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Clash of the Kevins, 2025's Biggest IPO & Reels Hit a Bigger Screen 12/16/25
00:43:52
We break down the differences between the leading contenders for the next Fed chair. Medline's IPO will be the biggest since 2021. Plus, Instagram launches a new app for TV.
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Kelly Evans
Introducing Fidelity Trader Plus.
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Dan Clifton
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Kelly Evans
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Dan Clifton
TraderPlus investing involves risk, including risk of loss.
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Kelly Evans
Fidelity Brokerage Services LLC Member nyse, SIPC.
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Dom Chu
Before the trophy and bragging rights are rightfully yours.
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Kelly Evans
Before your sleeper turns in a season no one saw coming, before stats and.
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Dom Chu
Projections turn into points on the board and your lineup falls perfectly into place.
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Dan Clifton
You flip the lid on a can.
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Dom Chu
Of on nicotine pouches. And as you make your first pick, you know this is the season where fantasy is going to surpass reality. It's on products for tobacco consumers 21.
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Kelly Evans
Years of age or older.
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Dom Chu
Warning, this product contains nicotine.
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Kelly Evans
Nicotine is an addictive chemical. You're listening to the Exchange. Here's today's show. We're going to start right there. Scott, thank you. The funky labor market, the clash of the Kevins and the biggest IPO of the year which has nothing to do with AI. Welcome to the Exchange. I'm Kelly Evans and we have session lows on all the major averages right now. The Dow down 410 points as Scott just told you there and it is the worst performer. The S and P is falling today and notably that's the third straight down session even as treasury yields edge lower the 10 years around 415 oils down too. In fact, crude WTI is hitting its lowest level in four years today. It's just over $55 a barrel and it's on pace for having its worst year since 2018. Flip side of that. Tesla just below its all time high after closing at its highest level of the year yesterday. As Ford says it'll take a and a half billion dollar charge on rolling back its plans for EVs. But we start with today's economic data. The delayed jobs report showing a lackluster gain, unemployment hitting a four year high. Ed Yardeni says it paints a picture of a funky jobs market. We also learned that retail sales roughly unchanged in the month, manufacturing growth slowed and firms reported passing along the biggest price hikes since 2022. That was in the flash. PMI we got this morning here. Here to break it all down. Diane Swonk is chief economist at kpmg. We're also joined by our own Steve Leesman. Welcome to you Steve. Well, glad you're on set. First time I think I've seen you in the past couple of weeks since I've been back. Anyway, where are we now that we're finally getting the data? The data is here, sir. And what is it telling us?
- [02:17]
Steve Liesman
Well, I don't know if funky is an official economic term, but I'm going to go with it. We're in a transition period here. There's a lot going on. I think the tariffs are going on. I think that there's some transitions going on with government spending and there's a lot of uncertainty out there. When I was, one of the reasons I haven't been here is I was in Chicago last week talking to Austan Goolsbee, right? He says low fire, low hire is not a normal situation. You're either in a low fire and a high hire or a low hire and a high, high fire situation. He thinks this is all uncertainty. And I think we're working this out right now. I look at basically moribund private sector hiring while you have massive layoffs going on in the federal government sector. So I come away with questions. Will these federal government workers find jobs in the private sector? That's the first thing. We had an unemployment rate tick up in part because of new entrants to the workforce. Will these people find work? So I'm reserving judgment about what the hell is going on until I figure out what the hell is going on. Can I say hell on Gabe on.
- [03:18]
Kelly Evans
The, you know, we already did. I know, but, but he, or is it purgatory? Is it a waiting game? Right. Because it sounds like what he's saying is this kind of situation is abnormal and maybe not sustainable.
- [03:28]
Steve Liesman
I think it's not sustainable. I think something has to break one way or the other. One thing I do know is the administration came on and said, you know what, the Biden administration employment was terrible because it was government and government adjacent jobs. And they pointed to health care. Well, health care has been the number one source of jobs under the Trump administration. And we've had a decline in manufacturing. You got to hold out some hope that some of the things they're working on might work. You can't dismiss it. They're putting up the tariffs, hopefully bring back some manufacturing. Can't dismiss it. But it ain't happening yet.
- [03:58]
Kelly Evans
Diane, how would you describe this? Is it abnormal? Is it funky? Are we just in a waiting period of transition? What do you say is going on here?
- [04:09]
Diane Swonk
Well, it certainly is an early chill for the holiday season, but I think, you know, consumers are still spending, which is ironic. The core retail sales, which goes into the GDP calculation for the retail sales data, actually was up 0.9%. So much better than that headline figure suggested. And data for September and August were revised up. So we came into this with consumers holding on even though the labor market shows no change basically in payroll since April of, of this year. That's a long time to be stagnant. And we're seeing that unemployment rate, like Steve said, some of it was spillover effects from the government shutdown. We had more people entering the labor force. We are also more having to go into temporary layoffs. That was collateral damage from the government shutdown. We also have this late holiday season. It is all compressed once again into the month of December last year that resulted in the strongest month for job gains of the entire year in the month of December, which I would not be surprised to see yet again this year. We also know going into next year not only do we have those rate cuts by the Fed, but we have expansions to tax cuts that were retroactive to the beginning of 2025 that will add double digit gains to tax refunds. And we know consumers treat those as if they're windfall gains and that could make the inflation data look even stickier.
- [05:38]
Kelly Evans
A lot of people are talking more positively about consumer discretionary stocks in some areas like that for that reason, Diane, but it's interesting what you said and this uncertainty is reflected in the divide at the Fed where you have those who want lower rates, you have those who are worried. You know, we should be here and to that point in the flash PMI this morning showing firms passing along price hikes. You know, I know some accuse this Fed of having political bias towards hawkishness, but I sympathize with the fact that we came out of this inflationary period that was horrible. You know, arguably their fault, they don't want, they want to finish the job. So when we see these data points, does it suggest to you that that that job is finished yet and what should they do about they have a slowing kind of churning labor market and stickiness on the price side?
- [06:24]
Diane Swonk
Yeah, here we have a labor market with a one legged stool. The health care and social assistance is driving all employment gains in the private sector. That's nothing to be excited about. I think we'll see more broad based gains in the months to come. But will they stick? What I'm also worried about though is that even if we get a little improvement in the labor market, we're still going to have some stickier inflation. And I think that is something less than the level of prices is what consumers care about. I was at the same. I saw Steve. Nice job Steve, with Austan Goolsbee. But you know One of the issues that came up was, you know, that we're normalizing inflation. We're five years in now and we've seen inflation hikes. And even though you're supposed to look through the tariff related increases in inflation, first of all, they're not all at once. They're coming sequentially, which is mimicking inflation and further normalizing inflation. At the same time, there's spillover in the service sector, which Austan pointed to as well. And I think it's important when you look at the hawks, they're not of just one political ilk or not. What we're seeing out there is a lot of people are concerned about the stickiness of inflation and the fact that the Fed has not been able to achieve price stability really in many years now. And that is something to worry about because along with uncertainty, it is also normalizing inflation and it gives us this stagflationary nature. Even though the overall economy adds up on paper to look better than it feels to most Americans.
- [07:55]
Kelly Evans
On top of that, and I'm glad you put it that way, they have this decision where they say we have to kind of buy some T bills or up to three year Treasuries to make sure the banking system has enough reserves and so on. Is that, you know, a monetary policy impact, Diane? Because everyone I'm reading this week says even if it's just to make sure that the banking system is, is smoothly functioning, it has a liquidity impact on the margin, there is an extra buyer of these Treasuries or what have you than there wouldn't have been otherwise. And does it mean that they're easing in the kind of sticky inflationary environment you're describing?
- [08:28]
Diane Swonk
Well, that is a concern. I mean, without it. What we know is that we saw when the Fed first started to cut rates sometimes, it wasn't always seeing the rates actually in this fall move at the same time taking a whole week for rate cuts to show up in short term rates. And that's because of a lack of liquidity in these markets. So they're trying to bring the rates down to what they would be and what they should be because of liquidity problems. You don't want to dive into a pool without any water in it. And that is essentially what the Fed is trying to correct for by putting liquidity out there. But it's like a QE light. It is not quantitative easing by any means. It's meant as a technical adjustment to keep markets liquid. But the reality is that the Fed has legitimately had some criticism for the size of its bloated balance sheet and how the asymmetry is. You know, you can't just reduce the balance sheet. Like you could increase it as rapidly. You could increase it and turn it on. You cannot go in reverse without having risks of credit market seizing. And that is a very bad situation you want to avoid. But nonetheless, it leaves the Fed open to more criticism.
- [09:40]
Liz Ann Sonders
Yeah.
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Kelly Evans
Steve, a final word here.
- [09:42]
Steve Liesman
One of the things that's so good about Diana, she reminds me of things that I wanted to say and she touches on a lot of things. I'm going to add three things that I wrote down while she was talking. One is it was also an increase in those working part time for economic reasons. That's another. And the broader measure of labor, slack up to 8.7%. The so called U6 is something worth watching.
- [10:01]
Dom Chu
A very important.
- [10:01]
Diane Swonk
8.7.
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Steve Liesman
Yeah, 8.7. And the other thing that's interesting, we did seem to have a better hiring season, at least judged by seasonally adjusted data for retail than we thought we were going to have. There was, there were a lot of companies that were not hiring as much. The hiring, the retail numbers were good. The third thing that is really interesting to me is putting together two things. Diane said this flood of refunds we're expecting next year should boost consumer spending. Is that a time when retailers will feel comfortable passing along more of the tariffs?
- [10:35]
Dan Clifton
So invest that environment.
- [10:37]
Deirdre Bosa
Yes.
- [10:38]
Steve Liesman
There's two different ways that tariffs can have an impact.
- [10:41]
Kelly Evans
In other words, that even as we're talking about this, consumers watch out. Because if it means you're paying a little bit higher price at the grocery store or wherever you're going because they know that you're going to.
- [10:49]
Steve Liesman
But I got another thousand bucks in my pocket. I'm happy to shell it out, but.
- [10:52]
Kelly Evans
Exactly.
- [10:53]
Steve Liesman
We've had an impact, it looks like in tariffs. It's a deflationary recessionary effect. Right. Which is the price went up. I'm not buying it. Right. The other thing I want to point out, which is one of the key factors for me going into thinking about next year is what's going to happen to small business. In the ADP report while you were gone, businesses of a size of 1 to 49 employees shed 3, shed a quarter of a million jobs in the wake of the reciprocal tariffs. In the prior seven months, they added a quarter million jobs. That's ADP data, but I'm waiting to see in the official data as to whether or not that continues. And is it a tariff thing Is it something else going on? Is it uncertainty thing? But we're not going to get back to robust job growth until we have robust small business hiring.
- [11:40]
Kelly Evans
And on that note, we have to move along. Diane, literally just a word or two because I want to let our audience know how you feel on this. Do you then argue for a few more rate cuts next year or do you have to wait?
- [11:50]
Diane Swonk
I think the Fed should, should pause and wait for the data because we've got a lot of data that's going to be to the upside coming into next year. And I am really worried about inflation becoming sticky.
- [12:01]
Kelly Evans
Wow. All right. That's a, you know, out of consensus, I think fair to say view at this point. We appreciate it. Thank you both a lot. Diane Swonk, Steve Liesman on the economy. And let's turn now to the latest in the battle for Fed chair. National Economic Director Kevin Hassett telling CNBC just this morning that the president has nothing but good choices on when it comes to making the pick and dismissing the criticism that he's too close to Trump.
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Dan Clifton
I'll give you the 30 second elevator pitch about why someone shouldn't be denied the job. And the idea that someone isn't qualified for the job because they are a close friend who's worked well with the president is something that I think the president rejects.
- [12:41]
Kelly Evans
The Kelshi prediction markets agree, by the way, with Hassett now back ahead of former Fed Governor Kevin Warsh, who took the lead I think just this week. Hasset leading the odds today with a 53% chance of getting the nod washed down to 34. While the market debates, which Kevin could win the horse race, we wanted to ask what would be the real difference between them as far as the market can discern. Let's bring in Dan Clifton. He's head of policy research at Strategus. Dan, the task goes to you. I'm sure everyone is asking you about this as well. Is Hassett viewed as more dovish on the margin and is the market kind of responding, I wonder even literally the 10 year dropping a bit today, Is that because his odds seem to be down in the prediction markets as well?
- [13:20]
Dan Clifton
Well, first, Kelly, thank you for having me on. I think the conversation we're going to have on the Fed chair is very much related to the conversation you just had with Steve and Diane about what's going to happen on economic growth next year. And we do anticipate that GDP will accelerate. We have $400 billion of fiscal policy. Fed's cutting rates, it's expanding its Balance sheet. I mean this is shocking awe fiscal and monetary policy coming for 2026. And what we know is that when you go from the first year of a president to the midterm year, you get accelerating growth, you get rising bond yields and you tend to get a much more defensive and declining stock market in mid year. So all the ingredients are there. But what happens is once you get that growth, the Fed has to pull back on the punch bowl. And that means that you're going to have the new Fed chair appointed by President Trump facing accelerating growth and likely going to have to put the brakes on this. You can just see how this is going to play out midyear. And the good news is that you have two very qualified candidates. You have Kevin Warsh and you have Kevin Hassett. I think even if you add Waller in, who I think is the best central banker in the world right now, you have three good choices that are on the table at this point. Both of these candidates, Kelly, both Kevin's believe that we're in a productivity boom and that boom is going to allow the Fed funds rate to go lower. And if you look at some of the employment data that came out today, the higher unemployment wage growth down, that may argue that the neutral rate has to go a little bit lower rather than just being right around that neutral rate. Maybe you've got to be a bit stimulative here. And the reason is that we're in an air pocket. That air pocket is that we're getting all the spinach from the tariffs without that fiscal policy sterilization. But as you go into 26 you will start to get that, that sterilization happening. That timing difference is making data look weaker and it's also showing that the Fed probably should have been cutting rates a little bit sooner. So yeah, I tend to think that the difference between those two are going to be more on the balance sheet than it will be on the rates. But maybe, you know, it's like one rate cut over another. It's really not going to make a bigger difference on the rate side, but it's the balance sheet where you'll start to see some of those differences.
- [15:29]
Kelly Evans
What it's worth, Nancy Lazar had a big note over the weekend where she details the productivity boom and agrees that we could be in the middle of one. We've had strong data for several years now, so you can certainly make an economic case for that. What do you think then? Are there differences on the balance sheet?
- [15:43]
Dom Chu
Yes.
- [15:43]
Dan Clifton
So Kevin Horst has been very hawkish on the balance Sheet doesn't believe the Fed balance sheet should be where it is. You just heard from your other guests there might be a case for that. But what's happened is that this is intricate, intricately linked to financial regulation. When we regulated the financial sector, we closed off a lot of bank reserves. So right now there's not enough bank reserves in the system.
- [16:04]
Kelly Evans
Right.
- [16:05]
Dan Clifton
It's the Federal Reserve is expanding its balance sheet. This is not a one way case. What the Fed is doing right now is that they are expanding their balance sheet to fill in the gap until we get to financial deregulation in 2026. And when you get financial deregulation, you can unlock some of those reserves sitting on the bank's balance sheets. And if you're able to do that, you're able to get the Fed balance sheet lower.
- [16:30]
Kelly Evans
Do you think between the two, knowing that there's always some uncertainty with Congress and the midterms are coming, so who knows if they'll get deregulation done? If war were selected, do you think he would allow problems, financial system problems, to manifest, to force the government to do something, or do you think he would face, you know, have no choice but to kind of continue the QE light, for lack of a better word, because it falls under the Fed's purview?
- [16:56]
Dan Clifton
I think once you get there and you see the plumbing under the system, something my colleague Chris McGrath has really documented very well, that the plumbing is broken, he'll see that and that this would be a temporary expansion of the balance sheet. Remember Governor Bowman, the vice chair of the Fed is going to be in charge of this financial deregulation. And she's focused in four areas, Kelly, most notably the supplemental leverage ratio which just got done, the stress test which is in place, but then it's the Basel 3 and the most important is the global systematically important bank surcharge where she's looking to release that so the.
- [17:29]
Kelly Evans
Fed can change its mind about do they need Congress to do anything here or all of this can be done by the Fed Fed.
- [17:35]
Dan Clifton
I think this could be done by the Fed. But as you know, Michael Barr, Lisa Cook, they're not going to want to vote for this. So that means that the Fed chair is going to have to be persuasive and a key vote will be whether Jay Powell steps down when his Fed chairman ends in May and is then replaced by somebody on Trump. But this can come down to one vote at the Federal Reserve and it's going to be one that I think both candidates are going to push but it does have to be aggressive to unlock those bankers.
- [18:01]
Kelly Evans
I sympathize with people in this position who go, ok, my choices are the financial system dries up and our rate cut is not effective because there's not enough liquidity or we have to do bank deregulation that was put in place to prevent another financial crisis. Like those just feel like two bad options.
- [18:14]
Dan Clifton
They are. Look, this is years and years of this lingering and, and it's created this problem overall. But at the end of the day, you know what the real problem is, Kelly? It's a $2 trillion budget deficit. We didn't have the $2 trillion budget deficit, we wouldn't have this problem. So until Congress actually goes and acts on the deficit and gets federal spending back near where its historical average is percentage, right now it's at 23, you're going to kind of be in this race of a game of bad choices I think you so eloquently outlined.
- [18:43]
Kelly Evans
Right. Or yeah, that's, that's almost even a separate topic in and of itself. But I'm glad that you outlined those differences, Dan. It's going to become more important in the coming days, I suspect. Dan Clifton of Strategic Always appreciate it.
- [18:56]
Dan Clifton
Talk to you soon.
- [18:57]
Kelly Evans
Coming up, Tesla within striking distance of its record high from a year ago. It's about $10 short of that level right now as advances in autonomous driving have investors pretty excited about 2026. We'll look at how to trade it and the names that are getting bruised as its technology improves. Plus, Schwab's chief investment strategist, Liz Ann Sonders joins us with her forecast for next year with a contrarian take on the small caps. We'll tell you what she likes and what she expects on the front ahead. And as we head to break, here's another look at stocks not having a great day. In fact, we're right at session lows this afternoon with the Dow down 450 points. We're back after this. This is the EXC on cnbc. A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities and even another passenger or three. And with 100 years of navigating ups and downs, you can count on Edward Jones to help guide you through it all. Because life is a winding path made rich by the people you walk it with. Let's find your rich together. EDWARD jones member, SIPC GAS GIFTS tolls. This holiday trip is draining my wallet. Yeah, but we'll get to see all our family.
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Dan Clifton
You're festive.
- [20:19]
Kelly Evans
What's your deal? What's my deal?
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Leslie Picker
Holiday savings at Metro I got one line of 5G for just $25 per month and I kept the phone I.
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Kelly Evans
Love and no activation fees and a.
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Leslie Picker
Five year price guarantee on my talk.
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Kelly Evans
Text and data detour to Metro. It is get that more for your money feeling only at Metro by t mobile it's $30 your first month or.
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Victoria Green
Without autopay price, guarant exclusion supply.
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Julia Boorson
See csipher details is it time to reimagine your future?
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Kelly Evans
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Julia Boorson
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Kelly Evans
Learn more at capella. Edu Tesla shares are flattish after nearing an all time closing high yesterday. As Elon Musk says Tesla is now testing out driverless robo taxis. And as Ford pulls back on its EV ambitions, is Tesla pulling forward 2026 gains here or is there still plenty of juice left in the stock? Let's ask our trader. Victoria Green is CIO of G Squared Private wealth and a CNBC contributor. Dan Ives I don't have to tell you Victoria, very bullish sees it hitting another trillion or two in market cap next year. What do you foresee for the stock?
- [21:43]
Victoria Green
Not quite as bullish as Dan Ives, but like I said, it's very difficult.
- [21:46]
Kelly Evans
To be as bullish as Dan Ives.
- [21:47]
Victoria Green
In this day and age in technology because he's an uber bull here. But I do like Tesla. Now you got to be willing to take some lumps with Tesla. He does always get there, but it often takes him a lot longer to get where he wants to go. But this is the dream, right? If you actually get the Cyber Cab going, get full self driving, autonomous driving robo taxis. This is what Tesla is supposed to be expensive for. This is why Tesla doesn't trade like a traditional automotive company. You need to be wary that we probably are going to see falling EVs, right? We're probably going to see sales plummet in Europe. We're probably, we're expecting lower sales in the us but this is what Tesla was made for. So as long as you believe in the vision, you're willing to take some lumps next year. We think this stock could push up and above 500550 range, maybe even hit that 600. I'm not sure we'll hit it next year because rollout's likely a little bit slower and that Cyber Cab is still a model. It hasn't been approved yet, but that's there. All the pieces are there to put together for the next leg up over the next couple of years.
- [22:41]
Kelly Evans
So you share the enthusiasm. You know those would be pretty significant gains if we get them. The flip side of that. Victoria, I'm curious what you think about Uber because I could see a more value minded investor seeing an opportunity here. Shares are down 13% in the past six days under pressure again after Tesla said they're testing out those robotaxis without safety drivers. So it's a question of opportunity to get into a stock like Uber or is there this massive existential threat looming to its business model?
- [23:05]
Victoria Green
Sure. Uber I see as a hold here. I think they have such an extensive platform user based on loyalty that they do have a lot of intellectual property and they have integrated in with Chat gtp. So you can order Uber from Chat GTP as long as you have the, the two linked. And so I think they're aware air is coming, technology is coming and robo taxis coming might actually help them with their margins if they're not having to pay drivers. Could Uber be the platform? You summon all types of robo taxis from a Waymo to a Tesla. So as long as they stay as the, the platform and the market share leader and ride share hailing, which they are, and they continue to grow their verticals with Uber eats, I see this as a defensible moat. And so yeah, you see some profit taking right now after a strong year. But they could be a beneficiary if it does help lower costs. And it may take a while for say a Waymo or a Cybercrap to develop the technology to sell these, these riderless rides to, to the general public.
- [23:57]
Kelly Evans
Yes, you're kind of met on Uber. You're a sell on Lyft. We don't have to get into that for now. It's always been kind of the sibling there, there. Let's pivot entirely. We've got a couple of companies reporting in the next couple of days. Think they're both on Thursday with Nike and FedEx. Nike still struggling to kind of gain some traction here. We spoke to an analyst the other day who's bullish on it. See 70% upside, it's down 11% year to date. So they need some kind of catalyst obviously to get back you know, into the growth mode. Do you like the stock here? I don't.
- [24:27]
Victoria Green
I'm a hold here. I'm a show me. Mikey, I really need you to show continued sales growth. Not just one quarter of my slight improvements, not just a little bit. We need all of that inventory rolled out. We need your DTC to work better. We need your sales to grow consistently. We need new products. We need people excited about Nike. I do think they're taking steps in the right direction. I'm a little worried this quarter could be a little bit of a step back. We know they didn't do as much discounting and promotion which should help their margins. Just not sure they sold enough shoes. And so for me this is a show me earning. Come on Nike, prove me wrong. Show me here that this, this is finally bottoming out after like a five year slide. Are we actually going to be bottoming out earlier this year? But you haven't seen the stock reaction you think you'd see if the turnar was a locked in FedEx for me like them a little bit better though. I think that they are, they're going to do a little bit more. Sorry, I pivoted right to it.
- [25:14]
Kelly Evans
My bad. All good. You see I was only going to shout out with Nike. It's still trading at a 35 p e if that's correct, which is pretty elevated for companies struggling to show growth.
- [25:22]
Leslie Picker
I thought you were going to be.
- [25:24]
Kelly Evans
More mad on FedEx but you like this one. Why?
- [25:26]
Victoria Green
Yeah, I think they have turned the corner. They understand they're spinning off FedEx plate, they're redoing their logistics, their supply time lines between ground and, and the express. They're combining them, they're, they're racing technology. The fact that actually raised their outlook Even with the MD11 grounded, that shows how much faith that management has that this is going to continue to be a robust shipping season for them and a robust holiday season. I love the spin off of freight. I think they're focusing on higher margin business and they're going to be so competitive as e commerce continues to grow and grow and they're showing that they can defend the de minimis isn't really hurting them. We're seeing high volumes and I think they're going to get better at cutting costs and defending their margin. I do want to hear about that though. I want to see their continued pathway to growing profits. I want them to show they can operate the company well and with efficiency. In the day and age of AI, are they able to rejigger all of these kind of ingrained supply chains and spoke spoken hub to more regional settings which they need to grow.
- [26:21]
Kelly Evans
Nice 23% gain over the past three months. Maybe investors liking what they're saying, as you mentioned, about spinning out ground, maybe operating more efficiently. We'll find out more on Thursday. For now, Victoria, thanks so much. We appreciate it. Victoria. Thanks Kelly. Coming up, Medline could be the biggest IPO in four years and the largest MedTech IPO ever. But the stakes are even higher for the private equity firms banking on a big, big debut here. We've got the details. Next.
- [26:49]
Dan Clifton
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- [27:04]
Julia Boorson
Is it time to reimagine your future?
- [27:07]
Kelly Evans
The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella.
- [27:32]
Dom Chu
Edu and now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep Day day. You've got AT and T5G so you're fully confident, but the vendor isn't responding. And International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device coverage not available everywhere. Learn more@att.com 5G Network.
- [28:05]
Kelly Evans
The biggest IPO in four years is going to price. After the close today, Medline, the medical and surgical product company company, might not be just the biggest since Rivian four years ago. It could also be one of the biggest IPOs ever. And yet there's very little hoopla surrounding it. Leslie Picker has more on the stakes here. Hi Leslie.
- [28:23]
Leslie Picker
Hey Kelly. Yeah, it's almost like we forgot how to spell ipo. But I am hearing that this one is expected to price toward the upper half of the range. Medline manufactures and distributes medical supply products. Think of things like masks and gowns and legs, lab kits. It was taken private by a consortium of private equity firms back in 2021, which was then the largest LBO post financial crisis. So at the high end of its IPO range, Medline could be valued at $55 billion, which is more than $20 billion higher than the sponsors paid for it a couple of years ago. Medline is perceived to have this sticky, resilient business, having grown net sales each year since its inception in the 1960s at a CAGR of 18%. According to the prospectus, the company says it will benefit from secular tailwinds like an aging population and consolidation of providers. Medline also acquired several companies as well and plans to continue to do so. That's a key part of its growth strategy. Concentration within Medline's business and its customers is seen as both a tailwind and a risk in the prospectus. Quality problems and product liability, another risk factor listed, as well as its overall pricing pressures in the health care industry and potential for more Cal.
- [29:41]
Kelly Evans
I like those numbers. What it was at 16, 18% CAGR since inception.
- [29:46]
Julia Boorson
Yes.
- [29:46]
Diane Swonk
And it's.
- [29:47]
Kelly Evans
Does it have a lot of debt? Like 60 years?
- [29:49]
Leslie Picker
What's the mean now? Now it does have a lot of debt because it was taken private by a consortium of private equity equity firms. However, it does plan to use at least part of the proceeds to pay back some of that debt. And of course, interest rates were lower back in 2021. So you saw a bunch of these take place. The problem has been since then getting them to go public at a higher valuation, which appears to be the case this time around.
- [30:13]
Kelly Evans
It's also interesting that Databricks, which is still public. I'm sorry, still private, did another fundraise today. $4 billion at $134 billion valuation. Which tells us you. For all the exciting markets people are trying to get into, it feels like they're still stuck in the private space and not in the public space yet. Could the IPO today change that or why do you think Medline is going now in December? What does it tell you about 2026? Potentially?
- [30:37]
Leslie Picker
Yeah, that's a Series L. I don't think I've ever covered a series before, even heard about a Series L before. But it's noteworthy because you have this rising debate of. Of do you encourage more companies to go public sooner in their fundraising process, or do you change the dynamic and democratize the private market so that more retail investors can get in there? You see movements on both fronts. The government has kind of initiated various policies to try and encourage at least exploration about how more retail investors can get into these companies sooner before going public as well. Well as changing the IPO process to make it easier and more appealing for companies to go public sooner as opposed to kind of staying private for longer. So what's interesting about this dynamic, Kelly, is that we talk so much about AI and actually there's a Goldman Sachs basket of I think it's the Goldman Sachs TMT US AI basket, which kind of has AI exposed companies that was down about 7% in November. Whereas the health care sector sector, which has been in the doldrums for the past few years, is actually on the upswing. So it's not so surprising that you'd see a company that's in the health care sector go public as these companies kind of wait for that market to maybe recover.
- [31:53]
Kelly Evans
And to your point, probably more than anything, a test of another big E name where it's been a tough year for some of those exits at least once they're on the public market. So Leslie, a series L data point. So Leslie series exactly. Not for yeah, loser. Leslie, thanks very much. That they don't want that. They want series W. Leslie Picker, yeah. Speaking of Databricks, the CEO will join the closing bell overtime at 4:00pm Eastern this afternoon. He can talk more about their intentions perhaps to ever go to the public markets. Let's get to Bertha Coombs now for the CNBC news update. Bertha Kelly, After Defense Secretary Pete Hexa said today that there are no plans to release unedited video of the that September 2nd strikes on the suspected drug trafficking boat in the Caribbean, California Democratic Senator Adam Schiff said that he will make a request on the Senate floor for unanimous consent to release the full boat strike video. Only one senator, though, would be needed to object to block it. Hyundai and Kia agreed today to retrofit more than 4 million of their vehicles in the US and install prevention equipment on all new vehicles. The agreement resolves a bipartisan probe by 35 state attorneys general, which accused the automakers of not installing industry standard anti theft technology. A series of TikTok videos emerged back in 2023 showing how easy it is to steal the cars without that technology. And Netflix is expanding its video podcast offerings. The streaming giant announcing a new deal today with iHeartMedia to stream more than 15 of its podcasts, including Charlemagne, the Gods. The Breakfast Club follows a recent partnership with Spotify for video podcasts announced back in October. Everybody loves video. Very big deal. They're trying to take on YouTube even as they're trying to buy Warner Brothers. Bertha, thanks very much Bertha Coombs coming up, should you stick with the small caps heading into next year? We'll ask Schwab's Liz Ann Sonders what she thinks of that next. Welcome back. With stocks moving off session lows but still under pressure this hour, Dom Chu has a closer look at the day's biggest movers.
- [34:15]
Dom Chu
All right, so Kel will start off with the biggest decline in the S and P so far today, sector wise by a pretty wide margin. Its energy stocks taking some big hits today following crude oil prices lower for US benchmark prices hitting their lowest level since February of 2021. Brent crude, the world gauge, hitting its lowest level since May, driven in part by optimism over a possible Ukraine, Russia deal alongside some softer data out of China. Stocks like APA Corp. And Halliburton, by the way, some of the worst performers on the day so far. Shares of Kraft Heinz are also now up about a percent or so after it announced the hiring of former Kellanova CEO Steve Kalain as its new CEO beginning January 1, Cahilain will be tasked with leading the company as it moves forward with breaking itself up into two separate companies after the split. He's going to serve as the CEO of the part of the company being temporarily named Global Taste Elevation, which has brands like Heinz Ketchup, Kraft Mac and Cheese and Philly Cream Cheese as well. And we're going to end on the intersection of stocks and crypto. Shares of Circle Internet are up roughly 8% right now. The company behind stablecoin US dollar coin is higher after Visa announced it will launch payment settlement settlement in the US Using US Dollar Coin. That program is going to run on the Solana blockchain. And Solana prices are higher as well to the tune of 2% on that news. So, Kelly, keep an eye on crypto. I'll send things back over to you.
- [35:29]
Kelly Evans
Visa is going to use usdc. Visa gets in everywhere. Visa now they're in crypto.
- [35:35]
Dom Chu
I think it's part of their ad campaign. Right. They're everywhere.
- [35:37]
Kelly Evans
Oh, Dom, thanks very much. Dom Chu, our next guest expects more dispersion in the MAG 7 stories stocks next year with the trade moving from the picks and shovels to the adopters. What does she mean by that? Liz Ann Saunders is the chief investment strategist at Charles Schwab. Liz Ann, it's great to see you. Just straight off the top of your head. What do you foresee for 2026?
- [35:58]
Liz Ann Sonders
I think some of this broadening out is likely to persist, maybe not in a linear fashion, but in fits and and starts over the past six months it's only 17% of the constituents within the S and P have outperformed the index itself itself. But over the past month that's up to 61%. So that's one way to measure breadth. You see it in small caps. Which of the three major indexes Russell 2000s and P and Nasdaq small caps have the best improvement in breadth relative to both 50 day and 200 day moving averages. I think they'll be bout still when you come back into those prior leaders. But I do think that there is money looking for more diverse places to come now.
- [36:38]
Kelly Evans
Right. And do you look? I think most people would say well good, you know, they've had their run, it's time for the rest of the economy to to start clicking and performing. And yet the flash PMI data this morning wasn't that great. So hopefully this narrative doesn't stumble. I mean the markets today you've got stocks under pressure and yields down. That feels like kind of a classic slowing economy risk off kind of backdrop.
- [36:59]
Liz Ann Sonders
I do think the economy is showing signs of slowing and I would expect that to persist in 2026. And so far the trajectory of earnings has not weakened commensurate with some of the data that we're seeing at the macro level. And I think that is really important as we go into 2026. We stopped just aggressive multiple expansion in about August of this year. The April to August period was just a rip higher in multiples. You had rising earnings growth and expectations thereof at the same time. But multiple expansion went well beyond that. Since August multiple has been kind of flat in sort of a choppy pat. But earnings have continued to accelerate. So earnings for now anyway are doing more of the market's heavy listing. But you're right, that is the thing that has to hang in there for a another strong year in 2026.
- [37:51]
Kelly Evans
Yeah, small caps. What's your view on them? They more people are turning positive on them have had a couple of strong weeks lately but still this is the space would be under pressure if we have, you know, bad earnings quality, economic slowdown, persistent kind of inflation stickiness or higher interest rates than than expected. What do you think is going to go on here?
- [38:11]
Liz Ann Sonders
So I totally agree with that Kelly. I think the key is staying up in profitability particularly since the April 8 closing low. The Russell 2000 constituents that are unprofitable and that is about 40% of the index. Their stocks are up 62% since the April 8 closing low. That's in contrast to the profitable stocks up, let's see my notes, 29%. But recently you're seeing more of an acceleration in those profitable stocks. So what we've been saying is you want to fade the unprofitable lower quality segments within small caps, but lean into the higher quality profitable segments.
- [38:51]
Kelly Evans
And finally, I don't know if you can name names, but maybe get us as far as you can down that path. What do you mean by focus on the adopters in the trade next year?
- [39:01]
Liz Ann Sonders
Yeah, I'm not speaking specifically about names. I just think the focus going to be on how companies are utiliz AI, what it means for their labor costs, what it means. We're starting to put meat on the bones of is this a benefit to productivity, is it a sales tool? So not, not that there's this sort of basket of a couple of adopters that are particularly going to do well. Just I think there's more of a focus on. All right, let's see the implementation of this technology right now to see if it's justified based on the capex that has been put forth.
- [39:32]
Kelly Evans
Right. It's kind of like AI going mainstream. Like you don't buy the AI companies, you buy the companies using AI. Yeah, effectively. Yes, effectively. Liz Ann, thanks so much. Good to see you.
- [39:44]
Liz Ann Sonders
Good to see you too.
- [39:44]
Kelly Evans
Liz Annders with Charles Schwab coming up. The trade has lost its footing a bit lately and now it's facing some pushback from Washington. We'll explain those details next. That said, Wells Fargo is staying bullish on data centers into 2026. They think current concerns about overcapacity are overblown and they named Digital Realtors its top pick. Those shares are down 15% this year, but Wells argues that current valuations make the risk reward more compelling. The Exchange will be right back. It's been a rough go for Broadcom lately. The shares are down more than 18% since Thursday, by far and away the worst performer on the SMH, while Oracle is down 16% over the same period. Moody's reiterating its negative outlook on that name last week week writing that while their backlog is impressive, supporting the growth carries risks. And speaking of risks, here comes a new one for the trade from Washington. Deirdre Bosa has more in today's Tech check. Hi, Deirdre.
- [40:44]
Deirdre Bosa
So Kelly, this is why it's a risk. It's because political pressure can raise costs very quickly. States they can require more upfront, they can lock in longer power contracts, even create special rate classes that shift more of the cost back to bitcoin tech. And that pressure is building. Three Democratic senators, Elizabeth Warren, Chris Van Hollen and Richard Blumenthal, they sent letters this morning to Google, Amazon, Microsoft Matter and three data center companies. They say that data centers are forcing billions in grid upgrades and households, not big tech, are footing the bill. So in doing so, they're tying infrastructure costs directly to inflation, which is still the most sensitive voter issue. And that is why this is a very different kind of tech backlash, slash antitrust fights, which we're now well accustomed to. They're about market power issues that played out in courts and took years to resolve. This one hits a lot faster. It runs through state politics, local regulators, and it can raise costs before any law ever even changes, making it a real risk for the trade and one that may be overlooked. The market at large has in the past been complacent on tech regulatory risk. But this time, Kelly could be different because it's playing out at the local level.
- [41:53]
Kelly Evans
I think they should give us all dividends to help pay for electricity bill. I don't know why we were talking about Indiana. There must have been some skirmish in there about this the other day. 2.8 million households. You give everyone $1,000. That's $3 billion. That's nothing for a big tech company. I mean, it could prevent trillions in headaches for them down the road.
- [42:12]
Deirdre Bosa
Right. And you don't think that that would sort of the Capex vigilantes, you don't think they'd be upset about an extra 3 billion? Maybe you're right.
- [42:23]
Kelly Evans
I mean, it's not 30, not that much for 300. Yeah, but I think you're putting your finger on the most important issue here politically. If electricity bills continue to go higher and there are problems because of data centers, 100%, you're going to get the public pushback and the political pushback.
- [42:39]
Julia Boorson
Right.
- [42:39]
Deirdre Bosa
And it's not just Washington at this point either. There's, you know, a suburb in Arizona that, you know, voted against or decided it was unanimous. The local politicians there in building up a data center. I think you're just going to see more of these stories come up.
- [42:52]
Kelly Evans
Agreed. Deirdre for now, thanks very much. Deirdre Bosa, speaking of which. Kind of. And coming up, Metta is betting on connected TVs in the new year. We're going to dig into that next. Morgan Stanley is also bullish on smart TVs and they're upgrading Roku today. They say 2026 will be a strong year for ad spending with the Olympics, the World cup and the midterms all providing some tailwinds. And they say connected TV is poised to be the fastest area of growth. Roku shares are actually up nearly 13% in December. And Morgan sees more than 20% upside from here. We'll be right back. Graham is making the leap from your phone to your television, launching its first ever Instagram app for TV just a few hours ago. Julia Boorson is here with more on this story. Julia, how does this work?
- [43:48]
Julia Boorson
Well, that's right. This new TV app will autoplay reels and will be customized based on people's interests. It will also allow users to explore different channels and categories. And while Meta says the app will launch without ads, it will eventually add ads. Now this follows YouTube success on TV, announcing in January that it had more viewing on televisions than on mobile devices. Ads on connected TVs can cost two to three times as much as ads on mobile devices. And that's because over 90% of people complete watching connected TV ads rather than skipping them. So now Metta is joining YouTube in chasing this fast growing market. E Marketer estimates that $33 billion will be spent on connected TV ads this year.
- [44:31]
Kelly Evans
Year.
- [44:31]
Julia Boorson
That's compared to 50 billion spent on linear TV ads. Any marketer projects that connected TV ads will top linear TV ads by 2027. The growth of short form video on TVs actually has implications for Netflix's battle to buy Warner Brothers Discovery. Now Netflix argues it's competing not just with the media giants, but also with the social platforms on the same screen.
- [44:55]
Kelly Evans
Right, Kelly, Netflix also making a big play for those video podcasts cast today.
- [45:00]
Julia Boorson
That's right. That's all part of the conversation here. The question is where are you consuming content? And we're seeing the lines of division between what's a podcast, a video cast content you'd watch on Netflix and content that you'd watch elsewhere. All of those lines are blurring. So what we're seeing right now is Netflix wants to have the podcast audience. So they're making deals with Sirius xm. They previously made a deal with Spotify, Spotify to play those video casts on Netflix. And then you also have this kind of content that makes it easy to watch reels, that short form video content on your TV screen as well. The lines have disappeared.
- [45:36]
Kelly Evans
Kelly, I like to curate. We've talked about this. The content I'm showing other people, like, look at this reel, look at that. I'm not sure that I would just leave it on in the background and what implications that would have for it? It's always trying to target your preferences. Right. To just have it on is very different from something that you're scrolling through.
- [45:52]
Julia Boorson
Well, I think it's more about being able to watch on a bigger screen. So right now you see so much consumption of YouTube videos. In our house, we watch Mark Rober, who's a science creator and he does a lot of science experiments. That's content. And those videos range in length, but they might be as long as 20 minutes long. That content is watched in the living room by my kids obsessively. So the question is, what is the equivalent for an Instagram. Instagram video that people might prefer to watch on a bigger screen and sort of have it more as a lean back experience? The key thing about the lean back experience is that if people are watching the big screen, those ads are going.
- [46:28]
Kelly Evans
To be more valuable and it opens.
- [46:29]
Julia Boorson
Up a whole new arena for advertising, for Instagram and Meta to go after.
- [46:33]
Kelly Evans
Yeah, and I can hear the creators sort of screaming because it's fascinating to watch social media become more and more like tv. So we replace TV with social media only. So social media could then be watched on a table tv.
- [46:45]
Julia Boorson
It's all content is all attention and eyeballs. The question is just, are you watching on your phone? Are you watching on your screen? Are you multitasking? There are ads everywhere. And the question who's going to be getting those ad dollars?
- [46:57]
Kelly Evans
All right, I'll let you go clean up that spill. I hope it wasn't water by any of the important computer. Yeah, Julia, thanks very much. Julia Borsten. That's it for us today as the NASDAQ is trying to get back into the green. Thanks for watching the Exchange and Brian Sullivan will pick things up with Power Lunch after this break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities, and even another pass messenger or three. And with 100 years of navigating ups and downs, you can count on Edward Jones to help guide you through it all. Because life is a winding path made rich by the people you walk it with. Let's find your rich together. Edward Jones Member, SIPC.