Closing Bell Overtime Data Centers, AI Spending and Higher Rates 10/7/26

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0:39Value, safety, timing. You decide what matters most. Stop overthinking what to buy and sell. Go to VectorVest.com slash closing bell. Get 30 days for just 99 cents. VectorVest provides stock analysis tools, not personalized investment advice. Terms at VectorVest.com. The Bell's bringing in to the trading day at the NYSE. Genius Sports doing the honors and at the NASDAQ. Resolve AI ringing the bell. Welcome to Closing Bell Over Time. We're live from Studio B at the NASDAQ Market Site. I'm Melissa Lee along with Mike Santoli. Stocks ending in the red, but off the lows of the session. The Dow off about 350 points.

1:12S &P and NASDAQ both down a quarter percent each. Small caps under pressure off more than 1%. The more defensive parts of the market holding up better today with health care and staples leading tech the laggard with chips, cyber and software mostly lower. The midday bounce coming after yields retreated following a solid 10-year Treasury auction. Both the 10-year and 30-year yield hit 24-year highs in earlier trade. Lower oil prices also helping to keep a lid on the sell-off with crude falling about a percent back below 89 bucks a barrel. Let's get the first take on the close here. And you did see the reaction of the market to that better than feared auction.

1:48A little bit of a release there you saw intraday. Definitely. There's been this concern that we're going to see this presumption of momentum higher in Treasury yields. I mentioned yesterday it'd been like five or six weeks since we got two days in a row with the lower 10-year Treasury. We didn't quite get there today, but we are off the highs. And of course, for weeks, we've been talking about this 530 area. Maybe that's where buyers show up. All that being said, if there was a concern that yesterday getting the 28th new record high for the S &P 500 this year was going to cause some kind of burst of exuberance and blind buying, not even close.

2:18I mean, three to one negative to positive breadth today in terms of across the different exchanges. You mentioned small caps. Banks didn't like it. So you still have this idea that we're kind of flinching against the macro stress from yields and oil and what that's going to mean for credit and the economy. And yet the AI theme on a given day, today it was memory and Apple and all that, manages to hold the index together. And I think there is a broader belief on Wall Street that yields will not stay here through the end of the year. I mean, if you take a look at a lot of the forecast, they are 5 percent or below by year end.

2:50Quarter percent lower from here. We'll see. But that's sort of the general consensus that we are going to go lower. And so I would think there's a belief that this rally can hold. That's true. And in fact, I think that the market has kind of gotten away from what the consensus was just six months ago. So it sometimes takes a while to catch up. But that is true. And I think that a lot of the math internally in the bond market, since inflation expectations aren't Surging would suggest maybe we can hold on here. Let's get more of some of today's biggest movers. Go to Seema Modi with that. Seema. Melissa, with yields remaining a central focal point for investors, we did see technology as a whole under pressure, but notable weakness in the semiconductor space.

3:27NVIDIA being one of them, despite news of Microsoft releasing a new laptop powered by its chips. NVIDIA closing down by around eight-tenths of a percent. AMD also in the red. This as the market awaits Taiwan Semi's monthly sales that publish in the early morning. storage and memory names continued their downward decline. Names like SK Hynix, Western Digital were down around one to two percent. One bright spot was Micron up three on the day. Sandisk also coming back towards the end of the day, as were most of the hyperscalers, though still some concerns around the political pushback data centers are facing, with Google being ordered to halt work on two data centers that's developing in Finland until environmental impact assessments have been completed.

4:07Now, with rates spiking, homebuilders were under pressure. We saw Lenard down on the day, as well as a lowered share price target from Wells Fargo. One interesting mover was Spotify rallying on an expansion of its audiobook service. We saw the stock close up by around 5 percent. Melissa and Michael. All right, Seema, thank you. Well, elevated bond yields have been pressuring rate-sensitive sectors, but have not prevented the S &P 500 from holding near-record highs. So how long can the market hold up in a high rate environment? Joining us now is Kate Moore. She is Citi Wells' chief investment officer.

4:41Kate, good to see you. Yeah, I'm wearing my green to channel my positive energy. There you go. Hey, there's always, hey, a quarter of the market was green today. We're OK. And for the month, we're OK. I do think you have to, I guess, specify what part of the market we're talking about when we say the market's holding up. We keep talking about this deep split inside of equities. Is that rational to you? Is it a call to action in any respect? to suggest that you should be moving things around? Hey, look, when there isn't dispersion in the equity market, that actually makes me more anxious. The fact that there is, you know, a separation between near-term winners and losers, I think that's a sign of a healthy market.

5:16You don't want, like, an enormous amount of exuberance, everyone rushing to buy everything, regardless of fundamentals. And I think we're going to have some digestion around some of the core themes. You know, you mentioned earlier that there was a little bit of a backup in semis and security software. These are incredibly strong, durable themes in our view. And I think a little bit of a consolidation period makes sense when you're investing for the long term. You can also make the argument, though, that everybody's rushing in to buy technology at the expense of the other things. So how can you determine whether or not that's a good thing or a bad thing?

5:45Because the argument would be, you know, it's a bad thing because there's no diversity in the markets. Yeah, I mean, this is one of the big things we debate all the time. Where do you actually get diversity in the market? And, you know, the truth of the matter is in every sector, in every industry, the winners, the companies that are putting up better revenue growth, who have better prospects, are the ones who are embracing technology right now. They're the ones who have a plan for driving future revenue, productivity, efficiency. And so I don't, you know, even if you're in another GIC sector, I don't necessarily see a theme that's completely separate from this technological kind of revolution.

6:18It's uncomfortable. I get it. Sure. Yeah. No, absolutely. And I think the question is, you know, if rates are going up, if bond yields are going up, in part because the market has to sort of ration capital because there's so much demand for it. Is it doing so in a way that's not effective in the parts of the economy that need the rationing, right? I mean, CapEx is impervious to it for AI, but other parts of the economy might not be. Yeah, we're going to be watching this really closely, I think, over the next couple months. Are these parts of the economy that we're spending, where we're getting kind of a pickup in CapEx from pretty low levels, is it going to be sustainable?

6:57if we're at a 5 % or higher 10-year. You guys were just talking about this, the consensus on the street expecting bond yields to back up into year-end. That's not necessarily our view. We may have hit a near-term top kind of technically, but all the things that are in place, the competition for capital, the strong growth environment, the fiscal deficits, I think that's all going to put a floor on yields coming lower. So you're a risk-on into the end of the year, because there is some talk that if you believe that this is sort of the peak in bond yields, And maybe it is time to rotate in some of the sectors that haven't hit because of higher rates.

7:29Yeah, I guess that's right. I mean, that's the argument people are making. But I stay really focused to our argument around fundamentals. And here's the story on small caps. Like, small caps surged so strong for so long in the beginning part of this year. But it wasn't based on super strong fundamentals. It was around this expectation that there was not going to be a rate adjustment. And I think what we're getting right now, kind of a backup on small, especially relative to large, is appropriate for where the growth cycle is and where our expectations on policy are. This doesn't mean, you know, sell all of that risk.

7:59It just means you have to be thoughtful about sometimes the adjustment that we're making in the rate sensitives is deserved for the macro backdrop that we're in. If that core exposure to the strongest fundamental themes, which brings you back to technology one way or another, is going to remain there, what do you grab for diversification against it? I mean, I assume you're suggesting you don't just kind of lock in longer term bond yields. I mean, so many times people ask us this. Our clients ask us this. My colleagues, some of my competitors, we're all having this conversation. Is there a magical number, a magical yield at which we would be buying duration?

8:34And I got to tell you, the answer is no, because we're paying attention to why yields are moving up, not the actual level. So how do we diversify a portfolio? I mean, we've been looking at commodities. We've actually had a very strong commodity industrial metal theme for the better part of this year. Last year, I added gold as a substitute for duration. So that's performed very well in that part of the portfolio. But we're constantly looking for different instruments and different ways to express kind of uncorrelated views. It's hard, though, I have to say. And when we have big risk-off days, you find how much factor exposure you have across your public, your private, your equity, and your credit portfolios concurrently.

9:12So nowhere on the curve do you see value or? We've stayed short duration, you know, and I think that makes sense. I would love to be in a place where I wanted to add a significant amount of credit risk at this point. But we're pretending that we're taking that kind of beta risk in equities for now. Right. And then I was mentioning earlier that, you know, you can take heart in the strength of the earnings projections. Totally. The fact that they've been going up over the course of the quarter and the fact that companies just reliably beat them by a lot. But the market has been a little bit reluctant to reward all of that earnings growth in the last little while.

9:45Is that just because of rates or are we worried about a front load or an over-earning type situation? I mean, the market has been concerned about the sustainability of earnings for a long time. Look, I've been an equity bull for a good period of time here. But even I have been surprised by the numbers that companies have put up in the last couple of quarters in earnings. The thing that really jumped out to me during second quarter earnings was how strong the margins were. We were seeing this kind of breadth of inflation, and we know that there's more coming through from energy over the next couple quarters, both in terms of goods and services.

10:14And yet still, margins were phenomenal. So it's just kind of a reminder for me once again and for the rest of investors on the street, do not bet against corporate resilience and the ability of companies to toggle up and toggle down their businesses in order to achieve the bottom line. So I get it. We're all a little bit nervous that we're not going to be able to sustain double-digit earnings growth forever and ever. But for the next couple quarters, I think that's in store. Kate, great to see you. Thank you. Thank you so much. Well, Tropical Storm Isaias formed in the Gulf Coast today, and it is expected to strengthen into the first Atlantic hurricane of the year.

10:46Forecasters are expecting up to six inches of rain starting on Friday. Joining us now is Paul Walsh from G2 Weather Intelligence. Paul, great to have you with us. Hey, guys. And maybe people have been lulled into the fact that, you know, we have not seen such an active hurricane season. But that doesn't mean that this hurricane, this one in particular, won't be damaging, right? What are you seeing at least right now? Well, exactly right. And this is actually the first time in 37 years or 32 years that we have not had a hurricane in September. And I don't think we had any landfalling storms even last year.

11:21So this storm is the first. Whenever you have the first storm, the impact is higher than normal. And, of course, the track of the storm is going into the eastern Gulf. It's not necessarily going to impact the energy infrastructure, but it's a little too close for comfort. So we're starting to see the impacts now. Typically what happens with a storm like this, you have three levels of impacts. The first impact is driven by media, frankly. It's by all of the newscasts that are driving people into Home Depot and Walmart to get their supplies. Second phase is when the storm hits and people hunker down.

11:54And the third phase, of course, is a recovery from the storm. So we're very, very early. The next result will come out or the next forecast will come out at 5 p.m. It seems like it's strengthening. It's possible it could strengthen. And, of course, the stronger it is, the bigger the impact will be. And best as you can tell at this point, you know, strengthening maybe what to category two. Is it mostly going to be rain or is it going to be wind? Where are we looking for the deepest impact? All of that, Mike. So it's going to be, and it's potential that we've seen historically that rapid intensification.

12:31I think that's still possible. But we're going to see strong winds, flooding, you know, all along the Gulf Coast and then inland into the rest of the middle of the country. And, of course, because, again, it's the first storm of the year, it's the first storm, you know, it's a historically late storm. there's been a general feeling I think certainly within the meteorological community but I think that's translated in because of the so-called super El Nino which has pushed down the forecast pushed down storms and it was there was a correct forecast so we'd have lower storms so this this one because it's you know so late in season where there may be some I don't want to see and so people aren't quite used to this these kind of storms so the the the impact will be greater than it would be if this same storm happened after we'd had several other storms impact in the Gulf Coast.

13:25You make the point too, Paul, that that damage, it could actually impact the midterms in some way. We're just weeks away from that. In what way, in terms of voter turnout, because they're dealing with the damage that they have to repair, et cetera? I mean, what would the impacts be in your view? I think it depends on how big of an impact a storm has when it impacts land. Of course, the National Weather Service has taken a very big hit because of those. There's been a lot of people that have left or have resigned. Same is true with the other parts of the sort of the recovery infrastructure. And so, you know, I'm not sure, you know, how well prepared we are for a large storm.

14:09And if we aren't well prepared and there There is some bad media around it. Then we go back to, you know, the old, you know, the Katrina impact when we had George Bush talking about was the old saying, you're doing a heck of a job, Brownie. So that that's a risk. And so the timing of this from a political perspective could be a bit dodgy, to say the least. And then obviously this is a late first storm. Is there any indication as to whether there are others developing behind this one? I'm not sure, Mike. I haven't really looked at that, but we're still – the season will go on to the end of the month.

14:51So it's possible. But then it's also possible this could be the lone storm that we had. And, of course, it only takes one. Remember Hurricane Andrew years ago where there was only one storm that year, but it was a disastrous storm. So it's just something to watch. By the way, Google has got a hurricane forecast that's really done well. It uses AI to help sort of create the forecast, and it's integrated into the National Weather Service forecast. So there's a bit of an AI success story here in terms of watching the forecast and the track of the forecast. Paul, thank you. You'll be watching for the 5 p.m.

15:26forecast. Appreciate it. Paul Walsh, G2. Thanks, Melissa. We do want to get to Levi Strauss. Earnings are out right now. That stock is not really moving in the after hours yet. Adjusted EPS, 48 cents. We are not comparing that to estimates due to a 16-cent tariff refund benefit. That refund also helped the debtor maker boost its earnings and margin guidance for the year. The company reporting a slight revenue miss,$1.61 billion versus a street estimate of$1.62. CEO Michelle Goss noting that the direct-to-consumer business disappointed during the quarter, but she is saying that she's optimistic for the holiday season.

16:00Levi shares right now. Now they're reacting. They're up 5 percent. This after about a 5 percent loss in the regular session. And don't miss Jim Cramer's exclusive interview with Levi's CEO tonight, 6 p.m. on Mad Money. Coming up, data centers were supposed to be huge tailwinds for the commercial real estate sector, but now many projects have been put on hold and governments are imposing moratoriums. So what does it mean for the sector? We'll dive into that. Plus, thoughts from the road on the back of an overseas tour. KKR's Henry McVeigh tells us the key market themes developing globally that took him by surprise.

16:31And we want to show you Hartford Funds, ringing the closing bell at CBO in Chicago, ending the regular trading day for options there. Closing Bell Overtime, live from the Nasdaq Market Site, back right after this.

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18:22SpaceX is in talks with Apollo Global Management and several banks to raise$40 billion of debt to help the company buy GPUs from NVIDIA that will be used in SpaceX's data center build-outs. The deal will primarily rely on the investment-grade debt market. This underscores Wall Street's growing push to finance AI infrastructure through the debt market, with NVIDIA CEO Jensen Wang telling CNBC back in August that his chips are an investable asset. SpaceX has raised$25 billion in debt less than two weeks after its IPO. The stock is up 23 % since that debut, down 2.5 % today. I guess it peaked at like$2.25 or something like that.

18:58And quickly, the story behind SpaceX, or one of them, has been they can command huge amounts of compute. And we're scarce, and they're renting it out, and that was a surprise when they did the initial IPO filing. And so the whole, like, can they handle the debt is really a question of how fast can it be deployed and what can they get per month for it if they're renting it out. At least for now, there are some questions about whether they can handle the debt. We've seen the five-year CDS blow out a little bit. Exactly. This is something that investors are clearly concerned about. It was a bit of a stretch when they were kind of reaching for that investment-grade rating and all the rest of it, for sure.

19:31Exactly. Let's stick with data centers. The build-out has been bullish for some parts of the commercial real estate market, but the backlash against them is rising rapidly. According to Data Center Watch, at least 75 projects worth roughly$130 billion were blocked or delayed in the first quarter of this year, followed by 45 projects in Q2. On top of the uncertainty about these big build-outs, the commercial real estate industry is now dealing with higher interest rates and a Fed that is in hiking mode. Joining us now, Willie Walker. He is the chairman and CEO of Walker & Dunlop, one of the world's largest commercial real estate finance and advisory firms.

20:03Willie, great to have you with us here at the NASDAQ. In terms of these delayed projects, do you think this is a trend that's going to continue? Do you think that this is happening right now and it will eventually abate? Because it does seem like there are a lot of candidates out there, at least in the midterms, and they're running on platforms that are basically anti-data center. What are the data centers actually going to bring our community? Well, I would put forth that, first of all, there were 571 data centers at the end of Q1 in the United States. There were 1 ,400 at the end of Q3. So we're seeing this massive development data centers.

20:39There are 2 ,000 in planning right now. So if the stat that you just put out there, a couple have been pushed off to the sidelines, it's not going to necessarily change this amount of capital that's going there. The hyperscalers are going to supposedly invest$800 billion in data center build out in 2026. So the capital is there to continue to move forward. Is the political will there? We'll see come election day. because obviously in states like Pennsylvania and in Texas, we've seen governors who've sort of pulled back from there were all in on the data center play. And yet at the same time, there's so many projects going on in the country and there are innovative financing ways to get there.

21:19So like Related is doing a very large data center in Michigan right now. They did a 144A filing. So typically they would have gone to banks and done a syndicate of financing on that. Instead, they went to the bond market and did 144A registration. So people are finding ways to get the capital to it. And obviously, there's tons of equity capital given the market caps of the NVIDIAs and the Googles of this world. So given the demand and all of that willing capital behind that one theme, what does it mean for the rest of commercial real estate at a time where either it's starved for real resources or the repricing of the debt markets have stranded a lot of assets?

21:56And, you know, we hear talk of this sort of refinancing wall. What does it all amount to? A lot of debt outstanding. Yeah. In multifamily alone, Mike, in the next four years, there's$1.5 trillion of debt that has to get refinanced in four years. That's a lot in our market. But, A, you've got the agencies there. Fannie and Freddie do$150,$160 billion a year. And they've got the full faith and credit of the United States government behind them. So they'll be in the market, good times or bad times. I think right now what you're seeing is a lot of people are talking about deals being retraded, sales deals being retraded because of rates moving.

22:32That makes perfect sense. Your cost of capital has gone up. You've got 60 % leverage on the asset. Assets not worth as much as it was yesterday today. That's perfectly fine. That's just the market working through it. The question really is a lot of this debt was put on in the early 2000s when rates were much, much lower. And so the problem we're facing right now is owners who are coming back to us and saying, hey, I've got a$60 million loan on this asset. and I need to get refinanced on that when you have property values down by, say, 20 % and you have the cost of financing up by 30 % to 40%. That presents a problem.

23:06And what it's doing is it's pushing a lot of borrowers to the short end of the curve because that's where the cheaper money is. They'll get through this. The question is, are we then just taking an instrument that should be a 10-year return and term and making it a three-year so then we're piling up so that by the time we get to 20, 29, 20, 30, that wall of maturities that you talked to, Mike, is even bigger. And so, you know, the bottom line is rates seem to have run higher than they should have right now. They're higher than anyone had expected. Will they cool off? Hopefully so. The other thing I would remind you of, and I've been in this industry, unfortunately, for long enough to remember this.

23:40Talk to me in 2000 and 2001, and no one wanted to talk about commercial real estate. Everyone wanted to talk about the dot-com and how great it was and globe.com going public for a valuation that no one could believe. Come 2002, everyone had moved out of the tech trade and into hard assets. The one nice thing about hard assets that every real estate owner knows is it's a fantastic inflation hedge. And particularly when you're in assets, you can reset the rents on a consistent basis. So hospitality and multifamily are ones that you change those rents all the time. Office, which is having a real renaissance right now.

24:15Office here in New York, office in San Francisco. If you own, if you bought that 18, 24 months ago, you've done incredibly well on office in San Francisco and New York. The issue right now is you're locking in a 10-year lease on that. So your yield on it is pretty much static over that period of time. Getting back to the wall, though, of maturing debt, though, at least for the next year, the ones that, you know, the debt that expires in the next 12 months, the bulk of it is in multifamily. So do you think that, is the can just going to be kicked down the road because they'll go to the short end, they'll refinance, and then we'll revisit this sort of problem in a few years?

24:46or is there going to be real fallout here? Well, that's sort of the million-dollar question. Well, you would have the answer, wouldn't you? Well, I do. I mean, look, on multifamily, you cannot discount Fannie and Freddie being in the market. That's unlike any other sector. So if you had that much office debt maturing and you didn't have Fannie and Freddie there, you'd sit there and say, whoa. But you have an unprecedented amount of debt fund capital. So all these private equity firms have gone out and raised huge amounts of capital for their debt funds. They also own captive insurers, which allows them to have a huge source of capital that goes in.

25:16Life insurance companies are lending and banks' balance sheets are flush with capital. And while I know the banks have sold off a little bit and you were talking about earlier today, relatively speaking, the banks sit in a really good position. So there's plenty of debt capital out there. The real question right now is equity capital and who's bringing equity capital to the market if these projects need to be re-equified. And that is right now a big question mark for 27. And then quickly, in terms of new build, I know it depends on the market. I know some areas got really overbuilt the multifamily.

25:46But where does that sit, given the price of debt? Now is the perfect time to be putting a shovel in the ground, except no one's going to do it. I mean, you look at the supply side on multifamily on an office. Office in 2026 is supplying 9 % of its normal annual supply of new office. The office market is completely undersupplied. And real estate's all about supply and demand. Multifamily is gone from record supply down to very soon record low new supply. It's a perfect time to start projects to be delivered in the next two or three years. The problem with it is back to equity capital. You're not finding the equity capital going towards it right now.

26:24And as a result of it, we will be in a supply constrained market, which what will that do? It'll push rents up. All right. I guess got to wait for the next tech crash or something. Willie, good to talk to you. Thanks to be here. Willie Walker. Ahead, why companies have a higher hurdle to clear when it comes to borrowing, as you were just discussing. And take a look at shares of Hertz, the stock sharply higher to kick off the month, posting its fifth straight day of gains, up more than 30 percent in that time frame. The stock may be up 30 percent, but we should note it also has a short interest of more than 30 percent of its shares, one of the highest in the market.

26:58Closing bill over time. We'll be back.

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28:31Shares of ag equipment manufacturers down today after the FTC and USDA launched a public inquiry regarding potential anti-competitive conduct among the group. The request for information comes a few months after the FTC in five states settled with Deere in an antitrust lawsuit alleging the company limited farmers' ability to independently repair Deere's equipment. Well, this is the familiar chart, Mel, of the 10-year Treasury. It goes back five years. We've easily cleared the former high right around 5 percent. And back then, of course, it was when the Fed was tightening aggressively and all the rest of it, inflation was still high.

29:05Now, take a look at investment-grade corporate debt yields of U.S. issuers. And that's not yet at those old highs, but it's on the verge. It's right around 6.5%. Back then, credit spreads were wider. We were worried about recession and a lot of other tumult in the financial markets. Now, it's really just spreads are tight, but the base benchmark rate is a lot higher. So it's not onerous, 6.5 % in the grand sweep of history, for high-grade corporate borrowers to have to pay. But it does change the break even on various projects and buybacks and all the other things that these things finance. And, of course, high yield will be pushing like 9 percent.

29:41So it's changing the equation on some level, even if the biggest borrowers in the market, tech, can both afford it and kind of don't care what they pay on the rate. Right. But this actually shows you that there has been a tightening of conditions. Totally. Yeah. Yeah. I mean, even on the rate level, it's a tightening of conditions, even if spreads remain compressed. Exactly. Time now for a CNBC News update with Brandon Gomez. Brandon. Hey, Melissa. The FBI says it foiled a terror attack on the Mall of America. Authorities say an 18-year-old was arrested after he tried to buy an assault rifle and ammunition from agents several miles away from the mall.

30:13They say he was radicalized and exchanged messages with a confidential informant for nearly two years discussing plans to shoot anyone in the mall who was not Muslim. The Department of Homeland Security, meantime, proposed a$70 ,000 fee today for international students seeking work in the U.S. Schools would have to pay the fee for students in the optional practice training program and$30 ,000 for renewal. The current fee is$500, which students typically pay for themselves. And two-time major champion John Ram is leaving the Live Golf League. His attorneys said during a bankruptcy hearing today that he reviewed the terms of Live 2.0 and determined the terms were unacceptable to him.

30:51The league is trying to relaunch following the Chapter 11 filing after losing funding from Saudi Arabia's public investment fund. Melissa, something's back to you. Brandon, thanks. Up next, KKR's Henry McVeigh on why global inflation is worse than he thought and how he is putting money to work in that environment. Closing bill at overtime. Be right back.

31:15As we've been discussing, elevated rates continue to be in focus for investors. The 10-year yield has not fallen in back-to-back sessions in over a month. And today, touching a 24-year high as the street begins to adapt to higher for longer. Our next guest has been banging that drum and others since his first appearance here in January and before that even. Joining us now, Henry McVeigh, head of global macro and asset allocation at KKR. He's out with a report today focused on the global investment cycle after a recent trip to London and Singapore. He says that higher for longer view was only reinforced by what he saw on the road.

31:48So, Henry, good to see you. So, yeah, you've kind of been on this idea of we're in kind of a new world, right, where, you know, heavy investment, a lot of redundancy being built into the global economy, you know, rearming and deglobalization and all the rest of it. So what convinced you even further that this is going to be here for a while? OK, so a couple of things. So first was in London and Europe. And what you see is actually big business fixed investment in the UK is going up, even though consumption is trending down. Go to Germany. Germany is actually trading a lot more with Eastern Europe.

32:24Their exports are going up away from China within Europe. That's new, and it's all coming from the fixed investment side. So think about CapEx over consumption. Headed to Singapore after that, spent a lot of time with the KKR teams all over Asia, talked to different CEOs and macro folks. And what we pick up is you really have a similar boom, but it's intra-Asia trade. There's a huge build-out of the whole supply chain when redundancy, as you said, Michael, And then and then A.I. is clearly having like kind of the exclamation point on top. And so that area has been underfunded. Most U.S. investors have been stuck overweight the U.S.

33:04That's been the right call. They're starting to come back to Asia. Corporate reform in Japan, where we have been quite focused for some time, that's spreading to Korea and even to Singapore. You want to play that theme. Consumption upgrade, Southeast Asia and India. Those things are green lights. And so there's a lot of, I'd say, very favorable comparisons in that area. I'd say I walked away thinking private equity franchise, that's where we started there. Infrastructure is really booming, and you're going to see that continue. And then I think there's more credit moving away from the banking system towards both the liquid capital markets as well as the private capital markets.

33:42You mentioned sort of the exports within certain countries booming, but within region. And is that something that is new or is that strengthened in recent times? And does that change how you invest? I think that the U.S., the Americas, if you think about Mexico, Canada, the U.S., that's mature. It's probably 70 percent. When you look at Europe, I thought it was mature. It's around 65 percent of GDP. What you're seeing now, sorry, 65 percent of intraregional trade, that number is probably going to 70 to 75. So they're pulling back from parts of China. They want to trade more themselves. and Eastern Europe is growing, and that is a new phenomenon.

34:18So I'd say that's a new data point. Asia, I would just say it's the overall pace that we're seeing, which is money is funneling back into that area, and you're really seeing a lot going on in Japan, and you're seeing probably the big surprise is what we're seeing out of Korea. There's a lot going on in our infrastructure business there. You've seen us do transactions with some of the large conglomerates, and I think that's a beacon that there's more to happen. What are the implications, I guess, from a real big picture macro perspective, I guess upward bias to inflation is something that you've been kind of expecting for a while.

34:51And it's sort of a capital over labor theme as well. So I think there are a couple of things we have always consistently come up here and said, we think we're in this new regime. But we've also said there's a productivity feature as well. Otherwise, we'd be talking about stagflation. So to me, my one thing I would caution investors, everybody is running around worried about higher rates right now. Let's make sure we're looking at higher rates relative to nominal GDP. We've got a pretty good incubation lab. We've got 200 companies around the world. Corporate profits are booming right now. You guys report about this all the time.

35:22You've had a very low pre-announcement season. Things are good. That productivity is funneling through the system. So I would make sure that you're thinking about who can deliver nominal GDP, nominal revenues, and they're able to pass those costs along. If you have no productivity and you're facing cost of living increases, that's a tough spot. And so there is this, you know, we wrote about this in our mid-year, there's this divergence going on. And that's one of the big divergences. The second big one is that all the things that you guys are reporting about is in the government bond market. You're not talking as much about the corporate bond market.

35:54You can talk about France. You can talk about the United States. You can talk about the U.K. Those are the hot spots. It hasn't been that the corporate sectors, you know, maybe we get there, but that's not the Achilles heel of this sector. And the same thing with the consumer. I mean, aggregate, the consumer is doing well. It doesn't mean there aren't pockets, particularly those being afflicted by the higher oil prices and the higher health care costs. But when you look at an aggregate, since I've known you in the cycles we've talked about together collectively, this one is quite different. I'm wondering, you know, when you're talking about Asia and some of the corporate reforms there, on top of all the growth that's going on, how can we understand what is going on corporate reform-wise?

36:34that will actually add a kicker. So if you look at Japan, 40 percent of the stock market still trades below book value. 17 percent of the assets are sitting in cash. And they're now activists coming in and saying, hey, you need to make this better. 70 percent of assets are in cash? 17. 17. Okay. I was like, what? That'd be a real bargain. If you go to Korea, though, 70 percent of the stock market is trading below book value. And if you look at X, the semiconductor players, they're trading like 10 times earnings and they're growing 20 percent. And even in Singapore, it feels like they're around financial services.

37:07There's more going on to entice foreign capital to come in. So it's a very positive story. I think people have been right to be in the United States. That was where we had the productivity boom start. I would just say take another look, see what's going on in Asia. I don't think the story's over there yet. Henry, great to see you. Thank you. See you after your next trip. Okay. Thank you, guys. Henry McBerry, KKR. We've got a news alert from Washington. Eamon Javers got the details. Eamon. Yeah, Melissa, that's right. President Trump is going to be presenting some prestigious awards to some prestigious people from the world of high technology and corporate America tomorrow.

37:41The president's hosting a science summit here in Washington, and he's going to be presenting a number of awards, including the National Medal of Science. And that will go to Elon Musk, Sergey Brin, Jensen Wang and Lisa Su. Obviously all familiar names for those who watch CNBC. And then the National Medal of Technology and Innovation is going to go to two people, Michael Dell and Satya Nadella. So the president, once again tomorrow, is going to be surrounded by sort of the high-tech thought leaders in America. We saw him with a lot of these same people just last week and again tomorrow at this science summit.

38:16Melissa. All right, Eamon, thank you. Eamon Javers. Levi Strauss shares lower after reporting earnings. Up next, a look at what the results could be telling us about the consumer. And here's a check on some S &P 500 stocks hitting new highs today. Marathon Petroleum, Bolero, AbbVie, NetApp and Corteva. Closing bell over time. Be right back.

38:38Levi Strauss losing earlier gains after reporting earnings earlier this hour after the company lowered its net revenue guidance and its direct-to-consumer business disappointed during the quarter. The results come on a day where the Fed minutes showed a concern about the spending divide. Several members noted that the stock market gains have provided support to consumer spending among higher income households, but low and moderate income households are facing strains. With us now is Dana Telsey, Telsey Advisory Group CEO and Chief Research Officer. Dana, great to have you with us. Thank you. So what did you make of the quarter, and do we have any idea of what was behind the DTC shortfall?

39:11So overall, the EPS came in better than expected, better than the guidance. The revenues didn't make the cut in terms of beating the guidance. but overall when you look at the guidance for the fourth quarter, still work to do. The gross margin is what delivered the beat. The U.S. was the underperformance. The DTC shortfall calls at 5 o 'clock. We don't know what it is yet, but they did say the DTC business has improved. So whatever that shortfall was, it sounds like they've corrected it, but we don't know what it is yet, so we want to hear what that is. In the meantime, overall, the fact that they even raised their guidance a little bit, But the health of the consumer and what we're seeing about the state of the consumer, there is demand for newness and certainly demand for denim.

39:52I expect to hear them say that Levi's maintain their share in this quarter. If you are looking at Levi, I mean, it seems a pretty undemanding valuation. And what are the main things that have to go right? Is it just sort of a macro consumer push? Is it the brand? Is it the denim cycle? What are the main swing factors? I think the swing factors of Levi's, can you keep adding to your business with sales growth, with women's, with tops, with international, with stores, the growth levers to show accelerated growth, and then you deliver leverage. I think that's what's going to drive it. We all know there's a denim cycle.

40:27They're the main ones in it. Continuing to beat and raise, you have a new CFO, John Vandermore, who's starting from Skechers. So it'll be interesting to see how he paints the picture because his first quarter will be when they report fourth quarter. earnings. So we've seen the stock down about a percent right now. And as Zaina had mentioned, the conference call at five. In the meantime, I want to ask you about Lulu, because you pointed out a press release which crossed management shakeups. So this is sort of maybe the new CEO's effort to sort of put her imprint on the C-suite. Yes, I think you had a lot of people leave Lulu at the time that she was joining or right after she joined.

41:01There's a lot of holes to fill. Megan Frank, who was the interim co-CEO, stays on as the CFO. That stability, I think, certainly helps, but you need to see top line. We know that the newness in product hasn't delivered what they expected. There's work to be done. The public company that happens to be doing well in performance happens to be free people movement. We've seen double digit increases. It's performance with feminine and fashion. It's part of the urban outfitter's portfolio. Athleta still has work to do. And Lulu just hired Maggie Goudreau, who had been the president and CEO of Athleta.

41:37So you won't hear from the Lulu CEO until sometime in December. And it's still a picture to be painted. Seems like there's always an upstart of some sort in athleisure at this point. I know you have your own conference tomorrow. What are you expecting to hear in terms of tone of the consumer and and I guess the thrust into the end of the year? Yep. Super excited about the conference tomorrow. We've got a ton of retailers there. I think the tone is going to be that everyone is so cautious. When is the consumer going to fade? You haven't seen it fade. I think you're going to hear companies talk about what are we doing to activate it, the focus on marketing initiatives, the focus on newness, the focus on events, how they're using the tariff refund money and how they're deploying it.

42:18And I think my A's, they're going to talk about AI, affordability, assortment, activation and advertising and agility. That's what they're going to do. And I think overall, as we get into the holiday season, we're in the midst of Amazon Prime Day yesterday and today. I think so far, companies have been managing well. And I think that's what they're showing, even with a consumer that feels like it should be topsy-turvy, but we continue to be surprised. Mike is constantly looking at the Prime deals. I mean, catch me. That's all I can do. Did you take advantage? I'm joking. I'm very passive when it comes to this stuff.

42:51I'm joking about that. But in terms of your top pick, who is fulfilling all of those? You know what? Urban's doing a great job. Urban Outfitters doing a very good job with newly and free people movement as the growth vehicles, urban anthro and free people, the core free people as the base drivers. Dana, good to see you. Nice to see you. Thank you very much, Dana Telsey. All right, shares of Webull plunging on a new congressional report alleging the online brokerage is essentially a front for China's government and a national security risk. Details from Closing Bell Overtime live from the Nasdaq Market Site returns.

43:29A front for Beijing. That's what a new report accuses online brokerage Webull of being. And Shia is going to hit hard today as a result. Eamon Jairus has the exclusive details. Eamon. Yeah, Melissa, that's right. We reported this story earlier today, and we did get a response from the company, which complained that the Senate committee, the House committee that put out this report, raising questions about the company's ties to the Communist Party of America, The Communist Party of China, I should say, did not contact them adequately and did not get enough time to respond. And they said that the report was full of errors.

44:04Now, Webull shares were down nearly 30 percent in the wake of our initial report on this this morning. In a statement, the company said in part, it is deeply disappointing that the select committee published a report containing significant inaccuracies and unsupported conclusions without ever seeking clarification from Webull. Webull has made every effort to cooperate with the committee, but did not hear from them for more than 20 months before this report was released. Webull's U.S. business is conducted from its global headquarters in St. Petersburg, Florida, and its office in New York City, while U.S.

44:36customer data is stored in the U.S. and access to sensitive customer data is controlled by the U.S. Now, the new report alleges that the company, which has 28 million global users, is quietly tied in structural ways to the government of the People's Republic of China, presenting a national security threat to American finance. CNBC obtained the new 25-page report exclusively from the bipartisan Select Committee overseeing U.S.-China relations, which finds a profound gap between the firm's public marketing as an American company and the actual control of the firm. Webull, which trades on the Nasdaq, says it operates a global network of licensed brokerages offering investment services in 18 markets.

45:18But the Congressional Committee says the online brokerage represents a national security risk because critical back end systems, personnel and data flows may remain exposed to the Chinese Communist Party's mandatory intelligence laws and coercive demands. Back over to you. Do we know what the more granular sort of allegations are? Because every single Chinese company that is listed here, they always have that boilerplate disclosure in their in all of their filings, that they are tied to the Chinese government and that there are laws in Beijing which would compel them, in theory, to share data?

45:50Yeah, I mean, among other things, the committee report suggests that Webull misled or responded inaccurately to the committee's questions about exactly where their data was being housed. And the concern here on the part of the committee is that this is a lot of American user data. The Chinese government has access to it through the Chinese servers. And so the question is, what is the Chinese government doing with all this data? And could this be the kind of thing that the Chinese can put in place in advance and then use, if they decide to, at some future date in the event of a conflict, to disrupt American financial markets?

46:26Eamon, thank you very much. Yeah, there was concerns about this before Webull went public. It did it through a SPAC. You know, we'll see if it's been sort of hovering out there for a while. The stock did kind of keep to a 19 percent decline. Interesting. I mean, the structure of this sounds like TikTok. Right, right. In terms of their arguments, right? Everything is housed here in U.S. Exactly. And it's unclear, I suppose, if the concern is that just the direct access to customer finances and data are the issue or the linkages that the firm has here with other financial services infrastructure is part of the issue.

46:59Like threat to the system. Or it's just kind of, you know, they're pointing out that there's, you know, some big relationship. We'll see. That does it for overtime today. Fast Money starts right after this quick break.

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