earnings, 20% earnings growth for three years. >>there's a tremendous need for carbon free power, that's what happened today with constellation energy and microsoft. other technological giants will follow suit and secure the output. >> all right. i'll take you through the final stretch of the week. good to be back. i'll see you on "closing bell." ♪ ♪ and welcome to "the exchange." i'm kelly evans. here's what's coming up ahead this hour. even with the half point rate cut, our guest says the fed is still behind the curve. the interesting thing is how well that's worked out. both for the fed and for the markets so far, which have been making a series of record highs this year. the question is for how much longer? we'll debate that. speaking of which, the home builders, which have been leading markets all year, aren't cracking today. but there's still a lot to like here. our analyst will tell us how much upside he sees.

>>s is china's pain u.s. mega caps gain? new data showing things are slowing down for temu. it's good news for u.s. tech names in particular, and not just a temu story either. before all that, let's start with the markets and dom chu has blessed us with his presence. >> good to be back, kelly, after a week out in california. feels good to be home. let's talk about the correct pronunciations, there is no debating how we pronounce these ones. but the nasdaq, the s&p 500, and the dow jones industrial average are mixed in today's session. the outperformer, just fractionally so, the dow jones industrial average, up 72 points, 43,079. the s&p is still above that 5700 mark, 5705. we're down about 0.1 of 1%, roughly eight points. even at the highs of the session, which we are tilting towards right now, down about

four points. well off the session lows. we were down 39 points or thereabouts at those session lows. so tilting again towards the upper end of that trading range so far today, albeit still lower. the nasdaq up about one quarter of 1%, 37 point downside for 17,976 on the nasdaq composite. two spokes in particular are very much in the news headlines. we'll start with the bad news. fedex after a earnings and revenue disappointment for the quarter and a lowering of its profit forecast and lowering of the sales growth forecast. shares down about 13.5%. this has been an outperformer over ups, but closing some of that gap now. meanwhile, on the opposite end things, a dow component, nike shares up 6.5%. they've been holding fairly steady around those levels for the better part of the day after

a big c-suite change. the ceo stepping down, elliott hill, who was in retirement, coming out of retirement to take over the helm effective october 13. so that's got some nike bulls here a little bit more, i guess, positive about the stock. remember, we are still down about e pandemic highs, this was a roughly $179 stock. it currently sits at $86 and change. back over to you. >> a troubled story lately. dom, thank you very much. dom chu. michelle bowman is the first fed governor to vote against an interest rate decision in nearly two decades. she's the first governor, a member of the board so to speak, and speaking out about that decision for the first time since wednesday's cut. steve liesman is here with this breaking news. steve? >> yes, thanks, kelly. the fed governor michelle bowman is the first governor to dissent since 2005. she issued a statement explaining her decision in favor

of a 25 point cut. she said she was concerned about the risk that a larger cut would be seen as both premature declaration of victory. she preferred a quarter because the inflation rate is still running above the fed's 2% target. she said "we have not yet achieved our inflation goal, and a measured pace would ensure further progress in bringing down inflation." she does support overall the concept announced by the chairman or said several times by the chairman of recalibrating the funds rate toward a more neutral policy stance. she said the u.s. economy remains strong, and the labor market is near full employment, but the readings of the labor market have become more uncertain because we have measured challenges and there's the immigration issue. fed governor chris waller interviewed about 90 minutes ago gave a guardedly dovish outlook on rates, explaining he was swayed to support the 50 basis

point move. he suggested, depending on the data, there could be more big moves. >> look, the data comes in fine, nothing bad one way or the other, you can imagine going 25 at the next meeting or two. if the labor market data worsens or the inflation data continues to come in softer than everybody was expecting, you can see going at a faster pace of possibly 50. >> so marcus took it as a dovish sign with the possibility of a 50 basis point move in november, a cut going from 41% to 51%, actually it's 54% now. on the other side of the 50 line. his analysis that core pce inflation likely ran at a 1.8% annualized rate in august, and if housing inflation came down, could run below 1%. he said that is what put me over the edge to say look, i think 50 is the right thing. so waller added that the fed's rate projections into next year

showed the average community member believes that there is a lot to move down over the next 6 to 12 months. now we watch the data for signs of weakening in jobs or below target inflation to know if another 25 or 50 is on the table. >> let's pick it up right there. our next guest sees a soft landing and quarter point cut at each meeting until the rate comes down to 3%. let's bring in carl tannenbaum, chief economist. great to have you here. >> good to be with you. >> do we start with the pace of dissent, whether they go to 3% versus 4%, what do you make of bowman's dissent? there's a lot to unpackage here. >> don't you feel worn out? now we're embedding our expectations into what the next meeting looks like. the term data dependant is overused, but that describe where is the governors want to be. and the employment new is going to be front and center.

steve mentioned something that concerns me. survey response rates are lower, having a hard time coping with population increases with immigration. we get the final figures, numbers could be closer to the original announcement. so our assessment of the labor market, which is essential to where the economy is, is in a state of flux. >> steve, your interview with waller pin pointed exactly what -- he left the door open to 50. he said i wanted to be aggressive on the way up, but he said it was last week -- they were in the blackout period. the input into that metric was 0.18. he said in previous interviews, once ywe're below 0.2 -- at the same time thursday morning, the jobless claims came out and they've been super strong this whole time through. if this fed is supposed to be

thinking more about labor market weakness than inflation, which is say it is -- it's not dramatically lower, why wouldn't they look at that and say better to go 25? >> you left something out of the argument, kelly, which is a good one by itself. but the retail sales came out that morning, and that reported to a 3% gdp number, which made me think 25 is the better. bowman mentioned that, as well. hey, what good sign of independence here by fed officials. two trump appointees on different sides of the policy here. both making someense, and speaking their minds. i think that's a good sign for the federal reserve. carl may be worn out by the end of the week. i'm still psyched and raring to go, trying to figure out fed policy. i think it's interesting to think about what happens to rates here. i know carl is an old housing guy. he did housing analysis for many years, was on my a-list of people to talk to.

reported out this morning from the fed staff suggesting that maybe mortgage rates only go down as far as 5.5%, which is an interesting development. so we're watching that, but i think the issue that you bring up is an interesting one. it's why -- it's a down payment and now we're data dependant. that last juan was part of renormalization. we may go another 50 in november. what is is your expectation of cuts now, and here's a question for you. we talked about how mortgage rates may not gom down. is that because of fiscal dynamics, better growth hopes? is it the potential for a little more inflation down the road? because that's going to be the more direct impact, to mortgage and housing. >> i do think it's premature to conclude victory over inflation. let's not featherweight in the second half of last year, we got those clips, and we thought it was done. so there's still the potential that could happen, especially if

the economy continues at a 3% real trace. the motor trade was at a much higher level than it had been before. it's coming down. we're beginning to see more activity in the housing sector. that too could add momentum to an economic picture that hadn't had it until now. and so, again, i certainly respect the 50 basis point move, the outlook still seems to be solid. the thing that won the day, and steve, you can chime in, in the back, the balance of risks. the group is getting more confident about inflation and a lot more anxious about the employment picture. that's probably what won the day. >> we're all looking at the same official series, but there's lots of private sector measures. do you think we're headed towards having a negative payrolls print in the coming months? >> i wouldn't have one in the forecast. we are still seeing decent labor demand conditions. those who are finding work very quickly.

people are losing jobs, they're not claiming unemployment benefits. and certainly some of the alternative measures of job openings, the jolt survey is one of the ones we ask the most questions about, are showing solid labor demand. >> why would that argument about the fed going 50, instead of 25? >> yeah, i think the trickle and flood argument is the one i've heard most often. you can occasionally get small movements negatively in the labor market and hiring managers conclude it's a real good time to get thin. then you can see an acceleration up from here. for the longest time, talent has been scarce. one never knows when that dam will break. >> so steve, curious your take on this, this sense that we're slowing, we're slowing, and then we're breaking down. >> yeah. i mean, i would think of it, kelly, more in terms of risk management. that's where i think the fed decided on the 50. they said hey, what is our

biggest risk right now? and the revelation of those pce numbers or forecast from waller is kind of a game changer, that they're looking not just at a below target inflation number for august, but when they start measuring in the index finally catching up with the decline in housing inflation and beginning to incorporate that, you potentially get to a number that is 1% or lower or well below target. so that becomes a risk. and then you start factoring in, what is my bigger risk? what's happened to the job market? and i think we have to remember on this show, kelly, i did a report about the painer from jackson hole about the beverage curb, and the relationship between job openings and unemployment, and we're reaching that level of one open job for one unemployed person. that is a threshold where the authors oh of that research paper, which a lot of fed officials like, but it's a place

to start to get worry wriyed ar those that move up unemployment, not just get rid of jobs. >> is it a problem if inflation is below target if the labor market is not weakening enough? in other words, why do we care? if inflation wants to run at 1.8% annualized after 20% increases in the pandemic, wouldn't we welcome that? what it's different this time? >> great question. we're starting to get some relief on service prices, and the chairman mentioned that. so further weakening in the labor market is not as essential to achieving the inflation target as it was earlier in the year. the last thing i would say is jay powell has 18 months to go in his term, and he would like to leave the economy firmly in soft landing territory. he's very proud bringing unemployment down and broadening opportunities for all americans. that would be a legacy he would

like to preserve. >> steve, ten seconds. >> what do you think of the fed forecast that says mortgage rates don't get much lower than 5.5%? >> i think that is a high estimate. again, there's a lot of capacity to underwrite mortgages. now that rates are down, baby boomers might be turning their houses over to younger people. >> that would be nice. we'll pick up on this specific topic at some point in the weeks to come. thank you both very much. while a recession may not happen at this point, could the market still be underestimating those risks? after all, bank of america downgraded its dep growth to 1.8%, because aggressive rate cuts could make it more difficult for the fed to achieve the 2% inflation market. and barry banister is expecting a market correction now with the s&p falling back to low 5,000 level by q4. my next guests remain cautious, as well, and sticking with stocks that would do well in a

low-growth environment. joining me now are my guests. it's great to have you both here. after the conversation we were just having, i'm feeling buoyant about the economy and labor market. what am i missing and why do you feel more cautious? >> well, i'm a little cautious for a number of reasons. i expect longer term interest rates to go up, even though the fed is reducing the fed funds rate. because we're going to eventually get a more normalized yield curve. i think that's a good thing. and i believe that's -- that's the kind of yield curve that would favor more of what i would call the safe stocks and value stocks, the dividend paying stocks. and we could perhaps see a bit of a selloff in the sectors of the market that have benefitted the most recently. keep in mind, of course, lower interest rates are good for all

kinds of stocks, including value stocks. but an upward slowing yield curve would favor the value stocks over the growth stocks. >> i so want to dig into the wonkiness of this, but i want to talk about the stocks that you think are going to do well here. just to rattle off a few examples. ibm, verizon, pfizer. you like the small caps, you've got the small caps and the triple qs, you have the semis. talk me through this. >> okay. so over all the periods of time, we have known in the u.s. stock market, value stocks have outperformed growth stocks. this has not been true in the last 10 to 15 years. the reason is because the fed has been dealing with all kinds of pricing, and they have done things we have never seen before, basically bringing interest rates down to zero percent. now, we're in a more normalized environment.

the yield curve is uninverting and will continue to uninvert, because we're normalized. i think that brings us back to what i would consider normal, and it brings us to an environment where we could once again see value outperforming growth and small outperforming large. >> yeah, it's -- this is like a hope springs eternal thing. i don't want to be too cheeky, because you have a barbell strategy where your bets are somewhat hedged. if the big caps keep outperforming, great. if the small caps keep performing, great as well. margy, your thinking is on a more sluggish growth period. what stocks do you want in that environment? >> well, i think realistically, we should expect slow growth, even though the fed is cutting rates, long overdue. we see that as a sign of stress and labor that we have seen since the end of '22. so slow growth is most likely

for the next few quarters. what i'm looking at is not so much as a macro sector, but companies that has some sustainability, that have the earnings growth rate much above low level growth. so that's why we like broadcome, very diversified, and has a very good track record, making acquisitions to add value. something like eaton, which is involved in increasing our capacity and improving the transmisability in the electricity field, and we also like vistra. we think that there is a shortage of power and we think they're well positioned with their power over the next two years. so what the companies are going to do rather than a macro approach, large or small. >> sure. are there any companies, you

know, i want to be careful how i ask this, that you have sold recently or where you're not as excited about prospects? maybe it's for value ration reasons, maybe it's an earnings story. what are your thoughts about earnings at this point next year generally speaking? >> we think even if you have real growth lows, say 1%, 1.5%, something like that, you could still have -- that does not translate into standard earnings. you can have earnings maybe 4%, and earnings maybe next year say 8% to 10% lower than they have been, but still very competitive with say fixed income returns. we haven't really sold anything. we have just basically kept what we have, which is a heavyweight in technology space, the industrial space. but in those sectors, we think they have a particular path to continued growth and grow faster than the market, even in a low-growth economy. >> understandable.

just come back to something that concerns a lot of our viewers. maybe just elaborate about the debt and the deficit. how do we know, do we know if that's pushing up long-term rates and what are the implication it is so? >> i don't think they have shed but i expect that to happen. it's remarkable to me that we have this much debt and paying, you know, $1 trillion a year on interest. and the government continues to run on deficits. it's only a matter before those long-term rates go up. in addition to that, even though the fed is reducing the fed funds rate, at the same time, it's still trying to shrink its balance sheet. that also puts upward pressure on these interest rates. >> any last comment on that? >> no, i agree with that. i've been surprised that we haven't seen long-term interest rates stay higher than they have been because of this huge supply imbalance. on the other hand, there are people that still want that kind

of asset. >> indeed, especially if we're heading into a softer growth environment. thank you both. appreciate your time today. coming up, home builders are pulling back after hitting more record highs yesterday. l lennar reporting mixed results. and darden coming off its best day since 2020 after striking that deal with uber. shares are just 4%, but wall street is split, with the stock getting an upgrade from one firm and downgrade elsewhere. we'll make sense of it all with the ceo. "the exchange" is back after this. >> this is "the exchange" on cnbc.

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welcome back. yesterday, all of the components of the itb, the home construction etf, were in the green for the week after that jumbo rate cut, with dr horton, taylor morrison, all hitting all-time highs. but lennar warning of margin pressures this morning, having shares down 4%, despite a beat. it's enough to go negative on the week. putting other home builders under pressure today, as well. our next guest is bullish on the name. investors should buy the dip, and he said that back in june. lennar is up 21% since his last call. for more, let's bring in ubs' an

less. what are your thoughts now, john? >> hey, kelly. thanks for having me. it's an interesting industry, and there's never room for victory laps here, because it is volatile. look, lennar's quarter was choppy, for sure. but importantly, they beat on revenue, on operating margin, on eps. now, where they missed was on gross margin, and they signaled they have a little lower gross margin. keep in mind a couple things. one, they are production builders. so they are going to keep volume moving. two, they don't utilize brokers or third party realtors as much as the other builders that embrace that community. but i think what we saw in the quarter was a little bit of community challenge, specific to lennar and what they did is they turned around into dry volume. they pushed a little more on the incentive front and used some of the savings to kind of fund that. so operating margin is still a beat, and that's a big key here.

>> so there's nothing that says the builders have been lead thing rally for a couple of years now, it's time for some profit taking, time for some kind of rotation or maybe there's a bigger signal here? >> i would argue the opposite, kelly. what i think is that this group is trading at multiples that are still so punitive. and they've changed the business model so dramatically in terms of cash flow, consistency, return capital to shareholders, less land on their books, and they have de-levered massively. what we can really argue for is a valuation rerating. we're starting to see the early signs of that. so our price target on lennar is based on 12.5 times earnings. that is a market multiple that is 20, 21 times. there's a lot of room for improvement as these businessing evolve. >> your price target is $195. the other thing i heard people say is you want to sell the home builders when rates fall because their competitive advantage over the existing inventory goes

away. the mortgage buydowns respect as attractive, what is your response to that? >> a lot of folks like to hate this group. i think you can also go the opposite when rates are going up, you're supposed to sell. the opposite happened this time around. it's a valid argument lower rates bring supply back to the market. 80% of mortgages are below 5%, 60% below 4%. so it will have to come down quite a bit to unleash unvenn toir. we think the increase in inventory will come, but it's old relative to 44 years on average. generally not the right price points that are a focus for the first-time buyer. i think what it's going to do is also open the opportunity for more home sales in general. so a bigger buyer pool. at the other end of an existing home sale, there's a home purchase, and that can be a new home purchase.

so lower rates are just good for housing in general. >> you have a buy rating on almost all of the major builders. you're much more mixed on building products. a lot of those names, a couple of them you have have a buy rating on them. what explains that? >> i think there's going to be a real opportunity on the building products side. existing home turnover has been running at low levels, down 20% year over year over the past couple of years. the speed or the trajectory of that recovery is still in question. needless to say, we believe that we come off of 4 million units to closer to 4.4, 4.5, so call it 10% growth. that should drive improvement in repair and remodel activity, which will be beneficial for the building product companies. they have done a tremendous job of controlling costs. as volume comes back, you'll see those cost savings come through in the margin. >> just to put a button in it, for lennar, it's not that you see multiple expansion from

here, it's just that you see literally the earnings power continuing to grow. >> that's the most important point, is that volume is improving, no question about it. the macro housing data suggests that, and what the builders are saying would suggest that, including lennar. the earnings power is the most important thing. but i would make an investment case on this inclusivity, but we believe that the multiples will expand. but it's the earnings power we're most focused on. >> john, thanks so much. >> thanks, kelly. still to come, temu's parent company is trying to rebound from its worst month in three years after forecasting continued revenue pressure and profitability challenges. we have some new data on the slowdown and a look at what it means for veisadrters and competitors here at home. stay with us.

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welcome back to "the exchange," everybody. i'm tyler mathisen with your cnbc news update. in a briefing currently underway, the acting director of the secret service says the agency needs more agents and equipment immediately. and for the long-term. he's discussing findings from an internal investigation that found there were communications

breakdowns, in what he called a lack of diligence ahead of the july assassination attempt on former president trump in butler, pennsylvania. the u.s. is planning to announce next week the long awaited agreement to draw down troop levels in iraq. white house officials tell politico they are in the final stages of negotiations over the plan, which would have 2500 u.s. troops leave iraq by the end of 2026. critics on the hill say there's no strategic military advantage to carry it through. and the georgia state election board approved a rule earlier this afternoon requiring counties in the battle ground state to hand count all ballots this year. in addition to the machine counts at polling stations. a hand count must be done the night of the election or the next day. critics say the new rule could delay rules by weeks, even months. kelly, back to you. >> major issue with a few weeks left. tyler, thank you. tyler mathisen. meantime, meta is hitting

new highs today as it remains one of the best performing of the mag seven lately. but the main revenue driver, ad dollars, would be under pressure. deidre bosa has more on this fascinating angle for us in today's "tech check." i had not considered this, deidre. >> right, because all eyes are on generative ai and open source models. but let me put this together. first, take a look at shares of temu over the last month. down some 30%, massively underperforming. the key difference between pdd and the rest of the names is advertising dollars going directly to our biggest digital ad companies, meta and alphabet. temu was meta's top advertiser in 2023, and the top five ad center at google. thousands of temu spenders point to more weakness, new buyer

activations wael off the peak. in early 2023 levels. this chart showing the number of new shoppers is half of what it was less than a year ago. and this comes on top of another negative catalyst, restricting use of a trade exemption that has helped the chinese commerce apps like temu, ship packages to consumers duty free. but this could translate into pain for meta and google where they have spent millions in advertising to reach the american consumer. meta's valuation, shares hitting another record. the forward pe multiple 24 times early in late july. it was just holding on to 20 times forward earnings. so we could argue that meta is now priced for perfection. everyone is excited about generative ai. that will take time to trickle through. for now, the main revenue

engine, advertising. that could be stopped if temu continue this way. >> i didn't realize they were one of the biggest advertisers. so deidre, thanks for bringing that to us. deidre bosa in "tech check." the pharmacy benefit managers are responding to the ftc's suit that was brought against hem last hour. this is the most contentious between an agency and industry that i can remember in some time. >> we are getting the reaction from the pharmacy bet fin managers, sued by the ftc this morning, bringing the suit against these three. the commission says the companies have engaged in anti-competitive and unfair rebating practices that have artificially inflated the list price of insulin drugs and shifted the cost of those drugs onto vulnerable patients. it alleges that the companies rigged pharmaceutical supply chain competition in their favor

with what they call a perverse drug rebate system. in a statement, a cbs health spokes person said -- >> andrea nelson for the cigma group issued this statement on behalf of express scripts. >> and a spokesperson for optumrx says --

>> kelly, i just want to add to this discussion, this is not just about the pharmacy benefit managers, there's also a shot across the bow from the ftc to the drugmakers themselves. the ftc saying, although not named in this case, all drug manufacturers should be on notice that their participation in the type of conduct can raise concerns with the potential for significant consumer harm, and the bureau of competition reserves the right to recommend naming drug manufacturers as dependants in any future enforcement actions over similar conduct. so the ftc suing the pharmacy benefit managers and also sending a very explicit warning here to all drug manufacturers

that similar action could be on the way in their case if they engage in this behavior. >> doing a quick check on biotech, down about 1% today. not a dramatic reaction, but that is a dramatic statement for a lot of companies, both startups and mature ones to consider as it relates to future pricing power they'll have. thank you for bringing that to us. now to steve covak in this morning city, as the apple iphone 16 goes on sale. steve, what are you seeing? >> reporter: yeah, kelly. i wanted to point this one out, because i've been covering this launch event for three years. the lines have dwindled quite a bit. this time last year, the line was around the corner. we have an overflow one that goes around the corner of the apple store, down 58th street. that line hasn't been full since 10:30 a.m. or so. you're now looking at a live

shot where the name line is that snakes around the plaza, and they let people in. you know, a group at a time. i don't know, maybe a third full. don't really know how to read into this. it could be more people are buying online or from their carriers, but it comes at a time where there's a lot of concern over what iphone 16 behand looks like and what the kind of artificial intelligence demand, what kind of demand ai can drive, as well. but we do know that it's not launching until next month and the subsequent months and into next year. so still plenty of people here buying, getting in line. they're waiting to buy the new iphone. but compared to last year, far fewer people waiting in line at that 5th avenue flagship store. >> i love this shot, because when we look just at you, steve, it looks busy behind you. we have to zoom out to get the context there. and interestingly enough, there are analysts, ubs for instance,

saying don't overreact to a soft week of preorders. but there's a significant change here with this iphone launch. >> reporter: that's exactly it. ubs is echoing what we heard from other analysts that sent the stock of apple down on monday, which is those preorder windows have shrunk, by led people to believe demand is lower. this could be -- others are saying this could be more drawnout cycle because of that ai rollout. anecdotally, i talked to several folks in line today. no one told me they're waiting in line for artificial intelligence. everyone said they're a huge apple fans and they upgrade every year or they need a new phone and they like this new camera and all the new capabilities there. so not really -- at least for the people i spoke with, they're not as excited about ai as the features we talk about all the time, batteries, screen, camera.

>> apple shares are up 1%, they've had a decent couple of days, but this is an important color to bring to us. steve, thank you. >> you've got it. coming up, we'll ask darden's former ceo to settle the bull/bears debate over the stock. the same-store sales at olive garden just took their biggest hit in a decade. but its uber eats deal could ramp up deliveries. we'll speak to clarence otis about this, next. when it comes to amgen's life-changing medical breakthroughs, every second counts. but without investment, those breakthroughs are often paused. citi's seamlessly connected banking, markets and services businesses, deliver global financial solutions. so our client can keep investing in innovations for patients around the world.

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before anyone hears him talking to himself. [ dog whines ] buy u.s. stocks and etfs for as little as $1, with no commissions. talk about easier investing. welcome back. dardzen restaurants is now giving back some post earnings boosts from yesterday. the vote's just not entirely sold. evercore isc, seeing new opportunity in limited time offers and delivery partnership with uber, expecting it to boost traffic and advertising. but burnstein downgraded it to

underperform. so who's got it right? joining us now is clarence otis, former ceo of darden restaurants. >> thank you. good to be back. >> i'm biased towards the latter. i look at this and wondering if it's papering over some bigger challenges. the company was talking about how fine dining restaurants, consumers didn't show up this summer and things like that. what do you think is going on here? >> i do think there are some larger issues that are out there with the economy. you've seen a softness in the restaurant industry, and you've seen that across segments. quick service, casual dining, fine dining. but i think that we're moving towards the end of that cyclical softness. when you look at what the fed has been able to accomplish, it looks like they're going to be able to accomplish a soft landing. so what that means is, as inflation comes down, and the

pressure on spending comes down for customers, the employment market still looks healthy. so with that healthy employment market, i would expect demand to start to strengthen. and so from that perspective, i think we're in the right place in the cycle. so i wouldn't be as concerned because ultimately, employment levels, even if they're a little more muted than they have been over the past couple of years, are going to drive solid demand. >> the only thing that muzzles me, i think about chili's. there are been a couple of restaurant names on fire, because their kind of cost gap to fast food has caught up. in other words, when mcdonald's is charging $10 for chicken nuggets, sitting down and getting a three course meal for $10 at chili's looks better. why do you think darden has been caught slightly off foot. the comps were not that good last quarter, down 6% in some units, down 3% in others. are they somehow off trend?

do they need to cut price more or do something to be more relevant to the consumer right now? >> i don't think so. i think darden's pretty well positioned. the numbers i saw said for the past quarterly period for darden, in casual dining, same-restaurant sales were down roughly 4%. olive garden was down nearly 3%. but overall, when you look at darden down 1%. so darden has the advantage with the kind of portfolio it has of really having some brands offset softness. you saw that this quarter when you looked at others. so they're pretty well positioned from that perspective. i think in response to the pressure that consumers have been facing, you have seen more discounts. the folks i think that will be most successful will be more artful with that discounting. so instead of putting the entire menu on sale, really offering

specials that do have limited timelines to them. and so that's happening. and i think darden has done a good job. always seems to be ableto do a good job with those kinds of dynamics, and they're extraordinarily well positioned because of the portfolio nature of the business. >> quick comment, it makes her more sympathetic to evercore that did the upgrade, saying the company is now going on the offense and advertising protein offerings on the menu. i'm trying to get to however many protein grams for my body weight, and this company just delivered sauteed chicken, and that alone, i think it could have our entire household business. so is that potentially a differentiator or a way that we should be looking for more offerings that might kind of drive sales, drive uber traffic and so forth? >> well, each brand has their own identity, and they have

their own consumer proposition. so olive garden has strong propositions. it's the strongest brand in casual dining. and it has protein offers, but it's not protein heavy. it's not the same as say, again, a long horn, which is definitel again, a longhorn, which definitely is much more protein forward. so i don't think they're going to veer very much away from the brand envelope because that's what consumers expect, but that's why the diversification makes a lot of sense. i do think there are other steps they can take, and i see the potential partnership or the announced partnership with uber around delivery as a definite step in the right direction. when you look at olive garden, its offerings can be bulk at takeout, and that is good for the long term and the short term. from a short-term perspective,

those bulk offerings are tremendous value compared to the per person meals that you'd get in the restaurant. also, with the takeout, you don't have the beverage component, and so that increases value. the gratuity is smaller, which also really drives value. all of that leaves room, i think, for the delivery fee, and i think darden is doing it the right way by offering that delivery through its own app. >> yeah. >> because the real goal in all of that is the consumer data, and so they're able to capture and keep that data. >> great point. we'll put a marker here. clarence otis says they're doing the right thing. it'll work. be patient, everybody. they'll come around. thanks for joining us to make the case. former ceo of darden restaurants. more on "the exchange" right after this.

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to come? >> munis moved a lot in the last six months. six months ago, we were rich to treasuries and other asset classes. with eve backed up a lot. what could happen in the race cycle move is that maybe munis do get cheaper to treasuries, which we see as a buying opportunity going to the end of the year. there's also a lot of technicals going on right now. ton of supply, right? our supply numbers are at a record year-to-date. >> reel reallily? >> i think because the last couple years, you know, there was so much covid money, they didn't issue a lot of bonds. this is a catch-up year for the last couple years of issuing less. i think that people are trying to issue before the election, so i think the time to buy is sort of the next couple months. i think maybe once we get to the election, things slow down. >> do you see any interest from people worried about tax rates going up in the next couple of years? >> it is the conversation that everybody is having right now. because i think that this election with taxes, with tax cuts and jobs act expiring the

end of '25, it's the most important topic, i think, right now. for munis, the two candidates couldn't be more different on what they want to do at the end of '25. we get these questions all the time. because the impact on the muni market, i think, will be very different depending on which candidate wins. >> sure. because it will alter demand considerably. >> considerably. >> what about the drop in rates broadly speaking? is that something that you think could kind of push people on the margin toward looking elsewhere in terms of asset classes? >> i think, like i said, munis have backed up versus treasuries. if they back up a little bit more, we become more attractive versus other asset classes. listen, in the past few months, you know, go back to march, april, may, june, we were not all that attractive and still had solid slows into the asset class. i think usually what a rate cut triggers is flows into the asset class. munis are about as pure a duration as you can get. a high-quality, duration asset class. what happens is, when the fed is

raising rates, people sell munis because they're afraid of high-quality duration. >> as we saw. >> traditionally, when rates are going down, that's when the money comes back in. maybe there's a little bit less look at relative value of munis and maybe more of a just pure duration play that people want to take. >> hard question to answer in ten seconds, but for people in high-tech jurisdictions thinking about this, what muni bonds should they own? >> high-quality muni bonds are really pretty attractive right now. high yield is more the trend play, right? there's so much demand for high-yield munis right now. there's not a lot of issuance. the technicals and high yield are really strong right now. that's more of a trend trade, if you want to jump on the trend. >> right. >> for the long term, i think high-quality munis are great. >> that's easy. craig, thanks so much. good to see you . appreciate the time. that's it requer hfo"t exchange" tyler is getting ready for "power lunch," and i'll join him on the other side of this.

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