Transcripts For CNBC Squawk 20240703

The retailer sees some booming ecom sales. And of course buffetts big surprise, revealing a secret Minority Stake in one of the markets biggest insurers. S p closes above 5,300 first time and the dow does inch closer to 40,000, jim. You said this morning, overbought, but things can remain overbought for a while. When it gets this overbought, when theres so many different buyers, and we have had this a couple times, bill paul does the great work for the oscillator, you can actually have a sustained churn, flop and chop. It doesnt plummet if youre up at these levels. It kind of just marks time. Now, we did have one of these last year where we came in, the first couple days, nvidia got slammed, the big momentum guys got slammed. Then, they came right back. I know it sounds odd, but you can get to an exalted level like we are now and have some rotation internally, but its not like when were like plus 5, 6, really fast and then boom. I know i dont want to be complacent, but when you see a walmart, and you come in and thats the leader, and then the leader yesterday was the industrials. The leader before that were the utilities. Thats that really kind of benign rotation. Its not a vicious whip. And its not being led by the magnificent seven, which is really sensational. Is that why, good example, talking about the head line indexes, goldmans not moving off 5,200. Yardeni, not moving off 5,400. I think that look, ive been doing this analysis. Some managers come on and really rebel against the idea that theres so much index buying, and i think as long as people invest, i dont care how they invest, but you have so much index buying going on. The buybacks are pretty furious. If you do come in and want to buy two million shares of even apple, you will move the stock up. Apple is a big buyback. When you buy s p, youre buying apple. Theres a little bit of a short supply. Im not going for a stock shortage call. Thats always too glib. But i am saying we didnt have the ipos. Were above last year for ipos but not by a lot. We dont have a lot of new supply. Weve got the investing up, 61 of the people are back into common stock. Its the highest since 2008. You have a plethora of buyers, not a lot of sellers, and so big buyers move stocks. But again, i come back to the buybacks as being the most significant issue right now. Now that the windows open. Theyre in there buying. The banks, geez, the banks buy a lot of stocks. Apple. That buyback turned out to be very meaningful, and there were a lot of people who got off the apple train, and that was a mistake. Biggest in history. Meanwhile, the sentiment, jim, is pretty positive. Journal today, soft landing still is intact. B of a, stagflation is so 2022. The risk now is a reacceleration into services. I think one of the things you got to go back to the home depot quarter, and it was a down beat quarter, but what really struck me was that they were talking about Service Inflation. They werent so specific as to say that their own customers, the contractors, are charging more, but weve got to get Service Inflation down. Were going after rent. Were going after homes. What we have to Start Talking about services has gone up too much since 2019, and then the article in the journal about hospital costs going up. I dont believe in stagflation, because we have good growth. I do believe theres still inflation and that the fed will possibly do a surprise cut, but i think the fed needs to wait. And one of the things that we know, waiting is good for stocks. We didnt think that. We used to think waiting was bad, but this whole anticipation of is actually better than the actual. At least we do have, in these comments out of walmart today, jim, general merchandise, year on year, midsingledigit deflation, and then low single digit inflation on food. Okay. So, i mean, you remember today they talk about how the wealthier are back. And look, i joke, but i always tell them when my daughter was here yesterday, she was wearing her combat boots from walmart. She said, this is what you wear. If you want to be stylish, you wear your walmart combat boots. Immediately, i sent that to dougs crew. French bread, down a dollar. Big prices down for private brand soda. Big prices down for frozen popeyes. These are just examples. Boneless, skinless chicken, sub 3 per point. They are the inflation fighter. Youre not going to get the government to say the reason why we could have peak inflation is because of walmart. Thats not their style, but i look at the walmart styles and the costco prices, and i am impressed that thats whos really keeping food inflation in check. These walmart this is obviously just representative of the things that walmart is doing. The prices there are really, like eddie, you know, crazy eddie. Theyre insane. You cant believe. Aisle after aisle, the bargains in walmart. Walmart, by the way, is so ex exciting, because they have the fashion aisle is incredible. My daughter went to parsons, but all her friends shop in the fashion of walmart. Thats a big move. Deserving. By the way, makes it odd, the page one journal piece today on how the regime at walmart is on shaky ground because in order to keep 4 sales growth, you need another 25 billion in sales every year. I thought that that piece was the kind of thing that, i just thought missed the mark. When you get these really incredible companies, they find ways to do these things, and that reminds me of all the articles about how tim cook could never outdo the phone. Walmart can do so many things. Maybe they get ecommerce to 25 . Ecom is now 22 of total sales. In 2019,it was 9 . Theyre doing great things. Costco hasnt done as much. They like you to come to the stores. But this is in an era where amazon is ascendant. I think walmarts always reluctant to say, listen, were destroying small business, but there are still some chains. I understand, by the way, why Rodney Mcmullen from kroger feels that he is right and the ftc is wrong that they need to combine with albertsons, because what a juggernaut walmart is. At the same time, walmart is a walmart wants prices to be low, and people who shop at walmart realize they are indeed getting the bargains that sam walton used to talk about. Meantime, advertising up 24 . Thats found money. Inventory in the u. S. , down 4 . How about the fact that they closed those minute clinics when they realized they couldnt make any money . Some people were critical of that, saying, thats an example of how they cant grow. How about they just had the guts to admit they made a mistake . You were impressed by that. Oh my. When i went over it with them, they said, look, staffing is a problem. Why would we want to do that . It turns out to be not si synergistic. I wonder, what is the like for cvs, especially when amazon is gunning for the front part of the store and now wants the back part of the store with automatic drugs that are cheaper than cvs . Very challenged. Lets touch on cisco, jim. The year over year revenue number is awfully weak, worst in years, but talk about stabilization of demand. We got splunk now rolling into results. That was a quarter that i have i mean, if you go to ben righteous, by the way, the kind of coda which says, listen, dont get too excited. I went over it and i thought chuck robbins, the ceo, did a very good job explaining how were done through the d stock, we got new orders. Gary steele is going to stay. I was so afraid he would leave. Hes just a miracle worker. But i have to tell you that in the end, i was surprised to see the orders could be up so big, given what just that things were not so great just six months ago. So, i want to see how this works. I dont think this is the i dont think this is, like, the bell went off and its good. I want to see how well they integrate with splunk. One of the reasons the stock was up and lost two bucks, i think people felt, its good, but lets its still show me. A lot of software, which we like. A lot of longterm contract, which we like, but a lot of splunks a big zero. Who anticipated my mind there . Splunk is a big zero. Meantime, meme stocks, we continue to watch. Losing steam ahead of the open. Weve been getting halts for volatility on the downside. I felt bad, people at 4 00, they were selling it down to 33, and i said, they didnt get the collapsible chair memo. Remember the other day that started with the hello kitty with the chairs, and i find that whats happened is they just didnt have the short positions. And adam aron came in and used them to be able to pay down debt, because adam is hysterical. He said hes a legendary cinema funny man. So, you think there was a plan in a drawer for a return of this moment, and as soon as it came, they were like, lets go . Yeah, adam, definitely. I think that ryan cohen is a great mystery man. Hes hes inscrutable. We dont know what hes up to. We know he made a lot of money in bed bath beyond. I salute a guy that made a lot of money, even though i wouldnt necessarily approach it that way. You think this whole phenomenon may be short lived this time. It would help if the company were doing well. The companys not losing the money that it was, but we have a cycle, and youll hear it from take two later, you know, this is not a great business. Everyone did it online, and the they picked the company. There are so Many Companies they could have picked that they could have run and done, and this one just isnt as good as when they first ran it and gunned it. You can go back, by the way, if you look at this kitty guy, hes still got the rationale for why he first gunned it, and there, it was pretty compelling, but that was then, this is now. And yet your criticism of regulators, 24 7 casino well, they dont care, the regulators. I think they view everything as caveat emptor. I think that they kind of really blew the bitcoin thing when they had a chance. They could have gone after the coins that were less legit and become a world leader the way tim massey recommended, and they split the cftc and the s. E. C. Its not clear where the s. E. C. They let the spac phenomenon go. I know their heart is in the right place. I know that they have a lot of good thoughts, but i thought that jay clayton on squawk was unbelievable. He said, look, theres no place for this. But i think the s. E. C. Maybe feel like the 34 act says nothing about meming so meme away. You say youve often said the ftc is heavy handed. Do you think the s. E. C. Is too lighthanded . I think the s. E. C. Is too ca caveat emptor. I think i have felt that theres something. Chubb has an Auto Insurance business, and geico has an Auto Insurance business. You mentioned this online. If the ftc wanted to kind of just show, listen, we have guts, maybe they look into that. Were going to talk about chubb and a lot of the 13fs as we finally got that mystery unveiled. When we come back, dow is holding its investor day here at the nyse, and Jim Fitterling is going to join us. Futures close to the flat line today. Lot of retail to get to, including under armour, goose, dillards. Well look back at disney and netflix yesterday, talk some deere in a minute. The future is not just going to happen. You have to make it. And if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. The all new godaddy airo. Put your Business Online in minutes with the power of ai. Food isnt just fuel to live. Its fuel to grow. My family relied on public assistance to help provide meals for us. These meals fueled my involvement in theater and the arts as a child, which fostered my love for acting. The feeding America Network of food banks helps millions of people put food on the table. When people are fed, futures are nourished. Join the movement to end hunger and together we can open Endless Possibilities for people to thrive. Visit feedingamerica. Org actnow welcome back to squawk on the street. Rick santelli here with live breaking news from cme hq. Our april read on Industrial Production expected up 0. 1 , near expectations, unchanged. Goose egg. Unchanged. And last month, we lost some ground from up 0. 4 to only up 0. 1 . If we look at the Capacity Utilization numbers, exactly as expected, 78. 4, and in the rear view mirror, that was also 78. 4, but that just got revised to 78. 5, so it moves up by a tenth. Production levels, utility rates now are the best since the end of last year. We do see that Interest Rates across the entire curve outside of 30year bonds have turned higher. Prices have dropped, mainly due to a very large spike in import prices i brought out at 8 30 eastern. Squawk on the street will return after a short break. [ growl ] ready for the road trip. Everyone comfortable. Yep, theres plenty of space. Ive even got an extra seat. Wait no, no, no, no, no. [ gasps ] [ indistinct chatter ] [ sigh ] lets just wait them out. The volkswagen atlas with three rows of seating for seven. Everyone wants a ride. [ snoring ] ok, get in. [ speaking minionese ] yippee and see despicable me 4 in theaters july 3rd. Rated pg. You founded your Kayak Company because you love the ocean not spreadsheets. You need to hire. I need indeed. Indeed you do. Indeed instant match instantly delivers quality candidates matching your job description. Visit indeed. Com hire lets get cramers mad dash as we count down to the opening bell. One of the most enjoyable people in all of business is kevin plank. Every time he puts out a number at under armour, im hopeful that this is the number that breaks out of the very negative spiral. No. His projection here is now for 50 to 70 million in income. People are looking for 352, so this is a giant miss. Hard to find bright spots, and International Revenue, a little bit stronger. North america, down 10 . But i would tell you that this is the changing of the guard, carl, and nike, not doing that well. Under armour, not doing that well. Hoka, doing incredibly well for deckers. Really, really well. On doing amazingly well. So, its almost as if new balance is private, but theyre doing very well. This brand still needs one more makeover. I dont know what to suggest, but i know that under armours an incredibly popular brand, but theyre just not making a lot of money. They did announce a new restructuring, 500 million buyback. Yes, and i thought that was positive, but obviously, people think that the buyback is a propup, and i think whats a shame is that when you go overseas, the brand resonates, and a lot of youll see people that teams where high school wear it, but they have not found a way to make a good deal of money. And i know that kevin has tried a couple of things now, and nothings worked. But that doesnt mean you can count him out. Its just that i do need to see a couple of quarters before i believe that any sort of transformations occurring. In the meantime, deckers has been the great one of the great stars of the year. I guess one thing you could say is they did clean out some inventory. That was very positive. Absolutely, youre right. There is you can say that. You can even say, frankly, that with europe being as strong as it is, International Revenue is very big. 561 million. So, maybe its almost we saw this with vans and vf corp. When they go out of style, they go out of style bigtime, and i still have hope by the way, this mans done an incredible job for baltimore. And Everybody Knows that he has been committed to making that city great. But right now, i just cant find a reason to buy it. Its killing me. I wanted to come to the thesis, saying, listen, dont count this one out. Instead, i just say, you got to wait and see. Well watch that story. Its been interesting to see. Wait and see. Opening bell is coming up in just about eight minutes. You can catch us any time, anywhere, just willlisten to an re eng llpoasuawk on the stetopinbe dct. Trading at schwab is now powered by ameritrade, giving traders even more ways to sharpen their skills with tailored education. 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Shares of chubb are surging, the biggest gainer on the s p premarket after Warren Buffett and berkshire finally revealed the company as their secret stock pick, buying a stake worth nearly 7 billion, although jim, your comments about competition a moment ago i just know that, look, i know these guys are included. Youve got evan greenberg, one of the finest ceos in the land, a 100 billion company. What im saying is that we know that insurance is costing a lot of people a lot of money. Chubb is my insurer. Anecdotally i checked around, and i will say that the amazing thing about this Company Sells at ten times earnings. The finest insurer, arguably, in the country at 11 times earnings, you know, 10, 11 this year, 10 next year. Heres what i find most interesting. People talk about how expensive the market is. Lets use 11 as being the pe. You have evan greenberg, maybe the best ceo in the insurance business. Youve got a book of business thats unassailable and has taken on very little risk. Why is this stock at ten . Why isnt it at 15 times earnings . I think Warren Buffett sees the disparity, sees that you have a company thats so inexpensive, how can you not own it . What can i say . How can you not own chubb . Thats a great buy here. It was one of the interesting tidbits coming out last night. We knew about the apple trim. We got others like third point buying some mag seven and others. Weve got dave tepper selling some mag, and i want to mention that a lot of these times, i always feel like i have to say this, that by the time you see these things, they may have changed. I know that there are very few people like Warren Buffett who take a position, and they get loud through the filings and dont leave, and then there are other people who get loud on tv and leave. So, i always take these with a grain of salt. But i thought the chubb buy was really well played by buffett. Thats a very hard stock to buy. Its very illiquid. And it shouldnt be, but remember, its only up 12 for the year. If people want to go in and say, i want to buy what Warren Buffett buys, occidental did work, even though it seemed like the Balance Sheet wasnt that good, and i think chubb will work, and i want to salute g greenberg as being probably the most judicious insurance writer of our era. Mr. Fishman, i thought, was also excellent. But i think that this is a bargain. And warren got a bargain. Your point about insurance feeding inflation is interesting because yardeni today points out that pce, th, does net out claims, so its not going to be as intense on the pce front as it is for cpi. Thats very interesting, very good. It is whackamole. Health care comes up. I come back to, if you want everyday low price, what youre going to see at the pump, and we saw valero downgrade today, refinery margins coming down, that means gasoline is going to come down. If you shop at walmart or costco, youre paying less for food than you did a year ago. Now what we need is housing, and we need Housing Insurance and some medical. Medicals sticky. Thats why this starts number today was so disappointing. Geez. The supply is just not coming. No. And i know toll is i mentioned yesterday, its going to report, and i think theyre going to have a blowout quarter, and these companies, they on a you know, there was a period when you could recommend a home builder, and people would say, what does that mean . You recommend a toll, and the whole group moves up. The Gross Margins are so great because they only build they only build what they think they can sell. You would think that given everything we know, why not double the number of homes built . One, its harder to get the labor. Two, they dont like to take risks anymore. And three, they like to buy back their stock more than they like to put them up. Thats a new thing, and theyve done it very well. Energy companies and Housing Companies have picked that lock. You know, scott sheffield, whom i adore, who is the ceo of pioneer, now banned from being on the board of exxon, he was the one who said, listen, we need discipline. Lets just buy our stock back. Unfortunately, thats come off as price perusal, which i dont think is fair. Two industries that used to have very little discipline, oil and gas and homes, their discipline has turned into great profits. At the big board, it is federal agricultural mortgage corp. , known as farmer mac, celebrating 25 years. At the nasdaq, Venture Capital and private equity firm, insight partners. By the way really . Insights fantastic. Yeah. Full disclosure, my stepson works there. Really fabulous. We havent gotten to deere, speaking of ag. The stock was down. They did cut the guide. I guess crop prices. Although wheats come all the way back. I think that thats one of the reasons why people are less likely to want to bolt ere, because some of the commodities have come back. You know, deere made that forecast, geez, deeres got to learn how to forecast better. They really do. Theyre terrible forecasters. Holy cow. Cant they get a better read on things . They were saying it was going to be 7. 5 to 7. 75 billion a couple months ago. Now its going to be 7 billion. Its not is it that hard to forecast heavy equipment . I guess so. Ag co told us that could happen, and they just didnt see it coming. Its really strange. Interesting. Usually deere reports on a friday, so its nice to get it midweek. Yes. As for the indexes here, jim, were going to add a couple points to 5,311. The russell, which people have been eyeing for a while, within 70 basis points of trying to get its own alltime high. When you go through the russell, the bargains there are extraordinary. One of the things that is really difficult for a lot of the bears to come to terms with is, there are so many stocks that could still go up, and not get to expensive levels, and you have a few stocks that are Enterprise Software companies. Insight, the bell ringer, they have a lot of Enterprise Software companies, meaning servicenow, salesforce, which have been home runs. A lot of companies arent expensive in small cap. When you look at them, you say, wow, thats doesnt anyone know that that companys around . I mean dont you want more clarity on rates . Would you rather be too early than too late . I would rather be too early on those. As long as i buy them at that level of low price, i can continue to buy. Its the higher ones that i do im concerned about. Like the ones that even in march and april got hit when there was a when we had tenyear go up in yield. March and april was incredibly difficult, and youll talk to these companies, and they say, you remember how bad march was. They say, what are you talking about . Our stock went down. One of the things this wasnt necessarily during that period, but servicenow, we had Bill Mcdermott on. The stock went down like 40 points. Nothing had happened. It wasnt bad. A lot of companies were like that. I didnt think that data dog was nearly as bad as what people said, and data dog went from 138 down to 119 in a heartbeat. So, you have those. But those are the 70 times earnings, and those are the ones that i dont care for if we have rate issues. They really dont work. Speaking of names with pes like that. Wells with an interesting note on tesla today, jim. They reiterated underweight. Its called the dragon has awakened, and they say teslas no longer the biggest disruption threat to autos. Its the chinese. Well, i dont know if everyone saw the eunice yoon piece today. I thought it should be run continuously. This morning. It took her four hours to get the robo taxi. This was one of the most superbly produced pieces that weve ever done in the sense of, okay, you think its now . Ing up you think its ready . It took four hours to get that cab. That is not what i would call an optimal time to get the cab. Just to be clear, this was one of teslas rivals in china. Yes. Where you do get into a car, you click your phone, it supposedly takes you where you want to go. There were some left turns that were so i said, oh my god, i had to hide my eyes. But once in, she said it goes 30 miles an hour, no children, no i thought this was intersection. No heart risk. I mean, thats what happens when youre on magic mountain. We have to check your Blood Pressure before you get on. Im not going to have to check my Blood Pressure every time i have to go into a cab. Thats not what its ill advised if you have high Blood Pressure, obviously. Speaking of china, putin is in china with meeting president xi. They had a joint statement today. More cooperation on energy and finance and trade. And then you had microsoft. This journal piece. Wasnt that interesting . Telling workers in china who deal with a. I. To consider relocating. China and microsoft, remember, meta, not there. Alphabet, not there. Microsoft, it always seemed like a quiet, good relationship. Not unlike not as boisterous as apple, because apple is consumer. I didnt like that story at all. That just shows you that you got to keep an eye on them. Microsoft is such a smart company. For them to be worried about i, i guess everyone should be worried. I mean, a Putin Meeting with Putin Meeting with xi, its just like, why . Guys. But the news flow, everywhere. Like saras excellent interview with netanyahu. It was excellent. And aiim sitting there and listening, and one thing we can all agree on is this is an unstable situation. Ukraine, unstable. And yet, market remarkably stable just choosing to say, look, these are not why you should buy or sell dow at this price. And i think a lot of people at home are saying, i just watched netanyahu. I dont know if i want to be involved in stocks. And then the market goes to these highs, and you say, well, maybe i was wrong trying to conflate the two. Right, right. Yeah. Energys a good example, jim, although its up a bit today. Weve been talking about the rolling 30day decline, one of the worst of the year as that war premiums been drained out. I just am shocked. I dont know, again, i hate to opine on anything in the middle east, because why listen to me . I read the papers like everybody else, but it would seem that there should be more of a war premium than there is. As for some retail names, jim, we mentioned under armour. Goose was a beat, but they do guide below. But china was good for them. Yep. I thought it was interesting that it was good for canada goose but bad for burberry. One of the things thats happened with china this time is certain theres in and out of style. I mean, richmont, they like the watches. Estee lauder, i hope, my travel trust buying estee lauder here, but we have been dead wrong thinking there would be a turn in china. Its hard to guess where the chinese are going to buy and where theyre not. Some of the biggest gainers, walmart leads the s p, which you dont always see. Dollar general is close behind. Target is close behind. Target may be really cheap versus walmart now. Dollar general is a quandary for me, because Dollar General has had problems finding help. Dollar general is their actual unit size, walmart will tell you, is not the bargain that you think it is versus walmart. Walmart is just a plethora of bargains, and its also like the old days, you walked in, and it was little debbie, you know, Cinnamon Rolls and tasty cake cakes and pies. Just give me the lipitor. And now, you walk in and its like organic and super organic. Super organic. Well, staples are the number one sector this morning on the s p. This is what i mean about the rotation that we talked about of overbought. Now, staples staples were terrible all last week. They were terrible, except for colgate and procter wechlt know that General Mills is doing very well. I keep finding, okay, today is staples. Yesterday was industrials. Weve got this amazing rotation that is its not really lippy, though. Things are not getting crushed. Were going to talk to dow chemical in a second. This stock has quietly gone up with a pe that is not expensive for next year and how did dell get there . Its got a great yield, and its doing a lot of things to change its business model. So, i just find, again, you can find plenty of stocks that are inexpensive, but you got to look for them. You cant just say, oh, i want to go buy i got a right now, i got to go buy amazon. No, you dont have to buy amazon, as much as i respect what theyre up to. Right. Speaking of really quick, on amazon and the ongoing battle within media, we had igers comments yesterday at moffett about just how much they were spending on a low return, nearterm opportunity. And then the netflix up front. Wow. Hey, you know what . The netflix, i think that netflix, the way you do this, just go by trade desk. Once again, jeff green has confounded people. Theyre going to be the broker for the ads, one of the brokers. That stock, theres a high multiple stock that i like very, very much. Jeff green is just a miracle worker. Hes gone up against google. Unstoppable. Unstoppable guy. For a business they said they werent interested in a couple years ago. Justice department should take a look at exactly how powerful trade desk is and realize there are people who fight against monopolies and theyre not just the government. Well, weve got, speaking speak of the devil, we have dow here. Turning to one dow name that were watching, shares up roughly 15 in the past year, its been a quiet move, company saying it sees Strong Demand in the number of sectors and signs of recovery, this is most important, in china. Im thrilled to have us joined right now at post nine on their big analyst day, dow chair and ceo Jim Fitterling. Jim, i noticed you have such a mosaic of things that are going right, whether it be organic products that you have come up with, just new ideas, countries where youre selling more in, but ive got to come back to something that people dont understand. You are still linked to oil, and when oil goes up, jim, it doesnt seem to matter that youve gone carbonfree. It helps. Energys a big part of our mix, and what we do, and so when energy moves up, obviously, that creates the clearing price for our products. But natural gas is what gives us our advantage, and 65 of our investments are in really advantage territories like the americas and were making Big Investments in canada and then hope to come back here in the u. S. And do the same. So, were continuing to make investments here to take advantage of this Energy Advantage that america has. The Energy Advantage should make it so that asias doing well, and it looks like asia is doing pretty well. It is. I would say it has the same slow spots as america does with housing and construction right now, but i would say the consumer economys holding up relatively well. Electric vehicles, obviously, very strong. Solar has been very strong. And obviously, a lot of that material has ended up coming here, and we see that. We have large customers in all those markets. I think what were starting to see in the Global Economy is with all of the infrastructure that needs to be built, whether its investment in the existing electric grids and the infrastructure to support our own energy needs or the new energy demands thats coming from a. I. And datacenters, this infrastructure spend is happening, and i think last five years, we have been focused primarily on getting our house in order, getting the Balance Sheet right. Right. And today, were going to tell investors, look, weve ticked the box on everything we said wed do for the last five years and focus forward to 2030 on the investments that were going to make to generate another 3. 5 billion of underlying earnings for investors, which will allow us to not only return share to them through dividends, you know, pay them through dividends, and share buybacks, but top and bottom line growth. Last five years, we had to put a lot of money towards Credit Profile and Debt Reduction and get the Balance Sheet right. Its the strongest its ever been at this point in the cycle, and the cycle is starting to turn, and our investments are timed well to capture the upside of the cycle. If you go from where we are to mid cycle or peak earnings next peak, youre talking about 10 to 16 compound average growth rates from here andit feels like its starting to turn. You mentioned some of these projections on power demand over the next five to ten years. Do you consider it a potential crisis, or is there so much attention and investment being planned now that you think well skate to where that pucks going . I dont think itsa its a need, for sure. Its an opportunity, a big opportunity for us. It requires safe, reliable, and dispatchable power. Its not going to be done by wind and solar. Wind and solar are going to have a place in the economy, but were a huge energy user. We generate ten gigawatts of power. Were on the scale of a utility, and some of the individual Tech Companies are talking about 30 gigawatt needs. To give you an example, were challenged to decarbonize and grow the company, and now we got to also figure out how to service it. Theyve got to find ways to Energy Efficiency for datacenter cooling. Were working on a project with x energy on small modular reactors and some Tech Companies want to talkto us about why we think thats going to be a Winning Technology and does that play a role in how theyre going to supply datacenters with power . Youre going to see combined cycle natural gas with mean scrubbing. Thats going to be a reliable source of power. And then where youve got the ability to have carbon capture, like in the gulf coast, youre going to see Blue Hydrogen and carbon capture. Those are your three most Cost Effective and reliable, dispatchable power, and thats going to be what fills that need. Could you explain to me, jim, when you say the small Format Nuclear reactors, we just went through what was almost the destruction of southern, the great utility. Those were big, big nuclears. I know that ge vernova, which is a sensational company, is talking saying, jim, you got to be a little more bullish about nuclear. I still dont hear anything happening before 2030. It takes time, right . Were in the process of working with x energy to put a construction plant with the nrc for a plant down in texas. I think by the end of this year, beginning of next year, well have the construction plan in. Youve got to get that permitted and then built. So, were hopeful to get it up and running by 2030. But this is a big project. This is the kind of time frame it takes. For our path to zero project in candidate, were in construction right now. Phase two will be running in 2030. Thats the kind of lead time that it takes. The beauty of the small modular reactors is the sensitive construction on the nuclear core happens in a facility which is well monitored, and the Quality Control and documentation could be well monitored. The other thing is, its an inherently safe technology, and it takes a much smaller footprint than a big onegigawatt reactor. So, i can put four 80megawatt reactors on a 20acre site right beside the sea drift facility, and all the power and steam that i need will be zero carbon emissions. It would take 3,500 acres of solar panels to come up with that amount of electricity. This is not going to happen. Nuclears going to be the way to go, and this technology is different from the light water Reactor Technology in that its inherently safer. Its the same kind of its a different fuel source. Its a different kind of cooling technology. It doesnt the reaction doesnt run away on itself if you lost utilities. Its inherently safe. It is going to take off. And i think were going to were working hard with x energy to get the total installed cost of small modular reactors down. The operating costs will be very low. If we can compete with combined cycle gas and scrubbing or Blue Hydrogen and carbon capture, hands down, small modular reactors are going to win. Boy, that would be amazing. It would change everything, because its steady, doesnt need wind, doesnt need sunlight. It works. Jim fitterling, congratulations. I remember when people felt the dividend was in jeopardy, and those people were dead wrong because of your discipline. Thank you very much. I hope were going to be able to increase it for them. That would be terrific. Thank you, jim. As we go to break, lets look at bonds today. Lot of data, whether its claims or starts or ip out in the last hour or so. Got a ton of fed speak as well on the way, including barkin with us here onset. Meantime, tenyear just back above 4. 35 . Stay with us. [busy hospital background sounds] this Healthcare Network uses crowdstrike to defend against Cyber Attacks and protect patient information. But what if they didnt . [ominous background sounds] this is what it feels like when cyber criminals breach your network. Dont risk the health of your business. Crowdstrike. We stop breaches. Are you interested in safeguarding your investments with gold . Alamos gold is a growing canadian gold producer with a long track record of outperformance. Alamos gold. Invest with us. Our growth sets us apart. Your shipping manager left to find themself. leaving you lost. You need to hire. I need indeed. Indeed you do. Indeed instant match instantly delivers quality candidates matching your job description. Visit indeed. Com hire its a beautiful. Matching your job description. Day to fly. Wooooo busy day in chips. Jim has been all over nvidia which is still on the way in the coming days. Got a couple upgrades. Wolfe takes intel to peer perform, adds amd and amat tonight. Meantime dow taken a step back, down 21 and stop trading with jim is up next. Are you interested in safeguarding your investments with gold . Alamos gold is a growing canadian gold producer with a long track record of outperformance. Alamos gold. Invest with us. Our growth sets us apart. Do you have a Life Insurance policy you no longer need . Now you can sell your policy even a term policy for an immediate cash payment. Call Coventry Direct to learn more. We thought we had planned carefully for our retirement. But we quickly realized we needed a way to supplement our income. Our friend sold their policy to help pay their medical bills, and that got me thinking. Maybe selling our policy could help with our retirement. Im skeptical, so i did some research and called Coventry Direct. They explained Life Insurance is a valuable asset that can be sold. We learned we could sell all of our policy, or keep part of it with no future payments. Who knew . We sold our policy. Now we can relax and enjoy our retirement as we had planned. If you have 100,000 or more of Life Insurance, you may qualify to sell your policy. Dont cancel or let your policy lapse without finding out what its worth. Visit coventrydirect. Com to find out if your policy qualifies. Or call the number on your screen. Coventry direct, redefining insurance. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Its time for jim and stop trading. Im going to introduce people to people have been over demographic to a Company Called shark ninja, sn, we had them on. Bank of america comes out with a piece ive been waiting for. Initiate with a buy. They have the best styler. Okay. Ice cream maker almost impossible to find. Second best seller blender on amazon. New cooler that is hard to get, sold out initially at dicks. Dont laugh. This company is a price cutter. Go to costco you will not believe how cheap their brands on. I had them on and blown away about how they keep prices low, design them here, make them there in china. I salute bank of america for not being a snob in recommending this thought. It goes to your point about the undiscovered gems you think exist in the market and also to the degree to which theyre under covered by the street. When i had them on, okay, they pitched themselves to me and i laughed. I went to costco. Called my daughter. Dad, who would ever buy dyson when you can buy the hair styler . The ice cream maker is so great. All right, let me ask around the younger people. This is the brand that represents what we used to think of as like maytag, you know, actually hoover, what we used to think about blenders like warring and shark ninja has it going. Wow. I love their stuff. Ive been a convert to it. Its going to prod investors to do some digging. They ought to. Its a great writeup by bank of america. Jim, cisco up, but its the syy version. I like syy. Its funny, walmart, food is just such a big issue and cisco tries to keep prices down, walmart keeping prices down for the consumer and cisco, unfortunately, has the right thought, its just very understand how they were able to make the transition. Why not wait to see how gary steele does and how splunk does. Again, congratulations ben rice at nelius that wrote a piece that said whoa. His dad is a great analyst. Ben has the hes really got the zeitgeist on the tech market. You, as well, have, it seems to me a population of names that you want to you dont want to give up, but theyre definitely in the box. Yeah. Cisco, you mentioned under armour. I just want why. I think the world of chuck robbins, even though a falcons fan. Chuck, i expect to see you for the eagles game. I got under armour. What the guy has done for baltimore since the wire, i said, please, someone do something. He answers the call. But apparel is hard. And i you know, my mom worked at lits, my dad sold at gimbels. My mom did lady undergarments. They would come home every day and be just like, i dont know, i dont know. I mean, its a very hard business and people think its not hard, and theyre wrong. How about tonight . Tonight im going to look at the hottest stock in the market. Im going to do the chart for it. I think youre going to be surprised about my verdict. I dont want to reveal the stock because its on the move. Watch tonight. See you tonight. Thank you. 6 00 p. M. Eastern time. A cnbc exclusive with richmond fed president barkin live at post nine in a moment. This is remington. Hes a member of the family, for sure. We always fed them kibble it just seemed like the thing to do. But. He was getting picky we heard about the farmers dog. And it was a complete transformation. His coat was so soft, he had amazing energy. He was a completely different dog. Its a nobrainer that remi should have the most nutritious and Delicious Food possible. Im investing in my dogs health and happiness. When it comes to investing, we live in uncertain times. Some assets can evaporate at the click of a button. Others can deflate with a single policy change. Savvy investors know that gold has stood the test of time as a reliable real asset. So how do you invest in gold . Sandstorm gold royalties is a publicly traded Company Offering a diversified portfolio of mining royalties in one simple investment. Learn more about a brighter way to invest in gold at sandstormgold. Com. Barkin. Good thursday morning. Welcome to another hour of squawk on the street. Im Carl Quintanilla with leslie picker and mike santoli. David and sara on assignment. A lot of levels this morning awfully close to yesterdays close. 5313. Dow is about 90 points from 40k. 10year, 4. 36. The vix awfully close to an 11 handle. Watching that on a busy day for data and earnings. 0 minutes into the trading session, some of the movers were watching. Shares of walmart hitting alltime highs. The giant reporting Strong Revenue growth, beating top and bottom line estimates. The Company Expects to hit the high end or top of its full forecast. More on this stock ahead in the show. The shares up more than 6. 5 right now. We are keeping a close eye on meme names. Quite a while in the week of trading for those stocks. Gamestop and amc down again today after plunging double digits yesterday. This comes on the back of two massive days of gains. And shares of deere taking a hit this morning. The Farm Equipment maker cutting its profit forecast for the second time and the companys Earnings Conference Call under way this hour. Shares down 3. 4 . We will bring you the headlines from that call as they cross. As we said, s p and dow hit record highs yesterday. S p above 5300. Its 23rd record close of the year and the dow is getting closer to 40k. Mike, we had a big discussion with jim about youfr overbought conditions and some strategists not budging on the yearend targets. Overbought conditions are quite a few building and i dont think were as stretched. 1 above the march 28th highs in the s p as we were back then. I think what we had was a kind of successful sevenweek test of the general soft landing, but noneconomic outlook theory. Earnings came through enough so the market is a little bit less expensive than it was 1 lower. Its kind of how progress is supposed to go in the markets. Its unclear we had any kind of cleansing of the market of, you know, it wasnt like people ran and panicked away from stocks, but we did have that 5 wobble that often is enough to reset the market. I think from here, though, we do have to have a lot more attention on the pace of the economys performing in my view and weve seen a little bit of an adjustment, i think, of peoples orientation in terms of sensitivity to signs of softness, as opposed to six or eight weeks ago when it was the economy is overheating. The narrative moves faster than the economy but we have to keep an eye on it. Where we are in the mindset of the market is the economy heating a good thing for the market. More of a slowdown as were paying more attention. Im always of the view that good news tends to be good news. Were going to hear a lot more about the whole reaction to this inner play between policy and everything else. Bad news only good news if you think its kind of a temporary blip and you get less tight conditions or Something Like that. I believe with inflation maybe on the path again, you would rather see better Economic News than not. Thats generally been your take. I always tend to think thats the case. The bad news is good news thing for specific windows of time, yeah. We got plenty of fresh prints today. Turn to the fed and the reaction to the latest inflation number and whats means for the feds timeline for cuts. Steve liesman here with a special guest. Thank you, carl. We have tom barkin here from the richmond fed, just a short hop up from richmond to new york. Thanks for coming, tom. Great to be here. I start with you, start in a place i dont start with most fed officials. You come more from the Business World than the economic and theoretical world and youve been talking for many years now about what i call the culture of inflation. Your whole idea was it became okay in the middle of a pandemic to raise prices, and youve been watching this tension between the companies, thesellers and the buyers. Where are we at in your opinion in the ability of companies to pass along higher prices, whether or not its still cool to do that and whether or not consumers are fighting back . If you go back to before the pandemic, people thought as you said they had no chance. No Pricing Power. Market power and all those things to say i have no chance. The pandemic hit and they had no choice. So people took a step they hadnt been ready to take, which is to increase prices. When they took them up, they didnt find any consequences. We like to think were back in the no chance world, but people are still saying theres no crime, no crime in trying, and theyre still trying. I think theres a big difference between goods and services and when i talk to folks on the goods side, you can see this in the numbers, goose producers are goods producers are convinced theyre back to where they were, hearing news from the home depot and lowes of the world that says we dont want to take any more price increases. Commodity costs have come down in many cases and they dont have the story anymore. On the Services Side im still hearing people trying. I was with Pest Control Company last week who said, oh, no, we didnt take prices up for seven years from 2015 2013 to 2020, and then we took it up a bunch and still taking it up. Labor is a story that they use. Nothing to do with costs. It has something to do with they changed their view with price elasticity on the customer side. They changed their view and keep trying until customers or competitors were not there yet in your opinion. Not on the Services Side. On the which which brings me rather easily to the Inflation Report yesterday. I dont know. I guess in economics you get more than three strikes because it was one, two, three strikes youre out through march. Yesterday, did you see that as a little better . Are we back on track as mike santoli suggested . I actually was interested, even more interested in the retail sales report yesterday, because the Consumer Spending numbers for the couple months before that had come in quite strong and stronger than i was hearing in the marketplace. So i was testing my own thinking. Right. I think when you take the retail sales of yesterday and look at the threemonth numbers you say thats what im hearing in the marketplace, which is, good but not great, consumer spend. That was one piece of the puzzle which is how hot is demand. On the flainflation side it cam off the numbers of the prior side, its still not where were getting target. Most importantly, i would say back to where i was going, goods, you know, zero to deflationary, services and shelter inflationary. You like to imagine that mix would come back more to where it was before covid. My colleagues are anxious to ask questions here, but i want to do one more before i go where i give it up here, is it your opinion that this, the consumer, and growth needs to slow to get back to your 2 inflation target or can we do it with gdp remaining above trend and potential . Well, we had a really good year last year. Supply chain stuff was unbelievably helpful. And you didnt need to run below potential . Exactly. And you could always come up with some more supply stories, supply side stories, that would help you. I think were going to have to take the edge off demand, not we, but the edge off demand a little bit more to have inflation back at target. Well see. Thats when i say that customers and competitors need to teach people that they dont have Pricing Power. Yesterdays number the big goose egg on retail sales was good news in that bad news . Well, again, look at the threemonth numbers not the zero numbers. Fair enough. 2. 7 and you dont have that much inflation on goods. Its a couple Percentage Points of growth, not terrible. I wonder how you fold in labor market clues lately, the hiring rate, quit rate, umich expectation, the return to Office Demands were seeing . Wouldnt that prod consumers to have more fortitude in pushing back on prices . The hiring numbers, the overall number on the labor market to me is normalizing and thats good. We saw really big numbers back in december, january, february, but we think weve come off of that. Unemployment, you know, 3. 9, maybe edging up. Youve got initial jobless claims this morning. Not low by historic things, but maybe youre seeing a normalizing labor market with the exception of skill trades. So i still hear nurses, construction, those are places where its still quite tight. The big breadth of the labor market is normalizing. That takes a little bit of the edge off. You mentioned Services Side of things, and, you know, theres this sort of equivalence of Services Inflation is basically wages as you allude to. I wonder if theres a way around that in terms of how much the labor market might have to soften or wage growth decelerate to get that inflation story into line . Well, services has a lot to do with wages but theres a lot of catch up going on in the services too. Look at Car Insurance or Auto Insurance or health insurance. Three categories where, you know, the costs have come up hadnt been passed through and now being passed through. Thats certainly part of the services story too. I think youve got the travel part, which i guess you could say wages matter, but thats a lot more demand story and on the air side a supply story because youve got snfts boeing stuff being a little bit later to come on line. So i still think theres a lot of movement on the Services Side and going to take a little bit of time. I do believe were on the right path here. I believe inflation is coming down. On the big picture. My point is only, you know, more of a to get to 2 sustainably in the right kind of way i think its going to take a little bit more time. Sure. Go ahead. Do you feel like financial conditions are doing the job here . I ask this because we did a piece earlier this week about how theres been kind of a decoupling of the way that typically when you tighten and banks pull back on their lending standards you see a decline in gdp and weve seen that very predictably over the past 30 years. That hasnt been the case more recently, and some of the researchers said that maybe thats because of all sorts of aspects of the economy were taking advantage of quantitative easing and they had this cheap debt, didnt need to go out and buy more. Im curious if you believe that that decoupling will persist . And what that means for the prospect of rate cuts . So i just want to support what you say in terms of Interest Rates not having the full effect on the economy as quickly as you would think. I mean, mortgages, 92 fixed rate. Huge percentage of that below 4 . So none of those people had the kind of impact on interest that you would think they would have had if you take yourself back to 06 and 07. There are definitely differences in the economy and that means a slower pass through. But there is a passthrough. Youve had a bunch of Real Estate Professionals on here that will tell you there is a passthrough, bankers will tell you there is a passthrough. Interest sensitive sectors are getting hit. The real question is, for how long do you have to keep rates where they are to get the kind of impact you want to get . There is this debate going on around the neutral rate might be or not be. You could make a case in a lot of places that its come up a built. I think even the highest models, one in the richmond fed, are still significantly below where we sit today. Im inclined to believe were at a restrictive level, and it takes time. Bouncing exactly off of what leslie was talking about, stan brushen miller had an interesting critique of the fed, it was the talk about cuts in december, and a loosening of the financial conditions, that went along with that, that has led to more inflation and really the reversal that we saw in the first part of the year. I dont want to ask does the fed talk too much . I want to ask the question of whether or not the outlook for potential rate cuts that came from the Federal Reserve is part of the reason why we saw a pick up in inflation in the first part of the year . I think its really hard to say Interest Rates move very have impact slowly and say Interest Rates have impact very quickly. Im not sure im there on that. But what i thats a good tag. You got us on that one. But, you know, i think the inflation story is much longer term than takes longer. Than what happens to the market. You can make the case theres activity on the mortgage side in january because Mortgage Rates came down. I think thats true. I dont think thats whats driving house prices. Whats actually happening is, it got to january when people raised prices. A lot of people asked themselves the question, am i going to do the normal thing, preindicovid g or something a little bit more, people said we will do a little bit more and we have more inflation. I dont know how to ask a fed official about the fiscal side of things because it kind of causes you guys to shut down and not answer the question. I think thats not right in the sense that its a big part of whats happening in the economy. Crishner from evercore out with a piece that suggests the fiscal impulse later this year will be waning. And im wondering if you can talk about how you incorporate that into your forecasts and whether or not thats part of the reason why there could be cuts down the road in that the fiscal impulse has been inflationary and that inflationary impulse, if you look at the budget projections, could be waning later this year . Lets see what happens after the economy. I do want to say that you cant say that fiscal spending has no cuss quensh on the economy. The best example construction workers. We are short construction workers. You hear that in housing and every place you go. Thats not how its always been. Back to 08 we were not short construction workers. It has to be the case that thats also being driven by the fact that were investing a lot in infrastructure, right. Were taking up some of those construction workers. Ai playing a piece. Data centers are everywhere. I will call it exogenous impulses causing an increase in demand, in this case for construction workers and helped part of whats happening there. I dont think its irrelevant bshs what about the projection . I think you have to figure out where it goes. I dont think i can tell you what budget situation is going to be. Tom, we let you go, but leslie you didnt want to harang him about child care costs and the inflation numbers. I was asking steve before we got on the set here, my kids child care has gone up 34 in three years. We just did that math because we now have an apples to apples comparison of the exact class and exact school and how much of that is a part of this cpi number as well . Youre talking services, child care is a great example. That is one of the labor driven services and whats happened, i think theres a whole bunch of these Care Industries out there, elder care, child care, nursing, where a lot of people in the services weve said for years, have been under paid versus their contribution to society, and when the market for labor got hot a lot of people found other things to do. So thats a very distressed market. Its one of the few parts of the jobs market that continues to be strong because we got so far behind in covid. What youre seeing is the impact of, you know, less supply of labor at a time where demand is strong. We saw that. During the pandemic it was so much turnover and very kind of unstable from a teaching standpoint who was going to be in the classroom each day. Now much more stable, just much more expensive. To be the economic wonk, what would happen to female labor supply, especially female labor supply, if we didnt raise places to child care, attract people in to do the child care that would otherwise not have allowed females to come back into the workforce . Were seeing alltime records for women in the workforce. Interestingly, its at the top for women with kids under 5. And thats wow. Shocking given what you hear on the child care thing. Two things that are useful to talk about. One is the role of hybrid remote work that may be letting people work more or giving people a mindset that they can make it work, the other piece is that participation for women 65 and up has dropped significantly and i hear lots of stories in my generation of grand mothers taking care of the kids. Fascinating. Really appreciate you both being here today. This was a great wellrounded conversation. Really appreciate your time. Glad to be here. Our road map for the hour. Netflix scoring a touchdown with the nfl planning to air games this christmas and making the nfl the first professional Sports League to partner with netflix. Well discuss what is at stake for both. Whale watching. The one sector the money has piled into and the mystery stock that buffet bought. Walmart hitting alltime highs after the earnings beat. Well talk about how much higher the stock may go with the dow 40 k, about 15 points away. Dont go anywhere. A slow network is no network for business. Thats why more choose comcast business. And now, were introducing ultimate speed for business our fastest plans yet. Were up to 12 times faster than verizon, at t, and tmobile. And existing customers could even get up to triple the speeds. At no additional cost. Its ultimate speed for ultimate business. Dont miss out on our fastest speed plans yet switch to comcast business and get started for 49. 99 a month. Plus, ask how to get up to an 800 prepaid card. Call today 39989 as we are on dow 40k watch today. Mike, thanks for this one. Dow is up every day but one this month. Currently up 81. The nfl announcing a threeyear deal with netflix to stream its Christmas Day games. Netflix will show two games on christmas this year plus at least one game in 25 and 26. Nfls chief media and Business Officer behind the deal and our own Julia Boorstin join us here at post nine. Hey, julia. Thanks so much. Brian, thanks for joining us. Thanks for having me. Insight into the deals. You do all of these deals and you made some big moves with a deal with peacock, streaming games on amazon. For this we understand netflix has payed 75 to 150 million per game beyond just that, why does this make sense for you in the nfl . Makes sense for a lot of reasons. Christmas day is a big football day. You saw that last year. We had some of the most viewed games on Christmas Day. Were trying to make that a much bigger day for football fans and fans tell us they want that. Thats number one. Number two, were really leaning in to where fans are, so weve always been a sport about reach. How do you reach as many people as you can. That these days means not only broadcast television but streaming. Netflix is the biggest streamer in the world. Third i would say global. This is really the first deal that we have done that is truly global in nature. These games will be distributed in every country that netflix is in, which is about 190 countries, so those things all sort of came together and make sense. How does this fit into your broader Global Expansion plans . Global is important to us and we will build global the same way we build a sport in the united states. Its about reach. And reach means the right Media Partners in these territories. Netflix and streaming allows you to do that really efficiently. You have seen the commitments we have made to play games overseas and we will play more games overseas. So pairing real live games with the real Media Partners is important. You are locked in to the longterm deals of your major Media Partners. After seven years you have an out to renegotiate. Does this deal set up netflix to be one of the companies that could buy some of your major rights and i believe those negotiations would start around 2028 for games starting after the 2029 season . Im sure its possible. If anybody tells you what the world will look like in seven years theyre lying to you. We dont know. We know that were going to make these as successful as possible for netflix. And im sure if we do that, then im sure they will be there when the other deals come up. How do you address concerns that the market is too fragmented, too hard to find games, and this is going to put more games behind a pay wall . Were unique in almost every sport. Last year almost 90 were on broadcast television, even on netflix, will be on broadcast television in the local markets. No other sport can really say that. So were still embracing free broadcast television to see games. I dont think thats fragmenting too much for us. Brian, thanks for joining us here on set and we have to leave it there. Appreciate it. Thank you. Carl . Meantime, handful of points away from dow 40 k. Fun to look at milestone numbers. I was looking back for the first 30 k, back to the fall of 2020. Yes. It wasnt just a necessarily a simple splicing through it every time. You know, i think that theres not necessarily a lot of clustering of actual equity exposure where people are saying im betting on 40,000, but it does represent a catch up move by the dow to the s p 500, which, of course, has been driven by the mega caps. Today, obviously, you have walmart kicking in, but also 3m and the under loved parts of the market helping out here and, you know, ive tried to find rhyme or reason in terms of does it act as a barrier, act as a launch point . I dont think theres any particular rule to it, although 10,000, of course, was i think in 1999. That really was a big one. We got above that ultimately to the high, but then, you know, i dont know, nine years later, we were down in the 7,000 area. So, obviously, no magic to getting above it, but its, obviously, a landmark that shows big caps continuing to make progress. What about the barometer like mike santoli having personalized hat that says 40,000 . Is that usually a good indicator we get there . I think when we had the 35,000 and i have to go back and look at the chart, but, you know, sara wore it on the air, and, you know, the market backed off pretty quick after that. I dont know if its always a jinx but you have a lot of people anticipating this moment with the merch. Maybe dip your toes into the merch, dont buy a car with it plastered on the side. Thank, mike santoli, about 8 points away from the 40 k level. New filings reveal moves by the big investors including the mystery stock buffets berkshire thayas bn yi. Haaw heebung squawk on the street is back after this. Ow whats brilliant . Boring. Think about it. Boring is the unsung catalyst for bold. What straps bold to a rocket and hurtles it into space . Boring does. Boring makes vacations happen, early retirements possible, and startups start up. Because its smart, dependable, and steady. All words you want from your bank. For nearly 160 years, pnc bank has been brilliantly boring so you can be happily fulfilled. Which is pretty unboring if you think about it. Dow 40k watch continues this morning. In the meantime try variant researcher adam parker joins us at post nine. Interesting day, mix of everything interest data to earnings and certainly these records have been getting our attention. How about you . Yeah. I get why you guys get excited about things like 40,000, i get a little less excited because its a price weighted index and i dont even know if i can name the companies in there any more or all of them. We can. I think making shortterm one month market calls is hard. We empirically tried to do that for years and its hard to do. Everyone tries to do that, and try to talk about equity premium with bonds, that stuff has almost no predicative value. If youre going to have a framework i think it has to be much more about where do i think corporate profitability can go, what are the cyclical impacts on margins, the structural things that can make margins higher . What can ai do to the productivity market . Most of the debates, i did with investors, i did a dinner with seven or eight investors and it was about where can growth and margins surprise the upside . Its more that that i focus on. This stuff is all nice, but 40,000, i dont know, it could be the number times ive been wrong about the stock market in the last 25 years. We are also at a record which, lets be clear, i mean on the the market. Yeah. But i wonder what you think the market is essentially implying about the corporate profitability . Yeah. Piece of it . In particular, the sort of ai wave thats sort of dominating so many corporate budget and everything . I looked at Goldman Sachs had a chart of the Ai Infrastructure plays, you have the ai implementation plays, both done really well, especially fracture. Right. The productivity side where companies talk about how it will help their regular business not doing anything. I wonder what market thinks the payback on all this investment will be . I think its going to be massive, personally. I think its not surprising that revenue beneficiaries act well at the beginning. You saw that next wednesday nvidia reports. Only a year ago they gave you the biggest upward sales revision of any mega cap company ever. We have a chart where we tag every company that mentions anything related to ai in their Earnings Call transcripts, gpu, large language models, and their margins over time versus other Growth Companies that arent mentioning those, they arent asking the management teams about them, and their margins are already starting to pick up a little bit. The revenue beneficiaries are on the path. Your point is a tough one on when do the cost beneficiaries. You see it in medical distribution. Cor talked about it. Companies like mckesson and cardinal are going to benefit. Its more on the Health Care May be one three three years, financials five through ten, a long wave towards productivity enhancement from ai. What do you make of the consumer right now . I ask this because there was a note this morning by goldman which talked about how the financials reported looks like theres breaking news. So we will pause. I think we touched it. Dow 40k. Almost four years after dow 30k. To adams point, may not mean much from an empirical stand point, but you will acknowledge there is sentiment tick in the brain that happens . Some of these can be sort of milestones where if you set a number, hey, were going to get to the s p at 6,000, you know, two or three years ago, people thought you were crazy. Then when you get there it seems look, i feel that way all the time more at the stock level. If you told me 15 or 20 years ago that nvidia would go up in the premarket more than intels entire market cap i would have so i get the milestone thing. It hits me. Hits everyone different ways. Most Institutional Investors dont care about this and thats not going to be worth much. You have some swag. We have dow 40k swag. The depreciation of that hat will be pretty rapid. Well see. To use the wall street term. Etsy if we could. Maybe get a tax shield on it. If you sign it it might be worth something. Im not putting it on because apparently when sara did that at 30k, it caused the market to fall. I will hold it up. Its like as soon as you get a Business Card youre about to get fired. Exactly. We got to 40,054. My take in terms of the recognition of the number is that the dow is equivalent to batting average in baseball, which is the number everybody has known since the 19th century what it means and whats good and not a good number, we know now its not the best way to measure whats going on. Price weighted stuff is tricky, right. We struggle with that when we do analysis, equal weight, cap weight, margin weight, whats the most emblematic of whats going on underneath. Its nice to celebrate. Im for a party. Im not trying to rain on your parade. But i dont think real Institutional Investors care. I have to be honest. Back to what i was going to ask you about. The consumer. They care about that. They care about that. We did have richmond feds tom barkin on earlier this hour and they were talking about the culture of inflation and the way that consumers are willing to eat some of those price passthrough. Yeah. During earnings season it seems like the consumer ceos themselves have been more cautious about particularly the lower end consumer, and im curious what you make of that as it pertains to margins and the need of these companies to control costs if theyre no longer able to pass through the prices in the way they have over the last few years . Yeah. The part of the market ive been surprised is up so much is sort of the retail box, the xrt type. Because i think i know why. People thought the fed was going to be super accommodative and you buy retailers when that happens. Most are somewhat impaired on the margins and youre hitting on the right issues. On the revenue side think about pricing or mix. Sell more expensive stuff or you have to have pricing without some commensurate loss in unit demand. The cost side wage inflation, productivity, input costs, materials, depreciation. I dont think theres a lot of margin upside for most consumer businesses. The high end, you know, its inelastic. You see people paying 80 for bminus steaks at restaurants around the country. The low end is showing signs of slowing slowing and seeing many data points in the credit card data and all the subprime. Thats starting to widen. I think if i told you go home, tell me how the consumer is doing, youre going to say but getting worse in aggregate with the low end deteriorating. I dont want to buy a bunch of xrt myself. I think the physical box retailers, we get a data point, i care about target next wednesday before the open thats one i think is up too much relative to what the fundamentals can generate youve been it was great the last nine months of last year and a bad call the last seven, eight months. In the store they comp negatively online and dont add new stores. You can go bankrupt when youre short before youre right. Wake up today do you want to pay 20 times nine bucks. I think the retailers are not the place you want to add new money. Certainly a story today regarding walmart and as adam says, well get target in a few days. Stay with us, if you wouldnt mind. Dom chu and look at the dow names that have contributed to this move. Carl, to you, your point, and mikes point, leslies point, adam parkers point, price weighted indices are a tricky base but wanted to crunch through some of the numbers world war to the move that weve seen. Now the last time or the first time that it closed the dow above that 30,000 mark was back in november 24th, of 2020. In the pandemic era on an intraday basis and november timeframe there as well. On a yeartodate basis we know that markets have been relatively strong, so lets pull up some of the charts and look at where the point contributors were for this move so far in 2024 to the upside. Its been led by some of the more heavily weighted names, coincidentally, good percentage moves. Check out Goldman Sachs in particular, which is right now adding roughly 520 points on a yeartodate basis to the dows overall point total. Caterpillar has added roughly 390 or so points at this stage and American Express roughly 350. So those three in a price weighted index have been your biggest contributors in 2024. Now its the other side of the coin that has people interested as well. Maybe no surprise that aerospace and commercial, you know, defense giant boeing has been the biggest detractor on a yeartodate basis. The troubles there with the 737 max and everything else, the dreamliner has detracted about 510 points from the overall dow. Mcdonalds has taken off about 150 points on its own so far year to date and intel, which has been a computer chip laggard among larger cap peers has taken away about 120 points. So again, we know that professionals dont often look at a price weighted index as much as they used to say 30, 40, 50 years ago. The s p is a much better, larger cap encapsulation of whats happening in the market on a mega cap basis. Still these are big names, blue chip names, those six stand out in particular, carl. Back over to you guys. Dom, appreciate that. Great look at how history has gotten us here. I am curious, you wrote a piece a few months ago, not that long, about whether or not you could argue Gross Margins had bottomed and how youre feeling, if you feel pressure to increase your earnings number on the s p for the year. Yeah. I think margins did bottom july of 23. I think were fast we can tell that. For a lot of companies, maybe the big 50 are different. They have Pricing Power in most. A median company in the market, the cyclical pressures when cpi was high, hurt their margins and as its come in some they have the ability to offset that. Well see what happens with commodities and materials. Theres a moment there over where i thought they were going to be tailwinds and maybe now its not as optimistic. It depends on the business. I thought maybe logistics could be more of a problem, but that still seems somewhat benign. You have to monitor. When i think about it its labor, depreciation and materials. Depreciation not a problem for most businesses. Materials, mixed but okay. And then labor is all about can you fire people or be more productive . What i see from the businesses a lot in the transcripts is, they can grow the revenue without hiring anyone else. I think there could be incremental margin on the revenue above these levels and thats what makes me excited. I think margins will trend higher. What about interest expense. I ask this because a lot of Bigger Companies have hoarded cash generating many cases more on that cash than theyre paying for debt. But were ultimately going to face some sort of refinancing wave. Is that something youre looking at and particularly as it pertains to a bifurcation of the larger Cap Companies versus the smaller ones. The thing i want to know the most what financial conditions will look like six months from now. If i could get that nailed i would know do i want to own junk stocks, small caps, et cetera. The s p 500 is kind of a superior asset class. This is sort of dismissive but no companies go bankrupt in the s p. You know, you put the 40,000, the dow went down. Now that i say that something will go bankrupt in the next. You know what i mean. If its not accounting fraud its kicked out the s p. It replaced 6 of the companies 30 every year and add good ones and get rid of bad ones. Your question is really about kind of more small or mid Cap Companies which when financial conditions ease do well and they can refi. Any ceo worth their salt would have tried already. Im not that worried about it. I think the bigger wave is 26, 27 and see where we are with yields at that point. I guess not everybody is antsy. Yeah. Bob pisani joins us on seth having absorbed the last ten minutes or so. Just walked on. So look, you heard dom talked about what mattered here. Its really remarkable if you look at what pushed the dow up. I look from the last 10,000, 30,000, october of 22. Microsoft, 1200 points of the 10,000 points from 30 to 40,000. Caterpillar, 1100, Goldman Sachs, so the three of them together are one third of the dows advance since october 2022. Salesforce was a monster too, about 1,000 points. Theres a small group of companies here, maybe six or seven, that are 60 of the dows advance out of 30. Its not exactly uniform. But whats been happening recently and youve been noting this very well, is just the broadness of the advance and thats what really impresses me. Remember when dealing with market cap weighted indices and price weighted, you can get inequalities here where a few stocks start moving things up dramatically. What ive seen here, s p 500 advancedecline line new cap, s p mid cap, advancedecline line new high, s p small cap 600, almost new high. Thats a really, really broad advance in the markets overall. On top of that earnings increasing for the second quarter. We see record earnings estimates for the third and Fourth Quarter and continuing to hold up so the basic story on earnings this season has been, beat and at least affirm and in some cases raise. Generally beat and affirm has been the story for the earnings. So i see low volatility, earnings going up, breadth dramatically improving. All of this is why i wrote a story this morning and mike talks about this a lot about analysts and strategists changing their number. Belski did it yesterday, high on the street at 5600. A love lot of them below 5,000. The thing about 5600, less than 6 away and thats the high on the street. That tells you something, the median and the average sell side target for the s p is below where we are right now. Its 5200. Where we are round. Tells me ive made the sausage. Sure. Is, you know, theres no value in that and theres no value in that job. Right. For Interest Rate strategists or equity strategists. What theyre good is not setting a price target. Theyre forced to. If they havent demonstrated by now they dont have skill in that, what do you need to see . How many times do they you know working against that is the general tendency at the beginning of a year everyone kind of collects around a plus 5 yeah. But were not because theres so many for keeping their job nick the math makes it hard right now to argue for big up. Because you have to put an upside on the earnings. So, you know, i i hear you. Look, i live in a glass i dont have to do that in my own company for a living. You did. And its not fun. Like the worst quadrant is youre bearish and wrong. So thats the hurt locker. Why do we persist in talking about price targets . We this is true, by the way, in stock pickers. They dont add a lot of value too. No persistent in stock picking we wrote a note on that region that this title is a little provocative on purpose and said from counter indicator to useless. You could be the opposite in the sell side analysts now they have no value in aggregate. I dont spend a lot of time i think they care because they want to know where the sentiment is and mikes point spot on, guys too bearish, raise their numbers and get networks more excite and on the margin positive, but you dont listen to what they say. If youre a longterm asset allocateer with billions of dollars you will not wake up and be like weve been incorrect. Youre solving something much more sustainable than that. I think you have to think about equities as 10 per anum return in 3 to 5 year view moving that kind of ship. Yeah. This has entertainment value essentially, were talking about strategists yeah. And stock pickers too they want to keep their job. The buy side is different. You have to make money from now to the end of the year. I spend my time talking to those people. I had to do it, but i dont do it now because nobody no real person would pay for that. One thing thats interesting about this the lack of persistence. The fact that the strategists dont have any out performance here. One does well, one year, the next year they wont do well. Of course. Theres no persistent. Yeah theres no bias mba hot hand. You set your frame. What i respect is people who have a framework that can understand what it is and theres some logic to the framework and then people can understand multiples can move around for a number of reasons, flows, perception about Interest Rates, changes the perceptions about the growth path. Things can alter. I like a framework and some of the guys at the big firms, a lot are incredibly smart, so i think thats what people on the buy side sink their teeth in to. Mike knows this for 20 years. Yeah. Were aware. So i think whats more important here, where carl is at, when i buy a stock do i think the margins are more achievable . Where do i have a different view on margins . Then i will build the positions. The strategists have an army behind them. When bank of america raises a number they have an army of ml people that say the strategy is bullish and can affect stock buying. A little bit. You have to really on a daytoday basis like most of the multi strats have 35 teams each running 6 to 1200 growth exposure with two hour to three day holding period. A lot of the price action has nothing to do with the Asset Allocation guys who decide to take on more u. S. Equities. The marginal buyer is not some guy, u. S. Equities quota. Its not whats moving stuff day to day. Its price liquidity in one economic signal or whatever. You can see the numbers. The guys are behind the curve, right . The median is 5200. The average is 5100 for the strategists. 20 strategists. Downside. Hang here. Were all going to stick around. We are going to talk a little more about one of the big reasons dow has been crossing 40k today. Walmart, the gains in that stock are helping out on its earnings, beat, and also the positive outlook. Ubs analyst Michael Laser joins us to talk about it. Michael, reasonably High Expectations it seems to me towards walmart. The street was pretty comfortable with the story. Yet still pleasantly surprised. What in the numbers do you think theyre keying off of . What the market is keying off of, mike, if youre a shareholder, every single from this report was exactly what you would hope it to be and if youre not a shareholder, the signs from this report are suggesting that you need to at least take a look at this stock to own the key to the report were 3. 8 samestore sales growth in the united states, entirely driven by traffic that is going to out shine most of the other retailers during this quarter. The other noticeable point was, operating income was up 900 million year over year. One third of that came from alternative revenue streams. Things like selling advertising to online sellers, marketplace fees to thirdparty sellers, logistic services. If you annualize that, thats a 1. 2 billion of incremental profit that walmart should get this year versus last year. That alone can drive 4 growth in the companys overall operating income. This is going to really help this report will help the market take notice. Yeah. I guess the other two things maybe themes that came out of the commentary were, initially that somewhat higher end consumer accounting for a good deal of the beat and then i guess the other piece of it is just the cost advantage of grocery eating at home versus restaurants. All that suggests if that much more spend is being funneled toward walmart and grocery theyre a price leader and seems like it would have a relatively dampening effect in aggregate on pricing pour in retail . They did say that in aggregate 40 basis points of the growth came from like for like price increases so thats a reflection of inflation at this point. You keyed on two other important factors here that walmart is doing a very good job of capturing incremental wallet share across the income spectrum and its benefitting from the macro environment. With that being said, you should attribute this report not to just walmart being at the right place at the right time, its really executing well on its strategy, which is to serve all consumers in a way that is unique and as a result, its really having the impact on itsous look. Michael, we made note this morning of the growth in advertising, up 24. I wonder if you help it things alleviate handwringing in the journal today, questioning the companys regime, ability to grow revenue fast enough to keep that 4 growth target. Yeah, i do think this puts some of the skeptical arguments at rest. Your point is a good one, carl. This is a Large Business with 600 billion plus in revenue. Its just hard to grow that given the law of diminishing returns. With that being said, the company is showing purveying merchandise in that business can be very lucrative when you do it at scale. Whats driving the growth here is alternative profits as well as the implementation of automation and thats driving this virtuous circle thats making it more appealing across income demographics and to a wide variety of stake holers. Thats not going to slow down any time soon. So, those skeptical arguments, i think, are offbase at this point. Michael, appreciate your perspective. Walmart up 6 on the morning. Financials looking to build on their recent rally as well. The etf that tracks them, ticker kbe, the s p banks etf, new 52week high, up 40 over the last fuel year of trading. Some names led by wells fargo up 20 in that time frame. Citi, bank of america and jpmorgan all up double digits over that span as well. Final thought, ap . I think its interesting hearing on walmart. The xrt is 4 . Amazon and walmart combined. Theyre 72 of the market cap or something. Its a good example of trying to pull equal weight. Yeah. Skewed toward mall stores. I think the stock market is telling the economy is going to be a little better in the second half of the year. I think thats the overarching message. Im seeing opportunities long and short in the market. Theres a lot of dispersion and things i can own. If im trying to make one nonconsensus call its probably spending more time in health care. Theres a lot of businesses that are trading pretty cheap where they could have productivity three through ten, lots of data, Predictive Power for their data and customers and a lot hf stock has been pretty bad. I dont want to romanticize as a contrarian. Apple back above 190. Climbing higher after hitting a 52week low on april 18th. S p, we should mention, 4320 s p, we should mention, 4320 will take your yeartodate [busy hospital background sounds] this Healthcare Network uses crowdstrike to defend against Cyber Attacks and protect patient information. But what if they didnt . [ominous background sounds] this is what it feels like when cyber criminals breach your network. Dont risk the health of your business. Crowdstrike. We stop breaches. The dow crosses 40k for the First Time Ever a few moments ago. Interestingly, managing to hold it for the moment at 40,040. S p a fresh record at 5321 with a fresh double digit gain for the yeartodate. At the same time we know the mystery name that Buffetts Berkshire hathaway has been buying, the insurer chubb. Contessa brewer joins us for more on what that means for the name and if you were surprised. I have been telling you for more than a year that chubb is firing on all cylinders. You have Berkshire Hathaway starting to build its stake through last quarter last year and first quarter, we saw shares up 25 to the end of first quarter. You have firing on all cylinders. Disciplined underwriting, now prices and rates exceeding what their lost costs are. Interest rates are helping them, especially on the Life Insurance business. So, is there room to run . Analysts say yes. Berkshire knows insurance, thats the other piece of that. So you have 3 bump today. Exactly. Thanks, contessa. Money movers starts on the other side of this break. Good thursday morning. Welcome to money movers. Im Carl Quintanilla with leslie picker at post 9 of the new york stock exchange. Today the dow hits 40,000. Wells fargos scott wren on why its time to reduce exposure to a few points of the market. Max