Loading summary
Transcript142 lines
- [00:00]
Eamon Javers
Hey Fidelity, Can I get a second.
- [00:02]
Carl Quintanilla
Opinion on stocks in the Fidelity app?
- [00:05]
Fidelity/Nordstrom Rack Announcer
With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then when you're ready, trade US stocks and ETFs with no commissions.
- [00:16]
Eamon Javers
That's right.
- [00:16]
Fidelity/Nordstrom Rack Announcer
I am always right.
- [00:19]
Carl Quintanilla
Investing involves risk, including risk of loss, online US equity trades and ETFs and retail fidelity accounts sell order, assessment fee not included, some account types and securities excluded. Details@fidelity.com commissions Fidelity Brokerage Services, LLC Member.
- [00:28]
Mark McClain
NYSE, SIPC.
- [00:30]
Seema Modi
New Year New Gear Thousands.
- [00:33]
Fidelity/Nordstrom Rack Announcer
Of fresh active styles are at Nordstrom Rack stores now. Save on top brands like Nike, Puma and free people starting at just $35.
- [00:42]
Sarah Eisen
How did I not know rack has Adidas?
- [00:44]
Jeremiah Buckley
Cause there's always something new.
- [00:45]
Sarah Eisen
Plus, join the Nordy Club to shop new arrivals first, unlock exclusive discounts and more.
- [00:51]
Fidelity/Nordstrom Rack Announcer
Great brands, great prices.
- [00:54]
Carl Quintanilla
That's why you Rack market moving insight and analysis. Join Jim Cramer, David Faber and me, Carl Quintanillo on the opening bell hour of cnbc. SQUAWK on the Street.
- [01:11]
Sarah Eisen
Good Thursday morning again. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and Mike Santoli live today from post nine of the New York Stock Exchange. David has the morning off. Stocks are hanging in there quite nicely despite another hot CPI report. Another inflationary read that came in a little disappointing. On the upside, you've got strength in a lot of groups, materials, consumer, discretionary, technology, financial, staples, industrials, energy, utilities and communication services. They're all up right now. The only ones that are down are real estate and health care. The S&P 500 up a quarter of a percent. Adding to the weekly gains, the NASDAQ's up now more than 1% for the week. Treasuries also catching a bid despite that warmer CPI report. And we are seeing yields come down a little bit from their elevated levels Yesterday though the 10 year note yield is importantly still above that 4.5 level which we did break higher yesterday on the stronger inflation number.
- [02:04]
Carl Quintanilla
It's a very busy day in Washington, dc. We've got a House budget markup, got a White House appearance on tariffs, Prime Minister Modi of India and this Robert F. Kennedy Jr's final Senate confirmation vote to be at Health and Human Services set to begin at 10:30 Eastern Time. We'll bring you the latest when we get that later this hour.
- [02:22]
Sarah Eisen
And we've got a lot of movers. 30 minutes here into the trading session. Here are three that we are watching. Cisco in The Green beating estimates reporting revenue growth for the first time in four quarters. Full year. Guidance also coming in above expectations. A bigger part of that story, shares of Applovin surging the company, which helps developers make apps for mobile devices but is really now just becoming an advertising company, beat on the top and bottom line. Revenue up more than 40% from a year ago. Shares have now gained 1,000% over the past one year. And then Deere shares are under pressure. Earnings topped estimates, but we're down sharply from a year ago. Deer feeling the impact of farmers renting equipment due to weaker incomes and higher borrowing costs. Guidance also pointing to more revenue declines. Deere down 3.4% but it had been an outperformer on the year.
- [03:12]
Carl Quintanilla
Meantime, a developing story we're watching this hour. The president set to announce reciprocal tariffs on countries that impose higher duties on U.S. goods. Let's get back to Eamon Jabras with the latest. Morning again, Eamon.
- [03:24]
Eamon Javers
Yeah, good morning to you, Carl. I'm learning a little bit more now from White House officials on what to expect at the 1 o' clock event in which the President's going to announce reciprocal tariffs. One thing to watch for is I'm now told that there's going to be a time delay of some kind on these tariffs. They're not going to go into into effect today. There will be a date certain in the future. Unclear what that date will be. April 1st has been discussed as a possibility for the tariffs to go into effect. That is still tbd. So don't count on that particular date. But one thing is for sure, these tariffs are not going into effect today. This is going to be a presidential memorandum, not an executive order. So a little bit sort of lower on the totem pole of presidential authority here. The USTR is going to be tasked with identifying next steps to in the reciprocal tariffs. As part of this presidential memorandum that we're going to see today. We're going to expect to see a couple of new details in terms of exemptions in this announcement today. We're not really sure exactly what the exemptions are. I'm told there will be some slight exemptions to the tariffs. The President has been resistant to the idea of offering any industry group that asks for it an exemption to the tariffs, but he has put in some exemptions, I am told. We'll wait and see what the details of that are. A couple of CEOs have been in the building over the past 24 hours, I'm told. Not clear which ones have spoken to the President about tariffs. But the CEO of American Airlines and the CEO of Verizon, I'm told, have been on campus over the past 24 hours. So clearly a lot of folks are making their case about their industries to this White House. Just in general, no CEO calls on the schedule for today and no indication, I'm told, that there are any exemptions for any particular countries. But we'll wait and see. All of this, I'm told, is a moving target through this morning. They are still putting the final touches on this tariff announcement today even as we speak right now. So we'll wait and see where everything lands and where the dust settles at.
- [05:25]
Sarah Eisen
1Pm Guys, Eamonn, do the countries get a heads up or are they waiting like we are for the announcement?
- [05:30]
Eamon Javers
The countries, the countries have been burning up the phone lines. I mean, I talked to Kevin Hassett, the National Economic Council director yesterday. He said he, he's been on the phone yesterday morning with foreign leaders. He said the commerce secretary, Howard Lutnick was on the phone with foreign leaders. All of those negotiations have been going on country by country over the past 24 hours. So we will see whether any countries get an exemption, whether any of that lobbying paid off behind the scenes.
- [05:57]
Sarah Eisen
All right, Eamon, thank you very much. We wait till 1pm to see what this all looks like. Eamon Jabbers by the way, if you're looking for who's targeted here, the trade deficit, you know, we, we run a trade deficit. We import $1 trillion worth of goods. We are buyers from the rest of the world which President Trump has had a problem with. Here are the biggest trade deficit partners or folks that Trump would like to see them buy more from us. China, we know obviously a biggie. Mexico, Vietnam, Ireland, Germany. That's why Europe is in the crosshairs of course. And then, you know, rounding out the top 10, which couldn't fit in here is India's number 10, which Prime Minister Modi is going to be at the White House today. They have tariffs so they could be a target here. And also Canada is number nine. We did speak with the White House trade adviser Peter Navarro yesterday. We asked him about reciprocal tariffs. He said he couldn't announce anything on the show, but he did give us some hints.
- [06:51]
Carl Quintanilla
Listen, if they won't lower their tariffs to ours and their non tariff barriers, we're going to raise ours to theirs or vice versa. It's the most common sense thing in the world. The EU particularly has a VAT tax, a value added tax and it's not well understood that that acts, it's like a two punch. When they're sending us stuff, it acts as an export subsidy. When we're sending them our stuff, it acts as a tariff. And then of course you got the problems with all the other countries around the world. So reciprocity president has embraced that gives.
- [07:34]
Sarah Eisen
You a little bit of their motivation and the thinking behind why they feel justified in doing this, that they have trading restrictions and tariffs like a VAT tax in Europe, for instance, that make it unfair. So we're now fighting back, unclear whether what the upshot of that is going to be. Are they going to buy more from us? Is there going to be more manufacturing? And yes, we challenged him on those points like. But it's hard to know what the end game is. But one thing is for sure, if they do go with tariffs, they're trying to raise money for the deficit.
- [08:02]
Mark McClain
Right.
- [08:02]
Sarah Eisen
They're trying to raise revenues. So that's part of the strategy too.
- [08:05]
Mike Santoli
Yeah, I mean it's one of the effects if it, if in fact it gets paid, the numbers can't get that big in terms of revenue. I mean obviously even if we applied it to all of our three plus trillion dollars in goods imported and I guess the question is too, I mean, do we have proper replacements? A lot of India imports of pharmaceuticals, for example, probably could do it here.
- [08:23]
Carl Quintanilla
That was the crux of your question. Are we going to start making shirts?
- [08:26]
Mike Santoli
Once again, it's kind of one of these. And if all it is is we're going to charge the rest of the world for access to the US consumer which is the single strongest force of demand in the world, fine, that's what we're doing. It just doesn't necessarily contribute directly to a restructuring of the US manufacturing sector or something like that. That might be an ultimate goal.
- [08:45]
Carl Quintanilla
The other the question, and it was interesting the way Navarro went right to as a sign of success, the price action of shares of steel makers. Yeah, which is what he went to yesterday and which totally makes sense because Nucor for example did raise the price of rebar this week so that the discussion of pricing impacts on the answers.
- [09:03]
Mike Santoli
That business protection of domestic producers in an industry where there's overcapacity globally. Right. So it's not like there's people going to have to create more plants. It's just we can protect our, our ability to produce it. I mean which, which you know, has some value.
- [09:17]
Sarah Eisen
Dealmakers are ecstatic about these tariffs. I mean all of them have responded very positively, not just their share price, but in terms of their statements as well. Look, so you have the trade deficit, you've also got the budget deficit. And we did get some new numbers on that and we're expecting. Right. The House Republicans, they did put out a plan. It's going to get marked up today.
- [09:35]
Carl Quintanilla
Yes. And Johnson says he expects it to pass unanimously. It'll be interesting.
- [09:39]
Sarah Eisen
So here's the setup. Here's the deficit. The budget deficit as a percent of GDP and where we are now is negative, what, six and a half percent of gdp. Why that's significant is because the only time it's been lower than that in recent history has been during those gray shaded lines of recession. Covid the financial crisis. I mean that that's when the deficit dips because we have to spend a lot stimulus to get out of it. And that's why people are especially worried right now about just how much debt and deficit we're taking on. Because we're in a strong economy. I mean pretty much 3% growth economy, very strong labor market. We don't need to be spending quite as much goes the thinking. And that's the, that's the problem. I'll just end with just the Peterson Institute came out after the House Republican plan and you know, not a fan in terms of the fiscal responsibility here. They think America is in terrible shape and the new administration and Congress have many available policy options to improve our fiscal outlook or at the very least fully offset policies they wish to enact or extend. The bottom line was that this, that this plan that they put out spent a lot more in terms of the tax cuts and the giveaways than it raised.
- [10:50]
Mike Santoli
The accounting for the extension of the tax cuts is very, very punitive when it comes to trying to have, you know, offsets. I will say though, non interest spending, primary spending is right now about 20.1% of GDP. In 2019 it was 19%. In terms of actual outlays, that's what we're looking at kind of like a one, one and a half percent of GDP toggle. It's the interest expenses built interest costs.
- [11:17]
Sarah Eisen
You can't get 92 billion for the first quarter of the fiscal year out of 840 billion. So it's a sizable chunk to your point. Absolutely. That's why president wants lower interest rates. Elon Musk wants lower interest rates. Everybody wants lower interest rates.
- [11:32]
Carl Quintanilla
We, we had a good there for a while. Meantime, that is coming off 18 straight days of gains hitting all time highs going back to the 2012 IPO. It has been a bright spot in the Mag7 trade and that group overall underperforming the broader stock market S and P would actually be higher this year if you took out the Mag 7 names. Joining us to talk about that and the state of the overall market is Jeremiah Buckley. Janice Henderson, Equities Portfolio Manager. His top holdings include Metta, Nvidia and Apple. Jeremiah, good to see you. Thanks for joining us.
- [12:00]
Jeremiah Buckley
Yeah, thanks for having me on.
- [12:02]
Carl Quintanilla
I think it was one desk last week that said it's really the Mag one and it is Metta. I wonder if you'd go that far. And if you think 18 in a row has put it in an overbought position.
- [12:13]
Jeremiah Buckley
Yes, obviously Matter has had a good start to the year. It's amazing that they've had the winning streak that they've had and certainly fundamentals have been strong. They had better than expected revenues and so it's been deserved. And they've had very aggressive investment plans and we're optimistic about that. And so yes, the valuation has increased. It's towards the upper end of the year, the Mag 7 names now, but we think that that is appropriate given the growth outlook. And so we're still positive on Metta. You know, we also see Amazon is up so far this year outperforming the S and P modestly. They also had strong results and fortunately for them they had good growth and us that was in line with expectations and so still optimistic on most of the Magic seven.
- [13:02]
Carl Quintanilla
What do you make of what do you think the fallout has been from the Deep Seek news? The gut check on training costs and then the subsequent reiteration are actual positive revisions on CapEx guidance in the past, say couple of weeks.
- [13:17]
Jeremiah Buckley
Yeah, so we think we paid more attention to the CAPEX guidance and the CapEx plans and we think that the demand for COMPUTE is going to continue to be very strong. We still are very positive on Nvidia. We think earnings growth is going to be quite impressive again this year. We're certainly paying attention to the Deep Seek. I think it was an interesting development. We certainly need efficiency to continue to improve in AI for this to continue to be a long term growth driver. But we don't think at this point in time that's impacting CAPEX plans. And we're still very positive on infrastructure.
- [13:53]
Sarah Eisen
I mean, do you think these are all just secular AI stories or does it matter which way bond yields go go and what happens with tariffs and macro for some of these stocks to work?
- [14:03]
Jeremiah Buckley
To me it's the secular themes around AI that are driving these companies. If you look at they all have extremely healthy balance sheets with lots of cash. And so I think within the market they're less interest rate sensitive. To the extent that the higher interest rates would materially impact the overall economic growth, then they will certainly see some impact from small businesses, etc. But in general, I think it's really the returns on the capital that I generates over time and their leadership globally that will drive the stocks and their outlooks.
- [14:38]
Carl Quintanilla
Finally, I know you can address some names in the consumer and travel space. We've been watching discretionary versus staples and whether or not that ratio is shifting and what that would mean longer term for the market and the consumer. But you know, for example, a name like Disney and their reliance on parks and experiences, where do you think the rest of the at least first half of the year is going to lead us?
- [14:59]
Jeremiah Buckley
Yeah, so we're still positive on travel trends. I think you saw with fourth quarter earnings results and then you saw MGM report this morning with some favorable commentary. We think the consumer continues to spend on travel. Demand is quite strong, I think fortunately for the consumer, despite, you know, the recent inflation reports, some of the staples or part of consumer spending has moderated. And so they have more of their income available for discretionary spending. And so we think that consumer discretionary spending will continue to be positive and travel continues to be really well positioned to capture those gains.
- [15:36]
Mike Santoli
Yeah.
- [15:36]
Carl Quintanilla
Well, tomorrow I'll get retail sales. Give us another indicator of where they stand right now relative to their comfort in spending the money they have. Jeremiah, thanks. Good to see you.
- [15:45]
Jeremiah Buckley
Jeremiah, thanks for having me on.
- [15:47]
Sarah Eisen
Market continues to push higher here. By the way, every sector now green except for utilities as we had to break. Here's our roadmap for the rest of the hour. The IPO market heats up in 2025. Cybersecurity company SailPoint making its debut today, pricing at the higher end of its range. We're going to talk to the company CEO ahead of that first trade.
- [16:04]
Mike Santoli
Plus Elon Musk's Doge obligations, a risk to Tesla. We'll discuss that next.
- [16:09]
Carl Quintanilla
And Indian Prime Minister Modi meeting with the president today. What investors investors need to know as a big hour of squawk on the street continues after this.
- [16:26]
Fidelity/Nordstrom Rack Announcer
At Amica Insurance, we know it's not just what's inside your home that matters. It's who you share it with. That's why we work even harder to protect it. Visit amica.com and get a quote today at Nature's Bounty, the belief is simple. You already have a brilliant body supplements just help support your journey. For over 50 years, nature's bounty has offered vitamins and supplements to help you eat, sleep, thrive, repeat from magnesium glycinate for heart and muscle support to hair growth capsules for fuller, thicker hair and probiotics. With 20 billion live cultures for digestion, Nature's Bounty. It's in your nature to thrive. Learn more@naturesbounty.com be these statements have not been evaluated by the Food and Drug Administration. These products are not intended to diagnose, treat, cure or prevent any disease.
- [17:12]
Eamon Javers
Building a portfolio with Fidelity Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics and managing it as.
- [17:24]
Mike Santoli
One big juicy investment.
- [17:28]
Fidelity/Nordstrom Rack Announcer
Mmm.
- [17:29]
Eamon Javers
Now that's pretty good. Learn more@fidelity.com baskets Investing involves risks, including risk of loss. Fidelity Brokerage Services LLC Member NYSE SIPC.
- [17:57]
Tim Higgins
I think we do need to.
- [18:01]
Mark McClain
Delete entire agencies as opposed to leave part of them behind. Because if you leave part of them behind, it's easy. It's kind of like leaving a weed. If you don't remove the roots of the weed, then it's easy for the weed to grow back. But if you remove the roots of.
- [18:16]
Tim Higgins
The weed, it doesn't stop weeds from.
- [18:18]
Mark McClain
Ever growing back, but it makes it harder.
- [18:21]
Sarah Eisen
Elon Musk, speaking virtually overnight at a conference in Dubai calling for entire government agencies to be scrap, deleted his comments. Coming as a federal judge allows the Trump administration to carry out its federal worker buyout program. However, investors are questioning just how much of a distraction Doge is for Musk. With shares of Tesla down five of the past six trading days and down 16% so far this year. Joining us is Tim Higgins, who wrote the book and comments on Musk, has been studying him for a long time. I'm glad to talk to you, Tim, because I feel like there's some misunderstanding or a lot of noise around what the motivations are for Elon Musk here when it comes to Doge. Can you clear it up from your, from your perspective as to what's going on?
- [19:06]
Tim Higgins
Yeah, he's been, I think for the last few months pretty clear what his his perspective and what is his ambitions are and that is to cut government spending, but I think more importantly cut government regulations. He has for years talked about how there are too many regulations hold holding businesses back, in particular his companies at Space X and Tesla. He has seen that up close and personal. When you look at Space X in particular, he wants to get to Mars. He wants to get into outer space a lot. He's been running into hurdles that he says are unnecessary, such with the EPA and other agencies. And now he has that opportunity to get in there and make things run quicker.
- [19:44]
Sarah Eisen
In his mind, the Democrats say he's conflicting inflicted. He's going through his own contracts, he's violating our privacy. He's. I mean, he has unrestricted power. Do you buy any of that?
- [19:57]
Tim Higgins
Well, it's, I guess, not surprising given that they are on the other side of the aisle, but they do raise some legitimate concerns here. It is potentially conflict of interest if he is in there in these government agencies that have potential to regulate him. That's the sort of thing you don't necessarily necessarily see or want to see in government, but it's a unique situation. When President Trump has been asked about conflicts of interest with Elon, he says Elon will, or he says Musk will kind of police himself and that he's. He's watching over him. So, yeah, definitely concerns from people who study good government and have worries about overreach and business in government.
- [20:36]
Sarah Eisen
Yeah, I mean, but the counterargument is that, you know, the government hires consultants all the time, like a McKinsey, and. And they pay them a lot of money to come in, which is also something. And Elon's not getting paid for this. Right, right.
- [20:49]
Tim Higgins
And I think you're hearing his supporters say, hey, he's the world's richest man. He's not doing this for money. He's doing this to help the taxpayer. That's kind of the back and forth on these arguments. But what is really unique here is that he's not the first CEO, the first businessman in the world, or the history of the US who wanted to be involved in government in some way. And we've seen it in the past. But what he has done, at least in these early weeks, has shown an effectiveness to get himself deep within the trenches in a way that we haven't really seen before. And that gets at the kind of close relationship he has with the president and that his willingness to be out front fighting these dragons.
- [21:28]
Sarah Eisen
Is there any indication that his focus right now, which seems to be primarily on Doge and Washington, comes at the expense of Tesla, or is there. Is there leadership in place that. It doesn't matter and they shouldn't skip a beat.
- [21:43]
Tim Higgins
I mean, the one thing that Elon Musk seems to not be working on right now is creating more hours in the day, and that's probably what he should be working on. Right. But it goes back. I mean, the criticism that he's too distracted, that he's too overwhelmed, has gone back for many, many years. At this point, Tesla investors know what they're getting. But I will say that, you know, when he took over Twitter in late 2022, this was a concern. The company, Tesla, the automaker, was at kind of an inflection point. There was starting to be some signs about where the way the electric car market was going and where the Tesla was positioned. And it would seem as if Tesla is now in the, in the, at the point where it doesn't have the kind of new product that it needs to excite the market. Right. There is promises of some cheaper vehicles later this year. But the big issue is that if you look at its lineup, it's pretty old. And that's always a tough place to be if you are a carmaker. New sheet metal sells. Old sheet metal sticks around. And that is an issue if you're a Tesla investor. That said, Tesla investors are really betting that sheet metal isn't the future. It's software that these vehicles are going to be autonomous taxis, that driverless cars are on the precedent of happening. And that is where they're putting their money with Musk and they're hoping that his relationship with Trump will help kind of usher in that new era.
- [23:01]
Carl Quintanilla
The other big story, it's actually in the Journal this morning, Tim, is about MERS of Germany, who's the frontrunner in their upcoming elections, who says that Musk will face consequences, in his words, for meddling in German politics. And of course, Germany, the home of their one huge European factory. What kind of price might he pay for that?
- [23:21]
Tim Higgins
Well, you could see that the price being consumers being turned off by the brand. That's been a concern, especially in Europe where sales have struggled. We've seen here in the US Democrats being turned off by the brand at certain points when Musk has been especially vocal on some of his more contentious views. You also have just the idea that governments around the world are wary of some of the way he's using his bully parp pulpit of acts and getting involved in external politics, whether it's in the uk, eu, Germany. These are things that make people nervous and definitely, you know, create some unhappy will, if you will.
- [24:03]
Sarah Eisen
Yeah, we are seeing that play out. By the way, Tesla having a nice comeback day. Five and a half percent higher. Tim, thank you for your insight. Tim Higgins from the Wall Street Journal. Also, the book is Power Play Tesla, Elon Musk and the bet of the century.
- [24:17]
Carl Quintanilla
As we go to break, check out some of the biggest gainers on the S and P this morning as Dow's up 100 points back to 6081 MGM up there. We mentioned GE Health Care casinos having a very nice day across the board. Also today, Apple taking a major step to roll out AI in its iPhones in China. Details on that after this quick break. Now is your time to get into a new Dr. Horton home by taking advantage of its national red tag sales event going on right now through January 25th. Stop by any of its participating communities and find select red tag homes at Incredible Pricing. So whether you're buying your first home or looking for an upgrade, you don't want to miss the red tag sales event going on right now. Discover the Dr. Horton Difference. Tap your screen now or visit drhorton.com Dr. Horton America's Builder and Equal Housing Opportunity Builder Building a portfolio with Fidelity.
- [25:11]
Eamon Javers
Basket Portfolios is kind of like making a sandwich. It's as simple as picking your stocks and ETFs sort of like your meats and other topics and managing it as one big juicy investment.
- [25:25]
Fidelity/Nordstrom Rack Announcer
Mmm.
- [25:26]
Eamon Javers
Now that's pretty good. Learn more@fidelity.com baskets Investing involves risks, including risk of loss Fidelity Brokerage Services LLC Member NYSE, SIPC.
- [25:40]
Sarah Eisen
S&P 500 not too far off from the session highs. We've been moving higher all morning long. No fear of reciprocal tariffs, no fear of hotter inflation numbers. That's what the market is suggesting. We did get that news broken by our own Amyn Javers at the top of the hour that while we are expecting an announcement at 1pm on the Reciprocal tariffs, Amens reporting that they will be a delayed start. They will start may start, he reports on April 1st. So that they are not immediate, maybe leaving some window or room for negotiation.
- [26:10]
Mike Santoli
And they're not an actual executive order.
- [26:12]
Sarah Eisen
And they're not an executive order either. A little bit less sort of stringent maybe on that front, similar to what we got maybe from the 25% announcement on Mexico and Canada which then were delayed for a month and there are concessions being had and being made, all the feeds into that. While this is just a negotiating strategy to get something that he's after, whether it's on immigration, whether it's on trade, whatever it is, the market is less worried about it than say other days where we are anticipating tariffs or have been before. They're trying to get used to what this is all going to look like.
- [26:44]
Carl Quintanilla
Yeah, it's easy to declare victory if you never say what you're after in the first place.
- [26:47]
Mike Santoli
Reserve leverage.
- [26:49]
Carl Quintanilla
Meantime, shares of Nvidia and HP are worth watching. And videos popping on news that HP has shipped its first Grace Blackwell system. The company says the system is designed to help service providers and large enterprises quickly deploy very large, complex AI clusters with advanced direct liquid cooling solutions. Sarah, we've talked with Antonio about that before and what kind of technology that involves.
- [27:12]
Sarah Eisen
Absolutely. I mean, he's also busy. They're trying to fight this, fight this acquisition. Right. That they're trying to make as well. They're trying to fight the, the federal authorities. Yeah, they're trying to buy Juniper. And so that's going to be another key test for sure.
- [27:25]
Mike Santoli
Turning to another part of the Mag 7, Alibaba chairman Joe Tsai speaking overnight at a summit in Dubai, confirming reports that Alibaba is partnering with Apple to roll out an AI for iPhones sold in China. Those stocks both jumped on the report this week. I said Alibaba would offer Apple a local partner to help navigate the regulatory environment and localize its AI. You see Apple up four and a half percent week to date. It's up just about 40 basis points or so today and has had a decent bounce. So it does remain about 8 1/2% below its high. So again, a lot of this churning around the the Mac 7. Time now for a news update. Let's get to Contessa Brewer. Contessa, good morning.
- [28:08]
Contessa Brewer
Hey there, Mike. German Authorities say nearly 30 people when a car plowed into a crowd in Munich the day before a major security conference. Vice President J.D. vance is among the major world leaders attending that conference. Police suspect this was intentional. They say they're investigating for a motive. And they say the suspect is an asylum seeker from Afghanistan and was known to authorities for previous unrelated drug and theft incidents. The ceasefire between Israel and Hamas appears intact for now. The two sides agreed to resolve a dispute over a lack of aid entering Gaza that could have derailed that fragile arrangement. Hamas says it will release hostages as planned this weekend after getting guarantees that caravans and medical equipment will be allowed into the enclave today. Former World Wrestling Entertainment executive Linda McMahon is on Capitol Hill today. She's appearing before a Senate committee for her confirmation. He hearing to become the next education secretary. President Trump has suggested he's going to dismantle that department that she's seeking to lead. Interesting dichotomy there. Will it end or will it continue? Carl, we'll be watching.
- [29:18]
Mike Santoli
All right.
- [29:19]
Carl Quintanilla
Thank you. Still to come this morning, our next guest company is going public today. Just priced at the top end of the range last night. We're going to talk to the CEO of cybersecurity company Sailpoint Points in a moment.
- [29:35]
Mike Santoli
Welcome back to Squawk on the Street. Sailpoint, the latest company coming through the IPO pipeline. Cybersecurity company first went public in 2017 and then was taken private by Thoma Bravo for $6.9 billion in 2022. Salt Point pricing at the higher end of its trading range of its anticipated range, valuing the company at over $12 billion. We wait for the stock to open from its $23 issue price. Joining us now, SailPoint CEO Mark McClain. Mark, welcome and congratulations.
- [30:06]
Mark McClain
Thank you very much. It's an honor to be on your show today. Thank you.
- [30:09]
Mike Santoli
So talk about a little bit of now versus then in terms of where the company finds itself, your particular lane, I guess, in cybersecurity. And what's changed since 2022, which, which was when you were sold into private equity pre chap.
- [30:24]
Carl Quintanilla
GPT.
- [30:25]
Mark McClain
Yeah, good question. Yeah. We're in a part of the security market called identity security, which is really ensuring that all the identities an enterprise cares about, mostly people, but increasingly non people, things like machine identities, they're called, and even agents. The world of AI agents is rapidly evolving. It's making sure all that data that those enterprises have is secure to those identity lenses. And to your point about what's changed, when we were in the market before, it was still mostly about a people level of control. Could your employees or contractors and others that needed to access your systems, you know, could you ensure that was safe and accurate and you hadn't been compromised? Right. Because the attack vector from the bad actors has shifted to an, an identity based compromise. So that movement toward machine and agent AI has been the biggest shift in the last few few years.
- [31:13]
Mike Santoli
And what are the implications of that? I'm just wondering in terms of. It seems like you're dealing with kind of credentialing and making sure that these unique identities are protected from a company. But it would seem like those things, you know, if they're non human, can proliferate almost indefinitely.
- [31:29]
Mark McClain
Well, and there's kind of two parts of this identity story. I liken the metaphor to a building. You know, here in New York, when we were visiting investors, we would check into a building, give them our license and then be allowed into the building. That's called an authentication process. Like we go at TSA at the airport. But then our software is focused on say when you get into the building or into the Application environment in a technology sense. Where can you go? What can you do? Can you access all the data, see the data, change the data? Well, doing that across the thousands of applications and sometimes hundreds of thousands or millions of identities that an enterprise cares about is very complex. And companies are looking to Sailpoint to help them navigate that journey towards securing all that data, as we like to say, through the lens of identity. It's ensuring the right identities have access to the right data.
- [32:14]
Sarah Eisen
Who are your primary rivals doing what you do? Because it does feel increasingly competitive, this whole cybersecurity market.
- [32:21]
Mark McClain
Yeah, there are a number of players in and around the industry, but frankly, very few of them have actually been as focused on this part of the market. As I mentioned, there's this access market, companies that have been focused on what's called single sign on or multi factor authentication. Are you really who you think, who we think you are? Can you log into everything or. There's some vendors focused on privilege access, but Sailpoint's been uniquely focused on this identity security space and frankly there aren't a lot of significant challengers to us at the high end of that enterprise market today. So that's part of the positioning that I think investors were excited about when they heard the story.
- [32:54]
Sarah Eisen
The other thing is it will remain a continuous controlled company. Right. Thoma Bravo will still own, what, 88% of the company after the IPO. Is that going to be a problem for investors that you're talking to?
- [33:05]
Mark McClain
We hope not. We have an unusual story. We were actually owned by Thoma Bravo. We'd been a venture backed company owned by Thoma Bravo, went public in 2017 and then were public for almost five years. Went private with Thoma Bravo. Again, a fairly unusual story actually. And so the investor community has seen Thoma Bravo handle that and be very thoughtful about how to unload some of that equity into the market. That that time they actually completely exited. I think the sense is they'll come down from a control position, but probably be a long term owner. But there's a great deal of equity to be sold into the markets in the coming years and investors are, I think, pretty excited about that.
- [33:41]
Carl Quintanilla
Mark, you're right, you're in rarefied air in terms of the number of people who've taken a company public more than once. I do wonder, though, we spent a lot of time talking about private markets and how it's led to, some argue, less urgency to be public at all, why you felt this was a good move and how you would characterize the overall window.
- [34:00]
Mark McClain
Right now, yeah, it's a great question. We are very privileged to be one of the first tech IPOs, obviously in 2025 to open on NASDAQ. And we're hopeful it's going to go well, obviously. And I think if you look at that, there is a lot of companies who I think are interested in getting back into the public market setting. I think there's a lot of things that that does, it gives you some credibility. You, you're held accountable to those public investors to talk about where you are in the market and your progress. And I think we're very confident that we can continue to deliver very good results. And it also signals some of the competitive landscape where you are and how you're doing. So I, I think we're very open to it. We were, we've kind of been focused as a business, I like to say, always on, you know, doing what we need to do to build a great company. When we first, first went public, I kind of was developed, developed a famous little saying. Every second you spend looking at the stock price, you're not helping the stock price.
- [34:46]
Tim Higgins
Right.
- [34:46]
Mark McClain
We told our team, stay, stay focused on building a great business. The stock price will take care of itself. And that's been our experience. It's been a, been a very nice series of growth in the last two and a half years while private and we're pretty excited about our prospects in front of us.
- [34:59]
Mike Santoli
What have you found to be kind of investors key themes in terms of what they're asking you about what, what they're looking to, to try to capitalize on in terms of the, the overall industry trends. And really what are you seeing in terms of the, the selling market right now for your, your services?
- [35:15]
Mark McClain
Well, first, for sure what investors like the story today is one where you can balance ideally scale and growth with profitability. And we are a great story on that dimension. We had released some of our fiscal Q3 numbers into our S1 and you know, we were growing it over 30, 30% overall, over 40% in our SaaS product line, which is the bulk of our revenue. Now we were doing that at the scale of over $800 million of annual recurring revenue. And we were non GAAP profitable at about 15%. And that combo of growth and profit is very in demand. But then when you get to ready to reenter the public markets, what they want to know is how long can that sustain what they all call durable growth. And I think they see the, the secular tailwinds in our markets. This, this rush to machine and agent AI that the number of enterprises around the world that don't feel like they've fully secured their environment through the lens of identity and they think Sailpoint is fairly uniquely positioned to capitalize on that in the coming years. I think that's what the, the investors were really interested in our story.
- [36:13]
Sarah Eisen
But, but so it's what about gap profitable and how long does that take and how much of the business is driven by subscription which I would think would be much more profitable.
- [36:24]
Mark McClain
Great question. You know as a software business we were once a software what was called perpetual license had been shifting to SaaS but we ceased selling those what's called perpetual like perpetual licenses and moved to it's called term licenses Net net. We're over 90% subscription revenue now. That's a profile investors really like. And I'm not the best technical person here but what I can tell you is it's pretty traditional in the, in the software market to stay focused on non GAAP profitability. Profitability because of a lot of the stock based compensation issues they can really put a damper on on GAAP based profitability. And so in our marketplace I think non GAAP profits are generally what are considered kind of the bellwether of good potential future performance.
- [37:03]
Mike Santoli
Yeah. At least initially. Certainly hearing the current indication for the opening of the share somewhere around 26 relative to the $23 offer price. So we'll continue, continue to track that. Mark, great to talk to you. Thank you very much.
- [37:16]
Mark McClain
Thank you everyone for the time. Really appreciate it.
- [37:19]
Mike Santoli
All right.
- [37:20]
Sarah Eisen
We continue to push higher here on the S&P 500 now up 6.10 of a percent. But here's a look at some of the biggest losers right now on the S and P. You've got the airlines in there down 4% or so. So at this the animal health care company also getting hit pretty hard. We'll be right back.
- [38:00]
Carl Quintanilla
Keeping a close eye on Capitol Hill this hour. Robert F. Kennedy Jr. S final Senate confirmation vote to be at Health and Human Services to be secretary getting underway. We'll bring you headlines as they cross. We did see some interesting like intraday movement and names like Moderna during his hearings. We'll see if we get any more once we get a vote.
- [38:19]
Mike Santoli
Yeah, you wonder if a lot of that again is just kind of spilled through the market in anticipation. And you know, we'll just know what we know once the, once somebody's in the office.
- [38:27]
Sarah Eisen
Speaking of movers, check out shares of Molson Coors rallying on the back of the the latest earnings and Outlook, the beer company beating expectations, higher prices helping to offset continued volume declines. Molson's full year outlook indicating further growth and above street forecasts. Molson is part of the consumer staples group which is the best performing sector so far this month and one of the best so far this year. I guess it pays to be a hated group, right? The alcohol makers, the consumer staples, they have not been loved for a long time and that is staging a bit of a comeback.
- [38:59]
Mike Santoli
Although Wal Mart and Costco are carrying the staples.
- [39:02]
Contessa Brewer
True.
- [39:02]
Mike Santoli
And they've been, they are, they dominate the market cap weighted sector and they're up like 15% year to date.
- [39:08]
Sarah Eisen
Yeah, but we've had some nice earnings.
- [39:10]
Mike Santoli
Some of them have actually had some relief rallies. You're right.
- [39:12]
Sarah Eisen
But on that, well, on the low expectations point, I mean, Coors, what had sales down 2% and that was better than expected. It's still not necessarily growing. It's also been a big beneficiary of the market share shift over the last, I don't know, a year or two away from Bud Light into Coors Light, Molson, Coors and they've, they've been able to retain some of that.
- [39:29]
Carl Quintanilla
Yeah. Still, still wrestling with the whole cannabis and glp. One question as well when we come back on Money Movers later on this morning, former NEC director in the first Trump administration and former Goldman Sachs president Gary Cohn is going to be with us breaking down the latest out of Washington. That's at 11am still ahead this hour, Indian Prime Minister Modi meeting with the president today what investors may need to know after the break.
- [40:16]
Mike Santoli
Indian Prime Minister Narendra Modi meeting with President Trump today. Seema Modi here with more on what's at stake with this get together. Hi, Seema.
- [40:24]
Seema Modi
Hey, Mike. Well, if these reciprocal tariffs are meant to scare other nations, it seems to be working. I'm told by sources that the Indian leader will strike a more conciliatory tone when he meets President Trump at the White House today ready to cut Indian tariffs on agriculture, medical devices and tackle that growing U. S. India trade deficit, the 10th largest in the world, by purchasing more defense equipment like missiles from Stryker, natural gas from Cheniere Energy. Russia currently accounts for about a third of Indian imports. Now, Trump has touted the importance of India in the past as a strategic ally in Asia, his warm relationship with the populist leader. But he's also criticized India's high tariffs which average at about 15% on U.S. imports. He could also face pushback on immigration. The Indians make up about a majority of of H1B visas issued by big tech Republican hardliners have criticized the program, while Elon Musk has shown support. Another sensitive issue is Indian businessman Gautam Madani, a key supporter of Modi who has been indicted by the US Justice Department on fraud allegations. Bringing this all back to markets, guys. India has gone from being one of the best performing markets last year to among the worst performing in 2025. No doubt on these trade tensions, guys. So we're watching this meeting very closely.
- [41:36]
Sarah Eisen
I was, I was looking into some of those statistics and you just mentioned that Russia's still a big trading partner. Why do they buy most of their oil from Russia? If India has become such an important ally geopolitically with the US Why not buy more from here?
- [41:51]
Seema Modi
You know, India's argument, Sarah, has always been that the oil and the energy they're getting from Russia is a lot cheaper than other importers and therefore they're going to continue to buy from, from Russia. But I think the question is, depending on how these discussions go with Trump at the White House, how much more India is willing to buy from the U.S. it's already, I think, one of the fifth biggest buyers of liquefied natural gas from the U.S. names like Cheniere Energy, among others. So that energy relationship will certainly play a big role here, as is defense. I mean, not only does India buy oil from Russia, but it also buys a lot of defense equipment as it does from the U.S. so there's an opportunity here to, to get this country to buy more here, to level the deficit while at the same time reinforcing the importance of the national security presence of these two countries and seeing India as a way to counterbalance China's role in Asia.
- [42:42]
Carl Quintanilla
Although seemed I was going to ask you, we keep talking about a more hawkish trade stance in the US and the lanes that that opens for China. How would we characterize right now the relationship, at least in trading between China and India?
- [42:55]
Seema Modi
Not great. I know the two leaders of India and China recently met to try to strike a more positive backdrop for the relations to get better. But these two countries no doubt are competitors. Chinese nationals right now are not allowed into the country. They ban TikTok. So India views China as a strategic competitor. And Modi will likely reinforce this point because he knows that's something that Trump will likely want to hear in these meetings today.
- [43:20]
Mike Santoli
Carl Sima So if the focus seems like on the trade front to be about what else India might be able to buy from the US it would seem as if the subject of the actual 15% tariffs or so India imposes is not much in play.
- [43:37]
Seema Modi
I think it could certainly become in play. I mean, we heard, you know, Sarah, in your interview with Peter Navarro yesterday, what Kevin Hassett told the channel as well over the last week, that India needs to address this, address its high tariffs specifically, specifically on agriculture, luxury cars, bringing down tariffs on Harley Davidson motorbikes, which India seems to be more receptive to. Which by the way, is very different than how they treated tariffs under the Biden administration. Which tells you that with Trump in the White House, they're very much willing to have negotiations versus opt for retaliation.
- [44:10]
Carl Quintanilla
Seema, we'll keep an eye on the meeting with your help today. It's an important one. Seema Modi joining us from Washington, Washington, D.C. thanks. Meantime, Jeff Bezos, Is space venture Blue Origin cutting 10% of its workforce? In an email obtained by CNBC's Morgan Brennan that was sent out just a few minutes ago. The layoffs will impact positions in engineering, R and D and program project management. The CEO saying, quote, over the last few months as a leadership team, we've worked together to define our 2025 annual operating plan and growth strategy. Our primary focus in 2020 and beyond is to scale our manufacturing output and launch cadence with speed, decisiveness and efficiency for our customers. We grew and hired incredibly fast in the last few years and with that growth came more bureaucracy and less focus than we needed. Also became clear that the makeup of our organization was changed to ensure our roles are best aligned with executing these priorities. It comes a month after the company's successful new Glenn rocket launch launch. And I guess we can add it to the list that we mentioned earlier between Chevron Salesforce, Metta, Estee Lauder Kohl's and some others that are trying to keep corporates as nimble as possible.
- [45:18]
Sarah Eisen
Efficiency is the word.
- [45:19]
Mike Santoli
Yeah, exactly. It looks like, I mean obvious because. Right. Because they can afford to keep as many people as as they want. About 14,000 total employees looks like so 1400 of that and seems like that's roughly equivalent employment to Space X. In which case you would think maybe SpaceX has a bigger commercial business and you know, obviously a little bit of a mismatch there perhaps based on it.
- [45:40]
Sarah Eisen
Is interesting how these things, you know, go from Washington to business. Like the bureaucracy is very bad right now. The wave of efficiency is in. Yeah, you know, the work from home stuff. Like there's a lot of symmetry here between corporate America, what's happening in the White House.
- [45:54]
Carl Quintanilla
It's a far cry from when they couldn't get enough workers at all. It was just a scrambling for workers. We're off the session highs but S and P still not far away from 6,100, which we haven't crossed above since Friday. Money Movers begins after this. You've been listening to the opening bell on cnbc. Squawk on the street all opinions expressed.
- [46:21]
Fidelity/Nordstrom Rack Announcer
By the Squawk on the street participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, 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 andor 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 square squawk.
- [46:58]
Mark McClain
On the street disclaimer introducing Fidelity Trader.
- [47:02]
Sarah Eisen
Plus the next generation of advanced trading from Fidelity.
- [47:06]
Mark McClain
Customize your tools and charts and access.
- [47:08]
Sarah Eisen
Them seamlessly across desktop, web and mobile.
- [47:11]
Mark McClain
For faster trades anywhere you go, try.
- [47:14]
Carl Quintanilla
The all new Fidelity Trader Plus.
- [47:16]
Mark McClain
Learn more about our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss.
- [47:24]
Sarah Eisen
Fidelity Brokerage Services LLC Member NYSE SIPC Member.