The Exchange : CNBC : June 28, 2024 1:00pm-2:00pm EDT : Free Borrow & Streaming : Internet Archive (2024)

they've beaten estimates by 15%. earnings and revenues up by 20%. 2% dividend growing at 6% to 7% a year. >> stephanie? >> travelers, 11 times earnings for 10% premium growth. they have raised the dividend 20 consecutive years. >> good week, everybody. see you on "closing bell." "the exchange" is now. ♪ ♪ thank you, scott. welcome to "the exchange." i'm kelly evans. here's what's ahead. a seismic decision by the supreme court, and it impacts nearly everything the government does. from health care to financial services, tech, taxes, and more. we'll walk you through what just happened, and the far-reaching implications for main treat and wall street. the latest inflation report coming in as expected. the good news, headline and core prices cooled. the bad news, this may be as good as it gets for a while. we'll look at whether that's right, what it means for the markets and the fed from here.

shares of nike are on pace for their second worst day on record, following weak results. is this another sign of what jpmorgan calls a selective recession? if so, who can best weather it? let's start with the markets and dom chu has the overall markets. >> so the numbers right now, kelly, are tame. i mean, relatively so. if you look at the markets, pretty much flat. earlier today, we did hit record highs, i'm going to put the stars up, for both the s&p 500 and for the nasdaq composite. on the heels oh of that, kind of tamer than expected inflation report that you just mentioned. the dow is up about seven points, call it flat on a basis of 39,171. the s&p 500 is at 5481. at the highs of the session earlier this morning, we were up roughly 41 points, anddown six points at the lows. so, again, tilting towards the lows of the session. the nasdaq composite, the

underperformer, down about 0.2 of 1%, 17,828 is the trade there. sit the end of the month and the first half of the year, so let's check on the stock story that has been the month. of june and every other month so far this year, that's nvidia. shares hit a record high, and briefly made it the most valuable company in the world, topping a $3.33 trillion market cap. we have seen about $260 to $300 billion of that evaporate. but keep an eye on nvidia shares, joining that $3 trillion run. so a lot of big tech in focus. nike, by far the worst performing stock in the s&p 500 today and the dow, as well. down about 20%. kelly mentioned the second worst day on record for the stock. a lot due to not just the mixed report it had, but the idea that the current quarter could see its sales decline that was deeper than some expected, as well. all of this happening in the

athletic apparel and footwear, is there more of that consumer crack that's showing right now? kelly, i'm sure you'll talk about this later on. back over to you. >> a 20% drop. that inline pce report may not move markets too much, but was there anything in there that could move the middle on the rate cut timeline? let's bring in chief investment officer peter bookmar, diane swan, michael gapen, and steve liesman. full house here. we appreciate everybody's house. steve, just kick things off. what jumps out to you? >> i like the real spending being up to 0.3. that's a good number. incomes are doing well. the big number is the 0.1. the big question is does it continue? the fed is not modeling 0.1, i'm just actually crunching the number now. to get to the 2.8 that the fed is forecasting, it's got to be

at least on the core, it's got to be -- they're looking at 0.2. so the fed is actually, i don't know the they're more realistic or pessimistic, capital economics thinks they're more pessimistic than is warranted right now. the core pce is running 0.2 below right now where the fed thinks it will be by the end of the year. >> and that says we've already hit target. should we expect to say there? >> i would be really surprised if 0.1 each month was the new trend. i do think something closer to 0.2 is probably where we are. certainly,it's a bit trickier p. we're now saying we have four months of bad inflation, followed by one good month of inflation.

so we can debate on what the new trend is. either way, it means the fed needs more time to see where we are. so i don't think 0.1 is where we are, but obviously we'll see going forward. >> that's a good point about the revisions. diane, would you say that's a change worth noting or would you stick with the more emergent disinflationary story? >> i think there's a wider path to a cut in september, although we're still only at one cut for the year. that's because there are a lot of special factors. the good news is, it looks like the shelter cost likely overstated because of an overweight by new york and a poor survey response for the owner's equivalent rent. we should be getting some good news on that back half of the year. the year over year comparisons in the back half of the year are much harder, as we get past june. so that's one of the hurdles. but i think more importantly, as you really need to see continued goods deflation. a drop in goods prices, which

we're starting to see, and pushback by consumers. they're pushing back but not pulling back. that's good on price hikes, and retailers are responding to that. but you need that to offset what's becoming more structural inflation in the service sector, most notably in insurance cost. everything from vehicle insurance, housing insurance to health care insurance, and health care cost. one of the largest increases in health care cost overall since 1983 on a month-to-month basis. that is really stunning. and those are structural factors that the fed has to offset with declines in prices in the goods sector. we had a lot of goods deflation for several decades, but there are a lot of reasons to believe some of the declines we saw in goods prices might be temporary, because there was stocking up ahead of concerns of u.s. port strikes, everything from storms and geopolitical tensions disrupting flows of goods as we

get into the summer. interestingly, some of that stocking up has already shown up in halloween promotions before the fourth of july. absolutely crazy, but i think we are in a situation where the fed still needs a lot more evidence and much more importantly, the polling on inflation and politics is important. consumers and the research is showing up on inflation. inflation is much more corrosive than many economists had anticipated, and scarring to people's psyche, as well. i think that's really important. that's something that is in the fed's mind as well, is that they really need to beat this battle on inflation, and their bias is to overtighten because they're data dependant and the data have lagged. >> peter, she brings up a point about goods, inflation, deflation. this fulls like a fulcrum for the reports ahead.

do we see inflation pick up again or downward pressure because of excess inventories that diana is referencing? it feels like we could go -- maybe be pulled in both directions. >> i think the seeds are being sewn for a liftup in goods prices. at some point, we're going to see inventory restocking, whether there's demand to substantiate that or not. what i'm looking at every single week is what is happening with container prices. we entered the year, the 40-foot container price from shanghai was just under $1700, down from almost $15,000 at the peak, but similar to february of 2020. this past week, it was $73 00. every single thing that's made in this world ends up on a truck, a ship or a plane. so not only are we seeing the rise in container prices, it's

falling now into a sharp increase in air cargo prices. trucking prices still remain subdued, but over the next six months, that will flow back into higher goods prices. >> you're right, what do you make of the fact that auto inventories are looking glut-like at this point, which puts down toward pressure on auto prices and auto insurance. it's not an accident we're hearing from these different names about sales issues that translate meaning more markdown in product. >> if you merge all these different factors together, is that enough to just magically get us to 2%? not only getting us there, but staying at 2%. getting inflation back down is not winning the war, it's winning the battle. having it stay down at 2% is winning the war. i think we merge all this together, and diane said it perfectly with the services inflation never being transitory

ever, that is sort of a bid underneath inflation. and then you throw in all the government spending, 3% to 4% is the new normal relative to the precovid 1% to 2% level of inflation. >> michael, the sheen of this discussion has been somewhat hawkish, i think we could say. as much as the inflation data have broken lower and the markets may be pricing in a couple of cuts, no one seems to think we need to start a significant era of rate cutting. >> that's right. i think what peter and diane are saying, and i would agree with entirely, is the good reports that we have had recently tell you wow, you need an awful lot of deflation and things like goods or non-service -- non-shelter services inflation to get inflation to 2%. so i would flip this around and say what ultimately would give the fed confidence to cut? probably is when does shelter

take a step down? so the fed could be confident that services prices, which as diane noted neverreally fall, are rising slow enough to give them confidence inflation will converge to 2%? all these other bits we're seeing are nice, but you need a lot of disinflation or deflation in those categories to make up for the stickiness in services driven by housing-related inflation. so to me, confidence and how much cutting you're going to get is based on that category. i'm with diane, we don't think they cut until december. we have them cutting to 3.50 to 3.75. so still confident inflation is coming down, the direction of travel should move lower. it will just take a little more breaking power from the fed to get it there. >> steve, we'll hear from the fed next week at the ecb forum? >> yes. sarah will be interviewing him. i just want to say one thing.

i understand why these pre-eminent economists here on the panel are talking the way they are. they're talking within the framework the fed has laid out. that's the kind of forecasting that they need to do for their customers. but i think there's another way to think about it, which is the framework the fed hasn't laid out. let's go back and talk about the fact that we're coming up at the end of this month on the 12th month or the one-year anniversary of the fed being at 5.38. of that period of time, the inflation rate has fallen from -- which number do you want, kelly? let's give you the core number of 4.20, down to 2.60 today. over that time, there's been no relief at all in the funds rate. and so to me, sticking there, i think, is taking a very high risk that the economy suffers much more than it otherwise needs to, because they had set a rate, the funds rate for one

level to bring inflation level down. it's come down substantially, so i think the fed is waiting perhaps a little too long here. any way, somebody needs to be the dove on the panel. >> diane? >> actually, i think the bias is exactly that, that the fed will over -- could overtighten. that's the risks. and i agree with steve on that. the reason for it is because powell remembers 1970s. he doesn't want to cut prematurely. that's left him with data dependance and the data are lagged. so by the time we see enough things for the fed to be convinced to cut or a weakening in the economy that's more broad based, which doesn't look like the case right now, but there are some things we're watching like the rise in unemployment. could be seasonal adjustment, but the bottom line is, the fed does not want to repeat the mistakes of the 1970s and cause

a more pernicious bout of inflation by cutting prematurity. could they do something like what the ecb did, cut once and do it as a hawkish cut? that is a possibility, but this fed, i think, is convinced in its institutionalized not to do that. so the bias is to overtighten. that's why you hear people like mary daley talking about non-linearity. about the risk they hit a trip wire, which powell is most concerned about, and they accidently set off a more negative cycle for the economy and a more broaden weakening of economic conditions than they like. >> i think we'll just leave it there and appreciate your analysis of the pce report, everybody. peter, thank you for joining us here. we have a news alert on another s.e.c. suit. >> so the s.e.c. is suing

another crypto firm, this time it's consensus, alleging a big fail to register as a broker. this is a company run by the co-founder of atherium. it is the latest enforcement action from the scc. -- s.e.c. robinhood also got a notice from the s.e.c., so this is alined with the s.e.c.'s previous position. coinbase also countersued, coming at a time when crypto has become this hot bed -- hot button political issue. former president trump has really come out as more vocal backer of the industry than trying to court donations from crypto entrepreneurs, but it did not come up in the debate, guys. >> we'll talk about the s.e.c. next block. thank you very much. coming up, while washington grapples with the fallout from last night's debate, the supreme

court overturninga four-decade old precedent with major consequences for all federal agencies. we'll debate for what it means for wall street next. and president macron's citizens head to the polls sunday. we'll tell you why the economy, similar to the u.s., is the number one issue for voters there. "the exchae"s ck aerng ibaft this. >> this is "the exchange" on cnbc.

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welcome back to "the exchange." chevron is overruled. that's what chief justice john roberts wrote in the opinion as the nation's pop court overturned a 40-year-old precedent, delivering a blow to the power of federal agencies. let's go to washington with those details. >> for a generation, conservatives and business groups have been campaigning to overturn a supreme court ruling that was little known outside legal circles, but had huge influence in the balance of power between companies and the government in washington. it's the so-called chevron doctrine. today they got their wish. the u.s. shchamber of chers released a statement saying -- >> the doctrine stems from a 1984 supreme court ruling in shechevron verses the resource

council ruling -- >> the supreme court today used a case involving herring fisherman in the atlantic ocean who challenged fewer requirements to agree. the biden administration argued that overturning the chevron doctrine would generate a convulsive shock to the legal system. now we'll find out just what that convulsive shock looks like, if it comes. bun likely outcome is that business group also file lawsuits against vast swaths of the federal regulatory agencies and all regulation, looking to see where the new balance of power lies between the regulators and those they regulate. >> wow. by the way, is there a sense of the time frame for all of this? in other words, sometimes the supreme court decision lands with immediate effect. is this of that nacher? >> i think the time frame for the impact that i'm talking

about here, that will take some time. people are going to have to digest this ruling, figure out the likeliest targets and figure out where things are in the process of litigation. then you will see in months to come a wave of litigation trying to test where the new limits are. >> thank you. we appreciate it. one of our next guests is really surprised by the decision and says it will send ripples across the economy. joining us for more is my next guest. welcome to you both. james, were you surprised? >> i was not surprised that they did the ruling to repeal chevron, but this is a big one. roberts dropped the big one. it's total, complete, and across the board. it's not nuanced. it's not well, sort of, kind of, let'sy adjust things. chevron is gone. the agencies have to listen to

the courts. this is a complete reversal of chevron. >> that's what struck me as well, is the nature of it. this has been a court that has been a little cautious, and they did not at all nod towards what others have said. hey, deference to the 40 years of history. no, they go back to that ruling, say it's overturned. where does that now -- which agency is most vulnerable or which rules do you think stand to be most challenged? >> is that for me, kelly? >> yes, go ahead, sorry. >> ev regulations are most at risk. we can see those get to the supreme court by various pathways as soon as this fall. otherwise, i think the epa's power plant regulation is vulnerable. and the idea of climate regulation through a pool of a government system where you try to find statutes that give you some bases of what you want and

you interpret them creatively. all of that is in big trouble now. >> danny, what would you add? >> this was always about who decides the law. and ever since chevron has decided, the courts gave deference to regulatory agencies with two main ideas. number one, the agencies usually have the experts. so if we are talking about an agency devoted to fishing, that's the people who know about fishing. the second thing is though piece in those agencies are accountable to the extent they can be fired. federal judges seven for life. they're appointed and serve until they're impeached or they die or step down. so they don't have the same accountability, and they don't have expertise. but what they do have is a constitutional directive to be the only branch of government that interprets the law. executive agencies traditionally don't have that prerogative. but since chevron, when the law

was ambiguous -- >> how much does this ruling trim the sales of that power, in a substantial way or only at the margin? >> you bring up a good point. we learned in school that it's the legislature that makes the laws, but that's not entirely true in our system. we know that judges can make law by decides cases, but the executive branch technically makes law.

when congress passes a law, the executive branch interprets it through its agencies. they put out regulations. the code of federal regulations, for example. and those have the force of law. so the executive branch in that sense does create law through its agencies, and chevron stood for a deference by the court, charged with interpreting that law to those agencies. now, this case, it's been 40 years since chevron. this totally up ends that approach. it doesn't necessarily mean the mass chaos. it could, but not necessarily. even justice roberts noted in oraling argument that look, chevron doesn't come up that often, but there's a good point to be made there. what does justice roberts know about business and regulations on the frontlines where it's actually happening? he, of course, is in the cloisters of a federal judgeship. so he doesn't know it the way

people live it know it. >> james, what would you add beyond the climate areas, what are some areas investors might pay attention to? >> network neutrality, a lot of health care regulation where the cms or some government agency gets the decision -- gets the opportunity to make decisions on health care. labor law. it really is, as you said, kelly, comecomprehensive and ac the board. we're trying to do climate policy based on laws from the '70s, so that is critical. but it applies to telecommunications, health care, labor and to financial services, and a financial services example is the climate disclosure rule. one, we don't know how far back this decision would reach. there is another decision coming up versus the federal reserve board of governors that will tell us how far back some of

these decisions could be challenged. and then also there's a rule for the states. we talked about congress and the executive branch, and the judiciary. the argument is that chevron has diminished congress, and it's also allowed the courts to fail to seven their function. if you look at these big cases challenging epa regulations, they're all being brought by groups of states that feel that the states are the losers to chevron, too. >> interesting. >> another example of that would be the -- the good neighbor plan. 25 states said what about us? this is not fair to us. and it sort of preshadows where we're going, given not only the three branches of the government, but the states the rightful authority, too. >> and danny, it's interesting coming in tandem with the debate last night. there are those who are already asserting if trump wins in the

fall, his administration, under his administration, these powers could be substantially reduced. do you think that's a possibility? >> yes. no surprise that if trump fully grasps what's going on with this chevron decision, then yes, he might use that as justification or it might embolden him to enact policy that would be essentially immune from agency interpretation. now, look, that doesn't mean that agencies won't still issue regulations and it doesn't mean that they don't still have the force of law. it just means that when they're challenged in court that the court reviewing them has the primary responsibility for determining the law. they don't have to show that deference to the agency interpretation. under chevron, as pointed out in oral argument, all nine justices could interpret the law one way, but they would beforced under chevron to defer to a non-judge, an agency, an unappointed

agency's determination of what the regulations are. so regulations still exist, it's just what happens when they get challenged in federal court. >> we can imagine it will invite a lot of challenges now. so quite the day. danny, james, thank you both very much for explaining it. we appreciate your time. coming up, nike is swooning after cutting its full-year guidance and warning sales could drop 10% on weakness in china. the stock is having its worst day ever, down more than 20% and on a huge surge in trading volume. with more than 90 million shares traded today, that's nine times the average. we'll break down the quarter and whatt ys aut t isabohe state of retail. stay with us. ty, we never stop looking for new mobility solutions. because sometimes the best road forward, is the one you didn't expect. (♪♪)

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(♪♪) ♪ well i was raised by careful hands ♪ ♪ yeah, they made me who i am ♪ ♪ so i'm off to see... ♪ we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪ welcome back to "the exchange," everybody. i'm tyler mathisen with your k cnbc news update. the u.s. will remove the aid

pier off the gaza coast because of weather. about 12 million pounds of aid remains sitting in storage for more than two weeks, as agencies have difficulty moving the aid into gaza. the pier has been closed once because of weather before. tractor supply, the retailer known for selling goods focused on a rural lifestyle, announced it's ending its diversity program after online backlash. they are withdrawing its carbon emissions goals. uber will pay you $1,000 to ditch your car for a month. the ride hailing company has a new promotion where it will pick 175 cities in select cities in the u.s. and canada, including los angeles, chicago, toronto and vancouver and given vouchers for uber rides and public transport to get them to stop driving. sign up online for the trial. it starts july 22 and, kelly.

back to you. >> clever, but a good, long-term business model? i don't know. >> that's not usually the way to make money. coming up, as so goes france, so goes america. on the heels of last night's debate and the head of france's snap election this weekend. we'll discuss what the rise of the right in europe could mean for the global economy, investors and the u.s. election. and overseas, responding to the cnbc's latest survey. expect india to outperform in the third quarter. japan in second, europe a close third. "the exchange" will be right back.

welcome back. last night's presidential debate making headlines around the world, with multiple outlets questioning whether biden will stay in the race. germany writing, that was painful. while the u.s. election is still more than four months away, events overseas may provide a preview of what's to come, particularly on the economy and immigration. we could get a glimpse as early as sunday when the first round of france's snap election

starts. our next guest has been covering. joining me now is the financial times paris bureau chief. leila, great to have you here. >> thanks for having me. >> i think that's how the biden administration feels when they think, well, strong economy, where's the love? but i think we know the punchline is inflation. >> yes. french consumers have been feeling the pain of inflation for a couple of years. as you know, the sort of war in ukraine a couple of years ago started in '22, sort of hit energy prices in europe more than in the u.s. the french government actually did a lot to protect households. they put a price cap on electricity, which helped. it's just people seem to have forgotten they did that and they get almost no credit for doing it. >> what are people saying about what could happen on sunday? and what do you think it does tell us about the mood, perhaps

globally, about what has happened with inflation, immigration, and the economy in recent years? >> yeah. i think president macron has kind of been like a bulwark against populism in france for seven years now. he has done something a bit wild in calling these snap elections. it was unexpected. he didn't have to do it, and he's now put him and his centrist allies in a difficult position where they are looking at heavy losses in this two-round vote. what does it tell us? i think it just tells you that the forces of populism are quite strong. it's happening in europe. we can see that in the u.s., too. it comes from a frustration with some voters about living standards, and also sort of -- a real sort of like protest vote against immigration, which is real and i don't think can be denied. >> if he's going to lose, or suffer losses or however it's going to shake out, why call it? >> that's a great question. if i was in his brain, i would

be able to tell you. political observers here, including my team, have been debating that since he did it earlier this month. his official explanation is that it's actually the most democratic thing to do in the french system. his party had suffered heavy losses in the european election, and he hasn't had a majority in parliament since 2022. so it's been a bit rocky for him. in the french constitution, the president can call snap elections when he feels like the legislative branch, the parliament, is blocked and not functioning well. so he made the argument that his -- he lost badly in the election. the parliament wasn't functioning well, and the most democratic thing to do is go back to the voters. i think maybe he felt like he could destabilize his opponents and come out ahead, but that hasn't happened. he's facing a far-right party that has just ascended. you feel something happening in the country where they have a

good shot at winning. >> what about the far left? >> so you can't actually call them the only far left. the whole left has coalesced into one party, made up of the far left and more moderate parties. so it's a hodgepodge that's not intellectually coherent, but they've mashed it together in a matter of days. so they're running second, and will probably come in ahead of macron's camp, which is devastating for him. economically, they have a heavy tax and spend program, which will change things a lot for investors looking at france. >> beyond france, where should our attention be focused as that was a snap election. we have ours in a few months. so where else might the balance of power shift? >> the uk is having their elections on july 4th. that one has a little more of a

predictable script. labor is going to win, so it's less of a surprise, but it will lead to changes in the uk's position, potentially bring them closer to the european union. since brexit, they've been out on their own. the incoming government has given signs they might want to change that. but i also think you have to watch other countries in the coming years that are going to have elections and the sort of nationalist and far-right parties are polling strongly in a lot of places. >> just the most obvious question, if that far-right party wins, policy wise, what are the immediate implications? >> you go into something called a co-habitation in french politics where the prime minister's office is run by whoever won the legislative session. they would control daily affairs, government, the budgets. the president still stays in place and he controls defense and foreign affairs. now, that's how it was supposed to work on paper. we have never seen, although

there have been previous co-habitations in france, we've never seen with leaders in parties so opposed. so how conflictual will it be for macron? no one really knows the answers to these things, but these are the things that matter. >> leila, thank you so much for joining us to explain. let's look now at what those snap elections could mean for investors. ises this is what they're watching, the spread between the french and german ten-year bond. it's been used as a barometer of risk tied to the election, with the spread at 82 basis points. this is the widest since the crisis back in 2012. experts say an outright majority win by either government, whether it's macron or the right leader marie le pen, that could send borrowing costs across france sharply highly.

morgan stanley expects another 40 basis points, giving either government the power to increase the country's already high fiscal deficit. a hung parliament would potentially result in uncertainty, and yields will likely remain elevated until the markets have more clarity on the election outcome. and remember, the european central bank also has the option to intervene in the event that borrowing costs surge to a point where it causes real contagion. so far, officials have down played any need to intervene. these are some of the scenarios people are gaming out. a potential silver lining, bank of america says the risk of contagion stillover increases the likelihood of faster rate cuts in the european region. the election begins on sunday, then the uk snap election on

thursday. followed by france's second round on july 7th. kelly? >> to say fireworks is such an easy thing to say. we talked about bonds, but what's the outlook for european equities? >> there's been this active debate around european equities. now you have these conflicts forces at play. yes, more political uncertainty over the next four to six weeks to see how these elections pan out. but a central bank that is incentivized to keep cutting rates. the key indicator people are watching from an economics standpoint is pmis. we're seeing those crack across europe, so that could be a sign of managers and businesses losing confidence. >> it's going to be an interesting few months. coming up, jpmorgan says own the cruise stocks. shares of carnival and norwegian

are up. we'll get a check on some of the other big movers next here on "the excng" n'gonyere.hae.

welcome back to "the exchange." we notched a new record high for the s&p and nasdaq here. before turning slightly negative this afternoon. the nasdaq, though, is set to notch a near 20% gain for the first half. this is the last trading day of the month, the quarter, the half. we're looking at 20% gains here for the nasdaq, nearly 15% for the s&p, and the dow lagging up only 4%. salesforce has been alaggard there. but don't be fooled by that 4% gain, it's still the first half since 2021. so what's driving these games? it's the obvious, amazon, walmart, microsoft, these are the dow winners.

intel, mcdonald's and nike are the big laggards. along with those power producers you hear pippa telling us about, they're the top two names in tech and utilities. on the other hand, retail among the worst performers in the s&p. walgreens just yesterday, of course, much of this decline and l lulu lemon, what a turn of the times for lululemon. the chip makers dominate the top spots. nvidia, arm, micron, along with constellation here, and that rounds out, of course, an amazing first half of the year it has been for equities. coming up, shares of nike falling nearly 20% to their lowest level since late march 2020. pandemic nadirs here at $75. this after results and guidance disappointed. from direct to consumer issues to china, why our retail expert says it can be even bumpier than

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her uncle's unhappy. i'm sensing an thunderlying issue.m. it's t-mobile. it started when we tried to get him under a new plan. but they they unexpectedly unraveled their “price lock” guarantee. which has made him, a bit... unruly. you called yourself the “un-carrier”. you sing about “price lock” on those commercials. “the price lock, the price lock...” so, if you could change the price, change the name! it's not a lock, i know a lock. so how can we undo the damage? we could all unsubscribe and switch to xfinity. their connection is unreal. and we could all un-experience this whole session. okay, that's uncalled for. welcome back. shares of nike are in free fall after they missed on revenue last night and cut their full year earnings guidance.

the shares down 20% are on pace for their worst day ever as a publicly traded company. management saying sales are expected to fall 10% in the current quarter due to softer sales in china and uneven consumer trends around the world. my next guest believes nike has some seriously large shoes to fill if they plan to return to growth in the near future. stacy is here, founder of sw retail advisors. great to see you. i wish it were on better news, but for everyone who's watching the debate and not digging through these results, what the heck happened? >> yeah, you know, the title of our note was "from swoosh to squish" and we weren't kidding. the overriding theme is that nike hasn't innovated, and now they're talking about pulling forward innovation, which is great, but in the past, when they have gotten their innovation back, it was different. we're in a new environment. we've got all of these serious competitors that we haven't had in the past, like hoka and new balance is back and asics and on

running, so it's harder to come back from here, and i think the biggest challenge for them is that their dtc is down high single digits, and now their wholesale business is positive, which is a negative margin shift on top of the fact that they're promoting to move products right now. >> let me play, to remind people what matt ball said yesterday, this was before nike, wasn't about any particular company. it was about what's happening with retail more broadly. let's take a quick listen. >> the backdrop that we see from a macro perspective, based on our work, is a selective recession, and what that means is you are going to have extreme volatility. >> well, and don't we ever have extreme volatility. so, let me put it this way. can nike, in a way, blame its problems on a bad macro? or is bad macro more important than dtc and china and all the rest of it? what do you think is the explanation here? >> nike cannot blame this on bad

macro. if you look at what the competitors are doing -- let's not talk about the new, shiny new competitors like on and hoka. let's talk about adidas, who, double-digit sales increases in stores and online. gross margins up 500 basis points year over year because they're selling increasingly full price. opposite situation with nike here. and even across the spectrum of retail, it's the have and have not. h&m was terrible yesterday. yet, into tex is up double digits, so it's about the winners and losers, and i don't think you can just point to the macro and say, hey, look over there. >> excellent point. what do you do now with the stock, quickly? >> i think they're talking about q1 down 10%, the year down mid-single digits revenues. i think it will be bumpier than that. they're talking about innovation, but we have to see it. the customer is starting to get used to them promoting again. it's hard to bring them back.

i think this could be a very bumpy road back, and i think earnings estimates would have to come down again. >> it's funny. we were just having this conversation offset. could buy on or the owner of hoka, deckers, or are they already too rich? >> i think it depends on the name. abercrombie, hollister, just got a little bit better here. abercrombie is not promoting at all. same thing with anthropologie. as long as that keeps going, you can still own them. and by the way, these brands are citing the customer is not digging for promotions. they're happy to pay full price. foot locker's business got better during the quarter as they pulled back on promotions, so you can't point to that. you can't point to driving promotions. >> fascinating. that means nike has some big -- it's like nike's down, lulu is down, starbucks is down, everything i knew for the past

15 years is out. it's a new world, new economy. stacey, thanks for joining us. we really appreciate it. and i will see you next on "power lunch" with tyler. don't go anywhere. amelia, weather. 70 degrees and sunny today. amelia, unlock the door. i'm afraid i can't do that, jen. ♪ (suspenseful music) ♪ why not? did you forget something? ♪ (suspenseful music) ♪ my protein shake. the future isn't scary. not investing in it is. you're so dramatic amelia. bye jen. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com. (♪♪) iconic brands speak for themselves. we are so excited to welcome you to our community. today is all about you. (♪♪) (♪♪)

[crowd chanting] they ignored your potential, and mocked your ambition. but it's not the critic who counts. with every swing and block, your game plan never changed. ♪♪ some still call it luck. let them. because you know what it's always been. inevitable. ♪♪ ♪♪ ♪ good afternoon, everybody, and welcome to "power lunch." alongside ellie evans, i'm tyler mathisen, and we will get to that presidential debate, bu

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