Morning Call 9/3/26

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1:00I'm Morgan Brennan and this is your morning call. Good, there's a morning. Let's get a check on US stock futures. The major averages coming off their first positive trading sessions. In for attempting for another one here with a lot of green on the screen. You can see right there the S&P is basically poised to be fractionally higher, indicated to open up about two points right now at the down 95 points and that's the X-17 points. Yields though, still elevated, still a big focus, especially given the fact that it is a low volume week coming into Labor Day here in the US. You can see taking a little bit of a breather though this morning versus what we've seen the last couple of days. He holds a bit lower across the curve. US 10 year treasury, yielding 4.77% Fed-sensitive to your treasury, yielding 4.36% and 30-year treasury, 5.25%. If we get a check on the dollar index as well, dollar or software against other major currencies.

2:04The big story there continues to be the spike we've seen in the end in the last two days here and speculation about the possibility of intervention there again. You can see dollar index 9920 is the level there this morning. Also getting a check on oil which is hovering around July highs, but we'll call it stabilization. We're seeing some stabilization here this morning. So WTI is up fractionally is trading around $91 a barrel. Brent is also up about a half a percent trading around $96 a barrel. Aside from rates, the other big driver this morning rains big tech and earnings. So let's start with Broadcom shares and get a check on where we're trading there this morning. There you go. Down about 2.5% right now. The company posting a top and bottom line beat for the third quarter with particular strength from its AI semi-segment. Easily topping street expectations at $16.7 billion forecast to hit $21.7 billion. Next quarter, Broadcom saying the third quarter profit more than tripled and revenue nearly doubled. But it is the outlook that is weighing on shares failing to top analysts most bullish estimates with zero margin growth.

3:09And Broadcom saying demand for its custom AI chips should keep growing. It's very bullish commentary on the call last night, protecting revenue for that business to double in the next two years. If we turn to shares of huelette Packard enterprise, though, also under pressure despite raising sales outlook for the current and next fiscal year. Also beating on top and bottom line estimates for the most recent quarter. The company CEO says however sales are being held back by a continued lack of components. And the company is working with partners to secure additional multi-year supply agreements. And we're going to hear more on the results when HPE's CEO joined CNBC at 10am Eastern, that's Antonio Nierry. Flipside, though. Take a look at shares of snowflake. Those are soaring. And I do mean soaring up 23% right now. The enterprise software player raising its full year sales outlook after topping street estimates for its most recent quarter. Thanks to quote rapid adoption of its AI assisted coding tool, Coco. Here we're going to hear more from snowflakes CEO when he joins Squawk on the street at 10am Eastern time as well.

4:16And let's see how Europe and Asia are shaping up today. Karen Cho is in London with more from around the world. Thank you Karen. Good morning to you Morgan. Much more muted action on this side of the world. We've got a steady picture for European equities. In fact has taken us about two hours to climb even the ranges that you're witnessing at the moment. The Italian stock market bouncing, but the strongest signal we're getting on the 14-mibb there as we move ahead by about four tens of percent. Modest elsewhere and the French stock market still showing a patches of red. The uncertainty over global bond yields prevails even as they pull back from record highs of late. Now the Asian indices, they would largely mix with investors' laser focused on bond markets too. What you had don't forget you just mentioned the strengthening Japanese yen that has taken some of the heat out of the equity market as well. So a red picture for the NIC-225 elsewhere, the calls be moving ahead. Pause of territory today about a quarter of one percent. Now we continue to keep a close eye on rates as US Treasury yields hovening multi-year highs.

5:19But the bond sell off on this side of the pond has eased as traders look to the upcoming US economic data for more clues on the Fed's next move. And as you can see across the board from bonds out of Germany, a tracking lower 3.36th the level across to Italian paper, BTPs, also drifting below the 4.2 percent mark. So just a slight reversal from some of the highs we've seen in recent trading sessions. Morgan, back to you. All right, Karen, show thank you. Let's continue the market conversation around earnings yields, the Fed's next move, bring in Luke Bars, Chief Business and current officer for Fundamental Equity at Goldman Sachs Asset Management. Luke, it's great to have you in the show. Welcome to you. Let's start right there. We've been looking for a little bit of a summer slowdown. Maybe perhaps we're getting it right now here coming into a holiday weekend's state side. But overall, underneath the surface, how would you assess the action we've been seeing? Oh, look, I think clearly Morgan, the summer has been one of fairly heightened volatility, but more volatility at the stock level, the necessarily index level.

6:21And the backdrop we see for equities is still constructive. It's part of this transition we're seeing, especially in the US, away from a consumer-led economy, to one that is very much corporate capex-led. And so to the extent that earnings continue to beat on the upside, to the extent we still see estimates for, especially hyper-scaler capex, increasing through the back end of this year and into next year, we think that dynamics still fuels a positive backdrop for equity earnings and for markets more broadly. But there will have to be selectivity, even as we're seeing this morning at the individual company level, if you can beat and raise, markets are going to reward you. If you can't show that positive forward guidance, there's going to be a lot more scrutiny around that forward outlook. Yeah, and light of that, I mean, we just mentioned it. You see Broadcom shares under pressure this morning. On the flip side, you see Snowflake spiking higher. Are we seeing rotation within tech right now, too, and in terms of how the markets interpreting the latest round of winners for AI? I think we're seeing a natural and quite healthy rationalization of some of the things we saw through the earlier part of the year, which is not to say we don't see opportunity in the hardware cycle.

7:27We'd absolutely do because that continuation of hyper-scaler capex driving the demand for semis is not going to abate in the near to medium term. But we're seeing a broadening out of that perspective. And so I think as you go through the value chain on the hardware side, especially into infrastructure and power, that's becoming more a compelling story, especially given where multiples are. And then on the software side, we know what we've seen through the course of this year, the scrutiny around software outlooks and the disruption from AI. But you're starting to see companies bring forward products and solutions underpin by those AI capabilities that actually have economic value. And so the monetization of that, which has been the key scrutiny and where you've seen the market really focus, has started to really fuel positive both near term earnings, but also forward guidance. So in light of that, at least here in the U.S., I mean, when you're looking at an early season that's wrapping up, that's what, 50% plus in terms of EPS gross, I realize some of that has some noise, you've got tariff refunds, you've got companies that have stock stakes in other companies as well. And you strip all that out still, so much more robust than expectations going into Q2 results here. Is this a peak earnings moment, or if there's more realization to be had in terms of the productivity gains and the return on investment from AI, are we really just getting started?

8:41Well, I think from our perspective, we're really at the early stage of this. And you make the point that earnings 50% year on year, but even when you strip out some of that noise, it's still looking like 25% to 30% organic growth in a lot of these areas. And that is a hugely positive statement, especially in the current context of how do you monetize the capital investment spend. And so as we think forwards over the next three months, but also more importantly over the next one to two years, that cycle looks very healthy for us. Now, what I would say is it is going to be about individual company performance, an individual company execution, the monetization of that spend is going to be a key variable that the market focuses on. And I think within that, what you are also seeing, maybe not in the last six weeks or so, but more holistically across the course of this year, is the broadening out of that opportunity set. And so, especially as we go down the market cap spectrum in the US, as we go outside the US, the growth story that has been very anchored in the US for the last few years is now starting to drive earnings in a very healthy fashion in many other parts of the market.

9:41What do you like outside of the US right now? We continue to be bullish on the emerging market story. Obviously, we know most of the growth this year has been in the AI value chain, in the memory space and career in Taiwan on the semi side. But actually, if you look at what that's doing to the local economies in many of those emerging market, that's actually very favorable. And so, you're starting to see the pull through of earnings into the real economy, and that's actually starting to lead some positive economic data points. Again, it's a very heterogeneous universe, so you can't just paint it with one broad bush. But what we're seeing on the earnings progression, both through the course of 26 and forecast into 2027, gives us a huge amount of optimism. Yeah, I mean, we've been talking so much about what we're seeing in this global run-up and rates, particularly in developed economies right now. You've obviously had a dollar that's been, for the most part, stronger recently, as well, here too. And I just wonder how all of that is factoring into this investment picture when you do look around the world, when you do see something like emerging markets that has had a strong ear. Well, I think there's obviously a funding cost aspect to that, and then there's the legacy concerns around what EMFX does in an environment where dollar is stronger and maybe Fed is a little bit more hawkish.

10:54But the reality is actually the dynamics there have changed a lot in the last decade, and so most of that is still now local currency funded. The underlying economies are increasingly domestically orientated, notwithstanding that AI value chain story we mentioned, but at least the pull through into the domestic economy is very healthy. And so we think it's a fairly resilient backdrop, and as we see that growth dynamic globally, stay fairly robust and improve across the key EM markets, that to us drives earnings in a very healthy fashion for the course of the next 12 to 18 months. All right, Luke Barz from Goldman Sachs, great to have you on. I appreciate it. We got a lot more to come here on morning call, including the AI model price wars, meta turning up the heat on the competition plus cost, conscious consumers, flush toys, squishies, if you have kids you know what I'm talking about. Driving the bottom line at five below, a check on the pre-market action is coming straight ahead and later what's next for Clippers owner Steve Bommer. After a major salary cap investigation, multi-million dollar fine and a one year ban, a very busy hour still ahead one morning call returns.

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13:00Nothing beats tradition like weekly game nights at mom's house and tostitos crafted with masa made the traditional way starting with whole corn kernels with flavors worth gathering around like a hint of lime and Mexican street corn and no artificial colors, flavors or preservatives. That's the tostitos way. Bring tostitos to your next game night and you'll be winning either way tostitos tradition matters. Welcome back to morning call the race to launch bigger and more powerful AI models rolls on and we really got off to a strong start here for September. The latest entrant meta which dropped muse spark 1.3 yesterday, which it says puts it on par with top rivals like open AI and anthropic. This is the third AI model released just this week following new versions from Google and anthropic and it comes as token prices are hitting fresh low breaking below $1 million tokens. Lowest reading since this metric started being tracked late last year. Let's bring in Sarah Coons managing director at Cleo Capital Sarah.

14:03It's great to have you back on the show. There's so much news in the tech world to get to but I do want to start here with you because it was met a yesterday on the heels of Google. And one of the things that gets my attention here with metta specifically is the fact that not only is this the latest launch here for met I think four models in five months now. But you have Mark Zuckerberg taking a social media last night and saying that the new model costs almost nothing to run. Are we entering the commodification phase when it comes to these models and what does that mean in terms of a price war phase to gain more market share now. I mean, I think that the price war whether or not that's a good or bad thing really depends on whether you've gone public already or not. For metta's investors that is great news and I think we're starting to see that in the stock and we'll continue to see it. We saw this with the legless metaverse right you want zuck to say yeah I'm going to make new things but I'm not going to spend the earth on it.

15:03So the idea that he is guiding his investors towards hey guys this isn't going to hurt as much as we thought maybe it's not going to be maybe as much catbacks that's going to be great for metta. I think it's similarly going to be good for names like alphabet. I think it's not so great for in particular open AI but anthropic space sex those other names where the story they're trying to tell is we're going to make a bunch of money on AI doesn't go well when AI is getting cheaper and cheaper. So in light of that how to think about it feels like every day every week there's different horses leading the race here when you have metta which is a pre market 1% right now you had alphabet yesterday and I think there was sort of the sense that they needed a win especially given how shares have been performing over the last couple of months. What does this mean in terms of this idea of driving down costs for models here in the US when open AI and a thropic are burning cash and spending a lot of money space to a certain extent to and then on the other hand you have Chinese cheaper Chinese models that are coming in and undercutting the market globally as well.

16:07I mean I think it means that this is not necessarily something where you're going to see the revenue to the spend that people have been promising for the last couple of years right but we've kind of already known that if I had to sort of put a first date of hey there's trouble in paradise it certainly was around the time that Uber came out and said yeah we don't actually want our engineers spending all of this money on AI we're going to start throttling it and we've seen that ripple across basically. Every enterprise industry where people just are not particularly willing to pay the prices that these hyper scalers had originally hoped alright so in light of all of this what do you make of broad calm results last night I mean the commentary on the call was very very bullish they're obviously catching a lot of demand to custom build chips and and work silicon here for some of these very same companies that we're talking about and yet the current quarter guidance does seem to be disappointing investors this morning. I mean that was a great sort of doing everything right for like 16 months ago but the market has changed and there is no there's nothing wrong with broad calm broad calm is one of those cockroach companies that I absolutely love been around forever it'll be around forever not concerned about it as a company but that AI story that has worked like magic over the last kind of year and a half two years for a lot of these companies it's not working the same anymore because that optimism in the market is not going to be a big deal.

17:33The trade has has left right certainly the consumer optimism for AI is not there right now you know we see that with the data center backlash and then increasingly everything from enterprise to to what the street wants to buy we're just not seeing the same sort of blind enthusiasm that we had when Papa John said AI and it's earnings call 20 times or whatever. So and we just touched on this a few moments ago in the show as well but given what we are seeing with a renewed interest and renewed pick up and some of these software stocks coming off of earnings snowflake perhaps being the most recent here in the last call it 12 hours or so but you had sales for his last week there are number of other names that have been a focus to is this an area that is capturing investor interest as AI investments begin to pay off to I mean I guess this is this an inflection point for software. I think that people are realizing that software is not going to go away you're not going to have five AI agents that that look like a sales force in a trench coat and and that was never really particularly logical I think to to a lot of people it never really made sense that AI agents were going to completely wipe out software and so I think now that trade has sort of right size is there a risk that now software takes off kind of past where where it logically should be.

18:56Certainly but I do think that that there is sort of a coming down to earth moment happening right now where people realize that AI is a great tool but it is not a panacea alright Sarah Coons great to have you on always great to get your insights appreciate it. We'll straight ahead we're digging into the quiet rally in Tesla shares ahead of a cyber cap event tonight and what could be a maker break moment for the stock one call will be right back. You can get the car in autonomous world as being like just a little lounge you're just sitting in a comfortable little lounge and you can do whatever you want while you're in this comfortable little lounge and when you get out you will be at your destination. So yeah it's going to be awesome. Planning for the future state farm can help because they know life's biggest moments often come with big responsibilities whether you're starting a family or buying your first home. State farm life insurance can help protect those you love with flexible coverage options that fit your budget plus the ability to update your life insurance policy as needs change you can live more confidently as life changes get started with state farm like a good neighbor state farm is there.

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21:14Welcome back to morning call us get a check us in this morning's other big stock movers five below is higher after the discount retailers second quarter earnings revenue and same store sales. Came in better than expected same store sales comes were 14% that beat forecast the company also raising its guidance for the second time this year as it's seeing strong demand for new and trendy products like. Squishy toys they also raised their guidance for comp sales to double digits for the years well you see other shares are about 5% see 3 AI meantime is lower at first quarter results that just at past estimates and revenue guidance for this quarter that is below forecast the company has had a rough go of it shares are down more than 20% this year and haven't closed above $20 since last August turn around strategy marketing turn around strategy is what's underway there right now. shares down about 1.5% trading around $10 a share net app meantime is also falling despite the company reporting first quarter results second quarter outlook that were well ahead of estimates but deferred revenue came in just shy forecasts net app shares are still up more than 50% on the year despite the move you see right there on your screen down about 9% pre market still on deck though we've got JP Morgan share of global research joys Chang here on the global bond yields shock the E.M. markets.

22:33and so much more morning call continues next. and so much more on the back of earnings though broad com he'll at packer enterprise snowflake I could see shares right now moving in all directions broad comes down about 3% HPE is down about 3.5% in snowflake is spiking almost 24% I was going to check on what we're seeing in treasuries as well right now I think really the themes morning stabilization across asset classes and you could see that playing out in the treasury market with yields. taking a bit of a breather across the curve here you as 10 year treasury yielding 4.77% fed sensitive to your treasury 4.37% and the 30 year treasury yielding 5.25% let's get a check on energy to fresh strikes in the Middle East we've got more on that in just a moment and you can see energy is crude oil futures are fractionally higher up about half a percent for WTI trading around $91.47 a barrel rent is also up trading just below 97 dollars a barrel.

23:55we had a check on global markets to the mix session in Asia taking a look at the early trade in Europe mixed trading there to but we'll say very fractional moves marginal moves right now let's check some of the morning latest headlines Kuwait says it's army is facing a fresh round of hostile missile and drone attacks from Iran this is just one day after president Trump said the recent fighting in the region would quote not last too long Microsoft me time is shaking things up the company says it will start disclosing. quarterly revenue numbers for its azure cloud business for the first time previously Microsoft only reported growth figures the changes part of a broader shift to change its reporting structure it's going to trim operating segments from three down to two but they are promising more transparency in that process for the most recent quarter Microsoft says azure had nearly 30 billion dollars in sale it's well behind Amazon's 42 billion but it is ahead of Google and certainly represents an accelerated growth rate. Tesla meantime is set to hold an event tonight for its cyber cab robot taxi in Austin Texas hopefully answering questions about regulatory roadblocks and safety of its full self driving technology also some of the economics and business plan around how these robot taxis are going to roll out and what that's going to mean in terms of who owns them the cyber cab was originally unveiled about two years ago and Musk said there that it would eventually be available for 30 thousand dollars.

25:21and speaking of the these for its reportedly aiming to sell more than a hundred thousand of its new fathom e-v trucks and its first year production that is set for next year the fathom is set to start around 30 thousand dollars and aside from Tesla no other automaker has sold 100 thousand units of a single e-v model in the U.S. in a year. Well if we turn back to the markets and ongoing focus on bonds both here in the U.S. and around the world New York Fed president John Williams telling CNBC yesterday that the recent surgeon yields is the product of a strong economy rather than market dysfunction on the topic of a potential central bank hike. Williams would not commit on whether he thinks one is necessary saying he's still absorbing economic data and that recent inflation data has been encouraging. We're not seeing kind of second round effects or broadening of the tariffs. We're not seeing unusual broadening of the effects of higher energy prices. So we're seeing well anchored inflation expectations and pretty contained compensation growth. So I am actually seeing inflation the trend in inflation moving slowly down as some of the effects of the tariffs can move into the rear view mirror.

26:33More let's bring in Joyce Chang chair of global research at JPMorgan great to have you here on set great to be here Morgan. You know it was interesting hearing from Williams yesterday. I think you sort of seen as more modern maybe slightly more dovish when it comes to Fed composition. But I did think the comments about how a strong economy is feeling what we're seeing in the bond market were particularly interesting given both what we've heard from the Treasury Secretary from Fed chair Worsh but then also on the flip side of that all the debate around war induced inflation and the economy. And fiscal imbalances and some of the other things that you know are seem to be driving up yields globally just love to get your thoughts on that well look I think the deficit is a key area to focus on and the numbers that have come out they've revised the deficit up 170 billion dollars there's a lot on both sides you don't see any movement in the Congress where they hold the purse strings where they're going to bring the fiscal deficit down so you're looking at six and a half percent of GDP and you know we call it the six D's that most important one being the deficits as far as some of these long term secular trends which mean higher yields.

27:37And I still would use a baseline of you know a real yield that's around two and a half percent if you're looking at two and a half percent inflation that's still above target more still looking at the potential for Treasury yields to move a little bit higher from here. 4.85 percent by the end of the year so I don't think that it's necessarily going to go off the charts but I also think the message from Jackson whole was very clear they're not comfortable that Worsh is not comfortable with where inflation is right now so if you get a print that really points to that lack of comfort being there I think you know the next move will be hikes we have it in December. I think that's the summer is not off the table. OK the other thing I think that's kind of fascinating about all of this is that even as we've seen a run up and rates here in the US and we're trading at multi your highs. It's still nothing compared to what we've seen in other markets like Japan and UK what you're seeing in France right now for example as well to so what does that mean in terms of looking around the world where you invest and how to think about some of these dynamics and how it translates back to other assets.

28:44Well I think that markets have to accept that on developed markets in the higher for longer on the long end is there and one of the big issues really is just the amount of crowding out you're seeing from longer duration issuance that's coming out from the hyper scalers because we keep on revising those numbers up but the Treasury is still the deepest and the most liquid market. So you know all of the countries though that you've mentioned they all have issues with the deficit so I come back to the deficit as one of the indicators but the Treasury still has the benefit of having greater liquidity greater size and the ability to you know have less concerns about the overall market function even if you're worried about the deficit. What do you think about emerging markets right now? There's been a strong run there but I think it could go further. I think a lot of that still has been an AI trade because it's been Asia outperforming and a rebound from the sell off in Korea like Latin America actually has lagged a little bit but one thing that we have looked at is you know just the profit growth and the margins the profit margins and we track 28 different economies and 24 out of 28 economies.

29:58We've seen the profit margins growing so it's not just a developed market phenomena I mean emerging markets as well we've seen some broadening you know beyond AI of some of the profit margins but Asia has been where you've seen the strongest performance last couple of weeks because it's still the memory trade. What conversation with the CEO of a who's on the front lines I will say of global freight flows and trade flows right now too and one of the things this person said was that they're seeing growth they're seeing strong demand really across the world right now. And so we talk about the economic story here in the US but how is that playing out globally too I mean is it a strong global economic growth story moving forward? Well I think that you have a recovery that has been broadening and we've been seeing that in the majority of the you know economies that we have been tracking but still those that have been in the AI trade so you know looking at you know Korea China Malaysia you have you know outperforming that's where we have a lot of our recommendations as well where you've seen Latin America lagging that a bit so there is a broadening of the you know I think that is a

31:11good thing to do is to extend the non-tech sectors as well but what we still have seen is it's uneven across regions. Yeah I mean it's pretty incredible we're having this conversation despite the geopolitical backdrop as well we have some news crossing right now so we're going to bring that to our viewers US employers announced nearly 59,000 job cuts in August according to Challenger Grand Christmas that's nearly 40% month on month but down 38% from this time last year so that of course that's the other big piece of the picture that we haven't touched on yet. And that is the labor data I know everybody's talking about CPI readings next week and sticky inflation at least here in the US but how much is also going to hinge on the jobs report this week especially if it's softer than expected. Well look I think we have seen sluggish job growth and the work we've been looking at is that you know the AI is starting to influence some of that it's not necessarily printing out in the data right now but I think you've got a number of structural factors in place there. You're seeing sort of greater capital efficiency I wouldn't necessarily even say it's AI but just not necessarily the amount of job growth that you would expect given where the pace of the recovery is that I do think that some of that is really structural in nature but I also think that Worsh's comments made it clear the focus is less on the labor markets than on the inflation prints that come out so that's what we're really looking at right now is you are going to inflation print which sort of lets them wait a little bit longer.

32:37But the next move is a hike you can quibble a little bit about the timing whether it's September or December but I think that that's where the bias has been very clear so there's inflation you know there is the deficit and I think the numbers that are coming out on the job market will continue to be on the side that is probably you know softer than anything we've seen historically when you look at these growth numbers. Okay. Driss Chang. Stay close we're going to bring you back you're going to be part of a call crew can't wait for that we'll continue this conversation. We do have a lot more coming up here I'm morning call to the NBA dropping the hammer on Steve Balmer and the LA Clippers over its massive salary cap investigation we're going to dig into the fallout for the sports world and beyond morning call you right back. Welcome back we're turning to the dramatic story out of the NBA the league suspending Los Angeles Clippers owner Steve Balmer for one year finding the team a record 30 million dollars as part of a series of sanctions over its salary cap probe around superstar superstar

33:41Kawaii Leonard the league making the move after a nearly year long investigation that found that Clippers circumvented the salary cap by allegedly facilitating quote no show endorsement deals for Leonard saying Balmer quote knowingly tried to help the former star forward the Clippers denying the NBA is finding with the team and the team is going to challenge them as well as the punishment so for more let's bring in Lee Eagle professor at the NYU Tish Institute for global sport. SPS at NYU the best school says the alum sitting next to you right now said it all okay we've surprised by this punishment why is it so harsh the punishment so harsh for the Clippers and Steve Balmer's owner because one is there have been allegations before accusations before the league is in place. The league is investigated and this time it it seems so severe what the what the league is discovered that the penalties and that it come through and it's a web it's it's sort of found out from the Clippers to sponsors and organizations outside of the Clippers do you think this is a situation in which whether it's explicitly or implicitly Balmer is sort of pushed to sell the team.

34:58I'm no good at predicting it doesn't seem it doesn't seem so it's a popular question that makes sense it doesn't seem so the NBA has been pretty clear in the past especially under the leadership or with leadership of Adam Silver as commissioner. When there's been an owner who's done something or that a series of acts and actions that have been so beyond that they've needed to move an owner on or really get into those kinds of conversations that doesn't seem to be the case here and it probably isn't likely it seems with what the NBA has come up with in terms of penalties that what you see is what you get at least so far. Is this situation where it's going to impact the valuation of the Clippers and I ask that knowing that valuations in general have continued to climb to record highs. It's a question that always gets asked any time that there's any circumstance any situation that comes up where an owner might look like he's got to sell that happened also with the Clippers in 2014 when Donald Sterling owned the team and Steve Balmer came in with a $2 billion purchase that came out of nowhere and raised valuation for all the time.

36:09All the clubs all the franchises in the league. The same thing here. This is now upwards of $7.5 billion as an enterprise. It's it involves arenas it involves the club all sorts of other parts and pieces of ownership. There's also the LA Lakers down the road yeah $12 billion at least as far as Josh Kushner and Bob Igergo as new owners so start to get into the valuations it doesn't seem like this is the one that goes out it's all going to tank from here. Yeah LA certainly seems to be for different reasons the epicenter of some NBA news the summer that's for sure and I believe a new deal in for that stadium with within to it as well I am I am curious if you think this sets a tone for the league or what it says about the league's decision making now moving forward. In terms of the league's decision making the league has been really consistent in terms of how it makes its decisions and it's interesting in that way that with Adam Silver and the leadership team at the headquarters in New York.

37:21There's the financial there is the legal and then there's the socially responsible and they're very conscious about that so when it comes to things like this situation they really run it through and not just means they're really good. And not just made sort of a snap decision or had a report may conducted and you know there's discovered the findings and then meet it out some sort of punishment legally financially there's really all of it wrapped around in some things or moral ethical socially responsible. Okay legal it's great to have you here on set appreciate it. All right thank you. All right straight ahead morning call crew team up the trading day ahead and why one member says investors maybe in for a surprise when it comes to the market September performance. We're back in a moment. Welcome back it's time for your call sheet where we look at the topics driving the trading day ahead crew members today we've got Joyce Chang of JP Morgan it's still here Ryan Dietrich of Carson Group also CMBC contributor and Paul Meeks of Freedom Capital markets.

38:22Great to have you all here okay we just tease it before the break so Ryan I'm actually going to kick this off with you September slump seasonality that we know and sentiment that's associated with September your thoughts. Yeah Morgan thanks for me back and hope everyone has a nice three day weekend coming up here September is the worst month on average everyone's heard this last 10 years 20 years third worst in a midterm year. I think it's kind of like it's important to note though as you're coming into September how are things going more and you'll get the 10 worst September's ever nine of them saw a down year to date return going into it and the worst ever were like down double digits coming in 74 2000 to 2022 and 2008 that's not the case now right so that's one positive and one more. When you're up in August and up double digits for the year September historically does pretty well but it's the rest of the year that's higher like a 10 out of 11 times. So one more quick one we do have some internal tieration more and more stocks are below the two day moving average very real low number above their 20 day moving average a little flush out maybe a little more trouble early in September but I think we have a surprise September rally and all said and done.

39:27Alright joy so love to get your thoughts and especially since we know it's also a midterm election year and once we get through the elections and we have outcomes you do see tend to see the stock market rally in response yet well I think it's all been about the cat backs numbers I mean we can on taking the cat backs numbers up. You take a look at the cloud service providers and we have that up now is at 940 billion dollars and we've also taken up just even the issuance that's coming out of data centers so you're receiving the demand there you're seeing the cat backs growth that's still very much on track. I think whatever he's looking at is you oil prices what's happening on the Iran conflict is this going to be something where the Iranian strategy is to have this in the midterm elections. I'm not expecting many big surprises out of the midterm elections I think the House will flip but it's not going to be a full blue wave there are just not that many competitive seats. I think markets will look at though is there a third reconciliation bill that can go through there seems to be no progress on any fiscal consolidation measures.

40:29I think that's going to keep bond yields high even if the equity markets end up you're sort of bucking the trend of being down on September and having a more positive return. I don't think you're necessarily going to get much relief you know I'm where treasury yields are at. Paul would love to get your thoughts and have you weigh in on this whole conversation especially when we talk about midterm elections one of the things that really is and it doesn't matter what your political party is one of the things that very much is on the docket here is AI infrastructure build out and tell the public that the public is going to be a full blue wave. And tell the public is reacting to it and how potential incoming lawmakers are going to react to it. It's a very serious issue because you have some governors that have been very pro AI development you think about Shapiro and Pennsylvania and Abbott in Texas and Texas is particularly interesting because in the United States. The bulk of data centers are in West Texas with honorable mention going to the state of Virginia.

41:33So now that these fellows are trying to get reelected they do what they always do there's a 180 degree flip flops and so we do have some regulatory angst some regulatory push back I expect it to only worsen and we know that this is a very important driver. Not just for technology which overwhelms the markets but also for its impact this development on GDP growth so I'm a little bit cautious and I think in the end we will be fine but we're going through a period right now where the narrative is clearly anti AI development. And we're having this conversation as we have more earnings from more tech companies including broadcom who was very bullish on their call last night Ryan about this ongoing AI demand and what that means for a company like that. Well that's right and they're not the only one that said that right and they're down about 3% or so pre market you've got snowflake on the other side of 20 something percent on just incredible news also.

42:33I think more than a month a week ago today was a signal right that's when software had a 7% rally one of the best one day rallies we've ever seen go back last 10 years when software gains more than 5% a day near lows like it was that usually means software is up significantly 3 and 6 months later listen lifeblood of a bull market is rotation I said it with you for a while yes it was all about chips first half the year but I think software clearly showing they're taking back the baton and that's a good thing for diversified portfolio one more quick one on a monthly closing basis the software. Equal weight ETF last month close at all time high nobody probably expected to say that back in March or April that's a good thing with the market broadening out I'd say OK Paul it looks like you want to respond to that. Yeah I listen to the AI results from broadcom last night and consider this this is a company that has a October fiscal so for fiscal 28 which isn't so far out in the future. The company is probably going to do 35 to 40 dollars earnings per share and before the call the street was expecting twenty six dollars a share so I think despite the reaction today this is overwhelmingly positive news not necessarily for the near term but for the long term I'm very comfortable with AI infrastructure building probably the super cycle last into 2030 in my view.

43:57I'm choice of a back something you're just talking about energy prices geopolitical landscape everything we're seeing around that one of the things you said earlier in the show is that you know you built in a case for. A hike in December. Why December and especially in a day where we're going to get more fed speak in general how much that does hinge on some sort of conflict resolution whether it's Iran whether it's. Russia Ukraine if that were even to happen or something else so the key thing we're looking at is how the August inflation print comes out you know and there is a case where you could hike in September depending on that outcome but what we're forecasting right now like point two percent we think there's probably a case where you can wait a little bit longer till December but I think it's very clear that whether it's September December you the case for hiking is there and so combination of different things. It's the higher energy prices it's the sticky inflation but it's also the higher deficit numbers so I think the cases less about whether it is September or December but just what kind of hiking path are we on are we looking at one hike and it's done or we looking at that you know typically what happens in these cycles ends up being 50 to 100 basis points so September is in focus right now but it is very dependent on you know the August inflation print.

45:17We still have December in the forecast but you know it I wouldn't rule it take it off the table for September okay we got a minute left I'm going to just lightning around this Ryan the other earnings in focus consumer earnings whether it's five below Lou lemon where you get after the bell tonight to thoughts. Yeah I mean overall we'd say the consumer still pretty solid the labor market I know that's everybody's discussion right now it's a little bit stronger under the surface some of those regional manufacturing data pieces shows some big jumps in employment so overall consumers still pretty healthy we'd say Morgan okay and Paul we're going to get Tesla cyber cab events tonight as well we've seen that stock rebound here in the last call month or so space X to alongside it they've been trading kind of similarly. Yeah when I take a look at those companies Tesla clearly it's EV businesses in a decline not necessarily in for his unit volumes but profitability is very poor space X I was out even before the IPO the fact that this was valued at $2 trillion and even three trillion of one time really just blows me away 92% of the total available market according to must for this company is AI not rockets.

46:29Yeah said like broadband and the problem there is they're not even close to the top. All right we're going to have to leave the conversation there thank you to our morning call crew great to have you all here. Something amazing is happening this agency is experiencing a cyber attack but no one is panicking that's because CDW government secured optimized and future proved their data with the Dell technologies power store solution it increases cyber resiliency and improves end to end performance. For a secure scalable solution that doesn't require more physical space Dell technologies and CDW government make amazing happen find out more at CDWG dot com slash Dell federal.