In short
Fast Money episode covering (1) U.S. long-term yields surging to 19-year highs after stronger September manufacturing/services data, (2) market “ripple effects” for stocks, the dollar, and Fed expectations, (3) Meta’s Muse AI agent and what to expect at Connect 2026, (4) company-specific moves: McDonald’s investor day and IonQ’s quantum breakthrough, plus (5) diesel cost pressures on U.S. farmers.
Guests (on-air)
Steve Grasso, Karen Feynman, Dan Nathan, Courtney Garcia (desk panel); Steve Leisman (senior economics reporter); Alicia Levine (CIO, BNY Wealth); Brent Dale (software/Internet analyst, Jefferies); Megan Casella (CNBC White House); Pippa Stevens (farm reporter); Brian Moynihan (Bank of America CEO, quoted); Carl Quintanilla (interviewer, quoted).
Key claims
Higher yields reflect “higher for longer” Fed pricing, driven by oil rising, PMI strength, and hawkish Fed signals; equities can digest via large-cap/tech resilience but small caps/utilities lag. IonQ’s real-time quantum error decoder is a step toward practical quantum error correction. Muse could drive subscriptions/commerce/engagement, but monetization details remain TBD and rivals (e.g., Google assistants) are a risk.
Notable examples
10-year yield >5.4%; Nasdaq down >1% after record highs; Muse paid parking tickets via a photo; Muse partnerships: Instacart/Expedia; McDonald’s Arch IQ for drive-through/kitchen ops; IonQ end-to-end real-time quantum error decoder; Iowa diesel/fuel costs up 45% (6 years) and bankruptcies rising.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VORising Rates Overview
0:00 to 0:22
Discussion on the recent rise in long-term yield rates and its implications.
“Mazda has been named Consumer Reports' safest new car brand.”
Rising Rates Overview
1:42 to 2:30
Discussion on the recent rise in long-term yield rates and its implications.
“I'm Mike Santoli in for Melissa Lee today, coming to you live from Studio B at the NASDAQ.”
Market Reactions to Yields
2:30 to 4:04
Analysis of market reactions to rising treasury yields and economic data.
“So is there more pain to come on the rate front?”
Understanding Bond Movements
4:04 to 5:27
Insights into the factors driving current movements in the bond market.
“if you try to pull apart exactly what the components of the move in bonds has been, it doesn't seem like market-based inflation expectations are really part of this.”
Impact of Economic Data
5:27 to 8:04
Exploration of how recent economic data influences market expectations and Fed policy.
“And we might not get one for the whole year.”
Investment Strategies Amidst Rate Hikes
8:04 to 12:05
Discussion on stock market strategies and asset management during a Fed hiking cycle.
“It just goes, spikes higher, right about 9.30, 9.45.”
Market Dynamics and Tech Sector Insights
14:00 to 17:40
Discussion on the current state of the IT sector, market corrections, and long-term investment strategies.
“Like, coming into last week, the IT sector was trading at 23 times, the lowest it's been in a long time, with the market at 19 times.”
Consumer Sentiment and Inflation Effects
17:40 to 19:00
Exploration of how inflation and consumer sentiment are influencing market expectations and corporate earnings.
“Courtney, how are you juggling all this stuff at this point in terms of how clients should be thinking about this?”
U.S.-China Relations and Trade Impact
19:00 to 20:27
Analysis of the upcoming U.S.-China meetings and their potential implications for trade and stock markets.
“And once you have these inflation expectations become embedded, right, as far as corporates are concerned, but it's also on the consumer side.”
McDonald's Investor Day and Market Response
20:27 to 21:51
Review of insights from McDonald's investor day and market reactions to its performance and strategies.
“So the focus then is more on portraying stability and closeness in the U.S.-China relationship.”
Show all 22 chapters
Consumer Discretionary Trends and Challenges
21:51 to 28:00
Discussion on challenges facing consumer discretionary stocks and the influence of inflation on spending.
“Plus, a quantum leap giving shares of Ion Q a boost, the major computing breakthrough for the company and what it can mean for the quantum trade going forward.”
Quantum Computing Breakthroughs
29:27 to 31:34
Discussing IonQ's advancements and the implications for the industry.
“Shares of quantum computing company IonQ jumping as much as 13 % today after announcing it made a major breakthrough.”
Meta's Muse and AI Impact
31:34 to 32:39
Analyzing the early reactions to Meta's AI agent Muse and its market effects.
“Plus, the industry is already getting shaken up by the company's new AI agent, Muse, when Fast Money returns.”
Brent Dale on Muse's Potential
32:42 to 36:35
Brent shares insights on Muse's capabilities and its implications for users.
“For more on what to expect, let's bring in Brent Dale, software and Internet research analyst at Jefferies.”
Meta's Stock and Market Prospects
36:36 to 37:59
Discussing Meta's stock performance and future revenue opportunities.
“Finding hair products and outsourcing the criticism of your wife.”
Impact of Rising Yields on Banks
38:00 to 40:04
Examining how rising yields affect banks and financial markets.
“They haven't really monetized it to the extent that they can.”
Farmers and Diesel Prices
40:05 to 42:02
Reporting on the challenges faced by farmers due to high diesel prices.
“I think they'll continue to move, whether it's two times this year again or one time or in one time early next year.”
Macro vs. Micro Trades in Banking
42:02 to 42:35
Explore the distinctions between macro and micro trading strategies in the banking sector.
“You know, I think there are things to think about here.”
Impact of Diesel Prices on Farmers
42:35 to 43:06
Understanding how rising diesel prices are affecting farmers as harvest season approaches.
“farmers facing record high diesel right as harvest season gets underway.”
Challenges Faced by Iowa Farmers
43:06 to 44:33
Insights into the numerous rising costs and their implications for Iowa farmers.
“Diesel prices continue to hit records, adding to the rise in fertilizer, labor and land costs for farmers in the U.S.”
The Diesel Dilemma
44:33 to 45:51
A discussion on the complexities of the diesel supply issue and its impact on prices.
“So that is the backdrop here as Iowans prepare to head to the polls in a lot of very closely watched races.”
Final Trades Analysis
45:51 to 46:53
The hosts share their final trades and market insights to conclude the episode.
“Diesel's a tougher thing to solve than the other.”
Transcript
Automatic transcript. May contain errors.0:02Mazda has been named Consumer Reports' safest new car brand. It starts with our approach. Every Mazda comes standard with proactive safety features. So 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. Did you know that Neurosymbolic AI can help your business find new ways to make money? EY Parthenon is the only one offering this groundbreaking growth platform. Neurosymbolic AI analyzes hundreds of millions of data points to reveal new growth strategies.
0:45EY Parthenon teams deploy this innovation so you can uncover hidden value and scale beyond existing boundaries. Want to know what Neurosymbolic AI can do for your business? Contact EY Parthenon today. Solutions that work in practice, not just on paper. Live from the NASDAQ market site in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. Rates on the rise. Long-term yields at their highest level in more than two decades. The 10-year hitting fresh 19-year peaks. What's behind the moves and the ripple effects across the markets? And Meta's muse continues to make waves.
1:21So what's at stake when CEO Mark Zuckerberg takes the stage at the Connect event tonight? One top analyst weighs in. Plus, McDonald's worst day in a year. What Bank of America's chief executive had to say about the Fed and a quantum leap for IonQ, the breakthrough that sent shares climbing as much as 13 percent, and what it means for the future of quantum computing. I'm Mike Santoli in for Melissa Lee today, coming to you live from Studio B at the NASDAQ. On the desk tonight, Steve Grasso, Karen Feynman, Dan Nathan and Courtney Garcia. And we start with that great rate rally or that rise in yields, the great bond sell off that sent the yield on the 30 year treasury to their highest level since 2004.
2:02Long term rates topping five point four percent at their peak, while the benchmark 10 year jumped by over 15 basis points. That's the biggest one day gain since April of last year. Two year yields at the highest in more than two years. The latest move coming after new economic data showed stronger than expected readings on both the manufacturing and services sector in September, giving investors more confidence that the Fed will hike rates for a second meeting in a row next month. Stocks, meanwhile, pulling back, the Nasdaq dropping more than a percent after hitting a record yesterday. So is there more pain to come on the rate front?
2:37And how do you position yourself right now? Now, Dan, I was very intrigued to see the acceleration higher in yields on that S &P PMI release at like 945 a.m. That's not a top tier, you know, benchmark of what the Fed's going to do or anything else. And yet it shows you this market was sort of sensitive enough to any sign of overheating.
2:59Melissa Lee:Yeah, it's worth noting. I mean, the S &P is down one and a half percent, you know, from its all time highs made a couple of weeks ago. We did have a new high in the Nasdaq 100 yesterday. you would have thought, you know, to have this sort of move in such a short period of time that it breaks out, you know, gets back towards those 2007 highs, that there would be some sort of reaction in the equity market. You look at the VIX and you say, all right, it was up 7 percent today. And, you know, but it's still 15. You know what I mean? It's not signaling any sort of, I don't know, concern as it relates to investors or traders in the market.
3:29Melissa Lee:But let's talk about the move index. I mean, this is the basically the VIX on the Treasury market. That's probably what we should be looking at for all intents and purposes. because sooner or later, none of us know what that point is. But there's going to be a breaking point. You've seen the dollar kind of move higher here. And at some point, as we get closer into earnings season over the next few weeks, that strong dollar is going to be something that I think a lot of investors are going to think about as it relates to multinationals. But the flip side of that is you have a strong economy. And if you have the economy and the stock market doing OK with 5.11 in the 10-year, maybe that's where we should be.
4:03Melissa Lee:I don't know. Yeah, I mean, you know, Karen, what's fascinating is, if you try to pull apart exactly what the components of the move in bonds has been, it doesn't seem like market-based inflation expectations are really part of this. Not a big part of it. In the back of people's minds, they think, OK, tighter Fed than we thought, maybe over a longer period of time. Maybe you get this supply-side investment boom, and that kind of raises the metabolism of the economy. And then you have a less predictable Fed, whatever it might be. But it's not necessarily saying that this is an inflation panic. So I guess, should we welcome it?
4:38How does the stock market economy absorb that kind of? I don't know. That is a good question. I mean, this also is August numbers, right? And that was before we saw oil, I mean, has really moved a lot since then. So it could be a lot worse. I think this is sort of the green light for the Fed. You know, it's interesting. I do think Jeff Gundlach was saying he would have done 50 and 50 and that was it. There's some rhyme there. I don't remember the rhyme. And that seemed, you know, on the outer limits. And in hindsight, that wouldn't have been so crazy, given that we saw these kind of numbers. It wasn't that high was the magnitude of the beat here.
5:15So we'll see. Maybe there'll be some revisions or something like that. But, I mean, you can't help but think, wow, that is a significant move. And I'm surprised the market didn't react even more. Although, Steve, two months ago, this consensus was we're not getting a hike in September. And we might not get one for the whole year. So we're only getting after Warsh. Jackson Hole kind of set down the the you know, the parameters of what he was thinking. And then you got a little bit of warmer data from there. So when I look at this and I'm interested in your comment on this, too, because you love the data with the PMI, you see this panic buying because on new orders, new orders exploded.
5:54And you see this panic ordering, I should say, not buying. Is it because there's been supply issues that we're getting this panic issue that inferred a 5 % GDP when the market was expecting 2%, 2 % to 3 % GDP? So you have a market that's reacting to panic in a PMI print that might not be as accurate as we'd like it to be, inferring that we're only going to get rate hikes. And the rate hikes can't do anything about the inflation that we're seeing. Sure. Although there's no doubt about that. I think I'm probably going to say the same thing, that if it's a warmer economy and they want to cool that, not just focusing on oil at all.
6:35Yeah. If it's just that, you know, the economy is humming along. Sure. I don't know if that's what you were going to say. Where is it coming from? I guess the question is, it's really coming from the hotness is coming from the supply shock that's creating these bottlenecks, that's creating the PMI to rush into pre-order or over-order. Yeah, I mean, I do think you had to take the initial condition before those numbers hit, which is yields did not really come in at all with oil down 10 percent. So something is happening in the bonds. Let's dig deeper into rates with our senior economics reporter, Steve Leisman.
7:12Steve, you know, some of it's definitely the Fed. Obviously, odds for October changed here. What's your read on the kind of chain of events?
7:21Melissa Lee:Michael, you and I have been doing this for a long time, and you rarely get a move like this with just one factor. I'm going to go through what I was watching all day, beginning in the morning, the tail of the tape. First of all, the two-year was already elevated in the morning. But I want to show you the list of things that seemed to happen during the day. The first thing that happened was really an oil price rise here. That was the first thing. That was followed by those PMIs. So it kind of threw some fuel on the fire there. And then you had Governor Barr backing more hikes. The buybacks remained at$6 billion with some hope that it was maybe going to be higher.
7:55Melissa Lee:And then the market started pricing in more hikes from the Fed. So let me show you the oil chart here. And what's interesting about that is that's about 9.30 that starts to happen, that oil prices start to rise. Then bond markets start to react. And you can see it. It just goes, spikes higher, right about 9.30, 9.45. And then you move in later in the day. You look at the Fed funds and what happened was looking at about a 55 percent probability of a Fed rate hike. And then that spikes up to around 75, settles around 68, 70 for the day. So what is the story here? And I think you guys were getting at this.
8:31Melissa Lee:Well, you've got a Fed chairman who says, you know what, I'm taking signals from the market. Well, the market, you can see that spike there on the 10 year. And there's those probabilities looking for 94 percent probability that there's another hike by December. Then you get into the spring of next year, 90 percent probability of another hike there. The market is sending, Mike, I think, an unambiguous signal here that rates need to be higher. And you're hearing Fed officials start to talk about it. You absolutely are. And, you know, if we go beyond that, because there was this standard take, Steve, that, OK, maybe the Fed takes back the three cuts from last year.
9:06That's a mini tightening cycle. They're not chasing inflation. They don't have to necessarily push that hard or at least hope get some help on the oil front and the rest of it. But, you know, it seems like a higher for longer mindset is setting into the bond market, too, when it comes to where the Fed's going to land.
9:21Melissa Lee:I think that's right. And you're also starting to hear it from, you know, just business getting the same idea that, hey, we're not going down anytime soon. And look, this all started with the really deterioration of the situation in the Middle East and the idea that there wasn't going to be a quick fix here, that there couldn't be a flash in the morning that said all of a sudden the problem was solved in the Strait of Hormuz. And now you have these diesel prices that have remained high, and that's going to filter into other parts of the economy that won't be X'd out when we start looking at the core of just X energy and food.
9:53Melissa Lee:It's going to start to show up in other areas and it's not going to satisfy the criteria laid down by Fed Chairman Kevin Worscht, which is he needs confidence that we're heading back to the 2 percent target. That kind of underlying inflation is going to work against that. And just getting to the PMI showing strong growth, you can have the market price in higher rates from the Fed because of strong growth, or it can just say to the Fed, hey, you don't have to worry about the employment side of the mandate, that that's a done deal. Just go ahead and focus on inflation. So it gives the Fed license or ability to focus on inflation without worrying about the other side of the mandate.
10:35Steve, it's Karen. So just to further your point a little bit, if oil were to come in, let's say another 10 bucks, do you think this is still if one wants to be hawkish, that all the all the elements are there to still be hawkish?
10:49Melissa Lee:You know, yes, because I mean, I was following what Mark Mike was talking about earlier, the idea that oil prices did move. You can see it right there in the middle of your screen. They came down and bond yields did not fall. So think about it, Karen. If you get that$10, what is that going to do now? given where we are. I'm hearing talk about 530 on the 10-year being a next point there for resistance. It's something to put in your back pocket to think about where the next point might be where we end settling down. So what does that mean? You take 10, 15 off. You're still at 490, 495 on the 10.
11:22Melissa Lee:And I'm very interested in the two-year, which has been really creeping up. I think it hit 490 today, maybe settled just a little bit below it. And that's 100 over the Fed funds, Karen. So the market is making a sort of unambiguous call that the Fed funds needs to be higher. That's, you know, think about the two year in terms of the average of the Fed funds rate over a two year period. And that's telling you the market certainly seeing. I have to say this two year, guys, is more aggressive than I think the Fed is right now. But it's certainly telling the Fed to be more aggressive. Yeah, definitely telling you the direction maybe of surprise over the span of that two years in terms of how the market is thinking about it.
12:03Steve, thank you very much. For more on the market, how it's digesting all this, let's bring in Alicia Levine, Chief Investment Officer at BNY Wealth. Alicia, good to see you. Great to see you. So, you know, look, interesting questions get raised here in terms of parts of the stock market that are weathering this move in yields better or worse. If it is all for, you know, good economic reasons, what does that mean? What does it mean for valuations? So, look, I think we just have to start from the basics, which is that a Fed hiking cycle is never great for risk assets. So it can be navigated, but it's never good.
12:35And so you come into a world where you had that rotation over the summer, but the index went nowhere. And really, since Jackson Hole, the index was able to move higher because large cap tech took over, because as the market digested, higher rates likely to happen. Those companies that don't really have to borrow are doing fine. And I think you're going to see more of this. So you're likely to see large cap companies and large cap tech do okay with degradation under the surface. Coming into that weaker season of a midterm election cycle, we really have not seen that weakness that you typically get every four years.
13:09And so you're really set up for a market, even though the market was pricing in 75 to 100 basis points, it actually wasn't clearly because the market got so nervous today when it looked like it's not to be 75. It's actually going to be more than that. So you're going to get more of this indigestion. And I think you're going to have a pretty good consolidation here. And to me, the big debate seems to settle on, you know, what you just laid out there, where you haven't really had that pullback in the indexes and things like that. You could point to equal weight consumer discretionary is 12 percent off the highs.
13:41OK, utilities can't get a bid. Small caps down 7 percent off the high. So you have all these pockets of the market that are saying, we're noticing, we see what's going on, and we're taking the pain. Does the index itself, did the majority of stocks have to reset lower before we're through this episode? Tech already reset lower. Like, coming into last week, the IT sector was trading at 23 times, the lowest it's been in a long time, with the market at 19 times. So that gap really shrunk. I think you've already had the correction in the multiples in tech. I just think this is what leads coming out of it.
14:18You may not see enormous damage on the index level because of that, because of the weighting, but everything else is going to get hit in the short term, and you just have to really live through it. Because in a world where the problem is too much growth, well, I'll take that any day because the earnings are going to support the market ultimately, and ultimately any sell-off will be viable. So when you look at it, you key in on diversification and you key on really great premium assets. But when you're talking about a sell-off, they throw everything out. So when you look at the tech sector, that's 35 % of the market, but it's credited with probably 40 % of their earnings growth.
15:00Where do you hide and where do you go anywhere else besides tech? And do you stay in it for the long haul because you can't time it, right? You can time it. You stay in it. I think that what's happened with small caps here is actually very interesting because everybody hates them right now and they've hated them for five weeks but loved them before. So I think there's probably an opportunity here to leg into these assets as they sell off. But ultimately, timing this, Steve, as you point out, is notoriously difficult and people and investors tend to lose money this way. Hard to know. But clearly, the velocity of the rate move today is not something the market wants to digest.
15:36I'd say this. There's been a lot coming at the market. We've had oil over 100 for six months. We have inflation expectations higher. We have a hawkish Fed chair. And in the end, the market has sort of held in there much better than expected. And you're not seeing degradation in emerging markets yet, even with a stronger dollar. That may come. We know those are the risks. But so far, like, it's not so bad. And this is what one would expect. So everybody wants to buy the dip, but not in bonds. Right. Right. So, I mean, that's what's going on right now. There's a big correction going on in treasuries.
16:10Is that now serving up to you an opportunity to say we can just kind of import some of that into the portfolio for the future? Like in the end, it really depends what you were like your view is. Is it a six month view or is it a 12 month view? Like ultimately yields over five percent are pretty juicy. Yeah. And it can make up for any capital loss that you have on the duration side as rates move higher. And if you say, where are we a year from now, we're likely to be here or lower. So if that is your timeline, it's not a bad time to actually leg into this. Having said this, this is obviously a different bond market.
16:44And what we're seeing is normalization. So we keep on saying 2004, 2007. It sounds scary. Well, what's scary about it? Like, we knew that COVID ushered in a world that's a nominal growth world. It's inflationary and it's higher growth. And this should not be surprising that yields are where they were 20 years ago. So opportunity, yes, hard to time. But if you think about core inflation at 2.5 percent, like in some ways, the Hawks really have they have a burden here to explain why inflation is not higher. It should be higher and it's not. So there's an interesting story here of headlines terrible.
17:19The inflation is coming through the service side because everybody wants to go to dinner and go on vacation. But, you know, the truth is the good side is still not bad. And you would expect to see much higher goods pricing coming. Muse is going to help just cut prices for everybody. It's a disinflationary force. We'll see that that becomes tomorrow's market narrative. Alicia, good to talk to you. Thank you so much. Great to see you. Courtney, how are you juggling all this stuff at this point in terms of how clients should be thinking about this? Yeah, well, I mean, I think when you see the 10-year treasurer it is, if this is happening because we have increased growth expectations, the markets can handle that.
17:53And I think that's why you're seeing the markets today aren't that far off of their highs. But I think the bigger conversation is where oil goes from here. I think we want to continue to see those conversations. If you're going to see some sort of revolution in Iran, which at this point doesn't look like that's necessarily in the near term future, that is more of a concern for longer term inflation. But realistically, as we get closer to October here, I think we're going to be talking a lot less about the Fed rate increases than we are about earnings. And if that continues to show a strong economy, a strong earnings season, earnings expectations and a strong consumer, I think that's going to be the focus, which ultimately can lead markets higher from here.
18:25Yeah.
18:26Melissa Lee:On the earnings front, though, if you think about it, expectations for Q3, and we're going to start getting that, obviously, 28 % year over year. I mean, just think of that. And we just printed a number like that, I think, in Q2. And the expectations for Q4, 26%. I know you track this sort of stuff. I mean, Faxet has, like, normally you will see throughout the quarter expectations for earnings come down. Yes. On, like, low single digits. They've been going up low single digits. So in this inflationary environment, you know, like, we've had that sort of earnings growth. But I think to Karen's point earlier, I mean, you have this accelerating sort of inflationary environment because crude oil has stayed above these levels for that long.
19:01Melissa Lee:And once you have these inflation expectations become embedded, right, as far as corporates are concerned, but it's also on the consumer side. I mean, that's really where the problem is. And the point where I started with earnings growth, where it is, it can't really get that much better. Right. And so you have an S &P that's trading at multiples that are high relative to the five, 10 year period. So to me, I think that's where the risk is of 5%, 10%. It's high relative to the 10-year period. It's actually right back to the average of the 5%. But the question is whether we're going to pay for 30 % earnings growth when you didn't pay for it in the second quarter, because the S &P is basically where it was mid-July.
19:34So we'll see if it changes this time. All right, meanwhile, China's President Xi Jinping soon to arrive in Washington ahead of tomorrow's high-level meetings with President Trump. CNBC's Megan Casella has the latest from the White House. Megan. Mike, the festivities are set to kick off in less than an hour when President Trump will greet President Xi on the tarmac at Andrews Air Force Base. That is an exceedingly rare diplomatic gesture and one that will set the tone for all the pomp and circumstance to come over the next few days. So some schedule highlights to show you here. Tomorrow kicks off with a formal welcome, followed by the official bilateral meeting, and then at night a big state dinner where we expect a slate of big-name tech and finance CEOs, Jensen Huang, Mark Zuckerberg, Jamie Dimon, just to name a few.
20:15There's a tea and a tour on Friday as well. Now, all of that pageantry is taking center stage. Expectations from everyone I've been speaking with are quite low for any real breakthroughs on policy, especially on areas of deep division. So think Iran, Taiwan, export controls. So the focus then is more on portraying stability and closeness in the U.S.-China relationship. Now, that said, there have been prep meetings ongoing on policy, including another one today between Treasury Secretary Besant and his Chinese counterpart. You can see them here. We know they've been talking trade and AI. So as a result, an extension of the boost on trade truce and the establishment of an AI safety dialogue.
20:51Those could be two of the most concrete deliverables that we see later this week. Mike. Megan, thank you very much. Steve, is there is there a trade in here? Yeah. So I think there's always that trade where you see the China related stocks run up into this type of a meeting. It turns out to be more of a photo op than something substantive and usually reverses right after we get out of it. And if you look at rare earth, I think that's the key, as Megan was talking about. I think what you're really going to see out of this more than just the trade is they're just going to extend this trade policy deadline past November.
21:24And we'll see where we are. But way too risky to be going all in on China related stocks right now when we've seen these things whiplash way too often. Yeah, obviously, I think this is kind of a no news would be good news, kind of a kind of an outcome for most involved. I think. All right. Coming up, McDonald's shares getting grilled after the company's investor day. What the CEO had to say about the consumer and why investors aren't impressed by its new drive through. Next. Plus, a quantum leap giving shares of Ion Q a boost, the major computing breakthrough for the company and what it can mean for the quantum trade going forward.
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23:51Melissa Lee:It is a challenged environment right now, but strike the word challenge. It's just, it's the environment that we're in and we're not expecting it to change. And so there's all sorts of surveys out there around consumer sentiment, certainly hear consumers, how they feel about inflation, the outlook around cost of living, all of those things, particularly when it comes to discretionary spending, I think weigh on the consumer, but there's growth to be had out there. I mean, there are people out there who are still driving growth. That was McDonald's CEO, Chris Kamchinski, speaking with our Carl Quintanilla about the consumer headwinds that he's seeing right now.
24:27Shares of the burger chain fell nearly 5 percent today. It was their worst day since April of 2025. The company failing to impress at its investor day, where they laid out new financial targets and unveiled Arch IQ, an AI platform to handle drive through orders and streamline kitchen operations. McDonald's shares have been under pressure all year and today hit their lowest level in nearly four years. I don't know, Karen, it would seem like there was a kind of a low bar going into this meeting and it didn't really meet it. Here's the thing about these kinds of meetings. You know, if you're going to disappoint like this, I always think it's helpful, probably, if you kind of let that know, let the street know that.
25:07Yeah. So that, you know, that expectations can be lowered and then you won't have, you know, exactly surprises. The street hates surprises. For sure. So it doesn't, I mean, it gets cheaper and cheaper, but it continues to get cheaper and cheaper. So I'm not inclined to jump in here. And the other restaurants are, you're finished, right? Yes. I didn't cut you off, sorry. The other restaurants are actually doing it. So you see Burger King, that's been QSR. That's been in the focus point. And guess who runs that? Patrick Doyle, former Domino's, right? So efficiencies. If you look at Brian Nichol, what is he doing for Starbucks?
25:41So this is a McDonald's problem. This is not a fast food problem. and they're giving answers or they're saying tough times are lasting to 2030, the market wants it now. Yeah, for sure. I mean, obviously it's a bigger base. It's more global, slower to move, I'm sure. I'm not sure it's a McDonald's problem.
25:58Melissa Lee:I mean, like, obviously they have their own issues, but look at AutoNation. Look at Nike. I mean, I can keep on going. I'm just talking fast. No, I'm just saying, but that's why I'm kind of broadening out a little bit. I mean, look at Dick's. I mean, there's just so much weakness in the consumer discretionary space. And when you think, and the CEO just meant that he said there's growth out there. Look at the retail. Look at Walmart. I mean, it doesn't seem like there's a lot of comps that are growing right now. And so through the lens of the stock market, that consumer confidence that we've been seeing, it kind of matches up with a lot of these names.
26:25I would look at it more on the cost side. I mean, to me, him saying, look, this is just the environment, meaning the inflationary one. You also had General Mills saying we can't not pass through costs today. So it seems as if these companies are like out of options to preserve margins to some degree, Courtney. Yeah, and I think this is what's interesting to look at. When you look at consumer spending as a whole, the consumer generally actually has been holding up here. But I think they're being very discerning about where their money is going. And so I do think that is going to come at the cost of marketing costs.
26:52They do have to really increase the efficiencies, which is what they're trying to do with AI. But clearly, the customers are not going there. And is that a McDonald's problem or overall fast food problem? I don't know. But this is something that is an issue with their consumer. And if they can't capture it, they're going to have to figure that out. Well, they're going to Chipotle. They're going to Starbucks. And they're going to Burger King, right? Those are head-to-head. There's no other. I don't disagree with Dan on the retail side of it. But when you're looking at burgers to burgers, right, they're losing.
27:16Yeah, no, this stuff's all cyclical. We've seen McDonald's remake itself a bunch of times, see if they can do it again. A lot more fast to come. Here's what's coming up next. A quantum leap in computing. One industry leader making a major breakthrough. What it means for the next stage of the tech revolution. Plus, Meta's Muse, inspiring more than just a boost in the stock, the broad range of names impacted by the new AI agent and what to expect from the social media giant's Connect event tonight. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.
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29:19Make amazing happen. Find out more at cdw.com slash everpure. Welcome back to Fast Money. Shares of quantum computing company IonQ jumping as much as 13 % today after announcing it made a major breakthrough. The company is saying it demonstrated the industry's first end-to-end real-time quantum error decoder, making it possible for a single processor to find, fix, and decode errors while running continuously in the background. Rivals for Getty and D-Wave both falling today. So, Steve, you've been watching this space. You know, if you need a like a whiteboard to kind of diagram. Yeah, trapped ions, neutral ions, the whole thing.
29:59Yeah. So so I think the big takeaway is this is that's been the problem for the entire industry. It's the real time error correction because you can't slow down the machine and you have to use the quantum speed, but be able to not get that. Think of it as a fork in the road. If you keep going down the wrong answers, it defeats the purpose. This they've solved. But if you looked at the chart on the rest of these, this is a they're solving it, not the rest of the quantum space. And you also have to look at what's the spend. They burn a ton of cash, the whole industry. So I think that we're getting to quantum sooner than people thought the timeline is.
30:37You want to own a basket of these names. It's still big picture, Courtney, kind of a research project, right? It's not a product project. Yeah, but I think the concern like longer term is like, could this cannibalize other industries? And I think AI specifically. And I think what news came out of this that was pretty interesting is that it's working with AI to coexist rather than taking over it. And I think immediately, I don't think that these companies are going to be a short term buy. But your beneficiaries are the ecosystem outbuilders, which is things like an NVIDIA. So, yes, this is longer term.
31:09But in the meantime, as they're getting in the mix, NVIDIA is going to benefit from that. Right. It's joining with AI to hack Bitcoin. And take over the world with the money that it steals from everything. Not a delightful day for Bitcoin. Yeah. Yes. You have to think some part of it is this. Yeah, I don't know. It was good. I mean, it had a great run coming into it, but it didn't help. Plus, the real rate's going up. Who knows? I've stopped figuring out why Bitcoin moves the way it does. All right, coming up, what to expect from Meta's annual Connect event, which kicks off in just over an hour.
31:38Plus, the industry is already getting shaken up by the company's new AI agent, Muse, when Fast Money returns.
31:51Welcome back to Fast Money. Stocks falling as yields surge, the Nasdaq leading the losses down more than a percent, and the Nasdaq 100 snapping a five-day win streak as the 10-year yield hit fresh 19-year highs. And more fallout from the launch of Meta's Muse. Instacart and Expedia both down despite announcing partnerships with Meta. Muse will connect to Instacart's grocery infrastructure and allow users to plan and book trips through the agent. And Charles Schwab getting hit again as investors fear the new AI agent will help traders bypass traditional trading platforms. MetaShares, meantime, up ahead of the kickoff of its Connect 2026 event.
32:29CEO Mark Zuckerberg set to take the stage in about an hour. Muse expected to feature prominently tonight. Shares are up 20 percent, Metashares, since the agent was unveiled just two weeks ago. For more on what to expect, let's bring in Brent Dale, software and Internet research analyst at Jefferies. So, Brent, I assume you've been test driving it. Is the excitement around Metashares because of Muse justified? Yeah, Mike, we're using it pretty heavily. We're not only using Muse, we're using Instinct and some of these other agents. So what I would say is it's early, but it's really encouraging. I'll give you an example.
33:06My college son left his car in San Francisco, got five parking tickets. I took a picture on Muse and it automatically paid to San Francisco police all the parking tickets with one click of the button. Right. That process, I would have to upload all the tickets. It's helping plan weekends, restaurants, travel. And I think, as Mark Zuckerberg says, you can start small, but you can go big. and I've already seen it go big in some of the use cases and the things that we are asking you to do with it. They're not alone, right? They're going to be others. Instinct has launched. It's an incredible user interface.
33:44It's your chat on your phone. We expect Google, others to come out. So the question really is, is this going to be more like, you know, threads, which kind of petered a little bit, or is it going to continue this trajectory? So far, I think we like what we see as the competitors. And I think ultimately, how many personal agents are we all going to be able to consume? Right now, I have two running in my personal life. I think maybe one to two is the max that most people will handle. So again, a lot to still figure out in this trajectory to continue. But so far, I'd say the product is a killer app from what I can see.
34:25There has not been much out of Meta in terms of excitement on the AI spend, and we're seeing this product live up to the hype. So if you don't have it downloaded, I definitely recommend giving it a try. I mean, I might be more impressed if it talked its way out of the parking tickets rather than paid them all at once, but it's still pretty good. How does it fit into the Meta earnings model investment case? Is that just TBD? some of it's tbd but i think if you think about a world where um subscriptions right so if uh if i pay one series of parking tickets a week versus i'm using it for 10 things a day you know i'm happy to pay for the service right as a subscription so i think there's an element of subscription there's an element of you know this is great for brands i was in uh i was in europe last week and i took a picture of a hair product that i liked i couldn't find it on amazon and it went out and found it and shipped it to my house, sent me a Shopify link.
35:26It's good for Shopify on commerce. So I think, you know, again, I'm pretty bullish about what it can do and the quality and the scope of what it's doing in terms of the product. The revenue opportunities, I still think from an advertising side subscription, it's going to drive, obviously, a lot more compute. It drives engagement to the platform. I'll give you one other example. And my wife is an interior designer and she lost a project to another designer. And I said to Muse, hey, analyze my wife's work relative to the woman who won the other part of the work. And it came back with a really thoughtful analysis on both sides of what the style is and maybe why my wife lost this assignment.
36:13So, I mean, the stuff it's doing in terms of a link to even Instagram and some of the other websites, I mean, I'm just finding it to be really engaging, really easy to use. And I think the thing is, like, I'm a tech analyst. I was a software developer. But, like, I want my mom and dad to use this. I think they can use it. I think it's really usable. And I think that's a good test that this could go a lot further than where it is today. Finding hair products and outsourcing the criticism of your wife. I think I'm sold right now. But, Karen, I think you had a question. Yeah, Brent, let's just talk about the stock a little bit.
36:44Obviously, it's had a tremendous run, and the street is very hyped up about this. Do you think the penalty that it has gotten over and over again over the last several quarters for CapEx spend and CapEx increase, is that penalty going to be overdue? How do you think about it? The multiple now is a little above market multiple, not stretched, but having run up from a low of like 540, a lot of good things. I think it's slightly over. I think, you know, again, it just depends on the sustainability. As I said, there are other products. If you haven't used instinct, try it. It's an amazing product.
37:17Right. They're going to be other agents. Can they differentiate themselves? I think tonight, you know, with Zuckerberg, can they launch a compute business? Can they launch a subscription business? We've said this repeatedly. There are Alexander Wang, who's part of their AI initiative, has said there's 200 million small businesses on that. There should be billions. Why are not small businesses using this as an agent to run their business? And why can't they have a broader subscription offering to run their business? So I think you've got to see further proof these other revenue engines that are going to drive the next leg of this.
37:52And we haven't really heard Zuck lay them out. I mean, it's really easy. If he lays these out, I think people's imagination will go wild because they effectively have an incredible platform and data that's on it. They haven't really monetized it to the extent that they can. So, yeah, I believe the stock is going to go higher. I think, again, I'm not fully subscribed. It's fully out of the penalty box for several reasons I talked about. Yeah, maybe Zuckerberg will detail some of that case tonight. Brent, really appreciate you weighing in. Thanks so much. Thank you. Anybody see a trade? All right, so I do have a trade.
38:29Melissa Lee:So Meta, or Mike Zuckerberg, he laid out the case for the metaverse. OK, so like at the end of the day, and I think it was interesting that Brent mentioned the threads. I mean, it really was meant to be a Twitter killer. It did not. Right. It was one of the fastest growing apps at the time. I think the trade is Google. I think that Meta's gains over the last couple of weeks have been really at the expense to some degree to Google. It's down 17 and a half percent from highs that it made in February. Just think about that. Right. So it has not participated in this Mag 7 rally. Obviously, Microsoft has had a big rally, too.
39:00Melissa Lee:You know, Google will be coming out with a personal assistant. And when you think about it, I would much rather have Google connected to my Gmail, connected to Android if you're there, connected to Chrome, right? They dominate that thing. And you can keep going with the calendar. I mean, these are massive, massive products. So at the end of the day, you know, Google, they're going to come out with one. And I think that's probably going to be to the detriment of Meta. And it could set up, I think, as a really good pair straight. Yeah. I mean, look, there could be room. We'll see. You know, yes, he wasted it all on Metaverse.
39:30He also bought Instagram for like a billion bucks. But he did also, he shut down Metaverse. Yeah, exactly. The pivots keep happening. But all this stuff are science projects, right? Still 98 % of revenue comes from ad dollars growing at 27%. That's what you're paying for. This is a sideshow hobby. Well, it is until it really pays for it. It's sucking all of the revenues out. Reality Labs lost$4.6 billion on revenue of 430. So it's running into technical problems. That's the takeaway from me. I know a whole lot more about you, and I bet you advertisers want to hear some of it. So here we go. Coming up, the impact of rising yields on financials, what the CEO of Bank of America had to say about surging rates and what it will mean for bank stocks.
40:12That's ahead. More Fast and Two.
40:31Inflation's got to get under control. The Fed has already moved once. I think they'll continue to move, whether it's two times this year again or one time or in one time early next year. But over the next six months to 12 months, they'll have to move the rate structure up to make sure the inflation continues its path down. That was Bank of America CEO Brian Moynihan on Closing Bell earlier. Speaking on rates, inflation and the number of Fed rate hikes he sees coming, bank stocks continue to face pressure as rates hit two decade highs. As a matter of fact, from, you know, Friday before last, I think the bank index down six or seven percent.
41:04There's been a flattening yield curve. Maybe some talk about trading hasn't been as strong, you know, this quarter. I just wonder how that's going to shake out for what happened. A pretty popular group in the market, Courtney. There hadn't actually another another reason that was weighing on this is Muse, which you were just talking about. People are a little concerned of what that's going to do to the financial space and what that's going to do to trading, which honestly, we've heard this before, probably a decade ago. The robo-advisors were supposed to take over the wealth management space and get rid of it.
41:29But really, they just used it as tools, and the space got bigger. And I think that's probably going to be part of this conversation. So I would actually, if anything, be buying on the weakness of banks. I don't think this is something to be overly concerned about, whether it's rates or it's Muse or, you know, some of these short-term pressures that they're facing. Part of the thesis for what Muse might threaten is any business where it's just a pain in the neck to switch, right? If you're a customer, you don't want to stay in the front of customer service. I don't know. Maybe banks are in that category.
41:57Maybe Muse is going to find the best deal to spend all your membership reward points for your credit card. You know, I think there are things to think about here. Is this a macro trade or is it a micro trade? Well, that last one is interesting. Yeah. Your points. But I think, though, for the big money center banks that have a bunch of different businesses that I think it started with actually Moynihan a couple of weeks ago talking about this third quarter actually being down. And Doug Petno actually said the opposite. Right. So I like when banks are down going into earnings. And I think it's setting up as well as I could hope for right now.
42:31We'll see if it's still the case in three weeks or so when we start getting those numbers. All right, coming up, U.S. farmers facing record high diesel right as harvest season gets underway. Our own Pippa Stevens is in Iowa with more on how surging prices are impacting farmers. Pippa. Hey, Mike, it is terrible timing because here in Iowa, farmers are chomping at the bit to start harvesting all of this corn. And where fuel is right now, it's going to cost them a whole lot more than last year. More on the pressures farmers are facing coming up next on Fast Money.
43:05Welcome back to Fast Money. Diesel prices continue to hit records, adding to the rise in fertilizer, labor and land costs for farmers in the U.S. just as they enter harvest season. Pippa Stevens joins us from Iowa with more on all this. Hi, Pippa. Hey, Mike. So here in Warren County, Iowa, farmers are feeling squeezed on all sides. Diesel is the most recent and a very visible cost increase, but it is not the only one. So in the last six years, the Iowa Soybean Association says fuel costs up 45 percent, labor also up 45 percent. You've got fertilizer 37 percent, electricity up 36 percent, and land interest up more than 70 percent.
43:43So essentially, any input costs you're looking at for farmers, it's going up. And that's complicating the profitability picture here in farm country. So right now, I'm south of Des Moines at Kevin Middlesworth's 1 ,200-acre operation. He's got 600 acres of crop rows. You see that behind me. Also 600 acres of pastureland, cow-calf operation. These bulls over here, CC and GC, are hanging out behind me. And what that means is that he doesn't have any overextended exposure to any one market. So that has enabled him to weather any storms, weather price volatilities from specific crops. But he is on the larger side of the farm spectrum.
44:20And some of these smaller farmers don't have that same flexibility. And Middlesport said that some of these new farms especially might not be able to survive these higher fuel costs. And we have seen Iowa farm bankruptcies on the rise. So that is the backdrop here as Iowans prepare to head to the polls in a lot of very closely watched races. for the first time since the 60s. You have an open Senate seat as well as a governor race. Two of the four House seats are open. And so Democrats are really pointing to what they say are Trump administration policies, including around trade and tariffs that are raising costs for Iowan farmers here in Warren County.
44:55Mike? Yeah, making for, I guess, what's going to be a pretty fascinating six weeks or so till election day. Pippa, thank you so much. Steve, I mean, food costs, diesel, we can go anywhere with this. I'll go with diesel. Yeah. So diesel is the problem because you can't open up this. Even if the straight opens up, that's an easier fix for oil. We don't have an oil problem. We don't necessarily have a gas problem. It's a refining capacity problem. So we're at 98 % utilization on our refiners. So whatever they decide to, if they want to pump, if they want to refine more gas, then they're going to hurt jet fuel prices.
45:30They're going to hurt heating oil, and they're going to hurt diesel. There's two spots where diesel comes from. Three. 20 % of it comes from the U.S. and then fragmented throughout. Russia is about 6 % or 7%. Saudi is another 4 % or 5%. So you have two that are in regions where there's war. We're at max utilization on refiners. Diesel's a tougher thing to solve than the other. The one thing they should do, just cut the taxes on it temporarily. Don't do the ban. That's always in the toolkit. We'll see if that gets in the uptake. All right, Steve, thank you. Up next, we'll have your final trades.
46:10It is time for the final trade. Let's go around the horn. Steve? Aurora Innovation. They're a driverless truck company, and they're already operating. No drivers, no passengers. All highways in Texas. All margins. Phil LeBeau is there this week. Yeah, I'm agreeing with Dan. Google and go Liberty.
46:28Melissa Lee:All right, Dan. Go Liberty. I agree with you. You know, this Apple, it's like a port in a storm or something like that. This new beta series is so bad. and I think the duo is going to be a dud. I don't get it at all times. All right. Courtney? XLF. I'd look at financials on the weakness here. Thanks for being here. And thank you all. Thank you for watching Fast Money, Mad Money with Jim Kramer starts right now.
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From the publisher
Stocks taking a leg lower as the 10-Year yield hits its highest level in nearly two decades. The impact of rising rates on markets, and the sectors and stocks that could see the biggest jumps and drops. Plus, McDonald’s shares get grilled after an unimpressive investor day, one quantum computing stock leaps on a major breakthrough, and Meta’s ‘Muse’ inspires more than just a boost for the social media giant. The stocks from various parts of the market seeing an impact as the new AI agent rolls out.
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