10AM Hour: Nvidia’s $150B Buyback, Mortgage Rate Outlook, Meta Pulls Back 9/28/26

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0:32Schwab 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. Good Monday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Cantone and Michael Santoli. We are live from Post 9 of the New York Stock Exchange. David Faber has the day off. Stocks are under pressure this morning as oil prices jump and bond yields move higher.

1:09We'll get to the latest Iran headlines that are driving the action this morning. Plus, NVIDIA announcing a historic$150 billion buyback boost as the company also lays out a plan to stop AI agents from misbehaving. We'll get an analyst's first take on whether those headlines will move the needle for the stock. And is a 9 % mortgage coming? We'll talk to one economist who says rates on the 30-year fixed could go a lot higher from here. And that's where we begin. We've got a big week ahead. And the focus for all Wall Street is on the jobs market. So this week, we will get, starting tomorrow, consumer confidence, jolts, which is always good measure on how hot the labor market is.

1:50It tells us how many job openings there are and how many quits there are and that sort of thing. I mean, this is all ahead of the big jobs report for September that we'll get on Friday, and also in between Q2 GDP and the August PCE, the Fed's much-watched inflation report. So it's a big week of economic data. But the story really has been this March higher in rates, in yields. And that impacts people. I mean, there's the tenure. Had quite a jump last week, a big jump toward the end of the week especially. And there's follow-through today, where bonds sell off, yields go higher. Why is it happening?

2:26Well, it's a mixture, right? Oil prices are higher. So there's geopolitics there. Higher inflation worries that creates higher rates. Better economy. I mean, we did get some good manufacturing numbers last week that helped bring yields up. So that's the good reason instead of the bad reason of inflation. And then this competition for capital, right, where the hyperscalers and all the AI players are trying to raise money and issue debt to get everybody to pay for basically the build-out of data centers and AI. And so there's competition there when it comes to some of these bond auctions. Those are just a few reasons.

3:00And by the way, those were some of the reasons mentioned by Fed Chairman Warsh as well at the last Fed meeting when he was asked to interpret the move. It hits consumers. I mean, everybody will feel this, right? The 30-year fixed mortgage just since the Federal Reserve raised interest rates, has gone up 7.4 percent. Credit card rates up to almost 20 percent. And there's a jump even since the Fed raised rates. Home equity loans also higher. Again, these rates have moved higher throughout the war as oil prices have gone on. But this is who feels it. Whether or not that was the intent for the Federal Reserve to raise rates and sort of slow things down.

3:37Initially, it's actually felt in sectors that don't need it. Yeah, this is the tricky part. They don't need it and arguably are not the areas of the economy that are keeping inflation elevated. So, you know, it's never surgical in terms of how the bond market and how policy tries to impact these things. And, you know, I do think that the stock market has registered that as well unevenly, just just as the economy is feeling it unevenly. You know, I kind of had to smile. Come in today and all the commentary is, you know, stocks remain near highs despite bond yields being, you know, at 20 year highs or whatever they are.

4:15I don't think it's despite. I think the S &P 500, because of how concentrated it is, the sectors getting hurt are driving safety buying and AI excitement buying in the parts of the market that keep the S &P higher. But on a one-month basis, since the 10-year was at 475, you have the Russell down 5 % or 6%, you have banks down 8%, consumer cycles, and the median S &P stock basically down 5%. And the median S &P stock is down like 16 % from its high. So the market's feeling it, and it's kind of pricing it in. And the question now is, if you get any relief on rates in oil, does the average stock just fly and tech has a backseat, or do they converge in some other way?

4:56I think that's been the big debate in terms of stock impact. Or will the Fed have to go even further? Because, I mean, the chairman, Kevin Warsh, did say financial conditions are not restrictive. Well, guess what? With stocks at a high, he's not getting financial conditions more restrictive. Why? Because information technology is such a big part of the stock market. And to your point, Mike, where the market is feeling it is where the consumer is feeling it, in the housing market and auto loans and credit card loans. And that's not really dictating financial conditions right now. Neil Dutta has a great analysis of this this morning from Renaissance Macro.

5:29We'll talk to him later. But basically, here is what he said are the most rate-sensitive sectors, right? When the Fed raises rates or when interest rates rise, no surprise, residential investment, transportation equipment, motor vehicle parts, right, auto loans and everything like that, furnishing and household equipment. All of these areas were already not booming going into a Fed raising rates. They're not being influenced as much by rising oil prices or inflationary pressures. And, you know, what's not on this list is memory chips or technology. The parts of the economy that are booming and keeping growth really strong overall and keeping the market high.

6:09Two things. Goldman Sachs maintains a financial conditions index both with and without equity market factors. If you exclude where the stock market is, then you are actually quite tight based on the last couple of years experience. So dollar's been strong. Bond volatility is up. Obviously, yields are up. The place where it could all come together or not is the credit market. So credit spreads have started to widen out, but they've not done so in a way that really seems like it would impinge on the main investment themes. You know, CapEx in terms of tech, whether it changes the break even rates for a lot of the data center investment and all that.

6:45But it could. I mean, that's the other piece of it that I think so far remains noncommittal. And that's one of the reasons that the market's been able to hang in there. I do. I do also think, Carl, it is a it at least it's a good vote of confidence from the markets in the strength and the resilience of the underlying economy and earnings. That oil prices at 100, 10-year Treasury above 5 percent. I mean, that that these things are not signaling a slowdown in growth because then you would have bond yields go the other way. if there were some serious growth concerns, and we haven't gotten to that point.

7:17The other only tidbit that the market is signaling, which is good news, is the break-evens have not gone up, 10-year break-evens, which means the market is not worried as these oil prices rise about credibility in the Fed to be able to fight inflation. They actually came down last week, which is just notable because oil prices are high. Yeah, some of that's market-based stuff. We did get U-Mish one year goes to 4.6 on Friday, so some of the survey work is not going in. Consumers are very sensitive to gas prices. It's different. Yeah, which is another way of saying it's the real interest rates that have gone up a lot, not the inflation-influenced ones.

7:50And that is the stuff that tends to matter for cost of capital and equity valuations. So that's why it's sort of impacting it there, but not as much in terms of inflation or Fed. No, it's good. It's good. It's a mark that the market still feels that the Fed has credibility to fight inflation in the long term. Yeah, there's a higher neutral rate, basically. Some of the opinion pieces are that it's Warsh's credibility that's working as opposed to, say, the Treasury secretaries, which might be suffering at Warsh's expense in a way. We'll see. A lot of moving pieces. Let's get to Eamon Jabris this morning in Washington with the latest on Iran as these oil prices are higher to start the week.

8:23Morning, Eamon. Yeah, good morning to you, Carl. President Trump told Axios last night that he expects more talks with Iran this week after he rejected an Iranian peace offering over the weekend. The president said the Iranians want to make a deal, but he said it's not the deal that I want to make. It is what we would have agreed to maybe a year ago. They overplayed their hand, the president said. He also said he is always thinking about resuming strikes on Iran. And meanwhile, there are indications that any renewed conflict could spread in unpredictable ways. An Iranian Revolutionary Guard official said on social media that if another war breaks out, the Iranians would undoubtedly attack and hit American ships, including in the Indian Ocean.

9:12And British police said Sunday that they arrested several men on suspicion of offenses under the Explosive Act. And the army was examining a number of vehicles after security was stepped up at a British air base used by U.S. forces in southwest England. Now, that base, RAF Fairfield, has been used by the U.S. to carry out strikes against Iranian missile sites, including around the Strait of Hormuz. And back here in Washington, President Trump broke bread with Anthropics CEO Dario Amadei at the White House last night at late. It was a 10 p.m. start, and this was a detente of sorts in a strained relationship between the AI powerhouse and an administration, which has been deeply critical of the company and skeptical of Dario Amadei's warnings on AI safety, guys.

10:01So we'll wait and see if we can get any readout of what was actually said during that dinner last night and if any real breakthroughs happened in the relationship or if this was just sort of a getting together and a kind of combining of thoughts on AI and AI safety. Amen. Some conjecture about this White House announcement today at 2 o 'clock. Some believe it might be related to an announcement of a steel plant in Iowa. Do you have much? Yeah, I have from a White House official just a short time ago that the president will announce the largest steel plant in American history to be built by Mesabi Metallics in Iowa.

10:37They say that Mesabi recently invested$2.5 billion in a brand new 7.5 million ton per year iron ore mine in Minnesota. That was the first new mine in the iron mine in the U.S. in 50 years. So the president is going to use this opportunity to underscore American manufacturing coming back and what he's doing for American jobs, particularly in the mining and steel industry. All right, Eamon, thanks for that. We will obviously look for that once it hits. Let's get to the broader market picture now in a mixed bag for tech this morning as NVIDIA pops on buyback news while some software names pull back.

11:13Let's bring in Trivariate Research founder and CEO Adam Parker. Adam, good to see you. You know, you heard us kicking this around. I know you've also been doing some work on this whole interplay between oil and rates and what it could mean for the stock market and various parts of it. So what's your bottom line? You know, two of my least favorite subjects as an equity person are rates and oil because I think they're two of the hardest things to forecast. and people I've worked with who are experts aren't good at forecasting it either. It does seem like the correlation between oil and rates is at a multi-year high and it's somewhat unusual.

11:52We only have three regimes we could find in the last 25 years. The Fed was hiking while the tenure was rising also. So you don't have a lot of data to analyze. And I think what makes this regime unique is just that earnings look really good And as Sarah was picking around, the tech earnings in particular. So I think people are going back to the tech trade and the MAG-7 almost for defense, which is not what we had heard earlier in the regime. That's definitely happening, Adam. I mean, I guess now if you had kind of the blank sheet of paper, what would you do to navigate now that those price adjustments have been made?

12:29You've had this kind of correction in the average stock. And that whole idea of a broadening earnings growth story is not really being reflected in the market. Look, there's three things that I think I know. And, you know, obviously everything I'm saying could be wrong. So you got to put in quotes. But we're short. There's a shortage of compute. There's a shortage of power. And there's a shortage in health care services and our ability to do that effectively. We're recommending semiconductors. We're recommending energy and power. and we're recommending healthcare services because we think ultimately that you have a combination of two things you need in this market.

13:03One is good absolute earnings growth, and two is above average estimate achievability. We got in your macro update up front there, the one thing that you guys didn't mention was Micron prints this week. And I think that's an important data point. I think everyone knows they're going to produce maybe one of the best quarters ever produced by a manufacturing company in the history of humankind, $50 billion in revenue, 86 % gross margin they make in a factory. The question is, is the market rewarded or not? What does the market think about the go-forward earnings growth? So I'm really recommending things now, assuming the multiples are going to contract, assume price earnings multiples and EB2 forecast and sales multiples contract.

13:43Can they grow through it and not miss? And I think that's the playbook we're focused on. But do you have to be more specific, as Mike and I were talking about? Like, it's a tale of two markets. It's those that are being impacted by higher rates, both from the Fed and the market, and those that really aren't. Yeah. I mean, we're underweight financials. We're underweight consumer staples. We're cautious, undiscretionary. You don't want to own things where the estimate achievability is below average, Sarah. I think that's the—in the old days, you could say, well, I know current conditions aren't very good, but it's cheap, and I'll play for the eventual improvement that I can see or envision in a year or two.

14:17Well, the penalty for missing estimates has been so harsh. The reward for beating has been mixed. More companies beat than miss, so the market's near at highs. But you just can't head into this October earnings season with any doubts about estimate achievability. Now, if you canvas the data for most of the conferences out there in September, conditions corporate earnings for the biggest couple hundred companies are still pretty good. So I think people are expecting a decent earnings season and guidance, and the absolute growth rate's good. But, yeah, you have to be very note specific in terms of what you own.

14:48I don't think you want to own discretionary companies that don't have pricing power staples. You know what's interesting? I was looking at this the other day in the last year. If you go like a year ago to today, 2027 earnings expectations for technology are 70 percent higher today than they were a year ago. And staples are four percent lower. So people say it's not trading on fundamentals. Maybe it is. Right. And you said you're going to go under the premise that you're not going to necessarily get valuation expansion from here, at least across the board. I just wonder how the market is going to digest this idea.

15:22As you say, shortage of compute is basically stipulated shortage of power. But whether, in fact, we're going to be able to extrapolate that beyond next year and the year after we're going to pay up front for that or not, Because that seems like what's impacting things like the micron you mentioned and some of the other AI related industrials. Look, I wrote my note yesterday that mark to mark, I do feel a little worse this week than last week. The only reason I said that is because I talked to too many macro people last week at a couple of big events. And they always make me worried about, you know, rates and oil and the whole thing now is oil.

15:55All of a sudden I told you I hate those subject areas. You know, I do think the biggest risk here in the next few weeks is policy. You know, you see these commercials about data center and you see these, you know, policy around that. That I do think could create some fear about the growth rate and sustainability, the growth rate of AI. But I don't think it solves the compute shortage. And I want to say something wildly bullish before we let you go. Look, I am worried about unemployment, white collar unemployment from AI deployment in the next couple of years. I am. But I do think that there's some probability that the 2030s, let's call it, in America, turn out to be an industrial revolution that's massive.

16:40And I probably personally assign a higher probability to the fact that we'll all be using humanoids and a lot of them and a lot of them will be in America. So I'll leave people with that optimistic comment because I do think that that's got a higher probability of the consensus. I love the optimism, and I think there's not enough of it when it comes to AI, but I'll just counter your optimism with what. But here's a risk that I don't think enough people are talking about. What if the politicians block it? I mean, there is a growing call to put a moratorium on data centers, including from politicians in states that were once very open, like Governor Greg Abbott in Texas.

17:20And there's that on data centers. There's increasing calls for regulation and slowing down of AI frontier models and potentially even bans on superintelligence. So what about that? I mean, that appears to me to be a much bigger equity risk in the medium term. I agree. I think the regulation policy is the biggest near-term risk. I think the data center stuff is node-specific. You will have some places where it makes a lot of sense. You'll have some places where it doesn't. In the end, you need to get employment benefits. You need to get lower power cost benefits for the politicians to get on board with it.

17:55I don't want to criticize either party, but both can be fickle when it comes to this topic. Well, they're responding to voters. Yeah, we're into voting. Yeah, they're not making these decisions in a vacuum. I can't let you go without asking about what happens up until 2030 when this golden age appears and how disruptive you think it might be. It sounds like you're a little bit concerned. Look, I mean, it depends the topic. I don't see anything that can break supply, demand, and balances for stuff like Micron in the next several quarters. I think semiconductors are going to grow fast. And even if I embed massive multiple contraction, they're still going to be good stocks.

18:34If you take a look at the tech sector, I mean, the earnings growth is going to be so high the next few years that even if the multiples really collapse, it'll be good. Tech is supposed to be 50 % plus of the growth this year, 60 % next year. I like that. I want fast growth and I'll take the more contraction that comes with it. So I don't think the fundamentals will be impaired in the next couple of years. I think this is one of those misunderstanding things that politicians have to wrap their arms around as we head out over the next few years. And usually, sometimes, often, common sense prevails.

19:05So I think the other thing I think people don't understand is you can't just turn a data center on. Like these things take, you know, many, many, many years. So I think it'll be very note specific. We'll still be short power. We'll still be short compute. and you're going to want to be overweight in those sectors for a long time. Look, I think day one was Mike Rond's upper revision May of 23. I think it's a 10-year cycle. You're three and a half years into a 10-year cycle. Do you think the stocks are over? I don't. All right. Well, with that, Adam, we'll have to let you let us go. We'll catch up with you again soon.

19:38Thanks a lot. All right. Here's a roadmap for you for the rest of the hour. When we come back, NVIDIA out with a plan to fight rogue AI agents, along with a historic buyback. Analyst Stacey Raskon joins us with his first take. Plus, much more on oil's rise to start the week. We'll talk to one energy expert about the wide-ranging spillover effects. And higher mortgage rates are already a big concern for homebuyers. One expert says the 9 % rate on the 30-year fixed might be coming. We'll watch that with only energy and staples in the green this morning. Squawk on the streets back in a minute. Legacy credit scores only look at a brief snapshot in time, and that limited view often leaves millions of qualified credit seekers out of the picture.

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21:00Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools, no extra logins, just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. 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.

21:44Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. We hope it's an engineering problem. I believe it's an engineering problem. I know it's an engineering problem. And we all need to hope that it's an engineering problem. If it's not an engineering problem, it's not solvable. And so the fact that all of these companies still are advancing the state of the art is because they also believe it's solvable. These are some of the brightest engineers in the world. I work with all of them. And this is a technically solvable problem.

22:19NVIDIA's Jensen Wong on Squawk this morning as he unveils a new safety software platform. NVIDIA also announcing that additional$150 billion buyback authorization this morning, expecting to complete$235 billion of buybacks by fiscal 28. Let's bring in Stacey Rasgun, senior analyst at Bernstein, has an outperform rating on the stock and a 400 target. Stacey, happy Monday. Good to see you. Good to be here. Thanks. Let's do buyback first. I mean, Obviously, this has been the chatter for a while. Is this as aggressive as you would have liked to have seen? What kind of floor does it put in? Yeah, so they've talked about increasing cash return for a while.

22:56I think they said something like up to 50%. And it's funny, if I'm just looking at my model, so$235 billion by the end of fiscal 28 is over the next six quarters. It's like$40 billion a quarter, which is double what we were modeling. Although if I sort of look at my model, it's about 50 % of my free cash flow across fiscal 27 and 28. So it's kind of in line maybe with what they've talked about. I think it's higher than what folks are modeling and maybe higher than might have been expected. But what I find very sort of amusing in some sense is this is a huge buyback. I've been reading that it's like the biggest buyback in history.

23:30Yes, yes. In the context of a$5 trillion market cap, it's still not that big. Presumably they're not going to be finished by the end of 28. If all goes well, they should be generating a lot more cash in fiscal 29 than they are in 28. So I don't see any reason that the growth in the free cash really has to change. But by putting a stake in the ground and showing that they're serious about it, I would hope that it's taken well. I know it's something that investors have been looking for. Yeah, I mean, just to put some numbers on it, Stacey, I mean, when Apple announced its$100 billion buyback in 2018, I think it had like an$800 or$900 billion market.

24:06It was like 11 or 12 percent of market cap. So here you have NVIDIA 235. You know, we know it's less than 5 percent. still big. And I guess maybe investors want to make sure that a trillion dollars isn't going to accumulate in free cash over the next three years. And it's just not going to come back to them at all. But I guess what about this idea of NVIDIA trying to be sort of the fix for some of the concerns out there? Is this a cleanup operation? Is it material for the business? How do you read it? I think it's material for the business in the sense that he's right. If you can't fix it, we have a big problem.

24:41So in that sense, it's scary. I doubt this is something that they just started working on last week also. They've been talking about guardrails and things ever since this started. So maybe being ready to sort of put it out there and formalizing it is maybe somewhat new. And I know it feeds into some of the angst that's been out there recently. But if anybody is equipped to address this, it's going to be NVIDIA. I mean, they're They're everywhere. Like, they're in every lab and every company. And, you know, they're widespread across the industry. They basically created the ecosystem that's mostly being used.

25:15And, you know, if anybody's equipped to address it, I think that they are. You know, the buyback, I was looking at the NVIDIA stock price performance. Just over the last 12 months, it's up about 30%, which puts it pretty much on par with, like, Archer Daniels Midland. And I don't have to tell you that most of the other AI stocks have well outperformed that over the last 12 months, even though this is a company with what? A growth rate of 80 percent revenue growth, more than 100 percent profit growth. We've talked to Jensen about it. He's called it one of the great mysteries of the universe. But what what is, Gil, wrong with the stock?

25:50Yeah, it's been a little frustrating. I mean, the stock, by the way, has still been fine. It's underperformed some of the other players. But I mean, 30 percent is maybe nothing to sneeze at. But, you know, there's been a few dynamics going on. Like for a lot of that year, you know, people were sort of playing the bottlenecks instead. You know, they were playing memory and semi-cap and networking and power and more recently CPUs. And there was the idea that you'd play things with more torque, you know, to the upside in terms of earnings. The idea was NVIDIA is so big they just can't show it. Which hasn't really been true because as big as they are, they have been accelerating.

26:23But that's been one view. I think there's another concern that maybe has some teeth to it is just that they're big. It's 8 % of the S &P or whatever it is. For some of my clients, it's just hard for them to own more of it. So there's been a view that it's safer to use it to fund some of these other plays. I figure that just sort of takes care of itself over time. I figure those weights can get big. I think Samsung and Hynix collectively are two-thirds of the Kospi. So clearly those weights can get bigger. This is something that maybe just has to take care of itself over time. But I do think there are some technical aspects beyond just the fundamentals that have sat on it a little bit.

27:04But at the end of the day, I mean, they are the ones that are out there sort of creating the market that everybody else is playing. And I sort of still feel like if they're not ultimately successful, I don't think anybody else can be. So I still like it. Finally, Stacey, forgive me for not knowing. Micron, part of your coverage? And even if it isn't, do you have thoughts on what's on the line this week? Yes, it is not. A colleague of mine covers Michael, but they report, I think it's on the 30th. Yes. Yeah, and you could argue it's either the last one to go or the first one to go, depending on how you want to carve up your own season.

27:37But I mean, look, people, without giving any takes into the quarter, I mean, people are going to be looking at ASP upside and whether or not the long-term agreements that they put in have capped their ability to continue to take price. They're going to be looking at just the overall demand environment. They'll be looking at, you know, I cover the semi-cap, so, you know, their CapEx outlook for me is going to be important. That's something that I'll be looking for sure. Yeah, yeah. Interesting interview with ASML and the FT as well today. Yeah. Looking for all kinds of angles. Stacey, busy week ahead.

28:07Thanks for the help. Talk soon. Oh, you bet. Stacey Raskin. You bet. Anytime. Up next, why a software glitch has shares of Boeing sinking this morning. Plus, could mortgage rates actually be headed toward 9 %? We'll talk to one housing economist who is warning of just that. And we'll get to the news sending MongoDB sharply lower this morning and what Mark Zuckerberg has to do with it. All in Squawk on the Street returns. Ever notice how every new AI tool asks you to explain your business to it all over again? Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more.

28:44No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. 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 market update podcast, or find Schwab Market Update wherever you get your podcasts.

29:28Tyler 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. Void where prohibited by law. CT &C's 21 Plus. Sponsored by Chumba Casino. Welcome back. We're about 30 minutes here into the hour. Here are three big movers we're watching. First up, Boeing shares are down sharply after the company said it flagged a software glitch for some 737 MAX aircraft that could affect certain landing procedures.

30:14FAA saying it's assessing the problem and will take action if there are actually safety concerns. Meantime, MongoDB shares are plunging. The CEO announcing he is departing the company for a senior role at Meta, selling AI tools to enterprise customers, which is their news today. He will report directly to Mark Zuckerberg. And we're watching SpaceX after a successful test launch this morning of its Starship rocket. It was the vehicle's first ever orbital launch attempt, delivering 26 upgraded Starlink satellites to space. Interestingly, Mike, not really having an impact on the stock, even though this, you know, the notion that they can do this more.

30:50Well, it's just critical to the bull story. It's definitely positive, but I think largely assumed. I mean, Cathie Wood's bull case on SpaceX was 10 ,000 Starship launches a year by 2030. That's 27 or something like that a day. So getting one out there is just the start. All right. Time for a CNBC News update. Pippa Stevens has that for us. Hi, Pippa. Good morning, Mike. Iran denied any involvement today in a suspected plot targeting a U.S.-operated airbase in England. The country's embassy in London said today it rejects and condemns the unfounded speculation surrounding the arrests of five men on suspicion of terrorism and explosive offenses.

31:26They were taken into custody early Sunday morning after a farmer tipped off authorities about three large white vans headed toward the airfield in western England. Ukrainian officials say the latest wave of Russian strikes killed at least seven people, including one woman who died in a strike on central Kiev that hit the National Academy of Sciences. Ukraine's Ministry of Foreign Affairs says this is the latest example of Russia hitting a civilian site. Russia also hit a pharmaceutical company and gas stations in Kyiv. And Major League Baseball just wrapped up its fourth straight year of attendance growth.

32:02The regular season ended on Sunday with total attendance of 71.75 million for 2026, up about half a percent from the year before. This marks the first four-year streak for attendance growth since 2004 to 2007. Sarah, I'll send it back to you. OK, thank you very much. That's Mike going, right? It's not bad. I did my share. I didn't do half a percent worth. But, yeah, it's nice to see. I know they've shortened the games, but they're just so long. I brought my kids to them. All right, some news out of Washington this morning to tell you about. The Treasury Department making a new hire. Longtime CNBC guest David Zervos will serve as counselor in the Treasury Department in a broad advisory capacity to the secretary, Secretary Besant.

32:45Zervos recently backing the secretary's decision to increase buybacks of longer-term treasuries, as well as calling for lower interest rates. The position does not require Senate confirmation. He's expected to start immediately. You'll remember that Joe Livornia was in a similar type role, counselor to the secretary. And we hope that David can continue to be a frequent guest and voice on CNBC, especially now that he'll be, you know, working in conjunction with the treasury. and I think an important voice for Treasury Secretary Besson to help get his message out, especially when it comes to things like the bond market and what they want to have happen with rates.

33:24Do you think it's a function of his, what would you call it, more aggressive commentary about terminal bros and I am the House? Who? A Zervos? Oh, Besson's file. Oh, Besson's. No, yeah, I mean, I think, look, Joe, I think it's a commentary. I think that it's a role that he's had before, I don't know that it's necessarily new, but I think that Zervos is kind of one of those unique economists that has credibility in markets commentary. You know, he's not just writing about the economy and economic growth. And I know he travels the world for Jeffries, and clients are always very eager to meet with him and hear from him.

33:58So I think it's just a signal that the Treasury wants to continue its public outreach as well and also get the advisory work of someone who's really in touch with what's going on in the markets. That's a loss for Jeffries, that's for sure. Incredibly valuable. He called it, Zervas called it a pause in his note when he announced it to some of the folks that read his stuff. So maybe he'll go back. Can't wait to hear more. After the break, why our next guest is warning that mortgage rates could potentially go as high as 9%, plus a number of software names with some pressure this morning. At the open, we had ServiceNow, the biggest S &P laggard off of these session lows.

34:33Squawk on the streets back in a minute. Welcome back. 30-year fixed mortgage rate nearing 7.5%, level it hasn't reached since 2024. Our next guest says mortgage rates could go as high as 9 percent given the current spread between the 10 and 30 year Treasury yields. Let's bring in Selma Hepp, chief economist at Cotality. Selma, that's quite a headline. Is that is that actually what you see happening here? Well, it's possible that mortgage rates go up to 9 percent, but it's really not our base case scenario. You know, it would it's more of a severe scenario in which treasuries go up to six or seven percent.

35:08And that would really be triggered by several major disruptions that would have to happen simultaneously. You know, we're talking about the debt limit standoff. We're talking about more serious Treasury market confidence shock, dollar safe haven status deteriorating further. You know, all of these things would lead to temporary rate spike in Treasuries, which when added 200 basis points of a mortgage rate spread would lead to 9%. But again, it's not my base case scenario. So what is the base case scenario, basically, now that it feels like we're kind of held hostage here to the rising price of oil when it comes to rates?

35:50Yeah, so I think the most important story in the housing today is no longer Fed. It's really the bond market, right? And so with price mortgages off of long-year treasuries and with those yields being pushed higher, We're really now being driven by what the bond market believes a long rate should be. And so my base case scenario at the moment is higher for longer, but mostly in line with where we are today. You know, I do expect continued volatility, but bonds remaining in an upper, mid to upper 4 % range and mortgage rate spread oscillating around 200 basis points, which leaves mortgage rates in 7 % range.

36:36So this is where we are currently, and I think we're going to stay there for a little while. You know, the risks are tilted to the upside, but hopefully we won't get there. And what does that mean in your outlook for pricing, for turnover levels? It's been sort of fascinating that this last move higher in mortgage rates has not really caused additional weakness in some of the homebuilder stocks. I mean, I think people are wondering if we're at some base level of activity that may not have much further to fall from here. Well, absolutely. I mean, we are currently at about 4.7 million home sales.

37:14And that's really where we were in a period leading up to the pandemic. So naturally, we could have more home sales activity if we have lower rates. But, you know, this is sort of a natural state of being at the moment. Affordability is constrained. And, you know, that's really the major thing holding back the housing market at the moment. But the way builders are dealing with it is they're providing rate buy-downs, seller concessions or, you know, builder concessions. They're able to adopt product for lower income households or households for those budgets that can afford at the moment. So builders have been in a better position to adjust to the current unaffordable housing market.

38:01The issue really has been for the existing homeowner who, with higher mortgage rates, feels more locked in into the rate that they're currently in. We are sort of in some of the widest spreads that we've ever been in terms of the outstanding mortgage debt and prevailing mortgage rate at the moment, which is keeping that existing home market stock and turnover rate really, really low. All right, Selma, thank you for coming on to talk us through some of the issues in the housing market. Appreciate it. Selma Hep from Quotality. All right, coming up, we'll get to what's weighing on Meta as the stock gives up some of its recent gains this morning.

38:38Plus, next hour, we'll get an inside look at the business of LeBron James, how the 76ers, its media partners, and the city of Philadelphia stand to benefit from LeBron's arrival. A breakdown of the dollars and cents ahead. Oil prices rising this morning as the president rejected Iran's latest proposal to reopen the Strait of Hormuz. President also says the White House is, quote, seriously considering that export ban on diesel. Let's bring in Scott Modell, Rapid Air Energy's CEO. Scott is a former CIA officer. Five tours of service, including in the Middle East, has been a huge help to us and to viewers since the war began.

39:13Scott, welcome back. Thanks, Carl. Are you surprised by the willingness of the White House apparently to seriously consider this? I am surprised by it. You're talking about the export ban. Yeah, we are surprised by it. But in some ways, we're not. You know, back in April, we were looking at this. 35 % odds we had that there was going to be an export ban. And we even thought that was high because from a very fundamental level, we knew that Secretaries Wright and Burgum, who certainly are the wisest about the oil system, have been against it from the start, knowing that it would provide temporary relief at best.

39:47But when you run out of options, Carl, and as we've gotten closer to the midterms, we flipped as the president flipped. So yeah, we were surprised because I think if anything, it provides just temporary relief. Right. We're starting to hear some jitters from Europe on the idea of this. Certainly Latin America would be affected. Goldman today has a note looking at what the disruption would mean for retail gas. Have you guys put numbers together on that? I don't think we have specific numbers on it. I think it's definitely going to go higher. It depends on what kind of a ban he does. You know, we've heard partial bans.

40:24We've heard quotas. We've heard even suggestions of voluntary cuts. So it really depends. But we don't have an in-house view other than this other than sort of the options are running out. And from a fundamentals perspective, short lived gains at best in some of the states that have been the loudest in terms of Republicans breaking ranks, if you will, for political reasons, the run up to the midterms. But on the coast, certainly on the coastal areas and the Gulf, it's not going to get much better. And in fact, gasoline is going to go higher. Jet fuel is going to go higher and so forth. Do you have a view on where this goes after the midterms?

41:03The president has really sort of staked the midterms as an important point for either when, after he might make a deal or also, or I don't know, in his words, annihilation, but, you know, start the bombing again. Yeah, Sarah, it's a good question. Look, we've consistently sensed that President Trump wants to do a deal. He wants to find an off-ramp. So did the Iranians for that matter coming together at the UN General Assembly wasn't much of a surprise That was long in the works coming coming away with with nothing and the president rejecting it We weren't surprised by it. I just think there's too many fundamental hurdles to overcome the president needs something That's face-saving and I think in the room up to midterms There's particular sensitivity with regard to the optics of it and Sarah.

41:50I think even before or after the midterms, he's going to have a very difficult time presenting the public with something that doesn't elicit the same fierce reaction that we saw when the MOU was released a few months back. But there is this economic pressure. I mean, Treasury Secretary Besant said on Sunday that Iran will complete its oil shipments to China, the remaining ones, within two weeks. And then there'll be nothing, I think he said, left to trade for anything. He has increased sanctions, cut off airlines. I mean, is there any evidence that this is working? There's no evidence that it's there's no hard evidence that it's working to change the Iranian position fundamentally.

42:28But I think that remember, though, the Trump administration is under the impression the president himself and that and that's really what matters. He's under the impression that it is working, that this economic strangulation approach, this blockade will eventually get the Iranians to soften their positions and even to break down in cave that the Iranian economy will collapse. So there are fundamental analyses driving the idea that if we just hang in there, time is on our side and we're going to win. The problem is the Iranians are there and they're not showing anything to suggest this is working anytime soon.

43:01I think it'll be interesting, not only into the midterms, but beyond. The president, I think, is going to escalate after the midterms. We continue to hear that the Iranians are going to escalate into the midterms, barring some sort of a magic deal that suddenly emerges this week or next out of the U.N. General Assembly. I think the direction of travel is to escalation. It will be interesting to see post midterms what happens. But I think the president is convinced that the best way forward is to continue to drive a real aggressive approach to try to get Iran to capitulate. But there's just no signs of it yet.

43:35Yeah. While you were early on the Houthi chapter being introduced, and that definitely came to pass, we'll check in with you regularly, Scott, as we get closer to the midterms. Appreciate it. Good to see you. Great, Sandy. Thank you. After this, Meta and a number of software names getting hit hard this morning. We're going to look at what the options market is signaling about those moves next. Welcome back. Meta getting hit this morning, giving up some of its recent big rally. Let's get to Oliver Rennick at CBO in Chicago and look at what the options market is now signaling. Hi, Oliver. Hey, Mike.

44:07Meta's rampage of disruption continues after plucking the MongoDB CEO, but options trading suggests this one may not be as easy a win. Shares of Mongo are crashing, but traders are mostly fading these early moves as opposed to last week when we saw them chasing Meta's Muse impact. More calls are trading than puts in Meta, but there's a lot of calls selling this morning. Almost 70 ,000 calls were likely sold versus 50 ,000 baht, and seven of the top eight trades out of the gate were actually bearish. Traders spent about$200 million buying options premium in meta, and roughly$100 million each was split between calls and puts.

44:46In MongoDB, more puts were likely bought than calls on options volume that's 17 times the 30-day average. But there was notable dip buying here thanks to a few big-money traders that spent enough buying calls that the total premium spent was actually heavier on the call side. The biggest trade this morning was someone buying 1 ,000 of a 370-490 strike call spread in MongoDB, expiring mid-January for$2.2 million, while selling 1 ,000 of the 270 strike puts, expiring the same day for$2 million. A bet this sell-off will reverse, and Mongo would stage a potentially big rally, guys. Quite a story as we await further guidance on the reasons behind that move.

45:32and, of course, on the quarter. Oliver, thanks. 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. You 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.

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