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The Exchange
The Exchange 6/5/26
00:44:01
Listen to the day's top stories, the must reads & a whole lot more for today's modern investor.
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It's smart to always have a few financial goals and a really smart one. You can set earning cash back on what you buy every day. And with Discover, you can get this. Discover automatically matches all the cash back you've earned at the end of your first year. Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show see terms@discover.com credit card.
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Hey Fidelity, how can I remember to invest every month? With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Huh, that sounds easier than I thought. You got this? Yeah, I do. Now where did I put my keys? You will find them where you left them. Investing involves risk, including risk of loss.
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Fidelity Brokerage Services LLC Member NYSE sipc.
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You're listening to the Exchange. Here's today's show. Thank you very much Scott, and welcome to the Exchange. I'm Kelly Evans. As you can tell from the graphic we were just playing there, the market sell off is picking up steam, especially in the Nasdaq and the small caps today. Just take a look at the Nasdaq. They're down nearly 3% as the AI trade has been hitting the skids again. And the small caps, remember they have a lot of AI infrastructure exposure to the they also have rate exposure and it doesn't help that yields are moving higher today after the way stronger than expected jobs report the 10 year now at 452. We'll have more on that later. The safety trades are holding up the Dow and S and P. That's sectors like health care which has been super strong this month. Staples, even utilities adding a smidge while Bitcoin is now below 60,000 to its lowest level since 2004. It's just a hair back above that now 61 and change. Semis memory. Most of the MAG7 is down the semi ETF. Look at that. SMH is down nearly 7%. Five hundred and eighty four. It's down 43 points today. SanDisk and Micron SanDisk down 10%. Similar for Micron as well. So why this sudden reversal in the trade that has absolutely dominated the year? Well, investors are pointing to a few notable events this week. Google doing one of the largest capital raises of all time. The concern why can't a behemoth like them fund their own AI buildout? Then Broadcom reporting a less than stellar outlook in its earnings report this week and investors start to question and they start selling. We saw a deep decline yesterday that's continuing with a 5 or 6% drop today. Concerns are now building about the market's ability to absorb these massive IPOs as well and where the funding may come from from investors. And finally, the jobs report today may solidify the narrative that we'll see no rate cuts this year, maybe even a hike. Here for our opening exchange is Drew Mattis, the chief market strategist at MetLife and Investment Management, and Adam Crisi of Vital Knowledge. It's great to have you both here. And Drew, prior to today, you were saying there's only a few areas of the stock market you still liked.
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C
Yeah, you know, I think what you're seeing today is, you know, first of all, there's a lot of narratives that are kind of intertwining, intertwined right now. And I think it's interesting, right, you get a good jobs report, which, you know, if people talk about AI, they typically talk about like labor savings. And then we're seeing jobs being added, which has kind of been our thesis. And I think, though, maybe it just causes enough people to rethink kind of, you know, what they're thinking is going to happen over the next 12 to 18 months. And certainly with the Fed, it, you know, it's, you know, it's not enough to kind of, I think, prompt a hike, but it's certainly enough to kind of get people thinking that maybe it cuts. Not on the table anytime soon.
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B
Using the only user. I'm not really comfortable with most equities right now. If I had to pick something health care, the needs not going away. Real estate is starting to look more interesting. I mean, do you, does this really mean to you that investors should look to those areas and not towards the areas that have generated multiple hundred percent returns up to this point?
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C
Well, everything has a time and place. So it's a question of, you know, are you comfortable taking risks right now? And I think what the market's showing us right now is that a lot of people, you know, are maybe trying to take some chips off the table and make sure that, you know, they've got, they've got cash on hand. And I think that's what you're seeing play out today.
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B
Adam, what would you add here about this kind of breakdown that we're seeing?
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D
Yeah, I definitely think that, you know, there's been very thin leadership over the last several weeks. So some of the groups that have been not participating and you're seeing them kind of catch up a little bit today, I suspect that those areas are going to start to behave better, you know, than the white hot tech Stocks that have just been massive outperformance for the last month and a half, two months right now. So today sell off has to be put in context of kind of what's happened before. These tech stocks have rallied enormously and you know, you can barely even see today so often in a multi month chart of some of these names.
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B
Right. But Adam, we were speaking with a guest yesterday who firms called Informed Momentum or something to that effect and they do a lot of tracking of momentum moves. And I asked him if we are seeing a break in the momentum in the tech space now. Maybe today the answer is yes, but yesterday the answer was no. He said the medium term sort of strength is still there. So when you say zoom out, does zoom out tell you that stick with the AI buildout that has years to go, or does the zoom out tell you that market action like we've seen in those areas up to this point was uncalled for?
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D
I definitely think for the next couple of months you can see tech consolidate and lag a little bit behind the rest of the market. And you know, I definitely think that the AI boom, AI is a very real technology, is going to have profound implications going forward. You know, but that doesn't mean that the parabolic price action that we saw throughout April and earlier this month, April, May, earlier this month, that that is sustainable. So I definitely think that at best you're going to see a lot of these names consolidate and then some of the other parts of the market catch
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B
up when people check their apps. Drew, turn on the tv, look at what's happening today and, and say what happened? I mean, is it the jobs report?
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C
I think that might be part of it. I do think though, you know, we're talking about a long term technological change in America and yes, it's happening more quickly than others, but even the other ones happened quickly took a long time. And so even if we condense that time frame, we're not talking about, oh, we're all going to know what's, what's going to happen and who the winners and losers are over the next month. Right. We're still talking, you know, a multi year period here. And I think, you know, thinking longer term is probably going to serve people best right now.
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B
So where does that tell you to go? I mean, Is this an 8 or 9% pullback in some memory leadership names in an area for entry for, for a sector that's supposed to be leading the charge until we are told otherwise, Forget the price action or does that tell you to go elsewhere? In the market?
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C
Well, I mean, I, you know, as, you know, as kind of the investor who can kind of go anywhere, which is kind of our framework. You know, as I said, you know, there are sectors that you like and then there is also kind of different asset classes that actually, you know, I would prefer right now. But you know, if you're, if you're sticking to equity space, you know, look back a week and that's where we are again. Right. You know, so that's, that's been actually the sell off that we're talking about the last three days. Yet you, you go back to where the last time we were here and it was last Wednesday. So, you know, it's kind of important not to make too much out of a short term move.
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No, but the question is, if we're only back to last Wednesday, do we need to correct more in some of these overheated parts of the market?
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C
I think what we could simply be seeing is that there's a lot of volatility and there's been volatility on the upside, or not volatility, but kind of like sharp move movements to the upside. And usually the pendulum has to swing both ways over the course of any period of time. So I wouldn't make too much out of any of the moves around and I wouldn't necessarily rethink everything. It's just a matter of being comfortable with where you are. How much risk have you taken? How much risk do you want to be taking? And I think what we've seen today is some people are saying, you know what, I have enough risk and I still have enough exposure. So I'm going to take some off the table so that I have an opportunity for later.
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Adam, are people. I'm getting a lot of questions about this. Do you think investors are selling to make room for putting space X in their Portfolios when it IPOs next Friday?
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D
I think to a certain extent, you know, I think it's not like this came out of nowhere at the markets have been preparing for this for a while. I definitely think the news from S and P overnight that they were not changing their index inclusion rules is spooking of people a little bit, you know, raising some concerns about how the markets can be able to absorb some of these mega cap like yields over the coming months. And now that had been one of the mechanisms by which people thought the market would be able to kind of take in some of this extra supply. And so with that not happening, you know, I definitely think there's a little bit of anxiety within tech, just from a technical, mechanical, supply demand perspective. So, you know, you probably are seeing that, you know, not just an equity issue, but that's probably explaining what's happening in crypto to a certain extent as well, where investors definitely are freeing up capital. You know, SpaceX in particular is going to be allocating a big chunk of for retail investors, and so that's probably playing a role as well. And what we're seeing.
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B
Drew, you want to give a final comment on that?
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C
No. I mean, I basically agree with the view. You know, it's, there's a lot of movement right now and, you know, it's not one factor. So we're all looking for the reason. It's not the reason. There's multiple reasons why this is happening over the last couple of days. And I think, you know, there's reasons why it could continue and there's reasons why it could stop. And I think it's, it's, you know, I don't necessarily think the labor market's kind of the big story here today. Obviously, I don't think it drove this, but it was certainly a factor in it.
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B
All right, gentlemen, really appreciate it. Thanks for joining us. To talk this through a little bit, Drew Mattis and Adam Crisafoli. Let's turn now to Space X. As we were just discussing, we learned from S and P Global last night that they will not change the rules of entry for it to go into the s and P500, meaning they will not get fast access into this important benchmark. The decision means that before being considered for inclusion, a number of requirements for Space X will still have to be met, such as companies have to wait at least a year after going public. They have to have reported some ongoing profitability which SpaceX doesn't have right now. And the stock needs a public float of at least 50%. That decision is in contrast to the Nasdaq, which has decided to fast track newly public companies into the NASDAQ 100. And it's not just those major indices making some changes here to accommodate Space X. Retail brokerages are also changing rules for once Space X goes public. Seem a moody. Seema moody. Moot moody today? No, they want to clarify sema, that in some cases they can always move things around. So in what areas are we seeing something we've never seen before to accommodate this ipo? And in what areas is this a reminder of? Yeah, sometimes these, these rules can move around. Right.
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So because, Kelly, there's a 30% retail allocation, the brokerages see this As a huge opportunity, they're incentiv advising investors to buy into Space X by lowering the minimum account balance needed to participate. That's for a couple of them. They're also issuing guidelines to discourage retail traders from trying to flip the stock. So here's Fidelity's message. If you sell Space X shares in the first 15 days of trade, you will likely be blocked from participating in future IPO deals for six months. If you make a second attempt to sell within that time span, you'll be blocked for a year. A third flip, that's a lifetime ban. Other brokerages like Robinhood and Sofi define flipping as selling in the first 30 days, which is in line line with watchdog Finra. So the key thing here is to check with your brokerage what rules are in place once Space X goes public next Friday. Because there are implications on your ability to potentially get an allocation in future deals, including Anthropic, which filed confidentially last week. There's open air, which is expected to be in the near future. We're told these guidelines in general are in part motivated by underwriters that want to avoid big swings in Space X's stock. Because again Kelly, there is a big retail allocation here for this deal, 30%. That is much higher than the 5 to 10% that we typically see for IPOs.
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Yeah, I mean so Fidelity is an interesting one to use as an example. They are going to lower the account
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minimum to typically 100 to 500,000. Now they're saying 2,000.
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Right.
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So they're really trying to get exposure to a retail investor that typically isn't in the market or is interested, interested in space. And they see this as an opportunity to get in because they do have that allocation.
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Yeah, Infidelity says this isn't a rule change. We, we've moved it down to 2k before. I haven't yet heard from them. And what cases for they can move those numbers around. So there is some flexibility there. I don't have a problem per se with brokerages making it easier for people. Like if somebody who's, you know, in their 20s, doesn't have a huge brokerage account and wants shares of Space xp, I don't have a major problem.
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I think it's the anti flipping policy, the guidelines there that is generating some debate. Right. If there is that 15 day holding rule for let's say what in 15 days the stock is perhaps a lot lower than where they came out, came in@Pre IPO, are you then at a disadvantage? So that's just the big question is this specific guideline on flipping putting them in a more vulnerable position two weeks into the company being listed.
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If and if the rules are too strict, they can just go make a bunch of prediction bets and there's always and lose money on sports.
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So the predictions market is quite active though around SpaceX. What will it open in that? What will the market cap be in two weeks? Very interesting to see a lot of interest.
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That's true. There's a lot of ways to actually take make a point of view on it, make or lose money on it without necessarily owning the shares, which for the long run should be the anyway, the way to go.
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A lot happening.
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Sima. Thanks. Sima Moody. No, let's stay with Space X because as the tech trade cools off, the momentum behind Space X is stronger than ever. CEO Elon Musk spoke to investors last night at a JP Morgan event about the IPO.
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It's probably been, I don't know, almost 10 years that people have been suggesting to me that I should take SpaceX public. We've been positive cash flow for quite a long time, I think since around 2014, 2015 and we've been self funding, in fact in our sort of private equity rounds. They actually have not been fundraising rounds, they've been liquidity rounds for investors and, and employees because we give everyone at the company stock and SpaceX has actually bought back stock in most of our sort of funding events. So what's different about now is that. Well, it's a number of things, but we are embarking on a significant
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growth
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phase, like a capital growth phase.
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Get Elon Musk at that JP Morgan event last night. Wall street struggling a little with valuation and comps for the company. But there may be one overlooked source of revenue that could keep the stock going through the rest of the year. Joining us now to discuss is Dovin Petersen, he's head of data infrastructure and Commodities Research at 22 Dolan. I hope I said your name correctly. It's great to have you here.
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F
Thank you, thank you.
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B
And from your point of view, what are the important parts of the SpaceX story?
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F
Yeah, I'd say there's a couple of things, you know, in terms of near term catalyst for the company. I think the anthropic deal that they announced recently, you know, could be a potentially bigger story for them in terms of, you know, compute deals with colossus and adds revenue and subsidizes some of the CapEx spend in terms of negative free cash flow this year. And then secondly, you know, it's widely reported that they will likely exercise the option to purchase cursor, you know, within the near term, you know, next 30 or 60 days, which additionally adds revenue to the, to the story. So I think quite quickly they start to compress the price to sales ratio. And I also, you know, had pointed out that, you know, it's an incredibly catalyst rich story when it comes to the commercialization of space launches and increasing that velocity.
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I didn't realize the cursor acquisition could be so imminent.
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Yeah, I've read a number of reports that they've talked about, you know, exercising that option, you know, at some point, you know, near post ipo.
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And if they do you think they're that right now people say the multiple at IPO would be like 100 times revenue if I'm not mistaken. And you think that would actually once we bring all of those factors into play, maybe it's more like 40 times.
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Yeah, I think largely, you know, in terms of cursors estimates, I mean there's obviously a wide range of that but you know, multiple billions and then the anthropic deal which is, you know, a billion and a quarter a month. So those are significant revenue adds to, you know what I think most analysts are still restricted to talk about in terms of LTM revenue that's been, you know, and so I think you add those together, they sort of have a near term compression of the multiple that's been floated about.
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B
And Cerebras, you say, look that one still has about a 50 times price to sales multiple even after, even as the prices come in a little bit.
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F
Yeah, I'd say, I mean it's come in in the last few weeks here but I mean the you know, the revenue estimates, obviously it's a smaller market cap company but you know, we're still seeing very high multiples in companies that have, you know, a significant growth rates, AI related or significant catalysts that are embedded, you know, an optionality in the company. So I think these types of companies can support a higher multiple and then term you know, based on, you know, what the vent path is for them.
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B
For what it's worth, cerebras with a 3% drop today is at 208. The IPO price was 185. So we're above that but not as much as we were when it opened at I think 380 or 390 on that first day of trade. And I'm curious what you think about the dynamics for next Friday's open. Yes, Space X has set this Price, I suppose they could raise it. The NASDAQ is going to still have to take into account all of the buying, the pent up demand around it to make sure that there's not too much of a pop and a halt for trade on the open. So how do you think those mechanics and dynamics might play out?
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F
Yeah, you know, it's a loaded question. I mean the technical nature of this size of an ipo, you know, doesn't have a lot of precedent. But I do think, you know, some of the, the things that you were talking about earlier about fidelity and the lockups, timing in coincidence with the Nasdaq inclusion and a staggered lockup I think are all ways to technically prevent, you know, anything, you know, sort of dramatic happening that's not fundamental for the stock.
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B
Do you think there would be plenty of institutional support? Look, the way I see it, there's plenty of retail support for the Elon Musk narrative. I can't imagine that's going to change in the next 30 days. Even if there were some big drop, I mean, can you imagine a situation in which the public just decided after all the ups and downs of Tesla, after everything that might happen with this IPO that what if it goes down in price 20% and they all run for the exits? I just can't imagine that.
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F
Yeah, I'm, you know, I'm very excited about, you know, the space story, the AI and the data center story. And I think that that narrative continues. So, you know, I think technical glitches in stocks and mispricings are probably going to be taken as opportunities.
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C
Right.
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And by institutional. We have plenty of interest in what we heard from Duncan Davidson, the VC yesterday. He loves the story. Also Dovin, we'll leave it there. Thanks so much.
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F
Yeah, thank you. Have a great weekend.
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B
Jovan Petersen joining us from 22V. Coming up, today's blowout jobs report and the big revisions higher. Do those take a rate cut completely off the table and is that behind the market pressure today? Our guest says yes and the market should prepare for multiple hikes. She'll join us ahead on the exchange. This is the exchange on CNBC Foreign. Global. We think about what can be done, not what's usually done through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
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It's smart to always have a few financial goals and a really smart one. You can set earning cash back on what you buy every day. And with Discover, you can get this Discover automatically matches all the cash back you've earned at the end of your first year. Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show see terms@discover.com creditcard hey Fidelity, can I
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get a second opinion on stocks in the Fidelity app? With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then when you're ready, trade US stocks and ETFs with no commissions.
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That's right.
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a service fee of $100.
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See details at fidelity.com/commissions Fidelity Brokerage Services, LLC Member NYSE SIPC we're watching this continued sell off today with the NASDAQ the most under pressure, down more than 3% right now. Semis software, all of those hot air areas are now experiencing some pain. Where should investors be looking to buy on the drop? Let's ask Jeff Kilberg joining us to break it all down. He's the KKM Financial founder and CEO and a CNBC contributor. Jeff, it's great to see you. You've been encouraging people to kind of stay with this trade, kind of broadly speaking up until now. So I'm curious, is this for you a big break in trends? And do you go, do you go to health care? Do you go to, you know, those kinds of places of the market or do you act opportunistically in tech?
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I
Well, Kelly, I think today is an eye opening day, no doubt about it, seeing the NASDAQ down 3% and seeing some of the profit taking. But if we rewind, just two days ago, Wednesday, we were looking for the 10th straight consecutive day of gains in the S&P 500. And what happened? It didn't happen. So here we are seeing some profit taking. But I'm going to reflect on Coach Holtz, my Notre Dame football coach. He always talked about not flinching. Today is not the day to flinch, Kelly. This is an opportunity. And I look at you're never going to go broke taking profits. And we closed our micron position $200 ago. We kind of got ridiculed, but nonetheless, we're looking at Micron to get back in. We reduced our position amd a week ago kind of laughed at again but nonetheless we're looking at that. We're looking Intel. Intel still our biggest hold in the Essential 40 ETF despite the fact it's back in filling down $101. We still want to own it and we own it at $20. So I think you have to take it in context, take a big deep breath. The semiconductors ETF stocks is still up over 100% year to date. Now it is amplified. All these moves are exaggerated and highly emotional. Yes the Vix is up 20% today but this is an opportunity. If you missed allocating these are quick drops here and I don't think the theme is walking away anytime soon. Despite the fact the jobs numbers, interest rate outlooks we are seeing earnings that Q2 earnings at 27% year over year growth. That is the guiding light.
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B
I'm so interested to hear this on Micron AMD intel that you're buying it here and see this as an entry point because plenty of people might say down 9% like the more value oriented mindset might be. No, I need it down 30% before I, you know we did not, we
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I
did not buy Micron yet. We are looking to re establish a position in Micron because we've been very tactical in our Geary etf, the Mango Growth etf. Very tactical in that etf. We did buy Broadcom after the earnings report we saw a significant drop in Broadcom. We still believe in the earnings forecast. Yes, it wasn't a Nvidia forecast and backflips on a stage somewhere to get investors excited. But what is Broadcom done? They've delivered year after year and this growth is still consistent. So we want to own this theme. Yes, semiconductors got way too hot. It got frothy. So it's going to come back and fill. But this theme of needing chips, having more efficient chips and with the Space X Google, all these things looming, this is providing a perfect opportunity to profit take. But the trend is not broken. We are going to see the bears have their day today but the bears are still going to get kicked in the teeth for the rest of June, for rest of the quarter.
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B
You know I see analysts notes saying that you know Space X is going to catalyze a stellar Is this Space X's fault? Look at Quantinum. Yesterday it closed pretty much at the IPO price. I think the price for The IPO was 60. I think it opened at 68. It barely closed above 60 yesterday. It's at 54 today.
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I
I know down 9% and that's the quantum trade, right? The quantum trade was absolutely decimated early on. And we've seen a sensational move higher. Now we have profit taking. So some of these quantum names, which are smaller in market cap, Kelly, those are seeing 10, 20% moves. So it is sensational to me to see we have $14 trillion companies. So these markets are moving faster than ever in the size of these. Look at IBM, for example. IBM is a company. We own our Essential 40 ETF. We love the fact that it's moved $50 in two weeks. But moving $50 in Big Blue, that is historic and sensational. So I think we have to take a big deep breath.
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B
But you're not scared out of it. There are some who say this is so historic and sensational that I'm running, I'm running away. I'm gone, I'm out. I'm going into Coca Cola, I'm going into the health care, I'm going into UnitedHealth. And it doesn't sound like that's what you're doing. It sounds like you're just saying, I'll let it rerate a couple of points and then I'm buying it.
- [25:15]
I
Well, we own in an equal weighted manner. So all the tech stocks, we own our essential for etf, equal weight. But we also own Johnson and Johnson and Lilly and the health care names. Chubb. Look at Chubb say so there's reason for diversification. But specific to tech stocks, this tech theme is not over. Was it overdone in semiconductors? Did the bounce in software? Look at Oracle today. Some of the wind coming out of that sale off of that recent balance. But these companies, Kelly, they're able to match with the AI theme. They're able to match their roi. Look back at the words of CEO Andy Jassy from Amazon. He talked about the more capex they spend, the more ROI they're going to have. And that's the exact case why we saw $84.5 billion this week from Google get sold. Why are they selling that? Why is that a bigger IPO, in essence, than SpaceX IPO? Because they want to fund more AI, because they've been able to calculate the ROI. So the tech is in theme. But yes, profit taking is part of natural. And markets don't move in straight lines. Nothing is linear.
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B
All right, no flinching. You're past it. Kelly, Jeff, thanks very much. Jeff Kilberg, appreciate it. Coming up, we'll talk about shares of Boeing. That stock has struggled to find its footing over the past year. Not a lot of catalysts to get people excited. Excited. But the company telling CNBC today they will start new production of the 737 Max in July. Will it be enough to get the stock going? We'll hear from the CEO next. And still ahead, Tim Cook preparing for his final WWDC Worldwide Developers Conference as CEO of Apple. Will he finally deliver on his AI promises? We'll discuss when we come back. Never bet against American grit or American Energy through innovation. Venture Global is not only building some
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of the largest energy facilities in the
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world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
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A
It's smart to always have a few financial goals and a really smart one you can set earning cash back on what you buy every day. And with Discover you can get this. Discover automatically matches all the cash back you've earned at the end of your first year. Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show see terms@discover.com credit card this episode is
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Welcome back to the Exchange. The NASDAQ and Russell 2000 selling off to the tune of nearly 3% today. But it's not just the tech trade under pressure. Dom Chu is here with more of today's biggest movers.
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H
Dom, all right, let's go outside of tech, we're going to start off with a big earnings mover, Kelly following the broader markets lower, that's shares of Lululemon, which are down 8 1/2% range right now. One of the worst performers in the S and P, the Athleisure apparel company posted quarterly results that actually narrowly topped estimates. But then it lowered its full year guidance and then gave a weaker than expected current quarter forecast, which interim CEO Megan Frank blamed on negative commentary in the media and underwhelming recent product launches. Now former Nike executive Heidi O' Neill takes over as full time CEO, but that doesn't start until September. Lulu shares down 8% not all stocks are in the red, though, bigger down day, of course, but shares of Chipotle up 4 1/2% among the best performers in the S and P, in large part because of an upgrade by analysts over at JP Morgan to an overweight from a prior equal rate. They did trim their target price to 35 bucks from 38. They say that the recent slide in those shares creates an attractive entry point. And they're pointing to things like better sales growth at existing restaurant locations early in the year, having some more sustained momentum. And then we're going to end with a check on the slide in bitcoin prices, which now have dropped below the 60,000 mark at 1 point today for the first time since 2024. They're currently just above 60,000 right now. The flagship cryptocurrency has seen a lot of negative sentiment, most recently driven by sales by Bitcoin treasury company Strategy and then more interest from traders, diverting funds away from them and then towards hot sectors of the market like AI and computer chip stocks. That's having, of course, an effect on not just strategy shares today, but also trading houses like Robinhood, like Coinbase and even Circle Internet Group on the stablecoin side of things. So keep an eye on the entire complex down markedly. Kelly, I'll send things back over to you.
- [30:09]
B
Dan Dalle had a nice note on Circle to just saying stablecoins could be moving more into the traditional space and that's putting some pressure there as well. Dom, thanks. Meanwhile, we're watching shares of Boeing. The company just met FAA requirements to increase production of the 737 Max. Philippe Bow joins us live from the assembly line in Renton, Washington, where he just wrapped up a conversation with Boeing CEO Kelly Ortberg. Phil, what can you tell us?
- [30:34]
J
You know, Kelly, the production rate here in Renton, which is where all the Maxs are made right now, it's moving up to 47 per month. It was at 42 per month and they're going to stabilize that over the next couple of months. But eventually next year it's going to jump up to 52 per per month, or at least that's the target the company has set pending FAA approval. When that time comes, how will they get there? Well, a new final assembly line that they're going to be opening next month, not at this plant north of here in Everett, Washington, starts final assembly work on July 6th. That it will be the fourth 737 Max assembly line and they'll be building the Max Dash 10 hasn't been approved yet by the FAA hasn't been certified, but that certification production is expected by the end of the year. We talked to Kelly Ortberg earlier and we said to him, are you ready to increase production? Given the track record that Boeing's had over the last several years, he's confident they're ready. Well, we're trying to reset that track record and I think we've done a good job as we've come back up here the last 18 months and increase rate. And we've done it differently.
- [31:37]
C
We've made sure that we're not moving
- [31:40]
J
until the production system is stable. We're not pushing work down the production
- [31:44]
B
line like we were before.
- [31:48]
J
Huge change in culture here at the Renton plant. And you can tell that when you talk with the workers. And just being here, compared to a couple of years ago, monthly max production again, it's at 47 now, expected to go to 52 sometime next year. 63 is the long range target, though. There's also been a report in the last 24 hours that Boeing might even alter. Ultimately consider 70 airplanes, though when I talked with Kelly or Perk, he said that's a ways out. We're not even actively thinking about that at this point. 71% of Boeing's backlog is the max. Remember this, Kelly, production drives delivery, drives free cash flow. It is the bread. It is the key to the buttering the bread, if you will, for Boeing and for their free cash flow and for investors. And they are increasing production. You can definitely tell the difference when you're here in the Renton plant.
- [32:37]
B
It's great. Again, as a strategically important, a vital company. We hope that is the case. Phil, thanks very much, Phil LeBeau. We've got a news alert on Warner Brothers. Julia Boorstin with the details. Julia, Kelly, Warner Brothers shares are sinking on a report in Reuters that U.S. states are preparing a lawsuit to block the Paramount acquisition of Warner Brothers Discovery. Now, it's not clear which states would sue, but California Attorney General Rob Bonta has said that his office will be making a decision on a potential action on this deal very soon. So there is an assumption that if there were to be an action, his office would be involved. We've reached out to Attorney General Bond his office, as well as to both Paramount, Skydance and to Warner Brothers Discover. We have not heard back yet, but we do see shares of WBD now down 2 1/2 percent, shares of Skydance down over 5%. There is a lot of anticipation on the urgency of this deal for Paramount in particular. And so just watching those stocks as we await commentary from both of those companies. Back over to Story's not over just yet, Julia. Thank you very much, Julia Boorstin. Let's get to Pippa Stevens now for the CNBC news update.
- [33:49]
K
Pippa.
- [33:50]
B
Hey, Kelly. Russian President Vladimir Putin today rejected a proposal from Ukrainian Ukrainian President Volodymyr Zelensky for a face to face meeting to end the war. Putin today called a letter from Zelensky requesting the meeting boorish and says he sees no point in having a meeting. A federal judge this morning ruled that the Trump administration's travel ban on people from 39 countries unlawfully barred immigrants from receiving decisions on everything from asylum requests to green cards and citizenship. The judge ruled that the policy quote, through the lives of countless immigrants living in the US into indeterminate legal limbo and ordered processing of applicants to resume. And after more than a century in the Windy City, Chicago Bears ownership announced today that it's moving the team about a half hour south to Hammond, Indiana, where they rebuild a new stadium. The team's board of directors approved the move after the Illinois legislature this week adjourned without taking up bill that would have allowed a public private partnership with the franchise. Kelly, back to you.
- [34:52]
G
Wow.
- [34:52]
B
Okay, Pippa. Thanks. Pippa stevens, Coming up, the May jobs numbers, well, they just doubled expectations. I think we can call that a trouncing. Does it mean more rate cuts are definitely and officially off the table? We'll discuss when the exchange returns. Welcome back to the exchange. The economy added 172,000 jobs in May. That was more than double expectations. My next guest says that plus sticky inflation will force the Fed to hike rates this year. In fact, she still sees two hikes in the second half. Joining me now is Diane Swonk, the chief economist at kpmg. Diane, I mean, I observe, I'm not asking you to comment per se, but that this appears to be weighing we'll call it on on the market. And maybe it's just a coincidence that the tech stocks are selling off the way that they are, but you've been telling us for months that we need to take rate hike odds more seriously.
- [35:50]
K
Exactly. And I think one of the clear issues here is when you look at the wage gains that were embedded in this report, they were much lower because the composition of job gains were heavily weighted towards leisure and hospitality. That got an extra bump from tourism in the month of May and leading up to the World cup and host cities during the summer, and that starts on June 11th. I think that's important because it adds steam to that service sector inflation that's gotten very sticky. You've got the well heeled and welded deal do holding up inflation and creating a floor under service sector inflation which has actually accelerated since the start of the year. And that's outside of the energy bump or tariffs. We also have more tariffs in the pipeline as the administration tries to restore what was lost to the Supreme Court ruling in August. That will be another bump as we get into the summer. All of this is helping to entrench inflation in a way that the Fed now with a more stable unemployment rate, even though that inequality is still worsening and leaving many consumers feeling that the economy they're worse off and feeling left behind because of their erosion in purchasing power. That is exactly the reason the Federal Reserve needs to deal with this inflation. We're more than five years in now and you've heard many Fed officials within the leadership actually argue about a rate hike sooner rather than later.
- [37:18]
B
I have so many thoughts about this, but it strikes me that there's a two speed problem that the Fed has to respond with one tool to, to a two speed economy. Those are the top, like you say, holding things up, spending, leisure travel and so forth. You could argue that needs to be slowed down because it's causing this inflation. But it does have the benefits of creating a lot of jobs around that too and a lot. And that spending helps the economy. On the, on the other hand, those who are hurt the most by inflation at the lower end, well, you hike rates there may or may not cure the inflation problem and you're going to slow the economy and possibly take away their jobs. So how do you solve that?
- [37:52]
K
Well, the bottom line is inflation is a regressive tax. And Kelly, we know that inflation is a labor market problem over time as well. So you know the idea that not curing the inflation to help low and middle income households, that just doesn't work because it just makes the inflation problem more entrenched and you risk repeating policy mistakes of earlier decades like the 1970s. This is not the 1970s. We do not have the kind of inflation we did back then. But we did do have this sort of suspended animation for many in the labor market. Even though the unemployment rate held steady, the underemployment rate is still elevated at 8.1%. We still have the length of duration of unemployment going up for those workers who are out of work. They're having a hard time getting in. And we know new grads are having a challenge in this labor market. The Fed cannot cure those problems with rates cuts alone. If they could, we'd already see it because they've done rate cuts. And I think that's the important message here, is ultimately you need to cure inflation because it is not only a consumer erosion, purchasing power problem, it is also ultimately a labor market problem. And over the long run, the only thing that really matters is stable prices because you cannot attain or sustain full employment unless you get of rid, rid of inflation.
- [39:14]
B
We I saw kind of a similar comment from Nancy Lazar this morning and she said look, we're kind of following the usual playbook. Takes about two years for cuts to hit the economy. Fed started cutting rates two years ago and boom, here we are, all of a sudden job growth is accelerating. So I think that kind of makes the same point, which is if you're looking at this economy two years from now and we're in pretty decent shape, it doesn't seem to argue that it needs more rate cuts.
- [39:41]
K
It doesn't need more rate cuts at the moment. The problem is, of course, the stress among subprime borrowers and student loan borrowers, especially older gen X student loan borrowers, is really mounting. That said, we, we really need to get rid of inflation. It is the most regressive tax out there and it is the biggest thing contributing to inequality and polarizing and electric going into the midterms.
- [40:06]
B
I love how convicted you are about I'm like now this is going to make it so interesting when Warsh takes over. We'll be in D.C. for that in just a week or so time. See how he messages around that and what may be to come. I think it's going to get only more interesting from here. Diane, thanks very, very much for making the time today. Diane Swan joining us from kpmg. Coming up, the US Government is reportedly eyeing a stake in some of the biggest names in I will dive into that and what it could mean for their future IPO plans. We're back in a minute. Welcome back. US officials are reportedly eyeing a government stake in AI giants like OpenAI. Kate Rooney has more in today's Tech check. Kate.
- [40:51]
L
Hi Kelly. So we are hearing that the US government is considering taking a stake in Open OpenAI, possibly other AI giants as well. A source tells me CEO Sam Altman and the Trump administration have been talking about this idea for more than a year now. Altman first floated this from what I'm Hearing back in 2025 when Trump initially took office, a source says that OpenAI would actually donate a portion of its equity to a possible AI fund. As part of this, Altman was on Capitol Hill just this week. He was meeting with lawmakers from what we're hearing, including Senator Bernie Sanders who has pitched a 50% government spending stake in some of these companies. He confirmed to CNBC that he and Altman talked about the concept of a sovereign wealth fund in terms of investing in AI. Much of this does mirror what OpenAI has said publicly already. Back in April it did pitch a handful of solutions to try to spread the economic benefits of this technology and let Americans participate in AI's financial upside at a time when there is real anxiety around widespread job loss. The government though has a recent track record. When you look at recent direct equity stakes in other tech companies, you have intel, IBM, Global Foundries, other critical mineral companies, plus some quantum companies as well. Worth noting though, a handful of other governments around the world are actually already invested in OpenAI and Anthropic through their own sovereign wealth funds. You have MGX out of Abu Dhabi and then the UAE fund. There are also some state funds that own blocks through venture capital firms. So there's sort of a precedent for this on a global scale.
- [42:19]
B
Listen, I not that my opinion. I love the idea of a sovereign wealth. I hear that one of the issues with it is how do you decide what to do with it? And that becomes very politicized. Who exactly the money goes to? You know, is it checks, is it to whom? And there can be a lot of politicking and kind of behind the scenes influence there. Nevertheless, if we can solve that. Sounds good to me Kate. For now. Thanks.
- [42:40]
L
Yeah, appreciate it.
- [42:41]
B
Kate Rooney Coming up, we're just a few days away from Apple's Worldwide Developers Conference with the Stock On a 10 week win streak, is it winning by the sidestepping the whole air race that's ahead? While the majority of tech is selling off today, in some cases quite sharply, Apple is in the green again and the company is set to kick off its annual Worldwide Developers Conference on Monday. The stock in fact is on a 10 week win streak and has outperformed every Mag7 name in the past month. So what happens with this year's event? And investors want clues on its AI strategy to see if it can recapture that innovation edge. Or do they? For more on what to expect, let's bring in Wamsey Mohan. He's senior IT Hardware Analyst at BMA Walmsley. I think he should take the stage, say you're welcome and leave.
- [43:30]
G
Kelly, thanks for having me. Look, I think that for the past two years investors have Been waiting to get an update of a series that people will actually use and people have gravitated to other chat bots of various kinds in the interim because Apple has just not delivered the experience that people want yet. I think this year at WWDC will be there on Monday in person to attend this event and we're quite excited about it because I think this is the first opportunity that Apple has to really show customers and consumers the ability for them to deliver something in AI beyond expectations. I think expectations in the bar is quite low just given the past history of where the chatbot experience has been. But I think that we're going to get a new face to that and the new face is really going to be in a different few phases. The first phase of that is going to be about just getting people to use and interact more with Siri. We published a very detailed note on the longer term opportunity which we think is very bullish for Apple and in that we think that there will be an agentic experience where you could do multi step task and handoff. So it'll come in different waves but we're quite excited to listen to what they have to say this coming Monday.
- [44:39]
B
Yeah but my cheeky comment is that look at the stock, look at what's happening to the rest of the mag. 7 I'm thinking a lot about this whole idea that they're becoming these capital intensive business models fundamentally making a commodity and Apple can sit over here and say as long as you use it on the iPhone like we're cool, we don't have to really worry about this.
- [44:57]
G
Yeah, it's a very different strategy and it's different for a few different reasons. Right. I think people misconstrue not spending a lot of capex for lack of innovation and I think that you don't really need to be in the model business to really win in edge AI. What you need to be in is deliver a superior hardware product and an experience that might be based off of somebody else else's LLM but you're in the distribution business. This product is in the hands of a couple of billion consumers and you have to give them the experience that they desire and it doesn't have to come from your own ip. Now that said, I think what is really important is that they have to find ways to monetize it and this is something that Apple has already proven that they can do in search of with Google and I think that they will do it again because they are key to the fundamental distribution layer of this beyond that the consumer experience has to do a lot with personalized experiences and a trusted agent to work on your behalf. Apple has that trust. Apple has Apple pay. Your payment information is there, your security information is there. So any agent that's spawning off of this already is authenticated and validated, which is a huge plus for Apple that nobody else has.
- [46:07]
B
One little question, I just wanted to tuck in here, Ramsey, before we go. Now that Nvidia is making chips for the PC that can do it, does that matter? I mean Apple still does have a big business in laptops and those traditional computers. Does that matter? Or is actually the whole play going to be that we start doing AI compute on the iPhone, in which case it's game, set, match.
- [46:28]
G
Yeah, I think what Nvidia is doing is quite different. Right. Like if you think about the Mac, I mean people are using using Mac Minis at the moment, but you can buy a high end Mac which is fully configured with an M5 Max and you can run local agents on there. In the long run, the market will gravitate towards having agentic AI run at the edge because it's going to be just a cheaper way to do things. Now that said, on the phone it's kind of different, right? You just don't have that kind of horsepower. You just don't have the kind of battery life and ability to support all that. So we think that Apple's IP in its own chips on the phone is very differentiated from what might happen on Max. And Max, by the way, Kelly is just $50 billion business. I know it sounds like a lot, but in the scheme of Apple at 450 it's still a small part.
- [47:13]
B
Yet $5 trillion companies, you know, 50 billion is neither here nor there. Walmsley, thanks very much, Appreciate it. Today, Wamsi Mohan with Bank of America securities again. WWDC as they call it, is next week. We look forward to that. And that's it for us. Up next, Brian Sullivan and a special new friend. That's your tease. Power Lunch will pick up coverage of this tech sell off after the break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. Hey Fidelity.
- [47:48]
E
What's it cost to invest with the Fidelity app?
- [47:52]
B
Start with as little as $1 with no account fees or trade commissions on US stocks and ETFs. Hmm, that's music to my ears. I can only talk.
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H
Investing involves risk, including risk of loss.
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B
Zero account fees apply to retail brokerage accounts only. Zero dollar commission does not apply to customers designated by Fidelity as a professional equity trader. A limited number of ETFs are subject to a service fee of $100. See details@fidelity.com commissions Fidelity Brokerage Services, LLC Member NYSE SIPC.