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Oil Surges, Tesla Recoups and Meme Stocks are Back 10/23/25
00:44:02
Oil prices jump after the Trump administration puts sanctions on Russia. Tesla shares recover after sliding on earnings. Plus, what the options market indicates about the direction of the meme trade.
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Courtney Reagan
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Drew Mattis
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Courtney Reagan
Stay smart, stay safe and stay protected. With a 30 day free trial@lifelock.com specialoffer terms apply. You're listening to THE Exchange. Here's today's show. Welcome to THE Exchange. I'm Courtney Reagan. And today for Kelly Evans, stocks gaining some momentum into afternoon trading following yesterday's move lower. Disappointing results from high profile names like Tesla, IBM and SAP weighing a bit on sentiment, although Tesla has turned around. Meanwhile, the move to safety is back with gold getting a nice bump and oil in the spotlight rallying more than 5% after the administration announces new sanctions against big Russian oil companies. Crude now on pace for its best day since June and its first positive week in four oil services names moving higher in tandem. And quantum computing stocks seeing big gains despite the Commerce Department saying they are not currently negotiating equity stakes in some of those names as originally reported. We'll give you the updates on that soon, but we're going to start with stocks. My guest here that's joining us says that it's getting harder for markets to climb this wall of worry and that consumers are not okay. That K is the key here. We'll get to that in a minute. Joining now, Drew Mattis, chief market strategist at MetLife Investment Management. You know, Drew, I have to start this off by reminding viewers that I do cover the retail sector. And so I think about the consumer an awful lot. And I have been really surprised pleasantly on how well the consumer has held up. I'll even go back five years, 20, 20. If you would have told me that we would have seen retail spending the way that we have over the last five years, knowing what happened in the broader world, I never believed you. But you're saying it's not the case anymore. You're seeing some cracking signs. Tell us what you're seeing.
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Drew Mattis
Yeah, I think if you look at the New York Fed survey, which is one of the few data points we're still getting out, and you look at the breakdown by income, what you see is that the biggest deterioration in terms of people's expectations for their income minus inflation is coming from the extreme upper end of the income scale, right? So lower end consumers are actually their worst worsening, the middle is kind of holding in, but the real deterioration in terms of expectations is coming from the upper end. And now that might not translate into decreases in consumption for quite some time, but it's certainly going to get those people that maybe be doing things that are different than they had been in the past, maybe looking for deals where they hadn't in the past and generally, you know, adjusting their behavior in order to kind of compensate for the what they perceive as a potentially higher risk of being laid off in the future, which is something else we're seeing in the data.
- [03:33]
Courtney Reagan
I don't disagree with you with what the data is telling us and then what that should portend for what happens. But I've been wrong for a while now and the data sort of shows, particularly the softer data, the sentiment we're not seeing that follow through when it comes to spending. Consumers are still spending. And so if I can just push back for a minute, the higher end for some time has really been pulling the train for consumer spending. And the lower end, I mean, aren't they always a little stressed? If the Fed isn't worried about the rate of inflation and they're not seeing a strain on the consumer, why then do you think it's happening now with the lower end? And why do you think that upper end is starting to feel more strained? I'm still just not quite understanding how that's happening when I've been wrong before, certainly.
- [04:21]
Drew Mattis
Why? Look, I'm an economist, so I've been wrong a lot in my life, in fact made my living off of it. I think if you look at consumption data that we have right now, obviously the government stopped producing some of this data. But the most recent data we had really had begun to show a downtrend in spending on services. And my first boss on Wall street, genius at reading the consumer, used to say that if someone's worried about buying a cup of coffee in the morning, they're not going to buy a car in the afternoon. We're beginning to see that pattern emerge where spending on services is drifting below a trend like level. Spending on services tends to be consistent. It's you stopping off to get your cup of coffee in the morning, it's you going to your doctor's appointment, it's you getting your hair cut. These are patterns that really shouldn't change all that much month to month. And we're beginning to see that drift lower. What that usually means is that, you know, people are beginning to cut back on things or do things differently. And when people behave differently, it's not usually for a good reason. I think that when you look at sentiment, the sentiment is way too low than it where it should be relative to unemployment and the like. But these patterns are emerging where consumers are beginning to act more cautiously and it's going to take a while for that to show up because upper income people have the means to keep spending for a while. But that doesn't mean they're not noticing these things. And I think that's, that's the key difference now is we're seeing evidence that they are noticing these things and actually beginning to take some actions.
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Courtney Reagan
That is interesting. And of course this time of year is really important for consumer spending. As we're looking at the last couple of months and of course we have the holiday. If consumer discretionary then is probably not where you want to put your money. Based on the thesis that you're putting forward, where is a place that we should be investing? Or because consumer spending drives so much of economic activity, does it sort of feel like maybe you're less bullish overall going into the end of the year? What's your advice for investors?
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Drew Mattis
Well, probably less bullish is a good way of looking at it. But I would also think about this. Just because someone's having trouble making a purchase now doesn't mean that they're going to have trouble paying for what they've already bought. Right. And so I think, you know, if you think about where you can take advantage of an improvement in the economy or deterioration in the economy, if the Fed's cutting interest rates, who benefits from that? Well, typically financials benefit from a steepening yield curve. Typically financials benefit from volatility. So it's a way of saying that if I'm wrong on the consumer and there's more volatility around the numbers, then we could see financials benefit. And if I'm right and the consumers begin to fall apart and the Fed cuts interest rates aggressively, then you'll see the yield curve steepen and banks should also take advantage of that. So it's kind of a nice way to hedge. If you look at other places, you know, there are places you probably want to avoid. I think housing is a great example. Housing prices are not likely to collapse anytime soon and people talk about a housing shortage. But at the same point I'm not seeing a lot of buying out there. And so that's, you know, a place to be a little more cautious.
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Courtney Reagan
You know, it's very interesting when you talk about financials. I feel like earlier this year financials was sort of a sector that so many looked at and said this one, this is going to be the one that's going to take off with the change of administration, the expectations that regulations were going to pull back. And you didn't mention that in your thesis. I suppose if there are some big regulations that pull back, maybe more deals start to happen then that could further, further sort of push the financial group higher. Or is that sort of financials are your pick? No matter if that happens or not, it's really immaterial.
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Drew Mattis
It's more just how they, how they respond to the consumer and some of the natural hedge that it provides. If the economy.
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Courtney Reagan
Okay, got it. Well, that makes sense. Go ahead.
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Drew Mattis
And the economy is really weak, then everyone's going to have difficulty. Right. But it's a matter of does it create more volatility in markets? If so, good for them. If consumers are still able to pay for things that they purchased, good for them. And if the economy takes off, good for them. It doesn't mean there aren't scenarios out there where things can fall apart. But at the same point, a large majority of the scenarios lead to kind of decent outcomes.
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Courtney Reagan
There are, huh? Very interesting. Of course it has underperformed quarter to date on a percentage basis. So maybe there is some room to run there. Drew Mattis with MetLife Investment Manager, thank you for joining us here today. Meanwhile, Tesla is recouping its losses after sliding on an earnings miss. My next guess is Tesla is caught between its past and its future and faces some pain ahead. Now he lowered his price target slightly, but he's maintaining a buy on the stock.
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Christina Parts
So.
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Courtney Reagan
Joining me now is George Genericis. He's senior analyst at Canaccord Genuity. George, thanks so much for being here today. I guess we'll just start with a brief over you of your thoughts on the quarter. We sort of ran through that they had an earnings miss, but they did report stronger than expected revenue.
- [09:10]
They had a great deliveries quarter in the third quarter that basically helped them overcome the first two quarters that were basically terrible. But the real tension here in the market is trying to figure out how Tesla will bridge its current EV related business to a future that's more focused on robot cars and robot humanoids. And what investors are really trying to understand is what that bridge looks like. Is it it going to be a timeout from growth or will, will we continue to see growth over the next several quarters and years? And I thought last quarter, last night's earnings release had something interesting where Elon Musk essentially said for the first time in a while that the company is going to increase its production capacity, which to us signaled that he actually has some confidence in EV sales growing for the foreseeable future. While at the same time that long term growth trajectory with Humanoids, there was a little bit of a, of a pause there in terms of how quickly they can scale production. So we had a little bit of everything. Some good news I thought on the EV side, but a little bit of pause on how quickly they could scale that robot army.
- [10:11]
That's really interesting because it feels like at least before we got the results yesterday, whenever we were speaking about Tesla, it was all focus on Robo Taxi straight ahead and that, you know, maybe, maybe we're past the growth area for the EV sales. But like you said, deliveries were stronger and then now maybe they're slowing the robotaxi at least to a degree or they're less bullish there. Can both be true? I mean, can you grow both at the same time?
- [10:35]
Well, we think so. Look, the robot cars, the robotaxis, will continue to scale this year and beyond. But our concern about just that, what that market looks like in the United States is their cost of bringing those to market. Our analysis suggests that it's about a dollar plus in terms of cost per mile to the consumer. But if you really want to break through and create an enormous market for Robo taxis, you have to get to something that's less than 75 cents. But for now it'll be 24 billion miles, which doesn't mean it could be impactful to Tesla's P and L, but not enough to really drive it until 2030 and beyond.
- [11:12]
And it is worth reiterating here that you're reiterating your rating and you're lowering the price target that we are seeing shares sort of recover from those early losses. If you can't see the chart, it's sort of that march higher up and to the right. But I would love to ask you, George, while we have you, because you have sort of a wide range of coverage and expertise about rare earths, obviously the United States, Australia, signing the SCRA Critical Minerals Agreement, $8.5 billion project pipeline with a $3 billion investment over six months. And so we're seeing a lot of stocks in this area rally. What do you make of this agreement between the United States and Australia as they try to source these rare earths from areas that don't involve China?
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Frankly, look, our estimate is that we consume about 50,000 tons of rare earth magnets per year in the United States. And if you look at what MP plans, what other companies like we cover, like USA Rare Earths, we still have a large gap to fill. MP plans on building 10,000 USA rares, about 4,800 tons. And if we want to become a self sustaining market, we need a lot more magnets to build in the United States. And to make that happen, we need oxides, the rocks, essentially the powders we need to make the magnets. And so there's a lot of room to run here. And we need help from our partners to make that happen. Whether it's Australia, Canada, other markets, you'll see a lot of this activity, in our opinion now and in the future to make sure we can secure a supply chain to build those magnets here.
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Do you think that the stocks have moved appropriately or is this by rumor? Sell news.
- [12:45]
Look, our price targets are where they are, but we suspect over time that the market needs to figure out what the cost curve looks like in the United States in our friendly partners. So if you look at the cost of these materials coming from China, they're at depressed levels. And what we haven't figured out yet as a country and as a West collectively, is what that cost curve looks like in our models. We have assumptions that are a little bit higher than where the current market is in China. But if you listen to what the companies and the sector say, they're trying to send a signal. Look, our magnets have to be significantly more expensive than they are from China because we just have a different cost structure here. Eventually the market will figure this out. No one really knows what that price is today, but I think the stocks reflect this uncertainty as to how this pricing will play out in the US and the west over time.
- [13:33]
I see. Got a lot to learn and I got to go back to my periodic table of elements too for some of this, to get through some of these notes to make sure I have a good understanding of it. George Generakis with Canaccord Genuine. Thanks for joining us here today on a two pronged segment. Well, coming up, oil jumping today as the administration announces new sanctions against big Russian oil companies. Is the movement overreaction or is this the return of the energy trade after months of underperformance. Plus what goes up must come down. After rallying more than 400% in a week, shares of Beyond Meat are giving back some of its gains. Is the resurgence of the so called meme trade already fading? Look at what the options market is saying. The exchange is back after this.
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Drew Mattis
This is the exchange on cnbc.
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Courtney Reagan
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Drew Mattis
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Courtney Reagan
Welcome back to the Exchange. Oil jumping nearly 6% today as the Trump administration puts additional sanctions on Russia's two largest oil companies. WTI crude now at $61 a barrel. Brent at 65. Our next guest says the physical impact be media. For more, let's bring in Jeff Curry. He's chief market strategy officer of Energy Pathways at the Carlyle Group. So Jeff, sort of get us up to speed here. We were talking about this oil glut in the market and now we're talking about sanctions on Russian oil. So does the move in oil feel appropriate for how much the market may lose when it comes to Russian oil and thus propping up the prices as supply falls?
- [16:19]
Jeff Curry
Well, this just shows the dangers of how big that short position that was developed in this market around the, you know, the epic supply glut that was coming? I'm not dismissing the supply glut and you know, given the news today that to start to make a little bit more sense. But I think at this point right now, it's still too early to assess it. And why do I say that is that the US did not apply Secondary sanctions. And that's really important because secondary sanctions would be anybody who transacted with US oil be taken out of the US Swift system and they'd be forced to be in the Chinese SIPs system. What we're going to find out in the coming days is how big that loss is. So everything were to be lost, 5 million barrels per day. This is a, you know, world class supply disruption. You know, the reality we'll find out is maybe it's a million or something of that nature. We do know barrels of oil have already been, you know, loaded in Guyana and heading to India. So there are groups that are unwilling to take that risk, but we won't know the full extent of it for a while. So, you know, I would tend to think, you know, you don't want to be this short oil in these types of events. Hmm.
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Courtney Reagan
So if you don't want to be the short oil, where do you think then the price could go? We're sitting about $62 a barrel right now for WTI.
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Jeff Curry
Well, in looking at the, the upside here, you've already rallied somewhere around $5 off, off the lows. You know, you could rally another $5 plus on this. You know, I think getting over 80 would be really difficult. You'd really have to have a substantial shock to the system to be able to achieve that. But in terms of thinking about the very immediate situation, we're seeing the unwinds of these shorts. The people had the shorts, they were short the curve and so you really saw it flip. But I think what's going to happen in the next couple of days, we're going to get information which refineries are going to be unwilling to take the Russian oil. We'll have a better assessment of this and then that's where we'll probably move to the higher levels. Another five, $10 a barrel wouldn't be completely unreasonable, again, given how short the market is. But the pushback we're going to get from a bullish perspective is what about that big oil glut, the flotilla of oil at sea?
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Courtney Reagan
Right, right, exactly. I mean, what, obviously there's so much of the moves in oil prices that are geopolitical in nature, obviously economic implications around the world when it comes to the supply gut as well. When you're putting this all together and we're talking about sanctions, how effective, I mean, does it really do what we think it will do? Do companies or countries rather really comply with what they're supposed to do?
- [19:09]
Jeff Curry
The answer is that no, they're not Effective. Clearly they aren't right now. They would be effective if you're willing to employ secondary sanctions. But the time I've seen secondary sanctions applied against Rosneft in March of 2018, it's a shock to the system because they nobody's going to touch it. It becomes a hot potato because you don't want sanctions yourself. And that's why the US Government is so reluctant to do it. But that would stop everything. But what's different between then and today and this has been driving a lot of gold. Gold is the de dollarization trade is starting after they saw those secondary sanctions in 2018. The Russians reduced their their debt exposure, started buying gold greenbacks to actually transact in. Then the Chinese did it after the central bank freeze. So a lot of that demand you're seeing in gold on these sanctions. But I think the key point is it is very disruptive. If you go the secondary sanction route, it would be effective but it would be extremely disruptive. And I think the question is what refineries are willing to take that risk because they say after 21st they will then you know that's a threat. They'll use them after the first, but they did not use them at this point.
- [20:21]
Courtney Reagan
Well, you've given us a lot to think about here. And of course we just showed the chart of gold up about what, 57% or so year to date and very interesting points about the interconnected business there. Jeff Curry, thank you for joining us here today. We've got to run. We have some breaking news out of Washington. Emily Wilkins has the story. What do we have now, Emily?
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Kate Rogers
Well, Courtney, on day 23 of the shutdown, Republicans are trying something slightly different. They just put a bill on the floor that would have allowed federal workers who have not been furloughed. That means they're currently working to get their paycheck tomorrow. Over 2 million federal workers are expected to miss their first full paycheck of the shutdown. A huge of course a major pain point for them. But most Democrats actually voted against this bill. It failed, it did not pass. And Democrats were saying all federal workers need to be paid, including those who are furloughed, not just those who are currently working. Interestingly enough, you did see two new Democrats cross the line. You saw Fetterman, who of course have voted with Republicans before. But both Georgia senators Raphael Warnock and John Austin off also voted with Republicans on paying federal workers who are currently working. Interesting. There, of course, Georgia, you've got a giant Delta hub and of course TSA has been very impacted by everything with this shutdown. And we'll have to see next week when lawmakers come back. Is federal workers not getting paid enough to shift the balance to some degree and lead to some breakthrough in the shutdown? Right now it's just not clear that's going to happen, Courtney.
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Courtney Reagan
Yeah, absolutely. That's definitely a turning point when those paychecks don't come when they were supposed to. And I know the American public does appreciate the workers still coming up, coming and showing up to work despite knowing if they're going to get paid immediately or not. Emily, thank you so much. Well, coming up, from intel to Critical Minerals, the administration is starting to look more like a venture capital firm. But not all investments are created equal. We'll dig into that. Plus, it's not just about the mag 7. One analyst says he's watching the fabric 5 of fintech. He'll break down the names in the payment sector that he says having a minefield but are great opportunities. Stick with the exchange. We'll be back in a moment.
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Drew Mattis
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Courtney Reagan
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- [22:49]
Welcome back to the Exchange. Let's get you a check on markets right here. Dow Jones Industrial Average is higher by 2.10of a percent. You can see the Nasdaq though leading the way higher by 8. 10 of a percent. S and P 500 adding a half a percent. And the yield on the 10 year treasury just tucked under that 4%. They're watching that at 3.999. Here are some other movers this hour. Las Vegas Sands, the casino and resort operator, one of the top performer names in the S and P after posting higher profit and sales in its third quarter now mostly due to completed investments in Macau and Singapore. The company also boosted its extent its existing buyback program and raised its annual dividend by 20%. Shares higher by 12%. American Airlines also flying higher, though shares up about 5% after the company said it anticipates record revenue in the fourth quarter. The airline posted a smaller than expected loss for this quarter and be it on revenue expectations as well. Shares higher by 5%. And in the red Molina Healthcare, that stock the worst performer in the S and P after cutting its 2025 full year earnings guidance. The company citing rising medical costs for that weakness, shares off nearly 21%. Well, a Trump administration official now denying an earlier report from the Wall Street Journal that said the Commerce Department is in talks with some quantum computing companies for equity stakes in exchange for funding. Quantum stocks took a dip but still higher today. Despite that denial. Christina Parts and Levis Parts and Evolis has more in today's 10 Tech Check. Hi Christina.
- [24:15]
Christina Parts
It's been a rollercoaster with this story, but like you said, the Trump administration is really pouring cold water on a report about quantum computing deals. An administration official tells CNBC Amon jabbers that they're not currently negotiating equity stakes in quantum firms, but stocks like you said, I and Q D wave are still much higher. IQ up for D wave, up almost 10%. The key words though are currently an equity which suggests that there could be a deal in the future, perhaps one that would use warrants giving the government the right to buy shares later rather than taking ownership now. But Rugetti told CNBC this morning, quote, we are continuously engaging with the US Government on funding opportunities. If the US does not lead in supporting these breakthroughs, others will, posing significant risks to our national security. So if a deal happens, it would follow Intel. The government converted grants into a 10% stake just earlier this year, but intel has billions of dollars in revenue. These quantum firms have barely any and are burning cash on tech that doesn't work commercially just yet. Washington would be essentially backing smaller startups while Google, IBM, Microsoft, Amazon spend billions on quantum. Google just said recently in the 24 hours that its Willow chip ran an algorithm 13,000 times faster than a supercomputer. This is really just a global race for quantum dominance. Australia put nearly a billion dollars in psi quantum. The US sees quantum as critical to staying ahead, especially ahead of time, China.
- [25:41]
Courtney Reagan
Christine. So you start off talking about sort of the volatility of these names today along with the announcements that we've heard. But to your point, they're still higher. Why?
- [25:50]
Christina Parts
It speaks to the speculation of of these names and how they can be almost categorized in the meme box.
- [25:56]
Courtney Reagan
I was going to say anything with quantum, it seems like, yeah. Is there a big retail trade in these names?
- [26:02]
Christina Parts
Oh, of course there is. But I don't want to discount the scientific breakthroughs from a lot of these companies and they are doing some, they are producing something, you know, versus maybe some of the other mem names or you're wondering they're just completely negative in terms of revenue. They what is their product even. But in this case there's a lot of names. They move quite in tandem with any speck of headline. And we saw that early today in the White House pouring cold water. The other thing too is that the White House said currently.
- [26:28]
Kate Rogers
Right.
- [26:29]
Christina Parts
An equity stake which could imply that maybe.
- [26:32]
Courtney Reagan
Yeah.
- [26:32]
Christina Parts
Or, or a complete other deal. There's a lot of companies that are in talks with the US Government right now because the US Government has shifted their stance in how they deal business, NP Materials, int, you know, others, you know, just in regards to investing in these firms. So it's changed the game here and firms want in with the government.
- [26:51]
Courtney Reagan
Yeah. Obviously it's really important to listen to these words and sort of parse through them and have you on to explain them because I definitely hear with what you're saying it's potentially speculation and maybe it's not stock or it's not equity, but it's the opportunity to do so later on. Thank you so much, Christina, for explaining that to us. Now on to Kate Rogers. She's got a CNBC news update. Hi, Katie.
- [27:12]
Kate Rogers
Kate High Court after San Francisco Mayor Daniel Lurie said earlier today that President Trump called off a planned federal deployment to the city. The president just posted on Truth Social confirming the move and writing that quote, great people including Nvidia CEO Jensen Huang and Salesforce CEO Mark Benioff called him to ask that he not move forward with the plan, arguing that the mayor was making substantial progress in the city. Electric vehicle maker Rivian is planning to lay off more than 600 people, or about 4% of its workforce. A source familiar confirmed those layoffs to cnbc. Rivian and other EV makers are facing slower than expected demand, in large part due to a drop off in sales since the elimination last month of the seventy five hundred dollar EV tax credit. And soccer superstar Lionel Messi is staying in Miami through 2028. The team announced the contract extension one day before the season opener. Messi earned approximately 2, 20 million a year under his original contract, making him the highest paid player in the league. Courtney, back over to you.
- [28:11]
Courtney Reagan
Well, pretty unbelievable. I have seen one European soccer match and we actually saw Messi drive out himself in the car just from under the stadium. So pretty cool stuff to have him here. Kate Rogers, thank you so much. Well, coming up, the massive volatility in Beyond Meat bringing back to light just how volatile and unpredictable that aforementioned meme trade can be. Is this trend here to stay or are these big moves a short term redux of 2021? Remember that? Well, we'll look at what the options are telling us the exchange back right after this. Well, welcome back. Beyond Meat's wild Meme stock ride continues. Shares Lower today, down as much as 22% premarket, but up nearly 400% so far this week. And while volatility is the name of the meme trade game, there are signs some options traders are actually banking on a bit of stability in a few of these names. I'm nervous to even say that. Joining me now to discuss is Susquehanna's Chris Murphy. Okay, I think we're all still trying to understand meme stocks, how the retail trader ends up glomming on to one. Is it still Reddit? Just sort of explain where we are right now in 2025 with meme stocks and if it's similar or dissimilar from 2021 when this phenomenon began.
- [29:29]
Chris Murphy
Sure, yeah. I mean, it really can start anywhere. I think with the Beyond Meat situation, you had just a enormous sell off over the last couple of years and I think most importantly, a huge short position for, you know, one of these situations to get kicked off. That seems to be a big component. So short covering spike, then the momentum begins and then that's really when you see the call buying. So it's not, not typically that the call buying is the catalyst. It's the move in the stock is the catalyst and then you see the call buying follow on. And Beyond Meat was obviously the first mover in the most recent surge here.
- [30:09]
Courtney Reagan
So if I can drill into this and get a little wonky when we're talking about the short covering, our data team here sort of look through the numbers and said, yes, Beyond Meat's short covering position or short interest was much higher previously, but they've updated the shares outstanding. So really it's more like a 10% short interest, which is not, not that high when you're talking about sort of a meme stock short interest. But does that, does that not matter here? Does that not apply?
- [30:35]
Chris Murphy
I mean, once, I mean, think, I think once the momentum kind of starts and you see the huge surge in call buying. And I would point out it's not just small lots which we typically attribute to retailers, there's larger blocks trading as well. Okay, so it is certainly a momentum story in addition to the shortage interest.
- [30:56]
Courtney Reagan
Okay, so we mentioned in the intro that you think there actually could be some stability here. Why do you think that? And if we follow that thesis, what should we do? I mean, if you are an investor that typically is investing based on fundamentals or so, maybe even technicals, is it dangerous to sort of follow the meme trade here to try to make some money?
- [31:20]
Chris Murphy
Well, I think you need to know what what it is, okay, you know, you need to know that you're playing a momentum situation. You're not necessarily investing on fundamentals. That's not to say that there's opportunities. I mean, you can kind of watch how this unfolded. It started with Beyond Meat, and then all of a sudden, people are looking at sweetgreen and Wendy's and dnut, and those stocks start to move, and you start to see, see, you know, call buying there and stocks moving higher. So, you know, it is a specific type of trade you do have to, you know, be thoughtful about. You know, okay, it's happening in Beyond Meat. Where is it going to happen next? And then you also, in terms of how not to trade it, you just have to be careful when volatility levels get this high. You know, we've seen this movie before. A lot of times these skyrocketing moves come back to Earth worth. But you have to be careful when you're buying options, for example, put options, because one component is the volatility level. And there's situations where in Beyond Meat, for example, the stock goes higher, but the puts become more expensive. And that's because volatility has moved up so much. And that can work both ways, where the stock can come back down to earth, but you can not make any money on your puts because so much volatility comes out now.
- [32:41]
Courtney Reagan
So I would love to get your thoughts very. I have two questions very quickly on the Quantum stocks. We were talking about it earlier on in the show, and obviously there are some potential fundamental things happening there which may initially move those stocks. But it also seems to have gotten tangled up in this. In this meme. In this meme trade. Should we look at those stocks differently since there seem to be some fundamental reasons why you might want to belong those names?
- [33:09]
Chris Murphy
Yeah, I mean, absolutely. Especially if you're looking at it as. I'm not an expert in these stocks, but if you're looking at it as a situation where, sure, there's a chance they could not be worth that much in the future, and there's a chance they could be revolutionary. So there's a probability of a huge move higher and there's a probability of it not going anywhere, and the fair value of the stock would be somewhere in between that. So, yeah, that would be my view.
- [33:32]
Courtney Reagan
On that, that I have more questions because I've got more to learn. But unfortunately, Chris Mervey of Susquehanna, we have more breaking news, so I have to let you go, but I'm going to have you back because I got more to learn here. We do have more breaking news out of D.C. eamon jabbers this time with the story. Amen. What do we have, Courtney?
- [33:46]
Chris Murphy
We're getting our first official scheduling detail.
- [33:49]
Courtney Reagan
For the Xi Jinping Donald Trump meeting, which the White House says now is scheduled for Thursday morning in Asia. White House press secretary Caroline Levitt is briefing reporters right now at the White.
- [34:00]
Jeff Curry
House and she just gave us the.
- [34:02]
Chris Murphy
Detail of a Thursday morning briefing.
- [34:04]
Courtney Reagan
No other information on that other than what the president said yesterday, which was that this meeting has been scheduled and he said they blocked out a long period of time for it to take place.
- [34:15]
Chris Murphy
And that presumably is because of both the complexity and number of details that.
- [34:20]
Courtney Reagan
They have to discuss and also the.
- [34:21]
Jeff Curry
Translation issues that are involved in having.
- [34:23]
Chris Murphy
A meeting like that.
- [34:24]
Courtney Reagan
You know, there had been some about whether this meeting was on again or off again. The president had threatened to cancel it at one point, then said it was back on. Then earlier this week said maybe it won't happen. Now the White House is giving us our first official date for that and.
- [34:38]
Chris Murphy
That is Thursday morning of next week.
- [34:41]
Jeff Curry
Courtney, back over to you.
- [34:42]
Courtney Reagan
Wow. Okay, Eamonn. That's one that we need to all mark down on our calendars and watch very closely. Thank you for bringing that to us.
- [34:48]
Chris Murphy
You bet.
- [34:48]
Courtney Reagan
Well, coming up, the results of the new CNBC housing market survey and an on the ground look at what really real estate agents she tried to say across the country are seeing when it comes to housing. Is it finally turning into a buyer's market? Maybe. And no contracts, no coffee. That's the Starbucks unions rallying cry as members ready to vote to authorize a strike. We'll look at what it means for the company heading into its key holiday season. The exchange will be right back. Welcome back to the Exchange. CNBC debuting a new housing market survey going beyond the headline numbers for an on the ground look into residential real estate, which is perfect, right? It's a local you need on the ground. Diana Olich joins me here on set with the third quarter findings. This is going to get interesting as we have compares.
- [35:36]
Chris Murphy
Right?
- [35:36]
Diana Olich
Exactly.
- [35:37]
Courtney Reagan
What do we know now?
- [35:37]
Diana Olich
Okay, so looking at the third quarter and first just want to explain what we're trying to do here, which is kind of get behind, get beyond these really cold national statistics on housing and find out what real estate agents from across the country and in a cross section of neighborhoods across, investors are hearing from buyers and sellers. So here are the highlights from Q3. Now, when the average rate on the 30 year fixed mortgage was mostly on the decline, but it did move up a little bit mid September. During that time, 49% of real estate agents we surveyed said it was a buyer's market, meaning buyers had the advantage because homes weren't selling and supply was sufficient. 30% saw it as balanced and just around 21% saw sellers with the advantage. As for price prices, 44% saw them on the decline. 35% stable, just 20% increasing. Again, all real estate is local. We know that. And market fundamentals are therefore different based on location. Still the trend definitely lower prices, but buyers are definitely getting more creative in how they're financing their purchases. We asked agents how and their answers ranked the following. The most had clients using mortgage rate buy downs and that could be from a home builder or an existing home seller. Seller next most popular was borrowing from family or friends and finally turning to adjustable rate loans. And in fact this week in the mortgage applications data, we did see that share rise. Now 89% of our agents reported having at least one seller who decided to cut their price last quarter. That really shows how kind of overoptimistic sellers still seem to be despite all the uncertainty in the economy and this slowing market that we talk about all the time. Even more drastic though, 40% of agents represented sellers who delisted their homes due to these rough market conditions. Now this is just a few of the pieces of the survey. You can read all about it of.
- [37:22]
Courtney Reagan
Course on where cnbc.com yeah, I want to dig more into that. I mean we're talking always about forward looking information. Crystal ball. What are agents thinking about for the next quarter, fourth quarter of this year?
- [37:34]
Diana Olich
Okay, so we asked them that question and the vast, well 49%. So almost half of them said they expect the market to actually improve slightly. I'm sure that's based on these lower mortgage rates. 35% said it'll stay the same and it was really just 17% who said that they thought home sales would start to decline and the market would actually get worse. So that's a good thing.
- [37:53]
Courtney Reagan
Good thing. The adjustable rate mortgage interest, interest from buyers is interesting to me as well. Thank you, Diana. This is going to be great stuff to have as we go forward and can get those compares. Well coming up, these shares down nearly 10% over the past month. Wells Fargo says it's one of the fast of fintech. What is it? Well, that name and the other four. Next you gotta keep watching the exchange. We'll be right back. Welcome back. Wells Fargo borrowing from A Tale of Two Cities and its recent FinTech coverage and initiation wrote calling it the best of times and the worst of times for the sector. But analysts managing to find what they call the Fab five of fintech, which includes a firm that was our mystery chart, if you're watching now. Joining me now to discuss this is Jason Kupferberg. He's a senior research analyst at well as Fargo Security, initiating on these names. Jason, thank you so much for joining us here because it's your initiation. I'd love to sort of start with your big thesis about this space before we get into your Fab Five.
- [38:53]
Jason Kupferberg
Absolutely. Well, thanks very much for having me. And the reason why we chose it was the best of times, it was the worst of times is because on the one hand you've got a sector with $2 trillion plus in market cap, strong balance sheets, good cash flow, solid profitability, secular tailwind in terms of ongoing cash displacement opportunity. So that all sounds great. But on the other hand, what we've seen from an investor sentiment standpoint is worries around competition, market share disruption, stablecoins, you name it. And so you have this dichotomy out there and we think sentiment is too negative. Hence we see numerous opportunities in the space.
- [39:32]
Courtney Reagan
Okay, so numerous opportunities, but you've got five names. The Fed five of fintech. She tries to say carefully, sort of tell us about. Yeah, exactly. Can you go through some of these names, tell us why you picked them, why you said some opportunities. So I also think there may be some names that you're not thrilled about which we'll get to next.
- [39:51]
Jason Kupferberg
Terrific. So I would start. I'll go in alphabetical order here. So Adyen is the first of the Fab five of payments. Adyen, we think has a best in class backend tech stack. They've been expanding into new addressable markets in store as well as going down market into small to midsize business. And they still have their bread and butter E commerce business as well. And we think that they're going to have solid 20% plus top line growth for at least a couple of more years. We have a firm on this list as well, which you mentioned earlier. And we believe that the secular opportunity for a firm and Buy Now Pay later in general remains robust. Robust. Buy Now Pay later is only 8% of U.S. e commerce. And while there are still some potential cyclical unknowns in terms of the lower end consumer, we think that the secular tailwinds can help to offset that. And we've been very impressed with the management team and the execution there. We have MasterCard also which we believe still has a tremendous competitive moat, is keeping up very much with all the new technologies and payments, whether that be stablecoins, agentic commerce and continues to enjoy a terrific cash flow profile as well. And you can really play offense and defense at the same time owning MasterCard and we have a similar thesis for Visa. What I would also say for both of them is that they've diversified away from their core businesses into value added services very effectively. And then finally Toast is the last of the Fab five and we believe that they continue to enjoy a very strong competitive position in the point of sale space.
- [41:32]
Courtney Reagan
I have seen that pop up more places at point of sale. That's a good point. I love that you didn't shy away from some underweights. I know sometimes that's harder to do for a sales slide analyst. But tell us about why these two names you are less thrilled about.
- [41:46]
Jason Kupferberg
We are underweight rated on both ADP and Paychex. And just to be clear, this is a cyclical call. This is not a structural call. These are still solid business models. However, based on our analysis, when you have a period of potentially rising unemployment and lowering of interest rates, that's not the right time in the economic cycle to be owning these names. And so those we want to avoid for those reasons.
- [42:12]
Courtney Reagan
I want to go back to some of these Buy now pay later names like Affirm, which is in your Fab five. It's a. It's a very interesting business model. We know it doesn't stand alone. Now there, there are others other competitors in the space. But things have changed a little bit with reporting for credit agencies for delinquencies. I know you've said only 8% of E commerce is comprised of this Buy now pay Later. But when you see adoption pick up for a firm, is that a good thing or a bad thing? A good thing for a firm, but I guess I mean writ large for the economy and what it says about the consumer's ability to spend.
- [42:47]
Jason Kupferberg
We believe that Buy now pay later is actually a more consumer friendly product than a traditional credit card. A traditional credit card has revolving features. You pay compound interest, you pay late fees. It's very unconsumer friendly with a firm. There are no late fees. There is maximum transparency in terms of what the consumer owes and when they owe it. And we believe that the pay in for classic variety of Buy now pay later four equal installments over six weeks with zero interest is extraordinarily consumer friendly and can help the average US consumer stretch their dollars a bit further. And that may come in especially handy around the holidays.
- [43:27]
Courtney Reagan
Yeah, I know retailers like the option. Of course, more and more have been adding it checkout. It says it does help to increase transactions. Many of them told us that at least in the beginning. Jason Kupferberg, Wells Fargo on your initiation, thank you for joining us here today.
- [43:40]
Jason Kupferberg
Thank you.
- [43:41]
Courtney Reagan
Well, still ahead, Starbucks shares down 6% since Brian Nicholl became CEO. And there could be more trouble brewing just ahead of the key holiday season. That's next. The exchange will be right back. Welcome back to the Exchange. Unionized Starbucks workers to vote on authorizing a strike tomorrow. And that could throw wrenches. And to CEO Brian Nichols, turnaround plans. Kate Rogers joins me now with more. Hi, Kate.
- [44:11]
Kate Rogers
Hey, Court. So voting on a strike at unionized cafes will be open for several days starting tomorrow. And if approved, the strike itself would be open ended with specifics to be determined. Now if the union does strike, it would be the third national strike to take place since last December. Workers United says it's pushing to secure a contract that addresses better hours, higher take home pay, though they don't specify a number and resolutions of hundreds of outstanding unfair labor practice charges. The two sides are not in active talks right now. They were in mediation last spring and the union voted down a proposal from Starbucks back in April. Starbucks said in a statement that, quote, Workers United only represents around 4% of our partners but chose to walk away from the bargaining table. If they're ready to come back, we're ready to talk. A union rep told me, quote, we're going to do whatever it takes to secure this contract. The holiday season does often meet a bump in some sales for Starbucks, which as you mentioned, is in the midst of a turnaround under CEO Brian Nicholl. Earnings are next Wednesday. Same store sales have been negative for six straight quarters. So we will certainly be watching for any performance of this turnaround plan and how things are going back over to you.
- [45:13]
Courtney Reagan
Interesting. Kate, how many stores could be affected if this strike does happen? And am I going to be able to get my peppermint mocha latte so important.
- [45:22]
Kate Rogers
Yes. So the details of the strike, this is just a strike authorization vote. So we don't, we don't know yet if the union is actually going to vote to strike. If they do vote to strike, the duration, location and timing all are yet to be determined. So yes, of course, I'm sure you will be able to get your latte. But it remains to be seen, you know, how widespread and how long this might wind up being but again, 650 unionized stores out of 18,000 stores in the US and Canada that are licensed and company operated. So 4% of its work force. Small but meaningful as this has been going on for several years, Courtney, especially.
- [45:57]
Courtney Reagan
If it impacts your Starbucks. Right? But that's good perspective on the total number of stores versus those that might be affected. Kate Rogers, thank you so much for joining us. As we let you go into the next show, we're going to give you a quick check of the markets here. It does look like we are holding on to some gains. If we look at the sector breakdown, we're seeing mostly in the positive. The Dow Jones Industrial averages up by about 4.10of a percent. We are just about at session highs if not off just a tick. That is it for us. Thank you for watching the Exchange. Power Lunch starts now.
- [46:27]
Christina Parts
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Drew Mattis
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- [46:36]
Courtney Reagan
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- [46:38]
Drew Mattis
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