Power Lunch - Tech stocks wobble, Fed highlights inflation risk 1/8/25

Episode Date: January 8, 2025

Stocks are about flat today, as Wall Street assesses the potential for future Fed rate cuts amid persistent inflationary pressure. 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.

Welcome to Power Lunch, everybody, alongside Kelly. I'm Brian. Stocks, they have turned lower now. Bond yields, they're pulling back, but they were the highest that we have seen, Kelly, since April, the rate spike causing stocks to sink. As you're saying this, we're back at 471 on the 10-year, as we get the minutes coming out right now from Steve Leasman in Washington. Steve, do tell. The Federal Reserve at its December meeting was at or near the point after cutting by a quarter of slowing its policy easing. The rate cut that they did enact was seen as, quote, finely balanced. It was a finally balanced call, and some wanted to not cut at all. That is, more than just the one dissent. Not everybody has the vote. So why did the Fed cut? The

minutes say that the Fed cut rates to maintain the strength of the economy and the labor market while continuing progress on inflation because they believed they were restrictive. The risk between inflation and employment were seen as roughly balanced. Inflation had eased substantially, though it remains somewhat elevated. What you're going to hear next is a lot of the back and forth at the meeting between those most concerned about inflation and those less concern. So the pace of disinflation had slowed, some said, with recent readings higher than anticipated. Upside risk to inflation had increased.

Several were concerned that disinflation may have stalled or risk stalling. On the other side, some people said disinflation was still, apparent across the board, especially in market prices as opposed to the non-market prices on a range of goods and services. Now, moving on, the firms were seen as more reluctant to increase prices. Consumers were more price sensitive. Changes in trade and immigration policy. Now, a big discussion about coming fiscal policy. It's mentioned several times in the minutes. Changes in trade and immigration policy could delay inflation improvement. The uncertainty of Eleanor. also elevated the uncertainty out there about policy.

It was a rising business optimism, however, and uncertainty reported from expectations for tax policy changes, along with deregulation. Positive market sentiment and momentum in growth could put upward pressure on inflation, and the Fed was concerned about knowing the difference between what was a temporary increase in inflation, for example, from tariffs.

They didn't use that example, but that's the implication, or from other forces in the economy that might be more permanent. So a period of uncertainty ahead, according to the Federal Reserve guys, and this is why they have telegraphed. They will be slowing the pace of easing in the coming year. Brian? All right, Steve, stick around, obviously for more reaction to the Fed Minutes, the interest rate, the macroeconomic environment. Let's bring in Seth Carpenter. He is global chief economist at Morgan Stanley as well. Seth, your take on at least the headlines that Steve gave

from those Fed Minutes. Yeah, unsurprisingly, Steve did a great job in summarizing what's really important. Look, I think the facts are clear. The U.S. economy is still on pretty solid footing. The labor market had cooled but was by no means cold. And inflation keeps coming down, but there's noise. And there's lots of sort of readings in recent months that gave some of the members of the committee pause. And so what's a central bank to do after you've cut interest rates a lot and you don't know where the neutral rate is? They ask themselves, how much further do we have to go? And they're going to keep, they're inclined to keep going. We just heard on the wires a speech from Chris Waller. They're inclined to keep cutting rates. They just don't want

to overdo it. They're doing this balancing act. And I think the fact that they're getting closer to where they need to be is showing through in this sort of dispersion of views and this disagreement and just how much faster and how much further they have to go. Yeah, well, answer your own question. Because, Seth, I think it's confusing to a lot of people and by a lot of people I'm really referring to myself, which is that in September, the Federal Reserve cut rates by a half a percentage point, AK 50 basis points,

and we've been talking about the pace of rate cuts for the end of last year and all this year, and all the bond market has done is react in the exact opposite way, and bond yields continue to spike. So I think the technical term is somebody screwed up. I want to be a little bit more. sympathetic to the really difficult job that Jay Powell and his colleagues have. They're reading the data coming in in real time. They're inferring from the incoming data what they have to do.

We were a little bit surprised by the 50 basis point cut, the soft readings from the labor market. We thought at the time we're sort of exaggerating what was really going on, but the Fed didn't want to take any chances at that point. And as they were just starting to lower interest rates, they knew they were further away from neutral. And so if you're going to make a bit of a mistake, that would be the time to perhaps cut a little bit more. So I think they were doing risk management. And one of the paragraphs in the minutes that just came out was all about the risk management discussions. I think now what they're doing is they're reading the incoming data and asking how far do we have to go.

Our view is probably two more rate cuts this year. The economy will slow, but not crash for a while. There's huge uncertainty, though, about what's going to happen with tariff policy, as Steve alluded to, what's going to happen with immigration policy as well. All of that uncertainty just means they can't be confident and how far they have to go. I guess, Steve, the point is there's a lot of people out there that were hoping that rates would go down

so they could afford a mortgage to buy a home and they heard rate cuts, and they probably automatically assume that rates were going to go down. And they did go down, by the way. And maybe they did something in September. If they did, good for them. You timed it perfectly. But if you didn't, maybe you thought, I'm going to wait.

And rates will keep going down. but they haven't gone down. Is there anything that you've seen or somebody that you've talked to that can explain why the Fed is cutting, but bond yields are soaring? You know, Brian, that's a great question because reading these minutes

in the 23 minutes that we get to read them, I was struck by the idea that this did not generally read like the set of minutes from a meeting where you would cut interest rates. Unless you are good, darn sure that you're above the neutral rate and restrictive. There were parts of this thing that you could read, you know, like two-thirds of it, that would read like the kind of minutes from a

meeting where they either held the policy rate the same or even raised the policy rate. It was a very unusual situation when you look at the discussion about the possibility of inflation stalling, when you look at the uncertainty around fiscal policy that's coming from trade and immigration. So you're right in the sense that the rate cut was, I think, a little unexpected by some people. And then you have people in the room there. We got some of that when we look at the dot pot as well. But there was more than one person in the room who didn't want to hike rates.

Now, not everybody got the vote. And sometimes there may be some people, Brian, who voted for the rate cut that didn't really think it was the best course of action. It may have gone along with the majority on that. But you're right in the sense that we thought rates were going to come down. And if you look at that chart of the 10 years since September, they have gone straight back up. But the key here that I think is important for the Fed, and maybe Seth wants to comment on this, is that the substantial part of the increase is not from inflation expectations. It's from term premium, and that may have more to do with

growth prospects, productivity prospects, as well as the fiscal outlook. Yeah, I think there, I agree with Steve. It is really important to note that the increase in rates that we've seen since, say September, it's two things. The market, along with the Fed, sort of took those soft readings from the labor market in August and over-extrapolated. So part of the reversal is the incoming data saying, no, no, no, no, those fears of a big slowdown, those were overdone. And then subsequent reading said, in fact, boy, the U.S. economy is just fine. And so it's not that inflation all by itself is a big problem. It's not even that there's been all that big of a change in where the Fed's going to end up.

It's more that the economy has proven to be resilient and markets have to now price in a stronger economy for longer and then a Fed that's now showing themselves to be much more cautious. So I think there's been a lot going on. The economy is resilient. It's surprised a lot of people to be upside, including the Fed. And I think that combination of things is what's giving us this rate reaction. All right, gentlemen, we'll leave it there. Really appreciate it with the tenure just below 470, Seth Carpenter of Morgan Stanley and Steve Leasman. Let's get a deeper look at what's been happening on the yield front today with Rick Santelli.

And it's not just here in the U.S. We've seen yield spiking. Over in the U.K., the tenure has risen by one full point in the last couple of months. Rick, and at least our currency is strengthening. There's Aint. And it's even worse than general EU conditions. Not only are they seeing inflation issues pick up. They're seeing a stagnation in their economies.

Germany and parts of Germany haven't had positive growth in many quarters. This is a big deal. I don't understand why everybody's so confused about why interest rates are going up despite the Fed and their giant bias. It's pretty darn easy. A, they've been wrong. B, it is about inflation. It's nowhere near 2%. C, debt and deficits matter.

And just because the Fed's easing doesn't mean investors are ignoring the data, which is pretty darn hard to ignore. They're not doing QE. Their balance sheet's too big. spring-like quality of the long end. Look at 2001,000 in claims today. Everybody's talking about how great that is. There's a seasonal adjustment problem during holidays. 201,000 isn't really real, in my opinion, because if you look, an hour before that is when rates peaked, and they started coming down. They came right down, right through that number. It wasn't until after the bond auction, as you look at a 30-year yield, at 1 o'clock Eastern, a terrific auction.

that rates bottomed out. And then the minutes and nervousness about the minutes in front of early closures tomorrow, stock closed, push yields up a bit. If you look at a three-day charted 30-year bonds, it was pretty darn easy. The minute you closed above and negated the double top at 481 on a closing basis, it gave you about 14, 15 basis points pretty darn quick. And if you look right now where we sit in a 30-year bond, We're hovering at the highest yield close going back to the end of October.

But get this, that bond auction we had today, the yield, it was 4.913. We haven't had an auction yield that high in a 30 year. In 18 years, zoom that chart back to 2007. You see how close in general we are to yields going back that far? And remember, when you have auctions, it's only a couple times a month. So you're kind of dancing between the everyday raindrops. but that chart really shows you how significant a violation of 5% and long-dated yields will be. Brian, back to you.

I want to refile mortgage in euros, Rick, because they're paying, what, 3%? 3 and a half percent? Why can't we do that? Yeah, and you know what? In Europe and the EU, they have 6.5% unemployment and they celebrate it. It's a whole different calibration. Remember when Mark Cuban refinanced his loan to buy? I think that was the Mavs into yen so that it would basically take advantage of the currency to appreciate.

That was like 2013. Genius. Genius move. Thanks, Rick. Rick Santelli. All right, the other big story that we are following today, and that is the raging wildfires across the Los Angeles. Area four separate fires are currently burning. The causes are not yet known, but as people risk their lives to fight them.

The L.A. County Fire Chief says there simply are not enough firefighters. to address fires of this magnitude. It is still a very dangerous scene. ABC News is Jennifer Borkler, joining us now with more, Jennifer. Brian, you know, the firefighters that we do have working on these fire lines are so frustrated because this fire is going, it's counterintuitive. You know, most fires travel up hills. This fire started at the top of the hill in the Pacific Palisades Highlands about this time yesterday.

And it has been charging towards the Pacific Ocean. on the corner of Sunset Boulevard and Pacific Coast Highway in the Gladstone's parking lot. A very famous beach made famous by Baywatch, and it's now in flames in so many places all up and down the coast in places we never, never thought were at risk for fire, more at risk for a storm surge or big waves. So a very difficult fire to fight and overnight, the most important tool that fire crews have in fires like these in the canyons are the air attack, water drops, the helicopters. They get less effective with the higher wind, and then it's that much more dangerous. So it's not even worth sending crews up to risk their lives to make drops,

dropping water that will blow away and dissipate before it even hits the ground. So this fire overnight was like a blowtorch coming down the hill. And across Los Angeles County from here all the way the San Gabriel Mountains in Altadena, there are four fires burning, as you mentioned, more than a thousand structures that have burned hundreds, tens of thousands of people evacuated and many, many injuries to those, according to the L.A. County Fire Chief that did not heed the warning to evacuate and stayed behind. So we have burn injuries. We have one firefighter injury and two deaths in this fire under unspecified circumstances. But a difficult situation here all across Los Angeles.

basin. It is a very, very scary day with these winds not expected to let up before the weekend, Brian. Jennifer, I can't even believe how wind. Can you even hear me with how windy it is there? When is this going to die down? It's crazy. Kelly, I am standing here at a spot that usually is just a beautiful, clear blue ocean. It is like the eclipse. I was at the eclipse a few months ago, you know, last year, I think in April. And during totality, it's just dark everywhere. It feels like nighttime. It feels like that. It feels like nighttime all over the city.

And throughout Los Angeles, there are these big clouds just hanging over and it is dark. And the wind is very, very scary. They expected that the highest winds were going to be overnight last night. They've extended that through till 5 o'clock today. But it's almost like I heard when weather forecaster put it this morning, it's like if you have a temperature of 107 in your diet, If your temperature goes down to 103, which is, you know, like what the wind is expected to die down a little by the weekend, it's still dire. It's still not okay. It's not going to be over just because the wind has died down. It is going to continue through Thursday, Friday, and into the weekend, potentially, before we see this wind event die down. And this is a windstorm like we haven't seen in at least 10 years, possibly more. I don't remember when this sustained and this consistent. since I've lived here in the last 25 years.

It's wild. To watch how bad it is, just speaking with you now, and the sky like you described and everything else and the way the fires came down the hill instead of going up. Jennifer, we really appreciate you joining us this hour. Jennifer Bjorkland with NBC. Now, before we go to break, we want to show you quickly shares of Edison International.

That's the utility in Southern California. Shares are down almost 13% today. Southern California Edison, its unit is the power utility for those Los Angeles surrounding areas. Nearly 70,000 of its customers are without power right now. Previous wildfires, of course, have been linked to issues with power equipment. It's unclear now there's no clear evidence tying Edison to these fires directly. Yeah, there is, I want to be very clear on that.

There's absolutely no evidence. We don't have any idea what caused these fires. Could have been arson. Could have been anything. We have no idea. It's a terrible, awful situation. We did do a sort of mini documentary about a year ago. It's on, I'll put up on social media, Kelly, which talks about utilities and wildfire.

fire risk. Again, no idea what started or caused these fires, but those winds that you referenced, no doubt playing a role in this. And those wins are plenty strong to knock things over. They're incredibly strong. And the questions about the brush, how that situation is being handled, almost regardless of what started fires like this, how are they spreading so quickly? What makes this so unique? Why has this not happened to this area? Very dry. It's very, very, very, it's very, years, you know. So they had a lot of rain in the northern part of the state. It's very dry in the southern, It's my home, born and raised there, but it is very dry in Southern California. The reservoirs, you're hearing a lot about water levels.

I want to be very clear. There's 17 reservoirs in the state. The data is publicly available. They're all at or above historical capacity. Oh, interesting. So there is plenty of water in the reservoirs. The critical issue is getting the water from the reservoir and the ground and the pipeline to the hydrants, so the brave women and men,

firefighters can go look at these winds. It's just absolutely, absolutely. I'm glad you made that point. We talked to Rick Caruso last hour who had heard that perhaps low reservoirs were an issue as to why there was no water. No issue with reservoir levels whatsoever. The data is publicly available. Anybody can use the internet. I'll post it. Yeah. Can go look at it for themselves. Appreciate it. After the break, why rising yields may be a threat to stocks haven't been lately. But maybe now, we'll see. Plus the hype around high flyers like quantum computing and micro strategy. both of those names losing momentum today. Those sectors are one sector, one name anyway. We'll dig into both when power lunch returns.

All right, welcome back. We want to talk more about bond yields and the stock market because a lot of attention on both, right? We've hit it all, not just on this show, but all day long how bond yields have gone up and stocks have gone down. So we know that earlier today, the yield, the borrowing rate on the tenure note,

hit above 4.7%. That's an increase of about half a percent in a month. Now, half a percent in a month, I know if you're not a bond expert, doesn't sound like a lot. But in the bond market, half a percent in a month is, I think the technical definition is, a lot. So what does the yield spike mean for stocks? Well, we don't know, but we can show you a little bit of history. So this is what I want to do. I want to look at history.

We've got the 10-year yield is the blue line. And we've got the S&P 500, the orange line, New York City or Nix colors, dare we say. Normally, when yields fall, we see stocks rise. Conversely, when yields go up, stocks can go down. We've seen it in the past. How's my drawing, Kelly? It's not too bad. Perfect.

We've seen it here as well. What's happened lately, though, is that we're seeing both stocks and yields go up. The question is, for smarter people, maybe Dominic Chu or Bob Pisani or Santoli, if they're out there, What they might be able to answer is when yields have risen the last couple of years, stocks have gone down. Yields are rising now, but stocks have not gone down, at least not yet. The question we have to answer or ask is what does that mean besides some really bad drawing on a tell us trader? I thought that was flawless for your first time. Not bad, not bad, huh?

Let's ask our next guess, in fact, will rising yields be a bigger problem for the market in 2020? Joining us now, David Spika is Chief Market Strategist at Turtle Creek and Jeff Kilberg as founder at KKM Financial and a CNBC contributor. Welcome to you both. All right, David, take it. Why are stocks shrugging off this move and rates? I think what we have to factor in, Kelly, is why are yields going higher? So the drawing on the board demonstrated certain periods of time where yields were going up or down based on expectations for Fed policy and really based on inflationary pressures, that's going to have an big impact on stocks. Most recently, yields have been going up, and your previous guest confirmed this, based on growth expectations. So if

yields are rising based on growth expectations, we can get more comfortable around earnings growth. That's positive for stocks. If yields are going up because of deficit concerns, or more importantly because of inflationary concerns, you're going to see stocks fall. So really, it's a function of what's driving yields. However, I would say that over time, lower yield, lower yield. Fills favor the equity markets, particularly longer duration equities like these mega-cap tech names. So that's something that we're going to have to get used to. We're going to have to get prepared for higher, longer-term rates, for higher rates across the curve as rates continue to normalize. Jeff, I like the story of, you know, yields are rising for good reasons.

And it happened in the late 90s, by the way. The only difference between now and then is that we have huge deficits and we have a big debt pile. And so when yields are hanging out at five or six percent, that means, interesting. costs are going to be one of the biggest payments of the U.S. government. It means we're going to keep having deficits. We're going to keep having, you know, growing debt piles. So we can't, I think, be as comfortable with it now as we were back then. Well, I think you're right, Kelly. I think David laid out the narrative. He's absolutely right. When you see optimism on economic growth, you can see equities move higher with higher yields because that's a strong economy. And I think

that was the narrative in 2024. And subsequent to the election results, people got really excited. We talked about animal spirits. But now at 473 in the 10-year, for the first time, we even saw it in the minutes, the markets are questioning, was the Fed right in cutting? If you go back to September, they've cut 100 basis points, and the 10-year note is up over 100 basis points. So I think as the Fed is kind of sniveling today, you're seeing just skittishness. You're seeing confusion. Look at the S&P 500. Intradate today, Kelly.

We have seen the S&P 500 go positive and negative over a dozen times. There's no leadership. There's a little bit of confusion. The VIX was up another 5% earlier. And for the first time, as we get closer to this 5% level in the tenure, I think people are considering massive profit taking or rebalancing because 23 and 24 were historic equity gains back to back. So I think at this moment in time, it seems like the 10-year note is going to go to 5%.

And that is going to have a little bit of acute reaction to all these high flyers or these top 10 holdings in the S&P 500, which you can easily argue are way over-concentrated. David, what would you say to that? Oh, I agree. I think something you have to factor in is what higher rates mean for the equity market. And I think the problem today is that so many people are yearning for the ultra-low-rate environment we saw in the last cycle. What they don't understand is that to go back to that ultra-low rate environment means the economy has to collapse. We don't want that.

What we want is normalized yields. Now, it's not going to be an overnight sensation where people wake up and say, say, oh, okay, I'm okay with a 5% treasury yield. I still want to own equities. You're going to see allocations into bonds and even into money markets as these things happen. But over time, that normalization of rights makes perfect sense. It may skew your portfolio a little bit. You may want to own companies that are shorter duration in terms of their earnings growth prospects. But over time, people are going to have to adjust to a normalized rate of interest across the curve. And that is actually healthy for the economy and for the markets. David, just to add out

real quickly, Kelly, the messaging coming from President-elect Trump, that is actually confusing markets. Will the bond vigilantes win and get to 10-year over 5% or will President Trump fire the Fed and come in and promised lower interest rates? How is that going to happen? So that type of conversation

is going on right down on the markets and that's why you're seeing a little bit of a skittishness and a little bit confusion in the long end of the curve. All right, gentlemen, thanks. David Speaker, Jeff Kilberg, joining us today. All right, coming up, we've got a long way to go. Energy and technology? Are they tethered together? They just might be. And we'll show you why in Market Navigator.

Next. We are at session highs. You just heard Jeff Kilberg talking about how we've gone back and forth 12 times today on the S&P between positive and negative territory. Well, we're moving a little bit more decidedly in the positive direction. The Dow is up about 76 points right now. All of this after interest rates had also backed up again, 469 on the 10-year Dom, so I can't figure it out. 59.50. That's a 50 day in the S&P 500. Anyway, so let's talk about. a little bit about Nvidia overall, outlining this new wave of superchips at the CES show on Monday. But supercomputers are still very power hungry, and our next guest thinks that natural gas could be the big beneficiary of that trend. And he's here to tell us how he's navigating that space,

so to speak. So this is Rob Thummel, the senior portfolio manager over at Tortus Capital. And Rob, natural gas, power generation, nuclear, solar, anything power related for data centers and AI is the big theme these days. But why Nat Gas versus, say, some of the other power sources? Yeah, so thanks for having me. So for the first time in my career, my 30-year career in energy, you know, energy is intersecting with the technology sector. And so what that means for the future, in our opinion, is more talk about Zatabytes and more talk about terawatt hours, but ultimately it means more billions of cubic feet of natural gas. And that's what's going to be the future of energy going forward because natural gas is going to be the main supply source of electricity

generation, which is really, really, if you think about it, natural gas will be the lifeblood for a lot of these data centers. So if you take it, so if you look at a company like EQT, the largest producer of natural gas in the lowest cost basin, the Marcellus Shale, not too far away from where you guys are in Pennsylvania. That's a great way for investors to play the sector of higher natural gas production. And a tortoise, we think natural gas production could increase by 30% between now and 23rd. So, Rob, just let's talk about this for a second because we had Toby Rice of EQT on just a few days ago.

And I asked him, you know, basically what's going to happen with this huge tidal wave of supply that's coming online? All these new LNG import terminals being built and so forth. Won't that depress the price? Won't that be a problem for companies like his? And he admitted he's like, look, we'd probably like to see prices in the 450 range to be more profitable than in the 350 range where they are now.

Yeah, you know what? also, Toby, probably also talked to you about all the cost savings and cost cutting he's done, to lower the production cost of natural gas. We have a real benefit in the United States and that we have a significant amount of low cost energy. It's really benefited us. It's derived from the U.S. Shale Revolution. It's still here. It's going to be here a long time. It's kept consumer prices low, inflation relatively low. And so we've got seven more decades of this to produce. And that will benefit higher industry in general. Rob, let me just ask you for those at home who are wondering, okay, so do I jump into EQT,

do I jump into LNG, the Chenera meaning, what are the names where you feel the highest confidence quickly where people can benefit? Or pipelines even. Sure, absolutely. Yeah, well, and that's a good point, Dom. So I think if you think about energy and the circulatory system that you need, that's the, that's the distribution of energy out to the various sources. You need these pipeline, these energy pipeline.

Like Williams Company, Williams Companies is an example, owns a massive pipeline network, one of the largest pipeline networks really in the U.S. It's impossible to replicate. Huge economic mode. Got a three or four percent dividend yield, going to grow the dividend, six percent this year, is going to benefit from all these growing trends, whether it's coal retirements and more natural gas, whether it's LNG and more exports of liquefied natural gas, or this AI development that's happening as well.

You mentioned Kelly, Scheneer, LNG, U.S. is the largest export of LNG in the world. We're going to double LNG exports. Now, you were talking about a few days ago, that's a lot of that's a lot of, actually gotten lost in this say and say I boom, but liquidified natural gas export, oh, it's going to be a big deal. And Chenier is the largest exporter. Got a massive amount, high quality cash flows, lots of stock buybacks, lots of dividends coming from Chenier as well. All right. And those shares have been near all-time highs. Rob, thanks. We appreciate it. Rob Thummel. Thank you. Dom, it's one of those things where you go, this is great for the U.S., but it's still, it's still risky for investors. And there's an interesting supply demand dynamic that's developing on the production side.

Aeza-V prices, so we'll see where that LNG trade and everything else goes. All right. Can I give you guys a dirty little secret? Well, dare we call it the RBI, random but interesting? Oh, he brought it back. Who has, who sold more LNG to Europe the last three years than any time in history? Better be America. It better be America.

And Russia. Oh, interesting. There you go. Somebody blew up the pipelines. There's the competition. But they're still selling the LNG. Guys, thank you. All right, on deck.

Speaking of energy, we're going to show. you part of our exclusive sit down with a real power player with the CEO of Chevrons. He's happening with oil and gas and their stocks. All right, well, a few weeks ago, the oil prices are going to crash theme was in full effect. And to be clear, they still might. But lately, oil prices have been rising. And that has helped oil and gas investors just a little bit. Now, overall, let's be clear, oil and gas stocks pretty much stuck mostly where they were two years ago. They made you no money. So we wanted to find out what is really going on and where we may go. So today, we spoke with the CEO of Chevron about whether with the White House changing the next four years would be very

different than the previous four years. I do think the future is going to look different than the past. We've got an incoming administration, particularly in some of the key agencies that has deep energy experience, deep energy knowledge. And I think the desire to help form stimulate strong and sound energy policy for American consumers, for the American economy, and to encourage investment in American energy of all types. So we look forward to working with the incoming administration and continuing to build a strong American energy economy. I think the critics might say, and they might have a point here, Mike, which is that at 13-2, 13.3 million barrels per day, at least of oil, gas, different story. We can get to that.

How much more room for growth is there? Is American oil production already maxed out? Well, America is the largest producer in the world by a fair amount with Saudi Arabia and Russia coming in behind the U.S. And we've seen strong growth over the last decade, decade and a half. I think there's still some upside, but probably not growth at the rate that we've seen over the last number of years as particularly some of these new shale plays. begin to mature. That said, there are other opportunities in the U.S. The Deepwater Gulf of Mexico being a prime example where we brought a big project online in 2024. We've got another one starting up early in 2025 and a third one that will begin in the middle of this year. And so there are still lots of opportunities in this country and there's lots of unexplored acreage.

Yeah, so Kelly, we spoke to Mike Worth for a lot longer, in about 15 total minutes with Mike. So obviously a lot more to do in that interview. We talked about OPEC. We talked about gas. We talked about LNG. We talked about pretty much everything. And also, boom and free cash flow. Why is the stock getting a more love? Check out CNBC.com slash pro for the full thing. There's also a right-upcoming a lot more with Chevron CEO. You know what this is all bringing me back to? The era when Exxon, what was the big deal they did XTO back in 2007? Yes, for 44 billion. Right before everything blew up. But I'm thinking about what do we say? The LNG boom is kind of where it's at right now. Oil is a uniquely American story.

I mean, we drive gasoline cars, not a lot of other places that, you know, important demand centers in the world do. And you just wonder if the economics would ever shift again and make them look at, you know, some of those booming areas. I don't know, but it's bringing me back to that. Like I said to you and Dom are two biggest competitors in liquefied natural gas, cutter, and Russia. I know people think, well, Russia's out of the gas game. No, they're not. They're out of the pipe. pipeline gas game. They can still send it on ships. And they're selling more record amounts of sales for Russia last year. All right. Speaking of energy, one of America's hottest stocks is an energy company. It is Baltimore-based electricity and power producer Constellation Energy. I know you guys

have talked about it a ton on the show. I guess power lunch is the appropriate name. Constellation today down about 5%. It's on reports, just reports, that it may buy privately held Calpine for $30 billion. Constellation owns, among other things, the nuclear plant formerly known as Three Mile Island. It's now the crane power or something. But the one that Microsoft wanted to restart, wasn't it? That's it? Yeah.

Yeah. And by the way, Microsoft's willing to pay $100 per megawatt hour for that power when you and I or like a regulator utility may pay 30. Wow. And the regulators don't want it to happen. Is that right? I don't remember where we stand on that front. But the point, the fact that there is another deal of this magnitude being discussed,

The trickle of a deal boom that we've started to have, it feels to me like it's picking up. I think the Hussein meet the new boss, same as the old boss. I have a feeling that the regulators that are coming may not be the regulators. That we had. That we have. Indeed. Let's throw that out there. And let's get to Bertha Coombs now for a CNBC News Update.

Bertha. Hey, Kelly. The Israeli military says today it recovered the body of a hostage in the tunnel in Gaza. Officials say they are identifying additional remains that could belong to another captive. The discovery comes as negotiators continue ceasefire talks in Qatar that would bring the remaining hostages home in exchange for the release of Palestinian prisoners. Two groups representing the credit reporting and credit union industries are suing the Biden administration over a new rule that would remove medical debt from credit reports. The Consumer Financial Protection Bureau says the move would remove $49 billion in debt for some 15. million Americans. Trade groups argue the rule violates the Fair Credit Reporting Act,

which allows the reporting of medical debt. And the Ski Patrol Union in Utah reached a deal today with Vail Resorts to end a nearly two-week-long strike. Work stoppage led to long lines, closures, and delays at the Park City Mountain Resort in Utah. No details were released about the deal, but the ski patrolers were calling for a wage increase from 21,000. $1 an hour to $23 with all the snow out there, Kelly. I'm sure folks want to get out on the slopes quickly. Huge story the past couple weeks, Bertha Banks. CNBC is accepting nominations for the 13th annual Disruptor 50 list.

These are private venture-backed companies. Just scan that QR code or go to CNBC.com slash disruptors to nominate or be nominated. We'll be right back. Meta making more rule changes today. following yesterday's big shocker on their content oversight changes. The company announcing it's allowing eBay products to be listed on its marketplace platform on a trial basis. A meta shares down a percent today, but eBay is getting a nice pop on this.

The shares are up about 12 percent at the highs, up nine now. Our next guest has eBay as his best value idea. And thanks, we're at a turning point in the AI investor story. Joining us from the Consumer Electronics Show is Baird's senior research analyst, Colin Sebastian. Colin, I did not have eBay on my bingo card as big movers out of CES this year. Yeah, it might not be the first option that you'd pick, but I think really putting together the two largest e-commerce platforms that are operating outside of new and season retail, Facebook Marketplace and eBay really speaks volumes about the strength of both of those platforms and for eBay really puts them back on the map, I think, in terms of overall e-commerce. Hasn't Facebook Marketplace basically eaten their lunch? Colin, I mean, we are showing the shares of eBay, which are up 60% over the past year,

but it seems to me they must have lost some decent share to Facebook Marketplace. Yeah, I think over time in the classifieds business, Facebook Marketplace has taken a lot of share, where eBay has really established itself as a leading marketplace outside of new and season retail, is in used product liquidations that really aren't about local sellers. So they ship products worldwide, and that really distinguishing. itself from marketplaces like Facebook, and that's part of what I think makes a lot of synergy potential from this combination. Yeah, and this is a name that you think will continue to perform well, so investors who

are maybe thinking about owning the stock can rest on your recommendation there. What else out of, maybe it's out of CES or just in general, given the positioning in the space, do you think is interesting right now? Well, you know, we're at CES, as you mentioned. There are thousands of companies here, hundreds of thousands of people. It's amazing to see what the generative AI boom has led to to and driven in terms of the ideas and inspiration. From our perspective, it's hard to pick the winners in agents and applications at this point. We like the infrastructure providers,

so Google and Amazon in particular, they're spending more on an annualized basis, the four hypers by the end of this year annually, than the GDPs of countries like New Zealand and Finland. That's opening up new revenue opportunities. They will benefit from this AI boom, and so we continue like the bigger hyperscale or infrastructure companies. And you think we'd probably stick with it, as do many. So was there anything when META announced those content changes that would, you know, give you some pause in that direction and think, okay, now that maybe a little bit of a looser leash could cause some blowback in the future?

Yeah, I don't think so. I think there was a lot of a lot of variability in content moderation, you know, through the elections, through the pandemic. And I think there's a bit of a right-sizing recalibration now. So I think it's generally going to be a positive step. Obviously, the devil's in the details. But for meta, I believe it's the right step. All right, Colin, thanks for joining us.

We'll let you get back to it. Colin Sebastian from Baird. Thank you. Meetime, shares of Palantir. They are losing investor money this week following, of course, a monster run last year. So the question out Palantir, do you buy more? Do you sell it if you own it? We got questions and their answers in three stock lunch coming up.

All right, welcome back. It's time for today's three-stock lunch. And here with our trades, Mr. Michael Farr. He is president, CEO, Far, Miller, in Washington, as well as chief market strategist at High Tower Advisor and, of course, a CNBC contributor. Mike, welcome. All right, first up on your list is Chevron. Obviously, we heard a little bit from the CEO earlier today. The entire interview, by the way. Cheap plug is at cnbc.com slash pro. And Michael, you say bye, Chevron. Sully. And thanks for having me. And congratulations on this great show. Kelly, this is awesome. Yeah, Chevron's great and it's a must-see interview on CNBC.com. You've got to watch it. Look, this is a 4.35% dividend. It is a fabulous balance sheet. Oil is sort of still towards the lower end of its trading range. If you believe in growth and GDP growth, anywhere around this, 2.5 to 3% for 2025, I think these oil companies is a safe dividend play will be pretty good. will be pretty good. Michael, we don't have a lot of time, but let's mention AT&T, which had a really nice year last year, and Deutsche just named it a top pick for 2025. You like it? No. I mean, okay, it's okay, Kelly. I mean, AT&T is fine. I can't see what the growth.

I just don't see. And it has a dividend yield. I know. So how do you buy it now? I mean, and you love the dividend. It's been great. AT&T's a stalwart. I don't have a problem with it as a as a whole. I can kind of do it, but I just can't see where they're going to come up with the big growth for this year. All right, look, it's only up 27% over the year anyway. So what's that jump change? Yeah, compared to Palantir, the hottest stock in all the S&P 500 last year. 340% gain. It's down a couple percent this year. What do we do with Palantir, Michael? Okay, I, if you all promise not to tell anybody. Promise not to tell I have a confession. Just between you and I. I bought this stock in May.

Wow. Just between us. There we go. I bought it in May in my personal account. Because my son, my brilliant son, Robert, says, Dad, I like this doctor, should buy some. I didn't buy enough, needless to say. I tripled my money in six months. I've sold 80% of my position, maybe more. That's a guesstimate, but it's about that. And I've kept some chips on the table to see, you know, okay, what, I've gotten all my money out, plus plenty.

I'm going to hang on and see what happens here. But I didn't buy it across the board. It was too risky. That is the best story I've heard. From Michael Farr in the past. Your son told you to buy you part on the personal. You got to always listen to the kids. They'll get you in a video.

They'll get you in all this stuff. Michael Vicks. What she said. Thanks for watching Power Lunch. Closing bell starts right now.