Transcripts For CNBC Squawk 20240703

Plus a mega deal in the oil industry. Chevron is buying hess. Were going to have the ceos of both Companies Joining us here at post nine momentarily. And one of apples largest suppliers, foxconn, reportedly being investigated by authorities in china. They are said to be conducting tax audit inspections and revving land use of foxconn subsidiaries. That is pressuring sales of apple a bit as we get started with trading 29 minutes from now. Carl . Actually, im going to send it to myself. Thank you, carl. We do start not with the markets itself but with that major deal in the energy sector. Chevron agreeing to acquire hess. Its an all stock transaction, valued at 171 a share before before we see chevron trade this morning. The ratio, 1. 025 shares of chevron and again were going to be speaking to both the gentlemen behind that deal very shortly. Jim, it follows, of course, exxon and pioneer. I am told, however, these two were talking long before that. At least they have been having conversations. My understanding is they date back a long time, but even in terms of getting serious about a potential deal now, it didnt have anything to do with exxon pioneer. Nonetheless, we are seeing significant consolidation monks some major players. I think that theres a sense that oils worth less on wall street than it is in the ground. Thats a great time to buy. One of the undercurrents i do carl, i got to do this. Does mike wirth, the ceo of chevron, believe maybe, you know how we always talk about higher for longer . Does he believe in that for fossil fuel . Higher for longer . I do start thinking that maybe evs are in play here. The reason i say that is because wall street is not valuing these companies as if theyre valuing them as, like, look, theyre going to go away. What weve seen in ev world in the last couple weeks is very telling, and i dont think oils going away. I think oil has been underestimated in terms of how long its going to be with us, and davids been to guyana. Or guyana as those of us who have been there like to call it. I spent a lot of time getting that right. Maybe you correct some people. There we are at one of the exxon thats an exxon deal. They are going to be a partner with exxon. Oh, yeah, thats okay then. Mikes watching right now. They like each other, because they dont name me two Oil Companies that dont like each other. They like each other when they can be producing a Million Barrels of oil a day. They like each other just fine. Some of the adoption forecast getting pushed, the uk pushing back net zero targets as its politically increasingly untenable to have some of these firm deadlines. Unless you get california saying, look, were going to outlaw fossil, what happens to the heres a thought. That musk Conference Call, that echoed all the way to milan where i was, and that was a Conference Call, and david, you were the first to get existential with him. That was a Conference Call where he was worried. I mean, were advertising, and it was like, everyones got he said, basically everyones got one. He was worried about macroeconomic headwinds, not the least of which is higher Interest Rates and we will certainly get to the 5 level of the tenyear. Im sick of that, by the way. Im now focused on 1998. Evs are not in the sentence. When you speak to the executives in the oil industry, they will quickly remind you about chemicals, plastics, jet fuel and on and on from there. Darren woods of exxon is saying, yeah, under our stress scenarios, into the future, we see us going back to 2013 levels. That was thats where they see demand going. Whos the Largest Company in the world in 2013 . I mean, exxon was top five largest in 2013. Thats why you see these kind of deals. We should ask mike and even john hess. I think we will given the opportunity. All i can tell you is that sheffield, i think, sheffield had problems finding an heir to the throne. Johns been around for a long time, and this is a great opportunity to stay on the board. Hes not selling stock and rejoining the board. Thats true. Hes all in. You see more coming . Is there a possibility . Any names you want to share . I saw some i promised to come back from europe with a kinder some idiot downgraded diamondback today, which is higher than clown. I just want to say. You talk about devin and diamondback. I dont know. Is there going to be more consolidation. Rick moncrief has had a bad run at devin. I would hate to see him give up at the bottom. Those two have almost identical market caps. I know. Devins pretty domestic. They dont have a guyana, to quote you. Devon is about just conventional europe. Its not about permian, unlike pioneer, which has got incredible permian. By the way, guyana is incredibly cheap. The break even. Yes. What do you think of that . What do i think of it . Sorry to ask. How was the weather . The weather was okay. Jim, its not just energy today, though, theres deals involving roche and fortive. Im saying that there is a belief that the peak in the ftcs prowess, not that theyve ever had any, but im being kind, that ship has sailed. That titanic has sailed. You are welcome back with an actual merger monday, i think its fair to say, carl. With this deal being the largest, but to your point, vista deal is a 4 billion deal. Weve got roche buying an asset. Im glad. Theres a bit of activity. It doesnt mean that were going to see anything close to record levels, but no, but and jim, it may be, to the point youre making, that companies are a bit more a bit braver when it comes to deciding to Venture Forward in light of the recent losses at the ftc, although frankly, regulatory is still going to figure very prominently in any of the decisions that go towards saying, okay, were going to go forward with a potential deal. But its still there. I think the debacle of the week was unfortunately James Gormans swan song with Morgan Stanley. Hes saying, look, issuance is coming back. M a is coming back. Lo and behold, whos doing this deal . If Morgan Stanley had done this deal three weeks ago, its stock wouldnt be at 72 going to 68. It might be at 78 going to 81. They did kind of miss. Lets get kind of out of it. The average stock reacting to earnings has not been kind. Thats a big piece of mike wilsons treatise over the weekend, that price action on earnings, i think, even wells tallying some of the number of companies that are raising, eight versus the number that are lowering, seven. We had a price target raise in slb, schlumberger. They do set the tenor. Remember, were a podcast, so youre nodding in agreement with me, and no one knows. They do set the tenor, jim. Thank you. Youre welcome. A lot of this revolves around geopolitics as well. Well move on to the middle east. Nbcs jay gray is in tel aviv with the latest. Reporter hey, good morning, carl. Lets talk about the last 24 hours, intense air strikes from idf fighter jets. We know, according to the idf, that at least 320 military targets were hit. They say that includes tunnels and operational control centers. We also know that strike teams have moved across the border. They say theyre going in looking for hostages to clear the area, again, they say, of hamas gunmen. At least one idf soldier was killed, three others wounded from those attacks. The Hamas Ministry of health saying over 400 people were killed overnight in those attacks and 182 of them are children. They say that 12 hospitals and 32 Health Centers have been forced to close due to a lack of fuel. That gets us to the aid coming in on the other end of the gaza strip. We know that 17 trucks moved through yesterday. 20 more today. Theyre carrying muchneeded water, food, medicine. What they dont have is any fuel, and israeli teams are searching these trucks and making sure theres no fuel on board. They have said repeatedly, no fuel is getting into gaza until this war is finished. The white house has said they will continue to see a flow of aid moving through that gate, but the u. N. Says at this pace, its about 4 of what they normally see daily in supplies before the war began. So, its really just a drop in an area that is desperate for any help. They also say that hospitals that are still operating have about two days of fuel left, and we now know, carl, that many of the doctors in those hospitals are carrying out procedures in the operating room, doing it by the right of their cell phones. Thats all they have. Jay, incredible. Well talk maybe later this morning about the number of military assets from the u. S. That are moving closer to the region. Jay gray in tel aviv, thanks. When we come back, chevrons mike wirth and hesss john hess here at post nine. Well talk about their 53 billion deal. Well get to a bunch of calls today on walgreens, pins, salesforce, roku and set up for a very busy week. Cmon, were right there. Cmon baby. Its the only we need. Go, go, go, go ah touchdown baby touchdown are your neighbors watching the same game . Yeah, my 5g Home Internet delays the game a bit. But you get used to it. Try these. Theyre noise cancelling earmuffs. I stole them from an airport. Its always something with you, man. 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Joining us first on cnbc, chevron ceo mike wirth, and he is joined by hess ceo john hess. Nice to have you here at post nine. Thank you. I would typically start with the acquirer, asking a question, but john, i really am more curious in some ways as to why youve chosen to sell hess to chevron, why now, why at this price after obviously a company thats born your family name for quite some time and has done quite well in the stock market certainly over the last year . Well, thank you. Its an honor to be here, and you know, this year is the 90th anniversary of our company. Our company started, has a proud history with my father driving a truck during the depression, a secondhand truck, delivering fuel oil in the region, and weve always been guided by making the right longterm decisions for our shareholders. This is the right longterm decision for our shareholders, and at the end of the day, a very compelling one. I think whats important to understand, david, is that hess brings growth to chevron, growth in resource, growth in production, growth in cash flow, and chevron brings us financial strength, financial strength in terms of a strong balance sheet, a diversified portfolio of assets, and industryleading cash returns, so this strategic combination really builds and creates the premier oil and gas Company Position for the Energy Transition. You talk about longterm, and i get that, and im sure your shareholders do too, and they will be able to participate, but my understanding is you guys have known each other for quite some time. You have had conversations years back about this possibility and im curious, john, why now . Its a strategic fit. Mike and i have been talking about it for a couple years, but the pricing never works. Now, the pricing works. And people talk about it. People have to realize that we have the best Growth Portfolio in the business, and if you look at our stock the last five years, we were the best tsr, total shareholder return, over a fiveyear period. Whether its major or whether its independent. And last year, we were up 94 , number two in the s p. So, the prices and the Exchange Ratio converged where it would be on a 20day basis a 10 return, a price that worked for mikes shareholders but also would work for ours. Remember, were getting stock back. Understood, but its pricing that youre it just the timing now is correct because, in part, as you just said its a winwin. And the prices are properly fit. Right. But since our shareholders are getting chevron stock, we get to participate in the upside. Of course. But we also get a higher dividend. Our dividend goes from 1. 75 a share to 6 a share and next year its going to be 6. 50 and yet we still improve the sb Intrinsic Value in chevron. Congratulations to both of you. Im wondering if we cant go back in time a couple years ago. Oil stocks were hated. There was a belief, whether it be esg or lack of growth, that it was finite. Theres some terminal value by 2030, and yet the world has changed. We need oil much more than we realized. The Oil Companies are a little bit better citizens. Maybe it even turns out that the electric vehicle adoption is slower. How many of these determined the idea that, really, just put a lot more of your Company Shares toward fossil . First of all, we believe the future of energy is lower carbon, and we are committed to helping to build a Lower Carbon Energy system. Weve been investing in hydrogen, Carbon Capture and storage, Renewable Fuels and decarbonizing the oil and gas that we use today, reducing the Carbon Footprint of the energy the world uses today. The reality is the Energy System is massive. And it needs to continue running to keep the light on, to keep the trains running and keep the toy trucks delivered for christmas. And so, look, we need to operate in the world that we live in, and that is one that still needs oil and gas delivered by responsible producers. This is a fantastic, exciting deal for us. Its about longterm growth. Its about longterm value, and a continuing commitment to a Lower Carbon Energy system. Is oil still cheaper in the ground than on wall street because of these concerns . When i listen to you, i think to myself, wait a second, maybe all these are buys. Maybe congratulations, tsr, but the fact is people gave up on these. That was a great business. I think theres a lot of upside in these stocks. The multiples are still low. The cash flows are long. The duration on our cash flows, i talked about longterm growth and longterm value, this extends our visible Growth Profile into the 2030s. Weve got leading shareholder distributions. Our Dividend Growth has been 6 . We announced the intent to raise our dividend 8 in the First Quarter of next year, increase our share buyback. Were returning cash to shareholders and still see relatively low multiples compared to the rest of the market. So, we think theres a lot of upside. Doesnt sound like regulatory worries are top of mind. Can you talk about how close a look that got during negotiations . You always talk about that did yo during negotiations. This is an upstream transaction. Theres no refining, no marketing. The oil markets are big. We produce 2 . We have 2 market share in the global oil markets. Our portfolios have really very little overlap at all, and so we dont believe there are any real competition issues here. Well certainly work with the authorities to go through the process, but we so this as good for america. These are two Great American companies that are coming together. Its good for Energy Security, good for the american economy, and we see it as a transaction. Something else on peoples minds is trying to reduce the Carbon Footprint across the board in this world. How do you respond to people who say, its stock but youre buying back a lot of stock to offset what your to a certain extent what youre issuing . You could use your capital more effectively here by continuing to focus on carbon reduction efforts, and youre not doing so. Instead of, youre buying a lot of assets. I would disagree with that, david. We are focused on Lower Carbon Energy. Weve got the largest production and storage of Green Hydrogen project in the u. S. Were the second largest Renewable Fuels producer and were expanding our Renewable Fuels production. Were absolutely committed, and remain committed to building these hour Carbon Energy systems, but the worlds using the energy that it is today, and we can combine and reduce the emissions intensity of the oil and gas thats being used in the world as well so we have to do both. Its not about one or the other. We need to do both of them. And you think by this deal, you will be able to reduce the overall Carbon Footprint, for example, from production . Sure. Were doing things today to reduce methane emissions, to reduce the improve the efficiency of all the operations. If you look at the Carbon Intensity of our business today, its down 25 from what it was just a few years ago. Weve got a commitment to get it down to 40 by 2028. Hess has been doing a great job of reducing the Carbon Intensity of the scope one and two emissions of their operation as well. Were absolutely working on that at the same time as were working on these new Energy Systems. John, you kind of broke ranks with your company, but hess was the Gold Standard at the gas station. It was the Gold Standard in refining. How did you know to leave those businesses and just go for pure . Well, you know, we have been on a journey. It is about change. You never stay with the same hand, and its always try to invest in the highest returns and the business where you have competitive advantages. So, while we started with a truck, then became a refining and Marketing Company based in new jersey, we talked about it. Then, the gas stations, and then ultimately, in 69, merged with amrata to balance e p and refining in marketing. I became ceo in 95, and in 2010, we started our journey just become an emp company because we thought the returns would be higher, but jim, you made a point before about oil and gas. Oil and gas are going to be needed for decades to come. Theyre key to an affordable, just, and secure Energy Transition, and in the united states, its a strategic industry for our country. 12 million jobs, more than automotive. Lower energy and electric costs by a factor of two to three versus europe. And were energy independent. Both europe and china buy 70 of their energy, so this issue of Energy Security is key, but people have to think cleareyed thinking. Oil and gas are needed for decades to have an affordable transition. The key Going Forward is investment. The world needs to invest more in oil and gas, like 500 billion a year, where the last five years it was 3 to 400 billion, and on new energies, the world needs to invest 4 trillion a year. Last year, that number was 1. 7 trillion. We have to be realistic about the investment challenge ahead. If thats the case, mike, the Oil Companies in this country have been spending far less. Theyve been returning money. Its not the drilling the way they used to do. I hear john, but i dont know what to do with the companies that have two and three rigs going when i would have expected 10, 15, 20 by now. Well, i think over the last decade, we saw companies outspend cash flow, not create value for shareholders, chasing growth. And the industrys gotten the message that shareholders expect a return of capital as well as a return on capital, and so Companies Across the industry have become more disciplined. I think theyre returning cash to shareholders. The u. S. Is still growing. The u. S. Is over 13 Million Barrels a day of production, the highest its ever been. Its the biggest producer in the world and its growing. Were doing both. And i think thats the key. Whether youre talking about Energy Transition and traditional energy, whether youre talking about growth and return to catch, you need to have a balanced approach here. Those production numbers have been getting a lot of notice lately. Does that mean that conversations with policymakers are getting easier . Earlier in the year, there was a lot of discussion about lack of conversation or tense conversations. I would say there continue to be mixed messages on the policy front. We dont get a consistent set of messages on investment, and for longterm investment, thats important. So, i think theres still room for us to have more dialogue and try to find a path to steadier and more Durable Energy costs in this country. And to build on what mike said, russiaukraine has changed the conversation. Energy security has changed the conversation. The importance of oil and gas to our country has changed the conversation. So, i would say the administration is a little bit more pragmatic about the need for oil and gas, and its actually a strength of our country. Guyana, something we talked about over ten years ago when you were fighting off elliott. Ive actually now been there and spent some time. Your partners going to be exxonmobil. Is that an issue at all for chevron when it comes to guyana . I think hess and exxon have done a fantastic job in developing this resource and refining it and continuing to find more and more. We work as partners to share risk in this industry all around the world. There are places in australia and and kazakhstan where we operate and exxon is a partner. Weve got a good relationship. Theyre an Outstanding Company with great technical capability, great project capability. What are your expectations in terms of production from that region . From guyana in particular . Were seeing the growth that you have seen out of that project. Three of the two floating production and offloading units, a third not far up, ultimately up to ten and in excess of a Million Barrels a day over just the next few years. Projects have been on time, on bh budget, and theyre delivering more than expected. Its a world class asset, its unique, and were honored to be joining. Do you need all the assets . Youve got southeast asia, guyana, gulf of mexico. How about a disposal . Well, well do some disposals as a result of this because our portfolio is stronger, and you always look at investing in the strongest, most advantaged assets that you have. Theres other assets that we have that are good but they may not compete for capital as we remain disciplined on capital investment. They may fit better for others. Well do some divestments as a result of this. I know that youre no stranger because youre kind of ambassador for the industry, but noble energy, which was, i thought, a great acquisition, at the same time caught up right now in the mideast, one down. Stay, work with the different governments, work with israel . Or is it a distraction and maybe time to say, that was good, but it didnt work . Its a longterm business, jim. We had geopolitical risk. We see Security Risk in our business all around the world or in my 40 years, this is not the first time weve seen a hot war in an area where weve got operations. First priority is the security of our people and Reliable Energy supply into the country. Were focused on that today. But its a longterm business and we got to take a longterm view. The position in the middle east, offshore israel is a very attractive one and its a strong resource, and we intend to be there for the long haul. Mike, when it comes to acquisitions, does this, in a sense, complete what you believe you need in terms of the Growth Profile for chevron for years to come . Well, this is certainly this is our second deal this year, and so its important. Its far larger than the other one. Its important to integrate these things well and to maintain stable and safe operations as you go forward. Thats a lot of work. Thats certainly what were focused on the here for the foreseeable future. That said, in our industry, over our 143 years, weve grown through organic and inorganic activity over time, and i suspect down the road in the future, well see both. Yeah, and john, was there ever a consideration obviously, youre acting on behalf of shareholders, of which youre a large one, as much as 10 , of selling to another company . Did you entertain other offers or was it always just chevron . We get inbounds from time to time, but with the strategy we had, we thought wed create the most value by executing that strategy. Chevron was the one company that offered us financial strength while we offered them growth and the pricing worked out where i think were really creating the premier oil and gas company, uniquely positioned for the Energy Transition, and by the way, its also got a great ceo. So, were very comfortable havinghas go into chevrons shares and being a longterm shareholder with the country. The hess name goes away. Does that bring you any the hess toy truck will continue. Thats enough to keep you happy . There are going to be some other things. Im going to stay engaged in the business. Im going to join the chevron board, and i intend on having my voice heard on the Energy Transition. Gentlemen, thank you both for being with us. We appreciate it. Lets get the opening bell here. Carnegie hall today celebrating its 133rd concert season. At the nasdaq, kolibri global energy. Jim, reflections on this . I have to believe as mike said, stronger, longer. As john pointed out, Energy Security could play a matter. 2 is all they have. I mean, its hard to believe thats a monopoly. I think that this is a sign that these oil stocks are cheap, particularly after sheffield selling to exxon. Market look, the market is so grim right now. Maybe you have to look at where raising numbers are. You could raise number of them. You heard what hesss return was. But i come back and i look at prices, and i think, only bright spot for the moment, this group. We have taken now the 200day, took out at 42. 16, the october intraday low. Were seeing the magnificent seven retreat. Were seeing so many Different Companies, frankly, Wilson Wright in terms of the forecast being not that great. I know that if youre what some of the things that were said on that Morgan Stanley call that, look, if youre going to get 5 , were not going to tell you not to get 5 . So, right now, we have to try to get settled to where i think the 30year goes to 6 , david, and people have to just realize this is what happens while youre galloping to that and youre going to go down every day toward that gallop until we stop. Every day . Really . Every day that it moves. Yeah. There will be days where it looks like its going to be over, but its not. Especially with the issuance, especially with the fact that retail sales were strong. We had a strong employment number. I mean, geez, the economys not really quick were coming off a strong employment number. You still think soft landing, though . Absolutely. This economy is too powerful to land hard, and i think those who are saying its going to land hard dont realize that we have had rate increases like this. We just havent had the speed, and the speed is daunting. Look, i keep going over the words of jamie dimon about the world being dangerous. He did a piece this week for club members, and i come back and i say, okay, listen to what they said. You actually could argue that the only part of the world being dangerous thats factored in yet is that oils higher, and there could be more to it. Do you not check the headlines every couple hours . We do, and i do hear a lot of remarks from Market Participants saying it seems as the market doesnt seem to react as much as to geopolitical events as you might anticipate. Perhaps it doesnt know how. Its often hard to judge exactly what the reverberations are going to be from war between israel and hamas, for example, but if it goes to the northern border, if it starts to spread, that would certainly not be a good thing. No, but the i dont know how much of that is Market Reaction right now or not at all. Again, i think its just trying to figure it out. You heard jay gray speak. Every day youre going to get an nbc report from there, and you have to figure out, what does that have to do with the earnings . You dont know. In the meantime, the deals are happening, and people are yawning. This is a huge deal. Pioneer was a huge deal. Yes. They were saying, theres no more deals. Well, i mean, wrong. These are two of the biggest deals, without a doubt. But i mean, you can take a look. What are they doing for those who like to see deals . Hess is not doing anything. Its down. I mean, the reason i was asking john, in part, is there are people who are disappointed with the price, as you might imagine. And pioneer, look, my travel trust owns it. With the add distributions, we did really well. But carl, at the same time, boy, that tenyear is its too delicious to resist . Was that on john oliver we did the tenyear play . Theres a moment where youre sitting and saying, you know what . New jersey general obligation bonds, three and change versus this nuttiness . Even over google, amazon, meta . Not me. I like the im not calling them companies. Theyre nation states, because they dont have to borrow. Theyre like the medici states, having just returned from italy, i wanted to get one reference in. Oh, david, what time is it . Oh. Thats very nice. Thats the official eagles do you want to share it with the class . Id like to. My problem is this is the only good news. Otherwise, i come in, and i say, look, i was watching the markets last week, obviously, and wow, the earnings, not bad, but the reactions so horrendous. Some of these, when you look at the reaction, you would think that they had first class misses. It wasnt true. The pe multiples are shrinking so radically. We havent seen even what happens if this auto strike doesnt end soon. You sound like mike wilson now. No, no, i want to be you do sound a little im going costume for thanksgiving. Im not going i mean, for halloween. Im going with kostin. Are you going as kostin . Im going to serve wilson for thanksgiving, because im going to be right. Its just going to take some time. We have to get the bonds where they got to go. And not jay powell. Its not jay. It puts into context some of the sellside calls this morning. I wonder what you think of the piper downgrade of salesforce. Can we just talk about the hatred of Enterprise Software coming from them . Huge upside surprise. Benioff was the most bullish ive ever seen him. I follow up with a trip to dreamforce, hes starting to break into new verticals. Theyre doing so much with generative a. I. , and its hated . I mean, to me, thats just pe multiple. Were going to hear from service now soon. This week. They only miss in the event of thermonuclear war. I think this is completely overdone, but i recognize a bad chart. Its a head and shoulders. Procter did well, by the way, only good quarter last week. Head and shoulders. What are you looking at . Im looking at some texts. Youre looking at jalen hurts. Im making sure ive got some information to discuss the next thing i wanted to talk about which is another deal this morning, engage smart, vista buy it. 23 a share. It is all cash. So, unlike hesss stock, at least, if you own engage smart this morning, Enterprise Software, you know, relatively small. Youre happy. The stock is up. At least youre somewhat happy. There you go. Got a nice 12 bump. You can see you havent seen that price this year. Havent gone back and taken a look, but im just looking through i mean, obviously, vista has been active. I did notice, speaking of the financing markets, theyre not financing this right away. Theyre going to wait. Theyll probably so, its all equity. Theyre bringing in most likely, you know, some best. Theyre taking General Atlantic down, which owns 52 of this to about 35 . And as i said, fully committed equity financing, not subject to a financing condition, because you may want to wait if you can in this market and see. Maybe things will get a little bit better for you. How about the fact that a this is not a leveraged buyout at all. How about a pe firm being able to cash out a little . How nice is that . I was going to ask you about i was going to ask you about blackstone. What about them . And cash out. That quarter wasnt that good. There was a disappointment, perhaps, that there werent more. Thats what i thought. Cashouts. Even though they did pass the trillion dollar level in assets under management. This is another one where it could it was hated. Was not a good performer. It was down as much as almost 5 the day after earnings. The reaction, carl, to those that just did okay is so punitive. Again, i dont want to miss the fact that i got look, has wilson been right during the last week . Yeah, dead right. But i also think that were going the level of gloom is very high, and a lot of it is in the context of jamie dimon saying maybe you should be more scared. Rates going higher, the world going crazy, and then theres the usual conundrum of the consumer, and i wanted to talk just for a second about steve squeri and american express. If the student loan problem is so bad, why is that the biggest spending cohort . And i cant figure that out. Its a confusion, but we end up just saying, well, listen, maybe thats an aberration. Theyre still going out to dinner like mad. That stock has acted so poorly, and yet, i just dont think it deserves it. We talked a lot about it on friday. Profit up year on year. Travel entertainment up 13 . U. S. Consumer up 9 . No real credit worries, at least telegraphed at the moment. No. I mean, yes, okay, not on express, but we do have auto loans, and we talked a lot to companies in the auto business this week. Auto loans, there are some problems with delinquencies and auto loans. Thats the first. But 30year is the worst delinquencies. Thats not good. Really . I didnt realize. Thats bad. Even though as you just said, amex was talking about great strength among their base. Profligate young people. Apparently people who have enough money to continue to spend it have what fifth third said last week was some degradation in overall credit but a real bifurcation between the high end and the low end and some b to b caution recording budgets going into next year, capex, that kind of thing. Were stuck with walmart and costco and tjx doing well. And everybody else, doing poorly in the retail world. And thats a shocking development, because do we really only have well, amazons doing well. Do we really only have a couple companies doing well in all of retail . All of retail. Right. Worrisome. And to carls point, you hear that from a number of Different Companies in terms of the difference of willingness to spend amongst the middle to higher versus the lower where there is a lot more pressure now. Lets call it, you know, 40 or 50,000 a year and below in terms of annual income. I think even musk talked about that on the call. People who make 200,000 a year have no idea what its like right now trying to get by on 50,000. Wasnt that a great comment . Not that hes the common man. Im not making fun of him, but of all the calls ive heard, he seemed the most sensitive to the idea of the tale of two cities. Yeah, the worlds richest man. Empathetic. Thats not one of the characteristics i would associate with him, no. And in fact, i think youve read the isaacson book. I think its time for you to go. Goodbye. I know we worked together for 20 years. Goodbye. You know, i just left out about how steve jobs wasnt the nicest guy. No. By the way, not being a nice guy and those kinds of things can be a very effective way to ben frank lin was a nice guy. Tesla shares, as we just saw, continue to see significant not really. Not really . That thing is down a lot. You always resist, though, getting caught in the gloom and losing sight of opportunities. Cant. I cant. Today, upgrades of walgreens. Upgrades of pins. Upgrades of waste management. Ill so glad you mentioned walgreens. Thats lisa gill. Shes saying that walgreens is going to get away from this shoplifted, close the decks tour, the greatest Flagship Store they had, that i went and did a piece from, closed. Shes talking about wentworth being a Smart Health Care guy. Theyve got to get out of the shoplifting business and get in the money business. That shoplifting per share has got to go away. They call it a clearable bar as this new management rolls in. When they give away the chocolate at the front of the store because they know that therefore they can say, look, here, an offering, thats got to go away too. You should charge. I find charging to be an incredibly positive experience. Its a very helpful way to make money. There was a great piece in the atlantic about selfcheckout being a failure. I said, maybe they dont use the selfcheckout because its such a pain, they just walk out. You can pretend to use the selfcheckout. You can sort of do, you know have you ever done that . No. Bay mistake . Costco says theres a lot of people who do it by mistake. They thought they paid. Thats why they have to have people. They didnt have the receipt. Right, but this is the problem with shelfcheckout. Cvs and walgreens continue to do it. Whos got the worst pilferage . Well, maybe target. But target is the whole foods around the corner here does selfcheckout, but i always go bay by the book. I paid for a bag and they didnt have it, and i went and complained, and they said, are you kidding me . I walked out with a chicken, Walking Around the street with a chicken. You cant get a bag. Hey, how you doing . A guy said, are you cramer . I said, chicken. Why are you carrying a chicken . Like at disney world carrying around a turkey leg. How about the india and the espn valuation . Mr. Naysayer disney . Yes, and the 8,000 from last week. You might have talked about that. We did talk about a number of those things. Life goes on without you. You still have a show, i know. We did talk about some of these. Theres long stretches of awkward silence. Absolutely. Thats what its like without me, but i did think that iger is lifting his head, starting to put together something. Its still coming. The whole plan. Work in progress . I think so. I think particularly on espn. Again, i sort of have said many times, the abc idea thats noncore sure but will that really result in any kind of transaction . Very difficult to say. Look at that. Oh, no, dont look at that. I told you hes going to boeing me with the disney. Theres a why did you buy it, jim . Theres a line about reliance in india. We got at least we got the actors talking again, starting again tomorrow after two weeks of nothing. Yeah. Theyre back to the table. Well see if they can finally get to the finish line like the writers did. I was going to mention netflix, but once again, i would hear, jim, where were you . Im going to skip netflix. I like the idea that im always in your head. You are always in my head. Guys, you know, we should take a look at shares of apple, and speaking of newspaper stories, this is the global times. Paper of record. Its out of china. And so, mainland tax Natural Resource authorities inspect Foxconn Companies in several provinces. Seems to be in part because the companys founder said in august that he would be running as a candidate in the 2024 elections of taiwans regional leader. Independent candidate. And foxconn may be investigated because he is running for those elections. Chinese mainland experts again tell the global times the investigation is normal and legitimate as any company goes through tax inspections. But again, given everything we know in terms of chinese regulatory authorities, what they do or dont do, response to u. S. Or not, related to taiwan and so forth, you might imagine apple would get at least some concern and thats happening with the stock down over 1 . I want you to go back five wo weeks ago when we heard that the government basically was saying, hey, dont buy apple. Telling government employees, dont bring an apple phone to work. What american was the best received in china this year . Tim cook. And how are sales . Jam packed. Jim, i dont know how sales are. Reuters has a piece today that chinas offering deep discounts. We dont know whats right. We left out the fact that they have been terrible at a. I. How about that . Thats known sources within the company. You know, if you talk to someone within the company and you talk to the and youre in the media, youre done. So, whenever i read these known sources, and, by the way, they dont like to do something until theyre the best. Yeah. Jim is referring to a piece on the tape today that a. I. Within app apple is seen internally as a disappointment, that they were thrown by the wave of a. I. Interest earlier in the year. I think that their history is, when its figured out and does more than just term papers, well be in there. Ive been using it a lot. Its fun. Im going to use it to do wordle. Chatgpt . Yeah, i think i might do it for wordle. Its good for games. Its good for a lot more than that, jim. Im just saying that when apple, when its worth it for apple, apple will do it. Now, people are going to say that when, in december 4th, when lisa su unveils her chips, people are going to say that the microsofthewlett packard access is going to make it so theres a. I. That fits in your daily life. With copilot . Yes. Nice piece. Microsoft is holding up better than most Enterprise Software companies. God this, markets ugly. I was going to say, the Kbw Bank Index is really flirting with taking out its may low. I cant believe those companies the stocks are doing worse than during the crisis. I dont think its right, but then if you go back to the bank of america, obviously, not a small bank, people were worried about their bond portfolio, which i think is pretty ridiculous. I mean, it was just too high. Hold to maturity, but they had embedded losses that are enormous numbers but to your point wait, worse than the Global Financial crisis . What are you talking about . The bank crisis. Not the global. Oh, the bank crisis in march. Yes. Okay. Its like lot of those companies, people were worried about. They were worried about the stocks. The businesses themselves arent that bad, but the stocks are horrendous. We need mergers so badly. Its awful, awful. Jims right. We lost 4,200 here. All sectors red except for industrials. Slight gain there. 1 declines on names or in industries, at least, like financials, energy, utilities and so forth. Quick reminder, you can get in on the cnbc investing club with jim. Sign up and find out more at cnbc. Com jointheclub or use the qr code on your screen. It takes you right there. Fed is in a blackout window, mercy mercifully, so no fed speak, but of course the news of the day is the tenyear visiting 5 , currently just a shade below. We planned well for retirement, but i wish we had more cash. You think those two have any idea . That they can sell their Life Insurance policy for cash . So theyre basically sitting on a goldmine . I dont think they have a clue. Thats crazy well, not everyone knows coventrys helped thousands of people sell their policies for cash. Even term policies. I cant believe theyre just sitting up there sitting on all this cash. If you own a Life Insurance policy of 100,000 or more, you can sell all or part of it to coventry. Even a term policy. For cash, or a combination of cash and coverage, with no future premiums. Someone needs to tell them, that theyre sitting on a goldmine, and you have no idea hey, guys youre sitting on a goldmine come on, guys do you hear that . I dont hear anything anymore. Find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. Here in hawaii there is always time. Theres time to spend with family, time to enjoy with friends. Theres always time to listen or lend a helping hand. Here we have all the time in the world, but no time to waste. Watching the long end this morning. Bill ackman got a lot of attention when he announced his bond shorts. A couple tweets we covered our bond short. There is too much risk in the world. Well see if that marks a turn in sentiment. Dow coun about 140. Well get stop trading with jim in a moment. Lets get to jim and stop trading. My tag line for mad money theres always a bull market somewhere. I dont like this bull market. I dont want to be like cal. L 3 harris recommended by wells, its good, they bought the aerojet general. The stock is well off its highs. Very well run. They are the i would say the big winner right now in whats going on. If you did want to capitalize off of armaments, which i wish we didnt have to, lhx is the one to buy. Generally the consensus when people talk about that. The stock is so were talking about a stock 177, it was at 255. Theres a lot of room to run here. How will you frame up the week tonight . Well, im going to have snap on today. Im focused on this strike. They got to reach an agreement this week. The uaw. Yeah. I think that shawn fain is running the uaw, is moving the goal posts. Its become political. Im wondering whether the rank and file are with them. 500 a week is not that much and it is getting cold. The strike must be solved soon and prices that are not prohibitive, and it cant include batteries. If it includes batteries musk has such an edge thats never going to take off for ford and gm. 4,000 it would add to the battery. Make that up with the pennies. Gets to the key question in terms of their ability to generate any kind of a margin if theyre given what their costs are going to be. Musk sounds like a guy who makes cars. He does make cars. Wants people to go to the office and drive there. Want him to drive to the office. Hes no joke. Robo, full selfdriving is coming. Still have to have some money i know. The cyber truck, by the way, not yet. Not yet. Its very hard to make. Well see you tonight, jim. Mad money. 6 00 p. M. Eastern time. After we have recovered 4200. Whartons Jeremy Siegel on how higher yields fit in his market perspective. Dont go away. [ clock ticking ] were going to have so much fun. Good monday morning. Welcome to another hour of squawk on the street. Im sara eisen with Carl Quintanilla and david faber, live for you as always from post nine of the new york stock exchange. Take a look at stocks here early monday morning after a down week on wall street last week. Were lower, but again off the lows of the morning be and there are pockets of strength there. On the right,industrials, Health Care Communication services all green. Everybody else is red. Energy at the bottom of the list after the big deal well talk about. Consumer discretionary under performing ahead of some big tech earnings this week. Number of sectors on the move as you can see and treasuries got to include it at the top of the list. The 10year yield above 5 earlier in the session below 5 but as you can see elevated across the curve. Were 30 minutes in the trading session. Three movers were watching. Chevron one of the worst performing stocks after announcing the 53 billion stock deal to buy hess. Both ceos speaking with us last hour. More on what deal means for m a and the energy space from here coming up. Another day in the red for tesla after a new filing revealed the companys Capital Expenditures for the year would exceed its original 7 to 9 billion target. Shares are down 20 in the last three months. They got hammered last week on the back of that Earnings Report and Conference Call. Then walgreens one of the top gai gainers jpmorgan upgrades it to buy. Under the company at new management, price target 30 a share there. Stock is up 2. 25 . This is going to be an important stock. Tech earnings and a calendar to show you how much is at stake this week even though its a quiet period for the federal reserve. Theres the earnings pitting. Its going to be dominated by consumer names like cocacola. Well get economic bellwethers like 3m and the big tech setting the tone, alphabet and microsoft tomorrow. As far as Economic Data two key reports i would highlight toward the end of the week, the first look at the quarter gdp which should be very strong and wall street estimates are between 4 and 5 growth that we could see for the Third Quarter and then on friday, we get the pce deflator the feds preferred metric on inflation. Few other releasing in there. New home sales interesting with Mortgage Rates above 8 and that fed speak theyre not going to talk about policy, powell and barr, because theyre in a quiet period ahead of the meeting next. Good. But it almost doesnt matter because any of this stuff right now because its all about treasury yields and the 5 yield on the 10year were wondering is that going to cause people to come in and buy. Bill ackman covered his short. Yes. Carl mentioned that ackman said the economy is slowing faster than recent data suggs. Bill likes to introduce himself into the conversation. There was focus on that position which has been a good one for him being short and now they are covering, obviously. They believe perhaps theres going to be more money or demand for those bonds. It does feel like a dangerous world, no matter what happens here, and the fact that treasuries havent been acting as safe havens is interesting especially the march up in gold. Maybe things will get a little too tense where you just have to buy treasuries. There are two factors i wanted to hit as to why these yields continue to move up that we dont talk about as much as, you know, the solid growth and higher inflation and higher for longer. What happened in japan kicked off the rate move overnight which is there was a report out of the nikkei Business News that japan at its bank of japan meeting next week is looking at scrapping the yield curve control further because they are facing upward pressure on rates as well as the 10year nearing 1 . Remember its a global move. The dollar yen around 150. Theres talk of potential intervention. They intervened last time because the yen is getting so weak, so there are my point is there are other factors at work here and its a global move and sometimes thats what trigger is for a move that weve seen in our bond market. Macro thoughts were going to get from the Big Companies . Sara, you mentioned earnings and its nice that earnings is going to take the forefront perhaps over endless chatter from fed officials, i dont know, are there any particular that stand out to you. The earnings are good but the guidance is less good and the commentary from ceos is more cautious than the Economic Data were getting on strong jobs and strong retail sales. Brine moynihan said retail sales are noise. The fed is doing its job and its working. Ceos have a pretty good realtime indication of whats happening with the economy. If we get this cautious chatter and guidance, that could give us clues into where were going. Thats been the big surprise, is how resilient the consumer demand picture has been. The new york fed does a recession odds sort of model, just another regional fed model, and base it on the difference of the threemonth and 10year yield and its come down a little bit. Were in the 50s or so percent chance of recession. It did get as high as 70 chance of recession. Thats thanks to the stronger growth and, obviously, the back up in yields. People have been positioning away from this at a time where ceos are growing more cautious. Thats going to be a setup for how to think about this week for a little bit. Rihymes with the journal survey. Raised recession odds second time in a month to 35 . Largely on the back of geopolitics. The problem is weve been waiting for a recession since march of 22 when they started raising rates and it hasnt happened. One other factor out there that i dont think is getting enough attention but could be a reason yields move up from here, the treasury likes to bury this report that comes out on friday of the deficit. We got the final deficit number. I saw it. Wow. For this fiscal year. 1. 7 . Technically 24 higher than the year before. 1. 7 trillion. Thats an important t. We wish it were 1. 7 . Its double if you sort of take out the quirks around the Biden Student loan forgiveness number. The problem is this is happening at a time of high growth, fullon employment. Those are times you should be dealing with the deficit not adding to the deficit and debt, and yes, government has to pay higher levels of interest and thats a big part of the story here, but its a problem. Its going to factor into this story whether theres enough demand for the all the supply. Interestingly i learned a [ inaudible ] note the note today. The s p topped out july 31st when the announcement of issuance came out for treasury on this quarter was significantly higher than last quarters issuance. That tells you thats a factor here at play of who is going to fund all this debt. Our next guest says higher yields reveal stronger growth bad for bonds, not as bad and perhaps good for equities. Wharton School Professor of finance is with us. Great to have you. Does that mean you think earnings for the quarter are going to impress . [ no audio ] professor, apologies. Well get your audio working in a second here and come back to you. That is, obviously, one of the key hopes for the bulls, that the macro backdrop is going to reflect some strength in least consensus earnings, maybe 24. I think we got your audio back. Lets talk about very good reasons why yields have repubrisen. If its stronger growth would you rather be in stocks or bonds . Stocks are the place to be if we get stronger growth. I dont mean just for last quarter. You know, i think the promise of ai is real. This year, our growth has been driven by productivity. We actually have payrolls that are only half as big increase as we had last year and we had also than 1 gdp growth and this year were going to have well over 2 gdp growth. So productivity driven growth, i mean, first of all, brings inflation down. Its good for earnings. But it does drive yields up. Higher real growth, more borrowing, more capital investment. I want to be in stocks and not bonds. Lets talk about the deficit. Suppose a higher yields are driven by the deficit and that may mean higher inflation in the future with big deficits. Where would you want to be . Stocks or bonds. You want to be in stocks. Now sara mentioned japan. Im not as convinced, you know, japan 30 years ago, when its stock market peaked off was as big as the united states. Now its a tiny fraction. Its economy in an aging population is declining. Yes, it holds a lot of treasuries, but i dont think japan is the force that it once was. Im not as concerned about japan as being a source of the reason. But when i take a look at these higher yields driven by productivity, growth and even if you worry about deficits, listen, i would rather be in stocks. Isnt the geopolitical picture now, professor, more short term and more acute and apt to given investors caution . Right. It does. These geopolitical problems are usually opportunities to buy if we look back at history. Clearly things could get worse in the middle east before they get better, you know. You are invited to try to time that in the market, not many people can, you know, what is the most famous saying in stocks, that stocks climb the wall of worry and when the then theres no clouds in the sky, youre buy too high. I think geopolitical risk is in the long run an opportunity to buy stocks not to sell stocks. I think the point i was trying to make, professor, on japan, not necessarily that its an economic headwind, however, it is a trigger for higher rates in the u. S. Because we do see that when theres talk of their yield curve control adjustment our treasury yields rise which is all an economic hieadwind. I get you like stocks better than bonds and we have had growth, but now were facing the fastest tightening cycle weve seen, the backup in yields and what that does for financial conditions and for consumer spending, and quantitative easing at the same time, thats the test for growth and for earnings ultimately, isnt it . And you meant quantitative tightening. Tightening. Yeah. At the same time, right. Certainly i think these higher yields have been the source of the 5, 6 drop that weve seen in the s p, but then when i think about well, is that because of stronger growth, then that means next quarter that means next year, earnings are going to be better than they would be otherwise . Dont forget we talk about stronger real yields and certainly they have gone up, the 10year tips to 2. 5. We have to remember when tips came out in 199, they were 3. 5 and within three years, they were 4. 5. So in the long picture, these real yields, although certainly higher than theyve been in the last 10, 12 years, are not high in terms of history. If we have real growth thats the source of the higher yields i dont think thats a negative for stocks. Finally, s p, year to date, total return is a nice 11 with dividends, but you strip out the magnificent 7 and youre almost half a percent. Do you think that we need to continue to rely on mega cap tech or can the rest of the economy join in . Wow. Its been so unusual that the new bull market, if you call this a new bull market, but usually when you have a bear market, the new market is different leaders and this is the same leaders as before, they have been magnificent to say the least, but the difference between the big tech price earnings ratios and small and midcap price earnings ratios, which are 11 and 12, is one of the biggest that ive seen. So im not saying that big cap are way over priced or anything like that, but i say, ive rarely seen mid and small as cheap as they are today. Yeah. Russell with a new 52week low this morning. Professor, well stay in touch. Good to see you. Thank you. Jeremy seeingle. As we head to break, our road map for the rest of the hour. Mega merger monday with another deal in the oil patch. Chevron buying hess more than 50 billion. What it means for the sector and who could be next. Plus, just speaking of the magnificent seven a crucial week for the likes of alphabet, microsoft, amazon, meta, all gearing up to report earnings and were going to get you ready. While the Health Care Spotlight has been focused on these weight loss drugs, big tech has been hitting new lows. Well discuss that when squawk on the street continues in a moment. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com heres why you should switch fo to duckduckgo on all your devie duckduckgo comes with a builtn engine like google, but its pi and doesnt spy on your searchs and duckduckgo lets you browse like chrome, but it blocks cooi and creepy ads that follow youa from google and other companie. And theres no catch. Its fre. We make money from ads, but they dont follow you aroud join the millions of people taking back their privacy by downloading duckduckgo on all your devices today. This extends our visible Growth Profile into the 2030s. Weve got leading shareholder distributions, our Dividend Growth has been 6 per year over the last five years, double that of our nearest. We announced the intent to raise our dividend 8 in the First Quarter of next year, increase our share buyback. Were returning cash to shareholders and seeing low multiples compared to the rest of the market. Hess brings growth to chevron, growth in resource, growth in production, growth in cash flow and chevron brings us financial strength, financial strength in terms of the strong balance sheet, diversified portfolio of assets and industry leading cash returns. This combination really builds and creates the premier oil and gas Company Positioned for the energy transfer. There it is, that Energy Transition. Ceos of chevron and hess speaking with us in the last hour about the 53 billion all stock mega deal. Chevrons acquisition comes after exxons deal to buy pioneer. Lets discuss what all this latest m a action in the oil industry means for the sector. Joining us at post nine is paul sankey. Nice to have you here. I guess both sides give it to me. I was asking hess why and why now to chevron, especially given the price. Give me your take from chevrons side and hess side . We know its the best asset in global oil. Hess was trading as takts jofr play and the question was, can you get a high enough premium to be a consummated deal. The question for hess why now and at this price . Hess stock last week was at an alltime high. 5 premium to that price which is kind of bad. This is by far the best remaining independent oil company out there on the u. S. Exchange. It is a light price and does raise questions for the sector. We dont have the asset base of hess. For chevron, just just a great deal. Chevron is heavily exposed to kaz zik stack whstan which has travel through russia. If they buy in the permian they will dilute themselves. Can chevron get hess. Frankly, i didnt think they could. Im delighted for chevron. For john hess its a tremendous end to his career as a ceo. Why didnt you think chevron could get them . I didnt think they would get them for 5 premium. We were talking 200 a share in range with the highest price targets on the street. 20 below that and that was the stretch target, lets say. The average street price was 170, but that doesnt include a takeover premium. Does it mean theres more console dmags shale . The knee jerk its bad for oxy. Maybe mr. Buffet included. Mr. Buffet owns chevron and oxy stock. And then a second rank if you want of companies where what were seeing here is the medium ranked companies are getting a poor multiple and as you get bigger, you get a better multiple. The bigger the better in oil. The highest multiples are exxon and chevron, the next hess, how do these guys in a synergistic way and a good for all shareholders way combine lets say someone like devin and vincent and someone else. These guys need to get bigger. We had other rumors around chesapeake and other news you would do deals to scale up. The big guys are done for a while. Theyre going to be digesting large deals. Absolutely. They have to be done. I say its a little bit of a negative for oxy here. The regulators going to let all this happen . Gthere isnt really a major issue with intradeals. If you flip out hess for chevron, it doesnt really change the competitive landscape. I do think exxon for hess would have been much more of a challenge because that would have worried the guiana. The concentration to one big oil. I think they liked having john hess around to keep everyone honest. Mike wirth is no less honest. It all adds up. Its sofrtrt of winwin. How about for the climate, in terms of spending on carbon reduction efforts, theyre not changing their targets at chevron. Is this recent wave of consolidation saying anything in terms of the Energy Transition . On friday the great people of the midwest basically had the pipeline canceled, a co2 pipeline that would have let ethanol become sustainable fuel. Nimby had the pipeline canceled. Its going badly. The other theme in energy is the solar stocks. Theyve been a disaster. If you list the reasons why, its pretty brutal. The guidance of solar was horrific that combines with the Interest Rate environment, the long return, Long Duration renewable stocks are getting crushed and until we get some kind of better Interest Rate environment with better returns because the solar stocks are making poor returns essentially, its tough for everything on the environmental side of the market basically right now. We were the mentioning the uk and the prime ministers move on net zero. Does it make sense for policymakers absent nimby . The rubber is hitting the road. Is tesla more environmentally friendly when you look at the scale of things, and it goes through everything, right. Then youve got all the automaker problems to add to that. A major backing off of the environmental investment. Lets just throw money at the problem and it will sort things out because the returns are poor and the environmental benefits are questionable. Its a problem for the sector when you combine it with the fed. Environmental benefits being youre running tesla off the grid and if its 75 of teslas in europe are built in china. Thats 75 Oil Manufacturing in the case of the batteries using forced labor, you know, do you feel thats environmentally friendly . This was always the issue and a trump issue, youve essentially offshored your manufacturing to a high coal, 75 coal. Chinas coal consumption is 50 Million Barrels oil a day. Anything out of china is not environmentally friendly. They have the renewables as well. Leading on renewables actually. Yeah. All right. Were going to have you back to talk about these things as well. Paul, thank you. Pleasure. As paul mentioned occidental getting hit. The only energy name doing worse than chevron. Pippa stevens with the sector and names moving on the back of this. There is so much buzz around that chevron and hess deal. Energy stocks are in the red today alongside the broader market. Looking at the technicals, its now one of just three sectors trading above the 200 day moving average. The other two being tech and Communication Services. According to btig. Thats on a market cap weighted basis, but if we look at an equal weight basis, energy is actually the only group above its 200day. Jonathan crinski from btig noting energys relative breakout means the sector is attractive, despite its out performance over the last three months. Those gains have been led by upstream players, a pickup in deal activity with the xop up 10 in the last three months. On the flipside he refining stocks have taken a breather after making a series of new highs and the crack etf which tracks the space up just 3 in the last three months. David, back to you. Thank you. As we head to break, check out the move in fmc, agricultural science company. The company reduced Third Quarter revenue and Earnings Guidance on what its calling destocking trends that were, tiote, more severe than ancipated. 15 down. Dont go anywhere. Icy hot. Ice works fast. Heat makes it last. Feel the power of contrast therapy. So you can rise from pain. Icy hot. When youre looking for answers, its good to have help. Because the right information, at the right time, may make all the difference. At humana, we know thats especially true when youre looking for a Medicare Supplement insurance plan. Thats why were offering seven things every Medicare Supplement should have. Its yours free, just for calling the number on your screen. And when you call, a knowledgeable, licensed agentproducer can answer any questions you have and help you choose the plan thats right for you. The call is free, and theres no obligation. You see, medicare covers only about 80 of your part b medical expenses. The rest is up to you. Thats why so many people purchase Medicare Supplement insurance plans like those offered by humana. Theyre designed to help you save money, and pay some of the costs medicare doesnt. Depending on the Medicare Supplement plan you select, you could have no deductibles or copayments for doctor visits, hospital stays, emergency care, and more. You can keep the doctors you have now, ones you know and trust, with no referrals needed. Plus, you can get medical care anywhere in the country, even when youre traveling with humana, you get a competitive monthly premium, and personalized service, from a healthcare partner working to make healthcare simpler and easier for you. You can choose from a wide range of standardized plans. Each one is designed to work seamlessly with medicare and help save you money so how do you find the plan thats right for you . One that fits your needs and your budget . Call humana now at the number on your screen for this free guide. Its just one of the ways that humana is making healthcare simpler. And when you call, a knowledgeable, licensed agentproducer can answer any questions you have and help you choose the plan thats right for you. The call is free, and theres no obligation. You know medicare wont cover all your medical costs. So, call now and see why a Medicare Supplement plan from a company like humana just might be the answer. We continue to monitor the headlines out of israel. This war against hamas. Nbcs jay gray live from tel aviv with the latest. Jay . Yeah. One Important Note coming out of actually washington just within the last few minutes that says sources tell nbc news the Biden Administration is advising israel to delay a ground assault for hostage talks, saying they should delay that ground assault to try and rescue some of these hostages. Thats been something weve been wondering about, sources telling nbc news that is the case. Look, it hasnt slowed the air attacks over gaza, 320 military targets according to the Israeli Defense forces hit in the last 24hour period, including tunnels, Operational Command centers and they have been clearing out that area along the border with gaza. We know that select teams are moving in for raids in that area, looking for information on those hostages, clearing out the area of hamas gunmen, they say, and so its really stepped up along that border. We also know theyve been repositioning some of the troops and some of the equipment there, leading many to believe that a ground assault is very imminent. We know that on the other end of the gaza strip, aid continues to move in, 17 trucks yesterday, 20 trucks moving in today. Food, water, medicine, medical supplies, no fuel. Right now, the u. N. Says fuel is desperately needed as much as any food or water. We have been told by the Health Ministry of hamas 12 hospitals have closed, 23 Health Centers have closed for lack of fuel or damage from the air strikes of the hospitals that are remaining right now. They have about two days of fuel left according to the u. N. And then they will be forced to shut down as well. We know that in some of those hospitals, the doctors are actually performing surgery just using the lights on their cell phones in those operating rooms to see what theyre doing. That gives you an idea of how desperate the situation is. As for the other aid, the u. N. Says whats coming in right now is about 4 of what before the war was an average daily delivery for gaza. Thats an incredible number. Appreciate the update. Lets get to phil lebeau with a news alert on the awesome and stellantis. Carl, the uaw is now striking a second Stellantis Assembly plant, the Sterling Heights final Assembly Plant outside of detroit. Essentially taking down the most one of the most profitable plants that stellantis has in north america. Youre looking at 26 of u. S. Production, where they make the ram 1500, quad cab, very, very profitable vehicles, for stellantis and you have the uaw taking down production for 47 , 48 i should say, of stellantis u. S. Production. 48 is now knocked out because of uaw strikes. This was announced within the last half hour, the uaw saying it made the decision because stellantis still needs to go further to catch up with gm and ford in terms of the negotiations. To make a point of saying they are lagging relative to their competitors in terms of the negotiations, in terms of what theyre putting forward, so again, the uaw calling a second final Assembly Plant for stellantis for those workers to go on strike. 6800 workers. There are more than 40,000 uaw workers for the big three in the u. S. Who are on strike. Guys, back to you. Yep. From bad to worse. Phil, gm and ford are going to report earnings this week and i feel like they have a little bit of a communication challenge when it comes to how they characterize the impact, if it if theyre bullish the union can use that against them. Bearish, they face problems on wall street from investors. How do you thread that . I dont think its a communication issue in terms of being bearish. I think wall street you have to play it that way. If you were gm and ford you cannot portray this or try to play down the bearishness aspect of this. These stocks can they go lower yes, they could go lore. Is it likely they go lower . Probably not. I expect you will hear from the gms, how much money theyre losing every day, and it the need to get it resolved. I dont think its a communications challenge. They will go at this and they will be bearish. They will not portray things as hey, business is good, and we think we can get this resolved. You will hear pessimistic comments from gm and ford executives. And then questions about losing competitiveness to awesome like tesla absolutely. Those questions sara, those questions are there already. You cant communicate your way out of this. And i think we will hear from them in terms of when they report their Financial Results for the Third Quarter. Phil, thanks. Phil lebeau this morning. Meantime fairly ugly open. We did lose 4200. Mike santoli watching that, although i think hes also watching the banks and small caps too. Yes. They actually did bounce off those lows as yields came in a little bit. You had that you were talking about the bill ackman tweet, coinciding with when the market got a little bit of a bounce. I think you would have to say, i would say, that it shows you that almost everybody was poised and fixated on okay, were kind of near some kind of support level, been up 15 mondays in a row, biggest, most Profitable Companies in the world about to report. Thats the onehour tactical play. You might have seen unfold. If you want to talk about what the market has been most concerned with its not just a pure the world cant live with 5 10year neelz, the economy cant handle it. The economy has been stronger than expected. If i look at target and capital one and whirlpool trading back towards spring 2020 prices it shows theres no faking the cyclical or financial trade. So whether, in fact, you get another burst of maybe it will be okay, as earnings go up and got get rewarded for it, thats the question. Vix 22 is interesting. It has been interesting. Look, you got above 20. It had been a ceiling since may or so, but it shows you theres been building concern and, of course, no shortage of excuses for people to be more anxious or on guard with whatever is going on in the world, so there is this build up of anticipation of potential things that arent, you know, going to go our way. Gold and oil are calm today. Maybe we had a sense where friday you get the build up of anxiety, a little bit of tension release on monday has been a pattern for two weeks. 15 mondays in a row. Except for labor day monday. Yeah. Going back to june since you had a down monday. Cant explain it. Dont know if i have to. Well see we can see where we close. Talk soon. Mike santoli. As mike mentioned big week for big tech earnings from alphabet, meta, amazon. Our next guest says the tusep looks tough for the group. When we come right back. Cant explain it. When we come right back. Welcome back to squawk on the street. Im dominic chu with your cnbc news update. A group of House Democrats wants a briefing from u. S. Intelligence officials on how the chaos over the House Speaker election is affecting the countrys relationship with china. The 11person Minority Party members on the select committee on the Chinese Communist party claim beijing is using the failed elections and a nearly 20day speaker vacancy as a propaganda tooled. And they report to Chinese Media as evidence. The u. S. Renewing a warning to beijing following a collision in the South China Sea and the u. S. Would defend the philippines in case of an armed attack after chinese ships blocked and hit two filipino vessels in con tested area of that sea. No injuries reported. Democratic senator bob menendez is expected to immediate not guilty to new charges claiming he accepted bribes from the Egyptian Government and acted as a foreign agent. The senator entered a not guilty plea for earlier corruption charges alleging he accepted hundreds of thousands of dollars worth in bribes. Sara, ill send things back over to you. Thank you. Lets get to what is at stake for big tech. Amazon, meta, alphabet, our next guest cautious, quote, overzealous ai expectation and fear of a spending slowdown. Lets unpack and bring in Jeffries Research analyst and brent has a buy rating on alphabet, meta and amazon, feeling cautious about the group or particular names . I think the Group Overall has had a great run and were seeing a cautious investor. Youve seen numerous hedge funds basically bring down their exposure given this concern as well as the long onlies dont have town of conviction given the backdrop of some of the concern on the demand side as well as stocks. Going into earnings print. The good news many stocks have been derisked going in, the bad news, no one has a ton of conviction and weve had a great year to date return. Who has the best setup in your view . We still think microsoft and meta, microsoft given the ai platform hits are going to start to take hold in the next six months, so as weve said, theres an ai wave coming. Theres a price uplift. This will help reaccelerate demand in the azure business. The stock has sold off from 366 down into the low 300s, so we think the setup is looking better there. The certainty of the products coming out, again, the microsoft 365 copilot coming in november which everyone is excited about. You have that as a backdrop in demand and that Pricing Power will help microsoft in the next several quarters. On the meta side the comps are easy and theyre continuing to accelerate. Market share gains, the Points Solutions of pins and snap and other have been losing share to google and meta, so we think their consolidation play as well as easy comps and continuation sucks with advertisers right now is in a good spot. Brent, any unifying theme around the Conference Calls from these companies you will be listening to or we should be listening to get a sense of whats going to be most important . I think the most important is really all the ai excitement. A lot of this is efluff to be honest. Its not revenue until 2024. The single biggest question everyone is getting when does this turn to revenue. A lot of excitement, the semi names of amd and nvidia have done well this year because you have to build the services on top, but they arent all live. They will become live. The number one question, when do they come live and whats the pricing impact to the economic model for the Software Companies in 24. Does that mean the street will be sensitive to guidance on operating expense or hungry for more cuts or layoffs . Yeah. I think right now its been the capex war. Every Technology Company is bringing their capex up, many have compared it to telco days of investing out. Everyone is concerned about investments. Microsoft had to raise their capex between 8 and 10 billion. These are huge numbers. Oracle, we were there last week, they cant get the super clusters up fast enough and theres concern that the services arent coming online and theres a lot of expense. Theyre getting delayed because this is complicated and were in a new world of ai. Its going to take time. I think thats the concern in shortterm are we going to have a margin overhang and no revenue in the short term, more of a 6 to 9 month view. As we go into 24 and 25 that will change and the revenue will come snoonl well leave it there. Thank you. Im sure well be talking throughout the next few weeks. Thank you. Still ahead this morning, S P Health Care under performing the broader index by the widest margin in 20 years and big tech hitting new lows. Are there stocks cheap enough to buy here . Our next guest says yes, and well get to his top knicks a moment. When youre looking for answers, its good to have help. Because the right information, at the right time, may make all the difference. At humana, we know thats especially true when youre looking for a Medicare Supplement insurance plan. Thats why were offering seven things every Medicare Supplement should have. Its yours free, just for calling the number on your screen. And when you call, a knowledgeable, licensed agentproducer can answer any questions you have and help you choose the plan thats right for you. The call is free, and theres no obligation. You see, medicare covers only about 80 of your part b medical expenses. The rest is up to you. Thats why so many people purchase Medicare Supplement insurance plans like those offered by humana. Theyre designed to help you save money, and pay some of the costs medicare doesnt. Depending on the Medicare Supplement plan you select, you could have no deductibles or copayments for doctor visits, hospital stays, emergency care, and more. You can keep the doctors you have now, ones you know and trust, with no referrals needed. Plus, you can get medical care anywhere in the country, even when youre traveling with humana, you get a competitive monthly premium, and personalized service, from a healthcare partner working to make healthcare simpler and easier for you. You can choose from a wide range of standardized plans. Each one is designed to work seamlessly with medicare and help save you money so how do you find the plan thats right for you . One that fits your needs and your budget . Call humana now at the number on your screen for this free guide. Its just one of the ways that humana is making healthcare simpler. And when you call, a knowledgeable, licensed agentproducer can answer any questions you have and help you choose the plan thats right for you. The call is free, and theres no obligation. You know medicare wont cover all your medical costs. So, call now and see why a Medicare Supplement plan from a company like humana just might be the answer. You. Welcome back to squawk on the street. Big tech hitting multiyear lows. The xbi on pace for three straight years of decline as S P Health Care under performance the broader index by the widest margin in a couple decades. Our next guest, quote, cannot remember pain to this extent in health care. His top stock picks include merck and biogen. Lets bring the analyst here at post nine. Always good to see you. You too. Thanks for driving in. No problem. We talk about the impact on med, tech and dialysis by the day, but talk about how you see it broadly lately. Its been painful. Youve basically had a couple of winners. The glp1 obesity thesis has been monumental for a couple players, lily and novo leading the pack. For the rest of health care its been difficult. Youve got pressure in pharma, you have pressure across the med tech as you alluded to, Life Sciences with the comps because covid was a boom for them, and now were kind of left with, you know, a pretty destructive year broadly. Yeah. What does your screen look like and what distills the winners from losers . There have been so few winners. You have a couple in pharma that have led, you know, med tech mixed, very, very tricky lately with the obesity names having a huge impact. Distributors and managed care are like two other areas that have been decent i would say, but allin, its been a tough year. This is going to be one of the worst years for health care if we continue on this pace versus the market and certainly were hoping for better. Doesnt seem like theres momentum here. Its not like the innovation is there, right . Beyond the obesity space, cancer, were seeing a lot of break through. Alzheimers. Its been incredible. The innovation is a doubleedged sword. A ton of breakthroughs but almost Unlimited Company creation. If you own one stock on one particular day it could be obsolete the next look. Thats what investors are having trouble with. Too Many Companies in big tech. Theyre all vying for a niche market. Thats one reason why the obesity trade has had legs like this. Its a huge market that everyone can kind of come to terms with and its easy and its simple and the rest of big tech is very esoteric. During the rest of the year theres oftentimes when im reporting on pfizer or name your big mega cap pharma paying a premium for some Big Tech Company none of us have heard of, that doesnt help . It has not really happened. Its been probably the most common bull thesis for biotech investors the m a wave was going to cause a flurry of interest into the broader sector. We havent seen it. You have to be in the right stocks. You clearly cannot draft off of whats happening in m a and buy the broader sector and come out with positive returns because the xbi is like the i guess the best, although not a great indicator of big tech biotech. You can tell people not to sell or short stocks. Sure. You could do it quietly, i know. I hear you. Do you . Maybe thats the way to go. Its i feel like most of what i have, you know, written over the past over the past few has not been overly bullish. Its tough to get up every day and write with that sort of tone. Yes, its been very tough. I think the Interest Rate environment is creating another headwind for this group. Im not sure the correlation over decades has been there but over the past couple you can make a decent comparison that one is hurting the other. Hopefully we get going but its not been hes. I get going, whats the catalyst to get going . Well, i feel like at some point we kind of get into a mode where youre going to see more consolidation. Some of the losers in the xbi are going to kind of evaporate. Either they get too small, reverse mergers happening, asset sales and distributions. I think we basically just have to truncate this entire industry and get to a point where the companies that are remaining are a little more palatable for the street. Wow. Attrition. Attrition. I would argue mizuho notes not like for candor. Appreciate reading your stuff. Good titles, too. When a look at where queeldz go from here with the deputy of c cio. By the way, it has reversed, after going above 5 earlier, the tenyear yield back down to 4. 9. Olukai slippers are so comfortable, you wont want to take them off. And with that outdoor worthy sole, you dont have to. The all around best slippers by olukai. Welcome back to squawk on the street. Thinking of buying real estate in new york . Officials are making an historic change when it comes to commissions and theres some pretty big money at stake. Robert frank has details. The real estate board of new york changing the way new york brokers are paid. President board will now prohibit the sellers broker from paying the buyers agent fee. Currently the sellers broke split that 6 commission wither the buyer broker. Some say its anticompetitive and inflates home prices. Under the new rule, the sellers will pay the buyers broker directly. The entire Commission Structure is now under fire. A classaction lawsuit by thousands of home sellers against the National Association of realtors and two real estate agencies is now under way in kansas city. The plaintiffs say the Fee Structure is anticompetitive. Two Brokerage Firms have settled for a combined 139 million. The Justice Department also reportedly looking into the nars fees and policies, whether they violate antitrust. In other developed countries brokerage fees typically about 2 or less. The nar saying, quote, the market itself decides how Real Estate Agent services are given. Where prices where they are and Technology Sort of taking over this business, no surprise these Fee Structures are now under fire. Under fire, robert, but does it mean theyre going to come down . Well, part of it might come down if this lawsuit that started in kansas city is successful. That really just sets up a 6 structure where the buyer agent is paid 3 no matter what. If that is chipped away and negotiable, maybe it comes down in some cases to 4 and 5 . Its not 2 , but its a start. Its a start. Okay. 2 the rest of the world, or many other places,dy hear you say that . Thats right. Wow. Robert, thank you. Robert frank. As we take a look at the markets, sara mentioned the s p had briefly treaded into positive territory. Its backed off a bit. The nasdaq is positive. Again, i mean, its the tenyear. Rate relief. Potential relief as we exexceed seeded that 5 yield briefly and it backed off from there. No fed speak for the remainder of the week but a lot of important earnings, as we have said. And some Economic Data coming later this week. I think its notable that the buying is starting in Communication Services and alphabet, for instance, has gone green. Tomorrow really kicks off with microsoft and alphabet after the bell. But they have been outperforming by a wide margin some of the less profitable tech stocks, for instance. No doubt. Got a huge deal today in oil but sss not doing anything for he. Shares are down 20 cents. More squawk on the street. Which have become top targets for Ransomware Attacks. But theres never been a reported Ransomware Attack on a chromebook. Which is why thousands of schools like the fairfieldsuisun Unified School District switched to google tools for education. So they can focus on teaching and 22,000 students can focus on learning, knowing that their data is secure. Municipal Bonds dont usually get the Media Coverage the stock market does. In fact, most people dont find them all that exciting. But, if youre looking for the potential for consistent income thats federally taxfree, now is an excellent time to consider Municipal Bonds from hennion walsh. If you have at least 10,000 dollars to invest, call and talk with one of our bond specialists at 18003764376. Well send you our exclusive bond guide free. With details about how bonds can be an important part of your portfolio. Hennion walsh has specialized in fixed income and Growth Solutions for 30 years and offers highquality Municipal Bonds from across the country. They provide the potential for regular income, are federally taxfree, and have historically low risk. Call today to request your free bond guide. 18003764376 thats 18003764376. Jeffrey shermans going to break down whats next. From baby bottles and toothbrushes and lighting, the ceo of phillips is with us. And the impact of rising rates on tech from cash flow valuations to startup funding. Well talk about that as well. First up, though, a look at the markets. Stocks coming off the lows of the session as yields retreat after the tenyear, carl mentioned, briefly css