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tiktok cently launching an in-app shop pushing big into e kmors. could it be similar to other platforms that sell made in china products. but first a check on the markets. the dow on place for its 12th-straight positive day it is up right now about 70 points everything, all the major averages are higher right now except for the transports which are floating just below the flat line. >> morgan, let's start with the big list of earnings out and on deck everything from automobiles to housing and big technology let's start with gm. shares down despite a second quarter earnings beat. the automaker raising full-year guidance but announcing deeper cost cutting ceo telling our phil lebeau she is still optimistic about the automaker making the ev goals. >> we said we would produce 50 million in the first we are still on track to do that >> and here with his reaction and thoughts, michael ward, auto

analyst at the benchmark company, has a buy rating and $60 price target on gm welcome, michael good to have you with us i guess my question about gm is this, it feels like a stock that is stuck in neutral and always has to me. it just sort of trades there from the high 20s to the high 30s, maybe it nips -- but never breaks out, let alone get to 60. >> yeah. well, thanks for having me first of all, you know, it's amazing. very cyclical, that's a given. historically they perform very poorly in downturns. as a result, people stay away from the stocks when you get into those dicey areas one of the things that's real unique and why i have a buy rating on general motors is we are in an automotive downturn, early stages of a recovery, not just in north america but also in europe and in china and so when i look at general motors, i look at ford and look position of the group, they're probably in a better position

today than they ever have been in the early stages of a recovery and so, now it's put up or shut up really. and that's where we are. >> so, then is the read through here that this is not just a gm-specific story but this will translate to other automakers like ford that will report later this week, too >> yes and i think part of the reaction on the stock today has to do with the upcoming union negotiations the union expires in mid september. when you look back historically, it's a four-year agreement and every time you come up to that expiration date, in each of the last five periods, the august before the september deadline, the stocks have underperformed and so, that is a head wind. really that comes down to news headlines. the uaw needs to get out in front on the news comes out with headlines that are looked at negatively as it relates to the auto manufacturers the vehicle manufacturers really can't say much so unfortunately at least for the next month the stocks are probably dead water, but i think

when you look longer term, i mean, this is the first time you're coming out where you don't need to restructure cost, product or balance sheets. and the companies are spending money to accelerate growth as mary barra just mentioned on the vehicle side and electric vehicles are coming. and in north america, it's probably going to be more on the pickup truck and van side which is the strength of general motors and ford. >> i like your subtle analysis here, michael. i mean it. i guess if i'm going to put it in my words, it's that gm is better positioned today because things aren't as bad as they usually are. >> that's a good way to put it that's exactly right one of the reasons why the stock has been stuck in that rut is because in downturns they perform poorly including going bankrupt in general motors case. >> yeah. so the buy rating of 60 by when? >> usually 12-month time horizon. >> michael, thank you very much.

michael ward of the benchmark company. appreciate your time. >> thank you for having me. >> you talk about ev transition and the fact that the labor scheme there is not as intensive in terms of man hours as it is with ice engines so this is going to be a sticking point. >> many, many fewer parts to assemble among other things. >> that's right. let's get to another earnings mover, the home builders posting strong second quarter earnings this morning, topping wall street estimates boosting new home sales despite mortgage rates crossing 7% last hour again. as a result, the stock is up nearly 6% today. it's up 80% for the year let's bring in stephen kim, home builder's analyst at ever core isi. great to have you. i don't think you're surprised you have been bullish on home builders for the better part of a year now >> yes, that's right we've beenof the opinion that you're going to see

significantly better than expected results due to the lack of inventory in the market that was something that really convinced us last year that we should stay with these names even though things were really looking like they were falling off a cliff. and, in fact that really has been rewarded. investors who stuck with the bill, since last july, you're up about 90% from any of the builders including poulty and they put up a whooper of a quarter this morning it was really across the board better than expected and not only that but they leaned into it with their guidance and said, look, these margins that were generating, there's no shoe to drop was a phrase they used on the call they're forecasting them to stay very strong for at least the next couple quarters. >> the incentive piece of the puzzle, i asked that on a day where we did see case schiller, home price numbers where, again, increase month on month for prices in the major metro areas here in the u.s. and as we have seen commodity costs and certain costs associated perhaps even with

labor begin to come off right now. i mean, is pulte and the other home builders in a sweet spot in terms of margins >> yeah, they really are i think that's right a year ago and even a year and a half ago people were very concerned that the rise in prices was just simply, you know, unsustainable and they saw it as something unnatural. which we actually by contrast saw as really the natural result of a complete and utter lack of supply nothing sells like a shortage. and basically these home prices got to where they were because somebody was buying them that's what you're still seeing today. the home prices are high the mortgage rates are high. but there is no supply out there. and the situation cannot be fixed quickly because frankly we have been underbuilding in this country for about 15 years it's still hard to build houses. pulte will be the first to tell you it's not easy building houses, getting approval and finding all the labor and materials to do it

so therefore you're going to remain in this tight inventory situation for the foreseeable future and that will be a benefit to the margins. >> what does their order backlog look like? >> their orders were fantastic actually their orders surpassed expectations up 24% year over year more to the point, the communities they are selling out of are generating more sales per community than they were in the pre-pandemic period. we attribute that to a number of things, including the fact that builders in general are trying to make sure that they are offering a product which maybe a little smaller, maybe a little cheaper or smaller so they can hit a price point and typically when you're doing that, you're selling more homes per community. that's sort of built into your business plan. so their productivity in units is very, very strong that's really a help to them in leveraging the fixed costs. >> quick question for you. stock is up 82% so far this year is it still a buy here >> it is i will tell you that when we looked back, i have been doing

this business for a very long time had mike earlier on. i have been doing it probably as long as he has when we go back and look at what kind of runs you can see in home building stocks, we still have a ways to go you know, i know it seems like an awful lot but you have to remember where you were starting from was basically as low as it ever gets. we have seen runs like this last longer than this, go further than this and hitvaluations that are higher than we're at right now. >> thank you very much stephen kim, we appreciate your time today. >> thank you for having me. >> you bet. moving on to two tech giants that report after the bell, microsoft and google investors looking for updates on ai and growth for cloud computing. our next guest covers both of the names and also has a buy rating on both he's brent phil of jeffries. brent, welcome good to have you back. let's start with microsoft what are you looking for there what are the key numbers we should pay attention to? >> yeah, the key for microsoft is really closing out their

fiscally strong q4 growth of azure office and most importantly the ai impact. they launched pricing a week ago that kind of blew everyone away in terms of the price lift between a 50 and 100% price lift per seat per user. so, when is the ai rollout going to have an impact? there will be a lot of attention on that. i think there will be a lot of attention on the pricing everyone said that is way higher at $30 per user per month. why did they feel confident in pricing at that level. >> what do you think what do you think? is it too aggressive or what do you feel >> i feel like it was too aggressive out of the gate remember, enterprises will get discounts. they'll get bundled in when they sign a larger enterprise license agreement with microsoft on paper it looked really aggressive, but i think this goes back to microsoft's view and the value they're creating in this platform it's not generally available so you can't talk to a lot of

customers to see, hey, do you think it's worth it. i think everyone in the industry we talked to in the last week thought that was way ahead of expectations if they can pull it off, why we're so bullish on microsoft, getting customers to pay for this, it's a massive revenue and earnings story that the offset of this is the expense structure. everyone is freaked out that they're going to have to guide way higher on expense. ultimately they get a hall pass as long as the revenue is there they can guide where they want on the expense structure cap-x and op-x is street is a lot higher bracing for an ai investment wave. most of these products are not generally available. so you have to plan and put in the infrastructure to get it sold. >> balancing investment versus actual monetization of these new ai capabilities. i could ask the same question about alphabet as well these are very much in an ai arms race against each other.

>> yeah. little different here really about the state of the ad market rather thanthe enterprise demand market where google most of its revenue is tied to advertisers. the checks have been advertisers felt better. the writer strike is helping youtube. we continue to see good momentum around their ai platform we don't believe the consumers are running to bing. they're staying with google. that's good for advertisers. they want to spend money where the users are. so overall things are improving. they should accelerate revenue growth and again, ai is the story here, but it's probably a little more murky. everyone will ask a little more questions about directionally where they're going, when they can monetize it. they have not been as loud and as convicted as microsoft. so more clarity there on that front will be needed stock is still cheap we think again the simple thesis in ai, microsoft will win the enterprise google will win the consumer there's room for both. both are buys in our book. >> why do you think google has been a little murky?

and seemingly a step ehind >> microsoft lost the cloud to amazon nadella is a thought leader. he did not want to lose this look, whu did he get out there why did he carry the flag and the torch out in front of the parade and jump up and down? because he didn't want to lose the next battle, which is the cloud shift now the ai shift he wanted to be out in front of this i think that google has the technology i think everyone will be blown away when they take the cover and pop the hood on this engine and everyone gets to see the power behind their ai platform that's been our thesis for a while. so they have done a poor job of articulating what they have. but behind the scenes we think google has an incredible lineup and they're going to shock us all. again, you can see other ai products and work and all consumer products use jumping your car with waze, gmail, their productivity suite you can already see their ai at work they haven't been as loud and

articulating what it is relative to microsoft microsoft is carrying the torch in terms of the chatter and the expectations and the sentiment and i think google is really going to carry this on the product line when we get to see truly what it is >> very interesting. >> yeah. we just talked about ai commentary guidance, investment, monetization of ai, both of these companies what that looks like and what the future holds but in terms of the key metrics and the segments that are already generating money in meaningful ways today what is going to move these stocks is it azure at microsoft and the ads business at google, as you mentioned? >> those are the two those are the two biggest mile markers. again, enterprise demand for microsoft, azure and office, and then ai those are the ones to watch. for google, state of the advertising business that's really what's driving the bulk of the revenue. those are the big mile markers everyone is looking for. >> brent thil, thank you for joiniing us

great to get a preview >> check more coverage 4:00 p.m. eastern. i'll kick that off we'll strap on our seat belts. it should be a wild hour. >> a good hour. >> yeah. coming up on "power lunch" in the meantime, another major earnings mover raytheon down big after disclosing manufacturing issue on some claims those details ahead. plus, tiktok keeps adding services to its shopping list. expanding into music streaming betting big on e-commerce but is the the platform taking a big risk check out spotify, issuing weak guidance, missing on revenue. all that said, subscriber numbers did climb but that stock is falling it's down about 15% right now. stay with us

welcome back tiktok keeps pushing the envelope, despite having regulatory target on its back in the u.s. the social media platform recently announcing a push into music as well as retail. diedra bow is a and steve kovach are here to discuss. all right. deirdre, lay this out for us given the fact that this is, i think, yet one more example of an internet company, of a social media company becoming an all in one, one-stop shop. >> and what's unusual about this is that it is a chinese one. i mean, chinese companies have

traditionally had a lot of trouble moving into the west they haven't even tried to then tiktok came along and proved essentially that it could be a real competitor to american internet companies, like facebook so, you saw move and the chinese e-commerce companies begin to have a lot of success here they flooded the market with a lot of advertising, super bowl ads and gaining success and gaining american consumers tiktok is saying, hey, we want a piece of this also but i don't know if you used any of these, morgan or tyler, it's quite the experience it's not shopping as we know it. it is shopping with chinese characteristics. >> steve kovach, you're laughing at that. i think it's interesting we're getting this news, 24 hours or 48 hours after the rebrand of twitter into x. >> you took the words right out of my mouth. we have been talking about x as the super app. that's what tiktok is doing, not just this -- >> trying to do. >> not just this e-commerce thing but just last week they

added a new way to post with just text. we know tiktok as a video app. then they are also getting into music streaming taking on spotify and apple music. that's an interesting move here, too. they're doing it only in brazil and indonesia now. tiktok got its start from a different app called musically it's a huge music discovery platform so there's tons of other streamers trying to take on spotify and apple music, the two market leaders but this could have a chance just because of that dedicated tiktok user base if they ever do bring it here to the united states and expand more. >> deirdre,what are apps going to look like in five years if that's what we're talking about here is kind of the change in the way we interact with apps. >> yeah. >> and our phone what's it going to be like >> yeah. that is the difficult question because we have this big generative ai shift. who even knows if we're using our phones, looking at apps

going on the internet. that could all change. however, what elon musk, what mark zuckerberg, what many tech leaders hoped their own apps would look like are, as steve has been talking about, super apps but it's a very different case here than it is in a place like asia where the internet, where payment systems evolve very differently. so, we know that this isn't the first time that elon musk has tried to copy or actually you could even say he was thinking about super apps before the chinese were but he hasn't been successful in doing so what is the future of shopping online i mean, that is a good question. maybe you do need to open the tmoo app it's like my producer this morning said it was like gambling like you're spinning wheels. stuff is popping up at you the discovery function is so much more built out than say an amazon, but it's really in your face and you're getting offered free stuff, free money all the time >> not to mention you order something it may show up in two days, two weeks or two months. you don't know it's not a guaranteed prime

shipping thing it's a very different experience but like deirdre saying, huge. it's number one and two -- >> what's the quality of the merchandise. >> chinese junk. >> not good. >> plastic stuff. >> right >> so yeah that's what -- but it's huge. it's cheap that's the thing. you want to buy a case of toothpicks or something, it's probably better than going to walmart or target. >> case of toothpicks. that sounds good put that on my birthday list, please. >> there you go. deirdre bosa, steve kovach, thank you for joining us so what impact does tiktok the fast fashion industry have on the retail space we'll continue to tug on this thread joining us now is retail city's managing director and co-host of the cpg guys podcast brian, thank you for joining us. and i'm going to ask you that very question. what does the future hold now? >> well, we're all going to buy cases of toothpicks apparently i'm very excited about that. so, i think there's a couple things in here i think that steve made an excellent point talking about

the concept of discovery i think that's a lot of what you're seeing here is just the nature of how products are discovered has changed so fundamentally because of tiktok and the engagement that it has, and the way in which it serves that engagement up which is alga rhythmically and harder for advertisers to manipulate and control. as a result, all of the things that can connect to tiktok are different than things that can connect to insta or facebook or youtube which are platforms that large advertisers understand better so it created an opportunity for things to come along that kind of natively understood that sort of randomized alga rhythmically driven demand generation and matched the footprint with tiktok with their own footprint. right now that's been the biggest shift. >> interesting and we have touched on a little bit the fact there is this

regulatory angst or risk or whatever you want to call it brewing around tiktok and its operations here in the u.s., but you just mentioned some of the names of other competitors that are stepping in with a similar business model here, but we're not talking about u.s. companies that are doing it. at least not yet maybe x is on its way. >> okay. sure maybe it is. i just -- they have a ways to go to figure that out i'm probably -- i think both relatively well established businesses in china know how to link up to that type of algorithm is fine. tiktok is a very different thing than tmeu and shin tiktok moving to commerce reminded me what shopify tried to do, they tried to run their own logistics for a hot minute and discovered running a platform and running a warehouse are two very different exercises. i'm not 100% what tiktok is trying to do in that space will

work or be any good at it. they may be, they may not be i think the ability that tiktok has to generate demand in a particular way works well. i think the other thing with tmeu lucked into low price points expands the potential buying audience to teenagers who don't have a ton of money but who are all the people on tiktok the ability to get teen demand is interesting it's like taking five below and attaching to tiktok. >> how worried does amazon need to be? >> amazon is always going to be concerned about anything that interrupts the discovery process because amazon sells a lot of things they don't make a ton of money doing that they make a lot of money selling advertising. and their advertising is generated in a very specific way. you look at prime day, for instance, and what amazon was trying to do with the connection with tiktok which was

unbelievably strong during prime day as well as through amazon's own initiatives to engage shoppers in a more dynamic and sort of content centric way, i think amazon is already beginning to respond to that it will be interesting to see as tiktok continues assuming it continues to be a big part of the consumer engagement landscape, does it do better connecting to amazon or does it do better trying to run its own commerce the jury would still be out. >> the point that morgan was driving at and that is the comfortability factor that american consumers may or may not feel doing business with chinese apps and exchanging money with chinese apps that may or may not be under the influence of the chinese government and whether u.s. government is going to countenance it forever. >> yeah. i certainly think from -- if you look at shein in particular and the curious ownership it has, i

think there are certainly areas you could see regulatory involvement start to restrict the types of chinese companies that can work here but i think in the end if the consumer gets value out of something, especially for something that brings them joy like tiktok does, i just -- i really wonder day in and day out -- my daughter is 14 years old and on tiktok all the time does she care the chinese owns it i don't think she does i think she likes her tiktok videos. >> thank you very, bryan appreciate it. >> take care. coming up, less than a day away from the fed decision on interest rates we'll get a preview what the bond market peexcts live from the floor o.-cpo next.

all right. welcome back our favorite segment of the day. oil higher on the day, so is gasoline. >> gas and oil up to 79.90 today as a three-month high and 10 cents away from the $80 level. so some optimism there and now getting outside of the range it's been in for the last few months gas is also on the move today

and we'll hear from eqt later today. they're one of the biggest producers in the u.s. about the state of nat gas he thinks the nat gas market is very well supplied in the short term and take some sort of catalyst like a winter storm or supply outage in order to get out of that range it's been in the prices have been more under pressure now one area to watch today are the steel stocks, the slx at highest level in 12 years today. one of the big gainers there is cleveland cliffs reported a very strong quarter their volumes were up, prices were up and costs were down. so clearly investors responding with the stock up about 8.5% >> pippa, thank you very much. we appreciate it. let's get now to bertha coombs with cnbc news update a federal judge in san francisco ruling today against the biden administration's asylum policy at the border. the ruling is stayed for 14 days allowing the administration to appeal to the ninth circuit. the policy largely limits

migrants who pass through another country from seeking asylum in the united states. the case may ultimately end up at the supreme court and legal observers tell nbc news it is likely that the policy will remain in place while that process plays out in the courts. a state department spokesperson says the former u.s. marine released in a 2022 prisoner swap with russia has been injured fighting in ukraine. according to u.s. officials, trevor reed was transferred to germany for medical care officials say reed was not acting on behalf of the u.s. government and the department of education opened a civil rights investigation into admissions practices at harvard a spokesperson for the department says the investigation will focus on whether harvard discriminates on the basis of race by using donor and legacy preferences in its undergraduate admissions process. morgan, those legacy admissions are really starting to come

under the microscope now. >> they very much are. bertha coombs, thank you. ahead on "power lunch," what is the c suite spot for corporate america? do shareholders want chief executives to get the job done and keep the ship sailing or innovators who push the envelope we'll discuss next ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪

seeing a bit of a split emerge in corporate america between innovators and operators running companies. on the one hand, you have boards turning to seasoned veterans chevron yesterday waiving its retirement age in order to keep mike wert on as ceo. one, we saw at disney. bob iger coming out of retirement in his 70s. but then there are those taking the opposite approach. elon musk throwing out the multimillion dollar twitter brand in order to create a so-called super app called x mark zuckerberg did something similar abandoning the facebook brand in exchange for meta which is better for shareholders here to discuss is cnbc contributor steve, president and ceo of the conference board also former ceo of office depot and

auto zone. good to have you with us welcome. maybe we're oversimplifying here between the founder, innovator and the seasoned operator, the corporate exec i put larry cull p of ge also into that group of the seasoned operator types talk us through this are we on to something here? and which ones seem to have the better success at running companies profitably and good for shareholders >> yeah. well, there are multiple issues here first of all, you know, this whole magic of a 65-year-old retirement age is an artifact of 1930s and social security when it was set that way and used as the retirement age and yet people are living 20 years longer this notion of a 65-year-old retirement, ceo is out, i think is completely being rethought. particularly with people very energetic into their 70s, board members in their 70s we have a president who is 80. and warren buffett is 93

is there a magical number, no. now the other issue is, do these people have to be innovators or what is the juxtaposition of innovation versus running a company. of course you want to have innovative ideas and leadership and so forth we're talking about inventors when we talk about musk and zuckerberg why on earth is elon musk a ceo of a public company. just listen to the things he's invented of course we know tesla, spacex, hyperloop, open ai, one of the founders of the open ai, neuro link, zip to, solar city, electric jet, boring company which is not very boring, all these things he invented and more in the pipeline why is he wasting his time day to day why is a board of directors having him change the logo at twitter? why isn't he inventing there should be a whole waiting room of ceos where elon musk invents something, hands it off

to a ceo to launch and run i think it's a highest and best use situation. this is what boards of directors need to think about. the true innovation inventors versus people who can run the company, take it to the next level, deal with shareholders and other stakeholders day to day. >> yeah. not to minimize musk, he is not the ceo of twitter anymore he is still calling the signals. he is the head -- i guess he's the head coach and she's the offensive coordinator. >> chief technology officer. >> yeah, yeah. chief technology officer az think back about founders sometimes founders, you said it. it's like musk has too many ideas to be messing around as ceo. >> yeah. musk is a national hero. literally, he's a treasure he may not be ceo of twitter but he's calling the shots but he was running tesla day to

day and tied up with the regulators on all this stuff that's not what you want him to do boards of directors need to think seriously about the kind of person who can launch these ideas, launch a company to the highest and best use and the professional leadership who can carry it on and really take it to the next level. but i think this whole concept around age needs to be completely rethought, tossed out the window as well that's been done largely on boards of directors where people are staying longer some people are ready to retire at 55. some people not until, you know, much, much later so i don't think you can create this artificial situation. now, founders is a whole different kettle of fish where you've got people who come in and take it to a certain level, hand it off and you know it gets fumbled. howard schultz is an example of this they brought him back a couple of times to run starbucks and fix the situation. but ultimately you have to groom a successor who can carry it forward and take it to the next

level. that's what shareholders want. they want predictability and consistency. >> yeah. that bench is so important and there are so many companies that are fabled for their executives that are groomed and rise through the ranks, to your point. i do want to shift gears a little bit here because it is helping to propel the market higher today it's the consumer confidence reading that we got this morning. it was really a goldie locks reading the fact that we saw it come in above expectations, best level since july, 2021 we are seeing those inflation expectations continue to move lower, too walk us through the report and whether it feeds into this soft landing thesis that the market has really seized upon >> yeah. so the conference confidence came out a few hours ago it was a great report. consumers are more confident than they have been in years and that's driven by their own view of their jobs, their jobs are stable they're feeling comfortable. they're feeling like they're going to be able to keep their

jobs they're not eliminating jobs in this company their wages are higher and you know, all of this is feeding into it. inflation has come down. and it's predominantly gas that is driving that. food inflation rates have come down to some extent as well. and that's really important for the lower earning folks where food and gas are a higher proportion of their expenditures so, you know, you ask -- we ask consumers this time, do you expect there to be a recession and fewer and fewer consumers are saying that they, in fact, expect a recession maybe there will be this soft land -- so-called soft landing we're down to about three or 4% inflation levels the fed is trying to hit 2 they think they'll go up this week they probably will go up one more time, 25 bases points but you know, if they can do that without driving a negative gdp number, that will be a soft landing and it will be easier on employees.

>> it sure will be it will also be somewhat of a rare feat. we'll see if they can do it. steve odland ceo of the conference board thank you for joining us. >> thank you. shares of rtx on pace for their worst day since march of 2020 so the pandemic. after disclosing engine manufacturer issue coming up, we'll hear pr the ceo about what exactly is at stake "power lunch" will be right back (fisher investments) it's easy to think that all money managers are pretty much the same, but at fisher investments we're clearly different. (other money manager) different how? you sell high commission investment products, right? (fisher investments) nope. fisher avoids them. (other money manager) well, you must earn commissions on trades. (fisher investments) never at fisher investments. (other money manager) ok, then you probably sneak in some hidden and layered fees. (fisher investments) no. we structure our fees so we do better when clients do better. that might be why most of our clients come from other money managers. at fisher investments, we're clearly different. how's the chicken? the prawns are delicious. oh, i have a shellfish allergy. one prawn. very good. did i say chicken wrong? tired of people not listening to what you want?

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welcome back shares of rtx punching after disclosing issue with its enginings on pace for the worst day the stock is more than three years. down 11% phil lebeau joins us with more on exactly what happened and what this disclosure means for the company. phil >> well, it's a little uncertain what it means long-term. near term it will be $500 million hit that they're going to take because of the engine inspections that need to be done we're not going to get too wonky here but let me explain what rtx is going to do through it pratt & whitney division they'll expect 200 of these gear turbo fan engines in the coming weeks. 1,000 of them will be checked over the next year the issue, they're looking for powdered metal contaminants. not all are believed to have these contaminants

but those that do, they will then have those parts replaced and all of this brings up the question, well how many of these engines are out there and what does it mean for the airlines that have planes using these engines? 3,000 in service worldwide the turbo engines power 40% of the air bus a 320 worldwide. extremely popular plane using extremely popular engine but they have to expect these which means some of the airlines have to have some down time here where some of the aircraft will have to have these engines pulled off and inspected here is the ceo of rtx talking earlier today about the process. >> we have to increase the shop capacity to do these accelerator inspections. we have 1300over haul shops today. we'll add six more test equipment that needs to be put in place we have to put vertical assets in place to replace engines as we pull them and we're going to have to try and work with the airlines to compensate them for some of the cost associated with this.

>> take a look at shares of delta and spirit two of the airlines that fly aircraft a 320 that have these geared turbo fan engines we should point out, this is not a flight safety issue. they're not grounding these planes they will need to do these inspections some in the coming weeks, others over the course of the next year. also as you take a look at shares of rtx, which as you mentioned, morgan, had the worst day since, what, march of 2020 this is going to be a $500 million hit at least initially that's the expectation longer term they have not put a price tag on how much this is going to cost the company. >> incredible how much this dominated the earnings call, the conference call as well. this issue and the fact that this very much, phil, overshadowed what was a very strong q2 raised by the company for the full year. commercial aftermarket defense doing really well, too, as you see that restocking of supplies supplied to ukraine and yet this has begun the driving factor for

this name today. >> right it's partially that they haven't been able to say we know how much this will cost long term. will this be devastating to rtx over the course of the next year or a blip? odds are it won't be long term keep in mind, they have a decent sense of how many of these aircraft engines they think are to have parts replaced they do not think it's a large number but they have to do these inspections. not a flight safety issue. it would be different if they said ground these planes that is not what's going on here. >> very quickly, where does this powdered metal come from >> it was part of the manufacturing process. and they first discovered an issue going all the way back to 2020 as they started investigating. then they said, okay, here is where we think the impact is it does not impact the geared turbo fan engines that are in production or in the manufacturing process right now. >> all right, phil lebeau. thank you very much. ow lchwi brit back

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we have a news alert on a battered regional name hit hard following the collapse of silicon valley bank. leslie picker has the story. >> the stock price whip sawing in the wake of bank failures in

march and april, but the journal reporting that banc of california is in, quote, advanced talks to buy pacwest. they say the move is to further shore themselves up following that regional banking crisis earlier this year. but i want to draw your attention to stock prices right now. pacwest down 23.5% on news that it could be part of this deal to be purchased by banc of california, which is actually a smaller lender and that one up 13%. the journal is citing people familiar with the party and they say equity will be contributed to help fund the deal. this brings up all sorts of questions about consolidation, about what the earnings will entail this afternoon both of these lenders are expected to report earnings, and what it says about the overall health of the banking sector, as well as the

regulatory appetite to allow for additional bank mergers. so a lot of questions at this hour hopefully as the journal is reporting, we could hear about a deal announcement as soon as today when both banks are scheduled to report their results, after the close of the market today we are gng toio take a quick break and "power lunch" will be back right after this. ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ i was told my small business wouldn't qualify for an erc tax refund. you should get a second opinion from

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welcome back stocks are higher as the dow stries for its 12th straight positive day bond yields rising as wall street braces for the fed's next decision on interest rates that comes tomorrow. let's go to rick santelli for more >> tyler, it's been a wild day on so many front richmond fed has top tier data and the manufacturing was weak, weak, weak what wasn't weak was consumer confidence look at this chart 117, the highest level of two years. if you look at the interday, you would think they peaked today. when the data came out at 10:00 eastern. and if you look at ten-year, we're on pace for the highest yield closesince the 11th interday with the highest levels since july 12th, and we're going to find paul and see if he wants to discuss the markets >> there's a lot of action going on today why don't you tell me what you're seeing from the

perspective of traders, especially understanding that tomorrow is the big day for a fed meeting that's been baked in the cake for a long time >> yeah, i would agree with that there's not a lot of intrigue with the actual statement tomorrow, but the forecast, people are still very curious to see exactly what they have to say. starting yesterday we saw a lot of interest for tomorrow, but we're trying to figure out if that's for the fed or is it maybe for google and microsoft tonight. >> that's actually a good point. one would think it's most likely the latter, because truly, there is no surprise left in this. it's like a surprise birthday party where everybody fell asleep before the guest arrived. now, what do you think outside of the earnings, which are super important? is there anything else going on? i'm looking at the vix and the markets are up and the vix is up what's up with that? >> that's unusual ahead of a fed day. and the vix actually bottomed the middle of last week.

we've had some pretty big orders come in the last five or so trading days for some downside exposure, coincided with that vix bottoming, and the futures haven't really kept up the rally that we've been experiencing the last few weeks. >> now, if you had to summarize very quickly what's the biggest issue that people in the office and clients are talking about in general, what topic would that be today >> right now, i'm going to go away from the fed and go more with earnings, if you're asking me if they have a change of tune -- >> especially with the markets dow jones industrial average going for an even dozen. this is historic my other question is, when i look at two-year note yields, they are hovering just below 5%. the high yield closes 507 from the spring if that doesn't take that level out, it's definitely going to be a negative, meaning we would most likely see lower yields, good success

real quickly, we're almost out of time, what do you think >> i think after tomorrow we'll have a way better idea of the path of the curve. >> got you back to morgan we're going to fist bump because we think the fed is going to have a hard time beating google earnings when it comes to volatility >> rick santelli, thank you. markets are fading the gains great to be with you. >> great to be with you. thanks for watching "power lunch. welcome to "closing bell." i am brian in once again for scott. this make-or-break hour begins with a make-or-break moment for mega cap stocks. we are an hour away from earnings from both alphabet, google and microsoft those reports could pop this rally higher or they could derail the tech run. we're going to get to all of that first, here is your scorecard on wall street. we are higher across the board, not by a lot the do