Markets Brace for the Fed as Earnings Roll In 10/27/26

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1:2810 % in October. Bond yields moving slightly higher, the 10-year right at 5 % as the Fed meeting kicks off with a decision due tomorrow. Coming up, we'll hear from someone who is expecting the Fed to actually hike tomorrow. We're also expecting earnings from Visa, Robinhood, Seagate, and more in the next few minutes. Let's begin with a recap of today's trading. Pippa Stevens joins me here at the Nasdaq. Pippa, hi. Hey, Mike. So let's start here with the chip stocks because Broadcom kicked off That rallied by striking a$63 billion deal with banks to fund Anthropik's purchase of AI chips, AMD Intel, among the other chip names moving higher as well.

2:05That sign the money is still flowing helped the neoclouds today. Core, we've up 8 percent. And, Mike, you did mention that the Dow not really participating in today's gains. Now, Boeing was a drag on that index. It posted a bigger than expected loss and cut its delivery target for the 737. Sherwin-Williams, the second biggest point drag on the Dow. It missed on earnings but beat on sales, the company blaming higher costs for that disconnect and says it will look to cut costs and perhaps raise prices to combat inflation. Energy was the worst-performing sector today following a move lower in oil.

2:38U.S. crude back below$100 amid renewed diplomatic efforts in the Middle East with Iran's president and Saudi Arabia's defense minister holding direct talks in Tehran. And Brent, Mike, ending the day at 1.14. You know, past couple of days, Pip, a really good example of how the market just wants to confound kind of the last thing people thought we knew. Everyone was talking about being defensive and credit risk and how semis maybe were going to be compromised. And two days now you wonder if it's going to be people saying maybe the A.I. trade is reinvigorated with some of these financing deals and we don't want to miss it.

3:10And clearly the anthropic prospectus yesterday kind of led to some optimism there, particularly on those revenue numbers and just kind of the idea that maybe that this that the spending, the money to spend will show up in profitability metrics sooner than we thought. I think, though, it will be interesting to see once we get past earnings season, once we get past midterms, as well as, of course, the Fed decision tomorrow. What does that mean? What's the shakeout after that in terms of the trade? And then also, you know, are we going to see the 10 years still around 5 percent and kind of this move back into the safety trade because of concerns around AI CapEx?

3:42But I think key to watch will be the earnings and the extent to that spending is now going to start showing up in the profitability. Yeah, I mean, people think that we have some potential, quote, clearing events coming with the hyperscaler earnings Fed meeting in the election. We'll see if, you know, next week this time we know something. But thank you very much. The appetite for capital in the AI world has outgrown what any one part of the market can provide. This week alone, Wall Street saw about$200 billion worth of new AI financing plans and commitments. Meta announcing plans to raise$95 billion through a stock offering to fund its AI buildout.

4:14NVIDIA saying it would invest up to$3 billion in Meta's equity offering, with AMD also investing a billion. SpaceX closed$40 billion in debt financing to buy GPUs, and Broadcom secured$63 billion in financing to lease its AI chips. So does all of this mean the AI funding boom is still alive and well? Joining us now is Eric Mandel, Guggenheim Security Senior Managing Director, where he advises on major deals in the tech, media and telecom sectors. Eric, good to see you. It's great to be here. Thanks for having me. You know, obviously, this is a sector that needed some reassurance. It's gotten a bit with a lot of these announcements and deals, but there's still been undeniably some indigestion and the market repricing the cost of capital here.

4:58So are we waving it all clear? Are we saying that maybe only the strongest have access to capital? How do you see it? Yeah, great way to set it up. And I'll dovetail on Pippa's comments. I think the anthropic news was the calming that the market needed. And the reason for that is now we're just dealing with facts. What was the history and what are we looking to for the future? And, you know, the work that we're doing, which is a balance of equity work and M &A work, is people are always looking at not a trailing revenue multiple, but a forward revenue multiple. And you look at where Anthropic, let's say it comes out at one and a half, one and a half trillion.

5:36Yeah. That's in the low 20s on a forward multiple. That's obviously a very rich number, all things considered. Forward multiple of sales. Forward multiple of sales. But when you look at where SpaceX is trading on a forward basis, it's a little bit of a premium to that, but not very much. And I can tell you in the board conversations we're having right now with a lot of the M &A deals we're working on, for a business that's growing not nearly as fast as Anthropic, you can command it 20 times multiple. So I think the story that the market liked was if this is an ability to underwrite into 27 in that way, and there's a path, as Dario has said, to$200 billion, is that a way that it can be financed without having the stress of this CapEx pressure that you just mentioned?

6:22It's definitely the case that Anthropic, because you had some numbers to fix, too, because they have 100 billion plus in cash on the balance sheet before the IPO proceeds even hit. I think that did calm some nerves. On the other hand, you know, SpaceX price talk on their debt was over 8 percent. Yes. There may be investment grade on paper, but that's kind of not an investment grade rate. Similar with Oracle. And I just wonder, even Meta, you know, they do the secondary stock was seven hundred and seventy dollars. two weeks ago, they price a deal at$625. So my point is the market is kind of extracting some concessions here.

6:57And do you think that slows down the aggregate ability for this build out to happen? Or are we okay there? So also a great question. I would say this. The amount of energy that the Magnificent Seven plus the next 10 or 15 companies, so think like IBM, Cisco, ServiceNow, you know, the list goes on and on. The amount of self-imposed pressure that they all have to fulfill this trade is unwavering. If anything, it's actually ticked up a little bit. And I would say there's one statistic that your viewers, I'm sure, picked up that has been resonating all over Techland right now, which is NRR, right?

7:35So it's the recurring revenue on a net basis. It's 900%. In my world, if I'm selling a business, if we're at 130%, that's best in class. So I think when people see that in the short run, will people have to take their licks to finance? Probably. But in the long run, the demand is there without a doubt. Eric, take one second. We do have Robinhood earnings coming out. Kate Rooney has it for us. Kate. Hey, Mike. So revenue for Robinhood is in line here. Trading and predictions markets appear to be the engine behind some of that growth. The company also lowering its full year spending outlook. That total revenue number,$1.42 billion.

8:14That was right in line with estimates up about 12 % from a year ago. The EPS number for the quarter, 51 cents when you adjust and strip out a couple of items there. EPS is closer to 60 cents, but unclear right now how the street is going to be treating some of that. So we're not going to compare that number, but adjusted EBITDA came in better than expected, 808 million there. Robinhood taking the prior spending outlook down by about 25 million. They say that reflects, quote, ongoing efficiency gains across the business, transaction-based revenue. So this is typically based off of customer trading, Still the bread and butter for Robinhood, a little bit lighter than expectations, but options, the leader here, made up almost half of that category.

8:53Events contracts. This is interesting, Mike, a very bright spot up 6x year over year, and very notable that prediction markets in the quarter brought in more revenue than equities trading and a lot more than crypto. Crypto volume, the notional volume, is down about 38 percent from a year ago. I did catch up with the CFO of this company, Shiv Verma. He highlighted predictions market, event contracts. He said it is becoming more diversified. It's not just sports. He said there were some topical things around pop and culture. You're now starting to see crypto in event contracts. He said big picture.

9:26It does continue to be a wider variety of assets. And then the core trading business, he said it's incredibly healthy. Equities, options, margin were all at all time highs, up 50 percent from a year ago. He did call out some dip buying as well. Customers, he said that they especially went into semis. Semis got hit. We did see some dip buying and then said October trading looked healthy. We do expect to hear more about that on the analyst call, Mike. All right, Kate. Yeah, maybe a little bit of evidence there that a lot of the former crypto traders did move on to prediction markets of various types.

9:56We'll see if we get more color in that direction. Appreciate it. Kate Rooney. Thanks, Mike. And Eric, you know, a couple of other things on just the broader financing landscape. It feels as if, you know, on one side you have this idea that GPUs are retaining their value. The rental rates are very high. These are very good assets to finance. On the other, token prices crash. This is being commoditized. All these models are never going to be able to reap what they are now investing for. Do you have to have a call on that to be, you know, actually raising money for these companies? This is the question.

10:31This is what everybody's focused on. So I'll share one thing, which I'm sure many of your viewers are focused on right now, which is Jevin's paradox, which the amount of pressure just intellectually that you would have on your mind when these models become this efficient, by definition, people are going to spend less. The opposite is happening. And it's happening in a very big way. I would also add, you know, we're very deep in open source as a firm, also as an advisor. It's sort of mind-blowing, but the majority of the tokens that are now being consumed are free or close to free. They are open source driven or open weight models.

11:04So when you see that and you still see the moats that the frontier models have created and that the neoclouts continue to enjoy as they're training these models, if you had to make the call, you're probably long rather than short. That would be my two cents. All right. I guess there's enough to go around for the moment. We'll see, Eric. Good to talk to you. Thanks so much. Thanks for having us, Eric Mandel. Well, those financing headlines giving the A.I. trade a boost again today with the Nasdaq posting its best day in more than a month. So is this the all clear for investors to fully dive back in or should they continue to stay diversified?

11:37Joining me now is Daryl Kronk from Wells Fargo and Tim Urbanowicz from Innovator at Goldman Sachs. Good to see you guys. Good to be here. Thanks for thanks for coming in. And Daryl, I want to dial back just a little bit. S &P is up like 13 % year-to-date. Equal weight S &P is up 13 % year-to-date. You look at that and you say, I guess nothing's happened. You know, we kind of got to these levels like three months ago. But plenty has happened under the surface. So how do you feel like right now the markets are set up going into the last couple of months of the year in terms of metabolizing what's to come and how you should be positioned for it?

12:09Yeah, I think it's a tough environment right now because, you know, we're right back 100 points on the S &P off of the September highs of 78-18 and basically the August highs concurrently. So, you know, at 100 points, looks like all's clear on the surface underneath incredible violence that's happening. And most of it's hard rotation between and amongst the sectors. It's actually not capital leaving the equity markets, which is why the indices are staying there. But to the extent that tech is rotating hard, which it is, because it's such a big market cap weight, it's dominating that. We still think you can kind of glide through in November and December.

12:46But, you know, high yield spreads, widening oil prices, interest rates where they are, stuff kind of boiling overseas between France and what happened in Brazil this week and Asian equities. All that starts to add some turmoil into the year end. Yeah, it does seem there's a little more more friction to deal with. Tim, get you in a second. We have Seagate earnings, as a matter of fact, out. I want to give those to you. Stock is falling. Earnings coming in at$7.68 a share, 26 cents ahead of the estimate, also beating on revenue. Guidance for the second quarter also significantly better than expectations.

13:20At the low end of its range, Seagate sees earnings of$9 a share compared to the estimate of$8.58. Nothing glaringly negative in this report, but the stock is up 140 percent this year. There, of course, could be a sell the news reaction, although also way off its its highs. These have been very volatile names. And, you know, obviously, we don't exactly know what was what was priced. And we'll have to get to the the sub layers and the call to find out what the reaction is all about. And we'll do that in just a moment. So, Tim, you know, we talk about the kind of churn under the surface. It does seem as if you have bond yields offering you at least a little bit of a cushion on some level.

14:02And you do have maybe look, you're going into the fifth year of a bull market. You wonder if your expectations should come down. On the other hand, you don't want to miss this once in a lifetime investment boom, which the S &P gives you access to. So what would be your your cut at it? Well, Mike, I think if you take a step back, you look a few years ago, it was very difficult to get investors to a 7 percent return. You had to overweight equities in a pretty meaningful way. That's no longer the case. For the first time in a long time, bonds are actually paying you and they can protect you. I think what we want to focus on, though, is diversification has to look different.

14:36Right now, it's not about owning many different assets. It's about owning different risks. And bonds in and of themselves are going to protect you from specific risks. In AI slowdown, bonds are there. Outside of that, inflation, they're not. So we want to think about these other risks that we're owning in the portfolio. And you're setting that against what? Essentially just a core exposure to, as I keep saying, the S &P 500, you know, you got your AI. exposure there if you own it? Well, you do have your AI exposure there, but right now what we are focused on is really relative value. We think the AI trade is alive and well.

15:11Demand is strong, but you don't need to necessarily overweight the U.S. to pay up for that growth. We see, you know, you look at markets like Korea that just went on sale 30 percent. There's good value there, and you're still getting access to the AI growth story. On top of that, we also think you're heading into this next phase of adoption. And just like the first phase of the AI trade, it was all about the picks and shovels. Those were some of the biggest beneficiaries. We think this next phase of agent deployment is really going to be about those picks and shovels, but those are going to look different.

15:42You know, security providers, ID, commerce, all those different areas are going to be really important. Different kinds of picks and shovels. All right. The whole hardware store. I do want to show you the World Federation of Exchanges ringing the closing bell at SIBO in Chicago. That ends the regular trading day for options there. Darrell, what do we make of the fact that, as we talked about, the S &P 500 itself has kind of not made a lot of headway in recent months, and you've had two straight quarters of just absolutely gaudy earnings growth. So the market is not necessarily giving full credit or extrapolating that growth, or, you know, maybe valuations have been unduly compressed.

16:19Well, they have. Actually, it's a year ago right now when multiples on a forward basis peaked at 23 times. They're about 19 times today. So they've actually come in four full points, which makes, you know, if you love the market a year ago right now in October, you should probably love it now. I think, you know, the tech side of things is really going to be the question we have to answer in 2027. I don't think it's going to be a valuation issue. I don't think it's going to be a demand issue. We know all the backlogs across the complex that are happening, I think what it becomes is an expectation issue.

16:51Can we deliver the compute? Can we deliver the earnings? Can we monetize the models as fast as we want to? If we can't do that, then I think you introduce a lot more volatility in 27. Could still be a good year. Earnings growth will still be robust, but it's going to come with, you know, we haven't had a 10 % correction since April of 25, right? We're 18 months into that. That's very unusual. Yeah, you've had all the corrections that have happened below the surface, not at the index level. Jonathan, good to talk to you. Thank you very much. Appreciate that. Visa earnings are out. The company beating on both the top and bottom lines, reporting adjusted earnings per share of 348.

17:26That was four cents more than forecast. Revenue coming in at 12.1 billion dollars. That was above the estimate. Visa also raising its dividend by 16 percent to 78 cents. The shares off by two percent. Shares of Seagate down eight percent despite strong results and guidance. Up next, we'll ask an analyst for an explanation of all that. Closing bill overtime will be right back.

18:17We'll see you next time. broadens access to the credit economy and brings 5 million mortgage-ready borrowers into the market. That's why top lenders like Rocket Mortgage, as well as nine of the top 10 banks, rely on VantageScore 4.0. With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. Everyone wants health care to be simpler and easier. That's why UnitedHealth Group is fast-tracking more than 60 % of children's procedures that used to need pre-approval so more kids get the care they need when they need it. And speeding up procedure approvals and payments for more than 1 ,500 rural hospitals so they can focus on caring for their communities.

19:01And that's just the start. Learn more at uhg.com slash access. There are three kinds of investors that listen to this show. Those protecting what they've got, those looking for solid returns, and those swinging big. Most tools pick a lane. VectorVest doesn't. Every stock gets three scores. Value, 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. Shares of SoFi jumping today. The company beating on earnings and revenue, also raising its outlook for the rest of this year and giving strong 2027 guidance as well.

19:49Despite today's gain, the stock is still about 50 percent off its 52-week high and more than half the analysts covering the name rated as a hold or a sell. Let's get another check on Seagate. The stock falling despite beating on earnings and revenue and giving guidance above the street's current expectations. Joining us now is Matt Bryson. He is equity research analyst at Wedbush Securities, has an outperformed rating and a$1 ,000 price target on Seagate. Matt, good to talk to you. So what on first blush seems like the market might be reacting to here? I think there's two things. One is their exabyte growth slowed.

20:26So they had a really strong quarter last quarter in terms of shipment growth. And it just wasn't that strong in fiscal Q1. And then the second thing is, if you think about gross margins going forward, it looks like the implied guide has about 60 percent, which suggests that gross margin growth is slowing. And is that attributable to component costs or some other factors that the street might not have been ready for? I think it's just there's some cyclicality to quarters. So they had a phenomenal quarter last quarter. Exabyte growth surprised everyone. the upside gross margins were a whole lot better than expected this quarter.

21:09So you get a little bit less production out. That means your shipment growth isn't quite as good. Maybe you don't quite mix up as much as you did last quarter. But I don't think it's a larger issue. I think it's just every quarter is a little bit different. Yeah, it's worth mentioning just in the last two days until the close today, The stock was up 6 percent. So it participated in this relief trade that we got on a lot of the hardware areas based on, I guess, some loosening up of these sort of funding commitments and whatnot. Big picture, what is the story behind Seagate's continued growth and its role in this whole buildup?

21:51Yeah, you need data for AI. And the cheapest way to store data is hard drives. There aren't enough hard drives. And you look at the closest period of hard drives, which is NAND. And NAND pricing is up 6x, 7x from where it was a year or two ago. And we think the same thing happens with hard drives. Now, maybe it's up 3x instead of 6x, but it's basically still flat to the largest buyers. And I think that that's eventually what drives a whole lot of upside for the hard drive stocks. And then, you know, I guess the other question is, you know, the market has been unwilling to really pay up for this big earnings bulge that we're seeing right now.

22:36Is there anything you can foresee that's going to persuade people that, you know, this is all getting executed on as they planned and you're not going to see a lot of delays and all the rest of it? From a from a market perspective, I think you saw a little bit of it with Anthropic today. But the nervousness around credit and funding, that keeps on coming and going. For the hard drive companies in particular, I think it's seeing these contracts reset at the hyperscalers, getting big jumps in gross margin like we saw in D.R.A.M. and NAN that changes the narrative there. Yeah. And I know we're talking about the longer term supply agreements and things like that as well.

23:18Matt, appreciate you giving us the instant breakdown. Thanks very much. Matt Bryson. NXP semi earnings are out as well. The company beating on both the top and bottom lines, reporting adjusted earnings per share of four dollars and 20 cents, beating the estimate by 11 cents. Revenue coming in slightly higher than expected at three seventy nine or three point seven nine billion. Company also authorizing a five billion dollar share buyback. But the company's muted operating income and revenue forecast are overshadowing that EPS beat stock down now just about 8 percent after hours. As the Fed has embarked on a rate hiking cycle this year, bond yields have soared, taking interest rates with them.

23:58The 30 year fixed mortgage rate now sitting at seven point three three percent. Up next, we'll look at the impact of that rate shock on the housing ecosystem. Stay with us.

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25:54The frozen housing market is taking its toll on remodeling, but not all stocks in the space are reacting equally. Dan Olick digs into all of it in this week's Property Play. Diana. Well, Mike, home remodeling is kind of stuck in the middle of today's frozen housing market because it has two drivers, people who buy an existing home and then renovate and people who feel like they can't sell their home. So they stay and upgrade. Home sales are at a 25 year low and sellers are now reluctant to list. As a result, spending growth on renovation and repairs in Q3 is expected to come in at just one and a half percent year over year.

26:30And spending is expected to remain relatively flat through late 2027. That's according to Harvard's Joint Center for Housing Studies. All right. So what about the stocks going back six months? Home Depot and Lowe's tell very different stories. Home Depot down about four percent. Lowe's down nearly 19 percent. Home Depot is still seeing customers take on smaller projects, which offset some of the overall weakness, while Lowe's, which tends toward higher end discretionary DIY spending, lowered its outlook. And of course, the stock took a hit. Sherwin-Williams and Masco are faring much better because they serve professional clients as well as consumers, and they aren't quite as dependent on home sales.

27:09And finally, Whirlpool is getting crushed because of weak demand and higher costs on materials and shipping, also tariffs. It's very discretionary. Of course, for more stories like this, get ahead of the play with the Property Play newsletter. It's free. CNBC dot com forward slash property play. Mike. Diana, you mentioned that there is that one type of homeowner that doesn't feel they can move and therefore going to do renovations on their existing house. is that activity just also kind of running its course or petering out? And that's why, you know, remodeling is still so stalled. Well, it's petering out a little bit just because of the broader economy.

27:47People don't want to really spend money on anything right now. So there was this kind of lock in effect, which we talked about. People have very low mortgage rates if they sell and they move to even a smaller home, they're going to be paying a higher mortgage rate. So that's that effect. And about half of homeowners still have a mortgage rate under 4%. We're up at 7.33, as you said. So the question is, do they stay and remodel? Do they upgrade? Do they add on? Or do they just kind of sit and do nothing because they're waiting for the economy to get slightly better and prices to come down for the goods that they would need to remodel?

28:18Right. And of course, I guess some folks do borrow somewhere to remodel as well. So that takes a hit on the rates. Diana, thank you very much. Time for a CNBC News update with Brandon Gomez. Brandon. Hey there, Mike. Polls just closed in Israel, where a high-stakes election is setting records for voter turnout. The Associated Press says exit polls indicate no clear winner, and it could take days or even weeks before a leader is declared. By 8 p.m., local time election officials said nearly 75 percent of eligible voters had cast ballots. That's the highest rate for that point in the day since 1988.

28:49Meantime, authorities in Utah say serial killer Ted Bundy has been connected to a murder of a 17-year-old more than 50 years after her body was discovered in the woods. Investigators say DNA evidence connect him to the killing. Bundy, who killed at least 30 women and girls in multiple states in the 1970s, was put to death by electric chair back in 1989. And French soccer star Kylian Mbappe apologized today for calling former Chinese leader Mao Zedong a dictator in an interview that resurfaced on social media earlier this week. He lost sponsorships with several Chinese brands as a result. Mbappe called his comment ill-judged and said he now understands it hurt many people in China.

29:28Mike, send things back to you. All right, Brandon. Thank you. We are less than 22 hours away from the Fed decision on interest rates, and everyone on Wall Street seems to think the Fed will hold for now and then raise in December. Except our next guest, he'll make the case for a Fed hike tomorrow. Stay with us.

29:52Welcome back to Closing Bell Overtime, live from the NASDAQ market site. Tech stocks leading the way higher today. The NASDAQ gaining more than 1%. The S &P 500 closing back above 7 ,700. The Dow closing up only 16 points. Boeing weighed on the index following its results, costing the Dow more than 100 points. Chip stocks were the main catalyst, with Broadcom leading the way on a fundraising deal with Anthropic, the Sox closing higher by 4%. NXP Semi falling after hours following its results, beating on earnings and revenue for the third quarter. Guidance for Q4, however, right basically in line with the existing forecast.

30:28And now to a name in the news recently, Cheesecake Factory posting earnings of$1.02 per share. That compares to the estimate of$0.95. Revenue also a beat. Same restaurant sales up 15%. That was much better than expected, and the shares are marginally higher at the moment. Well, we are less than 24 hours away from tomorrow's Fed decision, and the probabilities say the market strongly expects a rate pause, but not everyone is convinced there will be no moves. Joining me now is Aditya Bhave, head of U.S. economics at B of A Global Research. It's good to see you. Thanks for having me on. You concede it's a bit of a long shot that the Fed will defy the market expectations of no move, But you make the case that arguably they should be moving based on the recent inflation numbers and maybe perhaps Kevin Warsh's larger objective.

31:18So talk about that. Sure. So let's start with the inflation data. Inflation's been horrible. The September numbers were problematic not only in terms of the top line, but also in terms of the details. And if the Fed started hiking because it was concerned about the trend in inflation, then logic to us suggests that it should continue hiking, especially because most of the committee is already on board with two hikes this year. So why not get that second one done in October and then leave the door open to either hike or potentially stay on hold in December? But, of course, the market's not pricing it in.

31:49We completely concede that had this been Chair Powell or Chair Yellen, there would be basically no chance of a rate hike. But this is really Warsh's opportunity. If he wants to end forward guidance, this is his opportunity to do it, because obviously the guidance has been there from some other folks on the committee that they don't want to go. So if he can push through a hike here, then I think that would really end the market's habit of listening to the guidance from other FOMC. Right. So Waller, Williams, Jefferson have more or less come out and said, we can wait. And that seems to be what the market is pinning itself on.

32:24Waller was more open minded. Was he? Yeah. I guess that's right. He was very data dependent on the fresh incoming numbers. I guess there's another line of thinking that, you know, you've had seen a little bit of unsettled market activity. Longer term yields remain higher. And you always get this idea as if the market is doing the Fed's job for it. It's tightening conditions. But of course, the market is also keying to some degree of what it thinks the Fed's going to do. And it's unclear if the Fed wants to essentially delegate everything to the markets. So I think the way the Fed has been talking about long end yields has been really asymmetric.

32:58When yields were at their peak, the Fed was saying, look, term premium is up, the 10 years up so much. That's done some of the tightening work for us. But they never make the argument in the other direction. Now that yields are down and term premium is down, they're more likely to say that this is risk off and therefore we shouldn't be hiking. Not that the market isn't doing the work for us and therefore we should be hiking potentially more. So I guess the best as you can figure it out, what do you expect to hear from Warsh tomorrow, given all of this? You know, I was saying yesterday that as much as it seems right now that there was plenty of ammo for them to hike this month, arguably back in September, there were some benign inflation numbers, at least relative to expectations.

33:41And you could have seen them skipping, but he had already kind of set the agenda with Jackson Hole. Right. So I think ideally Warsh would probably want to lean a little bit against whatever decision he makes. So let's say they stay on hold. Then I think the risk is that the markets think Warsh is too complacent on inflation and you get a repeat of the July trade. That's what he wants to avoid. So he wants to sound hawkish. Now, under Powell, for example, they could have said mid cycle adjustment and the market would have understood that that means 75 to 100 basis points of rate hikes. but Warsh doesn't want to do that.

34:14So the challenge is how do you convey that message, whether it's a hawkish hold or a dovish hike, if you want to call it that, how do you convey that message without giving any guidance? And I think that is the real challenge for him. All presumably in a 30 minute press conference as he's made his habit. Bigger picture, whether we were to get a hike in October or December or whatever it is, where is it all going, do you think in terms of the path of inflation and then how rates interact? Exactly. And that's a great question because you don't want to lose the forest for the trees, the minutiae of when they hike.

34:47It's interesting for rates markets, but ultimately we think regardless, they're going to hike by about 75 basis points. So if they don't go tomorrow, we would think December and then March with risks of more. And basically the story is that the economy is hot, inflation is too high, and it will probably remain above target through next year and going into 2028, in part because you have now repeated supply shocks that are likely to stay in the data. And in part, again, because the demand side is pretty robust as well. And then just quickly, that all amounts to, you think, 75 basis points will likely be a kind of successful mid-cycle adjustment?

35:27That's the hope. Yeah. I think you do 75 and then you get into a period next year in the first half of next year where the base effects are quite favorable. Year over year, Core PC can roll off significantly. And then you can reassess in the second half of next year. So we don't have any action in the second half of next year, but we're very open-minded to the idea that it could be hikes, it could be a hold, it could even be cuts if they get lucky. Yeah. Obviously, it's a long way out since there's already a little bit of uncertainty a couple of months out. Aditya, thanks so much. Thank you. Good to see you.

35:58Up next, what's driving the rise of the far left with just a week to go until the midterm elections and what it could mean for control of Congress and Wall Street. And as we head to a break, here are some notable stocks hitting 52-week lows today. Boeing, Netflix, Booking Holdings, and Bright House Financial. Closing bill overtime will be right.

36:22The midterm elections are one week from today, and one theme we're seeing throughout the country is the rise of the far left on the ballot. Contessa Brewer explains why. Contessa. Well, I'm here in Dearborn, Michigan, Mike, where we're seeing a tight Senate race pitting a progressive Democrat, Abdul El-Sayed, against Republican Mike Rogers, a former congressman. Look, this is a divided state where polls show Islamophobia may be a factor, but Michiganders say the economy is the top issue driving their choice at the ballot box. The Detroit Chamber of Commerce pointed out that Michigan has lost 7 ,000 manufacturing jobs over the last year and a half, that tariffs have hit Michigan especially hard because it's so trade dependent, as$6 ,000 per household hit because of tariffs, according to the chamber, or three times more than the national impact of tariffs.

37:15And distrust in big corporations and their political influence is palpable here. The Detroit Chamber has also formally endorsed Mike Rogers. Here's what the CEO of the Chamber had to tell me. The people are not happy. There's a lot of disgruntlement. There's a lot of thought that Western democracies are not working for the middle class and the lower class in our society. And both parties need to get a better handle about how they handle that.

37:51President Trump was here in Michigan this weekend stumping for Mike Rogers. So was Barack Obama and Bernie Sanders campaigning for El Sayed this weekend. The surge in support for the Democrats, though, is surprising even Republican strongholds like Kansas, Texas, Mississippi among them. And by the way, everywhere you're seeing, for instance, the cost of gasoline being a real factor in how households see their personal economics. This one, gas is$4.35. The statewide average is pushing$5. There's been a line out here all day long of cars waiting to get gas. And Contessa, because that's the case, because things like the price of gasoline and other consumer prices loom so large, it seems, in terms of how voters are leaning this time.

38:41Maybe we should hesitate in saying that it's a kind of ideologically driven move to the far left. Right. I mean, you have these candidates that certainly do present that way. Democratic Socialists of America endorsements and things like that. But it's unclear that, you know, if those candidates win, it's kind of an endorsement of the whole textbook agenda of the far left. I mean, is it is it a referendum on President Trump? There are those who say, yes, absolutely. I want him out of the White House. But then there are those who say and in fact, there's a campaign ad running of a guy who says that he's voted Republicans, you know, eight times.

39:18But now he's changing his mind and he's going to support Abdul El-Sayed. in part because the president's economic policies have hurt the families here. That's what I've been hearing. I mean, tariffs were supposed to be a saving grace for autoworkers. They thought it would help bring back manufacturing jobs. And instead, what you hear the UAW workers say is, yeah, but the cost of everything else is going up. When we're spending all of that money in wars they told me that we should not be in, then that affects how we're spending at home. and the tariffs are not helping the way that we thought they would.

39:52The other interesting thing is President Trump was in town and he decided to double down on Islamophobia, calling El-Sayed a racial slur, and then it was left up to Mike Rogers to come back and point out the way that Democrats' tax increases might hurt Michigan families. Contessa, thanks so much. Well, whether or not there is, in fact, a far-left wave, what could be the market implications from the outcome of the election. Joining me now is Ariana Salvatore, Morgan Stanley's head of U.S. public policy. Good to see you. Good to see you. You know, this idea that at least among a lot of voters, what you're hearing is these specific decisions by President Trump, obviously the Iran war and tariffs, they can kind of connect that to the things they're dissatisfied with.

40:38It is also a reminder that even if you get a blue wave, or even if you get split government with Congress in Democrats' control, there are still executive actions that will sway things down the road. That's absolutely right. You hit on two really important points there. I would say first, of course, even if you were to see a Democratic sweep, they're limiting factors from a policy standpoint. Right. So you could see some of these Senate races either go the way of the Democrats or flip. And in that case, maybe you would see the introduction of new legislation. But of course, President Trump is still in office for the next two years.

41:11That'll be a mechanical sort of limit to the type of policy that can actually get over the finish line. And the second point that I think is really relevant here is on this issue of affordability and what it can tell us about 2028. So most of my clients now are asking if we see Democratic outperformance this election, what does that mean for the next presidential race? And our view is effectively that the issues don't really carry over from one election to the next. And if they do, it's not a very clean way. So affordability, cost of living, economy, jobs, inflation, it's always the top concern for voters.

41:40This time, the transmission mechanism is gasoline prices. If you think back to 2022, the transmission mechanism was grocery prices. Right. And that hurt the incumbent Democrats. So it's not so much a clear translation from the midterms to the general. Sure. I guess the other question would be if, in fact, you do get Democratic control of Congress or half of Congress, what does it mean for some of the regulatory initiatives? I mean, I'm thinking of things like financial regulation. We have one CFTC commissioner to share. OK, you're supposed to have, I guess, five and you haven't been nominated prediction markets under the CFTC purview.

42:16So I'm just wondering if you think that there would be pressure around the edges of some things like that. So deregulation is one of those policy variables that is explicitly within the control of the executive branch. The agencies are the heads are appointed by the president. We think that if you see a flip in Congress, they can enforce more oversight. So you can have hearings. You can see lawmakers call agency heads in front of Congress. But at the end of the day, the overall agenda is going to stay intact. And I think particularly for financials, it's really interesting because a lot of the rules that have been proposed are really, in our view, going to be finalized really before the end of this year, even before the midterms in some cases.

42:51And, in fact, you might see the inverse effect of something like M &A comes up because there is, in our view, going to be a bit of a pull forward in terms of announcements ahead of a new, potentially more restrictive regime after the next presidential election. So, in that vein, we think that deregulation pretty much continues unabated. Yeah, you see stirrings of that, I think, in some of the corporate maneuverings already. And then in terms of fiscal, I guess conventional wisdom is, you know, gridlock means maybe more fiscal constraint. But in this instance, if kind of nothing much changes on the fiscal front or nobody can get anything incremental done, autopilot is still very large deficits.

43:27Yeah, we think deficit expands in every outcome, even in a Republican hold scenario, divided government and a Democratic sweep. The primary reason for that is the fiscal is really the legislative variable here. And the path of least resistance in Congress, when you see something like a standoff, is really just to kind of spend more on both sides. Right. So from that perspective, we think that the typical blueprint here is divided government, gridlock, clarity. That's good for markets. That blueprint doesn't hold up this time around. And we're still constructive on the U.S. equity market. You know, we tend to see pretty solid market performance in the three to six months after the election, regardless of what happens.

44:00But we think that it's not necessarily the easy kind of playbook that we're used to. Yeah, we didn't get the real deep gut check ahead of the midterms just yet. So we'll see what the snapback might look like. But that is what history says. Good to see you. Thanks so much. Up next, a scheduling conflict forces an unusual move by the WNBA. We'll explain how you can watch the finals and when. Plus, shares of Royal Caribbean ending the day higher by five and a half percent. The company beating third quarter earnings estimates and raising its full year guidance. Here's what CEO Jason Liberty had to say about the consumer earlier today on Squawk on the Street.

44:34What we're seeing is high quality demand or significant demand for the different cruise experience or vacation experiences that we're delivering. We've seen an uptick in bookings as well as our guests willing to pay us more today and tomorrow than they did yesterday. And so we see a relatively healthy consumer.

44:58Welcome back. World Series TV ratings just out. Alex Sherman has the fresh details. Hey, Alex. Yeah, I'm literally just getting these as we speak. These numbers are fresh off the press. A strong number for Game 1, 12.2 million viewers across Fox Univision and Fox Deportes. That is higher than the Game 1s of 2023, 2022, 2021, and 2020. basically meaning higher than all of the last two World Series, which were played by the LA Dodgers, which have a huge fan base, obviously. Now, Game 2 numbers, 10.8 million viewers across Fox and Fox Deportes, also outperforming the Game 2s from 2023, 2021, and 2020.

45:45So, fairly strong numbers here for two small market teams, the Milwaukee Brewers and the Tampa Bay Rays. What I will say is that the number in Milwaukee is particularly high. It is the best local number for a game one in seven years for a local rating. So clearly there's a lot of Brewers fans out there that are very excited about their team. Now up 3-0 in the series. They could clinch the World Series over the Rays if they win, obviously, game four. So strong numbers across the board on a relative basis. Yeah, I guess we should say 2024, yep, they had the Dodgers in there, but also the Yankees.

46:31So it kind of had the inflated numbers. And, you know, it's also a question of how much it matters longer term in terms of networks willingness to pay up for these packages. Right. It's kind of luck of the draw, small market, big market in a given year. But I just wonder if just in general, things like the World Series are holding their value. Well, not only that, Mike, but also the Major League Baseball collective bargaining agreement is going to come up at the end of the year. And the big issue is the need for a salary cap with this idea that we want more competitive balance in here. So optically, having these two teams in the World Series and having them be fairly popular may work against the owners as they try to push this argument, not only on the players, first and foremost, but even on the fans, that there's a problem here that needs to be rectified.

47:19Maybe there isn't. It might take a little more than just these two teams in the World Series to get people to overcome their Dodgers hate out there. But, look, the numbers are what they are, and it's pretty nice to see. Alex, appreciate you jumping on with that. They hate watch, right? People love to hate watch. That's true, too. That's the other thing. No, there's no doubt about it. Appreciate it. Alex Sherman does it for overtime. Fast Money begins right after this. Quick break.

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