Power Lunch - S&P 500 rises slightly following Trump tariff plans 11/26/24

Episode Date: November 26, 2024

The S&P 500 is slightly higher today, as investors look past the threat of new tariffs from President-elect Donald Trump. We’ll break down what it all means for markets and your money. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Contessa Brewer. I'm Tyler Mathis, and glad you could join us on a somewhat soggy day here in New York. Quick check on the markets right now. The industrials with modest gains of about five points at 44-742. S&P, about a half-point higher, ditto, the NASDAQ. Let's get right to Steve Leesman now for the minutes from the latest Federal Reserve meeting. Steve. Tyler, thanks. The minutes to November meetings say that if the economy performs as expected as in inflation continues. to come down. The labor market remains around full employment. It will be appropriate to gradually move the rate towards news. Notice that word gradually appears a couple times in the minutes. All participants agreed at the meeting to lower the rate in November. Almost all saw the risks on both sides of the mandate between full employment and stable prices to be pretty much balanced. Some saw less downside risk to the economy in the labor market. Some suggested that the could pause if inflation remained elevated. Some said easing could be accelerated if the economy

and the labor market weakened more than anticipated. There was uncertainty over the neutral rate, complicating the level determining how restrictive the Fed is and underscoring the need for the Fed to move gradually because of that uncertainty over the level of restrictiveness and the neutral rate. The committee did see progress on inflation, but noted it remained elevated. They expect housing inflation to come down in the coming months. A couple were concerned that inflation, however, could take longer to get to the 2% target. Several factors were seen putting downward pressure on inflation, including declining pricing power at businesses, the still restrictive monetary policy from the Federal Reserve, along with anchored inflation expectations. Some did not

see wages any longer as a potential source of inflation, especially due to productivity gains. The economy was seen expanding at a solid pace, and the financial system has, had risks, including unrealized losses on bank assets and commercial real estate. Notice, guys, no talk of tariffs. The only mention of the word fiscal was in regard to China, and there was no talk on the election, except for one note from the staff about volatility and markets around the election. But those may have been issues that were on the minds of Fed officials, but does not appear they showed up in the meeting.

Tyler? All right, Steve, stick around as we discuss this a little bit more with Steve. Stephen Stanley, Chief U.S. economist at Santander, U.S. capital markets. Stephen, welcome. We'll try and make you Stephen, and we'll make him Steve, just for clarity's sake. Do you hear anything in here that surprise you at all? Not really. You know, the Fed is on a downward path, and we're just all guessing about what the pace is going to be. Yeah, and you hear in here, some say a pause is possible if inflation reignites. Others say we could move more aggressively lower, a cut as possible, if you continue to get the economy and the labor.

market's performing. So it's a pretty balanced report, right? Yeah, it really is. And, you know, I think the markets right now are pretty finely balanced. It's pretty close to a coin flip. It priced in the market right now. So cut to the chase in December, what do you expect? I think they'll cut again. I think they feel like they're still pretty far away from neutral. So they feel like they still have some distance to go, and they'd like to get another notch in their belt on that. We heard Fed Governor Michelle Bowman say that progress on inflation has stalled. Given the headlines that Steve Leasman just brought to us, does it sound like that was factored into the discussion in the last meeting?

Well, I think there's starting to be a little difference of opinion amongst Fed officials. I think Powell and a number of others on the committee are feeling pretty optimistic about inflation, but some of the more hawkish members like Governor Bowman, I think are starting to question a little bit. Steve, what are you seeing on that front? Did you hear some of those echoes of what we heard from the Fed governor? Yeah, when they say almost all see the risks as balance, that may mean that it's just Bowman or maybe Bowman and a couple others

who are a little bit more concerned about inflation. But I think the operative phrase, I was just rereading it, contested, to make sure I presented it correctly. So I'll just read it to you. In discussing the out of your monetary policy, participants anticipated that if the data came in about as expected, with inflation coming down to 2%, the economy remaining an investment,

maximum employment. It would likely be appropriate to move gradually toward a more neutral policy. So what does that tell you? I think that tells you that it's going to take a bit to shake them off of this trajectory they're on. They're moving gradually. There are no particular hurry to get there, but still the direction of travel has not changed. And I think it would take a pretty market change in what's going on with inflation or, for example, an acceleration in the labor market that would alter them from this path they appear to be on. And you said that there was some question over determining the neutral rate. Right. The neutral rate. What goes into that? Well, what, as, as Chair Powell has said, you know the neutral rate by its work. So you set the

policy, you see how the economy behaves. You look at the numbers coming in. And if the numbers are higher than you expected, well, maybe the neutral rate is higher than you thought it was. If it's lower than expected, maybe it's lower than you thought it was. Maybe you're less restrictive than you thought you were. I think there's good agreement on the committee that they remain restrictive. And this really gets to Stephen Stanley's point, which is that the Fed feels as if they have some ways to go. How much is unclear before they hit that neutral rate? I am looking now, Contessa, by the way, at the probabilities pretty much unchanged. I think Kashkari's comments that you could consider or should consider a rate cut in December moved it up a little bit. So we're now at a

59, call it a 60% probability of a rate cut in December. That's about where we are. And then that would be follow-along. It looks like the market is not sure what happens in March. Remember, the way it had been priced was cut December, pause January, cut March. Now it's pretty much cut December, pause in January, and we don't know what's going to happen in March. Stephen, let's talk about two particulars. One would be your outlook on inflation. Is it moving in the direction you would hope it would, and how much progress is being made there? And then What do you think overall about the economy as we are in this fourth quarter and move into the first quarter of 2025? Slower?

Steady as she goes? Faster? What? Yeah. So on inflation, I think we are moving in the right direction, but I think it's pretty slow. And it feels like we've seen these fits and starts, right? We have very low core inflation, second half of last year. Then it re-accelerated to start 20-24, then a little slower.

And now it feels like we're on another one of these upticks. as we had high inflation numbers in September and perhaps again in October. So I think that gives the Fed maybe a little bit of concern, but in general I think they feel pretty, most of them seem to feel pretty confident that with time, inflation will continue to come down. On the economy, I think we're heading into a little bit of a soft patch. We were hearing a lot from businesses in advance of the election

that they were pulling back on investment to wait and see what happened in the election and then what policies might look like going into next election. year. So I think business investment is probably going to be pretty slow in the near term and then pick up as people re-engage with a cooler labor market. The consumer should still be healthy, but maybe a little slower than what we've been saying. Stephen, when you look at the question mark surrounding the incoming president's policies, the tariff proposals that we've just been hearing about today, and we'll get into that a little bit ahead in this hour. But it's unconventional. The thought

leadership that will come out of the White House is unconventional. Can the Fed interpret an unconventional fiscal policy through conventional Fed policy? Sure. So I think one thing we know is that the Fed is not going to try to forecast or get ahead of what the administration is going to do. Chairman Powell is very clear about that in November. And I think for political reasons, if for nothing else, they have to kind of play it that way. So the Fed is just, they need to keep their eye on the ball. They're supposed to be focused on inflation and the labor markets, and I think they continue to do that

and just conduct policy the way they would in any other environment. Steve Leasman, a final word to you. Want to sum it up for us? Yeah, no, I think what Stephen Stanley said is what I was going to emphasize. It may be the reason why there is that uncertainty in the March probabilities, because we don't know two things. We don't know exactly what the administration is going to propose, how it's going to affect the economy,

and of course the knock on from that, how the Fed will react. It may be well down the road. If Stephen Stanley is right in how he's thinking about Powell and I have no reason to think he's wrong, then what you would do is you would have a policy enacted. It would hit the economy, and then after some time, it would show up in the data. So you can imagine the Fed not necessarily reacting to this,

if it's just going to react to how it affects the data, for maybe a year from now would not be a crazy thought. Now, it'll change the outlook. create more uncertainty, and that may cause the Fed to move more gradually. I think it's probably the best bet here. All right, Steve Leasman, thank you very much for bringing us that coverage. Steve and Stanley, you're going to stick with us, and let's get into that tariff discussion in just a little bit.

Thank you for that. Let's get to Rick Santelli now in Chicago for a look at how the bond market is reacted to what we just heard from the Fed. Rick? Well, you know, the markets do have an opinion here. If you look at twos and tens on one chart on an intraday, what you'd jump out at us is several things. First of all, two-year led the move lower, short maturities because of the implications of the Fed. They're down about three basis points from where they

were prior to the minutes, and that was around 429. We're down about a basis point. Actually, 10s now are right back where they were, 431. They haven't really moved much. And that makes sense, because when I look at the minutes, I think like the market thinks at this point. There's a bit a rethink going on, didn't read anything about weakening labor market. I understand we didn't see much about the election and politics. That makes sense because nobody really knows how things are going to happen after the president's sworn in. He's already making a difference without getting sworn in by floating some of the terrified ideas with regard to issues like Mexico. And on the neutral rate, you know, you asked how do you calculate a neutral rate? There really isn't an answer

to our star. It's guesswork. They think it's a lot. lower. They said that in the past. They didn't say a lot lower this time. So there are question marks. And if you look back to Friday, even though rates are up today a bit from Friday, we could see how Monday really took the wind out of the sales of higher rates and stopped that 10 right at resistance of 4.5%. And when you put all three on one chart, dollar index 2s and 10s for a two-month chart, which encapsulates the big run-up in rates in October, you can really see that for the most part, the issue that the Fed should think about is that maybe they're looking for less Fed because it certainly seems as though there's a sideways stickiness to rates, very similar

to year-over-year inflation core numbers, which, by the way, we'll be getting more of tomorrow morning. And you'll be all over that, I know. Okay, Rick Santelli in group think with the markets. That was my takeaway there. Rick, thank you. Coming up, not so free trade, President Trump expanding his tariff targets beyond China. On to North American allies, Canada and Mexico.

What happened to our deal? We'll discuss the impact on the economy next. President-elect Trump threatening to hit not just China, but Canada and Mexico as well with tariffs on his first day in office. Let's bring in Aman Javis now for a look at what Mr. Trump said and also the motivation behind it, Amen. Hey there, Tyler. The president-elect's flurry of social media posts Monday night are raising the question of what he's up to here. because the bar he's setting for compliance by foreign countries is almost unattainable. Trump took to social media to complain about human migration and also drug trafficking

and suggesting that he'll impose tariffs on Mexico, Canada, and China until the flow of fentanyl in particular has stopped. Now, Trump said he'll impose a 25% tariff on all products coming into the U.S. from Mexico and Canada. And he also wrote, drugs are pouring into the country, mostly through Mexico. And until they stop, he'll charge China an additional 10%. 10% tariff. The Chinese embassy in Washington responded with a statement of its own saying, no one will win a trade or tariff war. The idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality. Now, the stakes here are enormous with $130 billion in U.S. vehicle imports from Mexico in 2023 and billions more in

electronics, machinery, and other goods. The big ticket items coming in from Canada include more than $130 billion in mineral fuel oils, distillation products, along with vehicles, commodities, plastics, and so much more. So this may be an attempt by Trump to speed up a renegotiation of the U.S.-Mexico-Canada trade agreement that he signed back in 2020. That deal is up for renegotiation in 26, but Trump may be calculating here that he can bring all sides to the table earlier using the leverage of tariffs, and that's what we're seeing playing out on social media over the past 24 hours.

What I see here is what we know, I think, about President Trump, and that he is about making deals and he is about applying leverage wherever he can. And this is leverage to try and get from China, from Mexico, from Canada, the kinds of concessions he wants. And he's using an economic weapon to address things that are, in some cases, not really economic threats like fentanyl. You know, I think that's exactly the right way to look at it, Tyler. The problem for Trump here is that, you know, he can't have a win-win, right? I mean, he wants the tariffs and he also wants fentanyl out of the country. And in theory, imagine that, you know, fentanyl could be shut down by these foreign governments coming into the United States.

That's debatable. But accept that for a second. If the tariffs work to do that, then, you know, more the merrier, right? But ultimately, you know, if you have the tariffs in place and you have the fentanyl coming in, you've got a problem. And you can't win on both sides of this argument. What's the reaction from Canada and from Mexico? Well, we'll see. I mean, there was an interesting quote from Justin Trudeau said that this relationship requires some maintenance,

and that's what we're going to do. We're going to put in the work. So clearly, you know, Mexico, leaders in Mexico and in Canada have seen this movie before. They know who Donald Trump is. This is not an unknown character coming into the White House. And so they'll have a plan of their own to deal with it. That's like the understatement of 2024. probably some maintenance.

All right, Amen, thank you for that. Let's get more on how Trump's tariff plans would affect the markets and the economy. And once again, Stephen Stanley, Chief U.S. economist at Santander, U.S. capital markets, joins us. And let's also bring in Malcolm Etheridge, managing partner of Capital Area Planning Group and a CNBC contributor. Malcolm, the tariffs have long been telegraphed by Trump. How's that for alliteration?

What do you make of the targeting of Canada and Mexico in this? case? Yeah, Contessa, I am not as sure as Tyler and Eamon seemed to be just then in that last conversation about the fact that it is 100% meant to be a bargaining chip. And part of the reason I say that is the answer to your question, the fact that we're now roping in Mexico and Canada into what to this point has been more of a conversation about China. And I think the global market seemed to be a bit torn in response too, right? Traders in the U.S. have been fairly muted today, maybe positive. You know, I know the dollar's been rallying, which is sort of the opposite impact, I imagine, that the incoming president wanted to have. But currencies are steadily

falling all across the other countries that we're talking about. So Americans might be used to Trump and his hot and cold temperament and big proclamations when it comes to negotiating, but the rest of the world, obviously, is not. Let me, let me push back a little bit on the bargaining chip point. I mean, we raised the idea that the tariff, raising the tariffs on China might be employed as a way to get China to restrict the flow of fentanyl and its precursors into, through Mexico, into the United States. But the same could be said here about tariffs being applied to Mexico. They want to stop the fentanyl that's coming across the southern border in precursor form or in final form.

So that could be a bargaining chip there. And they also want to control the flow of refugees and immigrants across the Mexican border and an economic penalty that causes pain in Mexico. might induce the Mexican leadership, a new leader, by the way, to take stronger steps to control immigration. So it's not merely economic tit for tat. It has to do with these other, let me call them, for lack of a better term, more social objectives. The concern there that I would have as an investor are the implications that all of those tariffs would have on inflation, right? So the last two and a half, let's call it years, the Fed has been doing the one thing that it can do to bring down inflation.

And in the middle of us easing, right, we're in the middle of a cutting cycle on interest rates. Everything that we're discussing right now presumably would be inflationary. So I understand the idea that it helps solve one piece of the agenda from a social perspective. But it also stands to undo a lot of what has been done by Jerome Powell and crew. And so I think there has to be a balancing act. Don't disagree all about that. Do not disagree about that. Although Stephen and I were having a conversation before we came out for power lunch today.

You talked to him before? I did. Without me there? I invited you. I couldn't find you. But the conversation was about insurance, which I cover fairly closely, and all the complaints that we've been hearing about premiums for car insurance and for homeowners insurance, part of the reason those premiums have skyrocketed is because the cost of replacing homes or your roof or repairing your house.

the cost of replacing your car or repairing your car, it all shot up. We can see it in the CPI. And so my question was, is it inflationary, even for an industry like insurance, if you're putting tariffs on cars and car parts and things like that that are coming from Mexico? And you had a really interesting answer for me. So, yeah, you have to, well, if you're an economist, a layperson would have a different answer. But as an economist, you make a distinction between the level of prices and the rate of change. of prices, which is inflation.

And the Fed has often said that they tend to look through one-time changes in prices. So if there's a one-time tariff hike that raises the level of prices, but it doesn't change the longer-term trend of inflation. So the Fed has said in the past they would look through that. I mean, an oil shock would be a good example of that in the past. So it's not tariffs are not necessarily inflationary? They're not necessarily inflationary, but they can be if there's, you know, tit for tat, we go back and forth and there are multiple rounds of retaliatory tariffs,

or if the initial imposition of tariffs leads company to raise their prices by more than the amount of the tariff, for example, which would have probably never happened in 2018, but, you know, given the inflation we've seen over the last few years, could happen this time. And so when you said you see a softening patch coming ahead as companies maybe hold back from Cap-X investments or the like to see how the new president, the new policy, play out, how do you see tariffs playing out and the overall impact on the economy? Yeah. So I think there are pluses and minuses from the business perspective. Lower taxes, obviously a plus. Deregulation, obviously a plus. Tariffs definitely a minus. And potentially,

if you go back to 2018, I would make the argument that the biggest impact that tariffs had in terms of eroding growth was the uncertainty that they engendered, right? Because, Because you start out by saying, oh, I'm going to put tariffs on this industry for this reason. But the Trump messages from last night suggest he could use tariffs for any purposes. And so if I'm a business, I may think I'm safe from a trade war, but maybe I'm not. It also complicates, I think, Malcolm, when you have certain industries who make decisions. Say you are an industry, a textiles industry that move from China to Vietnam so that you could take advantage of more favorable trade policies. If you don't know what's coming down the pike,

if you don't know whether Mexico, which is a favored trading partner today, might not be next year, it's very hard to plan for the future. Yeah, I think without some sort of offset, right, to ensure that business back from wherever in Asia it might be to the U.S., which I assume is also part of the Trump agenda and what they really would like to see,

is a lot of these companies that have left the U.S. and ultimately those jobs also left come back into the country. And so if there is some sort of offset that allows those companies to benefit from bringing that in-house where we would be able to predict a little bit better, control a little bit better, because you wouldn't have the destabilization of currency, exchange, and all those sorts of pieces, I think that would be a benefit that people could get behind. But just simply the rhetoric around ideas of tariffs on countries, you know, across the board carte blanche causes way more instability than I think maybe isn't. intended today. A couple of your stock picks, Malcolm, have nothing to do with tariffs. They have to do with cybersecurity, Palo Alto, and SoFi. Give us quick thumbnails of both of those and why you like them.

Yeah, so I'll go with Palo Alto first because it does tie slightly into the conversation that we're having, right? The pullback that we had in response to the earnings last week presented a great buying opportunity, I actually added shares because there's a lot of rhetoric that's happening against China from the U.S. currently, the incoming administration. And we already know that one of the more hostile bad actors when it comes to cyber is China. And so I think that Palo Alto being one of the largest beneficiaries of federal spending on cyber defense is going to be even more benefited from those contracts coming their way. And that could be part of a bargaining chip, a tariff, to

pressure China to cease its whatever cyber mischief there. are doing. Malcolm, thank you very much. Stephen Stanley, thank you for being with us for 25 minutes from the start of the show. That may be a record all-time. He's like, that's a lot out of my dead here. And then you talk to him off and off. Yeah, right. I took up some of that too. You took up some of that time. We appreciate it. Up next is Amazon Prime to take the lead in the AI race. Our next guest says the company's deal with Anthropic could be a game changer. The market navigator is next. Welcome back to Power Lunch. There you're seeing green arrows across the board, although really the Dow is flat. The S&P 500 up a third of a percent,

same for the NASDAQ composite. We'll keep our eye on that throughout Power Lunch. Now let's get to today's market navigator, and Dom Chu joins us. What's in it? All right, so Contessa, we're turning now to the AI race. What else? Amazon announcing last week it will invest in additional $4 billion in Anthropic. That's the artificial intelligence startup founded by ex-open AI research executives. our next guest thinks that's positioning Amazon to take a leading role in the space, despite all the open AI talk. So let's join us now, joining us now is Jessica Inskeep, the director of investor research at stockbrokers.com. And Jessica, this is a multi-horse race, but why is it in your mind that Amazon is the one that we really have to watch? Yeah, I think the narrative is a little incorrect saying that the big competitor now emerging is Nvidia.

And I really think this anthropic investment with Amazon emerges a new competitor, which is Microsoft. It makes it, Amazon has the infrastructure, but lacks the intelligence to become an AI titan. So this $8 billion investment, it brings Chat JPT's main rival, which is Claude, to Amazon. We have to remember, Amazon has a lot of devices. It has the infrastructure, and now it just needs this large language model. It doesn't necessarily have the clientele that ChatGPT does, But because of this infrastructure, think 2026, especially with the news with NVIDIA today, it's going to really heat up the AI wars.

All right. So the NVIDIA is like audio generative AI. Everybody's getting in some aspect of it. What exactly then is the trade that you would make on Amazon if you feel as though they're the best position? Yeah. Well, at first one I define my sentiment, which I definitely want to use the technicals to do. And the technicals are certainly in harmony. They're showing a bullish trading cycle.

Dom, you know, I like to look at the 13. in 40 weekly moving averages because that represents one, two, and three quarters worth of prices. I want to see that increase as we look at the market quarterly. That's acting as support right now. It's my lower level around 193. My near-term resistance is around 2.15, which is that high it made back in November 11th. So I really have a bullish sentiment, a bullish backdrop on this. I just want to see a continuation of the rally.

And of course, I'm watching the strength of the trend. So this is the one thing I'm flagging. I utilize Bollinger bands to look at momentum when I'm looking at a weekly chart because it represents two standard deviations. If I have the trend momentum, I expect it to stand at the higher end of those deviations. That waned a little bit, but I see us heading towards the upper end of those bands. So if we're at the upper end of those bands, that's going to give me strength. So meaning, I am neutral, short-term, bullish, long-term on Amazon right now. Okay. And what does that mean in terms of your strategy?

How exactly would you position yourself to capitalize on these particular? moves. Yeah. So to deploy that, I'd like to add it to my longer term portfolio. I love to do that as an option trader via utilizing a cash secured put. I essentially am selling the put, creating an obligation to buy the stock at my strike price. So I'm selling the January 17th, a 205 strike looking for something closer to the money that gave me about $6.65 cents altogether. I'm risking that entire exercise value of 205 per share. However, it's offset by that upfront premium that I'm realizing of $6.65. All right.

So you're using that cash secured put. You make it a little bit cheaper to get Amazon stock. Jessica Inskip, thank you very much. We'll see you again soon. Happy Thanksgiving. Thank you, Don. All right. So this is an interesting play because there are so many kind of cross currents and channels.

There are people who are allying with each other, investing each other. The large cap picture for tech, very muddled by all these investments in AI. The other thing is, if you look at Google, Amazon, Microsoft, capturing two. thirds of this market. It would be interesting to see of the other third that is chopped up, who's got an opportunity to make a run at it and make a go of it? I would say this, Contessa, I think among all the mega-cap tech companies, Amazon probably knows the most about me. Just kind of weird for me. Totally true. I know. All right. Thank you, Dom. Chiler. All right, thanks, guys. After the break, we'll stick with the AI space. It's been two years

since Chat GPT launched. How far has AI development come? And are we ready or already moving? into the next big thing. And what could it be? Power Lunch. Be right back. Welcome back to Power Lunch. I'm Pippa Stevens with your CNBC News Update. As tensions between NATO and Russia escalate, the military alliance reaffirmed its support today for Ukraine during an emergency meeting. Kiev called the meeting following Russia's launch of an experimental, indeterminate-ballistic missile last week. NATO called the attack another Russian attempt to intimidate Ukrainians. Texas's Land Commissioner announced today that more than will be available to the incoming Trump administration to use for detention and deportation

facilities on the southern border. It comes ahead of Trump's promised mass deportation once he takes office. State officials say they purchased a 14,000-acre ranch for this purpose and said other properties have already been identified for federal use. And dictionary.com named Demure as its word of the year. Searches for the word exploded in August following a viral video from TikToker Jules LeBron. Dictionary.com says it saw a 1,200% increase in usage in digital web media alone. Other words that made the shortlist were brain rot, brat, and extreme weather. Well, Tyler, I guess the kids are learning some vocab on SITS. Yeah, that was a very demure report there.

Thank you very much, Pep. All right, it's been two years since Chad GPT was released to the public, kicking off an AI craze that has sent stocks soaring. The NASDAQ 100 is up 77% over that span, but could the AI-fueled rally be running out of steam? Kate Rooney joins us now from San Francisco. What say you, Kate? Hey, Tyler, yeah, so that is the big question. The launch of OpenAI's chat, GPT, about two years ago really did kick off this AI rally.

It created sort of these halves and have-nots in tech when higher interest rates were really eating into growth and valuations. AI names seemed to be immune in the past two years or so. Our data team looked at the global XAI and tech ETF. That's jumped in value by about $11.5 trillion, roughly doubled over two years. That's across 84 stocks. And if you look at just Nvidia, Microsoft, Amazon, Apple, Mehta, Google, those six names added $8.4 trillion, making up most of that in market cap. So the big question, as you mentioned, Ty, is this all a bubble? What's going to happen next?

Most investors I have been talking to say there are some bubble-like pockets of this market. But overall, they say no. They think we're still in the early innings of this tech wave. They argue it is not like the dot-com mania of the 1990s. Brent Thiel from Jeffery's pointing to CAPX as one signal says, as long as that keeps climbing as the hyperscalers, those big tech names I mentioned, keep spending. He says they're all in on this,

and that is a positive signal also pointed to multiple, says Microsoft and Viti are trading below 30 times 2026 earnings, says that does not signify a bubble in his mind. Adam Parker also in the no bubble camp points to the broader rally. energy and infrastructure beyond just tech. What he says would end the AI party would be any sort of sign of lack of demand from Nvidia and TSMC's and the chipmakers. He's also watching for AI to flow through to earnings. Any company's increasing margins without needing to hire would be a bullish sign. And then Nicola's telling me does have some of the vibes of the 1990s,

he says, the dot-com bubble there. But he says it's without the scores of IPOs we saw back then. The fact that we have not seen the amount of IPOs tells him that the bursting of any sort of bubble is still some ways off. Also says the bubble, though, does seem to be happening in private markets, guys. Okay, well, speaking of private markets, I know you had some reporting this afternoon on Databricks. Contested, that's right. So, Databricks is one of these AI darlings out here. I'm told by several sources it's in the middle of raising between $5 and $8 billion, which might break a record. You remember OpenAI raised around $6 billion.

This could top that if it ends up going to the high end of that range. It would be a $55 billion valuation. And we talk about the bubble. I mean, a $5 to $8 billion round is massive, but it seems like we're reporting one of these every other week. The numbers are just eye-popping, and it really has become the norm. You talk to some CEOs out here. They worry about a bubble. They worry about going public, actually, next year at the peak of a bubble.

If you remember in 2021, when interest rates were at zero, a lot of companies went public. They look at that as the example of what not to do. If you go public at the top, your investors end up losing money, your employees end up losing money, they really don't want that. So that's some of the conversation I'm having with CEOs. They do worry about it. I would say also in venture capital, the mindset is they're willing to let nine out of ten companies fail. So there is this FOMO factor that sort of baked into the venture capital investment in general, just the mindset. And they're willing to kind of chase the next big thing.

As long as they get that 10 bagger, as long as they get that one out of 10 that wins, they're willing to let some fail. So a bubble is kind of part of the boom and bust aspect of this town. It sounds like gamblers. Like that's the mentality of gamblers, too, in Las Vegas and elsewhere. But if investors are looking for the next big jackpot, it sounds like they're really focusing attention on quantum computing stocks. We've seen those names really soaring in the past week after Amazon Web Services launched Quantum Embark. It's a program that helps customers prepare for the era of quantum computing. Is this?

Is this the next big thing, Kate? Yeah, no, it's a great question, contesto. So quantum computing, I think a lot of people look at this as they're trying to find the next NVIDIA. They're trying to find the next sort of picks and shovels of AI. This is seen as one, but quantum computing has been around for decades. It's been around about as long as AI. It is really these deep technology, and there's not that many publicly traded ways to get into

this. What those stock charts are going to buy to me is a little bit of FOMO, a little bit of retail, chasing sort of the next big thing. And it is something that's talked about. You've got Amazon, Google, a lot of the big tech companies trying to build their own supercomputers and quantum computers. There is an AI aspect. It makes sort of improving these models a lot easier and a lot faster.

So, yes, there is sort of some optimism around that. But I would say what's happened to the stock charts is more a symptom of FOMO of retail chasing. And a little bit of the froth you see out there. You look at something like Bitcoin. That's another symptom of, I think some of that underlying sentiment. All right, Kate, good to talk to you.

Thank you. All righty, coming up, Amgen announcing its experimental weight loss drug, help patients with obesity, drop 20% of their body weight after a year, but that news is doing nothing to lift the stock today. One of the biggest drags on the Dow. We're going to get the full story here. It's losing weight. It's losing weight in the Dow.

Down 6%. We'll be back. Welcome back to Power Lunch. You're looking now at the markets. You're seeing the S&P 5. up almost half a percent, the Dow industrial is up a tenth of a percent, and the NASDAQ composite up 0.35 percent. In fact, the Dow had just turned positive despite what we saw was a big drop in Amgen. Angelical Peoples joins us now with more. I mean, like you would think if you said,

okay, you're showing some real improvement in weight loss, that would be enough, but instead the stock moving in the opposite direction today. Exactly. And I think it just speaks to really the competitive dynamics that were in here, because you do have these two effective treatments on the market from Lilly and Novo. And so the bar is higher. Now Amgen did say that people who took Maritide lost on average 20% of their weight, but the street was looking for closer to 25%. So already there's some disappointment. And then with the side effects, 11% of people dropped out because of any side effects and 8% specifically because of gastrointestinal issues, things like nausea and vomiting that are common with these drugs. But together, that brings a mix that raises questions

about really how competitive they can be here against Lily and Novo, who have a big head start. And so, you know, there were also some questions about really what's next for Amgen, what their plans are for the phase three. And they didn't answer a lot of those questions yet because they're saying that they're in conversations with regulators. But, you know, I think as a whole, investors are kind of looking and trying to figure out what is next for them. But you are seeing the stock pay back some of those losses. It was down closer to 10 percent earlier and now down 6%. So maybe people are getting a little bit more comfortable as they digest these results. I'm just curious. Were you satisfied with how much detail you got in the report or was there

some reluctance on the part of Amgen to share everything that might be of interest to investors and slash journalists? That was a big question that did come up today on the call. There was a call for investors and also a call for reporters. And we were trying to ask basic questions like, you know, can you tell us, you know, what can you tell us about the side effects? here and about the doses that you're seeing, you know, where are you going from here? And we didn't get a whole lot of detail, even things like trying to specify exactly, can you talk to us about the rates of nausea and vomiting and, you know, how those compare? And, you know, it seemed like a little bit of, you know, they were not giving straight answers. And I think that was frustrating for people.

They just kept reiterating, you know, these data looked good. We're seeing weight loss that's going to get better over time, you know, things like monthly or every other month because they explored both of those. And I asked them specifically, you know, if it's working for monthly and every other month, why not just do every other month? And, you know, we have to talk to regulators, which is a fair point. But I think that just adds to this confusion today. Yeah. So you can compare you the side effects profile and the side effects can be quite distinctive, I mean, on these drugs, right? Yeah. And that's a problem that we've seen with all of these drugs. But people are trying to parse out exactly how it compares for Maritide with what we already have on the market.

And, you know, Evercore put out this list of just breaking down all of the percentages of the GI side effects. You want to feel sick or you want to be skinny? Yeah. And so, you know, that's not to discount the fact that this is a monthly, possibly even less frequent injection. Because, you know, I actually just heard from an obesity doctor that we talked to who said that is something that's valuable for patients. And the fact that maybe if you do lower the dose, the starting dose that maybe you can decrease some of those side effects. But again, this speaks to just the state that we're in that it's not just a number. enough to show a 20% reduction in weight.

You need to think about everything. I'll bet when that analyst was in business school, he never thought that he was going to be listing out the side effects of... What's the percentage of these sort of gastrointestinal side effects? Wow. Well, thank you for covering the story so well. Appreciate it, Angelica. All right.

Still ahead, we will trade some names that could see a big ripple effect from President elect Trump's trade and tariff threat. A special three-stock lunch is next. We'll be right back. Welcome back. Time now for three-stock lunch. Earlier in the hour, we discussed President-elect Trump's vow to add additional trade tariffs on China, Canada, Mexico. Now we'll trade some names that could be directly affected. Our trader today is Victoria Green. She's the founding partner and CIO of G-squared private wealth and a CNBC contributor. Our first stock today is Walmart, and you say Walmart is going to be better able to navigate these tariffs since it can use its size and scale to help offset the costs. Explain. Yeah, so I see Walmart as a huge winner regardless, but everybody has some concerns. Oh, my gosh, everything they sell in Walmart is made in China.

But the fact of the matter is it's not going to be Walmart likely eating that. It's going to be all their suppliers. Think Pepsi, Procter Gamble, Kimberly Call our Nike, Adidas, anybody that wants to sell Walmart, Walmart's the biggest retailer in the world, and they're going to say, hey, you need to eat some of that costs. We're not passing it on to our customers. They likely make their suppliers eat the bulk of any of tariffs to continue to provide discounting. We saw that work well for them during the inflationary periods of 2021, 2021,

2022. So I love this stock here. And if there's going to be a fight, I want the biggest bully in the world. And that's going to be Walmart, getting me the best prices for their customers. All right. And I can hear the PR people right now freaking out about being called a bully. But, you know, like you make a good point there. What about booze? You've got a bully in a good way. Yeah, right, right. Like a bully pulpit. Like you're the preacher. All right. Constellation brands. The maker of Corona, Medella beer, which of course tied heavily to Mexico. Is that a problem? I think it's a huge problem for them.

And I understand some people are arguing, well, this was part of the reason they had to keep the manufacturing there with the distribution deal that they made about a decade ago. But I see this as a massive problem for them. They're 87% of their revenues are beer-related, and their beer brands are Corona, Modelo, Victoria, all these Mexican brands. And it's estimated that a 25% tariff is likely going to increase price to 12%. So not only are they facing a potential tariff headwind, very focused on Mexico. But they also are afraid of seeing declining beer drinking volumes. The only reason that the revenues have gone up is because they're raising their prices, but they're not actually selling a lot higher volume.

And specifically, beer business, which is a lot of their volume and most of their revenues, is already a declining business with the younger crowd. So they were facing secular headwinds with beer drinking in general in the United States is going down. Now they might be facing tariffs. For me, I want to sit the stock out. I'm a little worried it's going to hit some new fresh lows and retash lows from 22. So to me, I think I'm worried. about it. Did you say they had a beer named Victoria? Is it named after you? They do. Wow.

They named it after me. Absolutely. You ought to, yeah, you better serve it then. All right, final name is General Motors. There could be big pressure on automakers to build here at home, and the industry is on the hot seat, Victoria. We got about a minute. Yeah, so for me, this isn't just about the four manufacturing plants GM has in there, but it's all the part suppliers that are based in Mexico. So you may see upward pricing on cars, and we've already seen that be very, very difficult. So if we see Oprah pricing in cars, GM has to raise prices, we're already seeing potentially slowing car sales volume. That's bad for them. Additionally, they got called out by name by the Mexican president, so they may get caught up in a sit for

tat. And they are Mexico's largest automaker exporter. They export mostly to the U.S. and Canada, so they are just looking at a whole lot of problems if there's retaliatory tariffs. And it's also people are overlooking how many parts manufacturers are based in Mexico. So even if GM can slightly avoid these tariffs. All of the manufacturing and parts that are coming in, likely more expensive. And that is where we got into car insurance and how down the road this could actually have an impact there as well. Victoria Green, thanks for joining us. Appreciate it. Happy Thanksgiving. Happy Turkey Day. All right. We got a Dow that's moving higher by about 47 points right now. So a bit of an up day. Russell 2000 is negative. S&P positive by about a half percent.

The same for NASDAQ. Thanks for watching, Powerline. Scott Wapner and the closing bells start right now. Yes, it does.