11AM Hour: Former NEC Director Gary Cohn, ServiceNow CEO & Goldman's Chief U.S. Equity Strategist 9/10/26

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0:48Ben Snider: Investing involves risk, including risk of loss. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of$100. See details at Fidelity.com slash commissions. Fidelity Brokerage Services LLC member NYSE SIPC. Good Thursday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Cantania, live from Post 9 of the New York Stock Exchange. Today, signs of stubborn inflation and implications for the Fed's upcoming rate decision as Treasury yields rise. We'll discuss with former NEC Director Gary Cohn in just a minute.

1:15Ben Snider: Call it AI's fear factor. Paul Tudor Jones with an op-ed sounding the latest AI alarm. ServiceNow CEO Bill McDermott is going to join us. We'll hear why he sees AI cyber risks, quote, expanding every moment of every day and how now is positioned to benefit. And with the NFL season now underway, sportsbooks are looking to stave off growing challenges for betting customers from predictions markets. We're going to discuss with the CEO of Fanatics Betting and Gaming, Matt King. It was a big event in our house last night. Meantime, Mark, it's a little wear and tear here as the S &P is down for a fourth consecutive day.

1:49Ben Snider: You see the 10-year there above 4.9, almost to 4.92, looking for its potentially highest weekly close since 2007. And look at the tenure. Yeah, there you go. As Carl mentioned, 5 % almost. We're closing in on highest levels here since November 2023. Joining us now is the former director of the National Economic Council during President Trump's first term, Gary Cohn. Gary's also the former president of Goldman Sachs and current vice chairman at IBM. Welcome back. It's good to have you. Always good to be here. On a day like today with these rising treasury yields, How nervous should equity investors be about these levels?

2:25Well, I think the Treasury yields are directly correlated to what's going on in oil. I mean, the oil rate market correlation is very high today. I think people are very concerned with the oil price. It all feeds into the general consumer mentality, and it also feeds into the inflation fears. Are you surprised at how resilient the consumer has been in the face of these rising oil prices? I'm not in many respects. We've had this conversation many times. I think the consumer in the United States is very stable. That said, they poll really poorly. If you actually poll consumers today on how they feel about the economy, the polling is pretty negative.

2:59If you actually look at the real data and you look at real wages and you look at spending and you've had a couple of the bank executives on talking about credit cards and how well it's doing, the consumer continues to be in a fairly decent situation. You know, their positive wage growth, there's things going on that are positively driving the economy. And I think we're going to continue to be in this cycle where there will be enormous fear. And look, there's fear of AI. There's fear of oil prices. There's fear of the war going on. There's fear of housing prices. All of these things are driving consumer sentiment, but they're actually not flowing through the real economy.

3:34Right. I know. It's so interesting. Watch what they do, not what they say. But is there a point, and I know it's kind of self-reinforcing, treasuries are watching oil, oil's rising, the combination of higher oil and then higher borrowing rates. You know, we're seeing already 30 or around 7 percent where that does start to really hurt the economy. There always is an impact. The initial impact we've seen, you know, we've seen credit card rates go higher. We've seen automobile loans go higher. We've seen mortgage rates go higher. So the direct impact on consumer, which, of course, is not Fed funds, which is what the Fed deals with, is already working its way through the market.

4:11That's it. There's a real time reaction. When the futures market trades up and the cash market trades up, banks reprice loans to their consumers almost instantaneously. So that is feeding through the economy. And, yes, there is a continued negative effect on the economy as people try and borrow money to spend to home improvements, cars, anything they need to borrow money for. The cost of money gets more expensive. Their purchasing power goes down. Look, I think that's another reason that the Treasury is involved in the Treasury market. I think they're concerned about the dollar. I think they'd like a weaker dollar, which may be inflationary.

4:48But at the end of the day, it makes our exports more affordable to the world. Do you think it's going to work what he's doing? It's very difficult to actually intervene in a market and have it work long term. There's very few cases. I would almost point to there's almost no case. And Secretary Besson knows that. Yeah, he knows that. Scott, look, Secretary is a very smart guy. He knows that he's been trading as long as any of us. He knows that ultimately the market is the market, and the market will find a natural clearing level. If he's impacting the market or he's impacting duration for some period of time, that, too, will come to an end.

5:22And so I understand what he's trying to do. I understand he's trying to put a curve flattener on. He's trying to flatten the curve. And I understand the reason why he's doing that. But at the end of the day, you know, he's got to keep refinancing that. and he's got to keep issuing debt. And unfortunately, the better way to stop this would be issue less debt, which means we'd spend less money. That's not going to happen.

5:43Ben Snider: Are you confident they can come up with some fiscal measures to rein in spending? I mean, either with Congress or without Congress? No, I'm not confident. Obviously, necessity will breed some type of response. But, you know, the initial response you're seeing now on the first sort of focal point, which is Social Security, is there seems to be a reaction that we shouldn't fix the problem. We should just charge. We should just raise taxes, which I'm not against them raising the cap on the Social Security tax. I'm not. But that said, there are a lot of other things that we could do in the Social Security system to stabilize it in a more long term fashion.

6:24So if you look at where we are in debt and deficit, you know, the first thing they're dealing with is we'll just deal with it by not cut spending or not revamp the program. We'll just find a way to create more revenue. Yeah. I mean, we're not talking, the president's not talking about reigning in spending. He's potentially talking about increasing spending. Here's what he said last night about this, this dividend payment to Americans. If the Republicans win the House of Representatives and the United States Senate, both of them, because of our economic, tremendous economic success. Like in history, we've never had anything like what's happening.

7:00But because of our tremendous strength and success economically, I will issue a dividend to every adult citizen in the United States of America for$5 ,000. Is that possible? It's possible. I mean, it will need in Congress. It will need an act of Congress, But here's the reality. If they win the House and they win the Senate, they can put this through on a straight reconciliation vote. So meaning they need a simple majority in both the House and the Senate. And if the Republicans take the House and the Senate and the president will take credit for that, he will tell them, look, I want this to go through on a reconciliation package.

7:43It will meet a bunch of opposition from different places. But at the end of the day, it's definitely in the realm of possible. Do you think that he can pay for it with tariff? Income? That was suggested. Yeah, I don't believe, although I don't have current data, that the current amount of money sitting in Customs and Border Patrol's budget or sitting in their bank balances is enough to cover a trillion-dollar payment out to U.S. adult citizens.

8:12Ben Snider: A trillion three. Okay. A trillion three. I mean, we're assuming tariff revenue runs, what, 300, maybe something like that? Yeah. Math is hard. It's a lot of years. Yes. It's a lot of years to be able to put a trillion dollars out in one fall swoop of collecting tariffs and assuming tariffs don't change. It assumes import patterns don't change. It makes a lot of assumptions. But look, can he get it through Congress? Potentially. You know, reconciliation is a very powerful way to get through. You know that pretty well. I know it very well. I know it very well. And he can find the pay force on that front?

8:45He may not be able to find the pay force. Again, I think that is actually a more difficult conversation. I think the Congress may be willing to vote for the$5 ,000 if they can find a pay-for for it. And the pay-for is not going to be tariffs alone. So I actually think that's where the more interesting conversation comes out of. If it was tariffs alone and we're sitting with$1.3 trillion in the Customs Border Patrol budget of excess tariff money hadn't been collected, I think the probability would be relatively high that he could get that through. Yeah, but it's not that high. The fact that it's not sitting there, it means the money has to come from somewhere else.

9:23And as we know, and I say many times, all dollars are green, meaning it's got to come from another budget line or it has to come from tax revenue. It's got to come from somewhere. So, look, I think the probability of getting this through is low because of that, not because Congress wouldn't want to give the money out. And also, I mean, he has to still win the House and the Senate. Well, he said, but look, he did make that clear last night. He said, if I win the House and Senate, if the Republicans maintain control of the House and Senate, we will do this. How do you think the politics of AI will play out in the midterms and the rising fears?

9:55Well, I think they're starting to play out already. You know, obviously, there's a huge fear, as I said, in the consumer. I think there's an equal fear of what a data center means to my community. I'm not sure it's all fact-based. You know, data centers actually do not consume that much water. They do consume a lot of electricity. Many of the data centers that are being built today are being built what we so-called behind the meter. Means that they are self-sufficient in their electricity needs and electricity generation. They're not drawing off the existing grid. So it's hard to say, you know, politically, if you're building a data center, you're behind the meter, and you're independent of everything else in the community, that there's not some economic reason to do it.

10:41In fact, there's a large short-term economic reason, which is all the construction jobs and all the spending in the local community. And then there's the tax revenue and the tax base that will come in from having the data center in your neighborhood. So, look, I think it's a long-term opportunity for many cities. And the thing about data centers, which is unique in our country, is they can go in very remote locations. They can provide jobs where we've seen job decrease for many, many years. And they can provide tax revenue for those cities. And that means they can have a better school system. They can have a better infrastructure, a better police department.

11:16And the town becomes more and more attractive to citizens.

11:19Ben Snider: Before I let you go, you made a great call in the early days of the war about December delivery on crude, which looked really smart until lately. Would you renew it from here? Well, that was December delivery. Yes. December delivery has been delivered. Yeah, exactly. So you push it out maybe another six months. What do you think? Yeah, I think as you look into next year, I think we will have lower crude prices. I think this year is going to be tough to get there based on what's going on. But as we get into, you know, the end of this year, first quarter next year, I would think that oil prices would tend to be lower.

11:56Do you think that we should be scared of AI killing us? I mean, I feel like you and Arvind at IBM have been very rational about this whole AI risk. And now the debate is heated because this anthropic researcher quit after a few weeks and warned us that they don't know what they're doing. There is risk in AI. In fact, we're seeing an enormous amount of it. We at IBM are heavily involved in all of the newfound programming errors that are in the open source world. And we're creating a clearinghouse so everyone can fix these problems and we can create more efficiency in the system. but these fears, Sarah, are much like the fears we've had as you've seen major evolutionary evolvement of the world or the country.

12:39You can go back and look at when we brought the first combustion engine on and we were going to go from horse and buggy to cars. How many people were going to be killed by cars on the road? We could see the same data points when you talk about electricity, how dangerous electricity was and how it was going to catch everything on fire and we weren't going to be able to maintain it. Things did catch on fire. They did, and they still do. So there's always these fears. What happens is the fears go away over time as people become more and more comfortable using it. I'm not sitting here advocating that AI is going to solve all our problems, but I'm also not advocating that AI is this great fear that we should worry about.

13:17I think we need to worry about some of the cyber issues right now, and those are being heavily looked at. We are doing that. And I think that's the shorter term problem is to make sure that everyone's systems and infrastructure can run flawlessly with all the newfound patching that has to be done. Is that a problem? It's a huge problem. Yeah. Look, these AI machines have found errors in coding that has been there for decades. And it didn't become apparent until we had these machines. And now everyone's got to go back and patch these problems and fix these problems. And like I said, we at IBM, we're helping people do that.

13:52Yeah. We're going to talk to Bill McDermott as well, ServiceNow, about that. Thank you, Gary. Thank you. It's good to see you on a variety of topics. Always, Gary Cohn. When we come back, shares of ServiceNow, as mentioned, have been making a comeback. CEO joins us to discuss the software sector and his take on recent AI warnings.

14:08Ben Snider: Well, get in touch with Goldman's chief U.S. equity strategist, Ben Snyder, as we're trying to hang on to 7600 here, about the levels we had when we came into August, get his expectations for the market, and talk about where he sees opportunity in a minute. weren't agents supposed to take things off your plate? Building another to handle the others is a bit much. Don't make more work out of work. Gemini is the one agent that knows all parts of your business and actually gets stuff done. You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow.

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15:52Ben Snider: Welcome back. We're seeing more and more warnings about the threat of AI. Paul Tudor Jones today and a former OpenAI employee, just the latest to speak out. Our Kate Rooney has details on all of it this week. Hey, Kate. Hey, Carl. So yeah, these two op-eds are really adding to a chorus of alarm bells that we've been hearing about the existential risk of AI. You had billionaire investor Paul Tudor Jones in the Wall Street Journal warning that we are, quote, underestimating the risk. And as he put it, we ain't seen nothing yet. These machines, he says, are just getting more powerful. And as he puts it, we are at the dawn of recursive self-improvement.

16:27So that is when AI systems become more autonomous and more capable of building the next and better versions of AI that could pose even more risk, make it harder to track. He also argues AI could effectively become a third superpower, as powerful as a nation rivaling the United States, rivaling China. He also calls, speaking of nations, for global coordination between President Trump and Chinese President Xi Jinping at their upcoming meeting. He does argue neither country can solve this problem alone, especially as they compete to have the best technology in AI. And then over at the New York Times, former open AI safety researcher Stephen Adler makes the case that AI labs don't need to wait for any sort of government intervention to act.

17:11He points to some of the recent cases of AI agents going rogue in these test environments and then attempts to also conceal some of those actions and get around restrictions. He calls for AI companies to start disclosing some of these serious safety incidents and near misses, sort of describes this as what happens with plane crashes, also calls for more independent investigations, and then also wants to make sure that AI agents can't disable these systems that are designed to police them, says that the companies can do that right now. It does follow a string of warnings that we've heard from anthropic researchers, as we spoke about yesterday.

17:44And Washington right now is very much paying attention. We're hearing more lawmakers calling for action in the past couple of days and semaphore reporting that we may start to see legislation introduced on this topic as soon as next week, guys. What do you make of some of these people coming out and saying that it's a little bit of a conspiracy theory, that it's kind of like a setup to get a PR campaign to get Democrats to regulate AI. I mean, there are some compelling cases, like how this guy's quotes showed up in the Wall Street Journal before they came on. He was unfollowed. He wasn't there for a very long time.

18:17And there are some connections to different groups, you know, that are connected to Democrats. Yeah, I mean, I've seen that crop up. Sarah, we don't have any reporting to suggest that that is the case. It's been some of the pushback. He has, the researcher, has gone on various networks. He was on CNN yesterday describing this and talking about it, saying that he left because of safety reasons and that it's very much consensus within Anthropic that there's a lot of worry about AI and safety, as he's discussing. You also had others chime in on this. David Sachs chimed in on the other side. I would say it also speaks to some of the pushback and the political side of Anthropic and the perception from a lot of people that they are more of a left-leaning company, a left-leaning culture.

19:00That's been the criticism of Dario Amadei as a CEO. But I would say the important takeaway, especially for investors, is that Anthropic is in an S-1 process right now with the SEC. So as all of this is going on, whether it's political pushback, you know, regardless of if any of those theories are true, it does speak to this company being divisive. And they are dealing with all of this, all of these safety risks at a time when they are about to go public. I mean, it's just unprecedented. So I would expect it to show up in the risk factors as we talk about their upcoming S1. I think it's super interesting that already Bernie Sanders, Senator Bernie Sanders, wants to ban superintelligence on the back of this post.

19:36Thank you, Kate Rooney. Let's stick with tech. Our next guest joins after speaking yesterday at Goldman Sachs' Communicopia conference and says the next big AI investment opportunity is moving away from infrastructure spending. With us now in a CNBC exclusive is ServiceNow CEO and Chairman Bill McDermott. Bill, welcome back. It's good to have you. Great to be with you, Sarah. Thank you. What do you make of all of these warnings, or especially this latest warning from an ex-researcher at Anthropic, about how dangerous the technology is? Well, AI can do a lot of things for you. It can also do a lot of things to you.

20:11And that's why ServiceNow is the lead enterprise software company in moving from workflow to cybersecurity. So if you think about the ServiceNow AI-controlled tower, every company, every enterprise in the world needs it because every AI, whether it's native or third party, has to be visible. You have to govern it and secure it. You can't have blind spots running a company. That's a no-go. So you have to see it first. 94 % of the companies out there have zero to very little AI visibility. And most of them cannot distinguish between personal AI accounts or corporate instances. That's real bad. So to govern it, you have to take the 400 plus global AI regulations that are already there and provide the rules and rails to run the company.

21:00Furthermore, you have to have a kill switch if you have rogue agents that get out of control. We have all of that. But here's the big idea, too. proving the economics, track the token consumption, enforce the budgets and measure AI ROI. So now you're running a business, you're running it safely and securely, and you can win with ServiceNow. How are your customers looking at software, AI budgets and now cyber, which you're talking about? Is it all kind of one in the same or is one more in demand than others? Well, it's the fact is it is all one in the same. Yet the enterprise has not discovered that.

21:39And that's why I see the AI value moving up the stack from infrastructure, which has been heavily invested in, as you know, computers, amazing. And these labs, they're extraordinary in their intelligence, but they're also extraordinary in their cost. So now we're moving into the execution phase. And we've seen this movie before where you get attractive economics and ServiceNow takes the best models. We add proprietary enterprise context. AI doesn't work well without context. It has to go east to west and north to south. And then we apply workflows and governance and turn the intelligence into action.

22:19And that's where the money is. Action fabric is the gateway for the agentic enterprise. So you have one secure entry point for any ServiceNow or third-party agent to execute across the enterprise. and this is using existing workflows and governance with no custom integrations. This is the game changer.

22:39Ben Snider: Bill, you mentioned the kill switch thing, which obviously perks some ears up. Is there an easy way to describe how that works when we've obviously seen some agents get creative in fulfilling a mission that they thought they were supposed to do? Yeah, what's really interesting, Carl, you know, a lot of companies will call us the ERP of IT. So we've had the system of record for more than two decades of all the people, places and things that go across an enterprise. And so what's happening now is you're seeing something I call vibe slop, where you have architectural weaknesses that are turning today's productivity gains into technical debt and risk.

23:21So if you look at software that's developed from scratch with these large language models, you're talking not only about a 10x total cost of ownership cost decline in terms of using a proven platform like ServiceNow, but we already have the kill switch built into our autonomous IT service management platform. so it's built in. It will recognize an agent when an agent, just like a human, is doing something that they shouldn't do. Furthermore, we can recognize the robots that are coming on that are doing things they shouldn't do, and automatically the system will shut them down. And then a human has to come in if they want to turn them back on.

24:02So we prefer to shut things down before mistakes are made. So is this all because, Bill, of your acquisitions you've done, like Armis on cyber? Is that what you're referring to here? Yes. You know, Sarah, it was really interesting. You know, we've been the fastest growing enterprise software company in the world. We're now the fastest growing enterprise security company in the world. And as you'll remember, when we made a few M &A moves, there were question marks as to why we were doing it. Well, we were doing it because we wanted to have the one and only integrated cybersecurity cybersecurity architecture that connects identity, assets, AI, and workflows, because we knew the market needed it.

24:44So VESA is the identity graph, ARMIS is the asset graph, and ServiceNow is the workflow graph. When you take ARM, VESA, and ServiceNow, you have a control tower that manages every instance in an enterprise. And we can go in, for example, to a public service entity and identify the fact that they have 95 % of their assets unrecognized in that graph. We can immediately take action with VESA and look at the identities, the permissions, and the governance, and then the workflow gets oriented around what actions have to be taken to change the game. Only company in the world that does it. Think about integrated risk management, security operations, identity management, and asset management, IT, IoT, all things that move in an enterprise, we got it under control, all on one platform.

25:37Okay, Bill. Thank you for joining us to make the case. We always appreciate hearing from you. Thank you for having me, Sarah and Carl. See you soon. It's been an interesting story to follow. That's Bill McDermott, chairman and CEO of ServiceNow. Much more on software and AI with Toma Bravo, founder Orlando Bravo. He's going to be joining Power Lunch at 2 p.m. Eastern.

25:55Ben Snider: When we come back this morning, Goldman's chief U.S. equity strategist, Ben Snyder's with us. We'll talk about where he sees some opportunity in this market. And later, CEO of Fanatics Betting and Gaming joins us. His expectations for sports betting this year as the NFL season kicks off. We're back in a moment. If you like YouTube, you'll love YouTube Premium. Hi, I'm Sean Evans from Hot Ones, and I want to tell you about YouTube Premium. It has offline downloads, so you can watch without Wi-Fi. Background play, so you can lock your phone, and it still plays, baby. Oh, and it is completely ad-free.

26:30Ben Snider: Yes, I said it, ad-free. Try YouTube Premium for two months free at youtube.com slash premium. Trial eligibility varies, terms apply, cancel anytime. Your financial life rarely fits between nine and five, and the questions shaping your future don't follow a schedule. That's why Citi created Citi Sky, a secure AI member of your Citi wealth team built with the Gemini platform on Google Cloud. Whether expanding your portfolio or planning your future, you'll be able to access tailored wealth guidance on your time. Start building with Gemini at cloud.google.com slash AI. CitiWealth Investment products and services are provided by Citigroup Global Markets, Inc., member FINRA and SIPC.

27:12This 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.

27:43Ben Snider: Getting some breaking news this morning on heating oil. For that, we'll turn to Pippa Stevens. Hey, Pippa. Hey, Carl. So heating oil futures, which is a proxy for diesel, topping$5, hitting the highest level since April 2022 when it traded as high as 586. But that was in the wake of Russia's invasion of Ukraine. And there were only a few prints at those levels around the contract's role, meaning we haven't yet have never seen sustained prices above the$5 level. And right now, the national average for diesel is 598. And it's a question of when and not if we top six. That could come as soon as tomorrow.

28:14And be watching, be sure to watch California because diesel prices there are approaching $8, currently at$7.91 per gallon. Sarah. OK, thank you, Pippa. Rising energy prices. Time now for a news update. Brandon Gomez has it for us. Morning, Brandon.

28:27Ben Snider: Hey, good morning, Sarah. A federal appeals court today struck down ICE's efforts to detain millions of migrants without bond. In the two to one majority opinion, the judges compared the policy to, quote, historical stain of Japanese internment during World War II. But the legal case is not over, as the Supreme Court will likely decide the issue in its new term. Multiple American military aircraft were reportedly damaged by Iranian strikes on a U.S. base in Jordan overnight on Wednesday. CBS News reports several fighter jets and attack aircraft were lightly damaged and most have been put back into service.

29:00Ben Snider: There were no U.S. injuries that were reported. And San Francisco Mayor Daniel Lurie tells The New York Times that he He plans to declare a rent emergency in the city today as residents face an affordability crisis amid the AI boom. Lurie says he'll back legislative actions to delay evictions by an extra month, limit rent increases and boost funding for nonprofit lawyers working on eviction cases. According to the mayor's office, median rent jumped more than 25 percent in the past year alone. Carl, send things back to you. All right, Brandon, thanks so much. Still ahead, cost of living concerns are a major focus in the closely watched North Carolina Senate race.

29:36Ben Snider: Can the Democratic candidate flip the seat blue for the first time in 12 years? We will take you to the state for a live report. Plus, Goldman Sachs' chief U.S. equity strategist joins us. The key catalyst he's watching right now for the market and where he sees opportunity. We're back in a moment.

29:54Ben Snider: Get a check on some of the broader markets here. Stocks are lower on the heels of this morning's PPI report. No real negative surprises, but the yield environment did accelerate on the back of that data. Let's bring in Ben Snyder this morning, Goldman Sachs, Chief U.S. Equity Strategist, who joins us here at Post 9. We can talk about sort of trudging our way through September here. Are yields sort of creating wear and tear on equities at the moment? Of course, directionally, higher yields are a negative for valuations. But if you look over the last year, a year ago, the 10-year Treasury was close to 4%.

30:24Ben Snider: The S &P 500 was trading around 6 ,600. So clearly stocks can do okay while yields are rising. The real challenge is volatility. And if you look over the last few days, it's the sharp rise in yields that's really making things uncomfortable for equity investors. I'm trying to think what the house view on rates has been pretty dovish, right, relatively speaking? Our base case is no hike next week. Yep. But it will come down to CPI. It's a close call. And expectations for CPI, I think you're looking for core at 2.4, right, which would be the lowest in about five years, year on year. That would be pretty friendly.

30:56Ben Snider: But as you noted, this morning, PPI was a little bit high. All right. So sector-wise, what looks interesting right now? This is a market being driven by earnings. That's been the case for a long time. It remains the case. And so as an equity investor, you should be looking for earnings strength. Clearest earnings in the market are driven by AI. But as we've also been discussing for months, we think to reduce volatility, it makes sense to diversify a little bit. And one place to look today, especially as the market is very focused on pressures from oil, is look at some consumer stocks. No, we've been highlighting consumer experience stocks that have very strong secular earnings growth that are trading at pretty low valuations today because the market is so concerned about energy prices.

31:34Ben Snider: Yeah, I was making a list of 52-week lows yesterday. McDonald's, Carnival, Lowe's, Las Vegas Sands. Is that where you'd be sort of playing at the moment? That's exactly right. Our equity analysts have Viking on the conviction list. Goes along with that list. So as long as earnings hold up, you're not too bothered by the rise in rates, yields? I think earnings are the most important thing for equities. At the start of the year, the S &P 500 was trading at a 22 times PE. We're trading at a 19 times PE today. Our positioning indicator, which combines hedge funds and mutual funds and other investors, is at the lowest level since March.

32:08Ben Snider: And despite that, the market is still pretty close to a high, and the answer is earnings. Why do you think the earnings growth is sustainable? Is it AI and productivity savings? I think we have a combination of a pretty healthy economic backdrop. You know, it's Thursday as we sit here today. We saw another friendly jobless claims print this morning. And then on top of that, as you know, AI is contributing a lot to earnings already. We estimate that AI investment spending is driving about half of S &P 500 earnings growth this year. Wow. Is that a new number that you come from lately? We're updating our estimates all the time, but that's the way it looks today.

32:43Ben Snider: Is September fraught given quarter end, some options expiration, some blackout windows? Is the month going to get tougher, you think? Or I have a few more weeks, but you think the highs are in for the month? The calendar is challenging. First and foremost, if you look historically, I think most investors know seasonality in September is usually weak. It's particularly weak ahead of midterm elections. We also have all of this macroeconomic uncertainty in terms of oil, interest rates, CPI, the Fed, as we've been discussing. But the good news is, as Sarah was pointing out, the earnings backdrop is still very strong.

33:14Ben Snider: All of these seasonal technicals start to improve as you get closer to year end. And so while it's difficult on a day-to-day basis, as we're seeing today, over the medium term, we're still constructive. As a strategist, do you worry about concentration risk in AI stocks? I think it is inevitable that we see a broadening. We've been talking about AI for four years. It's amazing. And for most of those four years, the story has really been the infrastructure spending. But if you look over the last several months, we've seen an acceleration in broad enterprise spending on AI. And what that signals to me is we are getting closer to starting to see earnings gains and productivity gains in other companies.

33:51Ben Snider: And we just looked across all of the earnings calls for the S &P 500 companies. And you're starting to see some companies really highlight the earnings accretion that is coming from using AI in their business. Yes, although you also said that only 2 % are quantifying it in earnings calls. You have to start somewhere. When do you think that number starts to move? I think in the next several quarters we'll see that improve meaningfully. Where they start giving you, I guess, some metrics on their adoption ROI. I think we'll hear more about it from corporates. And more importantly, when we look at the earnings data, when we look at the economic productivity data, I think we'll see it there.

34:24Would you rather play it in those kind of companies that benefit from AI productivity savings or the AI players themselves, the chip stocks and the infrastructure stocks?

34:34Ben Snider: The way the market has been treating the AI trade for the last several years is to focus on near-term earnings. Investors really are optimistic about the future, but they don't want to speculate. And so I think we'll see that transition when we really see those earnings accelerate. For the time being, the most visible, obvious earnings are still in the infrastructure layer. Are clients asking for ideas if there is a change in control in Congress? It's surprising. Usually at this time of the cycle, we would be getting a lot of incoming and midterms. This time around, it's just not that big of a focus.

35:04Ben Snider: Huh. Does it does it are there elements of your playbook that would shift if you wind up with a Dem Senate and House, for example? I think the likelihood of a major legislative change over the next couple of years looks pretty limited, at least based on prediction markets that are signaling pretty high likelihood of Democratic control of the House. So it might create a little bit of tactical volatility. But over the medium term, it's all about earnings. And then how about U.S.? I know you're U.S., but ex-U.S. versus U.S. Does anything look interesting at the moment? For me, my primary focus is U.S.

35:35Ben Snider: Earnings look good here. Yeah. Well, big day tomorrow. We know that. We'll see what we get out of CPI. Ben, thanks as always. Good to see you. Ben Snyder. Still ahead on the show, we'll break down what's at stake here in this upcoming North Carolina Senate race. Our Megan Casella has more on what's coming up. Megan. Sarah, that's right. We are just outside of Charlotte this morning in Cabarrus County. Democrats think their path back to Senate control runs through red-leaning suburbs just like this one. We'll tell you why after the break.

36:04Welcome back.

36:05Ben Snider: As we get closer to the midterms, cost of living concerns are becoming a major focus in the closely watched North Carolina Senate race. Our Megan Casella joins us with more on the economy election from Concord, North Carolina. Morning, Megan. Carl, good morning. This is Cabarrus County. It's a red-leaning suburb of Charlotte in a pretty red-leaning state, at least at the national level. But Democrats are feeling confident that suburbs like this one will help them put a Democrat in the Senate for North Carolina for the first time in nearly two decades. And they think that partly because there are so many concerns about the cost of living.

36:36So the Democratic candidate, Roy Cooper, is centering his entire campaign in the race against former RNC chairman Michael Watley on the campaign slogan, Make Stuff Cost Less. People in the middle class are barely hanging on. And for too many North Carolinians, there's just too much month at the end of the money. Right? Now, Watley is centering his campaign on two issues, affordability for one, but also crime. He spoke last night in Dallas at the GEP's midterm convention, and he says that voters should be blaming Cooper for inflation, given that he was governor here until just last year. Take a listen.

37:18Folks, this is the radical Democrats' playbook, to raise costs on our families, to impose

37:25Ben Snider: a reckless tax and spend agenda, like Roy Cooper did in North Carolina. Now, guys, that brings us here to Cabarrus County. This is a booming suburb by nearly every metric. There's lots of population growth, lots of new housing construction going up, a low unemployment rate compared to the national average, and tons of new private investment coming in, including billions of dollars from Eli Lilly. But all of that growth is also driving up the cost of living. So take a look at these two stats. The median household income here in Cabarrus County is$89 ,000. It's a pretty wealthy suburb. But MIT economists estimate that the average family here with two parents, two kids, needs$114 ,000 just to cover their basic expenses.

38:06That's an affordability gap of nearly 30 percent. And that's the financial strain that voters have been telling us about since we got down here this week. Now, Cooper doesn't have to win this county, but he thinks that if he could even eat into Republicans' lead after President Trump carried this county by eight points just two years ago, that's what will help them win the Senate seat. Guys?

38:25Ben Snider: Megan, I'm thinking of all the Senate races that are getting tons of attention. Texas, Iowa, Alaska, Maine, Michigan, of course. Where would you put North Carolina in that list? North Carolina does look like it might be the Democrats' best chance of flipping a seat. A lot of those, they're defending seats in blue states. This was a Trump plus eight state. This is now Cooper plus eight on average in the recent polls. So it looks like their best chance of flipping that state. But they haven't won a Senate seat here since 2008. Cooper won two terms as governor in this state, never won this county.

39:00They were tight margins both times that he won those. So it's looking good for them, but everybody expects that to tighten, partly because now the national attention is coming in and now the national money is coming in. President Trump just said this week that some of his MAGA Inc. Super PAC money, I should say, will be coming here to North Carolina. So while it looks good for the Democrats, it's looked good for the Democrats and a lot of previous Senate cycles here at this point in the race. And there's still a long way to go between now and Election Day. Yeah. Ohio, too. Sherrod Brown is trying to make a comeback.

39:32But they need four seats to win control of the Senate. Thank you, Megan. Megan Cassell will be watching North Carolina. Coming up, Fanatics Betting and Gaming CEO will join us for his expectations for sports betting this year as the NFL season officially kicks off. We're back in a moment.

39:50Welcome back. NFL season kicking off last night with the Seattle Seahawks beating the New England Patriots 13-10. The American Gaming Association projected the handle for the NFL season to be flat compared to last year, citing the explosive growth of prediction market platforms instead. Joining us to discuss is Fanatics betting and gaming CEO Matt King. It's great to have you back, Matt. So is that true? Is the predictions market taking all the business from the betting market?

40:16Ben Snider: The prediction markets are definitely taking some share. We think that the business will be flat from an industry perspective. Our business is up 70 % year over year, so we're still taking a lot of share. But we certainly expect less growth this year than we have seen in the past year. You're taking share directly from DraftKings and Fandle? We're taking share from everybody at the moment, so it's a good place to be. And how are you doing that? A lot of it starts with the Fanatics proposition. So people love the Fanatics brand. They love fan cash and they love what we've done with Fair Play, which obviously everybody's been copying a long way.

40:49Ben Snider: But we keep raising the bar every year. Is it expensive to win those customers? It is getting more expensive, yes. But we still think we have the best unit economics in the business. So we know that our customer acquisition costs are lower than the competition. Our paybacks are better. And so we focus from day one on how do we build a better business model than the incumbents out there so we know we can take a lot of share. And just in terms of the business model, I do have one more, which is you recently announced that you're putting, I guess, the betting and predictions markets in one place, right?

41:19In one app. Is that the future of this business? It just kind of converges?

41:24Ben Snider: So we still operate them as two separate products. So depending on the state that you're in, you're going to see a different product experience. What putting them in the same app really was about is how do you make it easier for customers to find us? We had two apps in the app store, and we found that there was some customer confusion of somebody in California downloading the sportsbook app and vice versa. So we said, look, let's make this easier on the customer. Let's put them all in one place. And it becomes geo-aware. So if you're in California, you use the prediction market. If you're in New Jersey, you use the board side.

41:53Ben Snider: Matt, it's interesting. You know, you've got other sports, hockey, baseball, basketball, where your game frequency is so much larger, there's just more opportunity to take a stand on a game. But I guess nothing really can compete with the popularity of the NFL. Nothing can compete with the popularity of the NFL, that's for sure. But we do see, I mean, to your point, what you find is the NFL is kind of like NFL season starts kind of like Christmas. Everybody shows back up from, you know, maybe having laps partway through the year. But then they start betting basketball. They start betting hockey.

42:25Ben Snider: Frankly, tennis in the U.S. Open has been for us. Soccer grows every year. And so year over year, we just see more and more engagement across a broader number of groups. Are you seeing a faster trajectory of a new user getting into more complicated or sophisticated kinds of vets? No, I would say it's about the same as we have seen historically. A lot of people come in for very casual vets. They start with NFL. Obviously, everybody loves the same game, Parlay. We had originally innovated. And you're in a place where over time they just start betting new additional sports. I think what you see is the growth of soccer, the growth of tennis is really about honestly good stories being told by the underlying product.

43:12Ben Snider: And people want to bet on their beliefs about those products as they get into those sports. Are those same game parlays good, actually good for the customer? It depends on what like a lot of customers like the lottery ticket. effect, right? It's the same reason why Powerball, get with the Powerball prize pools are larger, more people play. People like the idea of, I can put a dollar down and maybe win 100 bucks. What you see consistently is the longer the odds of a bet, the lower the bet size. And so, people understand that I'm taking a higher risk bet, but they like the idea, you know, that one in 100 shot.

43:48Ben Snider: If they put 20 bucks down on a weekend, they might make two or three of those. And so you'd be surprised at how sophisticated customers are about understanding the risk. Well, it's funny. You know, we have a discussion here covering Wall Street where some of us will use Claude or chat to ask, what's the iPhone event going to look like tomorrow? Are you seeing users use models to try to challenge the house a little bit more? You are. You're seeing, I mean, it is true of betting from day one, which is everybody has always tried to use every tool that's available. You certainly see a lot of people using chat GPT or Claw to try to make their bet.

44:27Ben Snider: What you find, though, is a lot of people are using that to do their research and then they'll put their opinion on top of that. And so you see kind of it's just yet another tool that people are using. But it's the same tools that the same is going to Matthew Barry's fantasy column. People are always going to use every piece of information available. And what I would say is, in a lot of cases, the way they use their tools is a lot about kind of researching the things that they want versus necessarily asking directly who's going to win this game. Most surprising bet of the season so far?

45:07Matt? Oh, can you not hear it anymore? Are you still there? Oh, we lost him. Oh, well, that was just a fun one. Yeah, anyway, Scott King is the head of Fanatics Gaming.

45:18Ben Snider: All right, thanks to him. We are getting a news alert on mortgage rates. Let's get to Diana Olick on it. Hey, Diana. Hey, Carl, that's right. The average rate on the 30-year fixed mortgage just crossed 7 % to 7.07%, according to Mortgage News Daily. That's up 10 basis points just from yesterday, and we're now up 16 basis points in the past week. It's the first time we've seen a 7-handle since May of 2025. This comes as a surge in oil prices caused another jump in bond yields. Mortgage rates loosely follow the yield, of course, on the 10-year Treasury. Now, the home building ETF ITB was already down this morning on the drop in existing home sales.

45:56This is not going to help. Now, just as a comparison, since the start of the Iran war, when rates were at 5.99 percent, the monthly payment on the median-priced home is now about$250 higher than it was back then. Back to you guys.

46:10Ben Snider: And then on the existing data today, Diana, month supply, one decade high or so? Yeah. It was a surprise. Highest in over a decade, but prices still going up despite that new supply. We were talking about this with Robert Repkin of Compass. Thank you, Diana. And he was saying that the story here is the low and middle part of the market. That's what's most vulnerable to these rising mortgage rates, because the upper end, they're just paying more cash because the stock market continues to do well. And to Diana's point about the correlation between treasuries and crude, Brent's approaching 107 and you got WTI approaching 102.

46:47Ben Snider: Pretty high correlation. Yeah, it's just hard to divorce those two instruments at the moment. The question is, can the equity market remain resilient in the face of both of those rising risks? Yeah.

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