Software Sector Hit By Double Whammy, Fed Focus Meets AI Optimism 6/17/26

 I'm Morgan Brennan and this is your morning call.
 Good Wednesday morning.
 Let's get a check on you as stock futures,
 which are mixed right now after a mixed day of trading yesterday.
 It saw the S&P 500 and the NASDAQ both snap three day wind streaks,
 but the Dow closed at a fresh record high.
 You can see it's the inverse playing out in the pre-market right now,
 with the Dow down fractionally about 13 points.
 S&P points to open up about 14 points higher.
 The NASDAQ, the big mover this morning,
 points to open up about 194 points higher.
 Now ahead of Kevin Worsh's first Fed decision and retail sales today.
 We are also watching yields and the action in the bottom market overall.
 And you can see yields are higher across the curve.
 US 10 year treasury yielding 4.439%.
 Fed sensitive two year yielding 4.05%.
 Energy, keeping an eye there with the latest IEA report out just a short time ago
 about an hour ago saying the global oil market will recover gradually
 from the closure of the straight-of-form moose before tipping into a significant surplus next year.
 Remember before we got the war, we were in a surplus for oil.
 That adds now that it expects global oil demand to fall by 1.1 million barrels a day this year.
 That's where it's previous forecast of a decline of 420,000 barrels a day.
 Next year, demand growth is forecast to rebound to 2 million barrels a day.
 Right now, though, you could see prices are fractionally higher pre-market.
 WTI crude is up about a quarter of a percent trading around $76 a barrel.
 Brent also up fractionally trading around $79 a barrel.
 And SpaceX, after another big day yesterday, closing up another 4%.
 And you can see up about 3% again pre-market right now.
 Talk about a rocket ship of a stock a little bit upon intended there.
 Well, ahead of the open SpaceX is now the fifth most valuable publicly listed US company.
 It's surpassing Amazon and just shy of Microsoft.
 Let's give you a little note on revenue, though.
 Microsoft reported $282 billion in revenue in 2025 SpaceX, $18.7 billion in revenue last year.
 Well, around the world, a very busy morning for global markets.
 Plus, President Trump still in France wore that G7 summit.
 We continue to monitor that complete coverage here on morning call with J.P.
 Young in Singapore on the overnight action in Asia.
 We got Steve Cedric in London with our really movers in Europe and Megan Kasella is on the ground with President Trump at the G7.
 Megan, let's kick this off with you.
 Morgan, day three of that G7 summit is now underway.
 President Trump's sitting down for the first working session of the morning just a few minutes ago.
 But of course, the biggest news here all week has been this US Iran memorandum of understanding.
 And we've slowly been learning more and more about it.
 Bloomberg has now published what they say is a draft version of a 14 point plan of the MOU.
 When I want to bring you a few of the highlights here.
 First, we know that this is calling for an end to the war on all fronts, including in Lebanon.
 That has proven to be a sticking point, at least with the Israelis, who are not recognizing that they need to remove their troops from Lebanon.
 We also know it'll be a mutual lifting of the blockade and a reopening of the state of Hormuz.
 There's also a line in this document, Morgan, that says the fate of enriched material and Iran's nuclear needs will be adequately addressed in a final agreement.
 That gets at what has been one of the strongest criticisms of this MOU so far.
 There's nothing more specific on Iran's nuclear program than that line right there.
 They also say a final deal will be negotiated within 60 days, but that that time period is extendable by mutual consent.
 We're also starting to hear some criticism that maybe this MOU will just get us into a new negotiating period that then gets extended and extended over and over again.
 Morgan, the other big news here, of course today, is that there will be a working lunch later this afternoon with global tech leaders.
 A number of them in attendance here, open AI's, Sam Altman here in Evian France.
 We've got Dario Amade from Anthropic, Metta's Alexander Wang.
 You can see a number of them up on your screen there.
 All of them sitting down with the full G7 leaders for a working lunch to talk about AI regulation.
 It really does show where the power sits on AI right now, how political leaders feel that they need business leaders to be at the table to get anything done here.
 We expect them to be talking about things like regulation of course globally, as well as online safety, the protection of children online according to France.
 Open AI had also previously told CNBC that they expect some voluntary commitments to be agreed to, so all of that on deck later this afternoon.
 Morgan?
 No, no, no, Doris, of news that's for sure, Megan, I want to go back to, you know, some of the, some of the reporting that we've got in here.
 regarding this deal between the U.S. and Iran,
 and specifically that $300 billion
 of Iran investment fund that is expected
 to be launched to share a private vehicle
 with no government money attached.
 Any more details or commentary at G7 regarding all of this?
 Yes, this has been a big point of contention.
 First President Trump saying yesterday,
 I know the U.S. is not investing any money in Iran.
 He called it a rumor that there would be
 some sort of $300 billion fund made up by the Democrats.
 But of course, that is baked into this document.
 It's a private fund, though.
 So we're getting into an issue of semantics.
 U.S. officials say there's no government money
 attached to this, that all of this is going to be put
 up by private companies.
 And it's designed to incentivize Iran
 to start making more commitments on its nuclear program,
 on dismantling its nuclear program.
 And the U.S. emphasizes that none of this money,
 the $300 billion fund, or the sanctions relief,
 or the unfreezing of assets,
 none of that they say will be available
 until Iran begins taking steps to dismantle that program.
 They're all laid out here in this memorandum understanding,
 though, at least according to the reported draft.
 And that's to show Iran what they can get
 as long as they keep moving.
 But there are a number of financial incentives baked in.
 There's also sanctions waivers that Iran will immediately
 be able to begin selling oil.
 So we expect that as of that Friday signing ceremony
 here in Switzerland, all of these things
 are already going to get started.
 Iran's starting to get these financial incentives
 right away.
 OK, Megan Kasella, thank you.
 Stay close.
 I suspect we may need you a little bit later this hour.
 Well, we're going to stick with the action in Europe.
 Let's check in with our Steve Seddwick, who is in London,
 with the early movers there.
 Steve.
 Yeah, thanks very much indeed, Morgan.
 You can pretty much sum up this morning's equity picture
 in three words, waiting on wash.
 The main stocks benchmark pretty flat.
 And as you can see, the markers on my left hand side
 fly it to slightly easier.
 I'll give you a reason why the German market is a bit easier
 in a few moments' time.
 But we just got a soft inflation print out of the UK.
 So that's pretty good news for those worried
 about what the Bank of England is going to do next.
 Now, German stocks are underperforming.
 As I say, I'll come back to that as well.
 Quick look at the gainers and guess what?
 It's tech gaining.
 Are people worried, weren't they, about the money
 being found for SpaceX from other investments?
 Well, it seems liquidity in SpaceX
 is being boosted by liquidity into other tech names as well.
 Plus, we've got a bit of retail and industrial names
 also trading in the green.
 Autos dominating the market headlines this morning
 for all the wrong reasons.
 The sector in reverse, BMW issued a profit warning.
 Get out of this Morgan.
 They said that their operating margin, the key metrics,
 will be as low as 1% this year, 1%.
 So all of that infrastructure, all that cost, all that energy,
 all those employees, to have 1% operating margin.
 That's pretty bad news for the European OEMs, back to you.
 All right.
 Steve Sedgwick, thank you.
 I'm going to borrow that too, waiting on wash.
 We're going to say, war in wash.
 Well, to the action in Asia and J.P.
 on standing by in Singapore, JP.
 Yeah, good morning, you guys on Morgan.
 And don't be fooled by the shade of green
 you saw for major markets in Asia
 because it wasn't an easy session today.
 From markets from Tokyo to Taipei,
 sold a Sydney.
 A lot of them actually opened in the red
 and had to fight hard for these very hard fought gains today.
 And it's a bit of a wait and see, and also
 a bit of a what now mood out in Asia.
 What do we really make of this US Iran ceasefire deal?
 What's going to happen with Kevin Warsha's first FOMC
 meeting as Fed Chair?
 And what do we do?
 And what will tech stocks here follow
 the downturn we saw on Wall Street overnight?
 Well, in the case of Japanese markets day,
 it all really depends.
 When you look at some of the top losers
 today in Japan or the notable losers,
 the likes of arms, parent company, soft back,
 and also Renisa decided to close in the red.
 But memory maker, Renisa Akiosya,
 and also a trip equipment maker, Tokyo Electron,
 both looked at the downturn Wall Street,
 said no gracias and decided to book some gains.
 So again, a little bit of nuance
 in the Tokyo trade this Wednesday,
 especially in the tech sector out in Japan.
 Out in South Korea, it's also a little bit of nuance there.
 You take a look at Samsung Electronics,
 they opened solidly in the red today,
 and also had to fight hard to close solidly in the green.
 SK Heinex is also very interesting
 because they are on a five-day winning streak.
 And ever since they were those reports,
 on them possibly listing those ADRs out in New York
 came out, we actually saw them gain ground
 and have been in the green ever since.
 We have to remember,
 this is the biggest high bandwidth memory maker
 in the world with more than 50% market share
 and bigger market share than micron and Samsung combined.
 So this is a stock that will warrant some curiosity
 in the days to come.
 Of course, when you look at Chinese markets,
 it was a little bit more touch and go really there.
 The Hong-Seng not managing to catch the gains today
 out in Asia and close in the red,
 but take a look at the Hong-Seng tech index
 and look at the chip maker,
 Susan Shanghai star index,
 they also look quite confident at the close
 and also manage the shrug,
 the downturn we saw in the tech sector out
 on Wall Street overnight.
 Of course, the attention now will shift
 to the FOMC's meeting in a couple of hours.
 It's the stage is set for Kevin Warsh
 as in his first meeting as FOMC chair.
 Morgan, it's back to you and happy hump day.
 And to you as well, JP, thank you.
 That's JP Ong in Singapore.
 We'll turn back to SpaceX shares higher again this morning
 after adding nearly 5% to that post IPO gain
 that was yesterday,
 because these shares are about 3.5% right now.
 We're up 50% since the debut on Friday
 and that $135 price target that was set.
 Our listing price, excuse me, that was set.
 SpaceX, wasting no time as a public company,
 though, making its first acquisition,
 buying the startup behind the popular AI coding agent cursor
 for $60 billion in an all stock deal.
 Keep in mind, they had struck a deal to potentially do this,
 but of course, coming much faster,
 I think that folks anticipated here.
 The deal is the latest in what's been a busy year,
 so far for M&A activity,
 which also includes SpaceX acquiring XAI.
 We got that paramount Warner Brothers merger
 among other high profile deals.
 According to a new report from PWC,
 the value of M&A deals in the first five months of this year
 hit 1.2 nearly double from the same time a year ago.
 1.2 what, well, let's bring in Kevin to Si.
 USA and Mexico deals later at PWC.
 Kevin, it's great to have you on.
 And how would you categorize the deal environment right now?
 Morgan, thanks again for having me this morning.
 I think you hit it well in your lead in here.
 The deal market hit 1.2 trillion dollars
 through the first five months of 2026.
 That's nearly double the 603 billion we saw
 in the first five months of 2025.
 When you look at that, though,
 it's a really a story of two markets.
 While there are 1.2 trillion dollars,
 it's being powered by 39 transactions
 of more than $5 billion or more,
 or cohort that we like to call mega deals.
 While the broader market is actually down 5%
 on a volume basis, so far this year.
 It's interesting to hear you say that, okay.
 So in light of that, what has been driving the activity,
 how does that play out through the rest of this year,
 especially when you think about how expensive
 many assets are, whether they're public or private right now?
 Yeah, I think it's a very good question.
 And there remains a fair bit of uncertainty,
 but hopefully the level of uncertainty
 as you've already reported this morning
 is coming down with some of the deals that are being struck.
 But the uncertainty remains high
 and you covered a few things.
 We have the geopolitical situation
 and we have the fact that the treasury yields
 are almost still at 5%,
 which is a level that we don't traditionally see
 until going all the way back 20 years ago
 or 19 years ago into 2007.
 I think the difference right now is credit spreads
 and remaining pretty tight.
 And that's allowing for deal making to continue.
 And we're seeing an overall credit profile
 that would allow us to believe
 that the market will kind of continue to go.
 However, we do believe it will be dominated
 still by the top end of the market
 because the middle market really, really requires
 broad base recovery of the entire economy.
 So GDP continues to hold where it is
 and employment continues to hold where it is.
 Perhaps it'll be a broadening of the deal market.
 But for now, we're seeing CEOs really leaning
 into large deals thinking about what's
 going to drive top line growth for their businesses,
 leading to this bifurcation and probably
 what will remain of further bifurcation in the market.
 Okay, I want to dig a little deeper into
 the middle market, recovering what that's going to entail here.
 But you also talk about in this report,
 the fact that even if there is money
 to put to work at acquisitions right now,
 there aren't that many targets to take over.
 So what are the types of targets
 that are still out there and in focus right now
 and what does that mean in terms of the ability
 to see some of these mega deals get done moving forward.
 It's again, spot on.
 When we look at the data that we're looking at,
 you can see that mega deals last year was a big theme too.
 But a lot of it was AI powered mega deals
 with almost 27% of mega deals in 2025 being tied
 to some sort of the AI ecosystem.
 That is trending down, right?
 For the, if you look at January and February,
 we're at the same level, 27%.
 As you come into March through May,
 that's coming down to 21%.
 We're seeing that the availability assets continues to shift.
 We started with a really a digital layer of the AI economy
 and we're moving more to the physical layer of the AI economy.
 Where so what does that mean?
 Software businesses, decided business to now this year.
 You're hearing a lot of talk about infrastructure,
 power utilities in the grid,
 in order to power the AI economy.
 And that really becomes interesting
 because there aren't that many scaled assets
 in this realm to go and acquire.
 On the flip side of that, that we saw the notable decline
 in AI level deals, but the overall deal
 and mega deal market remains hot
 and we're seeing the diversification
 into healthcare and Medtech,
 in into retail and consumer,
 which are some of the logos that you had on the screen earlier.
 Yeah, okay, we'll continue to monitor it.
 Kevin, decide.
 Thank you for joining me.
 All right, thank you so much.
 Thanks for having me.
 Well, you got such a full hour for you, still to come.
 A major milestone for Intel after closing down 8%
 in yesterday's trade,
 why shares are looking up again today,
 about 4% pre-market plus.
 Well, there won't be conflicting reports.
 So over Netflix's M&A intentions,
 sending one stock sharply lower today.
 But first, what are the biggest tech conferences in Europe
 and our current show is live in Paris,
 following all of it, Karen.
 Morgan, good morning from Paris.
 I am live at Beaver Tech,
 where AI adoption and digital sovereignty
 are at the heart of just about every conversation.
 Jeff Bezos also, the headline act on stage of this hour,
 plenty more with Morning Call on the other side of this.
 Welcome back to Morning Call.
 We got a market flash in Intel,
 the company's starting production of its most advanced chip,
 dubbed the 18AP.
 It's being produced at the company's facility in Honolulu,
 Hawaii, the development is seen as a critical step
 for Intel to lock in a potential deal to make chips
 for some Apple devices as well,
 but also seen as a big opportunity
 with a stock surging here as well.
 Maybe some speculation in the market
 that you could see a capillaries.
 We'll see, we'll keep an eye on it.
 Shares of Intel are up 4%.
 We're also watching Shares of HPE and NVIDIA,
 the two announcing that they're expanding their partnership
 with several of NVIDIA's technologies,
 being further integrated into HPE's AI factory offerings.
 And you can see Shares of both companies
 that for actually right now,
 speaking of NVIDIA, the company also breaking ground
 on an expansion of a Texas production facility
 with factory owner coherent.
 Now that expansion is expected to quadruple production capacity
 for AI data center components
 and NVIDIA's Jensen Wong really touting that expansion
 as an example of how AI is fueling industrial activity
 and re-industrialization here in the U.S.
 We're sticking with tech.
 One of Europe's largest events focused on the sector,
 Viva Tech, officially underway in Paris,
 our Karen show is there.
 She's talking with a flurry of industry leaders
 and policymakers and has all this latest for us
 on the ground from Paris, Karen.
 Morgan, good morning to you.
 This is the 10th anniversary of Viva Tech.
 I've been to everyone and I can tell you
 that we've seen just about every trend of the years.
 But this year, we are talking about AI adoption
 and tech sovereignty.
 When it comes to tech sovereignty,
 I'm flanked by the Canadian booth, the German booth.
 We've got the President rolling on from the G7
 with the head of Indian arranger of Modi coming with him.
 So everybody is talking about how they build our tech
 in their own country.
 One of the biggest issues, though,
 as we talk about Wall Street setting the landscape here,
 the amount of capital being raised
 stateside space X, telling us there is no shortage of capital.
 Yet Europe has a problem.
 It has a funding gap.
 We're hearing first hand from the Viva Tech founder
 that Europe needs a European fund to bankroll
 some of the startups so they can scale in Europe.
 And I can tell you, Europe is enormously spooked
 by what we saw a few days ago.
 The powerful anthropic models,
 stable five and mythos being pulled from the market.
 That is created a sovereignty issue.
 Europe wants its own frontier models.
 Now we have one challenger, Mr. AI,
 and Europe wants more of that.
 They're looking at where they can plug the gaps
 already there's European regulation
 that has identified gaps in data centers
 and cloud infrastructure.
 When it comes to some of the other big touch points here,
 AI adoption, who's going to be disrupted?
 Who can disrupt again?
 Jeff Bezos, the founder of Amazon
 and Blue Origin is on stage shortly.
 He, of course, is being disrupted when it comes to
 the market value of his company, Amazon.
 It was overtaken by SpaceX on the market yesterday.
 He's on stage talking about what he is building.
 He is building engineering again.
 He's trying to solve real world problems.
 So again, he is building at pace
 and he is another challenger again in the marketplace.
 What I want to pick up on here, though,
 is how Europe finds its way.
 There are concerns that we don't have enough tech here
 that we're not going to fund it quickly enough
 and that we're going to have gaps in the market
 where we're not just an American technology,
 but if you think about the use of main models right now,
 it's not just the proprietary systems,
 it's a lot of cheap models coming out of China
 and the usefulness for AI, of course,
 is when you put your industrial data into those models.
 That has security implications.
 Back to you, Morgan.
 Yeah.
 Speaking of security implications
 and this idea of sovereign AI,
 I mean, just yesterday news breaking that France
 and its domestic spy agency has cut ties with Palantir
 instead looking to work with a local rival.
 So should we see this as the beginning
 of a bigger trend than for Europe?
 And if so, perhaps just as critically
 are the local startups in a position
 to actually take this business versus their US peers?
 Absolutely, and it's just the beginning, Morgan.
 You've touched on the story that could run
 across other American companies.
 If you think about what France has done,
 this is its domestic intelligence service.
 You think about how dominant Palantir
 has been in the US intelligence service.
 This is France, even with the security challenges saying,
 we will cut Palantir out of the system
 and replace it with French tech at some point.
 What is it trying to replace Palantir with?
 It's replacing it with the very small company.
 It's called Shum's Vision.
 This is a company founded in 2019.
 It's only made 200 million in revenue last year
 compared that to the 4.5 billion Palantir
 that makes.
 Keep in mind Palantir does have a contract
 and that will run for a few years.
 So somewhere between now and that contract ending,
 this little French startup needs to find scale,
 needs to find other contracts and have the capabilities.
 But yes, we're just scratching the surface
 of exactly what Europe wants to build out.
 The question is whether the Trump administration,
 politics gets in the way here
 and whether this provokes some sort of fresh bite
 when let's face it, Taurus, have not gone away either.
 All right, Karen Cho, great reporting.
 Thank you.
 Well, straight ahead, famed investor Michael Burrey,
 weighs in on SpaceX, but stopping short of a short.
 We got that full story in just a moment.
 First though, checking shares of sales force,
 those have fallen for 11 straight sessions
 down more than 22% over that period.
 Mark's the longest losing streak on record for sales force.
 Earlier this week, the company struck a deal
 to buy AI customer service platform
 thin for more than $3 billion,
 adding to worries about integration risks.
 Sales force has been on an acquisition
 spree for quite some time,
 but you can see shares are fractionally higher this morning.
 We're back after this.
 Welcome back to morning call.
 We're checking the morning's headlines.
 Amazon reportedly facing a possible lawsuit
 from the FTC and a number of state attorneys general
 over claims that it misled advertisers in a suit
 that could cost the e-commerce giant billions
 of dollars in civil penalties.
 This is according to Bloomberg,
 which says the suit or possible settlement
 could come as soon as this summer.
 Well, big short investor, Michael Burry,
 telling his followers he has no short position in SpaceX,
 arguing on sub-stack that options used to wager
 against the stock are just too expensive.
 Still, Burry is questioning SpaceX's valuation,
 calling it, quote, fundamentally,
 a small space niche telecom
 and the deviled social media company.
 Well, we're watching shares of Lionsgate Netflix
 and the streaming giant Denying Reports
 that it plans to pursue an acquisition
 of the movie studio.
 It's according to semaphore reporting
 that it was after semaphore reported
 that it was considering a bid.
 Lionsgate shares are up 30% in the past month,
 more than 170 in the past year.
 There's been a lot of speculation
 about whether Netflix could still be in the market
 for an acquisition.
 So, perhaps not surprising to see the back and forth here.
 Lionsgate shares are down about 6% right now.
 The Commerce Department is reportedly holding off
 on blacklisting China's deep seek
 and more than 104 in firms that may pose security risks
 over concerns doing so may escalate tensions with Beijing.
 Reuters notes that the list has not been updated
 since October.
 It's the longest stretch in more than a decade.
 And the New York Knicks Saturday Night Championship
 when was delivered, did deliver
 the NBA's biggest television audience
 in nearly 30 years with Game 5 averaging 24.5 million viewers
 on ABC and ESPN.
 It's the most since 1998 finals with Michael Jordan
 and the Chicago Bulls.
 Not to be outdone though, Friday night's US win over Paraguay
 at the World Cup averaged more than 27 million viewers
 across Fox.
 It's streaming outlets Tel Amundo and Peacock.
 That's after more than 19 million watched Mexico's win
 over South Africa a day earlier.
 Well, still on deck.
 Apollo's tors since lock is with us.
 And he's talking Kevin Worsh's first rate call
 as a Fed chief for petrol futures tokenization
 to state of the markets.
 It's also going to touch on stocks where a lot to get
 to more in call.
 We'll continue next.
 I'm Morgan Brennan.
 Welcome back to more in call.
 Let's get to check on US stock futures, which are higher
 right now with the S&P poised to open up 12 points.
 The Dow basically just above the flat line up six points
 the Nasdaq up 179 points.
 That's after a mixed day for stocks yesterday
 that saw the S&P 500 and the Nasdaq both snap three day win
 streaks, but the Dow close at a new all time high.
 Well, ahead of Kevin Worsh's first Fed decision
 as well as retail sales data this morning.
 We're also keeping in mind the bond market
 we're watching yields.
 You can see higher across the curve right now US 10 year
 treasurer yielding 4.43% Fed sensitive two year treasurer yielding
 4.04%.
 We're checking energy with the latest IEA report out
 just a short while ago.
 That report shows the global oil market will recover gradually
 from the closure of the straight up from moose
 before tipping into a significant surplus next year.
 Adding in now expects global oil demand to fall by
 1.1 million barrels a day this year.
 That's from a previous forecast of decline
 of 420,000 barrels a day.
 Next year demand growth is forecast to rebound
 to 2 million barrels a day.
 You can see right there on your screen right now.
 Energy prices, WTI is down fractionally so is Brent crude.
 WTI trading just below $76 a barrel.
 Brent right around just under $79 a barrel.
 Space X meantime, another big day.
 Yesterday closed up another 4%.
 And right now it is higher again pre-market.
 Up 3% retreating just around $208 a share pre-market.
 Ahead of the open space X is now the fifth
 most valuable publicly listed US companies
 are passing Amazon at just shy of Microsoft.
 And if we check global markets,
 Japan's Nikkei briefly topping the 70,000 mark today.
 Cosby leading gains in Asia finishing up
 about 1.5% 1.6%.
 Meanwhile was a mixed session so far in early trading
 in Europe with the DAX fractionally lower.
 And we're also checking shares of Coinbase this morning.
 That's after the aspiring everything exchange
 launched a flurry of new products yesterday,
 including tokenized stocks, which will trade overseas
 and are represented as digital tokens
 on the blockchain in a one-to-one ratio.
 I spoke with Coinbase CEO and co-founder Brian Armstrong
 yesterday and he said this is all about
 giving global investors more access to US equities.
 Like 4 billion people in the world don't have any way
 to access US investments like Nvidia
 or Coinbase stock or anything like that.
 So they're stock holding cash and low-quality investments.
 So it's very important for financial freedom
 that everybody in the world can access
 high-quality investments.
 And it will just create more demand
 for high-quality US companies.
 Well Coinbase also announcing perpetual futures contracts
 in the US linked to stock index
 that are tracking four main themes,
 the Nasak 100 AI, China and defense perpetual futures,
 which are a type of crypto derivative
 that trade around the clock and never expire
 or recently approved by the CFTC
 to list on registered US platforms.
 Other products that were announced yesterday
 by Coinbase include an advisor.
 A SEC registered AI-powered investment advisor
 designed to bring financial advice to users 24-7,
 really perhaps speak to what we're seeing overall,
 amid crypto and AI.
 And that is the convergence of these two technologies.
 Well, let's talk more about the markets, the Fed,
 the economy, how products like this speak to
 perhaps the moment we're in when it comes
 to financial markets as well.
 It's Torsten Slok is joining me,
 Chief Economist at Apollo Global Torsten.
 It is great to have you on the show.
 And I do want to start right there
 because we're going into Fed day here
 and there's a lot of focus on the hawks on the FOMC
 and what this means moving forward
 for monetary policy, but financial conditions
 certainly do remain very loose here.
 So this blurry of products, tokenized stocks,
 perps, whatever you want to talk about,
 how does it speak to this moment
 where in four markets overall in the liquidity picture?
 No, you're right Morgan.
 Because the backdrop for this meeting
 is an economy that's actually quite strong.
 We know very well the employment report
 was very strong last month.
 We also know headline inflation is about 4%.
 Co-inflation is about 3%.
 The Fed's target is that inflation should be two.
 So on both sides of the dual mandate for the Federal Reserve,
 it is the case that the economy is running pretty hot
 and to your question here about the financial
 conditions issue, well, we have financial markets
 that literally have been red hot now for quite some time,
 which is also very supportive.
 And that is making the decision for the FOMC
 quite simple today that they are not going to change rates
 in either direction, but the communication here
 is a lot more complicated.
 And that's where of course Kevin Walsh
 at the press conference will have his challenges
 talking about not so much necessarily giving forward guidance
 on what they will do going forward,
 but really also communicating that this economy
 is quite strong and how do they look at that
 from the incoming data still continues
 the printing very solid,
 both when it comes to inflation
 and also the employment numbers.
 What a pullback in communication actually perhaps
 be better for the Fed and better for the markets
 moving forward.
 In other words, they're not going to box themselves in as much.
 Well, that's a very important debate,
 of course, mainly in bond markets at the moment
 because on the one hand,
 there's a very strong argument for saying,
 well, let's show a dot plot.
 Let's show expectations to what the Fed thinks
 interest rates should do going forward
 because that will anchor expectations very clearly around.
 This is what we expect will happen over the next several years.
 But the problem with the dot plot
 is that it anchors expectations so much
 that it doesn't give there for them to see much flexibility
 if conditions suddenly change.
 For example, we just got the Iran deal,
 conditions have changed dramatically.
 So now, of course, therefore,
 if we now get a lot lower enterprises,
 that should allow them to have more flexibility
 and not be anchored around whatever they said
 at the last meeting.
 So it is really putting up on the scale
 on the one hand,
 you would like to have expectations in markets very anchored.
 But on the other hand,
 you would like to have that the FMC has enough flexibility
 and that's what Kevin was has been focusing on.
 They need flexibility when conditions change
 and that's likely how he's going to communicate today
 to not promise much if anything going forward.
 But really focus on we need the flexibility
 if conditions change as we go forward
 over the next several meetings.
 Assuming we get to a deal and we see the reopening
 of the straighter four moves here in coming days
 and coming weeks,
 is it safe to say inflation at least in the US
 has perhaps potentially peaked?
 Well, the challenge is that there is not only upside
 pressure on inflation coming from energy prices.
 There's also upward pressure on inflation coming
 from the late effects of tariffs.
 And there's also now some upward pressure on inflation
 coming because of the data saying a buildout.
 The data center buildout also results in high inflation
 of course in chips and semi conductors,
 also of course in labor that is constructing data centers
 and also in equipment.
 So the fact that the boom in AI spending,
 now accounts for as much as 1% is point of GDP,
 remember GDP normally grows at two.
 And now roughly half of that 1% is coming
 because of the AI boom.
 This is also the strength of the economy.
 This is also putting upward pressure on wages
 not only in the sectors that we have focused on before,
 but really broadening out to a broader set of categories.
 So the answer to your question is that the upward
 pressure on inflation is not just coming from energy prices.
 There is a broader set of pressures that the Fed needs
 to then think about, do they need to ultimately
 hike rates in response to those types of upward
 pressures on inflation?
 Yeah, and I want to touch on something
 and we're going to be doing double duty with you.
 So we're going to dig into all of this in more detail
 in just a few minutes a little bit later on the show too.
 But in the meantime, I do want to talk about something else
 you've been looking at and covering pretty closely
 and that is software and where we're at
 within the software market with AI disruption
 on the one hand and elevated rates on the other.
 Yeah, because software is really hit
 by a double whammy at the moment.
 Of course, there's questions about the terminal value
 of a lot of software companies because of AI disruption.
 That's created a lot of discussion around different types
 of software.
 It's a cyber security.
 Is it educational software?
 What types of software isn't really that
 is more vulnerable to AI disruption?
 And the second part of the double whammy
 is not only about AI disruption,
 it's also this discussion we're having here
 about will it rate higher for longer
 because inflation is higher for longer.
 That means that sectors in the equity market,
 sectors in the credit market that have higher leverage
 and have lower coverage ratios
 and software stands out dramatically
 ran into the rest of the index
 that software is characterized by having a lot of debt
 and having also low coverage ratios.
 Coverage ratio of course measures one of my earnings
 divided by my debt service in cost.
 And if you have this combination
 of both being hit by the AI disruption risk
 and now also being hit by having a lot of debt
 and not a good ability to service that debt,
 that means that there are just significant hitlings
 to the software sector at the moment.
 And that's of course why software has been
 going through this turbulent period
 that we've seen over the last several months.
 All right, Torsten Slocke, thank you.
 Great insights as always.
 Don't go too far.
 You're gonna be part of our morning call crew
 in just a few moments as well.
 In the meantime, we do have a lot more to get through
 until we get there, including a big morning
 for ISD space mobile at Cape Canaveral in Florida.
 See those shares are up about 4% right now.
 We got the details straight ahead
 and as we head to break,
 a check on shares of lazy boy.
 The literature retailers at fourth quarter
 just that earnings blowing pass forecasts
 while sales just edging past estimates.
 Lazy boy chalking the results up to expansion
 through a new stores and acquisition
 of several independent locations.
 You can see shares are up 16%.
 Nothing lazy about that.
 We'll be back in a moment.
 Welcome back to morning call.
 Take a look at shares of ISD space mobile.
 Those are up 4.5% right now at pre-market.
 After the company successfully launched
 three of its Bluebird satellites earlier this morning
 via a SpaceX Falcon 9 rocket.
 This marks the company's first mission
 after its launch set back in April
 when Blue Origin's New Glenn rocket delivered a satellite
 to the wrong orbit, which resulted in a loss.
 ISD may be using SpaceX for launch services,
 but its direct-to-device communications service
 from space is also a competitor
 with SpaceX's emerging Starlink mobile service.
 Well, if we stick with space and new comments
 this morning from Blue Origin's CEO, Dave Limp,
 he says that reconstruction of the launch pad
 down at Cape Canaveral,
 that was damaged in that massive rocket explosion
 on the pad last month, that's begun.
 When speaking at Viva Tech in Paris
 just a short time ago saying the project started yesterday,
 NASA previously said, well, NASA did not say that.
 NASA said it was gonna take some time
 to see that launch pad.
 Restored, Limp reiterating his recent comments
 that Blue Origin expects to be able to resume launches
 later this year, which keep in mind is very ambitious.
 We continue to monitor that Viva Tech conference too
 because Jeff Bezos is also on stage there.
 Straight ahead, the morning call crew
 teaming up the trading day ahead,
 and a new era for the Fed and markets
 as Kevin Worsh prepares to take the podium.
 Welcome back. Here's what to watch today.
 Several pieces of economic data this morning
 including retail sales, weekly mortgage applications,
 pending home sales.
 We get that Fed rate decision this afternoon.
 Kevin Worsh's first news conference as chairman.
 We get earnings from CarMax and J-Bill
 before they open and AWS holds its summit,
 showcasing its latest in cloud and AI innovation.
 Now that event comes as Amazon shares are down really 12%
 from the high hit back in early April or early May, excuse me.
 It's time for your call sheet
 where we look at the topics driving the trading day ahead.
 The crew members today,
 Howard Capital Management CEO, Vance Howard,
 Garcia Hamilton and associates on our Gilbert Garcia
 and still with us Apollos Tourston Slack.
 Great to have you all here.
 Got to start with the Fed and Gilbert,
 I'm gonna kick this one off with you.
 What are you watching?
 Well, first of all, I go back to Paul Volker.
 I think this has probably been most exciting time
 to get a new Fed chairman in place.
 I think he's gonna set a very strong tone
 and I think it's gonna go a long way
 to improve overall morale at the Fed
 and I think it's gonna do a lot to restore
 the whole Federal Reserve credibility worldwide
 with other world leaders.
 So I think it's gonna be a very exciting time
 and I think he's gonna set a very new
 strong tone for top.
 Okay, and Vance, I just wanna throw up,
 we have a chart from Kalshi here
 and that is on odds of a Fed rate hike before 2027
 and then into 2027 if we can just pull that up.
 Do we have it?
 Okay, anyway, there it is.
 Before 2027, 36%, but before 2028, 79%.
 I wanna get your reaction to that
 because we do have stocks at or near all time highs,
 even as you have a market that expects
 that the Fed could be leaning much more hawkish here,
 not just this year, but into next.
 I couldn't agree with Gilbert Moore.
 I think Gilbert Spotout, I think there's a new breath
 of fresh air that's coming in
 because I knew with a former Fed chair
 won't mention his name every time he got in front
 of the podium, he just tense up and become frightened
 because he usually just drove the market lower.
 But I think that above the Fed's target rate of 2%,
 we all know that.
 We also know that a lot of the big impacts old
 and all the gas and what's going on the straight right now
 but that's gonna start to fix itself in the near term.
 So another thing that Warsh has said that he's gonna look
 at sort of incrementally looking at different pockets
 of inflation to sort of gauge
 at a different gauge than what they've been looking at
 at the 4.2 and he's mentioned that a little bit.
 Like Gilbert said, I think this is a breath of fresh air.
 Thank you for him showing up.
 I'm glad that he is our Fed chair.
 Okay, Torson, I wanna get your reaction to all this too,
 especially since it's not just the Fed this week
 in all more than 20 central banks accounting
 for upwards of 40% of world output
 making rate decisions this week.
 Of course, we got Sweden earlier today.
 We get BoE tomorrow as well.
 Just overall, the global monetary picture here
 and how the Fed leads the charge if it does.
 Yeah, this is very important for markets
 because it's very clear that there's upward pressure
 on inflation globally.
 We've seen the RBA and Australia race interest rates
 last week was all the ECB race interest rates
 and now we're discussing whether the Fed should
 also be raising interest rates.
 The reason why that's important is that normally
 when interest rates go up, it matters
 because it's the discount rate
 for the net present value of cash flows for companies.
 But at the moment, this stock market does not put much
 if any weight on that because today, most of the increase
 in the stock market has come from growth companies
 tech companies are not as sensitive to interest rates
 when they have the strong tailwind coming from AI at the moment.
 So the debate in the stock market is really all about
 should we take out the traditional textbook
 and focus on what is the net present value
 of the company that I'm looking at?
 Or should we instead say it doesn't matter
 what the net present value is,
 now we should focus on that there's a lot of growth
 and these companies in AI are going to generate
 a lot of profits and that is the debate.
 Namely, are they going to generate a lot of profits
 over the next several years?
 Or should we go back to the framework
 of valuing companies according to what is actually
 the net present value of their cash flows?
 Yeah, it's worth time to go back to something
 you mentioned before and that is if oil is falling
 like a rock here and we are skewing towards
 according to the IEA earlier this morning
 and oversupply as soon as next year,
 what does that do to the inflation narrative?
 Yeah, absolutely.
 That does mean that inflation will be coming down
 and that certainly also will ultimately imply
 that therefore the probabilities of the fit hiking
 should also be coming down.
 But the challenge is that there are other upward
 pressures on inflation and of course
 with a very strong economy because of the AI spending boom.
 And let's not forget we also have the one big bill of a bill
 which is also boosting according to the CBO,
 GDP this year by 0.9%.
 So we have some fairly strong wins
 that are not particularly interest rate sensitive
 and that's a challenge for the fit
 that they may ultimately have to hike rates
 but the economy is probably not going to respond much
 because the AI boom will continue
 and the one big bill of a bill will also continue
 to be a tailwind.
 Okay, Gilbert, your thoughts on this?
 Yeah, sure.
 I actually go the other way.
 I think that ultimately I think it would be a mistake
 to raise rates.
 I think the Fed chairman has started going to lay out
 the facts that AI is going to be a deflationary impact
 worldwide and certainly on our economy.
 I think he's going to talk a little bit about
 the balance sheet, the importance of getting it down
 and I think you're going to start seeing the whole change
 of a market sentiment going away from any Fed heights
 to going back to sort of in the middle of fairway
 to even leaning to rates being lower
 and I think he's going to make that case very clear.
 Okay, we got 20 seconds left, Vance, final thoughts here
 especially to continue to monitor the rocket ship
 that is SpaceX.
 Well, my last 20 seconds is I'm very, very bullish
 no matter what war says.
 I think that it'll be over the next couple of days.
 I think it'll be a lining bird cages
 but long story short is I'm glad that he's here.
 I think he's going to make very good decisions
 on behalf of the economy and the market
 and I see the market going much, much higher
 no matter what he says.
 Okay, well, thank you to our morning call crew.
 Great to have you here.