Oracle Reports Results… And Mortgage Rates Top 7% 9/10/26

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0:50Here's what's on tap tonight. Oracle on the rise. Here's the tech giant jumping on its latest earnings report. But can the software company keep the gains coming this time? And what's the deeper read into the AI space? Plus, a mortgage mess. Rates hitting more than one-year highs. Home builders taking it on the chin. We dive into the housing trade, what it means for the consumer. And Apple jumps on strong reviews of its new foldable phone, the Fold. Copper miners sink on threat of new tariffs. And can Starbucks shares get recaffeinated? What the CEO had to say about the company's turnaround plans and whether it's time to buy the stock now.

1:23I'm Melissa Lee. I'm with you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. We start off with tonight's big tech report. That would be Oracle. That stock jumping on better-than-expected results in cloud infrastructure revenues at more than double than the latest quarter. The call kicked off moments ago. Seema Modi's got the details here. Seema. And, Melissa, Oracle does say that customer demand for its AI cloud training services continues to grow faster than supply with more than$30 billion of new contracts in the first quarter.

1:51So the demand story is improving with its backlog, remaining performance obligations in the quarter climbing to$664 billion. That is up from$638 billion last quarter on financing. Oracle confirming no new plans to raise capital and that it has completed the previously announced$20 billion equity issuance program. So that is likely a sigh of relief for investors. We're still awaiting management to address how politics are at all impacting its data center pipeline. We are looking at shares right now up about 7 % as investors refocus on the demand story. And still, I would point out, down solidly this year.

2:28More comments as we get them, especially as we await comments from Larry Ellison, the founder. All right, Seema, thank you. Keep us posted. Seema Modi. And maybe the setup for the stock was perfect going into this report in that everybody was negative. I mean, nobody had a kind word to say about it. Well, Steve Grasso last night did, to his credit. But I'll say this. You know, the free cash flow, which has been a disaster, wasn't good at$5.4 billion negative. But it was twice as good as the street was expecting, if that makes sense, because the street was looking for negative$10 billion. So maybe they're getting it in line there.

3:00Margins were slightly better. But, you know, forget about Oracle for a second. What does this mean, the overall software trade? And I will continue to say, I think the software trade can go higher. Oracle, regardless of what it does, IGV, I think, especially on the back of this print, is going to continue to do the grind higher. So I think the one thing she said that was so important was no new plans to raise capital. Yeah. Now. And now. And they completed their offering. Right. Right. I wonder how long that now is. And then what I don't know what the CapEx will actually be. Right. Last time they were sort of along with everybody else, surprising more and more to the upside.

3:35And so we want to see what that is, because, you know, the debt we know is a sort of integral part of the story in the CDS, which reflects higher concern about the debt. But at the moment, this is positive, and I agree that setup was good going in. Yeah. A lot of bearish sentiment. Yep. I believe the expected CapEx for this fiscal year is$92 billion or so. Yeah. So we'll see what number they come up with. I'm going to ultimately defer to diesel over here. But the setup in the options market was pretty crazy. I was even thinking about where the O in Timbo might see a call spread just to kind of measure my risk here.

4:10This is the O in Timbo. It is the O in Timbo. And it's part of what's taken me down. I mean, it's no bedang. Let's put it that way. But I mean, not everything is. But but, you know, the cloud revenue is fantastic. The the cloud infrastructure up one hundred and twenty one percent, as Seema noted, is is is very strong. I don't think we ever questioned the demand. The question is, can they fulfill it? And I think this is part of the story. And also we get back to the capital market stuff, which I don't know how they can continue without another raise. So I thought that the risk was much more skewed to the upside.

4:41I don't think they could have done a whole lot better than what they announced. And I'll just say, I think this result is a little different in the way the options were being priced. I'm glad I didn't pay for calls because, in fact, the upside was very, very expensive. And, in fact, I don't think you're getting rewarded here. Yeah, 12 percent implied move in either direction. And, you know, just think about how far this stock has come from that quarter going back last September when they got that big open AI contract. And I think that, you know, we're not sitting here after earnings season over the last two months, it feels like it's been going on and on and on, debating whether these companies are going to beat or not.

5:12It's just by how much, right? And then when you think about some of the strain that we've seen, I guess, in the ecosystem and how they're financing these sorts of deals, that's fine that they say they're not raising any more capital. Timbo over there is saying that, you know, when? You know what I mean? It's going to happen again. This is a company that has$167 billion in debt. And you think about the size of those contracts. Fine. These RPOs keep getting bigger. There is no guarantee that they are going to be able to fulfill those obligations. And when you think about it from an execution standpoint, this is not a company, I think, that has a great track record doing this.

5:44So on the demand front, we know it. If SpaceX is selling XAI compute to their biggest competitors, which is Anthropic and Google to some degree, right, then for all intents and purposes, we get it. We get that there's a lot of demand. But at this stage of the cycle, if they can't deliver for open AI or open AI falters a bit in their demand, then you have this sort of I don't know what you want to call it. This like chain of events that ultimately will happen. But it's going to start with these companies, these heavily indebted companies. How should we think about that compute in the backlog? Because I spoke to two analysts on Closing Bell Overtime, Gil Laurie of DA Davidson and Bernthal Jeffries.

6:20And they're saying this is the one company that is building out and is not getting full credit for that backlog. Whereas everybody else, you know, whether it be a neocloud, which has no profitability, or Microsoft, they are getting full credit for what they have. Well, I heard that interview talking about CoreWeave specifically, I think, getting, and Nevi is getting credit for theirs. I also think, I mean, maybe the debt isn't quite as bad as we think in that when they proceed with some of these projects that are further out, sometimes they do get paid some of that up front or coincident. So that helps a little bit.

6:56But it's interesting. I think of Oracle as sort of the bellwether for the downside, but not so much for the upside, which maybe isn't fair to them. I don't own it. I don't own position. But, I mean, this bar was low enough where this is good. It's an AI infrastructure company, I think, software company as well. And, again, we talked about Larry, he pushed all the chips into the middle of the table. And, you know, you look at the margins, which is better than expected. Free cash flow was better than expected. I understand there's probably another raise coming. The balance sheet is problematic. But if you believe in the AI story and you think they're the epicenter of this whole infrastructure build, then you have to own this.

7:34I'm not convinced of it, by the way, but there are people that absolutely believe it, which makes Oracle very attractive. Look, they added 850 megawatts of capacity during the quarter. They certainly told you about more demand that's there. So I'm not sure what else they could say. to summarize what I think I'm hearing both from Karen and even Diesel? Well, and Diesel. Diesel, Dan? Is Diesel Dan? Oh, yeah. Is there a question about that? I didn't know. Mel was gone for a month. Things happen. It's not fair. It's probably not fair to folks at home that wonder why we're calling them diesel. But there was a day that Dan started talking about diesel prices.

8:11And it was so exciting for me to hear Dan in the energy space that not only was it Wow, diesel, but it decided that diesel, Dan, is an aggressive name for him. I got it. Were you making a point? My point is that I think that the company is now priced still in a prove-me situation, and there's nothing about the result today that changed that. And yet, I think they gave you everything you can. The price action to me is disappointing if you were expecting, if you're on the long side of this, this should have been a 15 % pop, I think. You mentioned software and the software business on here. Is this the bellwether?

8:42I mean, is this the tail-on software? or is Adobe, which we also got. Yeah, which was a little bit of a different story, right? Or is it Salesforce? Exactly. I can rattle off four or five. You're right. I mean, they're all seemingly telling a different story. I guess my point in saying that is I think the death of software that we were talking about six to nine months ago was probably maybe justified at the time, but in retrospect, wildly exaggerated, which is why I think IGV can continue to go higher. Or was it Snowflake or ServiceNow? Right. The list goes on and on for the upside. Yes. Yeah.

9:14Well, all right. So if the CEO of Oracle, OK, was sitting next to Dario right after this report and Jim Cramer was interviewing him like they did with Benioff, you were gone. It was part of your thing when you were gone. But, you know, like they report this number. The stock was trading up five percent in the aftermarket. Then they shoot to, you know, Benioff and Dario from and then the stock went berserk. Like literally it went berserk. And you think about that. I think it's the association with how are we going to position ourselves if we are not like, you know, AI native, like for all intents and purposes.

9:41A lot of these companies were built that way. Oracle was not. They have a lot of legacy business. This business is growing off a low base, which is why it's growing so fast. But, you know, I'm listen, I'm not saying you guys are right. There's a lot of leverage in this thing. If they ever get a couple quarters correct and they start doing some things, you worry less about actually the balance sheet leverage. Then the stock could easily go much higher. But for some reason, the fact that this stock has been left in the dust and it has, you know, yes, it's had a big bounce. But relative to some of the other stories, I can't imagine some of the top analysts on the street would think that this is particularly interesting right here relative to some of the other.

10:15Only we had one. Yeah, a colorful one. Actually, we do. For more on tonight's earnings, as well as a broader tech trade, let's bring in Dan Ives. He is a partner and senior managing director of Yorkville. Ives, Dan, it's always good to see you. Great to be here. Do you like Oracle here? Look, in my view, when you think about the RPO and really the revenue that they have in the backlog, I think the street is almost assuming 50%, 60 % of that never happens. They're never going to be able to build out the data center and the conversion of revenue. I think this was a big step in the right direction.

10:48And look, this is a penalty box stock. I mean, New York City cab drivers are embarrassed in Oracle, and they need to ultimately make these steps because it does speak to the broader software trade. When you think about Palantir, Snowflake, Salesforce called a step in the right direction now, Oracle, definitely better days ahead from the SaaS apocalypse that we saw even a few months ago. I'll ask you the following question. Is it not necessarily all clear for software, but you've got to get some tailwinds now on the back of a couple quarters, Adobe and some other names notwithstanding? Also, institutionally, investors, they're caught off sides.

11:24So they're going to have to definitely adjust to owning more software because the software has really been a do not enter zone. And when you think about earnings and what we've seen across the board, the data points are now lining up where I wouldn't say it's an all clear because Adobe is a good example. It's still a lot more wood to chop, but definitely a huge step. And you're going to see software, I think, outperform as we go into the rest of the year. So, Dan, what gets them out of the penalty box? I mean, because, again, I thought these numbers were good enough, especially with the sentiment.

11:52What do they have to do? Look, Rome wasn't built in a day. So they're going to have to show a few more quarters. I think investors, going back to what Nathan talked about, when you had the open AI of$300 billion, now they want to make sure that these data centers are going to get it built. So I think they did a great job in the conference columns, Blake Shelton-like performance in terms of what they're sort of navigating. But now they've got to show it a few more quarters. Street's not going to give them credit for just one quarter. So if we don't really think of Oracle as a proxy necessarily, what would be?

12:22Who would be? Who's the most important? Is it NVIDIA or someone else at this point? Yeah, I think from a software perspective, I think what you're saying. Any part of the way. So I think the biggest dynamic change was from Palantir to Snowflake because that really showed that software trade is now on. The use cases are starting to happen, the second, third, fourth derivative. But it all does, it starts and ends with the godfather of AI, Jensen, NVIDIA. They have the best perch. And I think when you actually see what demands of supply as it's playing out, Now you're going to start to see second, third, fourth derivatives play out across software, infrastructure, cybersecurity.

12:59Go back to cybersecurity. And when you look at CrowdStrike, Powell out those good examples. Hey, so, Dan, the socks really had that move, right? It doubled from, I want to say, mid-spring to, you know, the end of Q2 in the end of June. And, you know, it's really chilled out. It's down about 20-so percent. It's really kind of stuck in the mud here. But we just mentioned NVIDIA. It really did find its way back towards those prior highs. And when I think about what's going on here, that bifurcation doesn't make me more bullish about semis. How are you thinking about semis? Listen, I think that a lot of folks have been on this NVIDIA train.

13:29Karen, never gotten off of it. You've been on that same way. But it seems like right now it seems to be a safer place to be than companies like AMD or Intel right now, given where their positioning is relative to, you know, like, you know, trying to take on NVIDIA. Yeah, no doubt. And I think you're going to start you're going to see more investors make that sort of bet. The reality is demand and supply today in chips, based on what we see in Asia, is 13 to 1 in terms of demand and supply. So that spillover effect, it's, of course, not just NVIDIA. It's going to be Intel. It's going to be AMD.

13:59And I think what you see on the semi side, and there's always a question, could semis and software, can they actually both outperform? I think part of what you're seeing now, the hyperscalers from Microsoft really being front and center, you've seen a lot more money rotating to that. But you put it all together, we're in the third inning of the AI revolution trade, but they're not all winners. I think Adobe is a good example. They're going to have to prove it more and more. But software now, we'll call it somewhere between a green, you know, a light green relative to how investors are viewing.

14:31Kind of like the color of your jacket? Kind of like this. It doesn't say a bright green, but now investors feel more of an awkward. It's like a Kermit green. Like a Kermit green. It's not that easy. It's not that easy. It's not easy. It's like a lime green, actually. Dan, good to see you. Thank you. Dan Ives of Yorkville Ives. I like that name. What, Yorkville Ives? Yeah, it's clever. Thank you. In the meantime, oil prices spiking again today, with WTI crude now riding an eight-day winning streak, topping $103 a barrel, the highest since mid-May. Diesel prices hit $6 a gallon for the first time ever, Dan, according to GasBuddy.

15:06The move is sparking renewed inflation fears and sending yields higher as well. Short-term rates jumping 15 basis points, benchmark 10-year, closing back on 5%, the highest since October 2023. 30-year yields hitting their highest since 2007. All that amid today's$22 billion bond auction and the Treasury's closely watched buyback operation. CNBC's Rick Santelli joins us now with all the details. Rick. Wow, that's a long list. I'll try to whittle it down a little bit. Obviously, oil is the story. Once again, it's the war. It's not the war. Look at the week-to-date of Tenzin Oil. Boy, they're right on top of each other.

15:44And if you look at Tenzin, as you just pointed out, Melissa Lee, highest yield close since the fall of 2023. For two years, it's basically July of 2024. And if we look at what's going on globally, and this is so important, if you look at Boone yields, they're fresh 17-year highs at 3.5%. You look at the French Oat, 444, fresh 18-year high. You look at the UK, Gil, 537, a fresh 19-year high. We have Fed probabilities a little bit over 70 % for a hike next Wednesday. And, of course, between now and then, we have CPI tomorrow. A couple of things I want to hit that are super important. First of all, if you look at what happened with the auctions this week, honestly, I've been looking at auctions for a long time.

16:35Back-to-back 10 and 30 years, A-pluses were my grades. Boy, the smallest takedown by dealers in the 30-year auction, highest yields in a 30-year auction since 2001. I mean, these were just stellar, over-the-top auction dynamics I haven't ever seen. And I have very little doubt that Treasury Secretary Bessett made a lot of phone calls, but it doesn't matter. Very solid performance. And as for the buyback, you know, all the headlines are right. But for all the wrong reasons, they're saying, ah, buyback disappoints. It disappointed for a very good reason. When you have a coupon auction, a regular auction, you have a bid to cover.

17:15When you have a reverse auction or a buyback, you have an offer to cover. And how many offers were there? $10.5 billion. How much did they buy the government? $5.19 billion. Take the$10.5 divided by$5.19. $2.02 is your offer to cover. That is weak by any standards. Buybacks or reverse auctions, the range for kind of average is offered a cover of two and a half to three. So lack of sellers is a good reason to disappoint a buyback because they're not selling, most likely because they rather hold the paper. Back to you. Very good point there, Rick. I'm wondering, we didn't even mention PPI today.

18:00And in terms of the setup of the bond market today going into CPI, given the rise in yields, if we get a hotter print, how does that play out? Well, I think right before we get the print, I would not be at all surprised to be sitting right at 5 percent. I think 5 percent is a fait accompli. I think today's PPI, just because it's as expected, and it basically was, it was still warm to hot. These numbers are big on year over year. I think going into CPI, you really want to watch the year-over-year numbers. I don't know that we're going to see a whole lot of cooling, but it only would take a little bit of cooling to move those Fed fund percentages rather dramatically, so everybody really needs to pay attention.

18:45And ultimately, I still think that when you look at what's going on overseas with their rates, the dynamics overseas are clear. These countries like France and Germany, they're going to have to stimulate their economies, And that's going to mean issuing more debt. The story just goes on and on to continue to push up rates. I have two big resistance levels to pay attention to. 5.17 percent and 5.29 percent above the market in tens. Rick, we can't avoid the yields around the world. I totally agree with that. And you dove in deep, as we expect you to, on the technicals of the bond market. But isn't this really about oil prices that have given us this last surge?

19:24And if you thought that oil was going back to 80 bucks, do you think we would be talking, having this conversation about treasuries? You know, I'll tell you what. No, I think the way we went up from February 28th, just basically a 45 degree line on the charts the day the war began. I am fairly confident when the war ends that they're going to go back down. And I think the break evens make that argument. But there's a big asterisk here. It's going on too long. And if it keeps going on too long, all those comments I just made are going to get watered down a bit. And we're going to get seepage into actual inflation because of the long-term implications of what's going on in the Mideast and how it's affecting prices around the world.

20:08Rick, good to see you. Thank you very much, Rick Santelli. It's always nice to have him at 5 o 'clock. See him early in the morning. It's nice to have him here at 5. We really get him at 5. Yeah. Yeah, when he can do it, it's a big day. Of course, he makes himself available. We were talking to Greg Dacco yesterday. He was talking about just sort of, you know, the longer inflation sits on us, the bigger the impact is. And so here we are, to Rick's point, the war has been going on for a long time. And even prior to that, inflation has been high. And the president and the people in the administration have now acknowledged that, and I think I heard it over the last couple of days, that it will probably last through the midterm elections.

20:44I think something that the market has been pricing out, but now it's been acknowledged by people that matter. So, yeah, the longer this lasts, the worse it's going to get. But I think we've been steadfast. And Tim is right. Look, if crude oil prices weren't where they are now, would we be here? Probably not. But the trajectory was going there regardless, in my opinion. And I still think yields continue to grind higher. You're saying the trajectory of yields or the trajectory of oil prices? Yes, 100%. I agree. Well, when inflation is there for a while, the expectation of further inflation is just embedded there.

21:14I still think, though, that Trump cannot stomach certainly oil above par for right for West Texas. Well, anywhere. But, you know, one oh seven and one oh two and change. I don't know exactly where they close, but I do think he's going to do some try to do something to materially bring that down before the midterms. Just really quickly, you know, on oil is for all the ebb and flow of oil prices. We're within nine percent of a closing high for the all time during the war. It feels like, oh, wow, oil prices aren't really back to where they were back in April. But guess what? I mean, we're within.

21:48And now all we've heard about for months is the depletion of supplies and inventory. And Saudi today, again, they announced that they produced 6.3 million barrels in August. And that's down 26 percent from where they were in July. And that number is probably going down even more in September. So you can't tell me that the pressure on the oil market, which is now about to take out those old highs, which we're not even really talking about. It almost seems like the oil prices have gotten prepped up again. The other thing I just think is very important is that the short end of the curve on some level is even more important than the long end of the curve, because we've got$9 trillion of$40 trillion to refinance in the next 12 months.

22:24And they're trying to front load the short end to actually minimize the borrowing costs. And meanwhile, the short end over the last two days has outperformed in terms of yields going higher than the long end. And that's something to pay attention to. Yeah, just say this, you know, Karen, when you say what the administration wants, I feel like this is so different right now than the last time we were at 495. You know, I think the markets, whoever the markets are, at least in the bond market, they see the whites of their eyes. And I think they think that we are stuck. If they look at the way that the administration's been acting about this war for six months, they look at the way the Treasury secretary, you look at Warsh, who's kind of keeping his cool.

22:54Like, I mean, we'll see what happens next week. I just I think about markets. I go back for the last couple of decades. This is a tricky situation. I don't mean like things are going to go haywire and we're going to crash or anything like that. But I think that there are people that would like to have control of these markets and they are not in control. And I think that's where like maybe accidents happen. I'm talking about oil, though. Well, oil and yields. But I mean, like, look at the way they're moving. And by the way, with the VIX at 17 and the stock market, 2 percent off its all time highs.