Power Lunch - Stocks Slide, Earnings On Deck 10/13/23

Episode Date: October 13, 2023

A tumultuous week for the world and the markets is ending with stocks sliding throughout the session. We’ll break down all of the issues investors need to know.And, that includes earnings. Bank results have mostly been strong, while Netflix is a key name set to report. We’ll talk to an analyst who is downgrading the shares ahead of the report. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Barrelunch, everybody. Alongside Kelly Evans, I'm Tyler Matheson. Coming up, a tumultuous week for the world and for the markets, looking like it is going to end with stocks sliding throughout the day. Down more than 1% for the NASDAQ, the Dow relatively holding better. All issues, we've got all covered for you, all the issues investors like you need to know about. And that includes bank earnings. Banks mostly strong. Netflix, one of the big names on deck for next week. And we'll talk to an analyst who has downgraded that stock, Kelly, ahead of those results. Yeah, it's hit a slippery patch of late, Tyler. Thanks. But let's check on the market. Speaking of slippery patches, the Dow's clinging on to a 29-point gain after giving up a 300-point

rally this morning. The S&P is now down 23 points or half a percent. And like Tyler said, the NASDAQ is now down one and a quarter percent for the day and it's in the red on the week. The S&P Dow slightly in the green still for the whole week. Let's get to the banks reporting today. JPM Bank of City Group, Wells Fargo. You can see the names here. J.P. Morgan was up almost 5% at one point, a little less than 2% now. City, a half percent gain Wells a little more than that. Jamie Diamond also had some cautionary comments we will get to in just a moment.

We also want to check on Novo Nordisk, which raised its sales growth target to as high as 38% because of strong demand for OZempic. This continues to reshape not just the way health care is trading, Tyler, but many other sectors as well. All right, Kelly, thank you very much. with the latest in the Israel-Hamas war. As we enter day six of the conflict, 1,300 Israelis are dead, as well as about 1,800 Palestinians.

Israel ordering the evacuation of more than a million residents of North Gaza overnight. This is Secretary of State Anthony Blinken met with the Palestinian president, Mahmoud Abbas, in Jordan today to discuss the fallout from the Hamas attack on Israel. Blinken also met with Israel's prime minister, Benjamin Netanyahu yesterday to pledge the support of the United States. For more insight, let's bring in Daniel Kurtzer, former U.S. ambassador to Israel and Egypt,

and he's currently a professor of Middle East Policy Studies at Princeton. Ambassador, welcome. Good to have you with us. Thank you so much. I watched Secretary Blinken not only speak this morning to Abbas, but also to the Emir of Qatar. And he was very direct, right in the back-year. of Hamas, where they get a lot of their money. But I wonder how the United States threads the needle between its support of Israel and its right to defend itself and its interest and its people. And what could turn out to be a major humanitarian crisis in Gaza over the next weeks.

Tyler, I think that's exactly the diplomatic challenge that the Secretary is facing on this trip in the region. On the one hand, to show the Israeli people, the Israeli government, that President Biden's speech of the other day was meaningful. There's no daylight between us. We have your back. We support what you're doing. But I think the private messages are likely to be tougher. You need to avoid exacerbating the humanitarian situation. in Gaza. You need to create a situation in which civilians are not the targets, unintended targets,

of your actions. In other words, you need to find a way to meet your goals without making the situation worse. He was, if I heard him correctly, Secretary Blinken, that is, a little bit vague, I think, I would say, on the question of does the United States support the idea of evacuating 1.1 million people from North Gaza. Could you talk a little bit about that? I think it's fair to say that it's an impossible mission to evacuate 1.1 million people from one of the most heavily populated areas of the world. There's not enough room in South Gaza. The highways and roads are not passable, and there's no fuel to, have a convoy of trucks. Nonetheless, it's important for civilians to get out of the way.

Israel, I think, is trying to figure out how to avoid civilian casualties, but it's very hard when Hamas is using those civilians as kind of hostages in their own right. Daniel, what other options does Israel have, given what happened over the weekend? What should be the course of action for dealing with Hamas going forward? What role can the Palestinian Authority, if any, play? Who governs Gaza at this point? I think Israel has to believe that it can at least decapitate Hamas' leadership. It probably can't destroy the movement.

But it needs to send a lesson that the horrific events of last weekend were just unacceptable. The Palestinian Authority has been silent. The Secretary of State met with Mahmoud Abbas today in Amman, but they're caught in a bind. They don't like Hamas any more than anybody else, but they have to stand in solidarity with the people of Gaza. This is a complex situation which is only going to get worse as the conflict persists. It is such a difficult situation with lots of, I guess I would call the mischief makers at play here, the hand of Russia, potentially China, Iran, and we don't know what the roles are of each. But I'm wondering what your worry is about the possibility of a wider war.

So far, Hezbollah in the north has done sort of what Hezbollah typically does. They've lobbed some missiles into Israel. There have been some skirmishes. But by and large, my sense is that there has not been any kind of full-scale provocation on the northern border. What's your view of the possibility that this war expands? You know, the National Security Council spokesman just addressed this question and said, we have not seen evidence that Hezbollah is preparing to intervene. That doesn't mean they won't. It doesn't mean there are no conditions under which they'll feel compelled, but they're also

caught in their own binds. They are a political force in Lebanon. And Lebanon, as you know well, is pretty much a basket case economically right now. And so to consider an Israeli strike in Lebanon should Hisbalah launch attacks on Israel means that the situation in Lebanon will get worse and Hisbalah will be held accountable for it. So we haven't heard from the Secretary General of Hisbalah, Sheikh Nasrallah, for good reason.

I think he is biding his time, hoping that the conflict in Gaza does not, in a sense, compel Hisbalah to come to the assistance of Hamas, and therefore everybody's holding their breath. The other point of possible escalation is the West Bank, of course, relatively quiet. There's been some violence back and forth. Jerusalem was relatively quiet today. But the question is how long the people of the West Bank can sit quietly when they see the suffering among their brothers and sisters in Gaza. Let me just very quickly, since you were.

with Ambassador as well to Egypt. I wonder, as you move south from Gaza, there is the Sinai Peninsula. Is Egypt in any way able to handle the refugees that might come there? Well, the Secretary of State is probably pursuing that, and the Egyptians hope that it doesn't come to that. They have their own insurgency, which has been going on for about a decade in Sinai. The last thing they want is the introduction of a large population that probably would include Hamas fighters among the refugees, housing and feeding and providing for them over the long term is a scenario that I think the Egyptians want to avoid. But it may be unavoidable to prevent humanitarian disaster in Gaza.

All right. Daniel Kircher, we thank you so much for your insights today. I hope we can count on you coming back and sharing your thoughts in the future. We appreciate it. Sure. Thank you, over to U.S. politics. Now, let's get an update. on that race to replace Kevin McCarthy as Speaker of the House. Steve Scalise, of course,

took himself out of the running last night, where we've had a new entrant in this afternoon. Where to things stand now? Emily Wilkins joins us from Capitol Hill. Hi again, Emily. Hey, Kelly. Well, that meeting is still going on. Lawmakers are holding yet another candidate form, similar to what they did earlier this week, except this time they're hearing again from Jim Jordan, as well as Congressman Austin Scott. Now, Scott's name was not one that was really thrown around. And Scott himself told me that he did not think when he woke up this morning that he was going to run for Speaker. But he says that he's very frustrated with how things have gone. He's upset at the eight members who voted to oust McCarthy. He's saying this is not how Republicans

should be inducting themselves in the majority. And that's part of the reason he's running today. So really, you know, he's kind of running as a bit of an opposition candidate, but the momentum is still behind Jim Jordan. Former Speaker Kevin McCarthy actually just came out and told reporters that he will be backing Jordan. And you have heard a lot of support from him across the conference. That includes from moderate members as well as hard right members. They say that, hey, he is a good communicator. He has really led a lot of the Republicans' opposition to Biden administration.

And while there are some concerns with Jordan's very conservative background, a lot of members just really want to unite at this point. Now, of course, there are some concerns. Congressman Mario Ziazbollah came out and talked with reporters a little bit earlier this morning. And he said, look, he liked Jordan. Jordan had never lied to him. He'd always been straight with him. But he noted that over the last couple days, Jordan did support Scalise. And he was trying to get his supporters to go with Scalise. And yet it was many of those who are affiliated and associated with Jordan who held off voting from Scalise and basically have left Republicans in the spot where they are continuing without a speaker. And Diaz-Bowlerd's comment to me was that, look, if Jordan can't bring his own out,

on something like electing a speaker, how is he supposed to bring them along on much more difficult things? Things like Ukraine, things like funding the government. So that's one of the concerns that's been out there at this point. Now, we are expecting an internal vote today from House Republicans to see exactly how much support Jordan has now that Scalise is out of the race. If there's a lot, it might mean that Jordan also can't get to 217

and that he's going to have to step aside. And there's a question, you know, there's a lot of folks who have shown a bit of an interest in our running for Speaker at this point, but there's also a sense that no one has the 217, and there are just a lot of questions about where to go forward. It's an unprecedented moment in unprecedented times, guys. Emily, thank you for now. We appreciate it. Emily Wilkins continuing to track that for us. The uncertainty here and abroad already being addressed in earnings. J.P. Morgan's CEO, Jamie Diamond, warning this may be the most dangerous time the world has seen in decades. That said, his company beat estimates. Joining us now to talk about earnings, risks to the market,

rates and more. Ron Ansana is chief market strategist with dynasty financial partners and a CNBC contributor. And Victoria Green, she's CIO at G-squared private wealth, also a contributor and here in the flesh, I should add. Welcome to you. Absolutely. Thanks. What a day or a week also, Victoria. What's top of your mind? I mean, when you look at the market, broadly speaking, do you see it kind of trying to break out to the highs or worry that it's trying to maybe go back and test some lows? I think it's just trying to tread water right now. It's got some good catalyst. earnings were generally pretty positive. I love how Jamie Diamond.

It's almost clockwork. Every time his company reports earnings, he says something dire about how everything is terrible, and yet his company continues to outperform. So I always think that's an interesting dichotomy from Jamie. But yes, there's a lot of risks right now. The uptrend does remain intact for the markets. 4200 is held. Uptrend is held.

So for now, there is potential that we could see this rally out if earnings do continue to come in stronger. But there are, you know, I've said, hey, we've been climbing this wall of worry, but this wall keeps getting higher and harder to climb. And I think stocks are facing a lot of headwinds. They may, may get a leg up, though, with the Fed looking today. And what Harper said today, I think was impressive because he said, look, by doing nothing, we are doing something. And to me, and he's a voting member.

I know Bullard came out saying six and a half, but Buller's been saying six and a half for a while. And so, look, I mean, you might get that kind of the Fed put a little bit if they come to a pause. But for now, yes, the fundamentals, earnings, there's some numbers that potentially. Ron, I forget where I read it, but maybe it was Peter Bookvar making the point that we seen the 10-year-up 75 basis points, I mean, the equivalent, let's call it, of three more hikes than the Fed has actually had to do. And the 30-year action yesterday, pretty ugly. So these rising rates are having an effect. Oh, absolutely, Kelly. And I think they're peeking out. And I think the Fed's done. I mean, to prior points. And listen, I'd stop listening to Jim Bullard.

He's not on the Federal Reserve anymore. He's now at a university. He was generally wrong for much of the time that he was at the St. Louis Fed. So I'd got to discount him. With respect to what Jamie Diamond said, I would tend to agree with him in Paul Tudor Jones that this is a risky period. Although, you know, in 1962, much more risky. We had the Cuban missile crisis. We had a near accidental nuclear launch in the early 1980s by the Russians. And certainly in 1973, we had the Arab oil embargo. This may turn into something wider that invites in superpowers and could become a regional conflict that has, you know, dramatic consequences. But I think that remains to be seen this is tragic. It is horrendous. It's hard to say, however, what the long-term

impact on the economy and markets would be, unless this were to spiral out of control. So, you know, on the one hand, I think rates are peaking. I think that, you know, the stock market's going to chop around until it has a good reason to rally fully. But not much has changed in my point of view other than the fact that I think the Fed has absolutely done at this juncture. Yeah, it would seem that this international tension would be. probably hold still their hand for a while. I'm going to ask both of you the question that is, in light of what's going on around the world, truly trivial.

But I'm going to ask it nonetheless, Victoria. What is an investor to do right now? Number one is not panic. And I think that's the biggest thing investors like to do. They like to read a bad day or a big move like yesterday happened to Treasuries. And then suddenly they panic and say, oh, I have to rip up my strategy. Sometimes a bad drought, bad drought, a hot inflation print doesn't always have the effect investors think it will have. And not to be callous and cold, this is a tragic period we're facing right now.

But unless the market sees oil above 100 for an extended period of time, right now it remains a regional conflict. And the market has shown the ability to look beyond geopolitical conflicts. Look what happened with Russia and Ukraine. You know, there have been multiple periods in time. If you look back historically and said, these were the events happening in history. What did you think happened in the stock market? You would probably say, oh, it did terribly, right? Everybody went risk off.

But often the market cares a little bit less about what's going on geopolitically. little bit more about earnings, about Fed, about inflation, and what's happening in the United States. So for now, investors should stay the course. They should be looking for quality. They should understand their cash flow and their liquidity needs. But panic is a horrible investment strategy. Right. Ron, any thoughts? Yeah, look, I think, you know, I agree wholeheartedly. I would also point out that with respect to the price of oil, you know, above $100 is not the same as what we saw during the Arab oil embargo in 1973, where the price of oil went up 300%. That would be the equivalent today. Let's take it off the lows of oil going to 180. In 1973, average miles per

gallon, 11.9, today 32. 6% of the fleet is electric. So the impact of energy, given the difference in energy intensity today versus the 1970s is vast. And so I worry a little bit less about oil spiking to $80 or $100 than you might have in other periods. And I think, you know, at the end of the day, I would agree that markets tend to look through geopolitical risk unless or until it becomes an all-consuming event. And that's obviously something we simply, one, can't forecast, and two, are hoping doesn't come to pass. All right, folks, thank you very much. Ron Insana, thank you for your weekly visit. Victoria, we're going to keep you here throughout the hour. We're not letting you go, okay? All right, coming up, the stream or dream or nightmare?

Wolf Research downgrading Netflix, saying the company's two biggest drivers, Look increasingly risky as the former king of streaming falling behind, plus three strikes. The latest in the negotiations with health care workers out west, auto workers everywhere, and Hollywood's actors. Details when Power Lunch returns. Welcome back to Power Lunch, everybody. Shares of Netflix are down today after Wolf Research downgraded the stock from outperform to peer perform, saying its valuation seems just too high amid rising growth concerns.

Note that the stock is, down 14% over just the past month. Joining us now is the analyst behind that call. Peter Sapino, Media and Telecom Analyst at Wolf Research, and Victoria Green, also back for another helping here of Power Lunch. Peter, thank you for joining us. Explain the reasoning behind your downgrade of Netflix. What are you concerned about here?

Netflix is the best company in streaming, but that doesn't mean it's a great stock. And we're concerned that the two biggest drivers of Netflix, share price performance historically and for good reason net additions of subscribers in particular in north america and the price they get per subscriber they call it arm both look uh risky relative to forecasts they'll keep growing but we're concerned uh that forecasts are too optimistic are they spending too much on programming still or have they uh wrestled that one more to the ground. That was always a worry there. It's amazing what time cures. The Bulls on Netflix always said

that over time, the reporting of programming expense would eventually align with the cash expense for programming, and that is where we are. Netflix will spend about $17 billion this year in cash on programming, and they'll amortize a similar amount on their income statement. So that's no longer a big controversy, and yet it stands as a powerful signal of Netflix market power, because that's more than almost anybody will spend, certainly in general entertainment X sports, and they're making money. So let me bring Victoria into the conversation. I think Victoria sees Netflix a little bit differently.

I'm going to let her either ask you a question or bring to the table her point of view. So I know one of the catalysts to this downgrade was the CIO coming out saying, hey, the 300-bit margin expansion, just not on the table going forward. they're still targeting about 180, 200 BIP expansion, along with it looks like it's still a growing universe they can get into you. So one of my questions is, as we're seeing linear TV decline, and they have a superior position in streaming, do you not see that as a potential catalyst for continued growth? Well, I agree wholeheartedly with you that the fact that more than 50% of viewing and much more than 50% of spending on video continues to be paid TV,

that's a huge opportunity for Netflix to continue to attack. I think the debate about Netflix as a stock is whether the company is going to grow 8% compounded for many years or 12 or 13% compounded for many years. And right now the street is on the higher end of that forecast. And what we've seen is historically when Netflix increases their prices, subscribers tend to decelerate. In fact, they might not even grow in North America specifically. And the share price tends to appreciate at a lower rate after price increases. And that's what's coming in the next six months is a big price increase. And I do understand that.

I think they had one, what, January 2020 was the last time they did a price increase. But at the same point, they're still very, they're breaking into Asia. They have emerging markets. And the passwords sharing crackdown and the advertisers, they still have some areas they're ramping up. And I do believe they've been a little bit of a soft touch here on how much they've cracked down on passwords, trying to get everybody warmed into it and not alienate. And they haven't seen a higher turn. So one of the reasons I'm a little bit more bullish is I think because they are cracking down on password,

and they have different revenue opportunities if either you're an add-on member or you do the ad-based tier as well as the ad-based tier continually ramping up in 24 and 25. I'm just wondering if maybe that offsets some of the historical slowing of the user growth that you would have seen because they didn't have quite as many options

or you went to the free version, right? You know, if they raise prices too much then suddenly we're hitting up your friends and roommates for logins and that's gotten harder. So I just wonder if maybe there's a little bit more growth than what we've seen historically because of the actions they've taken the last few months. Yes, password sharing and advertising were really good ideas, smart ways to respond to the

deceleration of the business 18 months ago that you alluded to. And Wall Street has come all the way with the company and is fully behind these initiatives. Our concern is not that they're not good ideas, but that the net ad benefit of password sharing will fade by the middle of 2024, in part because of the price increase, but also just because they will have sopped up most of the excess demand out there from former password shares. And then we're somewhat concerned that that same advertising positive doesn't amount to enough to offset the deceleration of subscriber growth. All right.

Thank you both. We appreciate it. Peter, thanks so much for joining us today. On this downgrade, Moves Price Target goes to Marketweight, Peter Sapino. Coming up, the U.S. tightening sanctions on Russian crude, with oil climbing more than 5%, almost 6% now in response. We'll discuss the implications next with WTI back up towards $88 a barrel. Stay with us.

Welcome back. Oil popping almost 6% now today after the U.S. Titan sanctions on Russia. Pippa Stevens is here with more alongside Victoria Green. And Pippa, interesting time to crack down here. And a big response in crude. Yeah, exactly. So it is ending the week, crude up almost 6%,

wrapping up a very volatile week here, though still important to note it. WTI is still under $90. despite the week we've seen. And so the latest development is those sanctions on Russian oil. It is the first time the G7 has enforced that price cap so the U.S. Treasury Department sanctions to shipping firms that they said

were transporting Russian oil above $60. Now, the intent of the sanctions was never to take a meaningful amount of supply offline, but rather to reduce the revenue that Russia is getting from the sales of their oil. And so this action by Treasury doesn't really impact the market all that much.

What it does do is it sends a signal to the market that they could start cracking down at any time. And to your point, Kelly, the timing, of course, is really notable with all eyes on Iran, especially with those unconfirmed reports that Hezbollah may now become involved. And so the timing really is key here. So tell me how these sanctions against Russia work. You mentioned a $60 price ceiling that Russia is allowed to sell, what, as much oil as it wants at $60 a barrel? So up to that level.

And so the firms that are transporting oil that was purchased for more than that $60 level, They're the ones that are being sanctioned or... Exactly, exactly. Now, it is hard to track. And what happens to them then? Who finds them? How do they collect the money? What do they do?

Do they take their ships? Well, so the thing is, if you can't get insurance from a U.S. or Western-based company, then you're not going to be able to transport that oil because nobody wants to shoulder that risk. But these are very difficult to track because we've seen a huge uptick in the shadow fleet of vessels for both Russian and Iranian crude. But the U.S. is now coming out and saying, you know, we're going to... to no longer maybe turn as much of a blind eye. I think the other important thing to know here in today's jump is that nobody wants to be short going into this weekend.

There is so much uncertainty in this market. Why would you want to hold a short position? Much of what Dan Yurgan said was the same, Victoria. I don't know how you feel about oil or the energy stocks here. Yeah, I'm pretty bullish on them. One thing I point out is that we don't really have as much in the SPR to help us out. And the SPR was actually put together basically to offset some of this volatility. But we never really got around to refilling it after we tried to bring

prices down last year when prices spiked over $100. So we don't have as much of a crush to fall back on. We obviously are not going to pivot to Iran. And Iran is one of the only places that has a lot of floating stores that could immediately bring barrels to the market. And so if you look around, obviously Saudi Arabia has some voluntary cuts, but you say, who's going to help out this physical market shortage that we may be seeing? And some people have said, well, we're trying to maybe normalize with Venezuela.

But Venezuela is like a year or two from really producing, I mean, the infrastructure they'd have to put back in place to actually get significant amount barrels of the market is key. So if the Middle East crisis does widen, my concern is we do not have a lot of fallback that can help us out, because we are certainly not pivoting to Iran to help us out. Would that make you bullish on the energy stocks as a result of all of this? Or do you just kind of, because I think it was Peter Bookbar again, who said oil and gold, that's the new safety trade, you know, replacing almost people used to do with long-term treasuries. And we were a bit bullish on energy to begin with because they were printing money,

and they're much more shareholder friendly right now, instead of drilling and putting it back and spending it on CAPEX, they had vastly increased their dividends, share-by-backs, and variable dividends. And this just puts even more emphasis on what they're going to be able to produce. So, yes, I am bullish on the energy sector. And they have minimal direct exposure. I think Chevron is the only one that actually has fields in Israel. Everybody else has some indirect exposure to the areas that are being fought over currently.

But a lot of the integrated oils and the big guys out there, yeah, I think they could benefit from higher oil prices, the refiners. And we've seen the Permian, even as rate counts has fallen, and our production has actually continued to grow. Absolutely, as PIPA has highlighted. And one note on that Chevron point, European natural gas future is up more than 40% this week. They have been absolutely surging.

And Chevron did take that tomorrow platform offline. It's a very, very small portion of overall, you know, demand for not gas, but it does show the sensitivities in this market, particularly since it's transported out of Egypt. To leave it there, Pippa, thanks very much. Victoria, you'll be back with us in a little bit. Let's get the birth of Coombs now for CNBC News Update. Hi, Tyler.

The Israeli defense forces has released a statement this afternoon, saying they have been conducting raids inside Gaza over the past 24 hours. The IDF says the goal is to find evidence leading to hostages and added that its soldiers also thwarted terrorist cells and infrastructure. Fighting along the Lebanese and Israeli border escalating today, the Israeli military says it's using drones to strike Hezbollah, targets inside Lebanon. Hezbollah supports Hamas. The operation comes amid clashes at Israel's northern border after Israel said Hezbollah opened fire on a number of military positions. And Senate majority leader Chuck Schumer heading to Israel this weekend.

New York Democrat says he's leading a bipartisan group of senators to show the unwavering support of the U.S. government. The Senate is to reconvene on Tuesday to debate how much much. money and equipment will go to Israel and whether to link that funding with an aid package to Ukraine. But Tyler, of course, the House remains up in the air. Absolutely. Thank you very much. Bertha Coombs reporting. Ahead on Power Lunch, a big week of earnings ahead. Consumer stocks, we've got some more banks, some technology, some airlines, and more. We'll trade some of those as well as some key

movers of the day in three stock lines. That's next. Welcome back. It's time now for our three-stock lunch. We're trading some of the movers of the day. And one of the biggest is Dollar General. Shares are up 9% after they've been upgraded to a buy over at Gordon Haskett, saying their latest leadership change could help stabilize the business. Victoria Green is back with our trades. And, you know, this is the real news. Victoria. How many companies are at this point are turning to an old CEO to try to save it or bail them out of the new problems they're having? Do you like the stock here in this move? I don't. I'm a sell the rip here and I'm a sell on this stock. Look, he's already was on the board. He was the old CEO. He knows there are substantial problems there. What is he going to do about the inventory buildup? What is he going to do to reduce shrink? They already had rising costs, lower in-store traffic. And so I think he has real problems he's going to have to fix. And it may not be an easy turnaround in this quarter. They already had a really nasty quarter last quarter where they had their downgrade expectations. And so I think this is just an uphill climb. I think if you get a

chance today, I'd be kind of more selling this rip than I am because I think it's going to be a slower turnaround and his consumer base is really what I'm worried about. They're showing a lot of stress. The under $500,000, which is the vast majority of their shoppers, is just a little stress right now. Hard for a CEO to change that. Yeah, let's talk about Delta Airlines stock down a little bit today. Profits up nearly 60% in a record third quarter. That's because a strong summer travel. Also, though, trimmed its free cash flow estimate for the year to $2 billion. Down from the $3 billion it forecast over the summer, you don't like to see that kind of forecast coming, do you? No, and that for me is a sell again. And Delta just is facing a higher fuel cost. They had a pretty bad run of it there with maintenance taking longer, higher costs in general. And so the downgrade didn't necessarily surprise me on their earnings. But if you look at their stocks chart, they're in this horrible downtrend. I think they may have to retest that 30150 before they catch a bounce. All their summer travel, a lot of that margin was built on European travel. Those are the higher fare mixes. And you typically see a little bit less of that in the seasonal travel here because maybe Americans travel a little bit more domestically.

Yeah, you go back, if we can put that chart back up with the three, I think it was three months maybe. That was a very telling chart. Down a lot over the past few. It's almost straight down, fairly not a good chart. It's nearly 50 now down 3420. It had been straight up. I mean, if we expanded that another three months, I remember back in the spring, Delta had been on a 16-day wind streak. What is going on with the psyche of the market where it takes Delta on almost its longest wind streak ever and then sends it directly back the other way?

They mess with the sky miles. But it ain't just that. I think the airlines have probably traded more or less as a group here. They do. And investors have just been burned so many times by airlines. I think that's one of the problems now is nobody really trusts them to continue to do profitability. Have a great quarter. Great.

What are you going to do for me now? And the concerns with them kind of trimming profit forecast, investors are looking and think, okay, well, maybe this isn't sustainable. Maybe this 13, 14 percent margin isn't sustainable with rising fuel costs. So they look at it and say that was great, but thank you, no. I do feel bad. I mean, no one could have foreseen that jet fuel would really pop the way that it had. I don't know whether it was Warren Buffett, but it may have been Warren Buffett.

If it wasn't, I apologize, Mr. Buffett. But I believe he said more money has been lost in airlines and has ever been made in airlines. And was it Munger who said if he had been there at Kitty Hawk, he would have shot the plane out of the sky? Sounds like him. It sounds like him. Either him or Warren. Our final name is United Health, which is higher after topping earnings estimates in Q3 and raising full year guidance, as they say medical costs are beginning to stabilize here. What would you do with this stock?

This is a buy for me. United Health is one of my favorite stocks right now. They're just a quality company. Key 3 has historically been a great quarter for them. In about a month, they usually do a conference, and they'll announce their 20, 24 guidance. So many people were worried about medical costs and what that was going to do. And they actually came in better, beat it by about 84 bibs on their medical loss costs. And they've seen Optum RX.

They've got good Medicare. They've got good corporate penetration in there. And so their EPS outlook is looking stronger. And for us, we look at this stock and say, I think it's a stock on the rise. They always have a little bit of political risk that there could be changes coming. down the road, but right now you've got a lot of grid locks. So for for now, it looks like quid proe on any kind of Medicare or Medicaid updates. That said, we were talking a moment ago about how nothing in this market is really working the way you would expect. A lot of the

defensive trades have been terrible. Health care, to quote Jared Holtz, who covers the space from Missouho, he said, health care equities have never traded this terribly. And you kind of run the gamut. Now, the weight loss drugs, ironically, are a big part of why. But this is an area that's traditionally seen as defensive. Strategists come on and tell us all the time how they want to be in health care right now, but the equities have to start to act better, and maybe UNH can be part of that. Hopefully, and I think you've seen like a lot of the medical diagnostics have really struggled, and so beyond, pharma is beyond Lilly, and no Nordics haven't done as well.

And so the sector definitely has been a surprise. It usually is a quality sector. But for us, we do think, United is best in the managed care insurers. At the end of the day, they can continue to raise their premiums, and you're going to have to continue to pay their premiums. So I see their revenue growth is something that is sustainable, even if we hit a slowdown. All right. There we go. Victoria, thank you. Victoria Green, three-stock lunch. We'll be back with you again shortly.

All right, as we had to break, CNBC celebrating Hispanic Heritage, sharing the stories of influential business leaders. Here's Ricardo Mora, Goldman Sachs co-head of Latin America. Hispanic Heritage Month is uniquely American. It was initially created as Hispanic Heritage Week by Lyndon Johnson. Later, it was extended into a month by Ronald Reagan. It's a unique opportunity to celebrate our diverse set of cultures. ties us together not only through our hard work, but through our communities, and more importantly, through our families. The Hispanic culture defines the American experience. Welcome back. You're looking at live shots at a protest at Baruch College in Manhattan, kind of on the Lower East Side. It is, as really Prime Minister Benjamin Netanyahu says,

the weeks-long retaliation for the Hamas assault in Gaza is, quote, only beginning. We'll continue to monitor the situation, as New York is one of many cities. on high alert, many college campuses and even many schools across the country on alert today. All righty, Treasury yields pulling back. After the big spikes we saw yesterday, let's get to Rick Santelli in Chicago for the latest in the bond market. Rick, explain the action this week in U.S. Treasuries. You know, I think the one issue that makes traders the most nervous, Tyler, are geopolitical issues when they're fresh.

and still very much moving, with a lot of moving parts, as horrible as what's going on in the Mideast, of course, and how you are supposed to position yourself. And you contrast that against the data we've seen this week. And geopolitics and flight to safety in front of a weekend is always a big issue. And that's one of the main reasons, in my opinion, listening to sources. We are going into the weekend with interest rates on the tenure side, for example, down 17 basis points on the week.

And if you consider the data, PPI month-over-month core up three-tenths, hot. CPI core up three-tenths, hot. University of Michigan, both inflation reads, hot. The actual University of Michigan number was much weaker than anticipated. All of those data points augur for higher rates, but geopolitics and what's going on, Middle East, of course, has everyone's attention. Look at an intradate chart. We made the high yield after the aforementioned University of Michigan preliminary data, but now it's going sideways. And don't forget, we had 101 billion of Treasury supply,

threes, tens, and thirties, and the amount of demand by investors was tepid to say the least. So I expect Sunday night. Hopefully the Middle East doesn't get much worse. And if it doesn't, you probably see yields even move higher very quickly. If you go to the charts, we made our low for the year on the 6th of April, right around 331. It has pretty much been a 45-degree line upward since. And if you look at what's going on since 2006, on the left side there, those yields are around 530. Many suspect that that's what we're going to ultimately test in the long end and the dollar index. What a stunning reversal. On the 3rd of October, you see it on the left side of the chart. That closed that day was a 10-month high close. Look at how we view turned. We're not very

far from those levels. Kelly, Tyler, back to you. Indeed, we have. Rick, thank you. Coming up, Deal or no deal, Kaiser Permanente reaching a tentative deal with health care workers. Same can't be said of some of the nation's other key labor disputes. We'll have all the latest details when Power Lunch returns as the Dow has turned negative once again. Welcome back to Power Lunch. Let's get you updated now on the strikes going on across several industries, kicking things off with the UAW strike. Just moments ago, Stalantist announced temporary layoffs for an additional 700 employees in Indiana effective today. It brings the total number of laid-off workers to more than 1,300.

The move follows UAW President Sean Fang, saying the union could expand strikes at a moment's notice, but not announcing any new walkouts in his weekly address. That also came on the heels of Ford saying they've reached the limit on how much they can offer in wage increases. Different story for Kaiser Permanente, where 75,000 health care workers may be heading back to work after a tentative deal was reached with the Kaiser unions. wages will go up by 21% over four years, which they hope will retain workers to alleviate staffing shortages. And no progress in Hollywood, though,

as talks between the studios and the actors surprisingly broke off with studio suspending negotiations saying the two sides guys are too far apart. Victoria, what's your read on this all? It's tough. I mean, right now there is a lot of power and the labor end. There was this kind of pendulum that swung in for a while there. You couldn't get a job, and it was so hard. And now, yeah, Jolt has narrowed a little bit.

bit, but obviously the unions are flexing their muscles. And so we have to be wary on that. Number one, there's a trickle down from this. If we see auto workers and layoffs continue, you know, the amount that affects the overall economy is not insignificant. And then number two is what it will do to companies' margins. They're offering, I believe, it was a 25% increase, the last offer. And obviously, those are some fairly significant numbers for a large workforce. So on one hand, as an investor, you need to be aware of what this may do to margins and labor costs. But more immediately, especially for the auto workers, And all the surrounding industries that support automotive production, it could be a pretty disastrous next couple months if they have to continue to shut down and do layoffs.

And then, you know, that doesn't just start back up with the snap of your fingers. There's kind of a lag effect that may come back into play there with the auto workers. On the media side, I do think there's a little bit more fallback content that they can use. So I see the more insulated. Netflix is considered one of the most insulated media companies because of its broad content. I think that libraries that they can run off. I mean, I'll watch Seinfeld. Yeah, we'll watch.

I'm watching Gilmore Girls right now. You know, we'll watch, you know, Friends, Homeland, everything. So, you know, they have reruns, so it's not like they have to shut down their systems if they don't get new content. So I do see media. There is going to be an eventual effect,

but we'll go back and watch reruns because we'll have something to watch. And their algorithm will suggest some random movie we would forgot existed. All right. We're going to take a quick break here, Victoria, because I'm tired. I'm just, I just want to watch Seinfeld.

A little nap. The lunch is hit. We're going to power through many more headlines of the day as we can in closing time. Welcome back, everybody. About three minutes left in the show, several more stories to run through. Let's get right to it, wasting no time. And starting with Microsoft closing that Activision deal, even though the FTC is still technically challenging it. If Charalina Khan's challenge is successful, they could be forced to unwind it, but that possibility is seen as unlikely.

What do you think here, Victoria? I mean, it's great for Microsoft. This has been an overhang for a while. This was casino is a big hurdle for them. So if they can get the divest, as done that they need to get done, check the boxes, and put it away, it would be fantastic. Paid a lot of money for it.

Yeah. Paid a lot of money. Netflix reportedly plans to open brick and mortar retail destinations. They'll not only offer merchandise, but also food options and other Netflix-themed experiences. No word specifically just yet on what's going to be there. But the first locations are expected to launch in the U.S. in 2025. This seems so retro for the streamer to go into something that sounds.

It's not the theater business per se. Everything old is new again, right? But I was just waiting on this. I was waiting on a squid game, theme park, something. That show was so large, and I hear they will potentially have a squid game that you could play. So I see them diversifying a little bit. They take the Disney model or the Warner Brothers model and add in some... Stranger things, yeah.

Yeah. Dave and Busters slash Disney, it could work for them. I do think it's a natural fit. And look at how a strong Disney's parks business is. And speaking of which live events and all... that sort of thing. Taylor Swift's era's tour movie is kicking off with the bang, taking in $2.8 million in early previews

last night. It already made $100 million in advance ticket sales, and the projections are it could do another hundred over the weekend. Interesting wrinkle. She released the movie directly to AMC, bypassing distribution from Hollywood Studios, thanks to some, I think a Trump-era moves that allowed this to happen because it unwound the previous antitrust

from the 1920s. Anyway. Can we just all admit it's all Taylor Swift world? We're just living in it? I mean, it's the year of Taylor Swift, 100%. This helps the theaters, doesn't it? Like the AMCs. It helps AMC only, but it does help them. Yeah, it helps them along. Party, non-alcoholic. Let's just stick with Taylor. She was at the game last night. I didn't even know, oh my goodness. Non-alcoholic beer gaining a huge buzz in the U.S. thanks to better taste and a rise in sobriety and health priorities in younger Americans. Sales of non-alcoholic beers, they're up 32 percent. year over year and averaging 31% growth over the past four years, while sales of hard beer, celtars and ciders, have stagnated since their early pandemic surge.

What do you think here, Victoria? I mean, I do my best to help with beer sales, but I think a lot of it is just the focus on carbs and sugars has been tough. It's moved a lot of people to hard liquors, George Clooney's tequila. You know, everybody's kind of doing mixed drinks now and the mock tail and the growth of that. So I think there's always going to be a place for beer, but certainly the younger generation dose in a little bit. I haven't tried it yet. I don't get the appeal. Other than if I'm trying to blend in at a party, am I drinking it for the taint? I don't understand. By the way, it could be a pharmacy staff at

Walgreens and other chains walking out amid a rally in the coming week, so our labor unrest ain't over Victoria. Thanks for being here. We really appreciate it. Thanks for watching, Power Lund.