Tech’s Record Rally, Assessing Amazon’s Valuation, Global Energy Uncertainty 10/7/26

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1:07The tech-led rally, it's taking a bit of a breather. Welcome to Power Lunch, everybody. I am Brian Kelly. Be back tomorrow. The Nasdaq 100 trying for its seventh straight day of gains. The broader market, though, under a bit of pressure. The Dow down more than 350 points. Investors like you reassessing just how much higher interest rates can really go. The 10-year yield remains near multi-decade highs, putting a higher cost of capital back at the center of the market conversation. And in moments, we're going to get the minutes of the Federal Reserve's latest meeting and get a fresh look at the debate over inflation and whether monetary policy is restrictive enough and maybe if rates are going to keep going up.

1:45Plus, the global energy complex back in focus. Brent crude back above$100 a barrel. geopolitical risk. It is back. It is repricing supply, inflation and the outlook for the global economy. Halima Croft is here with what matters most for oil and your money right now. Folks, welcome, everybody. We are right off record highs that we've hit the last couple of days in the NASDAQ and the S &P. Market's down a bit today, but remember, we're coming into today on a six-day win streak. And a lot of the AI stocks that really propelled the market and hopefully your money higher in the past month or so are today giving back some of those gains.

2:22You've got AMD, Meta, Palo Alto networks, and many more on the downside, but not everything can go up every day or can it? Well, your next guest or first guest is actually closing out his bullish view on tech after this recent run, but overall, he is not worried about the macro market, expecting a nice run-up in the midterms. Joining us now, Eric Johnston. He is Chief Market Strategist at Cantor Fitzgerald Asset management and head of equities at O 'Connor. Eric, good to have you back on. Good to see you, Brian. You selling stocks then? Selling stocks? Yeah. No. Some stocks? I think we're going to break out and it's going to be somewhat of a more correlated move.

2:59So we turned bullish in tech in August and we've gotten a sharp outperformance. It's almost been a flight to almost perceived safety while everything else has been sold around related to interest rates, related to oil and related to a slower IPO calendar. But I think that the next move up, I think we're actually going to break out. There's a big wall of worry out there. Obviously, rates is number one focus. Well, keep – sorry to interrupt. Keep your mind on rates because we've got some breaking news with Steve Leesman right now on the minutes of the latest Federal Reserve meeting. Steve Leesman, bring them to us.

3:36Hey, Brian, thanks very much. Minutes from the last meeting say that most Most participants said it would likely be appropriate for another rate hike by year end. This leaves open the possibility of October, but also keeps December into play. Of course, they said that decisions at the future meetings would depend on the incoming data, which has been mixed in the meantime. Many said that the higher path for a funds rate would be prudent on risk management grounds, something we've heard increasingly amounts from Fed officials. It would provide insurance against high inflation because of stronger demand and further supply shocks to the economy.

4:13Several said the current policy rate was not restrictive or only mildly restrictive, kind of picking up on language from Fed Chairman Kevin Warsh, who had said he didn't really find it very restrictive at all when he looked around most parts of the economy. Participants noted that inflation remained elevated, had not seen sufficient progress, and the risks were skewed to the upside when it came to inflation being elevated in the near term or the medium term. And, of course, they talked about what was driving inflation. That includes geopolitical developments and supply shocks. And they were concerned that these inflation expectations, which had been running higher, we had a report this morning about that, could affect wage and price decisions.

4:51Strong business investment, consumer spending all supported solid economic growth. And there was not much worry at all about the labor side of the economy. They said the scale of the AI build-up had continued to surprise them. And the underlying momentum in the economy looks like it also increased. They said the labor market they viewed as broadly in balance. And it was close to maximum employment. And it actually had strengthened a bit. And this was before this last jobs report. So I'll leave it there, Brian, except I'll be checking for a minute here what's happening in fixed income markets. The 10-year broadly unchanged at 528, where it was before the number, and the two-year at 476, maybe down a tick.

5:34And the outlook for an October rate hike remains very low, with just a 17 % probability. But again, a little bit of an increase in the December probability at 89%, maybe just up about four ticks from what it was before the meeting because of that statement at the top that said most agree, or many agree, that another rate hike would be warranted this year. I'd say this is in line with market expectations, Brian. Not a big surprise. Well, listen, you're the music guy, so I'll throw this out at you. It feels like the who is wrong. The new boss is not the same as the old boss. It feels like the new boss is actually the bond market.

6:09And the bond market is going to do it at once, and it's going to force the Fed to align with its thinking, yes or no. So, Brian, that's a very important statement you made, which is if you could please put up the two-year, You could take me off camera or take Brian off camera. Oh, I didn't mean Brian. You could have taken me off. That's the 10 year. But the two year is at 476. And let's do a little math, Brian. The Fed funds minus the two year is now what about 100 basis points or more over where the Fed funds rate is. And that is exactly to Brian's point that the two year is indicating that the average of the funds rate over a two year period is going to be much higher than it is right now.

6:53So there is more baked into the two year. Does that force the Fed's hand? I would point out that Fed Vice Chair Phil Jefferson just said in a recent speech that the Fed is going to have to make its own decisions separate from what the markets have decided. And that could take some time. So you're right. The market is pushing the Fed. But it's not entirely clear the Fed will be pushed quite that far. Steve Leesman, great stuff. As always, Steve, really appreciate this. Eric Johnston, you could hear what Steve was saying. Does that outlook or prospect or potential for higher rates, does that change your stock market thesis in any way?

7:31It doesn't. I think the peak Fed hawkishness is now priced in. So the market's pricing in, you know, three hikes basically between now and June. I think the long end of the curve is doing some of the work that was necessary to try to bring down inflation. So I think that's probably somewhat close to peak. If you look at the four-month average, for example, for CPI, core CPI, four-month, month-over-month annualized, 2.1%. Supercore, four-month, month-over-month annualized, around 1.6%, 1.8%. You know, wage growth is somewhat under pressure. Yeah. And so I do think that the inflation trends are there.

8:13What's driving up the long end is really real yields, and they're getting attractive now. They are. OK, sit tight. We're going to bring another voice into this conversation. That is Kai Wealth founder and CIO, Chem Carson from the SIBO. Chem, welcome. Good to have you on the program. Technically, this is our bond report, but we should call it the Fed report because that's what we just heard. What are you watching the most closely now? And what is your reaction to what Steve Leisman just told us about the Fed? I agree with Steve. The Fed minutes are a bit stale, candidly. We've had an unemployment report since then.

8:46Obviously, the long end of the curve is not reacting. We're getting a bit of a steepener today. It's more of the same, right? Why is the long end of the curve breaking out? I get that question all the time. And my real question to you is, why wouldn't it be breaking out? If you look at every single factor that would go into the input of the long end of the curve, every single one points to continued increase in the back end of the curve. What are those things? Less international buying, obviously. Inflation, that's what a lot of people point to due to the strain of hormones. But the two biggest things by far is that we're hitting the five to seven year anniversary, which is the average duration of bonds that were taken out in 2020, 2021.

9:28And all of that refinancing is a tidal wave of demand here, of supply on the bond market. So on top of that, obviously, this major other issue, which not enough people are talking about, which is the crowding out of the long end of the curve from all the hyperscalers and all the other debt that's being taken for CapEx spending and whatnot. At some point here, we're catching, we're going into a catch-22. If the market is going to continue and be more and more concentrated to the capex that's happening in equities, that itself is going to drive more stress in equity CDS. We are seeing that credit default swaps in the last month across the board, whether it's corporate or sovereign, are starting to really break out.

10:13That is a sign of risk premia increase. And that is basically a buyer strike. People starting to say, wait a second. If we're going to take this kind of risk, we need more price. We need a little bit better pricing here. And that's starting to move not just at the same pace, but really starting to break out. That is something you really, really need to watch. We're hitting a point where the back end is starting to break things. And if it continues, it is going to break things very quickly. In the words of Hank Paulson, who is just so very vocally. Well, hold on, Jim, Jim. I'm sorry to jump in on you, but I've never met anybody.

10:45I didn't like interrupting, so I apologize. But I've got to jump in. You're good. What number is going to break things then? What, five and a half, five and a quarter, six percent? Do we know? I think we're getting very close. Again, you're starting to see it in CDS. You're starting to see it in France with some of the stress we're seeing in French bonds. I'd say we're probably 20 basis points away, but it's less about the basis points. It's more about that move, that volatility in that index. So it's how fast does it move? If it keeps ticking, ticking, ticking, you're kind of right up against the edge.

11:15You're on this cliff looking over. But as some other people highlighted, that can be a wall of worry in the short term. We knew about COVID, for example. I know this is not the bond market, but in December and January. But the market continued to rally. Vol continued to be compressed until FebOffix. You can get this wall of worry kind of rally. But I'm telling you, we're getting up to that edge. And you can see it happening. At some point, we'll wake up one morning and bonds will move 20 basis points along the curve. And things will really start to break. Well, now I'm not going to sleep tonight.

11:46Chem Carson of Kai Wealth. Chem, thank you very much. So, Eric, yeah, that was a little scary, what he just said. If you listen to what he said, he thinks bond rates are going to keep going up, and at some point, it's going to break things. So I would just add to that, you know, the 10-year yield, three-year average is 4.3%. So we're right now 100 basis points above that level. So the and the real driver, right, of the economy and and the borrowing within the S &P 500 companies is coming from the AI CapEx build out. And so the hundred basis points in terms of the incremental what it's going to do to the outlook for spending is just not that significant.

12:30And the economy overall, while certain parts of it are clearly sensitive to the long end of the curve, for sure. If you look at the broad S &P 500, its impact and sensitivity has gone down significantly. So we showed this at the top of the other show, the one o 'clock show, which was 2022 yield spiked quickly and the stock market went down 20 percent. Not all at once. It took months and there were moments where stocks went up too. But over the long trend, the S &P was down 20 percent. It went into a technical bear market as rates rose. Is it, Eric, is it the absolute value of where 10-year yields are, or is it the speed and ferocity at which they get to whatever level that is?

13:14So speed is super important, but I would say that the 2022 S &P 500 is very different than the 2026 S &P 500. Explain. And so the driver now, that was sort of pre-ChatGPT and pre-any of this AI CapEx. If you look at the makeup of the earnings, the makeup of the S &P 500, the contributors to earnings are all coming from selling into this CapEx bill debt that's likely to be unaffected by the long end of the curve. So is it going to hit housing? Of course. Is it putting some pressure on the consumer? For sure. But there's offsets, for example, with the wealth effect and the wealth effect today versus 22 also are the end of 21 significantly different.

14:02And I don't like talking politics, but we do have these midterm elections coming up. You did refer to the. So when you say it, I can now talk. Yes. Talk about you've opened the door. Let my love open the door. I think somebody from the who once saying that, how much are you watching the midterm elections? elections? And does it matter from a markets perspective if we get Democratic House, Democratic Senate, Democratic both, whatever? So the short answer is no, is that we know with very high certainty, we the market, right, that Democrats are going to take the House, the Senate's going to be up for grabs.

14:40But the bottom line is they might take both. We don't know. We don't know. But there's not going to be a veto. The market's not going to be shocked. The market will not be shocked and there won't be a veto proof majority. And of course, the Republicans have the White House. And so their noise level will go up. Investigations will go up. But I don't think to me that broad of an impact. And if you look at the performance of the market after midterm cycle since 1950, we put this data out. It is incredibly strong. Since 1950, there's been 19 midterm elections. Six months later, 19 for 19, the market's been green, average and median performance has been about 14 percent over that six month period.

15:16So I think it's going to be a clearing event and the market's going to see as that risk is now behind and the market can move forward. I think in many cases, the noise level around AI is going to go down post the election. Well, it sounds like it sounds like we got to go, but it sounds like if we get that outcome, let's say the Democrats take the House and the Senate, but But by a couple of people each, to your point, no veto, proof majority. Trump's angry. They're angry. They say a lot of stuff, but nothing happens. Maybe it's that Goldilocks porridge where we can tune out of politics for a couple of years.

15:49That's right. That's our dream. Nothing is good. Nothing is good. Nothing is good. You know, nothing comma is good. Yes. It's Matt DeGrasse. That's exactly right. I just want to make sure, you know, stop clubbing baby seals. But you've got to have a correct comma in there because otherwise. Yes. No, for sure. And so, you know, getting some the budget passed will be tricky. But in the end, whether there's government shutdowns, we know the market hasn't cared about that beyond a few days. And so I think no legislation is going to be something the market's going to like a lot. So you're bullish post midterm election.

16:23Yes. Even with rates where they are, you're bullish. Yes. Fantastic. Can we market that hat that says nothing is good? Like that guy from 30 Rock who would change his hats every show? Nothing. I get royalties. There you go. Nothing is good. I love this was good. Eric, always good. Thank you very much. Appreciate that. All right. On deck. Dramatic video from around Russia. You've got to see Halima Croft will be here to talk about that and more. Plus, more on Porsche's big turnaround plan. But is it maybe a little late for Porsche? And after the break, why analyst extraordinaire Laura Martin says that Amazon stock is still on sale.

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18:02slash workspace with Gemini. Introducing Fidelity Trader Plus. With customizable tools and charts you can access across all your devices. Try our most powerful trading platform yet at fidelity.com slash trader plus. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSE SIPC. Welcome back. Got some breaking news now on Anthropix, new AI model. Let's rejoin Kate Rooney with this. Kate, what's going on? Hey, Brian. So this is Anthropix third model in the Claude family in just the past month or so. It does come after CEO Dario Amadei talked about, quote, pacing the frontier of AI.

18:41This one's called Haiku 5.5. They say it's designed to be the fastest and the cheapest option out there. It costs about 75 % less than its previous version or the previous similar version. It is another sign, guys, that price is becoming the battleground in AI. And this version they talk about is aimed at high volume tasks. So think about summarizing things, AI agents, which need to really respond in real time. It does also come as these agents we've been talking about are becoming the newest form factor in AI. The company also highlights safeguards for cybersecurity as well. And this also does signal a strategic move on the enterprise side for Anthropic.

19:18As it's looking to go public, this company has been offering now a range of models at different price points. And it has also been offering different performance levels. It does come as other companies are trying to really rein in their own AI budgets. Open source options out of China are a lot cheaper and more viable at this point. Anthropic does want to have these lower cost options to keep enterprises in the Claude family. That is really important right now. And it does also have those more premium models. Think of things like Opus. We've talked about fable before for some of those more complex coding tasks and things like knowledge work, they say, but some of those deeper, harder tasks, Brian.

19:55All right. Kate Rooney, thank you very much. All right. Let's kind of stick with AI and the hyperscalers. And your next guest is looking for double digit gains in two magnificent seven stocks, including one she says is undervalued. Laura Martin, a senior intranet and media analyst at Needham, always a compelling interview, one of the best in the world, certainly on the street. Laura, why do you think that Amazon's stock is undervalued? You know, one of the things that we're saying is that only 20 % of its total traffic is exposed to agentic commerce, like Muse or OpenAI Shopper. And Amazon is doing a really good job of actually, it now says 67 % of its users use AI to search for things on its own website.

20:42So it's making its product better. And one of the things we're seeing is that actually AI is concentrating winners in the biggest because they have the most tech stack. They can organize the best word search and they have the best infrastructure. So these hyperscalers, I think, in these walled gardens are going to be the big beneficiaries of generative AI disruption. Assuming you can get people to come into that garden once they're in there, they've got the walls. Laura, it sounds like you're convinced that Amazon, which, of course, already has people in, quote, the garden, is going to be able to keep them there.

21:17Keep them there and very little of its traffic. Like I said, one out of every five prompts is actually available in the open web to steal. The rest are all in app. People just type in Amazon or they have Amazon in their bookmarks or they have the Amazon app and that's where they shop. Those aren't exposed to AI agents. So that helps that helps that whole thesis. Can I ask kind of a dumb question, Laura, because I know you hopefully won't think too low of me for asking this. What is Amazon? I mean, we all shop on it. I get that. But I don't think they make a lot of money on that. What fundamentally is the company?

21:53One percent margins on e-commerce. I would argue the economy is now Amazon is now a cloud company. The cloud is growing 40 % at 35 % margins. The e-commerce business is funding that because it's a cash cow, but it has 1 % margins and it's really capital intensive. So I really like this pivot. Whereas Google and Meta used to be CapEx Lite and now they're becoming CapEx heavy. Amazon was always CapEx heavy, which is why it's doing such a good job of building out data centers. This is their core competence is building physical assets. But in the cloud, when it does its cloud business, it takes a physical asset and turns it into 35 percent margin businesses.

22:31So Amazon is becoming more capital light compared to the earnings power of those data centers compared to the old world, where it had one percent margins on the e-commerce business. I'm going to pivot to media and entertainment. Skydance. Obviously, they got the deal done with Warner Brothers. They got a kind of a new newish name. I know David Faber sat down with David Ellison. Great stuff. But they got a lot of debt, Laura. They got a lot of debt. You've said this is a levered call option on the future of entertainment. Is it going to work? So that's the great question. They must sell assets, in my opinion, because everything they're talking about, like six billion of synergies, synergies take years, plural.

23:14And they start at closing today. They have seven times leverage. Investment grade is two and a half times. and they've said they're going to get to 3.8 times in two years. I have no idea how they're going to accomplish that unless they sell assets. They just, I think they, so the debt, nothing can go wrong here. If we have a black swan event or if rates keep going up, it's going to be, it's a call option because the public float is only 500, 5 billion out of 50 billion of equity. And the total market enterprise value here is 110 billion of which the public floats like 5 billion. So it really almost is a warrant, highly levered.

23:52So if it works, it's going to work big because a lot of value flows to the equity holders. But if it doesn't work, the public equity will be the biggest, the people hurt most. Yeah. So I'm not going to ask you if it will work because we just don't know. And they could come out with some show that we're not aware of, and it could be the greatest hit in the history of the world. And they could make a ton of money. What do you think, though, they need to sell? Do they sell CNN? You know, they have a lot of real estate. They did it, you know, in order to get the deal approved, they made a lot of promises, like they won't sell the lots for five years.

24:23But I am hoping that they lease to generate cash flow some of their excess stages and real estate, because they have two lots, they don't need two lots. So and they have a lot of corporate office buildings, they have every everything in corporate is duplicative, which takes up office space. So you don't need two controllers, and you don't need two head of sales. And they've announced their management teams, which means a bunch of people are going to lose their jobs in the next 30 days. I'm hoping all that real estate gets released to somebody else or sold. That would be great, too. Yeah. So sold to somebody who will then use it.

24:55I know you are in Los Angeles. What we don't want to see are a bunch of empty lots. Laura Martin, really appreciate your time. As always, Laura, thank you. Have a great day. Have a great day. All right. Let's get a check right now on shares of Micron in a down market. Micron popping today after a very bullish note from Gil Luria at DA Davidson that included a price target increase to$3 ,000. Now, the stock's at$1 ,087. Gil's got a$3 ,000 price target on Micron. The note acknowledges that that's a big jump, but ultimately, Gil concludes that the demand for memory, longer term, higher prices for DRAM, stuff Micron makes, justifies that.

25:39A little bit of a halo effect on stock as well. You've got SanDisk up about 4%. So Gil Lurie, if that's not the, I'm not looking at it, but if that's not the highest price target on the street, then somebody let me know who's above 3 ,000. And by the way, Micron was like a$50 stock just a couple of years ago, not a couple decades ago, a couple of years ago. All right, coming up, the Middle East, not the only energy Flashpoint right now. We're going to show you some dramatic footage around Russia and a super tanker and talk to Halima about it. Stick around.

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27:50While much of the energy world's attention has been fixed on the Middle East, do not lose focus on what is happening in Eastern Europe because the war between Russia and Ukraine is, if anything, intensifying. And energy infrastructure is once again literally in the crosshairs. Look at this. Russian officials say a naval drone struck a Liberian-flagged oil tanker off the coast of Sochi, Russia, yesterday. That is the video of the ship burning. It was a massive fire. Black smoke sent over parts of the resort city as well. That is quite dramatic footage. Now, it is not clear whether Ukraine was behind that attack.

28:28Again, we're going on what Russia said. But this morning, Ukrainian President Vladimir Zelensky claimed responsibility for strikes on Russian oil facilities. So let's talk more about this. I'm bringing in Halima Croft, Global Head of Commodity Strategy at RBC Capital Markets. We've got some other stuff to get to as well. We've been rightly focused on Hormuz, but Ukraine pounding Russia. Pounding. You've been actually focused, though, on this story since the summer because it's so important to the diesel story. I mean, this is why President Trump has repeatedly asked Ukraine not to target Russian energy infrastructure because the refinery attacks are contributing to the diesel problems that we're facing here.

29:07But the question is right now is, has Ukraine just made the decision that they are going to disregard Washington's pleas to cease and desist? And is energy going to remain in the line of fire? Because this is not a crisis that the White House can easily deal with while we're still trying to deal with the Hormuz situation and the Houthis in Saudi Arabia. It's not just respectfully to the White House. It's not just us. It's Europe is in a bigger hole. I know they've got a lot of diesel inventories, but they might be in a bigger hole. I think we just got our answer. I mean, 50 percent of Russian refining assets have been hit.

29:38100 percent. They could be currently offline. The information is a little bit sketchy. I don't think Zelensky cares. No, because the reality is like we're not giving Ukraine the type of assistance we did at the start of the war. And Ukraine took the position that if you're not going to fund us, we have to at least try to defund Russia's war ATM. So there's no indication that Ukraine is pulling back on these attacks. And so I think we have to anticipate that, particularly when we think about the refining sector, that we're not going to get a turnaround story when it comes to Russia anytime soon.

30:09Halima, I also want to mention this as something that I think really highlights how tight and expensive shipping is getting. A ship broker source of mine told me this morning that a ship was just chartered from the U.S. Gulf Coast, basically the Houston, Texas area, to China. The cost of that charter was$76 million. A normal pre-war rate was$7 to$10 million. The ship is called the Alexandros. The charter is trading firm Trafigura. Afegura. It will load around November 19th, assuming the ship holds around two million barrels of oil. That is a cost to Lima of$38 per barrel to sail from Houston to China.

30:47There was another one that happened about an hour ago, the same source telling me$77 million for a ship from Houston to Korea. It's not just the paper contract that we show on the air. The price of the physical barrel is soaring. Soaring. And I think we pay too much attention to the price that we see on the Bloomberg terminal. This is now a shipping crisis. And this is the challenge, again, when we think about the price a refinery has to pay. Exorbitant shipping costs, exorbitant costs for crews. Some ship captains are commanding$100 ,000 a month to sail through Hormuz. Because the crews don't want to die.

31:22Right. And that's something, again, I wouldn't. Barrels are moving. But the key question is, at what cost are these barrels moving? A cost in terms of shipping costs, risk to, you know, personnel on these ships. Was it, I guess my question is, at one point, we've been talking a lot about interest rates, at what point are these costs unsustainable? What costs, you know, right now, buyers are willing to pay, clearly, because they need the oil to keep their economy going. But at some point, the marginal buyer is going to be like, we're out. At what point does it cause demand destruction? And the question is, how much higher can these rates go?

31:53I mean, that's why you had Russell Hardy, CEO of VTOL, talking about these much higher oil price scenarios because he said this is now a shipping crisis compounded by the fact of low inventories. So this is the critical point, folks. And the reason that we're talking about this and bringing this data is that even if the paper contract, the number that we show you on the screen there, the 90 bucks or 92 bucks or whatever it might be, even if that goes down, the price of moving the oil is going up. It is not going down. If you are the refiner sourcing those barrels, your price is going up. So the paper price is not reflecting what is happening in this physical market.

32:33Do you see any end to this? I mean, it sounds like the idea might be if we refund Ukraine, that maybe they back off a bit, give us a break on the diesel side. I don't know. What's our time frame? I don't know. And I'm not going to speak for you. No, we've been talking about this since summer. And the White House has been upping the ask of Ukraine in terms of cease and desist on infrastructure. And there is no indication that Ukraine is answering that call right now. So, again, where is the where is the off ramp? Where is the strategy for dealing with Ukraine? Yeah. And let's bring that video back up one more time of that ship off the coast of Sochi, Russia.

33:12By the way, Sochi, Russia, I was there. It was in 2014. That's where the Olympics were. Yeah. Yeah. I was there for the Winter Olympics, which is weird because it was 70 degrees and it's a seaside port. That is an environmental catastrophe as well. This is Russia just hit Ukraine a couple of days ago, a civilian bridge when the chancellor of Germany happened to be in town. I need our audience to understand that this is heating up, not cooling. There's the video. Right. There's a couple of days ago. People going to work or coming home from work and the bridge gets blown up. And that's what Ukraine has said to the administration in Washington.

33:47if Russia stops attacks, we will stop attacks. And so right now, there's no indication that either side is pulling back in this dispute. Yeah. Halima Croft, always great to get your insight, real-world insight. Scary stuff that's happening in a lot of places. Halima, thank you very much. Yes, thank you. All right. Still ahead, one of the world's most iconic car makers struggling to drive profits higher. We will talk about the path for Porsche next.

34:18We've got some breaking news out of Washington, D.C. Let's get more now with Eamon Jabber. Eamon, what's going on? Hey, Brian, just want to flag for you something that happened in the Oval Office just a couple of minutes ago. President Trump talking to reporters, and he was asked about this new campaign ad by Mike Rogers, who's the Republican candidate for Senate in Michigan. In that ad, Rogers appears to break with President Trump on the issue of the trade war against Canada. I'm going to play you the ad, and then I'll play you the president's reaction to it after that. But here's what Mike Rogers is running now for his campaign for Senate in Michigan as a Republican.

34:52Take a look. Here in Michigan, we know that Canada is not our enemy. We need to end this tariff war now. So the president asked about that comment from Rogers, who says Canada is not our enemy. We need to end the tariff war. Here's what the president said in response to it. I viewed it as though he wanted Canada to make a deal. I viewed him as saying that he thinks Canada should make a deal. It's really interesting, Brian, because you see Rogers, that ad is widely viewed as Rogers sort of breaking with the president on this issue of tariffs in Canada. The president, though, says his interpretation is Rogers is actually on his side and wants Canada to get to a deal.

35:32So the president said he's not worried about it. Clearly, the trade war with Canada obviously playing a big role in that Michigan Senate campaign. We'll see how it plays next month in November, these midterm elections. You're looking across late St. Clair from Detroit, and guess what's over there? It's Canada. They are literally connected. Eamon Javers. You can see it from your house. You really can't. If you have a nice house on the water. Eamon Javers, thank you very much. Appreciate that. All right, changing gears, it is no secret that Porsche is in the midst of a rough stretch. Been dealing with years of slowing sales and weakening demand, and the stock has lost more than half of its value just going back three years.

36:07But Porsche holding an investor day this morning with a plan to turn his business around. Phil Lebeau joining us now with more. Phil, what did Porsche say? What are they going to do? Essentially, this is a playbook where the new CEO, Dr. Michael Leiders, has essentially said, we are going to become much more exclusive, much more restrictive. We're going to raise our prices. And essentially, less is more, Brian. And if you look at Porsche, that's a smart move. It's got huge brand equity. It is a brand that resonates especially with high-end buyers. The problem for Porsche has been twofold. One, the China market that used to juice sales, that's gone due to competition over there.

36:48And second of all, in terms of that exclusivity, there's not a whole lot of it. If you want to buy a Porsche, you can, and certainly you will pay a pretty penny for a new Porsche model. But what's the difference between a Macan crossover utility vehicle and, say, a competitor from BMW or from Mercedes? If you look at it that way, you realize there's not a huge difference. Dr. Leiters has basically said, you know what we're going to do in the future? We're going to focus on our core DNA, performance, luxury vehicles, especially sports vehicles, sports cars. That's in the DNA. And they're going to have fewer model variants, focus more on those model variants, raise the prices about 20 percent, and really almost copy the playbook that was laid out by Ferrari, which is why Ferrari has been so successful.

37:37You want a Ferrari? You can have it. But there's not a lot out there. You're going to have to pay more for it. So that's essentially what Porsche is doing. I want to turn out a used car prices, not just Porsches, any used car, because Cox and its Mannheim division coming out with an index. They've got an index. Very handy. We like charts. And the index shows that used car prices ticked a tiny, I mean, a smidge down in September. They think they'll keep going down. But where are we right now with used car pricing? They're down about 1 % relative to last year and down about 0.6%, I believe, compared to August.

38:15Again, not a huge drop in prices where you're noticing that softness in prices, pickup trucks and large SUVs. People are simply not going to be paying as much for them. And the dealers know this. In the wholesale used market, they're not buying as many of those. And the ones they're buying, if they can get them at a little bit lower price, that's what they're doing. Where the demand is smaller fuel-efficient vehicles as well as electric vehicles. Those prices on the used market have actually gone up a little bit. Bottom line is this, Brian. This is the first decline we've seen since early last year.

38:46But you've got to look at where the average retail list price is for a used vehicle. I know. It's just over$27 ,000. Hasn't really changed a lot in the last several years. Still remains, for the used market, relatively elevated. Maybe I'll get a 2012 Jeep Wrangler for$27 ,000 at this point with roll-up windows. Phil LeBeau, thank you very much. By the way, which is a quality car. All right, let's get now with Frank Holland with a CNBC News update. Frank. Hey, good afternoon, Brian. Attorneys for Krista Pike say she's unable to swallow, eat, or move her arms after Tennessee attempted to execute her last week.

39:19They say she's angry and confused after regaining consciousness. This afternoon, a judge ordered the state to preserve evidence related to the botched execution, including surveillance footage, medical supplies and communications. President Trump said today the U.S. does not believe a lab worker's death in Russia was the result of a bioweapon. He also said Russia says they, quote, have it very much under control despite releasing new details about that incident. The director of the CDC, Erica Schwartz, said the risk is to the U.S. is extremely low, but the agency is prepared to monitor and screen travelers.

39:50And a new report from Common Sense Media says Chad GPT's new feature for teens is an unacceptable risk. The nonprofit says the feature does not send alerts to parents when it should, does not offer the right to help in crisis situations, and it still does homework for kids. OpenAI released its first report on teen use today, saying teens spend less than 15 minutes a day on average on ChatGPT. Brian, back over to you. No, we did our homework for us, Frank. The dog ate it sometimes, Brian. The dog ate it every night. Frank Holland, thank you very much. Thank you. All right, folks, coming up, you know how we've told you that this is the first year in 112 years where there wasn't a hurricane?

40:27Well, it's no longer true. We'll talk about it next.

40:35Tropical storm Isaias is expected to strengthen into the first hurricane in the Atlantic Basin since before the year began. David Parkinson is the senior weather data analyst at MSNOW, and he's also charting Isaias' path. And what do we know, David, about that path right now? Yeah, so right now the storm's not terribly well organized. It is up to 50 miles an hour. It's moving to the east-northeast at 8 miles an hour. And it is to the west-northwest of Progreso, Mexico. It's going to be heading out over some incredibly warm water over the Gulf of Mexico. So it'll be a Category 1 by tomorrow. And by Friday, a Category 2 with 110-mile-an-hour winds at 7 a.m.

41:14And by the evening, it may be weakening just a little bit as it makes landfall. Here's the interesting thing, you know, this is one mile an hour from a category three, so it would not take much for this to become a major hurricane. But I want to pay attention here to all of these blue dots that are on your screen. These are the locations of the offshore oil platforms. So if we take a look at those, you can see there is actually a decent amount that's clustered right in the track. But if this one hugs to the west, that would impact them some more. The other thing is this red flag right here. This is Chevron's Pascagoula refinery.

41:48It handles about 369 ,000 barrels of oil per day. And so the problem here is that if this one comes offline and you have 100-mile-an-hour wind, it's not coming back online the next day. It's going to take a while. So exactly where this tracks could have real impacts on the refinery side and not just the rig side. Yeah, and you're speaking our language here, David, which we appreciate. By the way, it's why you're on. And thanks for flagging this to us this morning, David, reaching out to me directly, which is great. So we got the warmer water. That tends to be an accelerant for these storms, not like I know anything.

42:23But do we know how big that East IS might ultimately become? Yeah. So the interesting thing is the models, at least as we were seeing them earlier, were saying that we could top out as a Cat 3 or a Cat 4. Now they're likely topping out as a Category 3. You have two things. One, you have the really warm water. So that is bullish on how strong this storm is going to get. The downside is you do have some shear. That is what hurricanes hate, and it stops them from really developing. The interesting part about this here is that if you remember what a purpose sort of ecologically a hurricane serves, it is nature's heat release.

42:58And because we've had no heat release, the water temperature in the Gulf is bathtub warm. It is over 90 degrees in some places. And so as a result, you are having the perfect strengthening opportunity there, assuming you don't have Scheer taking it apart. And again, here is the European model. This is the most accurate model in the world. We run it 50 times, and it's all taking the west side of this cone, which brings you closer to New Orleans, closer to some of these rigs, and right on top of that Pascagoula refinery. David Parkinson, you keep us informed about East IES and that because a lot of people worried about it, but we also watched the energy infrastructure.

43:34David, thank you very much. Sure thing. All right. Coming up, call it the rise of the robots. We're going to reveal some eye-popping humanoid numbers next.

43:50Let's talk about the rise of the robots, because the humanoid revolution is beginning to get real and investors are pouring billions into the race. According to a new note from Morgan Stanley's Adam Jonas, investment in humanoid robots, startups like that one, has already hit$9.4 billion this year. That's the only double the money raised in all of last year. And Jonas thinks the market could become even more massive. Ten years from now, Jonas estimates humanoid robot adoption could reach 28 million humanoid robots in America. For context, that is larger than the populations right now of Florida and New York.

44:31And then get this. Jonas says that we could see one billion robots by the year 2050. That would translate into a seven and a half trillion dollar annual market. But here's the number that may really get your attention. China is way out in front of robot patents. In fact, more than 7 ,500 Chinese patent applications have mentioned humanoid over the past five years. That compares with fewer than 1 ,500 such patents here in the United States. There we go. Humanoid robots. Would you buy one? Would you have one? I would. Be great. All right. Let's get a quick market check before we go here because the major averages, they're mounting a slow comeback.

45:13Remember, we're coming in on a six-day win streak for the NASDAQ. The NASDAQ right now is down three-tenths of 1%. The S &B down two-tenths of 1%. The Dow off a little bit more, six-tenths. But here's the thing, two-tenths, that's not a lot. We got an hour and a couple minutes left in trading. It is possible. The S &B 500, the NASDAQ, they turn around and end the day positive. We'll see. Take a short break. Back right after this.

45:45All right, before we go, we're going to check out some market movers. We got an interesting call from Bank of America. The firm says that Spotify is what they call muse proof, at least in terms of subscriber risk. That's the meta AI agent. Spotify at 5 % today. Bank of America maintaining its buy rating and its$685 price target. Next up, two refiners hitting new highs today, Valero Energy and Marathon Petroleum. Folks, we've talked about these for a long time. Look at their one-year moves, up 159 and 130 percent. These have been huge moves as what they call the crack spread. The price between oil and the refined product just keeps going up.

46:27We are done here on Power Lunch. See if the markets can turn it around by day's end. Closing bell starts right now.

47:02Fidelity Trader Plus