Power Lunch - S&P 500 slips as benchmark struggles to reach record high 2/18/25

Episode Date: February 18, 2025

Stocks are slightly lower today, with the S&P 500 struggling to reach the all-time high set a month ago, as Wall Street weighs headwinds on global trade and inflation. We’ll cover all of the angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. Could the world see a peace deal in Ukraine sooner than later? The U.S. and Russia talking today. Markets are moving. We'll talk more about what could happen with any deal. Plus, you've seen the stories on social media that is concerned about layoffs in Washington, D.C., really hitting their housing market. We're going to show you data and talk to a real insider. And what Microsoft has to say about AI and whether Elon Musk can really compete in the world's hottest. and most competitive playground, Kelly. Just talking about it. Brian, thanks. Let's first get a check on the markets as stocks have faded from this morning's highs. The S&P was within a few points of a record high. It's now down of just a couple of points.

The NASDAQ hit a two-month high above $20,000 briefly. It's now down a third of 1%. And keep an eye on shares of meta, which inevitably have to be lower someday. And they're down 3.5%. Is it because of Grock, you wonder? They are breaking their 20-day win streak, potentially. Again, a 3.5% drop. But two hot stocks continue their rallies today. Intel is one of them up another 10% on these reports of a potential breakup. Super Micro is up 13% and up more than 90% so far in February. We're also seeing some selling across the Staplespace. ConAgra, General Mills Smucker, hitting 52-week low. Strong dollar, Brian, has been a headwin there.

A meta story is a big one. All right. Meantime, some big global macro headlines kick off the hour. The U.S. and Russia agreeing to appoint diplomats to try to work together to find a selection. to Russia's invasion and war in Ukraine. It is the first real talk between the U.S. and Russia in more than two years. Russian representatives led by Sergei Lavrovs are in Riyadh, Saudi Arabia right now. They are speaking, Marco Rubio, and other high-level American diplomats. It is critical to note, as we did in the exchange before this, that Ukrainian president Volodymyr Zelensky is not in attendance, and has expressly said that he would not accept any outcome from these talks, because his nation did not take part. In fact, Zelenskyy postponing his scheduled trip to Riyadh on Wednesday.

That said, the U.S. and Russia are talking. And the hope is that Ukraine also comes to the table. So we highlighted last hour, any peace deal or end of the fighting could have an impact on stock markets, both here and in Europe. Many European markets have been rallying on this and, of course, other things like hopes for lower borrowing costs, lower energy costs, whatever it may be. Things to watch include crude oil, natural gas, both here and in Europe, LNG stocks here, iron ore, steel, coal, and wheat. Those, Kelly, are some of the commodities

and energy sources to watch if and when any deal does occur. And as we were talking about U.S. exceptionalism had reached a peak at the end of 2024. The stock market was at all-time highs in terms of global market cap. Now we're seeing a bit of a reversion. The best-performing stock markets have been international, including Europe. The stock 600 is up 10% year-to-date, and the idea is not only might corporates benefit from higher defense spending, domestically, their companies, as you've pointed out, the steel users, the energy takers, could benefit if energy prices do come down. Yeah, and almost everything we just scrolled through here. You saw a pop there at the beginning of 2022 when we had that invasion. The other thing, too,

urea's, which are fertilizers. Look at names like a CF Industries and a mosaic here in the United States, big urea producers. Ukraine was one of the big urea producers. That got taken offline for the most part. Again, a lot to do. Sure. Long way to go. We'll see what happens. So as we have pointed out, European stocks have been blowing past their American counterparts this year. It's only been a couple of weeks, but the European stock 600 has more than doubled our S&P 500 this year. In Europe, remember, their borrowing costs are about half of ours. So what a all this combined and more mean for your money? Well, your next guest has some big time thoughts on all of it. It's bringing Mike Wilson. He is CIO and Chief U.S. Equity Strategist at Morgan Stanley.

My good to see you. How much, if at all, are you and your team watching what happens in Europe vis-a-vis how it might impact our equity markets and your client's money? Yeah, I mean, I think there's, I mean, obviously there's a lot going on. I mean, the ending in the war would be, I think, tremendous positive tailwind. I think the market's getting in front of that primarily. There's also just massive political change. In some ways, you know, the win, President Trump in the most recent election almost puts pressure on other countries now to kind of bootstrap themselves. And I think, you know, we have a big German election coming up and that's part of the story too, is that they might get more active with their own fiscal policies because they kind of

have to. And same thing for China. We've seen that market perform extremely well kind of on the same on the same basis. But you also have to remember, Brian, that at the end of, I mean, last year was just a tremendous year again for U.S. stocks, and we ended up, you know, pretty much on a high note. December was a little tougher, but we had a lot of good stuff happened in the second half of the year. And it may just be that simple, which is at the U.S. market's just, you know, consolidating and taking a bit of a break here. There's some fundamental drivers that are maybe capping us here. Sixty-100 was a level that we identified back in October. We hit that, And we've just struggled with it for the last three months.

That's not, you know, the end of the world. It's just that's the resistance level. We haven't been able to break through it. Stock market's expensive in the U.S. And what we've been focused on is just trying to make money under the surface where I think the opportunities that's been tremendous. You know why I knew international stocks were going to outperform, Mike? Because I had taken them out of all of my retirement portfolios.

You know, because a couple of months ago, I was like, I've had it with small caps. I've had it with international, you know, fool me once, shame on you. you fool me 15 times, but maybe now is the 16th? Yeah, it could be. I mean, like, every dog has its day, as they say. But I mean, the reality is the U.S. market just got tired, and we priced a lot of good news. And once again, I want to make this perfectly clear. Like the, you know, under the surface, there's been some, you know, huge winners in the last

couple of months. And it's just, and the MAG7 has really underperformed. And I think that's what's weighing down the index. It's almost the opposite the last couple of years where the index did extremely well. anything else did terribly. And now we're seeing a little bit of a broadening out under the surface. And to me, that's a better outcome. Well, maybe it's a good and a bad thing. And, you know, I talk a lot, Mike, obviously, about energy. And people say, why do you talk so much about energy? Well, energy is the AI story. Even if you don't care about energy per se, you might care about the

stock market, which means you care about Nvidia and Microsoft and Google and all that stuff they want to do, which is powering our stock market higher. All that has to literally come from some form of energy, how closely do you guys watch some of these subsidiary markets? You know, if we see a break, let's say Nvidia comes out one day and said, well, we just don't know if there's the power to make all these data centers and thus maybe not sell all these blackwell chips. What's going to happen? Yeah. And it's not just about AI, Brian, as you know. I mean, we need energy for the economy, broadly speaking. And we've probably underinvested in capacity and electricity and other forms of energy. So we've been on that power theme for quite a while. Our analysts have done a great

job. And that's probably an era where we're more constructive at the margin than perhaps even the AI directly. I mean, the, you know, the AI story's been really about the enablers, you know, the picks and shovels. That's sort of fading now. And now it's about the application layer and then the power to kind of, you know, drive these new networks. What does that mean the application layer? Software, effectively. So, you know, all of the, all of that sort of an app loving, I'm not, you're not a single stock guy, but is that like why an app loving is up 500% recently? Well, sure. I mean, and think about the money that has to move, right? So the money, you know, the large chunks of money were in, the hyperscalers and some of the picks and shovels,

and then it has to go into maybe perhaps smaller names. And I think that's why you're seeing outsized moves. Some of those are probably overdone. But at the end of the day, all of the value add generally in compute is done at the software level, ultimately. If you think about the internet itself, the long-term value creation was in the application. not in the infrastructure itself. The infrastructure is the highway, but then the value add is in the software. So we're moving into that phase of it,

and then also the adopters. The companies that are actually adopting some of this stuff and are facile with big data sets, they've benefited from AI early on, and the market's smart. The market's been making that shift now for the better part of four to six months. Where does that, Mike, you say leave us?

I mean, again, the larger to me sort of, I wouldn't call it an anxiety, but what's the right allocation to you? to international? What do you think about small caps? Well, we've always been fairly balanced in terms of trying to, you know, not be too tied up in one particular market. Look, we're still, I mean, the U.S. is still a great place to invest. I think, you know, because of the passive strategies and some of the indexation, it maybe got a little bit concentrated. One thing I'd like to point out to listeners, though, is, you know, it's the same thing overseas. We're seeing,

you know, this high quality factor carry the day in every market. So if you look at Germany, for example, it's even more concentrated than the S&P 500. Same thing in Asia. So in other words, what the market's paying up for is the same thing as paying up for in the U.S. is paying up for high-quality growth. High-quality is working because interest rates are still fairly high globally. There's not a lot of organic growth yet. Maybe that's going to pick up here as we go into 2025 and 26.

And so the market's paying up for high-quality stocks. Bonds are not uninvestable, but people have shun bonds. And that's what they're paying up for. And so what's happened is the market is just saying, hey, we kind of did that in the U.S. Now we're looking for some of these high quality names outside the U.S. We have some other catalysts, for example, ending the war potentially in Ukraine and between Ukraine and Russia. We have some political change going on in countries like Germany and others. So markets are always looking for the next catalyst. And is that why Germany, and we've

talked about how bad their fundamental economy is for years and their stock market, I know it's only been a couple months, okay? Don't at me, folks. But they've doubled our market, in the last three months, is it because it's, we always say, Tina, there is no alternative? I'm trying to think of T-C-T-I-T-T-T-T-T, too cheap to ignore. Well, I mean, and it hasn't done much for the last, you know, 10 years, basically. It's flat up until recently for 10 years. And now everything else is expensive. So, yeah, I mean, market moves where it thinks the opportunity is going to be better in six months' time.

So there are some catalysts in front of us. I mentioned, too, the potential ending of the war, elections. change over. And then the pressure, once again, I wouldn't understate that it's a pressure that the elections are now putting on other countries to do things for themselves, right? I mean, that kind of gets the ball moving. So that's what the markets are expecting. That's what it's hopeful for. Is it maybe getting a little far ahead of itself, potentially? But markets do that. Markets will get ahead of themselves and we'll have to see how this plays out. But there is a reason for why it's happening. Yeah, and perhaps important to point out,

this is not the euro crisis. You know, this is not stocks plunging, bond yields breaking out. When people say, you know, Trump is going to cause the breakup of Europe, that is not what markets are telling you. They're telling you the opposite. They're telling you that Europe looks stronger to them now than it has. Look at that stock chart in 10 years. What I would say is it's telling us that the potential is better going forward because, you know, let's face it, the last 10 years when you talk to people about Europe, they roll their eyes and they say, you know, call me later. I lose my number. And so now people are basically saying, hey, maybe.

there is something going on here. We haven't been looking there. By the way, remember, the best analyst sometimes is price, right? When price starts going up, people get excited. So all those factors are playing into this. And the fact that the leadership names in the U.S. market have sort of flattened out is giving people a reason to look to. When those names are going up every week, there's no reason to look around. And so there's just a lot of things that have come together here in a short period of time. And so markets do. They're going to move to where the opportunity, where they think the opportunity is going to be the best for the next three to six months.

Indeed. Mike, thanks so much. I appreciate you joining us today. Mike Wilson of Morgan Stanley. Take a quick break. After that, Doge is taking D.C. by storm as Musk and the team trim the federal fat, jobless claims are spiking. But what does it mean for the D.C. housing market?

More next. Well, the alarm is officially being sounded in parts of the American new housing market. New data shows that Home Builder Settom. dropped to a five-month low. And though some of the concern is about tariffs, which we all know may never happen, right? There's been a pause. We don't know what's going to happen. There is also a concern over borrowing costs, which refused to go down.

There's a lot more as well. Let's talk about it all. We're going to go national. And then we're going to go to the D.C. area. We'll start Diana Oleg nationally. How are things looking? Well, we got to read this morning, Brian, on Homebuilder's sentiment. And it took a very hard hit in February.

and the primary concern is tariffs. The NIHB's Sentiment Index dropped a much wider than expected five points to 42. That's the lowest level in five months. Anything below 50 is considered negative. But sentiment had been rising steadily since September, even though mortgage rates began rising again in January.

Of the indexes three components, current sales conditions fell four points to 46. Sales expectations in the next six months, they dropped a whopping 13 points into negative territory to 46, and buyer traffic dropped three points to 29. And that future sales component, that's the lowest since December of 2023. NIHB's chairman Carl Harris said in the release, while builders hold out hope for pro-development policies,

particularly for regulatory reform, policy uncertainty, and cost factors created a reset for 2025 expectations in the most recent HMI. The builders noted 32% of appliances and 30% of softwood lumber come from internet. national trade. And while the Canadian and Mexican tariffs were paused, builders are still worried Chinese are in place. That's where your appliances come from. In addition, the share of builders lowering prices. It dropped to 26 percent in February. That's the lowest share since last May. Other sales incentives also fell. You would think they would go up, but no, this may be because incentives are becoming less effective at attracting buyers, since high prices and high rates have

reduced the pool of buyers for whom these benefits actually move the needle. Brian? All right, Diana, thanks. And stick around because jobless claims in the D.C. area are soaring as people look for that impact from the Doge job cuts. For the week ending, Feb Eighth, filings were up 36% from the week before and up 400% year on year. At the same time, home prices have seen a drop, down almost 9% compared to 2024, according to Redfin. So let's ask a local real estate expert, what's going on? Joining us now is Daniel Heider. He's executive vice president at TTR Sotheby's and CEO and founder of Hyder. real estate. Daniel, welcome. Thank you for having me. What's it feel like in D.C. right now, and what are you seeing in the housing market? Well, it's very sub-market dependent. I see certainly perhaps a bit of a moderation, which is usual for this season. You know, winter months tend to bring on a slower pace to the market, but there certainly isn't any seismic shift happening here. We see consumer confidence very, very high in the upper bracket markets. And while, you know, these Doge cuts certainly make headlines, the facts are is that in terms of levels

of inventory, we're about the same that we were this time last year. But you've seen somewhat of a slowing, which you said is a little bit unusual for this time of year. I also thought it was interesting. You said there are other factors that are kind of tailwinds for the market primarily return to work. How does that factor in? Well, you know, there's an opportunity for folks that need to be back in office five days a week to be closer to those work centers. The commute is becoming more of a central point and the decision-making factor for a lot of families and individuals. Who knows how that's going to affect our suburban markets here in the capital region. But, you know, savvy folks see the opportunities that exist in times like now. Let's, Kelly and I both went to high school and college in Virginia. We have a lot of friends in D.C., my brother-in-law is a realtor in Maryland, so we know what's going on. Let me ask this.

I know Doge and the cost cuts are getting all the attention, Daniel, but also, if I look at Falls Church, Virginia, or Fairfax, Virginia, or Silver Spring, Maryland, three-bedroom, two-bath homes are like $900,000. Now, it's been the hottest economy in America. for 30 years? Is there a part of you, even as a realtor, and you make your living off optimism, I get it, that just says, man, things, maybe they just got a little too expensive for the average family with interest rates, you know, 7%, 900 grand for a three-bedroom, two-and-half bath ranch? Sure. Look, things are definitely cooling off, and there's no doubt that the past few years have been extraordinary for that specific subset that you mentioned in the suburban markets. But look, interest rates are 7%.

Folks are being a little bit more cautious. And look, I see this as a regularity, not necessarily a total softening. There is still a very big need for housing in Washington. inventory has been historically tight. And what we're seeing, you know, and this remains to be seen, but what we're seeing is a little bit more inventory being introduced to the market. And who knows how that's going to play out in the next couple of months. But there's an opportunity for buyers that want to toss their hat in the ring right now. And Daniel, is that because you don't see enough changing to like the big picture long run?

Because if you see that, then it sounds like all of Doge's workers for nothing. Look, you know, Washington, D.C. is a seat of power for federal government and all of the ancillary companies that support it. You know, while these cuts are significant, they impact people. Certainly in my life, my cousin recently lost her job. You know, this is very real. You know, it doesn't seismically shift this area. There is a lot of stability here. Washington continues to be a very, you know, undervalued market and folks want to make it their home. Well, I do know our colleague who lives in D.C., Diana, you've been listening. I was in the office two weeks ago. I stood next year for two days. I know you've got a lot to say about this topic. Yes, I do, Ryan. Look, I've been in D.C. reporting on housing for over 20 years.

So that's several different administrations. And everybody thinks that the housing market is going to be impacted dramatically whenever a new party comes in, whenever a new president comes in. And what we're seeing now definitely is a factor that's happening nationwide is that there's still very low supply. And we're seeing that also in the D.C. area. The one difference that I'm hearing from a buyer's agent here on Capitol Hill is that they're seeing extreme demand close into Capitol Hill from both Republicans and Democrats who want to get in on this very hot political arena. So you're seeing bidding wars. You're seeing prices go up and you're seeing bidding wars of over $100,000 for homes that need $400,000 worth of work. That's on Capitol Hill. But in the rest of the area, remember that when supply is as low as it is, you're going to see people fall out of the market, you still have that mortgage rate lock-in effect, and you also have this uncertainty that's going on in the market. Specifically, we're hearing anecdotally about people who perhaps were going to move, but they work at NIH, which is right in Maryland, and they don't want to move because they're concerned about their jobs. Or you hear about people who were moving to D.C. because of federal jobs, and those federal jobs no longer exist, so they're no longer

looking for a home. So you are seeing some very specific shifts, but it's not an overall, oh my God, the sky is falling, even though there have been, and I will just note this, some false posts on social media claiming that supply of homes for sale in D.C. has jumped 1,000 percent, which it has absolutely not. And Diana, that's why we're, so that's why we're doing this segment. Kelly and I are both incredibly boring people. And all weekend long, we did, literally we did nothing, except look at the story. I'm not joking. We had to look at the emails that went around. There was no skiing. And I spent the weekend fact checking them. Yeah, and we actually did some reporting, Diana.

It's crazy. And Daniel, I think you hit it, okay? Diana lives there. She knows more than we do. But Daniel, you send commuting. Okay, let's be clear. And I'm old, okay? When I was your age, Vienna was like the end of D.C.

Like, if you lived in Vienna, you might as well live in the sticks and have a farm. Okay. I went to high school to talk called Winchester, which nobody had ever heard about, which is now a suburb of D.C. There's a FEMA backup headquarters. People are commuting in. I think what's happened is people have realized if they're going to go back to the office, the commuting sucks. That's right.

It impacts their lives. And we're in the business of helping people live their lives when they're choosing shelter and housing. And look, if you've got to be back downtown or back to your office, you want to be close to it. And so it remains to be seen how it's totally going to be. be impacted. I know some companies are holding on to, you know, a more sort of liberal work-from-home policy, but it remains to be seen. I mean, the market is so segmented and the performance of the high-end market versus the sort of, you know, mid-tier market. They're very, very different right now. And so you can, you know, data is meant to be skewed and looked at in all of these

different ways. But I totally agree with Diana. There's a lot of fodder out there, especially over the weekend. My phone blew up with the text messages about, you know, all of this surplus of inventory that hit the market and, you know, it's not true. It's just not true. It's not true. It's not true at all. It's not true. Daniel, we're going to leave it there. Diana, I love it. We actually looked at facts. It's a sometimes when you do that, it's amazing what can happen. Facts. Right. Diana, she's nodding. She's like, I told you. Diana, thank you. All right. So whenever we talk about specific cities or metro areas on this show, we have the unique ability to look at how they are doing in the stock market. This is information nobody else has, not even others, the NBC

shows. It's called the Power City Index, and it is named after this show, but named that way for 10 years. It's the 12 biggest market cap companies in 38 different city and metro areas around America. Let's quickly check the D.C. Metro Market. This is Virginia, Maryland, and D.C., and it's real estate may be going to. fine. DC stock market, not so much down on a yearly basis, Kelly. Some of the five big decliners in the last three months, you got a lot of defense companies, strategy, which is formerly known as micro strategy. That is also down. A lot of defense names, as you might imagine, in the Power City Index for DC, not having a great three months, but that is not real estate.

Right. And Boeing is on an upswing, but after a pretty tough stretch. So there are some headwinds. there, as they admitted. Coming up, gold prices still climbing. Goldman boosted its year on target. How can you make money on this trade? Market Navigator is next. All right, before we navigate these markets, hear how things are looking right now. We are, listen, we're down a little bit. The Dow was down 192 points. That was a lot of points 10 years ago. It's not anymore. Down 4 tenths of 1%. I think the big market story is met a 20-day run. Probably going to come to an end. It's down almost 4%. It's the greatest. Big Caps, stock run in the history of the modern stock market.

And yeah, that's a lot of TV hyperbole. Anyway, let's navigate. Domchew, first off, before we navigate, am I wrong about that? Could we say that meta's 20-day run is epic? I would, I, in my mind, covering the markets that I have. Giant brain. And trading the markets before that on my career on Wall Street. I think a 20-session run like Meta has had would stand out to me.

Thank you. I wouldn't say historic because I don't have those numbers in my head. It doesn't need fact checking. But to see a stock that's a mega cap go up for 20 days in a row, it's not the same as going to a blackjack table and saying, hey, I won 20 hands in a row. But it's kind of, you get that feeling, right? It's a big winning streak. I like you, Don.

It's a big winning streak. No, he's all right. Anyway, let's talk about the gold prices right now because gold is up just about 50% in the last 12 months, a pretty good run of itself. Political uncertainty has made it one of those safe havens of choice. One futures trader, though, thinks it will go even higher still and is playing the commodity outright through the futures market. So joining us now is the killer, Jeff Kilberg, founder and CEO of KKM Financial. He's also, of course, a CNBC contributor, a frequent guest on this program.

And a nice guy despite the nickname. Just a nice guy. And a Notre Dame football alum. So let's talk a little bit about gold prices and those gold helmets. How much can gold go higher, Jeff, in your mind? Well, down, gold certainly is near and dear to my heart. but I think it has the ability to vault over 3,000. That's my short-term target.

But there's three inputs, Dom, first being inflation. It seems like no other market has really been concerned. The stock market certainly wasn't bothered by the inflationary data that was hotter than expected last week. But gold was. We're seeing a $50 range day. And yes, it's at the higher end of the range. But there's also a component of the U.S. dollar.

Think about the dollar, Dom. It's been higher ever since Election Day. I know it's backed off a little bit off of 110, but we've seen gold move higher in the face of a stronger U.S. dollar. That's impressive. And lastly, I don't want to start the rumor mill, but we are talking all weekend. We heard buzz. Are we short some gold bullion at Fort Knox? There's supposed to be 143 million troyes at Fort Knox. We will see. But there's a bid in gold. I think that's why it's going up above 3,000. So why, I mean, so if you play the futures market and you target the way that

you have, this particular market is a leveraged market. So it's not a dollar for dollar return. How exactly then do you risk manage these situations? And why are your stops so tight and your profit level so tight in this? So it's funny. I thought these stops were kind of wide. It all depends on your perspective, right? But I think if you look at the valuation, so right now this April futures contract, I bought it at 2,930 this morning.

It's up towards the highs right now. It's actually trading on the high. But if you think about every dollar move in this futures contract is going to be $100 plus or minus. So if the gold futures move $10, that's a $1,000 swing. So I have a stop down. Just in the event, we see some tariff conversation continue to dissipate and we move back under because it's been sideways from like the last month, kind of attached to 2,900.

But I think we get a vault above here. I think we just have one last leg here. But I do only have a $70 move here, Dom, because pigs get fat, hogs get slaughtered when you trade futures. All right. And then one more point here. As we talk about the gold trade itself, fundamentally speaking, is there a real? reason why you think there could be potential downside, what exactly when then trigger what you

think would be a move lower in those prices, given the fact that we have everything going with tariffs and trade and the markets at record highs and everything else? So I think what triggers the downside, if we see the central bank buying dissipate, last three consecutive years down, we've seen collectively seen China, India, Russia. They bought collectively over a thousand metric tons of gold. I think we're on. and paste again for 2025. In the event, we see them walk away from buying. That's how it comes back off. But that type of buying, there's concerns about currency wars, trade tariffs. That's why the central bankers are hoarding the gold right now. And that's why gold is going to continue its

upward trajectory, in my opinion. All right. Jeff Kilberg for the trade on gold. Thank you very much. We'll see you soon. I think Notre Dame is going to need some gold if they're going to win the national championship because the NIL money keeps going up. So maybe Notre Dame will have to get some but Kilburg's gold so they can, you know, bring some players in. Or any other kind of gold. That's kind of where college sports is going. Or use the gold in helmets and actually use real gold. Real gold.

That be heavy, though. Thank you, Jen. You got it. On deck, what one of the world's leading AI experts has to say about who is hot and what else of Microsoft may have up its sleeve. Stay with us. We'll be right back. Welcome back to Power Lunch.

I'm Bertha Coombs with your CNBC News Update. A law firm representing Tesla and Elon Musk wrote a proposed bill that would change Delaware's corporate law and pave the way for Musk to receive his 2018 CEO pay package. The measure was introduced in the state legislature on Monday and comes after a judge rejected Musk's pay package, which is worth tens of billions of dollars and is the largest CEO compensation plan in public corporate history. The Vatican said this afternoon that the Pope has pneumonia in both of his lungs, but is remaining in good spirits as he receives treatment at the hospital. He was admitted last week for a respiratory infection, which grew to bronchitis. The Vatican has now cancelled all of his events through the weekend. And a Nevada judge today rescheduled the trial of the man accused in the murder of Tupac Shakur

to February 2026. It was due to start this month, next month in Las Vegas. The judge said that nearly one year delay was needed to give Dwayne Davis a fair trial after his defense attorneys claimed new witnesses can prove that Davis wasn't at the scene of the 1996 shooting of the RAP Star. It would be 30 years after the fact that trial will start. Bertha, thank you very much, Bertha Coombs. Now to the latest in the artificial intelligence wars, there's always something every minute, it seems. Now Elon Musk has unveiled his new high-powered AI model called GROC 3. He claims it outperforms OpenAI and Deepseek based on early testing.

Shares of rival meta, perhaps coincidentally, are perhaps not, down 3.5% today to break their 20-day win streak. And as for OpenAI, leader Sam Altman is now trying to shield the company from hostile takeovers, potentially, from Musk himself. Microsoft is a partner with OpenAI, of course. Although as of last month, it will no longer be the sole cloud provider. So where does all of this leave Microsoft in the AI race? Here on set with us is Dean Kerrignan. He's director of AI Innovations at Microsoft and co-author of the new book out today

called The Insider's Guide to Innovation at Microsoft. Welcome. Thank you for having me. Give us all some inside trade secrets. What a cool job to have at such an interesting time. How long have you been in the position? So 20 years at Microsoft, about five years ago, So I met my co-author, Joanne, who had just joined.

And we looked around the world and we saw, wow, the world is changing fast. And in fact, in the era of generative AI, it's going to move faster. So you saw this coming five years ago. We did you guys have any, the open-a-app partnership was more recent. So it sounds like Microsoft maybe had its own things going on on that front. We had a lot of internal AI. We had a lot of other innovations. But one of the things we noticed was the patterns of innovation were consistent across all of our technologies.

and in fact they were kind of independent of the underlying technology. So we realized they're transferable. It's not just Microsoft that can use these, but any company, any person, any organization. Can you give us some examples? Perfect example is when we started to interview people for the book, we realized how little they relied on a single idea and how much they relied on an innovative process and collaborative partners to actually execute the idea and bring it into the world.

So you're saying there's no eureka. moments. Precisely. Or there are many eureka moments. And the hard part is choosing the one that you're going to execute on finding the right partners across the company, bringing everyone together into this big tent and pulling in the same direction to get the thing out into the world. So what can you tell us about AI efforts at Microsoft now? I mean, as much as you can kind of open the kimono a little bit, like, what do you think the next couple of years look like? Yeah. It's a big question with many possible answers. I think the thing that has really helped us, has been to stay grounded in what we call human-centered AI. Human-centered AI starts

with the question of what should AI do and only secondarily ask the question, what can AI do? And that's almost the inversion of the public conversation that we're having right now, which is really centered on the capabilities. When you flip the lens and you look at the needs of users and customers and employees, you can zero in on the tasks that AI is good at and needs to help with. And you can be much more intentional and precise in how you roll the AI out. Is AI going to take all of our jobs? I don't believe so.

Why not? And I'm a father of two children, 11, and 6. And so I do ask myself this question. My daughter's in college, and I say look for careers that, as I tell her, can't be AIed out. Precisely. That's exactly the right advice. And AI is very good at the things that can be standardized and routinized. Those are usually the things that people, humans, don't like to do.

They're what we call the drudgery of our job. And so by adopting AI smartly, you can bring it in to do the things that you would rather avoid and outsource. And you can go into the activities that are truly human, creativity, collaboration, negotiations, supporting teams and bringing coalitions together. So I believe that's the path that we're on. It will be, there are industries that will be hit harder than others, and it will be somewhat of a rocky path. But I believe ultimately we're going to have a world where there are more and better and more satisfying jobs. You know, I find it actually helps me be more creative and more collaborative. Even just at home, the sort of silly ways we use it, I come up with little like things to do with my kids or I ask it.

I mean, I use it quite a lot. But that said, I wouldn't say I use co-pilot a lot right now. What are Microsoft's plans for kind of its branded AI technology? The creativity point is such a good one. And one of the things we write about in the book is the opportunity of their importance of diverging your thinking. Now, the way we've historically done that is with other people. And we get together and we brainstorm and we share ideas. People aren't always available for that.

Sometimes we have an idea on the spur of the moment and we're home and we want to have a round of feedback or input. or sometimes people's personality is such that they don't like the feedback or the criticism or the way people might attack your idea. AI has this ability to be with us all the time to respond to the way we like to engage and to help to kind of mature and develop our ideas. Yeah, it's kind of an argument. So you can, wait, can you can use, it's interesting, you can use AI to tweak people's performance at work? Well, it's more about your thinking process. So if you think about the typical thought process, You may have an idea, you may develop it.

At some point, you're going to be blocked. Now, there's two things you can do when you're blocked historically. You can think harder, which typically doesn't get you there. Or you can seek out a human and bounce ideas off. AI is an alternative there. And it's also an alternative that can not only take your ID and give you feedback, but could do a little bit of research. It could search the web.

It could look through your email to see if you've talked about this with other people. So it can pull together other resources and assets. It's not necessarily a substitute for talking to another human, but it's an opportunity when a human might not be available or a situation might not be ideal. All right. So you don't tell your kids there's anything to worry about? I tell them to embrace AI, use it, study it, learn it, have fun with it,

and be prepared to make it a part of their future life. This is for people of a certain age, Dean, we've got to go. Just make sure co-pilot doesn't turn into that stupid little paper clip. I love Clippy. I love clippy. It comes up all the time and you can't get it off the screen. I don't think there's a risk of that. Okay, but I just, I know you're, you know, as you go, you go back to Redmond.

Just let, you know. I will have a word with the right folks. Just one random dude's opinion. How dare you? Dean, thank you. Thank you. Appreciate congrats on the book. Dean Kerrignan is Director of AI Innovations at Microsoft.

Still to come, Intel and meta have both been on hot streaks, but should you still still jump in free stock lunch is coming up next. And as we had to break, take a quick look at shares of Robin Hood on a wolf research a downgrade today. They're saying good news is already priced in. The shares are selling up about 7%. They're actually off session lows. Still Robin Hood, since Jan 1 is up 62% even with today's drop. We'll be right back. For 20 straight trading sessions, we have been telling you about meta. It is the greatest big cap stock run in the history of the modern stock market. But like all runs, Lou Gehrig, Cal Ripkin, Jr. trying to do the Baltimore accent. Everything ultimately comes to an end. We still got what

an hour and 10 minutes to go, Kelly. But with meta down almost 4%, it looks like the 20-day run will be the end. We're back to three-stock lunch right after this. Welcome back. Let's do some three-stock lunch, and we have big movers today. Let's give you the insight on how to trade them exactly. Jessica Inskip is here. She's director of investor research at stockbrokers.com. Jessica, glad to have you back. Let's start with META. Don't need to say much else about it, although the 4% drop today. I'm not sure we know why, but it's breaking a 20-day win streak.

What do you do? Yeah, so META was actually, if we look at the one and a half year chart, again, 13, 26 and 40 weekly moving averages. I'll use that consistently because it represents one, two, and three-quarters worth of prices. It is still in its bullish trading cycle, but it is following a pattern that it's been following since it broke out of a six-month consolidation pattern formed in 2024. Essentially what it's doing is if you look at the Bollinger bands, which represents two standard deviations, it reaches that, loses its momentum, and then it has a pullback and finds support around the 13 weekly moving average. And then that upper range of the band actually aligns with the 161.8% Fibonacci extension around 740. So that puts support

really low around the 13 weekly moving average, takes about four to six weeks, but know that that's a target. All right, but a pullback is expected. A pullback expected, but you still see an up trend. Let's move on to Intel then, which is jumping today on the breakup rumors, you know, but it's been up a lot this year. What do you see there? So this one actually overcame all of its major milestones to shift into a bullish trading

cycle and it's forming a base. So my next target for INTC is 2643, which is the November 2024 high. Follow that by $30, which is the May 2020 for weekly high. And the 40-weekly is now the first level of defense. That's found around 24 and then below that a range from as low as 21. That needs to be maintained. So this is a base. We need it to stay.

If we go below 21, that is bad. All right. So you're getting a little bit more of a morning. Even I can look at that chart and see which way the lines are going. So a note of caution there. And then what about Amazon? The shares are a little lower today, but they're up 11% since mid-November. You know, it's often mentioned as, you know, kind of that and alphabet.

I don't know. That was one of our guest picks earlier. What would you do with that stock here? So still bullish at risk. These are short-term pullbacks that I'm seeing that's aligning with the broader breadth of the market. We had a big breakout relative to the S&P 500 over a five-year period. That is still intact. We still see the 13, 26, and 40 acting as support in the near term.

A sell-off could be triggered if we have a weekly close below the 13-weekly moving average. which is around 225. So watch that. 225 is the number to watch. Jessica, appreciate it as always. Good to see you. Jessica and Skip. Stockbrokers.com. We'll be right back. Got to end with META.

Meta's 20-day win streak. Likely, unless we see a massive change, Kelly, coming to an end. This has been an incredible run for one of America's most well-known company. I think you're right. One of the most incredible runs we've ever seen in markets.

Down 4% today. Maybe it's Grock. I don't know. Maybe it's just time to take some profits. That's it. Thanks for watching. Closing balance starts right now.