On a dropoff in steel prices. Later, the mber chair on what to expect from the fed. Thats the committee that officially declares if were in recession. Why he is not necessarily buying the recession narrative. Well start with the markets ahead of tomorrows fed decision the dow is at the highest level since 2017 and looking to add to its 11day win streak. The next guest says the economy is out of the wood as liquidity is the issue joining us is jeff solomon what are you worried about on the liquidity front . Good morning to you. Good morning to you listen, i think the markets had an incredible rally but thats because we had this major two major issues with the budget crisis and the Regional Bank crisis so, any time you have anything that happens to the downside, youre going to see a rally. I just think when you look at some of the challenges in terms of where liquidity is in the marketplace, certainly in credit, were not quite seeing the flow of liquidity. And i think last time i was here, i talked about the fact there would be a dampening of lending and things like that in the marketplace. Then though credit spreads have tightened, i would like to see capital start to flow a little more i would like to see deals start to get done before you can declare that, you know, were sort of beyond the last crisis all of that is supposed to happen with the fed raising rates. It hasnt been as bad as it could have been with more than 500basispoint tightening in fed policy in a year and a half. We were long overdue for that were still going through an adjustment period here i applaud the fed with the speed of which theyve done it i would expect there to be possibly be more disruption. Thats what im saying. The Regional Bank crisis was a disruption but it wasnt nearly as bad as it could have been we still need to see how things will play out in the Real Estate Market thats a slow rolling issue thats going to play out over the next few years i think the next meaningful Inflection Point the market has to look at is whats going to happen with the budget the budget negotiations in the fall. Thats really thats why i think markets have done incredible any time were on an 11day win streak, back to alltime highs, you need to be more skeptical that were completely out of the woods. I will just say it feels today like unlike the last time i was here aed that of the budget deal or the debt ceiling deal, feels a lot better ipos are starting to happen again. Were seeing followon opportunities and people are using this window as a chance to access capital. In the meantime, obviously were expecting a rate hike tomorrow whats your view on the rest of the year you say the next big Inflection Point are deflection one more hike, is that in danger of creating some wobbliness in the market i think the market has pretty well got its head around this idea the fed is going to do whatever it can to knock inflation out. Eradicate it, if you can and nothing like a great inflation scare to remind people how bad that can be. The markets got its head around the fact theres one, maybe two, but the fed will also take a look, even though its independent, arguably, independent, it will take a look at what happens with fiscal policy this is something i think in the bernanke years we saw a lot. When janet yellen we saw a lot the fed waiting to see how fiscal policy was going to play out as potential stimulus or contraction we have the ecb and bank of japan as well. I think the fed focuses primarily on where we are in the u. S. Economy it will take a look at if theres going to be a protracted budget debate and government shutdown, what will that mean and what can the fed be doing to ensure theres more stability in the markets during that period of time . This is something, again, you rip it out of the playbook we saw from bernanke and predecessors. Theyll never admit that. Thats what theyre watching. Theyre not supposed to. You start off saying liquidity, i would like to see more deals one of my takeaways from the Bank Earnings is theres increasing excitement around pentup demand and potential green chutes for deals starting in early 2022. Early it from james gorman and David Solomon of goldman sachs. It will be selective. Everything kind of shut down during the Regional Banking crisis and then the onetwo punch where everyone had to see how debt it would clear on the debt ceiling crisis. Were talking to a number of sponsors thinking about launching post labor day theyre taking their best assets and beginning to turn them over. Those are the kind of things were starting to see. We do expect to see a pickup in deal activity, m a activity. We focus mainly on the middle market well see increased activity coming into the back half of the year. You focus a lot on biotech, pharma. We do what is demand going to be like for deals there waiting for the ftc well see how that plays out. Whats interesting to us in the middle market and lower middle market side, were seeing the cleanup that needed to happen in biotech a lot of these companies that went public, the science didnt work, theyre sitting on piles of cash, a lot of companies, private companies are saying, do i go public through an ipo or do reverse mergers . Were seeing a bunch of that stuff starting to happen were deeply involved in a number of those situations i think thats really healthy to clean out the underbrush in that area we just did the largest biotech offering in history of followon offerings of biotech that should give you an idea theres a lot of capital here. One of the things thats interesting, even though liquidity is still concerned, people tend to forget the earnings capability, the rally in the market, the yield on fixed income theres so much cash flow that gets generated that ultimately needs to be put back to work again even if theres not new inflows. I like to bear that thesis out a bit but it certainly feels like liquidity is could get better here how, if at all, has your perspective changed since your company was bought by ameritrade in canada, part of this retail Trading Company . Well, look, actually, Td Ameritrade was sold to schwab. So, to be fair, were focused much more on the institutional side of the market and what i will say is td bank group, one of the largest banks in the world, what weve been able to see, it just added to my peripheral vision. I have a much better handle on fixed income market than i used to from just looking at the equity market. I would say we have a better global view. I certainly am spending more time on north america more broadly than just in the u. S and what will i say the crossborder activity between u. S. And canada, the opportunities are far greater. As we look at the combination of our two businesses, the things were able to do, already starting to see meaningful collaboration between the organizations as we build new securities Going Forward im really excited about it. I think its honestly its better than i thought it was going to be. Spending a lot more time up north. Yeah, yeah. My grandmother is from canada. I was at the calgary stampede. So, plenty of stuff to do in canada, which we love. Thank you, jeff thank you for clarifying, td bank jeff solomon, thank you. Still to come, the ceo of clevelandcliffs, out with results. Up big today can the stock be a beneficiary of investor shift away from growth we will discuss. We have a big interview with starboards jeff smith, the activist investor breaking down some of his newest investments his ongoing stake in salesforce and the future of activision squawk on the street will be right back dow is hanging on to a small gain s p is doing a little better well be right back. Clevelandcliffs seeing a boost, up more than 6 after reporting a revenue beat for the Fourth Quarter seeing steel shipments thanks to an Auto Industry turnaround net profit fell due to the average price dropping more than 15 year over year joining us in a first on cnbc interview, ceo lourenco goncalves. Thanks for being here. Thanks for having me. Auto sales were a big driver for the quarter but that was on record auto shipments. Do you see more upside when it comes to auto business than shipments in the sending half of the year we do its second to none here in the united states. And everything we are doing is starting to pay off. As we showed in q2 and compares with the results from last year, apples and bananas. Our growth in terms of profitability against q1, its amazing, from the profitability standpoint, sales standpoint, all metrics you can use. Your shipments went up 15 but the price went down 15 at the same time. Whats putting pressure on price when youre seeing more demand price is going up sequentially from q1 when you compare last year, were comparing a year that people were not talking about recession on a daily basis this yearwe have been plagued by this constant conversation about not if but when the recession would hit. Now reality is sinking in and the softer landing is a lot more of the reality than the recession people were talking pretty much every day on tv. A good point. Obviously, the thoughts of recession eased up a bit were seeing more bullish sentiment. At the same time you still saw, i would imagine, less demand from china, also less autos being made i understand there was a sequential increase, but still year over year, double digits. Well, youre very negative, frank. Lets talk about the reality a little bit the industry is having their best year since covid. Supply of automotives in this country. We are enjoying their improvement more than anyone else, so covid was a big wakeup call for the Automotive Industry supply chains that were all tied to important stuff changed a lot. So now they are bringing things back when they bring manufacturing back to the united states, clevelandcliffs is a player, a partner to work with. Gm also raids good answer an optimistic sign for you about a quarter of sales goes into infrastructure and manufacturing. A lot of that tied to some of the iijj infrastructure bill we are seeing roll out. How steady is that revenue going to be . Weve talked to companies that say it can be lumpy at times. Actually, it has been lumpy youre right about that. More recently were starting to see a real constant inflow of orders on some portions of the infrastructure bill and Inflation Reduction Act that are really starting to shine i will call one solar. Solar energy is starting to show a great promise in terms of demand we are seeing the orders its all about our galvanized steel. And this is actually very exciting right now. Okay. Clevelandcliffs shares up more than 6 . I have to work on my optimism and not being so negative. We appreciate you do. You absolutely need to do that. Thank you ill definitely put some work in on that. That was nothing compared to how he spoke to the analyst. I do remember that. Thats why im like, let me take a step back. Three red flags for tech as we get ready for reports from alphabet, microsoft and snap tonight. Thats coming up on techcheck. Dont miss an interview with starboards jeff smith were talking the latest on his stake in salesforce, revealing that position last october the stocks up 50 since then. Back in two moments. This is your moment. Critics declare oppenheimer is magnificent. The New York Times calls it staggering. Its utterly enthralling and one of the best movies of the century. Tech heavy weights alphabet and microsoft reporting earnings after the close and first to show investors if the hype around a. I. Is actually justified. Thats the focus of todays techcheck with deirdre bosa. Frank, we know the case for mega cap cap pristine balance sheet, wide moats, and greater concentration in a handful of names and raises the stake this is week because even a wobble from any of them, that could shake the whole market just in case i wanted to use this time to highlight some potential red flags. Red flag one would be techs mass outperformance in the first half tech is trading at a 54 premium to the market. Thats its highest level in 45 years other than the dotcom bubble compare it to its historical average premium of just 26 . Its not like the fundamentals have boosted valuations. Five of the six largest mega caps have had negative earnings revisions over the last year and all of techs relative outperformance this year has come from multiple expansion in other words, the stock price is going up faster than the fundamentals red flag two, the generative hype cycle investors have moved into the show me the money era. Tech may have to justify this rally with actual tangible a. I. Driven revenue and earnings even microsoft, which got investors excited about that 30 a month a. I. Subscription, it will have to sell those subscriptions against a slower macro back drop where companies are trying to cap their a. I. Spending the third red flag, that is cloud outlook and capex. Growth has been decelerating for all the big cloud players. Investors are looking for signs its bottomed out or is bottoming. Theres a new worry this quarter and that is capex. Bernstein writers, all those nvidia gpus have to be going somewhere. Guys, im wondering what your previous guest would think about this segment what a Debbie Downer but we have to tell the folks about the red flags. He would call you out for being too negative i think your point is well taken. The setup has been very bullish. The expectations are high. The analysts are still upgrading these names. Meta got an upgrade yesterday ahead of results you said nvidia beat already high expectations. Microsoft continues to surprise us, including this announcement this week on charging for a. I. It does feel like there still could be upside depending on how these businesses are thinking about monetizing this trend. It also depends on how much runway, right, the investors want to give them. Yes, the excitement is still there and the fact that microsoft could charge 30 a user a month that could lead to billions and billions of dollars in more revenue, but thats further off. Are we in this era where investors want to see this now they want tangible results were not going to get that from microsoft. Thats still some time in the future is anyone going to be able to deliver that other than nvidia even if you look at fiveyear earnings, its not that far off from the historical average. So, it does beg the question, where is it coming from . Again, not everything has to make sense weve seen even the speculative stocks in tech run up this year. It may just be momentum hype cycle continuing yeah. I think also the question on how much the cloud or i. T. Spending environment is slowing to the macro concerns, too. Its been hard to figure out deirdre, thank you the chair of the National Bureau of Economic Research is with us next is he expecting one more and done from the fed tomorrow or is the market in for a surprise watching General Electric more than doubling over the past 12 months. This morning reporting an earnings beat and raising outlook. The stock now at a fiveyear high shares up more than 5. 5 right now. Dont go away. vo its time to switch to verizon. Sadie did. And now she has myplan. The first unlimited plan that lets her choose exactly what goes in it. Now she gets to pick only the perks she wants and saves on every one. And with an incredible new iphone on us, no wonder sadie is celebrating. Introducing myplan. Get exactly what you want. Only pay for what you need. Act now and get iphone 14 pro on us when you switch. Its your verizon. Circulon with scratchdefense. Built from three layers of nonstick to withstand over 350,000 metal utensil scrapes in laboratory testing. 130 times longerlasting than the competition. Get Free Shipping at circulon. Com with the fed decision due tomorrow, risk of recession is a major focus for investors. The imf chief economist joined last hour to discuss whether he thought a soft landing is possible we see a slowdown of growth to 1 next year. Its fairly weak its fairly vulnerable as well a few shocks might knock off that path, so theres a narrow path to avoid a recession if you want in the u. S. , but we still think its doable. Joining us is nber chair john lipcy, the organization officially responsible for declaring a recession here in the u. S. John, thanks for being here. Happy to be here. Rear hearing comments from the imf earlier, joined sara you call yourself an inflation optimist what does that mean that well likely have a rate hike tomorrow and maybe even another one later this year . Well, inflation i define inflation optimism in the current context as suggesting that the surge in inflation we experienced earlier was mostly a reflection of supply constrictions rather than some outsize demand growth. After all, when we take a look at where the economy is today in terms of output and employment, relative to where we thought it would be before the pandemic hit, were about on track. Before the pandemic, there wasnt a sense that the economy was out of balance in an inflationary or recession way, so its not obvious today. In other words, theres good reason to think that inflation is going to keep moderating, continue moderating, even without further policy action. Thats fair enough. A lot of people think maybe the data were seeing in the economy, whether its in the u. S. Or globally, may be lagging the action thats actually happening. Earlier today i spoke to the incoming coceo of oak tree and he believes later this year well see Interest RateSensitive Industries and also Cyclical Industries start to fall under the pressure of higher cost of capital. For sure. Fed policy is restrictive by their own admission and by every reasonable measure its not severely restrictive and this is going to affect principally the intersensitive sectors, such as housing and construction at the same time, household Balance Sheets are in pretty good shape, incomes are growing. The fiscal stance is going to continue to be supported as theres still spending left that will be helping the economy from earlier measures there are good reasons to think this economy could avoid a recession, but there are also good reasons to think that growth is going to be slow how do you interpret the fact that the yield curve has inverted 100 basis points for the third time in the last year or so, the fact that leading Economic Indicators have shown several months that typically correspond