Market drivers, GameStop, China's property push: Catalysts

Markets (^DJI, ^IXIC, ^GSPC) hope to solidify gains seen during this trading week and close above recent milestones: the Dow Jones Industrial Average is in a back-and-fourth bout to stay above 40,000 as the S&P 500 teeters above the 5,300 mark.

BMO Capital Markets Chief Investment Strategist Brian Belski joins Catalysts Anchors Seana Smith and Madison Mills to lay out what circumstances could propel the S&P 500 above 5,600 points.

As GameStop (GME) shares tank and meme stock sentiments pull back at the end of this week, Wedbush Equity Research Managing Director Michael Pachter touches on the biggest competition and headwinds for the video game retailer going forward.

The Chinese government has a new strategy to revitalize its drooping property and real estate sector.

Yahoo Finance's Catalysts also cover other top stocks like Tesla (TSLA), Boeing (BA) as its annual shareholders meeting is underway, Applied Materials' earnings (AMAT), and Netflix's (NFLX) streaming deal with the NFL.

This post was written by Luke Carberry Mogan.

Video transcript

It's 10 a.m. here in New York City.

I'm Madison Mills alongside Shana Smith.

Welcome to Catalyst it, Friday May 17th was I right into it.

The catalyst that are moving markets this morning, the dow Hoing just below that critical 40,000 level milestone that we first hit yesterday as investors, we the fed path forward.

Now, the doubt that it's important to point out isn't alone.

You got the S and P 500 the NASDAQ also hitting record highs this week.

We'll see whether or not we will get back to that 40,000 level here today.

That's right.

And next week, the rally facing another big test with in videos earnings.

Can the chips giant deliver on the streets high expectations?

And so taking another leg lower today after gamestop warns of falling sales and also plans to sell shares.

This comes after a two day sell off that wiped off about $7 billion of prior games from both games.

Stop and A MC.

Well, first, our big story and that is markets just at record highs here today.

You've got the S and P 500 just around that 5300 mark.

The dow hitting 40,000 yesterday.

Our next guest see more room to the upside.

He's got a year end target for the S and P 500.

A 5600, the highest call on the street.

So let's bring him in.

We've got Brian BBMO, capital markets, a chief investment strategist, Brian.

It's good to see you.

So you and I were talking.

Not that long.

You sounded a bullish for your previous target.

Now you're raising why now?

And what's the catalyst, Shana?

Good morning, good morning, Yahoo.

Um You know, a lot of people were telling or accusing us of being bearish because we said, uh in late February that the market was getting a little tippy, toppy and needed to be sideways here, especially considering the type of move that we saw.

You know, we really believe first off that us stocks are in a 25 year secular bull market.

Uh Number two, we believe that the cyclical portion of the bull market means this new cyclical bull started in October of 2022 typically.

And historically, the second year of a bull market has a, has an average correction of 9.6%.

Um And we didn't see that we only had like a 5% correction.

And so given what we're seeing in earnings, given what we're seeing and hearing from what the Fed is gonna do.

And we think equities now are becoming an increasingly important part of people's asset mixes, especially considering what's going on in the bond market in the unwind of what we'd like to call the 40 year bull market in bonds.

Uh, we think that there's more upside and so it doesn't mean that stocks are gonna be linear forever.

Uh, we are going to see some sort of a normal correction.

Uh, and I think that's a better buying opportunity, but for now, uh, I think the screens are green and the skies are blue and we're going to have a little bit more upside here.

Brian, what do you think that correction, that short term correction could look like?

Well, I think it comes from a higher level.

So, you know, a lot of the technicians out there use this phrase higher lows.

I think this period, this year is gonna be a period of higher lows.

So I think the correction comes from a little bit higher prices.

And so it would be from a, from a technical perspective and from a just a pure health perspective of the market, it would be nice to um take a, take a bit of a breather here uh in the in the bull market and the upside price appreciation, take a respite, get ready for the summer into the fall.

And I think uh fourth quarter in particular, especially post election will do very well.

But Brian, what would the catalyst for that pullback be?

I mean, this market is acting like that CP I print was the best thing it's ever seen and it really wasn't that soft.

No, it wasn't.

That actually is a really great, uh, point.

I think that we as investors, um, have and when we've reared an entire generation of investors that only believe that stocks go up of interest rates go down.

And if you think about it, we enter 2020 for meaning the stock market and the investing world thinking and believing that the FED is going to cut six times while all of a sudden that changed.

And as early as 10 or 14 days ago, people were talking about the fed raising rates.

And so I do think that we're transitioning quite frankly into more of a trading range environment, more of a focus on the stocks versus uh the forest through the trees.

Uh Let's call it versus all this macro.

So what could be the catalyst?

I think for a pullback would be some sort of a near term uh scare and interest rate, some sort of a near term uh momentum change whether or not it's geopolitical or not.

I don't think it's fundamental.

I don't think it's fundamental is because the earnings prowess, the United States stock market is very strong, the cash flow strength is strong return on equity is strong.

And we do think actually there's a portion of the market quite frankly where numbers are too low, especially namely in some concern stocks, but financial financial financials.

I think an area where analysts have been too conservative in their outlook and I think a lot of earnings power will come from the financial sector.

Well, Brian, let's talk about earnings.

I always love to monitor mentions of things and earnings.

That's always fun.

Uh, pricing power mentions are down expense management mentions outpacing pricing power mentions by quite a bit here.

Can companies in the S and P expense manage their way to 5600 expense managing their their way through the last 15 years for all intents and purposes, it's called under, under promise and over deliver.

Uh we on Wall Street as investors or portfolio managers, which we are as well.

We love it, love it, love it, love it, love it when, when companies cut costs and shut down divisions and restructure because it shows that they're having discipline.

That's why if you take a look at free cash flow and you look at the operating performance, whether or not it's return on asset return on invested capital return on equity has been so strong.

Um You know, we think too from the discern ability of earnings and the consistency of earnings is stronger that we've seen in prior big bull market cycles.

And so to me, this reminds me a lot more of the mid nineties prior to the irrational exuberance of 1996 which oh by the way, was had nothing to do with tech stocks, had everything to do with the consumer staples area.

What you're talking about pricing power, like you remember, the consumer staples um sector benefited from food inflation and their, and their earnings have been strong.

Now you're starting to see those stocks roll over.

That's why like a stock like Walmart, it's just a juggernaut.

They've done an amazing job with their inventory in their stores and in the, in the, especially in the grocery side.

Uh but that, that stock in particular, I think is kind of bucking the trend and the in a consumer staples sector by the way, which we think is increasingly expensive.

And one we think you should ignore, aside from, let's say Walmart and Costco Brian, going back to where you are seeing those opportunities within the market, you mentioned financials, you've been overweight that sector.

Now for some time, you're expecting that out performance here when it comes to future earnings.

Where else are you seeing that opportunity and have that at all changed from when you initially came out with your S and P target for the year?

No, it hasn't changed.

I mean, we're right now positioned as a Barbell, right?

O overweight, um technology and financials.

And I think the difference with technology the second half of the year is dare I say they're not quite second tier companies, they're not, they're not Microsoft and Apple, which are really the part uh in NVIDIA, part of the, the magnificent seven which oh by the way, number seven in the magnificent seven is Hathaway.

So uh so the, the financial stock is kind of snuck into that, be that as it may, I think stocks like Qualcomm and a MD and Broadcom and Oracle and Salesforce and Adobe.

Um some of the second tier companies relative to the top ones like Microsoft and Apple, I think they're gonna take more buying power and more kind of increased money.

I think too, that we've seen an overall broadening out of, of the market.

You've seen the equal weight that S and P uh hit new highs.

You've seen look at small and mid cap are doing very well as well.

And I think that's the opportunity there.

So I think an overall broadening out and they don't also forget um healthcare, healthcare is the second largest sector in the market.

And um I think healthcare aside, so such as uh focus has been on Lily and the like which we are very fortunate to own the stock.

But you know, the United Healthcare and the Mercks and the engines of the world, I think are stocks that could do very, very well.

The second half of the year.

All right, Brian, we're going to have to leave it there.

Thank you so much for joining us.

We really appreciate it.

That was Brian Bell.

He is BMO Capital Markets Chief Investment Strategist.

Now, investors are looking ahead to in video results next week which could drive more momentum in the current market.

Rally shares of video significantly outperformed the rest of the market for the last year.

They are up a whopping 96% year to date.

The big question though, can the chip making powerhouse deliver on lofty expectations?

Joining us now on, this is our very own miles, miles.

Thank you as always for being here.

I mean, can they, can they pull it off?

Who knows to find out?

I think that, you know, in the context of what Brian was just talking about with respect to the overall market rally right now, the shape of that rally, the drivers of that rally in videos report that everyone's been eyeing for quite a long time and obviously the the structure around it, how investors expect this to factor into the overall situation that doesn't change too much.

It's still a high volatility event, both for the company and I think overall, but the context in which they are reporting has changed quite a bit over the last month in that there's now much more enthusiasm from investors around what the earnings picture is going to look like, not just in this quarter but over the balance of the year.

You know, as Brian was discussing the fundamental idea, like the idea that a fundamental reason to see a, you know, 910 15% pull back this year has really faded in investors minds.

So I will be curious to see if NVIDIA becomes a much more specific A I trade and like, how could it be more specifically A I?

But I mean, it, in the sense of all those Pullbacks we saw at the beginning of earning season, the Ts MS of the world, um, does that come back for NVIDIA?

But does the market kind of move on anyway, I, I guess, put it even more plainly for the viewers just how significant this one report really is for the market.

When you're talking about these growth rates that we've seen at NVIDIA also, just how unusual it is.

We pointed this out in our morning brief here uh this morning at Yahoo Finance Lee, he wrote it.

But when you talk about how unusual it is for this type of growth to continue when you got a company at this size.

Yeah, it gets back to a conversation that sort of picked up at the end of last year, which was, are we sure that the semiconductor industry is no longer a cyclical business because it has long been a heavily cyclical business?

And that, meaning there are times at which you see order growth 100% plus, I mean, NVIDIA has seen revenue grow, um and and earnings grow much more aggressively than that over the last several quarters.

Um And then there's a time when you start to see a pull back, we've had a lot of cap X from the biggest tech companies already outlined, those are going to be many of Nvidia's customers.

So analysts can do the math on what that implies in terms of the growth rate for the company.

But we're really talking about what's 2026 look like for NVIDIA, what does 2028 look like for NVIDIA?

And how much has that story changed?

And you know, to Julie's point, you don't typically see again in whether it's a company of this size in video.

Obviously, you know, many trillions of market cap, you know, two trillion market cap at this point.

Um not only companies of that size but industries in which there is such a cyclical component to it.

Um Growth rates like that continue indefinitely.

All right.

Well, it's clearly a story we will be covering very closely here you by miles.

Amazing.

Thanks so much.

Another fact that we're watching today is game that we've got shares of the meme stock here falling this morning at losses of 23% of prelim results here showing a drop in first quarter sales.

They also issuing here a plan to sell shares and that's really what is moved the stock here in early trading.

We want to talk about all of this and what is next for gamestop and the trade a large for that we want to bring back.

He's what Bush Equity research and managing director Michael.

It's great to see you before we get into it just first your quick reaction to the news that we're getting out on game stop this morning.

Well, I think they're pretty smart.

Um, you, you definitely have to give them credit for capitalizing on the opportunity to build their war chest.

Um, I'm not seeing anything in the preannouncement that tells me that the business is turning around.

Uh, but at least they'll raise enough cash to last another three or four years if they, uh, if they in fact continue to flail and try to find a new strategy.

So I admire that they're taking advantage of the opportunity.

That's, that's probably in the best interest of their longer term shareholders.

I feel sorry for the fools who buy the stock at 21 because it's worth single digits and I'll have a note out shortly.

My, my targets under review.

Ok.

But still Michael, I mean, we saw roaring Kitty getting back on X and then that causing a little bit of this rally.

I know it wasn't the only cause, but could there be another random catalyst that leads to a gamestop rally?

That really isn't about the company fundamentals.

Well, with, with respect to her and Kitty because he was absolutely right in 2020.

Um there was a structural flaw in the holdings of gamestop.

I mean, they had more than 100% of the share short and he made that obs observation, it was astute, he rallied uh retail investors, redditors, you know, reddit Raiders to, to buy into the stock.

And he was right and they made, they made a movie about it and he was right.

Um, now he's not actually doing anything other than posting video clips.

And, you know, I, I, he, he was dormant for two or three years.

He just started a frenzy of post, but they're all video clips.

Only one had any reference to gamestop.

It was a woman with a Gamestop logo on her dress.

Um I don't know what he's saying.

So sure, you know, guys posting movie clips saying it's over.

What's that mean?

Um If you want to buy a stock based on that, God bless you, but he has not actually said go buy Gamestop.

So Mike, what do you think the next several months, several quarters look like here then for gamestop, they're going to see continued declines.

Uh There's nothing big coming out this year.

You know, we don't have anything incremental this year, next year, you have Grand Theft Auto but nothing big.

No new consoles this year.

Uh The console makers are all kind of guiding to lower expectations.

Sony is looking to sell 18 million consoles.

They were looking to sell 25 million before.

Um the, the big news today, which is a Wall Street Journal exclusive speculation that called it duty will be on game pass.

Um I can confidently tell you that anybody who's a game pass, subscriber would be an idiot to buy Call of Duty, they won't.

So call of duty sales will be lower this year.

It wasn't on game pass last year.

And that means physical sales at gamestop will be lower because of that.

So lots of, uh, of head winds for them and I don't see any way out of it.

The preliminary results were actually worse than we had modeled.

They did under 900 million of revenue and we had modeled a billion.

That's down 25% year over year.

Now, that's not all industry decline.

Some of that is store closures and we don't have the detail yet, but realistically, they cannot save their way to prosperity.

Their store unit economics can't get any better.

You have to have an employee in the store.

You can't leave it at self serve or people will steal everything and you can't not pay rent or not turn the lights on.

So they're, they're done shrinking their cost structure.

The only question is, can they, you know, shrink their store count and re return to profitability?

I don't think so.

They lost money last year.

You know, they made 17 million net income with 45 million of interest income.

So they lost on an operating basis by over 30 million Michael.

You mentioned the news that Microsoft is reportedly planning to release the next installment of Call of Duty as a subscription service instead of the usual all car model.

That's according to the wall street journal here.

Do you think that that is a game changing move for Microsoft?

It is, I mean, they, they, you know, game pass as a subscription service is only worth $15 a month, you know, 100 and $80 a year if you play more than 100 and $80 worth of games.

So, so roughly three games a year, if you can use game pass instead of purchasing three games, it's a good deal.

That's why we pay, you know, for Netflix, we pay about the same for Netflix, but we want enough content to make it feel worth its while, you know, worthwhile.

Um And so Microsoft's just trying to build the content so that they have enough people view the subscription as an attractive substitute for purchasing games.

Um Yes, good for Microsoft.

In the long run.

They won't be making money on game pass until they get to around 100 million subscribers and they're at 34 million.

So the only way they're going to get to 100 million is to put premium content on there like Call of Duty.

Um uh they own Call of Duty.

So it's gonna cost them the sales of Call of Duty, which is also gonna cost Gamestop and they're just hoping that they get enough subscribers to, to make up the difference.

They won't this year, but they might in five years and I certainly think they will intend.

So they're willing to take some losses while they build the business out.

I quickly want to talk to you about one other name that you cover, which is beyond, you've got an outperform on it.

This includes bed bath and beyond.

For anyone who may not know they obviously had their own issues and recovered to a degree.

Is there any evidence that Gamestop could follow a similar path as bed bath and beyond?

Uh Well, they could follow a similar path as the former, as the bankrupt debt bath and beyond.

Uh follow a similar path as Marcus Lemonis led beyond.

No, I don't think so.

Uh I I had to look the word stand up to.

It's, it's a stalker fan.

That's me and Marcus.

I I am absolute stan I love that guy.

Um Now you, it takes a visionary retail leader like Marcus to turn a company like beyond around.

Um He's buying that brands.

He bought the bed Bath and Beyond brand are actually for men.

He bought the Zulu brand and he's revitalizing the Overstock brand.

Um I love that.

I think they're gonna be kind of all by themselves and close up merchandise.

They're gonna be a premium brand for home furnishings and a premium brand for toddler uh merchandise.

I think that that Gamestop if they try to re invent themselves more power to them.

But what's left?

I mean, we've already seen Ryan Cohen do Chewy.

Is he gonna try to sell dog food through the Games Stock brand.

I doubt it.

You know, I, I mean, for real and the gamestop brand's problem is that the substitute is not, you know, a, a different online retailer or a different physical retailer.

The substitute is a digital download.

Gamestop sells something you don't need to purchase physically beyond does not beyond sells stuff that you're either gonna buy at a different online retailer or you're going to go to a physical store to get, you can't digitally download a couch, just can't happen.

So you can digitally download Call of Duty and Microsoft's making making it easier by letting you stream it so very easy to to not make that purchase at gamestop.

No, they cannot follow in this in the path of beyond unless somehow Ryan Cohen takes his, you know, billion dollar cash balance and pays it to Marcus Limona since he's Marcus turn business R for.

All right, Michael, we're going to have to leave it there.

Thank you so much for joining us.

We really appreciate it.

That was Michael Pachter.

He is Wedbush Equity Research managing director.

China is unveiling plans to revitalize its property sector, the country easing mortgage rules and pushing local governments to buy unsold homes to develop more affordable housing.

Now this sending China's property index shares higher in the pre market here.

You can see that in the trade here.

Actually, I should say, but Shana taking a step back just to go over kind of what this is the rescue package is meant to prop up the property market in China, which has really just been in shambles over the past couple of years here.

This is the most urgent step that we've seen from authorities.

They're going to have about $40 billion that will go to state owned entities to convert empty homes to social housing.

And just to indicate kind of the context of how tough the situation has been for housing.

We have data overnight from China showing that housing prices fell at their steepest levels in over a decade here.

And this makes up about a quarter of China's overall economy.

So a really big deal to see that struggle in the housing sector.

Last thing I want to bring up is a note that we got from UBS, Paul Don in this morning.

And he was basically talking about this idea that if the growth target for China is met through production output, for example, rather than domestic consumption, China could be vulnerable to trade reprisals and things like tariffs moving forward.

If your economy is based on sending stuff out and then you get a lot of tariffs that could be a big headwind for China, which then is a headwind to a lot of the companies that we talk about all the time.

Yeah, I think, I think the what ultimately the impact that this is going to have remains to be seen.

Right.

There's a lot out there, a lot of stress, just a lot of forecasters saying that clearly they're not out the woods just yet.

I think that is largely the consensus at this point given the struggles that you had just been highlighting here.

But the move writing 40 $42 billion of funding to buy those unsold homes.

It does mark a transition or a difference in the stance that we have seen Beijing take on the property sector here in China.

So it certainly is significant.

What exactly this does ultimately to prop up the economy down the road.

We are starting to see that recovery gain a bit of traction in China.

But again, the data continues to be mixed.

We did see some pressure on the latest consumer data coming out and then you take a look at the industrial numbers actually and they showed they pointed to a sign of strength there and we're seeing that play out in some of the commodity trading, especially oil, that movement to the upside here that we are seeing today.

So again, remains to be seen, certainly a story to watch here.

And more broadly speaking, the impact that this could potentially have on China's economy and that recovery.

And what exactly that means ultimately here for the global markets.

All right.

Well, coming up Boeing's annual meeting is in less than an hour, we will speak to a shareholder of Boeing to get his take on what to expect and what he wants to hear from Boeing.

We'll be right back.

Let's do a check of the markets here, sponsored by tasty trade looking at green across the screen but just barely.

The dow is underneath that 40,000 level that it hit its all time high at yesterday.

The S and P 500 just flipping above 5300 here.

Just barely though.

So we'll monitor what or not that is able to hold on here.

The NASDAQ also just barely up here.

We see not a ton of conviction, not a lot of volume and also just not a lot of momentum heading into the trade as we kick off the day about an hour or two hours into the trade here.

All right, let's talk Boeing because Boeing's annual shareholder meeting is set to kick off 11 a.m. Eastern time today.

One of the big questions being voted on is whether it embattled Ceo Dave Calhoun, who will step down by the end of the year, whether or not he's going to be re elected to the company's board for more on this.

And what ultimately lee shareholders want to see happen at Boeing or prioritize here for Boeing.

We wanna bring in Tony Bancroft, the belly funds, portfolio manager and Boeing shareholder.

I it's great to see you Tony.

So talk to me just about what you think Boeing should prioritize and what you're hoping to learn at today's shareholder meeting.

Hey Shanna.

Uh great to be here.

Thank you.

Uh You know, I think for priority uh my focus as a shareholder in our uh Gabelli commercial airspace and F uh GC ad ETF I think would be number one.

I, I mean, I know they've got to get through the, the um uh the technicalities of just going through the uh the annual meeting and uh voting on um on voting on directors and, and uh, and uh CEO pay.

But to me, the focus is they've got to get a, uh, they've got to announce and in place in a new CEO now that they've announced that the O Calhoun is leaving, uh, you know, they've, they've got to get the Spirit deal uh done with and uh put in the books.

Uh thirdly, they've got to get the 737 max um uh authorization increased production with the fa uh increase to above 38.

And then lastly, they, they've got to get the 787 deliveries production and, you know, uh, and supply chain uh squared away and, and that's what I'd be looking for in the sort of the, the near term.

So I'm curious, Tony, uh you obviously know that shareholders are voting today on whether outgoing Ceo Dave Calhoun should remain on the board.

What would your take on that be?

You know, iii I refer that to our proxy voting committee.

Uh But me personally, I, you know, I, I have no, no problem uh with Ceo Calhoun, uh Matty, I think he's, you know, actually I've done a great job, you know, just remember he took over in the midst of, of uh two mishaps.

Um And then obviously on top of that, uh COVID hit the worst downturn in uh commercial air travel in history and, and he essentially brought Boeing back from about zero production of the 737 max of 38 a month.

That's a, you know, that's a large increase and he did a, he did a pretty good job.

Um So overall, I I have no issues with the CEO Calhoun.

Who do you think Boeing should consider or, or when you talk about what that past experience should be?

Who do you think some of those not, not naming specific names but talking about the possible success or just what that conversation looks like?

Yeah, Sean, I think it's, it's probably gotta be, someone doesn't need to be an insider.

It could be, but it somebody needs to have a, a technical background.

Um you know, you know, Boeing at some point is going to have to design a new plane.

There will come a time when, you know, technology and efficiency uh is going to uh out, outrun the current uh the current um production aircraft.

And I think someone who has an understanding and background to work with engineers uh is probably, is probably a pretty uh, it can be heavily weighted, uh, for the decision, at least, at least in my opinion.

And II, I think most probably, uh, investors are probably thinking the same way.

Well, Tony, let's just talk about the obvious here.

Boeing's had a really rough couple of months here.

I mean, my friends, whenever they see a plane issue in the news, they just assume that it's Boeing.

How bad is that for the stock?

And would that issue for them, the safety issues ever change your mind on Boeing?

Yeah.

You know, you know, it's a good point, Maddie, I think the reality is that Boeing has, has, has partially lost the narrative of, of, of sort of the reality of what's going on.

You know, right now there's multiple 737 max aircraft launching and safely recovering all, all around the world.

And, you know, uh just statistically speaking, the fa uh fleet is the safest fleet in the world and probably the safest, uh you know, form of public transportation in history.

We haven't had a crash related fatality since 2009 of 15 years.

That's about 10 to 12 billion passengers traveling safe safely in under FAA watch.

And 51% of that fleet of the FAA fleet are Boeing aircraft.

So they're by far the mass majority of, of us driving the safety in this country.

But, you know, with that being said, you know, sometimes perceptions reality and I think the reality is Boeing is just gonna have to just keep blocking and tackling, moving forward and, um, you know, producing safe aircraft, which they have done for, you know, last uh multiple, multiple decades and they'll continue to do, uh going forward to www when we talk about the future of Boeing, what exactly that's going to look like the potential acquisition interest here that we have seen in spirit aerosystems.

I'm curious from a shareholder perspectives.

Does that increase the value here for shareholders?

Why or why not?

And then there have been some issues raised just about the, the impact that this is ultimately going to have on the industrial industry and the defense industry at large.

How should investors be looking at that?

I, I think in the near term, it's gonna cause volatility.

Obviously, it's gonna be a big cost, you know, Boeing is gonna, is gonna have to pay uh pay for, for Spirit.

Uh Obviously, they have to get figured out with the Airbus of how they're going to uh deal with the two production plans um that, that produce uh you know, Airbus, Airbus um components.

Um And then after that, you know, I'm on a run rate is probably gonna save Boeing about a billion dollars a year in uh in cost by, by owning these businesses.

And I, I think more importantly, you know, it's, it's gonna own the culture and it's sort of gonna be one team, one fight uh you know, fuselage, the critical uh go stores component for an aircraft.

You, you're not gonna get two fusil suppliers.

And I think it's just, you know, it's just, it's, I think it's pretty apparent that uh the OEM who's producing the aircraft needs to own, needs to own that, that component of the aircraft, it's just so critical as far as production supply chain, you know, you name it.

So I think in the long run, this is gonna be very beneficial to Boeing and uh it's, it's just the right thing to do.

All right, Tony, we're gonna have to leave it there, but really appreciate you joining us today ahead of this shareholder meeting.

Thank you so much.

That was Tony Bancroft Gabelli funds portfolio manager and Boeing shareholder.

Now, Tesla is reportedly moving ahead with its plans to build a data center in China.

It could be used to help develop the self driving algorithm that is according to reporting from Reuters.

For more, we're going to bring in our very own pros Subramanian pro.

This is a really big deal.

What do we know so far?

Well, it's actually a bit bit wrinkle here.

It's not much of they're building a data center is that they're actually using the data there and they can't bring it to the US, they had to or, or, or already have a data center in China for their, you know, the uh local regulations about data collection So the the key was is that Musk wanted to bring all that data from the, from China to the US to train the self driving A I.

All right, can't do that.

So now according to Reuters is reversing course and said, OK, we'll we'll build well, data center stays here, the data stays here, we'll train the algorithm in China.

I mean, it's, it's important because that's where the most cars in the world with, with, with the FSD type sensors are in China.

Um You have also have a lot of mapping technology or a lot of other partners there that are, that are gonna share data.

So he's saying potentially, what if we train the Algo there in China and then take that information and spread elsewhere, right?

That's sort of like the kind of the the pivot here.

Uh there's some risk there, you know, with dealing with China, you never know when they can lock you down, you never know when they can say, you know what we're gonna stop you here.

So it's it's kind of a risk.

But also I think he sees that as an opportunity, you know, they use the the Reuters article notes that China Giga factory became the leading factory there for them.

And that wasn't necessarily going to be the case when people thought about them creating that factory there.

So maybe China is the push, maybe China is the sort of the angle for where they're gonna attack FSD?

Is this a strategy that you think?

Do analysts think that it makes sense in terms of Tesla's longer term goals in trying to increase that widespread adoption?

II I, yeah, I think there's two parts, right?

I think, yes, because it's a big market, there's, it's sort of widely mapped other players like Baidu already doing that stuff there and you can kind of work together with.

But the problem is that then they don't necessarily own the data potentially, right?

Also, there's a mention of how you can't sell these NVIDIA chips in China because they're they're banned.

So how do you get around that?

They need those chips to, to build a data center and to train the Algo.

So um but yeah, I think they're right, there is an opportunity but also some risk.

Yeah, certainly it seems like, yeah, there, it seems like there's a number of risks and almost like it has to be weighed just in terms of whether or not those risks uh outweigh some of the benefits that maybe Tesla could see or to this.

But clearly this story, we're gonna keep following the right price.

Great stuff.

Thanks.

Let's take a look at applied materials.

Aim at the country's largest semiconductor equipment maker.

Shares are essentially flat this morning, but we're bringing this up because we're getting data out the latest earnings report here and pointing to some larger trends that we wanna highlight and what this exactly tells us about the chip industry.

So when it comes to what these expectations were investors were looking at am at for signs of whether or not this chip recovery is well underway.

Remember that this is a stock, if you actually take a look at a longer term chart of applied materials, this is a stock that has actually risen about 30% this year.

So these results failing to really live up to those expectations or give investors a reason to buy at these elevated levels.

But it does give us a good sense of demand and some crucial parts of of the electronic supply chain here.

So again, they forecast a bit tepid here at least that's the view of some of them, some investors and analysts at this point.

Matt.

Yeah, it's interesting seeing some of the commentary that we're already getting in after this update from a A as well.

Morgan Stanley's analyst Joseph Moore saying he reiterated his equal weight rating saying that the forecast is conservative around China spending next year.

Again, China spending continuing to come up across a lot of these prints.

He said that they're impressed by their execution, but they don't see an immediate an imminent negative catalyst with the China spending but still something to watch because it was a little bit conservative there.

Again, those sales in the third quarter could remain flat, essentially given what we already know from them and it just continues to be another name that is impacted by China spending on chips in particular.

But interesting to see whether or not that is going to be able to normalize a little bit, particularly as the situation in China potentially normalizes after that government intervention there and looking at cannabis stocks as well there in the green this morning, after you, after the US Department of Justice officially unveiled their proposal to ease restrictions on marijuana.

Under the proposal, cannabis would be reclassified from a schedule one drug to schedule three.

Now, just to remind people, schedule one, some of those drugs, cocaine, uh fentaNYL, I mean, really intense drugs here schedule three, a much more moderate uh schedule sign that the drugs in that category have a low potential for physical or psychological dependence.

Some of the other drugs in that area include the likes of Advil so much.

Uh It's a really big deal.

It's a huge shift.

Now we did see some of these cannabis stocks moving to the upside, but they are still well below their five year high as a company like here leaf is still down 66% from its highs to re we've spoken with the CEO together Shana down nearly 97% from its highs as well.

And there is some talk about whether or not this is a deal or, or a move that is being done before the election because it could potentially win uh the favor here of especially the younger voters here for President Biden.

We know President Biden yesterday, uh endorsing this.

We did see some of that excitement play out when you come to the cannabis stocks and the movement that we saw to the upside here yesterday saying that they are going to treat this.

He's going to treat this as marijuana as a less dangerous drug.

Now, we do, it's important to point out that this isn't going to legalize weed though under the federal law, right, only Congress can do that.

But again, it is giving investors a reason to buy.

We did initially, I see the excitement when this report was initially released.

We've talked to a number of the, these cannabis CEO S talking about the fact that this is largely viewed as a massive step in the right direction.

Clearly, more reform needs to be seen in order to have a massive catalyst here for these stocks.

But it is enough for many of these names to catch a bid here in early trading, catch a bid yesterday.

And that's what we're seeing play out when you take a look at the stock action today.

Well, we're gonna have more of your market's action ahead.

So stay tuned for all of that and more.

You're looking at gains across your screen, the S and P just above for 5300, but the dow is still below that 48,000 level.

Keep it here for more.

You're watching Catalysts Netflix's surprise three year partnership with the NFL is marking a major shift into live sports programming, live programming in general here for the streaming giant for how the street is interpreting this deal.

What ultimately this means for Netflix Yahoo Finance's very own.

Alexandra Canal is here and Ali I know you've been speaking with a number of analysts, just give us a better sense of how they're viewing this deal and whether or not how big of an opportunity this is for Netflix by and large reaction on the street is very positive, especially considering sports has been considered the last frontier of the streaming wars.

However, there are some on Wall Street that say that this might be more of an experiment for Netflix really testing the waters to potentially bid on more live sports down the line.

Jason Bas from city told Yahoo finance, he doesn't necessarily think the NFL will help Netflix retain loyal subscribers over the long term, but that it's still a good thing and a natural evolution of the industry.

JP Morgan.

Meanwhile, that the games will offer a boost to Netflix says add here and that seems to be the driving story here that it's going to be a great opportunity for advertising and will also deep in Netflix relationship with the NFL analyst do.

And it also said that the deal terms are attractive.

Now, Netflix is not revealed any specific figures, but Bloomberg has reported that they are paying less than $150 million per game.

And that's actually less than what they, they spent for some of their original movies.

Like the great, for example, and considering the NFL has such a large built in audience that is attractive at the end of the day.

And really what it comes down to is that live sports, live events in general, we've seen them really double down with live comedy events.

There's a stickiness there, there's this on demand appointment viewing and if you have that element, you're going to attract subscribers and hopefully once they're there, you can keep them there longer based on the content that you already have on the platform.

And that's what we're really seeing across the board.

Netflix is pretty much shied away a little bit from the live sports game, but now we're seeing them really dive right in with this NFL partnership.

Well, I know in your reporting, you highlight the number of games that Netflix has compared to the other ones and it's like a really tiny percentage, obviously.

Um I wonder is there a world in which people end up being like, I don't even know where to find my NFL games and then that ends up being a headwind or do they have the marketing budgets that that's not really going to be an issue?

Listen from the consumer perspect if this isn't ideal.

And I do think over time, that's why we're seeing all these bundled offerings, right?

I think we're going to eventually see more consolidation in this space.

But the NFL has several partners are seeing those on your screen right now and Netflix only has two games.

But there are one piece of a very large pie between broadcasters and streaming giants.

Now, the NFL, the NBA, all these major leagues, they want to get as much money as possible and they're realizing that if they can siphon off certain games, they can get a lot large amount of money for those specific games and have them as exclusive offers on these different streaming services.

So as a consumer, you're going to have to pay a heck of a lot more money than you're used to paying uh in order to watch every single one of these games and that doesn't create the best user experience.

I'm curious from your reporting and from you who you've been speaking with the experts within this area, how sticky are the customers who maybe do try out some of these services just for the games?

Have we seen data on it or is it still a bit too early to really figure out what that traction level looks like?

Peacock did host an exclusive NFL game last season and they did see a bump in their Peacock subscribers and most of them did stay for the duration.

So I think we're still a little too early to know if that can be replicated across the board there.

But again, it all comes down to the type of content that you have on your platform that can keep people there.

Obviously, there's a new season of Bridgerton now I am fan.

So, you know, as someone that is a fan of those types of shows, sure if you can get them on the platform for a live event and then they can stay for some of your other scripted content.

That's great.

But there's also a lot of competition right now on the market and that's really where all this is coming to a head.

So we'll see if this is just cyclical.

We'll see if this is the norm that these live events are just going to be receiving a lot of money and we know sports in general, the value of those have ballooned.

But for now, Netflix is getting into the game.

I forgot that Bridger was back.

Oh, yeah, I watched the first episode last night.

That's, I mean, that's the weekend, but they're doing it in two parts though.

So you can't fully binge it, which is, yeah, which is a strategy that they've been doing.

There you go.

All right, we can talk to you forever.

But the police are yelling at me.

Thank you so much.

Really appreciate you as always.

Well, NVIDIA shares are surging so far this year up over 90% year to date and investors eagerly awaiting those first quarter results coming up next week.

Here's a look back at the company's rise.

Stocks are poised to end the week higher.

All three major averages hovering near their record highs.

The S and P 500 just above the 5300 level, the Dow just under that 40,000 level.

But the star of the show this week is the Dow briefly passing that critical 40,000 mark on Thursday.

So we want to zero in on the big names that drove that rally stocks that doubled the Dow since 2017.

Among the winners, Apple at the top United Health Health, Microsoft Caterpillar and Goldman Sachs.

These are really the names to watch because of the degree to which they drove this rally.

But having said that Shaw of the Dow is like such a funny little index because it's more of an average of prices rather than it doesn't weigh things correctly.

One could argue and the company waiting in the index are so different than their market cap.

So when you look at a name like Apple has having a lower waiting than Home Depot, that's just, yeah, certainly it's, it's an interesting to point out it's important to point out.

And I think that's why so many investors really were talking a lot about the S and P and the movements that we're seeing there versus focus specifically on the Dow and the Dow components, which obviously a shift going back many, many, many years.

But I think that when we talk about 40,000, the level of 40,000 that milestone, what it means.

Psychologically, I think there is reason to be excited about it.

Clearly, my take away from the conversations we have been having with so many strategists here at Yahoo Finance over the last week is hey, when we are at the out the the levels that we are currently at and valuations are as high as they are.

Yes, we are due for a pullback, right?

It's not exactly going to be just up and away from here at these levels with the dow at 40,000, with the S and P right around 5300.

But there is still reason to be optimistic just about what that action could look like between now and to end.

So maybe we should be ready for a pullback.

We could get a pull back around 5% but then we also could reverse and trend higher.

That's actually viewed as being healthy here for the market.

So my takeaway is that yes, there's a lot to be excited about when you talk about 40,000.

There's also reason to be a little bit hesitant or questioning the current levels, the current value viewing a potential blowback as healthy here for the broader markets.

And then ultimately, like Brian Bowski, where we started the show saying there's reason to think and reason to believe that we could see the S and P hitting 5600 by the end of the year, 5600 hats.

Get them ready.

All right.

Well, coming up is wealth dedicated to all of your personal finance needs.

Our very own Brad Smith is gonna have you for that during the next hour.

So stay tuned.