Closing Bell Overtime: Markets Face a Big Week as AI Takes Center Stage 10/26/26

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1:02The bell's bringing an end to the trading day at the NYSE. In Jevedy ringing the closing bell and at the Nasdaq, Camp 4 Therapeutics doing the honors. Welcome to Closing Bell Overtime. We're live from Studio B at the Nasdaq Market site. I'm Melissa Lee, along with Mike Santoli. Stocks higher across the board with tech leading the way. The Dow up a little more than 150 points, again about two-thirds of a percent for the S &P 500. Nasdaq 100 up more than 1%. NVIDIA leading chip shares higher for the second straight session, but the stock's still well off its recent highs following a nine-session losing streak earlier this month.

1:33Tesla up about 5 % thanks to an upgrade. It's leading the consumer discretionary sector today, along with some of the travel and leisure names as well. Bond yields a little change ahead of the Fed meeting, which starts tomorrow. The decision coming on Wednesday, part of a very busy week for the markets. Let's start off with the first take on today's close. And no doubt that the calendar definitely has an influence over the action today, which we saw. I mean, nothing too definitive, I think. Right. Pretty subdued. I mean, certainly net positive. This is a tape in need of some AI reassurance. And we maybe got that through the Anthropica filing as well, arguably through, you know, Microsoft offering buyouts to 60 ,000 employees.

2:12This notion that, OK, maybe we can take a second look. But in general, yeah, I agree. It's not as if this market is really making sudden moves, definitive moves. You do have the Fed meeting as well as, I think, the big hyperscaler earnings. Definitely. And everyone seems to think that maybe the cloud performance is going to give us a window on whether, in fact, we're still on the spending treadmill or we can play for some more defense. Yeah, but with that in mind, I mean, it's important to note, Meta's action today's session was not good. We finished pretty much at the lows of the session, pretty much at the lows since it reported earnings.

2:47And so if that's any sort of a blueprint in terms of what we can expect from the other hyperscalers, I don't know if it means that the story is de-risked a little bit in terms of going into those earnings or if it means that the risk is very much alive since the action is not good here. On paper, it should be de-risked because the valuation, because it's down, you know, 140 bucks since the high about a month ago. And, you know, it is raising new debt and equity. And so the market didn't love that, but it did basically expect that. And it's one of the various things that's lining up that says we should actually have a firmer performance here.

3:21You have most of the sickle groups in corrections already. You've had washouts in certain groups like semis. So what you're looking for is the market to actually make something of those ingredients. And it's been a little bit halting so far. Yeah, so far. Part of Big Good Text Bounce today, the S1 from Anthropic. What did signal about AI demand and spending? Let's bring Kate Rooney now for the details. Hi, Kate. Hi, Melissa. So Anthropics, that's one that dropped this morning, showed on one hand, breakneck revenue growth, I should say. It's been a long day. Massive compute commitments, and then about 100 pages of risk factors as well.

3:55And as part of this, Anthropics does plan to list on the NASDAQ under the symbol ANT. It will use most of the cash it's going to be raising for compute. We did also get a glimpse of Anthropics' bills in the coming years. Anthropics said Its costs could surge to$750 billion. It's split between Broadcom, you have Google or Alphabet, Amazon, Microsoft, and SpaceX. These deals do underline, guys, just how connected Anthropic is to the broader tech market, even before it goes public. Revenue for the first half of this year,$16.3 billion. We got those numbers earlier. Grew more than 1 ,300 percent from a year ago.

4:32Margins for this company above 80 percent. And then the operating loss was almost 700 million in the first half of the year. That did narrow significantly for the same time last year. It was around$2 billion last year. Anthropics was also profitable, at least on an adjusted basis. Total net losses, guys, for the first half of the year also came in around$81 billion. But important to note, the majority of that was due to accounting around convertible debt. And then governance was a major new disclosure this morning. Anthropics founders are set to keep voting power through a single special share.

5:04It is a class F share. It's owned by those seven co-founders of Anthropic. It carries a 50.1 percent percentage of the vote and they will have voting power and control here. Palantir did something similar. You do tend to see these sort of founder ownership rights, especially with tech companies that go public. Risk factors, another big highlight that ranged from political backlash. They talked about the model risk, things like self-preserving and coercive behavior on the extreme end of the spectrum and then access to compute and debt were also both listed as risks. You had customer concentration and then open source.

5:39Finally, they said could add to some of the pricing pressure for its products, guys. I thought was interesting also, Kate, was how much Anthropic is benefiting from its own product in terms of how much code is being written by Claude. all the savings that they're getting in terms of the agents working on behalf of their sales team. So it's not just a pitch to raise money, but it's almost like a sales pitch as well. It's a great point. I think they said 90 percent of their code is actually written by Anthropic. So you are seeing this sort of reinforcing flywheel of, you know, that the code gets better, the technology gets better, and therefore it's used to build this company.

6:14So it's definitely it was highlighted in the S1 and something that they wanted to highlight as as a way to sort of just promote their product in a certain sense to say, you know, look how great it is. It's actually helping us build what could be a$2 trillion listing from what we're hearing, I mean, on the high end. But that was another big part of it. And I think the other interesting moment today was just the connection with all of these other. We learned a lot more about the customer spending, kind of their compute commitments and what you guys were talking about and the impact on the Nasdaq.

6:46I think there was a lot of optimism based on what Anthropic is set to spend on some of the hyperscalers as we look to earnings this week. Yeah, for sure. Well, Amazon Web Services started out by Amazon trying to do something for itself, right? So maybe that's the optimistic view on what Anthropic might be up to as well. Kate, thank you very much. So what are the most important numbers that potential investors should take away from this S1? Joining us now is Burnham Park Capital Markets Partner and Chief AI Officer Rohit Kolkarni. Rohit, great to see you. We did know certain, I guess, financial details that were leaked out and some other things about ownership structure.

7:23But what in the actual filing was incrementally new and do you think is most important to seize on? Hey, thanks for having me. And thanks for reporting to you guys and everybody else on the street. A lot was leaked on the street. A lot of investors already knew what to expect. So the margin of positive surprise was pretty low. In my opinion, there were three things that helped the stocks today. It was almost like a collective sigh of relief that, OK, I think this deal will get done no matter what the valuation. But there are positive signs here. First was just the trend line and profitability.

8:03We don't know the Q3 profitability yet, but through Q2, I think with 50 percent gross margins, 8 % operating margins, that's a positive. A company that was a negative gross margin, deeply negative a year ago, and has more than 50 % gross margin, and probably when we get to IPO Roadshow, they'll talk about 70%, 75 % gross margins in sight sometime next year. So that's one big checkbox. Second, they already have more than$100 billion in cash. So I think everybody who started worrying that maybe this company may not be able to pay their bills. They have been signing these IOUs left, right and center over the last nine months.

8:46They'll have a bunch of cash from the IPO. They have 100 billion already. So next 12 to 18 months, they should be able to pay their bills while innovating, while investing in growth and so on and so forth. And finally, the enterprise footprint. Mike, I think very few companies on earth, correct me if I'm wrong, have disclosed the number of enterprise customers, 12 ,000 customers paying$100 ,000 per year. That's a pretty significant footprint within such a short period. So I feel those were the positive things. A lot of things need to come out over the next month or so. That will help price discovery.

9:25But overall, I think this was a better first step than what we anticipated through the S1 filing. And this is, as you mentioned, just the start, Rohit. But I'm wondering, you know, a bigger question is, can these frontier models compete with what is coming in terms of open source and the Chinese? And how much of a moat there might be? Did we get any answers whatsoever on that front? And what's your view on this? Yeah, I think there are a lot of fill in the blanks in the S1. They have a blank around October annualized run rate. That's probably the single biggest number that people will be focused on when they file the next iteration of the S1, perhaps in a couple of weeks.

10:09What is their annualized run rate for October? We know from reports in the media that there has been a slowdown from July through September. Sequential growth rate has significantly slowed down. And the two factors that you talked about, Melissa, Chinese models and open weight models. And plus the third factor is price competition with OpenAI. So these three factors are not going to go away for a company like Anthropic. So what that looks like in Q4 and the next year and what they might talk about as well as the sustained growth rate is going to manifest into that October number. And that's going to be in two weeks.

10:47Everybody is going to be focused on that before they kick off the IPO roadshow. Yeah, obviously, that'll be a big help. And then I guess we have to have some view on whether the trend that the company cites of its revenues growing faster than its compute costs is something that will continue at that trajectory and scale. Knowing what you know, I know you haven't like launched formal coverage or anything like that. Would you be excited to own the business at a trillion and a half market cap or thereabouts? Absolutely. I think this is once in a generation, if not once in a lifetime company, along with a couple of others waiting in the pipeline, simply given kind of how much price would you put on intelligence.

11:28And this is clearly over the last 24 months, probably the leader in monetizing intelligence and making it available to consumers and enterprises alike. economic, the economic value of that remains to be decided, and that's where the speed will come into play. But I feel this is, we are truly sitting at the cusp of a very historic capital markets kind of opportunity here, and along with OpenAI, Anthropic gives us, gives U.S. capital markets that edge that has always been there and will be here to stay. Rohit, great to speak with you. Thank you. Rahit Kalkarni. Well, Anthropics filing comes in the midst of the reset in the AI trade.

12:10Investors worry about AI financing is growing. The neocloud stocks are faltering. Semi-ETFs down more than 10 % this month. And the red-hot memory names are down 40 % from their 52-week highs. And this week will be a big test for the trade with Microsoft, Alphabet, Amazon, Intel, and Sandisk all set to report. Joining us now is Niles Investment Manager, founder, and portfolio manager, Dan Niles. Dan, always great to speak with you. Pleasure, Melissa. Before we delve into sort of what we're expecting from the hyperscalers this week, now that you've seen the Anthropics S1, how much do you think this will be an issue just in terms of competition for investor capital, competition for investor attention as we move into the Anthropic IPO versus the hyperscalers?

12:53Well, I mean, I think there's a lot of competition for capital, and I think Meta is a great example of that. If you look at their 8K, there were a couple of lines in there that disturbed me, which it should disturb everybody, which is they wanted to get out in front of other players that were looking to raise capital because they were worried about the market being, quote, saturated. And they said there is an increasing competition for that capital. And you've seen the stock go down about 10 % from when they reported the quarter, great quarter. But as I was concerned about going into it, I thought it would have more to do with cash flow, CapEx, spending and financing needs.

13:31And I think that's the same set of issues that you're going to be looking at when Google, Microsoft and Amazon report coming up. And, Dan, that sort of links up with what Elon Musk said over the weekend about how, you know, when he's got SpaceX investing so heavily and with his balance sheet trying to build capacity as quickly as possible, that maybe the neoclouds end up out in the cold on this whole trend. I mean, the market seems to be kind of front running that possibility and rationing capital accordingly. Yeah, no, 100 percent. And Elon's got a massive cost of capital advantage. Because he can raise capital at a price to sales ratio that is much higher than any of these neoclouds can.

14:18And so from that perspective, the more he spends, the bigger advantage he gets because he gets to take every dollar of revenue and multiply it by a much bigger number than any of these neoclouds can. And he's got another set of businesses, SpaceX, as well as the satellite business, Starlink, to help support that. So that puts him in the same category as a Google and Amazon or Microsoft, where, yes, they have this cloud business supporting AI. But then they also have these massive base businesses that throw off a lot of cash flow that helps fund it, which these neoclouds don't. And, you know, in general, I'm in a complete agreement that when this thing bubble breaks, you're going to have most of them go out of business.

15:05In terms of what we're expecting for the week, Dan, I'm wondering what you make of Microsoft's, you know, voluntary buyout announcement today ahead of the earnings release. You know, whenever I see that, it always makes me nervous. I mean, the good news is Microsoft had one of these same things, I think, back in January. Stocks obviously done well. They were very profitable. And I think it speaks to the fact that anybody who's used AI, and obviously Microsoft is a tech company, and so their employees are much better at this, it makes you so much more productive. And so my hope is that this is because they're getting that much more efficient.

15:46But you do have to worry about one big thing, which is on the margin is everything we've heard about data center moratoriums and the slowdown in revenue for Anthropic, right? Anthropic grew revenues 145 % sequentially in Q2. That slowed to 45 % in Q3. We're all waiting to see what the annualized revenue run rate is when they finally fill in that category. You know, you're struggling with that and the fact that open weight is, in fact, dropping average selling prices by over 50 percent since May. And so how do all those things come out? So I'm hoping it's a good sign from Microsoft, much like it was earlier in the year.

16:30But, you know, we'll have to wait and see, obviously. And then just to, I guess, put a button on the Anthropic story, Dan, I mean, did you look at the at the details in the filing and say it was much better than we might have thought? It was about what you expected. Does it all depend on what the deceleration shows eventually in the third quarter? Yeah, it's all of those things, Mike. In general, I actually liked what I saw. The things that struck me were, hey, top five customers are 25 percent of sales. So there's not this massive customer concentration I was worried about. You've got, you know, the Fortune 10, all of them using it.

17:06You've got 30 % of the Fortune 500 with over 100 ,000 in trailing 12-month revenues and 30%, I think, of the global 2000. So that was all good. And then the other part that I really liked was when you looked at a chart they had in there in terms of revenues over the amount of compute expenses they had. A year ago, that was about 0.6. The most recent quarter, it's 2.1. and it had gone up from like 0.7 just two quarters ago. So for every dollar they're spending on compute, they're generating a lot more revenues. And you saw that with the SpaceX numbers as well. So those things have to make you feel better about the overall health in the AI trade, even if you're saying, yeah, these neoclouds, they're not going to make it, but the real businesses will do well going forward.

17:58Dan, great to speak with you. Thank you. Thank you. Dan Niles. Well, big tech earnings are only one part of this week's market equation. The other big part is a Fed meeting starting tomorrow with a decision in a press conference on Wednesday. Will they hold rates steady as expected? What will they hint about December? We'll discuss that next on Closing Bill Overtime.

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20:19nat gas producer. The buyout represents a 20 % premium to range resources closing price on Friday. EQT ending the day lower. JetBlue earnings are out. The stock bouncing back a bit after falling 9 % in the regular session on growing concerns about the airline's cash burn. Phil LeBeau has the numbers. Hi, Phil. Mike, this is a wider than expected loss in the third quarter for JetBlue. The company losing 60 cents a share. The street was expecting a loss of 55 cents a share. But keep in mind, these estimates have been dropping dramatically over the last several weeks. So 55 cents a share was where they settled at heading into today.

20:53Revenue roughly in line with expectations coming in at 2.81 billion. The street was expecting 2.82 billion. As it is for all airlines in the third quarter, jet fuel is the story. And for JetBlue, it was up 57 percent compared to a year ago, an average cost per gallon of$3.91. They were able to recapture 87 percent of the jet fuel through increased fares, increased revenue. In the fourth quarter, they're expecting jet fuel to go even higher, forecasting an average of$4.64 a gallon. That would be up 85 percent year over year. Guys, one reason why we may be seeing shares move a little bit higher, the company is pretty optimistic about as it approaches the situation with its creditors, they like where they're positioned in terms of cash as well as their unencumbered assets, which they have increased by $1 billion.

21:47They now have$7.5 billion in unencumbered assets, including$2.8 billion in planes and engines. So this is not a spirit story in terms of people saw those headlines saying, oh, wait a second, the creditors are talking about restructuring here. JetBlue believes it is in a far different position and that once it can move past this period we're dealing with right now and you look out into the future, they still believe that they can get to EPS of at least$1 a share in 2028 with positive free cash flow. But again, in the third quarter, the story is JetFuel. And that's one reason why JetBlue reported a wider than expected loss of 60 cents a share.

22:28Guys, we'll send it back to you. Yeah, I mean, Phil, we should mention that the market cap's below a billion. There's eight or nine billion of debt on JetBlue. So that's why they have to, you know, kind of try and point to their liquidity. in this instance. And of course, they're saying what they think might come later in 2028. Nobody saw what's coming this year. So it is interesting. I do wonder, though, you know, what the what the overall back and forth might be in the call. Well, that's going to be one of the key questions for CEO Joanna Garrity. It's not only where are you right now in terms of your balance sheet and unencumbered assets is clearly a big part of that.

23:06That's one more lever that they can pull. But further out, the big question is going to be jet fuel. If we're looking at jet fuel at this, let's say, in the second quarter of next year, I mean, that's going to put even further pressure on JetBlue. I think that's what's key here, Phil, is that they're projecting out to 2028, but we don't know what their assumptions for jet fuel are. I mean, whereas other airlines, they have put out their assumptions for jet fuel and they build their forecast on that. Right. Everybody is forecasting that at some point it comes down to what degree nobody knows. And nobody has any confidence, Melissa, that this will cool off in the first quarter or the second quarter.

23:41In fact, I spent time this weekend with some airline CEOs. Almost everybody said the same thing. Your guess is as good as anybody's in terms of what happens with jet fuel. Yeah. Mark, it's been actively guessing. We'll see where it goes. Phil, thank you. You bet. Interesting setup. As we mentioned, it is a huge week for investors with plenty of earnings and data to sift through. In the middle of that, we'll get the Fed's rate decision on Wednesday. The market currently pricing in a pause and favoring a hike for the December meeting. So what are the keys to look for in the FOMC statement and during the press conference?

24:11Joining us now is Michael Gapin, Morgan Stanley, chief U.S. economist. Good to see you. Thanks for having me. So you are in tune with the market's overwhelming expectation. We get no rate hike this week. It's fascinating on one level because going into the September meeting, you could have made the case. You know what? The inflation prints have given some cover. Maybe they don't have to go this time. but what Kevin Warsh had said at Jackson Hole set the agenda. This time, you actually have had some firmer inflation readings, but based on what some other Fed members have said, market expects nothing.

24:41So where do you think that's going to leave us on Wednesday afternoon in terms of the outlook for the ensuing part of the year? So we do agree with the market that the Fed will be on hold. So I think the message, the line that he has to walk is to say, on one hand, we didn't find a lot of urgency to raise rates again today, but you should still expect the policy rate to go higher in the future. So that's a bit of a fine line to walk because you might argue, well, why didn't you just raise rates today? I think they will argue they want to see the underlying trends and take time and assess where policy may ultimately go.

25:17So I think that's the balance. They stay on hold, but it's not a view it as kind of a hawkish hold where I think the expectation will be that, yes, policy rates are going higher. We just didn't want to do it today. How do you think they'll address the recent volatility in markets and the tightening of financial conditions that have happened since the last meeting? Yeah, I think he could argue that financial conditions have tightened. The market's certainly pricing in more hikes. So we think the market's doing some of our work for us in that regard. Ultimately, they will have to decide whether to validate that pricing or not.

25:52But I do think it'll come up. And I do think you could argue that, yes, one argument against going at successive meetings would be the risk of causing too much tightening in financial conditions. So there's a balance here. I think there's risks to whichever way they choose here, hiking sequentially or pausing. But I think you could argue, yeah, it played a role in some of our thinking on why we can take this at a more gradual pace. You have a bit of a playbook in terms of, you know, various ways in which the statement and the vote and all the other things might be net dovish or hawkish. So what do you think are the key things to watch for?

26:29Well, number of dissents. So there were three dissents when they were on hold in July. We think you'll get two dissents. But to your point, maybe the volatility in markets brings that number down. So the closer dissents are to zero, the more dovish that sounds. If there's three dissents in favor of a hike, you could view that as hawkish. And I guess explicitly the language in the statement matters. What I would say the old Fed would guide you with some sentence that said additional policy rate firming is likely. Warsh probably doesn't want to do that, given his proclivity against forward guidance.

27:05So how does he weave that? So something about the timelier return of inflation, I think, has to stay in the statement. And then I do think how much he leans on whether financial conditions have tightened a lot or volatility in equity markets, how much spreads have widened out. The more he leans into that, the more dovish it would sound as well. And, of course, the energy picture is different as well since the September meeting. I mean, the conflict in the Middle East is no closer to being over. Oil prices, energy prices remain high. And it's not transitory for sure at this point. We just heard JetBlue earnings.

27:38It's a big question mark in the economy next year. diesel prices and the impact. And so I'm just, you know, wondering how you think that that factors in into his view, because there is a view that if he does not do anything at this meeting, then it's sort of a signal saying, you know what, we're going to let inflation go and it's an excuse for yields to go higher. Yeah, so I wouldn't agree with that. I do think that I would be surprised if he doesn't highlight risks around second round effects from prolonged elevated energy prices. We're factoring some of it into our inflation forecast next year.

28:11I think many on the FOMCR as well. So the more he leans into that, the more hawkish it sounds. I don't think the Fed's out of the water by any means. I don't think they think that. I think the argument here is just can they hike every other meeting and assess data as we go? I think the answer to that is yes, but we'll see where energy markets take us. And do you think the economy can remain resilient to where yields have gone and potentially another couple of hikes? There is some talk about you looked at the first half of next year and you're kind of having some fading tailwinds. Sure. Yeah, I think it's right to think the economy can handle 75 to 100 basis points in total hikes without, say, a tremendous amount of concern.

28:51But if it starts to be clear that the Fed needs to do, say, six or seven total hikes, getting us back to 2023 levels, then I think you've got a different answer. Michael, thank you. Thank you. Thank you. All right, retail investors have cashed in over this four-year bull market, but more and more people seem concerned about the party about to end. So are retail investors starting to bail out? We'll look at one reading of sentiment next on Overtime.

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31:14been a lot of talk for months about how overly negative consumer sentiment readings and survey-based readings don't really match up with overall spending levels. There's something similar going on with investors. The AAI poll weekly survey of investors shows quite a bit of bearishness. This is the number of bulls minus bears. So you're showing it's pretty much near zero. It's been knocking around these levels for a while. But this is the same group, in theory, the AAII, American Association of Individual Investors. This is their portfolio allocation to equities, which has remained near historic highs.

31:48You see in the past, these things tended to move more together. The survey itself, the weekly survey is not particularly scientific. I don't think it necessarily is really reflective of what people are doing. But I do think it's important to note this piece of it, which is for as much as people worry about things like a busted AI bubble or concentration in the market or what the Fed's doing or inflation, they're still riding relatively high equity allocations. And this is matched by other readings as well. Right. I mean, AI typically is a contrarian indicator, correct? That's exactly it. It used to be historically a contrarian indicator, but it's just hard to know what to make of these things.

32:23Maybe it's on a a little bit of a different scale because they're not getting as bullish when they're bullish as they were, let's say, 25 years ago. I think this same group has been kind of static and aging, and you never know what to make of that. Okay. Time now for a CNBC News update with Mackenzie Cigalos. Hey, Mel. President Trump said today the U.S. would give$1 million to anyone who reports voter fraud that leads to an arrest and conviction. He made the offer just over one week before the crucial midterm elections, but he says the award would still be good for instances of prior fraud. President Trump has repeatedly claimed without evidence that there was widespread fraud in the 2016 and 2020 elections.

33:01Student leaders in France say they turned down a package of education proposals from France's government today. They say the government pledged to overhaul its university admissions system, cap class sizes and give out loans to renovate schools. But the students say the proposals fell short of their demands and they vowed to keep up mass protests across the country. And Secretary of State Marco Rubio said today that U.S. officials told Venezuela's interim authorities weeks ago that opposition leader Maria Corina Machado should be allowed to return to the country ahead of elections next year. He said the only time the U.S.

33:34advised against it was in the aftermath of devastating earthquakes in August. Guys, back to you. All right, Mac, thanks. Mackenzie Cigalos. With all the focus on big tech, the other sectors tend to get overlooked. But so far this month, health care has outperformed tech by a wide margin. And similar to tech, a long list of drug stocks reporting results this week, including trillion dollar behemoth Eli Lilly will get you set up for those reports next on Closing Bell Overtime.

34:08Welcome back to Closing Bell Overtime live from the Nasdaq market site. Stock starting a busy week on the right foot. The Dow up 146 points. The S &P 500 higher by seven-tenths of a percent. The biggest gainers were the Nasdaq indexes. NVIDIA gaining more than 2%, helping lead a chip comeback. Amazon and Microsoft both higher ahead of their results coming up this week. Meta down 2%, however, as it announces a plan for a$95 billion capital raise. Shares of Whirlpool falling sharply after hours after a revenue miss. We are not comparing earnings to the analyst forecast. The company also cutting guidance and saying North America sales fell 8 percent due to soft demand.

34:50Well, it's not just the big tech names set to report earnings this week. We'll also hear from some of the big players in the health care space. Novartis, Biogen, Eli Lilly, Merck, Gilead and AbbVie among the highlights. So what can we expect with the health care sector outperforming recently? Joining us now is Jeff Meacham. He's city's head of health care research. Jeff, great to have you with us. Thank you for having me. I would think the bar is extremely high now, Jeff, since many of these names are close to all-time highs, and they're trading at premiums to the S &P 500. What is the setup here in terms of those expectations being high for this group?

35:23You're right. They've done really well, I would say, in general because of the tech trade. A lot of investors have looked at health care as one way to kind of diversify the tech trade. But the businesses have done pretty well on their own. So, yeah, I'd expect 3Q there to be quite some good beaten raises. Lilly comes to mind as probably one of the better performers that we expect looking to not just 3Q, but definitely 2027 and beyond. And just in terms of how investors are approaching the group, you mentioned they've looked for diversification away from tech. But you also say that positioning within biopharma still is a net positive.

36:05So you don't think that necessarily it's gotten crowded yet? Yeah, I don't think it's a sell the news phenom for 3Q. I would say across the board, Smithcap Biotech has done. It's sort of a mixed performance there. But you still have, I think, a pretty good trend looking to next year. Good capital markets. You have M &A still happening. And so investors really do want to see a continued cycle, right, of consolidation for some of the big players to spend money on the Smithcaps. And I think that the market is not quite there yet. It doesn't feel oversaturated at all. The smitcaps are typically viewed as targets potentially from the big guys who are losing exclusivity, Jeff.

36:46And I'm wondering how we should think about that, especially as the Treasury is moving to make it more difficult to strike up deals with Chinese biotech firms, which is a route that most of these big guys have done in terms of licensing new molecules. Yeah, that's exactly right. You had a new policy proposed just a few days ago. But I would think in general, though, the pipeline of SMID bios that are coming out from an IPO context are pretty robust. But also, there's tons of companies that are maturing from phase two to phase three, have really exciting, innovative products. And pharma and Big Cat Biotech is definitely there to kind of gobble that up.

37:25And, you know, just this weekend, the ESMO meeting with a lot of the Moderna, Merck, you know, news showcases, right, next-gen technologies, next-gen innovations. And what about the, you know, the hit that Merck in particular took on that news regarding the, you know, the new results on the cancer vaccine? Yeah, I would say so Merck's SAC-TMT, which is a next-gen oncology drug, those data look pretty good. From the Merck and Moderna collaboration and melanoma, it's interesting. For sure, the new drug, MTSARAN, looks approvable. But I think investors are really expecting it to look unequivocally great and to be de-risked into looking at kidney cancer and bladder cancer and lung cancer.

38:15And the results didn't quite support that. And that's why you've seen a little bit of a sell the news phenom, you know, definitely in Moderna and to a lesser degree, Merck. You mentioned Lilly before. How should we think, Jeff, about the weight loss space now? I mean, it doesn't have the number one oral, at least not yet. Novo has that. And yet look at Novo stock. It's been severely underperforming both Lilly as well as a broader sector. And so it's almost like Lilly doesn't necessarily need to win on that front in order to be the winner. That is exactly right. So if you look at, you know, July 1 is when Medicare patients started to get access to GLP-1s.

38:56So that's obviously going to be a nice tailwind for 3Q. And then looking to next year, broad global availability of both the oral and broader consumer spend on GLP-1s are certainly going to be a tailwind for Lilly. They also have some things in the pipeline that are really exciting, that are orals, that are not even outside. They're outside of the obesity, diabetes space. But they do involve GLP-1s, and there's not a lot of expectation for that, as well as Red at True Tide. Right. That's the next gen GOP one that looks very robust on efficacy. And that's maybe a late 27 type of launch. And then, you know, before we finish up, Jeff, is there one that you cover that's going to be reporting that you feel like is either controversial or you have kind of a of a variant view that you think could surprise?

39:45Yeah, I would look to Gilead Sciences. It's been one of our favorites for a while. They do have an HIV prep or prevention drug called Yes2Go that has done quite well. The stock has done a bit of a mixed performance for this year. But that, I think, could do quite well for 3Q. You also have a next-gen blood cancer drug called Anitacel that's going to launch at the end of the year. So that one's not even part of the Gilead narrative. And so you'll have two launches in the first half of next year that I think investors will really like. But right now, though, the main focus is just on the HIV prevention drug.

40:23Yeah. Interesting. I have to watch it. Jeff, really appreciate it. Jeff, thank you. I'm city. A surprise election results sending Brazil's stock markets sharply lower. The country ETF posting its worst day since 2020. But Tesla shares jumping following an analyst upgrade. Much more on both those stories after a short break. Stay with us.

40:49It was a nail-biting runoff election in Brazil, with President Lula being re-elected to an unprecedented fourth term, beating the right-wing candidate Flavio Bolsonaro. Those results beat prediction markets, which favored Bolsonaro. Following Lula's win, Brazilian stocks and ETFs slid double digits, the EWZ ETF falling nearly 20 percent. Shares of Benco, Bradesco hitting a 52-week low, and the Brazilian Real dropped against the dollar, hitting its lowest level since December of last year. We mentioned the prediction markets. It was actually, I mean, it was indicating 80 percent chance of Bolsonaro winning on both of the platforms Saturday into early Sunday.

41:27And so that's how people were positioned on Wall Street. And in fact, if you read a lot of Wall Street research, they cited the prediction markets as reasons to prepare for a Bolsonaro victory. Well, interestingly, we've talked about this before, 80 percent chance of getting any majority whatsoever. This was a 50.1 to 49.9 election. So it wouldn't have taken much for the 80 percent to have been correct. But the 80-20 makes it seem like there's no suspense here. Exactly. It's a no-brainer. That's like a poll. When it's not a poll, it's a probability of one event happening, which didn't happen. Obviously, it was much closer to a coin toss than the markets were priced for.

42:04For sure. And it's fascinating, the market giving back the big rally that it got. And then some. And then some from when Bolsonaro won the previous round. What is interesting, though, is the Brazilian economy and stock market didn't do terribly in this latest term. But it's definitely considered, you know, the Lulu administration not as friendly to business, maybe not as much fiscal discipline and all the rest of it. So we'll see how all that plays out. Well, Tesla posting its best day nearly two months after Barclays upgraded the stock to overweight from neutral. analyst Dan Levy citing three key reasons, the potential merger with SpaceX, signs the core vehicle businesses turning around, and an inflection in robo-taxis.

42:46The fundamental drivers, I mean, fair enough. I mean, I do think you can make the case that things are moving in the right direction. But even with it, even on Barclays projections for the next couple of years, this is not a great return business. It's like a 5 % ROE business. It's still, you know, it's not going to have free cash flow. It's much more about handicapping the terms under which Tesla might be acquired by SpaceX. And$450 a share is the number that he kind of arrives at through a lot of kind of gaming, what it would do to Elon Musk's voting control over the resulting company. Well, at least he didn't just come up with$420.

43:17No, he goes into it. Into$420. No, he talks about how$420 is logical, too, because one, he said it before. Yes. They bought Twitter for$5420, and there was another$420, you know. But that's the I mean, for him to say 450 is a little. Yeah, I think 450 might be a little. I think part of the reason for that is that the stock has traded to 450 before. So you don't want to make a takeout offer that would leave at least a few buyers on, you know, out of the money. Yeah, that's fair. A few diehards showed up at Apple stores Friday to be the first one on their block with a foldable duo. Now that we've had a weekend's worth of data, we'll take a look at what customers are saying about it.

43:56Closing Bell Overtime Live for the NASDAQ Markets. I'd be right back.

44:09Shares of Apple falling today amid today's tech gains as the stock continues to trade contrary to the rest of mega cap tech. Adding to today's trade, early sales figures and early complaints about the iPhone duo. Mackenzie Sigalo is joining us with that part of the story. Hey, Mike. So the iPhone Duo's first full weekend of sales is showing strong demand, but also the first real durability concern for Apple's new foldable. Duo in-store inventory is essentially sold out across the markets that analysts track globally, while Bank of America is seeing roughly 91-day waits across storage configurations and colors versus four days globally for the 18 Pro.

44:45Now, Apple's reportedly asked suppliers to increase Duo orders by about 30 percent. And while Apple has not confirmed that figure, the company's marketing chief did tell me that they are actively ramping production. And in terms of those consumer complaints, Apple says that it is aware of an inner display problem affecting a small number of units after reports of bright lines and screen failures around that hinge. IDC says that failures showing up in the same spot could point to the hinge or how the screen folds around it. Repair firm iFixit says even a small manufacturing variance or piece of debris there can essentially damage the flexible display.

45:21Apple says impacted customers should contact AppleCare for a replacement. The scale of this is still unclear, but for a$2 ,000 first-generation device, how Apple handles these early failures could be critical to buyer confidence as it ramps production. Guys? Mac, do you think they're going to give us an update? Will we get a sense as to whether or not these complaints will impact whether people will actually go through with the delivery of this phone to them? If the problem scales, I think that this is a real concern that it may prove a reputational risk to the iPhone duo. You're talking about screens becoming unusable within a few, within an hour, within 20 folds is what one person reported in Australia.

46:05And so the concern is that if this problem scales, because we don't know the scope of it just yet, and if it becomes a wider spread issue, then not only are you looking at concerns around whether people want to make the purchase in the first place, but what does that mean for existing supply, which was already strapped going into this, especially if Apple is just going to swap out devices for them. You have this 30-day window with AppleCare absent having purchased the device. They'll swap it out if there's an issue. But if this scales to a larger issue, that's going to be a concern. And we'll hear from John Turness on it, I'm sure, during the earnings report and call that he is hosting for the first time in a week from now.

46:36Could be a manufacturing issue as well. So we'll see. Mackenzie, thanks. Thanks, Mackenzie Cigalos. Let's get you set up with tomorrow's trade today. It will be one of the busiest days of earnings season. In the morning, we'll hear from Coke, Boeing, UPS, and Corning, which has become sort of an AI build-out play. And tomorrow afternoon on overtime, we'll get results from Seagate, Visa, Robinhood, as well as NXP. On the econ front, we'll get durable goods, home sales, and two-day Fed meeting kicks off as well. Yeah, plenty to work with. And really, I think it'll be interesting to see if you had a little bit of a bounce in semis today.

47:08The anthropic halo effect, the IPO filing. I do think we'll see a nice little test as to whether we get something beyond just a one-day bounce. Yeah. Speaking of bouncing, we want to congratulate Christina Parsnevels on the birth of a beautiful bouncing baby girl. Mom, dad, and especially big brother are all excited to welcome the newest addition to their family. Look how adorable she is. She seems to have something to say there. I don't know. It's quite adorable, though. Yes. Excellent. Congrats to all. That does it for overtime. That's when he starts right after this.