Kelly Evans (3:41)

Right. Steve, jump in here. How did you read the report?

Steve Liesman (3:46)

Well, I'm thinking of, and work with me on this folks. I'm thinking of inflation right now as a badly cooked layer cake. And I got at the base, I start off with inflation a little bit thicker than I wanted it. I have a layer of tariffs on top of that. Now that may be running out. We did have a 1% increase in apparel prices that could be a tariff indication. But mostly the, the, the addition to tariffs was probably running out. Now I'm going to layer on top of that a big chunk of higher gas prices. And on top of that I have another piece of services or services ex housing and energy that is added on top of that. And that's how you get to this 3.3%. But so if I take away the oil, I'm still got a pretty thick couple layers underneath that I have to worry about. So all of this leads to me to a Fed that looks at this cake and says, you know, I think it's not time to necessarily, you know, take it away right now. Just, just really take away or add to the additional stimulus out there in the economy. So I see a Fed on hold waiting to see if those layers dissipate or if I have to actually do something. And I think Diane is right. This is a multi month thing that has to work. You can imagine, Kelly, that some of the increase from higher energy prices taking Three months or so to work into the core if they're going to get there.

Kelly Evans (5:13)

Diane, you. We see the odds here for a hike are still pretty small, but as you say, we're starting to teeter into that direction. Why would a rate hike, would it be the right response here to these price shocks which are largely supply driven?

Diane Swonk (5:29)

Well, what we don't know yet is what the demand destruction is going to be down the road from these. And that is something the Fed has to weigh. But my own view is that since what we've been seeing is the debate within the Fed about whether or not its next move will be up or down has intensified and intensified before the war and at the March meeting, we know from the minutes that that was still top of mind. And we've heard more from some of the hawks like Austan Goolsbee on the Fed that have sort of noted the resilience of the US Economy in the face of higher inflation. And that does sort of lean you towards an additional hike. And I think that is where the Fed is going to go in April is to signal optionality that the next move could be up or down because that is what they're debating at this point in time. And they need to sort of be not behind inflation again and not stuck with the transitory story. The transitory story we heard already in the beginning of the post pandemic inflation. And there are many elements of what we're going through in terms of supply chain shocks that echo the pandemic. They're not as bad as a pandemic, but due to rationing in many emerging markets, we don't know how long factories are going to stay online. And we also know that China chips are at risk because of the slowdown in helium exports out of the Strait of Hormuz. Helium is a key component of chips that we know what happens when you get chip shortages. They're prioritizing AI chips right now, which are higher margin to be produced, but that leaves shortages elsewhere in the system. The other interesting issue, and I just want to add this on there, is that the tariff induced inflation, I'd like to believe it's over. But the export goods prices, which is something that's been influenced by high tariff inputs, those prices increase and they increase about a six month lag with the, with the PC index in February, they accelerated at their fastest rate since August 2022. That's important as well.

Kelly Evans (7:27)

Just going back, Diane, to the pandemic, obviously you had the government doing massive fiscal stimulus. What was the number 5 trillion. When you add up all the different acts. We had stimulus checks going out and so forth. I mean that's how you get plus what the Fed was doing, that's how you get inflation. So reading through it this time, if there's no stimulus, and you could argue maybe there is a little bit of fiscal stimulus to keep an eye out for. But meaning how you know, doesn't this act more like a contractionary tax hike on the consumer and on the economy that if anything the Fed should ease in response to or. No,

Diane Swonk (8:01)

that's not clear at all yet. What we've seen is in the aggregate consumer spending numbers. And we know there's a disproportionate role that affluent consumers are playing in holding up those numbers. Numbers. But we also have a big bump in tax refunds right now that are due to tax cuts from last year. And those are hitting consumer bank accounts right now. Those are holding up things like vehicle sales. Strongest vehicle sales in the month of March on new vehicles in six months we saw used vehicle sales go up. Used electric cars got a lot of demand in the month of March and those are being bought with those tax refunds. So it tells us that there is still stimulus in consumers wallets. And I think that's important because it's a double edged sword. Right rate. It's helping to blunt the blow of higher energy prices but it's also helping to buoy consumer spending along with the cushion in stock holdings that we've seen. Wealth effects should work more hurt more on the downside than they help on the upside. But in general we've seen just an enormous amassing of wealth at the same time that inflation has compounded. And the Fed's inflation fighting credibility I think is itself stake five years in.

Kelly Evans (9:10)

Steve, a final word here.

Steve Liesman (9:13)

I think the politicians want to monetize the oil price increase but the central bankers don't. Right. It doesn't help you to provide extra stimulus out there with your inflation problem when you have an oil price shock. I think the best advice here for the Fed or the best route for the Fed is probably to hold still here. Don't add any fuel to the fire, so to speak. You're right that the inflation of the pandemic or the post pandemic inflation was driven a lot by the fiscal side, but also on the monetary side. I think there are lessons from the 70s that we've learned that you do want to tighten but maybe not tighten too much to create a worse impact out there. So given that the Fed is restrictive and in a place where it could rightly say that it's not adding fuel to the fire. I think the idea of holding still here and not monetizing essentially the oil price increase is probably the route that the Fed will pick. And I think what's interesting is that's how the market is priced Kelly and it's priced that way for Fed Chair Powell and it's priced that way for Fed Chair nominee Kevin Warsh.

Kelly Evans (10:25)

I said last one day but just a quick observation I just want to get your reaction to. I mean this is an important reading on consumer sentiment. This is not a survey with a five or ten year history. Doesn't it go back to like 1950, 1960 and 2022 is the first time we saw that it responded to those price shocks sank to what was then a record low. This number is a lot worse than that. I know people take issue and say there's been survey and methodology changes and these are all political umich and conference board but even Piper Sandler's daily tracker that they developed to respond to that, it was at a year to date low last week before this. So that's where yeah, that's where the

Steve Liesman (11:02)

layer cake thing really works well in the sense of well you gave people higher inflation to begin with. You piled on the tariffs and then you piled on the oil price shock. And I think all of that is weighing down on the consumer and maybe it's a pile of laundry rather than

Diane Swonk (11:20)

said yeah and a stagnant labor market. The idea that you can't just jump jobs and hop jobs as you did during the hiring frenzy. Remember everything's relative. And even though this is not the stagflation or the situation in the 1970s right now the lessons of that era are important and it really does sort of nail down 100% of the whole economy feels inflation. Only a few percentage points feel unemployment and that's what we're seeing in these consumer sentiment figures. And the sentiment data is much more sensitive to inflation and the ongoing upward price is pressure on price levels. The level of price is being very high is very important right now for the US consumer.

Kelly Evans (12:05)

Very interested how it goes. We get through the consumer part of earnings season, you know in a few weeks from now and for the rest of the year. Thank you both, really appreciate it. Dan Swonk, Steve Liesman talking us through those results today. Let's get to the latest now on the meeting with Treasury Secretary Besant, Fed Chair Powell and the bank CEOs. Houston joins us with more. Hugh on this meeting that was earlier this week.

Hugh Sun (12:26)

That is right. KELLY So a new AI model is raising enough alarm in Washington that regulators rushed to convene Wall Street's top CEOs this week to talk through the potential cyber fallout. As you mentioned, Benson Powell called an emergency meeting with the CEOs, America's biggest banks to discuss the cybersecurity risks tied to Anthropic's latest model. Sources tell CNBC the CEOs, including bank of America's Brian Moynihan, Goldman Sachs, David Solomon, were already in D.C. for a financial Services forum board meeting on Tuesday when they were summoned to treasury headquarters. I'm told the message as I understand it, banks should be preparing now for the cyber risks posed by Anthropic's new Mythos model. Now, as a reminder, Anthropic this week announced a limited preview of its its latest AI model, Claude Mythos, citing concerns that its capabilities could be exploited by hackers. The model has already identified thousands of quote, high severity vulnerabilities across the corporate world, including in major operating systems and web browsers. According to the company, initial partners in Anthropic Cyber Circuitry Initiative, which it calls Project Glasswing, include firms like JPMorgan Chase, Apple, Google and Nvidia. And an Anthropic official told CNBC the company has been in ongoing discussions with the US Government about Mythos, about Mythos and its potential cyber implications.

Kelly Evans (13:42)

KELLY so again the concern here is with this Mythos model, Mythos is able and explain HUGH did Anthropic unleash Mythos on the world or did it partner with companies to identify these vulnerabilities? What's the order of operations?

Hugh Sun (13:56)

It is not unleash the world and thank goodness it's not, Kelly because it's apparently very powerful. So they at some point Anthropic did realize the implications of, you know, of this LLM model and is and basically said we're going to have a very veiled rollout to a few key players so that they could begin to gird themselves against this threat and essentially use AI to protect themselves from future attacks from people using AI as well.

Kelly Evans (14:25)

KELLY about the best press I think Anthropic could wish for for this for this rollout. Hugh, thanks very much. Hugh sun there. Our next guest says the meeting underscores how vulnerable private sector companies could be here. John Carlin is cybersecurity chair at Paul, Weiss, Rifkin, Wharton and Garrison. Think I got that all in. And a former assistant attorney general for national security. JOHN it's great to have you here. What's your understanding of the issue here? How real are the threats?

John Carlin (14:51)

This is a real issue. I mean, if you think about it, cybersecurity has already been estimated as a multi trillion dollar problem, and that's because of crooks, nation states, terrorists attacking our systems day in and day out. And one of the main ways they do that is they go after vulnerabilities. Think of your house with an open door or an open window that remains unpatched, or because the technology is old, is unpatchable. To cite one report alone from Cisco, of the top 10 exploits used by criminal groups and others in 2025, two of them were vulnerabilities that already were more than 10 years old. And 1/3 of the top 100 exploits used were also more than a decade old. And 40% of the vulnerabilities that get exploited are on it. That's so old that it cannot be patched. So you have to get new systems in place in order to be able to patch it. And the problem with Mythos, if it's released, is it means that you don't need to be a cybersecurity expert, you don't need to be a coder. You can be an average person behind your keyboard using this powerful tool. And it's finding flaws, according to Anthropic, across literally every single major operating system and every major web browser that have existed for decades, but no one has ever been able to find them before. So think about that with that many new vulnerabilities, with the ease of a click on a keyboard, that you can get into a system. And then once you're in using the same tool, you can do damage at a speed and scale that simply was not ever capable before. That's the genie that's coming out of the bottle.

Kelly Evans (16:31)

Again, I haven't done deep research on this, but just thinking this through, I mean, in some ways I'm glad that this is happening. If these vulnerabilities are known and have existed, first of all, what are all the cybersecurity companies and corporate companies doing? Or where is Microsoft, whoever is responsible for patching this? It feels to me a bit as if someone walked down a neighborhood, you know, with a scanner and said, here are all the vulnerabilities in all these houses? Well, on some level, you'd want to know. So what should everyone do? Just go to Anthropic and say, give us this tool and let's go find this? It's interesting that all the cybersecurity stocks are selling off on this when, if anything, it suggests the companies need to be more proactive in deploying these technologies to patch things up.

John Carlin (17:11)

You know, you raise an important part and that, that's what I think. Glasswing is a good example of what should be done and should be done before other models as well, which is they're allowing those that use them, cybersecurity companies, those that might be vulnerable, to get in and figure out how can we protect ourselves before this is released into the wild. It does raise the larger problem though. This is one company handling it responsibly. What about other companies as they develop and what about companies that are developed or have this breakthrough? Who are the bad guys? And I think what it points to is we really need a new framework to figure out how do we fix these vulnerabilities at scale and throughout society. It's one thing to focus on, you know, Fortune 100, Fortune 500 companies that have the resources to pour into this and quickly and that's got to be a priority. Our critical infrastructure depends on it. But what about mom and pop, the small businesses, medium sized businesses? How do we get them to get the new systems that even can be patched in time before this tidal wave of new attacks enabled by AI occurs.

Kelly Evans (18:20)

But again, what's the alternative? To leave everybody out there as sitting ducks? I think there's a responsibility. Look, we're in the middle of a war against Iran. We have Russia on the offensive. Iran has explicitly warned that it could attack US Companies, their cybersecurity defenses and so forth. So I don't know exactly what role the government could play in this, you know, but there's something to be said for deploying this technology and, you know, kind of reinforcing the defenses before someone with many, you know, with much worse motives goes and does it. And you know, and these. If Anthropic has the technology, how far behind could other could China, Iran, could Russia be?

John Carlin (19:03)

I think that that's exactly the right point to be making and share the, share the concern. It's been known for a while now, right? Like, look at the statistics I gave you, that a lot of the cybersecurity problem is coming from unpatched or unpatchable vulnerabilities. Having us accompany that is, you know, US company that shares our values or an allied country, get there first and be able to sound essentially the alarm bell so this can be fixed, which was critically important. And I don't see a choice but, but to do it that way. But now there's this question of who's going to win the race before a model like this gets deployed. How fast can we move to ensure that it doesn't cause the damage that has been previewed?

Kelly Evans (19:52)

Preview just a final thought on this. And Anthrop, I believe, has committed $100 million in usage credits to some of the bigger corporate partners. It selected $4 million in donations to help harden software. We all have to keep in mind too, this could on some level be a marketing exercise and it's better to find out now, you know, how successful is it? It may be the case that all of these concerns are somewhat overblown or not. But so I understand on that level, if the cybersecurity names are selling off today because Anthropic is going to come in and effectively say we'll help, cybersecurity will disintermediate them or that.

John Carlin (20:30)

Right. Or that there may be some new solution that's ultimately, even if it's not anthropic, AI dependent. And so they'll be looking to see who can develop that new type of solution first. And you're right as well in terms of you have people have previewed that this is a problem that could occur. You have people testing it. Now a lot of what we're talking about is based on anthropological anthropic description of the problem from its own testing of the tool. And we'll need to wait and see if this is the tool that is that step change in technology. Whether it is or isn't, though, I think everyone is predicting that step change is coming. So there's an urgency now to focus both on how we can be prepared for it. The other issue is outside the, the security itself. Preventing it from occurring is going to be in the short term, I think, a focus on resilience. Let's say the tool gets out there, you do get in. How can we make sure that we can continue to do our business without significant disruption?

Kate Rooney (21:33)

Right.

Kelly Evans (21:34)

Because this is a great moment for investors, you know, those who really understand these businesses. We are just showing bug in ETF, but hack is one that's down 25% from its October highs. So if this is all an overreaction or if these companies could actually help in some regards, it would be an interesting, interesting buying opportunity. But we'll leave that for the traders. John, thanks very much for now. Appreciate it.

John Carlin (21:53)

Thank you.

Kelly Evans (21:53)

John Carlin with Paul, Weiss, Rifkin, Wharton and Garrison. Coming up, the president says Iran, speaking of Iran, that they hold no cards while the vice President is on his way to Pakistan for cease fire talks. We have the latest with oil around $98 a barrel, fractionally higher today, still down about 12% this week. And as we head to break the chip, stocks are on track for a big week with the Semi SMH ETF up about 11% and intel is one of the big ST there. It's up 40% so far this month. It's riding a seven day win streak, its longest since 2023 and it closed at a five year high yesterday on its expanded partnership with Google. Nice rebound there. We're back after this.

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Kelly Evans (24:17)

Welcome back to the Exchange. Not a lot of relief for the crude oil price today. In fact, it's fractionally higher WTI around 98 and change per barrel as the Vice President sets off for U S Iran peace talks in Pakistan. Megan Casella is live in D.C. with the latest.

Kate Rooney (24:31)

Hi Megan, Hey Kelly.

Megan Casella (24:32)

So these negotiations appearing to be on thin ice today before they even really get underway, both sides doling out some tough talk and remaining at odds over the terms of the two week cease fire to the speaker of Iran's Parliament earlier today warning that two issues that Iran believed to be part of the two week deal have yet to be implemented. That was a cease fire in Lebanon and what he described as the release of Iran's blocked assets. He wrote that, quote, these two matters must be fulfilled before negotiations begin. So that suggests that the focus this weekend will need to be on litigating the terms of the cease fire even before Iran is willing to engage on broader peace talks to end the war. And then on the US Side, President Trump posting on truth social media just in the last hour or so saying the Iranians don't seem to realize they have no cards other than a short term extortion of the world by using international waterways. The only reason they are alive today, he says, is to negotiate. So acknowledging there the leverage that the Iranians do have in the Strait of Hormuz while still suggesting that the US has the upper hand. All of that said, Kelly, remember that Vice President J.D. vance is the one in charge of the talks for the US Side. He's well known as an anti influence interventionist. He was reportedly the biggest voice of opposition against war with Iran inside the White House. So there is some speculation because of that that having him lead the US Delegation could potentially increase chances of a deal. Kelly?

Kelly Evans (25:49)

All right. We need those chances, I suppose, to take any increase they can get. Megan, thanks. Our next guest says we avoided the worst case scenario in the conflict this week, but the true off ramp remains elusive. Let's bring in Ed Mills, Washington policy analyst Raymond James. And it's good to see you. We've been talking to a lot of geopolitical experts this week about what might happen with the Iran conflict. Based on what's happened so far, what can you tell us about the fallout kind of back at home?

Ed Mills (26:14)

Yeah, Kelly, clients here, Raymond James, have been asking kind of what is the end game? And what we have told them is a good degree of skepticism has been something that's been really important. There was a sense that this could be over very quickly. We told them it will take a little bit longer. As we look at the cease fire, there are three things that really are important. What happens with the enriched uranium, what's happening with the Straits of Hormuz and what's happening in Lebanon. We have two additional things that the speaker from Iran has just added to that. But the U.S. delegation are going to make sure that we know what's happening with that enriched uranium, know what's happening with those straits and can make sure that they're on the same page with Israel.

Kelly Evans (26:54)

And what's the political fallout both in terms of the midterms and I mean look, that could consumer sentiment number today is really bad. Very much reminds me of the bad June 2022 readings we got for Biden, which I think was also right at the same moment coming up before the midterms.

Ed Mills (27:10)

Yeah, Kelly, you're absolutely right. One thing that we've always tracked is the right track, wrong track of the country because generally if things are on the wrong track and when you see the consumer sentiment the way it was today kind of at record lows, that absolutely tracks with wrong track. The Republicans had a lot of headwinds coming into this year for control of the House of Representatives. And I think people are anticipating that is only growing and it's really moving a conversation over to the Senate. The Senate has been a math problem for Democrats. They have to pick up three seats and there's not a lot of great opportunities for them to do that. And so we look at this consumer sentiment and say, well actually if Democrats are able to pull that inside straight, are they putting more states into the competitive column in could the Senate actually flip? That is what the market's going to start paying attention to here. And then when we look at some of the policies, is it going to be Democrats challenging him on entitlements that got cut under the one big beautiful bill last year? Is it going to be Democrats challenging him on some of the tech export controls with China that he's trying to loosen up. And that's really important for semicap equipment, that's really important for semiconductors. So those conversations are really what we've been spending our time here at Raymond James.

Kelly Evans (28:19)

That's a great point. Yeah. And bringing it back to one of the important, most important parts of to the market as well. So the true off ramp though, you think does remain elusive. Talk a little bit more about how you're looking at things.

Ed Mills (28:29)

Yeah. So I think there's three paths from here. You could have this breakthrough, you could have an agreement. I think that that is unlikely in this near term time period. Things could fall apart. We see kind of something that is quite fragile. We see Iran continuing to attack Gulf neighbors. We see activities still going on in Lebanon or we can have what we usually get progress and then kicking the can down the road. So I would expect as a base case over this weekend is getting progress, trying to get to that next deadline. There is a concern that if there is not progress, we've kept all those military assets in the region. And something that we have told folks here at Raymond James is that when President Trump has positioned assets from a military perspective in a region, he's used them. And so the chance that we have escalation before we get final resolution is very high. Kelly.

Kelly Evans (29:18)

Right. And that being the case, is that you think why the oil markets might be responding the way that they are. Again, they're not so anticipatory. We'd have to look out to future contracts for a little bit more of that. But after that big drop in the oil price a couple of days ago when the president called off additional strikes, it's since been treading water, if not drifting higher.

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Ed Mills (29:37)

So on a call yesterday that we had with a couple hundred clients, we asked what the base case for oil. And over the next three to six months, months, about a majority said around $100. And so they're anticipating things don't get much worse. But even if things end tomorrow, getting all of those tankers through the Straits of Hormuz, getting oil production back online, our energy team has really done a nice job showing just how long that's going to take. And because this has gone on now for a month and a half, it's going to take much longer than that for things to return to normal. So the new normal in the energy prices is higher than it was before the conflict, at least, at least through the end of this year, that's for sure.

Kelly Evans (30:16)

Ed, thanks very much. Appreciate it.

Ed Mills (30:17)

Thank you.

Kelly Evans (30:18)

Talk to you soon. Ed mills. Coming up, OpenAI says cyber risk isn't the only reason that Anthropic is withholding that Mythos model. We'll have details from their side of the story next. And before we head to break, check out shares of Commvault Systems. Up as much as 12% on a report the data protection software provider is exploring a sale after recent takeover interest. Thoma Bravo is reportedly one of the firms interested in a deal. Those shares are now up a little bit less than 10%. CBLT. We're back after this.

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Kelly Evans (32:20)

Anthropic, as you heard earlier, is withholding its latest AI model called Mythos. It warns it could usher in a new era of cyber risk. Risks says it's capable of exploiting vulnerabilities in every major operating system and Web browser. But OpenAI sent a memo to shareholders alleging its competitor isn't being entirely truthful. Kate Rooney has more in this tech chat.

Kate Rooney (32:40)

Kate Kelly so we got a hold of that memo that OpenAI sent to investors this week and in it the AI giant accuses rival Anthropic of a lack of compute. So that's basically the hardware of data centers energy needed to train and run some of these AI models. OpenAI in this memo outlines plans for 30 gigawatts by 2030 anthropic. They compare that. They say they're expected to have roughly 7 to 8 gigawatts by the end of next year. In the memo, they say even at the high end of our range, our ramp being OpenAI is materially ahead and widening. And they say the scale is now a real differentiator. This Kelly has been a really strategic disagreement between the two leading AI labs. You've got OpenAI planning to spend about $600 billion in compute over the next five years, and then Anthropic has taken a much more conservative tack on this topic. CEO Dario Amade has criticized what he called the YOLO approach on the data center build out. He frames their approach as much more responsible in terms of capital allocation to investors, though OpenAI highlighted some commentary from Ben Thompson over at Strategic he argued that Anthropics Compute is now going to be a product constraint. Could also put a ceiling, he says, on growth. They really Talk about that in the memo this week. Of course Anthropic did release that new model as you mentioned Kelly, only going to be available to 40 companies rolling out slowly they say because the model is so powerful but open. I really pouring cold water on that saying reluctance to make this model widely available to the public is actually not about security concerns. And it comes down to the reality that Anthropic simply does not have enough compute. They cite Thompson on that too. But Anthropic's CFO said recently that they did just make their most significant compute commitment yet. That was the Google Broadcom deal to keep pace with what he described as unprecedented growth.

Kelly Evans (34:33)

Kelly, that's a fascinating point, you know, on the compute angle while others think or cite certain kind of forums suggesting that this tool just isn't that powerful or is somewhat overblown. And again, on some level I'd like for us all to find out, I'm not saying to unleash it on the unprepared world and I do worry a little bit, not just that we always say small businesses who care. What about state and local governments? I mean if you're looking for anywhere that has old systems and really important information, I, I think about that level as well.

Kate Rooney (35:04)

It's such a great point. One of the things I thought Kelly, that stood out in their announcement was some of the vulnerabilities that had been out there for 30 years had just been sitting out there that Anthropic's new model was able to solve and find in seconds. So I think the power of this, regardless of Anthropic rolling it out widely or not, I don't think that's up for debate. A lot of people look at that and say wow, you know, if that gets in the wrong hands, I think the question is this model will at some point be released more widely. The heads up that some of these companies are getting, at least you talk about this group that got access, it's JP Morgan, it's you know, Google Us. It is not necessarily small local governments but how much of a heads up do you need to actually protect and also really fortify against bad actors?

Kelly Evans (35:49)

Have they said, is it, you know, my mind goes to Microsoft, which, you know, their software is ubiquitous, their operating platform is ubiquitous. I don't know if they are the ones who have these 30 year old vulnerability as if we're talking about a variety of software hardware players.

Kate Rooney (36:03)

It's, it's Internet browsers, it's sort of everywhere. And one of the things that this model is apparently really good. By the way, it was not designed for cybersecurity. That was the CEO said essentially we tried to make this really good a code. And as a side effect, it happens to be good at cybersecurity. One of the things this model is apparently really good at is taking sort of separate things like making a connection that's needed to solve those vulnerabilities. It sounds really complex, but yes, it's something that this model is really good at. And so it's hard for a human to parse through that amount of data and find these vulnerabilities. But there are things that were sort of in plain sight that this model was able to do. By the way, it's not just anthropic. OpenAI from what I'm told from sources, is working on another cybersecurity model. They don't plan to gatekeep it in any way. So even if it's not anthropic, other competitors will be coming out with cybersecurity models. Clearly, as you talked about with you, going to get the attention of US Government also should mention, comes at a tense time for anthropic when they're in a fight with the U.S. government. You would think that you would want, whether it's state and local or federal governments to have access to this and to be able to get ahead of it.

Kelly Evans (37:09)

I was thinking a little bit about a wildlife analogy in the sense that what it's good at is kind of circling the hyena pack to attack a deer or something like that. And so perhaps that will have other applications as well, if you'll forgive the analogy. Kate, thank you very much.

Kate Rooney (37:24)

Kate Rudy, thanks.

Kelly Evans (37:25)

Appreciate it. Let's get to Julia Boorson now for the CNBC News update. Julia

Julia Boorson (37:30)

Kelly, the Irish government is calling in the army to help clear blockades on crucial role roads as protesters protest over rising fuel costs entered their fourth day. The protesters, many of them farmers, have caused major disruptions by blocking several highways, ports and even an oil refinery with trucks and tractors. They say they will continue to protest until they can meet with officials and get more support. A warehouse employee has been federally charged with arson for deliberately setting fires that destroyed a massive Kimberly Clark distribution center in Southern California. The fires engulfed a 1.2 million square foot warehouse and caused roughly $500 million in damage, according to federal prosecutors. The suspect allegedly started the blaze early Tuesday morning and it took first responders more than 2012 hours to get it under control. Former Vice President Kamala Harris is offering up some of her most Direct remarks yet about her political future. At a conference in New York today, she said she is thinking about running for president in 2028. If the former vice president decides to run again, it would be her third bid for the White House. Back over to you.

Kelly Evans (38:40)

We will see. Julia, thanks. Coming up, the big banks lower today but posting some big gains as we wait for their earnings start rolling in next week. We'll hear from JP Morgan, bank of America and Morgan Stanley and Citi. They're all up about 5% or more since Monday. In fact, 8% for Citi. As you can see, their financials are our market guest top sector even after a rough start year to date. We'll talk about what's got him so bullish next. Welcome back. Stocks are mixed this afternoon and we're wrapping up a noisy week on the geopolitical front. All three major averages are still on track to finish positive though. And my next guest says expect some choppiness but stay positive. Focused on four positives in the markets. Let's bring in Wells Fargo wealth and Investment Management CIO Daryl Cronk. Darrell, good to see you. What are the positives? Please remind us.

Daryl Cronk (39:32)

You too. Well, I think obviously the markets, we're going to get a really strong quarter of earnings growth. Prices are reasonable. We're back down to, you know, basically 20 times forward 12 month P Es at this level you've got interest rate stability. Right. The yields have been unbelievably stable at this point, which is good for sectors like financials, good for technology stocks. I can now go out, we just made a trade earlier this week about selling energy and buying technology on a high convexity trade opportunity where I can buy tech at market multiples today with twice the earnings power. Wall street rarely gives you free lunches. That looks like a free lunch to us.

Kelly Evans (40:12)

Wow. Okay. So that you were explaining a little bit now you might have to, I don't know, stay outside of software or stay outside of cyber or. Are you talking to just the Mag 7?

Hugh Sun (40:21)

Yeah,

Daryl Cronk (40:24)

well, no, I think I look, I mean you've got this big dispersion as you know, Kelly, in a lot of these sectors. I mean obviously semis against software. In tech, you know, you go into financial financials and it's very much banks against, let's call it alternative and private credit managers. Those big divergences we think create kind of high convexity opportunities where your downside is somewhat limited. Right. At some point. But, but if things start to turn, if conditions change, the upside can be really material and that's the kind of thing we want to layer into portfolios when you get these kind of moments in time where things are quite volatile.

Kelly Evans (40:58)

Right. So let's, so let's go from that to the financials where you also have a high conviction and yes, they've had a decent week but they've been under pressure here to date. Flattening yield curve and some things like that going on. Why are you positive?

Daryl Cronk (41:13)

So a few points. Right. Financials now traded a 40% discount to the overall market. They've underperformed the S&P 700 to 750 basis points year to date already and almost two 2000 basis points on a rolling 12 month. You're going to, you're going to see probably the best quarter for M and a activity since 2021 in Q1 when we get the earnings numbers. In fact, there was 22 mega deals defined by $10 billion plus of M&A activity in Q1. That's the most we've ever seen. Good, good quarter for sales and trading as well with all the volatility. And if I look at what we call shareholders holder yield, total shareholder yield, I include the dividend and share buybacks. Financials are a buyback machine. They can redeploy capital back out to shareholders at levels we haven't seen as regulation pressures come down, as some of those capital buffer requirements come down. The total shareholder yield on financials right now is about five and a half percent, Kelly, which is really rivaled only by technology. So the two together we think make a lot of sense here.

Kelly Evans (42:16)

I like the way to think about that. Total shareholder yield of five and a half percent. Good reminder. Daryl, thanks so much. Good to see you. Daryl Cronk with Wells Fargo. Coming up as the US and Iran approach the negotiating table, theoretically at least we'll look at how long it will take oil prices to normalize.

Diane Swonk (42:34)

Stay with us.

Kelly Evans (42:40)

Welcome back. We're keeping an eye on the price of oil which has reversed to move higher throughout the session today as it may re approach 100 a bail. We're at 98 and change right now. The US and Iran expressing some doubts about the staying power of the cease fire. My next guest calls it the least cease fire, cease fire in the history of ceasefires. Joining us now is Denton Cinco Grana. He's the chief oil analyst at Oil Price Information Service. I know a lot of people feel frustrated, Denton, that it seems to be the case that way. What do we know about what's happening with activity through the Strait of Hormuz right now and the prospects for that based on great outcome, no outcome or a bad outcome this weekend.

Commercial Announcer (43:18)

Yeah. Well, Kelly, good to be with you again. So, yeah, I think you would describe the straight right now as maybe a trickle of ships coming through. Obviously, you know, this weekend could be very critical to how things turn out. Hopefully there's a good outcome and traffic resumes. But again, I think I may be aging myself here a little bit. We need to avoid the three, what I like to called the three Stooges syndrome where Mo, Larry and Curly try to go through a doorframe all at the same time and then nothing happens. They just get stuck. So if the street does reopen, you know, hopefully that we don't have this kind of rush, it's orderly, etc. Hopefully that that's the end result here. But you know, again, I think this weekend is still going to be a key to, to what we we see here over the next couple of weeks.

Kelly Evans (44:05)

Do we know based on just what's happened up until today, Friday, how quickly the oil price could fall back to something in the low 80s range?

Commercial Announcer (44:16)

Yeah, it could be, I think it would still need to be a couple of weeks to a month. I still also think that you're going to need sort of an elevated price because really demand probably won't take that big of a hit. It's taking obviously a short term hit, but it's going to going to have to be kind of elevated because you're going to have a lot of demand for countries that have exhausted inventories. They're going to need to refill those, those inventories and not just the Strategic Petroleum Reserve here in the United States. Think about countries in Asia, Japan, Korea, South Korea that have gone through a lot of their oil reserves that are going to need to refill those.

Kelly Evans (44:52)

Yet the speaker of Iran's parliament posted this morning around 10:45 Eastern, that certain conditions need to be met before negotiations begin. An hour later, the New York Post published an interview with President Trump who said, quote, we're loading the ships, readying the military if Iran doesn't comply with talks. He's implying there, I mean, that's kind of why you're getting this sticky price action today coupled with a little bit of weakness in stocks. And you've come up with an interesting way to think about the impact that this is having on Americans debt. And we saw that terrible consumer confidence reading this morning. You said, look, based on the median U.S. income, Americans had to work for four minutes to buy a gallon of gasoline. Now to six minutes. So it's a 50% increase. It's just one way of thinking about, you know, the real impact this is having. It's psychological, but it is real as well.

Commercial Announcer (45:40)

Yeah, absolutely. And again, you know, four minutes versus six minutes, you're like, wow, big deal. But there's some, you know, that's based on the median income. There's obviously people on the lower end of the economic spectrum where this really hurts and it's really starting to hit them. And we are starting to see some gasoline demand destruction. So, for example, here at Opus, we get retail volumes from about 40,000 stations around the country. March 2026 was about five and a half percent down versus March 2025. Now, granted, we have been in a bit of a secular decline for gasoline demand, but that year on year, change by month is usually somewhere in the 2 to 3% area. So you can make an argument that gasoline demand destruction based on the price rise here over the last month, and change has been somewhere in the 2 to 3% area.

Kelly Evans (46:25)

That's fascinating. Do you have any sense yet, it's April 10, of how it's going for the month of April so far?

Commercial Announcer (46:30)

Yeah, I think it's probably going to be in that same kind of neighborhood still very early, obviously in the month. But I wouldn't be surprised if we end up in. If we continue on this path that we're on. Probably somewhere in that 5% area.

Kelly Evans (46:43)

Again, what was it when gasoline hit $5 nationwide a few ago? Years, years back.

Commercial Announcer (46:48)

Oh, shoot. Got me on the spot.

Kelly Evans (46:51)

Let's remember, people had stimulus checks. We were all. It was the era of the great resignation. So I'm not sure if there was much demand destruction back then. I assume there was.

Commercial Announcer (47:00)

There was some. And also, you know, keep in mind that cars are much more efficient. So we had that paying playing a role as well. People were working from home. We're doing this interview, zoom, instead of me being in the studio with you. So there's been ways to cut back at that demand. But I think one of the things that we kind of noticed back in 2022 is when your drivers who don't really care about the price of gasoline, those driving a Porsche 911, where if you could afford that car, you don't care. But they started reverting back to regular when it got to about 450per gallon.

Kelly Evans (47:37)

I see. All right. And we're not even there yet. So. Denton, thanks. Really appreciate it. Cinco Grata with Opus. That's it. And for us, power lunch picks up our coverage right 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. Sitas receta medica los dias and los kenesitabas Prescription medica parallela pildorantic conceptiva and terminado Opel estadis pony venlinia ila majoria de la tomal control de dusalud reproductiva con Opel usalcodigo Birth control irresiva ventico porciento de descent to premier meste Opel and Opel Puntocomp.