Fed Meeting Kickoff & Sen. John Fetterman (D-PA) 7/28/26

0:00This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, 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. You know what's not a great use of time? Getting data ready for AI. That's why IT leaders turn to CDW. We help unify data and govern it, building the foundation for your AI and agents to deliver results.

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0:58Bring in show music, please. This is Squawk Pod and I'm CNBC producer Cameron Costa. On today's episode, the new Federal Reserve under Kevin Warsh meets on interest rates. Is now the time to make a move? We talked to Stephen Myron, who President Trump named to the Fed's Board of Governors. He saw the central bank's recent leadership transition firsthand. Should monetary policy be restrictive? And to me, the answer to that is no. How to Study Money. After a few bad predictions, monetarism really lost a lot of its shine and then eventually, it eventually became disused and people stopped looking at the money supply and the Fed stopped monitoring it.

1:41Then Senator John Fetterman can be a contrarian in his own Democratic Party. You're not going to become a Republican, are you? I've talked about that. How could I be? I couldn't be a Republican. You can't be a Republican. You're a Democrat. What he says he was wrong about. I would rather stand up to this extremism and just tell people as a Democrat, I think here's the truth where we are right now. Plus Cracker Barrel's branding nightmare. Johnson & Johnson's quarter century of legal troubles. And there can only be one. Like my favorite, Love Island. Big Watcher. Big Watcher. You are. The popular show driving one streaming business.

2:23I mean, is there a lot of, is that what happens? It is Tuesday, July 28th, and Squawk Pod begins right now. Stand Becky by in three, two, one, cue it please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We are live from the NASDAQ market site in Times Square. I'm Becky Quick, along with Joe Kernan. Andrew is out today. a down day for the Nasdaq yesterday as well. At this time yesterday, in fact, the futures were pointing to big gains for the Nasdaq, but the index closed in the red. You can see it was down by about 43 points. That came even as the Dow did close higher. Fears of overspending on AI pushed Nvidia shares down by 5%, allowing Apple to reclaim the world's most valuable company title for the first time in more than a year.

3:13SK Hynix's American shares slumped to a new low. SpaceX fell more than 1%. It has now lost the equivalent of a Tesla in market cap since its post-IPO high last month. And you can see the losses there. SK Hinex was off by 7.5%. All of those technology fears spreading to Asian stocks today as well. You can see the Nikkei closed down by about 4%. In South Korea, the KOSPI down by 10.8%. And these are things that we're going to continue to watch. Energy prices this morning are lower once again. In fact, WTI is sitting just above$80 a barrel,$80.60. Brent is all the way down to$85.90. So we've continued to see those declines in oil prices.

3:56And then Treasury yields ahead of the Fed meeting that starts today with the press conference anticipated tomorrow. The 10-year sitting at $4.62. The two-year is now below 4.3 % at$4.29. Kevin's fantastic, but he's got a board and the board members are very political. So, you know, we fight our way through the race because we're doing so well. But no, he's got a board. He wants to do the right thing. I know what he wants to do. You need the consent of some people that have perhaps bad intentions. The Fed also set to kick off its latest meeting, as we were just saying, speaking with reporters yesterday.

4:40President Trump backed new Fed Chair Kevin Warsh, while also at the same time calling for lower interest rates. The president said that the U.S. should have the lowest rates in the world. The CME's Fed watch tool points to about a one third chance that the Fed could hike tomorrow, which is fairly high. I guess because of Kevin Warsh at this point and a lot of the main players, it's kind of an unknown what they're saying behind closed doors. A good family fight is what the journal talks about that Kevin Warsh wants. And apparently there is some dissent and some back and forth. They highlight a conversation with, I guess, Waller.

5:25Waller, which, you know, it's interesting. Waller sounds almost like somebody who's a little sour grapes with some of the stuff that comes through. It does sound like that. But I will also say, Kevin Warsh is coming in wanting to change the institution. It's almost like in a corporate situation where they bring in the consultants, and they're going to bring in these outside advisors to say, here's the panels that are on it. Waller, I guess, said, tell me who's on the panel, and I will tell you what they're going to say, what comes along with some of these things. But this is a change that Kevin Warsh wants to make at the Fed.

5:58Forget about interest rates for the moment. These are changes that he wants to make at the institution of the Federal Reserve. That a lot of people are. That he has talked about for a long time with some of these issues. And other people have said they're a long time coming, too. Yeah. When it comes to interest rates, Kevin Warsh has been very clear that he doesn't want to give guidance. So if the market gets surprised by a rate hike this week, that would really signal the new change about this guidance. If they're serious about it, they're not going to tell you what's coming. But a lot for the market to anticipate.

6:27But he could, if he really is looking for credibility, you could think, I'm going to write out of the box, I'm going to raise rights, but I don't see that. I don't really see that. I think he wants the big bazooka in his pocket. I think he wants people to think that that's something he might do. He might have to do something at some point. But at this point, I think it's just going to be jawboning more than actually. I would be far less surprised to see it in September than to see it now. But I think the market's set up for that same situation. Let's talk about an individual stock company, Johnson & Johnson, reaching a settlement to resolve tens of thousands of lawsuits claiming that its baby powder and talc products cause ovarian cancer.

7:14The company will pay roughly five and a half billion dollars. That cash will settle nearly all of the remaining talc claims against Johnson & Johnson, about 76 ,000 in total. In order for this deal to go through, 95 percent of the claimants will have to accept the deal before it becomes final. In a statement, Johnson & Johnson said, while we are confident that the company would have ultimately prevailed with further litigation, as it has in the vast majority of cases tried to date, this resolution allows the company to put this matter behind it and remain focused on its mission to develop medicines and devices that saves lives.

7:50Now, I did speak to someone at the company yesterday, late last night, who talked about what this means. Again, in order for them to go through with this, they have to get at least 95 percent of the claimants to sign off on that. The company is pretty confident that it will get that because it already has 22 plaintiffs, firms representing more than 95 percent of those clients who have agreed with this and who have started putting out their own press releases talking about this as well. You may remember that back in 2024, the company had a deal that it thought it would go through in bankruptcy court.

8:22It proposed an$8 billion settlement versus the$5.5 billion that we're talking about now. They did get more than 75 % of the claimants to sign off, which was what they needed. Ultimately, the judge decided not to go through with that. It got caught up in bankruptcy court. And at that point, Johnson & Johnson said that they were going to fight this on a case-by-case basis. They have been doing that since then. they have won almost all of those cases, either in the first or on the appeal of those cases that have gone through, which they said has given them a much stronger hand with the settlement that they're now offering.

8:53Again, it went from$8 billion in 2024 to$5.5 billion now. $3 billion of that would be paid out in January of this coming year, if this is agreed to by the claimants that sign off on this. They got resolution on this. They did have, just this last week, a couple, a federal judge threw out two of the plaintiff's experts, withdrew two of their causation experts, and that weakened the plaintiff's case, which is probably why you're seeing this settlement today. The stock is up by about 2.5%, 2.25 % right now. Remember, this has been a huge issue that has been an overhang on Johnson & Johnson's stock for a very long time.

9:28They've been wanting to get this cleared up. There have been some analyst notes that have come out saying, okay, this finally clears the way for some of those things. So we'll see how the stock continues to perform from this point. I mean, this goes back years and years. Because I had some personal experience with it. I always used to recount those stories about baby powder. I used to like baby powder. I don't use it anymore. I'm not really sure why. But I switched to cornstarch 25 years ago. There's no way I'd put in. And there are other companies that still use talc. I think Gold Bond or I don't want to speak out of him.

10:02But there's still talc around. And not only can, supposedly, I think it can have traces of asbestos in the talc from how it's manufactured. But I think the chemical composition of talc is, in some respects, similar chemically to certain carcinogenic things in the past. Now you sound like one of the experts for the plaintiff's lawyers. 25 years ago, I stopped using cornstarch. And you don't want to... You stopped using talc in favor. Stop using it in favor. And, you know, sometimes it was like ovarian, and I didn't want it on any part of me to give it to, you know, where you'd be. This is what the company has been fighting this entire time.

10:42And this goes into our discussion yesterday about how great it would be if AI replaced all the lawyers, because they've had a field day over the years with this. But there are times, obviously, where you need lawyers. Where you need a good plaintiff. You need a good, I guess you need a good Colleen Sawyer from time to time. I mean, this goes back. I mean, think of the Johnson & Johnson CEOs. Remember Ralph? And you remember the guy that came out. Ralph was the most famous one. Yeah, you'll remember him if I bring it up. What was the last name? So many years ago. But he was a longtime CEO. And then came the next guy who got hammered in terms of.

11:29Ralph Larson. Ralph Larson. And then who came after Ralph? Because then they had started having all kinds of issues with quality control at a lot of their manufacturing plants, both abroad and here. William. Anyway. Weldon. Weldon. Bill Weldon, right? Yeah. Yeah. He looked like a CEO, just performed very well, according to the song at J &J. Cracker Barrel is replacing its CEO about a year after that controversy over the restaurant chain's logo. Julie Messino will step down next month and be replaced by former Bloomin' Brands CEO, I think that's out back, David Dino. He's a restaurant industry veteran who also held senior positions at Yum!

12:22Brands. You might recall last August, Cracker Barrel unveiled a new... Lame logo. They were calling it sleeker. It was... Boring. It was less... I don't know. People said it was more PC and less woke. I don't know. I don't know what Cracker Barrel is. For whatever reason, she thought that was a good idea. It was going to cost millions of dollars to change everything. and it immediately got hit with such a backlash that it prompted the company to abandon its update plans. It's not quite as bad as New Coke, but close. Cracker Barrel shares Bud Light comes to mind. Cracker Barrel shares sell more than 50 proofs Bud Light back in the news again, isn't it, that whole sitch?

13:14Anyway, but the shares have doubled this year. A major video platform in streaming services as they're building up NBC Universal and YouTube bundling up have agreed to a deal to embed Peacock in the video platform for premium subscribers. And YouTube will add all Peacock content to its platform starting early next year. Eligible YouTube premium subscribers in the U.S. will also gain access to the ad supported Peacock premium subscription. Jim Peacock's content includes live sports like NFL, Universal Films, and original shows like my favorite, Love Island, USA. Big Watcher. Big Watcher. You are.

14:02Yeah. YouTube said additional details and launch dates will be shared over the coming months. Love Island has been mentioned in several Comcast earnings reports because it's so popular. Because it's that important? It's that important to it. And I will say all the young women in my house and beyond that I know watch it. I mean, is there a lot of... Is that what happens? I haven't watched it. I don't think it's that. I think it's the matching up and the breakups. If you hook up, I guarantee you that you're on an island. I'm not saying they're showing it, but I'm sure they talk about it. Well, sure.

14:35It's the drama. Who's with who? Who trades up? You're right. I'm not watching. I don't even like talking about it. Somebody is. It's important enough to make the earnings releases. Tees will be next. Coming up on Squawk Pod, the worth of money. Former Fed Governor Stephen Myron is looking at how the supply of money impacts policy, from rate setting to reining in higher prices. To the extent that we've had higher inflation readings in the last six, nine months. It might be temporary. Actually transitory this time. It's much more likely to be transitory. It's much more likely to be temporary this time because it's not driven by policy.

15:17We'll be right back. Your data lives everywhere. On-prem, in the cloud, across apps. Bring it all together with EverPure, the platform that acts like a living system, delivering the latest in data performance, security, and innovation without ever slowing you down. Sophisticated enough to anticipate your ever-changing data needs, yet simple enough to feel like second nature. Tame your data chaos with EverPure and make storage and data management the simplest part of your business. Visit everpuredata.com to learn more. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab.

15:53Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, 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. When you partner with CDW, you get more from your devices with solutions that take modern work to the next level. CDW experts are delivering powerful productivity with Lenovo AI PCs, helping users block out distractions, access virtual support anytime, anywhere, and share content seamlessly between devices.

16:41Make amazing happen. Learn more at cdw.com slash Lenovo.

16:51Welcome back to Squawk Pod, today with Joe Kernan and Becky Quick. Sherwin-Williams adding around 150 points to the Dow this morning. Look at that. The stock's up by 6.6%, a gain of$21.63. It came after the company reported earnings of$3.70 a share. That beat estimates of$3.52. Revenue came in at$6.8 billion, which was also ahead of expectations. And Sherwin-Williams is raising its earnings and revenue guidance for the full year above what the street was expecting. You can check it out. Those gains are better than the gains for the full year to this point, which were up by 3.8 percent. Paint? Paint.

17:32Like for data centers or something? That's a good question. Do you need to paint semiconductors? No, you don't paint them, but maybe paint the buildings you're building. So it really is just paint. Is it AI paint? What about AI paint? I don't see any AI in here. It said the company would increase prices at its paint store group segment by 8%. There's no tie-in. There's no... In response to inflation across raw material, energy, logistics, and packaging. But no pure tie to AI in any way. No, and the company did say that the U.S.-Israeli war on Iran has led to supply chain disruptions and pushed up costs for raw materials, energy and logistics.

18:16but they're raising their prices and think that that stands with them. I think there's an AI play here, picking out the color for you.

18:25If you don't know the Fed's set to kick off its two-day policy meeting, you haven't been paying attention, because it is. And as a result, Stephen Myron here, he's a former Fed governor, currently senior strategist at Hudson Bay Capital, also former Council of Economic Advisors chair, so you know a lot of the thinking of President Trump on a lot of different matters. I hesitate to lead a segment with money supply because it's so arcane. We just want to talk about what Warsh is going to do, Warsh and Company will do tomorrow. But I think it's important because it might inform us on what to do. And in the old days, all market players watched the money supply and aggregate money growth.

19:05In your work, which you're bringing back, I think because Warsh pays attention to it, we're at neutral right now. Yeah, I think that's the takeaway from our work. First of all, thanks for having me. It's been very clear from Chairman Warsh's statements and writings over the course of decades that he cares about the money supply. And so what I did with my colleagues at Hudson Bay, Nouriel Urbini, and also Peter Ireland, a professor at Boston College, we delved into the literature on this to look at the state of the academic field on it. And money supply and monetarism more broadly used to be super influential in the setting of monetary policy.

19:39As you said, everyone looked at it every week, right? Every week. And then after a few bad predictions, monetarism really lost a lot of its shine. And then eventually it eventually became disused and people stopped looking at the money supply and the Fed stopped monitoring it. What we find in the paper as we surveyed the literature is that a lot of the reason why people stopped paying attention to money supply is because they just weren't measuring it correctly. As financial innovation occurs, as new types of money become invented, some of those types of money are more for store of value than for transactions.

20:09And so if your goal is to predict transactions, the economy, and money supply is growing for store of value purposes, like a money market fund, you're going to make bad predictions. So what some of the modern literature that's developed over the last 10, 12 years has done has been to try to measure money supply better by looking at different types of money and how transactions focused they are versus how store of value focused they are. And when you try and weight them like that, in the same way, when you look at inflation, you weight shelter, you weight housing more highly than you weight video games because people spend more money on housing than they do on video games.

20:42When you weight money supply based on how transactions-focused the type of money is, you get much, much better predictions. And that addresses a lot of the problems that money supply has had for usability and monetary policy. When you do it this way, you correctly capture the deflationary pressure after the global financial crisis, which is something that if you remember the endless op-eds and columns that M2 was exploding because of QE, there was going to be hyperinflation that didn't pan out. And we still had sustained deflation, right? Right. You measure money correctly. You get that right.

21:12And then after the pandemic, you can totally see what happened. Absolutely. After the pandemic, even the most cursory look at money would have told you, hey, this inflation is going to be big. It's going to be persistent. you better get ahead of it and do something. There are so many more forms of money to be used as transaction than there used to be even in 2008. You think about new forms now. How do you keep track of keep measuring those things? What did you have to do to feel like you really had your hands around it? Yeah, so fortunately, we didn't actually do the measurement ourselves because there's other researchers out there, other academics who do the measurements.

21:47There's a Center for Financial Stability, which does a lot of the measuring of those things. and we use their data that they generously make available. But we reported on the studies and we modernized and updated the studies for today's data. And as Joe said before, what we find when we do this is right now, you know, monetary policy. It's not like post-pandemic at all. It's not like it at all. Right now, through this lens, monetary policy looks pretty neutral, which tells you that to the extent that we've had higher inflation readings in the last six, nine months. It might be persistent. It might be temporary.

22:20Actually transitory this time. It's much more likely to be transitory. It's much more likely to be temporary this time because it's not driven by policy. It's not driven by monetary policy. It's not driven by fiscal policy. And so as a result of that, because that would show up in money also, right? The money supply doesn't care what the origin of the money is, whether the money originates at the Fed, originates from Treasury or internationally, right? If it were policy driven, it would be showing up in the money supply and that's not happening. And so this is telling you higher inflation right now is much more likely to be transitory than it was after the pandemic.

22:51And after the pandemic, when you looked at it at these, it showed that there really was a serious increase. And we should have noticed that, that it was not going to be transitory. Absolutely. These would have been, you know, five alarm fires. And people would say that all it was was supply chain disruptions, that no one could have controlled to cause the inflation. This puts that notion to rest, does it not? Yeah, I think this type of analysis is heavily indicative that the supply chain analysis was not the major driver of the inflation that we had. Or even if you really think that the supply chain problems we had were a major driver, that they were the type of driver that monetary policy had a responsibility to counteract.

23:28I see. So either way, there were mistakes that the Fed. So then did the case you just made make us think that the Fed stays on hold tomorrow? Well, so that's my read, is that the Fed should stay on hold based on this, but also based on everything else that's going on in the economy. I mean, look at it this way. In June, you had a unanimous vote to hold rates constant. Since June, the inflation data have been very favorable. We had a marginally negative core CPI month-on-month print. So I don't know what type of reaction function would say, in June, I thought it was appropriate to hold rates steady.

24:11But then I had a negative core CPI print, and that's what pushed me over the edge to think I have to hike. I have a hard time imagining what type of reaction function would say core CPI being negative is what pushed me over the edge to hike. OK, how about the argument that people come up with that for five years, the Fed has been above its anticipated range of inflation? How and when do you have to deal with that? So credibility is important. But the way that credibility manifests in monetary policy is through inflation expectations. And if inflation expectations started peaking upwards beyond the one-year horizon, i.e.