Power Lunch - S&P 500 touches record high after Trump pushes for low rates and oil 1/23/25

Episode Date: January 23, 2025

The S&P 500 rose to record highs once again today,  after President Trump called for lower interest rates and cheaper oil prices, among other demands. 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.

And welcome to Power Lunch, everybody. I am Brian Sullivan. She is Kelly Evans. It is a huge newsday with a hat trick of headlines hitting from the World Economic Forum and won President Donald J. Trump. He took on the Fed saying he wants lower rates and Saudi Arabia. He wants lower oil prices. He took on Brian Moynihan saying banks don't lend to conservatives and government spending, which he says skyrocketed too much in the past four years. Well, let's start with the president's comments on rates. Didn't name the Fed directly but says he'll abuse pressure. to bring rates down. I'll demand that interest rates drop immediately, and likewise, they should be dropping all over

the world. Interest rates should follow us all over the progress that you're seeing is happening because of our historic victory in a recent presidential election. James Pethakukas is an economic policy analyst at the American Enterprise Institute. He's here with us for a little while. CNBC contributor and is one. Julia Coronado is president and founder of macro policy perspectives, former Fed economist as well. Listen, Julia, let me start with you. And, you know, not the drama of the comments as fun as that is. What's the significance of it as far as you're concerned? I don't see much significance.

The Fed has really indicated very clearly that they're going to continue to follow their independent decision-making process. and ultimately Trump's ability to reshape the FOMC, the first slot he's going to have opening up is January 2026. So in the near term, you know, there's going to be a lot of job owning. We saw that with the first administration, his first administration. And, you know, the Fed is going to make its decisions based on incoming data. Right now they're in Wade in C mode. And I expect that will continue to be the signal next week with the January.

policy statement. Jimmy, some John Spel and Zani, others are saying, well, all right, could he say, I want to bring mortgage rates down? And those spreads are still very wide. I mean, is there, is there any other way to get rates down? Even, even Federal Reserve rate cuts don't seem to do it. Yeah. Listen, being pugnacious like that is highly entertaining. It, you know, it sends a message, you know, certainly to a global audience, you know, doing it at Davos. But right, so on rates specifically, that's going to be really difficult. Now, I will say that the president jawboning and jawboning the Fed, if this is what he's going to be doing for the next two years,

to say that that would have zero influence on the central bank in which have already been a taxed on its independence, they have the central bank just utterly ignore the dominant political party in Washington, you know, attacking it for keeping it. rates too high. They say that I'm not sure what the right percentage as far as influence on the Fed would be, but it doesn't seem like it would be zero. Well, Jimmy, I'll follow up with that very quickly because at day, even these are all human beings. Okay, Jerome Powell, everybody in the Fed, they're human beings. Nobody wants to be attacked like reps in a football game. They are probably

influenced by the crowd, even if we want to pretend they are not. That said, we are learning that the Federal Reserve may not be in control of borrowing costs anyway. Maybe if Donald Trump, wants to yell at somebody, he should yell at the bond market, because while the Federal Reserve is cutting rates, the bond market is raising rates. Well, I believe it was President Clinton, President Clinton who discovered the power of the bond market, and you can yell at the bond market. But the bond vigilantes are super powerful, and they're going to be especially powerful if your national debt is going up, and there's no plan to lower it. Julia? Exactly. So even if you are successful in intimidating the human policy makers into keeping rates lower than they otherwise might, that could have the exact opposite effect on the long end.

If there's a sense that the Fed is being negligent in controlling inflation or not not sort of following its usual process and procedures, that could spook the bond market. So the borrowing costs are much more important further out the curve. The Fed only sets the Fed funds rate. Could they tweak the portfolio maybe? But you've got, you know, a body of a lot of policy makers that, you know, will have a say-so on this. That could create noise. And it could spook markets.

And that could, again, just backfire in terms of trying to get long-term borrowing costs down. Although, Jimmy, he could try to say, listen, if I think it's a lower interest rates, If you want lower interest rates, one, you know, you've got to hope we continue to get strong productivity growth. So all the AI stuff is super important. And then the other half of that I think is telling bond markets that we actually really do care about the deficit. That's not a particular sexy issue. But if the president were to come with a real deficit reduction plan, plus all the excitement about AI and how that could boost productivity growth, I mean, that's the kind of powerful combination that we got in the 1990s, which led to tons of growth and also very low interest rates.

And that's a pretty nice sounding formula. Kind of get there. Julia, thanks. Appreciate it, Julie Coronado. Yeah, and Jimmy is going to stay with us as well. Folks, we're just getting started. President Trump also addressing energy in that virtual speech to Davos. He said that he will ask OPEC and the Saudi Arabians in particular to lower oil prices.

And in doing so, could end the Ukraine-Russia war. I'm also going to ask Saudi Arabia. Arabia and OPEC to bring down the cost of oil. You got to bring it down, which, frankly, I'm surprised they didn't do before the election. That didn't show a lot of love by them not doing it. I was a little surprised by that. If the price came down, the Russia-Ukraine war would end immediately. Right now, the price is high enough that that war will continue. You've got to bring down the oil price. You're going to end that war. All right, so let's talk more now about this, because it obviously also follows a series of executive actions regarding energy springing, John Kildoff of again

capital. John, putting aside the price of oil, Ukraine war thing, which we could debate, that's a totally separate argument. Here's the problem, is that even the president earlier in the speech, in a sound bite we did not run, said that he wanted to, Saudi Arabia is committing 600 million or 600 billion in capital to the United States. President Trump implied he wanted to raise that asked to maybe a trillion dollars and complimented, his royal highness, Muhammad bin Salman, but in the same time, suggesting that he wants oil prices to come down. And I just don't know or don't think that the two things are necessarily compatible. Well, it is a difficult thing to square, Brian. And I do believe that the first call President

Trump made was to the crown prince to emphasize the close U.S. Saudi ties that he wants. Look, one thing he's right about is that the Saudis and OPEC plus could lower prices. You and I have watched those prices wobble and go lower, even on the hint that the current production scheme wouldn't hold together and there would be increased production, even just noises about that, have sent prices lower. Just to talk about the Russian thing for a second, we all know the Russian economy is teetering. It's highly dependent on petro dollars to the extent we choke off that supply of funding to Russia, that would certainly be a problematic situation for Putin. So President Trump, I think,

is pushing the right button there on that one, too. Now, here's where it is possible, John, which is that if the Saudis go after a market share war, and I don't think they will in our reporting from OPEC, the meetings in Riyadh, the virtual meetings, whatever it is, suggested the same reading yours and others work. If they went after a market share war, so they were able to bring prices down, but sell more barrels. Now, the United States wants to sell more barrels as well. So that would imply a lower price, but more money, but it would also come at the expense of somebody else. And I'm assuming what the president means is that the expense of somebody else would be Russia, because talk to us about how Russia is still selling a lot of oil, as is Iran around

the world. We got to cut that off. I think that's what the president was suggesting. It is. And again, this is to your first point about this being difficult to square. Look, OPEC plus wants a higher price of where we are right now, not a lower one. The Saudis have their own hopes and dreams these days in terms of building out a new nation and country and future that is much less dependent on oil. So we're going to come up with a trillion dollars for us and then several trillion dollars for their own Nielm aspirations is an open question. But as far as the market share war goes, look, the Saudis are the Saudis are the low-cost producer by far, as you know. They make money on oil, even when it's down to the 30s,

20s, down around there. It's our own domestic production that gets threatened by much lower prices, Brian. So our guys would pay, but certainly some of the other OPEC countries as well would be suffering like Iraq and Libya and some of the others. Jimmy, I just want to bring you in to see if you have a point of view on this, because there's kind of a couple different aspects to the energy question. There's the question of what's happening on the international front and also what our needs might be here. Yeah. Listen, if there was like a theme throughout, I think, the president's speech, it was a lot about supply, supply of energy, supply of oil, the deregulation. All that stuff's going to take some time. So I think we need to acknowledge that first. But I have to tell you

that I can imagine a scenario here where the Saudis thought that they were going to get Trump off their back with that $600 billion investment. That, you know what? We don't want to lower oil prices, but we're going to invest $600 billion in the United States. So they did not get that

because Trump came back and said, no, actually I would like a trillion and I would like it to lower oil prices. Now, again, as we were just saying, which I think is a great point. I'm not sure those two things go together, but I think the Saudis got a really a really powerful taste of the Trump negotiating technique.

You think that's fair, Brian? Yeah, I'll chime in with my opinion here, John, and then you could jump in Jimmy as well, which is that they don't really square, and I think, to Jimmy's point, if you want to talk to Saudi Arabia and say, well, they're going to invest $600 billion, that's fantastic, right?

And I think it's better to have a good relationship, economically, politically, in every way, than a bad one. That said, I go back to my previous point, John, which is that if Saudi Arabia, Saudi Arabia, which, by the way, can pump two plus million more barrels of oil a day like that overnight, no problem. If they were going to do that, the only way they're going to do that is if it comes at the expense of somebody else, they're not going to do it on purpose. But if the world is using whatever number of barrels of oil per day it is, that that number either has to go up, which with China demand, it's really not, or somebody's going to lose market share.

and I could tell you that somebody is not going to be Saudi Arabia because they have already willingly cut by two million barrels of oil a day. That's right. And they have the contracts in place to sort of force oil onto some of their buyers where others do not have that. But again, Brian, it's going to be a revenue story for all the oil producers, including U.S. EMP countries, E&P companies that are going to be struggling here. And look, I've often said it. It's not the first move. It's not their go-to move. But the Saudis do hold the nuclear option here in terms of flooding the market with oil. It's what they did in 2020 right before the pandemic, unknowingly,

which generated that negative oil price. So they can do it. But I don't think they're going to do it, you don't think they're going to do that, John. I don't think they're going to do that. I doubt it, but I have seen them do it before. So that's the only reason I can't make it a zero option, Brian. Yeah. Right now, I think, Jimmy, it's fair to say that there's no zero options on anything. No. No. And I mean, anything. I'm not talking about energy. I'm talking about everything. We don't know what this president, it's been what, three days, whatever day it is, time's moving quick. I think three. It's been like three days to be the president, Jimmy. We have no idea what's going to happen. That speech in Davos went after everybody from

Bank of America's Brian Moynihan to global interest rates to whatever. I'll go back to my original word pugnacious. You could say combative, but I will say the kinds of things broadly that the president was talking about during the campaign, deregulation, tariffs, pumping more oil, that's part of the Besson-333 plan. We did see that in that speech, but we also got a bunch of other things, too, like picking a fight with Bank of America. All right, John Kildoff of Again Capital.

John, thank you. Jimmy, we're just going to milk you for all your worth your sticking around as well. We've got a lot more on President Trump's fiery pugnacious. Do we call it? Doblo's speech. It up next. We're going to dive into his comments on banking and government spending. He went right after this kind of bizarrely, the CEO of one of the biggest banks in the world. That's next.

Welcome back, a laundry list of the ways President Trump made waves with his Davos comments a few hours ago. Laid out a laundry list of targets he plans to fix, including government spending. On that issue, here's what he said. Total government spending this year is $1.5 trillion higher than was projected to occur when I left office just four years ago. Likewise, the cost of servicing the debt is more than 230 percent higher than was projected in 2020. 20. The inflation rate we are inheriting remains 50% higher than the historic target. It was the highest inflation probably in the history of our country. Well, solving that problem, the spending issue is the primary focus of Doge and Elon Musk. And actually, Senator Elizabeth Warren said

Musk 30 ideas of her own today for cost cuts. Let's bring in Emily Wilkins with more on that. Jim Petthacuchus is also still with us. Emily, what did the senator suggest? Well, Kelly, the senator has a number of suggestions, but it was very interesting how she phrased them. Because if you read her letter, she basically bashes some of the stuff that Musk has put forward as harming the American people and says, hey, if you really want to cut government spending, why don't you look at stuff given to major corporations as well as wealthy Americans? She mentioned eliminating things like the estate tax and the corporate carryover loophole. But, you know, she also did mention a couple things that do have bipartisan support. PBM, those pharmacy benefit managers, that is something

both parties are interested in taking a serious look at, seeing if there could be some savings there, as well as things like when it comes to negotiating the cost of drugs over Medicare, Medicaid, that's been something that lawmakers have discussed. So the letter was a bit tongue in cheek. She's proposing a couple things that we know that Republicans will never go for, but at the same point she is putting forward some serious ideas. And so are a number of other lawmakers. There is a doge caucus here in Congress that, yeah, was started by Republicans, is mostly Republicans, but you've had Democrats come to the first couple meetings and say, hey, it's not that we're against cutting government spending. We have a few areas that we think could be wasteful.

And that group is putting together a long list of things for Elon Musk and his Doge colleagues to look at. But of course, Kelly, if you want to get spending cut, you are going to have to go to the folks who are holding the purse spruits, purse strings, and that's right here in Congress. And the thing I've spoken with lawmakers about this week, they say, look, we're all fired up. We're very excited about Doge. We're excited about this idea. But it's not quite clear at this point exactly how Doge is going to fit into the process of funding government. I think that raises some questions about how many cuts they might be able to implement. I'm looking through this letter, 21-page letter.

And she spends the first several pages of it on areas where the Department of Defense should be making cutbacks. And so, again, trying to kind of take this idea and then move it to areas that are typically seen as, you know, Republican hobby horse. I guess, for lack of a better word, talks, you know, she's going after the insurers and the Medicare space and so on and so forth. So I guess that, Jimmy, is, and maybe that's one way to get this, you know, to find some common ground. Yeah, maybe.

I think you can, I think where you find common ground are on rather small items, items which are not, are not going to affect the trajectory of our debt GDP ratio. If you listen to the president's speech, what he mentioned, when he talked about, he talked about debt and deficits, and spending, and the other thing he mentioned was the Inflation Reduction Act, the Green New Deal,

or the Green New Scam, as he called it. That is the thing, which most often gets mentioned by Republicans as a place to cut spending to help pay for either to bring spending down or to pay for tax cuts, cutting a big chunk out of those green subsidies. Again, something that the president did mention, and when he mentions that, and he mentioned spending in the same paragraph, I think that is where the focus, the GOP focus is going to be primarily. Well, you can add one more controversial topic to what President Trump said to Brian Moynihan, the CEO Bank of America. Listen to this.

By the way, speaking of you, and you've done a fantastic job, but I hope you start opening your bank to conservatives because many conservatives complain that the banks are not allowing them to do business within the bank, and that included a place called Bank of America. They don't take conservative business. And I don't know if the regulators mandated that because of Biden or what, but you and Jamie and everybody, I hope you're going to open your banks to conservatives because what you're doing is wrong. Now, Brian Moynihan to not respond in the moment.

We reach out to both banks that were mentioned, Bank of America telling CNBC, quote, we welcome conservatives that have no political litmus test. J.B. Morgan Chase saying, quote, we have never and would never close an account for political reasons. full stop. Jimmy, again, I don't want to speculate with what the president was talking about, but you know the headlines. There have been some concern that Bank of America may have done something around January 6 people. There's a lot of things that are out there that I don't want to give necessarily credit to. But I think, I think President Trump was kind of sending out a warning

to Brian Moynihan about treating people different. I don't know. What do you think was going on here? Yeah. To me, this really sort of reminded me of a lot of the conversations about DEI and Walt Disney and big companies being anti-conserved. To me, and debanking certain politicians, right? And the political, some of the tech class, you know, I think it was Mark Andreessen recently on Joe Rogan saying he got debanked. And there's some talk that Bank of America may have tracked credit card data around people. And again, not giving credit or credence to any of it, but I think that's what President Trump was talking about.

Yeah. I think the message to businesses is do not think that this president is a, even though in some ways he really does seem like a traditional Republican and he talks about tax cuts. But in the way that he is not a traditional Republican, is that he will go after businesses that he feels are being unfair to the people who voted for him, for his people. So he's not just an advocate for the market or corporate America.

He's an advocate for his base. And his base has a problem with a traditional, maybe Republican constituency like business. They should not count on there being a reservoir of goodwill there. He will go after them. If, Jimmy, if I may, I want it while you're here to ask you about Stargate this week. You know, a huge, splashy announcement. All the tech dames are flying. you know, all the mega-cats, as we were talking about with our guests earlier this week,

that means there's going to be more spending, bigger pie for everyone. But also at the same time along comes DeepSeek here to spoil the party. It's this low-cost AI model from China. More and more people are using it. They say it rivals what our leading LLMs offered a fraction of the cost. So, you know, does Stargate this supercomputer help us keep the AI edge or not? Yeah, listen, I think it's competition. That's great.

That's great. Here's what I want. I want all those companies to feel like they have a completely aggressive, lethal competitor in China, and they will behave accordingly. And if that means more GPUs, bigger models, or being more efficient, then that market threat will affect how they operate. You want them to be under maximum competitive intensity. But by the way, they're not going to be able to build star games.

unless we have the kind of permitting reform, the president did talk about that at Davos, the kind of permitting reform that will allow them to build and power all these data centers. Beyond that, good. They should accept the challenge and behave accordingly.

That's not bad. Yeah. I guess it's just, it's an odd thing. We sort of think, okay, well, if we just throw the most dollars at this, if we have all the tech leaders, if we have the leading edge this and the leading edge that,

then surely we're going to win, right? And I'm not sure if it's going to just be a game of size and scale? You know, the Chinese, you know, we've tried to put this kind of, you know, shield around them to, you know, to keep them from accessing, you know, the best technology. But one sort of, and some people predicted that they will have to get smarter and more efficient. And sometimes, like, that constraint allows you to be more innovative and creative. Yeah, Jimmy Peth-Cookus, we're going to let you go.

Emily Wilkins, everybody. And by the way, Jimmy, and Kelly, I kind of just say this into the ether, I will say whatever you think about President Trump, I do appreciate the fact that we're hearing from him and that we're having content from him knowing kind of where he stands. We may not always understand or agree with where that is, but at least I feel like we've heard from President Trump more in the last five days than prior to the administration. For four years. But now watch how every single comment out. It says a huge, you know, it becomes entire industries are put on edge because of comments that he's making.

Well, he says that he's such a macro way. Yeah. We got interest rates need to go down. What does that mean? Where? And it may mean nothing. I don't know. Maybe.

By the way, we should follow Europe because the 10-year German bond, their bond, is 2.5%. Yeah. We're at 4.6%. Their Germany is 2% lower on government borrowing costs. That's why the German stock market has done well. And the lower currency, you know, the euro is going to go below parity. I don't know if we, they're, they've got some challenges. Yeah, I don't know what the German word for hosed is, but their economy is not in good shape, but hey, it's cheaper to borrow.

Meantime, your next guest is seeing market signs that might worry you. The market navigator is next. Welcome back to Power Lunch with the Dow leading the way today at a bit of a turn of events. It's up three quarters of a percent. The S&P up 11 and the NASDAQ down a little bit. S&P record high today, Don? It was close. The last I checked, we hit 6,099, which is one point.

single point on a basis of 6,000. And yet, well, all of this has been going on, the VIX has been rising, and that's the focus of Navigator. That's right. So with that volatility index kind of gently moving higher over the last few months, at the same time that the S&P 500 has seen the gains that we've seen towards record highs, our next guest says that these two things together are not typically a great scenario, and they could signal a divergence in market sentiment.

So what does it all mean, and what should we be looking out for? joining us not to break it all down is Brian Stutland, the chief investment officer over at Equity Armour Investments, a guy who knows options, futures, derivatives, up the wazoo. So Brian, take us through the volatility measure. The VIX, it's kind of like this thing that maybe market professionals talk about often, but maybe retail investors don't often focus as much on. What is the VIX telling you with the S&P one point away from record highs? Well, the VIX measures option premium in the S&P 500, and primarily it's based off of put option contracts. These are contracts that allow people to ensure their portfolio on the downside. And when the VIX starts sort of rising or holding in there, what that tells me and what I've

noticed is that institutional traders are buying put protection. They're buying insurance on their portfolio. So even though the markets, you know, we all feel good right now. It's hitting all-time highs. But we see the VIX rising. these are institutional traders that are looking for a hedge. They're looking for some sort of volatility event to take place over the next call at 30 to 60 days. And when you look right there, look, after the election, after everything kind of sort of settled out,

the week from after the election until now, the S&P 500 is at all-time highs. It's moved higher. And the VIX has moved higher. So this is all indications that there is some level of concern on the institutional part that this feel-good rally is just not going to continue. So, Brian, I'm going to put it in context for the viewers out there, because if they look at the chart, it has gently been climbing, but the VIX is still languishing right around that kind of 13 to 14 level,

well below historical averages. That suggests to me institutional buyers are buying insurance because it's relatively cheap compared to history. Take us through the downside trade that you are putting on. Yeah, that's correct. So it is relatively kind of cheap here, and I think it makes sense. Look, we've had some nice gains on the year. I want to look to lock some of those in, right, and protect my portfolio.

So I can buy a put March option contract, let's say, going out to the end of the quarter on SPY, that's the S&P 500. If I buy one contract, it basically protects me against $50,000 worth of investments in the stock market, right? So I can just do this sort of as a broad-based sort of a hedge trade on a portfolio. If I'm invested 50, 50 grand or so in the market, I can buy one-put contract. I do that for about $5.70. I'm spending less than 1% of the value of the S&P. So I'm not really spending a whole lot of premium out. I get protection for the next two months.

And if the stocks, if the market drops, the S&P drops, I can exercise that put, have a short position on from 585 and lower with the break-even you see right there, 579, 30. And this is a great way just to hedge. It's a cheap time to do it. Act like an institutional trader right now. That's what I'm looking to do for clients. And I think this is a smart sort of hedge, you know,

sort of take my profits and protect those. All right, Brian Stutland, CIO at Equity Armour. Thank you very much. We'll see you soon, sir. Thank you. Now, the cheapness is what's got a lot of people kind of intrigued about this, right? Because at 587 and change, you're basically saying that for 100 contracts worth of, or 100 shares over with one contract, you're paying $587 to insure 50 grand plus worth of exposure.

So if you're looking for that exposure, it's like a, you know, insurance. You kind of hope you never have to use it. Exactly. Dom banks. You got it. Brian. All right. Well, speaking of insurance up next, yet another fast-moving fire erupting.

in California would be where it is next. All right, welcome back. I hate to talk about it, but a new fire is now burning in Los Angeles County. This one is called the Hughes Fire. And this fire is happening, even as the Palisades Fire and the Eaton Fire are still active. NBC News reporter Dana Griffin, live in Valencia, California, with more, again, about what we know and what we don't, Dana. Brian Kelly, some great news here. Firefighters have done an amazing job.

the hues fire. Yesterday we saw these big plumes of black and orange smoke. Look behind me now. There's just a very faint wind blowing. There's just a very faint level of smoke still in the air. That is a really good sign compared to just how close flames got to this local community. I just want to walk over here and show you. We've got the command post behind us. And just moments ago, Governor Gavin Newsom was here with a local representative and they were inside this command one vehicle. and they were getting a briefing. And I asked the representative, you know, how did it go in there? And he says, you know, things look really great.

It looks like they saved Kaseiak. So that is such a huge, huge thing for them to report. Right now, we know the fire has burned some 10,000 acres, but they have stopped the forward progression. Tens of thousands of people were under evacuation orders, and many still are. At one point, it was a very scary scene as we were seeing high schoolers evacuating their school under this ominous cloud of smoke.

There's still a concern here in Southern California as those red flag warnings continue through tomorrow morning. So we are feeling some of the gusty winds right now. The hope is that whatever small fires pop up that they can tackle those very quickly. And luckily, firefighters have been here. They've been on the ground and been able to get on top of those fires very quickly just because they've been pre-deployed across this region. Brian Kelly? Dana, do we have any idea what? But first off, I mean, I grew up in Los Angeles. It's been a long, I'm very old, it's been a long time.

The magnitude of the devastation, what I'm seeing is just terrible. As you drive around the area, just as a resident, you know, these fires are terrible. They burn people's houses down too. But what's it doing to just L.A., which is one of the most important economic areas of the world? Yeah, I think more than anything, it's keeping L.A. on edge, you know, the myth that, these sprawling LA neighborhoods are immune to devastating wildfires is no longer the case. And I think that's why we saw so many people evacuate yesterday. A lot of times people stay behind. They try to water down their homes, try to save their poverty. But because of those deadly fires we experienced just two weeks ago, the palisades and eaten fires,

I think people are taking the fire danger more seriously. And it's leaving people on edge. You know, this is a community that's been traumatized. And economically, we know that the recovery is going to cost likely $10 billion maybe more. And so now communities are trying to decide how do we rebuild. A lot of people want to rebuild faster, but some climate and disaster experts say you might want to pump the brakes and think about how you're rebuilding, spacing out homes farther apart, getting rid of those plants that tend to burn very quickly and widening roads so that emergency vehicles can get up into those canyon's neighborhood. So we are definitely in a moment. We're trying to figure out how to rebuild.

There's been an amazing show of support from community members who have come together to support one another. But this is just the very start of the rebuild for this community and the communities that were impacted just two weeks ago. But we are still not out of danger because fire season, we're starting to see it. It's lasting almost all year long. Not only a reporter, but a resident as well. Dana Griffin, thank you. Yeah. And let's get to Bertha Coombs now for the CNBC News Update.

Hi, Bertha. Hi, Kelly. Alaska Senator Lisa Murkowski said this afternoon that she will not vote to confirm Pete Hegseth as defense secretary. She is the first Republican to oppose one of President Trump's cabinet picks. The announcement of her decision comes ahead of a crucial test vote on whether to advance Hegs' nomination to lead the Pentagon. Just moments ago, Italy's highest court confirmed a slander conviction, against American Amanda Knox. The arguments today were her last chance to clear her name for falsely accusing a local bar owner in 2007,

the 2007 murder of her British flatmate. Knox and her Italian ex-boyfriend were convicted and then acquitted in the 2007 killing. And Nepal raised its fee to climb Mount Everest for the first time in nearly 10 years. Those attempting to summit the world's tallest mountain during the peak season will have to pay $15,000. That's an increase of about 35%. It comes as Nepal faces growing pressure to limit the number of climbers on Everest amid reports of overcrowding. You know, that one is not on my bucket list, Brian. Yeah, that's not going to be a problem that I encounter personally.

Bertha Coombs, thank you very much. All right. Speaking of hitting a new high, Climbing pink. Shares of Oracle hitting their highest levels in three years is old tech, Kelly, suddenly the new hot thing. Is old young again, I think is what I'm asking. And we're back right after this. Welcome back. Let's do some three-stock lunch today, where we hit three different stories and why they matter to you. Here with our trades is Cort.

Bernie Garcia, Senior Wealth Advisor at Payne Capital Management and a CNBC contributor. Welcome, Courtney. Let's start with CIT. We're starting with Cisco. They are in the news again because they unveiled a cybersecurity offering to protect against AI cyber threats. The shares are trading at three-year highs. They have some exciting partnerships with these AI startups. Courtney, what do you do with it here? Yeah, and I heard you guys introing this of are these old tech stocks like the new future. And I do kind of like that idea of going with some of these older tech companies. I think there's a lot of longer term growth opportunities here. This is a company that has a really strong balance sheet, right? They have over $5 billion in share repurchases still authorized for

2025. They recently increased their dividend to 3%. And you're likely going to see more M&A activity from a company like this and having that strong balance sheet and likely going to continue to turn that value to shareholders. So I do think short term, I don't know what the catalyst is going to be to bring some more robust growth for them. But longer term, I think a lot of these are really positive opportunities here and something you absolutely want to make sure that you have for the longer term. All right. Stock number two, Courtney's GE Aerospace, they had good earnings. They got a big buyback. The stock is up nearly 7%. But what do we do with GE Aerospace?

Yeah, and this is a company that beat expectations on top of a really high bar being set, right? I mean, this was up almost 80% over the last year coming into this. And they really beat expectations and really set a good guide for what their outlook looks like for 2025. And this is a story where the demand is clearly there, where you're looking at aging, for it when it looks at aircraft or you're looking at expanding aircrafts, commercial airlines are expected to basically double my 2042 and they service about 75% of U.S. commercial airlines. So the demand is there. It's more of the supply constraint and they've really been working with their key suppliers to make sure that they can address that. This is going to continue to be

a positive for them as we look to this year. So again, a company with a very strong balance sheet, really returning a lot to their shareholders. I think they still have a lot of upside here, despite the fact they've already done very well. Well, one moving to the downside is electronic arts. They just slashed full year guidance for bookings. They cited a slowdown for the soccer game franchise. And the shares, Courtney, are down 17%. Do you pick them up here? Yeah, and this one is tough, right? I mean, coming into this, this is a company that has a lot of sports franchises, which are annually released. So that adds a lot of, like, more recurring revenue that can be reliable when you're looking at a company like this. But then you get news like today

where in their soccer franchises, you see this big kind of unexpected drop-off. in demand. So if that really is something structurally changing for them, that would be an issue because it's a really high margin business for them. I think the question you have to ask is, is this something that's more seasonal or execution related, in which case it's more of like a one-time thing? And is this sell-off justified, right? It's down over 17 percent on this. So I would actually be inclined. It might be worth picking some of this up as an opportunity, but I would actually proceed with a little caution until you get to that earnings call. I believe it's February 4th where you really get some clarity of why this.

happen and kind of what they expect that to look like going forward. I remember playing those soccer video games like literally 20 years ago, so I'm sure a lot's changed. Franchise with some staying power. Courtney, thanks very much. Appreciate it. If they're no longer just big figures. Thank you. Yeah, they're not just black and white etchings. Yeah. He's drawn on a paper. All right, now we're going to get to the bond market with the 10-year note ticking higher today. Rick Santelli in Chicago. Rick, you heard the the president say it earlier. Let's just force interest rates down. Tell the president says it and the bond market's going to do what he says, right? Well, you know what? It's always possible,

but it's very interesting lately that the long maturities, you know, 10 year, 20 year, 30 year, these long maturities have a mind of their own. And I'm not so sure they're going to listen to Chairman Powell, the President of the United States, anybody, except for investors. Let's start at the beginning. couple days, I've been talking about how rates certainly technically seem to have rolled and turned to the upside. But maybe let's look at continuing claims first. Today, a whisker under 1.9 million on continuing claims. You see that chart there? That chart goes back towards 2022. In the middle of 2022, we had the lowest level of claims, 1,339,000 since the late 1960s. Now look where it's at. It's at a 39-month high. We have not.

had a 1.9 million handle. It's knocking, but we haven't had that handle since November of 21. And when all that occurred, look at what 10-year note yields did. They dropped. All yields dropped. You see it there on the chart. But then they moved up, except for the short end. Short end's paying attention to potential weakness in the labor market most closely associated with the Fed. But the long maturity is. Now look at a two-day. Higher yields than yesterday. Look at a three-day. Tuesdays was, Wednesdays was higher than Tuesdays. That's called stacking. Traders pay very close attention to that.

So we're steepening the curve. We're building momentum. I would consider that the lows for the longer maturities may be in. Next stop to pay attention to right around that 470 to 475 mark and a 10-year note yield. Kelly back to you. Doesn't sound like it's leaving a lot of room for rate cuts, Rick. We'll see. Thank you, Rick Santelli.

For stocks, it's all about earnings. or at least that's what our next guest insists, saying investors can tune out all of this noise and just focus on the prints as we get into peak earnings season. And here's what Morgan Stanley, CEO, Ted Pick, said in Davos today. We've been talking about growth. And so you really have to not look at the earnings we've seen, but the earnings we think we're going to see over the next 12, 24 months. That is kind of the indicator. And the earnings continue to be strong. How many companies right now are really talking about recession, if anything, they're talking about inflation?

So I feel like the earnings pull through looks pretty sanguine. We like that word. Raymond James, investment management chief market strategist Matt Orton is here. Welcome. I mean, it seems a little trite to say focus on earnings, but it is the most important. Jim Paulson, who's retired now, but he still puts out research and was warning a little bit about some headwinds from consumer staples and things like that today. But you're still seeing bright prospects? I am. Great to see both of you. And I think earning season so far have been very constructive. And I think what's most important about earning season right now is that it's not just dot. by a few companies who are doing very well.

We've seen for the past few quarters this breadth in earnings finally expanding to a number of different sectors. Finanials are finally participating in earnings, which is really, really important. And so as you see that translate to more sectors, that's what matters most. But why is it that even as earnings breadth has been widening out, market breadth has been very narrow, or at least it was last month, maybe we're in a better position now? Yeah, I think, Kelly, we saw breadth from price actually start to improve. over the back half of last year, December was a terrible month from a price perspective. But I think when you have that earnings growth and earnings breadth expansion,

I think that's eventually going to have to translate to price expansion and breadth. And that's why one of the key opportunities I see in the market right now is down market cap. Small caps have not participated in much of the upside of the bull market for the past few years because they haven't had earnings. We're finally seeing an inflection point, and that's what gets me very excited from a timing perspective. Even with high interest rates. Even with high interest rates. I think there's a misconception in the market that the 10-year yield is going to impact small. Two, two and a half percent finance costs. That's what it is. It's earning growth that makes most. I want to believe,

we want, there's so many that want to believe you. We've been, we waited for Godot, who waited for Guffman. The waiting is the hardest part, right? We've been waiting for small caps forever. And yet they've just not performing. And to Kelly's point, I think you're making. We just focus on the same seven to ten companies. When does it start to really matter for the markets and our viewers' money? Yeah, so we're seeing differentiation across the market brand. There's a lot of companies, a lot of companies that I like a lot that are in the electric equipment space. We've talked about that in the past, Kelly, that have great earnings, good visibility, that are actually smaller companies.

The key is selectivity. You can't just own the Russell 2000 and expect to outperform. But if you focus down market cap where there's valuation opportunities. Like where where specifically is that opportunity? So one of my favorite companies right now is Sterling infrastructure. It's a small cap company. What they specialize in is early site development for data centers and kind of e-infestructure, e-commerce projects that are coming to to market.

And their CEO is literally saying there's opportunities falling out of the sky every single day. That stock has done great. And as you hear announcements related to AI and AI data center buildout, that's going to translate directly to earnings of that company. Anyone else? So I think Uber, a lot of people have been talking about Uber. Speaking of a small cap. Not a small cap.

No, not at all. But we're going down just the breadth expansion overall and diversifying your portfolio. And so Uber is a stock that's been beaten up because of expectations of autonomous vehicles taking over the world. Uber actually has a great partnership with Waymo. Valuations look fairly compelling. They're returning cash to shareholders, which is very, very important. So for investors who are looking to find a compelling opportunity to put money to work today, that's not too expensive, look right there. Matt, we appreciate it. Matt Orton, joining us here in studio from Raymond James.

Thank you very much. Amazon closing all of its warehouses in Quebec, laying off hundreds of workers in the Canadian province. We'll dive into that and why next. Before we go, Amazon says it's closing all seven of its warehouses in Quebec, the Canadian province. move, which will eliminate about 1,700 full-time jobs in the Montreal area, 250 more temporals. Spokesperson said the decision was made following a recent review of operations in the region, but a Canadian labor union, which successfully unionized one of the warehouses there, is accusing Amazon of shutting operations to fend off that organization.

Quebec was the only location in Canada with unionized Amazon employees. I don't know about with that. I want to give a shout out. Amazon, I'll tell you what, the plows were not out. It's snowed here today. You know who was out? The Amazon delivery person. No plows, the Amazon delivery person and a giant ribion was there. It's snowy in Quebec, so good luck getting those packages. And thanks for watching Power Lunch. Closing bell starts right now.