do you ever do this on -- >> i can't take it that far. >> 1:00 to 3:00. >> i can take a couple of questions, but i give you credit. >> well, it's -- you know? make sure you join us next week. i'm going to go sleep. "squawk on the street" is next. ♪ live shot of jackson hole, wyoming, home of the event that markets have been waiting for. fed chair powell set to address the kansas city fed's annual summit, and of course we will bring it to you live. good friday morning, welcome to "squawk on the street," i'm carl quintanilla with david faber, sara eisen at post nine of the new york stock exchange. cramer has the morning off.

stocks do look to recover some of thursday morning's losses. we got bostic in our pocket now. two-year has a 3 handle once again, healthy diet of single-ticker upgrades today as well. we will begin with the fed chair's speech, which comes just days after the fed minutes indicated policymakers do see a september rate cut as likely. we got bostic saying that passive tightening is a thing, and it might make some sense for him to bring his rate cut view forward. >> he wasn't as dovish as he could have been. he also said that inflation is not close to target and we've got more work to do, which doesn't exactly channel where the market is right now. look, as far as jackson hole, it's hard to imagine that the fed chair can go into any kind of specifics as to what the market really wants to know, which is, how big is the first cut going to be? he's not going to precommit to that. he has no incentive to do that, especially with another pce report coming next week on inflation and a jobs report coming before the fed meeting and what does the path of fed

cuts look like after the first one? he also can't really do that yet because it's hard for them to know how much they have to do and what the path is going to look like. so, those are the big market questions, and it's hard to envision, david, that the chair can be very specific on that. the expectation is that he will give a nod to the fact that they have transitioned into a place where they're more worried about jobs, for instance, and feeling good about the inflation risk, and that they are looking to move to cut rates as soon as september, but that's already in the market. >> right. right. what's changed between the last time we heard from him at the press conference and now? >> more evidence that inflation is looking benign, got the cpi report. inflation expectations continue to come down to more normalized levels. the last pce, and the fed target is 2.5%. their target is 2%. that has continued to move in a good direction four months in a row, and the jobs numbers have

gotten increasingly soft, not sort of collapsing in terms of -- not seeing a pile-up of layoffs. we're not seeing extreme stress. we're seeing a tick up in the unemployment rate, as it should be with the fed being so restrictive on policy, and so they have two mandates. it's to keep inflation in check and to keep joblessness from coming from skyrocketing or from going up, to keep jobs intact, and so now that we're a little more worried about the jobs side of their mandate and that's the backdrop to this speech and that's why the market is all excited and pricing in 100 basis points of cuts before the end of the year. one surprise could be if he expresses confidence in the economy, and then maybe the market walks back some of its 100 basis points of cuts. let's bring in senior economics reporter steve liesman, who is there at the jackson hole fed summit. he's been speaking to other fed policymakers. what's your expectation at this point, steve? >> so, i think powell will lay down something of an important

marker here, sara, whether or not that marker is priced in is a different conversation from where we are in the chronology of things. look, the fed has been out there fighting inflation for, if you count it up, 30 months. i count it from the november 21st speech. i remember it was a thursday at 4:30 where he dropped the word "transitory" and kind of said, hey, we got to start reversing course. we have had 11 hikes from march '22 to '23, 500 basis points, restrictive higher for longer period, $2 trillion off the balance sheet. i think this whole process we're looking at here has come to an end. you're right, sara, a lot of it's priced in, maybe not all of it, because i think what he does today is really say, hey, we are much more confident that inflation is headed to 2%. we're much more focused on both sides of the balance sheet. i agree with you about bostic, that he was maybe a touch more hawkish than you would expect, but still, it's a change. if you notice what he said to me when i said, you had one cut before, is it multiple now, he said, that's in play here.

so, he'll probably affirm this market expectation for at least more than one cut, and the other debate that's happening is this issue. okay, you take 100 off , but you're still restrictive and that gets to this passive tightening thing. right now, the federal reserve is as tight as it's ever been because inflation is low while the funds rate has remained 5.38%. so, what does that mean? it means, i think, the chair makes it clear, we're entering a new regime here, not necessarily regime of stimulating the economy with rates but a regime where we're done being restrictive and now we're going to start a regime of being less restrictive. >> i think one mystery, what i am eager to hear him say, which i think there's some differing opinion on from economists and from policymakers, steve, is how worried is he about the outlook? because that will be a clue, right, as to how he's thinking about what comes next. >> you know, i think right now,

the -- what i'm hearing about the fed's view of the economy is it remains relatively strong, but there are concerns and risks out there about weakness, and you know the same data that i'm looking at. jobless claims have been sort of unchanged. the four-week moving average over a one-year basis, gdp is still running 2.5% to 3%, depending upon how you look at it, so i don't think they see very much weakness out there. i think there's the risk of weakness and concern that some of the lagged effects of monetary policy start to bite down. >> steve, appreciate that. big morning ahead as we rely heavily on you once again. that's our steve liesman in jackson hole. interestingly, speaking about the labor market, goldman with a note last night looking at the business surveys we got in recent days saying not terribly encouraging things about manufacturing employment and services employment as we pay more -- we start raising the curtain on august jobs.

>> employment, component of the flash pmi that came out yesterday, was weak, went below 50, so people are weigh attention to that. it's tea leaves considering the overall labor market data hasn't been all that bad, but yes, combine that with that new york fed survey of confidence that they did on people who expect to lose their jobs, which was the highest level since data going back to 2014, and the softer data is certainly showing more nervousness about the prospect of layoffs and a weaker job market. >> and then as far as the implications for equities, a lot of trading desk notes today. tony pascarel's point is that valuations remain demanding. the narrative on a.i., he argues, is more two-sided than it was a couple months ago, and a lot of stock operators, in tony's view, are going to have trouble pricing in all kinds of election outcomes in the coming weeks as we wrap up the dnc last night. >> it's difficult. we haven't heard, really,

exactly from any sort of strategist or investors how they're positioning at this point for the -- everyone's just waiting to hear more policy and try to figure it out. but i think that goldman note was interesting because his baseline was to be bullish. if we're going into soft landing and the fed starts cutting rates, that's a good scenario for stocks, but we've already come so far so fast and that's the backdrop. >> yeah. i mean, where are we in multiples, though? are we back -- i guess we are. we're back up a bit, obviously, given where the market is right now. >> yeah, i mean, we're not too far from record highs. >> no. mag seven hasn't performed quite as well. you pointed that out yesterday. >> we'll see. next week's going to be big. a bunch of notes on nvidia and what's on the line. >> that's it. very much focused on. hard to -- listen, we'll see. hard to imagine there's going to be much of a diminution at this point in terms of the demand, even if they blackwell, it just means the h-100s and the others that are available are more in

demand, but yes, it will be an important reflection overall. but the capex cycle continues to be incredibly strong. nobody cut their numbers whatsoever or even spoke in any way towards the idea that they weren't going to spend whatever was necessary. >> i know you pay fierce attention to the capex guidance that we've got in recent weeks. >> i do. i'm trying to just understand the entire ecosystem at this point, and from what i can tell, nothing is giving, so to speak. >> joining us this morning here onset, we have torsen slok and michael. good to see you guys, happy friday. t, you have been so constructive on the economy at large. you put out notes every week, arguing the economy, in your words, is just fine. >> well, as david was just saying, the guidance in terms of capex is still quite strong. the magnificent seven, their investment in capex has been very strong so on the firm side, businesses are still spending.

the a.i. tailwind is very strong. on the consumer side, there are issues where it comes to consumers that are highly indebted and impacted by high interest rates but across the board, the latest retail sales were strong, gdp in the second quarter was 2.8 and if you look at the labor market, there are no signs of layoffs, so it brings you to the conclusion, where is the slowdown everyone is talking about? i do understand immigration is going up, but broadly speaking, it's just not clear to me that the economy's slowing down this way that justifies four rate cuts the way the market is pricing at the moment. >> michael, how does your view rhyme with torsten if at all, and what does it mean for the stock market? >> well, i think it's a very bifurcated backdrop still, and i think we're seeing more weakness creep up from the bottom half than strength trickle down from the high-end consumer or businesses. so, you know, i think we can corroborate all this macrodata,

which i think, you know, there's a enough strong data and enough weak data to pick your own narrative, but if you look at the earnings data, and particularly mid cap and small cap stocks, the most economically sensitive groups, their estimates continue to fall. in fact, estimates for this year are now below realized earnings of 2023, and 2025 earnings are also continuing to come down. that said, large cap stocks, which have certainly been the strength of the market, their earnings continue to remain resilient, and they will be the last to fall and won't fall until we really see a more -- a bigger decline in the labor market. >> and that's what we're seeing, torsten, to push back on your view. unemployment rate is up. job openings are down. sentiment surveys are pointing to weakness. that's the thing that the fed is focused on. >> well, but if you look at layoffs in the j.o.l.t.s. survey, the lowest level since 2001. no one's getting fired. same thing in the christmas survey of job cut announcements.

it's trending down. if you look at the notices, it's suggesting that jobless claims will be lower over the next two months so the very important nuance in this debate about the labor market is that there is weakness, but that weakness is mainly becoming an issue because labor supply is growing. it's not because people are getting fired. all indicators of layoffs are at record low levels, so in that sense, firms are not laying off workers, so where is this recession so many people are worried about? >> i mean, with the consumer, there's definitely signs of slowing. >> well, hold on. target this week reported that everything was fine. >> that's a value play. >> walmart was saying there's no broad-based -- >> where do you go when times are tough? you go to target and walmart and trade down >> weekly data from redbook on same store retail sales, it is misguided that the consumer is crashing. >> not crashing, but i have a chart on delinquencies for credit card loans and it's way up.

>> that's only for certain segments of consumers. in the aggregate, consumers were just fine. i mean, i think the message today from jay powell, very importantly, will be that, yes, number one, we are cutting in september. >> there's my chart. >> but after that, we will begin to see more evidence that the data is maybe not as bad as we're expecting, and i think he also will clearly say, we just don't know yet what will happen after september. i completely understand the idea that we may be above, may be restrictive as you talked about earlier, but the question is, are we in a hurry to cut rates a lot? and the answer to that is, absolutely not. >> michael, remind me, is the house view at piper net bearish? is recession your base case? >> our economist, nancy lazard, does see recession beginning in the fourth quarter. our view on equities, we've been bullish since october of 2023 on the view that we're going to have softylocks, which is a moderation of economic activity and lower inflation and lower rates would be very good for

equities. we changed that view at the end of july with the view that inflation here has been largely priced out, and obviously, we've priced in a ton of fed rate cuts and now we're going to be more focused on growth data, activity data, and i think we're going to see, and what we've seen in the last month is we're going to see more of this is a lot of realized volatility in the market. when we get good data, we're going to get relief because there's budding recession fear. but if we see bad data, we're going to see the markets sell off equally as sharply, so we're seeing all -- i disagree with torsten's kind of binary view that everything's all great. and again, i think we can look to the markets, and it doesn't have to be a binary answer, but if you look at market leadership, we continue to see leadership in higher quality stocks, companies with good interest coverage, high profitability, better fundamentals. that's not the type of leadership you would be seeing if the economy was strengthening or strong. it's quite the opposite,

historically speaking. >> one final word? >> well, one final word, of course, is that remember what creates recessions is normally a shock to the economy and that was covid, the financial crisis, the i.t. bubble bursting. what is the shock to the economy today? it's the fed has raised rates. we've been waiting for literally go and a half years for godot to arrive and the economy begins to slow down, why should it slow down in august? we can still wait a while longer. the fed has plenty of time to think about cutting rates. >> we will rely on both you guys. i know you both track a lot of high-i high-frequency stuff. have a good weekend, guys, michael and torsten. >> thank you. when we return, wrapping up the democratic national convention, the vp formally accepts her party's nomination for president. last night's speech setting the tone for her race against former president trump. we'll talk about it. more "squawk on the street" straight ahead. (♪♪) car, this isn't the way home. that's right james, it isn't.

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♪ ♪ the race for the white house entering a new phase. vice president harris wrapping up the democratic national convention last evening with her presidential nomination acceptance speech. megan cassella joins us from chicago, been covering this for us and has more this morning. good morning, megan. >> good morning from chicago where we have made it to friday. democrats are a few miles from here are breaking down the united center after that fourth and final night of the convention wrapped up and it was as big of a party as we saw from the democrats all week long. it was a mix of celebrities and elected officials giving speeches, and there was somewhat of a focus, more than any other night, on themes of foreign policy, on the need to keep the u.s. secure and on standing up to dictators. vice president harris touched on all of that in her speech. it was one part buying frooe. she connected that to her policy

agenda and started to elaborate at least a little bit on some of those economic plans we've been talking about all week. take a listen. >> i will bring together labor and workers and small business owners and entrepreneurs and american companies to create jobs, to grow our economy, and to lower the cost of everyday needs like health care and housing and groceries. we will provide access to capital for small business owners and entrepreneurs and founders. >> harris then went on to talk about issues that were meant to shore up her moderate policy credentials a little bit more. she spoke about the need for a bipartisan border agreement and working with republicans to get that done. she spoke about standing up to russia and iran, and she sort of struck a little bit of a both-sides position on israel and gaza. she said that the u.s. will always protect israel's right to defend itself, but she also

called for a ceasefire and said that palestinians also deserve the right to freedom and security. so, overall, guys, she was sort of looking to make an outreach or make an appeal to moderate or independent voters who might be undecided about who to vote for in november. listen to this. >> i know there are people of various political views watching tonight, and i want you to know, i promise to be a president for all americans. >> now, one of the main mejz we heard from center stage was for democrats not to get complacent or overconfident. they have to keep putting in the work between now and november. harris has just about ten weeks left. we're going to have to hear her laying out more of a policy agenda. she'll have to start answering more media questions. the hard part is really coming from here. >> okay, megan cassella, thank you very much. what'd you think of the speech? >> i actually thought it was a decent speech, personally. it kind of more or less kept me

interested. a loat of generalities, i think is the general review in terms of specific policies, i guess not unexpected that you wouldn't get specific policies down to any sort of granular level in a speech like that. but to your point earlier, sara, that's sort of what we're going to be waiting for. whether or not we get it, i think, remains unclear. it may be viewed by the democrats as an opportunity to sort of keep talking about things at a 10,000-foot level as opposed to getting more granular on certain issues. >> some of the write-ups today talk about how she really didn't mention her race or her gender, not leaning heavily on that. wasn't afraid to go into immigration and the economy and reproductive rights. as far as the economy goes, it's going to be interesting to see where the debate settles on the important states. take a state like north carolina, which is newly in play, some argue. interesting piece on the tape this week looking at how incomes there have surpassed the national average under biden's white house.

employment's lower than the national average. we've talked about datacenter spending. that's a big north carolina story. so, how does that work? >> some of the policy specifics that we do have, though, wall street is starting to crunch the numbers. for instance, a raise in the corporate tax rate to 28%, according to the cbo, would hurt profits by $10 billion annually. so, that's something to think about if they get both houses. anyway, we're going to talk about it. >> less than a quarter for apple. >> yeah. it has an effect. >> it's like a month. >> yeah, but look, i mean, wages come from earnings, right? and we want to keep wages going. >> no doubt. >> we're going to take a quick break here as we count you down to the opening bell ahead of fed chair jay powell's jackson hole speech. reking another look at futures he, pointed to a higher open with dow futures up 200. this summer, there's no better time to experience the latest mercedes-benz has to offer. make your dreams come true. but the choice won't be easy with exceptional offers on the e-class sedan, c-class sedan,

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the day is finally among us. jackson hole, powell coming up, we expect, in just a little more than half an hour. s&p is on pace to enter this jackson hole with the second strongest year to date d e eng nce since the year 2000, anthopinbell coming up in about four minutes.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. welcome back to "squawk on the street." futures, pretty steady here, going into powell's speech in jackson hole coming up in the next hour. let's get the opening bell here. at the big board, it is usta

foundation, the charity arm of the united states tennis association, celebrating 30 years. and at the nasdaq, the actuate therapeutics, a biopharma focused on treating high-impact, difficult to treat cancer, commemorating its ipo. despite the green arrows, some of the companies that reported earnings, of the 20-plus names we got, i think 16 were down and the median cdroch drop, about 5. >> today is better. we've got cava. that was a nice beat. this is the restaurant company that ipo'ed just the few years ago and has been a big hit and success, so the company beat on every metric you can look at. same-store sales growth up 14.4%. you don't see that in

restaurants these days. that was well above the consensus. they raised their same-store sales growth guidance, which a lot of analysts, wedbush saying it looks conservative. they raise the growth. they saw nearly 10% traffic growth, so clearly, it's working, and the ceo was on "squawk box" this morning and talking about how consumers see it as a value play, and that has a lot to do with prices. listen to what he said. >> that's been one of the things that has really helped us drive our success and drive our traffic. if you think about, from the end of '19 to the end of '23, we only raised prices about 12% during that time period. cpi went up about 18%. >> so, another advantage that he says, beyond the steak offering, which was new, which helped drive some traffic growth, and some interest, but we've been covering this company since it went public and the question when it went public was always,

is this the next chipotle? and i was talking to karen finerman on "fast money" last night and she was saying, certainly looks to be that way. said she missed the chipotle run, missed this one too, but clearly it is delivering. and they are opening new locations as well. they managed to open 18 new locations during the quarter, so now the total footprint is about 341 restaurants, so wall street still sees a lot of runway for growth. >> i always think back to jpmorgan, back in june, cut to neutral, and they said that the valuation per store on a 328 current store base is $33 million, a level of valuation that they say is unprecedented in the group. and they add a $77 target. clearly, it's gone even higher since then. >> look, wedbush raises their price target today. i'm just reading one note, based on a 94.8 times ev to ebitda multiple on the 2025 estimate. that's three times chipotle's 30.8 times multiple. it's getting a high multiple, to question about it, but it is

also delivering pretty strong results, especially in the face of a restaurant industry and especially a fast casual industry that has been slowing down as consumers have been dealing with inflation and higher interest rates, and cava, i saw a quote from the ceo that says people are trading down from higher-end restaurants into cava and trading up from fast food restaurants into cava because they see the value. >> we'll see if that continues. mcdonald's made some headway with their value meal driving traffic. subway launching a new $6.99 sandwich for a sandwich that, in some cities, cnn reported, can be as high as 14 bucks, so definitely on the quick service side. >> it's all disinflationary. this is music to fed chair jay powell's ears as also goes kind of against the senator elizabeth warren that companies are just being greedy and causing inflation on all of us, driving up their profit margins. it's actually going the other way. >> well, it brings a good point.

we made a chart, looking at where margins have gone up postp post-covid. in retail, they did go up and then come down. but in food and beverage retail, you can see they went up and the blue line and didn't really retrace. i think that's where the focus may be of warren's criticism is coming from. >> look, i mean, i've looked at a lot of these packaged food margins, and they are -- a lot of them have come back down. at least to, you know, 2017, 2018 levels. i think when you talk about inflation and food, you have to factor in a few things. one, input costs, which have risen. two, margins definitely went up during covid when there was nowhere else to go. remember, restaurants all shut down, and so there was a lot of traffic into the grocery stores and into the packaged foods and they were able to get margins, but those have come down as the world has reopened, and as input costs have come down and as consumers have really pushed back. it's hard to find any sort of

egregious example, at least in packaged food, where i have looked, because that's been a target of some of the politicians, where they are getting these crazy margins, even when they shrink packages, you would see that show up in the margins. and they've done that to try to deal with the higher input costs. >> didn't help the ceo of nestle. i'm sure you've seen the reporting today. >> that was a weird one. surprise ouster of the ceo, and looked sudden too. he was scheduled to appear at a barclay's conference last night. market didn't particularly like this, so they announced a new ceo, someone who's been a veteran of the company since, like, the 1980s. and the current ceo is out. >> yeah. that was actually -- that was after our show yesterday. >> yeah. >> mark snider, that was, i think, unexpected, certainly. >> yeah, he -- >> and it was after the delivery of a quarter that wasn't particularly strong. >> right, so, the stock basically peaked in 2022, ran up, but also, schneider was liked by investors because he made a lot of moves. you know?

he got rid of the confectionery business and made other sort of portfolio moves, but they had this $2.1 billion writedown in investment in peanut allergy medicine. that was harmful to the reputation. the stock has been weaker since 2022, but the overall industry has been weaker, so we'll see if the new guy -- i don't know much about him, other than he's been inside for a while. he's ran the american business, ran the european business. it's one of the biggest food companies in the world, and there's still a lot of work to do, according to investors and analysts, on the portfolio, especially spinning off businesses that are just underperformed. >> yeah, but as you say, one of the larger companies in the world in terms of food and unexpected and interesting. he's been in the job eight years, i think. >> he also paid, like, $7 billion for the starbucks -- the rights for starbucks brands in grocery. that was another big -- he did big things. >> he did. he had, i think, dan loeb was on him for a while. that's years ago. of course, we dealt with some activism as well along the way.

but it was an immediate departure, which, you know, is rare. >> abruptly. yeah. >> abrupt. >> i think reuters had a report that the board just quickly fired him. >> europe sometimes, i think, more likely to have that happen there. guys, i do want to talk about workday. shares are up 13.5% this morning. company reported after the bell yesterday, and i think the ceo was also -- was he on "mad" last night? >> yes. i'm sorry. intuit was on last night. >> we'll get to intuit in a minute. let me give you some of the specifics as to why workday share price is up. it wasn't necessarily about sort of fiscal year third quarter subscription guidance or even annual revenue guidance, although that is intact. it does appear it's about margins, and operating margins were higher, and the company also raised its long-term operating margin target to achieve 30%. that is, we're talking through

fiscal year '27, but that does seem to be giving investors a lot of hope at this point. not to mention the quarter itself in which they did raise operating margins by 25 basis points. last -- you can actually -- if you want to go back just a few months, you can see, may, is when they last reported earnings, and the stock fell dramatically. on this one, it is rising rather nicely, and there you can get a sense for where the stock has been over time. but you can see that move down in may as a result of earnings as we go back a while here. workday shares up almost 13% this morning. any number of analysts, as you might expect, raising their price targets accordingly. >> i would point out another winner today is ross stores, which is up another earnings beat. better topline, better margins, comp store sales up more than 4%. the story here is value. and i said it like 20 times today, but that's what's working in retail, and it's the perception of value that if you have it, and that was the story with target too, and walmart,

and cava, if you have that right now, and that's what ross stores does, sort of the off-price retailer, that is working. stronger trends at ross. management's been focused on branded value merchandise at better prices, and the strategy has worked, and a lot of the analysts say that the second half guidance they provided is pretty conservative, and they expect the momentum here to continue >> interesting, speaking of ross stores, citi today with a negative catalyst watch on ulta. part of their argument is that they're facing competition from the likes of sephora at kohl's and other competitors. they think they're going to probably miss. they report on the 29th and beyond that, they have an investor day in october where citi thinks they're going to drive lower their long-term margin target. ulta really not participating in a pretty decent tape today. chewy, on the other hand, and roku, both benefitting from upgrades. the roku upgrade at guggenheim, they argue this third-party

advertising is likely to drive some topline acceleration on a day where we're watching all kinds of advertising-based stories. >> such as? >> paramount maybe? >> i have a feeling, carl, i'm going to talk about paramount every day next week, so i was sort of -- >> at least for 15 minutes. >> the calls have been coming. there's not going to be too much to advance the story at this point. people may have seen the latest story that skydance sort of objecting in some way, saying that they weren't notified in the way they should have been, in terms of the extension of the matching period, so to speak, or i shouldn't say the matching period. the go-shop period, excuse me. the matching period would be four days if, in fact, the bronfman group actually does come forward with a deal that is deemed superior. still seems unlikely, but they've certainly come up a lot in terms of the capital they're putting to work here and the potential list of equity financing sources they have is

very long. whether any of them will actually step up beyond the group which is fairly large, already been outlined in a number of different letters by the bronfman group, remains unclear. and presence of fortress, you got to remember, they're controlled by mombadala. that could make a difference in terms of how much they can contribute. lot more next week. for now, let's move on to the banks ahead of fed powell's speech a little bit from now at jackson hole. gerard cassidy, head of global financials, he joins us now. when i look at, you know, jpmorgan, gerard, or bank of america or even citi, i mean, goldman-sachs, pretty good years for the stocks. as we get ready, potentially, for rates to decline, are we going to see any significant response from these banks? >> david, it's going to be interesting, because as you pointed out, many of these stocks have had good years so

far. year-to-date performance, generally, for the banks, has outperformed the standard & poor's 500, so i think what the stocks are doing is anticipating the fed will cut rates. it will be beneficial to the banks and we'll start to see an improvement in their revenue growth as loan demand comes back in the economy that many of us expect to be a so-called soft landing. so, if you go back in time and look at a last time on the only time, i think, in our careers that there was a soft landing, it was 1995, and that year, the bank stocks already moved that, you know, in the beginning of the year, that they were up 55% in 1995, best-performing sector in the s&p that year, because of the soft landing and the expectations going into '95 that there was going to be a recession, which never showed up. so, i don't expect that kind of dramatic increase, but they should continue to outperform if we do get the fed to cut rates and we do have a soft landing.

>> and where are you in that camp? you believe her, then, and therefore a believer that there's more upside for many of these big banks? >> we are a believer, david. and i think the reason being is though the employment picture has softened a bit, employment is still very healthy. the unemployment rate, at 4.3%, thereabouts, is still a strong rate, relative to history. now, relative to recent history, of course, it's higher, but these are strong levels. the consumer, the balance sheet is in good shape, as are most corporate balance sheets, and if the fed does start to get rates, generally, that's been positive for the net interest margins, which have been a challenge to the banks. >> when trump's odds were going up a few weeks ago after the debate, after the assassination attempt, the banks were rallying, and people were saying because of the odds of a trump and red sweep would be good for banks, and deregulation. is the election a swing factor now that things are looking a

little more even in the polls? does this matter for banks, ultimately, and what we expect from basel iii and everything else? >> sara, it's an interesting observation, because you're right. after the debate and then the assassination, trump had an upswing and it was a trump factor in the banks as you described, and it was very dramatic when he won back in 2016 because of the deregulation as well as cutting tax rates, and even if he was to win, it's a hard one to call, of course, it just won't be as positive as the past -- his past term, but it would be more positive than the current administration, who's kind of, you know, held back on a number of areas, particularly when it comes to mergers and acquisitions. but you brought up something else quite interesting, which is basel iii end game, and that is the critical regulatory piece that needs to be finalized. it came out in july of '23.

everybody pushed back on it. now, what's happening is we think they're rewriting it. we'll get a new proposal, which will be less onerous for the big banks, and once that comes out, maybe we'll get it before the election, just the new proposal, not the implementation, and then the banks can really have an understanding of what kind of capital they need, and we expect very strong stock buybacks, because the banks are very well capitalized, once we see that final plan. >> gerard, always appreciate it. thank you. >> you're very welcome, david, thank you. >> keep your eye on bonds today. we did have the two-year with a 3 handle at the open, although still flirting with 4%. s&p, 5,606. vix back below 17 and a nice 7 to 1 up open here at the nyse. stay with us.

okay, team! oh, thank you so much i couldn't have done it without you. honestly, i don't do a whole lot here. i'm really just here for the at&t internet, it's super-fast so, any pre-launch concerns? what if nobody buys them? that's mean or, what if everybody buys them? oh, i hadn't thought of that that's probably not gonna happen can we handle that kind of traffic? the network can handle it! i downloaded eight hours of true crime stories just during our last video call i'm learning a lot i can't believe you corporate types are still at it. just stop calling each other rock stars. and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll.

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r so, how have stocks

historically performed leading up to and during the fed chair's jackson hole speeches? dom chu back at hq with some answers to those questions. >> sara, if you take a look at the performance around jackson hole, it's been pretty mixed but the team at bespoke investment group took a look. over the last 30 years, there have been six times where the s&p 500 has traded around a period where the futures market was expecting an interest rate cut at its subsequent september meeting. for the s&p 500, right now, just to put it in context, in the week or month heading up to it, we are seeing some positivity around the s&p 500, especially since the lows that we saw going back a few weeks. so, again, we have positivity, near term, and a little bit more medium term for the s&p 500. with that in mind, if you take a look at the crunched numbers, it becomes a little bit interesting when you look at them in aggregate on average. if you look at the s&p 500 performance, futures pricing in a rate cut, at the last six jackson hole meetings going kind of back towards the 1995 era,

here's how the average numbers sort out, and again, average numbers. so, there's quite a bit of variability here. the average performance has actually been down nearly 1.5% during the actual speech itself, so again, a today occurrence. it's an only positive two times during the actual speech and that was in 1995 and 2007. on average, the day after the speech, about 1.3% declines and on average 0.8% declines until the september rate meeting. that is the overall picture. now, however t i mentioned before the context around it, if you look at instances where we have seen that positivity, in 1995 and 2007, like what we have right now, in 1995, we actually rose by 0.5% during the jackson hole speech for the s&p 500 and when were up about 3.1% between today and the next fed rate meeting. in 2007 it was positive 0.7% performance and a 3.1% gain

until the next meeting overall. so, carl, again, it's a small sample size, only six occurrences in the last 30 years, but if you look at the way things are shaping up with positive one-week and one month price performance, it could be something interesting to watch what the s&p does, maybe positivity, but we'll see. >> yeah. bofa today, five of six powell jackson hole speeches had the s&p down 7.5% on average in the next three months. so you do have to parse the time period but we'll see what the next few weeks give us. >> remember when he said pain at one of them, inflicting pain when he wasn't being serious enough about rate hikes. that was a jackson hole speech. >> mountain air. >> people think it's luxurious there but the jackson lake lodge, i promise you, is not. very rustic. >> oh. not a sara eisen chosen spot. it is beautiful. >> that speech at jackson hole is coming up. leo! he's there when we wake up,

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salesforce, intel and apple and stay with us with powell on deck.

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we are looking at a live shot of jackson hole, wyoming, where in a few moments fed chair, jay powell, will take the stage to deliver his policy speech. we'll take you there live as soon as it begins. they allow a camera inside that room. they've done that in recent years. before that, it used to be the text they released. so clearly a lot of focus and eyeballs on this one. welcome to another hour of "squawk on the street." i'm sara eisen with carl quintanilla and david faber, live as always from post nine of the new york stock exchange. stocks are rallying ahead of the fed chair's speech. we've got the s&p up more than 0.5%. information technology at the top of the market, thanks to nvidia, 3% rally will help the

overall market. remember the company reports earnings next week on wednesday. i've read notes this morning saying nvidia just up there with the fed chair powell as far as potential market mover. communication services, the second best performer right now, but all the sectors are in the green. take a look at treasuries ahead of the fed chair remarks. we're seeing lower yields on the 10- 10-year, 3.84%. fed chair powell has come out on stage inside that room full of invite-only economists, guys. set to deliver his remarks. we'll take you there live and talk to steve liesman. there's a lot of anticipation on this one that he signals a change in tone he's ready to start cutting rates in september. >> by the way, really interesting take in the times about the origins of the symposium, how it started back in the volcker days, kansas city fed trying to draw him there, loved to fish. >> fly fish. >> and it stuck. it's literally smack in the middle of the kansas city fed

district. >> yeah. the grand teton. i mean, a lot of the other i think federal reserve districts have been jealous of the kansas city and tried to do that and they do their own economic symposiums. this has been the one because the fed chair always attends and many in the past, including greenspan and bernanke and powell have used it as a way to pivot and talk about big policy change. >> to steve liesman on the ground. steve? >> fed chair, jay powell, in a speech at jackson hole will say the time has come for policy to adjust. he goes on to say the direction of travel is clear and the timing of rate cuts will depend on incoming data and the balance of risks. the balance of risks to our two mandates has changed. he says that unless upside risk to inflation and more downside risk to employment. finally my confidence has grown, inflation on a path back to 2%. one quote i'll highlight and then the chairman, when the appropriate [ inaudible ] policy restraint there's good reason to

think the economy will get back to 2% while maintaining a strong labor market. let's listen to the chairman. >> our objective has been to restore price stability maintaining a strong labor market, avoiding the sharp increases in unemployment that characterized earlier disinflationary episodes when inflation expectations were less well anchored. while the task is not complete, we have made a good deal of progress toward that outcome. today, i will begin by addressing the current economic situation in the path ahead for monetary policy. i will then turn to a discussion of economic events since the pandemic arrived, exploring why inflation rose to levels not seen in a generation, and why it has fallen so much while unemployment has remained low. so let's begin with the current situation and the near-term outlook for policy. for much of the past three years inflation ran well above our 2%

goal and labor market conditions were extremely tight. the fomc's primary focus has been on bringing down inflation and appropriately so. prior to this episode most americans alive today had not experienced the pain of high inflation for a sustained period. inflation brought substantial hardship, especially for those least able to meet the higher costs of essentials like food, housing, and transportation. high inflation triggered sense and a sense of unfairness that linger today. while restrictive monetary policy helped restore balance between aggregate supply and demand, easing inflationary pressures and ensure that inflation expectations remained well anchored. inflation is now much closer to our objective with prices having risen 2.5% over the past 12 months. after a pause earlier this year, progress toward our 2% objective has resumed. my confidence has grown that inflation is on a sustainable

path back to 2%. in the years just prior to the pandemic, we saw the significant benefits to society that can come from a long period of strong labor market conditions, low unemployment, high participation, historically low employment gaps and with inflation low and stable, healthy, real wage gains that were increasingly concentrated among those with lower incomes. the labor market has cooled from its formerly overheated state. the unemployment rate began to rise over a year ago and is now at 4.3%. low by historical standards but almost a full percentage point above its level in early 2023. most of that increase has come over the past six months. so far rising unemployment has not been the result of elevated layoffs, and is typically the case in an economic downturn. rather, the increase mainly

reflects a substantial increase in the supply of workers and the slow down from the previously frantic pace of hiring. even so, the cooling in labor market conditions is unmistakable. job gains remain solid, but have slowed this year. job vacancies have fallen and the ratio of unemployment has returned to its prepandemic range. the hiring and quits rates are now below the level that prevailed in 2018 and '19. nominal wage gains have moderated and all told, labor market conditions are now less tight than just before the pandemic in 2019, a year when inflation ran below 2%. it seems unlikely that the labor market will be a source of elevated inflationary pressures any time soon. we do not seek or welcome further cooling in labor market conditions. overall, the economy continues to grow at a solid pace, but the

inflation in labor market data show an evolving situation. the upside have diminished and the downside risks to employment have increased. as we highlighted in our last fomc statement, we are attentive to the risks to both sides of our dual mandate. the time has come for policy to adjust. the direction of travel is clear and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks. we will do everything we can to support a strong labor market as we make further progress toward price stability. with an appropriate dialing back of policy restraint, there is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market. the current level of our policy rate gives us ample room to respond to any risks, including the risks of unwelcomed further weakening in labor market

conditions. so let's now turn to the questions of why inflation rose and why it has fallen so significantly even as unemployment has remained low. there's a growing body of research on these questions, including the work which we'll shortly discuss, and that is a good time for this discussion. it is, of course, too soon to make definitive assessments. this period will be analyzed and debated long after we are all gone. the arrival of the covid-19 pandemic led quickly to shutdowns in economies around the world. it was a time of radical uncertainty and severe downside risks. as so often happens in times of crisis, americans adapted and innovated, governments responded with extraordinary force, especially in the united states. congress unanimously passed the cares act, the fed we used our powers to an unprecedented extent to stabilize the financial system and stave off an economic depression.

after a historically deep, but brief recession, in mid-2020, the economy began to grow again. and as the risks of a severe extended downturn receded and as the economy reopened, we faced the risk of replaying the painfully slow recovery that followed the global financial crisis. congress delivered additional fiscal support in late 2020 and again in early 2021. spending recovered strongly in the first half of 2021 and the ongoing pandemic shaped the pattern of the recovery, lingering concerns over covid weighed on spending on in-person services, but pent up demand stimulative policies, pandemic changes in work and leisure practices, and the additional savings associated with constrained services spending, all contributed to a historic surge in consumer spending on goods. the pandemic wreaked havoc on

supply conditions. 8 million people left the workforce at its onset and the size of the labor force was 4 million below its prepandemic level in 2021. the labor force would not return to its prepandemic trend until mid-2023. supply chains were snarld by lost workers, disrupted trade linkages and tectonic shifts in the composition and level of demand. clearly, this was nothing like the slow recovery after the global financial crisis. enter inflation. k after running below target through 2020, inflation spiked in march and april 2021. the initial burst of inflation was concentrated rather than broad-based with extremely large price increases for goods in short supply, such as motor vehicles. my colleagues and i judged at the outset that these pandemic-related factors would not be persistent and thus the sudden rise in inflation was

likely to pass through fairly quickly without the need for a monetary policy response. in short that inflation would be transitory. standard thinking has long been that, as long as inflation expectations remain well anchored, it can be appropriate for central banks to look throughing a temporary rise in inflation. the good shift transitory was a crowded one. with most mainstream analysts and advanced economy central bankers on board, i think i see some former ship mates out there today. the common expectation was that supply conditions would improve reasonably quickly, that the rapid recovery in demand run its course and that demand would rotate back from goods to services bringing inflation down. for a time the data were consistent with the transitory hypothesis. monthly readings for core inflation declined every month from april through september 2021, although progress came slower than expected.

the case began to weaken around mid-year as was reflected in our communications, and beginning in october the data turned hard against the transitory hypothesis. inflation rose and broadened out from goods to services, and it became clear that high flation was not transitory and that it would require a strong response if inflation expectations were to remain well anchored. we recognize that and pivoted beginning in november. financial conditions began to tighten, and after phasing out asset purchases we lifted off in march of 2022. by early 2022, headline exceeded 6%. new supply shocks appeared. russia's invasion of ukraine led to a sharp increase in energy and commodity prices. the improvements in supply conditions in the rotation and demand from goods to services were taking much longer than expected due to further covid waves in the united states and

covid continued to disrupt production globally, including through new and extended lockdowns in china. high rates in inflation were a global phenomenon reflected in common experience, rapid increases in the demand for goods, strained supply chains, tight labor markets, and sharp hikes in commodity prices. the global any tour of inflation was unlike any period since the 1970s. back then, high inflation became entrenched and outcome we were us utterly committed to avoid. by 2022 the labor market was tight with employment increasing by 6.5 million jobs from the middle of 2021. this increase in labor demand was met in part by workers rejoining the labor force as health concerns began to fade, but labor supply remained constrained. in the summer of 2022, labor force participation remained well below prepandemic levels. there were nearly twice as many job openings as unemployed

persons from march of 22 to the end of the year signaling a severe labor shortage and inflation peaked at 7.1% in june 2022. at this podium two years ago i discussed the possibility addressing inflationing could bring some pain in the form of higher employment and slowed growth. i expressed our unconditional commitment to fully restoring price stability and to keeping ahead until the job is done. the fomc did not flinch from carrying out our responsibilities, and our actions forcefully demonstrated our commitment to restoring price stability. we raised our policy rate by 425 basis points in 2022, and another 100 basis points in 2023 and we've held our policy rate at its current restricted level since july 2023. the summer of 2022 proved to be

the peak of inflation, the percentage point from the peak has occurred in the context of low employment a welcomed and unusual result. how did inflation fall without a sharp rise in unemployment above its estimated natural rate. pandemic related distortions to supply and demand and severe shocks to energy and commodity markets were drivers of high inflation. and the reversal has been a key part of the story of its decline. the unwinding of these factors took much longer than expected, but ultimately played a large role in the subsequent disinflation. our restrictive monetary policy contributed to a moderation in aggregate demand combined with improvements to reduce inflationary pressures allowing growth to continue at a healthy pace. as labor demand moderated, a historically high level of vacancies relative to

unemployment has normalized through a decline in vacancies without sizable and disruptive layoffs bringing the labor market to state where it is no longer a source of inflationary pressures. a word on the kriftscle importance of inflation expectations. standard economic models have long reflected the view that inflation will return to its objective when product and labor markets are balanced without the need for economic slack, so long as inflation expectations are anchored at our objective. that's what the model said. but the stability of longer run inflation expectations since the 2000s had not been tested by a persistent burst of high inflation. it was far from assured that the inflation anchor would hold. concerns over the anchoring contributed to the view that disinflation would require slack in the economy, and specifically in the labor market. an important takeaway from recent experience is that anchored inflation expectations, reinforced by vigorous central

bank actions can facilitate disinflation without the need for slack. this narrative attributes much of the increase in inflation to an extraordinary collision between overheated and temporarily distorted demand in constraint and supply. while researchers differ in their approaches and some extent in their conclusions a consensus seems to be emerging which i see as attributing most of the rise in inflation to this glitch. all told, the healing from pandemic distortions, our efforts to moderate aggregate demand and the anchoring of expectation have worked together to put inflation on what increasingly appears to be a sustainable path to our 2% objective. disinflation while preserving labor market strength is only possibility with expectations which reflect the public's confidence that central bank will bring about 2% inflation over time. that confidence has been built over decades and reinforced by our actions. that is my assessment of events.

your mileage may differ. let me wrap up by emphasizing the economy has proven to be unlike any other and that there remains much to be learned from this extraordinary period. our statement on longer run goals and monetary policy strategy, making appropriate adjustments through a thorough public review every five years. as we begin this process later this year, we will be open to criticism and new ideas, while preserving the strengths of our framework. the limits of our knowledge so clearly evident during the pandemic, demand humility and a questioning spirit, focused on learning lessons from the past and applying them flexly to our current challenges. thank you. [ applause ] juror sadly no q&a at jackson hole but that was the fed chair in -- i would say a classic jay

powell speech. brief, direct, signaled a policy change. had a little humor in it. the money line, the time has come for policy to adjust. those were the magic words. the market likes to be validated on this view that the fed is about to start cutting rates and what powell said about that is that the time has come for policy to adjust the direction of travel is clear, he says, the timing and pace of rate cuts will depend on incoming data, evolving outlook and the balance of risk. as expected no real specificity on the size of rate cuts or the pace of rate cuts. he can't do that right now, but he did affirm the market's view and i would say added a little more on the inflation front, that inflation is becoming less of a problem. he says my confidence has grown that inflation is on a sustainable path to 2%. on employment he says it seems unlikely the labor market will be a source of elevated inflairry pressures any time

soon. not as worried about inflation. we do not seek or welcome further cooling in labor market conditions. overall, i would say a pretty dovish speed from the chair, as dovish as he can get at this point without knowing the next jobs report or how much they want to ease or what it's going to look like. he's moved in the market's direction and the market likes that. >> anything surprise you? >> not really. >> okay. >> i would say that, you know, look, he spent -- he went -- most of the speech why inflation. why we've had inflation in recent years. everything from why he thought it was transitory and made a joke about a lot of folks were on that transitory both, it wasn't just him, a lot in the audience as well. he talked about supply shocks and the war in ukraine. he talked about a very tight labor market. he talked about demand increasing, and he talked about why the policy worked. interestingly, guys, he did not

talk about greed inflation, corporations unnecessarily raising their profit margins. so, you know, in a pretty long list of the why on inflation, that's interesting. >> can he do that? >> no, he wouldn't do that. >> you're just using that -- >> if that was part of the economic story here as being framed, i think by certain politicians, i think -- i don't know, corporations passing on high inflation -- >> he took a pass on defending the fed from moving in an election year. very little mention of politics in general. did, steve liesman, say the cooling in the labor market is unmistakable, and that they do not seek or welcome more of it. your thoughts? >> yeah. that was a repeat from the july press conference. i think this is a landmark speech. you go along and you put stakes in the ground over time and a lot of times he puts them here in jackson hole. there was a speech the eight-page mic drop speech the short, sharp, shocked speech where he said we will fight

inflation and there may be pain. came back and said this is going to take a while. there could be pain. the idea of it's time to adjust policy, what we're talking about here in terms of the change, notice he said the timing and -- the exact language, the timing and pace of rate cuts, so what we're talking about here is a process and i think he affirmed that process. it was a question i asked him in july would this be a process, and he said yes, it would. now he's sort of come down and the importance also, i think, of having the discussion ability inflation and the history part which is less interesting from a news standpoint but more interesting from policy going forward is one we're going to say what did we do right and wrong here. he said we didn't get the transitory part right, but we did keep inflation expectations under control and addressed it correctly with policy and now we're in a place where we're going to be adjusting that policy. the missing thing was, how

restrictive does the fed believe it is right now and how far can it go and need to go in terms of getting policy to the right place. that's going to be the debate inside about exactly where we're at in terms of where that neutral rate is. that was not part of this discussion. it's probably part of the next discussion. >> steve, people are looking back to the speech two years ago and sara mention the this, where the move, the working until the job is done would bring, quote, some pain to households and businesses what do you think his characterization of the pain we did sustain would be? >> i'm glad you brought that up, carl, because i had that quote. i don't know if you can bring the full screen up he said with an appropriate dialing back of policy restraint, there's good reason that the economy will get back to 2% while maintaining a strong labor market. so effectively he's backing off that pain prediction and he's kind of -- that's the kind of saying hey, i think we can do this soft landing thing. we didn't really have to have as

much of the pain, other than, of course, the inflation pain that he talks about, but did not have to have the joblessness and now he's saying we do not welcome further weakening in the job market and make that adjustment and get out of it. how does the fed do the soft landing? it's tried a couple times and maybe made it once and not all that often has it succeeded. this would be historic if they pull it off and he's telling you i think we can do that if we adjust policy now. >> one other reason for the market move and neal is pointing this out from renaissance macro, he did not use the word gradual unlike some of the other speakers we've heard on the fed. in other words, he's not taking off the possibility or the option of doing a larger move if they feel like they have to do that. >> i think that's fair. he did sort of hedge that idea of the timing and pace. but i think, sara, the other reason for the market optimism is, his idea of adjusting policy

was unhedged here in a sense that it creates scope for let's assume next month and on the downside, we get a 0.3 on inflation, i don't think that changes the idea that the fed can cut rates, become less restrictive, and yet remain restrictive. i think what we're talking about is the next series of data points are going to adjust, you know, how far the fed goes, how fast the fed goes, but when he says this line it's very direct, the direction of travel is clear. that's an unhejds statement and i wonder, sara, if the market was, perhaps, thinking the speech itself would be a bit more hedged. >> certainly a possibility. i mean, pretty broad rally we're seeing right now across the board. the semiconductor equipment on top, but also some of the sectors that benefit from lower rates are rallying hard. the home builders. the home improvement stores like

home depot, consumer discretionary having a nice day. technology is on top again, though, carl because nvidia is up 4.2%. >> we're going to talk more about that in the coming days. i wonder if you think his speech primes the market with the ability to absorb a downside surprise on august jobs? >> when you say downside your mean a weaker than expected surprise or a -- because it depends on which side of the trade you're on, obviously, right. >> yes. >> when i see these notes about a bad day for oil, i think that's a good day for oil when there's a bad day for oil. but the -- i think it does. i think that a downside surprise is something that would make you lean more into the 50. about even would say okay we're going to do a 25 here. upside surprise, i think is less consequential in the sense that, again, i believe he's put a kind of parameters around the idea that we're cutting rates if data is going to come in within a

tolerable range here. obviously, a huge upside surprise on the inflation data would give us pause here about what the fed might do next, but what i think we're talking about when he says the direction of travel is clear, the time has come to adjust policy, all that means to me, he feels pretty confident within a certain tolerance of the data that's what we're going to do here. >> you know what i was wondering, steve, he lived up in terms of his history making policy changing jackson hole speeches, which i was talking about, tends to occur, and i was wondering if it's the time of year, a coincidence it's always in the transitional period, or if they really do look at this as one of those kind of moments? >> my reporting, sara, suggests to me it's the latter. they work very hard on this speech. i believe they start working on this speech months ahead of time. and they do see this as an important part of the overall

communication to the markets and the country about where monetary policy is. and i think they know that the market is expecting something and so they deliver it. i think there are times they feel like they would like to get off of that train of expectations and not having to fulfill it, but they work hard and it's something that the chair cares deeply about delivering something that is a meaningful bit of communication. sometimes as you know, sara, the events of the day dictate what is said, how it's said and importance of what's said. other than a time to reflect and by the way he's standing in front of all his colleagues from around the world and it's an important time just in the personal aspect of this to say something meaningful and, of course, you have a lot of central bankers here who are hungry for information about what the u.s. does. as you know, the u.s. central bank policy influences international policy around the

world, so they come here and i've been here at times when the international guys are, you know, they're grousing about what it is that the fed is going to do. will they tell us? some of the emerging markets central bankers were here and they want to know. powell has a variety of different audiences and you're right, he uses this as an important policy tool and they care deeply about delivering something that is of interest and using the opportunity. well, we couldn't do day like this without you, steve. thank s for a great day of coverage. >> thanks, carl. >> steve liesman in jackson hole. let's continue that conversation with former pimco chief economist paul mccauley, adjunct professor at georgetown and mike santoli. great to see you both. mike, got a knee-jerk in equities. 10-year still hold 3.8. your thoughts. >> the s&p went back to yesterday's high, similar to wednesday's high. the market thought it had a fix on what was likely to be said by powell. i think powell probably was a

net pleasant surprise, mostly in his expression of unequivocal confidence about the inflation picture being more to their liking. he didn't really accentuate, you know, that rates are still above the target as bostic did. but also, i think in general, of this sort of soft form of data dependency where it's not about if, but how about fast and far rates will be cut. so, you know, we thought we knew what we were going to get. yesterday was a little bit of a rethink of let's not get too complacent about what could be said here and we have popped higher here in the s&p. we're a little bit below the all-time high, the soft landing being on is basically the entire bull premise and seems like at least right now, it was ratified on the contingent base sglis just to reiterate, here is what the fed chair said minutes ago, specifically on inflation that mike referenced and the fact that he's more confident coming down. listen. >> our restrictive monetary

policy helped restore balance between aggregate supply and demand and ensure that inflation expectations remained well anchored. inflation is much closer to our objective with prices having risen 2.5% over the past 12 months. after a pause earlier this year, progress toward our 2% objective has resumed. my confidence has grown that inflation is on a sustainable path back to 2%. >> that sounded pretty confident. now the bigger risk is employment, employment. what's your take? frrjts i thought it was an absolutely marvelous speech. i would call it a valle dixer to yan. we don't see those very often. you see them at turning points. essentially this this was a valedictorian of essentially chair powell turning the page, saying the mission, which has been focused on inflation for

the last two years, has been successful and that we are there and that i you going forward the mission is going to be maximizing full employment. he doesn't want to see any further weakness in the labor market. and that we're beginning an easing journey back towards neutral. i thought it was an absolutely marvelous graduation speech in h from a successful anti-inflation campaign now to a new campaign to maximize employment and represent further deterioration. it was a marvelous. >> david asked if there was anything surprising. we expected the pivot to come. i guess there was a risk he wouldn't necessarily be as steve said so unhedged when it came to

confidence on inflation and the timing to adjust. it's been priced in. the market has already moved so much when it comes to pricing in rate cuts for this year and next. you do wonder how much longer a speech like this and policy pivot can carry us. >> exactly. it would be really hard for powell to have kind of outdoved the market based on how the market had gotten priced in there. the bond market, yields, breaking down. we saw what's going on with the dollar. i think that was mostly happening a couple days ago. people got really over their skis. now we have it priced and it's about monitoring it. the soft landing is not everyone's comfortable with everything. it's, sometimes it looks like we're sliding into a downturn and sometimes looks like things are great and we're reaccelerating and nets out to being kind of slow and steady. you guys were talking about the two years ago when he said we might have pain. unemployment was at 3.6% then. up to 4.3. he characterized that as

unemployment didn't have to go above the norm or what we used to think of as full unemployment to get inflation down. nominal gdp point to point from that speech two years ago up 5.5%. obviously, you know, it was definitely an upside surprise to how the economy was able to handle it and now it's about, you know, monitoring along the way. that's all we're going to be doing week to week. . >> is there a powell put again, paul? he's -- he's in adjustment mode and has the market in the economy's back. doesn't want to see weakness. >> i think there's a put from the standpoint that in the pace of the easing to come. my base case scenario is that we are on a journey of 25 basis point cuts for the next eight meetings. comhundred cumulative. that's my base case. if we see weaker growth and particularly weaker jobs, then i

think we could have a bit of front loading and start the process with 50 basis point cuts. i don't think that's the base case yet, but clearly he's opened the door for front loading of the easing process just like you had front loading of the tightening process. if we see material further deterioration in the labor market. i think that was -- if there was a positive surprise in his speech today, which was marvelous, it was the notion he drew a line in that we don't want to see further deceleration in the labor market. we're there so i think that would be the trigger if we were moved to 50 basis point increments versus 25. i think essentially the takeaway from this is over the next year, you're going to get a couple hundred basis points worth of easing which is simply validating in many respects what

the market has already discounted. so i'm actually giving an amen to mike. >> interesting. yeah, mike, you know, your point about a soft landing having a variety of views brings to mind a couple desks, morgan stanley, piper, who argue or have been arguing lately that risk assets are maybe too benign relative to a recessionary scenario and even yesterday, suggested maybe the terminal rate comes six months earlier than you thought. >> put that all together with what paul said is, you know, a more dovish fed than we think is the case right now is not really the bull case, right. good news is good news. bad news is bad news. they are going to be reacting to an unwanted deterioration of the economy if they ramp up the pace and depth rf rate cuts. i do think it's an open question. i mean if you look at the market action itself you're seeing a little bit of a slightly more defensive tone coming into today. today unprofitable tech is ripping because people go back to the playbook and buying the

small caps because that's what, you know, that's what the supposed rules tell you to do. but that's not necessarily the case that's going to carry on from here. i do think there's going to be -- this is underlying reserve of doubt as to whether we're in the clear. you're almost never purely in the clear. you kind of know it once you make progress down this path. so far so good. these are the things we can monitor in real-time week to week. you don't have to have a lot of speculation about what the fed's reaction function is going to be. are they trying to engineer more weakness and all of that. let's get away from the financial conditions as a big input to what the fed is doing. they're looking at employment right now. >> look at the dollar intraday and you can really see the move, and it continues to make new lows for the day. it turned around completely. weaker, weakening, about to 100. paul, you know you were discussing whether we're going to get a 50 or 25. the odds are rising a little bit for a 50 in september.

it just makes the september 6th august jobs report more important because he didn't take it off the table that they could do a double. i mentioned with steve, didn't say the word gradual. didn't telegraph anything about the size of the move. what would a weak jobs report that would yield a 50 basis points front loaded cut look like? how weak would it have to be? >> i think you're right, sara. that report is hugely porngts on the opening move. and i thought it was really important when he said we really don't want to see further weakness from here. we got a weak report last month and we think there's some noise in that which would imply some pullbackimpo. . he is focused laser beam on stabilizing from the market on where it is. he wants the labor marketing to

stabilize here. he doesn't want to have further weakness. he wants a zero second derivative if he doesn't get it, then i think the odds of 50 as the first move go up. i'm not going to pound the table about that, but we'll all be watching at 8:30 on the first friday of september. >> yes, we will. thank you, paul. mike santoli, stay close. as always. thank you very much. as we see a 1% move higher for the s&p. near the highs of the session. the dow up also a few hundred points. the dollar is weakening significantly off the back of that speech. for more reaction to jay powell let's bring in live from jackson hole former federal reserve vice chair and past tiaa ceo roger ferguson a cnbc contributor. it's great to have you here. you were in the room. what's your reaction to what we heard from the fed chair? the time has come to adjust snols. >> my reaction, i think similar what i've heard from others he

was definitive not hejds. a bit more definitive than i imagined frankly. at the same token he was not in any sense declaring to be completely -- he -- it wasn't a victory lap. i like the speech, and it reinforced messages that september is very much the time to look for the next move. >> and what is that next move going to look like? 25, 50? >> i think at this stage the odds are much more towards 25. the market might be leaning towards 50. but this situation is not getting out of hand. he observed while unemployment has gone up, it is still at normal levels. so while he doesn't want to see it worsen, i don't think he feels the necessary -- necessity to move dramatically. so i would suggest and expect a series of 25s as the most likely outcome at this stage. >> he said that his confidence has grown that inflation is on a

sustainable path to 2%. talked about inflation expectations. i know it's the prevailing view that inflation is back on a sustainable path to 2%, but is there a risk in that view. >> we still have pockets of the economy with higher than target inflation sticking around longer than expected. >> so i do think there are risks from that view. let's be clear. core inflation and what's called super core are both well above anything that feels like 2%. and so another reason for them to be cautious is they don't want to lose control of the narrative. he identified inflation expectations as being an important part of this. if it looks as though, you know, they are taking their eye off the inflation ball altogether then there are risks there. ing so that's to me yet another reason to move cautiously even though he didn't use those words but i would suggest that's the more likely outcome at this stage for a variety of reasons. >> where would you be looking,

roger, for a marginally rate to start to impact the economy first? would you see it show up in discretionary consumer? would you expect to see the housing pent up demand get unlocked? where should we keep our eyes focused? >> i think it's going to be in housing. the usual discussion around inflation expectations. obviously, because the labor market is still relatively strong, consumers are still doing reasonably well when it comes to wages, so i don't expect that to be the place where the turn is foreseen. i think it's going to be much more in the so-called inflation sensitive sectors. housing has been a problem for quite a while. to be clear, if you give me another minute or two, the housing story is much more than simply an interest rate story. it is also a story about the ability to start new homes which has been very slow for a period of time. so i think all of this is going to take some time to play through. and i don't think, actually, as they reduce rates that we're going to see the economy zoom or take off.

they're trying to keep it stable roughly where it is now, drawing a little bit close to potential unemployment not getting worse, nice balance between job market, supply and demand, so i think they like where they are and they're not trying to engineer a reversal. they're trying to engineer, you know, the stability of a soft landing. >> right. and your point on housing is well taken. we got that nice uptick in existing this week. redfin on a four-week average, percentage of homes with a price cut is approaching 7%. i think that's the highest on record. they're on the market a little bit longer as it takes a little more to get your house sold and another 6.5, 30-year fixed makes a difference. >> i think that's right. look, the story right now is, they're trying to achieve balance and keep things roughly where they are. they would like to see an improvement in the housing sector. mostly don't want to see a dramatic deterioration in labor markets. to the other point raised by sara, you know, continued

confidence that inflation is coming down. it's not at 2% yet. we'll see what the next forecast is. remember the next meeting is also one where they have the so-called dot plots, the sep, that would be very telling to get a sense of the overall confidence of when they expect to hit that 2%. i think it may be a little delayed perhaps beyond the level of confidence that's currently being talked about. >> so as it relates now to the path, sort of probably get this cut, but then we don't know what happens next, is it going to be at every meeting or 25 basis points is it going to be 200 into next summer as the market expects, the fed chair said that the downside risk to employment have increased and i just wonder what your view is on what the downside risk to employment looked like at this point? we haven't seen a ton of layoffs. we have seen softening, definitely, in the labor market, but it just is not a typical cycle. >> well, first, to your point,

sara it is not a typical cycle. his speech emphasized that. you know, i think that the downside risk to the labor market should not be overstated. you probably know that i do a survey of ceos, the last survey i did, we released a little while ago, suggests that ceos are still expecting to hire. they are seeing that the markets, as chair powell said, are roughly in balance. this notion of downside risk leading the fed to move much more quickly should not be overstated. it feels to me as though what they're trying to do is keep a pretty balanced economy having now roughly a i achieved one, keep things on a path towards a 2% inflation rate and so another reason to expect a series of gradual moves is, as we see things now f, you know, it's not falling out of bed. you know, one of the things that he talked about in his speech was some concerns of recession expressed by many people.

that also seems to be not the base case. since you don't have base case of recession on the horizon, since you have unemployment that is not historically out of the range, since we see a labor market that's in greater balance, all of that says to me, that gradual progression through a series of meetings makes much more sense than a dramatic move of 50 basis points. incoming data could change all of that, so that's the view as i see things today here in jackson hole. >> let me ask about incoming data. you said not falling out of bed, not getting out of hand. what would it look like if it were, if either of those were the other side? getting out of hand and falling out of bed? what's the data look like? >> well, it's the kinds of things we talked about. unemployment continuing to go up by let's say 0.2 percentage point every reading. if we started to see that point that sara made earlier, layoffs

starting to pick up. if the survey data from let's say my ceo survey started to suggest that ceos are less confident and that they are seeing an uptick in recessionary risks that would be important. we have seen consumer confidence be roughly stable, maybe a little bit of a downtick, if that started to move south that could be a signal. there are lots of possible signals, but i would start with survey kind of data and then some of the high frequency data. let me be clear about all of this, the fed as i said data dependent but not data point dependent. one bad reading does not necessarily signal i a change in strategy. markets will be data point dependent trying to pick up, you know, any nuance. i would encourage market participants to look across the data as the fed i think is doing to see if the basic narrative has changed. right now the basic narrative is one of balance returning and let's therefore move from

restrictive to neutral. i think a pace that could be more gradual 25 basis points as opposed to 50 here and there. >> anything -- any other interesting tidbits you picked up from inside the room? i know there are a number of papers that are presented? >> look, i think this is -- i've been to, i don't know now, 25 of these jackson hole conferences. this is one that's very academic as we're trying to understand, you know, an experience that is recently evolved. so i think this one feels much more like a learning experience for all of us. as we hear from academics. one of the things that chair powell said is this recent event, not yet over, but the pandemic, the pick-up in inflation, all of that is going to be the fodder for, you know, future kansas city meetings for future dissertations, so this feels to me like the first one we're going to have a chance to start to look back and see what we've learned, but it is, obviously, preliminary in the

early days. >> weekend reading for me. revisiting the phillips and beverage curves. can't wait for that one. thank you very much for joining us from jackson hole. >> my pleasure. >> we'll take a break here. markets enjoying the news of the morning. dow up 325. 1% gains for energy, consumer discretionary, i.t. and materials. and some of the top s&p nvidia, tesla, norwegian, southwest, caesars. we're back in a minute. ( ♪♪ ) morgan stanley is partnering with the women's tennis association to remove boundaries... ( ♪♪ ) because this game is for everyone.

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it's always the bank stocks in focus. whenever there's a rate commentary type of meeting. jpmorgan, bank of america, wells fargo, morgan stanley, goldman sachs up from 0.75% to 2%. the financials generally doing very well in this kind of

environment on the heels of those comments from jay powell. up next the rate-sensitive name, utilities and consumer staples. n nextera energy, xcel energy, kraft hines, archer-daniels on the by the way of those comments. one to watch when it comes to mega cap technology, they are more rate sensitive, lower rates, but mixed. apple is up 0.50%. microsoft is down 0.50%. that's mega cap technology. we'll end with the housing side of things. mortgage rates and everything else playing into the home builder equation as well. dr horton, lennar, nvr, home depot and lowe's on the home improvement side, posting 1.5% to 2% gains. keep an eye on those. back over to you. >> i wanted to add my two cents.

we often see a reaction among smaller cap stocks. the iwm is up sharply, 2.7%, the russell 2000 etf, well above the s&p and nasdaq's gains. >> absolutely. a toelt total outperformance. among some of those it is the small and regional caps -- small and regional size banks among that russell 2000. doing very well. to your point, a handy outperformance for the russell 2000 etf. >> thanks. by the way, one of those stocks doing well is yompas up 5%. ceo and co-founder joins us here at post 9. music to your ears, right, hear jay powell spell it out about the time to cut rates. >> today is a good day for compass, for real estate. for him to say the time has come for policy to change is music to our ears. it's been three years of a

rising rate environment and we're looking forward to a declining one. >> we've already seen mortgage rates and treasury yields fall in anticipation of this move. how much activity has that brought on? >> we see more inventory, 20% more inventory than this time last year. we saw existing home sales yesterday up for the first time after four consecutive months of decline. but we're not yet seeing buyers rush back. what we're hearing from our agents, and we have a unique perspective, nearly 30,000 agents were focused on sole volume, but we're hearing buyers are waiting for the september 18th cut. they see in the headlines, rates are going down on september 18th. i think there's a misunderstanding much how much of that rate cut is already baked into today's mortgage rates. it's actually a good time to buy in advance of september 18th because you'll have effectively a similar mortgage rate with less competition. >> right. so, they think the fed is actually going to lower their mortgage rate in september,

which is -- it's the market rates. >> can i ask you about the rental market for a second in new york city. new york city, which was counted out three or four years ago. i got this recently from a large owner of apartment rentalals, giving me an update on what they're seeing. throughout their portfolio, huge surge of tenants moving into new york. currently 63.5 of new tenants are tenants moving to the city for the first time. highest they've seen on record since they started keeping track in 2010. new inventory, percentage of total inventory, zero. zero percent. a crisis, they're talking about, in renting space in manhattan. property fundamentals booming. then they go on to say as well, tenants have high earning potential and are paying high rents. what's happening here in new york? >> i think we're seeing a return to theme that lasted decades before covid, which is people moving from the suburbs into the cities. and new york is one of the biggest beneficiaries of that. >> so it's real? >> it's very real. >> and are people going to start buying apartments as a result of

being unable to rent them? >> well, rental inflation we're finally seeing from a country perspective, we're seeing it flatten out. the prices have not increased over the last number of months, which is a good sign for inflation. >> you mentioned inventory. and it seems like the real growth in inventory is in the supply of new homes, right? single family new? >> it's new and existing. but we just saw today that new home sales saw nearly the highest increase in new home sales since early 2022. >> so what happens to pricing even in demand holds up, given that surge in inventory in. >> i think prices will continue to remain high. we have four months supply right now. six months means a balanced market between buyers and sellers so it's still a sellers market. >> are you worried about florida, texas, which we talked about a couple of times? >> what's happening in florida is very unique. florida has a new rule for old inventory, which will require the owners of the condo to put

in a lot of money to fix it up. so, there's been effectively a rush of inventory of old inventory. i think you even see today in the new home sales, new home sales have bounced back faster than existing home sales. people have money, they want to buy new things. the markets with high income markets have performed better than low income markets. it's florida with this old inventory -- it's a unique problem. >> how much pent-up demand is there? we hear about the lock-in effect, people not moving because they have the low mortgage rates but they want to. a, how much will stimulate that? >> give me something with a 5, 5.999, and i think we'll see seasonally adjusted home rate back at 5 million or above. the home sales have between 4 million to 2.7 million over the last 30 years. last year was 4 million, the lowest since 1995, 28 years ago.

we're in an historically depressed market. but anything below 6, i think the market bounces back. >> okay. robert rufkin, thank you for joining us, compas co-founder and ceo. speaking of powell and the markets, we are backed well off the highs of the session after chair powell's speech. the s&p up 0.7%. you can see the nasdaq as well, which had been up as much as 1.2%. i would note, smaller stocks are benefiting the most with the ishares russell 2000 etf up over 2%. a lot more market coverage straight ahead. hi, my name is damian clark. and if you have both medicare and medicaid, i have some really encouraging news that you'll definitely want to hear. depending on

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work with principal so we can help you with a plan that's right for him. let our expertise round out yours. good friday morning again. welcome to "money movers." i'm sara eisen with carl quintanilla live from post 9 of the new york stock exchange. coming up, we go live to jackson hole following jay powell's market-moving speech. randy kroszner joins us with his reaction. we get a gut check on housing with taylor morrison. guggenheim says roku can surge more tha