Transcripts For CNBC Squawk 20240703

Citing high valuation and concerns of soft u. S. Growth. And its the Largest Health care strike in u. S. History. Some 75,000 Union Members at Kaiser Permanente walk out of hospitals and medical offices. Lets begin with the markets. Dow coming off the worst day since march as you may know by now, losing its gains for the year to date. Jim, this morning, writing a lot about the tyranny of the tenyear, as you put it. Look, i think theres a consensus building that you cant have the yield curve be the shape that its in now, and i know this probably bores a lot of people, but if youre just trying to figure out, what the heck is this all about, theres a sense if you go out ten years, we got to go the usual, which is that theres a steepening curve and were all going to have to pay a little more if we go out long. Meaning, lets say you need a mortgage, thats going to go higher. We got a number that was softer today from adp and shows theres not as much wage growth, which is what people are worried about with the fed, but im much more concerned about issuance, how treasury pays. I know that yesterday ed had a fantastic hit where he talked about how its possible that we dont have a lot of Federal Reserve bonds sold, but just be aware that and david, you know this its very hard for people to understand and interact with the bond market, but if you think that the tenyear, which is currently at 4. 74 should be above what the treasury rate is, then you know theres more pain ahead. It just may not happen with the velocity that its occurred and its the velocity thats driving people crazy. Listen. Everybodys trying to figure out when were going to hit a top or nearterm top in yields, jim, and you point out the technicals. Weve talked a lot about them lately. We have in the second hour of squawk on the street. Sara has been talking about it for weeks in terms of the supplydemand equation. Has something changed in a significant way . Given all the supply that still needs to come to the market, and is that sort of new normal . But you know, when it comes to Equity Investors right now, i guess you made this point last week when we kiddingly talked about just having the entire show be about the tenyear. You have to look at it. You have to make a decision here, ultimately, in terms of what youre going to do. But what do you see as the impact, really, lets call it near term and long term . Obviously, does seem to increase the chances of a hard landing, doesnt it . Yes, it does. And i think that theres a sense that, well, what does the fed really want here . And i say, forget that. Its not about the fed right now. Its about demand, and when you see small and mediumsized businesses still charging ahead, still hiring, still growing, but the large ones are not, then you say to yourself, wait a second. If wages go up, even though mortgages are now higher, the spendings not going to bring mortgages not going to bring the price of a house down. I think that the carl, when i look at the fact that houses are still up 40 from prepandemic, thats the last holdout, the last thing the fed wants to come down, but if youre going to have to finance this deficit and do the quantitative tightening, which is what the feds really more important right now than the fed funds rate, then were not done in the selling. And i would like to think that because were so oversold, were done, but i also am not naive enough to think if we get a number thats strong on friday, we could have some real problems. Yeah. Not a lot of people adjusting their forecasts for friday in light of adp. I think pantheon this morning calls it an unforecastable dataset just because its been wrong. J. O. L. T. S. , which we panicked on yesterday, i had paychex on yesterday, they said, look, this thing shows the opposite to the previous month. They dont use it. They dont think its important. They do see what powell wants. They see this marginal wage gain, 2 to 3 , they see some pockets of strength, some pockets of weakness, but they still see growth, and i think that the bond market forget powell the bond market wants to see contraction. We dont have we come in and see strikes, and we see ford, but theyre not doing best and final. Ford is offering something. Were not seeing drugstores close. Were not seeing major problems in retail. Look at auto sales yesterday. Oh my god. So strong. Lets say the bond market is separate from what powell is doing. I think what the bond market is, they got it so wrong. We sat here forliterally even in april and said, well, the bond market says theres going to be a recession. Now were all off. Now were saying the bond market is sfwgoing to cause a recessio. Theyre two different things. The bond market was so wrong in april, theres nothing that says it wont be so wrong again. You mentioned yardeni, who coined the phrase, bond vigilantes. This week, he coined the term bond heretics. The bond vigilantes, i think, i first came in heard that term back in the early 1990s when inflation was high and Interest Rates were moving up in 94 and 95, and nominal, you know, tenyear yields kept rising higher and higher, suggesting that the feds work wasnt done, and they werent doing enough, and the concern was the bond markets were driving the feds behavior, and that they would continue pushing the fed to the point where the economy would fall into recession. Now, i dont honestly think thats the case now. I think the markets are trying to figure out what is the fed and other Central Banks going to need to do to make sure that inflation stays low . Look, ive kind of a a very longwinded way of saying that, yeah, ed yardeni was right. Ed is also talking about the im immaculate displaegs inflation. David, you remember this. The rates of the vigilantes were much higher than they are now. But theres also a sloping curve that we had then, and right now, why is the 30year treasury, i posit, giving you 4. 8 return and youre getting a much higher return from the fed funds rate, even though when you go out that far in time, theres a lot more risk . Yeah. Its a reasonable question. I dont have an answer, as you might expect. I do know that if youve got to refinance something in the next six months, youre not particularly happy about it, and anybody who did refinance whatever piece of paper it was over the last year is probably a bit happier than they might have been otherwise, even though it was higher than it was the year prior. And then, if youre trying to buy a house, well, we can see that almost 8 . Thats got to lock up the Housing Market at some point, doesnt it . Not to mention, again, also, with the move of this speed, whether people like to say it in the market, something breaks. I dont know what that is or what it could be. We never do until it happens. And maybe it wont. But its a concern. But there is a housing cycle. I mean, typically, what happens in a housing cycle is first the beginning. Theres a lot of demand, so the Housing Companies Start Building a lot of houses, and then the demand goes up, and then the Housing Companies start charging more and charging more, and then the Mortgage Rate goes up, and then theres a cliff. That has been the way this has worked all the time. Now, maybe theres a shortage of homes right now, but it tends to be carl, its a cycle, and right now, we should be at the cliff. And the fed should win. But we all think that theres just unassailable amount of demand. There could be demand destruction too. Dont forget, i mean, theres a level where the housing the house comes down to make it so that even though the rates up, the house is cheaper. Thats also happened. In the end, weve always had overbuilding. I think the Housing Companies are showing the same discipline that the Oil Companies are showing. Everyones showing great discipline. Were all waiting for someone to break out of the discipline cycle. Damentioned the banks. Silicon valley happened at tenyear 3. 6 . Right. Different time. I mean, we do have liquidity is abundant. Everything got saved on deposits last time around. Jim, i think that does help. Any concern there might be about the banks this time, although carls absolutely right, of course, and bank of america stock yesterday did reflect that continued concern, at least just about embedded losses in its portfolio. Right, and look, i think that there are always going to be loss. I had macys on last night. They have a credit card division, and its experiencing losses, and defaults, and we know that the student loan, hear that endlessly, they have to finally start start paying, but i would say that we normally kind of the normal defaults that we have in 2019, i keep going back to the fed wants us to return to 2019, and its housing that hasnt returned. Food is coming down so quickly. You see egg prices this morning . Throwing them away. Yeah. I just think that were not going to get to a point where a box of cereal is going to cost as much as 2019. Its going to cost less than 2019. What goes into a box of cereal is coming down in price, and the costcos of the world, which is the second largest food is saying, you know what, guys . Thanks for nothing. We got Kirkland Signature corn flakes and theyre every bit as good as tony whatever, right . Flakes. Theres nothing to frosted flakes, david. Youve been really unkind to kellogg the last couple days, jim. I just think that cereal is not one of those its a bit of a commodity. Its got the bag, the box those are worth ten times how much the stuff thats actually in it and youve got the sugared raisins, and maybe costco comes out with a little less sugar and says, this is the better for you, bfy. Carl, dont get him started on wegovy. Im all over that. You cant find mounjaro in this city. Theres a big distribution of wegovy yesterday. The trunk finally came. The truck of wegovy . Are people on the upper east side, waiting on the side of the road . The upper west side. The east side doesnt know wegovy. There is no wegovy. Theres no on the east side, theres none to be had. None. All those hospitals, none. Still to come this morning, well talk about the criminal trial for Sam Bankmanfried going into its second day in court. Were going to take you live to the scene next. Futures trying to look for a bounce after we did lose briefly the 200day moving average of 42. 96. Well get to news on apple this morn morning. Icy hot. Ice works fast. Heat makes it last. Feel the power of contrast therapy. So you can rise from pain. Icy hot. Day two of the criminal trial for Sam Bankmanfried set to kick off this hour as the jury selection continues this morning. Kate rooney is outside the courthouse with the latest. Good morning, kate. Hey, carl, good morning. Jury selection continues today here in Lower Manhattan for Sam Bankmanfrieds criminal trial. We do expect Opening Statements as soon as today, guys, and on to witness testimony as well. The court is down to 50 potential jurors. They plan to whittle that down to 12 people and then youve got 6 alternates as well. The judge, in the meantime, saying to those potential jurors, dont talk to a soul about this case. He said, no news, no internet. He called it electric quarantine. Bankmanfried has been watching all this play out from that courtroom, flanked by his lawyers. His parents were not there. He was noticeably cleaner cut with shorter hair after spending time in a federal Detention Center there. He has been in custody since august after the judge said he violated bail conditions. He has pleaded not guilty to seven counts of fraud and conspiracy and maintains that the blowup of his 32 billion Crypto Company was bad risk management, he says, not fraud. His top executives, though, they say otherwise, pleading guilty and saying they knowingly committed fraud. We do expect three of his top former colleagues, one of whom is also his former onagain, offagain girlfriend, to testify against him. Other possible witnesses were listed in court yesterday. Investors, including alfred lynn of sequoia, hes led investments in doordash and airbnb. Anthony scaramucci as well, bankmanfrieds brother and more ftx employees, including former general counsel. Kate, weell watch it with your help. Bitcoin holding at sixweek high, almost. Carl, Ford September sales are part of they put them all in the q3 sales so were going to give you the q3 number here. Q3 up 7. 7 compared to the same quarter of last year. Q3 ev sales, remember, this is going to be critical as ford looks to do that transition, ev sales up 14. 8 compared to last year. Mustang mache up 45 . Theyre just starting in with the lightning, so its sales were down 45 year over year and then youve got the ford q3 bronco sales up 24. 8 . Thats important because remember, it is Michigan Assembly where they build the bronco, so that in that number is likely to fall as we go into october, november, if this strike continues as we see the supply of broncos that are at dealerships continue to be restricted. So, what we have is ford in the Third Quarter up 7. 7 . Guys, back to you. Lets say substitution. People buying evs now that gasoline is so high . Do i think were seeing that . I think theres some of that. Yeah, there definitely is some of that, and theres greater selection now. Not as much as where the Industry Needs to go next year and then into 25 and 26. Were not at the point yet where you can say to somebody, you want an electric suv . What are your options out there . Theyre pretty limited at this point, and thats going to change, jim, but we are seeing people having slightly greater selection than they had, lets say, six months or a year ago. Meantime, phil, streets trying to get their arms around this latest reported offer to the union from ford. 20 plus, and then shaving pretty dramatically the amount of time it would take a new employee to get to top pay. Right, and thats a big push that ford is making with this offer, which was presented on monday night, and in making this offer, and in announcing it yesterday, ford, through Ceo Jim Farley and his comments, saying, look, this is a costly offer to us. This is not like we can say, okay, were giving it to you, and we have the same level of profitability and everything is the same as it was before. No, this is going to cost ford, but they want to get this racked up as quickly as possible, and they understand that the uaw is holding out for certain things, including quicker progression in terms of wages for new hires. They are north of 20 . Theyre not saying exactly where. Theyre also adding in cost of living adjustment benefits over the life of this contract. So, its a far richer offer than what weve seen from ford in the past. Whether or not this gets the deal done remains to be seen, carl. Phil, well talk in a bit. Busy day on the auto front as well. Thats our phil lebeau. Well get cramers mad dash, countdown to the opening bell on a busy wednesday. Squawk on the streets back after a short break. Lets get cramers mad dash as we count down to the opening bell. Jon fortt had a terrific story yesterday about intel selling altera. These are specialized chips. In many ways, they are, until the a. I. Chips came, the most valuable. Whats interesting is they paid, in 2015, they paid 16. 7 billion. The competitor, amd, bought xilinx, paid 49 billion, so in the interim between 2015 and now, its obviously gained a lot of the industry has moved up. This is but fortt did point out there is a problem in that intel didnt do that much with this, so i dont know how much its really worth versus xilinx. You do mobilei, and you do this, and you say, wait a minute, maybe intel is worth more. That is what Pat Gelsinger wants. All that said, what we really want, its like we want we dont want tuna with good taste, we want good taste in tuna. The rest of intel is not worth as much. Youre selling the crown jewels in order to be able to finance whats not a crown jewel. Thats putting money behind a hand thats not as good, and throwing away some. What about the argument that if theyve lost on the engineering front, at least theyre making moves that are a little bit more shareholder friendly . Absolutely, they are. And maybe we says, wait a second, if you look at the stub of what theyre not selling for altera and for mobilei, then the company is undervalued. But you know what . I like nvidia. And nvidias no financial engineering. In nvidia, there are people talking about 100 billion in orders for their really expensive cards. Thats what i want. Right now, everyones against nvidia. Look, people are saying, come on, this thing went too far too fast. If you have the best chips, it really doesnt matter. People should go back and look at intel, 286, 386, pentium, and see what happens with the stock. Nvidia still made a lot of q4 top ten lists. Next year is going to be a very big year for nvidia because theyll get all the demand. Microsoft will take everything they make, one company. Well talk more about it after the opening bell. Of course, coming up in just about six minutes. Dont go anywhere. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to help keep our Online Platform safe from cyberthreats . Absolutely. Can we provide health care virtually anywhere . We can help with that. Is it possible to use predictive monitoring to address operations issues . We can help with that, too. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. You cant buy great conversations or moments that matter, but you can invest in them. At t. Rowe price our strategic investing approach can help you build the future you imagine. T. Rowe price, invest with confidence. Announcer the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. Lets get to apple this morning, under pressure in the premarket. Keybanc did downgrade to sector weight this morning, down double digits over the last three months, jim. We got the downgrade, which well talk about, and then some executive stockselling as well tim cook sold a lot of stock. Heres what i think. When you get to the tail end of the magnificent seven selloff, you have people who break ranks. The stock was at 198. Now its at 172. You could make a lot of cases that perhaps its overvalued, perhaps we dont know about how the new phone does. The phone is running hot, which apple will tell you, theres always been iterations in the beginning where they run hot or theres some problem. I come back and say, just, please, dont trade it. Lets say you sell it at 171. Can you buy it back at 163 . Thats the way you have to look at it. Then, it would not have such a high multiple. Lets be careful. The traders, whatever you want, but if you are an owner of apple and you like to own it, this is not something that you shake through. What about the crux of the keynote, and that is, slower postpaid sub growth, maybe a Fourth Quarter of down revenue year on year in the u. S. . We dont know yet. We do know that historically, when you have these iterations, its very difficult to gain, and again, i think that thats why it could go from 198 to 160. Thats a very big decline. Its possible. But thats what the down quarter is about. Why it went there. I mean, if it was up quarter, it would be 210. People should recognize that apple is rationally priced, and maybe it needs to be a little bit lower, but i just think that nobodys good enough to trade this stock. Nobody. There will be many people who claim that they sold at 171 and bought it back at 161 and well check their trading receipts and see that they were maybe puffing. David, does the carrier element interest you . You know, i mean, its always an important component of the overall story, but im not sure its that different from what weve seen in the past in terms of promotion levels for the 15. At this point. And what it will mean. You know, jim, is this heat is this an issue, how hot the phone gets . Is it real . When you talk with apple, they would say that they have a software patch, that this has happened periodically. There have always been these different situations that are negative. Titanium, by the way, in the aircraft industry, does not run as hot as aluminum, so you would say, wait a second. Why do they build planes with titanium . The answer is, because it works better under heat. I dont know, carl. I come back, and i say, yeah, i mean, its down a lot. Someone wants to make a splash, and theyre making it. We just talked about it for four minutes. Congratulations. Thats right. Thats what its about. Thanks, key. No target on their note, just the sector weight. Cliff. Yes. Lets get the opening bell here. At the big board, its Empire State Realty trust celebrating its tenth listing anniversary. At the nasdaq, its nuvini, an acquirer of saas b to b companies in brazil. Hey, david, isnt that what we want right now . A spac from brazil. Okay. Isnt that exactly whats called for . And by the way and the braves have been doing well. You follow the braves . The stock . Thats starting because of the braves. Its doing well. Its a pure play, they own the stadium too. I think the buy is meaningful for them. Theres the realtime exchange. All right. Theres the theres the heat map. Do you guys know the realtime exchange doesnt exist any more in reality . Thats real, but that thing they showed earlier is not real. Thats why i was making that face. Are you telling me thats a sham . Im saying its created in the where . I dont know. Its a wow. Its a. I. I dont know. Im looking for it. Im like, where is that that darn and it wasnt here. Is the 30year a sham . Look at me here. Oh, look at that. Now you look like succession. I am. Whats going to happen in the house . Lets make it happen. Lets pick a new speaker. All right, everybody. He can do that too. What a multitalent. So good. Speaking of things that are not real, jim, these reports of meta laying off some employees at the Metaverse Division reality labs, according to this reuters story . Well, look, are they spending more . Its a possibility. By the way, its part of dougs note today at jpmorgan. Yeah, look, i think that the most important line is buried at the end of page three of that report, which is that revenues are coming in really well for advertising. But right now, were also beat and were so defensive, weve been flogged. The analysts will be flogged until morale improves, and all i can say is, dont take your cue from people who are worried as much as you should take a look at people who are calling the revenues to be good. I would have flipped that piece entirely. I would say, lets start with the revenues being better but expense is higher because they have to have the capital equipment. David, there is a beatendown nature of the analysts, like any other profession, where, lets say you were beaten very badly on a monday night. Youre a football team. You do not come in the next week and say, you know what . Were going to crush them. What you say is, geez, i hope you know . I hope. Theres a lot of hope right now among the analysts that maybe things will stay here, you know, push, you know what im talking about . I follow you exactly. And i appreciate the nfl reference. Thank you. Yeah. That said, for meta, we had mark mahaney on yesterday and hes positive on their ability to continue cutting costs and just to paraphrase, jim, he thinks it will create some momentum under the stock when you get the next quarter under your belt, unless a surprise with a cost number and or guidance that is far behind what is expected right now. Oh, yeah. I mean, look, and i know davids focused on that reverse head and shoulders pattern. But you know, i just want to go back to apple for a second, because i think we missed they got messi when they spoke at the when eddy cue spoke, he talked about sports. The nfl is in play for apple. Who reported that, jim . Where is it in play . This is an evercore piece. I dont know what he is doing. Hes speaking positively about apple. I dont know what thats about. Its certainly not warranted today. But were talking about espn currently talking about espn. They said that apple bid for the nfl sunday night ticket. David, who is that . Who has the sunday night . We do. We do, jim. Did you see our ratings this past sunday night . Nbc family. Biggest ratings since the super bowl. The taylor effect. I dont know who the quarterback is, but boy, what a tight end they got. Whoo although he did not have the greatest game. And our guy actually had a pretty decent game, amazingly enough. Forget about the nfl. Jim, listen. When it comes im going down to dallas for a sunday night game. When it comes to sports, it is not unimportant, although the nfl is the least of it at this point. Many of the deals are still in place for quite some time to come. The nba contract is nearer term. There are some questions. When it comes to apple and by the way, this is i mean, this has all virtually nothing to do with the fundamental underpinnings of the stock, but when it comes to apple and amazon, the real question is, do they really want to become more robust in terms of their sports programming and what they have available . I know you talk a lot about messi, but its not going to move the needle that much. And even the the question is, even for them, whatever they spend wouldnt move the needle that much for apple or amazon but could crush those who rely on these deals to generate real numbers. Now, by the way, you know, when it comes to tv, people basically, at this point, are talking about tvs really just the nfl. Thats all it is at this point. Either you got it or you dont. And if you dont, then youre not really in the tv business. Youre right. Look, i think that people its very rare to have something that everybody watches. And i mean, that households watch. I havent seen the numbers for espn and all the baseball games last night but they probably all together dont add to travis kelce and swifties. Philly had a nice early part of the game. We had a very good game, but i dont know how many people care about it. I think they care more about the refiners going down, the oil. By the way, oil peaked what didnt didnt oil go up and then drive the bonds . Well, now, oil is going down. Interest rates was that just all for show when we talked about oil every day, driving the bond market . Energy, the only sector red this morning. The opec meeting has no real change in policy. We got to 87. 32, now at 86. 73. Chevron went up not nearly as much as oil when oil ran and now its going down harder than oil coming down. But i think, david, we often make these linkages that we then dont talk about when theyre wrong. We did say that the tenyear was marching to the beat of oil. Now, oil is getting crushed, but no one talks about how the tenyear that maybe that linkage wasnt as smart. I wasnt aware of that linkage to begin with, not a lin linkage that i saw. Youre not a linkage guy, maybe. I didnt see the head and shoulder. I didnt see the linkage. What we will continue to come back to is that supplydemand and whether, in fact, that is a new normal that were going to be dealing with in terms of funding these deficits and whether the japanese are not there any longer and the chinese, and how were going to distribute the supplies successfully, and what Interest Rates are going to mean as a percent of gdp. Those are the linkages were speaking of. Youre being substantive in making these judgments as opposed to being facile. I suppose. Im trying. There he goes, david, once again. I dont want the facts to get in the way of the story, so i went with oil. No, david is right. It is supply and demand. And david, by the way, there are a lot of people come on and make these what i really do say facile statements. I want to know, the biggest short position in the history of tenyear, how many people are calling for apocalypse now . Are they short the tenyear . Shouldnt we ask them . I know, i know. And one sort of somebody i speak to regularly said to me today, when bill ackman comes out and takes one last victory lap, because he has been short at the long end here, that will be the top. So, lets wait for that. Or, as you suggested this morning, jim, maybe moodys doesnt follow through with the downgrade or maybe the europeans start getting interested in our paper. The germans do have money. Why dont the germans buy ours and short theirs, and the dollars being great. We always focus on japan. Japan, no growth environment. We should do what theyre doing. China is we have no idea what china is up to. Thats big debate as to whether or not they are actually recycling less. Theres all sorts of takes this morning. We dont know. By the way, the chinese economy, there are signs that say that its doing better. Whats interesting is maybe xi jinping decided, you know what . Well crush the real estate sector and after that, well let the economy go up. Its a command economy. Hey, david. Yo. Theyre communists over there and its arguably that, you know, when they dont tell you how the 21yearold Unemployment Rate is, maybe we should be saying, hold it. Maybe their numbers are not to be trusted. Well, weve always had that debate in terms of the veracity of the numbers coming out of china and whether theyve overstated growth and things of that nature. To your point, whether they just simply hold back in certain areas because they dont want to deliver particularly bad news. Right. Property sector, jim, there continues to be, i think, the key focus, given how important it is to the overall economy, particularly when it comes to the consumer and spending, which theyre obviously trying to increase as an overall percentage of their gdp. I dont know. I mean, that just doesnt look great at this point in terms of property and what theyre going to actually do to potentially save some of these companies and how aggressive the state is going to get in terms of doing that. Right. Well, david, couldnt it just be a cramdown . Th theyve got a habit of defrocking the rich over there. Weve got people like the ftc. They do that. But they dont detain people, the ftc. No. But the point is you got a lot of people who have invested in whether its the funds that invested in property and or were providing financing to these companies. Youve got a lot of apartments that have been promised that havent been finished. Youre talking about the middle class that could be hurt and or to the extent a lot of their wealth is tied up in real estate in some way or their ownership, their willingness to spend comes into question. Well, i mean, nike, they sell a lot of nikes. Theres the counter. David is right. But im looking at alibaba. The stock does go down all the time. Maybe theres a sense theres been destruction of the middle class, carl. Citi today raises their chinese gdp forecast back to 5 . Thats the second firm in the past week or two. Tesla, of course, led a discussion about teslas china demand. The competition with byd. I see jonas took a crack at that today. Yeah, jonas is out there. You know, david, when jonas speaks, i know you listen, because hes kind of clever and funny, but i actually asked phil lebeau about the oil substitution, trying to anticipate exactly what jonas would be focused next time, but look, i think theres you can do tesla every day, david. You can do netflix too. We didnt even talk about how netflix is going to charge more, i dont know. These are the two stocks that fascinate what we call retail, david, so anything you can possibly do about either one of them is called what we get its called numbers. It is called numbers. Youre right. Netflix performed fairly well yesterday in the selloff as a result of the belief they are going to, at least according to the journal, raise price after the actor strike is potentially settled. Havent heard updates on that. What have you been watching on netflix, david . Youve got companies that are levered like warner bros. Discovery. You mentioned nba, david. Nba, too. But if youve got any, you know, any nearterm refinancing coming up, rescue got to hit the bond market in a real way, its not a pretty picture. No, and thats one of the reasons why macys, when i spoke to the two gentlemen, the soontobe out ceo and the soontobe new ceo, that stock is down because theres concern about the credit card, but they have debt that comes due 27, 28. All these guys would tell you that david zaslav has made it so maturities in the next year and a half are not so bad. True, and im glad you pointed that out, because that is the case, but it doesnt mean that investors arent screening for that kind of stuff and looking and seeing in terms of the capital structure and when refinancings are due. When youre talking about close to 5 tenyear, that is going to change the, you know, the needs. You havent mentioned verizon or at t. Is there a reason why youve left them out . Yesterday, as you know, you surprised me. I did not notice, a, i guess the decline in verizon stock price, which has resulted in its dividend yield being 8. 5 . Dont you think thats a red flag . Carl, when i see a yield at 8. 5 , i say to myself, red flag. Red flag. Is it, though, jim . Is it a red flag . Yes, it is. Theres nothing that says they dont have the ability to pay that dividend. Yes, but i think historically, it doesnt matter what company. If you see a company that has a yield thats far in excess of everybody else, lets say this were one of the great blue chips and it had that yield, i would say, okay, well, thats a bit of a red flag. How about, bit of a red flag . Okay. Like, a piece of a red flag. Speaking of you know, all of this discussion reminded me, jim, of when you were trying to get the government to issue 50year paper. That would have been a deal, right . That would have helped the maturity. They all laughed, not unlike what carrie said about john travolta, and you know what . They all laughed. Its a carrie market. I went to every one of the socalled big muckety mucks in washington and they thought it was funny. They thought i was funny. Like louis ck funny. Another one of those big ideas that nobody listened to. Yeah, like sam kinnison. Disney park in new mexico. You had 300,000 acres traded the other day, and theres some 50year. Yeah. What else, carl . How many have they laughed at through the years of these big ideas that jim spends a lot of time working on . They think im a genuine wall street funny man. Lets see. We got services pmi crossing the tape this morning. Lets get to rick santelli. Hey, rick. Hey, good morning, carl. Yes, these are the final reads, so we replace the midmonth read. It was 50. 2. It gets downgraded to 50. 1. Thats the weakest since january. On the composite, the other direction. 50. 1 becomes 50. 2 and that now is the weakest since february when it was 50. 1. We see that Interest Rates are down. The best way to describe today is that were at 4. 75 in the ten and yet its down five basis points from its 5 00 eastern cash close. Its been up nearly over 480 and the longterm horizon is until somebody gets interested in those yields from a purchase standpoint, liquidity issues, probably continue to make selling have a bigger move to the upside than the lack of buyers to any moves to the downside. Squawk on the street will return after a short break. Oil lower, generally means some positive arrows for the transports, and indeed, the airlines are close to the top of the winners list today. Didnt really mention the the u order for 50 more 787s. Well get stock trading with jim in a minute. Move to the cloud. So, the question is. Cyber attack as cyber criminals expand their toolkit, we must expand as well. We need to rethink. Next level moments, need the next level network. [speaker continues in the background] the network with 24 7 builtin security. Chip . At t business. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com heres why you should switch with a partner from chrome to duckduckgo. Duckduckgo is a browser you download to your mobile and desktop devices. Unlike chrome, the duckduckgo browser has privacy builtin. It comes with a private alternative to google search, which doesn■t spy on your searches, and it blocks cookies and creepy ads. And theres no catch. Its free. We make money from ads, but they dont follow you around. Join the millions of people taking back their privacy by downloading duckduckgo on mobile and desktop today. One thing we havent gotten to is this strike by some kaiser workers. About 75,000 across several states impacting potentially 13 million customers in that time. Its an unbelievably ive had their insurance. Therefore, its much more visible than say a Writers Strike in peoples daily lives. Look, theres a lot of people who feel left out and have not had the big wage gains. Its not what the fed wants to see. But people dont make a lot of money. I expect it to last three days. And to your point, jim, a lot of the union wages, the auto is a good example, it hasnt kept pace. Which is why certainly they have every reason to strike. You have to be careful whether the companies have enough money to pay. It brings us to a flash head about gm today preparing a 6 billion credit line to cushion some strike costs. The read there is that maybe theyre ger believing its goin be longer than expected. These people are playing hardball now. Ford has five months. This is not going to be shawn fain is running out of room here. Its a kinder, gentler jim cramer when it comes to labor shortages . Versus my rarefied people. The real people arent making nearly as much money, carl. Theyre all living in their cars like i did for six months with any gun and my bottle of jack daniels so i dont know jack. She stole that from me. Lets get to stock trading. What are you watching today . Im watching chipotle. Dont fear, everything is fine. I just point it out, there are a lot of people trying to defend stocks that kind of been drifting down and chipotle good but the chart is bad. Is it as bad as mcdonalds . A lot of that they have franchisees. You cant grow if youre not going to get credit to buy a new mcdonalds and theyre unhappy. Chipotle owns its stores. Thats why ive liking the model more than mcdonalds. People like the mcdonalds model. I like the chipotle model. Its a great 20year chart. Were doing 20 years yesterday 20 year is different. Chipotle is amazing. Theyre spun off by mcdonalds and its one of the greatest companies on earth and its well run and i think it deserves to sell where it is. Maybe higher. David, you ought to try some of the new things there it is. Thats a nice one. Eat half and save half. Really . Thats a lot. Its a lot of food. Its a great value. How about tonight . I have molson coors on tap. These are companies, by the way, that younger people are buying. So im trying to get trying to get people a little more interested in what people love the they have a big analyst meeting. These companies are doing well, but theyre not nvidia. When do we get constellation . Thats tomorrow. These were all because of the bud light theyre doing a whole category got hollowed out. Bud light was the largest. Not anymore. Good to have you back. 6 00 p. M. Eastern time. Well get more data after a quk eawh wreacinicbrk ene bk two. Unnecessary action hero missing punches . Unnecessary check reversals . Unnecessary time sheet corrections . Unnecessary unentered sick time . Unnecessary go unnecessary go unnecessary when you can take this phone, youll be ready. Make the unnecessary, unnecessary. Let your employees do their own payroll. Good morning. Welcome to another hour of squawk on squawk on the street. Im sara eisen along with david faber who is live in new jersey. Take a look at stocks after yesterdays big selloff. Brutal selloff that left the s p at a fourmonth low. Were bouncing today. Up a third of 1 . The dow is higher by 14 points. A little bit relief on the yield side after the 30year crossed 5 . Were 30 minutes into the trading session. Here are big movers. Apple getting a rare downgrade this morning. Key bank cutting the name to sector weight to overweight citing a number of concerns, valuation, u. S. Sales expectations and Aggressive International growth estimates. Jp morgan cuts price target on meta to 400 per share but maintains an overweight rating. Meta is preparing to layoff employees at its metaverse reality labs unit today. And then intel on the move but off the highs after announcing programs to spin off its programmable chip business. Got some pmis this morning. Lets take a look at factory orders. Up 1. 2 . Tha that is multiples of what we were expecting. In between, we had minus 2. 1. Quite a comeback. One might say averaging out some of these months. 1. 4. Thats the best since march of 22. If you look at durable good orders, these are the final reads. We take the mid month reads out. Its at 0. 2. It becomes 0. 1. Transportation remains up 0. 4. If you look at capital good offensive, nondefense, it remains a juicy up 0. 9. Shipments remain up 0. 7. Heres the big numbers. Ism services, 53. 6. 53. 6 on services index. 53. 6 actually is the weakest since july when it was 52. 7. In between we had a solid 54. 5. Thats all pretty good because every month this year was above 50. We havent been below 50 in contraction mode since december of last year. If we look at the prices paid component, 58. 9. 58. 9 which equals our last look and its unfortunate because both of those numbers are the highest since april. Weve had numbers in the 54s in between. So we rather see obviously prices paid remain more tame on the services. Employment front, 53. 4. 53. 4. Well, that actually is the weakest since 50. 7. That was in july because we had another solid month in august. Finally, on the new orders front. 51. 8. And 51. 8 is on the weak side. We have to go back to the end of last year to find a weaker number and that number happened to have been under 50. We see Interest Rates remain lower on the session, but much higher on the week. Sarah, back to you . That has been the story. Rick santelli, thank you. Overall, guys, if we look at some of the data that rick said, good for the markets for it to come in on the weaker side of expectations. But its still showing maybe a little too much strength for comfort. And i think we should dive into some of the other numbers we got today on jobs. The labor market is key to this story. The Federal Reserve has wanted to see at least the labor market weaken enough to calm down wage inflation, but not so much that we have a stress or a spike in unemployment. So we got the adp report today which gives the sector private jobs hired. 89,000. That was a lot weaker than expected and it was the lowest in awhile. Its hard to square that, david, with the report that we got at the same time yesterday where we saw 9. 6 million job openings. I think its worth diving into for a moment. A lot of economists this morning are poohpoohing the report. They said to take the report with a massive pinch of salt. Why . He said because postcovid its come out much, much stronger than some of the precovid numbers and he thinks that that survey is having a hard time adjusting. David rosenberg who has a bearish bias was saying theres a 33 Response Rate on the report. Not as big as 70 the report before. The bottom line, carl, is that its really hard to get a signal through a lot of these noisy reports. We know the fed pays attention. Thats why the market paid so much attention to it yesterday. Is the job market cooling . We think so. Tomorrows job report should be confirmation. And thats really going to be the key because it is hard to tell whats happening on some of these noisy volatile data points. Jolts was narrow in the areas that did rise. Cramer citing paychecks saying maybe people are posting more job openings because they feel better about potential supply, people are back looking. Thats when before, youve given up hope. And as for adp, no lack of notes today saying that data set is unforecastable. Its not changing our number for friday. I think the estimates are still 150, right . Exactly. Theyre kind of poohpoohing both of the reports when it comes to figuring out whats going on. One big discrepancy is that the biggest job losses in the adp report came from professional business services. Legal services, architecture, accounting, that sort of thing. It was one to have biggest job openings posted in yesterdays data. 500,000. That just shows, david, that theres some noise here. Theres professional business services. That was a drag on todays report. Its hard to know what to make of the overall number. The expectation for tomorrow, ive seen estimations between 150 and 170,000 payrolls and thats down from the 187 increase in august. I think the wage number is going to be important as well when it comes to the labor market. Thats what the fed is targeting on the inflation front and i you know, we have this new strike happening with the workers in california three days. You do wonder whats going to happen with wage growth as a result of these strikes. These are thousands and thousands of employees. Adp did say 12 months of consistent deceleration still up fiveplus in adps view. It was interesting to hear yellen say some would say pollyanna, but optimistic things about the percent of gdp that paid to service the dead and the idea that higher for longer in her words, not necessarily a given. I think with that sound. I wanted to listen to the sound. Thats why i was pausing. We have been surprised that the u. S. Economy has shown so much resilience. Consumer spending remains strong. Investment spending is solid. Housing is usually clobbered by tight monetary policy. Its stabilized and seems to be moving up. And so i think people are trying to figure out exactly what its going to take to keep inflation moving down and the Economic Resilience that they see maybe suggests higher for longer. But well see. And i think its by no means a given. So i think that shes maintaining the positive tone around the economy, the soft landing story, the fact that the bond market is reacting to the Federal Reserve. And you remember i pressed her a few not that long ago, about the deficit and the concerns about supply and demand on treasuries. And he did dismisses it. Remember when i asked about the high deficit, she gave a different metric. She said its important to watch the u. S. Interest costs as a share of gdp. Heres a chart today about what is set to happen to the u. S. Interest costs as a share of gdp. She wasnt worried about it. If you can see the blue line there, were still under 3 . Not bad. Not out of the ordinary. But the orange line in the middle is where Goldman Sachs expects it to go and that is to a record high by 2025. A peak. The top line shows what would happen if rates stay where they are right now. The bottom line, the white one, shows if we go back if the fed cuts down. Its still set to rise. Theres the forecast. And what does this tell us . This tells us that the u. S. Has a government the u. S. Government has a supply and demand challenge. And the cost of servicing our debt is going up and is on track to hit a record. Thats problematic. Yeah, sarah, they dont make any bones about it. Its not about the data set. The Inconvenient Truth is, the u. S. Bond market has a supply and demand challenge. They were saying similar things yesterday. They seem very straightforward about it. Youve been talking about it for weeks. If its not about the data and its just about supply and demand, i dont know where we are. I guess well look at technicals. Some people think we may be nearing a top. Who knows. I think it all goes into it. Yesterday we got a big jump in expectations for the november fed meeting, for them to raise Interest Rates. Thats definitely part of it. Worried about inflations are flaring up again or remaining sticky. But the rate strategists, its theres more to it built into the rate move we are seeing right now. Maybe its technical in nature and maybe its positioning. But its more than just the fundamentals of the economy and inflation and fed expectations and thats why i continue to point to the deficit. Well see. The Kevin Mccarthy news, i think it doesnt help. Dont miss the forest through the trees and the forest is we have 33 trillion in debt and a rising deficit. It speaks to the challenges in dealing with it. Lets talk about what these rising rates might mean with equities with bob dahl, chief investment officer. Bob, its good to have you. Are you of the view, bob, that yields have separated from anything regarding inflation right now . No, i think the the bond market and the stock market are waking up to the fact that you cant have a good economy, falling inflation back to 2 and the fed done or almost done and going to cut rates next year. Its not going to happen. Its going to be one way or the other. And sarahs analysis, i fully agree. For a decade we have the the deficit going up, but Interest Rates falling. So Interest Rate expense didnt go up. Now with the debt going up and Interest Rates going up, all of a sudden that free launch weve been eating for years, were going to have to pay the piper. You put that off altogether, no surprise were at 475. What does that mean for equities . Are you paying any attention to some of the 1987 analogs where it was a picture that stocks had rallied and yields had continued to climb relentlessly up until october . So what i would say is that the possibility of a financial accident certainly has gone up. When you move Interest Rates this far this fast, we started to see some quality spreads widening. Im not forecasting anything. I dont know anything. When you get this abrupt change, it often leads to that. And i think thats part of the rising required rate of turn, if you will, and among the reasons stocks have gone from 4600 to 4200. How does this resolve itself, bob . It doesnt look like were going to get much action from congress. The treasury secretary isnt even seeing this as being pinned on worries about u. S. Debt. So where is the resolution . On the Government Debt side, there is no resolution. Weve got to live with this which means slower growth, somewhat higher inflation, god forbid higher taxes. Hopefully some day some spending cuts somewhere. But theyre all longterm issues as you know, sarah. In the meantime, the markets have got to come to grips with, okay, how long can the economy stay good as Interest Rates are catapulting higher or do we have economic weakness in that dreaded word recession comes back into the vocabulary. Its a valuation judgment from a reset from 2021 pe, the 1819 on this years consensus earnings. 1819 times is still not cheap as you well know. And so this 4200 holds, if the economy stays okay and Interest Rates stop going up, but if the economy weakens and earnings estimates have to come down, i dont know where were going to get a double digit percentage gain in earnings next year. 4200 is a lot more interesting than 4600 but i think the risk is sadly still to the downside. Where are you long here, bob . I would own companies that have earnings predictability, earnings persistent, good cash flow, reasonable valuations. The hmos are an example there. Great stocks last year. Struggled this year. Starting to poke their heads up again. Of those kind of names that have some economic independent, if you will. Bob, well keep it short today. Good to see you. Thanks for the time. As we head to break, heres our road map for the rest of the hour, the reits rout. Are they worth buying . More on the stocks that have the most exposure and what it may mean for those companies. And the soaring yields making companies with big cash hordes rethink returning cash to shareholders. Well talk about why when squawk on the street continues in a minute. This is jabra enhance select. Its more than just a hearing aid. Its a smart hearing solution that makes hearing aids more convenient and less expensive. With jabra enhance selects premium package, better hearing doesnt have to start in a doctors office. It starts with our free online hearing test. You can fine tune your settings with your remote audiology team. With jabra enhance select you can get the same advanced Hearing Aid Technology and professional care you expect from a clinic at a fraction of the cost. Try it risk free for 100 days. Visit jabraenhance. Com. The first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Real estate sectors down more than 20 from its 52week high. But could there be opportunities for this Fourth Quarter . Joining us now is bmo Capital Markets analyst. Sorry im not there in person with you. Youve had an interesting call in the past. I would assume this move down recently is just on rates. How do these things typically perform hisically when we have the ten year soaring to recent hires. Its not a good time to be a reit analyst. With Interest Rates going up, demand is slowing across most asset classes. Theres a lot of uncertainty with asset prices. We think that needs to settle out. We need to see a settlement on Interest Rates. I think the opportunity is on the supply side. Its coming down as far as Development Starts across most asset classes. Well see that really come to fruition in 25. 2025 looks like a great year in terms of fundamentals for real estate. What about the underlying financing, for example, for either new or existing developments that perhaps have maturities that are coming due and what that may mean for the sectors if they have to refinance at a higher rate or unable to. I come back to offices. But more broadly speaking across the board. Its creating a huge uncertainty in the markets and were seeing that in stock prices today for the office reits. Right now it seems likes the banks are willing to work with the owners and kicking the can down the road. But we need to see fundamentals improve and were starting to see that in office. Were starting to see more activity in places like new york and san francisco. So those two combinations need to come together. But, yeah, it creates thats why reits are trading where they are. Cant get in until 2025 . Well start to look at 2025s. We might be into the reits next year. Rising Interest Rates, really uncertain economy, were not really superbullish on reits today. Is there anywhere to hide in the sector which has also traditionally been a safe spot. Although, the fact that it says bond proxy doesnt feel safe right now. There are many companies. I think the really good thing about the reits today is that the Balance Sheets are much better. There are some Blue Chip Companies in the four times range where they could be opportunistic on acquisitions if there are distressed sales. Prologis one of those . Prologis, bxp. All very good Balance Sheets. When you get pushback, is it about current valuation or longerterm doubt about vacancies recovering to prior trend . The pushback is on deceleration. Demand is coming down. On office, we are starting to see activity on leasing but occupancy is not really picking up. A lot of these things in office feel better but were not seeing it in the numbers yet. In other asset classes, comdema is not as strong as it was earlier this year. There was a lot of a time the yields were far ahead of the ten year. That may not be the case any longer given the drop in the reits overall. Normally you want to see the dividend yield above where the tenyear is at today. And for some companies with a lot of growth, you can stomach that. Right now, we would like to see either rates come down or growth kind of lead to higher dividend growth. I did notice bmo jacked up q3 gdp more than a point yesterday, right . Right. The steam engine continues to fire. Jon, thanks for coming in. Good to see you. Another day of fresh highs and yields for the dollar. Well take a look at which companies have the most exposure to a strong dollar and what it means for them. You see almost 1 t07his morning on the dxy. Stay with us. Here in hawaii there is always time. Theres time to spend with family, time to enjoy with friends. Theres always time to listen or lend a helping hand. Here we have all the time in the world, but no time to waste. The dollar hitting its highest level since november of 2022. Sara eisen knows that. But some warnings for fx headwinds are ahead. Overseas being a part of that. Im excited to have dom chu here. Im here with you. Im so excited. Because we actually get a chance to do something physically together here. Kind of like what jim would do with the mad dash with the stock exchange. Were doing to stay a little bit more focused because we are looking at this sector from the dollar side of things. You showed that kind of oneyear chart of what were seeing here. And this is the move that everyone is paying attention to. Its roughly about a 10 move higher since weve seen in the mid part of that summer. But were still, remember, at one point, we were down about 11 from the highs that we saw just this year. Now in 2021, forget about that. Remember the massive 28 rise that we saw postpandemic. So were still relatively okay compared to that. But this move has some concerning efforts, i guess, for some traders in certain specific groups. When we talk about the dollar exposure, there are certain key sectors that always get mentioned. We talk about Consumer Staples often. So if you take a look from a sector perspective, its probably going to be Consumer Staples, technology and to a certain degree Communication Services as well. This is, by the way, one of the efts that folks are using to track that dollar move higher. Uup is the ticker. The move higher here, in context that weve seen in that 2021 span, remember, from here to here, it was a 28 rise. Its kind of important to keep that in perspective. From a sector side of things, Media Companies and a lot of names like netflix, alphabet, meta platform, those names mentioned in terms of dollar exposure. Tech and com services could be affected. Consumer staples in that group as well. You could argue about whether or not those factors for the dollar are more or less important than some of the risk aversion elements that are in the market right now. But you can argue as to whether investors actually Pay Attention when we are told these were dollaradjusted numbers or adjusted for the moves. Oftentimes, investors are being to overlook with the idea being that eventually it comes back to some sort of exactly. And if you take a look at those, those are the sector that is you mentioned that are affected because of the adjustments. Some of the one that is people look at probably more impacted by the rate trade. You talked about real estate. Utilities are also one of those sectors thats getting adversely affected because people use this as an income trade. The dividend yields are bond proxy like. But these are the least exposed, some of the least exposed to the dollar movement. Probably rates unless the dollars rise. Youre talking about the apartmenttype exposures, homebuilders, for the most part in the s p 500, make a lot of their homes inside the united states. And so for that reason, homebuilders are a little less exposed to that u. S. Dollar trade. I would point out, regional banks, Money Centers aside, they have massive exposure, sometimes outside of those u. S. Markets. But regional banks do not. The insurance sector side thing, progressive, allstate, dont have as much. This is due to inventory. Correct. 8 mortgages, well see how that plays out. There are so many crazy crosscurrents right now. Its almost like the entire economy in the u. S. And markets are in a state of transition. There are so many different factors that are affecting this tugofwar. It only affects Certain Companies in certain ways when those narrative that is would be big are taking a backseat to whats happening with Interest Rate moves or the housing dynamic in america. Thank you. No, thank you. Im excited to be here with you. Hes here. Its not like that its not artificial intelligence. Its not that virtual wall that i learned existed. Sara, did we find out whether the japanese did intervene on the dollar . They havent confirmed thinking. But they did keep us all guessing because we saw that wild move where the yen strengthened and the dollar weakened. Whether they intervened or they just scared people that they were going to intervene, there was a move with no confirmation. Still trying to figure it out. One Silver Lining of the higher yields, higher returns for companies with big cash hoards. Bob pisani joins us on set to explain. There is all sorts of knockon effects. We have been talking about how rapidly rising rates are playing havoc with companies that need to borrow money. Heres another knockon effect. Higher rates is that buybacks may be reduced because Companies May feel the need to hoard cash. Corporate america is sitting on 2 1 2 trillion dollars in cash. Companies with a large cash hoard are now getting a significant return on the cash just by investing in shortterm debt. Buybacks were lower in the Second Quarter compared to the first quarter. This is largely due to the banking crisis. But now were waiting for these Third Quarter numbers to come in. We dont have them in. It will be a few weeks. Howard silverback says he expects them to be lower in the third and Fourth Quarter due to the higher Interest Rates which may cause companies to pull back to hoard crash. There are a small group of a few Dozen Companies that are sitting on billions of dollars in cash. This cash is typically invested in shortterm debt instruments that used to generate no income. Now they can get 4 to 5 returns which is very significant when youre a company like alphabet or apple, for example, look at the cash hoard here. Apple has over 160 billion in cash. Suddenly, these cash reserves are generating significant income. This isnt necessarily any reason to become bullish on apple just because they have the cash look, 160 billion, 5 even on a shortterm interest, you have 8 billion in cash for doing almost nothing at this point. Im this is another example of the enormous knockon effects of higher Interest Rates. We were talking about how Biotech Companies are having to spend more to borrow. Were talking about wind farms, anything capital intensive. Look at the effects that you dont necessarily think about of all these higher Interest Rates and you can see why the stock market is having so many problems. Theres all sorts of implications here. And the other one is that bonds with their yields are much more attractive alternatives to stocks which was not the story. Remember, when there was no alternative. The premium you get for holding stocks, its almost zero at this point. Its kind of unfortunate. In a way, i dont know how you feel about it, i think its good that were getting more normal. Thats weird. My First Mortgage in 85 was 11 . I remember that very, very well. And there was 17, 18 . It was 17 in the early 80s. Now, 5, 6 mortgages, thats more normal. I know were at 7, close to 8. I think a normal Interest Rate world is not a bad thing. Getting a real return on your bonds, i dont think thats necessarily a bad thing. Well, its happening very fast. I know. Thats the problem. Agreed. Others would say orderly. Orderly. But quick. Quick move in rates. In the last two weeks, its been verging on the disorderly. I agree with you up until then. And its very traumatic. This is why were doing these stories about all of these knockon effects. The markets are having a hard time digesting this because the move has come so quickly. Dont tell that to i remember when mortgages were 20 . I just said that. Didnt i just say that . My dad said it on the phone last night. That was a reference to me and im not a i said were all a product telling millennials that. Thank you. That was a reference to me. Thank you, bob. Always love ya. The average rate on a 30year fixed mortgage, some are warning of more pain ahead. Jp morgans chief economist is joining us. Were back in two minutes. Announcer realtime Exchange Sector sort is sponsored by select sector efts. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to help keep our Online Platform safe from cyberthreats . Absolutely. Can we provide health care virtually anywhere . We can help with that. Is it possible to use predictive monitoring to address operations issues . We can help with that, too. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Welcome back. Heres your cnbc news update. Baltimore police are searching for the shooter or shooters who injured five people tuesday night after a homecoming event at Morgan State University in baltimore. Police said early this morning that no one is in custody and all of the injured are expected to survive. The parents of ftx founder arrived at a manhattan courthouse this morning as jury selection continues in their sons fraud trial. Theyre on the list of potential witnesses that could be called to the stand to testify for either the government or defense. Jury selection is expected to wrap up today and we could hear from the first witnesses by this afternoon. And President Biden is wiping out Student Loans for 125,000 americans just days after payments resumed. Of the newly announced 9 billion in forgiveness, half will go to people who have worked in the Public Service sector for a decade or more. The rest is set aside for borrowers with disabilities. Back to you. Thank you very much. Soaring bond yields becoming a singular focus for the markets. The 30year hitting 5 . The highest level since august 2007. Yields on the tenyear and the fiveyear hitting their highest. Twoyear is above 5. 1 . And new data showing mortgage demand plunging to its lowest levels since 1996. Lets guess what it means for the economy and the fed with jp morgan chief u. S. Economist. Is that the end of the soft landing story . Well, you know, i think over the past year we and other forecasters have been kind of bouncing between soft landing or mild recession and certainly the latest tightening in financial conditions, not just higher Interest Rates and higher Mortgage Rates, weaker equities, a stronger dollar, all those are certainly raising the risk that we may be leaning a little more toward the mild recession rather than the soft landing. Do you think the fed is going to keep raising rates . No, we think theyre done here. And, you know, i think this what weve seen in markets lately probably reinforces our conviction in that. Even if we do get some better data between now and early november meeting, we think they probably have seen enough damage here or implied damage from financial conditions to the broader economy that theyre going to be comfortable, we believe, on hold for the rest of the year. Housing is getting hit. We mentioned mortgage applications. How much worse do you think its going to get in that sector and how do you look at the spillover and other sectors too. Yeah, so right now home sales are basically at rock bottom levels. Theres always some underlying demand for resales, i think whats interesting is that event seen a similar hit to Home Building and i wouldnt expect that to come down dramatically from here in part because even with extremely weak home sales, youve seen growth start to pick up again and i think it was last week, we saw the surpass the peak that was reached last year. I think that does support housing. So maybe this wont be if it is a mild recession. I dont think it will be a housingled downturn but broader economy i think looks a little more challenged by the higher rates. Which raises the question about the labor market. We get a jobs report on friday. I sort of did a deep dive into jolts in adp and why economists were brushing off both of them because they were delivering signals. What do you think is happening underneath in terms of the labor market and specifically on wages which we know is key for the fed. Youre right, you have to look at all the figures impressionistly and adp isnt something we want to hang our hat on very much but the labor market has been slowing, maybe not slowing as quickly as people thought at the beginning of the year. But the trend is still pretty clearly down. The revisions certainly have been consistent with that. So i think well continue to see that in the year end as our view and well get sub hundred payroll growth by early next year. Wage growth has been decelerating. But, you know, i think theres some further to go there for the fed to be comfortable. Switching from, you know, a tightening bias to more of a neutral bias. You dont think fed chair powell is going to look at this report and say 1 1 2 openings for every unemployed. Thats still pretty hot and tight. We got to do more . Hes said that before. Certainly. The vacancies to Unemployment Rate did tick down a little bit. But it is elevated, as you said, its 1 1 2. Normal might be 1 to 1. 2. But we are making progress that peaked around 2. Were probably halfway on this journey to a more normal labor market. And, you know, powell has said theyre going to be forwardlooking in this respect. They you know, they were on hold last month with vacancy to unemployment ratio at 1 1 2. I think theyre going to be forwardlooking here. Mike, good day to have you. Thanks for talking talking us through these higher rates. Cathy woods Ark Innovation app is coming off its worst day. Its down almost 60 as you see in the top right corner there over the last three years. More with the ceo behind one beatendown name, pagerduty about how tech spending is holding up. Stay with us, were right back. I embrace my hispanic heritage because my heritage is deeply rooted in family values and hispanics boost economies through the millions of Small Businesses they own. Science and tech are winning noble prizes in industry and play critical roles in Public Service, from congress to the u. S. Supreme court to many other areas. Hispanic americans are and will continue to be a driving force for progress. were lucky to have this team working for us. Our therapists give their all each day, by helping those who need it most. We take great pride not just in the job our team does, but in them as people. Our people. And while were in the business of taking care of others. Its important our therapists know that with benefits from principal, theyre taken care of too. tech spending being impacted by rising rates. Some estimates that Global Security spending is estimated to rise 14 next year despite some of these rate pressures. Our next guest says a. I. Igniting spending pagerduty ceo is joining us now. We were having a discussion about buybacks and how rising rates are making it difficult to spend money on that. It was because they were scrambling to spend on a. I. Is it starting to erode some of these other priorities . It is a difficult market. Weve seen a lot of volatility in the macro environment, political uncertainty, and i think customers continue to be really thoughtful and cautious on where theyre making investments. But theyre making investments in areas that grow their revenue, generative a. I. Is a big part of that. Help them reduce the risk and cost of material operational failures which become more and more challenging as these companies transition to being truly Digital Businesses and were also seeing customers adopt automation more readily. That was something that people historically employees were afraid of, would automation replace me. Were seeing employees be open to adopting automation as a way to improve their productivity, to drive efficiencies for their teams and companies. Has it changed the way you frame a sales pitch or argument to bring in new business . We have upleveled the conversation about how do you protect value, protect and grow your revenue, reduce your operating cost and is do that in a highly quantifiable way with things like lower cost of ownership and quick time to value. Its we dont have customers that want to wait five years to see a Value Proposition play out. They want solutions that are easy to deploy. Dont require a lot of Systems Integration and extra costs. Dont require a lot of administration and maintenance. That increased appetite for automation is there because their teams need to do more with less. Everybody is sort of in this race to figure out how to make generative a. I. Work in their business but also in their products and services. And so, you know, there is a little bit of an arms race going on there and that requires investments. So youre looking in other places in your budget to find that capacity. What is that youre offering them . Its a great question. A. I. Has been part of your platform for almost a decade. We released a number of features over the last year that really serve as sort of copilot agents to help our operations teams do their work faster, whether its drafting a post mortem report so you learn from it faster or automating the process of selfhealing, without the need for employees to get involved in that process. Were automating more and more of the value chain associated with what can be very costly damaging incidents. The more we can automate that, the more we return these knowledge workers back to innovating. We hear about this growing market for a. I. And preventing hacks. What do you think is going on with your stock . What are you hearing from investors there . I think investors want us to be superoptimistic about an economic environment that is uncertain. Weve chosen to be prudent. We continue to control the controllables. Since wemean, since we went pube have nearly tripled revenue, improved operating margins by 35 points. We posted a strong growth and profitable quarter, and were focused longterm on durable growth. Longterm, i remain very optimistic about the market. I was with 100plus ceos at fortune Ceo Initiative conference yesterday and you know, what i see is everybody grappling with a challenge of wanting to embrace generative ai, but needing to figure out how to do it responsibly. I think its a maras law that tells us that we usually overestimate the shortterm impact of new technology, but underestimate the longterm effect. And i think thats really where we are in this hype cycle. But what i was really encouraged by is, every one of our large enterprise customers and were in over 70 of the fortune 100 and over half of the fortune 500, is trying to figure out how to innovate faster, do more with less, and automation is critical to them. Thats a good look at sort of the mindset around spending. Great to see you again. Its great to see you both. Thank you so much for having me. About ten points below where we are right now. Well keep an eye on that. Stay with us. At morgan stanley, old school hard work meets bold, new thinking, to help you see untapped possibilities and relentlessly work with you to make them real. Meet gold bond daily healing. A powerhouse lotion that moisturizes, heals, and smooths dry skin. With 7 moisturizers 3 vitamins. And. New gold bond healing sensitive. Clinically shown to heal moisturize dry, sensitive skin. Gold bond. Against Kaiser Permanente this morning. Its the largestever Health Care Strike in the u. S. Bertha coombs monitors those issues for us, amongst so many others. What do we know here . Well, this one is for the record books. The nations Largest Health care system, this labor action, the largest ever for a hospital. Kaiser says negotiations are ongoing, but thousands of workers started the walkout at 6 00 a. M. Local time, across kaiser facilities in six states, beginning with hundreds of pharmacists and ophthalmologists at kaisers virginia and washington, d. C. Facilities. Thats the area over in the red, as we take a look on the map. Theyve only authorized a 24hour walkout. Meantime, workers out west in colorado, washington state, oregon, and california, those are the blue on your map, have voted to strike until 6 00 a. M. On saturday. The walkout does not involve doctors or registered nurses. The nurse signed a fouryear deal just last year. But this does involve eight unions representing 75,000 workers. 65,000 of them in california, where Kaiser Permanente is based. And they range from lab and xray technicians, vocational nurses, home therapists, and other support staff. This amounts, though, to about 40 of kaisers national workforce. And beyond wages, key issues include staffing and subcontracting of jobs. Kaiser says there was progress in talks overnight and that it has offered pay increases of 12. 5 to 16 over four years, minimum wage of 21 an hour, 23 an hour in southern california. And that the hospital has boosted hiring to try to combat understaffing. This walkout, though, marks the seventh major Health Care Strike this year, according to the bureau of labor statistics. And an eighth now looms with workers at 11 tenant facilities in california, thauthorizing a strike that would start october 19th. And david, tenant is publicly traded, most of the other facilities are notforprofit health systems. So these workers may be back on the job as soon as the weekend, at least striking workers now, but it doesnt mean theyll get anything done in terms of a deal. Not necessarily. Although, what weve seen, if the past is prologue with kaiser, the larger walkouts usually are shorter. And they usually result in a deal some time later. Smaller walkouts, theyve had engineers that were out for three months, they had Mental Health providers who were out for two months. Those may take a little longer, but just the sheer size, were talking about 40 of their workforce could mean that this moves a little faster. An interesting thing that makes it similar to the uaw strike is that theyre also talking about the right to make sure that they can have Union Representation in whatever new hospitals the system acquires. Much in the way that the uaw workers want to make sure that they can have Union Representation with the ev makers. Bthera, thank you. That does it for this hour of squawk on the street. Stay with us for another hour. With gold bond. You can age on your own terms. Retinol overnight means. The smoothing benefits of retinol. Are now for your whole body. Plus, fastworking crepe corrector diminishes wrinkled skin in just two days. Gold bond. Champion your skin. Ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Good wednesday morning. Welcome to squawk on the street. Im Carl Quintanilla along with sara eisen on the floor of the new york stock exchange. New jobs data shows signs of what might be a cooling labor market. The manager of a 388 billion fixed Income Portfolio is with us next on what could be coming. Plus, fewer iphone upgrades resulting in an apple downgrade