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tv   Power Lunch  CNBC  February 26, 2024 2:00pm-3:00pm EST

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slipping out of balance into freefall. i'm glad i found stability amidst it all. gold. standing the test of time. good afternoon, everybody. glad you could join us. coming up we heard from two big names in business. we will break down what they said about the markets and the economy. we are breaking down the healthcare industry and art weeklong ecosystem. we start with a look at health insurance companies. let's start with the check on the markets. we have the major averages in mixed territory. the nasdaq composite leading the way by just under 1/10 of a percent. the dow jones is lower by a
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tent the percent and the s&p 500 down 2/10 of a percent or just about 10 points. >> changes in the dow. walmart trading at $60 a share after a 3 for one split. you see that up nearly 2%. shares of domino's pizza are rising just like the dough in the oven. heading for ties close and more than two years. despite a small miss on sales, we will talk with a ceo later this hour. let's start with the ceo of j.p. morgan. leslie joins us to sum it up. what did he tell you? >> reporter: with a i and focus these days i asked him about the technology and its applications for banking and whether there's too much hype. >> this is not hype. this is real. we had the internet bubble,
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that was hype. this is real. people are deploying at different speeds, but it will handle a tremendous amount of stuff. faster, smarter. we have to counter the bad guys. is being used in combat cyber right now. >> reporter: he said j.p. morgan uses ai for risk and fraud, suggestions, and it's just starting and will be used in almost every job to make it easier to do things. j.p. morgan is also investing in old- school. i asked him about the recent headlines that they are building out 500 new brick-and- mortar branches over the next several years. >> some small businesses need a. at the end of the day you have to drop off currency and even wealthy people like to visit their money. we had to change directions
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somehow. 1 million people a day. what people say, really, your little 1 million people who walk that they cannot do that anymore, so does it mean you can't be a great digital bank. >> reporter: speaking of competition i asked him about the recently announced deal between capital one and discover financial, which would surpass j.p. morgan as the largest credit card issuer in the u.s. if it's approved. he said, let them compete. >> interesting when he was talking about branches. in my town they've been closing branches and a lot of banks have been closing. but they are choosing to go the other way. maybe there can right size some of the branches they have. >> reporter: they have 5000 branches. this is a big investment.
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500 more over the next three years. he said that people want to see their money and going to a physical place. i thought that was telling about as we see the competition from the digital banks, there's a lot more of it, especially over the past few years, and he mentioned some of the competitors. having branches, if i read between the tea leaves is a competitive advantage for those customers to be able to step foot and talk to someone face- to-face and that's why they are investing. >> i think that's really a key point. i think people want to have a human being they can talk to and have a question about their account or service or maybe they need to have a notary public witness a document. leslie, thank you so much.
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now to warren buffett after record-setting week stocks head into the final week of february. they are on a high note. in his annual letter to shareholders, he said it's not easy to find value in the market. he said berkshire may only do slightly better than the average company because of their size. it's another way of saying markets are over concentrated into a few texts stocks and should investors stick with apple and nvidia. i'm happy to see her smiling. that means you must be happy with the way the markets are performing.>> so far so good. january and february have been positive. let's hope it continues for a while. the warning to investors from warren buffett, i think it needs to be heated. you cannot argue with his success. what it highlights is one of the problems with size.
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in order to move the needle on return of investment, he has to find bigger deals. we think here that a lot more opportunities could be transformational in the small and mid-cap space where they don't have to worry about 137 dollars in cash on the balance sheets. >> you touched on something i want to ask about. do you think his warning was more about how difficult it is for him and the people at berkshire to find companies of a scale better value place. but are large enough to move that big battleship, or was he talking more broadly about the dearth of value in the market? >> i think you are right as far as the first interpretation. i think it is large-cap specific worry that he has.
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if you want to go out and if you are berkshire, the valuations may not be as attractive as if it was in a small company, but is it worth his time? you can build a good feast from the crumbs from his table. >> when you talk about valuation, the first thing i think of is things like nvidia. it seems like it's only going one way. and if you are not in it, it might be intimidating to jump in now. when you look at valuations and concentrated success, however many you want to categorize, is that we just have to be in the market until we have real substance that we see things right now? >> we think we are going to see things right now if you look at the actual performance of industrials and materials over the last few weeks.
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small caps have occasionally performed pretty well and we've seen early signs of broadening and maybe a little top heaviness of the markets beginning to turn, but then you get the shock from nvidia where revenues are more than 200%. it's actually kind of important thing to note is that the stock price has gone up quite a bit as have the fundamentals. until we see the fundamental weakness, i'm not worried about the valuations we see, but, keep in mind,, risk is fun and games until results in down markets instead of the up moves that you've seen. >> if you are still looking at elevated rates and not sure what the fed is going to do and when, but as of right now they are on hold and race are elevated. should you be looking for something that is less risky and not all high-yield?
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>> we work with a number of high-yield managers with a have more focus on looking at the higher quality high-yield bonds sometimes called junk bonds if you want to use a pejorative. some of it can be fairly high quality if you look at the revenue generation relative to what they need to service. some have been able to trim out their debt. it's dangerous to take the broadbrush scattershot approach to investing. there are a lot of these different pockets of opportunities. it might be high quality, high yield. might be some of the more profitable small-cap and mid- cap names out there.>> i guess it would be remiss to not ask you about what the fed would do. what do you think the fed is reading in the tea leaves right now, especially after the
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surprised ppi came in hotter than expected? >> it's reset the clock for them and they want to look for 3 more months in a row of decent inflation numbers. that would put us at june at the earliest for them to cut rates. they are likely to communicate at the march 20th meeting with the plan is for tapering the quantitative tightening they've been doing. then they can tee up the rate cuts. >> thank you very much. great to see you. coming up, gemini getting probed for bugs and issues by consumers. and topping estimates and domino's pizza. we will find out what is working in the restaurant space. that is when power lunch returns. t-mobile for business. pga of america and t-mobile are partnering on 5g-powered analytics
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shares of apple that thinking. problems around the ai model, gemini, pile up. at first they had to pause their image generation tool and now users are pointing out questionable responses from the chatbot. what kind of issues are they seeing, and are they little alarming? >> i will tell you the backdrop you need to know is google had all the elements to dominate the ai race. but it keeps tripping up. the company finds itself at the center of renewed culture wars over recent diversity. the image generator has been suspended after trying too hard to be diverse. creating diverse images of the u.s. founding fathers and shoulders. the chat pod has a similar
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problem in gemini refused -- equated elon musk with hitler. some posted different answers from chet gpt that had more straightforward stances on these straightforward issues. i try to replicate some of the searches. i could not, but in some cases gemini said it could not assist with the query in chatgpt always give an answer. the broader issue is whether this underscores it corporate reality. one of the questions they don't have answers to is what happens to google search? they've ruled out the ai products to be more cautious. they put emphasis on safety and cautious ai, it has not worked out for them. it underlines the complexity of this. >> the queries that produced offensive may not be the right
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word, but let's:questionable responses, were they intending to trip up the model or not? >> that is a great question. there is a little bit of cherry picking going on, but the answers are the answers. they are anything but straightforward. when chatgpt first came on the scene, there were all these issues about misinformation and bias. can't forget the reporter who chatgpt said to leave it's wife. google is trying to clean this up as well and these are just inherent issues in chatbots are trained on certain kinds of data. it's not an easy answer. >> it is tricky. i've asked, i think it was chatgpt.
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but asking questions about critical race theory to untangle it and explain it. and you could see very easily in the answers were depending on your point of view you might be offended or agitated by the answer, or you might say that's pretty much the way this. you cannot take the sensitivity or sensitiveness out of the sensitive topic. >> well, hold on. when you look at something, there is a lot here that is fuzzy. but this is the argument that people are making. when you compare elon musk to hitler, the chat pod needs to shut that down. it's these cut and dry issues that google is getting a lot of heat for. they are trying to be two politically correct.
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and we are talking politics, which i hate to do, but that's where it's gone.>> that is where the sensitivity is. whether you are artificial intelligence or dom in revoking adolf hitler in any form. >> i was thinking it interesting that we talk about having have google try to fix it or un-teach this machine learning. is in it supposed to evolve with time, and how you unteachable things? it boggles my mind to understand that. >> woman go back to chatgpt when it was first released, there were these issues that are ironed out. google has kind of been behind the curve. it took them 20 months longer to get the gemini model out and so i go back to the question, what happens to search.
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it's the investors story. search is still the cash cow. we don't have an answer for that. if more people are going to chatbots, that will hurt the cash cow and business model. and they are the dominant model for decades.>> and they had their saying. do no harm. thank you very much. breaking down the healthcare ecosystem. there's more than one way to invest in medical space. we will break them down starting with insurance stocks. and make sure to mark your calendars for our new documentary. melissa lee will give us an in- depth look at this in the way we treat obesity in america. you definitely will not want to miss that. wl beweil right back.
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welcome back. we heard from jamie diamond
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earlier. cautious about the probability of a soft landing. more cautious than the markets are. gdp among the pieces of economic news we will get this week. let's check in on that with rick in chicago. >> the big news in the bond market today, 127 billion. that is a big number. look at this to you to your note you'll. the largest to your offering by the treasury ever. and you see on that chart we never looked back. they continually move higher. it was a few hours later at 1:00 p.m. eastern we had 64 billion of five for notes. there's 127 billion. and what is notable is that around one point eastern we put the high-yield of the day in.
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the rest of it, to your note yields are on pace for the highest yield close in three months. here is what is interesting. short maturities have fresh high-yield closes. the rest of the curve is close but not quite there. why's that? the short maturities associated with the fed is everybody scratching their head as to how many rate cuts they are going to be at under review. that keeps the yield curve more negative as you see on this next chart. on pace for 3 month most negative close not spread. short maturities leave the curve with higher rates and long treasury yields have rested. the maine diner was debt. we are looking at debt. it's the shorter maturities. back to you. after a long winter, gas
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prices have been turning around. what is going on?>> coming off of four straight weeks of losses we are seeing green and that's because some producers are signaling they will scale back operations. specifically chesapeake. they said they will drill and they will not complete them. they are not going to turn them on. this is a different approach from other producers who been saying where to keep producing. so the estimate by the end of your production would be about 30% lower, which is meaningful. to utilities, that was the worst sector so far this year. over the weekend warren buffett had choice comments about the industry in his annual shareholder letter. he said there were severe earnings disappointment saying the final results in utility industry making on a certain utilities may longer attract
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the savings of american citizens and forced to adopt the public power model. he said when the dust settles, the capital expenditures will be staggering and he did not anticipate or even consider the epperson development's regulatory returns. so what he's saying is there are severe regulatory issues in berkshire owns some that are settled with fire debts and liabilities. and ultimately he said the industry may no longer attract savings for americans.>> wednesday describing there? nebraska went to a public power model -- i can't remember exactly. and it's controlled by the minister tally. these exist on the country, but not the predominant model because utilities have to grow and they need capital. access to that capital is important and that's where investors come in.
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>> the public markets.>> you cannot pay all utilities with a broad brush. they each have very different regulatory environments in different management teams in the best once will be able to weather the storm and figure things out. but the regulatory environment -- >> these are best as publicly owned -- owned by municipalities or privately owned. that operate within a regulatory framework. thank you. let's get a news update. alec baldwin's trial for involuntary manslaughter over a deadly shooting on the set of rust is expected to begin in july. court documents show jury selection scheduled for july 9th with the trial expecting to last 10 days.
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the armor of the film is currently standing trial. jordan parachuted medical supplies into gaza today in the biggest airdrop operation so far to the war-torn area. this comes as local officials say the amount of aid entering gaza from january to february dropped by 50%. don henley appeared in the new york court today to testify in a criminal trial surrounding the theft of handwritten draft lyrics for the album hotel california. three people are facing charges in the case and accused of trying to hide the origin of the lyric sheets so they could sell them. don henley says he gave them to an author to write a book and never intended for them to be made public. and they could be sold without
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his authority. >> it looks pretty good there. i've never seen him in a suit. domino's pizza raising the dividend eating estimates. power lunch will be right back. nice to meet ya. my name is david. i've been a pharmacist for 44 years mainly because i just love helping people. as i got older, it was just a natural part of aging, i felt that my memory was beginning to decline and that's when i started looking for something that would help. when i first started taking prevagen, i noticed my memory was so much better. just stuff seemed to come together and fit like a jigsaw puzzle in my mind. prevagen. at stores everywhere without a prescription.
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uh-oh. good bunnies. ahh! welcome back. domino's pizza hit a new high on the back of their q4 earnings. earnings topping expectations. joining us now is the ceo. >> thank you for joining us today. >> good afternoon. >> you had a lot drivers in this quarter from the loyalty program and partnership with uber and promotions. from where he said, what is your assessment of the consumer sentiment right now? >> from a consumer standpoint, as we look forward we expect to
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see -- we don't expect to see that it dominoes. i think that's part of why we had a good reaction. we were launching, hungry for more. it's about more profits and more sales. we start with some of the results in q4 so we have product innovation. we had value with our loyalty program and the amazing emergency pizza promotion in the partnership with uber.>> you mentioned value. value has been key for restaurant players this earnings season. how are you evaluating that in deciding when and how to reach consumers? >> the thing about value is it's not one-size-fits-all.
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sometimes it's the top line. we did a carryout special and it was one of the best once we've ever had. what we try to do is micro target and that's what the loyalty program is about. some people need to see certain things. sometimes it's price and sometimes if you're vegetarian you don't want to see a meat pizza. getting people in the top of the funnel is what the promotion is about. once they are in the loyalty program, we can micro target.>> two questions. how do you differentiate if you had to describe why dominoes, as opposed to the other national chain or franchise operations,
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what is the value proposition? what is the discriminating difference that makes dominoes the place i should go, and how do you compete against local pizza shops in a pizza hotbed like new jersey, where i think we have the best piece in the country.>> i know what kind of pizza you're talking about. i will talk about consumers in the second. but why if you are franchisee, when you think about the profitability of dominoes franchisee, we were at 139 last year and 162 in 2023. when you are a franchisee, you most likely started in the store. 95% of franchisees started as delivery drivers are making pizza. the story is one that order to
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brand well they become owners and operators. the other special thing is now outside business. you are all in on dominoes and that is the secret sauce. and that's why i think we have the best and offer our customers. we've had a mix-and-match offer since 2010. we have not changed. so the best pizza in industry. operations that back are delivery times are back to where they were prior to covid. and pricing that you can understand. >> uber is still a small piece of the puzzle. they had long resisted working with aggregators, but investors like how it's going.
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how much business will to strive for you next year? >> we are seeing this year, uber will be about 3% of sales for us. the pizza business called about 5 billion. our sure that is about 1 billion. take about three years to get there. what we saw in q4 -- started in q1. we are about .4% of our sales was uber and it will be a bigger part and continue throughout the year. >> we will leave it there. thank you for joining us. that stock is up 6% today. come back again soon. >> thank you for having me. i'm partial to new jersey
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pizza. detroit has great pizza. new york has great peace. >> ohio pass a great pizza. coming up we break down the healthcare ecosystem. one analyst will tell us was insurance names are leading the pack. that's coming up. ♪♪ ♪♪ ♪♪
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(other money manager) wow, maybe we are different. (fisher investments) at fisher investments, we're clearly different. welcome back to power lunch. there is always more than one way to invest in industry. we are taking look at the ecosystems in the stocks within them. this week we are looking at insurance, pharma, and biotech. joining me now is the managing director of healthcare services equity research. thank you for going through this with us.
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let's talk about unitedhealth. that is name that's been coming up a lot on cnbc because of the earnings reports in a number of trader contributors have positions there and. talk to us about where they sit in this space and how you feel about the prospects going forward.>> this is an interesting time for the health insurance industry. we are seeing costs go up and challenges on the rate site. united is one the largest medicare ensures. they are diversified and an industry leader and have a large point of service division as well as technology, but they will be exposed to the pressure that we see come in 2024.>> so what about if you compare them to humana? so you think they are subject to pressure as well.>> the issue
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is seniors put off getting services done during the pandemic and they're coming back and is surprised a lot of insurers. the government is crimping margins. at humana we downgraded because we think the have the most exposure that. companies that are less exposed to core insurance and have other ancillary businesses. we like two companies that have large exposure to the pbm industry we think they are more safely positioned.>> what is that industry? i don't know.>> when you want to get drugs you go to cvs or walgreens or email the men.
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somebody has to negotiate drug prices and make sure that your taking things that are not contraindicated in working with physicians to make sure use the best protocol. all of that is something called a pharmacy benefit manager. >> i do know what a pharmacy benefit managers. i'm not sure that i like them, but i know what they are.>> there have been a lot of legislation trying to change the way the contracts were, but we think were getting to a point where we are past the majority of risk and we think about cigna they just won the big contract away from cvs. we think they have a nice couple your earnings from that. we are heading into a period of investments where they are going to rely on each other for
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shared services and we think it's a unique pathway. >> when it comes to talking about the pbm's, something like mark cuban's plus drugs. is that a disruptor kind of innovation that try to lower costs with or without insurance plans? is it making any dent in these bigger players? >> is interesting because other insurers are making similar plans. cvs just launched something where they will break out the cost of drugs from the value added services and it will be disability and pricing like the mark cuban plan does. in a way that will be margin stabilizing. and that it's their power to negotiate with the
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pharmaceutical manufacturers. a key area is glp-1's. that -- is a huge amount for a single drug class. that's an area they are focusing re-down the price as we look at more and more employers adding that is was state medicare agencies requirement for weight loss.>> how come some of the drugs i get cost me zero in pay and others cost me $28 and others might cost me 1100. how does the company make money if they're charging nothing?>> when they costs zero it's because you could be better off if you take these preventative drugs. they are on the lower formulary.
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as you see more and more drugs, it could be the cost but it could also be that those are not the preferred brands.>> so they are encouraging me to do something they think will ultimately save the money. it's not out of the goodness of their hearts. >> a lot of what insurance does is make money by changing behavior. incentivizing these is how they create the value. >> i like how you answered that. thank you. still ahead, from solar panels to energy-efficient appliances, americans are trying to green their homes. but you will need to start with construction. diana will give us the details next. and ramona hood will share her story.
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shares of usa jumping in the last few minutes, briefly halting for volatility as bloomberg reports that charter is exploring a takeover of the company. it is not clear whether formal talks have taken place between the two outfits, according to the report. shares of all tees are up 50% while charter is trading lower on the report, down 2% at two 93 and change. >> we all want our homes to be greener, more environmentally friendly. what if our homes could actually produce more energy than it consumed? we explain in her continuing series on climate start-ups. diana, what did you learn?
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>> reporter: real estate, as you know is a method carbon offender. but the construction and operation of the built-in environment account for 40% of global greenhouse gas emissions. how do we reuse that. when start-ups has to start at home. >> reporter: from solar panels to energy efficient appliances, americans are trying to green their homes. to truly do that, you need to start with its construction. that is what home builders like clever and a california-based start-up for the homes. the ceo claims they will ultimately be carbon negative. >> the energy we generate after 16 years, that offsets all of the carbon that was used to build a home. >> he points to four critical elements. first, arrow claims to use the most sustainable materials possible, like timber, and less concrete. they then tighten the buildings envelope, making it as energy
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efficient as possible. part of that process is building a lot of the home of site where they can monitor quality control and engineering. energy efficient systems and appliances, and finally solar with battery backup. >> we are focused on using the materials in the building of our homes they use as low of a carbon footprint as possible, and they need to be practical. and need to be accessible, affordable, they need to be reliable in the supply chain. >> zero homes are not cheap. they build large homes. the latest is priced at $5 million. part of that is the price of land in california. investors say that once they are scaled, they can make the homes more affordable. >> we have the ability to go very mass market with this. i think this first home is an engineering statement, which demonstrates what's possible. we can deploy that across a much broader set of geographies. >> arrow is backed by innovation endeavors, western technology, and stanford university dy/dx. total funding so far, $21
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million. >> arrow has only build a few homes thus far, but by the end of this year, they will be on track to build 36 homes per year, and the facility could handle up to 100. courtney? >> that is so interesting, diana. it seems great to buy a carbon negative home if you can really do that. the price tag seems pretty high, especially given today's housing market. even if they bring it down a little, it's really feasible for the mass market. they are making hundreds. >> it is very much a niche market, and so when you look at the competition in the space, dell, clever, some of those homes. some of those homes are very pricey. that's what it would cost to get these large scale -- we are seeing more innovation. that innovation trickles down to the affordable housing category. even if it is just the sober -- or pre fab aspect of it. we can take all we can get. right? >> absolutely. it's really fantastic stuff. we still have more stories that we are watching, diana.
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we have only got about two and a half minutes left in the program. some more stories that we would like to tell you about. let's get right to. at walmart, one of the top performance in the dow today. that is the retailers three for one stock split going into effect this morning. the company said that the split is part of the ongoing review of optimal trading and spread levels. and their desire for associates to feel that purchasing shares is easily within reach shares, now up about 2%, as you see there at 69 68. you did not get more poor this morning, what happened to my wallet? >> you definitely didn't. and walmart is just darting in a program where they are giving store managers gifted stocks in addition to the employee purchasing. >> what's interesting here as you certainly know, the dow is a price weighted average. walmart at 175 this year, 178 a
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share, they have more influence on the dow than walmart at 57 or 58 a share. not that they care. >> of course, amazon is going in and replacing walgreens as well. >> definitely. intuitive machines, odysseus returning their first images from the moon surface over the weekend. an update late on friday, company executives say that they believe they caught the landing gear sideways, and it tipped over while touching down. they say they are still sending data. i find a space stuff fascinating. >> they turned an ankle there, i guess you can turn it. i believe the japanese lander that landed the last week, once again sending back some data as well. good news there. the husband of former b p m and a manager, pleaded guilty to insider trading by eavesdropping on his wife's work calls while she was handling potential acquisitions of travel centers of america. tyler loud and, there's that name again. a houston resident earned 1.7
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$6 million with the illicit trades based on a run for the possible acquisition of his wife's company. >> i don't even know there is to say about that. >> legal trouble is one thing, legal trouble in the family is different. on that note, folks, thank you very much for watching power lunch. >> closing bell starts right now. ♪ ♪ ♪ all, right courtney, thank you so much. welcome to closing bell. i'm scott liner, here at the u.s. stock exchange. the make-or-break begins with the abc's of alphabets, the a i misstep. shares getting smacked around today as the latest answer to chatgpt faces even more criticism. all of that is only adding to questions about their ability to compete with microsoft and others at the forefront of this technological transformation. you see what the stock is doing their. is hanging around the lows of the day down, 4%. we are going to ask our experts what is really at stake for that stock in just a few moments. in the meantime, let's take a look at the

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