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You're listening to the opening bell of CNBC, Squawk on the Street. Good Wednesday morning, and welcome to Squawk on the Street. I'm David Faber with Sarah Eisen and Mike Santoli. We're live from coastline at the New York Stock District. Carl's on assignment, Jim has the morning off. Let's give you a look at futures. We get sort of with trading on what we like to call hump day. You can see we're slightly lower open, perhaps when we get started. But, you know, we'll see what happens in the next half hour. Speaking of which, let's get to our roadmap. It does begin with records. Both the S&P and the Dow are coming off closing highs. But, of course, does the rally have room to run? Plus, Apple shares under pressure ahead of the open amidst potential new signs of weak iPhone 16 demand. And we're also watching auto stocks moving lower, one widely watched analysts downgrading GM and four due to China capacity concerns. Let's start with the markets after another record-setting day. Sarah just mentioned China capacity. Mike, I guess I'll come to you because China has had an impact yesterday overall to a certain extent it would seem. We did get with a 30 basis point cut as well. Another one. From the Chinese, although that market not necessarily responding as positively as it did. I don't know where you want to go this morning as you sort of paint a roadmap for the market. It was kind of an interesting little bit of a jolt to the global growth story. They kind of executed the typical playbook, right? Copper goes up, base metals go up. But I also do think that it is a little bit of a boost to this story in the U.S. of trying to figure out in the week since the Fed decision what exactly were to make of the macro setup right here. Because I do think there was some sensitivity to that consumer confidence number yesterday. You see the labor market indicators within it eroding a little bit more. They had the implied chances of another 50 basis point Fed rate cut in November rise on that news. And at the same time, everyone's saying, well, maybe it's early cycle in China even if it's late cycle here. So net net, we're kind of holding on to the post-fed gains. We're the S&P 500 traded yesterday at the close at the high from Thursday of last week right after that post-fed reaction rally. And now it's I think a little bit of a matter of constantly testing for the fact that soft landing or not. I mean, honestly, it's almost the entire game in the near term in terms of those indicators. We did get to a 20% year to date gain in the S&P 500 as of yesterday's closed. It would be two years in a row of 20% plus. One thing I wonder is, you know, China's stimulating market, that stock market extending its gains overnight and actually about to go even for the year. So wiping out some of the losses for the year. China's been a deflationary pull on U.S. goods prices. So I do wonder, you know, if China's starting to really throw in the big guns when it comes to monetary policy, if that presents a risk for the Fed in terms of just how much cutting it can do. As we're all on alert for any potential flare up in inflation. But there was a move overnight. The dollar versus the Chinese yuan passed seven. That's a stronger Chinese currency on a better outlook for Chinese growth. Now it's clearly missing the fiscal ingredient, which economists say is key. I mean, there's two big problems with the Chinese economy, housing inventory and household spending. And this doesn't necessarily get at either of them, but it does provide a boost to liquidity and potentially short-term growth. And that's what the market's reacting to. Yeah, I mean, it seems like we're a little bit past the point where, you know, China being relied upon as the growth engine, China kind of consuming way more than a chair in the way of goods. I do think it seems like more of an offset now to what we're dealing with in terms of deceleration. And maybe just a little bit of a sideshow, to be honest with you, in terms of the markets there, there have been so many fallstart violent rallies as that market has lost value over time. I do see all the indicators that the outflows have been extreme from the Chinese market. And maybe what it could be is a little bit of an excuse for a value rotation that's been called upon in the US for a long period of time. Because the non-US markets are trading like US value stocks and vice versa. So we'll see if that does matter. I have to say yesterday, you know, you did get semis decide to support the market again. And so it's kind of like, you know, the market is deciding on a given day what it's going to rely upon to stay supportive. Yeah, I mean, the semis, I think the socks is up 1.3% roughly. You have a pretty good day for NVIDIA. I believe you're getting micron results for the close. After the close. How do you read that mic in terms of one day we care and the next day we kind of don't. I mean, again, for the part of the market that for much of the year was the driving force. Sure, sure. I mostly read it as, and this sounds really deterministic, but the market has kind of decided that we're comfortable with these levels. You don't have aggressive selling at S&P 57 and change just yet. And so on a given day, if the macro cooperates, you know, if we have to rely on the handful of semi stocks that look like the relatively oversold. You got this headline out of, you know, and not even a headline, just a story that Jensen Wong maybe is going to slow his sale plan. Yeah. I mean, or stop it for now. I mean, that shouldn't really matter. It wasn't really a huge swing factor in terms of the value of the stock on offer for NVIDIA. But nonetheless, it was a pretty good excuse for that to work. I think it's much more about, you know, in a given day, it's either banks and small caps working or it's the Magnificent Seven. Banks and small caps working really relies on soft landing and fed cutting rates. The rest of it just reminds us, relies on the mood about, you know, the long-term secular growth stories. The other thing that's happening that people are paying close attention to is the steepening of the yield curve. And that has continued. We saw it for a fifth day in a row. We saw the curve go above 20 basis points for the first time since I think June 2022. Yes, we got that weaker consumer confidence number. So you can attribute maybe the move that we're seeing lower in the two-year yield to that. But Mike, it's important people are watching it. It has implications for stocks and also generally for a shot clock on recession, even though this time may be different on that. I mean, look, I think that the fact that the 10-year yield has been steadily higher since the Fed cut rates, one, it totally fits with history. After the first rate cut, usually the bottom market anticipates it, and then you get a little bit of a move higher in yields. Two, I don't think we should be wishing for much lower and longer-term treasury yields right now. Because that would probably suggest that the Fed still behind, and we still have recession risk rising. The 10-year yield was at 4%, a little bit higher the day before that August 2nd job support that got the growth scare going. Okay, so you were at 4% there, you went all the way down to the 3/6 area, and now you're just sort of, you know, lifting gently into 3 and 3/4. So I don't think it's at scary levels. The re-steeping of the yield curve, I guess it mostly just means Fed's going to get moving on the short end, and meantime, yeah. And the outlook improves on the long run. It should be somewhat improving. So I think you could live with it for now, but it's definitely been a pretty clear message. Or just the deficits are just getting so large, and the spending picture is not great. We're going to hear more on Vice President Kamala Harris' economic policy today, but there's been a lot of scrutiny on both sides about what- Yeah, nobody seems to be talking a great deal about deficit reduction in a significant way, and certainly Trump is not, I mean, kind of cutting taxes. You want a tax cut. You get a tax cut. Everybody gets a tax cut in some fashion or other, but to your point. Although lower rates should, I mean, should maybe have some sort of impact over time in terms of interest costs? Sure. Yeah, for sure. And now that interest costs are above a trillion dollars and bigger than the defense budget. And everybody who is criticizing the Treasury for leaning on Treasury bill issuance to fund the deficit is, all of a sudden, that's where you're going to get the best benefit. The yields are going down fastest. Although, you know, it's hard to see a big move for the bond market, I think maybe until next week when we get the jobs report, because jobs has taken center stage again as far as what the Fed is watching most. We'll get a PCE number on inflation on Friday, and that's the Fed's preferred gauge. Although the market is feeling pretty good about the inflation story as far as inflation coming down, it's gotten a lot of evidence, and so is the Fed. Fed's feeling pretty good about that story as well. Let's talk autos a bit here, because Morgan Stanley downgraded a number of companies in that sector this morning, including General Motors. Motors, it goes equal weight to underweight. Ford, also now an equal weight, had been an overweight. This is analyst Adam Jonas, and he's citing what he calls a China butterfly effect when it comes to capacity. Quick note, apart from his note this morning, credit losses and delinquencies continue to trend upward for less than prime consumers. China's two-decade long growth engine has not stalled. It has reversed in terms of China profits flipping the losses, and China producing nearly 9 million more units than it buys. Upsetting the competitive balance in the West, cutting estimates on China price mix and loss share, better ways to play rate cuts. This is a story, of course, and has been for some time. It's sort of the fungibility over producing, and they're not selling here, but it doesn't mean they're not selling in other markets where, or our automakers compete, and therefore, good stuff for market children. And he argues, happening at a time when US affordability of new cars is at a relative low. The average selling prices have gone up, and therefore it's not as if they're equipped to compete that well for volumes right now. Did say to buy the dealer stocks. Yes, I noticed that as well. The idea that there's a little more flexibility as rates come down and maybe get volumes moving, or at least that there's going to be enough working through the system. He also has been a big advocate for a while of the legacy automakers. They should just curtail their CapEx in terms of EVs and everything else. They've done some of that, maybe he thought not to the degree that you ought to, not as aggressive, in terms of reducing their capital plans and maybe getting some partnerships and M&A going. So I feel like it's almost the flip side of his general net bullishness toward Tesla. Feeling as if they have this prime spot, they have this optionality in terms of new technologies, and everyone else is fighting over the volumes for what's left in a global oversupply. Obviously, Mr. Farley at Ford is very much focused on and has been for quite some time. The Chinese EV makers, as they move more boldly into that market at Ford as well. In terms of being able to be competitive, it's not easy when you're paying your workers, obviously, multiples of what the typical Chinese on the line is making. And meanwhile, they trade at five and six times earnings, and they have forever, Ford and GM. So it's like you're kind of just essentially saying there's no way out any time soon for them to have some kind of sustainable profitability that the market's going to pay up for at this point. There's some macro stuff in here, too, just on how cyclical the auto industry is. I mean, Jonas looks at after-rate cuts, usually autos outperformed for six months, and then six months after that, they're weaker. He's looking at some of the signals from the German automakers. Lately, the BMWs of the world, VW and Porsche all through cautious on auto demand. Don't wonder about Tesla as well. I mean, what Musk really is. How many thinks about his auto business? I mean, he's made it clear in the last few conference calls. Don't know my stock. You care about autos. Exactly. You got to be a full believer in robo-taxis and an optimist, like my actual robot. Earnings for this year and next year for Tesla are half of what they were supposed to be a year ago. So that's the auto business right there. That tells you that that's the part of the size. Do they ever introduce an actual new car? And the stock is the next year, lower cost version. Can they compete with the Chinese, though? Can they really compete? They can in the US because they're not sold here. When we come back, a closer look at the company dethroning Nvidia as this year's top performing stock on the S&P 500, everything you need to know about this truck. Taking a closer look at futures here as we heading into the opening bell. Looks like we're giving some back. Coming off of another record-high close. I think 41 record-high closes so far in 2024. Dow futures down two. We've recovered a little bit here throughout the session. Spark on the street will be right back. 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Internet required. Top rated news based on 2023 Nielsen ratings. My dad works in B2B marketing. He came by my school for career day and said he was a big RO as man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laughing me to this day. Not everyone gets B2B. But with LinkedIn, you'll be able to reach people who do. Get $100 credit on your next ad campaign. Go to LinkedIn.com/results to claim your credit. That's LinkedIn.com/results. Terms and conditions apply. LinkedIn. The place to be. To be. What an incredible run for Vistra Energy. This is the electricity and power generation company leapfrogging NVIDIA to become the year's top performing stock on the S&P 500. HIPAA Stevens is here with a closer look at Vistra. We know a lot about NVIDIA, not as much about Vistra. Yeah, that's right, Sarah. And Vistra is now surpassing NVIDIA as the best S&P stock this year as investors look for ways to play the AI trade beyond just the trips. So Vistra is the largest owner of restructured generation capacity in the country, meaning it directly benefits from growing power demand and higher prices. Vistra also owns the second largest competitive nuclear fleet in the US, which is why the stock rallied on the back of Constellations announcement that it's restarting three mile island to power Microsoft's data. There's clearly speculation here that Vistra could ink a similar agreement. The company also has a sizable gas generation portfolio and operates in Urcott and PJM regions that are seeing power demand growth. But with the stock nearly tripling this year, perhaps it has gotten a little bit ahead of itself now. And that is exactly where we should sort of continue to conversation here. Because we do have, stay with us actually, for more, we're going to bring in Steve Fleischman, who is a Wolf Research Utilities Analyst. He has an outperform rating at $112 price target on the stock. Let's start right there. Pippa laid out the regional benefits, the asset mix, the degree of regulated or not regulated businesses that Vistra enjoys. And the question now is, has it been completely recognized by the market? What do you say? So we think it has not been fully recognized by the market. The data point last week was pretty profound from Constellations deal. You know, the price they're selling power to Microsoft is about $110 megawatt hour. Whereas current market prices are only about $55 to $60. So if you were to reprice Vistra's whole nuclear fleet at a similar level, there's a really substantial amount of additional upside. We're still trying to figure out exactly how we want to bake that in, because every $10 is worth about $17 a share for Vistra on their nuclear fleet. So the question is how much of that $10 might happen or not, but it's very levered to getting a deal like this or deals. Yeah, I mean, I guess longer term, the question might be, first of all, how many of those types of deals are going to be available as the industry tries to clamor for dedicated generation assets to fuel the AI boom. And also, I mean, longer term, is it really going to be that the profitability flow is going to end up on the bottom lines of these utilities for this AI boom? Is there room enough for those types of returns for the power generation piece? Yeah, so that remains to be seen, but every deal aside from benefiting the company who signs it, it also tightens up the market, because that capacity is not available. You know, either supply gets reduced if it's on site of a power generator, or it's just incremental demand. So the supply demand tightening for the broader market happens, whoever signs, the next deal. And so, you know, we're pretty confident that there's an upward bias to the pricing environment, and both the talent, Susquehanna deal, and then this most recent constellation Microsoft deal. It suggests just, you know, pretty meaningful repricing, particularly for nuclear. So part of the question is, how much will that also come for gas assets? But for nuclear, there clearly seems to be a willingness to pay a lot more than what the current power price environment would suggest. But Stephen, one key difference here is that with Three Mile Island, that was additive to the grid. So, with all these data centers now coming online, is there any chance that we could see, you know, local or regulatory opposition to data center agreements with nuclear providers directly, given that that would be taking power away from the grid as a whole? Yeah, that's a great point. It's a key debate in the sector right now, and I think there is some pushback on that. On the other hand, the time to power aspect that the hyperscalers are interested in is just very hard to find scale locations for some of the size of data centers they want. Nuclear plants are really good locations for that. So, and then we will likely also see upgrades of nuclear to help in terms of the issue of kind of providing additional power. But that is a fair point, and that's part of the question of, do you think these are worth $10 more per megawatt hour? They were $60 more like the constellation deal. We think there were definitely more. It's just a matter of how much. Aside from Vistra, Steve, are there other names that seem like they're in a good position to exploit all this? You know, that's one of the interesting things. There's only really three companies that are meaningfully long, net long, power generation in the entire stock market. It's really just Vistra constellation and talent, and so part of the reason the stocks are doing so well beside some of these fundamentals is there's just a scarcity value of stocks. Most of the assets are owned privately. So, I think you continue to see, I think, money coming in just from a scarcity standpoint. There's a few others like public service, enterprise group, and potentially NRG that could be long power, but it's really these three that are net long power and have a lot of nuclear exposure. Got it. We're familiar with the scarcity of AI plays, which helps explain Nvidia, too. Steve, thanks very much. You said the time, Pippo, of course. Thank you. Great time to be a utilities analyst. Who knew? Still to come, fan dual parent-flutter entertainment's getting a lift, this after outlining its long-term growth strategy. Also, more importantly, perhaps for the stock authorizing a $5 billion share buyback program. We're going to have the company's CEO on. 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Google filing an antitrust complaint with EU regulators against Microsoft accusing the company of using unfair licensing contracts in its Azure Cloud computing business to stifle competition. No shortage of either companies and/or regulators accusing companies of stifling competition these days. It's really true, and it also strikes me that all of the charges, so we talk about this one, or, you know, Visa. Visa from yesterday, the trust department. SAP. Yes, SAP, right? It's almost as if you could take all the bullish analyst notes and start with the premise for why this is a great business. Switching costs are really hard. Once they got you, you're in, their network effects are really powerful. They have, you know, in some cases, illegal or tacitly legal duopoly. I mean, all that stuff is kind of why these companies have such great valuations that are loved by investors. Now, obviously, it doesn't mean you're doing anything illegal or wrong, but it just does show you that there are these moats and they are the toll takers to cross those moats. And, you know, it's kind of an interesting dynamic where they have to then go out and say, "Actually, we have a ton of competition. We're really a vulnerable business." I think this one's funny in particular, because the EU has been finding Google for so long itself on antitrust. And, in fact, Google just won a challenge against the EU for nearly $2 billion fine, who goes flipping the script here complaining about Microsoft. Whatever we know about this, it's going to take years. That's what we know about EU antitrust. You just heard the opening bell here. It's the big board president of the European Commission, Ursula von der Leyen in New York, the UN General Assembly. Over at the Nasdaq Bakara Therapeutics, it's a biopharma focused on treating tumors. It's celebrating a recent IPO. And, Sarah, to your point, though, about Google being the one to be the accuser in this. This is the one business where Google is kind of the underdog, right, where they don't have, you know, dominant share in the cloud. And, you know, so it's sort of like Microsoft's the big bully here, as opposed to Alphabet. I do think it's interesting, too, recently we had this meta event going on later. Meta has been the one magnificent seven stock that just keeps racing to new highs, rebuilding its valuation. Its premium versus Alphabet right now is pretty much at a recent record. It's like a five P.E. point premium. Meta has relative to Alphabet, and that's, you know, alongside all the regulatory pressure that Google has been under and all the rest of it. But it is interesting that people, all of a sudden, feel like Meta's the safe one. Meta's the one that's free of a lot of the regulatory stuff, and it has that leverage to the ad demand that's still pretty strong. Since you brought Meta up, we should mention, of course, they have their Meta Connect beginning today. I think it's a two day event keynote today, one PM from Mark Zuckerberg, of course, AI use cases, AI agents, Meta AI adoption, AR, VR innovations, perhaps also going to be discussed, of course, the smart glasses, the Ray Vans as well. And, you know, any number of other, we'll see, other potential tools. Maybe we get something on CapEx. You never know. I'm looking at the best performing stock right now on the S&P besides Vistra, and not just for the year, but today. It's HPE, which we don't always talk about. You'll pack an enterprise, but we do talk to the CEO because it got an upgrade from Barclays today, clearly making the rounds, taking it up because they think it's a great way to play AI servers. And Barclays analysts expect the server revenues to improve in storage, and it's one of the best ways to invest in this emerging trend. No, Dell has been a big beneficiary of this, obviously, and much bigger. >> Much bigger. There's questions about the margins there, and then getting access to the chips, and who's actually putting the servers together in the data centers, and where is the chip demand coming from? I've been trying to figure all that out because you constantly hear, well, Amazon's ordering the chips and Tesla's ordering the chips, and obviously Microsoft and Alphabet and Meta, and yet HPE and Dell are also ordering the chips, but yes and no. >> Who's just packaging them and reselling them? >> Based on storage. >> Exactly, well, but also sort of the NVIDIA chips, where are the actual, where's the orders coming from? Is it? >> Yeah, no, it is very true, but that is the game right now, right? It's kind of like, you know, what companies that are not yet given a crazy AI multiple still have some, some upside to it. And Meta, I do think, is one of those situations today with their event. Well, Apple's WWDC, all of a sudden it gets the stock going, just because they said, yeah, eventually we're going to have AI capacity. >> And Alphabet had one yesterday, Thomas Corinne in terms of Gemini and all the various things you can do as well. Of course, people come back to the fact that Meta trades at what, 22 times, something around that. >> 24, it's gotten up there, yeah. >> Has it gotten up there, yeah? >> The 23, 24, and then Alphabet's like 19 and a half. >> Well, sticking with AI, do you see this Hollywood squaring off against Silicon Valley over California's first of its kind AI safety bill? More than 125 Hollywood actors, directors, producers, adding their names to a letter yesterday urging the governor to sign the bill, which would implement safeguards on the technology, saying the industry needs to be realistic about the risk. So, James Cameron, the filmmaker, joined closing bell over time yesterday to talk about the role of AI in Hollywood. Here's what he said. >> Can we make our output faster and cheaper by incorporating a lot of these new generative AI tools? Absolutely, absolutely. We just don't quite know how to do it yet, which is why I sit at that tectonic interface between the CG world that I've lived in for the last three and a half decades. And the new generative AI world, which promises wonders, but as of right now, you can't make a movie with Gennai. It's not iterable enough. It condenses images out of vast data sets in a way that seems quite magical until you get under the hood and you look at the algorithms and the models required. >> Interesting, really interesting. >> But also interesting that now Hollywood is joining this fight, just showing how polarizing it is, trying to get this AI bill signed into law in California, the SAG AFRA, you know, the prominent union, definitely on board with it. >> Yeah, and obviously, you know, the idea behind that is there will be a time when it'll be like a reasonable facsimile, and even though AI is just building off of stuff that's already out there in the world, then it's going to look a little bit less, maybe, fake as Cameron is saying right now. But I find it fascinating because, you know, if you talk about the way they arbitrate, who gets writing credit for a film? Like, if four writers touched it, this whole process, you get this percentage of credit, and you know, it's a story by, it's not a streamwriting credit. I mean, the whole system is built, excuse me. The whole system is built. >> Or your peniming. >> Sorry. This time it was unintentional. >> The whole system is built on, like, which particular people had this idea and executed it, who deserves credit for it, as opposed to, oh, this is pretty good. >> Yeah. >> Let's just put it out into the world. >> Well, at some point, eventually, it's just going to be, who did the prompt for this movie? >> Yeah, right. >> Yeah. >> Exactly. >> I wrote the prompt, and then- >> Well, that's why you see- >> Jenna, I wrote the did the movie. >> Say again? >> That's why they're threatened, and backing this bill. >> Yeah, of course, but it would seem hard to imagine that they're going to be able to- >> To fight it. >> I mean, he has been at the forefront of the technology, obviously, when you go back and see what he'd been able to do with the computer-generated, as he said for the last three decades. So, that was interesting- >> I mean, at some point in Hollywood, there were people who painted the set-track, the backdrops, and, you know, they were this intermediated by CGI and electronics and whatever else. So, obviously, you can make your piece with it, but it's pretty interesting. It's where it's going to come. >> It's coming, baby. It is coming. >> Yeah, of course. But you do hear, when you look under the hood, as Cameron said, that it's not quite ready for certain applications, but it doesn't mean that a year, two years, or certainly a number of years from now, that will be a very, very different for the use cases. >> That's why utilities are at the top of the market again today. >> Yeah, what about this year? I just think it's so funny. >> Insulation and Vistra. >> It's like, yeah, I mean, that utility answer we had on, like, he's a celebrity right there. It's by getting calls from accounts you'd never have anticipated, because I know plenty of hedge funds who would mean this trade has been the best trade of the year. >> Not since Enron. >> Yeah. >> Not since Enron, right? >> It hasn't still been so hard. >> It's been an exciting nuclear capacity. What do I need to understand about this, who's going to actually sign up the next nuclear generating contract? Mike, you mentioned SAP. We should go back to it. It's down a bit, not as much perhaps as had been initially seen. Bloomberg reporting, they are among companies being investigated by the US for potentially conspiring to overcharge government agencies. That's SAP, of course, that we're talking about as you take a look at the gainers there, and they include the Lexi Constellation Investor. There's SAP, down about two and a half percent. >> Service now and also down about three percent. >> Service now on the news, yeah. And there's no shortage, you know, yesterday after the show, of course, we got the news in terms of the DOJ and Visa, but it's worth coming back to. Some of this coming, arising out of their investigation of that when they did not allow Visa to buy plaid. That's a while back. >> Sure. >> But apparently they took a deep dive into the debit card business at the DOJ and said, wait a second. What's the percentage that you guys have? What are the fees that you're actually getting paid? And obviously they are quite large. By the way, anybody interested in Visa, take a listen to the acquired podcast. Great four hours if you want to spend it on how that company came into being and where it is right now. But they're basically saying, listen, you have a 60% market share and it's even more profitable than your credit card business. >> Yeah. >> And Visa saying it's very competitive and they're new entrants that are thriving. >> Yeah, in fact, we do have their response to the antitrust lawsuit. Let me read it for you. When businesses and consumers choose Visa, it's because our secure and reliable network, where class fraud protection, the value we provide, we're proud of the payments network we built, the innovation we advanced, and the economic opportunity we enable, lawsuit they could say is meritless, and of course they will defend themselves vigorously. As I always say, Mike, one of the quietest 500 plus billion dollar market cap companies out there is Visa. >> For sure. And there is an argument that there are certain businesses that will naturally tend toward concentration, if not monopoly. And arguably this is one of them, building a network, having all the relationships with every bank, being able to instantly credential any transaction, and all that stuff, you couldn't build it today very easily. And that's why they constantly have pricing power and they just take a little piece, a little more every year. And that's been a great story for the stock, one of the higher margin stocks, and S&P was smart. They put Visa and MasterCard into the financials when it seemed like banks were in trouble, and now the financial sector is very non-bank. It also sort of jibes with what we've gotten from this Justice Department a little bit when it comes to antitrust and targeting middlemen, especially on fees and thinking of live nation. They get a little bit of Apple in the credit card fees that it processes on the App Store and some of the other suits that we've seen come about. >> Yeah, that's right. Using your established leverage to essentially muscle others and get pricing power in that way. You want to hit KB home, KBH? >> Yeah. >> It's down 4% results seem like they were short of most estimates. We've been pretty much on target, but margins are a little bit of pressure. And these stocks have been phenomenal over the last couple of years, up 150, 250%, if you look at D.R. Horton and Lenard and KBH. And it just seems as if just that affordability equation has been tough for them, yep, rates are coming down, mortgage rates are coming down, massive refinancing, volumes off of that, not yet on the purchase side. And it was interesting because when you had such a tight market with no supply, that was considered to be really bullish for the builders because obviously they're creating the supply, but also they could buy down the mortgage rates and they could therefore kind of sidestep some of the macro pressures within the housing market. You wonder if the market kind of loosens up a little bit, you get more supply, you get more turnover if they don't quite have that advantage. Everyone loves them, Jeff DeGraph over at Renaissance Macro keeps what's called a buying frenzy indicator in certain stocks, and D.R. Horton tripped it yesterday, just in terms of the momentum stampeding into these admittedly very strongly. >> I think we have some sound from the conference call where a CEO of KB Home describes what they're seeing in the market. Have a listen. >> With a lower rate environment, and given that the consumer has been a little more conditioned on these higher rates the past, you know, a couple years or so, you know, we're expecting to see a pretty strong spring sign season given the right conditions. >> So optimism clearly on the lower mortgage rates. And by the way, that refinancing has gone strong now. We saw another big jump last week. We got this morning, but the lower housing gross margin outlook, I guess, is what has people a little concerned at that. And just the run-up you said that these stocks have had, it's similar to reaction to Lanar that we got. >> They've been cutting price, and they've been trying to keep volumes up, and that's been hitting the margins. >> You know, it is fairly rare that we get the vitriol that has come to the fore between Southwest and its large shareholder, Elliot. And so I like to spend time on these things, but bear with me, because I got a lot of reading to do here in terms of the various back and forth. >> I'm going to take a picture today, Southwest, excuse me, Elliot, saying, hey, we're going to call a special meeting, and make sure you take control of your shares. If you have them on stock loan, get them back. They keep putting out these false record dates, they say, of Southwest. But we're going to go with October 7th, and make sure you own your shares in your record, in your name, by October 7th. And they say a lot of different things as well. Let me share that, and then we'll get Southwest's response, which came out later yesterday. Unfortunately, they say at Elliot Southwest management board had chosen to go to a loan path with the goal of instructing a leadership change that's urgently needed. They talk about a chaotic series of defensive actions, a poison pill, hastily recruited new directors, a half-baked announcement of changes to the company's product. And of course, what we covered last week, or very recently, the fact that almost half the board is going to resign in November, and Gary Kelly, one-time CEO, is going to step down his exact chair in May. Let us be clear, whatever difficult decisions management has decided must be made. They're the product of a failed management team that has delivered years of deteriorating performance and is now taking any action, no matter how short-sighted they believe will preserve their own jobs. It's a pretty strong language. Elliot, of course, is running ten directors in that proxy fight and was not satisfied by that move that Southwest made, where almost half the board announced their plans to leave roughly a month, month and a half from now, and then Kelly in May. They did respond, Southwest did, saying Southwest made every effort to reach a constructive resolution, including over a dozen phone calls with Elliot representatives, several in-person meetings, an offer for Elliot to participate in the board refreshment process and understand our views. Before even speaking with CEO Bob Jordan or hearing about the company's plans, Elliot predetermined its position and has remained entrenched in demanding a super-majority of the board. The CEO changed. -Ugly. -They want him out. -Yeah. It will be very much interesting to see if they do actually get to a vote here and not to some sort of a settlement. It doesn't appear they're close right now. -If we assume, let's just say, Elliot gets it's laid in there. Like, what's the move? Like, what specifically is like the one, two, three strategic, you know, priorities that they're saying this company ought to be pursuing? -Mike, it's a good question. In fact, I've asked Elliot to make John Pike, who's leading this fight for them at the firm available. Maybe he will join us at some point for an interview, and I can ask him that, because I think those are valid questions. Other than, of course, saying, you're out of here. -No matters. -Yeah, exactly. -Yeah. -They also cues, Southwest accuses him of public ambushes to disrupt an investor day. -Who? -They are. -They're accusing Elliot of that. -Oh, they are. -Yeah, in this whole thing. It's gone through the whole three paragraphs statement. -It's been a while since I've seen Elliot. Certainly, they have not engaged in proxy fights very often to go back on my nose, but it has been quite many years since they had one. -And then this level of public vitriol, interesting. -I wanted to hit U.S. Steel, because we did hear from the CEO yesterday for the first time on the network. Dave Burrit talked to us on money movers about this deal. So the current, what's happening right now is that it's in the hands of the U.S. government. It's Siphias. That's the committee that has to decide whether it's okay to go through based on national security. It's headed by the Treasury Secretary Janet Yellen. -It includes, though. It includes commerce and does DOD representatives from many different parts of the U.S. government. -So clearly investors have been excited about the deal. The union, not so much. They've opposed it. Politicians from the state of Pennsylvania oppose it. At the national level, Biden, Harris and Trump all vary publicly. -And the reason the stock is down today is because Trump came out again yesterday and said, "I'm going to stop it." -So Burrit wouldn't comment on necessarily the Siphias process, but he did very strongly and through a number of my questions and challenges defend the merit of the deal. Here's what he said. -We strongly believe the deal closes on its merit. If you think about what it does, it checks all the boxes for all the stakeholders. It's not just great for our stockholders, but it's great for our customers, our employees. The country, and as I just said, even the planet, it checks all those boxes very nicely. -You know, he didn't talk about this very much, but he's on the board of Lockheed Martin as well. So just interesting to note, given there are questions about the national security. I don't know what they are because he wouldn't go into necessarily what the house Siphias is thinking about it while this process is ongoing. But Japan, very close ally of ours, so it's, you know, you wonder what that's gonna be. -Yeah, it has to do with things of access to steel from military use and things of that nature to a certain extent. Now the unions and/or their ally in Cleveland cliffs, which was the cover bidder here, will also say that the Japanese continue to dump and not be properly penalized. -And I asked Burrit about that. He said that, you know, hasn't been going on for a long time. -He said, look, the competitor is China. China controls half the market, right? And they've been dumping steel, and that's where the capacity is. And so why not team up with an ally to fight that? -It also seems to be a belief, though, Sarah, that ultimately nippons intentions, despite the fact that they announced another $1.3 billion of investment on top of what they were going to do, that they really will idle a lot of the capacity so that they can actually have the capacity they have in Japan be more productive. That seems to be the concern of the unions. -Of the unions and the competitors would say, well, they'll only do it for a certain amount of time and then just give up. -It's been punted until after the election, so it's given them some time. -Three months, right? -Well, we'll see, yeah, but, right, you start the clock again with Siphias, which they did. All right, let's take a quick look at the bond market and check out how treasuries are for you this morning. Sarah, you really should be doing this. You know a lot more about the bond market than I did. -Well, yields are higher again. That has been the trend. -That I could have said, that much I might have been able to share. -We get no new home sales, PCE on Friday, but post-fed, we've seen this slow creep higher and yields the steepening of the curve, as well as something that people are paying attention to, reflecting. More cuts come in sooner and potentially more debt in the long run, but also a better economy. We'll be right back on Squawk on the street. Micron, higher today, comes out with quarterly results after the close of trading. -Do not miss our interview with CEO Sanjay Mehrotra tomorrow morning. Squawk on the street. He's going to join us at 9 a.m. right here to talk about the quarter and what he sees for AI. Demand, much more. We'll be right back. -Caroline Ellison, the star witness in the prosecution of FTX founder Sam Bankman Freed, has been sentenced in New York federal court to two years in prison. She's also been ordered to forfeit $11 billion. Mackenzie Sagala joins us now. She has more for us. Mackenzie. -That's right, David Ellison, who formerly was the CEO of FTX's investment arm, received a stiffer sentence than even the federal probation department recommended for her role in the implosion of FTX. Now, their suggestion of three years of supervised release just wasn't enough of a punishment in the eyes of Judge Louis Kaplan, who said the FTX case is probably the greatest financial fraud perpetrated in the history of the U.S., and because of that, he just couldn't agree to a literal get-out-of-jail free card. Now, Kaplan previously sentenced FTX founder Sam Bankman Freed to 25 years in prison in March. Both Sam and Caroline had been charged with the same seven crimes that carried a maximum sentence of 110 years with a big difference, but between them is while Bankman Freed still maintains his innocence and is pushing for a retrial, Ellison pled guilty in December of 2022, and has since been cooperating with authorities to help them locate otherwise irretrievable crypto assets. Now, in terms of next steps, the judge requested she do her sentence at a minimum security facility as close to Boston as possible, and he ordered her to surrender to authorities on or after November 7th. This is the third ex-executive of the now-defunct crypto exchange FTX to get a harsher than expected sentence by Kaplan, as the veteran judge looks to deter other bad actors in the space, even if they're willing to work with the government after they're caught. Two other former FTX leaders, Gary Wong and Nishad Singh, are scheduled to be sentenced later this year, like Ellison, they pleaded guilty instead of standing trial. David? Mackenzie, thank you. Mackenzie Sagales, and thanks to you as well, Mike Santoli. Of course, it's up. You're joining us this hour. Coming up, we're going to have the CEO of FanDuel Parent Flutter Entertainment. Their shares are up on news of that company's $5 billion share buyback plan, also a decent long-term outlook. Keep it here. 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. 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. Pharmacy benefits that benefit your bottom line, it's possible. Complex specialty care that cares about your ROI. It's possible, because we're already doing it. All while saving businesses billions, that's wonder made possible. 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David Faber, Sara Eisen and Mike Santoli covered all of the market bases as the Dow and S&P 500 hit new all-time highs. The anchors also reacted to shares of General Motors and Ford falling on downgrades from Morgan Stanley analyst Adam Jonas. Hear what one analyst had to say about investing in Vistra, the company that leapfrogged Nvidia to become this year's biggest gainer on the S&P 500. Also in focus: KB Home slides on earnings, Activist investor Elliott escalates its battle against Southwest Airlines, Justice Department vs. Visa, Google files a complaint with EU antitrust regulators about Microsoft's cloud business.
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