Power Lunch - Streaming Battle for Live Sports, The Bull Case for Walmart & Is the Market Fairly Valued? 2/20/24

Episode Date: February 20, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Launch, everybody, alongside, well, alongside Tyler Matheson. I'm Tyler Matheson. Stocks sliding throughout the day with the NASDAQ really leading the way lower. InVIDIA, lower by 5% ahead of its earnings later this week. Expectations sky high. Can it live up to the hype or would a little slip twixt cup and lip bring that one tumbling down? We've got some news moving individual stocks today, starting with the biggest deal ever in the credit card space. Capital One agreeing to buy Discover.

$35 billion is the price tag there. The latest on government spending is part of the Chips Act. Global Foundry is getting $1.5 billion Intel expected to get a lot more than that. And retail earnings, Walmart rising on its results, a dividend hike and a big deal in the process there. Home Depot is slightly lower as it struggles to grow. We've got our team of reporters on all of these big stories. Kate Rooney on that credit card deal that broke over the weekend. Megan Casella in Washington on CHIP's funding and Melissa Repco here to break down Walmart's report.

But let's begin with Kate Rooney in San Francisco. Kate? Hey there, Tyler. Yeah, so this $35 billion deal is merging two of the biggest players in the credit card space. On one side of this Capital One Discover deal, it's all about scale and efficiency. So Capital One executive saying they plan to add more than 25 million cardholders, more than $175 billion in purchase volume. It's in the next three years or so. And then $1.3 billion in cost savings as well. Then you got the credit card dynamic of this deal. So like many banks, Discover issues its own cards.

But it's also got this card network, which has been an underdog in the past few years. It's fourth place behind Visa, MasterCard, and American Express. The biggest Discover has struggled historically with getting other banks to run on its rails. Capital One now saying that it's going to move some of its credit card volume over to Discover to help grow that network. The CEO of Capital One calling the dynamic of a card issue. were having its own network, he called it the Holy Grail. So American Express is one really successful example of that, and it often means more pricing power. Executives did say that they would keep partnering with Visa and MasterCard, but it is seen as a threat. It has been weighing on shares

of MasterCard and Visa today. Mizuho estimates Capitol 1 accounts for about 10% of U.S. credit volumes and says the Capital One steering volumes over to discover could help it save on network fees. Executives touted this as a way to really increase competition, but Senator Elizabeth Warren Just chiming in on X, formerly Twitter, saying that it reduces competition, and, quote, regulators should block it immediately. Tyler, back to you. On what grounds would it reduce competition? Tease that one out for me, Kate.

Yeah, so the companies have argued the opposite, that Visa and MasterCard are the biggest players and that you need a company with scale to be able to go and compete. Elizabeth Warren here arguing that this is just another big player coming in and that it could add cost to the consumer and that they may be able to raise prices here. part of the efficiency that you talk about, and the pricing power is not always a good thing for the consumers, so we'll have to see. But Capital One and Discover would argue that, hey,

if you're going to have anybody compete with Visa and MasterCard, it might as well be us. It's hard to have, you know, a startup come in and get to the scale to compete with Visa and MasterCard. There's a couple things in Congress going on. The Durbin Amendment is one that's really been, they've been trying to get going to say that there needs to be other options for banks. But any bank is going to be able to use, you know, a startup card network. need someone like a discover to come in. So that has been really what they're leaning on. But with these bank mergers, Tyler, too, you've got so many agencies that this needs to pass muster with. So even if it's, you know, Congress that's pushing back on this, they've also got

to deal with the OCC. There's the FTC that could get into this. So it's got a lot of regulatory agencies. I would also watch the 2024 election coming up as, you know, potential game changer for some of these antitrust issues and potentially different administration. Who knows? We'll see, but that could have a big effect on big deals like this and what happens on the antitrust side. All right. Thanks. Kate Rooney. Appreciate it. Let's get to Washington now as the federal government is doling out billions to improve chip manufacturing capabilities here in the U.S. and billions more could be on the way. Our Megan Kisela is in Washington with the details. Hi, Megan. Hey, Tyler. So this is the first major award being announced under the Chips Act.

Biden administration officials are making $1.6 billion in loans available to global foundries. In addition to that $1.5 billion award. They estimate that could spark $12.5 billion in private investment as well. Overall, the funding should create 10,000 jobs, and they say it should triple the company's production capacity of what are known as legacy chips. Now, these legacy chips are really considered the cornerstone of modern electronics. They're in fridges and smartphones, but they're also in satellites and the defense system. The shortage of these chips was also at the root of those supply chain struggles that we saw during the pandemic. Global foundries will be supplied those chips to General Motors, the two companies have a partnership. And in the past,

it's also provided chips to Lockheed Martin and the U.S. military as well. Given their broad use, Commerce Secretary Gina Ramondo says this funding sends, quote, a clear signal that the U.S. is serious about bolstering economic and national security. Now, Tyler, what this award won't do is boost production of those advanced chips, the highly sophisticated technology that's used to power AI, for example. But industry officials expect that we will be seeing much larger awards being doled out to much larger companies, think Intel and Samsung, to produce those chips in the coming weeks. Tyler? So those would be the big downstream awards or contracts that would be given to the likes of Intel and others that would be the AI chips? Absolutely. We do expect to start seeing

some of those announcements in the next four to six weeks. And just for a little bit of perspective here, this is a $1.5 billion award. It's not nothing, but we're thinking, you know, from talking to industry officials and doing reporting on this, that we could see awards more in the $10 billion range for companies like Intel and Samsung. They've pledged to, you know, also invest privately much more than global foundries can do something in the $100 billion range. So many more jobs created much more production capacity there. So a factor of 10, basically, there, $10 billion, I heard you say, are these loans or

these outright grants or straight funding, I guess is how I'd call it? That's an important question. It's actually a combination. So the loans will be a big piece of it to supply, to support those awards. And it will depend, it seems like, on what the overall private investment is going to be, too. They're not going to get all this funding up front. This is just one step. They have to really jump through a lot of hurdles in order to get the money.

And they have to reach milestones. It'll be doled out as they reach specific milestones as well. Megan Kinsella, thanks very much, reporting from Washington. And over in the retail space meantime, Walmart reporting a strong beat and announcing a deal to buy the TV maker Vizio, both headlines sending the stock of Walmart to record highs. Melissa Repco has more all-time high for Walmart here. Melissa. Yes, so Walmart's fiscal fourth quarter results beat on the top and bottom line, thanks to shoppers turning to its stores and its website during the holiday season. Globally commerce sales jumped 23% year-over-year, topping $100 billion. In the U.S., online sales

rose 17% this fiscal year, or this fiscal year ahead. Walmart expects consolidated net sales to climb 3 to 4%. It expects adjust to $1%. It expects adjustment. earnings will range between $6.70 to $7.12 per share on a pre-stock split basis. Walmart announced a three-for-one stock split in late January. CFO John David Rainey told me customers are still discerning when it comes to purchases. He said they're shopping more with Walmart, but buying fewer items when they do. Yet he emphasized on an investor call that Walmart isn't just selling cereal in socks. It's also making money from newer and higher margin areas like selling ads.

Walmart is an advertising company to compete with the likes of Google or? Yes, or in Amazon. It's major competitor in the retail world as well. And that's exactly why it's buying Vizio. It wants to have more reach. It wants to be where people are watching TV. And it wants to have more data to understand that if it's advertising for one of the brands that's selling that ad to, that it can track, are people then going to its stores or going

somewhere else and actually buying the item? Vizio is what? Is it American-made? company? It's a company that makes these smart TVs. It competes with Broku, which actually is seeing it shares down today, because it's a TV where you can watch things like Hulu or Netflix. Streaming TVs. Exactly. Connected TVs. I can mirror my phone onto the TV. And they sell not just in Walmart. They sell across the board. Exactly. They sell across the board, but this would give a lot more visibility for Walmart as it's selling its ads and reach about 18 million people that Walmart says uses the

platform that Vizio uses for connected TV. Fantastic. Melissa, thanks. Appreciate it. All right, coming up, those Walmart results, exciting investors, but is that retailer the best in Big Box? Target's been on the rise over the past month, though underperforming Walmart in the longer run. We'll have a bullfight next and further ahead. High-stakes streaming, the partnerships between Fox Disney and Warner Brothers Discovery come

with a host of rewards for all free parties, but some of the risks could hit some harder than others. That's in today's tech check. We'll be right back. On Power Lunch, everybody. Time now for our bull fight. Walmart versus Target. In one corner, we have Walmart, the company beating Wall Street expectations.

It stood up to high inflation better than many retailers, as you may know. And in the other corner, Target. The stock up about 8% over the past month. Still, though, underperforming Walmart over the past year. So which should you own in your portfolio now? Joining us now to make the case for Walmart is Greg Mellich, equity analyst with Evercore ISI. He lists Walmart as one of his top five picks.

And to make the case for Target is Chuck Grom, an equity analyst with Gordon Hasket. He just upgraded Target a couple of weeks ago and highlights it as one of his top ideas for the year. Mr. Grom, welcome. Good to have you with us. It's not that you don't like Walmart. It's just that you like Target a little better.

And if I'm reading my notes, right, see an implied return of about 12% in that stock. What is it about Walmart? What is it that you like about Walmart? Well, I like both of them, actually. So first of all, Greg, please take it easy on me, if you will, in this bull fight. I do like Target. Target's significantly underperformed over the past 18 months, whereas Walmart's up

over close to 25%. Costco's up 60%. Target trades at 14 times. And to your point earlier, it's significantly underperformed. And when we look ahead, we think there's going to be some mean reversion within the general merchandise category. And, in fact, we think we've already started to see some signs of that. over the past couple of months from Costco,

who's called out an improvement in discretionary. Even this morning, Walmart talked about an improvement in unit demand. And so, first of all, I think that the big thing for us is we think the general merchandise category is stabilizing. And as we progress throughout 24, we'll start to improve. And that really is the big reason we upgraded the stock a couple weeks ago, to your point. So, Greg, let's, I don't want you to beat up on Chuck there. He asked for your mercy, but let's move to why you favor Walmart over Target today.

Yeah, so again, Chuck, don't beat up on me too much either. We also think Target can be worth more than it is today in 12 months time. But the reason we favor Walmart and has since we upgraded really last March was we think for the first time in almost a decade, they've got real retail momentum driving traffic growth. And with that value proposition driving traffic growth, that gives them the opportunity to unlock margins in a lot of different areas. It could be through the advertising business. It could be through 3P.

And critically, it could also be through taking out cost, which they talked about again today on their call as they automate more of their regional DCs. That could be 100 bits of margin potential over the next few years. So to us, Walmart is in the early innings of a multi-year re-acceleration of not just sales growth and traffic growth, but really profit growth. And that's why, yes, it is more expensive. It's around 24 times next to your numbers. But once you back out Flipkart and Sam's Club, it's some sort of evaluation discount to Costco. We think Walmart U.S. is trading it under 20 times, and that's a pretty attractive valuation for an asset of that quality. So give me quick thoughts on two things.

One is Walmart as an advertising player, something I wasn't really deeply aware of. And number two, Walmart and its deal for Vizio. How do they factor in? Well, we're stricken on the Vizio deal, so I won't speak to that. But to answer your question, bigger picture on advertising, we look at Amazon, and we look at them taking advertising revenue. up to about 5 or 6% of GMV, which is a 30% margin plus business. And if we look at Walmart now with 100 billion of digital revenues, just getting to that Amazon-type penetration could get you to 5 or 6 billion with that higher margin.

So it's the kind of thing that it's not going to be massive right now. It may only be 10, 15 bips of tailwind, but as it starts to scale and grow, and again, there are different ways to do that. Vizio is one other way. but as you scale that business, we think it's a real tale into Walmart that, frankly, a lot of other retailers don't have. Back to you, Chuck, with some thoughts on Target. I note in my notes that you cite spring weather, easing inflationary pressure, discretionary recovery,

and margins as all reasons that Target may get some benefit here. Couldn't you say the same thing about Walmart, though? Yeah, unequivocally. I mean, I think we, like I said, we're more byrated on Walmart. we have a 190 price target on it. We upgraded it a couple of years ago. I think it's in this environment where there's still uncertainty, it's important to be barbelled and to have Walmart on one side of that barbell and target on the other.

And to your point on the margin front, there's very few operators today whose operating margins are a couple hundred basis points below where they were several years ago. And because of shrink, because of mixed, because of digital, you know, targets operating margins this year going to finish close to five. we think over the next couple of years to get to six, that gets you, you know, $9 to $10 in earnings power, which really has got tremendous upside to this stock right here. We agree with Greg.

I like Walmart a lot for all the reasons he said. I think it's a great long-term holding. I just think Target's got a little bit more juice here in the next six to eight months right now, if we're right on general merchandise recovering. All right, gentlemen, the case has been made. You've made it well. We appreciate your time today. Greg Melich and Chuck Grom.

Thanks. Thank you. You bet. All right. Be sure to catch Walmart CEO, Doug McMillan. on Mad Money with Jim Kramer. That is at 6 p.m. Eastern Time. Further ahead, forget Tiger beat. Teams might care more about an earnings beat. New data shows custodial accounts for teenagers are surging in popularity. We will discuss that later in the program. And before we had to break,

don't forget to sign up for free virtual CNBC Women and Wealth event on March 5th at 1 p.m. Eastern Time we will bring together top financial experts to help you build a better playbook, practical strategies to increase income, identify profitable investment opportunities, and save for the future. There is the QR code on the screen. I'm just going to let it sit there. You can take out your phones. You can do whatever you do, massage them, put them, aim them, and it will take you to CNBC Events.com slash women and wealth. That is on March 5th, 1 p.m. See you then. Welcome back to Power Launch, everybody. Bond yields lower today following last week's inflation induced spikes and ahead of tomorrow's release of the Fed minutes, always a key day.

Rick Santelli is live in Chicago for us. Hey Rick. Hi, Tyler. Indeed, last week, CPI and PPI, both being warmer than expected, remains in the minds of traders and has a lasting impact on the market. Now, as you look at two-week chart of two-year maturity and 10-year maturity on one chart, you can see that yields are stubbornly high. And last week's data really is the center of attention until we get to the jobs numbers, and we're still a couple weeks away from those. If you look, we're within six bases point of the high yield closes for 2024 and both twos and tens. As you see on that chart, now if you open it up here today, you can see what I'm talking about. And today we had the 23rd consecutive negative month-over-month change on leading

economic indicators, one month shy of two years. Anecdoal evidence of slowing runs right into the notion of strong labor markets and what's been going on with wages, even though they've moderated, they're still much higher than they were pre-COVID. Now, finally, there's a lot of talk these days about what's going on with the Niki stock market. They're getting very close. Friday within 100 points of their 1989 all-time high close. But they've moved a bit away from it. On this chart, year-to-date of dollar yen, notice we're hovering right around 150, And if you open a chart, we're only about 3% away from 1990 extremes at 155. That was about the time.

The neat guy was making it's all-time high. We want to continue to watch the dollar's strength against the yen weakness. Tyler, back to you. Rick Santelli, thank you very much. Let's talk oil prices. We're calling back today after a long weekend and a three-month high close on Friday. Pippa Stevens has the details. Hi, Pippa.

Hey, Tyler. So oil is tumbling into the close here. It's important to note that. the contract does roll today, so that's fueling some of that selling. But actually, Matt Smith over at Kepler, told me prices would be a lot lower, were it not for the geopolitical risk premium that's being priced in because refiners are now in maintenance season in Europe, in the U.S. and also in China. And when refiners go into maintenance season, their utilization rates drop.

And so they're buying less crude. They're making fewer of the products that we use. However, Matt Maley over at Miller-Tabok said the $79 range on WTI is really important, and that looking back to December, WTI has now made a series of three higher lows, and so it is on the uptrend. And interestingly, energy stocks have not actually kept up with the rise in oil. So you can see we have a chart here showing the XLE versus the XOP and oil itself. And you can see that the stocks have lagged the actual commodity price. And so he said that it could be ripe for a catch-up trade.

Of course, right now everyone is very focused on tech and AI and the chip stocks. But at a certain point, their growth may slow, or their rate of growth, I should say, may slow. You mentioned geopolitical concerns as one of the reasons putting a floor under the oil price and rising it. What are those concerns right now? Is it the Red Sea stuff or what? I think it's the fear that the longer this goes on, the more chance there is of an escalation. An escalation, a spreading of the hostilities. Exactly.

And one place where we've really seen this play out, though, an immediate impact is on gas oil. That's European diesel. And so after the continent moved away from Russia, they started importing more. They've always been short diesel products. They started importing more from the Middle East and from India. And so now either you have to pay a higher premium to go through the Red Sea, those insurance costs are rising, or you're going around the Cape of Good Hope, which adds, what, 15 to 20 days on. And so ultimately, that leads to higher prices in Europe. And actually, Salk-Gen said that dissalate prices are European inflation's Achilles heel.

They've always been short. Their stocks still haven't recovered after COVID. So that could really start to hurt looking forward. All right, Pippa, thanks very much. Pippa Stevens, thank you. Well, let's get to Bertha Coombs now. CNBC News Update. Hey, Bertha.

Hey, Tyler. The United Nations World Food Program is pausing food and aid deliveries to Gaza. The group issued a statement saying it faced gunfire and violence from hungry crowds swarming its trucks. Hamas's government media office called the decision a death sentence for people in Gaza. A Russian court ruled today to keep America. journalist Evan Gershkovich in custody pending his trial. That means the Wall Street Journal reporter will now spend at least one year behind bars following his March 2023 arrest on espionage charges. The comms after Russian President Vladimir Putin alluded to a possible deal to exchange

Gershkovich with a Russian prisoner during an interview with Tucker Carlson. The U.S. and the Wall Street Journal maintained he is not a spy. An extremely rare lake in the driest place in the United States is now deep enough for people to kayak, at least through April. The National Park Service says the normally dries salt flat in Death Valley National Park started to fill up with water in August when the remnants of Hurricane Hillary hit California. Record rains have kept it from evaporating, at least through now. That's an amazing sight. Back over to you, Tyler. Look at that photograph.

A friend of mine sent me, by the way, over the weekend, a photograph of the Los Angeles skyline, downtown L.A. In the background, I guess it's the San Gabriel Mountains. I'm not sure. But snow-capped. It was gorgeous. I mean, just gorgeous. Clear as day. Bertha, thank you.

As we head to break, CNBC out with a new screener taking a look at stocks that have a tendency to beat expectations and climb. The highest flyers on average are co-star group, Nvidia, and Elements Solutions. You can see the full list on CNBC.com slash pro. At cnbc.com slash pro. Welcome back to power launch. Stocks continue to slide on concerns that hotter than expected inflation data is going to force the Fed to keep rates higher for longer. Our next guest says as the narrative slowly moves away from Fed policy, the market is fairly priced, and that's good news for long-term investors.

Joining us now, Julie Beale, Chief Market Strategist and Portfolio Manager at Kane Anderson Rudnick and a CNBC contributor. Julie, good to see you and see you earlier in the day. Usually when I see I'm on fast money with you substituting for someone. That's right. Good to have you here. Talk us through what's been going on in the market over the past week or so as what had been sort of a string of unbroken gains turns into a little bit more choppy performance, basically on that inflation news, I suppose. Yeah, I think it's, you know, it's the problem with expectations in life when they're really high in the stock market is, you know, then we set ourselves up for disappointment. And so the market really got enthusiastic about the number of cuts as opposed

to just listening to what the Fed was saying in terms of, you know, we're going to wait until we have more confirmation data that says we can really cut here. And I think all you have to do is look at the dot plot. There are three Fed governors right now that, say, in 2025, their rates are going to be above 5%. You know, and there's one that's at 2.5%. So there's a lot of divergence of opinion with the Fed. And I think what that means is we don't really know, they don't really know. It's data dependent. And what you should focus on are, you know, the stocks in your portfolio and owning good quality. I have this feeling. Maybe it's just sort of silliness on my part, but that, you know, investors have waited, waited, waited for the Fed to start cutting rates.

And it's gone from six cuts in 20, 24 to three or to four, or whatever it happens to be. But I have this feeling that when the Fed actually does start to cut rates, investors are going to go, Oh, well, that's not good news because that means there are only two more cuts coming. You know what I mean? In other words, we've already had one. It's not going to, Christmas isn't going to go on forever. What do you think? I think that is exactly the right metaphor, is the enthusiasm is more about, you know, the potential for the pivot.

And then once we get the pivot, we're not as excited. That's like, that's also just like how life works, right? But I think we don't know, right? They don't, they really don't know. I think that's really clear is they're trying in all of their body posturing to give themselves the most amount of room to wiggle in each direction or not. What we don't want is for them to be cutting rates because there's trouble in the economy. That's actually super bad for the risk assets that seem to be rallying. And so I think it just kind of bears repeating. You want to protect yourself

because there's still a lot of uncertainty in this market. That's a deep thought about how life works. When the surprise has actually arrived, you begin to lose a little bit of the juice for the surprise. Let's talk about some of the stocks that seem, I mean, an awful lot of stocks. Here's Walmart at an all-time high. There's an invidia, just an unbreakable stock until maybe today. What about the stocks that are setting up those records? Are those stocks you can continue to trust or ones from which you might take profit? I think you have to look at each of them pretty individually.

The way that I look at it is when I have a stock that's had a really big rally, my scope of consideration for it and whether or not I should continue to own it, my skepticism, the bar is just higher on that. And so, NVIDIA's bar is just super high, but part of that is really founded on goods fundamentals, right? This business has so many big moats around it, and it's so profitable, and its opportunity set looks to be really large. So it makes sense to me owning it.

I would be comfortable trimming it here if you had had a large gain, right? But it is what I would consider a very high quality business with a lot of strong fundamentals behind it. Let's move to some of the, I mean, we've been talking, we talk a lot. inevitably here on CNBC, as you well know, about the mega-cap stocks, which Invidia would be one, Walmart would be another. Are there better targets for initial purchase today a little bit lower down on the market cap scale? Well, I mean, I'm a small and mid-cap investor, so I'm always going to be super biased. You're going to say yes. Okay, that's all right. I have to. That's my job.

But yeah, I do think that in, you know, small and mid-cap, you can still find really strong durable businesses that have as many protections around them as a Walmart. And you just have to be really choosy. Typically, they're kind of more niche. So an Aspen Technologies is a business that does software optimization for refineries and, you know, for large-scale chemical fabs. But they also have this great grid optimization technology. And we know, you and I both know, our grids are a mess. And the more renewables we put on them, the more stressed out they'll get. So I think this is a business that's really well positioned. And the earning, you and the earnings, you know, you and the earnings are very, very durable. So if you can get past some of the volatility that's in the

stock because of oil prices, it ends up being a really great long-term fundamental compounder. So we've got Aspen Technologies, as we close off here, OLLIS, which is a discounter, and West Pharmaceutical among your choices. If you were to speak to a common thread in those three, what would it be? I really like durable earnings. To me, I'm willing to pay for a company that can kind of produce compound results over time, not just booms and bus and lots of cyclicality. I like those businesses because they're easier to own, but they're also businesses that are easier to run. And, you know, I believe in human frailty, right? So I want businesses that can kind of run themselves. And these are very durable, strong businesses. Awesome. Julie, thanks.

Appreciate it. Good to see you. Julie Beal, Kane Anderson, Rudnick. Thank you. All right. Still ahead. Another NBA All-Star game has come and gone. If you had the over on 300 and some points. You're feeling pretty good right now. But will this year's ratings beat last year's bus? I doubt it. Julia Borson will give us

the play-by-play next. And before we head to break, make sure you're to mark your calendars for the premiere of CNBC's newest documentary, Big Shot, The Ozempic Revolution. Our Melissa Lee will give an in-depth look

at how the diabetes drug reinvented weight-loss culture and the way we treat obesity in America that airs this Thursday at 10 p.m. Eastern Time. Big Shot, the OZempic Revolution. You don't want to miss that this Thursday. Well, Sunday night's NBA All-Star game was a rather controversial points-filled exhibition with many purists calling it a joke and demanding changes, so no team ever scores 200 points again. What was that, boom?

That event was important for the sports streaming strategy of Warner Brothers Discovery and its new partners, however. Julia Borsson has more on that in today's tech check. This event was carried largely by TBS. That's right. So the ratings are now in for the NBA All-Star Games, and it aired on TBS and T&T, and it also streamed on Max. Now, Sunday's game averaged 5.5 million viewers.

That is up 14% from last year. A good sign for Warner Brothers Discovery after last year's All-Star game drew its lowest ratings on record. Now sports rights like the NBA are a key piece of Warner Brothers Discovery's lineup. But so far, the NBA hasn't really bolstered its streaming viewership. UBS and Nielsen report that since live sports were added to Max in October, its percentage of total TV viewership has not grown. And now we're coming up on the NBA's exclusive 45-day negotiating window

with Warner Brothers Discovery and ESPN ABC. That starts March 9th. Sports loom large for Warner Brothers Discovery. Its lack of NFL rights is seen as a key factor that could drive the media giant to do a deal. And now Warner Brothers Discovery is seen as having the most at stake in the streaming joint venture sports streamer with Disney and Fox.

Morgan Stanley writing that for Warner Brothers Discovery, the joint venture is perhaps most controversial in that the majority of WBD's monthly linear basic cable network economics are tied to networks not in this new sports bundle. That means that Warner Brothers discovery has the most to lose if the bundle drives cord cutting. So we'll be watching for how WBD CEO David Zazlov talks about the importance of NBA rights when that company reports earnings. That is Friday morning. Tyler? I have noticed just

incidentally, Julia, that I tend to see David Zaslov at a lot of NBA games lately. He's been in a lot of next games. I think he was at a Lakers game. I don't know whether he was there over the week. I didn't see him but but at any rate it that would that would tell you that he is really interested in what happens with the NBA and as you point out they are they are the rare one fox has the NFL ESPN has the NFL yeah and look david zazov has said he really understands the value of the NBA the question is though how much more he and the other media giants are going to have to pay to secure those NBA rights especially if you consider the fact that's pretty likely that we have a the big tech giant in play here as well.

If you look at Apple or Amazon Prime Video or even YouTube, are those companies going to be offering a lot of money for the NBA rights? How much does that drive up the price tag for the likes of David Zazov? So we know he wants to hold on to the NBA. The question really is how much more will he have to pay? Yeah. All right, Julia, thanks very much. Julia Borsden reporting.

Coming up, Home Depot's earnings left a lot to be desired. The retailer beat on both the top and the bottom line. but still, reported cooling demand. Our three-stock lunch trader will tell us whether she's buying that name next. And during February, we're celebrating Black Heritage. Here's General Mills' CFO, Kofi Bruce, sharing his story. The companies that invest in building the network of support around their employees who are different. In this case, whether they be African-American or they come from a different ethnic background or sexual orientation or their veterans,

builds a culture of belonging where everybody can bring the best of their talent and apply it to the company's goals and objectives is a company that's going to best be able to leverage the talent of a diverse workforce. All right, let's give you a quick market check here with the Dow Industrial's off about 62 points or about one-tenth of one percent. Nasdaq is the big loser here today, down more than one percent at 15-592 and the S&P 500 back as it has been for a couple of days now. I guess below 5,000, 49, 4973, down 32. Back in a minute.

Well, welcome back, everybody. Time for today's three-stock lunch, where we take a closer look at three names that are making moves today. And here with our trades is CNBC contributor Courtney Garcia, Senior Wealth Advisor with Payne Capital Management. Up first, Home Depot, the home improvement retailer, beat earnings and revenue estimates,

even as sales dropped there. Shares of Home Depot flat today, up about 14% over the past year. Your trade, Courtney, on Home Depot. I would be a buyer of Home Depot here. We did just see that their earnings expectations, actually beat expectations, which is great. But their outlook was actually a little less

than Wall Street wanted to see. But a lot of that is due to the fact that the housing market has remained a lot more sluggish than it was expected, mainly because mortgage rates are still higher than people wanted to see. But I think the question is when rates are going to come down, not if they were going to come down.

It's not going to be here in the next couple of months, but likely whether it's later in the year or later in the year, you're going to see that come down. That's going to be to more housing activity, which is going to lead to more sales for Home Depot. And I think you're going to want to make sure you benefit from that. And this is a company who returned about $7 billion back to shareholders through interest and dividends and share-by-backs in last five years, which is absolutely a company that you want to be a part of. All right. Let's move on to another one that's sort of in the building space, I suppose.

Caterpillar, Evercore ISI, given the heavy equipment manufacturer a downgrade, saying it sees the industrial space cooling off. Shares have cat down about 2% today. Courtney, your trade on the Big Cat. Yeah, industrials, I think specifically Caterpillar, is going to continue to benefit from the infrastructure spending bill that was passed. And you're continuing to see unprecedented infrastructure spending go into things like construction and a lot of equipment sales are going to benefit from Caterpillar.

But on top of that, electric vehicles, actually their CEO pointed out, you're needing to mine a lot more things like Cobalt and lithium, and you need equipment to do that, and that's where something like a caterpillar is going to benefit you. And they did fantastic last year. They beat profits, sales expectations. I mean, they kind of made records across the board. Now, stock was up over 23% last year. But interestingly enough, their earnings were up over 53% last year, which is like, even though it did so well last year, it still trades at a pretty reasonable 15 times next year's earnings. I think that's absolutely something you want to make sure you're taking advantage of. Interesting. So that one's a buy. Let's go on to gold.

of that commodity, well, not shares. You just buy the economy. They're up nearly 1% today. Your take on gold, Cort. I would not be a buyer of gold here. The reason being is gold was about $2,000 almost five years ago in 2020, and it is still hanging around that same price right now. There's been a lot of false starts here. It actually looks like it's starting to lose momentum again for the fourth time in the last five years. There's been a lot of catalyst of why gold should do well. It's supposed to be an inflation hedge. We're at 50-year high inflations. We have government spending that continues to be high, a record high deficit, but all these things have not led to a breakout in gold.

And I really don't know what is going to further bring that breakout. And I think it's probably going to stay ragebound here. So for a lot of those reasons, I actually don't think this is something you need as a long-term strategy. All right. Let's leave gold alone then. Courtney, thank you very much. Courtney Garcia. We appreciate it.

Thanks for having me. All right. We've got about, well, about six minutes left in the program. And we've got several more stories you need to know about. So let's get right to it. More and more teenagers are starting to put their money into stocks. The brokerage firm Charles Schwab says that custodial accounts for teens totaled more than 300,000 last year. And that's up from nearly 200,000 in 2022 and 120,000 in 2019.

Do we have Sharon with us? I think Sharon Epperson was going to join us. We do. So this is good to see you from D.C. This is an interesting development. A 50% gain, I guess, in custodial accounts at Schwartz. indicating that people are saving more and more, I suppose, for their kids' education and beyond. Well, teams, I think, are starting to realize and their parents are realizing for them that there's no real secret to building wealth.

The secret is investing. And you need to invest in the future. But many of the teens, I think, are looking, at least from some of the reports, are looking more at the immediate gratification. What can I invest in now that's going to get me a good return in the next year or so so that I can buy a car, or afford an apartment or those types of things, more day-to-day than the way that many of their parents started investing, which was for their retirement. I think one of the great ways to get teens to be able to do both is to be investing in a Roth IRA, because if you open a Roth IRA for a teen that has earned income on their own, you match that money. They're learning that this is

delayed gratification. This is money that is supposed to be for the future. But the great thing, of course, about a Roth IRA is you have access to the money that you contribute. more immediately. So I think that that might be a way to combine the long-term saving and the investing at the same time. But understanding also that you need to be saving money just because, because you never know when you need it for the rainy day. That idea of having the emergency fund, I think, is one that teens need to understand as well so that everything's not tied up in something that should be a long-term investment, money that you're not going to need for five, 10 years or more. Quickly on the Roth IRA, you mentioned something interesting there. As I understood,

it that money that you would put into a Roth IRA has to come from earned income. Is that right? Absolutely. It has to be earned income. So it needs to be a teen that has a part-time job or has some type of job and that you are able to then say this amount of their earned income, they can put the whole thing into the Roth IRA, even though they may be spending some of it. The idea that a parent matches or a godparent matches the investments that a child is making, a teen is making, that's a really great idea because that then gets them again in the habit of doing something that may be available to them one day from an employer. Yeah, fascinating stuff. All right, Chairman, let's move on to number two, and that is Capital

One's $35 billion takeover of Discover left a lot of questions up in the air, including what the deal really means for consumers. What can we expect here? And I guess Senator Warren has already come out and urged antitrust regulators to block this deal. Well, there's a lot of wait and see, of course. It's going to be a lot of regulatory scrutiny that this deal is going to go through. But what it highlights is the importance of understanding your credit right now. because there could be a change down the road in your credit card. So you want to know what is the interest that you're paying, what are the fees,

and pay it off or pay it down as quickly as possible. The Consumer Financial Protection Bureau did do a study looking at credit card fees, and it found that Capital One has at least one card that is charging something like 30% interest or more. And so those are numbers that often consumers don't understand what interest they're paying on that card. And so I think that's important for people to know, as well as if you're able to get points, rewards for either these cards. It might be wise to use them up now before those terms could change. All right. Let's move on.

Obviously, big changes there with implications for MasterCard and Visa, if Capital One, which is a big issuer, starts to move its transactions over to Discover's network. At any rate, American Airlines moving on. Just raised the price to check a bag for the first time in more than five years. Passengers will now pay $35. to check a first bag for domestic flights as the service is booked online in advance. Or $40 if they purchase the option at the airport. So I guess book ahead of time. Both options previously cost $30.

I think the airlines are saying, Sharon, among other things, that airfares have declined, according to some measures, by about 6%. So they're looking to make up for lost revenue. They're looking to make up for lost revenue. And so what consumers need to figure out is how can I avoid paying these fees or paying as much at all? One way is to look at a credit card that might be able to offer you points or rewards that you can use as a statement credit or toward travel purchases like check bag fees. The other may be to look at airlines that don't charge for you to have your bags there. So those are ones that I think there's going to be more competition than people looking for where can I get those kind of breaks as well as where can I get the lowest cost for that flight.

All right. And now finally, Virginia proposing a first of its kind plan to pay for a new special. for the Washington Capitals and the Wizards, the plan would receive funding from the corporate tax businesses pay to operate at the arena, as well as personal income tax paid by workers employed at those businesses. This is a novel approach to helping finance an arena that is basically going to serve private ends. Very, very unusual approach, and a lot of folks here buzzing about it. There are a number of critics among those who are living in the Virginia area, I'm not sure if this is really going to work out, but it'll be interesting to see what happens. We're going to see what happens, and the wizards aren't very good to begin with, but that's another matter.

We'll see. Sharon, good to be with you. Thanks for being with us. I'm with you, too. And thank you for being with us and watching Power Lunch. We've got a closing bell coming up right now, I believe, it's Scott Walker. Hey, Scott.