AI, oil and rates drive the market outlook 9/23/26

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1:19Good Wednesday morning. A little tongue-tied there to start the hour, but let's take a look at U.S. stock futures with the Nasdaq trading in record territory. We did close at another record high yesterday. It was very minuscule moves for the major averages yesterday. The S &P coming off its first down day in four, albeit fractionally lower. Similar situation for the Dow yesterday. And you can see right there on your screen, we have small moves. We're basically flat here, pre-market too. The S &P is poised to open higher to the tune of 10 points. The Dow 71 and the Nasdaq, really right near the flat line, indicated to open higher by about one point right now.

1:53Investors' attention remains, though, focused on the AI trade with chip names coming off another banner day. You can see this morning a lot of green on the screen once again. OK, I take that back. That was yesterday. A lot of red on the screen this morning as chip stocks take a little bit of a breather here. SK Hynix is down about 2 percent. Micron is down fractionally and Sandisk Western Digital as well. Let's take a look at the Treasury market, what we're seeing with bonds right now, because you can see we're basically stable here, slightly lower with yields. U.S. 10-year Treasury yielding 4.95 percent.

2:28Fed-sensitive two-year Treasury 4.76 percent. And the 30-year 5.29 percent. We're also watching metals. Copper trading at an all-time high. What a move we've seen in copper. We're up about 22 percent so far in the year, but that's after dipping lower at one point earlier in the year as well. So you can You can see copper futures here in the U.S. trading around$6.83 per pound. And let's take a look at oil, too, because it's riding its longest daily losing streak in more than a year. And WTI crude is down about six-tenths to one percent right now, just below 90 bucks a barrel. What a move lower we've seen here in the last couple of days.

3:09Brent crude is up fractionally, and it is trading right around$99.50 a barrel. Let's see how Europe and Asia are shaping up. Steve Cedric is in London with the trades there. Steve. ah Morgan lovely to see you look Asian shares closed down a little bit mixed despite aiming for a sixth session of gains earlier off the back of a strong performance in the tech sector yet again in the regional eyes of course on that meeting that you mentioned there between Mr. Trump and Mr. Xi this week now look the major European indices mostly in the green today lower crude prices as well as continued buying of the aforementioned tech sector both lifting sentiment But we had some really, really good PMIs.

3:47You've got the US ones coming out later, but the really good PMIs out this morning. Business activity in the Eurozone accelerated despite all those high oil prices as well. Now, in Germany, the flash composite rose to 53.8, and that is a big number. We're seeing figures which were the fastest expansion since October last year. And in France, we grew at our fastest pace of expansion over two years. Really interesting corporate story. I'm just going to very quickly mention Morgan, and that's over in Switzerland. Lawmakers in the upper house there have voted in favor of really high capital rules for UBS, which would require the bank to back its foreign units with 90 percent CET1 capital.

4:25Now, that's a technical term. It's basically common equity tier one capital. It's the best level of capital. And just to give you a bit of context, the top U.S. banks, Goldman's, JP, everyone, they have capital levels between, say, 14 and 17 percent for this really high level capital. The Swiss UBS, which is twice the size, by the way, of Switzerland in terms of its value, is being asked to have 90 percent CT1 for its foreign units. That is a massive blow. And what does Sergio Motti say? You'll love this quote. He said we can live with a black eye, but two black eyes and a broken nose is too much.

4:56But that is exactly what these capital levels are going to require to do so. He said that in a magazine. I'm sure you look on a regular basis. The Neuer Zürcher Zeitung. Morgan, back to you. All right. I do enjoy that quote. Wow, that's a wild story. Appreciate it. Steve Sedgwick, thank you. Two black guys and a broken nose. Well, our top story, Chinese state media reporting that President Xi Jinping has departed Beijing for the U.S. state visit. This is Beijing flags Xi's top priorities for the face to face and red lines that it says that Xi will not cross. Let's get to Eunice Yun with more from Beijing.

5:31Eunice. thanks Morgan well as President Xi heads to DC the official People's Daily has outlined a reminder of what the two leaders agreed to here back in May and that is to lean into what they described as a constructive relationship of strategic stability there are plenty of China analysts who believe that President Xi would benefit from a more stable relationship in order to pursue his own economic as well as technological goals. Now, as part of that, the official paper said that the two should consider that Taiwan independence is a common enemy, it says, of both the U.S. and China. And it slammed what it described as erroneous U.S.

6:15perceptions of China as a geopolitical rival. Now, all of this is highlighting the expectations that President Xi is going to press President Trump to potentially weaken language around Taiwan, an island that Beijing claims as its own, and also building on President Xi's very direct, if you remember back in May, a warning to President Trump that crossing China's red line on Taiwan could lead to a conflict. Now, on terms of the business delegation that potentially could be traveling with President Xi, The foreign ministry said that it currently has no information on who might be coming. And in fact, it looks more and more likely, Morgan, that there may not be any CEOs or any Chinese businesses that will be traveling with President Xi.

7:10From certain sources that I've spoken to, they said that the Chinese have been somewhat put off by the lack of information they were getting and the lack of reassurances that they were getting from the U.S. side. And so those invitations from the foreign from the Commerce Ministry weren't actually issued for many of those Chinese companies. Doesn't necessarily mean that no one will show up because it looks as though there are some Chinese CEOs who are in the vicinity of D.C. and might end up showing up at the end of the day. We'll see. That's super interesting. I'm just curious, Eunice, because we do also know we're reporting this on the show yesterday, that the founder of DeepSeek is going to be one of those AI CEOs, one of those AI executives that briefs the United Nations today as well.

7:59When you look back over history, I realize it's been a couple of years since we've seen one of these summits here in the U.S. like this, but have we seen business delegations on the Chinese side take part in the past? No, it's very unusual for President Xi to travel with the business delegation. So when this first had come up that he might be traveling with Chinese companies, it was seen as really unusual and potentially a sign and a highlight of which companies would be seeking to do more business in the U.S. There have been a lot of different rumors and reports of companies, mainly in the automotive industry, that would be interested to expand their business, such as BYD, such as CATL, which is a battery company.

8:48So we'll see whether or not it actually pans out that way. But as of right now, the signals, just based on the invites and the possibility of getting a visa so quickly at this stage, you know, it's looking as though, if anything, it might be a downsized delegation. All right. We'll be watching. Eunice Yun, thank you for teeing it all up for us from Beijing. Great to have you on. We are going to have more on President Trump and Xi's meeting and the AI factor of it all when we speak with Congressman George Whitesize. That's going to be coming up a bit later this hour. He's been early to this entire conversation, debate, and possible legislative action when it comes to pacing the frontier.

9:28So a lot to get into there. Let's keep the conversation going right now, though, what it all means for investors, what it means for the markets. Let's bring in Ben Emmons, chief investment officer and founder at FedWatch Advisors. Great to have you here on set. I mean, there's no shortage of news to start September here, to start fall. So I guess maybe we just start right there, because what we have seen in the markets, in the equity markets specifically, has been this bifurcation. It's been AI versus everything else. And even when you go under the hood on AI, there's been a lot of dispersion there, too.

9:59How to think about what we're seeing in terms of breadth and what it says about the economic state, not only of the U.S., but of the world? I think that the AI trade had sort of reinvigorated because I think people realized that as much as we may get some kind of regulation, actually, that's a bullish story, right? If it gets more regulated, you don't get these rogue issues. In addition that the economy could use the firm, as Kevin Wors said the other day, if you have an accelerated environment of growth, then, you know, growth companies do the best. And I think this is why it picked up again.

10:35And again, you get the individual stories of Meta and all these other things. And then over that is the development about what will now really happen between the U.S. and Iran and affecting oil prices. And that link there, I know that the correlation between tech and oil is very negative. So that's also another catalyst, I think, that if oil starts to decline, you're going to get more lift in markets. Yeah, I'm having this entire conversation, though, as we have seen. You just mentioned Meta. It's a good example. We've seen the shift in the business models and the spend for these biggest companies as they do deploy this AI infrastructure and this compute power on the one hand.

11:12On the other, the Fed just hiked interest rates again. And yes, oil prices are coming down, but we're still at these elevated levels. This feels like an unusual market in general to me right now. And I'd be curious your thoughts as somebody who's been doing all this a lot longer. Yeah. So the Fed has obviously big impacts. But I think what the Fed did right was put the message out saying, we're going to get to inflation target, but we're not just going to slam the brakes on it. We're going to do this in a deliberate way. And markets like that, it's predictable. It becomes more like something that you can see coming along without having this surprise element.

11:48The certainty matters more than the actual hike. Yeah. And I think this, you know, the other day I was thinking about this becoming a market more of certainty that people are investing based on certainty as opposed to dip buying of like where you have uncertainty because that's what the previous psychology was. So I think if you have a market where things are not too surprising, then I think you only lift higher from here. In addition that the AI trade just gets this boost because people are looking at it. If this is a certain market, then growth will be certain and high growth companies benefit.

12:19Yeah, and we've had quite a bit of Fed speak this week, and we're going to have more before Friday is done here. And yes, it's been hawkish in nature, but part of the conversation from Fed officials we have heard from has been the fact that underlying this is still a solid economy. And that, in turn, has been contributing to the inflation picture, too, the demand piece of it. When I hear Steve Sedgwick reporting about flash PMIs in Europe being much stronger than anticipated, Is this a U.S.-specific story, or is this a story that we're seeing export globally as well? It's a global story, because as much as oil has had impact everywhere, I think what's happening is an industrial cycle that picked up everywhere.

13:02Because we do continue to have to import a lot for this AI build-out, which Germany, as in one example, benefits from. But it's also about a story, I think, that the investment cycle picks up everywhere, because AI is everywhere. As in, you know, it's not only like a U.S. unique story. So I think these PMI data indicate that it's an export story, obviously. You know, Europe is very much driven by export growth. But it's also about that investments are happening there, too. They lack the AI cycle and they're realizing that. So I think that's what it's about. Yeah, AI and defense spending, too. Defense spending.

13:39In a certain world. Correct. All right. Ben Emmons, great to have you here on set to kick off the hour. Appreciate it. Thank you. All right. We got a lot more to come here on Morning Call, including, I just touched on it, but oil falling back below 100 bucks a barrel, falling below 90 bucks a barrel if you're looking at the WTI contract. And the price of gasoline and diesel doing something for the first time in several weeks. Plus, we're breaking down the market's muse problem and the basket of stocks facing fresh pressures as the meta AI agent tops the download charts. We have a very busy hour still ahead when Morning Call returns.

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14:53You've got competition to outrun, momentum to build on, and your own high standards to meet. Stop now? Not a chance. At Capella University, we help you catch what you're chasing because you've always had the drive. Now, go earn the degree. Capella University. What can't you do? Visit capella.edu to learn more. Great meeting. Who took notes? Anyone? With Monday Notetaker, the meeting ends and the plan already exists. Action items, owners, deadlines. Go to monday.com, the AI workspace platform. Welcome back to Morning Call. We're watching the price of crude oil. WTI briefly falling below 90 bucks a barrel.

15:35Basically flirting with that level. First time in weeks. Brent breaking below$100 a barrel with the global benchmark riding its longest daily losing streak since August of last year. We're down six sessions in a row. And as you can see right there on your screen, prices right now, WTI trading right around$90 and Brent crude$99.50. Well, the downside moves are coming after the U.S. and Iran yesterday held their first talks since June, characterized by the president as, quote, very good. Meanwhile, China's Xi Jinping preparing for his state visit with Trump that starts today. and Saudi Arabia looks to restart its damaged east-west pipeline in the coming days.

16:11We've got reports that it's up and running. And as oil prices continue to fall, prices at the pump are starting to make their way lower too. A little bit. Price for a gallon of regular, according to AAA, this is the national average. It's down a fraction of a penny today. Same with the price of diesel, now a hair under its all-time record. Well, joining me now is Paul Sankey, founder and lead analyst at Sankey Research. It's great to have you on the show. A lot to get to here. perhaps I will start with just the mad moves we've seen in WTI crude and in the oil market in general. We had a huge spike.

16:47We've been coming down pretty aggressively right now. Does the move make sense? Yeah, I mean, I think the big one to highlight, as you said, is that diesel prices at the pump are still very close to their all-time high, but we've seen crude prices falling quite a lot. And that really speaks to the problem that we've got here, which is a refining problem. And then what you're going to see is the crude price is essentially a limited demand range. You know, the refineries are running at full capacity. And so whether or not Hormuz is sending out a lot of oil or very little oil, that's almost all crude.

17:21And you've got to remember that, of course, the Strait of Hormuz was previously a major exporter of oil products, which is what we need. But at the moment, the changes that we're seeing in the military geopolitical situation in Hormuz are the ones that are driving the price of crude. And that's really just manifesting itself in wider and wider refining margins as such. It's not making much difference to pump prices. And of course, as you know, that's leading to talk of a product export ban here in the U.S., which is terrifying everybody that owns refiners. And of course, overtures for peace that we're seeing very clearly at the U.N.

17:56this week. Yeah, I mean, the product export ban is really gaining ground here. And even President Trump weighed in on it yesterday, I think, raised some eyebrows with that. You know, I'd spoken to Interior Secretary Doug Burgum at the G20 Energy Conference last week on camera about that. And he had said, hey, look, you know, we have examples in the LNG market just going back a couple of years ago where you had a pause on LNG exports and that that actually did not help the price of LNG at the time, natural gas at the time. It actually did had opposite impact and led to a dearth of investment and the like as well.

18:31What would a product ban short term or long term do to this entire conversation? Well, it would bring down pump prices, which is why, you know, we're talking about politicians here and short term gains. You know, they don't care about the long term implications. The long term implications would be terrible. You know, essentially, as you know, China banned product exports, Russia banned product exports. Next thing you know, in Washington, they're saying, hey, we should do it, too. And you're like, you know, do you really think about that when you think about who's doing the bans? So the U.S. has really thrived to an unbelievable extent from the development of oil and gas in this country entirely through the free market.

19:12And, you know, as a result of that, we've become a superpower in oil and gas. And as a result of that, what 30, 40 years ago would have been a complete catastrophe for the U.S., which would be the situation in the straight-up war moves, this time simply hasn't been because we've actually been the marginal exporter of oil and gas. So to mess around with that would be long-term a disaster. And what you really need is more refineries. And, of course, by banning exports and messing around at the margin, even threatening a ban, you effectively disincentivize further refining investment. So there's a lot of long-term reasons why this is a terrible idea.

19:45But of course, in the short term, what can you do? It's going to bring down prices. I think we remain, because Secretary Energy Secretary Wright and, as you said, Interior Secretary Bergen are very vocal on the record as saying it's a bad idea. I think on balance it remains less likely to happen. But then you've got Scott Bessent and President Trump, who arguably are both more powerful, saying the opposite. So I think I kind of fear for the worst with this one, but we'll have to wait and see. It's basically going to have a major disruptive effect because you have too much diesel in the Gulf Coast area where all the refineries are.

20:22And the export ban would cause a lot of problems moving that diesel to where you need it, which would be places like California and the East Coast, which are already maxed out in terms of how much our infrastructure can carry up there. So it would be a hugely distorting effect. And I really hope that they don't make this mistake. OK, if we look around the world right now, I mean, there's a lot of focus on the east-west pipeline restoration there and reports that that that that is flowing again. But the refinery piece of it, to your point, has been a global story. And whether it is in the Middle East or whether it is in this Russia-Ukraine war right now, you've seen a lot of capacity come offline and get damaged in conflicts there.

21:02So what is it going to take to see more capacity globally come online in general? Do we have any sort of sense of how extensive some of these damages have been? Well, I think, you know, to answer the question immediately, the answer is obviously no more war. And as we see these, say, for example, the Petroline, the East-West Pipeline come back, we mustn't forget that we're still in an active war zone. And those are pretty renegade attacks. You know, the Saudi Petroline was shut down by Shia militias in Iraq, supported by Iran. It's quite convoluted, and it's not sure how much power anyone really has over those guys.

21:41For example, President Trump meeting the Iranians yesterday. We all know that that's not the guy with the power. That's not the people that make the final decision that he's meeting there. And so there's a real uncertainty here. In terms of when they put their mind to it, can they fix this stuff? Yeah, there's a proven track record in Russia and in Saudi, absolutely, in the UAE building a further bypass pipeline. These things can be done very quickly, but even in an active war zone. But of course, the active war zone also deteriorates the situation depending on what happens next. Are we going to get peace?

22:19I think that there's a level of military exhaustion here. In fact, you can argue that the US more or less left the Middle East region, as we should, in my opinion, to itself, because of our oil and gas position domestically here. We don't need to be involved in these infinite wars in the Middle East anymore. Yeah. You know, so the potential is there, I think, for both the Iranians and the U.S. and the Gulf, the GCC, Gulf Arabs, to be exhausted by this situation for it to sort of dribble away as an ongoing conflict. I hope that's what happens. But of course, as I said, with these militias like the Houthis, like the ones in Iraq, it's very hard to actually know how much control anybody has over these guys.

23:00And so the risk remains high. What they're doing with oil, I think, is more of a herding kind of approach, where they take so many tankers through that only a couple get attacked. It's hardly a satisfactory solution, and it adds a lot of cost to the oil. It's about$25 a barrel to move oil from Saudi to China right now because of tanker rates. Before the conflict, that would be under$2 a barrel. So it's, you know, 10 times more expensive now. And of course, you know,$25 a barrel is a lot when it's just the transport cost. That's interesting. And of course, a lot of the oil that was going to China was discounted Iranian oil, too.

23:35So just finally, quickly, Paul, how does China factor into all this, especially as we do look to Washington for the summit this week? Well, I always felt when this went badly wrong in the first place, because it clearly went very badly wrong from the moment the Ayatollah was assassinated. that President Trump should have immediately gone to China and made a deal with President Xi, who really is the one that has some kind of control over the Iranians. But in fact, he delayed his first trip. And on the second trip, they didn't really seem to address Hormuz. I'm hopeful maybe this time around, but as I said, with exhaustion setting in here as we're in seven, eight months into the crisis, that the Chinese want this thing solved as well.

24:13And hopefully something positive will come out of the Xi-Trump summit. I think they should really focus on Hormuz above all in terms of the agreements that the two countries make. OK, Paul Sankey, appreciate it. Thank you. Thanks. All right, straight ahead. SoftBank's Masa San looks to make AI investing history. We've got that full story coming up. But first, let's watch shares of Six Flags higher in the pre-market following a report that activist investor Janna Partners is calling on the theme park operator to explore a possible sale. Shares are up 3%, but they are down roughly 42 % over the past year.

24:48That's the latest red flag coming last month when the company reported a wider-than-expected net loss. Morning call. We'll be right back. Quick question. How much of your day is spent typing? Emails, Slack, notes, prompts to chat GPT. Whisperflow is a voice-to-text app. Instead of typing, you talk, and it types for you. And any app on your Mac, Windows, iPhone, or Android. It takes out the ums, fixes the typos, and the result sounds like you wrote it four times faster than typing. So the email that used to take two minutes now takes 30 seconds. Whisper Flow is free. Download it at whisperflow.ai.

25:24That's W-I-S-P-R flow dot A-I. You've never been one to settle, stand down, or stand still. You're a lifelong learner, energized by excellence. There's a fire inside you you can't ignore. You've got competition to outrun, momentum to build on, and your own high standards to meet. Stop now? Not a chance. At Capella University, we help you catch what you're chasing because you've always had the drive. Now, go earn the degree. Capella University. What can't you do? Visit capella.edu to learn more. Great meeting. Who took notes? Anyone? With Monday Notetaker, nobody has to take notes again. It joins your call, transcribes it, and turns the whole conversation into a clear plan.

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26:28We've got a market flash for you on IonQ. Those shares are surging pre-market after the Quantum Company announced the development of the industry's first end-to-end real-time quantum error correction decoder, and it operates on a single standard CPU chip. Why this matters. Quantum error correction is essential for building practical fault-tolerant quantum computers, and then running it on a single CPU provides a path to commercial-scale quantum computing. This is actually something we spoke to CEO Nicolo DeMasi about a couple weeks ago. While other, we can see shares of IonQ are up about 11.5 % right now on this news, but it's also pulling other pure play quantum company stocks higher.

27:07Names like Rigetti, D-Wave, Quantum Computing are all jumping in response to this report as well. Well, let's get a check on some of the morning's latest headlines. Qualcomm unveiling its newest Android chip set, speaking of chips, at the Snapdragon Summit last night, positioning phones running its high-end chips as, quote, AI hubs. CEO Cristiano Amon will talk more about that when he joined CNBC later today in a first on CNBC interview. That's in Power Lunch. And China reportedly probing the use of Broadcom chips in its state-backed AI data centers. This is part of its push to boost domestic AI, manufacturing, and reduce reliance on foreign AI tech.

27:46Well, SoftBank, you can see shares of Broadcom down about half a percent. SoftBank kicking off what's said to be one of the largest junk bond sales in history, looking to raise roughly$11 billion dollars, marketing dollar bonds with yields ranging from 8.75 percent to as much as 9.8 percent. The offering aims at helping fund its investments in what else? AI. You can see SoftBank shares are down about one percent. We're also watching shares at KB Home, the company lowering its annual gross margin outlook and full year sales outlook, citing worsening housing sector conditions. Those shares are down right now.

28:20And Florida private passenger railroad Brightline is reportedly in the final stages of restructuring some of its debts via a Chapter 11 bankruptcy filing that could come as soon as this week. The filing would exclude Brightline's operating unit, which would allow it to keep running trains, instead focusing on restructuring about$1.1 billion worth of corporate debt. Passenger rail, private passenger rail, tough business. Keep an eye there. Still on deck. What to expect when top AI bosses head to the United Nations today? Morning Call. We'll be right back. I'm Morgan Brown, and welcome back to Morning Call.

28:52Let's get a check on U.S. stock futures, which are in the green this morning. Fractional moves, though. S &P poised to open up nine points. The Dow, 37 points. And the Nasdaq, five points. We're basically hovering just above the flat line. That was after a mixed trading session yesterday that saw the Nasdaq close at a record high. The debate around AI and the technology safety taking center stage at the U.N. General Assembly today. OpenAI CEO Sam Altman, Anthropic CEO Dario Amadei are expected to be among the AI leaders that brief the group's security council on the risks posed by the technology.

29:25Now, during his address to the UN yesterday, President Trump, who has repeatedly downplayed warnings around AI, condemning the idea of a global entity to oversee it. The technology is expected to be a key topic of conversation at the president's meeting with Chinese President Xi Jinping, who arrives in Washington later today. But for more on all of it, let's bring in Congressman George Whiteside's Democrat from California, who serves on the House Subcommittee on Cyber Information Technologies and Innovation. He's also recently wrote an op-ed in the Washington Post calling for a one-month safety stand-down on frontier AI research to establish regulatory safety standards.

30:01Congressman, it's great to have you on the show. Welcome to you. I do want to start right there. What are you proposing and why is it so important right now, given the fact that AI is front and center in the conversation, not only domestically, but geopolitically? Well, good morning, Morgan. It's good to be on. And, you know, I think it's crazy that the leaders of these AI companies are testifying before the Security Council, before they've done a full testimony in front of the U.S. Congress. I've called for a one-month safety stand down based on my aerospace experience, where we say, look, when we have an accident or an anomaly in aerospace, what we do is we stop flying.

30:40We try to understand what happened. We put down in writing what we're going to do to prevent that from happening again. And then we return to flight. And that has not really happened in a public way here in AI. And that's, I think, what we need to do during that time. We need to look at the red lines that the industry will follow as they pursue this developments in recursive self-improvement. Yeah. And for folks that maybe are tuning in but don't know, you were the chief of staff at NASA back in the day. You and I have known each other for quite a while as well. You're also the CEO of Virgin Galactic, took that company public at the time, too.

31:14So when you talk about leaning on the findings, the lessons, the framework of aerospace, what would a one month stand down actually entail? Is that just a pause in terms of development and release of new models and focusing on what exists in the marketplace already? Is it something different? No, it's exactly that. Look, I mean, your Gemini or your chat would keep working, you know, the consumer versions of these things. But But what you hear from really thousands of researchers who are inside these companies is a very deep concern about where this is going, how fast it's going, and the risks it poses to the public.

31:47What we really need to do is to enable those folks to talk to each other, to come together in a room with independent experts as well, and to really talk through what's going to happen next. And I think a lot of people feel scared because they don't feel like anybody's really in charge. And certainly these words from President Trump where he calls AI a hoax is not reassuring anyone. I think you've seen that in the polling. Basically, the public doesn't trust the White House on these issues. And so we need to get everybody in a room, take a pause, get things straight before we keep moving forward on the frontier models.

32:20I think some of the argument coming out of the administration right now has been that there are some rules and regulations already in place. And that perhaps it's not the role of the government right now, given the competition with China. this is the way it's being framed, to regulate, but rather it's up to the companies and the industries themselves. Hence, no need for a liability shield, as Treasury Secretary Besant said on CNBC earlier this week. Yeah, I mean, look, Morgan, I've heard that argument. And I do think that I've constructed this one month pause because we are sensitive to the concerns around the lead that we have over our Chinese counterparts.

32:56But, you know, with the chemical industry or the aerospace industry. We don't rely on the companies to design everything themselves in terms of how they're going to keep themselves safe. We have regulation. And there is no doubt that these technologies have amazing capability to improve human life and cure diseases, other things like that. But there's also no debate that these things could wreak havoc in terms of cybersecurity, potentially design of new novel bioweapons and all these other things. So we have to get on top of it. And I've put forward one idea. I think, look, the main thing is that we have to have to like sort of think about it and engage on it as a combined government and industry community because the American people deserve no less.

33:37So in light of everything we're seeing on the geopolitical stage this week, whether it's General Assembly, whether it is this Trump-She meeting down in Washington today and tomorrow, what are you watching for? What are your expectations in terms of the global dialogue around AI? Well, I think the summit between the U.S. president and the Chinese leader is very important. It will be very interesting to see if there's anything substantive that comes out of that. Obviously, there's a little bit of a food fight going on inside the administration right now between pure accelerationists and folks who do want to exercise some amount of at least oversight over the AI industry.

34:14We'll see what comes out of that. I do think the interaction between China and the U.S. is very important because that is the arms race dynamic that we have going on. And so my hope is that the Chinese, as well as the Americans, can come together to do this safety standout and to give the American people and the Chinese people some measure of reassurance that the government is on top of it. Yeah. So in light of all of this, I'm going to ask you a question I'm asking every lawmaker that comes on our show now, and that is what can get done in Congress between now and the end of the year? Well, that's why it's so disappointing that the Speaker has basically taken us off the playing field through the election.

34:51I do think it is conceivable that we do something after we get back from the election, the lame duck session. There are folks on both sides of the aisle who would like to do that. We'll see what the final form contains. There's a wide variety of bills, including several that I've introduced on AI safety. And I think we'll just have to come back and try to hit the ground running. I think it's crazy that we're not in Washington, D.C. right now working on these issues as well as costs. But that's not very different from the rest of this Congress so far. Yeah, we could have a whole separate conversation on the affordability piece of it.

35:21And I hope we will. Congressman George Whitesides, it's great to have you on the show. I appreciate it. And I believe we're going to see each other in person a little later today for this XPRIZE Foundation wildfire event, too. So I look forward to that. Great to have you here. We've got a lot more to come here on Morning Call, including Metamuse risks. The sectors and stocks that are taking a hit on worries around the latest AI agents. Morning call is right back. Ahead of Meta's Connect event today, its new Muse AI agent is creating a new problem for a big basket of stocks, what Goldman Sachs calls the consumer inertia sector.

35:53With Muse able to shop, compare prices, book travel and handle customer service tasks for users, it could potentially make it much easier to switch providers or to cancel services. And Wall Street is already repricing that risk. In yesterday's trade alone, Planet Fitness falling 9.5%. LPL Financial down 7.5%. The New York Times off more than 7%. Schwab losing 6%. Allstate down 5.5 % as well. We've got some sizable movers for even bigger players, with names like JPMorgan, Wells Fargo, and Booking Holdings all coming off sharply lower trading sessions. The common thread here, these businesses benefit when customers don't shop around, making loyalty, or at least laziness, a lot less profitable.

36:37From the Goldman trading desk, its, quote, consumer inertia basket is now down more than 7 percent in six sessions. The bank now warning clients that telecoms, streaming and utilities may be the sectors to watch for another leg lower. We'll see. Well, returning to prediction, Marcus, the Wall Street Journal reporting that the CFTC is examining potentially unusual trading activity on Calci. This after the journal citing analysis of public data says nearly 1 million Ether Perpetual Futures trades occurred in almost identical amounts of around$5 ,500 a piece, accounting for more than$5 billion of volume over the past month.

37:14The paper says that the pattern has prompted allegations of wash trading, which involves trades creating a misleading impression of market activity. Now, in a blog post, Calci said it's seen no evidence of wash trading and that the practice is explicitly banned in its rulebook. A note, CNBC and Cal sheet have a commercial relationship that includes customer acquisition and a minority investment. Well, straight ahead, we got the morning call crew teeing up the trading day ahead. Why one member says fears around AI, they're simply overblown. We're going to keep diving into that debate. We're back in just a moment.

37:47Welcome back. It's time for your call sheet where we look at the topics driving the trading day ahead. Well, the crew members today, Paul Hickey of Bespoke Investment Group, Sarah Bianchi of Evercore ISI and a former deputy U.S. trade rep, and Doug Bonaparte of Bonafide Wealth, also a CNBC Financial Advisor council member. All right. We have a lot to talk about. I feel like I say that every day. But Doug, I'm going to kick this off with you because one of the things we have been talking about, particularly in the last half hour of the show, has been what we're seeing in AI in the reignition of the AI trade, especially as we look to the MetaConnect events tonight.

38:19What are you watching? Yeah. So we're still seeing new things pop up in AI. Just when you think, hey, this rally is done. Here we are extending. And I think that's going to continue for quite a bit longer, right? So volatility, a feature, excuse me, a feature, not a bug. And, you know, if you're looking long into the future, how is how are you not placing some bets here on AI? You're just going to have to deal with the volatility as you get there. Yeah, we just talked about it before the break, Paul. But just the the widespread selling we've seen across sectors in anticipation of what AI agents starting with Meta are going to do.

38:56You think it's overblown. Why? So, I mean, I think fears of AI, you know, taking over are overblown. I think there's still lots of room for improvement. As Doug was just saying, we continue to see improvement with each successive model, which is a positive. I don't necessarily know who the winner of ultimately from AI is going to be this week. Everyone's putting their bets on Meta. Next week, it could be Anthropic again, then OpenAI or Grok. Who knows at this point? But what I am pretty confident in is each successive model has shown improvement based on the different benchmark tests that we have.

39:32And it's up and to the right. And that justifies further investment in the sector. And the key beneficiaries there are going to be semiconductors and memory stocks. So I think those are the two sectors to watch. This is a tech-driven AI bull market that we've been in for four years. And if you think this bull market's going to continue, those are the two sectors I think you should be focusing on here. Yeah. And to your point, we get an open AI event next week. Expectations we could get an agent released there, too. Sarah, this is not just in focus here for the markets. It's in focus for politicians.

40:05We just talked to Representative Whitesides about this. And it's in focus for world leaders, too. Look no further than the U.N. Security Council and briefings we're going to get from AI entrepreneurs today. Absolutely. I think this really elevated, at least in Washington last week, around reports of the real safety concerns that exist. And I think it is a place where both Republicans and Democrats are concerned. We see a lot of action in the states. We saw President Trump sort of after calling it a hoax pivot a little bit to being potentially having a new czar and other things. So I think they are reading the tea leaves at the White House, too.

40:51There's a lot of concern here about what to do. I'm not saying it's going to slow down the momentum that we're all talking about, but I think you're going to see some guardrails as we go forward. What do you think that looks like as we see Presidents Trump and Xi meet over the next couple of days? Is AI, Sarah, going to be one of those meaningful takeaways or is it something else that's going to matter more? Well, we have said that what we expect on AI from the summit is really just more dialogue. And that's what I think Secretary Besant signaled over the weekend. So I don't think we're expecting much but more conversations, although at least that is some promising signs.

41:37I'm not sure we're getting a lot of big deliverables out of this summit across the board. I think the meeting itself is a lot of the message. And there are a lot of underlying strains going on. Rare earths. The United States really doesn't feel China has kept its end of the bargain. So a lot to watch in the next couple of days. Yeah, and I think rare earths, I was looking at some data earlier this week, rare earths exported out of China have actually dropped ahead of this summit. Doug, what would be a deliverable for the market here? Is it an extension of this, if we want to call it a truce? I'm not sure if we do, a trade truce?

42:13Yeah, that's a really good point about this meeting speaking volumes more than really anything else. The two countries, as far as their competition with AI is concerned, I mean, neither one wants to lose this race. So I really don't think we're going to see any slowing down. As far as trade is concerned, I'm not so sure on that one. But we'll see the AI trade or at least these two countries fight for supremacy when it comes to AI. Yeah. Paul, what are you watching in the midst of all this? And what does it mean for companies and their stocks, U.S. companies? You know, I mean, I think I don't think like Sarah was saying, I don't think there's gonna be a whole lot of deliverables here.

42:50I don't put too much focus on these U.N. General Assembly meetings each year. I think it's a lot of just, you know, talk and no action that we tend to see. So we're just focusing more on what what the market is saying here. We're in a lull period as far as there's no earnings coming up. But the fact is, we've had this summer slowdown or summer siesta in the market here. And the Nasdaq is just, you know, as we get into fall, it's just starting to break out of that range we've been in for the last three and a half months. And I think that's a positive trend that you see. The key here is interest rates remaining contained.

43:27I think as long as we can keep the 10-year under this 5 % or right around 5 % or lower, I think that should be a positive tailwind for stocks. But if we do see rates start to continue to accelerate above five percent, that's going to be problematic for the market. Yeah. Summer siesta. I like that. Although from a news flow perspective, it did not feel very siesta ish to me. But, Sarah, you know, the other it's everything's interconnected. Right. So I'm curious your assessment of dynamics in the Middle East right now, what's being interpreted in the markets, at least the oil markets, as a potential diplomatic thought here between the U.S.

44:03and Iran. and how a country like China is going to factor into all of that. Well, I think that the president is doing everything in his power to send out the message that there is going to be a diplomatic thaw. I think he will also try to use the meeting with China to act as if they are going to be more of an ally here. But the reality is that the bid as between the United States and Iran is still too far apart right now. So we could have a lull in the action, which would be good for the markets, but we still don't have a path to a resolution here. Doug, your thoughts? I see you making faces here.

44:45We're nodding. As we go back and forth, you know, in 10-year above or below 5%, oil above or below 100, right? That seems to be the reoccurring theme back and forth. Markets like it when it's below. Markets don't like it when it's above. And, you know, hey, if you're trading volatility, maybe there's an opportunity here. But it's getting tired, I think. You know, you look at earnings, they look good. I like the AI trade. There are things beyond this that still look good that are carrying the market here. We just get very absorbed in those headlines here. And I don't know when it's going to end.

45:15I want it to end, but when? Well, maybe after the midterms. That's what they say. That's what we heard from President Trump yesterday again. Paul, we look under the hood on the S &P. And to your point, we, you know, AI trade has been kicking off here and re-rallying. But you look at some of the other more economically sensitive sectors within the market, we're seeing some signs of weakness. Financials, case in point, some of the consumer stocks on a day where we're focused on McDonald's investor day. Your thoughts quickly. You know, I think what we've seen, to your point, breadth has been very weak, but, you know, a lot of concern over that.

45:48But historically, large declines in breadth haven't necessarily been a real worrying signal for the market when you've, you know, looking forward. So I think it's good that the index has held up, even with some deterioration under the surface. All right. It's great to have all of you here. Thank you to our Morning Call crew. You've never been one to settle, stand down or stand still. You're a lifelong learner, energized by excellence. There's a fire inside you you can't ignore. You've got competition to outrun, momentum to build on, and your own high standards to meet. Stop now? Not a chance. At Capella University, we help you catch what you're chasing because you've always had the drive.

46:29Now, go earn the degree. Capella University. What can't you do? Visit capella.edu to learn more.