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tv   Squawk on the Street  CNBC  September 23, 2024 9:00am-11:00am EDT

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ecosystem, or should i try those other phones? >> the samsung is pretty cool. it is pretty cool. having said that, i'm an apple. i got the whole ecosome. i find it easier to use, but samsung is pretty cool. the pixel is cool. it's got a better camera, by the way, than the iphone. >> never tried it. john paulson tomorrow. make sure you join us. "squawk on the street" coming up right now. ♪ good monday morning. welcome to "squawk on the street," i'm carl quintanilla with david faber, sara eisen. cramer has the morning off. premarket is mixed coming off friday's record dow close and back-to-back positive weeks for the nasdaq. lots of fed speak and macro the next few days, including pce, ten-year, 3.76%. our road map begins with a big week ahead for investors. 16 fed speakers and a barrage of data, including gdp on deck. plus, intel shares are on
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the move a bit after qualcomm did approach the company about a potential takeover. and ftc chair lina khan warning that a kr kroger-albertson's merger could increase grocery costs. let's begin with the markets after a week which saw record highs for stocks, actually turning into a not-bad september. we talked a lot about seasonal weakness coming into the month, but right now, it is the best september since 2019. >> i guess not all septembers include a double jumbo-sized rate cut, which off to the races, especially if you compare that with the soft landing, and that is the outlook and what has propelled stocks. so, here's a good stat that i read over the weekend from bank of america. on the day after the fed cut, when equity markets were ripping, basically, equity trading flows saw the largest long only inflows into u.s. equities in one and a half years and it was led by tech and consumer discretionary.
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one of the debates that's forming is big tech or the rest of the market value, because valuations still look appealing, and if we do get this sort of best-of scenario for the market, where you get rate cuts on top of an economy that doesn't go into recession, is it finally time for the rest of the market, the value stocks, to catch up? or is it still just about nvidia? that's the age-old question, but the set-up is different now with these rate cuts. >> you know, it's a new environment. we'll -- every day going to be -- we'll have to wait and see. i don't know what to tell you, sara. every day is about nvidia. we know that much, no matter what. >> it is, but still macro. we're still guessing on the trajectory for the fed. friday pce is going to be the highlight of the week, as far as data. we're looking for another benign number but now it's all about labor market because the fed has emphasized they're more worried
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about the labor market than they are about inflation, so if we see more softness in the labor market, it could be a bigger market mover. >> people starting to take three-month averages of the labor market, job growth. now looking at 116. in q2, it was 147. in q1, it was 267. morgan stanley over the weekend said, if we get 100 or near 100,000, next week, on jobs friday, x-strikes, then you would be, in their words, watching powell's forcefulness of not falling behind the curve come to the fore. >> you mean more 50s? >> that's what they're implying, yeah. >> the base case is two more 25s this year and powell made it clear that just because we went 50, doesn't mean we're going to be 50 in every other meeting. neal kashkari was on "squawk box" this morning. he was in favor of 50 and more 50s. here's what he says about the risks going forward.
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>> certainly, the risks have shifted. i look forward, and i think, which risk am i more word about right now, a surprising uptick in inflation or a surprising uptick in unemployment? it's the latter, at least for me. right now, we have a strong, healthy labor market, but i want to keep it strong and healthy and a lot of the recent inflation data is coming in, looking very positive that we're on our way back to 2%. i don't think you're going to find anybody at the federal reserve who declares mission accomplished but we are paying attention to what risks are most likely to materialize in the near future. >> i did note the dissent, michelle bowman, the fed governor, publishing her statement on friday, saying she was worried that to the public, a 50 would be a sign that we are declaring victory on inflation, when we are not back at target on 2%, which is why pce is going to be so important because that is the fed's metric. that's what they target for 2%. economists are expecting a number that could be as low as
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2.3%, so getting closer. >> goldman, i think, on headline, they're looking for 12 basis points, which would put you at 2.25%. core would put you about 2.6 or 2.7%. we did hear from waller, joined us, liesman talked on money movers on friday, who's now throwing out four-month annualized and rolling in ppi, which he argues would be running around 1.8 right now. >> which is dovish or at least as a justification for their 50 basis points, which i feel like they -- they have some explaining to do, right, on the recalibration of 50 and why they didn't go 25. but what matters now is obviously what they're going to do next. i would just point to the ten-year treasury yield because after they went -- so, if you look at yields, but right before the fed decision, what was the ten-year, 3.64%? we're higher, actually, has the outlook is maybe a little more hawkish than what people expected to get from the fed,
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even if the action was more dovish at 50, by saying we're not guaranteeing more 50 by getting some stronger economic data, remember jobless claims are still at the weak enshrinemenest since may. we got better industrial production. >> retail sales. >> retail sales were a little better. gdp, tracking for third quarter is what, 3%? not bad. >> atlanta is 2.9%. >> that's a healthier economy. so, the market's in a bit of an interesting position right now in terms of maybe priced for perfection as far as cooling inflation and weaker data that would allow bigger fed cuts and if we get stronger data, maybe they don't need to cut quite as much as the market's hoping for, which is good for stocks and earning power, but again, ten-year yield, a little bit higher. pay attention. i think that matters. >> that's one reason we got, i think, 18 basis points today as we see the curve continue. >> that's something that has
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resumed, the steepening yield curve and people saying it's long overdue, and we'll continue to watch that as well. overall, it's been good for the market. i thought mike wilson from morgan stanley with his comment about the fed and how it relates to stocks was notable. he wrote over the weekend, "the fed delivered on what we thought was the best short-term case for stocks. tactically, we continue to be neutral on defensives versus sic cyclicals as markets await more clarity on the labor data. we continue to recommend a large cap, quality bias." maybe some m&a. >> you want to do that now? you ready to talk about that? >> i feel like you're very busy. >> i had nothing to offer you two, but that was a great conversation. >> now you're on the -- you're on the podium. we could get a deal, right? >> thank you, sara. thank you for that. i appreciate it. i always want you to just introduce me. >> i'm building you up. >> entering the podium. >> what have you learned? >> let's talk about intel and
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qualcomm. of course, on friday, late friday, "the journal" reporting an approach from qualcomm to intel, got a lot of people excited, as you might imagine, of course, if a deal were to actually occur, it would be a monumental one to say the least, and i can confirm, as so many other news organizations have, i think, since that first report, that an approach was made. what does that mean? any number of viewers who have watched for years know that doesn't much mean anything depending on the level of difficulty of actually getting to the finish line and, of course, level of difficulty here would be quite significant. that said, it doesn't mean that it's not newsworthy, in part, because, of course, qualcomm at least has interest in exploring that. it's very much unclear whether there's been much going on since that approach was made. beyond early is the way one person who is, at least, familiar with the situation put it to me, and as is often the case in situations like this,
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the chance that you would see a completed deal, quite low. quite low. why? well, any number of different reasons. first of all, let's keep an eye on shares of qualcomm, because this morning, you did have many of the analysts weighing in with their views, which may be reflected to a certainly extent by the investor base at qualcomm itself, saying, are you really sure you want to do this? we'll get to regulatory in a minute, but let me share a couple of research notes we've gotten this morning. it's not as though there are those who say, hey, we see some of the merits of a potential transaction. that said, stacey raskin, for example, typically, the axe when it comes to chip sector, "overall hard for us to see a deal working out financially with acceptable risk. if the fabs are included." best i can tell right now that is -- well, hard to know. i'm not getting that level of detail, frankly. i did ask the questions, not really getting the answers to whether that's the case, but he says, "we prefer qualcomm not pursue this.
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seems very risky." over at b of a, overall, skeptical of the merits of many proposed transaction, "believe any announcement could great confusion, potential for head count, road map disruptions and be a relative positive for rivals of intel such as amd, nvidia, broadcasom, arm," go on down the list. there are scale benefits in terms of, you know, increasing their scale and scope of qualcomm's business. there are just so many risks. where else where the risks? they're regulatory. it's not really here in the u.s. chinese approval would be needed. you really going to get that? is that really a possibility? maybe. you can never tell, but it could take an awfully long time if, in fact, it were to ever come in a positive fashion. where is the u.s. in this, sara, becomes a question mark as well, because if there is a view in the u.s. part where we've been trying, of course, to bulk up
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our domestic chip-making ability, create in a sense a national champion to rival that of taiwan's tsmc, if the u.s. were to feel that intel was faltering in there, they might be encouraging of such a transaction. and then, there are other questions, which is broadcom. you know, i can go back a couple of years. qualcomm, at least, had some interest in intel. broadcom has. you know, if, in fact, they were to go into sale mode, then it would be interesting to see who else emerged, but again, right now, you've got to put the chances of any potential transaction as very low. that always can change. oftentimes, deals like this, we say, no, there's no way, because it is such a small percentage, but you know, you can get momentum. it's unclear to me whether there's any momentum here as of yet. >> what about this potential investment from apollo? you see that report too? >> i did. that was a bloomberg story. it's interesting. apollo, of course, has already partnered with intel in one of their fabs, the same way that
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intel has partnered with brookfield, which goes, of course, to the constrained position they find themselves in at intel in terms of capital, needing to partner. this case would be different. why not, right? you're apollo. you got -- you're seeing a potential opportunity. you can structure something to meet intel's needs, perhaps, in terms of debt or equity and what might make the most sense. i mean, having spoken to marc rowan lengthily last week, that's the business they're in. whether that comes to any real fruition also is unclear, but we do know intel needs, you know, they have significant needs in terms of capital, given the changing face of the business that they're in, the fact that so much has gone towards generative a.i., towards nvidia, while gelsinger is pursuing this long-term plan to turn around this company. >> just a reminder, i think, of what's happened, like, third year of shrinking sales. they have -- they had this foundry business that the u.s.
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was all about. they got -- theylobbied for the chips deal, they got chips money, and then i guess, you know -- >> they've gotten it, although a lot of it hasn't come in yet, but they've got the commitments -- >> they don't have the customers? they didn't get -- >> these fabs take many, many years, and so you've got to outlay so much capital, and meanwhile, your core business is in a bad place, and so, can you actually meet the, you know, $52 billion in debt because of -- and you're still constrained in terms of how much capital you can put out there because fabs can cost tens of billions of dollars, and that -- how you get through that period, that five to seven-year period until you get to the other side somehow, where you're producing chips that are -- that are at the leading edge on the market, and that's still a question. that's kind of the -- >> that's why the stock has lost 56% of its value this year. >> when we return, we'll take a look at what lina khan told "60
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minutes" last night about greed-flation and in particular the kroger-albertson's deal. there's some news on airlines and boeing. downgrades of gm a mroft a moment. ickleball? it's basically tennis for babies, but for adults. it should be called wiffle tennis. pickle! yeah, aw! whoo! ♪♪ these guys are intense. we got nothing to worry about. with e*trade from morgan stanley, we're ready for whatever gets served up. dude, you gotta work on your trash talk. i'd rather work on saving for retirement. or college, since you like to get schooled. that's a pretty good burn, right? got him. good game. thanks for coming to our clinic, first one's free.
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professional dancers! -ok! stay connected during your move with the best in home wifi. easily transfer your services in the xfinity app. bring on the good stuff. welcome back. indian prime minister modi meeting with top tech executives, leading that global a.i. revolution. our steve kovach was there, spoke to some of the ceos, ceos of ibm and nvidia. sounds like it was a who's who of corporate america. >> quite a few people there, sara, and that was the meeting with narendra modi, and he met with several tech ceos on sunday in new york city ahead of the u.n. general assembly. among the attendees, jensen huang, alphabet ceo su sundar pichai, and the topic, of course, artificial intelligence, and by the way, india's important because tech companies from apple to google, they have
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been seeing india recently as a prime investment area, thanks to a growing middle class and large workforce. i was able to catch up with two of those attend designated, huang and arvind krishna. he praised modi for understanding the importance of artificial intelligence. >> prime minister modi is inspiring. every time i've seen him, he is such an incredible student, loves technology, loves artificial intelligence. he was one of the first people i ever explained artificial intelligence too. this is an extraordinary time for him, and time for india, because it's a reset of the whole computing stack. >> i also asked him if he discussed with modi clearing up some of that bureaucratic red tape american companies often complain a lot when trying to do business in india. he said it's not a problem for nvidia. >> i haven't really experienced that. nvidia has been in india for almost 25 years. our design centers are in
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bangalore, really fantastic engineering capability there. some almost 10,000 nvidia engineers are in india. they do every single aspect of our engineering, and so they have been a part of our company since the very beginning. >> i also caught up with ibm's krish krishna out of that meeting, and he praised the meeting, told me about the delicate dance of doing business in india, even though that country is tacitly supportive of russia. >> countries are going to do what benefits each country, so you've got to put those things a little bit to the side and says, is there any national security threat? let's look at the major thing. if you look at the geopolitical lens, cooperation between india and the u.s. is going to be strengthening both nations to the point where then you can go take care of all the other secondary issues. >> just a few other little details from our seema mody. modi giving alphabet's
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sundar pichai praise, pointing to investments in indian companies. and because some pharma ceos were there, there were discussions on biotech and ip protections for u.s. companies operating in india, guys. >> we were just talking about semiconductors, and how america wants to become a center for semiconductor manufacturing. is that some of the -- that's what's needed, right? the picks and shovels of a.i. what's happening on that front in india? >> that's what jensen huang talked to me a little bit about, and i would go back to his comments there in that first sound byte i played for you guys, just really talking about how they understand or modi understands the kind of infrastructure that needs to be built out there. also point out that the hyperscalers that we talk about all the time, amazon, google, microsoft, they've announced numerous infrastructure for a.i. investments in india and billions of dollars being spent there on that front as well, sara. >> steve, appreciate it.
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while we have you, this downgrade of microsoft is interesting out of d.a. davidson. "we believe competition has largely caught up with microsoft on the a.i. front," they say, which reduces the justification for the current premium. >> this is something -- a theme that we have been hearing in recent months, carl, this commoditization of all these large language models. look what meta is doing with llama, that open-sourced version of these large language models that have been closed down by google and openai and microsoft and the like and this idea that maybe you don't need to necessarily go out there and create your own model or buy someone else's model. maybe this has become commoditized to the point that you don't need to go to one of those hyperscalers. at the same time, i noticed that d.a. davidson note didn't talk about copilot that much. that is another really key piece outside of the azure cloud business for microsoft, but they're really not -- there's not much indication of what demand looks like for that
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copilot product. that's another thing they could have an advantage on, but so far, that hasn't really broken through, carl. >> between that copilot event the other day, dreamforce getting spicey here regarding competition among the hyperscalers. steve, thanks. steve va'skoch plate is very full today. more "squawk on the street" continues in just a moment. at least, not the way it could work. your people are buried in busy work. and you might be thinking... can ai make it all work? it can. on the servicenow platform, ai transforms your entire business. because when your people work better, everything works better. so, let's get to work. idris elba works here? mm-hmm. ya, he's super nice. tony, its gone. no. how am i going to do this? welcome to the mdy mid-cap cup, presented by state street global advisors. today's challenge is to play 9 holes without the middle of your bag.
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♪ take a look at some premarket gainers, regarding the nasdaq 100. we covered intel. we'll get to tesla and some of these headlines coming out of commerce this morning about autonomous software in driving. micron is going to give us earnings later in the week. opening bell coming up in five minutes.
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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. instead of inflation, are you contending that it's greed-flation, that these monopolies are deliberately hiking the prices? >> so, there's a lot of discussion about what's driving the inflation, and we've actually seen some executives boast on earnings calls about how inflation is great for their bottom line. >> they say that? >> they have said that publicly, yes. >> what about the argument that when companies merge, prices often come down because of
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efficiencies, scale? >> but even if those efficiencies arise, if the company's not checked by competition, it won't have an incentive to pass those benefits on to the consumer because those consumers may not have anywhere else to go. >> ftc chair lina khan on "60 minutes" last night stating her case against the kroger-albertson's deal. it was the first time i've heard her talk about it while the ftc we know has gone after the deal. it's in the judge's hands right now because we've heard the final arguments for that preliminary injunction. she says the merger will lead to higher prices at the grocery store, and it's that political environment that this deal is trying to happen in. rodney mcmullen, the ceo of kroger, says under oath that prices will come down for consumers at the grocery store if they are allowed to merge, why? because there's a price gap. albertson's charges more, higher margins, there's work to do to lower those, and they can do that if they combine.
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that is at the heart of whether this deal gets approved. kroger says people shop everywhere for groceries, at costco, on amazon, at whole foods, it's very different. so, lina khan clearly disagrees. let's get the opening bell. at the big board, it is the president of argentina here in new york for the u.n. general assembly. at the nasdaq, it's climate change makers from around the world, including loreen kyle jobs and tom stier. an interesting piece in the "times" over the weekend about jobs and sam altman of openai and johnny ive working on a.i. devices. i noticed you've been toying with your new iphone. >> i got the new iphone, the 16, but there's no a.i. on it yet, i guess? >> no. steve kovach will tell you it's a couple of months away until you get the full software
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upgrade you're going to need. but you have sara intelligence, so you're fine. >> i'm excited about the bubble gum pink and happy that they had it in stock, which may or not be reflective -- >> in talking about devices, there is this question that as we move deeper into the a.i. world, what is an app going to look like? what do you really need? what is a device? if a device can be fully run by a.i., is there an opening, perhaps, for some sort of competitive device to apple that is, you know, different but cheaper and runs solely on the edge by the a.i. that you can just talk to it all the time and then what does that mean for the apple ecosystem? >> or, as jensen huang would argue, there would be a super a.i. that you would deal with, and then it basically has a hierarchy, passes along certain duties to other versions of a.i. interesting stat out of barons over the weekend. they looked at apple performance
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on launch day and announcement day. usually, up or down 0.1%, which sort of explains why often those days seem a little tame, but six-month forward average 11% on apple over the last 17 cycles of phones. >> dan ives is going to be with us in the next hour. he's always excited. >> i think the general view is they will not be threatened, but you do wonder when you hear jony ive potentially working on a device of some kind, what that really will mean over the long-term for the likes of apple. >> meantime, mixed open here. dow is down 12, holding 5,710. mike santoli joins us at the desk to talk about -- i'm not sure what interests you the most. this surprising september or some of the commentary over the weekend? >> i think it's kind of a now what moment. the broad market weather is very favorable at this point. you have the fed easing aggressively into a resilient economy and also an earnings
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recovery. i think that's a unique aspect of what we're doing here. we had an earnings recession at the time the fed was tight and now we're loosening. you get a new hire in september, which actually is not that common, it's almost never been the ultimate high of a bull market, perhaps absolutely never, not even almost never, so all that stuff makes sense to actually acts act as support for the market right now. currently, we have a pretty slow macro week in general, boring is bullish for markets, meaning no big known macro events is a positive thing. working against that a little bit is we got after the friday's options expiration, very busy. you get a little bit of a cleaner slate. market can slosh around a little bit more after you get through that, and we are expensive again. i think you have to contend with the fact that this starting point, you have a fully valued market. we were near this level, a little below this level at the mid-july peak. you're close to 22 times earnings. you're just a little bit under that right now. earnings moving in the right direction, but it seems like
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fully recognized. i do think that the really relevant thing is, look, we've talked about nvidia being the market. hasn't been true in, like, four months, okay? nvidia first got to today's price in june 4th. since that, the s&p 500 is up. if you look since july 11th, that was the day of the june cpi report, which i think was the really, everybody in, soft landing is here, fed's going to ease moment, you have the equal weighted s&p up, like, 5%. you have the nasdaq 100 down a similar amount. so, all these things are kind of doing what people were hoping they would do in the first half of this year. now, it's just a matter of monitoring the economy to make sure it doesn't slip away, because the only thing that matters after the fed cuts for the first time is, do we get a recession in the next 6 to 12 months or not? if you don't, market's been able to hold up. >> you talk about things being expensive. a lot of charts over the weekend looking at s&p versus x-u.s. talk about expensive. you got to go back to periods of
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euphoria to see numbers like that. >> it's been the case for so long. the rest of the world trades at a huge discount to us. it's a very value-centric mix, usually, in non-u.s., but there's no doubt about it, it's very similar to growth versus value is u.s. versus the rest of the world. so, i do think they don't have the same secular growth sector we have that's now 30% of our market, but there's no doubt about it. and we have had massive outperformance in the u.s. if you believe in this rotation toward kind of real economy, you know, more value-type sectors where earnings growth matter more, that also should wrap in non-u.s. to a fair degree. you might even want to do x-u.s., x-china, and you'll see a cleaner view of that. >> on the outperformance of growth, dollar is stronger today, treasury yields are firmer again. i highlighted they've been firmer since the fed did that surprise cut, and if it's on a better economic outlook, great for stocks, right? that should be helpful, but if
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it is also on, well, they're not going to have as much to do as far as cutting, is that really great for stocks that have craved rate cuts for so long? >> it's at least an offset to the mega-bullish view. i think if you look at history, interestingly, after the fed cuts for the first time, treasurys do drift higher. this market really anticipated this move, and some would argue, push this move, so i think you can give it room for yields to lift a little bit here and not really have it be much of an issue. remember, we were talking about, oh, can the u.s. economy handle a 4.3% ten-year krtreasury yiel? that was not that long ago. what you want to see is if these go up, you don't want mortgage rates shooting to the moon. the fed doesn't want to see that. obviously, a lot of moving parts to fit together, but at this point, it's, you know, the don't fight the fed, don't fight the tape rules suggest, give the market the benefit of the doubt.
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>> we're still under 4% on the ten-year, which i think people see as encouraging. i was looking for individual stocks today, if there was follow-through on nike because of the huge announcement that came thursday after the market closed and i wasn't here on friday, so i'm curious to discuss it with you guys, but a little giveback today, 1.25%. lot of excitement and over the weekend, speaking to sources inside nike. overnight, the morale changes as the company announces it's bringing back 32-veteran elliott hill to become the next ceo. that's going to happen on october 14th. before that, though, nike is going to report earnings on october 1st, and today, there are questions about what that's going to look like. are they going to reset earnings and guidance lower because they have this new ceo coming, and because the trends have not been favorable for nike on the innovation and growth side, especially in china where the macro is weak, we know, but also in north america, where there are questions about how much market share they're losing. they're still huge. they're still the giant player
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in the room and there's a lot of optimism that going -- what's new is old -- what's old is new again, bringing back elliott hill, who understands product, understands what sells in the marketplace, understands the unique culture of nike, things that john donahoe, the ceo, is criticized to have not done, will bring back that kind of growth momentum, the brand heat that is so important for the growth story of nike going forward. but in the meantime, for instance, jpmorgan, this morning, opens a negative catalyst watch on earnings of october 1st because of the reality of numbers, you know? it's great that they're bringing in this guy that everyone seems really excited about, inside and outside the company, but it's going to take a while to see what the strategy is toward returning to growth and towards pivoting away from some of the -- from some of what's been, i guess, mike, also, you look at valuation of nike, and you wonder how much damage has been done and what the numbers reflect at this point. >> yeah, and how reluctant the street might be to give back
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that big premium that the company used to trade at. relative to the market, it's rarely been this modestly valued in recent history, so it's not as if the bar is that high. yeah, you always have the question of, people embrace the ceo change, but you have to ask, what was the sense of urgency that catalyzed the ceo change? i think that's where the jpmorgan call comes in, which is a little bit of a rough go in terms of, you know, market share, things like that, and in the neear term, but seems like the initial verdict of the market was, good move, probably positive long-term. we'll see how it plays out. there you see -- what's that, a five-year chart? that's a 20-year chart. >> b of a ups on holding to neutral. strong brand heat and white space opportunities helping to fuel topline growth, translating into higher margins so it is only to neutral, but the idea that there is opportunity for rivals. >> that's the thing -- yeah, exactly. didn't necessarily have to think about with nike.
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it was about its own cycle. no doubt about it. although, it seemed like they kind of missed it when they were upgrading it, so a little bit of a catch-up call. >> page one of "the journal" today is israel and hezbollah approach full-scale warfare and i wonder if you think that's getting reflected in anything beyond crude back to $71. >> doesn't seem like it. the mark has a pretty high bar for what should we be repricing today based on this, and at this point, not a lot. correctly or not, it seems as if -- and even oil is a little tangential to it at this point. you did see oil bounce just on a technical way, i think, more than anything, when you also had kind of an everything rally after the fed, which included some commodities, so i don't think that's necessarily the thing. one thing you do hear is this is the moment where, if you're going to see a little bit of election year giveback, seasonally, it happens now.
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and i don't know anybody that's going to go out and say, history says it could be choppy from now through the election. on the other hand, almost every one of those people say, you buy it. so, nobody's too nervous, even if the stated bullishness is not really that conspicuous. i think the highest target on the street is up 7%, right? he's the only one saying we've got more than 5% upside right now. >> i think it was the jpm desk today, "we are inclined to buy every dip" as they look for some election chop in the next few weeks. by the way, we mentioned crude. nat gas, highest since july, watching utilities as constellation energy, david, adding more to friday's gains. >> yeah. i mean, this story that we have been following, i think, fairly closely, in terms of just the endless need for power, given, really, the rise of the datacenter in terms of powering generative a.i. and any number of other areas, of course, it was last week that they said they're going to bring back on
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the power from one of three mile island's reactors in order to essentially provide power to microsoft to run, what else, large datacenters. this is -- this has been sort of an unexpected story, i think. if you had told people when chatgpt was introduced back in the fall of '22, that that would be the case, i'm not super that they would have immediately rushed to buy utility stocks. >> no. it was definitely, like, the third bank shot off the a.i. trade. if you look at a chart of industrial production, electric utilities, basically just, you know, electricity production in the country, it's like, flat for, i don't know, 15 years or something. and just barely has ticked up. so, this is all kind of on the come, obviously, in terms of electricity demand. >> although the percentage gains that are at least seen by many of the experts are very significantly, 20, 30% over the next ten years or so.
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>> right. and off of no growth for that many years, so it's obviously very new. you wonder if it also just c catalyzes reduction in cost in terms of every other kind of alternative energy. in other words, innovation investment. it seems to me, it can't just be, we're going to be using that much power at higher prices. that seems a little bit of a stretch to me, but i guess we have to see how it goes. >> well, and to your point, many of the biggest companies in particular, the ones that are putting out so much of the capital to be leaders in generative a.i., have climate commitments that require them to take most of their power from renewable sources. >> almost forces them into nuclear. >> you do have a number of forces there. that said, you're going to have a lot more people plugging in their automobiles and using the grid. coal is still 17%, i think, of where we are right now. natural gas is far above that and that's one reason why perhaps vice president harris,
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for example, at least she could cite it. i haven't heard her do that for the national security needs of the u.s., saying, i'm in favor of fracking because you need it. >> n >> microsoft is having an impact, that downgrade. gloria of d.a. davidson did downgrade the stock and cited competition in a.i. microsoft has outperformed over the year, also cited margin pressure on the fact that it's just getting more expensive. they rely on nvidia, for instance, to supply the nvidia chips, saying, microsoft now guiding for a decline in operating margins in order to pay for those datacenter chips. >> it is interesting. microsoft is in the top ten,
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according to fact set, of names with a high percentage of buys. >> absolutely. >> along with amazon, nvidia, even delta united have a high percentage. >> i was going to say that it now feels a little safer to downgrade the magnificent seven because they've obviously kind of faltered a little bit. they're no longer leadership. no longer seems like the clients just feel compelled to buy every day. only meta is making a new high. we talked about that. that's got its own drivers to it. so, it is -- you should get a little more two-way, you know, ratings and flow through this. >> i also want to point out this is not, like, a pure downgrade, as we would think of it, because he kept his price target of $475, which is still higher than microsoft is trading right now, but took it from buy to hold. it's not exactly bearish. >> that's true. >> the other name there is tesla on the winner list today. commerce, according to reuters, is proposing prohibiting key chinese software/hardware in connected vehicles on american roads due to a national security concerns. a move that reuters says would
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effectively ban nearly all chinese cars from entering the u.s. market. >> yeah. it's just actually been a pretty resilient chart. i mean, it's obviously got a lot of work to do above this $250 level but at least right here, it seems like that's been one of the big overhangs, this idea that they're not going to be able to compete long-term with that. >> pmis in europe were not necessarily strong. we'll get some of our own right now. for that, we'll turn to rick santelli. >> these aren't necessarily strong either, but some of them are above 50. let's look at s&p global. on the manufacturing pmi, 47.0. we're expecting a number well over 48. in the rear view mirror, 47.9, this is the weakest since june of last year. now, if we look at the services, it is above 50. 55.4, but it's still the weakest since, well, just july of this year. and if we look at the composite,
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54.4, same scenario. it's over 50, but it's the softest since july of this year as well, so two out of three are above 50. services, of course, pushing up the composite, and similar to europe, manufacturing not doing well. think germany here. and some highlights to keep and pay attention to, we do have twos, fives and sevens, $183 billion in supply. that will all be occurring tuesday, wednesday, and thursday of this week and we want to pay particularly close attention to all the yield curve spreads. hovering around 17 that's the steepest on a closing basis it's been in 27 months. "squawk on the street" will return after a short break.
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switch today! pretty tight range to open on this monday. let's get to bob pisani at president biden. >> modest open, but look at the trend. it really is very, very powerful. i just want to show you what the sectors are and how they're moving right now because we have historic highs on a lot of things here. look at what the leadership is right now. consumer discretionary, historic high right now. that's a three-year high. materials are at a historic high. industrials at a historic high. financials at a new high. this is a lot of insurance companies. some of the banks are doing really well. and utilities. look at this leadership group. this is the kind of stuff you expect to see with the economy strong. these are cyclicals by and large. there's utilities. none of this is dramatically overbought believe it or not. utilities probably on a tear for the last three weeks because utilities is two stories, an ai
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story for all of the power they're going to need to supply to the ai companies and it's also a low interest rate story. arguably, utilities are a bit overbought. nothing else really. it's quite remarkable to see that kind of leadership. what's kind of lagging right now. well, technology has been lagging throughout the month, but not disasterly so. nobody is terribly worried about it. defensive names like consumer staples and health care have been lagging. this is indication of a still growing economy. nobody is suddenly throwing money at defensive names necessarily even though they're holding up quite well. technology is holding up. i'm quite excited about meta. this things has been on a tear. we're up 60% for the year and last few days have been enormous moves upside for meta. this is another new high for meta. believe it or not it's not stupidly overpriced. we're talking about 23 times 2025 numbers. that's really remarkable considering a 60% move in the stock usually you get overbought
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territory. where are we right now? this is called the broadening. that's what's going on here. all-time highs s&p, equal weight s&p, all-time highs, breadth advance-decline line is at a historic high. that's the biggest line. and the russell 2000 is 3% from a new high here. everybody talks about weak september and it's true, this is one of the weakest weeks of the year. the last two weeks have been terrible. look what's going on here, the average week of, you know, fourth week of september you get down 1%, s&p 500 down 1%. this week is notably weak. they said that about september. we were talking about four down months for september for the last four years. so far september is up 1% despite all the declines we saw in the last four years. not only do you have the -- not seasonal weakness we're having here. we're up 1%. compared to all of these poor
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seasonal septembers. we've got the fed easing and no recession. there's good reason to be reasonably optimistic. >> do you worry about the buyback window closing? >> yes. it's closing. that aels happens right now. the buybacks have been very, very strong. we may do -- we're going to do $900 billion in buybacks and may come close to a trillion. that would be a historic high. that window will reopen very quickly. >> we'll see you soon. >> okay. >> as we kick off this monday with the dow down a touch. you can see a couple points. ckn mont.
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good monday morning. 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 building on gains from last week and record highs.
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the s&p up about .10. energy leading best performer sector up almost 1.5% after it lagged this year. utility, real estate, some of the defensive are clawing back gains and underperformed last week. you still got strengthtoday in groups like the financials and industrials, materials, cyclical groups as well. tech is underperforming a little bit. the information technology index down. broadcom, oracle giving back recent gains. salesforce under pressure as well the dow down 14 points right now. a few losers include microsoft, disney, nike. take a look at treasury yields right now. we continue the trend post-fed of firmer yields still below 4% on the 10-year yield but there has been a bit of selling as investors try to figure out what fed path looks like from here and the economy as well. the two-year yield firmer to
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3.6. 30 minutes into the trading session. here are three movers we're watching. intel at the top of the list, definitely in the spotlight after qualcomm approaches the company about a take overon reports that apollo global management has offered to make a multibillion dollar investment in the company. constellation energy shares off their best week ever after a new nuclear power deal with microsoft and adding to those gains again this morning. up 4.5%. best performer on the s&p 500 this month. watching shares of gm as well. the company temporarily laying off 1700 workers at its assembly plant in kansas retooling the facility to make the next chevy bolt electric vehicle which will come out next year. farce what we've got in the week ahead a lot the of fed speak, 16 fed speakers that we are expecting, which i imagine we'll be paying attention to after many were surprised by the
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double rate cut and what it means for the size of rate cuts going forward next year. we'll hear from goolsbee this hour of chicago. we've got economic data to watch this week and i think the highlight of that will be on friday where we get the spending numbers and the income numbers and most importantly, the pce price numbers, the fed's target for inflation which could show another benign report, joining the year-over-year inflation rate down to 2.3 or 2.2%. the fed wants to see it at 2%. moving closer to target. we'll see if that happens. the number of earnings reports this week, we hear from micron, costco, on the consumer. one thing i did want to mention which seems to be having an impact is that china overnight did surprise a little bit, lower the its reverse repo rate, how it eases policy a little bit, and also announced there's going to be a special meeting tomorrow for its financial regulators, including the governor of the central bank, the peoples bank
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of china, which spurs all sorts of excitement, maybe they're finally serious about stimulating and maybe we'll get the bazooka we haven't gotten over the last few years because the data in china has gone from bad to worse, so perhaps that's helping some of the commodities trade, which had already been firm last week in oil and nat gas and gold and that sort of sector. energy outperforming today. >> china has been tough. a piece over the weekend looking at the new phrase that the chinese have to describe their economy. "garbage time" a sports term when the game is so lost all that's left is just the end of the clock, essentially, and that's on social media in china that's kind of how they're referring to things because xi's not going anywhere for now and at this point there doesn't seem to be hopes that there will be policy that will reverse some of these trends in unemployment. >> significant stimulus they don't seem willing to do, particularly sort of at the local level to try to at least give some semblance of
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confidence to the property markets. >> and on the demand side to stimulate the consumer which they refuse to do. always more supply side focused. they have such a high savings rate, though. they really do. they could -- >> because they don't have a social safety net that is that reliable. >> yeah. larry fink talks about it. 30% savings in china. sop high rate there. >> they're relying on their exports to drive the economy, which, of course, then has an impact around the globe in terms of deflationary as you pointed out. >> there's excitement building today maybe we'll get more on the policy side. look, the fed gave some room to other central banks when it went double on the rate cut. the chart of the day for me comes from citigroup and nathan chief, their economic team, about where rates are going always over the world. we're in a period of coordinated central bank easing. so all the lines are the major central banks and how tight policy got, they all hiked
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together and the u.s. is right there at the top of the list because we hiked the most and the dotted line shows where cities expecting that policy rates to go and they are expecting the headline here for them to all come down, not all the way back down to zero, which is where we started during covid, but to come back down and that should offer some support for economies. is it enough to keep economies from going into recession and from stress in the labor markets perhaps in the u.s. is the thinking, maybe not so much in europe where the fundamental backdrop has been worse, but that's the setup we're looking at right now. which is a different scenario than in the past few years of tighter policy, right. it's theoretically a good thing. how much has been priced in? >>. >> want to take a look at shares of intel and qualcomm. over the weekend a number of people trying to digest these reports that began late on friday an approach had been made
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by qualcomm to intel, confirm that is the case, as i shared in the 9:00 hour, at least according to people familiar, this is very early. not uncommon that we do see these kinds of leaks and then reports as well these days. very early in a process, but it also means the chances of getting to the finish line for a potential deal in which qualcomm would buy intel -- we don't have a lot of the details, for example, the key one being would they want to really own the fabs in addition to so much else? the other parts of the company. would they bring in some sort of partner? all of these are details simply not available or haven't really been discussed because as i shared earlier shared with me, it is very, very early in any potential process and very much unclear whether it will advance beyond that. the percentages seen as extraordinarily low.
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that said, the unlikely deals do start with low permiscentages a build momentum. one of the reasons, chinese regulatory approval, antitrust approval, could you get it? the u.s. government and how it would look on what has been viewed as the national champion that is intel and the money that has come to it under the chips act to get it to increased domestic production of high-end chips in this country so we're no longer as reliable on tsmc, which essentially fabricates all of the high-end chips, certainly those for nvidia, which power so much of the future right now in terms of generative ai. so, yeah, when it comes to structure, when it comes to anything else very much unclear were there. the analysts weighing in here. i wouldn't say they've given positive reviews to the possibility of it. certainly there are plenty of synergies. $52 billion in revenues, but
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50-odd billion in debt that qualcomm would be taking on. stacy raskin, we have on frequently, considered perhaps the most inciteful of all those and influential of semiconductor analysts says don't do it, qualcomm. it seems very risky to us given the uncertain returns and the amount of time it would take even if you got china conceivably would take years and bofa, we'd' get it, there's benefits, but how long it would take, the confusion that it would potentially create would give even more of a lead to intel competitors who, of course, carl, already have been benefitting from that company's as we've pointed out so many times with jim in particular, critical of them for years, just been a sad saga, frankly, in the midst of a turnaround under ceo pat gelsinger that is going to
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extend for years to come. >> the comp has been notable for different reasons, namely its size, and even attempts to introduce new clients, so to speak, people point out aws has been working with them some time what's new about this iteration of business. >> the latest announcement we got in terms of a potential chip. it's a long period of time with an enormous amount of capital investment required by intel. we've talked about how constrained they conceivably are. one reason they bring in the likes of an apollo or brookfield to help them announce the new fabs they are planning on building. apollo figuring into the weekend's news as well, bloomberg reporting the company at least looking to potentially make as much as a $5 billion investment in intel. if you go back to my interview with apollo global ceo marc rowan from last week, 4,000 people who do nothing but try to originate credit for the most part. you might imagine, especially given the existing relationship,
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if they can figure out a way to structure something they think apollo needs that would benefit them that is a hybrid security between debt and equity they may pursue it. >> it was pointed out in the article how the billion dollar investment in western digital some experience in the chips sector specifically. i do wonder if that makes it less likely that intel would have to pursue a deal with a qualcomm, they get this sort of equity investment. >> it's not clear to me at all that intel was the one that obviously, first of all they were not the one that reached out. it was qualcomm, which i believe a couple of years ago also had interest. i remember at the time -- been reporting on it -- that there was at least some interest and perhaps an approach was made back then. then broadcom also. if intel were to decide we got to sell ourselves or figure something out, there might be other potential suitors, although again, all of them come with a significant amount of difficulty in terms of -- >> sounds like a lengthy regulatory review process.
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>> you're not kidding. >> back to the broader markets, the major averages coming off the record highs of last week. the next guest says the s&p has become a, quote, mega cap growth fund but the rest of the market is not as expensive with a few financial and energy names worth looking at. bill joins us, cio, u.s. and portfolio manager joins us today. good to see you. >> thanks for having me, carl. >> dive into that. this megacap growth fund idea. what leads you to that and what parts of the market reflect it? >> well, you know, when we look at the oakmark fund and think about it as a place that investor can put money and not think about it for the next five or ten year, the s&p 500 has always been that kind of index, where someone could put the majority of their capital, believe it was reasonably well diversified and not think about it very long. there are four or five names now in the s&p 500 that are -- have a larger weighting than our largest position in oakmark.
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the technology sector is becoming dominant within the index, and the 25 or so largest names in the s&p 500 make up about half of the investment. so it's not nearly as diversified as investors think it is, and i think we'll see investors revisit the idea of the s&p 500 being kind of the low risk way to invest in equities. >> and what do you think would take its place? >> well, i think just a more diversified portfolio. you know, there's no reason to think an individual is best off by having their personal investment match what the economic production is or what the market valuation of that production is. if you think about south africa there's no reason they would want their portfolio to be gold mining and minerals.
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the u.s. economy has been pretty well diversified for a long time, but today the way the market is valuing the technology sector an s&p 500 investment is really a pretty heavy bet on tech. >> yeah. but can you blame them? what is it 93% of active managers have underperformed the s&p over the last 20 years. i mean, why would i want to go with you when i can just go with an index? >> well, our 20-year number is not bad, and since inception we've roughly doubled the performance of the s&p 500. but the reason is because we follow a thoughtful process of investing in out of favor companies, and there aren't many of us that do that anymore. it's gotten to the point that some academics think there aren't enough value investors to force convergence to fair value anymore, and that's why it's
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become so important to us that we invest with companies that are taking matters into their own hands and using excess capital to repurchase their own stock. >> but you're rising an important question, it's one that, again, i'll reference marc rowan from an interview we did last week about the public markets themselves. i mean you seem to be indicating -- i don't want to use words -- is there a crisis here because of the lack of price discovery and/or the lack of people like you who are actually doing that? >> well, i think there is an issue with how many investors today want positive price momentum in their portfolios. they don't like to buy companies that have fallen to a cheap price. they want to buy after they've gone up somewhat. i wouldn't call it a crisis at all. i think it just creates a tremendous opportunity for companies that are good, good businesses, generating a lot of cash flow, and it gives them the opportunity to increase per
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share value by reinvesting in themselves. >> yeah. but you got to get money to actually recognize that, don't you? i mean, otherwise they just keep getting cheaper. if there's not enough assets -- money actually chasing these names, you know, look at small caps. they're lost right now. >> i look at a company, david, like one in our portfolio, core bridge financial, about a $15 billion retirement services and life insurance company. it was spun off from aig fairly recently. it's a name not many people know about. 27, $28 stock price. should have a book value of about $50 a share by the end of next year and be earning about $6 a share. so we're talking 4 to 5 times earnings. they can buy back 20% of their stock a year. so they don't have to depend on other investors to recognize the
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value. they just keep reducing the flow. >> okay. >> very provocative view. we're going to come back to you time and time again before the year is out and beyond. it's bill nigren. >> we are getting fresh fed speak today crossing the tape from goolsbee, speaking at the conference for the national association of state treasures. some of his key points today, the long-term view dictated it was time for the fed to act. he says that jobless rate of 4.2 is at a level many consider sustainable full employment and adds inflation is down from the peak as it's coming in at target for multiple months which takes us back to what waller said on friday too. >> less of a surprise coming from goolsbee who has been leaning a little more dovish. not a voter this year. will be fnext year. they want a soft landing. they differ a -- economists and investors differ on the right way to get there in terms of
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what level we ultimately settle at and how fast and how big the cuts are. clearly goolsbee is out here saying we can't be behind the curve if we want a soft landing and that's what action is about. a lot more explanations from fed members through the course of the week. as we head to break here's our road map for the hour. apple coming off an important weekend for iphone 16 sales. what the channel checks are saying about demand. >> the state of commercial real estate as the fed is cutting rates. we'll have the ceo of one of the largest players in that basic area. walker and dunlap's willy walker will join us. >> house republicans unveiling the stopgap bill to avert a government shutdown would fund us through december 20. if it's likely to sshepa wn "squawk on the street" continues a after this. breakthroughs, every second counts. but without investment, those breakthroughs are often paused. citi's seamlessly connected banking, markets and services businesses,
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. welcome back to "squawk on the street." apple's iphone 16 going on sale and his channel checks are showing strong demand. dan ivess joins us now. he's got an outperform rating on apple price target of 300 has been bullish about this phone and this whole cycle. dan, i got a 16 over the weekend, but i was a little surprised they had the inventory, they had it in stock last night here in the oculus, the brookfield place store. is that a sign of demand or --
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>> depending on the stores, but everything we've seen it's showing about 8 to 10 million ahead of iphone 15 from a unit perspective. that foots with everything we saw in asia over the last few weeks when we were there. what you're starting to see is just the reason this is going to be what i believe is an ai driven super cycle partially like you, 300 million iphones have not upgraded in four plus years. >> mine was steal. >> then the next step, apple intelligence will start to get rolled out, a lot of the features into holiday season, and post-holiday season. that really is going to be we think 20% of consumers worldwide who ultimately access ai through an apple device. >> some of the reviews suggested if you were really going to give a healthy diet of ai tools, you would be giving more than, for example, 8 gigs of memory. is that fair. >> for iphone 17, they will have to step that up. >> really. >> i think it's an iterative
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process. apple, if you really think about it, they were late to the game when it came to ai. you had to have the openai partnership, chatgpt, other partnerships will come along but it comes down to that install base and the way that they're doing these upgrades. i think you're going to see more and more marketing material rolled out into holiday season and i think for apple, this is the start of a renaissance growth. everything we see from asia shows high single digit it, double digit unit growth come out of iphone 16. that happens. >> do you think that their shipping has become more effective and their inventory management effective and that's the reason why people are able to get them? >> yeah. it's about -- they've added about 10 to 12 million more units this year than the year ago. so they were prepared for that. now i think in terms of preordering there's noise about it last week you look at
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preorders and that was down. i disagreed because you had essentially 10 to 12 million more units that were available. you actually look at lead times and everything we're seeing in asia, this is -- i think it's tracking to what will ultimately be 240 million more units or more, which would be a historical record for apple in a year in terms of iphone units. >> channel supply checks leading into a cycle are getting less useful with every cycle. >> you have to understand -- it's part of being the asia the last two weeks. for me to just go on the website, lead times, compare them, have mathematical gymnastics tells just one part of the story. for us it's about what suppliers are seeing, what that looks like. what we believe the pent up demand from an install base. you go back two years, 140 million. that's almost more than doubled. i think that's why when you look
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at apple stock the investors are kind of looking through this to be what can incremental services revenue be, what does ai mean to apple. 30 to $40 per share. that's why i think some of the sm parts, this would be $4.5 trillion. we have a price target, i think it just starts what i believe is a super cycle. >> i know this is a smally held view in terms of ai for apple, but it also could some believe be a threat, existential threat, these reports over the weekend that johnny ives is working on a device with openai, sam altman saying generative ai made it possible to create a new computing device. is that anything that anyone in apple should be worried about long term? >> look. i think they have to be concerned about just broader trends, but when you have what cupertino has 2.2 billion ios
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devices, that is the key ingredient to their success. it's about that install base. i think it's them further monetizing the install base. if we said a year ago they would have a partnership with openai no way, that's not apple. look what they did. i think they are starting to change with the times and i ultimately believe google and others are going to have to integrate into iphone 16 to ios 18 because otherwise you're on the outside looking in of this ai consumer revolution. >> making the case for apple again. thank you very much for coming in. >> thank you. >> off the new weekend for iphone 16. dan ives. >> still to come this morning a closer look at the new government funding proposal that would avert a shutdown. we'll go live to washington for the latest next. trend tracker is sponsored by cme group.
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i'm silvana henao with your cnbc news update. the israel military launched a series of air strikes across lebanon today appearing to signal the start of a broader military campaign. lebanon's health ministry says more than 180 people were killed and hundreds more injured as israel warned citizens to move away. the fbi revealed ryan routh had a date of lists and venues where former president trump appeared or was scheduled to appear. that one of his cell phones showed searches on how to get from west palm beach to mexico and that he left a letter with a neighbor admitting to the attempt. routh is charged in the apparent assassination attempt with two federal firearms fence line at trump's mar-a-lago club. and apple's former design guru jony ive is working with
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sam altman on a new device. ive tells "the new york times" he met altman through the ceo of airbnb and their venture being funded by ive and the company run by lorene powell, david. >> thank you. house speaker mike johnson unveiling a new temporary government funding proposal yesterday. let's get over to emily wilkins and more details on what that could mean and for a potential shutdown. emily. >> hey, david. the top congressional leaders have released a plan to fund the government with only a little bit more than a week left. now the real difficulty is going to be getting that plan through both chambers. this is a stopgap bill that would keep the government funded at current levels until december 20th that gives lawmakers time to hash out how to fund the government for next year and includes 271 million for the secret service to bolster their security following the second asass nation attempt of donald
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trump. the bill does not require the measure to show proof of citizenship, too partisan to be able to pass. chuck schumer told reporters yesterday that he was optimistic that a shutdown could be avoided. >> we really now have some good news. there's a really good chance we can avoid the government shutdown with all the pain it would cause for new york and america this week. >> the house is expecting to vote on the bill on wednesday, but ahead of that, there could be some rocky moments with procedural votes given the devise in the republican conference. lawmakers have until 12:01 a.m. on october 1st to pass something. if they don't hundreds of agencies and programs will be impacted including tsa, food inspections and some aspects of social security. >> they don't want to own that just ahead of the election. thank you. emily, keep us posted on any developments there from washington. after the break, nike shares coming off their best day in two years as a new ceo is about to take the reigns.
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is it enough to turn the stock wh tou. upitofhe street's top analysts here with his take after a quick break.
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welcome back to "squawk on the street." jpmorgan this morning adding nike to its negative catalyst watch list. lowering the price target on the name to $80 a share from 83 a share following the company's big c-suite shakeup. that's where we'll start with the number one retail analyst matt boss at post nine. welcome back. >> gad to be back. >> you have a lot of actions today. let's start on nike. there was so much excitement and enthusiasm inside nike headquarters and on wall street for their choice of elliott hill. even if a lot of people had to google who that was, he is well-known inside the company and it is a recognition by the board that they have to go back to the core, what has worked, the culture, going back to focussing on retail relationships. why did you open a negative
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catalyst watch. >> i think you laid it out well, meaning the return is well received. the need for change was very much paramount here. i think for us going back to the old, it's really a returning to the old guard, and it's not just elliott. they brought back three different executives with more than 25 years of experience at nike prior to 2020. so we're encouraged by that potential change. i think the timeline might just take longer than many anticipate, and to your point, that created the catalyst in terms of where we stand today. you have issues with innovation, you have issues on the wholesale front. it's very competitive, particularly in the last two years in terms of the backdrop that created where we stand today, so we lowered numbers for the quarter. we see a cut for the year. i think street numbers for next year are too high. they're embedding a return to industry growth. more of a 2027 type of a playbook. >> yeah. because the company reports earnings next week before even the ceo turnover.
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there's also this investor day they were planning to hold in november, not sure what the deal is on that, but i guess the point is that this will take time. >> yeah. so the investor day timing which was supposed to be in november is being reassessed. they had just sent out the invite for that two weeks back. as you know, bill knight had personally talked about his commitment to john donahoe, who is outgoing. >> that was last earnings when nike had its worst day in the stock market ever in the end of june. >> as you think about where we stand today, to me, you have first is going to be the return to a bull market and that's where nike aims for full price selling. i think that's basically over the next 12 to 18 months and that will be the margin stabilization story with the top line growth tied to this scaling of innovation more of a two-year to two and a half years out which would bring you to fy 27 for nike. >> is the degradation from '19, is it an outlier?
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is it like enormously large for keep this size? are there similar other comps? >> nike historically has targeted a mid-teens type of an operating margin opportunity. they're now in the low double-digits and i think if you go back to this old guard coming back, it was more in the low teens. i think that's the opportunity. that's actually what we're modeling two years out. put a mid 20s historical multiple on that the stock is more or less fair value today. there is downside right now to our numbers and street numbers in particular for the next couple quarters and potentially next year. >> when mr. donahoe was appointed, what were the -- what was the view of the board te time in terms of what they thought he would be able to accomplish and what did he misjudge over the last number of years. >> it's interesting. bringing back elliott hill, 32 years of experience at nike. mark before he took the ceo spot had 27 years of experience at
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nike. john was the outlier. john was on the board but not a nike internal executive. so i think that cultural dynamic, potentially some of the changes -- now look, what nike has done well is expand and scale the digital and that's where they now have a materially scaled, higher margin, digital business. i think that came at the expense of shelf space where you allowed brands like hoka, an into their wholesale partners, particularly run specialty, and now the competitive door has been opened and i think you have lost market share and now it's going to be in my opinion a multiyear effort to gain that back. >> it was all about having a tech executive there. >> right. >> that was appealing for a company that was digital first and focusing on direct-to-consumer which worked really well and served nike during covid. >> yeah. >> he came on in 2020, and the stock ran up to record high in 2021. the problem is, coming out of covid, they lost shelf space. >> like peloton light in a way.
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>> it just -- it was over emphasized the direct-to-consumer strategy, and it came at the expense of relationships with wholesalers. when people started going out shopping again it was a different world and they didn't have the right shoes on the shelves or the shelf space to show it and lost a lot of the brand. nike is still pretty dominant, right it was the trajectory of where they're going. >> what i was going to say, as we look at recent access across the global brand space, to me the focus is on brands that are agnostic to channel and developing innovation, product improvement drives pricing power, so a bir ken stock, ravel lauryn, three. >> tapestry, whether they do the deal or not? >> the coach brand, 32% operating margin with it handbag 20-year cycle, it's delivered mid-single topline as the number one player at five to six times ebitda with or without the deal
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this is a mispriced security. >> it's done okay this year, up 20%. matt, thank you very much. could talk retail all day long. appreciate it. matt boss from jpmorgan. >> as the fed cuts rates one question is the worst over for commercial real estate? the chairman and ceo of walker and dunlap joins us to give us his read fm rothe ground. that's right after this.
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you another day another record high. gold has been on a stellar run higher this year. one trader sees two factors coming together to indicate that that rise could soon reverse course. tune in to our market vitonagar segment today on "power lunch" 2:00 p.m. eastern time.
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welcome back to "squawk on the street." with the fed cutting rates and
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more companies mandating workers return to the office could the worst be over for commercial real estate. the ceo of one of the largest players in that space, willy walker joins us to talk about a lot of things. we always have you on. first time we've had you on that the fed has started cutting rates. i guess my question to begin is, will things get more active again as a result in commercial real estate? >> no doubt. i look back, david, to being here two years ago where we were in a wildly inverted yield curve at that time and everyone saying we're into a rate tightening phase, and things were going to look bad and we've gone through two years of tightening and now back into an easing phase. you've seen it start to impact volumes in commercial real estate as it relates to sales, financial volumes picking up. you're looking forward to a distinct next couple years from the last two. >> we've been talking about a potential crisis in commercial real estate in the balance sheets of certain banks that have lent heavily as a percentage of the overall
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portfolios. are we through that or make too much of it over the last couple years. >> i don't think we made too much of it in the sense that it was a concern after silicon valley bank went under. crisis averted. think about how the fed thread that needle as it relates to avoiding a downturn in the economy and rising rates so high. it did have the ability to break something, and clearly it's broken individual deals, but fortunately, it hasn't broken another financial services institution subsequently. you look at delinquency rates in commercial real estate, they look pretty stable right now. in august you had a number of new loans that defaulted but at the same time getting curing at the same time and they actually -- the delinquency rates stayed stable in august of new ads but also some other loans that got cured. you're at the inflection point where you tart start to move down. >> you need to increase debt and can't do that, are a lot of these owners still in the same
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place and/or lenders or does rates coming down, let's call them another 150 basis points from here really help? >> it super helps. you have to keep in mind, two-thirds of commercial real estate debt is fix the rate. only a third we're talking about. you get a 50 basis point pick-up, not saving everyone's day. with that said more commercial real estate construction loans are floating rate so if you have a project that has come out of construction its floating rate debt, you want to put permanent debt on it. the cost of permanent debt is down significantly and helps the market a lot. we have a lot more cutting on the short end of the curve to get to a more normalized yield curve and the market can really start to function again. >> what kind of curve would you want to see? >> what do you mean by that? >> short rates versus long? what would help i guess. >> look at where the 10-year was last week before the fed announced the 50 basis point rate cut. the 10 in the 3.6. today about to get to 3.8.
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everyone bought on the rumor, if you will, and then all of a sudden they come in with 50 basis points and starts to move back up. a lot of people have been waiting for the long bond to come down even further, and i'm going, how much further do you think it's going to go because you've got to get the short end of the curve down so far over the next year and a half. so you clearly right now the market is telling you you're going to have a fed funds rate around 250 a year four months from now. we'll see if we get there. it's going to be a very healthy market for commercial real estate as rates start to come down. >> i wanted to ask about residential real estate and what you make of some of the campaign promises from the harris campaign to stimulate more affordable housing tax incentives to build first-time home buyers and rental buildings, money for first-time home builders. do you think that's going to be effective? >> a couple things there. you have to think about the shift in policy from biden calling for 5% rent control on a nationwide basis to kamala harris calling for 3 million new
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homes being built in america. that policy shift is unbelievable. you're going from a very progressive, control the market, to a very free market let's puts supply into it. that alone is a huge shift. with that said, building 3 million new homes in a year is too much. we're at about a 1.1 million sa new homes in a year, it's too much. we're about 1.1 million right you in. you need to get up to 1.5 million so the obsolescence that happens in the market doesn't get eaten up by demand, but we need more housing in america. the thing that would be nice is see the trump campaign come out with a proposal that distinct or similar to the harris proposal which says, this is what we're going to do about housing because housing is a big issue. >> isn't it just cut the red tape, deregulation? >> big time. but what you're focusing on there is all the money sits in washington and all the control sits at the local level. local jurisdictions control land use and land entitlement. until you connect the dots
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between the money in washington and the land use policies at the local level, you're not going to solve the problem. >> speaking of washington, you're the biggest transactor with fannie and freddie. you reported gses were down 20% year over year. is that going to turn around? >> we've seen fannie and freddie step into the market in the second half of the year. that's positive from that standpoint. as you saw, david, the trump campaign has called for the reprivatization of fannie and freddie, a lot of speculation on what that would mean for the multifamily and single family mortgage markets. there's a lot of devils in those details if they get to try to spin those back out. that would be major news if president trump gets elected. >> our viewers may become sort of familiar with you, our many conversations during the course of the pandemic when we were talking about back to the office or whether that would ever happen. what do you make of amazon, what
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are you seeing and what are your expectations in terms of getting people to return? by the way, i'm also curious as the ceo of a public company what your own policy is and expectations are. >> you know, david, i think that what's interesting is with unemployment at 4.2%, there's a little bit more flexibility for employers to start to take a stronger stance on this. when you had unemployment down in the low 3s, everyone is like, it's too tight a labor market. if i put any policy in place, people will walk out the door. you're seeing more and more -- jamie dimon is a big leader on this, back to the office. i think you're starting to, a, see ceos take a stronger stance on this. i think the other thing we saw this summer from our summer interns, they wanted to be in offices where we had people back in the office. they want to learn. that's a really important shift. where they're saying, i need to be sitting in exto someone next to carl, want just remote through a zoom call.
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i see ceos taking a more proactive shift to in office. >> we were laughing because that upgrade of keurig dr. pepper today from citi is all about coffee pots, reflecting month again, which is the coffee room, coffee room. >> occupancy rates will -- >> i think they'll start to recover. >> to be continued. >> thank you. >> willie walker from walker and dunlap, thank you. coming up in the next hour, the head of antitrust for the eu, margrethe vetager, her take on regulation, and new fines on apple and google. do not miss that. we'll be right back. and retirement savings. presentation looks great. thanks! thanks! voya provides tools that help you make the right investment and benefit choices so you can reach today's financial goals. that one! and look forward, to a more confident future.
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this target price, we're talking roughly 38% downside. dell technologtechnologies, del have been underperforming as of late compared to its peers. 86% analysts have a buy rating. this target price implies would could be 25%, 26% upside for sell. the honorable name for omni, which goes in today. back to you. >> glad you memgsed that as well. thank you. the september rallies continues with the broader markets. we'll have a lot more coverage of that straight ahead. ♪ (vo) now, every phone can be the new iphone 16 pro at verizon. just trade in any phone in any condition and get the iphone 16 pro, on us.
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good none morning. welcome to "money movers." i'm carl quintanilla with sara eisen on the floor of the new york stock exchange. today tech names to target as the nasdaq reproaching some record highs. meta is pacing for a six-day win. we're going to talk to one portfolio manager about how to position mag 7. >> then the eu's antitrust chief, margrethe vestager on her outlook on tech regulation, the recent multibillio

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