Closing Bell - Closing Bell Overtime: A Bull Vs. Bear Market Debate; Why Zillow Doesn’t See Housing Prices Coming Down Anytime Soon 06/12/23

Episode Date: June 12, 2023

Stocks closed higher today, near session highs as the Nasdaq notched its seventh straight positive close. Cantor Fitzgerald’s Eric Johnston and Cresset Capital’s Jack Ablin break down the market action. Third Bridge’s Scott Kessler reacts to earnings from tech giant Oracle. Zillow Chief Economist Skylar Olsen on the highlights from Zillow’s June housing report and why home prices keep climbing. Thomas Karam, Equitrans Midstream CEO, talks the company’s debt deal and why he is urging more bipartisan work in Washington to ensure energy security. SGH Macro Advisors Chief U.S. Economist Tim Duy looks ahead to this week’s important inflation read and the upcoming Fed decision. Plus, ON Semiconductor Hassane El-Khoury joins after the news that the company is joining Nasdaq-100 index next week.

More gains for stocks today with the S&P touching a new 13-month high. That is the scorecard on Wall Street for the actions just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Coming up this hour, we'll talk to the CEO of Equitrans Midstream. That's the energy pipeline company that got a huge boost thanks to a provision in the debt ceiling deal to speed up permits. It's his first TV interview since the passage of that bill. Plus, we're awaiting breaking earnings from a $300 billion software giant Oracle, which closed higher today on the back of an upgrade from Wolf Research. We'll bring you those numbers and expert analysis as soon as they cross. We're two days away from another interest rate decision by the Fed. This is the

calm before the storm, John, with the S&P 500 up 5% in the past month. Bulls are firmly in charge. Welcome back, first of all. Thank you. Missed you. Yeah. So, yeah. So I think we need to start right there with the markets because we do have a very big hour.

We are awaiting those earnings from Oracle. So let's talk a little bit about that. We've got a bull-bear debate to kick off this hour. Our bear, Eric Johnston, Cantor Fitzgerald, head of equity derivatives and cross assets. And our bull, Jack Ablin, Crescent Capital founding partner and CIO. Good afternoon to you both. You know, we keep talking about the fact that the S&P has now exited bear market territory up more than 20 percent since October lows. A lot of calls that this is the start of a new bull market.

Eric, how do you see it? So we actually saw about five 20% plus rallies in the 2000 to 2002 bear market and the 2007 to 2009 bear market. And all five of those 20% rallies ultimately led to new lows. So the fact that we've gotten a 20% rally off the lows, I don't think is a good forward-looking indicator. While the market clearly has significant price momentum right now, this market is now priced for, I think, almost more than perfection. We're currently trading at 20 times this year's earnings and about 19 times forward earnings. And we think the global liquidity flows, which have been very helpful to this

market, are in the process and are about to turn very negative. We actually think that liquidity flows will be about negative $2 trillion over the next year, with a lot coming within the next six months. And we still think the economy is not out of the woods yet, even though it has been fairly resilient so far. Yeah. I mean, Jack, folks have been pointing to, despite all of the positives for this market and all the upside momentum, the fact that you do have a Fed that maybe is pausing or skipping this week, but we don't have the full effects of those rates yet. We breath has at least until recently been pretty poor.

And perhaps the S&P, for example, is very expensive right now. Even if you look at earnings forecasts, despite the fact that we're coming out of a season that was better than expected. Would you be buying here? Yeah, I'd be buying. I'm maybe not buying the largest companies in the S&P. But let's let's take a look. The Fed has raised rates 10 times and now we have the banking turmoil piling on top of that, creating a lot of, you know, liquidity disruption. I think if you take that and look at the fact that the time lag between a peak in Fed funds and a subsequent trough in inflation is somewhere between a year and a half and three years. At some point, the Fed is going to have to say, all right, enough. Once that happens, we believe that will then trigger a rollover in the dollar.

We'll see gold continue to rise. And a lot of the lower valued players that have not kept up with the S&P, like quality small caps, international, particularly Japan, will lead the way higher. So no, I'm not banging the drum here, flapping my arms for 20 times P.E., but I do think that international and general trading at half the valuation of the S&P 500. Eric, you've been bearish for a while, right? I mean, and and the market just has kept going higher. So it seems like there's danger in that position. What did you get wrong up to this point that perhaps tempers the bearish argument about where things should go from here? Right. So we've been wrong the last six months. We've gotten about a 9 percent rally since we

resumed our bearish view. To be fair, it's in the context of a multi-year performance that's been, frankly, excellent on both the upside and the downside. What's kind of propelled this market over the last six months, I think, is three different things. One is the budget deficits. The budget deficit is $2 trillion this year, which essentially is a $2 trillion stimulus package. And it's happening for a whole host of reasons, but essentially the private sector is getting about $2 trillion more than they're paying in taxes, which has been stimulative. Second thing has been those global liquidity flows. And then the third thing is the AI, you know, euphoria that's going on, which we think, like everyone else, AI is going to be revolutionary and change the world forever. Where we would disagree is we think it's much more uncertain around how you make money off of that and what the impact of that is on stock prices and how that will ultimately fare in a downturn in the economy. As we saw during the

internet bubble, the downturn in the economy overwhelmed it, and we think it would this time also. Okay. I want to mention Oracle earnings are out. We are going through them. Stocks bumping all over the place after hours between roughly flat and then up and a bit down. Jack, you know, how much of a risk is there built into some of these stocks that are trading at? I mean, Oracle's multiple hasn't gotten much higher than it is right now in a long time, if ever. Yeah. So, you know, I tend to agree with Eric on AI. I think here, you know, if you look at it this way, valuation by itself is not a timing tool, right? Expensive stocks can get more expensive. Cheap stocks can get more expensive.

You need a 7 to 10 time horizon for valuation to play out where expensive stocks underperform cheap stocks. When it comes to AI and a lot of these thematic strategies, that's productivity. Productivity takes 20 years to play out. And so while I'm totally on board with AI, robotics, genomics, all of those themes, we put it into a 15-year and beyond strategy and recognize, if you go back to the internet theme, for example, that was down 85% in 2000. And 15 years later, it was up 300 percent, if you're willing to hold. So that's how I would play AI in a lot of these themes. But, you know, a lot of investors just aren't that patient.

So, Eric, I mean, in addition to a Fed decision this week, we've got a tsunami of economic data coming down the pike. What are you watching most closely? Yeah, it's certainly a super busy week between the three central banks and then retail sales. We also have a lot of sell-side conferences. So I think getting the corporate read not only this week, but over the coming month around how this quarter is shaping up will certainly be very important. And then I think the core to the entire economic outlook is jobs. And so jobless claims, which is a weekly number, is more important than ever. It ticked up to a new local high last week.

We will be aggressively watching that in the coming weeks. And then one more point would be the student loan situation that we're watching. So student loan moratorium ends the end of August. We think this is going to be about a $200 billion headwind annually to the consumer when it resumes in early September. And I think the market will discount that ahead of that moratorium ending. All right. Eric, Jack, thank you. Thank you. Now, oil under some serious pressure today. WTI crude firmly below $70 a barrel.

That was supposed to be the floor, I thought. Senior markets commentator Mike Santoli at the New York Stock Exchange has a closer look at that price action. Mike? Yeah, John, I'm pretty conspicuous on a day when, of course, there was an announcement that the Strategic Petroleum Reserve would do some buying. I would say 65 to 70 on WTI is viewed as perhaps the range that could provide a floor. This is a three year look, though, and it shows it's pretty precarious in terms of potentially breaking back to these levels that we saw before the huge surge. Right here is the invasion of Ukraine and as well as the real meat of the inflation shock that we got last year right before the Fed started to hike rates.

So the way it plays into the Fed and the inflation picture is actually more benevolent, you would say, or benign, which is that it really does help reduce inflation expectations, take some of the pressure perhaps off the Fed. Now, take a look at the interplay between stocks and crude oil. Of course, stocks today making a new closing 52-week high, just as WTI makes just about a new low. And you see how they have been inversed. It hasn't always been this way, but over the last year, because inflation was the issue. June of last year, peak in oil prices. That was also really the initial climactic bottom in stocks. We more or less matched it, slightly undercut it in October as crude again made a new high and now, of course, diverging again. So I don't think this is the main variable deciding where stocks go,

but it shows you we've gotten a lot of benefit from the disinflationary push from oil coming down and what it's enabled the market view of the Fed to turn a little bit less hostile for now, John. Again, we'll take a cooling where we can get it, I guess, Mike Santoli. Thank you. I mentioned Oracle earnings are out, have gone through them now. Frank Holland, how do the numbers look? The stock is up a little bit more than 1% right now. Yeah, John, as you mentioned, the stock now just finding it's footing up one and a half percent after a beat on the top line and a beat on the bottom line. EPS came in at 167 a share compared to estimates of 158 a share. Looking deeper into the numbers, cloud revenue that grew by 54 percent.

The guidance was 49 to 51 percent. And then you look at this two main segments where it gets the majority of revenues, cloud licenses, cloud services and and license support. That beat estimates. However, cloud license and on-premise license, that came in just in line, actually just slightly below the estimate. Now, when we're looking at margin, our data team is still looking at this. The margin came in at 44%. The estimate was for 44.9%. Maybe some of that went on the stock. You look deeper in the report, you see Chairman and CTO Larry Ellison

talking about Oracle's Gen2 cloud becoming the number one choice, in his opinion, for generative AI workloads. Really pointing to their NVIDIA partnership is a reason for that. The company has a partnership with NVIDIA. Both of them also invested in Cohere, an AI startup, last week. So right now you're seeing shares of Oracle rise after a beat on the top line, a beat on the bottom line. And also its cloud revenue growth above its guidance of 49 to 51 percent, coming in at 54 percent. Back over to you. Frank, everybody's got a partnership with NVIDIA. I mean, everybody. It's like the new Microsoft, it seems. I mean,

I'm trying to remember who doesn't have a partnership with NVIDIA at this point. Yeah, I mean, obviously, we're seeing NVIDIA chips used in almost every application when it comes to AI. However, these two have also invested in other companies together, something a lot of analysts have pointed to, a very close tie up between the two of them. In fact, a lot of people are expecting Oracle to make a somewhat splashy announcement that their investment in that AI startup Cohere would allow them to sell large language models to customers for their cloud service. Don't see that in the report. However, the call is coming up at 5 p.m.

I know what you're saying, John, but these two are a bit closer than most other companies. Okay. NVIDIA was pretty close with ServiceNow as well a couple weeks ago when it was sitting next to Bill McDermott. So I don't know, Morgan. Thanks. Yeah, I remember that well. And you were sitting there interviewing them. It's interesting to see this. I mean, Oracle had such a run up into this print, right? Six percent increase today. I know there was a wolf upgrade

and certainly seen as one of those names with the cloud, you know, cloud share market share potential, the AI potential, the ability to grow revenues maybe perhaps better than the street had forecast. A lot of expectations and hopes going into this. And this is the big database player. But, of course, we had MongoDB in overtime a few days ago popping huge because they were gaining with an AI story as well. So we'll see how all that gets explained. After the break, much more reaction to Oracle's print and the read-through for other software names like, well, Adobe reports later this week. And later, don't miss our interview with the CEO of pipeline company Equitrans Midstream, which is up nearly

75% in the past month after a favorable provision in the debt ceiling deal surrounding its pipeline. Overtime, back in two. Welcome back to Overtime. Let's check on Oracle. The stock is now higher after hours, about 4% at the moment, after better than expected earnings and revenue. Oracle's CEO saying revenue growth was driven by its cloud and infrastructure businesses. Let's bring in ThirdBridge Global Sector for technology, media and telecommunications, Scott Kessler.

Scott, if I recall, Oracle gives guidance on the call. So are there any questions about pull forward here? How much volatility might we see in this name after hours, given how much it was up during the regular session it is trading higher now. Yeah no absolutely John I think it's a good point- and the frankly the stock if you look. You know over the three months concluding. On Friday the stock was up I think over seventy percent. As you're

talking about- a name that people have obviously been gravitating to. I think the results were largely good, although I'd say revenues were largely in line. So it seems to me like people are anticipating, you know, some favorable commentary around, you know, those key buzzwords right now, cloud and AI, which, you know, everyone's interested in hearing more about. How should I process this given the upside surprise from MongoDB that sent that high? I mean, Mongo's a much, much smaller than Oracle, but David Echerry was telling a story of share gains there driven in part by AI workloads.

Yeah. And I watched that interview that you did with him. Look, I mean, I think a lot of the trends are similar, although I would argue that people look at MongoDB as a shared taker from the likes of Oracle. And I think you guys might have talked about that to some extent during that interview. Look, the bottom line here is to what extent we're going to see accelerating growth from the company. And obviously, you have to account for the Cerner acquisition. But I think people have been looking at Oracle as kind of a mid-single-digit revenue grower. And now they're thinking more about it potentially getting back to double-digit growth, whether it's this year or next year. I think that's kind of a big key to thinking about how investors should be perceiving and acting relative to Oracle going forward. How does the macroeconomic uncertainty that we've been talking about with every company but

especially with the tech industry and you know enterprise tech specifically how is that going to factor in here how much of a risk is that to when you're talking about cloud you're talking about infrastructure you're talking about A.I. to the story the growth story that is Oracle. Yeah look I mean Morgan we talk to experts every day. And one of the things that we hear. On a regular basis is this notion that. Look there's economic

uncertainty. Maybe in fact things are better than were anticipated. But companies are looking to cut costs are looking to manage expenses. And Oracle consistently talks about how They're looking to manage expenses. And Oracle consistently talks about how they're able to kind of work with customers to provide more value-added solutions for better prices. And I think that's something that Oracle has been hammering on for the last

couple of quarters. We'll see to what extent they can talk about that over the course, not just of the conference call, but in the coming weeks as well. You know, John raised this earlier, and I'm going to channel him here with this question. But NVIDIA, the closeness with NVIDIA, the fact that in the press release you have Larry Ellison talking about NVIDIA themselves are using our clusters, including one with more than 4,000 GPUs for their AI infrastructure. How important is that to Oracle? And I guess more broadly, if you're going to be a company that's adopting generative AI right now,

like, you have to be partnering with NVIDIA. Is that the game in town, at least in terms of communicating with investors? Look, I think that message is one that resonates with potential and existing buyers. But to a large extent, I think some perceive that as, you know, a marketing spin to some extent.

Oracle historically has been very good at the sales side of software. We'll see to what extent they can connect the dots in terms of the alliance and alignment with NVIDIA and how that helps them provide better products and services to customers. Scott, very quickly, do you buy at these levels? Very quickly. So the fundamentals are definitely strong.

And so I think people are looking for cues to see whether they'll continue going forward. Scott Kessler, thank you. Thanks a lot. Oracle's the best trash talker in enterprise software, hands down. Larry Ellison, been doing it for a long time. Nobody, nobody does it like him. All right, speaking of enterprise software and disruption, these established players are going to have to watch their flanks

as startups try to use AI features to steal share from the likes of Oracle's Fusion, SAP's Concur, and others. So, Navon, the late-stage travel and expense startup, previously known as TripActions, out with news this morning. Its AI-driven platform now works with any corporate visa or MasterCard. So I spoke with the CEO, Ariel Cohen, who's been clear that Navon is ready to go public. It's raised more than $2 billion, too.

So it could be a sizable debut when it does. But he told me the market's not right yet. I don't think that the market is open yet for SaaS companies. So that's one issue. Definitely the market improved since, you know, we've last talked. I think we've probably last talked after SBB. So obviously, you know, some stabilization still since there. I want to see stability in the market. I don't want to manage the ups and downs. I think I mentioned it in the past. I have really patient investors.

I am patient. I don't need to rush it. But eventually, it will be public. So when I will think that the market is stable enough and it is rewarding high growth SaaS companies correctly, that would be the time for us to go. One of those important startups ready to go. Well, apparently the market's more ready for restaurants with the Kava IPO getting a boost today in the range from 17 to 19 bucks a share to 19 to 20 on the range where it would open in the not where it would open necessarily, but the pricing on the technology side, though, even outside of software as a service. It is notable that Tomo Bravo sold a Denza to Nasdaq for ten and a half billion in cash and stock rather than bring that public. Morgan is notable. Kava, to your point, is going to be one that gets watched very closely later this week.

I believe it's supposed to start trading on Thursday. Real test on whether we're going to start to see this thawing, if you will, of the IPO market, especially after we've seen some what I'll call relatively successful, at least on first days and first weeks of trading, spinoffs from some of the more established companies with more established businesses, like a J&J with Kenview, for example. You need your hummus to thaw before you eat it. I mean, for sure. You don't want to eat cold. Would it be frozen before? Well, you said the market needs to thaw. It just needs to come back to room temperature.

Yeah, at least. I wonder how much, I mean, maybe it affects the overall market feel, but there seem to be a couple different things happening here. One set of rules and possibilities if you're kind of a non-tech player. But, you know, if you're if you're Ariel at Navon and you've raised two billion dollars, you need for the market to be excited. Right. Yeah, that's true. Hungry before you're going to see what you did. I'm always hungry on this show. Yeah. All right. Well, Well, one more thing for us to watch and cover closely this week. We have an appetite for it. Zillow just releasing its latest forecast for home prices. Big jump from earlier estimates.

We're going to talk to the company's chief economist about just how high home prices could still actually climb. Really high. home prices could still actually climb. Really? Higher? Well, speaking of housing, some home builders making the list of new 52-week highs today, including D.R. Horton and Pulte Group. Other names on today's list include Boeing, Carnival, and, yes, we mentioned it before, Adobe reporting later this week. We will be right back. Home values are continuing to rise while home sales are forecast to decline with these tight inventories we're seeing. That's from a new Zillow housing report.

A key read on the consumer ahead of tomorrow's inflation report and the Fed decision Wednesday. Joining us now, Skylar Olson, Zillow chief economist. Skylar, how is this possible? I mean, homes were already so expensive and then mortgage rates going up. Is it just the lack of inventory? You know, that is, you know, a big, huge, massive part of the picture. You know, when we talk about less homes coming on the market, fewer homes coming on the market now than, say, pre-pandemic, we're talking 30, 39% down just last month. So the forecast that we've recently updated is we think home prices could grow as much as 5% over the course of 2023, only two months ago before

we saw these radically low new listings numbers. We were forecasting something much more like 1.2 percent, something small. Now, 5 percent. That's on the hotter side of steady and stable. How much risk do we have in the market now with affordability being so low? People are taking on their spending more of what they're making on housing and employment's pretty high, but it doesn't always stay there. Yeah. You know, risk is an interesting kind of thing to think about even in this situation. I think because the existing homeowner has access to their preexisting low mortgage rate. They've fixed it in for decades for many of them. 70%

of mortgage homeowners have a mortgage rate below 4%. That's a low-risk environment. They've got financial stability. They've got lower monthly payments they can afford to save. They do not want to give that up and move on. That's what's keeping the new listings back so much. If we think about from the perspective of a first-time home buyer or a hopeful first-time home buyer, in other words, a current renter that wants to move on, they're experiencing much higher rents than last year. Rent probably takes up around 3% more of a median household income, that's a good reason to push forward. So there's low risk that home values will fall. And actually, when we plug in our numbers and run scenarios in our forecasting model, we can really turn mortgage rates up. And it's very hard to get prices to fall

because of what we watch new listings do. You know, we're in an environment right now. This is challenging. When I hear you talk about that with rent prices, I think about those rent prices and those shelter costs, how how big of a portion of CPI they are. We have these conversations on our air constantly that that portion of CPI, that data factors in on a lagged effect. And it's part of the reason why market bulls have been saying, hey, listen, this inflation is happening much more quickly than the data is suggesting. But when I hear you talk about high rent prices, it doesn't sound like that's the case. Has rent turned higher? Yes. Well, let's put it, you know, often we have to get pretty specific when we talk about,

you know, what is happening. So rent grew incredibly quickly over the course of 2022. Then we saw it slow down, certainly in the, you know, first kind of quarter of this year. Now rent is growing slower than a pre-pandemic place. So, you know, the pressure is off of a lot of rent markets. That's also why we've seen multifamily permits suddenly come down. But that does not mean rent is falling anymore. Rent has continued to grow. I think in terms of those kind of overarching rent inflation numbers, I think what we're seeing there, or we can start to anticipate, is that it's a bit of a good sign, not as much of a good sign as I would have wanted to hope in order to get really good confidence that inflation is going to come down and we can finally get a

break on mortgage rates. But it is something, less pressure than maybe pre-pandemic. Unlike U.S. home values, the home value picture in those wealth of a month, that's hotter than pre-pandemic. It's pretty extraordinary. It's pretty amazing. We know U.S. apartment construction's at a record pace, too, so we'll see if that continues. Skylar, great to see you.

Thanks for joining us. Thanks for having me. For much more on the housing market and the state of consumer spending, don't miss an exclusive interview with the CEO of Home Depot. That's tomorrow at 7.30 a.m. Eastern on Squawk Box. Okay, it's time now for a CNBC News update with Contessa Brewer.

Hi, Contessa. Hi, Morgan. We are learning that one person did die in the I-95 highway collapse in Philadelphia. Rescuers pulled a body from the wreckage today as they prepared part of the highway for demolition. Police say the elevated northbound lanes collapsed after the driver of a tanker truck lost control trying to negotiate a curve on the exit ramp and slammed into the wall behind the interstate, causing an explosion and a fire. And it could take months to repair the heavily trafficked highway.

Democratic Senator Richard Blumenthal is demanding to see the records related to the proposed merger between the PGA Tour and Saudi-backed Live Golf. Blumenthal wrote a letter to Commissioner Jay Monahan saying he's concerned about the Saudi government's human rights record. A Live representative declined to comment and NBC News could not reach a PGA spokesperson. Donald Trump landed in Florida this afternoon ahead of his arraignment in Miami tomorrow. A small group of supporters gathered to greet the former president as he arrived at his nearby resort. Trump says he plans to plead not guilty to charges related to taking and keeping classified documents. Morgan.

Contessa Brewer, thank you. Sure. After the break, the CEO of energy pipeline company Equitrans Midstream joins us to break down how his firm benefits from a provision in the debt ceiling deal, which has sent the stock skyrocketing in the last month. And some news on Chegg this hour. The ed tech company cutting 4 percent of its workforce, about 80 employees. It says the move is to better execute against its AI strategy. Remember, AI issues are what sent the stock down a bit ago last month after it warned chat GPT was affecting new customer signups. We'll be right back. Welcome back to Overtime. Shares of energy pipeline company Equitrans Midstream

recently seeing a surge doubling off this year's lows on the back of a key provision in the debt deal that says the completion of the Mountain Valley pipeline is in the interest of national and energy security. Joining us now in his first broadcast interview since the debt deal, Tom Karam, Equitrans Midstream CEO. Tom, welcome to the show. Thanks for being with us to talk about this. Thanks, Morgan. Thanks for having me. So this is really interesting. Mountain Valley pipeline, Equitrans is the largest stakeholder, not the only stakeholder. 21 days since passage of that deal for approval of all of the outstanding permits. We're counting down the days now. What happens when you get those approvals? Is it shovels back in the ground immediately? You recommence work?

Are you on track to finish the pipeline by the end of the year? We are, Morgan. We expect to mobilize, full mobilization, probably early July. And we have about four or five months worth of construction to complete and commission the pipeline and bring it into service. So we're excited to get back to work. We have less than 20 miles to complete, which I said would take about four to five months. And Morgan, if I could would take about four to five months. And Morgan, if I could just step back a little bit, as a company and as a partnership, we're very grateful

to be included in the Fiscal Responsibility Act. It should not take an act of Congress to construct infrastructure in this country that is necessary for energy security and reliability. But it did take an act of Congress. There's been a lot of reporting done on this idea that it was a week-long scramble to boost the project. Washington Post, for example, saying that you met with some congressional staffers to discuss how this was going to factor into the debt ceiling deal as well. I guess walk me through how this came to be within this package of legislation and the case you did make. So we started to make our case back in early 2022 when the Fourth

Circuit Court vacated our most recent biological opinion. And in some cases, we were on our second round or third round of agency permits. So we started to make our case to our elected officials in Washington. And to his credit, Senator Manchin said, wait a minute, this doesn't sound right. And he picked up the mantle to quarterback this with his colleagues and to continually make the case. And as you know, Senator Manchin proposed some permitting reform, which included specific language about MVP. And then Senator Capito from West Virginia did the same thing. And then later in the House, Representative Carol Miller proposed some legislation as well, as did Representative John Joyce. So the idea and the

concept of needing an act of Congress to complete MVP has been out there for a while. And then when Secretary Granholm, Energy Secretary Granholm, issued that public letter of support deeming Mountain Valley people on both sides of the aisle to say, you know, I think that we should take this up because it's time for this project to be completed. And we're grateful that in the Fiscal Responsibility Act, we had champions in both houses on both sides of the aisle who said the timing is right for us to be included. Yeah. I mean, the language got a lot of attention because it bypasses the courts and the judicial system to allow these permits, these outstanding permits to be approved and for this process to continue forward. I just wonder, though, whether this actually marks true, more meaningful energy infrastructure reform, if there is more appetite from both parties to see more of that happen now? So I surely hope so, Morgan. I hope that the momentum from including

some directional reforms in the Fiscal Responsibility Act and specifically MVP, that both parties can get together to put comprehensive permitting reform into legislation. Because if you think about our ability to continue to grow as a nation, generate economic opportunity and to maintain energy security, over the next 25 years, the demand for natural gas is going to increase by 20 BCF a day, almost 20 percent increase. The demand for electricity is going to increase by 150%. We will not be able to construct the infrastructure necessary to meet that demand growth unless we have comprehensive, meaningful permitting reform. So this is a clarion call to both parties, to our elected officials, to finally come together and have permitting reform for all forms of energy.

You raised some key issues and ones that I hope you will come back to the show and discuss in further depth with us. Tom Caron, thanks for joining us. Thanks, Morgan. Thank you very much. Up next, Mike Santoli is going to look at how the Fed's 10 straight rate hikes since March 2022 have been impacting financial conditions. Welcome back to Overtime. We are just two days away from the Fed's next rate decision. And Mike Santoli is taking a look at how financial conditions have been impacted by previous rate hikes. Hi, Mike. Hi, Morgan. Yeah, in fact, recently anyway, financial conditions have gotten only easier, not tighter, since the Fed has been slowing down but

still increasing the pace of rate hikes. Here you see this chart, the Fed funds target rate. This was liftoff right here in the early part of last year. And you see this financial stress index is what it's known as. As it goes up, it means that markets are getting more agitated, tightening financial conditions. It's really declined here. Now, there's a few things that go into this credit conditions, as read by the corporate bond market, volatility in the financial markets, even equity valuations is a piece of this. So the stock market strength itself is seen to be reducing the financial stress. But it makes for an interesting setup for the Fed, because their rate hikes have not

necessarily done an awful lot, at least not directly, to really impinge on the economy broadly and certainly not on financial market conditions right now. They're probably OK with where we are for the moment, but it does support the argument that they will try to keep rates elevated at or near current levels, maybe take them up slightly more, but keep them there for a while because they do believe they need to have some restraint on longer-term inflation

and maybe even bring the economic growth rate down a bit more, Morgan. All right, Mike Santoli, thank you. Up next, the CEO of OnSemi on how Tesla's new charging partnerships with Ford and GM could impact that chipmaker's growth in the industry. When we come back. Welcome back.

This is the first trading day since NASDAQ announced that chipmaker OnSemi is joining the NASDAQ 100 index next Tuesday. OnSemi is making a big push in silicon carbide chips for intelligent power and sensing. And I spoke with OnSemi CEO Hassan El-Khoury about the news that Ford and GM are joining Tesla's supercharger network. I asked whether it's good or bad for his business that Tesla is consolidating so much, well, power. Having the agreements and the collaboration between Ford, GM, and Tesla is actually a positive for EV adoption in North America. I think that is very important in the journey towards that 50% EV penetration by the end of the decade. It just adds credibility to the outlook that we have in the market and supports the fact that with the energy infrastructure, back to what I mentioned, the storage and deployment of charger EVs are happening. And that's the interdependency I

talked in the sustainable ecosystem. Morgan, we're just beginning, I think, to get a sense of who the winners and just, you know, share maintainers might be as we get these shifts in how the systems work to support power generation and charging, as well as just the new drivetrain across EVs, the digitization of the car. Yeah, which is fascinating. You know, it takes me back to the conversation we just had with Equitrans CEO, too, and the fact that you're just going to see as EVs become more adopted, as you see more manufacturing, more production, more of these charging network partnerships, it's going to mean more energy consumption as well with Global Foundries and Lockheed Martin, actually, the weapons maker, announcing a partnership as well to manufacture more chips for more sensitive national security-related work

and secure more of that supply chain, too, because, as we know, there's the CHIPS Act and there's all of these different dynamics at play with the decoupling between the U.S. and China and just, in general, a lot happening in the sector. Does Lockheed Martin also have a partnership with NVIDIA? I have to double check. I want to say they do.

I have to double check. Yeah. All right. We're going to have much more on the outlook for chip stocks tomorrow when we're joined by AMD CEO Lisa Su. That's going to be a first on CNBC interview. Don't want to miss that. Up next, what tomorrow's Fed meeting and the latest reading on inflation could mean for the market and your money.

And we're going to have another check on Oracle right now as we head to break. It's holding on to those post-market gains. You may even get a little bit more. It looks like, oh, no, no, it's up 3%. It had been up a little bit more than that. We'll see what happens when the call kicks off. Top of the hour guidance is on the call. Overtime, we'll be right back.

Welcome back to Overtime. There is plenty of economic news for investors to digest this week. Tomorrow, we'll get the latest read on inflation with May's CPI report. We'll see if the Federal Reserve decides to skip or hike on Wednesday. Here's what Goldman Sachs CEO David Solomon said earlier on Squawk on the Street about inflation and rates. I'm not referring necessarily to this week, but I do think inflation is a little bit stickier. And, you know, I do think that in the distribution of outcomes, there's a reasonable chance that rates do go higher. I'm not saying they're definitely going to go there, Sarah, but I think you've got to be prepared for that.

Well, joining us now, Tim Dewey, chief U.S. economist with SGH Macro Advisors. Tim, welcome to the show. Great to have you on. Thanks for having me. Pause, skip, hawkish hold. It's really the summary of economic projections, the SEP and the dot plot, isn't it? That's going to be a big part of how I think the Fed's going to want to signal that this is a skip and not a pause. If it's a skip, then really the expectation is you're going to want to hike in July. And for that to happen, if you know you want to do that, it really needs to show up as a small increase in the dots,

a 25 basis point increase in the SEP median. Yeah. I mean, you show up as a small increase in the dots, a 25 basis point increase in the SEP median. Yeah. I mean, you're something of a Fed whisperer. What do you expect in terms of forecast and what do you expect in terms of messaging from Powell this week? Well, I think the forecast would be generally supportive of a future of another rate hike in the sense that we should get a slight increase in the core CPI inflation to 3.8%. I expect that unemployment will be revised downward, the unemployment forecast, and the growth forecast should be revised upward. So I think the mix here is pointing toward another rate hike, and it's just an issue of strategy and timing for the Fed.

But the market is counting on a pause for now. When we look at the CPI report tomorrow, what has to be in it to give the Fed kind of that permission to pause that the market is expecting the Fed to get? Are there particular lines you're going to be looking at there? Yeah, so the Fed, I think, has tried to set this up in such a way that the decision is kind of invariant to the data, that it's really not a data-driven outcome. The idea of a skip or a pause or however we want to call it is that you're giving time for the data to tell you a story. Do you need more rate hikes or not? Are you sufficiently restrictive? So I think the Fed's been trying

to say, look, we're moving toward a skip strategy. The data here is not as important for this meeting as we thought. And really what it's about, what the Toronto CPI report is more about trying to say, OK, this is evidence that we're going to need to keep going in the future, that we're going to need to keep going in July. What if it's a scary story that we start getting tomorrow? I mean, aren't there some numbers that can come in kind of hot, right? And then the Fed's got to hike sooner? Yeah, I think that creates a problem for them. And that's going to create some optionality for the hops to move a little bit more aggressively. But, you know, those on-site cases, you know, I think that's going to really,

really make it hard for the Fed to skip. But I think they're really trying to skip here. Yeah, we've got this Morgan Stanley Financials conference going on. You've had a number of regional banks come out with pretty downbeat commentary and forecasts today, whether it's KeyBank or Truist or Citizens or others. How much does tightening lending standards and credit in the regional banks, as we've seen it playing out now in real time after SVB and all of that collapse. How much is that going to factor in here in the coming weeks, in the coming months? Yeah, I think that's a big factor in why we're getting in the position where we want to pause here. It's just simply the case that the Fed is not as confident as it was, you know, two months ago, that it can separate out the impact of monetary policy from the impact of the financial

stability. And Paul basically said that a couple of weeks ago, and Jefferson followed up on that. And I think that was your signal here that the Fed is seriously looking at, yeah, we need to skip here in order to give banks time to adjust. So I do think that commentary is, in fact, critical in helping establish this skip story. All right. Tim Dewey, thanks for joining us. Thank you. Well, that Federal Trade Commission filing and the Microsoft and Activision attempted merger is out. Steve Kovach has it. Steve. Yeah, John. So the FTC filing that injunction in San Francisco court, I got it right here.

It just came in basically asking for an injunction blocking Microsoft from completing its transaction or its acquisition, rather, for $69 billion of Activision. And the reason they cite for this, John, is they're saying, I'll just read you straight from the filing. They said a preliminary injunction are necessary because Microsoft and Activision have representative that they may consummate the proposed acquisition at any time. So we know there is a timeline on this that in mid-July that they have to complete this transaction by with Activision. And the FTC here is alleging that Microsoft is just going to go ahead and do it anyway, despite what the FTC is suing over and despite the U.K. regulators rejecting the deal. I asked Microsoft about that. No comment directly on that yet.

There have been some media reports about this, John. There's one in the New York Post saying Microsoft might do this, but largely it's just speculation around this. So this one is a little odd right now, so I'm going to dig for some more for you, John. All the indication is that both parties still want this deal so they could extend it beyond that deadline, right? Yeah, but which would cost more money for Microsoft to extend it right now.

So there's that July 18th deadline. Unclear how much that would cost Microsoft in order to extend it and work through these legal issues. But it would cost more money instead of just doing it right before that deadline. Steve, thank you. Sure thing. Morgan, fortunately, Microsoft still has a little more money. Microsoft has a little more money, and this really becomes a lightning rod, right, when regulators, by the way, not just here in the U.S.,

but in Europe and other places as well, have set the bar much higher in terms of many of these deals getting done. We've seen other deals under other industries scrapped. So this is going to be one to continue to watch. That's why we're watching it so closely. And we knew Lena Kahn was going to do this. This is her thing.

All right. Well, that's going to do it for us here at Overtime. Fast Money starts now.