it is 5:00 a.m. here at cnbc global headquarters. here is the "five@5." stocks searching with direction as the rate shock puts the squeeze on global equity markets. higher for longer mentality is raising the odds of the soft landing. we debate what's next. $100 crude less likely as recession fears hit demand and prices. we head to abu dhabi with the latest. more ripple effects with the uaw strike in the third week. what ford and gm did that's raising the stakes. and why instagram users in

europe may have to pay up for premium features. it is tuesday, october 3rd, 2023. you are watching "worldwide exchange" here on cnbc. good morning. welcome to "worldwide exchange." i'm frank holland. let's start the day as we kickoff the hour with the check of u.s. stock futures after the mixed monday. we see the nasdaq with the four-day lead. the dow is up right now. up 30 points or so. higher for the s&p. as always, it is early. we are checking the bond market with the ten-year marching higher. 4.68. you see the upward move over the last month. these yields moving higher. something we'll talk about later on in the show. we are looking at energy.

oil extending recent losses after its worst day since august. look at the wti crude right now. up fractionally. back below $90 a barrel. the move to the down side. a few days ago it was above $90 a barrel. still positive for a month. that is your u.s. set up. we now want to go to europe and opening up in the red after the rough session overnight in asia. joumanna bercetche is in the london newsroom with more on the early action. joumanna. that's right, frank. european indices with a mixed bag. stoxx 600 is coming off a six-month low. we reached that yesterday. the index ending down 1%. we see retailer like boohoo posting a sales warning for the year. that is pulling down that market. minors under pressure with the strength of the u.s. dollar.

one part of the market we are watching is industrials as we continue to grappple with the manufacturing doll drums. the ftse 100 is leading with the retail prices risen at the lowest rate in years. as for asian markets, hong kong was open for trade, but we ended the session down 2.7%. pulled down by energy and real estate. once again, that is the center of attention. the property market is driving that market lower. nikkei is in focus in japan down 1.6%. 520 points lower. we are keeping a close eye on the yen. dollar/yen is 150. that is close to the bank of japan getting to intervention levels. the australian index is down 1.3%. the rba meeting overnight and

they did not hike interest rates. keeping them unchanged. sentiment in asia is subdued. asia pacific markets with china at the lows of the year, frank. >> joumanna, thank you very much. joumanna bercetche live in the london newsroom. turning attention back to the states. the stocks feeling the pressure from the surge in treasury yields and the ten -year treasuy at 4.68. jpmorgan chase says the unexpected shutdown of the government is driving neyields higher. joining me now is the global head of asset management. >> good morning, frank. >> we are in a situation where good news is bad news. avoiding the shutdown is driving yields higher. do you agree with the thesis

that this is the primary catalyst for yields to move higher? >> it is moving in the wrong direction on most of the data we are seeing. i do agree we are disconnected from the fundamentals. if you look at inflation, which should be the driver of yields with the upside of inflation, then the market is dismissing the data points. if we look at the move in core pce, it should put cut in the rate. >> one thing we're watching in the united states is inflation and how that impacts the fed's decision. jay powell in rural pennsylvania getting an earful of the higher rates. we are seeing the russell 2000 in correction territory. 10% off the lows. do you believe that it still remains a leading indicator of a

possible recession? >> i don't think we will see recession in the u.s. we will see an economic slowdown. the yields are tightening financial conditions and what we are seeing with the small cap index, it has tighter financial conditions which means higher rates means higher credit spreads. the issue will move against us. we will see the value with the equity laggards in the u.s. we move outside the seven stocks, the s&p 500 istrading seven times earning. we do think there a little bit of a fed bluff in the sense they will cut interest rates next year on the back of inflation falling and economy will start to slow. they know they are putting in restrictive territory. >> you are looking outside the magnificent seven stocks. you are actually bullish on the

stocks. a basket that includes google the and nvidia. you say the market for a.i. co-pilots with microsoft launching their's on november 1st. is that a reason to invest in the magnificent seven stocks today with the thought we will see a lower earnings decline this your? quarter? >> we think about the companies providing the infrastructures. we think it is worthwhile with the seven stocks from the global perspective. we have a few companies in europe and one in particular in asia that is very well exposed to a.i. we like to think about the

disruption it will have in a different sector. we are thinking about the different industrials or healthcare or education where we see some of the a.i. space impacting the industry. we think there is a wide range to play with a.i. >> mark andersen of ubs, thank you very much. we will turn attention to capitol hill and late breaking news. matt gaetz has officially introduced a motion to oust kevin mccarthy as speaker days after mccarthy brokered the deal to keep the u.s. government open. this is the latest in the moody's warning last month over intensifying political polarization and the future of the country's aaa credit rating. brie jackson is joining me from washington with more on the drama in d.c. >> reporter: good morning, frank. kevin mccarthy is in the fight of his political life or for his

political life. trump ally rep matt gaetz forced a vote to oust mccarthy from the speakership after the bill was passed this past weekend. gaetz warned he would try to oust the speaker if he worked with democrats to reach that deal. that short-term spending deal keeps the government open until november 17th. now the house must vote this week on mccarthy's future and has until wednesday to do so. gaetz says he has enough votes to remove mccarthy unless democrats move in to save the speaker. kevin mccarthy has remained defiant saying he will survive. during an interview, he urged a vote saying let's get it over with and let's start governing. that is a sentiment posted on t

x. something to keep an eye out on is how democrats play into the vote because it is unclear whether matt gaetz has enough to actually get speaker mccarthy ousted. >> this is interesting talking about the leadership of the speaker. it sounds like pro wrestlers. interesting dialogue on x. brie congratulations on running the berlin marathon. >> thank you. we have more than coming up on "worldwide exchange," including the one word investors need to know. today is the first day of the criminal trial of the failed crypto exchange ftx and sam bankman-fried. we see what is on the agenda next. and a hot opinion on the show in recent weeks. buying into consumer staples. we layout the case for the bulls and the bears when "worldwide exchange" returns in a moment. stay with us. fe ortless.

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welcome back to "worldwide exchange." shares of mccormick trading lower this morning a. mccormick is not alone in the stock struggles. conagra and lamb weston with similar declines as they prepare to result. all of this with the retail consumer staples with the latest

on the table. we have our bull case and our bear case with our guests. matt, let's kick off with you. we have had a number of guests singing the the praises of stap with higher for longer rates weighing on the market. >> part of it is the issue of the market. the biggest thing on the broad case is we have the situation where the bond market has been pricing in higher for longer for six months now. the stock market has not. just starting to in recent weeks. we have a diffivergence with th stock market and bond market. that is resolved with the stock market coming down more. i think people need to get defensive.

a lot has to do with the technicals. we see the xlp etf becoming oversold. the most oversold in half a dozen years. the same thing with some of the individual stocks which are finally becoming cheap. i'm afraid the entire group is not cheap. there are individual stocks i like here that are becoming cheaper here. it is a group i think will do better for the rest of the year after a poor six months. >> scott, i want to come over to you. you have the bear case. one thing is we are hearing more people say you have to judge companies by the qualities they have with margin and profitability. i'm looking at the staples. 59% of staples in the s&p saw profit margin expansion last quarter. second to communication services. if we are seeing margin expansion, why are you bearish? >> frank, you have to figure out why margins are expanding.

staples love inflation. if you have a consumer staple good, you can pass that along to consumers and with the stimulus in your pockets, consumers pay it. it wasn't hurt on the input side. they were helped out quite a lot by output side. they can raise prices a lot. that helped margins which led to a nice year in 2022. this year, and we have been going forward with inflation collapse and going forward susta sus sus sustainably. >> matt, i know you are bullish with the consumer staples. how big of a factor are dividends? kimberly-clark with the 4% dividend. are there other dividends with consumer stocks? >> you mentioned kimberly-clark

and the biggest competitor is p&g. that is why i like kimberly like because that is not as high. i like general mills. these are stocks that are relatively cheap. a lot of the names are cheaper than six months ago, but not necessarily cheap. archer daniels midland. they pay a nicedividend of 4%. same with general mills. you know, with that short-term rates at high levels, this may not be as important as it has been in the past. this pays you to wait. i think they are a good play here. >> scott be, back to you with t bear case. these stocks benefit from the inflation. it sounds like you are in the soft landing camp. if we are having a soft landing,

then it is time to jump off the stocks? >> you need a catalyst. you need the economy catalyst or high inflation catalyst or both. we think that is why we had a poor performance for some of the stocks for the year to date. you know, if you will not get the soft landing or seeing inflation decline and steadily, then the tailwinds are gone. you have to look outside the stocks that gain from the inflation trade. maybe walmart didn't pass on as much or didn't need as much inflation to generate revenue gains. something like that may work in an environment like this. really stay away from anything inflation to maintain. >> matt maley and scott ladner,

thank you. coming up on "worldwide exchange," one of the hottest stocks in the magnificent seven and today. microsoft may be giving investors more reasons to pile in we have the full story when we come back. stay with us. you deserve better than that. i'm hungry, i'm in a hurry, i don't have time to make anything healthy. you could if you had a blendjet. blendjet? it's the portable blender that makes the healthy choice the most convenient choice. i don't know. it seems like a hassle. hahaha! wrong. just pour in some milk, add some frozen fruit, and bam! you've got a nutritious and delicious smoothie. mmm!

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welcome back to "worldwide exchange." today is day one of the criminal charges of ftx founder sam bankman-fried. this is the downfall from the crypto stratosphere.

we hhave mckenzie sigalos with more. >> the trial kicks off at 9:30 a.m. in downtown. sam bankman-fried has been in jail since august after several criminal counts of the ftx firm. those are securities fraud and money laundering. the former ftx chief misused money for permasonal purchases like real estate in the bahamas. the government also contends that sam bankman-fried was using the customer deposits to cover bad bets at the hedge fund alameda research and make $100 million in campaign contributions. all-in, $8 billion of ftx money

that went missing. sam bankman-fried pleaded not guilty to all charges, but if convicted by a jury, he could end up in prison for more than 100 years. frank. >> what else do we know about the trial? will sam bankman-fried testify? do we expect other witnesses? >> we are looking at a six-week trial with prosecutors expected to take a month to make their case. we don't know if sam bankman-fried will testify. the roster is expected to include the top deputies at his inner circle. that includes his former girlfriend caroline ellison and his best friend from math camp who co-founded ftx. they have been cooperating with the u.s. attorney's office for months in manhattan. as for the legal strategy, his lawyers hinted at advice of counsel defense. he was following the guidance of

lawyers and did not realize what he was doing was illegal. worth noting, frank, this is the first of two separate criminal cases against sam bankman-fried. a second trial is slated for march of 2024 and that deals with additional charges after he was brought to the u.s. from the bahamas. >> mackenzie sigalos, thank you. before we head to break, we are celebrating hispanic heritage month. here is frank del rio jr. >> as a first generation cuban american, my parent emigrated here. growing up in miami, it was a comforting feeling because i was surrounded by folks who

understood my culture. now i'm able to raise my kids in miami, it is nice because we are able to keep our heritage alive.

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muted. pressure p coming from the wall of worry with the d.c. drama top of mind. why it may be too much for the soft landing ambitions. and the latest is in on the a.i. unveiling for microsoft. does it live up to the hype? it is tuesday, october 3rd. you are watching "worldwide exchange." welcome back to "worldwide exchange." i'm frank holland. we check on the u.s. stock futures. we're in the green across the board. off the highs of earliearlier. we are watching the russell 2000. it turnedin negative yesterday. the trend started here in

august. it is down fractionally for the year. this is important. this index is believed to give a real-time look of the u.s. economy and the dip into the red. it could signal declines for more stocks this year as economic conditions catch up with the bigger companies. we will dive into the economy in a moment. a big part of the story is higher borrowing costs for longer. ten-year benchmark at 15-year highs at 4.689. two-year yield at 5.1%. higher borrowing costs is one factor in the growing wall of worry in the increasing debate over whether or not the fed can pull off a soft landing or recession is coming. in addition to borrowing costs, investors are dealing with labor strikes across a number of industries and the rise of oil prices where millions the americans are resuming student loan payments and the government pushing into next month over the

long-term spending bill. for more on whether a soft landing or recession is on the horizon, let's bring in steve whiting and the senior bank of america economist. good morning. great to have you here. you recently changed your recession call a few weeks ago. what led you to change your mind on your outlook? >> we are now forecasting a soft landing for the u.s. economy. we see a material slowdown in the growth from the current pace. we have it at 0.7% next year. it is close to recession, but not quite a recession. a couple of things led us to change the outlook. the first is the resilience in the consumer spending and the second is the upside surprise in business investment along with the idea that the recession has really rolled across the rate

sensitive sectors of the economy with autos hit first and housing. now those rate sensitive sectors are finding a part in the uncertainty. >> okay. do you see one of those clearly turning to the downside and giving us a clear sense we're in a recession? >> all of those are issues that will contribute to a deeper slowing in the economy. i would not look for a period that is going to conform to a traditional recession. a collapse in everything all at once. we think we have been going through rolling recessions and that will extend particularly to employment in the coming year. this is not going to be a collapse in the traditional sense. we have been growing below trend. a 20% decline in resideidential

construction. manufacturing has contracted for a full year. we will have slowing in the services sector which is rebounding from covid to new highs. these are things that willbe material, especially for employment. in the end, we don't think this is going to show up as a period of a drastic rise in unemployment in a full-year decline in gdp. >> if we don't see a decline in gdp or higher unemployment, what makes it a recession? >> it is contraction and getting things out of the way that normally happen in recessions and taking a longer period. it is unfortunate because many investors would love to have a period that's clear as day where you have a collapse like 2020 with 15% unemployment and all of the macroeconomics risks are behind you. you have the 6% growth year of 2021. that is devfinitive and clear.

two years of below trend growth and rise of unemployment, gradual, all of that would be the same effect of having a short or shallow recession over six months. >> you see a .7% gdp growth over the next 12 months. you are in the softish landing camp. the student loan payments and uaw strikes could change your mind again? >> those are downside risks to the fourth quarter gdp. with the student loan payments, the sooner, the less the impact. on the uaw, whatever impact on inventory gets paid back in the first quarter as well. they do create some risk to the fourth quarter and that means

the fed doesn't end up doing that last hike in november. in terms of the broader economic outlook, you get a protracted strike which has a knock-on effect is the base case. i don't see this as a long-term hit to the economy. >> steve, oil easing off the highs of a couple of days ago above $90 a barrel for wti. still elevated for the year. how does that play into your thesis? >> this rebound of headline inflation and dread on consumer income tripcontributes to the rl slowdown. if you look at the inverted yield curve and tight hmonetary the policy can lead you to shocks. you are in a weaker state in the event you absorb a stock. this is not like early 2022 with the invasion of ukraine. we moved up an abruptly and we had real question marks of the

availability of supply. this, again, does not help in this particular moment. this is extending that drag on incomes. we benefitted a lot lalready. from taking consumer down from the peak of 9% to the recent low of 3%. that did a lot to take already recessionary consumer confidence out of the really weak position. that will be a slowdown. it is not going to be as abrupt unless the oil price and we had another shock. >> just a few days ago, we were talking about the possibility of $100 a barrel. that is not as likely now. rising oil prices and energy prices in general, if they continue to rise, does that change your thinking? >> it adds another drag to the fourth quarter. as steve said, where we are right now is a bit of a drag on the consumer. i don't think it is back breaking. you see that in the consumer

sentiment figures. you look at inflation expectations. they picked up a little bit, but they're fine within the range we see. if you get a significant increase, it will depend on the how the rest of the consumer basket plays out in terms of inflation to see overall impact on the consumer. >> steve and adity, thank you. great to you have here. time to get a check on the top corporate stories with silvana henao. silvana, good morning. >> frank, good morning. meta platforms is exploring a new business model for inn sta grat -- instagram in the eu. they are weighing to charge users $14 a month for ad-free versions. logging into facebook is not consent for the platform top

send users ads. ford and gm announcing a new round of layoffs as the strikes enter the third week. ford said it idled two factories that supply parts to the plant in chicago who worker are on strike and let go 330 employees. gm says it was forced to layoff 130 workers at a plant just outside cleveland and sent home another 34 at a factory in indiana all tied to the strikes. now 25,000 uaw strong. and the high profile investors including bill ackman is sweetening the deal for the offer for sculptor. they offered $13 a share which is up from the previous $12.76

offer. sculptor agreed to sell to rhythm capital to $639 million. frank. >> i see it is up 6%. silvana, thank you. turning attention to big tech. microsoft a.i. assistance for the office suite is several weeks away from going on sale. a number of testers got their hands on it as they look to get a leg up in the a.i. arms race. steve kovach has more. >> frank, can anyone generate meaningful sales from the a.i. boom? microsoft is about to try a month from now with the lawnunc of the a.i. assistant copilot. it costs $30 ap month. double what you pay for a subscription for teams and outlook and word.

question investors are asking is it worth the steep price? microsoft has customers testing launch. i spoke with one customer who has been using copilot for two months now. >> what i see is the potential for breakthrough productivity. i feel like with the pace of diffusion of a.i. you wait, you will get left behind. >> one told me it allowed him to be in two places at once and catch up on meetings he missed. >> before copilot, it would have taken three hours. it took minutes to interact to bring the information current. >> the pressure is on to sell that experience we just heard about to more than 300 million

users across microsoft 365 especially as companies are tightening the i.t. spending. >> we he don't say think of this as addition to the i.t. department, but revamp all of the processes and your company. most customers are interested in productivity gains. they are very interested in what it will do to create value. we will start there. >> more competition is coming. google is working on similar a.i. tools for google docs. it costs the same as copilot. but daniel newman says microsoft has the lead over google. >> i believe google will continue to be the leader in search and microsoft p will be e leader in the productivity

tools. you will see a few jump over the fence in time. this is not compelling the switching as much as locking customers in. >> microsoft says sales from copilot won't kick in until later in 2024. frank. >> a lot to unpack here, steve. you mentioned a lot of competition. we had pce launching their a.i. copilot. the market for a.i. will go from $2.2 billion last year to $127 billion in 2027. how big is the market? do they have a sense of how much demand is there? >> at the event where microsoft announced this availability and said we have a waiting list. they never had a waiting list before. at last we heard, there were 345

million users on microsoft 365. individual people using it within companies. $30 per month. that's more than $9 billion per month in new sales for microsoft potentially. >> big revenue bump there. i know it doesn't get launched before november 1st. if you try it out before then, let us know. >> thank you. coming up here on "worldwide exchange," the march toward $100 a barrel taking several steps back on fresh headwinds. we go live to abu dhabi about crude's ice rwprfoard and more. we have more coming up. stay with us.

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welcome back to "worldwide exchange." time for the morning call sheet. we start with evercore raising the target on warby parker. evercore sees an inflexion story with the risk/reward outlook. shares are up 1.3% in the pre-market. another upgrade from warner user group. ubs saying it sees wmgm a long-term secular trend in music. shares of warner music up 2%.

key bankraising the price target on nvidia. speaking of a.i., hiking it from $670 to $750 a share. shares of nvidia right now up .30%. time now for the global briefing. we begin with news in china. evergrande surging 42% before paring the gains for the chinese property developer resuming in hong kong. they were suspended last thu thursday. australia central bank keeping rates on hold for the fourth straight month. rba says further tightening may be needed. the asx 200 closing at the six-month low. check out the russian ruble pushing to the $100 against the dollar. coming closer to the all-time

low. it has been weakening since last month when russia central bank had to step in to stabilize the currency and hiking the key interest rate to 12%. sticking with the global picture. we continue to watch the price of oil. the benchmark brent falling from the recent highs s and coming o the recent highs with the fear of energy demand. let's get to dan murphy in abu dhabi who has been speaking with people who know a thing or two about oil. dan, we spoke about the possibility of $100 brent crude a couple months ago. >> reporter: good morning, frank, and good afternoon from the middle east. this conference brings together executives from the oil and energy value chain.

the focus of the conversation is not just about oil and gas, but the focus is on decarbonization. that is because we are here in the uae which is hosting cop-28 in november. that climate event will bring together world leaders to discuss the transition and decarbonization agenda. that is a focus here. of course, oil is still on the agenda. i had a chance to speak with the secretary-general who with weighed in on the fourth quarter for the markets. at the same time, also weighed in on the feud, if you call it that, between opec and iaea on the forecast. opec and iaea have a disagreement with when we are going to see peak fossil fuel demand. iaea says 2030. opec says that is nonsense. >> we respect the iaea. the projection is fossil fuel

will peak in 2030. this is less than six years from now. fossil fuel demand has been 80% for the last 30 years. it hasn't changed in 30 years. it goes back to the earlier discussion about the availability of critical minerals and everything required to move the energy system from a fossil fuel energy system to renewables and all of the above. this is critical. >> reporter: opec secretary-general speaking there. there needs to be investment in fossil fuel to guarantee energy security and supply. the iaea says fossil fuels have to stop. >> dan murphy, thank you very much. ahead here on "worldwide exchange," the one word that every investor needs to know today and stocks looking to hit a reset button on the new month

and quarter. that's coming up after this break. stay with us.

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welcome back to "worldwide exchange." it's time for the wex wrap-up. congress member matt gaetz launching a motion to oust kevin mccarthy. visa announced it will invest in an a.i. start up for $100 million. tesla scoring a legal

vehicl victory in the legal matters over the auto pilot features. tesla will not have to face class action claims on the matter. and bytedance pulled in $6 billion in the year and it is looking for an ad-free subscription tier outside of the u.s. and the jets and chiefs game featured taylor swift in the crowd cheering on travis kelce. >turning to stock futures. the nasdaq -- it was negative a short time ago. now it is higher. this is kicking off orctober an

the fourth quarter. let's bring in sylvia jablonski. >> good morning, frank. >> how do you see rates moving higher right impact on the market was in the red and now it turned back positive. >> i think rates will be a nuance for a while longer. when you see rates at this level and you hear the fed talking about being higher for longer and remaining hawkish and looking at the ten-year rate, that will impact companies in particular. for investors, they start to think about looking at the mega caps and companies with the strong balance sheets which will be as impacted in the sho shshort- short term. we are probably at the end the rate hiking cycle. we had four cuts on the schedule for next year. now it is down to two. there are still cuts on the

schedule next year. we are coming up to the end of the rate hike nightmare. >> i heard this before. we will have to see. two more meetings later this year. you mentioned weakness and stocks. mega cap stocks like apple. you say right now is a buying opportunity. why now as we see the elevated rates? you don't think the stocks will slide? >> those are all great points. if you look at apple, it has fallen 12% from the peak performance this year. it is a great story. iphone 15 sales were better than expected. it looks like consumers are starting to upgrade to the premium models. they have billions of users captured into the apple services ecosystem which has high margins. the company is down to 26 times earnings. there is a discount there.

i think the mega caps are looking cheaper after this reset in august and september. >> okay. with all this in mind, what is your wex word of the day? >> my word of the day is the october effect. it is the month of whhalloween d we should not be spooked by it. october tends to be better than september. some of the money making happening is in october. that is a move of 5% or more. i would expect we could get a year-end rally. october could be better than last month than we could get a rep reprieve. >> vi sylvia, thank you very mu. >> thank you. thaf . that will do it here on "worldwide exchange." "squawk box" is coming up next. thank you for watching.

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good morning. stock futures flat today, but the ten-year yield, again, in the highest level since 2007. the russell 2000 has turned negative for the year. we will show you what's ahead. kevin mccarthy is facing a vote to oust him from the speakership. we will have a live interview at 8:00 a.m. ford and gm announcing more layoffs related to the strike. we will have the latest from

detroit on this tuesday, october 3rd, 2023. "squawk box" begins right now. good morning. welcome to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. here we go again. a mixed picture. nasdaq was flat and dow was down again. if you look at the modest advances. dow up 10. nasdaq up 3. same with the s&p. if you are looking at the major averages for the year to date, dow up less than 1%. the s&p up 11.7%. nasdaq