Power Lunch - Stocks falls as President Trump affirms tariffs coming 02/27/25

Episode Date: February 27, 2025

The S&P 500 is lower amid a volatile session, after President Trump’s declaration that tariffs on Canada and Mexico will proceed as planned, as well as a negative reversal in bellwether stock Nvidia following earnings. 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.

Welcome to Power Lunch alongside Kelly Evans. I'm Dominic Chu. The markets are grappling with some big issues today, including the president's latest insistence that tariffs will go into effect without further delay, Kel. Plus more signs of economic weakness on that jump in jobless claims and pending home sales falling to their lowest level on record. Now, despite all of that, markets are holding up relatively steady. You can see there, the Dow's up 230 points, Kel. And the S&P is going between gains and losses, a slight gains. At the most slight losses, I should say. The NASDAQ, though, is the bigger decliner. Invidia is weighing there, with its nearly 4% drop, despite the initial pop last night on what many said were strong results. We'll also watch shares of Tesla down for the six straight day

and giving up nearly all of their post-election gains. They closed right around 250 on Election Day. We hit 480 in mid-December. We're down 40% from that peak. All right, we'll begin today, though, with news out of Washington, D.C. The president is meeting with UK Prime Minister Kier-Starmur. They are expected to hold a joint news conference in just a little bit. Let's get out to Megan Casella for a look at what we've learned so far from this nice meeting between two big allies.

Sure was, Dom. So that news conference is set to get underway at the White House later this hour. The way we will say things are running behind over there today. But we did just get a chance to hear from both leaders in the Oval Office. They spoke with reporters ahead of their bilateral meeting and ahead of a lunch. And a big focus of this Q&A session with reporters was on 10. tariffs. This, of course, coming after Trump posted on True Social earlier today, that 25% tariffs on Canada and Mexico would be taking effect on Tuesday. That's March 4th. And he also said

that he'll be putting an additional 10% tariff on China on top of the 10% that took effect on Chinese goods earlier this month. 10 plus 10. It's a second 10. And I think you'll, I think you're going to see eventually you're going to see drug stopping because The country should not be allowing those drugs to come into the United States of America. And we're not going to allow it to happen. So that goes on on the 4th of March. And then on the 2nd of April, we have reciprocal tariffs.

Now, Trump was also asked if he would put tariffs on the UK specifically, and he did say he would have to take a look. But he saved his complaints, guys, for the EU, vowed again to impose reciprocal tariffs against Europe in response to the value-added tax and because of the way he says they've treated some American companies. He specifically mentioned lawsuits against Apple and Google. We did not hear any mention in this meeting about potential trade negotiations for a deal between the U.S. and the U.K., but something to watch for once this press conference gets underway.

Megan, thanks. Appreciate it. Megan Kassela. We'll watch the situation there and any impact on markets. For now we have plenty to contend with and for more on the impact of the terror for marks. And let's bring in our panel. Allie McCartney is here on set with us. She's managing director at UBS Private Wealth Management. Jimmy Pethakoukis is an economic policy analyst at American Enterprise Institute and a CNBC contributor, and it's great to have you guys both here. So, Ali, just kick this off, put this in context for us.

Endless tariff announcements. How big a deal is it? So we've been calling it tariff policy ping pong, right? And it just adds to all of the uncertainty in Washington at a time where there seems to be some weak data in other places. So what we have is sort of right now this perfect storm of seasonality, which tends to be really tough right now. And so you saw the retail buyers step away. A lot of geopolitical and Washington-based uncertainty, both for individuals on tax policy and for corporations on tariff and tax policy. And then you have this over-leverage bid that was in the market stepping away. So this is just another thing that is going to continue to make, you know, to provide volatility in the market.

the market and to stop a lot of the big tech companies from continuing to be the sector leadership that we've come to rely on. I mean, this is one of those situations where we look at the impact that these three key, so-called magnificent seven sectors have had, and then we look at just how much downside can be generated when they don't perform. It maybe is at odds with this broadening out trade, right? Because everyone wants to see the broadening out, but they don't like to see the still inordinate amount of influence certain key sectors have. It was a learning experience for the last week,

right? I agree. And I think it, and it really is causing a lot of concern with people. And, you know, to the extent that whether it's, you know, Apple pulling back in a couple of data sectors, whether it's what's coming out of Washington, whether it's sort of the, what's been flip-flopping between the way one interprets what Invidia put out last night. And so, you know, the truth is that those Mag 7, the techs are down year-to-date. The market, by the way, is still, materially up year to date annualizing at a rate of, you know, high single digits. But I think we are going to see that breadth. And I think to a certain extent, it provides a buying opportunity back into big tech for people.

We were big buyers yesterday. Interesting. Jimmy, just to pivot quickly to the broader question here, we've talked to Adam Posen about this last hour. He thinks we're headed towards universal tariffs. He thinks tariffs and maybe a VAT are basically going to replace kind of the income tax system as we know it. would you underscore those comments or no? Replace the U.S. income tax system? Well, you know.

Fund the reconciliation bill and so on and so forth. Yeah. Yeah, well, I do know that like every, like, you know, tax activists, maybe not economists, but tax activists that sort of always hated VAT taxes. Especially on the right, there was a long history of that. Listen, I'm not sure what we're going to do in our. side as far as reacting to these tariffs. What I do know is that if the president were trying to inject as much uncertainty in the economy as possible with his trade policy, this would be it.

I mean, I still don't know what exactly we're trying to do here. Is it about protecting certain industries like steel or aluminum? Is it about trade flows? Is it about creating surpluses? It's about raising revenue or is it about negotiating with the EU and Canada and Mexico, all the above, partially above, none of the above? I think that's the position. If we're already uncertain about like inflation, this adds a whole lot more uncertainty. I thought it was interesting, the comments from Alcoa, I think it was this week in their earnings where they said they were against aluminum tariffs, thought it could cost 100,000 U.S. jobs and wouldn't they be the key beneficiary? So one, you would think they would be the beneficiary. Then two, you have people who use

these as inputs. They were seeing spiking aluminum prices, spiking steel prices. Whenever the administration talks about tariffs, they seem to never talk about how it raises costs for producers, as well as, you know, for consumers. It just somehow has not penetrated the president's sort of view of trade that there are costs that are not necessarily borne by the other countries. They're born internally. I assume economists have tried to get that message through, but it's just not making its way through and certainly not sticking if it does. Allie, are we starting to see signs that tariff policy itself or the threat of future tariff policy or trade uncertainty? Is it starting to manifest itself in your mind in certain key economic points that you're looking at and then

by extension in the market? We're still near record highs. There's no doubt about it. But we pulled back, but you're saying this was a buy the dip. Does that mean that tariff? policy does not worry you as much as others? It clearly worries me, and it clearly worries, you know, every company out there. And you've seen from every big bank an estimate of what it could take off GDP. And you have the Fed being very clear that they're concerned much more about inflation than the labor market as a result. So please do not, you know, in any way think that it's not a concern.

However, I am not a politician. I am an investor and an economist. And what I believe in what UBS believes is that this administration, this president particularly, uses tariff conversations and this ping pong as a negotiating tactic for many other things. And what he ultimately wants and monitors is the value of the SMP 500 and the value and the level of the 10-year. The 10-year has now gone down 50 basis. points since mid-January, which is exactly what he and Besson have said they are trying to do. And the market is something, again, that he clearly and frequently references. So although to the point that was just made, the administration doesn't seem to be

having very open conversations about the effect of inflation on the directionality of interest rates, et cetera, that is absolutely part of what's behind it. And so that when you have this sort of all three legs of the stool, ultimately the micro, the macro, and the sort of secular trend of AI, all pushing tailwinds to a president administration who wants to see growth and dampen down inflation, I'm going to lean into that, especially when the market gives me the opportunity. Jimmy, you want to give us a quick last word on that? Yeah, listen, I think what Ellie gave was it was a sort of like the best take, rationalist view of what's going on. And I think that's, I think that should be like part of your forecast. But the other part of the forecast is the goal

post is constantly changing. Maybe this is a ping pong game, but like we don't know how you win at the game. We don't know like, you know what the rules are. Can you just switch sides? Can you bring in different paddles? We don't know what the rules are. Ultimately, while they may be looking at the market and the tenure, the president is also probably looking at a lot of other things, such as the trade deficit. And does he want this to be a revenue raiser? So I think that long list of things that the president may want from what he calls the most beautiful word in the world in the dictionary, tariffs,

I think that is just highly uncertain. And that's what the uncertainty comes from. I mean, I hope Allie's right. This is just sort of a leveraging tactic, but I have my doubts. All right. What did you say? I said, so buy gold. So buy gold.

But gold was, like, down for a couple of days. Always, always, of course. It all comes back to buy golds. Ali, thanks, Jimmy thanks, Ali McCartney and Jimmy Pethiccus. Bouncery or ping pong balls is what you want. Anyway, the trade story prominent on the company front as well. Chip firms have a pitch for the White House. Let them make sales.

Microsoft and Nvidia are looking to work around some of these export restrictions. We've got that story and much more when power returns after this break. Welcome back to Power Lunch. International Trade a hot topic again today. Not just on the tariff front. Microsoft is pushing the Trump administration. to loosen restrictions on exports of U.S. chips. Steve Kovac is here with the story.

The rub to me, Steve, not to give it away, was this is not chips to China. This would be to our allies. Yeah, that's the whole thing that's going on here. So this was a blog post that Microsoft put out this morning from President Brad Smith, asking President Trump to basically open up chip and AI model exports to our allies. This includes countries like Israel, Greece, Poland, Saudi Arabia, several more countries that we are allies with. And let me just talk a little bit about why Microsoft is doing this.

We know they're building out data centers all over the world. And they say this is really about providing the best AI technology for their customers. They're making this argument here saying it's good for American jobs as well, because even if these data centers are built overseas, some of the equipment will be made here and then exported overseas to build those data centers. And right now, many countries are blocked from importing the best chips from Nvidia and others or top AI models. It's not just about the chips, guys.

It's also some parts of these AI models. And all of this was part of the diffusion rule put in place by the Biden administration in its final days back in January. It blocks export on those advanced chips and AI models for national security grounds. And they basically break it up into three tiers and pushing some of our allies into the second tier, meaning that they can't access the best technology. And by the way, Microsoft agrees with most of that diffusion order, but it says it's going too far pushing those allies into that second tier. system. And the big ask here is just allow those allies to have the same access to the best

artificial intelligence tech that we have. And by the way, this would also keep our China from kind of swooping in and saying, we'll provide it for you instead. That's part of it. This is the next kind of chapter in world hegemony, right? During the Cold War, it was the Soviets and the U.S. and then the satellite countries geographically around them. So why can't this be a situation where the U.S. benefits by saying, hey, let's have all of these people in our ecosystem as opposed to China's, because we know China is definitely a rival ecosystem. And this is U.S. companies building these data centers. We have Microsoft in this case, but of course, Amazon's looking all over the world. Meta's looking all over the world. I know Christina's get into this in a second,

but those are all huge Nvidia customers too. So Nvidia has a benefit here as well. I was thinking that, you know, Microsoft's kind of going out there and taking, I don't want to say the fall, but willing to put their name on it. But it sounds like this is almost an effort that many companies could have undersigned. And that's the thing. And they just think this Biden regulation went just a little too far saying these are our friends.

And by the way, the last thing we want is trying to coming in, going to Poland or Saudi Arabia and saying, hey, your allies over in the U.S., they're not going to offer you this technology. Let's offer it to you instead. And we're going to be the good guys here. That will prevent that. All right, because you brought it up.

We're going to step right through that open door window because now we're going to turn to Nvidia, which would like to be more able to sell more of its chips to somebody arguably an adversary, which is China, but it's also running into export controls as well. Christina Partsenevolous, as alluded to, is looking at that angle of the NVIDIA AI export story. Well, Dom, NVIDIA is really walking this type road with export controls. You got balancing compliance, profits, and competition. And I'll get to that. You guys just talked about it. On last night's earnings call, CEO Jensen Wong noted China revenue has dropped to half

of pre-export levels. Sounds great. but that still means $17 billion, according to their annual report. That's 13% of total revenues that's now at risk if new U.S. restrictions take effect. Export compliant chips, that would be the H20s, have been InVDIA's China Lifeline, generating an estimated 12 to 15 billion in 2024. Keep in mind, Nvidia doesn't break it out, so this is according to semi-analyst analysis, I should say. Chinese customers continue buying them up, especially since Deep Seat gained global attention. But if banned, Nvidia could lose billions of dollars annually from China, its global dominance,

yes, and new Blackwell line will definitely soften the blow, no doubt. But the real question is China's response. Will they keep buying these cut down or watered down chips or shift to domestic alternatives? Wong himself warned competition is growing in China with Huawei, now listed as a competitor in their 10K for the second straight year in a row. hasn't been listed in over five years. Most analysts believe Invidia's stock already factors in future export controls, which is why you've seen it come down, been rangebound.

But Mizuho's Jordan Klein, though, says shares have been de-risk, while City expects China restrictions and semiconductor tariffs will keep this stock rangebound for the next little while. The real long-term threat, though, isn't just today's revenue hit. It's Nvidia's potential, or the fact that Nvidia could potentially lose its foothold in the world's largest semiconductor market, just as local competitors, gain momentum. So all of what you guys just spoke about, Dom, too. So, Christina, how big of a threat is the domestic chipmaking market within China compared to

Nvidia? How long do folks think it will take before it really becomes a situation where there is a viable competitor, real viable confeder competitor to Nvidia's dominance? Factoring when Biden put in place these rules, which was in 2020, when you really started to see beginning of it and then factor and that's when wawaway was banned as well from just any type of relationship with the united states you've already seen it grow i saw one stat about 60% of the market is coming from wawa chip so it's growing exponentially faster uh and that's the argument against export controls if you add these export controls it's only going to help the homegrown markets grow stronger and larger and faster and then it really

isolates each country uh invidia's argument is that their chips are better quality but then you bring up the the whole Deepseek argument. Hey, Deepseek was using H-800 chips, which are not as high-end as the other chips that are available on the market now with Blackwell and stuff, but they were still able to provide incredible compute. And so that's really going to come into play in the near term. No doubt China's growing, and that's the biggest argument against these export controls. You're helping the other guys get better. All right. Christina Partsenevless was the latest there on Nvidia and export controls. Thank you very much for that. Let's stay with that semiconductor trade. By the way, the biggest

laggard out there among all S&P 500 industries in today's trading. Every single name in the S&P semis industry group is down on the day, except for Intel as the market grapples with potential Trump tariffs and export controls on those semis. So joining us now is B of A Security Senior Semiconductor analyst Vivek Aria on this. Maybe Vivek, I'll start with the same question that I just asked Christina, which is how long will it be before a homegrown Chinese chip company becomes a true, true competitor to Nvidia. Sure. So I think let's quickly review what we heard last night.

Number one, demand for Nvidia's products is exceptionally strong. So even though the sales to China as a proportion of their sales have come down, but look at how much the U.S. hyperscalers are spending, look at how much the European Commission is planning to spend, look at how much France is planning to spend. Number two, the technology transition that we are going through, a move to inferencing of these new reasoning models. The computing intensity required to process these models is going up by a factor of a hundred, right? So this whole deep seek moment has

actually energized a lot more spending rather than less spending. So demand environment is very strong. The technology transition is working in their favor. And now they're starting to ship their Blackwell product where shipments in the last quarter were twice as what we had estimated. So I think that's the good news. When it comes to competition in China, The thing to keep in mind is that as much as about 14% of their sales are exposed to China, it's spread across gaming, across automotive, and across data center. What they're shipping to China are very low-end products that, in the majority of cases, are being used for a lot of consumer-grade applications.

So I'm not surprised to see competition come up in China, but the one other point to keep in mind is that the advantage of using Nvidia products is that they're already certified to work with a lot of the Western large, language models. So it's a really turnkey product that whether it's the customer in China and Europe and the U.S., they feel very confident in buying because they know they have the full weight of the software and the developer ecosystem behind them. So Vivek, do you stay bullish on NVIDIA, you know, kind of the broader space? Would you make any comment that would extend so far as those who are supplying power and, you know, data center support and all the rest of the daisy

chain? Yes. I think that, you know, from what we have heard, from the company and more importantly what we have heard from their customers, whether it is Microsoft, whether it is meta, whether it is Amazon. They were all aware of the innovations that DeepSeek spoke about. So DeepSeek was actually more of surprise to Wall Street. It was not a surprise to the technology industry. This is all in the open source. And after hearing that, the customers are still planning to spend a lot more.

I think that's the most important aspect of this narrative, that the demand environment is exceptionally strong. And now you have a stock which is growing 50 to 60% a year, which is twice as fast as, by the way, how their customers are growing spending, and it's trading at less than one times their earnings growth. If you look at the S&P 500, or if you look at the other max seven stocks,

they are trading at two times their earnings growth. So from that perspective, we think Nvidia is very compellingly valued. But at the same time, what happens is that every time the company reports a few days in advance, expectations go up. So, you know, we go through this kind of same song and dance about expectations. And to be fair, the product transition that they are going through for Blackwell,

they were able to deliver a lot of product, but the initial ramp-up costs are high. We think these are short-term issues as we get through to their GTC conference and then to the back-up. We will start to see their margins expand. And I think that's going to help re-energize the stock. So we took up our estimates and we took our price target to $200. Okay. So if you are that positive, Vivek, on NVIDIA, I know it's hard to model, but based upon how much attention NVIDIA gets and how much coverage NVIDIA gets and how much notoriety they have, how much of the entire semiconductor industry, all of the other companies that are out there making computer chips, how much is their fate tied to what happens with NVIDIA's stock specifically?

Is investor sentiment just tied to NVIDIA and then by extension, every other stock is just different in their own way, but trades like NVIDIA does? For sure. And to be fair, this isn't just particular to the semiconductor industry, right? We see this in a lot of end markets. It's that the way the leader behaves, whether it's in terms of fundamentals, whether it's in terms of their stock performance, absolutely plays the role in guiding the sentiment. But where we are as a semiconductor, industry is that if you look at the markets outside of AI, whether it is PCs, whether it's smartphones, whether it is automotive, whether it's industrial, they're still trying to find a bottom, right? The spending environment is not that great. All this news of tariffs and restrictions I think is hurting consumer sentiment, it's reducing the demand, right?

It's creating a lot of confusion among a buyer. So in that situation, a lot of the dependable customers are all in this AI market. the advantage that stocks exposed to AI, whether it is Nvidia, whether it is Broadcom, whether it's Marvell, what they are very assured of is exposure to this very dependable group of customers for whom spending on AI is not just a nice to have. It is mission critical to their future and they have the means to spend on this technology, which is why we think that yes, there is volatility, but this is a place where I think the profitability characteristics are the best and the most supportive.

But you're right. Sentiment of the leader does affect the rest of the space. All right. Vivek Aria, B of A Securities. Thank you very much. We'll see you soon, sir. Thank you.

Still to come, this commodity having its best month since September. We'll give you a gold medal if you guessed right, but that's not the answer. That would be too strong. Too easy.

Too easy. The reveal is next in Market Navigator. Welcome back to Power Lunch. Dom, this is a familiar pattern from the past couple of days. We build gains throughout the morning. We're giving them back here in the afternoon. The Dow is only up 80 right now. The S&P is down two-thirds of a percent and the NASDAQ is down one and a half percent.

Back towards session lows at this point. So in our market navigator today, we're going to look beyond the equity and tech markets here. Copper prices. That was the mystery that Kelly was alluding to. It's not gold. It's copper. It's had a strong start of the year up about 15 percent or so in 2025. But will that continue? Our next guest says that with new tariffs on the table, could see a copper rush similar to what we saw with gold, a rush to bring in inventories into the U.S. before those import tariffs potentially so could kick in. So joining us now is Philip Striebel, the chief market strategist at Blue Line Futures. Phil, this copper trade is one that you've keyed on for quite some time now. This is one that's seen some good upside momentum. Is it able to

continue and for how long can it do so? Yeah, I think so. I mean, it's one of our favorite commodities in the metals complex. It oftentimes acts as a leading indicator for inflation in the economy. And there's three factors that are really driving out prices higher. One, we've got the arbitrage. We've got the opportunity for traders who are shipping copper in from Asia. In South America, they're selling the futures contracts on the U.S. exchanges. And they're playing that arbitrage. So it's a window here where, you know, during which that traders could kind of move the metal into the U.S. without paying the tariffs and they're locking in profits. That's similar what we saw it at gold coming into December, most of January. And then you have the end users

are trying to secure this inventory. So U.S. copper consumers, they're locking in the inventories. They're bidding prices up here. So the request to take copper out of the LME in the warehouses in Asia, they've searched since Friday. So we've got the biggest four-day drawdown in inventory since 2013. You look at the demand side. Global demand is expected to increase that usage by double over the next decade, everything. And some of these have come off a bit, like EV vehicles. They use four times more copper than traditional gas, AI, the grid, renewable technologies. You got your constant demand, construction infrastructure spending, and defense. And then finally, I think you'll look at the mining supply. Expanding and developing these mines is a lengthy process and a complex

process. So it's tough to bring on supply. We just saw Chile. They just had their worst power outage ever. And also, you know, it's going to take a while for that capacity to come back online. Okay. So, Phil, with that in mind, take us through, it sounds like you're bullish, take us through what the strategy is. Okay, so I got two things for you. The trade is really the main micro copper. We like it because of its size and scalability. Every penny move is going to be $25. We like buying the copper down at $450. So we got close here today. We'd say a stop loss below the recent swing low. at 435. So your risk in $375. Our upside target is $5, which is $1,250. So it's got a good risk or reward ratio. And then finally, for an equity, we like Freeport MacMran. It's a U.S.-based

copper miner that, you know, has that price advantage by being in the U.S. has great margins. And it is mostly it mines gold and copper. So you get that benefit of both. All right. There's the copper trade and an equity trade on the top of that. Phil Strebel. Thank you very much. We'll see you soon. Thank you. Folks in the back, show the Dow chart quickly, if you could please. We've just gone from nearly a 300 point gain. There it is.

To a negative. Look at that. Look at that line. Look at the slope there. It wasn't our fault. I don't think it was Phil, but we will check the wires. We'll have some chat. We'll come back, tell you more about it.

Stock's now moved to session lows. There's also a new ETF hitting the street, leading to some controversy. Those details are also next. Welcome back to Power Lunch. I'm Julia Borsden with your CNBC News update. A new Pentagon policy memo says transgender troops will be discharged from the military within 60 days. It adds some trans members can be considered for a waiver on a case-by-case basis, as long as they demonstrate their support of, quote, war-fighting capabilities.

The memo was released as part of a lawsuit against President Donald Trump's executive order, barring trans people from enlisting and serving in the military. It provides clarity on how the policy will be implemented. The Vatican says Pope Francis continues to improve from his double pneumonia infection, but needs more stable days before doctors can say he will fully recover. The statement added that the 88-year-old also used a mask to receive high flow oxygen. He's been hospitalized in Rome now for 14 days. And freshman Senator Elisa Slotkin of Michigan will deliver Democrats' response to President Trump's joint address to Congress next Tuesday. The opposing party typically selects an up-and-coming politician to rebut high-profile presidential speeches before Congress.

Kelly, back over to you. All right, Julia, thank you very much. Meantime, a controversial new ETF is hitting the street today focused on private credit. But this corner of the market is a mystery still to a lot of investors who are trying to figure out the rewards and the risks. Bob, Bessani joins us with more. And Bob, just so we're all click, private credit is basically like loans, right? but instead of a bank making the loans, it's a different kind of financial player. Yes, it's private players making loans, not banks here.

So this is a big deal today. Wall Street is very eager to provide access to this private equity and a private credit to the masses in general. An ETFs are the obvious wrapper to do that. So today, State Street launched an ETF design just to do that here. This is the Spider-A Apollo Public and private credit ETF. I know it's a mouthful, but what they're doing is they're investing at least 80% of the assets in investment.

grade debt securities. That includes a combination of public debt and private credit as well. So because private credit is illiquid by definition, it's been a real problem trying to figure out how do you get this into an ETF wrapper because ETFs need liquidity and they need to buy and sell the underlying products. So they are trying to solve this problem by having Apollo provide private credit assets that State Street is going to purchase and Apollo will buy those investments back if need be. So there is a bit of a liquid market. Now, normally, ETFs are only allowed to own illiquid investments up to 15% of the fund. But in this case, private credit can range between 10 and 35% the prospectus says and can be above or below that.

That's a lot. So this filing has been very controversial from the very beginning. It was filed back in September. One early concern was that if Apollo is the only firm providing the liquidity, it naturally raises questions about what type of pricing state street is going to get. However, in the perspective, States Street apparently can source from other firms if it can get better prices. We'll see. Here's another issue, Kelly. Apollo is required to buy back the loans, but it's not entirely clear how much they're required to buy back. So this could be an issue.

If there's some limit, it's not clear if market makers would accept, for example, these private credit instruments for redemption. So this is a potentially groundbreaking ETF. If they crack this nut, it could open the floodgates for a lot more investment. for ETFs in private equity and private credit. But we got to see how it trades and how the liquidity is. The proof, of course, is what happens when there's a downturn when it gets a little tougher. But I find it quite interesting, Bob, that you're saying almost because of the ETF rules, you can never really have something like private credit being higher than about 15% of the ETF.

So I wonder, would they either relax the rules or, you know, for people buying in? It's like, all right, well, a lot of this you can kind of get in other ways. Well, the rules were changed a bit. It's 10 to 35 percent that it can help. That's a pretty good number right now. So I think there was some surprise at how quickly this was approved. Generally, most of us who follow this, I've been following ETS for 25 years, thought that this would be a process that would take several months, particularly with the new administration coming in. But this was sort of approved sort of out of nowhere. We were quite surprised in the last couple of days just to find out all of a sudden it was going to be made effect. and start trading today. So like I said, this is kind of a big moment. What's going to happen here now is if this is successful, if this goes on without a lot of liquidity issues for a few months, you're going to see a lot of other people trying to get in. Other people besides Apollo have,

of course, private equity and private credit investments, and they could potentially form something as well here. So interesting risks. I mean, there's 10 pages. Here's the prospectus. I read every word of it. Eight of the ten pages consists of an endless discussion about the risks that are involved in doing something like this. So there's a lot of disclosure here right now. And I would encourage anybody interested to read the prospectus. Bob, just how big could this be in terms of a market? I mean, this is, ETFs are obviously a big deal for retail investors. But if you really wanted access to private credit, you could just go as a bigger investor to Apollo, Ares or somebody else, right? Yes, but yes, but you'd have to be qualified investors. Look here, and anybody can sort of

buy into this. This is democratization of getting access to private equity and private credit. It's just like, you know, essentially, if you wanted to have gold 20 years ago, you'd have to go buy it, or you'd have to be buying futures, you'd have to hold it, and the ETFs sort of made it easy for anybody to own it. They call it democratization of this particular asset class. The question that you should be asking, we should all be asking is, is this a sign of a and private credit, private equity? We don't know. Obviously, there's tremendous interest right now. Does private equity and private credit really outperform, given the high fees associated with them? We don't know. I mean, there's legitimate questions around the public's interest in getting into this

asset class. But, you know, there's a lot of questions about the ownership and this particular – about private equity and private credit in general and about this particular ownership class and what you're getting access to and the risks that are involved. All right. Bob Bassani with the latest controversy in ETFs. Thank you very much. We'll see you later on. Okay. Treasury yields are swinging higher today as Wall Street digest this morning's jobs data. We'll head out to Rick Santelli in Chicago for a bond report coming up next.

Welcome back to power lunches. You're seeing right now the Dow has slipped into negative territory down about 30 points or so. Stocks turning lower this afternoon erasing a 450 point gain at one point earlier in the session for the Dow. The NASDAQ is down more than one and a half percent. Invidia is continuing to fall as well, now down 6 percent on the day and 12 percent in a week. We are at session lows for NVIDIA. That's, by the way, roughly $350 billion in market value lost just because of that drop. And the market cap is now barely hanging onto that $3 trillion. No, barely is a relative term, barely hanging on to $3 trillion. Now let's get out to Rick Santelli in Chicago for the picture on the

bond side of things, Rick. Yes, you know, Dom, it's a fascinating day in the interest rate complex because what you just were discussing, in my opinion, is the reason we're seeing such wild activity in treasury yields. The green has no lasting ability in the equity markets to hang tough all session. To see 400 plus points disappear the way it has really underscores the anxiety and the volatility and the price uncertainty in the equity space. why the road from getting out of equities and into the safe harbor of treasuries is so popular.

Now, there has been some important data, but it really doesn't go a long way to explain much of the activity, in my opinion, today. We did see the Q4 revisions that were associated with the GDP report show us that the pricing indices were hotter than expected. So you saw the quarter over quarter PCE core moved from 2.5 to 2.7. You can see it on the chart. Once again, no matter what metric for inflation you look at, it's all higher than pre-COVID. Or you look at a jobless claims, the $242,000, basically a seven-month high. People want to say it was D.C. It was Doji. But if you look at Maryland, Virginia, their claims were lower.

We had President's Day. There's seasonal adjustments that seem to fail. So it could be weather-related. We're not sure, but it's still a seven-month. month high. And if you look at the notion that even with some subtle, and I mean subtle rise in yields, we may break the chain of six consecutive lower year close in a row in tens. And finally, that little subtle bouncing yields, a little selling pressure, actually has had a positive effect on the dollar index breaking out of its recent downtrend range. Kelly, back to you.

Yeah, look at that back at 107. Rick, thank you very much. As we head to break is the tide turning to the downside for this shock that's up nearly 50 percent. in the past year. That and more on three-stock lunch next. Welcome back. It's time for three-stock lunch, where we hit three different movers and what you should do about it. Here with our trades today is Courtney Garcia. She's senior wealth advisor at Payne Capital Management and a CNBC contributor. Courtney, welcome back. Let's start with Tesla, which is really unwinding a lot of its election gains. Down almost 2% today likely extends its losing streak to six sessions. It broke below the trillion-dollar market cap level yesterday, still down there today. What do you do? You pick it up?

You know, I would actually still stay on the sidelines here of Tesla. And this is a company that, you know, investors are very optimistic on if you are pro Tesla. And I understand the logic. I mean, this is a company that has really great technology. They're the best EV seller here in the U.S. And there's a lot of positives like they're expected to have a lower priced EV later this year. And the big thing for them is autonomous vehicles, which with Elon Musk being so close to the Trump administration, the assumption is that that's more likely to go through. But the problem is, in the meantime,

autos really are their core business, and it has been slowing. And not only that, but you're having to see price cuts, especially in places like China where there's a lot of competition. And my biggest problem with Tesla is just the valuation. It trades over 105 times earnings, which is not only expensive to the overall market, but that's even more expensive than its own historical average. So I think for all those reasons, whether I find another place to add my money or wait for a better entry point, I would not jump in with two feet at Tesla right now. All right. So that sounds a little bit more bearish on Tesla.

Let's talk now about Moderna, lower on reports that federal health officials are now reviewing the nearly $600 million bird flu vaccine contract it got from the Biden administration. What's the trade for Moderna? And by the way, this is a stock that was a $460 stock in 2021. Yikes. Yeah. And again, I would also stay on the sidelines here. The biggest reason is their main business is the COVID vaccine, which we're,

We have seen a huge drop in demand for ever since COVID ended. And they did recently introduce an RSV vaccine to hopefully diversify their revenue streams. But you also saw some of their competitors like Pfizer also get approved for those. And now you're seeing with some of the news today and things like the bird food vaccine, they're getting some pushback on. So I think there could be some long-term opportunity with other uses of mRNA. But in the meantime, again, I'd stay on the sidelines here. It's way too constrate to COVID vaccines, which I don't think there's a huge opportunity of in the short term. So your last name, which is actually a buy, and I was surprised by this, was eBay.

Just had a tough quarter. First quarter revenue guidance, I should say, was light. They cited uncertainty around the consumer and discretionary spending. And why are you picking it up here? Yeah, and this is a company that has, I think, really been showing that they're willing to innovate. So they actually, their overall earnings was not negative. It's their overall guidance. And I think you're starting to see a lot of that just with people worried about uncertainty

with the consumer overall. all. But this is a company who I think has a lot of opportunity with their recent partnership with Facebook Marketplace. They're also partnering with Open AI to try to get more AI directed toward eBay. And they're having a lot of positives and things like collectibles and luxury goods. So a lot of that guidance disappointment had to do with the consumer to consumer fees in the UK. So essentially they got less on transactions there. But I don't think that's really a reason to get out of this stock. I think some of those other bigger changes are going to be a longer term impact. So I think that's something is probably worth picking up some on the shorter term.

And up 44% over the past year, in fact. Courtney, thanks for doing the honors today. We appreciate it. Courtney Garcia. Thanks for having me. All right, welcome back to Power Lange. Before we go with a final check on the markets right now for our hour. We are right near session lows for the S&P 500 down three quarters of 1%. It's 47 point downside. The down dusters are down negative. There were 450 points higher at one point today. And the NASDAQ composite is down 1.5%. That's 380. points for the composite index overall. And honestly, Dom, you tell me, I mean, I can't really point to a catalyst for this move in the past half an hour or so where we've gone from positive to negative.

It's interesting only because it, as you point out, seems to have been the MO for this market, that you kind of find a little bit of positivity. But again, we've been kind of rangebound, though, for the last three months. Also, keep a quick eye on oil where crude is up about 2%. Now that was maybe to some extent on tariffs. OPEC Plus is also reportedly debating whether to raise output in April due to uncertainty over sanctions and tariffs. Again, if they're going to raise output, you think we're going the other way? It's also interesting. This energy trade is one that a lot of folks out there is saying it could be a real upside catch-up. So whether or not it happens. I hope not as a driver. Anyway, all right, guys, thanks very much for watching Power Lunch. Stocks at Session

lows right now. And Dom, thanks for being here. Closing bell starts right now.