A Jobs Jolt, Mayer’s New Venture, and Can Nike Pick Up the “Pace”? 10/2/26

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1:01Thank you very much, Frank. The Nasdaq hitting a record high after that softer than expected jobs data this morning. I'm Kelly Evans and welcome to The Exchange. The Nasdaq composite, along with shares of NVIDIA, CrowdStrike, Palo Alto and AMD, all hitting new record highs today. The Nasdaq's currently up 1.2 percent. This after the U.S. added just 29 ,000 jobs last month and prior gains were revised down. All of this has the odds of a Fed hike falling. We have 20 percent barely of an October hike now in terms of the odds, down from 75 percent yesterday. Interestingly enough, though, that's not helping the 10-year yield decline today.

1:39Our 10-year up to 527 right now, even as we see global yields calming down, too. We'll get into all of that in just a bit. Plus, Marissa Meyer is here to dazzle us with her new app. I've tried it out, and it's pretty slick. But how can it compete with the growing array of personal agents like Muse? That's coming up later this hour. But let's begin with that jobs report. Weaker than expected, just 29 ,000 jobs added last month, the unemployment rate rising to 4.2%. And we are joined exclusively right now by the brand new U.S. Labor Secretary, Keith Sonderling. I think on your first—oh, no, yesterday was your first official day on the job.

2:17Congratulations. Replacing Lori Chavez, a dreamer, I think if I'm saying that correctly. Mr. Secretary, it is great to have you here. Welcome. Hey, thank you for having me. And yes, this is my first interview, not as acting Secretary of Labor, but the Secretary of Labor. Very grateful to the U.S. Senate for confirming me this week. And of course, to President Trump's trust and confidence in me of nominating me for the Labor Secretary. I looked into your background a little bit. It sounds like a kind of lawyer by training. You'd spend some time in the office, I guess, in that area doing some work.

2:49And you've got your hands full when it comes to the U.S. labor market. So top level, up until yesterday, we thought the narrative was job growth was picking up some steam. Now, today, we're not so sure. Can you give us any more granularity? Maybe you get access to more slicing and dicing of the info. Or maybe it's all in this comprehensive BLS report. But how would you describe things right now? Well, we have to look at that. And first of all, in President Trump's second term, there's been one million new private sector jobs created. And that's exactly what he promised, that he would re-invite the private sector, bring back jobs that were shipped overseas.

3:25And that's what we're saying. So if you break down the jobs report, number one, there was 46 ,000 new private sector jobs. It was dragged down by the loss of some government jobs, which also was a big part of this administration, right-sizing the governments and making sure that those jobs are going to high-paid, high-skilled private sector jobs. But let's look at manufacturing. Today is actually National Manufacturing Day. So let's talk about the manufacturing numbers. This is a very big key for this administration to reindustrialize American manufacturing and bringing those jobs home. And that's exactly what we're seeing across the board and in this job report.

3:58So this month, 9000 new manufacturing jobs, bringing it to 72000 new manufacturing jobs for the year. The manufacturing index has increased every month for the last nine months, reversing years of decline. And if you look at the last two months of the prior administration, the last two years of the prior administration, they lost 200 ,000 manufacturing jobs. So we're starting to see these investments paying off. As you know, and you report on often, there's trillions of dollars of investments coming in all across the world. Just this week, talking about the LNG line in Alaska, that's going to bring thousands and thousands of jobs, too.

4:32So in manufacturing, it's an industry that continues to rise, and we see great job numbers. And the second part of that, too, is also on the construction side. So you need to build these plants. So, so far in the president's second term, 112 ,000 construction related jobs to manufacturing. And a lot of that, too, is based not only on the president's policies getting these deals here, but the working family tax cuts gives a lot of incentive to bring back American manufacturing because everybody wants American manufacturing. And more importantly, where the Labor Department comes in, made by Americans.

5:03You know, there is a little bit of a blue collar, white collar thing going on with the labor force right now. And we've heard it from some unions who were pro data centers and said it was once in a generational, once in a lifetime opportunity to get into the middle class or the upper middle class for their members. So, yes, construction and manufacturing, all that. Another kind of weird wrinkle. There's so many weird wrinkles to this economy right now. One of them is that low mortgage rates are, you know, we always talk about labor market mobility and, you know, can move around the country and get a job.

5:32And, I mean, as you know, I think you're about my age. Everybody bought when rates were 3 percent. And the line is, I'm dying in this house. I'm never moving. And I'm curious what impact that's going to have on kind of the dynamism of the labor market, people getting jobs and so forth. Well, the president and this administration is working very hard to bring down those interest rates for home mortgages. But from our perspective at the Labor Department, you know, really, again, shifting to the jobs side of this as well. We're seeing people staying in their jobs longer now. New unemployment claims fell to almost a 66-year low.

6:16So like housing, a little different in employment. We're seeing people very happy where they are in their jobs because employers are doing better. They're doing more productivity in the president's second term here because of a lot of the policies that we're seeing of them being able to reinvest in their businesses across the board, whether it's technology, whether it's new machining, too. So from what I know is the labor market and I see some parallels in that people are staying in their job because, you know, the economy is rocking. Yeah. Perhaps, like we said, it's kind of this no hire, no fire.

6:49Do you think that categorization is right, that characterization, this idea it's low hire, low fire, no hire? Because I do know a lot of people who are in between things and really struggling to land that next thing. But to your point, I'm not hearing a lot of new layoffs. Low hire, low fire, no hire, no fire, something like that. So we're actually seeing something different. In this month's jobs report, the labor force participation rate went up. That's almost 480 ,000 people coming off the sidelines, coming into the labor market, either getting jobs or entering the jobs. It was about the same last month as well.

7:26So between the two months, it's a million new people who weren't working before that are taking these jobs. And there's more jobs available right now than there are people looking. So that's a really good thing. And it's a testament to President Trump's economy, to the exact type of private sector jobs he promised to bring back that we're seeing. We're seeing it across different industries. We talked about manufacturing. and we talked about construction. But as we see this reinvestment in the United States, we're really seeing a diversification of jobs in industries. And that's really the Labor Department comes in.

7:54And that's going to be one of my top priorities as the president's labor secretary is to make sure that American workers have these skills. Because the worst thing we can do is see all these foreign companies, countries, domestic manufacturers and businesses making that reinvestment in the United States. We want them to go to workers within their communities. And we're working really hard with the Department of Education, with our state workforce agencies to make sure that we're lining up the skills needed for these new high-paying, high-private sector jobs with the workforce and education system so people can stay in their communities and take these jobs.

8:26And I see that when I travel the country, the ability of local workers not having to leave home to get some of these jobs that didn't exist in their communities before. And that's what's something very special about this administration. Your predecessor left after some accusations made by various publications about maybe her behavior on the job. Is there anything you would say about the culture at the Labor Department that you're looking to change or improve upon? Well, you know, the Labor Department has some of the best workers in the federal government that I've known for a very long time. And I can tell you that everyone is excited to make sure that not only the health and safety of workers in President Trump's economy, where we're having so many people in the workforce, as the president says all the time, more people are working today than any time in our nation's history.

9:12So the The Labor Department's mission is even stronger than ever now. We need to make sure that workers are safe and return home safely every night through OSHA. We need to make sure their health and retirement benefits are protected as well. And more importantly, too, making sure that people are getting their paychecks properly. So I love the Department of Labor. It's the honor of my life to be a Labor Secretary. This is what I've done, as you said, my whole career. And we have a great team. And we're really going to make sure that in President Trump's economy, all workers are benefiting from that.

9:41And you have my commitment on that and all the staff at DOL. All right. Labor Secretary Keith Sonderling, thanks so much for making the time. It's good to have you. Thank you for having me. Appreciate it. Let's get some more reaction now to the jobs report today from KPMG's chief economist, Diane Swank. Diane, it's great to have you back on. You've been pretty hawkish about inflation coming into this report today. Curious if it changes your mind at all about the dynamics in the economy. It doesn't change my mind at all about the Fed rate hikes. We had one in September and one in December, and that's still what we have.

10:12We certainly expect the Fed to raise rates three times the least over between now and mid-2027. I think the more important issue is that we saw wages fall behind the overall inflation rate for the 12th consecutive month. That along with low quit rates and this low churn and low turnover in the labor market, certainly consumers are expressing it as job insecurity. Those who have a job are holding on and those who do not have a job are having a hard time getting a foothold into this labor market. And that's causing a lot of consumer angst. It's why the resilience of the U.S. economy is not resonating with so many consumers out there.

10:54And I think that's really important. And in reference to the number of jobs we're creating. Yeah, a million is great, but that's what we created in six months in most years in the 2010s. So we're well behind the pace of anything we saw pre-pandemic and, of course, of the pace we saw emerging from the pandemic. So this is a very low pace and a low-hire environment. And the churn, I worry about that mobility you mentioned earlier, Kelly. It really is important because it's a dynamic that is no longer in the labor market. People cannot move to where the jobs are because they're locked in place. And I think that's very important, along with small business formation has now plummeted, not only of those individual businesses which had picked up for a little bit in response to AI, but of just a single person heading it, but those with an intent to hire, that has now plummeted as well.

11:50And that's starting to worry me about dynamism out there. I hadn't seen that yet in the data. I was still under the impression that we had this big boom in new companies and in small companies. So you did hear the interview with the labor secretary. I mean, he pointed to the number of people coming into the labor force, and I think he said a million or so. Labor force participation rate is up. So he took, you know, he wasn't so sure about that characterization that it's low hire, low fire. Yeah, it got back to the May levels, basically. Right, right, because we were falling kind of precipitously there.

12:23Yeah, it was really, really horrible during the summer. So it did come back, and it came back four-tenths of a percent in the last two months alone, and that was after we were losing ground much of the summer. But the question is, you know, that's part of the reason we had a 4.2 % instead of 4.1 % unemployment rate. Still low historically, but it just doesn't feel like your father's 4 % unemployment rate did. It's like the Dow points aren't what they once were, but in that case, that's true. So broadly, then, you know, if you were look at I was looking to the 10 year, I thought, hey, maybe it's going to be down eight basis points today on move.

13:00But it was down that much yesterday from the highs. So there was some sense, I think, of the market positioning for a soft report, which is exactly what we got. It's now pushing out the odds of a Fed hike maybe back to December. September, why would that still be necessary? Another hike, do you think? Well, what we're going to see is a really ugly inflation number in the month of September. So that's already baked into the cake because of higher energy prices. But the problem is, of course, the refining globally is really low. The ability to get diesel down is going to be very hard to get it down and stick there.

13:36We've got many states doing holidays, tax holidays, to try to reduce prices at the pump and especially prices for diesel, which is so important coming into the harvest season for farmers out there. That's really important. That said, it still is going to be a constricted supply environment. And any sort of benefit we get from some of these tax holidays, of course, goes away quite quickly and leaves a hole in state coffers at a time when they're getting more cuts from the federal government and Medicaid and SNAP benefits starting yesterday. So I think these are important things to be watching as we move forward going out there, because there are a lot of tradeoffs to it.

14:15And there is a long tail to that energy price spike. And what the Fed is worried about is the persistence of inflation. We're still running at 3 percent or above on inflation, even with improvements in how they measure inflation and the methodology that we saw in this week. And I think that's important as well, is that 3 percent inflation compounded. It's not enough for the Fed to sort of raise rates aggressively like they did in 2022. But it is enough for the Fed to be concerned that we're getting a muscle memory of inflation and we're going to get more of it. And every company I talk to out there plans on passing along those increases.

14:52Quick last comment on this. And yes, ISM prices paid was very hot. Don't get me wrong. But, you know, point two on the core PCE last month, that is your father's inflation. Well, not the 70. All right. Maybe if you have a young dad. I mean, in other words, point two is a normal, healthy, completely fine reading. There's nothing worrisome in that core inflation number that tells you the Fed needs to jack up interest rates, you know, to fight this problem. So I'm just not convinced. Look at real estate, housing. Those are only going to go down, aren't they? Yeah, I'll push back, unfortunately. One of the biggest problems is health care.

15:29And the service sector is still at 0.4 percent on its inflation. It was up much more. It's been running a percent and a half above what we saw pre-pandemic. And that's something that we know historically that is not cyclically sensitive. It's harder to hit with interest rates, which means the Fed has a harder job of bringing goods prices down when we don't have cheap imports coming in from abroad. And they have to hammer goods prices, including the price of housing, in order to get inflation to be overall in what they consider price stability. And that's what the Fed is very concerned about right now.

16:04All right. But if we have a health care inflation problem, I don't I don't that I don't think has anything to do with the Fed other than the latent inflation that had built up over the years post pandemic. You know, I don't know how health care inflation is something that we need a monetary policy response to unless it's a really, really tight and severe one. What we're seeing is we've had We've had this in the past. The Fed can't produce oil. The Fed can't bring down health care costs. In fact, the lingering inflation of the 1980s, 1983 was the last time we saw the PCE index because of the health care costs.

16:39And because of that inflation, it lingered above the overall CPI inflation rate for some time in 1983. And I think that's important to remember. And those costs weren't completely offset until we got into the 1990s. We saw more globalization and productivity gains that actually brought down prices. We have productivity gains right now, but they're not offsetting enough to bring down other prices out there. And you still need to have offsets somewhere else in the economy, even if you cannot hit that sector. All right, Diane, thank you. Really appreciate it today, as always. KPMG's Diane Swank. Coming up, former Yahoo CEO Marissa Meyer.

17:19She's launching a new tech startup that's an AI personal assistant. But instead of dwelling or using your email mostly, it's really using your camera roll to learn about you and offer recommendations and interact with you. We'll have those details ahead. Plus, the Nasdaq hitting an all-time high after this morning's soft jobs data. NVIDIA leading the way, hitting its first record high since May. Is the AI trade back in the driver's seat through December? We'll talk about that next on The Exchange. This is The Exchange on CNBC.

17:55Have a great day.

18:38www.fidelity.com.au

18:53NYSE SIPC. It's the holiday season at House of Burl, which means that it's the perfect moment to review some key rules. Rule number five, more style means more celebration. Number four, buy gifts, but remember to treat yourself too. Number three, there is no dress code, but always leave them talking. Number two, show off different outfits. No party remains unattended. And rule number one, have it all without spending it all. Happy holidays from House of Burl, Burlington. Welcome back. Stocks are higher after a soft jobs report, raising hopes the Fed will hold steady later this month at its October meeting.

19:33The 10-year did initially drop to a one-week low after the data, but has since turned higher, as you can see there. It's pushing stocks slightly off their session peaks. We'll talk about the implications of all this. Good news, bad news. What does the rebound in yields show us? Amanda Agati joins us now. She's the chief investment officer at PNC Financial Services. Amanda, welcome. Where's your mind going in the wake of today's number? Well, it's always great to be with you. Thank you. It's a bad news is good news kind of a day. And we haven't had one of those in a long time. I mean, I guess I'll take it.

20:04It wasn't really bad news per se. It just wasn't great news. So I think from my perspective, it doesn't really change things all that much. I was not baking in a rate hike out of the Fed for October. I think this is the nail in the coffin for that. I don't see how they could possibly raise rates against this jobs report. So December is probably still alive. I think the net effect of all of this is the market got a little bit overzealous with thinking about the speed and urgency and pace of rate hikes. And maybe we're just going to take a slight breather here, which is clearly good news for stocks.

20:38So I think it's worth kind of calling this that we're showing on the screen now, too, you know, still overweight U.S. stocks. You could talk about kind of where in the area. A lot of people are asking the question, do you buy bonds? I mean, look, there's there are some where I think we're talking to Jeff Kilburg about this next hour. He thinks the 10 years go into 475 with a couple of things kind of if the bounce ball ball bounces the right way. Should you lock in yields at these levels if all of a sudden we're going to put kind of the worst of the global bond scare or the Fed hawkish story behind us now?

21:09Well, I hope that he is right. That is not our base case. Our base case is that there's just going to continue to be this some level of upward pressure for a whole host of reasons that, you know, I think we've talked about a lot, right? Stronger than expected growth is one. That's a good reason. But there's a lot of good, bad and ugly reasons for yields to be rising. And so I'm not convinced any of those sort of global, macro, geopolitical, treasury related, all of those corporate bond issuance. I mean, the list goes on. I don't think any of those factors necessarily have changed in any material way.

21:45So I expect rates to continue to kind of creep higher here. That being said, I would not be buying bonds in favor of stock. So I'm not looking at that kind of tactical rotation. But we do think the way yields have moved, bonds are certainly attractive. I think it's tough in this environment, given how flat the yield curve is, even though it has shifted higher to go long duration in this environment. I don't think investors are getting paid to take on that kind of volatility and be whipsawed at the long end. But the intermediate portion of the curve certainly looks attractive in this environment.

22:18All right. Maybe like this caught my eye. It was in the Financial Times yesterday as so many people have been coming out and talking about buying bonds here. Bill Gross has a column, you know, Bond King. He says, don't own bonds and be cautious with equity. But again, it's the bond call that really grabs my attention because you'd think the bond people would be saying, yeah, here's a bunch of places to go. And he kind of a little bit of what you're saying. I think that people who have been in this for a long time know that something's up with the long end. And maybe this is the buying opportunity of a lifetime.

22:52But I think people have thought that for the last, you know, point, point and a half in some cases. And now we're wondering, well, kind of where's the resting point? Yeah, I think it's it's a great call out. It is definitely eyebrow raising, as I think I did when you were reading that quote. Certainly, it's not exactly what you would expect. I mean, I think the reality here is if you just go back to the underlying fundamentals of both the economy and the market, a.k.a. earnings growth, there is an underappreciated resilience to how strong the backdrop is. We have not seen cracks in the underlying fundamentals.

23:25We have not seen cracks in the consumer on balance. We know the low end is under pressure. We could spend all day talking about what's going on there. But I think that's important that investors need to understand that the path forward still looks positive. Yes, there is a ton of macro, what I like to call purple uncertainty swirling. It's way more complex today than it was even just at the beginning of the year. So, you know, I think for investors, we should be using some of the volatility we're seeing, both stocks and bonds, as a buying opportunity. I'm not running for the hills. I just think in bonds, you have to be very nimble, very careful, and very active looking for exposures there right now.

24:06Yeah. He says don't own bonds with the exception of one-year treasury bills. Amanda, great to have you here today. Thanks so much. Appreciate it. Amanda Agati with PNC. Coming up, we'll talk some Nike on pace for its worst year on record after weak guidance and new layoffs. What will it take to turn things around? We'll talk about that ahead. Shares are down 5 percent. Plus, a look back at Rick Santelli's nearly 30-year career here at CNBC, including some highlights from our time together in Chicago this past summer. It's like Wrigley Field. Come on. Here, you need a hand?

24:44We should have been paid for this. This should have been a sponsored safety. Yeah, here we go. Don't go our little way.

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25:37That's 5 % cash back at different places each quarter, like grocery stores, on gas, and at restaurants. It pays to discover. Terms apply. See discover.com slash 5 for details. Hey, Fidelity. What's it cost to invest with the Fidelity app? Start with as little as$1 with no account fees or trade commissions on U.S. stocks and ETFs. Hmm, that's music to my ears. I can only talk.

26:22Welcome back to the exchange. All-time highs for the NASDAQ today. The triple Qs, that's the NASDAQ 100, and the tech sector, kind of that ETF there broadly. Dow, by the way, laggard, Nike shares not helping. But let's move on, shall we? Because it's the end of an era here. at CNBC today. As we say goodbye for now, I don't know what that means, to our own Rick Santelli, he's been a fixture at this network and a part of our family for nearly three decades. Here's a look back at his one-of-a-kind career. Hey, show it to me! These guys are working your bit. Rick Santelli's all fired up at the CBOJ, Rick.

26:58It's going to be a bumpy ride. Hey! Viewers, be careful out there. How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills. Raise their hand. President Obama, are you listening? How can somebody go to Congress for days before a recession and ask for my selection? Stop spending. Stop spending. Stop spending. Stop spending. Stop spending. Would you rather have this slice or this slice? Smash, smash, smash some deficits. We're good. Rick, how you doing? Bring it, Rick. You're going hard.

27:37Yeah, here we go. I'm the sergeant at arms of this joint. Once again, a stellar auction. Fabulous. A plus. A plus. A plus. C plus. Charlie plus. Z minus is the grade. D, D, D as in dog. That's a big collie tail there. Not good. You see this? This is a mop. That's a bunch of hooey. Auctions are like buffet tables. The buffet indicator. Buffet, buffet, buffet table. Hardly had anything left at the buffet table to take. Everything in my life goes back to the markets and CNBC. Back to you, big guy. Rick, I mean, so you're going to come back, right, as a contributor in six months? Okay, so it's not, it's not, but people need to understand, your assignment was to cover bonds, okay, and to bring us breaking economic data.

28:27Like, this is not, it should be the most boring of all possible roles to do on television. The fact that you made it into that watchable is a huge testament. All I know is there was a time where somebody would pop in my ear and say, listen, okay, we're going to cut your two minutes down to one minute. And all I kept thinking was I'll get the same hit I would give for two minutes and just talk twice as fast. That's been my life on TV. If I want to get something out there, I don't care how short of a time period they give me, I'll try to get it out in one way or the other. You have been here for so many of the big ups, especially late.

29:07We've had so many crazy moves in markets lately. Here's a moment in the Treasury, right here on the exchange, March 3rd of 2020. Apologies, we have to go back and relive this. But the 10-year fell below 1 % for the first time ever. Let's revisit. it. Well, I was just getting ready to take a picture because I see 9999. There we go. Snap the picture for history. I think I'll send a copy to Janet Yellen, Ben Bernanke, and maybe Jay Powell. Mission accomplished. And so, Rick, we look at it now and we're at five and a quarter because you and me, that was just a few years ago. That's a big move that we've made.

29:47So anyway, you've been here for the ups, for the downs, for so much of it. Yeah. And the great Mark Haynes that we showed in one of the earlier clips, what a wonderful talent he was. Yes. I'll tell you what, not only do I remember the March move under 1 % in August of 2020, we traded 50 basis points, half of 1%. And in March of 2020 for the 30 year, we traded that same yield you just showed for the 10. We traded the historic low of.997. So, yes, we've seen quite a run since those days. Well, we asked viewers, and they gave you an A-plus for your career. That is their grade. And Rick said, there we go.

30:26You get your own A-plus. No easy grading here either, Rick. Seriously, for taking what you have, the material you were given to work with, and what you've done with it, Ephenom. We'll see you soon. Thanks for everything. Well, thank you, Kelly. And it's been a pleasure to work with you and the entire crew. Thank you. Likewise. Rick, thanks. Rick Santelli. Let's get to Dom Chiu now for the CNBC News update. Dom. All right, Kelly, Rick Santelli, a roll metal for so many of us. Congratulations, Rick. Saudi Arabia is reportedly planning a military offensive against the Iranian backed Houthi rebels in Yemen.

30:59That's according to Reuters, which reports a key objective is to reverse territorial gains made by those rebels in recent months, who now have a strategic control over parts of the critical Red Sea shipping route. The Kennedy Center announced today that for the first time in its 50-year history of the event, the annual Kennedy Center Honors will not be held at the Kennedy Center. With the main building now closed to the public amid a fight over adding President Trump's name to the memorial, the center is moving the celebration to Capital One Arena in downtown Washington, D.C., which is also in the middle of renovations itself.

31:35It is scheduled for December 7th, but honorees have yet to be announced. And Tony Romo is out at CBS. The network announced today that the NFL game analyst will not return after his July arrest for driving under the influence. The network said it was a mutual decision. In a statement, Romo said he's going to take some time off before considering his future move. Kelly, I'll send things back. I think he said it had been nine years, which I couldn't believe feels feels brief. It feels like it just happened. But a long time ago for sure. Don Banks. You got it. Coming up, would you rather give an AI agent access to your email or your camera roll?

32:12We polled people on X. We'll bring you those results when we speak with former Yahoo CEO Marissa Meyer, who's unveiling her new tech startup called Dazzle AI, the personal AI agent powered by your photos.

32:27The AI assistant race is shifting into high gear with companies racing to challenge Meta's popular muse. One of those competitors is Dazzle AI, a new consumer startup from former Yahoo CEO Marissa Meyer. Dazzle analyzes information from your camera roll rather than your inbox to build a more personalized AI experience. Joining us now is Marissa Meyer. She is the founder and CEO of Dazzle. Marissa, it's great to have you here. Welcome. Thank you so much for having me. How did you get this to work? I mean, I'm using it. I'm texting it because I think that's like the great interface. And it's so fast, but I'm like, who's the back end of this?

33:04Well, we have a little startup here in Palo Alto. So it's our back end and we built it. And yes, you can use it via iMessage. We also have an app and a website. And what we do is we grab your camera roll with your permission. You can give us all of your photos or just some of them or none of them at all. And we personalize the experience and basically customize the AI to you. Yeah, I messed around with that. It reminded me a lot of how it works with other. I've dabbled a teensy bit with Muse or worked with like the likes of Gemini Spark and things like that. I kind of can't figure out what the difference is between all.

33:37And I'm so impressed that you guys can offer the same kind of experience I'm getting from Gemini or Muse. But you're saying that your team built this and you're the back end. So what happens to all these, you know, frontier models with all of this firepower when Dazzle, to me, again, I'm a basic user, but can kind of do the same thing? Well, to be clear, we do use the frontier models as our back-end LLM, but what we really feel is that the next frontier of AI is in the context layer. How do you understand more about what the user is trying to do, the context in which they're using your product?

34:08And so for us, that context comes from your photos. From your photos, we can figure out where you live, what your kids like, the foods you like, where you like to go, how you like to spend your time. And it means when we're suggesting things like what you might do this weekend or, you know, where you might go on your next trip, what a gift you might buy. We can be much more personalized because we understand the visuals of your life. Yeah. How big is, you know, you can give as much detail as you feel comfortable, but I'm asking for a reason. How big is the team? How quickly could you stand this all up?

34:40When did you get the idea? What if other people are working on the same thing? I think there's a lot of people who are working right now on the assistance space. We're the only ones we know that are working particularly on using photos as context. And right now our team is small. We're about a dozen people. And we've been working on it, I would say, for about the last nine months. So it's been exciting and it's a great time to be a builder. It's been a really fun time to build because there are so many amazing tools and insights you can get from the product. And that's what we keep hearing time and time.

35:12You know, when Mark Zuckerberg gets out there and wears a shirt saying, building is my love language and to see how different the vibe is at Meta now in many of these places, which feels like it's back to 15 years ago, right? It's all of this building going on. Where do you think this is going? I mean, are you guys thinking about things like IPOing or raising more capital? Because for the public markets, the options right now seem to be anthropic when it comes and debate the trillion dollar valuation, OpenAI maybe sometime next year, and then it's kind of crickets. Well, I think that for us right now, we're a seed stage company, so we're just getting started and we just released our first product on Tuesday.

35:50So for us, it's really about getting to know our users, understanding what they want, how they want us to evolve the product and really making it work for their lives and in the context that they want it to work. And so we have lots of feature ideas. We're going to be basing that off of our initial users input and how we see them using the product. And so a lot more to come, but we're just getting started. Yeah. How come, you know, one of these companies couldn't just say, yeah, yeah, yeah, we do that now, too, with photos. Right. I mean, is that or do you become integrated? Are you an aqua hire?

36:22There's like how you actually use photos and the insights you get from them and how people take photos. Because one of the things we're seeing is that when people know they've got an agent that's monitoring their camera roll, you take different photos. You take photos of things you need to do, things you need to buy, things you need to fix. because we also have a get-it-done list where we can figure out what your to-do list is and we can actually deploy AI agents to help you get it done. So there's a lot of really exciting things. So we do feel that we've built a significant amount of IP and the way that we handle photos, it's something that we've worked out for a really long time and I think we get really deep, better insights than someone who's just starting out today on it.

37:01But it's definitely a very competitive space and we're going to have to keep evolving and keep bringing out things that delight our users. Do you, I'm trying to get into like the business model, a little bit of these things, compute the cost of it, all of that. I mean, to what extent does that affect you? So if you all of a sudden have a huge spike in users, tons of people are downloading and using this, do your costs go up? Oh, certainly there's some amount of linearity with all the costs of these agents. I will say that the models get better all the time. There's new and exciting models like JEV that are coming out that could really transform the economics behind this.

37:34But our goal is really to provide end user value. How can we provide something that people want, they want to keep using on an ongoing basis, and become really integral to their lives and a resource that they turn to frequently? I think if we can get that kind of adoption and that kind of usage, it fuels the ability to do direct-to-consumer payments, either on transactions or on a subscription basis. And I wonder, you know, if there's people out there who go, well, I don't know if I trust, you know, OpenAI with my photos, but I trust Marissa, right? I mean, you wonder. I do think that there is, when we start to deal with some of this private and sensitive data that a lot of these assistants need in order to do their jobs well, I do think there becomes an issue of trust.

38:18Dazzle has been built with trust at the foundation, so we let people decide what kind of photo access they want to allow. And we also have a view of when in doubt, leave it out. So whenever we see a sensitive photo, we just immediately leave it out if we have any concerns that it could be sensitive at all. So, you know, we need to have that type of element of privacy. But I do think another thing that we see consumers do is they'll say, you know, look, I don't want to give all of my data to one company. I actually do want to have a few agents, not a ton of agents, but a few different agents that have different capabilities and different specializations.

38:50And we really think that there's a lot to be an offer through photos. In fact, we have an MCP, and when you take that MCP and you plug it in to Claude or Codex, we see that Claude will consult us and say, what kind of dietary preferences do they need? What are some of their favorite colors and aesthetics and things like that? And we can actually help improve the capabilities in your core agent as well as just being a standalone app. Yeah, it's a massive race. Kind of a barrage of questions to kind of close this out. How do you guys make money? Because for me, it was just a free experience. Like you said, it still has a cost associated with providing the service that you're providing.

39:28And kind of where do you see all of this going? You know, your own journey, but all of this technology. Here we went so quickly from chatting with, you know, AI to having agents flooding the Internet, you know, working for you. Well, we are a free service. I think ultimately we will end up being a service that has multiple tiers, both free and paid. And in terms of where this all ends up, I think it's a really exciting time. I think that there's going to be both a broadening initially of different agent capabilities and then a narrowing. But I also think that most people are likely to have a few different agents that ultimately work for them.

40:05And it's going to be a matter of which ones they trust and also which ones provide the most value. So right now our focus is what do we see Dazzle users doing? What do we see them enjoying? Where are we great? Where do we need to broaden out our capabilities? and it's just terrific to have users using the product and seeing the exciting things they're doing. I've been excited about personal assistant software since college. My grad degree is in artificial intelligence and I remember reading the first personal assistant papers and being like, this is something that probably is going to happen in my lifetime.

40:35So I couldn't be more excited for this moment. So do you worry about AI extinction risk then? I definitely think that there are some risks about AI, but I would say on the whole, I'm an optimist. I think that we're going to see so much opportunity, so much creativity unleashed by these increased capabilities that are being offered through these agents and other technologies yet to be invented that I tend to be really optimistic. I definitely think we have to keep an eye on the downsides, but I also think it's important to not forego the upsides out of the concern for the risks. Great tool for busy moms.

41:10I think you know that firsthand. Marissa, thanks so much. Really appreciate it. Thank you, Marissa Meyer. Coming up, shares of Nike touching a 13-year low today. The company announcing a new operating model, but it's not enough for Wall Street. What can turn it around? We'll discuss when we come back. Welcome back. Nike shares down four and a half percent today after declining revenue in the first quarter and issuing weaker than expected guidance. They're also announcing a new operating model, which includes layoffs. That's Nike's third round this year. Here with the details and whether it will right the ship is food and wellness reporter Brandon Gomez.

41:49Brandon, where do we go from here? Hey there, Kelly. Yeah, the key takeaway from the call last night is that Nike is finally putting a more concrete plan around its turnaround, but also acknowledging just how long that plan will take. CEO Elliott Hill pointed to momentum in performance, which helped growth in North America. He also pointed to early momentum in women's basketball, including strong sell-through for its new Caitlin Clark shoe that released yesterday. But those wins are not yet big enough to offset the deeper resets in sportswear, Jordan, and China, where Nike is saying it will shut down much of its partner-operated digital distribution and concentrating sales in official flagships, working to reposition itself as a more premium, locally relevant brand.

42:27But management is clear it will hurt revenue and profitability in the near term with pressure extending into early fiscal 2028. And that explains why the analyst's reaction this morning has been fairly negative. Morgan Stanley called the profit beat low quality, while Wells Fargo said it is hard to find good news. Citi says Nike is increasingly becoming a cost-cutting story. And that's becoming the case. Nike announcing, as you said, a restructuring plan called PACE, including supply chain changes, a geographic reorg. Two and a half billion dollars is expected in savings, including cutting some jobs, as you said, in 2027.

42:59The company's CFO is saying the largest savings aren't expected to be felt until 2029 and 2030. For now, though, Kelly, Investor Day is the next real test for Nike's credibility and if they can turn the stock around. Or we'll start talking about, you know, who might be their Brian Nickel, perhaps. Brandon, thanks for now. Appreciate it, Brandon Gomez. Coming up, while Nike's trying to pick up the pace, McDonald's is preparing for what's next. With both companies under pressure this year, we'll get the turnaround plan our trader is betting on. Which would she rather? We'll find out next. We just mentioned Nike, the biggest Dow laggard today with shares on pace for their worst year ever.

43:37Another consumer name isn't far behind, and that's McDonald's. Down nearly 24 percent since Jan 1. It's the third worst performing blue chip. So which one would our trader rather buy? Let's bring in Victoria Green. She is CIO of G-Squared Private Wealth and a CNBC contributor. Victoria, let's close things out here with a little bit of would you rather. We'll start with this one, McDonald's or Nike. What are your thoughts? Oh, it's the battle of the beatdowns, but it's McDonald's all the way. They have a clear vision, strong leadership. They've involved in McDonald's. What's next? They're going to invest over$5 billion.

44:11They want to grab about 150 basis points more of the chicken market. They want to grab another one and a half percent of the beverage market and they know what they want to be and what they need to do to get there. I see so much value in the stock here. It's one we own. It's one we're adding to because we know they know their customers. Their real estate portfolio is absolutely unmatched. And McDonald's is known to execute well on a turnaround. Plus, as a Diet Coke girly, they have the absolute best and freshest coldest Diet Coke and Coke. There absolutely is. And so they resonate with me, the casual fan or the like weekly users.

44:43McDonald's it is then. Okay, I want to move along and actually ask you about a bunch of different things in the market. We were just talking to Marissa Meyer. We were talking about kind of her new agent called Dazzle. There's all these personal assistants out there. Is there a name like Meta that you would feel is the growth engine for the space? Or is there kind of a more traditional Google, a big kind of multifaceted provider where they might have a Gemini plus a lot of other things going on? Which which would you rather of these two? Yeah. And look, they're quality stocks, but I think meta takes it by a hair.

45:18I love what they did with Muse. They're pivoting into a whole new atmosphere. They have three point six billion daily active users across their platforms. That's 43 percent of the estimated global population logged into their app. Now you're unveiling, hey, use this as the everyday person implementing A.I. And we see Muse as a huge catalyst. They have litigation behind them. They're executing. Well, yes, there's CapEx burn. But look at how they're pivoting. And they have now new verticals, right? They have the Muse app. They have the Ray-Ban smart glasses. And they're kind of pivoting away from the crazy metaverse reality brand thing that we never really loved.

45:51So if MetaFolk Force goes into AI, I see them taking the lead here. And I see them grabbing market share with Muse. Absolutely. I think it's a very interesting play. All right. This next one is supposed to be kind of semis or software. But I'm going to add a twist with the memory names. You probably saw a couple of those key names, Sandisk and the likes, down on reports, I think, of Taiwan. adding more capacity today. And you were right. I mean, we talked about this around the time this was peaking and rolling over, and you said don't sit out kind of the semis and the memory names. So do you kind of still feel good about going in that direction?

46:28The SMH is up 4 % this week, by the way. You've got software, which is also showing signs of market leadership up too. I guess you don't have to be would you rather. You could do them both, but just weigh in on that. It's kind of a triple SMH, DRAM, I guess we would say, or IGV. Yeah, I do like both. I think it is semis over software. There's some great names in IGV as expanded software. You get your Palantir, your Palo Alto. Cyber's been a big fan. I have to say if I'm backing one, it's going to be semis. And if you just take apart that ETF, you get NVIDIA, Taiwan Semi, Intel, Broadcom, AMD, everything you want to own in that space.

47:01We are still bullish semis. It actually has a little bit less of the direct memory names in there. It really doesn't have a big holding in SDX or WDC and those guys getting hit today. This is a pure play on some of these huge chip stocks. We like this space. We think NVIDIA got cheap, and that's the 20 % of this ETF. If you need a broad-based AI play, I see this as a really great way to get your toehold in to a broad-based chip play, which is possibly going to do very well in earnings season if we continue to see the capex we've seen. All right. Perfect place to leave it. Same place we've left it, I think, the last few years.

47:35Victoria, thanks so much. Appreciate it today. Thanks, Kelly. Victoria Green. And that's it for us. Thanks for watching The Exchange. I'll join Brian Sullivan for Power Lunch right after this break.

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