10AM Hour: McDonald's & General Mills CEOs, CFTC Chairman, & You Muse You Lose? 9/23/26

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0:46Have customers worldwide get payment details in 22 currencies, so you get more of each hard-earned payment without hidden conversion fees. Be smart. Get Wise Business. Download the app. T's and C's apply. Good Wednesday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. We've got a big hour coming your way in just a moment. A rare interview with McDonald's CEO Chris Kamchinski as the company hosts its Investor Day and lays out new growth targets. We'll get his thoughts on inflation, the consumer, AI, and much more.

1:20Plus, the chairman of the CFTC is with us as Cal, she asks the agency to allow margin trading on its prediction markets platform. And we'll talk to the CEO of General Mills, fresh off earnings this morning that largely topped analyst estimates, though the stock is still deep in the red for the year. I thought I would start out with housing because we are seeing these 30-year mortgage rates reach new highs here of the cycle. We're above 7 percent. We've seen mortgage applications come down for another week. As a result, the housing market continues to struggle, and affordability is really the main problem with higher prices and higher mortgage rates.

1:56It's a really bad combination. We did hear from KB Homes, one of the home builders last night, reporting earnings. I mentioned they lowered their margin. And here's the color we got on the earnings call from the chairman. The housing market remains challenging, with conditions having weakened since our last earnings call in June. Affordability is under further pressure due to rising mortgage rates. Inflation remains persistently high, driven in part by fuel prices. Geopolitical uncertainty and broader economic headwinds have resulted in consumers becoming more cautious about buying a home. Look, this is an area of the economy that did not need an interest rate hike.

2:34Obviously, we have bigger inflation, broader inflation problems, which is why the Fed did move. But it is one of the areas that feels the rate hike more acutely. And it's unfortunate if you look at existing home sales and new home sales, just a long lens here, or 10 years or so. I mean, we're contracting, shrinking in terms of new home sales. We'll get a new number out tomorrow, but both pending home sales have been falling for several months. And this is, you know, a big part of the problem. And by the way, rents aren't much better because rent prices are up as well on this inflationary concern.

3:09Here's the latest data on housing. And, you know, we're negative and it's problematic. Yeah. Re-fis, I think, 19 months or the worst in 19 months. This is three straight weeks of mortgage apps falling. I mentioned you guys on Monday, Citi had written about Depot, which is down almost 2%. They met with management, lack of visibility, housing affordability is tough, but also those who are locked into their existing homes are looking at renovations and they also are dealing with the sticker shock of materials. And Citi says labor too, which is interesting. Yeah. It's not just a story about buying homes.

3:42It's about renovating homes and remodeling homes. There were a bunch of these companies speaking at conferences last week, Lowe's, Depot, and all of it was the same kind of downbeat tone from all of them about consumer demand. You've also got this structural issue, too. We haven't talked about this in a while, but the amount of young adults that are still living with their parents or grandparents, these are still very elevated numbers. In fact, here's the latest from 2025. 49 % of adults under 30 lived with a parent. That was up 12 percentage points from 2019. That's according to the Federal Reserve's economic well-being of U.S.

4:20households, which was published earlier this year. And you would think that that would be actually a big tailwind for the market as those people were going to go out and buy first-time homebuyers. But the problem is the affordability issues. And so RBC put out a big report this week on housing, and they said that a lot of it is going to go more to rentals, even though rent inflation is still high, or people just staying where they are because it is not affordable. The other factor here, which is problematic, is the college graduate unemployment rate is higher than the national average. I mean, it's around 5%.

4:54And so that doesn't make it easier as well when you're going out and looking for a job to buy a home. Isn't it possible to say that there's been a fundamental rethinking of homeownership and how it figures into the American story, so to speak? Because it's so expensive? Because it's expensive, because while it creates value over time, I think you can look at investing in the S &P as a better way to actually create wealth. Yeah, I don't know. Now, it is your home. I get it. I get it all. I'm a homeowner myself. But that said, you know, I think I do hear from this younger generation. They just, it's not necessarily something.

5:28It's not the same aspiration. Yeah, I mean, you know, that could be factoring it in as well. We're seeing such low new time home buyers. Now, that said, if things became a lot more affordable, of course, you might get a very different conversation. You'd open up the spigot to get more home buying. But look, there are all sorts of trends that are demographic trends. There are migration trends. There are people moving to different states for jobs where we're seeing employment grow or we're seeing lower taxes. I mean, that's all part of the mix here. But overall, on the national numbers and the part of the economy, which is crucial, it remains pretty weak.

6:02Yeah, that 10-year at 504, getting a ton of attention. If you missed it a few moments ago, Rick Santelli brought us news on these PMIs. Cycle highs for the composite, for manufacturing, for services. We are getting some breaking news out of the Fed. For that, we'll turn to Steve Leisman. Hey, Steve. Morning, Carl. Fed Governor Michael Barr saying that further policy adjustments are likely to be needed. Of course, that means further rate hikes is what he's talking about. He says the risks to achieving the inflation target have increased. Risks to the labor market have receded, which obviously creates the ability for the Fed to hike without having too much effect on the economy.

6:40Price stability, he says, is crucial in supporting maximum employment and durable growth. Fed needs to, quote, recalibrate monetary policy to reflect the balance of risk. The Fed was quite out of position, he says, given changes to the economy. And he talked about a lot of the new changes that have been there. tariffs, higher oil prices from the Middle East conflict, as well as the major investment in AI. And we've had some real movement today, even before Barr spoke on the Fed funds outlook here. The probability is now 64 percent for October. That had been, you know, around 50, 55. And that's up this morning.

7:14The probability of that first hike happening December, 94 percent. And then take a look at here for the second hike, another 25 basis points now priced in with an 89 percent probability for March. And then looking at the two-year, you guys were talking about the other end of the curve. I want to talk about the shorter-term end of the curve. It's having a day. It's up now 484 on the two-year, 486, up two base points since I last looked at it. And I think it may be moving on those PMIs, but certainly that 486, guys, reflects a very aggressive outlook for the Federal Reserve that I don't know if it's actually what the Fed is thinking, but that's a big spread over the Fed funds rate at 486 with the Fed funds currently being around 387.

7:57Guys? Kind of make you wonder, Steve, what happened between from the September meeting to the from the meeting prior. And I know Jackson Hole was in between because, you know, they didn't hike and it wasn't that different of a of a data set then. I mean, maybe a little bit warmer core CPI number, but feels like they all got the inflation religion and now they're just like very focused on it. And that wasn't the case three months ago. Well, I mean, you had three dissenters. And I think the chair set up that hike, if you ask, you know, if you look at what he said, he talked about this idea of needing confidence that inflation was heading back down to the 2 % target.

8:34That number came in. It was not favorable on the front end. But I think the other thing the chair said at the press conference is important, Sarah, where he talked about the idea that geopolitical developments had really change the outlook. And I think what you do is they look down the road at what was happening in the Middle East and they did not see any comfort, any resolution happening to oil prices. So I think when the next inflation reports come in, the Fed will look reasonably exonerated in having raised rates here. And I find it very aggressive to think they think they're going to do it again with that 64 percent probability for October.

9:12That can change, but it's worth watching here. All right, Steve, thank you. Pleasure. Steve Leisman, let's get more on where the market stands right now. Bring in Truist Wealth CIO, Keith Lerner. Good to have you here at Post9, Keith. Great to be with you guys. We talk a lot about rates, of course. You believe the market has already undergone a meaningful reset. What do you mean by that? Yeah, so if you think about the S &P itself, since June, the peak back then, the market is flat. And then as we think about underneath the surface right now, if we look at how many stocks are participating in the uptrend, we have less than maybe half in uptrends and then about 30 percent above the 50 day moving average.

9:51So it just says it's been a narrow market. We've seen tech come back alive. That's been our call recently as well. So in our view, we've had a reset in valuations. We have sentiment reset as well. Expectations reset. So overall, we still think the bull market deserves the benefit of the doubt. But we're also seeing this kind of two-speed market, two-speed economy. And I think that continues into the fourth quarter. What does that mean, the two-speed thing? Well, so going back to the same thing, if you look underneath the hood, retail is down double digits. Home builders are down. But you have tech coming back alive, and that's the biggest part of the market.

10:26So you can have both of those happening at the same time. And we also have this tension, right, this real tension between these higher rates that we're talking about today. But why are rates moving up today? Because we have a really strong ISM and growth as well. So, you know, I think that's the market development. I think the other part of it is that we're in this more macro-driven market as we're away from earnings season. Once we get back to earnings season, I think there will be a positive because we can focus on earnings that are still moving higher. And maybe one last note, as we move into next year, the earning estimates, just like this year, are moving up as opposed to going down and being cut like they normally do this time of year.

11:01Although I think we just broke the weekly streak, right, of earnings revisions, 21 weeks or whatever we've had. Yeah, I wouldn't overplay one week. And especially even the ISM has correlation with earnings as well. And I also think, listen, you have to give these companies the benefit of the doubt. I mean, let's think about where we are. If, you know, this year we have oil at$100, interest rates at$5, and these companies in general continue to perform. Did you think the corporate, the conference commentary was good or mixed? During the earnings season? Yeah, the last couple of weeks. Yeah. Out of financials, out of some transports.

11:35Yeah, it's been more mixed. And that's why also the rates are biting. I mean, it is biting below the surface. And that's kind of a two-speed economy. But we are seeing transportation, retailers, home builders hit. So that's a real part. The good news for the S &P 500, they're not huge parts of the overall market. And that's why you're seeing things like small caps start to underperform, industrial is a little bit under pressure as well. So we are seeing it biting, just not on the headline index. Well, is that more, I mentioned rates and then asked the question, is that more about rates? And where are we in terms of at least your expectations, given we do expect now, or the market does another Fed rate hike?

12:10Yeah, I do think it's in. There's a tension between the economy is still relatively strong, the market's sensing that the Fed's going to have to do something to slow it down, the stocks are reacting ahead of time. I mean, the good news is, going back to the initial question, is we have reset valuations pretty well across the market during this time of moving sideways. And even though we like the S &P market cap better, the equal weight index has contracted as far as valuations pretty well and a little bit oversold down 5%. But again, I think into year-round, one of the key messages is the technology sector, which we wrote about on a note last week, the valuations have reset back to the same levels when ChatGPT was announced in late 2022.

12:46And it still has the strongest earning trends. And I like there's been some friction about some of the discussions about circular finances and uncertainties because that means, in our view, some of that's being reflected in the valuations. And we think tech is leadership. Do you think there's an opportunity? Because I compared what's happening with the Muse trade to the SaaSpocalypse, where it was like all software is going to die. And then that turned out to be a great buying opportunity. I don't know where we are in this sort of next phase, but there's a lot of concern about consumer companies, app companies, and how they might be disrupted.

13:18by these consumer chatbots. Yeah, I think in some ways, this is going to put pressure on, you know, is there actually a value from companies versus inertia for moving? I heard some of the conversation on Muse earlier. But then I think also companies are going to adjust. They're going to figure out what their value proposition. You know, I flew to Atlanta on Delta. I'm a loyal client. I might be able to get it somewhere cheaper, but I'm probably going to stay on that airline. And so I think companies will figure it out, but there's going to be winners and losers. Another thing that really stands out in our work is correlations of how stocks are moving together.

13:48They're moving less in lockstep that we've seen for the last 30 years. And why is that? Partly because of winners and losers from AI and then the two-speed economy that's being reflected in consumer discretionary. Keith, thank you. Great to be with you guys. Keith Lerner. All right, so here's our roadmap for the rest of the hour. Coming up, should CalShield users actually be allowed to trade on margin? We'll ask the chairman of the CFTC about a new proposal from the Predictions Market platform. Plus, the CEO of General Mills is with us as the company does top earnings expectations. The stock, though, as you see, down almost another 4.5 % in the red this year.

14:24Excuse me, that's McDonald's. Sorry. McDonald's is lower after releasing some new growth targets this morning. We'll hear from Chris Kempczynski next, including the warning he's giving about inflation. Across the board, we're seeing that inflation is sticky. It's sticky not just in the U.S., but around the world. And I think the drivers of that, we don't see changing. A lot more from that interview coming up after the break.

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16:22Welcome back to Squawk on the Street. McDonald's under some pressure this morning, pacing for the worst day of the year so far as the company kicks off its first investor day in three years this morning. McDonald's unveiling a number of new financial targets and some efforts to improve the restaurant concept and food quality, as well as plans to materially support franchisees. We got a chance to talk to Chris Kempchinski in a CBC exclusive where we asked him about the view on the macro environment, inflation, and the main theme he wants to communicate on this Investor Day.

16:56I think the main message that we're talking about today at Investor Day is really we're building on our strength here. We have one of the world's great brands with McDonald's, and the opportunity for us is to be the first choice for more customers more often. And so the way that we're doing that is we're going to improve the taste and quality of the food. We're going to improve the experience that we're offering the restaurants and all that's going to be enabled by technology that's going to make our restaurants easier to operate. So I'm just excited to share it. I know our systems have been excited and it's all about just putting a shot on McDonald's.

17:28Yeah. What's pretty interesting, I think, are some of the targets adding a point and a half of share gains in chicken and beverage by 2030. You got some some target on expanding operating margins by by 2030 as well. Can you walk us through why those in particular are important and the process you're going to use to get there? Sure. Well, let's just think about our three priority categories. We have beef, chicken and beverages. Beef is about a 50 billion dollar category globally. We already have a 40 share of beef. But if you think about chicken, chicken's 130 billion dollar category. We have about a 20 share of chicken.

18:05Beverages is about a 230 billion dollar category. we have a 10 share of beverages. So just right there, it dimensionalizes the upside that we have in particularly chicken and beverages for growth while still having a really strong presence in beef. So that's certainly one big opportunity that's going to drive the top line. On some of the other things that you were referencing, we also see an opportunity for us to make ourselves more efficient. And there's a lot of things that we've been doing to leverage technology to make ourselves more efficient. But when you put the two of those together, strong top line growth, with us doing the things that we should be doing to make the organization more efficient.

18:42All of that delivers on that margin improvement, getting us to low to mid 50s on margins by 2030. Right. I want to get back to some of the specific initiatives. But is the backdrop, Chris, an industry in which growth is going to be slow and inflation is going to stay elevated? Is that sort of the canvas that we're painting on here? Sure. I think that is the environment, certainly in developed markets. I'll leave developing markets aside because they operate a little bit differently. But in developed markets, if you look over the last few years, industry traffic has been down and there's been elevated inflation.

19:19And one of the things I've talked to our team about is we need to stop talking about that being a difficult environment and just say that is the environment. Because I think as we look out forward, we're not expecting things to change. We're not expecting that the industry all of a sudden is going to go to having robust traffic growth. We think that's going to be largely flat. We do think inflation is going to be with us for, unfortunately, I think many more years at an elevated level. And so in that environment, how do we make sure that we're set up to win? And the biggest thing that you need to do in an environment like that is you have to be able to earn share.

19:55You have to be able to actually grab growth from your competitors. And that's a lot of what we're going to be talking about at our investor day today is how do we aim to go after and grab share and chicken and beverages behind some of the initiatives that we're talking about. Yeah. One of the big things that stands out here is your involvement in helping franchisees. You talk about some targets of partnering support by 2036. Why is that important? And have franchisees played along so far in things like the value message? I know it's always been wrangling cats. That's sort of the way the industry goes.

20:33But has this cycle been more difficult than others? Well, in an environment where you don't have robust industry growth, I think it's and you also have elevated inflation. inflation, certainly that's going to put pressure on margins. That's going to put pressure on the franchisees. And at the same time, we need to continue to have high ambition. We need to continue to invest in the business, which is why creating this capacity through productivity is so important. I think it's probably even more important today than maybe it has been historically. And so there's a number of things that we're going to be doing there, both in terms of how the restaurants operate, how we can leverage our supply chain that will deliver that productivity.

21:12All that then and creates the capacity to do the type of investment that we're talking about here. But you're right, Carl, anytime you're talking about investment, certainly our franchisees have a lot of questions about that. I think those are all appropriate. We did share this strategy with our franchisees in June when we had our global convention, about 15 ,000 franchisees and suppliers came together to hear the strategy. And there was tremendous excitement around that. 90 plus percent of those who participated We're excited about the strategy. But, of course, very quickly thereafter, there were all sorts of questions around the investment required, the payback period.

21:50And we'll be sharing and having those conversations over the next few months. On earnings calls, you've been pretty candid, I would argue, last few quarters, giving us some color on especially the low end, the lower income cohort. And I wonder if there's a macro message that you're willing to share today, either about final quarter of the year or going into 27 on that front. A little bit of what I was saying earlier, Carl, you know, I think it is a challenged environment right now. But strike the word challenge. It's just it's the environment that we're in and we're not expecting it to change.

22:24And so there's all sorts of surveys out there around consumer sentiment, certainly hear consumers, how they feel about inflation, the outlook around cost of living. All of those things, particularly when it comes to discretionary spending, I think weigh on the consumer. But there's growth to be had out there. And there are people out there who are still driving growth. And so our opportunity is to make sure that we're doing that disproportionately. And that's a lot of what we're sharing here today at our Investor Day. Just to circle back to some of your initial comments about the inflation cycle and sort of telegraphing the message that this is kind of how it is.

23:00I wonder, was there a moment in which your team looked at where we are in the macro and said, maybe we're not going to ride down a wave of disinflation or where those hopes kind of dissipated? Yeah, I think probably it was in the back half of last year when we were hoping and I think in a certain a few areas thinking that inflation was going to come down. And we didn't see that last year beef prices were up 14%. That was after record beef inflation years prior. If you think about over the last five years, beef prices are up almost 100 % in our largest markets. And so we're not looking for that to change.

23:41That's obviously a huge input for us. but across the board, we're seeing that inflation is sticky. It's sticky, not just in the U.S., but around the world. And I think the drivers of that, we don't see changing, which is why our outlook has pivoted from, you know, thinking about this being perhaps a blip to actually down just being sort of our new operating reality and one that we've got to make sure we're set up to succeed in. Right. And then your ability to pass it on, are those days gone? We've got to be really careful about it. And I think where we got into a mistake previously that I've talked about on earnings call is where we priced ahead of what the consumer's willingness to pay is.

24:21And so I think it's a balancing act, as is always the case. Certainly, we're continuing to see inflation. Next year, we're expecting mid-singled inflation on our input costs. There will be a desire to certainly try to pass some of that through. But at the end of the day, we've got to make sure that we're providing better value than any of our competitors. And so we have to be really thoughtful about how we do that. Stock obviously reacting maybe to the way they're characterizing the backdrop. The stock was$340 in March. It's off$100 since then. We're going to talk more later with Chris about the stock price, how they're using GLP-1s in their menu selection, how they're using AI.

25:01But essentially, if you're trying to boost traffic and improve franchisee cash flow and invest, that's expensive. And it's a little complex. That might be why we're seeing the reaction we're getting today. Yeah. I mean, you've covered this company on it for many years. You did a documentary. It's a long time ago, I know. I'm just curious as to how you view this current period and the challenges they face versus others. I mean, the inflation thing is surprising. I thought he was pretty candid about the fact that they're just not counting on relief, especially on their main ingredient, which is beef.

25:30But I will say when they want to move the needle, it moves so wide. I mean, they're talking about loyalty adjustments here, giving loyalty members Uber ride credits and Disney Plus subscriptions. So their scale is incredibly powerful if they can get it to work. But the backdrop is probably, as he said, more challenging than they thought it was last year. I mean, I get it on the cost side, but in an inflationary environment where consumers are feeling the pinch, you would think they would want to be spending more on value meals. And that would be a growth driver for McDonald's. I mean, it's like Walmart.

26:01Like, I can never quite tell. Like, if McDonald's isn't doing well, what does that say about the consumers? Does it mean they're willing to shell out for more? Yeah. Higher, better ingredients or more top-tier restaurants? I mean, I think it kind of reminds me of what some of the staples have said lately, is that pricing is tough. It's tough to take price in this environment, even with your own costs elevated. But you're right. I mean, casual dining, we had lots of examples of casual dining restaurants doing just fine, even as quick service has been challenged here. OK, we'll keep an eye on McDonald's.

26:36Of course, the stock down, as Carl said, four percent just today. Still to come, the chairman of the CFTC is the agency reportedly examines unusual trading on CalShift that is tied to crypto markets. Plus, we'll get another read on the consumer. Gas prices continuing to rise. The CEO of General Mills is with us. He'll break down this morning's earnings. There's a look at General Mills' stock price, which is down about 1%. Don't go anywhere. I've got a lot more for you. Straight ahead. When you partner with CDW, you get more from your devices with solutions that take modern work to the next level.

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28:00Shop Jared Jewelers. Where others see obstacles, you see opportunity. You collect wins, even when no one's watching. This is what hustle looks like. So chase that degree and let your hustle make it happen. Capella University. What can't you do? Visit capella.edu to learn more. Down 100 there at McDonald's, Google and Amazon, the biggest weights. Time now for a CNBC News update. Seema Modi has it for us. Morning, Seema. Sarah, good morning. Here's what we're watching at this hour. Iran's president addressing the United Nations this morning in New York City, a day after President Trump said he was considering whether to annihilate the country.

28:37He accused the U.S. of not respecting international laws and said that Iran does not want a nuclear weapon but will not accept limits on its nuclear program. The lone representative of the U.S. delegation in the Assembly Hall walking out as he gave his speech. Meanwhile, President Trump's Board of Peace unveiling a six-month,$2.5 billion recovery plan for Gaza today. The proposal, including spending for economic recovery, temporary housing, rubble removal, and the deployment of a multinational security force. The plan, estimating damages in Gaza at more than$35 billion. Hurricane Polo's rain bands reaching the southwestern coast of Mexico today as the massive Category 5 storm churns in the Pacific.

29:16The National Hurricane Center says Polo could bring life-threatening floods and mudslides to the country. However, the powerful storm is not expected to make landfall. Sarah Carl, back to you. Thanks so much. Still to come this morning, AI heavyweights from Sam Altman to Dario Madej reportedly set to meet with the U.N. Security Council. We'll tell you what we know so far. First, though, the chairman of the CFTC talking prediction markets, crypto and where regulation will be headed. Now down about 70, 10 year 506. Stay with us. Welcome back. CFTC reportedly examining activity on Calci's platform for allowing so-called wash trading in the cryptocurrency ether.

29:54Wash trading is the frequent buying and selling of the same contract, often by the same person, which could violate commodities trading laws. Calci said in a blog post that it had seen no evidence of wash trading on its platform. That news coming as Calci requests the CFTC to allow margin trading on its event contracts. We should also note that CNBC and Calci have a commercial relationship that includes customer acquisition and a minority investment. And joining us now on a first on CNBC interview is CFTC chairman Michael Selig. Welcome back, Chair Selig. It's good to have you. Thanks for having me.

30:26So first on this investigation, tell us what you found that looks suspicious. Well, of course, I can't speak to any investigations. So I'll just talk in generality that, of course, we have a zero tolerance policy when it comes to any sort of manipulative trading, including wash trading, insider trading or fraud in our markets. And we take that very seriously and we'll always investigate to make sure we get to the bottom of these sorts of things. So is that what you can't say, I guess? You can't say whether you're investigating wash trading or prearranged trading or something? I can't speak to the specifics of any investigation, unfortunately, but we are a cop on the beat.

31:01You're a cop on the beat. So does the cop on the beat favor margin trading for events contracts? Well, the margin trading issue is interesting in that exchanges in the prediction space typically do not have intermediation with a broker or an FCM, as they're called in our markets. Calci is one of the exchanges that has allowed for direct to exchange trading. And what they've seen or what they're telling us they're seeing is an interest in institutional participants that want to come in and trade on margin. So this proposal, we're, of course, evaluating it. It's not one that we've approved to date.

31:31But the proposal would allow for institutional traders and certain traders that meet very stringent eligibility criteria that we're evaluating to trade on some of these event contracts in the Kaushin market. That doesn't include sports. It includes certain products. It also doesn't include some of the cultural markets they've listed. So we're looking at the contracts they want to allow margin for and the criteria around how they'd allow that. And we'll hold off on any judgment there, but it's something we're considering. I guess on the plus side, it could bring in liquidity from institutions on certain markets.

32:05But on the downside, and I guess this is something you have to evaluate, is it feels like very binary compared to the way other margin products are traded, just given the nature of predictions and what these are all about. Is that a problem? You know, I don't view that as a problem. I think these contracts have really exploded in popularity over recent years. And there's interest both from retail and institutional players. And so we have to consider that new interest in the markets. The institutions typically trade in the futures markets on leverage and margin. We expect them to want to trade the same way in these markets.

32:41And so we're working with the exchanges to make sure we get the rules in place to allow for that activity. I think it was yesterday you said that the regulated entities and the prediction markets mentions contracts are at greater risk of manipulation. A number of people taking that as saying that you're going to ban those contracts. Can you give us some clarity? We've had a lot of concern with these contracts, as I'm sure your audience has seen. We took several enforcement actions related to mentioned markets, and we continue to see activity in these markets that's concerning. Our statute does not permit contracts that are readily susceptible to manipulation to be listed in our markets.

33:19We take that very seriously. We, We, of course, have exchanges that self-certify to us that those contracts they're listing are not readily susceptible to manipulation. But if we start to see a lot of manipulation in particular contracts, of course, that's going to catch our attention. And that's exactly what happened here. We took action yesterday. Our staff did to put out guidance explaining that there's effectively a presumption against these contracts. They're concerning to us. we're going to hold them to a high standard and make sure that if exchanges are listing them, they have really evaluated the product and are sure that there's not a high risk of manipulation.

33:54What are we talking about? Sorry, but we're talking about like the mentions of words and speeches. That's right. Earnings calls, speeches, activities. We saw, for example, the George Santos contract where, you know, that one was easily manipulated. Would he show up or not somewhere knowing that he did? Well, I mean, TD Cowan comes out and says they see the guidance as effectively shutting down the vast majority of mentioned market contracts. Would you agree with that? We're not going to prejudge what comes in the door. So if the exchanges believe that certain of these contracts are not really susceptible to manipulation, we'll review that.

34:28We, of course, have the ability to reject those contracts if we disagree. But that's right. I think a large number of these contracts have issues. And so we're going to take a hard approach in evaluating those. Are prediction markets on the front burner? What else is it? I mean, in terms of priorities? I'm trying to think what else is, I mean, it's obviously top of mind, but are there other things that are more important at the moment in terms of initiatives? Well, our markets are rapidly evolving. They're transforming due to technologies like prediction markets, but also crypto, artificial intelligence.

34:59And so we really have to reevaluate all of our rules and regulations to make sure that we're ready and prepared for this transition to 24-7, on-chain, and these automated markets that are facilitated through the use of algorithms and agentec finance. So it's an exciting time. We're taking that responsibility very seriously. We, of course, are on the, you know, weeks after this clarity vote. And so we're considering the next steps there. We've sent some rules over to AWIRA for consideration and we'll continue to modernize our rules and regulations for this new frontier finance. I was going to ask, how much, like, did you get a call from the White House after the Clarity Act failed?

35:36Like, can you take this up in the CFTC and how much can you do to compensate for the the fact that they didn't pass that structure bill? Well, the president has said since day one, we're going to have crypto market structure done. That means either legislation or rulemaking. And the agencies have a ton of existing statutory authority. When we got together two years ago now, as part of the president's working group on digital asset markets, we looked at statutory authorities as well as legislative authorities. And if you look at the report, we have a whole section in there talking about using our existing authorities.

36:08And the president was prepared for it, We're prepared for it. And so it's go time. We're going to continue to ship rules to make sure that we're ready to go for the new frontier finance. While we're talking about your resources, how much is dedicated now toward investigations, you know, investigating CalShift? Because, I mean, you're making a big argument on the national stage that it's not up to the states, that it should be you and that you can find the wrongdoing. And you've launched some investigations and some action. But do you have enough resources to do it? It's an important point. We are committed to building out our enforcement program for these new markets as they continue to evolve.

36:40We've got a ton of resources dedicated to this right now, and we're growing that. I think it's really important when you look at the types of fraud and manipulation in these markets, they are market-based violations of our statute that we're seeing. And there is a challenge from some of the states saying, hey, these are casinos, these are different from markets. Of course, they have an order book, they go through a clearinghouse, they function very much like markets. But the states really have never policed these types of violations. When you're looking at things, market manipulation, wash trading, insider trading, that's not typical behavior in a casino.

37:16It's something you see in the markets. And these are across state lines, right? It's not intrastate activity. This crosses state lines. Traders are matched on a book that crosses across the state lines. And it also sometimes is international. We take our authority very seriously. There's offshore exchanges, offshore markets where there are derivatives contracts that are maybe accessed by a U.S. person or maybe affecting our markets that we need to enforce for the integrity of these markets. So whether it's a contract on a sporting event, on an election, or the price of corn, we've got to be there to police that, make sure there's integrity, and we'll do exactly that.

37:53That's why we're aggressively defending our authority in court in some of this litigation. Is there an increasing number of incidents of bad behavior? We're seeing it. I mean, we've got a strong surveillance program. I think when you have new types of markets evolving, you're going to see fraud with that. We saw it in the early days of crypto. We still see some of it in crypto. We saw it with the early grain markets in the 30s and 40s. That's why we got the federal commodity laws. We saw it with the securities in the 30s as well. That's why you got the federal securities laws. We have markets for a reason.

38:24We have market structure and rules for a reason. And so we'll continue to enforce our rules in the light of that. Well, thank you for coming on for an update. And keep us posted, of course, on your decisions and investigations. Michael Selig, the CFTC chairman. Good to see you. Good to see you. After the break, CEO General Mills will join us. We'll break down some new numbers while he says inflation for his company could go to six in Q4. Stay with us. Welcome back. Take a look at General Mills sliding today on earnings despite posting a top and bottom line beat before the bell. But net sales slid 3 percent, which the company attributes to divesting its U.S.

38:56yogurt business. Stocks down around 15 % this month and 25 % so far this year. Let's bring in General Mills CEO Jeff Harmoning for a first on CNBC interview. Jeff, it's great to have you back. Welcome. The trends were better than expected. Are things improving on the sales side or not? We're encouraged by our first quarter trends. Our sales rate has increased by two points in the first quarter, and it's really broad-based. If you look at our North America retail business, we improved in most of our categories. Our food service business is up mid-single digits. Our international business is up mid-single digits.

39:32And as we lapse and price decreases from a year ago and increase our levels of innovation and renovation in our businesses, we see sales momentum continuing. So we were pleased and encouraged by the first quarter. There's more work to do, as there always is. But we feel the momentum externally, and we certainly feel within the four walls of General Mills. And how is that happening? Is it marketing? Is it changing ingredients? How are you improving sales with consumers? We kind of look at remarkability across a variety of attributes on our products. So whether it's products or packaging or advertising or where we sell or price.

40:09I'll give you a great example. A year ago, we were declining in our Pillsbury Dough business, and we've actually stabilized that business. We've got the prices in the right places first. But now we're adding on top of that, we're renovating and improving 70 % of our core products. things like more cinnamon and flakier biscuits. We're adding on top of that, you know, cookies for the fall that are, you know, relevant to current culture like Harry Potter cookies. And so as we look and we're reintroducing, we've reintroduced the Doughboy and we're accelerating our advertising there. And so, you know, Pillsbury is a great example, but I would also, Lucky Charms improved 5 % in the first quarter besides some great advertising and a huge unicorn marshmallow.

40:48Yeah, I mean, more cinnamon I always am in favor of. What about the inflation story, though? And we heard it from the CEO of McDonald's today. What does cost inflation look like right now for you relative to where it's been? And can you offset that in this environment by passing it on to the consumer? So if we look at the cost environment, there's no question that inflation has increased and it's broad based. At the beginning of the year, we said we expected four to five percent inflation. and it's now at the top end of our range. And that's things like freight, but also logistics, oils, packaging, things like that.

41:22So it's pretty broad-based inflation, but only at the top end of our range. We've been able to offset it by putting hedges in place for the first three quarters of our year. But also, really importantly, we have industry-leading productivity program, holistic margin management, and now transformation initiatives. We're on track, and we're still on track, to save$750 million this year on our way to$3 billion over the course of the next four years. And so that's literally the first line of defense. And then after that, we look toward product mix, so improving our sales through mix. So I'll give you an example.

41:54Honey Nut Cheerios Protein, which is really flying off the shelves, is at a higher price than regular Cheerios. And so the combination of improved productivity as well as some product mix is really going to help us in an environment like this. Jeff, there was some reporting this week about Kroger revolting against suggested price hikes from certain brands like Boar's Head and Red Bull. Is that happening more often? You know, I'll let Kroger speak about Kroger. However, what I would say is that it's true that all of our retail customers are looking for value because their consumers are looking for value.

42:32And General Mills is really well positioned because a year ago we got our prices back in line, our everyday prices back in line. And our retailers really appreciated that because we were providing value to retailers. But also, our innovation levels are up 50 % versus two years ago. And so this combination of increasing advertising, improving our current products, increasing innovation with making sure the prices are right, I can tell you we stand in good stead with our retail customers, and they like the way that we are helping improve our categories. So how's the consumer doing? How do you characterize the consumer environment right now, given the higher inflation and rising gas prices, but also the resilience we see across the economy?

43:11Well, I think I think you hit it. I mean, the economy at large is fairly resilient. What we're seeing, though, is the consumers are stressed. And that's particularly true of consumers at the low and middle part of the income tier. So you combine years of general inflation along with reduction in SNAP benefits and the consumers are stressed. So what we're seeing in the grocery business is that consumers are buying more on promotion as an industry in general. That's not just for General Mills, as an industry in general. It's one of the reasons we're so encouraged by our first quarter, because even in the face of that consumer pressure, our sales velocities increased by 2%.

43:47And so what we're seeing is that consumers are still being selected, but they're willing to pay for things that really matter to them. And I mentioned Honey Nut Cheerios Protein. And we have a we're up double digits on our protein cereal business, even though the prices are higher because consumers see something they value. So the consumer is stretched, but we're competing very effectively. And that's one of the reasons why we're encouraged by our first quarter. OK, well, we look forward to talking to you next quarter about the progress. Jeff, thank you very much for joining us. Thank you. All right.

44:18Jeff Harmon, the CEO of General Mills. Still to come, why Meta's Muse is having a big impact on a number of financial services company stocks, such as that one you're looking at right there. It was down sharply yesterday, that being Charles Schwab. We'll give you the details next. Welcome back. Keeping an eye on financial services stocks. They have gotten hit a bit this week already on AI disruption fears. That's tied to the new agent from Meta called Muse. Let's get to Oliver Renick at the CBO in Chicago. He's got to look at what the options market is signaling on this topic. Oliver. Hey, David, Meta's stock keeps zooming on Muse and its disruptive potential is inflaming a longstanding rivalry between brokerages Charles Schwab and Robinhood.

45:03Schwab's stock is down 8 % since Meta introduced its assistant, which does not make trade recommendations or give financial advice, but can track investments, progress towards financial goals and analyze portfolios. Options volume in Schwab was five times the average yesterday as put trading surged. And we're seeing some follow through this morning as volume is above average, thanks to a few traders who sold some upside calls out of the gate. In Robinhood, calls are doing twice as much volume as puts, with 80 % of the$30 million in premium traded this morning tied to calls, and most of that initiated by call buyers.

45:43Contracts expiring on Friday were the most popular trades in hood, with strikes from 127 to 130 in high demand, the latter which needs another 5 % rally to pay off. Or of course, instead of picking a side in the broker battle, you could just trade meta, which many are doing. Volume's been a runaway train, and market makers There's a pricing a 55 % chance this stock touches a new high by October 9th, guys. We'll keep our eye on that hood summit coming up on the 29th. Oliver, thank you. Oliver Rennick this morning. 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.

46:26You 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. Something amazing is happening in data management. Even though storage needs are constantly changing, companies are only paying for what they need now.

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