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Nvidia's Biggest Deal Ever, China Strikes Back & Retail's "Returnuary" 12/26/25
00:44:03
Nvidia strikes a $20B deal with Groq. China imposes sanctions on 20 U.S. defense-related companies. Plus, as holiday shopping wraps up, returns are just beginning.
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Listen to podcasts and be part of the conversation. You're listening to THE Exchange. Here's today's show. Thank you very much, Dom. It's in videos. Biggest deal ever. China strikes back and returnuary is almost upon us. Welcome to the Exchange. I'm Kelly Evans and we are finishing the shortened trading week on a high note. All three major averages on pace for a weekly gain of more than 1%. The S& P hitting another record high today. Small caps lagging though, the Russell 2000 down nearly 1%. Meantime, yields are at their lowest level levels in about a week with the 10 year hovering around 412. Nudging up a little bit in later hours of trading here. And tech is the best performer with Nvidia leading the way today. Check it out, a 1.3% gain, modest but significant. We'll have more on that momentarily. The S and P tech index up about a third of a percent. And the metals keep climbing. Gold, silver, platinum, all touching record highs once again. Feeling like a broken record here. Look at silver up 7% today. Copper's up 5% to July levels. Platinum is up nearly 11% today. Remember it had a big sell off the other day, a ton of volatility here as people are obviously both chasing and trying to short these trades into year end. It's also a turbulent day for the airlines ahead of what could be the largest winter storm to hit this New York area and nearly four years and busting out of here this afternoon. I will bring you the latest forecast, but some pressure there and a forecast of a different kind is where we begin with third quarter GDP as we know coming in much stronger than expected earlier this week, better than 4%. But my next guest says that strength could come at the cost of this quarter's growth. Joining us now with what that all means for the Fed next year. Thomas Simons is the chief U.S. economist at Jefferies. And of course our very own Steve Liesman. Welcome to you both. Thomas, kick things off for us. You know, rain a little bit on our break because it's been nice to see jobless claims are low and GDP is high. But what do you think this quarter could bring?
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C
Yeah, you know, I mean, I think that that's been one of the hallmarks of 2025 so far is relationships that have typically held in the past are a little bit different or just completely unhinged from, you know, previous historical patterns. And you know, one point you just made there is that jobless claims have been, you know, very steady. They've actually been behaving quite well and yet we haven't seen any material movement in the unemployment rate. The Q3 numbers also, you know, looking at GDP versus payroll growth during the quarter, really big disconnect there. So either we had a huge surge in productivity in Q3, or if there is some sort of measurement issue with gdp, that's eventually going to reverse. And I think that trade is a good place to, to start looking for, you know, some potential quirks there.
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A
What do you mean?
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C
The monthly trade deficit numbers really didn't show any difference between Q3 and Q2, and yet we got a 1.6% contribution to GDP from, from net exports.
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A
Steve, jump in here.
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D
Well, you know, I think the general notion that the third quarter was higher than one could expect to be sustainable is pretty well accepted. You had a few one off items there, and I think the idea is right, that we need to figure out how trade shakes out. There was a lot, as you know, Kelly, front running and then working off of inventories. Trade is not in a place where it's sort of something you can count on what it's going to do next quarter. I think that's a pretty big deal. Looking forward though, to the first half of next year, though, one of the things that we found, even though a lot of the spending was on health care is consumers were spending. And this other difference, you talk about jobs and growth. Another big difference here is this notion of the difference between consumer sentiment and consumer spending. And once we saw that, I think that created a certain optimism for this quarter and next year that even though consumer sentiment is really in the gutter, consumer spending is not right.
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A
THOMAS and so again, talk to us about why you think in particular the third quarter could be unsustainable. And when we talk about a give back or a reset in Q4, is it a big ugly one or just kind of something at the margin? Because the other funny thing about GDP is by the time you get it, you're already off into the next quarter, right? We're going to get it at a time when we're already saying, well, what happened in January, what happened in February and that kind of thing.
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C
This is true. I mean, the story on Q4 will be basically written well before we get the Q4 numbers for GDP. But I am concerned that there's some potential payback that is rooted in the consumer spending numbers as well. Obviously, they were off the charts here for Q3. I believe PCE was up something like 3.5% on the quarter. The monthly numbers look like we should have gotten something closer to 2.7. And I still hold that that's kind of fundamentally where the anchor really is. So if I have 80 basis points of extra growth in Q3, that's a pretty good starting point for thinking about how much I have to give back in Q4. And then if we also incorporate the trade numbers there, where I don't think that 1.6% contribution was real, then you're kind of starting in the hole about two and a half percent. So that's, you know, one of the ugly ones, I guess, to kind of fit it into the options presented at the beginning of the question.
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A
Such a grinch, such a huge time of year. Go ahead.
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D
I was sure it took the more optimistic side of that, Kelly, which is that if, you know, you do get the payback and consumers spent another 80 basis points more than you expected, and it averages down 80. It comes off 80 basis points. So it averages. If you're doing between 2 and 3% real consumer spending, say in the first half of next year, I think we're going to be in pretty good shape. It doesn't say, go to the bank and start collecting money on your 4.3% GDP growth as Howard Lutnick suggests. That's not what we're talking about. What we're talking about is, you know, where's the sustainable rate? Yeah, they spend a little more third quarter, they'll spend a little less fourth quarter. You could have had some stuff like the ev. The EV issue might have bumped up car spending. You had this extra health care spending that'll probably come off. You also had a bit of drawdown of savings. But I think if you end up in a place where you're too. I mean, Thomas, you have to acknowledge 2 to 3% consumer spending growth would be pretty good.
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C
Yeah, absolutely. And I think that looking at the averages over quarters, you know, several quarters, not just two, but three and four, you know, you do get a sense that the consumer is still in pretty good shape, that spending is on a positive trajectory. And, and I think that, you know, looking at some of these little details, like potentially borrowing forward demand for EVs just the same. We borrowed forward demand against tariff expectations. The point that's the most important is that consumers can borrow, you know, pull forward that demand. They're capable of doing that spending. So even if there is some sort of give back eventually, you're still dealing with a fundamentally, you know, strong consumer in the aggregate.
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A
And where, Thomas, does this leave you on the Fed? I know you guys were originally thinking more like June for the rate cut, maybe pull that forward on the softer inflation data. Seeing it in Q1 now. So is this going to be impactful? In other words? You have to imagine, whatever the reason, the higher the GDP number, the harder it is for the Fed to cut, the lower it is. I mean, could be good timing for them if they're looking to do more of a spring trim.
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C
Yeah, I mean, you know, if we look at the inflation data, that's more timely that, you know, basically, or at least nominally is labeled as October and November, as has been, you know, I think well discussed already. There's a lot of issues with the particulars of that report that we got last week. But the bottom line is that we're going to be registering readings here for at least the next several months and that's going to give the Fed a little bit of Runway to cut. And then, you know, just to go back to what we were talking about before in terms of how old the story GDP is, Q3 GDP may have been really, really great. But if Q4 is slowing down and you know, you had a federal government that was shut down for basically half of the time.
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True.
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C
You know, how can we expect that we're going to get continued momentum along that, that trajectory for the near term? So I think it does open the.
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D
Door for a couple of cuts in.
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The early part of 2026. I don't think they're necessarily going to cut by January just because hard to see how they could get that much data to convince them by then. But you know, by March, I definitely could see a resumption of the cutting cycle beginning again.
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If the government shutdown hurts GDP in Q4, then we could have a snap back in Q1 and we have just this lovely spring back and forth where we had too strong and then too weak and then too strong again. And I don't know, maybe at some point we'll get clarity.
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C
There is definitely an element of that, of GDP all the time. But I'm skeptical that we're going to get all of what was lost in Q4 with GDP back from in Q1, at least as it relates to the government shutdown. There's a lot of activity that was postponed or delayed that's just never going to happen again in terms of travel and, you know, recreational activity and that sort of thing.
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Yeah.
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Plus spending that maybe wasn't done on the degree it would have been by federal workers who weren't getting their paychecks.
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All right, Thomas, really appreciate it today. Thanks for joining us. Get the, you know, I think you look cozy. You don't have to worry about the winter storm. I mean what I'm hearing, eight inches.
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C
Now, that's what I've heard too. It's going to be ugly overnight. I have my fingers crossed and my snow blower ready to go. So we'll, we'll, we'll be okay.
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All right. Steve's in New York so he's, he doesn't have to worry about that.
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D
I'm, I'm only offering, I'm only offering economic forecast this afternoon, not weather forecast. If you want to talk weather, we'll do another segment.
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Steve, I'll see you next hour. Gentlemen, thank you both Thomas Simons and Steve Liesman. Really appreciate it. Let's move on to Nvidia striking this $20 billion deal today with the AI chip startup Groq. That's Gro Q licensing its technology and hiring top personnel. Mackenzie Segalos has more in today's tech check. And Mackenzie, I sort of stopped short when I was reading about this. Maybe you can help explain because it called this a licensing deal but then it said, I believe if I'm not mistaken, that the CEO of Grok is going to go work for Nvidia and that it's non exclusive. What is this an acquisition or what is this?
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It's not an acquisition. They've been very specific in saying that. But this Grok deal came together in just a few days. And the structure, to your point, Kelly, tells you a lot about where this market is headed. So non exclusive licensing agreement where Nvidia gets Grox IP and its founder Jonathan Ross who helped build Google's tpu. And that's the secret sauce of this deal. It matters because the TPU has become Nvidia's most credible competition. Google stock is up 65% this year and a big part of that is its vertical stack. Its in house chip has helped land major cloud deals with Anthropic and Metta. And now the guy who helped design that architecture is going to Nvidia instead. As for what Nvidia gets, technically the AI industry is Shifting from training models to running them at scale. That's called inference, and it's where a lot of the future revenue is coming from. Nvidia sees Grok's design as a way to own that next phase, and relative to its $4.6 trillion market cap, $20 billion isn't that big a bet. But the deal structure also matters here. Gil Lauria at DA Davidson telling me that these contracts are often set up so that big VC investors get paid, while employees may not get as much as in a traditional acquisition. And then there's Nvidia's cash problem. It's sitting on $60 billion and has been looking to aggressively deploy it. $100 billion proposed for OpenAI 5 billion into intel backing Core Weave ahead of its IPO. So this deal lets them add inference capabilities while keeping a competitor off the board, which is really a win win here.
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Kelly. Right. Or keeping regulators off their cases as it may be. I also read that this company makes LPU's language processing units. And maybe I'm inventing the LPU moniker, but it said again that these are less compute intensive than GPUs. And it sounds like we're going to hear a lot more about these alternative forms that are meant more specifically to be used with AI models as opposed to just kind of the power hungry GPUs was.
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B
Precisely. And Semi Analysis actually put out a report this morning pointing to the fact that while the first generation of what Grok was producing wasn't as competitive as Nvidia's models, there are two more coming down the pike quite soon. And that Nvidia and Jensen Huang might have been reading the tea leaves there and wanting to get ahead of it, license their tech before AMD or Broadcom could get there. What's also interesting is the fact that Grok actually just slashed its 2025 revenue projections by 75%. Then you think, all right, well what was the. Exactly. So what's a competitive advantage here? And it does come down to chip design. Grox chips essentially keep data on the processor itself, which could help Nvidia bypass a key bottleneck in the process, which is memory chip shortages and price hikes. So Nvidia's GPUs rely heavily on high bandwidth memory and a supply chain controlled by just a handful of firms. This helps them get around that.
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A
Hmm. I wonder if that would have implications for Micron. But you said the company just slashed its own revenue forecast by 75%.
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B
It did. And I will say this, this deal in particular also shows how Hard it is to challenge Nvidia, even with billions in VC funding and we are seeing this wave of consolidation. So it's not just Grok. You've got intel reportedly in talks to buy Samba Nova Metta just acquired an AI chip company, Revos, in October and hired the team behind Untether AI, which also develops chips for running AI models. So we're just seeing a lot of movement here.
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A
Indeed. I appreciate you having all that. Top of your head, Mackenzie. Thanks so much. Appreciate it today, MacKenzie. Seagallos. Sticking with tech. It's my favorite segment of the year. You know it. Who won Christmas? Steve. Steve Kovac is here with a look at the tech companies that best won over consumers this Christmas and who didn't.
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E
Yeah, and so I do this every year, Kelly. And I love looking at the App Store. I'm such a dork. I love looking at the apps on Christmas Day because the rankings get really skewed as people are unlocking their new phones and downloading apps. And so you see different apps you normally were. This year it was Tony's. Did you get your kids Tony's? Do you know what that is?
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I do know what these are. They're. They're. They're audio boxes.
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E
Exactly.
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Stories.
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Yeah. So you have like a little character. You put the character on top. We're showing you right now. And I'll tell a story that was number one this year.
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Almost went for this.
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This.
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This is like the hottest thing if you have a kid under the age of 10. This is this. This was the gift. So it rocketed up to number one of the App Store. It surpassed Meta. It surpassed ChatGPT.
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Who makes the Tony?
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You know, I don't recall. I don't recall the name of the actual company, Tony itself, but it's a toy. It's a connected toy and it's extremely popular. So that was the big one.
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I guess Amazon would win. In that case.
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Amazon was another big winner. Alexa was number seven. So that's obviously those Echoes are always on sale around the holidays, around Black Friday. It's an easy gift. It's a great stocking stuffer. So that was up there as well. I want to stick to accessories for just a second. Then we'll get into AI. The Oura Ring. Number 10. This is the first year I've seen it crack the top 10. Really huge, huge seller there. I don't really have to explain what that is. Everyone's familiar with Tracks your sleep. Tracks your sleep. Andrew Sorkin is obsessed with. Obsessed with his as are A number of other people. Leslie Picker in this newsroom as well. Oh, Dom Chu is a big aura guy as well. But I did want to talk about AI. So think about this. You get your new phone and in this day and age, you want, okay, which chatbot am I going to download first? Right.
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True.
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ChatGPT was the pure Play winner there and that it was number three in the App Store behind Meta AI. But I'm putting a handicap on Meta behind Meta AI because Meta AI is the app you need for the glasses.
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But that's still a good sign.
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A good sign. But people don't use Meta AI as a chat bot the same way use ChatGPT. Totally.
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But if they sold a bunch of.
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The glasses, selling a bunch of these glasses is a very big deal. And it also gives us a hint at seeing more AI hardware next year. Apple thinking about making their own glasses, for example. But the fact that Chat CBT and Gemini, number seven.
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I was going to ask if Gemini.
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E
Gemini was up there. Okay, so Gemini. So that just tells you where the most people are thinking, okay, I need XYZ, I need an AI app. I'm going to get ChatGPT or Gemini. Not even the top 25. Didn't see Grok. Didn't see Xi's Brock.
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Its own app.
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E
It is. It's a separate app. It's also built into Twitter, so you can kind of argue it gets used there and then Anthropic Claude did even crack up there. So as far as like a regular consumer focus, that feels right. It feels Gemini and Chat CBT is.
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What they're who didn't win and to.
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Kind of pivot Anthropic and Grok.
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Exactly. What about Waymox? I heard they had to go dark again in San Francisco because they were having what was a torrential rain or something.
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E
So this is really interesting. I did not see them in the rankings. Obviously it's not going to rank as highly because Waymo literally isn't available everywhere in every city. San Francisco is a really interesting test case. Every time I go out there, I use Waymo instead of Uber because it really is a good experience. But this just shows you what we saw over the weekend with the power outage. You know, how do they not think about that? And then the torrential rains is its own special thing. That feels more like a safety issue that they shut it down other than it couldn't handle it. I will point when we talk about the robo taxi Wars Going into 2026, you had Elon Musk bragging, well, my robo taxis didn't shut down. Well, also, you don't have any. Or you have a few and you have a driver behind them. Look like.
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A
Yeah, it's still. You still could have been in a situation where even the cars with the driver in them glitched out. And I totally think it's unclear if anything like that.
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E
Exactly, exactly. But I don't take the Elon Musk argument very seriously. He's not even close to the scale with the Tesla robo taxis compared to what we have at Waymo. Just all those cities. Anybody can just download the app and call it like an Uber. You can't. And there's nobody in the front seat, whereas you can't really make that perfect comparison.
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A
Any other standouts to the upside or downside?
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E
Some of the shopping apps. Oh, the no Reds Santa Tracker was a big one, of course. Yes, of course. So that was kind of bleeding over geography. That was bleeding over from the night before a little bit. And then that got replaced eventually by Tony's and. And some of the others. But I was tracking early in the morning when I first woke up, people were still tracking Santa, I guess to make maybe their presence relate or something. I don't know.
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A
My kids actually asked. They said, well, can we check the Santa Tracker? And I said, I think it's done. And then they're like, well, is it in China?
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Right?
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Like, trying to think China's ahead.
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E
Yeah.
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Like, no, I don't think so. But then I'm like, I know we're not the last one.
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E
No, he hits Australia and China first, right?
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A
Yeah. But then who would be after us? Hawaii.
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Hawaii. Hawaii is like the last stop. I think Guam or something. Yeah.
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Steve. Thank you very much, Steve Kovac. Coming up, Congress will look a little different next year, with a record number of lawmakers either retiring or resigning from office. And corporate America could feel the ripple effects. We'll have those details and talk about which industries could be impacted the most. But first, China responding to America's multibillion dollar arms sale to Taiwan with sanctions. We'll tell you who they're going after and what could be next on that diplomatic front. We're back after this. This is the Exchange on cnbc. Hi there, it's Andy Richter, and I'm here to tell you about my podcast, the Three Questions with Andy Richter. Each week, I invite friends, comedians, actors and musicians to discuss these three. Where do you come from, where are you going, and what have you learned? New episodes are out every Tuesday with guests like Julie Bowe and Ted Danson, Tig Notaro, Will Arnett, Phoebe Bridgers and more. You can also tune in for my weekly Andy Richter call in show episodes and where me and a special guest invite callers to weigh in on topics like dating, disasters, bad teachers, and lots more. Listen to the three Questions with Andy Richter wherever you get your podcasts.
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VGW Group Voidware prohibited by law CTNC's 21/ sponsored by Chumba Casino shares of Northrop Grumman, Boeing L3. They're all lower today after China imposed sanctions on 20 different US defense related companies just a week after Washington announced a nearly $11 billion arms package for Taiwan. It also comes days after the Pentagon's annual report on China's military, which said the country is in the midst of a, quote, historic buildup, leaving the US More vulnerable to an attack. Joining us now to discuss is Michael o', Hanlon, Brookings Foreign Policy Program Director of Research. Michael, it's great to see you. Those headlines make me think the defense stocks should be higher today. Welcome.
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G
Thank you. Merry Christmas. Well, I think that on balance, this was an interesting report to read because it began with some consoling positive language about the state of the relationship and of Course, we're all accustomed to a little bit of a different style of rhetoric from the Trump administration and, you know, comments always being laudatory towards the commander in chief. But this was still significant to my mind in that, yes, there's some alarmist language about China's military buildup, but there's also some calming language about confidence in the White House that we can keep the relationship stable. And I have to admit, I sort of liked it. I sort of liked the combination. So the alarmist tone that some of the headlines portrayed is not really one that permeates the entire report. And China's buildup certainly is significant because its economy, of course, continues to grow, but it's still spending less than 2% of its GDP on its military. And we all know that NATO countries are being asked to spend three and a half percent at least. And so I take this in stride.
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A
Yeah, I'm just looking obviously not to make too much of today's one day move at stock like Northrop, for instance, down about 10, 15% since October. I'm thinking also of some of the other news flow this week. I mean, look, the fact that Ukraine might put this peace plan to a referendum vote pretty imminently here, the pope kind of pointing in that direction as well, really taking the Christmas message, opportunities to emphasize kind of the call for peace on that front. I mean, could there be a situation? Obviously, we're trying to lower tensions with China, apparently ahead of this visit that the two leaders are going to have next spring. So on either front, do you expect things to calm down more than to heat up?
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G
Well, on the Ukraine question, it's an open question. And I do want to give President Trump credit. I was not happy with the way he and Vice President Vance dressed down President Zelenskyy in the Oval Office back in February and their uncertain commitment to Ukraine. But they've come a long way in policy and they've more or less had Ukraine's, and we're in a better place now. And moreover, they're more realistic perhaps about what's going to be required to have some kind of an agreement that Russia will live with. Not that we should be trying to please Russia as the first order of business, but if you don't count for any of their interests, then you're not going to get an agreement. So I think the big question is going to be, does Ukraine concede any territory that it currently holds without having it taken away from them on the battlefield? Most of the other issues, I think, have at this point been fairly well Finessed.
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D
Right.
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A
And I wonder if we come to any kind of agreement if that. Again, not that this is all about whether it's bearish or bullish for the defense stocks, but obviously we're looking at it through that lens. What would be your parting thought then on China kind of into the new year then you were, you were more reassured by the language than alarmed by it.
- [24:10]
G
Yeah, I think it's going to be a difficult issue for the rest of my career. And so I think the US Defense budget is going to stay robust for the rest of the my career and many others. But I don't what would worry me is a small crisis blowing up because the two sides have demonized each other so much. And so the good outcome here is strong defense stock, a solid U.S. defense budget and no war. And that's where I think the combination of robust deterrence helping Taiwan improve its own defenses, but keeping the Beijing, Washington relationship calm, as calm as possible anyway, is the best answer. Now, obviously the tariff war can get in the way of that as well as a lot of things. So I'm not going to be too bullish about things staying calm. But on balance, this report is not so bad.
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A
And finally, what would you say the odds are in your mind for some kind of peace deal or, you know, temporary agreement on the Ukraine, Russia front.
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G
5050 in the course of 2026? I don't really expect any deal in these waning days of 2025. I would love to be wrong. I think we're going to have to show our commitment to have Ukraine's back to up the pressure on Russia even more. And, you know, Putin may want more than Zelensky and the Ukrainian people are willing to offer. And so I think more pressure on Russia is going to be a key part of the equation right now. We haven't shown we've got the resoluteness to deliver that, so I think it may take a bit longer.
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A
Got it. And then finally kind of a back burner issue, but one that feels like we'll move more front and center next year. The US Revoked some European visas this week. Did you see this over their free speech kind of crackdown? I don't know much about the legality of how all this works. You know, the US Obviously free speech zone, other countries not so much. So what does this all tell you in terms of the relations? Is this just the US Trying to push against what it views as their censorship that is impinging on our borders, even if it happens elsewhere? And is this just a side issue or something that could kind of blow up in a bigger way.
- [26:11]
G
You know, I think the larger context goes back to the national security strategy. So another recent document from the Trump administration, which more or less to my mind, an okay document, except for the treatment of Europe. And it's really quite unusual. I would recommend anybody read it. It's only five pages, the section on Europe, but it talks about Europe having sort of lost its traditional character, its traditional values, you know, its old way of doing business. And so there's an element of the Trump team that really wants to beat up on Europe. They don't always get their way, and it's usually a zigzag. And obviously, Europe contains most of our allies, most of our core allies. And so in that sense, they want to celebrate NATO because they want, you know, to give President Trump credit for pushing NATO countries to spend more on their military, to do more, to help Ukraine, et cetera. So it's always going to be sometimes this is more of a culture war sort of thing. When you have this kind of an issue. I think it's the part of the Trump team that just wants to wage culture war with Europe and is willing to do it and sometimes gets its way. But usually that does not dominate the policy.
- [27:15]
A
And as we've seen, leverage in one area can often be very much applied to another. So, Michael, thanks so much. Appreciate it. Are you in the parking lot of a shopping center? Where are you?
- [27:24]
G
Yeah, that's about right. My apologies, but Merry Christmas to everybody.
- [27:28]
A
All good. Michael o' Hamblin with Brookings. Want to flag some stocks near session lows today as we're sticking with Washington. A record number of lawmakers from both sides of the aisle are leaving this election cycle, and the effects will be felt far beyond the Beltway. Emily Wilkins is in D.C. to explain. Emily?
- [27:44]
B
Hey, Kelly. Well, look, between gridlock, heightened partisanship, the longest shutdown ever, many lawmakers are frustrated with D.C. and that is leading to a record number of folks deciding not to run for re election. You've got 53 members of Congress, 44 members of the House, nine senators who currently have announced that they will not be running for their current seat. And that is a record for this time in the cycle, according to Bella Pedia, who began tracking lawmaker retirement in 2012. To put that in comparison, a total of 54 lawmakers retired in the entire 2018 cycle. Again, we're at 53, but we're only halfway through the current cycle. And if you look at history, we can expect more retirements in January. Now the reasons for lawmakers leaving vary. Brianna Ryan, who covers retirements for Ballotpedia, says some lawmakers known for working across the aisle are also deciding to go elsewhere as well as others who are just frustrated with how Congress is being run. We've also seen people like Thom Tillis and Jared Goldin talk about the fact.
- [28:46]
A
That they're very frustrated with how Congress.
- [28:49]
B
Is going right now.
- [28:50]
A
We've seen that recently with she was.
- [28:52]
B
A resignation, but Marjorie Taylor Greene coming.
- [28:55]
A
Out and saying that she isn't very happy with how Congress is being run.
- [29:00]
B
Now, not all who are who aren't running for reelection are leaving Congress entirely. Fourteen House members are giving up their seats seats in hopes that they will then be reelected as members of the Senate. And of course, others are heading to return for governor or other offices in their states.
- [29:15]
A
Kelly all right, that will leave a big question mark ahead as to who fill those seats. Emily, thanks very much. Emily Wilkins, as you mentioned there, you see the Dow kind of hovering near session lows at this hour, but we also have millions of Americans under winter weather warnings ahead of the weekend. And New York City could see its biggest snowfall in years. They better not overhype this one. No, I'm actually kind of concerned. We'll get you ready. And ahead of that storm, shares of Generac are coming off their worst week in over two years and set to close out their fourth negative month in five. Believe it or not, the stock is set to end the year lower for the first time in three years and only the fourth time in its 15 year history. It's down 10% since January. I just want to know if that means you can finally get a deal on one of these whole house generators. We're back after this. Hi there, it's Andy Richter and I'm here to tell you about my podcast, the three Questions with Andy Richter. Each week I invite friends, comedians, actors and musicians to discuss these three questions. Where do you come from, where are you going, and what have you learned? New episodes are out every Tuesday with guests like Julie Bowe and Ted Dance and Tig Notaro, Will Arnett, Phoebe Bridgers, and more. You can also tune in for my weekly Andy Richter Call in Show episodes.
- [30:30]
G
Where me and a special guest invite.
- [30:32]
A
Callers to weigh in on topics like dating, disasters, bad teachers, and lots more. Listen to the Three Questions with Andy Richter wherever you get your podcasts. The holidays mean more travel, more shopping, more time online, and more personal info in more places that could expose you more to identity theft. But Lifelock monitors millions of data points per second. If your identity is stolen, our US.
- [30:57]
C
Based restoration specialists will fix it, guaranteed.
- [31:00]
A
Or your money back. Don't face drained accounts, fraudulent loans or financial losses alone. Get more holiday fun and less Holiday worry with LifeLock. Save up to 40% your first year. Visit LifeLock.com SpecialOffer Terms Apply thanks to TikTok ads, I was able to open up a business with my childhood friend and even hire employees. My name is Julian and I am one of the founders of the Snacks Lab. We are an exotic snack company. We import snacks from all over the world. We had over $100,000 in sales from our TikTok ads in the first month. So our orders went from five a day to over 250 orders a day. You definitely have to use TikTok ads. TikTok for business is helping owners like.
- [31:37]
C
You reach new customers every day.
- [31:39]
A
Head over to get started.TikTok.com TikTokads millions of Americans are under winter storm warnings and travel advisories heading into the weekend. Accuweather's Anna Azalien Jo joins us now with more. Hi Anna.
- [31:53]
E
Hi.
- [31:54]
B
It is not great timing for all of this bad weather and a lot of people traveling today and into the weekend. Taking a look at the alerts that are out right now well into the Northeast we have especially these ice storm warnings. That's what I'm most concerned about, the freezing rain that makes for just horrible road conditions. But we have winter weather advisories, winter storm watches, winter storm warnings, and then of course all of the flood washes that are still issued in California. So I want to take you to current radar and clouds, give you an idea of exactly what's been going on the last six hours here. Still raining in California, but things are getting better. It really starts to move out tomorrow. But any additional rainfall, I mean, we continue to get flash flood reports in today and then into the Northeast. The timing is really into the evening, especially for places like Philadelphia. New York City. Right now it's moving out of the Great Lakes and into western New York, western Pennsylvania, several inches of rainfall in California. That, of course has been the problem. Ventura county has been a big focus for flooding today. But let's talk about the Northeast and this storm get you prepared for what's to come. So as far as the snow itself, Philadelphia, you're in the one to three range here. We'll switch over to sleet at the end. So that's tomorrow morning somewhere like New York. Well, we're in the 3 to 6, but here's the thing. We could get up to 8 inches of snow and it's not out of the question to switch over to sleet tomorrow morning as well. That really brings us to the problems. Several inches of snow, that creates problems. Adding ice, it's just a bad combination.
- [33:19]
A
So, Anna, what time do I need to leave here to get home? 3pm 4? 5 1. Now? Should I just get in the car now? 4 or 5?
- [33:29]
B
I mean now. Better safe than sorry. Say bye, guys. I gotta go. Okay. Things should really get kicked off about 4 or 5pm all right.
- [33:36]
A
I think I'll make it. Best wish to be safe out there, everybody. And Anna, we appreciate your update. Thanks for joining us. Thanks. Anna Azalean from accuweather to Brian. Brian, where are you for the CNBC news update?
- [33:49]
E
I am at the nasdaq. And that's why you can't leave now because I will be here doing fast money at 5pm, Kelly. So no leaving. All right. I'm hoping to get out of New York City, not sick because in New York City last week more patients went to the emergency room complaining of flu like symptoms than during any other week in the past decade. That according to preliminary new hospital data from New York City across America, doctors say flu season has arrived earlier than usual this winter. Kids being hit especially hard. A 15th person has died as a result of that UPS plane crash in Kentucky back on November 4th. Louisville Mayor Craig Greenberg announcing the updated death toll on Thursday. The plane was bound for Honolulu when they left engine separated from the wing as the plane crashed. And again, according to preliminary reports. And Pope Leo delivered his first Christmas message in Vatican City yesterday. It was to some 26,000 people. The Pope calling for an end to global wars. He highlighted the humanitarian crisis and asked for sympathy for immigrants around the world worldwide. Nice message there, Kelly. I hope you and yours had a wonderful Christmas. I will see you at some point. I don't know when that is.
- [35:02]
G
They won't let me out of the nasdaq.
- [35:05]
A
I hope I'm not gonna. You're not driving. You're not gonna know.
- [35:10]
E
No, I'm gonna hitchhike home. I hope or walk. But I did bring snowshoes.
- [35:14]
C
All right.
- [35:14]
E
We'll see what happens.
- [35:15]
A
Brian, thank you very much. Good luck. We'll be tuning in coming up. Our strategist says don't let the AI trade distract you from next year's more important market driver. He'll tell us what it is after this. It's been a good December. Stocks are on pace for their fourth Positive week in a row. And the S and P is hitting another record high today, all as investors gear up, or I guess we're in now this Santa Claus rally. Tech is leading the way. My next guest says investors should look beyond the AI trade, though, and focus on the fact that a soft landing has been achieved. I love this. Joining me now is ProShares global investment strategist Simeon Hyman. Welcome.
- [35:52]
F
Thanks for having me.
- [35:53]
A
You're absolutely right. There's kind of two things going on here. And those who are worried that the market's only up because of an AI bubble should also be aware of the larger soft landing narrative here. There was never a recession. Now rates are coming down. So what do you think is going on?
- [36:08]
F
It's actually almost that the soft landing is the nearer term thing. The I think is critically important. But that's going to take five to 10 years to play out. In the meantime, the business cycle is still the biggest driver of the stock market and of course the economy.
- [36:23]
D
Economy.
- [36:23]
F
And look, we had a little upside on gdp. We've got prices coming down, just high twos on inflation. Let's take a victory lap. That's a soft landing. We were at 7% core and core inflation, 10% headline. And we're getting real close to that 2%. And we did it with unemployment. Just maybe a tick over that natural rate.
- [36:43]
A
Yeah, it was actually kind of perfect. I mean, kind of a perfect landing in gymnast speak, which is I was definitely in the hard landing camp. Thought a couple of years ago that it looked much, much worse and we kind of got got through it. Now there might be a flip side to that, which is we're left with high deficits. Right. The fiscal piece of this still did a lot of heavy lifting. But all of this said, I think that there's also some kind of recency bias because a lot of us, when we see talk about Fed rate cuts and rate yields coming down, think to ourselves that's a sign we're heading into recession. And you kind of have to go back to the earlier cycle, 6,070s. Those kind of remember, no, no. If the Fed's lowering rates, even if employment's wobbling around a little bit, it's a good sign. It means that inflation, the bigger problem, has been vanquished.
- [37:23]
F
The classic driver of the the business cycle and a recession is overheating. There's no sign of overheating. Take a look at the isms. You got manufacturing, 48, you got services 52 average amount. That's 50. That's the break even of expansion and contraction and folks have forgotten about the old school capacity utilization number. I'm trained. If it's over 80, it's overheating. We're going to get a recession. We've been pinned at 76.77 for 12 straight months. Markets, that's a soft landing. So if we're not overheating, the impetus for the recession that comes because of overheating isn't really there.
- [38:00]
A
So then I'll flip it to people saying, okay, that sounds great, but we're up three years in a row. This has been a really strong rally. So can I just be fully invested and comfortable that, you know, it's kind.
- [38:12]
F
Of full steam ahead in the headline of our 2026 outlook is it's not Y2K. And what we simply did is we took prices and fundamentals of the equity market and compared them to the end of 99 to the end of the last century. And what you see is prices are substantially lower. You had 56 times on the tech sector, then we got mid-30s. Now that's not cheap, but it's not sky high, at least compared to 56. And fundamentals are much stronger profit margins and return on assets. And if you're worried about debt, debt, net debt to EBITDA for the, for the S&P 500, we could have a whole talk about the private markets. But at least what you can see, one and a half times net debt to EBITDA for The S&P 500, there's no debt.
- [38:56]
A
When's the last time you were this constructive on the outlook for equities? Because you don't take me as the kind of perennial bull, you know, go go type of, of analyst. And again, even some of your own strategies are things like the high income, you know, a little bit more conservative strategies. But, but I noticed that Wall street forecasts are pretty optimistic. Everyone's reading from a book and they go, yeah, there's not a lot out there to worry about. So I'm just curious how unusual that is.
- [39:19]
F
Well, I think the good news is that actually for many stocks and even just about the nasdaq, multiples have actually come down because earnings growth has actually outstripped price performance this year. So that's a pretty good sign. And really I do think it comes down to looking at economic cycle and this soft landing puts us in a pretty good position. Look, it doesn't mean that you shouldn't watch your concentrations. If the tech sector is 35% of the S&P 500 if you've got more than that because you got some winners, then you should think about trimming, but certainly broad market exposure. And that's the next piece that I wanted to talk about was this opportunity for a broader participation. In particular, you mentioned high income income. We've been looking at income opportunities in small caps. Now if you look at that takes.
- [40:08]
A
It makes me doubly nervous.
- [40:09]
F
Takes about 30 seconds to unpack. The Fed is cutting, but the long end is stable.
- [40:13]
A
Right.
- [40:14]
F
The long end drives large cap multiples, so don't expect a tailwind from that. But the Russell 2000 does benefit just from the Fed cuts because they're highly leveraged and they got shorter term debt.
- [40:25]
A
Front end borrowing, that sort of thing.
- [40:27]
F
Now you need a little more income because your money market fund is making 150bps less than it was two years ago.
- [40:33]
A
I see.
- [40:34]
F
Generate some income from those small caps. We do it in our Russell 2000.
- [40:37]
A
High underperforming this week. It doesn't. I mean they're highly volatile and you know, the earnings trajectories aren't that great.
- [40:44]
F
This is exactly why it's a cool place to think about income because what we do is we write calls on the Russell 2000 that takes advantage of the volatility, but in a very nifty way. And it's a ticker, is it Wo and the way we do it is a daily approach to covered call writing which actually allows you to generate the income from that volatility but get the full return of the Russell 2, which, yeah, it's a little behind this week, but ahead of the s and P500 this year. And a lot of that's due to Fed cuts.
- [41:13]
D
Right.
- [41:13]
A
And you collect that income, as you can see. While the performance is that you've thought about a lot, I give you credit. It's almost like you do this for a living. You've thought about a lot of these things.
- [41:20]
F
I owed you notes at 730 this morning. I got up early, so thanks.
- [41:25]
A
Good to see you.
- [41:26]
F
Happy holidays. Thanks so much.
- [41:27]
A
Simeon Hyman with Pro shares coming up. It's been another disappointing year for the beverage, the booze stocks, whether they can shake the Hangover in 2026. We'll talk about that next. Another strong session earlier on, at least for the markets. The S and P hitting a new record high, but we've moderated somewhat. We flipped negative on the Dow and the S and p. Dow down 82 points though Nasdaq about unchanged as Nvidia's having. Still a Pretty nice session on that acquisition. Not acquisition, sorry, licensing deal today. Coming up, Christmas is over. Well, some of us think 12 Days of Christmas anyway. Returnuary is now upon us. The National Retail Federation estimates nearly 16% of holiday purchases will be returned this year. And we'll talk about what that means for consumers and retailers next. Just when you thought you made your last trip out to the mall or the shopping center this year, it's time for return uary. According to the National Retail Federation, retailers estimate about 17% of their holiday sales will be returned this year. So how do all those returns impact a store's bottom line? And what does it say about the consumer? Let's ask Bill Simon. He's the former president and CEO of Walmart U.S. bill, it's great to see you. And I guess stores are trying to really take advantage of this and something that's usually a headache for them and the consumer maybe turn it into more of a positive opportunity.
- [42:46]
D
Oh, yeah, sure. That's usually how it goes. That number 16, 17% is pretty standard for the holiday season. You know, really, retailers look at it as just another opportunity to get somebody to buy something else. So come in and trade out. Buy something else. You'll see really aggressive discounting as you head into January. So it's part of the normal process and an indication of actually a pretty good selling season.
- [43:09]
A
How would you say the selling season? I mean, from what we know. How do things go overall? You know, it's. We have kind of a couple things happening. You have all these shifts in the retail landscape, you know, that have been happening for years, and then you have have an uncertain consumer this year, low consumer sentiment, as we know, sour attitudes, a lot of talk about the affordability challenges, and yet it appears like it was a decent season.
- [43:29]
D
Yeah, it looks to be a really almost quite good season if you, you know, you believe the credit card data. And they're usually pretty accurate. You know, we're probably talking about 4% or maybe low 4% growth rate in retail sales this holiday season. And that's really, that's really quite good. Now, there's some, you know, price pressure in there, so. So maybe 200 basis points of that price increases, but that still means there's some good growth. Think it's going to top $1 trillion in the holiday selling season for the first time. So by and large, pretty good.
- [43:58]
A
You, you know, I don't want to say you're a stock picker, but you know, the space and you maybe have an eye on some areas of opportunity or an area where things maybe look too over consensus. I mean, what, what do you think? What do you like in the retail landscape right now?
- [44:12]
D
Well, you know, consumers really, you know, really drives the bus. They're smart and they're, you know, very particular in what they're buying. And right now they're buying discount, they're buying off price and they're buying deals. So the discounters, my old company, Walmart, you know, is a machine and they'll keep going. Amazon is just cranking and they'll, they're going to have a great quarter. Costco looks to have done pretty well. I think the mid tier department stores might be a bit challenged. You know, I think Target might have had a better Christmas than they did last year, but they're still pretty heavy in inventory. So I think they've got continued challenges.
- [44:47]
A
Yeah, Costco recently had a sell note on the street. We talked to the analysts and it wasn't just a valuation issue. Obviously they trade it like a 50 times multiple. He said there are some signs that their newer stores aren't getting as strong performance as the older locations. And I kind of understand that. And I wonder if they're cannibalizing to some extent as they start to expand. And it's like the Kelly indicator. Once it shows up in my neighborhood, it's over. It's getting to that point at Costco, I don't know if you would, you know, if you think there's anything to that argument or if you'd have any concerns about, you know, maybe the stock having done so well. Could something like that be a moment of reset?
- [45:23]
D
Well, at a 50 multiple, you know, I think first of all, Costco is just probably one of the best retailers around. Their, their merchandise capability, their buying team, bar none, probably the best in the industry. So I'm not worried about them. I don't think that store density is an issue. They're really not cannibalizing themselves. I think there might be some format challenges going forward. The family size and the development of the family and the large pack size model, that's the club channel might be demographically challenged in the short run, but I'm not worried about Costco.
- [45:57]
A
Yeah, I wonder about that also. What are your thoughts about doordash?
- [46:02]
D
Doordash, you know, it's a service that people are really excited about right now. I think it's going to be difficult for them to continue to maintain their, you know, the growth rates that they've been putting up. I think the pricing has always been a problem with them. And then on the retail delivery side, I think there's still some growth opportunities. On the food delivery side, I think that space is very saturated.
- [46:24]
A
Yeah. You know, I just wonder because that's the. Often the way that people at Costco you can use kind of the same day that Powered by Instacart Doordash has for me, for many, I think, become a shorthand way now of getting groceries. You're paying a little premium, but it's a decent service. Maybe someday the Waymo can just bring it to you. Maybe the robot shops at the store brings it to you in a Waymo. Right. Is that where this is all going?
- [46:48]
D
Yeah, look, I think technology from the consumer facing side, but from the retailer facing side, the back office side, is really going to transform things. There's clearly some upward pressure on prices from tariffs and. And other things, but the way companies are using, starting to use AI and technology to be able to become more and more efficient, I think will actually put downward pressure on prices. So I think retail space in the coming years is going to be very exciting.
- [47:17]
A
Yeah. Is the tariff story over then? That was the, you know, the dog that never barked or whatever.
- [47:23]
D
I think it barked. It just didn't bite. You know, I think we all heard it and we all talking about it, and everybody's still waiting for the impact, but kind of a combination of, you know, the really good retailers, particularly the big. The big guys able to mitigate it, you know, absorb some of the cost, move some of the production, and the fact that it really, you know, is. Is it really inflation if the price goes up but nobody buys it?
- [47:49]
A
Exactly.
- [47:50]
D
I think the consumer is making some decisions as well. We're hitting. Can hit April, hopefully, and, you know, we'll be past Liberation Day. Wasn't that what it was called?
- [47:59]
C
Yeah.
- [48:01]
D
And then kind of it's. It's old news. It's sort of built into the model from there.
- [48:04]
A
All right, Bill, thanks for your time. Appreciate it today. Bill, that's it for us. Thanks for watching the Exchange and I'll see you for Power Lunch right after this quick break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. Hi there, it's Andy Richter, and I'm here to tell you about my podcast, the Three Questions with Andy Richter. Each week I invite friends, comedians, actors and musicians to discuss these three where do you come from, where are you going, and what have you learned? New episodes are out every Tuesday with guests like Julie Bowe. And Ted Danson, Tig Notaro, Will Arnett, Phoebe Bridgers and more. More. You can also tune in for my weekly Andy Richter Call in show episodes, where me and a special guest invite callers to weigh in on topics like dating, disasters, bad teachers, and lots more. Listen to the three Questions with Andy Richter wherever you get your podcasts.