let's hear what they have to say when they report earnings next week. >> i like free port-mcmoran. >> i'll see you on "closing bell," everybody. "the exchange" is now. ♪ ♪ welcome to "the exchange." i'm in for kelly evans. here's what's ahead. the bond market still keeping stock gains in check. this as we prepare to hear from fed chair jay powell and we'll bring you headlines as to where to find opportunities across stocks, bonds, and commodities. plus, office vacancy rates hitting a new 20-year high. we'll look at the reits setup and the potential winners and losers into earnings, this aztec layoffs continue to pressure that sector. housing starts posting the

biggest drop in four years, but there is one name better insulated and better positioned to reap the benefits once rates start dropping, according to jefferies. the analyst behind that call is here to make his case. but we begin with dom chu with the numbers. >> trying to recover from that selloff over the course of the last few days, shorter term. right now, we're just about unchanged in the market. the broader s&p 500 is at 5060. it's down about one to two points, so flat on the session right now. at the highs, up a modest eight points on the s&p and down 21 points at the lows. so, again, the middle of that trading range. a level that we were watching before still remains around 5116, 5115. on the upside, that is now the 50-day moving average, so a level some traders are looking to see if we can recover there. but the dow is up about 1.25%, 37,851. paying attention, though, united

health care on the heel of earnings is accounting for every little bit and more of the dow's gains so far. so if not for unh, the dow would be negative right now. and the nasdaq composite up about six points, 15,890. interest rates, a key part of that discussion. john alluded to it in the open, but look across the yield curve. every maturity in the u.s. sovereign bond market is lower in price and higher in yield. the two-year benchmark, 4.97%. the ten-year, just a hair above 4.66%. for those people that use the tlt etf to trade in the government bond market, those shares are down about 2/3 of 1% after a 1% decline yesterday. so watch yields. and then the stocks of the day, it's the closeout. the winding down of big bank earning season. it's a tale of two different stock moves. morgan stanley and bank of america reported better than

expected reports if most of their business units, but morgan stanley is still up about 3% off the session highs, but positive there. bank of america, though, solid beat. however, some concerns for investors and some analysts about the prospect of interest net income looks like. john, we're all going to watch that big interview on "closing bell" later on with brian moynihan. back over to you. >> dom, thank you. talking about rates, the bond market keeps stocks in check still. one of my next guests says stocks can still move higher even if rates do stay higher for longer. my other guest is sticking with commodities. let's bring in peter, chief invest amendment officer, and general crumbman, investment strategist. guys, welcome. peter, so look at these yields. it's got to have an impact on the equities market, right? >> you would think from a

multiple perspective for sure, going into this recent rate move. the s&p 500 on a trailing basis got up to almost 26 times earnings, and forward about 21. that's rather rich for the rise in interest rates. and its economic and earnings impact depends on which side of the fence you are on. are you a borrower, looking to buy a house, trying to finance a factor? on the other side, are you collecting nice interest income as receiver, are you a boomer that wants to go on cruises? you seem to be doing just fine. >> the lender part is looking pretty good right now, jeff. what moves are you making in this environment, given not only do rates not seem to be coming down any time soon, but yields getting a little spike. >> so, you know, we're still in kind of hold your ground mode, and there's no specific theme that we see out there. what we do like is, you know,

having active strategies that we manage. there really is correlations that are coming down. you can even see that within the magnificent seven. they're moving in disparate kind of patterns, and that says that there's opportunity that's based upon the fundamentals, the valuations and technical elements of these stocks. so they're maintaining a blend between growth and value. we find plenty of attractive opportunities within technology outside of the magnificent seven. and we really like within capital spending, the industrials look good. the economy is holding up nicely. there's still opportunities with the consumer. and we're poised and measured in our view. we had a target of 5200 to 5400 on the s&p, and we're kind of maintaining that, and it's hold your ground and look at those stocks that aren't priced at 30 times, unless they have 30% growth rates. and kind of enjoy the attractive

metals out there. >> peter, you do remain bullish gold and silver, and other commodity stocks, energy industrial metals, uranium, agriculture, why that specifically, and is there a danger in not believing in some of this technology stuff, right? the ai story that, yes, some stocks are pretty rich in their valuation, but isn't the story just starting to unfold? >> no question, and it's going to be very exciting to see how companies use the technology as tools in terms of improving their productivity and improving their businesses and so on. right now, we're sort of in the picks and shovels development phase. let's see how what the returns of investment are for the users oh of that. on the commodity side, the crb index, tieing into interest rates that complicates the fed's job, it closed yesterday at the highest level since august of

2022. i think that that commodity bull run still has a ways to go. i've been bullish on precious metals. i think silver is one of the more exciting things to own. agriculture has lagged, but it's beginning to play catchup in terms of the fertilizer stocks. we know cocoa is on the upside, coffee is on a year high, and the industrial metals getting a lift from the ev excitement. but with all the money invested in tech over the past five to ten years, it was not invested in commodity production. so, this is sort of a payback of all the lack of investment in that area to the benefit of technology, and now you have the supply/demand imbalance leading to higher commodity prices. >> jeff, we talk about tech all the time, but health care and defense. let's start with defense, because the state of the world pretty troubling.

you like booz allen there, why? >> you wanted to get away from tech, but it's hard to do that. it's really ai at a reasonable price. so they have a number of contracts with the government. but as they move towards ai and systems development, it's an i.t. consulting company and they're benefiting from new contract wins with the government to develop systems that use ai technology. so, you can get this at a reasonable price as the estimates come up, they're priced at very reasonable levels in terms of pd, and we think that's a good place to be. >> and in health care? >> yeah, you know, you've had eli lilly that all of a sudden we're going to cut half of our body weight with these obesity drugs. what that's done if you're in sleep apnea or diabetes, the

world said we're going to have no more diabetes and everyone is going to sleep through the night, and we felt that has created opportunity for these wonderful companies with, you know, medical equipment and those areas for bdiabetes and sleep apnea. >> some of us have cut half our body weight. but not you, jeff. you're doing okay. peter, what do you do strategically when you think about making these moves in the market? it feels like we're trading sideways for a while. you could get complacent with your money and cash, but historically, that's where investors miss out on opportunities. so how do you figure out when and where to get aggressive? >> that's the most difficult thing is trying to time the market. the market rallied almost 10% in the first couple of months of the year. that was just an unsustainable pace in terms of annualization of that. sentiment got bullish measured

by a few indicators i looked at. you tie that into this rise in interest rates. valuations that i think made no margin for error, that in the short term, i think it's only prudent to be prudent. >> right. well, okay, we're trying to be prudent in this market as it keeps running. peter, jeff, thank you. china's economy grew faster than expected. but the hang sang selling off with these ongoing tensions with israel and iran. but my next guest says contagion is limited as long as we don't get a spike in oil. movering around $85 a barrel mark right now. dirk, you know, we hear about perhaps oil not getting hit as we await israel's response here, but how much of a risk is it? >> yeah, really good question.

i think the first take of the market after the weekend was, it will probably not escalate, at least not in a way that puts oil pro production at risk and puts war between iran and israel on the table, so the market likes it a little. i think that is the right view, because it was clearly demonstrated how important the u.s. really is for the defense of israel. and the u.s., of course, has absolutely no interest to let this thing escalate, so they will use all the leverage they do have to keep things in a fairly manageable level. and that means yes, you will not get an oil spike. right now, oil prices, it's really just to around current levels. but the risk being to stick with us for a longer time period, but we don't see this causing more damage. now, the risks clearly have

increased. basically, it's pushed to take a more hardline view, but it's not our base case. we think we can avoid that. >> even if we don't get a spike, does this risk, in a way, put a floor under oil? >> yes. i mean, probably $4 to $5 of risk right now in oil, and that is higher than we would have thought sometime ago. and that could probably stick with us, at least for another quarter or two. in the end, fundamentals will take over, and in the end it will be how much oil demand is rising, how much supply is rising and so north, and we see oil coming off again, but probably only in q3 when things could have come from current levels. and that is something we just have to live with for now. this risk premium in the oil price, you're right about that.

>> so q3 is just a quarter away from q4, and then we talk about weather again as an impact on energy. so how much room for volatility is there in that quarter before we start really talking about weather and nat gas and things? >> yeah. i think we will probably just stick around current levels unless there really is a big intensification between israel and iran. there could always be other issues, not just oil prices. many of those, so there's always in the oil market, i feel the unexpected happens. but we have moved quite a bit. we priced in -- i think we are typ fine for now. so from here, you would need an additional shock. and anything can happen, but we are confident that we are in the

right range. >> how does natural gas look at the same time, given that it also plays into some of these conflict narratives, probably more russia/ukraine? >> yeah, that's a good question. the important thing to realize, though, is from a local macro perspective, especially when it comes to the u.s., the natural gas market has become more international, but it's still the case that it's a more regional market. it is really all about the oil, and nat gas will play second fiddle. so the market rightly focuses on what this conflict means for oil first and foremost. >> we talked and q3, mentioned q4. by q1 of next year, we'll have clarity on who will be in the white house for four years. how much of an impact is that going to have on either domestic

production, or at least the narrative around it? because the u.s. is still producing a lot of oil, even though half the country thinks maybe not. >> yeah. the election is important in many ways, not just the policy towards oil producers, but also there's clearly a question of our relationships with saudi arabia, with opec being more willing to help a different administration out if production increases, so there are many, many components that go into this election. and really it's not that easy to sort of compartmentalize in terms oh of what is what. in terms of the production response, the normal playbook is that for republican presidencies, oil and gas does quite well. and we could certainly see some of that. >> finally, emerging markets.

given that the geopolitical turmoil out there, are there plays or too much risk? >> emerging markets, i would say in this particular instance, it's a very sort of regional impact. so yes, we do think some of the israeli credits probably should price a little bit more risk. so that is true. i think maybe some parts of gcc, but it already becomes quite weak unless we don't go backwards in this big oil spike. so my view, if everything goes according to plan, so it stays sort of globalized conflict. if we go back to trading fundamentals, the fed story and that is really important for emerging markets. so the reason that the emerging market carry trade -- if we can

stabilize u.s. rates and then things will improve in the emerging market. >> if everything goes according to plan, it will be the first time. dirk willer, thank you. coming up, a sea suite view on the impact of higher rates with the ceo of byi melon. we'll have him later on in the show. but first, big tech is getting smaller, down sizing its office foot print. we'll look at names and cities that are most at risk, next when "the exchange" comes right back. ♪(voya)♪ there are some things that work better together. like your workplace benefits and retirement savings. voya provides tools that help you make the right investment and benefit choices. so you can reach today's financial goals and look forward to a more confident future. voya, well planned, well invested, well protected.

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welcome back to "the exchange." demands for commercial real estate is still slugger, with u.s. vacancies at 20-year highs. my next guest says big tech layoffs aren't helping. joining me now is a senior equity research analyst covering reits. steve, welcome. i keep hearing that there is sort of a richer and poorer story in commercial real estate, and an office particularly. the newest kind of class-a is still filling up nicely, but the older stuff not getting as much demand. is that so? >> yeah, thanks, john. that is true. we are seeing real bifurcation

in quality across all the cities, and newer products are certainly leasing up much better. they're certainly holding rental rates much better, and companies want to bring employees back into highly amentized spaces across the country. >> what happens to the old stuff? >> that's a really good question. so if it's going to get repurposed into other types of real estate, in some cases it may be able to get converted into residential, that's starting, but it's going very slow. in other cases, it may get completely knocked down, and repurposed into other things. it could be hotels, retail. but, you know, in some cases, it's just not going to function as office space going forward. >> how honglong does that conti to play out? it's probably going to be expensive for longer, but does it get easier for potential

investors to pencil out exactly how much those expensive conversions are worth spending on, how long it's going to take for them to make whermoney? >> it's going to take a while. it has to be cheap enough for new buyers where they can buy a new building, invest a fair amount of capital and get an appropriate return. to your point about higher interest rates and higher costs, the investors have to make an adequate return on that investment. so the rents have to go up on the other things they're trying to convert it into, or the cost space for that building has to come down enough cheap enough to make an adequate return. so one way or another, the returns have to pencil for the new investors, and that's just the slow process. and then you have regulation in different cities about time to convert and the process to convert. so it's happening, but it's

happening very slowly. >> are we yet seeing that real capitulation on price in these older buildings that so many have been concerned about that will hit regional banks? have we yet seen that, since that is sort of what it might take with the cost basis on these conversions, but it would cause some pain for people who were in them before? >> yeah. so you're starting, and you have seen the banks taking more charge-offs and writedowns for their commercial real estate book. that's been a concern in the marketplace for the better part of a year now. certainly since silicon valley bank at their problems over a year ago. we have seen increasing charge-offs and write-offs from the banks. so that's happening. in some cases, they are foreclosing on assets from borrowers who can't make debt service, and they're taking those back. and then they're having to turn around and remarket them and sell them.

so as i said, it's an ongoing process. it's not one that's going to happen very quickly. but we're probably looking at another 12, 18, 24 months oh of this, you know, taking place in order to right size some of these problems. >> what's big tech doing? we've been hearing layoff headlines out of big tech for a while, and then there's the whole hybrid remote work thing that was going on there. but then certain cities seem to be coming back somewhat. seattle and amazon said, everybody back in the office. you really saw small business around downtown pick up. are those things balancing out or is it still a major drag in the areas where tech had really pushed into office ore the past five, ten years? >> well, look, tech was the huge driver of office demand going back self-veral years. whether it was in seattle, san francisco, new york, usaustin, texas, big tech was leading the

charge in leasing activity and precommitting to hires that ultimately did not get hired. so they found themselves long too much space, and they're putting some of that space back on the sublease market. but i think the return-to-office is unfolding, and i think today, you know, there's less talk about just pure hybrid work or, you know, people working fully remote. and they are back in the office certainly more. you have seen that come down from big tech over the last six to nine months. and that's certainly good for small businesses in and around the office buildings. i think today, the bigger issue on the leasing front is the economic uncertainty, and the fact that interest rates have been volatile and c-suites in large companies can't really make decisions about where the economy is heading. ultimately, that's probably a bigger factor today than the return-to-office discussion. >> okay. now that they have set the table, let's eat when it comes to the reits specifically that you like and you don't like.

what do you like, what do you not like in the reits? >> well, we like different things across different subsectors. so we've got -- like in the residential space, we like avolon bay on the residential side. we like federal realty and the shopping center space. we like health peak in the health care area. and even in office, you know, we've got a few buys where we think the balance sheets are good and the assets are good. such as the boston properties, and you know, corporate office defense properties. so we do have buys across a couple different subsectors, and we are being careful about leverage and balance sheets within the space given the rising rates. at this point, john, we're worried more kind of the balance sheets than some of those value cases that stacked -- valuations

that stacked up. every stock has a price and entry point, but there are other places we would rather be in the short term. >> sounds good. steve, thanks. now, coming up, amd, one of the worst performing names in the semiconductor etf over the past month. trying to avoid its first three-week losing streak since october. but one wall street firm is turning bullish today, ocrecasting a 40% rally in that stk. we'll tell you why, straight ahead.

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good afternoon. welcome back to "the exchange." i'm tyler mathisen with your news update at this hour. voting technology company smart mattek and far-right network one america news have reached a settlement. both parties confirmed that confidential settlement, ending the defamation lawsuit. dubai international airport diverted arriving flights after

nearly four inches of rain tell over 12 hours in the united arab emirates on tuesday. what dubai normally gets in a year. this is according to data from the u.n. a storm flooded out highways, suspended operations at the airport for nearly 30 minutes, while in ohman, the death toll from flooding rose to 18. cowboy carter is giving jeans and cowboy boots a new life. bey beyonce's first country album features levi lejeans, and sale increased 20%. and western style boots were up 24% the same week. john, i expect to see you in boots soon. >> it might happen. i haven't seen people this excited about country music in a long time. coming up, there are still a million things banks haven't

done. byn melon, america's oldest bank, founded by alexander hamilton, has a play in ai. we'll see the results and the new $6 billion buyback program after this break. and only two days away from the inaugural cnbc changemaker event in new york city, april 18th. we'll hear from some of the women transforming business gina ramando. we'll be right back.

welcome back to "the exchange." the bank index on pace for its fourth negative session in five and 8% off the 52-week high hit less than three weeks ago. bank of new york melon, down about 2%, despite reporting the highest quarterly ly revenue in0 years. the bank reiterated a full-year guidance, expecting a 10% drop. joining me now from downtown manhattan is the ceo and cnbc's

leslie picker. >> we are here in by melon, and we have some memorabilia back here, the first-ever loan to the u.s. government, $20,000 back then. the debt has risen significantly in the years since then. but robin, we appreciate you being here on this earnings day. highest quarterly revenue ever in that 240-year history, thanks to gains in market values and declines in negative interest rate from the balance sheet mix. how would you characterize client behavior? >> first of all, thanks for being with us. we have some fun history around us today. that warrant you were just pointing to, it is, in fact, the origin story of the u.s. national debt, the first-ever piece of debt of the united states. so, i think as i look at us and our performance this quarter, we are quite pleased. we think we had a solid earnings, as you pointed out, a

high on an operating base fris a revenue point of view, and our focus has been to drive forward our company, which is 240 years old today but still innovating. that's been our focus as we look to serve our clients in new and different ways. that's one of the strategy pillars, being more for our clients. >> how would you describe those clients as they look ahead to the potential likelihood of a soft landing, as their rate complex has shifted higher in the last few weeks, what are they doing with their money? >> it's a complicated world. we have all of the geopolitical sort of issues that we have seen, most recently over the course of the weekend with everything untolding in the middle east. so that's been an issue. we clearly have elections around the world. those will continue provide uncertainty for investors. but in the u.s., we have this underlying strength to the u.s. economy, which i think has

surprised many people. we have had this view that there are going to be less rate cuts this year than many market practitioners were suggesting, at least earlier in the year. i think we're seeing that inflation is a little stickier, but it's sticky in a way for quite good reasons, which is this underlying health to the economy, and that's causing clients to need help navigating the world. and so that uncertainty cascades into their behavior. >> i have to take a quick break, because we have steve liesman with breaking news on chairman powell. >> thanks, leslie. chairman jay powell at a conversation with the central banker of canada, saying that recent data have not given the fed greater confidence to cut interest rates. he says it is taking longer than expected to achieve that confidence in order to bring down rates. he goes on to say the fed can maintain the current rate of restrictions for as long as needed. the performance of the u.s.

economy has been strong, and data shows a lack of further progress on inflation this year. but the labor market, he says, is moving at the better balance, even amidst ongoing -- further wage pressures are moderating, but the 12-month more piccpi wa little changed in march. recent data have not provided confidence. leslie, back to you. >> thank you, steve. and that's the perfect actual segue to the next question, which is how does recent rate volatility change your expectation for net interest income and the broader macro environment through the rest of the year? i saw in a recent interview, you said a rate hike is not impossible. >> that's right. i don't think it's impossible. that underlines our approach to business generally. we're in the preparedness business. we think resilience is an important part of how we operate that. allows our clients to go about

their business every day. that's obviously the core of what we do, which is to serve our clients. but you're right, i think there's a possibility. i don't think it's the base case that we would see the fed raise rates. but if we had incredible strength and stickiness in inflation, you can't rule it out. it's also possible we won't get any rate cuts. but as you just heard, the data has not given them the comfort that they're looking for to actually move forward in that direction to cut rates. it's not super surprising. if you think about all the underlying tailwinds the u.s. economy is benefiting from. you have money coming into the united states, investor confidence, people wanting to build factories in the united states. we just had of the past few days additional industrial policies, essentially giving money to buildfabs here in the united states. we have $6.5 trillion, 5% yield. the math says $300 billion in

terms of dividends coming off that. that's a percentage point of gdp. 60% of americans are invested in the stock market. we have $25 trillion in 401(k)s and iras for americans. they have been seeing successive highs in the stock market, and that gives confidence. that part of what is driving spending, and we have just seen in recent data that spending has been doing quite well. so there are these underlying strengths to the economy, which is really powering that. it's not particularly surprising to hear chair powell to say what he said. >> fiscal spending, to your point the effect from the broader markets. you did in the quarter take some reserve increases due to commercial real estate exposure. i'm curious what you can chair about your cre book and how it's weathering higher for longer rates, various demographic shifts. i know you said on the call, so goes the ten-year, so goes the

market, especially in 2025. >> so our cre book is pretty small. we're a very modest commercial real estate lender with a modest amount of office, so we don't view that as a particular story as far as we're concerned. we have a liquid balance sheet. we're into the capital return services platforms. that's kind of the nature of who being what mellon is. but in context of the broader market, as we look at the commercial real estate, certainly clients and other participants, you have to see the wall of refinancing that comes of the next couple of years. that doesn't tie to the overnight feds fund rate. those borrower also be looking to wear a five-year, seven-year, even ten-year rate. so we've had a march higher in those rates, and refinancing for those borrower also look different at a 4.5% to 5% rate, different than it would be if it

was 4% or 6% or 7%. we don't predict those higher numbers, but you can't completely rule them out. >> the hike is possible. you know, we talk about the history here. i want to talk about the future, because you recently announced you would be the first globglobal bank to deploy ai super powered by nvidia products. what do you plan to implement to make sure the ai systems are functioning and safeguarding the use cases that you have? >> well, yeah. nvidia announced that we were the first bank to deploy one of those super pods. i think that ai is going to be a very important change to the world of commerce, to the world, but also to the financial services industry. if i look at it through the three lenses of our strategy here at the company, being more for our clients, it's going to help clients be able to see things and understand that data

in ways that they couldn't previously understand. we have software in market that helps clients avoid settlement issues in the post trade market space. that's making life better for them, more efficient for them. we also look at it through a lens of running our company better, which for us means how do we create more efficiency? how do we help employees to spend their time doing things that are more rewarding for them and the use cases there are being able to get a head start on the day. so there are so many things i think this will ultimately be a benefit from a revenue point of view and some expense savings, but also from a cultural point of view, helping our people be able to spend their time doing the things they want to be able to do. >> real quickly, you have 50,000 employees. does ai make your workforce larger or smaller?

>> fundamentally, ai helps our workforce be more productive and connected, spending their time on things adding more value to them and our clients. >> we'll be watching. i know you probably said it's not a '24 thing, maybe a '25 thing. so we appreciate you being with us. j john, back to you. >> leslie, thank you. we'll hear from another bank ceo. bank of america's brian moynihan will join us on "closing bell" today at 3:00 p.m. eastern. "the exchange" will have more from fed chair powell after this quick break. i have a business idea. and it just might change the world. but here's the thing, i can't do it... alone. so, are you in? i'm in. nothing else to do. yeah, i don't know...

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welcome back. we have more headlines from fed chair powell. steve liesman is back, along

with cnbc contributor peter. steve, you were just reporting that chair powell supposed to be talking about canada, but he says the fed does not have the confidence to cut rates in the foreseeable future, can stay here as long as needed, as this economy remains hot, inflation is stubborn. but the labor market seems fine. i thought he was talking about canada. >> he could have stuck to can dashgs but he came out of the box with something to say about interest rates and inflation. he's not happy, he's not happy that bond yields are not happy. i guess the stock market probably looks like it came from this brief selloff there. but what he's saying is he does not have the confidence. he said that inflation is not running the way they thought it was going to run. it's running hotter than they expected. and this is not giving them the confidence to cut. i don't believe he's taking cuts

off the table. there was an interesting comment this morning from vice chair jefferson where he did not discuss cutting rates. he said current rates left where they are should be enough to bring down inflation, but he leftsoon. that's not there. i didn't hear powell talking about that. it doesn't mean it's off the table. what it does mean, i think, is the possibility to now -- i'm looking at what i think is probably an all-time low for the june contract probability, just 16%. and more interesting is the falling july probabilities just now at 40%. and they're starting to work on september a little bit, jon at 65%. all of those have been quite a bit higher. there was a time probably not too long ago that june was trading near 100% probability of a rate cut. that's off the table. under 50% on july. starting to think about september now, too. >> peter, when the show started i think the 10 year was at

4.67ish. looks like on these remarks it spiked up to 4.69. now back down 4.676. how does this change the calculus, if at all? >> i think the 10-year is going back to retest the 5% level we saw last year. you think about powell, he celebrated new year's with a 2 year inflation break even at 2%. he thought he was coming into this year -- >> are we now 2.09. >> 2.90, commodity prices two-month hiets. him wanting to establish confidence, this doesn't give you confidence that it's the right time to cut. >> no. just to underscore what peter is saying, you have the market based measure of inflation expectations and the survey measures, both of those are going up. so either way they look at it, there's game for the hearts and minds of the public and the markets for the outlook for inflation is slipping a little bit. >> and to clarify for people, it's like the marshmallow man in "b "ghost busters," they think it

will cost more, they pay more. >> so when you're talking about consumer expectations, it's definitely a focus. but i think we need to see the hard numbers. rather than what someone feels -- >> right. >> you want to see what's in reality. >> i do think we need to take a moment to acknowledge the first-ever comparison of inflation expectations to the marshmallow man in "ghost busters" that's a historic moment. that is right. what i'm looking at right now the market's expectation -- guys, do you have the january 2025 feds fud contract. i use that to see what the market is fedding for the full year. and now they still have two hikes, two cuts built in at 4.94. they haven't really started working on that yet. but we'll see -- there's the probabilities right there, which are shrinking now the opposite of what the marshmallow man did in "ghostbusters." i think what we're doing, we have to hunker now, this april 26, pce report, peter, is the

one that powell intimated that's not going to provide much assistance for the effort to reduce inflation. january, february and march are kind of off the table. think about -- i like the wrestler analogy, jon, which is if he's down, you start -- the referee starts counting one, two. if he gets back up, you have to start counting again. that's where we are in inflation right now. >> we'll keep stretching those metaphors. steve, peter, thank you. >> thanks. well, housing starts falling nearly 15% in march. biggest monthly decline since april 2020 as resurgence in mortgage rates keeps buyers on the sidelines. what my next guest says there's one stock in the real estate universe that cannot only with stand those higher rates but will also benefit when buyers get some relief. and that is zillow. joining me now is senior internet analyst at jeffries. recently made z, zillow, his top pick. john, why can zillow buck this

trend? >> yeah. thanks for having me. so, we see tail winds from a series of new products that zillow will be rolling out over the next few years driving over 20% up sides of street estimates. i think what's important here is that while zillow is well positioned to benefit from a recovery in the housing market, that's not what's embedded in our base case assumptions here. so, what we think is -- we think of zillow has a self help story, it's not a housing market recovery story. we think of the housing market recovery happening over the next few years as a potential driver of even further upside. and i think what's really compelling about this story is that it has -- this business has very low variable costs. so if we're right and there is significant up sides to street revenue, there's even greater upside to street profit estimates. >> in this environment where inventories for residential real estate have been low and there's been more reliance on the rental

market, how important is that segment of zillow's business where property owners are able to market their properties as rentals, even manage them through that software? does that matter? or is it mainly that core business that has you can excited about zillow still? >> yeah. it's mattering more and more. zillow is focussing more on their rental offering than they ever have before. and i think specifically what they're focussed on is the multi-family side of things. so think of these as big buildings with 100 plus units in it. they're going after that market. they have the most traffic in the rental space and it's growing very quickly. in fact, it grew over 50% year on year in the fourth quarter. that's one of the four major drivers of upside that we see. so zillow is creating an ecosystem of services around the housing market. the core business focussed on the residential side. then there's the rental side. there's a mortgage side. there's a variety of things they're working on where they

can benefit sort of across the entire ecosystem. so, that's something that we certainly like about the business. >> so how do you measure their potential there versus say co-star group which has apartments.com, also focussed on multi-family and those tools? >> it's a big market. and there's room for two very successful players here. there's over 5 million multi-family properties in the united states. zillow has slightly over 30,000 today. so it's a big market for both of them to go after. there's plenty of room for both of them to succeed. >> okay. and no risk from zillow from these changing rules over real estate agents and what they can charge? >> this is actually really interesting. this i think we're a little controversial here. we actually think the weakness in zillow's shares since the settlement was announced makes for a compelling entry point. we don't think it will impact the fundamentals.

the internet age makes it easy for agents to continue sharing permission splits on platforms off of the mls. we think as long as they can find out how much they're going to get compensated on the mls or another platform, the current incentive structure remains in place. >> interesting. john, thank you. that will do it for "the exchange." but i'll see you in a little bit on "overtime" at 4:00 p.m. i'll talk to interactive brokers chairman thomas peterffy. "power lunch" is up after this quick break. tamra, izzy, and emma... they respond to emails with phone calls... and they don't 'circle back', they're already there. they wear business sneakers and pad their keyboards with something that makes their clickety-clacking... clickety-clackier. but no one loves logistics as much as they do.

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♪ welcome to "power lunch." it's tuesday, everybody. alongside contessa brewer, i'm tyler mathisen. glad you could join us. the dow getting help from united health after its earnings were out. new comments from jay powell about a lack of progress on inflation is tripping up stocks in a bit. the focus is back on earnings, the fed for today, the geopolitical tension is taut. israel has not yet responded to iran's missile attack. we're going to talk to the head of emerging risks for a global insurance brokerage about the threats to business and to the