Power Lunch - Tech Stocks Tank, Power Mover 7/11/24

Episode Date: July 11, 2024

What appeared to be a CPI-rally has faded, as the tech-heavy Nasdaq is sinking nearly 2%. What are tech stocks selling off on soft inflation data? We’ll dig into that.Plus, shares of energy storage player Quantumscape are surging on a landmark new agreement with Volkswagen’s battery company. We’ll speak to the CEO about that and more. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch alongside Morgan Brennan. Welcome Morgan. I'm Tyler Matheson. What looked like it could be a CPI rally has faded. Inflation actually fell by one-tenth, month over month, adding to the case for a September rate cut. But stocks are lower with the exception of the Dow, which is up ever so slightly. Yeah, the Russell 2000 having a big day, too. Bond yields also following on the news, the 10-year currently trading at 4.197%. We've seen a lot of buying. in the bond market today. We're going to get to Rick Santelli for more on that. But a look at Tech's big three selling off in today's post-CPI market. Look at that, some big moves. Invidia down five and a half percent right now. But we are seeing some big moves in, some intrastative names. Real estate is the S&P 500's biggest sector today, has not been in that position in quite a long time. And look at some of the home builders there. Linar up

6 percent. D.R. Horton, almost 7. And Toll Brothers, 6 and a quarter percent. So why are tech stocks selling off on this CPI number? Let's bring in Michael Cantorowitz, chief investment strategist with Piper Sannler. That sounds like a good place to start. Why are tech stocks taking it on the chin today? Well, I don't think it's anything fundamental. I think, you know, the large-cap growth space and tech stocks have really melted higher since interest rates peaked in late April, starting off with the unemployment rate moving up. And so I think investors have been looking for a reason to look for other opportunities and rotate.

And this is really one of the first good, good data points on inflation that investors have gotten. So I think it's some short-term profit-taking on overextended stocks, perhaps. But I don't think anything fundamentally is shifted. Can you nitpick the inflation number? Are there parts of it that are not as favorable as the overall number? The core was a little higher than... I think inflation is such old news at this point. I think, and I may have said this last time we hear, once the unemployment rate starts turning up higher.

And now it's been several months in a row. And forward-looking indicators suggest that it's going to continue. It's time to look beyond inflation. And I think the market's finally there. Is the rise in the unemployment rate worrisome to you? Is it rising so fast? It's still at a low level. Yeah.

But is it rising fast enough to be of concern to you? No, I don't think so. And certainly seeing small caps finally get a bounce is not indicative of that. So I think the market's been weighed down the last two years by higher interest rates and higher inflation. inflation started going away in October of 2022. The Fed started going away, ending their tightening cycle last November. And that's why the markets have drifted higher. And I don't think people are worried about inflation so much anymore.

And part of that is because the unemployment rate's going up. And so I think the risks are shifting, just as Powell said recently, speaking to Congress. And I think that's where the market is. I don't think the unemployment rate has been moving up high enough or is high enough to cause a sustained, broadening downturn in the equity market yet. Okay, so disinflation narrative is intact here. The inflation stories, you just said, old news. You've got the markets pricing and something close to 100% expectations of a rate cut. This first rate cut in September. The flip side of disinflation, and in some cases even deflation, is the impact it has on the micro. So look no further than

PepsiCo, Delta, and ConAgra with earnings from all those consumer-facing names this morning. and we're seeing the impact of disinflation start to hit earnings. How big of a risk is this, especially given the fact that investors have very high expectations for this season? Yeah, that's a great point. And expectations are pretty high across the board. There's not one spot where it's necessarily outrageous. So I think this is why I don't want to be chasing small caps here. We saw in the last NFIB report on small businesses that companies' plans to raise prices are fading.

And that's probably because they can't raise prices anymore. And if you can't raise prices and you have sticky labor conditions, you're going to have to lay off more and more people. So I think what we're setting up for is this, you know, we've seen a pop in multiples for small caps. They're not cheap trading at about 16 times earnings. They were cheap a year ago at 12 or 11 in October of 2022. What we're going to see is reality hit as earnings season comes.

And you're going to have stocks that have just seen P expansion because rates are down, inflation are down, and people are overlooking the point that inflation coming down is a function of pricing power coming down, which means tighter margins, weaker revenue growth. And I think small caps are going to have really difficult earning seasons. So you think this is a knee-jerk move with the Russell 2000 up 3.4% today. It's a big move. It's been a huge underperformer, though.

In some ways, we're talking about 180-degree reflection of the market dynamics we've seen up until today. Yeah, I think the reason there's been such a sharp knee-jerk reaction is because we've seen since April, bad macro data. You know, the economic surprise index is at a three-year low, rising unemployment. We stopped seeing small caps rally on bad news, on bad macro news for the last two and a half months. So they're really only upside here, while earnings estimates continue to be chewed down lower, is inflation coming down, which is exactly what we saw today. So that's why I think you're seeing such a knee-jerk reaction. There's fewer reasons or catalysts for small caps to continue to go there. So you've got real estate performing well today. No surprise there.

interest rates are going to come down sooner rather than later. Are there other sectors that you would expect to benefit from the macro environment that you see? Yeah, I think you've got to be careful. What's leading today is rate sensitives and risk, low quality. The issue with buying low quality and risk is that when earnings season comes around, and particularly because we've seen bad macro news rising unemployment, softer inflation, you're going to get earnings misses. So the areas we would prefer rather than small caps would be areas like utilities, just buying bonds, the TLT index, or even emerging markets. We see the dollar softening today. So the one benefit of softer U.S. macro data, lower inflation or weaker unemployment, is a softer dollar because

the Fed's going to cut. And that alleviates countries around the world that have had really weak currencies and allows their central banks to more rapidly cut interest rates. Interesting. Michael, thank you very much. Michael Cantorowitz. We appreciate your time. Well, now let's get to the bond market piece of today's action in a little more detail. Rick Santelli is in Chicago to break down the big moves we are seeing in bonds. Yes, Morgan, you know, it was a huge day. If you look at a chart with twos and tens, I don't need to say much. When the wires had the 830 minus 1 tenth of percent on headline CPI, that was it.

Interest rates dropped like a rock, and the equities, of course, pop. If you look at a twos and tens on a four-month chart, if the 10-year closes under 419, it's probably the lowest yield close in four months. Two's are on pace for that. If we go above 419 towards the end of March, it was a huge number. But just to keep it in perspective, if you look at the actual indices of CPI, there's two of them, core and headline, they're both still at all-time highs. The indices did not reflect that negative number because last month was so much more powerful. The compounding nature of inflation is a tough one. Mike, nice to talk to you today. All right, what did you think of the numbers today under the context that?

Equities continue to ride high, even though we're looking at one cut. The beginning of year, it was a half a dozen. What's driving equities? I mean, inflation is the story of since 2022. We've talked about it constantly. We look at CPI. We've looked at unemployment. We're thinking about these kind of inflation numbers.

And, effectively, what is the Fed going to do? As you said, earlier this year, we were pricing in five, six cuts. We kept pushing those out. I think what's notable, we kept pushing those out because we didn't get inflation numbers that we were confident in. The last thing the Fed wanted to do was the cut rates. get a bad inflation number and have to raise them back. We've kind of kept pushing them out, but the market has remained calm.

We're at the lowest VIX in a year since 2017. It was, we have under 14, about 13.8 VIX averaged this year. So the market has remained calm, even though we pushed out these cuts. I think that's a sign the market was just confident that inflation would come under control and confident that because inflation would be under control, the Fed would eventually lower rates. And we haven't had that sell off. We haven't been worried that there'd be never be able to. If there's going to be a big mogul down the road, in your opinion, what event or an exogenous event would that be?

You know, the nature of that is exactly the problem, is that it's going to be something that we're not going to expect. Now, in the past, we've had things like oil we've looked at. We've looked at different geopolitical events. 15 years ago, we really gained Greece. And now none of that makes a difference. We have a president where they're debating whether he's good for another four years. I ask, is he good right now? And yet none of that gets priced in. No, 25th Amendment, nothing.

No, we're not seeing an effect on political kind of concerns right now. Right now it is about inflation. It's about those numbers we're seeing. And actually CPI, as you know, we have PPI tomorrow. People are looking at that. As far as the political situation, that's probably for a different channel. As this stands right now, inflation is driving what we're talking about going forward. We have about 100% chance having a rate cut in September. Looks like we're going to have maybe one, maybe two, even before the years out. I think that means the market's in a pretty complex.

I guess my final question, because we're out of time here, as if they cut and inflation comes back a bit, are they going to have egg on their face or are they going to be fluid real quick? It's going to be an interesting market if that happens, and we'll be ready for it. All right. Mike Palmer, thank you. Tyler, back to you. All right, Rick Santelli, thank you very much. We've got new numbers out on government spending from the Treasury Department. You can imagine which way they're going.

Megan Cassella joins us now. How much interest did the U.S. pay on its debt, Megan? It just keeps on climbing. Tyler, new Treasury data shows the U.S. government spent $140 billion on interest costs just last month. That's a 14% jump from the same month a year ago as the debt has grown and amid high interest rates. Fiscal year to date, interest costs are now 33% higher or $215 billion higher than they were this time last year. Besides interest, spending at the Social Security Administration was up and adjusted 8% last month. That's due to the cost of living adjustment made to account for inflation. and spending at the Department of Education was up a pretty remarkable 228%

due to a recalculation of student loan subsidies. Top line guys for the fiscal year so far, the government is running a roughly $1.3 trillion deficit, but that's 9% smaller from this time a year ago, Tyler. Why is it smaller? Tax receipts higher? What? Higher tax receipts and slightly lower spending in a couple of different categories.

It's mostly those receipts, though. They're benefiting just a little bit from those. All right, Megan, thank you very much. Megan Cassella reporting. As we had to break, check out shares of Tesla on pace to snap an 11-day winning streak on reports that it's delaying its robo-taxy event from August to October. We're going to continue to follow that with shares now down almost 8%. On the flip side, shares of QuantumScape surging nearly 30% today. The energy storage player climbing on news of a landmark partnership with Volkswagen's battery company.

We're going to speak to the CEO of QuantumScape about that and more when we return. Welcome back to Power Lunch. We want to drill down on a big power mover. Shares of QuantumScape, soaring 25% today after striking an agreement with Power Co, the battery subsidiary of the Volkswagen Group, the goal of the partnership to speed up the manufacturing of QuantumScape's lithium metal batteries for electric vehicles. Here, first on CNBC, is Siva Siviram, the president and CEO of QuantumScape. Siva, it's great to have you on, and I'm going to start right there. What does this partnership with PowerCo, who's looking to industrialize your, battery technology, what does it entail and what will it take to get to the point of production?

This is a highly collaborative partnership that we have developed with Volkswagen and PowerCorp. Volkswagen has been a long-term partner for us. We have a very, very highly differentiated technology that allows us to have both very high energy density and power density in ourselves. Volkswagen has been evaluating ourselves and earlier this year showed that after a thousand, cycles, we still retain over 95% of the power in the cell. Okay. Volkswagen has since been working with us closely and we decided to take our partnership to the next level.

As a Silicon Valley company, we are a technology company. Volkswagen is a worldwide manufacturing behemus. Together, we can leverage our respective strengths for us to now take our path-breaking technology into high volume at the fastest spot. possible way. Okay. So we're talking about solid-state lithium metal batteries. It's a new technology. It's a new innovation, as you just noted right there. What does it take to actually see this produced and end up out on the roads and in electric vehicles? Yeah, this is exactly what we are attempting to do. Clearly, the path-breaking technology, unless it becomes a product and it goes on a series vehicle, it's only a pipe dream. So for us to make sure we take this immensely high- potential technology, we need to take it from concept prototypes into gigawatt-hour scale production. Volkswagen has the infrastructure to do it. Our technology is poised to go into that ramp. We need to now industrialize our technology. Robust it. Make sure that we are able to ramp in

high-volume production. And that's what they are going to help us do it. And they are going to do it in their own facilities. So what does a solid-state lithium-metal battery do? that a traditional so-called lithium-ion battery can't do? Is it going to add range? Is it quicker charging? What? Or all of the above?

Yeah, glad you asked. There are five things that all batteries have to do. They have to be safe. They have to give you range. You need to be able to charge very fast. You've got to be able to cycle it for many number of times so that there is life in the battery. No degradation.

We are the best in all five of them. We, with the ceramic separator lithium metal technology that we are coming in, we are, we believe we have a potential to be the best on all five of those vectors. So if my battery in my EV gives me a range of 320 miles, how much would your battery give me in my EV, which happens to be a Tesla? Correct. So it depends on what the size of the battery pack, that the OEA. is willing to put into it.

A typical 80 kilowatt-hour battery pack, which is at the high-end vehicles, gives about 300 miles. And it takes about four, five hours to charge. Sometimes for a short distance, you can do a very fast charge. What we are saying is we can, over time, give us, give the consumer a high range, and you are able to charge on 0 to 80 percent or 10 to 80 percent in less than 15 minutes. and not lose range when you are hauling or you are trying to take a lot of power, 80 kilowatt tower battery having a thousand horsepower.

That combination of power and range and safety, the most important thing in a battery, given this solid state battery, is the safest battery yet. So I heard you say that the charging time to go from 10 to 80% is something like 15 minutes. that is an improvement having just spent a good long time at a charging at a Tesla supercharger. I did not hear you say, however, what the increment to range is from what I get now, which is 320 or thereabouts, to what a comparably sized solid-state battery would give me.

Ah, a comparably sized is a good number. If you had asked that question, I've told you that. We are a good 30% better than the current lithium-ion batteries out in the marketplace. Okay. So in light of that, we know that there's a demand slump right now for EVs. We saw it in the Mannheim used car index earlier this week, that EV prices had fallen more dramatically on a year-over-year basis than some of their combustible brethren. What does this technology do to actually, I guess, charge demand for EVs?

Yeah, I'm glad. I'm talking about a power company talking at Power Lens and talking about charge. This is the best thing I can do. The question you're asking is very, very valid. Today's lithium ion batteries leave a little bit to be desired. The average customer does not get convinced to go into lithium ion batteries and buy a EV because, as you said, the range is not there. We can't quite charge fast enough.

It doesn't give you the power that you need. And if you use the power, the range drops out dramatically. And to get the safety, there's a lot of additional weight that you need to add. What we are coming and saying is, look, for you to move from the enthusiast to the average consumer, you need the next generation of batteries. We are the leaders in the next generation of batteries. What we are coming and saying is whether it is range, whether it is how fast you can charge, whether it is safety, whether it is the number of cycles that you can charge the battery, we are a quantum better than everybody else. Ah, okay. Siva Sivaram, CEO of QuantumScape. Thanks for joining us. Thank you. Thank you for having me. Also, I think I said combustible instead of combustion.

I knew what you meant, though. I knew what you meant. I don't think anybody was... Big difference there. My home state, Virginia. Well, it's actually a Commonwealth, crowned as this year's top state for business, but which states or Commonwealth are leading the way in the great AI race. We will reveal that when Power Lunch returns. Welcome back to Power Lunch. Virginia crowned as this year's top state for business, thanks to its high scores in education and infrastructure. Future winners are also going to be, need to be strong in AI. And Scott Cohn joins us now with a look at the states that are taking the lead in that area. Scott. Yeah, Tyler, this is so important this industry and it's gotten so important so fast that we knew that we had to incorporate some metrics about AI in this year's top states for business study. We have them in our technology and innovation category and in our business-friendly friendliness category. And from that, we can glean America's top states for AI.

And we're not the only ones tracking this. For all the subjects they study at Stanford, only a handful warrant their own institutes, like foreign policy, neuroscience, the economy, and since 2019, artificial intelligence. That's how big a deal they say this is. This technology is a general purpose technology that's going to affect everyone and everywhere. In addition to helping to shape the future of AI, they're measuring the present. Where's the innovation occurring? Where are the jobs? Who's regulating it at a time when the industry is asking for direction? Right now, we kind of are in a wild west in this space.

Using data from Stanford's 2024 AI Index report and our own data on technology, workforce, and computing power, these states are leading the way. Texas, with America's top workforce overall, is a mecca for AI jobs, 36,000 posted just last year. Virginia isn't far behind, plus enormous data capacity. Maryland is helping to shape artificial intelligence law. Washington, the home of Microsoft, is a center of innovation, with 12 AI models developed by Washington companies just last year. The leader in AI is California. California by far is the leader of the pack. and not by just a bit, but significantly in comparison.

Home to the biggest players, by far the most jobs, and massive computing power. The other thing that California is on the cutting edge of is regulation, which right now is seen as a positive in AI, but Russell Wald of Stanford tells me that the industry wants to be regulated until it doesn't, and it may very well be getting very close to that point. We've got lots more about all of this, and see where your state ranks across the board in our top state study, topstates.cnbc.com.

Guys? Oh, I think this is so fascinating, Scott, and I'm very familiar with the AI Index report. I actually did something with the authors of it at the Council on Foreign Relations not that long ago. So I find this fascinating. Does power or connectivity factor into any of the methodology around this too? Because we know the infrastructure piece of this is going to be critical as the whole complex is built out. Yeah. And, you know, doing an index of top states for AI is a little bit tough because of all of these things that are happening.

We definitely look at the power grid in our infrastructure category in top states. That's really important. It's one of the things here in Virginia that they are concerned about because they've had some reliability issues. They're trying to get on top of that for just this very reason, because so much data goes through this top state for business that if they want to keep at the top state, they need to beef up their power system. And as you pointed out, Virginia has a tremendous number of those data centers. And I know Dominion Power has been big in making sure that they have enough capacity to fuel them. Anyhow, Scott, good to see you. Enjoy my home state. Likewise.

Thanks a lot. Yeah, we'll do. The Commonwealth. The Commonwealth. Well, let's get over to Sima Modi for a CNBC News update. Sima. Morgan and Tyler, President Biden announcing a $225 million military and aid package for Ukraine today following a meeting on the sidelines of the NATO. with President Lizelensky.

And that, of course, is getting a lot of attention. The equipment includes anti-aircraft missiles, munitions, and a Patriot missile battery. According to the Biden administration, this is the 61st weapons package the U.S. has sent Ukraine since August of 2021. Houston's biggest power provider said today half a million customers will not see the electricity restored until sometime next week. Widespread outages have plagued the city since Hurricane Barrel made landfall earlier this week. as a category one storm, as many as 2.7 million people lost power at the peak of the outages. And a hiker in Colorado captured the moment a small plane nearly crashed into the side of a mountain.

The FAA says the single engine ended up landing safely at its destination after it stalled and descended near the devil's thumb hiking trail on July 4th. The agency is investigating the incident. Scary stuff. Morgan, back to you. Seema Modi, thank you. Coming up, the end of Apple's record run, well, a streak of seven straight days hitting new record highs is about to be snapped. We're going to get the full story and how to trade it in three-stock lunch next. At 32 past the hour, welcome back to Power Lunch. Time for a deluxe three-stock lunch edition.

We'll get stories on three stocks in the news and then get trading advice on each one. Our trader today is Michael Farr, and our first stock is Apple, which is likely to snap its seven-session win streak. Let's get to Steve Kovac on the story of why. What do you say, Steve? Hey there, Tyler. Yeah, it's been a record run for Apple. And back on top as the most valuable company, it overtook Microsoft just this past Monday. And like we've been saying, seven trading days in a row closing at all-time high.

Stock hasn't done that since March of 2012. On pace to break that winning streak today, though, we're seeing that big rotation out of tech. Several price target increases, though, this week for Apple, Piper Sandler, Needham, and today, Bank of America. And all this has been happening over the last month since Apple revealed its artificial intelligence product that's going to start rolling out this fall. But more important than that, I should say, the AI rollout is expected to spur iPhone iPhone upgrades this fall since most older iPhone models aren't powerful enough for all those AI features. Bank of America analyst Wamsie Mohan said this morning in his note, this is the beginning of an iPhone refresh cycle that's expected to last a few years. He also said more than 70% of iPhone users today have a phone that's at least three years old, so they'd be due for an upgrade, pretty much regardless of whatever AI features are out there.

The hope, though, those new AI features are going to be tantalizing enough to convince folks to upgrade earlier than they normally would. And then down the road, there's hope that services, which is already growing by double-digit percentages again, will see a boost from AI partnerships, especially with companies like OpenAI and Google. Steve, thank you very much. Michael Farr, welcome. Good to see you. Your thoughts on Apple, my friend. Thank you. Good to see Utah. Steve did a great job. I mean, Steve nailed it. What we're seeing today in Apple is a pullback based on the regulatory news out of the EU. Okay, got it. The stock's not off that much. It has been up rather consistently. And the stock is fully valued. This stock isn't

cheap. It is, I think, a core position. Three point four trillion dollars in market cap. It's got a little bit of a dividend. I think you could probably buy it cheaper than here if you give it some time. Longer term, give it five years because I'm a buy and hold kind of a guy. I own this stock. If I didn't have it in portfolios, I'd add to it. Could I get queued on timing? Maybe. But this is a stock and I think kind of a core position. And I wouldn't be waffled by the EU news right now. Okay, well, up next, we've got Pfizer getting closer to entering the weight loss drug arena. Angelica Peebles has more on that for us, Angelica. Yeah, Morgan, Pfizer today saying that it will keep working on an experimental weight loss pill.

Later this year, Pfizer will start trying to figure out the best dose to give people, and those results should be ready in the first quarter of next year. Now, this drug, Danu Glypron, is a pill that's given once a day. It was originally supposed to be given twice a day, but Pfizer scrapped that plan last year. after people in clinical trials struggled with side effects like nausea. So Pfizer decided to go back and focus on the once daily option. Now, today, Pfizer is saying that they're encouraged by the data that they've seen so far, but this is still pretty early work.

It could be years before this pill reaches the market, if ever. But it's a step in the right direction for Pfizer in an area where they've been wanting to go, but they've struggled to get into. And there's a lot of pressure on Pfizer right now to prove that it can succeed beyond COVID and find the next big thing, getting into the estimated 100, billion dollar obesity market could be a way to do that. Morgan. Angelica, thank you. And of course, we know what that has meant, what a boon that has been for the other players in it, Michael. So are you a buyer for Pfizer from here?

You know, I'm a little bit nervous about my enthusiasm for this stock. I really like this stock. I like to buy them when they're down. I like this great balance sheet of this terrific company that, yes, post-COVID has tried to figure out who it's going to be, really. It's a have a bit of an identity crisis at Pfizer. They are moving into the GLP1, the drug space that has transformed so much of health care. I think that's going to continue. I think the once-a-day pill is always more successful if you talk to health care providers than a twice-a-day pill. So I think you buy this stock, 6 percent dividend, 6 percent dividend while you wait with a solid great balance sheet that's moving into a market area where they can gain some short.

share and the market area and for this drug is going to continue to grow. I like it. I have it personally in my own account. I'm probably at some point going to buy some more. Money where mouth is. Thank you, Michael. Let's go to Delta now, down big following earnings. And Phil LeBow spoke earlier to the company's CEO. Phil. Tyler, this is all about supply, demand, and low airfares. And oh, by the way, this is an industry-wide story, not just with Delta, but Delta's paying the price today because are the first one to report their Q3 results. The industry metric to look at is unit revenue. Fancy way of saying revenue per available seat mile.

That's what they call it in the industry. It was down 2.6% in the second quarter for Delta. Worse than the guidance of what they expected. They were flat to negative 2% was the guidance. Here's the problem. The industry has oversupplied the number of seats that are out there in the domestic market here in the U.S. That's why airfares are as low as they are.

Revenues are not going to be meeting expectations. And this is a situation that is going to be here this summer. Here's CEO Ed Bastion talking about the industry impact. The industry brought more capacity for this summer. Capacity is up 8% for the summer. I'm talking particularly in the domestic marketplace. Real demand in the summer anyway, and I'm saying summer between June and August, it's probably closer to 4% in terms of real organic demand growth.

So you do have an oversupply. Do you take a look at shares of Delta, keep in mind that their guidance for the third quarter, to earn between a buck 70 and two bucks a share. The street going into today was a 205, so there's going to be some adjustment there. But they did reaffirm their full year guidance. Next up, what do we hear from the other airlines? Keep in mind, guys, Delta is the most profitable airline in the United States. And if they got dinged for coming in with lower than expected revenue per seat mile, what do you think we're going to be hearing from American, Alaska, southwest, and United? By the way, we already have heard from American and Southwest in terms of

adjusting their capacity. This quarter is going to be a rough quarter in terms of this revenue picture that the airlines are dealing with. And this is the impact of having so many seats flooded into the market this summer. Yeah, very interesting. Michael, your response here on Delta, and I note, Phil noted that maybe airfares are coming down a little bit. Well, not where I fly. They don't seem to be coming down where I go, ever. I know. I can't. People tell me about these cheap fares they get, Tyler, and I'm still looking for them. I'm not. finding them. Look, this is perhaps the least ugly house on a really ugly street, meaning I don't like airlines. I've never liked airlines. Remember what Nancy Reagan said? Just say no

when it comes to airlines. Warren Buffett said he was going to hire an analyst whose sole job it was to talk him out of ever buying an airliner considering it ever again. Hugely cyclical business. Delta's miss wasn't bad. It was minimal. The guidance for the year is Phil Lobos, Ed is still stable, and yet the stock is down 6% today. So if I were going to do it, I would probably do Delta. I stay away from every one of them. I would stay away from this one, and I call it a sell. All right. That's pretty emphatic. Michael Farr, thank you. Good to see you. Michael is High Tower. Great to see you. Great to see you, Chief Market Strategist. Morgan. Well, still to come. Biden time. The president set to hold a news conference this evening with an

eye on proving to both supporters and critics why he should remain in the 2024 presidential race. We'll get a temperature check from Washington when power lunch returns. Welcome back. President Biden holding a press conference this evening, hoping to prove his fitness to run in service president, as he seems to be losing support, especially financial support. Megan Kassela is following the money for us, Megan. I don't, I can never, I can't remember a time where we've ever seen this much focus from a domestic standpoint on a press conference for NATO. Absolutely.

And I would venture to say that most people are not watching it to hear what the news was from the NATO summit this week. All eyes are on that press conference. And while the president is still vowing to stay in the race, donors and strategists have begun to look at what would happen if he steps aside. One big question is where the millions of dollars he's raised so far would go. So the campaign has about $91 million on hand. If Harris steps up and becomes the nominee, she inherits all of that money and the campaign

apparatus. So things move forward rather quickly. If both Biden and Harris are replaced, the money can't be transferred directly to a new candidate, but they could send it all to the party, which could spend about a third of it in coordination with the campaign and the rest of it to sort of support the candidate. They could also transfer it to a super PAC, which could not coordinate with the campaign, but would be supporting it. The third scenario, Harris remains the vice president, but somebody new takes the top slot.

This one gets tricky. I've been told there's a legal argument to be made, that she could spend the money because it's still her campaign, But because it's a gray area, they could be subject to lawsuits. Now, guys, these are hypothetical scenarios for now, but the pressure for Biden to step aside has been mounting for weeks. Democrats are in limbo. Fundraising has mostly been on pause, and we just learned this afternoon that Biden's own campaign has been polling Harris versus Trump to gauge its viability. So Biden's going to try again tonight to quiet his critics, but the chance of a fatal error for his candidacy is really quite huge, guys. What's interesting in this to me, among many things, that we have.

been in this kind of territory, maybe ever, is not what some members of Congress are saying, but what some members of Congress are studiously not saying. And I'm thinking of former Speaker Nancy Pelosi, who was, as politicians are wont to do, was very, very careful in what she said about where the president stands. There is so much reading between the lines here, Tyler. You're absolutely right. I think one of the most interesting developments this week is, you know, We saw the president start the week by saying, I, my decision is made, I'm staying in this race, we need to move on. Then we saw lawmakers come out and say, we hope he makes his decision soon, we'll support

whatever his decision is. And when they're confronted with reporters saying he's made his decision, he says he's staying in, we've heard Nancy Pelosi and others say, well, I hope he makes that decision soon, we'll support whatever he does. So it's clear that there's so much maneuvering going on behind the scenes. When NATO wraps up this afternoon, the press conference is going to be of utmost importance to watch, but it's also going to be interesting to see what happens after that. We're hearing many reports that lawmakers have statements ready that Pelosi herself asked them to just wait after

NATO was done before they said anything if they felt like they wanted to come out publicly. So we're about to see a very momentous, I'd say, 48 hours or so. Is the press conference he alone or or are any other NATO leaders alongside him? It's him alone. That's part of the interesting thing here is that he really does not do many solo press conferences. This is his first, In eight months, he's only had, I think, four solo press conferences since the November midterms, which means he's going to have a chance for more than those just two questions, which he takes when he's alongside another leader. We don't know how long it'll go, but there'll be many things to ask.

I'm guessing not, he's not going to get a lot of questions about NATO. That's my bet. Anyhow, Megan, thanks very much. Appreciate it. And remember, you can always hear us on our podcast. Be sure to follow and listen to Power Lunch wherever you go. Just wherever you go. We'll be right back.

Grocery store, ball field ain't, you know, pickleball. Welcome back to Power Lunch, everybody. Time now to get out to one of the more fun events we cover every year, the American Century Championships with athletes and actors teeing off on the golf course out in Lake Tahoe. Dom Chu is there covering the event and he's joined by one of the participants. Hey, Dom. All right, so, Ty, we have Brian Baumgartner here. A lot of folks will know him from the office.

Brian, thank you so much for being here with us. Thank you so much. It's my pleasure. So you've been doing this for a long time. You've been here. You're a main state. We see you on TV every weekend. How long have you been doing this, and why do you keep coming back?

I've been, this is my 17th year, which really only means that I'm old now. Like when I started coming, I was one of the young pups, and now I, well, I'm not anymore. What brings me back is the people. And it's not just the celebrities, which is awesome. I'm a huge sports fan. So the relationships that I've made with guys just coming here every year, I cherish and value more than just about anything. But it's also the people of this community, the volunteers. You know, on every whole, there's three or four volunteers.

Many of them are here every year and have been here for the 17 years that I've been here and much longer. So it's a very special place, obviously beautiful as well. It's my favorite week of the year. It's funny because we just watched earlier this morning, American Century CEO Jonathan Thomas, tee off with NFL's, the Jaguars starting quarterback Trevor Lawrence, and there's NFL guys all over the place. The fans are going crazy. Just talk to us a little bit about the energy here. Oh, it's incredible.

And that's what I mean. I mean, the number of NFL quarterbacks now, either past or current, that I have real meaningful relationships with because of my time here. and then we make time to see each other throughout the year is really, really special. The event seems to grow every single year. I heard crazy numbers, 75,000, I think last year. They're expecting even more. It seems like they break a record every year. It's a great event for the fans and the interaction, hand-to-hand combat, if you will, out on the course.

It's a lot of fun. So there's also a dynamic here where the selection. are obviously stealing the show here, but it also kind of highlights this idea that with all the celebrities out there, the celebrity world, pop culture is changing. And certainly for you guys as actors, I wonder if you might take us through what you're thinking right now about the craft, your trade craft, artificial intelligence, and everything else that's kind of permeating through the business these days. Well, it's a changing time. I mean, even since the office premiered, which is crazy to say, in 2005, so we're almost 20 years.

since we started the number of changes both with streaming. Now, yes, as you mentioned, with AI, stuff is changing a lot. Fan interaction, social media obviously has some value. It also has some difficulties, but that's why a place like this, like here, where we're able to have a real connection with those fans who've been watching for so long, be it sports or entertainment, It's very special. If you had to say one thing with regard to what actors have to do in the future, what would it be?

Wow. It's a great question. I think that AI has a place and it will exist. And as long as it's used responsibly can add great value to entertainment. But I think the autonomy of actors and the creativity of actors and individuals and the collective. collaboration between directors, writers, actors that create this television and movies that people love so much. Ultimately, I think in the end, we will still experience that value. Brian, I wish you the best of luck this weekend.

I hope you play some good golf. And Ty, I'm going to send things back over to you. Remember, you guys can all watch live coverage of this on NBC and NBC sports this entire weekend coming up. Ty, it's going to be a lot of fun. Please say hi to Brian, whom I met about a month ago at a similar golf outing. It was a great guy, and it was nice to meet him on that. occasion. I wish him the best. And again, you can Friday to Sunday. Watch the American Century Championships. NBC, a golf channel, Peacock, anywhere you want. We'll be right back.

Welcome back, everybody. A quick check on the markets. As you see right there, the NASDAQ, taking it on the chin down 1.3 quarters percent, 328 points. The Dow Industrials, meantime, are up about 8-100th of a point or 30 points. Well, the annual Allen & Co-conference is underway in Sun Valley, Idaho. The future of sports is front and center with league commissioners there. And our Julia Borson is in Sun Valley, where earlier today, she sat down with NFL commissioner Roger Goodell in an exclusive interview. Julia. That's right. Commissioner Goodell making big news saying that the league is making progress on the move to allow private equity to invest in NFL teams. Take a listen. We've had a tremendous amount of interest,

and we believe that this could make sense for us in a limited fashion. probably no more than 10% of a team. But that would be something that we think could complement our ownership and support our ownership policies. So we think whether we're moving in a very positive direction and hopefully I'll have something by the end of the year. Now that 10% would be lower than the 30% that other major leagues typically allow. Commissioner Goodell also weighing in on the deal between Skydance and Paramount Global, which owns NFL broadcaster CBS, saying that they will evaluate whether they should renegotiate with CBS under its new ownership.

Now, as for the NFL's jump in ratings last year, Goodell said he is sure that the Taylor Swift effect was a positive one, but he said it does come down to the quality of the game and of competition. He also said they're working on ways to keep the game exciting, including some new rules around kickoffs, and there has been a lot of chatter about expanding the regular season to 18 games, which would involve moving the Super Bowl to President's Day weekend. But Morgan and Tyler Goodell noting that this is a decision

that would need to be made alongside the Players Association. Back over to you. All right, Julia, beautiful out there. Thanks for being with us, and thank you for watching Power Lund. I'll see you at 4 p.m. on overtime.