10AM Hour: White House Opens New Lisa Cook Investigation, OpenAI’s Revenue Numbers Spook Market, Delta Cuts Outlook on Fuel Prices 10/9/26

0:00This episode is brought to you by Schwab market update an original podcast from Charles Schwab Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration.

0:39Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Good Friday morning. Welcome to Squawk in the Street. I'm Carl Quintanilla with Leslie Picker here at Post 9 to the New York Stock Exchange. Sarah Eisen and David Faber are off today. Stocks trying to stabilize a bit after yesterday's tech-driven sell-off. We're going to talk with noted analyst Ben Reitzis about some of these AI revenue concerns at OpenAI and this new report hitting shares of Apple this morning.

1:18Former United chief Oscar Munoz with us to talk some airline earnings after Delta with its first double miss in a couple of years. surging fuel prices at bastion facing criticism from elon musk and an exclusive with fcc chair brendan carr to discuss spacex's deal to buy a large spectrum portfolio a move that is definitely hitting telecom names today tmo down almost nine percent yeah busy friday here but first consumer sentiment just crossing the tape steve leesman has that for us hey steve Yeah, another drop here, Leslie. The University of Michigan's Survey of Consumer Sentiment declining to 46.3.

1:57This is a preliminary number. They'll come back later this month and they'll give a final. The expectation had been 48. It's down from the prior month of 48.1. There was a real collapse in the assessment of the current conditions, causing me to do a bit of a double take here to make sure I got it right. It looks like it fell to 44.7. and that was from 50.9 in the prior month and again well below expectations. I don't see the expectations index here. I can tell you though that the one-year inflation expectations ticked up again to 4.7 for the one year and picked up again to 3.5 from the prior of 3.4.

2:40I don't know when that was the highest since. It looks like we were higher, well it's been a while since we've been at 4.7 on the one-year expectations. The New York Fed survey of inflation expectations also ticked up on the one-year while it was stable at the five-year level. Again, something for the Fed to think about and to consider, first of all, that you have this really downbeat views on the economy from overall that suggest not really great aggregate demand if you tie it to sentiment. On the other hand, inflation expectations continue to tick up. It's something for the Fed to watch. We've had people telling us that or Fed officials saying they are concerned that these supply shocks and this inflation, even though they'd like to look through it, it's their concern that these higher inflation numbers bleed into inflation expectations over time.

3:30Yeah. Steve, thank you. Steve Leesman for us. For more on the data and the broader market action, let's bring in Evercore ISI Vice Chairman Krishna Guha. Krishna, what do you make of this data this morning and just overall sentiment that's out there? So the consumer side of the economy is fascinating right now because the low to middle end consumer is finding it tough going. Incomes are not growing very rapidly. Inflation, particularly with the energy costs, is running high. And yet total consumer spending growth we see is still quite healthy. How do you explain that? Well, the answer fundamentally is wealth effects driving consumption among the top 20 % or so of households.

4:17So then at what point does that gap start to narrow? Do you see that as the likely next step here between just the soft data and the hard data? Or do you expect to continue to see a widening, in which case we should be potentially concerned about when that ultimately kind of filters through into the real economy? So I'm afraid to say that I suspect we're going to see these trends continuing. In other words, we're going to have quite a lot of strength in the economy at the GDP level, coming from the investment side of the economy and from the high-end consumer with the accumulated stock price gains, but that the average worker is going to remain under stress, feeling the squeeze, and reporting to anyone who will listen that they are very unhappy about things.

5:10And then at the same time, there's also this broader question as to when there will be more of a transfer mechanism between the higher rates that we've seen into equities and when equities will start to really meaningfully respond to that. As we look into the beginning of earnings season next week, what's your expectation? Because earnings strength has really held up the market so far. Are you expecting that to continue? Well, certainly, you know, I think the story here is best understood at a disaggregated level, right? There is the AI boom beneficiaries, and there's everybody else. So if you look at equal weight S &P, as you guys know, equal weight S &P has already taken a substantial hit from rising yields.

5:59And there are a number of stocks in a lot of sectors that are down quite a lot from their highs. What's kept the aggregate index very close to record highs is, of course, the strength of the AI-related names. although that's come under pressure from this specific open AI news, the specific Apple questions and so on in the last 24 hours. The broader theme is still that it's a common shop that's pushing up expectations of AI related earnings on the one hand and pushing up yields on the other. So those stocks that are benefiting from the same things that are pushing yields higher are not surprisingly proving pretty resilient.

6:41Krishna, a lot of that leads to a discussion about policy, which I hope you can have with us in a moment. But stick with us. We're getting some breaking news out of Washington this morning on the Fed. For that, we'll turn to Eamon Javers. Morning, Eamon. The White House is taking additional action against Federal Reserve Board Governor Lisa Cook this morning. The White House posting an announcement on social media just within the past couple of moments here that earlier in the week, The president created what they're calling a committee of inquiry to investigate allegations that Federal Reserve Governor Lisa Cook made false statements in connection with one or more mortgage instruments.

7:18Now, Carl, I can't emphasize enough that this is just an extraordinarily rare situation. I can't think of a precedent for this. And we're going to have to go back and do some research and just make sure that we understand this. I don't remember a committee of inquiry created by the White House for anything ever before. But what they're saying here is that the president is going to create this three-member committee. It's going to have members including the assistant to the president for economic policy, the chairman of the Equal Employment Opportunity Commission, and the director of the Office of Government Ethics.

7:53That committee is going to investigate these allegations that the president made against Lisa Cook involving her home mortgages. Those allegations made a year ago central in the president's effort to fire and remove Lisa Cook. Remember what happened with the Supreme Court, though. The Supreme Court blocked that on procedural grounds, saying in part that what the White House hadn't done was provided enough notice and a process by which Lisa Cook had the opportunity to respond and engage. And therefore, that was part of what the Supreme Court said was wrong with the president's effort to fire Lisa Cook for cause.

8:32So now what you see is the White House is creating this commission of inquiry to look into these allegations, which the president says are true. And he says in this statement, as president, it is my job to ensure the laws are faithfully executed, including by firing subordinates who cannot be trusted to tell the truth and follow the law. He says the committee shall investigate the allegations against Governor Cook and report to me whether there is cause for Governor Cook's removal within the meeting of the within the meeting of the U.S. Code here. It's also establishing a process and procedure here, Carl.

9:06It says Governor Cook may submit a written position statement to the committee regarding the allegations, provided the statement is received at least three days before the hearing. They're saying there will be a hearing at the White House and they're saying that the committee may request documents or other evidentiary submissions from Governor Cook as appropriate. And Governor Cook shall comply. Going to be an interesting question about whether that's mandatory or not. Shall comply with any such request. So what we have here, Carl, it looks like to me on very first blush here, this is just breaking, is that the White House is creating now a process by which the president can move forward to get to a decision to fire Lisa Cook, which is the position that he says he's wanted to have, which would provide her all of the notice and opportunity to respond that the Supreme Court said she didn't have the first time around.

9:56So this seems to me, Carl, to be an effort by the White House to establish some process and structure around the president's inquiry here with the same goal, which is to get Lisa Cook off the board of governors. But is that by circumventing any kind of DOJ inquiry? This seems like it would be independent of a DOJ inquiry. This is like I say, I can't think of a precedent off the top of my head for a White House committee of inquiry on anything. With a hearing that happens at the White House, that's just not normal process. This seems to be creating an entirely new process, or at least recently unprecedented, shall we say, until I check it and make sure that we haven't seen this before somewhere in history.

10:41But an entirely new process that would go after these allegations and give Cook the opportunity to respond in writing. that may be an effort to satisfy those procedural concerns that the Supreme Court had about the first attempt to fire Lisa Cook. And then if you get to the end of this process and the president makes the decision the president is likely to make, given that he said that she should be fired and he wants her off the court or off the board, then maybe I think you can see the White House arguing to the Supreme Court. Look, we did it right this time. We established a process. There was a hearing.

11:17She had a fair opportunity to respond in writing. We asked her for documents, et cetera, et cetera. And so this one is legitimate. So it seems like this is a second bite at the apple by the White House to go after Lisa Cook and try to get the result that the president wanted the first time. Amen, I'm sure we'll be talking about this for weeks to come. Thank you for that, Eamon Javers. You bet. Krishna Guha, I hate to throw that in your lap, but it does lead me to a question about what's been driving yields in aggregate. tariffs, the war, deficits, but also the notion of Fed independence, especially when you apparently are creating super judicial instruments of regulation.

11:56Yeah, look, I'm responding as you are, you know, on the fly to a statement that I haven't seen fully. But this is massively counterproductive. If, as president, what you want to do here is to create circumstances in which the Fed raises rates less rather than more and yields moderate from current levels. It seems that the president has convinced himself that the reason the Fed has turned hawkish is because Chair Walsh, his own appointee, is being boxed in by a very hawkish board and therefore is trying to ramp up pressure, try and get rid of people from that board. No one who follows the Fed thinks that's actually what's happening.

12:35Everyone believes that it's Kevin Walsh, Trump's own appointee, who has made the judgment that it's necessary and appropriate to raise interest rates at this point to guard against risk of more persistent inflation. And in so doing, he has the nearly unanimous, essentially the unanimous as of September, backing of the FOMC. In terms of what's been driving yields, it's not primarily Fed-related issues in my view. It's fundamentally the strength of the medium-term AI investment boom and what that means for the future normal, or to use the technical phrase, neutral interest rate, the amount of hyperscalar debt issuance, and of course, the renewed pressure from oil, which is a product of the unresolved US-Iran war.

13:19But if you want to lean in the direction of yields going higher rather than lower, having taken all of that into account, then raising questions about Fed independence, again, is a great way to push yields in exactly the wrong direction. Yeah, it's certainly a key question and a developing story. We appreciate you commenting on it right away in real time. Krishna, thank you. Thank you. Let's move on to SpaceX this morning. Moving higher, as the company said it had acquired a nationwide spectrum portfolio in a move to push deeper into the mobile carrier market. That news is hitting names like AT &T, Verizon and T-Mobile.

13:58Our Julia Boorstin's all over that story this morning. Hey, Julia. Well, that's right. Those stocks are plummeting on SpaceX, making a deal that shows just how serious it is about competing in the wireless space. SpaceX is acquiring a nationwide wireless low band spectrum portfolio from grain management with a reported$8 billion price tag. The deal is subject to FCC approval. CEO Elon Musk writing on X, quote, quote, this is the last critical piece of the spectrum puzzle needed for SpaceX to provide complete phone coverage in America. The analyst community does have consensus that this move is negative for the mobile providers, but there is debate about how much more spectrum SpaceX would have to buy to become a true player.

14:38Wolf Research saying mid-band spectrum auctions next year and the following offer SpaceX more opportunity, predicting this will weigh heavily on telco stocks in the future. Bernstein writing, quote, building a terrestrial network would require substantial capital and time, but investors cannot completely dismiss the possibility. Whether or not SpaceX ultimately builds a nationwide network, Musk's track record creates a credible threat that is likely to remain an overhang on incumbent valuations. And Evercore writing that, quote, the read through is incrementally negative, going on to say SpaceX's presence in the space pushes up clearing prices at coming auctions, whether or not it wins.

15:20Meanwhile, shares of cell tower infrastructure stocks such as American Tower and Crown Castle are higher on the news of SpaceX becoming a new customer. Leslie? Yeah, the whole thing is fascinating. The whole IPO was centered around the prospect of a total addressable market in AI, and it seems like they're just building and building more of the telecom side of their business in the near term. So it'll be interesting to see kind of what that product mix looks like moving forward. Julia, thank you. We are going to be talking much more about this story next hour when we're joined by FCC Chairman Brendan Carr, whose agency still needs to approve the Spectrum deal.

15:55Take a look at our roadmap for the rest of this hour. When we come back, we'll talk about whether concerns over AI valuations are misplaced, plus some new news hitting Apple today. We'll talk to analyst Ben Reitzes from Milius. Plus, another company withdrawing its plans to go public details on the latest red flag for the IPO market next. And what Delta's Ed Bastian told us this morning about Elon Musk after Musk said Bastian would lose his job after passing over Starlink for in-flight internet. Squawk on the Street's 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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17:14Schwab 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 it's the holiday season at house of burl which means that it's the perfect moment to review some key rules rule number five more style means more celebration number four buy gifts but remember to treat yourself too number three there is no dress code but always leave them talking.

17:56Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Welcome back. Another firm pulling its IPO plan. This time it's Nvidia-backed Australian AI data center operator called Firmus. For its public debut on the Australian Securities Exchange, Firmus had initially planned to raise about$5 billion in a more than$30 billion valuation. But now Firmus is withdrawing its application for the listing and will pursue other types of funding options instead. The board says, quote, the terms on which the offer could proceed would not appropriately reflect the strength of the company's business.

18:38The Firmus situation underscores this ongoing tug of war between potential listings and public investors. Many companies like Firmus are seeking 11-figure valuations with limited operating histories, limited revenue, and the market has been pushing back. So as a result, look at all of these. We've seen a slew of companies postpone or withdraw their IPO plans as timelines for open AI and Anthropic also continue to be stretched. Carl, it really feels like things are just much more difficult. You also have, of course, the rising interest rate picture, which makes the dynamic even more challenging.

19:13But you do have this kind of checks and balances system with the IPO market, whereby people say, you know, I have no data centers in operation, but I promise you I will have one. Oh, and by the way, give me this$30 billion valuation. And the market's like, no, not. We don't even know what's going to happen with all the regulations, with all the municipal pushback. Oh, and by the way, there's, you know, some sensitivity, obviously, surrounding just the future of AI in general. So you are starting to see some diligence, at least on the part of the public market investors. Yeah, those are the big ones there, Holtec, SP Energy, or, of course, last couple of weeks.

19:50This would have been like the second biggest new issue in Australia in history. Yeah, this is huge. This was a huge deal, would have been a huge deal. And now I think another interesting thing to dig into here is that how open and accommodating are the private markets going to continue to be if the public markets aren't an option for these companies at the valuation? So are the private markets going to say, oh, yeah, sure,$30 billion. Sounds like a great deal. We'll go ahead and go for that. Or are the private markets going to start reflecting what you're seeing in the public markets and therefore kind of funding sources begin to get more tight all around?

20:24We haven't seen that, you know, in the first half of the year. But, you know, what happens with debt markets? What happens with the VC private markets, especially as they maybe begin to take their cues from the public markets, I think remains an open question. Maintime, CoreWeave this morning extending some losses a couple of weeks here since we've seen share prices this low. NVIDIA, Oracle among the AI stocks, though, that are bouncing back after that sell-off yesterday on that report about OpenAI's revenue. OpenAI told investors it brought in roughly$50 billion in annualized lower than the$68 billion figure that was widely reported last month.

20:57Let's bring in Ben Reitzes, head of tech research at Melius, covers many of the big names that went lower yesterday on the news. We got the FT, Ben. We got what Leslie just mentioned. We got some insider selling ratios that don't look great. Are you having to answer more concerns? Not really. I think that a lot of the institutional investors already knew that the OpenAI number was around 50 on a net basis. And it seems like there's some accounting discrepancies here and reporting. I think it's all systems go, actually, for OpenAI. I know the numbers lower on the headline than some people thought, but they actually are accelerating a bit here.

21:36We're hearing Codex is doing better. They actually have lower prices vis-a-vis Anthropic, and they're really going for it in the enterprise. It'll be interesting when Anthropic IPOs to see how they're dealing with the cheaper prices from OpenAI and the share wars they're going to have on the frontier. So I think this will get sorted out and we'll be okay. So is ARR the appropriate metric by which we should be looking at these companies, especially to assess the health of the overall ecosystem and the potential growth? I mean, it seems like we have so much of a reliance on these types of numbers and there's still all this discrepancy over gross versus net, which company is reporting which.

22:18You know, are there other metrics that we should be looking at instead, you think? Well, there's a lot of confusion about what ARR means. Is it recurring revenue or is it just an annualized run rate based on the last month? Because a lot of these companies have consumption elements where you can like token max and that's not really recurring whatsoever. You could actually lose that share to a codex next month and have people adopt and token max on a cheaper platform. So OpenAI and Anthropic could actually have consumption go back and forth, you know, a month. So it depends how much is subscribers versus consumption and how much of that's really locked in and can land and expand.

22:58So I know that sounds confusing, but the best it really means nobody knows what the heck's going on. And you got to look at the latest. You got to look at the latest month and then just try to extrapolate that in the future. And I got to tell you, it doesn't mean it's recurring. It means a lot of it's recurring, but it doesn't mean all of it. And a really big chunk isn't recurring. So the companies, when Anthropic goes through their process, they're going to have to say, look, here's how we get in, here's how we stay in, and here's how we grow. And it's got to be convincing. Ben, I'm just looking ahead to some of the catalysts next week.

23:32It's going to be kind of busy. We'll get some AMAT Oracle investor days. We've got NVIDIA GTC Berlin. Do you think there's enough that we'll get cleared up to restore some enthusiasm? Oh, yeah. I mean, I think so. So there could be something while I'm talking. You know, I was in Silicon Valley this week. There was literally news coming out every day, every hour that literally changed the trajectory of stocks. And I don't expect that to change anytime soon. But I do think that people will figure out that CapEx is still actually going higher. The big debate is going to be whether we can stand up land power shell at the rate at which chip companies and AI companies want to get it up.

24:15and that's really the key to this build-out right now. Can the rest of the economy kind of catch up to where the chip companies want to go? And we have to see how that goes. We have to get through the midterms. But I actually think that we're going to end up in a pretty good place. I'm optimistic that there's a lot of pricing power and that people are going to use AI more and more and people are underestimating open models. Open model usage and token usage is going up And that benefits actually a lot of the neoclouds and a lot of the clouds and Microsoft and Amazon in particular. But given what we saw yesterday, underscoring the fragility of the system and the sensitivity to even headline numbers surrounding potential discrepancies in accounting metrics, should there be more of a discount ascribed to the publicly traded companies, namely the ones that you cover, NVIDIA, Oracle CoreWeave, given the sentiment drivers and just the price swings that you can see on a daily basis as a result of headlines from just really two companies, OpenAI and Anthropic.

25:21I mean, would you tell investors to maybe price some of these other names a little bit lower in spite of all that? Well, a lot of the companies have a lot of different valuations. I got memory companies trading at five times earnings probably. And then I got, you know, AMD trading at what looks like a high multiple, but they're going to crush numbers. So I think that NVIDIA, I mean, how much cheaper do you want it to go? So it's a very complex answer to that question. What I think you got to decide is the build out going to continue or not? And are we going towards a three and a half to four trillion AI infrastructure TAM by 2030?

25:59If that's the case, these stocks will power higher. There is a lot of debate on whether or not we can stand up this kind of power. I do think at the end of the day, while there's a lot of noise, capitalism will shine through. There's too many dollars. Texas gets it. There's a lot of noise that Texas is is is backing off. I don't think so. I think it's very capitalist down there. And I think the states that open their kimono to the data centers will grow a lot faster and there'll be a lot of FOMO. So I do think there'll be some delays and whatnot. But in general, we're moving towards a$4 trillion infrastructure number by the end of 2030.

26:38And I think that powers the stocks higher. I think within software, you're showing Microsoft there. We're showing some winners and losers. It's not just AI eating software, like I said, for the last three years. We're starting to see a bifurcation of certain winners. Anthropic did a big favor to Microsoft by saying the world could end and we need adults in charge. So a few software companies are rising up. Yeah, we've talked about Microsoft with you in recent times, and we'll see whether or not the moratorium zeitgeist does shift after midterms. Probably one of the hardest questions to answer at the moment.

27:10Ben, good weekend. We'll talk soon. Thanks. Ben writes us. Yeah, thanks. Take care. Bye. After this, a key readings upgrade for Humana's Medicare Advantage plan, giving those shares a boost up 12 percent. Plus, we'll get to Delta results and how higher fuel costs are hitting guidance and the impact for ticket prices. Stay with us.

27:58This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules.

28:33Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington, Welcome back. We're about 30 minutes into the hour here. Three big movers were watching this morning, including American Express, fined$350 million by the Federal Reserve in the office of the Comptroller of the Currency over deficiencies in its anti-money laundering program.

29:13Those shares down about 0.6 percent right now. Then a new report saying Netflix could cut 5 percent of its workforce for about 850 jobs next week as part of a restructuring. Puck News says the plan cuts come as the company is facing pressure over weakened engagement and a depressed stock price. The share's down about 24 percent year to date, down about a quarter of a percent right now. And a key rating for Humana's Medicare Advantage plan, sending those shares higher. Annika Kim Constantino has more on that story. Annika. Hey, Leslie. Humana is the biggest winner of new star ratings for 2027 Medicare Advantage plans, which were announced late yesterday.

29:48Humana said 95 percent of its Medicare Advantage members will be enrolled in plans rated four stars or higher in 2027. And that's up sharply from 20 percent in 2026, thanks to the company's work to improve measures of care quality and member experience. For example, one of Humana's largest contracts covering over two million people moved from 3.5 to four stars. Analysts at J.P. Morgan said they had expected only around 60 percent to 70 percent of Humana's members to be in those higher rated plans. So here's how all of this works. The federal government rates Medicare Advantage and prescription drug plans on a scale of one to five stars.

30:29And higher ratings lead to bonus payments from the government that amount to billions of dollars and can boost plan enrollment. For example, Oppenheimer analysts estimate roughly$3.6 billion in added revenue in 2028 for Humana, thanks to these higher 2027 ratings. And we saw some firms upgrade Humana or increase their price targets for the stock after yesterday. Meanwhile, rival health plans are in the red today after the government trimmed their star ratings. CBS had three contracts downgraded from four to 3.5 stars, while Alignment Healthcare saw its largest California contract decline that same amount, Leslie.

31:07Yeah, there's some big moves. I think Humana highest in a couple of years this morning. Thank you, Annika. Annika Kim Constantino. Let's get a CNBC News update with Brandon Gomez. Hey, Brandon. Our Homeland Security Secretary Mark Wayne Mullen said this morning immigration agents were not aware a five-year-old boy was in the car when a federal officer shot a Dominican man in New York yesterday. Mullen also revealed that officers involved in the incident were wearing body cameras at the time of the shooting. Police say a preliminary investigation determined at least one officer fired seven rounds at the car, striking the man below the left ear.

31:40The child was uninjured. The United Nations Human Rights Office said today a planned live streaming of a U.S. military execution by firing squad would violate prohibitions on torture. It comes after Defense Secretary Pete Hegseth said yesterday the December 3rd execution of Fort Hood shooter and former Army psychiatrist Nidal Hassan would be broadcast live. And former International Criminal Court Judge Navi Pillai won the Nobel Peace Prize today for her work defending international law. She led the U.N. panel that concluded Israel committed genocide in Gaza. Both President Trump and Israeli Prime Minister Benjamin Netanyahu have rejected those findings.

32:19Leslie, send things back to you. All right, Brandon, thank you. Up next, Delta slashing guidance in the wake of higher fuel costs. We'll hear what CEO Ed Bastian told CNBC about the outlook for prices, plus oil facing a new threat as a hurricane heads toward the Gulf. Those details coming up next hour. Don't go away. Welcome back. Delta slashing guidance on the back of higher fuel costs. Phil Lebeau just spoke with CEO Ed Bastian about the quarter. Great interview, Phil. It really feels like an inflection point for the industry now. You know, Leslie, thank you very much about the comment on the interview with Ed Bastian.

32:54It was interesting talking with him. He clearly believes that, look, there's not a whole lot they can do about jet fuel prices aside from mitigating the impact as much as possible. That's also what they're talking about right now during the conference call with analysts. They're about a half hour into that call. Most of it is focused on the outlook for the future. Look, when you look at the third quarter for Delta, it was a miss on the top and the bottom line, Not by a lot, but it was a miss. We should point out the analyst estimates. They came down dramatically because of the impact of higher jet fuel prices.

33:23The revenue side, that's what Delta is doing to mitigate the impact. They were up about 15 percent year over year as they have been forced to raise fares. And here's the reason why. When you look at their jet fuel costs, up 62 percent year over year. As you take a look at jet fuel, we should point out that Delta's fuel forecast for the fourth quarter, $4.25 a gallon. For a point of reference, it was$3.61 a gallon in the third quarter. They expect, by the way, jet fuel to be double the price in the fourth quarter, what it was compared to the fourth quarter of last year. Here's Ed Bastian talking about why they will be, the impact of that and why they have to raise fares.

34:04The fares will be a function of what the market bears and where the industry goes. with these high oil prices, absolutely, we're going to be forced, and the industry collectively is going to be forced, to continue to cover the cost of doing business. As you take a look at shares of Delta versus the airline index, we should also point out that Delta lowered its full-year earnings guidance down to a range of 510 to 560 a share. Heading into the call today, the estimate from the analysts is at 546 a share for the fourth quarter. One last note, guys. We had a chance to talk with Ed Bastian about the decision Delta made to not go with Starlink as its next generation high speed Internet Wi-Fi provider for its aircraft.

34:50They are doing Amazon Leo. And that prompted Elon Musk over the last several weeks to say, look, that was the wrong decision. I think Ed Bastian will ultimately, because of this and the perception that perhaps he doesn't want to work with Elon Musk, will ultimately lose his job. We asked Ed Bastian about that. Ed said, look, I've got great respect for Elon Musk. I drive a Tesla. But the fact of the matter is, we believe Amazon Leo is a better product. And that's why Delta is going with Leo, which, by the way, will not be on Delta planes, I think, at least until 28. They're in the process of the Leo Constellation low orbit satellites getting up.

35:26Once that's in place, then you'll see Amazon Leo as opposed to United uses Starlink. American has a contract to use Starlink. So just one last point about the conversation that so many people are talking about within the airline industry. What a story, Phil. And we're just getting started with earnings overall, especially with travel and airlines. Thank you, Phil LeBeau. Safe travels home. Let's continue that conversation with former United Airlines chairman and CEO and current CNBC contributor Oscar Munoz. Oscar, welcome. Good to see you. Hey, Carl. Good morning. I'm just trying to think, if Delta is having to work at covering these fuel costs with their premium pole position, what are the other legacies going to do?

36:07Well, I think United, you'll see a potential similar picture with regards to the revenue and the demand. The cost will hit harder for everyone else because they don't have that refinery offset. It will be interesting to see and watch the other carriers because I think right now customers are liking and enjoying that high value, high premium service that, you know, certainly Delta and United both are providing. The other ones have a little bit lesser demand. So you will see a significantly higher impact on those as you go into this next quarter. So we'll be watching that closely and we'll be watching the earnings over the next few weeks to see what they say about their outlook.

36:46look. At this stage, are you, I mean, Howard, what kinds of efficiencies are they building in that are at work to help cover this 60 % increase? Listen, as you saw in the numbers, they're astronomical increases in a very sudden rate. There's nothing anyone can do technologically or with any kind of process or efficiency that can offset those sorts of costs. These are significant. But over the time, I mean, certainly aircraft has become a lot more fuel efficient. There's a lot of move for sustainable aviation fuel to replace that. But all of that is long term in nature. And these fuel prices, as you've seen over the last couple of years, have come up very quickly.

37:29So they will do everything they can, but there's just no way. The impact or the action they take, of course, as Ed said, is to they're forced to raise prices to just cover the basic economics. You mentioned the importance of high-value flyers, and we've seen these status-matching wars kind of get back into the headlines in recent weeks. How does that strategically filter into some of the talks of ticket pricing and demand that we've seen? And do you think that United's decision to do the status match is kind of a reflection of the importance of those high-value flyers amid all the headwinds related to fuel costs?

38:09um you know everything's related what a great industry i'm from right there's always drama there's always excitement but you know the the status matching as a long-standing practice it just seems to be in the headlines right now and customers have every right to choose and whether it's wi-fi which was just discussed which was discussed or or all these other matters i think people will fly uh continue to fly the way they have and the status match is yet another long line of competitive thrust that this industry takes against each other. What do you expect to see in terms of capacity moving forward?

38:44Are there certain geographies that you expect to see more or less capacity in light of all this? Yeah, and back to the other question from Carl, that's another one of the areas that you've seen very prominently. The airlines start cutting services to areas where the economics just don't work. As you can imagine, every single flight for every airline is monitored and watched for its contribution or lack thereof. And where you have lesser performing routes, we take that aircraft and work it somewhere else. So you'll see in certain areas, certainly that's one of the actions they'll take is capacity, which impacts customers.

39:19And it's usually in areas where, you know, we'd rather not do that because they're not big cities. But at the end of the day, it's just unfortunately simple economics at this point. Yeah, Oscar, we always say, I mean, what other industries are capital intensive, consumer facing, unions, safety regs, trade? I mean, it's just an amazing business. Social media heavy, opinion related. I mean, everyone has an opinion. I've flown a lot. I've flown all the airlines recently. And I'll tell you, the Wi-Fi conversation is a good one. Starlink is a premium product. I was with Andy Jezzy, and I know a lot about Leo.

39:57That's going to be an outstanding product. I think Ed and Delta gets it. They're going to put the right thing in. Customers are very, very particular about that particular situation. And I know I dealt with that a lot when we were developing ours. And so it's great to have it on there. But there will be a continuous sort of war of words that happens. But it's just turbulence. It's just turbulence. It's not weather. Customers don't care. They want access. They want prices. And they want to get to where they want to go. And that's what we all try to do. Yeah. A little spicy on the Starlink stuff.

40:26That's interesting. We'll watch how that evolves. Oscar, as always, our thanks. Good to see you again. Oscar Munoz. Appreciate it. When we come back, record stock prices have Gen Z spending big on art. We'll look at how the collectibles market is racing to adapt in a minute. Welcome back with record stock prices and newfound wealth. A new group of buyers are pouring into the art market. Robert Frank joins us now with that story. Hey, Robert. Listen, good to see a new and very young group of buyers. The global art market reaching$60 billion last year, and collectors in their 20s are now the biggest spenders.

40:59Wealthy Gen Z collectors, that's people between the ages of 14 and 29. They spent an average of$347 ,000 on art just last year. That's more than twice the average spent by baby boomers and other generations. This is a survey of more than 3 ,000 millionaire collectors by UBS, Art Basel, and Arts Economics also found that 20-somethings were the biggest buyers at the very high end, making up half the collectors buying works over$1 million. And it's not just art they're buying. Gen Zers are far and away the biggest collectors of sports memorabilia, wine, whiskey, and collectible sneakers. They spent an average of$151 ,000 just on jewelry and gems.

41:41So the big question, where are they getting all this money being so young? Mainly inheritances and families. 37 % of these wealthy Gen Zers in the survey attribute their wealth to their family, with the remainder coming from employment, their own companies, and investments. Their interest in collecting also comes from their families. Forty percent said they started collecting due to their own family connections. They were more likely to collect for pleasure and social relationships rather than investment reasons, and they are hanging on to their parents' art. Ninety percent of them who inherited works, they still have them.

42:15For more on the art market and how the great wealth transfer is reshaping the high-end economy, sign up for the Inside Wealth newsletter at cbc.com slash inside wealth. This goes against the notion of the art market as being one that's dominated by really old men. And what we're seeing now is it's younger and more female. These Gen Z buyers, a lot more female than previous generations of art buyers. We've had conversations in the last few months, really, about the millionaires being generated in technology, for example, and where they would go to first. Cars, watches, art was one of them, right?

42:50Yeah, they make it in digital and they spend it in analog. So they want things that are deliberately anti-tech. And in addition to the inherited wealthy, we're seeing Gen Zers, you know, the co-founders of Calci, they're in their 20s. It's never been easier to start a company with AI and generate a lot of revenue very quickly. So a lot of these are entrepreneurs and they're looking for things that take them away from the technology environment that they spend all their day thinking about. Presumably, too, that age group and cohort have big new mansions with big white walls that they need to fill as well.

43:22They have a lot of big walls to fill, a lot of big walls to fill. For people who are then buying, you know, buying their first home, if it's a mega mansion or whatever, and then filling it with art on the walls. Absolutely. Real estate is at the top. This is the first thing you do, even if you're in your 20s. Now, I don't know, you know, that generation on the whole is not big house buyers. That's for affordability reasons, largely. But yeah, real estate, certainly part of it, travel experiences, but art and not so much digital art. They're not interested in the digital art. No NFTs? They want the real stuff.

43:51They want emerging young artists. They're buying it. They're looking at it through Instagram rather than going to galleries and they're going to these art fairs. There's a big social component for the Gen Z to collecting art. They want to be part of that community and they want to share it with that community. Fascinating. Yeah, really good. Great story, Robert. Thank you, guys. Robert Frank. When we come back, the options markets split on the direction of the chip trade. We'll look at some of the biggest positions, including a major bet on Micron's next move in a moment. Welcome back. Options traders split on the fate of the chip trade, which is going to get some catalysts next week.

44:24Let's get to Oliver Rennick at SIBO in Chicago, see what options are saying. Happy Friday, Oliver. Thanks, Carl. You too. It's been a pretty manic 48 hours of trading in tech, and this morning's no exception. Out of the gate, there was a rare put-buy in NVIDIA that was the biggest trade on the tape. Someone spent$21 million on 100 ,000 180 strike puts expiring in January. Could be a hedge to some bigger short position that they're lightening up. But if it's a speculative trade, it needs a 30 % crash in NVIDIA in the next three months. Then looking at Micron, some really wild stuff here this morning.

45:01The stock's been making traders nuts with head fakes in both directions since earnings. And while calls were outpacing puts by volume this morning, which suggests retail bullishness, the premiums all on the put side. Thanks to someone building a$14.5 million synthetic short position through a string of deep in the money puts from the 2250 to 2500 strikes in micron expiring in June 2028. For context, these contracts cost between$120 ,000 and$160 ,000 a pop. This is not just fading a stock. This is like trading with a vendetta, guys, looking for Micron to drop. Wow. Interesting. Thanks, Oliver. Oliver Rennick are watching some of the options activity today.

45:49All 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.

46:20To view the full Squawk on the Street disclaimer, please visit cnbc.com forward slash Squawk on the Street disclaimer. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Well I can do that.