10AM Hour: New AI Safety Warnings, MongoDB Interim CEO, Alaska Air Group CEO 9/29/26

0:00This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. Tyler Reddick here from 2311 Racing. And Bubba Wallace. You know what's the worst part of a race? A rain delay.

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1:06Good Tuesday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and Mike Santoli. We are live, as always, from Post 9 of the New York Stock Exchange. David Faber's off today. We've got a big show coming up. In just a moment, early anthropic investor Byron Dieter will join us as details from the company's prospectus emerge and as rival OpenAI hosts its much-anticipated Developer Day. Plus, the interim CEO of MongoDB is with us first on CNBC after the company's former chief unexpectedly departed yesterday to join Meta. The stock down nearly 20 percent this week. And as high oil prices remain front and center, we'll talk to the CEO of Alaska Airlines about the impact on jet fuel and what he's seeing from consumers right now.

1:45First of all, let's get some breaking news in Washington as the Trump administration gets set to launch a new AI initiative ahead of a big meeting with tech executives later on. Eamon Javers is all over it. Morning, Eamon. Yeah, good morning to you, Carl. We're going to see the president later on this hour at the Mellon Auditorium here in Washington, D.C. He's going to be unveiling this new website, America.gov. And what the White House says is this is going to be sort of the front porch for American presence on the web in terms of citizens accessing the information that their government provides.

2:16It's going to be an AI-enabled website, and they're saying it's going to come with a lot of bells and whistles. We'll wait for the official unveiling to see what all of those are. But the president is going to be absolutely marinating in tech executives today. There will be, we expect, some tech executives at that event. And then later here at the White House at about 1230 this afternoon, he's going to have lunch with a whole host. And there you see them now, a whole host of top tech execs. These folks, and we suspect even more, will be here at the White House later today. And it's this fascinating moment, guys, where we see this prospectus from Anthropics saying, you know, look, our product might end with the elimination of all human beings.

2:53It might end up with the massive disruption of the U.S. economy. Washington has to figure out what to do about all of that. And you have a president right now whose position is we really don't need to do anything. What President Trump has said on all of this AI disruption is that we have the Department of Justice, and that's what we need, and that's all we need in order to protect Americans from AI going rogue or from any criminal activity as a result of AI technology. And you have these tech executives who are saying, wait a second, you need to stop us before we tech again, and saying we need regulation, we need the government to be involved here.

3:29It's sort of the inverse of what we've seen, you know, in my lifetime in Washington, where every industry comes to Washington begging traditionally for less regulation. This industry is coming asking for more. And I think a lot of that table setting is going to be done at the table here at the White House later today with that lunch with the executives. Will they be able to move President Trump off of his position, which is basically everything is fine. And the last thing we want to do is slow down AI and slow down development of this technology, because that could hurt the U.S. economy. The president is sort of in lockstep, Treasury Secretary Scott Besson has said, with Jensen Wang and his view of AI growth and sort of a maximalist view.

4:11But there will be some others at the table who share a different view. And we'll see what they say on the way out later on this afternoon. Guys, back over to you. Amen to your point. It does collide with the timing of this reporting about the Anthropic Prospectus, in which they do talk about existential risks to humanity, self-preserving behaviors on the part of the models that resemble blackmail at times. I mean, stuff like that has got to come up. Absolutely. And the idea of A.I. is it, you know, refused to be turned off is certainly a scary piece of sci fi. But I think the general view, at least for now, inside the White House, at least the people who've been successful in talking to the president, is, you know, look, this is AI doomerism.

4:53This is, you know, people who are techno-futurists who've kind of gone amok and they're paranoid and they're crazy. And ultimately, you know, this thing is not nearly as concerning as all of that. And if we have liability in place, if we have the Department of Justice in place, you know, these things will police themselves. That's the view. It's not widely shared in Silicon Valley. And so, you know, they're going to have to make an argument to an audience here in the audience of one, the president, who has said he has already made up his mind. And he can be a bit of an immovable object once he's made up his mind.

5:24So we'll see how it goes today. We'll have crews out staking out all of these tech execs. So if they're watching right now and they want to talk to us, we'll be on the sidewalk. You know where to find us. All right. Hope they stop by. Thank you, Eamon. Eamon Jabbers, where all the action is around AI in Washington. We just got some breaking economic data to share, and it was a miss on job openings. The JOLTS data coming in for August, the consensus was around 7.2, and what we got in terms of millions of job openings was around 7.07. So lower than expected. It looks like the opening rate slipped a little bit from July to 4.3 percent from 4.4 percent.

6:03Quits rate stayed the same. Overall, you know, the fact that it's above 7 million, I think that's kind of where we've been lately. But it is a miss. And, you know, we'll watch it because we're looking for any signs of sort of labor deterioration in demand. And openings has traditionally been a good sign that the Fed looks at as far as what's going on with companies' openings for workers. Overall, though, you know, the 7 million number has been pretty good. We're well off of, obviously, the post-pandemic highs, around 12 million. But we're kind of now near pre-COVID levels. This would be the lowest, I think, since the spring, somewhere around March.

6:38So we'll watch the trend line. We'll watch it. We also got a weaker consumer confidence, I'll just report from the conference board. Just came out and it was 81.9. The consensus was around 90. So that was definitely lower than expected. But I don't know, with the rise in gas prices, I think that we see consumers sensitive to that, at least in the expectations and confidence numbers, not necessarily in what they actually spend. But I'm looking sort of present situation looks like that one actually was a little bit better in August than we had in July. And then in the expectations, that was a dip to 68.2 from the 74 that we saw in July.

7:18So weaker expectations, overall weaker consumer confidence number. Hard to know, Mike, how much to make of these, the so-called soft data, which is the surveys because gas prices are high. We know that. Yeah, it's been diverging from a lot of the harder data and, of course, how the bond market's been pricing for a while. In terms of the reaction to just slight downside miss on jolts, two-year yields are off, just modestly off their highs from right before the report. So I don't think the market is taking anything that says it really changes the picture in terms of Fed here. Obviously, the big jobs number is on Friday.

7:48The jolts openings number softened up, but it's essentially even with the total number of unemployed. So we've had that ratio kicking around one to one for a while. In other words, in theory, you kind of have an offset between people who are not working and looking for a job and opening. So it's not a big mover, but also not something that gave the bond market a ton of relief in terms of downsides to yields. That's been a big pressure. Well, it wasn't another hot number on jobs, which would be another sort of like flashing green light for the Fed to keep hiking rates because they're worried about inflation.

8:19They watch jobs, too. You know, I want to say we'll look for any sign of weakness or deterioration. As far as the hard data and certainly the commentary and what we're hearing and seeing from consumer companies, I mean, that tells a different story. That's been the resilience story that we've been chronicling. Today, we got two consumer companies, CarMax, the used car company. Here's what we heard on the earnings call. Consumers resilient. At the end of the day, across all spectrums of the lower-end consumer to the higher-end consumer, we're definitely seeing resiliency there. Carnival Cruise, which, you know, the stock has been buffeted around by what's happening with oil prices.

8:52But what they say is booking trends continue to strengthen throughout the quarter with volumes meaningfully ahead of last year and far outpacing capacity growth. Twenty twenty eight is also off to an excellent start at higher occupancy and prices than last year. We're going to talk to the CEO in the next hour of Carnival to get a little bit more color. But that's, you know, Josh Weinstein always joins us. But that's pretty bullish commentary, especially in light of the fact that, you know, when oil prices go down, this is one of the stocks that also goes. Yeah, it is kind of well off the tie for sure.

9:24No doubt about it. I mean, I think that, you know, it's when these companies talk about resilience, I almost think it doesn't have a lot of meaning because right. Lower income Americans spend what they have plus a little debt. That's so we know kind of what the earnings are. It's not as if they choose to save almost ever more than they otherwise would. But we don't always hear about the resiliency of them. I don't think that that's... We don't always hear about it, but I think that's what they're kind of saying, which is overall spending levels have not really gone down. People are not choosing to forego things.

9:55They're looking for value within it or whatever. But no, there's not been a pause because we are close to relatively full employment and incomes remain up there. And so I think that's what's backstopping things. I'll go back to it, though. The market is not keying on this stuff. Like right now, the debate is not are we are we wobbling into recession? Is the consumer going to hang? It's about oil prices, how the Fed's going to react to oil prices. You know, is growth because of A.I. basically in this higher for longer world? And what does that mean for equity valuations? And I think that's that's kind of the whole feedback loop.

10:30I mean, one reason why consumers might be very resilient, even though, you know, they they they say they're not. The expectations and the confidence numbers are weak, but they continue to spend. They're in a bad mood, but they're spending. But they're spending. And here's a great chart from Bank of America, which shows maybe one explanation. This is the price of gasoline in blue and the inflation-adjusted gasoline. This is B of A today? This is B of A. It's a little wonky, but what it actually adjusts for is, like, so this is actually adjusted for purchasing power and wages. And so, yes, 450-gallon is sort of politically hard, but I think that the bottom chart, which shows what they're actually paying or how it feels, shows that it's a little less painful than the actual sticker price, just if you adjust it to inflation.

11:16I mean, this kind of gets to what Apollo wrote last week, is that it's not really, it's not about retail gasoline. It's about diesel gasoline and what that does to the increased price of your physical goods, because they all got to get delivered and you're going to get charged for that delivery with additional diesel costs. Yeah, no, this is just straight up like at the At the pump. No, for the diesel thing, yes, that filters through into more of the industrial economy. And we're waiting to see sort of like how inflationary ultimately that's going to be. Right. Let's get back to the AI trade. Anthropic is set to devote a substantial portion of its IPO perspectives to warnings of AI's existential risk to humanity, saying the technology resists shutdowns, exhibits what they're calling self-preserving behavior, according to some new reports.

11:57This is the high profile AI summit gets underway in Washington, as Zaman told us a moment ago, and his rival OpenAI gets ready for its own developer day. Let's bring in early anthropic investor and partner at Bessemer Venture Partners, Byron Dieter. Great day to talk to you, B. Welcome back. Thank you. Always exciting in tech land these days. Yes, especially today. Any issues with the reporting around this perspective? Did you see or hear things that you think are just wrong? Well, I think importantly, people are just reacting to a draft and the whole world's waiting for the flip to public of the actual S1 with any updates, etc.

12:31As large early investors, we can't comment directly on the company, but I would share that the dialogue is becoming pretty constructive. I think it's a very good sign that you've got the President of the United States, Speaker Johnson, and the leaders of the major frontier labs all getting together within minutes from now to work through these next phases and next steps. And I think we're making real progress. In terms of the risk statements and disclosures there, It's a pretty unique, powerful technology. It's a pretty unique set of disclosures. And I think we all appreciate that the dialogue's happening and that they're being upfront about it.

13:03Do you think that today's discussion at the White House is about pros and cons? Or is this just a way to, as we saw in G20, for example, a way to create more commercials for the promise of AI? I hope and expect that it is about implementation of these ideas. What you've already seen is things like OpenAI delaying the release of their current model, which is a step in that direction. And when you see Anthropik flipping to public, you're going to see more transparency, more disclosures, more reporting that comes with being public. And so these are the things that when you combine that with some of Dario's essay talking points around inspectors and industry collaboration, we're getting this framework that's coming together in a very tangible, very real way.

13:44And that's how as an industry we're going to get through this while maintaining our lead over China and while maintaining economic growth that comes with this. Byron, how does the cooperation look? You're going to have an IPO trying to be marketed. Anthropic, you're going to be emphasizing perhaps the lead that Anthropic has over OpenAI and the others, maybe even extolling, you know, better or more advanced safety measures. and yet you're also supposed to be acting in concert with the competitors if you're anthropic and essentially trying to be frenemies in some formalized way and yet saying it's not going to impinge on the pace of progress?

14:25So this is the age-old term in Silicon Valley, co-opetition, where absolutely in customer engagements on the field, in the product-diff cycles, you're trying to lead, you're trying to win, you're trying to create the best tech and capabilities. At the same time, there needs to be cooperation in important areas around public safety, trust, transparency, regulatory frameworks, those sorts of things. Both can and have existed in a lot of industries for a long time. It will happen here as well. And I do think what you're seeing is given the importance of these issues, given the powerful nature of this technology, you're seeing people get ahead of it much earlier than historically you would.

15:02As these early signs are emerging, as you're seeing the power of this technology and what can be, the leaders of the tech themselves are saying, let's come together, let's figure out how to get through this. And I absolutely appreciate that the administration is keeping, you know, goals one, two and three of U.S. leadership, U.S. safety, U.S. security, while now embracing the industry's views on how to manage that in a collaborative yet, you know, forward leaning way. I mean, what do you want to see as an investor on that front? How do you like what's the right level of regulation that wouldn't hold back innovation and growth, but also make everybody feel safer?

15:42Well, to answer the first part of the question, what I'm excited about is to see what this technology can do on the frontier. We're just starting to see it solve 200-year-old math problems and do frontier science. I cannot wait for it to be leashed into the world of life sciences and healthcare and what's possible there. Energy, material sciences, these things are coming and these things are going to be powerful. We just need to make sure that we're doing it in a way where these models are not unconstrained. The cybersecurity elements of this are massive. I'm more worried about what happens when you put these tools in the hands of human actors that are our adversaries and nation states and terrorists.

16:21And we need to make sure that the biomedical areas are constrained and that a lot of the extreme possibilities of this are limited while at the same time unlocking those benefits for scientific frontier research in humanity. When you think about OpenAI in this developer day, Byron, what do you think they need to say? And what does it say that they delayed the release of 6.1 Astra on these safety standards? So the back and forth among these two leaders has been fascinating, and it's been great for the industry. They truly are innovating at the frontier. I do think that this is what the pause of their model is what the new strategy looks like in practice.

17:01The extremists and doomerism of stop all AI development and put people in jail if they create science here, that's preposterous and unpractical. However, this idea of measured releases, safety standards, inspectors, while keeping up with what's possible, is the leapfrog in a measured way that needs to happen. And so I expect them to continue to have more exciting releases in their developer day to preview what's ahead. And similarly, Anthropic is going to continue doing the same. We've got this wonderful consumer app on the front end with extremely powerful APIs underneath for enterprise use cases.

17:40And we're just unlocking in the very early days the possible benefits for economic development and for individual developers to build. And we're just seeing what's possible. All right. As you said, a busy day in tech between the AI meeting at the White House, the developer day. It didn't even touch on Meta and Muse, but we'll save that for next time, Byron. Always appreciate it. Likewise. Cheers. Have a good start to the week. Byron Dieter. Later today, by the way, do not miss OpenAI. Sam Altman from the company's developer day. He'll sit down with our Kate Rooney at noon. And then at 3 p.m. Eastern, we'll talk with OpenAI CFO Sarah Fryer directly following the keynote.

18:20Here's our roadmap for you for the rest of the hour. After the break, the interim CEO of MongoDB back at the helm after the company's former CEO abruptly left to join Meta. He's going to join us next. Plus, Neuberger's chief investment officer for fixed income is with us as Wall Street remains laser-focused on bonds with yields at multi-decade highs. And a first on CNBC interview with the CEO of Alaska Airlines from the sidelines of their investor day. We'll talk about energy price, consumer spend, and some new concerns about the 737 MAX when Squawk on the Street continues.

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19:30With higher predictability and greater access to credit, everybody wins. Get started at VantageScore.com. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. Tyler Reddick here from 2311 Racing.

20:08And Bubba Wallace. You know what's the worst part of a race? A rain delay. Sitting around and waiting for the track to dry is dull. But instead of waiting, we hang out with Chumba Casino. Social casino slots, bingo, solitaire, plenty of fun to keep us entertained. So why let a rain delay slow you down? Play now at ChumbaCasino.com. Let's Chumba! No purchase necessary. VGW Group, void where prohibited by law. See TNCs 21 +, sponsored by Chumba Casino. Welcome back. Take a look at shares of MongoDB, down around 20 % to start the week after announcing their former CEO would be stepping down effective immediately, taking on a new role as Meta's chief enterprise platform officer.

20:50The company hosting its investor day this morning at the NASDAQ with our next guest returning to take the helm on a temporary basis here after previously running the company for 11 years. Joining us now in a first on CNBC interview is MongoDB interim CEO Dave Itacharya. Dave, welcome back. Thank you for joining us. I think the timing really caught investors by surprise ahead of this big investor day. When did you find out about this? The timing was not great, but I found out about it last week. And so the board asked me to step in, and I agreed to do so. I think the company's on great footing.

21:31The business is doing very well. I think the investors will be pleased with what they hear later today. and I'm really excited about the future. This company is well-positioned given the AI wave. How long do you intend to stay on a CEO? I'm going to stay as long until we find a really suitable successor. So frankly, the company doesn't need to worry about me leaving prematurely. We'll find the right person and I'm very confident that we'll have a lot of attractive candidates very interested in this world. I mean, I guess the other nagging question that investors might have is, Why would he leave?

22:07If there was an exciting opportunity here when it comes to enterprise AI, why would he leave to go to Meta to work on that business? How do you reassure investors today? Yeah, I think the short answer is I think Meta put a very lucrative offer in front of him and he accepted it. And I think that's that's it. I think when investors hear what they hear today at investor day in terms of the product innovations we just announced this morning as well as the long-term outlook I think they'll be quite pleased about how the business is doing I think MongoDB is on a great foundation I think the need for as people deploy more and more AI and genetic workloads the need for MongoDB decreases with the need for real-time fresh data the ability to find data quickly and the ability to scale up and down because a lot of these workloads it's very unpredictable, their demand, and you need a platform that can massively scale.

23:01And I think we're really well positioned. So I'm really excited about the future. Do you have the relationships with the Frontier models themselves, Anthropics and OpenAI? Yeah. So we have a large go-to-market organization. There's relationships up and down those organizations. And obviously, I will interject myself where appropriate, but we have a strong team, both with the Frontier Labs, the AI native companies, and also Enterprise Fortune 500 companies. They are also very, very interested in learning how to deploy AI technology in their organizations so that they can transform their business.

23:36And obviously, we have deep relationships across a whole wide variety of industry sectors. Dave, I imagine as of a week or two ago, Meta was not on your mind as a potential key competitor in your core business. Does it need to be there now? I don't really view Meta as a competitor. I think, you know, again, I don't know all the details of what they plan to do, but what I would say is, you know, the Frontier companies are great partners. They're great distribution partners for us. We work with them closely to close business. A lot of what we'll announce today is how their tools are tightly coupled with MongoDB so people can turn up instances or quickly get data from as they're building software applications and so I don't view this as necessarily a competitive issue.

24:23Actually, I view the ecosystem expanding and frankly the more frontier labs there are, it's better for MongoDB because we are multi-cloud and we're multi-model and also multi-deployment. You can run in the cloud, you can run on-prem and you can run in a hybrid way. So the fact that customers want choice, the fact that they want choice both in terms of models they use, the deployment models that they want to work with just positions us really, really well. What kind of growth rates are we talking about, especially for Atlas, which is really the growthy part of the story, right? Yeah, I think you'll have to wait in less than an hour.

24:57We'll start our investor day, so I would be violating Reg FD if I started sharing information right now. But I think investors will be quite pleased with what we have to share. Yeah, I was just wondering, because looking at some of the competitors' rates, like the snowflakes and the data dogs. I mean, they've really seen an acceleration in growth over that 30 % level. So I'm wondering how that's happening and whether that's something that you guys can do too. Yeah, I think the point is, first of all, I'm the lead director at DataDog, so I know that company and the leadership team well. What I would say is that our business is slightly different and it takes time to build new applications.

25:33A lot of the data being used by Snowflake is for training, so that's, you know, and querying data, which is, you know, something people do up front. But as people start deploying more sophisticated applications, more sophisticated genetic workloads, the need for a highly scalable, highly flexible operational data store becomes really, really important. Because think about it. How do agents get the real information? How do they find information to reason properly? How do they take action? How do they provide updates? It requires a real-time database. And we're well-positioned to see that business come to us.

26:06Dave, are investors or analysts asking you to commit to a certain timeline in the role? Do you feel like you need to give the street that much clarity? I've not really had many conversations with investors just yet since we have our day today. I'm sure I'll be talking to investors after we do our analyst day. But I will just assure everyone is that I'm not running away, you know, very prematurely. We'll do the search thoroughly. will find the right people. The board is intimately involved. In fact, many of the board members are here with me today. And I also want to emphasize, we have a really, really strong leadership team.

26:43The leadership team has been running this company. It's not one person. They really run this company well, and they're still here. They're going to run the company going forward, and so we're not going to miss a beat. And I'm really proud to be part of this team, and frankly, all the credit goes to them for the results that we've delivered this past year. I mean, the fact that they gave them a more lucrative offer at Meta. Does it speak to just how difficult it is to acquire talent right now in the AI race when you have some of these hyperscalers and mega cap companies spending anything on good talent?

27:17Yeah, I would say, I mean, obviously every company makes their own decisions about what kind of talent they need. There's clearly been a talent war more on the research side than, say, on the business side. I think Meta just didn't have a lot of experience. and again I don't speak for them too much, they don't have a lot of long history in the enterprise. That is something we know really well. I spent my entire career in the enterprise, the team we have has spent their entire career on the enterprise and it's not just the leadership team, it's the team we have across the whole world. We've been serving the most demanding and sophisticated customers in almost every industry and for almost every conceivable use case.

27:52So we really know this market well and what I would say is I think other organizations don't necessarily have all that experience. And so they may choose to, you know, do something about it. Well, stock's coming back a little bit this morning, Dave. Thank you very much. We really appreciate you talking to us ahead of Investor Day and speaking to the audience, too. It's great to be here. Thank you for having me. Thank you. After the surprise comeback of former CEO, Dave Itacheria. When we come back, the CEO of Alaska Airlines is after the break, live from the company's Investor Day in Washington, detailing the next leg of growth.

28:25watching shares of FICO today as well, losing nearly a quarter of its value. Classic volatility in this name as the FHFA director Pulte says he's introducing some new changes to mortgage pricing that will add some competition to their credit scoring business. You can read more on CNBC.com. Don't go anywhere.

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29:43Make amazing happen. Learn more at cdw.com slash Lenovo. Tyler Reddick here from 2311 Racing. And Bubba Wallace. You know what's the worst part of a race? A rain delay. Sitting around and waiting for the track to dry is dull. But instead of waiting, we hang out with Chumba Casino. Social casino slots, bingo, solitaire, plenty of fun to keep us entertained. So why let a rain delay slow you down? Play now at ChumbaCasino.com. Let's Chumba! No purchase necessary. VGW Group Voidware prohibited by law. CT &Cs 21 Plus, sponsored by Chumba Casino. Welcome back. Alaska Airlines hosting its Investor Day this morning.

30:24Our Phil LeBeau is in Washington State, joins us with the company's CEO. Phil. Thank you, Mike. Ben Minacucci. It's great to be here out at your customer center. And we'll talk more about the Investor Day in just a little bit. But we're in basically a peak of what the future is going to be in terms of upgrading your product, new seats, new premium seats, especially heading towards the premium end of the market. How quickly will you be able to retrofit and design your new interiors? Well, good morning, Phil. Great to have you here. What you see here, this is our Aurora experience, our new experience.

30:57It's called Le Hoku for Hawaiian. But all of this is going to come to life by the fall of 28. And so on our 787s, on our 737-10 Maxes, on our 330s, all of this experience is going to come to life in the next couple of years. These seats will be going on your 737 Max-10. That's right. But as everybody knows, the Max-10 hasn't been certified. There is a software bug that Boeing has to work out. The head of the FAA yesterday said, yeah, this is going to delay it until we can prove that this is definitely not going to be a flight of safety issue or a safety of flight issue, I should say. And so the question becomes, are you frustrated that you're outlining your plans for the future with this aircraft?

31:39And again, you're going to have to wait. Well, look, the whole reason for a certification process is to pick up bugs like they just did. So we're happy that they're finding these issues right before certification. Our goal is to get the safest and reliable airplane coming out of the certification process. All the I's and T's, I's need to be dotted, T's need to be crossed. And we're going to work with Boeing and F-A to make sure that when we get the 10 max, it's ready to go. But at the same time, you've got a plan for bringing these into service. If it's not certified, let's say for six months or nine months, will you have to modify your plans?

32:14You know, it's going to definitely push to the right if it moves that long, Phil. Right now, the airplanes are designed to come into service in 27 and 28 on the 10 max. The live-flat seats on the 10 max will be the fall of 28. So I think we still have some time for that. So we're not overly concerned. But, again, the certification process has to be done right, and we're going to work with Boeing and the FAA on that. You're not giving guidance today for the remainder of this year. Jet fuel is the big question that everybody is wondering about out there. How are you planning internally for jet fuel prices?

32:48Are you expecting them to stay roughly at this level for the remainder of this year? Well, look, I think they are high now. Nobody knows where they're going to be next month in the fourth quarter into next year, which is why we're not giving guidance today. But, you know, the way we're looking at it is that we're going to – we're announcing an investor day is what we can control in terms of going forward. So what we control is our business. We're going to invest in premium. We're investing in international routes. We're tripling our cargo capacity and we're investing in our loyalty program. Those are the things we can control.

33:17So if fuel prices drop, of course, we'll have more tailwinds. But we're trying to build a business that's resilient over these economic cycles. You're also I didn't hate to interrupt you here, but you're also having to raise fares. And that raises the question of whether or not the consumer, whether it's a corporate buyer or the leisure traveler, Are they pulling back at all as you're raising those fares? You know, even with this high fuel environment, demand is strong, Phil. And, you know, the American consumer is strong, which is, you know, really the silver lining behind all this. And look, all these products are designed for that upper part of the K-shaped economy.

33:52But we are very mindful about the level of fares. And so we want to be attractive to people on the lower part of the K, which is why we have a great main cabin, a great saver fare. And so we want to be attractive to the entire flying population. Not just the people who want the premium experience, which is going to be there for them, but we're extremely mindful of fares. Finally, with this premium experience, it's not just the cabins. You're also showing today new lounges that will be coming online in San Diego, Seattle, and Honolulu in the next year and a half. Did you wait too long to invest in the premium experience?

34:23Because your competitors at United and Delta, they've been doing this for some time. Did you wait too long? Well, it's been an evolution for us. You know, if you go back to 2015, 2016, Phil, only 50 % of our revenues came outside the main cabin. Today we're at 53%, and all of this is designed to take our revenue base, our diversified revenue base, to 60 % outside the main cabin. So in December of 24, when we announced Alaska Accelerate, all these plans were going in place. And the whole message today on Investor Day is that the building phase is done for us with Alaska Accelerate. we're entering the harvesting phase, the phase where we're going to have value creation, where the earnings power of Alaska is really going to come to life over the next couple of years.

35:03Ben Minicucci, CEO of Alaska Airlines, on a huge day, guys, out here. The number of things they're showing in terms of upgrades for the premium experience. We'll see what happens over the next year and a half. Guys, we'll send it back to you. Okay, thank you, Phil. Always good to get the color from Alaska Airlines. A lot more coming up on the travel industry, by the way, next hour. We'll be joined by the CEO of Carnival Cruise Lines. His first reactions to this morning's earning. Look at the stock. It's spiking 12 percent. Plus, Neuberger, CIO and had a fixed income. Why? He says high rates, maybe the new normal.

35:34Had a brace for all that. We're back in two.

35:40Welcome back. Let's get a CNBC News update with Frank Holland. Morning, Frank. Morning to you, Carl. Former Department of Justice Special Counsel Jack Smith is defending his criminal cases against President Trump this morning. He is facing the Senate Judiciary Committee for questions about his probes into Trump's alleged efforts to overturn his election loss and alleged retention of classified documents. Smith said today he stands by his cases. He insists investigators develop proof beyond a reasonable doubt that Trump engaged in serious crimes. Lindsay Clancy is back in court today for the first time since the judge declared a mistrial in her high-profile murder case.

36:15Prosecutors have not said whether they will retry Clancy for for killing her three young children in 2023. Her lawyers have pushed for the case to be thrown out, arguing she was suffering from postpartum psychosis. And Defense Secretary Pete Hexeth ordered the military cyber warfare unit to protect the upcoming midterm elections from foreign interference. The announcement comes after President Trump gutted the civilian agency created to guard election infrastructure and after early voting has already begun. Sarah, back over to you. Thank you, Frank. After this, the outlook for global rates and why Neuberger Berman says investors should get used to higher yields here.

36:51Plus, don't miss Meta's president, Dina Powell-McCormick, on the launch of the company's Muse AI agent for small business. She joins Jim on Mad Money tonight. That's at 6 p.m. Eastern. We're back in two.

37:06Welcome back. Checking in on the broader market. You see the S &P 500 just about flat, but the 10-year treasury yield up at 5.25%. Let's bring in Ashok Bhatia, CIO and Global Head of Fixed Income at Neuberger. Good to see you here. Great to be here. Thanks for coming in. So, you know, the Treasury market's offering you, you know, the ability to lock in 5 % from three years out at this point. Should investors look at that as an opportunity or is it some kind of warning about what to come from the Fed? Well, I think, you know, this is one of the main discussion points with clients right now. It's like, is this the opportunity in fixed income or is it going to get worse?

37:38And our answer is this is starting to enter the opportunity zone for strategic investors. You know, we're priced for forfeit hikes. We're priced for real funds rates of, you know, 2.5 % to 3%. We're into that zone that historically this is value in fixed income. And I think the other really important thing that fixed income is starting to offer is the ability to hedge some of these risk assets. And I think we're seeing it in the market these days where higher yields are leading to some pressure in risk assets. And if we continue to see this, I think we're getting to this inflection point where treasuries and government bonds can start to hedge risk.

38:11Do you have to have a bit of a theory of the case of why we're here in yield and also why, let's say, on a day to day basis, we're so linked to oil prices? Yeah, I think there's two things going on. One is the Fed's reaction function to inflation has changed. Warsh has said we want to get back sufficient speed, five years of missing. So there's this Fed component. But the oil message, I think, is really that the Fed, central banks globally, are scared that we'll see oil prices feed into core inflation. We haven't seen that yet, but I think that's the way, like when you ask about the theory of the case, the theory of the case is that these elevated oil prices create that asymmetric risk on inflation that the banks will have to respond to.

38:51So I do think for bonds to really have a rally from here, we are going to have to see oil prices come down. And that can get, you know, we can get a bigger rally if we start to see some pressure on the growth side. What about the labor market? I mean, we get a big jobs report this week, so we'll know more. But we've got a little bit softer openings data this morning. Do you think the labor market can stay strong throughout these higher rates and higher oil? I think if we take a step back, labor market, we're printing about 60 ,000 to 80 ,000 jobs. You know, consensus is about 80K. We're at an unemployment rate of below 4%.

39:23The labor market's been incredibly stable this year. And I think that's sort of the expectation of what we should expect is continued stability. I'm not thinking that we're going to see either a big hiring wave here or a big rise in the unemployment rate. So I think it's more about sort of the capital spending and some of the other sides of growth rather than labor. That's the other culprit or suspected culprit for the yield environment is the AI build-out. I've even heard the carry trade. The carry traders are having to liquidate some of their bond holdings. I mean, are any of these theories, do they make more sense than the others or is it the combination of them all?

39:58Well, I do think, you know, bonds, we come back to what is the Fed going to do? And I think one of the reasons you've seen the carry trade liquidated is people have had to change their expectations for the Fed. That's the driver and the carry unwind. I think my view is that's been more of the symptom of what's going on. And the AI build, I think, has had certainly an impact. It's had pressure, obviously, on some areas of credit spreads. But it is really dwarfed by the size of, you know, this is a 30-odd trillion government bond market. And so the AI trade, I think it's obviously impacting growth.

40:29It's impacting some supply. But I think it's more of a secondary thing than the Fed and the Fed's reaction functions. Does this high yield environment on corporates, does it feel tenuous? And do you see that bleeding into IG or no? Well, I can tell you what we've seen the last few days is we have seen a little bit of weakness in high yield. It's a little harder to sell some securities. It's nothing, I would say, dramatic. We've seen 20, 40 basis points of widening, which for a bond investor, that's kind of middle of the road type of widening. So there's a little bit going on there. But overall, credit still offers a lot of value.

41:02And I would be surprised if we see, you know, unless we start to see the Fed and we price the Fed going 150 in the next wave of this. Apart from that, I think credit's going to be pretty stable. And that's one of our messages to clients. You mentioned that the bond market now presents an ability to hedge equity risk. And this is something I've been kind of banging on for a while, because if you look at the trailing 10-year stock over bond returns, it feels like why did I ever bother owning any? Now maybe it's changing. And yet people are so sensitive to the idea that, well, if I start to leg into fixed income now, what if yields move against me a little bit?

41:37And, you know, it seems like you have a cushion. Yeah, I think that's absolutely right, you know, Mike, is that one thing is, like, this has not been a great bond market year. But our big bond market indices, they're off 2%. Like, the scale of the negative returns is not, like, I think the emotion about it is a little worse. But we're now at, I look at the 10-year, we're at 2.5 % to 2.75 % real yields. You know, when we were at zero real yields, like, that hedging argument was a big problem. But at this point, can bond yields hedge? I think they can. But I do think, like, you know, this is, who knows where we can go if we can price another one or two Fed hikes.

42:15But my main thought is we have entered this zone where there is some strategic value. And it's global, right? I mean, this is not just a U.S. bond market move. It is. I would say we are much more keen on the U.S. I mean, European rates, you know, they've moved up, but they're still in the 2.5 % to 3%. Japan's got its own issues. So I think for a global bond investor, the U.S. is the best value here. Michelle, great to see you. Thank you. No, great. Thanks, Farrah. I appreciate it. When we come back this morning, a lot more to come on the markets as we are dealing with that high-yield environment.

42:48Also, some options about SpaceX after that successful Starship orbital flight, followed by that fiery landing in the Pacific. Stay with us.

43:02Welcome back. SpaceX's Starship rocket making a fiery splashdown in the Pacific after a successful orbital flight yesterday. How is the options market thinking about the stock after the mission? Let's get to Oliver Rennick of CBO in Chicago. Oliver, morning. Hey, Mike. For all the flash-in footage, this might be as much Bond story as anything else. SpaceX launched Starship into orbit. The question is if the stock will, too. But shares are muted, and about 120 ,000 options have traded so far for just about$50 million. A surprisingly quiet figure considering that milestone, possibly because SpaceX has proven very sensitive to interest rates.

43:38The stock's 10-day correlation to the 10-year yield is currently negative 0.95. As a result, the stock failed to make it above$160, and we're seeing more calls selling than buying this morning, both by volume and dollar amount traded. In fact, the two biggest trades out of the gate were sales of the 145 strike calls for next month and the 150 strike calls expiring in January for a combined$7 million. That said, there isn't a ton of put buying, So there's not a strong appetite to bet against SpaceX right now. And by volume, the top six most popular contracts were all calls, including some heavy buying of the 150 strike call expiring Friday that needs SpaceX to rebound more than 3 percent by the end of this week, guys.

44:25All right. Yeah. Oliver, thanks very much. Yes, SpaceX interesting is really sort of held its value, I think is what you could say, since that opening flurry after the the IPO. And guys, the market itself is kind of hanging in. The rule has been yields higher has meant market breadth has been wretched. It's not as bad today, but still a little bit of a pull lower in the average stock. You do have NASDAQ managing to try and hold the indexes up. I think the debate right now is, are many pockets of the market getting washed out enough? You've seen this pile up of new lows day after day that you just need a little bit of a spark from relief on the yield front, whether we get it through jobs or not, or some Middle East news, which would at least allow this bit of a comeback relief rally.

45:09The other piece of it is we have quarter end. It is tomorrow. There's been a lot of or should have been a lot of mechanical sell my stocks, rotate back into bonds if you're a balanced investor. It's unclear how much of that activity maybe has to work its way through, along with tax loss selling. So I think it's a lot of sort of tactical noise in there. But in general, heading into earnings season, it feels like the bar has been lowered. Yeah, it is remarkable. Some of the percentages off the 52-week high. Industrials down 21. No, transports 21. Russell down 8. Dow down 5. S &P down 1. Banks down 12.

45:43The BKX is down 12. And equally, its consumer cyclicals are down 13. So that's it. So there's been a lot of damage below the glare of the headline indexes. And, you know, the markets, in some measures, as oversold as it was at the March lows, when you basically had a 9 % correction. Although there's strength. I mean, you continue to see these rotations. Today, it's utilities, industrials, and real estate. But that's exactly, but that's the laggard. So it's a wonder if that's saying maybe they're kind of sold out for now. Mike, thanks. We'll see you later on. A lot more in the next hour on this huge day for the AI trade, including tech portfolio manager Tony Wong, along with Bain's head of tech, as Squawk on the Street continues after this.

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