Transcripts For CNBC Squawk 20240703

Yesterday the s p was up more than 1 . So, kind of putting on a brave space treating good Economic News even with the headwind of whats happening. Im watching financials which were lower and in reaction to more Bank Earnings and have turned higher. I dont know if its yields. Theres a lot in there because bank of america and Goldman Sachs were better. They were better. As i was saying, when it comes to the banks, if the economy is going to be okay, the banks should probably be okay. If your biggest concern is recession, we pushed it off a little farther. And Home Builders up 0. 50 . Energy and cyclicals. Lets take a look at the state of the consumer. I spoke with bank of America Brian moynihan, and his assessment is the fed is working. Well have 4 trillion plus of our consumers moving accounts, writing a check, taking cash out, spending money with zelle, so 4 trillion plus a year. In 2021 that grew over to 2022 growth rate was 9 to 10 . In the early part of this year, 23 First Quarter of last years First Quarter sort of say 9 . Its now down to 4 . A little over 4 to 4. 5 . Thats held true in the month of september and also october. That growth rate, to put it in context, is consistent with where we were in 16, 17, 18, 19 which was low growth, low inflation economy. The consumer activity has slowed down. It moves around from which categories but across 4 trillion, 37 million checking customers it slowed by half which means the consumer is being slowed down by the Interest Rate environment and whats going on. Good snapshot of realtime Consumer Information and the slowdown on consumer spending. He did say theyre still not expecting a recession at this point. For more on what this means for the markets, were joined at post 9 by ubs alignment partners managing directly alli mccartney. Great to see you again. It is confusing. Weve had a batch of strong data. We hear the consumer is slowing from the banks. And the market is sort of waffling between the soft landing, the hard landing and the rate scenario. What are you telling clients . We are actually highlighting that sort of the binary nature of whats going on. You have one narrative thats driven by a lot of actually, Brian Moynihan and a lot of the banks have pointed out both sides. You have rates are catching up, u. S. Credit card debt is going. He pointed out middle income houses are, you know, starting to show signs of weakening. Then you have that other narrative, but the consumer still goes. We just saw great retail sales numbers, you know, were seeing actually in the rear window, we have earnings recession, so we think thats behind us and would he moving forward. It is very much a confusing time. I think ultimately the question is, is the fed going to continue to drive markets or are fundamentals, because what were seeing in fundamentals are still very strong both on the corporate earnings perspective and individual households. Remember, in the u. S. , 70 of gdp is driven by households by individuals and their spending. Would you tell investors that its safe to be buying cyclical stocks like were seeing today . Yes. So, today is that cyclical day. Youll see a lot of them. What youre seeing is hedge funds get behind that trade and a lot of the asset manager is not. Theyre leaning more into bonds or longer term. Most of the last 15 years for investors, the market was a beta trade. There were years that were faang and years that were not. In general, if you bought the markets, you bought the whole market. I think that is not going to continue. You have to get behind Going Forward secular themes and laggards. We expect this to be a great earnings season and lead into future earnings growth. We do think thats going to be driven by the magnificent seven. We also think that he will allow them to grow into their multiples as opposed to shoot to the moon. Right now i think its about balance, a balance between stocks and bonds, about balance between commodities and more traditional assets, its about balance between private and public equity. You talked about expectations. I wonder if you just pan out and say, the stock market measurement of the s p has done nothing for two years but given you 10ish plus percent over five. Bond yields are the highest in decades, but giving you an opportunity potentially in a port foal, capture yield, maybe have an offset to equity risk down the road, and enable you to maybe hold more equity. How are you telling people to think about that . Thats the right question. Its a conversation that hasnt been had in a very long time. Again, going back to this investor muscle memory. If you look at what our expectations are, relatively soft landing, rates probably stay where they are for, lets say, another year and go back to this, quote, unquote new normal of 2 to 3 , then basically what that says is, were about to face an environment where stocks, bonds, cash and commodities can perform. Not only can they perform, but because there are different themes and narratives and tensions in the market, the other thing that can happen is they can actually balance each other out. Again, were trying to get people to do two things be diversified and discreet. Know what they own, transparently own those things in separately managed accounts. Like weve been talking about with the banks, youre not stuck selling bonds, know what you own in the stock market, make sure youre more equal cap weighted than market cap weighted. And really just, you know, use cash as a place to deploy when those opportunities come up. I noticed your speck lar themes, which you say are necessary in this environment. You had the obesity trade on there. Thats already worked so well. Do you still think theres room to run . Heres my response to that. Theres probably not the same amount of initial upside, sort of similar to the a. I. Trade and what happened in the First Quarter of this year. But we are talking about a theme that i think if you actually dig into the numbers of the Health Care System and the issues in this country, there is definitely still room to run with true commercialization and sort of acceptance of these drugs. Again, i think similar to a. I. , theres not a broad understanding systematically of how theyre going to affect the world. To get back to that, when we think about investing, you really have to look at the intersection of history and graphics. When you see some of our themes, reshoring, industrialization, you think about not only Government Spending and what consumers want, but you think about the demographics of this country and others that play into those themes. Alli, thank you. Good to get an update and some thoughts youre sharing with investors. Turning to the latest in the middle east, President Biden expected to visit israel tomorrow. Kelly cobiella is in tel aviv with the latest. Hello, kelly. Reporter hi, mike. Yeah, at this moment secretary of state Antony Blinken is meeting with mahmoud abbas, Palestinian Authority leader, in amman jordan, for the second time, i believe. The president is set to meet with muhaahmoud abbas after stopping here in israel. It is a very important visit. Somewhat of a surprise given the security situation on the ground, but the president set to arrive here tomorrow. The National Security Council Spokesman don kirby saying the goal is to give the president more of a fingertip feel on the israeli plans and how things are going on the ground. The president has been involved in this diplomatic effort around the area, trying to get all leaders to talk and try to contain this war between israel and hamas, talking to iraqs Prime Minister late yesterday and as i said, a series of meetings tomorrow, of course, with Benjamin Netanyahu here in israel and on to amman, jordan, with more diplomatic meetings, more push to open up some humanitarian channels for gaza. In the meantime, israel continues to hit hamas targets. In gaza that has had a really tragic effect on some civilians. Particularly in Southern Gaza where people were told to evacuate two nearly two dozen people killed. More people dead as well in rafa, where that Border Crossing is with egypt, the very place where hundreds of people, including foreign nationals, including americans, have evacuated to, hoping that that Border Crossing will at some point open. Negotiations have been ongoing now for days. And theres still no sign of people being allowed to cross over or of humanitarian aid being allowed to go in. Kelly, thank you very much for the latest from israel. Still to come, the u. S. To tighten curbs on chinas tech access. The impact for nvidia, intel, amd and others coming up next. Exposing a crypto billionaire and its not sam bankmanfried. The largest government bcoitin seizure ever. Details next. Squawk on the street is back in a moment. United airlines reporting after the bell. Revenue expected to be strong after strong summer travel. The concern here for the street is rising fuel prices, which delta also warned about that would eat into its Fourth Quarter profit. Cowen tells us they are watching for updates on business travel. United shares have been bumpy with the stock down double digits in the last month. For nearly a decade it was one of the biggest mysteries in crypto, who stole 50,000 bitcoins which would be worth more than 3 billion from a dark website called the silk road. No one knew until the man behind the crime made a costly mistake. Now a new cnbc documentary crypto 911 exposing a bitcoin billionaire provides never before seen footage and the story behind one of the biggest heists in history. Eamon ja javers has the story. Reporter jimmy, how do you feel . Why did you steal the money, jimmy . A spectacular crime. Theres a lot more money we dont know about. In a small town. Shocked. I was shocked. Reporter why . I was so surprised. A 28yearold secret bitcoin billionaire. His private jets, wild parties and dark secret. It was just a real feeling. With jimmy, there were no limits. This is the story of one of the biggest crypto heists of all time. Hes living this Party Lifestyle with no visible means of support. Right. With clues dating back to the earliest days of bitcoin itself. In a story that reveals a dark truth about the hackers and coders who created cryptocurrency in the first place. Huge amount of bitcoin is leaking out of the system and you have no idea where its going. Its a huge question. And the man who could have gotten away with it, except for one phone call that led to an abrupt end to a nearly decade long manhunt. Clark county 911. What is your name, sir . Its jimmy zhong. Thats just a sneak peek of the documentary. In it irs criminal investigation, the agency that investigated the case, takes us behind the scenes and shows us how they cracked the story. We also get a detailed look into their interactions with zhong and a look into thinks bizarre life. You can check it out now on cnbc. Com or scan this qr code at the corner of the screen for a link to the whole story, guys. Back over to you. Eamon, you said its a bizarre life. Who is this guy, jimmy, who is at the center of your story . Hes a brilliant hacker and a brilliant coder. Investigators who met with him and talked to him said they saw his fingers flying across the keyboard as fast as they had ever seen. He never used a mouse because he knew the cheat codes to get it to work on the laptop. Hes a guy that lived with his laptop and had was a party boy in athens, georgia. He hacked his way to a 3 billion secret fortune and it didnt change his life in exactly the way he expected. Amazing. Ea eamon, look forward to checking out the full story. Thanks, mike. After the break, opportunity in the housing sector. Wells fargo laying out the names the firm would buy right now despite rates rising and sentiment dropping. 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Choice is asking wyndham shareholders to approve the bid which offered a 20 premium to wyndhams last closing price. The wall street journal reporting minutes ago wyndham will officially reject the takeover offer. Both stocks halted. Wyndham had been up 10 ahead of that halt. The Semiconductor Names are seeing a big move lower with the semi etf seeing a drop off the lows on the back of news that the u. S. Is planning to further restrict chip exports to china over National Security concerns. Kristina partsinevelos has been following this one. What do we know . These new export controls are not meant to impair chinas Economic Growth but stop its military from advancements in a. I. This is according to commerce secretary raimondo. A year ago they first introduced export controls to china and the Commerce Department today is broadening that scope to include more advanced computing chips. Companies that also want to export chips to china or other embargoed regions will now have to notify the u. S. Government. Additional chip equipment will be restricted impacting names like kla and implied materials. Kla is down 1. 5 . That also means nvidias a800 and h800 made specifically for china are now restricted. Nvidia said onefourth of data revenue comes from china and mizuho flagged the potential for 6 drag for 2023 estimates because of the 3. 5 billion in sh sales to china. Nvidia spokesperson said, quote, they dont expect a nearterm meaningful impact on their financial results. Whereas its not necessarily the same case for asmo. They put out a statement saying these export control measures will likely have an impact on the regional split over system sales in the medium to long term. Intel, i just reached out to them, waiting for a statement. They also have an a. I. Chip for china, which could be restricted. Intel recently pointed to improved demand for china as one of the key underlying factors for a. I. Revenue of 1 billion in 2024. That 1 billion number could change. Shares are also down 1. 5 . And amd that has been working with chinese hape hyperscalers. These new restrictions are effective in 30 days and come at a time when President Biden plans to meet with xi jinping in just two weeks. Maybe setting the tone. Thank you very much. What does this latest move mean for the future of u. S. china relations . Joining us is kyle bass. Kyle, we turn to you on china. Youve been a longtime critic and advocating for tougher restrictions like this one. I do wonder about the timing, though, ahead of this much anticipated xi biden meeting in november. Yeah, well, hi, sara. Its a pleasure to be here. You know, something that got lost also in the news flow, given the atrocities of the hamas invasion of israel, on october 12th there was a Congressional Committee reviewing the strategic position of our nuclear our nuclear arms and our nuclear strategy. And it was Bipartisan Commission that actually list china and russia as our two top adversaries. Not our friends, not our competitors, not the countries janet yellen is looking to engage more cooperation with. They listed them as a nuclear peer nation and adversary. When you talk about me being a critic, i believe we need to apply realism to whats happening here. These new chip restrictions, if you look back to the Biden Administration, i think the c. H. I. P. S. Act was the crowning achievement of the Biden Administrations Foreign Policy plan. Here we have about a year later some more interim final rules. If you read what ive read so far, it looks like this affects only the highest end chips and those just below. It will grab nvidia 800 series and some others. If you remember once october 7, 2022 happened, you saw the Chip Companies parading to d. C. Saying you cant restrict us, restrict our sales. These ceos do not look after u. S. Or european security. They look after their bottom lines. So, we can debate the economic effects, but to your point, the National Security aptly matters. And i think the world were at a hinge in history here where the economics wont drive the next 20 years like they drove the last 20 years. National security and geopolitics will drive the next two decades. We need to have leadership, hold their ground when they make crowning Foreign Policy achievements like the administration did last october. Stop allowing the private sector to, i guess, push back on these sweeping restrictions, in my opinion. It does get us to whats happening in the world right now. And as we speak, putin is in china meeting with i mean, rare for him to even make a foreign trip right now. Hes there to support the belt and road forum in china. This is the new sort of International World order. Both of these autocrats have been aligned in terms of criticizing israels response in gaza. They called for a ceasefire as President Biden makes his way over to there. How do investors wrap their arms around all this . I mean, as you know, ive been asking that for a long time, sara. We have china, xi jinping, publicly declared a limitless partner with the worlds number one war criminal. They are working in concert in every way. As theyve said, nothing is off limits. Here we are talking about, oh, which chinese stock should we buy . Which company do we have our 401 k invest in because we might make money investing in china . In the end, westerners wont make any money in china in the long run. Theyve already prooun that in the last 15 years. We have to wake up and realize that this that the worlds bifurcated and the bad guys are all working together. Its obvious what theyre doing. If you listen to the director of National Intelligence or you look at the Nuclear Commission report that we just put out, it is clear as day who the enemy is. We need to start defining the enemy as the enemy and stop talking about the economics and what that would do to our economy. Theres no easy button. Its the semihard or really hard button well be pressing. Investors need to be aware thats coming with their chinese investments. The u. S. Is the best market in the world to invest in. You should refocus your efforts there and stop investing somewhere run by an authoritarian dictator, a genocidal mad man who has a partnership with the worlds number one war criminal. These are easy things to see. I just dont understand how people dont see it. Kyle, National Security concerns at this point are always going to be the stated motivation for any restrictions like this that the Biden Administration is imposing right now. Does it matter to you where the line is between, yes, genuinely there are National Security considerations and were trying to protect our advantage in certain technologies for our own industry . Yeah, its such a hard question. You know, look, i am not a quantum computing expert or hypersonic expert, but last november of 21 was the u. S. Military and u. S. Intelligence community sputnik moment when the chinese circumnavigated the globe with a hypersonic weapon. It reentered the atmosphere, tushd and hit the target. We thought they were a decade behind that. They showed they could do so and they did it with our advanced chips. When you draw a line as secretary raimondo said today, these are dual use technologies. You can use them in mill military and civilian applications. We just figured out a lot of these chips put together and develop quantum superiority, or at least quantum peer a adversaries and hypersonic adversaries. With chinas belligerence, how they have a Limitless Partnership and turning the Propaganda Machine against the u. S. , against europe, against israel, it is so obvious to see from 10,000 feet, and yet we had on this program talk about every day, well, where could we draw the line where it works economically but helps us on National Security . In the end youll see a full decoupling. Im telling you thats coming. The administration has tried, sending secretary yellen and raimondo. Kyle, youre an investor. If investors that are watching agree with your world view and see whats coming geopolitically, we get it, you dont want to be in the chinese market. Where do you want to be as a safe haven . Do you want to buy Lockheed Martin . The swiss franc or gold . Whats your preferred hedge . I mean, look, the best investment in the long run is in the u. S. Marketplace. Whether its the s p 500 or whether its in, you know, in the next decade, probably the Defense Industrial sector. And the defense tech sector. If youre trying to be specific. But in the long run, you want your money where there is a firm rule of law, where there is a respect for human rights, where we try hard to respect human rights, we try hard to respect the law. Its not perfect. But, you know, we are the best place in the world to invest. Europe, unfortunately, has tethered themselves to russia on the energy side. Europes going to have a really difficult decade Going Forward. Remember, europe has only grown their gdp 7. 5 in the last 15 years while the u. S. Has grown ours 70 . Europe is a great place but they have significant challenges. U. S. Is still the Innovative Energy for the world. I just think weve allowed china to get behind our gates and now we finally realize that, you know, that the enemy is behind the gates and we need to figure out how to extricate some of these relationships with the private sector and the chinese public sector. We need to start severing these relationships. Unfortunately, yes, people will lose money. Some of these companies have made bad decisions in the long run. But Many Companies in the u. S. Havent. And i think thats where you want to invest your money. Heck, you guys were showing this money the 10year is almost 5 . Theyre going to get inflation down below 2 given the restrictions they put on the economy. You can buy a 10year at five and inflation at sub 2, thats interesting. Stocks are interesting because the u. S. Is the best place to invest. So, broadly, you just want to refocus your portfolio away from, lets say, the robes gallery of dictators and authoritarians and probably back to somewhere where democracies work and capitalism works. Dont tell that to starbucks and nike and apple and so many other Major American Companies that do have extremely important ties to china. Kyle, well leave it there. I know a lot of our audience agrees with you. Were getting a lot of mail. Kyle bass. Time for a news update with contessa brewer. Russian president Vladimir Putin made a rare trip outside russia, landing in beijing today to meet with chinese leader xi jinping. The kremlin says its to highlight the no limits partnership between those two countries. Putin has limited his travel since the International Criminal court issued an arrest warrant for him in march. Ukraine used u. S. Provided longrange missiles for the first time against russian forces. The Associated Press reports these missiles have been secretly delivered by the u. S. Nearly a month after President Biden promised them, fulfilling a request from ukraine president volodymyr zelenskyy. The president approved those missiles when zelenskyy visited the white house last month. And republican jim jordan is facing a vote this afternoon on whether hell be the next speaker of the house. Jordan needs 217 votes to win the title. He can only afford to lose four republicans. The house has been without a speaker for nearly two weeks after Kevin Mccarthy was ousted. Drama in real life on capitol hill, mike. For sure, contessa. Thanks much. Up next, wells fargo initiating the Home Builders. The top ckarne athpis e xts e s p 500 goes green. [soldier] take a look at this theyve left us a gift. [soldier] i think we misjudged them. I love horses. birds chirping [soldier] we should open the gate. Lets see what charlotte thinks. [narrator] at crowdstrike, we monitor trillions of cyber events to detect threats and prevent breaches before they happen to keep your business from becoming history. We stop cyberattacks. We stop breaches. We stop a lot of bad things from happening. Crowdstrike. Protection that powers you. Were about two hours into trading. The s p 500 is now positive after being down about 0. 75 . Lets go post to post with bob pisani. This is a great turnaround. We have three problems higher yields, tepid reaction to banks earnings and problems with the semis today. I want to show you vmware, which has gotten clobbered. Vmw is being acquired by broad com. Theres some speculation, perhaps, that china could block this acquisition in retaliation for what the Biden Administration is dooing. This is all speculation. Thats the reason thats down. Elsewhere, if you look around, some other tech stocks have turned around. Shor service now up nicely. Jp had nice comments. Thats a nice move for that stock. Ive been talking about tepid reaction to the Bank Earnings. Moynihan is in the soft landing camp. Good numbers overall from him. We opened at 27 on bank of america. Its been moving up a little bit. This is the first day were seeing, okay, finally moving up on decent bank reports. The reactions have been very tepid recently. Thats another good sign. Banks starting to move on the earnings. Finally, remember these high yields. Take a look here at the highyield etf were seeing here. Remember, the spiking yields because retail sales are strong. Thats not bad for the goldilocks scenario. A stronger economy means higher Interest Rates. That could mean higher defaults on highyield stuff. More defaults on highyield stuff later on. This is near a 52week low. Thats an indicator for a weaker economy. Again, the Economic News is excellent right now. So, a big debate, are we stronger or going to be weaker . Its hard to figure out right now. Back to you. Always is. Bob, thanks very much. Home Builder Sentiment dropped to a tenmonth low this morning but a slew of ini initiations from the desk of wells fargo grabbing our attention. The bank naming dr horton as a top pick, saying it is best positioned whether the near the nearterm rate storm, but with mortgages at a 23year high in yield and rate, buyers could be under some more pressure. Join ng us now, cnbcs diana olick to sort all that out. Hey, mike. Dr horton is the largest home builder in the u. S. Theyre essentially a manufacturer. Theyll have to push product. Whether that means Mortgage Rate buydowns as incentive or lowering prices, thats what theyre going to do. Its interesting because in the Builder Sentiment report today, they did note that builders are using more incentives. I was talking to housing analyst ivy zellman yesterday and she said 70 plus percent of those incentives are mortgage buydowns because rates are at such a high right. Its amazing, diana. Everything happening in housing and in the bull case is pretty clear, works to the benefit of new Home Builders as to existing homes. I just wonder how much longer that can essentially go in this time of scarcity. Well, look, we have a massive shortage of homes for sale in general. So, the builders really need to step up. They have a long runway. The question is if affordability is hit this hard and builders cant get buyers in the door, we saw buyer traffic incredibly low. On the Builder Sentiment, 50. Anything below is considered negative. The buyer traffic was in the 20 range. Thats not good Going Forward. We just simply need more supply, but again, if the affordability isnt there, youll see more people stay renters longer. Right now rents are coming down. Thats a little bit of a bright spot in the market. Again, you know, we need more people to sell their homes to get the existing Home Inventory up. Why would you do that if you have a 3 rate on your 30year fixed and trading up to 8 . Its a log jam for sure. Thanks much. Well, a number of companies releasing statements and making donations to relief organizations in the middle east over the past week. But recently brands have faced backlash for speaking out on cultural issues. A story weve been covering here at cnbc. Courtney reagan at post 9 with new numbers on what consumers say impacts their loyalty to a brand. Something that companies try to figure out. Yeah, this is a really tough subject to tackle at any time, but especially right now with this very polarized nature of the country. Its harder for companies to take a stand without risk of alienating some portion of their consumers. While the war on israel has caused some donors to academic institutions to cut off donations, many corporations have not yet taken a stance. A new survey shows when consumers were asked what positively impacts their loyalty to a brand, 36 said when it stays away from political issues. Thats just second behind a brands longevity. When asked what brands could do to lose loyalty, 20 said take a stand on moral or ethical issue that is at odds with my values. Selling poor quality was first at 45 . Anheuserbusch and target both saw negative impacts after selling pride merchandise. Neither were the Companies First forray into selling those. Quality director told us timing played a part. These campaigns were around contentious state legislations with many antilgbtq bills. Light had been a predominant sponsor of pride festivals. This was the first time it pulled back after the hate from the trans influencer. Target had little choice but to move merchandise when shoppers came into store harassing employees, threatening employees. And its not without consequence. Its putting the Community Back into the closet. Courtney, its seemed to me Companies Face this fix of trying to seem responsive to their own employees. Exactly. Not just customers, not just the world at large. Especially at a time it was standard to think, okay, younger employees in particular want to feel like they work with a company thats aligned with their beliefs. Its tricky for them to nav dpat. The Human Rights Campaign keeps this index of companies and corporate responsibilities. A lot has to do with what youre talking about, how inclusive they are for their employee base, what theyre offering to their employees. Many top Fortune Companies have a perfect score in that area. Its when they take a stance to the Consumer Base for which theyre selling their products where it gets a little murky. Its gotten harder, frankly, for these companies. Yeah. Its different, though, i think. Its totally different whats happening in israel to some of the cultural things youre talking about now. Thats just condemning a terrorist attack. But clearly, this is a hot topic. Yes, exactly. Not exactly the same thing. Very good point, of course. When weve heard from donors like ken griffin and huntsman family taking their stance. Thats not a companys, per se, but understandably in that same vein. For sure. Courtney, thanks. Up next, tech focused on margins as earnings season kicks off. Linkedin, the latest to announce layoffs. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. That first time you take a step back and see everything youve accomplished. I made that. With your very own online store. I sold that. And you can manage it all in one place. I built this. And it was easy with godaddy. I am doing this. With a partner that puts you first. Start for free at godaddy. Com sell i got the cabin for three days. Its gonna be sweet start for free what . Im 12 hours short. Have a fun weekend. Unnecessary action hero unnecessary. Was that necessary . No. Neither is a blown weekend. With paycom, employees do their own payroll so you can fix problems before they become problems. Hmm get paycom and make the unnecessary, unnecessary. See you down the line. 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. [ heavy breathing ] [ lights buzzing ] [ music builds ] [ screaming ] another round of layoffs might be hitting the tech sector as they gear up for earnings season. Thats the focus of todays techcheck with deirdre bosa. Good morning to you, mike. For a few months this month tech employees could relax. Companies raced to prove their a. I. Propositions. Now, however, another shift is happening. Linkedin just laid off nearly 700 employees. Qualcomm is planning to cut 1,200 jobs. It all raises a question, could more cuts be on the way . Mega cap tech has been all in when it comes to investing and generative a. I. Microsofts deal with openai, amazon and google pouring billions into anthropic. Most of them rising capex to build out new data center capabilities. As one analyst put it, the hype is here, the revenue is not. And the street is starting to notice, too, that techs spending discipline may have been shortlived, leading some to wonder if the strong margin rebounds in 2023 will hold up. Take meta, for example, b of a expects the company to guide to 100 billion in costs and possibly 40 billion in capex. Morgan stanley expects microsofts Capital Spending on things Like Data Center and spending could hit 50 billion in one year. At the end of the day, the mega caps are still profitable. Free cash flow generating cashrich companies which are arguably more defensive. Big tech has already made cuts in response to the macro back drop. This round of layoffs is hitting another subsector of the tech space and could continue to weigh. Linkedins biggest revenue is recruiting fees and startups may be reaching the end of their runway if they last raised money in 2021 when money was easier to raise. More of a casebycase basis. The space to watch may not be mega cap, but it may be small and medium cap where unprofitable and economically sensitive stocks are getting harder by rising yields. Names that rebounded in the first half of the year, they lost momentum and backtracked over the last month. Open door, carvana, affirm, block, chewy down between 10 and 30 over the last month. Of course, they were hit hard postpandemic, but they did hit some rebound earlier this year. That has pretty much disappeared in the back half of the year. Dee, i wonder for those somewhat Smaller Companies that maybe have tried to get profitability up and havent succ succeeded, the other way out is succeeded. The other way out is to sell and participate in m a and i wonder what the appetite is now broadly speaking, if they are also in margin preservation mode. Yeah, good question. Activision blizzard, if you have the appetite to go to court, you can get the big deals through. I dont know what the appetite is for some of the other companies that may not fit into their sort of strategic aims. Hard to imagine a carvana or affirm or one of the open doors being acquired by big tech. Theyre looking to generative ai to boost themselves there and even video game fits into that push that is one way. Weve talked about this as well that some of the smaller deals, even by p e firms provide hope perhaps for a buyout. Itll be interesting to see how the rest of the year plays out, if that rebound can still be sustained because a lot of the names i mentioned in the small and medium cap have had terrible second halves of the year so far but theyre still up because of the rebound and earnings season, of course, will be important for the mega caps. All right, deirdre, thank you. Deirdre bosa. After the break, vote for House Speaker kicks off. Why washington insiders are saying chances of a prolonged crvernment shutdown do greatly inease if jim jordan is elected. Thats next. 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Were just a few minutes away from another House Speaker vote, two weeks after the ouster of former speaker Kevin Mccarthy. Jim jordan of ohio the frontrunner right now. Questions remain whether hell have enough votes. Joining us now is an Economic Policy analyst at the america enterprise institute, cnbc contributor as well and author of the new book the conservative futurist. Jimmy, good to have you here. Lets assume, i guess, if we can try to assume, jordan ends up as speaker under whatever terms and agreements. What do you think the implications of congress tackling this budget issue . I think its an interesting situation kind of like the Fire Department hiring a guy whose only experience is using a flamethrower. Thats kind of the situation. This is not a recipe for having no shutdowns and coming together on bills. Listen, jim jordans a hardliner who is going to get this job, if he gets it, because of other hardliners. That is a recipe for conflict, for a long shutdown, and not much else getting done for a long time. Well, hell get the job because of hardliners, but with the at least agreement initially of moderates who seem to want to make sure we dont have some kind of prolonged government shutdown. So you dont have a lot of trust in that process . Yeah, well, i think these moderates, what they dont want is to have the United States house of representatives be leaderless, be completely nonfunctional for an extended period of time when were already backing one war, when we have another war breaking out. It just seems that is not sustainable, so there needs to be someone occupying that position. I would be very surprised if the moderates think, well, if jim jordan is speaker, we avoid another shutdown. I think thats a leap. Well then play it out for us then. Assuming you get a shutdown of some duration, usually wall street says ignore it. They usually pass, but we get by them because we have to ultimately, but do you think its going to create anything different in spending levels or just going to be lets fight a lot along the way, the inevitable . Yeah, i dont think at the end of the day republicans are going to get lower spending. I dont think at all. The only thing that is for sure is that they will get a lot of political blame and there will be a lot of suffering politically, which i think jim jordan is prepared to take on, but i think an extended shutdown two, three weeks i think wall street is generally right that, you know, this doesnt make a huge difference. Its not like the debt ceiling deal which had huge political and economic implications. It could have huge implications for 20 24 and that does have economic implications. What will happen to defense spending . If you look at what the cbo says, were supposed to be on a gentle glide path as a share of gdp. It really, to me, does not seem like that is very likely to happen given the world you can look at asia, the middle east, look at europe. Spots are already hot, others getting hotter and ones where its easy to imagine them becoming white hot. All right. It only seems to go in one direction, jim. Thanks a lot for the time. Appreciate it. I want to check in on the banks before we go. Two big movers and two big announcements. Stocks were both a beat, though. Bank of america doing better, raised their Net Interest Income forecast. We talked to Brian Moynihan determined to close the gap and priced to book between him and jpmorgan, put some of the concerns to rest about marking any of those securities on their Balance Sheet that people were worried about, the health and securities in longterm treasuries and talked about how theyre going to get more competitive and the pipeline looks strong. Goldman sachs has a lot of has a few of those issues from the Consumer Banking than theyre writing off, but the beat came in the core business, which is more than 70 , and its a billion dollar beat on trading and investment banking. It was a Good Business in capital markets. Its not always the case the market immediately rewards a stock for that because that waxes and waynes. It shows you that bank of america ultimately is a call on the economy, and if youre feeling better about the economy and the consumer and how theyre navigating it and stand in the middle of it, the u. S. Economy, you will reward a Company Trading at book value. The commentary from David Solomon at goalldman, a little more muted because of rising geopolitical tensions. Which we report on every single day. Thank you, mike. Thats going to do it for us here on squawk on the street. Over to courtney and the halftime report. Thank you, sara and mike. Welcome to the halftime report. I am Courtney Reagan in today for scott wapner. Front and center this hour the semi smackdown, chip stocks whacked. Our Investment Committee is standing by. Joining us for the hour brenda vingiella, joe terranova, amy raskin and jim lebenthal. Lets get a check on the market here at noon eastern. The dow and the s p 500 are higher. The nasdaq slightly negative. Were looking at tefrls almost al