Morning Call 10/1/26

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1:00Morgan Brennan: A 24-year high for the 10-year yield. I'm Morgan Brennan, and this is your Morning Call.

1:19Morgan Brennan: Good Thursday morning. We're kicking off a new month and a new corner, the final quarter of the year, with U.S. stock futures a mixed picture right now after the Dow's first down month in You can see the Dow is under pressure again this morning on this first day of October, poised to open down about 228 points. The S &P poised to open higher by about 11 points and NASDAQ 159 points. This was after a mixed picture in terms of the major averages for September. With the Dow lower, the S &P and NASDAQ higher, led higher by MegaCapTech. And a mixed quarter, excuse me, for the major averages as well, with the NASDAQ eking out a gain for Q3.

1:58Morgan Brennan: If we head into the final quarter of the year, though, the Nasdaq remains the top performer year to date with a more than 15 percent gain. The Dow lags the group. It's up less than six percent on the year. And the action for the third quarter and heading into the fourth is really what we've been seeing in the bond markets. It's the yield story. The benchmark 10 year Treasury has jumped up more than 87 basis points in the past three months. It's the sharpest spike since 1994. And as of this morning, about an hour ago, it's now sitting at its highest level since 2002, 5.32 percent for the 10-year Treasury yield.

2:32Morgan Brennan: If we check the rest of the yield curve as well, you can see higher across it right now. Fed-sensitive two-year Treasury yielding 4.91 percent, 30-year Treasury 5.66 percent. I believe we're at a high last seen in 2002 there as well. And by the way, it's a global story in terms of what we're seeing with bond yields. We'll have more on that in just a moment. Whipsaw action in energy markets, too, with WTI coming off of a 30 percent third quarter gain and up another two and a half percent this morning, trading just below 93 bucks a barrel. Brent crude is also up 2.7 percent right now, trading right around$100 a barrel.

3:10Morgan Brennan: In terms of the rest of the energy complex, obviously, we've seen the big move higher in refined products as well. We continue to track that. We're going to talk a little bit more about diesel and all the chatter around possible policy moves there throughout the hour, too. But first, let's see how Europe and Asia are kicking off the quarter. Karen Cho is in London with the trade and I think fresh off of a little celebration for Steve Sedgwick, 25 years. Big news in the London Bureau. Yes, the big jubilee. Exactly, Morgan. Well clocked the jubilee anniversary for Steve today. But circling back to markets, because we are seeing a lot of fast moving pieces at this hour.

3:49Sharp contrast in Asia as the markets closed this morning. Japan's Nikkei at its highest level in six weeks, while Indian and Australian equities close sharply lower. Now, chip stocks in Tokyo are getting a big boost from the micron numbers and the fairly robust outlook. But in Europe today, there's heavy risk of sentiment that is really dominating the benchmarks. They're down more than one percent. The stock 600 actually hitting its lowest level since June. So not exactly covering itself in glory for the start of the final stretch here. The FTSE 100 down 1.5 percent, 1.5 percent, I should say.

4:24It has pulled back from a near-off 2 percent sweep lower. So minimizing some of that downbeat trade, bond markets are the big catalyst here. They are in focus as yields on a number of European sovereigns hit their highest level since the turn of the century, following similar moves in U.S. Treasuries. French bond yields, particularly in focus after the 10-year benchmark, climbed to its highest level since July 2002 as the country's lawmakers prepare to unveil their next budget. And Morgan, as you well know, the last couple of budgets have been torturous and we've seen the fall of a couple of governments.

4:55So it is something the markets are watching very closely here, and we are seeing that sweep into the red, particularly in the banks in Europe today.

5:02Morgan Brennan: Back to you. OK, we'll keep a close eye here as well. Karen Cho, thank you. Go enjoy that jubilee. Well, turning to shares of Micron, which Karen just touched on, the company out with fourth quarter earnings, fiscal fourth quarter earnings after the close yesterday, posting a solid double beat, surging demand for AI memory chips and a growing order backlog now stands at$32 billion for a stock price to perfection. That could be debatable, but headline beats may not be enough. Ahead of yesterday's report, the company had delivered three quarters of earnings beats that were as much as 30 percent above consensus.

5:33Morgan Brennan: And keep in mind, consensus was already up triple digit percentages in terms of their earning moves year over year. And this time it was less than six percent. Micron also falling short on guidance, an area where it has shined in the first three quarters of the year. Companies gross margin outlook coming in just shy of what the street was expecting, echoing similar outlooks for names like AMD, Applied Materials and Cisco. CEO Sanjay Marotra speaking with analysts on the conference call last night, saying he expects the market to get even tighter in the years ahead. Industry demand has strengthened since our last earnings call, and we expect memory and storage supply demand conditions to be much tighter in fiscal 2027 and 2028 than they were in 2026.

6:22Morgan Brennan: Well, on earnings growth, it's also becoming clear to investors the best of times may be behind it, despite earnings coming in 11 times what it saw just one year ago. Let's bring in Kevin Cassidy, Managing Director and Senior Research Analyst at Rosenblatt Securities. Kevin, it's great to have you on. I mean, it was a beat and raise quarter for Micron. Yes, we're nitpicking some of the margin guidance here. But when I hear comments like what we heard from Marocha, who said this several times in the call last night about about that demand exceeding capacity through 2028. I mean, that's that's an extension of what we've heard from him in the past in terms of the timing here.

6:58Yes, thanks for having me on, Morgan. Yeah, yeah. The the supply is expected to increase the number of wafers, say, by 10 percent in the second half of next year. But some of that supply is being soaked up by the high bandwidth memory that go into the GPUs and TPUs for the AI calculation. So this is soaking up the bits. And, yeah, we expect it still to be tight supply through 2028 now. We were thinking at least through 2027. But Sanjay is now declaring they have visibility through 2028.

7:37Morgan Brennan: In terms of that visibility, the fact that Micron has been signing customers to multi-year supply agreements, I think they said there are up to 36 such agreements now. That's up from 16 that cover about a third of revenue through 2030. How does that speak to a smoothing out of cyclicality for memory and a company like Micron? And what does that mean in terms of how you rate the stock moving forward? Yeah, you know, in past cycles, it's been the PC and handset companies that are driving the demand. And now it's coming from data center companies. And these companies have to plan five years out to get their building built, their power in and get the equipment in.

8:16So they've got better visibility than, say, a handset maker would. So this is giving Micron better visibility. And, you know, at 86 % gross margin, by the way, you know, the miss is they said that will be the low of the year of 86.25 % gross margin. And it gets better from here going forward. So, you know, we think this is still, if you look back on it three years ago, they were in negative gross margin range. So this is all very, very healthy. And we're looking forward to them coming out with Micron coming out to discuss what they're going to do with the free cash flow that they're going to generate in 2027.

8:53Morgan Brennan: So in light of that, are you surprised to see the stock trading fractionally lower pre-market right now? Would this be a buying opportunity? It is a buying opportunity. And we're not surprised that Micron, maybe I've been covering the stock for over 20 years. And on their earnings report, it's always volatile. You never know if it's going to be up or down right on the earnings report. Being down 1 % is not too bad considering the run it's had in the past year. OK, Kevin Cassidy, great to have you on to kick off the hour. Appreciate it. Thank you. Well, we're going to hear more on Micron's quarter when CEO Sanjay Marocha joins CNBC exclusively at 9 a.m.

9:30Morgan Brennan: Eastern. We're sticking with AI chips, though. Financial Times is reporting China's Tencent is leasing 100 ,000 chips from Oracle to accelerate its AI push. The FT says the five-year deal is estimated to be worth$7 billion, with an upfront payment of about 30 percent. It's definitely a bigger trend afoot here in terms of some of the contracting that we're seeing. Turning back to the energy market, Reuters, the White House is telling, is reporting at the White House is telling Germany and France to release their emergency diesel inventories to help ease global fuel prices or face a potential U.S.

10:05Morgan Brennan: diesel export ban. Now, this follows comments from President Trump at the White House yesterday as his administration continues to consider an outright ban. I think it's something that we think about and we talk about every day, but it just seems that it would have a negative impact on gasoline so that that would go up a little bit and diesel would come down a little bit. And we think we're in a very good place, it's going to start to come in. Well, the price of diesel this morning, according to AAA, is sitting at$6.39 a gallon. That is compared to$3.71 a year ago. By the way, interesting note from JP Morgan yesterday on the knock-on effects of a potential diesel ban on things like global copper production.

10:42Morgan Brennan: So a lot to consider here, and not just within the energy commodity complex, but other areas too. A lot more coming here on Morning Call as well, including Google upping the ante with a new AI model as federal regulators look to crack down on the AI industry's leaders, or at least investigate some of the security stuff we've been seeing. Plus, the future of warfare, unlikely leaders helping the Pentagon map out its 21st century military strategy and beyond. We have a very busy hour still ahead when Morning Call returns. Ever notice how every new AI tool asks you to explain your business to it all over again?

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11:59No 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. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all.

12:36Happy holidays from House of Burl, Burlington.

12:41Morgan Brennan: Alphabet firing a new shot in the AI model arms race, unveiling its latest Gemini 4 Argon AI model. It's the most advanced yet, seeing improvements in coding, cyber defense and other complex tasks. Google says the model is already being used internally at the company, as well as quantum research shops. The company also adding it plans to release the model in phases, starting with trusted cyber partners, as it works on pre-release safety measures with the U.S. government. The release, however, not coming without some red flags. Bloomberg reporting that some company insiders say the model, which beats OpenAI's Astra in some metrics, struggles with day-to-day tasks, including coding.

13:18Morgan Brennan: The development coming as the FTC announced that it is conducting an industry-wide probe into Anthropic, OpenAI and other AI labs to uncover potential dangers and risks to consumers. So in comments to CNBC, the regulator declined to name any companies outside of Anthropic and OpenAI that are being investigated. investigated. But joining me now for more is former FTC Assistant Director of Policy and Evaluation, David Balto. David, it's great to have you on the show. I want to start right there. Your thoughts, your reaction to the FTC opening this probe meter is apparently also involved in this investigation as well.

13:52Morgan Brennan: Are you surprised to see them taking an action like this? Not in the least. This is an area in which FTC enforcement is definitely necessary. And the whole idea that you possibly could rely on these firms to self-regulate is just a recipe for disaster. I guess what is surprising to me, and I can say this, I was in Washington on Tuesday. It's the reason I wasn't on the show yesterday. I was in Washington on Tuesday with this luncheon happening with all of the founding fathers of AI, if you will, and at the summit that was attached to it, this Hello America summit as well, where many of these folks got on stage and spoke.

14:34Morgan Brennan: And you had this executive order that was signed to basically rebrand AI to superintelligence by President Trump. You also had this accord, this White House safety accord that all the tech folks signed their names to as well. And so the timing of this to see that happen and then see the FTC open a probe almost simultaneously says what? I think there's a huge gap here. The lack of regulation poses real problems for the economy and for society. And just this promise, which basically is the same as what they entered into with the Biden administration, is insufficient to fully protect the economy or consumers.

15:19So the FTC probe is absolutely necessary.

15:23Morgan Brennan: How to think about what is the jurisdiction of the FTC versus the DOJ in terms of the security landscape, the liability landscape when it comes to the AI frontier labs and everything we've been talking about? That's a critically critical question. The FTC can prosecute violations that are unfair trade practices, which is much broader than the mandate of the Department of Justice. Now, one problem here is that the Trump administration has tended to diminish the FTC's ability to challenge practices under Section 5 of the FTC Act. So the FTC is going to have to go back to their old playbook to figure out how to best prosecute problems that they identify.

16:14Morgan Brennan: All right, David Balto, appreciate it. Thanks for joining me and sharing your insights. Thank you. Thank you. Well, keeping our eyes on Washington and tech, the Pentagon says it has called on Elon Musk, Andrew co-founder Palmer Luckey and former House Speaker Newt Gingrich to help with what it's dubbed Project Meridian. This would help the military identify new strategies, weapons and technologies that it may need to fight future wars. Defense Secretary Pete Hegseth saying the Pentagon technology chief, Emile Michael, will oversee this project with Musk, Lucky and Gingrich as co-leaders. There was a very big event with lots of news overall coming out of the Pentagon yesterday.

16:52Morgan Brennan: But speaking of the future of warfare, coming up, my conversation with the CEO and co-founder of Saronic. as the company takes its first steps to revitalize shipbuilding in the U.S. But first, let's get a check on shares of Constellation Energy and Amazon. Constellation is striking a 20-year deal to provide Amazon with power from a nuclear plant in Maryland. Amazon will also help finance a project to expand the plant's capacity by about 190 megawatts, or enough for nearly 200 ,000 homes. Amazon is building data centers in the region, but the Constellation plant isn't expected to power them directly.

17:29Morgan Brennan: Nonetheless, shares of Constellation up 3%. Amazon is also up fractionally this morning. Morning call. We'll be right back. 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 go.gle slash workspace with Gemini. Weren't agents supposed to take things off your plate?

18:09Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration.

18:43Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.

19:05Morgan Brennan: Welcome back. We have a market flash on Sanofi and Regeneron. They're expanding a partnership to co-develop and market four new antibody drugs for diseases related to the immune system. Sanofi, Sanofi will pay Regeneron as much as$8 billion in the deal. and you can see shares of both are slightly higher this morning. We're also looking at Eli Lilly as results from a phase three trial show that its drug Fondeo helped patients lose weight and reduce the risk of a heart attack, stroke or hospitalization. Those shares are fractionally lower. Well, it's the first day of the fourth quarter as we come off a period marked by one of the biggest surges in U.S.

19:40Morgan Brennan: bond yields in a generation. This on worries about energy costs, fueling inflation, rising government deficits, heavy capital spending from AI and the data center boom. and a bunch more as well. So here to talk about this in the broader market picture right now is Sunaina Sinha-Haldea, Global Head of Private Capital Advisory at Raymond James. Sunaina, it's great to have you back on the show. Welcome to you. I do want to start right there because, wow, what we've seen not just here in the U.S. with the 10-year Treasury yield at the highest level since 2002 this morning, but even just globally in developed markets has been pretty incredible over the past month or so.

20:14Morgan Brennan: Your thoughts? Indeed. And it's tightening, without the Fed or any central bank having to do very much. And that has some real concerns for Main Street in terms of financing costs for businesses, for valuation of those businesses. And we're really coming up between a rock and a hard place here, given where we are with inflation, certainly in the short term with the energy shock from the Middle East. We are all looking at a statutory picture, certainly in the most developed markets in U.S. and Europe. And it's going to be interesting to see how the coming quarter plays out. with respect to central bank reaction, but also all of the capital market flows that we've gotten quite used to.

20:55Morgan Brennan: Yeah. And just today, speaking of, Treasury has announced another$6 billion buyback operation. So it's one more thing to watch in the bond market, at least here in the U.S. today. In terms of what this means for capital markets, flows, liquidity, some of the dealmaking valuations that we have seen, do you expect some sort of correction or some sort of tightening here? At what point would that actually happen if it hasn't already? So it's going to start happening gradually. Private markets work at a slightly longer lead time than public markets. So the reaction will come through, especially when it comes to financing costs.

21:31When private markets go to do new deals, especially leveraged buyout, higher financing costs will absolutely matter when they come to underwriting that deal. But it also comes down to valuation. It's going to put pressure on exit multiples if they're looking to come and sell companies. All that will start coming through if this persists. The question on everyone's mind is, is this a short-term move by bond markets because of what's happening in the geopolitics in Middle East and elsewhere? Or is this actually going to be a sustained level of long-term rates, in which case we're looking at a very different picture when it comes to all capital flows, private markets or public markets?

22:07What do you think? Well, I think right now is a great opportunity for retail customers to think about adding bond exposure, given where yields are at. So a lot of retail clients are telling their wealth advisors, perhaps it's a good moment to lean back into that 60-40 portfolio that was left by the wayside a while ago. What we are seeing is that another quarter or so will bring about a sustained M &A volume. We're not going to see more assets coming to market than were planned. Right now, we're not seeing a pullback of companies pulling their M &A processes if they were planning to come to market in this fourth quarter.

22:45What we are, of course, seeing is IPOs getting pulled because of sentiment pulled back over the last quarter. That will persist until flows come back online and the market starts to find a bottom when it comes to thinking about where these long-term yields lie. But private market deal flow hasn't caught on quite yet. Everything that was meant to come to market in Q4 is still on the calendar to do so.

23:06Morgan Brennan: Yeah, you just touched on it, but I want to dig a little deeper. And that is what we're seeing in the IPO pipeline because we have seen a number of offerings that have been pulled last minute, even just this week with Aura and or IPO filings that have been kicked out to later in this year or next year as well. And we were just starting to see that thaw this year. So what does that mean? Well, it means that there will be a lack of liquidity for the largest companies and sometimes the largest positions in private markets, in venture funds, private equity funds, but also those that have invested through retail channels, evergreens, 40X structures into some of these biggest companies out there.

23:47People often ask, why do IPO markets matter for the rest of mainstream, for private capital in general? It's because most of the capital is concentrated in some of these largest businesses. Getting liquidity out helps make the entire machine return when it comes to M &A, deal volume, getting liquidity back into institutional investors' hands so that all of that can recycle back into the markets. So it's not a good signal. We thought we were coming to the other side of the IPO market here, and the window was very much opening. The doors were opening, too. But this pullback, we hope it's short-lived because the market sure needs some of this liquidity to come back around.

24:25Morgan Brennan: We were talking so much about how big tech has been tapping into the debt markets and issuing debt here to raise the capital to keep building out this AI infrastructure boom. We've been focusing on and tracking what's happening in high yield as that's diverged from the S &P. But I am curious your thoughts on what we're seeing in investment grade and whether there's risks there as well. Well, so far, credit press haven't widened in a material way. There's been a little bit of widening, but not in a material way enough to signal any stress in the system as yet. Right now, we're looking at record earnings across most corporate balance sheets.

25:03Corporate balance sheets remain healthy. So any risk of stagflation hasn't flowed through to earnings as yet. Now, the question, of course, is yet. And when do bond markets, especially investment grade, start pricing in any risk of that in the medium to long term? At the moment, it's looking like we that the corporate balance sheets can sustain this level of debt. But of course, it all matters as to whether the yield continues to move higher in the long end from even where we are today or whether this now starts to normalize if there's a geopolitical resolution in the Middle East.

25:38Morgan Brennan: OK. Sunina Sinha-Haldea, it's great to have you on. Appreciate it. From Raymond James. An important voice at an important moment for the markets. Well, straight ahead, President Trump renews his attacks on the Federal Reserve and won Mr. J. Powell. But first, we're watching shares of Paramount and Warner Brothers Discovery. A California judge yesterday formally approving the Paramount Skydance settlement with California and several other states and clearing a way to close this$110 billion takeover deal. Shortly after the ruling, Paramount Skydance CEO David Ellison announcing that Mattel's now former CEO would become the co-CEO of the newly combined media giant.

26:17Morgan Brennan: You can see shares of Paramount are down 2 % pre-market. We'll be right back. I'm Morgan Brown. Welcome back to Morning Call. We're kicking off a new month and a new quarter. U.S. stock futures right now are mixed after the Dow's first down month in six. You can see the Dow is lower again this morning, poised to open down 110 points. The S &P up 23 points. The Nasdaq up 202 points. That was after a mixed month for the major averages with the Nasdaq and S &P squeaking out gains and a mixed quarter for the major averages with the Dow finishing lower for Q3. We're watching Micron shares, too, because those earnings were after the close yesterday.

26:54Morgan Brennan: It was beat and raise, posting a solid double beat on surging demand for AI memory chips and a growing order backlog. But Micron falling short on a specific metric in guidance. The company's gross margin outlook was a bit shy of expectations. You can see those shares are down fractionally right now. But we continue to watch yields as we kick off the new quarter as well. The benchmark 10-year Treasury jumped more than 87 basis points in the past three months. It was the sharpest spike since 1994. And as of this morning, it's now sitting at its highest level since 2002, 5.31 percent for the 10-year Treasury yield.

27:30Morgan Brennan: If we check the rest of the curve, we are higher this morning. You can see the 30-year Treasury yield also at its highest level since 2002, 5.65 percent right now. Fed-sensitive two-year Treasury, 5.9 percent. If we go around the world, it's red arrows in Europe to kick off Q4, a mostly higher session in Asia, though. Big news from South Korea announcing a$22.3 billion strategic investment with the U.S. Commerce Department. Project Star, this is a massive energy infrastructure campus in Texas being jointly developed by related companies and Nextera Energy. This is something we were talking about earlier in the week with Nick Potter from Equinor.

28:08Morgan Brennan: This whole idea of building out AI data centers and bringing your own natural gas and building out the infrastructure for that natural gas alongside it as well. But if we just take a look at global markets right now, Japan's Nikkei finishing up 3.3 percent. The KOSPI also up 2 percent. And right now the FTSE 100 is down at one and a half percent. The global bond yield story is very much afoot. It's not just U.S. treasuries that are trading yields that are trading at multi-decade highs. Well, we've got breaking news, too. Challenger Gray and Christmas out with its September layoff report. Job cuts in September falling 18 percent month on month last month to 43 ,281 jobs.

28:49Morgan Brennan: Now, through September, employers have announced just over 573 ,000 job cuts. That's down 39 percent from the first nine months of 2025. In other words, employers are laying off fewer people, according to this latest reading. We're checking on energy prices now as well, which are moving higher, adding to yesterday's gains, even as a recovery in crude exports from the Persian Gulf is easing some supply concerns. But shipping risks remain. Intelligence Service Maersk reporting three Liberian flag tankers were struck by unknown projectiles in the Strait of Hormuz on Tuesday. Meanwhile, Reuters is reporting Chinese refiners have suspended exports of oil products to regions beyond Hong Kong and Macau until further notice.

29:33Morgan Brennan: That's a move that will put a further squeeze on global fuel markets. The disruptions caused by the Iran war pushing spot day rates for VLCC tankers or very large crude carriers to record highs on the Middle East Gulf to China route. The rate jumping to nearly one point three million dollars this week. Well, joining me now is Herbjorn Hansen, the chairman and CEO of Nordic American Tankers, which operates a fleet of Suez Max tankers. Herbjorn, it's great to have you back on the show. So if I recall correctly, back in July, you said that you had gotten all of your tankers out of the Middle East and more recently suggesting that you're not going near the region right now and that you don't have to.

30:14Morgan Brennan: So perhaps an update in terms of what you're seeing globally for demand for your tankers. I have been in the business for close to 550 years. And over the last five years, we have been to 68 countries, providing me with some insight into world affairs. I have focused on two matters. Firstly, on Nordic American tankers, which is listed on the New York Stock Exchange. And secondly, the industry in general. And I would say two things. Firstly, the position of our group is excellent. And secondly, the industry outlook is also very bright. I would add, though, that freight rates have skyrocketed. Whilst you paid$2 a barrel for transportation or cargoes from Europe to the Far East, you paid$2 half a year ago, and now you paid$25.

31:21Morgan Brennan: Wow. So rates have gone up 10 times. That's such a key point that you make because we see it in the paper markets for energy prices for futures. It's trading Brent this morning,$100 a barrel. But in the physical market, it's so much higher than that. Is the way to understand that, that that a lot of the price that we're seeing in real time on the ground with crude oil that's going to refiners, that it's the transportation costs at this moment? I believe you're right on that assumption. But it is difficult to predict. But I essentially believe you're right. Transportation costs have skyrocketed.

32:01And we as a company, we are benefiting. Our industry is benefiting. And the burden is carried by the consumers.

32:11Morgan Brennan: So where are you sending your tankers right now? And what does that mean in terms of routes that are being used for crude oil and refined product? We are trading our tankers worldwide. We go to all ports and all harbors. And that is the gist of our business. We are a worldwide company in the sense that we are going to almost everywhere in the world. And that is providing us with some insight into world affairs. We are not focused on one port. We have a versatile fleet of Swiss Max tankers carrying one million barrels of oil. And our ships go everywhere, including to your country, the United States.

33:05Morgan Brennan: So are you sending ships back to the Middle East right now then? No, we don't do that because our priority number one is the safety of the crew. Priority number two is safety for the ship. And also priority number three is pollution risk. So at this time, we do not trade our ships into the Arabian Gulf. We had three ships that were stuck there. But luckily enough, we managed to get away late evening and we essentially escaped, if I may use that expression. And now all our ships are trading worldwide all over the place. We just talked about it. Reports that Chinese refiners are suspending October fuel exports.

34:03Morgan Brennan: What are you seeing in terms of the transportation picture in and out of China right now? I have a lot of business in China. I have got a ship in China almost every 14 days or so. And I must add, ma 'am, that the Chinese, they have always treated us very well. Two or three years ago, they asked us to go to Iran to pick up Iranian crude oil and carry it to China. And they said, no, we are not going to do that. A Nordic American is a listed company in the United States, and we have to go forward absolutely correctly. For which reason, the Chinese said, OK. And I said, we are sitting in the pockets of the Americans, and we feel well by sitting in the pockets of the Americans.

35:00Morgan Brennan: Is your sense, just looking across the industry right now, that Iranian crude that is floating on the water is depleted? I can repeat that question, ma 'am. There's an expectation that Iranian crude oil that is currently on the water is going is coming close to being depleted. Is that your sense looking across the industry? I think that's the right assumption. But these short term aberrations, I call them, it's difficult to predict. But the future is clear. That is two things. oil is needed all over the place because you need oil to provide welfare. And secondly, oil is floating, if you wish, all around the world.

35:52And as the cargoes are depleted and the storage tanks are depleted, they have to be refilled. And we are benefiting from that as a company. There is no question on that score. And also, we are an international company trading all over the world.

36:14Morgan Brennan: Herb-Jorn Hansen of Nordic American Tankers, it's great to have you on. Appreciate it. Thank you for having me. Morning call. I'll be right back. CNBC disruptor company Sironic breaking ground yesterday on its Port Alpha shipyard in Brownsville, Texas. Among those attending, Vice President J.D. Vance, Texas Governor Greg Abbott, and OMB Director Russ Vogt, who is a major proponent of rebuilding American shipbuilding. Port Alpha represents over$3 billion in private capital investment, promises to create 10 ,000 direct jobs, and is positioned to become the largest shipyard in America. So ahead of the ceremony, I spoke with Sronix CEO and co-founder Dino Mavrucas, who says the first ships will roll off the line in 2028.

36:55The American shipbuilding industry has been hollowed out. There is lack of supply chain, there is lack of workforce, and you really have to start with the manufacturing process itself. How do you build the manufacturing machine again that goes and builds the machines? And then how do you do that in a software and autonomous first approach so that you're actually able to redesign the ships from the ground up to make them simpler and easier to build, to do a design for manufacturability? And then at Port Alpha, we are going to take a complete greenfield design. We are designing a shipyard from the ground up to layer in efficiencies of material movements to leverage not only autonomy in our products, but autonomy in the actual building of our products as well to drive scale and drive down costs.

37:49Morgan Brennan: Manufacturing 2.0. Well, currently the U.S. accounts for less than 1 % of global commercial ship construction, and the military numbers are staggering too. China's naval shipbuilding capacity is estimated at roughly 230 times that of the U.S. Sironik is developing and building ships for the military. Its Corsair autonomous surface vessel is being used in the Iran war. It was involved in that downed Apache helicopter rescue operation back in June, and CENTCOM confirmed Corsairs were being used to strike an Iranian naval facility in what was the first ever combat use of lethal sea drones by the U.S.

38:23I obviously can't get into too many specifics of real world operations. But what I will tell you is the most important learning that we have is the importance of working with the military, working with the Navy, working alongside them, seeing what's happening, and then having the ability to iterate, not just in software, but in hardware. The speed of iteration is what's going to determine if the United States stays ahead of our adversaries or not. So we're updating software almost daily. We're updating hardware in terms of integrations and payloads and new designs weekly or monthly or as the mission demands.

39:00So it's that speed of iteration and working with the Navy in real time and adapting to the missions and the use cases that you're trying to employ them on.

39:09Morgan Brennan: There have also been some reports that it's been used in demining the street. But Saronic so far has delivered hundreds of 24-foot autonomous Corsair speedboats to the military. But up next, the U.S. Navy just awarding a production contract for a new ship.

39:26We're beyond excited to be awarded a production OT contract for Marauder. This is a 180-foot fully autonomous ship for the MUSV program within the Navy. And when you think about what autonomous ships can provide the militaries, really anything from contested logistics to long range fires. But what's really significant here is we've designed, built and launched our ship Marauder in under a year. Not just and not just we didn't just build one. We made a$300 million investment into our shipyard in Franklin, Louisiana, which hosts Marauder production, so that we can scale Marauder into the dozens moving forward per year.

40:10Morgan Brennan: Full interview with Saronic, CEO on CNBC.com. By the way, since we just closed the fiscal 2026 year for the government, a flurry of contracts this week, including a major win for Boeing for the Navy's sixth gen fighter. It's the second such contract for Boeing, which is also building the Air Force's F-47. Huge move there. Multiple contracts, too, for military shipbuilder HII, including one to build 10 Romulus unmanned surface vessels, which sent that stock higher yesterday. Because really, drone warfare, it's what's in focus and it's what we've been talking about and we'll continue to talk about.

40:42Morgan Brennan: A lot of investment flows there. It's time for your call sheet, though, and that's coming after the break. It's time for your call sheet where we look at the topics driving the trading day ahead. Crew members today, Victoria Green and Keith Buchanan. Great to have you both here. Keith, I'm going to kick this one off with you. We've got a 10-year Treasury yield, now its highest level since 2002. What does this mean as we go into a new month and a new quarter? Sure, thanks for having me. We've done a lot of work around this topic, and a 10-year Treasury, of course, is the really most influential price in the world.

41:13But what we really think is happening right now is you have earnings growth is really pushing the market higher and putting upward force on the market. But the gravity of where stocks eventually end up is really predicated on where the trader rate ends up. And we feel like that hurdle rate is moving higher. It's really putting a lot of stress on earnings growth. Again, it's overwhelmed that pressure up to this point. But we continue to have to see that earnings growth continue to come through for the market in order to move higher and sustain these higher levels. We're really concerned and focused on what earnings growth really can produce over the next couple of quarters.

41:48Morgan Brennan: I want to get to that a little bit more in just a moment. But first, Vicky, I want to get your thoughts on all this, because we finished September with a mixed picture for major averages. S &P actually squeaked out again. NASDAQ as well, because we know mega cap tech has been powering the broader averages here. But that happened even with oil elevated, even with bond yields at multi-decade highs and even with a stronger dollar. Can it continue? Yeah, it was a massive wall of worry. The market got up. But I think at this point, you also have to be careful of what you consider the market because it wasn't a rising tide lifting all boats at all.

42:18Actually, in September, I think eight or nine of the sectors were actually negative on the month with only technology and communications really lifting it. And it was the same for the quarter. You saw value lag terribly. You saw utilities really fall off a cliff here this quarter and you saw breath deteriorate. So for me, I call myself a reluctant and a cautious bull right here. Very difficult for me to bet against tech and AI. Very difficult for me to switch bearish and bet against this market. I also have to realize the S &P is now 15 % concentrated in NVIDIA and Apple. So this is hiding a lot of pain below the surface.

42:48And we're seeing that pain show up in dividend portfolios, value portfolios, small caps fell off a cliff. And so you just have to be very cautious here, be looking at quality, be shortening up your risk. You know, I look at the Treasury market and I thought 5 % was a red line in the sand. So candidly, I'm a little surprised the markets weren't down more in September with 5-3.

43:07Morgan Brennan: Yeah. And to your point, we also had a 30%, almost 30 % surge for meta. Terry Wiseman's also with us. I want to bring you into this conversation, too. We had a PCE reading that was softer than expected, but devil's in the details. The methodology changed. We're going to get ISM manufacturing this morning. Are we in a scenario with, when you look at what's happening in bond markets, better economic data is actually not being received very well because it means the economy is running hotter? Look, yesterday was a very strange day, admittedly. Right. We should have seen a market rally. We should have seen bond yields come down.

43:40We should have seen gold rally on that very soft inflation print. And I think it has some bearing. That soft inflation print could conceivably have some bearing on what the Fed does in October. Remember, Kevin Warsh did not want to raise interest rates, and yet he was forced by events into raising interest rates. I think he wanted to wait until after those revisions came out, the ones that came out yesterday in the PCE. And now they have, and they've been showing that inflation has actually been running softer than we thought, than the market thought, than the Fed thought over the past year. I think he's got a good case to make in October for telling the rest of the committee that they should hold off on October and not raise rates.

44:17And if that happens, can it give the market a bit of a lift? Yes, I think it can. I think that's really, though, the only thing that the market has going forward at this point is a potential Fed hold in October. Obviously, long-term years are still high. That's going to put pressure on multiples.

44:34Morgan Brennan: OK. Keith, I want to go back to it. What we're seeing with earnings. I mean, how important now are bank earnings going to be in a little less than two weeks here after financials had their worst quarter in a couple, worst month, I should say, in a couple of years? And are we starting to already see some signs about that debate when you look at Micron and some of the other names that we're getting here this week? Absolutely. we think bank earnings not only set the stage for their earnings power and kind of going forward, but also the tone and rhetoric for an earnings season that, again, as we've talked about earlier, is critically important to where we are in this rally.

45:08So we think, of course, the earnings growth and what they project over the course of 2027 is paramount, but also kind of the tone they use and what they see as far as our economy and how those engine pistons are moving throughout the U.S., especially in the consumer, and how they are holding up given that they're two-thirds of the economy, A lot of growth really depends on how the consumer gets through this inflation belt that we're currently moving through.

45:33Morgan Brennan: OK, Vicky, want to get your reaction to Micron? Also, I want to get quickly what you're watching for Nike. Yeah, look, Micron crushed it. It was amazing. They're not getting a lift, we thought. We usually leave about six, seven percent. But what they said was really fascinating. It's not just about data centers and clouds. It's about autonomous and robotics. They're getting all these long term contracts and these service agreements. I expect a large buyback announcement in December. And I really liked what they had to say. But obviously, the market is still capital here. I do still think you need to have your toehold and chips in memory.

46:03I do not see memory as a near term bubble at all. We're getting so much forward guidance saying, look, this is not a 26 thing. There's 300 percent rally in earnings. It's amazing.

46:12Morgan Brennan: OK, unfortunately, we're going to have to leave the conversation there as we also parse through labor data today and tomorrow as well. Thank you to our call crew. It's the holiday season at House of Burrell, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington.