Mike Santoli (2:10)

It's interesting all yeah all the kind of risk appetite bellwethers have been running. So that means that the policy mix that we were treated to with the Fed rate cut and also just the projection of further cuts in a economy that hangs in there. And even with the Fed projection showing uptick in inflation expectations and and Growth shows you that it's equity friendly, at least right now. Now, you know, within, within limits. You see the Russell 2000, we have had this breakout to a new high. A lot of people getting excited about that.

Melissa Lee (2:41)

Sure.

Mike Santoli (2:41)

Could still work. That would be the obvious playbook. The other piece of it is the bond market. You know, it's reacted, some would say it in an expected way with yields leaking a little bit higher off of that sub 4% 10 year yield we got on the day of the rate cut. I think we're in a zone here where until you get above 424 and a quarter, everyone's going to say this is probably a benign sort of retracement, no big deal. But you have to watch it in case it starts to flag that we either have overheat risk or the inflation stuff is going to be sticky again.

Melissa Lee (3:10)

Or growth scare on the other side.

Amy Javers (3:12)

Exactly.

Mike Santoli (3:12)

If we, if we run lower, I mean I see a lot of targets around 380. I mean who.

Melissa Lee (3:16)

Exactly, exactly.

Mike Santoli (3:17)

And what that would imply for the economy.

Melissa Lee (3:19)

Yeah. But it is worth noting the banks are having a great day. So we're seeing some, some follow through there amongst the bigger banks. Wells Fargo for instance is up a percent or so. Cities also higher today. And the homebuilders are really, we got Lenore earnings, but also this notion that mortgage rates are spiking. We saw that, that dip on the 30 year fixed rate mortgage earlier this week prior to the Fed meeting. We're seeing that rise now. And so the question is, you know, the impact on the homebuilders, we certainly saw that. Lennar will sort of monitor that situation to see if that really does impact their margins further in terms of them buying down.

Mike Santoli (3:49)

That's the, that's the sort of undisputed part of the economy that's just kind of stuck.

Chris Daniely (3:54)

Right.

Mike Santoli (3:54)

So housing and the economy, rest of it is kind of detached from that. Labor of course is also soft. But people have all these asterisks out there about why it's not necessarily as worrisome and you know, include some members of, of the Fed. So it's a, it's an interesting macro environment. The market's essentially in almost every respect looking on the bright side of the debate.

Melissa Lee (4:12)

All right, well meantime, let's delve deeper into Intel. Yesterday was a big winner. Today, not so much Citi today, not buying all the hype, downgrading the stock to a sell from a neutral. Today they see a limited impact from the partnership and say Intel's foundry business has Minimal chances to succeed. Joining us now is the analyst behind that call, Chris Daniely, Senior Semiconductor Analyst at Citi Research. Chris, great to have you with us.

Chris Daniely (4:34)

Thanks for having me.

Melissa Lee (4:36)

So you're, you're totally not buying the hype. Why would Nvidia get behind an intel if they didn't think that intel was, you know, a solid, solid company?

Chris Daniely (4:49)

Yeah, great question. So obviously there's a lot of political pressure going on with various parts of the market right now. I think that has to be somewhat of a factor. But as far as Nvidia goes, it's no skin off their back. So they gave Intel $5 billion. They're down to their last $67 billion in cash. I don't think that's a big deal. They already have some products called Grace that offer an ARM core. So now they're offering an intel core with that and then they're going to sort of loan their graphics capabilities out to intel to let intel integrate the graphics in their own laptop chip. So for us, you know, the 5 billion is no big deal. Intel is still behind AMD in terms of processors, and if you have a better graphics chip, it doesn't necessarily help the actual core processor. And then on the, you know, sort of a product offering that might end up being, you know, 500 million a billion, maybe 2 billion at best to Intel. But that's years out and Intel's a $53 billion company. So again, not enough to move the needle. And more importantly, we think this continues to keep intel in this perpetually money losing foundry business, which we think they should get out of. And if they did get out of that, making chips for other companies, we think that unlocks a dollar to $2 in earnings power and we're, we're loving that. But this sounds like this is just going to keep them in this like perpetual cycle of trying to make chips for other companies.

Melissa Lee (6:18)

So you don't think that intel could possibly give up the foundry business at this point because of this partnership with Nvidia? Does that preclude them from that or could that still be a path down the road? And is that the only way you'll get back to a neutral, at the very least on Intel?

Chris Daniely (6:34)

Yeah, great question. Well, obviously if the stock goes down, I go back to neutral.

Melissa Lee (6:38)

Right.

Chris Daniely (6:40)

Number two is I want to make two important sort of clarifications there. So intel does foundry for their own processors and we definitely think they should stick in that. They've managed to make a lot of progress there over the last two to three Years. But it's this, making chips for other companies, especially for Leading Edge. You know, they've been trying to do this for 10, 20 years. They are no closer now than they were five years ago, 10 years ago, 15 years ago. There are still two to three years behind Taiwan Semi. They're losing billions of dollars in this. Yes, it's possible that they could do it. And we've outlined that mean, first of all, you probably want to hire like two to three Michael Jordan's from Taiwan Semi to come and you know, teach you how to do the foundry business. Intel has not done that. They have like a non foundry person running the business. And you know, the foundry business is almost antithetical to what made intel great. Right. Like what made intel great was manufacturing their own chips. You know, it's a single processor for Intel. It's not taking somebody else's recipe and making it yourself. So you just have to completely turn the company around. And we just think that's not their forte. So if this keeps them in the business. And based on the feedback that I received, if you heard the conference call with, with intel and Nvidia yesterday, like a third of the investor questions were on, is this going to be a foundry deal? Are you going to get a foundry deal? I mean I hear it every day. I just think that they're still, you know, kind of running down that rat.

Mike Santoli (8:09)

Chris, if you feel the market in the knee jerk reaction got a little overexcited about this with the run in intel shares. What about the secondary responses? In other words? I think the initial reflex was that maybe it's net negative for AMD or AAM or other players that maybe seem like they were, they were less central to the overall story.

Chris Daniely (8:32)

Yeah. So clearly it caused AMD to sell off, caused ARM to sell off. And ARM is the, you know, the only provider of the, you know, the core processors for the Grace product, which is where, and they talked about this on the conference call, which is where they're going to be, you know, inserting Intel. You know, our ARM analyst says that's not material to arm, but you might see some share loss there. On the AMD side. I think this is Mortal Kombat between Nvidia and AMD and whatever Nvidia can do to make their product offering better versus amd. Even though AMD has a very small slice of the market, they're going to do it. At the end of the day, you know, we think that if AMD can get 10% of the processor market and that's a pretty good deal for, for amd. So I think that there's, the bottom line is there's so much money and so much growth that are be going into the market that there's plenty of room for Nvidia, for amd, for Broadcom, for all three of those leading companies to make plenty of money. We have, we haven't seen, I haven't seen anything like this since the, since the Internet days of 98, 99, 2000. And there's, you know, good comparisons and eventually bad comparisons to that.

Melissa Lee (9:47)

Do you think, Chris, Nvidia is actively looking for other partnerships out there?

Chris Daniely (9:53)

You know, I don't think so. I think that, you know, some of this was obviously, you know, name me a tech CEO that wants to get in their jet every month, fly out to Washington D.C. and explain themselves and gravel and have to deal with this stuff. So I don't blame him for that. And at the end of the day, it's not, it's not a big deal for Nvidia to just, okay, we're going to offer intel products as well. I mean, it's not a real competitor for us and we're going to give them 5 billion, you know, that's whatever 7% of our, of our cash and we're already getting a good return on that. I'm, you know, I don't know if they're going to do other deals with other companies. I just think that this was, you know, kind of a risk reward, win, win for them.

Melissa Lee (10:34)

All right, Chris, great to speak with you. Thank you there. Any time. Chris Stanley of Citi downgraded intel today.

Mike Santoli (10:40)

All right, meantime, President Trump and China's President Xi holding a high stakes call with the hopes of finalizing a deal over the fate of TikTok in the US Amy Javers is at the White House with the highlights of what we learn. Amen.

Amy Javers (10:52)

Yeah, Mike, that's right. We've got a statement here from ByteDance just within the last little while talking about this deal. And what bytedance is saying here is we thank President Xi Jinping and President Donald J. Trump for their efforts to preserve TikTok in the United States. ByteDance will work in accordance with applicable laws to ensure TikTok remains available to American users through TikTok US. We also had a statement from President Trump on his social media platform Truth Social media. President Trump said after that call, which was lengthy this morning, he said, I just completed a very productive call with President Xi of China. We made progress on many very important issues, including trade, Fentanyl the need to bring the war between Russia and Ukraine to an end and the approval of the TikTok deal. The President going on to say he thanks Xi Jinping for that TikTok deal. He said the call was a very good one and we will be speaking again by phone. Appreciate the TikTok approval and both look forward to meeting at apec. So interesting there that none of these statements actually say there is a deal for TikTok and we haven't seen any paperwork on that from here at the White House in terms of what the particulars are. So a White House official tells me that significant progress was made in this call today toward a tick tock deal, that any tick tock deal will ultimately be announced by the President. But they, they also caution, you know, don't jump to the conclusion that this means there's no deal. So we're somewhere between, you know, a deal signed with paperwork and all the rest and a deal where some things are still being ironed out and I's dotted and T's crossed and the like. We may hear from the President. He has an event on his calendar at 3pm today. We'll see if he lets cameras in and reporters and takes questions so we might get some more detail from him then. But that's where we stand as of right now. Not entirely clear that, you know, there are signatures on the bottom of a page here and documents that are being exchanged on this agreement between the United States and China on TikTok. Guys, back over to you.

Mike Santoli (12:55)

And I guess amen to whatever degree we can infer from the ByteDance statement and what the officials on both sides have said is it's almost as if no discernible change to the customer experience. It seems like a transfer of value as opposed to transfer of technology being contemplated. Yeah.

Amy Javers (13:13)

And well, and the real question from a national security perspective, Mike, is that transfer of technology, the algorithm here is all important. The question is who controls it and what's in it. And those are answers we're not getting right now from the White House or from Beijing, which is what agreement has been struck about how that algorithm will be transferred, if it will be transferred to the US owners under this contemplated deal, and then if the US owners will have an opportunity to crank it open, look under the hood and see if it's transferring data back to Beijing and see if it allows Beijing any sort of backdoor way to influence the videos that are sent to millions of Americans on a minute to minute basis. That's the national security concern, is that this is a giant potential propaganda tool for the Chinese government inside the United States. The question is whether what has been discussed today satisfies that concern. And that's important because that is in the law that Congress passed earlier this year that the president has now deferred implementation of several times and has now deferred again for another period of time.

Mike Santoli (14:15)

Right. All right, Amy, and see if we can fill in any of these blanks as we go along. Thank you. Coming up, the technical take on intel fairly it's Katie Stockton will join us with the bullish signal she's seeing in the chip makers charts.

Melissa Lee (14:28)

Wesley Narcing a fourth straight quarter of declining profit shares on track for their worst week since February. We'll get a check on the health of the housing market. The exchange is back right after this.

Mike Santoli (14:39)

This is the exchange on CNBC.

Melissa Lee (14:46)

Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org.

Mike Santoli (15:17)

I'm no tech genius, but I knew if I wanted my business to crush it, I needed a website. Now, thankfully, Bluehost made it easy. I customized, optimized and monetized everything exactly how I wanted with AI. In minutes, my site was up. I couldn't believe it. The search engine tools even helped me get more site visitors. Whatever your passion project is, you can set it up with Bluehost with their 30 day money back guarantee. What have you got to lose? Head to bluehost.com to start now.

Melissa Lee (15:48)

Whenever I need to send roses that are guaranteed to make someone's day, the only place I trust is 1-800-flowers.com with 1-800-flowers. My friends and family always receive stunning, high quality bouquets that they absolutely love.

Katie Stockton (16:03)

Right now, when you buy a dozen multicolored roses, 1-800-flowers will double your bouquet.

Melissa Lee (16:08)

To two dozen roses. To claim this special double roses offer, go to 1-800-flowers.com Pandora. That's 1-800-flowers. Com Pandora.

Mike Santoli (16:20)

It has been a record week for stocks with Small cap seeing the biggest gains. And our next guest says those gains will likely continue. Joining us now with the technical analysis is Katie Stockton, founder and managing partner at Fairlead Strategies and a CNBC contributor. Katie, always good to see you. So you're endorsing the move in small caps here? Obviously it's Been kind of a long road for, for small cap bulls over the last three or four years. Why do you think that this breakout might stick?

Katie Stockton (16:47)

You know I always say there's nothing bearish about new all time highs and we did see yesterday, now also today from the Russell 2000 index, new all time highs. It's essentially testing final resistance. That's from the 2021, 2024 highs of roughly 2460. So that's the key level to watch today and next Friday for confirmation. We just want to see a strong close above that level to suggest that we have a real breakout in store. And also if you kind of zoom out on the Russell 2000 chart, you'll see a big cup and handle formation. I'm sure that was on your radar too. And that's a great high probability setup. Typically from a long term perspective it doesn't mean that the Russell 2000 can't pull back and offer a better opportunity for those who are looking to get in. But it is something that would bode well for actually future outperformance even versus large caps, which as you mentioned has not really been something that we're accustomed to. We have some signs of life there in the ratios and the ratios. Russell to The S&P 500 now actually have some counter trend buy signals from the demark indicators that are kind of compelling.

Mike Santoli (17:56)

So would that represent small caps just simply outpacing further advances in the large caps or do you think that there would be more rotational and you'd actually have, you know, some payback in the large cap area?

Katie Stockton (18:09)

Yeah, I would say, you know, with this kind of scenario it's too early to suggest that it would be a long term shift that payback, but at least during maybe some consolidation for large caps, which they're certainly overdue, you could see small caps do a little bit better in that type of environment. But when you look at the bottom up charts there in the Russell 2000 you will see a lot of long term turnarounds. Most of them look somewhat overextended in the short term but it does suggest that this could be the early stages of that. Just based on the ratios alone. I think it's too early to make that call.

Melissa Lee (18:42)

How would you trade intel at this point, Katie?

Katie Stockton (18:44)

Well, we love seeing that breakout. A big base had been in place for more than a year for intel is an exercise in patience. But even as that sideways action occurred in intel, we saw the long term indicator shift to the upside. That would include something like the monthly macd which is a long term momentum gauge. And then of course the breakout is a good thing. We did see the stock come back into yesterday's gap or the day before his gap. So that to me suggests that we'll see a bit of a pullback for a better buying opportunity. But I think the gap up will ultimately give way to a confirmed breakout. And that confirmed breakout puts next resistance on the chart for intel around 30 and a half. And if we were to see it get through that level well then the next resistance above that is really well above closer to 38 and a half. So it's a, it's a big breakout.

Mike Santoli (19:33)

And Katie, we were Talking about the 10 year treasury yield earlier and whether there's any real significance to this bounce in yield that we've got.

Katie Stockton (19:42)

Yeah, you know I think it's a, it was a natural place for a bounce to unfold. It was at 4% that we had this long term triangle support and I think it's going to see a retest. So I think this bounce is more a response to oversold conditions. And then of course the FOMC announcement came and went. So there's a little room on the chart for 10 year yields up to the 50 day moving average. That's roughly four and a quarter quarter. And that's where I wouldn't be terribly surprised to see them meet resistance because if you reference the monthly gauges, even the weekly gauges, they mostly are sort of neutral to lower to suggest that that triangle is still, you know, has risk of resolving to the downside.

Mike Santoli (20:23)

Yeah, that four and a quarter area sort of has been a familiar pivot area I guess for, for a little while. We'll see how it goes. Katie, thank you.

Katie Stockton (20:30)

As of course.

Melissa Lee (20:33)

Coming up, Apple's latest iPhones go on sale today. CEO Tim Cook was in New York this morning for the first sales. We will tell you what he is saying about pricing and how it compares to previous launches. Ahead back right after this.

Mike Santoli (20:52)

I'm no tech genius, but I knew if I wanted my business to crush it, I needed a website. Now thankfully bluehost made it easy. I customized, optimized and monetized everything exactly how I wanted with AI. In minutes my site was up. I couldn't believe it. The search engine tools even helped me get more site visitors. Whatever your passion project is, you can set it up with Bluehost with their 30 day money back guarantee. What have you got to lose? Head to bluehost.com to start now.

Chris Daniely (21:23)

And now a next level moment from AT&T business.

Mike Santoli (21:26)

Say you've sent out a gigantic shipment.

Melissa Lee (21:27)

Of pillows and they need to be.

Chris Daniely (21:28)

There in time for International Sleep 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.

Melissa Lee (21:54)

Welcome back to the Exchange and Mike is taking a look at the S and P and its return to the late 1990s.

Mike Santoli (21:58)

Yes, very familiar. Everybody's hearing echoes of that period. Now both bulls and bears. Bears will say we have a hyper concentrated market the way we did back then. We had an Internet bubble, then we have an AI bubble, very expensive valuations, all the rest of it or in the bulls are saying if we're going to have a rerun, we're not nearly at the end of it. Here's what this says. Bespoke is mapped the current trajectory of the S&P 500, including the April pullback was a non recessionary near bear market and then the comeback. So we are tracking the late 1998 through 1999 into 2000 path. It would be weird if we continued to stick exactly to this. I think you have to say take it with a grain of salt. These things are kind of cherry picked on some level. But the other piece of it is earnings estimates have been rising since that sell off both this time and in 98. So you know, you can maybe take some heart in there. Even though the market's expensive and everyone's already overexcited to a degree.

Melissa Lee (22:52)

It's interesting because bank of America's Mike Hartnett had a study. He was looking at 10 bubbles from trough to peak and he was saying if those hold in terms of the average gains, which is 244%, then the mag7 specifically, which, which is basically a proxy for The S&P 500 has more to go because, well, more at 220.

Mike Santoli (23:09)

JP Morgan said 47% higher. I mean depending on other measures.

Melissa Lee (23:12)

Yeah, so we'll see. We've got some breaking news from Capitol Hill. Emily Wilkins has got that. Emily. Hey guys. Well, yes, the Senate has now voted on that stopgap that passed the House, but it has failed to get the number of votes needed. In the Senate. It was only 44 senators who voted for for it, 48 against. That's not even a majority, they need to get to 60. And so now it's really an open question of what comes next. Again, a shutdown is headed for the end of the month. Lawmakers are out next week and we just got a notice that the House that was supposed to come back on the 29th and the 30th, they're now not planning to be back until October. They're trying to jam the Senate to take up what the House passed, but at this point the votes don't seem to be there. So. So we're on track for our shutdown. There is still time left, but it's just not clear what the path forward is, guys.

Mike Santoli (24:02)

All right, Emily, thank you. We have some breaking news on X AI David Faber joins us on the phone with that story. Hi, David.

David Faber (24:10)

Hey, Mike. Yeah, Some new reporting involving the latest fundraise to take place. Of course, in what is an ever growing industry can report that Xi is raising $10 billion from a number of investors that I am told may include the Public Investment Fund of Saudi Arabia, although I have not gotten comment from them. And that $10 billion raised will bring the post money valuation for Xai to $200 billion. To put it in perspective, it wasn't long ago that it was raising money at about 50 billion. It did raise equity and debt most recently only a few weeks ago, in part from SpaceX, number of other investors. And then as I said, also part of that 10 billion was in debt as well. And that raise was sort of in the mid-150s. So the valuations continue to rise despite certainly what is an incredibly competitive arena, as you guys well know, with the likes of OpenAI's chat, GPT out of Gemini, from Alphabet, not to mention of course Anthropic and Metta and so many others. Elon Musk trying to keep pace building that giant supercluster to go with the one he already has in Memphis, Tennessee, for which he told me back in May when we last spoke he would be buying a million GPUs. So no doubt the money is needed both to hire talent and to continue to fill those data centers up with GPUs as well.

Melissa Lee (25:43)

David, it's amazing. It's just staggering to think about the valuation of these things. J.P. morgan was just out with an initiation report on Anthropic. Valuing it at more than $180 billion is certainly in this range of rarefied air for valuations. What was xi's last valuation round? I'm just curious as to how much it's gone up since yeah, you know.

David Faber (26:05)

Melissa, there's been so many different things. And again the debt slash equity most recently, I think it was in the mid-150s. I think that sort of 150 billion or so is sort of where I think a lot of people assume the last valuation was. I can go back to them raising. I think it was last November I reported they were raising 6 billion which at the time by the way seemed like an enormous amount at something like maybe was 50 billion. I don't have all my notes in front of me, but it does give you a sense of course as to just how quickly these valuations have risen. You mentioned anthropic. A similar trajectory there as well, despite what of course we all know is no profitability from any of these given the voracious appetite they have for capital. None more so than the leader, of course, OpenAI's ChatGPT. OpenAI valued at some $500 billion in the midst of a significant restructuring of its capital that includes Microsoft and that is raising money at a level the likes of which we've never seen and frankly has to continue as Sam Altman has made clear, to continue to fund their endless needs for computer.

Mike Santoli (27:10)

Yeah, I mean open, I mean current usage of CHAT GPT is far in excess of Xi's Grok, so who knows if that you get parallel increases in implied valuation there. David. I guess it also tells us something about perhaps why the Tesla board felt as if, look, we have to essentially throw out a new longer term incentive package. Try to keep Musk's focus to a fair degree on, on Tesla when, when all this value is accruing outside of the public company.

Amy Javers (27:38)

Company.

David Faber (27:39)

Yeah, and of course it is interesting to note that last, the last raise of course did include another Musk company, Space X putting some money. And it's always been a question as to whether Tesla perhaps would even participate in a fundraise for X. I'm not aware that that is anywhere part of this, as you say, but you know, New York Times story today, Mike, I'm sure that both of you have read talks about how much time in fact Musk has been spending at XAI as they change personnel and as they continue to try to build that latest cluster of course in Memphis.

Mike Santoli (28:13)

Yeah, absolutely, David, moving fast. Thank you very much.

Melissa Lee (28:20)

Coming up, Lennar having its worst week since February after posting mixed results. We'll hear from the CEO in a look at what the numbers say about the state of real estate next. The exchange is back right after this.

Mike Santoli (28:38)

Shares of Lennar down 3 and a half percent following its fourth consecutive quarter of profit declines. Diana Olek joins us now with more on the struggle there. Diana?

Melissa Lee (28:48)

Well, Michael and I had a rough Q3, no question. The stock is down, as you said, well over 3% on the day. Revenue missed estimates, deliveries came in light and guidance was revised lower. Lennar Chairman Stuart Miller said on the analyst call earlier today that this has been a difficult housing cycle.

David Faber (29:05)

Our third quarter results reflect the continued softening of market conditions and affordability through our third quarter. Sales volume was difficult to maintain and required additional incentives in order to achieve our expected pace and to avoid building excess inventory.

Melissa Lee (29:26)

And that just builds on what Miller told me on a call last night about Lennar's homebuilding gross margins, which dropped to 17 and a half percent. Now compare that to 29% back in 2022 at the height of the pandemic. Miller told me, quote, it's all about getting to the intersection between what the buyer wants and what the buyer can afford. It's about affordability. We know we're going to have to bring our margin down, but additionally, by maintaining volume, we've been able to also get contribution from our trade. In other words, they too have been bringing their costs down, recognizing that if we're not building homes, they're not getting paid anything. Now, Miller did say he was encouraged by lower interest rates this month, but they are slowing production and lowering delivery guidance. He said they're taking the edge off volume as the market continues to be stressed, recalibrating. So they're not pushing too hard on a market that just doesn't want to be pushed back to you.

Mike Santoli (30:21)

Yeah, Diane, I guess that was going to be my question. So how far are they from being able to, you know, approach that intersection of what the, the customer wants and can afford? And can rates get them there? Clearly they don't think so.

Melissa Lee (30:37)

Well, I mean, I guess you'd say not there yet because we keep seeing margins shrink and we do know, you know, look, rates pulled back early this month. We were down at a three year low on Tuesday. But then what happened after the Fed cut? They went up 24 basis points. We're back now down about 2 basis points, but it doesn't look like we're going to see, you know, Miller had said to me, if we get toward 6% and we sit there, that would be really optimistic for us. We'd see more volume come in. But it doesn't look like it's actually going that way. And if we do see more rate cuts, it's possible that we start to see mortgage rates which don't exactly follow the Fed, they follow the 10 year go up even higher. Diana thanks. Diana Olek, let's stick with housing. Our next guest says this week's rate cut will spike housing demand, particularly from first time buyers, but warns that could also also drive prices back up. Joining us now is Noble Black, real estate broker at Corcoran Noble. Great to have you with us.

Noble Black (31:29)

Thanks for having me.

Melissa Lee (31:30)

Are you expecting rates to resume a downward sort of trajectory even though we saw a spike right after the Fed meeting?

Noble Black (31:38)

Who knows, right? I mean, I think we're certainly not going to see them fall dramatically from here, but hopefully they're going to continue falling somewhat. They're going in the right direction. Overall, I think the Fed cut today certainly sent kind of a boost of confidence is what we were hoping, what we were somewhat expecting. So again, right direction, but I don't think anything dramatic from just the decision this week.

Melissa Lee (31:59)

How sensitive are buyers to those fluctuations in mortgage rate? I mean, you know, there has been talk that the rate would need to come down to, you know, 5% at least have a 5 handle to it in order to really entice buyers off at the sidelines. Are you seeing that or does even a quarter point reduction in the mortgage rate, does that drive sales?

Noble Black (32:19)

It all helps. I mean it's all marginal. So I mean a quarter point is not going to do that much for an individual buyer depending on where they are price point wise. I'm in New York, obviously we've got, you know, last year I think it was 80% of our deals above 3 million were cash. So it's not as though financing plays a huge role here, but it plays a big role psychologically. So, you know, even our wealthiest buyers are watching that. They want to see where the economy is going. They want to see is that a shot in the arm for people, you know, and what happens on the bottom of the market sometimes trickles up. So it's all important with that in and of itself, a quarter point is not going to do much. But again, it's a matter of where it's going and you know, kind of giving some people confidence to come back into the market, which is is needed.

Mike Santoli (33:00)

The overall numbers have shown an increase in in homes for sale. Obviously the secondary home inventory are rising and yet it still hasn't quite, you know, gotten to that equilibrium price where it seems like it's going to really encourage a lot of activity and turnover. What are you seeing in your areas in terms of Our sellers sticking by, they're asking prices. Is there flexibility there?

Noble Black (33:22)

Well, I was going to say it depends on the market you're in. Right. So you certainly see a lot of oversupply down in the Sunbelt. You know, certain areas in Florida, you know, even on the west coast, there's certain places where there's too much supply. In New York, it's really almost block by block. So if you're talking about something that's a brand new condo downtown West Village, you can name your price. You know, there's a building that's done incredibly well. There's blending at over $5,000 a foot, and they've been selling, you know, like hotcakes, doing a crazy, crazy, crazy, crazy past few months with them. If you're looking on the Upper east of the Upper west and it's a co op that needs work, there's huge flexibility with those. So it really does depend on the product and the price point. But we've been seeing activity at all levels. It's just a question of how it's priced for what it is. It's not universal across the city and certainly not across all of the markets.

Melissa Lee (34:11)

Is a mayoral election. Is that race playing a role at all amongst the buyers that you're talking to in terms of the likelihood of, of a Mayor Mamdani and whether or not that deters people from buying? Is that a narrative at all?

Noble Black (34:25)

You know, it's a narrative. I think everyone's trying to figure out exactly what the narrative is, but it's certainly a topic of conversation. It's definitely gotten a lot of people nervous. I think for the most part, once people start looking into it, they recognize, okay, this is something that they're not in favor of necessarily, at least for a lot of our buyers. But it's not like the sky is falling and all of a sudden the city is going to be going to hell. I think, you know, you're seeing overtures by certain business leaders that they're finally starting to warm to the idea that they may have to deal with them. They're going to work to try to moderate some of the policies, to try to educate, frankly, him on some of the policies. You know, I think they recognize you've got someone that's not done in a real leadership position ever before. He's only been an elected officer for four years, so. So some people, although it's not their first choice by far, I think that are looking how can we influence, put our stamp on things to, to keep things going in a positive direction. I've not had any buyers talk of moving out of the city, talk of selling, talk of, you know, running away, and certainly not big corporations with. You know, I think it's a topic of conversation. I think that the socialist label certainly scares a lot of people and brings a lot of eyeballs on him. That probably would not otherwise be the case, but it's not like it's been some huge amount of coal market yet.

Melissa Lee (35:39)

Noble, great to speak with you. Thanks.

Noble Black (35:40)

Thanks for having me.

Mike Santoli (35:43)

Coming up, Apple shares higher today as the iPhone 17 hit shelves. CNBC Steve Kovac is outside the Apple store on Fifth Avenue in New York City. Steve?

Melissa Lee (35:54)

Yeah, Mike.

Chris Daniely (35:54)

And it is just going crazy here all morning, all afternoon long. The lines are just still around the block. I'm going to tell you what it means for Apple shares when the exchange.

Mike Santoli (36:03)

Comes back after this.

Melissa Lee (36:12)

Welcome back to the exchange. JP Morgan increasing their price target on Apple by $25 to 280 a share, citing surprisingly strong iPhone demand. Analysts expect that strength to continue with the foldable iPhone 18 in 2026, setting Apple up for a period of robust growth. But before we move on to the next iPhone model, let's get a check now on how sales of the 17 are going. Steve Kovac is at the Apple store in New York City with more. Steve, the crowds. Wow.

Chris Daniely (36:40)

Yeah, it is really crazy here, Melissa. I was actually on this program exactly a year ago and by this time during the day the line was empty. It hasn't just maintained the line here outside the fifth Avenue Apple store, it's actually grown. And so we're seeing just enormous demand and robust excitement around these new iPhone models, in part due to design. Even the cops are into it. It sounds like they're going down fifth Avenue right now. Gotta love New York. There they go. All right. Anyway, what we're looking at right now.

Melissa Lee (37:15)

Is we saw over the weekend the.

Chris Daniely (37:16)

Early data of the pre orders price looks really good.

Melissa Lee (37:19)

That seems to be translating into launch day as well.

Chris Daniely (37:22)

You referenced that JP Morgan price increase. That is something we're seeing. I don't recall the last time I've seen Apple shares up 3% on an iPhone launch day. So there's tons of excitement on this. And like you said, Melissa, on top of all that, we're already looking forward to next year and 2027 where we're expecting even more new designs and iPhone models that seem to be the real catalyst that drives these iPhone sales, not artificial intelligence as the thesis was last year, guys.

Mike Santoli (37:51)

Yeah, obviously an upside surprise in terms of the Response. Steve, thanks very much. All right, coming up, could a new Magnificent Seven be emerging? A group of private companies have seen their valuation gains nearly triple that of their public counterparts over the past year. More on that next in tech.

Melissa Lee (38:28)

Welcome back to the Exchange. You've heard of the Mag 7, but seven names in the private market are also attracting billions in value. Mackenzie Segalis crunches the numbers in today's tech check. Hey, Max. Hey, Mel. So the so called Private Mag 7, the biggest non public names have surged to a combined $1.2 trillion valuation. That's up 96% in a year, roughly 3x the gains of their public market counterparts, according to new data from Forge Global. Now the leaderboard reshuffled. OpenAI just edged past Space X for the top slot. And Anthropic jumped up to number three, making its first appearance in the Private Mag 7, the model maker beating out both Stripe and Databricks. Remarkable for a company that didn't exist four years ago. Now Forge says some of these firms are posting up to 300% revenue growth on billion dollar bases. And the money is hyper concentrated. 19 AI firms raised $65 billion year to date, accounting for 77% of all private capital. That kind of fire hose makes IPOs optional, even as startups like OpenAI quietly fuel some of the public market rallies that we've seen, like Oracle's 34% jump this month. Meanwhile, defense tech is breaking out. Anduril joins the list as investors chase AI at the edge. Enough that Forge spun up a dedicated defense vehicle. And then the aqua hire frenzy is only intensifying with mega caps writing multibillion dollar checks to poach elite talent and license technology. A faster, lower friction way to buy a brand power without the antitrust baggage of full acquisitions. And then of course, our David Faber just reporting this hour that xi is raising $10 billion. Guys.

Mike Santoli (40:06)

Amazing. Yeah, the world is awash in capital, apparently. Mackenzie, thank you very much. Before we head to a quick break, a check on FedEx. The shares are up 2 1/2% on better than expected results despite the ongoing trade uncertainties. CEO Raj Subramanian calling it a testament to the quote, resilience we built into our network. The exchange.

Noble Black (40:26)

Back in tips.

Melissa Lee (40:36)

We'Ve got another news alert out of Washington, D.C. amen Javors has this latest Eamonn.

Amy Javers (40:41)

Melissa, CNBC has obtained a clip exclusively of an interview with former White House adviser Steve Bannon. The interview is conducted by Sean Spicer, who was of course the former press secretary for Donald Trump in his first term. In this interview, Bannon makes a provocative suggestion about the future of Scott Besant, who's the treasury secretary, and whether or not he should have a role at the Fed. Here's what he says.

Mike Santoli (41:07)

I am a big believer that on an interim basis, that Scott Bessant should be both the head of the Federal Reserve and the secretary of treasury, and maybe get through the midterm elections, step.

Chris Daniely (41:17)

Down his treasury and take over the Federal Reserve.

Amy Javers (41:20)

Now, that full interview is going to air at 6pm on Sean Spicer's podcast on YouTube. But in that you see Spicer discussing this with Ben and we should note, of course, neither one of those men is a current White House official. Both of them retain significant relationships here inside the building. And so this idea that Scott Bessant should be both the treasury secretary and the chairman of the Federal Reserve after Jay Powell is clearly an idea that's going to get some traction inside this building. Whether it will be embraced by this building is a different question entirely. We'll ask White House officials what they think of that idea. Scott Besant himself has said he does not want to be Fed chair. He's happy in the job that he's in. The president said in August that he was taking Besant off the list of candidates for the Fed because Bessant told him he wants to stay at Treasuries. So this idea, though, that he could have a dual hat obviously will raise a lot of concerns among people who are very focused on the idea of Fed independence. The idea that you could have a Treasury secretary simultaneously running the Fed will be controversial in those circles. Guys, the whole interview, as I say on 6pm tonight on YouTube. But that is the gist of the comments there from Bannon, who says he likes the idea that Besson can both explain Trump economic language to capital markets. And he's got a steady pair of hands in terms of understanding what Trump wants. So that's the comment. We'll see what people make of it.

Melissa Lee (42:47)

Well, the capital markets probably wouldn't like this move, but Amy, stay with us. Let's bring in senior economics reporter Steve Liesman to discuss this. This haven't floated out there before, Steve, and it seems like they're swatting away, but here it is once again. I would imagine you have to go pretty far back in the history books, actually find an example of this in the past, if there is one.

Mike Santoli (43:06)

I think there was in 1913. I'm just doing my search here for a little bit. But in 1935 is when the Fed, they really wanted this independence in place in 1951, there was the accord between treasury and the Fed. Really asserting the Fed's independence is something Congress has wanted. And I guess literally the treasury secretary being both the treasury secretary and the Fed chair, would effectively end that independence. And I just have a couple of questions, beyond which, whether or not and how much Bannon matters in this White House. I guess if the President hears it and likes the idea, he might suggest that. But, but the first one is the extent to which a proposal like this is specific to the people, or is it something that they want to happen sort of broadly, that the treasury and the Fed chair should be independent on an interim basis? But why? I mean, why on an interbase. Why not? Why not permanently if you're going to do that? The trouble here, and Melissa, you kind of got at it, which is that I don't think capital markets would like this to the extent that essentially what you'd have is the guy who's selling you, you the bonds would determine afterward, or could determine afterwards what the prices of the bonds you just bought. So that would be a big problem, and it would really seriously undermine both Fed independence and most importantly, the biggest and most liquid markets in the world, the US Bond market. Yeah. I mean, at the risk of, you know, maybe trying to project a little bit too much strategic meaning to the message, Steve, me, you know, the interim basis and this comment and maybe step down after the midterms, to me, it rhymes with this general sense of the administration wants to find all these levers to run the economy to be really hot into next year. So rates lower, you're going to get the fiscal push. They think they're going to get a lot out of corporate spending off of the tax bill and all the rest of it. Also, a really active tax refund season apparently is on the way in the.

Melissa Lee (44:57)

First quarter, and the proposal is on an interim basis through the midterms. That's specifically. Right. Yeah. So that is exactly to Mike's point here.

Amy Javers (45:06)

Yeah, Melissa, I think Mike just nailed it. I'm sorry. Go ahead, Steve, go ahead.

Mike Santoli (45:09)

And.

Amy Javers (45:11)

Well, the idea of putting it a peg on it through the midterms obviously puts a political spin on it, but the Overton window on this is moving.

Mike Santoli (45:18)

Right?

Amy Javers (45:19)

I mean, the idea would have been controversial, you know, a year ago to have somebody on the Fed who simultaneously is holding a temporary job at the White House and coming back to the White House after that. But we have Stephen Myron now sitting on the Fed and intending to, to come back to the White House after that job is done. So markets didn't really react to that question of whether that is an independent relationship or not. And so the question is, how far has the Overton window shifted on this? You know, the window of what's considered acceptable? And do markets like this idea? It's clearly an idea that's in the conversation. Now that you have Bannon and Sean Spice are talking about it. It's in the conversation in the MAGA base. Is it in the conversation in the White House? As soon as we get done here, I'm going to go inside the White.

Melissa Lee (46:05)

House and ask, doesn't it need to be a conversation in Congress as well? Amen. I mean, isn't there a congressional aspect to this where the administration can't just make this happen?

Amy Javers (46:14)

Sure, yeah. I mean, they'd have to get approval. Right. And the Senate would have to. Would have to agree that that's a good idea. Are there Republican senators between now and the midterms who would say, you know what? We really like what Scott Bessen is doing. We don't care about this idea of Fed independence so much. What we want is somebody who can translate, you know, Trump's broad economic desires into specific concrete economic policy, and so we'll overlook all that. You know, you'd have to talk to a Senate watcher to know if the votes are there for that. Now, that would have been considered an enormous, almost impossible leap. Like I say, a year ago, six months ago. But, you know, as a. I say the Overton window is shifting, and so we'll have to take everybody's temperature and.

Mike Santoli (46:55)

See what they say.

Melissa Lee (46:55)

All right, thanks.

Mike Santoli (46:57)

So the question real quickly, guys, is whether or not the Overton. Whether or not the Overton window includes violating the Federal Reserve act, which mandates that members of the board shall devote their full time to being on the board. So that's a little unclear.

Melissa Lee (47:10)

Excellent point there. Thanks, guys. Appreciate it. Eamon Java, Steve Liesman, and a quick programming now. Commerce Secretary Howard Lutnick will be joining Closing Bell Overtime for an exclusive interview today, 4pm Eastern. We can ask them all about that.

Mike Santoli (47:21)

All right, that is it. Yeah. For us. Thank you for watching the Exchange. Power lunch starts right now.

Melissa Lee (47:27)

You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place, at Capella University.

Chris Daniely (47:36)

Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the.

Melissa Lee (47:42)

Course room to the workplace. A different future is closer than you think. With Capella University. Learn more at Capella Eduardo.