Morning Call 10/26/26

0:00At Edward Jones, we believe rich isn't about having life all figured out. It's opening yourself to all the possibilities. That's why your dedicated financial advisor provides long-term planning built around you. Meeting you where you are and helping you get closer to where you want to be. So no matter where you're starting from, you can move forward with confidence. The key to being rich is knowing what counts. Let's find your rich. Edward Jones, member SIPC. Good news for anyone who's bad at waiting. Black Friday deals at Lowe's are already on. Get up to three free select DeWalt, Craftsman, or Cobalt power tools with the purchase of a select battery kit.

0:43Three for free? You better believe it. Plus, select ladders are up to 50 % off. So go ahead, get in there early. Shop Black Friday deals in-store or online now at Lowe's. Valid through 1118, while supplies last. Free tools vary based on battery kit purchase and location. I'm Dominic Chiu and this is your Morning Call.

1:17Good Monday morning. I'm Dominic Chiu and for Morgan Brennan today, U.S. equity futures right now are higher after back to back weekly losses for the S &P 500 and the Nasdaq. Currently, we are implied higher by just about 203 points for the Dow, about 18 points for the S &P 500 and about 38 points. More modest moves higher for that tech heavier Nasdaq 100 trade. On the Treasury side of things, ahead of a triple threat of central bank decisions later on this week, you can kind of see the 10 year note yield currently just below the 5 percent mark, 4.995 percent. The two-year note yield, 4.699%. And the long bond 30-year, 5.317%.

1:58On the dollar side of things, we are seeing a little bit of movement there, driven by, of course, domestic catalysts, but also, of course, by international ones as well. The ICE U.S. dollar index just about flat on the session so far, 101.80 the last trade there. And on the energy side of things, oil prices continue to be in focus here, although we're seeing a bit of a pullback this morning. U.S. benchmark West Texas Intermediate, just about$101 per barrel, down about 2.25%. Ice Brent crude futures, the world gauge,$114.63, down about almost 2 % as well. Let's now see how Europe and Asia are shaping up.

2:34Karen Cho is in London with the latest on the international trade. Karen.

2:41Good morning to you, Dom. Well, Asian equities traded cautiously today as oil prices eased from six-month highs. Semiconductor fatigue continues to dominate trade as well. Many looking to the all-important tech earnings this week from the likes of Amazon, Microsoft and Alpha for further clues. But, of course, one of the issues has been Elon Musk's comments around some of the neoclouds. That is impacting sentiment across Asia, also here in Europe. Now, when it comes to Europe, we are starting on the front foot today. Don't forget, we saw a lot of red ink last week, so green has popped back onto the boards.

3:13But there are some key policy rate decisions as well that will impact sentiment from the ECB and the Fed. Both are firmly in focus. And meanwhile, in France, protests continue to dominate the headlines over the weekend. As well as Moody's rating decision, the agency maintained its rating of AA3 with a negative outlook for France in a surprise move, adding it assumed that the deficit-reducing budget for next year will be adopted and financing costs will create a bait in the next few months. But so far, we have a positive turn on the markets, It's up 7 tenths of a percent on the DAX. French stocks trading higher, too.

3:47Dom, back to you. All right, Karen, Joe, with the latest out of London there. Thank you very much for that. Turning to some of this morning's big stock movers, SpaceX and Neoclads, as Karen just mentioned, in focus amid their recent sector sell-off and new comments from Elon Musk this morning, saying SpaceX has closed a$40 billion debt deal to pay for the chips he needs to fuel the company's AI aspirations, though reports indicate those talks are indeed still ongoing. Now, in a post on X, Musk added he is his debt deal means, quote, the 200 plus neoclouds are going to see guppy level death and consolidation.

4:21Some will make it through, but not many. So we're watching some of those names in the pre-market trade right now. Core Weave down nearly three percent. Iran down about three and a quarter percent. Nebbia Supply Digital, Digital Ocean, all seeing some weakness in that pre-market trade. We are also, by the way, tracking a sell off across Brazil's equity markets after its president Lula da Silva pulled a shocking election upset in a runoff over the weekend to defeat Flavio Bolsonaro, a stunning comeback that wins him a historic fourth term as president. As late as Saturday, users on Calci indicated an 81 percent chance of a Bolsonaro victory before the results started pouring in.

5:02By the way, you can see there some of the moves on the crypto side of things as well playing out. Stocks are under pressure with Bitcoin briefly falling below$80 ,000 amid geopolitical uncertainty. Technology sector losses and tightening financial conditions this morning are at play. Names like Strategy, Coinbase and Riot all down ahead of the opening bell roughly one to three percent right now. Bitcoin prices are, again, moving to just the downside by half of 1%, 80 ,000 and change the last trade there. Turning back to the broader markets and what's expected to be a wild week for Wall Street, it is the busiest week of earnings season with more than 160 S &P 500 companies and 10 Dow components reporting results, including the likes of Google Parent Alphabet, Microsoft, Amazon, SanDisk, Boeing, Starbucks, Chevron, Coca-Cola.

5:52You can see and that's just a small plate, an appetizer, if you will, of those logos there. A lot of earnings reports coming out this week. And if that weren't enough, we get three major central bank decisions with the Federal Reserve on Wednesday, the European Central Bank on Thursday and the Bank of Japan on Friday. Plus a big batch of economic data in PCE inflation, the first read on third quarter GDP and Chicago PMI as well. It is a mouthful. So joining me now to weigh in on all of this is Robert Teeter, the chief investment strategist over at Silvercrest Asset Management. I almost had to auction it off because there are that many things that are going to be potential macro and micro economic catalysts this week.

6:37How exactly do you handicap the most important ones that you will be focused on? I think the most important one is going to be earnings season. We're likely to get a beat in terms of earnings, mostly across the board. That's been the pattern. There's been very strong earnings. But the really important key here is going to be reaction to earnings. Thus far, there's been a lot of scrutiny around even very strong earnings. There's been a lot of market reaction that's been more mixed than one might imagine, given those strong earnings. And I think that's really the tell here is that you've seen market action this month that says fundamentals are great, but maybe the pricing is too high.

7:10Maybe we already are all filled up on the AI trade and we need to go somewhere else. And so you've seen some of this churn and erratic behavior. year, we'll be watching earnings to see what the reactions to those earnings moves are. It's been early so far, and that's the big caveat here. But we have seen a number of higher profile blue chip type names come in the early going. And we've seen, to your point, positive results and maybe outlooks that are positive, but not positive enough. So how do you think expectations are shaping up around just how good things need to be to continue this move higher?

7:44That's where I think the market's struggling right now, is that I think the expectations game is one where it's almost impossible to overdeliver in this environment. No matter what the number is, no matter how big the beat is, people are stepping back and saying, well, that's great for now, but what's happening next year? Is that number, whether it's 20 percent earnings growth, 30 percent earnings growth, is it going to be higher next year or lower? And I think some people are coming to the conclusion that maybe we're getting close to the peak in earnings growth. And that's starting to be a cause of some of this pullback that we've seen, some of this volatility and rotation that we've seen.

8:14The pullback that we've seen have also made valuations a little bit more palatable, right? Especially on a forward basis. If you look at the expectations for 12 months ahead in earnings and then the price you're paying for it right now, it has come down, especially at an index level. So what exactly does that mean then for the tech AI kind of trade that has been leading everything? It has come back as well, but there doesn't seem to be as much appetite to jump headfirst into that trade like we have seen over the last six to 12 months. Right. I think that's one of the most interesting dynamics here.

8:47And one of the takeaways I have from that is that it's not a reason to necessarily get bearish or concerned that we've had some of this churn and rotation. It's simply saying these fundamentals are going to be great for a while. You want to stay in the equity market, but you want to be careful as to how much exposure you have to AI. And that's why we've seen rotation this month moves higher in health care, for example, and other places that are outside of AI. And so it gives you a long runway to say fundamentals are going to be great for a long time. I don't need to wholesale get out of the AI trade.

9:13I just need to gauge how much exposure do I have to it. And is that comfortable for me going forward? Now, the AI stock story has obviously been very front and center for a lot of investors, but maybe arguably even more so has been the bond market these days, especially with rates going the way that they have. What do you make of the price and yield action that we've seen over the past few weeks in that kind of sharp move higher in the 10 year to almost five and a half percent before pulling back markedly in just a few days time? Did value investors find value in bonds or is this just a positioning trade?

9:49I think it's a little of both. Whenever you get over five percent, it sort of rings those alarm bells to say this is a pretty good yield here. Maybe from an asset allocation standpoint, I do rotate back in. The strength that we've had in the past few weeks really says that you are getting some of that rotation, people pulling back a bit on the equity side and moving into bonds. Whether that continues or not, I'm not so sure. I think, again, we do have strong fundamentals on the equity side, so there's no reason to see a wholesale pullback. Fed reaction will be really interesting this week as well.

10:15You know, does the Fed interpret this to be something that maybe there's a concern on the economy? I don't think so. I think they'll just interpret it the way that we're just talking about it now, a little pullback, a little bit of rotation. Really quickly, do you think the Fed holds pat or does it rise? I think they absolutely hold pat. The best part, of course, will be the Q &A and what kind of interpretation we get of the moving yields. We'll get a lot of Fed speak as well in the next few weeks. Yes. Robert Teeter, thank you very much. We appreciate it, sir. Thank you. Great to see you. All right.

10:40Good to see you too. We've got a lot more to come here on Morning Call, including what experts are calling Black October for the cyber defense sector and what CEOs need to be doing right now about their cybersecurity. Plus, much more on that big upset in Brazil that's rattling equity markets across the country. And then later on, another week, another win for Nathan Field. There's unlikely box office hit. We've got a very busy hour still ahead when Morning Call returns after this commercial break, but we are seeing everything, by the way. With the Discover Cashback card, it's payback time when you earn cash back on everyday purchases.

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12:35Taxes and fees apply. All right, welcome back to Morning Call. Well, this month is shaping up to be one of the worst months in cybersecurity history. Experts, insiders and executives all sounding the alarm bells over what's being called Black October, following the discovery of major vulnerabilities in a programming language used by seven out of every 10 websites, as well as simultaneous AI powered cyber breaches across wide swaths of the Internet, from Netflix to PayPal to Walmart, Quest Diagnostics and others, to Intuit to MGM Resorts and more, from healthcare to government to banking. You kind of get the idea.

13:13It's widespread. And while some of the patches and fixes are in some, like Anthropics' deputy chief information security officer, they're warning it will get worse before it actually gets better. Salesforce CEO Mark Benioff taking it a step even further, calling the situation a quote-unquote code red. So joining me now to weigh in are Adam Ely, the general manager of AI agent security and global cyber defense at Checkpoint. Also with us is Sophia Velastigy, the CEO of Velastigy Ventures, Microsoft's former chief AI technology officer as well. We have an expert roundtable here to break this Black October down.

13:55Adam, I'm going to start with you here on this. you are somebody that is deploying or helping companies deploy solutions to tackle cyber threats in your career. Have you ever had to be as fast and nimble about adapting to an environment in cybersecurity as you have now? We know where there's a will, there's a way people will find a way to breach, but the tools have made it so much easier. Yeah. We we've never seen a fundamental shift in attackers' capability and their efficiency as we have with the introduction of AI by attackers. I was on the other side. I was a practitioner for many years. I was a CISO for many years.

14:37I never had to respond to attacks this fast. It's really just in the last few years that the attackers' abilities have increased and why we're seeing attacks move so quickly and teams needing to change how they're operating fundamentally to now stay ahead. If I could just follow up on that. From that perspective, have you seen the ramp up happen? I mean, we know it's been the past three or four years where it's kind of ramped up quickly. But it appears as though with the AI development trajectory, especially with these models, that the ramp up has been even exponential just in the past six to 12 months in the way that things are happening.

15:16How much of that is because models are coming out in such a sophisticated fashion so quickly? It's 100 percent. We're seeing the number of vulnerabilities that attackers can exploit increase exponentially at a faster rate than we ever have in history. Just these recent PHP vulnerabilities that have made the news, those were discovered using AI. And then in turn, attackers used AI to automate their attacks. So we've seen that about 46.9 % of companies have been attacked in the last four days. That's up from just 10 % four days ago. And this is all AI driven. So now the attackers have those tools and the scarcity of the sophisticated, knowledgeable, highly skilled human attacker is no longer a limiting factor for these attacking organizations because they can use this technology that has been evolving so quickly in roughly the last six months.

16:13So, Sophia, I had mentioned before the introduction to our segment that the laundry list of companies, and by the way, that was not even exhaustive of the number of companies that have been impacted by cyber threats and attacks over the course of the past few weeks. We have not yet, though, as consumers and at the broader enterprise level felt a real, real bad outcome just yet. How far are we away as consumers and enterprises from seeing some really debilitating type attacks in our in our future? So one of the things with these attacks is that it allowed them, the attackers, to have the master key.

16:53and that key unlocks taking over the website, stealing password, as well as changing what you see. We saw last week a number of sites going down as a preventive measure to go in order for them to have time to patch, but that's not enough. In addition to patching, it's required that You have to assume that they stole the keys or the passwords and that you change those passwords and information. Sophia, how much are companies going to have to pay more attention to the cyber side of things? I've spoken to a lot of chief technology officers, chief information officers, chief information security officers over the course of the past 12 to 18 months.

17:41They all acknowledge they're going to spend a lot more on cybersecurity. But how much does this Black October kind of phenomenon lead you to believe that budgets will be increasing even more rapidly than they have been over the course of the past year? We are at an AI inflection point around cyber. So what used to take weeks to find these hidden cracks, now with the burglars as well as the attackers, we're talking about ours. And they're also using AI in order to build the method to break in. So they're finding it faster and faster with AI than ever before. And what's happening is the owners and the companies impacted, as well as the defenders, it may take weeks or months.

18:25So it's just as important for them to focus on changing the lock, being up on their security, patching even faster than ever before. So that's what's happening in the market. That's the danger zone until the defenders are able to be in line at AI speed like the defense, like the attackers. You know, Adam, Sophia mentions changing the lock. The problem is if you're moving towards a world in agentic AI, you're going to have and I'm going to use this as a technical term, gazillions of locks. that are vulnerabilities in this case here. How exactly are cyber firms like a Palo Alto, like a Checkpoint, others, how exactly then do you deal with developing tools or models of your own that can solve for the fact that there are going to be a lot of locks that can be picked and or fixed?

19:19Yeah. First, it's the realization that the way that cybersecurity teams have traditionally solve these problems is simply knowing about the problem, then fixing the problem. Now we're seeing that the number of problems is increasing at such a rapid pace that the teams are overwhelmed. They simply cannot keep up. And there's not enough capital to keep hiring people and just trying to solve the problem through that. So where we've invested at Checkpoint is building our own foundational models and bringing AI to our solutions to provide companies with preventive technology that can stop the attacks even when we don't know about them.

19:56So for instance, customers that were using our latest prevention technologies this past week were automatically protected from these PHP vulnerabilities because we brought AI into our preventive technology. So that investment that we started several years ago is now paying off for our customers that are on that latest technology. And we're going to continue to iterate on that while continuing to iterate on how do we make the economics work for customers that are under financial pressure because of borrowing costs and inflation. So later today, we will announce firewall as a subscription so that CFOs can have a predictable monthly or annual spend, but the cybersecurity teams can get all of the latest AI power technology, stopping 99.9 % of unknown attacks, while Checkpoint carries the hardware capital costs.

20:50I think we're going to coin the term, right? FAS, right? Firewall as a service. Sophia, I'm going to give the last word to you. Speaking of budgets, the predictability aspect of it is something that's going to be very appealing. But just how much are boards and management teams at large companies going to have to deal with these budget concerns? And is there a blank check, or should there be, for cybersecurity? With the equal investment in AI, why security needs to be considered hand in hand. This is also important to understand, as stated before, that the speed at which this is happening is faster than ever before.

21:28It's an inflection point, but this is also the new norm. So to prevent that, where are we exposed? Getting that understanding beforehand, have we patched and being as fast in our response as possible? and how can we do it faster each time and next time? That's how we are able to address this. And again, it's important that we invest in AI, but also the security associated with it. All right, the budgets are going to be a key focus right now. And we coined it, firewall as a service, F-A-A-S. All right, thank you to Adam Ely, Sophia Velastigi. We appreciate the conversation. Please come back to see us again soon.

22:06And still on deck for the show here, why the King's copyright holders are all shook up over Anthropic claiming some suspicious AI minds and agents meet me at fault. I'm going to have that song stuck in my head. Suspicious Minds all day long. Warning call continues next. With the Discovered 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.

22:45See discover.com slash five 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. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules.

23:23Rule 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. Welcome back to Morning Call, checking on a few stocks on the move early today. The Wall Street Journal reports a group of JetBlue creditors is working with a restructuring advisor as the airline's bonds and shares sink. As of mid-year, JetBlue had roughly$1.6 billion in cash and cash equivalents, along with$8.5 billion worth of debt and lease obligations.

24:11JetBlue has not yet commented on that report. Instacart is reportedly exploring a possible sale. The information says it's held early talks with potential buyers, including DoorDash and Uber. Any deal would likely draw anti-crust scrutiny, as it would boost two of the biggest U.S. food delivery platforms in existence already. Instacart and Uber and DoorDash have not commented. Well, straight ahead on the show here, Yemen's Houthi rebels claim responsibility for another attack on Riyadh's King Khalid airport just 24 hours after resuming operations for the first time in weeks. We've got a live report from the region when Morning Call returns after this break.

24:49I'm Dominic Chewin from Morgan Brennan, and welcome back to Morning Call. Right now, U.S. equity futures are moving to the upside here. The Dow's implied higher by just about 235 points, the S &P up by about 20 points, and the tech-heavier NASDAQ 100 trade up by about 68 points. Now, we've got a close eye on tech and the neocloud specifically. after Elon Musk warned this morning of, quote, guppy level death and consolidation in the sector, suggesting that debt markets are all but shut for the group. Right now, many of those neocloud stocks like Corweave, IRA, Nebius and others are down roughly quarterly, maybe a quarter of one percent for DigitalOcean, up to about a two and a half percent loss for Corweave shares.

25:34Now, treasuries are in focus ahead of a critical week of central bank decisions. three big ones later on this week. And right now you can see the 10-year note yield hovering just below 5 % at 4.99, the two-year note yield at 4.694%, and the 30-year long bond actually seeing a slight up move in prices and a move lower in yields to 5.312%. Energy is also moving lower today with U.S. benchmark West Texas Intermediate down about 2.25 % to$100.91. Ice Brent crude futures down about 2 % as well to$114.46. On the global market side of things, a little bit more of an interesting move mixed, so to speak, so far.

26:12The Asia trade saw the Japan Nikkei and the South Korean Kospi down about one or so percent. But meanwhile, the FTSE 100, the German DAX and the CAC in France are all fractionally higher so far this morning. Checking some of this morning's latest headlines, no comment from Canada or its prime minister after President Trump told a crowd in Michigan that a trade deal with Canada is, quote, coming soon. The president adding Canada is, quote, willing to give us anything at this moment, end quote. The last major formal Canada U.S. trade negotiations collapsed and broke down going back in August. The head of the out, the head of Audi is defending his company's decision around a new four billion dollar U.S.

26:54assembly plant in Georgia, the brand's first on this side of the Atlantic. The company says the The plan will be to produce about 200 ,000 SUVs a year, noting the decision was preceded by many months of careful planning and intense negotiations. Volkswagen's board still needs to give the final green light for that approval. Sixth Flag says it plans to add seatbelts to some of its roller coaster rides following a fatal accident earlier this month at its Georgia theme park. The company says it's also hiring independent engineers and ride inspection professionals to review safety procedures and protocols across all its rides.

27:29Goliath, which is that Georgia roller coaster ride, and eight others at five of its parks remain closed as those investigations continue. The owners of Elvis Presley's music are suing Anthropic, alleging it used the King's copyrighted music without permission to train its AI models, including all shook up, can't help falling in love and return to sender. In a statement, Anthropic says it disagrees with the claims and intends to defend the case fully. And another week, another win for the unsettling Elizabeth Holmes documentary that you can see everything. You're being real right now. Always being real.

28:19All right. That was the A24 flick directed by Nathan Fielder and Lance Oppenheim, scoring yet another 19 and a half million dollars at the box office this weekend, bringing its two week total to forty five point one million dollars, one of the highest in documentary history ever. The studio only invested a reported$7 million budget in the project. Well, turning back to the energy markets and a developing story in the Middle East, Iran-backed Houthi rebels this morning say they have attacked Saudi Arabia's east-west crude oil pumping stations and Riyadh airport while Saudi Arabia says it's destroyed two ballistic missile launchers in Yemen's capital, noting it has not confirmed any new attacks by the Houthis on its own soil.

29:05The back and forth is coming less than 24 hours after Saudi Arabia reopened operations at its King Khalid International Airport after a deadly attack earlier this month in the regional travel hub. Joining me now is Dan Murphy, live from Abu Dhabi with the latest there. Dan, how exactly is this going to play out given the fact that we have many conflicting stories, perhaps no real confirmation and oil prices are actually falling this morning? That's right, Dom. Good morning to you. Another twist in the tail of the oil market narrative this morning. And as you say, oil prices are pulling back right now after last week's surge, as we see diplomatic efforts here raising some hopes of easing tensions between the United States and Iran.

29:49We've also been tracking some flashes this morning from a high-level meeting that's taking place right now in Tehran. Saudi Arabia's defense minister leading a delegation that includes Pakistan's army chief and Turkey's top intelligence leader to meet Iran's president and senior security officials. This basically brings the three Mecca joint defense agreement countries into direct contact with Iran at a moment when Saudi Arabia is really facing a growing security threat. As you mentioned, Zom, the Houthis said today that they attacked Saudi pipelines and Riyadh airport once again, but we've seen no immediate confirmation from the Saudi side of those attacks or the damage.

30:32So we're watching and waiting to see how this situation evolves. Ultimately, what it reflects is, on the one hand, an effort to keep that diplomatic window open and keep the conversation going here among Saudi Arabia and its partners in that defense pact, But at the same time as well, the last 24 hours also really shows how the Houthis are still capable of waging threats, if not direct attacks against Saudi Arabia. So that's something that's keeping oil prices well-beared. Meanwhile, I also spoke with the IEA Executive Director Fadi Birol this morning. He says the agency is now prepared to take further action to support the markets.

31:12And it is currently keeping its options open. it's discussing next steps with member governments on what a potential oil release could look like. Now, this is a really important signal, Dom. It basically tells us that the IEA is keeping its response options open as it watches these potential supply disruptions take place in the backdrop. Birol also saying he does not expect energy markets in 2027 to return to where they were before the war. Certainly another sign that the effects that we're seeing right now could outlast any short-term price pullback. So markets are, of course, also watching all of this.

31:50And Don Fetter say they're also watching the Israeli election tomorrow and the U.S. midterms on November 3. That's next week. Reports say the United States and Israel may consider strikes on Iran after the midterms. And that is also adding to the risk of further escalation here, again, keeping prices in this triple-digit handle this morning. That's where we stand. It's back over to you. All right, Dan Murphy and Abu Dhabi with the latest on the oil markets and the Middle East tensions. Thank you very much for that. In other geopolitical news, Ukraine's defense minister says the military's Starlink system is working normally again.

32:24SpaceX had throttled speeds on Starlink this month, resulting in Ukrainian forces losing connection with their drone fleets. Elon Musk posting on X this weekend that Ukraine had violated Starlink's terms of service, a claim Ukrainian officials are disputing. There were more mass protests across France, meanwhile, this weekend over the cost of living and growing inequality. Police and demonstrators clashing in cities like Lyon, and more than 1 ,300 people were arrested across the country. And then across the Atlantic again in Brazil, a shocking upset as President Lula da Silva has been declared the winner of the runoff election over Flavio Bolsonaro, the son of the former president Jair Bolsonaro, who was victory bucking a regional trend of wins for right-of-center candidates allied with the U.S.

33:11and President Trump. It's a lot to digest, but joining me now to discuss the market impact of all of this is Peter Cheer, the head of macro strategy at Academy Securities. Let's talk macro strategy then. I mean, right now, the the pre-market trade for some of the ETFs tied to Brazil are showing some extreme movements to the downside. Meanwhile, we aren't seeing as much activity for some of the continental U.S.-based ETFs in reaction to these protests. How exactly then do you figure out what the strategy should be if you're investing outside the U.S.? You know, I think right now you still have to come back to what's going on with Iran, that war, the conflict there and kind of the growing regional threat.

33:50Right. You've got Saudi Arabia having their battles with the Hooties. The UAE is kind of on the Saudi side in some cases. So that's going to be really interesting to see how it plays out. Want to see what Israel's election looks like? I think when I talk to our geopolitical intelligence group, about 40 retired generals, admirals, CIA, we all expect renewed hostilities after the midterm elections. We're putting more troops into place. There's enough threats. What exactly it looks like is probably undetermined. In all likelihood, we go after their targeting facilities in and around the strait to reduce that.

34:20we probably go after some of their nuclear facilities again. Maybe that way, even if we don't accomplish a bigger win, we can say, hey, we've done set the back there. So I think that's going to be the big story over the next two weeks. Now, outside of Iran, because it's not that I don't want to focus on Iran. We know that that's there. Let's talk about some of the stuff happening in Europe with these protests and also with Brazil in a big upset in this election. By the way, that's being contested by Flavio Bolsonaro. How exactly does that play out? So I think in Europe, we're watching Europe. I don't want to say it's fracturing, but I think it's going through real pain right now.

34:51I think Europe was designed in a structure where everyone gets a vote, everyone gets this, every country has to kind of behave. And I think as you're going through some sort of economic issues, each country wants to do their own thing. So I think you have this balancing act where at the one side, people are frustrated with cost of living. At the same time, I think more importantly, Europe is realizing that they have to do more of their own production. I think they just put on some more restrictions on Chinese imports. I think you're going to see Europe explode in a good way in terms of the economy.

35:18I think you're going to start seeing them drill in the North Sea. I think you're going to see them free up their energy companies. You're going to see this real development. And a lot like, I think the U.S. triggered a lot of this, but I think their response to the U.S. kind of onshoring is they're going to try and re-onshore themselves. So I still think the economy there is going to be doing quite well. It's going to be interesting. There's going to be volatility. But I think the investment there, you want to invest in the energy, the infrastructure, and the build-out of manufacturing defense in Europe.

35:42I mean, the biggest, arguably one of the biggest energy influences outside of Venezuela and South America is Brazil. There was a market, I guess, the markets, if you wanted to look at this way, wanted a Bolsonaro win. That's the way some strategists put it. You got the Lula win instead. Does that really upset the balance for not just the energy markets in Latin America, but also the way that the economy shape up around that Brazilian ecosystem? I think it does at the margin. Again, let's see how this all plays out. it's being contested. We'll see how it goes. In the end, I don't think it's going to be that big of an issue for the global.

36:15I think whatever's going on with Venezuela is more important, what's going on there. And then when I look really to our own equity markets, to me, it all still comes down with our friction with China, right? And China, I think the story that does not get enough attention, we keep trying to bring it up, is the cheap compute coming out of China, right? China's ability to generate chips, they're getting better and better. I think we forget how quickly Huawei dominated telecom, how quickly they dominated global manufacturing. training. I think we have to make sure that our administration and whatever it looks like after the midterm elections continues to push out the data center and AI build, because I'm really worried we're going to see this kind of cheap compute come in from China and it's going to upset our markets and our economy.

36:50It's the tech hardware and the open source models they have for AI as well. And the electricity generation. Everything there. Peter Scheer at Academy. Thank you very much. It's a bigger conversation. Please come back and see us again soon. Thanks again for having me. All right. A lot more to come here on Morning Call, including our Morning Call crew assembling on how you need to position as we get set for the busiest week of corporate earnings and a big Fed meeting, plus the sell off in the neocloud sector and how far these stocks can actually fall as Elon Musk warns debt markets are no longer interested in the sector.

37:19A very different tune than we heard from NVIDIA's Jensen Huang right here on Morning Call last week. We're back after this. The demand for the neoclouds is off the charts. Their capabilities are extraordinary. And so what is missing in the middle is the working capital to fuel that growth, to fund that growth. And because there's just so much demand across so many sectors of AI, there's a scarcity of capital. The demand of the capital is much greater than the availability of the capital. That's going to get solved. And that's going to get solved because fundamentally the most important things are the values that these guys are providing, these companies are providing.

38:03The demand for it is so strong. All right. There you see raw stores leading the S &P 500 gainers in the pre-market trade. One of the reasons why UBS is upgrading the company to a buy rating and raising its target price more than 30 percent to 315 bucks a share, saying the retailers same store sales growth momentum can continue past this year. Those raw store shares again up three and a quarter percent in the pre-market trade. And then Tesla is leaving the Mag 7 this morning after Barclays raised the company to overweight and its target price to 450 bucks from a prior 370, citing potential M &A opportunity.

38:38Those Tesla shares up two and a half percent pre-market. We're back in Morning Call after this. All right, here's what to watch in the week ahead. It's the busiest week of earnings season with more than 160 S &P companies and 10 Dow components reporting results, including Google Parent Alphabet, Microsoft, Amazon, SanDisk, Boeing, Starbucks, Chevron, Coca-Cola. I could go on and on. Now, if that weren't enough, we get three major central bank decisions with the Federal Reserve on Wednesday, the European Central Bank on Thursday, the Bank of Japan on Friday, plus a big batch of economic data in PCE inflation, the first read on third quarter GDP and the Chicago Purchasing Managers Index.

39:16And one other event to watch if that weren't enough, with the stock sitting at an all-time high, Apple is holding a product release event for its first touchscreen MacBook on Wednesday. So with all that in mind, it's time for the call sheet, where we look at the topics starting the trading day ahead. The crew members assembled today are Eva Ados of ER Shares, Jimmy Lee of the Wealth Consulting Group, and Bilal Little from Direction Funds. Let's start with our first topic, and thank you very much for assembling here for us today. Let's talk about the earnings season. I mentioned the busiest week.

39:47That's a lot of catalysts coming up here. Let's start with you, Ava, on this. Is this earnings season one where we can expect expectations to be exceeded, but the stock market to maybe react more tepidly? That's exactly right. I think this earnings season, strong results are not going to be enough. The market is hypersensitive when it comes to AI spending. We saw this with Maydaf. It beat last week. It was up after hours and the next day was down about 6 % because they're targeting$825 billion when it comes to AI spending. So this is what concerns us. And what set the table here is CoreWeave, one of the data center companies which has bonds yielding at 15 % at about 11 % spread.

40:36So I think this is going to be the theme this earnings season. All right. So from one ETF provider to another one, Bilal, How do you think things shake out with regard to investor expectations on those earnings reports? Because the big ones are here this week, the MAG7 type names. For sure. Well, they should have been cautiously optimistic coming into this period of time. And here's the reason why. We already know that a lot of these companies are struggling on the free cash flow side. The more important story, though, I think right now is there's a ton of margin debt out there when companies have actually been selling off.

41:07So the rotation outside of just big tech, the opportunity has been the breadth of the market. And that's what we've been talking about. The Dow is up over the last three weeks. We see the divergence obviously happening in the tech story. I think right now in the back half of this story, the concern should be how does that guidance play out and where do we get paid? Jimmy, where do you get paid? If you're looking for this earnings season, are there places that you could see opportunities develop if things don't shake out the way that they're supposed to? Yeah, I think, you know, when financial advisors say that it's a smart idea to be diversified, so far I think this year that's absolutely the case.

41:42I mean, if you look at value stocks, for example, outperforming growth stocks, not very sexy, but there are sectors that are doing well that have, you know, not done so well in the last five years now. And so I think these buying opportunities is what I'm looking at in terms of the tech areas, where I think you've seen corrections inside this market while indexes are at double-digit returns this year. So if you look at S &P 500, overseas markets, small caps, they're all in double digits, but it feels awful. And I listened to a couple of economists that I follow over the weekend on interviews recently.

42:13Now they're starting to turn into the economy is going to go into a recession idea again. I don't think that's going to happen. I think there are buying opportunities actually in areas in technology, for example. And investors are very underweighted, for example, in energy as well, which is led obviously this year, followed by tech. But I think there are buying opportunities across the board and you have to be an active investor to do that. All right. Bilal, let's talk about some of those opportunities, because one place that we are seeing a lot more of it isn't tech and AI. Neo clouds, especially to Eva's point.

42:43Are those neo clouds a concern given Elon Musk's tweet? And by the way, this idea here and I just kind of want to put it up there one more time. Elon Musk is basically calling for a shakeout in neo clouds. while Jensen Huang, who was invested in Neoclouds, is saying, no, things are good. Look, I think that is certainly a story, and there is a concern that should be had there. But I think the bigger opportunity should be who the corporate buyer is, because as you know, Dominic, corporate buybacks have actually been on hold for the last couple of weeks. And more importantly, there's$1.5 trillion that's set to come due, where these companies will be able to deploy that capital and provide some level of floor for the market.

43:23And no one's talking about that because everyone's concerned about the headlines of, hey, will these data centers continue to be built out? How's the spend going to be? And where do we get paid on our money, which we were talking about? But I think, again, the opportunity is the breadth of the market. And that's why I think the corporate buyer at the end of November is going to be a tremendous opportunity. Eva, is there the shakeout? Are you a buyer of tech with this or is it too early to really get back into this trade? We're very selective. For background, related to your point earlier, with the XOVR ETF, we can invest in companies like Anthropic and OpenAI because we invest in private companies as well.

44:00But we're seeing a financing issue with these companies, a cash flow issue. So what we want to target is we call it the winning the losers game. You want to be in this area, but you want to invest in companies that are going to benefit regardless of who the AI winner will be, such as companies that create batteries like Micron or companies that have to do with connectivity like Astera Lab. So we like these companies that are going to benefit regardless of what happens with the big AI names that have competition with China, with DeepSeq and Keman. You mentioned earlier on the show that China is providing the same type of technology in a much cheaper way.

44:43OK, and let's go to our last topic because we're running out of time here. It is a big central bank catalyst week. I'm going to focus on the Fed because we're here in America and that's kind of what matters more to us. Let's talk about, Jimmy, the expectations for the Fed. Do they raise rates or do they hold? And is it a good reason why? I think the Fed holds. I think it's absolutely a good reason why I'm not as concerned about inflation longer term as many people are. And so, you know, the war is going to end at some point. And when it does, I think oil prices come plunging down. I think inflation becomes not the story after that.

45:16I think it's going to be more of a growth scare. And so I think the Fed, you know, should stay put. And when, you know, the sentiment turns to more potentially for cuts down the road, I think you've got areas that you can invest into. So right now we're leaning into areas that have been beaten up recently, like industrials, financial cyclicals. So we think there's opportunity there. All right. And really quickly, our last question, you get the last word, Bilal. the fixed income markets of focus. Is the 10 year at five plus percent a buying opportunity? I thought it's been a buying opportunity for the last month and a half.

45:47I think you see why it's an opportunity because there's a mental hurdle and threshold that you got to get over. But I do want to touch on the Fed really quickly because this is important. They're on hold because of the calendar. They're not on hold because of the data. And you think about what's going to happen in December is going to be the critical point for why we need to pay attention. All right. Eva Salados, Bilal Little, Jimmy Lee. Thank you guys very much. We appreciate it. Shop Black Friday Appliance Savings and get up to an extra$1 ,250 off select appliance purchases like GE Profile. Plus, free delivery on appliance purchases of$398 or more.

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