10AM Hour: Treasury Sec. Bessent Testifies, Thermo Fisher CEO, Morgan Stanley’s M&A Outlook 9/15/26

0:00Treasury Secretary Bessent: 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.

0:13Thermo Fisher CEO: 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.

0:30Treasury Secretary Bessent: When you partner with CDW, you get more from your devices with solutions that take modern work to the next level. CDW experts are delivering powerful productivity with Lenovo AI PCs. Helping users block out distractions, access virtual support anytime, anywhere, and share content seamlessly between devices. Make amazing happen. Learn more at cdw.com slash Lenovo. Good Tuesday morning and welcome to Squawk on the Street. I'm Sarah Eisen with Carl Cantania. We are live at Post 9 from the New York Stock Exchange. David Faber joins today from the Morgan Stanley Global Healthcare Conference here in New York, where he's got some big interviews ahead, including the CEO of Thermo Fisher, Morgan Stanley's global co-head of M &A, and then later Morgan Stanley co-president Dan Simcoeck.

1:19Treasury Secretary Bessent: Also ahead, stocks under pressure here, yields are rising as the Fed kicks off its policy meeting, and AI fears remain front and center. Noted investor Dan Niles will tell us why he's cautious on stocks through the midterms. Plus, the Senate expected to hold a key procedural vote on the Clarity Act today. We'll talk about what's at stake for the crypto world and the banking world. And Treasury Secretary Scott Besson testifies this hour to the House Financial Services Committee. We'll bring any headlines as soon as we get them, especially looking out for any comments on bonds and yields and the decision to increase buybacks and what he's made of the relentless rise in Treasury yields since then.

1:54Treasury Secretary Bessent: And with the 10-year this morning, over 5 percent reached the highest level since back in 2007. It really is teeing off of oil, which remains higher, especially on concerns about this critical pipeline shutdown. Over in Saudi Arabia, oil prices rise, 10-year yields rise. And then it's the self-reinforcing concerns about, you know, the government being able to fund itself. But it is conference season, and I've been following some of the commentary from bank and credit firms about what's happening out there with consumers and with businesses. And overall, it's a pretty healthy read. Just want to share some commentary from the Blue Owl co-CEO.

2:33Treasury Secretary Bessent: Remember, their big private creditor, they lend to all sorts of businesses. Credit quality remains pretty strong. And I can't look out more than a year, maybe 18 months, but I'm anticipating that will continue to be the case. Bank of America CEO Brian Moynihan. Again, this is at the Barclays Financial Services Conference. The Fed will raise rates, but it won't knock the economy off its movement. And I think that's important as we do look for the Fed to raise interest rates tomorrow. Not a certainty, but the market is pricing it in. And the question is, can the economy handle it? So Moynihan says yes.

3:08Treasury Secretary Bessent: Citigroup's CFO says spending is in good trends, not only obviously picked up from the oil inflation pickup and gas prices. But even you see, you look at travel, you look at discretionary, is relatively broad based. And so we continue to see that constructively credit is stable. Delinquencies, losses, leading indicators, they're down year on year. The Wells Fargo CFO, we see spend up across the debit and credit card, you know, products every week, year on year. We're not seeing changes in delinquency trends that would sort of lead you to believe there's like, you know, more credit issues coming.

3:41Treasury Secretary Bessent: And then finally, PNC CFO, we're a little bit surprised. how the world is, how strong the economy is. So especially I thought the credit commentary was notable because that's one of the concerns if you're a Fed member that you're raising interest rates. First of all, are you doing it just on the supply shock of oil? And second of all, you want to preserve employment trends, which have been good, and economy and credit trends, which have been good. And so far, the read from the bankers is all OK.

4:09Thermo Fisher CEO: Yeah, it's interesting. It feels like a lot of the coverage about where the pain is about manufacturing, maybe the farm belt, big piece in the FT today about lack of certainty. Empire today, for example, was a miss. Prior 20, looking for 15, we got seven. So maybe it's an issue where the manufacturing sector and corporates can still absorb some of this.

4:32Treasury Secretary Bessent: Well, I mean, they feel higher oil prices and they feel some of the uncertainty from tariffs, which is ratcheted up back again. Also, I would I would add housing housing to your list, Carl, because we did hear from the Equifax CFO who said mortgage clearly with where rates are now. That's more challenging. We've seen the impact on the transaction volumes in the market over the last certainly over the last month or so. And, you know, it's this thing where while higher rates can be reflective of a better economy, Ed Yardeni has certainly said that, 5%, don't freak out, it means the economy is doing well, it can also be a headwind.

5:06Treasury Secretary Bessent: And Bank of America did their survey of fund managers, and now the biggest tail risk for September has become a disorderly rise in bond yields. It used to be the AI bubble, at least if you were looking in August and July. That was the sort of biggest outstanding concern. Now that moves to second place. Third place is the second wave of inflation. Geopolitics is actually way down on the list. So it gives you a sense of how that is causing some nervousness and some angst about market and economy. Yeah.

5:36Thermo Fisher CEO: The other good question was the percent expecting no impact to yields from the Treasury buybacks. Forty six percent said probably isn't going to mean a whole lot to at least the long end.

5:48Treasury Secretary Bessent: I go back to what Secretary Besson told me at G20 after we had seen the rise in yields. And he said then, we're not trying to change the equilibrium. We're not trying to change the direction. We know we can't do that. But it's our job to, he didn't use the word orderly, but did say the speed. That was something he pointed to. Didn't want to see it sort of get out of control. He said, hedge funds, they're in the business of speed. I'm in the business of slowing it down.

6:11Thermo Fisher CEO: And we know hedge funds are now an increasingly large owner, up against the House, so to speak. Right.

6:17Treasury Secretary Bessent: So that's the concern, right? If they lose. I mean, someone needs to buy like we have to we have to raise a lot of debt. There's going to be a lot of auctions and their concerns about who's going to buy that, especially with the competition from all the big technology companies as well selling debt.

6:33Thermo Fisher CEO: Yes. For more on the market, let's bring in Niles Investment Management founder and portfolio manager Dan Niles this morning. Man, so much to get to this morning. Dan, great to have you.

6:42John Collins: Good to be on, Carl.

6:43Thermo Fisher CEO: So while we're in the neighborhood on rates and watching the 10-year at 5, I think it's Deutsche today comes out and says maybe it's time to have a discussion about a terminal destination of 6. Is that too much?

6:57John Collins: No, I don't think so. I mean, rates historically, if you look at where the 10-year is, they're pretty low. And so I don't think given you've got, you can look at the U.S., right? We're running 6 % deficits as a percentage of GDP. It's the highest outside of a major war. You've got$40 trillion in debt against$33 trillion in GDP. You've got hyperscalers now competing with the government to issue debt. 6%, yeah, you could definitely see that, in my opinion, especially because you don't have the same capability as you used to when you had much lower debt to GDP to go ahead and mess around with trying to keep rates lower.

7:43And the Fed composition right now, that doesn't seem to be something that they want to do either.

7:49John Collins: They've let the market kind of dictate where rates want to go.

7:52Thermo Fisher CEO: Still, the second part of that discussion is maybe stocks don't mind. Maybe you can have rising stock markets and rising yields like we have had in famous eras.

8:01John Collins: Yeah, I mean, anything is possible, but you can also look at it and say, hey, you know, there's more straws being put on this camel's back. And there's some questions around the AI trade as well. So and that's been really powering the market since the end of 2022. And we had this thing called Chad GPT show up. So I'm more looking at it and saying I have some simple rules, right? Don't fight the Fed. It looks like we're going to go into a hiking cycle. Don't fight the bond market in particular. and there we're talking about could rates get to 6 % and then don't fight seasonality. And seasonality going into midterms, the median drawdown is about 10 % from end of July through November 9th and that's double what it normally is in non-midterm years.

8:50John Collins: So for me, the market keeps pitching but you don't have to take a swing and I don't mind just not taking a swing right now.

8:58Treasury Secretary Bessent: Yeah, so, I mean, you sound pretty bearish for yourself, Dan. Just to clarify, so how are you positioned right now?

9:04John Collins: Yeah, no, I mean, I've been writing about this since late July, where I'm concerned about a 10 % drawdown between now and when you get to the midterm. So I've got a lot of shorts on. I have some names that I like. You know, Metta is one in particular where I feel like the sentiment there can continue to re-rate. Wait, Metta, you're short or you're long? No, no. I like Meta on the long side. You like it on the long side. Yeah, because I think they've cleared a lot of hurdles with settling the lawsuit against the attorney generals. And then more importantly, they've been sort of in this camp of, hey, they're doubling their CapEx.

9:43John Collins: But unlike Google and Amazon or Microsoft, they don't have any other way to monetize this. They don't have a public cloud. They don't have an API. Well, a lot of that got solved over the last couple of weeks. Metamuse Spark 1.3, it ranks really well. It's low cost. They introduced an API two weeks ago. Then last week, they introduced an AI agent. That takes off with 3.6 billion daily active users. That could do well. And the valuation is below where the S &P is trading and certainly below a lot of their peers that are trading in the low 20 times where Meta is trading at 17 times, calendar 27. So, you know, there's names that I like in there.

10:24John Collins: But you don't want to fight a tape that can potentially get hit hard. And it's sort of the same view I had at the end of June, right, when I put out something saying, hey, I think we could see an AI speed bump. And that turned into one hell of a speed bump between June 22nd and July 29th. So I don't I see all of these issues and I can just sit back and let it unfold.

10:48Treasury Secretary Bessent: Although, you know, sometimes when we go through AI speed bumps, yesterday was, I think, a prime case of it. There are opportunities and there are sort of the non-AI winners, like the software players, for instance, or the crypto players. And I do wonder if, you know, investors should be a little bit more savvy about how they're thinking about AI winners and losers.

11:09John Collins: Yeah, I mean, I think you have to, and we've seen this over the last couple of months, Sarah, so that's a really good point. You have to get a lot more discerning as you go through this period of time. But, you know, let's not make any mistake if you do have, you know, what the term they use was pacing. Right. Slow down the pace of advancements. And then the bigger issue, and this is the one that bothered me starting a few weeks ago, is when you have states going ahead and saying, hey, you know, let's slow down the data center expansion. You can't simultaneously say, well, access to power is a big gating item or expansion.

11:50John Collins: And now you've got states, even Texas, saying, well, we're going to slow down the ability of these data centers to have power and not say that, you know, won't have a negative impact. Right. You can't have it both ways.

12:01Treasury Secretary Bessent: I don't know. I think there are enough states that are welcoming it.

12:05John Collins: Well, there are, but I think you'd have to agree, right? There's a lot more issues with Pennsylvania, Texas, other states that are slowing this stuff down. That on the margin is certainly not better than it was three weeks ago, right?

12:18Treasury Secretary Bessent: Yeah, sure. I guess.

12:20John Collins: And that's my point.

12:21Treasury Secretary Bessent: West Virginia, Virginia, Wyoming, Alaska. I don't know. It's not clear to me that that's the case for reduced data center spending or reduced CapEx spending. And I think that's the question from yesterday, too, even on this pacing of the frontier, if that ultimately also leads to reduced spending on all of this.

12:43John Collins: Well, I mean, if you are cutting back at the pace you're training these new moms, by definition, that's going to slow down CapEx on that piece of it. Now, are you going to spend more money on security and other things? Sure. But that's not going to require the same number of GPUs as if you're going to go ahead and train. And so this gets back to the comment you made earlier where you have to get selective. Is security looking increasingly like a good place to be? Absolutely. Is the demand for training hardware probably where it was before Sam Altman, you know, Anthropic, OpenAI, and Elon Musk said, hey, you know, we want to slow down the pace of advancements.

13:27John Collins: Well, that's also true. So I think, back to your point, you have to be more selective on where you get involved. But I'm very focused right now on the fact that oil is staying up here, and I don't think there's going to be a resolution to this through midterms and potentially longer. Eventually, high oil prices, high bond yields, they have an impact, right? It's not day one. It's three, six months out. And so I'm trying to look at this from a bigger picture perspective, especially seeing what happened between the end of June through late July. Semis went down 29 percent.

14:06Thermo Fisher CEO: Yeah. Yeah.

14:08John Collins: Right. So like that was I consider that a pretty big drawdown in a month. And now I feel like you've got even more issues now than you had back at the end of June. So, yeah, I want to be a little bit more cautious.

14:21Thermo Fisher CEO: Right. Well, no, the Sox is still down by a fifth since the June high. Some argue it's already priced in. Are his pricing in some kind of pacing dynamic? Dan, we'll see what we get as we work our way further toward the midterm. Talk soon. Thanks. Dan Niles. Thank you, sir.

14:37Treasury Secretary Bessent: On Thursday, we're going to talk more about the rising chorus of AI warnings when we are joined exclusively by Palantir CEO Alex Karp here on the show, 11 a.m. Eastern, squawk on the street. Always worth listening to him. I mean, he's warned in the past we don't want to let our enemies win. So very eager to hear from him on the new Dario post with Sam Altman agreeing and Elon Musk as well. Here's our roadmap for the rest of the hour. The crypto industry looking for clarity. We'll talk about today's big Senate vote and what it could mean for the whole crypto complex.

15:10Thermo Fisher CEO: Plus, we have a few big interviews coming up here. We're at the Morgan Stanley Global Healthcare Conference, including the CEO of Thermo Fisher and Morgan Stanley's global co-head of mergers and acquisitions. And the Treasury Secretary is testifying before House Financial Services as investors look for some commentary on bond yields in the Fed. We've already got some. We'll get you the headlines when we come right back.

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16:18Thermo Fisher CEO: Welcome to The Circle. In this game, you never meet the other players. Your goal is simple, become the most popular. But should you play as yourself or catfish as someone else? With the new host, celebrity contestants, and this time, audience voting will influence the game, you decide who has what it takes to win. Watch the Hulu original series The Circle on November 17th, streaming on Hulu and Hulu on Disney Plus for bundle subscribers. Terms apply. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

16:52Treasury Secretary Bessent: Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates,

17:00Thermo Fisher CEO: 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. Welcome back. I'm here at Morgan Stanley's 2026 Global Healthcare Conference that brings together some big names, of course, in pharma and biotech, as you might expect. Joining us now on a CNBC exclusive is Thurmo Fisher's Scientific's Chairman and CEO, Mark Kasper. Nice to have you here. David, thanks so much for doing this. It's great to be here.

17:37Thermo Fisher CEO: My pleasure. I'm happy to sit down with you. You know, AI is on everybody's mind, and you actually mentioned it in the remarks that you were making in your fireside chat just moments ago. I'd love to start there because you are connecting it to at least, Mark, what appears to be, you know, AI driving stronger impact on the returns within drug development. I'm quoting you here. And that is definitely fueling an investment cycle.

18:00John Collins: Can you explain what you mean? Yeah, so one of the things in the pharmaceutical and biotech industry is what ultimately drives it is bringing successful medicines to market. And the higher the returns on those investments, the more virtuous the cycle is. So when you hear about new modalities or new therapeutic areas that are having success, that ultimately spurs more investment. And AI is helping to kill ineffective medicines faster so that you don't spend money on things that don't work. and at the same point in time, shorten the time to market for those things that do work, and that gives you a longer return cycle on an approved medicine, and that also will spur more investment.

18:39John Collins: So we're very excited about what the technology is doing and ultimately how we're applying it at Thermo Fisher Scientific.

18:45Thermo Fisher CEO: To those, Mark, who would say, yeah, but AI can also allow you to do fewer actual experiments because what you might have had to do in the lab you can now do on a computer, and therefore they're going to be using few of your products, you say what?

18:57John Collins: So when I think about it, in this industry, the human biology is incredibly complicated. So when you have more insights of what you do, you actually do a lot more validation because what you'll then do is spend more money on the ultimate number of indications or types of disease you're going after with the medicine. So that insight of what's likely to work actually gets more research being done. So it really drives really strong growth in the business.

19:22Thermo Fisher CEO: So AI, more spending, not less spending. Is that what I'm hearing you say?

19:27John Collins: That's our view in terms of how it will play out. And as the industry leader in the field, because we have more data than anybody else in the life science tools industry, we're getting unique insights from that data, which is allowing us to be more competitive as well.

19:40Thermo Fisher CEO: I want to talk more broadly now in terms of the environment itself. Again, you were talking about what I guess is being called a funding to revenue lag. You said just moments ago the confidence from our customers and the emerging biotech companies is picking up. You saw funding start to improve as last year progressed. It stepped up even further this year. So what does the back half look like for you? Obviously, we're in the middle of it because you have made some promises to investors that do indicate you expect at least, what, 4 % to 5 % organic growth.

20:07John Collins: Yeah, so when we think about this year in aggregate, we expect 4 % growth. And we expect to have 4 % growth in the second half of the year. You know, farmer and biotech will be stronger than that. So that's our fastest growing end market. It's about 60 % of our revenue. We've seen demand really pick up from the biotech companies. So the cycle is positive, and we continue to grow faster than the competition. So we feel very well positioned as we are well into the second half at this point.

20:33Thermo Fisher CEO: Now, longtime CNBC viewers may be very accustomed to watching your stock price do nothing but go up. And I can remember Jim Cramer and I sitting there looking and talking and lauding your management, obviously, over a long period of time. It hasn't been the case, though, for the last number of years. Stock's more or less been flat. You know, in the second quarter, you beat guidance by 300 million bucks. You raise for your outlook. You raise your second quarter. And the stock didn't really do much. Were you surprised?

20:57John Collins: So when I think about the performance, at the end of the day, if we're doing great work for our customers, we're going to get rewarded for our shareholders as well. And we have tremendous momentum. You saw it in organic growth. And what you've seen is the stock has started to appreciate again. And I feel good about the outlook of the business. and us continuing to deliver on our commitments, raising our outlook, and creating a lot of shareholder value.

21:22Thermo Fisher CEO: We have a chart of the stocks up 1 ,331 % since you became CEO. Not bad, Mark. So, yeah. Lots to be done. But again, I wonder, do you expect then to have the run that you had perhaps from, let's call it, you know, 2010 to 2020? Or, you know, can you have that kind of momentum in your business? Or is this a different world given the size of your company, for example?

21:42John Collins: Yeah, so one of the real advantages of the scale that we've developed is we have incredible relationships with our customers. And our ability to accelerate our share gain is very high. So I actually think the organic story going forward is very good. You'll see us return to 7 % organic growth in the not distant future.

22:00Thermo Fisher CEO: When's the not distant future?

22:01John Collins: We've said 2028 is our view and it's progressing in the right direction. And then interestingly enough, we have a really good track record of strong capital deployment and creating value. And we're still in a very fragmented industry. We're going to be active. That supplements the growth. You're still going to be active on M &A?

22:16Thermo Fisher CEO: Obviously, you built the company in part through that. We have. You just did a fairly large deal. Your debt load is higher than it's been, I think, 3.6, three and a half times the EBITDA. Are you comfortable with that, or do you want to bring that down?

22:27John Collins: Yeah, just as we've been able to grow our earnings, sort of mathematically, that's going to come down. We'll do some repayment of debt. We have strong investment-grade ratings, so when the right opportunities come up, you'll see us be active. It's been a good year from a capital deployment. The transaction we closed in March is a business called Clario, performing great in the first couple of quarters of ownership. It's doing really well. And so we're excited about that. And it'll be a good growth asset for the company. And then ultimately, when the right things come along to create shareholder value, you'll see us be active.

22:55Thermo Fisher CEO: You take a look. All right. Finally, a couple of key things that certainly investors still have top of mind. NIH funding. It ended up being a lot less severe, the cuts, than had been anticipated, given Congress restored lots of what the president wanted in cuts. That said, are you still cautious in terms of how that money flows and whether or not you'll ever see growth again from that funding source?

23:16John Collins: Yeah, for us, we expect modest growth in NIH budgets over time. There's very strong congressional support for science because at the end of the day, if you're not spending on the research, we're going to get overwhelmed as a country as the population age from a cost perspective. So I actually feel that it's not going to be a strong growth market, but it should return to growth. And you saw us return to growth in the U.S. in the second quarter in academic. And we feel good about the midterm prospects. And finally, China.

23:42Thermo Fisher CEO: I think on the second quarter call, you said China grew low single digits, but it's still not accretive to your organic growth as a company. I don't know if you said anything different just now, but I'm curious, what are your expectations? Are you starting to see some return to growth in the Chinese market?

23:57John Collins: We are. So it was nice to return to growth in the second quarter. We've been very cautious about our outlook on China being the expectation will be slightly slower. growth in the rest of the company. But actually, when I came back from China in August, there's so much investment going on in pharma and biotech, I actually think that'll be a good growth market over time.

24:14Thermo Fisher CEO: You did talk about spending more time in China in the second half on government relations topics, I think you mentioned or was mentioned on your earnings call.

24:22John Collins: What does that mean? So because I was chair of the U.S.-China Business Council, I've worked with both the U.S. administration and the Chinese government on business policies that are mutually good for wealth countries. And so I continue to have a regular cadence of meetings to make sure that U.S. companies can compete, you know, effectively and that policies support a good growth environment.

24:43Thermo Fisher CEO: Let us know if you can do anything about having them slow down their AI development. Mark, thank you. Appreciate you taking time. Mark Kasper, CEO of Thermo Fisher. Carl, I'll send it back to you. David, thanks. A lot more from David at Morgan Stanley's healthcare conference today. He'll be joined by the firm's global co-head of M &A after the break, Plus, former Fed Governor Stephen Myron's with us next hour ahead of the rate decision tomorrow as the 10-year, kind of stubborn above five here at levels not seen since 07. Stay with us. Welcome to The Circle. In this game, you never meet the other players.

25:17Thermo Fisher CEO: Your goal is simple, become the most popular. But should you play as yourself or catfish as someone else? With the new host, celebrity contestants, and this time, audience voting will influence the game. You decide who has what it takes to win. Watch the Hulu original series, The Circle, on November 17th, streaming on Hulu and Hulu on Disney Plus for bundle subscribers. Terms apply. 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,

25:50Treasury Secretary Bessent: provides an information-packed daily market preview on stock updates,

25:54Thermo Fisher CEO: 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.

26:13Treasury Secretary Bessent: Something amazing is happening in animation. Studios are processing data faster. That's because CDW showed them new ways to maximize their infrastructure, then built a flexible Dell Technologies data solution. More automation led to reduced maintenance times and greater efficiency, so that creativity stays the star of the show. Dell Technologies and CDW make amazing happen. Learn more at cdw.com slash delldatacenter. Just want to show you what's happening with stocks. Dow's down a little more than 500 points, about a percent. You've got some pockets of green in the AI trade. That's keeping the S &P from falling further down about half a percent, like NVIDIA and AMD.

26:54Treasury Secretary Bessent: The energy stocks are rallying, too, but everything else is lower. The Dow is being dragged down, in particular by Goldman Sachs, shaving 163 points off the Dow. Microsoft and UNH are the biggest drivers. David, back over to you.

27:08Thermo Fisher CEO: Sarah, thank you. We are at Morgan Stanley's Global Healthcare Conference. The outlook for dealmaking, of course, also front and center right here. You just heard from Mark Kasper, of course, at Thermo Fisher, a company that's done plenty of deals. Joining me now is John Collins. He's Morgan Stanley's global co-head of M &A. We're here to talk about M &A overall, but you're an old health care guy. You're not old, but you've been doing health care for a while. I'm not a young health care guy. No, you're not young either, but you're younger than I am. So that's a nice way to be. Just had Mark Casper, obviously.

27:36Thermo Fisher CEO: I'm sure a good client. They've done a lot of deals. But broadly speaking right now, what are we seeing in terms of the appetite for deals? Let's start in health care, given we're here. Great. It's been really high. Super active environment. We've seen so far in 2026 as much M &A in terms of dollar volume as we saw all in 2025 through eight and a half months. And in terms of number of deals, we've seen more. And I think the important thing, David, is that we don't see it slowing down necessarily. What we're hearing in boardrooms from CEOs such as Mark is that there is a desire to continue to think about M &A as sort of a part of the strategy in order to continue to grow.

28:17Thermo Fisher CEO: And why is that? I think largely it's a little bit sector specific, but a lot of it comes down to growth. I think the the idea of for some of the larger companies of making sure that they have access to markets that are growing more quickly. That's very important in pharma, for instance, where you have natural sort of negative growth through patent cliffs. We've seen a ton of activity around looking to sort of refill their pipelines. Yeah, I mean, there's, you know, many mornings when I'll find some$12 billion deal, frankly, for a company I've rarely, if ever, heard of that is being bought by one of the majors at a significant premium.

28:56Thermo Fisher CEO: You would expect that to continue? I would. I think, you know, in a lot of ways, the activity begets activity. On one hand, there are companies who've been very active and in some cases have sort of pressed their advantage. I think some of the other companies feel as if they need to work to catch up. And, you know, in every every day deal, you need a buyer and a seller. And the valuations for biotech companies are pretty high. And so when somebody knocks on the door, biotech boards are generally not always, but more open to seeing if now's the right time to become part of a larger company. Right.

29:38Thermo Fisher CEO: Well, particularly for these companies that are sort of in the midst of developing a new therapy, but may not have a sales force or marketing or the expertise in that area. Yeah, exactly. They typically do look to sell. We're watching a tenure that's now above the tenure. Yes. Yield is now above 5%. Does that impact at all the way some of your clients think about deals, particularly those that require significant financing? Yes. Not we haven't seen an immediate impact from that. You know, I think corporate balance sheets generally are pretty strong and spreads are still fairly narrow. So the overall cost of borrowing is still not super high.

30:17Thermo Fisher CEO: That said, higher for longer rates, no doubt, starts to impact the way companies think about it, and particularly valuations. You need to factor that in to the way you think about what you can pay for a business. Where we have seen maybe a little more impact is with financial sponsors who just naturally rely more on debt to complete their transactions. And there in health care, it's probably been a bit more muted. It's been a bit more of a corporate led environment than financial sponsors. Yeah, I want to finish on health care, then get broadly in the brief time we have. But, you know, will we ever see mergers of some of the majors themselves?

30:58Thermo Fisher CEO: I mean, AstraZeneca and Bristol Myers was was something that was real, according to my reporting. I don't even know if you guys were involved or not, but you're smiling. But is that a possibility in your mind or is that just a bridge too far in terms of all the gating issues that come into play, not to mention some of them are cross-border and antitrust and on from there? So I don't want to talk about specific deals. But what I would say is that, you know, I talked earlier about the stats around health care and the fact that volumes past last year are annualized approaching 21. And that's frankly without very large deals.

31:38Thermo Fisher CEO: I wouldn't say for sure that a large deal will happen, but I think there's much more likelihood than there would have been three or four years ago. I think, you know, certain of the pharmas, for instance, have some very real, you know, some very real sort of growth challenges that if you look historically, a lot of times they have sought to address those by, you know, maybe putting two companies together, running more efficiently and kind of resetting the base for the growth. So I wouldn't say that it would certainly happen. Big deals are hard for all the reasons you mentioned. But I wouldn't also totally rule it out.

32:14Thermo Fisher CEO: All right. And every interview I've done with a co-head of M &A, of course, you're all instructed. The pipeline is strong. I've never heard it otherwise. But what are we going to see in these, let's call it, last three and a half months of the year and early next year? That is part of the job description. So I think that everything we see is really strong. And we probably went from last year, early in the year, to talking about green shoots, to actually seeing the plants now. And, again, the level of discussion in boardrooms, we had a dinner last night with about 15 or 20 of the leading CEOs in health care.

32:51Thermo Fisher CEO: And M &A is very much top of mind and very much a big part of the discussion. Again, as I said before, I think those companies who have participated, you know, in several cases like Mark, are looking to continue to grow that way. A lot of the leaders in the subsectors have used M &A as an important tool. And then some of those who haven't, I think, are, you know, trying to decide whether they can get access to additional growth through M &A. All right. We're going to leave it there. John, thank you. Thank you, David. Appreciate your time. Appreciate it. Thanks. I'll send it back to you guys. Oh, actually, I got to read something here.

33:25Thermo Fisher CEO: There are a lot more coming up from the Morgan Stanley Health Care Conference this afternoon. I am going to sit down with Morgan Stanley's co-president, Dan Simkowitz, going to want to get his comments about Brian Moynihan's comments yesterday from that Barclays conference, which indicated perhaps things are a bit flat for that firm, at least. That'll be at 1 p.m. on The Exchange. Sarah?

33:45Treasury Secretary Bessent: OK, just don't tell him he's old. I'm David. We'll see you in a bit. Time now for a CNBC News update. Christina Partsinevelis has it for us. Morning, Christina. Good morning.

33:54Thermo Fisher CEO: President Trump slammed the Supreme Court today, hours after justices rejected new restrictions on mail-in voting. They were pushed by his administration. He wrote on Truth Social, quote, These are not the people I interviewed to serve on the United States Supreme Court. They are merely a shell of their original selves. The high court majority said yesterday the administration's proposed voting changes would likely lose in court. FBI Director Kash Patel is testifying right now on Capitol Hill before the Senate Judiciary Committee. He's facing questions from Democrats about allegations of excessive drinking and firing agents who investigated President Trump, while Republicans on the GOP-led panel are focusing more on his efforts to combat violent crime.

34:33Thermo Fisher CEO: And the Kennedy Center for the Performing Arts could close today. The board appointed by President Trump is expected to vote on whether to shutter the building immediately after warning it's on the brink of bankruptcy. They say the only way to ensure its financial viability is to put the president's name on its exterior, ensuring his fundraising efforts are intact. Carl, talk to you. All right, KP, thanks. Still to come this hour, we're watching crypto ahead of a key Senate vote on the Clarity Act. Bitcoin, Coinbase and Robinhood under some pressure this morning. Next hour, Virginia Senator Mark Warner is with us.

35:05Thermo Fisher CEO: We'll get his vision for regulating AI and talk about the conversations he's had with big tech CEOs as Squawk on the Street continues. The Treasury Secretary is on the Hill today testifying before House Financial Services right now. He did face some questions a moment ago from Congresswoman Maxine Waters. Treasuries with 30-year Treasury yields rising to levels that have not been seen since 2007. Just yesterday, in fact, the 10-year Treasury hit 5 percent. Mr. Secretary, do you agree that these high Treasury yields or interest rates on Americans' bonds means that loans paid by families to fix a roof or buy a car will also be expensive, yes or no?

35:51John Collins: The U.S. bond market has been the best-performing major bond market in the world. Yes or no, Mr. Secretary. Reclaiming my time. Reclaiming my time. Reclaiming my time. Reclaming my time. Reclaiming my time. Reclaiming my time. You keep talking, I'll keep reclaiming my time. And I'm asking you, Mr.

36:12Thermo Fisher CEO: Secretary, turn it to your trade policy. If tariffs are not inflationary as you claimed in your previous testimony, then why has inflation increased by more than 3 % over the past year? Do you deny that inflation is too high at 3 %? Yes or no?

36:32John Collins: Yes or no, Mr. Secretary. Yes or no, Mr.

36:36Thermo Fisher CEO: Secretary. Reclaiming my time. Reclaiming my time.

36:41John Collins: Reclaiming my time. Reclaiming my time. Reclaiming my time.

36:46Thermo Fisher CEO: I didn't hear you, Mr. Hill. What did you say? I said it's the gentlelady's time. Does the time belong to the gentlelady? Indeed. Indeed it does. And so she also pushed him on this race and spate of AI warnings. He said the administration's been at the forefront of model examination. Also had some thoughts about deficit to GDP, that 3 percent still a magic number in his mind, important to the debt curve. And at that stage, you could start to pay back some debt.

37:13Treasury Secretary Bessent: But it's all it's so political. I mean, it's so political. Why why ask questions if you don't want answers? You know that she does. She didn't even let him answer. ridiculous and her questions were nonsensical. He was, I think, trying to explain, you know, what he has said basically at G20 when we asked him about rising bond yields as well, which is that this is a global phenomenon. The U.S. has been a better performing bond market so far this year, which he's maintained and stuck to. And by the way, we haven't even talked about the fact the Bank of Japan meets this week and is set to raise interest rates as well.

37:42Treasury Secretary Bessent: So that's, you know, shifting the dynamic a little bit as well. But, you know, these testimonies have has gotten so political, and these politicians are just looking for one-word talking points so that they can use in their ads.

37:54Thermo Fisher CEO: Not a great use of time, although it's important that he goes. And to your point, Germany today on 10s, 09. Yep. Japan, 96. UK, 07. France, 08. Those are all highest cents on their 10s.

38:07Treasury Secretary Bessent: Right. So everybody's sort of teeing off of this global oil move, which affects all sorts of economies and is inflationary globally. Question is, how long does it last? Yeah.

38:16Thermo Fisher CEO: When we come back, got a key Senate vote on the future of the Clarity Act this afternoon. We'll take a look at the importance for crypto under a little bit of pressure this morning. By the way, don't miss the Energy Secretary, Chris Wright, live from the G20 Energy Summit in Houston today. How this damage to the Saudi east-west pipeline is already impacting prices. Stay with us.

38:37Treasury Secretary Bessent: Welcome back. The Senate will vote on the Clarity Act this afternoon, needing 60 votes to advance back to the House. Senate Republicans released new texts Sunday night incorporating an ethics provision demanded by Democrats. Bitcoin tumbling to begin this week, mostly due to these pre-vote nerves. For more on what the Clarity Act would mean for the industry, let's bring in Matt Hogan. He's the CIO of Bitwise Asset Management. It's a crypto asset manager. It's good to have you.

39:00John Collins: Thanks for having me.

39:01Treasury Secretary Bessent: So clearly you guys are in favor of this. What would it actually do for the industry if it passed?

39:07John Collins: Yeah, well, currently, look, there is no clarity on regulation of crypto in the U.S. There's no clarity on whether the SEC or the CFTC has jurisdiction over spot crypto assets. There's no clarity around if centralized exchanges have to do disclosures. No one is directly regulating that. So the industry is sort of feeling its way around the regulatory world. This act, if it passed, would make a clear pathway for us to move forward. It would allow more investment from Wall Street. It would push us toward a blockchain-based financial future.

39:37Treasury Secretary Bessent: You think that certainty would unleash what? Institutional capital?

39:39John Collins: I think it would unleash a tremendous investment from the institutional world into building on blockchain. I think it would release investment into crypto assets. I think it would position America to lead financial market infrastructure for the next 50 years. I'm not sure we're going to get it today. And I think there's a pathway forward just through regulatory efforts. But if we were to get it, it would be good for investors. It would make the world safer. It would make crypto more secure. And it would lead toward more investment into the space.

40:05Thermo Fisher CEO: Can you explain some of the sausage making? What's in the way? What do Democrats want as concessions? Is a lot of this about the president's exposure to crypto?

40:14John Collins: Yeah, look, I think it's more about politics than it is about policy, right? The Democrats are really focused on ethics concerns. How much can you limit the ability for executives and politicians in the Senate and even judges to operate in the crypto industry? The Republicans put forward the most aggressive ethics package ever considered in federal law. The first one that would constrain the executive branch. The Democrats are saying that's not quite enough. I don't think they're interested in this passing. I think they're trying to fragilize the crypto market. I don't think they want to see it move forward.

40:45John Collins: Again, I think they're putting politics ahead of policy. I think that's bad for America, but I think that's the state.

40:50Treasury Secretary Bessent: You know, the banks have been fighting this one as well. They want to see Clarity Act, but with certain protections that I think they feel would level the playing fields and not risk deposit flights from banks. Last week, I talked to Charlie Sharp, the CEO of Wells Fargo. He was really clear that, as it is currently written, he said it's unsafe for small banks because the risk of deposit flight.

41:12John Collins: The odd thing about that position is if this bill doesn't pass, which would further restrict the ability of stable coins to pay interest rates, then we're governed by the Genius Act, which makes it easier for them to pay interest rates. So I'm not sure that that's a logical position entirely. I would add more broadly, why shouldn't we get interest on our stable coin assets? You know, that money belongs to us, not to the banks.

41:34Treasury Secretary Bessent: I think they're just afraid of deposits out of the banking system.

41:38John Collins: All the studies, all the economic data suggests that that's going to be minor at best and probably not happen at all. I think more broadly, the banks are just concerned about competition. They're doing this for regulatory capture. They're worried about this new competitor moving into their turf. If they offered interest on savings accounts more than one basis point, which is the average interest payment on a savings account today in America, then it would take their concerns seriously. But they're not giving that interest to individuals right now. Look, I don't think it's going to happen, but I do think they're just trying to protect themselves from competition.

42:10Treasury Secretary Bessent: The other concern that he raised is money laundering, that there are not enough protections in there to prevent that.

42:15John Collins: We absolutely need more aggressive protections against money laundering. But here's the thing. The choice is between regulating this industry and not regulating this industry. We ran the Warren Gensler playbook for the past few years. That got us FTX. That got us Terra Luna. That got us Celsius. That got us a lot of money laundering activity. We've run the regulated pathway for the past two years. That's given us ETFs. That's given us regulated futures with surveillance agreements. If we want this to be safer, we need the regulations in place.

42:43Treasury Secretary Bessent: But shouldn't it be a level playing field with the banks on regulation where they can compete in a fair way?

42:47John Collins: Yeah, absolutely. I agree. It should be a level playing field. The banks pay interest. I would wish the stablecoins could pay interest as well. I'm all for a level playing field. They want it one way where they can do something that stablecoins can't. I think that's unfair. But of course, we all want more money laundering. Again, the industry is begging for regulation here. This is a bipartisan bill. We've been working on it for four years. There are huge concessions to the industry. I think it's time to move this forward so that we can have the future of finance exist here in the U.S.

43:15Thermo Fisher CEO: I mean, it's kind of it's almost a miracle we're even getting a floor vote on this. I mean, the timing was rough, still is rough. If it doesn't go today, is there time to cobble it together? I don't know.

43:25John Collins: I mean, I think it's very difficult if it doesn't go today, Carl. But the one positive, look, I don't think it's going to pass. The one part in the back of my mind that says maybe is that this thing has had 150 chances to die over the last four years. And it's never been fully dead. But again, if we don't pass today, I think the calendar just gets too hard.

43:44Treasury Secretary Bessent: How much lobbying does the crypto industry do right now? And how involved are they in getting this thing done?

43:52John Collins: Yeah, the lobby.

43:53Treasury Secretary Bessent: There's a lot of money that goes back into Washington from crypto.

43:57John Collins: That's certainly right. Right. Just as the banks are lobbying against this bill for the protections that they want, crypto is lobbying for this bill. That's how the sausage works. It would be great if this was a philosophical Socratic debate between reasonable people, but that's not how Washington operates. So, yes, there is lobbying on both sides. I think the thing to focus on is what would be best for investors. Do we want the era that gave us FTX, Terra Luna and Celsius, or do we want the era that gave us ETFs and regulated futures? I would say the latter, but we'll see what Washington decides later today.

44:29Treasury Secretary Bessent: All right, Matt. Well, thank you for joining us. Thank you for having me. In defense of the bill. We really appreciate it from Bitwise Asset Management.

44:35Thermo Fisher CEO: Coming up next with the options market is signaling about the precious metals trade ahead of the Fed decision tomorrow. Plus, Virginia Senator Warner is with us, the Senate Intelligence Committee's top Democrat pushing a framework for AI regulation. After talking to Sam Altman and Dario Amadei, stay with us. Welcome back. The options market's pricing in some big moves in the metals trade ahead of the Fed tomorrow. Let's get to Oliver Renick at SIBO in Chicago. Morning, Oliver. Good morning, Carl. Right now, we're seeing a stronger buy-the-dip response in gold than in Bitcoin. Right now, volumes are pretty big in GLD, trading about 30 percent above the 30-day average this morning.

45:14Thermo Fisher CEO: More calls are being bought than puts today, both by volume and dollar amount, which is adding on to several weeks of options flows leaning towards calls. With total open interest right now in GLD, two to one calls to puts. To be sure, gold bugs have been getting dragged for three weeks, but they keep trying. The highest volume contract of the day is the 450 strike call expiring in mid-January, thanks to one big call spread buyer who purchased 3 ,000 of those contracts for more than$2.3 million, then sold the same number of 485 strike calls for$1.1 million. That's a trade that can and make about$10 million if gold rallies 23 % over the next four months.

45:55Thermo Fisher CEO: In the case of Bitcoin, flows were a lot more mixed, with more puts trading than calls on IBIT, and twice as many puts likely bought versus sold this morning, pushing the volume ratio of puts to calls to the highest in over a month. Arguably the best thing about Bitcoin for options traders right now is that implied volatility is lower in Bitcoin than in a lot of tech stocks. So if you think it has a big move coming, placing a bet is relatively cheap in options. Back to you, sir.

46:27Treasury Secretary Bessent: Okay, thank you, Oliver. Oliver Rennick with the S &P now down a little less than a half a percent. 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.

47:04Treasury Secretary Bessent: To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer.

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