Utilities and AI, Biden's no-recession term: Market Domination

It's full steam ahead for stocks (^DJI, ^IXIC, ^GSPC) seeking to close out the day after taking in Thursday morning's Consumer Price Index (CPI) report for the month of June. Julie Hyman and Josh Lipton have compiled the perfect itinerary of top industry movers and market themes for active investors in today's episode of Market Domination.

The show starts off with Hennion & Walsh CIO Kevin Mahn outlining the next big sector that could play a pivot role in the AI trade: utilities (XLU)

State Street Global Advisors chief economist Simona Mocuta explains where risks may still lie for US consumers in the current economic environment as Federal Reserve officials prepare to possible cut interest rates.

Yahoo Finance senior columnist Rick Newman later comes onto the program to discuss how close President Biden is to completing his four-year term without a recession, and while the Fed nears its 2% inflation target to boot.

Other top trending tickers on the Yahoo Finance platform include Delta Air Lines (DAL) since reporting second quarter earnings this morning; QuantumScape (QS) and Volkswagen (VOW.DE, VWAGY) after forming a partnership on lithium EV batteries; and Tesla (TSLA).

This post was written by Luke Carberry Mogan.

Video transcript

Hello and welcome to market domination.

I'm Julie Him in that shot and live from our New York City headquarters.

We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.

And here's your headline blitz getting up to speed one hour before the closing bell rings on Wall Street.

We got another CP I report that points to celebratory rate cuts potentially in September.

Uh what we saw today was basically inflation coming down but not too quickly.

And that's exactly what the fed wants to see, especially as weakness creeps up in the job market.

What you've had over the last couple of years is just this record demand, record prices.

And basically I see that as uh leveling off my fair value on Delta is $39.

Um So uh kind of coming, coming in closer to where I thought it would be.

The quarter really didn't surprise me.

The key story really is a little bit of uh price softening.

This is the eighth price increase that we've seen on membership in the last 40 years and over that time frame they've seen no measurable, significant impact on membership renewal rates and membership behavior.

So we think this is incremental to Costco's bottom line and should help drive further earnings growth ahead.

We got one hour to go until the market closed.

So we're here to take a look at the major averages as we see the ripple effect happening.

Josh from the consumer price index coming in better than estimated showing the disinflationary trend is intact.

So that's changing all kinds of expectations or in some cases, reinforcing expectations for what the fed is going to do with rate cuts right now.

It only means a tiny gain in the dow up just about 36 points, 1/10 of 1%.

But we've got a big rotation today and this is something that you and I have been talking about because basically investors are getting out of tech and they're getting into some other areas.

The S and P down 7/10 or excuse me, three quarters of 1%.

And the NASDAQ is the worst performer today and it stems from what's going on in the rates market where we see a big drop in rates.

Yeah, I think it's, it is Julie one of the more interesting market days I think we have seen in a while and it is that rotation in the market that has people talking.

Um the way that big tech is not working today, they're in the red.

Um But the way listen low as you said at the same time, lower interest rates.

So not surprising the moves we're seeing in some of those rate sensitive areas today.

Home builders res Yeah.

So let's let's take a look at the sectors.

Let's take a look at the sectors here because we see that right reeds is right next to you XL.

Re up there in the left hand corner, up 2.4%.

Utilities also rate sensitive materials, industrials, all of those doing well and tech is where the money is flowing out of.

You can see that in the NASDAQ 100 as well.

Again, you're on why you're on the more extreme side of the, of the uh chart today.

It looks like both to the good and to the bad.

I mean, NVIDIA down 4% today.

So, I mean, you look at big listen, you know, big tech, we could, we talk about so much.

I mean, you could pull back the chart and these, these names have had such tremendous runs.

Maybe it wouldn't be too surprising if people, they saw the data today and maybe some of booking profits, redeploying that elsewhere and one place they're putting that we haven't talked about yet.

We were talking off camera about this is, is the move in small caps today.

Let's get back to a lot of people's attention too.

Yeah, most definitely.

I was looking at the equal weight which is up 1.1%.

But the Russell 2000 of small caps is just ripping higher.

3.3%.

We haven't seen that kind of out performance from Small Caps in a while.

We listen, we've talked to Smart stg who've been uh a live television, just go with it.

Um We, we talk a lot smart strategy.

We've been talking about, listen, pile, uh been kind of pounding the table for those kind of pint sized names.

You don't wanna, it's, it's interesting.

I guess the question is you don't wanna make too much of a one day move when, when big tech slips and you see kind of people bidding up the pint size names.

And I guess the bigger question is, you know, you're trying to figure out is it a one day move or is this rotation we're talking about here?

Is this gonna be something bigger?

Something broader we will see because this is not, this has not been the case thus far.

This definitely.

All right, let's talk to someone who maybe has an answer for us.

All right today.

Sell off.

Let's welcome in Kevin Ma, the Chief Investment Officer at Hennion and Walsh Kevin.

It is good to see you.

So let's let, let's start there.

You know, as, as you heard us, Kevin, we're trying to this stock rotation we're seeing together has a lot of people talking and we're trying to figure out if what you see here today.

Big tech slip in.

But listen, those interest rate sensitive sectors.

They are working Kevin small caps cash in a bid.

Do you think it's a one day move or no?

This is something bigger, it's broader.

It's going to stick Josh.

I think the rotation out of large cap technology stocks may have begun today and that rotation is going to be led by cuts in interest rates in addition to earnings growth beyond the magnificent seven technology stocks.

And to put on the perspective, let's remember that over the course of the last 12 months, 83% of the earnings growth in the S and P 500 has been driven by the magnificent seven technology stocks.

We also know that through the first two quarters of this year, the market was up by 15%.

Pull out the mag seven.

It's only up 4% now while that's an average year for the markets, it certainly doesn't sound as good as up 15%.

So the market needs to see earnings growth from those other 493 stock this quarter.

And the good news is according to fact sets, it's forecast that earnings growth will reach around 8.8% in the second quarter.

If that holds true, that's the best quarter year over year earnings growth since the first quarter of 2022.

The irony is I couldn't help but thinking this, you know, if, if we two years ago had gotten a day when rates were dropping, when the yields were dropping, tech would have been up.

Right.

So there's been this big sort of shift that tech is now a haven, which is sort of ironic, but I do wonder as rates do start to come down if the fed does start cutting, will those companies also benefit?

Will you continue to see its rotation or will it just be a buy everything kind of market?

Yeah, the tech trade isn't dead by any means.

And in fact, I think there's going to be years more of growth opportunities related to the A I ecosystem.

But what areas of the market really haven't taken part in this rally that started in the part of last year?

How about areas like industrials, aerospace and defense, consumer staples, health care and even utilities?

No one's looked at utilities for the better part of the last three years as rates have risen, guess what happens as rates come down all of a sudden that utility that pays 4.5, 5 percent looks pretty attractive again.

And it's also another way to play the A I game remembering that these data centers that power all these massive algorithms in A I they rely upon utilities that supply the electricity solutions that they need.

So I think there's another good way to play in those areas of the market that still are trading and attractive valuations pay good dividends can weather an economic slowdown and will offer more upside, perhaps even more so than what we've seen from technology already.

Not that you should trade out of your technology stocks altogether, but perhaps take some of your games and redeploy to other areas of the market.

I mean, utility is interesting.

Kevin, because we've got, you know, strategist, come on and they, they like utilities because they feel like you've got K in a little bit of offense and defense in that, in that sector.

You heard Julie and I talk about small caps today too, which is interesting.

I mean, it sort of a big, big text flip in a bit but small caps catching a bid.

Do you tell your clients?

Yes, you wanna be in small caps here.

I believe you wanna stay diversified.

And a lot of clients out there right now who saw that through the first two quarters of this year, the mark was up by over 15%.

Last year.

The market was up over 26% and they were parked really in short term C Ds and Treasury earning 55 and a quarter percent, relatively risk, free, smart way to play.

But guess what?

Add those two together?

You've missed out on some pretty significant upside that's taken place in the stock market.

I fear right now, Josh, those investors come off the sidelines, they look to move into areas in the market like large cap technology, they're gonna get in at the highs and they should consider being more diversified.

Look to small cap, look to international, look to some of those other sectors that I mentioned as well.

Have your allocations to large cap technology include the max seven but consider equal weighting as opposed to being market cap waiting.

I wanna circle back to the earnings theme because you and many others have pointed out that other 493 theme that they're going to start to see earnings climb.

Well, we got a trio of companies today, uh in the form of Delta Pepsi and Can Agra and all of them.

First of all disappointed.

But secondly, the theme seem to be that the consumer is weakening and not necessarily even just the lower income consumer, which had been the sort of conventional wisdom.

How much of a concern is that it's been a concern of mine for a while.

But we have to remember this is an intended consequence of all the rate hikes that the Federal Reserve has done over the course of the past.

Let's year and three quarters, five and 100 and 25 basis point higher on the short end of the curve, they're trying to cut demand by hurting the consumer.

Here's the catch though.

They forecasted unemployment to hit 4.1% by the end of this year.

We're there already.

They didn't forecast first quarter GDP growth slowing to 1.3%.

I believe, Chair Powell and the F four MC is now concerned that this economic slowdown may be progressing too quickly and while inflation is moderating, that's why I think two interest rate cuts are back on the table again because we have an over leveraged us consumer over a trillion dollars in credit card debts, early delinquencies on those credit card balances on auto loan balances are increasing.

And also the federal uh the federal government is also over leverage.

You look at our debt to GDP ratio.

So interest rates need to come down.

And I think those earnings reports that we saw earlier today, I'll just focus on Pepsi to start.

So my household, the man household is kind of split there.

My, my daughters and my wife like diet Coke, I like diet Pepsi, but we all have a mutual admiration for I get along.

We all, we all like Fritos, right?

Who doesn't like the great American corn chip?

But what we saw from Pepsi today is that they missed on earning, no, they beat on earnings actually, but they missed on revenues and they also forecast that weaker revenues going forward because of weakness in the consumer.

Boy.

Isn't that a telltale sign?

Right?

Weakness in the consumer.

That's why I think the Federal Reserve is gonna have to step in.

I'm not gonna play the guessing game.

Will it be September before the election?

But there are still two meetings after the presidential election, 12 days after the presidential election?

They do could cut two times this year.

And if in fact, that's the case, look for those beaten up areas of the markets to actually start to really perform, given your views of the consumer.

And you're right.

Um I mean, Kevin, we look kind of the, the Pepsico commentary on uh on the consumer today.

It was, you know, time after persistent inflationary pressures and higher borrowing costs and tighter household financial conditions.

right?

I mean, does that inform how you want to put money to work in the market then?

I mean, do you wanna avoid middle in low income?

Just take to high income?

How do you think about it?

I think you still want to build a diversified portfolio consistent with your risk tolerance.

We often get the question from our clients.

The market is racing higher.

I want to be more aggressive.

Oh no, the market is trading off.

Let me move more conservative.

That shouldn't be the case.

You should build a portfolio consistent with your risk tolerance, what your goals and objectives are and what your investment time frame is.

Do you make tactical adjustments?

Of course, you do.

In fact, we're equal weighted in terms of our exposure right now to those high growth technology stocks.

We've added some exposure to artificial intelligence areas.

We love data centers in this environment.

We think that's the hidden gem within the A I ecosystem.

We have money overseas.

No one's talking about international stocks right now.

But if you look at the EP index, MS Ciep, it's up over 8% during the first half of this year.

Merging markets almost up percent.

So build a diversified portfolio, resist the temptation to try and time the market and stay invested in the market.

Lots of ideas in there.

I wanna leave you on this, which is an election question which I'm sure, you know, we're gonna be talking about this for the next the next, you know, several months, if not longer.

Um Obviously, there's a lot of debate right now about whether President Biden should step aside as the Democratic candidate.

There hasn't been really any market reaction to that debate.

What do you think the reason is for that?

And when do you think we might start to see some of that being felt more?

I believe the market is more focused right now on when that first interest rate cut is going to take hold.

And if in fact, this economic slowdown is going to dip into a recessionary territory, if markets are actually pricing in what's happened historically, that political parties have an impact on certain areas of the market, but generally not the market as a whole.

In fact, history tells us that a divided government generally bodes best for stock market performance.

That's because no major new rules or legislation or regulations get passed.

I think that's what markets believe is gonna happen coming out of this.

Particular election as well.

What we're talking to our clients about is build your portfolio consistent with the opportunities that we believe are in the economy right now.

And once we know the outcomes of that election, then you could overweight or underweight certain sectors based upon the policies of those that are in power at that point in time.

But don't let it sway all of your decisions.

Don't sit on the sidelines waiting for the outcome of the, the political elections because we know that trying to time the market is an exercise in futility.

If you look back to 1990 if you just missed out on the 10 best days in the market, your returns would have been cut in half.

I don't know when those 10 best days are.

You don't know when those best 10 days are.

But I can assure you if you're not in the market on those 10 days, you're not gonna, I mean, look at the election in 2016, the market reaction that then was reversed.

So that was reversed.

You never know.

All right, thanks a lot.

Appreciate it.

Good to see you, Kenneth.

We're just getting started here on market domination.

Coming up.

Shirts of Tesla giving back some of the recent gains on news that the EV maker is delaying it planned.

Robot toy unveiling to October.

We'll talk about that on the other side.

Plus Pepsico sounding the alarm on consumer spending in its most recent quarter.

We're looking at how to navigate in the big picture in today's investor playbook and one strategist is raising his year and S and P 500 forecast to 5800 will be chatting the roaring 2020 with Ed Yard Denny in the four pm hour.

Stay tuned.

More market domination.

Still to come.

Let's get to some of the training tickers today on Yahoo Finance.

First up, we've got Tesla.

Unfortunately, all good things must come to an end.

At least if you're a Tesla shareholder, you see it as a good thing that includes Tesla's 11 day rally here with more Yahoo Finance's pros Romanian and pro um the shares were up about 44% in that 11 days, but today the stock is falling.

Yeah.

Uh The big reason why is this Bloomberg report about the Robo Taxi revealed that was scheduled for August 8th gonna be a push back uh about two months into October.

Perhaps that that's the reporting that Bloomberg is, is saying that basically the reason why is that Tesla needs more time to build the prototypes for the Robo Taxi in addition to the fact that there might be some rework of the design.

Uh Some people I guess aren't happy with how they look the actual Robo Robotaxis right now.

So that deadline has been communicated internally according to their sources and the questions that I have are, you know, but does this mean the Robotaxis aren't ready for prime time or is the software not ready for prime time?

You have competitors that are already testing out their robotaxis in, in sort of geo fenced areas, uh did must jump the gun on when he said, hey, a August 8th is going to be our our reveal date.

Uh Imagine he had done that.

Imagine this, this date change had happened before his pay package was approved, right?

Things like that are, I mean, I'm not saying this is, this is a, you know, they knew before, but it's just interesting to think that I would he have been able to get that pay package of, you know, just stuff like that.

I mean, I think investors are kind of used to him shifting dates and things.

So maybe that's part of it too and he hasn't said anything on X yet, right?

I haven't seen anything yet.

No comment yet.

Julie, right.

You know, the Cyber truck push back model Y model three were all pushed back.

It just, it's just part of their whole uh aggressive uh timelines and they kind of adjust that on the fly then separately because we got this new report today.

Uh Tesla's market share, maybe not what we once thought or what it used to be.

Well, yeah, according to Cox, they do this sort of eev kind of report, they do all kinds of sales reports portal on a quarterly basis and they found that for the first time, uh that they've been tracking this, that Tesla's market share of the US total pie is below 50% for the first time in Q two and 49.7%.

You know, it, it's to be expected as more competitors come online, more offerings are out on the market.

But uh it's still kind of a, a milestone or sort of, it's sort of a, a key sort of threshold that was sort of breached.

Their Tesla still sells the most vehicles.

But did they say that I'm just curious, did they say in that report who's taken the share?

Uh Yeah, so, so share is sort of kind of gum coming down to Ford Kia Hyundai even BMW on the higher end, the more vehicles that are out there competitive pricing, uh maybe better products, even uh consumers have a lot more choice.

You don't have to go Tesla.

Now, if you want an EV that's reliable and has good, good range.

And of course they have the, the nice big charging networks.

That's a big deal there too.

You top models too want to get the games out to the Cadillac lyric.

Really doing well this, this year GM ramping up their Cadillac Lyric production.

People are buying that.

You're seeing a lot more those with livery and, and, and, and um uh ride share drivers too.

A Hyundai ionic.

I mentioned Hyundai Kia ev nine EV six, the Toyota BZ four X actually kind of selling well and see the Nissan Aria good cars, but they're selling at discounts.

That's the only issues.

Can you make money on?

I have to say anecdotally.

I've seen an awful lot of Hyundai.

Is it icon?

Ionic 56?

Yes, I've seen those and I've seen a lot more Kias as well, so for sure.

Um there is one more ev related story that we're watching today.

Its stock is trending even above that of Tesla's on the Yahoo Finance platform.

And that is Quantum Scape, the battery company, the shares up what 20 more than 25% after they signed a new agreement with Volkswagen, this has to do with solid state batteries which I admit I do not fully understand.

What can you tell us about this whole thing.

So Quantum Scape signed a deal with Power Co which is VWs sort of not really a joint venture, but it's the coal control company that does all their battery producing.

And so they were already an investor in plant escape, one of their top shareholders.

Now they kind of inked a deal to have a nonexclusive license to build the solid state batteries up to a million evs a year according to this, according to the actual deal, uh basically these solid state batteries are they're lighter, they hold more power, they can discharge more power just overall more efficient, you know, Toyota's working on these on these that can make their cars potentially go up to 600 miles on a single charge.

So it's not a big deal.

It's a really kind of game changing moment for evs if they can actually make these, uh, at a, at a, at a cost efficient way.

Uh, so problems, low yield rates, they cost a lot of money to make.

The technology is still very nice and that it's gonna be years away.

But when they, when they do, uh, it should be a big deal.

All right, pro we'll be watching.

Thank you, my friend.

Appreciate it.

Moving on another trending ticker.

We've got our eyes on here at Delta Check that one out that stock tumbling Thursday after the carrier reported second quarter profit, that missed estimates despite record revenue for the period pulling down other airline stocks with it.

Despite this Delta Co Ed Bastian told Yahoo Finance's Morning brief.

The state of the consumer is strong.

Our consumer is very healthy.

Uh, our consumer tends to be a bit more affluent.

Uh, our, our consumer tends to have more discretionary, uh, wealth and, and, and purchasing capability.

Our consumers tell us that one of their top, uh purchase drivers for their, for their uh, well, their, their, their funds are to continue to travel.

So our consumers are driving the experience economy, whether it's, you know, traveling to Europe to see a Taylor Swift concert or going to see friends uh in another part of the country that's driving a tremendous amount of our stability and joining us with more.

Now is Yahoo Finance's very own.

Brad Smith stumbled over that most common last name in America.

I'm so excited to have you on the program.

That's the problem you, uh, so you spoke to Delta Ceo.

What were your big takeaways?

Yeah, a few big takeaways here.

And, you know, we talked about everything from the state of the consumer all the way to this phenomenon that some people may have heard of where people are abstaining from any type of entertainment on their flights.

The colloquial term that they're using is on earth dictionary.

I won't say it here, but all these things considered focusing it on the consumer right now.

This is a very affluent consumer that the CEO continues to talk about and how they're engaging with that core customer continuing to remain healthy as we were discussing.

And as you heard in a piece of that clip here, and one of the huge things that he said to me is that our consumers are driving the experience economy, he said, and as you heard there, of course, Taylor Swift gonna be happy that she's been summoned into to chat for yet another earnings season again here.

But it's a shift internationally here too that I would also point out because a lot of the domestic kind of push back that we've seen that's showing up in some of the CP I prints.

But it's re it's really more so where you're seeing some rotation on the international routes that customers are flying as well, going more to the Latin routes versus what we had seen last year into some of the European or overseas routes as well.

There is also a company that just netted out a new deal with Riyadh Air, uh an international airline that hasn't even started up yet.

That's not gonna start flying until 2025.

That's going to give them access into Saudi Arabia that's also expected to give them a fair deal of profitability, but that's not going to be really added into these numbers for the next few years here.

So ultimately, the investors right now are going to be taking away two things from this.

They're gonna be taking away that there's deceleration on the growth side and they're gonna be looking at some of the forecasts right now like we did see through where they're projecting this range for the next quarter of about a dollar 70 to the top end of the range $2.

You compare that to the same period last year, that's actually down a couple cents.

Yeah, I mean, and the growth is pulling back at the same time, the costs are going up, labor costs for Delta are going up, they signed a new pilots contract, you know, there's other costs that are, that are arising as well.

And you know, Delta is viewed by many investors as best in class.

So if Delta isn't doing well then, you know, that may, doesn't portend well for the rest of the airlines and many of those stocks were falling today too.

Yeah, that's spot on.

And one of the other things that he actually pointed out within our chat that I think we're gonna have to hear from a lot of the other airlines too to see how they address.

This is really the aircraft and the fleet that they're operating right now.

One thing that he told me on the call was that with regard to maintenance for the existing aircraft that are in their fleet, some of that maintenance operation is stretched and we're seeing a lot of that aircraft, even though they're expecting to take about 40 to 50 Airbus deliveries this year, they're seeing some of the others hitting maturity or getting closer to maturity and this could spell out a several years type of problem for the entire industry, not just Delta here and they are the least exposed to some of the issues that Boeing has seen, especially with the 737 max here.

All right, Bradley, thanks for joining us.

Appreciate it any time.

Some good news for consumers headline inflation falling in June for the first time since 2020 overall prices fell from May to June by 1/10 of a percent.

And joining us now is Simona Makuta State Street Global Advisors, chief economist Simon.

It is good to see you.

So let's get right to that big economic data point of the day, Simona CP I inflation moderating.

What, what did you make of that print Simona?

And, and do you think um at this point is a September cut locked in?

It was good.

First of all, to get a good inflation data for a change.

I mean, we got a good one last month.

Second in a row is, is very reassuring that what we experienced early in the year is not a new, you know, uptrend.

I think September is definitely a good time to start.

In fact, I would have argued even July would have been a good time to start uh easing and calibrating interest rates lower.

Um But I think right now we are looking at September and I heard earlier in the program, one of your guests saying, you know, two cuts for the year, I think we should keep the possibility open that there might be even more than two.

Interesting Sam II, I wanna ask you though, I mean, there a lot has been made of how economists and maybe the Federal Reserve as well sort of got burned last year.

In other words, there was a trend of disinflation initially at the beginning of the year that then reversed in the second half of the year.

And that phenomenon has been used to explain why the FED has been reluctant to begin its rate cutting.

Cycle.

How can we be confident that that isn't going to happen again this year?

Well, I think the economy as a whole, it is in a very, very different place and especially the labor market is in a very, very different place.

Uh already, you know, you guys had commented earlier in the program feedback from companies that they are seeing the consumer become more cost conscious, making some choices opting for, you know, lower end products.

In some cases, that would not happen if the consumer finances were as strong as they were a year or a year and a half ago.

But they are not.

And so increasingly as uh excess savings have been depleted, the consumer as a whole.

And I'm not talking about the high income and the top end consumer who still have a lot of wealth to draw down from, but the average person becomes much more dependent on the state of labor income.

So on the whole, you're looking real personal disposable income growing just 1% year on year for the last few months, you become much more vulnerable to a downturn in the labor market.

So here is what's different from a year ago.

Uh The downside risks to the consumer health actually are more prominent now.

And in that environment is very hard to imagine some kind of demand re acceleration that drives back inflation.

Simona some, some economists seem a bit um cautious about those rate cuts and they make different arguments as, you know, one argument I hear though is they'll say, you know, if you look at the stock market and how that's been in rally mode, Simona and that just means they say financial conditions getting easier and do you really wanna kind of fuel, you know, throw more fuel on that fire?

How do you respond to that?

I would say, uh, this question of how, how tight, uh, our interest rates has been a topic of heated debate for many months, right?

So you have to look at it from different angles.

One of it is the typical financial conditions index that takes into account market performance that tells you things are fine, in fact, maybe not tight enough, but you cannot just stop there.

You have to look at what in the real economy are consumers and businesses experiences as borrowing costs.

And there I think is why you are starting to see considerable pain in terms of credit card delinquencies, auto delinquencies, borrowing costs are high.

So if you don't need to borrow, who cares?

Right?

If you're locked in a 3% mortgage, who cares?

But how about the other consumers who are not and the people who do need to borrow and the businesses that do need to borrow.

So I think the overall uh, tightness of rates and financial conditions, um, you know, they are tighter than what some of these indicators that look primarily to stress you know, become only tight or short, uh, tightness when there is stress.

Um, it's, it's not as easy and lax as those.

And, and Simona, what do you think the risk is that the labor market starts to turn a little bit more quickly for the worst as the fed sort of, I guess, t tarries, uh, and, and, and delays in its interest rate cuts.

So, I think the good news is we still are in a very good place with the economy.

We've seen a downshift in growth.

We've seen a little erosion in the labor market but nothing dramatic.

So the fed still has a little bit of room to maneuver and perhaps to wait a couple of more months before they, they begin calibrating rate throw.

And we are not talking about dramatic cuts, right?

We are just talking about, you know, let's look where inflation is and whether a 5.5 funds raise still is necessary given the direction of travel.

So I'm not worried near term things unraveling, but I think the the balance of risk as Chair Powell has actually acknowledged and many on the FO MC have acknowledged has shifted and things risks are more balanced.

So we need to really think of the dual mandate as truly being dual again and the labor market now matters as much as inflation.

So not, but you know, very worrisome picture near term, but something that you need to be mindful of that perhaps things are not quite as robust as you thought, maybe even 23 months ago.

So Mona, thanks so much for joining us today.

We appreciate it.

Pleasure and coming up a check in on President Biden's economic track record.

That's next on market domination.

President Biden on the verge of an economic milestone, even as he faces calls to end his re election campaign.

Here are the details.

Yahoo Finance's Rick Newman.

What's the milestone, Rick?

It looks as if Biden is going to get to the end of his first term uh without a recession.

Um He there has been no recession during the Biden years so far.

Uh If you look at the Bloomberg forecast odds of a recession during the next 12 months are just 30% according to economists they survey and that's uh looking 12 months ahead.

Uh The odds of a recession have been much higher uh earlier in Biden's term, they were went as high as 65%.

Um and there were some economists a year or two ago saying it seemed almost certain that there was going to be a recession, there has not been a recession and it looks like Biden is going to get to the finish line on this one.

The question is, will uh will it help Biden?

And I guess the preliminary question is, will he even be the candidate uh going for re-election in November?

That's a totally different story.

And I think there's more news to come on that in the next week or two.

But uh even if the candidate turns out to be Vice President Kamala Harris, she would of course, be running to some extent on Biden's record.

Uh And I think she'll be able to say, look, we had, we've had no recession on our watch and by the way, uh inflation is cooling off um at just the right time for the incumbent Democrats to be able to say, as people are making up their minds in September and October, look, the economy is going strong.

Job growth has been strong and now inflation is basically receding.

So uh there's a pretty good economic story here for the White House.

Uh But of course, there's a bigger story which is whether Biden is going to be the nominee Bynes Big press conference tonight, Rick, how much is uh uh that now is uh how much is that riding now?

How big is this for Biden?

Well, I mean, it's, it's becoming kind of absurd inside the beltway.

Um It's like this is a do or die moment for Biden.

Um He's holding this press conference at the conclusion of this three day NATO summit and there's actually important NATO news.

I mean, you don't get to say that very often.

There's important NATO news, but there is uh uh Biden said this week that Ukraine is going to become, become a member.

NATO almost certainly even though he didn't give a time frame for that.

There's a new announcement, this is important that the United States may now position some hypersonic missiles and other types of advanced weaponry in Germany, clearly aimed as a signal to Russia.

And another new development is now seems like Ukraine is going to be getting F-16 fighter jets by the end of this summer.

I mean, this is all big stuff, but I think there might be three questions about that at this press conference and then, and then it's going to be all asking Biden, is he going to stay in the race?

Why is it?

Why doesn't he drop out testing him whether he can remember, you know, all these names of foreign leaders and stuff like this and of course, everybody who's going to be watching, which is going to be a bigger audience than you'd ever get for a press conference about NATO is just going to be watching.

Does he fall on his face?

Does he have a senior moment?

Does he lose his train of thought?

So, um there are a lot of people inside the beltway who, who seem to think that it is inevitable that Biden is going to withdraw.

And what we're looking at now is just the manner in which he does it and how clean the transition is to a new candidate.

But we're not going to get that news.

Uh Tonight, we're just going to get Biden trying to prove his fitness once again on live TV.

And we'll see how that goes.

Thanks a lot, Rick, everybody.

Well, the S and P 500 NASDAQ are falling from records as investors rotate out of big tech and this move lower coming after inflation cooled further in June.

So what does this mean for tech winners like NVIDIA and Microsoft Corey Johnson, the futura Group chief Market strategist is joining now, Corey.

it's great to see you as always.

So, one of the questions that Josh and I have been debating throughout the day and then again, at the top of the show was whether this is just sort of a one day blip as we see yields pull back a lot or whether this is the beginning of a bigger rotation.

What do you think?

Well, II I think that there is some nervousness among investors who piled into some A I related stocks video chief among them um uh about the valuations about the growth, about the change in the share price over a short period of time.

And what might take the wind out of that sale?

And indeed might it be a change in, in inflation rate?

And maybe a reaction from a fed that clearly wants to cut.

I think that that was certainly my takeaway from Jerome Paul this this week was that he wants to cut.

And so when we get the inflation data we got today, maybe that just gives him just enough wiggle room to get there to start cutting.

And does that change the underlying environment in which the A I stocks have risen and therefore they don't rise as much and maybe a little comes off the table on top of the Goldman Sachs note that I think has been really widely discussed and disseminated across Wall Street on an otherwise slow week.

Um To think about, hey, if we spend a trillion dollars in investment in A I, when are we going to get the trillion dollars back in return in our businesses and our economy?

Um And Corey.

Um you know, it, it's funny that you bring up that Goldman Sachs Note, I'm glad you did.

I thought it was really thought provoking.

I'm here to help.

And among uh among other things, one of the data points that the, the uh note brings up is the number and percentage of firms in the US.

And this includes firms of all sizes that are using A I in their daily business or that are trying to and it's not high, even not high among computing companies, it's a small number.

So do you think that that is a valid concern here that like we're putting all of this into A I, all this investment into A I?

When is it gonna bear some fruit?

Well, and we've done studies of futur and group polling people, polling corporate customers talking about these very issues and they say they want to spend and they intend to spend a lot more.

But I think they're still figuring out what, what they're gonna do with A I and where we can help their processes.

But I, I think that um and the, the Goldman Sachs Note again, it is very thought provoking.

But I think the one of the fallacies that, that the negative criticism in the note has is that the things that we do now with our computing will be the things that we do later with A I driven computing.

And I think that that's just wrong.

I think it's hard for us to imagine the things that we'll be doing with A I I was at Semicon West this week, which is a big conference that is really about the manufacturing of semiconductors and it pulls together a lot of the biggest and most interestingly though a lot of the small companies that do the work that makes semiconductors of all types.

And there was a lot of this discussion about A I, not driving demand, but about changing processes.

How can we change our, how can we fix our plumbing, literal plumbing?

How can we change our water usage by using the data that we get and processing it through A I in ways that weren't time efficient in the past and how can we change our staff?

So they're fixing things before they break?

Because A I tells us what's going to break in ways that we never would have done.

So, because the calculations were just too time consuming to do.

There are things that A I will let us do that we've never done before and they might not be sexy things like writing your term papers and chat GP.

T which are easy to understand, but there'll be weird, different things that we've never done before.

And I think that that is where the, uh the, the revenues and the profits and indeed the GDP changes that the A I will rot will come eventually.

We just don't know what those are right now in the, in the kind of near to intermediate term though.

Corey.

I'm just curious.

I mean, listen, you're, you're talking to a lot of tech companies, you're going to tech conferences.

Have you seen tech companies kind of roll out A I enabled experiences that you thought?

Oh, wow.

That, that is new, new.

Cool, exciting.

I have got to have that A I enabled PC.

I've got to have that enable A, an A I enabled smartphone.

I think, you know, when I think about semiconductors, going back to the olden days when the coolest technology you would get was a, was a portable calculator, electronic calculator in the sixties and seventies, right?

That was driven by a often by a Texas instruments chip.

Um I, you know, the, the what wasn't, what was cool was the calculator.

I would, I didn't know what the math was gonna be, that was gonna come out of it and what things were possible.

I think the same is true right now, what we're gonna see first are the TOS and later we're gonna see the results.

But I think that the, the change, so therefore the change in the tools is what's so interesting.

The fact that there is a surface PC out there that's doing A I on device, The fact that I'm meeting with private companies, I just got off a meeting with a private company doing small language models, not large language models, doing modeling off of CP US and even MP US, not GP US right.

Doing doing models of a little bit, take out some acronyms there, doing a large do doing A I processing of models on ships that cost a few $1000 instead of 4050 $60,000.

Those are the devices that are coming to market now, the start ups that are getting funding right now.

And I think we're going to see big companies, companies like Microsoft and others make investments in small companies that are doing small language models that will really change the nature of our understanding of the expense of creating a A I powered world.

And we're seeing that from the orders from the company, some of those stocks that are selling off today like Broadcom, right?

Big sell off from Broadcom today.

And yet those are the companies that are really going to benefit from more nimble A I in the future.

Well, that's what I was going to ask you to close out here.

Corey is all of the things that you're talking about.

Is it changing at all the way that you're thinking about where investments where, you know, equity investors should be putting their money right now?

Um II I think we really want to keep our eyes open to newly emerging companies that are doing interesting things that are different than massive investments like open A I spending billions of dollars at Microsoft with billions of dollars from Microsoft, we're going to see nimble different kinds of players.

We want to be wary of companies that are baloney that are putting A I at the end of their names are claiming that their email marketing uh solutions of 10 years ago are now A I empowered E I marketing A I Marketing solutions.

There's a lot of garbage out there.

We're going to see more of that than real solutions, but there will be real solutions that will be names that we're not focused on right now.

Um And I, and maybe one of the things you see in the market right now, in the in the general stock market, you see an understanding that the big concentration of the move around the magnificent seven or whatever you want to call them might be wrong and that while most S and P stocks have not benefited, they will benefit.

So take a little bit off the table with the biggest companies and look for the smallest ones because maybe that's where the opportunities will lie.

We will keep an eye on it with you, Corey Johnson.

Thanks so much.

Good to be with me, with me.

Coming up.

Value conscious consumers are cutting back on snacking according to Pepsico.

But don't write off the entire sector.

We've got some top picks coming in consumer staples, particularly beverages.

That's next on market domination.

Inflation is taking its toll.

Pepsico was sounding the alarm on consumer spending in its most recent quarter that saw sales volume for Frito Lay in North America drop 4%.

But there are still opportunities for investors in the wider consumer staples category.

And we're looking at how you can navigate that space with the Yahoo Finance playbook us now, Nick mode R BC capital markets, managing director Nick.

It is good to see you.

So uh you cover Pepsico's, let's start there.

I'm interested, Nick to get your thoughts on the earnings report there, Nick and also whether you thought there were any kind of kind of read throughs from that report for other names uh in your coverage universe, Nick.

Yeah, absolutely, Josh.

So look, Pepsico is a incredibly high quality company.

There's no question about it.

Um You don't really have to worry about them delivering on earnings because I think they have a very good productivity pipeline.

Um and are very good at managing their PNL.

But the top line is really the problem and look the snacking categories come under a lot of pressure for a variety of reasons.

Um I think partly due to economic pressure, especially with low income consumers that tend to over index to this category.

So I think that's partly what they're dealing with.

This is not just a Pepsico problem, this is a problem for the entire snacking industry.

And quite frankly, the entire packaged food industry is, is under a lot of pressure to, to your point about read throughs as we get through this earnings season.

It's going to be very evident that packaged food companies are gonna have to spend more money than they originally thought to really drive volume in this current environment.

And Nick, it's Julie here when you say spend more money.

Do you also mean cut their prices for consumers?

Well, I I think yes and no, I mean, II I think what, what they're gonna do right now is a lot of temporary promotions to really understand kind of how consumers are responding to the different price points.

Right now.

There's not just price cuts that, you know, there's other alternatives you can offer smaller pack sizes that are lower priced, you can offer innovation that might add a benefit uh which consumers are willing to pay up for.

So actually, instead of getting a price cut, you get slight price increase without actually raising the price itself.

So there's a lot of things they can do.

But yes, I do think promotional spend and marketing spend is going to ramp up in the back half of this year.

You know, Nick, it was interesting to, uh, kind of read through Pepsico management, how they talked about the consumer and they talked about persistent inflationary pressures, higher borrowing costs, you know, tighter household financial conditions.

Is that, is that kind of your read on the consumer, Nick just based on, on the companies you cover?

Yeah, absolutely.

I mean, you look it inflation, you know, going up 30% for these products uh over the last few years uh takes its toll.

Um but it's not just inflation in these categories, it's inflation and everything that consumers are doing from electricity bills to your insurance bills, to your mortgages.

And so this is, you know, we have to really understand in the grand scheme of things, we are looking at an overall wallet issue.

Um and consumer products is just a piece of that.

Um But it's something that these companies have to contend with given how much prices have gone up uh over the past two years.

Um And so let's get to what you do like Nick uh still within your coverage and in particular beverages, I find it really interesting that you highlight constellation brands as one of your pick because that's one as you point out in your most recent note that investors really haven't believed in.

Um, and they maybe more broadly, haven't believed in the beer story either.

Why do you believe in it?

Yeah, I mean, look, you know, we, we tend to take longer term approaches.

Um, this company has been able to deliver exactly what they've said in their beer business going back the last 10 years.

Um, all of the work that we do with distributors with retailers suggests that there's still significant upside in mea special penetration across the country and as well as Pacifico and even Madea Clara, which, which is grown to be a pretty nice size business for Constellation.

I think this management team is doing all the right things.

I think there's still significant upside.

I still think high single digit revenue growth is the right trajectory for this company over the next several years.

And I just don't think the valuation is reflecting it.

Now, I can't control how investors view information, but from what I see, it looks like they're actually doing everything that they've said they're going to do and they're outperforming all their peers, but they're trading at a discount and Nick another name you like.

And I think it's interesting, I want to hear the story, Monster Beverage, you know that stock has not been working Nick in the red this year in the red over the last 12 months.

But you, you, you see better times ahead.

How come?

Yeah, I, I think, uh you know, to me, Monster, you know, we've had a Bond monster for over 10 years straight and the stock's gone up, you know, 3.5 X over that time frame to me, Monster.

The real thesis is that this is the next global mega brand, right?

When you think about a Red Bull or a Coca Cola, like the Monster brand has shown that it can transcend category and country.

And so I think there's a lot of opportunity for this brand to grow internationally.

Just think about this, Josh, there are more drinkers of energy drinks in China than people in the US.

Ok?

And they haven't even gained significant traction yet.

That category is still building India is another great example.

So I think there's a lot of upside, but when I kind of think about where we are right now with the stock, given the pullback that it's had, I think that this is an opportune time to be buying the stock if you're uh a new investor or even an existing investor, because I do think the back half is gonna improve through a series of investments.

They're gonna take a price increase in November, which I think will help the help the top line.

Uh and the international growth story continues to have momentum, Nick.

So good to have you on the show today.

Thanks for taking the time to join.

Appreciate it, you bet.

And while wrapping up today's market domination do not go anywhere.

We've got you covered with all the action following the closing bell.

Stay tuned for market domination overtime.