copper, and i like it here for a buy. >> weiss? >> i don't want to say buy a stock that's up 2% in the day, but it's down quite a bit. i ad d to it quite a bit waiting for it to firm out after the quarter. it did, so i think this is one of the stocks i want to own. >> joey t.? >> eli lilly, pointing toward new all-time highs. see you on "the closing bell." "the exchange" is now. ♪ ♪ thank you, scott. hi and welcome to "the exchange." i'm kelly evans. here is the good news. yields are dropping and here's the bad news, yields are dropping. if they drop too much it could pose a whole new set of problems for the fed in the markets and we'll look at how and why you want to be positioned now. plus do lower rates mean better prospects for housing? our analysts say yes, even with recession risks growing he's here to explain. defaults in the private credit space that market also keeps going and we'll talk to the lenders about rates and returns and recession risk there.

first, let's get today's numbers after a very hot week for stocks, dom chu. >> best of the year so far, kelly. that's how hot it was last week and we're starting to show signs of cooling off just a little bit. it was a decently, solidly positive day. still green across the screen, and just about flat on the session. the dow industrials just about flat, up 14 points and at 34,075 and the s&p 500 off one or two points and flat on the session and a 0.1% gain for the nasdaq composite. just to give you some reference, at the highs of the session we were up 14 points in the s&p and down three at the lows, so we're tilting toward the lower end of the intraday drainage. by the way, viewers and listeners out there, each of these major indices are looking at six-day winning streaks, and each of those indices for now above their 50 and 200-day

medium term averages over the last couple of weeks and we'll see if that sticks around. if you look at the rate story that kelly just mentioned. yes, we are pulling back and rising ever so slightly. the benchmark note, remember, we got to 5.02% there, got below four and a half at one point. so this is an interesting area to see whether or not they do become sellers of treasury bonds and notes into this kind of strength. we'll see if that plays out in the coming days and weeks and one stock to keep a close eye on. dish network, now falling to the worst level since december of 1998. those shares down about 25%. a surprise loss for the quarter on slightly worse than expected revenues, driven in part by a loss in both wireless phone subscribers and its boost mobile unit as well as pay tv subscribers as well so keep an eye on dish network down 25%. kelly, i'll send things back over to you. >> what a drama that has been. thank you very much, dom chu. today is only the third full

trading day, believe it or not, since the fed kept rates steady and chair powell suggested they might be done hiking and we've seen a massive drop in bond yields. how much lower could they go? steve liesman is following that story for us, steve? >> kelly, three factors that drove the ten-year yield higher and helps stocks to rise and yields lower, i'm sorry. helps stocks rise all improved last week and they haven't completely gone away and they presented new uncertainties for the market. growing was one thing. we had weaker jobs report and weaker isms last week and more dovish outlook from the fed and treasurys and less supply on the long end and short term here. you can see the impact of all of that on the ten-year and the refunding announcement and another leg after the fed meeting and a third after the weaker than expected jobs report and it's still volatile out there and concerns remain and yields are up just a bit. today you can see there. the result of all of this was to

move the december outlook for fed rate hikes for 7% for december and 12% meaning the market is down betting pretty confidently that the fed is done with its hiking and those areas create new uncertainties for the market to navigate. on growth, how do we go? is recession back on the table. on the fed, diane swann on the show, could the yield mean more hikes if it is not under control and you can bet there is more coming and the mark will have to digest that eventually and the chief economist with the peterson institute just out with a warning advanced economies to get their financials under control. he says he fears a debt explosion, kelly, if they do not. we get to talk about this tomorrow with austan goolsbee tomorrow. >> there were many hopeful that we could take the deficit risk off the table with yields

dropping, and it sounds like we haven't quite sorted that out yet. >> no. blanchard was the one who said that governments could borrow so long as they were above their interest rate and that's happened now that you have the higher yields out there. he says they believe they may come down a bit from where they are right now and he talks the market at their word. i just want to show you what he said here about the dysfunction in the u.s. government and how that makes him even more concerned. he says that given the current budget process and dysfunction, one must worry that it will not take place any time soon and the debt ratio is likely to increase for quite some time. we have to hope that it will not eventual eventually explode. >> one of my next guests says fed's tightening cycle is over and the yields will no longer be doing the fed's job, and let's bring in julia coronado, and

peter book of our cio of blikre financial group and cnbc contributor. peter, i'll just let you start. yeah. it's sort of darned if we do, darned if we don't on bond yields. >> the rise in long-end rates were tightening for themand how do you define the recent drop? i think either way, the ten-year yield is over 75 to 85 basis points since the july rate hike and mortgage rates were up similar. so at least in the housing market the market has tightened three times since the july rate hike, and even when the fed is done raising short-term interest rates just by keeping them elevated for a while is a continuous form of tightening in addition to qt that continues on. >> we also, julia, this morning have people looking ahead into next year and talking about when, not if, but when the first rate cut will come. are they jumping the gun? >> no. i think that, you know, in our view the fed is done hiking and

so therefore, the next question is how high -- how long do they need to keep rates in this restrictive territory? when will they be able to at least move rate, the nominal funds rate down with inflation and that's a fair question. our own forecast is that by the may fomc meeting we will have core pce below 3% on year on year terms and that will be enough progress for them to say, okay, now we'll move in lockstep with the inflation trends to keep that real interest rate where it is, but provide a little bit of relief, and i think that that's not too distant in the not too distant future. it does assume or forecast more progress on core inflation trends, but i think if we look at the labor market we are not -- it is not generating inflation pressures. we are seeing price increases and price decreases. so i think the inflation

emergency is over even if there's still more progress the fed needs to see to actually move the funds rate down. >> do you think, peter, that markets are jumping the gun. we have 6% rallies for the averages and 8% for the russell. are we going to look back and say, yeah, this is the start of some face-ripping rally into year end or is this people hoping for a return of the past that can't return under these conditions. >> what are markets trying to do? once the fed is perceived to be done and sort of to the side, well, let's rally the markets and it's the pavlov dog's response, but as i said earlier, the fed is still going to be tight. even if they cut, there is a far distance from the zero world we lived in versus even if they cut 150 basis points it takes the fed funds rate to four, but they're still going to be shrinking in their balance sheet at the time, but it is still a form of tightening and the tightening is global. qt is global and the rise in

interest rates is global so there is a continuous form of tightening globally as debt comes due at these much higher levels. >> absolutely. that's where olivia blanche art and many have been making the point that markets might draw some relief and the fed funds rate going from 5.5 to 4, but four is a big problem, where, for instance, the u.s. government. >> and i want to just go back, kelly because we've been talking about this for a few weeks now. there is a difference between the near-term concerns of the market on the debt and the longer term concerns. really, it was august when the market decided the debt and the deficit was a problem and that came from a one-two punch from fitch who has downgraded the u.s. and the next day the treasury surprised the market with both the amount of issuance and the reliance on the long end. well, a little time's gone by and they got the deficit and treasury backed off and put it on the shorter end of the coupon

curve and the longer end, but that's the approximate reason for why it's edged out and that particular panic is out of the market. it doesn't remove anything about the longer term concerns when the market decides to get freaked out about that, i don't know, but olivia blanchard said what you're really looking for is the primary deficit, which is the deficit not counting interest payments of around, bringing that down to around zero and otherwise the deficit is growing. >> exactly. >> the u.s. is about 3%. 3.6% and blanchard estimates could take up to ten years, but the u.s. is so strong financially, kelly, that i think what the market wants to hear is from the biden administration and the treasury secretary and also from the republican side that we have political commitment to bring this under control of which there is absolutely none now. >> no. these are very hard decision, julia, you need to be make making because they have

entitlements and the things that you're stuck with. julia, if we head into a recession that would make things worse because revenue is under pressure. is that your best case for 2024, a recession? >> we don't have a recession as a base case, and when we were talking about blanchard's analysis, you know, it's built on sort of projections of trend growth and one of the upside surprises this year is that growth has outperformed when we consider that longer term trend and the divergence comes from productivity. productivity has really improved in the last couple of quarterses and if we happen to be on a stronger productivity trend, this cycle versus last cycle, then actually the math starts to add up a little bit better. two quarters don't make a trend. we've got to be cautious, but there's a number of reasons that you might think productivity outperforms the kind of low performance of last cycle which gives us a little bit more breathing room in terms of the

math that blanchard is talking about. so i think that's the thing to keep an eye on. does that outperformance of productivity continue? >> all right. julia? >> yes? >> i was -- i was down and chill with the idea that the deficit problem wasn't such a big deal because we were going so strongly. the trouble is that the revenues haven't shown up. in fact, one of the big reasons why we're in the hole we're in is because revenues so dramatically disappointed. my concern at this point, i don't know what the reason for that is. maybe growth isn't that strong. that's a possibility. maybe more and more people have decided that it's okay not to pay their taxes. that could be another reason. there was also a delay in california, but my concern, and i think the real reason for concern is that we've had the growth and haven't had the tax revenues. >> no, you're exactly right, steve, and it's important to highlight that that the surprise

in the deficit widening relative to cbo projections was indeed a shortfall in individual tax revenues and not even corporate tax revenues which is unusual in a strong labor market. say one possibility is the volatility and there's capital gains, taxes and the ebb and flow that contribute to volatility and the so it doesn't repeat and again one of the positive surprises last week was that treasury came out with a better deficit projection than people were expecting. >> so it could be that that was just a one off q3 that doesn't repeat and we had a still wide deficit and a better footing on revenues or it could be that, you know, they need to fix something in terms of the tax code so that the revenue collection is consistent with the strong economy and therein lies the danger of underfunding the irs. we know the research shows that the irs can pay for itself by making sure those tax

collections are consistent with the performance of the economy. >> no. it's a great point and these are the subject of much fighting let alone what's to come. thank you. julia coronado, and our own stuff liesman. my next guest says it's all about the normalization of rates. the return of free money, the return of fundamentals and in this environment he's finding opportunities for growth and value. joining me is value veteran investor chris davis, chairman and portfolio manager of davis advisers, a longtime berkshire hair holder and board member. thanks for your time. welcome. >> kelly, i'm always glad to be here. >> can i start with your reaction with bond yields? there's so much more to dive into. how would you describe financial markets at the moment? >> the system is very fragile. it's been grossly distorted and overextended and more than a decade, almost a decade and a half in which basically, money, the price of money was distorted

and manipulated and held artificially down in the face of an enormous amount of money being printed, and i think weir just in the earlyinings of this unwinding, and i think everything is very taut. the people that have gdp back through what we've lived with are absolutely out of touch with the reality, you better be focused on characteristics like durability, res ilynsy. be prepared because things have started happening and will continue to happen. >> i like that. i was going to segway into your stock picks and people might have heard this morning before, but be surprised at your holdings if they're already familiar. you have financials and before i dig into that, chris, what do you mean by more problems could be happening? what do you sense as a veteran

market watcher is lurking out there? >> you think about what happens when money is free. no basic models of financial analysis work, you know? all of the value investing is on a discounted present value and if there's no discount rate it doesn't work. cap m, the price capital and all of these distortions that were created in this idea were for the first time in 3,000 years money was free for a period of time. so what happened? when money began to be re-priced this is a return to normalcy. there's going to be a hangover from popping the biggest bubble they think any of us will ever live through that was the bubble of the fixed income markets, but it wasn't just in bonds. it wasn't just that, my god, you could lose 50% owning the 30-year government bond. it's still not in program's consciousness. i don't think people realize it, and then you solved problems,

and taking enormous interest rate risk. you saw it in some pension funds in the ushlgs k. in i at prif private eshlt kitty and i look at real estate and private capital market, there is an enormous amount of risk that still needs to be re-priced in light of the fact that capital, once again, the cost of capital n needs to be factored in. >> fascinating and a good setup. we'll be speaking with our guest later this hour. let's talk about what a company like berkshire does in the m middle of this. they have $157 billion in cash. where do they put it to work? >> first, i'm a director of berkshire. i can't make any comments about berkshire's positioning. every berkshire shareholder and every other company should study is the quality of berkshire's 10k. all of the information is in there that of the investors

would of the and we would want if the seats were reversed. i will say i've been a berkshire shareholder for 30 or 40 years and what is the most powerful aspect of berkshire that doesn't get appreciated when everything is sailing smooth, but what comes to get appreciateded in times of dislocation and transition is that that -- boy, that place is built to last. durability that notion that you are a fiduciary of the shareholders' equity and that is so deep in that place and certainly the recent results just indicate that culture in spades. >> i don't think anybody doubts that or is ungrateful. at some point even with the return that they're making on that cash, you've got to deploy and invest it. do you think they're -- let me ask you different so you don't have to comment on berkshire. if you had $857 billion in cash would you wait for a crash to pick up companies at better valuations? is that the problem right now is that it's still a valuation issue or they're just too big?

>> of course, given your name you'll appreciate the kelly criteria. so a big part of investing especially when people have failed to price risk appropriately is making sure that you are always there to participate in future rounds, that you're in the game to last and you don't get driven out of the table. so you have to size and that's right, numbers at places like berkshire grow, but so does market cap and so, you know, you can't look at one in the absence of the other. i remember when microsoft used to have 30 billion of cash and people said, oh, that was crazy and that was way too much, but optionality has huge value, and the fact that any company that has been a good steward of savings and a good investor, the idea of having that optionality as we go through a time of enormous transition in the economy and the marks and

geopolitics, in globalization, the value of that optionality is so much higher and should be valued higher. so i think, in a sense, any really thoughtful, long-term intelligent investor having some dry powder, i think is incredibly important because strange things are going to happen. >> perfect place to leave it. chris, thank you very much for joining us today. it's good to see you. >> kelly, i'm always glad to see you. >> i learned about the kelly criteria that i did not previously know about. >> as bond yields have dropped so have mortgage rates and up next, put the plunge into perspective and look at what it means for the homebuilders to buy down mortgages to incentivize borrowers. more companies are looking to break into the world of direct lending. we'll talk to morgan stanley's head of global private credit and equity about that and the biggest risks and opportunities he sees in the space. as we head to break, here is a look at the mark which is are red across the board although

slightly and the dow was up the session highs and the nasdaq down a third of a percent and coming off a hot win streak since january and the ten-year note just under 4.65. we're back after this. ♪ this is "the exchange" on cnbc. welcome to ameriprise. i'm sam morrison. my brother max recommended you. so my best friend sophie says you've been a huge help. at ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. our neighbors, the garcias, love working with you. because the advice we give is personalized, hey, john reese, jr. how's your father doing? to help reach your goals with confidence. my sister has told me so much about you. that's why it's more than advice worth listening to. it's advice worth talking about. ameriprise financial.

welcome back to "the exchange." mortgage rates dropped slightly and look at that, down nearly 7.4%. diana olick has a look at how much relief we're getting. >> we're in definite freefall last week and moved back up a little bit today, but the 30-year fixed started on monday last week at 7.92% and took three major plunges starting wednesday with the fed pause and ending friday with the

lower-than-expected jobs report. it totaled more than half of a percentage point drop just last week and that very rarely happens of course, the builder stocks loved that and the construction etf shot up and to put it in housing perspective, if you're buying a $400,000 home on a 30-year fixed mortgage, your payment was $119 lower last week than it was on the previous monday. what does it mean for the fall housing market? it could help on the edges, but we still have sky-high home prices and the last time affordability was this bad was in the 1980s when rates were actually in double digits and the average home cost about 3.5 times the median income and the average home cost six times the median income and home prices continued to rise. mortgage rates over here. it's still not a great time to buy. >> we either need incomes to spike by 60%.

home prices to fall 40% or mortgage rates to fall 4.5% to bring us to pre-pan demic affordability. >> the perfect storm. >> any one of those three seem pretty unlikely. if i had to place my bets i would place my bets, i don't know where i'd go. maybe mortgage rates. >> i don't know about that. i would look at home prices and they have been going up pretty dramatically still even now ask we're starting to hear people lowering their prices because of the higher rate and that's one to watch in the winter if prices do start to pick up a little bit and open the door. >> diana, thank you very much. our diana olick. as recession risks also run higher. my next guest sees opportunity for the home builder which historically outperform. >> senior analyst at seaport research partners. you have a buy on the homebuilders as you have for some time, ken. welcome back. >> thank you. we actually just upgraded five

of our ten builders on thursday. >> wow. >> yeah. it was a big deal for us. we do move ratings around. our upgrade looks at housing sector returns of the market being positive 75% of the time over the last inversion cycles and that was the ten-year with builders outperforming 29 and 46% versus the market on the 6 and 12-month basis. >> sothat's interesting. we all knowablely when the yield curve is uninverting that is a bad thing. there have been a couple of times when hadn't and we didn't have tightness in the senior loan and we have the tightness now. so it seems like we're going to follow the path where the recession comes next which in that case, i can't imagine, even if you buy the builders on inversion trade, where do you sell them?

>> well, the d inversion which is coming from the 100-basis-point spread and it takes 12 months and i don't think we're there yet. we don't know the direction of rates, nobody does, but we do point out that the inversion has led to a session high the last ten times. along with housing activity, ironically about two months after and there are too many things here, but as chris talked to you about in the segment before, rates have moved up. lows, we don't expect it to be there and we do look at history because of the 50s, 6 s0s and 7. namely, the rise in interest rates that we saw post the 1966 monetary tightness led with the inventory and those were the really important because that led the bottom earlier in 1989

or the 2007 period and we have a lot of excess housing units on the existing side. >> even if we had the downturn the housing is in the cyclical area held by lower interest rates and so maybe some people are anticipating that and the people i know who were very bullish and the value investor said on housing and they seem to be looking at kind of the demographic argument here, as well and the simple economics of supply and demand. >> right. i'm not a huge demographer in the sense that stocks are very volatile and i would capture 80% of the stock volatility. however, from a value perspective, the five stocks we upgraded are on book value and the more complex pitch on a better run company. this is very much a risk-adjusted call versus the market using a lot of historical data to guide us because we think we can be pretty much

similar to how we invest now. >> quick final word, how much upside can you see over the next 12 months if history repeats? >> our price is 25% outside and go incrementally, but versus the market it's 29% versus 46% over the cycle that we look back during the inversion. the materiel outperformance despite what they've had since last september. >> ken, thanks for joining us. we appreciate it. ken sievert of seaport. it is on track for a serve-day win streak. we're back after this.

♪ ♪ welcome back to "the exchange." the stocks have just dipped negative after giving up a gain of 106 points on the dow. let's get to tyler matheson for a cnbc news update. tyler? >> u.s. bases in iraq and syria have been attacked at least ten times since thursday. defense officials said there have been 38 attempted attacks on u.s. targets in iraq and syria since october 17th. officials added that most of the attacks have come via drones and rocket, but none have resulted in new u.s. casualties or damage that infrastructure. donald trump is testifying in his civil fraud trial today. on the stand the former president said that the judge

had ruled against him before knowing anything about the company calling him a fraud before making comments on the value of trump's properties. that is the judge is a fraud. trump testified that he is worth billions of dollars more than what the attorney general has stated and called her a political hack. president biden is in delaware this afternoon to announce a new $16 billion federal investment in passenger rail projects, famously known for riding amtrak. the white house says the funding will go toward improving the train's speed, cutting delays and creating union jobs and amtrak will get about $66 billion in new investments coming from the $1 trillion bipartisan infrastructure law. kelly, back to you. >> tyler, thank you. i'll see you soon. coming up, high risk, high reward, maybe. more companies are piling into private credit at a time when the threat of defaults is climbing and we'll has the credit business about those risks next here on "the exchange."

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warning civilians to clear out, while hamas forces them back. allowing in food and water, which hamas steals. welcome back. rising yields on corporate debt and the freeze up in bank lending since march have led to a surge in private credit. the market sits at more than a trillion and a half dollars and bigger than the high-yield debt could grow to $700 billion over the next few years and with booming business also comes bigger risks. s&p ran an analysis to gain borrower resiliency and found

that the current base rate of 5.5% less than 2,000 businesses surveyed would generate positive cash flow as the earnings dropped 10%. they identified vulnerable sectors as technology software and services. my next guest says software is where he's seeing opportunities and he said of global private credit and equity at morgan stanley. welcome to you. a much bigger job than when you began seven years ago. would you have said yes, this makes sense. >> it's been a long term trend, if you look back 15 years particularly following the gfc, banks have withdrawn lending so private credit has been growing alongside that and filling the void. you've also seen the ride in private equity over the last decade and a lot of private credit supports it. >> the private equity has gone from 2 trillion to 4,

4.5 trillion and credits are seeing private, and people benefited from the rise of the floating -- you mentioned, but you wonder if you look into next year if there will be more pressure companies and portfolio companies and more defaults on problems like that. >> that's a good question. i would separate what we're seeing over the course of this year and what i'll call current loans and we see great opportunity there. if you think about the rise in base rates, that's giving first lien secured loans 11% to 12% yields and they're seeing in these new deals, equity contributions coming in at 50%, 60% and down side protection supporting it. you also see some of the higher quality businesses that are coming to market certainly over the past year. so we feel very comfortable with the quality of loans that are issued here. >> do you think that there's an overconcentration of software is the service types of stocks.

if that exists is it a good thing because they're more resilient business models or do they have to grow market share in order to be profitable? maybe you can sell to other private equity and other players and it's hard to get multiple expansion which has supported the returns that we've seen over the past decade when we're come this kind of environment. does that sector in particular help or hurt that cause, do you think? >> yeah. we run a very diversified portfolio across businesses and sectors. we do like software. we have for a while and for a few reasons. first, we look for companies that are robust that have hundred of millions of revenue. that revenue is very recurring and tends to be long-term contracts with highly diversified customer bases and it's usually mission critical and hard to rip out. we like to lend money to sponsors in the software space that have deep degrees of experience, that also have levers to manage cash flow. if there is a downturn they can

cut off spending and cut off growth and generate cash flow. >> interesting. how are you planning? the range of outcomes could include rates stay high or go into recession or both. >> what are the return analysis you're running under the different scenarios. >> we always look at downside protection. the new deals are robust on the how they have the down side equity, but if you look back at the older vintage deals, certainly they were underwritten when people didn't expect rate ratrates to rise as much. i also look at the opportunity. there's increasing demand for what i call junior capital or credit opportunities that try and help companies fill that void and sometimes that's in the form of preferred equity or junior debt that offers a payment in kind option that allows companies some relief on their cash interest to boost their cash flow.

>> so i guess if push came to shove, do you think private credit could bail out private credit? in other words, if there were companies that didn't have the funding or fire sales of different portfolio assets in the whief at health carry could aid them. nobody expects that there will be a person for this type of industry. >> i think it will be bilateral on rationals. for companies stretched on the balance sheet there will be solutions offered by private credit players that have that mandate and that will allow them to grow into the balance sheet and really play for the future. there will be companies that are really underperforming that also have bad balance sheets, and i think that's where you will see default rates rise and that's where there will be some issues and we think it's a relatively small part of the universe and tends to cluster around sectors that are highly cyclical, have no pricing power and are very capital intensive so they're

chewing up cash. >> overall, do you think investors can expect double-digit returns or something of of that nature in the next couple years in this space? >> we do. it will be somewhat dependent on rates and right now we think they've flattened out which we think is a positive sign, but it will also be dependent upon the trajectory of the economy. even if the fault rates spike and go back to more normalized levels these 11%, 12% rates in portfolios will be able to absorb several hundred points of credit losses. >> david miller, we appreciate your time joining me from morgan stanley. uber shares nearly doubled and they report before the bell tomorrow and we have key factors to watch as the stock goes back into positive terrory itby a quarter-point cut today. stay with us.

rylee! from rylee's realty! hi! this listing sounds incredible.

let's check it out. says here it gets plenty of light. and this must be the ocean view? of aruba? huh. this listing is misleading. well, when at&t says we give businesses get our best deal, on the iphone 15 pro made with titanium. we mean it. amazing. all my agents want it. says here...“inviting pool”. come on over! too inviting. only at&t gives businesses our best deals on any iphone. get iphone 15 pro on us. (♪♪) welcome back. ahead of uber's results before the bell tomorrow, a standard

ride for competitor lyft is 4% cheaper as it slashes prices to gain market share. deirdre bosa, it could cause a bit of of a price war. >> yes. it ties into profitability because ever since uber went public the story has been around that profitability. first on an adjusted ebitda front and then gab net income. so uber has made strides on both of those fronts. they beat and raised adjusted earnings over the last few quarters. so investors will want to see them again. in terms of the net income, a lot of that has relied on unrealized gains on equity stakes and other companies that uber is in. so they'll need to show sustainable profits and remember that there's a new ceo and it also raises some questions about capital return plans and they'll start returning more to investors. what -- and this is what you referred to kelly, what could also affect profitability is a new price war that we may be seeing in ride sharing and lyft's new ceo david rischer

when he came in, he tried to be aggressive on that front and the third-party data that you're looking at right now shows that, as well and according to that profitability that could include s&pen collusion that could happen as early as this year. this is a stock that's trading at $47 and change. has nearly doubled this year and still just a few bucks above where it ipo'ed in 2019. >> do you think uber could shrug off the pricing challenge from lyft? >> they do have the uber eats business which has been making out more and more of that profitability and it might be easier to shrug off than it has in the past and i think potentially it could. ride sharing when the economy is getting better, that's when people are taking more of that and it's always been this sort of tit for tat with lyft and lyft isn't going away at least with david rischer. they could provide some stress a little bit, maybe.

>> what about on the regulatory front because they had this battle in new york city where ride sharing drivers were trying to get a minimum wage and there's always this question overhanging uber and lyft of how are they going to classify the drivers because if they were not classified in independent contractors and the whole business model essentially falls apart. on that front, we have a settlement on friday. that's good news for uber and lyft basically because it does not classify those drivers as independent contractors even though they're going to have to pay more than $300 million to settle it. the bottom line is that they get to keep their status and that's a good thing for uber and lyft. >> you can see the stocks perking up on that, as well. deirdre, i appreciate it. deirdre, we'll hear from uber tomorrow morn. we'll get to three more names reporting results and nxp semi which has topped revenues 19 of the past 20 quarters and it's been tough for semis lately. air products could see

accelerated earnings ahead according to wells fargo and realty income portfolio, and we'll geyou t the story, the action and the trade on all three next on "earnings exchange."

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welcome back. more earnings are ahead this week. so we've got the trades on mxp semi air products and realty income for today's edition of earnings exchange. joining us for that is marianne montagne. it's great to have you here. let's dive right -- >> thanks, kelly >> mxp semi has been on a good streak because of results but it's been i tough stretch for the stock lately as concerns persist about the sector. it's up 14 thers pers this year from the ai tide that has raised all the chips but the fast few months is a different story. stifel is focused on what's going on with the automotive space mobile demand they say near-term margins may have peaked as semis slow more broadly. would you be a buyer here? >> you know, we wouldn't. we think it's still too early because the return to growth in china just has been very

disappointing. it really hasn't accelerated like we thought it would. the auto production of course is boggled by that six-week strike across the industry. and we think that the outlook is perhaps a little dour for auto production. so the only positive is that ai. and we just think management's going to talk about those headwinds and we would not be a buyer. >> are you bullish or i don't know maybe how you describe it if you have a take on the semiconductor space more broadly here. you know, it's been kind of a rising tide like we mentioned but now we're seeing some more headwinds, some more differentiation, a lot of talk about when we're really going to get back to kind of normal here. >> yeah, i think it's pretty broad-based all these headwinds. i think it's completely across the semiconductor area. >> all right. so nxp just one of the names you might be a little cautious on. there's smh still up 46% year to date. let's turn to a different category entirely which is air products. the shares of that industrial gas and chemicals company are

actually down about 5% this year. wells fargo optimistic about the $17 billion mega project backlog for hydrogen clean energy conversions. but they're still concerned about increased capital spending, rates, volatile energy prices. what would you do with a stock like this, mariann? >> well, this is part of a duopoly. and we love finding companies that are in a duopoly. with just one major competitor. and here we think that the growth in the company is not fully priced into the stock. so we think there's mid single -- i'm sorry, mid double-digit earnings growth ahead. and our target price matches up with that but you add in a 2.4% yield and you're over 15%. i'll take that on a duopoly any day. >> any chance that that duopoly gets disrupted regulatorly or otherwise? >> i haven't heard anything of substance. >> i agree, i think this one's a little esoteric for those kinds of discussions. let's turn then to the income

space. reits and so forth. realty income reit is down 20% year to date. but starting november pretty strong after announcing its acquisition of spirit realty. mizuho bullish on the deal's boost of funds from operations but concerns about rising rates and tenant credit persist. yeah, this is a tricky one. ticker o. mariann, how would you play this one? >> well, we used to like this because it was historically very stable type of operation. they worked with a lot of grocery stores and convenience stores. you don't get anything more stable than that. but they are in the retail space. and that's a problem right now. and that's why it's underperformed both the sector and the market overall this year. that acquisition of spirit realty was really not well received, even though they are talking about being accretive to earnings near term. it just has a slower growth kind of business. and we prefer in the retail

space american towers and also extra space storage. >> interesting. okay. i was going to -- by the way, realty income's ceo summit roy will be on "power lunch" wednesday for an exclusive interview after those results. we're looking forward to that. because rates have now dropped, mariann, especially in the past week or so, does that make you take a second look across the reit space, some of those more rate sensitive parts of the market or do you stick with the fundamental headwinds that you see? >> well, we do like the more interest rate-sensitive sectors. not necessarily a big drop in interest rates but what we view as the cessation of rate increases out of the fed. so yeah, the reit sector is more interesting to us. some utilities. but again, we're stock pickers. so we don't do broad brush on any sector. >> yeah, that makes sense. if i had to ask you off the cuff what are your top couple of stock picks right now maybe into year end or the next few months

as we navigate both the rate environment and the recession risks people are worried about. >> well, we like some of the pharma companies. you know, they're more like consumer staples which i see are both leading today. but we think there's a lot of cash out there. they can be acquirers of some, you know, good stage 3 or phase 3 kind of biotech names. they can buy back shares. you know, bristol-myers is one of our favorites there. >> all right. a lot of people looking more closely at that space lately. mariann, thanks so much for your time today. he with appreciate it. >> thank you, kelly. >> mar ynn xwlooint gradient investments. that does it for us here on "the exchange." dow has turned lower this afternoon. for more analysis on markets and the economy you can get my newsletter at cnbc.com/newsletters or by scanning the qr code on your screen. next on "power lunch" the new big fail. the somewhat controversial book explaining what worked and what didn't in america's approach to covid lockdowns.

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where could reinvention take your business? accenture. let there be change. welcome to "power lunch," everybody. alongside kelly evans i'm tyler mathisen. coming up today stocks higher, building slightly on the recent rally but we'll talk to one of the biggest bears on the street about whether this rally is for real. plus u.s. students not making the grade. a.c.t. college entrance exam scores, 30-year low now. so how can the education system recover from the covid lockdown to create the future workers american businesses will need? kelly. >> before that let's get a check on the markets, which have turned lower this afternoon. the dow giving up a more than 100-point gain. we're talking about almost single-digit declines for all the major averages and they're coming off a huge week, pretty much bes