Morning Call 10/2/26

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1:00Morgan Brennan: I'm Morgan Brennan, and this is your Morning Call.

1:17Morgan Brennan: Good Friday morning, and what a week it's been. Let's take a check on U.S. stock futures after a mostly higher day. Four stocks were the major averages yesterday, and you can see this morning right now, pre-market, we are at session highs, and we are poised for gains again. The S &P is positioned to open up 34 points right now, the Dow 181 and the Nasdaq 213 points. Keep in mind, though, we are still on pace for losses, at least ahead of this move we're seeing pre-market for the major averages for the week. If we turn to the energy markets, this is really what's moving futures right now. We've got breaking news as we watch the price of crude, Arbob gasoline futures as well, other refined products all sinking this morning.

1:55Morgan Brennan: You can see right there on your screen. WTI is down almost 4 percent, trading below$90 a barrel. Brent crude is also down about 3 percent, trading just below$100 a barrel. Arbob gasoline futures are lower, more than 3 percent. And so is the diesel contract, heating oil as well. And actually, Arbob is still higher on the week, up almost 7 percent right now. But WTI is lower for the week. This is following Reuters reporting that France has proposed that the European Union release 50 million barrels of diesel reserves, with other IEA members unlocking another 50 million barrels of crude stockpiles.

2:32Morgan Brennan: Macron plans to meet with his counterparts today to discuss that possible scenario. The proposal coming after a reported phone call last night between French President Emmanuel Macron and President Trump on the global energy situation. Sources telling Reuters that the U.S. has requested that large European countries release as much as 800 ,000 kilotons of diesel over six months. Well, elsewhere, treasuries are well off yesterday's highs ahead of today's September jobs report as well. You can see green on the screen there, but again, well off the multi-decade moves higher that we saw yesterday.

3:10Morgan Brennan: Take a look at the U.S. 10-year treasury yielding 5.24 percent. That's after trading above 5.3 yesterday. Fed-sensitive two-year treasury, 4.79 percent, and the 30-year, 5.6 percent. We're also watching the dollar index because the dollar is weakening this morning against other major currencies. But wow, what a run it has had this week. It's sitting at its highest level since April of 2025. You can see right there, taking a little bit of a breather. So back under 102, 101.95 is the level there this morning. Let's see how global markets are reacting, though. Ben Boulos is in London with all of it for us.

3:44Morgan Brennan: Hi, Ben.

3:48Hi, Morgan. And yeah, the fallout from continued elevated global yields continues to play out in the equity markets. Asian equities had a somewhat mixed morning with Hong Kong's Hang Seng, the sharp outperformer on the final trading day of the week. You may notice mainland Chinese markets not on the board because they are closed for a public holiday. Meanwhile, in Europe right here, stocks are seeing gains in the face of the bond sell-off. But French fiscal uncertainty is putting a little bit of pressure on the euro. Crude prices, as you've been discussing, sharply reversing this morning after Reuters reported that European governments are discussing a French proposal to release diesel stockpiles.

4:31This is in response to pressure from the Trump administration. The proposal would reportedly see 50 million barrels released to the market, with members of the International Energy Agency releasing a further 50 million barrels of crude oil. You can see the effect that has had on equities in Europe a day after we saw losses on the key benchmarks recovering to a certain extent as we head further into the Friday session. Morgan.

4:57Morgan Brennan: Ben, I'm going to put you on the spot a little bit right now. It's because it's one of the top trending stories on CNBC dot com that a Brexit reversal is on the table 10 years after the vote that changed Britain. And that UK Prime Minister Andy Burnham has floated the possibility of another referendum on EU membership. What can you share? Is that affecting markets right now?

5:17Well, you know, I was at the Labour Party conference in the northwest of England and Liverpool at the start of this week. And a couple of people, a couple of business people did raise this with me. And they said, look, there is a bit of talk about maybe he's going to try and consider whether it's a customs union of sorts or maybe even returning to rejoin the EU in a more structured and more formal way. Of course, it would need a lot of political capital for him to do that. It certainly wasn't in the last manifesto for the Labour government when it was elected. So this is sort of signalling a conversation he wants to have, I suppose, ahead of the next general election, which he said will not be any sooner than 2029.

5:58And the danger for Andy Burnham is that there are some people within the Labour Party, supporters and voters, who are very Eurosceptic still. And they could risk alienating those and losing them to parties like Reform UK, for example. On the other hand, there are people within the Labour Party who would very much like to see that discussion reopened. I think it's more of an idea, a suggestion, a kite that is being flown at the moment. but it is certainly one that has got coverage and interest in the media here.

6:31Morgan Brennan: Yeah. And you're certainly the perfect person to share some context, given all of your reporting this week. Big Ben Boulos, have a wonderful weekend. Appreciate it. Thank you. Let's get to the stock story of the day. Nike shares are tumbling after the company reported another quarter of disappointing results, and they're now on pace for the worst year ever for the stock, down nearly 50 percent. Fiscal first quarter earnings speed estimates, but revenue missed. North America was the bright spot, but sales elsewhere fell. China dropping 26 percent, much worse than anticipated. Nike also projecting revenue for the year to decline in the high single digits.

7:05Morgan Brennan: That was worse than expected. And the company has worked to jumpstart growth by refocusing on key sports. But analysts say it's struggled to release enough new and compelling products, leading to more discounts and promotions. Here's Nike CEO Elliott Hill on the earnings call last night. Our Nike performance business is not yet large enough to offset the pressure we're seeing in Nike Sportswear, Jordan brand and greater China. We're taking deliberate actions to strengthen those businesses, but realizing the full benefit of those efforts will take time. Well, Nike unveiling plans to cut more jobs is moving three geographic regions, the Americas, Asia Pacific and greater China and Europe and the Middle East.

7:49Morgan Brennan: The layoffs will start next year. Nonetheless, you can see shares of Nike down 10 percent right now pre-market. Let's talk about all of it with Zach Waring, analyst at CFRA. Zach, it's great to have you on the show. They keep revising guidance lower and the bar was very low going into this report. So your reaction? Yeah, I'm a little upset. You know, I think this is the quarter that you would expect from a CEO on his third or fourth quarter, not his second year. So, you know, I think they're doing a lot of good things. It's just taking a lot more time than they expected and we expected. They're a large company.

8:27They've got a large reach. So I think it's just taking more time than investors expected.

8:32Morgan Brennan: So in light of that, do you see green shoots in the report on the commentary we got last night or no, not yet? You know, we do. We've seen some positive things in the last few quarters, just not enough to offset some of the struggles that you've seen in Jordan and Dunk and some of their legacy brands. We really like what they're doing in performance. Running's doing really well, growing double digits again this quarter. We do think it's near a buying point. We think the turnaround story is definitely coming together. Obviously, they're still struggling in China, but that's also a macro picture.

9:09China's been struggling for a lot of companies recently. Their economy is not doing as good as it had been in recent years. So they're doing a lot of good things. It's just taking a lot of time. They're, you know, they're the largest apparel brand in the world.

9:23Morgan Brennan: Yeah. I mean, in light of that, how much of this we know Nike is a turnaround story. So how much of this is company specific and how much of this is the macro, especially coming off an earning season where you did see other sports retailers, you know, talking about softness in their businesses, too? Yeah, I think it's a mix. I do think China's definitely maybe half and half a struggling consumer there, not really willing to spend like the North America consumer. You saw Nike do really well in North America or starting to turn around in North America. Lululemon's struggling in China after seeing significant growth over the last two or three years.

10:02The recent quarters have been pretty bad. So I think it's partially, you know, it's a little bit of both. But we, you know, we think the company is viable here still. We do think, you know, valuations definitely compressed here, even with the lower earnings expected. And I do think they're doing a lot of the right things. It's just taking a lot longer than investors expected.

10:26Morgan Brennan: So would you continue to rate this stock a buy here? Are you going to rethink that? No, I think it's still a buy here. I do think it's trading at levels not seen since 2014. On a revenue basis, it's pretty low in terms of valuation. I think expectations have been slashed. And that's typically a good time for patient investors to get into a stock. We think the brand's still strong. Like I said, they're doing well in a lot of different categories. Running's doing well. Performance is doing really well. They're having a lot of inventory issues with some of their legacy brands. And I think that's going to turn in the next few quarters.

11:03Morgan Brennan: OK, Zach Waring, thanks for joining me. Appreciate it. We shares a Nike down 10 percent right now pre-market deep value. A lot more to come here on Morning Call, including we've got much more market reaction to a potential European crude release as those prices continue to crater in the energy complex. Look at that. WTI back below 90 bucks a barrel, down almost 4 percent this morning. Plus a big bet on U.S. manufacturing. We speak with the executive chairman of global tire giant Pirelli. We also get his reaction to sinking energy prices, what that could mean for his company's bottom line and the business of making tires.

11:38Morgan Brennan: And later, a pre-Turkey Day IPO appears to be in the works for Anthropik, reportedly getting set to meet with prospective investors as in the next week or two. 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? 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.

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13:18Morgan Brennan: Welcome back. Let's get a check on U.S. equity futures ahead of another critical day for the markets with the September jobs report out before the opening bell in just about a little over three hours. Economists expecting a slowdown from August to just 84 ,000 net new jobs and the unemployment rate to hold steady at 4.1 percent. Users in CalShare appear to agree, putting odds that payrolls come in above 80 ,000 at 62 percent. Well, this is investors continue to digest the volatile rate picture with treasury yields sitting right near multi-decade highs and looking ahead to Q3 earnings season with S &P 500 earnings expected to grow by 30 percent.

13:56Morgan Brennan: That is compared to 53 percent for the second quarter. Joining me now is Jonathan Golub, Managing Director and Chief Equity Strategist at Seaport Research Partners. Great to have you here on set. Welcome. Good to see you. All right. I mean, where do we start in the week that's been here? I do think I want to start with the rate picture and how that's affecting everything else. We're taking a little bit of a breather this morning, perhaps some technical trading playing out there. But in general, how do you how do you see this market? Well, first, I think that we're you know, we're probably going to see rates move even higher from here, which is not what anybody wants to see.

14:28And there's a huge change in kind of the attitude, which is six or eight weeks ago, if I would have said that we're going to be at five and a quarter of the 10 year, people would have said that that's just preposterous. And now people are talking about five and a half or more. It's even more concerning than people think because when the Fed started raising rates, high yield spreads popped. So the actual cost of financing is up. And the real big story here is that the U.S. Treasury is going to need to raise $2 trillion this year. And then you're going to have, I don't know,$900 billion in capital raised from AI and data centers.

15:08So there's this enormous demand for capital and it pushes yields up, which pushes stock multiples lower.

15:14Morgan Brennan: So if what's buoying equity averages right now is big tech, how big of a risk is that then if you see any kind of slowdown in the ability to build out this AI infrastructure? Well, there's a really weird thing going on where earnings this year are up for the whole S &P by about 30%. And even if you strip out tech, that number is still high single digits. So it's not as stellar, but it's still quite good. Energy prices are forcing the energy sector to do really well. Financials, if you look last quarter, they came in at 25 % growth because they're financing all of this activity. So you have this huge boost in earnings.

15:55And then against that, you have multiples actually falling in the markets. Everyone thinks stock prices up, they must be getting more expensive. But stock prices are going up and stocks getting cheaper.

16:05Morgan Brennan: So you don't think you don't buy into this idea that we've already seen peak earnings here? Oh, no, no, no, no, no, no. Even with higher inflation? Or is higher inflation actually potentially a good thing here if you can pass that out to the end user, which we saw coming out of the pandemic? Well, first, that's exactly what companies do. And they're way more disciplined than they were a decade ago in being able to pass things on. So you go to your local hardware store and you go to buy lumber or whatever it is that you go to buy. They're marking that to market. If the price of lumber goes up, they're immediately adjusting that and they become more profitable.

16:41But the earnings picture for these tech companies is not to slow. Industrial activity is fantastic. Now, some of that is just the fact that the economy is good. And a lot of it is if you build a data center, you need to build a road to the data center and you need to build the air conditioning and the electronics and all these other things. So it's the idea that we're about to roll over is silly.

17:07Morgan Brennan: Yeah. I'm looking at your notes here and you see the backdrop for active management is proving to be very difficult. I just want to dig into that, why that's the case and what that means in terms of how you should position yourself then if you're an investor. So this is one of these situations where an individual investor actually is having an easier time than professional investors, which shouldn't be the case. So let's say, for example, you're running a big large cap growth fund. There's actually restrictions on because there's restrictions on how much you can be concentrated in a given company.

17:37Managers are underweight companies like NVIDIA and Apple and Microsoft because they're precluded from holding more than a certain percent in their portfolio. and it makes it really difficult. Not if you let's say, OK, well, I'm going to buy a global fund. Those managers are limited on how much they can put in the U.S. And the U.S. is doing so much better than the rest of the world that they they have rules about being more diversified. And they're having a hard time when credit spreads are really tight. Bond managers don't like to buy corporate bonds and high yield bonds. So they've underweighted those bets in their portfolio and that's causing a drag from them.

18:15So it's just the rules that are in place for mutual fund managers or institutional managers is actually making it harder for them to beat benchmarks.

18:24Morgan Brennan: OK, Jonathan Golub, it's great to have you here on set. Come back soon. Will do. All right. Well, we are also keeping an eye on what's going on in other markets right now. So global investors will be keeping an eye on Brazil this weekend as Latin America's largest economy votes in the first round of a high stakes presidential election on Sunday. The race matches the incumbent, Lula da Silva, against Flavio Bolsonaro, the son of former president Jair Bolsonaro. And this is why it matters. In addition to the economic stakes, whoever wins will inherit pressure to address Brazil's public finances.

18:57Morgan Brennan: And the result could also influence relationships with the U.S. and China, trade, access to critical minerals, other commodities, even matters of national security, including, it doesn't get talked about very much, but space launch. Bolsonaro is emphasizing alignment with the Trump administration. Lula is promising Brazilian sovereignty. But we'll be watching this one closely because we know in the U.S. the administration policy has been to bring hemispheric alliances more closely together here. Elsewhere in the world, there have been a flurry of deals announced, including the U.S. and South Korea on a power project in Texas, while others in LNG and nuclear are still pending.

19:36Morgan Brennan: And as G20 ministers meet in Milwaukee, U.S. trade rep Jameson Greer last night said a trade deal with India is not imminent as Washington and New Delhi continue to hash out the fine print. Greer's comments coming after President Trump and Indian President Modi spoke by phone. So a lot to watch here as we head into the weekend. But straight ahead on Morning Call, YMEDA could be on the hook for as much as$200 billion in legal penalties. First, though, not one, but two changes to the S &P 500. Twilio is joining the index soon. It's going to replace Warner Brothers Discovery when its takeover by Paramount is completed.

20:13Morgan Brennan: And Vylor has been added to the S &P after the close yesterday. That's after it was spun off from its parent company, Corteva, which is moving to the S &P mid-cap 400. Vylor develops ag technology to help farmers boost their crop yields. You can see shares of both of those companies, Twilio and Vylor, are higher pre-market. We're back after this. 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.

20:52Just 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. With the Discover Cashback card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to Discover. Terms apply. See discover.com slash 5 for details. weren't agents supposed to take things off your plate building another to handle the others is a bit much don't make more work out of work Gemini is the one agent that knows all parts of your business and actually gets stuff done you give it a project close your laptop and when you come back the job's finished no matter your industry or role your agent has the skills to help every team stay in their flow seriously make work less work with Gemini on Google Cloud check response subscription required.

22:00Morgan Brennan: Welcome back to Morning Call. Returning now to the auto sector, market flash on Stockholm-based Volvo cars. Those shares are falling down 3 % after pulling full-year guidance and warning of further deterioration in the China and U.S. auto markets. The company says market developments will have a, quote, significant negative impact on Q3 earnings and cash flow beyond previously highlighted raw material and currency risks. The news coming as we await monthly auto sales delivery numbers from Ford and Tesla today. You can see shares of both of those companies are higher pre-market ahead of that. But from the car makers to the car suppliers, no warnings from Italy-based tire producer Pirelli, announcing last month instead that a new$1.2 billion investment at its U.S.

22:42Morgan Brennan: manufacturing hub in Rome, Georgia, will move forward as it continues to bet big on the U.S. auto market. So joining me now to discuss this and more in a CNBC exclusive is Marco Tranchetti, executive chairman at Pirelli. Marco, it's wonderful to have you on the show. Welcome to you. Thank you. Happy to be with you. So you're investing more money into more production here in the U.S. Why are you doing that and why are you doing that now? The U.S. is the largest market for high tech ties, so-called the high end ties. And it's also for technology in general the largest market. We have 20 percent of our turnover in the U.S.

23:24And the market represents 40 percent of the global market for high-tech products. So that's why. It's as simple as that. So we invest 1.2 billion to produce 6 million ties in the U.S.

23:39Morgan Brennan: Did tariffs or trade dynamics factor into the decision to invest here specifically? No, we invest specifically there also because of cyber tires, so-called cyber tires. So we are able to provide information directly from the tire to the electronic control of the cars to provide real-time information about the grip, the ground is wet. So our technology is unique. So that's why America is the right market for us. I remember learning a number of years ago that tire usage, tire demand could actually be seen as an economic indicator, not only on the consumer side and how people are using their automobiles, but also when it comes to things like trucking and demand for goods to be moved on the roads.

24:31Morgan Brennan: So in light of that, what are you seeing in the U.S. and in other parts of the world? What we see now is that the iron market is still growing. The standard product market is slowing down. It's slowing down everywhere, in Europe, in the US and China. In the US, there is a lot of import. And so we see that there is a competition from the import. And that happens also in Europe. And that's one of the reasons why the local production has some problems. But the consumers are attracted by inflation. And so for the time being, we see a slowing down everywhere. Takes a lot of petroleum products to make tires as well.

25:22Morgan Brennan: Have you been impacted by what we've seen in the energy markets this year? We have been impacted obviously by the cost of energy. So we have 18 factories globally, and there are costs that are well unexpected. And then, obviously, we have to play with prices in a balanced way, because, again, consumers, they have less money in the pocket. So we continue to grow in any case, because the high-end segment is still consistent. And we are supported by the technology we have. We have developed it thanks to the Formula One and now also to GP1 in the motorbike. So I think that in a difficult time, we have the proper technologies and we are in the right segment.

26:14Morgan Brennan: And finally, just to circle back to this investment in the U.S., Formula One is gaining in popularity so quickly here in the U.S. You supply tires to the most sophisticated automobiles in the world, race cars in the world. How much is the opportunity around Formula One and sports factoring in as well? It's key for us. So we are part of 250 races around the world, but the most important is Formula One. We are the sole supplier since 2011, and we have a contract until 2028. Technology there is at the top. So what we do in Formula One is useful also for the cars in the streets because we transfer the technology directly to the cars.

27:05And the stress and the need of technology of Formula One is really amazing.

27:12Morgan Brennan: Okay. Marco Tronchetti of Pirelli, it's wonderful to have you on. Thank you for joining me. Grazie mille. Thank you. Thank you for the invitation. Bye. Morning Call is back after this. I'm Morgan Brennan. Welcome back to Morning Call. Let's get a check on U.S. stock futures, which are right near session highs this Friday morning. Attempting a second day of gains here with the S &P poised to open higher by 36 points, the Dow 180 points, the Nasdaq 228 points. Keep in mind, we're still in pace for losses for the week. This as we watch the price of crude move in the opposite direction. This is what's fueling futures right now.

27:47Morgan Brennan: We're going to have much more on that story coming up in just a moment. And we're watching shares of Nike because that is tumbling. It's down 10 percent right now after the company reported another quarter of disappointing results. North America was a bright spot, but sales elsewhere fell. China dropped a worse than expected 26 percent. Nike also projecting revenue for the year will decline in the high single digits. That was worse than expected, represented another guidance cut. Meantime, take a look at treasuries because those are well off yesterday's highs. The yields are ahead of today's September jobs report.

28:19Morgan Brennan: You see U.S. 10-year Treasury yielding 5.23 percent. We traded above 5.3 yesterday at the highs, but we're still hovering just below multi-decade highs here. Fed-sensitive two-year Treasury, 4.78 percent. 30-year Treasury yields, 5.6 percent. Let's get a check on gold and silver, too, because those are higher this morning, but pulling back on the week. Gold's poised for losses of 2.5 percent. Silver down 5 percent, which would be the worst week since mid-July. By the way, keep an eye on copper because that is pacing for the worst week since March. This, as we've seen the dollar strength in the dollar index trading right near 17-month highs this week.

28:56Morgan Brennan: We're checking some of the morning's latest headlines. Anthropic reportedly holding a pre-IPO Investor Day on October 14th, putting it on a possible track for a mid-November public offering. Investors remained confident, according to multiple reports, that Anthropic will fetch a valuation between$1.8 and$2 trillion. Well, Anthropics Go Public ramp up is coming as chip supplier Broadcom is reportedly building a new$60 billion cash hoard to fund Anthropics and others. AI chip build outs among the banks involved. Blackstone is reportedly leading the deal with$18 billion of Class B junior debt. You can see shares of Broadcom up one and a half percent right now.

29:34Morgan Brennan: The Financial Times, though, is reporting that Amazon is looking to offload about$8 billion worth of advanced NVIDIA chips to investors through a special purpose vehicle. in an effort to strengthen its balance sheet. Amazon would then lease the chips back from the new venture, adopting a more asset-light approach to its data center business. You can see those shares are higher this morning, NVIDIA and Amazon. New Mexico, meantime, is asking a judge to order Meta Platforms to pay between$35 and$40 billion in penalties after a jury earlier this week found the company misled consumers about data privacy to the tune of about 43 million consumer law violations.

30:12Morgan Brennan: Well, Meta could theoretically be on the hook for up to$5 ,000 per violation. And the company says the penalties should not be more than$3.45 billion. So we could get more on that today. Keep an eye out. Dallas Fed President Lori Logan out with fresh hawkish commentary on the Fed's next rate decision, saying last night that the central bank needs to raise rates by at least another 50 basis points to get inflation back on track. Logan, a former, or an FOMC voting member this year, calls last month's hike an important first step. That, of course, comes in what's been a flurry of Fed speak this week.

30:47Morgan Brennan: Let's turn back to the energy markets, because reports this morning that President Macron, French President Macron, spoke with U.S. President Trump last night to discuss the global energy situation. And that in calls today, EU countries are discussing a French proposal for Europe to release 50 million barrels of diesel and for International Energy Agency members to release an additional 50 million barrels of crude oil. Well, reports adding that any agreement on diesel stock releases should include a U.S. commitment to avoid a unilateral diesel export ban. We are expecting G7 country leaders to hold a call this afternoon and to discuss all of this.

31:23Morgan Brennan: But in the meantime, you can see right there on your screen across the board, energy futures are lower. WTI is down more than 4 percent right now, trading around$89 a barrel. Brent is also down 3 percent, back under$100 a barrel. Arabob gasoline futures are lower. So is the heating oil contract. Natural gas is under pressure here, too, but that's been moving for slightly different reasons this week. The pullback, though, coming after yesterday's last late day, she said, a price spike following a Wall Street Journal report that the U.S. is deploying an additional aircraft carrier up to 10 ,000 more troops to the Middle East.

31:57Morgan Brennan: So for more, let's bring in Amina Bakker, head of Middle East Energy and OPEC Plus Insights at Kepler. Amina, it is great to have you on the show. And certainly the data you've been putting out, an analysis you and Kepler have been putting out this week, has been getting its own fair share of attention and moving the energy markets, too. But given the news we got this morning, I do want to get your reaction on what this would potentially look like and what it would mean, at least in the near term, if we saw releases of diesel and crude oil. Sure. Thank you for having me, Morgan. Yeah, for sure.

32:28I mean, the release, if it does happen by the EU and the IEA, is going to cause a drop in price in diesel prices. But this is only a short term solution because fundamentally, we're still short, very short on products in the market. And a lot of the refineries in Europe are already running at maximum capacity. So we just need to look at the root of the problem, really. We're still getting refineries in Russia getting attacked by Ukraine. Ukraine. And then we have the tightness as well out of the Middle East. So if the release does happen, I would say and see it as just a very, very short term solution to higher prices.

33:08Morgan Brennan: Would it be a better short term solution than implementing a diesel export ban in the U.S.? Well, those are levers that, you know, could bring down the prices temporarily. I think both are being considered. We haven't heard the last decision from the U.S. and I've heard as well, I mean, that's still very much a viable option in the U.S. that President Trump might decide to go with. But I don't see them both really being effective. They might have an effect for a couple of weeks, but then you have to go back to the main problem, which is this ongoing conflict. I mean, The war isn't over yet. And despite that, we have been seeing and our data does point to improved flows out of Hormuz and the Red Sea.

34:00That doesn't mean that, you know, vessels continue to be targeted, attacked. Iran is still threatening energy infrastructure, as you rightfully said, where, you know, the deployment of troops might happen. So all of this points to more escalation. Yeah.

34:16Morgan Brennan: And just to, I guess, go further with that, the reports of a deployment of a third aircraft carrier, a larger buildup of U.S. forces in the region on the heels of these talks between the U.S. and Iran breaking down earlier this week. Is that how investors in the energy market should be understanding this, that there's a higher risk now possibility of further escalation? Yeah, I think, I mean, investors are just looking at the headlines again, And they're not I mean, of course, they are seeing the news, but it's not really having an impact directly on on prices. And even the fact on I mean, you you mentioned in your earlier report on the Fed possibly increasing rates once more.

35:02I feel like investors are also hedging in oil against that. So there might be a move towards hedging in different kinds of commodities, including oil, in line with the expectation that rates might be higher.

35:16Morgan Brennan: And finally, I do want to go back to the data that you've been putting out, that the market has been watching so closely. What is it showing and how does it speak to this divergence between crude getting out of the region, but perhaps refined products not or at least not as much? Yeah, it's not as much. I mean, with crude, we can see a clear improvement. The latest data that we have, which is the seven-day average, points to something close to 11.5 million barrels a day. And that compares to 17 million barrels a day. And this is, I'm talking about Hormuz flows earlier. It was, I mean, we had it between, again, 13, 14.

36:00It keeps fluctuating. But there is a clear improvement in flows. But at the same time, we're not seeing any improvement in products. It's less than a third of what the products were coming out to pre-war levels. So that's where the tightness comes from. And I mean, I don't see the risk, you know, getting removed. The risks are still very, very high. But countries here in the region want to prove that they are resilient and defiant.

36:30Morgan Brennan: and they want to get their oil to the market. Amina Bakar, it's great to have you on. Appreciate it. Have a wonderful weekend. Thank you. We've got a lot more to come here on Morning Call, including a breakdown of the big week for the space sector, but a tough one for shares of some of the biggest players. Details on what's driving the action when Morning Call returns. Welcome back. A big week for space news. Over 13 hours, over the course of 13 hours, SpaceX launched three missions. NASA's crew 13 astronauts to the International Space Station, a classified national security mission late last night using a Falcon Heavy, and a rideshare launch with 130 payloads from a variety of companies and agencies.

37:09Morgan Brennan: Now, that last one, Transport 18 mission, getting attention because Alphabet's prototype satellite built with Planet Labs was on board. Its TPUs will be tested for Google's Project Suncatcher Orbital Data Center plan. And speaking of, there was other Orbital Data Center news this week. Redwire teaming up with Sophia Space and buzzy startup StarCloud innovate in a StarCloud, she says, launching a launch deal with Firefly Aerospace. We even heard from Blue Origin CEO Dave Limp about that company strategy in an interview on stage with me at the White House's AI Summit on Tuesday. The idea is to have, you know, many, many metric ton data centers.

37:51You put them into sun-synchronous orbit, so this is kind of a little special orbit that's just off-polar, that you're in the sun 97 % of the time, roughly, and then we run inference workloads up in these constellations, and they don't have to have a lot of communications capability because they'll beam down into these mega constellations. So in our case, we'll ground them into TerraWave, which is our constellation, and they'll come down to the ground. And this gives us access to effectively infinite compute. And this will be, you know, our FCC filing here is for 56 ,000 of these satellites. So this is what's going to move us from hundreds of launches a year to thousands of launches a year, because you're going to want as much intelligence as you can possibly get.

38:40Morgan Brennan: 56 ,000 satellites. These are staggering numbers. Limp adding that Blue Origins funding round, the first to include investors beyond Jeff Bezos, is not yet closed yet. but is oversubscribed. So all of this on the heels of SpaceX's first flight to orbit for Starship and as NASA announced a new plan to bring Boeing Starliner online for astronaut missions. So how did the stocks do? Well, it was a down week as rising rates pressure momentum names, including the space companies. So take a look at shares of SpaceX with this morning's pre-market move up fractionally for the week. Planet Labs, Alphabet, Redwire Firefly, all actually trading lower this week.

39:18Morgan Brennan: And if we get a share on Boeing, even Boeing is trading lower this week, despite what has been a flurry of news for that company overall. Morning call. We'll be right back. It's time now for your call sheet, where we look at the topics driving the trading day ahead. Crew members today, Peter Bokvar of One Point BFG Wealth Partners, also a CBC contributor, Barbara Duran of BD8 Capital Partners, and Chris Hodge of Natixis CIB Americas. It's great to have you all here. Chris, I'm going to kick this off with you. What are you watching in this jobs report this morning. How monumental or perhaps not monumental is it?

39:49Yeah, I think a stable and relatively solid jobs market is pretty much baked in at this point. What I think would really move the needle is if we saw a continued uptick in hours worked, if we saw heating up of wages, and if we saw job gains really widely dispersed. Because broadly speaking, it's an economy that's displaying strength, but not necessarily heat. And it's not really contributing to the inflationary impulse right now.

40:15Morgan Brennan: Yeah, it's been interesting, Barbara, how much Fed speak we've gotten this week. I'm not going to call it dovish, but I'm going to say it does seem like there seems to be a shift towards the possibility, at least from a number of members, being willing, if the data stays like this, to hold in October. And you've seen in return a real repricing, re-rating in Fed funds, futures and the like. Your thoughts. Yeah, no, I agree with that, Morgan, because everybody coming out is looking at things like yesterday's PCE number, which was better than expected, 3.4 percent versus 3.7 percent. And that's good because that's obviously the Fed has made it very clear they're not worried about jobs.

40:56They're not worried about wages, even though on the lower income they are not keeping up with inflation. But that lower income, it looks like they're spending despite the worries about the K shaped economy. So I think inflation is really their focus. And that's, you know, jobs would be a big surprise. Certainly, all the numbers coming in and jobless claims week after week are tame. It's showing no layoffs. People are employed 4.1 percent unemployment. So the Fed is very clearly focused on inflation. And so with that softer PCE number, there's also the uncertainty with geopolitical action, and that's Iran.

41:29You know, that is also this. It buys them time to hold off this next month to see if things are resolved there and helps oil prices go down lower.

41:37Morgan Brennan: Yeah, which is where I'm going to take this with you, Peter. And that is nonetheless, we still have and it's not just a U.S. story. It's a global one. We still have bond yields in many developed countries, including here trading right near multi-decade highs or in some cases even record highs on the one hand. On the other, you have crude under pressure this morning because of reports of possible releases out of Europe and G7 countries. But overall, that's elevated, too. Yes, and we know that the releases is really just buying time. It's putting the Band-Aid on the supply situation. But, you know, the pain point, of course, is inflation.

42:10It's particularly energy for anybody driving a truck, for anybody driving a car. I think that the one thing with rates that I find most interesting, as you point out, is the global rise. I mean, now we're realizing that France is a problem child. French yields gapped up to the highest level since 2002. too. And yes, we can all argue about what's causing the rise in U.S. rates, but I do argue that it's a multitude of things, especially worries about debts and deficits, not just in the U.S., but in France, in the U.K., in Japan, and that the global rate rise is lifting everyone with it. The interesting thing yesterday, though, was when the U.S.

42:51yields turned lower, German yields turned lower as well at the same time that French and Italian yields were widening out. So we almost had a little flight to safety. So maybe in the short term, the rise in long-term rates will take a little bit of a breather.

43:05Morgan Brennan: Chris, I want to get your thoughts on what we are seeing in global bond markets right now, because it does still seem to be pretty orderly when you compare it to what's happening equities, for example. Move versus VIX has been, and the divergence has been, something that folks have been pointing to in the last couple of days, for example. Yeah, I think as markets are ingesting incoming developments, you're right. This is fairly slow-moving overall. And I will say that, you know, Chairman Warsh in the July press conference for the Fed said that market was doing a lot of the work for the Fed. And maybe he shouldn't have said that, but he was absolutely correct.

43:40So financial conditions have tightened a bit. And I do think that that's broadly encouraging for the path of inflation. And we are continuously optimistic about the trajectory for inflation, especially given these tighter financial conditions.

43:57Morgan Brennan: Barbara, I mean, we're having this conversation with Jonathan Golub in the show earlier this hour, but the fact that earnings continue to be so strong here, I mean, Nike's down 10 percent. That's very much a specific company story, turnaround story, perhaps. Would love your thoughts on that, too. But overall, what are you watching as we do start to ramp up into earnings season? Yeah, well, I agree on the Nike. I think it's a one off. That is going to be a long, long turnaround story, given they've lost their innovation engine there. In terms of what's watching in the market, I think the key thing really is earnings.

44:26As you've pointed out, earnings were estimated at 15 percent S &P 500 at the beginning of the year. They're now coming at 30 percent. Revenue is much higher. Margins record highs. And if you listen to forward guidance on these recently concluded quarterly earnings calls, it's all very positive. So I think that is what the market responds to. And I think that is right now offsetting the rise in rates. You know, and obviously you have, you know, I think it was Chris mentioned about what's happening in the in bonds. And I think there's a couple of things in the long end. You've got the 30 year, which I think is responding more to deficit worries.

44:58And that's worldwide. And on the short end, shorter, even 10 years, responding to economic growth and strengthen the economy, because that is one thing is clear. The economy is fine right now. You know, it may not be going, you know, six percent GDP, but estimates are coming up for this quarter. So I think we're looking at, I think you stay in the large cap growth because that is where the sustainable real growth is. So that would be where I'm sticking.

45:23Morgan Brennan: OK. I mean, manufacturing numbers have been really solid, Peter. You talk about it, two stock markets. What do you mean and how does that continue to factor in here? Well, the economy is extraordinarily bifurcated. Half of economic growth is driven by the AI data center construction. Half the earnings contribution is from data center construction. Half the S &P almost is touching data center construction. So I'm looking both in the jobs number and the economy going forward is the breadth of it. You know, it's it's in jobs today. It's going to be leisure and hospitality, be health care and it'll be construction.

46:00Outside of that, it's relatively muted.

46:02Morgan Brennan: OK, thank you so much to our call crew. I hope you all have a wonderful weekend. Tires matter. They're the only part of your vehicle that touches the road. Tread confidently with new tires from Tire Rack. Whether you're looking for expert recommendations or know exactly what you want, Tire Rack makes it easy. Fast, free shipping, free road hazard protection, and convenient installation options. Go to TireRack.com to see tire test results, tire ratings, and consumer reviews. And be sure to check out all the special offers. TireRack.com. The way tire buying should be.