those will be pretty important. >> let's take a quick look at the dollar. should we show the dollar? >> bitcoin. looks good. >> dollar is good right now. >> dollar is strongest levels -- closed yesterday since its highest level since november. >> dollar's good, which is bad. >> join us tomorrow. we got to roll. "squawk on the street" begins right now. ♪ good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer here at post nine of the new york stock exchange. david faber is at cnbc hq this morning. premarket is pinning its hopes to some relief in bond yields after adp comes in line, 89,000, the lowest in three years. ten-year yield back below 4.75%. oil near a three-week low. our road map begins with treasury yields. stocks look to regain some of yesterday's big losses. plus one long-time apple bull downgrading the stock,

citing high valuation and concerns of soft u.s. growth. and it's the largest health care strike in u.s. history. some 75,000 union members at kaiser permanente walk out of hospitals and medical offices. let's begin with the markets. dow coming off the worst day since march as you may know by now, losing its gains for the year to date. jim, this morning, writing a lot about the tyranny of the ten-year, as you put it. >> look, i think there's a consensus building that you can't have the yield curve be the shape that it's in now, and i know this probably bores a lot of people, but if you're just trying to figure out, what the heck is this all about, there's a sense if you go out ten years, we got to go the usual, which is that there's a steepening curve and we're all going to have to pay a little more if we go out long. meaning, let's say you need a mortgage, that's going to go higher. we got a number that was softer today from adp and shows there's not as much wage growth, which is what people are worried about

with the fed, but i'm much more concerned about issuance, how treasury pays. i know that yesterday ed had a fantastic hit where he talked about how it's possible that we don't have a lot of federal reserve bonds sold, but just be aware that -- and david, you know this -- it's very hard for people to understand and interact with the bond market, but if you think that the ten-year, which is currently at 4.74% should be above what the treasury rate is, then you know there's more pain ahead. it just may not happen with the velocity that it's occurred and it's the velocity that's driving people crazy. >> listen. everybody's trying to figure out when we're going to hit a top or near-term top in yields, jim, and you point out the technicals. we've talked a lot about them lately. we have in the second hour of "squawk on the street." sara has been talking about it for weeks in terms of the supply-demand equation. has something changed in a significant way? given all the supply that still needs to come to the market, and is that sort of new normal?

but you know, when it comes to equity investors right now, i guess you made this point last week when we kiddingly talked about just having the entire show be about the ten-year. you have to look at it. you have to make a decision here, ultimately, in terms of what you're going to do. but what do you see as the impact, really, let's call it near term and long term? obviously, does seem to increase the chances of a hard landing, doesn't it? >> yes, it does. and i think that there's a sense that, well, what does the fed really want here? and i say, forget that. it's not about the fed right now. it's about demand, and when you see small and medium-sized businesses still charging ahead, still hiring, still growing, but the large ones are not, then you say to yourself, wait a second. if wages go up, even though mortgages are now higher, the spending's not going to bring mortgages -- not going to bring the price of a house down. i think that the -- carl, when i look at the fact that houses are

still up 40% from pre-pandemic, that's the last holdout, the last thing the fed wants to come down, but if you're going to have to finance this deficit and do the quantitative tightening, which is what the fed's really more important right now than the fed funds rate, then we're not done in the selling. and i would like to think that because we're so oversold, we're done, but i also am not naive enough to think if we get a number that's strong on friday, we could have some real problems. >> yeah. not a lot of people adjusting their forecasts for friday in light of adp. i think pantheon this morning calls it an unforecastable dataset just because it's been wrong. >> j.o.l.t.s., which we panicked on yesterday, i had paychex on yesterday, they said, look, this thing shows the opposite to the previous month. they don't use it. they don't think it's important. they do see what powell wants. they see this marginal wage gain, 2 to 3%, they see some pockets of strength, some pockets of weakness, but they still see growth, and i think that the bond market -- forget

powell -- the bond market wants to see contraction. we don't have -- we come in and see strikes, and we see ford, but they're not doing best and final. ford is offering something. we're not seeing drugstores close. we're not seeing major problems in retail. >> look at auto sales yesterday. >> oh my god. so strong. let's say the bond market is separate from what powell is doing. i think what the bond market is, they got it so wrong. we sat here forliterally even in april and said, well, the bond market says there's going to be a recession. now we're all off. now we're saying the bond market is sfwgoing to cause a recessio. they're two different things. the bond market was so wrong in april, there's nothing that says it won't be so wrong again. >> you mentioned yardeni, who coined the phrase, bond vigilantes. this week, he coined the term bond heretics.

>> the bond vigilantes, i think, i first came in -- heard that term back in the early 1990s when inflation was high and interest rates were moving up in '94 and '95, and nominal, you know, ten-year yields kept rising higher and higher, suggesting that the fed's work wasn't done, and they weren't doing enough, and the concern was the bond markets were driving the fed's behavior, and that they would continue pushing the fed to the point where the economy would fall into recession. now, i don't honestly think that's the case now. i think the markets are trying to figure out what is the fed and other central banks going to need to do to make sure that

inflation stays low? >> look, i've kind of a -- a very longwinded way of saying that, yeah, ed yardeni was right. ed is also talking about the im immaculate displaegs inflation. david, you remember this. the rates of the vigilantes were much higher than they are now. but there's also a sloping curve that we had then, and right now, why is the 30-year treasury, i posit, giving you 4.8% return and you're getting a much higher return from the fed funds rate, even though when you go out that far in time, there's a lot more risk? >> yeah. it's a reasonable question. i don't have an answer, as you might expect. i do know that if you've got to refinance something in the next six months, you're not particularly happy about it, and anybody who did refinance whatever piece of paper it was over the last year is probably a bit happier than they might have been otherwise, even though it

was higher than it was the year prior. and then, if you're trying to buy a house, well, we can see that almost 8%. that's got to lock up the housing market at some point, doesn't it? not to mention, again, also, with the move of this speed, whether people like to say it in the market, something breaks. i don't know what that is or what it could be. we never do until it happens. and maybe it won't. but it's a concern. >> but there is a housing cycle. i mean, typically, what happens in a housing cycle is first the beginning. there's a lot of demand, so the housing companies start building a lot of houses, and then the demand goes up, and then the housing companies start charging more and charging more, and then the mortgage rate goes up, and then there's a cliff. that has been the way this has worked all the time. now, maybe there's a shortage of homes right now, but it tends to be -- carl, it's a cycle, and right now, we should be at the cliff. and the fed should win. but we all think that there's

just unassailable amount of demand. there could be demand destruction too. don't forget, i mean, there's a level where the housing -- the house comes down to make it so that even though the rate's up, the house is cheaper. that's also happened. in the end, we've always had overbuilding. i think the housing companies are showing the same discipline that the oil companies are showing. everyone's showing great discipline. we're all waiting for someone to break out of the discipline cycle. >> damentioned the banks. silicon valley happened at ten-year 3.6%. >> right. >> different time. >> i mean, we do have -- liquidity is abundant. everything got saved on deposits last time around. jim, i think that does help. any concern there might be about the banks this time, although carl's absolutely right, of course, and bank of america stock yesterday did reflect that continued concern, at least just about embedded losses in its portfolio. >> right, and look, i think that there are always going to be loss.

i had macy's on last night. they have a credit card division, and it's experiencing losses, and defaults, and we know that the student loan, hear that endlessly, they have to finally start start paying, but i would say that we normally -- kind of the normal defaults that we have in 2019, i keep going back to the fed wants us to return to 2019, and it's housing that hasn't returned. food is coming down so quickly. >> you see egg prices this morning? >> throwing them away. >> yeah. >> i just think that we're not going to get to a point where a box of cereal is going to cost as much as 2019. it's going to cost less than 2019. what goes into a box of cereal is coming down in price, and the costcos of the world, which is the second largest food is saying, you know what, guys? thanks for nothing. we got kirkland signature corn flakes and they're every bit as good as tony whatever, right? flakes. there's nothing to frosted

flakes, david. >> you've been really unkind to kellogg the last couple days, jim. >> i just think that cereal is not one of those -- it's a bit of a commodity. it's got the bag, the box -- those are worth ten times how much the stuff that's actually in it -- and you've got the sugared raisins, and maybe costco comes out with a little less sugar and says, this is the better for you, bfy. >> carl, don't get him started on wegovy. >> i'm all over that. you can't find mounjaro in this city. there's a big distribution of wegovy yesterday. the trunk finally came. >> the truck of wegovy? are people on the upper east side, waiting on the side of the road? >> the upper west side. the east side doesn't know wegovy. there is no wegovy. there's no -- on the east side, there's none to be had. none. all those hospitals, none. . still to come this morning, we'll talk about the criminal

trial for sam bankman-fried going into its second day in court. we're going to take you live to the scene next. futures trying to look for a bounce after we did lose briefly the 200-day moving average of 42.96. we'll get to news on apple this morn morning. icy hot. ice works fast. ♪♪ heat makes it last. feel the power of contrast therapy. ♪♪ so you can rise from pain.

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day two of the criminal trial for sam bankman-fried set to kick off this hour as the jury selection continues this morning. kate rooney is outside the

courthouse with the latest. good morning, kate. >> hey, carl, good morning. jury selection continues today here in lower manhattan for sam bankman-fried's criminal trial. we do expect opening statements as soon as today, guys, and on to witness testimony as well. the court is down to 50 potential jurors. they plan to whittle that down to 12 people and then you've got 6 alternates as well. the judge, in the meantime, saying to those potential jurors, don't talk to a soul about this case. he said, no news, no internet. he called it electric quarantine. bankman-fried has been watching all this play out from that courtroom, flanked by his lawyers. his parents were not there. he was noticeably cleaner cut with shorter hair after spending time in a federal detention center there. he has been in custody since august after the judge said he violated bail conditions. he has pleaded not guilty to seven counts of fraud and conspiracy and maintains that the blow-up of his $32 billion crypto company was bad risk management, he says, not fraud.

his top executives, though, they say otherwise, pleading guilty and saying they knowingly committed fraud. we do expect three of his top former colleagues, one of whom is also his former on-again, off-again girlfriend, to testify against him. other possible witnesses were listed in court yesterday. investors, including alfred lynn of sequoia, he's led investments in doordash and airbnb. anthony scaramucci as well, bankman-fried's brother and more ftx employees, including former general counsel. >> kate, wee'll watch it with your help. bitcoin holding at six-week high, almost. carl, ford september sales are part of -- they put them all in the q3 sales so we're going to give you the q3 number here. q3 up 7.7% compared to the same

quarter of last year. q3 ev sales, remember, this is going to be critical as ford looks to do that transition, ev sales up 14.8% compared to last year. mustang mach-e up 45%. they're just starting in with the lightning, so its sales were down 45% year over year and then you've got the ford q3 bronco sales up 24.8%. that's important because remember, it is michigan assembly where they build the bronco, so that -- in that number is likely to fall as we go into october, november, if this strike continues as we see the supply of broncos that are at dealerships continue to be restricted. so, what we have is ford in the third quarter up 7.7%. guys, back to you. >> let's say substitution. people buying evs now that gasoline is so high? >> do i think we're seeing that? i think there's some of that.

yeah, there definitely is some of that, and there's greater selection now. not as much as where the industry needs to go next year and then into '25 and '26. we're not at the point yet where you can say to somebody, you want an electric suv? what are your options out there? they're pretty limited at this point, and that's going to change, jim, but we are seeing people having slightly greater selection than they had, let's say, six months or a year ago. >> meantime, phil, street's trying to get their arms around this latest reported offer to the union from ford. 20%-plus, and then shaving pretty dramatically the amount of time it would take a new employee to get to top pay. >> right, and that's a big push that ford is making with this offer, which was presented on monday night, and in making this offer, and in announcing it yesterday, ford, through ceo jim farley and his comments, saying, look, this is a costly offer to us. this is not like we can say, okay, we're giving it to you,

and we have the same level of profitability and everything is the same as it was before. no, this is going to cost ford, but they want to get this racked up as quickly as possible, and they understand that the uaw is holding out for certain things, including quicker progression in terms of wages for new hires. they are north of 20%. they're not saying exactly where. they're also adding in cost of living adjustment benefits over the life of this contract. so, it's a far richer offer than what we've seen from ford in the past. whether or not this gets the deal done remains to be seen, carl. >> phil, we'll talk in a bit. busy day on the auto front as well. that's our phil lebeau. we'll get cramer's "mad dash," countdown to the opening bell on a busy wednesday. "squawk on the street's" back after a short break.

let's get cramer's "mad dash" as we count down to the opening bell. >> jon fortt had a terrific story yesterday about intel selling altera. these are specialized chips. in many ways, they are, until the a.i. chips came, the most valuable. what's interesting is they paid, in 2015, they paid $16.7 billion. the competitor, amd, bought xilinx, paid $49 billion, so in the interim between 2015 and now, it's obviously gained a lot of the industry has moved up. this is -- but fortt did point out there is a problem in that intel didn't do that much with this, so i don't know how much it's really worth versus xilinx. you do mobile-i, and you do

this, and you say, wait a minute, maybe intel is worth more. that is what pat gelsinger wants. all that said, what we really want, it's like we want -- we don't want tuna with good taste, we want good taste in tuna. the rest of intel is not worth as much. you're selling the crown jewels in order to be able to finance what's not a crown jewel. that's putting money behind a hand that's not as good, and throwing away some. >> what about the argument that if they've lost on the engineering front, at least they're making moves that are a little bit more shareholder friendly? >> absolutely, they are. and maybe we says, wait a second, if you look at the stub of what they're not selling for altera and for mobile-i, then the company is undervalued. but you know what? i like nvidia. and nvidia's no financial engineering. in nvidia, there are people talking about $100 billion in orders for their really expensive cards. that's what i want. right now, everyone's against nvidia. look, people are saying, come on, this thing went too far too fast. if you have the best chips, it

really doesn't matter. people should go back and look at intel, 286, 386, pentium, and see what happens with the stock. >> nvidia still made a lot of q4 top ten lists. >> next year is going to be a very big year for nvidia because they'll get all the demand. microsoft will take everything they make, one company. >> we'll talk more about it after the opening bell. of course, coming up in just about six minutes. don't go anywhere.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. let's get to apple this morning, under pressure in the premarket. keybanc did downgrade to sector weight this morning, down double digits over the last three months, jim. we got the downgrade, which we'll talk about, and then some executive stock-selling as well >> tim cook sold a lot of stock. here's what i think. when you get to the tail end of the magnificent seven selloff, you have people who break ranks. the stock was at $198. now it's at $172. you could make a lot of cases

that perhaps it's overvalued, perhaps we don't know about how the new phone does. the phone is running hot, which apple will tell you, there's always been iterations in the beginning where they run hot or there's some problem. i come back and say, just, please, don't trade it. let's say you sell it at $171. can you buy it back at $163? that's the way you have to look at it. then, it would not have such a high multiple. let's be careful. the traders, whatever you want, but if you are an owner of apple and you like to own it, this is not something that you shake through. >> what about the crux of the keynote, and that is, slower postpaid sub growth, maybe a fourth quarter of down revenue year on year in the u.s.? >> we don't know yet. we do know that historically, when you have these iterations, it's very difficult to gain, and again, i think that that's why it could go from $198 to $160. that's a very big decline.

it's possible. but that's what the down quarter is about. why it went there. i mean, if it was up quarter, it would be $210. people should recognize that apple is rationally priced, and maybe it needs to be a little bit lower, but i just think that nobody's good enough to trade this stock. nobody. there will be many people who claim that they sold at $171 and bought it back at $161 and we'll check their trading receipts and see that they were maybe puffing. >> david, does the carrier element interest you? >> you know, i mean, it's always an important component of the overall story, but i'm not sure it's that different from what we've seen in the past in terms of promotion levels for the 15. at this point. and what it will mean. you know, jim, is this heat -- is this an issue, how hot the phone gets? is it real? >> when you talk with apple, they would say that they have a software patch, that this has

happened periodically. there have always been these different situations that are negative. titanium, by the way, in the aircraft industry, does not run as hot as aluminum, so you would say, wait a second. why do they build planes with titanium? the answer is, because it works better under heat. i don't know, carl. i come back, and i say, yeah, i mean, it's down a lot. someone wants to make a splash, and they're making it. we just talked about it for four minutes. congratulations. >> that's right. >> that's what it's about. >> thanks, key. no target on their note, just the sector weight. >> cliff. >> yes. let's get the opening bell here. at the big board, it's empire state realty trust celebrating its tenth listing anniversary. at the nasdaq, it's nuvini, an acquirer of saas b to b companies in brazil. >> hey, david, isn't that what we want right now? a spac from brazil. okay. isn't that exactly what's called

for? and by the way -- and the braves have been doing well. you follow the braves? the stock? >> that's starting -- because of the braves. >> it's doing well. >> it's a pure play, they own the stadium too. >> i think the buy is meaningful for them. >> there's the realtime exchange. all right. there's the -- there's the heat map. do you guys know the realtime exchange doesn't exist any more in reality? that's real, but that thing they showed earlier is not real. that's why i was making that face. >> are you telling me that's a sham? >> i'm saying it's created in the -- where? i don't know. it's a -- wow. it's a.i. i don't know. i'm looking for it. i'm like, where is that -- that darn -- and it wasn't here. >> is the 30-year a sham? >> look at me here. >> oh, look at that. now you look like "succession." >> i am. what's going to happen in the house? let's make it happen. let's pick a new speaker.

all right, everybody. >> he can do that too. what a multitalent. >> so good. speaking of things that are not real, jim, these reports of meta laying off some employees at the metaverse division reality labs, according to this reuters story? >> well, look, are they spending more? it's a possibility. >> by the way, it's part of doug's note today at jpmorgan. >> yeah, look, i think that the most important line is buried at the end of page three of that report, which is that revenues are coming in really well for advertising. but right now, we're also beat and we're so defensive, we've been flogged. the analysts will be flogged until morale improves, and all i can say is, don't take your cue from people who are worried as much as you should take a look at people who are calling the revenues to be good. i would have flipped that piece entirely. i would say, let's start with the revenues being better but expense is higher because they have to have the capital equipment. david, there is a beaten-down nature of the analysts, like any

other profession, where, let's say you were beaten very badly on a monday night. you're a football team. you do not come in the next week and say, you know what? we're going to crush them. what you say is, geez, i hope -- you know? i hope. there's a lot of hope right now among the analysts that maybe things will stay here, you know, push, you know what i'm talking about? >> i follow you exactly. and i appreciate the nfl reference. >> thank you. >> yeah. that said, for meta, we had mark mahaney on yesterday and he's positive on their ability to continue cutting costs and just to paraphrase, jim, he thinks it will create some momentum under the stock when you get the next quarter under your belt, unless a surprise with a cost number and/or guidance that is far behind what is expected right now. >> oh, yeah. i mean, look, and i know david's focused on that reverse head and shoulders pattern. but you know, i just want to go back to apple for a second,

because i think we missed -- they got messi when they spoke at the -- when eddy cue spoke, he talked about sports. the nfl is in play for apple. >> who reported that, jim? where is it in play? >> this is an evercore piece. i don't know what he is doing. he's speaking positively about apple. i don't know what that's about. it's certainly not warranted today. but we're talking about espn currently -- talking about espn. they said that apple bid for the nfl sunday night ticket. david, who is that? who has the sunday night? >> we do. we do, jim. >> did you see our ratings this past sunday night? >> nbc family. biggest ratings since the super bowl. the taylor effect. >> i don't know who the quarterback is, but boy, what a tight end they got. whoo!

>> although he did not have the greatest game. and our guy actually had a pretty decent game, amazingly enough. forget about the nfl. jim, listen. when it comes -- >> i'm going down to dallas for a sunday night game. >> when it comes to sports, it is not unimportant, although the nfl is the least of it at this point. many of the deals are still in place for quite some time to come. the nba contract is nearer term. there are some questions. when it comes to apple -- and by the way, this is -- i mean, this has all virtually nothing to do with the fundamental underpinnings of the stock, but when it comes to apple and amazon, the real question is, do they really want to become more robust in terms of their sports programming and what they have available? i know you talk a lot about messi, but it's not going to move the needle that much. and even the -- the question is, even for them, whatever they spend wouldn't move the needle that much for apple or amazon but could crush those who rely on these deals to generate real numbers. now, by the way, you know, when it comes to tv, people basically, at this point, are talking about tv's really just the nfl. that's all it is at this point.

either you got it or you don't. and if you don't, then you're not really in the tv business. >> you're right. look, i think that people -- it's very rare to have something that everybody watches. and i mean, that households watch. i haven't seen the numbers for espn and all the baseball games last night but they probably all together don't add to travis kelce and swifties. >> philly had a nice early part of the game. >> we had a very good game, but i don't know how many people care about it. i think they care more about the refiners going down, the oil. by the way, oil peaked -- what didn't -- didn't oil go up and then drive the bonds? well, now, oil is going down. interest rates -- was that just all for show when we talked about oil every day, driving the bond market? >> energy, the only sector red this morning. the opec meeting has no real change in policy. we got to $87.32, now at $86.73.

>> chevron went up not nearly as much as oil when oil ran and now it's going down harder than oil coming down. but i think, david, we often make these linkages that we then don't talk about when they're wrong. we did say that the ten-year was marching to the beat of oil. now, oil is getting crushed, but no one talks about how the ten-year -- that maybe that linkage wasn't as smart. >> i wasn't aware of that linkage to begin with, not a lin linkage that i saw. >> you're not a linkage guy, maybe. >> i didn't see the head and shoulder. i didn't see the linkage. what we will continue to come back to is that supply-demand and whether, in fact, that is a new normal that we're going to be dealing with in terms of funding these deficits and whether the japanese are not there any longer and the chinese, and how we're going to distribute the supplies

successfully, and what interest rates are going to mean as a percent of gdp. those are the linkages we're speaking of. >> you're being substantive in making these judgments as opposed to being facile. >> i suppose. i'm trying. >> there he goes, david, once again. i don't want the facts to get in the way of the story, so i went with oil. no, david is right. it is supply and demand. and david, by the way, there are a lot of people come on and make these what i really do say facile statements. i want to know, the biggest short position in the history of ten-year, how many people are calling for apocalypse now? are they short the ten-year? shouldn't we ask them? >> i know, i know. and one sort of somebody i speak to regularly said to me today, when bill ackman comes out and takes one last victory lap, because he has been short at the long end here, that will be the top. so, let's wait for that. >> or, as you suggested this morning, jim, maybe moody's doesn't follow through with the downgrade or maybe the europeans

start getting interested in our paper. >> the germans do have money. why don't the germans buy ours and short theirs, and the dollar's being great. we always focus on japan. japan, no growth environment. we should do what they're doing. china is -- we have no idea what china is up to. >> that's big debate as to whether or not they are actually recycling less. there's all sorts of takes this morning. >> we don't know. by the way, the chinese economy, there are signs that say that it's doing better. what's interesting is maybe xi jinping decided, you know what? we'll crush the real estate sector and after that, we'll let the economy go up. it's a command economy. hey, david. >> yo. >> they're communists over there and it's arguably that, you know, when they don't tell you how the 21-year-old unemployment rate is, maybe we should be saying, hold it. maybe their numbers are not to be trusted. >> well, we've always had that debate in terms of the veracity of the numbers coming out of china and whether they've

overstated growth and things of that nature. to your point, whether they just simply hold back in certain areas because they don't want to deliver particularly bad news. >> right. >> property sector, jim, there continues to be, i think, the key focus, given how important it is to the overall economy, particularly when it comes to the consumer and spending, which they're obviously trying to increase as an overall percentage of their gdp. i don't know. i mean, that just doesn't look great at this point in terms of property and what they're going to actually do to potentially save some of these companies and how aggressive the state is going to get in terms of doing that. >> right. well, david, couldn't it just be a cramdown? th they've got a habit of defrocking the rich over there. we've got people like the ftc. they do that. but they don't detain people, the ftc. >> no. but the point is you got a lot of people who have invested in whether it's the funds that invested in property and/or were providing financing to these companies. you've got a lot of apartments

that have been promised that haven't been finished. you're talking about the middle class that could be hurt and/or -- to the extent a lot of their wealth is tied up in real estate in some way or their ownership, their willingness to spend comes into question. >> well, i mean, nike, they sell a lot of nikes. there's the counter. david is right. but i'm looking at alibaba. the stock does go down all the time. maybe there's a sense there's been destruction of the middle class, carl. >> citi today raises their chinese gdp forecast back to 5%. that's the second firm in the past week or two. tesla, of course, led a discussion about tesla's china demand. the competition with byd. i see jonas took a crack at that today. >> yeah, jonas is out there. you know, david, when jonas speaks, i know you listen, because he's kind of clever and funny, but i actually asked phil lebeau about the oil

substitution, trying to anticipate exactly what jonas would be focused next time, but look, i think there's -- you can do tesla every day, david. you can do netflix too. we didn't even talk about how netflix is going to charge more, i don't know. these are the two stocks that fascinate what we call retail, david, so anything you can possibly do about either one of them is called what we get -- it's called numbers. >> it is called numbers. you're right. netflix performed fairly well yesterday in the selloff as a result of the belief they are going to, at least according to "the journal," raise price after the actor strike is potentially settled. haven't heard updates on that. >> what have you been watching on netflix, david? >> you've got companies that are levered like warner bros. discovery. >> you mentioned nba, david. >> nba, too. but if you've got any, you know, any near-term refinancing coming up, rescue got to hit the bond market in a real way, it's not a pretty picture. >> no, and that's one of the reasons why macy's, when i spoke

to the two gentlemen, the soon-to-be out ceo and the soon-to-be new ceo, that stock is down because there's concern about the credit card, but they have debt that comes due '27, '28. all these guys would tell you that david zaslav has made it so maturities in the next year and a half are not so bad. >> true, and i'm glad you pointed that out, because that is the case, but it doesn't mean that investors aren't screening for that kind of stuff and looking and seeing in terms of the capital structure and when refinancings are due. when you're talking about close to 5% ten-year, that is going to change the, you know, the needs. >> you haven't mentioned verizon or at&t. is there a reason why you've left them out? >> yesterday, as you know, you surprised me. i did not notice, a, i guess the decline in verizon stock price, which has resulted in its dividend yield being 8.5%.

>> don't you think that's a red flag? carl, when i see a yield at 8.5%, i say to myself, red flag. red flag. >> is it, though, jim? is it a red flag? >> yes, it is. >> there's nothing that says they don't have the ability to pay that dividend. >> yes, but i think historically, it doesn't matter what company. if you see a company that has a yield that's far in excess of everybody else, let's say this were one of the great blue chips and it had that yield, i would say, okay, well, that's a bit of a red flag. how about, bit of a red flag? >> okay. >> like, a piece of a red flag. >> speaking of -- you know, all of this discussion reminded me, jim, of when you were trying to get the government to issue 50-year paper. that would have been a deal, right? that would have helped the maturity. >> they all laughed, not unlike what carrie said about john travolta, and you know what? they all laughed. it's a carrie market. i went to every one of the

so-called big muckety mucks in washington and they thought it was funny. they thought i was funny. like louis ck funny. >> another one of those big ideas that nobody listened to. >> yeah, like sam kinnison. >> disney park in new mexico. >> you had 300,000 acres traded the other day, and there's some -- >> 50-year. yeah. what else, carl? how many have they laughed at through the years of these big ideas that jim spends a lot of time working on? >> they think i'm a genuine wall street funny man. >> let's see. we got services pmi crossing the tape this morning. let's get to rick santelli. hey, rick. >> hey, good morning, carl. yes, these are the final reads, so we replace the mid-month read. it was 50.2. it gets downgraded to 50.1. that's the weakest since january. on the composite, the other direction.

50.1 becomes 50.2 and that now is the weakest since february when it was 50.1. we see that interest rates are down. the best way to describe today is that we're at 4.75% in the ten and yet it's down five basis points from its 5:00 eastern cash close. it's been up nearly over 480 and the long-term horizon is until somebody gets interested in those yields from a purchase standpoint, liquidity issues, probably continue to make selling have a bigger move to the upside than the lack of buyers to any moves to the downside. "squawk on the street" will return after a short break.

oil lower, generally means some positive arrows for the transports, and indeed, the airlines are close to the top of the winner's list today. didn't really mention the the u order for 50 more 787s. we'll get stock trading with jim in a minute. 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... next level moments, need the next level network. [speaker continues in the background] the network with 24/7 built-in security. chip? at&t business. the first time you made a sale online with godaddy

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and there's no catch. it's free. we make money from ads, but they don't follow you around. join the millions of people taking back their privacy by downloading duckduckgo on mobile and desktop today. one thing we haven't gotten to is this strike by some kaiser workers. about 75,000 across several states impacting potentially 13 million customers in that time. >> it's an unbelievably -- i've had their insurance. therefore, it's much more visible than say a writer's strike in people's daily lives. look, there's a lot of people who feel left out and have not had the big wage gains. it's not what the fed wants to see. but people don't make a lot of money. >> i expect it to last three days. and to your point, jim, a lot of

the union wages, the auto is a good example, it hasn't kept pace. >> which is why certainly they have every reason to strike. you have to be careful whether the companies have enough money to pay. >> it brings us to a flash head about gm today preparing a $6 billion credit line to cushion some strike costs. the read there is that maybe they're ger believing it's goin be longer than expected. >> these people are playing hardball now. ford has five months. this is not going to be -- shawn fain is running out of room here. >> it's a kinder, gentler jim cramer when it comes to labor

shortages? >> versus my rarefied people. the real people aren't making nearly as much money, carl. they're all living in their cars like i did for six months with any gun and my bottle of jack daniels so i don't know jack. she stole that from me. >> let's get to stock trading. what are you watching today? >> i'm watching chipotle. don't fear, everything is fine. i just point it out, there are a lot of people trying to defend stocks that kind of been drifting down and chipotle good but the chart is bad. >> is it as bad as mcdonald's? >> a lot of that -- they have franchisees. you can't grow if you're not going to get credit to buy a new mcdonald's and they're unhappy. chipotle owns its stores. that's why i've liking the model more than mcdonald's.

people like the mcdonald's model. i like the chipotle model. >> it's a great 20-year chart. we're doing 20 years yesterday -- >> 20 year is different. >> chipotle is amazing. >> they're spun off by mcdonald's and it's one of the greatest companies on earth and it's well run and i think it deserves to sell where it is. maybe higher. david, you ought to try some of the new things -- >> there it is. that's a nice one. eat half and save half. >> really? >> that's a lot. it's a lot of food. >> it's a great value. >> how about tonight? >> i have molson coors on tap. these are companies, by the way, that younger people are buying. so i'm trying to get -- trying to get people a little more interested in what -- people love the -- they have a big

analyst meeting. these companies are doing well, but they're not nvidia. >> when do we get constellation? >> that's tomorrow. >> these were all because of the bud light -- they're doing -- >> a whole category got hollowed out. >> bud light was the largest. not anymore. >> good to have you back. 6:00 p.m. eastern time. we'll get more data after a quk eawh wreacinicbrk ene' bk two.

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♪ good morning. welcome to another hour of "squawk on "squawk on the street." i'm sara eisen along with david faber who is live in new jersey. take a look at stocks after yesterday's big sell-off. brutal sell-off that left the s&p at a four-month low. we're bouncing today. up a third of 1%. the dow is higher by 14 points. a little bit relief on the yield side after the 30-year crossed 5%. we're 30 minutes into the trading session. here are big movers. apple getting a rare downgrade

this morning. key bank cutting the name to sector weight to overweight citing a number of concerns, valuation, u.s. sales expectations and aggressive international growth estimates. jp morgan cuts price target on meta to $400 per share but maintains an overweight rating. meta is preparing to layoff employees at its metaverse reality labs unit today. and then intel on the move but off the highs after announcing programs to spin off its programmable chip business. got some pmis this morning. >> let's take a look at factory orders. up 1.2%. tha that is multiples of what we were expecting. in between, we had minus 2.1. quite a comeback. one might say averaging out some

of these months. 1.4. that's the best since march of '22. if you look at durable good orders, these are the final reads. we take the mid month reads out. it's at 0.2. it becomes 0.1. transportation remains up 0.4. if you look at capital good offensive, nondefense, it remains a juicy up 0.9. shipments remain up 0.7. here's the big numbers. ism services, 53.6. 53.6 on services index. 53.6 actually is the weakest since july when it was 52.7. in between we had a solid 54.5. that's all pretty good because every month this year was above 50. we haven't been below 50 in contraction mode since december of last year. if we look at the prices paid component, 58.9.

58.9 which equals our last look and it's unfortunate because both of those numbers are the highest since april. we've had numbers in the 54s in between. so we rather see obviously prices paid remain more tame on the services. employment front, 53.4. 53.4. well, that actually is the weakest since 50.7. that was in july because we had another solid month in august. finally, on the new orders front. 51.8. and 51.8 is on the weak side. we have to go back to the end of last year to find a weaker number and that number happened to have been under 50. we see interest rates remain lower on the session, but much higher on the week. sarah, back to you? >> that has been the story. rick santelli, thank you. overall, guys, if we look at some of the data that rick said, good for the markets for it to come in on the weaker side of expectations. but it's still showing maybe a little too much strength for comfort.

and i think we should dive into some of the other numbers we got today on jobs. the labor market is key to this story. the federal reserve has wanted to see at least the labor market weaken enough to calm down wage inflation, but not so much that we have a stress or a spike in unemployment. so we got the adp report today which gives the sector private jobs hired. 89,000. that was a lot weaker than expected and it was the lowest in awhile. it's hard to square that, david, with the report that we got at the same time yesterday where we saw 9.6 million job openings. i think it's worth diving into for a moment. a lot of economists this morning are pooh-poohing the report. they said to take the report with a massive pinch of salt. why? he said because post-covid it's come out much, much stronger than some of the pre-covid numbers and he thinks that that survey is having a hard time adjusting. david rosenberg who has a

bearish bias was saying there's a 33% response rate on the report. not as big as 70 the report before. the bottom line, carl, is that it's really hard to get a signal through a lot of these noisy reports. we know the fed pays attention. that's why the market paid so much attention to it yesterday. is the job market cooling? we think so. tomorrow's job report should be confirmation. and that's really going to be the key because it is hard to tell what's happening on some of these noisy volatile data points. >> jolts was narrow in the areas that did rise. cramer citing paychecks saying maybe people are posting more job openings because they feel better about potential supply, people are back looking. that's when -- before, you've given up hope. and as for adp, no lack of notes today saying that data set is unforecastable. it's not changing our number for

friday. i think the estimates are still 150, right? >> exactly. they're kind of pooh-poohing both of the reports when it comes to figuring out what's going on. one big discrepancy is that the biggest job losses in the adp report came from professional business services. legal services, architecture, accounting, that sort of thing. it was one to have biggest job openings posted in yesterday's data. 500,000. that just shows, david, that there's some noise here. there's professional business services. that was a drag on today's report. it's hard to know what to make of the overall number. the expectation for tomorrow, i've seen estimations between 150 and 170,000 payrolls and that's down from the 187 increase in august. i think the wage number is going to be important as well when it comes to the labor market. that's what the fed is targeting on the inflation front and i -- you know, we have this new strike happening with the

workers in california -- >> three days. >> you do wonder what's going to happen with wage growth as a result of these strikes. these are thousands and thousands of employees. >> adp did say 12 months of consistent deceleration still up five-plus in adp's view. it was interesting to hear yellen say -- some would say pollyanna, but optimistic things about the percent of gdp that paid to service the dead and the idea that higher for longer in her words, not necessarily a given. >> i think with that sound. >> i wanted to listen to the sound. that's why i was pausing. >> we have been surprised that the u.s. economy has shown so much resilience. consumer spending remains strong. investment spending is solid. housing is usually clobbered by tight monetary policy.

it's stabilized and seems to be moving up. and so i think people are trying to figure out exactly what it's going to take to keep inflation moving down and the economic resilience that they see maybe suggests higher for longer. but we'll see. and i think it's by no means a given. >> so i think that she's maintaining the positive tone around the economy, the soft landing story, the fact that the bond market is reacting to the federal reserve. and you remember i pressed her a few -- not that long ago, about the deficit and the concerns about supply and demand on treasuries. and he did dismisses it. remember when i asked about the high deficit, she gave a different metric. she said it's important to watch the u.s. interest costs as a share of gdp. here's a chart today about what is set to happen to the u.s.

interest costs as a share of gdp. she wasn't worried about it. if you can see the blue line there, we're still under 3%. not bad. not out of the ordinary. but the orange line in the middle is where goldman sachs expects it to go and that is to a record high by 2025. a peak. the top line shows what would happen if rates stay where they are right now. the bottom line, the white one, shows if we go back -- if the fed cuts down. it's still set to rise. there's the forecast. and what does this tell us? this tells us that the u.s. has a government -- the u.s. government has a supply and demand challenge. and the cost of servicing our debt is going up and is on track to hit a record. that's problematic. >> yeah, sarah, they don't make any bones about it. it's not about the data set. the inconvenient truth is, the u.s. bond market has a supply and demand challenge. they were saying similar things

yesterday. they seem very straightforward about it. you've been talking about it for weeks. if it's not about the data and it's just about supply and demand, i don't know where we are. i guess we'll look at technicals. some people think we may be nearing a top. who knows. >> i think it all goes into it. yesterday we got a big jump in expectations for the november fed meeting, for them to raise interest rates. that's definitely part of it. worried about inflations are flaring up again or remaining sticky. but the rate strategists, it's -- there's more to it built into the rate move we are seeing right now. maybe it's technical in nature and maybe it's positioning. but it's more than just the fundamentals of the economy and inflation and fed expectations and that's why i continue to point to the deficit. we'll see. the kevin mccarthy news, i think -- >> it doesn't help. >> don't miss the forest through the trees and the forest is we have 33 trillion in debt and a rising deficit. it speaks to the challenges in

dealing with it. let's talk about what these rising rates might mean with equities with bob dahl, chief investment officer. bob, it's good to have you. are you of the view, bob, that yields have separated from anything regarding inflation right now? >> no, i think the -- the bond market and the stock market are waking up to the fact that you can't have a good economy, falling inflation back to 2% and the fed done or almost done and going to cut rates next year. it's not going to happen. it's going to be one way or the other. and sarah's analysis, i fully agree. for a decade we have the -- the deficit going up, but interest rates falling. so interest rate expense didn't go up. now with the debt going up and interest rates going up, all of a sudden that free launch we've been eating for years, we're going to have to pay the piper. you put that off altogether, no surprise we're at 475.

>> what does that mean for equities? are you paying any attention to some of the 1987 analogs where it was a picture that stocks had rallied and yields had continued to climb relentlessly up until october? >> so what i would say is that the possibility of a financial accident certainly has gone up. when you move interest rates this far this fast, we started to see some quality spreads widening. i'm not forecasting anything. i don't know anything. when you get this abrupt change, it often leads to that. and i think that's part of the rising required rate of turn, if you will, and among the reasons stocks have gone from 4600 to 4200. >> how does this resolve itself, bob? it doesn't look like we're going to get much action from congress. the treasury secretary isn't even seeing this as being pinned on worries about u.s. debt. so where is the resolution?

>> on the government debt side, there is no resolution. we've got to live with this which means slower growth, somewhat higher inflation, god forbid higher taxes. hopefully some day some spending cuts somewhere. but they're all long-term issues as you know, sarah. in the meantime, the markets have got to come to grips with, okay, how long can the economy stay good as interest rates are catapulting higher or do we have economic weakness in that dreaded word "recession" comes back into the vocabulary. it's a valuation judgment from a reset from 2021 pe, the 1819 on this year's consensus earnings. 1819 times is still not cheap as you well know. and so this 4200 holds, if the

economy stays okay and interest rates stop going up, but if the economy weakens and earnings estimates have to come down, i don't know where we're going to get a double digit percentage gain in earnings next year. 4200 is a lot more interesting than 4600 but i think the risk is sadly still to the downside. >> where are you long here, bob? >> i would own companies that have earnings predictability, earnings persistent, good cash flow, reasonable valuations. the hmos are an example there. great stocks last year. struggled this year. starting to poke their heads up again. of those kind of names that have some economic independent, if you will. >> bob, we'll keep it short today. good to see you. thanks for the time. as we head to break, here's our road map for the rest of the hour, the reits rout. are they worth buying?

more on the stocks that have the most exposure and what it may mean for those companies. and the soaring yields making companies with big cash hordes rethink returning cash to shareholders. we'll talk about why when "squawk on the street" continues in a minute. - this is jabra enhance select. it's more than just a hearing aid. it's a smart hearing solution that makes hearing aids more convenient and less expensive. with jabra enhance select's premium package, better hearing doesn't have to start in a doctor's office. it starts with our free online hearing test. you can fine tune your settings with your remote audiology team. with jabra enhance select you can get the same advanced hearing aid technology and professional care you expect from a clinic at a fraction of the cost. try it risk free for 100 days. visit jabraenhance.com.

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high. but could there be opportunities for this fourth quarter? joining us now is bmo capital markets analyst. sorry i'm not there in person with you. you've had an interesting call in the past. i would assume this move down recently is just on rates. how do these things typically perform hisically when we have the ten year soaring to recent hires. >> it's not a good time to be a reit analyst. with interest rates going up, demand is slowing across most asset classes. there's a lot of uncertainty with asset prices. we think that needs to settle out. we need to see a settlement on interest rates. i think the opportunity is on the supply side. it's coming down as far as development starts across most asset classes. we'll see that really come to fruition in '25. 2025 looks like a great year in terms of fundamentals for real estate. >> what about the underlying financing, for example, for either new or existing

developments that perhaps have maturities that are coming due and what that may mean for the sectors if they have to refinance at a higher rate or unable to. i come back to offices. but more broadly speaking across the board. >> it's creating a huge uncertainty in the markets and we're seeing that in stock prices today for the office reits. right now it seems likes the banks are willing to work with the owners and kicking the can down the road. but we need to see fundamentals improve and we're starting to see that in office. we're starting to see more activity in places like new york and san francisco. so those two combinations need to come together. but, yeah, it creates -- that's why reits are trading where they are. >> can't get in until 2025? >> we'll start to look at 2025s. we might be into the reits next year. rising interest rates, really uncertain economy, we're not really superbullish on reits today. >> is there anywhere to hide in

the sector which has also traditionally been a safe spot. although, the fact that it says bond proxy doesn't feel safe right now. >> there are many companies. i think the really good thing about the reits today is that the balance sheets are much better. there are some blue chip companies in the four times range where they could be opportunistic on acquisitions if there are distressed sales. >> prologis one of those? >> prologis, bxp. all very good balance sheets. >> when you get pushback, is it about current valuation or longer-term doubt about vacancies recovering to prior trend? >> the pushback is on deceleration. demand is coming down. on office, we are starting to see activity on leasing but occupancy is not really picking up. a lot of these things in office

feel better but we're not seeing it in the numbers yet. in other asset classes, comdema is not as strong as it was earlier this year. >> there was a lot of a time the yields were far ahead of the ten year. that may not be the case any longer given the drop in the reits overall. >> normally you want to see the dividend yield above where the ten-year is at today. and for some companies with a lot of growth, you can stomach that. right now, we would like to see either rates come down or growth kind of lead to higher dividend growth. >> i did notice bmo jacked up q-3 gdp more than a point yesterday, right? >> right. >> the steam engine continues to fire. jon, thanks for coming in. good to see you. another day of fresh highs and yields for the dollar. we'll take a look at which companies have the most exposure

to a strong dollar and what it means for them. you see almost 1 t07his morning on the dxy. stay with us.

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the dollar hitting its highest level since november of 2022. sara eisen knows that. but some warnings for fx headwinds are ahead. overseas being a part of that. i'm excited to have dom chu here. i'm here with you. >> i'm so excited. because we actually get a chance to do something physically together here. kind of like what jim would do with the mad dash with the stock exchange. we're doing to stay a little bit more focused because we are looking at this sector from the dollar side of things. you showed that kind of one-year chart of what we're seeing here. and this is the move that everyone is paying attention to. it's roughly about a 10% move higher since we've seen in the mid part of that summer. but we're still, remember, at one point, we were down about 11% from the highs that we saw just this year. now in 2021, forget about that. remember the massive 28% rise that we saw postpandemic.

so we're still relatively okay compared to that. but this move has some concerning efforts, i guess, for some traders in certain specific groups. when we talk about the dollar exposure, there are certain key sectors that always get mentioned. we talk about consumer staples often. so if you take a look from a sector perspective, it's probably going to be consumer staples, technology and to a certain degree communication services as well. this is, by the way, one of the efts that folks are using to track that dollar move higher. uup is the ticker. the move higher here, in context that we've seen in that 2021 span, remember, from here to here, it was a 28% rise. it's kind of important to keep that in perspective. from a sector side of things, media companies and a lot of names like netflix, alphabet, meta platform, those names

mentioned in terms of dollar exposure. tech and com services could be affected. consumer staples in that group as well. you could argue about whether or not those factors for the dollar are more or less important than some of the risk aversion elements that are in the market right now. >> but you can argue as to whether investors actually pay attention when we are told these were dollar-adjusted numbers or adjusted for the moves. oftentimes, investors are being to overlook with the idea being that eventually it comes back to some sort of -- >> exactly. and if you take a look at those, those are the sector that is you mentioned that are affected because of the adjustments. some of the one that is people look at probably more impacted by the rate trade. you talked about real estate. utilities are also one of those sectors that's getting adversely affected because people use this as an income trade. the dividend yields are bond

proxy like. but these are the least exposed, some of the least exposed to the dollar movement. probably rates unless the dollars rise. you're talking about the apartment-type exposures, homebuilders, for the most part in the s&p 500, make a lot of their homes inside the united states. and so for that reason, homebuilders are a little less exposed to that u.s. dollar trade. i would point out, regional banks, money centers aside, they have massive exposure, sometimes outside of those u.s. markets. but regional banks do not. the insurance sector side thing, progressive, allstate, don't have as much. >> this is due to inventory. >> correct. >> 8% mortgages, we'll see how that plays out. >> there are so many crazy crosscurrents right now. it's almost like the entire economy in the u.s. and markets are in a state of transition. there are so many different factors that are affecting this

tug-of-war. it only affects certain companies in certain ways when those narrative that is would be big are taking a backseat to what's happening with interest rate moves or the housing dynamic in america. >> thank you. >> no, thank you. i'm excited to be here with you. >> he's here. it's not like that -- >> it's not artificial intelligence. >> it's not that virtual wall that i learned existed. sara, did we find out whether the japanese did intervene on the dollar? >> they haven't confirmed thinking. but they did keep us all guessing because we saw that wild move where the yen strengthened and the dollar weakened. whether they intervened or they just scared people that they were going to intervene, there was a move with no confirmation. still trying to figure it out. one silver lining of the higher yields, higher returns for companies with big cash

hoards. bob pisani joins us on set to explain. >> there is all sorts of knock-on effects. we have been talking about how rapidly rising rates are playing havoc with companies that need to borrow money. here's another knock-on effect. higher rates is that buybacks may be reduced because companies may feel the need to hoard cash. corporate america is sitting on 2 1/2 trillion dollars in cash. companies with a large cash hoard are now getting a significant return on the cash just by investing in short-term debt. buybacks were lower in the second quarter compared to the first quarter. this is largely due to the banking crisis. but now we're waiting for these third quarter numbers to come in. we don't have them in. it will be a few weeks. howard silverback says he

expects them to be lower in the third and fourth quarter due to the higher interest rates which may cause companies to pull back to hoard crash. there are a small group of a few dozen companies that are sitting on billions of dollars in cash. this cash is typically invested in short-term debt instruments that used to generate no income. now they can get 4 to 5% returns which is very significant when you're a company like alphabet or apple, for example, look at the cash hoard here. apple has over $160 billion in cash. suddenly, these cash reserves are generating significant income. this isn't necessarily any reason to become bullish on apple just because they have the cash -- look, 160 billion, 5% even on a short-term interest, you have $8 billion in cash for doing almost nothing at this point. i'm -- this is another example of the enormous knock-on effects

of higher interest rates. we were talking about how biotech companies are having to spend more to borrow. we're talking about wind farms, anything capital intensive. look at the effects that you don't necessarily think about of all these higher interest rates and you can see why the stock market is having so many problems. there's all sorts of implications here. >> and the other one is that bonds with their yields are much more attractive alternatives to stocks which was not the story. remember, when there was no alternative. >> the premium you get for holding stocks, it's almost zero at this point. it's kind of unfortunate. in a way, i don't know how you feel about it, i think it's good that we're getting more normal. that's weird. my first mortgage in '85 was 11%. i remember that very, very well. and there was 17, 18%.

it was 17% in the early '80s. now, 5, 6% mortgages, that's more normal. i know we're at 7, close to 8. i think a normal interest rate world is not a bad thing. getting a real return on your bonds, i don't think that's necessarily a bad thing. >> well, it's happening very fast. >> i know. that's the problem. agreed. >> others would say orderly. >> orderly. but quick. quick move in rates. >> in the last two weeks, it's been verging on the disorderly. i agree with you up until then. and it's very traumatic. this is why we're doing these stories about all of these knock-on effects. the markets are having a hard time digesting this because the move has come so quickly. >> don't tell that to -- i remember when mortgages were 20%. >> i just said that. didn't i just say that? >> my dad said it on the phone last night. >> that was a reference to me

and i'm not a -- >> i said -- >> we're all a product -- >> telling millennials that. >> thank you. that was a reference to me. >> thank you, bob. always love ya. the average rate on a 30-year fixed mortgage, some are warning of more pain ahead. jp morgan's chief economist is joining us. we're back in two minutes. >> announcer: realtime exchange sector sort is sponsored by select sector efts. ♪ ♪

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♪ welcome back. here's your cnbc news update. baltimore police are searching for the shooter or shooters who injured five people tuesday night after a homecoming event at morgan state university in

baltimore. police said early this morning that no one is in custody and all of the injured are expected to survive. the parents of ftx founder arrived at a manhattan courthouse this morning as jury selection continues in their son's fraud trial. they're on the list of potential witnesses that could be called to the stand to testify for either the government or defense. jury selection is expected to wrap up today and we could hear from the first witnesses by this afternoon. and president biden is wiping out student loans for 125,000 americans just days after payments resumed. of the newly announced $9 billion in forgiveness, half will go to people who have worked in the public service sector for a decade or more. the rest is set aside for borrowers with disabilities. back to you. >> thank you very much. soaring bond yields becoming a singular focus for the markets. the 30-year hitting 5%.

the highest level since august 2007. yields on the ten-year and the five-year hitting their highest. two-year is above 5.1%. and new data showing mortgage demand plunging to its lowest levels since 1996. let's guess what it means for the economy and the fed with jp morgan chief u.s. economist. is that the end of the soft landing story? >> well, you know, i think over the past year we and other forecasters have been kind of bouncing between soft landing or mild recession and certainly the latest tightening in financial conditions, not just higher interest rates and higher mortgage rates, weaker equities, a stronger dollar, all those are certainly raising the risk that we may be leaning a little more toward the mild recession rather than the soft landing. >> do you think the fed is going to keep raising rates? >> no, we think they're done here. and, you know, i think this -- what we've seen in markets

lately probably reinforces our conviction in that. even if we do get some better data between now and early november meeting, we think they probably have seen enough damage here or implied damage from financial conditions to the broader economy that they're going to be comfortable, we believe, on hold for the rest of the year. >> housing is getting hit. we mentioned mortgage applications. how much worse do you think it's going to get in that sector and how do you look at the spillover and other sectors too. >> yeah, so right now home sales are basically at rock bottom levels. there's always some underlying demand for resales, i think what's interesting is that event seen a similar hit to home building and i wouldn't expect that to come down dramatically from here in part because even with extremely weak home sales, you've seen growth start to pick up again and i think it was last week, we saw the surpass the

peak that was reached last year. i think that does support housing. so maybe this won't be -- if it is a mild recession. i don't think it will be a housing-led downturn but broader economy i think looks a little more challenged by the higher rates. >> which raises the question about the labor market. we get a jobs report on friday. i sort of did a deep dive into jolts in adp and why economists were brushing off both of them because they were delivering signals. what do you think is happening underneath in terms of the labor market and specifically on wages which we know is key for the fed. >> you're right, you have to look at all the figures impressionistly and adp isn't something we want to hang our hat on very much but the labor market has been slowing, maybe not slowing as quickly as people thought at the beginning of the year. but the trend is still pretty clearly down. the revisions certainly have been consistent with that. so i think we'll continue to see that in the year end as our view

and we'll get sub hundred payroll growth by early next year. wage growth has been decelerating. but, you know, i think there's some further to go there for the fed to be comfortable. switching from, you know, a tightening bias to more of a neutral bias. >> you don't think fed chair powell is going to look at this report and say 1 1/2 openings for every unemployed. that's still pretty hot and tight. we got to do more? he's said that before. >> certainly. the vacancies to unemployment rate did tick down a little bit. but it is elevated, as you said, it's 1 1/2. normal might be 1 to 1.2. but we are making progress that peaked around 2. we're probably halfway on this journey to a more normal labor market. and, you know, powell has said they're going to be forward-looking in this respect. they -- you know, they were on

hold last month with vacancy to unemployment ratio at 1 1/2. i think they're going to be forward-looking here. >> mike, good day to have you. thanks for talking -- talking us through these higher rates. cathy woods ark innovation app is coming off its worst day. it's down almost 60% as you see in the top right corner there over the last three years. more with the ceo behind one beaten-down name, pagerduty about how tech spending is holding up. stay with us, we're right back. >> i embrace my hispanic heritage because my heritage is deeply rooted in family values and hispanics boost economies through the millions of small businesses they own.

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tech spending being impacted by rising rates. some estimates that global security spending is estimated to rise 14% next year despite some of these rate pressures. our next guest says a.i. igniting spending pagerduty ceo is joining us now. we were having a discussion

about buybacks and how rising rates are making it difficult to spend money on that. it was because they were scrambling to spend on a.i. is it starting to erode some of these other priorities? >> it is a difficult market. we've seen a lot of volatility in the macro environment, political uncertainty, and i think customers continue to be really thoughtful and cautious on where they're making investments. but they're making investments in areas that grow their revenue, generative a.i. is a big part of that. help them reduce the risk and cost of material operational failures which become more and more challenging as these companies transition to being truly digital businesses and we're also seeing customers adopt automation more readily. that was something that people historically employees were afraid of, would automation replace me. we're seeing employees be open to adopting automation as a way

to improve their productivity, to drive efficiencies for their teams and companies. >> has it changed the way you frame a sales pitch or argument to bring in new business? >> we have upleveled the conversation about how do you protect value, protect and grow your revenue, reduce your operating cost and is do that in a highly quantifiable way with things like lower cost of ownership and quick time to value. it's -- we don't have customers that want to wait five years to see a value proposition play out. they want solutions that are easy to deploy. don't require a lot of systems integration and extra costs. don't require a lot of administration and maintenance. that increased appetite for automation is there because their teams need to do more with less. everybody is sort of in this race to figure out how to make generative a.i. work in their business but also in their products and services.

and so, you know, there is a little bit of an arms race going on there and that requires investments. so you're looking in other places in your budget to find that capacity. >> what is that you're offering them? >> it's a great question. a.i. has been part of your platform for almost a decade. we released a number of features over the last year that really serve as sort of copilot agents to help our operations teams do their work faster, whether it's drafting a post mortem report so you learn from it faster or automating the process of self-healing, without the need for employees to get involved in that process. we're automating more and more of the value chain associated with what can be very costly damaging incidents. the more we can automate that, the more we return these knowledge workers back to innovating. >> we hear about this growing market for a.i. and preventing

hacks. what do you think is going on with your stock? what are you hearing from investors there? >> i think investors want us to be superoptimistic about an economic environment that is uncertain. we've chosen to be prudent. we continue to control the controllables. since wemean, since we went pube have nearly tripled revenue, improved operating margins by 35 points. we posted a strong growth and profitable quarter, and we're focused long-term on durable growth. long-term, i remain very optimistic about the market. i was with 100-plus ceos at fortune ceo initiative conference yesterday and you know, what i see is everybody grappling with a challenge of wanting to embrace generative ai, but needing to figure out how to do it responsibly. i think it's a mara's law that tells us that we usually overestimate the short-term impact of new technology, but underestimate the long-term effect. and i think that's really where we are in this hype cycle. but what i was really encouraged by is, every one of our large

enterprise customers -- and we're in over 70% of the fortune 100 and over half of the fortune 500, is trying to figure out how to innovate faster, do more with less, and automation is critical to them. >> that's a good look at sort of the mind-set around spending. great to see you again. >> it's great to see you both. thank you so much for having me. about ten points below where we are right now. we'll keep an eye on that. stay with us. at morgan stanley, old school hard work meets bold, new thinking, ♪ to help you see untapped possibilities and relentlessly work with you to make them real. ♪

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against kaiser permanente this morning. it's the largest-ever health care strike in the u.s. bertha coombs monitors those issues for us, amongst so many others. what do we know here? >> well, this one is for the record books. the nation's largest health care system, this labor action, the largest ever for a hospital. kaiser says negotiations are ongoing, but thousands of

workers started the walkout at 6:00 a.m. local time, across kaiser facilities in six states, beginning with hundreds of pharmacists and ophthalmologists at kaiser's virginia and washington, d.c. facilities. that's the area over in the red, as we take a look on the map. they've only authorized a 24-hour walkout. meantime, workers out west in colorado, washington state, oregon, and california, those are the blue on your map, have voted to strike until 6:00 a.m. on saturday. the walkout does not involve doctors or registered nurses. the nurse signed a four-year deal just last year. but this does involve eight unions representing 75,000 workers. 65,000 of them in california, where kaiser permanente is based. and they range from lab and x-ray technicians, vocational nurses, home therapists, and other support staff. this amounts, though, to about 40% of kaiser's national workforce. and beyond wages, key issues

include staffing and subcontracting of jobs. kaiser says there was progress in talks overnight and that it has offered pay increases of 12.5 to 16% over four years, minimum wage of $21 an hour, $23 an hour in southern california. and that the hospital has boosted hiring to try to combat understaffing. this walkout, though, marks the seventh major health care strike this year, according to the bureau of labor statistics. and an eighth now looms with workers at 11 tenant facilities in california, thauthorizing a strike that would start october 19th. and david, tenant is publicly traded, most of the other facilities are not-for-profit health systems. >> so these workers may be back on the job as soon as the weekend, at least striking workers now, but it doesn't mean they'll get anything done in terms of a deal. >> not necessarily. although, what we've seen, if

the past is prologue with kaiser, the larger walkouts usually are shorter. and they usually result in a deal some time later. smaller walkouts, they've had engineers that were out for three months, they had mental health providers who were out for two months. those may take a little longer, but just the sheer size, we're talking about 40% of their workforce could mean that this moves a little faster. an interesting thing that makes it similar to the uaw strike is that they're also talking about the right to make sure that they can have union representation in whatever new hospitals the system acquires. much in the way that the uaw workers want to make sure that they can have union representation with the ev makers. >> bthera, thank you. that does it for this hour of "squawk on the street." stay with us for another hour.

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♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla along with sara eisen on the floor of the new york stock exchange. new jobs data shows signs of what might be a cooling labor market. the manager of a $388 billion fixed income portfolio is with us next on what could be coming. plus, fewer iphone upgrades resulting in an apple downgrade