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Trade Truce, Big Tech Breakdown and Freight Fears 10/30/25
00:43:25
The U.S. and China reach trade agreements. What to expect when Apple and Amazon report earnings after the bell. Plus, the XPO CEO shares how tariffs and AI are affecting shipments.
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Narrator/Announcer
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Leslie Picker
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Narrator/Announcer
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Leslie Picker
Thanks, Frank. Welcome to the exchange, everybody. I'm Leslie Picker in for Kelly Evans. Today, stocks mostly lower amid a trade truce and a mixed bag of Mag 7 reports so far. Microsoft and Meta leading the tech declines as investors worry about the company's increased spending outlooks. Oppenheimer among the firms downgrading better today. We'll talk to the analyst head who made that decision. This as Apple and Amazon are on deck, will get you set up into the print. And we're seeing a bit of rotation out of tech today, no surprise, but into sectors like financials, big banks higher. JP Morgan leading that group up about 2%. Health care also gaining Eli Lilly and Cardinal Health, the standouts, both delivering better than expected earnings. And take a look at rare earth stocks. You can see a mixed picture there as China agrees to delay export controls for a year. And that's where we begin today with that highly anticipated meeting between President Trump and Chinese President Xi overnight. Eamon Javers is live in Washington with the latest Amen.
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Eamon Javers
Hey there, Leslie. The trade agreements reached by the US And China overnight roll back a number of escalations that each side has made this year. And so it effectively resets the relationship between the two to sort of where it was sometime earlier in 2025. President Trump said he's not going to impose the November 1 100% tariff increase that he first threatened to put in place back on October 10th. The Chinese said they would not impose stepped up rare earth export controls that they announced the day before that. On October 9th, President Trump said the US would lower fentanyl tariffs on China from 20 down to 10%. He had raised those from 10 to 20 back on March 4th. Treasury Secretary Besant said the Chinese will ramp up soybean purchases in the months ahead. The Chinese buyers began to dial down their soybean purchases earlier this year and they'd zeroed them out by September. The Chinese side also said that the US Will postpone a rule blacklisting majority owned subsidiaries of Chinese companies. That rule, it was put in place on September 29th. So still to be determined are the fates of TikTok and advanced Nvidia chip sales to China. President Trump had said China approved a sale of TikTok to the. But today, Secretary Bessen said that transaction may not happen for weeks or months. And on the flight back to Washington, President Trump rated the meeting a 12 out of 10. And he said that even though the two sides did not sign a final trade deal, one could be ready pretty soon. Leslie, back over to you and Eamonn.
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Leslie Picker
If they do sign a trade deal or even these agreements, how binding are they? I mean, what's the likelihood that China blinks on soybeans or rare earths? And, you know, President Trump raises tariffs once again. I mean, it always feels so tumultuous and tenuous, right?
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Eamon Javers
Yeah, absolutely. And there's a long history of people breaking these agreements, right? I mean, President Trump himself has complained a lot that the Chinese did not live up to agreements that they put down during his first term. So will these be agreed to? Not necessarily clear. We haven't seen anything from the Chinese side specifying, you know, exactly how many soybeans they're going to buy. The president mentioned energy purchases. We don't know anything about the details on that. So it's on this agreement or this set of deals. We don't even really know what the deal is that the Chinese side would have to live up to in some of the cases. So it would be easy for them to break that.
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Leslie Picker
Yeah, no, exactly. I think that's an important distinction there, Eamon, thank you so much. That is, of course, the message out of Washington. Let's go now live to Beijing and Eunice Yoon with the messaging there. What are you hearing on the ground, Eunice?
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Eunice Yoon
Well, Leslie, the messaging is very complimentary on the part of the Chinese for President Trump. President Xi Jinping had told President Trump that he and Trump were at the helm. He said Helmsman steering this, this relationship. Also, President Xi had said that China's development goes hand in hand with President Trump's MAGA vision. Now, China, as Eamonn had said, confirmed a lot of the main points of us. One was that the US Cut the fentanyl tariffs by half, that China suspended some of the rare earth controls for one year. The US Halting that one rule that Amid had mentioned, expanding the curbs on blacklisted Chinese firms. And the Chinese and the US Also had confirmed President Trump's potential visit to China, as well as the invitation for President Xi to the US but where China did leave itself some wiggle room and an out is with the agricultural purchases. For example, the language in the Chinese readout is that it would scale up the trade in agricultural products, not necessarily necessarily saying who is going to be doing the purchasing. Also, no hard targets. Secretary Besant had said that this would be 12 million metric tons of soybeans during this season, for example. Not hearing a whole lot about that from the Chinese readout on fentanyl. They only said they reached common understanding on fentanyl related law enforcement, as opposed to what President Trump had said on Air Force One, which is that he believed that President Xi will take strong measures internally. So meaning domestically here, or at least in China, I should say, to stop the flow. And the other thing that I thought was quite interesting was with the export curbs related to rare earths, because President Trump had said that the roadblock is gone now. There is no roadblock at all on rare earths. The Chinese, though, had made it very clear that these are only regarding the rare earths that had been curbs that had been expanded on October 9th. Leslie?
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Leslie Picker
Yeah, Eunice, it feels like there is quite a gap there. I'm curious, you were covering the last time they met in person in 2019. How do you compare that meeting and what side said after that with what we've seen today?
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Eunice Yoon
Well, I think that we see that President Xi Jinping is much more, I would say, confident in terms of what he's willing to do. I think what was also interesting is kind of this is a little, maybe a little bit inside baseball, but you could even see that in terms of the positioning where President Xi Jinping was on the right side of the of president of the picture, which usually means that he's in the place where he prefers and is messaging that he's the one who's in control. So I think that was one point that was was really interesting when comparing these two different meetings. But I think overall what the messaging here is that China does have a lot of wiggle room to be able to steer things in a way that they might prefer in the future.
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Leslie Picker
Yeah, Rare earth leverage just being one of of the many things on that card. Eunice, thank you. Our next guest says that while it wasn't a big win, it's clear that China came out on top. Kind of reiterating what Eunice was Talking about there. For more, let's bring in Derek Scissors Asia, economist at the American Enterprise Institute. Derek, so you don't believe that this meeting really addressed the fundamental differences between the two countries. Do you feel like it? It kicked the can down the road, ultimately, will we get there?
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Derek Scissors
Yeah.
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Narrator/Announcer
As someone who's wasted a lot of time on this, I feel like we've wasted a lot of time on this. The meeting itself was a waste of time. The last nine months of US Policy has been a waste of time. Eamon was saying earlier, it's like we went back in time a few months. Actually we went back in time pretty close to the beginning of the Trump administration. And, you know, so that's where US Policy is right now. With regard to the meeting, it sounded like a jumped up version of a Secretary Besant meeting where he comes out saying, problems are solved, we're making progress, this is great. And we find out within a few months that that wasn't true and then we have to have another meeting. So there's been a lot of drama, sound and fury, signifying very little. I think US Policy is pretty much where it was when President Trump took office. And I don't think this meeting changed anything important.
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Leslie Picker
So will it ever. I mean, what's the end game here? Does the car just keep going around and around in circles or does it ultimately find the direction that it needs to go? I mean, what, what ultimately shifts the dynamic there?
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Narrator/Announcer
Well, there are two things going on, competing on both sides. One is the Chinese aren't ready to enforce broad export controls on rare earths or anything else. So when they say we're going to delay for a year, what they mean is we couldn't do this now anyway. That's not much of a win on the American side. On the US Side, we're trying to prepare, we're trying to get ourselves ready to resist coercion by the Chinese over supply chain. So the two sides are maneuvering. I will say the fentanyl tariff cut, some people will welcome it, but it makes the Chinese more competitive in our supply chain. So it's going to give them more levers down the line to say if you don't do what, behave the way we like, we're going to cut this off or cut that off. So you know what's going to resolve this is which side prepares itself better. And right now, as I said to you earlier, I think I'd give the edge to the Chinese.
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Leslie Picker
I want to drill into the supply chain question because we've seen companies Spending millions to diversify their diversified their supply chains away from China. Do you think that based on what we've seen that that shifts? Does it ever shift or because of this relationship being so kind of back and forth with regard to tensions, companies are just like, you know what? I'm going to, I'm going to cut my losses here, I'm going to move out of China and that's going to be that.
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Narrator/Announcer
Well, some companies are clearly doing that. They've disinvested from China. They've looked for alternatives on their supply chain. I wish more companies would do it. It's not going to be a clean outcome. We're going to get to a point where some American companies are in trouble. And let's take an incredibly specific example that's a little different from your question. I think some farmers have recognized I shouldn't be growing soybeans to sell to China. This isn't going to last. The Chinese aren't going to buy four years of heavy volumes of soybeans. Of course they're not. So, you know, there are American farmers, there are American companies that have made the shift or are making it. That's good. There are other companies that are going to get burned by their China dependents.
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Leslie Picker
Yeah. What do you think is the ultimate goal then of the president? We've talked a lot about the shrinking of the deficit, the trade deficit between the US And China. You know, do you think that's achievable and do you think once that happens everything else will fall into place, if it happens at all?
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Narrator/Announcer
Well, there are two different kinds of trade deficit reduction. One is a real trade deficit reduction and one is where the U. S. China trade deficit drops. And it's just because the US Is importing Chinese goods from other countries. And you know, the administration has not been very proud of its achievements on trans shipping, which is China shipping goods through other countries. So I don't see them doing much about it. I think President Trump, a year from now when the aggregate trade deficit is still very high, which is likely when we don't have this materialization of large scale foreign investment in the US which is also likely, he's going to have some problems talking about these deals. It looks like. I didn't think this was true, but it looks like he's just been stalling. The administration has just been stalling. That's the only conclusion to draw when nine months later, after a lot of noise, you're in pretty much the same position you were at the start.
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Leslie Picker
I was going to say the noise doesn't feel like he's stalling. But you're someone who's been studying it from kind of a higher up perspective than those of us who are in the weeds day in, day out, which I know you are as well. Derek Scissors, thank you very much for joining us today.
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Narrator/Announcer
Thank you.
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Leslie Picker
Stocks remain mixed despite the China trade truces. Earnings from tech giants Meta and Microsoft hit sentiment. My next guest says market breadth is the worst it's ever been for the s and P500. And this has to change if the revolution is for real. Joining me now is Paul Hickey, co founder of Bespoke Investment Group. Paul, thank you for being here. Great research on this. I was surprised by the superlative that Tuesday was the worst for S and P breath in ever, at least in terms of an up day. What signal does that send about kind of where we are right now with regard to concentration as well as just the outsized moves that are impacting the broader indexes?
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Paul Hickey
Yeah, so let's, I think what you've seen, so Tuesday was just an example of how the concentration in the market has become pretty extreme late over the, over the, over the last couple of years and to where we are now on a day like Tuesday where we had 398 stocks in the S&P 500 trade down on the day. Historically you tend to see about a 1% decline in the S&P 500 on those days. On Tuesday we were up 23 basis points. Tuesday was also part of a four day string where we've seen the market cap weighted index outperform the equal weight index by over half a percentage.4 days in a row. That's never happened before. And we're now on two months in a row of the cap weighted index outperforming the equal weighted index by about, by at least two and a half percentage points. So that you have to go back to 1999 for that. So it's a, there's a big bifurcation in the market between the haves right now and the mega caps and the have nots the rest of the market. But as you said in the intro, if AI is going to be as big as we all expect it to be, the benefits are going to have to start accruing to these other firms down the line. And, and I think we will start to see that. And I think part of the divide this month that we're seeing is in part due to the government shutdown. So that's created a lot of uncertainty on the part of Smaller companies and investors are flocking to the mega caps as defensives nowadays. And so you've seen this, you really saw the big gap widen in the last six weeks between the cap weighted and the equal weighted in the indices. So I think once we get signs that the government will reopen, you'll start to see that divide reverse.
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Leslie Picker
So maybe that flight to the big big cap tech is, is similar to what we saw with gold, although that's reversed a little bit. Do you expect to see a revision to the mean with regard to equal weighted S&P 500 and market cap weighted?
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Paul Hickey
Yes. So it's interesting, we put this all on the mega caps like the 7 trillion dollar club. But what you've seen is across all sectors so far this month except the materials sector, you've seen the cap weighted versions of the sectors outperform the equal weighted versions of the sectors. So you're seeing, take Consumer Discretionary for example. The sector is up 1% this month, but that's basically all Tesla and Amazon Outside of those two stocks, they're down an average of 3% this month and 75% of the stocks in the sector are down. And the consumer I think is feeling some pain here. As a part, you know, government workers are becoming more concerned and overall consumers are just becoming a little bit more over concerned given the uncertainty. But again, as that starts to revert when we do get the government to reopen, which it will happen at some point and I think once you start to see travel get delayed, the, you know, Senate will come back and they'll reach a deal. So I think at that, that's, at that point you want to start focusing towards the consumer stocks and those that are leveraged to the consumer because all this reduction in spending, you'll see a boomerang effect Come, come at that point.
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Leslie Picker
No, that, that all makes a lot of sense. Paul Hickey, unfortunately, we're going to have to leave it there. Of Bespoke Investment Group, we do have some breaking news out of Washington. Let's get to Emily Wilkins who has that story for us. Hi Emily.
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Emily Wilkins
Hey Morgan. Well, yes, the Senate just adopted a resolution that would overturn the powers used to set up many of his tariffs. This is the ipa. It's the one that's going in front of the Supreme Court and being debated on, you know, Congress. They do get to assert their power over whether or not the President can continue to use that. And so they put forward a resolution today. It's actually the third one this week that the Senate has approved. This one is on all tariffs that use aipa. We saw one yesterday focused on Canada and then one on Tuesday that was focused on Brazil. And you did see either four to five Republicans join with Democrats to overturn Trump's power. Now, it really is more of a symbolic vote at this point because we don't expect the House to be taking that up. So for now, it seems like Trump's tariffs will be in place. But of course, if you do see the Supreme Court or the courts go ahead and rule that the president can't use that power to impose tariffs or needs to check in with Congress, you are seeing here that he does not have the support that is needed for him to continue using that for many, many of the tariffs that Trump has put in place.
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Leslie Picker
Yeah, that's what I was going to ask, Emily, is what this means for the Supreme Court. If you're seeing this move out of Congress, does it have any, does it in any way shift what we might expect to see come out of scotus?
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Emily Wilkins
You know, Leslie, I'm not sure that what we're seeing here in the halls of Congress is going to necessarily impact SCOTUS and how they decide side. But certainly if SCOTUS comes back with questions about the President's ability to use this or if they say, hey, Congress needs to play a role here, you can already see that when it comes to the tariffs, there is some concern among members of Congress for the impact that they could have. We actually saw much more this year around Liberation Day. It did Peter off some as a number of those tariffs were pulled back. But it does show that there are a number of lawmakers, including some in the president's own party, who have concerns about what these tariffs are going to mean for their constituents.
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Leslie Picker
Yeah, certainly an interesting development there, Emily. Thank you so much. Emily Wilkins in D.C. coming up, Meta sharply lower despite an earnings beat. Our next guest is getting Metaverse vibes. Remember those days? And he's downgrading the stock. He joins us next to make his case. And losing just as much today is Roadblocks Daily active users up 70% year on year. But some conservative margin commentary for next year that is weighing on the stock, which is now down more than 12%. The exchange is back after this. This is the Exchange on cnbc. Hi, I'm Jenny Slate and believe it or not, someone is allowing us to have a podcast. I'm Gabe Liedman.
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Paul Hickey
I'm Max Silvestri and we've been friends for 20 years and we like to reach out to kind of get advice on how to live our lives.
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Leslie Picker
It's called I need you guys.
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Paul Hickey
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Leslie Picker
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Narrator/Announcer
My landlord plays the trombone and I can't ask him to stop.
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Leslie Picker
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Derek Scissors
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Leslie Picker
Price plan options available, taxes and fees extra. See mint mobile.com welcome back. Tech giants Alphabet, Meta and Microsoft reported results after the bell yesterday. Alphabet the standout here. That one's popping on the back of strong results. The company topping $100 billion in revenue revenue, quarterly revenue for the first time. On the flip side though, Microsoft and Metta are falling today on concerns over increased capex spending. My next guest downgraded Meta from outperform to perform based on that certainty. Joining me now is Jason Helstein, head of Internet Research at Oppenheimer. So there's uncertainty around AI. We've kind of seen this before with the Metaverse and Metta. How much of this is kind of sentiment driven or what is missing from the Metta equation that you would actually like to see?
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Eamon Javers
Sure.
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Jason Helstein
So the company is basically giving you pretty explicit commentary that spending is going up meaningfully. You can compare the adjectives used this quarter versus last quarter. But the point is the street had to take up expenses meaningfully. And when you ask kind of what the return on this is, more and more it suggests that this is in pursuit of AGI or superintelligence, which it's unclear how that's going to drive the advertising business. And so you had sentiment around investments in AI driving engagement and advertising on the platform, and now there's a concern that this kind of the next level investments, more about the llama model superintelligence and how is that going to drive more advertising revenue And I think that's what investors are pushing back on.
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Leslie Picker
So do you think that's what's distinguishing it from say Alphabet here? Obviously these numbers are eye popping expectations for 72 billion this year, higher figures next year for, for capex. But investors are being somewhat discretionary about what kind of Capex they support and which ones they don't. So is it just like the figures and what they're expecting from next year? Is it exactly how they're communicating with the street on the ultimate upside for revenue? You know, what is it that you think is distinguishing them?
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Jason Helstein
I think for now it's how it flows through the earnings. And so while investors were expecting again kind of big capex opex growth for matter for the next year or two, it just, I think now there's a focus on it just, you know, we're forecasting that is only going to grow earnings per share, 3% next year whereas you know, Google should be 25, 26%. And so really, okay, yes, we think MetaGross earning 17% in 2027, you really have to look forward and so when you look at those metrics you basically now have Alphabet and Google or Alphabet and Meta basically trading at the same multiple. While again over the next few years it looks like Google is going to deliver, you know, 50% faster earnings growth and they just have just much better expense discipline. So again that's where I think, as you alluded in your intro comments, like is this a repeat of the metaverse project? Which I think a lot of investors, you know, never really kind of understood the, you know, the return on that. And again, I think investors do understand the return on AI, but it's at such a level that I think it's for projects that, you know, don't even reflect the current business today.
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Leslie Picker
How easy would it be for Meta to just tone it down, tone down the spending a bit, turn off the spigot? Is that even an option or Most of these CapEx plans already baked, already committed, it's you know, sunk cost at this point.
- [24:25]
Jason Helstein
Yeah, yeah, it's a good point. I mean the CFO last night, you know, did say that the plan for next year are not 100% baked. Again, while the kind of the adjectives used to describe the level of spending got more aggressive since last quarter, the actual budget hasn't been set. So I mean, you know, listen, if the, is it possible, if the investor feedback over the next, you know, six weeks is enough. Do they go back and relook?
- [24:52]
Craig Moffitt
It's possible.
- [24:53]
Jason Helstein
I don't think it's at these price levels. I think if the stock was 15 or 20% lower, they probably would reassess.
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Leslie Picker
Yeah, there's definitely a level that they would have a more reflection on that. Meanwhile, they have I see headlines on the tape about a new corporate bond issuance that's gotten, you know, a lot of oversubscription, about $125 billion worth of orders, according to Bloomberg. So clearly there's someone willing to fund this Capex. Maybe it's in the bond market more than the stock market today. Jason, thank you so much for joining us today of Oppenheimer. Still ahead, Ethan Allen shares under pressure after a top and bottom line miss. We'll get the C suite view on the consumer and the ongoing trade uncertainty coming up. And before we head to break, check out shares of ebay plunging nearly 15% on a disappointing holiday quarter profit forecast citing headwinds from trade policy. The exchange will be right back. Hi, I'm Jenny Slate and believe it or not, someone is allowing us to have a podcast. I'm Gabe Leadman.
- [25:58]
Paul Hickey
I'm Max Silvestri and we've been friends for 20 years and we like to reach out to kind of get advice on how to live our lives.
- [26:05]
Leslie Picker
It's called I need you guys.
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Paul Hickey
Should I give my baby fresh vegetables?
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Leslie Picker
Can I drink the water at the hospital?
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Narrator/Announcer
My landlord plays the trombone and I.
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Leslie Picker
Can'T ask him to stop. You should make sure that you subscribe so that you never miss an episode. I need you guys. And now a next level moment from AT&T business. Say you've sent out a gigantic shipment of pillows and they need to be.
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Leslie Picker
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Leslie Picker
Learn more@att.com 5G Network welcome back to the Exchange. Markets mixed right now you can see the dow is up 170 points but the S&P is down down 0.3% in the NASDAQ. The big laggard here down about 0.9% at this hour. Financials Real estate. They are leading consumer discretionary and tech. They are the ones lagging. Hence the move in the Nasdaq, Chipotle and ebay weighing heavily on the discretionary sector. Now to Seema Modi for CNBC News Update. Hey Sima, Leslie.
- [27:30]
Emily Wilkins
The Trump administration publishing a notice today in the federal registry that it is receiving restricting the number of refugees it admits annually to the US to 7,500 people, most of whom according to the Associated Press, will be white South Africans. That's a huge decrease from last year's refugee ceiling set by the Biden administration of 125,000 globally. The administration did not give a specific reason for the reduction. The Pentagon's Doge unit is reportedly leading the effort to overhaul the US Military's drone program, Reuters reporting. That includes streamlining procurement, expanding U.S. production and buying tens of thousands of cheap drones in the coming months. Defense Secretary Pete Hegseth recently pledged to assert US Drone dominance in the wake of their widespread use in the Russia Ukraine war. And the NBA Board of Governors today gave unanimous approval for Guggenheim Partners CEO Mark Walter to be the new owner of the Los Angeles Lakers. Walter in June agreed to buy the team from the Buss family at a valuation of $10 billion. He also owns the Los Angeles Dodgers. Big numbers, Leslie.
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Leslie Picker
$10 billion. It's amazing. Sima, thank you. Fresh off its $4 trillion milestone, Apple is in the earnings spotlight. A look at what to expect from tonight's results and how to position ahead of the print as the stock hits all time highs. And that's not Even the only mag7 name on deck where I also keeping an eye on Amazon results. Are the company's massive compute bets finally starting to pay off? That's the key question the exchange is back into. Welcome back to the Exchange. Apple hitting an all time high ahead of its earnings tonight, up for a six straight day. IPhone17, demand services, China sales and its AI strategy or some would like to say lack thereof will all be in focus. Joining me now is Craig Moffitt, co founder and senior analyst at Moffitt Nathanson. Craig, first of all, maybe we could take a step back and get a sense of what you think the read through is from the three reporters the three companies we saw report yesterday, Metta, Microsoft and Alphabet. What's the read through from those reports for Apple?
- [29:47]
Craig Moffitt
Well first of all, hi Leslie. I don't know that there's a direct read through from the operating results. I think one of the read throughs is is that it's going to have to be a pretty pristine quarter to satisfy investors. The investors are sort of skittish at the moment. But Apple's in a pretty different category than any of the others in that it's not really playing this giant AI Capex game. And so the big questions about the ROI on capex that are so important for the bigger company or for the other companies really aren't the ones that are going move Apple.
- [30:27]
Leslie Picker
You upgraded the stock a little less than two months ago to neutral and the stock is actually up 13% since then. Is there anything that might show up in earnings that would encourage you to upgrade it once again to buy or outperform?
- [30:41]
Craig Moffitt
Yeah, look, the reason we upgraded it was partly because there were some giant risks that we didn't think were discounted in the stock. Tariffs were one of them. But the biggest was the risk of a negative outcome of the Google antitrust case and a limitation on the Google service revenue that accounts for so much of Apple's operating income. That case turned out that the, the decision was fairly benign and so we upgraded the stock. The reason we didn't go all the way to to a buy rating was simply valuation. I mean, right now Apple is, is enjoying a better than expected cycle on the iPhone, but it's still trading at 41 times trailing earnings. And even if you assume sort of 11% type of year for earnings, you're still talking about a company that's 35 times with roughly half the growth rate of its of its closest peers. So it's a tough one to get excited about at these valuations. But look, it's a great company and there are great products and it's certainly a more stable business than its peers. So I get why there's a willingness to pay up, at least to some degree. It just looks to us to be still too rich evaluation to think that it's going be able to compound at anything like the same growth rate as the other tech peers.
- [32:06]
Leslie Picker
Yeah, it sounds like the stability comes from the phone side and that the surprises, whether it's to the upside or downside, will be on the services side. What are you looking for there and do you think the likelihood is that it's tilted more toward the downside or the upside?
- [32:21]
Craig Moffitt
Well, yeah, Leslie, there are some, some risks there. You're exactly right. We're looking for about 12% growth, 12.5% growth. I think consensus is a shade higher than that. But there are some risks. Right? I mean, it wasn't just the Google antitrust case that mattered. They also lost a case to Epic Games that allows for anybody that sells on the platform. So that's not just game makers, but that's the Netflixes of the world to say they can now process payments outside of the Apple platform and not have to give Apple their giant 27% share of all of those payments. So that could start to show up in the numbers. We don't know whether it will, but it's certainly a risk. There's also the risk that Eddy Q raised and this is probably the largest and most important risk that Eddie Q a couple of months ago when in the Google antitrust case noted that search volumes were down. Is there a risk that AI is actually starting to replace some of the traditional search that generates a lot of the revenue that Apple gets from Google? The upside risk here is that AI itself is generating some incremental revenue because there are a lot of people that are downloading and using the ChatGPT app for example, and the ones that are paying Apple gets a piece of that revenue. So there are a lot of puts and takes in services. I think the numbers for the iPhone have been so carefully poked and prodded and everybody has tracked every detail about what's happening in China with the base model versus the pro models versus the the air model and so on and so on and so on that I don't think there's much room for a surprise on the iPhone side. But I think there is room for surprises either up or down on the services side.
- [34:17]
Leslie Picker
Yeah, and at a 35 times forward earnings it seems like investors may not have as much patience if it is on that downside. Something to look for, lots to look for. Thank you for breaking it down for us. Craig Moffatt with Moffatt Nathan said. Amazon also reporting tonight. Just in case you thought you got all the crosscurrents for the day's stock drivers down the street watching for growth in US and a return on its AI investments. Mackenzie Seagal has more on what to expect in today's tech check. Mac, you've had a busy week.
- [34:50]
Emily Wilkins
Yes, it has been Alphabet yesterday, Amazon today. Their stock really trades on its cloud business and it has been a rough few quarters for Amazon with Google, Meta and Microsoft all raising their capex in their latest quarterly prints. Amazon is under intense pressure to show that it has a plan to hold onto its number one spot in cloud. Now I will say AWS still commands 30% of the market which is a healthy lead over Microsoft Azure at 20%. And while both Google and Microsoft are growing cloud revenue faster than Amazon, that's largely a function of scale since is starting from a bigger base. But Backlog is key and Amazon heads into earnings with a weaker pipeline than Microsoft and Oracle, though CEO Matt Garman told me backlog, it's not a perfect metric to gauge future revenue growth, pointing to Oracle's surge being based off multi year deals that aren't online yet, but it still matters. Now the real tension though is positioning. Amazon has lost key AI workloads to rival rivals. Anthropic, its marquee AI partner, just expanded its deal with Google Cloud. And then Metta, which once leaned on us, recently signed a fresh contract to expand its compute with Alphabet. And this is Amazon's entire AI play right now to be the operational backbone powering large models. So the question going to earnings is really whether Amazon could not only match the scale of competitors on CapEx, but also show an ROI on that specific end.
- [36:18]
Leslie Picker
Leslie yeah, that is the key, key question. Mackenzie Rest up about two and a half hours to go. We'll see you later on closing bell overtime. Mackenzie Sagalos Coming up, mortgage rates on the move after yesterday's rate cut, but the direction may surprise you. That's next. And we're watching shares of Starbucks now higher after dipping as much as 3% premarket. The coffee giant missing on earnings but reporting same store sales growth for the first time in nearly two years. Meanwhile, Chipotle shares on pace for their worst day since 2012 after the chain reported a drop in traffic and lowered its sales outlook for the third consecutive quarter. The exchange will be right back. Welcome back to the Exchange. As we know, the Fed cut its benchmark rate yesterday, but mortgage rates went in the opposite direction. Diana Olich joins us now to explain what appears to be an undesired effect. Diana?
- [37:14]
Diana Olich
Well, I guess if you're buying a home, yes, Leslie. Now this actually though happened the last time the Fed cut as well. And the reason is pretty simple. The bond market had already priced in a cut, but it did not like the commentary from Fed Chairman Powell. So on Tuesday of this week, the average rate on the 30 year fixed had fallen to 6.13%. That matched the recent low on September 16th of this year, which coincidentally was the day before the last Fed cut. Now that 6.13 was the lowest level in over a year. But then after the Fed cut and the news conference, that rate shot up 14 basis points and then another 6 basis points today. So now we're at 6.33% and even 20 basis points higher. All this according to Mortgage News Daily, whose chief operating officer Matt Graham explained it like this. The market's enthusiasm for three Fed rate cuts in 2025 had grown a bit too large for the Fed's liking. The market was nearly 100% certain of another cut in December. The Fed was not as certain and Powell made it a point to say so yesterday. The result is a mild reset in yields back to levels that are more consistent with the December cut being a solid possibility, but not a full lock. Now, the recent drop in rates had caused a run on refinancing, with Those applications up 111% last week year over year, according to the Mortgage Bankers Association. But the lower rates did not move the needle much, much for potential home buyers. Back to where we started, Leslie.
- [38:40]
Leslie Picker
Back to where we started, indeed. Is there a level that you think does unlock or get potential home buyers off the couch and looking for homes?
- [38:48]
Diana Olich
Well, everybody says a five handle, right. If we could get into the 5% range. But you know, the expectation is not that we're going to get there again. We just moved up. We had moved pretty low into this one year low in just the last couple of weeks. But again, that didn't help buyers get off the fence. It's not just the mortgage rate, it's the price of homes right now and the availability. There are more on the market market, but not at the price points that people can afford. And the uncertainty in the economy makes them say maybe I'm going to wait a little bit.
- [39:15]
Leslie Picker
Yeah. And if the best case scenario is already priced into the cuts, I mean, how much further can you fall from there? Diana, thank you. Appreciate it, Dana. Oh, look for us coming up, AI related layoffs getting a lot of attention this week, but this freight company reported a third quarter revenue boost thanks to. I will reveal the name and dig into the numbers next. Welcome back to the exchange logistics company xp. Oh, that was our mystery chart reporting better than expected third quarter results. Frank Holland joins me now with the numbers. Frank?
- [39:47]
Craig Moffitt
Well, hey Leslie. XBO is moving higher, up just about 9% right now because of top and bottom line beats also honestly benefiting from a rotation out of tech stocks. But if you look deeper in the numbers, you're going to see something that has a lot of investors excited. Revenue per shipment that increases by almost 3 and a half percent while daily shipments they actually fell by 3 and a half percent. XBO CEO Mario Horik says that's largely due to this company using artificial intelligence. Little context here. Hark's an engineer and a data scientist with degrees from mit. After we saw layoffs at Amazon and UPS this week that some believe could have been related to AI. I asked Hark very directly if AI can replace drivers or other supply chain workers. Here's what he said.
- [40:28]
Paul Hickey
When we move freight, our drivers do multiple stops in a given day. So they are actually interacting with customers. They are actually going on a customer dock, moving the freight, delivering the freight. And we don't see AI replacing that any anytime soon. But when you think about it, it's all about how do we make our. How we use data in our network and our business to operate our business.
- [40:47]
Derek Scissors
More efficiently is how we think about.
- [40:49]
Paul Hickey
It in terms of the application of AI.
- [40:52]
Craig Moffitt
XPO has a number of large industrial customers, including Ford and Deere, who have been impacted by tariffs. Tariffs. But Herrick says the 10% reduction for tariffs from Chinese imports, that's a positive development. He actually sees tariffs being a tailwind. In 2026.
- [41:08]
Derek Scissors
You'Re going to have more.
- [41:09]
Paul Hickey
Freight into the environment because now you.
- [41:11]
Derek Scissors
Have to move the parts, the raw.
- [41:12]
Paul Hickey
Materials into a manufacturing plant as well as the finished product at the end of that process. Now what you saw in 2025 was that given the uncertainty with tariffs, you had a lot of customers want to.
- [41:23]
Derek Scissors
Defer their capital deployment just so they.
- [41:26]
Paul Hickey
Can get that certainty.
- [41:28]
Craig Moffitt
XBO and other LTL truckers, they're outperforming the broader market today. Eric also crediting not only his performance for giving a boost to the entire sector, but of course the Fed rate cut that could give a broader boost to industrials.
- [41:39]
Leslie Picker
Leslie, seems like all systems go there. Frank, thank you. Still ahead, another earnings mover, Ethan Allen. Yes, we are going to talk about that company, how its weather, weathering tariffs and more. It's down though, 8% after missing the top and bottom line. We're going to chat with the CEO next. The Exchange will be right back. Welcome back to the Exchange. Shares of Ethan Allen Interiors under pressure after missing estimates and reporting a more than 30% decline in retail traffic in the first quarter. But management saying that shoppers who did come in were more qualified leading to stable order growth. Joining me now to discuss is Ethan Allen Chairman and CEO Farooq Kathari Farouk, thank you for being here. How do you explain the miss this quarter?
- [42:27]
Derek Scissors
Well, first of all, good to see you and good to be on the call. Well, you know, these are very interesting times. As you just reported, we did have our first quarter and were impacted by the shutdowns. Had an impact on consumer confidence, impact on our traffic. Our traffic was down but interestingly our sales, written sales in our retail division were up 5.2%. During the quarter, despite all that issues where we were impacted was the fact that we have a major program with the US Government and the shutdowns stopped shipments and even to some degree new business. So having the impact of the shutdown to us was impacted our sales. But overall, as I said, we were happy that we had for our written sales in our retail digital 5.2%. We were able to make sure that we we strengthen our program that interestingly also we had of course made this decision previously. We increased our marketing spend this quarter to 3.4% from 2.3%. Having said all of those things, we have a strong network. We have vertically integrated company. We manufacture almost, almost close to 80% of our products in our manufacturing in North America. We have retail design centers all over North America. We also are, despite the fact that we have been giving strong dividends, we have. We ended up with $194 million of cash, which was up from $187 million last year. Even though we paid 39 cents in regular dividends of 10 million million. We give a special dividend of 6 million. We're a vertically integrated company, so making money rare, very unusual from making 80%. As I said, that map shows from Vermont to North Carolina to Mexico to Honduras. We also deliver our products at one price to our clients. Whether anywhere in North America, whether you're living in Seattle or Miami or New York, all of those things are important. So our while our traffic was down, it was more qualified.
- [44:59]
Leslie Picker
Right.
- [44:59]
Derek Scissors
So looking forward to the fact that we have strengthened our offerings. We have a strong interior design network, we have schools. We are continuously looking at the impact of tariffs. Like for instance, you know, we have a strong manufacturing in Mexico and in Honduras. So it's every day or every week we take a look at what is going to happen saying all of the while having seen all of those things, the good news is that we are virtually integrated company and we are positioned well.
- [45:35]
Leslie Picker
Right? Absolutely. And you know, obviously the shutdown having a major effect. So we'll see what happens if there's some sort of pull forward or you know, pull after the fact, you know, once the shutdown hopefully finally ends. Thank you very much Ethan Allen CEO Farooq Kathari. Really appreciate it. We are going to check the markets and some movers heading into the close. You've had a pretty mixed picture today. On the heels of some of those big tech earnings, you've got meta now down 10% after its capex plans kind of spooked the street. We heard from the analyst from Oppenheimer earlier today, which had downgraded the stock over concerns that they're seeing kind of that Metaverse spook again. This idea that this company has been spending too much on AI with an unknown ROI at the end, kind of end of the rainbow. Let's take a look at shares of Apple as well. You know, we talked about that company going into the print tonight, so currently shares up about less than 1%. That's it for us. Thank you for watching. The Exchange Power line starts right now. Hi, I'm Jenny Slate, and believe it or not, someone is allowing us to have a podcast. I'm Gabe Liedman.
- [46:47]
Paul Hickey
I'm Max Silvestri, and we've been friends for 20 years. And we like to reach out to kind of get advice on how to live our lives.
- [46:54]
Leslie Picker
It's called I need you guys.
- [46:55]
Paul Hickey
Should I give my baby fresh vegetables?
- [46:58]
Leslie Picker
Can I drink the water at the hospital?
- [47:00]
Narrator/Announcer
My landlord plays the trombone and I can't ask him to stop.
- [47:04]
Leslie Picker
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