past 20 years. they're not functioning that way, so instead you can get yields in other places and fixed income. you can also get exposure in your stock portfolio that's not so devoted in stocks. >> what about your portfolio? i'm kidding. it's a lair fink question. make sure you join us tomorrow. "squawk on the street" is next. good monday morning. welcome to "squawk on the street." i'm carl quintanilla with courtney reagan and mike santoli. final week of september, and q3. futures read as we come off the worst week for the s&p nasdaq since march. busy few days ahead with global inflation data, fed speak, and earnings from nike and micron. we have the last trading week of the quarter. s&p drops further from this three- month throw at the open.

plus, strike watch. hollywood reaching a deal with writers while the auto walkout enters its second week. ford says significant gaps still remain, and amazon's ai move investing some $4 billion in a chatgpt rival. let's begin though with a new market week. after four days of losses, mike, and we lost the 100-day moving average on s&p. >> yeah. new market week. you have the ten-year up 4.5%. we closed pretty close to the lows on friday, and now i think it's become -- the debate point is we expected we would have some seasonal weakness. we came into august overbought and overlogged and everybody embracing the soft landing scenario. now we have had a little bit of correc corrective mindset to that. how deep we have to go is a question of terms of trying to account for the rates and why they're there. i wasn't necessarily that alarmed at the specific changes

the fed made where they took away two cuts from next year and essentially higher for longer and they have been saying for a very long time, you. the but the market reaction, the ten-year reaction said, we aren't accelerating. the fed changing its own outlook because the economy has been strong, but we already knew that, so there's this kind of lag in the market perception of where we are, where the fed says we have to go, and also if treasury supplies a part of the story on the 4.5%, it causes everybody to say, can the consumer and economy handle rates and oil at this level? >> rates are moving higher, did you it doesn't seem like it's sold off. were you surprised? we did we make it more transparent. >> the change last week wasn't that dramatic. i think it was 11 points on the ten-year. a little less on the two-year, but because we broke out to 16, 17-year highs, now you have

everybody looking at the treasury charts and saying, well, the ten-year, 5% and 5.1% is right there, and that's the technical target, and that's whyinwhy it's happening. if earning estimates were racing higher and we were accounting for a faster growth world, it's obviously not necessarily the case. i'm not in the camp that easy i says, we plug the 4.5% ten-year into the equity valuation model and that's why we're down. that's part of why we're down. we're mostly worried about the fed seeing the economy weakening more than the stock market can handle. >> not being accompanied with the growth picture is how this has been harder for equities. we might mention supply. we're going to get twtwos, five sevens, and maybe others as well. >> we're testing this market. the supply is not a long-term linear relationship that says every time the government is selling more treasuries yields

surge, but there's enough of a worry that's the case, and it's also one of those things. when you get a correction in the markets, and you say, who did it? who was the culprit here? i say it's like murder on the oregon express. everyone did it. there's a role for all these factors to play. oil shutdown, you know, everything that we're kind of worried about, but yeah. the supply story is interesting. although the credit -- the corporate credit side has held up as we discussed pretty well, and so yeah. we're willing to buy bonds at these yield levels. corporates specifically, but yeah. you see two-year note, 5.12 keeps making new highs. bonds are oversold as much as stocks are getting oversold, if not more, and you would expect a reflex reversal at some point which maybe we take the pressure off stocks. >> as we move here into the final week of the month and the quarter, you have a qualm about seasonality, and how it's playing out to the script which is good because hollywood writers are still on strike, and

maybe they're done. we don't need them to write the scrip. what do you expect in the final week? >>st it's gotten to the point where it's gotten so close to the seasonal patterns that you wonder -- i wonder if investors are sort of leaning on that as the explanation more than we otherwise would, and people are quite concerned about the fact the market is down 6%. t the average stock is down a whole lot more than that, and we get that moment where we get to a real sharp repricing. we have a real, you know, panicky type of move, something that would say that long-term buyers are willing to come in here because people are so negative and take the other side because we've discounted some of the bad news. we'll see. the other part of it is, maybe that's why seasonality works because the longer it goes on, everyone says, whoa. maybe it's not just seasonality, and there's something else here and we get cared and october.

cos al comes along and we have a bottom. we can lean on the corporate earnings. . they're trudging in the right direction and that's also very top-heavy. it's the growth stock dragging up the s&p earnings. >> we've talked about how conference season came and went without major tape bombs. there was a good note from christine short last night about dividend growth. more companies are trimming, fewer raising, and that gap is the narrowest since covid really launched in q2 of '20. >> you also saw some commentary that the pace of corporate buybacks has actually slowed. it's still at a healthy level, but, you know, companies have discretion as to when and whether they execute the buyback, and it was a little bit light and now they're in the blackout window as we get towards earning season. those are all things that people deploy as excuses for why the market is not doing or not doing what they think it might do, but it all goes into the mix for sure. >> our next guest says a soft

landing may be the worst case scenario because a selling reprieve may be nearby. tony dwyer joins us this morning. tony, it's great to have you. you have been cautious i would argue for a good portion of the year. is there a sense that this market is sort of moving your way? >> well, it's kind of the good portion the last year and a half. carl, as you know, i'm per permeable, and it's been the opposite for thear and a half. it's one reason, and it's higher rates. mike talked about the corporate credit market holding in great, and people like me love to come on and talk about the study of how spreads and corporate spreads are doing well and it's not indicative of any kind of real slowdown, but somebody got to tell a cfo who's raising money in high yield at 8 3/4 it's okay because it's up from 3 3/4 from the end of '21. >> right. so i guess the point, tony, is that financial conditions are tightening even if spreads are

okay. they're tame, and if you're a corporate credit buyer, you can hedge it out in treasuries and you're still happy? >> yeah, mike, you know, we've done this a long time. every once in a while, we have to throw common sense in here. i run a household, right in it's going to cost me -- my mortgage expense would be so much higher if i had to take out a mortgage now. there's one -- whether it's a soft landing, a no landing, a hard landing. whatever kind of landing you want, there's always a catalyst that takes you out the other side of it and it's an improved outlook for money. that improved outlook for money always comes from lower treasury rates, lower mortgage rates, and lower corporate rates, and right now as you know, we're making the cycle high for all of them, but to your point earlier, mike, it's a really important point. yeah, the s&p is down 6%. the equal-weighted s&p is flat for the year, and the average stock and the nysc is down 29.3%. so the idea that people like me are going to come on here and say, now run for the hills because the market's starting to

weaken, it's already been extraordinarily weak. so what i think you want to do is look for when bad news becomes bad news and be ready to attack that kind of weakness, and we're getting closer to that point. >> it does seem tony like the trend is to be more negative. we've got strikes. we've got a potential shutdown. we've got a student loan resu resumption, the payments resuming. it seems like there's not a lot of options to be real positive since this doesn't have a super significant impact. even if you put it all together, it doesn't feel great for sentiment. >> that's really -- i think, courtney, that's exactly right. it doesn't feel great. if you have someone who has student debt, they have adjusted the budget. all those things are there, but that's why the average stock is down 29% from its 52-week high. more than -- almost 55% accordingto my friends of nysc

stocks are down 20%. some of that is going to be discounted. there's really three phrases of this game as you talk about economic weakness. there's when good news is bad news because it means a tighter fed and we got that in 2022. then you get bad news is good news because it means the fed is going to stop. we were in that into the summer of this year where the market rallied over 20% off the low, and but then you ultimately have to get -- unless there's a dramatic significant sustainable area of credit, you have to get into that bad news is bad news and that's when you want to look to take advantage of the opportunity. so courtney, going back to what carl suggested that i have been defensive for awhile, we call it light and tight. we want extra cash, not extraordinarily defensive because we want to be in a position to take advantage of some kind of economic elite, fear-based swoon that's likely to come when you're having, you know, historically high margins, expectations for earnings i

think for next year that are out of whack, too high, and the earnings yield in the s&p 500 is roughly equivalent to a risk-free rate. that's when you want to get prepared to attack the market, not to actually just jump right in. >> and then tony, i'm going to make a counterpoint to what i just asked, if we could play a sound bite from friday about how consumers have remained resilient. let's take a listen. >> i would have thought with 500 basis points or 525 basis points we would have slammed the brakes on consumer spending and it has not slammed the brakes on consumer spending. it continues to exceed expectations. >> so how do you account for that, right? all these negative pressures, tel negative sentiment, yet consumers are spending, even if those stocks have had a bad week. >> they had a really bad time, but i would suggest the fed is going by bad data. we got a study, and we got that

idea from ned davis, but we looked on the bls website. you can find something called the initiation survey rate. that's when the fed sends out data to payroll, you know, for the payroll number we get every month. the initial response rate pre-pandemic was somewhere north of 65%. they send out the survey. the business responds. 65% of the businesses respond. after the pandemic took place, that's dropped into the low 30s. it's been as low as 29%. so the fed is going by very inaccurate data under initial take, and i think that happens in a household survey that comes from the census bureau, so my whole point of this is we're kind of in a microwave market in a slow cooker economy. it takes a while, but people like me come on every day. you have 50 guests talking about what the consumer's doing. when we look back, we're going to say, oh yeah. rates went up to over 5%. consumer credit was weakening, and corporate rates and mortgage

rates stayed high. yeah, that's why things got hit. so i think again, courtney, the really most important point is it's already hit so many stocks. the russell 2,000 has been smoked. now's not the time to start getting nervous. i think now is the time as bad news becomes bad news and gets priced in, and you look to be more progressive. it's too early yet. >> thanks, tony. we appreciate that very much, and we'll see if we get a shutdown, we'll have no info to go on. thanks. >> thank you. now onto the uaw strike against detroit's big three as negotiations continue. president biden is planning to visit picket lines in michigan tomorrow. phil lebeau joins us now. >> good morning, courtney. we're starting to see talks between the uaw and at least one of the automakers. the automaker being ford. and we've heard from sometime those talks are further along

than gm and stellantis. over the weekend, there were very active talks about the uaw and ford on saturday and sunday. ford issuing a statement last night saying, we are making progress, but there's still some big gaps they need to clear before they're close to a tentative agreement. president biden as you mentioned, will be visiting picketers. that will be happening tomorrow morning. as you look at shares of ford, keep in mind the company got good news on friday evening when unifor, it approved a contract with ford. that's locked in. now the question is whether or not ford can get a deal locked in with the uaw, and they're making progress. i wouldn't expect something immediate, but they're moving in the right direction there. as for gm and stellantis, they're a little bit further to go in terms of a contract or tentative agreement with the uaw, and that's one reason why the uaw said, you know what? we're going to go out at the

parts and distributions centers. they hit 30 of them, yes. 38 of those between gm and stellantis on friday, and those workers remain on strike in addition to the final assembly plants for gm and stellantis in toledo and just outside of st. louis. so guys, it's going to be an interesting week. we will get the president in detroit tomorrow. details are still spending in terms of where he goes, and the union workers that he talks with, but he is clearly sending a signal here that he believes that the workers should get more, and whether or not that pushes the automakers and the uaw to an agreement remains to be seen. >> yeah, that's exactly what i was going to ask, phil, and sort of your history of covering the automakers and strikes, when you have a move like this, the president coming to join the picket lines, is that political posturing or does it have an impact? >> i'm not sure how much impact it has at this point. i think the automakers want to get a deal done with the uaw. it's just a question of, there are certain pinch points if you

will in the negotiations. wage tiers is a huge one. the uaw wants those eliminated where you're hired at this level and it takes you a number of years to make it to the top pay level. uaw thinks that ridiculous, and when you talk to rank and file, they say the same thing. according to the automakers, it's much costly oier over a ped of time. those rts are the things stoppi this. >> we'll see what happens tomorrow, of course, and all week long. our phil lebeau covering the strike entering its second week. when we come back, amazon ramping up its ai strategy with a $4 billion investment. we got news this morning on citi. it'll be a big week for meta, news for lulu, hp, microsoft, at&t, and more.

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that company, and it's also seen as one of the hottest startups in the generative ai space. this follows microsoft's massive partnership with open ai. anthropic also took a stake. here amazon gets a minority stake for up to $4 billion. we don't know how much of a stake, but this is unlike the exclusive microsoft open ai deal. anthropic is essentially embracing several cloud companies. alphabet, now amazon. already had a partnership with amazon. it will run models on both infrastructure systems and it's also seen investment from salesforce. unclear whether this deal will give amazon the ai halo effect from wall street that wall street has bestowed on microsoft and google which have been seen as the megacap leaders in the ai race so far. amazon shares there up less than half a percent on this news this morning. its strategy has been less consumer-focused. so no chat bot that we can use like a chatgpt. it's been more developer-focused with ai tools through its

bedrock surface. this is wain for amazon's aws ad customized chips which amazon is pointing to an alternative as part of the deal. anthropic will use this as the cloud provider and it will use amazon as the ai chips to build and deploy its ai software. aws customers though still want those nvidia gpus which are harder to come by, but of course, amazon does still offer them. we don't know how much anthropic will rely on amazon, but we do know these large language models, these startups need compute power which is expensive and they're leaning into big tech to get that. >> exactly, deirdre. there has been this sense out there it takes so much capital, so much access to day a that the big -- the big guys are the ones who have, you know, pulling all the levers here. i do wonder what the startup wof world looks like. is there just a parade of

well-positioned ai startups looking for this type of endorsement from one of these bigger companies? wha what does a better mouse trap look like in this world? >> yeah, certainly. it feels like every day i'm getting several, several pitches. startups either providing that large language model or they're providing software for chips or they're providinging chips themselves. i spoke to one last week that brought in their processors and they showed this has the same compute power as nvidia, but who are their customers? who's actually using this compute power? so far it feels like all the startups as you said, mike, are looking to big tech to get that, and there hasn't really been a startup able to provide that compute power on the very back end. >> thanks. we'll watch it closely. a big week for ai. that's our deirdre bosa. still to come today, more on today's movers including the media names rising on the tentative agreement now between the writers and the studios.

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you'll see some account-related names as there are more worries today about china property, especially some roadblocks to restructuring along with carnival who's going to give us earnings later in the week along with some others like micron, paychecks, nike, and vail. openg llomg iju under five minutes.

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most of the media names are up in the premarket. the writers guild did reach a tentative agreement with the studios and the streamers, one that might potentially end this

months' long strike. neither side would address the terms and the writers still must ratify the deal. actors have yet to reach their own agreement with the studios, but the negotiating committee, guys for the wga says this deal is exceptional and we did get a tweet from sag congratulating them on their agreement for now. so we'll see how much white space is between the two. >> yeah. stopping short of the worst case scenario which was just, you know, kind of punting this into next year, i still think it will be really interesting once they strikes are settled, what the studios do in terms of thinking about the volume of content that they need because i don't think that's going to be addressed in these agreements meaning they've gone this period without a lot of new stuff. >> sure. >> did they lose subs? do they think they can get buy with less? do you think the economics in the media companies improve or is it back to, hey. we have to just spend a ton on content constantly and hope we get paid? >> yeah, absolutely. ai, the last sticking point according to the "new york times."

we don't know the exact details there, but that would be fascinating as well to see how that played out. the vote is tuesday to go ahead and vote for this. the terms which we'll find out soon. >> let's get the opening bell here, and it's going to be the big board. it is crh celebrating its listing. we're going to talk to the company's ceo in the next hour, but the nasdaq, it is cbs celebrating the 45th season of "survivor"? >> wow. >> they have more than one season a year. >> it's not years. it's seasons. >> i was, like, that math does not work. >> i was thinking that too. >> two a year or something like that. >> a good reminder paramount created on the nasdaq. >> yes. yes. >> at the very least, the talk shows will be able to restart. >> right? >> as a result, if, in fact, this writer's deal is ratified, so we'll keep our eye on that. a lot of macro commentary.

we've seen denny who has been net bull herb tempering some of his enthusiasm saying maybe 4,200 is a short-term target. >> 4,200 is the area that now everyone has swung their attention to on the s&p. it's only 3% down from here, not even. it's not that far away, but basically where the 200-day average is, the 200-day average is tilting higher, but also if you remember back when it was the ceiling of a trading range for months and months, and people didn't get a break through, and that's one of the reasons we're looking for that area perhaps. you know, there is some talk too of some sort of technical fragility in the market. we broke a certain trigger, and then you have the systematic funds that might be net sellers. i think we're in that motive saying is the market oversold enough? is that enough for what might be coming? you have 452 on the ten-year. the pressure remains on from

that area. i think you also need for bulls to get really excited some idea out there of a reward like the story will change somehow, whether that's just seasonality improves in the fourth quarter or we could find our ways to earnings actually tilting higher. the nominal growth for the economy holding up or for that matter, eventually rate cuts. the fed doesn't want to talk about it, but they don't know what's going to happen any much better than we dop. >> as we look here, the russell 2,000 is down by more than a half a percent. that's correction territory. >> for sure. >> is that worrying? >> to a degree, it is. yeah. it's very much a, you know, we've talked about the very weak underpinnings of some aspects of this rally. it wasn't as much of a problem when both were kind of trudging higher, but just megacaps are doing much better than small caps. >> okay. >> it's a little bit of a concern. equal weighted s&p is also looking a little ragged.

the question is does that also just mean though that a lot of what the market has had to reckon with this reflected as tony dwyer was saying in the majority of stocks out there? i do think that rates matter as we said before, and oil matters if it's not accompanied by, hey, the economy is in acceleration mo mode, and then it acts as a pure restraint, you know, as we sort of test these new levels out there. >> and that's another thing costa was saying which is rates going up, and it's not about economic acceleration and it gets in the market's head if nothing else. >> yet another open where energy's the only sector higher up about half a percent. everything else is lower. a lot of interesting consumer stuff today, court. in particular this jeffrey's note where they survey those with student debt. >> right. >> 90% of those respondents say we're kind of worried about paying the bills this fall, and they cut -- they cut footlocker and they cut nike. >> they did, and we're going to

hear more this week, but there has been survey data suggesting those that are worried about these bills are going to cut things like apparel and footwear probably first, and those companies are really pressured. i think i went through a report and it was you truly a laundry list of the analyst notes that would be the most under pressure. it was almost anyone that sells apparel and footwear, and we have to watch that carefully, and nike will report outside of the rest of the retailers, but it'll be interesting. and to your point, the wholesale channel is likely to remain pressured because they're working on their inventories. consumers obviously are pulling back in some ways if they are worried about student debt according to their survey data, they're specifically calling out things like apparel and footwear, and also china plays such an important role for nike, and it's been okay, but not great. jeffries is calling out china when it comes to nike. so is jpmorgan's matthew boss,

and hutchinson. john cernan as well. nike key will probably report results that are in line, but most of them don't expect a blockbuster report because there's a lot of cross currents going on for that important global company. >> i do find it interesting. it sort of reflects a bit of a slow-motion ka pitlation by the street. they're saying it was considered to be that the brand had so much core enduring value, and it was an advantage because of the direct consumer and now the stock is back to where it was three, four years ago, and you wouldn't call it cheap, but it's, like, 23-times earnings and no longer at 35. so, you know, we'll see if this reflects people kind of giving up at the point that the stock might be trying to find value. >> if you pull up the names, and look within, it was a lot of these, you know, experience-based travel names that count in the consumer

discretionaries. caesars, mgm, airbnb, and here in the early going, you see carnival again under pressure, down 2.6%. tesla down there too. those all count as consumer discretionaries. we're talking about apparel and nike, but when you are looking at the sector, it does encompass a lot more than that, and carl, you pointed out earlier about the worries with china and mama macau, and that all plays a part. >> nike, the second worst down name of the year. only walgreens has done worse. the top dow industrial performer this morning is actually dow, jpmorgan goes to overweight. mike, kind of a dividend yield story, and that's sort of where we are as looking for things that can compete with 5% money markets. >> yeah. there's no doubt. i mean, in certain pockets that is the game. i will say the rest of the sort of basic materials and chemicals kind of riding along with the

strength and sealed air is one of the leaders to the upside today as well. you have some steel companies too. this notion of rates higher, does it mean, you know, it's kind of a higher nominal growth story? inflation is going to be stickier. that might be filtering in in that direction as well. >> the auto strike is interesting. ford obviously got a pass on the expansion of the work stoppage last week, but ford did say last night that there are still some gaps to go. i told the wires. interesting bfa does reiterate stub stubbornly, we reiterate our buy with ford on the automotive psych. we talked to lebeau, but the degree to which the involvement of the white house now physically on the white house now makes any difference. >> or if, in fact, ford is closer to a deal, it's hard to know if ford strikes a deal how much longer the other two would,

you know, be that far apart. once you have the template of some kind of parameters and terms, the market is at least feeling like it's going to be absorbable by the companies. huge big picture questions though to the point about, you know, can they -- do they have the wherewithal under a new deal to make this transition and throw all the capital they have to into evs? i feel like, you know, i can go back and look, but ford's been at $11 or $12 forever, basically. >> yeah. >> you can see how they've always looked cheap. they've always, you know, looked like, you know, they have the new story to tell, but it's been tougher to get out of their own way. >> economically important of course, these companies to the united states, and to the world, and amy silverman said on friday, look. we got the strike. there's geopolitics, the debt ceiling. the last time there was a debt ceiling in 2011, the vix went to

245. >> this is not ceiling it is this is shutdown. >> things don't always react like they do in d.c., but it may impact the sentiment. we're up, but just a little over 18, but nowhere close to, you know, where we've seen in the past. >> 2011, we were still in the post goal financial crisis, you know, post-traumatic stress markets. europe was considered to be broke. we got a downgrade here. i think 20 on the vix is what a lot of people are saying. we want to at least see it click towards 20. i think what's interesting is when you talk about the strikes or the government shutdown, it's things that would deplete economic growth in the short-term and then have an immediate catchup once you have those resolved. >> once those go on. yeah. >> it makes an interesting cadence for gdp growth and what the fed has to do. what we consider the real run rate for the economy. >> meta's interesting. we talked about amazon's ai

interest a while ago. the journal gets a peek at some of these customized chat bots that are now incorporating various personalities, and then the prospect of celebrities being able to host their own chat bots that would answer questions that fans have. although if you are that celebrity, you better hope that chat bot is well behaved. >> i was going to say, how much control do you have over this chat bot? i can see that being a little bit of a concern. i know meta wants to grab younger users. i'm not sure this will do it, but hey. i'm not working at meta, but i can see downfalls and pitfalls. >> it is fascinating. you know, the story with meta has really operated almost aside from the ai opportunity, you know, it's been obviously about margins, spending less on metaverse, and on friday, it was said that the ad loading reels and the engagement with reels has been so strong and it's like this unending inventory of ads.

you just think that's what's going to be driving top line. it doesn't have to be cost-cutting. it doesn't have to be some who knows maybe ai opportunity. a lot of that is -- it has kept people interested in the name, even though it's down 1%. still not crazy valuation-wise compared to where it used to be. >> we'll keep an eye on any headlines out of the presentation. you mentioned citi. jane frazier giving a town hall to employees in which she says, get on board. we have incredibly high ambitions for the bank and this train, it's going to move fast, so lean in. help us win with clients. help us deliver the changes or get off the train. >> mm-hmm. >> she's been really vocal last couple of weeks about some of the efforts she's making to reinvent the bank. >> yes, you know, trying to -- to try and kind of recharge the culture there to some degree. look. the stock trades at 40% of book value. it's traded at a massive d discount to book value for, you know, at least five years.

maybe you got closer to book value before. that tells you the market is saying there's not a lot of core value that's being realized out of the franchise as it sits right now. streamlining upper management, deciding that you have to essentially put people on notice, that you have to come up with some kind of results is -- is, you know, something that i guess makes sense from a relatively new ceo right now. >> yeah. talking about less focus on geography and, you know, the piece quotes senior bankers saying, look. i understand she needs to make some changes here. clearly where we are is not where we want to be, but i can imagine the employees may want to be on board, but they don't know if their jobs are safe. >> of course. >> she hasn't given a lot of details. you want to stay on the train if you have a seat, but do you know if you have one? >> it's tough when you have a company that's not fully integrated from all the about by s -- acquisitions, but it doesn't have the wealth management it used to, and it's shrinking

itself down to what the old citi bank used to be, which is smaller foot pript with a lot of international clients and we'll see sif they can stick that landing. it seems to be what the project is there. >> fascinating look at some of the health care names which as you know, they have had one of the worst years in a couple of decades. story on the tape this morning takes a crack at it and argues it might be the fascination with drugs like ozempic that might potentially reduce the need for especially medical devices, but also therapies in the years ahead. i see pfizer now. that's another 2 1/2-year low. they haven't made data yet, but there is a budding narrative these stocks will change american health. >> there's no doubt about it. for years when you talked about medical devices, money managers and analysts come on, and the

entire thesis would start with aging demographics and chronic obesity in the country. i mean, that's where joints run out and you need stents and all the rest of it. clearly if you believe those things can be reversed to some degree, i mean, it's great news for everybody except for if you are putting a lot of, you know, artificial joinlts into folks. i've also wondered about the lab equipment side which was more of an ai story. it's kind of an interesting dynamic. those are the two big things going on theymatically in the market is ai and the weight loss drugs i think in turns of u upending business models, and will ai change the way we do diagnostics and test things and things like that? >> it's fascinating and if people understood the impact of these weight loss drugs, i remember earlier on in the year, health care was a name many. >> reporter: recommending and this was safe, but to your point, you can't look at it as

broad sector if you're not going to sell as many artificial knees and people don't need them as much. >> it's almost part of the performance as the broader market had been in terms of lill lilly and novo. >> mike cart is putting in a post-ipo low. interesting piece in "the journal" today looking at how cart, arm, and others faded. until that dynamic changes, it's hard to argue this is anything more than a soft open. >> it's conveying the idea it's a seller's market and that's not how to get new ipo buyers in there, and that's does reflect where we are. people are not looking for new risks to take on, and if it's a good idea or franchise, and there's often a hangover effect, and you get a little rush of excitement and you find their

level, and it's happening very quickly with these names. they have kind of been a quick little balloon, get inflated and deflated right away. >> we've tried to draw attention to the size of the float, and in history. >> the fact these are motivated sellers who had reasons for getting these stocks out there as opposed to just hitting the business and this is where you want to own it. all those things i think have made it a little bit of a tougher -- as test cases for the ipo. >> holding 4,300 by about 13 points. let's get to our bob pasani this morning. good morning. >> good morning. september living up to its reputation as the worst month of the year. again, pressure, and it's still higher rates that are really the problem again. two-year, ten-year on the upside. look at the semiconductor names. you look at the tech names in general. ark, the indicator of tech, but was flat at the open, and having a very rough month. semiconductors leading on the year.

auto's under pressure, and energy is the sole sector in the green this month. obviously when you are dealing with oil, towards $100, in the $90-range, that's a problem with stocks. you can talk about seasonality, but consistently rising rates are the real problem here and that's more competition for stocks and it does a lot to the e earnings situation, and the economy, and we have got stocks and bonds stelielling off again. that's a problem. remember 2022. this is an historic change. we have been dealing with lower rates as a tail wind for stocks. that's not true anymore. this is a big, historic change that's going on, and my friends like to call this a pocket picker market where you try the buy rallies and it doesn't work because oversold -- and we are oversold in a lot of sectors and it's not enough reason to buy. there were jokes about soft landing, and parts of the stock market are not soft landing. auto has had a horrible month. alaska and southwest at new lows

today. retail has been weak. the transports generally had been weak. mid-cap stocks where a lot of transports are like airlines have been down. they're down 6%. banks aren't particularly rallying. see what i mean? con con consumer discretionary, you see the damage that's going on, and even the old leaders, the semiconductor. smh is now basically 12% from the highs two months ago. that was tend of july hitting new highs in there, and it's been straight down for most of this month here. if you look at some of the big semi names, even nvidia has had a weak patch here in the middle of the month. we're down close to, what? 11%, 12% in nvidia? micro, amd, this is all this month, and this is a lot of damage. you were talking about the ipos. arm is not particularly helping these causes. remember, they were 51. now 50, 92. it was trading in the 60s for

the first two days. every retail invest who are bought it in the beginning, they're way underwater. they're $10 underwater at this point. it's the people who bought afterwards we're looking out for right now and those people are underwater on that ipo. i know mike was talking about the rsp, the equal weight index. we're basically flat on the year. it was up maybe 1% when i looked sunday, but you see here it's basically flat. that means this is not doing well for the year. the only thing holding up is energy, and even here, these energy stocks have been selling off last week even as oil has been moving up. that's how tough the market is when you can't even push energy stocks forward in a week where oil's going up. tough time, carl. back to you. >> our thanks, bob. as we go to break, let's check bonds. the ten-year back about 4.5%. we got google, and seven fed

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is good morning monday morning. welcome to another hour of "squawk on the street." i'm carl quintanilla and mike santoli, courtney reagan live at president biden. sara and david have the morning off. markets trying to start the week with a bit of a stabilizing action up 1 point on the s&p. obviously, very busy final week of the quarter as we watch unions and, of course, the data and fed speak. >> we are 30 minutes noolgts trading session. here are three movers. media names on the move after hollywood writers reach a tentative deal with the studios and streamers to end the nearly 150-day old strike. both sides need to ratify the deal. modest moves. only warner brothers discovery

off on the session. amazon betting big on ai announcing plans to invest $4 billion in ai company anthropic and take a minority ownership position. it's a rival to openai which owns chatgpt. we're watching the automakers as strikes continue at ford, gm and stellantis. ford warning significant gaps to close remain and we'll bring you the latest this hour. a busy week on tap for investors. tomorrow we get earnings from costco and economic data including new home sales and consumer confidence. wednesday micron earnings and weekly mortgage app. thursday mike reports results and initial jobless claims and pending home sale figures and fed chair powell speaking. the latest read on consumer sentiment and six days away from a government shutdown. let's bring in emily in d.c. with the latest on negotiations this hour. what's going on? >> courtney, there is no sign at this point that congress is going to be able to fund the

government before saturday night. that's going to set up a shutdown that could last for weeks. how speaker kevin mccarthy said this weekend that he does want to bring a stopgap measure to the floor this week, but he doesn't have the votes. a small, but powerful, group of hardliners is refusing to pass any short-term bill until a long-term bill gets passed. what republicans are doing, they're focusing on the long-term bills. they teed up spending bills in four areas of the government hoping to pass them this week, but that's not a guarantee. frustrations are growing within the larger republican party at the fact that the small fraction of hardliners is holding things back. congressman garret graves, a member of mccarthy's leadership team, said over the weekend that republicans are only hurting themselves. >> the arsonists have lit the house on fire, whining about the house burning, they will want credit for putting the fire out and set up a go fund me to get paid for what happened. this is really disingenuous.

>> meanwhile, the senate has gotten tired of waiting for the house and started work on their own bipartisan short-term spending bill to avoid a shutdown. if the senate passes its bill first, mccarthy will have to decide if he could bring the bipartisan bill to the floor and work with democrats to end the shutdown, but lawmakers, including congressman matt gaetz said if mccarthy does that and works with democrats, they will move to oust him from his speakership. lawmakers get back tomorrow night to d.c., and it's going to be a very, very interesting week. >> thanks for that. we'll keep watching with your help. emily wilkins. our next guest says that government shutdowns tend to have limited market preliminary ications and often inject volatility. what are the risks facing stocks as we look ahead to q4. truist advisory services co-chief, keith, good to have you back. it points to the q4 pot holes that a lot of people have been

pointing to, the shutdown, the strikes, and student loans. how rough could that be going into a period where some are looking for a chase? >> yeah. great to be with you, carl, and gang, this morning. i think the government shutdown by itself isn't a major issue from a stock market perspective. we look back since 1976, we've seen 20 of these. during the actual shutdown, the average performance for the s&p is 0.0. so there's some variation between that, but i think the challenge for the market right now it's not just any one thing, it's all the obvious things we're talking about as far as the student loans, the government shutdown, the uaw, and really more importantly, you know, yields are above 450 this morning. i think the challenge for this market near term is there's a lack of upside catalyst. at some point the concerns we're talking about f they get resolved, they can become the catalyst. i think it's going to be a slog near term. >> keith, what exact ways do you

think the yield story is playing into what stocks are dealing with? on one hand, look, supply driven increases in either treasury yields or oil prices are not necessarily good for the overall economy, but there is anything else happening? i have to say, last year we might have been having this discussion about can the market handle 3.5% treasury yields, not 4.5. >> yeah. it's a great point. a year ago above 4%, we would have thought it would have been an issue, above 3.5%. i think what's interesting and probably forgotten, mike, and i know you follow this closely too, the market peaked july 28th. if you look back at that date. what happened? we had a reversal in the market, and that was a day that japanese central bank tweaked their yield curve control, so i don't think that's a coincidence that was, you know, the day that the overall market, you know, peaked as far as the s&p. then more recently we did see the market handling the rising yield until we went above 4%

again. for this market to find some footing, we're going to need at least some stability in the 10-year as opposed to this daily grind higher because we've moved about 50 basis points in a relatively short period of time. >> what would you suggest that investors do to take advantage of potentially some of this volatility coming if stocks are up 50% of the time during the shutdown period, what should we be doing to prepare for that and maybe lock in some gains? >> well, i think a lot is about timeframe. for us, and, you know, we've talked about this over the last month or two, we think this is a time for patience, right. as far as our core asset allocation we're in line with our long-term targets when we think about equities, bonds and cash and being patient for an opportunity. the market is a little bit oversold but not deeply oversold yet. valuations have corrected, but not a lot yet. we would be patient. we can't force the narrative that we want on the market. we would be patient to take advantage if we have a deeper pullback. in the interim, we think

globally we're focused on, you know, large caps over small caps. you see that small caps have much more exposure to variable or floating rate debt. that's part of the reason they're lagging even though they're cheap. there's areas like real estate that are making fresh relative lows on a weekly basis and avoid that as well. and again, i think there will be an opportunity for areas like technology, to re-engage. this is point i think, again, it's a game of patience, which is tough with all these headlines on a daily basis. >> keith, why would you argue that u.s. should be benefitting more relative to outside economies? we know the troubles that china is having. i see apollo suggesting stagflation in europe. are we no longer the best house in a bad neighborhood? >> no. we still think we're the best house in a challenging neighborhood. we're still team usa. i think the reality is, as we're seeing the global yields move higher, i think it's going to challenge, you know, risk assets or has been challenging risk

assets. coming into this year our favorite asset class was large caps. there's a huge spread there. after the news with evergrande we think emerging markets, specifically china, will be challenged and if you eventually have more of a slowdown with the higher rates, normally the u.s. actually outperforms into a slowdown. we would stick with the u.s. on a global standpoint and still be more negative on international specifically emerging markets. >> keith, it seems like with the market pinched between what yields are doing and concerns about the economy, the escape hatch would be proof that inflation has downside momentum. right. if we get really friendly numbers on inflation, it's really going to blunt the idea that fed will stay higher indefinitely because it just chooses too. is that something you expect at this point? what's it going to take to be persuaded that inflation is more friendly? >> yeah. i think you're right. it's a tough call. the whole inflation question what the fed is doing and the market offsides over last year.

inflation will moderate but also stay above where we were before. the question is, is that enough? i think for us as far as the catalyst, we have to get through all this, all these obvious concerns we're talking about and seeing that the economy continues to hold up. i think the earnings season still several weeks away, will be a catalyst if the forward earnings, which are close to a 52-week high, continue to move higher and we have a reset in valuations, that may be enough into the fourth quarter as there are folks still under performing. the market right now it's amazing. we've been talking about this all year long. there's only three sectors that are up more than 4% this year and it's all growth sectors. i think it's really about earnings and the economy holding up which would re-engage investors to have, you know, more of optimism and animal spirits to get back into the market. until then i think it's going to be a chop. >> yeah. we'll see if this upcoming earnings season can do any of that. talk to you soon if not before. keith learner. >> thank you. as we head to a break,

here's our road map for the rest of the hour. renewed fears about china's real estate market as shares of evergrande plunge. the latest from beijing this hour. >> plus, mcdonald's franchisees clashing with the fast food giant. why and what it may mean for the stock. >> energy, the best performing sector this quarter up 10% in the third quarter. is there more room to run? "squawk on the street" will be right back. ah, these bills are crazy. she has no idea she's sitting on a goldmine. well she doesn't

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. the biden administration betting big on industrial policies. the largest infrastructure package in u.s.history shoring up over $1 trillion in funds. our next guest well positioned, two of the beneficiaries of the cra to discuss his outlook for the sector and his company transitioning to the new york stock exchange from the london stock exchange. i guess we start there. what are the opportunities we see and make the move now? >> first of all, crh is the largest building materials business in all of the united states and we've been here for 50 years plus and, in fact, really de facto being a u.s. business for a number of years, about 75% of our profitability is made here in the united states. as we look at a generational shift in the infrastructure support the largest infrastructure spending we've seen since the 1930s, we see an opportunity for our business here. it's a natural progression of our business to new york this morning. >> absolutely. you're the number one asphalt and concrete producer in the united states and largest road paver. you are well positioned to be a

beneficiary of the biden spending on infrastructure. what are you expecting? >> the infrastructure spend, it really is dealing with the aging infrastructure of the united states. of course we're well positioned as the number one player to capitalize on that opportunity. i think the difference we're seeing now is, actually people are looking to build back better, build the infrastructure back in a better way. i think that plays to our strengths because we don't just sell volumes of rock and stone. we sell sophisticated, highly manufactured techniques and roads as we build them back and provide the whole road. if you look at the challenges going forward we need to build quicker, cheaper in a more sustainable way and do so with less labor. for companies like ourselves when we use modern manufacturing and modern technology, to help build the component parts, it's helping building back better the american infrastructure. >> and look beyond the infrastructure bills is happening in terms of your end market demands? state and local, what are the metrics that define whether you're having a good or bad

time? >> infrastructure is important, it's a big part of our market. there's an interesting trend in the last couple years seeing it here in the united states, this restoring and onshoring of critical manufacturing. this reindustrialization of america which is strong and positive for the u.s. economy, going back to the heartland, you're seeing chip manufactures, semiconductor, pharmaceutical, bioscience, manufacturing battery, all of this being brought on shore and driving a whole new generation of construction in the commercial sector. but the people are doing that, it's actually going to bring high paid, well qualified jobs to parts of america that need it and for us, helping build those facilities which are highly specified, technologically challenged. they need people like us to help. that on top of the infrastructure bodes well for a very strong growth period for the next coming years. >> how about the notion that the emphasis on infrastructure and manufacturing construction is crowding out other areas that want to develop? restaurant chains, for example, it's hard for us to get labor

materials because there's so much federally funded work going on elsewhere. >> i don't think there's crowding out. you're seeing a shift. ten years ago, strip malls, hospitality would have been very much to the vogue. after the change to technology, much more warehousing. that shift, we're not building as many strip malls, hospitality has fallen out. that change shift in the sector. >> you mentioned using technology and labor and sort of how that interplays together. what are you doing right there? are you seeing labor shortages in the workers that you need? are you supplanting that with technology? >> labor shortages is only one part. it's part of a changing world we're in. you can see the weather in new york city is a symptom of the climate change that faces us every day, and it we have to change the way we build our world going forward. the needs of our world are changing. we have to build cleaner, more sustainably and resilient. those who start to manufacture

components in factories and controlled environments, use more resooilds materials. we can do that in controlled environments and bring it to the construction sites where they connect it together. it needs less label and more resilient and the opportunity for us in the years ahead. >> talking about the impact of climate change, a silly question perhaps, but are we seeing things like more potholes in the roads because of the changing weather and all of the cars driving over them and becoming more of a problem? >> you are. because in reality, we're the biggest road builder in the united states, and just take this part of the work in the northeast, the average life road of the freeze toll cycle is seven years. we see that contracting. you're getting more extremes. weather corrupts and interferes with construction. so again, from our point of view, not only are we looking to be more sustainable in how we produce but the products are dealing with those issues. a big issue we have is water. too much of space, not enough in

another space. the sequestration the capturing the transport of water is hugely important and part of what we do is building critical infrastructure, transport water and keep water over large distances and that's an issue of how we deal with climate change and ravages of climate change. >> fascinating stuff. thank you for being here today. >> thank you. still to come, uaw claiming real progress with ford, but ford says there's, quote, significant gaps to close. we've got the latest and what it means for the automakers next. stay with us.

welcome back to "squawk on the street." i'm pippa stevens. stocks are trading near the flat line to start off the final week of september but we are keeping an eye on analyst calls in the consumer discretionary sector. first carmax is higher as wedbush upgrades the stock citing inflection point and growth and profitability. analysts say tight inventories and the uaw strike could support demand and pricing in the used car market. carmax set to report earnings on thursday morning, the stock up

2%. nike getting downgraded to hold at jeffreys. analysts cite pressures in the wholesale channel. macro headwinds in china and expectations for consumers to reduce spending in the months ahead. nike is slated to report its quarterly earnings on thursday. that stock down 0.2%. back to you. we turn to autos once again. ford suggesting that some speed bumps remain and getting a deal done with the uaw after these expanded strikes at additional gm and stellantis facilities on friday. back to phil lebeau with the latest. good morning again, phil. >> good morning, carl. they are moving closer to an agreement between ford and the uaw but too soon to say we can expect one within any couple days or anything like that. they are making progress. here's what i learned talking with people familiar with the talks between ford and the uaw over the weekend. they were termed active by the people i talked with in terms of the negotiations between ford and the uaw. then ford last night put out a statement saying we are making progress.

however, there are still some significant issues that need to be cleared up on some of the key economic points. that's where we're at right now. we're getting down to where they've got to make the final hurdles and clear those. as you take a look at the expanded strike keep in mind, it's over 20 states, but the number of uaw workers in this latest round of strikes at the parts and distribution centers, it's a little over 5600. altogether you have about 12% of the big three's uaw membership on strike right now. so the majority of the uaw, the majority of final assembly plants, engine manufacturing plants, they continue to operate on a normal basis. so nothing has changed there. you're still not seeing a huge, huge financial impact for gm, ford and stellantis. that doesn't mean there's not some impact and the long-term implications is what everyone is focused on. as you look at shares of gm, ford, stellantis, ford got the rank and file to timize and

ratify the contract agreement up there for the uaw's counter part north of the border and now moves on to negotiations with gm and stellantis and everybody focused on detroit tomorrow because tomorrow morning is when president biden will go there and visit the picketers on one of the picket lines. we don't know where, but it's going to be a photo on everyone will be focused on and how much commentary we get from the president at that time. he made it clear, guys, he is in favor of the autoworkers getting more. how much more, that's at the heart of the discussions. >> very interesting stuff. i'm wondering if ford is potentially closer than the other automakers to getting a deal done, how much longer then does it take the others to sort of get a contract that could be ratified? does it happen in fairly short order? are timelines different based on each of the automakers and their own terms with the uaw? >> timelines are different. now do i think it will be a long

time between ford and let's say gm and stellantis? i don't think it will be a huge difference. ford will be essentially the pattern for gm and stellantis. however, there are notable differences between ford and gm and stellantis. let's take ford and stellantis. a big sticking point is whether or not stellantis will reopen one of its final assembly plants outside of rockford, illinois, idled in february. the uaw wants final assembly put back in that plant. stellantis would be more interested in saying we'll reopen that plante, maybe not for final assembly. that's a huge sticking point between the two. to answer your question, usually you see it come relatively quickly, not within days, but relatively quickly. in this case it may take longer. >> phil, in terms of, i guess, a lot of below the line details to what degree do we expect any of these agreements to include things like specific production targets of different types of

vehicles, anything about the company's planned transition to evs or mostly just more about the financial terms? >> great point. that is a big part of this, mike. one of the things that the uaw wants are guarantees in terms of jobs. we know it takes fewer people to build an electric vehicle than an internal combustion engine vehicle. how much of that transition happens between now and may of 2028? which is when the contract would expire. my guess is, some of that will happen, but how much then brings up the question, how do you transition the workers who are working let's say in a transmission plant to work on batteries or something else within electric vehicles? it's not an easy equation for the automakers. they have to figure this out. all of the automakers are dealing with the fact that they already have much higher labor costs than the transplant automakers in the united states

as well as tesla. they're way above where tesla is. they do have to think about that. >> fascinating stuff. thank you very much. you know we're going to come back again until we have a resolution for this and then still come back again an again. china's property crisis intensifying as shares of evergrande get slammed over restructuring setback. the latest from beijing is next. we're back in two minutes. my parents raised me to believe i could do anything. i came to the u.s., went to college here, pursued a lot of opportunities, before launching my company gold belly successfully. and i just know that this is an american dream for my parents and makes me really proud to have been able to deliver that.

welcome back to "squawk on the street." i'm pippa stevens. ukrainian officials say the military killed a commander of russia's black sea fleet in a friday strike on the fleet headquarters in crimea. kyiv is it not provide evidence for the claim which nbc news has not verified. if confirmed it would be one of the most high profile losses of the war so far. ukrainian's special forces said a total of 34 people died in the strike. america's railroads are about to see a big investment. the biden administration announced $1.4 billion in funding today to improve railway safety and boost capacity across the country. the money will fund 70 projects in 35 states and the nation's capital. and sophia loren said the actress is recovering from surgery after falling in her home this weekend. the representative said the 89-year-old broke her leg and hip when she fell in her bathroom. it's not clear when loren might

be released from the hospital. back to you. >> thank you. embattled chinese real estate firm evergrande back in the cross hairs, shares plunging with a number of other chinese property stocks. eunice yoon joins us with the latest on that sector. hi, eunice. >> reporter: hey, mike. renewed fears have gripped china's property sector. investors were taken aback by an announcement by evergrande late on sunday that it would be unable to issue new debt due to an ongoing investigation by chinese regulators into its local unit. the real estate group is suspected of violating regulations. the development comes after the property giant had flagged that it was going to scrap a debt restructuring plan and cancel creditor meetings, four of them, today and tomorrow, because of what the company had described as worse than expected property sales. that, of course, also raised concerns because there had been hopes that chinese authorities

had done enough or at least much to try to get those sales back up and running. however, those incentives that had kicked in have looked pretty lackluster, so cities have been trying to unroll more incentives to juice up the sales. the latest is gauangzhou, a manufacturing city in the south which said it was going to narrow its housing restrictions further. the noefr all feeling has been a disappointment in the incentives. investors are looking at the autumn period, september and october period, as usually a time when people buy new homes. a time that maybe we won't necessarily see that despite all of these new incentives. guys. >> eunice watching that, obviously, from half a world away, thank you for that. eunice yoon on all things china.

the last week of trading of september and while our next guest says the economy has been resilient, he thinks the markets will struggle to do well with the headwinds under way. here to lay out the challenges including the labor strikes and looming shutdown, roger altman. good to have you. eunice told us about china, watching the strikes, watching for the shutdown. are the markets incapable of handling all these boiling pots? >> it's hard to be sure about that, but let's step back a bit. the word i would use to describe the economy has been resilient. through the first nine months, it's just performed better, for example, in terms of growth, than most people expected at the beginning of the year or partway through the year. real growth in the second quarter was 2.4%. many think the figure for the current quarter will be higher than that and that's remarkable

this late in the economic recovery. after all, it started three years ago. but now, as chairman powell said last week, they've emerged a series of head winds, you've been talking about them at length this morning, oil prices, interest rates, resumption of student loan payments and then some shorter term ones in terms of the uaw strike, and so forth. and the prospect of a shutdown, of course, those five. and i just -- it seems to me until there's more clarity on these, especially the short-term ones, would be hard for markets to move ahead and they'll probably put downward pressure on the u.s. economy so that the fourth quarter, the one we're about to start, probably going to come in lower than the last couple, maybe around 1%, a little too soon to tell, but lower. >> are there policy responses to any of these troubles? i mean, what more can we spend out of the spr?

can biden do anything of note in detroit this week? >> in terms of oil prices, carl, i'm sure that they're going to work hard, perhaps in the context of these negotiations, between saudi arabia and israel over a diplomatic agreement and resumption of diplomatic relations to see if there could be some increased at least temporarily increased supplies. after all the saudis are asking the united states for security guarantees as part of that deal if the deal were to happen. whether that's possible, in terms of some relief on supplies, i really don't know. but i'm sure that administration is working some angle of that. look, the main policy that's operating right now, from a federal point of view, of course, is monetary policy. and we've all seen that the message from the fed is, higher for much longer, and we're all

seeing, you know, a 16-year high in the 10-year, 20-year high in mortgage rates and so forth and it's hard for the economy to continue this level of resilience in the face of that. >> roger, you mentioned that monetary policy seems to be sort of the prime swing factor in view, but the move in treasury yields is being attributed to some degree to treasury supplies through the size of deficits and it makes you wonder if we're at the point where after so many years of the alarmist on fiscal spending being wrong or premature or beside the point, somehow it's manifest in the markets as somebody who helped to run treasury. how would you think about these things? >> i think you may be right, mike. if you step back, the fiscal trajectory of the united states is pretty alarming. and it remains to be seen how

long markets will ignore that. we're running approximately a $2 trillion deficit at the moment in the context of pretty strong economic growth this year so far. there's no question that's too high. $33 trillion of total public debt is a pretty shocking figure. even in relation to -- especially in relation to the trajectory of that in relation to the gdp. historically markets take all that in stride until they don't. there will come a moment when they won't. whether that's playing out a little bit in markets right now, i'm not sure. but there will come a moment when the view of -- from a market point of view from that physical trajectory turns negative. >> on friday kashkari, minneapolis fed president, was talking about how surprised he was that interest rates being up

500, 525 basis points hasn't slammed the brakes on consumer spending at all. he thought potentially it would. you mentioned the resumption of student loan payments. can anything slow down the u.s. consumer? is that a concern for you? >> well, the excess savings, household savings, which the pandemic caused, which at their height or peak were a trillion, are now down below about $500 billion and falling. as to those excess savings fall, that will weigh negatively on consumer spending and i just think this current quarter, the one beginning october 1st, next weekend, is going to be a weaker one for the reasons we discussed already here and i think it will be weaker also for the consumer. interest rates have both a

mathematical impact, if i can put it that way, and a psychological impact. i think together with just affordability questions for consumers, because prices may be coming down some, but grocery prices and others remain high, so i think we may be seeing some weakening of consumer spending, but i don't think it will fall off a cliff. >> yeah. it's hard to imagine that fed would complain about that. we'll see. markets pricing a lot of this in right now. roger, thank you. always good to chat. >> always a pleasure. thank you. >> get a check on the markets this monday morning with the dow not far from session lows. down 118. s&p hovering close to the flat line down about 4 points. stay with us.

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nike set to report results this week amid a tough time for consumer names. the consumer discretionary sector coming off its worst week in a year. 63 of the analysts call the name a buy, despite underperformance on the year. as we're looking at some of the nike preview notes, jefferies is adjusting estimates moving the price target to 100. jpmorgan remaining overweight but $136 price target. bank of america is lowering the price target to 110. there's concern about what's going on in the wholesale environment for nike. of course there's still focusing on direct to consumer and wholesale an important part of their business. they're actually giving back inventory and rebuilding the relationship with dsw and macy's. that could take time especially as a number of these retailers have worked hard on getting their inventories under control.

lorain hutchinson of bank of america points out athletic sports wear companies, at least the data points she's seeing are suggesting promotions remain and a number of surveys from jefferies says if consumers have new student loan repayments they didn't have previously say they're going to cut back the most on apparel and footwear. >> i was going to say you get to a point in the cycle where companies start to come into focus for how discretionary their products are. there was a time you say people buy more shoes per year than they did before, as opposed to the ability to cut back, and normalization in spending trends is something the stocks weren't prepared for. >> the line about china the reason to go there was 2 billion seat. >> exactly. >> doesn't always work out how you think. >> china is a key focus for nike. it's been okay, not great. mcdonald's franchisees clashing with corporate after fee changes at that company.

kate rodgers talked about that last week and has more details. >> hey, carl. good morning. the national owners association, an advocacy group of 1,000 owners spoke out on the fee changes in a letter obtained by cnbc. mcdonald's announced it would be raising franchise servicing fees for new owners and changing the name to royalties. the noa says the change in know men clay tour is significant and will remove duty to provide services and said owners are flowing less cash despite the corporation making record breaking revenue and imploring owners to review new agreements with the company alongside a franchised attorney. reinvestment decisions should be reconsidered as reopening a restaurant will not provide a historic return for the franchisee. it's time for every owner to begin focusing on protecting their business, employees, and family. mcdonald's u.s. president told

cnbc last week we're not changing services but the mindset by getting people to see and understand the power of what you buy into when you buy the brand. the system, for its part, said franchisee cash flow is up on average 35% over the last five years but the company did decline to comment on the letter and position as you can see, mcdonald's stock is slightly lower this morning. back over to you. >> kate, we'll watch it and talked about how historic the move was. quick programming note as we go to break. there is time to register for delivering alpha kicking off thursday. you can scan the qr code or just phfomo.nbcevents.com/delivering 'r ala r rewee back after this.

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welcome back to "squawk on the street." the energy sector up 10% in this quarter. oil on pace for the biggest quarterly gains since march of 2022. so are more gains ahead or maybe is it stalling out? joining us now bofa securities francisco blanche and again founding partner john killdove. francisco, love your perspective

on how we got here to 91, $92 brent crude. is it purely a supply response in the markets and does it continue? >> hey, thanks for having me. yeah, i think there's supply, supply, supply at hand here. we've had lower four months running. remember, they started cutting supply around $95 a barrel on brent in september last year. we've also had russia joining saudi arabia in the last three months or so with pretty deep cuts. after really maximizing volumes four of the prior nine months. then, of course, we've had some refineries that have triggered higher diesel and gasoline prices at the pump. all of those factors have been pushing oil higher in combination with chinese demand story that, frankly, is not great but not all that bad either with transportation coming back from the covid lows last year. >> and at this level, francisco,

i mean, are we at a better clearing price? obviously north american production has remained not far from records. >> yeah, i think we're a better clean price. we think if opec sustains the cuts into year-end and demand continues to hold up, as it has, across most of asia, we'll see -- we'll see that in oil. remember, inventories did come down in august, are coming down in september, and they're likely going to come down in the fourth quarter as well. all of that creates momentum to the upside. now, i think the question is 2024, will we hold up at these high levels, if demand starts to wobble at high rates, continue to bite into the economic outlook. >> that's where i was going to go next. you have the rest of the asset markets that are kind of caught up in this concern about higher yields, whether it's going to really slow the economy. and yet you've had oil going

higher alongside it. how do you read it? >> i read it as a real mixed bag, mike. good to be with you. obviously, look, mohammed bin salman of saudi arabia is unbelievably committed to engineering a higher price so he can get more revenue for the public investment fund so he can embark on his gdp growth streams. he talked about them last week. it's coming at the expense of u.s. drivers. i think further gains from here are going to be hard fought as we were coming on air here i saw a wire report headline that evergrand had a major bond default in china. they're a major real estate lender there. it speaks to the problems in the chinese economy that has been a real headwind for this oil price rally that would otherwise be taking off here. they are as essential to the price picture from the demand side as the saudis and now russians are on the supply side.

so, to the extent that, you know, these interest rates also stay higher for longer and inflation comes down and it's effectively an even greater tightening by the fed de facto, we are going to continue to have headwinds for the oil markets. a lot to be afraid of, but i'd say, you know, just hold on here and just remain calm, as they say. >> john, you brought up evergrand, that leads me to pull on that china thread a little bit. in your notes you talk about how -- what's going on in china with oil is far from clear cut because of them purchasing a lot of oil, but not actually doing much with it until potentially for you. explain what you mean there. >> the chinese picture for oil has been very confused over the last couple of really years. why they didn't capitalize on amazing refining margins in the aftermath of the pandemic, big question mark. but also, too, back in august, the big headlines were record chinese crude oil imports. they were putting it into

storage. now they are refining it and now next month the headlines are going to be, record chinese diesel fuel for the asian market at least, which should have reverberating effect around the world. so, again, the sort of parade of horribles that you can paint here for the oil market and oil prices and refined fuel prices sort of loses its luster if you scratch at the surface a bit. >> francisco, i know you don't necessarily cover the fed, but there is an ongoing debate about whether or not the fmoc should or will look through the price action that we've seen lately. you got reflections on that? >> yeah, i think it's difficult for the fed to completely know what's going on in the energy markets. my fear going into 2024 is that we see russia playing around once again with prices in the same way they did with natural gas last year. remember, for muchof the past 12 months, russia has maximized

volumes over price in the case of oil. but that could change in 2024. and that may make things complicated for the fed. because commodity inflation tends to precede core inflation. it is the one asset class that moves at the fastest pace when you look across the broad range of price drivers in the economy. so, i think they can -- they can probably look at the first -- look through the first jump, but if prices do get into triple digit range and continue, it's going to be a lot harder. i would say maybe 95 they can look through, 105, 110, not so much. >> john, what about the dollar and impact there with oil prices. sitting at the highest level of the year, just below $106 when you look at the dollar index. >> another headwind for prices going to the upside here. it's not a one for one

correlation, but it's certainly there. when you get percentage point or several percentage point moves, that's when you see the effect, courtney. and, you know, with the fed effectively tightening as -- continues to come down, it's only going to boost the dollar relative to the other global currencies. that should -- a lid on prices. also higher dollar makes oil expensive for nondollar denominated countries out there. even more expensive for asia, for latin america. again, that's why i keep saying further -- you have to be hard fought. >> yeah. obviously multiple headwind. we'll see if this move does, in fact, get a little more friction to the upside. francisco, john, appreciate the time. >> thank you. meantime, markets here being stubborn. s&p has gone red yet again. ten points now separate the market from 4300 on the s&p. a lot more "squawk on the street" continues in a moment. don't go away.

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good morning. i'm carl quintanilla with morgan brennan on the floor of the new york stock exchange. the latest from capitol hill and

why it could cost billions. arm and instacart down big from their debut. has the window already slammed shut? details on the writers agreement and where the autoworkers stand today. first, taking a look at stocks on this holiday-crimped trading day. we have major averages with the exception of the transport are lower. the ten-year treasury note 4.21%. that is the focus, right? it's this wall of worry for the markets as we finish out the fourth quarter. the impact of higher interest rates, student loans restarting, threat of government shutdown, higher oil, and the uaw strike. >> the potholes of q4, as goldman called them, some are longer lasting, some shorter in nature, such as a