Power Lunch - Rocky Relationship, Trouble At Home? 10/23/23

Episode Date: October 23, 2023

Stocks are mostly higher today, as the 10-year yield pulls back after hitting 5%. We’ll examine the relationship between stocks and yields, and whether they can both go up at the same time. Plus, is the real estate system broken? Lawsuits, backlash, and rule changes in New York City have both sides of this debate saying it will change real estate forever. We’ll explain the controversy, and its impact. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Coming up, stocks mostly higher today, the 10-year yield pulling back after hitting 5 percent. We'll examine this frisky relationship between stocks and yields and whether they can both maybe go up at the same time. Plus, is the real estate broker system broken? Lawsuits, backlash, rule changes in both sides of debate are saying this, this will really change real estate forever. We'll explain the controversy and get end. answers, Kelly, on the impact. Looking forward to that. First, let's get a check on the markets, which have been really fluctuating all day long. The Dow is now down 28 points, despite the drop in bond yields, almost 20 basis points we've seen since earlier today from over 5% to near 480 right now.

The S&P, though, is hanging on to a 16 point gain amid that, and the NASDAQ is driving the way with a 910% increase. We also have a big deal in oil today. Chevron buying Hess for $53 billion in stock. Both stocks are lower. Chevron by three and a half percent. Hess, interestingly enough, by about half percent. Of course, this follows the Big Exxon Pioneer deal recently. We'll have more on this coming up. And ACTA, getting crushed again today. It's down 20 percent in a week after hackers accessed its support system,

losing 9 percent of that, Tyler, today. All righty, let's get that often rocky relationship between stocks and bonds. Since highs hit this summer, stocks have pulled back, while yields have jumped. So which is leading the dance? Let's bring in Mike Santoli now for more. Explain it to us, Mike. Yeah, I would say, you know, the circumstantial and logical evidence are that yields have definitely been the main driver of what's gone on in the markets. They started their assent in late July, just as the stock market was peaking.

I do, though, think it's worth stepping back and saying, okay, what does a near 5% 10-year treasure yield really mean? In the abstract, that's not some kryptonite level for either the economy or stocks. nominal GDP is equated roughly to the 10-year Treasury yield over the long span of history. We were around 5% on average for a long period before the global financial crisis. The issue is the pace at which it's happened, the losses being taken on Treasury securities, which are the collateral for everything in the world, and also, of course, whether it's non-fundamental factors that's driving it, as people have talked about supply. But I do think there's this sort of paradox at the center. Yields are going up at least in large part because the economic data have been stronger than experience.

the feds paying attention to that, wants to keep rates higher. Belatedly, we're getting a recession trade unwound from the long end. But those exact higher yields are causing a lot of doubt that the economy can handle it. And that's why the cyclical parts of the market since late July have really led the way lower. If you look at banks, you look at consumer cyclicals, you look at small caps, massive underperformance. So I think where that leads us is not so much some kind of a valuation math that says 5% or 4.8 on the 10-year means X-Mex. multiple on the S&P. It's much more about can the economy weather this. I think we're still in the process of figuring that out. We have late cycle psychology on top of the psychology in the

bond market that says there's too much supply coming out. So it leaves us in a fix, but interesting to see the relief today in a fairly oversold stock market on a relatively modest move lower in those yields. All right, Mike, stay there. We want to continue this conversation on stocks and bonds. Our next guest also looking at earnings and the opportunities that come from overreactions on the up and the downside. Let's bring in our friend Stephanie Link, chief investment strategist and portfolio manager at Hightower, as well as a CNBC contributor. Hi, Staff. How are you? I'm good. How are you? I'm pretty good. Thank you very much. Let's talk about the economy and bond yields. A lot of people think the economy. My basic question is, when are interest rates

going to start to slow the economy or have they already? We know they've slowed the housing market, but elsewhere, the economy seems pretty strong. Can we continue to expect that? Well, the economy is certainly chugging along, and that's been because the consumer has been resilient, and that's because jobs are still plentiful, right? And wages are actually higher, and inflation is coming down, so real income is actually going higher.

And believe it or not, the consumer continues to spend. We got the retail sales data that was over double the expectations last week alone. So I think the consumer is pretty healthy. But we know that higher rates are eventually going to eat into the economy. It's just the big question is by how much, and because we know the third quarter is going to be quite strong. The third quarter is going to be good, right? Yeah, yes. Third quarter is going to be good. But how much do we slow in the fourth quarter?

That's the question. Do we slow at all? And that's why it goes back to what you mentioned earlier, earnings. So that's what we're all listening to because so far the earnings are coming in better than expected. It's a small sample set, but almost 80% are beating. Now we have to listen to what the companies have to say. So far, none of the companies, including the banks, are saying that there is this massive slowdown coming.

It'll come, but we don't know to the degree. Mike, how do you react to what Steph just said there about earnings and where they are and the outlook for 2024 as we get ready to turn the calendar page? Well, yeah, I mean, while we've all just to file, we've been focused on a lot of these macro, intermarket factors with bonds versus stocks and everything else. The earnings trajectory has inflected higher. We do see the consensus building toward growth in 2024.

To me, the real question that this earnings season has to answer is, is the first half of 2024, those numbers plausible or not? So I think it's going to take the full season to get some better sense of that. But it also gets back to the underlying economy because I think a lot of those forecasts are based on, you know, the economy continuing to do reasonably well. And I think that we've been just on alert for some kind of either financial accident because of the fast moves and yields or just that effect flowing through in the cost of capital that might impinge on stuff. But again, I really think that we have sticker shock at near 5%, even though in the abstract, that's not some number that we should necessarily feel as incompatible with a steady economy. I'm a little unnerved, Mike, by the uninversion of the yield curve.

You know, it's now almost complete and you kind of like peering around the corner going, and we know what normally. happens next? We do. If there's anything we can sort of project on normal versus this cycle, I think it is a reason to be on alert. Again, and now it's happening through a different dynamic, as many have pointed out. It's not as if short-term yields are crashing because the Fed's got to cut into a weakening economy. That's usually the way it's happened ever since, let's say, the last 50 years in this cycle. But you're absolutely right. It's all of it is kind of, the ground's moving a little too fast under people's feet. And so whatever the actual set of factors driving yields in this direction, it could have a little bit of a challenge set up for us in terms of how the economy digest it.

In the near term, Stefan, at least it will take, you know, if the long end is kind of put in the highs for this recent move, you have to think that's going to help along with the earnings that you mentioned for at least the near term. It should, but the problem, Kelly, for stocks is now there is an alternative. even if yields were to pull back a little bit to the 4% level, there's still competition. And there hasn't been competition for 10 years for equities, right? It was the only game in town. And so now there's a strong rationale for 60-40 asset allocation or 70-30, where before it was like 100% zero, right? So that's what is the conundrum for the overall market.

But I do believe that earnings are going to be good this quarter because the economy has held up. And I think they'll be good even into the first half of next year. And then I think it's the second half of 2024 that I'm going to be watching for any clues on a slowdown in the economy as well as in earnings. Two stocks you added recently, Steph, American Express and Schlumberger. Why? Yeah. So, you know, I call earnings season, silly season, because you always get overreactions one way or the other. And on Friday, I got the double whammy of American Express and SLB, Slumberger. American Express, they had a good quarter. They beat on earnings and revenues. They actually talked about strong consumer spend. Total consumer spend was 7%, U.S. up 9%, international up 15%. And Gen Z, which is 60% of their membership growth, up 18%. And at the same time, they said that writeoffs and delinquencies were actually below pre-19 levels. So still very healthy in general about the consumer, which makes me feel.

better about the economy. Slumberjay, same thing. The stock fell almost 4% on their news, and they actually beat. They've had 11 straight quarters of margin expansion, two straight quarters of a billion dollars in free cash flow generation, and international is inflecting higher, up 12% in revenues with higher margins. Why that's important? Because it's 84% of total revenues for the company. So I think 20 times for a company of this caliber, and it was down on the news, so I bought that one, too. Thanks a lot. Steph.

Appreciate it. Mike Santoli, thank you as well. Let's go to Chicago. Now bring Rick Santelli in for his thoughts on this big reversal in bonds today, Rick. Yes, you know, I think if you look at twos and tens on one chart, not the spread, but individually, it really speaks volumes about how today turned out. The two-year note yields basically sitting unchanged hasn't really had any significant volatility, whereas the 10-year note yield, well, it was adversely affected, and I'll get to reasons why.

much earlier in the session, but it just continues to slide. And we could argue about all the differences between, for example, the U.S., the EU, the U.K., in terms of their economies. But there are also many similarities, and the similarities are debt, the similarities are supply, and also the state of the consumer and the slowing process. Now, we could debate whether the U.S. is as slow or slowing as quickly as Europe or the U.K., But there's no doubt that if you look deep enough, there are certainly signs, whether it's credit card signs or potential for some of the loans that are going sour. So let's look at the Tuesdays to tens for the U.S. and the EU on one chart. Now, the U.S. went from July to September since the 2s 10 spread was at this level.

The EU since March of this year and the U.K. since June of this year. But as you can see, look at the similarities there. And the reason I show that chart is because it's really much about central banks manipulating interest rates, and now the runway for that manipulation is running out. So there's certain stencils that are very similar. And I think one thing you need to pay attention to is the leadership of the German economy and how it's slowing is going to affect the EU in general, and also how debt is going to affect growth in the U.S. as we get GDP numbers this week.

And finally, I said there was an influence. early that pushed rates a little bit higher. Here was the influence. Ten-year JGB today, closing an 11-year high yield, just a whisker under 90 basis points. Their Bank of Japan meeting like ours is at the end of the month. Pay attention to JGB moves. They're the weakling that could push many interest rates higher. Back to you. All right. A tour to force. Rick, thank you. Coming up to the Victor goes the oil. Tons of deal-making in the energy space lately. The latest being Chevron, buying Hesse for $53 billion. They say they'll keep the Hest trucks online, by the way. We'll discuss that next.

Plus, going for the brokers, growing backlash over realtor commissions leading New York to make a historic change. Those details further ahead. And a score of big tech names reporting results this week. What should investors be looking for if they want to trade the results? We'll get some technical support when Power Lunch returns. Huge deal in the oil industry this morning. Chevron buying Hess for $53 billion. Let's bring in Pippa Stevens now for more on the deal. Hi, Pippa. Hey, Tyler.

Well, this all-stock deal is all about diversifying Chevron's portfolio, which had been a bit light on long-term growth opportunities. Hess is an attractive buy because it has assets in Guyana, which extends Chevron's visibility into future production. Here's what Mike Worth and John Hess told CNBC about the deal earlier today. The duration on our cash flows now is we bring these two companies together. I talked about long-term growth and long-term value. This extends our visible growth profile into the 2030s.

Hess brings growth to Chevron, growth in resource, growth in production, growth in cash flow, and Chevron brings us financial strength, financial strength in terms of a strong balance sheet, a diversified portfolio of assets, and industry leading cash returns. Shareholders have demanded capital discipline, and so acquisitions can be a more attractive way to grow output. And as Pickering Energy Partners, Dan Pickering told me, stock for stock reduces balance sheet risk while leaving plenty of cash for buybacks. This is now the fourth largest upstream deal on record, according to data from Enveris, and comes less than two weeks after Exxon bought Pioneer Natural Resources.

Enveris's Andrew Ditmar said the common thread here is majors looking to refill their pipelines to maintain production against a declining asset base, although shares of both Chevron and Hess are lower today. All right, Pippa, thank you very much. Pippa Stevens. Our next guest says, despite the potential upsets, side, this deal could bring on a larger scale. He is lowering his Chevron price target in the near term due to the decrease in value. Let's bring in Neil Dingman. He's an energy analyst at Truist.

Neil, it's good to see. Do you cover Hess as well? No, I don't have formal rating on Hess. Do you, I don't know if you want to speculate. Why would Hess shares be lower on this deal? I just think that the concern is, and Pip kind of talked about this, I think in the near term, you are going to have some dilution on this. I mean, that was my concern on Chevron as well. long term I get it. It provides a great runway, but in the near term on an asset like this, given what they're paying, Hestock has outperformed Chevron in the last several months, easily, even the last couple of years. So even that slight premium they paid tells me that they're going to be dilutive not only for 24, but likely 25. That's interesting. And we, of course,

saw somewhat of a similar dynamic. Obviously, Exxon shares were down when that was announced. Would you prefer that Exxon and Chevron were using cash for these deals instead of stock? No, I definitely prefer the stock for stock, especially when you have a market where we have now. I mean, there's, I don't want to say high probability, but good probability that we have a price spike given the geopolitical risk. I mean, you look where oil is right now. And, you know, if one would ask me, is there a better chance we go up $20 or down $20? I think it's much more likely. We go up $20.

So you want to make sure you're protected from that and participate. So I absolutely would prefer the stock for stock deals. Who did the better deal, Chevron or X. on just for the better deal and got the better price? I think near-term, Tyler, it's a good question. I think near-term, we like the short cycle, the Permian. No question, Gianna, is a world-class asset, longer term. Maybe it has a nice setup, but we just prefer the shorter term,

the higher returns of the Permian base in near-term, so we prefer the Exxon deal. Before the Exxon deal. You think they got a good price on it? They got a good, not a great price. Again, same thing. Pioneer stock had done pretty well. in the last year as well outperforming some of the majors. So, you know, what this does, you know, again, I think not a surprise maybe on that both of these had to add some assets. And, you know, I think what

this is going to do, Tyler, push some more pressure on other companies, the likes of Connick or EOG to maybe have to match that and go buy some things themselves. That's what I'm curious about. So if we see energy consolidation continue, who else has implied? Does it start to raise equity prices across the board on kind of hopes for some sort of takeover premium or just have the opposite effect on concerns about a dilutive one. How does this all shake out? And where does it leave, you know, producers and consumers at the end of the day? Six, 12 months from now is U.S. output at new record highs? No, I mean, in fact, maybe just opposite. What we've seen in the last deals, you know, Kelly on these is when, you know, one plus one, a lot of times don't even necessarily from an activity

standpoint equal to because they try to maybe let a rig or two go to actually. you get more free cash flow, more shareholder return. So, you know, again, I do think, though, this puts a lot more companies into play. I think it puts a bigger floor, given how cheap these companies are out there. You know, we look at even sort of that next group below, a permanent resources, pure permian company, Accord, pure Bakranooga, pure Eaglford company. We think all three are just sort of smid-cap, mid-cap companies that have great inventory, great balance and just a phenomenal valuation right now. And do you think there's any chance of antitrust moves here by the government?

Not in this one. I think there was so little overlap on this one. If you look what Chevron owns versus what Hess had, Ghana being almost 75% of the value of Hess and Chevron not have any or very small stake in that prior. So I think very little chance on this one. Had they bought, you know, maybe something. big in the Permian where Chevron already has a pretty dominant position, I think that probably

would have raised much more speculation. But in this case, I don't see it. Very interesting. And as mentioned, apparently they're still going to sell those trucks online. I remember getting them 30 years ago. I loved them. I think I still have them. Oh, I had one that had a helicopter and landed on there. Did you? Oh, yeah. Didn't really land. It was a toy. Neil, thanks so much. All righty. Yeah, thank you, Neil. Further ahead on the program, a power lunch triple feature. Big worries about the box office, Sag's Halloween dress code, yes, and a new era for theaters. We'll lay out three stories we're watching out of Hollywood when Power Lunch returns. We've got to stay with us. Welcome back to Power Lunch. I'm Contessa Brewer. Here's your CNBC News update this hour. A third

convoy of trucks carrying humanitarian aid to Gaza passed through the Rafa crossing from Egypt today. The U.S. and Israel have promised a continued flow of supplies into the region after the first convoys entered over the weekend. And this afternoon, U.S. officials say the White House is still working to establish a safe passage out of Gaza, particularly for U.S. citizens. Sweden is one step closer to becoming a NATO member. Turkish president, Recepéep Erdogan, signed the protocol on Sweden's NATO accession today, sending it to the country's parliament. Erdogan has been delaying Sweden's membership and has accused the country of being too soft on Kurdish militants and other groups. Turkey considers security threats.

but other allies have pushed Erdogan to change his position. And Uber is getting into a new type of transportation. The ride share company will now offer hot air balloon rides in Turkey, no less. $159 flights will last for 90 minutes and will take passengers over the country's volcanic scenery. I can't wait until it comes here. Kelly, sign me up. I give you credit because you cannot sign me up. And if you did, but that's very cool. Regardless.

Contessa, thank you. We appreciate it, Contessa Brewer. Ahead on Power Lunch, a historic change in New York's real estate industry. We'll bring you the details next. Plus, Apple supplier, Foxcon, says it'll cooperate with Chinese authorities on tax and land use investigations. What's it mean for Apple? Investors are shrugging it off today, but we'll dive in. And as we had to break, here's a quick power check on the positive side of the S&P is Walgreens.

J.P. Morgan upgrading the stock, saying the new CEO will usher in a new era. It's up 5%. On the flip side, FMC Corp down almost 12%. The chemical company cutting guidance launching a cost structure review. That's your power check today. We'll be right back. Welcome back to Power Lunch. Historic changes are coming to the New York City real estate market,

with buyers getting the upper hand. CNBC's Robert Frank is here to discuss the details, and maybe this could spread further, Robert. It could. We got here two class action lawsuits and a potential probe from the Justice Department all coming together and drawing fire at broker fees, the trial is now underway in Kansas City for a class action lawsuit by thousands of home sellers against the National Association of Realtors and Real Estate agencies.

The plaintiffs are seeking $40 billion, and they say the association's fee structure is anti-competitive. Two brokerage firms, remax and anywhere, have already settled for a combined $139 million. A second-class action suit is expected to head to trial next year. the Justice Department reportedly looking into the NAR's fee policies, which many blame for keeping broker fees artificially high at around 6%. Americans spent $85 billion on broker fees in 2020. Now, in other developed countries, meanwhile, broker fees are usually 2% or even less. The Real Estate Board of New York just announcing that it's going to prohibit the seller broker from paying the buyer-agent fee. It's also requiring a lot more transparency into those fees.

the National Association of Realtors saying, quote, the market itself decides how real estate agent services are given and paid for. I know a lot of home sellers and buyers would argue with that. Yeah, Robert, stay right with us here as we bring in Best Friedman, Brown Harris, Stephen, CEO for more. Bess, welcome. Where do you come down on this? As I understood it, you know, basically, unless I specifically as a buyer enlist a broker and sign a contract, indicating that that broker works for me and will be paid by me for the services provided, that the buyer's side of the transaction fee was paid out of the commission that the seller

pays to the listing agent. Is that the way it used to work? And how does this turn that upside down? Yeah, good afternoon. And yeah, I mean, how it works today is that the listing agent or the exclusive agent who represents the seller. The commission is put in there, and then the seller at the closing pays the seller's agent who then cuts a check to the buyer's agent. And so Rebney, as Robert said, has changed the rules that starting January 1, now the seller will pay the buyer's agent directly for transparency and consumer confidence, which is a good thing. We want buyers and sellers to understand who's getting paid and buy who and all of those things. So I think this is a good thing. What's unfortunate is that there's this complete misperception of what real

estate professionals do. There was an article in the journal today that referred to NARA as the cartel and basically said that buyers agents do little to no work and they're going to have to find a new industry to work in or a new line of work. And I think that's really unfair because there's a great value proposition and what the buyer's agent does. They help them, they educate, they talk to you about mortgages, about the property, about the pros and the cons. And so I think the real estate industry as a whole has been under attack, which is completely... I guess I would agree with you. I mean, I've worked with lots of agents over the years, and both as a selling a property, but mostly as a buyer, and those people do a lot of work, winnowing the field down and giving me

advice and so on and so forth. But to the extent that those buyer's agents were being paid from the seller, the argument has long been, hasn't it, that those buyer's agents fundamentally were all seller's agents. They really weren't working for the buyer because the money they were being paid. They had an incentive to get the best price for the seller because they were being paid out of the seller's proceeds. Well, representation and commission do not follow each other. And And so you can represent somebody in their best interests. And it doesn't have anything to do with the commission. And Rebby is very clear about that.

And in New York, we have something called agency disclosure. The Department of State insists upon that to protect the consumers. They understand who you're representing and why. And you can decide who you want to work for you or not. And I think that helps. What doesn't help at all, I think, is this perception that reality TV portrays like shows like selling sunset that show agents doing very little, not putting the client's interest first, dressing unprofessionally. I think all of those things make us look like

we don't know what we're doing and it paints an unfair picture. Those reality TV shows are not reality. It's absolutely not what real estate professionals do. They work so hard, buyers and sellers agents. And I feel like they're really under attack today. And I think the TV, really hurts us in that way. Bess, I think part of its TV, more of its technology, though, if you look at all of the industries that have seen their commissions compressed and their fees compressed by technology, miraculously, real estate agent broker fees are still at 6%.

Maybe you get them down to 5%, but many people say, look, I'm doing the work myself as a buyer or seller, mostly as a buyer looking at Street Easy or all these MLS listing. I'm finding the properties. I'm looking at the homes. Therefore, the buyer's agent. agent really isn't earning that extra 3%. So how do you think they've held up so well,

despite the fact that technology is doing a lot of their job for them? I mean, I agree with you about technology. It's a great thing. We have these aggregators like Street Easy who totally exploit real estate agents' listings for money. They would monetize anything that they could. They will make anybody an expert as long as you'll pay the fee. They would make a hamster an expert on Street Easy.

if you'll pay the fee. So I don't put too much weight into what the aggregators do. But the buyer's agent, even though technology helps you maybe to find a property or identify a property, they'll educate you about the neighborhood, about the building, about the co-op board, about your financing, about the pros and the cons. And they also have lived experience. I mean, this is what they do every day, all day. There's real value to that to working with someone who can help you and guide you and

comfort you. When you're doing this, it's usually the biggest investment of someone's life. So I don't think you can water down just because technology, yes, is important and helps us to communicate quicker and get information to people quicker. You still need a human being to guide you. Most people want to work with someone. I was, I don't know if I'm similar to others best, but I started by going, this is outrageous. And now, having been through a few different ones of these, I'm going, you know, yeah, no, we're taking a lot of time, even just looking to see the property and have someone just open it for you and show it to you. I mean, anyway, there's so much that goes into it.

Here's my question, though. So there's this lawsuit, this Kansas City lawsuit and potentially antitrust action could be coming from the government here. What happens in that case, regardless of whether it's right or wrong, if they start to try to say you can't have exclusivity over all of these, you know, MLS and all the rest of it, and we're going to kind of blow up the model. I mean, I think if that happens, then the buyer's agent is going to have to, get paid from the buyer. And I think this really hurts the consumer at the end of the day.

I don't think it would be a good result. I don't want to talk too much about the lawsuit. But I just think that the way it's set up today, it does allow for the seller to extend the commission to the buyer's agent. And it's in the price. So they're paying for it either way. But I think that there's just, I really do think the real estate industry is getting a bad rap. As I said, it was referred to in the journal today as a cartel. Right. I mean, it's a little bit, to me, it seems very unfair. And I don't, I don't think this, I mean, look, I love transparency.

We want transparency. We want people to know who's working for who and how they're getting paid. I agree to that all day, every day. I just think the way that they're going about it is not ideal. I think you need your own show, or maybe it's real estate wars. And, you know, we're going to be in Robert, me and Robert, me and Robert, Frank. Best, thank you so much. Best Friedman and, of course, our own Robert Frank, really appreciate it.

Meanwhile, China is launching an investigation into one of Apple's biggest suppliers, Foxcon. We'll discuss what it means for iPhone 15 production as reports of weak demand are already circulating. Power Lunch will be right back. Welcome back to Power Lunch. Apple's main supplier in China is under investigation by Chinese authorities. Joining us to explain the significance of this issue is Steve Kovac, and a lot of people are worried that this is a continued onslaught against Apple by the Chinese. Chinese government, but let's hear the details.

Yeah, so this is at least the third incident in recent months that I can recall where, you know, a couple months ago we had that issue where the Chinese government was supposedly going to keep employees from using iPhones. We saw what that did the stock. A few weeks ago, we had another story about App Store approvals and whether or not Apple would be able to continue operating the app store because apps have to be approved by the government on this kind of individual basis. And now this, this idea that, you know, state media and China report,

We're investigating into Foxcon, which is the most important supplier for Apple, makes most of the iPhones, makes most of the Apple gadgets. In China, it's a Taiwanese company, though. And this is just, you know, can be read as more saber-rattling as we watch the Biden administration here put these kind of restrictions on AI technology that can be exported into China. It's kind of this tip-for-tet. What are they looking into the Chinese government? Very low detail other than tax and land-use issues.

That can mean anything. Again, this is state media, so you can take it for the word coming straight from the government, but just very nebulous, not a lot of details. Foxcon saying, hey, we'll cooperate with any investigation. But again, there's also the Taiwanese geopolitical angle. The co-founder, and he stepped down briefly, but is running for president of Taiwan at the same time. So just a lot of geopolitical issues, and you have Apple stuck in the middle there. So that executive is in Taipei, I assume.

Exactly. Not, I mean, so he would not be subject to arrest, not he himself, would be subjectual arrest, which is what the Chinese have done to a lot of executives there. They kind of disappear. Disappeared for a year, like we saw with Jack Ma, a couple years ago. He kind of went off the grid for a year, maybe, or I forget what it was. But we haven't seen anything like that. But this is all happening. I mean, I was on with you guys last week talking about, you know, there are these signals of demand issues in China.

We just got a note today from JP Morgan analysts saying, you know, these wait times for the iPhones are shrank. Now, that might sound like a good thing. Oh, boy, I can buy my iPhone in time for Christmas. But it says demand isn't. It says demand isn't as good compared to what it was a year ago. And we know what happened a year ago with those COVID shutdowns that just ruined the holiday quarter for Apple. The question is whether demand can hold up, whether services can grow enough to keep Apple and return Apple to growth. We also know Tim Cook was just there again.

Last week. And then we get these reports about whether the John Stewart Show was canceled over some of its comments about China or whatever it was planning to say. Exactly. So is there a bit more activity now because perhaps all of this is coming at, you know, you just wonder about the timing of all of these events. Is there really a pickup here in the way or maybe the degree to which the Apple China relationship isn't as comfortable as it used to be it? I don't know. But they both need each other too. Sure. We talk about this a lot because Apple provides gobs of jobs. They literally busts people into these iPhone factories from rural China into the Shanghai wherever they build these. iPhones, they need those people employed, too. So it's, so that's why I kind of view this as saber rattling, because they're not necessarily making an action, but it's kind of like I was saying in the break, a nice iPhone you got there, shame if anything happened to it. Just kind of letting

them know who's, you know, who's in control here, which is really interesting. China needs those jobs, but it's also clear young people don't always want those kinds of jobs anymore, and the leadership is trying to signal that it's able to provide better and different ones. Listen, it's a mess. I agree. And it's interesting to see Apple's shrugging. it off today, but it has been coming off a bit of a losing. Yeah, I mean, when this headline first hit pre-market, that shares were down about a percent, I think, and it fell a percent and a half on Friday. So now they've shrugged it off, but it is definitely an ongoing concern. And still, the stock is up for the year. Yeah, it's like, I forget where it was. Like 17, 18 percent

for the year. Not as much, it's come off the highs. No, no. It's had a long streak here. We keep pointing out. It's like the seventh day in a row of declines for Apple shares. And that's the all-time highs hit in June, I think maybe July, too, but yeah, look at it. I think Believe Report's earnings in November second. Yep. A lot of pressure. And we'll get a whiff of what demand is like because that earnings report will include like nine or ten days of new iPhone sales. We'll get a little bit of a sense. And then of course any commentary they say about what smartphone demand looks like on the earnings call or any kind of forward guidance will give us more clarity. But right now, the data that we do have isn't looking promising. We know what you'll be doing on November 2nd.

I'll be out there. Yes, yes, you will. Steve Kovac, thanks. All righty, coming up, we are putting the tech in technical support. Lots of big names reporting results this week. We will check the charts for some attractive tech names on deck when Power Lunch returned. Welcome back to Power Lunch, everybody. Time for some technical support. Today we asked our technician to pick three stocks. She's watching ahead of earnings.

Today's focus will be on three of those magnificent seven tech stocks here to chart them. Jessica Inskip, Director of Product with Options Play. Welcome, Jessica. Good to be with you. Great to be back, Tyler. Thank you. I guess you could say the granddaddy of them all. That's Microsoft. That it is. So they all have very similar themes, which I find interesting. But this one I wanted to chart a daily chart. This

is where the support is right at 325. And you'll notice that all of the mega seven are finding support on moving averages, which I find very important and cognizant to watch. So we're at 325 right now. It's long as we hold this from earnings. Then we've got upward momentum to 340. and then again to 350. If not, then we are testing this lower level, which is lower of 300. So you would be bullish on this from what you see. I would. This is the ample buying opportunity as long as it holds this line.

If it does not hold this line, then that's when we flip to bearish. All right, let's move on to the next one is Alphabet. Yes. So Google, this one, we are looking at a 13 weekly moving average. This is a longer time frame, and this is honestly my favorite charts. 13 weeks represents one quarter of prices, so extremely important as we go into earnings season. This is sloping upwards, which indicates that bullish trend. I want to make sure that that is maintained.

That is absolutely imperative. So as long as this level right here around that 132 is maintained, then we are going to still remain bullish. However, if it fails, then we're bearish once more. But if we have positive earnings with that AI story, I'm expecting that. then we can expect 140 and even 150 from all the way over here. So if it dips below that purple line, if the price action dips below that purple line, that would be the watchout moment. That would be the watch out moment. These are crucial.

It's great. It's at support. We want to make sure that there's supply there. But if it fails and sellers come in, in which case we're going to flip back in. All right. Walk me through meta. Meta. So meta is also looking at the 13-weekly-

Same sort of looking chart. Same chart, which is. I love using the 13 week again because of one quarter of prices. Right now, same thing. META is right at its support line here. If that breaks, then we are looking at here, which is that psychological aspect that we talk about quite a bit. At one point, this was, it teeters between support and resistance constantly.

So if this isn't maintained. So I'm going to drive them crazy, I'm going to walk over here. I like it. So does that trouble you, that little part where it dips below that 13 weeks? moving average? So this doesn't bother me too much. We look at weekly closes. There are other moving averages that I like to layer on top of this. So you'll notice that even here, it goes above, but it acts as a mean of resistance. There are others I add to this, the 26 and the 40, which are two and three quarters. So we want to see rolling prices. You know, if this technical stuff doesn't

work out, you could be a weather person. Yeah. That's really well done. You brought a contrarian play along for this. So bottom line on meta is if it stays above there, you like it. If it dips below, you don't like it. Yeah, the beauty of all these are. It's so simple. I can't stand it. Or let's go to AT&T. Yeah, so AT&T, again,

looking at that weekly view, this is clearly a downtrend. We define downtrends as lower highs and lower lows, which is what we see. But on the weekly view, there is a indicator that I like to use as a forward-looking. It's called MACD. It uses

EMA, which is an exponential moving averages, make it simple. It puts weight on current prices, so that within the calculation. So that makes it forward-looking. That has turned up at the bottom here. So that means, at minimum, we could expect a rally upwards. Pair that with some positive free cash flow on the fundamental side. We're looking at a contrarian pick there. Jessica, thanks very much.

Good as always to see you. Thank you. Thanks so much. Kel. All right. And we'll be hearing more contrarian calls this week. Still ahead, a Hollywood triple feature. Three big headlines are trending out of Tinsletown today.

We've got all of the key details after a quick break. Welcome back, three trending stories out of Hollywood that are so good we needed a triple feature to cover them all. First, between SAG, as a, okay, first she said, talks between SAG and studios are resuming tomorrow. Speaking of SAG, the union also facing some backlash over its strict Halloween costume rules and Taylor Swift's era. tour ushering in perhaps a new era at theaters. Good thing, Julia Borson is here with us on set today. Our senior media and tech reporter, welcome. Let's start with the strikes first, the ugly. And now people saying, okay, maybe some more pressure is coming to bear on actors to get this done. The pressure's on it, and we have really high profile actors, including George Clooney,

really urging everyone to get back to the negotiating table, even offering to have some of the most high paid actors, maybe give up some of their wins to have some of that money flow to some of the lower paid actors. But I think a lot of the pressure right now is coming from the fact that it has been many, many months as the longest strike that the screen actors guilt has ever had. And if this continues, it's going to really have an impact not just on the spring television season, but even on the movies that the studios can release next summer. The summer, which really in Hollywood starts at the beginning of May, that's the key box office season. And you really need to know and have certainty about when you'll be able to either finish movies or complete these

films or even to shoot them to get them ready for launch next summer. Have most of the films that would be released in, let's say, May, Memorial Day, next year? Have most of them been completely shot or not yet? A lot of them are mostly shot. Remember, in Hollywood, there are a lot of reshoots or pickups, things you need actors for. Maybe there's voiceovers that need to be done, but also you need to know when you're going to be able to start promoting these things. And the big box office movies are often advertised for months in advance. Yeah, and they haven't been able to do any promotion so far. Let's move on to the next one, which kind of

I got my, tickled my fancy this morning when I heard it on the Today Show. SAG issuing restrictions around dressing as any characters that could promote films or developments currently being picketed. But the rules facing some backlash. Ryan Reynolds tweeted. And this is all about Halloween costumes, right? Halloween costumes. I look forward to screaming scab at my eight-year-old. So the girl who wants to dress up as Barbie or the guy who wants to be Ryan Gosling and dress up as Ken,

And you're not supposed to do that if you're a member of SAG? Well, what SAG was saying, this does not apply to children. So Ryan Reynolds does not need to worry about his kids. But he was making a joke about it. But there has been some debate within the Screen Actors Guild. Now, the Guild is saying, hey, why would we promote films that would profit the studios that were right now picketing? That doesn't make sense.

Let's not give them any free promotion. They're saying, and don't post pictures of yourself and any photos that might seem promotional. What they're saying is keep your costumes generic. So there's been some debate internally. A lot of actors saying this is a waste of our energy. But meanwhile, Sag's saying, we've got to be serious about this. Let's not give any free promotion.

What is Arnold Schwarzenegger supposed to do? Because when he walks out in public, he is the Terminator, man. I mean, he can't be anything else but his own character. Yeah, well, look, I mean, remember Arnold Schwarzenegger is not the Terminator. We need to keep the distinction there. But I think it's going to be one of those things where they're saying, let's not waste our energy on this. I don't think they're going to be enforcing it. But there is some pressure to not wear anything that is too overtly promoting.

Let's move on to Taylor Swift's Ares Tour, which is bringing that large crowd experience to theaters. And in some cases, really for the first time, it's changing theater decorum as well. They're letting people stand up and sing and talk throughout the movie. Is that going to be the new way to bring in a theater audience in the age where you can watch a lot of other movies at home on Netflix? People are saying that the Taylor Swift experience at a movie theater is a great concert experience and movie theater. It is not a traditional movie experience. People are not going to Killers of the Flower Moon and yelling and screaming and dancing and singing along. This is very much a thing because this is a concert film.

I don't think this is going to impact the way people go to other movies or the way they behave in other movies. And AMC theaters is trying to lean into it within reason. They're saying, feel free to sing and get dressed up, but don't stand on the seats, please. Question for you, though, if it becomes more popular to do the concert round, maybe, well, is that going to cause problems if her showing is next to killers of the Flower Moon? and my boys are in there screaming their lungs. I think those theaters are pretty well. Soundproofed. Yeah. So I'm not worried about that. I think it's more about people having to know what they're getting in for.

If you're going to go see a Taylor's show concert movie, expected to be raucous and people singing and dancing. It was like the old Rocky Horror Picture Show. Everybody knew the words and would stand up and play it out. But I think to a certain extent, we'll see more cinematic film experiences that are like the Rocky Horror Picture Show, more interactive. If you're going to have a lot of people together in an audience, you're going to have some element of fun.

It's like going to see a horror movie where people enjoy having lots of people scared and maybe even jumping out of their seats. We'll see it tomorrow at the tech event. Yeah, I'll see you there. Good good to have you. Thanks for watching, Caroline.