Markets React to Midterm Fallout, AI Data Centers and Energy Risks 11/5/26

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1:18Good Thursday morning. I'm Dominic Chew in for Morgan Brennan today, checking U.S. equity futures after that massive post midterms rally. The Dow, by the way, notching its best day in 18 months, closing up by about 3 percent. And right now we are poised for the time being for more gains at the opening bell. The Dow's implied higher by roughly 285 points, the S &P by about 1011 points, and then that tech-heavier NASDAQ 100 trade giving back about 145 points. Remember, though, big day yesterday. A number of sectors on the move in the yesterday session following the election, including technology.

1:53Mega-cap names like Apple, Microsoft, Amazon, Meta Platforms, Alphabet, up anywhere from 1.5 % to 6.5 % as the markets closed, as you can see here. This morning, we're seeing a little bit more of that kind of stability trade come in, more modest moves here. That MAG-7 big tech trade is showing just fractional gains and a fractional, just maybe a tiny loss for Microsoft in the pre-market trade right now. A different story, though, for a number of stocks in the AI and data center specific trades, getting hit on concerns that tighter democratic oversight and regulation could slow data center investments and development.

2:31Names like NVIDIA, SpaceX, Nebius, CoreWeave, Micron down anywhere at yesterday's close between 3 % and 10 % on that session. This morning, we're seeing again a little bit more of that stability. But still downside moves. Fractional losses here for NVIDIA, SpaceX down by about 1 % and about 2 % losses for Nebius, CoreWeave, and Micron. A look at the Treasury side of things. Interest rates did move lower in yesterday's session. You can see right now the benchmark 10-year no yield still below 4.9%, 4.878 the last trade there. The two-year no yield 4.589%, and the 30-year long bond just a hair above 5.25%.

3:12And energy, after the massive drop in crude oil prices post-midterm elections, U.S. benchmark West Texas Intermediate and Brent both down over 8 % in yesterday's session. By the way, that means U.S. benchmark WTI seeing its worst day since late May. And right now we're seeing some fractional gains. U.S. benchmark crude,$88.53, up one half of 1%. One and a half percent gains for ice brand crude futures, the world gauge,$95.96. With all of that in mind, let's see how Europe and Asia are reacting to Wall Street's midterms rally. Karen Cho is across the pond in London with the latest on the market action across the globe.

3:48Karen.

3:51Dom, good morning to you. Well, Asian equity markets were mixed today after the Democratic Party claimed victory in the U.S. midterms. Tech stocks and shares of data center supplies in Asia fell amid expectations that the AI infrastructure buildout will face significant pushback from legislators. So back to that bumpy old trade. Meanwhile, Toyota has lifted its annual outlook after strong sales of hybrid vehicles. The carmaker also unveiled a new shareholder return plan worth$89 billion. Meanwhile, here in Europe, mining stocks have helped to push the stock 600 within striking distance of its August record high.

4:29The power in European index is also being supported by strong gains in autos, banks, which we also saw yesterday, real estate rising, although defence stocks are under some pressure following a sell-off in yesterday's post-midterms trade. Ryan Mattel, in particular, shares are sharply lower after the German company cut its four-year sales forecast for the second time in three months. The defense firm said it no longer expected a contract from the German government this year for its box of vehicles, adding that revenue from artillery ammunition is set to be delayed. And also we're seeing a pullback in Merstock.

5:02This is the shipper. It had a miss on its EBITDA line. Back to you, Dom. All right, Karen, show with the latest on the global market action. Thank you very much for that. Checking U.S. equity futures again. Again, more of a mixed picture right now with that tech trade giving some of it back. Following yesterday's massive rally on the Democrats winning control of both the House and the Senate, the market reaction is rippling across a number of different sectors. Clean energy names like First Solar, Enphase, NextEra rising by roughly 3 to 5 percent on some bets that Democratic control could boost federal support.

5:33This morning, those trades are, again, kind of fractionally higher, maybe about a percent or so for the clean energy side of things. healthcare stocks rallying with HCA, UHS, and Centene up double-digit percentages on optimism the new Congress may revive efforts to expand healthcare coverage. Checking the pre-market trade again this morning here. They're up about maybe 1 % to even 2 % gains for HCA healthcare. Defense stocks largely falling yesterday as investors reassess their expectations for President Trump's proposed$1.5 trillion budget. Northrop Grumman down 4%. Lockheed, L3 Harris, both down more than 6%.

6:11And then this morning, we'll flip the board over there. Again, maybe some more modest moves here. It remains to be seen how that defense trade shakes out. Remember, the Iran war has depleted a lot of munitions that need to be replaced at some point. So with all of that in mind, joining me now is Peter Bookfar, the chief investment officer at One Point BFG Wealth Partners. He's also a CNBC contributor. And then Roman Schweitzer, aerospace and defense policy analyst over at TD Cowan. Gentlemen, thank you very much for being here with us right now. I think maybe we'll start with you, Peter, on this.

6:41The overall reaction in the markets, it was a decent size reversal from what we saw overnight on election day into the evening and then the massive rally yesterday. Surprising or not surprising to you? I actually think it was kind of rational in the sense that the markets don't care about your politics. The markets are very dispassionate. They believe that they're only going to respond to what's the actual economic impact and earnings impact of policy changes. And on the defense side, which I know you hear from, there is obviously going to be a change of budgeting, the health care perspective.

7:20But also when you think about at the federal level, nothing much is going to happen over the next two years. But at the governorship level, of course, we're going to be counting data centers just as oil people count barrels. And the amount of data center construction is now going to be under threat. So those stocks were punished. Then, of course, maybe hopes that the war would end with more pressure on Trump. And you had that oil price drop. And then you had all the value stocks that would benefit from a decline in oil prices. So it actually made a bunch of sense, obviously quite different than the night before when the S &P futures were down 100 points.

7:58If I could just follow up there, among all the sectors that we talked about, the data center trade and whether or not we could get rigged counts that are akin to data center accounts in the future. Was there any particular move that you thought was more significant than others with regard to the market reaction to that kind of democratic wave through Congress? Well, the hyperscalers rally because they thought, okay, if you're not going to build as many data centers, they're not going to have to spend as much cash. But on the other hand, if you don't build all these data centers, you don't have the proper computing power that you need to power your models.

8:31So I thought it was a little too cute to be buying the hyperscalers because you're not going to build as many data centers. Interesting. All right. Roman, you know, we mentioned the defense trade and I did mention the state of play with regard to the ongoing war in Iran, what the likelihood is that we could see some diplomatic solution. And we've seen the price action for names like Ryan Mattel over across the Atlantic in Europe. There are a lot of different cross currents, but maybe the big secular trade right now still has to be the world is going to rearm or arm itself fully. Right, Roman? Good morning, Tom.

9:05Yes, I mean, I think that's right. There's nothing in the election that changed the sort of geopolitical risk calculus, right? We still have, you know, really two generational wars ongoing in Europe and the Middle East. And really, the outcome is far from determined and the solutions are perhaps even harder to get to today. And, you know, I do completely agree with Peter. I think his point, his observation is very correct. I mean, the outcome of the election in the U.S. does sort of put to rest the notion of a$1.5 trillion budget. You know, my sense is that investors had never really expected that anyway.

9:43And it was it was much more a question of, you know, what the what the potential base case was in a trillion, a trillion two range. And again, with Democrats sweeping into control, taking both chambers by healthy margins. I think you're looking at a much more muted spending outlook, not only in 27, but potentially in 28 and 29. So I mean, this is not about just a one-year trade, obviously. This is a multi-year picture. And I think we've seen those changes both in the US and also Europe, because the spending picture there, given some of the internal budgetary difficulties, spending problems that the Europeans have.

10:25I think there's a bigger question longer term about some of NATO, you know, NATO's ambitious spending targets. So kind of pressure all along. Roman, can I follow up there as well? Because one of the reasons I heard from traders and investors in yesterday's session, as we saw a bid to U.S. sovereign debt, the Treasury market and a drop in yields, was that with this kind of a mixed picture, a Democratic-controlled Congress and a Republican-controlled White House, that we could see possibly deficits not grow or maybe even possibly shrink. Is that the proper assessment to make, given what we know right now?

10:58It sure feels as like both sides may want to keep spending more money. Correct. And that's usually what's going to happen. I think that's where the really the rubber is going to hit the road next year. shortly into next year. If the Republicans don't try to take care of it during the lame duck session, we're going to need another. The U.S. is going to need another debt ceiling raise. That's probably going to come along, you know, be needed sometime in the mid-summer timeframe. But that could arrive right around the time government funding might run out next spring if there's not a deal on spending.

11:31So we've got one of those famous Washington policy risk cliffs coming sometime next year. And in a divided government, you know, the Democrats, if Republicans want more money for defense, Democrats are going to want more money for non-defense items, you know, to include health care, education, energy, climate, you know, climate programs and things like that. Those negotiations have not taken place. And it's going to be it's going to be tough to imagine what those conversations are going to look like between Donald Trump, Chuck Schumer, and Hakeem Jeffries. At the same time, Congress is probably investigating many members of the Trump administration and the Trump family itself.

12:12All right, Peter, last word to you. We've talked a lot about the stocks. Let's talk about that bonds and follow up there. Is this move net positive for U.S. sovereign debt and lower interest rates in the coming year? No, I think we're still in a rising rate environment. I think that the problem with the U.S. government finances is that so many of their spending needs are on autopilot. And no new Congress, in my opinion, is going to alter that. OK, Peter Buchfar, thank you very much. We'll see you later on this hour. Roman Schweitzer, TD, we appreciate the conversation. We'll see you again soon, sir.

12:44All right. Turning to some of this morning's big stock movers, Qualcomm is falling despite reporting a slight fourth quarter earnings beat. But sales of smartphone chips, the company's core business, fell short of expectations on more sluggish demand and a decline in Apple-related revenues, which offset a positive outlook for its data center segment. Those Qualcomm shares are down 10 % pre-market. And by the way, don't miss a first on CNBC interview with Qualcomm CEO Christiana Amon later on at noon Eastern time today. Shares of Zillow are sliding as the company reported a surprise third quarter loss and issued a weaker than expected guide for this quarter.

13:20Zillow saw a drop in traffic to its apps and sites in the midst of what it's calling one of the toughest housing markets in a generation. Their words. With mortgage rates at their highest levels in nearly three years, Zillow shares are down nearly 14 percent pre-market. And then AppLovin is surging after third quarter results handily topped forecasts. The mobile ad technology platform, which connects advertisers with publishers, generating more AI driven revenues. Free cash flow also picked up from the previous quarter sequentially. And AppLovin is increasing its stock buyback program. So on a net basis, that results in a 16.5 % gain pre-market.

13:58We've got a lot more to come here on Morning Call, including more on the midterm election fallout and how C-suites are shifting their strategies with Democrats set to take control of Congress. Yale's Jeffrey Sonnenfeld, a professor, is here with what business leaders are telling him. Plus, data centers are a key issue in those midterm contests. new details on how OpenAI is looking to address voter anger over those data centers. And then later on, bracing for a potential energy crisis, our own Brian Sullivan is live in Rome, Italy, with how American nat gas producers may be coming to the rescue for Europe this winter.

14:34We've got a very busy hour still ahead when Morning Call returns after this commercial break.

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16:20Welcome back to Morning Call, a news alert on OpenAI, the company announcing this morning a new framework detailing what local communities can expect from the AI startup around the future of data center campuses that it owns and operates. Our own Ashley Kapu joins us now with the details, And this is a very relevant story because it literally decided many elections across the country, either from a personnel perspective or from a policy referendum perspective as well. Take us to what the news is. Yes. So OpenAI is acutely aware of how voters are feeling about this issue. And Chris Lehane, OpenAI's global chief of affairs, told us as much in a briefing yesterday.

17:01So basically what OpenAI is doing here is laying out a series of commitments, and it also published a policy blueprint to try to encourage lawmakers to adopt many of these commitments into law. So for example, OpenAI is pledging to publish its construction plans. It's pledging to cover the costs of electricity at these facilities. It's going to carry out noise assessments at the sites and in the neighboring communities. It's going to stop requiring local officials to sign nondisclosure agreements and basically trying to establish a baseline that they can move forward from here. This is so this is about maybe transparency more than anything else.

17:38Right. So that we know if there's going to be a data center being proposed. Here are the true ripple effects and here are the true implications. We kind of had an inkling that this was going to be an issue weeks and months ago, but it really did determine a lot of the election cycle. A lot of folks out there in certain key areas where data centers are going to be an issue voted along the lines of people who came out overtly against data centers. I can think of races in Ohio, in Texas, in South Carolina, in other places where we know that there's been some pushback on those things, as we're showing you right now.

18:15How exactly does this go towards addressing some of those fundamental issues? And what types of issues will voters and the citizenry look to try to remedy with these data center transparency initiatives? Yeah, it's going to be an uphill battle for OpenAI here. I spoke with an expert at the University of Southern California yesterday who conducted a survey recently that found that respondents trust big tech companies less than the federal government right now, which is a pretty striking finding. She said the government is usually at the very bottom of these lists. So the company is really just trying to kickstart these conversations now, engage with local communities now and lawmakers now, even before the new Congress is seated in January.

18:57OK, and I just want to show right there the number of folks out there on the Democratic side of things that have won based upon this anti-data center rhetoric. James Tallarico of Texas, of course, Sherrod Brown in Ohio on the gubernatorial side, Amy Acton in Ohio, Gina Hinojosa in Texas, Keisha Lance Bottoms, Annie Andrews in South Carolina for the Senate. What kinds of things do we think data center developers need to do to make these things more palatable to places like Texas, Georgia, South Carolina and others? Environmental concerns are huge here. So people are looking for more transparency around water usage.

19:36people are also really worried about their utility bills going up. So you're seeing commitments from OpenAI and others like Microsoft. Anthropic has also said something similar about covering some increased costs. So that's going to be what members of these communities are looking for. They want to be involved in these processes. They want to feel like they're participating and this is not happening to them. All right. CBC's Ashley Kapu covers data centers and the AI trade. Thank you very much. We appreciate it. We'll see you later on today. Thanks, Tom. All right. Straight ahead on the show here, Lights Out for Live Golf.

20:05details on why the rescue plan for the PGA competitor looks to be in the rough or maybe even in the water but first a check on shares of snap which are dropping even as the company swung to a third quarter profit revenues did rise but narrowly missed expectations as to global daily active users snap reported a slowdown and add revenue growth you can see that those shares are down nine and a half percent in the pre-market trade morning call is back after this

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21:33month. Visit SimpliSafe.com slash licenses for alarm license information. AI is here transforming how we work, live, and lead. And the women I talk to aren't waiting for the future, they're shaping it. I'm Julia Boorstin, Senior Media and Tech Correspondent at CNBC. This is CNBC Changemakers, where I talk with the female leaders transforming business as AI reshapes the world. Follow and listen to CNBC Changemakers, Women Leading in the Age of AI, wherever you get your podcasts.

22:07Welcome back to Morning Call. Checking some of this morning's latest headlines. A special White House panel appointed by President Trump is rescheduling a hearing for Fed Governor Lisa Cook towards mid-December. Last month, the president established a committee of inquiry to investigate Cook for mortgage fraud allegations. She has denied any wrongdoing. A hearing had been set for today, but Cook's lawyer told the White House she would be unable to attend until after the Fed's December policy meeting. Goldman Sachs and Apollo Global are reportedly in talks to sell part of a roughly 40 billion chip financing deal for SpaceX.

22:44Bloomberg says the deal is structured to keep debt off of SpaceX's balance sheet, with investors being asked to buy slices of as much as$500 million apiece before the official syndication process even starts. Microsoft rejecting an option to more than double the size of an existing deal with Nscale to rent computing power from the data center in Texas. The Financial Times reports Microsoft is walking away from a potential transaction worth tens of billions of dollars. Last month, Microsoft pulled out of another deal to anchor Nscale's flagship data center in the United Kingdom. China is blocking SoftBank's more than$5 billion takeover of ABB's robotics division.

23:23The FT says SoftBank had expected the deal would be approved until last week. Chinese regulators are reportedly concerned about robotics data being transferred overseas to train AI models, including those operated by OpenAI, for whom SoftBank is a major investor. And it could be the end for LiveGolf. BC Partners is dropping a rescue plan to finance up to$300 million for a revamped version of the league after it failed to secure enough commitments from players. Saudi Arabia's public investment Fund said it would stop funding LIV after the 2026 season ended. LIV is currently in Chapter 11 bankruptcy protection with a court hearing scheduled for later on today.

24:04Now let's turn to the energy markets because Europe is facing what could be a very rough few months. Natural gas storage levels are low for this time of the year and the triple shock of the Iran war, the Ukraine war, and a hot summer also means what they need to buy is going to be even more expensive these days. Brian Sullivan is live in Rome, Italy, with more on a story he and CNBC have been following now for five years, and that is this kind of brewing and now come to fruition energy crisis. Brian, what can you tell us? Well, Dom, I'm not going to say that Europe is live golf at this point, but let's just be clear, Europe is in a bad way.

24:43And this year is going to be very different than the last few years that we've been covering this. Now, We've been on the road in the UK in 2021, Rotterdam in 2022, Germany in 2023. And Europe has kind of been saved by relatively mild weather. Summers have been relatively OK. Winters haven't been that severe. So they haven't drawn down gas. Well, they had record heat this summer. And while they don't have the level of air conditioning that we have in the United States, they still use gas to cool things down. And so this year, going into winter, and it's a beautiful day here in Rome, Italy. But going into winter, the overall EU is well below its five-year average for natural gas storage level.

25:18So what does that matter? Okay, well, if they're in need of buying natural gas, they're going to have to pay a lot for it. In fact, they're facing a, you said, triple whammy, really, of lower storage but higher prices. Look at this versus the United States. In fact, import costs, I mean, that's just the paper contract that we're showing you there. Look at the spike the last couple of months. The Iran war, Hormuz certainly playing into that. Russia also playing into that. But to actually buy a load of liquefied natural gas, LNG, right now prices are about$30 per million, billion cubic feet. So MBCF basically.

25:57Put that into perspective. In America, we pay about three. So we're paying about three. They're paying about 30. You can kind of do the math. So what countries and what regions are sort of the hot spots, if you will, the ones that are buying the most natural gas? Well, you've got Egypt, which is not Europe, obviously, but Egypt, surprisingly, is maybe the biggest buyer of natural gas right now. In part, they also pass it through Netherlands, Italy, Germany, all these places buy a ton of natural gas. So look at those countries, Doms, at the one who are facing not only maybe non-growth economies, but huge additional costs to buy the natural gas they may need.

26:36If it's a really cold winter, there are parts of Europe, maybe not Italy, maybe not Rome, maybe not Paris, but there are certainly parts of Europe that could be in big trouble and possibly facing shortages. No. OK, Brian, let's we focused a lot here and we've shown maps of northern Africa and Europe because of the nat gas usage. I wonder if you can take us through maybe some of the policy implications of what that could look like in Europe and North Africa, given the election results that we've had here stateside. Could any of these things have ripple effects across natural gas production and or transportation?

27:15Yeah, absolutely. You better believe it. And, you know, we were on last night on Power Lunch, and I was talking about sort of these wonky rules around data centers in Texas, because I heard your previous interview, and there's a lot of concern about data centers. Some of the regulatory scheme that go into Texas are some of the same ones that go into natural gas exporting, because these sort of agencies in the state of Texas, Public Utility Commission, the Texas Commission on Environmental Quality, get to know, by the way, get to know that acronym, TCEQ. you're going to hear a lot about that lately.

27:47There are some of the same agencies that approve natural gas export facilities because it goes to air and water quality. Now, in Europe, they're recommending the delay, a three-year delay on these new climate methane regulations. I don't want to get too wonky. It's 5.30 in the morning in the East Coast of the United States. I get it. But they're delaying that because they realize that if they were to enforce these climate rules here in Europe, it's going to make the importation of natural gas either not impossible, but harder and certainly more expensive. I just showed you the prices, 30 versus three.

28:22So you look at the combination of increased export facilities in the United States, mostly in that Texas, Louisiana chain, there are about eight being built right now. There are nine that have been approved that they're looking to build. There are more that are in process. If those get stymied by changes in environmental regulation because there's a change in the Texas government, which we know there is because you've got a new incoming governor, does that make it more difficult or more expensive to export natural gas from America to Europe? It's a story we're going to be telling all day here on CNBC.

28:59And by the way, I know we got to go. Well, we can't be in Texas. Why are we in Italy? People are saying, well, it doesn't make sense. Well, we're here to cover the story. But also, Rome, Italy is where the U.S. ambassador to Italy now lives. His name is Tillman Fertitta, and he is one of the most important business people in the United States, arguably. And in Power Lunch, we've got a live exclusive interview with Ambassador Fertitta coming up around 2.10 p.m. Eastern time today. And that, my friend, is why we are given the tough assignment to come to Rome, Italy. Of course, we know Tillman, and we know he's always a great conversation.

29:34Brian, we're looking forward to that conversation on Power Lunch later on today. We'll see you again later on this morning. Brian, thank you very much for that. Still on deck for the show here. Much more on the fallout from the midterm elections, the corners of the markets set to benefit in a big way from Democrats controlling Congress and the C-suite strategies for the final two years of the Trump administration. Morning Call continues next.

29:58Lovely live shot of our nation's capital. Welcome back to Morning Call. I'm Dominic Choon from Morgan Brennan on this Thursday morning. checking U.S. equity futures after that massive post-midterms rally yesterday. Right now, the Dow's implied higher by 250 points, the S &P up by about 14, and that Nasdaq 100 trade implied lower by 130. A look at treasuries. We are still seeing a slight bid to treasury prices and a drop in yields. The benchmark 10-year note yield, 4.876%. The two-year note yield, slightly higher in yield to 4.589%, and the 30-year long bond, 5.257%. Energy after that massive drop in crude oil, yesterday post midterms.

30:35And right now, U.S. benchmark crude is at eighty eight dollars and sixty two cents, up one half of one percent. And ice Brent crude futures, the world gauge, ninety six dollars and nine cents, up about one and a half percent. Turning back now to the midterm elections and the continued fallout from Democrats stunning victory projected now to win at least two hundred and fifty four House seats and on track to hold fifty four in the Senate. Those are projections. The Senate races in Mississippi and Alaska are still undecided as they remain too close to call. President Trump speaking out on the aftermath of the midterms, telling our Eamon Jabbers that he can work with Democratic majorities in the next Congress on, quote, many more things than people understand.

31:17Speaking earlier in the day, he touched on the Iran war's impact on the midterms and the Democrats' massive victory. Well, I think it's largely true because it drove the gasoline up a little bit short term. and probably that's probably it's true. But at the same time, if I had it to do again, I'd have to do it again because long term, it's the only answer. You can't let Iran have a nuclear weapon. All right. The Democrats' massive gains in Congress, forcing many C-suite leaders to rethink how they'll operate in Washington, D.C. in the final two years of the Trump presidency. For more on that story, let's bring in Jeffrey Sonnenfeld, Senior Associate Dean for Leadership studies at Yale's School of Management.

31:59He is also a CNBC contributor professor, I call you, because you do have a professorial nature with regard to your students and even the CEOs that you speak with. The question becomes, how are business leaders going to react similarly or differently than what they've done in the first two years of Trump 2.0 in the last two years of Trump 2.0? Great question. I hope that's not professorial as an absent-minded professor or anything like that, is, yeah, actually, you know, I've written a book on President Trump. I've known him for 30 years, longer than anybody in Trump 1.0, except for Wilbur Ross, and anybody in Trump 2.0, except Steve Witkoff.

32:39I actually have known him a few years longer than Jared has known him, and it's the only book that studied the arc of his career and what his tools are, and he gets himself in trouble, obviously, sometimes, but he's not, as this book shows you, Trump's Ten Commandment. So thank you. I just happened to have a copy with you. I just happened to have a copy of this book with me right now. His critics wrongly see him as not so smart. He maybe wouldn't pass every geography contest, but he is quite savvy and he's not purely vindictive. He can be, but also he's much more expedient, much more pragmatist.

33:14He can take you backstage. It's sort of like the Wizard of Oz, if you ever remember that when Dorothy pulls back the curtain. And he is somewhat playful and shows you, look, I'm pulling these levers. Can you believe this stuff is working? And he can cooperate with his embrace of Senator Warren on some interest rate issues he was trying to work on and working with, obviously, Mayor Mondami. It's surprising embraces. He can be charming and a problem solver as he sees it. So the fact that we don't have a constitutional crisis and dominant in 20, right after the 2020 elections, I had 100 of the nation's largest CEOs called me to put together something when President Trump was cut off mid-sentence.

33:54First time in American history addressing the nation on tonight, Thursday night afterwards, calling it a fraud and everything else. Rigged elections. We had a crisis. They were worried. CEOs are so alarmed, so relieved. We don't have to do that now. And that he's suggested there are issues that they can work together on. And I I believe that's what he's going to do. True, lame duck, but it doesn't mean he's going to thrash around like a wounded animal in the corner. Jeffrey, what exact what types of issues do you think come to mind first when you talk about the things that they can work together on?

34:28Well, obviously, bringing some peace in the Middle East, there is some news that's been out in the last few hours, in the last few days, that both in the House and the Senate, Republicans of all people, from Tom Tillis, Senator Tillis, to Congressman Massey, will be introducing impeachment inquiry against Hegseth. If Secretary Hegseth is used as a fall guy, that's an easy thing for Democrats to rally around. And the Democrats, for the most part, we have centrist Democrats that have gotten elected. And for the most part, they don't want to be known as leading a vindictive trail of investigations.

35:06But they could target a few. And to some like Hexeth and perhaps Secretary of Commerce would also be sacrificed. But mainly on the positive side, it's data center issues. They can make a lot of progress. There are companies that have come a very long way. There's Ally Digital, Compass, and Meta have shown that they can get the edge around what you were just talking about, both with Brian and earlier with Ashley, on some data center issues, how to address issues having to do with environmental issues, but especially having to do with energy and working with communities. And I think that's a way this White House can make a big difference on the data center front.

35:45So the data center front is big, too. Another industry that comes to mind is cryptocurrencies. Another one that comes to mind is kind of the health care industry. How do they do that? Well, in health care, we have a great model. I mean, Albert Borla, like Michael Dell, we just have a number of CEOs that are not these pandering oligarchs. They don't care whose name is on it. They're problem solvers. Michael Dell, of course, in technology, but also with, you know, taking a look at these Trump accounts for getting money into kids' hands to believe in the system. But a great thing that Albert Borla did with others in Pfizer is taking a look at Trump Rx.

36:24It didn't address all 2000 drugs, but but for 2025 of them made a huge difference that they wanted to address. And there are things on health care where they can make a big difference. But of course, coverage is critical. But when you take a look at the issues of cryptocurrency, what's amazing is that there are 220 newly elected legislators that are pro crypto people. But that hasn't been out there yet. But that's pretty astounding that we will see that that probably the Clarity Act will be cleaned up. The problem with that is, as President Trump didn't want it to apply to the presidential family to be excluded from it and, you know, from being able to invest in crypto.

37:01But but certainly to see that stable coins can be properly some guard lines can be put up around with the Clarity Act. I think that'll be a big progress. I think what we really worry about in the near term as in terms of a frightening bit to close on, because I see holding up my book, you're about to hit me with it, is the the budget resolution that comes up is we're going to have a problem December 11th. Nobody's talking about it. I shouldn't even bring it up on your show. Every CEO in the country is watching this show, though. They should know that we're going to have a budget resolution issue coming up in a month.

37:33All right. Professor Jeffrey Sonnenfeld at Yale. Thank you very much. And again, this is his book here. Trump's Ten Commandments, just an insight into kind of how the leadership style works. We appreciate the conversation. Thank you so much, Tom. All right. A lot more to come here on Morning Call, including a potential fight taking shape over the take private push for Wendy's by Nelson Peltz's Tryon Partners. Details on the other side of this break. Morning Call is back after this.

38:01Welcome back to Morning Call. Wendy's reports earnings this morning as it weighs an unsolicited take private proposal from Nelson Peltz's Try-In Fund Management and its partners. But the$7.35 per share offer is drawing pushback from another shareholder. Brandon Gomez joins us now with what investors are watching. So this is a stock that is, quote unquote, in play. Yeah, I mean, the call could get spicy today, but let's look at shares. They've been down over 60 percent in the last five years. Last quarter, CEO Bob Wright suspended guidance to assess his turnaround plan. Now, today, the street expects adjusted earnings of nine cents a share on roughly$530 million in revenue.

38:36The bigger number to watch will be same-store sales. Wall Street expects a 6.5 % decline, with U.S. sales down almost 7%. That would be little improvement in the U.S. from last quarter's 7 % drop as well, while international also remains under pressure. Now, that weakness is central to CEO Bob Wright's turnaround plan that focuses on rebuilding a quality value menu, marketing that drives demand, and improving operations in digital offers. Now, it's a turnaround that Nelson Peltz says would be easier implemented outside public markets. Tryon, which owns about 16 percent of Wendy's and its partners, offering$7.35 a share in cash to buy the rest.

39:13Now, Wendy's independent committee is reviewing the non-binding take private proposal. But another investor, Blackwell's, tells me the price undervalues the company and questions whether unaffiliated shareholders would have enough say. Now, Blackwell's said Peltz as chairman until he stepped down in 2024 led to, quote, nepotism and cryonism for CEOs in under three years and a dividend cut 72 percent, adding that Wendy's is being run to be sold, not win. So today's earnings call, as I said, now doubles as a test of the business Peltz wants to buy and the case for accepting the price that he's trying to buy it.

39:49So$7.35. Is there a price that you think does get people on board? Obviously, it's higher. Everybody wants the most possible. But at what level do we think a deal might get done? Some analysts on the street have said that they could see this deal going through as it exists. However, Blackwell says$17 a share, which is the last price that Pelts and Tryon sold shares of Wendy's at back in 24, end of 24, early 25. And so that's the price that's been floating around, that there might be less opposition. But again, the stock, you look at it, it's a far cry from there. I do just say my kids want to go to Wendy's a lot more these days.

40:24So we'll see how that plays out. Those frosty freebie playbooks, right? Halloween. Those chicken nuggets. All right, Brandon Gomez, thank you very much for the latest on Wendy's there. straight ahead. The morning call crew assembles teeing up the trading day ahead. We're back after this.

40:41Welcome back. It's time for your call sheet now where we look at the topics driving the trading day ahead. The crew members assembled today are Peter Bookvar, Matt Maley, and Lee Baker. There is only one story, and that's the post-midterm market action. And so, Peter, I will start with you. We spoke with you earlier about it. What can we expect to see from the markets in this seasonally strong time of year going to the end of December? Well, we have two markets. We have the AI market and then we have everything else. With respect to the AI market, the most important thing over the next couple of weeks is the Anthropic IPO.

41:17They originally wanted to$2 trillion valuation. Investors said, OK, we don't like that. One and a half is what we want. and we're going to see how that settles out because a lot of this entire infrastructure build out is reliant on open AI and Anthropic. So that's going to be a huge thing. And with respect to the rest of the other part of the market, the non-AI market, can the rally we saw yesterday is at the beginning of a further sort of gut check with the AI trade, forcing investors to look at other things? I hope so, but we'll have to see. All right, Lee, does that kind of make sense to you?

41:52Are those the major catalysts for what drives the market story for the last couple months of the year? We think they are. You know, when we take a look at what typically drives these last couple of months, one is consumer spending, right? When we take a look at some of the data that we're seeing now, you know, airfare is 20, 30 percent higher than it has been. But bookings are still up. So folks are still going to go see grandma for Thanksgiving and at Christmas. and the retailers, their hiring is up. So their expectations is that we'll continue to spend. And as far as that division between AI and everything else, I think Peter is absolutely on point.

42:31Now, the question becomes whether or not any of that gets curtailed as a result of what we saw, the transformational change or shift that we saw a couple of days ago. Matt, do you like the way that the market action has played out very short term here around the elections and then setting up for the back half of this kind of seasonally strong period? Do we feel as though the rotation out of certain parts of tech into other parts of the market is a healthy thing for the medium to long term? Well, a couple of things, Don. First of all, we have to be a little bit concerned about what happens in this seasonally positive time.

43:06First of all, the last time President Trump had a midterm election, the stock market rallied 2 % like it did yesterday, the day after the election, and then spent the next seven or eight weeks going down 16%. And the key is that what's the setup? Usually in the second year of a presidential term, the market is lagging. It's up just a few percent. This year, it's up 12 percent. More importantly, it's also way more expensive. Usually when we go into a midterm election, the average price to sales ratio is 1.7, 1.7 times sales for the past 30 years. Now we're more than twice that at 3.5 times sales.

43:45So the setup is much different, and it's going to be, I think, tougher to see that kind of usual seasonality that we have, especially what Peter's talking about with the AI issue, and especially when we're seeing that even though demand's strong, it's very price sensitive. We're learning on that. And then, of course, the bond market issues are still out there because they're not going to do anything to clean up the budget on either side of the aisle. Let's talk about the bond market really quickly. Lee, I see you kind of nodding your head, shaking it at the same time. How important are interest rates for this market story in the next few months?

44:18Interest rates are vitally important, right? You know, we're seeing some of the data earlier. We saw Zillow fall off because folk can't afford to buy houses. So it's incredibly important. Now, one of the things I am wondering about is how that ties into consumer sentiment. You know, so it'll be interesting when the next Michigan survey comes out to see what or how consumers are feeling. That'll be one thing I'm keen to take a look at. And Matt, the market action in some of these consumer names, whether they're staples or discretionary, is it telling you anything about what this next couple of months could look like with regard to how people can spend and want to spend?

44:58Well, I mean, one of the things I think about what's going on here, You talked about rotation a short time ago. And, you know, we all know that a lot of institutional investors have to be 100 percent invested. And that can change very quickly if people start to pull the market money out of the market, if it starts to go down. But with the consumer staples doing so well, it shows that people are have there's a lot of fear. They're rotating out of the tech stocks into the consumer staples names. that's not really the type of thing that that that, you know, generates a lasting rally. So, again, you know, we had a nice rally yesterday.

45:35I still think there's a lot of headwinds we have to face. And so investors need to be quite nimble going forward. What are the key, Peter, industries or companies, the types of names that we have to pay the closest attention to in the wake of this kind of midterm election cycle? the ones that will be key to the market story in 2027 and 2028, the last two years of this presidency? It's all about the AI trade. It's how many data centers are going to get built next year, because if not all of them are going to get built, there's going to be less stuff sold into these buildings. And when you look at the hyperscalers, a lot of their cloud backlogs are dependent on these facilities getting built that would then use those services.

46:19It's all about AI. The U.S. economy is all in on AI. The U.S. stock market's all in on AI. The U.S. earnings growth picture is all in on AI. So that's where everything matters. What parts of the AI market are the most important to you? Data centers themselves, the chips, the picks and shovels, Caterpillar? It's the spenders and the receivers of that spend. It's all one big ecosystem with everything interlinked. And there's this game of dominoes in a sense. And you wonder whether you start to see some dominoes fall on one end, whether that filters to the entire system. All right. Peter Bookbar, Lee Baker, Matt Maley, thank you very much for being part of the crew this morning.

46:56We appreciate it. Let's check on the futures right now. After that big rally yesterday, the Dow's implied higher by just about maybe 250 points here. The S &P up by 16, the Nasdaq down by 133. Squawk Box starts right now. Snoring, gasping for air during sleep, daytime sleepiness. I'm Shaquille O 'Neal, and this shouldn't be anybody's experience. Ask your doctor about Zepbound or trisepatide, the first and only FDA-approved prescription medicine for moderate to severe obstructive sleep apnea in adults with obesity. ZepBound is a prescription medicine used with a reduced calorie diet and increased physical activity to help adults with moderate to severe obstructive sleep apnea, OSA, and obesity to improve their OSA.

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