is it code for something else you thought maybe? if you have more than 30 years experience, you're welcome any time on this program. shannon, final? >> reits. they're in good shape. they have turned out their debt. >> good stuff. see you on "closing bell." see what this market does. "the exchange" is now. ♪ ♪ thank you very much, scott. welcome to "the exchange." i'm kelly evans. here's what's coming up. the jumbo rate cut was just icing on the cake. our guest says stocks will go higher from here, but also to not chase the winners, buy the setback stocks instead. also talk about consumer confidence hitting a three-year low, a big drop this morning, a bit unexpected, as well. how it sets up the retail trade and holiday shopping from here. nuclear stocks are continuing to make new highs, but there's one name you may know but you may be surprised is

part of this trade. there's the chart, up 28%. you know how to guess. tweet me. we'll tell you how it's positioned to benefit. let's start with today's markets with dom chu. what stands out to you? >> they're modest, but i get to put up some stars, because we have new high water marks for two key parts of the market. the dow industrials hit a record intraday high in today's session, and the broader s&p 500 have both, again, hit record intraday levels today. 5734 is the new high water mark when it comes to the broader s&p 500. we're at 5728, up about 0.2 of 1%. again, kind of moving between gains and losses today, but the dow industrials up about 20 points, still 42,145. and the nasdaq is up about a half percent, the real outperformer on the day, 18,050, good for 85-point gain on the nasdaq composite. if you look at what's driving that tech trade, it has to do with some of the stimulus

measures coming out of china and what it's doing to many of the tech stocks out there. one etf in particular, the fxi, which tracks the china large-cap index for those hong kong traded shares for many of those names, is up 8.5% today. if you go back, you would have to go back to july of last year to find the same levels that we have seen. so we have got a lot of ground covered in one day's time on the back of that stimulus. a lot of it because of those mega cap names in chinese technology. it's not just mega cap this china, it's mega caps and maybe the larger cap names out here, as well. names like freeport, copper prices catching a bid. caterpillar, las vegas sands for their casino exposure to macau. and estee lauder, tied to the chinese consumer, as well. all up between 4.5% to 5.5%.

so keep an eye on those china ripple effects. right now, it is the theme of the day. back over to you. >> thank you very much, dom. let's dive deeper into that story after those stimulus measures overnight. chinese internet k-web is on pace for its best month since july of last year. joining us now is my guest. brendan, i appreciate you joining us. you say this is the bazooka, because i'm feeling a little unconvinced. >> it's definitely the monetary bazooka. numerous interest rates are being cut in china, a lot of support for the real estate sector in terms of mortgage rebalances, as well as most importantly, the chinese government says the stock market is going to stop going down, that they're sick of the markets declining and are going to allocate 500 billion rnb to the stock market.

so yeah, we're seeing the monetary side of the bazooka for sure. >> so many of these measures were self-inflicted and run deeper than maybe they want to admit. is this a message that private sector business is going to be more unfettered than what we have seen in the past couple of years, technology in particular? >> yeah, i think there's been an admission of a policy error. now we're seeing a pivot to rectify that. so within this announcement from the pboc, their version of the s.e.c., as well as one of the other regulators, talk about promoting private equity as well as venture capital. so they're trying to move a super tanker, which has been some of the negative sentiment. this is a very clear end case that they're sick and tired of the stock market going down, and they're doing more to support the real estate sector, which is geared to the low consumer confidence we're seeing in china today. >> peter was saying today he was hoping to give a boost to hong

kong stocks that had been sorely lagging. we had seen chinese stocks or the k-web up 15% this month. how much more might there be with a chinese, you know, etf or stock market, where should they go and how much more upside could there be? >> the securities within k-web are discounts of -- they're trading at valuations 2/3 of the u.s. equivalent. so talking about stocks trading at forward pes of an 8 or 9. so simply on a multiple expansion of simply doubling of that, there's always going to be a china discount, but i don't think it's unreasonable to think these stocks can get to a 2/3 discount to maybe a 1/3 discount, which means i think there's significant upside. really driven by little to no exposure from many investors to this space. mag seven was the most popular trade in the b of a manager's

survey followed by short china. this shows the underallocation of the space, which is why you can pull money off the sidelines back in. >> is it going to be a meaningful change? for people trying to figure out do i allocate a portion of the portfolio to this, i mean, fool me once, shame on you, fool me twice shame on me. >> china is only about 2.5% of the all country world index. for many investors, that number is probably zero. so why wouldn't you just pick a small piece of your profits from u.s. tech from japan or india and put it into cheap china? because of the high beta of the names like we hold in k-web, when they move, it goes up -- can really move. we've seen that to the downside. but i think there are some

positives. so i'm not saying put all of your chips into china tech. i have a disproportionally large position, but no one else should. why not take a small piece of those profits of what's done well and put it into what hasn't. >> we used to say that about gold. now gold is flying and china is all over the place. maybe they can bring more meaningful change. brendan, thank you for joining us. those china stimulus measures are one factor pushing oil higher today. elsewhere, israel continues its strikes on hezbollah targets in lebanon. and in an interview with cnbc in india, jpmorgan's ceo jamie dimon says geopolitics remain a top concern. >> my question is about geopolitics, which may determine the state of the economy, but these things, they're getting worse, not better. there's a chance for accidents in energy supply. god knows other countries get involved. a lot of war taking place right

now. you have american warships being attacked almost every day in the red sea. that's my biggest question. >> a concern he's been repeating. my next guest says the declining global crude stocks is at odds of expectations of inventory. rita, william. repriced in which direction? >> thank you. well, i think the prices are headed in the right direction. demand concerns have been paramount in terms of getting prices down. and we share those demand concerns. china has been weak. today's measures will go a long way in at least getting the economy off its worst, right? we have been saying that the worst is now behind us. but i think what we've been trying to highlightto everyone is that demands only one side of the equation. supplies continue to disappoint. libya's supply is offline. u.s. production isn't growing and inventories are low. so it is hard to justify price where is they are right now,

just based on those demands concerns. >> you think prices should be higher in other words. we look at the good news that might be for some energy investors but think if gasoline prices start to edge higher into the holidays, that could put pressure on the consumer,s who confidence this morning was already falling. is that likely to be the case? i don't think gasoline prices are high enough, even if crude prices go back up to $80 is high enough for consumer confidence. consumers have been struggling for other reasons in the u.s., and the u.s. fed cuts are a sign that the labor market has been starting to struggle. i mean, we're nowhere close to $4 gasoline, adjusted for all the inflation we have seen, is not high. but definitely not current prices. i think that's much more media rhetoric around high gas prices, especially the upcoming elections, rather than the reality of making consumer

sentiment weak. >> where do you think oil price is headed? >> look, i don't think prices are going to be materially higher in the near term, because you have so much uncertainty. you have the u.s. elections coming up, and i don't think necessarily that people want to position before that. you've also got a big opec meeting coming up in december. if inventories stay low, and one of the interesting things going on in the market right now is the time structure, which is the shape of the curve, is quite steeply backward. back in the bday, the flat pric should have been about $85. in the past by the way, a similar stimulus that china has done today, even half of the size in the past could have caused a $6 rally in prices over time, not immediately. so all the signs, be it v inventory, the stimulus china has done, should lead to higher prices. but having said that, the

chinese economy is much worse today than in the past. so i'm just giving you context how in the past markets have reacted and thus show you how the sentiment is right now. >> if people suddenly saw it the way you see it, we could get a meaningful move higher? >> i do think so in the sense that because positioning is very one-sided. everybody is short, and you can see that in the data. adding that, to be honest, is my biggest fear of volatility, that you have a couple of events and prices go up a lot. which nobody wants that volatility either, right? look, again, like i said, demand is a concern, but we do think with the fed cuts and with these china moves, demand should be gradually improving. again, we are only calling for -- these are very low numbers. but supplies are still

disappointing, and that's the point, that's enough demand growth to keep the market tight. >> even if gasoline doesn't go up a lot, it might be frustrating for the fed and a headwind for the consumer. thank you for explaining it to us. thank you for your time today. we had a two-year note auction. rick santelli is tracking the auction. it's been the long move higher. >> consider we were around 3.64, 3.65 when we had the fed lower rates. so we have made some progress. yields are lower on the two-year, but maybe not as aggressive. the long end, rates are higher, moving up every day since the rate cut. so we have 69 billion two-year notes. the yield at the auction 3, 3.5. spot on where the one issued market was. so no issues with pricing. direct bidding was a little weak, indirects and dealer takedown a little better.

i gave it a c plus. this is the first leg of 183 billion in coupon refunding. tomorrow, we're going to have five-year followed by several-year. and i guess if i was going to garner any information from this, investors didn't step up or aggressively avoid it. they just basically came, showed up. the takedown was very average. the seven-year is probably not going to give us a huge amount of information. i think that tomorrow's five-year at 70 billion is the auction you don't want to miss. back to you. >> rick, what's going on with the dollar? it seems to me maybe the new pressure point to watch in financial markets in a way, and just now, gold is at a new high. silver up 5% today, and it had been underperforming. i wonder how much we can tie back to china's stimulus, raising hopes about demand and growth and even inflation and all that. again, to what extent the dollar is supporting these moves higher, as well. >> yeah. i think the dollar really has

avoided any significant damage really since the fed lowered on wednesday. we haven't had a close under 100.50, which is technically significant. and i think if you look at what's going on around the rest of the world, it seems as though the king currency out of the big ten has been the british pound. don't forget, we always look at the japanese carried trade and try to garner information through the riprism of that parade. there's also a chinese yuan trade. the dollar index is holding up well, and the 50 basis point cut is being cast around the globe as a stencil. so it really is now a game of relative value. we'll have to see how all the rest of the central bankers sitting at the poker table react, especially considering that the bank of japan seems to be dragging its feet, and the eurozone economy is weaker. that is one big plus for the dollar index in the medium term

macro. >> it's a great point watching the chinese currency. maybe that will help the euro if they do have better demand for germany. rick, thanks. coming up, the fed ushering in a new green era according to citi, which says this clean water company is poised to outperform with strong fundamentals. that's our mystery chart. hitting a record high today and now up 50% in a year. we'll reveal it and speak with the analyst about investing in america's nuclear renaissance, next. and here's a broad look at the market, which is still in the green, with the dow and s&p once again hitting record highs. our market guest says the rally is in tact, but there will be corrections along the way. we joins us with his picks. "the exchange" is back after this. >> this is "the exchange" on cnbc.

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joining us now is drew petit from citi. drew, nuclear has really been so sexy, dare i say. we were speaking with one of the leading companies about it yesterday. what is the angle that you're looking at now for investors to be aware of? >> to be honest, it's more blocking and tackling, a lot less sexy here, back to basics. when we think about green in general, nuclear included, we want to see inflections in growth, because some of these subthemes aren't these long-term structural plays. they're very cyclical. so nuclear, we're starting to see more companies that are posting positive earnings, positive cash flows, and s startinstart ing to see sales accelerate. >> it's kind of like the dow of this movement, if you will, is eco labs. they do their -- they do what exactly? >> so this is a stock that's going to help companies more

efficiently use water. they're going to treat water. they're going to play to both the use -- the efficient use side of things, as well as the sanitation side. so i think this is key, because it's back to this looks like a momentum stock, but it's just a cyclical story that's starting to inflect from here. >> and so when we look through other -- the other buy rate in stocks, we have all these other, like graphic packaging, some of these are familiar and to some extent household names. others are under the radar. are you convinced that these can be better returns on investment than some of the other poster childs of green energy stocks that have not worked out well for investors? >> yeah, i do. before we get into the fundamental stories, we had all of these pure plays, especially in solar, wind, and even clean tech, blow up post pandemic.

it really takes a lot for investors that got burned to come back there. there's just no catalyst there. these more cyclical names, whether they're packaging names, industrial names, they have a fundamental inflection. and we've had the fed cutting rates that is going to get investors to look through to the other side of that inflection. so all of these names, while they might not yield like traditional types of names, they do play into a lot of themes that companies care about right now. and that's efficient use of resources, recycling where we can, and then honestly, to what investors need, which is confidence that the fundamentals are going to get better. >> if i were bullish on nuclear, but a little concerned about the best way to play it, we mentioned eco lab earlier. what are some of the other ways with the underperformance that some of these banner stocks have seen? >> some of the nuclear stocks are probably more volatile.

i think that the way to play nuclear is in a basket type approach. you will hear people talk about modular reactors, they'll talk about utility companies and miners, but there's some of the tech related companies and some of the engineering and construction companies that might help this buildout all play into it. i think you want exposure across the value chain, because it helps you get liquidity to this theme and helps you neutralize some of the rate sensitivity if you were to just play utilities in some of the commodity sensitivity if you just play the minor. so i think nuclear is more of a basket play at this point. i think water, when we talk about eco lab and iex, two companies we have on our thematic recommended list, that's more stock picking. >> there is an election coming up. did the outcome from a big bearing on the fates of these

stocks and industries? >> if you are a clean tech name, if you are an energy storage or a fuel cell name and even solar and wind, yes, we think those are much, much more election outcome sensitive. nuclear, a little bit more of the middle ground. the political sensitivity there is probably going to be more on the state and local side. water, actually, to us, does well no matter who wins. >> i think that makes a lot of sense. good luck with the 1-year-old. he'll be fine when he's 5 or 6. i'm still waiting. still to come, the ceo of novo nordis is testifying about the price of their weight loss drugs. we have the details and what the pharmacy managers are saying in response to his allegations. speaking of washington,

don't miss steve liesman's interview with janet yellen, thursday morning 10:00 a.m. eastern on "squawk on the street."

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exchange." the ceo of novo nordis is testifying about drug pricing today. what makes this so interesting is he's being hauled up to explain why these drugs are so expensive and pointing the finger art pharmacy benefit managers. >> that's right. they played a big role in today's hearing, and senator bernie sanders said he knew that they were going to say it was their fault, so he reached out to those companies and the three largest pvms in the u.s. have said that they are willing to actually expand coverage of these drugs if novo nordisk lowered the prices. they said if we lower the price, we're not going to get the same coverage, and those pvms telling sanders that they would not -- it would not negatively affect

coverage of whagovy if they changed the list price and they would cover the drugs more if that price was lower. take a listen. >> if, in fact, they keep their commitment, are you then prepared to substantially lower the list prices in the united states? >> i have to understand what this entails, because when i hear statements that pvms would accept this product, it needs to go all the way to patients. it means they walk about insurance companies being their clients is the owners. so it needs to get through insurance schemes and get to the patients. >> that was something that we heard over and over again from the ceo. he was saying that the pvms aren't passing those discounts to the patients and novo, as one company alone, cannot fix the u.s. health care system. he was faced with the question

over and over again, why does the u.s. pay so much more for these drugs than other countries. he managed to dodge that, but i'm sure we'll hear much more about the price of these drugs. >> why was he there and not eli lilly, was it to get at the issue of the foreign manufacturers? >> it's a good question, and it's not to say we'll never see lily up on the hill, but there's again so much focus on ozempic, because this is the drug people know. we have to see what the pvms end up doing this, whether we see any changes to the price of these drugs and the coverage. novo saying today that about half of patients with commercial insurance have coverage for wawovy. we'll have to see whether that changes, and if we see the price come down but it's hard to say based on this from today alone.

>> there's so much pressure from regulators on the pvms as it is, so this is an interesting wrinkle. anjelica, thank you. let's get to tyler mathisen now for the cnbc news update. tileer? >> thank you very much. gop members on the house foreign affairs committee are moving to hold on to antony blinken over l to testify on the u.s. withdrawal from afghanistan in 2021. the charge is the late nest a series of moves by house republicans over the past 18 months to hold the white house accountable for the chaotic withdrawal from kabul. new data from the centers for disease control and prevention show that about 40% of adults in the united states are obese. it marks the first time in more than a decade that the national obesity rate did not increase. it's the first time that's happened since 2011. warner brothers discovery is

partnering with google for ai generated captions on its max streaming platform. the two companies said the tech was built on google's ai platform and convert video into context for unscripted programming on max. it comes as the entertainment industry looks to ai to cut costs in making and producing content. kelly? >> keeps like a clear use case. >> absolutely. >> see you next hour. ai startups are getting a lot of tech attention, and now there are growing signs the type could be justified. we were just talking about captions, but new numbers is making the case that this momentum won't be slowing down any time soon. deidre bosa is here for "tech check." what is you say? >> kelly, so i got ahold of a document that anthropic has shown outlining gross marngins. a look shows that its top line

is projected to grow more than 1,000% year over year in 2024 to $1 billion. but its gross margin, thinner than the typical high quality companies at 38%. that likely has to do with higher upfront costs and developing these models like the need for gpus. investors, however, especially in venture capital, are willing to look past those lower margin it is top line is growing at 1,000 plus percent. revenue growth also helps valuations look more reasonable. the information reported that anthropic is in talks to raise another round at a $30 to $40 billion valuation. at the upper end of that range with a billion dollar in sales, it would put its multiple actually lower than it was nine months ago. similar story for openai, which is closing in on a round that would value it at $150 billion. now, that would be less than

doub double, but mow mentum from bot of those darlings is likely to help them continue to raise capital at ever-higher valuations, especially when the multiple looks this way. it's sort of a trick like we have seen from nvidia. now, a look a little deeper into anthropic's numbers, and some of the risks become a little clearer, as well. third party atis expected to make up 60% to 75% of total sales. that refers to the interfaces that allow external developers and third parties like amazon's aws, to build and scale their own ai applications using anthropic's models. customers will increasingly build their own, but a major question, can the source of this revenue continue to grow at the same pace? fascinating when you look at the

chat bot from anthropic. that makes up about $150 million of projected revenue, versus more than $650 million for those third party apis. >> i know the top line is strong, but as i understand it, i don't know if the company itself is this close, there's a cost of 36 cents associated with every query. openai could lose $5 billion this year. so the revenue is impressive, but these are expensive to operate. >> absolutely. i mean, that's the reason why i'm looking at the stock ems that throws anthropic's aggregate gross profit is just 38%. for a high quality stock company, that's somewhere between 70% and 85%. but because of those costs are expensive, and that is why everyone, the mega caps are, when i say everyone, the mega caps are looking at building their own chips to lower that cost. you know, there are signs that they're able to do so, like

google, which rolled out ai overviews to everyone say it's not costing them a material amount of money because they have more efficient ways to do it. >> i find that very useful. i use it all the time. >> you're using gemini. >> i'm exactly, thanks. consumer confidence tumbled 6.5 points in september, the biggest monthly drop in more than three years. but the retail etf, the xrt is up today, and nearing a new multiyear high. how what you make of it and which names are best. we'll talk about that, next. ♪(voya)♪ there are some things that work better together. like your workplace benefits and retirement savings. voya provides tools that help you make the right investment and benefit choices. so you can reach today's financial goals

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welcome back to "the exchange." my next guest likes the market setup, even before the rate cut, and now sees a rally into year end. he says investors can buy the weakness in tech. he's also picking up a freight stock that's been under pressure.

joining us is david capps. welcome to you. where would you most differ are consensus as you currently see it? >> i think that we think the broader market is going to do better, that we think technology will be fine, but with these spreads in terms of other areas like value and dividends doing better, we think that's going to continue for the next 12 to 18 months. that's where the biggest opportunities are, and a lot of the market is still chasing the magnificent seven, as those are the hottest and most popular stocks. >> i don't know if you would be buying the russell 2,000 per se, but what do you make of its underperformance since the rate cut last week? >> well, it did run up a lot a few weeks before that in anticipation. if you have a 12-month time horizon, the russell, the s&p small cap is going to be a good place to be. not that it's going to shoot the lights out, but we think it's going to play some catchup. a lot of the areas in the market

are going to continue to do that. interestingly, if you look at these sectors in the market over the last six months, a lot of sectors that did poorly last year have started to perk up meaningfully. financials, utilities, health care has picked up. under the radar, technology has been one of the weakest performing sectors this quarter. we think you're going to have lots of rotations and the things that have been hottest will cool down. >> which names in finance and health care would you be chasing? >> well, they have pretty good outlook this year, but the stock has done poorly. that's a great opportunity at 17 times earnings. u.s. bank corps has been one of our lagging banks. we think the investor meeting was upbeat. their capital ratios are good, but the stock has done very little relative to the growth. so that's an opportunity on that side. >> i thought it was interesting

that you like nestle. they do still do the chocolate business, do they not? >> they do still do the chocolate business. it's one of the world's biggest food companies. the stock has done poorly, down about 15% to 20% in the last year. as a result of it being down, it's now at an attractive valuation of 17.5 times earnings. we think ultimately, it will be a good business. should sell at a higher valuation. we think that is really not going to have a huge impact on their business long-term. so basically, a very good company. attractive price. also, the market's been volatile and we think that volatility will pick up. after a great run, we think having consumer staple protection is a good place to be. >> you mentioned u.s. bank. investors have been struggling to find a good story to tell about the banks.

do you like the financials broadly? and look at the investmentbacks, one of the best areas to be invested in. or do you just like stock specific stories like u.s. bank? >> we like stock specific stories, but we think financials, which have had a great run over the last 15 months, will continue to be a very good place to be. a slowly declining interest rate environment from the fed is good for the banks. the valuations are very attractive. the problems with commercial real estate are going to be a little less with lower interest rates. so quietly they've been a great group. we think that continues. >> that's a good story to spin. let me end with fedex, which has been under such pressure. once people stop needing this urgent shipping need, they're moving back to the lower margin business, why do you think that's a high quality stock people should pick up here? >> well, they're getting hurt because of the slower economy, and people trading down and

lower cost shipping. it has a new management team, they're doing a terrific job streamlining the business, cost cutting, and the economy and the global economy is going to start to pick up with lower interest rates, and we think you're going to see upside earnings. in the last quarter, they had a downside surprise. we think the negatives have been factored into the stock. it's off about 11% in the last week or two. at this point, you're buying it at 13.5 times earnings. they are one of the few players in their business and considering spinning off a business or monetizing the strucking business. so lots of moving parts and mostly to your benefit. it's a great entry point. >> and apple is one of the tech names you like, as well. that's been a battle ground, lately. david, thank you for joining us. >> have a great day. >> david katz. spotify is expanding its ai offerings.

previous subscribers in the u.s., ireland and new zealand can access ai play list, which creates play lists from a text description. it launched in the you can and australia earlier this year. spotify climbing for the 12th straight day, with a 3% gain. we'll have a speck on some other big movers, next. you'll find them in cities, towns and suburbs all across america. millions of americans who have medicare and medicaid but may be missing benefits they could really use. extra benefits they may be eligible to receive at no extra cost. and if you have medicare and medicaid, you may be able to get extra benefits, too, through a humana medicare advantage dual-eligible special needs plan. call now to see if there's a plan in your area and to see if you qualify. all of these plans include doctor,

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welcome back. we have a news alert on visa, whose shares have been under pressure. kate rooney has the details. >> so the u.s. department of justice has filed a suit against visa. according to new court records, the details of the filing are not clear yet, kelly. we are reaching out to visa, but it comes after it's been widely reported, at least yesterday, that this was coming, that the department of justice did plan to sue visa for being an alleged monopoly, having to do with the debit card business. so shares under pressure, down more than 4% what looks like the official filing, but, again, we do not

have the details quite yet, but based on some of the reporting, it appears this is the official court filing for that doj lawsuit. >> at least one analysis saying the timing is interesting with only a few weeks left in this administration to bring that into court and move along with it kate, thank you. coming up, we'll dig into the headwinds facing retailers and whether it will translate into an upck otif prices right before the holiday shopping season stay with us car, this isn't the way home. that's right james, it isn't. car, where are we going? we're here. (♪♪) surprise!!! the future isn't scary. not investing in it is. car, were you in on this? nothing gets by you james. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

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♪ welcome back to "the exchange." the nasdaq once again the best performer today, up about half percent, i mentioned because it's outperforming the russell and a bit of a battle going on between these two sectors who will carry us into year-end. elsewhere, the dow and the s&p hitting all-time highs today the dow turned lower by ten points and the s&p still up nine. but stocks are on track for their first positive september since 2019 we had horrible septembers the past four, five years. the s&p's record rally so far should be seen as a positive into q4 says ryan dietrich from carson group he crunched the numbers. goes on to post a fourth quarter about 90% of the time up about

5% on average. and during election years, it has 100% positivity rate if it hits a record high in september. so there you have it elsewhere, september also saw the biggest monthly decline in consumer confidence since august of 2021 and the 12-month inflation outlook ticked up to 5.2%. a few factors pushing prices higher, one of them a potential strike at 36 of the country's largest ports. but according to my next guest, still bright spots in retail and the stocks are doing pretty well today. simeon, what's driving the positivity moment? >> i think the starting point is the interest rate cycle. there's a lot of cyclical companies in retail. they've done poorly other the last few years durable goods has the negative for the last couple years. we've been reverting we had a lot of mixed reports. the euphoria over interest rate

cuts the next 6 to 12 months even if the slope is not great the market is looking out a year-out plus, what could happen there's a lot of derivative plays especially if housing picks up. >> interesting basically the economy hangs in there, housing could be a benefit and what are people thinking how that could boost the retail stocks? >> it's a cascade effect the first order is always home improvement, think home depot, lowe's the next order is home furnishing consumer hasn't been spending on big ticket for a long time further down the line, consumer electronics. housing turnover, product cycles, sporting goods things we're going to update and upgrade as we change over housing. that could be the excitement and we do typically -- the play book is typically you get this cascading effect but it takes six months a year and it's been a tough post-covid reversion i think that's the optimism that's fueling the market. >> do you think it's enough optimism to overcome what could

be kind of -- according to the deloitte numbers, meet diocre consumer spending for the holiday season signs of a weakening labor market, all the potential head winds in the near term. >> it's a tough one. there's the fomo trade i think it will be hard to fight that, right? because big picture in theory we should improve, but it will come back down to the rationality of how much of this or how good will this be unemployment is not terrible we'll lower mortgage rates but a lot are fixed. how much good to the housing market at some point we'll hold these companies accountable or valuations accountable to what the slope of improvement will look like next year. that could be the disappointment but some of this optimism probably fuels us, there hasn't been a big change post the summer consumer. sounds like back to school is okay and chugging into the holiday. and it's all about what you did for me lately. that will be the next data point the holiday sales. that will be the tell for the entire retail sector.

>> sure. interesting to ponder as well, post-pandemic f we end up not having this recession, are we at the start of a new business cycle without kind of having had the downturn >> in theory, yes. but is it a normal cycle because we haven't had the downturn? now some of these companies, home depot, lowe's, the performance of same store sales looks recessionary, but we're not going to see an employment rebound the way we have seen in traditional ones existing home sales should rebound, but we still have a supply issue, not enough homes to sale. so we don't have the thing -- it may not be coiled up in the same way. if it's slow and steady the market is resigned to be buying stocks even if it's slow and steady as long as we have something gradual, we can tolerate this. we have to start seeing that turn and that turn could be the holiday given where valuations are, if not, it will be early part of '25. >> very interesting. of your coverage list, only a couple names you're underperforming remarks apply to the sector overall

but are there a couple plays in particular that would make sense here >> we're still kind of barbelling we're being careful. and you've seen in a year like this where walmart and costco have shown incredible leadership, market valuations have gone to all-time highs. still like those but you have to have some cyclicality, some risk one of the names that we've liked, maybe too early, has been wayfair. a lot of leverage to home funnishing, to mainstream customer, housing turnover, valuation is not onerous it's a name that's a little lagged in this current rally so you have that cyclicality plus lag then the home improvement stock, that's the home depot and lowe's, will be a cycle, will be improvement. walmart has expanded to 30 times valuation or earnings, costco has gotten close to 50 why can't home depot and lowe's see expanding valuations in this winner take all environment.

that's a hypothesis. >> those are fighting words. home depot and lowe's, they have to offer mcdonald's on their home depot plus app or something. i saw your note about walmart and how you think that has been driving subscription ads. >> we were being cute. tracking walmart plus memberships, we do our best, it's an estimation they don't tell us the number. we saw a big jump in august. the only external factor was they announced this discount with burger king, 25% off and i think it's a free whooper every three months interesting. we know membership is going in the right direction. that's a positive for walmart. and we were being a little cute with what the driver, probably not likely that was burger king -- >> i think it is. >> i'm with you. >> it's buzzy. i think what you're pointing out is the start of us seeing a lot more in this vain and frankly i'm here for us. very curious about which way this could go. it's like the flights. they have the association or the union of all the different airlines and star alliance, that kind of thing, yeah. but for shopping

simeon, thank you for your time today. >> thank you, kelly. take care. that's it for "the exchange." we'll see you next hour for "power lunch." 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. without pause. for the love of moving our clients forward. for the love of progress. investment professionals know the importance of keeping their clients on track. sometimes they need help cutting through the noise, to ensure fresh investment ideas keep flowing, and to analyze the market from every angle.

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we invent them, we design them, we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪ ♪ welcome to "power lunch," everybody. alongside kelly evans, i'm tyler mathisen glad you could join us on this tuesday. the dow just turning negative, but we did set some new reco