Morning Call 11/2/26

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1:00Morgan Brennan: I'm Morgan Brennan, and this is your morning call.

1:17Morgan Brennan: Good Monday morning. Hope you all had a good holiday Halloween holiday weekend. Let's get a check on U.S. stock futures, which are attempting to rebound this morning, pointing to a modest rebound after last week's sell-off that capped off the Nasdaq and Nasdaq 100's worst month since March of 2025. You can see some green on the screen here this morning. S &P is poised to open up about 41 points. Dow up 241, 42 points. And the Nasdaq is popping up about, poised to open up about 229 points right now. That's after the worst day for both the S &P and the Nasdaq since early June. And as I mentioned, big losses in particular for the Nasdaq and Nasdaq 100 for the months of October, down more than 5 % and about 6.5 % respectively.

2:01Morgan Brennan: We're watching some of the hardest hit names last week with Amazon, Alphabet, Intel, and you can see all of those are higher here pre-market. Amazon right now up about 1%, Alphabet up more than 1%, and Intel up about three quarters of 1 % after one of its worst days on Friday in decades. Let's get a check on what we're seeing in treasuries and treasury yields right now and what has been in recent days of flight to safety. The bond buying we've seen in that, for the most part, continues here this morning. You can see the 10-year Treasury yielding 4.91 percent, so a little bit lower. The Fed sensitive two-year Treasury, 4.59 percent.

2:38Morgan Brennan: And the 30-year Treasury, 5.28 percent. Keep in mind, Treasury, we're going to get quarterly financing and refunding estimates this week. That starts this afternoon, too, so something to watch. Energy prices, those are falling sharply as U.S. and Iran officials ramp up rhetoric supporting a diplomatic solution to the crisis in the region. Iran and Qatari mediators are also holding a third round of talks over the weekend in support of a possible tension de-escalation. And you can see this playing out in crude prices. WTI is down more than 4 percent right now. It's back below 100 bucks a barrel, just below that.

3:13Morgan Brennan: Brent is also down more than 4 percent right now, trading around$108.62 a barrel. our Bob gasoline futures, diesel futures are also markedly lower this morning. That's after big gains, by the way, double digit percentage gains for WTI and Brent for the month of October. Let's see how Europe and Asia are shaping up. Steve Sedgwick is in London with the trade. Steve, great to see you.

3:38Yeah, lovely to see you, Morgan. Thank you very much. OK, let's have a go at this. There's a lot of stories here. Pan-European Stock 600, which, dare I say, wiped the floor with the And as that last week, the flight to safety trade as well. The stock 600 flat in early trade today. Weaker oil prices, that's oil prices, not refined product prices. And I'll come to that in a few moments time. Also hitting those energy stocks. We've had news out of France this weekend. Fitch has downgraded outlook for France to negative from stable whilst maintaining its A plus rating. The agency cited all the usual stuff.

4:11weaker growth, higher borrowing costs and a wider deficit as the key reasons behind the move. Elsewhere, Apple, I beg your pardon, Alphabet, has kicked off a euro denominated bond sale testing investor appetite on this side of the pond. Now, according to IFR, the tech giant will sell bond maturities ranging from two to 19 years. Morgan, I'm really interested in this next story because Ryanair, it's up there with Delta. It's got over 200 million passengers a year. It's a big player on this side of the pond, right? It says it is reviewing all costs after reporting a 6 % drop in quarterly profit, due largely to soaring jet fuel costs.

4:48Now, it's Europe's largest airline by a long way, by passenger numbers. It says despite significant hedging up till April next year, this is the point. And this is the point, whether we get a resolution to the war tomorrow, whether the brim price crashes 20 bucks tomorrow. The fact of the matter is the airlines, and I don't care if it's Southwest, Delta, American Airlines, Ryanair, The fact of the matter is they've been hedging a lot of these players up until April next year in the 60s, in the 70s. Right. Sixty, seventy dollars for the aviation fuel. Now, if they have to rehedge, it's one hundred and seventy bucks.

5:24That's like a threefold increase in many cases as well. So even if and I think our viewers need to know this, even if we get the underlying crude prices falling aggressively, The fact of the matter is the airlines that we all use on a regular basis, the refined product prices for aviation fuel, it's going to remain high. So everyone's going to have price increases, maybe 10 to 20 percent price increases, according to the CEO, who I spent a lot of time speaking to. I know Phil's going to do some work on this throughout programming today, but I found Ryanair's statement today absolutely fascinating.

5:54Back to you, Morgan.

5:55Morgan Brennan: Excuse me while I just pick my job off the floor. And by the way, you're right. We don't talk enough about the hedging piece of this. Did you say 170, 170?

6:06Yeah, yeah, because Morgan. I am the worst person at CNBC because I was the old OPEC guy, right? I'm basically the guy who looks at Brent. I look at crude the whole time. I look at WTI. I look at the spot price. I'm looking at the wrong. We're all looking at the wrong. We need to look at refined products, aviation fuel. This is not crude prices. This is aviation fuel. The crack spreads, I mean, it's a strange term, isn't it? The crack spreads are so much wider. There were almost record levels in many cases. So while people like me spend all their life going, look at the spot price of bread, look at the spot price of WTI, what I should be really looking for if I want to see the cost to our viewers, to investors, to consumers, I need to be looking at the refined products.

6:44I need to be looking at the fertilizer costs, the diesel costs, and especially in this case, the aviation fuel costs. Yeah, I'm talking about a near tripling of the hedge product costs if they were to hedge today.

6:54Morgan Brennan: All right, Steve Sedgwick, thank you. All right, let's get to our top story this morning. at least here in the U.S. Sources confirming to CNBC that OpenAI is looking to raise as much as $20 billion in a new funding round. That is far short of an earlier$30 billion target. While noting the deal has not closed and figures could still change, but other reports over the weekend suggesting that that raise could happen at a$1.25 trillion valuation. That's also shy of the$1.4 trillion that was originally planned as well. Why this matters so much amid a broader AI-induced sell-off in public markets? This is potentially the latest sign of how recent market volatility is negatively impacting both multiple and the amount of capital available for AI spending.

7:35Morgan Brennan: Now, a number of strategists already saying this will raise concerns about whether Anthropoc can come public on its pre-Thanksgiving timeline, raising$100 billion at$1.5 trillion plus valuation. Also adding to the angst, last night, Elon Musk writing on X that, quote, the cost of serving GrokBot was unsustainably high relative to revenue. That's in response users requesting GrokBak usage reset. So all of this put together has the potential to fuel investor concerns about AI revenues, justifying CapEx, something we've already been seeing playing out in the markets. That in turn has the potential to make it tougher for companies to access capital or at least access capital at lower costs, which brings us to meta platforms.

8:19Morgan Brennan: We're going to check those shares ahead of the open as well because we're sticking with this theme here. S &P Global ratings late Friday, lowering the credit rating outlook for Facebook's parents and negative from stable, saying the view reflects, quote, uncertainty about Meta's elevated capex, its negative free cash flow and its ability to monetize its AI investments. You can see shares are basically flat here, pre-market. And the update from S &P and tech sector sell-off were watching the price of the five-year credit default swaps on Meta's debt. That's a gauge of the company's credit risk and cost to insure against default.

8:55Morgan Brennan: And those swaps are now sitting at their highest levels on record. Well, let's also get a check on another momentum trade, crypto prices. Those are also in focus right now. Binance says customers pulled just over$3.6 billion or just over 2 % of its assets from their wallets. The FT this morning putting that figure at$5 billion. Now, this after the world's biggest cryptocurrency exchange resumed services following a cyber breach, a historic cyber breach that saw hackers linked to North Korea. We learned that over the weekend to steal six point three billion dollars from the platform last week. The company says withdrawals are not are now stabilizing as it looks to cover all customer losses and has so far raised some six billion dollars to do so.

9:39Morgan Brennan: Now sourcing the cash from its corporate treasury and an insurance fund and a fund set aside for security breaches. You can see shares of Bitcoin are bouncing back a little bit, prices I should say, bouncing back a little bit here, pre-market, trading just below$78 ,000. Ether is also higher, up more than 1%. Some of the other cryptocurrencies, it's a mixed picture, though. Largest crypto heist in history. So we'll continue to track that. Also this idea that North Korea is behind it. So some geopolitical implications there, too. Last week, though, started with a bang following Anthropik's S1 following, but it ended with a thud after disappointing earnings from Alphabet, Amazon and Intel.

10:17Morgan Brennan: The action doesn't let up this week. We've got earnings from Palantir and Apple today. You've got the midterm elections tomorrow, the October jobs report on Friday, a slew of other data as well and earnings. But let's tie this all together. Let's bring in Lynn Alden, founder and principal at Lynn Alden Investment Strategy. And Lynn, it's great to have you back on the show. There's so much to cover here. But first, I do think we need to start with the semi-smackdown and the great rotation that's been happening here under the hood is the Dow actually gained last month, but the S &P lost 5%. Your thoughts?

10:49I think it's rational to have a cyclical readjustment, but I still view semiconductors as fundamentally still fairly valued. So I wouldn't fade them in the total bearish case. But I'd be cautious about them going long-term bullish. I'm still bullish on Even though like hyperscalers and the open source models themselves, like the frontier models, that's where I'm more concerned overall compared to the semiconductors.

11:23Morgan Brennan: What do you think that means for Anthropoc going public later this month? I mean, I wouldn't be a buyer. I mean, I think they'll probably land it well. I mean, they have, you know, they've secured their investment banker participants. I think they've modeled this well. But from a retail or institutional investor, I would be cautious about going in at this valuation because when you're talking about trillion-dollar valuations for a frontier model with open-source, open-weight models kind of like nipping at your heels maybe six months out, the economic moat is very thin. So it's actually quite hard to justify a trillion-plus dollar valuation compared to what you can see with the semiconductors.

12:12So I would be cautious there.

12:15Morgan Brennan: I've seen some chatter over the weekend and a number of notes that it's not just the CapEx versus revenues dynamic and this idea of a potential AI bubble deflating a little bit here, if you even buy in that this is a bubble, but that there's also a political risk premium in the market here, too, ahead of midterms and this idea about AI moratoriums, at least here in the U.S. Do you think that's factoring in? I think both are factoring. I think overall the AI spend is probably slowing. I think investors are starting to punish just like unrelenting CapEx spending if they don't see kind of like a light at the end of the tunnel.

12:53So they want to see if you're spending, you know, in a quarter or two, how is this going to turn into profits? Not just revenue, but profits. And when you factor in the political aspect, I think that's a factor, too. I think when you're in fiscal dominance, which we are now, I think the sovereign starts to kind of like, you know, push its fingers on the scale. And, I mean, this is the leading technology. So this is where it's going to show up. And so I think investors have to account for that, which is why, again, I'm not very bullish on the models themselves. with trillion dollar valuations and open weight models kind of, you know, like confronting them, they're trying to capture, I think, regulatory modes to compensate for their, you know, kind of lacking economic modes.

13:44But I still think that semiconductors, you know, are, are, are fairly bullish if you're cautious about valuations and you buy in dips and hyperscalers, I think are mixed. You know, I used, you know, you know, a couple of years ago as bullish and hyperscalers now. So I think they probably overcommitted. But in the next several months, I think we'll probably see buying opportunities there as well. But I think that I think the cleanest trade is is cautious semiconductor, you know, bullishness or selling volatility.

14:18Morgan Brennan: What do you think about what's happening in fixed income right now? I mean, there's been some cracks in credit on the one hand. On the other, Treasuries have sort of renewed their status as a flight to safety trade recently, too. Yeah, it's a good question. I think that at roughly 5 % yields on the 10-year, if you look at money supply growth, it's something like 6%, and you're getting 5 % yields. So you're getting a negative 1 % debasement rate, which sounds bad, but as far as treasuries go, that's actually not that bad at all. I mean, if you look back in the 2010s, you were getting 2.5 % or 3 % yields, and you were getting 7 % money supply growth.

15:04So you were getting something like negative 4 % or worse debasement rates. So I actually think that, you know, I'm currently like I'm structurally a bond bear, but I, you know, it's hard for me to be bearish on bonds at the current rate for senior conservative investors at these current prices. So if I was a lower volatility or a senior investor, I would find 5 % plus yields fairly enticing at this current time.

15:39Morgan Brennan: Very quickly here, I do want to get your thoughts on this Binance crypto heist and what it means for Bitcoin and other cryptos. Yeah, it's a good question. I mean, it was the biggest hack in crypto history. Fortunately, it hit the biggest exchange. It was a small percentage of their overall holdings. And the combination of their reserve fund and their credit partners, they're able to put together a resilience kind of like your response to open up uh you know withdrawals um i think overall given the frequency of hacks that are occurring i mean ai is making hacking like it reduces the cost of hacking uh and so hacking is the way way more likely so i think multi-signature holdings which sounds like a jargon thing but like there's many you vendors that just make it easy.

16:35If you have, say, two or three keys or three or five keys spread around, you can avoid most of these types of hacks. Maybe not every single type of hack, but most hacks. I think most of these things are pointing toward multi-signature holdings overall.

16:52Morgan Brennan: Okay. Lynn Alden, great to have you on to start the hour. Appreciate it, as always. Thank you. We got a lot more to come here on Morning Call, including what to watch when Apple and Palantir report after the close and what those results could mean for the AI trade and the anti-AI trade. Plus, much more on the Monday morning crude crush as the U.S. and Iran inch closer to a diplomatic de-escalation, at least right now. Council on Foreign Relations President Michael Froman is here. He's going to weigh in. And later, countdown to the midterms amid a flurry of big developments and key races heading into the homestretch.

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18:43Morgan Brennan: Upfront payment of$45 for three months,$90 for six months, or$180 for 12-month plan required,$15 per month equivalent. Taxes and fees extra. New customer offer for initial plan term only greater than 50 gigabytes may slow when network is busy. See terms. Welcome back to Morning Call. Let's turn back to the tech trade in the wake of last week's sell-off. Big names reporting after the close today with Apple and Palantir. Wide divergence in those two stocks since their last reports. Palantir is up more than 50 percent. Apple up just 11 percent in three months. But year to date, it's a very different story.

19:12Morgan Brennan: Apple's up more than 26 percent. Palantir has gained just 4 percent. Now, for Palantir, it's about sentiment around the tech trade, specifically AI deployment and that application layer. For Apple, call it something of an anti-AI trade indicator. This will be the first report under new CEO John Ternus as well. And of course, they've had a flurry of product launches. Joining me now is Sarah Kunst, Managing Director at Clio Capital. Sarah, it's great to have you back on the show. Let's start right there. I mean, is there juxtaposition to be had between Apple and Palantir after the bell today? Or are the stakes very high for both for a variety of reasons.

19:49I mean, the stakes are certainly high for everybody right now. I think the similarity to start there is that both of these are companies that talk a lot about AI or referenced a lot in AI, but they don't make much of it on their own, right? They are both companies that seem to be settling into their lane saying, we are best suited in the AI race to be offering you largely other people's AI. And so watching Palantir kind of go higher on the fact that they are a rapper and very vulnerable to the underlying prices of their suppliers has been really interesting.

20:27Morgan Brennan: For Apple, the fact that we this is the first time we're going to hear on an earnings call from the new CEO, John Ternus. He took the helm in September. It's hit the ground running. I mean, three different product launches. And so far, it would seem that at least some of the reports we've gotten out there that demand is strong for the new iPhones. What are you going to be watching? I think that, you know, there are new iPhones. There are new laptops coming out. It seems like the reviews have been, hey, they didn't make much, so it's hard to get your hands on them, which definitely drives scarcity and might be good going into holidays to sort of juice the idea that, hey, there's something really you got to find it, right?

21:04You need to preorder. I don't think these devices are going to change our lives, and I don't think that's necessarily a bad thing. The heuristic I like is, you know, go ask your friends who use Apple, hey, are you planning to switch off the ecosystem anytime soon? The answer is almost always no. And it's not generally because they're so excited to get their hands on a foldable phone that doesn't have many apps that work with it yet.

21:31Morgan Brennan: All right. I want to stay right there because we have some breaking news that we want to bring to our viewers right now. Washington Post reporting just a few moments ago that SpaceX is in talks to potentially buy Boost Mobile or at least use its network, the potential move could give SpaceX a potential backdoor into a$235 billion wireless market. And of course, SpaceX has made no bones about the fact that they are expanding with Starlink Mobile into the U.S. market and looking to build out a wireless carrier competitor, something that has caused shares of AT &T, Verizon, and T-Mobile in recent weeks, recent months to sell off.

22:06Morgan Brennan: You could see a bit of red on the screen there again this morning. Echo Star, by the way, is popping on this report, and it looks like SpaceX is trading a bit higher as well. So, Sarah, not to put you in the hot seat here, but I'm going to put you in the hot seat here. I just I do want to get your reactions to that, because the other thing we have seen is quite a bit of M &A activity. We talk about IPO pipeline with Anthropic. But when you see this, when you see all the capital that's being raised, whether it's in, you know, debt markets or equity markets? How does it speak to the moment we're in?

22:36I think that the M &A talks don't surprise me. You know, we are potentially going into a different political climate, sort of locking down your M &A that you can do quickly and without scrutiny, especially in a space like phones and mobile. That doesn't shock me. The other thing we have to remember is when SpaceX stock needs to go up, Elon usually finds news to tease whether or not it ends up coming true. And so I don't think this is done until it's done. Sometimes it's not even started, right, when he says it started. So always the biggest grain of salt possible. But certainly it makes sense that they have a sense that they need to find a real business model because Grok and Cursor are probably not going to lead them to the promised land.

23:23Morgan Brennan: Yeah. And he made some comments about that on X last night. Sarah Kunst, it's great to have you on. shares of SpaceX up about 3 % right now. Aquastar is up about 2.5%. We'll see what happens with this. Keep in mind, they're already partners when it comes to a treasure trove of spectrum. Straight ahead, why markets in China are getting a big bump to kick off in November trading. We've got a live report from Beijing 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.

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25:18Morgan Brennan: Let's get to the action overnight in Asia. Major indexes across China popping, along with a number of China tracking ETFs in the pre-market here in the U.S. This is on reports that Chinese regulators and other financial players are holding meetings to find ways to shore up the faltering Chinese equity markets. Our Eunice Yun is covering that from Beijing. Hi, Eunice. Hey, Morgan. Well, the Chinese Central Bank did just announce a moment ago a new program that is meant to counter the stock sell-off. This program would be$15 billion in size meant to channel into the stock market, a one-year swap facility that would start on Tuesday.

25:56This would ultimately be allowing to exchange illiquid assets with liquid assets with the central bank to buy stocks. The announcement said that 31 firms have already applied, including securities companies, funds, as well as insurers. Now, separate to that, the central bank injected$81 billion into the banking system. It formally shifted its main policy rate. All of these moves meant to signal that the conditions for lending should be easier. And this all comes as the Chinese investors have been very concerned about what they've been hearing in terms of the AI trade, in terms of the economic data that we've been seeing out of here.

26:43The CSA 300 stock market has fallen 8 percent in October. And today we had more negative economic news in that the PMI, both over the weekend in terms of the official number as well as the private number today, both showed that the manufacturing sector is contracting or at the very least slowing down. Morgan?

27:06Morgan Brennan: Eunice Yoon, thank you for bringing us the latest from Beijing. Let's shift gears here. We're talking about airlines earlier. Let's talk about spaceflight. Late last week at the Schwab Impact Conference, I sat down with Victor Glover, the retired NASA astronaut who piloted the Artemis II mission around the moon earlier this year. We discussed the historic mission, the role of commercial space in this new lunar era, and whether human space flights will become more democratized and more regular. The knee in the curve for this is not like the airline industry. But if you understand the history, Pan Am, TWA, and the United States Air Force, and the Postal Service, the push that created what we have today as a modern commercial airline industry, this is very different.

27:48And the safety margins are much more critical to understand. And the distance, the proximity of where these missions happen, it's just like the difference between driving on the road and flying. Well, flying in the air and flying in space are that different. And so to democratize, yes, I can't wait until we get more people and more types of people in space. We need more artists. We need more kids. Blue Origin flew the youngest person and the oldest person to space, I believe, in the same year. That's amazing. But in order to make it more common or regular, that is a very different thing than democratizing it.

28:20And I would say we're not at the point where we're going to make this regular. It needs to feel like the most important thing you've ever done, going to the Olympics, playing in the Super Bowl, the World Series, every time we fly to space because it is so dangerous. Unfortunately, we make it look easy, but it is not yet. And I don't think we can start to treat it that way.

28:37Morgan Brennan: Those are some key insights from someone who flew farther into space than any humans prior, but was also on SpaceX's second ever crewed mission to the space station and has completed four space blocks. Commentary is a little different than what we've heard from Jeff Bezos, Elon Musk and Richard Branson. So worth consideration there. We'll interview on CNBC.com. I'm Morgan Brennan. Welcome back to Morning Call. Let's get a check on U.S. stock futures this Monday morning, which are attempting a rebound here. You take a look there. Some green on the screen. The S &P is poised to open up 42 points, the Dow 262 points, and the Nasdaq attempting for gains of 230 points at the open.

29:14Morgan Brennan: This is after the worst day for both the S &P and the Nasdaq since early June and losing months for both the S &P and the Nasdaq in October, even as the Dow gained. And we saw this rotation afoot with things like consumer staples and health care sectors hitting record highs. We're watching some of the hardest hit names last week, though, Amazon, Alphabet and Intel, because we really talked about it already so far this hour. But the semi-smackdown and what we've seen with disappointing earnings. And if we get a check on the Treasury market and what we're seeing with bonds after quite a bit of bond buying in recent days as well, at least Treasuries, You can see the U.S.

29:51Morgan Brennan: 10-year Treasury yielding 4.92 percent, Fed-sensitive two-year 4.59 percent, and the 30-year Treasury yielding 4.28 percent. We're also keeping an eye on the crude complex. Energy prices falling sharply, or at least futures falling, as U.S. and Iran officials ramp up rhetoric supporting a diplomatic solution to the crisis in the region. We've got quite a few headlines over the weekend, and you can see that is weighing on oil prices. WTI is down 4 % right now, just below$100 a barrel. Brent crude is also down 4%, trading around$108, well, just under$109 a barrel. Arbob gasoline futures are down more than 5 % right now.

30:29Morgan Brennan: Diesel's down as well. If we turn to the midterm elections, though, we're just one day away. President Trump spending the final weekend ahead of those contests in Kansas and Iowa. Two states he easily won in 2024, campaigning for Republicans there, facing challenges from Democrats. These could be close elections. The president is set to give his closing pitch on the elections today in Washington at the Lincoln Memorial. Meanwhile, the Justice Department says it plans to appeal a federal judge's ruling dismissing the agency's lawsuit, seeking to delay certification of Alaska's Senate election if Republican incumbent Dan Sullivan loses.

31:03Morgan Brennan: Now, the DOJ argued that there could be, quote, voter confusion over the presence of two candidates named Dan Sullivan on the ballot. That's been a crazy situation. In Michigan, big drama for the state's Democratic Party after the Senate candidate Abdul El-Sayed's former primary rival, Representative Haley Stevens, endorsed El-Sayed's Republican opponent, Mike Rogers. And all of this, 71 percent of users on Cal State expect the Democrats to sweep both the House and the Senate in tomorrow's midterms, while 25 percent think that Democrats take control of the House while Republicans hold on to the Senate.

31:43Morgan Brennan: So if we stick with the prediction markets, we're seeing plenty of money flowing in ahead of tomorrow's midterms with big swings in key contests. Contessa Brewer has been following it all, literally following the money trail. She has more on it. Contessa. Yeah. Yeah. We're doing it so much differently these days than when I started out in my journalism career here, Morgan. This has been a crazy week for predictions and politics. Robinhood tells me customers betting on midterms increased by nearly two and a half times in a week. Traders give Democrats a strong chance of winning the House, 93.3 percent on Calci.

32:17That's up 3.2 points, 94.5 percent on Polly Market in the Senate. Calci traders give the Democrats a 75 percent chance, and that has moved seven points higher this week. In the last 24 hours, you mentioned Michigan Senate race, Morgan. It saw so much movement after Haley Stevens switched sides and endorsed Republican Mike Rogers for Senate. On Sunday, Democratic candidate El-Sayed went from a 77 percent probability of winning to a 68 percent chance. And Rogers gained nine percentage points, though overnight those changes have reverted to where they were before the Stevens endorsement. So there was your chance to make a little money in between the gap of and the movement in those prediction markets.

33:02CNBC's analysis of the biggest moves yesterday show the top six trending toward Republicans. But then if you look over the last seven days, all the biggest moves, including a 17.5 point move in the Florida governor's race and a 13.5 point move in the Kansas Senate race, were toward Democrats. Cal, she says the Texas Senate race was the most active traded midterm contract by far, with nearly$12 million from Friday morning to Sunday afternoon. Michigan Senate race saw$5 million in trading volume, a lot of that after the Stevens endorsement. this weekend, the governor's races in Texas, California, and Florida all came in with roughly two and a half million dollars.

33:46What you're seeing here, though, is that the action is moving and the news headlines move those markets. Morgan.

33:53Morgan Brennan: That's sort of where I was going to go with you, with my follow-up question, because we've seen in past election cycles that traditional polling has not been working and it has not been accurate for the most part. Prediction markets have done a better job in recent election cycles of calling some of the odds, but they've gotten so much bigger. And the trading dynamics and what goes into these contracts is so much different. So I'm curious what that looks like in this cycle. You know, it's interesting, too, because some of the recent results have raised questions even about prediction markets accuracy.

34:24For instance, the Brazil presidential election, prediction markets got wrong. There was a race in Wisconsin earlier this year. Totally wrong. So the question is, is it any more accurate than public policy polling, which is based on science and math? You know, what you're seeing instead is maybe the money's going in and people are hoping to take some of the action. CNBC analyzed something like 142 competitive races and found that 88 of them, there was only a one-point gap between what Polymarket offered and what Calci offered, when you factor fees into that, there's just not a real opportunity to make money on the platform.

35:06So it becomes in these moments where you're seeing swings like we did yesterday in the Michigan race, can you get in and then get out when those swings are happening? All right, Contessa Brewer, great context there.

35:19Morgan Brennan: For more on the midterms and some of the big macro issues, let's bring in Michael Froman, president of the Council on Foreign Relations. He's also a former U.S. trade rep, former deputy national security. advisor for International Economic Affairs. And Michael, it's great to have you on the show. There's so much to get to. But first, I do want to get your thoughts, what you're watching, what you think investors and markets need to be watching as we come into and out of these midterms this week. Well, Morgan, you know, it's interesting. Historically, foreign policy never played a huge role in elections, particularly midterm elections.

35:51But this year, affordability is really being reduced down to what's going on in Iran and the president's use of tariffs. So suddenly foreign policy issues are very much on the agenda. And we'll see how that plays out over the course of many of those races that you were just discussing. The big question is, even if there is a significant blue wave, what does it mean for foreign policy going forward? And will the president feel constrained going forward with a Democratic converse? Or will he continue to rely largely on executive action?

36:21Morgan Brennan: Assuming you do see or the possibility that you do see a blue wave coming out of the elections tomorrow. What does that mean for the stakes around lame duck, especially as the president has discussed the possibility, floated the possibility of re-escalation in Iran coming off of those elections? Well, I imagine Congress will be trying to be active if they can during the lame duck to put in place a number of things to constrain the Democratic Congress going forward, whether that's another reconciliation bill, a debt limit increase, trying to take off the table tools that a Democratic Congress might use to put leverage over the president.

37:03In terms of the president, we don't know where he stands on Iran. On the one hand, we are hearing all sorts of stories and see movement of ships and soldiers, sailors, Marines into the region on the expectation that he might escalate the conflict there. On the other hand, we know that negotiations are ongoing, and it's only at this point in his mind whether he goes down one path or the other. He's really prepared, preparing to take action in the region should the negotiations fail. And the question will be whether that really changes the dynamic going forward or not.

37:38Morgan Brennan: What do you think about the dynamic that has emerged here ahead of the elections regarding Ukraine and Russia? And does that change or evolve? Well, ultimately, while the president relies largely on executive authority when he conducts foreign policy, the Congress does have an important role to play when it comes to appropriating the budget, appropriating money for the Defense Department. And there is substantial support in Congress, both among Democrats and Republicans, for providing more support to Ukraine. So one big question would be, will the Congress act to put more resources in the hands of the Ukrainians directly than the president has been willing to do up to now?

38:18And conversely, will they try and constrain what the president can spend in prosecuting the war against Iran?

38:24Morgan Brennan: Part of what makes America so, I would say, special has been the rule of law. I've seen a number of notes from strategists and investors over the weekend suggesting that if you see any kind of questioning of the election outcomes this week, that could trigger some uncertainty, that could trigger some market volatility and maybe continue to erode this idea of rule of law. How important is that? How closely are you watching it? Watching it closely, rule of law is one of the critical strengths of the U.S. economy. On the other hand, I think the courts have been active in this area, making decisions.

39:02I think the institutions will hopefully hold up throughout this. There are plenty of avenues to take this to the courts and not take action unilaterally. And I have faith, ultimately, that the courts will preserve the fundamental integrity of the election system.

39:19Morgan Brennan: All right, Michael Froman, it's wonderful to have you on the show. Thank you for joining us. Thanks for having me. Well, as we head to break, we're digging into the ongoing market rotation out of tech and the consumer staples sector as tracked by the XLP ETF, hitting a new intraday high on Friday. October marking the best month for the sector since October of 2000. That's according to BTIG. Names like Church and Dwight, Altria, Philip Morris, helping to lift the sector. All at 52-week highs as of Friday. We're back after this. It's time for your call sheet crew members today. Jeff Hugh of BNY Mellon, Ross Mayfield from Baird, and Jose Torres from Interactive Brokers.

39:57Morgan Brennan: Great to have you all here. We've got a lot to get through. We're going to get through as much as we can. Ross, I'm going to kick this off with you. I'll call it tech wreck, although we have a rebound afoot here, potential rebound afoot here this morning. What are you watching most closely, especially when semis and tech sectors specifically accounted for almost all of the downdraft we saw on the S &P on Friday? Yeah, I mean, I think the first takeaway is that the semiconductor industry is still a cyclical industry. I think there was a narrative that this industry was a permanent winner. What we're seeing is that rates matter, that borrowing costs matter.

40:32And so from here on out, I think the fundamentals and the earnings were fine. Expectations were really high. PEs have been reset. So I think from here, you are just watching the CapEx story at the major hyperscalers, and you're watching rates because it's clear that interest rates matter, even for the biggest and boldest companies out there.

40:51Morgan Brennan: Yeah, we had the meta downgrade coming into the weekend. Jeff, we had this opening eye report that they're not raising as much at a valuation as high as originally planned either. Question marks now, I think, going into Anthropics IPO. How meaningful is all of this? I think all of this just really begs the question, what are the financing costs for AI that the market is comfortable with? This is a dynamic situation. If you can justify the ROI, then you can justify the financing costs. If there are questions over the ROI right now, then we need to look at where Treasury yields are, where spreads are.

41:25And that's where some relief this morning from energy prices for the broader direction of travel still seems to be to the upside as central banks continue to hike interest rates. That's what they need to manage right now. Hmm.

41:38Morgan Brennan: Jose, I want to get your thoughts on all of this, especially as it is a key week for labor data and other economic data and with midterm elections. I mean, this has been part of the chatter that AI moratoriums have been in place ahead of the elections. And not only just from a congressional standpoint, but from like a local gubernatorial, et cetera, standpoint, that those are also funneling into investor sentiment right now. Well, overall, Morgan, I think that the fears of the Democrat blue sweep are overblown. I think the party is going to move more into the middle. That being said, there is higher risks of AI regulation and harsher oversight against that backdrop.

42:18Expectations were extremely elevated. Of course, a lot of those firms missed those expectations. Heavy investments, returns a little lower. And when you have the higher oil prices and the higher interest rates blocking the cyclical trade, unable for investors to move into areas in the Russell and the Dow, then we have a lot of broad weakness. The good news, however, this morning is that we're having some relief on yields and on oil. And if AI has a little bit of weaker momentum, at least investors can move into those cyclical areas and bolster the overall indices a bit.

42:53Morgan Brennan: Yeah, Ross, we reported on it earlier in this hour, but, you know, reports, Washington Post reporting that SpaceX is in talks to either buy Boost Mobile or use its network as it builds out a wireless carrier competitor here in the U.S. I mean, M &A has been a big part of the story here. Does that continue or is there a clock ticking given the fact that we do have midterms? And there has been chatter about the fact that we've maybe already seen peak deregulation, peak M &A, peak tax cuts. I think there's probably a clock ticking between the shifting political sands and, again, not to harp on it too much, but the higher rate environment.

43:30I mean, it makes a lot of the deals slightly less attractive. And with the questions around AI, a lot of the big companies that would be acquirers are already pumping so much money into the ground in building data centers or kind of building out their own AI infrastructure. But I think it does cause maybe the M &A and IPO market to slow a little bit. Financials had been a big winner over the summer, but have lagged a bit here. I think that's part of what's being priced in. But broadly, breadth is fine. I mean, we're looking at areas like health care, and I think there's still a lot of places to go.

44:03Consumer had a nice month. So there's still plenty of places to hide, plenty of places to rotate into as the market sorts out who the AI winners are and what's the next leg of this semis trade.

44:14Morgan Brennan: Jeff, how much are you tracking geopolitics right now? Because, yes, it seems like there's a diplomatic thaw that continues between the U.S. and Iran, at least coming out of the weekend. We've got WTI back below 100 bucks a barrel. But President Trump has also threatened to re-escalate after this election. And, oh, by the way, we've got North Korea in the mix with this Binance hack now, too? So, very much. This is really the key driver that central banks are looking at. And then central banks, they will determine the marginal cost of financing, underpinning debt and equity and M &A that we've talked about.

44:50I'll just quote the outgoing European central bank, President Lagarde. She once said that markets should stop trading policy expectations based on oil prices and energy prices. Yet that is exactly what markets are going to continue to do. Every ebbing and flowing of diplomacy or of other forms of action that will impact where rate expectations are going. And that's going to have an immediate knock on effect on all other risk assets as well. It's as simple as that.

45:19Morgan Brennan: We got a fair amount of Fed speak the end of last week. and Jose. And it seems like a foregone conclusion largely as of right now that the Fed is going to hike again in December. Is this really about financial conditions or is it about inflation? Is it about something else? I think it's about inflation, Morgan, but I think we might be one and done here. The only thing driving inflation meaningfully higher is oil. Without oil, Morgan, core CPI, you're in the mid twos. If you have a geopolitical resolution that gets you back to the 80s or 70s on WTI, Morgan, you're back to the low twos on inflation, right in the vicinity of the Fed's 2 % target.

46:00Interest rates down a lot in the last 45 days.

46:04Morgan Brennan: Okay. Well, we're going to leave the conversation there. Gentlemen, great to have you on. Thank you to our call crew. Every day as a small business owner feels like solving a puzzle. One moment you're cruising along. And the next, there's a shipping snag that has you scrambling. But here's a surprise you will like. With Progressive, small business owners save 13 % on their commercial auto insurance when they pay in full. So go ahead, surprise yourself. Get a quote in as little as 8 minutes at ProgressiveCommercial.com Progressive Casualty Insurance Company and Affiliates. Discounts not available in all states or situations.