9AM HOUR: Hassett on Jobs Report, Diesel Hits a Record High, Tesla Cybercab Launch Reaction 9/4/26

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1:30hike back to 56. Oil pretty steady. No real news of fresh U.S.-Iran strikes today, but still on pace for the best week since July. Our roadmap begins with the August job surprise, much stronger than expected. We'll get the first White House reaction with NEC Director Kevin Hassett in a few minutes. Plus, Tesla's quiet cyber cab debut, while the nation's top auto regulator opens an investigation into the cyber cab's deployment. And shares of Lululemon plunging after slashing its forecast for a second time. Let's begin with some market reaction to this jobs number. As we said, 162 only looking for 55 or so positive revisions.

2:07Two thirds of the gains are restaurants, Mike, and local education. Yes. So, you know, private sector was like 127 of the 160 ish. You also had health care was another healthy slug. So, you know, certainly it's a beat on any metric. It's more than just payback from a weak July number, which may have been impacted by seasonal adjustments because you did have positive revisions for the prior two months on a net basis as well. So, you know, certainly solid labor market or at least one that is steady is the way we can characterize this. Bond market did react pretty quickly, but not dramatically in the sense of going back to the yield highs we've seen recently because next week's inflation data is a little bit more decisive in terms of what happens with the Fed.

2:55Also, not the most sell-on-the-news equity response that you might see. It's sort of around the edges. We did sort of take a half step back. So, you know, I guess it's sort of no help for the doves. But I also don't think it's something that we shouldn't welcome, because you want to see, you know, the private sector hanging in there while we have these, you know, oil prices where they are, all the disruptions we've dealt with from geopolitics, and then rates going up to multi-year highs. And if there was one read-through for inflation, it would be what's going on with wages, which increase, but not surpassing the level of inflation that we've seen recently.

3:33So maybe that's giving people a little bit of pause, too. Wages were right on target in terms of forecasts. Really not accelerating and not, as everybody on the Fed and outside has said, it's really not the driver of inflationary trends right now. So I think that's an OK metric, at least from an inflation perspective. Obviously, it's not from a real wage growth point of view. And then the household survey was strong, but you say unemployment rate steady at 4.1 percent. When the Fed looks at the jobs picture, it mostly looks at the unemployment rate. It really does believe that's its best read in terms of how much slack there is in the labor market.

4:11And so that's kind of steady. She goes, worth mentioning a week ago, Kevin Worsh at Jackson Hole did characterize the labor market as kind of full employment. He wasn't saying that there's sort of any wobbles there as he gave what was kind of a hawkish message. So this market reaction more or less just takes back yesterday's dovish inference from Waller's remarks in the morning. Yeah, pretty positive on work week. Up a touch. LFPR up a touch. You like to see that. Matt Goldman had a really interesting note last night about the decline in participation that we've seen over the last couple of years.

4:45Argued it's probably due mostly to well-to-do, older, higher paid workers who can afford to retire. And that from a cyclical standpoint, that's less of a concern than some other alternatives. Right. It's not, you know, I quit looking for a job because I couldn't find one. You know, demographics are, you know, they're pretty stark when it comes to this, too. overall job participation is not something that's ever going to really go up back to the highs because of the aging of the population. But prime age labor force participation has been the thing to watch. And it hasn't been pretty really very far from like, you know, generational highs recently.

5:23And for that cohort, there's been so much wealth accumulation with asset appreciation that they have the ability to do that. The other kind of interesting thing is the AI, you know, the AI threads that we can garner from the data today, this idea that you see a lot more jobs in construction, which would presumably be the data center kind of construction that we're seeing, manufacturing, utilities, whereas areas that may be disintermediated, which we talked about earlier this week, financial services, information services. Which was negative, down 23 of the buckets. Not many were negative, but that was one, information services.

6:01Yeah, Which could maybe be people's jobs being displaced due to AI. Yeah. It also kind of flies in the face with the anecdotal layoff news that we've gotten this week. Trade Desk is the news today. But earlier in the week, Uber, 3K, Campbell's, I think, I don't know the number on Campbell's, Volkswagen, 50K. So we'll have to keep an eye on that as hiring plans get written for 27. Yeah. There's 159 million people in the employed workforce in the United States. 160 net job gain on a given month used to be kind of blah. Now it's significantly better because labor force is not growing for all the reasons that we know.

6:41But it also means I think you can kind of bounce around plus or minus zero and not really change the overall picture. Let's remember March and April, you had massive job gains, 200 ,000 one month, like almost like 130 or something the next month. And then we were right back to kind of minimal job growth for a few months. So I think that's the world we're in right now where it's not really trending in a strong direction. It's just steady as she goes. Do you think that today's data is indicative of, you know, you're sitting at the Fed. Employment is just not a problem you really need to worry about at all anymore.

7:18Pretty much. And just focus on the inflation side of the mandate. Yeah. I mean, I think that's where the committee has been for a while. Well, you know, there was a time late last year when they did those three cuts where it looked like the labor market might really be buckling a little bit. And I think you had a plausible case to say that you needed some insurance cuts. Now everybody's on board with inflation is really the sole relevant target at the moment that we have to worry about. And there's a big debate as to whether, you know, a few rate hikes here, one, two or three would do the trick.

7:47If it's the kind of inflation that that's going to help. I don't think it's make or break for the stock market either way, if they go in September or not. But we're going to be in suspense. I mean, you can see what happened. There's a really strong jobs number. And it didn't really swing us over to a prevailing belief of what's going to happen in two weeks in the Fed. It's like 56 % for a hike at this point, which is basically a coin toss. Yeah, which is kind of wild because we are so close to that event. Yeah. Obviously, next Friday and Thursday with inflation data will be key. PPI on Thursday, CPI on Friday as key indicators.

8:24But if we don't get a big move either way on inflation, I mean, do you think it still remains 50-50? It's it could be pretty close to 50-50 going in. And then it's about the committee dynamics and, you know, what people think if there's if there's more of a risk of going or not going. I don't know. I mean, I do think the market will maybe try to pick up some signals to sort of. put its hand on one side of the scale or not. That's why the oil story or more, I should say, more the distillate story is so important right now. We did get an all-time high on diesel overnight. What's the number? 585.

8:58And that's going to surpass the 2022 high. Inflation adjusted, you'd have to get back to seven and change. But AP with the nice piece today, looking at what it does to the cost of food, really. They argue the Groceries Association, about 15 to 30 percent of the cost of food is the cost of moving it around or refrigerating it or something like that. And that does tie back to diesel. And we've seen the spreads between raw product and distilled really blow out the last couple of weeks. Yeah. The distinction. I mean, consumers still seem to be driving and filling up their cars and going and purchasing things.

9:31But it is that diesel equation that's impacting the affordability dynamic and the cost of the everyday items, food and so forth that we use. And so that's kind of become more of a focus as we think about the inflation picture relative. And, you know, there's often a counterpoint that, well, that's kind of as much a restraint on growth as it is. And obviously, it's going to feed into the inflation measures, but it does sort of, you know, add friction to the overall wholesale economy. And maybe that means that you grow a little slower. And there was an idea going into the second half of this year that there would be some sort of natural deceleration in underlying growth trends just because you have, you know, a lot of the fiscal impact in the first half of this year from the tax bill and things like that.

10:16Maybe it's just going to settle out. Doesn't seem to be really happening at the moment. Keep your eye on that. Let's talk a little bit more about the jobs number this morning. We're joined by the White House first reaction. And then that's, of course, National Economic Council Director Kevin Hassett. Kevin, welcome back. Good to have you back. Great to be back, guys. We were all kind of bracing for maybe a softer number after ADP, after some of the Jolts hiring rates figures earlier in the week. What do you think flipped the switch? Well, you know, last time we talked about how there was a bad number, but a lot of it was sort of seasonal stuff with teachers.

10:48And so the first so I was saying I was kind of expecting a pretty good number because I thought there'd be a bounce back on that. But this number was way, way better than I expected. And it wasn't just me. We went back and looked and 77 people posted their forecast at Bloomberg. And this blew past everybody. So this number was above anybody's forecast. And by a lot, it was four standard deviations above the mean. And so it's a really blockbuster number. And then when you're trying to say, well, why did it happen? If you dig down, then what you can see is that there's a lot of policy success underneath it all.

11:21And so capital spending is through the roof. It's getting set to about double since President Trump took office relative to GDP. and you're seeing the construction of factories through the roof. So employment, one of the most interesting things to me in the data is that since President Trump took office, employment for people who are building factories has gone up by 90 ,000. So think about how many future jobs that's going to create. And so I think that the tariffs are making people onshore activity. The expensing is making people want to invest like crazy. And that's creating construction jobs and also beginning to show up in factory jobs, too, which now we're up 50-something thousand since Trump took office after declining over the last few years.

12:01Yeah, construction of 22 was kind of a surprise given some of the ISM employment survey numbers, which weren't nearly as constructive, if you'll pardon the pun. What does this do to people who are arguing for lower rates? Well, you know, I think there are a lot of different ways to think about it, but I think it's been clear, you know, over the many years that I've discussed this with my colleague at Hoover, Kevin Warsh and in his most recent statements as Chairman Warsh, that he thinks that you really got to keep your eyes focused like a hawk on inflation and that if you've got growth that's supply side, then it doesn't necessarily mean you have to raise rates.

12:40It's the same thing that Greenspan believed. And so I think that, of course, we're all going to be looking really closely at the CPI next week. But if you know what I like to do is look at the Consumer Price Index, the core, take the average over the last three months and annualize it. Because I think if you look at the 12-month change, then you're sort of forgetting all the momentum you might be having in the near term. And so right now, annualized CPI over the last three months is running at 1.6%. I think if the CPI continues to be that favorable in the next report, then, you know, I mean, the Fed will do what it wants to do.

13:13We respect their independence. But I think the argument for holding steady would be pretty strong. Yeah, Kevin, I mean, certainly everybody hopes that, you know, a massive rise in supply side dynamics feeds into a productivity bonus down the road. I guess we have to be alert for seeing how that comes about. But, you know, the Greenspan example, you know, he only became very tolerant of faster growth and full at full employment and allowing rates to stay steady after he aggressively and preemptively raised rates in 1994, crashed the bond market. And then, you know, inflation was contained. It wasn't as if he was chasing high inflation or worried about a relapse of high inflation.

13:53And then he he stood pat. Right. And, you know, the other thing that happened, it's like a little bit of my own personal history, is that I was part of the team advising him when the Internet happened. And all of a sudden we saw all this productivity growth. But it wasn't really in the data yet. But we hypothesized that it would be coming and that with that kind of boom from the internet, then you could have high growth and low inflation. And I think that that analysis we did back then for Chairman Greenspan had a big effect on his decisions about what to do with rates. And I think right now the AI effect is somewhat analogous or perhaps very analogous.

14:28And I think that, you know, since there are a lot of people who live through that experience, that I'm quite hopeful that we can go through a period where we have high growth and we don't, in a knee-jerk way, try to squash it. Yeah, we saw that impact, it appears, in the data from this morning with areas that had high AI adoption, things like financial services and information services, those were a bit weaker, whereas sectors that were more exposed to the building of data centers, construction, manufacturing, utilities were all stronger. How long do you expect that trend to continue? Well, I think that basically you're at a race right now, the AI firms, for really like AI supremacy vis-a-vis the Chinese.

15:12And they're making really rapid progress. And America's utilities are stepping up and increasing the amount of power that they're generating so that American people don't see their utility bills skyrocket. And so one of the things, if you're anxious about the data centers potentially affecting electricity prices down the road, one of the things that should be reassuring today in this report is like the really massive explosion in employment in utilities And remindful of the fact that also that utilities, that's usually one of the sleepiest sectors in the economy. Like since 1970, I think power generation only went up about 20%.

15:47And so having a big explosion in utility construction, utility employment, that's really something new. It's something new, and it is because of AI, the data centers. A lot of pieces in the tape this morning, Kevin, looking at, I guess you might call it asset migration out of the U.S. Journal page one with the Dutch moving some physical gold to London. Our piece on our website about the Norwegian Sovereign Wealth Fund looking to cut their exposure to government bonds everywhere, but that would have an effect on treasuries. What do you think is behind some of that? Well, I haven't looked at these specific stories, but I could say that right now the government bond market is showing what everything else, every other indicator is showing, which is that the United States is the best place in the world to invest.

16:34If you look at the stock market return, for example, it's saying that the private return on capital in the U.S. is skyrocketing. And so that's making private firms borrow and invest because they can invest at a much higher rate than their borrowing costs. And that's a really positive story. Have you weighed in yet on Treasury buyback and whether or not Besson has the prerogative, the firepower? What would you be saying about it if you didn't have your current job? Oh, well, you know, Secretary Bessett and I talk all the time. This is, you know, that's his lane. He spent his career thinking about those things.

17:11And, you know, we might talk about how the economy is doing or something. But in the end, interest rate policy is set by him and the president. We've I think we might have a chart available. J.P. Morgan this week looked at the issuance of debt from hyperscalers in NVIDIA as a percentage of Treasury issuance. We're getting up to 70 percent. Do you think there's a crowding out? I think that if you're issuing debt, right, then the problem that you have to decide if you're a market analyst is, is the return on the investment going to be higher than the cost of the debt? And I think that right now, with the economy booming, with jobs, like something that outperformed 77 people's expectations, and with the rate of return on these investments in data centers and AI being so high, then as a lender you're pretty comfortable and so there's like a supply and demand effect but right now when you look at the massive growth in revenue for you know the big AI companies which of course depends on the data centers the massive growth in revenue for Nvidia then people who are going into that space are happy to lend money and so it's a natural course of things now if the rate of return on those investments was really low then we should be very concerned, but it's not.

18:28Finally, Kevin, 60 days to the midterms. Sometimes we do see some personnel shifts halfway through a term. Are you going to be around with us in 27? Well, ultimately, the president will decide. But when he asked me to come in as NEC chair or NEC director, then he joked that I have to stay for four years. And I said, it's up to you, sir. Kevin, good color on the data today and tackling a bunch of other stuff on the tape. Have a good Good Labor Day weekend. See you soon. Thanks. You guys too. Kevin Hassett. When we come back, a look at Tesla's CyberCab launch in Austin last night. It's being described as kind of meh.

19:05We'll look at the ramifications for the company and a lot of the stocks that circulate around Tesla. Future's still negative here. We'll get more on the jobs internals and the impact on rates when we come right back. 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. Vantage Score is changing that by modernizing credit scoring. Vantage Score uses 400 % more credit and alternative data to create a fuller picture of financial behavior, including trended credit data, rental payments, and timely utility payments.

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20:59Tesla officially launching its cyber cab service in Austin last night. Rides in the autonomous vehicle will be available to paying customers today. But the company didn't live stream the event or provide any details. Weren't there like two million people kind of waiting in the queue on X to get some more details or figure out what's happening here? Yeah, it definitely excited the hive for sure, the Tesla hive. The stock had been up, not just yesterday, but even earlier in the week. And it was kind of out of nowhere. I also noticed yesterday that when Tesla starts to actually start to move a little bit, the ride-along stocks do, too.

21:41So SpaceX was up. Palantir was up. And so there was that feeling of, hey, it's finally happening. But there have been so many of these faults. First of all, this has been previewed forever. And it's been kind of like one of the linchpin elements of the bull case. and it's a modest launch and rollout and all the rest. And meanwhile, Pestle's where it was five years ago. Right. And so it's kind of one of these funny things where we know the story. It's well understood. They just don't have a lot of the bullish firepower to get it past a certain threshold. There's also concerns about competition from Waymo, Waymo being far ahead of them, and whether the event yesterday, there were questions going into it as to whether this would be kind of their offensive move here.

22:25And it seems like it kind of landed with more of a whisper. Yeah, I mean, there is a case that everyone who's kind of in Tesla's camp will say the Waymo vehicles are so expensive. Like, it's just not clear how it can scale if you actually want to make money on it. I don't know what Google's thinking about that necessarily. But there is a case that you could do kind of a low-cost thing if the infrastructure is ready for it. But I don't know. It doesn't seem as if this really moved the debate very far. Yeah, there's also regulatory concerns, being able to scale it as a result of getting local municipalities on board with the safety implications of all of this as well.

22:59And now SpaceX is, you know, bigger than Tesla by market cap by half a trillion dollars. So it seems like that's where, you know, that's where the juices has flowed. A lot of the sell side, I think it's bared today, keeping the optionality open. we want to own Tesla because they do believe that ultimately the two combine. We want to own the stock ahead of a potential combination. Yeah, I mean, it's fun to sort of game out exactly where the incentives sit on either side of that, where Musk has the control position in SpaceX, but obviously a large financial position in Tesla. And whether, you know, does that mean they have to offer Tesla holders a bigger premium?

23:40Because you do have a lot more kind of arm's length fiduciaries in there. what that would mean for SpaceX if that were the case. You have to pay up for Tesla, but ultimately it feels like everything points in that direction. Also, Musk's overall image will get more scrutiny with this new Alex Gibney documentary, which we're going to talk about later as Hollywood sort of sets its sights on big tech overall, but on Musk in particular. Take one more look here at the pre-market. We'll get this opening bell as we close out summer, more or less, in just a few minutes. This message comes from Wise Business, the only account your business needs to scale globally.

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24:52and 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. This holiday, all plans, even unlimited, are just$15 a month. A holiday deal this good obviously deserves an enormously expensive holiday song, like All I Want. Right. Okay, we can afford that. You know what? Forget the music budget. We're going to stick with whatever's in the public domain. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three months,$90 for six months, or$180 for 12-month plan required,$15 per month equivalent.

25:32Taxes and fees extra. New customer offer for initial plan term only greater than 50 gigabytes may slow when network is busy. See terms. The Dutch Central Bank cutting its gold reserves in the U.S. They're citing, quote, geopolitical unrest. The Netherlands moving about$11 billion worth of gold out of the Federal Reserve Bank of New York, the second European nation this year to announce it had decreased or eliminated its U.S. gold holdings. This has been going on for a while now. Journal goes into it. Not the first time it's happened. Mike, you seem nonplussed. I just think it's a little bit. I mean, certainly it reflects a little bit of desire for absolute certainty and security of where you hold the gold reserves.

26:13It doesn't change how much gold the central bank is exposed to. It's simply physically moving it out of, you know, on deposit in the New York Fed. I doubt they thought that, you know, the New York Fed wasn't honest about whether their gold is sitting where it said it was supposed to sit. But I do think that, you know, it does reflect a little bit of unease about exactly where the reserves are, what we hold it in. I think the Bundesbank in Germany did this in 2013. So it's not at all unprecedented and there's different motivations for it. I know people who are bullish gold see this as a bit of an endorsement, you know, because the absolute, you know, kind of rock solid ownership of gold as the one pure money, as they think, is sort of accentuated by a move like this.

26:58But I don't know that it changes too much. You know, maybe somebody watched Die Hard with a Vengeance where there was like a gold heist out of the New York Fed. So you get a little nervous if you watch it. Yeah. That's part of what Paul was getting to earlier when Kevin asked about just the kind of repatriation of assets in the de-globalizing world. The Norway Sovereign Wealth Fund being another name in the headlines this morning in terms of how much broad exposure to government bonds and what that means for the U.S. Treasury. Let's get the opening bell on this Friday at the Big Board on Wall Street at Rare Ventures, a philanthropic platform designed to accelerate development and therapy.

27:39rare diseases at the Nasdaq in Times Square. It's AMRA cap acquisition, a SPAC focused on businesses with strategic ties to the U.S. and Mexico, celebrating a recent IPO. And at SIBO in Chicago, it's the SIBO floor operations team. One final bell here before we all get ready for the fall season post-Labor Day. Mike, getting above 7 ,700, as we pointed out yesterday, not insignificant. No, not at all. I mean, it just sort of keeps the index sort of tethered to the recent highs, right around 7 ,800. Earlier in the week, you know, talked about it at the time, the market was focused on this. Holding this one line, it held the one line right around 7 ,600, just above there.

28:19And from there, it seemed as if, in particular, MAG7 starts to reassert itself. You have enough strength in some of the non-semiconductor areas that it kind of pushes things ahead just a little bit. It's not clear to me that we've necessarily really reset and reloaded for an aggressive move higher. I think institutions remain very, very heavily exposed, expecting good things for the final part of this year, even if September is turbulent. But, you know, I think it's the market didn't do anything this week to say that it feels very fragile, at least. Do you think it's fair to argue that hardware for the week, maybe the past couple of weeks, has underperformed X Dell?

28:58Yeah. That chips have underperformed X NVIDIA software underperformed XSnow, something like that? Yeah, it's possible. I think Snow had some coattails in terms of the general narrative. I was thinking yesterday that it was like the rally was in plays on the consumption of AI, not the construction of AI. Meta's, you know, rally on, you know, this kind of open source model and what they're going to do with it. Obviously, that's been a cheap and neglected stock. NVIDIA's hugging face deal also got focus on how are we going to be consuming this? How are we going to be interacting with it? And Snowflake as this corporate layer for AI access as well, as opposed to going straight to the models.

29:39Yeah, maybe that's a theme that does emerge, which nets out better for the big tech platforms rather than the memory chips. You did argue that you agree with the argument that if Anthropic and OpenAI were trading today, they probably would have traded down on Hugging Face. I give credit to Adam Christofieldy of Vital Knowledge, who's actually on the 4 o 'clock show today. by saying that yesterday, like it seemed as if if they were public companies, it would be a net negative for the pure model builders because you had all of these other cheaper options out there, all the focus on crashing token costs and things like that.

30:10That was the note out of Goldman yesterday. The Delta One desk said, this collapse in token costs better be made up by volume or software valuations might be under pressure. Jevin's paradox. I mean, so much of these valuations and their business models are based on enterprises adopting and being willing to shell out all this money for tokens, whether it comes out of their software budget, whether it comes out of their labor budget. So as you see costs continue to decline and you see a company like NVIDIA really make a big bet on open source, it definitely begs the question. I mean, we're still waiting those filings.

30:44They're confidentially filed, both Anthropic and OpenAI. We're expecting a lot of activity post-Labor Day. Just in terms of the IPO calendar overall, we saw ORA file yesterday. Which could be, I don't know, is that a diversifier away from the AI trade? I know they have a lot of AI technology. Is what? Aura. Oh, Aura. Aura. Yeah, I mean, that's such a niche thing. I mean, obviously, it's an application layer and, you know, kind of this idea of how we're going to access. By the way, as we're talking about how yesterday was all about the software, leaders of the S &P this morning, SanDisk, Seagate, Applied Materials, Lamb Research, Western Digital, Teradyne, Micron.

31:21So we're back to hardware. And so that's the toggle. that's been in place. So, you know, be careful about extrapolating the themes. But to your point on IPOs, we did get the report on that pre-IPO credit facility for Anthropic, right? Yes, that$15 billion pre-IPO credit facility, which we have seen kind of a trend toward kind of getting these debt facilities lined up before doing a big equity raise. So that seems, you know, Fox seems to have been checked for Anthropic. And then, of course, a lot of these bigger companies is want to wait until after the Labor Day holiday to make sure they get maximum eyeballs on any kind of S1 filing before going public.

32:02You don't want to do it when people are away at the beach last week of August. But presumably they want to do it as of June 30 numbers, as opposed to wait past September 30, or then maybe it puts them later. Who knows? Maybe there's a close call there. Yeah, because you're right. Numbers do get stale after a while. You have to refresh it. That takes some time. and then you have to kind of refile and go do that process with the SEC again. So there is a narrow window in order to get it done. And once you do disclose your S1, you need that on file for a minimum of 15 days before you launch a roadshow, which sets the price range and the valuation.

32:36So overall, it takes minimum three weeks from the time you see an S1 to the time they go public. And that's going as fast as possible. That would be a pretty truncated roadshow. Usually it's closer to about a month or so. they're probably going to have to create all kinds of virtual AI displays in the lobbies of various investment banks for this IPO like SpaceX. So it'll have to take a while. I know. SpaceX lent itself to so many fun decorations. I don't know what the AI decorations look like. Something tells me it won't involve data centers, though. Yeah, probably not. Just going to go out on a limb.

33:10Say they're not going to throw up a bunch of data centers in the lobbies of these big investment banks this time. Yeah, maybe a few miles up. Yeah, exactly. In retail, last couple of weeks, we've had some blowups. There's been Walmart. There's been Depot. There's been TJX. There's been Dick's. And now it's Lulu. Comp's down nine. They do cut the guide for the second time. This is going to be a chore for incoming CEO Heidi O 'Neill, who came from Nike, where the challenges continue. For sure. I mean, I think expectations were quite muted going into the number, and it really undershot even that, especially on comps.

33:44You always have that sense out there that maybe, you know, it's kind of kitchen sink. You kind of clear the decks for the new CEO. But it does show that it was a bit of a value trap. You know, based on numbers that prevailed before the report yesterday, this was trading at like 10 times earnings, which seems washout. It had tried to bottom around$104 and kind of migrated up toward$120 or so in the last few months. And you've lost all of that. So I think there's a big retool. And I think one of the major questions is, this is a company that grew up being able to charge full price, not really having to market itself very actively, not really having to compete that hard in terms of market share.

34:19And that's totally changed. And it's a very different landscape in terms of not just competitively, but maybe even by the category is just not growing as quickly as it had been. Yeah. Well, it was a status symbol, you know, wearing Lululemon kind of akin to a couple decades ago walking around New York City with a Starbucks cup. I mean, it was kind of in its class of its own. And now it has all of this competition from Rory, from Allo. It's taking share. You're seeing the declining comparable sales. If these declines that we're seeing today, I think the stock could be at its lowest level since, what, May of 2018.

34:55Yeah. So the market is clearly re-rating this company given all of its headwinds. And to your point, Holly O 'Neill, she takes the position in, I think, about a couple weeks or a month or so. And she certainly has her work cut out. And the question is, if this is a problem that needs to be fixed by innovative solutions, innovative products, innovative strategies, that takes a long time. And how much patience will investors have to really see that come full circle? And, you know, Nike's not benefiting in comparison. It is down, you know, over 1%, 1.6 % right now. It is now officially down 50 % off its 52-week high.

35:36Yeah. It's been a tough 12-year chart on Nike, that's for sure. Speaking of charging up, you are going to get an Apple event in the coming days. Yeah. And there's a lot of the trend force estimates on this foldable phone. I mean,$2 ,000 to$2 ,300, top of the line, potentially costing more than$3 ,000. This is going to be a really interesting pricing strategy. You've got to turn us at a time where memory is a challenge. Yeah, and my memory remembers when we had a foldable phone back like two decades ago. So we'll see what this foldable phone looks like relative to the Razer phones we had in the early 2000s.

36:15Well, those foldable phones you couldn't open up and watch Apple TV Plus on, which I think is kind of the idea. True, but I can do that on my non-foldable phone. So, you know, what are you getting for$2 ,000? All the people who, like, you know, consume content on their laps. But you could play Snake. No, I don't know. You didn't play Snake? Games, fun, that's not me. No, that's right. Mike's not on the subway doing candy. No, I'm happy to be done with summer. I mean, come on. We're entering the season of work and darkness and seriousness. That is for sure. Sounds like Mike. Some single stock stories.

36:47Adobe's got a new CEO. Finally, after a long period of transition, Anil Chakravathi is going to replace Shantanu Narayan. Shares were down a touch pre-market, Mike. And then Nadella, with his first insider sale of the year, selling about$43 million worth of Microsoft yesterday. Yeah. I mean, I don't know how much to put into the timing of that. You know, it's obviously not as if Microsoft's at a high. It probably seems as if it's kind of long-term, you know, trimming and diversification plans. You know, it's funny. I mean, Nadella, these non-founder CEOs, the boards had to kind of load them up with equity to get them anywhere close to where some of the founders were.

37:29I think his Microsoft stakes may be worth half a billion or something like that. So, you know, it's certainly a significant trend, but I'm not sure people are going to take that as a cue for kind of Microsoft's outlook or valuation. Have we seen insider sales among the hyperscalers this year on an outsized basis? I wouldn't say anything that necessarily rises to the level of a trend or an alarming one. In general, I think the founders don't really sell, except for Bezos, who has been methodically selling down on some level to fund other things. So, no, I don't think this fits into some idea that there's a flight from these guys.

38:07Yeah. All Mac 7 were positive yesterday, though. What's that? All Mac 7 were positive yesterday, though. And that kind of speaks to your earlier comment about whether that's going to reignite. We're going to see a reignition of the strength of Max. I mean, look, I think you need the big leaders of the index to perform if you want to actually make further progress. We had this phase where everyone was happy about the broadening out of the market after the second quarter. It was just an interlude. And that's how it's best. It's best if it's just kind of like the big leadership has to correct. You're better off if the majority of stock steps in.

38:39And that way you'd limit the index damage. But this idea that the average stock is going to, on an ongoing basis, outperform the S &P 500 market cap weighted is, I don't think, something you should wish for. That's fair market activity. Yeah. I do want to get your mic on industrials because for the last, I don't know, going to the middle of June, far outpacing the overall S &P, that is completely compressed. That spread's gone. What do you think that says about economic activity or at least prices? I think it's a shadow of the AI data center trade in a large sense, the power companies and things like that.

39:17I think it's mostly overvalued, overloved group because of that, because you could be a non-tech savvy investor and own the power plays and all the industrials. You mean GEV and CAT? 100%. All that. Yeah. All that stuff. And they actually look a little bit short-term oversold on a relative basis, so I do wonder if they'll respond to that. You get this big front load of CapEx, not just for data centers, but for everything because of the accelerated depreciation. So I think there's a lot of things going on with that. And as I said, they became the most expensive sector in the market at a given time a couple of months ago.

39:56So I think there was high expectations built in. And again, it's, I think, part of the rethink of the AI build-out trade. Yeah, this week also saw this renewed correlation between what happens with oil and rates and what happens with equities, which equities for much of the summer had been able to shrug off. And it seems like that sentiment has really shifted this week. Where are you seeing the most sensitivity to that? And do you think that is why we are maybe seeing a resurgence of MAC7, which has been more insulated from those? It's part of the reason. It acts defensive. I think it was basically, you know, WTI and Brent going back above 90.

40:3390 seems to be a level since the winter that kind of gets people's attention. But I don't think it's a dramatic effect. I mean, the overall market's hanging in there. You see it in consumer cyclicals. I mean, you absolutely see the wear and tear in that part of the market. And, you know, it's related to the rates. By the way, 10-year yields are actually modestly down on the day. So even though the jobs number did kind of juice the short end a little bit, it's kind of flattened out. So I think we're now not at 4.8 anymore on 10s. So it's kind of like the wolf's not at the door at the moment, and the market can just kind of settle and relax a little bit for now.

41:10Last three months, the best performing sector is healthcare, but financials are not that far behind. Better than 12%. We got a new head of BlackRock private credit today. There's some stuff going on. Yeah, and we saw some redemptions out of KKR, one of their private credit funds mostly focused in the European area that actually looked okay. They were only 2.5%. So, compared to what we saw with Blackstone yesterday, which most of the, at least the equity, the stocks of the alternative asset managers seem to really read through is, okay, we were expecting things to kind of continue with elevated redemptions for a few quarters.

41:46They're still looking through it, not as concerned about the wealth channel, not as concerned about growth. And then what we've seen with the steepening yield curve has been pretty beneficial for the banks, especially as credit quality holds up. If you look at what's going on with the employment picture from the jobs data today, that only bolsters the case that credit quality should be okay, at least what we've heard from bank CEOs who say it's not as much about what happens with rates. It's are people still employed? Do they have jobs? And can they still spend money that they generate from those jobs?

42:17That's more indicative of credit quality. Well, the six-month average on jobs, Nick Timros points out, about 106, maybe higher. Yeah, because that six months captures that March-April surge off of the weak numbers from before that. But yeah, that's not insignificant. You and I were talking about Robinhood, speaking of financials before the show, and this debate about tokenization. Adam Aaron and AMC, who thinks it's a problem that Robinhood lists as these tokenized instruments that are based on AMC shares. Now, it is only for non-U.S. investors, but this is a broader effort on Robinhood's part.

42:54I think they're pushing the limits of, you know, what people are comfortable with. And, of course, AMC, all they want to do is sell stock to new investors. Their share count just keeps blowing up because it's the only way they've kept the company alive, is selling new stock. Well, it feeds into the debate over these levered single-stock ETFs as well. So, I mean, there's all sorts of financial engineering going on on these single stocks, and the companies can't do anything about it. No, they can't. But at least those are kind of registered and at some level it feeds into the ownership of the underlying.

43:24As we go to break, we'll watch bonds as we continue to digest the jobs number. We'll talk more about it this morning. Front end's a little hot, but actually the 10 and the 30 yield is down. Actually, 10, you're pretty steady at 477. We'll be right back. Best performers on the S &P 500. You see Robin Hood and Dell jockeying for the top spot up about 15 or 16 percent. Squawk in the Street will be right back. We've told you a lot about big tech being under fire. Now Hollywood is entering the mix. A number of TV shows set to debut this fall are taking a pretty skeptical view of tech giants. Check out this trailer for CBS's upcoming series called Cupertino.

44:10This is Silicon Valley, Michael. Warriors don't make their money suing people. Next case. It's David and Goliath. And the Goliaths protect each other. Apple, Google, OpenAI. If you sue, you won't get a job anywhere. Without your co-founder, you couldn't be fired. Thought so too. Hollywood reporter with a big piece out looking at Hollywood, taking aim at big tech. I mean, we're in an environment where media companies want to reflect what they think the viewership wants to hear. Right. And if you want to tell an underdog story, that's the obvious kind of foil to it. And I think it's also tapping into the kind of societal unease that everybody seems to have, or a lot of people do, with what's going on, how fast AI is becoming the only thing anybody seems to fixate on.

45:00The one that's, of course, notable is Artificial, which is Luca Guadagnino's biopic of Sam Altman, which Amazon MGM dropped for reasons. And it got picked up. It's going to debut next month, I guess, at film festivals. But that's one that should be fascinating. Well, it also feels like a pivot because the last big TV series we saw showcasing Silicon Valley was Silicon Valley on HBO. And that was a comedy. It was poking fun into the culture. Sure, it was poking fun at the quirkiness, and everybody kind of laughed along with it. Everything that's coming out now is so much more dramatic. There's also a new social network coming out, too, isn't there?

45:41Social Reckoning, it's called. Social Reckoning, showcasing what's happened with Facebook after the social network. Now Meta, I guess. Yeah, for sure. I mean, Aaron Sorkin wrote that one and is directing it. But, yeah, I mean, it is fascinating because the big banks are no longer kind of like the key villain anymore. I know. I was thinking that, too. Industry in London obviously kind of takes place in kind of a trading, hedge-fund-y environment, but they've even moved on. Right. And then there was billions, which obviously a colleague wrote. Yeah. I mean, big picture, though. It is fascinating that tech feels like it has to play some defense and do some more proactive PR and try to say we're not your enemy.

46:29Well, that got reflected at G20 this week, certainly, and even on our air, as the industry tries to cobble together a message that literally the headline on the cover of Time is trust us. Right. The other element or wrinkle is David Byrne, a famous co-founder of the Talking Heads, who was commissioned to write a song for the upcoming Gibney documentary about Elon Musk, in which he derives his lyrics from actual Musk quotes. He says, I asked for quotes from The Martian and found more of them online. I'm sure he loves dropping these wild statements, and those became the lyrics. All of his own words, no editorializing, straight from the man's mouth to mine.

47:08So we'll see. I mean, once Musk sort of enters the cultural zeitgeist, you could argue that has positive and sometimes negative implications for Tesla. I wonder if it's quotes that he's spoken or if it's, you know, posts on X, because there's a lot more to work with there as well. It reminds me of what Lynn did with Hamilton. Took the actual quotes from the man himself, turned it into lyrics. Yes, indeed. And that turned out well. For the time being, I'm looking at the VIX today, Mike, as we flirt with the 13 handle. Yeah, 14. Classic. You're going to be closed for three days. There's definitely a downside bias ahead of a holiday weekend.

47:46Also, we've cleared the known catalysts for the next three trading days, let's say. So I do think that tells you that there is a little bit of an undertow in terms of volatility, as well as the fact that, as we said, the S &P 500 has stayed on the rails and not really changed trends, Stay within like 2-3 % of the all-time highs for months. Yeah, watching crew today as well with Brent down almost more than$2. We'll keep our eye on that. Dow's down$180 or so. You've been listening to the opening hour of CNBC's Squawk on the Street. All opinions expressed by Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium.

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