Power Lunch - S&P 500 rises to new record as Nvidia powers chip stocks higher 10/17/24

Episode Date: October 17, 2024

Stocks are higher after getting a boost from semiconductor names, while strong economic data eased lingering fears of a potential recession.September’s retail sales figures showed that consumer spending was still robust, with monthly spending increased by 0.4%, while the Dow Jones consensus estimate called for 0.3%We’ll tell you what it all means for you 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 Launch, everybody, alongside Kelly Evans. I am Tyler Matheson. Welcome, glad to have you with us. Stocks are higher today. With the S&P 500 hitting a new record, one big driver has been chip stocks following Taiwan semis results, and they were very good. And they have lifted other chip stocks as well. I mean, monster move there. Another factor contributing to the positive market sentiment, strong economic data. Jobless claims fell last week, even with the storms. They were below estimate. Retail sales were strong as well, up four-tenths of a percent. And that has people cheering about no landing, maybe. No landing, and the employment numbers, which seemed to wobble a little bit a couple of months ago, seemed to have stabilized now. And a potentially interesting tie-up reports that Uber has explored a possible bid for, or some kind of combination with Expedia, though our Deidre Bosa's reporting talks are not currently ongoing. This could be obviously a major game changer.

I'm not sure I see how the two fit together, but not sure I did understand. What I do see is the market cap gulf, with Expedia now a $20 billion company and Uber about $140 billion. Let's start with the tech component to today's market gains Taiwan Semiconductor higher, as you see right there by almost 12%. Following results and bringing other big chip names along with us, Sima Modi has the details on Taiwan Semi's report and its guidance heading into the future. Hey, Sima. Well, Tyler, with Samsung and the Intel facing their own set of troubles, Taiwan Semiconductor remains the go-eastern. to option for manufacturing AI chips. The company raising its revenue outlook to 30% for this year versus the 20% Wall Street estimate. Profits also coming in higher than consensus. And Morgan

Stanley this morning reiterating its top pick as TSM in the chip space. The company's bullish forecast now is raising hopes that spending on artificial intelligence will remain strong beyond this year. So dismissing the idea of AI, quote, peaking a welcome sign for tech investors. NVIDIA, which is a customer of TSM, seeing its shares hit an all-time high today. CEO of TSM's Cici Wei, saying its most advanced semiconductors used in artificial intelligence made up nearly 70% of quarterly sales, referencing discussions with customers, including the hypers who are building their own chips to rival Nvidia. Wei did not comment on geopolitics, the threat of China, but did say the chip manufacturers

build out of fabs outside of Taiwan in Europe, Japan, Arizona, specifically in the U.S., are making progress. He expects production in Arizona to ramp in 2025. However, he did caution that its overseas fabs will have lower profitability than in Taiwan due to the initial ramp. We're seeing shares up over 100% this year, guys. How many of these factories are they expecting to build? Is it three? It's three in Arizona, and then they have a couple in Japan, Germany, and they are looking beyond Germany across Europe, Tyler. So this clearly remains a priority for the company, given the broader geopolitical threat.

All right, Sima, thanks very much. Sima Modi reporting. And as Taiwan semi-thrives, U.S. chip companies doing business in China are facing obstacles. Let's bring in Eunice Yunn live with Beijing with those details. Eunice?

Thanks, Haley. Well, China's top spy agency warned of increasing security risks because of what it described as a global struggle for dominance and control over cyberspace. Now, this caught the attention one day after a group linked to the cyber

watchdog here had accused Intel of various issues and called for a security investigation into Intel's products here. So the association accused the US chip giant of having frequent vulnerabilities, high failure rates, and harming China's interests and national security. Now China accounts for about a quarter of Intel's revenues and the government already had introduced new guidelines late last year to delete Intel and AMD chips as well as other American tech from government servers as well as PCs. The development also comes as the Commerce Ministry today

had broadened its list of actions that could land companies onto a Chinese security blacklist, and that includes steps that make it much more complicated for companies to abide by U.S. laws that are regarding China, such as the U.S. Prevention Act. Intel, on its part, posted on social media here that it strictly abides by local laws and would cooperate with authorities to clarify any concerns. Guys?

Eunice, I think the question many have is whether this has been a kind of fundamental change in the way that these companies do business. Yeah, I think that is a big question because Intel is seen here as a company, at least within the international business community, is seen as a company that really did try to do whatever it could to stay in the China market. It's been here for decades. It's done whatever it can to try to maintain that very important business. And so there have been a lot of questions among American business people as to whether or not it really makes a whole lot of sense for American companies to be here. Is China's issues mostly with Intel or mostly with Mobilize a company Intel owns? Oh, well, so that is another rumor that has been going along because the Ministry of

state security had also accused a foreign company of illegally mapping using intelligent technology. There isn't any name yet as to which company that is, but there's been a lot of speculation that it could be Mobile Eye, which is a company that Intel has a large stake in. So at this point, the company, so Mobile Eye has distanced itself from that. from that, saying that it does abide by all laws. And at this point, we don't know if this is a rumor or if it's something that's going to be true, but people are worried that this could be a coordinated effort against Intel. All right. Eunice Yun, Yun, thank you very much. We appreciate it.

Meanwhile, TSM expects to start producing chips at its first new plant in Arizona, as we mentioned a moment ago. By the start of 2025, here's what city analyst Chris Dainley said yesterday about that. the number one foundry out there is TSM, and they literally gain share every year. In our opinion, and we've written about this, what the U.S. government should do is just give it all the TSM, have them build fabs in the U.S. Otherwise, you're just spinning your wheels. You're just wasting money. All right, so should the U.S. let Chinese companies operate here while China seems to be scrutinizing U.S. companies operating over there? Of course, TSM is in no way a Chinese company. It's a Taiwan-based company.

Joining us now to discuss is DeWordrick McNeil, senior policy analyst at Longview Global and a CNBC contributor. DeWordrick, welcome. How do you respond to what Mr. Dainley said there, which is the idea that, well, we should just take the chipsack money and give it to TSM because they're the ones who know how to build fabs. they're the ones who know how to operate them. And why not just do that rather than try and reinvent the wheel with U.S. companies that are neither as good nor as able to create the way TSM is? Good to see you, Tyler. Thanks for having me. Listen, I think I want to first echo exactly your sentiments about TSMC.

This is a company from Taiwan, not China. But to the point that was made, look, I think there's no question that T.I. TSM is a leader in the semiconductor space. We cannot deny that. However, when we talk about the U.S. government and the Chips and Science Act funding, I think we have to understand that this is not just a look at this space from the commercial lens, right? There's a large national security piece that goes into the Chips and Science Act, and so I don't think that we're going to be giving it all to TSM and letting it right. I think what the Chips Act is looking to do is focus on more than just fabs and producing chips, but to build out a more secure and resilient ecosystem,

total ecosystem. So research and development and design, fab, distribution. And so while, yes, it's been slow, and we've seen some success with TSM, less so with companies like Intel. I think for now, what's going to govern U.S. funding and action will be a broader ecosystem to include, Tyler, leaning on some allies to help do this. This is a bit challenging given the commercial competition with some of the allied companies, but that is the goal. It's really not to be dependent on one company as much as we love TSM. Maybe we'll come back to TSMC, but let me pivot just a little bit, and that is to question,

why is China causing trouble? That's my phrasing. Why are they doing what they're doing now? And is it related directly or by inference to the idea that the, you know, you know, the, U.S. has not exactly made it terribly easy for Chinese companies to get involved here in anything having to do with autonomous mobility, self-driving cars, that kind of work. Are they retaliating for what we've done? This is a very good question, Tyler. When I first saw these reports, and again, to Eunice's point, we don't really know the company. So we don't know if it's

mobile eye or not. We do know they have some issues with Intel. But, But let me take a step back and say, in Washington, this action will be viewed as calculated and reciprocal. And to strike back on what the Chinese view as an increased regulatory environment on connected vehicles, as you'll note, Tyler, we just, the U.S. just released their notice for proposed rulemaking on connected vehicles. They will say that this is also retaliation on the intel side for making it more difficult for China to access. semiconductor chips. Listen, here's what I will say, and that is both countries have a concern that connected vehicles pose a national security challenge. So the irony for me here is the Ministry of State Security and the U.S. National Security establishment both agree that these

vehicles that can connect to the critical infrastructure, that is collecting data on its users, that's geomapping, both sides fear that these vehicles will pose a national security threat. And then one final point here, because there's some irony in this as well, Tyler, and that is there are some Chinese companies who have been conducting tests on U.S. roads, California in particular, which has a permissive environment. So this action will likely increase calls here in Washington to have a reciprocal action against some of those Chinese companies doing the same thing that the Minister of State Security is accusing a foreign company of doing.

If it's Mobile Eye, Mobile Eye has a Chinese partner in Zika, there are no requirements for a partner here in the U.S., Tyler. So you can see this is going to get ugly before it gets better, in my view. One quick kind of button on that, DeWordrick, is what would you say to investors who are maybe heavily in the chip space, who are trying to think about how to be in the sort of what's becoming the avie, the sort of autonomous driving space? What's the fundamental takeaway?

that the competition around this space, Kelly, is just not settled. And it's hard for, I've been trying to figure out just how small the yard is, how big the yard is going to get, just how high the fence is. And as we see, this is a moving target because each side is acting and reacting. So I think we're still at a space right now was difficult to advise clients or investors on how you can play this space. I will say that it's important not to just think about the commercial aspects, because the national security aspects, as we're seeing, is playing heavily in how both countries engage with companies in this space. Absolutely. Well said, Dvorchuk, thanks for making the time today. Thank you, Kelly. DeWordrick McNeil. Meantime, retail sales rose four-tenths of a percent in

September. A strong report, the spending held up even better than expected, is the consumer flexing their might just in time for holiday shopping. We'll check in with the head of the National Retail Federation. And from flexing to stretching, Gen Xers in their 40s and their 40s are in their 40s and 50s are the most likely cohort to have maxed out a credit card in the past two years, according to bank rate. And that's despite being also some of the highest income earners. We'll dig into the data and get the conclusions when Power Lunch returns. Welcome back to Power Lunch, everybody. Shares of Deer taking a turn lower moments ago on reports. It's the latest company to be investigated by the FTC over antitrust concerns.

Amon Javers is in Washington with more. Amen. Tyler, this FTC investigation of deer was revealed in a filing earlier today. In that filing, a Minnesota-based data broker says it has received a demand for information from the FTC regarding deer. And it says that the FTC's investigation of deer is to determine whether deer and company or any other person has engaged in or is engaging in unfair, deceptive, anti-competitive, collusive, or other practices affecting commerce related to the repair of agricultural equipment. in the United States. Now, this is a long-going dispute involving John Deere tractor equipment and the right of repair by the owners and farmers who operate that equipment, whether they're allowed to repair or able to repair the equipment themselves. Elizabeth Warren, the senator, sent a letter regarding this about two weeks ago asking whether or not deer was being unfair

to farmers who own their equipment by withholding information about how to repair the equipment and therefore driving up the costs of repairing the equipment because it can only be done by Deere authorized personnel. The idea here is that tractors have become a lot more complicated in terms of the software that they use and that by denying information related to that, Deere could be unfairly denying the people who own the equipment the right to repair their own stuff. Now, we'll reach out to Deere and ask them about this investigation by the FTC, but this is the first now that we're learning in this. filing of some of the details of some of the information that the FTC is asking from this

Minnesota data broker, including information about market share and other data of how much deer has penetration into this industry. Tyler, back over to you. All right. Thank you very much, Amon Javvers. Meantime, today's economic data is showing some upbeat news on the consumer. Retail sales were better than expected, up 0.4%. And as we count down to the holiday season, The National Retail Federation is forecasting record spending once again. Between $9.79 and $9.89 billion, that's about a 3% gain from last year. Matt, Shea is president and CEO of the NRF. He is here this afternoon.

Matt, it's great to see you. I have to say that the holiday projections I've seen are somewhat muted compared with the actual spending that we're seeing in the economy. Why do you think that is? Well, it's a good question. The numbers we saw today from census, we did our numbers last week, the CNBC NRF monitor. We're a little bit more modest. But the numbers today, 1.7% unadjusted year over year. Our interpretation of the census numbers, which is X gas, X autos, X restaurants is actually 2.4%.

The NBCC NRF monitor from last week was up about 1% September year over year. So the numbers are good. Consumers are still spending. And, you know, there's a lot of firepower there. Surprisingly, we know the savings rate is way down. The pandemic payment. have been substantially whittled away, but inflation has come down pretty substantially from its highs in the last 18 months, and we're seeing real wage growth, and the unemployment rate,

although it has ticked up modestly higher from its lows earlier this year, still very low by historic standards. So I think consumers feel pretty good about their ability to spend. That doesn't translate into consumer sentiment necessarily. We know they have the ability to have one attitude and another kind of action. So the attitudes are still kind of muted, but the real actions out there when they're engaged in commerce have been pretty substantial,

and I think we ought to feel good about the way we're heading into the holiday season. Are the retail sales numbers you report adjusted for inflation in any way? In other words, if you basically had the same level of sales and prices rose 2.5% from one year to the next, would you see 2.5% growth in retail sale? Yeah, Tyler, it's a question.

We got it earlier this week when we did our release. And over the years, a couple of your colleagues have asked the same question. So there is an adjustment in there for inflation. So we're talking, you know, 2.5 to 3 and a half percent. So Kelly's got it averaged out at 3 percent. Goods inflation is actually down about a half a percent over the course of the last year. So what we're going to see this holiday season, we believe, is increased unit sales. they're going to be more units in the basket because these dollars are going to go further.

And you know, because you watch this, a number of retailers have reduced prices on thousands and thousands and thousands of items. So on the good side, there are real opportunities there for consumers. They're still lingering services inflation. We know that remains a problem. We know that's been about housing, somewhat about things like auto insurance and rent and things like. But in general, overall inflation is down, and it's down very much on. on the good side, and that'll be a great opportunity for the holiday season. Matt, in anticipation of the discussion we're about to have, if I told you that people

were a little bit tapped out right now in terms of their credit cards, and maybe some of, you know, the older Americans who should be a little bit better off financially right now, what would you say about that? Do you think, does that ring true to you? Why do you think that is, and what does it mean? Well, you know, revolving credit as a percentage of household debt is about six and a half percent now, and that's really in line with what we've seen in the years before the pandemic. where it was about 7%.

So the revolving credit is pretty good. And overall household debt, as a percentage of monthly income, is about 11%. That's much lower than we saw, for example, during the recession 15 years ago when it was 15%. And it's pretty consistent with where we would be, normally we'd be 11 or 12% in the years leading up to the pandemic. So while the numbers are a little bit higher in absolute terms, they're not higher, relatively speaking, in historic terms, and there's certainly nowhere near the levels where there ought to be great concern. So I think it's something to keep an eye on, but it's not something that as yet has shown up

in consumer spending patterns. Savings rates are about back to average, about 5%. For whatever that's worth, we know some countries save a lot more, some save a lot less, but they're back to what's kind of considered normal for a U.S. household. So overall, households are in pretty good shape. There are a couple of uncertainties out there. One of them's going to happen in early November, of course. Right. You're paying a lot of attention to what that's doing to the market. How consumers will behave, I think, relative to what happens, remains to be seen. But right now, consumers look pretty good.

Matt, thank you for your time today. Thanks, Kelly. Matt Shea, National Retail Federation. While the American consumer remains strong, a lot of that shopping is being fueled by debt. A new survey out today shows that Gen Xers in their 40s and 50s are more likely than other age groups to have maxed out a credit card or come close over the past two and a half years. Here, Sharon Epperson joins us with the data. Hi, Sharon. Good to be here, Tyler. You know, a new bank rate survey of more than 3,000 card holders found overall 1 in 5, where 20% had spent up to the credit limit they had on a card at some point between March 22 when the Fed started raising

interest rates and the second week of September of this year before they began lowering rates. Meanwhile, the percentage of Gen Xers, those ages 44 to 59 who maxed out their credit cards in that time, was far higher, 27%. That's more than millennials, baby boomers, or Gen Z. Being a caregiver is also contributing to GenX being tapped out. Nearly half of parents with children under 18 have maxed out their credit cards or come close, and 39% of parents with children 18 and older have done the same. And while the lowest earners are most likely to have spent up their credit limit, more than a quarter of cardholders with six-figure incomes have maxed. out as well. People said inflation was the main reason for relying on their credit cards for basic expenses,

and their financial stress is showing up in missed or late payments too. Maxed out borrowers are more likely to be delinquent. A third of maxed out borrowers have gone delinquent with their payments in the last year compared to less than a quarter a year before the pandemic. That's according to the New York Fed. So some of the experts that we talked to said being maxed out and delinquent with payments won't just impact borrowers' finances. It could be a headwin for the economy. going into the holiday shopping and spending season. This evidence really confirms, once again to me, how close to the edge American households are with their money.

They don't have, they can't, they couldn't survive a thousand dollar unexpected expense. Exactly. They're up against the wall in terms of a credit card use. They're probably not saving enough. Medical debt. That's another factor. Job loss or income loss. That's another factor.

And then there's too much discretionary spending. Some admit that they're just overspending, and that's why they've reached the limit. But there are a lot of reasons why people are doing this, and you're right. We always talk about the emergency fund, and people don't want to think about that. They want to make sure they're invested properly and all of that. That is important. But that emergency fund is key because when you don't have it, what do you go to? You go to your credit card, and that's the main factor driving up people being maxed out.

Well, and compare, I mean, the fact that to compare it pre-pandemic is so interesting to see how much higher it is, and rates are so much higher now that if you're carrying a balance, it's way more punitive than it would have been five years ago. It's really, it's, it's, it, it, it's, it, it's, it, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's a lower rate. It can't hurt to call. They may say no, but at least you've tried and look around for a low rate, perhaps to transfer the balance to, or get a zero percent interest balance transfer card. You may have to pay a fee, but it may be worth it to get that lower rate with rates right now averaging like 22% on a current card. Wow.

So you want to make sure you do that or even a personal loan that you could get out at seven. or 10% would be better than paying 22% interest on a credit card. So those things to look at and then talking to someone. Sometimes people don't want to admit where they are, but a non-profit credit counselor, you can find one through the National Foundation for Credit Counseling. That's someone that can help you figure out what's the best plan to help me pay this off. I love those little disclaimers that appear on some of your credit card statements where you have a balance and they say, if you pay the minimum amount each month, it will take you 62 years to pay down

this balance. I mean, it brings home. But if people don't have emergency savings, there's no way they're paying more than the minimum balance. No, no. And so they're going to continue to be. So that's why actually carrying a balance is another one of the main factors of why they're maxed out. They have the balance, and they're just paying the minimum, and they keep charging money. They keep charging, and they're not getting cut off so long as they're paying the minimum.

And if the advice of stop using your car is the one that they take, what does that mean as we go into holiday spending? Yeah, less. You can use your card, you can use your phone, you can use all these ways to pay. So easy. All right, be sure to join Sharon and me on October 24th. That's next week for the CNBC Your Money event. There you'll hear from financial experts who will share advice on how to grow your wealth, achieve your investment goals, safeguard your money, maybe even build that emergency fund. You can scan the QR code on your screen.

It's down there in the right hand corner or visit CNBCEvents.com slash your money. You guys get to hang with the property brothers. I know, right? Yeah, they're going to be here. Slash your money. Slash your money. We'll be right back. Welcome back to Power Lunch.

We've seen the Dow take a bit of a dive at the start of the hour to give up its gains, but it's climbing back up 137 points, about a third of 1%. The SMP is almost flat, though, up three points while the NASDAQ is hanging on to a 31 point gain. And that brings us to today's market navigator, Dom Chu. What are we watching? All right. So, Kelly, the shares of the transportation ETF, the ticker IYT, which tracks many of these markets, kind of weighted technology slash transportation type stocks that are in there are giving back

some gains after hitting record highs just in yesterday's session. Now, our next guest is taking a deeper dive into one specific name within transportation and sees more downside ahead. So joining us now is Mike Co, the chief strategist over at openinterest.pro. Mike, thanks so much for joining us. If you take a look at the transports, maybe it's not at all out of the realm of reason that after a record high in yesterday's session, we're giving a little bit back today. Do you think there's more downside and are there specific stocks and ways to play that downside coming up? Yeah, I mean, it's really a bifurcated story. I mean, I think a lot of the sort of pop that you saw yesterday was a result of United's results, right? So those came out

much better than expected. And the entire airline space was generally trading at a very cheap multiple. So, I mean, it's not as cheap now. You've got a 15% pop in one day that's going to change things a little bit. But if you've got a stock that's trading five and a half times earnings and the news is decently good, you have some material upside. But of course, the transports aren't just the airlines, and, you know, Delta and United are probably the best two on the airline space. But, you know, we're also talking about the logistics companies, the truckers, and the rails. And so I was taking a look at CSX, which also reported earnings and has also suffered some consequences as a result of the hurricanes that we've seen in Florida and in the Carolinas. And specifically, looking to

the Carolinas, it's their Blue Ridge subdivision. So that is the the line that goes through Tennessee and the Carolinas that was impacted. They have about $200 million worth of repairs that they have to put in. But you're not really just thinking about the cost of those repairs. You're thinking about how it's going to impact their operations going forward. It looks like Florida is pretty much coming back on. I only saw some minor outages according to their most recent service bulletins. But the interesting thing about CSX is that this company is going to be having an investor day on November 7th.

And I suspect that is what fueled a lot of the unusual options activity that we saw today. And what kind of options activity are you seeing? That unusual activity, is it tilted more towards forecasting downside or upside? Yeah, it's downside. So we're seeing more than actually, it's already traded more than four times the average daily volume puts our significantly outnumbering calls in CSX. And the most active contract actually is looking out to the regular way November expiration. So that's November 15th, and it's the 32 and a half puts that are most active. Those are traded on almost 3,000 contracts. Buyers are paying about 47 cents a contract for that. And there's really two big catalysts that we can think of that could potentially justify looking out that far.

And also the fact that the options are not that expensive. They're only about 1.5% of the current stock price. And we have that November 7th Investor Day, so that's obviously an important catalyst. And that same week, we've got the election. And the downside break even on that trade is only about 4% lower. So if people think that operational disruptions are going to last a little bit longer, if they think that some of the headwinds other than the hurricanes that the company has been facing, which includes lower coal costs and things like that,

which hurts that side of their revenue picture a little bit, lower fuel surcharges. So those are all potential impacts. And we're going to learn more about that on the 7th. So what you're saying is you're seeing buying of this 32 and a half, strike price put option with a roughly 50 cent premium that you pay to get it. So you'd have to have the stock go down to at least 32 to break even on that trade and make money when it goes below 32. Is that something that you think is going to be a situation that actually unfolds by that November expiration? Yeah, well, look, I mean, a 4% move in any stock over the course of

almost a month, and that's how far out we're looking, is certainly plausible, particularly when you have a couple important catalysts like the election, like Investor Day. And, you know, so you could have a general market pullback. That could impact it a little bit. And of course, we want to get a better sense of, you know, the operational disruptions that the company is going to be facing. And, you know, I think they're trying to do their best and manage through a difficult situation in that Blue Ridge subdivision in particular. But, you know, 4% isn't a big move for any stock, especially if you have several weeks for that to take place. All right. Mike Co. Openinterest.pro. Thank you very much. We'll see again soon, sir.

And in the past two hours, now you've heard both sides of this trade. Bill Stone was on at 1 p.m. saying of the three stocks he's looking at right now, they were Adobe, Dollar General, and CSX. And but the curious part is, if you see that unusually high activity for certain types of options, it might be that kind of tea leaf about where people are trying to place those bets. It should be something to watch. Good to be on the radar, Dom. Thank you very much.

Tyler. All right, tell us. We head to a break. A quick power check on the positive side of the S&P. You got Snap on the tool. and equipment maker surging on earnings despite posting a dual dip in sales on pace for its best day in 14 years. And it's the best performer in the S&P 500 today. On the negative side, you've got Walgreens boots on pace for its worst day in two months,

giving back some of yesterday's gains when it announced plans to close 1,200 stores by 27 as part of cost-cutting plans, continuing a sour year that saw it removed from the Dow. The shares have lost more than half their value this year. That's your power check. We'll be right back. Welcome back to Power Lunch. I'm Kate Rogers with your CNBC News Update. A Georgia teen and his father were formally indicted today by a grand jury following last

month's deadly shooting at Appalachie High School. The grand jury indicted the 14-year-old on four counts of felony murder for allegedly shooting and killing two students and teachers and added several others, including 22 counts of aggravated assault and 18 counts of cruel. to children. Israeli Prime Minister Benjamin Netanyahu cautioned today the war with Hamas is not over, even with the killing of the militant group's political leader, Yaya Sinwar. Netanyahu said today, Israel settled the score, but that hostilities would continue in full force until all hostages were returned. And Ferrari unveiled its new limited edition supercar today with a price tag of about $3.9 million.

The automaker will produce just 799 units of the F80, which incorporates features from endurance motor competitions and Formula One. The model is already sold out, even though it is the most expensive roadcar ever offered by Ferrari. Kelly, back over to you. Wow. They're still doing it. Kate, thank you very much.

The autonomous driving startup pony AI has filed to go public on the NASDAQ under the ticker pony. The company is based in both the U.S. and China and was valued at 8.5. billion as of 2022. Bloomberg earlier reported today that the company is looking to raise as much as $300 million from the listing. In its S-1 filing, Pony AI reports it has a fleet of more than 250 robotaxies and 190 robot trucks, and its backers include Toyota Motor. Meantime stocks are trading higher today, with the Dow hovering near an all-time high, and the S&P hitting yet another intraday record earlier in the session.

And with today's moves, the major indexes are each up about 30 percent over the past. past year. But our next guest says there's now even less room for disappointment as we head into the heart of earnings season. Joining us now is Carl Farmer, Vice President and Portfolio Manager at Rockland Trust. Carl, you're concerned that the market has risen 40% or so since early 2023, but earnings have not. Correct. And thanks for having me on today. So as you stated, the market's up almost 40%, or maybe even a little over 40% since its lows. But projected earnings haven't moved up as much, which means that it's a little more expensive than it was about 12 months ago. So we're trading it 21 times earnings, and we've seen some of the results from not only second

quarter, but the beginnings of Q3, that if you're not coming through as projected or with a little bit more positive to say, that it may be a little tough to keep pushing things higher. And so that leaves the market more vulnerable to a short-term, I guess I would say, short-term hiccup. In other words, that it's, there it sits at a high level, and if something spooks it, whether it's a piece of data, it's something the Fed says or doesn't say, whether it's some event in the world, it's vulnerable. Certainly.

And one thing, as you mentioned in terms of vulnerability, mentioned all-time highs. I mean, we've had almost 50 all-time highs this year, which normally might give people a pause, but it's not so much that we're hitting highs. I mean, that's usually a sign of optimism that people feel better about the future. But it's the valuations right now at 21, 22 times next year's earnings. You really need to see a lot of good results coming through

to sustain where we are and keep pushing higher. Do you, Carl, have an opinion on CSX? We've heard the bold case. We've heard the bear case. No, CSX specifically. Actually, Union Pacific is one of our favorites It's in terms of not only having the kind of exposure in terms of across borders and being able to open up a lot of different things. So they've had the rails have had great moves.

So I can certainly understand the volatility around that. One thing you touched on earlier for vulnerability, one thing to remember is that a Fed pause historically, if you look at kind of the work from Stategis is sometimes better for equity performance than cuts. So although we're excited and to see Fed's victory over inflation, we may have seen the best of it over the past 12 months. I wouldn't expect another 40% in 2025. Let's look at three stocks that you like. I'm going to start with the one that sort of stands out to me as maybe a bit of a sore thumb, and that's Nike. They do have a new CEO coming on board. That could be a catalyst, but the business and the stock has been down for some time. Oh, absolutely. In terms of

the highlights here, certainly having Elliott Hill come back is a big plus, and we had a good market reaction that day. We still might be really early here in terms of a multi-year turnaround. As a reminder, they withdrew guidance as they try to write the ship. And that may mean you have some rough quarters ahead in terms of digesting and making changes. Long-term picture, stocks about half the prices it was three years ago. So for those that have a good long-term outlook, you may have a little bit of a bumpy ride, but we think this is a good opportunity. Second one is Pepsi, which has not really set anybody on fire lately,

but tell us the case for it. No, sure, that's fair. And again, a lot of these names are not ones where people are arguing about the effects of artificial intelligence or what that's going to mean in terms of monetization. I mean, Pepsi, we know what they do. They have drinks and snack food. As you cited, recent results have really led to low sentiment and a discounted multiple. I think there's only so high you can raise prices before people push back. But in the future, they've got productivity savings and growing volumes from here.

And they still have some good flexibility across their. product lines to be able to make adjustments. So it hasn't participated as much in the rally in in 2024 as some others. So we still think this is a good long-term play. A lot of people looking for those names. You can play some catch up outperform what's been a very, very good market overall. Carl, for now, thanks. We appreciate it. Thanks a lot. Carl Farmer. The search is on for 2025 CNBC Changemakers, our list recognizing women transforming business and philanthropy. Apply or nominate a changemaker at cnbc.com slash changemakers and we'll be right back. Welcome back to Power Lunge.

We are seeing green arrows today, but they're slight and we're not quite back to the session highs we hit right around the open, better than expected economic data, helping to give stocks a bit of a lift, also sending bond yields higher. And that's where we bring in Rick Santelli, who's watching the action for us in Chicago. Hi, Rick. Hi, Kelly, indeed, arm and arm. We're looking at yields moving up. We're looking at stocks having a green day.

And everybody is debating. I have never, in all my years, monitoring or trading or talking about markets, seeing so much debate as to seasonal adjustments versus non-seasonal adjustments with regard to data, especially retail sales. Then you add in the history, the comps, and it's not adjusted for inflation. And this number becomes a real water cooler event. But if you look at it on the surface, up seven tenths on core retail sales was strong. Look at twos and tens.

That's a two-day chart. There's a couple things to point to. First of all, you see the skyrocketing yields there right around 8.30 Eastern. But the left side is yesterday. The right side is today. Once again, we're jumping over yesterday's session high yields in every maturity twos through 30s. Now, if you look at 10 years specifically, this chart starts, of course, on the day before the Fed cut interest rates, 50 basis points, the 17th of September.

And what I want to point out is the tens are the closest maturity, the only maturity that close to taking out its high yield on that move so far. Its high yield closes 410. We're hovering just below that, anything above 410, and really look to see more momentum bill going into the weekend and next week's data points. 10-year minus spoons on a day, the ECB had its third rate cut, the day. distance between those two yields is fast approaching 190 basis points, basically four-month wide. And we want to continue to monitor that because that, of course, affects capital flows. Tyler, back to you. Rick Centelli, thank you very much. Shares of Travelers Insurance hitting an all-time high on the back of better than expected third quarter earnings, higher underwriting

gains and investment income offsetting its catastrophe losses. We will trade it in three-stock lunch. next. Welcome back. It's time for our three-stock lunch. Today, let's trade some of the big movers. Jerry Castellini will do the honors. He's president and CIO at Castle Ark Management. And Jerry, let's start with Uber today, which is lower after CNBC confirmed the ride-hailing giant

discussed a potential acquisition of travel giant Expedia. The talks reportedly remain in early stages, so it's unclear if any kind of deal would actually take place here. But investors are kind of giving it a thumbs down. They're selling off on the news. Would you pick up the shares here? Well, we own the shares and love the long-term outlook. This is the play in taking this core app that they have and applying it throughout the economy.

It scares us the idea that they would try to find some synergies in a $20 billion business like Expedia. It's not that it's bad. It doesn't match what they've given us the outlook for. And we would sell if they actually announced that. All right. So right now you're hanging on to it. But if they do announce it, then you're dumping the shares. Yeah, there's a lot of stories, right? You've got to wait and see what happens. How about Netflix, Jerry? You know, the set to report third quarter profits after the bell. Investors paying close attention to details surrounding the company's ad-supported business.

The effects of its password crackdown, stocks nearly doubled in the past year doing pretty well. Yeah, and it's been quiet, though, because we're in that transition. We're probably going to get the last of the big bump from password crack down. And now it's real important to see how quickly the company is picking up on its ad-supported side, which is a huge market for them and something we're very attracted to. And hopefully, you know, they give you some signs here that they're getting a lot of uptake there because that would be a game changer for the whole business. All right, Jerry, we have to go.

But on the way out, tell us, would you buy seller hold Travelers insurance here? Buy travelers. Big change. You'll love it when catastrophes happen to insurers. It's a great profit enhancer and they're buying back staff. I think the polite term is hard market, Jerry, but the shares are up 8%. And we appreciate your time, Jerry Castellini. And thank you for watching Power Lunch. Closing bell starts right now.