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Oil Rally Strengthens, Labor Market Weakens, and Oracle's Opportunity 3/6/26
00:46:30
Crude oil breaks above $90 a barrel for the first time since 2023. The economy lost 92,000 jobs, but rising oil prices leaves the Fed's next moves up in the air. Plus, why Jefferies thinks Oracle's sell-off may be overdone.
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This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com Market Update podcast or find Schwab Market Update wherever you get your podcasts.
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The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen and keep striving. Visit strayer.edu Jack WelchMBA to learn more. Strayer University is certified to operate in Virginia by Chev and its many campuses, including at 2121 15th Street north in Arlington, Virginia. Okay, thank you very much Scott and welcome to the Exchange with our continuing coverage of this market sell off and boy do we need to talk about the oil price. I'm Kelly Evans. The Dow is having its worst week in almost a year now, including today's 600 point drop, the worst week since August for the small cap. Russell the worst performer again today, down almost two and a half percent. And every S and P sector is lower including materials, especially financials and consumer discretionary. And take a look at yields odd behav year. Today will get a lot of different opinions about it. The 10 year rising to about 416 headed towards 420 this morning it's reversed lower. It's around 412 at last check even as oil prices are on the move higher. And that is the biggest news of the day. In the afternoon here as well, take a look at the price of West Texas crude, the US standard at $92 a barrel. It's the first time it was over 90 since 2023. And now of course it goes even higher. And pay special attention to the Financials. They're down around 3.4percent today. The biggest down turn us in the credit names with BlackRock, Ares, KKR and Blue Owl seeing big drops. We'll come back to that later on. All of this trading action comes after President Trump says he is staying firm on his conditions for a deal to end the Iran war. Let's start with Eamon Javers with the latest.
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Eamon Kelly, that's right. The President of the United States is kind of weighing in here this morning with his idea for how this war can end. So many questions throughout the week of how this all will end. Well, the President posting on social media earlier today a structured proposal, I guess you could call it. He says there will be no deal with Iran except unconditional surrender. After that and the selection of a great and acceptable leader. Parentheses s We and many of our wonderful and very brave allies and partners will work tirelessly to bring Iran back from the brink of destruction, making it economically bigger, better and stronger than ever before. Iran will have a great future. Make Iran great again. Miga there instead of maga. And I guess, Kelly, the way to think about this is this is evidence of a president who is thinking very much about what endgame looks like. Now that we are just about a week into the war in Iran, the President wants to do regime change. He wants to have a say in that regime change. We've heard from other members of the administration that this war is not about regime change. The President here clearly saying that it is. And so he's got both the carrot and the stick here. The stick is US military intervention and continued military strikes. The carrot is, you know, if Iranian regime comes up with a leader the President can find acceptable, then there could be economic stimulus, there could be growth. The United States could work with a reimagined Iran on what its post war future might look like. So I think all of that is to say this is the President's offer on the table. We'll see if there's anyone on the Iranian side to deal with and if any of them find this even remotely acceptable.
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Kelly, I think it's going to be a long weekend and that sense, Siemen, as we wait to see what kind of response they may come up with here. Eamonn Javers. Thanks. And let's talk more about the effect this is all having on the oil price. Look at that spike on your screen. Let's bring in Pippa Stevens. Pippa, we were at 55 in December. Kelly, these are really, really big moves here. So let's start with WTI because it is up 13% for the week, up 36.5. That is its best week on record. Now trading at about 91. 34. Brent seeing its best week in nearly six years. Gasoline futures up more than 30% on the week, the best in four years with heating oil that's a proxy for diesel up 38%. That is a weekly record. European diesel up even more, up more than 50% on the week, the best through the contract's inception in 1981 with European natural gas up 60% on the week Now Macquarie saying a few weeks of traffic in the Strait at a standstill would send oil to 150. With Iraq already curbing output as storage tanks fill, since the start of the month, some 76 million barrels of oil have accumulated in the Gulf. That's according to JP Morgan. 46 million on tankers, 22 million at refiners and 8 million in commercial storage. Kelly, you add in products and the total value, According to Kepler, $17 billion stuck in the Gulf. But Pippa, all of this depends on activity restarting through the Strait of Hormuz, is that right? Yeah. So all of this is becoming now a giant, giant bottleneck because at a certain point, if there are no tankers that can come in to refill, there are no on land storage tanks, you have no choice but to cut production. And the clock is really ticking. That is fast, fast approaching. All right, Pippa, thank you, Pippa Stevens. This comes as Qatar's energy minister told the Financial Times today that you could see oil hitting $150 a barrel in the coming weeks if takers can't pass through that Strait of Hormuz. Let's bring in Paul Sankey for more. He's president and lead analyst at Sankey Research, along with RBC Capital Markets Global head of Commodity strategy, Halima Croft. Helima, welcome. Got to get Brian in here too, round this out. Let me just start quickly on your latest assessment of how quickly the Strait of Hormuz will reopen. I mean, there's no indication gallery that we have any movement on reopening the Strait. Yes, President Trump has flooded the dfc, insurance plan, naval escorts, but very little facts are, you know, plans to back up the announcements. And so we have no indication going into next week that we're going to see significant movement in the straits and that is leading to the prospects of cascading shut ins when it comes to production. Paul, what would you say your kind of handicap of this whole thing is as well? Are you thinking a few more hours, few more days, a few more weeks until it can reopen?
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No. Well, that's very difficult to say. But on Monday we said that if they don't get it open by Friday, we have a major, major problem. And last time I checked, today is Friday. You know, you've got to remember here that we measure things in barrels a day, 100 million barrel a day, 105 million barrel a day. Global oil market, 20 million barrels a day. Just in the example of oil, let alone gas, let alone everything else, helium is getting everyone's attention at the moment, these are daily numbers. And so every day that passes is just becoming a worse and worse crisis here. And as Salima says, no sign of ending anytime soon, such as over the weekend.
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What do you say, Paul, to those who point to maybe we can show the forward months, you know, and they say, look, by the back half of the year, we're back at 68. What's the problem?
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We will be because we'll destroy demand so much. If it's a question of supply side, you know, we'll go as high as we go until demand just gets crushed. You're looking here at $250 a barrel for jet fuel. How many people are going to be flying jets at that kind of price? And you know, the list goes on. So it's going to be a demand response here. And that's how the market rationalizes itself. High prices cure high prices.
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Helima, I think that's such a good point. And I, you know, I just wonder, okay, for I don't even think we've understood the effect this is going to have on the consumer right now. We've gone to, I think it was around $3.32 at the gas pump from 289amonth ago. That's almost a 50 cent increase in a month about to hit that psychological
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pain point of $4 a gallon.
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So I think the real question, Kelly, is if you are sitting in the White House and you are very focused on your affordability agenda, when do you start saying that the economic cost may lead you to scale back your political ambitions? I mean, the Iranians essentially have to survive. Air power alone can do regime decapitation. When you listen to the president's maximalist goals of unconditional surrender, the question is how long does he believe that's going to take? And again, we've had these pronouncements that they're going to be naval escorts, but we are an active combatant this time around. How many ships can actually be used to escort tankers through the straits? And where are we in terms of this DFC insurance plan? Yes. And Halima, just to press the point, even if the president were to say, you know, enough is enough and you know, he would declare something like a mission accomplished, do you think it's up to him on some level or is this how much is up to the Iranians in terms of lengthening the amount of time that the strait can be closed and this pain can be inflicted? I mean, the Iranians absolutely have a say. And I think we focused way Too much at the start of the conflict on missile stockpiles, not enough on their drone capabilities. Every time you hear announcements of how many ships that we have sunk, the question is what is remaining in terms of fast boats that can be packed with explosives that can target tankers as well. So again, the Iranians seemingly asymmetric capabilities that they can use. They can behave as a non state actor in terms of how they reorganize their leadership. And so the question is, you know, when are they also willing to say, we'll meet you at the table? No indications that either side is basically in de escalation mode yet. And Paul, with that in mind, then what would be, you know, if we now start seeing production shut down and I imagine that's what kind of what's driving this marginal move today. How would you game this out from here? You know, not to bring this to the traders per se, but what are the events that push us above 100 versus the events where we see a sudden reversal down to 75?
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Well, I think our concern is that we now have the Chinese. You might have to make an agreement with the Chinese. Or for example, this has all benefited Vladimir Putin enormously. Maybe the Russians want this to continue. The question is, who's going to surrender? You fragmented the Iranians into multiple different Hydra monster headed Hydra monster where you don't know who you're dealing with at all. And the fact of the matter is who's, you know, if one of them surrenders, will the other? We saw it separately in the Mediterranean. An LNG tank had blown up and sunk for the first time in the history of the LNG industry in the Mediterranean, which again, just brings a whole terrifying new aspect to this whole seaborne trade on which the whole world is so desperately dependent.
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Lima, a final comment on that, if you could. It's, you know, some, some aspects of this are even worse, you know, than what we've seen, Even with the 2022, Russia, Ukraine war, things like that. I mean, Kelly, what's concerning us is the blast radius from this conflict is much wider than even just the focus on the Strait of Hormuz. As Paul pointed out, we are seeing an extensive range of Iranian activities targeting ships outside the Strait. So again, it doesn't look like there are any safe waters around the Middle east right now. It's a great point. And Contessa Brewer reported the same thing, you know, when she talked to the insurance folks. It's not at all just the straight. It's much broader, affecting a lot more global commerce. Than, than even just that. Thank you both, Appreciate it. We'll leave it there for right now. Halima Croft and Paul Sankey, those rising oil prices certainly make the Fed's job a little more complicated. Comes just as we've learned about a slowing jobs market. As we saw with that this morning, 92,000 jobs cut last month could give them enough reason to cut rates. But inflation could also kick in as a result of oil prices. And while Fed Governor Stephen Myron agrees, he told CNBC's Money Movers he's still staying the dovish course.
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No question that oil will pass through
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into headline, into headline inflation.
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But what it does to the labor
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market and what it does to core inflation are in my mind pretty dovish. And so I don't really, I don't respond, I don't revise my expectations, my projections in a hawkish direction based on higher oil prices. I think it's appropriate to keep cutting.
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Meanwhile, we also heard San Francisco Fed President Mary Daly telling Steve Liesman earlier on that the Fed should wait to see how long oil stays elevated before making a decision. I think their meeting's coming up in about two weeks time. Let's bring in Diane Swan, chief economist at KPMG with our senior economics reporter Steve Liesman. Steve, how would you recap what we've learned from the Fed officials today and in light of this oil price spike?
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Well, you can't be surprised that Stephen Myron looks at a piece of data and finds that it's dovish. So I'm pretty sure that is not the general view of the committee in the sense that I think Mary Daly may be closer to the center in the sense that, well, you don't want to hike into an oil price spike, but I think it's doctrine not to cut into an oil price spike and try to exacerbate. You don't want to monetize it. That is a classic mistake the Fed made in the 70s and almost every Fed official swears they will never make it again. So I think that Stephen Myron might be end up dissenting like he has been doing. But I don't think he's going to carry any votes with him because I think the idea is you sit there and you pause at this juncture and you wait to see how it works through. It can be very unpredictable. And the idea that oil prices are going where they're going and gone where they've gone is suggestive to me, Kelly, that the President may not have thought this thing all the way through because he might have otherwise had a response or did he anticipate that the Straits of Hormuz would effectively be closed? And as your last guest said, there does not look to be an opportunity, a way that you would end up opening this in a safe and reliable way. So this could be around for a while.
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Diane, I don't know if you caught the full interview with Myron. It was very interesting. You know, he basically says that he's not worried. We've had some worrisome signs about inflation lately. But he says he's, he's not convinced that that's the story, that he thinks a lot of this is lagging. I think he even cited Portfolio Management Services as one contributor to just sort of stubbornly high inflation as opposed to kind of real and lasting impulses in the economy. I would just love your response to that. Well, actually, what we're seeing is we're going to get another hot measure on inflation next week on the PC index in particular, it's going to be over 0.4% again. And the core inflation, stripping out shelter costs and getting to the service sector is actually accelerated a bit. So that's proven not only sticky, but accelerated in December. It's something that Austan Goolsbee has sort of pointed out as well. And I think I agree with Steve completely that the bulk of the Fed is more in a wait and see mode because you don't want to cut into a situation where we've got inflation, we're five years in now and it's accelerating, not decelerating. And I think that's important. And the Fed does not have the luxury that other central banks do that have already, like the ecb, where inflation has already come down and gone to target or below target. That is not the situation in the United States. It's going in the other direction. So, Diane, and I'm looking back to 2008, I promise not, because I will just constantly be scarred by that experience. But I do find it interesting because we never answered the question, you know, in 08 in the first half we had oil going to 140, we had nat gas at like 13, we had aluminum prices at record highs and we had job losses. And the whole Fed wash included was in this. Should we focus on inflation or should we focus on the economy? And we never resolved that because then we had the credit crisis and everything blew up. So I'm wondering how you think officials should be reacting to this present situation today, which has echoes of that experience. Well, I think from my, from my perspective on This I am worried about the labor market. It's not clear to me though that the labor market can be cured with rate cuts alone. I worry that what we're seeing is more structural in terms of weakness, which means it's harder for a rate cut to stimulate demand to get firms hiring again. Uncertainty is the biggest tax you can put on the economy. As I've always said, it's like, you know, a broken stoplight. We just seen uncertainty spike out there. And what it does, is it cause at a busy intersection, traffic to back up. Some people opt out entirely, wait for the stoplight to be fixed. Others, you know, sort of wait for traffic to clear. But it really slows everything down, including investment and hiring decisions. And the only investment we've really seen that's robust has been in AI and much of that is imported. I've heard Steve, people saying this is a K shaped economy for businesses. And you know, the AI based boom would happen if we had 20% interest rates because the returns are that high. And everyone else is like, yeah, how about two? So this is the argument Barry Knapp and others have made, which is you've got to bring that rate down in order to keep hiring going for a lot of the rest of the economy and not just the trade. I wonder, you know, if that. How does the Fed deal with a situation in which they can kind of be pulled in two directions by those two parts of the economy?
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Well, they have one interest rate. And I don't think you can fill out a form and say, I'm part of the lower leg of the case and I need a lower interest rate and then you get certified as being part of the upper. You know, and I think, look, I like Barry a lot. I think he's really smart. But, but this notion that somehow QE helps asset prices and not main helps Wall street and not Main Street, I think is a very difficult argument to make. I don't see how that quite works. I think everything that has an effect on interest rates affects everybody who cares about interest rates. So. And we're looking, by the way, Kelly, just so you know, the market reaction to the job number this morning in the fed funds market was a dovish signal. And it did up the probability of a September 1 cut and a December 2 cut now at 60%. So I mean, that's significant. That is a real dovish signal. And I think, Kelly, you're putting your, your finger right on the quandary that the Fed has right here. You do have this weakness in the job market. And no matter how I twist these numbers today, I can't get a solid number out of it. I can take off the 31,000 for the strike. I can throw in some stuff for cold weather and some seasonal adjustment stuff. I still have a lousy number. I still have six months of really no gain or no change at all. No job growth at all over a six month period. And this is showing it's maybe getting worse. So that is a dovish signal. But the quandary is the Fed still has inflation over 3% or at 3% and has this impulse going through now of higher oil prices.
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Very well said by Diane earlier. We have to leave it there, but I appreciate it and we'll pick this back up. I want everyone in the world's thoughts about what we do during a capex boom with rising commodity prices and a slowing labor market in a K shaped business economy. So send those our way of the break. Diane Swonk and Steve Liesman, thank you very much. Coming up, our market guest as the recent sell off in software feels too extreme and like some names in the group will tell you which one's next. And Oracle is down 50% percent from its record high six months ago. But now Jeffrey says the pullback is overdone and the stock could double from here. The analyst behind that call joins us to make his case. Coming up on the Exchange.
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This is the exchange on cnbc. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your Podcasts A KFC Tale in
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another down day in the markets as oil shoots higher. And we can't emphasize enough just how swift and how big this crude move has been. Certainly taken investors by surprise. Can the market recover and stabilize if oil stays up where it is? Let's ask Tom Hancock. He's portfolio manager of the GMO US Quality etf. Tom, I love to check in with someone like you on a day like this because, you know, this, this oil price shock kind of has nothing to do with the companies that you would be looking at. And yet you have to decide if it creates an entry opportunity or, you know, might have ripple effects to consider maybe later on. So welcome. And how are you thinking through it?
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Yeah, thanks for having me. So you're right, there's no direct impact. Clearly it changes people's risk aversion. It changes their appetite for growth assets. I think actually one way, one thing maybe I'm a little bit worried about is not just cutting off the supply of oil, but cutting off the supply of capital from the Middle east longer term, because a lot of the big investors in private software and AI markets do come from that region. That should be a longer term thing, but shorter term. You know, a lot of what we're seeing in the market this week we'd kind of write off as hedge fund grossing. We've seen a lot of the losers of the year winning. So software, for example, beating semis this year is probably, I don't think we got a whole lot of information. Big conference this week, but still not a lot of information on that trade. And yet it's moved a lot. And when things move a lot for reasons that aren't fundamental, that does catch our interest, certainly.
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Yeah, so I will come back to that. But I like what you said and kind of thinking it through as well. I mean, Dubai and it was not long ago, the administration and Metta and a few of these other firms, they had made this big trip, done a ton of capital raising. We were told that kind of the Middle east was the new international market for all of this AI infrastructure potentially to be deployed. Could that, you know, be called into question to some extent?
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It's a risk. I put this off as a tail risk. Our Base case would be that things will settle over time, but it could have a longer term behavioral aspect on how people in the Middle east think. I'd probably be worried less about the domestic investment they're making and more about the capital they've been deploying around the world. That is really one of the driving forces behind AI investment is kind of, as they say about the bubble in 2000 it kind of ended not because the Internet was a failure, but because investors patience for funding it did run dry. So that would be the, you know, the risk that sort of intersects with the tech sector.
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Is that what they say about 2000? I'd love to hear more about that.
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Yeah, well, it's. This is of course Monday morning quarterbacking because people really don't know why the bubble burst to this day. But I think the idea that more and more capital was being thrown at assets that weren't generating a return, at least not sufficient return, was what, you know, at some point there's a tipping point and they sort of ran out of money to invest. We've been thinking this time's a little bit different than that. Just because so much of the investment is coming from hyperscalers who have deep pockets and long horizons. And that I think is largely true. But there's a worry at the margin here.
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How would you then. The biggest entry point, I think that's been created because the Mag 7 is actually outperformed a little bit amid all of this. But software is down big now. Some of those names are also up big from the low ServiceNow, I think even Salesforce, a few of them. Are you doing anything strategic there?
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Yeah. So we're obviously trying to sort through software and see where the companies are least disrupted but have fallen the most are one of the things that makes us kind of excited about this is the carnage has been so broad spread. That really speaks to investors shooting first and asking questions later. So we want to have some of the questions. Yeah, the kind of thing we like. We like software where there's data embedded in the software, where the user behavior is very entrenched for their regulatory or compliance reasons why you have to keep using the software. It's pointing us to some of the vertical names actually which could on the one side it become some of these very technical things like using Dassault software to design jet engines or using Cadence or Synopsis to design semiconductors. Those are what the engineers use every day. Turn on first thing in the morning. The costs of failure are really high. The cost of replacement, benefits of replacement kind of low. We think that's pret good place to invest. Or you could take another extreme like the vertical software with like a Constellation software or Roper where these are kind of simple applications used by say your municipality to run the software where you pay your property taxes. Those the advantage of ups, the upside of replacing the AI and the, you know, ability is low, the ability to do that slow. We think those are pretty good businesses. And all this stuff has really not this week but this year has really suffered. So I think there are great opportunities there.
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All right. Tom, talking us through it. I'm sure doing a lot of folks lately given the market action. Really appreciate you making the time today. Thank you.
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Thanks, Kelly.
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Tom Hancock with GMO coming up, the halo trade heavy asset, low obsolescence. Will it work as a strategy to ride out this volatility? Talk about that and keep an eye on the defense names as we head to break. President Trump and Defense Secretary Pete Hegset. They're scheduled to meet in the Oval Office with executives from these firms today around 2:30pm Eastern to press them on accelerating their weapons production. We'll bring you those headlines as we get them and more of today's biggest movers after the break. What time is it?
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This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
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Welcome back. As you might have just noticed there, Dow looking a little bit better. Oil's off the highs. We have a news alert out of Washington. Amon Jabber something to do with it over in your neck of the woods.
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Yeah Kelly that's right. This is a report that just crossed from the Financial Times a couple of moments ago. And what they're reporting is a new number on that insurance facility that's going to support the oil industry in the Persian Gulf. The Financial times saying the U.S. development Finance Corporation is creating a $20 billion reinsurance facility to restart maritime cargo and oil commerce stalled by the closure of the Strait of Hormuz. And we'd had some sense that that was coming earlier in the week. The Financial Times now reporting that that could be announced as soon as today with that number at the top of it. They're saying that DFC Chief Executive Ben Black and Treasury Secretary Scott Besant will on Friday unveil the facility. So I think that's what's providing a little bit of reassurance to the markets right now, Kelly, that that facility is real and it's coming and now we have a dollar figure for it.
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And you think they mean unveil it today, Friday?
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Yes, I think that's right.
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Okay. Because we just heard from Paul Sankey in the block at the top of the show, Eamonn, when WTI soared to 92 a barrel, and he said as far as he was concerned as an oil trader, he needed some clarity by Friday that the strait was going to be reopened. Until this report crossed, we didn't have that.
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Yeah, well, this doesn't say that the strait is going to be reopened. Right. I mean, what this says is that the United States is going to provide insurance support for firms that want to sail through the strait. So the question of military escort is still out there. The question of, you know, which shippers want to take that risk given active major combat is taking place in the area. And those tankers are certainly a target. Those questions are certainly still on the table. What this does is give some clarity that the United States is going to backstop that insurance market, because insurance, as you know, dried up nearly instantly when the when combat broke up, broke out. So some of the infrastructure of the oil shipment financing system is now being backstopped by the US that doesn't necessarily equal, you know, oil is going to start flowing out of the Strait of Hormuz this weekend.
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Right. No, but it's certainly the market pressing them for something to do more to get that going.
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Yeah. Clearly the administration is looking for ways to respond here. This is one of them. There have been discussions of a whole host of other ideas out there. And, you know, you've seen administration officials shooting down the idea that, you know, any other Assistance might be coming, but for now this announcement in the FT is providing a little bit of relief.
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All right, Eamon, thank you for now. Appreciate it. Eamon Jabbers Dow is now about 500 points off the lows. In other words, the tone is improving. We're down about 1% less so for the Nasdaq and S and P, Dom Chu has more of the biggest movers. Hi Dom Kelly.
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I know with all of the headlines that we've seen coming out of Iran, Iran over the course of the past week that the markets have sold off dramatically, but would you believe it if I told you that we're only about 3 1/2% away from record highs within the S&P 500? Just to put all of those moves in context that you and Eamon were talking about that we've been talking about all week about The S&P 500 currently sits at 6762. So it's off another percent or so today. But from the record highs that we've seen, again only down roughly three and a half percent during that Spanish.
- [31:25]
B
As you can see, we're still below
- [31:26]
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the 50 day moving average and hovering above the 200 day moving average. That area is going to be one to watch here. Generally speaking, 6900. On the upside is that bluish line and the Gold line just around that 6580 mark. So we're kind of in the middle of that range. We'll keep an eye and see if there's stability here. Now with regard to some of the major moves over the course of the past week, those rising oil prices and tensions, the travel disruptions and everything else have really taken their toll. Front and center on some of the travel related names. Delta Airlines, United Airlines. Indicative of the one week chart on many airline stocks because of rising fuel costs and travel disruptions. Cruise line operators as well, Norwegian Cruise Lines is now about 19 and a half percent over the course of the past week. So keep an eye on travel stocks. And then another place to watch is in cryptocurrencies, specifically with regard to bitcoin prices where over the course of kind of the last one week period we've seen actually a move higher by about 4% for Bitcoin prices overall. That's leading to at least a little bit of a bid for Coinbase and strategy as some of those bitcoin proxies. So keep an eye on what's happening with crypto, those risk market trades, whether they're indicative of what's happening with crypto or vice versa. That remains to be seen, Kelly. I'll send things back over to you guys.
- [32:36]
B
Thank you very much, Dom. Let's get to Leslie Pickard now for the CNBC news update. Hi, Leslie. Hi, Kelly. Mexican President Claudia Sheinbaum visited the western state of Police go today to address security concerns in the region ahead of the World Cup. It comes almost two weeks after violence erupted following the killing of a top cartel leader. Officials plan to deploy more than 20 government agencies, including the army and Navy, for the competition that kicks off in less than 100 days. European media giant Axel Springer is set to buy the Daily Telegraph in a deal worth more than $700 million. The 170-year-old British newspaper would become the latest acquisition for Axel, which previously purchased Politico and Business Insider. The deal is subject to regulatory approval. And Six flags is selling seven of its theme parks for more than $300 million. CEO John Riley says the move will simplify the company's portfolio and strengthen the balance sheet moving forward. The sale includes parks in Texas, Michigan, and Missouri. Shares of the theme park giant have fallen almost 60% over the past year. And Kel, fun fact, one of my first jobs was working at the Kansas City theme park that's going to be selling. Well, maybe you put together, you know, a few people, Leslie? Well, yeah, I mean, you know, you want to go in on it, maybe not. Yeah. Leslie, thank you very much. Leslie Picker. Coming up, shares of Oracle are catching a bid today. They're down 20% to start to the year, but what will it take to really turn things around? We'll ask one analyst who sees the stock doubling from here. That's next. Software has certainly been a port in the storm this week, up seven and a half percent. Oracle is part of that. It's higher by about 8% since Monday, as you can see there. But the shares are down 30% from its earnings back in December. And our next guest says the market may be overlooking some upside potential. He reiterated his buy rating today, lowered his price target to 320 from 400. Let's bring in Brent Thale, tech sector research analyst at Jefferies. Brent, thank you. And listen, obviously, investors who are frustrated at what's going on in other parts of the market are trying to figure out whether to jump into this space. And you think Oracle is a horse they could bet on?
- [34:48]
C
Hey, Kelly. I mean, the stock's down 50% from when they announced the open air transaction. And we think ultimately Oracle is in a better, better spot. It's one of the few Accelerating growth stories in our sector. The stocks again, as I mentioned, cut by 50%. You have a multiple now that they can get to 16 to $20 of earnings power. If you 20 multiple, which is not a big multiple, you're going to get anywhere between low $300 to $400 a share. It's really not a demanding multiple. As you've been highlighting in many shows, we've been in a software apocalypse. I'm traveling through Europe on the last couple of weeks meeting with investors and basically one or two out of a hundred of investors that I've met with in the institutional community are long software.
- [35:45]
B
Wow.
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And so you have a position where everyone hates our group. They think it's over. Yet Jensen, the CEO of Nvidia is saying it's illogical to think that there's not going to be software interacting with these data centers. And a year ago everyone thought OpenAI was going to be the leader in Google and the rest of the industry was done and now it's completely inverted. Everyone thinks that Anthropic and Google have taken over and OpenAI means nothing. And Oracle has huge backlog exposure to OpenAI. As long as OpenAI does well, they continue their funding, they continue their, their push into the enterprise. They're going to be able to pay the Oracle bill. And that's a big, that's been a big overhang is a majority of their backlog is, is related to OpenAI.
- [36:39]
B
It was striking this week to hear Okta saying no meaningful impact from seat reductions. Veeva AI is not replacing software. Those stocks were up like 11 to 15% in a difficult session Trade Debt Desk OpenAI partnership to sell ads that, that CEO I did a big insider buy. That stock was flying. So it's sort of like a lot of, maybe more people here than overseas might be sympathetic to looking around, but Oracle, it's debt. You know, I think there's a lot of balance sheet concerns about this one. It just feels like the stakes are higher. Maybe that's how you make the money, but it feels like the stakes and the risks are a little higher here.
- [37:15]
C
Yeah, I mean Oracle's had a high debt load for a long time and investors look past it and we, we don't disagree. Like it's a risk, it's a negative concern that margins are going from mid-40s to low-30s as they build out infrastructure. Right. They're going from a high margin software company to a data center story with lower margins. And I think that's, you know, a short term risk. But if they pull this off and they're building the right infrastructure for OpenAI and then they layer their higher margin software business on top, there's, there's a little more excitement than, than I think the market's giving it credit for. So, you know, it's not not our fav number one position. I think there are other stories that are potentially better positioned. But again, the magnitude of software hate is incredible. I think that many investors are saying software has the value of zero and I think that's just wrong. They're not going to be two companies left on planet Earth and software OpenAI Anthropic. They're going to be multiple enterprises are still going to rely on them. And again, we had a huge database scare six, seven years ago on Oracle, fought through this. So one thing I've learned covering Larry Ellison for 30 years, yeah, he finds a way out and I think he's going to find a way out of this.
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B
Yeah, you heard that about the workday CEO earlier today as well. Said there are some people here, you know, Obviously look at ServiceNow who are passionate about getting through this and finding a way to do so. Brett, thanks very much. Good luck with I hope you don't get thrown out of any meetings for the rest of the tour there. Brent Thill joining us from overseas from Jeffries got a market flash on Boeing. Those shares are moving higher. Phil LeBeau has the details.
- [38:49]
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Phil and Kelly, the reason Boeing shares are moving higher is a Bloomberg report that says the United States is in discussions with China and ultimately Boeing would be involved in these discussions as well, for China to place a massive order, potentially up to 500 airplanes with Boeing. Now this has been widely expected for some time. So the fact that it's pulled off a little bit from the initial spike
- [39:12]
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is not a huge surprise.
- [39:14]
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Everybody knows that China needs more airplanes and it's been at least seven years since they've placed an order with Boeing. So if an order is announced, and that would be expected to be announced when the President meets with Prime Minister Xi, then that is when you would see the announcement of an order from China with Boeing. And again, according to Bloomberg, the discussions center around an order that could be as much as 500 aircraft. We have a call in to Boeing. As soon as we get any more, we will let you know.
- [39:44]
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Kelly, back to you. Boeing, yeah, it's in the Dow. Right. So just to point out to the viewers, Phil, your report could have as much to do with the seeming market turnaround as what the FT was saying about, you know, whether we create a bigger insurance fund to get people through the Strait of Hormuz. Appreciate you bringing that to us. Phil LaBelle, we might have more from the White House on the defense name shortly. Meantime, a new a new report from Anthropic suggests investors may want to stay the course on the halo trade. That's next. Materials are though the worst performing sector today, although fertilizer stocks are higher. CF Industries, the largest North American producer of a key ingredient called urea, the price of which has spiked to a four year high as a third of the world's supply of that passes through the Strait of Hormuz. And while that's good for cf, the shares on pace for their best week in nearly six years. One fertilizer trader warned concerns it means food inflation will go through the roof around the holiday season later this year. They'll keep following that story. We'll be right back. Welcome back. Some possible signs of an AI impact in today's jobs report. The bad report from this morning, we lost 92,000 jobs and information services shed 11K. There may be another indicator that better tracks the labor impact of AI as it's happening. Let's bring in Deirdre Bosa with that story for today's a tech check. Hi, Deirdre. Hey, Kelly. So that indicator comes from Anthropic that actually sees all of this data and where AI is being used. Take a look at this one chart. It comes from Anthropic new labor study. So blue is what I could theoretically do to your job. Red is what it's actually doing today. So computer programmers, 75% is covered. Customer service 70 financial analysts, nearly 60%. But you got construction, agriculture, transportation, near zero penetration. So the physical economy is the last place that reaches. Doesn't mean that it won't get there. But according to the data so far, the last place it reaches. Now look at the gap here. Office and admin, huge blue, tiny red. Same with legal sales finance. That is the second wave. And it maps to where the enterprise deals are landing. Salesforce into a docusign. Thompson, Reuters, they're closing this gap. It's basically also Kelly, the halo trade visualized heavy assets, low obsolescence. Goldman's halo basket, it has outperformed Capital light names by 25 percentage points this year. The company that's actually building the AI just backed it up with these numbers. And one more number from the study that I want to highlight that sort of was really, really interesting to me shows that hiring of 22 to 25 year olds into AI exposed jobs jobs has dropped 14% since chat GPT launch. So companies are not firing people, they're just not hiring the next ones. And that doesn't show up in the jobs data. As it stands, it's great for productivity today, but it's certainly a problem for the labor market tomorrow if these trends continue. What Anthropic is saying and showing us is that they are expected to continue. Yeah. And I thought it was interesting hearing Steve Myron again this morning talking about, you know, we were sort of saying is the immigration sort of decline one of the reasons why we're seeing fewer jobs? And he said, no, look, a lot of the weakness is really in those entry level kind of college grad positions. Yeah. I mean, I've had so many conversations about this lately. I mean, it's certainly a huge topic here in Silicon Valley, but also Washington, Wall street, who's just not replacing their labor forces with these young people. And you know, when I ask, okay, what are young people supposed to do here? The answer is always they're supposed to upskill. Right. But everything is changing so quickly. The idea is use these tools and you're more likely to be hired. But the point is that whether you think it's sort of air washing companies are using AI as an excuse for layoffs or not to hire increasingly, I think you're going to see that AI is a valid excuse, especially with the progress that we've seen just in the last few months.
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C
Yeah.
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That it's going to be mentioned one way or the other. Deirdre, thanks. Appreciate it. Deirdre Bosa, let's get back to Washington now with more news from our Eamon Jabbers on a very busy afternoon there, Eamon.
- [43:47]
A
It's always a very busy afternoon here, Kelly. What we know now is that the White House is confirming that President Trump is going to meet along with Secretary of War Pete Hegseth with top defense contractors at the White House. That meeting expected in about 40 minutes time over at the White House. And we have a list here for you of the companies that are participating in this. They say Lockheed Martin, Northrop, Grumman, RTX Corporation, Boeing, Honeywell and L3Harris will all be in the room for this meeting. The White House has said that this meeting was scheduled weeks ago, so not necessarily they are cautious to point out a response to the war in Iran. But they are saying that this is about the President urging American defense contractors to work harder, produce munitions faster and more efficiently. And that's something the president is always going to do, according to the White House.
- [44:38]
B
Eamonn, I don't know how much of this is confirmed, but I had read that this was specifically because the Pentagon may release a list of underperforming contractors, that those companies who are identified as such would have 15 days to submit a board approved plan to correct the situation or their contract may be terminated. So just as we watch the stocks rallying into what appears to be a secularly bullish time for in demand for them, there's a lot of pressure on them as well. Look at what the President has already said about buybacks and executive compensation. And there's frustration with a lot of these companies and I wonder if we're going to hear some of that this afternoon as well.
- [45:11]
A
Yeah, you're exactly right, Kelly. The President has expressed a lot of frustration with the defense industry. He thinks broadly that they are too big, too well paid and too slow. He wants to see more American munitions made here in the United States at a much quicker pace than they've been made. That concern predates the Iran war. His voicing of that predates the Iran war. And maybe now that we've seen this military action in Iran, you know why the President was so concerned in recent weeks as he continued to hammer that point. He's talked about executive compensation, he's talked about the speed of production. So if you are a defense contractor, you can imagine how well the idea of underperforming contracts being announced publicly will go over. So I would imagine that this meeting, if you're a defense CEO. So walking into this meeting at 1600 Pennsylvania Avenue this afternoon, you've got two things on your mind. One is can we get more contracts? And the other one is can we get off of the President's hit list?
- [46:08]
B
Right, exactly. The names are still green, but we'll see what that brings. Eamon. Thanks. Eamon Javers.
- [46:14]
C
You bet.
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B
My next guest sees opportunity in the defense sector amid other spots. Victoria Green is here on set with me. She's G Squared, Private Wealth CIO and a CNBC contributor. I mean, you've been with me this afternoon. It's just like boom, every time we turn around, oil's at 92, then it's lower. This FT headline and now Bolt. So let's take a step back there. You do see opportunities with some of the defense names. Is there one in particular or across the board? Well, I think there are across the boards. There's a couple I really like. One of them is ati. They're actually a specialty materials maker. They're not Quite a defense contractor, but they do a lot with defense, especially for jet engines. So when you think about how much these metals have to survive heat, they have to survive stress, they have to survive pressure, high temperatures, high pressure. All of this stuff is done by a specialty manufacturer. ATI is the net beneficiary. So if you go down the food chain of who's really supplying all these parts for missiles, for helicopters, for airplanes, it's ATI next. I do like rtx. I also like hunting and Ingalls because there's not a lot of submarine manufacturers out there. And I think they're going to do great rtx, obviously with the missiles and aerospace. They've got Pratt and Whitney as well. Really well diversified contractor. Is there a risk that there's more pressure from the White House? Whether it's to speed up processes or, you know, any that's going to possibly pressure margins or speed up, you know, put. But make the businesses have to speed up a little bit and maybe make them a little uncomfortable. I think they'd love to speed up. I don't think the problem is that the defense contractors don't want to produce more. I think it's a supply chain issue. They need the specialty engineers, they need the manufacturing, they need the parts and the pieces. I don't think they're sitting around twiddling their thumbs, not making the missiles that we need to make. I think they're saying, hey, look, this is a real problem. We've been trying for a while, ever since 2020 and the COVID supply chain crunch and then they've been supplying missiles for Ukraine and Russia. Everybody had this need for more and more defense contracting supplies. So it's not like we've been able to stockpile anything. So we came into this maybe a little bit short on stockpiles. Now we're rapidly moving through and burning through some of our supplies. I don't think there's any way we can speed this up short of a massive push from the government to get behind these defense contractors and help them and help alleviate some of these supply chain constraints. They have let me move from one sort of, you know, potential pressure spot to another. And the other one is what's going on in private markets. And the reason why is that, look, to some extent these things happen. Who could have seen AI coming as a reset? I don't need to blame them, you know, endlessly. But they do have a problem now with investors trying to get their money out of funds that are supposed to not be that liquid. How do we keep this from spreading. And would you invest as a. Just a trader? Is there a trader investment to be made now that some of these like look at a blackrock. Right. I mean this name has been marked down 20, 25% on some of these concerns. Yeah. So first off, not everything's created equal in this land. But I am extremely worried about private credit. And I think you put out a great note of saying, hey, is this all of a sudden all these tech loans, are they going to be the new soprano? I'm sitting here saying I think private credit is the new so prime. I do think potentially we can keep it a little contained because that was their whole rise. Right. They said, oh hey, these banks aren't making these risky loans anymore. We're going to make these risky loans. Then came the flood of capital into private credit. And you're talking now it's a $1.5 trillion market and growing market. And then there's been a lot of issues with the opaqueness with the rating. We've all of a sudden seen bonds go from 100 to zero. They're not marking them down maybe. So I see this as a big problem. I see would steer clear. You're not looking. I wouldn't touch them. I know there's some discounts in there. I know you've got some BDCs trading at discount to. Now we have 10 seconds. Give me a name you like. Give me a pause. You did see a guess of Bolero. Man, you got a Valero. Really? Yeah, absolutely. All right, Victoria, thanks. Appreciate it. Until next time. We'll see what that brings. Victoria Green. That's it for us here on the Exchange. Much more to come when Brian Sullivan and Power Lunch pick up coverage right after this quick break. Why have we asked our contractor we found on Angie.com to be our kids legal guardian? 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