Power Lunch - S&P 500 is flat as shaky October start continues on escalating Middle East tensions 10/2/24

Episode Date: October 2, 2024

The S&P 500 is little changed today, as the market rally stalls amid rising tensions in the Middle East.Nike slid more than 6% after the sneaker giant pulled full-year guidance ahead of its CEO change. Tesla dropped 3% after reporting delivery numbers, though the tech sector is being buoyed by a rise in Nvidia.We’ll tell you all you need to know about today’s market action. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. I'm Brian Sullivan, in for Tyler today. And please be joined by Kelly Evans, who actually hosts the show every day. So no surprise. Some interesting internal and big company moves with your money today. What are they, Kelly? Let's start with Nike. With everything going on today, it's barely gotten to mention. But it's the biggest drag on the Dow after its earnings. The shares are down 6%. Revenue was weaker than expected. And it withdrew forward guidance. The new CEO Elliott Hill has not taken the helm yet, but he has a big cleanup job ahead of him. kitchen sink quarter. All right, but United Health making investors money today because of a Medicare problem at one of its big competitors. We're going to tell you who and why it matters. Yeah, Humana shares are down 13%. So there's your hint. And oil is higher once again following Iran's attack on Israel and ahead of potential retaliation. Interesting little skirmish. I'm sure you've been following, Brian, is what's going on with these comments from Saudi, what OPEC is now denying, whether oil is actually going to see a bearish potential downward to the $50 price level, or as we heard last hour, if we should say these are pure rumors, not substantiated in fact,

then maybe we'll see the market start to price oil higher again. Did you look at the show rundown? Is that what we're going to? Because that's what we're going to lead the show. And I think it's an appropriate place, Kelly, to lead it because you are right. This is like Days of Our Lives, OPEC version. It's always a soap opera. Yes.

Thank you. I didn't know if that was still Nott's Landing. It's probably what I should have said. All right. So let's start there. Because the real story, folks, on oil may not be why prices are up. You know that, but rather why prices aren't rising even more, given the fears around a possible retaliation by Israel against Iran.

You also had, to Kelly's point, a brief OPEC plus virtual meeting today, not in person, and there was no shift in policy. That is not likely to come until their big December 1st, in-person meeting in Vienna, assuming the in-person happens. And if that is not enough drama around oil, it was also that big Wall Street Journal, exclusive report this morning that some OPEC members are trying to whisper that Saudi Arabia warned them about the possibility of $50 oil if the group does not hold fast. Now, the Saudi is suggesting directly to me and a few others, in fact, the gentleman who's

about to come on your screen, that the story was either inaccurate or misleading. All this while natural gas closing back in on three bucks, in part because there is concern around the safety of this trade of Hormuz, where all of Cutters liquefied natural gas flows out of. Obviously, much to discuss. Let us jump right in, Bob McNally, founder and president of the Rapidan Energy Group. And with regards, we'll get to OPEC in a minute because I thought we had a scoop, Bob, but then they went out and put out a press release on this exact same thing. Let's start with why oil is not higher. Is it because of lack of retaliation? Is it because the Saudis have a couple million spare barrel capacity? Is it because of U.S. record high production, or D, all of the above? Good to be with you, Brian.

what, the market is complacent about geopolitical risk. If you don't see barrels going offline, like we saw with Libya recently, the impact doesn't matter much. It's boy who cried wolf, and they're tired of it. And I think they're hoping and expecting perhaps Israel will be restrained in its response, and that we won't see a material disruption in the energy production and flows. Like you said, 20% of world gas comes out of Rasopan, out of that region. And then you've got 33% of crude loadings and 17% of product loadings come out of that region. But the market's saying, nope, it's been a year now. Boy, who cried wolf, I'm not going to worry about it until I see actual physical damage. Okay. And let's hope this de-escalates. For the world's sake, for Israel's sake,

for everybody's sake. Let's hope it de-escalates. But the other day, we watched Israel light up a Yemeni port and oil import facility. Yemen dropped one bomb on Israel, on Tel Aviv, and Israel just lit up the entire port. If Israel were to do something similar with Iranian either nuclear infrastructure, I know it's not oil, but you get my point, or some kind of oil infrastructure, which I'm sure the White House is strongly deterring them from doing. But if they were to do that, Bob, then what? If Israel hits critical infrastructure from Iran, like oil facilities, major oil facilities, Karg Island, it's nuclear complex. I believe that would trigger a regional war and put all of the production and flows that they are at risk. And we will be up.

We'll measure the increments, Brian, and $10 a barrel crude. Israel is in three eyes for one-eye mode here, as you just mentioned with Yemen. However, however, we expect not just the Biden administration pleading and so forth, they may take it a little easier on the first, the first retaliatory package. I think it's going to be suppressing. air defenses, hitting munitions, command and control, kind of working over Iran, preparing the ground if they have to go back in future strikes. So I'll be a little surprise if they throw that big a roundhouse punch here in the first retaliatory package. It'll be bigger than April, but I don't think it'll be that big. Bob, as investors think through this, there's been a lot of

value to find, so to speak, and a lot of the energy stocks. A lot of that is probably, maybe you can tell me, is predicated on higher oil, but not all of it. You know, at levels where we are. It seems like some of these names should still be attractive. I mean, where would you be looking to position in the oil and the natural gas space right now for the next couple of months? I think we are in a once-in-a-generation opportunity to buy unloved oil and gas assets. And the real big inflection point will come when, and it is when the world realizes we're not on a track to peak demand for oil and gas by the end of the decade. Now, between now and then, Kelly, we could have an air pocket. macro is awful. China is awful. We're going to talk about OPEC plus. If there's some discipline

required, we could see lower levels, but I think we should position to buy with both hands for a multi-year boom cycle. Again, the may driver being, EVs aren't coming fast enough, ice cars aren't coming fast enough, the politicians aren't willing to push fast enough, and demand is not about to peak. When that surprise hits, we're all going to realize we're structurally short hydrocarbons in the medium term. That's the big play in my view. What do you make of this? I don't want to call it a squabble, but let me just kind of set the stage here to Kelly's point at the top of the show. Wall Street Journal has this bigger, by the way, Benoit, Summer, Anna, all great reporters.

Not knocking them whatsoever. They have a big exclusive that there was a conference call that OPEC or the Saudis may have had, kind of admonishing to your point, the discipline required. I think it's the language you used. The Saudis, I'm sure, his Royal Highness, reached out to me, probably reached out to you. Then OPEC actually made the unusual step of putting out an action. actual press release, sort of countering the Wall Street Journal's story. It's fascinating. We'll ultimately find out where the truth is. But what do you make of this kind of squabble? Do you think

it's a sign of some people inside of OPEC maybe leaking things that may or may not be true to the media for some end game of their own? Well, I think OPEC plus OPEC leadership was pretty offended by that Wall Street Journal article. The details, $50 a barrel. And so, forth. And you saw the formal rejection today by OPEC. But where there's smoke, there's fire. There is a problem with Iraq, especially. It's three to 400,000 barrels a day, above its required production cut, production quota level. They've been trying cajoling for months. It may not have worked. Now, I hear maybe the meeting went a little better. I think the Iraqis are talking with the folks who put up those secondary sources. You know, all eyes are on October 14th, Brian,

when OPEC will report what secondary sources, so non-government officials, private companies, what they say Iraq was. And I still think there's a discussion there. So I don't think the meeting was as negative as even implied by the tone of the Wall Street Journal article. But yet the jury is out and we'll see on October 14th. But if Iraq's not in compliance, if Kazakhstan's still overproducing, I think there are going to be consequences in for prices and for a softer production policy. Could the U.S. Bob on that issue either turn to the separate? to support the market, lower the price that they needed to.

Could they do anything with Iraq and Kazakhstan to basically say if they're the kind of flies in the ointment here, they're actually leading to potentially lower prices, try to support their output? Well, I'm sure there's a standing request from the Biden administration, the Harris campaign, please don't do anything to raise oil prices. I think you see the Biden administration trying to free up some trapped Iraqi barrels due to that KRG pipeline being closed. So I think, yes, it's fair to say the Biden administration is,

doing everything it can to keep more barrels on the market, tolerating overproduction. They don't mind. They want to see these low oil prices that we see right now. But the main effort right now, I believe, is begging Israel not to attack oil facilities in Iran. And how many barrels do you think that would take off line if it happened? Well, Iran exports about a million eight, 1.8 million barrels a day. But that's just where we start. If Iran's exports were halted, and you know what, a senior Iranian official once said, If we can't export, nobody exports. So then you're looking at 13 million barrels today

that's produced in and flows out of the Strait of Hormuz. That's just crude. So I think the market will price in a much bigger disruption. And all of the OPEC spare capacity, the buffer in the world, that's in the Strait of Hormuz inside the Strait as well. So it's more than just the 1.8 that Iran exports that would be at stake if Israel took that out. All right.

Bob McNally, thanks for joining us to kick off the hour. We appreciate your time. for with Rapid Ann. Beyond the tension in the Middle East, data here in the U.S. is helping to maintain some hope. The jobs report is just around the corner. How important will it be for markets? We'll have more on that next. And as we head to break, let's do a quick power check on the plus side of the S&P. Today is Caesars as the company launches a billion dollar offering of senior notes due for expiring in 2032. On the downside is Humana, falling on news around the company's reimbursements. We'll have those details in

three stock lunch and power lunch. We'll be right back. All right, welcome back. Let's talk Tesla. After a big run over the last month, shares are down today on car and cyber truck delivery numbers that did disappoint some investors. But some analysts are saying the numbers may actually be a positive. Let's talk about that in the big Tesla robotaxie event scheduled for next week with Phil LeBow. All right, Phil, kick us off. Tell us about these sales numbers. Well, the numbers are generally in line with the estimates that were out there, Brian. Now, we're going to show you the number here. and you can say, well, the facts had consensus estimate was 463, 310, so it's a miss. Look, people I've talked with have said 462 is what most we're expecting. You're really splitting hairs, if you call that a big miss here. The whisper number, 465 to 470, that might leave a few people saying, well, could they have delivered a few more? Any way you look at it, they generally, compared to the last two quarters, they did their job.

They hit the expectations thanks to strengthen China, despite the weakness that we've seen over in Europe. Europe, can they hit the full year delivery consensus of 1.78 million vehicles being delivered? Well, to do that, they're going to have to deliver about 512,000 vehicles in the fourth quarter. Keep in mind, they have never delivered more than a half million vehicles in any single quarter. Doesn't mean it can't be done, especially if the EV market starts to pick up a little bit, but that's what they'll need to do in order to hit 1.78 million for the year. The page now turns to the event that everybody's been talking about. unveil, which is next week. The cybercab is the question, do they show us some type of a prototype

vehicle, maybe a two-seat vehicle that many are saying could ultimately be an autonomous taxi of sorts? That's one of the things that is out there. Also, what kind of details do they give us about the launch of autonomous ride sharing with Tesla? Is it going to start next year in geo-fenced areas? Are there any pricing expectations? That's really what's going to going to drive the stock before and or after the event, I should say. If we get vague promises from Elon, which is a possibility, I wouldn't be surprised if the stock sells off. Then again, if we get some concrete details, people will sit there and start gaming out, well, how realistic are these that they can be hit? Don't forget, financials coming up a couple of weeks later,

October 23rd. So we're done with the first of three catalysts here, guys. Now the question becomes, does Robotaxy deliver in terms of the anticipation that is out there right now, or does it leave people really wanting more and not really having it yet from Elon Musk when it comes to the Robotaxie? And shares are poised. They're unchanged basically on the year ahead of that next catalyst. Phil, for now, thanks, Phila Bow. The major averages are little changed after losses yesterday on those rising tensions in the Middle East. But this morning we had the better than expected ADP report, raising some hopes for Friday's big jobs report. For more on what this means for the markets. Brian Jacobson is here. He's the chief economist at Annex Wealth Management.

Brian, welcome to you. A lot of economists are starting to say when you add it all up, the port strike, possible oil price increases from the Mideast and so forth, the hurricane effect that we could actually see a bit of a stagflationary queue for. What are your thoughts? Yeah, thanks for having me. And I think that actually when we see everything that's kind of on the horizon, Chair Powell probably has almost like thrown his arms up in the air and maybe banged his head on his table, like, What do we do here? Because a lot of the data that we're going to be getting for the fourth quarter is going to be filled with all sorts of distortions. You've got the port strikes, as you mentioned. And so that's going to likely affect the employment numbers.

We have to see how long the port strike lasts because they are going to have to worry about does it extend past that October 12th as far as the survey date. So maybe it'll be resolved before then. But now you have higher oil prices. Those port strikes could lead to inflation. So you could see an environment in which you see that weakening labor market and high. higher temporary inflation. The Fed is going to ask themselves, are they going to just look through this and just stick to their plan?

My guess is that Powell is probably really convinced that they do need to really get at least two more 25 basis point cuts in for this year. So perhaps they're a bit on autopilot despite all the noise that's going on. Right. But autopilot, meaning they continue to cut rates. The economy continues to expand. I mean, interesting to kind of look at how you're playing this market with industrials, health care reits financials.

Financials, by the way, one of the best names in the third quarter. Why so? Yeah, I think that really the reason is, is that we are seeing an economy that is slowing, but it's not necessarily stopping. There are, of course, risks out there that could lead to a recession or a more dramatic slowdown. But we think that the likelihood of those events are fairly low. And so if we go from really good growth to moderate growth and are able to kind of stay around here, We think that that actually sets up a pretty good environment for like industrials, from a valuation perspective, looks pretty attractive.

We know manufacturing has effectively been in a recession for about, you know, like 24 months now already. And so if they get a little bit more traction, healthcare also looks attractive. And then with financials, as the Fed continues to cut rates, that should be good for their funding costs and also take some pressure off of those parts of their loan book that are experienced. an increase in defaults. And so those are three of the areas that here at Annex on our investment committee that we're kind of optimistic about for the balance of this year. Brian, you don't have to give, like, one side of the other answer to this question,

but we do have this election coming up. Does it matter to the market how the election turns out? And I say that because watching the VP debate last night, which, by the way, it was incredibly civil and it was hugs and it was kind and it gave you hope and whatever. It doesn't seem like the two sides' economic policies, not social, but economic policies are that much different. Maybe a little adjusting over here for taxes, a little higher corporate tax rate over there. We also have Congress, which is probably going to be split.

Nothing will probably get done no matter who wins. Anyway, does the market care about the outcome? Yeah, I think that the market does care about the outcome because there is a scenario where, let's say, if it's a Democrat sweep, where you could see a situation where they try to get rid of the filibuster and they, I actually are able to get this almost wish list of policies through, which do include an increase in corporate tax rates, the top marginal tax rate. Really for the markets, you know, the bigger companies, they don't effectively pay that highest tax rate anyways. It's more the smaller caps. So I think that it matters as far as maybe under the hood, as far as with that tax policy.

Regulatory policy obviously would matter as well. But that's a very low likelihood that you would get that Democrat sweep. So if you get divided government or some form of Republican, if there's a Republican sweep, then that is likely to be somewhat business as usual. We are going to have to reckon with that massive fiscal cliff. If you remember back in 2012 into 2013, that fiscal cliff, that is going to be here on steroids at the end of 2025, unless they work out whether or not the Tax Cuts and Jobs Act, those provisions really get extended. So once we do, we do, you know, do get through the election, the market will then price in the likelihood of that type of fiscal cliff event happening. Yeah, I haven't heard fiscal cliff in a long time, like having flashbacks.

But I think about what David Tepper said on CBC the other day. I think it was something to the effect of as long as it's going to be a split, he doesn't have to really pay much attention to it. So that's how it looks, I guess, at this point. Brian, thanks. We appreciate your time today. Thank you. Brian Jacobson. All right, on deck. Kelly, you know what? You know what? what time it almost is again? It's fall. It's earnings season.

It's coming up. And so coming up, we're going to do some earning season options prep with Dom Chu in today's Market Navigator. All right, welcome back to Power Lunch. We are in the green. If you're on the radio driving, well, thanks for listening. Dow is up, only up 29, but it is in the green.

S&P and NASDAQ are higher. Tech is your big leader. When I say big, I mean, it's up two tenths of one percent. It is higher. We are in the green. And I get to, I've never done this before. This is going to be fun. We're doing what's called a market navigator with Dom Chu. Take it easy. My first time. No, this is going to be, this is great because we're going to kind of take you through the mapping and the navigation of the markets here. Hence the name. Hence the name. We're going to talk about package food because ConAgra is sinking today after reporting disappointing fiscal first quarter results earlier today. But one of our traders thinks this name could have a continued slow.

burn even lower. And here to explain why and how to take advantage of it, trade it, is Mike Coe, the chief strategist over at openinterest.pro. Mike, let's talk about this chart in ConAgra. It's down on the heels of earnings. You think it's got more downside. What's the trade? And how do you capitalize on that? I mean, it's been a very tough market, obviously, for the packaged food companies, not just ConAgra. You know, these are companies that have been struggling on the top line. And we did see some margin expansion for a number of them through the pandemic, but a lot of those margins are now coming in again. And one of the trades that we saw an institutional trader do today was the December January 30 put spread. So they were buying the January 30 puts, which are actually

going to capture the next earnings that the company is likely to report in the first week of January and then selling the december is to help finance that purchase. Now, you know, one of the things that you'll sometimes see is a little bit of follow through when real money accounts. So we're talking about those investors that tend to be sort of long only and slower moving. So we're talking about the T-Roe prices of the world, the big mutual fund companies, endowments and things like that, is that it takes some time for them to move out of their positions. And I mentioned T-Roe because it was actually one of ConAgra's largest shareholders and they had already sold more than six million shares just in the second quarter of this year alone. So one of the ways I would actually

tweak the trade that the institutional traders put on is I would actually reduce those strikes just a little bit and just sort of give us some time for that to play out to the downside, buying the January 28 puts and selling the December 29s against it. Now, the distinction there is that by doing that trade, you actually take in a small credit. So you can't lose any money to the upside. You would actually make some money if it drifts a little bit lower. And then, of course, it would have to go, you know, well below that lower stripe for you to have some losses. But that would represent, you know, another 8% decline. And we've already seen it decline 10% here. This decline we saw today is actually one of the largest.

The average earnings move is only 4% for this stock. And obviously, as we can see today, it's down significantly more than that. Mike, a follow-up question on that. Why use this calendar spread type event? What exactly does it do to take those particular put options and stagger them between expiration dates? What's the thinking there? Well, the key thinking on a trade like that is that, you know, the biggest thing that move stocks, catalyst-wise, is earnings.

Every publicly traded company in the United States has to report earnings four times a year, and that's when you start seeing the big moves. So if you're going to sell some premium to help finance buying longer dated options, it's better to do it when you have expirations that don't capture earnings. And so earnings have come and gone. The news was bad, obviously. We can see that in the price action. Those December options that you'd be selling, the only big catalyst between now and then is really the election. And I'm not sure that's going to affect the package food company business at much. But those longer dated options you own will capture the subsequent earnings.

And that's why you want to do a trade this way. All right. Mike Coe with the trade on Conagra and Packaged Foods, thank you very much for that. We'll see if that trade works out in the next couple of months. Brian, what's interesting about this whole consumer staples trade is there have been some relative, real relative winners, the ones that count. We're talking the Walmarts and the Costco's of the world. And the packaged food side has been kind of hit or miss. So whether or not there's more volatility into the new year remains to be seen.

but it's a sector that we're all going to watch because of that dividend play and everything else on the value broadening theme that things have been playing out in the marketplace. You got the Hormels on one side, famous for spam and dinty more beef stew. And their namesake chili. Which got me through college, probably got a lot of us. Dinty Moore Beef stew as well on one side. Can you quickly explain the calendar? I'm not an options guy. The calendar question you asked, Mike?

So the reason why he's using two different options, right? First of all, they both take that. Yes, they both take advantage of the downside, but you're selling one to help offset the cost of buying the other one. One of them is worth more than the other one is. You're just trying to make a little bit of a trade there to capture some of the relative value on one to offset the cost of buying another. You do it the difference in time. The strike prices are purely similar, but the change in value, the time decay in each of those put options is a little bit different. Thank you.

You're very welcome. And that's one to grow on. No, the more you know. There you go. I'm just nodding my head. Thank you both. After the break, we'll keep the trade parade rolling. Three key headline movers, Nike signaling a weaker holiday,

Humana facing lower government reimbursement, and Lilly increasing R&D. We'll get the full stories and a trader's take in three-stock lunch next. Welcome back to Power Lunch. We're going to do a deluxe three-stock lunch today. So we'll get the stories on three stocks in the news, and then we'll get the trading advice on each one. Anthony Fortione is our trader today.

He's vice president and portfolio manager at Rockland Trust. Anthony, welcome to you. Let's start with Nike, which is sharply lower after results. CNBC retail reporter Gabrielle Fon Rouge has more. Gabby, what happened? Yeah, thanks, Nelly. Kelly, shares of Nike are down about 6% this afternoon and down around 23% so far this year. What's going on here is that last night, the Sneaker Giant, reported its first set of earnings since announcing that CEO John Donahoe would be stepping down. It withdrew its full year guidance and announced that its first investor day in seven years, originally scheduled for November, would be postponed. Revenue also came in softer than expected, and that's partially because it has a lot of work to do

to fit its products assortment. Over the last couple of years, Donahoe has been focused on churning out the same old Nike classics, Air Force Ones, Jordan ones, and Dunks. At first, they were flying off the shelves, but now consumers are eager for something else, and they're shopping with competitors like Adidas, Hoka, and On. The consumer environment has also been soft in China, which Nike said last night that it is not immune to. It's going to take some time for things to turn around. Nike is expecting sales to fall again this quarter between 8 and 10%. Kelly?

All right, Gabby, thank you. Anthony, we turn to you. What do you do with Nike at this point? We continue to hold it and buy an any more weakness. At the end of the day, there was nothing really surprising from what they reported and commented on. We knew the quarter was going to be difficult. Those fundamentals are still challenged. We thought it was likely they would withdraw guidance and postpone the analyst meeting. Obviously, they're in a huge CEO transition and need time for the new CEO at Hill to take grasp of the company and provide his overview. So while they offered a somewhat softer outlook, it was offset by some green shoots that they saw in their running business, which in a turnaround is very welcoming. So at the end of the day, to my viewpoint, $4 plus of earnings par, the stock is still attractive as a turnaround. All right. Thank you very much. We're going to call this next story, O the Humanity.

Humana, plunging today down more than 16%. Let's get the story. And it's a big one involving Medicare and Medicaid with Bertha Coombs. That's right. Humana revealed this morning that the government has cut the quality rating. Those are known as star ratings. So one of its biggest medicare. Medicare Advantage plans. The star rating for its 2025 plan was cut a full point from four and a half stars that it got last year to three and a half stars. Humana says it narrowly missed the higher rating on just a small number of measures. But that cut below a four star rating means that it will not get a 5% bonus payment from the government. So that really messes with its top line. Centers for Medicare and Medicaid has been raising the bar for insurers to get those bonus star ratings, which are, calculated on a slew of measures like preventive screening and keeping patients out of the ER.

For Humana in the highly competitive Medicare Advantage plan market, lower stars could also drive customers to competitors, which will make for lower growth. Humana is appealing the rating, but they may not get a decision in their favor before open enrollment begins on October 15th. Brian? All right, Bertha Khrum's Bertha, thank you very much. All right, so Anthony, what is your trade? Do you have a trade on Humana? Yeah, this one is obviously, frankly, a mess. Thankfully, we don't own it for clients. And even beyond today, the stock is down from over $500 over the last couple of years.

So, you know, today's news sort of revealed a real nuance and Medicare Advantage and the plan ratings. And the reality is that the cut to earnings can be quite significant. I fear it's too late to sell if you own it here. And you may look to sort of sell on strength as we learn more in the coming days and weeks. but I certainly wouldn't buy it. We see better options than health care and certainly in managed care. All right. Let's move on to Eli Lilly then to round things out.

They're making some headlines today and the shares are edging higher. Angelica Peoples is here with the story. Is this weight loss related to Angelica? That's not a bad idea. Not a bad guest, Kelly. We are here in Indianapolis at the company's headquarters. And we spend the last couple of days just seeing everything that Eli Lily is doing to invest in obesity.

and beyond. This morning the company saying that it'll open a new four and a half billion dollar facility focused on R&D manufacturing. That's all a part of the investments that it's making in obesity, of course, but the company is also looking at other areas. Some of those things like brain diseases,

take a listen to what Eli Lilly's CEO, David Ricks, had to say. We're working hard in Parkinson's and a condition called frontal temporal dementia, ALS, we have ideas about how to go after that. I think this idea of neurodegenerative conditions, which are often caused by a few misfolded proteins or genetic precursors, we're beginning to untie that knot. And when we untie that knot of why they happen, we can drug them. I'm pretty optimistic that we're going to make a lot of progress, hopefully at Lilly, but

as an industry in the next 10 years in those terrible conditions. And Lilly has a really rich history in Neuro. Of course, they had that Alzheimer's drug that was approved earlier this year, and they also had that antidepressant Prozac that is so famous in such a big part of its history. So there's a lot to see here beyond obesity. But of course, we're going to be talking about obesity much more in the years to come, guys. Angelica, thank you. Angelica Peebles reporting there.

Anthony, final word on Eli Lilly. Do you buy it, sell it, own it, take out some options? All of the above. No, you own it here. I mean, as I kind of call it, Lily is the invidia of the healthcare sector, fantastic franchising company. and certainly a poster child for GLP, class one stocks. And what they've announced today is just continuing what they're doing in terms of increasing capacity and technology innovation.

You know, the only issue is that, you know, valuation reflects a lot of that at 40 times plus earnings. So what we advise the clients is continue to own it, but think about managing the position size given how much it's moved up and what it represents in the portfolio. So continue to own it. Right, but don't let it maybe get outside. I guess I take your point. Any quick final comment, Anthony, on stocks overall here?

Are they still going to ramp into your end? Or is October casting a very different tone all of a sudden? Well, I think we're seeing it every day with the election and certainly reminder of the debate last night that we're probably going to have elevated volatility into the election. And, you know, what's happening on the shorman strike is going to be an important factor in how that may end up being a political situation as well. So that's something that definitely watch. All right. Anthony Fortione. Thanks for your time today. it. Thank you. All right in the meantime, let's get right over to Julia Borsden, where they see NBC News

update. Brian, President Biden told reporters this afternoon he would not support a strike on Iranian nuclear sites and retaliation to yesterday's ballistic missile attack in Israel. The president said the group of seven leaders agreed during a conference call today that Israel has a right to respond, but it needs to be done proportionally. He also warned new sanctions would be coming against Iran. Meanwhile, the State Department says the U.S. organized a flight today from Beirut to Istanbul as Israel carries out a bombing and ground campaign in the country. It carried about 100 Americans and their family members. The State Department says 7,000 Americans have expressed an interest in leaving Lebanon. Carriers around the world have

canceled flights to Israel and Lebanon in response to the security situation in the Middle East. And Hamas claimed responsibility today for a shooting attack in Tel Aviv yesterday that killed seven people. Police say two gunmen boarded a flight, a light rail train, and opened fire on passengers. The shooting came around the time of the Iranian missile attack. Brian, back over to you. All right, Julia Borsten, Julia, thank you very much. All right, coming up, trading the port strike. Could supply chain challenges from the port worker strike actually be good news to one big group of stocks? It could be, and we have got the names you need to know. Next. All right, welcome back.

As we continue to monitor the port strike now in day two, Diana O'Lock has a fascinating look at a sector that could actually see a bump from the fallout. Diana. That's right, Brian, a brief bump. We're talking warehouse, and this is a short-term play, if it all changes if the strike goes long-term. But for now, warehouse reeds will see more demand and more pricing power, as tenants need workarounds for their goods and containers. This according to a new report from Alex Goldfarb at Piper Sandler.

So what are the names to watch? Let's start with lineage logistics. That's cold storage. It benefits from increased demand to manage food inventory in the case of import disruptions. You may remember cold storage, REIT seeing more demand during the first years of the pandemic, especially when vaccines required cold storage. Then you've got Terranow Realty. It benefits through strong demand for truck parking as tenants seek to avoid idle freight fees.

They raise prices during the first. years of COVID for container storage on their properties, according to Goldfarb, then pulled them back a little bit, but now they could go up again. I also spoke with prologists, the largest reet in the sector, and they said they are providing some overflow parking and storage areas to temporarily store inventory. They said their customers are evaluating different options, and they will consider adjusting operations depending on how the situation evolves. Now, this, again, is all if the strike is short term. If there's a complete port shutdown, long enough that the economy suffers, then really everyone loses because there are no goods

coming in and out of warehouses anymore, and that will hit them hard. But you, Kelly. Well, I would jump in, Dina, because you said it's going to be brief for a short term. It may not be, right? There's a chance. I mean, you've heard the head of the port talk. He's angry. There was no ships in port.

And Newark today, I drove by. All those goods, they've got to go somewhere. Right. And they're moving them around now, and they're trying to keep things where they are. and store them in the short term. But again, if this goes long term, and then you no longer have any movement in and out of the ports, or there's not some kind of rolling strike, which there had been an anticipation of in the beginning, then everyone's going to lose because the warehouses are not going to see

that inventory coming in and out. But for now, they're moving it around, and the most important thing is they're gaining pricing power in the short term. And the only, I guess, sort of benefit, and I wonder if this undermines a little bit the case for the warehouse stocks, Diana, but the fact that inventory levels are at highs that many of people kind of front-loaded knowing this could happen, you know, again, makes you wonder if that kind of smooths out the effect that the strike is going to have. Well, it could in part, but remember, there's also not been a lot of warehouse construction.

You have a lot of, you know, a high occupancy rate on warehouses right now. So, again, that does push, again, it's that short-term pricing power that we're talking about. All right, Diana Oleg. We appreciate your time. The search is also on for 2025 CNBC ChangeMakers. The list recognizes women transforming business and philanthropy who have accomplished a signature achievement this year. Nominations are being accepted through November 11th. Applying now at CNBC.com slash changemakers.

And we'll be right back. Welcome back. Markets have gone from slight declines to slight gains this hour. The Dow's up 59 points. So that's nearing session highs that we saw a little bit before noon Eastern. The S&P is up a point. The NASDAQ is up 28. And let's check in on the price of old.

which has been whipsawed by rumors and by geopolitical developments. Of course, today's been quieter on that front, at least in terms of the geopolitics, not in terms of the rumor mill, which we spoke about earlier with the Saudis reportedly looking for oil prices to fall, and then OPEC denying that they were actually doing so, or even that they met it all last week. The price of crude is up less than 1%, but it's over $70 a barrel today. In terms of the stocks making new all-time highs, Affleck, the insurance name is amongst them, Raytheon up to, along with the other defense names, Vist, a utility that's been a winner on the need for energy to power AI,

and that's the top performer on the S&P this year. Even outpacing Nvidia, Vistra has more than tripled. And remember, you can always hear us on our podcast. So be sure to follow and listen to Power Lunch, whatever your favorite podcasting platform, I'm sure that the show and others on CNBC are on there. We'll be right back. All right, the clock says that we've got about four minutes left in the show,

and we're not done. We've got a lot more stories, So I'm going to shut up and let's get right to it. Open AI, closing a funding round of $6.6 billion. Microsoft and Nvidia among the biggest investors, latest round. Values the company, Kelly, get this, $157 billion. I appreciate that, but to me the more important and perhaps relevant metric is how much they're losing. This is a company making less than $4 billion in revenue, losing $5 billion this year, reportedly. They have to pay for really expensive chips.

And as one person told Dan Primack, the way they want to play the Open AI funding, is by owning Nvidia, because that's where the dollars are ultimately going. Do they have enough energy to power all these data centers, too? That's a huge story that O'PIPP has talked about as well. So there's that. And by the way, chat GPT, it's like terrible on certain things. Well, not just that, but two questions need to be addressed. Number one, where are they getting current information from?

What are they paying to license that content going forward now that they're going to be a for-profit and they're out with the research model? And then number two, what are the other startups? Forget Open AI. How is AI empowering? And Deirdra has done great reporting on this. Startups to actually scale more. more quickly these days, I think we're going to start to hear more about even the IPO pipeline,

potentially, in a few more months. Well, maybe tomorrow we'll find out. Don't miss an exclusive interview with OpenAI's new CFO, Sarah Fryer. That is Lyle and Squawk on the street, 1015 a.m. They've had a lot of management turnover at that company, by the way. Yes, people need some stabilization. Didn't stop the funding round, though. Speaking of NVIDIA, they're expanding their partnership with Accenture to help companies scale up their AI adoption. Accenture will launch a new AI refinery service to provide clients with generative tools that will be powered by NVIDIA's AI stack. The news comes as Accenture announced generative AI demand drove $3 billion in bookings in its latest fiscal year. The consultants have gotten a boom out of

this so far, Brian, they'll probably continue to do so. But Accenture shares peaked a couple of years ago and year-to-date have not done much. Got a friend that used to work there. A lot of management shake up there. Certainly the CEO, putting her mark on the company for good or ill. I guess we'll find out long term. If you are a thought and knowledge-based worker, I know you're told not to fear AI. Don't worry. It's going to help you do your job better or it's going to do your job for you. And AI doesn't take sick days, doesn't take vacation, does it complain? I'm leaning out on the AI taking over anything narrative.

Me too. If you don't start to see major companies, and at the margin, maybe they're doing productivity enhancements, but real gains that we start seeing headlines from Microsoft about co-pilot, about adoption. Until we see that, I think these stocks are going to struggle to get bigger catalysts. Once they do productivity enhancements, then you're going to product yourself right out of the job. Enidia's CEO, Jensen Wong, and Accenture CEO, Julie Sweet, will both be on closing bell overtime at 4 p.m. Maybe a good topic for that.

All right. Meantime, China, wow, stocks red hot. They're just throwing everything. I think the Heng Singh is up like 25% in the past couple of months. Kelly, 30 seconds. What do we make of this monster run in China? It depends on who you ask. If you ask David Tepper, you're to make a lot of it.

Stocks are very undervalued, and they're going to continue to. support and stimulate. If you ask Dan Drucken Miller, you don't make much of it while Xi Jinping is still in power. But in the short term, Tepper with that bet he talked about on Squawk Box, if he could get his Carolina Panthers to perform like the Hang Singh. You know, he came on after they won. Did you notice that? They won, singular. Well, I'm just saying, one. His, the trade move he made on this alone has, is all the buzz. What has two thumbs that will be back with you tomorrow you. You. Thanks for joining us today. It's been fun. And thanks for watching Power Lunch. Closing bell starts right now.