Closing Bell: 10/16/26

0:00At Janice Henderson, we strive to deliver better outcomes through insight-led investing, innovation for clients, and a partnership approach that's core to our identity. I'm Jessica Lianzini, Head of Fixed Income Client Portfolio Management. I'm passionate about my role in investments. It allows me to partner with our clients, simplify fixed income, and support them in achieving better outcomes for their clients. Janice Henderson, investing in a brighter future together. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating.

0:38At Acura, that means looking closely at how every detail can make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance. That's Acura. Welcome to Closing Bell. I'm Leslie Picker in for Scott Wapner today. We begin this make or break hour with a notable turn for stocks today and the rotation out of tech as Wall Street reassesses that trade that's been driving the market higher. Let's get straight to the scorecard with 60 to go in regulation.

1:13You can see the Nasdaq currently down 2.4 percent. The S &P down 1.3 percent. The AI buildout names really getting hammered today. CoreWeave is down once again, down double digits for the week. The chip names also getting hit today as well. The SMH down nearly 10 percent this week, 3 percent right now for SMH lower. Tesla shares also moving lower after unveiling its highly anticipated Roadster. We'll have more on that story in a moment. But it takes us to our talk of the tape. The market's biggest trade facing perhaps its biggest test yet. And the selling is spreading. That's where we begin with our Seema Modi.

1:54Seema, you've been following this very closely. What's the latest? Well, Leslie, it seems like core weave is still in the eye of the storm with the stock now down about 26 percent just this week, while yields on its bonds remain elevated above 15, which is considered distressed. Analysts at BNP writing that the traditional debt financing for core weave now becomes basically uneconomic, so they need to resort to other financing measures. Core weave story certainly pressuring the neoclouds. Even companies like Oracle that has a diversified business, right? It's got software plus cloud and data centers.

2:28We've seen that stock underperform. UBS writing that this week has been marked by a clear unwind in AI-related names and that the AI financing for the build-out remains the key. Rory, now attention turns to Meta, which reports next week. Leslie, that will be the next big read we get from CEO Mark Zuckerberg on financing the GPU-backed loans. That, of course, will be topical. Both Corweave and Nebius, by the way, have deals with Meta. This as chip stocks remain under pressure, Cerebris among the worst performing names on the week, and then Memory, where we saw SK Hynix and Micron continuing to face renewed questions about pricing power and whether this new rival from China could dramatically change the landscape less.

3:07Yeah, so many headlines this week, Seema. We appreciate it. Let's bring in CNBC contributor Fundstrats Tom Lee. So this is Dan Greenhouse and Ed Clasold of Ned Davis Research. Thank you all for being here. So, Tom, let's start with you. You know, the market today kind of has the contours of an unwind here. You've got the VIX significantly higher as well. What do you make of the market as we've seen it today? Well, thanks for having me. You know, the market has been kind of climbing a wall of worry. AI fears escalated this week. And I think because it's Friday and there's, I think, concerns that, you know, with oil rising, you know, could tensions or the war escalate over the weekend?

3:53So I think it doesn't surprise me that markets are unwinding today. But I think before viewers think that this is the start of a bigger downturn, I mean, markets are at support. Our technical strategist, Mark Newton, thinks we actually probably could rally. We either bought them today or on Monday. And I think from a fundamental perspective, I mean, as much as we should respect the idea that like AI debt markets may not be that confident, you know, the fundamental story and the drivers of AI are intact. So to me, when you have the fundamentals holding in and markets getting fearful, it's actually a pretty good risk reward setup for investors.

4:32So you'd be, Tom, buying this pullback everywhere or there's specific pockets that you feel like are kind of reaching that technical area that makes them attractive for a bounce? I think the setup is for a buy on the memory, the semis, you know, the neoclouds, you know, tech broadly, crypto. I think that they've all pulled back to support levels at a time when people have become maybe very fearful of fundamentals. But as you know, if the fundamentals remain intact, then it's a coiled spring. Dan, what do you make of what's going on with the neocloud issue right now? Do you feel like the market is unfairly punishing it?

5:11Or do you think that it could be this canary in the coal mine. And that's why it's become such a point of focus this week. The problem with the canary and the coal mine argument, Leslie, is how many canaries have we killed in the coal mine over the last three years as everybody has latched on to every new sign of weakness, so to speak, as evidence that the bull market was about to end, only to see the broad market, both tech and otherwise go on to make new highs. So I don't know that I would read any more into what's happening now than I would have or did any of the other headlines. The issues appear to me to be rates are higher.

5:52And so to the extent that everyone's already nervous about the extent of the AI build out and it getting over its skis, everybody is starting to knock on the doors of some of the riskier parts of the build out. And Corweave and the neoclouds are on the riskier end of the spectrum. And even within that context, what's happening at CoreWeave is they're not knocking off the secured debt. They're knocking off the unsecured debt, which is the riskier of the riskier AI build-out play. So I think you have an issue here where people are looking to sell something in the face of higher rates. But we heard from ASML, we heard from TSMC, we've heard from any number of other companies that the broader demand environment remains It's pretty robust.

6:34And I would want to hear from Corweave that there were some issues with their business before I read anything larger into what's happening right now. But, Dan, demand is one thing. Capital is another. And so far, you've seen the capital chasing demand. And I wonder, as interest rates rise, as there becomes more attention on what's going on with credit right now, do those two elements kind of bifurcate a bit? Yeah. So I'm making two arguments. One is rates are higher, no doubt, obviously. And the issue is, do I want to believe that everybody in the build-out chain is able to finance themselves ad infinitum at higher rates?

7:13And the answer to that is probably no. I don't know whether this is the breaking point or another 25 or 50 basis points higher is the breaking point. But as rates move higher, the more speculative tales, so to speak, of the build-out are going to be called into question. And right now, that's core week. The point I'm making about demand is for the broader market, for investors out there who aren't long nebbius or core weave and are levered, so to speak, to the broader AI build out. I don't know that you could read anything to what's happening right now in a larger context, either for tech in general, although obviously it's selling off, or the market more generally.

7:50I'm just saying rates are higher, riskier ends of the spectrum are getting knocked, and right now that's the neoclounds. Yeah. Ed, what do you think? Is there a capital issue right now? And how big of an issue is that for the broader market? I mean, you have the cost of financing going up for a lot of these names. You've got IPOs becoming more challenged with a lot of the data center exposed ones getting pushed out. You're not seeing as much in terms of equity capital fundraising either. So, you know, before we were talking all about permitting being the biggest hindrance to the CapEx trend and the AI build out, It feels like capital is kind of moving up the chain of priority of things that are becoming more of a thwarting to this build out that we're, you know, so much of the economy is pinned on.

8:36So capital has a price and the market is trying to figure that out right now. And it's quite possible that you could see a bit of a slowdown in the build out. Now, there's so much demand still. We're going to have to see what the next earnings season looks like. And so we're going to have to wait a couple of weeks to get a really good answer. I think that's part of the reason the market's selling off today is that you don't know. And so you have to wait until we get those. The last couple of earnings seasons have really saved the day where the numbers have been so strong and the beats have been so great.

9:10I mean, last earnings season, S &P 500 expectations were for a pretty good 25 percent earnings growth. And they came in at 32. And here we are again, around 25, 26 percent expected earnings growth for Q3. We'll see if they can beat there. And so we're going to have to just be a little patient here. The market typically is week in September. We got that with small caps. We didn't get that with the large caps. So maybe this is a little bit of a catch up from what we normally would have seen last month. Tom, can the market and the broader AI trade survive if the neoclouds don't make it? I mean, are we putting too much attention on what's going on with the neoclouds?

9:47Or are they integral to the broader trend and the ability for this overall trade to hold up? I mean, I'd say it's actually very important that neoclouds survive this stress. And I'm not saying that they're facing any risk, but the market is just saying, well, the money is expensive. If I'm going to lend you money, I do want a higher return. Some of that, of course, could be political pressure because there's, you know, movements against hyperscalers. But if someone said, well, the neoclads are in trouble because the AI story is not grounded on either fundamental demand or visibility or backlog, I think that's where the market maybe is misinterpreting.

10:32I mean, you know, we know CoreWeave's customers, for instance, are the top. These are the bluest of chip companies, you know, whether it's Microsoft, et cetera. And they've got high quality investors. So it's not a question of are these, you know, shabbily built businesses that borrowed money at excessive rates. This is just the market saying, OK, let's pause. And I think maybe it's because it's Friday on top of war fears. And I think that's exaggerating the moves. Yeah, Corweave is currently down about 50 percent over the past six months. It's about to break through potentially$60 a share. It went public at 40, traded lower, but then has kind of maintained above 60 after that.

11:21Dan, I'm curious kind of how you think about this in the context of a bubble and whether what we've seen this week really solves for concerns about bubble activity. I was talking to someone earlier who was saying that the West Coast is still focused on ARR and the East Coast is focused on cost of capital. And there's kind of this tug of war right now. You know, what do you think people in the Midwest are thinking about all this, to use that analogy? The last thing I think people in the Midwest want is for me to pretend like I know what they're thinking. But that said, cost of capital is always going to win out.

11:56You know, I just want to pivot off this conversation because you mentioned the bubble. People have been looking for some evidence, if you will, some pinprick of the balloon that the quote unquote bubble is going to pop any minute. And we have hung our hat on any number of headlines I alluded to earlier, that everything was about to come crashing down, that this was all built on low interest rates or excessive valuations or X, Y and Z. It is repeatedly proven not true because, A, the demand is there and B, there's revenues all over the place for these companies. These are not this is not being built in a speculative fervor in hopes that somewhere three, six, nine, 12, 18 months down the road, customers show up to absorb all the fiber for fiber that I built that will wrap around the earth eight times.

12:48There's there's every single company in the supply chain says the same thing, which is that demand considerably exceeds supply. And again, you just heard it yesterday, basically this week, let's say, from both ASML and TMSMC. Now, again, these are huge companies. They're not exactly the lead. Like that demand has been booked out quarters in advance. But if you want to say that there's a bubble, fine. But I don't think Corweave's financing going from 9 to 15 is evidence that there's a bubble. I think there is a cost of capital issue here. There is a moment in time where rates are moving higher.

13:22And investors are calling into question the financing capability. in the valuation for some of those riskier portions of the market. I don't think in the short term it's really any more complicated than that. Well, demand is there. But just to follow up on that, we saw what OpenAI has reported. And I know there were some accounting confusions related to that for their ARR last week. This week, there was an investor meeting with Anthropic ahead of its IPO. They shared, according to sources, third quarter financials,$16.8 billion, dollars, a huge growth rate, but it did fail to impress a lot of people based on kind of expectations and what it meant for their go forward revenue.

14:03So I guess the question is, the revenue is there, the growth rate is strong, but if it underwhelms, is there too much concentration and focused on just a few players? And if those go sideways, I mean, is that something that the market should be discounting? Leslie, yes. If something goes wrong with OpenAI and Anthropic, then the stock market's going down 20 % or something like that. So I wouldn't argue that point. I think the issue, again, with respect to the growth rates, and with OpenAI, I don't have the data. We're not in the data room. We haven't had any meetings with them. But I think it was just a reclassification of some of the revenue.

14:39It's not as if we thought they were doing X and they instead did Y and some revenue vanished into thin there. But yes, if growth slows down at the core companies, at the center of this thematic drive, which is pushing the entire market from industrials to utilities to tech to comm services, then yeah, there's going to be a problem with the stock market. All I'm arguing right now is in the case of CoreWeave, I just don't think that development, i.e. again, financing going from 9 % of coupon to 15 % effective yield in the market, I just don't think that is the canary in the coal mine that tells me the bull market is set to end, the AI investment cycle is set to end.

15:17I just I think it's insufficient. Jensen Wong would agree with you. Obviously, his comments in support of that company on Thursday helped give it a little bit of a lift. But, you know, shares currently down 12 and a half percent. Ed, we've got earnings season. We've got meta coming out next week. Does this provide a fresh catalyst for the AI trade, you think? Or is the bar so high going into earnings season that it almost creates more of a risk overlay? Yeah, I think there's an opportunity for the market to reset and take a deep breath and realize that the earnings story still has further to go.

15:56So in terms of an economic impact, not quite as much. Now, from a trading perspective, the market doesn't care about The growth rate, it changed. It cares about acceleration, deceleration. And so even if we start looking at 2027, we say these are going to be some pretty good numbers, not as good as 2026. And keep in mind, there are a lot of one offs this year with tariff refunds, with some of the paper gains in these A.I. companies as they're revaluing privately. You could get some slower earnings growth. So that's a concern. And I'll just pivot quickly to how this plays into the technicals. The story of the bull market that started in 2022 has been an AI trade.

16:34The AI trade takes a breath. The rest of the market catches up and then it flips back and forth. So you've never really had a very narrow market for very long. And we've seen over the past few weeks is actually a much narrower market. The S &P close to the new high, low percentage of stocks above their 50-day, 200-day moving averages. We need that to correct itself. Otherwise, the recipe for next year is slowing earnings growth, less friendly Fed and core technicals. And that's what we have got to be on guard for. But in terms of earnings itself, I think we're still in decent shape to produce some pretty good numbers this year.

17:08Yeah, all about that guidance. Well, the three major indexes, near session lows, the Nasdaq down 2.2 percent, having its worst day since June 5th. And the S &P seeing its largest one day slide since July 29th. 29th. So we appreciate your perspective on this important market day. Tom, Dan and Ed, thank you all very much. Let's turn now to Apple pre-orders for its iPhone duo open today. Mackenzie Cigalos has the latest on that one for us. Hey, Mac. Hey, Leslie. So Apple's telling me that pre-order demand for the duo has been, quote, nothing short of extraordinary and that it's working to get the new foldable into customers' hands as quickly as possible.

17:49Apple being careful not to call it sold out, but launch day store inventory is gone and delivery dates that were in November this morning slipped into late January within an hour. Now, that could make the duo one of the most difficult tech gifts to get your hands on this holiday season, but it also makes it tough to separate real demand from limited supply, with one longtime Apple analyst saying that he has never seen iPhone lead times this long in 20 years of tracking them. But with Siri AI's slow rollout doing little to drive upgrades, the Duo's radical redesign gives Apple something that it badly needs, a much clearer reason for customers to trade up.

18:27And there could be a halo effect, people essentially coming into stores to see the Duo when it goes on sale next Friday, and then walking out with a$1 ,200 iPhone 18 Pro instead. And the scarcity may actually add to the appeal. As one analyst put it to me, exclusivity is a big part of the draw here because owning one early becomes a kind of ultimate flex. Leslie? A flex and the metaphor for the flexible phone as well, perhaps. Mac, thank you. Mackenzie Sigalos. Tesla taking the wraps off its long awaited roadster. Phil Lebeau joins us now with the details. Hey, Phil. Hey, Leslie, this is the video that everybody's talking about.

19:08It happened last night when they showed us the new Tesla roadster. And now Elon Musk is saying this is proof cars can fly. I'm not sure I would call is flying, but it certainly was impressive. This is the next generation Roadster that is being modified with thrusters from SpaceX and other technology. But it does raise the question, okay, that was an amazing demonstration. What's the reality about the next generation Roadster? Three versions are going to be offered by Tesla when production starts in 2028. The performance one, that's street legal, doesn't have the thrusters. If you want a thrust version, which will be more expensive.

19:45It does have some of that technology, basically race course technology. It'll be the kind of vehicle you take to a private race course. And finally, there is the one with the SpaceX thrusters. It's called Rocket. SpaceX technology. And again, not street legal. That doesn't change the fact that people are talking about this demonstration last night. And again, production starts in 2028. The volume is going to be limited here. We still don't know pricing on the vehicle. By the way, under a second for zero to 60. As you take a look at shares of Tesla, Leslie, let's point out that next week is a big one.

20:21After the bell on Wednesday is when they will be reporting their results for the third quarter. More importantly, it'll be the analyst call and a chance for us to hear from Elon Musk. Yes, there will be questions about the next generation Roadster. More importantly, I'm sure there will be a lot of questions about Tesla potentially combining with SpaceX. Leslie, back to you. Yeah, no doubt, Phil. Also curious what those seatbelts look like with the force there as well as the upside down flipping that the car is doing. Phil LeBeau, thanks so much. Let's send it over to Contessa Brewer for a look at the biggest names moving into the clothes.

20:57Hey, Contessa. No, I can't talk after that. I just wanted to. Buckle in. What happens when you combine that with RoboTaxi? And all of a sudden they're like, I know you just want to go to the grocery store, but wee. All right. Let's talk about some stocks here. Alcoa shares rising on an earnings beat, but a slight revenue miss. Of course, it's been helped by the fact that there are broader commodity boom, higher prices. Alcoa reaffirmed its projections for the 2026 aluminum production and shipment numbers it's already issued. Next up, Moderna shares sliding after their recent rally. Goldman Sachs maintained a neutral rating for the stock, but increased the price target on the biotech company.

21:34The stock gained 18 percent last week. Yesterday, it was trading at levels we haven't seen since January 2022. But right now, those shares are sliding down more than 10 percent. And Twilio is the biggest laggard in the S &P as investors likely try to lock in some profits. It had a recent rally ahead of its earnings report that is coming up on October 29th. Shares have risen nearly 70 percent so far this year. But as you can see, they're down 11 and a third right now less. So you did it, Contessa. The shares rose so much, it's basically like having a rocket thruster. Yeah, that's right. So it's a tie-in right there.

22:10Very easy to follow that video. Contessa, thank you. We are just getting started. Coming up a big week for bank earnings. But could rising rates threaten the sector's momentum? Where our next guest sees the biggest risks and the best opportunities in the space. We're live from the New York Stock Exchange. You're watching Closing Bell on CNBC. Legacy credit scores only look at a brief snapshot in time. and that limited view often leaves millions of qualified credit seekers out of the picture. VantageScore is changing that by modernizing credit scoring. VantageScore uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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24:13Welcome back. Bank earnings this week yielding mixed third quarter results in the wake of rising interest rates. Here to break down the latest and discuss some key stocks to watch is Argus Research Director of Financial Services Research, Stephen Bigger. Steve, it's good to see you. I would say just to kind of set the table here, NetNet, did you feel like the Wall Street side of the business or the Main Street side of the business really held out during the quarter? Well, hi, Leslie. Well, sort of both. You know, we had, I think we would look at the third quarter and say it was pretty good. And even better if we didn't have such a stellar second quarter that That included the SpaceX IPO, so particularly on the capital market side.

24:52But it was a lot of dispersion in the results this time. You just didn't have the entire group benefiting in the same way. And I think some of that was the footprint, right, where banks are located, where the strengths are. We had a big jump in Europe, for example. I think that benefited from activity over there. But on the lending side, it actually did pretty well. If you look at loan growth, that accelerated for the most part in the third quarter versus the second. And credit quality has really hung in there. And banks, I think, are benefiting from some kind of that benign credit quality environment.

25:30Yeah, product mix, as you mentioned, played a big role in terms of the results in the quarter. And you also mentioned the dispersion more than usual, perhaps, across the investment banking results. What do you attribute that to? Does it feel like the bigger firms and the top firms are taking more share? Or is it attributed to product mix, as some of the executives kind of explain on the call? Well, it's always a combination of both. I think there is some market shares, gains and losses in any given quarter. But I think this time it was more the geography. It was more the kind of the smaller deals, depending on where you're located.

26:07I mean, we've had year-to-date global or European IPO activity. The count is up about 35 percent. The proceeds are up about 28 percent. So to the extent you have a little bit more activity in Europe and J.P. Morgan, Goldman Sachs, for example, that did quite well in investment banking in the third quarter, I think, have that geographic mix that really benefited it this quarter. And Bank of America, you know, just did not. And it showed in the results. Yeah, Asia, too, was a big, important geographic locator for the equities divisions as well. In terms of the loanmaking division, we did see higher loans pretty much across the board.

26:49Do you think there's evidence of tighter financial conditions yet? It feels like that side and their guidance on net interest income was either to maintain or raise. It feels like things are doing just fine. And what you mentioned with credit quality, too, is still holding up. Yes. Surprisingly, the lending growth environment has improved, already accelerated. J.P. Morgan raised their target for net interest income, for example. Now, about a quarter of that, they said, was because of higher rates, a steeper yield curve actually benefiting. And clearly, we see that generally, historically, when the Fed starts raising, the banks are, look, the balance sheets are asset sensitive.

27:29So their assets reprice faster than liabilities, which means loans reprice faster than deposits. and we'll see that at least short-term benefit. So the worry, of course, is that the Fed overdoes it, gets too aggressive, and that will start to crimp loan growth, and credit quality will tend to follow on the downside. But I think as you look at the quarter-point rise, a lot of lending is based off the prime rate, not only went up a quarter point over the course of a quarter, and late in the quarter for that matter. So I think that's not, you know, if you're looking to build a project, if a quarter point is going to give you a yes or no on that project, it's probably not all that lucrative.

28:12Ten-year clearly went from, what, 4.3 to 5.4 over the course of a quarter. That's pretty massive. So anything tied to that, I think, like housing in particular, did not do quite so well in the quarter. But commercial lending growth did surprise on the upside. Yeah, yeah. And to your point, we'll see what happens with deposit betas moving forward. I want to also ask you about regulatory, because during this earnings week, we've seen, you know, that$1.2 billion enforcement fine on B of A, plus there was the OCC report on debanking. And broadly, you know, for the last few years, we've seen this as kind of a deregulatory environment as it pertains to bank, with little, you know, updates on that front.

28:56We should be getting some kind of update on Basel III. We got an update on leverage capital requirements earlier this year. How are you thinking about the banks in the context of their relationship with Washington right now? And do you feel like the D-Reg narrative still holds, given some of the updates that we've seen more recently? I think so. So I mean aside from the Bank of America regulatory fine that you mentioned, and that was for anti-money laundering, a completely different thing from capital ratios. But yeah, this Basel III has been expected for quite a while, and we do expect some softening, and that will benefit the banks and the amount of capital that they have to set aside.

29:40I mean, I think I'm in the cap of certainly most analysts to say that the banking industry is overcapitalized right now. Could they free up some of that capital for lending, maybe for buybacks, maybe for dividends? But I think lending in particular, they would say they want to be in growth mode. And providing the economy with more financing is the way to do that. And so, yeah, I think the capital situation, the regime itself hasn't changed. I think the regulatory bodies generally are all in the same camp. They like to give some relief, and we just have to wait and see how much. But I do think that is a catalyst here for the banks at large to get possibly lower capital ratios.

30:26Well, despite a down tape today, you've got kind of a mixed picture for the banks with J.P. Morgan, Wells and Citi in the green. So we'll see what next week holds. Stephen, thank you. Thank you. Up next, Fed Chair Kevin Warsh speaking out last night, but leaving out one critical question unanswered. Alliance's Mohamed El-Erian joins us to discuss, and we're all over this sell-off as we head toward the close. We're back on the bell after this quick break. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more.

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32:55Welcome back. Fed Chair Warsh. Signaling today the Fed is set to stay steady on rates despite the recent jump in inflation. This less than a week away from the October Fed decision. Joining me now to discuss is Alian's Chief Economic Advisor, Mohamed El-Erian. It is good to see you in important market day today. So I'd love to just get your perspective on how the market is really reading Warsh's comments. And do you think that the fact that they'll stay steady is truly the right way to be reading what he said, A? And B, do you think the markets are kind of fully digesting that, given what we're seeing with today's print?

33:33Thanks for having me, Leslie. The market is reacting curiously. Chair Walsh went out of his way to say I am not giving forward guidance I don't do this anymore and don't look for me to do so but the market read into this that he was being dovish I think there are two reasons for that one is he went on to say that the development in the economy has been consistent with his expectations so he's not particularly worried about the strong numbers that we've had on economic activity, nor the hot CPI numbers. It seems that both of those were consistent with his expectations. And then the second reason, I think the market has a behavioral bias to reading something that is dovish when it's not hawkish.

34:21And that explains why the probability now of an October rate hike is less than 20 percent, but that in December is almost 90%. What do you think it should be? I think that's right. I think they capture well what is going to happen. It's beyond that. The market is pricing in total two and a half hikes by the middle of next year, three by September. I think that's too much. I think there is an underlying concern about the economy, about segments of the economy that are interest rate sensitive. And if the sell-off in tech continues, that could have both an economic and technical dampener on other things.

35:10So I don't think we're going to get the three hikes, but I understand why the market thinks we are. Does this week's activity in the AI-sensitive credit markets, do some of the Fed's work for it? And I ask that because so many of the conversations around monetary policy have said, you know, have centered on what you just mentioned, interest rate sensitive pockets of the economy, of which AI historically has been seen as kind of less sensitive to interest rates. Does this week's activity kind of change that dynamic at all? So I think this week the market finally woke up to a simple fact. The AI trade depends not just on invention, which is going really well, but it also depends on broad dissemination, adoption, and being able to risk mitigate the unintended consequences.

36:04And these two other things are not really in the hands of the tech companies. And the market has started to realize it's tougher. What I don't quite understand is the rotation trade that everybody is advocating, what I call the one minus X. If tech does badly, that is going to impact non-tech for two reasons. One, you just said it, it impacts the economy. And secondly, let's not forget tech was a major magnet for lots of international and domestic flows into the market. So you have a technical effect as well. So I do think that the non-tech side of the economy is vulnerable to the tech side. And in addition, and you started the show with a whole list of issues, high levels of yields, high level of spreads, high oil prices.

36:50That's also impacting the non-tech. So do you think then that the wider spreads that we've seen this week make it then potentially less likely that the Fed raises rates in October just as a kind of a byproduct of that and its importance in the economy as well? Yeah, I don't think that I think October is out. and I think less than 20%, which is what the market is implying, is the right number for October. The question is going to be beyond December. And why does it be beyond December? Because they cannot ignore what were hot CPI numbers and what were very hot PPI numbers. And then today we got the import prices as well.

37:27They were hot. All of those were above expectations. So I don't think they can ignore it. The question is, do they keep going after December? The market thinks they will. I'm not so sure. All right, Mohamed, an important market day. We appreciate your perspective and your time this Friday. Thank you. Thank you. Up next, we are tracking the biggest movers as we head into the close. Closing bell is back after this quick break. 13 minutes until the closing bell. Let's get back to Contessa Brewer for a look at the key stocks to watch. Contessa. Leslie, Semtech shares right now are sinking like a stone, starting with a 10 percent decline yesterday, now off another 6 percent.

38:03The semiconductor company's long-term guidance for 2029 and 2030 implied a bit of a slowdown from its explosive near-term growth. Still, a number of bullish reactions out there today with Northland Capital Markets upgrading the stock to buy. And strategy shares are falling after index provider MSCI adopted new rules that could remove strategy from its global stock indices. MSCI said it will remove non-operating businesses. And, of course, that could include strategy, those share prices off 10 percent or so. So really, this could pressure the stock because index tracking funds would have to then sell the shares if that happens.

38:42Leslie. Yes, we have seen that time and time again. Thank you for flagging that to us, Contessa. Up next, a new strategy for Netflix's content slump will break down the latest leadership shakeup. And we're all over this sell off as we head toward the close. The market zone is next. We are now in the closing bell market zone. Mike Santoli and MJP Wealth Brian Vendig are here to break down these crucial moments. of the trading day, plus Contessa Brewer on what's lifting traveler stock. And Julia Borsten with the latest on Netflix Leadership Shake-Up. Mike, we'll start with you, though. Yeah, Leslie, obviously seeing a little bit of a rerun or a version of it of what we saw in July, you know, when you did have this real intensity of selling around the AI hardware complex in particular, the semiconductor index is above those lows from July, but not much.

39:31And so it does seem as if there's been this determined and sometimes disorderly selling. There was a very erratic spike in the volatility index midday. So it just shows you a lot of scrambling for forced repositioning, whatever that might mean under the surface. And the credit markets, to me, you know, kind of hold the wheel in terms of where things get steered from here. Obviously, sometimes you have these as cleansing events. We do still see the market able to rotate away from some of that danger. But it's a very sort of flight to quality and a defensive tone. And, you know, frankly, a little bit of late cycle type action in the market.

40:09Yeah, you can't even blame it really on the 10-year today, which is up marginally, essentially. Mike, what's coming up on overtime? Well, we're going to get into all that, including with a big bond investor about, you know, the credit risks out there. But also going to take a look at Walmart, a real beneficiary of this flight to defense and also looking like a pretty expensive stock. So we'll get behind that. All right. Looking forward to that, Mike. Thank you. Let's get to Contessa Brewer for a look at Travelers. One name in the green today. Yeah. Those shares for Travelers up more than a percent today after a big earnings beat helped by strong investment income and despite higher catastrophe losses.

40:45But one of the most interesting developments here is how Travelers is tackling a very costly problem really for the entire insurance industry. The soaring cost of lawsuits, which is helping drive premiums higher. Travelers is using technology to fight back first, a new digital tool designed to help people settle claims without hiring a lawyer. CEO Alan Schnitzer says it was designed to employ empathy and offer education and empowerment. He says 80 percent of claimants who don't have lawyers have engaged with it and the early results are encouraging. And when lawyers do get involved, Travelers is deploying AI to comb through hundreds of pages of claim files, spotting inconsistencies, building stronger legal arguments that then it feeds back into underwriting.

41:29That helps Travelers identify risks and price policies more accurately. So what the company really wants is fewer costly lawsuits, Leslie, better defenses when they happen and ultimately better profitability. The whole insurance industry wants this. And I will mention the insurance stocks I'm looking at right now are all bucking the overall trend. They're all in the green. Fascinating. Yeah, I can see how I would be a big efficiency gainer there. Contessa, thank you. Now to Julia Boorstin with more on the shakeup and Netflix. Julia. Lastly, Netflix appointing a Fox and Disney veteran Peter Rice as chief content officer, replacing Bella Bajaria, who had been there for a decade.

42:09Now, this comes on the heels of Netflix laying off 6 % of its staff earlier this week and amid growing concerns about weakening engagement. Aptopia reported that Netflix subscriber churn doubled between the second and third quarter. JP Morgan writing this morning, quote, this is the clearest move that Netflix management has made that acknowledges their engagement problem. With a stock down about 40 % in the past year, Netflix has been ramping investment in non-traditional content, bringing over YouTubers and investing in podcasts. Now the question is whether Rice can improve user engagement with Netflix's core business of film and TV shows.

42:47Leslie? We will see, Julia. Thank you. We are moments away from the close on this important market date. Let's get to MJP's Brian Vendig. Brian, a clear rotation under the surface here. You've got six S &P sectors in the green, but the sell-off really being led by information technology and communication services. What does that tell you? Well, it tells me heading into this quarter's earnings, expectations are high for earnings growth and outlooks for next year. And I think with some of the headlines that we got this week with AI chitters and obviously a resurgence of tension in the Middle East, that rotation is continuing.

43:27And we've seen, though, over the last 20 days, looking at the S &P's moving average, it actually percolated up to a higher level that we haven't seen since the summer, which is indicative of health care, utilities, financials, and some other areas of the market making a little bit of a comeback. So, again, I think this rotational market, Leslie, is going to continue until we get to a sense of those mega cap tech earnings, which start in the middle of next week with Meta and moving on to the other hyperscalers. Brian, I want to pull up a chart of CoreWeave on a tick-by-tick basis relative to the QQQs.

44:08You could see kind of moving basically in lockstep on a week-to-date basis. What does that tell you of the importance of what's going on with CoreWeave for the overall tech ecosystem and just the sentiment drivers that we're seeing from the credit picture and the potential distress? at that company in particular? Yeah, I think it's telling investors right now that what the market prefers is free cash flow, high quality names, especially when considering that the inflation data this week shows that price is going to stay sticky moving forward. And when you think about the interrelationship of CoreWeave, as well as the concerns of AI innovation spending and CapEx and this off-balance sheet financing moves.

45:00I think investors are looking for a little bit more predictability and lower multiples in some of the names that they invest in moving forward. Given what we've seen with the VIX, currently up 24 percent, around 20, and the very specific nature of the sell-off today, does this suggest to you an unwind? And if so, would you say that this is a buying opportunity? I think it's a buying opportunity definitely in some sectors of the market, Leslie. So, for example, industrials for the last three months are off about 6 % to 7 % while we've seen tech rally. And I still think there is innovation and spending that's going to be happening in the electrification and the grid and on-shoring of supply chains as well as CapEx spend still continuing into next year.

45:49And health care, I still think, has been something that has been tied to this rotation and momentum in the market. I still think that's going to continue, especially with jitters going into midterm elections. But the fact of the matter is the S &P 500 is influenced by AI and AI-related names up to around 50 percent of the overall market cap weighting of the index. So we should expect that when we do have these jitters and tech sells off like a day like today, it is going to bring the overall index down, which is what we're seeing on a week to date basis. And real quickly, do you feel like given today's moves, positioning has shifted and flushed out some of the excess?

46:31And, you know, what does that mean for next week? Yeah, that's a great question. I mean, I think some of the excess definitely has been flushed out this week. We've seen that in some of the individual names that are being disproportionately punished. But at the end of the day, this market is very dependent upon the power of earnings. And I think at the end of the day, if earnings deliver and those outlooks hold for 2027, this market still has a chance to climb that wall of worry, so to speak, and ground higher. And even across 2027, as we get these puts and pulls around AI innovation and the playout throughout the economy.

47:05Right. And we'll look forward to Meta next week as well, Brian. Thank you very much for your time today. They are taking a look at the market. They're going to be announced down 2.1%. They have to be down 1%. That does it for closing down. Let's turn it into overtime. With more to leave and more to leave. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail can make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next.

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