on the street." as we've been mentioning, it is pouring rain outside, but sunny in the markets at least for now. dow looks like it would open up about 202 points. s&p 500 up about 30 points after what has been a tough month, tough week. anyway, folks, stay dry if you are dealing with this outside. and have a great weekend. we'll talk to you on monday. "squawk on the street" begins right now. good friday morning. we are putting q3 mercifully to bed with green arrows as the disinflation trend continues around the world. eurozone cpi runs cool, core pce

with a three handle. a shutdown possibly this weekend. >> shares of nike are rallying despite the first revenue miss. the company saying that it sees resilient up canner both here in the u.s. and in china. and the street now braces for a potential government shutdown as soon as tomorrow night. meantime we knew pce was going to be the tent pole data point of the week and some relief we got. >> yeah, people leaning towards the idea that it would be a relatively softer number based on some of the clues going into it. as expected, we spoke around the close yesterday, i said that we're going to be allowed to mark our fear to reality here. because it has been all about, wait, what is going on with the messy selloff. it seems upnanchored and a life of its own.

and yesterday gdp revision, today pce inflation number. so we have the economy we more or less thought we had. getting a bit of a bid in stocks. it is all coming together almost a little too crypted. maybe last day of the quarter. you have had both stocks and bonds together in lock step. and so no real reshuffling that i would expect. but it does seem as if maybe for now have done enough on the down side in stocks. even if it feels a little too cute. by that i mean last day of the square, selloff really the weakness started and i go 1, very beginning of august. and then s&p goes down to, oh, i don't know, 20 points above its 200 day average and 42000. vix gets to 19.7 as the high. so the question is can it work to have that be all we needed to do in terms of a correction.

>> seasonal if i -- >> crazy, isn't it? >> yeah. sometimes i hear it and i'm like what are we even talking about. >> every single month, not even every year, i say how can this not already be kind of either front run, arbitraged out or just over time lose any ability to be predictive. because, you know, the more years you have, you would think more randomness can fill it into it. and of course it doesn't always work. i think that one of the reasons why i've been -- it could coincidence. a lot did pile on to the market. but so far it has mattered. you see people slicing and dicing even more finely where it is not just, oh, things start to get better in the middle of and i go and usually year end rally. to the point where if the market was up through july at least 10% and then down both in august and september, up the rest of the

year. just a handful of times. we're not talking about signi significant levels. but i guess there are certain flow elements that matter here. the cadence of looking toward next year's earnings of economic data, election cycle, all the rest. >> and a lot of the commentary setting up q4. goldman a good example where at the talked about the potholes, the student loans, but their general take appears to be that there seems to be some weakness, and there could be something of a head fake. they do raise their rate forecast today. they see the ten year ending both this year and next at 4.3 versus the prior 3.9, 3.75. >> yeah, a sense that clearly they can see that they didn't think that it would go as high as it has.

if you feel like the fed is where it should be, we have real yields in there, disinflation comes in, no perfect storm reasons that should drive it that much higher. but i don't know, a ten year yield forecast 15 months in advance is always just a bit of a crap shoot anyway. but in terms of the economy, in terms of the known head winds, we see them coming, it shoulds aer bait whatever throwdown is under way from a decent pace of economic activity. but seems whenever we get a shutdown or big strike, in addition to slowing things down, you get the payback phase after things resolve. and then you get permission to sort of down play or ignore the data that happened during the shutdown or the strike. you always remember, oh, people were going to put an asterisk next to it. so it kind of almost buys the market time to not panic

whatever comes next because of the extenuating circumstances. but that is just an educated -- >> i don't know if either one of you had a listen to barry this morning on "squawk box." but raising a harms about a lot of things including that the inflation target has been met if you take out rents and the lags effect. and that the fed could get out of control. of course it wouldn't surprise me because it did sound like a marketing pitch. but he is not one to ignore. but he is arguing again when you look at the ten year, that that may become much more of a factor. >> and certainly what you should be willing to pay to enter into a long term contract with the government, here is what beackm

said yesterday. >> my view is inflation is consistently higher, the house view. >> you are the house. >> i get i control the door in and out i guess. but our view is that we're in a different world. and the world sort of changes gradually. and you have a generation of people who are used to rates for sounds like a high interest rate. on historical basis, it is extremely low. so i would not be shocked to see 30 year rates well into the -- you know, through the five barrier and you could see the ten year approach five. >> five handle, yeah. five handle getting talked about all over the place. >> but this is between here and five is half the distance we traveled since july. so, i mean, you know, it is not really that big a loop to talk about five even though really not that long ago it was considered to be a bit of a stretch. but it is interesting to see the contrasting views. so you are saying really

inflation is already tame. a lot people saying that we're settling out above 2 to 3, whatever it will be. and so you can argue about that, you can decide which metrics matter most for that. but i think to me the big issue that the markets have had is a nonfundamental surge in treasury yields that at least on some level based on perception plus reality is supply driven, not necessarily a comfortable things. right? not like we're repricing what the fed is doing. it is just there are too many bonds being sold. >> and it moves beyond the fed's ability to control which is a scary idea. and if saudis don't step up and chinese don't step up, and why would they given what we're issuing right now, we have been talking about it every day with say remarks but certainly something that you have to think

ab about. >> and that being said, nothing goes in a straight line. you know, yield has got way off the rails in terms of how accelerated they were above their trend. and all that stuff. and you do find enough people saying listen, you are getting paid actually in terms of inflation adjusted yields on the longer end to lock it in. it is not a no-brainer. but there is still a school of thought that says it can do its job if you own long duration, you go into recession, presumably we get a bond route. to me the disaster scenario is the economy weaken, bond don't get a bid and everyone says our models are busted. that a scary moment but we're not really there. >> certainly getting telegraphed a little bit by a number of firm this is week. and then there is nike missing on revenue for the first time in a couple years although earnings and gross margins were at beat and john donahoe did sound

bullish. >> i've been to china twice in the past four months. we feel good about the market there and our position. you know, frankly, a couple things stand out. once sport is back in chooif, y chooif, you can feel it, and that gives us great confidence in the chinese consumer in our segment rauregardless of the macroeconomic outlook. >> and there are headlines to increase communication and more hopes that we bring at least the vice premier here, maybe xi to san francisco at this summit in november. >> yeah, it is working against i think weeks of kind of, you know, sort of doom's day about the relationship and trends there and whether the economy

can really accept the recharge that they are attempting. when it comes to nike, it is interesting you look at a five year valuation range because nike got really expensive the last five years and so that will give you a little more leeway to say that the fundamentals look better relative to the price. does really see the street get skeptical and start to sort of doubt the long term story going into this. so i think that is good in terms of the setup. margin is better. north america looks okay. and the sell side kind of takeaways today are all about it is refreshing to hear nike talk about innovation and newness or -- when have they not? that is all they really ever talked about and it is kind of true, but it is also -- just shows you people are wanting to latch on to the growth story again. inventories seem like maybe they are largely taken care of to some degree. >> but performance of the stock coming into this clearly indicated a belief that they were off track to a certain

extent. and they showed had they are not. >> operationally they were. >> and goldman for its part though saying near term path schill choppy. working through tough comparisons. but that is it driving the bear sentiment. >> exactly. and there was this phase, you know, in the last few months where it was -- people sort of feeling as if nike was a little more discretionary than they thought before. they don't have as much pricing power as they did, but seems like especially if it is true that china is going to redeem the enthusiasm that the company has right now, then, you know -- >> talking about more newness. come on. >> plus the olympics. >> check thele calendars and they are still on. >> and that is almost like seasonality. you are like that shouldn't work. olympics come on schedule, world cup comes on schedule. >> and you can see the olympics here on your nbc and peacock

channels. >> and -- >> a little early to promote. sorry. >> but you feel like that is a reason to buy the stock. so we'll see. >> mysteries of market that keeps you coming back. >> the more i learn the less i feel i know. billy joel. >> and so squawk goes to pebble beach for the tech and media conference. jane frazier will be joining us to talk about rates, inflation and her efforts to reinvest the bank. and arvind will bring us his take on ai and the techle syste. and we'll try to close out the quarter with some green and we'll get to se t oeromofheth names making new on this friday.

watching the auto name, shawn fain set to deliver an update at the top of the hour. expected to expand the walkout as the strikes enter their third week now. let's get to phil lebeau. i guess we'll have to fire up fbi live yet again. >> yeah, we've seen this the last two fridays. we'll see it again in about 45 minutes. here is how it will go down. 10:00 eastern is when shawn fain will go on facebook live. he will give an update in terms of his view of how negotiations are going. and if there is no progress in the opinion of the uaw, they will call for more strikes.

those strikes if there are new location, they would start at noon eastern. that is when the workers at those facilities would you can with a out. there are about 18,300 uaw big three employees currently on strike. that is about 12.5% of the uaw members at gm, ford and stellantis. most of these locations are maybe 100 to 200 people at a parts and disindustry abuse center. just three final assembly plants have been hit. bill ford the an employee town hall yesterday was talking about the strike. and he said that we'll get through it like we have every other difficult time we've had in 10 years. and we'll do it by focussing on the best interests of our employees. ford, gm, stellantis all believe that they are making pe difference offers starting somewhere in that 20%, 21% in terms of wage increase. and then obviously there are

other things such as cost of living, wage tier, those all need to be worked out as well. we'll be getting september and q3 sales. and for the most part this strike, it is a big deal. it is huge especially long term implications. but it hasn't impacted sales to a large extent at this point. sure you might be struggling a bit to find a ranger or a bronco or gmc canyon perhaps, but for the most part we'll see fairly decent numbers not only from the big three but all the automakers when they lost next week. >> phil, a couple things. we'll get tesla deliverings monday. and then jonas at morgan stanley talking about that we were inclined to at that take the un not anymore. but he doesn't think it is bad thing for the long term health of the d 3. >> yeah, from his perspective, if you read that note, a big

part of the note was talking about have they gone so hard into e investment development and plans for evs that perhaps people are underappreciating the legacy business. the intern at combustion engine business. they have massive profits right now that are coming out of their ice businesses. transaction prices have never been higher. truck demand, suv demand remains incredibly strong. he is noted a vow indicating that they give up on evs, but what he's saying is perhaps the big three about be more judicious in terms of their investments coming oufts strike when it comes to electric vehicles. >> and i guess the question is to what degree the d 3 can structure their business and their investment plans in a way that they can be agnostic and flexible based on the customers. if they are taking signals from the market, you look at tesla's market cap and market share trends, it is the market telling

them it is this or nothing. you have to be big in evs. very much like legacy media looking at netflix saying that we have to do all this streaming things. can the d 3 be patient about this transition? >> they will tell you that they can be patient. i don't mean to be flip apant, t you have to put out an electric vehicle that says i want that versus a tesla. sounds trite, but people who are not in the business or auto business, but i don't have anybody coming up saying i'm looking for this from gm or ford or when is stellantis having an electric vehicle. no, they were asking me gee, i was thinking about getting a model 3 or y, what do you think. that is the met ric right now. so at some point they have to come out with a product that turns heads. >> phil, thanks.

we'll see what happens later this morning. still to come, national economic council director lael br brainard with her reaction to the possibility of a shutdown ahead. a lot more skauk"squawk on the street" when we come back. ♪ upbeat music ♪ upbeat music

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i've lived through a few bubbles. we like to describe these momentses is super cycles. the internet, mobile, cloud computing. and now ai. they are the start of these things that are going to be profoundly impactful in our lives. but at those moments, you can also have overhype. and overprice. and so as an investor or a builder, you have to get comfortable with two simultaneous but competing truths. on the one hand, we probably overestimate in the very short term which leads to price inflation, him pimpact these th will have. but much like 98th, we underestimated the impact it would have over the preceding decade. >> and that was brad gertsner

with the impact of the tech. and we talk about whether it is possible for the market to get used to new chapters without overhyping. >> yeah, i think brad did a good job of summarizing what we've talked about. we ooften go back to the technology bubble ends in march of 2000. and it is not as though anybody is arguing that are thereweren't some a waze amazing companies born during that period of time or that the power of the internet wasn't perhaps not even close to being appreciated. yet 99% of the companies associated with it are no longer with us. >> and it is interesting because we are a little bit quick to lock into that mode of, well, this must be a bull. it has been less than a year since chatgpt really started getting that attention. back in the '90s, netscape was '95, bubble 4 1/2 years later. massive increases across the board in all kinds of companies

that were and were not beneficiaries. right now we're talking about three big companies and maybe an ipo that was tangentially ai. but for a while it seemed to be -- >> and are you really going to call nvidia a bubble sf i don't think so based on its growth rate. >> yeah, you could make the case that they are front loading massive amounts of revenue. i don't even think that he was asserting that. [ cheers ] >> what about the notion that ai is coming into a tech environment with a much deeper bedrock? >> exactly. so microsoft is the best example of that. it is like a really great -- [

inaudible ]. >> going into the open here with futures close to pre-market highs. [ cheers ] >> interesting to look at the sec sectors. energy the only green one. but elements of tech were some of the least. >> and sort of the growth that can endure trade was there. of course met take ig has been a strong stock. even alphabet held up better. so it is definitely a mix.a hasg stock. even alphabet held up better. so it is definitely a mix. to me the concern is that not long for the word, would get eroded. and it didn't completely, you know, unwind the enthusiasm of the consumer. but that is where i think most

of the doubt did come into this market. and interesting to see where we're trading up to here in the s&p. we got up three quarters of 1%. basically monday's high. also the august lows. so we're kind of playing a bit of the tactical game. certainly got pretty oversold. median stock in the s&p, i just took a look this morning, about 15.5% off its high. more than twice as much as the s&p off its high. and that median stock is also up only 1% year to date. and up 20% from the october low. so you could argue that there has been a fair bit of work done in terms of down side resetting valuation and expectations. if not because, you know, calendar will change, but because it is just a little bit less enthusiastic than we were in july about a soft landing. >> just about a couple weeks before earnings season kicks off. i think on friday 13th. >> yeah, that's right.

>> a good notion. tony echos that saying maybe this is too clever but it seems like if you do get out of a government shutdown, markets done a little moorere work, may you can rely on the historical trends. >> and you just get a critical mass of corporate fundamentals building up and, you know, we'll get through hopefully if we have the government data, you get through another jobs report, the three month core pce trend, three month, is just over 2% right now, so not a scary number. so a lot of the big i guess driving factors of the market going up in the first part of the year, and more or less remain in place. of course the yield story is you can't overthink it. if the treasury bond -- if treasury yields don't calm down a fair bit, it will still cause people to question because we had the late cycle psychology that we can't seem to get out of because of where we are in the tightening campaign and all the rest. >> what do we think a fair bid

is in terms of calming down on the treasury, do you have something in mind when you say that? >> i think that you just want to see like a couple of weeks of, you know, where just seems as if it is not a one way trade. there has been a lot of work done on the treasury etfs. >> and tlt, yes. >> and so that is all very long term treasuries. >> and we're moving in the right direction on yield at least the last couple of trading days. >> and all along as people have noted, corporate debt, spreads have remained tighter through this. and so maybe that means there is not a lot of value, but not any macro panic filtering in either. so the free cash load yield of the s&p 500, and this is something that i spoke to rick reare

rider yesterday too, you can look at the market without making it look overvalued. >> because of the kind of company, but you might say that you have 4.5%, but yeah, bond yields were hire and you still traded in the area. so i think that you could look outside the largest companies and say -- [ cheers ] >> and a view at least that excess savings which we thought was dwindling may be hire now relative to the projected trend before the revisions. i did see carnival come in with a pretty nice beat. 86 versus 75 cents. passengers carried up 40 year on year. passenger crew days up 46 year on year. that is a 4% gain. >> yeah, it is remarkable.

i mean, the excess savings calculation was always along the way just this kind of inferred number. based on prior trends, based on, you know, account balance. it is not exactly like a reported number. so you always have to triangulate it. it is worn doubt and not evenly distributed. and that is the other thing. tony also mentioned that risk could be a prop for inflation because baby boomers spending down their savings while they are here. you talk about carnival, i don't know if that is part of it, but seems like -- >> not leaving it to the kids? >> i think that was the implication. >> can't take it with you. >> i guess not. so we'll see. some upgrades this morning of the restaurants. you got brinker up.

texas road house, north coast up to buy. qsr. loop goes to buy -- some of these names are an example first in a couple years. >> feels like people are trying to get opportunistic to say that risk/reward looks a little better. so, yeah, you see that basically a flat year to date chart if things are holding together fundamentally. so it seems like that as opposed to a real call that we're in for a consumer acceleration. but this is what you have to do. as i said, you have the median stock off 15% from the high and see if that took care of some of the excesses and reset expectations pretty well. >> one thing we haven't apron g out. >> i didn't see that. >> and so yeah, let's see, i

have it here, wonder group 13 a share. remember that day of the ipo? >> i remember it well. i think i quoted it fairly recently when the ceo ultimately really didn't have answers. not a great moment there. but we all wonder of course, not a great ipo and hasn't been particularly good since the $81 million. by the way, it is worth coming back to some of the recent ipos which we were talking about on a daily basis, arm has held in there. haven't taken a look at at couple of the other ones that we also -- instacart. but they have hung in there. and arm in particular given it was the largest will -- look at that, that actually is performing fairly well. >> and cart around just over 30. up 2% this week. so they are finding their level

i guess after the initial wave of excitement and disappointment which is often the way they travel. did we hit exxon at a new high? >> no, that is a new all-time i believe. >> new all-time high and it is not always fun to look at. not all-miami time high in mark. over 500. a little over 4 billion shares right now at the high. >> largest company at one point. and what was incredible to me is that so many companies passed this as if it was just another large cap nothing stock. and then it was hello, everyone. >> hi, jim. how is jury duty going? >> nothing i'm allowed to talk about. >> you're not. well, nice to have you here even if you are two steps away from me. >> technically sequestered.

>> what are you thinking about this morning? >> i tell you, i think we're one of the situations where -- i know this will sound odd, but if oil is calm, bonds calm, it is nike. i think nike is presenting first time that the bears have something to fear. bears have the run of things. you have a good quarter and stock goes up and then it gets crushed. nike has some staying power. congratulations to matt boss who said do not desert this stock. it was a return to the joyous nature of new products. paris olympics. inventory is gone. just gleeful. >> i actually added to this picture of destocking having worked. going into the holiday. >> it does show you that there is something that we all look forward to. we were talking about earnings. but we are in a situation where inventories are loewer, you can imagine how many companies could

be doing much better. if that is the metric, wow. >> broader impact on the health of the chinese consumer? apwil wiple shares up but not outperforming the market. >> but apple was running hot. reminded me that every phone runs hot when downloading your initial. i always go immediately that only short sellers phones ran hot. >> are we going to see you again today? >> i'm here. just threw the makeup on. my late father who was crazy about -- anyway, when i would not have makeup, he would say what is it, flu, what do you have? just a cold? the whole guessing game.

so anyway, i don't, but i did not want to miss my opportunity too come on the show. >> you look good. >> thank you. got sleep. i have pt guy coming at 4:30 instead of quarter to 4:00. >> good for you. let's get to sara eisen who is joining us from out west. good morning, sara. >> good morning. got a lot of great guests coming up. and first we'll go to washington for this one on the news of date. lael brainard is joining us to talk about inflation, the shutdown and more. director, good to see you. >> nice to see you. >> so i'd love your reaction to today's inflation print. i would think that it is good news certainly in the market taking it that way to get core pce below that 4% level. and really starting to step down. do you think that we're on a sustainable path here to much lower inflation? >> you said it, i think that the inflation data today is absolutely good news. it is what we've been expecting

to see. if you look at core inflation in particular, it is running at 2.2% on a three month annualized basis. that is really very encouraging. we've seen unemployment now down below 4% for 19 months in a row during a period where inflation has come down and core inflation particularly is now in the range that it was pre-pandemic. >> but still elevated. i mean, isn't if? we're still looking at 3.9% core inflation. services inflation in particular is a problem. and then you have the forces out there, hire gas prices. and i know that is not into the core, but it could seep its way in.gher gas prices. and i know that is not into the core, but it could seep its way in. uaw, maybe health care workers, couldn't that threaten to keep

inflation elevated? >> i have to say the main story of all the naysayers was that you couldn't get core inflation to come down without a big increase in job destruction. that is not what we've seen. we've seen continued job creation and inflation at the core has come down into the range that we saw pre-pandemic. 2.2% on a three month, that is very consistent with where people had been before the pandemic. yes, i think that there are risks to the economy. the economy however has proven remarkably resilient and i think the real request right now is we can't take that resilience for granted. and, you know, if you look at what is going on with house complains on the hill in particular, i think that you really just worry about an unforced error like completely unnecessary shutdown putting the economy at risk unnecessarily at a time when it is doing so well.

>> talk to us a little more about the potential economic risk of a shutdown. how great is it in your view? >> i think that shutdown is still completely avoid only, completely in the hands of the house republicans. a voiding is shutdown is completely do bl. and 1.3 active service members working without pay.able. and 1.3 active service members working without pay. air travel delays because of the air traffic controllers being asked to work without pay. 7 million mothers and children being turned away at grocery checkout lines if they are not able to continue to access w.i.c. benefits. the list goes on and on. and it is a completely unnecessary risk to an economy

that is otherwise proven so resilient. >> and it should all snap back, right, when they open the government again? i know lost productive, but any lasting damage, any real worry? >> so i think really the concern is that going into a shutdown unnecessarily, you know, just think about it, three months ago there was a bipartisan agreement, strong bipartisan majorities in both the house and senate, they did a great deal cutting 1 trillion in spending. and now we're right back at it again with house republicans. before they were threatening to default and now they are threatening to shut down the government. i think that that takes a toll. and it really takes a toll on all those people who would be essentially being asked to provide really essential services to the american people without pay.

>> i'm sure politically there is blame on both sides. but the toll the way i hear it is the dysfunction and inability for both sides to be able to work together to tackle the fiscal picture which is not looking great. it is now costing us aaa credit ratings, warnings of potential more downgrades from the rating agencies. is there a concern, are you concerned that the bond vigilantes could come after u.s. debt, that we could be looking at persistently higher rates as a result of what is happening or not happening in washington? >> i am concerned that house republicans don't seem to understand what they are putting at risk here. if you think about it, just three months ago that the president sat down with speaker mccarthy, house republican, house democrats, senate

republicans, senate democrats and the president came together and did a deal and the deal was very clear on the budget parameters and yet here we are just three months later rehashing the same issues with even more draconian cuts being put on the table at the threat by house republicans of shutting the government down. it is an unnecessary risk and i really hope that they will take the opportunity they have to act and to avoid it. >> doesn't the administration take on some of the blame at least for the fiscal picture and outlook and the fact that all this legislation and a lot of it is good stuff for theinvestment and for the future of our country, but is costing a lot of money and is going to increase the needs, borrowing needs next year, inflation reduction act, chips act, infrastructure act, that is all coming and all part of it, part of what is frustrating to republicans.

>> so really senate republicans have come together, joined hands with senate democrats. and have put out a path forward for keeping the government open. and have been taking action that is in line with the agreement that was reached back just three months ago that did put the country on a sustainable fiscal path with $1 trillion in spending cuts. we got the second quarter gdp numbers. and business investment is responding to the great investment incentives to build in america and invest in the future of the company whether in semi conductors or the clean energy transition. so we're seeing a lot of strong long term investments as a result of that important

certainty that vinsinvestors ar getting in that legislation. >> and i think the fact that the shutdown is coming at a time where there are a lot of potential shocks. interest rates continue to rise in the market. that is a head wind for consumer and the overall economy. we have the resumption of student loan payments coming at the very same time. and gas prices have risen and oil prices continue to rise. this is all hitting. what are your expectations for growth in the last quarter of the year and into '24? >> yeah, you are exactly right. a lot of these risks come at a time when i think house repub republicans should be recognizes that the american people have made a lot of sacrifices. they are contributing to a strong economic recovery. the economy has been very resilient. last thing we need is to put all of that progress all of that hard work respect so many

ame americans off the sidelines, why put that at risk with an unnecessary shutdown. >> the message from the white house,thank you so much for weighing in. >> thank you. >> on the looming shutdown. and carl, and mike, see you in a few moments from pebble beach where i will speak with jane frasier and jane is posting her big tmt conference here with leaders. we'll talk to the ceos of arm and nasdaq, coming up. lot of talk about ai but the spending environment and inflation. >> can't wait. talk to you in a bit. sara eisen out est. as we go to break, bonds or the dow up about 60 points. the headwind number on pce, two-year can't give us a 4 handle. we'll be right back.

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fraser. the fed should stop because what they're injuring is the balance sheet of the united states. the economy is going too slow. the regional banks do not have money. i looked at a deal yesterday in our shop where we were getting a loan, went to 132 lenders and had four lenders actually submit us a proposal. spreads are crazy. what are we doing in life science project. >> that was starwood capital's founder on "squawk box" this morning. they have their offices downtown or meat packing. and he may well be raising a distress tip, given his comments which were dire in terms of, you know, where he thinks the fed is at in terms of potentially losing control, where the economy is or consumer may be. the lagging effects. i did think those comments about 132 lenders approached and only four even willing to consider

were interesting. and reflective of the credit crunch. >> the banks lack of appetite for bonds, i mean, that's one of the big issues of the supply-demand mismatch with treasuries is big banks not a big buyer and they're not in a position of expanding, you know, corporate credit risk at this time. we had delivering alpha a panel on private capital and those folks, you know, private credit rather, they're licking their chops. they're saying we can get you 11, 12, 13%, you know, for under banked companies. >> yes. >> they have moved in -- >> that's not a great proposition if you're the borrower. >> doesn't look great although willing to consider doing it. as we pointed out for some time, they have the banks when it comes to leverage buyouts and take privates to some extent. not always but often you do see the names that you would not have seen a number of years ago. private credit is in ascendance in part so much of the money

coming from other places in the world and sovereign funds. it's not going into the public markets, some in private credit and others in other areas. whether it's infrastructure, real estate, and on and on from there, mike. >> it is interesting, though, you know, as we go through this period when bonds have been under a ton of stress and, you know, we had the realization, some were taking paper losses you vice pr you haven't heard it as yields have made new highs. trying to stabilize in the theory their bond portfolios are worth less than in march. >> 4325. when we come back citi's jane fraser moments away when we head back to the tech and media confen le omebe erceivfr pbl beach.

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sweetness to our community. i make delicious cakes to make special occasions even better. maría doesn't just bake; she also creates opportunities. small businesses like maría's, open doors for communities to thrive. support your community. support small business. good thursday morning. welcome to another of "squawk on the street." i'm carl quintanilla with david faber at post nine of the new york stock exchange, sara eisen live from citi's tech and media conference in pebble beach,

california. two events we're monering, uaw shawn fain president speaking on facebook live where he is expected to lay out more strikes, and house speaker kevin mccarthy expected to speak about the latest on the efforts to avoid a government shutdown tomorrow night. we'll monitor both of those developments and get to sara in pebble beach. >> hi. good morning, carl and david. looking forward to a few big interviews this hour. we'll hear from jane fraser, ceo of citigroup, the host of all of these tech and media executives gathering here in pebble beach. we'll talk about that. there's a lot of talk about ai and the future of media kind of colliding with an uncertain moment in the economy. interesting stuff on citi as you know, jane fraser a few weeks aig announced a restructuring of the banks, didn't put a number on layoffs but is trying to flatten the organization and help make it more agile to the

current environment and try to boost the stock price which has lagged over competitors since she's taken over. a lot to get to on the citi side and the economy side as well with the new inflation numbers out. we'll talk to arvind krsihma about these hot tech trends and the i.t. spending environment. he has a good read globally. >> yeah. i mean, i'm interested in all of it, obviously, including hearing from arvind. as for you point out citi, it's an $80 billion market value. it's bite size in many ways, sara, in terms of its ability to grow its market cap in any significant way over the last number of years. the challenges are significant for jane fraser, they have been, so i think all of us will be interested to hear in terms of giving some more sense as to what is behind the reorganization that, as you say, she announced a couple weeks ago and what it's going to mean for the ability of the bank to be

more nimble. >> right. nimble is the word. and i'm looking forward to talking to her because she hasn't gone out on the record and talk about talked about the vision here. the market cap it's still the third biggest bank in the united states employs about 240,000 people. very significant footprint there, and it will be interesting to see how she changes. also the most global bank and that has been their history, the focus on the geography. she's pivoting that in terms of the decision making. we'll find out what the overall aim is and specifics of the plan. >> this is when i expect to hear macro thoughts from you, coming coming out of the interview with lael brainard. i was listening closely as you might imagine. she wanted to talk about hthe negative impact of a government shutdown. >> house republicans she said numerous times. i was trying to push on what it

means for the economy and it's an economic risk which director brainard acknowledged the fact that shutdown is happening at the same time the uaw strike a threat to the economy and inflation, at the same time student loan payments resume, a threat to consumer spending, at the same time we're seeing rates continue to creep higher, which is going to hurt the consumer and business. guys, we got the inflation data out this morning. pce numbers, that's the fed's preferred measure, and the core, which everyone is looking at, stripping out food and energy, showed good news. 0.1% increase in the month of august and that was the smallest increase since 2020, david. it certainly helps the case for investors, the bull case, and for the fed as well. >> all right. speaking of indicators, another one, consumer sentiment data out a few moments ago. rick santelli has that for us. rick? >> yes. david, the university of michigan sentiment september final reads, so the 67.7, turns into 68.1.

that's the highest read since last month. if we look at 71.4, also best read since august. and conditions that may lie ahead, 66.0, best since july. now let's consider the one-year inflation, 3.25%. 3.2%. that is a pop from 3.1. 0.1 higher. that's the highest rate since 3.5 in august. something is interesting here. if you consider that 3.1 last month was the lowest going back to 2020, we're at a very important point in the 1 and 5-year inflation on the survey. so you could see the numbers start to hold at these levels. same is true for five to ten-year. from 2.7 to 2.8. it happened to be the lowest read since march of 2020 as well. pay close attention to the subtle pops. they're much more well behaved

and as sara pointed out the last batch of numbers it looked pretty good. the year off year core pce dropped at 3.9, lowest since september of 2021. back to you, sara. >> rick santelli, thank you. just build on that what we heard from lael brainard she was looking at the three-month average showing lower core pce. this is going to be the debate. is inflation coming down far enough and fast enough where the fed can just be done raising rates and the market look forward perhaps to cuts, and how long is the market going to have to wait? that's the whole macro debate right now. how much the economy is weakening in the meantime. besides those inflation numbers, which we got this morning, we also got the savings rate. people don't talk about this as much, but it's an important figure because it shows it continues to deteriorate and that shows that the consumer's spend powering just isn't what

it was a year ago or coming out of video covid. everyone talks about the stimulus that went to deposits and pay off debt, there's a personal savings rate, and it came down to 3.9%. i want to highlight that as we figure out where the consumer is going amid some of these headwinds we've been talking about. >> yeah. i mean, maybe the fact that savings rate has come down reflects revisions to estimates about excess savings where we're back to talking about 1.2 trillion instead of 400 billion. >> that's a headwind frp consumer no doubt about it. look, we're wrapping up the quarter here and if you look at what the story has been in this month, this has been a tough month in september for stocks, if you look at the returns, except for energy which has gone up because of oil prices, not a good thing necessarily, strong dollar and it's been higher rates, and that has stood in the way of stocks and also presents

a potential headwind here for growth and for the consumer, for capital formation. i thought it was interesting to listen to or see some of the comments from larry fink of black rock. he's been on before, and he has talked about the fact that he doesn't see recession because of the fiscal stimulus including the industrial policies we're getting. the latest quote, my opinion is we're going to have 10-year rates of at least 5% or higher because of this invented inflation. the structural inflation is unlike anything and i think business leaders and politicians are not providing the foundation to help explain this. so, david, it runs a little bit counter to the mood in the markets today which is the celebratory aspect of the lower inflation numbers. i mean, 5% 10-year yield, we're at 4.5% right now. that's another big step up and potential problem for the markets. >> as well, i referenced this a number of times already, the interview this morning on "squawk box" with barry

sternlick who disagree or agree with him, it's always interesting to listen to and talking about something we've been talking about quite often lately, the fed potentially losing control in some way, given the supply-demand imbalance, the need to continue to fund deficits far into the future at higher levels, not to mention interest cost as well, saying the government is losing on two sides, paying more in interest expense and pointed out losing receipts because capital gains incoming has gone down a lot. love to get your thoughts from what you heard since it is, sort of an integral part of this debate as it relates to the interest rate right there for the 10-year? >> he's right to raise the problems over the debt and deficits clearly. that's something we've been talking about on this show nearly every single day, and it concerns there about the ability to pay them and how that may be putting upside pressure on interest rates. the only thing i would say about his views on the fed and they've

done too much and they should stop and how underlying inflation is back to 2% is it really depends on where you sit. he comes from more of a real estate background, right, and real estate industry, which is suffering the impact, the blunt impact of the higher rates in a bigger way than some of the other parts of the economy. what's interesting is you can talk to sternlick and hear a strong opinion on one side and then hear from larry fink we have structurally high inflation and some of the bank ceos saying we have sticky inflation and we don't expect it to come down. it depends on what part of the economy you sit in. i'm looking forward to talking to the carnival ceo in the next hour of "squawk on the street" as well because the services in inflation has been the sticky part in this economy. hearing from them and hotel companies and airlines about whether they're still seeing the strong demand is key in solving the services picture. by the way, guys, we're going to find -- talk about this with jane fraser, citigroup ceo. we have a rare and exclusive interview coming up, including

on this inflation story, on the direction about rates and of course on the direction she's taking the bank and her take on the health of financials, the fed and economy and more. we areacafr ve qck bk tea ryui break on "squawk on the street." to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. new projects means new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today. (♪ music ♪) whose resumes on indeed match your job criteria. (♪ ♪) the walking tree is said to change its entire location in pursuit of sunlight

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we are monitoring washington, d.c., where house leader kevin mccarthy is speaking right now. we'll monitor that for any headlines for you. we'll let you know as congress,

i don't know, is running out of time to avert a government shutdown by october 1st if they can't figure out thou fund the government, agree within the republican party and get the senate approval. we are here in pebble beach, california, at citigroup's tech and media conference and joining me is the host of the event, citigroup's ceo jane fraser. thank you for having us here. >> thank you very much. it's lovely to have you here. >> i'm looking forward to a lot of good conversation with tech leaders, but i'm happy to talk to you especially now because you've made a lot of news and announced in the last few weeks the big reorganization dividing your company into five business units. what's the vision here? >> so as you say, the last two weeks ago, we took the next big step in a very deliberate path that we have at citi to unlock the value and the potential in the bank. in the last couple of years we've set the strategy. we launched the transformation to address the issues that have held us back, both regulatory and operational.

and this is the next step, which is to put in place the organization structure that fits with the strategy and the bank we are today and not the financial supermarket we are and that we were in the past. as i look at it -- >> [ inaudible ]. >> indeed. it strips out a lot of complexity and simplifies the bank. it makes us more agile. it focuses our clients, it focuses on our clients. it frees up our people to do that and focus on exsdmugs you haven't put a number around layoffs, although you did make it clear that was very much part of this reorganization. do you have that? >> we're focused on simplifying the bank. it's much more about eliminating the complexity, flattening the organization, taking out layers, getting easier for people to work together and deliver to clients. we will give a number in the fourth quarter earnings once we

begin cascading it down. we expect to be in a place where the change will be done by the end of the first quarter and give the street a better sense of what does it mean not just in terms of savings, but how this delivers that simpler organization that we're all looking for. >> you didn't put a number on the cost savings as well. do you anticipate doing that? >> we will do that. you need to do the work to cascade the changes we put in at the top layers through the organization. then material. this is the most consequential organizational change that citi has taken in almost 20 years and we need to do the work and bring that down through the organization in an orderly, but paced manner. >> some might say what took so long? >> oh, we had to make sure that we had completed the divestitures. we had been a financial supermarket in the past, hedge funds, private equity, insures, 50, 60 consumer franchises.

now it's a much simpler business focused on the five core businesses that now report directly to me, and it was once we completed the majority of the divestitures an the consumer franchises that enabled us to do this holistically once and properly. >> you said unlocking the value. is this why you think your share price has lagged over the recently years? >> i came in clear to the ceo 2 1/2 years ago that my job was town lock the value in citi and this would be a multiyear journey. not only focusing the strategy on where we have incredible competitive advantages making sure we could deliver the returns that our shareholders expected in the medium term but we have to address the issues that have held us back over the years. that is not an easy fix. as you've seen, we have taken very hard decisions and tough decisions over the last couple

of years and very proud of progress that we've made. i also know that we've got a long way to go and the steps that we took last week and the changes that we'll make in the next couple months are very important to unlocking that. >> $80 billion, a shelf what it once was. even though it was the third biggest with more than 200,000 employees. >> our people want to win, our stakeholders want citi to succeed. being very deliberately taking it step by step over the last two years, it's a hard decision to get the bank in the position to fulfill that potential. >> how has it gone down the announcements and steps internally. there are reports your tone has shifted? you're talking tougher? >> look the case for change is pretty clear. our people want to succeed and

our highest performers get behind us quickly. we don't have room for bystanders and we don't have room for people who want to stand on the sidelines. this is an organization that's galvanized to succeed. we have a lot of work to do and we can and focused on delivering that step by step. >> how should investors judge whether the restructuring is succeeding and when? does that come in the next quarter numbers? >> they'll see this over the next few quarters. they'll begin to see some of the changes that we're announcing. along with the proof points of the divestiture waerps doing. we're building this case and showing that we're delivering what we said we would do in terms of delivering against our earnings guidance, delivering against the divestitures, delivering against the organizational simplification. we'll bend the curve on our expenses in the fourth quarter of '24. and we will do what we say we'll do. >> what about growth?

where does that come from and where can citi take share? >> i'm excited about a number of different businesses. in our services franchise you see us grow those businesses very rapidly in both security services and in treasury services. that is really -- they're two crown jewels for citi. high returning businesses, foot growth. we're seeing it in new client acquisition. this is market leading. our client win rate has an 80% win rate ratio. it's remarkable. we're investing and making sure we have cutting-edge capabilities there. we see growth in our commercial bank and around the world, new client acquisition and important growth we're seeing deepening across our relationships with clients in marketing and banking and here in pebble beach with one of the most vibrant sectors. 100 clients from around the world, and they've got a lot of business we'll be doing with

them and us helping them succeed. >> what is the investment banking outlook right now? we're starting to see some signs that activity is picking up slowly, ipos and m&a? >> i think you're right it's picking up, but everyone is feeling that it is early. we saw the investment grade markets open up and they've been the strongest ones as it's usually the clients saying i'm going to bite the bullet on the higher rates. starting to see more activity and we're gearing up ourselvesby to much more active in that market. when you speak to the sponsors in the tech face where a lot of the money goes it feels more like an next year and the year after where we think there will be a lot more activity. i think it's going to be a bit slow. on m&a, that's one that always takes tlorng see that hit the revenue line. certainly a lot of discussion of transformation in the corridors here from smaller companies, larger companies, the pipelines

are good. i think focus to still have a note of caution. when you speak to ceos, i have the benefits of speaking to ones all over the world, it's the pieces that are common, still a little bit of caution around rates still going to go higher, a feeling next year may not be as easy, particularly if you're in europe. china i think is taken some by surprise about how that has not come out of covid with the strength that was expected. it's actually been the reverse. it depends on where you are in the world as to how quickly that will unlock. >> what about in the u.s.? what are you hearing from ceos and how does it measure up to your expectations? >> we're hearing more transformation a lot, ai a lot, a tight labor market a lot from people, and a softening -- [ inaudible ]. >> still. you see a lot of softening of consumer demand but resilient sni it, particularly the bottom

end of the consumer. that's the one that we're starting to see cracks. you're seeing shift in the buying patents to lower categories in the spend. it's a resilient consumer but a softer one and that's something that the ceos are taking into account. september was -- felt a little bit more like 2015, 2016 than it did the earlier years. we're getting back to whatever the new normal is again. >> you also have a pretty big credit card business. off good window into spending habits. what does that look like? >> spending is still good. it's still positive. it's certainly come off and i think september in terms of the softening of the growth and demand isn't evident but the numbers in the whole system are about 4% of spend growth as opposed to to the double digits we're seeing in the recovery. services still getting a fair amount of that spend over goods. travel has been good. our great partner american airlines had a good summer.

we've seen that in businesses and entertainment, has been strong. with the rise in gas prices being a bit of a pick-up there, but it feels more like a normal environment again and we are paying attention to the lower fico consumer where there are cracks and we saw that in the fed numbers. va savings are down. they're very low. some of the excess savings from the covid years have -- are getting those depletion. >> where does that leave us? do you think that fed can stick the landing without a recession. >> is that possible? >> look, all the numbers right now would suggest you're in for a soft landing. the inflation is coming down. we're halfway to where wewant to get to in inflation. in terms of unemployment and job creation, the gdp, all the indicators are a soft landing. what gives everyone pause is probably history.

history would suggest that second half is a tougher half to achieve in the numbers than the first half. >> on inflation. >> on inflation. however i was starting to see the economy do the work for the fed now. >> it's softening. >> it is softening. and if the -- if we start seeing another few sets of data in the coming weeks, then i think that will make the fed's job easier. >> you don't sound as negative or as worried as jamie dimon, for instance? >> i think the recession, if there is one here, is going to be manageable. so it's been elusive so far, but i'm not sitting there worried about the health of our consumers, worried about the health of corporates. they are strong therend their balance sheet have been resilient and a strong job market is also a good thing. i also am sitting on top of a global franchise, so i compared that to our european colleagues and the european economies, that was a tale of two europe.

the industrialized nations were doing poorly, very worried about them, whereas the service driven economy, italy and spain, had a good summer. most americans seemed to turn up in europe this summer. the malaise is starting to filter into those economies as well. we're worried about europe. they've got structural challenges in terms of labor market and energy that u.s. doesn't face. then in china that's been slower than even those of us a bit more concerned about their economy, they're, obviously, facing economic headwinds in the coming quarters as well. >> is the stimulus going to work? are they going to be able to fight it? >> it's a tougher build for them than any of us and probably they expected. on the other hand you go to india, and it's vibrant. you look at a japan and our client activity in japan is tremendous at the moment. indonesia, vietnam, thailand,

philippines, all benefitting from the build of resiliency and supply chains to have alternatives to china and then india is almost it's vibrant. it's exciting being on the ground. and we're seeing the global lanes really changing. food lanes are changing, the financial flows are changing, the trade flows are changing. we'vechanged our organization structure and broken it up because we're finding the middle east has got more to do with asia now and north asia or south than it has to do with europe. brazil has more to do with india and china than with argentina. our geographic change has been to make sure that we can position ourselves for all these shifts that are happening in the world. >> are you positioning for a worsening in relations between the u.s. and china? >> i think everybody is making sure that there's more resiliency and redoneundancy in their business models. >> what about for citi. >> more of the focus on our

clients and helping make sure our clients are positioned for the shifts and trade flows, energy flows and they're able to take advantage of the opportunities this presents. we moved 4 trillion dollars every day for 5,000 multinational as around the world. that business is growing. so that also tells us that our clients are very active in positioning. but this is a decade long repositioning. this doesn't happen overnight. they're looking at this strategically and we're helping them do so. for us it's an opportunity but also one where you're playing both offense and defense. >> just on the markets you and i talk about the stock market and bond market, it's been surprising to people i think to see bond yields continue to rise even in the face of the fed pausing and maybe ending the rate hiking cycle. how much higher do you think they go and what will that mean for broader equities and the rest of the markets? >> our chief economist is certainly expecting to see rates

gang up in november is likely. everybody will have the same months, see more of the data because we've been in a lag. we're waiting to see what data looks like. our expectation is it probably will need to go up a little further. >> lot to raise more in november? >> we're expecting one more in november and it could be one more beyond that. we hope not. we hope the economy does continue to do the work. >> we don't know the data because looks like we're going to have a government shutdown. >> yes. for citi that has less direct impact for us, but it's much more important what happens to our clients. we've been here before. we have our playbooks ready to help support all of those who work in government and the real people that this can have an impact for. we hope this does not last long. as we've seen in the past, this starts to hurt people who matter in the country if this lasts a number of days and goes into

weeks. >> nobody wants that. >> we hope we can get over that quickly. >> thank you very much for taking the time this morning. jane fraser, ceo of citigroup, great to hear from her and the environment. we have another interview coming at citigroup's tech and media conference. ibm's ceo will join us on the state of tech, future of ai, how ibm fits into all of it. that exclusive interview coming right up. back to you. >> see you in a little bit. sara eisen. still ahead, nike rallying on the back of the earnings last night. it's been the second worst performer in the dow this year, down about 20% since the last earnings print. what's ahead for the stock from here when we return. in the u.s. we see millions of cyber threats each year. that rate is increasing as more and more businesses move to the cloud. - so, the question is... - cyber attack! as cyber criminals expand their toolkit, we must expand as well. we need to rethink...

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we're one hour into trading. the nasdaq the outperformer up 1%. over to bob pisani for more on what he's seeing this morning. >> you know, the important thing here is that pce number, goldilocks is moving in the right direction. those were the right kind of numbers we needed to see gap up on the s&p 500. we're off of the highs, but look what they're doing. look at the sectors. they're front running the fourth quarter.

you buy the losers in september, and you sell the winners. that's what we're getting here. arc has had a terrible month. consumer discretionary and autos terrible month. banks are bouncing. semis are bouncing. the big winner energy, selling energy stocks. exxon new high yesterday. that's kind of interesting. a lot of damage. look at the dow laggards even with the rally, big moves down in boeing and apple and coke. salesforce. even nike, nike is up 7% today. you think my heavens it would be positive but we're not. we need in october to get out of this seasonally weak period in the next two weeks. usually the market will bounce mid-october. bond yields need to stabilize. so many stocks down and positive earnings commentary. speaking of positive earnings commentary, nike was the big thing here. we've hat 16 companies reporting so far, 15 of the 16 have

beaten. more about that on monday. look at nike after being down 11, 1% for the quarter, excuse me for the month, bouncing back nicely today on the earnings report. back to you. >> see you in a bit. bob pisani. bob does mention nike getting the pop on the back of the latest results. stock a massive under performer this year. whether it's a buy at this point and head back to sara at citi's tech and media conference in clivwi.beach exuse th arvind krsihma. we're back in two. power e*trade's award-winning trading app makes trading easier. with its customizable options chain, easy-to-use tools and paper trading to help sharpen your skills, you can stay on top of the market from wherever you are. e*trade from morgan stanley. i did have hearing aids from another company...

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nike shares are sharply higher despite posting its first revenue miss in two years. the company beat profit estimates, gross margin flipped a bit but came in above forecast. china sales came in about 5% year on year. they were 1% if you take out the currency impact there. the ceo saying he feels good about the market in china and

nike's position and nike maintained its full-year guidance of revenue growth in the mid-single digits. the stock was up higher earlier and still up a nice 7%. talking to investors this morning about why, the expectations for nike was that there was a risk that they could cut guidance because of weakness in north america which was negative a little bit and potential weakness in china. they did not do that and the tone on the call was constructive on the china market, donahoe saying they continue to do well there and take share and the chinese consumers are resonating with the product there, and on the overall environment there was no real caution on the consumer or on demand outlook, but here's what cfo did say as far as factors they're watching for the second half of the year. >> for the full year, we continue to expect reported revenue to grow mid-single digits. at the same time we're monitoring the operating

environment, including foreign currency exchange rates, consumer demand over the holiday season and our second half wholesale order book. >> they're watching some of these factors. the headwinds potentially facing nike, strong dollar gets a lot of business overseas, the continued china recovery which people are sort of unwilling to get too bullish on and then the wholesale and inventory environment, whether wholesalers get more cautious about the environment. the takeaway from nike and those inside the company as well is that they're not seeing any real slowdown in demand. they're coming off tough comps and a bigger digital business, that's why digital isn't growing the growth rates we're used to seeing. they talk up innovation in the product pipeline and gets investors excited. the paris olympics coming up, they have the new kobe lines and

shoes that drake debuted and they still have the brand heap there. >> we did talk about people checking their calendars and the olympics are still on. the print gave bulls enough to re-engage. wells fargo analyst joins us to talk about nike and how much was priced into the print going in, although i still see a lot of commentary if you look at retailers missing their growth margins for the year, nike is a laggard. >> yeah. we have to crawl before we walk. this has been a choppy 12-month period for what has been a bellwether in the consumer space for a long time. i think this gives bulls enough to re-engage on the story. valuation had a low that, you know, we haven't seen in maybe five plus years. expectations on the buy side couldn't have been lower. sara allowed to it, i think at least 50% or more people thought

they might cut the revenue guide. there is a little bit of a hockey stick built into the back half of their year. you need china to remain somewhat strong and you need the wholesale channel to stabilize and start to grow again in order to hit the numbers. this is a good starting point for a stock that was kind of left for dead. >> i wish we could talk about it more. i hope you forgive me. we have uaw headlines breaking. we'll revisit another time. thanks so much on nike. the uaw president is speaking giving kooeltdetails about the wave of walkouts. >> two final assembly plants, one from ford and one from general motors where the uaw members there will walk off the job at noon eastern time today. we're talking about the chicago assembly plant for ford where they build the explorer, 7,000 workers between the two plants and for general motors it's the lancing delta township final

assembly plant. shawn fain saying that ford and gm failed to make meaningful progress in their negotiations with the uaw, by comparison he just said that the conversations with stellantis have improved. he is excited about the momentum in those negotiations. today there are no additional strikes called at stellantis, but again, two final assembly plants are going on strike. an additional 7,000 members. that brings in total after noon, 25,000, approximately, 25,000 uaw members who will be walking off the job. back to you. >> hey, phil, it's david, back to you, give me context on the ford here. i was under the impression they might not do an additional work stoppage at a ford plant. was that expected? >> i'm not surprised given what

we heard earlier this week when during their negotiations, apparently the conversation revolved around what's going to be happening at least some of the conversation, what's going to happen with a planned ev battery plant that is going to be built in michigan. and ford put out a statement, i think it was tuesday afternoon, saying we're going to have to reassess our commitment 23$3.5 billion investment we're flaig whether we can competitively run it. it wasn't long after that that the uaw put out a statement saying all we're looking for is a just transition, those are the words of the uaw, a just transition, to electric vehicles. so that told you right there that there is a contentious issue on the table between ford and the uaw. so i'm not surprised. last week ford was exempted from additional strikes. this week, it's stellantis. while he may say they're excited about the progress that's being

made, i still have no sense that we are going to see a resolution to these strikes any time soon. >> definitely confusing, phil, for those used to covering at least some kind of pattern bar beginning when it comes to labor cycles. we'll talk in a bit. phil lebeau with shawn fain's facebook live presentation. holding on to modest gains. 4321. sara with arvindrsmaf m aoment. oib

watching capitol hill as lawmakers race to avert a government shutdown tomorrow night. emily wilkins joins us from d.c. with the state of play at this hour. >> hey, carl. speaker kevin mccarthy just wrapped up a press conference with reporters. he really made the case that the votes we're going to see this afternoon he wants to make it a choice for republicans. they agree to fund the border and pass a number of border security provisions or agree to

a shutdown. this is really an appeal just to about five to eight members who said they will never vote for stop gap funding but that is what mccarthy needs to get done today to make the house a player when it comes to figuring out a shutdown. we're expecting two votes to occur, one a little bit later at 11:30 and that will be a procedural vote and if that happens, about 1:00, they will take that very critical vote on stopgap funding. it won't prevent a shutdown but it will get us a little bit closer to a potential solution for ending one. carl? >> we'll talk in a bit about whether or not we get a motion to vacate. for the time being back to sara in pebble beach. sara? >> hi, carl. we're live at citigroup's tech and media conference here in pebble beach, california. joining me is one of the leaders speaking, ibm chairman and ceo arvind krsihma. good to see you. >> sara, always good to be here with you. >> we have a lot to talk about

you made news yesterday which is a big deal but didn't get a lot of play. you announced you are going to indemnify your customers, protect them legally, against copyright and other issues related to ai. what is the significance of this? >> sara, when we deploy enterprise software we have always indemnified our clients for the software we produce, meaning is somebody going to come after you for intellectual property or copyright or says you're not allowed to use this and includes some of our information. we believe that provider should step in and indemnify the client against those things. then they're very comfortable deploying them knowing we're going to be there and we have the patents and the ip and willing to say how we claimed it and the data sets and describe them. all of that is going to be there. that should give them comfort in how to use the models. models ibm creates and provides and there is a further thing that people didn't pick up on,

we're willing to describe the data that we use to train those models on. >> you're going to reveal the secret sauce that goes into how to program the ai? >> i would say not all of the secret sauce because some of the learnings on how you create the models are still hours but in the end we allow our clients to modify the models. for our clients we reveal everything, but to the general public we will reveal all of the data sets and methodology we use. >> is anyone else doing that? >> meta has made forward steps on doing this. there's an open source company who does it for most of their models. so those are the two i can mention who are doing it. >> okay. >> i don't see anybody else doing it yet. >> you're trying to get trust from your clients and businesses and using your ai products. what are your ai products and where do you play in ai? you don't get the sort of frenzy that google or microsoft or openai get. >> absolutely. we do not have a download on your form or a website you can go and try random question and

get an answer because we don't think that's our strength. we're in the b2b strength and enterprises. the first use case that i think is critical is customer service. we can improve the quality of customer service, be it in health care and insurance and ? just to speak of some examples that are going to be here. the second and really important one is chord, how do you do this in a more productive place? this won't replace programmers but makes them 30% more productive. these are fairly well along and making progress. and how do you do audit, how do you do accounting? again, not replace but augment so peek can focus on the higher value tasks. i think these three use cases are where we're focused. >> you said it wouldn't replace programmers. who is it going to replace?

i think you've been one of the most candid ceo about a.i., generative a.i. replacing jobs. >> 30% of jobs more repeptive in nature -- >> the back office, you said, right? >> that will get replaced. but people took it to the next step, which i never said. that doesn't mean employment goes down. that means we can put more people in value-creating roles because there's an envelope of how much you can afford, and labor -- and in today's market, it's tough to get people. we can put them in areas of more value, in front of clients, writing more code. everybody would love more code to get written. i think more results and more productivity at the end of the day -- >> repurposing jobs. >> absolutely. >> what about your clients, which industries do you see most affected by the a.i. offerings? >> so, i think customer service applies to all industries. that's absolutely true. when we look at the chord, it's

coming up first in banking, financial services, insurance, because it's been the first to generally embrace new technologies. but i think communications, media are not very far behind. and when it comes to digital labor, we find there's a huge appetite for it because everybody's looking for how do i make more total workforce more productive? how do i actually reduce the g&a side, the back office side of companies? i think that will apply across the board. it's probably in that order. >> you have also been part of the conversations in washington, you signed the pledge along with other tech companies, i'm not sure if that has any teeth, right, the pledge to do no harm on a.i. you're part of the schumer meetings as well. is something going to get done? >> i actually believe something will get done. the question comes up, what time frame and how much? how intrusive is it going to be? the time frame is hard to predict. and looming other issues going on right now -- >> can't even keep the

government open. >> -- that will extend the time frame. i expect by mid next year we'll see something? >> see something on what? >> regulation. if you get too tight on regulation, you stop innovation. if you stop innovation, it means we as a nation can't participate in the $4 trillion of annual production that a.i. will create by the end of the decade. that's a big prize to give up. the other side, if there are these issues around mistrust and do harm, then you have to have some guardrails. i think holding the companies who hold and deploy a.i. accountable but not necessarily put so many restrictions that create regulatory capture is the way to go. >> what are you advocating specifically on that front? >> three cases. regulate use cases, not the a.i. itself. number two, hold companies accountable, that will include what we first talked about on indemocratty for -- >> make them all do that.

>> make everybody do that. >> because microsoft and adobe does that. >> adobe certainly does it and microsoft have made some announcements about heading down that path. i believe everybody should be accountable to that. and describe the data. three, be open. allow an open ecosystem to flourish. that doesn't mean everyone has to open everything but create a small ecosystem. >> you have all this excitement going on with a.i. and you mentioned the growth for ibm coming up against a tougher macro economic environment. you have a pretty good window into i.t. spending. is the investment in a.i. offsetting some of that weakness? how does the picture look right now? >> i've always technology, our i.t. spend is two to three points ahead of gdp. we think gdp is going to be 2%, which still seems to be the consensus, absent shutdown. that could lower that number. so, if gdp is going to be 2%, that means tech spending reremains at 4%, 5%. i think that holds. there are always going to be a

few offsets. we find issue right now on fire, the upper end of that, more in the high single digits in terms of growth. europe may be a little muted, but that is mostly due to energy costs, not due to anything else in their economy. in the u.s., everybody is looking at all these issues around shutdowns and interest rates and what is the nature of inflation. and i think that's just a little bit of digestion phase as opposed to a slowdown. >> we heard from accenture, it was disappointing, the quarter and guidance. do you have a view yet into 2024 and where i.t. budgets are going to come? >> i think i.t. budgets -- we look at data. we look at at demand signals, driven by our pipeline and forward-looking bookings. so far they look healthy. we need the next three months to figure that out to be more precise about 2024. >> and a lot have potential headwinds there. thank you for taking the time

today here at citi. ceo and chairman of ibm with a lot of good information, i thought, about a.i. and where we're headed. >> without a doubt. it continues to be, certainly in my mind, the most important or certainly an interesting subject that we cover here every day. and interesting to hear arvind's thoughts there will be some regulation, in particular. i thought that was -- >> next year. >> as you pointed out, he was at that meeting with schumer a couple weeks back. >> yeah, middle of next year, and with some specific prescriptions even as well. i think the indemocrat fic-- it hard to figure out to you ho regulate this thing and make people safer about what's coming. you know you're certainly worried. >> yes, you know i continue to be concerned. there are people who have been

asaging my concerns for some time. humanity only hangs in the balance. that's for another day. >> as ray dalio said, worry about what you're not worried about. that's one of thinks principles. >> i'll try to do that over the weekend. right now i'm worried about the rain and how we'll get home from here. enjoy the weather in pebble beach because in new york we're dealing with serious issues when it comes to being able to move around. sara, great stuff. we'll see you in the next hour as well. a lot more "squawk on the re" r u. have a great weekend, everybody. is it possible to fall in love with your home... ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. you founded your kayak company because you love the ocean-

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good friday morning. i'm sara eisen in pebble beach, california, with carl quintanilla back at post 9 of the new york stock exchange. big hour ahead for us. the ceo of arm joins me in california on whether he has a plan up his sleeves to reverse some of the stock losses post-ipo. >> also the ceo of carnival with us. choppy waters for the share post earnings. do they past expectation even though guidance disappoints. later nasdaq ceo edina friedman is here as well. what's in the pipeline for more public market debuts later this year. finally, we have