Closing Bell 10/1/26

0:00With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details. There are three kinds of investors that listen to this show. Those protecting what they've got, those looking for solid returns, and those swinging big. Most tools pick a lane. VectorVest doesn't. Every stock gets three scores.

0:39Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash Closing Bell. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com. And welcome to Closing Bell. I'm Carl Quintanilla in for Scott Wapner. This make or break hour begins with some rate relief as the 10-year yield does pull back from some 24-year highs. It gets your scorecard with 60 minutes to go in the trading session. Bit of a tug of war here between the rate relief and oil, which has been stubborn on some headlines regarding additional assets potentially to the Gulf.

1:19And that leads us to our talk of the tape this afternoon, how you might position your portfolio as we kick off the final quarter of the year. Let's bring in Jeremy Siegel, professor of finance of the Wharton School and Wisdom Tree chief economist. Professor, good to have you. Thanks for joining us. Good to see you, Carl. Did you get the inkling of the beginnings of a bond rally today? Well, I'm relieved we had one because I really couldn't believe the yields that I was seeing. You know, particularly, I like to look at the Treasury inflation protected bond yields and the 30 year one reached three and a third percent, 3.35 percent.

2:05And I don't think we've seen that for, you know, 20, 25, 30 years. And now, you know, is that, you know, when you get three, almost three and a half percent after inflation, a 20 P.E. stock market gives you five percent after inflation. So there's still a good margin there. But that that margin is shrinking. and in my opinion one reason why tech has held out so well I mean look at the margins of tech of mag 7 you know there's 50 percent 60 70 so you know there's a there's a tick up of interest rates but you know outside the tech and the in the real world when they're working on margins of 7 8 9 10 percent you start raising those interest rates and you really cut into what what we have profits.

2:59So, you know, to, you know, we all thought we had this great rotation going on at the first half of this year, and it certainly looked like it was rolling. But I think this rise in interest rates has really, you know, put a stomp on it. Right. Are the Bulls right to take heart in what Jefferson said today about taking more time, sort of piggybacking on what we got out of Waller? Yeah, I mean, you know, obviously Warsh is in a real difficult situation for the next meeting. It's six days before the midterms. Truthfully, I think we need two more increases this year. But he might be able to convey, I think two more.

3:41But I think he might say to the committee, listen, guys, you know, if you guys hold off, maybe we'll do a 50 basis point in December. Remember, let's not make this political by doing it six days before the midterms. You know, how much difference, you know, does a month or two make on a 20, 25 basis point? So I think he's got another, you know, juggling job to do there. But, I mean, when you take a look at the futures market and some of the other, I mean, just the strength of the economy. and the rise in yield just tells you that, you know, this economy can take a rise in short-term interest rates.

4:25Yeah, yeah. Nice piece out of Greg Ip today at The Journal, arguing that a 6.3 nominal GDP regresses to a 10-year at 5.5 with really no problem. Yeah, yeah. And normally, we think of, you know, the 10-year being, you know, 80 basis points above the Fed funds. Well, you know, I mean, if you're, you know, if you're at five and a quarter, five and a half, that's way above where we are right now in terms of the normal slope. I mean, some people, you know, have said that the two-year is a good indicator of where Fed funds should be. And wow, I mean, You know, that's that's also what it's on. And all those term structures issues, it argues for higher interest rates.

5:12Yeah. So it sounds like you think that the chair is between a rock and a hard place, that it's a close call, but that you do think it's more likely they continue to hike than pause. I think, I mean, continue to hike this year. I mean, again, you know, I mean, listen, he pulled out magic last time. I mean, you know, Trump two days before the meeting says he better lower interest rates here. He raised them and then hardly a peep. I mean, that was I mean, obviously he called Besson and he called Hassett. He called the advice that he got get Donald Trump ready for this. And Donald, he kept quiet after.

5:53He said, it's not my preference, but, you know, I understand what he has to do. But, you know, when you get within a week of, you know, important midterm, you don't want the wrath of Trump to fall on you. You know, stay neutral. And I don't think it would hurt the economy, even though I think it needs a couple more to wait for looking at December. We can get more data. You know, what could happen in the war in Iran and oil? I mean, you know, I mean, I think that Iran has no incentive, obviously, to stop conflict before the midterms. So, you know, they may actually increase the fight and send oil up.

6:38So by December, you will have that wind down of what is happening in Iran, more information and certainly a politically more accessible time to to raise rates. But I think, you know, the short term rates going up. Yeah, we did have a note out of Citadel today, kind of characterizing Professor Q4 as a reload. We know seasonality post midterms tends to be more friendly. Would you expect the bulls to find some sea legs here after the early November period? I think I think they could, you know, very definitely. But, you know, I think these these yields, you know, are are basically a challenge for equities.

7:23I still like equities and I'm in them and I don't like bonds because I think they may actually going higher. I mean, ultimately, you know, I mean, certainly strong economy is one of the factors. But, you know, ultimately, we have a lot of fiscal debt that we have to face and we have to fix in the next three or four years. And I think this is the beginning of the bond market reminding us these challenges have to be met. Yeah. And we did get comments from from Leader Thune just this week that we'll probably be talking about raising the debt limit once we get the new Congress into place. Professor, sit tight.

7:57We want to check in with our Oliver Renick at SIBO in Chicago, flagging a big move playing out in the options market that could signal the bond beatdown might stabilize. Hey, Oliver. Hey, guys. Two different things looking at today. First is in the XLU, the utilities group, which has been trading basically inversely to interest rates for the last two months. That's changed pretty dramatically this week, where instead of put flows, We saw actually quite a bit of call trading over the last several sessions that culminated in a lot of call action today that's happening on options volume that's 10 times the 30-day average of the XLU, which usually doesn't get a ton of trading.

8:35So, in fact, what we're seeing is actually quite a bit of call buying, so much so that there were more than 200 ,000 contracts roughly of calls traded, which is way bigger than what we saw on puts, roughly about 30 ,000 in terms of volume. Now, there is some call selling that's happening alongside the call buying. In fact, about equal in terms of buying versus selling of calls. But in fact, one of the biggest trades that saw call selling was paired with also put selling. It looks like a message that utilities are ready to bottom out or potentially rally. Then on top of that, I heard from a bond trader downstairs in the bond pits that there was a huge trade in the SOFR options, which is the overnight rate.

9:13It was about a$4 million bet that that overnight rate for SOFR across 100 ,000 of the March futures contracts are actually going to be moving back towards higher prices and lower yields for the overnight rate that would require us to get back to levels first seen in the first week of August for the trade to pay off. I think combined together, it's a pretty strong sign of sentiment shift, guys. Yeah, that would be music to some of the bond bull's ears. Oliver, thank you for that, Oliver Rennick. Let's bring in Morgan Stanley's Andrew Slimmon joins us here at Post 9 in the Taylor Group's James Taylor, as the professor is still with us.

9:47Guys, good afternoon. Good to have you both. Andrew, you make the point that every hike cycle begins with kind of modest expectations, and sometimes they're right and sometimes they're wrong. Right. That's the point. The story of this, you know, the last couple of months is the battle between good earnings. But what do we pay for those earnings if the Fed's raising rates? That's why the multiple has come down. So if, in fact, the Fed doesn't raise right into the election and we get lower rates, the multiple can float back up. And I think the market will rip into Europe. But if it looks like they're going to have to raise more than what's the comfort level, the two to four, then the multiple could come further down.

10:28So that's the key is it's not about earnings. Earnings are strong. And if we focus on that, that's bullish. It's what do we pay for those earnings? And that's where the Fed comes into play. And good examples would be on the bullish side, 2015, and on the bearish side, 2022. Exactly. But with both times, Carl, this is the key, they started with two to four times raising rates. It's always the same. How does that play out? That's the question. How do you think about the moment we're in, James? Yeah, actually, I'm pretty constructive going into the end of the year. I think once we go through the midterms, everyone's saying the midterms is going to affect the market so much.

11:01I think it could actually be a positive catalyst going into the end of the year, whether there's a sweep on the other end. The market wants certainty. They don't like uncertainty. I think with rates, I do think there are probably going to be a couple more rate hikes going into the end of the year. But to Jeremy's point, I think the broad-based economy is in really good shape. I think earnings are fantastic. Yeah, I mean, just this week alone, whether it's ADP, the recent retail sales, Chicago PMI, the ISMs today, I mean, it's growth and price that reflects the growth. Am I right? No doubt. No doubt.

11:34And on average, I mean, I know, Andrew, I'm sure you know that's that. But I think on average, you know, since 1950 in the midterm elections, Q4, the average return has been around 6.5%. After midterms, six months after, it's about 14.5%. So I think the market wants a little bit of certainty. As long as we don't mess up the rates with rate hikes, I think we're going to be in really good shape. I mean, you make the argument, right, that the first quarter we focus on the macro, market was down 4%. Second quarter, it was about micro earnings. Markets up 14 percent. Third quarter, back to the macro.

12:06Markets up 2 percent. Maybe we'll go back to the micro. And that's the good story. Professor, to the degree that sectors are ripe for some exploration, do you turn to financials first? Well, I mean, you know, there's there's a challenge with financials with those those higher interest rates. We saw a challenge with financials when Meta released Moose and everyone thought, oh, it's going to find you to take out of those lazy savings accounts that give you, you know, 0.2 percent and sweep you into higher rates. you know, I think in a higher rate environment, there's still going to be challenges.

12:50They put out loans. If there's any slowdown in the economy, and I don't see any, you know, that might hurt their portfolio. You know, let's hope that the midterms, the next Fed meeting is sometimes called a clearing event. We get that uncertainty out of the way. And, you know, somehow, you know, that's what I think could bring out a rally in the fourth quarter. But, you know, I think that the financials are still going to be challenged with this rate structure. I'll tell you what, the point's been made, Andrew, when it comes to the banks. They're at the center of so many sort of almost binary conversations about the AI build out, about the curve flattening, about delayed IPOs, about Q3 not being Q2.

13:34But what did Oliver just say? He said the XLU has been creamed. It's tremendously oversold and they're seeing a bottom. And that's the case. If that's true, that's telling you interest rates might come down. Financials might be a very good opportunity, given the fact they've been killed so much recently. Maybe this is a buying opportunity. What's all reflected is higher rates. Where does it rank on your list of favorites? I actually I like it. I think financials have had, you know, relatively tough year compared to like technology. Now, I was on here at the end of July and I said, you know, that sell off in technology could have been a really good buying opportunity.

14:08We're right about that. We don't retreat. We rebalance. So we'll take some gains off the tech names and look at some good high-quality financial names. And I do think that there's a decent opportunity there. Do more hikes mean that breadth needs to suffer as a result? Does it get even more concentrated into tech? I do think it's a stock picker's market right now. I think you're going and buying just individual S &P 500 ETFs. Yes, that's worked in the past. But I think you're going to fare a lot better being in a stock picker's market. Now, that's my opinion. That's not Wells' opinion. in, but that's what I think.

14:38I mean, what's interesting about that, Carl, is, you know, the bears always bring up breadth, but the last time the breadth was this bad was in March and what happened in the second quarter of the market around 14 percent. So be careful. Yeah, that's an interesting point. We did get the headline, Professor, this afternoon out of the journal that the administration may send a third aircraft carrier group, strike group, to the Gulf, nine to 10 ,000 troops, maybe by the end of November. Is that going to act as a suppressant on any enthusiasm we can gin up maybe if they do pause? Well, you know, as I said, first worry is interest rate.

15:14Second worry is oil prices. And they're kind of tied to the hip. If we can get oil down, whatever, into the 70s, wow, this market will take off because interest rates will ease. And, you know, I think a lot of these so-called value stocks that are non-tech will begin to really see their margins improve. The last thing I'll bring up, Andrew, is you point out XUS has kind of been doing pretty well relative to US. What's happening there? So it's fascinating, Carl. So what's the real story is stocks respond to the second dread, which is earnings revisions. And for years, people would say markets are cheap, but then it turned out the E was too high.

16:00Well, that's changing. Earnings revisions are starting to move up in Europe and Japan for the first time. And that's why those markets have become competitive return-wide. Japan's rocked this year with the U.S. So I really think it is a fundamental improvement. Now, you can ask why. We can pontificate that. But what I see is at Portfolio Manager, I'm finding more ideas where companies are saying, actually, business is better than you expected. Would you agree with that? I do to an extent. We're still overweight the U.S. You know, I do think in certain sectors there's more opportunity. I think that overcrowded trades like technology is obviously done really well, but I like health care.

16:35I like financials. I think those are undercrowded. And then, you know, industrials is another sector that I do like. And I think there's some opportunity there. Final question, Professor Jobs number tomorrow. Is it really important or is the is that side of the debate and the mandate kind of well understood by us and by the committee? You know, we get these weekly reports, ADP, and then we get the Thursday reports on jobless claims, and they've shown strength. So, you know, I don't expect a big surprise coming out of it. I guess it will be the last report before the next meeting. But, you know, again, I think what the Fed sees the bond market doing and, you know, what happens in Iran and oil, I think, are still by far the dominant players over the next two, three weeks.

17:28Great discussion, guys. Appreciate it very much. Andrew Slimmon, James Taylor, Professor Siegel. Talk soon. Another big story we're watching today is Alphabet moving lower after unveiling its most advanced AI model yet. For that, we'll turn to Mackenzie Sigalos. Hey, Mac. Hey, Carl. So Alphabet erasing its initial pop on Gemini 4 Argon. But despite strong benchmarks in coding and cyber, the model's rollout is heavily restricted, so investors have limited visibility into its real-world performance. The other factor, of course, is Meta, which has completely changed the stakes of the AI race. Since Muse launched three weeks ago, the battlefield has turned from frontier models toward personal agents.

18:04Just take a look at the divergence in shares. Over the past two months, Meta has surged 31%, while Alphabet is down five. Muse has already racked up an estimated five million plus downloads versus Google's AI agent Spark, which remains behind a paywall and deliberately stops short of making calls or purchases on a user's behalf. As JP Morgan put it today, Google keeps shipping AI products, but hasn't delivered a breakout consumer hit. And Bank of America sees Argon being more about driving cloud wins. Gemini's product chief, though, telling me they're exploring internally whether Argonne could power a revamped version of Google's personal AI agent, because ultimately there is more than consumer adoption at stake.

18:45JP Morgan warning that agents taking over shopping and travel could cut Google search out entirely threatening its lucrative ad business. Carl? Mac, one question on Gemini at large. For a while there, you and I were discussing whether or not Alphabet really wanted to play at the frontier level. Does this help answer that question? It certainly does, because this entire summer we've been getting new flash models for them. That's been a big part of Google Cloud success, more than 80 percent growth year over year in the most recent quarter. And now we've got Gemini 4, which at this point is competitively priced.

19:18That introductory price is on par with OpenAI, though it will increase after a certain usage period. And so there's this question of, do you need to compete at the frontier to win that agent battle? And the answer at the moment is no. So a flash model would be the more competitive way to run Spark, which is their agent. I mean, I would expect in the next few weeks we would see some sort of public launch of this agent. It's been behind a paywall since May. They've been pressure testing it, building capabilities based off of how existing pro users are putting it to work. Fascinating. Wow. What a showdown that's developing between some of these giants.

19:55Mackenzie McSigalos, thanks so much. We're just getting started this afternoon. A big Big test for beating down Nike's coming up. Earnings after the bell. We're going to break down what's at stake. Plus, what all the buzz around Caitlin Clark's new Nike shoe might mean for the stock. We are live at the New York Stock Exchange. You're watching Closing Bell on CNBC. We'll see you next time.

20:42like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discover.com slash 5 for details. There are three kinds of investors that listen to this show. Those protecting what they've got, those looking for solid returns, and those swinging big. Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash closing bill. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com.

21:22Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Welcome back. Nike getting ready to report after the bell tonight. Let's get to Brandon Gomez with a look at what investors might be watching for.

21:58Hey, Brandon. Hey there, Carl. Yeah, the stock is up today, but down more than 40 percent this year. And investors have grown impatient as CEO Elliott Hill's turnaround tries to find its footing. Wall Street is expecting another quarter of declining sales, roughly 3.5 % in earnings of$0.43 a share. But the headline numbers may matter less than what management says about the path forward. Just in the past few weeks, Bank of America, Morgan Stanley and BMO all turning more bearish. Investors will be watching four big things to turn the tide here in North America and whether wholesale partners are selling product at full price.

22:30Second, whether margins can improve without last quarter's one-time tariff refund. what's happening in China, which remains Nike's biggest trouble spot. And then the last thing is whether new performance products can offset weakness in classic lifestyle franchises. The bar is low today, but frankly, Carl, so is confidence. A modest beat alone isn't going to do it. Investors want proof that the reset is working. Those numbers are going to be out in just about an hour, Carl. Brandon, thanks for that. On Nike, let's bring in Oppenheimer analyst Brian Nagel to talk more about what we may see this afternoon.

23:00Brian, good to see you. I was just thinking about some of the recent downgrades, cutting numbers for fiscal 27, 28. I think B of AC's negative sales through fiscal 27. Are you surprised at sort of how long it's taken to get signs of any traction? Yeah, well, good afternoon. I am surprised. You know, I think going back, I mean, you know, this turnaround, obviously it's a big company. It's a difficult turnaround. But frankly, I mean, as I've written and as I've said, the turnaround is taking longer than initially expected. Now, And, you know, despite the challenges for Nike, I mean, they have been the company, this new management team has been attempting to turn around this brand in what has become an increasingly difficult macro backdrop.

23:43You know, as I've said to our clients here, you take into consideration the global trade war and particularly the tariffs and then more recently now elevated or substantially elevated gas prices. I mean, those are both very big headwinds for Nike and its turnaround efforts. Do you think so when people turn to the pipeline, lack of innovation, maybe even some C-suite turnover over the last couple of years, is that is that just an excuse? No, I mean, look, it's a tough turnaround. I mean, Nike made a lot of mistakes. Right. We talked about this a lot. I mean, the pulling away from wholesale, I think, during the pandemic.

24:21And this was not necessarily unique to Nike. I saw this in a number of brands. They really stopped innovating. And so when the pandemic subsided, people started shopping in stores again. Nike really had to pivot again. And that's challenging. I mean, this is a difficult turnaround. I guess the point I'm making is I look at Nike. I think it's got its challenges, but this macro environment has made things all the more difficult. Where does it rank in your coverage in terms of your favorites? Well, look, we still like it. I want to make sure I say this very clearly, long term. I believe that the underlying all this noise, so to say, the Nike brand is intact.

24:55But I think, like I keep saying, it's going to take a while to get this turnaround to work. We've written into this quarter tonight, which we'll hear about from an hour or so. Our recommendation to clients is to approach it very cautiously, to be on the sidelines. I think it's going to be another week, quarter. You've got a new CFO, a gentleman I've known for his previous roles. I think that's a big positive for Nike. But this is a fresh set of eyes. And I think there's a good chance that he takes a potentially even more cautious approach than near term financial guidance for the company. Yeah, they've made some changes at the board level.

25:27And all year long, Brian, we've been waiting for, you know, the November. I think it's the November investor day where you'd finally get some some longer term visibility. That seems to have been an overhang, just knowing that that was a date we weren't going to get till close to year end. Yeah. So, look, Nike's hosting its analyst meeting at the company's headquarters in mid-November. I still think that's very important. You know, and what I've heard from the company, again, this has been, I keep saying it's been a challenging turnaround, but I think they will still attempt to use that event to basically say, look, a lot of this heavy lifting is done.

26:00We've taken pain. We've cleaned the marketplace. We've reestablished the wholesale relationships. And now as we look forward, you know, the anticipation is that they're going to grow off this stronger base. I think that's still going to be the message, the timing of which is going to be, you know, how long is this going to take? How long is it going to take to grow, to get back to Nike-type growth numbers off this stronger base? Yeah, we'll see what we get. Watch some inventory levels and all the rest in just a few minutes here, Brian. Thanks, as always. Brian Nagel on Nike out of Oppenheimer.

26:29Speaking of Nike, Kaitlin Clark's new shoe nearly selling out ahead of tonight's big WNBA game. The Indiana Fever facing off against the Las Vegas Aces in a high-stakes playoff match, which does air on USA and right here on CNBC. For that, we'll turn to Alex Sherman with more. We talked a bit about this this morning, Alex, and just what's riding on the line for the WNBA and Nike, too, I guess. Yeah, Carl, I mean, you just heard Brian talk about the macroeconomic effects of Nike. So here's something that's a little bit more micro. Kaitlyn Clark-Shoo debuting today. And it happens to be, in just sort of a fortuitous circumstance, coming on the day that she is about to play at 9 p.m.

27:11here in what will likely be the highest-rated WNBA game of all time, an elimination game that is airing on CNBC and on Versace USA. We don't know for sure if it's going to be the highest-rated game of all time, but we certainly know it's going to be one of the highest-rated games of all time because game one of this series was already one of the highest-rated games of all time. And so here we are with Kaitlin Clark's shoe coming out on the same day that she's about to play in this highly-rated elimination game. That's got to be good for Nike, at least along the margins. It may not be good enough to push back some of the macroeconomic effects that we just heard.

27:48But certainly, if you take a look at where that shoe is selling today, and it's selling both on the Nike website and a bunch of different realtors, Dick's Sporting Goods, Champs, etc. Almost all the shoes are sold out already. It's only been a few hours, and you can't get a Kaitlin Clark shoe. I just took a look. Unless you are a women's size 16 1⁄2 or above, even the size 19 1⁄2 was sold out. You can see it right there. Every one of those lines crossed out, crossed out, crossed out. So clearly there's a lot of pent-up demand for this shoe, and obviously Kaitlin Clark is the biggest draw in the WNBA.

28:25You can just take a look at the ratings. for every Indiana Fever game this year, well above the average WNBA team, which overall was up 17 % year-to-date regular season, with 51 WNBA games having an audience of a million viewers or more. That's up from last year's 19. I'd say really that's a good look at the evolution of that model, the WNBA model. And we talked a couple years ago about how the numbers would come first and then the money would follow. I wonder how you're thinking about their evolution to date. Yeah, well, look, some of the money is already there, right? Because the WNBA recently renegotiated its media rights deal, and that was a sixfold increase.

29:08And it also put the WNBA on NBC, which is a broadcast network, which increases the ratings. So already that part of the sort of money situation has come. But there is a clause in that contract that allows the WNBA to renegotiate its rights. So there may be even more money coming in sooner rather than later because that was an 11-year deal. But there's sort of a renegotiation out clause there that may have more media money coming in depending on what the ratings are, which they're obviously strong. But it's more than just the ratings, right? It's ticket sales. It's revenue. It's from merchandising.

29:45It's sort of the sponsorships. Like all of those things are positive right now. We are definitely in a hyper growth moment for the WNBA as they look for a new commissioner because Kathy Engelbert announced that she is stepping down. So they are in the market to look for a new leader for the league. Yeah, interesting. Just expands the mind share broader through the course of the year as we work our way into NBA season two. It's going to be really interesting to watch. Appreciate that. As always, make sure to watch tonight's big WNBA game, the Indiana Fever in the Las Vegas Aces, 9 p.m. Eastern simulcast right here.

30:19on CNBC. When we come back, the backup and bond yields and what it might mean for the Fed's next move. We'll check in with Allianz's Mahala Del Arion, break it all down. Closing Bell is back after this break.

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31:19That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discover.com slash five for details. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud.

31:58Check response, subscription required. We're back on the bell. The 10-year yield pulling back from a 24-year high today. For more on that move, let's bring in Allianz Chief Economic Advisor Mohamed El-Erian. Talk about some of the action that we saw intraday today, Mohamed. Good to have you. Thanks for having me. What do you think it takes to sustain some action like we got this afternoon? So we have three positive developments today. One is Fed speak, and that has lowered the probability of a hike in both October and December, and I think that's the right move. The second issue is simply relative valuation.

32:39The spread between the U.S. and Germany has gotten to 174 basis points. Put another way, had you invested in a 10-year bond in the U.S. in September, you would have lost almost 4%. In Germany, you would have lost only 2%. People are looking at relative valuation, and suddenly the U.S. looks very attractive relative to Germany. And the third issue is what you've heard me say over and over again. There's two factors leading to this volatility at higher yields. One is a fundamental imbalance between long-term demand for bond financing, especially from the hyperscalers, and the diminishing reliable long-term holders.

33:19And that has been accentuated by these hedge funds coming in and filling in. And I think we had a bit of an overshoot. And I suspect that we're going to see a bit more stabilization going forward. Now, that's interesting. The journal did put the basis trade on page one just a few days ago. And maybe that was maybe that was the top of that dynamic for now. Yeah, maybe. But the key thing is the hedge funds now are an important part of this market. So we should all expect higher volatility in yields than what we've been used to in the past. Yeah, that makes sense, the evolving ownership. The other thing this afternoon, Mohamed, was just a look at retail inflows into TLT, especially some long-dated Treasury ETFs, more than five standard deviations away from the historical average.

34:09I mean, there've got to be some people, retirees, you name it, out there who think five, five and a half is pretty good to sit on. Yeah, and 3 % after inflation is good to sit on. Look, we haven't had high nominal and real yields for such a long time that it's pretty enticing for people, especially when they look at valuation. I think what we tend to forget, or you don't, but when people look at the S &P, what they tend to forget is the massive dispersion that has happened within the equity market. The other number I'd like citing is the return differential between the S &P and the Nasdaq on the one side and the Russell on the other is 10 percentage points in the third quarter.

34:5310 percentage points, Carl. So I think people are starting to realize that you have some valuation issues, and that makes the bond market more attractive for certain people. All right. Labor market, Mohamed, we'll get the jobs number tomorrow. I mean, there's been so much this week that's been assuring or reassuring. whether it's ADP, jolts to some degree, I guess. But even Barr this week suggested maybe we're not ready for the disruptions that are coming to labor as a result of AI. Egan Jones today with a report saying that the economy is going to get seriously disrupted. There'll be a new paradigm in which companies with fewer employees are more successful.

35:35Do you think we're taking the labor market for granted? So, Mr. Joppa's claims were below 200 ,000 today. That's encouraging. What I worry about for the labor market is from something completely different. It's not from AI. I think you're going to have a lot of labor enhancing that's going to be more than labor displacing. What I'm worried about is from the policy mix, Carl. We are going to have too much monetary policy, too little fiscal policy. What we really need now is fiscal containment. If the burden is placed once again on the central banks, then we're going to end up sacrificing the housing market.

36:12We're going to end sacrificing the car loan market. We're going to end undermining the low-income consumer. And that could start impacting the labor market. So it's this imbalance between fiscal adjustment needed but not being delivered and monetary adjustment that's going to have to carry the burden that I worry about the most when I look at the labor market. Yeah. Yeah. I know you've been after that theme that you don't want the central banks to be the only game in town. I mean, a good example is a chart of Home Depot or any of the mortgage wholesalers. Morgan Stanley today initiated home builders.

36:48There was only one overweight in the whole group. And that was toll. And, you know, you and I lived. Well, I did. You're too young. You and I lived to the early 1980s when we had too much fiscal and too little fiscal and too much monetary in terms of adjustment. And we saw what that could do to the real economy. We saw what could do to the dollar. I don't think we're going to replay the 1980s in full, but there's a bit of a flavor of that that's evolving right now. And I hope that the policymakers will understand that we don't want to replay that. Finally today, Mohamed, Germany, more comments from the chancellor about preparing for what they're calling hybrid attacks from Russia.

37:29The French yield story continues to get noticed. And yet we continue to hear people say that they like Europe. They like sort of the valuation, the potential for rejuvenation in things like technology. How worried are you? So I'm worried about France. If you include the UK in Europe, I'm worried about the UK. You know, it's unusual to have 3G7 economies that are vulnerable to bond market disruption. But that is France, the U.K., and Japan. Look, if you ask me, do you like the German bond market, I would tell you I liked it. I don't like it anymore now. So it's bits and pieces. But in general, I don't understand this view of fate, the U.S., for Europe.

38:13I think the U.S. has better dynamics and a longer runway in terms of fiscal responsibility than Europe does. So I would be really careful about simply jumping into Europe at this point. Yeah, definitely got to stay glued to the terminals for headlines regarding Europe these days. Mohamed, busy day tomorrow. We'll see what we get. As always, our thanks, Mohamed Al-Aryan. Thank you, Carl. Still to come this afternoon, we'll tell you what has shares of Accenture soaring today. One of the best days in the stock's history when Closing Bell continues.

38:49Just about 11 minutes to the Closing Bell. Let's get to Frank Holland, get some key stocks to watch. Hey, Frank. Hey there, Carl. First up, Constellation Energy up today on a 20-year deal that will provide Amazon with 190 megawatts of power from a nuclear plant in Maryland. That project will cost$3 billion. Constellation, you can see, is up about 2 % today, but still down more than 25 % this year. Accenture shares taking off today with the company adjusting its annual revenue forecast. The tech and consulting firm expects annual revenue to grow between 3 % and 6 % in fiscal 2027. Accenture shares, they're up more than 16 % today.

39:22And shares of Mattel are surging after the Wall Street Journal reported that the company received takeover interest from authentic brands. That interest could involve an offer from Mattel at a value of more than$20 a share. A source familiar telling CNBC that there are discussions, but that the talks are preliminary. Both companies declined to comment to CNBC. Shares of Mattel were last up more than 20 percent after being halted for volatility twice. Carl, back over to us. Stock's having a busy week, Frank. Thank you very much, Frank Holland. When we come back, what the big move in rates means for housing, we'll count you down to Nike in just a few moments.

39:55That and much more when we take you inside the market zone.

40:04We're now in the closing bill market zone. Mike Santoli, Northern Trust Joe Tanius here to break down these crucial moments in the trading day. Oliver Rennick standing by live from the CBO Global Markets in Chicago. And our Diana Olick watching housing as the 10-year yield coming off of those 24-year highs. Mike, first up with you. Fair to say some assumptions got challenged a bit today. For sure. And it collided with a bond market that certainly was stretched and had a pretty good head of steam up in terms of the yield surge. It's possible we saw some kind of a crescendo that's going to be consequential with positioning extended as it was.

40:40That said, the 10-year yield has merely come down to levels that seemed kind of scary on the upside two weeks ago. It could just be sort of getting into a neutral footing ahead of the jobs number tomorrow. But the relatively dovish Fed speak combined with yesterday's cooler than expected PCE and just a general sense out there there's no hurry to raise rates. Yep, let's see what's come off the boil. What I think is interesting is the stock market response is pretty textbook. We had lousy, lousy breath, a lot of new lows piling up for six weeks. Mega caps holding things together. You saw reversal, equal weight outperforming today.

41:14So we'll see. I'm a little bit cognizant. It's the first day of a new quarter. It could be a lot of mechanical, tactical stuff, as I said, ahead of the jobs report. But for now, you know, things are happening in a kind of orderly way. And maybe the market did get carried away a little bit in the short term. Right. Mike, thanks. Of course, Nike's coming up in just a few moments. Let's get to Oliver Rennick at SIBO tracking some of the options action ahead of that print, Oliver. Hey, Carl, Nike's showing a little sign of life, actually, ahead of earnings with a 1 % plus rally today and some fairly impressive options volume, about three and a half times the 30-day average with a fairly bullish bent, despite another 40 % sell-off this year.

41:56The biggest trade today was someone buying just shy of a million dollars worth of the 37.5 strike calls expiring November 20th. And while there were a few big put buyers, by volume, it was about 90 ,000 calls that were likely bought versus 73 ,000 puts. There is also a 9 % move implied for Nike, which is standard for this stock at this point. But this time, at least one big whale thinks they can do it. Oliver, thanks. Let's check in with Diana Oleg, talk about this move in rates and housing. We had just put up a chart of Depot a few moments ago, and we did get a big initiation of homebuilders over at Morgan Stanley.

42:35Yeah, we did. But look, it's just more pressure on mortgage rates. They did take a tiny step back today. The average rate on the 30-year fixed is now at 7.54 percent, according to Mortgage News Daily. That's a 117 basis point jump from a year ago, 65 basis points up from just the start of September. Now, we saw what that has done to mortgage demand in the latest application numbers, refis last week. They were down 56 percent year over year, and homebuyer applications were down 14 percent. That, according to the Mortgage Bankers Association. In addition, more than 10 percent of borrowers applied for riskier adjustable rate loans or ARMS, which offer lower rates, the highest share in nearly two years.

43:17Housing stocks are basically flat on the day. Of course, they have had a rough last month as rates have been rising. The home building ETF ITB down about five and a half percent in the past month. Carl. Yeah. New York Times even writes up the ARMS story. Got some flashbacks on that one, Diana. Thank you, Diana. Like, we are moments away from the bell. Let's bring in Northern Trust's Joe Taney as to talk about what we saw today. The environment we're in, Joe, it sounds like your take is, yeah, we're in a higher-yielding environment. Markets are repricing for that as opposed to going into a strict growth scare.

43:52I think so. I think so, Carl. I mean, look, the million-dollar question is, can markets sustain higher interest rates? Can markets and can the economy sustain interest rates at these levels? And while it is painful and there are certainly some consequences in terms of what it means for affordability, what it means for the housing market, which, of course, you just talked about. Overall, we think the answer to that question is yes, there are going to be some pain points. But I don't believe that interest rates at these levels are going to derail the market rally that we've been seeing. Sounds like you think we might be past the worst part of the oil cycle here.

44:25I do. I do. And what I mean by that is this. I certainly can't predict how this conflict is going to play out from here with respect to ongoing negotiations between the U.S. and Iran. Or, of course, they continue to break down. It seems like we take one step forward and two step back, and that's probably going to continue to happen. However, however, if you just think about where oil prices are today, and you assume that the worst of it is already baked in in the sense that oil prices hovering around$100 a barrel, given the traffic already kind of coming to a halt, if you will, through the Strait of Hormuz.

44:58We've seen a bit of a rebound there. I think you have to acknowledge that with oil prices at these levels, the impact it is having on inflation, the worst of it's already there. So when you take a look at consensus estimates for inflation or forecasts for next year, even the Fed's own projections, everyone tells you inflation is likely to roll over and we're probably going to come a little bit closer to 2, 2.5 percent by the end of next year. Yeah, we'll watch that. Obviously, the diesel story does linger maybe a little longer than the crude story. You think the good news, though, is that fixed income is investable again?

45:31The good news is that fixed income is definitely investable again. I think we have to be mindful of what happens with interest rates here. You have to be thoughtful about your duration and how you're positioned in your portfolio. But look, for the better part of a decade, almost two decades, the question and the concern that we kept hearing was one of financial repression. Interest rates were so incredibly low that in order to capture any yield or any income in your portfolio, you had to go out either further along the curve. You had to take risks that you didn't necessarily want to or dip a little bit further into credit quality.

46:01And that was something that made you uncomfortable. But when you take a look at yields at these levels as an investor today, whether you're talking about the taxable bond market, you're thinking about the municipal bond market and you evaluate their tax equivalent yields, or you look into the private markets and think about private credit, I think that market is becoming far more exciting for investors and for savers. It's a nice take to wrap up this session, Joe. Thank you. Joe Tanius joining us from Northern Trust as we circle around 76.65. That's such a closing bell. Let's send us into overtime this afternoon with Melissa Lee and Mike Santoli.

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