Power Lunch - Tracking the Record Rally, Holiday Retail 11/27/24

Episode Date: November 27, 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 Lunch on this Thanksgiving Eve. I am Dominic Chu alongside Contessa Brewer. Here, the Dow is hitting 45,000 for the first time right out of the opening gate this morning. But stocks are pulling back since then. And right now the NASDA is actually down nearly upper center or so Contessa. So we've lost some momentum here. Yeah, though we have a lot of people already getting a head start online. We're about to enter this crucial holiday period for retail leaders.

The next five days between Thanksgiving and the so-called Cyber Monday could make it. It's not so called. It's what it's called now. It is. Cyber Monday. It's a make or break year for many chains. We have an all-star retail panel about to join us. All right. So we're also looking at the impacts of the proposed tariffs. Today we're going to discuss energy as well as crude oil prices, not exempt from this. And we do import a lot of oil from, of course, Canada targets. I see. And we're going to talk to a CEO who says the tariff threat is keeping him up at night. His company makes pre-lit our. artificial Christmas trees. And he says, if tariffs on China are increased, as proposed, next holiday season could look a lot different and fascinating conversation. I have one of those pre-lit Christmas trees. They're a convenience. I love the smell of the real ones, but they become

such a pain to put up, take down the needles everywhere and everything else. Anyway, we'll get to that Christmas tree story a little later on. Let's begin, though, with what everyone's doing and talking about right now, which is shopping. We are, of course, Americans, and we do shop. As we mentioned, These next five days are huge for retailers. Courtney Reagan joins us now with more on that story. And Courtney, I just remember how many times you and I have both been in Contessa as well at shopping malls or something like that on the Black Friday. I thankfully will not be at a shopping mall this Black Friday. It's a professional tradition.

But you know what? Before I was a retail reporter, I used to go shopping with my family. It was a tradition for us too. And no rest for the retail weary this week at all because we're moving from big earnings to the Big Five. The unofficial start to the holiday shopping season does begin tomorrow. online for major retailers, even though many have already had early cyber deals in October or early November. Deloitte says spending during this stretch between Thanksgiving and Cyber Monday will hit a new record high of 650 bucks per person. That's up 15% from last year. They also predict 56%

of total holiday budgets will be spent over retail's Big Five. Interestingly, all household income groups say they plan to spend more than last year during this big stretch. Black Friday still expected to be the busiest store shopping day of the year, according to Sensormatic, though not as big as years ago. However, now that most large retailers are again closed on Thanksgiving, pushing store doorbusters into Friday morning again, that does help lift store traffic on that day. Now, Adobe Analytics predicts 17% of total online holiday spending will be spent during retail's Big Five. That's equivalent to about $40.6 billion, up 7% from last year. With the biggest growth on a percent basis, to be on Black Friday with a gain of nearly 11% over last Black Friday. Now, searches for tools

and home improvement. Those are up 73% the week before Black Friday this year compared to the week before Black Friday last year. This is according to Captify. Electronic searches are up just slightly this year from last. A pretty steady category of interest for this holiday week. Electronics always seem to be some of those door busters, Condessa. All right. So Courtney, hang out here with us for a minute. For more on what to expect as the holiday shopping season gets underway. and which retailers to watch. Let's bring in Deborah Weinzwig, founder and CEO of Corsight Research

and Stacey Whitlitz, president of SW Retail Advisors. We heard Courtney just laid out there that customers are expected or they have said they intend to spend more than last year. That is certainly good news for retailers. Stacey, where else are you looking for good news?

So the best news I've seen in a happy Cyber Week, by the way, so much at stake this week, 25% of holiday sales are going to take place over this period. And we're already off to the races. The good news is I track about 70 companies and so far the overwhelming majority have promotions that are flat to down versus last year. So margins in the industry so far are intact. And what we've seen really after we just exited Q3 earnings is that consumers are willing to pay full price when the product is good.

So I think certainly shoppers are going to be out there. They're not used to seeing bargains so much anymore because retailers are doing more full price. So they're going to be using AI to try to really search out those deals. It's interesting that you expect Macy's and Coles Stacey to be losers here. Absolutely. And you look at what they just reported. Coles Coms were down 10%. I mean, that was a pretty jaw-dropping comp.

When you look at Walmart comps up 5%. And by the way, Target, Blattish, should have been gaining that share from Colts, direct competitor there. So huge disappointment. Macy's also disappointing, but clearly those are share losers in business. That is not new news. And then certainly you have others that are absolutely picking up share like Walmart. 75% of their comp came from the higher income consumer. So that's a big shift and a big win.

Debra, do you agree with Stacey's assessment of the season and who comes out on top and who doesn't? I think we're actually forgetting some pretty important newer entrance to the market like Sheen and Timu, who are also being incredibly aggressive with a lot of these Gen A.I tools, really kind of focusing on these halls and social media to not only connect with their consumers, but also to make sure they're staying on top of the deals. So I agree with everything Stacey said and I'm just building on top of that. Deb, I actually have a question for you when we're talking about spending and intentions. How do you think all of this plays out with pricing?

Stacey was talking about promotions, but obviously in general, prices are up something 20%, give or take, per category when we're comparing it back to 2019. So if you're a shopper and you're saying, yes, I'm going to spend more, is that because you're buying more or because you just know prices are higher? Corny, that is a great question. And I will tell you, we've been very surprised at Korsight on the amount of pricing work we've done in 24, which is unlike anything that we've seen. So I think retailers are localizing price much more than they have in the past. They're thinking about where can they take margin and where can they invest. And this goes back to Stacey's comments on Walmart, because they're seeing significant growth

in retail media, also known as advertising and also data monetization and Walmart Plus, they can invest in price, so that's putting them in a completely different category than many of their peers. You know, Stacey, correct me if I'm wrong, the last time we ran into each other, it was at a grocery store. Was that, am I right on that? Yes, yes, it was. The Whole Foods session. Yes. It was at a Whole Foods, right? And I'm wondering, though, when we talk about these themes about shopping, you mentioned the Walmart outperformance and everything else, how much of this is because certain of those types of stores will get us in the door because we're going to grocery shop there and then keep us in the door because we will spend on those discretionary items there and not necessarily just at specialty mall retailers or department

stores traditionally speaking. And Dom, that is exactly why Walmart is gaining so much share because even the higher income consumer is saying, listen, inflation has gone crazy. But inflation at Walmart was still an extra 100 basis points last. quarter. So it's still creeping up. And those consumers are happy to shop at the value places. And by the way, they're probably spending on other things there. So that is the goal. And certainly target over the years, as they've added more and more food in, that was supposed to be the draw. So then you spend on discretionary once you get in the door. That doesn't seem to be happening

as much as it should, particularly as Coles, their comps, as they said, are down double digits. You know, Stacey, Deborah, Courtney, the casino industry, which I follow closely, has benefited from this move toward experiences. And they've talked about it on the earnings calls. They think quarter over quarter of showing strong margins that's persistent strength, especially in Las Vegas. But even where we've seen some softening in regionals, they think that they're benefiting by consumers and their discretionary dollars going toward experiences rather than. stuff, do the retailers fear that, that shift Courtney into needing to do stuff more than buy stuff? Yeah, absolutely. I think this has been happening for a long time.

I think sort of coming out of COVID accelerated that. And that's why you hear that word experience so much with retail. I think that's why some retailers are encouraged about seeing return foot traffic into store because it is also an activity. It's not an experience exactly as you're talking about, but it's more of an experience. experience and maybe sitting on your couch on your phone. Yeah, I know Tyler likes in-store shopping as well. He's not here to defend himself, but I'll bring that up. So I think retailers are definitely competing against that. They're doing what they can to offer that in-store, and they're really trying to be this

sort of lifestyle provider in so in as much as they possibly can. But that's a big one. I mean, I know I actually, just as a very small personal anecdote, will wait until Black Friday to buy subscription services, for instance, every year, things like that, that are experienced. spend that I'm going to spend throughout the year because I can get a good deal if I wait for this week. That's amazing. All right, Courtney, thank you so much for joining us. Deborah, Stacey. Appreciate your input today. Happy Thanksgiving, everybody. All right, still to come on the show, we're going to take a look at markets ahead of the holiday weekend as we approach the start of the final stretch of the year. As we head out to break,

let's get a quick power check. As you're seeing there on the positive side of the S&P 500, it's Alta Beauty, speaking of consumer spending. Telsa Group is maintaining its outperform and $450 target price on the stock. Meanwhile, on the negative side, H.P. Inc., down 12% following the company's earnings report and disappointing guidance. We'll be right back after this break. Welcome back to Power Lunch. Each of the three major indices have reached all-time high since the presidential election, but is the record rally in jeopardy with President-elect Donald Trump planning new tariffs on imports from China, Mexico, and Canada? Our next guest argues the economy is in good shape to handle those proposed tariffs. So joining us now to discuss her thoughts is Stephanie

Link, High Tower Advisors, Chief Investment Strategist. She's also, of course, a CNBC contributor. Stephanie, thanks very much for joining us on this Thanksgiving Eve. I wonder if we can take us through, you can take us through. The reasons why you feel as though will be constructive as a market and economy given the fact that tariffs may be in the offing and that there has been so much negative commentary about what the effects on the economy could be. Yeah, and it's great to be here, I think first and foremost, there are a lot of unknowns. We don't know the numbers. We don't know the countries.

And I think China certainly seems likely. I think 30% tariffs is kind of what I'm thinking. It's my base case. Remember that Trump wants to make doing business in China more expensive, and he wants supply chains out of China and actually supply chains to go throughout the world, including here, the U.S., which would obviously be a big beneficiary, but also someplace like an India, which I'm very bullish on. I think Mexico and Canada are a little bit harder to figure out.

I do not think it's going to be 25%. I think it's a negotiation tactic that he is doing. And it's also really difficult to change tariffs under NAFTA and USMCA policy. So I think it'll take longer if in fact it happens, but I do think it's more of a negotiation. So back to your question is, I think, the economy can handle higher tariffs because the economy is growing quite nicely. We're running at about 2.7%. That's the Atlanta Fed tracker for 4Q. And we know we got 3Q this morning at 2.8%. And you guys were talking about at the top of the show, consumer is really in good shape. And that is 70%

of our GDP. And we got great personal income data today and spending numbers. Inflation is still sticky, but it's coming down. And that bodes well for earnings. And that's really from investment point of view, what I care about. In a two, two and a half percent GDP world, you can do mid-single-digit revenue growth. And I think the big surprise is going to be margins, margin expansion. When even in a higher inflationary environment, yet these companies have pricing power. So I'm bullish. I'm bullish into the end of the year and into the new administration. You're not the only one, Stephanie. It feels that way. The general commentary amongst most strategist is bullish, if the market's going to go higher and keep marching towards these record

levels again and again, it could be a mix of earnings multiple and the earnings growth itself. Which do you think is the predominant story in 2025? Is it going to be that we pay more as investors for a dollar of earnings or the fact that companies actually just outright make more money? I think companies outright make more money. I much prefer faster growth in the economy and a little bit more inflation than the opposite. Because as I mentioned, you can see mid-single-digit revenues, and I believe strongly that margins are poised to move higher. So I think you're going to see something like 8 to 10 percent earnings growth. I know some of the bulls out there, Dom, are thinking about like 15 percent.

I don't know about that, but I am very comfortable paying for non-tech stocks and looking at other sectors that are trading at multiples that are much less than 22 times that do have the earnings growth. Okay, so if we're looking at the markets today, you've got the Dow, the S&P, the NASDAQ lower on the day. The Russell 2000 is higher a bit. And the volatility index, VIX, is up 2.5%. When you're talking about the areas that you're willing to wait and see for some earnings growth, I mean, do you like it? Would you stay in consumer discretionary? I always pay attention when you're talking about casinos, but are there other areas that you're particularly excited about? Yeah, I mean, I think that there are haves and have-nots in consumer discretionary. You know I own Las Vegas Sands, and that's really a Macau play and a Singapore play, and it's very, very cheap. But in terms of back home, I think you've had some pretty good retail sales numbers. Broadly speaking, the government put out a 4.6% year-over-year retail sales numbers in October. We've had PMIs and ISM services. as you guys were talking about services before, that the ISM and PMIs, the services are actually

close to 60. And then, of course, you have Walmart that did well, Costco that did well, Amazon that did well. Gap has a new CEO. Do you like Gap? I love Gap. Gap is one of my favorite ideas. The stock is trying to get 12 times earnings, and it has a 3% yield. And Richard Dixon is the new CEO. Well, he's not new anymore. He actually arrived in November of 2022, but it takes a long time for a CEO to kind of get their hands around the company and the situation and what changes need to be made. And I think he's doing a really good job. The quarter, they just reported it, the fourth straight quarter where earnings and total revenues grew. Athleta actually saw acceleration. They have new CEOs at Old Navy and Athleta. And I just think

the risk reward is really attractive here. All right, Stephanie, the other part of the market that's going to be leadership or maybe should be some kind of leadership is technology. But But if it's not MAG7, where in technology should investors look for that value play? So, I mean, there are two places where chief technology officers are spending money. They're spending money on AI because companies are trying to figure out what AI is for their business and cybersecurity. Cybersecurity because the companies can't afford to wake up one day and lose their business. So I think you're going to see double-digit growth there.

I like CrowdStrike, and I love it down 6% today. I think it's a gift. That company had a great quarter. They beat earnings and revenues. Subscription revenues grew 31%. Total ARR grew 27%. So guidance was a bit conservative, and that's why the stock is down, especially because it's up 25% this past month. But I do think it's an opportunity because I think that's where you're going to see overall the total addressable market expand pretty substantially. All right, Stephanie Link, High Tower, Advisors, Chief Investment Strategist. It's great to see you today. step happy thanksgiving happy thanksgiving contessa let's get to rick santelli in chicago for a look at how the bond market is reacting to this morning's economic data hello rick hi contessa i'll tell you

just looking at the bond market be hard pressed to guess what all the data was earlier today and there was a boatload of data let's look at some 12 hour chart shall we if you look at a two year what i want you to see is when the low yield of the session was made it was made basically right as the 830 data was being released. And as you move towards the 10-year 12-hour chart, its low yield was established right after the seven-year note auction. So let's go through this. The 830 Eastern data might have had some setbacks in terms of consumption, but it was still strong. All in all, take a macro view, GDP data. Nothing negative about that. Chicago PMI was a bit weak, but it's manufacturing, no surprise there. And then the big 10 o'clock Eastern data, well,

The income was very strong, and I'll tell you what, everybody's saying the same thing. The inflation data was as expected, but it was still sticky. And that is the point that we could talk about as expected and watch rates go as 10-year as you see on the last chart. It's about ready to close at a one-month low yield, two years at a two-week low yield. But the reality is that when we really come back after the holidays next week, I suspect it won't matter that the data came out as expected. What investors are going to pay more attention to is the notion that inflation is sticky, and it certainly doesn't seem to be getting less sticky as we move forward through time, especially considering that we're still pricing in a quarter point cut at the December meeting.

Dom, back to you, and I hope you and yours have a very happy and healthy Thanksgiving. Thank you very much, Rick's sticky like toffee pudding. We'll have happy Thanksgiving. After the break, we're going to explore the sharp reversal in the dollar. Market Navigator is coming up after this. Welcome back to Power Lunch. Let's get a quick check on the markets. And what you're seeing right now is right across the screen.

It's fractional, not a lot, half a percent for the NASDA Composso, but we are kind of trending towards the session lows, at least for the Dow, which is down about 107 points right now. Meanwhile, the U.S. dollar has been on a tear, but it's now on pace to snap an eight-week winning streak. The incoming Trump administration is promising big changes, but what will that actually mean for the longer-term trajectory of our greenback? the reserve currency of the world. Our next guest has thoughts on how we got here and where we are

headed. So joining us now is Tom Fitzpatrick. He's the managing director of Global Market Insights at RJ O'Brien and Associates. Big broker out in the Midwest. Tom, thank you for joining us here. Let's talk about the greenback. We all have a vested interest as Americans in seeing the dollar remain the strongest reserve currency out there. Is there hope for the dollar? There absolutely is, Dom. And thanks for having me. And I'm Obviously, from a reserve currency status, there is nothing really to challenge the dollar at this point in time. But I think as we sit here right here today, we've had a really good move up in the dollar,

which has been driven by a number of factors, including the talk about tariffs, the talk about the deficit, and also in particular the feedback loop of people talking about a Fed going on pause while at the same time, you know, an ECB may be going 50 basis points. And that resulted in a very good widening and interest rate differential for the US against Europe and other places. And it sent the dollar pretty much to the targets that were in place in terms of both dollar yen and Eurodollar as well as the dollar index. But in the near term, a lot of those factors have changed a little bit.

The tariff dynamic is beginning to look like it may be less stressful than it was originally looking. We have a situation where Scott Besson is obviously the nominee in terms of Treasury Secretary. is considered a little bit more budget hawkish in terms of looking for the deficit. But in particular, what we've seen is after a very big run in yields, as well as the run on the dollar and a widening in those differentials, that has come to at least a pause, and we've seen yields back up, we've seen differentials back up.

And that's why the dollar, as we move into Thanksgiving, has also managed to back up and lose some ground. All right, so what's the forecast and how exactly would you look at it, Tom? How exactly would you play this thing? is the trajectory medium to longer term still positive or negative for the U.S. dollar? I would say that the trajectory is still positive. I would be cautious right now and into December for a couple of reasons. Number one, we really do need to see that yield dynamic reappear. And we need to see it start to push back up again. We need to see those differentials widen out again. And I think that can come in terms of the relative economic backdrop and the relative policy backdrops.

There was no scare, as Rick Santelli said, in terms of the inflation numbers today. So the market is still on pace to believe that the Fed may actually ease in December. And if you look at the seasonals, the reality is for seven years in a row, the dollar index has actually fallen in December, an average in excess of one and a half percent. So I think you've still got to be fairly careful in the short term in terms of this dollar trade, and particularly looking at the fixed income side of the equation. But I'm on a more medium-term basis, this US economy is going to get more stimulus. It's going to get more deregulator environment.

And it's almost certain that the Fed, even if it doesn't oppose in December, is going to get more cautious on policy while at the same time, somewhere like Europe is actually getting more aggressive in terms of its easing policy. So I think that backdrop should see a re-emergence of dollar strength. But there might be a danger we have to wait until we get into the new year before we really see that start to materialize with any gusto. All right. The strong dollar policy may still be in effect.

Tom Fitzpatrick, thank you very much. We'll see you soon. Happy Thanksgiving, sir. Send you it up. Thanks. After the break, stocks to be thankful for, we have a special Thanksgiving edition of three-stock lunch. First is we had to break,

take a look at shares of Uber, briefly dipping lower this afternoon. It's about flat right now, but there was a report that came out that the company's the subject of an FTC probe. According to Bloomberg, the FTC is looking into whether Uber violated consumer protection.

laws with its Uber One subscription products. We have reached out and are waiting to hear from both the FTC and from Uber. We'll be right back. Welcome back to Power Lunch. I'm Simam Modi with your CNBC News Update. Israel says it will appeal the international criminal court's arrest warrant against Prime Minister Benjamin Netanyahu for alleged war crimes, calling it baseless. Meanwhile, Netanyahu met today with Republican Senator Lindsey Graham in Jerusalem,

who says he plans to introduce legislation in the U.S. that would sanction any country that tries to enforce the warrant. Republican Ohio Governor Mike DeWine signed a new bill into law that will bar transgender students from using the bathrooms that fit their gender identities. The law will apply to students from kindergarten through college at Ohio public in private schools. The measure takes effect in 90 days. And solar storms could make the northern lights visible across the northern U.S. and Thanksgiving. Meteorologists say how vibrant and how long the auroras last will depend.

depend on how intense those storms on the sun get. They predict the best viewing time will be after 10 on Thursday night into Friday morning. Back to you. Maybe Friday morning. We're supposed to get rain about here. Lots of rain. We're like literally while you're saying this, we're looking at the forecast to figure out whether we can catch the northern lights. It's a lot cheaper than a trip to Alaska.

Yeah. So wait till Friday morning. Okay. All right, Sima, thank you. Time for today's three-stock luncheon in the spirit of tomorrow's holiday. We asked our trader to pick three stocks. she's thankful for her here with our trades, Gina Sanchez, of chief market strategist and chief market. I don't know why it said at.

At Lido Advisors, Gina's also a CNBC contributor. The first stock, I love this idea that we're doing stocks that we're grateful for. You're thankful for Microsoft. Why? So Microsoft obviously is an incredibly strong company, but in particular, we launched a machine learning risk management startup with the backing of the Lido partners. and Microsoft supported us with a sponsorship in their startup program. And they've been doing this across a number of startups.

These are the same kind of startup Azure credits that they gave OpenAI when they started. And they're building up a business. And obviously, if you look at their recent earnings, that cloud growth flowed a little, but that happens to be more about sort of a constraint of what they can do. The demand is there. They're just continuing to increase their capacity. I mean, they're making significant investments. They just bought three-mile islands to use nuclear to power CHATCP.

That's how serious they are about the build-out. And so, you know, the outlook is enormous. But for us in particular, you know, as a scrappy startup and, you know, building out our machine learning process and software, Microsoft is an enormous partner. And they're going to gain a lot of business from us over the years from it. I'm sure there are a lot of long-term shareholders who also think that Microsoft is a stock to be thankful for. Let's talk about your next one because this is Peloton. It's already up 54% so far this year.

So investors who got in at the right time are thankful. But the ones who've been there for the longer term, maybe not as much. Why do you like and are thankful for Peloton shares, Gina? So if you followed my view on Peloton during the entirety of the pandemic, I was actually very negative on it because it was so overvalued. Today, you could argue from a PE perspective, it still looks overvalued. However, I do think, and much of it was really about leadership and what leadership was going to do. Barry McCarthy was very effective in stemming the tide, stemming the flow of losses, and those losses have gotten smaller and smaller. And so now there's some momentum.

And what we've seen is that the user base, which is still reasonably small, but, you know, it is there and very loyal is something you can build on. And so now we have, you know, Peter Stern, who's coming in with a breadth of experience not only in, the sort of health and active space, but also, you know, coming from Ford and their interactive experience. And really where Peloton needs to focus is they need to focus on figuring out how to reduce their costs on the manufacturing side in order to stem that. That is the piece of the puzzle that they haven't figured out. Peter Stern has the chops to be able to figure that out and exercise a turnaround story. Now, this isn't a one or two-quarter story. This is obviously a longer-term story. So I think there's going to be a breather and probably another bite at this apple.

But I do think that the company has at least proven that it could get past those huge, you know, pandemic darling days and has at least built a base of usership and, quite frankly, a very, very strong high-margin subscription product that they can build on. Well, there's always going to be a need for exercise. So figuring out how to meet people where they are is really top on the list. Last on your list, Disney. the stock has done extremely well this year. It's up 30%, slightly outperforming the S&P 500. But I guess it's personal reasons here, Gina.

Yeah, well, so it's interesting because Peloton I love because it helps me work off what is about to happen at Thanksgiving and every day because I'm working so hard on a startup. Disney is actually a part of that Peloton story because Barry McCarthy expanded that entertainment piece. And if you look at the Disney earnings, their Disney streaming revenue on Disney Plus, which is what's now included in Peloton, that is a big part of what's driving their business. They had some huge blockbusters, Deadpool and Wolverine, you know, Inside Out 2. But those actually just continued to drive streaming, you know, streaming demand. And Disney Plus was a huge beneficiary of the success they were having on the entertainment space.

And so, you know, all of these things for me, these are things that are sort of become part of my life. I basically peloton to Disney most of the time these days rather than peloton classes, but that whole experience is kind of important to me. There's nothing like Mickey Mouse cheering you to, no, do it harder. You can go faster. You can get over that hill. I'm not going to do the Mickey Mouse voice for you. I know you were expecting that, Dom, but it's not going to happen.

I'm just waiting to see. He's thankful for that. When Tootles comes up and helps us with our quiz over here. Gina, thank you. Happy Thanksgiving, Tom. All right, well, coming up with the show, details of a prisoner swap between the U.S. and China, bringing home three Americans but releasing an accused Chinese spy. Our Amen Javers has been all over the story, and he joins us with all the contests coming up next. Welcome

back this morning, the Biden administration announcing the release of three Americans who were being held in China. In exchange, the U.S. handed over two prisoners accused of spying, one of whom Amon Javers profiled in a recent CNBC documentary. Amon Javers now joins us with more on that story. Amen. Dom, that's right. Two Chinese agents held in the United States were released today as part of a prisoner swap between Beijing and Washington, and a U.S. official confirms to me that one of the spies was Chinese Ministry of State Security Officer Shu Yanjun. Now, he was the central character in our CNBC documentary on Chinese espionage last year after his dramatic arrest in Belgium for

attempting to steal technology from GE aviation. He was serving a 20-year prison. sentence in the United States. The other man exchanged is Ji Chow Quinn, who in 2003 was sentenced to eight years in prison for acting illegally within the United States as an agent of the People's Republic of China. The U.S. government said he was working for Chinese intelligence and he had joined the U.S. Army Reserves. The Americans' release as part of the deal include Mark Sweedan, who had been detained since 2012 and was accused of drug trafficking and sentenced to death by the Chinese government. Kai Li, a businessman, detained since 20, on espionage charges, and John Leung, who was accused of being an American spy and sentenced

to life imprisonment in China in 2023. Now, the release was the result of years of diplomatic work, including an effort by President Biden last month when he pressed for the return of the Americans during a meeting with Chinese President Xi Jinping in Peru on the sidelines of that apex summit. So, guys, a lot of work behind the scenes here, and this release of the Chinese spies really underscores China's efforts to conduct espionage, not just against the American government, but also against American companies. Remember, the target in that case was GE aviation. All right. So how likely are we going to see continued dialogue to bring home and conduct these prisoners swaps in the incoming Trump administration? What exactly do you think the relationship

will be like, given the rhetoric we've already seen and heard with regard to trade, tariffs, and everything else? You know, I think the rhetoric will be tough, but some of this kind of work will happen behind the scenes because it's in the interests of both countries. You know, China doesn't want its spies stranded here for 20 years. You know, Shu Yanjun conducted an operation for Chinese intelligence. He was a Ministry of State Security Officer. This was the first time the United States had ever arrested and extradited a Ministry of State Security officer and held him in a U.S. prison.

So, you know, maybe there will be more of those and maybe China will want them back as well. So we might see a future where you have this kind of below the radar, are a continued diplomatic engagement on these espionage cases, because the espionage cases themselves are clearly not going to stop, and they're going to be continuing to target American industry. All right, Amon, thank you very much for that. And we just want to remind viewers, if they'd like to see your documentary, they can do so on CNBC's channel on YouTube. While Trump's tariffs, and we knew this leading up, that he was talking a lot about targeting China, the president-elect now is setting his sights on Canada and Mexico as well. That could have major implications for global energy

markets. We'll talk to one CEO who says those threats of tariffs is keeping him up at night, and he's not even in energy. That's coming up on Power Lunch. Welcome back to Power Lunch. President-elect Donald Trump's plan to tackle inflation centered around cutting energy prices, including for crude oil. But his plan for negotiating trade deals centers around tariffs on goods coming in from Canada, including crude oil. So Pippa Stevens is here with a look at the impact of post tariffs on energy prices when the goal is to lower energy prices. That's right, Dom. Energy markets are, of course, global, and especially with our neighbors, these supply chains are very much linked. Now, when it comes to oil, more than half of the U.S.'s imports are from Canada,

and three quarters of that goes to the Midwest and Rocky Mountain regions, which are pipeline constrained, meaning there isn't an obvious alternative to fill the gap. In terms of pricing, Lipow Oil Associates, Andy Lipow, said either the Canadians discount the price of their oil to account for the tariff, or U.S. producers raise the price of their oil to import price parity, which could drive up prices at the pump. Lipow estimates a 25% tariff on $70 oil translates to more than 40 additional cents per gallon of gas. Now, for nuclear energy, the impacts could be even larger. The U.S. uses about 50 million pounds of uranium per year, but next to nothing is produced domestically. About a quarter of U.S. uranium comes from

Canada. And if utilities have to buy at a higher price, that will likely be passed along to consumers. Now, Christopher Gully from the Canadian Nuclear Association, said this is not good news for Canada, but it's also not good news for the U.S. Our nuclear ecosystems are inherently tied together. And at a time when the industry is trying to relaunch itself, this would cause significant headaches. And of course, there's all this uncertainty whether or not this is just a bargaining chip or an actual policy. You know, it's funny, Pippa, because when you're talking about those tariffs in Canada, Christmas trees don't have any tariffs right now. And what we see is that the promise that all Canadian exports that could come into the United States and we're the biggest market for Canada, you wonder whether tree producers would have to follow the energy producers to. Like either you're going to lower your prices to account for the tariff or everybody's going to raise their prices, and then that causes Christmas trees to go up.

Yeah, that's right. And it's a, you know, a lot of specialized projects. products like a tree or uranium. And so there's not really another source. And we've had these relationships for so long at where are you going to look? Speaking of Christmas trees, this is, of course, the most wonderful time of the year. If you sell them, Balsam Hill does. It's a leading provider of artificial Christmas trees, along with ornaments and wreaths and garlands

and other holiday decorations. But this tariff threat means not all is cheery and bright. Mack Harmon, the founder and the CEO of Balsam brands. Mack, it's good to talk to you on CNBC. we were having a conversation on the phone, and you said it's an issue that's really keeping you up at night. Why? Well, the uncertainty of the tariffs has been something we've been thinking about for a long time, but with just a couple social media posts the other day, it has sent our team into crisis management mode of,

what are we going to do to manage these potential 10% sheriffs on China, 25% tariffs on Mexico? So we've had to jump into action heading into our biggest weekend of the year, where what we really want to be focused on is how do we bring Joel? to customers as they shop this weekend. We do 13, 14, 15% of our sales over the next five days. Okay, so how many of your products that you sell on Balsam Hill through either the catalog or online? How many come from Mexico and how many come from China? So a small amount come from Mexico. It's a place that we invested under the last Trump administration, but the uncertainty over it has made it hard for us to really justify investing

more capital in plants there. And Mexico also is just a higher. labor wage rate for us. So the vast majority of our products, which is sourced from countries all over the world, even Europe. A lot of what we make is made by artisans, but the vast majority of what we sell are Christmas trees, and those are mostly coming out of China. So the 10% tariff, some people think it might be bigger. That is a big, a big threat to our business. And what's so interesting about it is if you think of our industry, artificial Christmas trees, it's really born out of the fact that Americans don't want to string lights on their trees. The biggest reason people go artificial and four out of five homes have artificial trees is because

they don't like putting the lights on and just much more convenient. They've actually never been made here. So this isn't a product that's going to come back here. You can't even pay Americans to put lights on trees? No. And, you know, 20 years ago, some artificial trees were made here. But when the industry went pre-lit, Americans are like, I don't like doing this from my own tree at home.

I certainly don't want to sit for eight hours a day and put lights on trees. And so we really exist because we've outsourced. this to lower cost areas where people take the time to meticulously put the lights on the tree so that we can focus on decorating it and celebrating Christmas rather than stringing lights on trees. Hey, Mac, it's Dom. You know, I'm one of those households that has an artificial tree, begrudgingly, but I do have one for the convenience factors, as you point out. One of the things that happens this time of year is a lot of advertisement on things like the Hallmark Channel. I know because my wife and my mother-in-law are massive Hallmark Channel fans. They look at the

advertisements for Balsam Hill. This is an all-American audience that you are targeting with these ads. How difficult would it be to make your products here in America and why would you not consider doing it? So we actually worked on this starting in 2019 looking at how could we change how artificial trees are made in the United States? And we got to a point where a tree that we would sell today for $800, we think we might be able to make it in the United States with automation. and I think we need to sell it around $3,000. And I just don't think that Americans are willing to pay for that. We've tried all sorts of different ways.

We'll continue to look for it. But it's just there's so much labor that goes into making a handcrafted tree that it's so hard to do it. Even we've looked at robots, all those different things. $3,000. And I know that the issue of even your decor and the ornaments and things like that, you could potentially have tariffs on depending on where they're coming from in the world. Just one more question. A lot of other manufacturers in textiles, for instance, went to Vietnam to try to avoid the whole tariff situation.

If not the United States, could you go to another country that has more favored trade status and make the trees there? Yes, we could move trees. The thing with moving trees versus cut so trim, which is an apparel, is that it's very capital intensive. We have equipment that's $5 million the size of a football field for one machine. And so that's not something you can pick up and move it overnight. So maybe a phased in approach could be more beneficial. Some pre-lit tree production since 2019 has moved to Cambodia. Some has moved to Indonesia. We're part of that trend.

But it's not something we can pick up and do overnight just because of the sheer capital. I mean, these plants can cost $50, $100 million to build a new one. And so even if you can move some of the equipment, it's a, it's a, it's a, big endeavor and we need certainty as to what's going to remain as a most favored nation location because otherwise like we invested in Mexico but now we might have a 25% tariff. It's just really hard as a business owner to make a rational investment when you just don't know what's coming next. Mack, thank you so much for bringing us the story.

And I guess for at least this holiday season, good luck to you. Thank you. Happy Thanksgiving. All right. And you remember, you can always listen to us on our podcast. Be sure to follow in, listen to Power Lunch. anywhere you go, our program in audio format. We'll be right back after this. Welcome back to Power Lunch. We're checking on the markets right now. The Dow's down just about

126 points. It's modest, but it's notable because, as you can see, we're near the session lows right now. Right out of the gate this morning, though, the Dow did jump to a new record high of 45,03. The S&P 500 and NASDAQ down a little more than the Dow is today. But still, we're on track for a positive week. So the rally post-election does continue at least for now in earnest. And now all eyes from here on out for the rest of the week turn to shopping and what the retailers are doing and how they're

performing as well. It's also interesting because you know in my early days in business news, I used to go down to the floor of the New York Stock Exchange because Friday with the half day of trading is Family Day. So you'll see all the kids and everything else. So awesome. But anyway. Well, thanks very much for watching Power Lunds. We wish you and everybody else out there. A very happy

Thanksgiving. And closing bell starts right now.