Morning Call 9/10/26

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 A $5,000 promise from the president. I'm Morgan Brennan and this is your morning call.
 Good Thursday morning. Let's get a check on US stock futures with the major averages riding a three day losing streak.
 You can see attempting a bit of a rebound here this morning pre market S&P is poised to open higher by five points.
 The Dow up 87 and the Nasak under a bit of pressure here this morning pre market again poised to open lower by 66 points.
 Now treasuries this has been the big story what we're seeing in the bond market following yesterday's a six billion dollar
 Bessent Treasury Secretary Bessent by back announcement.
 Today we're also going to get August PPI. We're also going to get 30 or Treasury offering too.
 So you could see that yields are continuing their climb here this morning.
 10 year Treasury yielding 4.859%. We are trading right around the highest levels since November of 2023.
 Fed sensitive to your Treasury 4.44% now and the 30 or Treasury 5.31%.
 If we take a look at the dollar index to the dollar has been weakening against other major currencies.
 You could see dollar index level right now 98 77th as we touched a multi month low in trading yesterday.
 The real focus here has been dollar yen. Yen is at about 153 per dollar this morning energy as well as we see crude continue its climb.
 We're now yesterday closing at the highest levels since May of 2022 and moving higher from there.
 So WTI is about 1.4% right now trading around $97 barrel. Brent is up 1% trading at $102 a barrel.
 Let's see how Europe and Asia are shaping up ahead of a major central bank decision later this morning.
 Steve Sedgwick is in London with all of it Steve.
 Morgan Loving to see will Asian equities they close large in the red amid those renewed shipping strikes in the trade of hormones keeping the Brent handle just above $100 a barrel.
 Japan clawing back some early losses to end Thursday trade in the green.
 Those markets of course in focus amid continued.
 Yang strain well let's take a look at Europe similar picture here in Europe.
 We've had a very much down week so far.
 France's cat cart index outperforming the rest though it's mostly a risk off mood on this side of the pond this morning with tech stocks the biggest declining sector.
 All eyes on the ECB we are almost certainly going to get a central bank delivery of 25 basis point rate hike taking its headline deposit facility to 2.5%.
 This is all prices as I say hit the $100 mark.
 Yes so for the first time since July raising concerns about higher for longer inflation but the ECB's future rate path remains unclear according to the ECB watch tool.
 Markets are largely pricing in a further 25 basis point rate hike in October followed by a larger 50 basis point rate hike at the meeting in December.
 And of course the big story on this side of the Atlantic as well Morgan is that $5,000 that every American adult will potentially be getting.
 If the Republicans clean sweep I'll be coming to you to borrow some money back to you.
 Deal Steve Cedric thank you.
 All right well turning to the tech trade with the NASA agrading a three day losing streak.
 Big news this morning from the world's largest contract chip maker time on semi seeing sales in August.
 53% to a record all time high that surpassed street estimates as it struggles to meet market demand sales are now up four months running for a company that counts in video Apple Broadcom.
 And more as key customers nonetheless you can see shares basically finishing flat overnight speaking of Apple checking on shares following yesterday's iPhone debut.
 The company's first foldable phone and the first hardware unveil event under new CEO John Turner's Apple also announcing a new iPhone 18 pro.
 AirPods 5 and Apple watch a series 12 also some price hike so though maybe not as high as some might have anticipated.
 All of this ahead of key earnings reports from Oracle and Adobe after the close today.
 Oracle shares by the way down 19% since the last report three months ago down more than 50% from the 52 week high that was hit back in September of last year.
 A lot to dig into here. So joining me now on this and more is Chris Ganati global head of research at wisdom tree Chris.
 It's great to have you on we got to start with Apple stock finished fraction lower this morning.
 But it's bouncing higher here pre market overall sentiment seems to be that this was a very strong first event from John Ternis your takeaways.
 Absolutely. I was paying particular attention to a lot of the hardware focus because in thinking of the difference between Tim Cook and John Ternis.
 He has this hardware background. It was fascinating to talk about I know you just mentions how on semiconductor they they're running this iPhone 18 series on the two nanometer process technology, which is a cool step forward.
 They talked about the different GPUs embedded in the chip the custom design the neural processing units.
 It was rather impressive across the board and I'm pretty excited to see or to start seeing live versions of that foldable phone there looks pretty cool.
 I mean called the duo I think some of the takeaways initial takeaways I've seen is that the phone is very thin yet sturdy.
 You think it's going to drive sales for iPhones and if so do you think the full potential here is factored into stock right now.
 It's fascinating to consider a moment that we are basically 20 years into the iPhone I was first unveiled by Steve Jobs back in 2007 and so we're approaching 2027 if you can believe it.
 The business of the iPhone since 2011 has been fairly stable from the standpoint of their so many different versions of the chart where you see Apple basically sells roughly 250 million units of the iPhone every year.
 People are estimating that this new phone in the last three months of this year might be an incremental 10 to 15 billion added to revenue which is an exciting you know initial debut but when you're already selling every single year almost like clockwork something around 250 million and it hasn't changed much for 15 years.
 We just have to keep that in the back of our mind.
 Okay I do want to shift gears to the earnings we're going to get after the bell today oracle which obviously continues to see a lot of demand but they're so exposed to open AI they have so much debt so question marks about that and then Adobe which is going to be the next key test on the software side.
 Absolutely the thing that we've seen this fall Morgan is that the software has really been coming back that the cybersecurity area of software has been particularly strong.
 I love to think about how Adobe has that photographic sort of provenance I know after an iPhone event you're always thinking of the pictures and using the pictures and a lot of people are sort of thinking about AI image generation and a lot of people forget they sort
 of think of the Adobe PDF and reading documents but Adobe is so much more than that and they have this service that allows you to really know how an image was generated.
 Do you have the rights to that image so it's a company that it's done an incredible share by back it's almost like a sleeper value stock that if people appreciate these additional details could really be on lot.
 Okay and finally quickly I do want to get as I look at your notes here I want to get your big idea especially because that idea is tied to an event and a company CEO that actually I spoke to just earlier this week.
 The I and Q investor day yes it's a passion project of mine I follow quantum computing developments in 2026 to be clear we don't yet have the full machine but I and Q put out as part of their investor day some rather interesting research about what it would take to have a quantum computer that can challenge the security of signing different Bitcoin transactions.
 They're preparing to deliver 2027 256 qubit machines that got their sky water acquisition which is their sort of vertical integration making the actual chips going strong so it was it was a great sort of proof point in an emerging sector.
 All right Chris cannotty great to have you on cover a lot there to start the hour appreciate it thank you we got a lot more to come here morning call as well including.
 If the Republicans win the House of Representatives and the United States Senate both of them because of our tremendous strength and success economically.
 I will issue a dividend to every adult citizen in the United States of America for five thousand dollars.
 President Trump's call for five thousand dollar dividend payments to all American adults with some caveats what that actually could look like what it means plus one-on-one with autonomous defense leader defense tech player.
 Arrow firemen as those shares pop here pre-market they are about six and a half percent and leader affordability on the campaign trail we're going to be looking at one battleground state for hits to November we've got a very busy hour still ahead one morning call returns.
 Welcome back we're checking shares of Arrow firemen which are popping six and a half percent right now pre-market that's after the company reported physical first quarter.
 I just had earnings that easily beat estimates on higher sales of its autonomous defense systems. The firm ending the quarter with a funded backlog of one point five billion dollars is also reaffirming guidance for the full year record revenue for the quarter during me now in a first on CNBC interview is Arrow firemen chairman president and CEO will he knew I'll be he will also be making your presentation at the Jeffries global industrials conference later today and joins us here first it's great to have you on set great to be with you Morgan all right so you had a record quarter.
 Defense demand continues here what's driving it what does that mean for air environment well Morgan we've had record revenues record backlog record bookings amazing set of results this quarter all fueled by a systemic fundamental demand drivers that is just global not just us but global.
 We are the company that have the right solutions for the kind of problems and challenges that are military in our allies are a need of we have the production capacity that allows us to be able to scale and produce today and deliver fast and we have the battle proven solutions that have actually been tested validated and as worked in several conflicts around the world and so when you combine all those things together.
 With the economics of the solutions being at the fraction of the cost of comparable traditional legacy systems is just gives us a position in the market that is really unique and.
 I've not felt this or experience this in my you know decade and have experience at a V ever before will position better today than ever before my career at a V.
 I mean there's so much there's so much focus on you know drones and drone warfare also increasingly it's something we've talked about before counter drone technologies to and you're very you know acutely positioned for for all of this so when I see things like contracts going out for your laser system locusts which I've seen in person with you out in California and we've talked about before how quickly can that be delivered and what does that mean when you talk about drones attacking ships in the straight of four moves.
 So the fundamental issue that exists is that nobody thought before Ukraine conflict in the epic theory that countries like Iran can shoot these hundred hundred fifty thousand dollar drones by thousands of not tens of thousands.
 And the economics of solving that or addressing that threat is just not sustainable we're shooting a million dollar missiles at a hundred or fifty thousand dollar drones.
 So the solution that we have developed called locusts which is the first ever full rate production contract by the U.S. Department of the war.
 For our local system the program called e hell we received a half a billion dollar nearly program a record award literally last month and it basically positioned us to provide the U.S. military and our allies.
 A solution that just basically cuts the cost of a system from millions of dollars per shot against these drones to less than ten dollars per shot number one number two.
 To the ability to shoot these things with almost an unlimited magazine many as as many drones come our way as long as I have power just just electricity you could shoot zap these things from there those two fundamental advantages makes laser weapon systems a paradigm shift in military warfare and in defense systems and so we've got we're expanding a factory in Albuquerque New Mexico we're delivering those today.
 We've also announced our first international contract for a U.S. ally internationally that is just an initial of several more customers that we're working with we're an inflection point this is the same thing is what we saw in Ukraine conflict how drones played a massive massive role in changing the paradigm in warfare.
 Nobody thought that small drones could cause this much havoc in battlefield now the conflict is about how do you defend against these drones how do you defeat these drones at economics that is affordable sustainable but it's also something that you can do them in volume.
 Directed energy system has been a technology that's been chased by U.S. military and our industry for three plus decades and we're the first company now that actually have delivered operational systems to the southern border to the Middle East into other parts of the you know world at scale and at reliability that actually works today.
 And so when we see things like U.S. Navy escorts of tankerships to the state of Hormuz it's going to be this type of technology that's deployed it sounds like perhaps even deployed in real time right now that's enabling some of these cargoes to make their way through the street.
 That is true.
 It's been interesting because defense stocks not only since the start of the air but since the start of the Iran war have actually sold off pretty aggressively including air environment despite what the fundamentals are suggesting in earnings reports right now.
 Investors seem to be very focused on midterm elections here in the U.S. and whether we're at peak defense spending so given the fact that we are continuing resolution how much does this factor into your outlook here and how also perhaps just as importantly should investors be factoring international sales piece of it.
 Like I said we're an inflection point we've got a whole set of solutions from multi mission and you know intelligence surveillance and reconnaissance drones to lethal drones one way attack drones like gloting munitions such as switch blades you've seen to counter drone technologies which is RF jammers also our locust laser weapon systems and our latest new missile system that is called Freedom Eagle 1.
 That's precisely targeted to drone threats and we have direct energy and space systems that is essentially the sweet spot of what is really desperately needed in our national security needs as well as with our allies so this is not a short term one time demand signal.
 This is a prolonged sustained demand profile that is going to change in this next stay around for decades in my view at least a decade and AV is position very very well for this because we make this we have the solutions that are military needs and it's the same thing that our military needs all of our allies need around the world.
 The international demand is really misunderstood or undervalued and that's why as you said I truly believe that there's a huge disconnect between the fundamentals of our business the demand drivers for our business the position that we have in the market the track record of success that we've had not just this quarter but the last couple of years and then in the future versus the value of our company and so I think this disconnect eventually is going to get solved itself
 and hopefully sooner rather than later and we're positioned really well I mean I have not experienced this type of a positioning and market demand dynamics for our business ever since with the company it's been almost 15 years now.
 Yeah I'm speaking of experience I do want to as we are on the eve of the 25th anniversary of September 11th I do want to get your thoughts on how national security has evolved over this time.
 Well obviously one of the fundamental things have changed in my view is the Ukraine war changed the conflict in terms of the paradigm shift of what drones and lethal drones can do now it's about how do you defend against those things and laser weapon systems I believe it's a multi billion dollar market that is going to make a huge difference almost every critical asset or infrastructure you can imagine hydroelectric dams nuclear power plants airports runways military sites
 air bases military munition depots vast vast majority of critical sites not only United States but our allies need to be protected against these new weapons and new threats laser weapon system has a unique technological advantage and value proposition and that's going to play a huge role in this whole thing.
 The the militaries of the world not only are going to have to worry about how can I buy something the fight drones or have more drones or laser weapon systems but it's also how do I institutionalize this into my military architecture and force structure that we keep up with the innovation cycle these things are improving on a constant basis no longer can is it sufficient to say I've got the latest greatest widget in military yeah it's not only do I have the latest
 greatest how do I keep up with the innovation cycle that if I have this today a year from now two years from now I can keep up with the innovation cycle that is improving the capability that we go forward this is fundamental to our product design it's fundamental to this industry's dynamics now that's actually changing the whole landscape and it's going to be critical and the companies are going to end up winning.
 Well he knew I'll be a very environment it's great to have you in set appreciate it great to be with you Morgan.
 Well straight ahead the growing chorus of former AI engineers sounding alarm over unchecked AI development and first though checking shares of American Eagle retailer second quarter profit beating estimates but much of that growth was driven by something we've been talking about this entire earning season.
 Terrible free funds same-star sales missing forecasts down 6% though sales at its area brand jumps 25% merchandise margins fell likely due to heavy promotions at its namesake American Eagle brand shares are down 11% right now we'll be right back.
 It's NFL kickoff time exclusive NFL team valuations with sports business expert Michael O'Zania NFL is by far the most profitable league NFL team valuations
 now on CNBC dot com slash sport.
 Welcome back developing story axios out just moments ago with a report that a Republican led Senate subcommittee is opening a probe into open AI in the hugging face breach from back in July.
 Senator Josh Holley chair of the Senate Homeland Security and Governmental Affairs subcommittee on disaster management describing open AI's handling of the situation is quote reckless.
 The reported probe follows a string of former AI engineers who are sounding the alarm over unchecked AI development the latest from former open AI researcher Steve Adler in the New York Times overnight saying quote without a speed limit both open AI and anthropic are pursuing dangerous recursive self-improvement strategies which enlist AI models themselves to design and train their own successors let's bring in CNBC senior technology correspondent Argin Carpal with more Argin it's great to have you on and that's where I want to start right there.
 Because recursive self-improvement is exactly where all of this debate and discussion now seems to lie.
 Yeah you're exactly right Morgan I think the people are obviously concerned about the current state of AI models and you mentioned the hugging face app and this was.
 Hack and this was really about these open AI agents that had effectively gone rogue and hacked hugging face but the next frontier many people see is exactly what you mentioned their recursive self improvement the idea that AI models can actually train themselves and improve themselves with very little human intervention and the growing concern around that is that you could get to a point where AI models begin to do things that humans no longer are in control of or have oversight of and that means.
 But these AI models are able to go rogue or do things that were not intended by the developers of the models and that's really when you're hearing some of the commentary over the last 24 48 hours a bit about extinction events that AI could eventually kill all humans which we heard from an employee over anthropic this is what they're specifically talking about here is these improved models based on RSI with very little over human site.
 So in light of this this gets to the heart of what is become a geopolitical and global debate and that is how do you regulate it how do you put guardrails in place especially if competitors in the case we're talking about the US but competitors such as China maybe aren't.
 Yeah it's a great question and I think there's this attention going on right now with the fact that you've got very highly valued very competitive frontier labs over in the US in the lights of open AI and anthropic trying to outcompete each other at the same time trying to fend off challenges from China that's the reality of the commercial environment at the same time they're developing these very advanced models so it's very hard for them to slow down.
 When they're trying to one up their competitors and that's really the challenge here I think for a long time the development of AI so far has really been done with very little oversight very little regulation and very little involvement from the government but now I think there is a growing cause about regulation about the need to regulate and have oversight of exactly how these frontier labs are developing their models what are the inputs and what are the potential risks that come out of that.
 Yeah growing so fast perhaps not paying enough attention or prioritizing some of the security along the way that is the debate and the very real risk here not only for investors but for the public as well and why we're having this discussion origin carpal it's great to have you on to talk about the blowback from these AI lab leaks well still on deck a taxicized coup reportedly making its way from New York to Dallas and the stock at the center of it all morning call continues next.
 I'm working for an welcome back to morning call let's get a check on the US stock futures after another down day for the major averages yesterday you can seem tempting a bit of a rebound here this morning pre market down points open up 45 points S&P basically flat flat to the upside here one point and that's that under pressure this morning down 100 points.
 Energy as crude continues to climb here which is factoring into what you're seeing in stocks this week that continues WTI is up about one and three quarters percent it's trading just below 98 bucks a barrel now and Brent crude is up about one and a half percent trading around a hundred and two dollars a barrel similar situation in the Treasury market as well we'll get into that just a moment but first let's check on some of the morning's latest headlines the department of justice is reportedly investigating whether a recent deal between Nvidia and Groc was set up to
 avoid antitrust scrutiny new details in so you can see those shares of Nvidia basically flat right now meantime though new details in the deadly Miami Amazon jet crash the NTSB says one of the cargo planes pilots try to abort the landing shortly after the plane touched down on Sunday now this is according to audio from the copics voice recorder indicating that the plane was going too fast. And Elon Musk's boring company securing new financing this morning to the tune of three billion dollars backed by the UAE
 barren capital and others the deal values the company at 23 billion dollars and pipeline giant energy transfers reportedly planning to move its primary listing from the New York stock exchange to the Texas stock exchange transfer is worth roughly 75 billion dollars and would be the biggest company so far to swap its primary listing location to Texas from New York Nike is reportedly trying to reassure investors its own and its own employees about the future of its business ahead of its removal
 from the S&P 100 index for the first time in 18 years according to a memo seen by Bloomberg the company is telling executives the removal does not affect its business strategy or operations and that it plans to remain a part of the S&P 500 index no official comment from Nike on that.
 Well to Dallas Texas and new worries for bond investors and the US deficit spending ahead of the midterm elections after President Trump last night promised what he's calling a trump dividend to all US adults here's what he had to say last night.
 If the Republicans win the House of Representatives and the United States Senate both of them because of our tremendous strength and success economically.
 I will issue a dividend to every adult citizen in the United States of America for $5,000.
 With some 270 million US adults ages 18 are older that amounts to one time payment of $1.35 trillion dollars 4% of total US GDP.
 Devils in the details though if that were to actually happen the president's comments coming after Treasury Secretary Scott Besson announced plans yesterday to buy as much as $6 billion
 in long term debt higher than previous commitments by the Treasury but lower than the shoot was expecting the 8 to 10 billion dollars that some on Wall Street were anticipating.
 Besson last night also became the first sitting Treasury Secretary in half a century to speak at a national political convention praising Trump's economic progress while saying Democrats
 quote brought this country to the brink of ruin these are comments that are now turning heads on Wall Street as he looks to calm Treasury markets stress.
 Joining me now is Max Kentner chief multi asset strategist at HSBC Bank Max.
 We're seeing Treasury yields move higher again this morning tenure Treasury at a level that we haven't seen since November of 2023.
 How much is hinging here on that intersection of policy and how investors are reading its credibility?
 Yeah look it depends which market we are looking at I think on the rates market certainly the comments around perhaps even more fiscal deficit that we've heard from President Trump yesterday I don't think they would help to calm down nerves.
 I think that's a pretty risk-free statement if I say that so if we were ready to see another $1.3 to $1.4 trillion spending and that of course would increase the deficit even more
 I think that'd be probably the last thing that we need right now in order to calm down bond market nerves.
 Sure but on the other hand I think one thing when we look at the equity and the credit market is we've already seen those effects.
 We've already seen effects really from higher yields you look for example at the S&P 500 PE ratio the price to earnings ratio last year
 hit to high and the second half of 23.2 we've just hit 19.2 so we've de-rated we've compressed a full 4 PE points.
 When you look at high yield credit you look at the credit markets the worst credit so when you look at triple C's and high yield they've only been trading at 550 basis points only around 6 months ago.
 We're almost hitting 900 now bear in mind from 1000 basis points onwards we're starting to describe that as distressed so we're not far off from that level.
 So to everyone is saying look everything's so calm we're not really seeing an effect.
 We are seeing the effects they are just a little bit under the hood there may not be on the equity on the price level because the earnings are so strong.
 So I don't actually think particularly on the rest of the asset on the equity side the yield side of things is the big, big worry.
 I think the bigger worry is on the earnings what if these historic earnings be trades that we've seen what if they actually start disappointing a little bit.
 I mean that raises a key question that is how is an investor position right now then if you have all of these macro undercurrents playing out at the same time.
 Yeah we're still very bullish in fact we can't be more bullish on it because we are maximum overweight on equities.
 We've been like that for pretty much almost six months now really buying that dip net what we've had in March and we've been really only
 fudging a little bit around with these sector weights and the regional weights while we've been a bit on the broadening trade in July.
 I think it's much more going back into the tech and AI story because that or that correction that we've seen really in June and July that's really left a lot of technicals quite oversold number one.
 Number two the earnings season again really really been strong also for the tech and AI names and they haven't really been rewarded yet.
 Why because of that compression on PEs that come from from higher yield.
 So it's really leaning back into the NASDAG it's leaning back into emerging market Asia into the tech names there.
 And on the rate side of things we're actually still more constructive on US treasuries at least in relative terms relative to European government bond yields
 because when you look at European government bonds of course higher oil prices that is in relative terms at least actually worse even more than for Europe than it is for the US.
 Yeah and to the point you're going to see a reaction from central bankers there with the ECB and expected rate height this morning and commentary that will be watched closely by the markets.
 How does what we're seeing in the currency markets factor into all of this and we do a lot of focus on dollar yen speaking of the treasury secretary said earlier this week that he dares traders to bet against the end that quote I am the house now.
 Maybe he can job on or not job on the treasury market but when it comes to effects and specifically what we're seeing in trading dynamics with the yen how to think about that.
 So I think actually for the overall asset class spectrum this is quite different from what we've seen two years ago remember two years ago we had these ominous arm rule being triggered that was pretty much predicting every recession in the post world war two environment and on the back of that we had these negative economic growth surprises dragging down US yields and that dragging down dollar yen and with these record high net short positions that were around back then that was then really really prompting the
 unwained of the carry trade that's quite different now we don't have negative US economic surprises we don't have that we have actually the opposite.
 We have nominal growth in the US that's just gone from 4.5% this time last year to almost 7% now so this is quite really quite different I think number one number two is we are not seeing really any of evidence any
 broad-based evidence of carry trades being unwound from a structural from a systemic perspective so the I really think the effect overall on risk assets whether it's on credit whether it's on emerging markets on the carry trade overall whether it's on equities is is really limited risk this time around.
 Okay Max Kettner great to have you on and get your insights appreciate it.
 As we had to break news out of the energy sector and bridge striking a deal to buy tall grass energies crude oil business for about 2.5 billion dollars that includes a majority stake in a pipeline connecting the Rockies to pushing Oklahoma tall grass is owned by Blackstone shares of
 Benbridge down about 2% and Reuters reporting that US pipeline operator Kinetic is exploring a potential sale of the company as well transports oil and natural gas from the Permian Basin in Texas and New Mexico Kinetic is also a majority owned by Blackstone no shares for
 4%
 We've got a marketplace on shares of Cooper companies the medical device maker falling after a third quarter revenue misforecast and cut profit guidance for the year amid weak demand for its contact lenses and that weed on sales I think they also scrapped a plan for a deal for part of their business too so
 those shares are down 15% straight ahead the morning call crew team up the trading day ahead.
 Welcome back there are 54 days left until the midterm election day Tuesday November 3rd one of the key issues across the board affordability this morning we're kicking off coverage of the economy election
 CNBC's Megan Casela is live in Concord North Carolina just north east of Charlotte amid a tight Senate race Megan good morning
 Morgan good morning we are calling this the economy election because voters care about the cost of living more than almost anything else and nowhere is that playing out more clearly than right here in North Carolina
 this is a key Senate race for the balance of power and Democrats see it as their best chance of flipping a Republican held seat
 now to get there the Democrat Roy Cooper in his race against former R&C chairman Michael Watley he's centering his entire campaign around the slogan make stuff cost less take a listen
 People in the middle class are barely hanging on and for too many North Carolinians there's just too much month at the end of the money right
 Now that message is hitting home for some voters here in Cabarras County this is a red leaning suburb of Charlotte and it's a booming suburb by nearly every sense of the word lots of population growth new housing is going up unemployment is low in billions in new private investment coming in including from Eli Lilly which you're seeing there
 Now all of that growth though is fueling a rise in prices so take a look at this just two numbers here tell this story the median household income here in Cabarras County is $89,000 but the MIT living wage calculator suggests that the average family here in this county with two parents two kids they need 114,000 just to cover their basic expenses
 That's the sort of affordability gap that voters are feeling here and that Democrats are keying in on now Watley spoke at the GOP midterm convention in Dallas last night Morgan and he says that inflation is the fault of the Biden administration and of Cooper who was governor here until just last year for now Cooper is leading in the polls by an average of eight percentage points
 But everybody expects that to tighten especially in a state like this one that hasn't sent a Democrat to the Senate in nearly two decades Morgan all right Megan Casela
 Thank you looking forward to all of your coverage here over these coming days
 Well from North Carolina to your call sheet crew members today Victoria Green from G squared private wealth
 She's also a CNBC contributor drew Pettit of round-till investments and Chris Hodge of Natixis C.I.B. America's I mean we've got to start right there
 Especially any day we're going to get the first of two inflation readings and Vicki I'll go to you with this first
 But this idea affordability and how it's rippling out not just in the economy but across the markets right now too
 It's a really tough spot to be in right now because you've got oil prices drifting higher record high diesel prices
 And the affordability is a huge issue with inflation
 So I think this is the most consequential CPI report we've had this year
 I think it might come in a little bit high 3.4 on the headline 2.4 on core 4.04 month over month
 But look, they're losing the headlines here
 And if it's not a real recession at the bond session for the middle and lower income classes
 You just feel continually squeezed by fuel prices by insurance prices
 You know maybe a little relief on rent
 But it's just not hitting the pocket books enough
 So this becomes the talking point
 When are we out of Iran? When do we get oil prices down?
 Then that can start bringing CPI down
 And maybe hopefully we can also fix the Treasury markets while we're at it
 So you know a whole litany of things that are just a really bad feedback loop right now
 Chris I want to get your thoughts on this especially because as Megan just reported from the ground in North Carolina
 We did have this GOP midterm convention
 The first of its kind last night affordability was a big focus there including the promise the possibility
 Depending on midterm election outcomes of a $5,000 per American adult dividend
 And a number of other things like making Trump tax cuts permanent as well
 Well I mean of course the president would have to get buy in from Congress to do anything like that
 But if affordability really is a concern
 Handing out checks and inform of $5,000 probably isn't going to do much to address that
 So I do think this affordability issue really is weighing on consumers
 And consumer demand has really been okay but it's that bottom part of the K that you know bottom 40% of earners
 That are really starting to pull back on their discretionary purchases
 Now it's not collapsing but I do think it's going to weigh on growth in Q3, Q4 and into 2027 as well
 Chris want to get out Chris do you want to get your thoughts on this too especially as we do see ongoing
 Gyrations and concerns playing out arguably in the treasury market
 Yeah it's funny so rates are our biggest concern so hot CPI if it has a feed through to a higher 10 year not good for risk taking
 But there's one thing like in the inflation report I think a lot of people don't look at
 I want to see the difference between CPI the PPI kind of I would say like end stage demand versus the early stage demand
 So we talk about this a lot it's inflation differentials that really matter to margins
 So if inflation differentials are still wide if CPI is coming in hotter than the early stage PPI
 You feel better about business confidence and margin that they can actually pass this stuff through
 If that's not the case with higher oil and input prices again
 Then you have a double whammy where higher inflation bad for rates bad for valuations bad inflation differentials bad for earnings
 Chris I do want to go back to CPI and PPI because okay yes crude oil is climbing again we're back at multi-month highs
 But you've got diesel in this is the case in Europe right you got a hundred you got a hundred bucks a barrel crude oil you got 200 bucks a barrel diesel right now
 So how important then is something like PPI we're going to see those first knock on effects which we know have broader implications for inflation overall
 Yeah it's certainly very important to measure those pipeline pressures but as Drew was saying
 What is the ability for these businesses to pass along these these pressures right so margins you know have been fairly solid right now
 And I do think that there's there's probably not much room for businesses to pass along these these up pressures
 So while PPI is important from from an earnings perspective I think it's less important for consumer prices
 Because I don't think consumers are really in a position to accept these higher costs
 And I think demand is ultimately going to be hit by this
 And we talked so much about government debt issuance but the other piece of this Vicki is you know corporate debt issuance as well
 And and one of those names that's been in in key focus for this AI infrastructure build out is Oracle so what are you watching after the bell here
 Oh it's all going to be all about CapEx and negative free cap flow
 We're expecting 20 billion in CapEx negative 10 billion free cap flow everybody wants to know how much more debt are you issuing are you doing the market equity issuance how are you paying for this
 They're expected to grow their their data centers by 115% they are growing the problem is that debt side and how they're financing this has become a real albatross for Oracle
 So in my opinion that's what we're going to be focused more on how and when are we financing it is it equity or debt the market is already punishing Oracle on both sides
 Especially on the debt side with the CDS swaps you know continuing to widen because they're saying look at this debt burden and balance sheet here then starting to house some major concerns on that
 I think obviously they're going to make a lot of money they're going to show tremendous growth on their data center side
 The big question is what is this trajectory how are you paying for when are you paying for it is it equity or debt and what is how is the market going to react
 Yeah true I see you nodding your head and of course it's Oracle actually bell it's also Adobe we're also coming off of what's being you know seen as a very positive first iPhone event for Apple too
 Yeah look it's this quality deterioration in some of these names that's a bit of the concern
 This is why we actually like rotating back into the magnificent seven right now some of them yeah are issuing some debt are issuing some equity but I think you get a higher quality play to kind of play through a lot of this noise
 And look Apple come back to the consumer they didn't really put as high a price on new iPhones as we expected so look there could be some sensitivity there
 So at the end of the day like if you're seeing quality deterioration you probably want to stay in the names where you have at least some conviction and growth mag seven sets up really well in that scenario
 Okay we've got 20 seconds left Chris final thoughts especially as we look to an ECB rate decision this morning we continue to monitor FX volatility as well
 Yeah I think ultimately what's going to matter for the Fed is CPI coming out tomorrow never before have clients been asking such granular questions
 And I do think that anything that comes comes below 0.22 on the month where is probably safe
 Okay we're going to leave it there thank you to our call crew great to have you here
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