10AM Hour: G7 To Release 100M Barrels of Oil, Nike Goes off Track, Goldman’s First Reaction to Jobs Report 10/2/26

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1:00Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Morgan Brennan, Mike Santoli here at Post 9 of the New York Stock Exchange. Sarah Eisen and David Faber are off today. Stocks trying to get some gains here as a weak jobs number and easing oil prices bring yields down. We'll talk with Goldman's chief economist Jan Hatsias about this morning's soft payroll print. Nike is sitting out this rally as the Dow's worst performer of the year. Piles on more losses, that soft outlook, some new layoff plans. We'll talk to an analyst who just threw in the towel on his longstanding buy.

1:31And former Tesla President John McNeil is with us as the company reports solid Q3 delivery numbers today. Well, factory orders just crossing. Rick Santelli has it for us. Hi, Rick. Indeed. Factory orders. This is an August fresh number, expecting up two tenths. Headline comes in it up one tenth. And that big number last month at nine tenths, well, we lose a tenth up eight tenths, but still a strong number nonetheless. Now, if we strip out transportation, it moves to three tenths. Still a good number, but half of what we expected. Up three tenths would be the best, well, since it was up six tenths last month, obviously, and that six tenths gets revised to up 7 tenths.

2:13So we actually gained a tenth on X transportation. Now, the durable good numbers, they're also August reads, but they're final reads, which means we take the mid-month and we revise it. Mid-month read was unchanged and now becomes down 110, down 110. And that would be the weakest level since it was minus four. And that was in May of this year. Now, if we take out transportation, nice improvement, up two tenths. And that is very close to where we were. It was up three-tenths on our mid-month read. And finally, if we look at Capital Good Order's non-defense X error, a proxy for capital spending, it remained at up 1.6, which was a very lofty number.

2:53It was the best since up 1.7 in June. And this series has been relatively strong, and that's a good thing, obviously. I would think maybe AI build up, build out playing into this to some extent. And finally, Capital Good Shipman's non-defense X error, also up six-tenths last read, loses a tenth, becomes up half of 1%. We see, as Carl pointed out, we didn't have a stellar jobs number, but it wasn't a horrible number considering population growth. And when we factor it all in, yields are indeed down. They were down a bit coming in. They're down pretty much around the world to various extents, considering how energy prices have pushed up yields in all the highly economic economies throughout the world, from France and Italy, U.S., the Eurozone.

3:41So the reprieve is a welcome sight. And crude oil futures, of course, are down on the session as well. Carl, back to you. Rick, really nice montage for you on this landmark day as you sign off. We're not done with you yet either. So we'll see you later in the hour. That's our Rick Santelli. Mike, what are you watching today? I know you're kind of keeping an eye on this AD line, which has been interesting lately. Yeah, I mean, that's been the story the last six weeks is that the average stock's really been taking on a lot of water. The S &P's remained supported. It's a dramatic picture of a divergence of the average stock from the index.

4:15What's interesting today is the textbook would suggest you get relief on yields and it's going to create a flush higher in some of the kind of beaten up areas of the market. It's not really happening. And I think it's because the yield response has not been particularly strong. I mean, definitely yields are off the boil. Yesterday we had some relief as well. But two-year yields only down a couple of ticks. So it's not as if it's suggesting that we're unwinding this big move higher. I still think it's OK in terms of trend, in terms of being able to handle this. The market definitely got ahead. And we spoke about this in recent days.

4:51The market seemed to be getting ahead of what the Fed had already said two weeks ago in terms of pricing and certainty of October and then more to come from there. I think we got locked into the CapEx overheat story. Today's jobs number moderates a little bit of that. Not seeing a lot of relief on banks either. And banks have been an underperformer in the last little while as well. So there's a lot of kind of swirling currents around the start of this quarter. Everyone's anchoring to the very strong earnings picture, which is expected to continue. And I've been pointing out we had massive earnings growth in the second quarter.

5:23The S &P has been trading within a few percent of where we were before the last earnings reporting season. And so clearly valuation has been compressed and that's been part of the story. I mean, we've talked about it, I don't know, for the better part of a couple of weeks now. But yes, we've seen these big moves. We've seen volatility in the bond market. Yes. But the fact that it's been pretty orderly response in other asset classes, including stocks, tells us what? Yeah, it's well, it tells us for one thing, something about structurally the stock market as measured by the S &P 500 has stabilizers.

5:56Look at that chart. There's all these offsets. The VIX is kind of subdued, and that's the move index. That's the VIX for treasuries. So obviously you've seen an acceleration higher in the jumpiness of treasury trading. But the S &P 500, it's all about the sort of rotational mechanics that have kept index-level volatility. So low VIX here doesn't mean necessarily complacency or greed. It means the index itself has been in a very narrow band. And for the next 30 days, statistically, people are betting it more or less continues. The dollar is much stronger, too, here. And yes, I realize I'm a bit weaker this morning against other major currencies, just given what we're talking about, including economic data.

6:33But how does that factor into all of this, too, especially when you do have commodity prices that are continuing their climb? I think it was part of the financial condition tightening, Fed hiking calendar, getting a little more busy, at least in the market's estimation. But we are coming in off that as well. Kind of interesting, hovering just under 102 here in the dollar index. Let's go deeper into this market action. And we'll bring in J.P. Morgan Asset Management Chief Global Strategist David Kelly right here. David, good to see you. Good to be here. So I think you've been kind of thinking that the Fed maybe didn't have to do a whole lot.

7:05Today's jobs number, even though it was an undershoot versus what you were expected, I guess, fits into that story? Absolutely. I mean, this economy is a tortoise disguised as a greyhound. It is just not as fast as it feels on Wall Street, because on Wall Street we're looking at the AI boom. But if you look at the rest of the economy, we've got this is the sixth month in a row in which real wage growth year over year will be negative. We've got very little job growth. We've averaged about 50 ,000 jobs per month for the last two years and actually for the last three months also. So there's not a lot going on in the rest of the economy.

7:41We've got labor supply very constrained. And I think this report is part of a lot of data this week that really says this economy, wait, this is not a boom. I mean, it's not a bust either, but this economy is not booming. It's just moving forward at pretty much a steady pace that we've seen for a number of years here. That being the baseline assumption for the majority of the economy, I think there was this narrative that had built up of, you know, the CapEx overheat potential in one segment of the economy and the at least stubbornness of inflation to come in toward target was at least enough that the Fed had to stay on alert.

8:16That seems to be what changed Kevin Warsh's message as well. I think that's part of it. I think also that there's a real problem with this idea of no forward guidance, because I think what's happened is we've actually built in a Fed uncertainty premium, because, you know, I think the markets have got way over their skis here. If you actually look at even the dots themselves said one rate hike in December. OK, that's now what markets have got. But the dots said no rate hike next year. And the markets are still pricing in a probability of two rate hikes, which I think is still too much. If you look at the inflation numbers, remember the mean Dallas Fed thing that Kevin Warsh was talking about in his testimony?

8:55That number has come down to about 2 % year over year. It's trading well below the core consumption deflation. So this is not an inflation-prone economy. We've got this issue in tech, but really the rest of the economy is not that inflation-prone. And one other thing. The Glanta Fed, I think, is going to reduce their GDP estimates, or they have already, from 5 % down to about 3.5%. Because when we look at the data for August, what's happening is, yes, tech is spending a lot, but we're racking up a trade deficit. This is demand that is going overseas just as much as it's staying at home. And that, of course, relieves some of the potential inflation pressure here.

9:31That sort of gets right to the question I have for you. And that is, you know, the bond yield story, the run-up in rates has been a global one. It's been a global phenomenon. France, in particular, last couple of days, sort of really getting a lot of attention as the problem child in the EU, for example. So when you take the U.S. and you compare it to what we're seeing in other parts of the world, how to think about that from an economic picture, an inflation picture, and what that means just in terms of an investing picture, since we have seen international money flowing into U.S. equities. Well, yes, and I think that can continue.

9:59But really what's happened here is a normalization of bond deals. I mean, what we need to recognize, continue to recognize, is the new normal was just a period of time for about 14 years where rates were extraordinarily low. And we're seeing those rates come back to more normal levels here relative to the underlying level of inflation. But I would point out that over the last year or since the start of this year, we've seen overall nominal yields go up about 110 basis points. We've seen real yields go up about 100 basis points. So there's only 10 basis points of more inflation. It's not that the market expects more inflation.

10:31It's just decided that these low real yields don't make sense in an economy which is growing OK, but one in which the U.S. government is running a budget deficit of$2 trillion a year. And by the way, everybody else is doing fiscal policy, too. And so there's just this extra demand for credit, which I think has just been pushing this up, along with, of course, Fed uncertainty. There's no doubt that the absolute levels of yields represent more normal long-term levels relative to GDP growth, even spreads to Fed funds, all of it. But I've been calling it a normalization shock only because it happened in a hurry.

11:04And it does have implications, presumably, for cost of capital and other ways that valuation fits into stocks. Yeah, it does. And I think this could be part of a breaking action on investment spending going into next year. Because particularly in the hyperscale, when you're borrowing the money and you have to do this also, I think that you're borrowing this much money at these rates. I think that's one more reason to just pull back a little bit. It's also going to hurt housing, but housing is only 4 % of the economy. And I would point out that the increase in short rates actually increases interest income for consumers.

11:38So I think it's a small negative. It's not a big negative for the economy. We're paying ourselves to some degree with these higher rates. David, thank you. Anytime. See you, David Kelly. Getting a news alert out of Washington this morning. For that, we'll get to Eamon Javers. Hey, Eamon. Yeah, Carl, that's right. I want to flag for you a social media post from President Trump just over the past couple of minutes. It could be significant for global oil markets. What the president has said is Europe has just agreed to release a massive amount of their heavily stocked diesel oil. The process will begin immediately, says the president of the United States.

12:09A lot of details we don't have here. Obviously, that's a pretty terse message from the president. We don't know, based on this comment, who's agreed to this, how much, how soon, what the effect of that might be on global diesel markets. But we do have this reporting from Politico this morning, which was pretty fascinating out of Brussels. saying that French officials had proposed a large release of strategic oil and diesel reserves during talks Friday in Brussels after pressure from Washington to do just that. We saw this social media post from Treasury Secretary Besant yesterday pushing for European officials to release some of their strategic diesel reserves.

12:48Interesting here in the Politico article, they're saying that according to officials, France's compromise offer today was in response to a fresh request by the U.S. to President Macron to release 100 million barrels of fuel, all of which should be diesel, Politico reports. But apparently there's a dispute here between French and German officials. Berlin, they say, was reluctant to release any barrels, according, again, to Politico's reporting. So if you take the president at his word with his social media post just now, he is suggesting that there's been a resolution to that dispute and some agreement.

13:24We are looking right now and checking the wires and with folks in Europe to find out if we can get any indication that there has been an announcement officially from any European entity that would back up the president's social media post. But for now, the president is saying that Europe broadly is not saying which entity has agreed to make a diesel oil release from their strategic stockpiles. And, Carl, oil markets are going to do a better job of parsing the significance of that than I can do from this desk here. Yeah, diesel. I mean, diesel at the retail level came in a little bit today to six thirty seven wasn't hugely dramatic.

14:00There's also the notion, Eamon, of whether or not if they did this to avoid an export ban on our part, whether that locks the president in or whether pressure will be so intense over the next 32 days until the midterm that he might do it anyway. Yeah, you know, he's been considering it. He said as much in the Oval Office earlier this week, an export ban on diesel, given how much diesel is produced in the United States and how eager he would be to keep the prices down there. But he wrestled with the real implications of that pretty openly in the Oval Office earlier this week, saying that he thinks it might have a negative impact if you do that, might have a negative impact on gasoline prices.

14:36And, you know, there's this idea that if you try to harness the diesel price here, you're simply going to push inflation out into other areas of the economy. And so net net, it might not get you the result that you want. And, of course, there are people in industry who would say, you know, that's government control of industry. We shouldn't do that because we should let free markets be free. President's wrestling with all of that. And, of course, all of that as he's trying to find an endgame to the war in Iran and as he's facing these midterm elections in November. All right. Iman Javers, thank you.

15:08Guys, I just want to get a check because we're showing it right here on the screen. I mean, you've got the heating oil futures contract. This is the ultra low sulfur diesel contract down almost four percent, five percent. Excuse me. I mean, that's a hefty move in response to this. Are Bob Gasoline futures also down similarly here? Amina Bakker from Kepler was on my show morning call earlier today and one of the points she made, and I think this is what you're going to hear more of in response to this, assuming this deal and the details of this deal continue to come out here, is that, yes, this is going to push prices down near term, longer term.

15:37It's going to buoy prices, right, because you're going to have to refill all of those inventories on top of all the other inventories we've been talking about. And you need to find more and more ways to restore and expand refining capacity globally here. Yeah, there's also some reporting today that maybe the Russians would consider loosening their own diesel export ban if some of these refineries are not damaged as much as some might have thought. We'll keep an eye on all of that. Our roadmap for the rest of the hour when we come back. Nike goes off track. Shares now down a full 50 percent on the year after the guidance and layoff news last night.

16:12We'll talk to an analyst who just gave up his longstanding buy rating. Plus, Tesla out with third quarter deliveries this morning. We're going to talk to the company's former president about why he says Tesla and SpaceX are becoming increasingly intertwined. And Goldman Sachs chief economist Jan Hatsias is with us to weigh in on the soft jobs report after his firm had just pushed back its rate hike timeline. Squawk on the street back after this break. We believe in starting with your financial goals, not a formula. At Oppenheimer, we put the full strength of our longstanding expertise to work, understanding your life and your ambitions, and designing the precise strategies that build and protect your wealth with confidence across this generation and the next.

16:58Put the power of Oppenheimer thinking to work for you. Wealth Management, Capital Markets, Investment Banking. With the Discover Cashback Card, it's payback time when you earn cash back on everyday purchases. Activate and earn 5 % cash back at different categories each quarter on up to$1 ,500 in purchases. That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discover.com slash 5 for details. Weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work.

17:42Gemini 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. Welcome back. Nikely's tumbling this morning on Rough Guidance, the company expecting revenue to decline by high single digits next fiscal year. Mikey also announcing plans for a third round of layoffs beginning in 27. Let's bring in Sam Poser, senior research analyst covering footwear and apparel at Williams Trading.

18:18He downgraded the stock this morning to hold after maintaining a buy rating for more than two years. Sam, we talk about kitchen sinks a lot. Was this one big enough? You know, I think we're not going to really know until we get to the investor day in mid-November. That was, you know, it looks like, you know, revenue margins may recover, start recovering in the middle of next year. But they said they're going to some of their restructuring, reinvestments from the restructuring are going to be made on the front end. So that makes the margin story harder as far as sales go. So I think it's going to be tough for them to convince anybody that sales are really going to improve probably until we get to fourth quarter fiscal 28, which is going right into the Olympics.

19:07And that's been the biggest change. I thought that they could fix all this stuff a little significantly faster than it ends up being. I think they're making the right moves, but it's certainly a bigger slog than what was anticipated. Yeah. We spent a fair amount of yesterday talking about the new Caitlin Clark shoe, but you refer to what you're calling a stalled product creation engine. Walk us through some of that. Why is that happening? Well, a couple of things. I mean, I think on certain items like the Caitlin shoe or some of their running shoes and soccer cleats, they've done a very, very good job.

19:41The problem is it's a much bigger business than that. And I think a couple things happened. One, within their core footwear, which is basically the sort of less expensive shoes, they got rid of all the support for that. They lost a lot of the people they had on the ground, their Eakins folks, which they've rehired, which have always provided Nike a huge amount of information. So a lot of the new people don't know the information. So the whole end, like the beginning of the engine isn't working. And I mean, the good news is they recognize this and that they were not upbeat on the earnings call, to say the least.

20:20So I think they realize the work they have to do. I do think they're doing the right things. They lost so much talent in the organization from supply chain to product creation to those folks that were always on the ground, out in the stores, talking to consumers, seeing what was happening. And that always used to relay back right up to the top. And a lot of those folks are new, so the information flowing is good and so on. And that all came home to roost yesterday evening. Sam, I know this is a turnaround story. I know it's sitting with management in terms of executing now. But how much is macro weighing in?

21:03I mean, you think about Dix, you think about JD Sports, you think about some of the other results we got from other companies that play in the space in this past earnings cycle. And when you look at the numbers in China, for example, where we know domestic growth has been slowing down, Is that just adding another layer of complexity here? I would say yes to the complexity, but no to the cause. I think that, you know, every company, it's very easy to say it's the macro this or the macro that. But there are always brands that are doing well in every market. China's more complicated. I think that if you have, there isn't enough newness in general in athletic footwear outside of running where there has been a lot.

21:46and that is causing the slowdown. When the economy is, you know, and it's tough out there, then the consumers even have to be more discerning, which requires the brands to step it up even more. And, you know, that is certainly not occurring. And Dick's is, you brought up Dick's Sporting Goods. I mean, that's a tale of two cities. The Dick's business is quite good. The Foot Locker business isn't. And that's a combination of needing a lot of new product, Nike and others, that is compelling, and the fact that they've had a huge change of merchants within the Foot Locker organization. So I think it's easy to blame macro, but if you're blaming the macro, there's really nothing any company can do about it.

22:36Right. Yeah, there's been a lot of ink spilled about buyer's remorse over at DKS, that's for sure. Sam, it'll be interesting. We'll see what we get in November. Always good to talk to you. Thanks so much for having me. Sam Poser over Williams. Still to come this hour, former Tesla President John McNeil will get his reaction to those delivery numbers out of Tesla today and why he says the company is turning its focus back to being a car company, even as it gets further entwined with SpaceX. We'll get Goldman's first reaction to the jobs number two. Jan Hatsias will join us in a few moments. Jan already expecting October probably to be a hold up the Fed.

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24:41Nasdaq at a record high, but let's also take a look at shares of Tesla. Because those are getting a nice boost after posting strawberry unexpected deliveries in the third quarter, though still coming in about 2 percent lower than last year's levels. You can see shares are popping about 5.5 percent. Momentum's really leading the charge here today. Joining us now with his reaction is former Tesla president John McNeil. John is the founder and CEO of DVX Ventures. John, it's great to have you on. Let's start right there with your reaction to what we did hear from Tesla this morning. Hi, Morgan. I think the numbers reflect something that kind of is underreported, and I don't think investors are focusing on enough.

25:15And that is Tesla's growing, I think, really because of one feature, and that is self-driving. I can't tell you the number of emails and calls I get on a weekly basis where people say, I didn't want to buy the car. I don't really like the brand, but I can't live without this full self-driving thing. I had a venture capitalist tell me yesterday that his dad lives in suburban New York, leaves his driveway, hits a button on his full self-driving, and shows up at their apartment in New York. And this advanced feature, I think, might be the beginning of a flip phone to iPhone moment in cars. with the iPhone equivalent being a car that will drive you for the same price as a car that won't.

25:57And I think you're seeing this in the Tesla numbers, and it's really driving their sales because they are clearly the leader in a car that you can buy that has this technology. Yeah, I'll take it a step further. I mean, the Cybertruck, it parallel parks itself better than I could ever do, that's for sure. And you can plug it into your into your house as a generator, too. So to your point, just how high tech some of these vehicles are becoming at the company that is Tesla, how much are things like auto sales going to matter, though, as we get to cyber taxis and a different business model in general when it comes to self-driving?

26:33I think it's kind of back to the future for Tesla in the sense that they need the cash flow from the cars to fund what is looking like a longer road to robots and a longer road to cyber cabs. And both of those are taking longer and scaling slower and require enormous amounts of capital. And so therefore, I think Tesla's wisely turning to the car business and hitting the refresh button and refreshing the Model 3, launching the Roadster in a couple of weeks with a lot of fanfare to draw the attention back to the car business. The robots will come and the cyber taxis, cyber cabs will come. but really the near-term cash flow is going to come from cars.

27:16So it's kind of back to the future. So the roadster, of course, they started taking deposits on that nine years ago. I mean, how big is it going to be in terms of moving the needle? And that even though deliveries this quarter, this past quarter, were better than expected, I mean, they're down small year over year. So I just wonder if we're talking about a scale change in terms of the auto business within Tesla or we're just kind of waiting for some kind of combination with SpaceX to rationalize the whole enterprise. I think it could be both, Mike. Clearly on the Roadster, that's more of a halo vehicle to return attention to the brand.

27:48And I think you're going to see a feature in that vehicle with thrust and potentially hovering that brings Tesla and SpaceX together from a product standpoint, which may set the further backdrop for those two companies coming together. But I don't think Roadster moves the needle in terms of scale. I don't think it's a scale story. But I do think it's a return to a focus on the vehicles being the primary cash flow driver, at least for the coming few years, until they can get out the other end of that to robo taxi. In the meantime, Tesla is one of the biggest users of chips and of AI for their self-driving development.

28:28So there's a lot of reasons for these two companies to come together, much less the capital structure where Musk would finally get control of Tesla. Yeah, we see that already playing out, beginning to play out with tariff fab. John McNeil, great to have you on. Appreciate it. Nice to see you. When we come back, more breaking news on the energy market. We told you moments ago about the president's post saying Europe had agreed to release, quote, a massive amount of their heavily stocked diesel oil. And the G7 just put out a statement saying, in part, we will implement our commitments with a coordinated release through the IEA of 100 million barrels to begin immediately over four months, including a front-loaded substantial diesel release within the first 20 days.

29:08The group says it will stand ready to adjust those measures as needed. Obviously, a lot of moving pieces in the energy sector today. When we come back, Goldman's Jan Hatsias, first reaction to the jobs number today, softer than expected. And the subsequent market rally that we're trying to hang on to, close to session highs, Dow's up 260, plus NVIDIA, new high today, helping lift the NASDAQ to a record. And the XLK, first all-time high since June 3rd. We're back in two. Time for a CNBC News update. Pippa Stevens has that for us. Hi, Pippa. Good morning, Mike. Governor Kathy Hochul has called in New York Attorney General Letitia James to oversee the investigation into an alleged gang rape at Cornell University.

29:47Hochul says she lost faith in the local district attorney's ability to handle the case after the investigation was closed without charges in 2024. According to a transcript obtained by CBS, the alleged victim told campus police at the time she could say with 100 percent confidence she was raped. Israel began preparation flights today to bring home travelers stranded in the United Arab Emirates in the wake of the attack on a Tel Aviv-bound plane this week. Commercial flights were suspended after authorities say the co-pilot of a fly Dubai plane stabbed the captain and tried to crash it. And the English Premier League's Manchester City says it has launched a comprehensive appeal after it was found guilty of dozens of serious breaches of financial rules.

30:31The league said earlier this week that Man City used sham commercial contracts to inflate revenue and understay costs by more than$1 billion over a decade. The team has denied wrongdoing. Carl? Thanks so much for the Stevens. September jobs comes in weaker than expected this month with the unemployment rate also ticking higher to 4.2. That news did send yields lower today and stocks higher. Let's bring in Jan Hatsias this morning at Post 9, Goldman's chief economist, get his first take on this report and sort of the week that we've had. Jan, good to have you back. It's good to be here. So we had Core PC, and we had Williams Jefferson Bowman, and now some of this stuff's kind of going your way in terms of your house view, yes?

31:11In the sense that we don't need a lot of hikes from here, yes. And we did push back the next move and final move in our forecast from the Fed from October to December on the heels of the PCE numbers, but all the events that you spoke about, the Williams speech, the Jefferson speech, and today's employment numbers, I think push in that same direction, that we don't need a lot of monetary tightening here. And I think markets are discounting still three hikes, and I would say that's not necessary. Why would we need one in December then? I think December, they've signaled one clearly. It was a reasonably clear baseline.

31:56So I think that is what they expect to do. And if we get no major news, it still would be my best guess. But it's certainly very possible that if we continue to see friendlier news, that they decide you can forego that and then it would be a one and done hike. I don't think that's what they intended to deliver, but it all depends on the data, of course. Right. I mean, one and dones are not common, but they're not unprecedented. That's right. It's possible, but it's usually not what a central bank sets out to do because 25 basis points is just a very small number. Why would you go through the trouble of signaling it and working up to it and then delivering it?

32:36But it's always going to be data dependent. What would be considered friendlier news? Ongoing soft inflation numbers in particular. So there's one CPI between now and the October meeting. That's going to be a really key data release, probably more important than the employment numbers. And, you know, we think it's going to look reasonably friendly, sort of 0.2 percent, maybe a little bit above. That would certainly be consistent with not going in October. But if you continue to see 0.22 type of numbers, maybe December does not result in a hike. It seems part, Jan, of the market's over-anticipation of further rate hikes beyond what you're looking for was somewhat related to this sort of momentum in the storyline about neutral rate maybe is higher, maybe worse signal that 4 % to four and a quarter, which would be one more hike.

33:27Maybe that's closer to what they think of as neutral, but also that financial conditions somehow need to tighten further. I was taken by the financial conditions indexes that you guys maintain. And when you eliminate equities from it, it actually was back toward like early 2025 tight levels. That's right. If you eliminate the major driver of easing, which has been equities, because we've seen such a strong performance, then you do see significant tightening because in particular, long-term interest rates have risen quite significantly at this point. If you look at the whole thing, and I think you should probably include equities, although the weight is always going to be a subject of debate, I would say it's financial conditions are maybe a very small headwind to growth at these levels.

34:15But at this point, it's still not really major. To me, if I look at the growth pace of the economy, we seem to be growing at basically a trend rate. The labor market looks stable. You can find some indicators like the U6 rate, for example, that have shown tightening labor market and improving labor market or continuing claims. You can look at some indicators like the conference board's measure of job availability that would say the labor market is loosening. If I take an average, it's approximately stable. So if inflation is not that pressing, you guys have written a lot about, say, hyperscaler issuance and just the competition, right, for capital.

34:55Does that keep the long end elevated or something else? I do think the long end is more complicated. At the short end, I would say the market's pricing in too many hikes. So more likely than not, rates can come down. At the long end, that has some influence as well, what happens to inflation, what happens to the expected level of the funds rate. But then you have the supply issues, and those do point towards higher rates. So for that reason, we have less conviction. We also have long rates come down somewhat, but we have less conviction there than at the shorter end. So you're still looking at back to target on inflation by December 27?

35:34Not quite. We have it at 2.2%. 2.2. Pretty close. Essentially there. And at this point, you don't think any holds or any moves where they do not hike, that doesn't add pressure to the long end. Where are we on that? Well, I think if they don't hike and the data supports the idea that it's not necessary to hike, then I don't think that would add pressure. We can see pressure if we had some unfriendly inflation releases and then they decided to basically defy market expectations for a hike. then you could see that kind of upward pressure. But that's not really our forecast. Is Eurozone CPI today like a cautionary tale of what we might be in for next couple months?

36:16I mean, headline certainly is picking up there. The core numbers have generally been OK. I mean, we're at two and a half percent for core HICP. It's only risen relatively modestly, despite the fact that Europe is much more vulnerable to the energy situation because it's the gas issue in addition to the oil issue. But I would still say they can deliver maybe one more. But I wouldn't really expect a lot of tightening. The ECB, you mean? Yeah, the ECB, sorry. Also because there are some signs of tightening in financial conditions. We did have quite a lot of turmoil in the sovereign bond market in Europe over the past week.

37:05So the ECB needs to tread carefully and look at all of the different drivers of policy before making any significant moves. Yeah, I mean, you saw a hotter than expected Tokyo CPI number two, to your point. So whether it's here in the U.S. or whether it's looking at the picture globally, does a resolution to the war in Iran actually change this entire conversation more quickly than anticipated? I mean, from a monetary policy perspective, I would have said if you'd asked me a year ago when, you know, there's news about energy supply that cuts in both directions because it, you know, you resolve the situation in Iran.

37:44That's a that's a boost to growth, but it also helps inflation. I think that's become more clearly a sort of dovish development because markets have focused and policymakers have focused so much on the first round inflation effects so that if you were to resolve it, it would probably help our forecast for fewer hikes than what markets are pricing. Finally, have you made any adjustments to AI impact on labor markets or productivity gains next year, things like that? We have not really. I mean, our expectation continues to be that we'll see a substantial impact, but that it's going to be more spread over a longer period of time, perhaps, than what others are saying.

38:29So we had this one and a half percentage point boost to long term growth from AI before offsets from things like demographics and redirection of capital spending. We still have that in our numbers. I would say the news in terms of AI capabilities has been, if anything, even stronger than what we've built into our numbers. But we haven't made any formal changes at this point. We'll watch for that. Interesting. The saga continues, Jan. Thank you. Good to see you. Thank you so much. Jan Hatsias. All right, still ahead. NVIDIA just hitting a record high, and it's closing in on a$6 trillion market cap.

39:08We'll look at when the options market sees that threshold potentially getting crossed. And later, new reports about Anthropics IPO plans. We'll look at the timeline for that company's public debut. Stay with us. Welcome back. NVIDIA hitting a record high, getting closer to$6 trillion in market cap. Yes, you heard that correctly. Stocks up more than 2.5 % right now. Let's get to Oliver Rennick at the SIBO in Chicago with a look at what the options market is signaling right now. Oliver. Hey, Morgan. After a week of chop in the NASDAQ 100, it's old, reliable NVIDIA breaking down the doors to new all-time highs this morning as semiconductor stocks roar, adding on more than 2.5 % as a flurry of options trading hits the big tech names.

39:52NVIDIA is now up more than 25 % on the year and trading just about 5 % away from that$6 trillion in market cap. That will happen when NVIDIA gets to just about$248. And options are currently assigning a 25 % chance that happens by next Friday and almost a 60 % chance it happens by the end of the month. There's a clear bullish bias in this stock. If it wasn't obvious from the price, market makers are charging a premium for at-the-money calls versus puts. And of the 1.5 million contracts traded in the first hour this morning, about a million were calls. That's almost twice the 30-day average volume for NVIDIA.

40:27And traders bought more than twice as many calls as puts. The biggest trades on the tape were call buyers, including a buyer of almost 4 ,000 260 strike calls expiring in March. That's a$6 million bet almost that NVIDIA will rally another 6 % the next six months. Back to you, Carl. Wow. After the first intraday high today since May, pretty interesting, Oliver. Thank you very much. When we come back, mortgage rates seen a big jump this week. As you probably know, we're going to look at which areas of the housing market might be most impacted. And after this, a look back at the more than 27-year career of Rick Santelli at CNBC.

41:07Welcome back. It is the end of an era here at CNBC today. Rick Santelli first joined the network more than 27 years ago after a long career as a trader and financial executive beginning at the Chicago Mercantile Exchange. In those roles, he first began appearing as a guest on CNBC in 94 before joining us full time in 99. Let's look back at that remarkable career.

41:33These guys are working your bit. Rick Santelli's all fired up at the CBOG. Hey, Rick, it's going to be a bumpy ride. Hey! Viewers, be careful out there. How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills? Raise their hand. President Obama, are you listening? How can somebody go to Congress This is not the time to debate ideology. and ask for my selection. Stop spending. Stop spending. Stop spending. Stop spending. Stop spending. Would you rather have this slice or this slice? Smash, smash, smash some deficits. Looks good. Hey, Rick, how you doing?

42:12Bring it, Ricky. You're the arms.

42:17Yeah, here we go. I'm the sergeant at arms of this joint. Once again, a stellar auction. Fabulous. A plus, A plus, A plus, C plus, Charlie plus. Z minus is the grade. D, D, D as in dog. That's a big collie tail there. Not good. You see this? This is a mob. That's a bunch of hooey. Auctions are like buffet tables. The buffet indicator. Buffet, buffet, buffet table. Hardly had anything left at the buffet table to take. Everything in my life goes back to the markets and CNBC. Back to you, big guy. Rick, that is an amazing montage. It's definitely worthy of everything you've done for viewers over the years, and we really mean that.

43:02I mean, how do you want viewers to remember what you brought to them over almost three decades? You know, I want them to remember that I love markets, and I hope that came through, that what I do is my passion, and not only sharing the love I have with markets with viewers, But I tried to make the bond market and interest rates a little bit more interesting. I know it's a dry topic, but to me, it's excitement. And I would like to thank viewers for allowing me into their homes so many times a day for the past 27 plus years. Nobody appreciates it more than me. I think I have more fun than anybody.

43:41And I really would like to extend my gratitude to everybody out there and CNBC, all the anchors I've worked with, all the management. Carl, I still remember the day of the rant when the Wolfman was standing next to me. You were there. You were there with Mark Haynes. It was a big day. You I mean, I think I would argue maybe more than anybody who works here. You moved the national zeitgeist in ways that I think a lot of personalities in modern media wish they could. Well, listen, that is flattering to hear, but my goal was always the same from day one, to be frank and truthful about the markets.

44:21Don't let politics enter into it. And I tried. I know I might have fallen off the wagon a couple of times, but ultimately I wanted to be a straight shooter. So when you tune in and you hear the data and what I have to say about interest rates and all the topics I try to cover, I'm trying to give it to you in an unvarnished, just the way it is if you were standing on a trading floor or in a trading room, the way many of those insiders would look at the markets. You know, Rick, I'm so happy I get to fill in on the show today. So I get to share my appreciation and gratitude with you and our viewers for all that you've done here.

44:56the bond market is not a dry topic when it's you talking about it, whether it's your handwritten notes and charts, whether it's sledgehammers like we just saw there. I would say that you are the bond king of CNBC, and I'll take it another step further. And I say this because I'm married to a floor guy. Once a floor guy, always a floor guy. That is the highest praise I could give you. It's been an honor and a privilege to work with you, really, truly, and learn from you. Well, thank you. Thank you. And thank all of you. It really has been a hell of a ride, and I don't think you're quite done with me.

45:28Maybe in about six months I might come back a bit and try to throw in a few topics with regard to interest rates. I'll see you in five hours, Rick. How about that? We'll do it again. All right, thanks. You will indeed, Mike. The classic Santelli-Santoli connection. One more time. Rick, congrats, man. Stay close. Thank you, Carl. Our Rick Santelli. A lot more on this Friday rally on the street and why one expert says he's still hesitant to give the market an all clear as the 10-year working its way back now to 523. Don't go away. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium.

46:14You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit CNBC.com forward slash Squawk on the Street disclaimer. Within every beautifully busy day, there's a brief moment between now and next.

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