Market rotation, AI and oil risks 10/23/26

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1:17Good Friday morning. Let's get a check on U.S. stock futures with the Nasdaq coming off of its worst day since June. You can see a bit of reversal here on the screen. Mixed picture with the Nasdaq poised to open slightly higher, about 65 points. The S &P slightly lower, down about four points, the Dow down about 250 points. This is setting us up for what is a mixed week as of right now in terms of the weekly moves for the major averages, with the Nasdaq slightly lower on the week coming into this final day of trading, the Dow higher, up more than 1%, and the S &P basically flat. By the way, small caps have had quite a heck of a week.

1:53The Russell 2000 will tell you more about that in just a moment. We're also watching mega cap tech after yesterday's steep sell-off. That saw Meta fall nearly 7 % on the day. Right now, you can see Meta is fractionally lower, Amazon fractionally higher, and Vidya's up 1 % after selling off yesterday. It's basically a mixed picture across the board. One standout, though, Apple bucking the trend, hitting a record high. We're going to have more on that stock and why you need to watch that today coming up. And let's get a check on Treasuries with the 10-year yields coming off its largest single-day drop since March of 2023 when the Silicon Valley Bank implosion happened, if you recall that, a couple of years ago.

2:35You can see yields are higher across the curve this morning. U.S. 10-year Treasury yielding 4.98 percent, so we're still firmly below 5 percent right now. Fed-sensitive two-year Treasury, 4.66 percent. Remember, we get a Fed rate decision next week. And the 30-year Treasury, 5.3 percent. Let's also get a check on energy and what we're seeing in the crude complex. higher prices. WTI is up about three quarters of one percent, trading right around 100 bucks a barrel. Brent is up almost half a percent, trading around 113, 114 dollars a barrel. Brent right now is higher in the week. WTI is lower. Let's get to the trade in Europe and Asia with our Karen Cho.

3:12Karen.

3:16Morgan, good morning to you. Well, European stocks are trading in the red this morning, rounding off what has been an incredibly volatile week for equities. Investors have been watching some key numbers out of Volvo Cars and luxury giant Kering. Shares of both of those stocks have been under pressure and you can see the major indices themselves really well and truly now in the red. When it comes to Kering though, that stock sharply lower after the luxury giant reported a 6 % decline in Gucci sales during the third quarter. The iconic brand, which accounts for roughly half of the group's profit, has once again struggled to turn around sales in China.

3:49with Kering describing the country as, quote, our major headwind. And I want to take you to Volvo Cars. The stock is under a brutal selling pressure today. It swung to a third quarter loss, dragging shares to a record low as demand in the US and China collapses. The CEO, Håkon Samuelsson, has told CNBC the carmaker is facing multiple challenges in the world's second largest economy, saying they need to regionally adapt cars as well as leaning into Chinese software to boost their lineup. Now, Morgan, that was telling me that if something is broken with the European strategy in China, that now not just making the cars locally is a strategy, but they need to adopt local software, infotainment systems and also autopilot.

4:30So a real shake up in strategy for Volvo. And I think perhaps other European car makers to selling into China. Yeah. And perhaps speaking to why we started to see some talk of or even some implementation of trade restrictions where some of these Chinese EVs and other vehicles are concerned on the global market. Karen Cho, have a great weekend. Thank you so much for bringing all of that to us. Wow, what a move in Volvo. Let's turn back to energy prices and WTI once again back above$100 a barrel as the U.S. apparently looks set to resume strikes in the region. Our Dan Murphy is live in Abu Dhabi with more.

5:04Dan. Hey, Morgan, good morning. Well, oil prices holding near this five-month high this morning. As you mentioned, WTI above 100. Brent also trading above 110 and on track for a third straight week of gains. This pop coming as Houthi attacks on Saudi Arabia raise fears of more supply disruptions. The kingdom saying it intercepted a missile fired towards Riyadh this morning. That adds to the 14 ballistic missiles and more than 60 armed drones that have targeted Saudi Arabia so far this month, according to coalition figures. Saudi Aramco, the state oil giant, also reportedly ordering staff to evacuate its Dharan headquarters and work from home.

5:49Washington also ordering some diplomats and their families to leave Saudi Arabia this week, as reporting suggests that the U.S. and Israel are drawing up plans for a strike. Now, I spoke with Charles Myers of Signum Global Advisors this morning. He said a return to war now looks inevitable. Maez said he expects real fireworks in the next week to 10 days. After the midterms, he said he expects another round of airstrikes on a much bigger scale than we've seen before and possibly even a joint U.S.-Saudi military operation against the Houthis in Yemen. Morgan, it's just one view, but other analysts I've spoken to this week say the Israeli election next week, followed just days later by the U.S.

6:32midterms, really adds to the risk here. Let's back over to you. Yeah. And of course, we're going into a weekend in the meantime ahead of that Israel election where polls are pretty mixed right now. So there's a lot to watch here over the coming days. Dan Murphy, thank you. Have a great weekend. Let's get back to markets here in the U.S. and what's been another turbulent week amid continued pressure on tech. The Nasdaq and Nasdaq 100 in the red for the week. The S &P 500 is flat. The Dow is up over one and a half percent. The Russell 2000 is a big winner. It's up over two percent. It's on pace to break a six week losing streak.

7:03But for more, let's bring in Paul Hickey, co-founder of Bespoke Investment Group. Paul, it's great to have you here on set. Good to be here. I mean, where should we start? Obviously, just, I mean, huge rotation in the market this week. But perhaps the biggest action has really been what we've seen in bonds. Yeah. So, I mean, we've seen bonds, some relief in the bond market. And that's helped the small caps, which you just referred to, are up the most this week. Yesterday, seems like a bad day for the market. Headline index, the S &P down over 1%. breadth was actually one of the stronger days we've seen in this environment, one of the stronger days we've seen in several months, like plus 170 on the S &P, which is very strong.

7:41In fact, if you go back since 1990, there was only one other day where you've seen the S &P down by 1 % and breadth on the S &P 500 this strong. And that was, you got to go back to January 27th of 2025. And for people who don't remember what that was, that was the big deep seek scare with, you know, when all the tech and AI-related stocks sold off sharply. And if that doesn't sound familiar, and I don't know if you were paying attention yesterday. In light of that, it does seem like, and this has been the takeaway. We actually heard it from NVIDIA's Jensen Wong on the show yesterday. He sort of summed it up well.

8:21But the takeaway has really been that the demand for AI continues to be insatiable. Right. That the biggest bottleneck, maybe it's not even power. Maybe it's not even memory chips. It's capital. Yeah. So how is that funneling into the broader market angst that we're seeing right now, especially when you think about a company like Meta yesterday, which put up strong results, but also they're going to raise a lot more money. Yeah. So they talked about raising hundreds of billions of dollars more in the next several years. And normally that kind of news would have been great for all the AI infrastructure companies.

8:52But we saw a sell off there and we saw what was interesting. We saw and you would have seen shutters in the bond market because that's going to mean more debt. But we saw the 10-year rally, the yield dropped over 10 basis points. And I think part of that was it also coincided with Meta talking about this new class of stock, which was going to be non-voting stock that they're going to issue to raise capital, use it as an avenue to raise capital. And I think at the margin, if you're going to start seeing more companies start to tap the equity markets for capital rather than the bond market, it's a A sigh of relief for the bond market, but it's not great for the equities of these stocks in the short term.

9:32Talk a lot about seasonality around the midterm elections. Is that in play here this year? What would you be watching to know that that's actually part of the machinations versus some of these big overarching issues we're already talking about? Yes, I mean, I think in the short run you have Iran is certainly a bigger issue facing the market right now. We have the Fed coming up next week. Earnings season, obviously, that's the big one to watch. Expectations were high coming into earnings season. Analysts were raising forecasts on the companies they cover. So I think some of the resetting of the bar makes sense here.

10:03But when you're talking about seasonality midterms, we're going to be finally past that in a couple of weeks, which we can all breathe sigh of relief for. But one of the good things is once you get past that seasonality for the market, the strongest period of the four-year cycle is right after midterms, fourth quarter of the midterm year out to the next three quarters of the following year. So at least bulls have that working in their favor, that the seasonalities are turning from a headwind in the late fall, worst time of the year for the market, turning into a tailwind. And this period, even in the three-month period, not even in midterm years, tends to be a strong time of year for the markets.

10:42All right. Paul Hickey of Bespoke, great to have you here. Good to be here. Thanks for having me. All right. Well, we're going to turn to some of the morning's big stock movers. SpaceX reportedly in talks to access a minimum of 80 ,000 cell sites across the U.S. in an effort to build out new mobile cellular network, one that looks to take on established players like T-Mobile, Verizon and AT &T. Keep in mind they have a partnership with T-Mobile. But shares right now of SpaceX are popping up about 2.8 percent. And you see Verizon, AT &T, and T-Mobile all under pressure again today. Now, among the companies reportedly talking with SpaceX, Crown Castle, American Tower, and Vertical Bridge Holdings.

11:19You can see Crown and American Tower both popping more than 6 percent for American Tower. And Crown Castle's up more than 7 percent. Some of the largest owners of U.S. cellular towers. Now, on its earnings call yesterday, the CEO of Crown Council told analysts to assume that they are talking with all parties with regards to tower access. OK, let's also take a look at shares of Moderna because we had a few different pieces of news tied to that company yesterday. But the one that really got attention and really has moved the stock yesterday down 18 percent. And you can see adding to that down three percent this morning.

11:59Details from what was a confidential mRNA based cancer vaccine study that were leaked on social media. The results, which were positive, but slightly short of street expectations, were originally scheduled to release during an oncology conference tomorrow. And on the earnings front, we're watching shares of Western Digital, first quarter results topping street estimates and announcing that it's boosting its dividend by 17 percent. The company says Q1 sales grew 55 percent from a year ago to more than$4 billion. And you can see the company's CEO today in a CNBC exclusive at 1 p.m. Eastern. Those shares are under pressure, too, though.

12:35And Hoka and Uggmaker Deckers outdoors under pressure after cutting its annual sales outlook amid slowing sales for its marquee brands. The company's fiscal Q2 revenue also falling short of estimates, and it says it plans to focus on full price selling and marketing instead of discounts to get back on track. Shares are down about 9 % right now. We have a lot more coming here on Morning Call, including much more on the volatility that's gripped Wall Street and the political risk premium now hitting your portfolio. Plus, the wait is over for the iPhone faithful and a company knocking on the door of most valuable in the world.

13:11We have a very busy hour still ahead when Morning Call returns.

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14:20Gemini 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. Welcome back. We're turning back to a developing story in the evolving geopolitical risk premium facing markets heading into the weekend and beyond. The latest unknown coming from Iran, warning that it will respond with strikes on airports, pipelines and other Middle East civilian targets if the U.S.

14:56and Israel resume their strikes. Now, this is Russia continues to hammer Ukraine's capital, despite Moscow agreeing in principle to resume three way talks with Kiev and Washington over a possible pathway to peace. Now, those talks expected to start sometime after November 10th, but investors are certainly paying attention. Along with the volatile AI trade, we're seeing Wall Street's fear index, the VIX, the volatility index, pop some 17 percent this month. Joining me now, Anya Manuel, executive director at the Aspen Strategy Group and partner at Rice, Hadley, Gates and Manuel, and Marco Papich, chief investment strategist and head of Geomacro at BCA Research.

15:33It's wonderful to have both of you here. Anya, great to have you back on the show. I want to start this conversation with you because we have seen or we hear that the U.S. has a third aircraft carrier strike group on the way, an additional marine expeditionary unit. We know that they're moving Americans and other civilians out of harm's way in certain parts of the region in the Middle East right now. I realize President Trump has said that he's not going to do anything until after midterm elections. And if you check the Pentagon pizza index, as I do. It has been relatively sanguine this week. Nonetheless, we're coming into Israel elections.

16:08We've seen commentary out of that country and Prime Minister Benjamin Netanyahu as well. What do investors, what does the public need to understand about the moment we're in and the possibility here for re-escalation? Very happy to be with you this morning. I think what investors need to understand that neither in the Iran conflict nor in the Russia-Ukraine conflict. Is there an end in near sight? Even if the United States resumes strikes against Iran, it is very difficult to imagine Americans putting boots on the ground there. This is an autocratic regime in Iran that was nearly decapitated, that is going to fight to the finish.

16:51So even if we resume airstrikes, I don't see the situation getting a whole lot better. So we are stuck. And that means diesel prices remain high. Crude exports, as you know, Morgan are now flowing through the Straits of Hormuz almost as much as they were before this crisis began. But any distilled product is still going to be a problem. So in light of that, Ania, Marco, before I bring you in, Ania, just a follow up here. What unsticks us? What could unstick us? In Iran? Yes. Not very much, to be honest. This is a regime that has absolutely no incentive to negotiate. They have shown themselves very willing to impose huge costs on their populations.

17:36What costs sometimes is how much the Iranian people are suffering in all this. You could imagine that with sustained efforts of the extreme sanctions that are now on Iran and the blockade that America has imposed, where there's been some reporting that all of the Iranian tankers, including the Shadow Fleet, are now basically empty, that in six months or so, four to six months, there's a reason to come to the table, but nothing anytime soon. Marco, I want to get your thoughts on this and how geopolitics is funneling into what we're seeing in market activity right now, especially coming off of a day where we had the 10-year Treasury yield drop the most on a single day since March of 2023, the last time we saw some angst in that particular case around regional banks in the market?

18:21Yeah, so I think that oil prices are effectively flagging that there's an expectation of more kinetic activity over the next month, either before the election or after the election. I don't think that it would change anything on the ground. The U.S., from what I'm seeing from the reports in the media, but it's also just clear from the amount of troops the U.S. has that any new attacks would effectively just be for domestic theater purposes, both for Israel and the U.S. And so sort of like a last show of force before effectively the U.S. has to re-offer the exact same deal from the summer. And I actually take a different view from Anya.

19:02I do think that we're close to the end because time is working against both sides. First of all, as she describes correctly, Iran is suffering, whether six months or now they know that effectively they are without revenues but on the other hand so is the u.s. the u.s. is coming to the bottom of the barrel both physically and politically speaking in terms of constraints physically i mean of course the strategic petroleum reserves which is coming to that bottom 200 million barrels which may as well be slush and then politically where president trump is now at the same unfavorability as richard nixon right before he resigned.

19:41So in both cases, I think what has changed from six months ago is just time. Both sides are running out of it. And so I think that provided that any kinetic activity is relatively harmless to Iran, provided that it is for domestic show in the U.S. and maybe in Israel, I do think that it could be actually that off-ramp and escalation to de-escalate into the new year. Anya, how do we need to understand the political calculus that goes into all of this. I mean, there is a clock, right, coming into midterm elections here in the U.S. and then out of it with a lame duck session in Congress. And then Israel has its elections next week, too.

20:21And we know they've been partners in so much of this in the Middle East specifically. Yeah, the political clock is very difficult to foresee here. And I actually agree with the other panelists, my point of four to six months to resolve might be it will be very difficult to have a complete political resolution here. What you might see and what I hope we see earlier is a smaller deal, which is unblocking the strait by the U.S. in exchange for opening the strait by the Iranians. Now, does that solve the problems in the Middle East? Absolutely not. Iran will still have a nuclear weapon, although those abilities have been degraded.

21:04They still have missiles. They're building new ones. They're still causing trouble. And the Houthis, not directly directed by Iran, but still out there, are still causing lots of turmoil in the Middle East. So the political window in the U.S. side and the Israeli side is complicated, but it also is for the partners in the Gulf and the Middle East. Marco, I want to shift gears a little bit because it's not just domestic politics and policy that are funneling into the broader geopolitical picture in the Middle East or even where Ukraine and Russia are concerned right now. It's also what we're seeing in places like Europe as we go into another weekend after protests and rioting and looting in France and other signs of angst in other parts of Europe, too.

21:46How are you gauging and assessing all of this? How is it again? I keep using this term, but how is it funneling back into markets and sort of the the geoeconomic picture as well? Well, I think what the markets are basically telling you is that you can't have multiple wars going on at the same time. You know, that's what's happening. The protests in France fundamentally are about the cost of living. The Republican massacre, which is coming next week, in two weeks, is fundamentally about the cost of energy in the U.S. So you have two wars going on, one with the largest commodity exporter in the world, which is Russia.

22:27And the other one in the Middle East. So the policymakers in the West who have effectively tripled down on all these conflicts at the same time, they have to come to some sort of an agreement with the public, which is that, you know, they're going to have to wind down some conflict somewhere. And you saw that this week with President Trump basically trying to triangulate. You know, effectively, I mean, for what it appears to be happening is that the U.S. is trying to scratch Russia's back so that Russia can scratch America's back in Iran. I mean, that's kind of what seems to be the naive game of diplomacy that's going on.

23:06Maybe not that naive. Maybe it will work. I don't know. But the point is that you can start to see the West, European policymakers, American policymakers, realize that they've bitten more than they can chew. It's a geopolitical trilemma, if you will. You know, you can't just have everything happening all at once. Something is going to have to break. And somewhere, the West is going to have to take an L, as the kids would say. Marco Papic and Anya Manuel, great to have you both here. Appreciate it and your insights. Well, straight ahead, we're jockeying for the market cap crown. the$2 ,000 reason that Apple may reclaim the number one spot.

23:47Just ask the early adopters. Braving the streets of New York City to be the first to get their hands on the new iPhone duo. We got a live report from Midtown when Morning Call returns. This message comes from Wise Business, the only account your business needs to scale globally. You're building a business with global ambitions, but hidden fees are eating into your margins. With Wise Business, you can pay overseas suppliers without exchange rate markups. Have customers worldwide get payment details in 22 currencies so you get more of each hard-earned payment without hidden conversion fees. Be smart.

24:24Get Wise Business. Download the app. T's and C's apply. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. 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.

25:05Gemini 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. We're tracking shares of Apple after closing at a new high yesterday, the only Mag7 and major tech stock to finish in the green as the rest of tech got hit and hit pretty hard yesterday. You can see we're down about half a percent this morning, taking a breather.

25:39But in general, with those gains, Apple knocking on NVIDIA's door once again for the title of most valuable company in the world by market cap, a possible catalyst for Apple shares its new iPhone duo, hitting store shelves today, facing short supplies and early high demand. This was the scene in China's capital of Beijing this morning as customers tried to get their hands on the tech giant's first holdable phone. Our Mackenzie Cigalos joins us now from outside Apple Store on Fifth Avenue in New York City. Mac, it's great to have you on Morning Call. Welcome. Hey, Morgan. And we are seeing that same early demand that you saw in Beijing here at Apple's flagship store on Fifth Avenue.

26:19People have been lining up on this block since Wednesday morning to be among the first to buy Apple's new iPhone Duo. And while some are the diehards who have done this for previous iPhone launches, I've also talked to multiple people who told me that this is their first time ever getting in line for one. And that tracks with what Apple's marketing chief, Greg Joswiak, told me ahead of the launch. He said pre-orders were off the charts and pushed back pretty directly on reports that production problems are behind these long waits, saying that Apple is ramping output as we speak to meet what he described as extraordinary demand.

26:54Jaws back telling me that John Ternus, now CEO, has patents on foldables going back 15 years, but Apple waited to ship until the display, durability, and software were ready to go. And the economics here are especially attractive. My supply chain sources estimate that gross margin is around 55 % on the 512 gig Duo versus 45 % on the iPhone 18 Pro Max. So Apple doesn't even need the duo to become a mass market phone for it to be significant to its bottom line. And keep in mind, foldables are still a relatively small piece of the global smartphone market, but they punch well above their weight in revenue and are especially important in markets like China.

27:37Multiple firms now expect Apple to dominate the category, taking 40 percent share and the top spot by next year. Morgan? Great report, Mac. I'm going to ask you a really basic question. Have you gotten to play with it yet? Are you going to play with it today, this new foldable phone? So I first tried it out when they launched it in September at Apple Park in Cupertino. I went down into the Steve Jobs Theater. I tried it out. I demoed it then. And yesterday I was meeting with Greg Josviak, who's the marketing chief. He walked me through some of the additional features. And I will say this. It's just a very impressive feat of hardware design because I've worked with Google's Pro Fold.

28:17I've looked at the Samsung Galaxy Z Fold. And this is just a complete departure in terms of that crease. I feel like that's always the first measure. Like, can you see a crease when it's open? And it is extremely impressive. The reviews are mixed, but even Joanna Stern, I was watching her video of it. She built a machine to fold this thing 32 ,000 times in the space of a week. And you couldn't see a crease after that. Mackenzie Cigallos, great to have you on. Stay warm. Thanks, Morgan. Still on deck. Why shares of SK Hynix are heading higher ahead of the open. We've got your top stories coming up.

28:51Pop at about 5 % right now. Plus, President Trump looks to supercharge U.S. oil production, refinery production. We're going to talk about that and more with Jared Agin, executive director of the National Energy Dominance Council, when Morning Call returns. I'm Morgan Brennan. Welcome back to Morning Call. Let's get a check on U.S. stock futures with the Nasdaq coming off its worst day since June. You can see we are lower for the major averages as of right now. The S &P is poised to open down 14 points, the Dow down 289, 90 points, and the Nasdaq basically just below the flat line, poised to open just below the flat line, down about 10, 11 points.

29:27Right now, before trading today, we are on pace for a mixed week for the major averages, with the Dow up more than 1.5 percent, the S &P basically flat, and the Nasdaq down fractionally. Now, in light of that, let's check some of the morning's latest headlines. SK Hynek's share is popping, saying that it's scrapping its$10 billion plans to list its flash memory unit in the U.S. amid strong opposition from regulators and shareholders. The company is also blaming, quote, recent capital market conditions for that decision. That's for Soladime. You can see investors are responding positively to it, up 5 percent here pre-market in the U.S.

30:03And amid multiple reports of hacking due to programming issues and a code that powers some of the world's largest and most popular websites, the Hack ETF is bucking the broader tech sell-off this week as well. That's up nearly 5 % this week. Up again this morning, names like Palo Alto and Cloudflare are higher on the week. And there's a lot of hacking action, cybersecurity action overall that is being reported this week. Some folks are actually starting to refer to this as Black October. So we're going to continue to track that. Sources tell CNBC, meantime, that OpenAI is close to finalizing a plan to raise up to$30 billion at a$1.25 trillion valuation from UAE and KOTU, other investors.

30:46Funding rounds acting as a likely bridge before the company taps the public markets in a U.S. IPO as soon as next year. And let's get a check on SpaceX because it's reportedly preparing a new$40 billion debt offering. We've had reports and some knowledge that this was coming. They even confirmed as much on the conference call earlier this week, with some yields expected north of 8 percent. That's new. The offering being arranged by Apollo and Goldman Sachs. That could be completed as soon as next week. We can see shares of SpaceX bouncing back this morning, up more than 2 percent. Let's also get a check on energy prices.

31:21WTI and Brent crude up again today, with Brent touching$114 a barrel for the first time since May. That's after Houthi attacks in Saudi Arabia, further raising concerns about supply disruptions from the Middle East. And this as U.S. fuel prices remain high, with regular unleaded hovering near$4.30 a gallon and diesel still well above$6 a gallon. President Trump taking more steps yesterday in an attempt to ease the pain at the pump, invoking the Defense Production Act to spend$150 million towards increasing U.S. production and refining capacity. Well, joining me from Washington is Jared Agin, assistant to the president and executive director of the National Energy Dominance Council.

32:01Jared, it's great to have you back on the show. You and I were together in Houston for the G20 Energy Ministerial just over a month ago, and you made some news then because you said the Defense Production Act could be something that would be considered from a refining standpoint. Here we are now. Why is this being invoked? How is it being invoked? And how quickly can it kick in and boost refining capacity? Well, Morgan, you're absolutely right. Everybody's heard of drill, baby, drill. Well, now it's all about refine, baby, refine. This is the issue we're trying to solve right now. The president is using all the levers that he has to increase refining capacity here in the U.S.

32:41We talked about when we were together in Houston, we brought the refiners into the White House. We brought them into the Oval Office and we said, how do we increase refining capacity? For a decade, we have shut down refineries here in the United States. States like California used to have dozens of refineries. Now they're down to single digit refineries. How do we get more refining capacity? And so what the president is now doing is he's invoking the Defense Production Act to use funds in the immediate to get more refining online in the weeks, months ahead. Now, building a new refinery takes a long time, but we have great refineries that can increase their capacity with just some small tweaks, more storage, more pipelines, more infrastructure.

33:26All of this is hard to do when you're running at 100 percent capacity or in the past where your margins are very, very slim. Now we're going to come in, help them on a lot of projects. We've already talked to over a dozen refiners who have projects that they've been holding off that they need to do to increase refining. We're talking about multiple states all can increase refining in the short term as we're building more refiners. The president talked about it. We're building more refineries. We've got a new one coming in Texas. But what can we do in the short term in the next six months or less to get more refining capacity online?

34:02That's what the president is doing. He is using the Defense Production Act because this is an emergency. We need to get this done now. $150 million. I can't believe I'm saying this, but$150 million doesn't sound like a lot of money to me. And then when I look at Valero Energy yesterday kicking off earnings season for the U.S. refiners, posting its highest ever quarterly profit. Is it about the money when we talk about Defense Production Act or is it about some of the other regulatory streamlining and initiatives that happen with that invocation? Well, it's about small projects that need to get done and small refineries.

34:38So some of these are refiners that margins are very, very slim. They're really working day and night to get the capacity out the door. They've come to us with projects. These are not huge projects. These are, you know, five, ten million dollars here or there that really can change how much they can put online. And so when you start to talk about 10 ,000 barrels a day here, 10 ,000 barrels a day there, All that starts to add up when you talk about dozens, if not multiple dozens of refiners that could start to add more capacity online. So this is also, as you note, about easing some of the regulations.

35:14Like I said, they are under massive burdens in a state like California that is essentially driven refining away from the state. And so now we're going to ease some of those regulation burdens and also give them some influx of cash in the short term so that they can get up and running. Obviously, while the whole world is looking at U.S. refining, I mean, the news just broke this week. We got more crude coming out of the Middle East than pre-war levels. And that's all thanks to President Trump. Think about it. He eliminated the nuclear threat, opened up the strait, and now we're using alternative methods to get more crude out.

35:49You heard the president when he was on the campaign trail last night talk about we've got oil, we've got crude. The issue is how do you attack the refining? And we've looked at multiple ways to do that. And here we're lit with it. This is the difference. We're bringing in the refiners, asking them what they want to get done, and we're helping them get it done. That is a complete sea change from in the past where people have tried to shut down refining here. We're trying to increase refining. Yeah. And so so we add this to to a list of levers that seem to be getting pulled right now. Red dye diesel coming to the market, too.

36:22And Venezuela oil coming online, which I realize is maybe a longer term dynamic that will continue to play out here. And now we have a tanker with 40 ,000 tons of Russian diesel heading to New York as well. The first in what's expected to be a 300 ,000 diesel deal with Russia between the U.S. and Russia. What are the other levers? What are the other things, policy pieces that are on the table, both near term and long term? Are there others right now? Well, yeah, absolutely. You talked about it. I mean, Venezuela is a huge one that actually is happening faster than people realize. I think this is the kind of message that the market wants to see.

36:58The president is actually doing things, tangible things. Everyone is realizing that we need to help our refiners here and we need to get more flow up. We've got a lot of refineries that are specifically built for that Venezuela crude. We have shipments coming up from Venezuela up to the U.S. that can help these refineries in the Gulf Coast. And then obviously, we've talked about it many, many times, but we're unleashing Alaska. So more production coming out of Alaska, opening up more wells in Alaska. We're really looking, again, also at California and how we can open up more wells and more production in California.

37:37They have been heading the wrong way, And now, you know, easing some of those regulations is going to increase more in Alaska and in California. So stay tuned for more news on those fronts ahead. As a top advisor in the White House around all of the energy policy as it's playing out in real time right now, how are you balancing all of this against the possibility, the very real possibility of escalation in the Middle East and what that's going to do to energy prices? Well, I think that's where the news of this week is a positive sign. Yes, you know, you're going to see news that pops here and there.

38:13But the longer trend is that we are getting more crude out of the Middle East than even pre-war levels. Now, ultimately, what you want to do is de-emphasize the strait in the long term. You want to have alternative methods, east-west pipeline through Saudi Arabia, other pipelines that can be built. And so we need a long-term approach. Just look at what happened in Europe, for example. All of the European nations had to shift away from the Russian energy sources coming into Europe, look for alternative methods. They turned to the U.S. for energy supply. You look at the Middle East. They need to find alternative methods of getting crude out of that area.

38:54And where can we build pipelines? Where can we build more infrastructure? Those are the kind of conversations we're having now. But it's a very positive sign that we are now hitting higher levels than pre-war of getting crude onto the market. And now when you talk about more diesel and using DPA authority to get more refining done, those are all the positive signs that the market wants to see. OK, Jared Agin, great to have you on. Appreciate it. Thanks, Morgan. From the National Energy Dominance Council. As we head to a break, a check on shares of Bloom Energy and RingCentral. On the move in very different directions on earnings.

39:29Bloom's earnings and guidance beating the street, but reporting negative cash flow for the quarter. For RingCentral, company beating on the top and bottom lines as its agentic AI pivot pays off. Morning call. We'll be right back. The demand for the neoclouds is off the charts. Their capabilities are extraordinary. And so what is missing in the middle is the working capital to fuel that growth, to fund that growth. And because there's just so much demand across so many sectors of AI, there's a scarcity of capital. the demand of the capital is much greater than the availability of the capital. That's going to get solved.

40:08Well, that was NVIDIA CEO Jensen Wong during his interview right here on Morning Call yesterday, talking demand for neoclouds, the shortage in capital to fuel the growth. Let's get more on that and the topic driving the trading day ahead with the Morning Call crew. All in-house today, crew members Chris Verona, Strategas, Jay Woods of Freedom Capital Markets, also CNBC contributor, and John Mourian of NFJ Investment Group. Great to have you all here. I mean, I'm going to kick this off with you, Chris. I'm just going to go right on down the line. To me, that is sort of the crux of the bull bear debate that we're seeing in the markets right now.

40:40A thousand percent. And listen, what is kind of in the middle here is bond yields. And, you know, we're two weeks past 535. They're quietly at 5 percent right now. So there's been meaningful relief, I think, at bond yields. And as that has happened, look at this vicious rotation that has taken shape here again. I mean, yesterday was exhibit A. 50 % of the S &P made a one-month high, even with the Nasdaq down 2%. Discretionary has improved. Health care continues to work. You're starting to see what I really think are the rate-sensitive cyclicals start to respond to lower bond yields. So I think you are getting some relief on that front.

41:14Well, I think that raises a key point. Why are we seeing this bond rally right now? Is this flight to safety? Is it concern about slowing growth? Is it something else? I think it's a little bit of all of the above, but right now, the rally, sorry about that. We've seen this rotation. I think that is the whole theme. And when we go to one sector, the speed to which we go is unbelievable. So this is all defensive in nature. And with the bond yields coming back down, the staples are getting a relief rally like we haven't seen. I mean, up over 10 percent since two weeks ago. Two weeks ago, I was on the show when we were talking about how tech is leading this market and there's no way this can continue.

42:01And then all of a sudden, the semiconductors are in a bear market. So rotation speed of markets is something that the trader loves. But the person watching at home is struggling to make sense of it. So right now, defenses are leading. That's got my spidey sense up. Like, this is not the leadership we want to see. And we have to watch semiconductors. As you led off with Jensen, things are going well. Fundamentally, we're seeing great strength. But technically, there's some pressure on these semiconductors. And if the pressure continues, it could take the market on a little leg lower, which I think will be quick and a great buying opportunity.

42:34Yeah, just to go back to those Jensen-Wang comments, I mean, scarcity of capital. How does that get fixed in a market environment where inflation stays elevated here? And yes, I realize maybe the Fed meeting, more likely than not that they hold steady next week. But you got Fed next week, you got ECB, you got BOJ. In general, we seem to be globally, from a central bank standpoint, shifting into a hiking cycle. Yeah, it's really interesting. So I would kind of delineate neoclouds and hyperscalers. That's the first thing I would say. The neoclouds don't earn any money. Okay, Corweave doesn't have positive earnings.

43:06So when I think about the need for capital and the crowding out of that, that's going to put more pressure on the companies that don't have the balance sheet to support that. So that's the first point I would make. So he's right about that. With your point, though, on cost of capital up, it is a significant headwind. They probably are going to hold rates. But the reality is the problem they're in, if they raise rates in December, which they probably will, it's not going to fix the problem. And they know this. Raising rates is not going to fix the inflation problem. We have supply chain dislocations going on.

43:35Started in COVID. Now we've got the Warner on. So it's not going to get fixed by raising rates. They know this. And they're going to do it anyway, probably, because it's the right policy decision. But it's probably the wrong decision for the economy. And it's only going to exacerbate issues we have with credit. Because I'd make one more point on this. Inflation is a regressive tax. Well, so I would argue our interest rates. Who pays when we take interest rates up? It's everyone. Because we run on credit in the U.S. So when you have a consumer that's relying on credit, when you have capital markets that rely on credit and you take up those rates again, I think that's going to put even more pressure on the economy.

44:12So I don't love that. But I do think that the market looks really attractive here. I'll make one more point. Halloween, October of 22, the Nasdaq multiples lower than it was today then. So we're back to that multiple of Halloween, October of 22, the lowest multiple on the Nasdaq. So we're getting ready for Halloween. It felt like the appropriate comment. Yeah. Halloween, midterm elections. We've got some geopolitical angst, particularly in the Middle East as well. I want to get your thoughts on all this and specifically on what you are watching. We just mentioned sub five percent, you know, back to sub five percent in 10 year treasury yields.

44:49Just like where do we go from here? What's driving this? I think it's always this time of year where you want to start thinking about what could be some of what could be some of the real surprises next year. And when I look at the landscape right now, so we're of the view that the KOSPI has peaked here. So that's memory costs. That's a commodity. Commodity prices are falling. Gold's breaking down. Silver's breaking down. Copper's under some pressure. Rates we think have peaked for the year. Are we setting up for some environment where we're in a very disinflationary 2027? I think there's some potential for that.

45:18And you're seeing this as the leadership, Jay, as you know. It transitions here, right? Consumer, which has been dead money for three years, starting to wake up. You've seen utilities start to wake up. Even financials within the sector, the leadership is changing regional banks over the money centers, insurance over the banks. So there's a case to be made here that I think maybe 30 or 40 percent chance we're heading towards some disinflationary environment. Yet the market seems to be pricing it at a zero percent chance. I think that's wrong. And to your point, the financials have been very resilient in this market, but it's another rotation.

45:51It's intersectional rotation. So those regional banks, the insurance stocks, they took a little bit of a hit, but they held key levels. They're starting to rally. And then you look at the Goldman's and the Morgans. They they've broken down. J.P. Morgan holding on strong. I'd like to see the financials start to lead us when you're in a strong bull market, a secular bull market. The financials are always a big part of that. So I'm watching the financials closely. But getting back to the midterm in October 2022. Yes. I think we are setting up for a moment just like that where we're about to wash out and give us a nice opportunity for a year-end rally.

46:24All right. More to come. Gentlemen, great to have you here on set. Thank you to our call crew. Thank you. Have a good weekend. At Jared Jewelers, we know it's about more than fine jewelry. It's the moment they open the box, that smile they can't hide, knowing you chose exactly right. because the right gift can bring a lifetime of meaning, a promise, a milestone, a memory in the making. Make every moment unforgettable. Find great gifts starting at$250. Jared, make the holiday last forever. Shop Jared Jewelers.