Power Lunch - Stocks rise to start week as oil prices fall 10/28/24

Episode Date: October 28, 2024

Stocks are higher, as investors look toward a batch of megacap tech earnings to keep driving the Nasdaq to record highs . A cooling geopolitical situation also aided risk sentiment. Weekend airstrikes by Israel against Iran did not target oil or nuclear facilities as feared, and oil futures sold off. U.S. crude prices were down 6%, on pace for their worst day in more than 2 years. 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.

All right, welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us on a Monday. Stocks are starting the week with gains, and despite last week's pullback for the Dow, all three major averages are set to close in the green for the month of October. That would mean 11 of the past 12 months dating back to last November were positive for the Dow and the S&P. It has Kelly been quite a run. Oh, who would have seen that coming at the time? We were all recession and, you know, everyone's buying treasury bills.

bills, papers, all the rest of it. Watch, speaking of which bond yields, though, we're near that 4.3% level on the 10-year. It's still feeling pretty hot. We're going to talk about a little bit more about that. Indeed. Because it is such a big story. Meanwhile, getting a benefit from falling oil prices, as Iran has minimized the severity of those Israeli strikes. I've seen Iran and Israel retaliating a few times now, of course, being somewhat tactical about that. But look at the response in WTI crude, below $68 a barrel. It's a 5.5% drop today. We're just talking about the retail and this will certainly help if it stays this way.

Yeah, the idea that perhaps this is a kind of a pause in some of the tit-for-tat retaliation between Iran and Israel contributing to a slide in oil today. Apple releasing a new operating system today, while some people find the updates annoying, this is the first rollout of Apple's intelligence features, and it is, obviously, the jury still out on whether this is enough to get the super-suffer.

in sales of the iPhone, what is it, 16 now? Yes, which I have the pleasure of holding it. Now, it's not a pro. Was that right? Is that a new one? I had to go last week because the last one broke. And as I mentioned, this is not the pro, so I was able to get it right away, get out of the store. I got the update to 18.

I guess, zero. Now this is what we have to clarify with our fine tech friends. That's not the fun one. Evidently 18.1 is coming today, we think 18.2 is where the real meat is. So we're all still waiting. All still waiting for the fully fleshed out. more fully fleshed out AI version. All right, meantime, the 10-year yield, as Kelly mentioned,

continuing to march higher today. Getting near 4.3%. The question of what does it mean for the markets? Do investors believe a soft landing is coming, is here, is not coming, and could higher yields themselves jeopardize that? Let's bring in Mike Santoli from the New York Stock Exchange for more. What do these higher yields mean, Mike? Yeah, Tyler, you have to have some theory of the case

as to why they're moving in this direction to know whether we should be worried about it. And I'll make a couple of observations. One is 429 in the 10-year Treasury yield right now. The last time we were here was almost exactly three months ago, the last week of July. That was when you had very high confidence in a soft landing scenario, but it was right before we were to undergo a pretty nasty growth scare. We had a bad jobs report right in the first day of August. That was deepened by another couple of worrying data points.

And we went into a mode of thinking that the Fed was too tight and was going to be late. And all of a sudden we had to ramp up our expectations of potential recession risk. That has all changed. rocketed higher, especially since the Fed cut rates by half a percentage point. But it's also, the yields have been also been rising right in tandem with the economic surprise indexes. In other words, data coming in better than forecast that at least provides a cover for why this is happening for a positive reason. Also, we'll mention that, you know, 1995 was one of these first initial Fed rate cuts. We also saw longer term yields go up. It's not unusual for it to happen. This degree of

increase is unusual. And I do think that if the velocity comes, continues and we get much higher than 4.3, you're going to have to address the idea that the market is bracing for something, like more supply, like a policy mix after the election, that perhaps will cause the economy to run hotter and obviously bring more attention on some of the deficit stuff. But I don't think you have to make that leap just yet. All right. Stick around, Mike, as we have just a week until the presidential election just over that. There remains significant uncertainty in the markets, especially with five of the so-called magnificent seven stocks, to report their quarterly results this week.

Joining us now with more on what's ahead and a chat with Mike is Stephanie Link. She's the chief investment strategist at High Tower Advisors and a CNBC contributor. Stephanie, always good to see you. How do you interpret the rise in yields on the tenure? And whether that suggests that the economy may be too hot for its own good, maybe a little more inflation is expected, which is not necessarily a bad thing. If you've got growth and a little inflation, that's usually pretty good for stock. It's pretty good for earnings. Exactly right, Tyler. So we're running about 3.3% from Atlanta Fed

tracker for this quarter. Later this week, we had a GDP number that will show us what, in fact, the first preliminary look looks like for GDP for the quarter. But we're running around 3.3. Maybe it's a little less. Maybe it's a little more. But that's actually very good. I think that's good news. And then, of course, the bond yields backing up is telling you that we are growing stronger than expected. And maybe inflation, maybe it stays a little bit stickier. Maybe it stays at two and a half, maybe it inches higher. I don't think we're getting anywhere close back to the 9% level that we saw back in the peak of inflation. So if you have 3% growth and 3% inflation, that's actually very good for earnings. And so far, so good. We've had 34% of the companies report in the S&P 500,

and 75% are beating them. We have 37% of the S&P 500 this week, including, as you mentioned, five of the seven mag seven but we also have a lot of other companies that are going to give us good reads like d r horton and eton and parker hanifin and the big uh energy companies like exon and chevron and so we're going to learn real time what the economy is growing and how these companies can handle it stephanie what is that behind you would is that a christmas tree do i see a chris is that a christmas tree it is a christmas tree just for you kelly and Tyler and Mike. It's back. I love it. It is a beautiful tree. You know, it's not even Halloween stuff. You're stressing me out, but I guess this is what it is. I know, but you know

what it is? It's only a two and a half month time frame because I take it down right after, you know, Christmas, right? So I like to enjoy it and it's kind of fun. It's something to talk about. Last year's was red. This year's is green. Or should we glean any market signal from that? Do you know that I read earlier that they said October 28th is the single. best market day in the last 75 years. Is that true? My guess is it must be because of all the October crises and that you get these big rebounds or something. So if we're not, if we're not green today, I don't know what that tells you. Well, it's interesting because August and September tend to be much

more volatile than October. It's the second part of October where you really start to gain momentum. This year, we have the election, obviously, next week. So we've got to get through that. We're going to probably have some fits and starts. But I think after that we're going to, it sets us up pretty well. We have 6.4 trillion of cash in money markets. We have a lot of portfolio managers that are underperforming their benchmark. And oh, by the way, the most important thing, the most important thing, earnings are coming in better than expected. Real growth, little less inflation. That's a good combination for companies to do mid-single-digit revenues, upper single-digit, maybe even double-digit earnings and operating leverage. I think margins are going to be the surprise,

Kelly, for this quarter. I think they're going to stay elevated. And some might see margin expansion, too. You read into the link Christmas tree indicator. It was red last year and now it's green. It was red last year. It's in before Halloween and it's green. I do recall, I do recall about Stephanie that she often is very early with the Christmas tree. I do want to see the stockings that say Tyler Kelly and Mike, though, if she said that the tree was for us, so maybe you can widen out.

Look, I think in general, hey, we have gas prices plunging again. Rages, wages relative to gas prices are actually running toward the upper end of their range. number of gallons of gas you can buy within an hour of earnings. So things are, I think, fine on the consumer side of things. The bigger question really is you see the way the market has sort of tacked in this direction of value outperformance, small cap outperformance, banks leading this cyclical leverage in the market. If that's all really responding to the same economic fundamentals, I think that's a pretty good macro signal. If it's front running some kind of expected election result and kind of applying the 2016 playbook, I think there are questions as to

whether the current setup is really accommodating. to that kind of a trade for much further from here. Just dwell, Mike, for one more second, for those of us who are panicking about longer-term bond yields. Sure. Would you, is this like a sell-the-rumor by the fact? I'm not sure which candidate it is that is causing this sell-off. But on election day, do you want to take that moment to buy

because so much has been priced in and nothing's actually going to, that they want to do is actually to come to pass? Buy in terms of bonds, you mean? I mean, look, I do think if you really believed that the move to, to four three on the 10 year is somehow really policy linked and it's essentially telling you that we're going to be worried about supply again, then I do think it's probably overdone right now.

At five and a half or six percent nominal GDP, where's the 10 year yield supposed to be? I mean, how low is it supposed to be? Now, it creates 7 percent 30-year treasury, I mean 30-year mortgage rates. Maybe that's going to be a restraint on growth down the road. And it's sort of the makings of the next growth scare is probably underway if we go much. higher from here. So I don't know that you worry at this level. It's the velocity. It's whether it seems disorderly. It's whether it seems not responsive to data and more responsive to a buyer's strike that I would worry about. Yeah, Stephen Stanley's stuff had a nice know over at Santander

about the numbers this morning and the deficit math. And he thinks that even the way that rates have behaved, we probably can wait until 2027 before we start panicking about interest payments again. So it's coming unless things, you know, go down significantly from here. Well, you know, the issue here is that either candidate, whoever wins, they're both spenders. They actually just spend differently. So I don't think you're going to see the deficit being addressed. I think we're going to kick the can. I think your kids and mine are going to have to deal with it, unfortunately. So I think it's just out there, something to be cognizant of, obviously. We don't want to see it where it is, 7% of GDP. I think it can handle 4% or 5%. But I don't think it gets addressed, Kelly.

But in the meantime, let's just step back and focus on the good fundamentals of this economy. The consumer is, as Mike said, really doing fine jobs and we get a couple of job numbers figures this week. They're probably going to be mixed at best. But it's still healthy and wages are still growing above trend. So I think that does vote well for the consumer and that's 70% of our economy. That's what we need to pay attention to. You like 3M. I saw Tusa on that earlier.

You're buying wells. You like Amazon. You added to it last week and that's a good one ahead of earnings. We'll leave it there. Thank you all. I was buying. go ahead, set? Okay, thanks. No, I was going to say, I was buying 3M before 2A, just on record. We were going to wish you, Merry Christmas.

Maybe he gets a stocking, too. Mike Santoli, Stephanie Link, thank you so much for your time. We appreciate it. Ahead on Power Lunge, artificial intelligence and real stupidity. First, Apple is launching its hotly anticipated iOS update just ahead of earnings on Thursday. Plus, remember that Chase Money glitch that went viral last month, where consumers wrote bonus checks to steal money. Now the bank is coming to collect. We have those details ahead on Power Lunch. Apple rolled out some of its Apple intelligence features as part of iOS 18.1 today. You got to have the 15 or the 16 those iPhones from last year this year to use the new features. But one of our next guests is we'll have to keep waiting for the iPhone super cycle. Joining us is Daniel Newman.

He's Futurum Group CEO and our very own Steve Kovac. Welcome. Daniel, I don't think you're usually trying to throw some rain on this parade. Give me your full thoughts here as these rollouts happen. Yeah, good to see you, Kelly. Look, I'm still very optimistic about it, but historically speaking, the cycles have been very hardware-driven, meaning there's some new feature, new camera, you know, capabilities that people are going to have to run out and get this right now. This is a software-driven cycle, and people aren't really seeing the benefits yet of

Apple intelligence. They haven't fully felt or experienced what these new features are, how perhaps writing their emails or improving images more simply is going to change their. lives. So we're hearing these sort of depressed numbers, some of these lower than expected forecasts on the 16. And I actually still think there's a big cycle coming. But what I think is going to happen is a virality that's going to come from hearing from your friends and seeing new features and kind of the, oh my gosh, I have to have that and realizing, oh, I have the 14, I need to go upgrade. So it's just a little different. And the fact that it's rolled out slowly, it's not

been in the device. It's just coming today. I think it has slowed people down. But this moment could be a big inflection, especially with the holiday coming up. Steve, I've got about three seconds remaining. So I don't get it. Apple nudged me to update to 18.0.1. And I did and nothing happened. That was just the basic update. Well, why give it the big round number of just a basic update? Then they tell we got it.

So then we just did 18.1. And it's going to give me, hmm, not much. Camera control. Camera control. That's not even AI. The big things you're going to get right now when your phone is done updating, you're going to get notification summaries, meaning you get a gobs of notifications a day, it's going to kind of coelate that into just a summarized version.

I'm skeptical that I'm going to like that. And there have been a lot of examples that people have been testing this early that are just kind of hilarious and some are kind of just freak you out. And then Siri will look a little different when you activate it. It's going to make your screen glow. You can have a, it'll sound a little different, but it's just as dumb as it has been all this time. What it looks like is not the problem. Exactly.

And so the big update, that's the one everyone's waiting for, right? When is Siri going to finally live up to its promise? We're not going to see that really until next year, most likely, when that Siri upgrade comes, when it becomes kind of more like chat GPT and also integrates with all the other apps on your phone, not just the Apple apps. Let me ask you this, Daniel, if another company, pick the name of the company, had come out with a heralded, hyped up product, Apple 16, with the AI and all of that stuff, and the AI really wasn't ready to go into the phone. Can you imagine the criticism that that company would come under as compared with what seems to be a rather gentle, genteel approach to Apple?

Because Apple is so popular, so revered, everybody loves Apple. I just can't imagine if some other company had come out with this kind of halting rollout of AI, that they wouldn't be pilloried. Yeah, well, the pushback is actually evident in the numbers, Tyler. They're not buying them as quickly as expected. This cycle has not driven people out of their family rooms and into the stores to buy this next level, next generation device. So I should speak louder than words here, basically is what you're saying. Yeah. I mean, look at the AI PCs. I mean, we heard this huge way, but the numbers are showing single digit growth. I think the PC numbers are going to disappoint. I do think people are moving to them. They're great devices, but people still don't know exactly what they're going to do with them. So why does it not matter? The shares are still at all-time highs. The company's still doing massive buybacks, I imagine. Bybacks is part of it. Yeah. It doesn't matter. And again, it's kind of a wait-in-see mode because to Daniel's point, he was talking about the super cycle's going to come. We just don't know when. A lot of the more bullish cases right now are that this is an elongated cycle, meaning those features are telling, by the way, chat CBT is going to come likely in December. That will be integrated in. And as these kind of milestones have, happened and we'll see little bumps in sales.

So I want to get your thought on that. Does Apple get a benefit of the doubt where other companies don't? It can because historically they've always done this. I just remember a year and a half ago when ChatGPT got out ahead of Google. Yeah. And everybody, and it was disaster mode. Freaking jump on poor Google. Oh, and Microsoft.

I shouldn't say poor Google. Yeah, I think they're okay. But yes, they do get kind of a benefit of doubt, but they've also historically done this. They weren't their first smartphone in the world, but they, to their credit, probably made the best. But they made the smartest? And they made the best. And the smartest one. They didn't make the first MP3 player, but boy, did they really change the game with the iPod and so on and so forth.

So you can apply that logic to what's going on here. They have a history of taking good to great. Yeah. And by the way, that is what they're promising to do here. Craig Federigi, who's the software boss over at Apple, he spoke to the journal last week and basically said, we want to take our time and get it right. So it might seem a little unimpressive right now, which is true. But over time, by this time next year, you're going to be really.

impressed with what your phone can do on the AI front. That's the argument they make. We'll see. The ability to record phone calls. That's great for every journalist. It is. That is great. I'm not sure with the broad. But again, that is not a huge AI thing that's going to make people jump off the couch to Daniel's point and run to the store and say, I need this new iPhone. That's just not happening yet. We will see if this really is the inflection point, the Bulls believe it is, and we'll see even more next year. Maybe the March quarter looks hotter than it normally does because of the slow roll out. Daniel, a final point then. If I had to say you pick one of the big tech companies reporting this week to buy, which one is it?

Yeah, I like Microsoft here. This agent path that the market is going under, it's going to be enterprise. Our data is showing the enterprise growth, three or four times faster than traditional enterprise software is going to be driven by agents doing work for us and helping us drive more productivity. All right. My update isn't done yet, Steve, so we'll check in tomorrow. We'll be posted throughout the show on Kelly's update. Well, you're not connected to Wi-Fi either. that would help. I am. It downloaded. It's just still preparing. We all have been through this.

The wheel of spinning. Just spinning. Taking forever. Thank you both. Daniel Newman, Steve Kovac. And after the break, navigating the currency market, something I always love to do. What's the better play? The dollar of the euro market navigator with Fernando Magellan is next. Welcome back to Power Lunch. Dells up 300 points today on a strong session for this Monday after the Dow and S&P shake off that down week. a six-week win streak ahead of that, but the NASDAQ is up seven weeks straight now and up a half a percent today, and we're going to hear from a lot of big tech players this week. Meanwhile, we've been watching currency moves as well. The dollar has been on a tear climbing against a basket of major currencies.

My next guest thinks there are even more gains ahead in the near term, especially as we head toward election day. But what about longer term? That could be a different story. Joining us now is Tom Fitzpatrick, managing director of Global Market Insights at RJ O'Brien. Tom, welcome to you. What's going on short term with the dollar here? Hi, Kelly, and thanks for having me again. I think of the short term, we have a very different picture to when we were speaking in August.

In that environment, we were seeing a very dovish fed. We were seeing a very cautious ECB. We were seeing a very hawkish bank of Japan. And as a consequence, we were seeing a move in the yield differential, very much against the dollar. And as a consequence, we saw a significant dollar weakness. And it continued all the way into the end of September. But since then the picture has changed quite dramatically, even with the 50 basis points that the Fed gave us, similar to what we saw in 2007, they turned much more cautious. They question the continuation of an aggressive move.

In fact, they're not even guaranteeing that they're going to continue to cut, while the Bank of Japan has become much more cautious. And the ECB has become increasingly dovish. And at the ECB, they're now talking about 50 basis point moves as a potential. And as a consequence from the end of September, we've seen a sharp reversal in terms of those yield spreads, moving dramatically back in favor of the dollar. And as a consequence, having had about a 12% drop in dollar yen and a 5% drop in the euro, we've now seen them come back quite strongly. And there is a danger in the short term it could continue further, number one, because we're pushing against and possibly breaking above some very good levels in terms of U.S. yields that might suggest we go even higher still in the near term and widen those spreads. out. And of course, number two, we have the election. And certainly at the long end of the curve, and there's a view that there's a little bit of what people refer to as the Trump trade going on.

And if that is the case, we could also continue to see a push on those longer end yields. And that seems likely, at least in the near term, to be continued to be supportive of the dollar. So, Tom, boil it down to me into one trade or maybe a couple of trades that you'd put on right now. I think Dolly N is the obvious one, only because it's always been. in the trade that is most risk-sensitive and it's always been the trade that has been very yield-sensitive. The risk environment going into this election is trading very differently to the last two equities are actually trading up into this election. The geopolitical risks have dropped someone. Oil prices have dropped, which takes away a little bit of concerns in terms of an economic

lag or an economic feedback land. And therefore, as a consequence of a positive yield environment in a positive risk environment going in here with a bank of Japan and a political structure as well over the weekend that has taken a little bit of a turn in terms of the LDP losing his majority. The most obvious trade

that seems to benefit from the backdrop and potentially another push higher on US heels is possibly dollar yen. We've already broken above some good levels. There's not really an awful lot between here and 157, maybe even a move to 162.

Maybe even a move towards 162, and you see the Euro weakening as well here, maybe even towards the 103-50 range, possibly. We could get to that point. I remember those articles we all wrote about in Euro parity. It was 15 years ago. So interesting to see these levels come back into play. Again, for now, Tom, we'll check back in after the election, maybe see where we stand. But you see this run continuing with the strong dollar. Thanks for your time.

We appreciate it. Tom Fitzpatrick with RJ O'Brien. Tyler. All right. Coming up, oil prices sinking. Iran downplaying. Israel's attack on Saturday. As these back and forth continue, it's becoming apparent that neither side seemingly wants this to fully escalate. If that's the case, does it remove a major overhang for the

markets? We'll talk about that next. Welcome back, everybody. Lots of movers to highlight. Time for a power check. First up, we got Wells Fargo naming Spotify as a top stock pick. The firm is bullish on the Music platforms rising margins as well as its strong product makes lots of podcasts there. Last week, Todd Gordon told us Spot is the best streaming name to own next to Netflix, Kelly. All right. Boeing is launching a stock offering that could raise roughly $19 billion. The move aiming to strengthen the company's finances, which have been hit by strikes as well as safety issues. The stock is down about 1.3%. Wed Bush naming Roblox a best idea. The firm expecting continued traffic And ad growth over the next three years.

Worth noting, the company recently faced scrutiny from the short seller Hindenburg. That stock is marginally higher today. And Volkswagen is considering widespread pay cuts and layoffs, as well as the closure or reduction of plants in Germany, according to the company's union. And a statement the automaker said the overhaul is necessary due to current economic conditions. And the shares are down nearly 18% this year and half a percent today. And finally, Taiwan Semiconductor down 3%. This on reports the company is suspending. shipments to a China-based chip designer after a chip it made was found on a Huawei

AI processor. In 2020, the U.S. stop shipments of U.S. technology or software to Huawei, including TSMC's chips, and that folks is your power, chap. And JPMorgan is going after individuals who profited from a glitch in the company's systems and turned the scam into a viral trend on TikTok. CNBC banking and payments reporter, Hugh Sun, is the first to report on these lawsuits, And he joins us now. Hugh, tell us the details. Thanks, Kelly. Yeah, J.P. Borgon Chase wants its money back after thousands of customers withdrew funds from ATMs with checks that later bounced. The bank on Monday began suing people.

It alleges stole cash in the so-called infinite money glitch that trended on TikTok a month ago. J.P. Morgan is going after the biggest examples of fraud in cases with possible ties to organized crime organizations, sources told CNBC. Among the biggest cases involved the Texas man who owed J.P. Morgan more than $290,000 in a fraud. Florida man who owes more than $140,000. This effort is separate. It's important to note from potential criminal cases the bank is pursuing with law enforcement, these sources said. Back to you guys. So tell me what happened here. Were people depositing bogus checks and then drawing the funds before J.P. Morgan Chase had the time to clear the check or find out that the check was fraudulent? That's exactly what happened. Now, what normally happens is you deposit a check and it takes several days for

the entire thing to clear. It's trunched. You get a couple of bucks access at first, and then the rest of it later on. Now, for a glorious... On a big check. If it's a check of $75, they don't tranche it that way, do they? Usually not. And it's different for every person, so it's hard to generalize. Yeah. But for a glorious few days in late August, a person could deposit a check. And in one case, it was $330,000 check, Tyler, and the whole thing cleared. The whole thing cleared. And the perpetrators here, then withdrew money against that cleared check. How were they withdrawing? They weren't going up to the ATM where you're limited in the amount you can take out of it. They're taking it from ATMs. They were taking it from bank tellers. They were doing wires.

And, you know, there was, this is, for me, this is a bit of a IQ test because here you are, you have people using their actual bank accounts where the Social Security, their names, their ID, it's all on file. They're going to ATMs in which there is surveillance video of them doing the extractions, and they're thinking that somehow they're not going to get away with this. It's also interesting because they say that the security, Jake Morgan's security team reached out to the fraudsters, but haven't been repaid for the phony checks. So you almost wonder if people had played ball and said, listen, that was stupid,

you know, here you go, here's the money back, but is this in instances of people who can't or won't return it? These are, in some cases, people who probably don't have liquidity to pay back $290,000, as in one of the bigger cases. And, you know, it remains to be seen if they're ever going to get their money back, I mean, being chase, and you have the other parallel track of law enforcement, and I would suspect some of these cases would warrant that. And some of these may be organized criminals who have taken the money, and it's gone.

I mean, it's just gone. It's gone. You know, it's turned into, you know, plastic cards, you know, payment cards, and that's in laundered and such. But you have the people who are the face of that who are going to face, you know. All right, Hugh, keep us abreast to this one. Thanks. Appreciate it. Let's get to Contessa Brewer for a CNBC News Update. Contessa. Tyler, a former Louisiana State Trooper struck a plea deal following his arrest of a black driver that resulted in that man's death. Trooper Corey York pled no contest to eight counts of simple battery and received a six-month suspended sentence.

Now, a grand jury originally indicted him on a more serious charge of negligent homicide, but prosecutors dropped that charge. Ronald Green died in May 2019 after troopers attempted a traffic stop, were led on a chase. They initially blamed his death on a resulting crash, but an associated press investigation found suppressed body camera video showing the white officers beating, stunning, and dragging green. Authorities are investigating early morning fires set in ballot dropboxes in Portland, Oregon, and in nearby Vancouver, Washington. In Washington, the county auditor said hundreds of ballots were lost. That area is expected to be home of one of the closest U.S. House races in the country. In Oregon, local officials say a

fire suppressant protected nearly all of the ballots and only three were damaged. John Stewart's return to the Daily Show desk reportedly has been extended. According to Variety, Stewart will continue to host the satirical news program on Mondays through December 2025. Tyler, I'll send it back to you. All right. Thank you. Very distressing about those ballot fires, ballot box fires.

Thank you, Contessa. U.S. crude on pace for its worst day in more than two years. Hope you are not on pace for your worst day in more than three. two years after Israel spared Iran's energy facilities in its aerial attack over the weekend. We will explore the fallout for the energy market and much more when we return. Welcome back and take a look at crude oil because it's now down 6% today after Israel strikes on Iran spared the country's oil facilities. Let's bring in Pippa Stevens with more on a pretty dramatic move Pippa that sometimes we see an immediate sell the news and then it kind of recovers later in the day. This is kind of the opposite.

Yeah, I mean down more than 6% at the low. here and on pace for its worst day in more than two years. And so the market is clearly viewing Israel's response attack on Iran, which did avoid those oil and nuclear facilities as a de-escalation. And the next question now, of course, is, you know, is this the end of this chapter in this conflict, or are we going to see another strike now from Iran responding to this latest strike from Israel? And for so long since October 1st, the market had been waiting to see how Israel would respond now that they have any of the geopolitical risk premium that had been priced in has now been unwound, and that is why we are seeing this big drop in oil prices today.

But, you know, RBC's, Helene McRough was talking earlier about another big wildcard for oil markets, which is, of course, the U.S. election now eight days away. And she was basically saying that, you know, if we get a Trump presidency, will that lead to a harsher stance on Iran? Could that potentially emboldened Israel? And so while there is an immediate response today in the sense that no energy, infrastructure was actually hit, there are still unknowns. And then, of course, we have that OPEC meeting coming up on December 1st, and they are set to start unwinding those cuts.

All right, PIPA, I have to leave it there last. Thanks very much, Pippa Stevens. While Iran downplaying the Israeli air strike, that was in retaliation to Iran's missile barrage back on October 1. At that time, Israel said its air defenses took out most of the missiles, and right now it appears that both sides are, as Pippa intimated, trying to retaliate and save phase. without the situation escalating into a full-blown war. So is this removing a major overhang from markets, whether petroleum markets, equity markets or more? Let's speak with Michael O'Hanlon,

Director of Research for the Foreign Policy at Brookings Institution. Michael, welcome. Good to have you with us. Do you view this, as so many in the press are, as a kind of muted response on the part of Israel and an effort based on what we've heard out of Tehran and Tel Aviv, to de-escalate things? Greetings. Well, I certainly do view it that way. In fact, I thought there was a possibility that Israel would use this opportunity,

even to go after Iran's nuclear infrastructure. That would have been a stretch and obviously extraordinarily escalatory. But if Israel is just trying to say, as I think they have with the killings of Nasrallah, for example, that we can't play by the old rules because we thought there was going to be restraint from the old actors, and apparently there is no restraint, I thought there was a decent chance that Israel would say, let's go for the nuke program, because we know that Iran rejects our right to exist, and they're encouraging Hamas and Hezbollah to it in such ridiculous way. So I thought at least Israel would go after some economic targets, and I'm gratified they have not. How instrumental, if at

all, do you believe the Biden administration was in causing the response to be calibrated the way it was? Absolutely crucial. I think that perhaps there were Israelis who preferred the more restrained approach themselves. But from all we can gather from the outside, there were a lot of consultations about this. And we certainly did, as you've been reporting, hear a lot of discussion about attacks on oil infrastructure and other ways in which the ante could have been increased quite a bit. So I think the fact that we have maybe some power of persuasion, but also considerable security, you know, leverage with Israel and needed to be involved perhaps in at least helping them prepare for retaliation against this attack or after this attack.

I think these were crucial elements of Israel deciding to do what it did and not do what it didn't do. Restraint vis-à-vis Iran is one thing, but it does not, does it, imply restraint vis-à-vis Hezbollah or Hamas at all? Do you feel as though Israel's ultimate goal with respect to either of those terrorist organizations is that they, surrender? It's an excellent question. I think that the answer may be slightly different with Hezbollah and Hamas. Of course, Hezbollah is seen as a mortal enemy, and that's why they killed Nasrallah. But also, I think, you know, Hezbollah is part of the Lebanese government, in effect. It has a certain desire itself, not to see this thing blow up into apocalyptic proportions, not to see another all-out-Israeli invasion of their country. And there's a decent chance that, as the new leadership,

reconstruct itself in Hezbollah that they will decide to de-escalate the attacks on northern Israel, which in turn will allow people to move back, which in turn could lead to an end to this phase of the fighting. But I think with Hamas, Israel wants it not only to be willing to negotiate a ceasefire, but essentially wants it to be broken into little bits and pieces and thoroughly emasculated, if not destroyed. So I would not be surprised to see that war continue on a fair amount. What is or what should be the plan for Gaza at this point, Michael, at what might be the conclusion of the war or in order to attain the conclusion of the war as there's been talk of Israeli settlements there now? Yeah, I think that's a non-starter, but I realize,

I say that from an American perspective, and Israeli politics have shifted a lot since last October for understandable reasons. But I think the United States needs to do what it's been doing even when it's not working. In other words, keep pushing for the two-state solution, not only with Gaza, but someday with the West Bank, remind Israelis we see no other plausible path to peace, and remind Israelis that as friends, we are prepared sometimes to use a little friendly leverage in this negotiation, not to give them an ultimatum, and I don't see an immediate way to create that new kind of a Palestinian authority, if you will, for Gaza. But that has to be the solution. There really is no other way. The last point I would add is, should the United States be willing

to join a multilateral security force helping patrol Gaza, we're a long ways away from that, but it may need to be on the next president's agenda as well. I can't imagine that that would be popular with the electorate right now. Do you think? No, it wouldn't. And that's why it can only happen as part of a larger piece that would require acquiescence by Palestinians and Israelis and be seen as the least bad option. I'm not suggesting we fight our way in. But obviously, as you're implying, I think rightfully so, if we were there, it would be dangerous and difficult.

And so this would only be justifiable if it really did bring you towards a two-state solution. Very interesting. So many challenges remain at this point. Michael, thanks for your time and for outlining them. We appreciate it. My pleasure. Thank you. Michael O'Hanlin. The search has begun for our 2025 CNBC ChangeMakers list. This recognizes women transforming business and philanthropy. Scan the QR code on your screen or apply at CNBC.com slash changemakers now through November 11th. And Power Lunch will be right back. Welcome back to Power Lunch. Stocks are heading higher this afternoon, but bond yields are rising as well.

getting very close to 4.3% on the 10-year. Let's get Rick Fantelli's opinion on that in Chicago. Rick, you follow these technicals. 4.3%? Is that going to be a big deal if we break above it? Oh, I think we will break above it. I'm still thinking it's possible to see four and a half or higher in front of the election. A lot depends on auctions. Today we had two really weak auctions and yields moved higher.

Now, they are done for the day, it seems. It seems we reached our crescendo and we're coming off. just a bit. Look at an intraday of twos. We had 69 billion of them auction at 1130 Eastern. You see that run up at 1130? Those were the results. Then at 1 o'clock Eastern, we had round two, 70 billion, five years, and right smack dab on the high yield there was right at 1 o'clock Eastern. Now, if we consider the fact that 731 is the last time we had yields up here for a two year and realize since the Fed lowered rates, well, the markets have taken. making it all back. We're up over 50 basis points and twos. And if you look at fives, I'm

paced to close at the highest yield since the 25th of July. And if you look at tens, when they were trading at 429, which was kind of where it did a lot of trading right as it was about to test 430, well, that's 64 basis points above where it was when the Fed lowered rates by 50. Once again, Fed give it, the market taketh away. And if we consider the fact the dollar index is on pace for the six consecutive close above 104. We could see what interest rates are doing. Tomorrow's $44 billion seven years at 1 o'clock Eastern. I think you ought to pay attention to that auction. Tyler, back to you. Rick Santelli, thank you. The McDonald's quarter pounder is returning to menus at about 900 locations, thank goodness. As the investigation into a deadly E. coli

outbreak continues, we'll trade McDonald's shares in three-stock lunch after this. Welcome back time now for three-stock lunch, we are trading some key movers of the day. Here with our trades is David Traynor. He is the CEO of New Constructs. First up, McDonald's announcing that the quarter-pounder returning to restaurants affected by a deadly E-coli outbreak after health officials rule out beef as the cause of the issue instead of honing in on the onions. About 900 restaurants will now serve the burger without onions. While an investigation continues, the shares are marginally higher, David, on the news. What do I do with McDonald's if I own it? And what if I don't own it? Should I buy it? Look, if you're a short-term trader type, I would definitely buy on this weakness.

McDonald's remains one of the best businesses of all time. High returns on capital, great cash flow, strong growth profile. It's a little too expensive for our focus list. We're really value-oriented on that front. But if you've got a short-term horizon, you want to get a good pop, I think we're going to see a nice rise in the shares here as it recovers from the the E. coli skater. All right. Let's talk about Delta. That airline is suing Crowdstrike, the software giant for breach of contract and negligence after the worldwide IT outage back in July, which brought down millions of computers and led to the cancellation of 7,000 flights and crowdstrikes striking back and saying it's all Delta's fault. The shares are up 3% today, also benefiting

from lower oil prices possibly. David, what would you do here? Kelly, we have a hard time being very constructive on the airlines. I think it's a very commoditized, competitive. business. We're going into economy. It's probably getting slower rather than faster. God help us if there's any kind of more war. This just doesn't really put a lot of upside in terms of cash flow growth. And the stock is really pretty expensive where it sits right now. The valuation is full in terms of expectations for future cash flow. So we'd recommend taking some money off the table on this one and putting it into more attractive stocks. And finally, we've got Robin Hood. The shares are higher after announcing it is going to offer.

prediction trades for the upcoming presidential election. They better do it quick. But the NYSE just announced plans to extend stock market trading up to 22 hours a day, putting it more in line with brokerages or competitive with brokerages like Robin Hood, which offers more off hours trading of certain securities. What do we think of Robin Hood? This is one of our original, Tyler, one of our original zombie stocks. So we're pretty negative on Robin Hood.

it remains a zombie stock. We think this thing is a big chance of going to zero. Look, when you're up against New York Stock Exchange, Schwab, you name it. Look, these guys just don't really have a real competitive advantage. I think they are too often focused on preying on unsuspecting investors as opposed to supporting investors. I'd love to see Robin Hood give investors real research, real information, to empower them to be smarter investors, not just traders. And so I think the Robin Hood story, I'm sorry. Yeah, sorry, Tyler. I think the Robin Hood stories is one that's going to eventually really end up in a bad for those that own the stock.

David, do you like the idea of ARCA going to 22 hours a day of trading in general? I mean, casinos stay up, you know, they're up in 24 hours a day. So, I mean, maybe that's where we're headed. I don't think it does anybody any good. I don't really know what good trading goes on and off hours. I don't necessarily believe in trading in general. I think it should be more about investing and understanding that people build well slowly and trying to do it in the short term is really more akin to gambling than it is to investing. But there's something to me that's intuitive about, you know, why do these things need to be open and closed, right?

There's always futures trading happening. It sometimes seems like such an artificial construct to worry about when it opens and closes. I agree. I agree. I don't really think it adds much value either way. I mean, that's what I'm saying. It's going to maybe go to 24 hours, but who cares? does it add any intrinsic value to any of the participants? I don't think so. We plan on being live 22 hours a day. It's going to be wonderful.

We'll be following the game. A lot of three stock lunch. David, thanks very much. And thank you for watching Power Lunch.