India election, Apple WWDC expectations: Market Domination

Investors shrugged off a weaker-than-expected JOLTS report, with the three major indexes (^DJI,^GSPC, ^IXIC) closing higher on Tuesday.

On the latest edition of Market Domination, Piper Sandler Chief Investment Strategist Michael Kantrowitz explains why an economic slowdown may be “good news” for equities.

When it comes to oil (CL=F, BZ=F), CIBC Private Wealth US Senior Energy Trader Rebecca Babin says oil traders were expecting to get a “gift” from OPEC+, one they didn’t receive.

India’s Prime Minister Narendra Modi declared himself victorious in a heated election race, but will likely have to rely more on allies to get things done. Global X ETFs Senior Portfolio Manager and Head of Emerging Markets Strategy Malcolm Dorson says that for investors, “A coalition government isn’t necessarily a bad thing.”

Bank of America Securities Senior IT Hardware Analyst Wamsi Mohan tells investors what they should be watching for from Apple’s (AAPL) Worldwide Developers Conference next week.

KeyBanc Capital Markets Equity Research Analyst Sophie Karp and eToro US Investment and Options Analyst Bret Kenwell discuss why the AI boom is good news for utilities.

Yahoo Finance’s Alexandra Canal breaks down Warner Bros. Discovery’s (WBD) latest price hike for the ad-free tier of its streaming service Max and Rick Newman explains President Biden’s executive action on immigration.

For more expert insight and the latest market action, click here

This post was written by Stephanie Mikulich.

Video Transcript

Hello and welcome to market domination.

I’m Julie that Josh left in live from our New York City headquarters.

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

And here’s your headline blitz getting you up to speed one hour before the closing.

Bell rings on Wall Street.

I think this is a pretty important data set, but it’s, it’s kind of painting a similar picture to what we’ve seen in the last few months where we know that demand for, for labor is definitely coming down.

You see that very obviously in the overall job openings number declining.

Um but also in a very low hiring rate.

Um That’s a really important detail of this jolts data.

Looking at the uh inflation data, you know, year over year core is still 2.8 now we can round all we want, but it’s hard to get to 2% when year over year core is 2.8%.

So I think they’re gonna hold off.

I still think we’re gonna see call it mild strength in the jobs data.

So consequently, I believe the fed is on hold until at least September, given the shift in landscape.

Story continues

Of course, the company needs to be focused on cutting additional costs out of that system so that it can help offset the revenue pressures.

But the real question here is the future of streaming and what they decide to do with Paramount Plus, we’ve got one hour to go until the market close.

So let’s take a look at the major averages here and we have a little bit of a rally but very a mini rally.

Let’s call it right now.

The Dow Jones industrial average is up 4/10 of 1%.

That’s about 124 points.

You’ve got the S and P 500 very little change to the upside.

As is the NASDAQ unclear if we’re going to hold on to these gains before year’s end day’s end.

But here are, is the sort of push pull that’s going on today.

We did have that jolts report this morning showing the lowest number of job openings in three years time that goes back to the April numbers that we got today.

And so this is raising the debate once again about whether the fed is going to be able to raise rate to cut rates or not before the end of the year.

You know, are we in a good news, bad news or bad news is good news kind of market sort of today.

We do see another drop in bond yields 4.34% here.

So we continue to see those yields come down.

Normally, that would be better news for stocks, but it’s not today.

And there are a couple of reasons why one of those reasons is oil because if indeed we are seeing slowing growth here.

Well, that also means that we are going to see lower demand for oil potentially.

So we’ve got oil futures that are lower and that then is translating into lower energy stocks as well.

So that’s one of the big drags that we’re seeing today.

Indeed, commodities overall you got here, the XL B that is the materials index down about 1.2%.

So between those two, that’s really the big drag.

You do have real estate consumer, discretionary and health care stocks that are on the rise.

They, so that’s sort of the balancing act that we are seeing in today’s session, Josh Julie oil prices, they are falling again today and on track for the sixth straight day of losses here coming after news from the weekend that OPEC plus easing oil production cuts for eight members and joining us now is Rebecca Babin senior energy trader at C I BC Private Wealth US.

Uh Rebecca always good to have you on the show.

So you know, oil has been in this downward trend.

Rebecca help us make sense of that move, what explains it and, and where do you see the price headed from here.

So I equate to what happened over the weekend as being invited to a party.

And the host says, don’t bring a gift.

So you write this nice card, telling the host how much you like them, your strong relationship in the future and you show up at the party, you hand the card to the host and they look at it.

You can tell by the look in their eyes that they wanted a gift.

And essentially the market wanted a gift from OPEC this over the weekend, they wanted those cuts extended into the end of 2024 and we didn’t get the gift and the markets disappointed.

So that was the first kind of reaction lower that we saw on Sunday night into Monday.

Then on Monday, we had a weaker PM I reading out of the United States, which as Julie just talked about kind of dovetails and amplifies this view that economic growth is actually starting to soften.

It’s not in a decline, it’s not panic mode, but we’re not seeing further acceleration.

So we saw crude kind of really get kind of spooked by the fact that hey, barrels are actually going to be coming back.

The economic picture is looking a little bit touch and go.

And the last thing and this is probably the most critical the trend following systematic um funds that trade, crude oil flipped from being long to going short at the end of last week.

And when we saw this negative confirmation over the weekend, they’ve been really aggressively pressing those shorts.

So that leaves us in a place now where the marginal buyer you ask yourself who’s going to step in and buy this dip, right?

Someone’s gotta be there or else there’s just no floor.

And you say, OK, fundamental guys, where are they gonna be?

They’re not gonna buy this dip until we see inventory draws.

haven’t been producing as of late those inventory draws.

That’ll change this week, hopefully and into the further into the summer.

Not here yet though.

Macro players, they’re looking at copper.

It’s a cleaner play way to play the A I boom inflation there.

That’s the shiny new toy.

They’re not looking at crude.

So it’s tough to find a base here.

Um So I think for now we’re looking for that floor.

I think whenever we get over negative and we talk about how bad things are.

You got to start saying, OK, how can we surprise the upside?

And I think we’re getting close to those levels where we could get that type of bounce.

Well, meantime, Rebecca, as we’re looking for a floor at the same time, have we also reset the ceiling?

In other words, there was an intriguing column from Bloomberg’s Javier Blas where he said OPEC Plus has now given up on $100 barrel oil.

Do you agree?

And if that’s the case, where’s the new ceiling that’s a really great point.

And I do agree and I’ve always agreed with that even when I was on, um, Yahoo Finance last time and there was a ton of political risk.

Everyone was talking about $100 crude and the spare capacity just really prevents that from happening.

And I do think their strategy now has made it even more difficult to get there.

I would say they have given up on $100 crude.

What they want is somewhere between 80 $90 crude where they’re able to slowly bring back production.

They don’t get into any political kind of, you know, tit for tat conversation with the US around prices being too high and they have stability in the market.

So I think they’ve given up the ghost on $100 crude and what they want now is just to find this $80.80 $90 sweet spot, Rebecca.

I’m also just curious, what, what kind of, what are you seeing uh in terms of demand out of China?

And how is that playing into your forecast?

It’s a great question.

So demand out of China over the past two months has been a little bit weak and we’re talking below estimates by maybe 2 to 300,000 barrels a day.

It’s not a giant gaping hole, but it’s caused some concern in the market particularly when they’ve cut refining runs.

Um So that they’re no longer buying as much crude, turning it into the product and exporting it into the market, which is their typical play.

Um So I think when we look at the travel data and the high frequency data that I’m looking at over the past couple of weeks, I think it’s going to stabilize and get better.

However, I think that’s a huge concern from the market and we will continue to be a focus.

I think it’s going to get better though and, and um Rebecca.

So if you think it’s gonna get better, you said there’s not a lot of marginal buyers out there, but would you be a buyer of oil?

This these levels?

Do you think we’re gonna see a rebound?

I do, I do think you will, I think again when you see kind of all the narrative and all the sentiment extremely negative and nobody can find that silver lining and the positioning gets very light and you start to price in kind of that worst case scenario.

Where’s China demand?

Is there any bottom?

That’s the time when you can start looking to kind of gradually leg into a long and play for an upside surprise because if nothing else, crude likes to surprise people to the upside and the downside, Rebecca also add this up, you know what, what does it all mean for gas prices?

Rebecca?

What, what do you see there in terms of just near to intermediate term?

So gas prices, that’s a good, good question.

Because right now we’re finding margins have been exceptionally weak in Asia and the United States and it’s helped really keep gas prices contained.

We’re at like 357 I think at, at an average here in the United States.

I actually think over the course of the summer, we’re gonna see a lift in gas prices probably closer to that kind of 3 65 3 70 level, nowhere near the point where it starts to make people change their mind on consumption.

But I would expect we see a bottoming here.

And throughout the course of this summer, we see a little incremental rise as demand picks up and the Refiners are able to kind of pick up a little bit more margin.

These are very compressed levels.

And I, I just don’t think it’s sustainable throughout the peak of summer driving season.

I mean, the other interesting thing about all of this Rebecca is that we, you know, we were at one point during the year, we were talking about concerns over oil prices being a feed into inflation even though yes, we know the fed doesn’t watch oil specifically.

But what if it, you know, sort of became um, less transitory, so to speak.

If uh companies sort of factored that into their cost, that doesn’t seem to be a risk at this point.

I don’t think it’s a risk the way it was.

But I think ultimately when we talk about how it feeds through into the rest of the economy.

It’s also not when we’re seeing this pullback.

I don’t think it’s being considered like this tailwind for the economy yet.

We’re not at a point where prices have pulled back.

We’re wow, energy prices are so low, it’s really going to help the rest of the economy.

So we’re kind of in this no man’s land.

Think there’s more fear of what will happen if it starts to go higher.

Um in in terms of what it will do to growth, then there is the benefit of it continuing to go lower.

So I think the focus is always how much damage will it do to the economy if it rises as, as opposed to?

Wow, there’s going to be a big tailwind if if those costs start to come down.

And I think part of that is just embedded in this inflation that has been rampant across the broader economy, not just in energy.

So I think that’s that, that fear of inflation is still there and I don’t think that’s gonna go away until inflation broadly is more contained.

And there’s still going to be a focus on energy inflation and there’s going to be fear around it.

And as we know, we’re not holding our breaths right now for that broader relief.

Rebecca.

Thanks a lot.

Appreciate it.

Thank you.

We’re just getting started here on market domination coming up.

It’s a big year for politics beyond the US.

With consequential elections over the weekend in both Mexico and India, we’ll discuss what the new leadership could mean for emerging markets.

Plus going green apple stock back in positive territory for the year.

We’ll take a close look at what’s driving that turnaround, all that and more coming up on market domination.

The number of job openings in the US hitting a new three year low in April.

The latest sign of a cooling labor market ahead of that big Friday’s jobs report weakening the labor market could help bolster the case for the fed to lower rates in 2024.

Our next guest expects two cuts by the end of the year with us.

Now to discuss all this is Michael Kantrowitz, Mike Piper Sandler, Chief Investment strategist Michael.

Good to see you on set.

So, so let’s start there that economic data because we got more of this this morning and demand for labor seems like it continues to to moderate it.

It kind of, you know, this kind of general drumbeat.

Now, maybe some softer data we’re getting.

What, what do you make of it?

What does it mean for the market?

Yeah, I think it’s more of the same the the chart you guys just showed it was just a downtrend that’s been going on for a while.

Uh there was a bit of an acceleration in this month.

But um when you look at the broader jobs data from everything from non farm payrolls to the unemployment rate, to temp employment hiring plans, uh quit rates, et cetera.

There’s been this underlying slowdown going on for about a year.

It’s broadening so it’s more data points slowing than are strengthening.

Uh I still think it’s that it’s good news for equities that uh it helps to quell inflation fears.

And I, I think we’ve got a ways to go before we have to worry about a real hard landing taking down equities broadly.

Um One of the charts in your latest note, I thought was really interesting where you talk about a potential generational shift in investor psychology.

And you know, for the past what decade we had yields and stocks going in the same direction which had reversed the couple of decades before it, are we now seeing another reversal where we’re gonna see renewed inverse correlation but between yields and stocks and what are the kind of, what does that mean?

What are the implications of that?

Yeah, it’s, you know, my entire career I started roughly in 0203. basically up until COVID, we did have a positive correlation between interest rates and stock prices.

Um And, but that basically to me tells us that no one’s really worried about inflation and when rates go up, the stock, the economy is getting better, the markets are going up um from again the last 20 years, not a lot of concern that changed with COVID, it changed due to zero rates and these big financing refinancing gaps we have in commercial real estate, residential real estate, corporate credit.

So I think because of that, it’s gonna persist that this negative correlation between rates and stocks uh for a while longer, you know, in the seventies and eighties, it happened because we had really high levels of interest rates and inflation.

We don’t have really high levels.

We just had these big high gaps between where rates were because of zero interest rates.

So um I think there’s a lot of reasons but uh until we see investors not worried about higher inflation, higher interest rates, a rate hike when the data improve.

Uh I think we’re gonna continue to see this negative correlation not literally every day.

I know today yields are down a bunch in the last couple of days actually.

And stocks really haven’t positively reacted.

But um you know, if you run that correlation over a real short period in time, you’d see it flip flopping a lot.

Whereas I look at over about six months to look really capture a regime and it’s been pretty negative for about the last two years.

We we mentioned like uh you’re expecting two cuts from the FED this year.

What what, what if that, what if it didn’t materialize and you had no cuts?

Would that, would that change your view of the market?

Does the market, does it need cuts to keep to keep moving higher uh I think parts of, I think smaller caps areas, you know, mid caps that don’t really have robust or broad based earning strength.

Yeah, I think regional banks, transportation stocks, real estate stocks, you know, it’s a long list.

Again, this all goes back to all these names that are rate sensitive.

Does the large cap growth index?

The 500 need lower rates?

Not necessarily because there’s still earnings growth there will, will the growth, uh, in, will, will stock prices go up as much without rate cuts or if the 10 year yield stays here?

No, I don’t think so.

So.

Um, I, I think it’s, if rates stay where they are for longer, it’s more of what we’ve seen with this large cap quality growth leadership, small cap value under performance.

And at the same time, even though we’ve gotten a couple of, or maybe more than a couple of negative economic data points at this at this time.

You again, in your most recent note, you talk about maybe some stabilizing factors that are underpinning the economy that give you a little optimism that, I mean, maybe things aren’t gonna be fantastic but maybe they’re not gonna be a lot worse.

Yeah, I’m taking a little bit from the bearish economic side and a little bit from the bullish economic side and kind of landing in the middle, um, the bullish economic stories that, you know, oil prices are low.

We have a lot of fiscal spending.

We’ve got a flexible labor market, uh a strong wealth effect from the the boomer generation and all of that’s gonna prevent a recession.

Well, maybe, but with all of that said, we do see the jolts data coming in weaker, we do see, you know, softer underlying earnings uh when we look more broadly.

So we are seeing a slowdown with all of that, but perhaps it means it’s a more moderate slow down.

Perhaps this is why, you know, some, some like me and others last year were wrong in calling for recession earlier because of these mitigating factors.

And so I think the goldilocks environment today is that it just continues to offset some of the high impact of higher interest rates and that we just continue to grind slower, not fall off a cliff like previous recessions have we have seen and Michael, let’s sort of add it up for viewers who are listening right now.

Um Given that kind of viewpoint you have, where do you see opportunity in the stock market?

What, what are you screening for?

Uh, still, you know, quality companies with higher profitability?

Uh I think one of the sectors that’s interesting is utilities.

Uh I’ve kind of said it could play Iron Man, uh offense and defense.

It’s a football reference, uh, American football.

Uh and so utilities have certainly played offense for the last two months playing with the, uh kind of on the back of the A I story and the drop in yields from 47 about a month ago.

And if things do become bad and bad news becomes bad for equities and, uh, I would presume rates would go down and utilities, there can be your kind of safety play, uh as they have the most stable earnings backdrop.

So, uh aside from that sector, uh generally just looking for stocks within different sectors and industries that have the best earnings momentum relative to their peers and, and just real quickly, utilities is unusual because it’s already had a run.

Even the rates haven’t really come down because of this whole.

Now, a I thesis about them as well.

But you think they have more room to go if rates do come down.

Yes, I think if we do end up having a hard landing recession, things get worse.

Utilities will be the last part of the market hanging in there.

Perhaps again, maybe not the A I stocks that have led the move, but you’ll see a rotation within utilities to more more stable bond like equities within there.

And that’s perfect because we’ve got our playbook today on utility.

So we’re gonna get some specific names as well from folks uh to how to play that.

Thanks so much.

Good to see you.

You too.

Thanks for being here and it’s time now for some trending tickers.

We’re watching Warner Brothers Discovery.

It’s the latest streamer to announce a price hike.

Alexander Canal is here with more details.

Yesterday, we were talking about music streaming, price hikes.

Today we’re talking about video streaming, price hikes, you know, and unfortunately if you’re going to, if you’re a consumer and you sign up for these streaming services, it’s going to be more and more expensive to watch your favorite shows.

Now, max Hiking, it’s a free offerings by $1.

So that means that monthly, a free plan that’s going to now cost 1699 instead of the prior 1599.

And then the ultimate, a free t this is a tier that allows for concurrent streams and four K streaming options.

That’s also going to increase by $1 to 2099 a month.

Although I will, that the ad supported plan that’s going to remain in place at the price of 999 a month.

So the price hikes come just over a year after we saw Discovery Plus integrate with HBO Max.

It also, I think strategically comes just ahead of the House of the Dragon season two premiere, which is scheduled for release on June 16th and over the past year or so, we’ve really seen streaming companies be more aggressive when it comes to hiking prices.

Those ad free.

That’s really been the target there.

As these media giants look to pull viewers away from, from those specific tiers and maybe gravitate towards those ad supported plans.

They want to up the viewership there.

That’s been a big initiative when it comes to fueling that top line growth, especially if they can get more eyeballs on those platforms, uh maybe potentially get more money from advertisers.

So that’s something that we’ve seen across the board.

Last year, we saw virtually all of the major media companies hike prices and that pushed streaming profitability.

It’s a trend now that’s continuing in 2024 and it’s not just Warner Brothers, we also saw Comcast recently unveiled that in July peacock, prices are going to go up again just ahead of the Olympics.

So they’re really timing it here to some of that key content.

Everybody’s got a religion now, right?

Get profitable ads for tiers raise fees, right?

And, and you could argue that all of these streaming services were priced probably too low in that attempt to try and just grab as many users as possible.

We were briefly talking about that the Spotify price hikes, you could argue that it’s still a pretty good deal that you have all of this content.

You can watch it from the comfort of your own home.

And this is what companies are starting to realize.

And that’s why we’re seeing more sticky pieces of content like sports, for example, be more of an attractive option for these companies to get.

Because if you have the sticky content, if you have the shows and, and movies that people love and wanna watch, they’re probably going to be more willing to pay for your service as opposed to some of those competitors.

All right, House of Dragon.

Are you a big?

I know.

I’m not a, I’m not a huge game of Thrones girl.

I love Game of Thrones.

The books, the series was fine and I haven’t watched other dragons.

No, no.

If we’re talking about offshoots of beloved, beloved things.

Give me, um, rings of power any day of the week on Amazon.

We’re talking deep geek here, man.

No, I get it.

I get it.

I get it.

Thank you.

I appreciate you.

It has been a fairly quiet day when it comes to the meme trade.

But let’s take a look at shares of gamestop here.

So a reversal there.

We had a nice pop yesterday.

We’re talking about that after roaring kitty posts, you know, reveals his bet.

I, I still think one of the most interesting parts we were supposed to kind of pull we were talking about this off camera.

Was that the Wall Street Journal article that uh maybe e trade thinking about barring him, which I think is still a fascinating part of the story that I’m going to play out.

Yeah.

And the whole idea that the securities and exchange commission is reportedly looking at his options activity.

Um Here’s what at what though?

Exactly.

I’m still waiting.

I don, I don’t know, I think that’s everybody is trying to figure out.

I mean, you know, I think that as we talked about yesterday with Miles H, this is just kind of a feature of the market right now that we, and, and not just right now, I mean, this is, even though this Gamestop episode is particularly acute, we have seen flare ups, so to speak of the meme stock trade really now and then.

Right.

And so it just feels like that’s kind of just part of it, a flare up like a bad cold.

Well, it’s not necessarily bad.

I mean, I guess if you’re long game stop, you’ve been all right.

Right.

But, uh, you know, it’s just that this is a thing that sometimes happens all of a sudden somebody starts talking about something on Reddit, whether it’s Keith Gill who is more, much more followed or, or there’s just sort of collection, although, wasn’t it?

So, I thought great conversation we had with Chris Murphy from Susquehanna.

How the shift though too, how it’s different.

How in 2021 definitely, you know, who’s the next target?

Right.

Well, and Andrew left said the same thing, which is why he was willing to come back in and short game stop after he sort of was scared off.

Andrew.

Good interview.

Yeah, that’s a good one.

Yeah.

All right.

And let’s also take a look at shares of Carnival corporation.

It’s jumping on news.

The company is wrapping an Australian line of cruises into its flagship brand and reaction to that news.

Melius research says this could be a catalyst for the rally the stock up 5.5 percent today.

There was also another upgrade to the stock from a firm called Peel Hunt which said that it’s accelerating.

The company is accelerating a debt for equity swap and that, that will make it more attractive as well.

Yeah, I think they were saying that they think it goes investment grade by 26.

You saw some names did pop.

I mean, Norwegian Royal Caribbean Viking also just to bring it back the conversation we had at the top of the show, Rebecca Bab and I mean, you look at oil and that downward trend, I’m sure that’s also given some investors some, some uh confidence in these names too.

Yeah, probably not bad news for the margins of these companies as they’ve continued to see pretty strong demand.

So moving on, coming up, the tide has turned Apple turns positive for the year, believe it or not wiping out its losses year to date, we’re gonna take a closer look with an analyst that’s coming up next, Apple shares turning positive for the year and they’re hovering near their highest level of the year and it comes just days ahead of the company’s worldwide developers conference, which is expected to launch the tech giants A I strategy.

Joining us now is Wy Mohan B of a security senior, it hardware analyst and he’s coming to us live from the Bank of America Securities Global Tech Conference.

So I’m sure that A I is probably a little bit of a topic of conversation there.

WC Thank you so much for joining us.

So, what do you expect from uh that Worldwide Developers conference?

I know there’s been a lot of talk about an A I powered Siri.

Is that kind of the, the centerpiece that you’re expecting?

Yeah, thanks for having me, Julie.

I’m delighted to join here from uh RB fa Global Tech conference in uh San Francisco.

Look, I I think that the set up here at the worldwide developers conference is kind of interesting.

Uh This is typically been not a huge event, right?

From an investor perspective.

But uh this time around, I think things are a little bit different because you do have these uh two demos that have happened from large uh tech companies including open A I and Google.

And when you look at sort of what the capabilities of the phone can be, that’s where the imagination sort of like starts to run.

Now we’re written that the next real upgrade is going to be called an in telephone, in our opinion, right?

Like you’re going from a smartphone, the step function change, you got from a feature phone to a smartphone, you’re not replicating that kind of productivity improvement in in telephone, which which what we mean by that is really that you’re going to have all these A I agents at the back end going and doing a lot of tasks for the users so making productivity significantly better.

So we hope to hear a lot of these announcements that provide developers the hooks to enable these apps that can then get plugged in from a conversational standpoint.

It’s not gonna be immediate.

But at the same time, we think that, you know, enhanced Siri kit, for example, will be something that would fit where using Siri.

You can better integrate into the apps themselves and then be able to have a conversational di dialog and manipulate the app, ask the agent or the A I app to come back with information, preserve that context over time and then go back to it, right?

So uh we’ll change in the way that we use these phones.

And so that’s why this developer conference is a lot more significant.

I mean, there’s going to be the standard set of all the tools that we, you know, kind of are more commonly and broadly available, including photo and video, image editing and all these fancy tools that can get enabled with, you know, automatic playlists and stuff like that using A I.

But we think the real productivity announcements have to come about the hooks of what you can do from a conversational A I standpoint that, that they will enable developers to have those hooks in.

W I’m curious, you know, A as Apple pushes harder into gen A I and and the reports and the rumors are flying fast who they might partner with?

Maybe it’s open a, I, maybe it’s Google.

I’m curious.

W do you, which way you think the money would flow?

Do you think Tim Cook would be paying Sam Altman or Sam Altman is paying Tim Cook?

Yeah.

Josh.

No, it’s a great question and, and, you know, obviously there isn’t a great deal of clarity around this, but the way we think about this is really that Apple is truly in the distribution business, right?

Like, so they didn’t have a search engine when people search.

Um you know, that traffic is directed from Apple to Google and Google pays Apple $20 billion a year uh for that um for that traffic being diverted to Google by, by default, right?

So uh it’s, it’s more about a distribution business where essentially you’re connecting this very lucrative installed base of users to that technology, right?

So again, we see A I as sort of similar in nature where you have amazing LLM based productivity tools sitting with open A I or Google.

But at the same time, you know, it’s hard to get that in front of consumers directly in a quick efficient way.

And then all that data that is collected around those kind of queries uh will enrich that whoever the provider is by, by a very large amount of magnitude.

It’s the same as what happened with Google and Microsoft in some ways they’re getting more and more data, search data results just to improve the quality of the search engine from a Google perspective.

So it was kind of invaluable in some ways to Google.

And I think in A I it’s, it’s going to be the same thing.

The monetization models are not completely clear uh in terms of money flow, right?

Like we’re talking large dollars over here and, and the balance sheets of some of these companies might not be quite as large.

So there might be a different kind of monetization structure to it.

Uh in terms of maybe revenue share at like an app developer level, maybe it’s the revenue share from, from usage of of infrastructure.

So we’ll see which way that evolves.

But what we’re confident about is that Apple stands at the crux of being able to monetize through its real expertise and distribution, which is connecting.

It’s like, you know, 1.21 0.3 billion iphone users back to the technology that is so appealing.

WSI.

Are you at all concerned still that all this stuff is not quite ready for prime time?

I mean, you know, anecdotally, you, you, you know when you do a Google search now and it automatically uses the A I, I don’t know if I trust that stuff, right?

So, and, and we’ve, we’ve heard multiple reports of it being kind of giving wrong answers or answers that make no sense, you know, Apple is never in a rush with this stuff and I wonder if there’s a risk for once that it’s rushing too much.

Yeah.

No, it’s a good question, Julie.

And as you point out, like Apple is very, very measured in its ability to sort of expose tech to consumers and make sure that the tech is, is kind of ready uh in some ways.

And so what we expect is that there will be maybe an additional orchestration layer of sorts uh that that Apple might introduce to keep things true.

So let’s say that, you know, there is a query and you, you, you come back with some results, maybe there is a filter that Apple will use on top of this to ensure that whatever is the response is compatible with what Apple sort of, you know, agrees that this is a qualified response.

And, and I mean, when we’re going into the domain of generative A I, it becomes kind of a difficult engineering challenge.

So I would say that, you know, there is probably going to be a lot of stuff that would be done on device which are going to be much smaller parameter models, maybe a 10 billion parameter models that are going to be run on device for a lot basic queries.

I think if you’ve got something else, I think Apple is going to have to figure out a way in which you know, the responses that are coming back from the cloud are consistent in some ways with, with their approach.

And by and large, I think that a lot of the problems that, that we’ve seen so far around hallucinations or maybe being trained on poor data.

So there are quality control issues that I think Apple will have to contend with.

So it’s a very legitimate question.

I think it is still early stages.

So in that way, uh Apple will have to be measured in the way that it comes out and deploys.

That’s why I think it’s very important to give specific interface hooks into Siri.

And then you have an API creation that kind of, you know, keeps it under Apple’s control, right?

And then Apple qualifies these apps.

So that’s one way in which they could do this in a more protected manner, so to speak.

All right, all eyes on Apple’s big software show, Wansey.

It’s always great to have you on the show.

Thanks for making time for us.

Of course.

Thank you, Josh, pleasure to be there.

National elections in both India and Mexico could shake up those countries’, economies and investments here to help us understand.

The fallout is Malcolm Dorson, senior portfolio manager and head of emerging markets Strategy at Global X. Malcolm.

Thanks for joining the show.

Le let’s start with India uh Malcolm and, and you see these headlines, it looks like election results showing a, a tight win for Modi here.

What do you make of that Malcolm and, and what does it mean for investors?

Well, thanks for having me, Josh Julie.

Nice to see you guys.

Um So the past couple of days have been really volatile broadly across emerging markets.

We’ve seen elections in Mexico, India and South Africa.

But India specifically going into the last night of elections, exit polls showed a remarkably strong uh victory for, for Modi and the B JP.

And now as we’re seeing real numbers come out this morning, it looks like the margin of victory was much smaller, meaning that we’re going to move forward with the coalition government.

And so what does that then mean?

I mean, it seems from what I’m reading that some of the implications are that um maybe there was some dissatisfaction with the vast inequality, economic inequality that’s going on in India.

But what, what are the implications for Modi’s ability to affect his uh economic goals?

Yeah.

So from an investment perspective, the market was very enthusiastic and excited about a potential um majority victory last night.

Market was up 4% yesterday.

And as we saw the real numbers come in today, we saw the nifty 50 fall about 6%.

Big picture.

I think the market is getting a little bit ahead of itself.

Modi is still in power.

A coalition government isn’t necessarily a bad thing.

It provides a good system of checks and balances and big picture.

India isn’t a two week story.

This isn’t a one week election story.

This is a 20 year story.

That’s probably the best structural setup that we see in the world.

Uh It’s benefiting from not only the democratic elections but a market friendly government, very attractive demographics, uh momentum out of China in terms of manufacturing and supply chain diversification and a very unique digital stack that’s well ahead of its curve.

So uh I manage an India Fund and, and the pushback that I always get is does India seem a little too expensive or multiple is a little high?

And in general, yes, especially the past year or two, we’ve been at a bit of a premium towards its historical average, but now this is it, we just got a 6% pullback on on the whole market with no downgrade to earnings and the country is still growing 7% GDP this year.

So frankly, I’m really excited.

Uh Malcolm, let’s switch gears.

Talk about Mexico as well.

First female president.

There.

Are you equally bullish on Mexico, Malcolm for, for an investor with a long term time horizon?

Sure.

So, so this one’s a little, a little difficult, more difficult uh say nuanced for lack of better words.

Uh I think this is more showing the risks behind a candidate winning too much power.

Uh Though we expected a Scheinbaum victory, um she did much better than expected in terms of support in the Senate and the lower house which is going to give her much more power and much more control uh between her and her predecessor, Amlo, she, they’ll be able to name nine out of 11 Supreme court justices before the end of her term.

And I think there is risk of more state intervention of more spending.

We’ve seen a big pick up in the fiscal deficit through the past few months that are going to be very difficult to turn back when she is in power because she’s either going to have to raise taxes or cut subsidies to the lower portions of the economic pyramid, which is totally against her ideals.

So I think that there is risk with a higher fiscal deficit that could translate into, into higher inflation and in a weaker currency, which of course, as a US dollar investor uh would create a challenge.

So we’ve been able to, to trim our positions in Mexico a little bit ahead of this and just briefly Malcolm, then do you think when we’re, whether we’re talking about India or Mexico that you expect in the near term, at least some continued caution and kind of at least a sideways trade perhaps in equities there.

Certainly in Mexico, I think that especially in terms of smaller cap, higher beta trades, people are going to be moving out of those and probably more into kind of quality safer blue chip names.

Um And then in India, I think that we’re going to see people refocus on fundamentals on equity stories and not just buying momentum, not just buying small caps, buying beta anymore.

Uh They’re going to see this more as a, as a system of checks and balances and uh and it’s gonna be a good opportunity for stock pickers across the board.

Thanks a lot, Malcolm.

I appreciate it.

Thanks for having me.

Well, President Biden taking action on securing the southern border, the executive actions to bar migrants who cross the border unlawfully from receiving asylum here.

With more on what this means for Biden and migrant flows.

Let’s go to Yahoo.

Finance’s senior columnist, Rick Newman V. There has been a lot of talk about this issue.

Um We haven’t seen really much congressional action on it, right?

Despite uh President Biden supported Bill that was before Congress earlier this year.

So I guess he’s taken the bull by the horns here.

The last major congressional action on immigration was in 1996.

So it’s been a little while.

Uh there was of course this little flurry of activity in the Senate earlier this year where there was some bipartisan agreement on an immigration deal, but Republicans who supported it then they changed their mind, they bailed out.

Uh Democrats said that was because Donald Trump said, don’t give Joe Biden a victory on immigration just let him deal with the problems at the border.

Uh because they thought that would be a uh uh better advantage for Republicans as a political liability for Biden.

So Biden has now um uh issued this executive order.

Um Basically what this executive order is going to do is sharply raise the standard for applying for asylum at the border when border crossings, uh sometimes called border encounters, when they reach a certain level, which is going to be a seven day average of 2500 border encounters.

And we were already above that level.

So this, this basically goes into effect today immediately.

So there, so there will be a sharp reduction in the people who can, who can qualify for asylum when they come to the border, the Southwest border.

So that what happens next is that’s going to cut down on border encounters and then when the number gets below 1500.

So it goes into effect when the number hits 2500 or more on a seven day average.

And then they suspend these stricter standards when it falls below an average of 1500 per day.

And the idea here is, um, as, as the news of this and the stories about people getting turned away as this ripples through the system.

Uh People who think they want to come to the, to the Southwest border and take their chances getting into the United States.

They’re just gonna say maybe it’s not worth it, maybe it’s not paying the thousands of dollars to smugglers because, uh, when we get there, there’s a much greater chance we’ll just get turned away.

Um And by the way, I would add, we were talking about Mexico.

What’s been happening this year is behind the scenes.

Mexico has actually been interdicting a lot of migrants before they even get to the US border.

So, um border crossings last year, especially in December, they hit record highs, but they’re down by a lot um from those levels.

So nonetheless, Biden thinks he’s got a big political problem with uh migration.

It’s one of the worst issues in terms of polling.

So he’s doing something about it.

Rick quick follow here.

Speaking of the, in the southern border of Mexico, just electing its first female president.

How could that in your opinion, kind of factor into us Mexico relations from here.

Uh Probably steady state, Claudia Scheinbaum who is the incoming president, she is uh she’s an ally.

She’s the same political party as Lopez Obrador am low as he’s known.

Um And relations have been pretty good between uh between Mexico and the United States under am low.

And President Biden, there are some issues um they relate to trade uh in, in many cases.

Um there’s obviously drug trafficking, uh fentaNYL that’s coming into the United States across the Mexican border and killing a lot of Americans.

Um So there is some tension there but generally the, the two administrations have been getting along and I think most analysts think that will be that will continue to be the case and that’s very present, very important for Biden to make voters think that he is making some progress, cutting back on migration on the Southwest border in five months leading up to the election because this has become a big deal for voters who are seeing this on cable news and think this problem is out of control.

So Biden needs to be able to demonstrate to them he’s doing something about it.

We’ll see if it works.

Rick Newman.

Thanks a lot.

Appreciate it.

Coming up.

A I’s energy usage could mean big gains for utility names more on how to put power to work in your portfolio on market domination, the utility sector outperforming so far this year closing out its best may since 2003.

But for investors looking into the defensive sector, traders may find a fresh perspective of opportunity with utilities.

We’re looking at how to navigate the big picture with the Yahoo finance playbook, Brent Kwell E Toro us investment and options analysts along with Sophie Karp, key bank capital markets, equity research analyst.

Joining us now to discuss, welcome to you both and Sophie, I, I’ll start with you.

We’re actually Sophie uh the start of the show, we were talking to Michael Krowitz uh from Piper who likes utilities and we’re asking why and, and he, he referred to them as sort of the uh the iron man of the stock market.

Sophie.

And in that, in the sense that you kinda, you’re kinda playing offense and defense when you, when you’re in the utilities, you agree with that Sophie?

Oh, thank you for having me and, uh, well, I obviously like to do this.

Uh, we are bullish on the space and we have been bullish since the start of the year and never from before, um, the start of the year and I think with the A I rush sort of emerging here, um I, I would refer to it as you know, uh we have this gold rush and utilities.

Uh power companies are the ones who are selling shovels to into this gold rush.

And so I think it’s an excellent one to get exposure to this trend of force.

Uh And it’s a, it’s a way that also offers defensive um uh characteristics because of the nature of this uh non cyclical nature of uh of this sector.

And um you know, so, and it’s historically still inexpensive relative to where utility is historically traded uh versus uh bond yields and versus the I found it as well well, and kind of to Sophie’s Point, Brett, what’s interesting here is, you know, as the market more broadly has come to this hire for longer realization, normally that would not necessarily be a great recipe for utility stocks, right?

But because there is this alternative narrative now about A I, they have been supported in a time when maybe they wouldn’t otherwise have been, right.

Yeah, I believe that there seems to be a, a sort of um multi catalyst approach to utilities at the moment.

They, they are typically a more defensive sector.

But um right now we have the A I uh catalyst helping to fuel the recent gains.

And, and while the idea of interest rates or at least lower interest rates have been pushed back, I think investors still have that on the front of their minds.

And when you look out over the next say 6 to 12 months, um the expectation is pretty clearly that the fed will be cutting interest rates and, and between that and, and A I, that’s, it’s a kind of a unique catalyst I think for utilities and it’s, it’s part of the reason why it’s performed so well this year.

So if I bring back to you, you know, we’ve had a number of, of strategists.

So if you come on the show and pat on the table for utilities, you know, it’s not a new theme and, and investors have bid, bid them up broadly.

When you look at this, at the sector, Sophie, do you consider it still, you know, attractively valued here?

Yeah, we do.

Uh I think, you know, when we look at the valuation of benchmarks where the sector trades uh versus the S and P 500 versus um bond bond yields, like I mentioned, I think it’s still historically inexpensive.

Uh It’s outperforming now, but uh look at the slightly longer chart and we come and all file like a year or two of underperformance versus all the major indexes.

Uh when the cyclicals were, were outperforming and utilities were essentially, you know, flat down.

So, uh in my, we’re just in the beginning of this uh reset for the space and the trend is real like it’s, it’s not, it’s, it’s visible in the power prices where there’s where this merchant market for power.

Uh power prices are at levels we have not seen in a very long time for the first time in like a couple of decades.

Probably we’re seeing actual growth in power demand in the U si think it’s, it’s a really big change.

It kind of shocked people into realizing that the space has a lot, a lot of potential.

I guess my big question when it comes to that increased demand and Brett I’ll take this one to you is whether the power companies can meet that demand, you know, especially if it continues to go up because of these data centers.

For example, can the grid take it?

Are these companies going to need to make big new capital investments in order to keep up?

They may need to.

But back, I’m back to Sophie’s point.

I think that the group is still, even though it’s had a big run, it’s still attractively valued.

And even though it’s, it’s, we’ve had sort of this giant rally, whether you look back over the last few weeks or you look back, you know, year to date or even all the way back to, you know, back to November.

Um, even though some of those catalysts might, might require more investment from those groups, um, the, the earnings expectations are still pretty strong and the valuation hasn’t gotten, um, you know, out of control for, especially compared to where it has been over the last few years.

And so I think when you look at sort of the, the bigger picture for utilities, it still remains attractive even with all of those considerations at hand.

And, and Sophie, it’s a good question.

So I want to get your take too, whether power companies can meet this demand, just given A I crypto EVs, what do you think Sophie?

Yeah.

And I think that’s for sure they can, right?

Uh It’s just a matter of how well aligned the timing of that is going to be with the uh uh how fast the uh A I and the industry wants it.

And I’m not sure what uh the tech guys are projecting here, but uh it’s possible to build generation relatively quickly in certain places in the US.

And I think like it’s, it takes probably a couple of years to build a gas plant, it takes couple of years to build a solar or wind plant.

Um And uh we see a lot of, and because eu is not a centralized, we kind of see that naturally uh tech customers are gravitating towards the places where there is capacity right now.

Uh And so we’re not actually seeing uh you know, right now a situation where power demand is not being met.

So there are different places in the country where there is capacity available and there are some places that are more tight, right?

So for example, not Virginia, that’s been a data center, you know, uh haven for, for a very long time.

They may have to wait longer if they want to interconnect there.

But um anywhere in the in the country, like in other regions that can be accomplished faster and hope we see that its customers spread out and and Sophie just quickly before we leave, you are there particular uh utilities that you think are best positioned either because of where they’re located or you know, their cost of, of, of power, for example.

Yeah, I think they definitely um uh it doesn’t, the customers tend to triangulate like they want cheap land, they want uh affordable power, they want time to market.

And from that standpoint, we would flag as the southeast of the US and they also want access to fiber, right?

So when you overlay all these factors, you you have advantage in sort of the Southeast and we will flag Georgia potentially uh other southeastern locations, right?

So that would be Southern company that benefits from that and we would flag like middle of the country where one of the largest public traded publicly traded companies is Excel Energy XCL.

So that’s another area where uh we see potentially uh influx of data centers.

Um And of course, the usual suspects, Dominion Energy who services Northern Virginia territory.

Sophie Brett.

Great discussion.

Appreciate your time.

Thank you.

Thanks for having us while wrapping up today’s market domination.

Don’t go anywhere.

I’ve got you covered with all the action following the closing bell.

Stay tuned for market domination over time.