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Good morning, welcome to Squawk on the Street. I'm David Faber with Sarah Isand and Mike Santoli. We're at Post Night in the New York Stock Exchange. Carl and Jim have the morning off. Let's give you a look at futures as we get ready to begin trading for the final session. The week, you can see we are looking for a sharply higher open. And our roadmap does start on those markets, as you very well might expect. Stock's looking as you just saw it to open higher. It's been a somewhat wild week of trading. Investors perhaps optimistic the latest PCE, for instance, suggest the Fed remains on track to cut rates shortly. Plus, plenty of earnings reports to monitor this morning. Bristol Myers, Charter, 3M among the biggest movers here in the pre-market. And Bitcoin rallying, closing in on its March record. The move higher coming ahead of Trump's appearance at Bitcoin 2024 conference. We're live for you in Nashville with the latest. Alright, let's start with what is the Fed's preferred inflation gauge? PCE rising 2.5% in June from a year ago. That was in line with expectations. This as the broader markets all sit lower on the week after another volatile session yesterday. Who better than discuss this with than Sarah Isand and Mike Santoli. Alright, I mean, I know it's the preferred gauge because of you. So what do we think of the number? What does it say for this ongoing debate about when we get the first rate cut? It's the preferred gauge and it's a preferred reading on inflation, which means no upside surprises, pretty much in line with consensus and shows that we're not getting that kind of inflationary spurt that we got in the first quarter. And I know we've been saying that now for three months in a row, but it's always good to see that we're not seeing inflation flare, especially because there was a little bit of an upside surprise on yesterday's GDP PCE report a little bit. And you can chalk that up to a May revision higher in this report, but the June numbers are out and they look good both on core and on the headline numbers. If anything, it just you go into next week as a Fed member with more confidence that you can start to signal a September cut because the economic data is okay. Good, not great showing that we're slowing incomes come in a little bit worse than expected. Spending comes in a little bit worse than expected. The savings rate goes down, which is a sign that Americans are tapping into their cushions from post COVID. And so it's appropriate, I think, if you're a Fed member and a lot of economists here agree that you should be paying more attention to the downside risks to the economy now because inflation does look like it is coming down to that target. It's not at the target yet, we're still what? Two and a half percent on the headline number, but it's getting there. Two and a half percent by this point, by the Fed's own collective projection, they're talking two six by the end of the year, maybe two five. So in other words, it's right in the zone where they thought it should track. And of course, the premise is because Fed funds rate is at five and three eights right now, there's a lot of room to cut. And I do think the market certainly has greater attention on the deceleration of the actual economy and some choppiness and consumer behavior. And you look at housing really looking bumpy right now, drying up a activity, you're seeing the automakers have not such great things to say about the immediate outlook. So it all does fit together. It also hits a market, though, that I think at the end of the second quarter, and then with that kind of lunch higher and tech into the first two weeks of July, really did crystallize around a perfect soft landing scenario. And to me, it's exactly at the end of the first quarter, where you finished at this record high point, tech leading the way, but you also had the soft landing and earnings growth expectations all working together. And you've had reasons to just have a little bit of doubt around those edges. Have we overpaid for tech earnings is a big question. Yes. And what does it mean that we can rotate around them? What does it mean for the stability of the market and the ability of the rest of the market? Multiple have started to come down for these biggest companies given this massive rotation we've seen and talked about now for the last couple of weeks. Yes. Let's get to that, Mike, because we end another volatile week as we just said, in which we've seen mega-cap tech once again decline, while the IWM, the Russell 2000 ETF has been going higher. Russell's ending the week up 2% with the NASDAQ down 3%. And these differentials are historic in nature at this point in terms of having -- when you add up what's gone on over the last few weeks, again, does it reverse? What does history tell us of anything in terms of a move like this? I mean, it's all the exact 180 degree opposite of what we were complaining about or many were for months before, right? Which mathematically, there was so much embedded in the very top of this index. And there's been this fascinating work that shows that the S&P 500 is less correlated to the stocks within it than it is to like the bond market and other currencies. In other words, it's trading as its own thing because the top 5 or 7 stocks are that big. Now, what does it mean the history wise when we get one of these reversals and you get a broadening out of the market, usually it does buy the market a few months of, hey, nothing bad tends to happen and sometimes you get some follow through. But I do think the erratic nature of the specifically small-cap revival probably has a risk of kind of petering itself out or just kind of losing a bit of steam because it is so mechanical and forced. It's kind of like when the market rallies and you see the most heavily shorted stocks go up 30% and 40%. It doesn't mean those are going to be the stocks that lead the way the rest of the way. It just means you had this huge lift of pressure and really what's going on is the most popular trades have come in. People have reduced risk in general. That means most of the stuff they owned is being sold and you're rotating a little bit into the rest of the market. It's not unhealthy, but I also don't think it's over. Yesterday's intraday rally was interesting, made sense on a lot of bases, S&P, 5% down from the high, the NASDAQ 100, 10% down from the high, you hit some key technical areas, starting to look oversold in semiconductors in particular which have basically been the lead on the upside and the downside, rally attempt, S&P 500 gets toward 5500 and you lose a percent and a half off the intraday high. That's typical high volatility. We're looking for traction in a pullback type mode here. I think PCE sets the macro on a pretty comfortable spot. It's much more about the market mechanics and how high the bar is for earnings. When you said that we got out of a lot of popular trades, I've been talking a lot about this move in the dollar yen and it was sizable this week. But 2% move for stronger yen is a reversal that we've seen and you saw similar type reversals from other crowded trades like gold and Bitcoin and dollar yen is considered kind of a litmus paper because it's a funding carry trade for some of these other things. But I do wonder just how much of the overall move and this extends to the rotation and to equities too is fast money, technical machine trading flush out of these crowded trades and instead of a fundamental reason to buy small caps at this point. I think the fundamental basis has kind of been there but it's not been an immediate catalyst. I do agree with you. It's mostly been about tactical repositioning and the stampede out of these crowded trades. I showed last night that on a one-year basis, the NASDAQ 100 and the Nikkei 225 have been the same chart. So long Nikkei short yen, it was all short in the same matrix. Exactly. So this morning you're starting to hear people looking at that activity in dollar yen and say actually that's a bear market rally in the end that might actually be spent at this point too which would be net equity positive. So I don't really worry that much about the causal relationship. It's much more about it all happening at once because people got too far on one side of the boat and now they're coming. By the way, Nikkei down 6% this week. Really? 6% yeah. I'm hearing Andrew talk to Bernard Arnow from LVMH as well about Chinese consumers who go to Japan to benefit from what had been that weaker yen in terms of buying their luxury goods. Japan was the star of the luxury reports. Yeah. Double digit growth in Japan, slowing demand in Europe in the US. Nice. And China. The stores there too. Don't say they're beautiful. In Japan. Oh, I know. They do shopping so well. Even their department stores are fun. Yeah. Like the US department stores need to be more like Japan. No. I wasn't expecting that when I went to Tokyo years ago. All right. Back to the US. Let's talk about the upcoming election for President, former President Obama now officially endorsing Vice President Harris while former President Trump prepares to meet with Israeli President Netanyahu. That'll be later today. And when it comes to business leaders who are continuing to work through what either candidate could mean for markets and their business, I see Chairman Barry Diller gave his thoughts on the Harris campaign this morning on Squawkbox. I hope that she does not tack. Let's call it left. I hope she is the center little L candidate and that she really does seize this moment. And if she does, she'll have the energy and excitement of the majority of the people. And she will be the next president. You seem somewhat confident of that. Of course, something that will indicate that perhaps is the VP pick from the expected nominee Vice President Harris. She's not obviously the nominee of the party as of yet. She doesn't have a lot of time to do it. Unlike a traditional cycle, we are increasingly hearing from business leaders. Yesterday, we talked to Peter Orzag, the CEO of Lazard, who stopped, took off yesterday off earnings. But he also came out, listen, and here's what he said about the vice president. I have known the vice president for over 15 years. I have always been impressed by her and I think she would make a terrific president. Orzag, I have one of many of those typically democratic donors as well that was on a call early this week. I mean, so many of the names, of course, we know very well. Roger Allman, who we spoke to, Larry Refron, Ray McQuire, Syed, it goes on and on. And I did hear from people who were participating in the call that there was more enthusiasm in terms of giving money, which obviously is going to be very important in these last hundred days of the campaign. I mean, her fundraising all this week has been nothing short of amazing. And I think the question now, and when you ask these business leaders the follow-up, Andrew did this morning, we did with Peter yesterday, so what do we expect for business, from a Harris administration, a little less clear, right? Consistency from the Biden administration, but how is that going to manifest in terms of antitrust policy, regulation, trade. Some of these are big question marks that we're going to need to- On the expiration of the Trump tax cuts is the one thing that any president is going to have to address, and if it's a split, I mean, there's going to have to be some navigation of that. Well, I don't think she's going to advocate for the continuation of the Trump tax cuts, but there's probably a space in the middle there to actually- And does she advocate for a higher corporate tax rate, which she did as a candidate- Right. Which we're just happening. By the way the law is written right now, it just happens by the college. It just happens. I'm hoping for it just happens. And then we get the salt tax deduction there. You and your salt tax. Look, it affects all of us. Look, it affects all of us. That I will ever have experienced and many other W2 employees here in blue states will ever have experienced in their lives. Yes, and that was painful when it went away. It continues to be painful. Yes, it continues. All right, well, broader markets taking a breather in July, but not Bitcoin. In the green, ahead of a widely anticipated speech from former president Trump this weekend at a major crypto conference, he's also going to have a big fundraiser there. CNBC's Mackenzie Sagalas is there in Nashville, where I'm sure there's a lot of excitement building. This is not your typical Bitcoin conference. No, it's not. It's the big flagship event of the year. As you said, Bitcoin, up 5% ahead of those remarks tomorrow. The former president's total 180 on his crypto stance has made him very popular with this voting block. But before the Republican presidential nominee takes a stage, we're actually going to be hearing from a half dozen other Republican and Democratic lawmakers. You've got senators Bill Hagerty, Marshall Blackburn, and Tim Scott all on the agenda for today, talking about their vision for how DC could shape crypto regulation in the US. Really, everyone is waiting to see just how far Trump will go in supporting this technology, what he promises to do for crypto innovation, if reelected as president. Now we know that in the past, he's made the suggestion that all future Bitcoin should be mined in the US, but he's going to have to make some big promises to live up to all of this hype. Just one example, Bitcoin got a boost to the $68,000 level briefly on Tuesday ahead of this event after reports that Senator Cynthia Lumis would introduce a bill that would require the Fed to hold Bitcoin as a strategic asset. He also speaks on Saturday, so we'll see if that comes true and if Donald Trump has any big declaration of his own. I think the biggest thing that we've seen in 24 is that this not only is being viewed as a more legitimate and important issue, but that that transformation has actually become now bipartisan in nature. Just there you're hearing from BlackRock's head of digital assets, so clearly some people within the institutional community here are hoping for this to be more of a bipartisan conversation, but overwhelmingly, I've been on the ground in Nashville since Tuesday. Everyone is talking about Trump and how they're planning to go all in for him and they're showing up, not just in person, but they're also voting with their pocketbooks. Yeah, I mean, you mentioned the idea of government buying Bitcoin as a strategic reserve. That's certainly something. Are there any other pieces of legislation that former President Trump could talk about or show a distinction from the Biden administration, particularly the SEC and Gary Gensler, who gets the most, I think, flack for being anti-Bitcoin in this administration, where he could talk about a real agenda? No, it's a great point. So last month, Trump was quoted as saying that he's going to end Joe Biden's war on crypto. Just as he said, Sarah, that starts with the SEC. And so he's been in conversations, being advised on who could potentially replace Gary Gensler, be more friendly to the community. He's also been talking about rolling back regulation, which is a mixed bag. Of course, we saw the washout of 2022, and a lot of that came from not having enough compliance, not enough hard and fast rules. His vice presidential pick, JD Vance, also has his own crypto regulation that will go up against what we're expecting to see from Senator Lomis. So a lot of different pieces out there. I think that people are very keen to see if the U.S. might add Bitcoin to its balance sheet, though. Mackenzie, thank you. Mackenzie Sagalas. After the break, Apollo's chief economist will give us his take on this morning's inflation number. And still ahead, Joe J. Annie, Trust Head, Jonathan Cantor will be a guest on Squawk on the street. Join us in the next hour. Maybe look at futures. We begin trading 15 minutes from now, and as you saw earlier, nothing's changed. We are looking for a sharply higher open, a lot more squat from the streets, straight ahead. At EverNorth Health Services, we believe costs shouldn't get in the way of life-changing care. And we're doing everything in our power to make it possible. Behavioral health solutions that also keep your projections at their best, it's possible. 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Learn how Capella can make a difference in your life at Capella.edu. Welcome back to Squawk on the street. Year over year, core PCE coming in, slightly higher than expected in June, ahead of a big decision on rates next week, though it was mostly in line and showed a lot of progress. Traders sticking to the view that the Fed will cut rates in September. Here to break things down as Apollo Global Management Chief Economist Torsten Slock, another sign of progress on the inflation front. Does this cement the view that they will start hinting at September next week? Well, as you're saying, Sarah, today it was actually the case that core inflation was a little bit higher and that's also what we got in the GDP report yesterday. So combining that with the overall GDP headline of 2.8% growth, strong jobless claims yesterday. We also got retail sales for June, still strong. If you look at the hotel demand on a weekly basis, still strong TSA data, also strong across the board, you're still seeing reasonably strong growth in the economy. Yes, there are some pockets of weakness and we're certainly all watching that very carefully. But I do think that the main message from the data we've got in this week is still that the economy is doing quite well. Inflation is coming down, but it's just not coming down as quickly as everyone would like. And finally, we have two more CPI prints before this September 18th when we see meetings. So yes, the Fed may cut in September, but let's just wait and see a little bit more progress on the inflation front just exactly as Jay Powell has been saying. So you are not convinced. I mean, it was a pretty core PCE and we're going to do decimal points here because zero point one, eight, two percent was the monthly change. I mean, that's okay. And even with the May revision higher, we're not talking about any kind of flare-ups of inflation like we saw in Q1 and Torsten incomes were lower than expected and spending was lower than expected. Understood. But the tailwinds coming from the gains in the stock market, the S&P is up more than 10 trillion since the Fed decided to talk about cuts in November of last year. But tailwind to consumers' spending is the whole reason why we're still seeing strengths in hotels, airlines, restaurants, concerts, sporting events across the board. It's not surprising that consumers are doing so well despite that the Fed is high. Yes, I know everyone wants this cut to come and sooner than the later because, yes, it does make sense from a number of different dimensions to begin to maybe normalize interest rates. But at the end of the day, if the strength of the economy is still running the risk here that we might get another, as you're saying, flare up on more tailwind to the economic outlook, then I do think it's premature to take out the champagne bottle and begin to talk about a dramatic amount of rate cuts coming. Just because the stock market is going up, I mean, you think that's the biggest upside risk. That's going to happen anytime they go into a rate cut. If you look at some of the labor market measures, the fact that unemployment has gone up to 4.1 percent, and I get it, it's still decent, but we're seeing a move up, the job openings picture. The earnings ratio to unemployed people, the unfilled jobs to unemployed, I mean, all of those point to cooling in the labor market, which is something the Fed, it's part of their mandate, and they have to prevent it getting worse. I hear you, Sarah, but hold on, none found payrolls was 206,000 last month, the contentious expects. Also 200,000 for July, it was 200,000 12 months ago. Job creation has basically been flat for the last 12 months. So in that sense, we're still seeing steady job growth. Some of that is likely immigration, and immigration is likely also the reason why the unemployment rate has gone up. We're not seeing a layer of score, we're seeing people show up at the labor market and looking for jobs, and therefore job growth is still steady, but you're right, there's some weakness in some of the labor market indicators, but the question is, does that justify the pricing of three cuts this year? And I don't think that's the case. I still think that the economy is doing quite well, yes, there are some signs of weakness here and there, but that's what we have seen all along as a result of the Fed raising rates hitting the hardest levels balance sheets, many of those balances that have the most debt. So overall, I still think that the economy is chucking along very nicely here. Okay, well, that's the hawkish view, which maybe that'll be a view inside the Fed as well next week if the debate goes on. Torsten, thank you very much for weighing in, and I'm PCE, appreciate it, from Apollo. Squawk on the street coming right back. Support for this program is provided by Chevron. Chevron for Energy is projected to continue rising in the future. To help keep up, Chevron is increasing their US oil and gas production, and they're innovating to help do it responsibly across their operations, including their Gulf of Mexico facilities, which are some of the world's lowest carbon intensity operations, helping supply energy that's affordable, reliable, and ever cleaner. That's Energy in Progress. Learn more at chevron.com/MeetingDemand Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. All right, let's take a look at shares of 3M up sharply this morning. Mike, you know, I mean, the sales numbers, top line, you wouldn't think much of it given down to half a percent year over year, but it's all about expectations. All about expectations, pretty depressed valuation, clear upside beat to earnings. Even organic sales growth, if you adjust for what the expected headwinds were, 1.2% annualized. That's better than expected. And clearly, they've also blessed the streets, current, full year view, the guidance was raised. I think in general, though, we have his embedded low expectations for a series of disappointed companies, new CEOs, he's only been there a few months, huge opportunity for simplification of this company, where the future ends up coming out. And only 50% of the street has a buy rating on it. A lot of people up to be convinced. Capella. I feel like it's not really that this is more of a self-help execution story now. Exactly. We've got a lot of movers we're going to get to. Let's tell you who did the honors here. That was the opening bell, of course. Take a look at the real-time exchange, as you might expect, given futures. A lot of green on that board. They're at the Big Board Supergroup Betway and Manchester City announcing Betway's deal to become the official betting partner of the English Premier League Champions Manchester City Football Club. It was a mouthful, wasn't it? Over at the Nasdaq, Esports Organization, NIP Group, IPO today. All right. Where do you want to start? We got plenty of movers this morning. I'll start with Charter. My area, one of my areas of favorite areas, stocks up 13%. A lot of shorts in the name of Charter, of course, one of the larger cable companies in the country competing against the likes, for example, of our parent company Comcast, which reported earnings earlier this week, which was also a beneficiary of Charter's numbers. Why? Well, even though they lost broadband subs, it wasn't nearly as much as anticipated. I think it was 149,000 was the loss. There were estimates out there that they would lose as much as let me just take a look at some of the numbers out there, 250,000 subs during the quarter, perhaps even more. That did not come to the fore. That is seen as a real positive this morning there. Oh, actually, I'm seeing 400,000 negative. Street was a 257,000. I'm looking at a Wells Fargo report. Unpredictability, though, of this affordable connectivity program is the key. We've talked about it a lot. Remember, it expired. It was helping people pay both their broadband bills or their wireless bills. You heard it, figuring to Verizon's numbers. It's figured into the Comcast numbers as well, not as much for AT&T. Here Chris Winfrey, the CEO of Charter, discussed the impact of the ACP during the conference call. Take a listen. During the second quarter, we lost 149,000 internet customers, most of which was driven by the end of the affordable connectivity program. We've retained the vast majority of ACP customers so far. The real question is customers' ability to pay, not just now, but over time. I expect we'll have a better view of the total ACP impact once we're inside the fourth quarter. The lack of ACP will also drive higher levels of market churn and selling opportunities for connectivity services over time. Any number of these companies working through the questions around this important program that helped, obviously, to enhance the roles of customers, many of whom they're trying to keep, but affordability, obviously, Sarah, continues to be a question for some of these people on the lower end of the income scale. It's like a theme we've heard across the earnings spectrum and consumer companies especially. The only stock doing better in the S&P right now than Charter is Decker's Outdoor Corporation. This is the parent company of Hoka, and that's the story of the strength in this stock and in this earnings performance. Decker reaffirming its fiscal 25 revenue, but beating on the top and bottom lines in a big way, the Hoka revenue up 20% from last year was up mid-single digits as well, and they raised their earnings outlook. Clearly, there's a lot of excitement and the global expansion around Hoka in particular is really taking hold, and investors have been excited. The stock is up 70-something percent over the last 12 months, and it's going to be up another 13%. You see that peak there, that was June, that was the peak in all momentum factor beneficiaries, and so they had this huge surge, it's a category killer within consumer. It looks a lot like Chipotle, and a few other anointed names, so you had this huge unwind of that trade, and now they got the fundamentals come in and say, "Actually, the story hasn't really weakened at all, it's just about the kind of valuation and sort of the relative positioning of the stock." So it hasn't been fundamentally based on some of these stocks. Right, so maybe the upside was exaggerated in the momentum surge, and now the sell-off overdone absolutely since the last month or so. They're given a reason to buy, they're talking up some new innovation and rollouts, including the bondy line of Hoka, and it really does stand in stark contrast to stock performance of Nike lately, of Lulu Lemon lately, and I know Lulu is less than the sneaker business, but when you hear Nike talk about softer sales and read about the market share declines, and then look at a quarter like Hoka, and also we talked to New Balance this week, it's a private company, but they've doubled their business in the last few years, you see where those shares gains are going. You could definitely argue that Deckers, though, has become a lot more kind of hit driven, so it's sort of like as long as that remains the hot brand, because it is now 28 times earnings used to be kind of a 15 times more slow and steady, so obviously changes the equation there a little bit. They're getting full price. I want to get to the blow-up of the day, and we've had a number of them this week. Yesterday, Edward's Life Sciences, our viewers may recall losing what about over a quarter of its market value. Today is much worse, and it's another large company from a market cap perspective, or at least it was at the beginning of the morning, and I'm talking here about Dexcom, had been a $42, almost $43 billion market value, a lot less now. Look at that loss as the company, both reports, a top-line miss for its second quarter, its revenue number, and it also reset guidance dramatically, driven by what they're calling three main factors, a sales force realignment, rebate timing having been accelerated, and as well, some issues in terms of patience, and the channel, and things of that nature, all of which is simply to say that this thing is not getting the gross, multiple fuel customers. By the way, I haven't explained glucose monitoring systems is what we're talking about here. We see these, and we have actually a few times this week, seen dramatic sell-offs and some names that really, when they miss the top-line, it's over. In the growth part of healthcare, in these areas within healthcare that are seen to have these massive demographic headwinds, and great unit economics, and all the rest of it. So yeah, obviously not a lot of patience for that story. Now they're talking about the diabetes drugs at this point, obviously it's got to be the first thing people think about it. Is it the GLP ones really that are affecting it or not? I saw Jim Kramer, who of course is off, but doesn't mean he's away, talking about he thinks maybe Abbott is taking market share in some fashion, even though there are some animals who are defending saying it's not a market share question, I think investors at this point are saying, "Well I'm going to sell now, we'll ask the questions later." It also, it comes down to, have they already maximized in a short-term basis in terms of their penetration, you know, if you get to be a growth company and you have to hit your numbers, there's always these little pull-fowards and you have a hiccup and a couple of things in a quarter, and this is what happens to, you know, a growth stock value that way. You did want to, we got to see the follow-through in Alphabet today, it's continuing to weaken, this has been a negative reaction to the CapEx numbers and a little bit of a modest miss on the earnings, and then we have the open AI headlines that hit during the trading day yesterday in the afternoon, launching a search engine. Search GPT. And I mean, obviously heavy sentiment, I guess, related to that, nobody can calculate what the actual effect is going to be, what the uptake of a new search engine might be, but I guess it just sort of, all the news this week pokes at the weak points in investors' view of Alphabet, even if it's not necessarily the business itself. That is- It's funny yesterday I was making the point of how short-lived the seeming threat from investors' perspective was to their monopoly in search, and literally a few hours later you had those headlines hit, and the stocks start to suffer a bit. Now it's not quite, they're not crawling the entire web the way Google does, and there are, by the way, important questions for publications that rely on Google Search to take people to their website where they then get advertising traffic that are raised by this, because it will give you a much broader answer that may be sufficient beyond having to actually go and read an underlying article. An opening, I also has content partners, right? Yes. That they're going to feature- That they're going to feature results. Potentially pay. Yeah, we'll see. But how is that different than what the chat GPT function, which you go in and you search, and you get answers primarily from the web, I mean, maybe this is just them saying that we're directly coming after you Google. It's giving you, yeah, more of a list. I mean, you're right. I haven't- Well, you actually work with it. I don't know the answer to that. And also the interesting questions about Microsoft, too, right? Because Microsoft, with the relationship to OpenAI, having access to it on some level for Bing, which is Microsoft Search Engine, I think it's sort of unclear how that plays out in the degree to which there's potential competitive frictions along with the park. Meanwhile, Mike, I mean, based on the last quarter from Alphabet and the top line growth rate and where their operating income number came in, I mean, you're talking about a stock that's trading probably around 20 times. It's a discount to the market at this point. Yeah, the overall market is, you know, 21, 22 forward at this point, 21, call it. And so, yeah, and it's happened from time to time, you know, and it's interesting because investors chronically don't give Alphabet a very long leash on capital allocation and on the urgency of strategic shifts, right? They kind of feel as if, you know, the core business is so perfect and profitable and it's all lost from there. In other words, it can't get more market share. Again, you have these bouts of doubt and everybody recognizes the incredible, you know, mechanics of the business itself and the dominant position it has and the fact that it's an amazing model. So, we'll see. I wonder if, I mean, talking about the rotation that we saw out of tech this week, the earnings were Tesla and Alphabet and they didn't live up. Next week that we get the rest of the MAG 7 X Nvidia, so we'll get the Microsoft and the Meta and the Amazon and perhaps it'll be on them to see whether this rotation continues. I would argue that you do see a little bit of, even in the bid today, it's like, how negative do you want to get when a few of the best companies in the world are about to show how good they are next week. I think semis, they were primed for a bounce, they're getting a bit of a bounce today. I don't think you have to say the rotation is over, the market can't stay broader, you know, and still say you can get some relief from the NASDAQ. I mean, those two things can happen at once. Sarah, I did want to get your take on Colgate. Yeah. It's funny, last time I covered this company, there was at least some rumblings of real activists there trying to get them to split the company. Of course, then the activists leave and they have a great, and the stock has a great run and that continues this morning. It was a good quarter. I mean, especially looking at it compared to some of the other consumer staples and household products makers. So the headlines there, NetSales at Colgate increasing almost 5% organic sales, 9%. They lifted for the 2024 organic revenue growth guidance to 6% to 8%. They were previously 5% to 7%. So feeling more confidence, they raised their adjusted earnings guidance 8% to 11%. And here's the kicker. The volume mix was good. They saw volume growth in all of their categories. It wasn't just pricing leading the way. And that is what separates Colgate apart from some of the others, especially the large cap peers. So they're managing this shift, this industry shift. Everyone's trying to chase volume now and bring down prices and get that mixed right so that consumers come back. They are clearly managing it if they're seeing this volume growth in six divisions and four different product categories. How are they doing it? I don't know. The CEO never talks to us, but they're clearly doing it right. Yeah. I just do think it's interesting because again, last time I followed it, you know, they have hills. They had to separate them. And it was all about that. They basically didn't really get a lot more action. Well, they have trial care. They have health care. They have a pet business. That's what I was saying. They have a lot going on. Guys, I wanted to follow up on a story I did yesterday, of course, about that lawsuit that has been filed by a Warner Brothers discovery against the NBA over, of course, their matching rights for a deal that went to Amazon. A number of questions I've gotten incoming, well, where's the lawsuit? Fair questions. It's coming. My understanding is it was filed with the New York State court and in New York State court. That court needs to unseal it, allow for a redacted version to be filed, and then it will become available most likely later today. So stand by. Of course, then we will get to see at least the arguments in the complaint in terms of why Warner Brothers discovery feels that it did have matching rights that were not, that were abrogated, essentially, by the deal that was signed by the NBA with Amazon. What will come into play here, of course, is a key in terms of something that was written some time ago, really before sort of the modern streaming era, at least in terms of definitions, could become important here. But there are also some differences the NBA would tell you that are right off the bat. Amazon's willing to put three years of the deal in an escrow. Warner Brothers discovery was willing to only offer a letter of credit. It's not a full streaming deal in the sense that Amazon is pure streaming. And by the way, had obligated to, now it depends on which side you talk to either as many as 80 million domestic homes or 100 million, but the point being they made a representation of homes that would be available that Warner Brothers discovery was unable to meet. And then, of course, the back and forth that I certainly hear about now in terms of the negotiation itself during the exclusive period. They were very close on told, although it depends again which side you speak to in terms of the dollar amount and how much Warner Brothers discovery was not quite meeting the NBA's asked during the exclusive negotiating period, which, by the way, was not for the Amazon package. It was for the package that ultimately went to our parent company, NBC. Now I've heard it may have only been a few hundred million bucks a year, but I've also heard that but certain playoff games were there, then they were pulled out. So there's always that back and forth as well, and then I am told Warner Brothers discovery. After exclusivity came back and said, all right, we'll take what we rejected, but it was too late because our parent company, NBC, had made a bid that the NBA was quite happy with and that was above what they had asked of Warner Brothers discovery. All of this will play out in court again. We should see the complaint perhaps as soon as later today. I think for reasons I just explained it's been a delayed, perhaps a bit more than had been anticipated, and then we'll get the NBA's response as well. But it's going to be a fun one to follow in terms of how it plays out. Derek Barry Diller had some thoughts on it as well earlier when he was interviewed by Andrew Sorkin. I believe we have that if you want to take a listen. When you've got matching rights or first refusal rights or whatever and you exercise them, then when you get into it, when people say, oh no, you didn't quite come up to what we thought it was. That's a real livable matter and so he's got a very good chance to at least muck it up right so that they settle. And perhaps that would be something Warner Brothers discovery would be happy with. Take some money and call it a day. I just wanted to hit the auto stocks. They got crushed this week. Yes. And last week, I mean all earnings season, even GM, which actually reported better numbers got hit. It had run up into the report, but then came Tesla forward yesterday. Ford is down 20% this week and look, the big miss there are the warranty expenses, worse than thought. Jim Cramer had a real mea copa on the show last night. I wanted to see what he said about Ford because he had liked it and just said that he was wrong because the warranty was a bigger deal than he was led on to believe from the CEO finally. Seeing no rebound thus far and shares it forward to your point. I mean GM's up, Tesla's having its worst week since April. Again, all of these earnings got hit. The land has got hit yesterday and you're up on a good number. And GM was the better number it seems, but there were other aspects of the report that were not that were frowned upon. Yeah. It had a nice run up, but the Mercedes was the latest one also today, also reporting a sales decline. They lowered the ceiling on the margin story and for them, you know, the issue that they excited China has an impact, obviously, on the luxury auto market. Also talked about, you know, EV demand. And that may be the overarching theme here is the weakened demand for EVs and the punishment of the stocks. The growth rate is slowing in terms of, and although the price keeps coming down to a level that's almost equivalent to ice and something like that. Markets have just impatience with how much capital's getting consumed on the way to scale in EV. So, Adam Jones and Morgan Stanley, also with Miyacope on Ford, so it's like a mid-teens free cash flow yield right now based on the new guidance for free cash flow. Markets just doesn't want here. No, it doesn't care. It doesn't care. I mean, GM trades at five times earnings, right? Right. Right. I mean. So then the worry is pricing and our margins and analysts told us yesterday on Ford, that is another big concern. The price is going to come down. Real quick, guys. The story we followed yesterday, of course, we had the CEO on with Phil Labo, Southwest Airlines, stocks down yet again after a lot of those changes, not enough for activist investor Elliot, which comes out in the statement, don't know we see this from Elliot, with some strong language. I'll just share a very brief part of it for you with you. They say that this failed leadership team's initiatives and obvious attempts at self-preservation are simply not credible. What that means and what comes next from here, unclear, but Elliot's certainly not happy. Southwest shares down a little more than one and a half percent. But we had a lot today. We have more to get to. Before we had to break, want to hit bonds, though, for the bond report, show you what treasuries are doing this morning. Earlier, they were rallying with yields lower, and we did get a slight rally overall this week with the focus on the weaker data points and the more benign inflation rates, I would say. US 10-year goes below 4.2, actually, 4.196, the two-year yield also lower at 4.3. We'll be right back here on Squawk on the street. The material sector, been a laggard this year, but if you're hunting for yield, there could be some key names in that group to watch. Dom Chu's been tracking the action. Hi, Dom. All right. So, Mike, it has been an underperformer for sure, but the material sector is only about a 2% weighting the S&P 500. It's the second smallest sector. But if you are looking for yield, we'd look for some of the ones that maybe have some relative safety on a percentage basis. Take a look at some of these names. If you look at the S&P 500 and said which ones have a above-sector yield, that's roughly about 2% if you look at the entire sector, but still have positive price performance. That is the screen that we used here. If you take a look at some of the results coming out of that particular screen, that is where you see some interesting names come out. Now, with regard to some of those names, we are seeing some dividend yields that are north of 4 or 5%. It's certainly something to keep a close eye on as we watch some of the names out there. If I would show them to you, you could see some of the names out there. But again, one of the things that we want to watch is dividend yields in this. Keep an eye on the material sector, guys, I'll send things back over to you. Dom, thank you. Dom, too, back at HQ. Finally, guys, I did want to hit this indictment this morning of somebody. Our viewers may know well Andrew left from Citron, a research frequent guest on a lot of different media, a lot of different networks, of course, including our own. A federal grand jury in the Central District of California returned an indictment, charging him with multiple counts of securities fraud for what they call a long-running market manipulation scheme that re-profits at least $16 million. That's the DOJ's press release I'm reading of. I mention that because you go to jail when the DOJ comes after you. It's not just the SEC, which is also involved here, which is civil, DOJ's criminal. Here's something from the press release alleging left common and publicly traded companies asserting market incorrectly valued, a company stock that advocated current price too high or too low, routinely included sensationalized headlines, exaggerated language, maximized reaction, and then knowingly exploited his ability to move stock prices, targeted stocks that were popular retail, posted recommendations, and really, Mike, we didn't get to the heart of it, which is, and then, of course, often did things that were contrary to what he was saying he was doing. That's always the key. Discharacterize your own interest and then convey anything that's deemed to be misleading or deceptive or knowingly wrong, that's where you get into trouble. It's not just expressing an opinion on stock that you own or short or whatever. It's that contradiction and potential for misleading events. False representations are the key here. Twenty-five years is the maximum penalty in jail. Coming up in the next hour, they head of antitrust for the DOJ, a very different area for the DOJ, Attorney General John McConner, talking the regulatory picture ahead, assistant Attorney General for the antitrust division, we're coming right back. You've been listening to the opening hour of CNBC's Squawk on the Street. All opinions expressed by the Squawk on the Street participants are solely their opinions and do not reflect the opinions of CNBC, NBC Universal, or their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information Squawk on the Street participants consider reliable, but neither CNBC nor its affiliates and/or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Squawk on the Street disclaimer, please visit cnbc.com/squawkonthestreetdisclaimer. Imagine earning a degree that prepares you with real skills for the real world. Capella University's programs teach skills relevant to your career so you can apply what you learn right away. Learn how Capella can make a difference in your life at Capella.edu. [BLANK_AUDIO]
