportation costs go up and so on and so forth. Right. I mean, that's part of the risk here. Right. Beyond the disruption of supplies. Well, Nimrod, thank you very much for being with with us. We appreciate it. Nimrid Com. Thank you. And speaking of that instability, let's talk about the price of oil climbing today after BP says it won't send tankers through the Red Sea. Pippa Stevens has been following this story for us. She joins us now with the very latest, Pippa? Yeah, that's right, Kelly. Well, BP joining fellow energy name Equinor, as well as container shippers, Marisk MSC, and a growing list of other names, opting not to send vessels

through the Red Sea as Yemen's Houthi Militin Group continues its attack on commercial ships. The Red Sea is a vital shipping artery, connecting the Suez Canal at the north to the Babel Mandib straight down south, and it's a key trade route for oil, which is why we're seeing prices rise today. About 12% of global seaborne traded crude, past, through the region, including the Sumed Pipeline, during the first half of this year, according to the Energy Information Administration. At 9.2 million barrels per day, that's about 9% of daily global demand. Additionally, about 8% of worldwide LNG, or 4.1 billion cubic feet per day,

passed through the waterway. The Suez Canal Authority said yesterday that since November 19th, 55 ships have rerouted via the Cape of Good Hope, while more than 2,000 have still passed through the canal. energy trade flows have shifted since Russia's invasion of Ukraine, meaning the canal has taken on greater importance. Crude traveling north through the Suez Canal is up 60% relative to 2020, as Europe imports more oil from the Middle East. Meantime, Russia's southbound oil traffic is up 30% relative to 2020, as it sends more crude to India and China. Now, for more on the shipping disruptions in the Red Sea, be sure to catch Mersk CEO Vincent Clark tomorrow at a

11 a.m. on CNBC's money movers. Kelly and Tyler. Pipa, where would you say this goes from here in terms of escalations? I mean, now that we're seeing major companies, does this put just put a lot more diplomatic pressure on the White House to try to come to some sort of solution here? I think we will certainly see some sort of response from the White House and definitely some statements. But I think at the moment, it's not having that much of an impact on crude markets, which is why we're not seeing a larger jump today. But I think, this is just another example of ways that trade flows have been altered. And if you think about

what's going on, whether it be Venezuela and Guyana and then also the builds up at the Panama Canal, as they, as they work through record drought and low water levels there, it's just another thing that can impact global energy markets. And of course, next year is an election year. And as inflation now has started to ease, a jump in oil could certainly start to reverse that narrative. All right. PIPA, thank you very much. We appreciate it. PIPA Stevens. For more on how the situation in the Red Sea is impacting energy, bringing Kevin Book, managing director of research at Clearview Energy Partners. Kevin, welcome to you. Just talk us through kind of how serious a situation you think this is.

Well, you can see the market response now. It was odd because a week ago when we wrote our first note on this, the market didn't seem to be pricing it in at all. One after the other, we're seeing operators deciding that they're going to take longer routes. Longer routes introduces latency, but it doesn't necessarily mean that crude doesn't get to market. On the other hand, if you introduce enough latency, you start to run into questions of choke points at the Suez Canal, that northbound traffic that Pippa was mentioning, adding to it, further congestion. And it raises, I think, the broader question of whether or not the market is thinking about geopolitical risk properly at this point. We seem well-supplied, worried about demand weakness,

maybe sleeping through supply risk. Could the United States, with its carrier strike forces, deployed in that part of the world, take out the launch points of these Houthi rebels who are sending missiles or drones to attack these ships. Could they do that? And who would favor that and who would be opposed to that? Tyler, not only could they do that, but Sentcom posted a picture of an F-18E superhornet fighter landing on the deck of USS Eisenhower adjacent to those very targets. Doing that would solve the problem in the short term potentially, but create other problems that could be riskier from an oil price perspective and otherwise.

The kingdom has been working on detente with the Houthis and trying to get peace in Yemen. This could potentially disrupt that fragile peace. It also would be a message that Iran might decide opened up the opportunity for other attacks on other regional transportation targets. In other words, Iran is backing the Houthis, and they would view an attack against them as against their vital interests. Well, Iran has kept their distance and probably very intuitively, we all know that every official in the administration who's spoken on this usually mentions them as the Iran-backed Huthis. But on the other hand, they haven't directly engaged. They might not directly engage, but they have proxies they can deploy in other ways.

And we are now at a point where it is transportation that is at risk, but not production. There's detente between Riyadh and Tehran, Chinese broker's detente. It may be fragile, though. And testing that detent is something that I think that the kingdom probably wouldn't want to see. And that was a hard one detent because the Saudis and Iran have collided over the Houthis in the past, correct? Absolutely. Kevin, so the Houthis are basically saying, no, no, no, we're only targeting Israeli ships moving through the Red Sea. But what should basically big corporations do even if that is the case and if they're allowed to continue those kinds of attacks?

And how much does that affect, not just the oil markets, but global commerce? Yeah, Kelly, I'm not sure you can just take the interpretation that because they say they're only going after Israeli ships. It's only Israeli ships. First of all, they've said that. They've said that nexus to Israel, much like our U.S. financial sanctions, trying to essentially make toxic anyone who does business with Israel. But if they're working from old databases, as your own Laurie Ann LaRocco has written, then it very well could be a problem because ships that are no longer Israeli. Nexus could be targeted. But also, it seems like it may be broadening. It may be trade writ large. And so from a risk management perspective, it's very hard to see until there is some task force

stood up or some mechanism that regulates the risk more obviously than just USS Carney shooting down any drones that it can hit. I think a lot of companies are going to be taking steps to be prudent. One of the ships that was hit was a Norwegian-owned vessel that was apparently carrying fuel stocks for fuel to Italy. It had nothing to do with Israel. Yeah, this is one of those wrong place, wrong time kind of things. I think a lot of operators, ship managers, don't want to be in the wrong place. All right, Kevin, thank you very much.

Kevin Book. We appreciate your time today. Thanks for having me. Thank you. All right, coming up, Southwest hit with a huge fine over last year's travel disaster. Will this set a precedent for airlines and avoidable delays in the future? And Apple losing a patent case regarding the Apple Watch. What that means for the company coming up on Power Lunch.

Welcome back to Power Lunch. We have several transportation-related stories on our radar today. So let's bring in our Auto and Airline industry reporter, Phil LeBow, for a power rundown. First topic, Phil, welcome, by the way. But is Southwest hit with a huge fine for the chaos that occurred last year between Christmas and news? years, thousands of flights canceled or delayed. Tell us about the size of the fine and the other financial consequences for Southwest. Well, it's substantial, Tyler, what you're looking at here, and here's basically what the DOT announced this morning, $140 million fine that it levied

against Southwest. 35 million of that will be going to the Treasury Department. The remainder of it will be going into various pots as part of paying out the fine. But when you look at this from Southwest perspective, this is all about the 2022 holiday meltdown. And remember when that meltdown took place, there was a number of, more two million people who were stranded, 16,000 flights that were canceled. By the way, the $90 million delay in the voucher fund, that's the key part of this civil penalty that was announced today. Here's the Transportation Secretary talking with us this morning on Squawk Box. Southwest is going to be leading the industry, if only because they've been ordered to.

And we want to see how the industry and the market respond to that. You know, as important as that cash fine was, we didn't want the majority of this to be in the form of dollars going to the Treasury. We want most of this to be dollars going back to customers. And that's what the 90 million is about. Altogether, Southwest taking an impact of $1.1 billion for that, meltdown last year. You take a look at shares in what they've done in the last year. Tyler, remember last week, we were with Bob Jordan, the CEO of Southwest Airlines in New York, and he said, look, we've made a number of changes. We embraced the fact that we dropped the ball a

year ago, and we have corrected the problems that were exposed during that meltdown, and he vows it will never happen again. What was that? Remind me, what was the origin of the snafews that took place? Was it computer? Well, it was weather. It was weather. And while it hit all airlines hard a couple of days after Christmas, all the airlines, except for Southwest, were able to rather quickly get back on schedule. Southwest was unable to do that, and it just had a cascading effect. Part of it is because of the way the airline is set up with its point-to-point schedule. But the other part of it is that it had not made the investments, the IT investments in order to do scheduling to get the airline back in shape as quickly as it

should have. Those are all the investments that the airline has made since that melt. down. Plains and people in the right places, basically. Yeah. Any big impact from this storm yet, Phil? Fortunately, I guess it was a couple days ahead of the real heavy travel season, yeah. Look, I know I've talked to a number of people in the newsroom. It's a mess out there. And I feel for you guys and what you're going through, if there's good news with this storm, it is the fact. And as we take a look at a shot of Philadelphia's airport, it's rain primarily, though there are some markets in the Northeast that are also getting snow. Rain, the airlines, and the airports can deal with relatively easily.

You know, things move a little slower, but they can handle it. Look, only 509 flights have been canceled today. Not fun for people who are on one of those 509 flights, but relative to when we see a big storm hit the Northeast, this is not huge. And if this is the worst of what we see over the next week and a half, we should have a fairly smooth holiday travel season. But you know how things can change with the weather, guys? No, that's absolutely true. It was 60 degrees when I got up this morning. So at least it was not icy conditions, which certainly would have compounded the problem. The last topic is Trevor Milton. He's the CEO of Nicola Motors, a Nicola Motors, a sentence in New York today, convicted on fraud charges for misleading investors, a stock that was a high flyer several years ago now, trading for less than a buck. Tell us what was the sentence he got. Well, the sentence came down within the last hour, and the judge gave him four years in prison, a $1 million fine.

He'll also have to forfeit some property, exactly what property has to forfeit. I'm not sure at this point. We haven't heard the final details from the courtroom. Trevor Milton was a little teary-eyed in court when he was talking to the judge, and he said, look, I did not intend to harm anyone. The judge said, I don't doubt your sincerity, but harm is harm. What you said was wrong. What you said was not truthful. And as a result, people were harmed in some fashion. And as a result, he is going to be spending the next four years in prison. At least that's the sentence from the judge. Keep in mind, he also owes Nicola $165 million that was handed down in arbitration a couple of months ago. This was for securities fraud and wire fraud. Correct, Phil. Correct. Two counts of wire fraud, one count of security fraud. And this was all over CNBC.

really all over all of the financial press back in 2020. They said that they would have an electric pickup truck. The plans were not what they said they were going to be. They said that they had a hydrogen-powered semi that was drivable. Well, the video shows that it was coming down a hill. It was not drivable. Those kinds of things. That was at the very beginning of what led ultimately to him leaving the company

and then being charged for securities fraud as well as wires fraud. Their stock is basically a zero. Is their business basically a zero? It's not completely a zero. Look, they are, they've had some manufacturing issues. The pickup truck is gone. That's dead in the water, has been for some time. They are working on a hydrogen fuel cell powered semi-truck, and they started to get some

orders. Then they ran into some manufacturing issues last year. They're trying to get that rectified right now. and that's the challenge that they're facing. And the stock now, as you see, it's trading for under a dollar. So clearly investors are not optimistic about the prospects here for Nicola. All right, Phil. Thank you very much. We appreciate it. Phil LaBalle. You bet. Coming up, Stopwatch. Apple reportedly halting sales of its smart watches as it prepares to comply with a controversial U.S. import ban.

We will get you all the key details when Power Lunch returns. Welcome back to Power Lunge. Apple loses a patent case and has to stop selling certain models of the Apple Watch right now. As a result, Steve Kovac is joining us to explain. Steve, did this come out of left field? Not left field. This has been kind of kicking through the process, but it is an unprecedented move. And Apple is halting sales of its two newest watches after losing a patent dispute with a health tech company called Mossimo. Apple stopped selling the Series 9 and Ultra 2 watches to United States customers, online this Thursday and in stores on Christmas Eve, so it likely won't impact Apple's holiday quarter sales too much. Now, in October, the International Trade Commission placed an import ban on Apple watches that have a blood oxygen sensor. The ITC says it violates patents from Massimo, which also makes a smart watch with similar features. The Biden administration, though, has until Christmas Day to reverse the ITC's decision. If it doesn't, Apple says it will appeal the ruling

and work on technical changes to get devices to work around patent issues. But it won't sell the effective watch models in the U.S. during that time. Now, Apple's wearables business is a growing segment in the company's hardware division, includes products like the Apple Watch, AirPods, and early next year, that Vision Pro headset. The segment that includes wearables brought in over $13 billion in the holiday quarter alone last year. So this is, you know, not a small business for them, but not important as the iPhone. phone. If Apple is forced to or chooses to fix these watches, how does that happen? Is it as simple as a software download to the watch? That's unclear. Yeah. Or if they, right now they're saying they're

still making them. Keep in mind, I want to make this clear. This is only the United States, and it's an import ban because these watches are made overseas and brought back in. So those, you know, if you're outside the U.S., you can still buy it, but that's unclear. Is it a software update? Is there something physically they have to change in the hardware to work with So I have to pause the sale while they make new watches that don't have this feature in it. And that might comply with the U.S. like maybe there's a specific U.S. version. We just don't know at this point. And in the meantime, Apple tells me they're going to go through the court process and the regular appeals process,

assuming the Biden administration doesn't change its mind by Christmas a week from today. This is really bad timing for them because people are literally making these decisions. So this is all about the blood oxygen sensor? Right. So this is the, these are the newer watches. is you can still buy the Apple Watch SE, which is kind of a cheaper and stripped down version of the Apple Watch. But the latest and greatest models, the one that just got announced in September and just started going on sale, those will not be sold. So, yeah, you were talking about, look, Apple's trying to return to top line revenue growth again.

Apple Watch, huge accessory, only about a quarter of iPhone owners have an Apple Watch. So they see a huge runway in front of them to get more people buying Apple Watches. This hurts their ability to do that. You can still buy the cheaper one, just not as many features. But if you want the latest and greatest, including that Ultra 2, which is way more expensive, do it before Christmas Eve, at least in stores. And then beyond that, it's anyone's guests. Seems like a rare mist up by the company, no?

I mean, they've been fighting this. And, you know, they would say their messaging around this has been, well, Massimo has their own smart watch. It looks very similar to our smart watch. They didn't file these patent disputes until after they did their own smart watch in order to get, you know, juice up their own sales. their allegations. By the way, their CEO, Mossimo CEO is going to be on closing about overtime with John and Morgan later. So it will be interesting to see, you know, more from his side of

this because Apple is also suing them. If you look at the Massimo watch, you know, I have an older watch here. It looks very similar. Square, you know, the dial on the, the buttons on the side and so forth. So Apple's saying, well, look, they're claiming, you know, we copied them. Well, they copied us. They just released a smart watch that looks just like ours. So it's, it's pretty, it's pretty Harry, and by the way, new Apple Watches are going to come next year. It's going to be the 10th anniversary, believe it or not, of the Apple Watch. There are reports that they're going to plan something bigger, add more features to it. Blood oxygen is one of them. That's going to, you know, that's a mainstay that's been around for the last few years. All right, Steve, thank you very much. Thanks.

Appreciate it. All right, let's go over to Leslie Picker now for a CNBC News update. Hi, Leslie. Hi, Tyler. The U.S. and Finland signed a defense agreement in D.C. today in a move that's expected to raise tensions between Finland and neighboring Russia. It gives the U.S. military access to 15 facilities and areas in the country and will allow Washington to store military equipment and ammunition there. A legal battle over who should pay for protests surrounding the Dakota Access Oil Pipeline is headed to trial. North Dakota is trying to get the federal government to foot the $38 million bill that stemmed from the demonstrations. A judge denied the government's motion to dismiss the case, putting the trial,

on track to begin in mid-February. And good news for travelers, processing times for passport applications are back to pre-pandemic levels. Routine applications are taking about six to eight weeks, while the expedited service is around two to three weeks. You may remember during the pandemic, wait times went as high as 13 weeks as the State Department dealt with staffing issues. I can validate this firsthand, got some passports from my kids. They came way faster than we expected, Tyler. Yeah, I got mine. I had to renew mine earlier this year, and it came quicker than I was expecting. So good. Glad to hear it. Leslie, thanks. Good. All right, still ahead. Retail hack attack, shares of North Face and Vansmaker VF Corp falling falling

falling after disclosing a cyber attack could hurt its holiday fulfillment. We will get a live report when Power Lunch return. Welcome back to Power Lunch, everybody. Shares of VF Corp falling sharply today after the company disclosed a cyber attack. that has crippled its operations. Amon Javers in Washington now with more. Hi, Amon. Hey there, Tyler. The company says it first detected unauthorized activity on its systems back on December 13th,

and it's been taking steps to contain the breach since then. VF Corporation, which is the parent company of such brands as Vans, the North Face, and Timberland says a threat actor has encrypted some IT systems and stolen data from the company, including, they say, personal data. The company also says, it is working to bring its systems back online now and that its retail stores globally are open

and consumers and customers can make purchases, but that the company is experiencing what it calls certain operational disruptions. And while customers are able to place online orders, the company's ability to fulfill those e-commerce orders, they say, is limited. The company says it is engaged outside cybersecurity help and is notified and is cooperating with federal law enforcement. As it happens, Tyler, today is the first day of new disclosure rules around cybersecurity at the SEC. Rules that we told you about back on Friday, experts tell me they think we will see more of this type of filing from companies who are now facing a lower threshold for disclosure and pressure to make incidents like this public in a matter of just a few days. So we'll see whether we see more of these rolling out over the week. You mentioned earlier that in this particular case, personal information may have been compromised.

Is that personal information of customers or personal information of employees of VF Corp or what? It's presumably personal information of customers, but I don't believe in the disclosure they specified whose personal information it is. I guess it's possible that that's employee personal information. All we have to go on here is the disclosure filing by the corporation. I emailed them asking follow-up questions and they said, you know, we're standing on our statement here. So what we have to go by is what we have to go by. But what a tough time for an e-commerce retailer to be hit with a cyber attack that garbles its ability to fulfill orders just before the Christmas holiday. And you can imagine that from the cyber attackers point of view, that's exactly why they'd want to do it right now.

Yeah. So you said this is really goes to their ability not just not to take orders or to process payment for orders, but to fulfill them. In other words, I guess there's a transmission point where you take the order and it goes to the. the fulfillment center and they package it and send it off on its way. Any idea as to who might have motive to do this and what the, who the malfactors may be here? Yeah, we don't know. The company is not disclosing that right now. They're not even disclosing necessarily that this is a ransomware attack, although it smells like one to me, Tyler. This is the kind of thing that you would do locking up a company's IT systems, jamming up their ability to fulfill orders the week before

Christmas and then demanding a large payment to undo that. The company is silent on that piece of it. We don't know if a ransom has been demanded here. And we don't know if the company intends to pay one or not. But you can imagine the sense of urgency that they feel inside the company to get things moving again in a moment in a week where, you know, time is money. And every minute that they're not able to fulfill orders, they're presumably paying some cost for that.

So the question is, if you're sitting in the C-suite, do you pay a ransom? if it's demanded, how much are you willing to pay? And how do you calculate all that as you're working through with your cybersecurity experts and presumably the FBI in the other room helping you to solve this crime? Are you going to send more money to these criminals in order to get your systems back online? It's a tough conversation for anybody. That answers one of my questions, Amon, which was obviously if someone, if there was theft, law enforcement would be involved. So that is your expectation here that they would be to help these companies with the cyber attack. My other question was going to be, since you follow this much more closely, but it feels

like between Klorox and BF Corp, where there's more high-profile incidents in the past six months, is that just my sense or have things picked up? Yeah, I think things are picking up. I mean, generally, a lot of folks told us that they saw a slowdown nearly two years ago now right after the Russian invasion of Ukraine

because there were a lot of Russian cybercriminals and a lot of Ukrainian cybercriminals who were sidetracked by that, but a lot of that activity has picked up either relocated or just gotten underway again. And we seem to be back to a quicker pace of cyber attacks. The great thing from a reporter's perspective about these new SEC disclosure rules is we'll be able to track this in real time now. We'll see these disclosures.

They have to put these 8Ks out within four days of an attack. So we'll see these disclosures in real time. And we'll be able to sort of establish a dataset to really figure out how often public companies are getting hit and maybe be able to make an estimate about how much they're paying and ransoms as well. All right. Amen, thank you for following this for us. we appreciate it. You back. And we hope there aren't any more incidents like this to come.

But speaking of retail, Walmart helped shoppers battle inflation by offering cheaper groceries. Now it wants to do the same with diamonds with one important catch. We'll explain its latest bright idea after a break. Welcome back. While the markets have had a great fourth quarter, the lead-up to the holidays hasn't been so great for Walmart. The stock is down more than 3% since October 1, making it 28th out of the Dow 30 components over that span. A lot of that on worries about how Walmart will handle a looming economic downturn if something like that happens.

Melissa Repcoe joins us now with a look at perhaps an unexpected place Walmart is going in the name of diversification. And it is jewelry and it is diamonds. And I had no idea Walmart's sold diamonds. But these are a certain kind of diamonds. They are lab-grown diamonds. And this is really a trend that has cut across a lot of jewelers. But as you mentioned, it's surprising to hear of Walmart leaning in. to this category. And the reason why is because lab-grown diamonds have put diamonds within its

price point. So it's sold clusters of natural diamonds in the past to kind of make it look like a bigger diamond. But now it's able to carry its largest diamond yet, which is a one and a half carrot diamond engagement ring. Of course, this is peak time a year for both buying jewelry and also buying engagement rings. And it's a time when Walmart's trying to capitalize on that value-minded consumer and try to translate it into other categories. How much less? Does a lab-grown diamond cost than a naturally mined diamond? So in the case of that one-and-a-half-carat diamond at Walmart, which will be its largest, it's about $700 for retail price and for the lab grown.

And if you had gotten a natural diamond, that would be about $6,000. So you can see how dramatic of a difference it is. And how much big... So we talk about the sort of trend of lab-grown diamonds, which is a huge one. and it's really going mainstream. How important is this category for Walmart? You know, if everybody soon jumps on this trend, are they going to try to just be a first mover,

just make it advantageous to bring people in this time of year? Last year, they experimented with this, and they rolled it out because they saw the popularity with these diamonds. They said in rural areas and some suburban areas, they're seeing a lack of competition with jewelers, and so they can capitalize on some shuttered or struggling malls and sell people engagement rings. They also spoke about how shoppers,

are looking for different things. So some of those Gen Z shoppers may not care if it's a real, more of a traditional natural diamond, they might just want a bigger diamond that resembles what a celebrity has, and that means a bigger stone for less. So they see this not just being something for the holidays, but really beyond as they lean into other categories

in general merchandise. Have you ever seen one of these lab-grown diamonds and compared it with the real thing? In other words, could I tell the difference with my untrained eye? You could not. I can't. I can't.

It looks the same. It looks the same. It looks the same. And that cuts across the board. That's not unique to Walmart. It's really something that if you go to Pandora, if you go to Brilliant Earth, this is a pattern that a lot of jewelers are tapping into. They'll offer both.

So they'll say, you know, what budget are you on and how important is it to get a bigger stone? And then maybe you would pick one over the other. Anything else we should be watching out for it to come from Walmart as it navigates this kind of tricky retail period? Going into next year, one theme that we've already heard from CEO, Doug McMillan, is that deflation is kicking in. And as the biggest grocer, that's going to put pressure on them to sell more units.

And that means selling more units of not just diamonds, but clothing and a lot of other items. Because if the price of eggs and milk continue to go down as they're seeing, of course, that's going to make their top line look weaker. And so it's going to cause them to look towards growth initiatives like this. All right. All right. Thanks very much. Melissa, we appreciate it. Thank you. All right. Still to come, revving higher shares of the online dealer Carvana, continuing their monster run,

higher today, and more than 1,000 percent. Did I say that right? A thousand percent on the year. Is there more room to run, or is it time to take the exits to profits? We'll ask our trader in three-stock lunch. That's next. Time for today's three-stock lunch. And here with our trades is Ryan Belanger, founder and managing principal at Claro Advisors. First up is DocuSign shares down 3% today. After jumping Friday on reports the e-signature company tapped advisors about a potential sale. What's your trade here, Ryan? Welcome with DocuSign.

Yeah, thanks. I like DocuSign. I mean, it's had a nice run this year. Obviously, there's some speculation of the takeovers. But, you know, anytime you're a verb, that's a good thing. You know, we Uber places, we Google something, and you docusign something. And, you know, that's powerful branding. I think they're going to try to capitalize on that with this potential, this takeover target.

And I think investors are speculating that some deal will get done. They've got good growth this year. And I think they're looking to capitalize on that. Post the pandemic, you know, really was great for the business. And now they're just trying to see if they can propel it to the next level. The only thing I'd say about that, Ryan, is that I've had people tell me I'm going to doc you sign something and then send me a different piece of software. It's like saying here's a Kleenex and they give you a Kirkland. Yeah, yep, it happens.

All right. Let's talk about Snap then, maybe a little bit harder to impersonate. Guggenheim upgrading the social media company to abide. The shares are up a percent today. Do you like it? Yeah, I'm not sure about this one. I know it's just wildly popular amongst the younger crowd. To me, it's an advertising company, and I'd like to go up the food chain a little bit

if I'm to play in this space. You know, it has met their, you know, it's beaten earnings the last couple of quarters, which is nice from an investor perspective. But, you know, the stock, I think it's almost doubled in the last couple of months. So it's already run up quite a bit. I think I might have missed a boat on this one. All right. Let's move on to the third stock on our list today, and that is Carvana.

Shares of the online used car retailer are up nearly 5% today and soaring by over 1,000% year to date. JPMorgan upgrading the company, citing improved cost cuts and productivity. What's your trade on Carvana? And have you missed the moment here? I mean, it would seem like you have. Yeah, definitely. This is not one that has been on our radar screen, you know,

a small-cap niche player here in a space that, you know, is somewhat speculative. This is a new business for a lot of people. Most people still like to go to the lot to buy a car. And I think more and more people are warming up to the idea of buying their cars in an alternate place. But the stock has really performed so well that it'd be, really tough to jump in at this level. I think as an investor, you'd kind of wait and see what

settles out over the next couple of months. And yet, it is up 6% today, three months up 5%. So it obviously had a huge gain early in the year. What are your thoughts more broadly as we wrap up this year? Can 2024 be anything like as good as 2023 has been as interest rates have cooled? Yeah, I mean, certainly anything's possible. I think that the market's really priced in these rate cuts that was somewhat of a surprise. I mean, it was just a couple of months ago. The market was forecasting two cuts next year. Now they're pressing in five. A year ago, we're already going to be cutting rates at this point. So what I've learned is the market is really not very good at predicting where interest rates are going to be. And I think for stock investors,

you really, you know, that shouldn't be what the forecasting tool that you're looking at. I think you've got to look at profitability and earnings. And I think earnings next year could be somewhat challenged. They're poised to grow by double digits. And I think, you know, given where rates are and the financing cost of a lot of companies, you know, those debts are still being paid off and it's going to take a long time to roll that debt. So I think I'm watching profits a little bit more closely. I was much more bearish for this past year.

And so, you know, I'm hopeful for next year. I don't want to be the guy that picks up the last quarter before the steamroller comes through. Yeah. All right, Ryan, thanks very much. And happy New Year on that note. We ended. Ryan Belanger. Thank you.

Happy New Year. So many headlines to still get to so little time. We'll power through as many as we can in closing time next. Welcome back, everybody. About three minutes left in the show. Several more stories you need to know about. So let's get right to it. We are starting to learn that brain signals might be responsible for the heart disease benefits

of popular weight loss drugs like Ozembe, Weigovie, and Zepbound, according to Bloomberg. These drugs work in part by mimicking the GLP-1 hormone, which moderates appetite. But a new study shows the drugs also activate an anti-inflammatory response in the brain, which leads to health benefits beyond just losing weight. And maybe Tyler gives you a glimpse of a market beyond weight loss. I think this has been one of the hopes of this class of drugs, is that there was some sort of coronary or cardiac benefit that attended to them, and that then, and therefore, doctors could either prescribe them off-label for people who have cardiac risks

or eventually that they may be approved and therefore coverable by insurance for people. And I still thought a lot of the benefits were, you know, downstream from the weight loss, not realizing that perhaps it's in and of itself, you know, activating something. It's activating an anti-inflammatory response of some sort. It isn't just that you're carrying around less weight and straining the heart that way. Right, which is interesting. are helpful together. All right, more Americans now own stocks than ever before, thanks to pandemic-era savings and the emergence of zero commission trading. About 58% of all U.S. households

own stocks as of 2022, according to the Fed's latest survey of consumer finances. That is up from 53% in 2019 and the highest mark in the survey's history. Though we should point out that this does not necessarily mean that people own individual stocks, these conventions. be ETFs. These can be mutual funds. These can be funds that you have in your 401k that happen to own equity. I also think it's a sign that the craze, the retail trading craze of the pandemic, in some ways has stayed with us. Overall, it's got to be a good thing. But as someone said, this is definitely not a sign what you get at the bottom of market. No, that's right. Yeah. Surveys are showing it could be a skimpy bonus season for many white collar workers

meantime. A new Challenger gray and Christmas poll provided to the Wall Street Journal found 34% of companies won't be giving year-end bonuses. That's up seven points from last year, and that's the highest number since 2019. Maybe companies are on bonuses, Zempic. They're kind of pair back on the size and the availability of those bonuses. It wasn't just financial firms either. They talked about some consulting, some technology roles, where, you know, it won't be a very Merry Christmas.

All right, and here is another one. The parent company behind the iconic pizza chain Chucky Cheese is reportedly exploring a sale amid growing takeover interest, sources telling the New York Post that CEC Entertainment, that would be Chuck E. Cheese Entertainment, is working with Goldman Sachs on an auction process and could attract both private equity firms and even rival restaurant chains such as Dave and Busters. That company, I believe, has been in and out of bankruptcy over the past few years. You know, I requested this one. I think you're glad you don't really have to spend a lot of brains based on Chuck E. Cheese. They recently renovated the ones they've been going.

to and now I know why. They're disgusting and dressing it up for sale. Thanks for watching Power Lunch. Closing bell starts right now.