Closing Bell Overtime 10/9/26

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1:09Welcome to Closing Bell Overtime. We're live from Studio B at the NASDAQ Market Site. I'm Melissa Lee. Mike Santoli's off today. Socks higher across the board. The Dow gaining more than 400 points. S &P 500 up a half a percent. Just about, call it six points shy of Tuesday's record close. The Nasdaq up two-thirds of a percent for the week. Everything but the Russell closing in the green. The Nasdaq up for the fourth straight week, but also short of its Tuesday record. Yesterday's big tech losers bouncing back today, but Apple continues to trade separately from the group. Much more on Apple and the larger AI build-out coming up.

1:41And big news in biotech. Moderna closing at a nearly five-year high on hopes for cancer vaccines. We'll have much more on this developing story. But we begin with oil. Two big stories today just breaking a short time ago. President Trump announcing a deal with Russia in an effort to bring down diesel prices. At the same time, a hurricane expected to make landfall tonight. That is threatening refineries along the Gulf Coast. Our Eamon Javers has the latest on the deal with Russia. AccuWeather's Anna Azalian is watching Hurricane Isaiah for us. But Eamon, we begin with you. What's the latest? Melissa, President Trump is suspending sanctions on Russia today in order to facilitate a deal to import Russian diesel fuel ahead of the midterm elections.

2:21In a social media post, the president said, I have just concluded a highly successful discussion with President Vladimir Putin of Russia, wherein it was agreed that Russia will immediately supply over 300 ,000 tons of diesel fuel to the American and global marketplace, another 500 ,000 tons during the month of November, and one million tons immediately thereafter. Additionally, based on the condition of their diesel refineries, Russia will then deliver within a short period of time 3 million tons of diesel fuel. Between our total control of the Strait of Hormuz and this great announcement on Russian energy, diesel prices for Americans and indeed the world will be coming down in record numbers.

3:02And fast, lower prices for Americans, especially our great farmers, ranchers and truckers, is my greatest priority. Now, shortly after that post, the Treasury Department said today at President Trump's direction, the Office of Foreign Assets Control, OFAC, is immediately issuing a temporary general license to allow the supply of Russian diesel in the global market. Now, Melissa, there's a lot that we don't know about the agreement today between Presidents Trump and Putin, including whether they discussed specifics on price of the fuel and whether the U.S. offered any concessions to the Russian side in addition to the lifting of these sanctions.

3:37the president's decision did prompt a sharp response from Ukrainian President Volodymyr Zelensky in the last hour, who wrote on social media in part, any easing of sanctions against Russia without a clear and lasting de-escalation agreement with Russia is an obvious weakness. It plays into Russia's hands, allowing it to kill more, wage war for longer, have even less respect for America and inflict even greater losses and damage on the world. Melissa, back over to you. I mean, the timing of this move can't be ignored, even in terms of weeks before the midterms at a time when affordability is top of mind, you know, amongst American voters at this point.

4:17But there is sort of this element of, you know, what does Russia get in return, as you mentioned? And I'm wondering if there is some skepticism on the Hill and some outrage to whether or not we are sort of selling out to Russia in some way. We must be giving them something, in other words, right, for this. Sure. I mean, as a reminder, I mean, Capitol Hill just passed a Lindsey Graham sanctions bill named after the late senator to tighten sanctions on the Russian oil industry, not to loosen them. So but that measure contained a provision allowing the president to say it's in the national interest to suspend it.

4:52So it's apparent that he's just done that. And look, you know, there will be reactions from all quarters to this, but it is clearly coming just ahead of the election. The president's been talking about this, sort of hinting that he had something cooking on diesel fuel for a couple of days now. So this has clearly been in the works. We know that he spoke to Vladimir Putin earlier in the week. He talked about speaking to him in the context of that plague outbreak in Russia. But now it's clear that there were other things on the agenda for that call as well. So this has clearly been in the works for at least a couple of days.

5:26But it's a pretty sudden development that a lot of people didn't see coming. and clearly designed to take some of the political pressure off Republicans on the campaign trail ahead of those midterm elections. Yeah, the details to come will be interesting. Eamon, thank you. Eamon Javers from Washington. Now let's get to another story impacting the energy market. Hurricane Isaiah is set to make landfall tonight as a Category 3 storm. Anna Azalian of AccuWeather joins us now with more on the storm's path. Anna. Yeah, that's a new update in the last hour that this is now forecast to make landfall as a Category 3 major hurricane.

6:01It's really just a matter of five miles per hour wind speed difference between the Cat 2 and the Cat 3, but it does change the category. Now, the good news when it comes to oil, most of the rigs and refineries are to the west of the path that East AIS is taking. Some of these have had to be evacuated. Some of these have seen impacts and will see impacts. But we've really been spared the worst of it here. I will say, though, it's a major hurricane. We're going to see major impacts. Now, it is moving very quickly. That is good news for us because it doesn't mean that once this is over land, it's going to sit there and really lead to significant flash flooding.

6:36There will be flash flooding, though. Take a look. Everybody highlighted here along the I-Path has the risk of wind that can cause power outages and rain. Of course, the worst impact is going to be at landfall and going to be the storm surge. 6 to 10 to up to 15 feet of storm surge between Pensacola and Panama City Beach. We're forecasting that landfall closer to Pensacola. 10 p.m. tonight, that's another new update. Moved up an hour because of how fast that storm has been moving. The wind threat, hurricane force winds even as far north as Montgomery and towards Birmingham here. We're talking widespread power outages that could last for days.

7:12And then there's the rain. If you are far away from the Gulf Coast, what you'll most likely remember East Angus 4 is the flash flooding from this rain. Anna, thanks for the update. Appreciate it. Anna Azalian. So what does this all mean for the energy market? Joining us now, Denton Cincagrana. He is the chief oil analyst at Dow Jones Energy. Denton, great to have you with us. There's a lot of moving parts here to the energy story this evening. So let's start with the hurricane. And Anna just outlined the path. I mean, the hurricane had been a little bit more west. Things could have been completely different, but we're still going to see, I would imagine, refining impacted in some way.

7:48Potentially. There's two that are kind of in that path, kind of directly to the west of the storm. One is Chevron's Pascagoula, Mississippi, refinery, about 370 ,000 barrels a day. And a company called Vertex, they have a refinery in Mobile, Alabama, that's about 90 ,000 barrels a day. So basically, the large area concentration of refineries is certainly probably likely to be spared. But the things you got to worry about here is obviously flooding, high winds. And really, this is out of the refineries control. Well, weather is out of the refineries control, but a loss of power. That's on the utilities, obviously.

8:25So keep an eye on the power in that area. That's the thing I'd be watching for the most and the impact to refinery operations there. That's a good point. It's not just the storm impact. It's the aftermath of the storm as well. Denton, in terms of the announcement, having Russia release diesel, basically, to the United States, what kind of impact could that be? I mean, before when Trump was talking about a diesel export ban, a lot of analysts were saying, yeah, it would bring down the price of diesel, but it would be a fleeting impact. How are you thinking about this sort of arrangement? Yeah, and I know those are some pretty big numbers that the president threw out in that true social post.

9:04But when you break it down from metric tons to barrels to barrels a day, it really kind of ends up being really a drop in the bucket, for lack of a better term. The November number of 500 ,000 metric tons works out to be, I wrote it down here, 123 ,300 barrels a day or so. So it's not a big piece, especially considering U.S. demand for distillate, according to the EIA in the most recent week, was about 3.6 million barrels a day. obviously Russian refineries have been attacked by Ukrainian drones so and also obviously one question has been answered with the Russian sanctions being lifted and allowing them to sell diesel on the open market I believe that's running through April of next year but also I was under the impression that Russia has a diesel export ban throughout in the month of October anyway so between their own issues and attacks by Ukrainian drones on their refineries.

10:02I'm not sure how Russia could supply this much diesel to the world market. So there's just a question in your mind as to whether or not Russia will be able to do it, whether or not we will actually see the 500 ,000 metric tons. That's correct. It's going to be difficult. I would also, and again, this is my own speculation that based on what President Zelensky said is they may have to step up their attacks on drones, on the refineries. So that's my own personal opinion. But we'll have to wait and see what happens, again, a lot of details are needed here before we really kind of make a move here.

10:37But the market is reacting, moving lower. Retail diesel prices have dropped about 25 cents or so from those all-time highs. But still at$6.26, 27, 28 cents a gallon, still really a headwind for the economy. All right. Denton, great to have you with us. Thank you, Denton. Thank you. Big tech bouncing back today from the OpenAI-induced sell-off yesterday. Microsoft, for example, down yesterday, up more than 2 % today. Well, Apple, the opposite, not trading on AI news, but instead its own concerns about the iPhone sinking that stock today. Let's get more on today's tech moves. Kate Rooney watching the AI reaction.

11:13Mackenzie Segal is tracking Apple for us. Kate, start with you. Hey, Mel. Yeah, so there was some confusion about OpenAI's revenue numbers that sent shockwaves through the tech sector, at least yesterday. It pulled down some of the chip names. The Nasdaq at the time, Microsoft and Amazon both took a hit yesterday with the major investors in OpenAI as well. The headline that got a lot of attention was about OpenAI's revenue being about$20 billion lower than expected. The FT reporting annualized revenue was approaching$50 billion. This is at the end of September compared to$70 billion that was widely reported.

11:46I did confirm some of those numbers with a source, but the discrepancy from what I'm hearing was more about accounting versus any sort of slowing demand. And OpenAI, in previous numbers that they had put out there, had included sales through cloud partners. But in new pitch decks, that's where these new numbers are coming from for its latest funding round. They are excluding that partner revenue. So it's a part of a$30 billion fundraise at a$1.4 trillion valuation, according to sources. I am hearing that that round has been gaining momentum. No term sheets have been signed yet, though. And one issue, though, these companies have been widely using annualized revenue and that run rate to show growth rather than what you see with traditional public company metrics.

12:26That can make it a lot harder for investors to get a full picture. And they are, of course, private companies. The knee-jerk reaction from the market yesterday, though, was a reminder of just how dependent this entire AI trade is on the growth of what are now private trillion-dollar AI companies, Mel. Kate, thanks. Kate Rooney, let's turn out to Mackenzie Cigalos with a look at Apple. Mac. So, Mel, Apple shares ending the day in the red on fresh concerns around iPhone demand. A report from Nikkei says that Apple cut October component orders for the iPhone 18 Pro and Pro Max by at least 15 percent from original plans because of softer than expected demand.

13:03Now, Apple does have a history of ordering aggressively ahead of launch, then scaling back. But those cuts typically don't show up until later in Q4. And Wall Street's watching a few other signs of weakness. UBS says that wait times are getting shorter, even though supply is stable, which suggests that buyers may be pulling back after September's price hikes. And of course, at the same time, this year's launch calendar makes the demand picture just harder to read. Some buyers may simply be holding out for Apple's first foldable, the$2 ,000 iPhone Duo, which goes on pre-order next Friday. And then beyond questions of potentially soft iPhone sales, Apple is also grappling with a couple of other issues this week.

13:44You've got some AT &T customers are having to now swap out their 18 pros over a cellular issue, while an Illinois biometric privacy case against Apple can now move forward to a jury trial with potential damages there of over$32 billion. Kind of taking it on all sides, guys. Mac, thanks. Mackenzie Cigalos on Apple. Joining us now to discuss what's next for the AI trade in Apple, Deepwater Asset Management Managing Partner, Gene Munster. Gene, great to have you with us. Let's tackle Apple first. Morgan Stanley joined in on the party and also said that their checks were consistent with that Nikkei report.

14:18Do you think that a demand for iPhone 18 is in jeopardy? No, I think it's going to be ultimately okay. We've said the same thing, that the lead times are getting compressed here, Mel. And right now they're running about, they're 15 % above the iPhone 17. Now they're running about 30 % below for the iPhone 17, but they're flat with that iPhone 18 Pro, which is a really big deal. So ultimately, I think this is a really good place to be. Apple's in a great place. They're going to just keep cranking on this, and I think that investors are going to be surprised at what these numbers ultimately look like when they report in a few weeks.

14:56And that duo number is really important, too. The fact that they're able to keep cranking here despite the dual issues, or at least the concern about the dual capturing market share. The fact that they're able to continue to have those strong lead times with the Pro Max is a sign that we're not seeing that cannibalization. So I think that's a positive. Why are you willing to look through this, Gene? I'm just curious because, you know, if you've got some other analysts out there, they're doing their own channel checks and they're saying, they see this also. Is it typical that Apple over-orders and they pair back, or is it atypical that just a few weeks into the launch of a new phone that they're already scaling back?

15:34I mean, how do you, you're willing to say, you know what, everything's going to be okay. Yeah, Mac, I think Mac and her setup covered it well. I mean, typically we see these production cuts a little bit later, but of course we're seeing them maybe a little bit earlier than expected, but there's just so much more noise around what's going on with the cycle this time because they're split that cycle. So instead of doing all the phones, of course, we've got some of them in the fall here, some of them are coming next spring, and that dynamic has thrown a little bit of a wrench in terms of how to read some of these numbers.

16:05My optimism comes from just looking again at those iPhone Pro numbers, the fact that those lead times are consistent with where they were last year. That's the segment that was going to get cannibalized ultimately from the duo. The fact that we're not seeing that, I think, is part reassuring. One last piece is that if we look at the iPhone expectations for the next year, for fiscal 27, the street's looking for 8 % growth. And last few quarters, they've been growing in the mid 20%. If what's going on around this personalized AI piece, which these newer generation phones run these bots much more effectively, I think we're going to see a better cycle.

16:41So I think when you put all this together, yes, there's some noise around what these lead times are. But in the end, I think that they're going to exceed that 8 % growth number for fiscal 27. Speaking of noise, Gene, those open AI revenue numbers, I mean, we know now that it was just how you were accounting for revenue. And so I'm just wondering how you think about, though, the fragility of the trade, if this is the reaction to a hiccup in revenue,$20 billion difference, and you see sort of the whole AI complex in question. There's two forces at play here. One is what's the underlying fundamentals of AI?

17:21And just to highlight a couple of points, we saw TSM numbers, they accelerated from 35 % growth in the June quarter to 51 % growth. It grew up 25 % a year ago. So this nice acceleration. And then later in the day, we got those open AI numbers that spooked this AI trade. And I think that the fact that, again, the underlying growth of open AI is unchanged. It's still 70%. It actually was a positive indication. The fact that they effectively reiterated what the numbers were, that these high growth rates that they've experienced, 70 percent quarter on quarter. So I think that what we're learning here is something that is pretty remarkable.

17:58It's about the momentum piece. When that gets put in a concern, that's what spooks investors. And I think that if we look at when that momentum piece works, look what happened with Meta. With Muse, the stock was up 27 percent. It added 400 billion in market cap over just under 2 million new Muse users. I mean, it was a fraction, but it showed that it could grow faster than GPT out of the gate. And so what my point of all this is whether we look at what's happened with Meta or what's happened with the AI trade this week with OpenAI and with the TSM numbers, which were undoubtedly strong, I think it just speaks to this underlying nervousness.

18:34And the part that blows me away is that the market's nervous. But if you look at the fundamentals in terms of how early we are, we're talking about sub-10 million users on these personalized bots. We're talking about physical AI hasn't even started. It's hard for me to still reconcile all this nervousness with the reality of how early we are. All right. Gene, great to get your thoughts. Thank you. Thank you. Gene Munster. Moderna jumping today on reports the NIH wants to rapidly develop cancer vaccines. The stock now up 650 % this year. Tops in the S &P 500 ahead of SanDisk. Much more on this story coming up in Closing Bell Overtime.

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20:30required. What happens when you combine a cozy night in with the whole family in matching Old Navy Jingle Jammies? It's a holiday moment of joy, at least for the time it takes to snap a picture. Shop a plethora of prints this year in jammies for everyone. Adults, kids, toddlers, babies, and even pets. Grab matching sets and classic plaids, whimsical designs, and even Disney-themed prints. Plus, they have coordinating graphic tees, sweatshirts, cozy socks, pet sweaters, and police blankets. Get more Mary for your money at Old Navy this holiday season.

21:04Moderna, Novavax, Merck and BioNTech trading higher today in the back of a new report by the New York Times detailing a new initiative set to begin in December that could fast track cancer vaccines similar to what we saw for the COVID-19 vaccine. Annika Kim-Constantino's got the details here. Annika. Hey, Melissa. So some vaccine makers are in the green today after a New York Times report detailing a new NIH program to accelerate cancer vaccine development. If you remember, Moderna and Merck are developing a personalized cancer shot, which uses mRNA technology to target and kill specific mutations in each patient's tumors.

21:38So investors see the companies as potential beneficiaries of this public-private partnership, which also involves drug makers and other researchers. But at this point, it's still unclear whether those companies or others may be participating in this. The Times says the program is slated to begin in December, starting with a focus on pancreatic, liver and colorectal cancers, among others. But the development of these shots will still take time. The NIH sees phase one of the effort taking roughly three years, while larger trials in phase two will take around four years. There's also no guarantee that this new bet on cancer vaccines will pay off in the first place.

22:14But there's been a lot of excitement since the summer when Merck and Moderna shots showed promising phase three results and a certain type of skin cancer when combined with Keytruda, Melissa. So it sounds like we're missing a lot of details here in terms of how this will actually work. What is the sense, though, Annika, in terms of NIH funding? I mean, you know, the budgets have been slashed. Research funding has been slashed. And yet this seems to be a priority of the agency. Yeah, that's a great question, Melissa. It is a good sign that we are seeing this new effort specifically focused on cancer vaccines.

22:44As you said, it's really unclear about the details and whether Madura and Merck and some of the other companies that are working on these shots are even going to be participating in this. But what this really does is add more momentum to this kind of approach to cancer, this personalized vaccine approach. And what it can do is see if there is an opportunity for this approach to work across different types of cancers. What we've really seen is that work in skin cancer with the phase three trial that I just talked about. But again, this specific effort is going to look at a lot of different types of cancers here.

23:13And we've seen the reaction in shares of Moderna and Merck, but there is some concern that maybe it's not going to be as profitable for a company like Merck. I mean, it's a personalized vaccine, so the ability to scale is just not there. I mean, from a profit perspective, do you think companies will be motivated? That's another great point to bring up, too, because, you know, you're talking about tens of millions of patients that would want to access something like this, even just skin cancer alone. There's going to be a lot of eligible patients. But that question for Maduro and Merck is whether they really can scale this and scale it quickly enough to reach enough patients.

23:45And so that's something that we're going to have to wait for. We don't have a lot of details on what the launch or the kind of commercial strategy is going to look like. They haven't even filed an approval yet with regulators. So that's something that we're going to have to keep watching. All right. Annika, thank you. Annika Kim Constantino. SpaceX's mobile phone ambitions causing a major ripple in the markets. wireless carriers getting crushed, but the tower stock's jumping. Is SpaceX about to upend the entire cell phone industry? That's next on Closing Bell Overtime.

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25:36Plus, they have coordinating graphic tees, sweatshirts, cozy socks, pet sweaters, and police blankets. Get more Mary for your money at Old Navy this holiday season.

25:48Shares of Fastly jumping today as Oppenheimer upgrades and raises its price target to$35 a share. Oppenheimer says its growth outlook is improving as its average deal size has been growing. Fastly, as its name suggests, helps speed up apps and websites. Oppenheimer thinks growing agentic AI traffic will lead to greater adoption of its bot management products. While wireless carriers continue to fall today, T-Mobile posting its worst day since 2013, Verizon ending with its biggest loss since 2002. The moves come after SpaceX announced an agreement to purchase a nationwide spectrum portfolio as it pushes Starlink further into the telecom market.

26:22While the transaction remains subject to FCC approval, the market took it as a big threat. But where but where the big moves in over reaction to this all joining us now, Frank Louthen from Raymond James. Frank, great to have you with us. Hey, thanks. Great to be here. You got a lot of acronyms here. So let's go through the GFT. Good for towers because we saw that group and sort of like walk through why you think the towers can continue to benefit. I mean, the whole idea here is really that SpaceX would eventually be a buyer of some of this equipment. Right. Yeah. So the tower, it's an interesting concept here.

26:55So earlier this year, we saw the towers sell off because people were concerned that SpaceX was going to be able to do all this from satellites. So you won't need towers, of course, right? So everybody's fearful and they're selling them off. Well, that clearly wasn't the case. And even if you talk, our SpaceX analysts would tell you his conversations with the company, they absolutely plan to use some terrestrial spectrum. But here you get a definitive point where they're clearly buying spectrum that is absolutely terrestrial based. and we are highly confident that it is already on some equipment that's on the towers that DISH was using when it was built out.

27:27We think DISH was initially planning to purchase the Spectrum, so it's already there. The tower companies can possibly get back some of that rent that they lost from DISH earlier this year. Plus, it signals that SpaceX is serious about buying Terrestrial Spectrum. If they buy more, they'll also have to deploy that. That's really what drives a lot of the towers. So the tower is getting a boost here. Sort of it's a rebound here. It makes a lot of sense. The carrier selling off, though, I think that is a little bit of an overreaction. People have seen this coming. Part of the issue here is we're three or four years away from seeing what SpaceX can actually do.

28:03There's a lot more pieces they have to have in place. This 800 megahertz spectrum they get is good, but it's a really small slice of spectrum. So they're going to need more bands of spectrum, a lot more build out. And they're telling us it's still three to four years away. So would you buy the carriers at this point? I mean, is it that much of an overreaction? I definitely think it's an overreaction. AT &T would be our top pick here in the sector. The question, you're going to continue to see some of this fearful trading that's going to happen. But once this, we saw the same thing earlier this year after the SpaceX IPO and the stocks sold off.

28:41Once we had a lot of conversation with investors, they seem to think This is a little bit less of a concern. But again, you're going to see these kinds of announcements. The carriers will tell you when we fully expect SpaceX to participate in the Spectrum auctions next year, probably the next one as well. And they'll continue to make a case. But this is a lot harder to do than it seems. You don't just buy a couple of bands of Spectrum and have a full-on wireless network. And it's multiple years away. But that, again, is also part of the risk here is that it's beyond a lot of investors' time horizons.

29:12and they don't have a lot of conviction on the names. Yeah, it takes a long time to build out infrastructure for sure. Back to the Tower Zone valuation, Frank, I mean, you make the point, too, that they were trading at a discount to their peers. So given the pop that they've had, where do they stand and how much more upside do you think there could be? There's still some upside here. Our colleagues that cover the Towers have some strong price targets for those companies there. So there's still upside here. They're still trading well below where they have been historically. And we think you're also coming into a trough in the cycle here for the towers.

29:49You should be leasing at sea leasing activity. You've got new spectrum auctions coming up next year. All of that drives activity for towers. You've got AT &T, which is building out 600 megahertz spectrum as they're trying to build out more fixed wireless in the country. That's going to start again next year. So all of those point to some upside for the towers that have probably not been seen yet. So we still think there's some upside from there. All right. We'll have to get to your last acronym next time. Good for Viasat. Frank, thanks for joining us. Appreciate it. Frank Louthan. Great. Thank you.

30:18Time for CNBC News Update with Frank Holland. Hey, Frank. Hey there, Melissa. President Trump said this afternoon he just appointed Katie Zakaria as press secretary. She currently serves as the senior communications advisor to Truth Social. She briefly worked as a spokesperson for the Department of Homeland Security this year and has been a commentator for Fox News and News Max. She will succeed Caroline Levitt, who left the job in August. A federal judge ruled today the Department of Justice's push to obtain state voter rolls and check them against federal immigration databases is illegal. The judge said that practice would wrongfully disenfranchise eligible U.S.

30:51citizens because the database could be inaccurate. And the Kennedy Center for the Performing Arts reportedly has a new artistic director, even as it remains closed for two years of renovations. According to the New York Times, L.A.-based rock and roll manager Ricky Canney will take over that role. He's worked with a number of musicians, including Motley Cruz's Tommy Lee, Jane's Addiction's guitarist, Dave Navarro, and Creed's lead singer, Scott Stapp. Melissa, back over to you. Frank, thanks. Frank Holland. A battle over sports prediction markets comes down to one thing. What is a bet? Is Patriots minus 3.5 a sports bet, or could it be a financial instrument, a risk swap?

31:27As the issue makes its way through the courts, former CFTC chairman Gary Gensler has been weighing in. We'll get his take next on Overtime.

31:39As the Supreme Court weighs whether to hear a key case on regulating sports contracts on the prediction market platforms, former CFTC and SEC Chair Gary Gensler is weighing in on the issue, filing an amicus brief arguing in favor of states having the power. He's not the only heavyweight on that side. Others include the NFL and former Senator Chris Dodd, the co-author of The Law at the Heart of the Case. Joining us now is Gary Gensler, former SEC Chair, former CFTC Chairman, He's currently a professor at MIT Sloan School of Management. Gary, great to see you. Great to be with you, Melissa. I mean, it sounds like the main point of your argument is that this was not the spirit of the law to take away the ability to regulate sports gambling from the states.

32:21Nothing could be further from the truth. What the administration's position, what Calci's position is, is frankly absurd. We had a big housing crisis. We all know about the 2008 financial crisis and what Congress was addressing was that swaps were part of that crisis. Sports betting was not part of that crisis. I testified 54 times in Congress during those years. Not once did anything come up about sports betting. Oh, let's let's tuck it in to a snippet of a word and and basically preempt all the states. It's it's not what was done. And I hope the Supreme Court takes it up and writes this, I would say, writes this wrong as to what the CFTC is doing now.

33:11Yeah, that was a very compelling part of the brief, Gary, when you said I was there 54 times and not once was sports betting mentioned. You also said in the brief it doesn't fit the purpose of the statutory language defining a swap. Just for an average American, can you sort of walk through this and explain why this sort of contract would not fall into that category? So for your listeners, for decades, actually for a couple hundred years, there's been this idea that commercial interests, starting with farmers and ranchers, could hedge a risk. It's called a price risk as to what their crop might be worth at harvest time.

33:53And so financial markets invented this thing called a derivative. It derives its price from something else. And then later in the 1980s, the financial markets invented yet another type of derivative called swaps, where people were exchanging or swapping cash flows to hedge commercial risk, interest rate risk, let's say, or oil risk. Well, in the body of the statute that we all worked on back in 2010 after the crisis, we We wanted to bring that swaps market under regulation. And there's words that clearly express that it has to be associated with a commercial, financial, economic consequence risk.

34:35That's that's not what whether somebody makes a three point basket in the third quarter. That that's not what Congress was addressing. Why do you think the CFTC has allowed this to happen? Why are we at this point where it's being challenged and brought to the Supreme Court? Well, let me just share with you two common sense bits of this. One is this filing by Kalshi listing sports contracts happened three days after there was a new president. So it's just common sense. They were waiting for a new president to come in. And it happens to be even that the president's son, Donald Trump Jr., has economic interest in one of this prediction markets, poly markets.

35:25Number two is the vast majority of the revenues on these platforms are related to sports betting. But one other common sense thing. Back in 2010, the Senate majority leader was from Nevada. His name was Harry Reid. In fact, Harry Reid's first job in politics was running the Nevada Gaming Commission. Senator Reid would have thrown me out of his office if I had said, could you just transfer your Nevada Gaming Commissioner authority over to this small federal agency that I'm honored to chair? I mean, I don't even know if President Obama would have kept me in the job if I'd asked for that authority.

36:04Right. I'm wondering what you think of the current CFTC. it's been clear the chair has made it very clear on this network and others that that he wants to bring innovative financial products to the United States. And in addition to what's going on with sports sports gambling and sports contracts, perpetual futures have also come under fire. They say it's perpetual futures contract. The CME is suing. They're saying that it is not a contract in in that way because there is no expiration. That is one definition of contract, according to the CEA. And I'm wondering what your take on the CFTC is in terms of being aggressive.

36:41It's great to bring innovative products to the United States. Do you think they are going too far? I think we have one of the most innovative capital markets. It's just remarkable how many different products and services are there, and it helps fund innovation into the broader economy. Look at this artificial intelligence financing boom that's going on right now as an example. But I would say in terms of the specific products you just mentioned, these so-called perpetual futures, what happened was there was a product called a perpetual swap. And then the CFTC said, well, let's call it a future and maybe it could be traded on a different platform.

37:24I am concerned that it will undermine investor protection, particularly as they are We're also saying that there could be perpetual single stock futures starting to trade as soon as November 2nd. And I think that's really undermining investor protection and it may be contrary to law as well. I wanted also to see if you had thoughts on election contracts. This is sort of a new thing, too. I mean, they did exist in the 2024 presidential election, gained popularity, and now here we are just before the midterms. Are you concerned at all? Because sometimes, you know, you're not trading election contracts necessarily for profit.

38:08In fact, if you wanted to manipulate the odds of your favored candidate winning, you would actually lose. So the incentives are not necessarily aligned. Do you have concerns about this area? I think what's really hard, and this is true about the sports events contracts as well, and geopolitical event contracts. It's really hard to guard against insider trading. It's very hard to guard against undermining the integrity of the underlying event, sports, politics, or these geopolitical events. And you don't need to go back just a few years. You can go back centuries. This is a real story. But Pope Gregory XIV, I think it was, in the 1590s banned, prohibited betting on papal conclaves.

39:02You see, like betting on who the next pope would be. And so what was the pope worried about in the 1590s? The integrity of when those cardinals were meeting. Well, now in the 2020s, you know, how do you ensure that some, you know, Marine or Army master sergeant is betting on the prediction markets around invading Venezuela? Oops, I'm sorry. That's actually what has been alleged happened in one case that the government has brought. it. Gary, it's always great to speak with you. Thank you. Thank you, Melissa. Good. Have a good weekend. You too. Gary Gensler. Up next, will earning season help fuel the next leg of this bull market or will rising rates and energy prices setting us up for year end pullback?

39:57We'll discuss that. Closing bell overtime. Be right back.

40:03All three major averages closing out the week in the green after rebounding from a midweek drop. investors are getting ready to kick off what is expected to be a robust earning season. So should investors gear up for more upside as results start to roll in? Joining us now is BDA Capital Partners CEO Barbara Doran and Unlimited CEO Bob Elliott. Guys, good to see you. Good to see you. What did you make of yesterday, Barbara? I mean, it really, when people started questioning the OpenAI revenue number, now we have a little more clarity on the number and how it compares and that it actually wasn't as bad as it was originally thought to be.

40:35But it really shows just how People are on the edge of their seats when it comes to this trade. They're really worried. The nervousness is there. It's there. And I think it's going to persist. I mean, this started really two years ago with the deep seek. That was the first fright. Right. And we just continue to have a series of freights about it, whether it's, you know, the CapEx will be enough. Now they're spending and borrowing and there's a circular financing. I think we're going to continue to see this because this is such huge spending and so much depends on it. And so much of the market action and the appreciation in the stock market is due to AI and all the related infrastructure build out.

41:06So I think it's people are nervous about it, and rightly so. I mean, I happen to be an AI bull because I think the demand is real and sustainable. And when you hear from companies like Micron, who sees visibility out into 2030, and you see it in video, all these companies, I mean, these are, you know, they are based on real demand. And even a Micron where it's take or pay. This is not like, oh, it's overordering. People can cancel their contracts. So for me, it's about the demand and believing if the demand is real. And I do. All right. You're not in that camp, Bob. So what concerns you about this trade?

41:38Because a lot in the market is riding on this AI trade. If the AI trade doesn't work, the market's not going to work. Yeah, I mean, we're increasingly seeing that the U.S. stock market is one big bet, and it's on the success of AI. And it's important to recognize that that success in AI is not, you know, linear growth in terms of revenue from LLMs or, you know, moderate productivity enhancement. in order to justify the type of CapEx that's currently penciled out, that's penciled into those NVIDIA numbers and Micron numbers, you need$3 trillion of revenue going to the AI complex by 2030. Now, we look at the incremental information that we saw from OpenAI combined with the flat lining of revenues from Anthropic.

42:21Those are big parts of the overall revenue cycle in the AI economy right now. And they've shown over the course of the last three to six months, we've seen a change from a parabolic growth rate to a linear growth rate. If you have a linear growth rate, it's just not going to get anywhere close to the type of revenue that's necessary to support this whole environment. And I think what we saw yesterday was just the beginnings of recognizing the gap in expectations that's likely to come. As we go into earnings season, Barb, I'm wondering if you think the bar is going to be extra high for some of these companies.

42:55We've seen time and time again where, you know, a company can post fantastic results, but it will be idiosyncratic to the company or it's going to take a lot for the company to move higher. Yeah, I think we've been seeing that and I think we'll see it this time, too. You know, it is going to be tough for companies, you know, no matter what the numbers are. But then again, you see what happened when NVIDIA, you know, reported numbers and the stock sold off. And that's been happening the last few quarters. And yet NVIDIA has recovered and made new highs. You know, until yesterday, we had a little bit of the fright.

43:21So I think that's what's happening. There's so much expectation built in And before, this has been normal reaction to pull back. But the fact is, these numbers are real. The demand is real. And the guidance is always key. But the guidance is getting stronger and stronger, not weaker. But Bob has a good point, though, because when things do go is more linear, the question is then what is the real growth rate? And I think the market has, I think we have had a reset in valuation. You're looking at what's, you know, we were 23 times at the beginning of the year. And with earnings growth, it's now, yeah, 19.

43:50So, and also there's been repositioning. Investor sentiment has repositioned down. So I think we're at a very good spot in terms of the risk we wear potential here. Do you think the market feels more durable at this point in time? Well, I think you look at those P.E. numbers, and it's important to recognize that those are forward P.E. numbers, and forward earnings is not real earnings. And what they're baking in is they're baking in some of the most extraordinary earnings growth in the post-war era out into the future. We're seeing basically consensus expectations above 20 percent earnings growth quarter on a year-on-year basis for the next six to eight quarters, that's very hard to meet, considering we're already where we already are.

44:31And what it's really reliant on is it's reliant on basically the AI CapEx boom continuing. And the only way that's going to happen is that you've got to start to get real spending out of real economy companies. We've got to transition from the hyperscalers basically betting their entire cash flow on AI to now the entirety of the real economy betting their entire cash flow on AI. And that seems improbable at best, given what we're seeing. All right. Let's talk about the first batch of earnings next week. And, you know, a lot of financials will come out. We've had financials, nice run, but a recent pullback.

45:04And so they're actually going into earnings season pretty well. So, Barb, what are you expecting there? Yeah, well, I think the numbers are going to be good. And I think it's going to be the forward guidance is going to be good. The banks have pulled back. Have you seen the main ETF? It's down 12 percent in the last few months. And I think that's because when interest rates go up, obviously you worry that may hurt loan demand. It may hurt overall economy. I don't see a recession in sight. So I think they're going to report good numbers, capital markets trading. They're going to talk about their net interest income because obviously the spreads get a little bit better.

45:32So I guess it's going to be very positive next week. Yeah, I mean, banks are in pretty good shape. And, you know, whereas the banks were really at the core of problems that emerged in previous cycles, the banks are more robust, more profitable, better NIMS than we've seen in a long time. And so if we're going to have a trouble, it's going to be outside the banking system and outside the core financials, in all those nooks and crannies where all that leverage has been developing over the course of the last couple of years. All right. Good to see you both. Thank you. Thank you, Barb and Bob. Coming up, we'll run through the earnings reports that need to be on your radar next week, as well as a pair of key inflation reports, closing bill overtime.

46:11Live from the Nasdaq Market Side, be right back.

46:19Welcome back. Shares of Delta Airlines ending slightly lower after cutting its full-year profit forecast due to higher fuel costs. But CEO Ed Bastian told our Phil LeBeau this morning that demand is still strong and there's room to raise prices. The fares will be a function of what the market bears and where the industry goes. With these high oil prices, absolutely, we're going to be forced, forced and the industry collectively is going to be forced to continue to cover the cost of doing business. The more premium we have, the more we're selling out. If there's one product I can't get enough on the shelf with is premium consumption.

46:51And you see the numbers are up 18 percent on a year over year basis. Delta shares are up 16 percent since January, while the rest of the major carriers are down year to date. Well, earnings season kicks off with a bang next week. On Tuesday, we'll get results from JPMorgan Chase, Citigroup Wells Fargo, Goldman Sachs, along with UnitedHealth and Johnson & Johnson on Tuesday. We'll get Bank of America, Morgan Stanley and BlackRock. Thursday brings PNC Financial, U.S. Bancorp. And the week closes out with travelers and a trio of regional banks. And on the economic front, we'll get September CPI on Wednesday, PPI on Thursday and import prices and industrial production on Friday.

47:28That'll do it for us here on Overtime. Fast Money starts right after this quick break.

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