Power Lunch - Stocks mostly flat after Wall Street’s latest round of earnings 02/06/25

Episode Date: February 6, 2025

The S&P 500 is relatively unchanged today, after the major averages posted back-to-back winning sessions. Investors are weighing the latest batch of corporate 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.

Hi and welcome to Power Lunch. I am Kelly Evans holding down the fort in New Jersey today. And Brian, hello. I am Brian Sullivan. As you can see behind us, Kelly, not New Jersey. This is our Washington, D.C. Bureau. And we have got a big hour kicking off right now. We're going to look at whether or not spin-offs tend to work out.

A few big chip names getting chopped. And inflation, you can feel and taste the big thing you all buy that is getting maybe, shall we say, you all ground up, Kelly. Looking forward to it. It looks good down there. I'm excited we got a lot on tap. Let's get a quick check on the broader markets where the Dow has turned negative in the past hour or so by half a percent. The S&P up 8, the NASDAQ up a quarter percent.

Brian mentioned the chip stocks and Skyworks. Check this out today, losing almost a quarter of its value, gets a lot of business from Apple, says the business is shrinking, Qualcomm and Corvo down as well. Invidia bucking the trend, though, it's up almost 3 percent back to around 128. We'll talk to an analyst defending that stock. And meta sounds like a broken record higher for the 14th session in a row now. It's last down day, January 16th. It's up 21% so far this year, Brian.

It has not had a down day under the new administration of the guy that occupies the big White House. That's about two miles down the road. We'll get more on that in a bit. But let us begin power lunch today with Honeywell. Now, Honeywell is a name you know well. The stock not doing well today. It is down 5%. Honeywell announcing plans to splice.

into three separate companies. Let's get more details of that spin and what exactly they're doing and why was Sima Modi. Cima. Brian, this is one of the last industrial conglomerates, now splitting into three amid growing pressure from activist investor Elliott Management who managed a $5 billion stake in Honeywell late last year. Wall Street is focused on Honeywell's highest performing business,

aerospace, which makes up about 40% of total sales, and will become one of the largest public aerospace suppliers following GE Aerospace. The success of GE, by the way, following this three-way split, no doubt incentivizing companies like Honeywell to use a similar playbook. GE-Vernova spun off last April and is up 160 percent since then. That's motivated more companies like 3M, DuPont to pursue a similar strategy. And then there's FedEx, Intel, Lenar, all on deck to spin off a business in the next year.

Activists are expected to accelerate this spinoff trend, Goldman writing that the new administration may encourage them to push the envelope and pursue bolder demands of companies they hold stock in. The data supports this trend. Spinoffs tend to outperform the market by 10.2% two years after completion, while parent companies underperform on average by 8%. That's according to Morgan Stanley, guys.

All right, let's kick this around. Stima, stay right there. And Brian, she's looking pretty good in your chair. I don't want you to get nervous. But Honeywell is following GE's model, hoping for some of this spinoff magic. A trend, even our parent company Comcast is looking for as well. And there's something to it.

out this data from Wolf Research. Over the past 10 years, spun off companies averaged 13% returns in the year after the breakup, while the parent stocks returned 11% or so on the one-year average. Additionally, and this is interesting, parent companies have a strong tendency of becoming potential M&A targets. Let's bring in Chris Seneca. He's the chief investment strategist at Wolf Research. And so that leaves a number of firms to keep an eye on potentially Chris. But before even going down that route, what's remarkable to me, the value of General Electric today is four times greater when you add up all the spinouts than it was before they spun out. So that's I imagine why we could see more of this.

Yeah, hi, Kelly. Thanks for having me on. Yeah, the G one last year was just a blockbuster. And anytime there's a significant transaction where the sum of the parts is greater than the whole, you start to see other companies follow. So our spinoff basket, in fact, is up 79% since the beginning of 2023. It was up 33% alone last year, beating the S&P 500, which, as we all know, is very tech heavy, and a lot of spinoffs aren't in the tech sector.

And that baskets continue to perform well up 6% year-to-date. So I think the spin trend is going to continue as long as the performance stays strong. Seema, all of that said, Honeywell's down 5% today. It's not getting much of a lift on this. Yeah, it's interesting. You know, I think in addition to announcing this news that they're splitting into three, Kelly, there's also guidance for 2025, which came in weaker than expected. But I think it's underperformance today does raise the question that how much of a spinoff success

is tied to the speed at which the deal can be done, because this split is not expected for 18 to 24 months. And the RBC Capital was saying that, you know, the upside could be limited until the spin is actually, we have it an actual date. So that's something to keep in mind as we watch shares down about 5.6. That's a great point. Brian? Well, I was just wondering, Chris, you know, here's the thing.

Bankers get paid either way. And the reality is this. These companies, they merged together for some reason. GE became GE for a reason. Honeywell kind of followed GE. Pharmaceutical companies have done it. Hey, even some of the media companies, and I'm winking, have also done this.

Now they've decided, for some reason, Chris, that breaking up is the better way. What changed? What made getting together so valuable 20 years ago and now breaking up is more valuable? Well, I think generally companies that do a lot of M&A tend to underperform, right? Being bigger and growing might help management's compensation or other empire building, but often isn't great for shareholder returns. So I think desimplifying, getting back into the kind of bread and butter. And then what's also happened is there's been a dispersion in valuation multiples, right? So aerospace and the fence in the case of Honeywell is a very much higher multiple business

than process automation or the materials business, right? And yet they traded a multiple that's probably not a blend of that. So I think the dispersion of multiples or some businesses in the markets now are being accorded, you know, high multiples and others not so much is the reason companies are doing it now. And make no mistake, a lot of these businesses have had activist pressure. And activists are pressuring bigger and bigger companies today because they have bigger, bigger, funds, and that certainly is an impetus for the breakups. I'm not convinced that all these same companies would be breaking up today without the activists in there. Chris, it's also weird that

we're at a point at which we thought we'd hear more about deal making. And again, we're hearing more about corporate breakups. Yeah, well, you know, a lot of times these businesses have been known forever, right? And the tax basis in the business might be very low. So it can be very tax efficient to spin a business off. Generally, it's structured to be tax-free to shareholders, and you kind of minimize the tax consequences of those transactions. So I think that's why we're seeing more spins than outright sales or M&A. I think it's an adjacent theme to M&A. I think it's a little bit of a perhaps wimpier theme to M&A because maybe if you won't. Or a precursor. Or a precursor, right, exactly. Like, you know, kind of put, dip your toes in there and then you see bigger M&A.

I will also add that often spin-offs become targets of M&A. We've found about 20% of spins within five years end up getting acquired. So some of these spinoffs that have happened over the last few years may end up being acquisition targets themselves. Do you also think, Chris, that at some point these companies just got way too big and also a bit confusing for the retail audience. And now there's this emphasis on smaller simplified stories that are easier to digest. and so you understand exactly what you're investing, and you take Honeywell, case and point. I mean, you're investing right now and everything

from ACs to aerospace engines. Yeah, I think simplification is a big thing. When an investor looks at a bigger, larger cap company, they might like one business, but then maybe a few other businesses they don't like within that conglomerate or within that, you know, other business. Even Lanar, Home Builder, is spinning off its land business on Monday because they want to be more asset light

and investors don't like very volatile land businesses. So there's a variety of them. I think we're going to see more of these. FedEx is spinning off its freight business. They announced that in December. And the freight business is a higher multiple business compared to the partial delivery business. And that one was push for activist pressure as well.

Is there an appetite for this in the market, Chris? Or is everyone just going to be focused still in the same 10 or 20 stocks? No, I think the market. is going to eventually broaden out. I think this is a corner of the market where there's idiosyncratic, you know, alpha that people can earn and investing in these types of companies. You know, there's obviously not like hundreds of them, right? But it's an area where I think there is value creation. And if folks, you know, want to diversify beyond the Mag7 and tech, this is an area that you can find opportunity where there's a catalyst, right? You know,

We always joke that there are a lot of value traps in the market, but these are value with catalysts usually, and the catalyst is the breakup and can be a great, great stock performance, and the proof is in the pudding. These historically, over the last 10 years, have performed very well, as we noted earlier. I just love thinking through the different combos. Okay, so they spit on this and the make of it, but again, GE has showed it doesn't have to be for any dealmaking. It really can just be to unlock more value. Chris, thanks for joining us. Seema, thanks as well. Chris Seneca of Wolf Research and Sima Modi.

Thank you. All right, folks, we are just getting started and coming up. It is a big name stock that is wiping out one-fifth of investor value right now. Well, there's your name. We're going to talk more about it right after this. All right, welcome back. Your disaster du jour in the stock market is Skyworks Solutions. Investors getting hammered right now.

They might want to get hammered later. Wiping out about one-fifth of their value. And apparently Apple is to blame. Christina Partsenevolous, please explain. Well, Apple's influence is really just creating a ripple effect right now across multiple chip companies. And I say that because Skyworks, for example, that you talked about, supplies components for consumer electronics and is facing significant headwinds. And that's as Apple plans to reduce its component orders by 20 to 25%. So there's a relationship there.

Industry analysts believe Broadcom will likely capture that lost iPhone 17 business. The Apple impact extends also to Qualcomm, another connection, despite positive momentum from Samsung, partnerships and strong premium tier demand. That's what Samsung said they had in China. Or, I should say Qualcomm said they had in China. Qualcomm's earnings suffered from royalty challenges. Walway's refusal to renew its contract hit particularly hard, as royalties typically carry higher profit margins.

That's why investors cared about that segment. And then you've got lastly, arm holdings. Their shares also struggling down at almost 4%, though for different reasons. The company, which licenses chip designs to major tech firms, including Apple, connection again, has seen stagnant adoption of its advanced V9 technology. Think of it just like a blueprint for building a chip. And penetration has remained flat at 25% for the last three consecutive

quarters. So these developments serve pretty much as a sobering reminder right now. Even as artificial intelligence, AI drives all of this excitement on earnings call. And especially in the semiconductor space with Nvidia, chip makers still remain vulnerable to traditional demand cycles. and customer concentration risk that we saw with Skyworks and its relationship with Apple. I would imagine, Christina, just another lesson that we've got to know what these semiconductor companies do. And what I mean by that is we always refer to them kind of in a lump, the chip stocks, the semiconductor stocks. Here's the reality. What SkyWorks Solutions does, I think, is very different than what Nvidia does, than what Intel does. And ultimately, you can buy an ETF, but you still have to know what these companies do.

Exactly, but unfortunately with a lot of the retail investment audience, they do focus on the basket of chips and the ETS. Therefore, you're lumping these names from analog that maybe have exposure to the auto sector to something like Nvidia that has exposure to large language models across the globe. So they're two totally different worlds. Yes, they are creating the hardware for every electronic that we operate, but the technology needed is very different. The exposure is very different. The markets are very different. And so it makes the job complicated, too, when you're talking about it, because you've got to explain it all to our audience and know that everything varies.

And that's why you see fluctuations in different stock prices for this chip sector. I would say down 25% or 23% is a pretty doggone big fluctuation for Skyworks today. Christina, thank you very much. All right, so we just talked about Nvidia, not a mistake. I mean, Nvidia stock has been hit hard out of late as well. In fact, Nvidia is down 14% in just the path month. A lot of that follows deep seeds, deep seeks large language model announcement. Remember that.

But despite the recent decline, Your Nextcast thinks this could actually be a buying opportunity to get back into or into Nvidia. Joining us out to talk about it all is Joe Moore. He is semiconductor analyst at Morgan Stanley. Joseph, we've now had, what, a week, 10 days to actually absorb. and try to learn about deep seek effort kind of came out of the blue and hit us a lot of us very hard and very quickly. What have we learned and what makes you a little more optimistic about NVIDIA? Yeah, well, look, I think it's a very impressive model that was created out of China. But the space here is one that has a lot of innovation over the course of any given year, any

given month. And I think, you know, we see this as more of an evolutionary gain where Deep Seek was able to get a little bit more out of a small investment than we've seen in the past. But our checks would say that investment in the space remains very robust. We're not seeing people rethink the larger kind of cluster, what we call large cluster training models that people have been talking about. There's sort of very clear evidence that that persists. So we still quite like the stock. And I think, you know, Jensen has talked about providing a million X performance in, kind of AI capability in the last decade and doing it again in the next decade, you're going to get deflation along the way. You're going to get indications like this where, you know, people are doing

things cheaper and better. And we think that's part of the narrative here. Yeah, you look at that and you think, okay, well, Deep Seek and listen, I want to be clear to our viewers and listeners. Some people think Deep Seek is a complete BS. I'm going to use my initials. In a nice way, Joseph, and that maybe they're actually using Nvidia chips and it's a chat, GPT, whatever. Let's put aside sort of all the quote conspiracy theories over here and just look at invidia's valuation it is still an expensive stock how would you defend that valuation number yeah well it's it's actually not that expensive of a stock on on earnings i mean they're very profitable so if you think about price to sales it's quite expensive uh but we see the stock trading at a low 20s multiple on next year

so the question is are those earnings numbers right you know are we going to stay on the trajectory that we're on. I think that we are. I think, in fact, we'll accelerate in the back half of the year. And you've actually seen some of the other AI alternatives, companies that provide custom solutions into AI, such as Brodcom and Marvell, now trading at a premium to where Nvidia's trading. So it's my view that as we get fully into this Blackwell cycle, we'll get that earnings momentum back quite a bit stronger in the back half of the year. And I don't think it will prove to be that expensive. But, you know, you guys talked about the perils of semiconductors early on. I'm definitely aware of that, you know, and when you have a gold rush like this, things can slow down.

The thing is they're just not right now. We're seeing, despite all of the anxieties around deep sink and the next generation models, we continue to see quite a bit of growth through at least the end of this year. And I thought perhaps one of the more notable developments this week, Joseph was actually what happened with AMD, because if you wanted to be really bearish on Nvidia, you could say, well, you could use AMD chips. And I know people say maybe, you know, some of the mega caps use their own chips and things like that. But what do you think AMD's results showed us? Yeah, look, AMD's done very well.

Year one, they did over $5 billion in kind of a startup product, a very impressive number. But Nvidia is going to have around 85% share when 2024, kind of all the numbers are closed out. And I think that number actually can rise slightly in 2025. It's competing with Nvidia is not easy if it were, you know, a lot of other people would be doing it. So we definitely were enthused for AMD, for Broadcom, for Marvell.

We see a lot of opportunity in this AI space. We like all of the stocks. But Nvidia is our top pick because they are in a very strong position right now. And going into a product cycle where they're delivering on a capability of scaling out at a rack scale level and a data center level in a way that AMD is kind of still working to be able to do. So enthused for AMD's long-term opportunities, but I think Nvidia will have more momentum this year. Joseph Moore, he is an analyst of semiconductors at Morgan Stanley. Joseph, thank you. Thank you.

And all hail the king? No, the king is dead. All hail the king. Well, for the first time ever, a company is expected to dethrone Walmart in quarterly revenue. We'll reveal who next. Welcome back. Amazon is set to report after the bell. It's not just a big deal because it's a big stock.

It has the potential to unsublished. seat, the king of quarterly revenue. For more than a decade, Walmart has held the distinction of being the top revenue generator in America. It was 2012 when it overtook ExxonMobil. For more on what he's watching from Amazon this afternoon, let's bring in Ronald Josie, head of internet research over its city. And Ron, I mean, it's one of these things like the size and scale of its retail operation, the street just kind of shrugs it off. Tell me about the cloud. You know, that's pretty funny. The size and scale of the company in general, is pretty impressive. I mean, not only on the retail side, you also have an advertising business

that could be $66 plus billion this year, and AWS could be, you know, $130 billion this year. And then you have little old retail. So it's a little bit of everything when we think about what Amazon is. But when I think about the multiple or how we value the company, they're tops in e-commerce. They've essentially won that market to a certain extent, but that's not stopping them from investing in newer products like Amazon Hall, logistics, like their new 12th-gen fulfillment center. And then, you know, of course, AWFs is a faster grower and advertising is high margin. So anyway, there's a lot going on at Amazon is the point, all very large businesses. They're once again retrenching from brick and mortar, but evidently are now licensing that kind

of, what's it called, don't check out payment technology. So even there, they appear to have, you know, a revenue stream that they can benefit from. Very narrowly, what do you think the stock's going to move on. Is AWS revenue growth? I think it's three things, really. I think, yes, AWS has a lot to do with it. Obviously, retail as well, but frankly, it's going to be operating income margins or operating income overall. And so we're looking for another big quarter of overall OI. They're more efficient within their core retail business, particularly in North America. Advertising helps there. AWS talks to the overall growth. You know, we're looking for 19-ish percent growth anywhere around there, I think would be good. Of course, anything better would be great.

We have gotten sort of somewhat okay checks from Google Cloud. We sell a desal. Same thing for Azure. So anyway, I agree with the OTAWS, but operating income is really a key part of the story here. Because from a valuation perspective, it's not that expensive and we're now looking at it on an EPS base. And there again is the trajectory for quarterly revenues of Amazon versus Walmart. You know, when Google sold off, a lot of people said it was the operating margin that was the real problem. So just kind of apples to apples, what do Google tell us? What do you think Amazon's going to say on that front? Where does Microsoft fall? So, I mean, I think Google sold off on a few things. One is search was fantastic, no doubt, but cloud was a miss. We heard they're

investing quite significantly in CAPEX. We heard that they have a capacity challenge, not a demand issue, which longer term is a fine, but we do need to build out so that impacts free cash. I think as it relates to Amazon and where we are looking here, yes, they're going to be investing quite a bit in CapEx. I don't think there's any doubt there. However, their retail business is more efficient. And what's fascinating here is we are now getting our packages faster. We're getting them more efficiently delivered and we're buying more, call it, overall everything, essentials plus whatever else we would buy. And so that's driving conversion rates higher.

And so as we get our packet is faster, being delivered more efficiently, conversion rates are going higher, they're making more dollars as the cost to actually ship is lower. So a lot of these things are working together. And then, again, I'm going back to advertising, which is we think at least a mid-40 likely higher operating margin on what could be $65, $66 billion this year. That's going to help margins overall as well. Absolutely. There's a lot. Yeah. And I find myself using it, you know, quite a lot because it's so quick, you know, things like birthday gifts or.

household items. What I'm still using DoorDash for is those groceries, which is a little bit easier because I'm more familiar with the inventory at kind of the local places to turn to that app. And I wonder if Amazon is ever going to finally crack that one. Yeah, I mean, that's something we've been waiting for, and that's clearly a foothold that Walmart has. And obviously, with the Whole Foods acquisition several years ago, their reinvention over and over again of Amazon Fresh, to just walk out technology to your point earlier, They're working hard here. I think the benefit of grocery is that it's at least once, twice, maybe three times a week purchase. And so you get just repeat usage. And so Amazon's investment in

their essentials, which is your paper towels, your deodorant, your soap, and now increasingly your groceries, that keeps people coming back more often. And, you know, if you wake up with a sore throat, you can go buy your cough medicine or your cold medicine at Amazon, be delivered within several hours. And I think that just drives a flywheel more and more, and that's that conversion rate. All right. It'll be an interesting afternoon. As always, Ron, thanks so much for your time. Appreciate it.

Thanks for having me. You got a rating 275 price target as well. Brian? Well, let's talk about the cost of delivering U.S. government debt. Bond yields are moving higher. We got tomorrow's big government jobs number. Rick Santellie's in Chicago. And Rick, I'll just say this.

We have seen a lot of revisions lately, and I wonder how much the job. jobs number, with all due respect to everybody, may not be revised again. And if it is, what does that mean for the Federal Reserve and them doing their job? You know, I'll tell you what, on the two front revision issues, the one we know about from August, I heard everybody talking about it earlier, 818,000, we knew that number. That's from April, March of 23 to April of 24. We'll get a finalized number on that. The other revisions, years and years, years of immigration. You know, immigration's the big story. It's all about the current administration. I find it so fascinating that, you know, the first

month of this president's term, all this is coming out with respect to immigration and these adjustments, but I'll make it easy. Tomorrow's number, just look at it on its own. Both those major revisions, in my opinion, aren't going to really change much. And I contend on the immigration front, there's so many things, how much money, representation by the states, all that that goes into it, and who knows how many people have come across the border? So I say just look at the number standalone. And since the last number, which was on January 10th, interest rates are dramatically lower. As a matter of fact, yesterday we closed at the lowest yields of the year going actually into December. And we haven't moved that far as you see. Now those are twos and tens. But

Here's something really fascinating that a lot of my traders are talking about. Look at the 2's 10 spread. Right now, it's the flattest it's been since the 19th of December. Why is this important? It's hugely important. Look at how much it's flattened just since the 31st. What happened on the 31st? That's when we released personal income and spending and all the Fed's favorite inflation numbers.

And everybody out there, Austin Goolsby, all the big. Fed personnel talking about how, yeah, we're making progress. To me, this spread is telling me that between the twos with less Fed and the notion that so many issues are still up in the air with inflation and on the other end, on the tenure and the longer maturities, growth is an issue. Think minus 500,000 plus on jobs. That spread is what you want to pay close attention to is your easy indicator of how everything's going in the economy and the Fed.

to you. Well said Rick Santellie. Thank you very much. All right. Speaking Kelly of inflation, coffee prices, the kind that we track, the commodity itself may be not on your store shelves yet. Coffee hitting another record high today. Coffee prices, the futures have more than doubled in the past year. You've got a huge drought in Brazil. You've got frost as well trying to grow it back. You've got global demand strong as sort of the coffee culture takes off. Now, despite high prices, shares of Starbucks and Dutch Brothers coffee, they're both soaring this year, or maybe Kelly, because of that, right? They can chart, even though they're paying more, they can now chart, yeah, or a lot of margin, as it may be. Um, meantime, on a much more sort of going to bed note,

cocoa prices have also been on the rise. They're up 90% in a year. And Hershey, reporting its quarterly results today saying that those cocoa prices put significant pressure on results and will weigh on forward earnings coffee and cocoa both up. I'm literally looking at research. Can you grow coffee and chocolate in New Jersey? The answer, you know, maybe in a greenhouse. But at some point, do you? Inside, yes, but these are, coffee's a very sensitive plant. Evidently, a delicious one too, but it's a crazy to see it keep shooting higher at some point. Maybe they can bring more supply online. All right, Coming up, we've got a mystery chart.

This stock is up 73% in six months. But our next guest thinks tariff could be bad news for the shares. That's in Market Navigator next. Welcome back to Power Lunch. And don't sleep on the markets right now because the Dow has quietly moved to a session load down almost 300 points. All right. So let's reveal that mystery chart, Kelly, from before the break in our Market Navigator today. If you check out the focus, it's on Lulu Lemon.

That was the mystery chart. shares of the $50 billion athlete your behemoth have been on a terracons bottoming out kind of last summer, last August. But what's ahead for the company and how will it fare under the Trump administration's new tariffs on Chinese goods? The company does rely on Chinese imports for part of its supply chain, a notable portion of it, particularly in fabrics. Now, our next guest is here to break it all down for us and give us her thoughts on where that stock is headed, short, medium, and even longer term. Joining us now is our fan favorite, Katie Stockton, founder and managing partner. and Fair Lead Strategies. She's also a CNBC contributor. So Katie, thank you very much for being here. Let's break down the Athletia Trade. There is pretty much one name that people associate most

closely with it. It is Lulu. It's reflected in the stock. But where do we think it goes from here? Well, it's had a really big run, as you mentioned, and we've been bullish since about 300 for Lulu, but we still see positive intermediate and now newly positive long-term momentum behind the stock. And I think that's the most important takeaways that holders of Lulu can feel pretty good about not only where it's come from, but the fact that the trend still does have positive momentum. We really cannot say that about the vast majority of stocks right now from a bottom up perspective. So as much as the major indices have held on to their gains, the breath just hasn't been great. And obviously the mega caps have been a bit of a drag. So we do have a weakness in momentum really sort of around the world.

So Lulu stands out in that regard. Now, shorter term, we would look for a pullback for a better entry. The 50-day moving average is roughly 381. And that to us is a great place to sort of revisit the stock and try to take advantage of this long-term upside. Katie, we have so many more consequential questions to ask you. But is it a fashion thing that's, I thought we had all moved on to denim? Well, I had to change out of my Lulu lemon to get dressed for this segment.

So it's obviously very popular. And the charts won't answer the questions that are more fundamental in nature, but they will help us understand what the sentiment is behind the stock. And it's obviously been quite positive intermediate term. If you go way back to about 2020, there's a very wide, long-term trading range. And it's kind of an unusual setup right now in the broader market. Within that range, there is upside to the upper boundary, which is roughly 485. So it's not a near-term objective, but that is long-term resistance. and you couldn't describe the stock as long-term overbought at this time.

Now, Katie, one last thing before we kind of let you go here. Trade is a big part of the discussion right now with regard to many of these names. As a chart watcher, are there places in particular that you are seeing in the market, whether they be individual stocks or sectors or certain indices that set up better as we see what could be a prolonged trade war-slash-negotiation play out? Well, the news is out there already, and I would argue that it really hasn't hit the likes of Lulu. So I think that's a positive in a way for that stock individually. More broadly, what we're kind of interested in from a technical perspective are stocks that actually have been in down cycles and seem to be emerging from them.

So that would be more common right now in defensive sectors like healthcare, consumer staples also, even some REITs are starting to perk up after down drafts. So that's where we're most interested for countertrend exposure until at least the major indices get to a place where we feel there's a better entry at hand. We think that could happen within a few weeks. But right now, most of our indicators from a top-down perspective still do point lower. So we think that the odds are best in stocks that honestly look a little bit different than the S&P 500. Yesterday, as an example, we put out a buy recommendation in Regeneron, and that stock had just

cleared its 50-day moving average. so it sort of crossed our radar for that reason. It's very interesting as the market sells off and as we await Amazon and what's been kind of a rough spot for big tech earnings. So Katie, this is our permission for you to get back into your yoga gear if you would like to. We're not sure what the rest of your day holds,

but thank you very much, Katie Stockton, for the views there on Lulu and trade wars and everything else there. Super interesting. Let's get to Sima Modi once again for the CNBC news update. Hi, Sima. Kelly, Senator Ted Cruz saying today

a key safety system was turned off in the U.S. Army helicopter that collided last week with an American Airlines regional jet. Senator Cruz said military aircraft are permitted to disengage the automatic dependent surveillance broadcast, but there was no compelling national security reason to do so during the training mission. 67 people died in that crash. A federal judge approved an agreement today to temporarily restrict some of Elon Musk's

Department of Government Efficiency staff from accessing sensitive Treasury Department information. A group of union members and retirees sued the Treasury accusing it, of violating federal privacy laws by allowing Doge to access its payment and collection system. The judge's order today keeps the block in place depending on the outcome of February 24th, and that's when the hearing is. Longtime Chicago Bears owner Virginia McCaskey has died. She inherited the NFL team after her father's death in 1983 and served as its principal owner for more than 40 years. Virginia McCasky was 102 years old.

Brian? And you got to see one of the best football teams of all time. I was going to say that, yes. In the mid-80s, the Super Bowl shuffle. Seymomodi, thank you. All right, coming up, we are going to go heavy on metals. A.I. is helping mine the rare earth minerals that are needed to power clean energy.

Our DC colleague, Diana Oleg, in the studio next to me. And we're back right after this. Welcome back. Well, the clean energy economy continues to accelerate, and that's what makes finding the minerals and the metals that power things like batteries, even more critical. As with everything else these days, artificial intelligence is stepping up. Diana Oleg has the details in her continuing series on climate startups.

Diana. Well, Brian, at face value, mining is pretty basic. First, you need to find the metals and then you need to get them out of the ground. Historically, this has been a long and arduous process, but new technologies from a slew of companies are disrupting the mining industry, looking to cash in on powering all that clean energy. Electric cars, solar panels, hydrogen fuel cells, they all have one common denominator.

They need precious metals, like palladium for catalytic converters. That's why as those clean energy industries grow, companies like cobald metals, VAR AI, and a startup called Earth AI are in a race to get those metals to market as soon as possible. Earth AI combines AI-powered mineral discontes, software with proprietary drilling technology. Their data goes back 50 years. We train our EI to learn from failures and successes of decades of hundreds of geologists that explored in the past. Test Luke says by using this mining process they can do it at half

the cost and in a fraction of the time. That's valuable potential as annual mine revenues currently range from $50 million to $3 billion. the system finds what it thinks are metal deposits, Earth AI can drill down to verify it in just a tennis ball-sized hole. We drill down to 2,000 feet and grab a sample of rock that has never seen light. And the metals in that rock, they can build hundreds of millions of electric cars. They can turn our grid renewable. Earth AI doesn't explore around existing mines, but finds new areas and then sells that information to mining companies. Their early success rate is very attractive to investors. The market for these minerals is massive. It's in the tens of trillions of

dollars. It's only going higher. There is a significant moat in their business model and the way that they've trained their large language model. In addition to Tamarack Global, Earth AI is backed by Cantos Ventures, Y Combinator, Scrum Ventures, Alpaca, and Overmatch. Total funding so far, $38 million. Earth AI recently discovered one of the largest verified deposits of palladium in Australia using AI. Their joint venture partner

is legacy minerals listed on the Australian Stock Exchange. Earth AI explores on its own as well as with other explorers to find deposits faster. Brian. All right, Diana, I'll see you out there in the lobby in a couple of minutes. By the way, folks, why am I

in Washington, D.C.? That is not a fake screen behind me. That is the actual capital because tomorrow we have a CNBC exclusive 940 in the morning on squawk on the street. I'll be sitting down with brand new secretary of energy Chris Wright. We're going to talk, Kelly, obviously about the Inflation Reduction Act, money, oil, fossil fuels, drill baby drill. Where does all this money go? Exclusive energy interview with Chris Wright tomorrow morning on squawk on the streets 940 a.m.

Tune in, Kelly. Cannot wait for that. Our viewers will remember him when he was still running his company. he would come on and we'd check in with him, so his comments will carry even more weight now than they did. Brian, we're looking forward to it. Our trader says you should sell this mystery stock that's more than doubled in just six months. She will explain why when we return. Welcome back. It's time for three-stock lunch.

We'll hit three different stories, why they matter to you and what you should do with the stocks. Sylvia Jablonski is here with our trades today. She's co-founder and CEO of Defiance ETFs. Sylvia, let's start with Roblox because the shares are plunging after their annual booking forecast came in below street estimates. Roblox is down 13%. Sparking fears about a broader slowdown in gaming. Granted, it's coming off a 60% up year. What do you do here? Hi, Kelly. Well, Roblox, I think, had a disappointing earnings announcement here. On one hand, if you kind of look at the numbers in isolation, 98 million, 32% up year over year, sounds pretty good. But they're not

coming in on their daily active users. So they're off by about 5 million there. And the users are actually also not spending on the platform. And the outlook on this is sour for 2025. And so I think what investors care about when it comes to companies like Roblox and gaming is just daily user engagement, and they're falling short there. And I think that, you know, kind of doesn't bode so well for the future here. But congratulations to the investors that, you know, got this on the run up. I would just be a seller here probably on my, on my gains and not a buyer on the dip. All right. Let's move along then to Tapestry. That was our mystery stock from earlier. It is up 12 percent today on a big earnings beat in the holiday.

and they boosted full-year guidance. Apparently, Coach is doing quite well. And these shares are up 120% in just six months. You chase it? Yeah, so I love that they're up over the last six months. And again, congratulations to those investors. But I would probably take my gains here. I think it's a great story. You know, they're known for coach and also high-end fashion accessories. They have a good business. But if you kind of like step back on this company, you know, over the last five years, the compounded annual growth rate has been about 2.6%. Their constant currency growth has been about 1.6%, which means that they're lowering prices a lot or having to lower prices a lot to grow. And I think that, you know, kind of extrapolating that out over the next couple of years,

I don't necessarily dislike the stock. It just isn't high on my buy list right now. And I think I'd be a taker of gains. You've had a great run if you hold that one. All right. She's not biting. She's not biting, folks. Let's see about Oracle, which announced today it's adding AI tools to its popular NetSuite software. to help with everything from hiring to tax planning. Now, the shares are only up fractionally today, but they are up 50% over the past year. What do you think?

I am such a strong buyer and interested in this particular name. So I think Oracle, yeah, one of the unloved tech stocks out there that became popular, they're the cool kid on the block again. So they're leaders in AI and AI infrastructure, which is great. The projected compounded annual growth rate for the next two years or so is 50% or more. Things like DeepSeek don't really. matter, if anything, they make AI more efficient and having cloud and infrastructure helps build and feed on that growth. So I think they're positioned well there. They've had a steady

dividend for the last couple of years. It's performing quite well. They're touching on quantum competing and Stargate. Let's not forget that, $500 billion of investment going in there. They're one of the top partners in that project, government funding. I just think that this is a potential moonshot here. Sticking with the Oracle. Sylvia, great to have you on today. I appreciate it very much, Sylvia Jablonsky. We're back after them. All right, welcome back to Power Lunch, live from D.C. and New Jersey, the Dow with a small bounce off your lows that we hit earlier.

The NASDAQ is back in green. So why am I in D.C.? Will tomorrow, Kelly be speaking with the newly confirmed Secretary of Energy? Chris Wright, obviously known to our audience, former CEO and founder of Liberty Energy Services. Now the Secretary of Energy. We have an exclusive interview with Chris Wright, 940 a.m. Eastern time, tune in, obviously much more on power lunch as well. It really dovetails with what we've

heard from the Treasury Secretary, Scott Besson, Brian, who was basically saying he wasn't piling on pressure on the Fed, you know, in terms of cutting rates. He was really saying, we're looking at the 10-year, we're looking to energy to be disinflationary. Well, I think that's going to be one of the key questions, is how do you lower the price of energy? We want to pay lower money for gas or electricity or for electric cars, but not also wipe out investors in the energy. space if you own some of these companies. If oil prices or gas prices go down, do you work at all to protect the investor side? That's one of the many questions that we're going to ask Chris, right? I guess I'll think of the rest of them probably tonight or tomorrow morning.

Well, I love that Chris has been on both sides, but he understands what investors are worried about and what maybe the country wants. Brian, looking forward to it. We'll see you tomorrow. And thanks for watching Power Lunch, everybody. Closing Bell starts right now.