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Inflation Cools, Metals Dip and the Christmas Countdown is on 10/24/25
00:44:12
Stocks hit record highs after the long-awaited September CPI report showed cooler inflation. Gold loses some of its luster. Plus, what the c-suite expects from consumers this holiday season.
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You're listening to THE Exchange.
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Here's today's show. Thanks, Scott. Welcome to the Exchange. I'm Courtney Reagan. And today for Kelly Evans, record highs for the Dow S and P and Nasdaq following a cooler than expected CPI inflation report. All three major averages on track for 2 plus percent gains this week. Yields mixed on the back of CPI with the 10 year holding just below 4%. Again, the gold rally continuing to fade. Giving back yesterday's gains now trading around 40$100 an ounce. And oil up a half a percent off the best levels. But still on back to end the week more than 8% higher. And a quick check on crypto coin of nearly 7% on an upgrade to overweight at JP Morgan on reduced risks and more opportunities. Bitcoin meanwhile, hovering around 110,000. Let's start in Washington. And the latest on the trade front. The president saying overnight he's terminating all trade negotiations with Canada over a quote, fake Ronald Reagan ad. Eamon Javors joins us with the latest. Amen.
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Hey there, Courtney. Well, Canadian Prime Minister Mark Carney speaking to reporters today and offering his first reaction to President Trump's announcement that he has cancelled those trade talks between the United States and Canada. Here's what he said. We stand ready to pick up on that progress and build on that progress when the Americans are ready to have those discussions because it will be for the benefit of workers in the United States, workers in Canada and families in both of our countries. Now, despite the tensions, White House National Economic Council Director Kevin Hassett said that Trump does plan to speak to Carney when they're both in Asia next week because it was the provincial government of Ontario, not the national government in Ottawa that ran that TV ad on tariffs that provoked Trump's anger. And don't forget the China talks as well. Treasury Secretary Scott Besant and Trade Representative Jameson Greer are expected to meet with their Chinese counterparts later today in Malaysia, where it is already Saturday. That meeting comes on the heels of the US launching a new so called Section 302 investigation into whether or not the Chinese have lived up to the commitments they made during the first Trump term. Now, the launch of that investigation just hours before Trump is set to fly to Asia for talks is widely seen as a way to prod the Chinese side ahead of his meeting with Xi Jinping next week. Back over to you, Courtney.
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Of course, I mean, you always hit on exactly what I was going to ask you about as you continue talking about that. It's sort of a precursor pre interview, maybe with President Xi before Trump meets with him. What do we expect from that? I mean, do you expect that then gives us a leg up on the negotiations because of sort of coming in and saying, hey, what have you done for me lately ahead of what can you do for me next?
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Sure. I mean, I think this action today with the 302 is, is sort of a rattling of the cage a little bit just to sort of get the Chinese side's attention. But there' much on the agenda for this meeting next week between Trump and Xi that it almost kind of pales by comparison with the scale of the overall talks between the two countries, not only economically but, you know, militarily, diplomatically and in other ways. This relationship is the defining relationship on planet earth between two nations. So enormous amounts of stake. When you talk to sort of old school Washington guys, they say, you know, you don't go into a meeting like this without some pre packed deliverables that will be agreed upon in advance. And then you get the two principals in the room for the handshakes and the photo ops. But really all the hard work is done beforehand. Not clear that that's what's happened here. So we'll wait and see what the announcements are next week in Asia. But I am told, by the way, Courtney, to expect some other trade agreements with other countries to be announced along the way on this multi stop Asia tour. So stay tuned next week, I think for a couple more announcements in addition to whatever happens with the China negotiations.
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It's definitely shaping up to be another very busy week for us all to follow all of those moves. Eamon, thank you so much. Let's turn to today's CPI print. It was lower than expected, climbing 3, 10 in September and 3% year over year, excluding food and energy. Core CPI rose 210 and 3% from a year ago as well. So my next guest says benign inflation leaves the Fed firmly on track to cut rates by 25 basis points in October and December. So Joe, joining me now is Krishna Guha. He's vice chairman of Evercore. Isi. Krishna, it's great to see you again. You know, I think obviously there are different ways to look at everything and that's sort of why we have these robust discussions here on cnbc. But you call the inflation benign. When I look at 3%, I say, well, isn't that still above the Fed's target rate? And a lot of consumers might say it doesn't feel so benign, especially after all these months and months of increases.
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So that's very fair. Obviously we're writing for a market audience and the question is it's benign for markets for sure. So why so obviously the inflation print came in a bit cooler than expected when you look under the hood. Importantly, there was no sign of any sort of catch up surge of pass through of tariffs into goods prices. Goods prices. Inflation was actually a bit less this month than it was in August. And the services side in the round was pretty well behaved too. Now when you break that apart, the positive piece there was housing services, inflation very soft. The other services on a CPI measure a little bit elevated. But in the round, nothing to be concerned about there. And so the absence of bad news on the inflation front gives the Fed a free hand to cut rates in response to labor softness and risks.
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Okay, that is really good context because you bring up labor softness and risks. Also is the other part of the Fed's mandate. We've been hearing more about layoffs. Just yesterday afternoon, Target doing a corporate layoff. Not a huge number, 8% of corporate staff. However, it's the first such layoff that we've seen from the company in about a decade. So what do you think or how do you think that will influence the Fed's thinking on that part of the mandate? Does that change anything for you?
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So we always have to be a little careful reasoning from single company examples. That's not the only one, as you know well and you've consistently said. I think obviously the Fed is going to keep a very close eye on layoffs in the aggregate sense because we've been in this low, higher, low fire equilibrium for a while. The Fed's always been a little bit edgy that look, at some point, if the layoffs pick up and hiring is still unbelievably low, then you could see quite a rapid deterioration, for instance, in unemployment. Now, the best measure, of course, in real time as to what's going on. There are other weekly UI claims and because those are aggregated from state data, we actually continue to get good visibility on that through the shutdown. And so far we've seen those UI claims broadly moving sideways. So we're not seeing any kind of red alert from the unemployment initial claims. But certainly, you know, we would track, and the Fed would track layoff announcements and be very attentive to whether we start to see any pickup in that aggregate measure of the initial unemployment claims.
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And as we sit here a day, what, 23 of the government shutdown and we're starting to talk about missing paychecks effective today for some of these government workers, there Also early on was discussions or maybe threats of reduction in force. So not just a furlough, but a permanent reduction. How are you understanding what's going on there when you're talking about government jobs and how that may be impacting the labor market right now?
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D
So you're absolutely right that in addition to the sort of underlying, if you like, private sector labor market dynamics, we have to keep a very close eye on what's happening with federal and state and local employment. So actually, on the federal side, there's actually two things going on, of course, because as you know, we're waiting for the, the lagged effect of the Doge layoffs, those negotiated severances to hit the data over the next couple of prints on the labor market side. So there's a lagged effect we already know is in the pipeline there. Then on top of that, we're going to see the furlough effects. And of course those are going to affect the potentially create some noise around the unemployment rate. And of course also if paychecks are not coming out, this can potentially be some kind of fairly small, but some kind of macroeconomic impact on the demand side as well. So we're going to have to think carefully about these federal government labor market effects that are taking place right now. But I think the Fed and the rest of us in the economics profession will be trying to focus as best we can on getting a read of where the underlying private sector payrolls, the underlying private sector labor market dynamics are because ultimately that's going to sort of shape where we're going from here when we work through these near term very prominent government employment issues.
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Before we let you go and in a way to button up the segment from where we started talking about cpi, I'd love to get your read a little deeper on something you mentioned about tariffs. And we're not seeing the impact of the inflation from tariffs really flow through like perhaps there had been concern, but maybe it's coming in a one time bump. When is that one time?
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D
Right. So to be clear to unpack this just a little bit, we're absolutely seeing tariffs being passed through in a number of goods categories. Remember that goods inflation is normally either around zero or even negative and now it's meaningfully positive. And that's the tariff effect. But we haven't seen quite as forceful a tariff effect as many feared. Fed feared that. We Fed early in the year, you know, around Tariff Day, Liberation Day back in April, the speed and force of the pass through hasn't been quite as strong as One might have anticipated in the base case that suggests first of all that it's going to be a slightly more dragged out, prolonged process. The company is going to sort of dribble through those price increases rather than try and force them on a consumer that may now be sort of resisting those price increases. I think there's also potentially some learning here. I think there is some learning here that companies are trying to squeeze out productivity activity gains, shift suppliers around and so forth in a way that will allow them to absorb a little bit of this cost on a sort of going forward basis. And so I do think cumulatively the tariff pass through is going to be a bit less than we had feared, but certainly still plenty of it lying ahead. There's always a risk that any given month you could have a lumpy month of tariff pass through could have been this report. And the fact that it wasn't is really why we're all saying it's great. And now we're firmly on track for most October and and December. In fact, I actually think right now the probability of a 50 basis point cut in December is fractionally higher than the probability that the Fed will skip.
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Very interesting. Giving us a lot to chew on there. Krishna Guha, thank you very much. And to your point, yes, we are feeling the tariff impact, but perhaps it's not as much. Even Deckers, the maker of Ugg and Hoka said it was not as bad as feared for the most recent quarter. Well, as we did just discuss, it's day 24, I said 23 to the government shutdown. We're starting to see the real world impact. Emily Wilkins is live in Alexandria, Virginia with more. Emily, what are you seeing on the ground?
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Hey Courtney. Well, you know, we have been out here for the last few hours where we saw 640 boxes of food distributed to roughly 300 federal workers. And they are just some of the 2 million who missed their first full paycheck today. There was really a long line of cars here. Some actually had to be turned away. There was not enough food to meet demand. And mind you, this is one of several food distributions that have happened this week in the D.C. area. I spoke with some of the folks in cars. They said they're dipping into their savings, they're considering part time work. There's a lot of uncertainty and frustration here. They just don't know when they're going to get their next paycheck. And mind you, some of them, they're still showing up and working every single day. Plus from the food distribution side they're thinking right now about federal workers, but it's not just them. What 42 million SNAP recipients could lose benefits when the food assistance program runs out of funding as it's expected to do at the end of the month. Now Congress is still stuck in a stalemate over the shutdown. The Senate had a vote yesterday on paying non furloughed federal workers that failed. Democrats said that all federal workers must be paid. We did hear yesterday that there are some bipartisan efforts to try to pay federal workers to fund snap. We're going to have to see next week if either of those might be able to get the 60 votes needed to pass. But as far as reopening the government, there's really no end in sight to the shutdown yet. In fact, the Capital Area Food bank, the one who did the distribution today, they were telling folks they're already planning to hold another distribution for federal workers next Friday. That's, that's how long they're expecting the shutdown to go on and how they're expecting it to go right now.
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Courtney, wow, compelling stuff. Emily, just a quick couple questions for you. I guess number one, you were talking about the line being so long running out of food and you mentioned that some of them were federal workers. But this was not exclusively a food bank for federal workers. There were also potentially others there as well.
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So for this one, it actually was federal workers. You were required to show some form of federal ID for this particular one. But I did. As I was speaking with folks from the Capital Area Food Bank, I asked them about SNAP and they're like, yeah, we have to start considering the fact that you are going to see in the D.C. area, it's hundreds of thousands nationwide, it's millions of people who are just not going to get these SNAP benefits. And I've talked to the National Grocers association as well who say, hey, you know, we're worried about these individuals, but also our retailers, our independent grocers could take a huge hit when SNAP funding runs out at the start of next month.
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Very important topics to dig into. And thank you for that clarification. It makes a lot of sense. Sense. Emily Wilkins, thank you. Well, coming up, the 10 year dropping below 4%, it's making our next guest more bullish where he's adding and trimming in a market that's continuing to hit all time highs. Plus oil on track for more than 7% gain this week. But there's one thing that could really derail the rally and that's coming up. We'll talk about it. The Exchange back right after this.
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This is the Exchange on cnbc.
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Welcome back to the Exchange. Stocks rallying after the softer than expected CPI Print tech leading the gains not only today but in the past three months and year to date. And that may be why our next guest has been trimming his position in that part of the market. So for more, let's bring in Barry Knapp. He's director of research at Ironsides Macroeconomics. Barry, love to get your read on the CPI number. Of course, one of the few data prints that we've been able to get, albeit you know, delay and guess. Sounds like the government had to pull some extra strings to get it to us. But 3% initially. Earlier on the show we had Krishna Guha saying that's pretty benign, at least from a market perspective.
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The two issues that I haven't heard discussed over all the commentary and I've been listening all morning, I saw you on Squawk Box earlier. There's two, there's two very important concepts that that have been missed generally. One is the role of government spending in the inflationary process. Go all the way back to 21. We know that that was the spark that lit the flame in March of 2021. Goods prices went from slightly negative to plus 12 and a half percent within a year after 1.9 trillion in stimulus. And the government sent everyone roughly 500 billion of checks. If you if you think about where super core services inflation was a year ago, it was at 5%. Government spending in the fiscal year ended September of 24 went up 11% effectively the last year the Biden presidency. In the fiscal year ended 2025 this September, government spending has cooled to 3% and that super core services inflation is all the way back to three. So there's lots of idiosyncratic issues within that that measure, but nonethele is the sector you'd expect to be most influenced by fiscal spending. So that's a very important point and that's what the Fed it's really the Fed's blind spot in thinking about inflation is the role of fiscal policy. The second issue is, as I was listening to you discuss it with Krishna Staples, sector margins are at their lowest level since the GIC sector was introduced. They're under a lot of pressure as a consequence of tariffs. They have seen weakening demand and pressure on profit margins. You're also seeing pressure on profit margins in the consumer discretionary sector. So with fiscal policy tightening, monetary policy very tight for floating rate small business borrowers, there's no ability to pass prices through. So yes, the headline number is A3. It's above the Fed's target. We've only been below the Fed's target one decade of the last three. It's kind of an ill advised target. But that notwithstanding all the conditions that were in place to create inflation in 21 are not in place today. And inflation is likely to head lower in the, in the months to follow. And I didn't even mention housing inflation. Of course we know that's still overstated. It's at three and a half. Alternate measures are more like one and a half or two. I think Blackstone mentioned yesterday their internal measure is more like 1:8. So inflation is really not an issue from this point and the Fed should be far more focused on the labor market.
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That is, those are all very, very interesting points. Another comment that came up yesterday was the discussion since you were talking about services after you were talking about the government spend, is that folks are less likely right now to buy a cup of coffee. And so they're not going to buy a cup of coffee. They're certainly not going to buy a car. I mean, what do you make of the aggregate pressure on the consumer from the current rates of inflation that we've seen so far at least, even if, you know, maybe 3% doesn't feel too bad to you when you're looking at relative history?
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Well, the biggest issue for me is the way the Fed tightened policy. Kelly and I have been talking about this for years now, but because they eased primarily through their balance sheet and tightened primarily using rate policy, that put the burden of tightening on floating rate borrowers. Those are households without assets, so those living paycheck to paycheck. But it's also small businesses, small banks, and the good news is 100 basis points of rate cuts in total, including the 25 they've already done, will boost bank, small bank profitability to the point where that credit channel will start to ease. Financing costs for small businesses will come down. So there is some relief in sight. It's overdue. The Fed should have gone 50, they should have started in July. But if they do cut by 100 basis points, a lot of that pressure will start to ease. And then of course, we know beginning in February, the individual provisions of the, what did I hear Joe Lavonia call it yesterday? Oh, triple B will start to kick in from tax refunds. And so some of that pressure could start to ease early in 2026. But for now, the Fed can't really take that risk because we know we've been overestimating small business employment by some 79,000 jobs per month in the year ended March. And that likely got bigger that overestimation since March after Liberation Day because we know demand for labor has weakened considerably. So the Fed really does need to be cushioning the slowdown in government spending. The impact of tariffs which the market told us clearly we're a much bigger risk to growth than they ever were to inflation. That didn't seem to get the memo on that on that. But the markets surely did and it's really time for them to just keep going and start easing that pressure before.
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We run out of time. We sort of lost the initial narrative because I got involved in what you were saying there at the top. But tell us what you're doing exactly with technology as technology kind of starts, starts to run away and what we should be doing to put all of this advice to work to make some money in the market.
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Yeah, it's, it's tricky because you know, I advise big institutional money managers and they're benchmark to the S and P. I'm pretty underweight technology now I'm down to 25%. The index weighting is 34.
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Right.
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But if you take that with communication services, a third of my portfolio is in this sort of Jenny I theme but benchmarked it's underweight. And so I actually think you're better off in sectors that will benefit from the corporate tax incentives of the one big beautiful bill act like the industrial sector that's doing quite well this this far through earnings season. Sectors like energy, materials, even utilities sort of the picks and shovels a little bit more than being directly into that that theme which is getting pretty stretched and, and we didn't discuss it or you didn't ask me about it. But consumer facing sectors, we've been underweight all year because of the impact of tariffs on, on sales and margins. And I think it's too early to lift that underweight or short and get long those sectors factors. But again in 2026 that fundamentals will.
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Turn for those very interesting stuff. Obviously a lot to digest there. Very Knapp with Ironsides Macroeconomics. Thank you for being here with us. We know we'll have you back again shortly. Well, coming up, shares of Alaska Air under pressure following an IT outage on top of a disappointing quarter. We have the latest on both. That's ahead. And before I had to break check out shares of Beyond Meat, the newly crowned meme stock on track to end its wild week on a down note after the company said it expects revenue and to come in on the lower end of its guidance range. Still, shares still up 250% week to date. We know those traders aren't necessarily paying attention to the revenue anyway. The exchange back in June. Welcome back. The exchange stocks higher across the board on this Friday. The Dow 592 points at the high, all three major averages hitting new record highs during the session. Let's check on some of the movers this hour. First up is Ford. That stock driving the S and P higher after reporting stronger than expected third quarter results last night. The company reaffirmed Progress under its Ford plus efficiency plan, saying they're still on track to cut $1 billion in expenses this year. Shares on pace for their best day since January 2022. Next, Comfort Systems, the H Vac provider that cools AI data centers, is on pace for its best day since July after reporting solid Q3 results. Earnings more than doubled on 35% revenue growth. CEO Brian Lane cited unprecedented demand for the firm. Services shares are up 16, actually now 17 and a half percent. And finally, Deckers Outdoors, the name behind brands like Doug and Hoka, down more than 12% after issuing weaker than expected sales guidance. The company blaming tariffs which it estimates to total $150 million this fiscal year. Shares on pace for the worst day since mid May. And shares are down more than 50% year to date. Deckers Outdoor. Now to Julie Boorstin for CNBC News Update.
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Hey, Courtney. In a major escalation of military buildup in Latin America, Secretary of Defense Pete Hegseth announced today that the US Is sending an aircraft carrier strike group to the region. The move will drastically increase the number of troops and aircraft amid tensions with the Maduro government in Venezuela and the recent US Strikes on alleged drug boats in the region. House Minority Leader Hakeem Jeffries will reportedly endorse so round mum dummy today for mayor of New York City. That's according to Politico, which reports Jeffries will issue a statement of support port later today. That leaves Senate Minority Leader Chuck Schumer as the last remaining endorsement holdout in state Democratic leadership. And French authorities tell ABC News today that they've collected more than 150 pieces of evidence from the scene of the Louvre heist, including fingerprints and DNA. All the suspects are still at large. They got away with $102 million worth of jewels. Back over to you.
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There's been a lot of news, Julie, but that is one of the more captivating stories of the Week. Thank you very much. Well, coming up, gold and the miners losing a bit of their luster this week with the mining ETF GDX down more than 6% but bank of America still staying bullish on bullion. That's next exchange. We'll be right back. Welcome back to the exchange. Gold taking a hit today after that cooler than expected. CPI print now on track to snap a nine week win streak despite yesterday's gains. For more on the commodities trade, let's bring in Francisco Blanch. He's head of commodities and derivatives research at B of A securities. Francisco, thank you so much for joining us here. Obviously do all commodities, but I would like to talk about gold because for so much of the year we've just seen this continuous run. Obviously a little bit of a pullback. Love to get your take sort of on the year so far and then what we've seen in the last couple days and then lastly what it portends for going forward. So give me a little past, present and future prediction here.
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H
Sure. So let me start. Thank you for having me. Let me start by saying that gold is both overbought but also under owned. And this means that you probably still want to own it in the long run. And that's why we've revised in the last couple of weeks. We revised our forecast by about 1,000 announced to 5,000. But also again, we've been bullish gold throughout. We had a 4,000 target that just happened a lot faster than we anticipated. The other thing I would say about the gold market is that the extraordinary volatility we've seen on the way up coupled with the declining volatility on the way down makes us think that the market is, as I said, a little overbought right now, a little frothy. And we've seen massive ETF inflows in the past few weeks. So that's really what's triggered this last run up in August, September and early October. It feels a little more retailish to be honest. And again there's fundamentals on gold. There is a big story of the fracture that we see in global geopolitics between the US And China, the new sanctions that have been applied to Russia this week. And of course there is a constant search by central banks for alternatives to US Dollar and Euro denominated assets. So that's been supportive of gold. But again we think it's markets a little overbought and it's going to be consolidating at these levels, maybe a little lower.
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B
Really interesting. And so for A long time, gold was always sort of seen as this portfolio hedge, a reason to hang onto it. But is it more than a hedge right now? I mean, if in three months it's up 22%, do you think maybe the advice should be differing now for how you're looking at gold or why you should be including it in a portfolio?
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H
Gold makes a lot of sense in their portfolio, so I think that's the first thing I would say. But also I don't think it makes a lot of sense to try to chase gold prices higher. Remember, we've had a lot of volatility in a few corners of the market. We've had volatility in a number of equity markets. In particular, we've had volatility in, in miners. We have volatility in nuclear stocks and so on, and perhaps also some of the AI stocks. What's going on in the gold market is somewhat similar. We've seen silver also joining that rally. So I wouldn't be necessarily chasing it, but I would be buying dips and trying to establish a more formal core position in gold, in a portfolio over time. Because I do think gold is money. And 50 years ago 10 ounces of gold bought you a car, and today 10 ounces of gold buy your car. So that's what you're buying there. You're buying some asset that over very long periods of time is going to more or less maintain its value. But I wouldn't be necessarily looking for gold to generate wealth for you. It's more of a protection against what may come. Whether that's. Yeah, that's the.
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B
Okay. At first I was going to ask if you think we're going to hit 3,800 before 4,500. But if your goal is 5,000 or your price target there for gold, I guess we know the answer. I'd love to move on to energy oil specifically while we. While we have you here because we've seen an awful lot of movement in WTI and now we're getting these headlines that President Trump is looking to sort of open up that Arctic coast again for potential drilling, I guess. What do you make of that? What is your prediction for where energy is going to go as well? I guess in terms of WTI crude oil.
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H
Right. So we've been bearish oil the whole year and it's been playing out more or less in that direction. There's been a number of hiccups. Remember at the beginning of the year we had outgoing Secretary Yellen impose sanctions on Russia on number three.
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F
And Four.
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H
The number three and four producers, those were Gazprom, Neft and Sergu Neft. And now we've seen President Trump going on against Rochneft and Lukoil which are number one, number two producers in Russia. So now we have the entire kind of top echelons of the Russian energy sector under sanctions. This is going to reduce the amount of supply, oil supply in the market. So that's the reason why we've seen a rally in prices, in crude prices. WTI and Brent Brent outperformed and we've seen in particular near dated contracts, those for delivery in December are rallying quite substantially because those sanctions go into play on November 21st. So if you're a refinery in India or in China, you have to rush and try to buy maybe some Middle east oil, maybe some European crude oil and maybe some US Crude oil. So that's what's going on in the background. That's where we had the rally. Having said all that, nobody really knows how this is going to play out. Iran has been, despite the sanctions, been able to push a lot of oil into the market over the years and the expectation is Russia will find ways outside the normal channels. So it could be two, three months where prices are a little higher. And in the meantime, remember, OPEC is adding production to the system as we speak. They've added 2.5 million barrels a day in terms of quota increments and they're adding now 1.6 million barrels a day. So we're not going to have a shortage of crude oil. We actually have a surplus which I think is part of the reason the White House has moved with us.
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B
Very interesting, of course, and it is very hard to calculate when players are playing by different rules, perhaps. Francisco Blanche, thank you so much for joining us here today on commodities complex. Well, coming up, it's the rally no one believes in. Intel is up nearly 70% over the last three months, boosted by that government investment in August. But there are just three buy ratings on the stock with shares up as much as 8%. An extended trade on a revenue beat but unable to hold on to those gains. Does today's vote justify the streets of skepticism? That's next. And checking in on shares of Apple up about four and a half percent this weekend, within striking distance of hitting a market cap of $4 trillion. Shareholders, the price necessary to cross that milestone is $269.53 a share. We're pretty close the exchange. We'll be right back. Shares of intel falling steadily today despite posting its first profitable quarter since January of 2024. For today's tech check, Christina Partz Nevilles has more on the street sentiment around this name. Christina Courtney, we should preface that.
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A
Yes, shares are down from the earlier highs, but they're still positive and they're up over 80% this year as intel returned to profitability after six straight quarterly losses. But I have to say that Wall street, based off of all the many notes I read, are somewhat skeptical of this turnaround. So yesterday I caught up with CFO Dave Zisner and he told me that intel is supply constrained on older chips. Demand for Intel's older hardware is coming faster than anticipated, driven by the Windows refresh. So that means enterprises aren't waiting necessarily for cutting edge chips in technology when proven technology gets the job done, a theme that could eventually apply to AI buildouts as well. Intel is definitely shoring up cash with Lifelines, $8.9 billion from the US government, $2 billion from SoftBank, and a pending $5 billion deal from Nvidia, our partnership. But Foundry revenue still fell in the quarter, 2% lower despite cost cuts. And Wall street just doesn't seem to be that convinced just yet. On the Foundry story, which is the manufacturing side of the business, bank of America doesn't expect meaningful improvement in Foundry's cost structure with peak capacity not until after 2030. So still years out. Citi reiterates a sell on intel, believing Intel's Foundry business is still years behind. Tsmc, Taiwan, Semi and then Morgan Stanley warning that the recent rally that we've seen in Intel's share price is really driven by geopolitical enthusiasm. In other words, the support from President Trump and not necessarily company fundamentals. And Mizuho's Jordan Klein put it bluntly in a note. Intel remains a total quote show me story with a ton of unanswered questions and he's saying no real AI exposure. He also said he hears zero mutual fund investors wanting to buy Intel. The positive read through though are going elsewhere. AMD benefits from stronger server demand. We saw that Intel's doing quite well and AMD does steal some market share from intel and then Microsoft could benefit from the Windows refresh. And then of course memory names that have been on a tear lately like Micron from these rising memory prices.
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B
Courtney, it's just so interesting to me. I mean, I understand the sentiment is sort of not all that jazzed up about intel, but gosh, don't put the old guys out to pasture yet if they've got something to offer. I mean if enterprise wants some of the old school technology that works, what's the problem?
- [34:06]
A
Well, the problem is that their supply constraints and if they had this supply. Morgan Stanley raises a good point. So their, their supply is constrained on older nodes. These are just, they've been around for quite some time and you would think that intel would have enough capacity for that. And so he was questioning why are they supply constrained? I thought they were supposed to be up to, to par with demand. The interesting angle though is why are the customers going for the older technology as opposed to the latest and greatest? And I wonder what that means for all of the chip depreciation conversations in the future when many companies may just be content with the not lesser quality, but less advanced computing needs, when we're always talking about the latest and greatest.
- [34:47]
B
Yeah, but isn't there something to be said about oldies and goodies? I'm just playing devil.
- [34:50]
A
Yeah, the legacy names are back. Oracle, intel, IBM, to a certain extent, minus the earnings. Cisco.
- [34:57]
B
Right, right. It's just the sentiment just doesn't seem to be there. But Christina, thank you so much for keeping us honest on this one. Thank you. Coming up, forget the ghouls and the Goblins, it's already all about the holly jolly at America's biggest retailers. We'll get the C Suite perspective on this year's holiday shopping season and speak with former Wal Mart US CEO Bill Simon when the Exchange returns. Welcome back. The Exchange. We are exactly two months from Christmas Eve today, and two words retail executives are using to describe the consumer seem opposing, resilient and choiceful. But many in the C Suite want to argue both can be true.
- [35:35]
F
We remain cautiously optimistic. I think what our team has brought in from a product standpoint, what we've.
- [35:42]
I
Got planned from a marketing standpoint, year.
- [35:44]
B
To date is great.
- [35:44]
F
Last year was terrific and we see those that trend continuing.
- [35:50]
B
Academy of Sports also sells athletic apparel and equipment, and CEO Steve Lawrence thinks his shoppers will be focused on deals.
- [35:57]
H
If we run the same promotion this year that we ran last year, there's a higher take rate on it. And so I think that's a sign. Customers are really savvy and they're figuring out when it's the right time to shop. Our belief is the customer's going to kind of aggregate their spending around those key kind of shopping moments on the calendar where they know they can get the best deals.
- [36:14]
B
While Kohl's chief merchandising and chief marketing officers think their shopper will continue the pattern of trading down, the duo have a different expectation than Lawrence about when consumers will shop specifically 15 times across all retail stores between November and January. And that's based on a survey that Kohl's did last year. Now, one common thread. None of the executives are concerned about inventory levels seemingly putting duress, worries that higher tariff rates would squeeze product availability. And so that brings me to our next guest who says the consumer remains in control heading into the holidays. Joining me now is Bill Simon, former Walmart US President and CEO. Bill, it's great to have you here. Give me a little bit of your thesis on why you think the consumer is in control.
- [36:55]
J
Hey, Courtney, good to see you again. Yeah, I mean, look, the consumer, you know, pretty flush right now. Nominal wages are up 4%. The inflation report today was relatively tame. There's been a lot of, you know, dark news about tariff this and tariff that. And, you know, it is a bit of a roller coaster. It's on, it's off, it's up, it's down. But in the end, the consumer decides, right? Like if, if, if the price of an item goes up, they buy something else or they buy less of it or they buy more of something else. In the end, Christmas is going to come and it's going to be a good one, by all indications, going to be pretty robust.
- [37:28]
B
We always talk about private label and the opportunity that exists for a number of the retailers that lean into it. I'm thinking targets. Also Walmart, your former employee Kohl's brought it up a lot as well as they're kind of trying to move more into the private label area than they have been more recently. Get back to some of those historical levels. And to their point, they said, look, we've seen the consumer trading down. We think that trade down is going to continue. And so we want to be there with them, to offer them a fleece at a lower cost than a national brand. What does that tell you? I mean, do you believe the trade down is happening as you're talking about consumers switching in and around these products?
- [38:05]
J
I think there's trade. It's trade up, it's trade down, it's trade across. It's about value. Right. You're seeing, you know, the discussion around tariffs particularly, and around inflation and more in general is made the consumer, you know, more alert and more aware about deals. And so, you know, if an item, it might be a trade up, but if it's a better value, the consumer is going to, going to buy it. And you see that a lot. And where retailers are getting hurt and consumer product companies are getting hurt or when they're trying to push through too much price. And you see that in some of the earnings reports, the consumer is just not going to buy it. They're in charge, they're in control, and they're smart.
- [38:46]
B
How would you characterize some of the layoffs and the holiday hiring or lack thereof announcements? We just heard from Target that they are going to look at laying off about 8% of their staff, albeit corporate. So that's, that's not in store. But by now we would have really heard a lot of hiring announcements or retailers seeking to fill this many thousands of positions, and we haven't really. Does that tell you anything about expectations for the season? Are retailers not needing to staff up because stores won't be as busy as years past?
- [39:18]
J
Well, I think there's a couple of things that are going on, you know, specific to, you know, to Target. And you know, in the intro you talked to the folks at Kohl's. You know, those guys are really having a difficult time with certainly more than just their holiday staffing. And I think that that's why you're saying layoffs at Target and maybe a little more caution from the likes of Kohl's than you hear from Dixon Academy and Walmart and Costco. They're just in a better place. I think that there's also, you know, increased use of technology, self checkout, and of course the, you know, the consumers buying more and more online and retailers with both physical and digital presence like Walmart, benefit from that and of course Amazon. And so I think that's probably why you're, why you're seeing that.
- [40:06]
B
You know, I continue to be surprised at how well both retailers and consumers, frankly, are managing tariffs and the higher cost. It seems as if retailers have figured out ways, maybe a bunch of different strategies compiled together to kind of mitigate through so that when the pass on happens, it's perhaps not as tense as it could have been. But consumers also still for the most part seem to be largely taking it on the chin. They're just, they're buying what they have to buy to get through it. What do you make of where we are right now with pricing, with inflation? We know the holiday season is always promotional. It's sort of the name of the game. What should consumers expect?
- [40:41]
J
You know, certainly you're starting to see item level price increases that are driven by tariffs. If you have a product that, you know it's coming from a heavily tariff jurisdiction, that price is going to go up. But where you see the ability to mitigate it. And you know, Walmart made an announcement earlier this week about the and I'm pretty proud of them for this. The, the price of their Thanksgiving dinner has gone down. They're able to take the costs that come in in certain elements from tariffs and other things and spread it out over a larger base of products and mix it out. So the actual basket of Thanksgiving dinner is lower than it was last year. And so if you've got retailer doing that, the consumer is also going to do that. So they're going to spend more money on X and less money on Y. And when Christmas comes, they're going to make sure their family has a great Christmas. They're going to make sure Halloween's delivered and Thanksgiving's delivered. They mix it out the same way retailers do. So all in all, when it goes through the system, you know, the impact of tariffs may be 100, 150 basis points, but it's not going to be tragic. And it's certainly going to be something that consumers are going to be able to manage if the nominal rates stay up 4% or so, which is where they've been.
- [41:54]
B
It's very fascinating. So too has the divergence between say, consumer discretionary stocks and consumer staple stops stocks. Wal Mart obviously plays across categories. We have to leave it here. But Bill Simon, appreciate you being here. It's nice to see you again as well.
- [42:07]
J
See Courtney, Thanks.
- [42:08]
B
Well, still ahead, shares of Alaska Air lower on an earnings miss and weaker than expected. Guidance carrier also experiencing its second tech outage in three months. What that could mean for Alaska's bottom line. That's next. Welcome back to the Exchange. It's been a rough 24 hours for Alaska Air. The carrier reporting disappointing results and experiencing another tech outage. FlightAware reporting 30% of Alaska flights are currently delayed or canceled. Phil Lebeau joins us, joins me now with some more. Hi, Phil.
- [42:40]
I
Courtney, It's a trifecta of uncertainty driving shares of Alaska lower. Look, it started yesterday afternoon. Q3 EPS was lower than expected. Then they issued guidance which was far lower than what analysts expected. And then they canceled the analyst call because of the IT outage. And that has people saying, okay, when do we get greater clarity that IT outage, by the way, it lasted for eight hours. They had a ground stop. They have been restoring the schedule today. But you know, you don't snap your fingers and it happens overnight. By the way, I was flying last night, saw people waiting around the Alaska gates at the airport. Goldman Sachs out with a note regarding the Q4 guidance saying we expect investors to be concerned that a continuation of elevated LA jet fuel prices and that's really crucial to the guidance for Alaska being lower, that it could present downside risk to the company's latest Q4 guidance. As you take a look at shares of Alaska, keep in mind that we're not sure when, but at some point they will have an analyst call. And until then, Courtney, uncertainty rules the day, which means shares move lower.
- [43:39]
B
And I'm sure investors in this name don't love to hear that there's another tech outage. It's obviously been a rough week for tech across a number of sectors and this company is getting a double doozy. Phil, thank you so much for joining us. As you can see here, the markets are trending higher in the afternoon as we head into the final several hours for trade of this week. The Dow is higher by more than 1%. The NASDAQ again leaving the way higher by 1.3%. That's it for us. Thank you for watching the Exchange. Power Lunch starts now.
- [44:05]
A
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