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Quadruple Witching, Stores Save 12/19/25
00:43:00
Christmas & A New Player in Predictions Description: Over $7 trillion of options expire today-- the largest expiration ever. Retailers are coming to the rescue in the last-minute holiday shopping rush. Plus, DraftKings CEO Jason Robins joins us as the gambling giant enters prediction markets.
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It's $30 your first month or without autopay price guarantee exclusion supply. See cipher details. You're listening to the Exchange. Here's today's show. Thank you very much, Scott. The biggest options expiration ever, another prediction markets push and a huge year for beef. Welcome to the Exchange. I'm Kelly Evans. Stocks are extending yesterday's G, the S and P and the NASDAQ are on pace to finish the week higher. But the Dow could see its first negative week in four. Keep an eye on that. Even with today's 288 point gain all week long, Discretionary has actually been the sector leader. Maybe it's the holiday spirit. Who knows? Energy is the laggard. We've talked about oil prices there. Meanwhile, silver hitting a fresh high. Platinum, a favorite of Carlyle's Jeff Curry. As you heard on the show yesterday, it's back above the $2,000 mark. And copper climbing to its highest level since July. Carnival is one of the best performers on the S and P. After reporting earnings beat and reinstating a $0.15 dividend. Those shares on pace for their best day in more than seven months, up 8%. And let's start there today with some of these huge earnings movers that we've had. What are they telling us about the consumer, the economy and how should you trade it all? Joining us, the CNBC contributor and KKM Financial founder Jeff Kilberg. Jeff, it's great to have you here, but before I even get in, we're going to start with Nike. But what does it tell you that we're seeing kind of these huge moves across the landscape? I don't know. It feels almost like a more uncertain environment. And yet consumer discretionary is outperforming. Maybe the economy is hanging in pretty well. Unless you're Nike. As you can see on the screen there. But what do you make of it all?
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Well, Kelly, you're spot on to talk about the exaggeration or the dispersion you're seeing. So I think you're seeing a lot of positions either being repositioned, being closed. We're in quad witching. So everything we're seeing today is being exaggerated. Look at this morning when they jumped and got above 6800 in the S&P 500. Think that's all related to some of the earnings and that's why you're seeing some of these moves. But I think right now you will see a bit of a setback next week. And I think the name like Nike, I just don't know how they get out of their own way. You remember, Kelly, we talked about Nike a year or two ago. You asked me specifically what would be the catalyst for me to buy. I said Michael Jordan coming out of retirement. Well, come out of retirement. And it's trading in the 50s.
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Right. It's actually done so poorly that they, even with the new CEO and I give him a lot of credit, he has a tough job to do. But let's go through these numbers. They beat on the top and bottom lines, granted, but they had China headwinds, they lowered their third quarter guidance. They're expecting a drop in revenues. And their gross margin contraction, they say is, you know, in large part due to tariffs. This is simply a story that has to find its growth again.
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E
It does. And I don't think it's a new story. I know they want to blame the tariffs. We hadn't really seen tariff really materialize into inflation. But I think Nike is a brand. My kids all love Nike. I see Nike everywhere. But this stock has really been in just a downturn for the last four years. We talk about what's going to be turning around. Obviously it's profits. But I think the China uncertainty, specifically in the Chinese economy, they're struggling there. And I think Josh Brown talked about it earlier, but the fact that Nike's not selling shoes with their big stars, their, their big profiles anymore, that's a problem for Nike. So they have to figure out somehow some way to turn the ship around. Yeah, but the end of the day we just want to see profits. We're not seeing it.
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A
I think you're making an important point also, which is that we haven't really heard a lot, a lot about tariffs from a lot of companies this quarter. This should have been the time of year that we were hearing the most about it. Right. Not during the implementation or initial rounds back in April, it was supposed to be that remember how worried people were about the holiday season, how the shelves were going to be empty, how the prices were going to be sky high. And now instead of all of that manifesting, we haven't really heard much except all of a sudden from Nike. So it just makes it a little bit hard to believe that it's a boogeyman for them more so than it is for everybody else.
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E
Maybe that's why they're getting pounded today down 10% because of the fact that they came up with the excuse for tariffs to pin is kind of pinned the tail on the donkey. Right. But I think right here at Nike at this level, there's no reason to own it. You can't try and you know, catch a falling knife here, Kelly. So I think Nike is really in a predicament. But this is four years in a row of just down, down and down further. So I want to stay away from Nike. I would love to own it because I know my kids love the brand, a lot of kids across our country, the brand. But that China uncertainty, that's the component that's really missing in all of the numbers which were pretty decent, Kelly. Right. I mean they're on top of bottom. It wasn't horrible.
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A
No. But the stock, to your point we're showing it on the screen There is down 57% over the past five years. All right, we're going to stop beating up Nike and move along to FedEx because again this should barometer kind of of trade of the economy. The shares are fractionally higher. They did have stronger than expected results. They raised the low end of the full year Guidance Barron's points out that update implies their second half operating profit though will still miss consensus by about 5%. Again this is coming off a strong three month stretch as well. A bit of a turnaround story here. They're shedding ground and the rest of it. What's the read through for you?
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E
Well, I own FedEx. It's an essential name. We actually own the Essential 40 ETF. But this is a name that we saw on Black Friday had just a stellar Black Friday. It's kind of tailed off since then. So yes, we're seeing their core business, their parcel business up 24% year over year. So that's encouraging. But when you talk about some of the freight I know they're talking about spin that off. There's a lot of moving parts there that investors didn't love. But this is a name I think you want to own. I know it's only 15% off its all time high. I think it goes back up to $315 where it was in 2021. That could be a retest next year. But FedEx is a name I think you need to own. We Talked about the Mag 7 at nauseum but this is a blue chip boring US economic centric name. So I think you own it here. And on this slight kind of, you know, reprieve if you will maybe have the opportunity to buy it close to 275 versus 287 right now.
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You know, you go, well it's trading at 15 times earnings but Nvidia is trading at like 20.
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Which would you, if you look at a Ford PE, you know it's trading pretty historically close to its five year average. So it's a little more expensive than it should be. But it's also been delivering. So I think you have to understand as you're going to the end of the year and you reposition and you're figuring out your tradeoffs to set up 2026, is this worth it? And this is a name that we do own for that exact reason.
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All right, I mentioned in video a quick one on that before I move along. I want to talk about housing before you go, Jeff. But on the mega cap trade, like you said, it's getting all the oxygen in the room but we're having this kind of about face and sentiment about it today. Look at Oracle, maybe it's a tick tock deal. Maybe it just got beaten up too much. Do you chase it here? Do you chase it higher? The whole, the whole thing?
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E
No, I think you have to be prudent here because what have we seen, Kelly, we've talked about it on your show for the last couple of months it's been this rotation inside of the Mag 7. So you saw Facebook, you saw Nvidia. I know Oracle doesn't sit in the Mag 7 but they were the poster child for the AI kind of profit taking if you will. So Nvidia, I don't think you chase it higher here. I still like Google, I still like Apple. Those were the laggards earlier in 2025. So I think that rotation inside the Mag 7 is not over yet. We are seeing a broader of the market. So that's encouraging for S&P 500 or for the other 493. But I think if we see interest rates come down lower, I'm a little concerned. I know there's price targets on Nvidia up at $275. I just don't know how we get there specifically with all the other folks now starting to make their own chips.
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Yeah. And by the way, yesterday, Amazon was the one that Robinhood's Steve Quirk told us was one of the most popular names amongst their traders, which I thought was.
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Steve Quirk is a very sharp man. He was in the pits of the Chicago Board of Option Exchange. I've known him for a long time. So, yeah, that's. That's a great opportunity to look at. I think you have to broaden your visible approach to who's making chips. If it's Tesla, if it's. You have to be more. Because even intel, which, you know, you would have laughed if I said Intel a year and a half ago, but that's one of the best performing names, up over 100%.
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Yeah, actually, that's a great point. All right, so finally on housing, we got KB Homes with a mess, disappointing results, a decline in deliveries. It's weighing on the stock, it's dragging down the rest of the homebuilders. They're down almost 9% today. Then we learned existing home sales fell about a percent from last year. So it's not like there's a ton of supply coming. You think that would be more of a tailwind for the builders? You have an idea here. It's kind of a home builder adjacent trade.
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E
It is. It's a congruent line because we don't want to own the home builders ever since, essentially 2022 was a rough year for them. They recover in 23, but they've been sideways, they're down since then. So if you look at ITB, which is one of the ETFs, that has a nice grouping, obviously a little heavy towards Dr. Horton and Lennar. But I want to own three other names. I look at Home Depot, I look at 3M, I look at Masco. 3M is having a sensational year. Maybe 3M Kelly is actually a precursor or kind of a, you know, a foreshadowing for what Home Depot is going to do in 2026. But this is a way, if we do see interest rates coming down again, which we would envision, and I, Fed speak is out there, that's going lower and a Fed, excuse me, if President Trump has his way, they're going a lot lower. But nonetheless, I think you look at Home Depot, you look at Masco, you look at 3M, those are ways to kind of play in the home construction space because I think the do it yourself projects are going to come back online. People are going to have the money. Right now inflation is the cost of inflation that we got out of COVID That really has gone away for a lot of the heartland here in America. So we're still having trouble understanding what project are we going to do next year. So I think when you look more broadly, these are three names that you can really play because there's just too much volatility in these homeowners. I don't like that volatility. That's a high beta way to play it. If you have a real specific feeling about one specific name, that's even a more concentrated higher beta way to play it. So I like owning the periphery names.
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Yeah.
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And I take your point that if people are thinking rates are coming down, I'll put on a homebuilder trade. Maybe not so fast, but some adjacent ideas from Jeff Kilberg. Thanks for your time today.
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I Kelly, see you soon.
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Appreciate it. It's not just earnings moving stocks today either. It's also a quadruple witching day for the options market with contracts on four types of securities expiring. And this happens to be the largest options expiry ever. Goldman Sachs reporting more than $7 trillion in notional option expense buyers today. And my next guest says that means this is also the last day for solid liquidity ahead of the holidays. Joining us now is Chris Murphy, Susquehanna's co head of derivative strategy. I love illiquid markets, Chris, because bigger price moves more to talk about.
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G
You're right, you're right. I mean it could be more exciting at the end of the year. We hope it is. I mean I'm stuck here most of the days until the end of the year. So I wouldn't mind some, some excitement. But yeah, probably the highest volume day of the year till the end of the year. And then with those expiration notional stats, sure it is the biggest notional expiration all time. But if you think about year over year, more options trade than ever and S and P is at all time highs. So really not that much of a surprise. It's the biggest notional expiration ever. I think it'd be bigger news if that number started to drop ever.
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I'm going to put you on the spot because you're so good at thinking on your feet. If you look back on 2025, you know, we talked a lot maybe, maybe last year, maybe earlier this year about zero day options and so forth. What would you say was kind of the takeaway from options action this year. We're about to talk later in the show again about prediction markets and the rise there. What would you say we learned this year vis a vis, you know, the options market? Just. Just a question to throw out there.
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Well, I think the story of most of this year was low correlation. So, you know, the index products themselves were not moving a ton and you saw massive moves in underlying stocks up, down, you know, not just the AI names. You guys discussed, Nike before this, the homebuilders, all these big earnings moves. So I think the story of this year has been, you know, idiosyncratic risk. And, you know, as the options markets get more and more liquid every year, the ability to play individual stock moves and also take advantage of much higher individual stock volatility levels through selling options. That's been the story and I would expect that to continue into next year. And like you said about exciting markets, when things are trading with low correlation and it's a stock picker's market, that's better for us and it's better for your show.
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Yeah. And hopefully people pick the right stocks, but it's really hard to do in those kinds of situations. Two more quick questions for you. One, what is the options market signaling or telling you about positioning into next year? Because the forecast from the Street, I'd love someone to pull the data on this. Seem to me one of the most optimistic we've had in some time.
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Well, you know, when we're watching the options trades, I think we would kind of call it cautiously, really optimistic. You know, obviously a lot of tech kind of took a pause recently, but we're seeing very consistent, mostly call spread buying in. Let's always, of course, focus on the Mag 7 names. You know, people are saying, look, you know, maybe AI is a little bit over its skis. Maybe I want to reduce my underlying positions a little bit, but I certainly don't want to miss a rebound, a breakthrough, any more upside. So certainly the most popular trade we've been seeing into the first quarter of next year has been taking advantage of attractive call spreads because of elevated call skew in Mag seven names. So that's been the focus on our desk recently.
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Okay. And finally, what do you make of this whole move to 24. Seven trading? Is it, is it synthetic, is it real? Is it affect things like the time of day that options expire and so forth?
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Well, I mean, I think that the liquidity is still most likely going to be in the US Hours. I think it's interesting for me when I see for example an aggressive after hours or pre market trade in the VIX or the S and P. Because that's a sign to me, you know this person does not want to wait until the open. There might be more information in someone knows something. Yeah, yeah, exactly. You know I'm hoping to not be trading at after bedtime. So you know, I think it's mostly going to be trading mostly during the same trading hours.
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All right, I'm happy to do an after bedtime show by the way. For the record, that would work out really well. You know, 8, 9, 10, 11pm Maybe same here.
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I got young kids too. I could do it.
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That could be you and me. Chris, thanks very much. Appreciate it. Chris Murphy Meantime, Oracle is popping today, another big mover after TikTok made major progress to keep US operations going, signing a deal to spin off that unit. And as this new entity now prepares to face off with existing social media giants in the US how will it fare? Oracle shares, by the way, are up nearly 8%. Julia Boorstin has more. And Julia, I think Instagram has come a long way this year. The algorithm is much, much better. The competition is a little starker than it used to be.
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Yeah, reels. Also YouTube has a short form video product as well. Competing head to head with TikTok. So the question now Kelly, is how the new US based TikTok will manage this transition both for its 170 million US users and also for its advertisers. Ad industry analyst Brian Weiser warns, quote, the main risk is not ownership, but execution. The transition could introduce friction across the consumer experience and advertiser infrastructure and algorithmic performance. The challenge is maintaining the consistency of the user, advertiser and creator experience amid some major changes that are coming on the back end. The new US based company is taking responsibility for US data for content moderation and algorithm security. That means retraining TikTok's algorithm on US user data. At the same time, the new US TikTok will have to integrate with the global TikTok. It will be the one managing interoperability as well as the likes of E commerce and advertising. Now those elements have to be truly global for TikTok to maintain its value. How all of those transitions go will impact TikTok's share of US digital ad spending, currently just 4% this year. And that's just a fraction of Meta's 23% and Google's 25% according to E Marketer. Now if user engagement and advertiser results are not negative, negatively impacted by these changes and without regulatory overhang, TikTok could be well positioned to gain share from the likes of Snap, whose Stock is down about 1% today. And it could also compete even more aggressively with Both Metta and U2. Kelly.
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A
Yep, it never went away. And Metta. Hopefully others like you mentioned will continue to play catch up and then they can all compete to see who's the best. Julia, thanks very much. Julia Boorstin. Coming up, New York Fed President John Williams with some strong words earlier today about that November CPI report. Was it a one off off data problem or is something else percolating? We'll debate. And speaking of the consumer, Lamb Weston shares are plunging on disappointing results. They're down 24%. We'll talk about why the french fry maker is at its lowest level since 2020 and get B of A top food picks for next year. We'll be right back.
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Maybe the most common one.
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What your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players new episodes every Tuesday, wherever you get your podcasts. Bond yields are rebounding a bit today as people question whether that CPI report yesterday was too good to be true. And New York Fed President John Williams adding some fuel to the fire, telling CNBC in an exclusive interview that some technical factors distorted the reading. Steve Liesman is here with the details. Steve?
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Hey, Kelly.
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Yeah.
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New York Fed President John Williams in an exclusive CNBC interview using the phrase well positioned to describe monetary policy that's been taken by Marcus to be a signal of a pause in rate cuts, at least for the next meeting. But depending on the data, Williams suggested the Fed could bring rates down further next year because policy is still restraining growth.
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G
The neutral rate is probably a little bit below 1%. So we're still mildly restrictive in terms of the stance of monetary policy. We still have some room to go ultimately to get back back to neutral.
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One reason to pause and look around and smell the data. Williams said technical factors related to how the inflation data was gathered in the wake of the shutdown might have biased it to the downside, supporting a story that we did bring you here yesterday about problems with the data, the technical factors.
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One is they only collected data in.
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The second half of November when when.
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All the sales are on. And that's going to give you a bit of a downward bias all way the so there was some issues about the rent data and things like that. So it's hard to know. But definitely, you know, I took some positive signs from some of the categories that weren't as affected by that.
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We always wanted to see more data the next month or two to get a better read on inflation. But he was upbeat on growth prospects next year and the potential for gains in productivity in part from the AI investment to fuel low inflation and higher growth.
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As we were discussing and going all the way back to your question to Powell, STEVE meantime, speaking of the chair, we're down to the final four candidates to replace him, the president interviewing Waller on Wednesday night. Here's Kelshi. They have NEC Director Hassett in the lead with roughly 50, 50 about a coin flip, 53% chance of the odds. We still have Warsh at 22, Waller at 16. What's the latest you're hearing into the weekend?
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STEVE well, I'm looking at these contracts, Kelly, I don't know about you, but I want to trade volatility in these contracts I don't want to. I'm sure that's next the candidates. I feel like that would be, you know, not my place to report it, but I could just trade the volatility, which has been quite high. What we heard last night was that Waller had a strong interview with the President. They talked about jobs. And we further heard that Mickey Bowman, the vice chair for supervision, is out here. And a third element we heard was that Rick Reeder, chief CIO for Global Fixed Investment or Fixed Income at pimco, he's going to be interviewed in the final week of the year down at Mar a Lago. They did not invite me, but I'm available if they want me to sit in on the interview.
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A
Yeah, in Florida. I was trying to say this time of year, we'll all sit in. Steve, thanks very much. Appreciate it.
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H
Sorry, one more, One more thing, Kelly. We did hear that the President was quite impressed when he learned that Chris waller can deadlift 350 pounds.
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A
Wow, that is a lot. I mean, who wouldn't be impressed with that? How old is he? And not to get into an age, but that's impressive. No matter how old you are.
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H
350, it's pretty impressive. And to be able to get monetary policy right, that's a. That's a feat right there.
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A
Even harder, Steve. Thanks very much, Steve Liesman.
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H
Sure.
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Let's bring in our next guest. He's looking at equities and seeing additional upside next year. 7700 for the S and P driven in part by a more accommodative Fed. Scott Kroner joins us from Citi. He's U.S. equity strategist Scott. Not to ask how much you can deadlift, but feel free to offer, you.
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I
Know, let's just say, Kelly, I can lift my weight, but that's about it.
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A
Which is looking like a little less than that. All right, so you do think a more dovish Fed is a plank of this bull market story.
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I
Yeah, it's kind of interesting. We just published a note that hit a few minutes ago that I titled the Data is Dead, Long Live the Data. And it's sort of a reference to the shutdown impact on the data. And now we're getting some information post that that generally speaking continues to support a soft landing narrative with room for the previous comment for Fed funds rates to come down a little bit more in this path towards normal, or I should say neutral. And so the setup here, in our view, is still for a fairly accommodative bias into 2026. As importantly, though what you also have to factor in here is, you know, the opportunity for other forms of fiscal stimulus to kick in. So all of this kind of sets us up from in terms of a positive view towards US equities as we head down into 2026.
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A
You know, I look through and all, everything you're saying here makes so much sense. We've talked about productivity that being a help. You even see a little bit of multiple compression. But again, earnings growth, you see the 10 year at 375 which would be key. Obviously, even with the bullish dollar, you've got 320 in index. My point is yours and others forecasts all sound completely sensible and are quite bullish. And it just makes me nervous. The Davos indicator, right. When we go into January, whatever the consensus is, usually the opposite happens.
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I
Yeah, it's so interesting. I feel like I'm always looking over my shoulder on these things. But I think, you know, where we're kind of stepping out, perhaps more aggressive than other strategists is on our earnings projection for 2026. You know, we've talked about this. We like to premise our views mostly on fundamental trajectories while incorporating macro influences on that, for sure. And the way we see it setting up here, Kelly, is that, you know, we think we could be more aggressive for a couple of reasons. Number one, we do think that we get a persistent beat and raise out of this mega cap growth AI influence cohort. The number two to this earlier discussion in terms of where some of the economic trajectories take us against this soft landing backdrop, it points a pretty good picture. Now, what are we focused on that's a bit more cautionary on this? Anything that can disrupt the trade, for sure.
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B
Right.
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Would be number one and then number two would be okay, soft landing feels pretty good, but what if it's not? So we think we're going to be wrestling with this productivity versus labor condition situation as we go through the first half of the year, for sure.
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A
All right, Scott, appreciate you joining us. Great to check in and you know, wherever you are, it looks fun. Looks nice in the background.
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I
Happy holidays.
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A
Thank you to of Citi. Coming up, the cannabis stocks rallied ahead of the president's executive order to reclassify marijuana. But they've given up some of those gains since the order actually came down. We'll tell you what's weighing on the group and what could be next on the regulatory front.
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Women Changing the game One of my.
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Favorite pieces of advice, think about what.
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Your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts. President Trump signed an executive order directing the DEA to move cannabis from Schedule 1 to Schedule 3, a significant shift in federal drug policy. So why aren't the cannabis stocks showing more excitement in the wake of this move this week? Brendan Gomez is here to explain. Welcome. And in fairness, we saw a big run up I think going into this, right?
- [26:50]
J
We did ever since last Friday when we thought it was going to be coming on Monday. And then you sort of saw the date get pushed to Thursday. But what should have been celebrated as a win has led to more questions in the near term. The president did ease restrictions on research, banking and taxes by rescheduling. Even more notably, a Medicare pilot program will launch in April, allowing some seniors to receive up to $500 a year in hemp derived CBD products. So why the sell off? Well, first, this isn't final yet. The DEA still has to formalize the change, followed by a challenge period and likely further litigation. Complicating things further, Congress just passed a ban on most hemp products starting November of 2026 and that includes the very CBD products in this pilot program. Now the order does say the White House will work with Congress to update the definition of hemp derived products, but what that will look like and timing still remains unclear. And the President saying repeatedly this is medical only, not federal legalization. Recreational use in interstate commerce remains illegal federally. So while investors see rescheduling as a positive, there's still some skepticism around capital will banks get into cannabis or will exchanges start welcoming companies to list once rescheduling is finalized? There's a lot more questions than answers here.
- [28:00]
A
So those questions are still not so what the rescheduling from Schedule 1 to 3 means, what it's related to how much trouble you get in for usage.
- [28:08]
J
Or effectively so under the Controlled substance Act, Schedule 1, heroin, LSD, the most restricted drugs. Now this is with Tylenol, with codeine, more medical accepted use. That could be a signal to financial institutions that okay, maybe we could start considering letting some of these companies list at the New York Stock Exchange as opposed to trading on over the counter sheets.
- [28:27]
A
And so I imagine to your point we should look for the ones that are really medically directed, where the banks, the financial system might feel safest, like there's not going to be any consequence for their being involved.
- [28:37]
J
Well, and if you look at shares of Tilray, they announced the second that this passed that they were going to be launching a U.S. medical unit because they already have such a medical business over in Europe and in Canada. So they're sort of seen as perhaps a frontrunner when it comes to medical cannabis use. The question will be who gets that federal partnership and contract to produce this because it needs to come from a federally regulated and state regulated source. When it comes to medical use stuff.
- [29:00]
A
Do we go so far as to say this was all a disappointment for the cannabis industry?
- [29:03]
J
Definitely not a disappointment. They always say, right, if we're talking this is a marathon, we're at the 5k mark. Right. We're just the beginning of the race. So they needed this to happen in order to conduct the medical research at the federal level by the fda. There's a lot of studies out there funded by a lot of people that say a lot of conflicting things. Cannabis is good for you. Cannabis is bad for you. This would now be regulated by the FDA and so therefore perhaps come with more legitimacy in terms of determining the medical benefits.
- [29:28]
A
Brandon Gomez, thanks. Now I understand. Appreciate it very much. Today, let's get to Christina Parts and Evil for the news update. Hi, Christina. Hi, Kelly.
- [29:37]
D
Well, Homeland Security Secretary Kristi Noem said today she's pausing the quote, diversity immigrant visa program after it was revealed the suspect in the killings at Brown University and of an MIT professor in the Boston area earlier this week had entered the United States on such a visa. The suspect was found dead inside a New Hampshire storage facility just last night. Authorities say he appears to have died from a self inflicted gunshot wound. For the eighth year in a row, the Pentagon has failed its annual audit. The Department of Defense released the results today. The first audit was conducted back in 2018 and has posted failures ever since, highlighting accounting and system problems just across the largest department in the United States government. The Pentagon said in a statement that it's committed to passing the audit by 2028. And Visa and MasterCard agreeing to pay more than $167 million to settle a class action lawsuit accusing them of conspiring to keep ATM fees artificially high. The proposed settlement still needs a judge's approval. Neither company has committed, but both, of course, have denied any wrongdoing.
- [30:45]
A
Kelly. All right, Christina, thank you very much. Coming up, target is on track to snap its record tying 12 day win streak that dates back to 1994. Crazy run here. The shares are up 7% in that time and its buy online, pickup and store usage is picking up steam. And Courtney Reagan is here to bring us all the details. Court with with five days until the big one.
- [31:06]
C
Kelly, if I know you, I bet you have a couple items still left to check off. You can order online and it'll be ready for you to pick up here at this Jersey City location in less than 90 minutes most likely because it's one of the fastest stores in the entire fleet. I will explain why you are far from alone and retailers across the country are going to be fulfilling orders like this and the biggest surge all year. It's coming up on the Exchange.
- [31:35]
A
Welcome back where we see a nice 300 point rally on the Dow today and a huge gain on the Nasdaq up better than 1% with that boost from Oracle and the AI trade. All of that said, the S and P and NASDAQ are still set to end the week a little bit higher just fractionally. The Dow and Russell are still down Since Monday and two major consumer names reported today, Lamb Weston shares are down 24% as a result. This is a five year low after they maintained their annual sales forecast for the second time this year despite their upbeat Q2 results. Conagra also lowered after revenues were in line, earnings missed by a penny. Management says while chicken prices fell. Pork, eggs and beef which hit a record high in November all continue to be areas of cost pressure. And my next guest thinks food prices will stay high next year even as commodities deflation persists. Peter Galbo is head of Consumer Staples Equity Research at B of A. Peter, it's great to see you.
- [32:27]
F
Thanks Kelly. Great to see you.
- [32:29]
A
Let's start with why you think food prices are going to stay high.
- [32:34]
F
So Kelly, our call actually isn't that prices are going to stay as high as they were in 25. You had a number of discrete factors across certain commodities. We call them the four C's or the three C's. In the report out this morning, Cocoa, Coffee and cattle, you had tariff induced pricing that was going in place that seems to be a tailwind for for next year as those start to fall away. Cattle alone had some tariff dynamics but also just some fundamental cases as the cattle herd continues to decline again. It's not that we think prices won't be significantly lower next year. It's just they're going to be going up against very difficult year ago comparisons and so we'd expect a little bit of relief in some of the key commodities.
- [33:16]
A
So you think in other words that we start to get some. It would make sense. We start to get some price relief. In some ways I'm surprised it hasn't happened already.
- [33:24]
F
So you've heard it now in the past couple of weeks from, from kind of the two bellwethers of the food group. And the question for 26, particularly for the food and beverage companies is going to be do any of the deflation and some of their input costs get competed away? You have General Mills and PepsiCo who have now come out and not only said that they're going to lower prices on products but actually start to enact that in place price. Wow. The real question as we heard from ConAgra today, they're still taking pricing in certain categories is are they going to have to turn around in 6, 9, 12 months time period and basically reverse that?
- [33:57]
A
This is hugely positive for consumers, obviously. Look, I sorry to the companies but this is the COVID unwind still. Don't you think this is. It would make sense at some point that once you get away from this period of incredibly high inflation and rising inflation to something a little bit more steady, they're going to have to start. Even anecdotally, you know, I see receipts coming home from the grocery stores where people are saving 2, 3, 4, $5 on these kind of big box, big brand items. And you think this doesn't feel like a one off, this feels more like a reset.
- [34:29]
F
I think that's right, Kelly. And look, if you look at what we published today, we titled our note, you know, K is for cookie. We're talking about the K economy. We're looking at the low income income consumer. These are daily use categories. When we talk about consumer staples and you know, unlike other consumer verticals, whether it's restaurants, retail, hotels, the high income consumer doesn't necessarily consume more daily use categories just because they feel good about the economy. But low income consumers certainly can consume less. And so unless these companies are going to give them a break on pricing on certain products, we think that that volume drag from low income continues to be a headwind. So that'll be, you know, the real telltale sign as we pivot into 26.
- [35:07]
A
Yeah, your top picks for next year, you have Coke Monster and what's Cocoa?
- [35:13]
F
Cocoa is, is the Vita Cocoa Co. Coconut water the only beverage category that's probably rivaling energy drinks at this point in terms of growth rates really more of a structural tailwind as a not only a before workout drink, a post workout drink, a post maybe night out drink for some, some folks. So it's really had more of a structural growth story behind it was a tariff loser that now becomes a tariff winner as coconut water gets exempted. And so we like the stock heading.
- [35:41]
A
Into that is fascinating that the fact they're publicly traded, that they were exempted from tariffs and that this wasn't a ten years ago story. Any point of view PETER I don't know if you cover Lamb Weston but what a huge move and a shocker there.
- [35:55]
F
We do cover Lamb Weston. I think coming into the quarter the expectation was that you know, there would be better margin improvement. You know the sales actually came in about in line with, with where the street was and what expectations were but really the margin improvement and the margin outlook for the back half of the year, particularly in some of Lamb Weston's international markets has been relatively disappointing. And I think that's what you're seeing reflected in the shares today.
- [36:18]
A
I remember when it was $100 stock, you know, not too long ago. PETER for now, thanks. We really appreciate it. B of A Patrick Albo Sticking with the consumer. There's less than a week until Christmas and for any last minute shoppers out there, I don't know any major retailers are ready to come to your rescue. Courtney Reagan has more at Target in Jersey City. Hi Courtney.
- [36:38]
C
Hi Kelly. I didn't mean to call you out, you know, I just know you but usually this Target location is one of the fastest in the fleet when it comes to fulfilling orders. With 97% of orders filled in less than 90 minutes, its target's overall average is about 90% right now. Though the retailer is still experiencing, quote an intermittent issue with the digital experience, a fix is underway. Some users do seem to be back online that had struggled earlier today. It's unfortunate timing as demand for the online order pickup is expected to swell in this final week before Christmas. Beyond the 75% of Target's online orders that have already been fulfilled with drive up or order pickup this holiday season, that number is just expected to get higher. Pickup is also a 90% cost savings over targets brown box delivery from a fulfillment center. So it really pays off for the retailer too. Adobe analytics predicts between 32 and 37% of online orders for all retailers will be picked up in stores in the final days before Christmas. That's about triple the typical percentage for the rest of the year. According to eMarketer. Old Navy says it sees a 250% increase in buy online pickup in store in the week before Christmas compared to the rest of the season. And it says 20% of its shoppers. They add something else when they come in that radiated sale. Of course, there's also the pure store option, too. More than 80% of Walmart customers say they shop in store in the three days before Christmas. They're planning to do again this year according to surveys done by that retailer.
- [38:06]
A
I love the Target mini turnaround. We'll see what happens now with the stock move maybe tomorrow telling us some better momentum there. Courtney, I expect that if you shop for Christmas like you're done by September 30th, like for sure.
- [38:19]
C
No, I do shop for Christmas. I'm not done by September 30th. But I do try to wrap it up in an orderly fashion. That doesn't mean I didn't also check things out today. I do. I keep this in my email draft. Email draft in my email drafts I've tried of things I want to buy for other people and maybe some ideas that I have along the way so.
- [38:38]
D
That if I think you could have.
- [38:39]
C
A big, I just snatch them up.
- [38:41]
A
Yeah, See, that's smart and kind.
- [38:45]
C
It's definitely not about the heart. It's just about organization. It just gives me a thrill to be organized, you know, gift to myself.
- [38:53]
A
I know I'll get there. Courtney, thanks very much. Great stuff. Courtney, right here.
- [38:57]
C
Thanks, Kel.
- [38:57]
A
Still ahead, an exclusive chat with DraftKings CEO Jason Robbins. And check out shares of Rocket Labs, which are meantime on pace for their best day since April after a successful military mission and an EO yesterday aimed at drawing at least 50 billion of additional investment into America's space markets by 2028. Rocket also getting some attention from B of A today, analysts writing that while there are still, quote, high technical barriers to overcome, Rocket Labs could benefit from the increased interest around orbital data centers and even in space that require electrical and cooling. And it could benefit names like Eaton Vertiv and Johnson Controls. Those three are also higher today. We'll be right back. Welcome back to the exchange. Every day this week seems to have brought another big splashy announcement about people getting into the predictions game. Well, today it's DraftKings, the latest one to get into the predictions market, officially launching DraftKings predictions in 38 states today. Joining us to discuss in a cnbc exclusive is DraftKings CEO Jason Robbins with our very own Contessa Brewer. Contessa kick things off for us.
- [40:04]
D
Thank you, Kelly and Jason, thank you for joining us Today, first off, set the expectation for investors. How meaningful will this be for DraftKings bottom line?
- [40:14]
B
Well, I think at least initially we don't know it's a new product and I do think that it will eventually be meaningful for the bottom line. But right now it just launched so first day and we're getting some data. So hard to say what exactly it will do.
- [40:29]
D
All right, we'll come back to you at the end of the day. No, I'm just kidding. When we look, when we look at this, 38 states that you're launching in, you've specifically carved out some of those 38 even from the sports markets because you have sportsbooks there. I'm just curious, if Kalsh is out there boasting we're live in all 50 states, why did you decide not to offer markets in some states altogether?
- [40:52]
B
Well, you know, there's really two reasons. One, we think that the business opportunity is not very significant, meaning we think our product that we have today serves sports fans very well and we don't really need to add additional products in order to do that. And we think, you know, the revenue opportunity probably won't be very significant in states that have legal sports betting. And then secondly, we obviously have very strong relationships with all of our regulators in the states that we operate in and, you know, we're very respectful of those relationships and we want to make sure that we're doing things in the right way.
- [41:25]
D
Does that put you at a disadvantage when you have Kalshee and now Polymarket and Robinhood and Coinbase coming in and making a big splash and just, I mean, Kalshee makes it clear that they think that they are regulated by the CFTC and that state regulators don't matter. When you, when you and I first talked about predictions, you told me you didn't think that the calculation she's of the world were a competitive threat. Have you changed your mind about that?
- [41:53]
B
No, I don't think so. And that's sort of why, you know, I don't think it's a disadvantage to not be in all 50 states like they are. I think in the states that we offer our online sports betting product, we have a vastly superior product to anything that the predictions markets offers in the realm of sports. And so I think we'll be able to compete just fine. And we've seen no impact, at least no discernible impact from the prediction markets in the states that we operate sports betting on our business. So I think that really is, you know, it's a nice situation. Where both the business opportunity and, you know, the places where we want to keep our relationship strong and all those sorts of factors all perfectly aligned on this plan.
- [42:31]
A
Jason, it's Kelly, if I could jump in here. The much more existential threat it seems to me this week comes from Robin Hood, if I'm not mistaken. Getting into NFL parlays, which is what we'd all think of DraftKings and FanDuel, that's what they do. They're definitely making a move onto your turf. How do you respond?
- [42:50]
B
Well, first of all, as you know in the states that we have sports betting, again, I still think, you know, it can introduce parlays, although I think the product is not nearly as strong as the sports betting product when it comes to serving fans of sports that want to look for action or maybe make predictions about the game. So I don't think that that's really a threat. And then I think in states that we have, you know, both are offering predictions, sports predictions, we're going to have to develop product and compete. It's just like in everything else we've done and we've always been very consistent saying we think best product wins, especially in these digital based markets where it's so easy for people to switch and there's so much network effect and so many things that people can read about online to see how good a product is. That is truly having the best experience will win out in the long term. So that's what we're going to set out to do. We're going to build the best predictions app out there.
- [43:38]
D
Although investors have been skeptical, I would say, Jason, because when Kalsi announced its combo bets, the your stock took a nosedive. It's still down more than 20% over three months. So is Flutters, by the way, FanDuel's parent company. When you decided to launch DraftKings team's predictions, you've launched it as a standalone app and a website. Why? And then does it make it a challenge to cross sell to sports and I casino?
- [44:09]
B
You know, on the first point that you made, you made around investors, obviously there's a lot of misinformation out there and I think as you noted earlier, there was a perception and still exists a perception that this is some kind of threat. I truly do not believe that it is going to harm, harm our numbers and I think from the, you know, things that we shared on our earnings call and what we're seeing, it really doesn't seem to be the case. So hopefully that'll catch up. But Sometimes, you know, in the market people or stock market investors just see bad headlines and they decide, you know, we're going to research this later or maybe, you know, other things and that's okay and that's their prerogative. But I think that creates a buying opportunity for people who are really paying attention and cross. And as for your question on the separate app. Yeah, so. So, you know, obviously, at least initially, we feel like the right thing to do is just to focus on predictions in the states where we don't have those other products. So there really isn't a huge cross sell opportunity. I do think that, you know, for us to be able to cross sell from our fantasy app is an opportunity, but that's something that we do with a separate app in sports betting states from fantasy to sports betting too. So I think we should be able to do it. Obviously it's easier if it's integrated, but given how separate we're treating these things in terms of the geographies we're operating and we didn't view that cross sell opportunity you mentioned as a thing.
- [45:21]
D
Jason, thank you so much for your time today. DraftKings stock, Kelly, up almost 2%.
- [45:26]
A
And Jason, we really appreciate it. Jason Robbins, of course, CEO of DraftKings Contessa put a pin in this for us. What an insane week it has been. Everyone's getting into the prediction space, Robinhood's getting into the NFL parlay space. There is. It's like the starting gun has gone off.
- [45:41]
D
You've got investing and trading and gambling and all of it is coming together. And what an exciting time for me to cover this industry. Kelly.
- [45:48]
A
I know. We'll see you with much more next week, Contessa. Thanks, Contessa Brewer. That's it for the Exchange. I'll join Mike Santoli for Power Lunch right after this break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place.
- [46:08]
D
What made you confident that you could do something that hadn't been done before? I have no fear of failure.
- [46:14]
E
Trailblazing women, changing the game.
- [46:16]
C
One of my favorite pieces of advice.
- [46:18]
A
Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts.