Tech earnings, AI spending and Fed uncertainty drive markets 7/30/26

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Transcript

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 Good Thursday morning.
 Let's get a check on US stock futures which are in the green this morning attempting a rebound.
 I'll be at very modestly right now.
 Pre-market the S&P is poised to open up by about three points.
 So basically around the flatline.
 Dow 40 points.
 The Nasdaq is poised to open up 35 points.
 This of course after a very broad based selloff.
 Yesterday the Dow coming off a more than 1100 point slide.
 It was the worst day for the Dow industrial since April of 2025.
 We saw 1% plus moves lower for the other major averages as well.
 The Nasdaq is now sitting in correction territory.
 It's down more than 10% from its 52 week high.
 And you can see that the S&P is down about 4% the rest will 2000.
 The small cap's down about 4.6%.
 It's really been tech that has led the charge.
 Lower will see how things go today as we continue to digest and make a cap tech earnings.
 This of course also after Kevin Worsh delivered his first policy decision as Fed Chairman.
 Holding rates steady.
 Holding rates steady in the face second policy decision.
 Basic sticky inflation and growing descent for a hike.
 And we saw some pretty dramatic moves in the bond market yesterday afternoon.
 So if we get a check on treasuries this morning you can see bond selloff continues.
 Yield are higher across the curve.
 Fed sensitive to your treasury yielding 4.26%.
 10 year treasury yielding 4.69% and take a look at the 30 year treasury.
 Because we saw that yield curve steep and pretty aggressively yesterday afternoon.
 That is currently yielding 4.23%.
 We're basically sitting at the highest level since 2007 for the 30 year.
 Also we get PCE inflation reading today and GDP on tap.
 So more economic data for the bond market and others to digest.
 And if we take a look at the dollar two which has strengthened pretty notably here in the last
 couple of weeks I can see dollar index is trading around 194 right now.
 Energy prices after yet another US strike on targets across Iran overnight.
 President Trump had signal this was coming and you can see we're higher this morning.
 WTI fractionally higher trading about $84.69 per barrel and Brent is up about 1%
 trading just below 92 dollars a barrel.
 Fed fallout and market fallout from around the world as well.
 J.P. Young has the Asia trade out of Singapore.
 Steve Sedgwick is tracking Europe from London.
 Steve let's start this off with you and what's been a very busy morning so far with earnings.
 Then of course we get Bank of England today too.
 Oh yeah yeah I've spoken to about 10 12 CEOs and CFOs this morning.
 I'm blown away but by large they're very very positive.
 But Morgan I think it's fantastic.
 I think the US shares as you brilliantly eloquently said got hit by a triumvirate a three-legged
 store they got hit on valuations on tech.
 They got hit by Trump and the strikes in the Middle East and hence the extra cost of energy
 and they got hit by what was seemingly a little bit too dovish wash for comfort.
 Well the three legs of that store don't seem to be affecting European shares.
 One because by large the earnings have been good.
 Well added as I'll come to that is a notable exception as well.
 Two actually even though for instance the Bank of England is going to be leaving race unchanged
 today we think they don't seem to be so worried about it.
 More sanguine about leaving race unchanged here as well.
 But yes on the third part we of course have been affected by those strikes in Middle East
 and the increasing oil price.
 But European shares as you can see over my shoulder are searching for some form of direction
 today after that sell off on Wall Street following the Fed meeting.
 Investors keeping a close eye on those earnings.
 A number of major European companies reporting including Shell.
 I spoke to the CEO well so one and they reported second quarter adjusted earnings
 of 9.8 billion dollars.
 That's more than double the same period last year.
 And it comes amid of course surging oil prices on the back of the Middle East conflict
 and their trading revenues were through the roof.
 Look at this one though we've talked a lot on this show.
 I know you have about Nike and the problems they're having are getting market share back again.
 Well it's the same story for Adidas which has the advantage of such a great back catalog
 of retro designs.
 But shares of Adidas are under pressure after the German sportswear maker issued a modest
 guidance upgrade that fell short of expectations.
 The company now expects revenue growth of between 9 and 10 percent.
 A second quarter revenue rose 14 percent amid strong consumer demands for its retro trainers.
 As I mentioned and it got the boost from the World Cup.
 But it wasn't enough and the shares down 17 percent.
 What they need Morgan is more of those snazzy silver sneakers that you are wearing in Singapore.
 They need more sales of those.
 Yeah my house can probably keep supplying.
 We'll see this is a huge move for that stock speaking of.
 By the way maybe we should get you some too.
 We can match the next time we see each other somewhere abroad.
 Steve Sedgwick thank you.
 Let's get to the action in Asia and our GP on GP.
 Yeah good morning Morgan for the record.
 I can't pull off some Chinese silver sneakers from Adidas.
 But what's not been shiny today were how markets and stocks were trading in Asia.
 It was a bit more about us pull back than a volatile one which might be seen as a sign of good
 news and perhaps some of this normalization.
 Though there's growing nuance and diversion though and divergence that is among some of these
 major markets. Take a look at for instance in Japan a day before the BOJ's policy decision.
 The Nikkei 225, managing to rise.
 But we saw the broader based topics actually pull back.
 So a little bit more nuance in that market.
 Same in greater China.
 We saw Hamseng shares closing in the green.
 But stocks and shares then mostly also taking a step back and closing in the red.
 We want to see more signs of normalization in the tech trade.
 Take a look at Japan actually.
 And once again for exchange we've actually seen good earnings results actually prompting
 a stock move upwards.
 That's for advanced as the chip equipment maker which reported record quarterly profits
 and also an upward revision for revenue and profit guidance.
 And that what do you know percent of stock surging alongside other chip related stocks like
 Tokyo Electron and Kyosya.
 South Bank though missing out on things and they actually closed in the red.
 So again not everybody getting lifted by that upbeat earnings report from advances.
 Of course the earnings we want to look out for is the memory chip giant Samsung today
 which blew expectations out of the water.
 But managed to close in the red despite a very rosy start.
 Now get this Morgan.
 They saw operating profits surged by a whopping 1,800 percent.
 I'll repeat that.
 1,800 percent high and also just above what markets were expecting.
 More interestingly also for Samsung is the outline that the continued shortage
 and demand for memory chips will continue.
 But something else they said was also very interesting actually on their earnings call.
 They said that they are expecting that by the end of the year they will have the same amount
 of market share, global market share in the high bandwidth memory chips as they do in the DRAM
 space which they lead at 38 percent.
 Now to put that into context that means they're going to try to catch up with SK high index which
 has 51 percent which means they might be eating into their market share which means
 that also might be one of the reasons why SK high index actually closed deeper in the red
 and by both of these also pulled the cost be down.
 More nuance in the memory chip space but also more information
 because they're coming for someone's lunch and whether it's SK high index or micron
 that's something we'll have to watch out for in the next couple of days.
 Good morning to you guys out there in New York.
 All right.
 Thank you.
 And good evening to you and we will be watching it.
 We know you'll be covering it for us, Jay Piong.
 Thank you.
 We've got a big day for big tech earnings.
 Shares of Microsoft surging seeing the fastest cloud sales growth since 2022.
 Also seeing more capex in the year ahead but a very different story for meta platforms basically
 basically kept their capex study in terms of their guidance for meta platforms free cash flow
 sinking more than 90 percent amid those soaring spending plans as well.
 And of course they don't have that cloud business.
 You can see Microsoft up 8.5 percent pre-market meta down about 9 percent.
 Cmbc senior technology correspondent Arjun Carpall joins me now with the breakdown Arjun.
 Yeah, Morgan, look it was a tale of two tech giants really there and let's dig into
 why we're seeing those moves.
 Microsoft really impressed investors and it was thanks to the strong results around that AI
 story.
 More importantly it was that Azure growth number which came in at 43 percent for the path
 quarter which was actually an acceleration from the previous quarter.
 Well it said it now has more than 30 million paid seats for Microsoft 365 co-pilot its AI
 work assistant as well and more importantly the revenue backlog is up 84 percent and the
 company is emphasizing that it's winning business now beyond just open AI.
 So that's a very interesting part of the equation.
 I think that shows really that those bets that Microsoft has been making on those AI
 investments are paying off as well and all of this even as the CFO signal potentially
 higher spending in 2027 because there are signs as I mentioned those investments are starting
 to pay off but a totally different story as you mentioned for meta which is down sharply
 this morning in pre-market trade.
 A couple of things now concerning investors the first was the revenue guide for the current
 quarter of between 61 and 64 billion dollars with the middle of range missing market expectations.
 Meanwhile the company kept its top end of CapEx which was around 145 billion dollars even as
 free cash flow plunge 91 percent that is a massive plunge in that figure there.
 The problem really was Mark Zuckerberg appeared to give a bit of a confusing message to investors
 around the AI story for meta saying he wants to keep some of the compute capacity which they've built
 but also sell some of that compute to third parties which will kind of be like a hyperscaler cloud
 business model as well but the problem was there are very little details and I think that stop
 drop you're seeing right now is perhaps some confusion from investors Morgan as to how meta
 is positioning around its AI strategy.
 Yeah and if we just dig a little bit deeper into that Arjun you know Microsoft you can see
 return on investment on all of this capital spending all this CapEx capital expenditure right now
 because of the acceleration you're seeing that cloud business and a hundred billion dollar
 run rate etc. you could even make the same argument for alphabet even though obviously we know
 what happened with that stock there last week with with free cash flow turning negative.
 It's going to be something in focus for Amazon meta doesn't have that same type of business
 hence the focus from investors on this possibility of building out a neo cloud offering
 what are the return on investment metrics to be watching when it comes to the AI spend
 for meta specifically then.
 I think there's a couple portions one is meta's advertising business this is the huge beast
 that is really driving the company right now meta has spoken about the fact that it's been using
 AI to do more targeted ads more efficient ads and so that ad business continues to grow and
 continues to be a mammoth piece of the meta story as well but I think what's happening now is
 the market saying look you've got Instagram you've got WhatsApp you've got Facebook there's
 billions of users on these platforms you've spent a ton of money on building out super intelligence
 labs with a hiring of Alexander Wang what is happening now what are you doing on the frontier
 and I think that portion of the puzzle is missing I think what investors want to see is something
 akin to kind of what Google's doing with Gemini Google is trying to monetize its huge base of
 users with Gemini is that something that meta can do with that massive user base of users across
 all of its apps right now can it create a product in meta AI that people are going to pay for at
 least that they can monetize in some way whether that's advertising whether that's by paid subscriptions
 can they monetize that huge user base so I think right now the metrics are twofold one is improving
 efficiency in the ad business which they are seeing but the second and this is where it's unclear
 and what I don't think Mark Zuckerberg's done a great job of of sort of telling the market is
 what is meta strategy and that second prong at round AI what exactly are they trying to build
 how will they monetize it and actually where is this business going to pay off and I think adding
 this kind of neocloud business into the mix without any kind of clear pathway also adds to some of
 that confusion as well Morgan all right Arjun Karpal great to get your insights to start off this
 hour appreciate it we're gonna get some more reaction now with Freedom Capital markets chief
 market strategist Jay Woods joining me here on set doing some double duty for us today I want
 to throw up a chart because we just mentioned it free cash flow we have a great chart showing just
 how much that's plunged we'll say X Microsoft Microsoft's not on this chart yeah but it really sort
 of speaks to where investors are keyed in this earnings season and perhaps the fact that Microsoft
 isn't a position to as you might say save the day would you say that today I think Microsoft
 is what this market needed right now and it could stabilize some of the big selling we've been seeing
 especially in these max seven names but Microsoft showed that you know okay we're limiting our spend
 we are actually getting results from that spend what they did in the Zora in the cloud base
 was phenomenal so and they can still buy back stock so that is one of the things that's good
 Google reset the bar all right they went negative on the cash free flow for the first time ever
 and now meta worst free cash flow in four years and then they're introducing another aspect
 that reminds me of the metaverse that has a lot of people confused right now so meta has a lot more
 to you know answer to and that's what the market is going to react to and then when you look at
 levels Microsoft all right it's coming back but is it back now let's watch the 200 day moving
 average it hasn't gotten a back above there that level is about 434 we're at 424 in the pre-market
 so let's see how it trades not just today but through the day closes and continues maybe it's
 finally turning around because that AI story that software story has been beaten down now we're
 looking for those winners and I think Microsoft is the one that was beaten down more than it should have
 and is going to finally come back on the 20s ways yeah and of course after the bell later
 today we're going to get Amazon we're going to get Apple which has been in some ways almost the
 I don't want to say anti AI but we'll say anti AI capex spend story when it comes to the mag 7
 remember these to criticize it all the time where's your AI spend what's the AI story apples
 the juggernaut it just continues to hit on all metrics and they're being rewarded now for having
 that lack of spend so what they're doing this will be Tim Cook's last press card last quarter
 as CEO so it's going to be interesting see how he passes the baton but they've they've hit it
 perfectly this quarter let's see what they have set up going forward Amazon is the interesting
 one to watch every time you think it's going to lift it head something comes back so AI spend
 capex spend is huge to watch when Amazon reports later and then you know we're getting some pockets
 of good earnings earnings continue to be robust but they're not being rewarded look what Samsung did
 today yeah that was a great quarter and it ended up closing on the day a little bit lower yeah
 so it's a good point very quickly here mm-hmm how is the market digesting this versus the fed
 uh the fed wow um you know as he took the the stage we got a little bit of a rally then when he
 left we we had more questions and answers he's not telling us exactly how he wants to do things
 which is what he said he would but inflation no tolerance and he had a chance to actually hike
 to get inflation back in balance because the reason we cut in the first place was because of
 unemployment well that's fine so I want to hear more about this family fighting you have a
 guest coming on who's actually at the center the last time there were three to sense in 2016 uh
 but it's going to be interesting because I think this family fight could get a little more
 vocal as we go into Jackson Hole and then the September meeting yeah Jay we're gonna see you later
 this hour you know join us with the call crew and that is the perfect setup for our next guest I
 appreciate it yeah uh because joining me now is loretta master former Cleveland federal reserve
 president and adjunct full professor of finance at the Wharton School uh university of Pennsylvania
 and loretta it's great to have you on jay just mentioned it uh you know this this idea of
 family fight that term was used quite a few times by chair wars yesterday in in the press conference
 I mean as somebody who has descended in the past how should investors how should the market understand
 understand that descent process um and in the wake of no more forward guidance with that whether
 that fills the void now well I mean I don't call it a family fight it really is people coming in
 with their views of the economy and what they read is in the appropriate policy going forward so
 different people on the committee had different views and I understand why they did because there
 is a lot of uncertainty about what the future path of inflation is so this isn't that surprising me
 and in fact if everyone agreed I think I'd feel more nervous about it because it means they're all
 viewing back to the same one yeah we've always had this kind of good discussions around the
 epilepsy table so I don't take anything from that as being the processes are working I think the
 processes were so I do think eventually we're going to need to get some indication from the chair
 of the committee having worse about how things thinking about the economy and not necessarily
 what they're going to do next but how they're processing the incoming information and what that
 means for the way they're thinking about what policy is appropriate for going forward so I don't
 think it's the same it will be totally silent on that because as you saw yesterday the markets are
 trying to evaluate the information but if there's confusion about how the Fed is actually
 talking about making decisions they're not going to get clear signals from the market about what
 the market thinks about the data it's going to be a muddled message um chair wars did reiterate
 that commitment to 2% inflation target yesterday and noted that inflation stays high rates could be
 part of the solution when you're talking about supply chain shocks when you're talking about for
 example we just touched on it you know Samsung saying that the memory shortage could be potentially
 worse in 2027 than what we're seeing right now when we're talking about hyper scalers deploying
 trillions of dollars uh in the impact that's having on the economy and on different industries
 right now how much can monetary policy really actually arrest what is sticky inflation
 well it has a tool this industry tool that is used to bring demand and supply back into balance
 right now supply is constrained and one of the pressures on it is the fact there's shortages
 because of oil we have shortages of some components that are going into the big AI build out
 and so those kind of constraints means that supply is constrained and demand is outpacing it
 what you're gonna end up getting is a sustained inflation unless the Fed does do what it needs to do
 with interest rates to bring demand better into balance with supply I think in this kind of
 environment where there are these shocks in the economy if you ignore them and we get a series
 of shocks as we've been experiencing you will end up with an inflation problem and even before
 the war and Iran brought oil prices and energy prices up we were seeing the service part
 components being very sticky in terms of their pricing and inflation so I think we have an inflation
 problem yes it could be back on a downward path at some point my own view is that they're going to
 need to do something with the interest rate in other words tighten policy because it's really hard
 for me to see this economy the way it's performing and say that policy right now is restricted
 I don't believe it is and I think they're going to need to bring up that interest rate or policy rate
 in order to get that supply demand balance that we're seeking and of course we're going to get a
 PC inflation reading this morning as well the bond market reaction that we've seen in the last
 I don't know call it 12 18 hours with the yield curve steepening with 30 year
 treasuries selling off the most aggressively in that process as well your thoughts on the market
 reaction we're seeing here and what it says about where we are in terms of the economic data
 and and the policy picture well there's a lot of things that happened yesterday
 that went into that is not all the Fed and what action were not lack of action the Fed took
 right we also have worries concerns about fiscal policy in the United States and its sustainability
 right we had the earnings reports that you were just going through so and then we had the Fed
 on top of it and I think there is some concern among market participants that perhaps the Fed isn't
 going to set policy in order to get inflation back down to 2% we'll have to see it's one day's
 reaction we'll have to see what happens in the markets going forward but I think there is a concern
 on the part of the markets that one we don't really have insight into how the Fed's going about
 making its decisions and so it's very hard to read what's going forward so you're going to get
 different views from different participants and different positioning I think it's not
 sustainable to be as silent as the chair has been about how they're thinking about the economy
 that's different than four guys saying we're going to be doing this with the interest rate
 at the next meeting it's really about the framework around which they're setting policy and I think
 we're going to have to get more information about that to feel comfortable with how the Fed is
 making its decisions after all Kevin Warsh says he wants us to be able to hold the Fed accountable
 for its decisions yes we can see what happens with inflation as part of that accountability
 but I want to know how they're going about making the decisions I would feel more comfortable
 knowing that they're doing a good job because you know you could get lucky on inflation right I
 need more I need to see that they made good decisions based on some kind of framework that makes sense
 to me about how they're reading the economy okay they're out of master it's great to have you on
 and it's always great to have your insights appreciate it thanks Morgan we got a lot more to come
 here I'm more in call including no earnings slow down we're digging into results from Starbucks
 in Chipotle speaking of chips the different type of chip a look at shares of arm while they're
 sinking ahead of the open down six percent and later hungry for shares to high profile consumer
 stocks making their trading debuts today very busy hours still ahead on morning call
 what made you confident that you could do something that hadn't been done before I have no fear of
 failure trailblazing women changing the game one of my favorite pieces of advice think about what
 your boss's boss needs leadership can look in many many different forms it really does come down
 to just trusting yourself like the short and you just got to think big to accomplish big things
 julia boston hosts cmbc change makers and power players new episodes every Tuesday wherever you
 get your podcasts welcome back watching shares of a on on the back of q2 results closing down about
 one percent yesterday the insurance and reinsurance broker reporting mixed results for the quarter
 beating on earnings but falling short on revenue reaffirming its guidance for this year
 for closer look at the quarter and for what we're seeing across the insurance industry let's
 bring in edmund reese cfo for aon edmund it's great to have you on the show welcome to you let's start
 right there you know I when I when I think about risk assessment there's probably no one anywhere
 more sophisticated in the world than the insurance industry when it comes to that so what is your
 assessment and it's a booming industry right now it's an extraordinary time to be in the industry
 you're right a huge industry by trillion and growing because our clients are facing all of
 this complexity and volatility you had a busy morning this morning that hit on the topics that are
 top of mind for our clients right now all the geopolitical developments in the middle east the build
 out on the AI infrastructure which is what you were just talking about energy transition projects
 workforce transitions from AI all of these things are creating complexity for our clients
 and creating demand for aon which is why our results continue to be very very strong sustainable
 growth here across all our solution lines a great time to be in this industry yeah so when I dig
 into all of that a little bit more let's start with the AI build out because it did come up on the
 earnings call yesterday and the fact that you do have all these companies that are deploying hundreds
 of billions trillions of dollars and this debate about what it means to ensure and reinsure all
 this infrastructure and everything it's going to come with it these to be specific roughly just
 from the five hyperscalers two of which you spoke about this morning roughly 800 billion this year
 the trillions over the next couple of years on both the infrastructure and the ongoing operations
 we have a leading role in this given our engineering and expertise helping with builders risk helping
 start up cause the general liability the ongoing operations cyber associated with this we have a
 leading role playing here and we're seeing continued investment from companies here the key for
 this is that so much is happening these numbers are unprecedented in our industry we have been
 focused using our data and analytics to bring in other capital to ensure this infrastructure build
 given what it's driving today so it's a big area for us it's been a significant component of our
 growth this past quarter and over the past couple of quarters as we've had double digit growth in
 our construction product line which is where this shows up and we continue to see it as a tailwind
 for us moving forward interesting when you say bring another capital like what if you think
 about the insurance industry Morgan it's as I said a moment ago five trillion dollars
 we have been focused on because that if you're thinking about data centers that are 40 50 billion
 dollars of build out no one insurance carrier is going to be able to support insurance for that so
 you need additional capital to come in and we've seen whether it's investment managers other private
 equity firms sovereign wealth funds they're looking for assets with uncorelated return to the other
 options that they have and so with our data we can give them insight just as we've done with
 catastrophe bonds helping to drive a yield in insurance linked securities we can do that same
 similar type of work for those asset managers and private equity firms when it comes to data center
 center support okay I do also you mentioned geopolitics so I do want to get your assessment of what
 we've seen in the Middle East since I know Aeon has been involved in insurance or maybe even not
 insurance right now with the Shade of Hormuz and some of the other unrest we're seeing in terms of
 maritime trade we've certainly been involved in the insurance there that it is uh you know uh
 again a challenging time for our colleagues a challenging time for our clients in those areas
 creating more uncertainty and more risk and it goes in the areas that you would expect insurance
 to be involved so the ships themselves the cargo themselves but it goes beyond that we've been
 talking for quite some time the impact of what we've been calling the four mega trends trade
 being one of them if you think about the impact that's happening with the volatility in the Middle
 East the impact on supply chains being disrupted the political violence and terrorism that is a
 specific type of insurance where we've actually seen balance sheets pulling back and prices going up
 the trade routes are being impacted so you know it is creating a lot of demand the complexity for
 us it's a smaller component in the specific Middle East of our business right now but it's been
 growing at a very high rate giving that demand and if this continues we'd actually can expect it to
 see it spill over into regions that are impacted by the supply chains and the goods coming out of that
 that space so it's a top focus for our clients and somewhere where we're helping with the data and
 analytics that we have okay something to watch lots to watch and memories of Aeon great to have
 you on thank you thank you for having me we'll be back after that
 and we're going to breath and welcome back to morning call let's get a check on us stock futures
 which are in the green this small this morning albeit with fractional gains pre market the S&P
 has poised open up 16 points the down 90 points and the Nasdaq 126 points as of right now this after
 a broad base selloff yesterday the Dow coming off a more than 1100 points slide it was the worst day
 for the Dow industrials since April of 2025 let's get a check on treasuries too you got PCE and GDP
 data on tap today and of course market digesting a fed rate decision yesterday a very we'll call it
 dramatic hold if you will fed sensitive to your treasury yielding 4.26% and the 10 year 4.69%
 the 30 year treasury yielding 4.23% at the highest levels we've seen since 2007 joining me now
 torsson slot chief economist at Apollo global torsson it's great to have you on there's a lot
 for investors to digest here overall but I do want to start with you right now with what we heard
 from chairwarsh at the fed yesterday and how that is intersecting right now with a geopolitical
 picture and with the tech and AI infrastructure build out picture because it does feel like they're all
 feeding each other yeah and you have to rewrite I mean a good description is unfortunately a
 dramatic hold normally we talk about dovish holds or hawkish hike but it was quite dramatic when
 you see the yield curve steepen as much as it did yesterday you saw short term interest rates come
 down traders basically expects now the fed to only start hiking later and long term interest rates
 unfortunately rose really really dramatically which is of course raising all these questions about
 what is the path of the fed going forward because especially as you say we now also have the risk
 that we could have all the prices elevated for at least a few more months and in the worst case
 for the rest of this year and this is raising all kinds of risks for the fed especially when you
 already have inflation at very high levels so the bottom line is for the fed that yes we have an
 economy that's actually quite strong and we have still unfortunately an elevated level of inflation
 adding the risks from the geopolitical side that just unfortunately bring them into the situation
 where they need to think about well maybe they should be hiking in September as the market currently
 is expecting yeah I mean we've seen this in other parts of the world arguably this year the return
 of bond vigilantes do you think that's happening here as well now well you're exactly right Morgan
 because this is not only a US issue we have the challenge of fiscal problems really everywhere
 Europe has been spending of course also a lot on defense and on infrastructure we also see
 significant spending in Canada we also see significant spending in Japan and for that reason
 there is just upward pressure on 10 and 30 interest rates everywhere combining that with the
 unfortunate situation that we also have high inflation is just a perfect storm for long-term
 interest rates that are strong economy strong inflation very very incredibly very strong also
 fiscal deficits that all means that we have unfortunately quite a lift in an overall global
 environment where interest rates are just going to stay higher for longer and that's the reality
 also for equity investors globally yeah I mean we we're just having this conversation you just
 touched on it with Loretta Mester earlier in the hour two and that is you know the argument is
 out there that yes the dollar strengthened we're seeing these moves in the bond markets right now
 stocks have started to sell off here but overall in general that fight financial conditions have not
 been tight at what point does that start to shift whether the Fed is actively and directly
 involved or not yeah and Washington talked about this also yesterday because if the Fed does not
 high rates sometimes the market does the work for the Fed like it did yesterday namely by tightening
 financial conditions and Washington said that since the last meeting we had seen a tightening
 financial condition so this was almost an argument for therefore we don't need to do much
 but the problem was that the market interpreted the tightening financial condition as not being
 enough rates which was required so that's why the path of inflation coming from both the late
 effects of tariffs also from higher energy prices also from the AI spending and build out
 trading and strong economy today it just implies that there is just a lot of upward pressures on
 inflation and that does bring it to the bottom line especially for equity investors that rates
 are going to stay higher for longer and when that's the case that does create unfortunately just
 the more challenging environment also for equities yeah which if we bring this full circle brings us
 back to this big focus we're seeing on CapEx spending by all these big mega CapTech companies and
 what we're seeing with free cash flow as well torsons lock it's great to have you on appreciate it
 come back soon all right as we had to break check out shares of Starbucks those shares are jumping
 to the coffee giant raised it's full your outlook also reported it's fourth straight quarter of theme
 store sales growth which much stronger than expected particularly in North America
 we're here from the CEO and first on CNBC interview in the 9am eastern hour today those shares
 are up 5% Chipotle also on the move company raising its sales forecast despite the nationwide
 parasite outbreak that has affected some other companies CEO notes outbreak linked items are not
 used on Chipotle's menu it's board also approving and you $1.3 billion share by back those shares
 are also up 5% we're right back the market faces another critical test today and this is
 unrelated to the Fed or the tech trade investor appetite some pun intended for consumer companies that
 are coming public there are two IPO'ing today both at the New York stock exchange jersey mics
 is set to go public after raising one billion dollars with its IPO the sandwich chain
 majority owned by blackstone pricing shares of $23 a piece in at the midpoint of the marketed
 range at that price jersey mics has a market value of $7.3 billion the company will trade on the
 NYSE under the ticker J.M.K.E. while reformation will also begin trading today under ticker symbol
 R.E.F. it's the largest apparel company to go public since Birkenstock back in 2023
 shares that sustainable women's wear retailer pricing at $15 a share that was a low end of the
 marketed range raising $211 million for market value of just under 900 million I spoke with CEO
 Halle Borenstein and I asked why reformation is going public now and what it will enable
 we have a approach to growth that's not one thing it's many things and importantly it's all
 things that we've proven they're already underway it starts with increased distribution so that's
 more stores today we have 70 stores globally and we're going to more than double that it's increasing
 our e-commerce business we have a broad assortment of categories and we're going to continue to have
 our customer diversify across our assortment and then lastly reformation is a brand that resonates
 outside the US about 18% of our revenue came from outside the US in 2025 and it's growing at a
 really accelerated rate so we're excited to bring reformation to more markets across the globe
 and altogether we're still really early on in our inning we have less than 1% penetration of our
 core market and so you're going to see a lot more from us well reformation which is backed by
 Primera and a favorite amongst celebrities including Taylor Swift and Megan Markle the majority
 of its business is direct to consumer with a lot of returning customers and across demographics
 a big part of the growth story so I asked Borenstein what she's seeing with consumer behavior both
 domestically and internationally especially as inflation remains in focus we are really fortunate
 that because we have that broad customer base particularly on the older more experienced in their
 career part of our customer base we're a bit more insulated from some of the pressures that we
 are hearing about in the news if you look at our demo the average consumer actually makes more than
 100K a year and so our business has been really robust we saw it in Q1 and Q2 our active customer
 numbers are incredibly strong and so we are feeling really good about our ability to continue to
 execute throughout the year even with all of the dynamic environment that we are operating in
 you can see the full interview with reformation CEO on cmbc.com we'll see how both of these stocks
 begin trading today a lot more to come here on morning call including a look at some big
 name of stocks seeing big pullbacks following earnings we first check out shares of lamb research
 up 7% right now one of the big gainers on the s&p Nasdaq Nasdaq 100 she said in pre-market
 expecting first quarter sales to come in ahead of street estimates this after beating on the top
 and bottom lines for the most recent quarter on what else strong AI infrastructure demand
 time for call sheet where we look at the topic straight driving the trading day ahead
 remembers today jaywoods freedom capital markets still with us Steve Grasso Grasso Global both
 are cmbc contributors Patrick more ahead of more insights and strategy we got lots to talk
 about Patrick I want to kick this off with you your resident tech guru your thoughts on what we
 got with meta and microsoft and also some of the chip names after the bell last night
 yeah so I like to look at whether things are company inflicted or market inflicted and I think
 we saw some really good signs from microsoft and we saw co-pilot who everybody you know loves to
 you know make fun of just absolutely crush it on revenue on usability on latency on satisfaction
 and Amy Hood really did the mic drop where she said we're going to get back to fcf catch
 flow positive in in 2027 on top of hitting the azure number on medits mostly self inflicted
 right they they beat on revenue they missed on eps it was primarily driven by running hot on
 expenses and also having a very weak guide and with them it's really a how do I get into the cloud
 business so completely understanding and qualcomm right as you would expect had very low numbers
 on the smart phone side given what's going on there with memory but the positive part is
 and I do feel like this when it was an inflection quarter from them that takes them out out of
 this chinese trough which hit below and all you could do is is move up so it's very positive
 signs until they get to their their data center okay Jay we kicked off the hour with you saying
 that microsoft might might have been just with the market needed here Steve want to get your thoughts
 on that yeah so when you look at microsoft microsoft the chart is terrible for the year but when you
 think about everything the Patrick just laid out there azure growth is off the chart so cloud is
 what is eclipsing the worry about the seat economics seat economics are definitely getting better
 and if you look at how they're growing those seats last quarter was 20 million now it's 30
 billion so I think people are starting to realize microsoft can turn and flip that switch our
 free cash flow whenever they want sort of the way AWS can or amazon can but a meta which is 98 percent
 ad rev is having difficulty because if you think about it their reality labs burns four or
 five billion per quarter when they're an ad company they don't need to wrestle around with
 data centers as much as they are they need to come back on catbacks that'll turn the name okay
 um Jay we'd love to get your action to all of this we haven't even touched on some of the other
 names we got after about last night port net we had arm we got a lamb research yes Starbucks
 Chipotle and then we're going to get more names this morning that aren't tech related and obviously
 we've seen you know a rotation in general in this market earnings overall seem to be pretty good
 so no earnings are good the question is are they going to get rewarded and when you're not getting
 rewarded in tech I'm very curious to see if microsoft is as Steve said the chart looks terrible
 can we get back can we sustain a rally get above that 200 day moving average that to me is the
 brominant of your health but when you look at Starbucks I can't wait for the brine nickel interview
 later in the show nine o'clock I think the turnaround is happening cheesecake factory no one's
 talking about that one yesterday up five percent so the consumer is still spending and the rotation
 is real in this market and when tech misses oh my gosh they're getting punished but the other
 sectors GE a health care great day yesterday being rewarded so we're still seeing that rotation
 but the the momentum is the factor and I'd like to see some of these tech names get that moment
 to back we see it in apple can it continue with their earnings today okay and the amazon needs to
 get back on track and maybe microsoft is going to get that track turned around starting later this
 afternoon okay we got one minute left of the show so I'm not lightning round this patrick what are
 you watching today is it amazon and apple after the bell yeah both of them I think I'm expecting good
 things out of amazon given microsoft numbers particular with azure and I think apple right they're
 the low low risk bet here high stickiness they've grown without really having any AI capabilities
 okay 30 seconds left Steve Grasso we didn't even get to pc and gdp and the fed how are you thinking
 about this yeah so so when when you look at the fed I don't know why everyone is so confused the
 fed didn't create the problem so they can't fix the problem I think the people are going to start
 to digest it and understand that rates will probably be getting cut not being raised or they're
 going to sit on their hands we're not looking at a raise this year okay 10 seconds yeah just watch
 in the 10 year see if it continues that upward trajectory that will be the tell and if it does
 the equity market's going to be punished for all right amazing thank you so much to our call crew
 we do have us doc futures higher this morning we'll see if that holds