Closing Bell: The Big Tech Playbook, Is a Rate Hike Inevitable? 9/11/26

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1:01Scott Wapner: Brian, thanks so much. Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange. This make or break hour begins with rates, the Fed and stocks, and whether an interest rate hike is, in fact, in the cards next week. We'll ask our experts over this final stretch what all of that would mean for the markets and your money. In the meantime, we'll show you the scorecard with 60 to go in regulation today. We have been green for all of this day, despite parts of the CPI that were hotter, oil moving lower. That's been really the guiding trade partly today. Oil moves down.

1:30Scott Wapner: We get a little bit of relief. Stocks are green. All eyes, no doubt, on next week's Fed meeting, though, and what's starting to feel like a foregone conclusion at least feels like that's how the market seems to be gaming out this coming Fed decision. For more on that, let's welcome in our CNBC senior economics reporter, Steve Leisman. Is this going to happen? I think so. I think there's a bunch of reasons why. I I thought that actually before this number this morning, Scott. I think that the and it's not just a single number that's going to lead them to it. It's a series of inflationary numbers.

2:02And you have these surging oil prices. I think it's also important, Scott, to remember where the market is priced here. The market is priced for this rate cut. And we have a Fed chair who has said he's taken lots of signal from the market. So the market's telling him what to do. And I think he's going to listen to that. And you also have these elevated inflation expectations. They're not higher, but the New York Fed, we reported it earlier this week, they're still north of 3%. They've been stuck there, and the Fed can't be happy with any of this.

2:29Scott Wapner: I'll tell you what, the great irony is going to be, Steve, if they do hike and rates at the long end actually come down, given what the Treasury's been trying to do and the fact that the roof of the White House may shake a little bit if they, in fact, do hike rates. You know, Scott, I will say the silence from the White House, at least today, is kind of deafening. It's very interesting. Obviously, earlier this week, we were reporting about the pressure that was coming from the administration, the vice president, the president, even the Treasury Secretary, though less so, got involved in trying to urge the Fed either to hold or to cut.

3:07So those are elements that are out there. We'll wait to see if over the weekend the president has something to say. But but I think that the Fed chair may have the leeway here to to to hike greats. And it's interesting because what's happening now with yields is only one element of inflation. Obviously, they're married very much so to oil prices. And unfortunately, and this is a reason why the Fed probably will hike, is it's hard to see any prospect militarily right now for oil prices to come down. It just seems to be getting worse. and you don't even hear from the White House this comment that kept being made, which is we'll have a deal tomorrow.

3:48That's not even there. So if you're the Fed and you're trying to figure out, are these high oil prices one-off? They don't seem one-off. Neither do the tariffs, Scott. We have new tariffs against Canada. We have a whole new set of tariffs that have been put in place. So it's hard for the Fed to say these are one-off when they seem to be fairly consistent.

4:04Scott Wapner: Well, that's my next question in terms of the one-off, whether it's one and done, because you theoretically you go next week, then you're not going to go in October, are you? Right before the midterms. But maybe one and done is all that this would be intended to do. Not so much for inflation's sake, but credibilities. I think credibility is important here, Scott, but I really was answering your question about the long end. I don't think you get a positive effect from the long end here by one quarter point rate hike. I think you're going to need to show that you're willing to do more. And indeed, there's two things you can look at.

4:39There was something like an 80 % probability already built into markets of a second hike in December. And then just look at the two-year. The two-year trading at 463 or so is 100 basis points above where the Fed fund's rate is right now. Now, it often trades, obviously, at a higher yield, not always reflecting where the market thinks the Fed ought to go. But that is one indication that the market thinks, you know, 50 or higher would not be something that would be out of bounds of where the market's priced right here.

5:11Scott Wapner: Gosh, I'm trying to think of what what what would happen in the markets if they if they held, if they didn't do anything and what interest rates may do a hold tantrum. I don't know how to explain that. I think the counterfactual on that, I would game out to be higher yields on the long end if they hold here. I think that would be a major credibility problem for the Fed chairman, for the Federal Reserve itself. You know, you've said you're losing patience. You said you're serious about 2 percent. You said it's the PCE. And by the way, the PCE is going to probably come in 0.3 or higher, regardless of how it's calculated.

5:49You can argue with the calculation. That's the horse the Fed decided to ride. So that's going to be the metric they have to follow. And I think if they ignore it now, it's going to be a credibility issue. But I do think it's going to have to be more than one here if the Fed wants to get in front of this inflation problem, show the markets that it's serious about inflation. And then the president's going to have to step forward with some sort of visibility on how this conflict in the Middle East ends. You know, one hundred dollars may be a down payment on where things are going here.

6:20Scott Wapner: Yeah, that's going to be one heck of a week. Thanks, Steve, for helping us think about what could transpire in the next handful of days. That's Steve Leisman, of course. Now let's bring in Dubravko Leikos, head of global market strategy at J.P. Morgan. Turn to you here. It's good to have you back. Thanks for having me. Mike Ferroli, he's a chief economist, right? He was on the network today, moved up his expectations to next week also. He thinks they're going to go. Yeah, next week and then again in December. Yeah? Yeah. What does the market do? I think already a lot is in the price. So I think for as long as it's a shallow hiking cycle, I think it's something that the market should be able to absorb.

7:00If for some reason you start to see an acceleration in inflation and then the forward curve starts to price in a broader hiking cycle, clearly that's going to create volatility and it will be much tougher. Can we withstand a couple, two, three hikes? I think so. I think we can withstand. And I would argue mainly because fundamental backdrop is very strong. And I would argue that my bullishness on the equity fundamentals over the course of the last three to six months, if anything, has gotten higher, not lower. So do now while you can. Correct. If they don't? If they don't, which is a really interesting question you asked, I think you get a lot of volatility and violent internal rotations.

7:38They off immediate reaction, maybe risk assets rip. But then subsequently, because the back end rate starts to sell off, you could basically see the market sort of puke it out. Debasement trade, I think, goes on fire.

7:50Scott Wapner: Gosh, I'm just trying to, you know, think about how you all who do your jobs are going to game this out. You know, if they don't, do stocks really rip? I mean, I feel like as people continue to say, and you heard, you know, Steve and others suggest, the market's already kind of priced it in. Now, if you surprise by doing what you didn't think was possible, but now you think is a formality, there are implications for both stocks and bonds there, too. Yes, yes. Look, again, I think the biggest question for equities and for risky assets in general is not so much what's happening on the front end.

8:22To me, like the 10-year, the 30-year is more important. It's an imperfect sort of science. We've done a lot of work on it. We generally think that for as long as the growth backdrop remains strong, for next year we're basically looking at 20 % earnings growth, equity should be able to tolerate 10-year up to about 6%. above that level is where you could start to see some, call it equity risk premia expansion and multiple compression.

8:47Scott Wapner: If you're as bullish as you sound, certainly on the economy front, buyer of any dip, that's buyer of any volatility here, how would you assess that? Yeah, I think that's fair. Obviously, no, there is risks of these exogenous shocks. I don't think we can completely set aside risks tied to the street of Hormuz. You know, Brent is at 100. I mean, WTI is more or less there. Right. You know, gasoline prices are moving higher. But then again, you've got midterms coming up and so forth. And the trade so far the last several months has really been range bound. You know, once Brent approaches 100, you take the other side.

9:20It goes back down to 75. You take the other side, right? So again, I do think that macro is a headwind. A lot is in the price on the macro side. At the same time, fundamentals are strong. As we get closer to 3Q earnings kickoff, focus turns back on earnings, which should be good. and valuation, I haven't mentioned, is becoming more and more or less and less demanding. Well, the rate question factors into that, though, no? Yes, it does. About valuation. Yes, it does. But again, I think if you look historically, going back 50, 60, 70, 80 years, growth environments of 20-plus percent can tolerate multiples in the 20, 21, 22, 23 turn range and yields basically on the back end moving towards the 5.5, 6 percent level.

10:05What about positioning?

10:06Scott Wapner: Like we've seen, I think, related to the move in oil and the move in yields, things like industrials, discretionary, not trade all that well lately. How would you be positioned based on your view? So positioning, I think, first of all, at the aggregate level, has been coming off pretty much since the end of first half of this year. When you had the famous momentum crash in the U.S., in Korea, Taiwan, and so forth, broad-based assessment of positioning for us is right now we're neutral. People are not short. They're not underweight, but broadly neutral. Sentiment is pretty negative. So I think the setup from that perspective, if fundamentals continue to come through, is actually quite OK.

10:47I think if you think about internals, given that we are now looking at a sort of higher for longer thesis, you want to sort of think about large over small. You want to think about quality growth over speculative stuff. We like big tech. We like areas like health care. And then I think there is something to be said about the debasement theme also. Do you think sentiment's gotten too negative? I think sentiment has gotten maybe a little bit too negative, yes.

11:13Scott Wapner: Because again... You pick up a lot of notes these days, and it's like risk-rewards change, etc., etc., etc. I feel like everybody was on one side of the boat, and now we've rushed over to try and get to the other side. Yeah, but again, not an entire surprise. Market sentiment tends to sort of oscillate and shift from one extreme to the other. Again, we are in between earnings periods, so it's quite common to have all eyes on macro. Macro has not been getting easier. And so, yes, sentiment is sour. But again, I think as you get closer to earnings, I think you start to see a bit of an improvement in sentiment.

11:44Scott Wapner: It's not like the macro has changed all that dramatically. I think your point's a good one in that we had earnings blinders on, so we were just solely focused. We had tunnel vision just looking at earnings, right? And now we have no earnings to look at, so we're thinking about, hey, do you guys see what yields are doing? over there backing up. And how oil is at 100, and now the Middle East feels like it's more unsettled than it was before. That's driving a lot of sentiment, don't you think? Yes, absolutely. And that's why I would argue, you know, positioning is down to neutral, sentiment is mildly bearish.

12:16But I think given everything we discussed, the setup into year-end is actually quite okay. Again, the key assumption here, earnings delivery continues to come through. Key assumption.

12:27Scott Wapner: So that leads me back to the mega caps, right? Because they're the drivers of earnings and they have been. What do you make of the comeback in that trade? Certainly the mags have reemerged as a group now to potentially lead you to where you think we can go. Yeah, so I think it makes a ton of sense. We continue to like the big tech, the hyperscaler complex valuation becoming more attractive. You definitely are seeing more and more green shoots on the monetization side. I think what was happening in the first half of this year was an extremely one sided momentum trade, long short, where basically you knew for certain that, you know, things had to get built up.

13:05So all the entire upstream complex ripped and basically midstream, the hyperscalers you mentioned, and the entire downstream complex software, enterprise SaaS, all of that was basically used as a source of funding. But now you're seeing monetization green shoots on the hyperscaler side, and I think you're seeing a lot of healthy activity on the downstream side. So when you look at software, there's a lot of dispersion, but there's going to be some really, really good stories there.

13:28Scott Wapner: I feel like it's almost reversed itself again and that the chips have looked a little bit better lately relative to some of the software. Does that tell you that momentum wants to come back? Yeah, I think momentum comes back. Again, you did have this, I would say, relatively decent flush, you know, in the month of July and early August. That was a relatively decent one. Well, U.S., I would sort of think of it more as a flash crash because, again, you know, the secular momentum thesis is still intact. But Korea, I think, was more of a stark sort of momentum unwind. So I do think momentum comes back, but I don't think it's going to be as one-sided as it was in the first half.

14:05I think it's going to be a little bit broader. And that's why, yes, you go back into some of the old momentum plays that you mentioned, memory, and some of the other upstream areas. But I don't think that that automatically means you start shorting, like, again, the hyperscaler, the sort of the downstream complex, and use that as a source of funding.

14:20Scott Wapner: But what about some of the big banks? I mean, by the way, people, I don't think a lot of people realize that there are some of the large financials that are in the momentum. Yes. Basket. I think, you know, I work for a bank, but I would say I would say. Which that one happens to be in. Yes. I think a lot is in the price with respect to banks. I think the fundamentals should remain healthy. Things look very positive. But again, positioning, to your point, has re-rated. And I think a lot is in the price. And similarly, I think if you look at the commodity equity complex areas like energy, I'm not sure I would want to be hanging out there because a lot is in the price.

14:55A lot is in the positioning there.

14:57Scott Wapner: Wow. Now, health care, you mentioned that that had a nice run. Like we put the chart up as you're talking about this, but then a little bit of a roll recently. Where does that go? We like it. We like it. We think it's an orthogonal play a bit to the A.I. theme. Again, there was a lot of headline risk that the sector had to digest in recent quarters with a potential gridlock. that should be a little bit less of a risk. Valuation, I think, still looks quite OK. And I would argue the whole AI disruption thesis tied to health care is extremely well advertised. And if anything, we could actually start to see increasing signs of monetization of AI and productivity in health care, areas like medical devices.

15:34And end-of-year target S &P, remind us. We're at$8 ,000, and we did revise the price target up slightly early August. But that was entirely a function of earnings. the multiple expectations we've kept capped due to the macro headwinds that we discussed. It's good to have you back.

15:51Scott Wapner: Thank you, Scott. Don't be a stranger. I won't. Dubrovko Lakos joining us, of course, from J.P. Morgan. Let's bring in our panel now, CNBC contributor Hightower, Stephanie Link, Schwab's Kevin Gordon. They're both here at Post 9 as well. I think the conversation begins and ends with what happens in the middle of next week. You don't think and haven't thought that they're going to hike, nor have you thought they should. Have you come around, Stephanie Link? I think for credibility purposes, I think they do have to go next week. Wow. OK. Well, 4-6 on the core. If you move the Linkster, then, I mean, you're like the barometer here.

16:26Well, 4-6 on a core PPI, 2-4 on a core CPI. They're not, they weren't any hotter than expected, but they're still hot. And for credibility purposes, like you just talked about, I think they do have to go. I don't know if they're going to go in December. A million things can happen between now and December. And one thing at a time.

16:45Scott Wapner: One meeting at a time. Exactly. And let's get the data and let's see what happens with Iran. Because we do know that oil is a big problem on inflation. Some tariffs are a problem. But the AI infrastructure build-out is also inflationary. So when does that switch a little bit from being less inflationary to more productivity? And I think that's what I'm watching, at least between now and the end of the year. We have a lot of time between that. I do not think 25 basis points or even 50 basis points is going to derail this economy. And why? It's because we learned yesterday from Oracle that the AI infrastructure build-out is still hot.

17:20I mean, they had bookings. Oracle had bookings of 46 percent year over year, and they're still spending on CapEx. I don't own Oracle. I don't like the free cash flow story. But the point being is they're seeing the growth, and that's going to continue. And then you mentioned discretion. You know, we were talking about it earlier this week. The consumer has jobs they're going to continue to consume. We get retail sales next week. Remember the last two months we had to average in because we had the prime day two months ago, and then it reversed. So I think the consumer is going to continue to consume.

17:49I think Brian Moynihan talked about it two days ago that spending in August was 4 percent. On CNBC, he did with Jim, I think, right? Yeah, and also on Wells Fargo, they also talked about a strong consumer on the high end as well as the low end. A lot of important things to see as well. A lot of important things to see. Of course, you have to watch it.

18:09Scott Wapner: But you're in the camp then of if you're going to do it, do it now while you can. Because in other words, you can't show up here and say, hey, the economy is great. The economy is great. They can't afford to hike. Right. I mean, I think they're they're hiking in a position of strength in a way. Right. Because they have that momentum. So that's what's so important. That's why the A.I. and just following the whole A.I. food chain is so important, because if anything happens there, Then we're going to see a crack in the economy. There's no question in my mind. But I don't see that, Scott. And again, you were just talking about earnings.

18:39That's the most important thing. And the market multiple has come down from 23 times to 20 times. And earnings are going higher. So this is an earnings-driven rally this year, year to date. I'm not saying we're not going to have volatility in September, because we probably will continue. But I think you want to be buying that.

18:55Scott Wapner: All right. KG, what do you think? Next week, do they go? I think it's likely. It's hard to take what Warsh said at Jackson Hole plus this morning's CPI purport and the components from PPI that feed to PCE and then the upward visions that you had for the summer months for jobs and then August. Hard to get all of that. You put that equation together and then you don't get a Fed hike. So we'll see what the committee nets out to in terms of the majority. But I do think that it would be, you know, to your conversation with Dubrovko in terms of if they didn't hike, I do think that you would probably have a negative response on the long end.

19:28And I think all else equal, that would be a negative day for or a negative response series of days maybe for the stock market because of this tight linkage that we have in the negative relationship between bond yields and stock prices. We've learned that very much so this week leading up to today. I mean, significant reaction from the equity market because of yields.

19:45Scott Wapner: Could we talk about that being the great irony being if the Fed hikes in stocks actually go up? Yeah, I mean, I think that's why you're seeing the price response that you're seeing today. It was a bit of a sell the rumor, buy the news event. It's become that. You know, again, I think this is the market. The response today, I think, is the market telling you that they do have an expectation that the Fed is going to hike very much to the spread that Steve was pointing out between the two year and where Fed funds is right now. I think it is the market's way across asset of saying that that is the expectation that they're sort of taking this step towards maintaining the inflation fighting credibility part of their mandate.

20:19Scott Wapner: I mean, but the issue still is seasonal weakness. That's still around no matter what the Fed does next week. Blackout window. Companies can't do buybacks. That's still around no matter what the Fed does next week. Earnings aren't happening for a minute. That's still around no matter what the Fed does next. We still have to get over some hurdles. Yeah, absolutely. And even on the earnings front, we're still of the mind and the thinking that the market can continue to do well. You shouldn't be significantly underweight, significantly overweight. We're sort of in that neutral camp for the S &P. Yeah, we've been in that camp.

20:55But neutral doesn't mean negative. Neutral is stay invested, stay at whatever your sort of target allocation and benchmark is for, if you have a benchmark, for the equity market.

21:05Scott Wapner: But it doesn't mean exactly you're playing offense. You're trying to sort of hold the line. Yeah, and you can also reflect that, I think, in sector leadership and how you sort of construct a portfolio. If you have less tech exposure, you're probably a little bit less constructive on the cap-weighted index because of the weighting that that sector has. But you can be relatively constructive via positioning in other sectors that are more cyclically oriented, still benefit from a growing labor market, which we're still experiencing in a growing economy. So there are ways to reflect that in the construction of a portfolio.

21:33Scott Wapner: That doesn't necessarily mean being overweight, something like the S &P. Are you finding positioning now more difficult to think about in the context of this newly introduced idea that you've even just gotten your own arms around? It could be a hike next week. And what that might mean? Well, no, it's not changing where I'm investing. In fact, I'm looking at any kind of declines to add to maybe some new positions, like Wells Fargo, for example, because they just told you that net interest margins actually have bottomed. And that's a good thing. And the consumer is strong. You're thinking about establishing a new position?

22:08Scott Wapner: Yeah. Because this was your largest position for as long as we've known each other, I think. And then you sold it at least in the last six months, right? Yes, I did. And it hasn't done anything. And it's lagged. And it's cheaper now than it's been in a long time. So there's there's that there's Estee Lauder, which actually has a whole new program to increase margins, gross margins, operating margins while getting better and back to normal and organic growth. There's Dick's that has gotten just hammered. Foot Locker is a mess, but Dick's itself is great. So there are names that I'm looking at, maybe not overall sectors where I want to change my weightings, but I think you're getting looks and opportunities.

22:43Scott Wapner: All right. Well, you'll update us as you always do. I will. Guys, thanks. Good weekend, everybody. We're just getting started here. Coming up next, the tech investor, Doug Clinton of Intelligent Alpha. He opens up his own playbook, the top tech stocks that he thinks you should bet on right now. We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC.

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24:31Scott Wapner: Welcome back. NASDAQ heading for its first positive day this week. Doug Clinton, the intelligent alpha founder and CEO, the firm investing in several of the biggest names in tech. It's good to have you on. It's been a pretty good week as well for certainly a couple of these names. Meta up five and a half percent. Apple up four. What's your ownership of both of those? Scott, it's good to be with you on a day where we are green. On Meta, we don't actually own that stock. But what I would tell you as just an AI user myself and an intelligent alpha, we test all these models. I think Meta over the last two or three months has proven probably as much as SpaceX AI has with their new launches of Grok that they can be really competitive in this model space.

25:17I think everybody had written them off six months ago from a model perspective. And now they just recently launched their Muse personal assistant. And so I think there's a good and rational interest in Meta where if they can get this personal assistant idea right, I think that's a$1 trillion plus market opportunity for them. And by the way, Apple, which we do own at Deepwater, that's another company that's playing for that same personal AI assistant world as they relaunch Siri hopefully later this year.

25:46Scott Wapner: So how would you assess what Apple did this week? It's interesting, right? The stock traditionally doesn't trade all that well in September, not for a calendar's sake, but the fact that it's usually a sell the news on the iPhone event. This time, it was sort of figuring out what it wanted to do and decided it wanted to be green. What was your takeaway? I think there were two things that were probably new about this particular Apple launch in September. One is we actually finally got a new Apple device with the Duo. And I think that even though it's a very high-end device,$2 ,000 price point, I think a lot of consumers are excited about that.

26:26And it finally gives us a new form factor, which we haven't seen from Apple in a really long time. The second piece I think is really important is John Ternus, new CEO. He made it a point to emphasize that the iPhone is the greatest consumer AI device. That's how he referred to it. And I think that that's probably true. And it gives you a window into the longer run at Apple. they see the iPhone, right? Is it just sort of this thing that continues to give you apps and videos and music? Or is it this thing that can become much more personal, that can be your confidant, your assistant? And I think that that ultimately is the future as they integrate Siri more deeply into the device.

27:06Scott Wapner: Back to Meta, if not now, when? In other words, of owning this stock, what do you need to see at this point that would cause you to want to buy it? you know we've owned it in the past and uh i think the the biggest challenge for us is we kind of look at the broader landscape of ai plays and you have to pick which ones you think have the most upside over what your investable time horizon is for us meta is still probably one of the players that's on the outside looking in in terms of really winning the ai race i think there are other players that are more exciting. And by the way, we're also thinking about IPOs that could be coming fairly soon from companies like Anthropic and OpenAI who are playing for that same game.

27:51So we're really thinking about not, you know, is Meta putting out good products, but on a relative basis, is it one of the best AI plays that we can make? Right now, we're still more comfortable with some of the chip plays and with Apple.

28:04Scott Wapner: Speaking of, I mean, NVIDIA is down 5 % on the week. I hear some suggesting that this stock's heading back to a new high. It's, what, 218 now, 236 to 52 week. What do you think? I think we would fall in the camp of a new high. It is a stock we own at Intelligent Alpha. And the reality is this. They came out a couple weeks ago. They said that they are looking for 70-plus percent revenue growth next year, which is a number no one expected. And that's a supply constrained number. And so I think it goes to show when we see companies like Meta launching the Muse Assistant, when we see GrokBot, when we see some of these other products now, I think really starting to go mainstream.

28:44You're getting the average consumer to use AI, not just power users. I think that speaks to the continued large amount of demand and ultimately infrastructure we'll need. And NVIDIA is, you know, 60 to 65 percent of data center build costs. They're going to continue to benefit from those data centers we need to keep building.

29:03Scott Wapner: You're bullish on a lot of the chip names that play right into the momentum space. TSM, Micron, Broadcom. We just mentioned, obviously, NVIDIA, LAM Research, SanDisk, for example. Where do you think the momentum trade goes from here? I think it'll start working again. And it's a trade that actually we had backed off of at Intelligent Alpha. We do use AI for our investing process. Our models had really backed off of the momentum trade kind of early July. We were a little bit early to that correction. And more recently, I would say the last month or so, our models have gotten more bullish on coming back to the AI trade.

29:42Now, I think we've seen a lot of these names correct 20, 30 percent. They've started to work again after that correction in July. And I think we could see the momentum continue, which will be, again, supported by the fundamentals we just talked about of continued data center builds that I think are probably still being underestimated in 2027.

30:02Scott Wapner: Doug, we'll leave it there. Appreciate the time as always. We'll see you soon. Thanks, Doug Clinton. Coming up, is that rate hike inevitable next week? Former Dallas Fed president Richard Fisher gives us his view next.

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31:35Scott Wapner: Welcome back. is a rate hike inevitable next week. The key question. Richard Fisher is the former Dallas Fed president, senior advisor now to Jeffries. He joins us with his answer. It's nice to see you as always. What do you say? Well, first, it's good to see you on this solemn day. And none of us can forget what happened 25 years ago. Now, getting to the Fed, I don't think they have a choice here. And I actually have an odd theory here. And that is that the president made his questionable demand tying a rate cut with trade issues in order to help Kevin Warg establish his credibility. In other words, should the committee under his leadership move to increased rates, which the market is discounting here in September, the next meeting next week.

32:34despite what the president said, it enforces or reinforces Warsh's credibility. So, A, I think the inflation numbers, given the employment situation, as Roger Ferguson said this morning on Squawk Box, the employment situation is great, the inflation situation is not, and it's pretty clear that this will continue for quite some time. then the Fed has, the FOMC has no choice. And I expect them to raise rates by a quarter at the September meeting, this September meeting. And that'll make, I think that will help with Kevin Worsh's credibility.

33:15Scott Wapner: Would it be in your mind a one and done, or would it be more than that? Well, not necessarily. I don't think you want to move in October, six weeks from tomorrow or next week. Because I think then it's very rare for the, it's been done, but it's very rare for the Fed to do it just before an election. It allows you to have the freedom of waiting until December. And I think there is a reasonable probability that they'll have to move again in December. It depends on the inflation situation. It's not improving. And if you look at the PPI, which was released yesterday, and you look at the CPI, which is just done, the PCE is likely to be very high.

34:04In my day, that's what we looked at at the Fed. And until recently, and there was some discussion and focus on the CPI. So we know that inflation is an issue. Tariffs, oil prices, diesel prices, fertilizer prices, et cetera, are not pointing in a disinflationary way. And if that continues, then I think they would have to move again in December for another quarter.

34:30Scott Wapner: I could almost hear Chair Warsh say, you know, Richard, with respect to your day, this is a new day. And I'm not necessarily interested in focusing so heavily on the PCE like you all did. We need to take greater things into consideration. I haven't even heard from my task forces yet, and I'm going to hike rates and risk possibly a mistake to save credibility because people think that I need to? You know, the people on the task forces all have been advising J-PAL and the Fed for a long time. There's nothing new there. I think it's a smart idea to get away from forward guidance. Remember, I gave speeches in 2014 saying the dot plot was a waste of time.

35:18And I agree with him on forward guidance. And there is, in a sense, even though he articulated a little bit better, a little more thoroughly in Jackson Hole, he still is focused on inflation. And we do have an inflationary problem. Whether or not we get new reports back on communications and the underlying data, et cetera, from these committees. So A, the committees are composed of people that have been working with the Fed for a long time, off and on, and help J-PAL or hinder J-PAL, depending on your perspective. And B, this inflation issue is not going away, particularly if the president keeps talking about inflationary measures.

36:05And if this situation in the Gulf, and we saw what the Houthis have now done to the Saudi Arabians, and they're cutting off that additional channel for exporting oil, then I think this is likely to be with us for quite some time. I don't like that, Scott, but that's, to me, a reality, whether you're Kevin Warsh or you are Jerome Powell or you name it.

36:30Scott Wapner: You mentioned Jackson Hole. Some say that the chair made his hiking bed in Jackson Hole because he was hawkish. So let's assume that. But, you know, it was. Let's give him let's give him some time here, because as a chairman. He's trying to figure out how to articulate himself a little bit better. And he is a very articulate guy. But his presser, we all remember, was not good. He made progress, but he still hasn't really given us a sense of how he wants to lead the committee. And that still has to be done. Meanwhile, he's been tested by the inflationary numbers and his references that that is the keystone.

37:15And we'll have to see how he leads now. And he has a good chance next week. And he's willing to go against the president's opinion, which I think it may be a setup because I think he will have to go against that opinion. And that will make him look a lot stronger.

37:32Scott Wapner: Do you think that he's been tested by Treasury as well? given the intervention in the bond market? And my second part of that question would be, if they do hike, what do you think long-end yields would do? I think that would maybe slow the progress of the 10-year going to 5%, which is, if you round it as we speak, it is at 5%. The 2 is at 460 or 60-something. Clearly, Bessent is not the house, as he said. I think he's a good guy, by the way, and I've met with him privately. But I think that the market's too big. And he, as a former hedge fund manager, understands the power of markets. Why he said that, and by the way, the yen weakened by one yen after the speech.

38:23It's now trading at 153 or so, roughly where it was, 154. Why he would take that kind of stance with only$6 billion in a market that is unimaginably large? So I don't think the long end of the yield curve is affected by the short end, except for if they gain credibility, it's possible that we might see the 10-year end from five year on out, et cetera, take a dip downward in the yield.

38:51Scott Wapner: You have yourself a good weekend. We'll talk to you soon. Always enjoy your insights. Thanks, Richard. Thanks for having me. Thank you. That's Richard Fisher. We're back after this. All right, what's happened from the bell? Let's get back now to Brandon Gomez. as he has a look at the stocks we're watching. Hi there. Hey, Scott. Yeah, take a look at Dell Technologies, rallying more than 10 percent as part of a broader upswing in tech. Dell boosted in part by an outperform rating from RBC, saying the company is, quote, well positioned as the primary beneficiary of the global IT spending environment.

39:21Now, elsewhere, GameStop shares up nearly three percent after CEO Ryan Cohen disclosed that he purchased one million shares. The meme stock is on pace for its first double digit weekly gain and best week since last November. And closing things out, nuclear stocks are under pressure today with new scale power down 14 percent after UBS downgraded it to sell from neutral. UBS citing the company's long build timeline and cutting its price target to six dollars from 10. Scott.

39:48Scott Wapner: Brandon, thank you. Brandon Gomez up next with the options markets expecting from that Fed meeting next week. We'll go to Chicago to find out next.

39:59Scott Wapner: now in the closing bell market zone mike santoli and empowers martin norton here to break down these crucial moments of this trading day oliver renick standing by live from the sebo global markets in chicago we game out that bed decision next week first though we go to mike santoli and your observations michael yeah obviously some of the pressure came off scott roughly as expected of the cpi number which i think gave the market the minimum it needed which was clarity about what's going to happen next week. I know you've been talking about that. So we do see this notch of relief in the S &P 500.

40:31It's not exactly exuberant. It's just kind of, OK, we can sort of relax a little bit. It has felt like the stock market was sort of playing not to lose as opposed to really playing offense and trying to make some some headway. And it's done that for the better part of five or six weeks. I do find it interesting that market breadth softened up over the course of the day, you know, yields and oil have been searching for that threshold that's going to have a broader, deeper impact on on large cap stocks. It hasn't quite found it yet. And so I guess we kind of dodged another bullet for the week.

41:03Scott Wapner: You pick up that conversation in less than five minutes now as you look ahead to next week, like we all do. Yeah, of course. We're going to go into it. Good pivot ahead to next week. Also got the former CEO of Lululemon going to talk about that business, which is having a tough time. Oh, man, there's no question about that. It's seemingly everybody in that space is too. We'll look forward to that conversation, Mike. Thank you. That's Mike Santoli. We'll go to Chicago now as we play options action with Oliver Rennick. And you're talking Fed and expectations. Options trading today almost makes it look like stocks want a rate hike next week, Scott.

41:38VIX bottomed at 15.6 today, unwinding two days of higher vol. Market makers were getting a bit lopsided when SPY was below 765 yesterday, a key level we are skating above right now. It looked like things could have gotten slippery under there, but instead stocks are stabilizing, which is a win ahead of a big week that includes not just the Fed on Wednesday, but triple witching expiry for stock and index options and futures on Friday. Yet put trading in both SPY and the Q's today was still dominant. That means if the market indeed is OK with the hike next week, some bears could be very off sides.

42:18Scott Wapner: All right, Oliver, appreciate that. That's Oliver up in Chicago, obviously. All right, Martin Norton sitting with me here at Post 9. You, like many, had been in the no-hike camp and have been forced to move. It sounds like from your notes. Yep, yep, forced to move. I think there's a few reasons for that. The first is I do feel like we got a little bit of forward guidance from the Jackson Hole address when Warsh went through his laundry list of the state of the economy, his expectations around inflation, the breadth of inflation. It just felt like there was a hawk flying around during that conversation.

42:52And then I would just add that as we look at Iran, it feels much more like a semi-permanent situation rather than a one-time supply shock. And we do know that that can start to affect core inflation. And so those are the kind of considerations that I think make some sense.

43:07Scott Wapner: Wow. So if that's the case, that would suggest more than one move. Potentially. I mean, I think they're going to take it meeting by meeting, data dependency as always. But it does seem as though it would make some sense for there to be an adjustment when we think about the conditions that we're looking at today. And what do you think the markets would do? You can take the bond market first since there's been so much focus on the long end. Yeah, I mean, it's pretty fascinating, right? I think one of the working theories is that you see those rates move higher at the short end, and that brings some certainty in the market and could potentially bring some of those long rates down.

43:42But when you look at the structural drivers of long rates, hyperscaler debt issuance, questions around fiscal concerns, I don't know if they're going to come that far down.

43:51Scott Wapner: Well, I mean, because the Fed can't affect those. That's the conundrum that we find ourselves in. What about stocks? What do they do? Well, it's kind of interesting. I mean, And earnings have been a massively cozy blanket for the stock market over the course of the year and really protected it from a lot of volatility. Until that gives up, it's hard to imagine they're going to collapse. But it's hard to imagine a major acceleration from here, too. That's funny. It's like until that gives up, it's hard to change your mind. Yeah. But until they come around again, we have nothing to think about. Nothing to think about.

44:22It's too bad. Yeah, just status quo.

44:24Scott Wapner: So what do I want to do then in that environment? I know I'm not getting earnings for a little bit. So do I get more cautious in positioning or do I just hold the line? What do I do? Yeah, well, I think one of the things people have to think about is their AI positioning, which is almost ubiquitous within the U.S. equity market. Of course, there's memory in the tech trade, but there's also all these other parts, small caps, industrials that are tied to AI. So I think this is a good chance to kind of reset and think about the breadth that you have in your portfolios. Healthcare used to be a great place to hide out.

44:53It's rallied, so that's difficult.

44:54Scott Wapner: But then it's rolled lately, so I'm not sure what that message is either. Yeah, well, I think it's a good play for defensiveness. I think if we are worried about an AI trade, I think health care is the place to be. There's also the energy trade that seems to have some legs here, too. So I think this is a good chance to think a little bit more about diversification. Do you think the hyperscalers and the comeback that they've seen, is that reflective of that safe haven trade that had existed? And now, as we enter a historically rough month, that's back? Yeah, I wrestle with that a little bit. I think valuations are a big catalyst there.

45:27I think there's a little bit more questions about their safe haven status when they have very little cash flow to point to.

45:32Scott Wapner: Interesting. I mean, they're more idiosyncratic, too, right? They're not trading as a monolith, as we're learning. But in some cases, they may be viewed as those safe placards. It's good to have you here. Thanks. That's Martha Norton. They're going to ring the bell, of course, to end this week on this solemn day across this country and certainly down here. on the rest of the week. I thought you were finished, Dean. Wish you all a good weekend. I'll send you the note of time.

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