- it's polite to thank someone when they do something nice for you, isn't it? well, how about when they do something brave for you? let's show veterans our gratitude. ask your local veterans affairs office how you can help. the more you know. good thursday morning. i'm carl quintanilla with courtney reagan. mizuho hoe's chief economist breaks down why powell's 2% target does not seem credible. why and how to play it ahead. we'll hear exclusively from bridgewater's ray dalio with his warning on the bond market. an hour and a half into the trading day, major averages are higher, marginally so, the s&p

500 leading the way. carl, we are seeing oil prices down after yesterday's big run there. in the mid-92s right now. 92.56. maybe some relief because we saw those run pretty far, pretty fast. >> got to 95 today. vix below 18 after yesterday as well. as we get closer to the end of a down month for the major indices, our next guest doesn't see it getting better from here, forecasting more weakness ahead for stocks and a potential recession on the horizon. he does say there are opportunities out there in the market in places like health care and industrials. joining us on set today, sameer, senior market global strategist for wells fargo investment institute. great to see you back. >> thanks, carl. >> no chance you can close out the quarter on at least a stabilizing note, you think? >> there should be certain rebalancing flows that will probably come in tomorrow. those could maybe put in a little local low. the thinking is we will have a

recession by the end of the year. if you look at the gdp data, the consumer is already slowing. that's before oil prices started to do what they're doing recently. >> you're not looking for seasonality or year-end chase or any kind of surprise resolution to the shutdown or a strike, giving q4 a boost? >> you could have some of those things mitigate the economic weakness. the tricky part is, look at rates. today the 30-year was well north of 480. the tricky part for investors is, what do i get paid in stocks to take that additional risk? if you can get 5% or close to it on the fixed income side, it's difficult to say, i want to take the equity risk. >> are you in the camp that corporate profits have troughed? >> probably on a year-over-year basis. the comparisons are very easy in q4. you probably do start to see some growth rates tick positive, but i think it has more to do with a tough q4 last year than a really good q4 this year. >> when we were just coming off the october lows? >> that's exactly it. >> you were talking about

rebalancing for tomorrow. that's because it's the end of the month, the end of the quarter? >> that's exactly it. >> what should we expect for volatility going into the end of the year when we have so many unknowns? strike, shutdown, student loan repayments coming up, the christmas holiday. how do you factor in all of that when you're looking at the landscape for equities. >> i'm surprised we were below 13 a few weeks ago. i think it would be fair to say the market was whistling past the graveyard. from here i think the skew is probably to the upside. 18, 20, i think that is closer to the historical average. i would say if there's a risk, it's to the upside. >> is your view so dire that economic activity can really roll here and yet the long end stays elevated? >> so because of stagflation, because of what oil prices are doing, again, it's not so much this time is different but you have to at least account for the fact there's a stagflation element you haven't seen probably since the financial crisis. honestly, you have to go back to the '70s and '80s. >> you think this is -- others

argue that was about energy, to a large degree and a weird mix -- a different mix of geopolitics. certainly a larger percentage of the workforce, unionized created a flog wheel in the '70s that would be hard to replicate today. >> when you think about the strikes, oil, it's probably all the headlines we're talking about today. maybe it's not a repeat but it sure is -- >> what's your allocation? what percentage of a portfolio is stock versus fixed income? >> we're underweight equities. we think we're in a commodity bull super cycle. we like fixed income. when you can get 5%, 5.5% on the short and long end, we think fixed income makes sense. for equities, we like large cap. i don't want to come across as overly negative. our target next year is 4700. we still think the s&p on this pullback is buyable. we think the risk/reward starts

to flip more favorable to the 4100, 4200 area. >> do you think where investors are sitting with cash on the sidelines, watching the fixed income area or even money market saying this is a lower risk than to play into equities with all these unknowns we're talking about? >> that's exactly it. if you look at earlier this year, we were around 4200. you tack on 5%, that's 4400. we're below that right now. if you had been in cash and you had been clicking that 5% coupon, you're probably neck and neck with with equities have done and taking more volatility to earn the same return. >> is your 4700 target assuming mega cap tech holds its gains, that tech profits come in strong, that a.i. remains a story that's monetizable? >> we do. again, there should be a recession and there's a recovery that probably starts middle to later next year. and then, you know, that should kind of kick start corporate profitability once again. it's all about sequencing. it's all about timing. so, first some weakness and then some strategy later half of next

year. >> would you describe it short but shallow? >> a moderate recession, probably six months. again, this is more of a fed-induced recession. the last have been more excesses that had to be cleansed. this one the fed trying to manage demand for a lot of goods. too much money chasing too few goods. i think they're trying to push that demand out the curve. >> moderate, that's stronger than what we've heard from some others. >> thanks. >> absolutely. as you know, cnbc is delivering alpha investor summit taking place in new york city. leslie picker has been talking to execs all morning. she has a few themes when it comes to the economy. leslie, we wish we were there with you. >> i wish you were as well. the morning kicked off with a bit of bearishness. katie cox spoke about the historic rise in interest rates. >> we are going to have a recession because that's the way the world works. it moves in cycles.

we haven't had a real one over a decade and a half except for a short blip. we have a lot of excess to work out of the system. i think some has worked out and the cushion is much thinner and we can unpack that in more detail. there is more excess to go. the longer we go until we get that recession, the more leverage there is to the downside. >> i also asked don fitzpatrick, cia of soros if she agrees a recession is inevitable. she said, yes, it's about when and how deep it is. given that back drop, i asked her where she sees opportunity amid all of the uncertainty out there. >> we think interest rates, government bond rates globally are going to -- we've seen them get sloppy in the last week or so. we think they continue to get sloppy and actually we're given an opportunity to set long positions that will serve investors well over time. but the net issuance coming to market, including central banks

speeding up qt, which the bank of england did last week, we think sets up for some pretty volatile moves there. it's a good time to -- when nobody wants to buy, it's a good time to buy. so we like that opportunity. >> there's a lot more content in store today from investors from blackstone and softbank and ubs. we'll bring you the highlights. >> katie talked about things that almost broke in this cycle. uk pensions, regional banks and her notion is the longer this lasts, the more things will break. is the other is her view that the ipo window isn't going to be some kind of barn burner. >> that was interesting. we spoke about growth investing as you're starting to get different signs and signals that potentially inflation is back and so what does that mean for growth investing? she said, you know, the fact

that we've seen a couple ipos at or around our issue price, not necessarily closing the window for the ipo market in general, but you could still see more deal activity to come. she's very interested in private credit, both -- actually, both women were interested in private credit and the opportunities there. particularly control, you know, if you do start to see a recession. >> and given all that, no surprise their view is that it's good to be in cash, right? very cash heavy given the potential roadblocks you might be seeing in the way of financial stability? >> yeah, katie koch in particular said, you get paid to be patient. cash is a very attractive asset class in a world where we haven't seen that in many, many years. so, if you are of the mind, as these two were, that there is a recession coming, it's just a matter of when and how deep it is, then, you know, you are paid to be patient. you are paid to sit in cash or

liquid treasuries and so forth. that was part of dawn's opportunity set as well. even though a lot of people are bearish -- or have some bearishness surrounding treasuries, she sees opportunity amid the volatility. >> thank you very much for bringing it to us. still to come this hour, how a cash-strapped consumer is deciding what gets added to the cart and what gets left behind. nike, lulu, peloton all in focus. mizuho's chief economist says he no longer believes the fed and the 2% target. we'll talk about why when "squawk on the street" comes back.

welcome back. peloton shares surging after announcing a five-year strategic partnership with lululemon. as part of the deal, peloton will develop digital content for lululemon while lululemon is peloton's athletic partner. lululemon will stop selling

mirror, the company they bought for $500 million in 2020. the fate of the mirror remains unclear for now, exactly what's going to happen. they are going to stream some peloton classes on it in the meantime. there's been no disclosure on revenue sharing between the two companies and what each gets in a financial arrangement for this strategic partnership. jeffrey's randall koenig said i don't see much for lululemon. peloton shares moved lululemon down marginally. a much larger company. i think the market cap is $48 billion for lulu. >> you can see who is coming in from a position of strength. >> i think so. >> although, good news for peloton, who has had new management this week, too. >> and obviously they're trying to push their content, that's sort of what they believe is their most powerful asset after stumbling since those pandemic highs. obviously content push for them. we'll dive deeper into the state of the consumer with the

holiday shopping season around the corner. what factors are driving decisions around purchases? joining us now, wharton school of marketing, barbara khan. thank you for joining us. i'm fascinated by the state of the consumer. it seems as if there are all sorts of pressures on the consumer, whether it's the student loan repayments coming due here soon, what's going on in labor markets with potential strikes, looming shutdowns, higher interest rates, dwindling savings. yet we've seen consumers still spend at least in areas where they want to spend. so, in general, it's a big question with probably a complicated answer, but how is the u.s. consumer? >> that's very interesting, all the different pressures you point to on the consumer. and we're seeing that in the complicated behavior in the marketplace. on one hand we see a lot of brand loyalty to price premium brands, like you just mentioned, lululemon, peloton, luxury in general, the new apple phone. and on the other hand, we see

incredible loyalty to incredibly low price options like temu and shein. >> that is obviously very interesting. when you hear from a retailer like a target, for instance, which is multicategory retailer, so they sell food and some items that are consumable household items, discretionary goods. for a long time it seemed consumers flocked there for some clothing and apparel but has not been the case recently. how do you explain that? if consumers are price sensitive, why are they not buying apparel from target? >> there's a lot of complicated things going on. target is having problems, likal physical retail, with crime, organized crime, and danger in the retail stores. that's kind of affected that physical space a little more. but apparel is a category where people have kind of gotten a little tired of buying and they've been looking to spend their money on other things.

you're seeing more spent on hospitality, travel, experience. and the retail apparel business has been hurt. so there's a little complicated reasons there. but target remains a very favored brand among consumers. >> barbara, are you still with us? >> yes. >> okay. i guess i was just going to follow up on that point about consumer behavior. i'm fascinated in general by what consumers say and then what they do. obviously, when you have surveys from jeffries and the like asking them about if they're worried about their student loan repayments, they say yes. the next question, what are you going to cut back on? they say, apparel and footwear. but at the same time, you have other surveys when we're asking what are you going to buy for the holidays, and apparel is number one. so what are consumers doing? are they buying it or not buying it? >> there's a difference there on whether they're buying for themselves or buying as gifts. clothing still makes great christmas gifts. on the other hand, some other contradiction you'll see is,

yes, i'll save money, and you'll ask, what are your favorite brands? they'll mention nike, lulu, apple, which are very high-priced brands. there's obviously some kind of complication. what i think doesn't work is stuck in the middle. people are either going after the brands they love and they're willing to pay a premium price for those for the splurge, or else they're going after the really low priced retailer like temu or shein who are giving you bundles of clothes for a very cheap price. >> barbara, the last couple of days we've heard comments, costco is a good example, general mills a few days ago, where discounts are really driving unit volume and the street is wondering at what point the street starts to inflect volume, even though price does not. my question is mostly about the ad market and whether or not you think that feeds ad budgets, even though overall economic activity might be softening. >> well, ad budgets is always a

question. especially in a lot of these different media places. where will the ad dollars go? we don't know. you're mentioning a couple important factors. one is price discounting idea. the idea these price discounts are coming earlier and earlier. with amazon prime day and walmart and target following up on all of that, we're starting to see holiday specials, you know, in september. it gets earlier and earlier every single year. some of the advertising dollars or promotion dollars will be spent on building brands, around search kinds of advertising, digital advertising. some is going to be spent on promoting price discounts. >> i think i actually started started shopping christmas presents the earliest ever. i've bought a couple. >> it's shocking. >> it is. >> barbara khan, professor from wharton school of business. thank you for being with us. >> my pleasure. speaking of the consumer,

the hispanic population, one of the fastest growing in the united states, has seen a big jump in household wealth in the past decade. our contessa brewer is at the latitude conference in miami beach with fresh data. >> hi, carl. latino household wealth is growing. in 2013 median net worth a little more than $15,000. by 2019, the latest year we have full data, it had more than doubled to $36,000. much of that fueled by real estate, which accounts for more than half of latinos' household wealth. and high mortgage rates, as you might imagine, are now really becoming a hurdle to first-time home buyers. according to a new report from the hispanic wealth project, latinos who own a home have a stunning, get this, 27 times the median net wealth of those who rent. >> i like to say that homeownership is a gateway to the middle class, but business ownership is the path to

prosperity. and latinos that own small businesses have five times the wealth as those that don't. so, entrepreneurship is a centerpiece. it's kind of like in our dna, to a certain degree. >> latinos are starting businesses at twice the rate of their non-hispanic white counterparts. often, though, with investments from family or friends, and so they face huge hurdles to access to capital. we've been talking about that on cnbc. latitude ventures aims to change that here. they're investing in enpr entrepreneurs and growing and scaling. others are participation in the stock market and the hispanic wealth project says latinos are just now beginning to age into their prime earning and investing years. so we expect to see more growth here and establish whether they will hit their goal of tripling hispanic household wealth in a

decade. we'll find that out later in this fall, maybe in november. guys? >> contessa, i was wondering about that. obviously, this is a population that is growing in numbers and growing in power when it comes to wealth and otherwise in the job market. is that the projection, if we've already doubled income from 15,000 from the median to $36,000, what are the projections for the next six years? how are they going to get there? what investments are they undertaking to see that wealth grow? >> that will decade goal will be up next year, in 2024. the latest data they're basing it on is due out by november. by the way, they said, oh, we're looking at some numbers from the fed this week as long as the government shutdown doesn't interfere with all of that. so, we'll see how that goes. you know, the interesting part is that while they have hit their markers and goals on increasing homeownership, on increasing entrepreneurship, where it's still falling short is diversification in investing.

for instance, in 2013, 25.1% of latinos had a retirement account, a 401(k) or something like that. by 2019, it was 25.5%. they only saw 0.4 percentage point growth. that's one area that's going to come into focus here, about how to get more people to diversify their investments. >> that's interesting. contessa, thank you very much. contessa brewer live from the latitude conference. still to come, ray dalio. we're watching micron. earnings in the red. revenue surprised to the upside. the ceo did join us earlier on "squawk on the street" and discuss the actions the company took to get efficiency better and bring down costs. >> micron showed decisive actions during the course of the year to cut down our costs, to bring down our capex significantly and to reduce the

supply. so, now as we are entering -- as we are in fiscal year '24, we are enteringfrom the down, the lowest part of the cycle, ending in fiscal q4.

welcome back. watch apple under pressure as users report the new iphone 15 gets too hot as apple closes in on 200-day moving average. street falls a fall below 165 would be significant while a

rise above 190 might potentially put the shares back on track. the stock is currently on pace for the worst month of the year. there's the journal piece about the pro overheating concerns. there's also a piece on the tape about the google pixel in japan stealing share where the iphone is below 50% for the first time in years. >> it's fascinating we're seeing, it seems like, a little more negative sentiment around the apple iphone, which i don't remember happening. you have evercore isi reiterating apple has significant pricing power. just ignore the fact it gets real hot in your pocket, i guess. >> it appears to be the pricing that is forcing some consumers to look elsewhere. >> absolutely. i mean, that is -- that is pretty eye-popping number. the way they do the installment of payment plans, some of us forget about it and it's become a necessity, to some degree, of some kind. doesn't have to be apple. >> trying to revisit 4300,

session highs. let's get a news update. >> carl, the manhunt for it the violent offender wanted in the killing of a texas ceo in baltimore has ended. the u.s. marshal's office says jason billingsley was taken into custody at a maryland train station last night. police say billingsley was connected to the murder of pava marie lepere from evidence through attempted rape earlier this month. she was found dead in her apartment on monday. investigators issued search warrants to look at brianyan kohberer's online activity leading up to the murder of four idaho college students last fall. they're interested in any click activity pertaining to knives. all four students were stabbed to death in their off-campus home. dna on the knife sheath was traced back to co-kohberer. delta is going to change their plan again. the overhaul made it more

expensive for many travelers to earn elite status and get into airport lounges. the delta ceo said this week the airline went too far and updated changes will be announced in the coming weeks, carl. there was a lot of outrage on social media when that happened. >> doing a bit of a u-turn. thanks. still to come this morning, mizuho's chief economist on why you no longer believes the fed is targeting 2% inflation. and then as cnbc celebrates hispanic heritage, we're sharing stories of influential hispanic leaders, like this. >> as somebody who emigrated from latin america, one of the things i'm most proud of are the values i was able to bring from my hispanic heritage. my family is from peru, and i also grew up in mexico. knowing where you come from is critical to set that path for success.

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results before the market opens tomorrow. the stock is up big, but oil prices are becoming a concern. shares are down 17% in the past three months. the company not hedged against a spike in oil prices. we're talking about those moves earlier in the show. the ceo will join the show tomorrow for a little more on the quarter. elsewhere in the travel set tore, jetblue predicting third quarter reeve new to be toward the low end of the range. leisure bookings not as strong as expected and also blaming weather. they have also been hit by rise in oil prices. you can see the opposing directions there, carl. a couple hours into trading. as we said, session highs, 4303. let's get post to post with bob pisani. >> i'm very happy because we're getting a bit of a bounce and in the right sectors. small caps are bouncing.

horrible month. midcaps are bouncing. horrible month where a lot of transports live. semis are bouncing, even though micron is down on the earnings. so, a little bit of maybe reaction to oversold conditions. i wanted to show you something right now here, not a lot of new highs out there, folks. smile, anthony. look at this here. exxon, $120.70 intraday. that is an historic high for exxon. my charts go back 40 years and nobody is telling me no. again, it's intraday. we'll see if we close here. it's down a little bit right now. there's those oil stocks outperforming. chef ran has been a stalwart. otherwise it's been about oversold conditions. all i get is emails, we're oversold, when can we buy? you can be oversold for a long time, folks. nike, this thing has had a very difficult month here. we were oversold at the end of august. it was $90. now look at it. it's $89. it's still oversold and it's

been oversold all month. you could stay oversold a really, really long time. another one, this is a big problem for the dow right here, boeing. a high priced stock. boeing had a great year until september. it's been down almost every single day. we're down like 13%. it has been oversold on a technical level relative strength indicators for weeks now. weeks and weeks and weeks. yet you don't necessarily get a buy signal just because it's oversold. here's another long-term problem. coca-cola has not had a great year overall. got oversold in early september. it was $60 a few weeks ago. now it's $55. a little oversold a few weeks ago. now even more oversold. what's the point about all this? the point is oversold is a condition, it's not a signal. just because it's oversold doesn't mean you necessarily have to buy now. we're in a seasonally weak period, september into mid-october. that's the biggest problem. the second biggest problem is we

have interest rates going up. a lot of people are perfectly happy to sit in their 5% two-year bond funds and do absolutely nothing right now. so, you put on weak seasonality on top of move upin yields, you have real competition for stocks. oversold is not necessarily a buy signal. back to you. >> thank you, bob. taking us through the equity market. we'll turn to the bond market. the move in yields has been top of mind for investors as the selloff continues. steve liesman joins us for more on what he calls a curious move. what are you seeing? >> yeah, thanks. it's been a rough couple months in the bond market with rising bond yeelsdz and falling prices, pummeling investors, especially on the long end. analysts think this run higher in rates could have further to go. yields are up from 375 to near 465. call it 463. a little relief this morning. anyway, the 4.65 was the high since 2007. at this level, talking about a

5% ten-year, it's within reason. it's within spending distance. bank of america says the ten-year could hit 5 as a result of some factors. hawkish fed and neutral rate. that cuts away cuts next year. there's the u.s. debt downgrade, better economic fundamentals and, of course, lots more supply than anticipated by market. it is the supply issue that looks to be driving rates right now. in fact, this upward move in yields is curious because much of the increases come with repricing of inflation without repricing of inflation expectations. that is, the move is in real yields and in term premium. blackrock, rick reader, i'll talk to him later on at deliver -- this afternoon at delivering alpha conference. he says of this massive issuance, quote, it's an extraordinary amount and it is going to continue. b of a says, get used to it. higher structural deficits along with a higher neutral rate in the bond market is more like it

was before the '08 financial crisis. that was higher yields and higher bond volatility. that means the challenge, courtney, to the bond market from -- to the stock market from the bond market could be around for a while. >> steve, stay close. our next guest says the biggest risk the fed faced when they met last week is market participants were beginning to get concerned over that commitment to 2%. should an adjustment be made? joining us at post nine is mizuho's chief economist, steve. good to have you back. goolsbee brought it up, saying it was perfectly appropriate after you got there. do you think it happens? >> if it happens, it's a disaster. so much of the federal reserve's credibility is tied to the 2% number. once you start playing with the 2% number, you lose your credibility. and that is the biggest concern the fed should be looking at. the more they give this, oh, yeah, we're committed to 2, but,

wink, wink, maybe we're not, the more you'll see long-term rates go up. this is their biggest problem. >> can't they change it? wasn't it in 2012 when bernanke put it in play, you can lower it, raise it, go back to stability as a target, get rid of the number all together? conditions change all the time. why do they lose credibility if they say, we need a reassessment? >> the reality of the situation is if you start allowing inflation to be an adjustable variable in terms of the thought process of what people are thinking in terms of their business decisions, you want to anchor expectations. when you have a federal reserve more dominated by political economists these days than academic economists, you have a risk that we go back to the scenario we had before paul volcker which is where monetary policy was driven by fiscal policy. and the reality is, we have a fiscal policy that's out of control. if the federal reserve attempts to continue to sustain or believe that employment is more

important than inflation, then you get an environment where inflation expectations could easily become unhinged, rising long-term interest rates become a problem of their own, and then you have to go back and reprove your credibility. that could be even decidedly higher short-term rates. the federal reserve would be better to just stick with it, confirm it, go with it and do what they need to do, get it out of the way quickly, get the shallow recession over and done with and get it done and move on. >> steve, i'll let you jump in and maybe ask if you can give us a read as to how this is getting ready within the fed and among staff. >> i'm starting to mix my metaphors here, but i don't hear the wink, wink that steve is hearing. i read austan goolsbee today. i thought he made a very profound defense of the idea of sticking to the 2% target. basically, if you want to live like a dove, you better act or walk like a hawk, is what i

heard goolsbee saying. the idea being that if you -- you need to stick to that target. he said that it was federal reserve credibility that has been a big and important role in bringing inflation down now without much pain. and if you want to avoid a recession, you better stick to that credibility, you better hold onto that 2% target. maybe we can do it later, but i don't see that as a wink, wink for not doing it now. the only thing i would say, steve, that you might be right is so far the fed has been able to stick to the 2% target without much pain. and that pain has not come yet in the unemployment rate. the government is able to sell bonds, able to service the debt. if that becomes more difficult, then there's a question about the 2% target. but we're not there yet. and i don't hear the wink, wink. >> well, i hate to disagree with you, steve, completely, but the reality of the situation is you go back to the comments he made the other day. there was clearly a wink, wink involved there. today he comes back with a

different scenario because the bond market went up. they change their mind day to day and come out with different comments, they float different trial balloons, there are different -- >> i'm not hearing that. >> by the same token, they raise their growth numbers, they lower their unemployment rate numbers, they push out their target to get to 2% and they still leave 50 basis points worth of red cuts in their 2024 outlook. the numbers don't add, steve. the numbers don't add. this is the problem. the market's beginning to look at what they're saying and doing and saying, none of this stuff makes sense. they're losing their credibility. >> very interesting stuff. >> i agree. i agree, steve, that their forecasts do not have credibility. however, while they don't necessarily come true, they are, indeed, the most important forecast. that's the idea. the market trades off of those forecasts. and you at home can sit here and play this game and say, you know what, i think the fed is going to be wrong in the following way. here's how i want to invest.

but you have to take that forecast as the bottom line, the pc, conventional wisdom and work off that because that's their stated intention or best guess of what they're going to do. >> you brought up a point earlier about getting to the shallow recession sooner, faster, let's get it over with, but you don't think it's coming any time soon. you're talking about reacceleration -- >> they have a strong third quarter number. we are looking at something in the fourth quarter of the year. probably looking at something in the second half of next year. but you have to keep short-term rates high on extended basis. if they're not going to continue to push short rates higher. they keep on wanting to tell the market, we're going to cut rates. because they keep telling the market they want to cut rates, you wind up in an environment where the belly of the curve, which is where securitization takes place, is not feeling the full effect of monetary policy. this is part of their problem. you can't say one thing and indicate something else in your forecast. you have to be consistent.

they're not being consistent because they want to have it both ways. if you want to have it both ways, you're going to have a problem. this, i think, is what the market is finally reflecting. >> steve, you're the one trying to have it both ways. they took away 50 basis points of cuts next year. and they took away -- >> steve, they shouldn't have any in there. steve -- >> hold on. let me finish. let me finish. while they have inflation coming down. and so they became on a real basis, and you know that that's how policy is judged, on a real or inflation-adjusted basis, the fed signaled it would be tighter. you know what, all you got to do, steve, i don't have to argue this, look at what the market did. rates went higher on the long end as the market began to tighten in a tighter fed from two ways. one is fewer rate cuts, a higher real rate. and the second is if the fed's going to cut later, that means more qt. it was really a double-barrelled tightening last week.

forget what i say. look at what the market did. the market tightened financial conditions. i rest my case. >> yeah, but that's a function of the currency, steve, number one. number two, getting back to your point, the reason why -- >> the currency is a function of -- >> the reason why the currency is selling off has to do with the fact that we're seeing an environment in here in which people are losing confidence in the federal reserve's inflation. we can agree to disagree on this. i think for the time period -- >> the currency's strengthening. look at the dxy, the currency went up to 107. the euro weakened -- >> that's because of interest rates, not long-term inflation expectations. they are rising. the concept yields are rising makes absolutely no since. the tips are not a good measure of inflation expectations. never were. never have been. never will be. they're a better measure of what's going on in the energy side of the equation. people are misusing indicators. i think that's part of the problem in this environment. >> all right. we'll bet a hamburger, steve. >> you got it.

>> i don't think the fed -- >> it sounds like wimpy here, but, okay, fine. >> cheeseburger. we're getting a cheeseburger. i don't think the fed is going to be coming off that 2% target in any way, shape or form. >> if they ever do, we'll kcome back to this tape. >> cheeseburger on the line. >> thanks very much. up next, sam altman and chatgpt getting bigger. we'll discuss tripling of o openai's valuation is justified. we'll discuss that next. are you still struggling with your bra? it's time for you to try knix. makers of the world's comfiest wireless bras. for revolutionary support without underwires, and sizes up to a g-cup, find your new favorite bra today at knix.com

open ai, the startup behind chat gpt, is reportedly looking to raise funds at $80 billion to $90 billion of valuations, triple from a few years ago. deirdre bosa digs into that for today's "tech check." that's a big number, dee. it tells us generative ai still red-hot. open ai might also tell us the

disconnect in public and private markets is back, or maybe it never even left. on the public front, look at the mega cap tech this month. nvidia lost 13% of value. apple 10%. the magnificent seven that led markets higher this year are now the weak spots and a big part of the reason is rising treasury yields, which makes future profits worth less. but big tech is already hugely profitable. it is the up-and-comers, the still private, unprofitable tech companies that rising yields should hit harder, not for open ai, though. "the journal" reports it is in talks to raise money up to $90 billion valuation on a billion in revenue expect this had year. i want to put into context how rich that is through a simple multiple, valuation to sale. open ai doesn't disclough finances but is expecting about a billion a year. at that valuation, investors would be paying $90 for each dollar of revenue generated this year, and that makes open ai

more expensive by this metric than the biggest tech companies listed on the public market. it is miles ahead of nvidia whose valuation to sales clocks in at 19 times, and even microsoft, which owns 49% of open ai, is at a mere ten times valuation to sales multiple. now this shouldn't be a major surprise. startups often get higher multiples, but there are huge risks and tradeoffs especially with treasury yields offering an attractive safer place to get a return right now. a lot has to go right for open ai. it is putting out the most interesting generative ai applications. i don't think anyone would argue with that. we saw voice and image in chat gpt but monetizing it will be a different proposition. open ai has the biggest tech companies like google and meta hot on its heels. meta just yesterday announcing dozens of new products. open ai may need even bigger ambitions. the information "the financial

times" reports sam altman and masayoshi son to launch a venture to build a consumer device, quote, the iphone of artificial intelligence, and, courtney and carl, would bring open ai into definitely a different stratosphere, make that revenue picture very different, again, in the future. a lot has to go right. it's kind of eye popping no matter how you look at it. >> it would be amazing if ive could create two phenomenons after creating one we all live with now. thank you, our deirdre bosa. > ray dalio on the bond market when we're back if two.

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legendary investor ray dalio receiving an investment leadership award last night from the managed funds association. our sara eisen sat down for a fire side chat, covered a lot of ground, including his concerns about supply and demand imbalances in the treasury market. take a listen. >> i think my worry is of the bond market and the treasury market. it got insane when negative interest rates and interest only loans so you didn't have to pay back anything that would give you the money, no interest and no principal so it got crazy. of course you accepted out a lot of checks to people. the amount of money that was sent out for checks for companies was about twice as much as they lost from income,

and so a great deal of money was sent down and, of course, that gets spent and it's not surprising we have inflation, plus with the conflicts we had the supply chain issues. and then you think, well, where should an equilibrium interest rate be? take a bond yield. and i think, well, a couple things. what is the inflation rate going to be roughly? i think it's in the vicinity if we don't have supply/deman imbalance, and there's a big risk of supply/demand imbalance, it's in the havicinity of 3.5, . so that brings you up to 5.5, and could be higher than that. i'm worried about the supply/demand issue because it just -- all markets have a supply/demand. >> dalio pulls no punches on what he's expecting for the u.s.

longer term. he does predict and has long predicted a debt crisisand explaining why we could end up seeing a meaningful slowing of the economy. he's worried about the election next year being contested. he's talked about that for years. to his point, we've tried to do a lot in the way of stimulus, where the consumer has gone through a recession with even more cash. >> absolutely. >> and reshoring production is costly. >> it really is. some unintended consequences we've done in trying to untangle now. a big mover after the bell tonight, likely nike, a big indicator whether north american consumers are slowing and the consumer there, of course, investment sentiment has been negative year to date, down 23%, underperforming the consumer discretionary etf and the s&p 500 up 11.2%. nike an interesting one for a number of reasons. it's global, it sells direct to consumer, wholesale partnerships. we have a clue into the rest of retail, too, which i like.

>> in the meantime, has the fascination with sports ever hotter than now? >> never. >> which does feed into the core consumer. >> it absolutely does. even if we're going to spend less on different apparel and clothing items because of student loans, teens still love nike. it's their favorite brand every year. >> ten points from break even on the s&p. to frank holland and "the half." all right, welcome to "the halftime report." i am frank holland in for the judge, scott wapner. front and center this hour, another big breakout in band yields calling into question the state of stocks and if another move higher can happen into year end. our investment committee is standing by to break this whole thing down. we have bryn talkington, remote, but here at post 9, shannon saccocia, brenda vingiella and steve weiss. let's get a check at the market, the dow at its highs of the day, up 185 points. the s&p and the nasdaq are hitting new highs as we speak. the s&p up jest over