Power Lunch - S&P 500 shakes off economic worries, rises to new high led by Nvidia 9/24/24

Episode Date: September 24, 2024

The S&P 500 rose to a fresh record-high on Tuesday and largely shook off a weak consumer confidence reading thanks to a sharp rise in Nvidia. Consumer confidence suffered its biggest one-month decline in more than three years, hitting 98.7 for September. Economists polled by Dow Jones expected a reading of 104. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Launch, everybody, alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us on this Tuesday. The Dow just turning negative, but we did set some new records for the Dow earlier and the S&P 500 as well. And the Dow is getting a boost today from Caterpillar in particular, one of several stocks benefiting as China tries to boost its struggling economy. They had a raft of stimulus measures announced last night. I was not overly impressed by the 4% market move they enjoyed, but Brendan Aherd made the case last hour. Tai, he thinks it is the start of something. significantly some monetary policy side. Well, their economy has been struggling a little bit, certainly. By many standards, people would be envious of the growth they've had, but not for China. And they've got a lot of people they need to employ, and this sort of cut of a big rate over there could be one of the moves in the direction to stimulate. So we will see and see what American companies might benefit from that.

On the downside for the now, you've got Visa reports that the DOJ is set to sue the company and call it a monopoly, particularly with respect to its debit card business. Yes, we're going to hear a lot more. There's so many different sort of attempts right now to either regulate or deregulate a lot of what's been going on in the debit card industry. But this is, you know, we're seeing a lot of these pieces of action right before the election. It's not that it's political per se, but it's just if there's an agenda and you have some, if the clock is ticking, you're going down the agenda.

This was first brought three years ago. It's the culmination of that investigation, and we've got official notice this afternoon. Stock's been under pressure all session down about 4% right now. That said, let's start today with taxes, because it's the number one issue for a lot of people in this election, specifically talking about what the candidates' proposals might look like in terms of raising revenue to be able to fund some of these widening deficits and to help kind of put the economy on sure footing. Yeah, absolutely. There are a lot of proposals out there.

Some endorsed by both parties and others very much not endorsed by both parties. Let's continue the conversation on taxes. As former President Donald Trump is making comments on the economy right now in Savannah, Georgia, he's been talking for roughly an hour thereabouts. Amon Javvers joins us from Washington with more on what Mr. Trump is saying. Amen? Tyler, that's right. You're looking at a live picture now.

Former President Trump, he's speaking this hour in Savannah, Georgia. He's laying out his vision for the American economy and going on to a number of other topics, as he usually does. Trump is making the case that for too long Americans have seen. too many companies be sold off to foreign competitors and that instead of foreign companies should move their manufacturing to the United States. Senior Trump advisors say that if elected, Trump will personally recruit foreign companies to come to the United States, making a sales pitch directly to them about business conditions here and also asking what they need in order

to make a switch happen. The former president has made a number of promises about what he'll accomplish in a second term, including a 15% corporate tax rate, For companies who make their products in the United States, low regulations, efforts to cut energy costs, steep tariffs on foreign imports, tax exemptions for wages earned in overtime and through tips. And in Savannah, Trump told the audience he's going to reverse decades of job offshoring in America. Here's what he just said. Under my plan, American workers will no longer be worried about losing your jobs to foreign nations. Instead, foreign nations will be worried about losing their jobs to America. America. And the former president is in Savannah because he views it as a great American port with infrastructure, strong workforce, feeder companies in the nearby area, all that are needed to become one of the premier American export hubs, especially as he sees it for American-made vehicles going overseas. And one other point I should add guys here, just as the former president was speaking, he said he will stop the U.S. Steel, Nippon Steel merger, which is pending now. And there's been some question.

whether the Biden administration will take steps to stop that deal. That decision time frame seems to now be slipping past the election in November. But now you've got the former president saying that if he wins in November, he's going to stop that deal when he comes in. So it seems both potential future administrations are extremely hostile to that potential deal. We'll see whether they can figure out. What has the Biden administration said about that particular point? Because I thought they had already come out and said they were inclined to stop that deal.

We got a lot of reporting that said that the President Biden would stop the deal. And then he didn't do it under Sipheus grounds. And there's now some question about whether a Sipheus report will come after the election that would give the president the ability to stop it. But of course, if you put it past the election, then maybe the current president could allow the deal to go through. There are a lot of supporters who say, hey, wait a second. That's a deal you shouldn't block because, of course, Nippon's deal is Japanese and Japan is a staunch American ally. It doesn't make sense to block that deal, but both the current administration and now the potential future administration are expressing real hostility to that deal and to the idea of an iconic American company becoming a subsidiary of a Japanese firm. Although, Amin, this one in particular gives me some pause because the CEO has said the better outcome for workers, for their production is going to be this ownership change.

And, Craig, if I'm wrong, this is an industry that saw this innovation from the Japanese 15, 20 years ago, has started. struggle to keep up. And at some point, if the new technology is superior, I guess what would the argument be that they could turn to the U.S. and say, okay, then you fund our investment into this kind of newer, cheaper technology. But if that's, if you want to keep the business going, what other options do they have? Well, I mean, the argument politically, what you just heard Donald Trump say in Savannah, Georgia is, I'm going to stop this deal, I'm going to keep U.S. steel in American hands and keep the Japanese from buying it. That got a huge round of applause from the audience in Savannah, Georgia. So you can see why politicians are inclined to say things like that

and to take that kind of action. If your U.S. steel, you're trying to navigate all this. The timing is exquisitely bad coming in the last two months of an election cycle. And you figure your best bet is probably to punt and get this decision point after the election with an outgoing president who won't pay any political capital for letting the deal go through before Kamala Harris would come in or Donald Trump would come in in January. Their best bet is probably to get it done in November or December under President Biden before the end of this term. I'm just looking at Airbus to see where the plants they have are different. You could pick an example from the foreign automakers.

I mean, there are significant employers in the southeast. So I take his point. I understand what you're saying about people's reaction to it. But these are also core areas of employment and opportunity as well. A big part of the debate we're about to have as well, Amin. Thank you. Amund Jabber's reporting. President Trump has laid out plans as well to exempt certain sources of income from taxes. But how do you make up for that lost revenue? Robert Frank is looking at that issue for us today. Hi, Robert. Good to see you, Kelly. Well, former President Trump

started his campaign with a plan to extend the 2017 tax cuts. That's estimated to cost the government $4.6 trillion over 10 years. And then he started adding even more. He called for adding taxes, ending taxes on tips, I should say, that could cost up to $200 billion in lost revenue. He then promised to end taxes on Social Security. That could cost another $1.6 trillion. He then said he would end taxes on overtime. That's another $1.8 trillion. He wants to, as Amon just mentioned, lower the corporate tax rate for domestic manufacturers to 15%. That would add another $700 billion. And of course, last week, remember in New York, he called for, quote, getting salt back that would repeal that $10,000 cap on state and local deductions.

That would add another $1.2 trillion to the deficit. Add it altogether, Trump has now proposed tax giveaways totaling nearly $10 trillion over 10 years. Now, how to pay for that? Well, he said tariffs would help offset the cost. Analyst, though, estimate tariffs would raise at the most about $2.8 trillion, which means Trump's current's tax plans would cost about $7 trillion. added to the deficit over the next decade. Now, we should add that Vice President Harris also has proposed extensive tax cuts. They totaled about $3 to $4 trillion, but she has also called for increasing taxes on the wealthy in companies. That would actually increase about $3 to $4 trillion in taxes, so that would offset most of her tax breaks.

So let's drill down a little bit on the totals here. So overtime, tips, Social Security taxes, the restoration of no limit, I guess, on salt state and local tax deductions. It all adds up to $10 trillion over 10 years, minus some tariffs that might or might not offset some of that $10 trillion. That's right, Tyler. So we look at the $10 trillion in taxes, which sort of keeps going up every week, it seems like depending on who he's talking to, he adds. another tax break. Kamala Harris is doing much of the same. But aside from the tax increases that she has already announced, we haven't heard any offsets for either of these candidates. So as you say, Trump, let's say we'll give them $3 trillion on tariffs, which is very generous. Most people

put it at 1 to 2. That would give you a total deficit add of about 7 trillion. Harris, if you add in her 4 trillion in tax breaks, but 3 to 4 trillion in tax increases, There's perhaps a mild increase in the deficit, if not deficit neutral. All right. Robert Frank, thank you very much. So if former President Trump's tax proposals become reality, would it shift the USA to a more consumption-based tax system, or at least away from a system that is built mostly on taxing income? And what could the impact be on Americans and the economy?

Joining us now to discuss is Brendan Duke, the Senior Director of Economic Policy at the Center for American Progress Action Fund, and Casey Mulligan, Professor of Economics at the University of Chicago. Casey Mulligan, let me begin with you. Let's talk about tariffs and their power to generate income or revenue for the federal coffers here. How much could those tariffs add, and who pays tariffs? Do foreign countries, foreign companies and foreign individuals pay the tariffs, or do Americans pay the tariffs? Casey?

On the revenue question, we have, you know, a lot of what we buy in America is from America, regardless of whether we have tariffs. So there's a limited amount of our spending out there that can be tariffed. And some of the rates that I've heard people talk about, I'm not sure where that's coming from in the Republican platform that President Trump presented in Milwaukee and was adopted by the RNC refers to baseline tariffs. I don't expect those to be all that large, although it's. It's a whole Republican operation, so a Republican Congress and House would have to decide what they mean by baseline tariffs and how much.

Brendan, let's talk about the idea that part of what may be afoot here as President Trump has moved away in his proposals to exempt overtime tips and Social Security income from taxes. is he moving away from a reliance on the income tax as the principal way the federal government is funded and in any sense toward a consumption tax? Yeah, sure. So as you guys said, he's proposed about $10 trillion of tax cuts, basically all on the income tax side, so that reduces our reliance on income taxes, which the wealthy disproportionately pay. On the other hand, he has pitched 10 to 20 percent tariffs on every imported good entering income. the United States, which is a consumption tax, in some sense, as Vice President Harris has said,

works in effect like a national sales tax. So that's raising our reliance on consumption taxes, which low and middle income families are going to pay more of than they do income taxes. So it's a shift of our revenue mix from income taxes to consumption taxes. And in that way, there's actually some similarities to traditional Republican ideas, you know, of shifting our reliance to a sales tax or that, but in kind of a weird way and actually a way that could actually really harm economic growth. Casey, I saw you're shaking your head there. Do you not see it that way?

No, tariffs are not a consumption tax. It's also an investment tax. I mean, we import, aside from residential investment, pretty much all other kinds of investment, we're importing a lot of a fair chunk of that. I mean, as I said before, most things we buy as American, whether it be consumption or investment, but the mix of imports between consumption and investment is like the rest of the economy. So I would view it more as more like some kind of expenditure tax or even somewhat like an income tax, although not the progressive element of it.

Somewhat like an income tax. So where Casey, in other words, is all the revenue going to come from? I mean, are tariffs of 10% or whatever number put out there enough to supplement or replace the changes or the income that would be lost on a traditional income tax? Well, I don't think there's a plan to have huge cuts in the income tax. The salt part, I don't know how that it got out there. There are people in Trump's orbit from California like Navarro and Mnuchin who want salt back, of course. But President Trump had dealt with that debate many times in his administration, and he's always siding on this side of keeping the salt out. And, you know, it's a giveaway to blue states.

And I don't see how we could possibly expect President Trump in a Republican House and Republican Senate to bring the salt back and have that give away. I think he said it last week in a rally in Uniondale on Long Island. He basically said he was in favor or would fight to get that salt deduction back into the tax code. I don't expect that to happen for the reasons I mentioned. Yeah. Well, there's a lot that probably isn't going to happen like, there's probably a lot that isn't going to happen. like, there's probably a lot that isn't going to happen because people are throwing around lots of promises. Brendan, let's talk about the idea of a pivoting toward a consumption-based tax.

I mean, I've often thought that one of the flaws in our tax system is that different kinds of income are taxed different ways and at different rates. And that is a distortion. It causes people to seek out income to get paid in ways. that produced the lowest tax rate. If you went to a consumption tax, is that a more efficient, not necessarily progressive, but a more efficient way to bring in revenue?

Look, I think the key thing is that a consumption tax, given the U.S. Congress, given, you know, President Trump, is likely to have just as many holes in it as the income tax. I mean, you can't take the politics out of politics. In other words, you would have loopholes. You would have certain kinds of expenditures

that wouldn't, or a VAT, which most countries have. Most countries have a VAT. Sure, but different rates on different types of goods, right? So, again, you know, you can't take the politics out of politics. I certainly would be loopholes. Well, I guess what I'm driving at is, is a VAT a more efficient way to raise and collect revenue for the federal government than an income tax is? I mean, again, I just like a VAT you made up without Congress putting in exemptions is, you know, one category that I think is not realistic. But on another level, I think the key thing is when you look at the studies behind, you know, what moving to a consumption tax and replacing the income tax with it would do, you get some increase in GDP, but most families are worse off because they're paying more in taxes, right? So, you know, on the one hand, on the other hand, so I think that's the key thing to me, in my opinion, is that just middle income families would be worse off.

because they're paying more in taxes, the wage increase isn't good enough to offset that increase in taxes. Casey, do you agree with that? Well, there's no doubt that what Ty is saying is correct. I mean, the Europeans, they have politics, at least as much politics as we have, but they have these vats. They have some loopholes, but they are revenue machines. Also, the payroll tax, revenue machine at much higher rates than we have here. I mean, our 12 plus percent seems like a lot, but they have a lot more than that in Europe. The revenue machines. Now, Brendan is correct, too, that, look, it's very, regressive. Europeans have quite a regressive tax system, really the most progressive tax system

in the industrial world is in the United States because we emphasize, comparatively speaking, the income tax that really has these higher rates for the higher income folks. Is there enough revenue left to be raised, though, in this era of deficit spending and high debt from the income tax side, especially if you go down the chain of families making under 400 or 200,000? Yeah, it's hard to imagine that getting a lot of revenue from income tax. Sorry, Casey, go ahead. Increases. It's hard to imagine that from income income tax increases.

Again, I look at Europe. They've been there, done that. The way they had these large welfare states was through payroll and, as Ty said, VAT tax. So payroll and VAT would have to support kind of the situation we're sleepwalking into. That's Casey's argument. Brendan, do you agree? I mean, at the most basic level, before we did the Trump tax cuts, we were raising more money from the income tax. So at the very least, you could go there, right?

So I think just the basic sense that we've continued to cut taxes over the last couple decades, we could certainly just kind of go back to the tax system that we did have before that was raising enough revenue to meet national needs like we did, for example, in the late 1990s. If you were to cut the payroll tax, which supports Social Security and Medicare, how would you shore up the finances of Social Security, Brendan? I mean, I don't know how you would do that. It seems to me that you've got to go the other direction. You've either got on Social Security,

you've either got to raise the payroll tax to fortify it, make it more formidable, or you have to raise the amount of income that is subject to the payroll tax from whatever the level is today. I couldn't agree more. So, you know, Trump has proposed no longer taxing Social Security benefits and there's no tax on overtime. Those erode the Social Security, you know,

income-based, basically, because the tax on Social Security benefits go to the Social Security Trust Fund. I actually calculated that it would bring up the date that Social Security runs out of money by three years from those two policies alone. So again, you know, we need to be addressing this problem, and Social Security is like the most popular program, ensuring up the revenue that strikes me as the easiest way to deal with it. Brendan Duke, thank you very much. Casey Mulligan, thank you for a very stimulating conversation. We appreciate it. It's fast. It might take away from that is payroll taxes are going up.

That's so interesting. I don't know how you solidify Social Security unless you reduce benefits some way or expected benefits without either making the amount of money that is subject to the Social Security tax or the payroll tax higher. Absolutely. I think that seems like the way to go, but I don't know. Glimps into the future perhaps. A head on Power Lunch, Starbucks receiving a rare downgrade. to underweight. Jeffries saying the new CEO, Brian Nicol, might not be enough to freshen the pot. The shares are down 1%. We'll speak to that analyst next.

Welcome back to Power Lunch. In a rare sell call following a major CEO shakeup, Jeffries is downgrading Starbucks to underperform, citing a long turnaround ahead for the company, despite the stock being up more than 20 percent since Brian Nickel was announced as the new CEO. Our next guest says the rally may be overdone and we could be due for some downside. joining us as the analyst behind the call, Jeffrey's Andy Barish. Andy, it's great to have you. And so far after Nickel took over, there were a raft of upgrades to the stock. And why are you going in the other direction?

Yeah, good afternoon, Kelly. Thanks for having me. I think it's just the reaction has been so positive that it's now taking into account the full turnaround already having taken place when Brian's just really getting settled in. And we like Brian a lot. We just think that there's a lot. lot of work to be done here to get this business stabilized and then moving in the right direction again. Do they have to kind of break things in order to put it back together, so to speak?

A little bit. I think there is some cultural and people issues that have kind of crept in over the last 18 months under the prior leadership that has created some challenges and a little bit of operational issues that are the first thing I think Brian needs to address. And obviously, he's not the only one that will do that. He'll be, you know, adding to the management team and making changes as we've already seen a little bit in terms of some of the announcements of departures of existing Starbucks executives. When I've patronized Starbucks in recent, there's several things that stand out to me. One is they, it appears to me that they have too many combinations and choices on their menu. That's number one.

Number two, their staff seem overworked. They've got digital orders coming in. They've got drive-through orders coming in. They have walk-in customers coming in. And third, the overall customer experience isn't as pleasant as it used to be. And the prices are higher. Where does he start? Yeah, those are all very key points.

I think simplification will be the name of the game. Again, under the prior CEO, there was a lot of innovation that really seemed to, be spinning its wheels and not generating incremental customer visits. And as you mentioned, Tyler, adding a lot of complexity and frustration to the partner baristas who are trying to execute this experience for the guests. And if they do a better job and they're happier, more guests are likely to come in. So it's really, I think, the first step is kind of a few steps back in simplifying and trying to get that partner experience improving again and having them buy off on the vision to deliver a better customer experience. And then we'll see where it goes from there.

At what point do you kind of wait for a reset or some would say, okay, fine, there's more downside ahead, but is this still a good entry point? How quickly can he start to pivot the ship? Because this is, after all, kind of a marketing-driven business. So maybe it would be a little bit easier to fix than, say, Boeing? There are some aspects of truth to that, but it's obviously a lot larger, more complex, more global than Chipotle, where Brian executed a fantastic turnaround and then growth over the last five plus years. So I think it's going to take a longer period of time.

He's got to build his team. He's got to get through. expectations for fiscal 25 that they need to lay out in late October when they report the fourth quarter. And all of these things are going to point to sort of uncertainty and, again, complexity that leads to, I think, some uncertainty in the stock and having it drift back in to where it may wind up being, you know, a little bit more attractive, again, from a valuation perspective, because I think the valuation has kind of gotten ahead of reality. here. All right. People are excited. They want their Starbucks to get better. We'll see if he can do it. Andy,

thanks so much for joining us. Thanks. Have good afternoon. You too. Further ahead, meta went all in on the metaverse from R&D to even changing its name, so it's called meta. But the metaverse kind of didn't really get a lot of traction. Now the company may be using a similar strategy in AI. We'll talk about that when we return in just a couple of minutes. Welcome back, Shares of Visa, So the best performer, along with Master Car, really, of the stock market in the 2010s, are now the biggest drag on the doubt today. Amon Javers is standing by with some breaking news. Amen.

Kelly, that's right. Attorney General Merrick Garland is set to announce that the Justice Department has filed a civil antitrust lawsuit against Visa for monopolization and unlawful conduct in debit network markets. The complaint, which was set to be filed in the U.S. District Court for the Southern District of New York, alleges that Visa maintains its monopoly position by blocking the growth of existing competitors and preventing other firms from innovating new solutions. The government says here that more than 60 percent of debit transactions in the U.S. run on Visa's network, which allows the company to charge more than $7 billion in processing fees every year. And the government says that visas agreements with merchants and banks punish its customers who route transactions to other

networks or systems. Now, we'll reach out to Visa to get their reaction. The Biden administration does believe that actions like this will help bring down prices over time, and they help to show that Biden and Harris are doing something about voters' number one economic concern, which is inflation. But if Trump were to win in November, it's not at all clear, Kelly, that large corporations would be out from under the antitrust microscope here. The Trump economic team has also been taking an aggressive line on antitrust. And in fact, one of the DOJ's current antitrust cases against Google began under the first Trump administration and has continued under Biden.

So there's some real dovetailing here of Trump and Biden and potentially Harris will have to see in the future in terms of antitrust, guys. Back over to you. Amen, thank you very much. A quick check now on where stocks stand right now. Early today, we've got a reading on consumer confidence showing it has slipped to its lowest level in three years.

There you see the industrials have gone negative. I think they set a record earlier today. S&P 500 flat NASDAQ up a little. Let's get to Rick Santelli in Chicago with a look at how the consumer confidence news is playing out in the bond market. Rick. Yes, you nailed it, Tyler. We're watching at 8.30 Eastern when I brought out these numbers. The weak confidence numbers definitely had an immediate effect on interest rates.

Bad news is bad news, especially for long-dated treasury yields, because as you look at a chart since the Wednesday, the Fed lowered rates by 50 basis points, we've seen 10-year-note yields rise every session. Today could break that streak, but you see two-year note yields are in a glide path where they're moving a bit lower. We had an auction today of $69 billion two years. I gave it a slightly above average grade. Tomorrow will be $70 billion on the five-year front. Now, a lot of people should be watching this Chinese currency.

If you look at the Chinese yuan, then that's the dollar versus won. The dollar now is at the lowest level since May of last year. Now, if you keep that same date and throw in the British Palm, which has been a currency on fire this year, you can see. The pound is at a one month high. We're at a low going back to May. And the reason we want to pay attention is we all know what the yen carry trade is. So when the yen strengthens, parts in the U.S. and global, some of the trades start to break apart. And what we're going to see is with the carry trade with the Chinese currency, we want to pay very close attention to those derivatives as well.

And finally, the dollar index, being a technician, look at the right side of that year-to-date chart. 100.5. We've touched it, touched it, and touched it. And technicals are like Pac-Men. If you take so many bites, you end up going through. A violation of that will be technically significant, and in my opinion, it's just a matter of when.

Kelly, back to you. Rick, I couldn't think of the word derivative. Direct, come on. I noticed Rick real quickly, not to overly belabor it, but the dollar index just printed 100.47. Do we consider that a break below 100.50 or no? It's got to be on a closing basis. Yes, if it closes under 100.5, I don't care if it's by one tick.

A lot of these models will move on that. All right. Thank you very much, Rick. Appreciate it, Rick Santelli. To Seema Modi now for a CNBC news update. Seema. Hi, Kelly. The suspect facing gun charges after he was discovered outside of former President Trump's golf club

in West Palm Beach will be held without bail pending trial. That's according to a judge's order released today. which weighed several factors, including the defendant's prior conviction and recent travel to foreign countries. Prosecutors said yesterday they planned to also charge Ryan Ruth with attempted assassination. An Israeli airstrike in Beirut today killing a senior Hezbollah commander as cross-border attacks on both sides stoke fears of an all-out war. The Israeli military says the Hezbollah commander led its missiles and rocket force. And Carolyn Ellison entering court just moments ago as she faces sentencing today for her role, in the fraud that led to the collapse of crypto exchange FTX.

She could face years in prison, but prosecutors have said she deserves leniency because she served as a star witness in their investigation. Kelly, back to you. I read she wrote a romance and Edwardian romance novel as well. And while she, while this is all kind of taking place, Sima, thank you very much, Sima Modi. As we had to break, let's get a quick power check on the positive side. Freeport MacMran, that miner along with other mining stocks, rallying on China's stimulus moves. It's up 8%. On the negative side, defense firm Huntington Ingalls down 3%.

No catalyst there, but again, under pressure to the downside. We'll be right back after this. All right, welcome back to Power Lunch. Worry's about the economy we've been hanging over the markets. With this morning's week read on consumer confidence adding to that, plus don't look now, but earning season is just a couple of weeks away. Dryden Pence is chief investment officer with Pence Capital Management. Drayden, welcome. Good to have you here. Happy to be here. How much more do you think the first? Fed will or needs to cut interest rates to make sure we don't, bless you, make sure we don't dip into a soft trough.

Well, now it's turned into question about cuts to a question about cadence, right? So we're moving from cuts, what are the cadence? So now we've had the 50 basis points. We think there's probably two more this year. And then they'll probably spread it out over 2025 as they begin to kind of see and get the data in. So I think that that's... So you get rates ultimately that are two points lower than they are now.

that puts them in the three and a quarter range and that's where you think a kind of equilibrium exists? Equilibrium is probably about three, but I think they're going to try to take their time getting there because they've done a great job of breaking this inflation thing, bringing it more into level. And so you don't want to blow the soft landing by reigniting something. So I think that that's kind of where it's like playing gymnastics with data, they stuck the soft landing.

So let's get the score and go on. And you're looking at some, you've almost got both in your portfolio of the either or fight that's going on in markets right now? Do you go with big tech and momentum and chips, or do you go small cap and kind of the broadening out? You've got AMD and the small caps and you've got ASML. By the way, Intel had an ASML stake that maybe they should have hung on to. That's a separate story.

Very, very true. Why this approach? Well, I think that the point is, first of all, you're going to continue to have the mega caps do pretty darn well. But their earnings projections are a little less for next year. But when you look at the rest of the S&P 500, you're seeing a continued growth, that they're going to look at 13 or 14% on earnings growth, that's going to be a pretty good market for next year if you take a look at it. So I think this broadening out, I've talked about being part of the 493.

So we trim down some of the magnificent seven spread out to the 493. You begin to see small caps grow in this environment. Lower interest rates for companies that borrow is going to be accretive to earnings. So I think all of those things are coming together to have a broader diversified portfolio, a broader diversified set of earnings growth going forward. So 2025 begins to shape up is a pretty standardly good year. So get on the 493. It sounds like driving directions in L.A.

Get on the 493 to the 405 and whatever. So what about the seven? Should I take the seven or not? Well, if you take the seven, you're still going to get there pretty good, right? The seven is going to be all right because you're going to probably have about a 19% earnings growth. It's going to come down from 30 or 40. It's going to come down to 19, but you take the seven, you're doing all right. Like a New York subway line.

Yeah, take this. Yeah, that's it. That's it. So it's all about transportation today. Yes, so which route do you take? But I guess is there any which way you see this kind of ending not so well? You know, we've talked to, it's pretty much consensus now, soft landing. We spoke with the retail analyst last hour.

He says he's excited about a lot of the names in the sector after we get through the holiday period. I guess this is the all clear. I, you know, you never want to say all clear. But I think the thing that you worry about is someone. large exogenous shock. You know, you always have to, there is tail risk out there. And that would, that would derail it. Otherwise, I think, you know, more people are working than ever before. More people are making more money than ever before. Is that true? Yeah. Yeah, you've got 100, we've grown. Just because the unemployment rate is up at the margin, I mean, there has to be

some loosening. But we added 6.1 million workers, right, in the last couple of years. That's like the entire labor force of Illinois. That's the equivalent, if you take it and multiply it out by salaries, We've added the entire economy of France in the last four years. Wow. So if you think about that much money, that many people, you know, stimulating this economy, it really kind of gives us a good basis for looking at things going okay forward. Now, the lower, you know, the softer part of the soft landing, right, the people making under $50,000 a year, those are the ones that were heavily affected by this consumer confidence

number. But I think that when you look at it in total, we're set up for a pretty good basis. Because, again, you've got a lot of people working. they're making money, they're spending it. That's what consumers do. I don't know why the Fed cut rates then. Maybe they should have just said, we'll just go a quarter and, you know.

Well, I think they felt that they maybe should have moved in July. And so we didn't move in July. Let's go ahead and get it 50. And then we can kind of be data dependent going out. So that's why I talk about it. It's all about cadence going forward. And the other thing is, is the Fed's far differently now than they were a couple years ago.

They've got bullets in the arsenal. They've got bullets in the gun. They've got the ability. If they have to make moves to lower interest rates, then they have the ability to do that. And I think that that's really important. Dryden, nice to see you again. It's good to see you again. Trident Pence.

I appreciate it. Tesla shares, I'm sorry. Meta shares are near all-time highs ahead of its big developer conference kicking off tomorrow. We'll get a preview of what to expect there, including clues into its AI strategy. When we return, the shares are up 59% here today. Wow. Welcome back. Mehta shares are fractionally lowered today after hitting a new all-time high yesterday, up 300% in the past couple of years.

The company made that much publicized pivot to the metaverse, but it's been a real AI winner, having quadrupled now since two years ago. The company's Connect Developers Conference begins tomorrow, and Julia Borson will be there. She joins us now with a look at meta's AI strategy, and I keep hearing about the glasses, Julia. Well, there's a lot to look out for tomorrow at MetaConnect, and meta is a good. expected to unveil new AI tools tomorrow there. And that's all part of its plan to spread adoption of its open source AI Lama model to avoid the emergence of a clear AI gatekeeper like Apple is on mobile devices. Now, meta by going all in on open source has exponentially grown its AI reach and adoption,

while rivals are offering paid enterprise models. The meta's Lama models have been downloaded over 350 million times since early last year. That includes about 20 million times in August. And Lama usage across its major cloud service providers, including partners, including Microsoft, Oracle, AWS, and NVIDIA more than doubled from May through July. Now, all of those big numbers speak to the wide range of companies that are building applications with META's open source software,

from Goldman Sachs using it to help extract data from documents, AT&T is using it for customer service tools, and Accenture created a custom ESG reporting tool, while there are a wide range of medical companies and researchers using it as well. Plus, AI startups are now building with Lama rather than having to raise millions of dollars to create their own foundational models. A&Corp contextual AI tells us that it's far more efficient to not train a model from scratch and that Lama is in effect leveling the playing field for startups like contextual.

So why is META open sourcing Lama? It does benefit from the feedback it gets on the AI model, which then makes META's own AI chat bots more effective. And once companies build with META's models, it's a lot easier to integrate their products and bots into WhatsApp or Horizon World, and then that will, in effect, grow engagement on META's various platforms. Tyler?

It's a great point. They think open source is going to be the way to go for... Pay them more, maybe not monetarily, but what they'll get. You need the products. You need the ecosystem, the tools. Julia, thanks. Yes, yep, sorry, Julia Borsden. All right, moving ahead.

Chinese stocks surging after Beijing unveiled stimulus measures to boost the nation's sluggish economy. We will trade some U.S. stocks, getting a sort of a secondhand boost in three-stock lunch. That's next. Welcome back. Big news. Today is China unveiling a massive stimulus plan to boost its struggling economy. And we're seeing a pretty big stock market reaction as a result. You can see the crane shares China Internet ETF up almost 10%. The FXI also up more than 9% today.

It doesn't matter if it's the internet names such as Alibaba, Baidu and JD, or a carmaker likely soaring today if it's Chinese. And many U.S. companies with big business in China are also seeing a boost from this stimulus. So for three-stock lunch, we're asking whether these gains can stick or is it not enough to save the Chinese economy? Here with our trades is Jerry Castellini, president and CIO of Castleark. Jerry, welcome to you. Let's start with Caterpillar, helping to lift the Dow on. its rally today. Would you be a buyer? Yeah, the three stocks that we're talking about today, CAT is the one that doesn't rely on the mass market in China to support its earnings and it's

order book. And CAT has been doing quite well going into this. We've worried on the commodity market side that China was going to erode. So the fact that they'll offer stability there should improve their earnings outlook and really help their order book. So I'd be a buyer, cat here. All right, let's move on to Las Vegas Sands on pace for one of its largest gains in recent memory. What do you think about LVS? Yeah, so LVS, Las Vegas Sands is highly dependent, if not 75% of their earnings and cash flow are from Chinese-based gamblers, basically. And you have to ask yourself the question, where have they been? The market has recovered in Macau, but only through a lot of promotion. So the profitability has been mediocre

there relative to expectations. We would still hold it, though, because it's not clear that the Chinese are done stimulating and that we could get to that mass market gambler soon. Okay. Well, let's bring us then to S. Day Louder, one of the poster children of China's ups and downs getting a boost of nearly 6% today. Would you, should you buy this one? No, I'd be a seller. There's too many structural problems here. They've got to fix a lot of things in their core business, even though China is half of their market cap, I would not touch this. I'd sell on the bounce. And how do you feel about the prospects overall, Jerry?

Is this going to work, you think, for China or no, not enough? No, I think this is the right step. I mean, look, we've been waiting for them to respond. The U.S.'s interest rate cut clearly shows stimulus is back on the table. And they better be ready to do two or three other rounds. Two or three other rounds. Wow. Jerry, thanks for your time today.

We appreciate it. They're playing our song. It means we got to get out of here. Thanks for watching Power Bunch, everybody. Closing bell starts right now.