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Senate's Shutdown Deal, a "Rare" Vote of Confidence, and 50-Year Mortgages 11/10/25
00:43:25
The government could reopen as soon as this week, according to one policy strategist. Deutsche Bank sees 20+% upside in MP Materials. Plus, are 50-year mortgages the key to jumpstarting the housing market?
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Welcome to the exchange. I'm Morgan Brennan in for Kelly Evans. Stocks are higher with a potential end to the government shutdown in sight while the AI trade is back on. Tech leading the gains with big moves for chips. Nvidia, Micron, Broadcom, all higher. Big reversal from last week. Names led the market lower. Nvidia up 4%, 4 1/2 percent. Right now. The SMH semiconductor ETF on pace for its best day in about a month. Gold also making a comeback, trading near the highest level in two weeks and that's pushing the gold miners higher as well. Those are up about 5% or more across the board. Speaking of comebacks, bitcoin catching a little rally after dipping below 100,000 for the first time since June last week, now trading around 100 $506,000. But we beginning was Washington, a key procedural hurdle that's been cleared in an effort to reopen the government. Emily Wilkins joins us from Capitol Hill with what's been accomplished and perhaps more importantly now what is next? Emily morgan, that is indeed the big question up here on Capitol Hill. Well, look, we did have a major breakthrough last night. You had eight Senate Democrats join Republicans to take the first step to reopen the government. And while the Senate and the House still need to take additional votes, the shutdown is poised to end. This week. Speaker Mike Johnson said that he thinks that the House has the votes to go ahead and to pass the package that the Senate has. And let's get into that agreement, just to be clear, it would fund part of the government, including agriculture, snap veterans programs for the rest of the fiscal year. So all the way into next September, the rest of the government that's going to be funded under a stopgap that will go until January 30th. And then there also is an agreement that reverses the House attempted firings of federal employees and gives federal employees the back pay they missed during the shutdown. Plus, Senator John Thune promised Democrats a vote on extending those health care tax credits. And now the race is on, of course, to try to find a bill that can do that before the end of the year. Now, some Senate Republicans told me that they want to find a path forward on the credits. They know that it's going to hit their constituents with higher costs. But many House Republicans, they're very leery of voting for anything related to Obamacare at this point. Spoke with Senator Tim Kaine. He was one of the eight that did wind up switching the aisle voting with Republicans. And he said that he thinks Republicans are going to come around to the idea of extending those tax credits as insurance premiums spike.
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If they don't fix this. Here's my prediction. They're going to look at last Tuesday's election as a good night compared to what they're going to see next year.
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Thune said that Democrats can request a vote on the bill of their choice by mid December, but Speaker Mike Johnson has not committed to putting any such bill on the floor. That, of course, is raising a lot of concerns among Democrats about exactly what is going to happen next. And Morgan will be keeping a very close eye on lawmakers as they try and figure out a path forward on these tax credits and whether they can actually get the votes for it. Yeah, I just want to go back to something you mentioned, and that is federal employees, because we saw furloughs, we saw layoffs. There's been debate about back pay. This would essentially establish that those jobs are preserved and that those employees get paid. Yes, Morgan, and that was kind of a key thing for Senator Kaine in particular to get his vote on this. It would make sure that they get back pay. We are told that as soon as Trump is able to sign the bill to reopen the government, that federal employees should be receiving their back pay as quickly as possible. Of course, that's under the 2019 law. We will see exactly how quickly the White House is able to move on this one. Got it. Emily Wilkins, thank you for bringing us the latest in this developing story after what I'm sure was a very busy working weekend as well. Well, my next guest sees the shutdown ending by midweek. And with Senate Democrats folding on their core health care demands, ACA subsidies are likely doomed. Joining me now is Wolfe Research's Tobin Marcus. Tobin it's great to have you on. It's interesting because the managed care companies, those stocks are all trading pretty dramatically lower today. Is that the takeaway that these ACA subsidies, or at least some sort of vote that gets put into place in time to add stability to that market, that that is doomed.
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So certainly there will be a vote as, as we just heard that has been promised to Democrats by Senate Majority Leader Thune. But that vote, I think very likely will fail. I think that's going to be a vote on Democrats chosen policy. They thus far have not succeeded in getting Republicans on board for any of that. So I think them having capitulated on their kind of core health care demands is one piece of it. But the bigger thing that's made us more pessimistic over the past 72 hours is this hard negative pivot that President Senate Republicans took on the ACA subsidies over the weekend, President Trump calling instead for, you know, using the same amount of money to pre fund FSAs or HSAs for, for consumers directly. I think that's a plan with a lot of questions about it that's not going to have bipartisan buy in and probably leaves the two parties at loggerheads.
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Interesting. What do you think brought more Democratic senators to the table here? I mean, because Senator Thune had basically suggested this and made a promise like this in the past as well. So what do you think is different now?
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Yeah, that's right. Pretty much this is the same deal that's been on the table for the past several weeks in terms of the Republican offers to Democrats. So I think we saw a few things. One, there was, I think, real anxiety building about some of the consequences of the shutdown that had been intensifying in terms of snap, in terms of interruptions to travel as we head towards Thanksgiving, even with, you know, Republicans taking a lot of the political heat. You know, some of these moderate Democratic senators weren't willing to hold out on that. And then I think with President Trump having made this sort of hard pivot away from the possibility of a bipartisan deal on the ACA subsidies towards these sort of heavy calls for Senate Republicans to do away with the filibuster to end the shutdown, Democrats basically gave up on the possibility of getting a better substantive outcome. And so they figured they just, you know, sort of call it quits, try and take a political win to the extent that they can and not keep holding out for substantive concessions.
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Are lawmakers in the House going to be a wild card here or should we really just factor in should investors expect that we are going to have an end to the shutdown by the end of the week?
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I think it's a fairly firm expectation that we'll have an into the shutdown by the end of the week. You know, probably somewhere between Wednesday and Friday. But the timing is still developing. President Trump is going to need to lean on House Republicans to get this done because there's not going to be a lot of Democratic support in the House. House Democrats are going to be pretty angry about this, but they'll probably get a handful of House Democratic votes. And then more importantly, I think the vast majority of House Republicans will follow the president's lead on this. So some possibility of a negative surprise, but not a high possibility.
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Yeah, I want to go back to this idea of furloughs and cuts to federal employees and this idea about back pay. The fact that all that seems to be getting restored potentially through this deal via lawmakers. I mean, how, how much of a setback is it, if at all, to the administration given the fact that this was seen, for better or worse, as an opportunity to make cuts to government?
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I always thought that that was more rhetoric than reality in terms of the idea that you could use the shutdown as an occasion to do mass firings. There was a lot of talk about that. President Trump was posting these videos of OMB director Russ Fot is the grim reaper and talking about that, you know, sort of truly mass firings. But ultimately the ability to do reductions in force is not affected by the shutdown. They were able to do that before, they'll be able to do that after. And so what we've seen over the course of the past eight months since he ordered agencies to prepare for riffs in the spring, is that they don't really want to do mass firings. And so I think that's why we saw, despite all the sort of sound and fury, we only ever saw about 4,000 workers dismissed, indications that might get up to 10,000.
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So.
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So, you know, reversing that is not nothing. But ultimately the scale of this effort was just not that big.
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Got it. Some key context there, especially given the fact that the bond market has been concerned about the fiscal picture. Tobin Marcus of Wolf Research, thank you. Ending the record long shutdown would remove one risk for the market, add another tailwind to the AI trade. That trade is back on today after leading the declines last week. And while my next guest says the trajectory of the story is volatile, he believes in it long term. He runs the Tech Heavy GMO US Quality ETF. Now this is up 16% this year thanks to the strong performance of its top holdings which include Lam Research, Broadcom, Alphabet, Microsoft and Apple. Joining me now is Tom Hancock, portfolio manager of the fund. And it's great to have you on. And let's start right there. The fact that we are seeing a recovery here, a rebound here in some of these big tech names. Does it have legs?
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Yeah. Thanks Morgan. Well, it's kind of funny right to see these stocks where what really matters is how successful AI is, what the end uses are five to six years from now. Moving around so much on questions about whether the government reopens in time for there to be Thanksgiving travel or not. That's not really what matters. So when you see selling on that, I think that's a good buying opportunity. On the other hand, if the market gets too excited about risk on that's probably a good time to take some profits. It's been a nice trading sector lately, really.
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So would you be buying in here when you have an RSI that's approaching oversold? For some of these names like Microsoft, Meta, Palantir, Nvidia, I could go down the list.
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Yeah, we'd certainly be looking at buying more. I think we don't like every name in the sector to be clear or maybe to put it slightly differently, we do expect a lot of this kind of volatility going forward and the real maybe fundamental risk that could come from the volatility is that the funding dries up if just risk aversion rises to a level where investors aren't willing to support the capex. So where we want to buy is companies where we feel like they can weather that storm. The hyperscalers particularly is where we like to position around trade.
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There's been a lot of focus on funding, I guess. How acute is that risk and how could that play out if it were indeed to come to reality?
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Well, there's a lot of money needed and there is a lot of money available. And one thing to think about is a lot of people who are spending the money. Stocks like Meta and Microsoft and Alphabet do have a very diversified business. They have very strong balance sheet. They have very long investment horizons too. They're not just going to panic over short term issues. So I think for most companies or at least most of the market cap, it's going to be fine. There are some companies where they're taking on a little more debt and where maybe they're a little bit different, less differentiated with their practice. So again you have to be A little bit careful about, we think, biasing toward the quality end of the trade.
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If we expand beyond tech, what are the other sectors you like?
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Well, health care is probably the big one. I heard your previous guest talking about that. And some of those managed care names that maybe are selling off a little bit now over the ACA subsidy concerns. ACA is not a big profit pool for these companies. So any, any overreaction to that I think is a buying opportunity in a damaged sector. But we also like the big, the big pharma names and we think we're seeing with the Pfizer agreement, with the GLP1 agreements that there's a lot more bark than bite to some of the rhetoric coming out of the administration. Those stocks have been underperformers too. So that would be the other sector where we really have a lot exposure in the strategy.
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Got it. So let's name some names here because you did come with some actual picks.
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Actual picks. Well, our biggest holdings, Microsoft, I mentioned them. Alphabet, I kind of like to call out them because they're a little bit maybe unique across the AI ecosystem and that they go all the way from end applications with themselves with, with search and YouTube down to kind of infrastructure. They have their own TPU chips that give them a cost of goods advantage over other people who are using Nvidia chips. They also have their own proprietary data, they have their own workloads, they have their own technical expertise. So if you're thinking among the LLM providers, I think that's really a great place to position. And by the way, some of those regulatory headwinds are kind of more in the rearview mirror than not. We saw Apple paying them actually to get access to Gemini rather than the other way around which we previously had with search. So one of our favorite AI stocks, no doubt.
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Okay. Tom Hancock with gmo. Thanks for joining me.
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Thank you, Morgan.
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With all the major averages higher right now. Well, coming up, MP Materials riding its first three week losing streak since May, although shares are higher today. That's after Deutsche bank upgraded the name to buy, calling it the only player in the west that's a fully integrated rare earth company backed by the US Government. We're going to speak with the analyst behind that call, next. Plus an exclusive interview with the CEO of NextEra. His first TV interview since the company struck a deal with Google to revive Iowa's only nuclear power plant as a energy demand surges, surges. You don't want to miss that. One of the largest utilities in the world, the exchange is back after this.
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Learn more@ multicare.org the heaviest metal credit card of all time, rumored to be one of only 18 in existence. Plated with the very same tungsten that forged the International Space Station and wielded at business dinners like a samurai sword. It's a classic corporate power move. But the real power move having end to end visibility on your most critical shipments. FedEx the new power move.
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Welcome back to the exchange. Shares of rare earth miner NP materials jumping 9% right now as Deutsche bank upgrades the stock to buy. The firm calling NP a buying opportunity, citing its status as the only fully integrated rare earth company in the west that's also backed by the US Government. This call comes as China suspends some critical minerals export curbs to the us for more let's bring in Corinne Blanchard, Lithium, solar and clean tech equity analyst at Deutsche Bank. Corinne, it's great to have you on and the upgrade for MP Materials. Why and why now? Right? Thank you for having me. Why now? Look, I think we are finally seeing the stock trading on a fundamental value. We have seen obviously a lot of euphoria and excitement around the stock over the last few months and we're really seeing that now. It's represent a good entry point for investor looking to gain exposure to a great company in a great thematic and in a great sector here in the us. So I think MP Mattel check all the boxes here and that's the rationale of our upgrade here. Yeah, I spoke to MP Materials founder and CEO Jim Latinsky in the middle of earnings last week and one of the things he did say was that this current quarter is going to be an inflection point in terms of cash flow, in terms of their ability to ramp production to commercial levels for some of these magnets. Do you see it the same way and if so, how does it set, set the stock up for 20, 26 and beyond? Sure. No, I think I would tend to agree. We obviously now started to see the inflation pound from the, from the deal they did with the government a few months ago back in July. So starting this quarter you will see AMPI benefiting from a hundred dollar per kilo price or like a floor price in support which is almost double versus what we see in the market price. So that's a significant inflation point and I think we should start seeing it come in this quarter and throughout 26. So I think that's an exciting time to, to look at the stock. There's obviously a lot of excitement, a lot of hype around any, any of the miners that are using the term rare earths right now. Now here in the US how much of this is hype versus reality? When you look across the sector and some of the peers and competitors to MP Materials? That's an excellent question and I think that's definitely an area that US investor I've been trying to, to get a good idea as well. Look, I think when you have such a deal in a structure of partners partnership that the US government gave to mp, if you are from close or far and you have that ability to maybe operate in that same sector and maybe benefit for a similar structure, I think you're going to do the best that you can to try to, to go out and prove the market that you have those resources. Truly I believe that MP is as we said in the report, they are the only one being fully integrated from having their mind in California with the Mountain Pass assets to heavy refining to producing magnet and you know, at some point going into the recycling. So I think if you want the best in class, you probably go and you look at NP material and probably not necessarily spend a lot of time on some of the other name. Yeah, I mean I guess if you look more broadly across not just rare earths but critical minerals as well, how much does this serve and this deal between the US government and MP materials perhaps being a big part of it, how much do you expect this template to move forward given the policy we do see coming out of the government right now? I guess just how, just how key is it? Just how key is somebody speaking in my ear right now? Excuse me, just how key is it right now, the policy piece of this to be able to see, to see the investment piece play out? Yes, no, I think, look, we have definitely seen a pretty big support from the US government into two worlds critical mineral I think the first one was definitely with NP Material we have seen with some lithium companies such as Lithium Americas. Look, I would say probably our view is we are unlikely to see the same kind of deal that we did see for MP with such a support in terms of pricing and in terms of volume and in terms of the commitment between between the two party. I do not necessarily think that we will see it again for some older because I think again it was very much like a unique situation for amp and a large focus of US versus China trade war, tension. So I don't think to the same magnitude but I think there is some pieces and we're seeing it again with Lithium America where we've seen a little bit of 5% equity being taken in exchange of some like debt or like interest payment being delayed. So I think that's probably kind of the kind of deal that you will be seeing going in the future. Okay, Corinne Blanchard of Deutsche bank, thanks for joining me. Thank you. With shares of NP Materials now up about 10%. Well coming up, Asian Internet earnings are on deck. This week we've Got SoftBank, Tencent, JD.com all set to report there's a growing divide in the AI arms race between the US and China. We're going to tell you what it is, what it means for the future funding that's ahead.
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Welcome back to the exchange. Markets right now are higher this Monday afternoon. You can see the NASDAQ is the outperformer as tech leads the charge once again up about 2%. Right now the S&P is up 1.3%. 6817 as your level there. And the Dow is up 250 points. We're seeing yields higher across the curve as well. But here are some of the movers specifically this hour. Palantir, that's number one name in the NASDAQ 100 today. Those shares rebounding big from their worst week since early April with their best day today since August. Those shares are about 9% right now. Diageo shares are higher after touching a 13 year low last week. Week, the company announcing former Tesco CEO and longtime Unilever executive Sir Dave Lewis will become its new CEO. That's effective January 1st. Bernstein praising the move, saying Lewis has, quote, the right toolkit for Diageo. Lewis is known for his cost cutting and innovative marketing, earning the nickname Drastic Dave. Over at Unilever, you can see those shares are 5% elsewhere. Cracker barrel, well, that's down after two proxy advisory firms said shareholders should vote against at least one of the chain's board members in the wake of its botched rebranding. However, neither firm suggested the CEO should be fired. Those shareholders are still down about 50% since the restaurant first announced that rebranding back in August and you know, generated quite a bit of public outcry. Those shares are down about 7% right now. Now let's turn to Bertha Coombs for a CNBC news update. Bertha Morgan, the FDA announced today that that hormone replacement drugs to treat menopause.
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Symptoms will no longer carry a black.
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Box warning about the possibility of stroke, heart attack and other serious risks.
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Supporters say they want labels removed because they discourage some women who could benefit from hrt.
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Critics argue the FDA should have convened its independent advisers to publicly consider any revisions. The FDA director, Kash Patel visited China last week to hold talks on fentanyl.
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And law enforcement issues, according to NBC News. During talks with President Trump last month.
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Chinese leader Xi Jinping agreed to ramp up China's efforts to stop the flow of precursor chemicals. President Trump reduced China's fentanyl tariffs the next day. Reuters reports Patel had talks with Chinese officials on Saturday and stayed about a day. And YouTube, YouTube TV is offering its customers a $20 credit amid a contract dispute with Disney. Disney owned channels were pulled October 30th.
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After their last deal expired. Both companies say they are negotiating in good faith to reach a new deal.
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Is that how much their Disney franchise is worth?
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20 bucks for customers.
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That's kind of an interesting price. Ah, maybe we'll find out more. With earnings this week, who knows? Bertha Coombs, thank you. Coming up, NextEra Energy shares are flat since announcing A deal with Google to restart Iowa's only nuclear facility. The tech giant promising to purchase energy from Nextera for the next quarter century. After the break, we're going to speak exclusively with NextEra CEO in his first TV interview since that deal was announced. The exchange will be right back. Welcome back to the Exchange. Shares of NextEra Energy climbing more than 19% over the past two months. The energy company recently inked a deal with Google to restart Iowa's only nuclear power plant as energy demand from artificial intelligence continues to grow. For more on this, let's head down to Hollywood, Florida where our Brian Sullivan is standing by with NextEra CEO John Ketchum at the Edison Electric Financials conference. Brian, take it away.
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Yeah, I mean the 60th year of this conference. Morgan, thank you very much. First time that CNBC has been here because so much attention now is around electricity, electric and utility and this thing called AI which apparently we've talked about a few times. We're pleased to be joined now by John Ketchum of NextEra Energy. First interview by the way, since you guys announced that massive 25 year partnership with Google to restart the Dwayne Arnold nuclear facility in Iowa. So John, great time to talk to you. Thanks for joining us. Great to be here. I'm going to ask you, I'm going to start off with a question you are not going to answer, but I'm going to ask it anyway because I have to, which is is how much is Google paying you for that power? I can't say, Brian, but what I can tell you, this project is going to have a huge economic impact on Cedar Rapids. $9 billion of economic impact, 2,000 jobs. Great outcome for the state of Iowa and for the city of Cedar Rapids. One of the real benefits of the partnership, is it fair to say without telling because I know these are trade secrets, right? But the power is going to be, I would guess, a fair way. You're not going to reopen the Duane Oral nuclear plant which has been shut down for five years unless you're being compensated fairly. Will this be accretive to earnings? Yes, it'll be accretive to earnings. We did say it should add up to 16 cents of adjusted EPS. So it will be accretive on your shares. So it's there. How about this? Was it a difficult discussion with Google or was it it that we need the power? You've got the power, let's make it. Well, we originally put this out for a request for proposals. So we had competing offers and Google was the Winner in that process. And we have a great partnership, a long standing relationship with Google. And in addition to this deal, we're working with them nationally on a collaboration around advanced nuclear technology, small modular reaction. So back to this original deal. You said multiple offers. I believe that's public information. So you know, you have this center. It's been shut down, but you can reopen it in a couple of years. How much demand was there for this nuclear power? There was a lot of interest because it's an unusual situation. There were only three plants that had actually been decommissioned that could then be recommissioned. One of them was in Michigan, another Palisades. Yeah, Palisades. The Crane Energy formerly known as Three Mile Island. Three Mile island rebranded that probably a good idea to rebrand. They rebranded it and then Dwayne Arnold. So those are the only three options. I mean you guys are holding the cards. That's it. Well, it's a great, it's a great opportunity. It's a great opportunity for us. Great opportunity for Google, great opportunity for the state. Okay. You announced your earnings are up 8% year over year. You're spending over 100 billion I think, think in capital spending. Where's that money going to go when NextEra spends? You're the biggest power producer, I believe in the United States. Where does that money go? Yeah, so we're the biggest power company in the world. The money goes short change. It sure changed me, Brian. You sure changed me. But it's going everywhere. We're, we're truly in all the above energy companies. So it's going into gas fired generation, it's going into the nuclear restart, potentially into small modular reactions, reactors, transmission, gas pipelines, renewables, energy storage, you name it. You guys are the biggest, I want to get it right. Renewables producer also in the world. You had a spin off, you had Nextera Partners spun that off. New name, new company. That's been almost a year now, but it's sort of semi related. What's the growth in renewables from here look like? Because wind is, wind has gotten the wind knocked out. Right? Right. The growth for renewable still looks really strong because we need as many electrons on the grid as possible. So our renewable business is doing really well. So is storage. But we're also coupling our renewable solutions together with gas fire technology, together again with nuclear bringing the bare gas pipelines, transmission. What's happening in the market is we need a combination of, of all these technologies working together to really fuel and jumpstart and get as much power on the Grid as possible. And that's what we're trying to do. We are leading the energy dominance agenda and trying to do our part to help America. One of the only companies in the US that has a 50 state footprint. We do business in all 50 states. And some are wondering here because every investment banking firm in America is here right now. Now, I mean, it's really unbelievable how many Wall street representatives are here. Because you guys, you don't worry about that. A lot of representatives are, you know, spending tens of billions of dollars hoping for deals. Your stock's up, you got a lot of firepower. I know you like to make deals. Do you see a deal in next era's future, maybe buying another big power producer? Well, look, I mean, M and A is always on the table. It's always, you know, look, being the largest company in the sector, it's always an option. And we have the ability, if we were to ever look at a merger and acquisition opportunity to go in and bring costs down immediately because we're known as one of the lowest cost power producers in the industry. Somebody who does it all. I have a lot of scale advantages, but we don't need it. We have a great organic growth platform as well, I believe. My colleague Morgan Brennehead, I hope you can hear. So Morgan, go ahead. Is I have popped out, but I believe it's back in. Yeah.
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Oh, okay. Well, I appreciate that. Let's, let's take a swing at this. John, it's great to speak with you. I, I just want to go back to the, to a data centers for a second because there's a group of Democratic senators are basically taking aim at AI data centers right now and they're raising questions about the role this infrastructure is playing to push power prices up for consumers. So I just want to get your thoughts on whether AI data centers are in fact pushing those power prices up for consumers and how to mitigate that.
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Well, what we're doing is we're helping data centers and hyperscalers bring their own generation so they're not having any impact on local power prices where they're locating. Duane Arnold is a perfect example of that. We have worked collaboratively with Google to bring Dwayne Arnold back. And Google is paying for the power, not the ratepayers in Iowa. So to the extent we can form partnerships with hyperscalers to bring their own generation to power their data centers, that's really the right outcome and the right solution. Yeah, we'll leave it there. John Ketchum, CEO of NextEra Energy rolling with it. I appreciate that. You know, the TV thing with all the wires, it's like running a utility. It's not, it's a lot more simple. But we appreciate it. John Ketchum, thank you very much for your time. You know, and Morgan, coming up in Power Lunch will be live from here with the CEO of Duke Energy as well. You're gonna hear from PG and E's Patty Poppy. We're going to talk to them about the, the important issue you just brought up, which is we all want chat GPT but we also don't want our electricity bills to go up. So we'll, we'll talk about how to thread that electric needle. I've done the electric slide. I don't know about the electric needle, but we'll talk about it coming up.
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Well, boogie woogie. Looking forward to that, Brian Sullivan. And we'll see you on overtime as well. And our thanks to John Ketchum too.
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Thank you, thank you, thank you.
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Well, as you just mentioned, we'll see Brian as well on closing bell over time. Calvin Butler, the CEO of Exelon is going to join us. That kicks off at 4pm Eastern as well. So don't miss that conversation either. Coming up, Chinese Internet stocks outperforming the mag7 so far this year. There's a key difference in how Chinese companies are approaching AI compared to their American counterparts. We're going to dig into that ahead of results from the likes of Tencent and JD.com this week. The exchange will be back after this. The trade is back in the green this week despite fears of a debt fueled bubble. This is banks reportedly lend Oracle $18 billion for a new data center. Deirdre Bosa is back. She dives into the growing divide in AI in today's, today's tech check. Hey Morgan. So Oracle, that's just the latest Megadet deal really underscoring an emerging new narrative in this race at large American players, they're building on borrowed money while their Chinese counterparts, they're building on efficiency. Put another way, it's massive data centers financed through private credit and bond market. That's the American way versus leaner infrastructure, far less capital. That's the Chinese way. Now the growing divide can be seen clearly in this chart from Goldman's China team over the weekend end. You've got US cloud giants on the left projected to spend nearly $700 billion on data centers by 2027. China's biggest players by contrast, Alibaba, Tencent, ByteDance, Baidu are together expected to spend just under 80 billion. That is a 10 to 1 gap in capital spending for systems that are performing at roughly the same level. Chinese models like Kimmy K2 and Alibaba's Quinn, look at this. They're ranking alongside American top models on benchmarks in the that's despite that massive difference in investment. Morgan, this all fits into a story that's been emerging from China's scene since the beginning of this year ala deep seek. But this could start to attract more attention as the trade starts to wobble. Of course, the next leg is being built on these Oracle type deals. More debt, more complex financing. China's Internet giants, they're just about to report earnings over the coming weeks and their fresh capex outlook. So that contrast could again make investors or skittish and it could lead them to question what these trillion dollar promises from our giants are actually priced in. Yeah, I mean this is such a, this is such a key debate right now, Deirdre, but I think it also raised the question and that is the methodology. Right. Because when you look at China, they've just been going whole hog for many years in terms of power generation and building out that infrastructure and the government subsidizes so much of it. So it's a different model I guess to begin with to then be able to build out all of this AI compute for versus here. It's a great point in terms of energy, which we know is a crucial component of training and even inference when you get down to it. China's far ahead on that. But also just these models, I mean it's the power really of open source is that you're able to do a lot more with a lot less. Those numbers out of Kimmy too, which made a stir in some tech circles last week, trained it for under $5 million again, you can question that. But the power of distillation allows them to do it for a lot less money. And over here we're spending, you know, hundreds of billions of dollars. At what point do you say good enough is good enough or do you go for AGI, which is still a moonshot and still, you know, unclear. Yeah. And seems to be a very American focus versus the rest of the world. Trader Bose, it's so good to have you back and at such a quick key and crucial moment to break all of this down as it evolves so quickly in real time. Thank you, Morgan. Happy to be back. All right, well, coming up up, the discretionary sector up nearly 40% since the 52 week low. It hit right before President Trump paused those so called liberation Day tariffs. A new CNBC survey indicates that positive momentum could continue this quarter. We're going to dig into the results when the Exchange comes right back. Welcome back to the Exchange. A sign of hope for holiday spending in the latest CNBC NRF Retail Monitor. Steve Liesman joins me now with the number first, Steve.
- [36:27]
A
Hey Morgan. Consumer spending bounced back in October after a pretty sharp fall off in September. We saw gains in the CNBC and our retail monitor across most sectors and added up to a strong start for retail in the fourth quarter. The retail monitor, which is powered by actual credit card spending data from Affinity Solutions, shows retail ex auto and gas up.06 compared with a 0.7% decline in September. The year over year rate edged down a.5% from 5. 4. We take out restaurants as well and that comes up with core retail. That rose.06 up from a.05 decline the year over year rate dropping to 4.9% from 5.7%. Still a healthy year over year rate. NRF economists note quote, recent economic data has been mixed, yet consumer spending remains solid, supported by wage growth, outpacing inflation, historically low unemployment and wealth effects from the strong stock market valuations. Nine of the 12 sectors were higher, digital products leading the way, followed by clothing and accessories, restaurants and bars, food and beverage and health and personal care. All did well. Building and garden supplies were down one of just three negative sectors that included gas station sales as well. The critical question in retail right now is the split between lower and higher income shoppers and how goods, inflation, tariffs and initial signs of a cooling in the job market will affect that holiday spending. Those factors did not hold back overall spending gains in October. Morgan and one of the big issues is whether a good October does bodes a positive November and December.
- [37:53]
B
I guess we're going to have to find out. Steve Liesman, thank you. My next guest says overall trends remain stable. His consumer survey suggests spending decelerated in October. Joining me now is Simeon Gutman, senior retail analyst at Morgan Stanley. Simeon, it's great to have you on and I love the report we just got from Steve because I think that's a good place to start. And that is the state of the consumer right now. How in real time coming out of October where we had a dearth of data and how it sets us up for the holiday season.
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A
So the consumer stable, that was our headline. You've had a very bifurcated and lumpy 2025. The beginning of the year was tough. Weather didn't help. Then we had tariffs we had a lot of spending that got concentrated into the summer months. We had a little bit of a decel and now we're dealing with a lot of different factors. Government shutdown, snap delays, we're lapping tough weather comparisons. We had hurricanes last year so it looks like the consumer is fine overall but we've had some bumps. And October our data looks a little bit bumpy. But for all of those reasons that I just pointed out.
- [38:57]
B
Hmm. So where consumers spending and how much of this is a reflection of higher prices and having to spend more on the tickets themselves versus strong or we'll say stable demand.
- [39:08]
A
Demand first. They're spending everywhere. But you make a good point. What we're seeing in data especially across the consumable category. So think grocery, think about dollar stores. The amount that tariffs are inflating price is exactly offsetting how much units are going down. So we're seeing a total level of spend that's relatively stable. But you're seeing the consumer make these tradeoffs. They're buying fewer units to account for higher price. The categories that are healthy Steve pointed out the home home category is a little choppy. That makes sense. We don't have a lot of home turnover right now. Consumables are healthy. Consumer electronics, healthy. Sporting goods, healthy. I would say most categories look pretty healthy. And if any, if any category home furnishings are very healthy. We had among the highest same store sales of the entire home furnishing universe that we've had since the post Covid period.
- [40:03]
B
Our consumers are consumers shopping with things like tariffs and potential impact to prices in mind or are they sort of shopping the way you would expect them to shop at this time of the year in general.
- [40:16]
A
So we published this wave 70 of our consumer Pulse survey. It's a Morgan Stanley research wide survey and it basically jumped by 10 points meaning consumer intention because of spending with tariffs jumped by 10 full points. Headlines. We haven't seen that worry actually since April. Look back in the survey history when we had prior tariffs. So it's definitely on consumers minds. You're going into holiday season and we're probably stepping into a higher run rate of tariffs in the next, call it couple of months. The July tariffs are going to run through retail and they're going to hit pricing in the next couple of months into early next year.
- [40:51]
B
So what are the names that you do like in this environment?
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A
So we like and continue to like Walmart. The story of retail over the past couple of years has been this narrowing of market share. We call it the funnel. So Fewer players are garnering a bigger concentration of incremental new market share. Wal Mart is one of the biggest winners of that. Plus, as they get more of that market share, it's funneling through into greater and greater rates of profit. So their ability to grow margin while the sales dynamic is occurring is present. The market knows this. But, but Wal Mart's growing faster in general merchandise categories which are more lucrative for them. So they have this new flywheel. It's the, it's the 2025 version of their flywheel that's working. They're also a relatively durable stock in, in tougher times if that's the direction the economy goes. So we still like Wal Mart. We do like Costco. Costco is that durable compounder. The higher income consumer hasn't really shown as much stretch than other sector, other consumer segments. And Costco does provide monthly sales. Their business is relatively stable. And we like the optionality that home improvement gives. It's been a couple of tough years for home improvement. We know we're waiting for more favorable mortgage rates. In theory, the Fed is helping that cause moving in the right direction. But it doesn't feel like demand can get any worse. So you get the optionality if demand rebounds. Both Home Depot and Lowe's look like pretty interesting place.
- [42:17]
B
Okay, some names for our viewers to consider. Simeon Gutman with Morgan Stanley. Thanks for joining me.
- [42:22]
A
Thanks for having me.
- [42:23]
B
Coming up, FHFA director Bill Pulte calling 50 year mortgages, quote, a potential weapon in the wide arsenal of solutions for making home ownership accessible for younger people. We're gonna dig into the numbers and what it would take to actually make a 50 year mortgage a reality. That's next. Welcome back. Major averages hovering near session highs right now, as you can see right there on your screen, the S and p is up 1.3, almost 1.4%. And the Nasdaq is the outperformer, up more than 2%. Right now as Mega Mega Cap sees mega gains, the Trump administration floating the idea of a 50 year mortgage to start the housing market or to jumpstart the housing market. Diana Olek has the details. Hi, Diana. Hey, Morgan. Yeah, it's an attempt to make home buying more affordable. President Trump floated the idea of a 50 year mortgage in a social media post. Now, the purpose of a longer term mortgage would be to lower the monthly payment for homeowners. The longer the term of the loan, the smaller the principal needed each month to pay it off in full. So using the latest median price of a home, $415,200 according to the Realtor. And the current interest rate of about 6.3% according to mortgage News Daily. I did some Math. On a 30 year fixed loan with 20% down payment, the monthly payment of just principal and interest would be $2,056. Now if you raise the length to 50 years at the same interest rate, that payment would be $1,823. That's a savings of $233 a month. Homeowners, however, would not build equity as quickly because their principal payments again would be smaller. And the amount of interest paid to the lender, that would be 40% higher. But the real question is, can Fannie and Freddie even do this? Analysts say yes, it is possible. But a 50 year mortgage does not currently meet the definition of a qualified mortgage under Dodd Frank, which provides investors with a backup from Fannie and Freddie if the loan goes bad. But regulators were given the authority to change that in order to issue mortgage to ensure mortgage affordability. But that could take up to a year according to Jerry Barrett Seaberg of TD Cowan, because you have to pass it through Congress. Seberg notes that really we just need more houses. Without more, home prices will continue to be inflated no matter what the mortgage rate. Morgan, I mean, it's a fascinating idea, but I'm also going to ask a very basic question here, Diana, and that is do we have any idea what the interest rate on a 50 year fixed rate mortgage actually would be? Well, that's a basic and incredibly important question because look, we don't know what it would be because it depends on investor demand for this new product. But I will say that the average rate on a 15 year fixed mortgage, which is of course shorter term, is 66 basis points lower. So that would imply that if you had a 50 year, that is a longer term mortgage, that the mortgage rate would be higher because investors would want to get more money out of it knowing that you're not actually going to keep that home for 50 years. So that kind of hits the affordability and issue. Okay, so maybe if not a 50 year mortgage, because it sounds like there's a lot that would have to happen to actually get there and bring it to fruition. What could be, and I realize we got like 45 seconds. What could actually be done to bring affordability into greater focus nearer term? It's just incentives for homebuilders. It's bringing some of these regulations back. It's helping them to, you know, be able to pencil more affordable homes because right now their cost for land, labor, materials. All of that is just too high. Got it. All right, Diana Olek, thank you. Well, I'll see you today at 4pm Eastern on closing bell. Overtime. We're going to get earnings from Core Weave and Paramount, two names that investors have been very focused on. Core Weaves up more than 160% since its March IPO. It just signed big deals with Open Air and Meta, so we're going to be watching that especially closely. In the meantime, all the major averages are higher right now at Session High. That's going to do it for us here. Thank you for watching the exchange. PowerLaunch starts now.
- [46:28]
A
Think of your commute, your train, your car, maybe your walk. Even if you don't realize it, crypto and blockchain innovations are all around you on your way into the office. So why not learn about them on the way? From institutional custody solutions to 247 cross border payments with nearly real time settlements, crypto and blockchain are shaping flexibility and innovation for institutions all over the globe and your city. Join Ripple and host David Schwartz for crypto and blockchain conversations on Blockstars, the podcast. It's happening with Ripple.