Fast Money 9/1/26

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0:41So you're more aware of what's around you, more focused on the road ahead, and ready before problems ever start. Mazda. More of what matters most to you. Go to mazdausa.com to learn more. Consumer Reports does not endorse or promote any product. Live from the NASDAQ market site in the heart of Times Square right here in New York City. This is Fast Money, and here is what's on tap tonight. Bonds around the globe selling off, sending yields to their highest level since 2008. Could this march higher in rates stall the rally in stocks here and all around the world? We will debate that. Plus, Apple's new boss getting a very warm welcome from investors.

1:23Also sending out a tweet. The stock climbing on a decidedly down day for stocks. What are the top priorities? For new CEO John Ternus, we will ask a top analyst. And later, inside the numbers of Dell's latest earnings, the surge in oil following new strikes in Iran, and the chart master with a new list of bullish to bear stocks that he thinks that you should sell. So, I'm Frank Holland in for Melissa Lee, coming to you live from Studio B right here at the NASDAQ on the desk tonight. Carter Braxton Worth, the aforementioned Tim Seymour, Dan Nathan, and Guy Adani. We begin with a new month with what some investors would say is kind of just the same old story this summer.

2:00Bond yields continuing their march higher, not only here, but all around the world. And oil prices climbing yet again as the U.S. launched fresh airstrikes today. More on the U.S. military action in just a minute. The rate on the U.S. 10-year climb to levels not seen since last January, while in Japan their 10-year climb to heights not seen since August of 1996. The shorter-term two-year yield also hitting 31-year highs. Milestones today were also breached in Europe. The 10-year gilt hitting its highest level since June of 2008, while Germany's 10-year boon rose to 2011 highs. Stocks reacting, as you would expect, to the sell-off in bonds.

2:37The Nasdaq down 1%. They're down the S &P each lower by about three-quarters of a percent. So can we expect this kind of slow grind lower to continue through this week, maybe even beyond? Guy, I turn to you. If the bond market continues to deteriorate that way, Frank, and welcome once again, I think the answer to that question is an emphatic yes. I think the market is finally reacting to this global yield story. And you mentioned Japan, which we've been talking about now seemingly for months, if not longer, on this show. And you have a bond market deteriorating, so yield's going higher. You have a currency that's weakening as well, now back above 160.

3:09By the way, this is in the wake of a concerted effort by Treasury and the Bank of Japan two and a half or three weeks ago to sort of intervene on behalf of the yen. And clearly that's not working. So, yeah, there are problems. I think there are problems globally. Maybe we don't have as much a problem here in the United States. But, you know, 480 in the 10 year is nothing to sort of shake a stick at, I think, Frank. Dan? Yeah, we've been there in the 480 and we talked about it a little bit last night. You know, we were at 475 a year ago, two years ago, three years ago. The S &P 500 is 77 or 7600 right now.

3:40Last year at that point, it was 6000. A year before, it's 5000. A year before, 4000. And I guess the issue I would add is that the equity risk premium right now is razor thin, right? It's 20 basis points. And so if we are going to a period where you think yields could go materially higher, you think that all this intervention really speaks to some form of, I don't know, panic is the right word, but it's not instilling confidence, then you say to yourself, well, the S &P 500 could easily come in a bit. It's down 2.5 % or something from the all-time highs. I'd also throw in there that, you know, with the war, with oil, with the midterm elections, There's not a ton to get that optimistic around.

4:16I mean, yes, some of these corporate earnings have been, you know, off the charts. But the question is, given all these headwinds, can they continue to grow like that? And what does deceleration look like, especially if you have a pullback in AI demand? So I know that was a lot, but I think you put them all together and you say to yourself, I don't think it's an amazing environment to buy stocks right here. All right. Fair point. Tim, coming over to you. Yeah, well, I think you add that into the just the dynamics around AI build out where we are seeing pressure in terms of issuance. There's complete competition for investment grade investments at the long end against sovereigns around the world.

4:50This isn't just so as we're saying, and you pointed out at the top of the show, Frank, this is this is a global dynamic. This is something that's been going on. The Trump administration wants to point out that actually they're not selling U.S. bonds to buy others. In fact, other bond markets are selling off in the U.S. is outperformed. I'm not sure it's a relative outperformance. I do think it is a relative better story. But it's clear that governments around the world in terms of deficit spending are a lot more focused on strategic positioning, defense, energy and things that are going to cost some money.

5:19So I don't see the CapEx dynamic changing. I don't see it changing. We're going to spend a trillion three next year in terms of AI CapEx build out. I think the inflation story continues to be complicated. The correlation between oil prices and yields. We know what it is. There's just, to me, it does set up for a place where, you know, why wouldn't equities need to take a pause? Oh, and throw in the fact that, guess it is today is September. And I learned, you know, I learned today was September, Guy. It's because I parked my car on the street and I thought I was good. I waited for, like, the time when I, the window I can actually park there.

5:49And I came back and there was a ticket on my car and I realized that my inspection had expired. So my car actually, as of the end of August, I need a fresh inspection. I know that's probably a dime moment. No, no, no. That is one of those unfortunate things. So, I mean, anyway, today's the first day of September. Had I realized that, I would have gotten my inspection. Maybe there's an inspection owner watching right now that will be more than happy to pick your car up and inspect it on your behalf. You know, we'll ponder that while Carter answers and talks about the bond market right now. Carter, I want to toss it over to you while we try to figure out Tim's car situation.

6:20First, Tim, welcome to the club. Mine expired at the end of July, and I've been pushing it around. I mean, hoping, but I got one. This is how the world works. If you don't meet a deadline, there are consequences. In any event, I guess from the point of view of the equity market, because in a way it is the thing that people trade more than the U.S. treasury market, not globally, of course, treasury market is three times bigger, but for purposes of this program and people's PAs, their personal account, we know we've been in an unusually tight range, mid-May to mid-July, a 5 % range. There's only six, seven instances in the post-war period where the S &P traded in a tight range.

7:00Then we had this breakout of sorts, of course, and we've given that back. And so here we are where we were essentially in mid-May, and the market has no character. There's great underlying character, huge recoveries in heretofore dead stocks, bearish to bullish reversals, software all over the place, and then heretofore winners rolling over. But it all nets sat as an equity market that's quite benign, dull, going nowhere. As to rates, it's all about rate of change. I think that's as well-documented a phenomenon as anyone. Were we to go to 5, 5.05 between now and Friday, it would be, I would say, inevitable that you'd have a real shock to the equity market.

7:40Were we to continue to just meander up there and get there by November, 5.05? I don't think anybody would care. Remembering, of course, that we were slightly above 5 exactly three years ago. It was in October, late October of 2023. The S &P has almost doubled since then. Yeah. You know, while we're talking about the bond market, we don't we all talk about the equity market being thin trading during August, the week before holiday. Does that also impact the bond market, Dan? I mean, is that something we should be looking at, the idea that there aren't as many participants in the market as there normally would be?

8:10Yeah, no doubt. But I'd say that the equity weakness has probably less to do with yields. And you guys might disagree. And really what happened with oil of 5%. It's been a really benign environment when we had some headlines over the last, you know, I don't know, month, month and a half or so. But this is a big move. And it kind of indicates this is not about lack of liquidity or lack of market participants, what's going on in the crude market. So maybe it is as it relates to the bond market. All right. Let's take a little bit deeper into these bond moves. Joining us now right here on set is B of A senior U.S.

8:38rate strategist Megan Swiber. Megan, welcome to the desk. Thanks for having me on, guys. All right. So you're kind of jumping in right where we're having this conversation. What is your take on yields right now? Globally, they're higher. Yes, the U.S. is a relative outperformer, but we've seen a pretty broad sell off when it comes to bonds. Yeah, it's definitely broad, global. A big part of what we see in U.S. rates is a combination of uncertainty around Fed policy. We just noted and we're talking about oil prices. In theory, the Fed shouldn't be too worried about that because that feeds into headline inflation, not core inflation, which Warsh outlined Friday last week, that he's focused on 2 percent core inflation.

9:15But the Fed has been missing this target for the past five years. Warsh delivered this very wishy-washy message following the July press conference. And that buildup and uncertainty around Fed policy has been weighing on yields across the curve. We've got large deficits. We've got a Treasury that is aware of this and trying to take steps to address it. And we've got tremendous amounts of IG supply coming in the form of hyperscalar issuance. All right. So you may have thought he was kind of wishy-washy after July, but at Jackson Hole, he seemed pretty definitive, I think, to me and to most people.

9:46And with what you're saying, does that mean the jobs report coming up on Friday has no factor on the Fed and no factor on the bond market? So he cleaned up the act and really refocused the market on policy rates as the primary tool, refocused on that 2 % core PCE as the gauge that the Fed's looking at, and really outlined that if they're not getting to that number, they're going to have to hike, which is all good things for the market. And interestingly enough, we did see the bond, the 30-year rally on that message because it did restore to some extent that policy certainty. In terms of jobs report on Friday, look, if you feed Warsh's speech through an NLP model, it would tell you that the focus on the Fed right now is really on inflation.

10:28So unless September is really a very weak report, that the payrolls report is extremely weak on Friday, it really won't move the needle much for pricing for a September hike. We're expecting one at B of A, and we think that the inflation data that we'll get the end of next week will clear the way for that. We heard yesterday the Treasury and the Fed are on the same page. I'm not convinced that they are. And we talked about dollar yen back above 160 and all those different things. Does that come into play? You're looking at that? So, yeah, I think that there's a couple of things to keep in mind here.

10:58So what we've seen over the past couple of weeks is both Fed and Treasury to take steps to stabilize the bond, the back end of the yield curve. Besson, a couple of weeks ago, announced the doubling or at least the doubling of these long end buybacks, which is reducing the supply that the market has to absorb at the back end. Less competition with the AI hyperscaler issuance that we're seeing out there that a lot of investors are preferring over lending to this government for 30 years. That was one good step to help support the long end of the U.S. rates curve. And again, this message that we got from Warsh, delivering more of that credible messaging, re-anchoring market to focus on 2 percent inflation as the primary goal, all good things, and does support a little bit more of this coordinated message between the two.

11:43Megan, how about clients? So we can say all we want about fundamentals, but you have investment grade clients, sovereign bonds. So folks that are really rates oriented, are they taking out protection against a move significantly higher? So a breakout of the bond market, as Carter pointed out, this has been, we've been drifting, right? But this actually is picking up momentum. I'm just kind of curious where the market is in terms of preparing for a real breakout in bonds and ultimately how you are advising people. Yes. So we are favoring a curve steepener. So preference for more belly duration versus the long end of the curve.

12:21Guy loves belly duration, by the way. Right? I don't know what belly duration means. I think you just said I'm kidding. I'm sorry. I don't know what it is. Explain that for a second. So let's think about this, right? So what's a 5-30 steepener? It means that you're going long the 5-year point, you're selling the 30-year point against it. Positioning, right, for more of this buyer base that we see right now, there's just not a lot of demand at the back end of the U.S. rates curve. Historically, right, we've had these defined benefit pensions that have a specific amount of long end duration that they have to access.

12:53But think about how all of our pensions are structured right now. Unfortunately, none of us really have defined benefit pensions. I think maybe a couple of people back at the Fed still have one. But it's really not a big part of the pension market right now. And that has reduced demand at the long end of the U.S. rates curve. It's reduced demand for long end curves globally. Treasury is aware of this, and they're very likely to shift more of their issuance into the belly of the curve as they've been doing. But it's really interesting that despite these actions that we've seen, Besson take, Warsh take, we're not getting a lot of chasing of any of the rally in the back end.

13:29Instead, we do still see asset managers very wary of the back end. And it's been a story of much more of a preference for all in yield that you can get from credit rather than buying treasuries. All right. Megan Swyver says bills in the belly. That's where the action is right now. Thank you very much. Great to see you. And a program, you know, don't miss an exclusive interview with New York Fed President John Williams tomorrow at 815 a.m. on Squawk Box. You do not want to miss that one. We want to turn to oil now surging to its highest level since July after the U.S. launched fresh attacks on Iran targets.

13:58WTI spiking more than 5 percent, settling above 90 bucks a barrel. Brent now just shy of 95 bucks. CNBC's Eamon Javers has a developing story on the U.S. and Iran. Eamon. Yeah, Frank, that's right. We've seen these strikes now back and forth between the United States and Iran. Iran saying it was retaliating for U.S. strikes, which happened at about noon Eastern time today. And I want to show you a map of the region. I think we have a graphic prepared of the Jordanian city of Aqaba. It's a strategically important city, and we're seeing reports now from the Associated Press that there are explosions that have been seen over this city in southern Jordan.

14:37It's right at the tip of the Gulf of Aqaba, which is itself at the tip of the Red Sea. Strategically important because that city would be part of any effort to bypass the Strait of Hormuz in terms of another route out of the Middle East for oil traffic. And it also would be a place where you might likely see U.S. military activity. So we are seeing now this report from the Associated Press, Frank, that explosions have been seen over that southern Jordanian city of Aqaba. And Iran says it is retaliating for the U.S. strikes of earlier today. So we'll wait on any official confirmation of exactly what damage has been done there or elsewhere in the region as the dust settles.

15:22and we wait for the Pentagon and the White House to give us some indication of where this goes next. Frank, over to you. All right. Eamon Jarosz with the very latest on the U.S.-Iran tensions. Eamon, thank you very much. Dan, I want to come over to you. Just thoughts on the energy sector we've been talking a lot about. It's just kind of the upside moves when it comes to energy. A number of names actually hitting 52-week all-time highs recently. Yeah, you know, just one comment. These guys know the stock's much better than me. I just think about what's going on with crude oil. We keep saying that it's transitory.

15:49It's much lower than the levels when the war started, you know. But$90 WTI in 94, 95 in Brent, there's just a lot of reverberations as it relates to a consumer that is strapped. And you think about these cumulative nature of inflation. I mean, that's the thing. We talk about the Fed missing that 2 % target. If you are the one who has a lot of stress about higher food prices, about higher gas prices, about diesel just kind of working all its way through our economy, this is a hard one. even if you have 3.1 or 3.3 sort of inflation. So again, I'm not in the camp. I'm not an economist. I'm not a strategist.

16:25I'd just be shocked if the Fed raises interest rates right now being that reactionary. But to me, I think the focus should be on the consumer. And it's not just that headline number. It's the cumulative nature of that lower K and the effect that they're feeling. So Carter, I want to come over to you. I also want to mention Valero at all-time highs. The XLE ETF hit an intraday high. Marathon Petroleum also trading at all-time highs. So we are seeing big upside moves in the oil sector. Right. So it's a recovery back to a high. We know, of course, that energy had pushed incredibly steep and uncorrected and then dropped some 15, 18 percent when there was the purported peace or resolution to the conflict.

17:07And now we've recouped those losses and just now exceeding the highs of April. But there are certain stocks that are quite extended. The three refiners, PSX, that would be Philips, Valero and MPC Marathon. They represent 15 percent weight, those three. All three are trading 10 percent or more above their respective Wall Street sell side targets. And they are sells by our work because of how far they are above their 150 day moving averages. The sector overall, of which they are a part, though, again, has only just now eked out slight new highs. And there's every indication that the sector can go higher, independent of what VLO, PSX and MPC do.

17:51Guy? They're extended. Carter's absolutely right. And, you know, I don't know if you're necessarily chasing here, but I will tell you that energy security is now first and foremost on the minds of every country on the planet right now, which makes this a structural change in the energy market, which is why I don't think you need to focus on the price of crude. You need to focus on these stocks that are in a position now that they've never been in historically. And that's not hyperbolic. And I just look at an SLB formerly known as Schlumberger. And this is a company that's a technology company.

18:23It's a company that is very much on the leading edge of where they are helping both sovereigns and oil companies not only find more oil. It's not just an oil services play. I mean, it's really a play that's working technology. We learned about that deal. They're involved essentially in cooling for HVAC systems and whatnot. So their technology makes them cheap. But if you go back 10 years, the earnings power on that company, which was the heyday essentially of alternative fuels in the Permian and whatnot, I think they're getting back there and the stock's not priced for that. And we all know what happened in the mid-teens.

18:55So, in other words, there was a real rush for alternative fuels. The U.S. was this kind of miracle in the world of alternative energy. And they overinvested. And I think they're all doing it differently. I think they're doing it conservatively. I think there's demand that we haven't seen. And, yes, I think this is more than just a trade. I think this is an investment. Yeah, as you mentioned, XLA hitting an intraday high. So a lot of movement in the energy sector. All right, coming up, a pair of big tech earnings to tell you all about. We're talking about Dell and Palo Alto on the move after their results.

19:24We got all the numbers. And what we're learning from the conference call is coming up next. Plus, Deere's record rally was fueling the tractor maker to fresh eyes. And the outlook for ag equipment now. Do not go anywhere. Fast Money's back in tune. You're watching Fast Money here on CNBC. We'll be right back.

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21:14Way fair, every style, every home. Welcome back to Fast Money. An earnings alert on Dell shares are jumping after the company posted a big beat on the top and the bottom line and reported that it sees AI server revenue tripling in the full fiscal year. Our Mackenzie Sigalos is here with much more Mac. Hey there, Frank. So the big takeaway from the conference call so far is that Dell's AI boom is now spilling into the rest of the data center. You've got COO Jeff Clark saying a moment ago that traditional server revenue jumped 122 percent, partly because companies need more CPU compute alongside GPUs for AI and agentic workloads.

21:54Storage growth also accelerating sharply, and Dell says that it's starting to see AI-related demand across networking as well. That mix is important for profitability. These traditional enterprise products carry better margins than the massive AI server deployments that have driven much of Dell's growth so far. Clark saying that another tailwind here is companies bringing some AI workloads back on prem where the token economics can be more cost effective and that customers have more control over sensitive data. And all of that comes as Dell dramatically raises the bar for the year and now expects AI server revenue to triple up from its forecast from just six months ago that it would double.

22:32while lifting full-year revenue to$192 billion. The one softer spot was PCs, with that business coming in slightly below expectations. But overall, demand remained strong, with Dell ending the quarter with a record$95 billion backlog. Frank? Mackenzie Tagalos, thank you very much. Dan, I want to come over to you. By the way, a lot was kind of priced into this stock, a lot of price target increases going into it, a lot of whisper numbers. What do you make of the quarter and that guidance, tripling revenue? Massive. I mean, listen, we've gotten used to this, right? You go into these prints, anything in around, you know, AI, you're expecting what is the magnitude of the beat?

23:07This is a huge beat. It was a huge guy in trade. I guess the most important thing, my final comment last night during the final trade is I'm really interested to see what that margin situation looked like. Right. We talk about memory. We talk about these input costs. You'd think that that would kind of put some pressure on Dell's margins. But it just went from sequentially 18 percent to 21 percent. That's the best gross margin they put up in a very long time. So at least a couple of years trading near a market multiple right now. I just don't I don't again, I don't know how you chase it. I wouldn't have been long into the print.