Power Lunch - Stocks tumble after strong jobs report dampens Fed rate-cutting outlook 1/10/25

Episode Date: January 10, 2025

Stocks are sinking after a hot jobs report dampened Wall Street’s expectations for more interest rate cuts from the Fed this year. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. And there are right now two big stories that we are all over. Number one, a big selloff in stocks. The Dow off its worst levels, but still down 500. Big Tech. And the NASDAQ down more than 1%. It all has to do with the Fed and rates. And we'll hit them both. Yes, we will. We're also continuing to track the latest on the California wildfires. 10 people killed at least. Crews working to fight four major fires. And markets are taking notice. Insurance stocks getting hit especially hard. More on this. that to come. And investors who had been banking on multiple rate cuts this year now have the surprising jobs report reducing those odds. So why did the Fed start cutting rates in the first place if the data didn't support it or if it's changed, then what should we do now? Let's discuss with Dryden Pence, the CEO of Pence Capital Management and Steve Leesman, our senior economics reporter, both of whom are with us on. You look like you're shaking hands before. And we will not talk about foot fungus on this show, Steve. That's it. I don't even want to know.

No, you don't. Maybe you can get us back into the lane of whether the Fed should have cut back in September or at the very least what they should do right now. Well, I think what we're going to find is that people that are banking on rate cuts are going to be sorely disappointed. And I think that it's basically going to be pushed out. If we get one this year, it gets pushed to the back of the year. But our view on it is this, we had a pause at $5.50 for a full year.

The world did not come to an end. we'll probably have a pause at $4.50, it could be up to a year. And the world's probably not going to come to an end. So we think in this market there's an overreaction right now. And I think that we basically spent, since 71, you've spent half your life with the Fed funds rate over 4%. And the economy's done fine. The markets have done fine. You know, 23, 24 were good and we're paused at 5.50.

So pausing at 4.50, so what? I feel like you're channeling your inner Steve Leesman. Because if I heard, oh, there, hi, Steve. If I heard Steve properly in the previous hour, your take is that this is a good number related to a good economy and a number maybe we should be happy about. Well, look, where you sit determines a lot about where you stand, right? If you're deeply invested in stocks going up at a very high multiple and that call is based upon future rate cuts, I think you're in a bad place. if you like to cover the economy and you like to see people employed, you like to see wages, and you believe that ultimately

earnings will be determined by the strength of the economy, which is determined by the number of people employed and how much they're spending, then, yeah, long-term, I'm chill on all that. This is the good news. It's good news. So we're back. I want to be clear on this. No, I've never been away from that. No, you haven't.

But let me ask you a question, Brian. Turn in the tables. Or maybe our esteemed gas here. What's worth more to you? 250,000 more people employed, a 4.1% unemployment rate, or 50 basis points of Fed rate cuts. I like people employed. I'll take the jobs. I'll take the spending.

And here's a preview. You're not going to get at any other show, which is just wait until our Monday retail monitor outlook with the NRF. Strong spending. I can't say. I'm saying just you wait. we've added Henry Higgins just to wait you got it thank you for picking up the My Fair Lady Rout you're very welcome we had we had 2.2 million people last year that's like the entire labor force of either Alabama or Oregon we've added you know six million

people since the pandemic that's the entire labor force of Illinois we've we've we've 159 million people okay so why did your fed cut rates in September why I think that's a decent question the August jobs report was bad remember there was a palpable sense guys you have my three-month average The carry trade blew up, remember in early August? The private sector employment was, had come down quite strongly. From 170,000 to back

then 110,000. One thing I did note this one when that number came out was how the jobs were in the private sector this time around. Government spending had picked up the man to government hiring had picked up the mantle for hiring in the economy. And that was, there was a case for worry. There was also a sense, Brian,

we set those rates at five and a half to deal with an inflation problem that was north of seven. inflation came down. You didn't need quite as much. The real question, I think, you might ask, is, did the Fed overdo it by a quarter? Does it have to put that quarter back? And now, I think we're right here in the sense that there's that three-month average chart. You can see there how much it had tanked at that time, which is exactly what Kelly Evans was talking about, those two dips in the middle.

Yeah, it made more sense then. And coincidentally, for whatever reason, the data started to turn around right after that cut. But they have, this is where Fed speak could have maybe said, kept up with that. Okay, yes, we see the stock market taking off. We see the bond yields arising. We see that the data is getting better. But I feel like we keep hearing the same thing from them since September, which is, no, we think, you know, rate, maybe a few more rate cuts are warranted.

Okay, well, it's. I think the 50, which I opposed at the time was maybe the mistake. Quarter, quarter, then you haven't, you know, you've got a lot. Because you said, would you rather have the jobs or the rates? And I think if your rates are locked in, you'd rather have the job. But I think for a lot of people that are that we're hoping that mortgage rates would come they don't care what the Fed funds rate is They care about what they're borrowed they want to buy a home so they care about the mortgage rate I think Right no one no one no one sits around the table goes right gosh darn federal I mean maybe we do

But we're the ones you know the federal reserve the Fed funds rate But the realtors at the time would talk to us and say well the Fed cut rates and mortgage rates are coming down That's right exact opposite because it makes sense the Fed cuts so I'm thinking rates are coming down and and and dried and to Fed cut, and all this happened is the market has rebelled, and I'm just in my little pea brain, just trying to figure out why. Well, the fundamental, I think the market is overreacting to this idea about cuts. Now, absolutely. At 475 or whatever we are.

Right, wherever we are. I mean, I think the point of matter is, is we're overreacting to the fact that you didn't get the cut. And so now they can wait. They had dry powder. They didn't have dry powder five years ago, right? We were in quantitative easing. So the Fed has the luxury of being able to wait so that they can kind of pause this out for a while and it's all right.

But we have to kind of put this forward. Does this change your view on the multiple you'll put on stocks if you don't get those rate cuts? I think it makes us feel like there's not that much multiple expansion left. What I'm going to pay attention to is earnings. I'm more interested in the bottom line than I am the headline. And so when we look at earnings growing by 10 or 11 percent next year, year, you say the multiple kind of stays the same, then you've got a positive market. I mean, it's not another 20% in a row, right? But it's still a positive market moving forward.

And it's all about our-grant. I said in the last hour, I thought that the market thought it's going to get his cake you needed to. You were going to get a positive, strong economy with maybe a boost from the incoming Trump administration, some of those policies, and you were going to get fed rate cuts. Well, guess what? One of the three things coming off the table that would appear. When do we start talking about rate hikes? People are already starting Bank of America In its note said hike might be the most likely next step now. The CME Fed Watch tool, see, I'm channeling my inner Steve Leasman. If I go to December, it only shows a 25% chance that rates are where they are now

and that we're likely to get a cut. Yeah, that's right. I don't see any pricing at all in this. I'm looking at right now the entire forward structure of the Fed Fund's futures curve. I don't see any pricing at all for a hike. I think we're away from that. I think, Kelly, the way the Fed would take that is it would let it run several more months of hot job numbers, accompanied by high wage numbers in which the job market showed itself to be a threat to the inflation numbers,

which it's not believed to be now, and then persistently higher inflation, especially in the service sector, that could turn the Fed around, but it would take several months of that date, I think. Yeah, indeed. Dryden. Thanks. Thank you. You're welcome. Thank you very much.

Thank you. Pence, Pence Capital Manager. You're welcome very much. All right. So as we just talked about, rising yields are a big part of the picture for the stock market. Maybe today they are the picture for the stock market. So let's get to Rick Santelli in Chicago for more on the bond market rates and sort of everything that we just talked about. Yeah, I don't know. It sounded like a lot of excuses what I was listening to at that last panel.

Listen, I think it's pretty simple. We could argue that there's a lot more growth in the economy that many would have expected. And obviously, that's probably showing up in rates and how it shows up in stocks can get confusing. But the other issue is sticky inflation. We could walk around it, talk around it, but the reality is the Fed really didn't have it under control in terms of what they believed was coming down the road. And that has cost them. The markets priced in part based on their guidance, which was incorrect. Now, there was a big thing going on today. Look at two. tens and thirties on one chart. And remember, pretty much, the big news had been long

maturity's leading rates higher. And if you take a weekly perspective, twos are up nine, tens are up 15, 30s are up 15 on the week. But on the day, twos are up 10, tens are up six, and 30s are only up two. And the reason this is important is because we have a bare market in treasuries, meaning price going down, yield going up. And yield curves are flat. which means that the short end has wrested control of the yield curve from the long-dated treasuries because of that exact discussion you were having. The markets are coming more in line with the data and the Fed can make any excuse it wants. Look at the data today. Not only we're jobs hot, look at University of Michigan sentiment. You look at the one year, it moved from 2-8 to 3.3 to 5 to 10 year,

from 3% to 3.3. These are important, and it doesn't get lost on many investors. Now, if you look at the yield curve for the week, you can see how it was steepening, steepening, steepening, and boom, today it changed. You really want to pay attention to the next several sessions of that dynamic, and it wasn't only in twos and tens. Other yield curves, like fives to 30s, had like a 10 basis point move.

That's a big move. And finally, the dollar index is definitely the good news embedded in this story because it is on fire hovering at the best level since the fall of 22. Kelly, back to you. All right, Rick, thank you very much. Rick Santelli. Coming up, we'll have more on the horrible fires in Los Angeles, what we know and what we don't know about the cause and who may pay for it all. Stay with us. Welcome back. We're all over the latest on what we know and still what we don't know about the deadly fires across Los Angeles. The death toll rising to 10 people. Thousands of structures have been destroyed. And given the value of the real estate,

these are likely the most expensive fires in California, if anywhere, history. And there is a huge issue of who is going to pay to rebuild the horrific damage. And this being CNBC, we'll get to that angle in moments. But right now, we need to go out west where brave firefighters, pilots, and many other first responders are still working around the clock to try to battle these blazes, NBC's Ellison Barber. Joining us now from Altadena, California. Hey, Brian, I mean, we were just standing here. You see this truck that's heading this way. They were just parked here. There's some water still left on the ground. That's because they'd come down from being up the hill in the mountain, fighting the fires to get topped off by a water tanker so they can go back up and continue trying to work on putting out this fire.

What we are closest to right now is the Eaton fire. That is one of two of the biggest fires that are currently active in this area. There are at least five fires that are active in L.A. County, the biggest ones being the Palisades Fire and the Eton Fire. fire. Palisades fire now at 8% contained, according to fire officials. This fire eaten fire only at 3% contained right now. These firefighters like this grew right here, you could smell as soon as they got out of the truck, the soot, the ash on them, their jackets just covered in what is from their time spent up there firefighting. When you look around here and come and we can walk a little this way, you get a sense of the destruction, all of the rebuilding that will need to

happen. And as soon as you walk into this neighborhood, the question that so many people have, despite those insurance questions that you brought up to, is just where do you even begin? Even if everything was going to be perfect on insurance post-response, there is so much. Just look over here and just do a pan. And you see how far the damage goes, that the amount of the need here, it's hard to wrap your head around how the demand could be met, even if everything was lining up perfectly to get people the resources they need. But what we keep hearing from people who live in this community, who live in this state, is that they feel like the resources are not there.

Many people tell stories about how they know neighbors or they themselves are not, don't have insurance, fire insurance anymore. Someone, man, we spoke to earlier this morning, said he's lucky he bought his house here 25 years ago. And he has insurance. But he said, I know most of my neighbors don't. And the question of where do they go from here, many people are still just trying to get into this area to get eyes on their homes or what remains of it and realizing very quickly that there's not much left. In this area alone, from this fire alone, fire officials say they believe somewhere between four and five thousand structures have

been either destroyed or damaged, but they're still working on getting a damage assessment. The cause of this fire, the eaten fire, still unknown. But again, right now it's only at 3% contained. And today, the winds have died down. But as they head into the weekend and early next week, it's expected to pick back up again. And the question is, can they hold those containment lives moving forward. We've seen so many firefighters here working, going in, going out, trying to keep it where it's at and get it under more control. But the weather makes that increasingly difficult and the bit of relief they have this afternoon from everything forecasters are saying that is going to be temporary. Brian? Ellison Barber. Thank you very much. All right. Speaking of the

damage estimates do continue to climb. Acque weather now has triple the high end of its estimate of the economic toll of wildfires to as much as $150 billion in economic losses. That's even near correct. It'll likely be the costiest wildfire event that insurers have ever faced anywhere in the world at any time. Because of that, insurance stocks are getting hit as Wall Street analysts are pegging their losses at $20 billion or even more. That includes our next guest as well. For more, we're joined by Elise Greenspan. She covers the insurance sector at Wells Fargo.

Also here is Contessa Brew. who covers the insurance sector for us. At least first to you, it's impossible to put a toll, a number on these now. It seems cold, but we have to do it. We're C&BC. What do we know about the possible liability of insurers right now? Yeah, and thank you for having me.

Before I get started, obviously, this is, you know, very devastating for those, you know, in California. In terms of, you know, the insurance industry, this is what, you know, the insurance industry is there for, right? they, you know, to, you know, settle and pay these claims. In terms of, you know, our estimates, you know, we've said this will be, you know, a $20 billion plus loss, you know, as you were just talking, right, there's about, you know, 10,000 structures that have been damaged. You know, property values out there, you know, kind of on average around $3 million. If you do the math just with those two numbers, right, you can go from something that's $20 billion to perhaps something that's $30 billion of losses for the insurance insurance insurance.

And I want to be very clear and careful here, Contessa, I don't know. I think you're heading out there. We don't have any idea how these fires started. That's critical. We don't know where the blame may or may not be. The insurance companies are there to try to pick up the pieces and to help rebuild. What can you tell us about potential liability, given that a lot of homeowners lost coverage this year? And there's also a lot of changes lately to California laws that have altered the insurance landscape out there. So just today we heard Commissioner Lara, the insurance commissioner, Ricardo Lara, speaking out about insurance and saying there's a moratorium for the insurers. They are not allowed to cancel policies for one year. They're not allowed if a policy comes due to say, sorry, we're not renewing you.

That's what we saw in large force last year with state farm, with all state, with farmers and others who said either they're not going to accept new policies in the state or they were going to start reducing their exposure. So in Pacific Palisades, for instance, you saw a lot of people lose their state farm policies. What did they do? They went to the Fair Plan. It's California's insurer of last resort. Fair Plan has $6 billion of exposure in Pacific Palisades alone. Guess what? They are not getting that, my sources say, in premiums.

What happens if they run out of money? And last year, the head of Fair Plan went in front of the California State Assembly and said, look, we're in danger of imploding here. Our exposure in the state is exponentially higher than what our resources are to pay out claims. What happens? Every insurer that has operated in the state for two years will be assessed according to their market share. So even though, say, Allstate has tried to reduce, if they've tried to reduce down their exposure to these wildfire areas, they could still find themselves on the hook for hundreds of millions, potentially billions of dollars.

if the fair plan goes belly up. So then at least if I'm them, I go, well, why bother operating in this state if I'm going to face that kind of risk? Well, you know, in terms of insurance companies, I mean, that's what they're around for, right? They're willing to... They're around to make money. They're around to make money. They're not required to you. But they're also taking on risk if they could get adequately compensated for taking on that risk.

And I think what you're going to see, you've seen some, you know, structural changes in the state of California. Pretty recently insurers were, you know, allowed to pass through higher reinsurance costs. that, you know, legislation, you know, happened in December. Previously, they could not. That was different than other states in the country. But there are changes that they're planned, but they're not in effect just yet. They have now been allowed to use computer modeling. They were forbidden from even using computer models to look at where the risk was going to happen.

They could only use what's happened in the last five years. If they can now use computer models, and to your point at least, if they can now pass through 20 or 30 percent premium hikes that they previously couldn't do, is that enough to keep them in the stage? I mean, look, I think that makes the market more attractive. And obviously, the level of required rate will depend on insurers, right? It's a regulated system. There's rate filings that need to go into effect. But I think if insurers can get compensated to take on the risk, you know, they are willing to take on the risk if the price is there.

And we're not defending in any way the insurance companies. Believe me, we've been tough on them. And we have a documentary. I did a documentary on utilities and wildfires utilities. and insurance risk. About a year ago, it's up. I posted it to social. But how much might the state of California lease be to blame

only in a sense that regulators did not allow not only a lot of price increases to go through, price increases that were needed to do things that cut underbrush, it was dangerous, but also, and this is hard to believe. We've been talking about climate change for decades, and I understand that only like a month ago, where climate-related risks allowed to be priced into policies?

That's not coming from these insurance. That's coming from Sacramento and state leaders. Yeah, I mean, look, you know, each state is... I know you got to be kind of... Each state is kind of different, you know, when they look to make certain changes. And obviously, you know, the insurance industry responds to that, right? That's part of the reason why these companies, you know,

have pulled back from the state of California. But, you know, talking about changes, that have gone on in the market, the fact that there will be a big loss, whether it's 20, $30 billion or more for the insurance industry, when that's what, you know, leads to better pricing losses is what perpetuates a pricing cycle for insurance companies. And they will be, you know, there to, you know, settle claims. And on the flip side, if they can get compensated, to also write policies out of this. The interesting thing is you look at Chubb and Evan Greenberg, the CEO of Chubb, has been saying for years, hey, we're not going to go in. We're not going

to operate where we can't get the rate to cover our risks. So they, operate a lot in the excess and surplus lines. This is for high net worth individuals that operates outside the regulated system where they can charge what they want. And you can either buy a policy or not. I'm curious, what do you think is going to happen to Chubb, to AIG and other companies that went into this excess and surplus lines. And now what we're seeing is those high net worth individuals are the ones who are the victims of this Palisades fire, for instance. Yeah. I mean, and look, one aspect that we didn't get into the conversation on, right is there's also a reinsurance element to this, right? The Chubs and the AIGs of the world,

they are buying reinsurance, right? So they are shedding some of their risk as well, right? So, you know, for business that was underwritten, whether it was in the standard or the excess and surplus lines market, right? You know, these companies will be there to settle claims, right? You mentioned, you mentioned Chubb, you know, AIG, there are some, you know, other insurers, you know, Pure, which is private, Cincinnati Financial, that have made bigger plays in the high net worth, right? So it's just like it sounds, right? There's going to be high property values there. And yes, wherever it was written, these companies will be there, you know, to settle the claims over the upcoming, you know, weeks.

And we've got to go. But if you have a mortgage, they force you to have it by law. So if you owe money to a bank, you must have insurance by law. And yet we're still fine. It's so broken. It's so bizarre. Not just in California. I mean, that's happening in lots of states, but anyway.

This illustrates the problem. It does illustrate the problem. And it's just, if it's an industry that you're forced by law to have, by law, you got to have it. Then they should fix it. Yeah, fix it how. Yeah, Elise, thanks. Contessa, thanks, Elise Greenspan, Contessa Brewer. Another stock we're watching relevant to this is Edison International.

The power utility in the Los Angeles area is down 18% this week. Previously, utilities have been held accountable for certain wildfires. No evidence linking Edison to this one. Shares are down 6% today as investors continue to try to sort through the risks. Ahead on Power Lunch, a blockbuster power deal, the TikTok on TikTok, and a streaming 180. The details on three key stories after this. All right, welcome back. We have got a Blockbuster Energy deal to tell you about.

Baltimore-based Constellation Energy buying Calpine for $16.5 billion in cash in stock. It is the biggest deal in American Power History and CalC constellation CEO weighing in on that deal earlier on CNBC. We wanted to create the kinds of capabilities and put them together that will power the U.S. economy at a very special time where we're seeing significant growth, not only in the data economy, but really across the board in a lot of different regions. So we like to follow where our customers need us, and that's what we think we've done here. Also in energy today, Kelly, crude oil is higher. In fact, crude oil is up. What is that? Called three bucks.

Just under three bucks. The U.S. imposing new sanctions on Russia today. And this time, Kelly, unlike the last sanctions, the market believes that these sanctions may actually be enforced. As we have reported two years ago, Russia bought a bunch of, we call them the Ghost Fleet, bought a bunch of really old crappy super tankers so they could sell oil around sanctions around the world,

and they have been doing that successfully. Keep an eye on WTI. See if that translates to any more inflationary pressures for the consumer. Constellation is also not the only deal news today. We've been getting more and more out in recent days. Now we have reports that drug maker Eli Lilly is at advanced talked by a cancer-focused biotech scorpion therapeutics. And a deal worth up to $2.5 billion, Eli shares about 1% on that. But there have been a number of big deal announcements and bids this week.

Getty images buying shutter stock for $3.7 billion. When resorts, buying a small members-only casino, Crown London, sent us making a $5 billion takeover bid to acquire a uniform rental firm. universe, Brian. So the, we're not going to call them huge yet, but you're getting this feeling that this is coming ahead of the incoming Trump administration and could kick off yet more deals, maybe even bigger ones. Today's a really big one in the weeks to come. So what does that tell the, what do we call it Kelly sense, Evan sense? What does that tell your deal, Spider sense? That more is coming. That's what I think until you see any kind of pushback from the new Trump

administration, maybe from whether it's, you know, one of their new regulatory chairs, If this appears to be, you know, green lights, full steam head, I think they're going to see a lot more to come. I like it. We've got to come up with a name for that. Kelly said some alarm, a siren thing. Anyway, all right, on deck. Is buying Greenland really as crazy as it sounds? Is it even possible? What about buying Canada? That story. Next. All right, welcome back. Well, Trump being Trump, has suggested taking control of the Panama Canal. Maybe Greenland maybe even Canada, all in the name of national security. But why exactly? And how does it benefit you, the American taxpayer? Could this even happen?

We're going to talk about all this. Let's start with maybe Trump's vision. If you're on the radio, I'm doing air quotes for Canada. Megan Casella has more. Hey, Brian. So Trump's gripes with Canada Center on four things. It's the trade deficit, immigration, fentanyl, and defense spending. So here's what we know about each of those.

on trade for the first 11 months of 2024, about $700 billion worth of goods exchanged during that time. Canada sells us more in goods. We sell them more in services. So overall, it's a trade deficit of about $55 billion. That's only the ninth largest of all of the U.S.'s bilateral trade deficits. Most of what we buy from Canada is energy. More than 60% of U.S. crude oil imports come from Canada. It's also a lot of cars and car parts, consumer goods and metal as well, crossing that border. On fentanyl, Customs and Border Patrol seized 40 pounds of fentanyl from the northern border in the first nine months of 2024. For comparison, they seized more than 16,000 pounds from the south.

As for attempted illegal immigration, it is up just a little bit. CBP had nearly 200,000 encounters on the northern border in the last fiscal year. But again, for comparison, on the southern border, that number is about 2 million encounters. And then finally, we can't exactly break down. on our defense spending by how much specifically benefits Canada. But what we can say is that NATO recommends countries spend 2% of their GDP on defense. The U.S. spends 3.4% while Canada spends just about 1.4%. So that is one area we often hear Trump calling for more spending.

Guys. Megan, thanks. And Greenland, a little discussed island previously. It's self-governing. It's home to a U.S. military base. Why is it so important to the president-elect? Pippa Stevens is looking for that answer. Pippa? Hey Kelly, well, President-elect Trump is eyeing Greenland for three key reasons.

Rich mineral resources, access to global shipping routes, and its strategic location in the Arctic, which is especially important as tensions with Russia and China flare. Greenland has 25 of the 34 minerals deemed critical by the European Commission, including lithium and graphite, which are key for both EV batteries and cell phones. It also has rare earth reserves, which are crucial for wind turbines, military equipment, and computer chips. China currently dominates that market. Arctic ice is melting, meaning that shipping routes around Greenland are becoming more accessible, significantly cutting transit times and costs. Two key routes are on either side of Greenland, the Northwest Passage and the Trans-Arctic Route.

Finally, location. The U.S. has had a base in Greenland since the 40s, and with Russia and China increasing operations in the area, ongoing U.S. access is key. Brian? Pippa, you're just in northern Canada. I mean, do we have a trip to Greenland plan? Are you going to Nook? Yeah, well, TBD. TBD? Somebody 757 just landed there. Pippa Stevens.

Great stuff. Thank you. All right. Finally, Donald Trump says he is tired. Panama charging what he views his exorbitant shipping rates to use. The Panama Canal, Lori Ann La Rocco, is here and how to explain what this might mean for arguably the most important waterway in the world. It most definitely is. Brian. So as you pointed out, President Trump recently complained that the canal's too expensive and actually threatened to regain control.

The U.S. is the top user of the canal with three quarters of imports and exports going through that waterway. Now, new rates were implemented on January 1st. The rates are based on ship size and the type of vessel. A regular vessel pays around $12,000 now. That's up from $10,500 from last year. The super vessels are being charged now $50,000 of transit. That's up from $41,000 from last year. Now, the largest ships, they have to pay $100,000 to cross. Last year was $80,000. Now, the Panama Canal Authority is in charge of setting these rates.

Last year, even with the drought and fewer crossings, canal revenue hit $3.38 billion, and it's gone up every year since 2017. Brian? Every year since 2017, maybe we need a trip through the Panama Canal. Great. Where are we go with this Joker's Wild? We've got three choices. Indeed.

Kelly, where are you headed? I think, Megan, let's go back to Canada for a second because I don't think anyone's talking about purchasing it outright like they are with Greenland. But do you think this comes down to natural resources? That could be part of it. I really think that a lot of this is bluster and sort of trying to exert influence and belittling Canadian outgoing Prime Minister

Justin Trudeau and his liberal government as well. It's much more about tariffs with Canada, I would say, too, than it is about a land grab, even though, of course, we're hearing about it becoming the 51st state. I do have some reporting showing that the Trump team has reportedly told the Canadian government, this is according to Canadian sources, that they're not actually all that interested in putting tariffs on Canada and likely not all that interested in trying to purchase Canada either, but that it is bluster and they want something from them. So that's where we're seeing a divide internally. In Canada now is how do you respond to? that. Justin Trudeau has come out a little bit forcefully and saying, I think his quote was,

there's not a snowball's chance in hell that Canada would actually rejoin the U.S. but they do have a lot of leverage here because of especially that energy and oil relationship being the biggest piece of it, a lot of leverage to hold over the U.S. if they did decide to sort of put tariffs on it or maybe try to purchase Canada. Pippa, listen, I know people want to, listen, we talk about buying Greenland, eyes roll, there's been a lot of mockery, but I want to be clear. In 1946, the United States made an offer to buy Greenland. In 1917, we bought our now beautiful Virgin Islands from, oh my gosh, Denmark, of all places, which is the current sort of, what's the right term boss of Greenland?

They won't like that, but what's the right term? What do we call Denmark vis-a-vis Greenland, Pippa? Well, there's still the controlling party, yeah, there. and Greenland is a territory that's semi-autonomous. But to your point, Brian, that offer back in the 40s for $100 million in gold was rejected. And it's important to note here that the Prime Minister of Greenland has said that Greenland is most definitely not for sale. But earlier today in a press conference, he said he had not spoken to Donald Trump, but that he is open to more discussions with the U.S.

And of course, the country is right now pushing for full autonomy. They could hold a referendum coming up in April when they have those elections. And when they look at their natural resources in all these countries that are now interested, it's not just the U.S. China also interested there, they could use that potentially to their advantage as they look for maybe some foreign capital coming in. So it does seem like while purchasing outright is off the table, there could be some room here for further negotiations and cooperation. And real quickly, Lorraine and the Panama Canal, the leader, the operator of it,

told the Wall Street Journal that there was no disfavorable treatment towards the U.S. or anything like that going on. Is that true that there's no, you know, the cost might have gone up, but there's equitable, whether it's America or other nations, and perhaps Trump is looking for a better deal. Exactly. You can't negotiate these rates. Everybody is paying these rates. As I indicated, you know, it's based on what's being moved. And also there's a neutrality clause, actually, two of them within the agreement between the U.S. and Panama when it came over to handing over the canal. So there's no treatment or mistreatment being used. Perhaps he wants non-neutrality and preferential treatment. For now, thank you all. Appreciate it. Lori and Loraco, Pippa Stevens, Megan Cassella.

Over to Sima Modi now for the CNBC News Update, Sima. Kelly, we are looking at four passengers hurt when a Delta Airlines flight aborted takeoff at the Atlanta airport this morning. Artsfield Jackson officials say the passengers exited the plane using emergency inflatable slides. The incident slowed down operations even more at the world's busiest airport. where already hundreds of flights have been canceled, hundreds more delayed, as Metro Atlanta is hit by a snowstorm. Venezuelan president, Nicholas Maduro, sworn in today despite credible evidence that he lost the country's election in July. Detailed tally is confirming his victory has never been published. The U.S. imposed new sanctions today on eight Venezuelan officials and increased a reward for Maduro's arrest to $25 million.

And a new federal proposal could give video game curses. currencies, similar protections to bank accounts. The Consumer Protection Financial Bureau says Americans spend billions of dollars within these games each year and many deal with hacks, theft, scams, and loss of assets. A potential rule could hold video game companies accountable for financial issues. Public comment on this topic will be open until March 31st. Kelly? Seema, thank you very much, Sima Modi. The fate of TikTok in the U.S. is hanging in the balance as the Supreme Court hears oral arguments and the government's case to ban We'll get a live report from Washington and look at the potential fallout next week.

That's next. The Supreme Court today heard arguments on a TikTok ban with the deadline looming next week. Amon Javers has been listening to the proceedings and he joins us with more. The market, Amon, is taking this as an outright ban is looking likely. Yeah, Kelly, I just think there's an element of uncertainty here that the market should look at. Look, we got no decision on the fate of TikTok today from the Supreme Court. This is just now nine days before a legally mandated. deadline for Chinese company bite dance to divest itself of the popular social media app.

The justices heard arguments today from attorneys for TikTok, a group of TikTok creators, and also the Biden administration, which is seeking to uphold the existing law. TikTok argued that the Supreme Court should delay implementation of the law, which takes effect just one day before President-elect Trump will take the oath of office on January 20th. Trump, who once supported a TikTok ban, now he opposes it, and he's asked the court to delay. the deadline so he can work out a political deal once he's sworn in. The arguments today centered on who's protected by the Constitution's guarantee of freedom of speech, not bite dance, which is a Chinese company, but maybe TikTok U.S., the American subsidiary. TikTok also

argued that American content creators have a right to express themselves that would be impacted by a TikTok shutdown. The attorney said the app could be forced to go dark on January 19th if the law is up. upheld, but that a Trump administration coming in the next day would bring in what they described as a potential new world. So the court didn't give a deadline for making its final ruling here. A decision could certainly come next week, Kelly. But again, some of the media explanations of this today have said the court seems to be leaning toward upholding the existing law.

We'll see if that's the case because of this weird political and timing overlay with the incoming Trump administration. Guys, back over to you. And, Amon, I heard you earlier with Carl and David. It's not real clear. I don't think. Let's say the Supreme Court says, okay, we agree, and we want to quote, I'm doing air quote, shut down TikTok.

You were talking a lot about the app and updates. Is it possible? It just disappears from your phone. New versions go away. What would happen if the court sides against TikTok? Yeah, that's a little bit unclear. And the court was trying to get to that question with TikTok's attorneys today. The way TikTok's attorney has described it is, you know, we'll simply go dark on January 19th if this is the case.

You know, clearly it might be the case that you won't be able to get TikTok in the app store. It might be the case that TikTok might not be able to update the algorithm with bite dance in China. TikTok U.S. may be able to continue to operate for some period of time. But the question is, how long is that period of time? What are the real technical back-end pieces of that? And what would TikTok look like on day one, day two, day three after that forced divestiture deadline comes through on January 19th? So it's a little bit of a gray area. TikTok is saying basically this means we go dark.

You know that decision is going to come down one minute after the show ends. I mean, you know exactly. It's going to be 301 Eastern. I'll say goodbye. Have a great weekend. Amen. Amen will tweet weekend. And then we'll get the Supreme Court decision.

That's what's going to happen. And all the rivals are going to be up 20%. And how will I know it if TikTok is shut down? Amen, thank you. All right, coming up, this fine program is a segment called Three Stock Lunch. And I guess appropriate, Kelly, we'll talk about it and trade a booze maker. Constellation brands. Let's do a little three-stock lunch.

David Wagner is here today. He's an analyst and portfolio manager at Aptus Capital Advisors. David, trade three stocks in the news. We'll start with Constellation Brands. It is down big after lowering its full year price. It's taking down the whole alcohol space. They have weakening demand for brands like Modelo and Corona. Modelo and Corona were supposed to be the big winners from the Bud Light fiasco.

What do you do with the stock? Yeah, Kelly, I actually do like Constellation brands right now, even after the performance today. But it's definitely a little bit more of a nuanced story because there's kind of a perfect storm of peak worry going on right now. First, you have the worry of tariffs as a company imports all of its beer from Mexico. And then secondly, the Marx is really trying to decipher whether or not the weakness is due to consumer. or if this is more of a permanent shift away from alcohol consumption due to GLP ones and or cannabis.

But it feels like investors, you know, they know that there's potential for a lot of upside here right now, given current valuations. But it feels like they're trying to wait out the storm and willing to lose out a little on upside momentum until there's more bullish commentary in the news, say, on the tariffs themselves. Okay. Which is a playbook. I definitely understand and respect as investors are seeking alpha through risk mitigation.

Okay. We're going to boogie through, sorry, we're going to boogie through the next two. Walgreens. David, help me out of 26%. It's like the best day ever for Walgreens boots. I've never seen anything like it. Now that it's out of the Dow. Yeah, yeah, so when it comes to Walgreens, it's just not time yet.

It feels like it's more of a peer victory for many investors who've really tried to call the bottom on this stock for a very long time, given its blue chip nature. But, you know, I'm not interested in owning a struggling retail and pharmacy business, combined with a third leg of the business of the stool that has had a really late. start to the party on the services side with horrible execution on its strategy. All right. You're not picking up this bounce, I guess we'll say. What about United Airlines? They hit a 52-week high after JPMorgan raised the price target to 198 from 133. Yeah, what can I say here? I really like United right now. But I guess that many investors are a little

skeptical right now after the incredible rally that we've seen in this name since August. But between Delta and United, I do think that this rally in these names are very much warranted. First, I I love the move of segmentation for these names. This move is really eaten into the competitive mode of these low-cost airliners. And then you have United Margins, their profile level. At this point of the cycle, it's never been at this relative, you know, discrepancy versus these low-cost carriers. So the segmentation that's going on right now, you know, it really feels like it's more

of a structural shift. And then you have these better earnings powers, it's an ability that is given a lot of optionality on the balance sheet. So I like the name right now. Sticking with it. David, thanks. Good to see you today. David Wagner.

And finally today, a huge story in media that's being trumped, I guess, by other stories. Alex Sherman joining us now. Fox, Disney, and Warner Brothers were supposed to have this huge new sports venture. It's now off. Yeah, you know, this has gone through quite the evolution. It looked as though this was going to be a huge announcement from these companies. Then this little company called Fubo, which is a sports streaming service, sued venue. and there was a temporary injunction,

and it looked like venue was not going to launch, or at least was on pause for a little while. Correct, yes, exactly. And then we found out on Monday that Fubo and Hulu with live TV, owned by Disney, are merging, and this lawsuit was going away. And it seemed like that was the pathway for venue to launch again. And I spoke to people that worked for venue,

and they were overjoyed, because it looked like this sports streaming service was finally going to launch, and maybe very soon. And then we get the news today that it's off completely. And I think what happened over the past 48 hours is that DirecTV and DISH jumped in and said, wait a second, that lawsuit

that you just dismissed with this merger acquisition, don't shelve it. There were some really interesting legal questions that were brought up about the bundling of cable services that we want a judge to investigate. So both of those companies filed letters with the court saying, no, no, no, we're interested in you pursuing this.

That may have been the catalyst for Disney and the other companies to say, you know what, it's just not worth it. Because Laura Martin last hour hypothesized that this was also about Disney, just giving up on kind of the linear-ish streaming model to do pure streaming, and that Fubo might ultimately be, in some ways, a way to kind of put its linear stuff in one app. Yeah, I think the whole world is headed in that direction. The interesting thing there with the bundling aspect is that Disney bundles its streaming system. services. It bundles ESPN and Hulu and Disney Plus. So if bundling was now going to be put in front of the court as potentially illegal, that would even affect Disney's streaming plans. What does this quickly? What does this mean to watching TV? I think the Saturday Night game is on

Amazon Prime or something. To watch NFL or college playoffs, you've got to have everything now. Well, right. That was a flaw in the venue strategy to begin with, which had only had about 60% or so of the sports. So you need to buy venue and Peacock and Paramount Plus and Netflix and Amazon. And by the time you threw it and Alex Sherman and Brian Sullivan. Yes. By the time you threw it all together, you were paying the price for cable. Anyways, that is a consistent flaw that has not been remedied yet. And it's why so many pundits say we're just headed back to something that looks like cable except that will be in streaming form. And here we are. More confusing than the Canada story. Hope everyone enjoyed the ride from 1.0 to 2.

Alex Sherman, thank you. Thank you. Thank you. Crazy tournament. Thanks for watching Power Lunch. Closing bell starts right now.