Chips, inflation and bank earnings 10/14/26

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0:40Only at McDonald's for a limited time. Price and participation may vary. Promotion pricing may be lower than meal pricing. I'm Dominic Chu and this is your Morning Call.

1:01top of the morning to you. I'm Dominic Chewin from Morgan Brennan. On this Wednesday morning, U.S. equity futures with the S &P 500 and NASDAQ coming off their fourth down day in five are currently showing some signs of stabilization. The Dow's implied higher by roughly 170 points, The S &P higher by just about 15 points and that tech heavier Nasdaq 100 trade implied lower by just about 45, 46 points. Now, treasuries ahead of today's big September CPI report. Core year over year numbers are expected to tick up slightly, by the way, to two and a half percent on that year over year basis. And you can see here the benchmark 10 year note yield ticking slightly lower to five point two zero percent.

1:40The two year yield four point seven, eight one percent and the 30 year long bond five point five five percent. So higher bond prices, lower yields so far for the time being ahead of CPI. Big banks, of course, in focus ahead of earnings and on the back of that one point two billion dollar fine against Bank of America. We'll have more on that story in just a moment. By the way, those shares of B of A down one and a half percent in the pre-market trade. We're also watching Morgan Stanley, BlackRock and State Street results expected out later on today. And energy as we continue to monitor the situation in Saudi Arabia.

2:12The IEA is also out with its monthly oil report today, saying diesel supply squeezes will last likely well into 2027. Right now, U.S. benchmark West Texas Intermediate up one quarter of one percent to ninety four dollars and forty one cents. Ice Brent crude futures, the world gauge one hundred and five dollars and sixty six cents. That's just about flat on the session so far. Well, turning to earnings and watching shares of ASML popping in this pre-market trade and overseas, of course, after the company raised its full year sales forecast, saying it will not be able to fully meet soaring demand for its AI chip making machines for the next two years.

2:50We're watching U.S. chip stocks in reaction as well. So ASML up about a quarter of one percent. NVIDIA, Advanced Micro, Broadcom, Micron, Taiwan Semi, relatively mixed in trading, but just about fractionally so, generally speaking. Let's now get out to our CNBC senior technology correspondent, Arjun Karpal with more on that ASML story. They can't keep up with demand. What's new about this AI chip story?

3:17Yeah, well, look, Dom, this is one of the most important semiconductor companies in the world and is often seen as a bellwether for the sector more broadly. ASML's profit beat expectation, but it was that for guidance you mentioned that was really closely watched by investors. ASML said the current supply it has planned for 2027 and 28 will not fully meet demand. And so it's looking at ways to increase capacity of its key lithography machines to 2028 beyond the 30 percent it had previously forecast. And one of the most interesting comments really was that the company said that some of its customers have expressed interest in placing orders for 2029 and 2030.

3:55Now, these comments will likely come for investors who've been looking for some of this longer term demand outlook for the company and to get a sense of how robust that AI demand is over the next few years, not just now. And the capacity increase comments are really interesting because typically semiconductor firms are quite conservative when it comes to CapEx and raising that capacity. And they'll only really commit when they know the demand is there. During the quarter, ASML announced TSMC and Samsung have committed to using the company's next generation machinery known as High NA, which I think is what fed through to that bullishness around capex but also to the company upping the lower end of its sales forecast of the year for to 44 billion euros with the upper end sticking to 45 billion euros as well it's the third sales forecast raised for asml this year and a reason dom the stock is up around three percent this morning in europe trade and up in the pre-market as well in the u.s and european trading but this kind of price movement suggests that a lot of the positivity and by the way the third straight quarter it raised its annual sales forecast, is maybe just meeting the bar for investor expectations right now.

5:03With ASML, this is by many measures for many investors a leading indicator for that semiconductor trade and by extension the broader tech trade overall. How important will ASML be to this AI build-out story because it is at the tip of the spear. They make the stuff that makes all these high-end chips.

5:26Yeah, you are spot on, Dom, because their lithography machines are critical for manufacturers like Intel, TSMC, Samsung to be able to produce those advanced chips, which are very much underpinning this AI infrastructure build-out we're seeing. So, if ASML is saying, well, we're getting demand at least two years out and we're getting interest three to four years out, that is an indication that a lot of these manufacturers of the chips that are going into data centers are feeling like they're going to need the capacity to continue to build out infrastructure. So it gives us an idea that a lot of the manufacturers of chips are feeling like they're going to need the extra capacity in the coming years.

6:09And of course, who are their customers? Well, it's the hyperscalers, it's NVIDIA, it's many of these other players who are actually buying the chips to install into the data center. So give us an idea of the trade. I think what ASML's good numbers are coming up against is jitteriness still in the markets around this AI trade about some of the stories in China competition from there. So it's an interesting dynamic at play, but certainly ASML story here is that their demand is strong, not just now, but for the coming years, Dom. All right. Arjun Karpal with the latest on ASML. Thank you very much for that.

6:40We'll see you later on to the rest of the trade in Europe and closing moves across Asia as well. Let's now get out to our Karen Cho out in London with the latest there. Karen.

6:52Dom, good morning to you. It is another day in the green for European equities. Tech names unsurprisingly leading some of those gains on the back of what you just heard from Arjun, ASML's third quarter numbers trending to the downside between the likes of retail and auto stocks. But of note, I think, is this broadening out diversification, not just in the tech space, but you're seeing it in health care and particularly household goods. That is one area in particular that the market is looking at away from the tech space. And it is connecting with Europe areas that have been beaten up and the French stock market, for instance.

7:22They are scooping up some territory this morning. Now, Asian stocks, though, in contrast, still closed in the red overnight with losses for South Korea's Cosby index, putting it down more than 12 percent just for this trading month. But it's China's trade surplus that dominated headlines from the region and now sits on nearly$940 billion and could pass the $1 trillion mark as soon as this month. And a look, as you can see, some of those markets in the red cost will be down four tenths of a percent. Back to you, Dom. Karen Cho with the latest out of London. Thank you very much for that. To some of this morning's other top stock stories, just days after going after American Express, federal regulators are fining Bank of America,$1.2 billion for allegedly violating anti-money laundering, AML and sanctions laws, including failing to timely report more than$5 billion in quote unquote suspicious transactions.

8:14That's according to the Treasury Department. In a statement to CNBC, the bank says it has invested billions in compliance and is far along in remediation efforts and will define will reduce its net income by about 17 cents per share for the third quarter. Treasury's Financial Crimes Enforcement Network says the penalty is the third largest in its history. B of A shares down one and a half percent pre-market. AT &T is slimming down, agreeing to sell its Mexico business to Latin American media giant Grupo Televisia and FinTech Holdings for about two billion dollars in cash. Televisia and FinTech will each own 50 percent of the Mexican mobile business, while AT &T doubles down on its focus for U.S.

8:55growth. And shares of GameStop right now. New filing show, its CEO Ryan Cohen just bought about$22.8 million in GameStop shares, boosting his stake to 46.2 million shares overall. The move marks Cohen's second big buy of GameStop stock over the past month. He bought$17.1 million worth back on October 2nd. Those GameStop shares up 1.5 % in the pre-market trade. We've got a lot more to hear to come on Morning Call, including reaction to that big fine against Bank of America as the big bank's earnings season rolls on today. But first, getting ready for a first from Anthropic as it makes its pre-IPO pitch to some would-be investors.

9:37And later on, details on the OpenAI employee behind bars for allegedly planting a listening device in his company's corporate offices. A very busy hour still ahead when Morning Call returns after this commercial break. Some of the most important design choices are the ones that go unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail can make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra.

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10:45Your receipt did. The sausage mumbuffin with egg extra value meal includes a hash brown and a small coffee for just$5. Only at McDonald's for a limited time. Price and participation may vary. Promotion pricing may be lower than real pricing. And welcome back to Morning Call, a news alert on Anthropic. Sources tell CNBC the company plans to disclose its third quarter financials for the first time today during a meeting with potential investors as it prepares for what could be the largest IPO in history. This as users on Calci are still holding out hope the listing happens this year, with 64 percent expecting one by December 1st.

11:2480 percent are expecting it to happen by February of next year. Today's pre-IPO Investor Day coming as Anthropic asks a U.S. appeals court to reconsider a ruling that allowed the Pentagon to label it a national security supply chain risk. In its petition, Anthropic is arguing the court misinterpreted federal law designed to target hostile foreign actors and instead turned it into one that presumptively reaches every government contractor. So something to watch for Anthropic. Turning back now to the earnings story and the bank results roll on today. Bank of America, Morgan Stanley reporting before the opening bell.

12:00We'll also get results from asset management giant BlackRock as well. Now, since their last results, B of A shares are down 13 percent. Morgan Stanley shares are down 18 percent. And today's earnings results are coming from city after city. JPMorgan Chase, Goldman Sachs and Wells Fargo yesterday reported results, all reporting higher profits on the strength of the U.S. economy and volatile markets that have led to a surge in trading activity, but warning that rising interest rates could create some issues. For more, let's bring in Jennifer Nason, former global chairman of investment banking over at JPMorgan Chase.

12:35Jennifer, thank you so much for making the time to be with us and to help us put some of these things in context. We've heard a lot with regard to the first big kind of four banks that came out of the gate. We'll get more color today. Have there been any key takeaways from you about just the kind of results that we are seeing, given the operating backdrop that we're in? And I guess maybe rates is front and center for that. Yeah, I think my observation was the last quarter was such a rock star performance by the banks. I mean, we all felt like we were tech companies for a while there. talk about JP Morgan approaching trillion dollar market cap.

13:10And now these results are very, very good, solid, but not the kind of sensational news we had last quarter. So the key points for me were really the kind of pretty significant slowdown in investment banking activity in September. So people hit the brakes on IPOs, capital raising, M &A. Hopefully that's just a pause and that will get reignited. But there was definitely a pause. And then just the ongoing challenge of managing a bank through high interest rates, volatile, geopolitical, just that list of risk factors that have been in play for a while now back in focus for investors. Investment banking is always a key measure that people watch, especially for these big money center banks or the capital markets focused banks.

14:01but they are not the most significant portion of these bank operating activities. One of the things that's getting focused a lot more on in this market with these earnings results is the FIC or fixed income currencies and commodities divisions. They are coming in weaker than expectations on some fronts for some of these big banks. But can you put in context for us why that's happening? Is it because of this lower bond prices, higher rate environment, and these banks having to navigate trading activities around a lower market for sovereign debt. Yeah, exactly. I think you pegged it exactly right.

14:38And I look at what Jamie's done at JP Morgan, for example, where he's been talking about rising rates and the risk of inflation for quite some time. JP Morgan's been buying back stock, now pivoted to lowering those repurchases and making capital available to invest because you can deliver, you can get a better return in this interest rate environment than you could six months ago. So I think managing that sort of accumulation of assets, fixed income and commodities, you know, some are going to do a good job of that and some are going to do a less good job of that. And I think that's sort of very interesting to watch right now.

15:17And I agree, investment banking and deal making tends to suck all the oxygen out of the room, but the real money is made around some of these sales and trading. Speaking of that kind of investment banking activity, we kind of understand or know we've had an inkling over the past couple of quarters, not the first half, notwithstanding that we have seen a slowdown in deal making activity. A lot of these high profile IPOs have been pulled over the course of the last few months because of market volatility. What exactly in your mind gets capital markets activity back up other than the S &P rising consistently or that interest rates start to stabilize?

15:57Or are those the two factors that we really have to pay the most attention to? Yeah, they're definitely important factors. But I think, look, for me, having been around this industry for 40 years, I think investment banking has matured. And now as a director, I see it from the sort of boardroom perspective. Companies are much more nimble decision makers. So, so long as you're prepared, you can hit the pause button. You know, I'm not going to launch that deal today. I'm going to sit back. I know I want to buy company X, but let me wait a quarter and see what happens. So, I think we're going to see more volatility in investment banking revenue, akin to sales and trading, because boards are prepared, management teams are prepared, and there's no shame in hitting the pause button if you don't think the time is right.

16:43I think that's actually a sign of increased sophistication, better decision making and a maturity of the industry. So the industry as well as the customers that are being taken to these deal markets as well. I mentioned Anthropic in the lead up to you. We also have OpenAI, two very highly anticipated IPOs. What exactly does it say to you through your four decades in investment banking that the two biggest or two of the biggest IPOs expected in mankind's history are now hitting that pause button? Is it sophistication on their part as well, coupled with that sophistication from the bankers who are attempting to take them public?

17:24Yeah, I think there's so much more associated with those deals than just pricing an IPO on a Thursday. These are events in every respect. So I think it's smart of them to take their time. They've got plenty of access to capital in other ways. So I think it's smart and I think it shows a certain level of maturity on behalf of management that they take their time. There's no end of issues associated with these companies. So making sure you've got it right, you only get to IPO once. So make it count and do it on your own calendar. And before we let you go, your outlook, optimistic, more maybe measured with regard to the financial sector for 2027?

18:08I'm optimistic. I do think it's an environment where leadership will really count more than ever. So as I look across the banks, and of course, I'm a Jamie Dimon girl, so I'm a little biased. I think navigating through these markets is challenging and there's huge opportunity for those banks that are well-led, organized, no internal drama and can focus on the markets and delivering a return for shareholders. All right. Jennifer Nason, thank you so much for joining us. We appreciate it. Please come back and see us again soon. Thanks, Don. All right. Well, we'll hear more on the bank earnings when the CEOs of Bank of America, Morgan Stanley and BlackRock all join Squawk on the street exclusively this morning.

18:47And Goldman Sachs' CEO David Solomon also speaking exclusively to CNBC at 1 p.m. Eastern time following his bank earnings yesterday. Well, straight ahead on this show, energy traders are on alert as Houthi rebels continue their attacks on Saudi Arabia, its people and its critical energy infrastructure. But first, checking shares of Apple, which hit a record high yesterday after the company unveiled its smart home device suite, HomeView, and a tablet and speaker powered by the upgraded Siri AI functions. Unlike devices from Amazon and Google, HomeView also has access to data on your iPhone. Also looking at Microsoft, which closed at a record high, capping a four-month rally.

19:28The previous record was hit last October before the stock began an eight-month slide that wiped out$1 trillion in market value. Morning Call is back after this. Some of the most important design choices are the ones that Go Unnoticed. The details that together make an experience feel intuitive, comfortable, and above all, exhilarating. At Acura, that means looking closely at how every detail could make your experience behind the wheel more rewarding. Every lesson learned and every idea refined becomes part of what comes next, and it lives inside every MDX, ADX, and Integra. That's precision-crafted performance.

20:02That's Acura. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. Your sausage McMuffin with egg didn't change. Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just$5.

20:41Only at McDonald's for a limited time. Price and participation may vary. Promotion pricing may be lower than real pricing. Welcome back to Morning Call following the latest developments out of Saudi Arabia. Houthi rebels this morning are claiming responsibility for the recent attacks on an airport and oil facilities in Saudi Arabia, including Saudi Aramco's headquarters facilities. The extent of the damage at the facility is not immediately clear, though no deaths or injuries have so far been reported. This following reports from residents of new explosions in the capital of Riyadh. It's not clear at this point the source of those reported explosions.

21:18The Saudi civil defense did report air raid alerts in Riyadh and another province located southeast from the capital there. Right now, energy prices you can see there are somewhat stable, up a quarter percent for U.S. benchmark West Texas Intermediate to just about$94.38. We'll continue to follow the latest developments from Saudi Arabia as well. Still on deck for the show, brushing off high rates, high oil and high volatility. Why one corner of the market is all about the bulls. We dig into that story when Morning Call returns after this. I'm Dominic Chewin from Morgan Brennan. Welcome back to Morning Call.

21:55U.S. equity futures right now are stable with the S &P and Nasdaq coming off their fourth down day in five in yesterday's session. Right now, you can see the Dow is implied higher by just north of 200 points. The S &P up by about 17. And that tech heavier Nasdaq 100 trade implied lower by roughly 65 points. Now, the big stock story we're following this morning is ASML on the back of its earnings report, saying it's getting order interest through the year 2030 as profits smash expectations. It's also raising its full year sales forecast for the third quarter in a row. ASML Holdings now turning slightly negative, down about three quarters of one percent in the pre-market trade for the U.S.

22:34listed shares. Out in the Netherlands, it's still up about 1%. Checking some of the other chip names as well, on the back of those ASML results, you can see NVIDIA is up just about maybe one-tenth of 1%, but lower moves for Advanced Micro, Broadcom, Micron, and Taiwan Semiconductor in the pre-market trade. Big banks, of course, in focus ahead of earnings and on the back of that$1.2 billion fine against Bank of America, those shares of B of A right now, by the way, down about one and a third percent. Morgan Stanley, BlackRock and State Street all expected with results later on this morning as well.

23:06Treasuries ahead of today's big report on September consumer prices, that's CPI print. Core year-over-year numbers are expected to tick up slightly to 2.5%. The Treasury market overall is showing a slight bid as we see the 10-year note yield fall in yield to 5.198%. The two-year note yield, 4.776%. And the 30-year long bond, just a hair below 5.55%. Energy, as we continue to monitor the situation out of Saudi Arabia, the IEA is also out with its monthly oil report today, saying that diesel supply squeezes will last likely well into 2027. Right now, U.S. benchmark West Texas Intermediate up one half of one percent to$94.57, relatively flat on ice Brent crude futures, the world gauge$105.78.

23:54Now a check on global markets, a negative end to the session in Asia overall. You can see here right now that Nikkei down about just about flat on the session. The Kospi down one half of one percent. But the FTSE 100, the German DAX and the CAC in France all up roughly one half of one percent right now. Checking some of this morning's latest headlines. OpenAI is reportedly in early talks to buy trail of bits in an effort to bolster its cybersecurity offerings. Bits, which specializes in finding and fixing vulnerabilities in open source software, was founded back in 2012 and has just 120 employees.

24:30According to the information, OpenAI is likely to pay in the, quote, low hundreds of millions of dollars in stock to buy the firm. Exact details of the deal could not be learned. Speaking of OpenAI, the company says the FBI has arrested one of its employees after a, quote, sophisticated recording device was found inside its executive conference room. That's according to the Justice Department. OpenAI says the employee, a 35-year-old Saudi national, planted the listening device a few days before it was found and was arrested on October 9th in connection with that discovery. Federal Reserve Governor Lisa Cook says she will be unable to attend a November 5th hearing at the White House, part of a new investigation into mortgage fraud allegations by President Trump.

25:16In a letter to the White House, Cook's lawyers say she will be executing her official duties as governor at financial and monetary policy meetings in Europe at that time, adding also that the hearing would have to take place after the Fed's December 9th decision to accommodate scheduling conflicts. A Trump-appointed federal judge late yesterday indefinitely extended his block on the White House from enforcing a ban on three media outlets, including CNN, Politico and our sister network, MSNOW, from covering President Trump. This is the second time the judge has ruled in this case previously handing down a temporary order requiring the White House to regrant access to those news outlets.

25:57And President Trump says Taiwan has agreed to buy three percent of gas from proposed LNG pipeline project in Alaska for, quote, the next 20 years. Taiwan is this morning confirming terms of the deal as a 6.6 million ton of LNG and as much as $4.4 billion investment, adding state-owned oil and gas from CPC Corporation signed the letter of intent back in March of 2025. His comments follow claims from earlier this month that South Korea has agreed to join the project as well, despite no official word from Seoul itself. Well, retail investors appear to be all in on the equity side of things, brushing off worries such such as rising interest rates, energy prices, and the Iran war.

26:39Their enthusiasm is showing up in the options market. Check out this chart from Carrick Lane, which shows the average daily volume in single stock options, recently hitting levels not seen since the meme stock craze back in 2021. The latest survey from the American Association of Individual Investors also reflecting the bullish mood, the number of people who expect stocks to rise over the next six months, topping 40 percent, the highest percentage since mid-July and comparable to lows seen back in 2021. Let's talk more about this now with Amy Wu Silverman, the head of derivative strategy over at RBC Capital Markets.

27:17Amy, this is an interesting development here with regard to just how much we need these kinds of bullish sentiment, I guess, indicators to propel this next leg higher. But the options market is suggesting that people are betting on, in some ways, more upside ahead. Just how important is this data? It's important and it's absolutely fascinating. One thing we've talked about is just this idea that post-COVID has really been its own options and volatility regime. And as you had mentioned, it actually started with the meme craze. Obviously, you're seeing this across the board now in terms of call buying interest.

27:58But if you go all the way back in time, it really started with that GameStop and AMC when retail investors essentially realized, one, that when there is upside momentum, it tends to be get more momentum. And two, frankly, the lesson for a long time now has been that you buy the dip. You think about April 2nd, Liberation Day, you even think back to COVID. And of course, while there are drawdowns, I think that's the lesson that investors continue to take away these days. We're also looking, I mean, more broadly speaking, and it's hard to say just how indicative this is. But we look at the CBOE S &P 500 volatility index, the VIX, people call it, right, the kind of fear gauge.

28:39Even that measure is low by historical standards. What exactly does that say about the overall feeling? I mean, even at an index level, people kind of don't feel as though there's a volatility regime headed to us ahead. so right now the vix is in and around a 15 handle that has been the case for a while you're right even on a historical basis when you think about where the vix has been it looks fairly suppressed one thing that we have sort of pointed out as a nuance is it's been a little bit of this paddling duck market what do i mean by that it looks pretty calm and smooth on the surface but those little duck feet are violently paddling underneath.

29:21So if you look under the surface, there are multi-standard deviation moves. All you need to do is look at software versus semis to see that that is the case. Essentially, what is happening is there's sort of this cancellation. Some people, some stocks zig, other stocks zag, and it keeps index levels relatively muted. But I think it is important to understand that there is a lot of volatility. You're not necessarily seeing it in the VIX, but importantly, you're seeing it in some VIXs and you're also seeing it in other asset classes like move, which measures treasury and rate volatility or OVX, which measures oil volatility.

29:59Speaking of individual volatility movements from a derivatives strategy standpoint, as you go beyond the index level, say for stocks, for equities, are there certain parts of the market that you are seeing notable either divergences or convergences from the charts in? And in other words, are there setups that you're tracking that might lead to outsized moves on the upside or downside, given some of the regime that we're seeing right now? Yeah, I'd say two important things. The first is because the index level, because the VIX looks relatively subdued, I think there is this bet that that will continue that fundamentally becomes a bet on correlation, meaning things are going to remain relatively uncorrelated.

30:44Some will zig and some will zag. And for a while now, I've thought that that could be untrue. One reason is because when you think about earnings season this time around, there's sort of this overhang of U.S. midterms, which is more of a macro concern that could make your correlation pick up. The second thing on more the sub indices or the sub sectors, I would say, unsurprisingly, internationally, things are sort of following a different tune. That could be Korea, that could be Brazil due to elections. And then outside of that, there is a differential that you're seeing when you look at S &P, which is on a weighted basis, an S &P equal weight.

31:22So you are seeing that divergence with a breadth divergence, but you're also seeing a divergence in their volatility, Dom. All right. So it looks like there are some places that could see a little bit more of that volatility play out in the coming months. Amy Wu Silverman at RBC. Thank you very much. We appreciate it. Come back and see us again soon. We got a lot more to come here on Morning Call, including the race to retain control of Congress. Speaking of those midterms details on the massive spending blitz by Republicans with less than three weeks to go until those midterm elections. And be sure to catch Morgan Brennan's exclusive sit-down with Lockheed Martin's CEO today, 12.25 p.m.

31:58Eastern Time, live from the company's new facility in Grand Prairie, Texas, as it looks to ramp up missile production. Morning Call is back after this. Welcome back to Morning Call. A market flash for you. Some fresh analyst calls out this morning. Mizuho is upgrading its rating on Albemarle, going from neutral to outperform, citing lithium demand exceeding expectations and tipping the market balance into favorable territory. Albemarle shares up two and a half percent. Meanwhile, Barclays is downgrading its rating on Dell going from overweight to equal weight, saying while it still sees upside to earnings estimates, the scale of the beats should become much smaller and may limit stock upside.

32:34Dell Technologies down about three percent in the pre-market trade. We are now less than three weeks away from the midterm elections, and the balance of power in Congress is in play, particularly in the Senate. It's coming down to races in about a half dozen states. As we hit the final stretch, Republicans are spending a lot of money to defend their turf. Our Megan Casella joins us now from Washington, D.C. with the state of play with three weeks to go before those elections. Megan. Dom, good morning. So call this the GOP's red state strategy. So with less than three weeks left until Election Day, a huge share of Republicans' campaign firepower is now being devoted to states that were once considered friendly territory.

33:18So take a look first at the money. Republican candidates and outside groups have now spent more than a billion dollars on advertising in the seven Senate races that are rated as true toss-ups. And a full three-quarters of that spending is in states that the president won by double digits just two years ago. Texas and Ohio alone take more than half of the money, plus Kansas, Iowa and Alaska. And then as for the president's own campaign travel, he has now held or announced 15 rallies so far this month, and 12 of those have been in states that he won by 10 points or more in 2024. Republican strategists tell me that that's a reflection of the president's poll numbers, which are hovering right around 35 percent.

33:58They worry that a visit to a purple state in a climate like this one could do more to drive the opposition's turnout than it would his own base. I know Trump wants to get out there and he wants to get out and do whatever he can to help the party. The best thing you do to help the party is just base turnout. And that's going to be big rallies surrounded by lots of Republicans, predominantly in red and Republican areas. Some of the strategy, too, they tell me is triage. Democrats are highly, highly energized this cycle. So in these final weeks, Republicans are doing what they can to bring turnout among their base in the areas where they can still win.

34:37All right. So one of the things as well that we want to watch a little bit more of is just how much these polling numbers can be relied on, because we've learned that lesson over the past 10 years in the past. How much are these deployments of capital from Democrats and Republicans based on those poll numbers? And how indicative really are they, given what we've seen over the course of the past 10 years, certainly going back to the 2016 presidential election cycle? Absolutely. It's a very fair question. And everybody that I talk to, you know, makes the same caveat that these are poll numbers and we never know.

35:12I will say pollsters have been regularly adjusting their methodologies, and especially since 2016, every cycle since then have gone a long way to try to capture the people that are actually going to the polls and making sure that that's different, that they're adjusting for just what people are telling them on the phone. But, Dom, I was just looking before this hit at the odds that Democrats would take over either chamber. I was looking at an aggregate of polling and of modeling that gives them a 99 percent chance of taking the House and a 71 percent chance of taking the Senate right now. And those are really high odds.

35:46I think that everyone would do well to dial that back just a little bit and recognize that nearly 100 percent chance of the House flipping is still a little bit optimistic at this point. But it is absolutely what both parties are looking at when they decide where to deploy this cash. And Republicans in particular are making a lot of big choices right now when they're deciding to pull money from places like North Carolina, for example, that they think is so far in the Democrats' favor, and putting it in places like Kansas, where it's still something of a toss up. I know for me personally, my own personal model, I'm still trying to figure out at what point I heavily more, which I heavily weight more, the polls or the Cal-Shee-Poly market data.

36:21So we'll see how that plays out. Megan Casella on the midterm election cycle. Thank you very much. We'll see you throughout the course of the day here. Well, as a reminder, please join CNBC's Trading the Midterms Forum taking place in Washington, D.C., where we're going to convene leading macro minds to examine why political risk remains one of the market's biggest blind spots right now and how tools like prediction markets are changing the way investors interpret uncertainty. There's still time to sign up. Just scan that QR code right on your screen over there or head over to CNBC events dot com slash trading the midterms.

36:53Well, straight ahead on the show, the morning call crew is assembling and teeing up the trading day ahead and a triple threat of chips, inflation and and another bank of batch earnings. This is big. We're back in a moment. Welcome back. Here's what to watch today. We get the latest look at inflation with Consumer Price Index, CPI also watching for weekly mortgage applications. The Fed releases its Beige Book later on this afternoon. And speaking of the Fed, we'll hear more from the central banks, Tom Barkin and Michelle Bowman speaking as well today. On the earnings front, results from Bank of America, of course, Morgan Stanley and BlackRock, amongst others.

37:28And CNBC will speak exclusively, by the way, and this is big, to the CEOs of all those companies coming up on Squawk on the Street. Goldman Sachs' CEO, David Solomon, also speaking exclusively to us during the exchange with Kelly Evans at 1 p.m. Eastern time on the back of those earnings results from yesterday. So a slate of big bank CEOs coming up on CNBC exclusively. Now it's time for your call sheet where we look at the topics starting in the trading day ahead. The crew members assembled today are Victoria Fernandez of Crossmark Global Investments, Hartika Singh of Fundstrat Global Advisors, and Stephanie Roth at Wolf Research, our economist on the panel.

38:08The topics today, we're going to start off with the chip trade, because it is one of the big things driving the markets these days, right? So, Victoria, I am going to start with you on this one. We've seen a lot of downside, more short to medium term. But if you look at the long term on these charts, it's been a stellar run. Are we calling the top in chip stocks? I don't think we want to call the top on that, just like I don't want to call the bottom on a lot of other elements. But you're right. Look at the long term component. This is when you want to kind of dive down into the technicals of these sectors and these individual stocks.

38:46And you look at those long term trends that you're seeing. And it's actually where you find opportunities is when When you have pullbacks, when you have oversold conditions, when stocks are in longer term uptrends, and I think you're seeing that in a lot of the semis right now. And then you look at the news that came out this morning out of ASML saying, look, they can't even produce enough to meet demand out one, two, three, even seeing companies place orders out to 2030. I think it tells you that you're going to continue to have demand. You're going to continue to have that pressure in order to deliver, which means prices will be higher and it should be supportive of these companies longer term.

39:27Doesn't mean there won't be volatility, but I think that means pay attention and find those opportunities, those oversold conditions and uptrends for those stronger names that we're looking at. I mean, look at a Micron or an NVIDIA or an AMD. Find those areas and those stocks that have those characteristics, and that could be a good place to add to your portfolio. Hardika, it's a good point, right? But look at the ASML price action. This is the third straight quarter they've raised their annual sales forecast. They say they can't keep up with demand. They've got orders coming through the year 2030.

40:00Why is the stock up 2 % as opposed to 5%, 6%, 7%, 10 % on those kinds of results? Are the expectations just so high? I think they are. And I think a lot of that demand just got baked into the price over the past few months, especially with some of these downstream names like SMH and DRAM, most of them for most of the summer haven't been doing all that much. Only recently we've started seeing them come back. With ASML, I think it's been one of the few stars that has been left standing per se. And I think that with this recent development that we got out of China, CXMT, it's a big leap. It's a big, impressive leap.

40:40But at the end of the day, it's mostly in conventional server DRAMs. And for AI inference, we still need a lot of HBMs. And do we have a demand for that? Yes, we have a lot of demand for that. So I think we're going to continue to see our performance from these downstream names toward the end of the year. And they're going to be stars. Demand outstripping supply in the tech sector overall is leading to ripple effects throughout the entire economy. So I'll turn to our economist on the panel, Stephanie. So let's talk about whether or not that's CPI story, because inflation is going to be front and center for consumer prices today and then producer prices later on this week.

41:15What exactly does that tech dynamic show about CPI and PPI and whether those are sustainable inflationary pressures or whether we could see some abatement sometime soon? Yeah, so there's been a couple of main factors that have been driving up inflation, certainly chips, and that feeds through in computer and software and accessories. And then there's been tariffs and then on top of that, the Iran war. So it hasn't just been chips that have been driving inflation. It's been a couple of factors. When we look ahead, the tariffs will roll off the data. You'll see the Iran war also, to some extent, roll off the data, even though the war is not ending.

41:49Just because of passage of time, there's only so much that can be passed through. It's the chips that's the question. And our sense is after computers have risen about 20 percent year over year, they're probably only so much that it can go from here. So really, we're probably going to see a deceleration in inflation. CPI will probably be close to 0.2 percent, which is really not so bad, especially in the context of where we've been. All right, Victoria, that inflation story, is it still going to be a headwind for the markets overall? Higher rates are here, but can we expect higher rates to be sustained?

42:20Well, and it's interesting because when you look at the inflation pressure that we're seeing, I mean, everyone wants to look at what's going on in the Middle East and it's oil and it's diesel. And that's true. But there's a lot of other elements that I think are making inflation sticky. So, I mean, you have to look at wages. You have to look at money supply. You look at component prices. All of these elements are playing into that. And so we don't actually see inflation coming back. I know William said he thought it would quickly come back next year to that 2 percent target. We don't actually see that.

42:50So we think inflation will continue to be a headwind. It may not be that it continues to get higher. Maybe we do stick around that 0.25%, 0.3%, but that's going to continue to be enough pressure to keep inflation higher. And I think that will keep pressure on the Fed to have to raise rates going forward. Not in October, but we do anticipate December, and we probably will see a little bit more going into next year unless we get a big growth pullback and unless we see yields come down because of tightened financial conditions that do the work for the Fed. Otherwise, I think you've got inflation sticking around for a little while.

43:28And by the way, Victoria is coming to us straight from the heart of oil and gas country out in Texas right now as well. So we can leave that aside. Let's talk about our last topic. It's the topic du jour this time around. Tech is important, but big bank earnings are taking center stage right now. We got four of the big ones yesterday. You got a lot of a lot of them coming out today, including Bank of America and Morgan Stanley. So, Stephanie, I'm going to go to you with this one. What exactly have you learned from this big bank earnings season? And yes, it's early so far about the consumer and the economy.

43:58We know that the consumer is a critical part of this entire economic story. Yeah, we've seen the consumer has been largely resilient. And our expectation is you'll see that to be the case for the most part going forward. Of course, there's been a little bit of a slowdown from here. And we expect that to be the case in the next couple of quarters where gasoline prices and rates start to have an impact. But generally speaking, the consumer, especially for the mid to upper end, has been incredibly resilient. And we expect that to be the case. You might see a little bit of deceleration in some parts of spending, like durables, just because it's very sensitive.

44:30But generally speaking, labor market's been good and consumer has been good as well. All right. And bank earnings, what are the expectations right now from you, Harlika? I think I was quite surprised to see JPM's rare miss yesterday. So I think the expectation for me going forward is seeing how investment securities portfolios are doing. like Stephanie said, consumer is holding up, consumer is resilient. So I'm not too worried about that. It seems like the investments in AI and consistent wage growth, according to Wells Fargo CEO, that's been outweighing the risk from inflation, oil prices and all those things.

45:01But that investment securities portfolio part, that's a small but crucial component because it shows how interest rates, their effects are rippling throughout these bank earnings. They are their unique foresight into what's going on with consumers. So it's very important to keep an eye on. And by the way, you can see on the bottom of your screen there, we're getting some comments from Fed Governor Michelle Bowman. They have to wait to see how financial conditions are developing and evolving before taking any action on rates. So more commentary there. Stephanie Roth, Hardika Singh, Victoria Finances, thank you guys very much for being part of the crew.

45:31We'll see you again tomorrow. Your sausage McMuffin with egg didn't change. Your receipt did. The sausage McMuffin with egg extra value meal includes a hash brown and a small coffee for just$5. Only at McDonald's for a limited time. Price and participation may vary. Promotion pricing may be lower than real pricing.