Transcripts For CNBC Power Lunch 20240712 : vimarsana.com

Transcripts For CNBC Power Lunch 20240712

You know, of three straight weeks in the red this time its not tech thats leading the sell off you have materials, industrials and Energy Taking the market lower at this hour plus, still front and center for both washington and wall street is that tiktok melo drama. Will the chinese give it its stamp of approval. Power lunch starts right now lets go to bob for a look at whats happening and why. Bob. This did not start today. It started earlier in the month. It Gains Momentum in the last four days. Theres some very good reasons why. This didnt come out of nowhere. Lets review why the markets are down concerns in the uk about potential new lockdowns. There are increased trade tensions with china. Concerns have increased. Concerns about over value tech stocks that hasnt gone away. I think were seeing a bit of rising anxiety around the election this is not a mystery about whats going on. What you want to look at as tyler mentioned is whats selling off today. If youll notice cyclical stocks like industrials have done well in the last few months this is the worst day identify seen since really june for some of these names like dover, techtech tech textron. The reopening is holding up. Other stocks are having a really tough time as well if you look at the airlines, live nation, marriott, we talked about the hotels big consumer names like General Motors holding up well one of the worst days ive seen in a couple movants fuouple of. Theres not a lot of clear Technical Support right at 31043104 were a long way from that keep an eye on that 200day moving average its like a kats hecat head n ear. You mentioned a bunch of reasons for sell off including d. C. Drama. Markets have been hoping for additional stimulus. That may have gotten unlikely. Kayla is here now with more for us kayla. Reporter to avoid a Government Shutdown in nine dardays both parties were discussing a compromise that would have seen money for school lunch programs. The bill that House Democrats released today didnt have either of those things sparking criticism from the right Senate Majority leader Mitch Mcconnell tweeting the rough draft leaves out key release for farmers suggesting it as insult to injury. Congress has nine days to fund the government through december. The senate has 12 working days between now and the election leader mcconnell and President Trump said they will try to condense a Historic Supreme Court battle into that time frame as well. Over at the white house larry kudlow with his unique brand of optimism suggests that washington can multitask we can get a clean cr which is the first order of business, keep the government open we could negotiate a sensible package thats targeted and would provide some assistance. Remains unclear whether any stimulus effort can move forward. Small dollar donors have been pouring money into organizations with a hundred million tlars in donations over the weekend with the death of Ruth Bader Ginsburg becoming a galvanizing event for both sides of the aisle. Kayla i was going to say that ive been so envious of her outdoor backdrop all summer that i decided to move outside. What do you think the odds are they can get all of what they think they can get done, done . Depends on wlp you compare the realistic attitudes to the ro rosier attitudes that a lot of the officials are sharing in public i i think the hope for a compromisive package are gone. A House Republican petition will go live this friday. That could move forward and could see some moderate democrat defectors. We will see about that theres also some bipartisan support on the airlines. Some airline ceos are meeting with the white house and Speaker Pelosi late last week. They talked about this desire to prevent layoffs. They are still very far apart o. The bitter partisan zip is only getting worse and the calendar is working harder against them thanks very much with stimulus in a doldrum and fears of the virus weighing on the market the dow is touching its lowest level since early august how bad could things get . Do you see stimulus all but dead and do you think the dow has hit its highs for the year we do for both of those value stox and other cyclicals have a earnings issue which is the economy will not get a whole lot better in the next few months we already priced in quite a bit of a recovery. The market has wobbled, michael over the past three weeks. Down each of those three weeks were off on a down note today do you see further downs we see a market that will be sideways with increased volatility we have seen a lot of growth taking place back and forth. Now Growth Stocks have been a valuation ceiling and with the increase and certainty we have into the election, we think market will be more or less sideways this sell off year is not the growth sell off that started two weeks ago. What were seeing now is more of a classic risk off cyclical sell off where you want to focus, have your money in defense and companies that have really good fundamentals and that brings you back to a lot of the large cap growth names that do have those characteristics. Bryan, the floor is yours to react. Do you see it the way michael does period of volatility within a narrow band or do you see Something Different . Id like to give you a little controversy and difference of opinion but i think were probably very close to being on the same page. Once labor day came and went without a stimulus bill and started getting into election season, it became increasingly more difficult for washington to get a stimulus package through prior to the election, its probably off the table there was some folks hoping for action in a lame duck session between the election and the inauguration the passing of Justice Ginsburg makes that increasingly difficult. I think that was that would have ban heavy lift to start with the pazi ipassing of justice gi makes it tougher stimulus is probably punted to 2021 now we have the raised prospect of a Government Shutdown not this week or not kayla was talking about some of the controversy surrounding getting a bill passed by september 30th in order to avoid a shutdown i think washington will avoid the preelection shutdown. I am more concerned that i had been about a lame duck december shutdown because were going to get through the election theres likely to be chaos emotions are going to be raw can washington get together and avoid a shutdown in december t the prospects have gone up. Michael, how can i make a little money in the chaos that bryan forecasts . I think investors should be sick of companies that have good fundamentals we could be adding some defensive parts to the portfolio. The yields are low if we get increased volatility, its potential for the markets to come off and bond yields to go lower. Gold has been a great save haven asset as well. We would stick with a core positioning of high quality growth stock, growth cyclicals as well as a bit of defense on the side provide diversification we both expect thank you very much for your time today have good rest of the week kelly. We have a news alert from washington right now its the new projections from the cbo. Reporter the Nonpartisan Congressional Budget Office is projecting that u. S. Debt is a percentage of gdp will reach 195 by the year 2050. Thats 45 Percentage Points higher than the agency has projected last year. That is largely due to the coronavirus and the response that congress has had to it. Even after the effects of the pandemic have faded, the deficit is still expected to remain high by historical standards reaching 13 of gdp by the year 2050. Also some long term scarring effects of the pandemic including lower fertility rates and immigration. The cbo is forecasting spending will rise through 2050 and Interest Payments is a share of gdp be quadruple revenues are also projected to i crease however, thats not expected to keep pace with spending. The cbo notes that rising debt persistently rising debt will pose significant risk to the outlook. Financial markets note do not appear to be factoring that in just yet back over the you. Thank you very much coming up, more on the markets as the dow is sinking. Right now down more than 900 points, do i see thats what it says right in front of me. Im going to believe it as a warning from the uk about an 800 points as another lockdown is spooking investors oracle could be the winner in the tiktok deal more power lunch after the break. Machin. Welcome back a deal we thought would save tiktok is being threatened the president says he wont approve the deal if bike dance has control of the company President Trump signed off on a deal but its still unclear if it meets the u. S. Or the Chinese Government oracle is set to take a 12. 5 state and become its cloud provider with walmart taking a 7. 5 stake thats because bike dance investors who will be getting shares of tiktok are 40 u. S. Based. Tiktok global would 53 owned by u. S. Investors and and approximately 36 owned by chinese investors. The global times tweeted out today that chinese officials wont sign off on the deal because it threatens National Security but a source close to the deal tells me they do expect to get chinese approval. It will be really interesting to see how this shapes out. I dont know if you can add anymore information to help why this approval looks likely and the chinese seemed more open to it the chinese should not go along with this will prover to be a bigger sticking point. The sense this is a party aligned newspaper. Hes widely followed its a big thumbs down thats right. It was a big thumbs down from my sources it seems like bike dance, tiktoks owner was aware of what the government would approve or not approve when they were putting together this deal. Thats why the chamber will be on the board of this new company. He would be on the board and continue to own a percentage of the company as the founder and chairman i think the understanding was as they were putting together this deal they would do something they believe the Chinese Government would sign off on these things con flikts. My sources who are here in the u. S. Saying if those shares in this new company are given, it their investors owning it. Well see what the Chinese Government decides or if President Trump decides he still approves despite the fact there could be a Chinese National on the companys board. Its like the most complicated flowchart of all time my guess is they hope that confusion makes, seem like everybody can say we won well let you go oracle manned up the big winner of this complicated mess shares are in the green by under 1 a lot of people said is the u. S. Really getting what it wants is oracle the big winner this has been an on and off again topic. It does appear that oracle has a real opportunity to change the narrative for the company. A narrative that has to do with growth, that has to do with cloud, relevant and exciting again. Others have made the snarkier that its taken the president and Major International spectacle in order for oracle to win this contract. I would say oracle is a feisty competitor. Never under estimate larry elerson if he wants to get into a market itstarted with zoom is a customer this year that was a big deal. It was their first highly relevant actionable customer win that stood out to us we think they are compoundsing gains if they add tiktok this is a company that spent 67 billion on share buy backs and doesnt have much to show for it whatever they pay for this could unlock a lot more value. Does it Say Something about the rest of the companies, the oracles of the world out there that investors are looking for growth thats a really salient point. We look at not only what they spent on buy backs and what that has done for the share price but their last major acquisition in the cloud space. When oracle is looking for opportunities to change the nar ti narrative, its looking at this rather than large scale mna suggests the valuation environment may not be one that supports that type of path right now. You say this may be the defining social media saasset oa generation what makes you so confident that tiktok is much, much more than a fad and is not replicable by some other company or some other Company Comes out with something that is more popular and more engaging thats a great question we cover Enterprise Software and not Internet Software. The data indicates the kind of engagement this app is driving is not just unique but very, at least in the history of applications in Internet Software difficult to replicate. The amount of people that spend more than 10 minutes, more than 30 minutes, more than an hour engaging is very different than some of the most established apps not just the amount of people that are engaging but the am of ti amount of time and people engaging over an amount of time. Theres a viralty thats driving this asset to be worth what we believe over a period of time could be in the 100 to 200 billion dollar range for oracle to invest at a 7. 5 billion state of a Company Worth 60 today could be compelling and add value to the share price what is this splintserring f the Global Internet say to you this is just one of many recent examples of different rules and wall gardens and political factors that would never have been the case 5, 10, 15 years ago. Will that negatively hurt the Companies Going forward . I think in my coverage universe we could look at microsoft of a gaming studio for 7. 5 billion. I think theres some convergence. Its something that creates more volatility. It has more customers need to injeki injei inject more of these digital channels, thats really good for my sector. Fascinating thank you we appreciate it today thank you for having me still ahead, virus fears and tensions in washington taking hold of the markets right now. Only walmart and apple are in the green among the dow shares financials are under pressure as sochl t some of the big banks are being accused of illicit transactions. We have details when power lunch returns after this. What if you could have the perspective to see more . At morgan stanley, a global collective of thought leaders offers investors a broader view. We see companies protecting the bottom line by putting people first. We see a bright future, still hungry for the ingenuity of those ready for the next challenge. Today, we are translating decades of experience into strategies for the road ahead. We are morgan stanley. Its a big, big market sell off today. This time it is not tech that is leading the market lower its those old economy groups. Materials, industrials, energy, all down about 4 . Financials are also getting a whack today and for more on that lets go to seema mody for trading nation. Tumble today in the broeder market sell off and following the report more than 2 trillion moved through the banks between 1999 and 2017 for whether this is a no touch zone lets bring in the trading nation team. With banks now likely facing more skrutsncrutiny, how would u trade financials theyre really terrible story. The biggest story for the banks right now taking the Money Laundering issue aside is the fact that the fed is suppressing Interest Rates they are not practicing yield curve control. They are creating yield curve control. Its the fact that nominal rates are so flat its really killing the banks. Whats happening is they are following the path of japanese banks and european banks that suffers massive profit loss by having absolutely no yield and no ability to have care. I think within that environment, it makes it a very difficult industry to trade. That having been said, though, even today, you see jpmorgan chance out performing the broader index. That is the star amongst all of the banks. If youre going to sort of trade relative bet than you would be low on jpmorgan index. Thats the best bet given the situation. On a day like this we tend to care a bit more about technic s technicals how are the banks trading in comparison to their 200day movimove ing aver rage in. They are not trading well this is a great example when the macro turns, when the market corrects, the weak get weaker. I can defend relative strength i can defend technology on this pull back. I cant defend the banks they are breaking down from a much weaker structure. This really exemplifies the market backdrop investors, Value Investors have been experiencing in recent years. They peaked back in 2018 theyve been in this multiyear decline since then now they are trying to base and i do think that is still in play with todays pull back but more is needed. While were in this in between, above support havent broken through resistance, the point we want the make is if youre bearing out there, if youre bearish on the market, the vulnerabilities is in the banks not technology id stay away from this group. All right back to you. Thank you. Well continue to monitor this sell off dow down 812 points now. Well look at what the 2020 election means for tech stocks opinion one top analyst will lay out the winners and losers if the president wins four more years. Much more after this break we got no free pass. Everything we have, weve earned. The unmistakable lexus is. Get zero percent financing on the 2020 is 300. Experience amazing at your lexus dealer. Welcome back here is your cnbc update American Household wealth has set a new high the rebounding stock market drove a 7 gain in three months to 119 trillion however, the gains flowed mainly to the wealthy millions of americans may not get C

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