Closing Bell - Closing Bell Overtime: Arm CEO On AI Demand; American Giant CEO On Walmart Partnership 6/24/24

Starting point is 00:00:00 Well, big selling for big tech. The NASDAQ finishing at session lows down about a percent. The S&P 500 finishing at session lows as well. But the Dow eking out gains. We saw a pullback for NVIDIA. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Coming up on today's show, the CEO of Chipmaker Arm Holdings, which has doubled this year, is going to join us for our first on CNBC interview as the company wraps up its first day of trading in the NASDAQ 100. Plus, NVIDIA CEO Jensen Huang speaking at partner Recursion Pharmaceuticals Investor day this afternoon. We will speak with Recursion's CEO about news from today's meeting and how the bio company is using AI for drug discovery. And TIAA's wealth management CIO

Starting point is 00:00:54 says we're entering a new phase for equity. She's going to join us to explain why investors need to be more risk aware in the second half of the year, which is right around the corner. Let's begin with today's action and this bifurcated market. As the Dow ends higher, the Nasdaq pulls back. Joining us now, Emily Hill of Bauer Sock Capital Partners and Richard Bernstein of Richard Bernstein Advisors. Good to have you both on this afternoon. Richard, I'm going to start with you today because, yes, we saw some profit taking, particularly in the mega cap tech space.

Starting point is 00:01:26 But we have also seen more breath in the market today. Case in point, the Russell finishing Russell 2000 finishing higher and the Dow finishing higher as well. With most of the sectors in the S&P actually in the green, is this the start of something meaningful as investors start to look to other parts of the market for the second half of the year? Or is this knee jerk, given the fact that we have had some softer economic data and perhaps there is just this repositioning after a strong start to the year? Well, Morgan, it's good to be with you again. I think we should all hope that this market broadens because the fundamentals are broadening. You mentioned the economy, but obviously what's more important to the stock market is corporate profits. And the reality is right now that just in the S&P 500, there's about 160 or 170 companies growing earnings 25% or more.

Starting point is 00:02:18 So the question that every investor should be asking is, what is so unique about the Magnificent Seven, about this narrow leadership, if so many companies are growing? I think what we're starting to see, slowly but surely, is the market starting to appreciate that there is nothing unique about this small set of companies. The profits growth really is revving up, and this is actually quite normal in a period of profits acceleration. So, Emily, I mean, I would argue we had slightly more dovish commentary from the likes of Daley and Goolsbee today signaling perhaps that you're seeing more softening in the labor market. And while they didn't talk specifically to rate cuts

Starting point is 00:02:57 and putting those back on the table, did signal that perhaps it's time to start rethinking this process from a Fed point of view as well. If you continue to see the softer economic data into the second half of the year and you continue to see the estimates for earnings for U.S. equities move higher in the second half of the year, can both coexist? I would expect the Fed to cut rates once. They have become very adept at signaling what they're going to do. They've said they're going to cut rates once, and I expect that they will. Inflation data, I think, by the end of the summer especially, is going to continue to surprise

Starting point is 00:03:35 positively. And so I think we are actually set up for a very good situation for markets. We just ended a very strong earnings season. The profit recession is over. Yes, economic data is softening slightly, but that's what the Fed wants to see. It's going to enable one, you know, potentially two, but most likely one rate cut in the fall. And I would say overall, the bull market as a result is going to be intact. And I think Chairman Powell has pulled off a soft landing, maybe a hair too soon to declare victory. But, you know, his primary fear was that he would end up with another Arthur Burns who left the Fed in 1978 amid runaway inflation and his reputation was in tatters.

Starting point is 00:04:18 And I think Powell feared that. But that, you know, I think that this has been a very successful Fed. And as a result, I think they're going to we're going to continue to see higher momentum and a soft landing. OK, Richard, you I see you noting that junk bonds and large cap stocks have both been outperforming, which is kind of weird. So how much of it do you think is because large caps this time around have been both a safety play and an expression of risk appetite? Well, that's an interesting question, John, as to whether they're both. But the relationship between sort of junk stocks, if you will, small cap stocks and junk

Starting point is 00:04:56 bonds goes back decades. I mean, I first learned about this in business school 35 years ago, I'm ashamed to say, but something like that. And it's held pretty tight except for the last couple of years. Last couple of years, you've seen junk bonds do very well. You've seen credit spreads narrow, but you've seen large caps significantly outperform small caps. That is truly unusual. I mean, amazingly unusual. There's many ways you can think about this, right? You could say that the large caps are in a bubble and that the junk bond market has it right because profits are improving and the stock market doesn't appreciate that. You could say the stock market's right and we're heading for one heck of a credit event. I kind of think that's probably not going

Starting point is 00:05:40 to happen given that we're not seeing any problems in the credit markets right now that would lead you to believe we're seeing something of that magnitude. Or you can say that there's a speculative fervor in perhaps both markets, that maybe we're seeing a speculative fervor among large caps, that we're seeing a speculative fervor in the junk bond market. That's a possibility. And that maybe unusual parts of the equity market will be safe haven, will be defensive. That would be something like small caps or emerging markets. And you might say, well, that sounds ridiculous. When are small caps and emerging markets defensive? The answer to that is after the tech bubble. After the tech bubble, they were both highly

Starting point is 00:06:20 defensive sectors of the equity market. So then, Emily, how do you see it? Because you say that mega cap valuations are stretched. You particularly say NVIDIA is ludicrous at this valuation. But small caps have also been a third rail. So when you say you see positive things for the market, what part of the market should investors look to to play that? Seeing massive returns to scale. And I think those returns to scale are going to continue. So I do not think large caps are in a bubble. I think valuations are stretched. But these companies, the Mag7 and NVIDIA, these are very profitable cash machines with innovative cultures.

Starting point is 00:07:03 And we now have governments that effectively been neutered and their ability to regulate. So that scale is going to continue to be very powerful. And conversely, the small cap universe is very different than it was 10 years ago. More and more companies partly due to private equity are not going public until they're mid-cap companies. Small cap universe is laden with debt-ridden companies, with profitless biotech companies, with broken IPOs, with value traps. It's a very different Russell 2000 than it was 10 years ago. And part of the reason is because these larger companies have such scale that they're buying the most profitable companies before they have a chance to go public in small cap. So I think that discount that we're now seeing of small cap versus large cap is going to persist. And I do not see small cap as defensive.

Starting point is 00:07:57 Wow. OK. Interesting way of looking at that as well. Emily, Richard, thanks to you both. And now let's turn to CNBC Senior Markets commentator Mike Santoli, who's looking at the potential rotation out of stocks and into bonds. Mike? Yeah, well, John, we're looking to see if we have the makings of something like that as we get toward the end of the quarter and of the first half. June sometimes is a pretty big reallocation moment for big pension funds. A lot of sort of nonprofits have a fiscal year,

Starting point is 00:08:25 things like that. Well, here's the quarter to date performance of the total stock market against the total bond market. It looks pretty much the same on a total return basis if you include yield. So, you know, talk about a three percentage point out performance of equities relative to bonds. If you wanted to rebalance back to whatever your initial mix was, 60-40 or something else, you'd probably be lightly lightening up on equities and reallocating into bonds. Maybe that was part of the bid in longer-term treasuries today. But this isn't really a very wide divergence to the point where you'd expect it to be the tail wagging the dog of the market. Just kind of a slight push around the edges, perhaps.

Starting point is 00:09:04 Now, in terms of other intermarket relationships, take another look at Nvidia relative to Bitcoin. Since the middle of last year, it really had been lockstep for a while. Then you got Nvidia's earnings report in this past quarter. It just went vertical, obviously, and really diverged from Bitcoin for the first time in this time period anyway, and so we're starting to see them not exactly converge, but slightly kind of close that gap. Of course, over time, this isn't going to stay forever in terms of being this lockstep. But it is interesting how both of these instruments seem to be, again, feeding off the same kind of energy flow, the same investor cohort, John.

Starting point is 00:09:41 Well, given, Mike, that you're poking around in the same territory, I want to ask you about what Richard Bernstein was just saying, how junk bonds and junk stocks traditionally have moved in the same direction at the same time, but are it now, given that first chart, what do you think is going on? It is interesting. I mean, I think high yield corporate debt, which is the junk bond index, I think the market's being pretty rational in saying that in a high nominal growth environment with profits doing really well, the kinds of companies that have public high yield debt are well positioned to cover those debts and default rates don't look like they're going to be surging. So that's a rational decision. At the same time, you're capitalizing the large cap stocks that have really great balance sheets and are kind of

Starting point is 00:10:25 beneficiaries of a higher yield environment relative to small cap stocks. So I think they're kind of separate dynamics that are going on at the same time. I understand what he's saying. In the tech bubble, you had a similar dynamic and eventually you did have credit events that really did undercut a lot of those trends and created this huge spill effect in early 2000s. I don't know that I consider it, though, a huge anomaly at the moment, mostly because small caps seem to be more impaired because they have more floating rate bank debt. One of the strange things about this cycle is high yields have been performing really well through a Fed tightening cycle. Everything has been doing really well through a whole 500 basis point Fed tightening cycle. That's the part that's been odd for, you

Starting point is 00:11:10 know, the better part of a year, Morgan. Yeah. Mike Santoli, great points. As always, we're going to see a little bit later in the show. Arm Holdings, one of the worst performers today in the NASDAQ 100. It's the first day that it is actually a part of that index. Chips in general selling off to start this week. The SMH ETF having its worst day in two months. But ARM is still up nearly 200% since its IPO last September. It has doubled this year. Joining us now is ARM CEO Rene Haas. Rene, it's great to have you on.

Starting point is 00:11:39 Thanks for being here. Thank you so much. So you did just start trading in the NASDAQ 100. You went public back in September. We just talked about some of the stats, but the valuation of the company has tripled since that IPO valuation in September. Has the market reaction surprised you? You know, I don't know that I would say I'm surprised by the markets. I would say in general, we had a lot of confidence about our business going forward, particularly given the fact that we have such good visibility relative

Starting point is 00:12:11 to our business model that when we reentered the public markets, we felt really, really good about our financial performance. And happily, we've been able to consistently prove that. Okay. So we know you're big in the mobile market. You're expanding further into PCs. You're working with not just the hyperscalers, but pretty much every one of the mega cap companies that are tech companies that are investing lots of money into custom silicon right now. Just last week, Masa-san of SoftBank, which still owns the vast majority of Arm, laid out his vision for the future of AI investing and talked a lot about the opportunity in robotics and data centers, autonomous driving and the role that ARM could potentially play in that. How do you see this new AI era evolving? And what do you see as the greatest growth opportunities for ARM in it? Well, you know, ARM is the foundation of every electronic device that we use every day,

Starting point is 00:13:02 whether it's your automobile, obviously the data center when you connect to the cloud, your PC, your mobile phone, security cameras, they are all ARM-based in some way. Seventy percent of the world's population uses ARM. So when you think about the fact that we have such a broad reach in the platform and AI is going to find its way into literally every device I just mentioned, ARM is going to be the center of AI, undoubtedly. So we are very excited, candidly, about all those markets I just mentioned, because we're seeing strong demand for AI capability in each one of those. Rene, good to see you. So part of the case that you're making and that you made on the last earnings call is that your licensing revenue is going to accelerate because AI software is running ahead of hardware. All kinds of upgrade cycles are going to have to drive in order for the hardware to catch up with people and the AI that they want to run.

Starting point is 00:13:56 How should we expect to see that play out as investors are watching from the sidelines? Is it phones first and these AI PCs? I mean, things like cars and washer dryers, they have longer upgrade cycles. It's happening really fast, John. If I think of mobile phones, for example, right, when Gemini was introduced last fall, the mobile phones that were designed to run Gemini, they didn't know about Gemini. That was two years prior to the product being designed that Gemini came out. So what we're seeing from whether it's phones or PCs or automobiles or data center, everybody's trying to future-proof because everyone knows that these AI capabilities are going to come to these devices. They undoubtedly need more and more

Starting point is 00:14:43 compute capability. They need to be power efficient. That's all good for ARM. And I think something that sometimes is lost on folks is that this AI capability is being added on to the functionality that's already in these devices. It's not like you can throw away iOS or Android or Windows. You're still running those workloads. But now on top of that, you're running AI. So that is really just causing an insatiable demand for all things compute. Yeah, but where should we expect to see it? In part because, well, this just drives the premium end of the market. We see what Apple is doing with the high-end phones being the ones that have the AI capability. ARM is a mass market royalty and licensed player. Are those capabilities going

Starting point is 00:15:27 to affect the broader ecosystem and drive more licensing revenue across the whole thing, or mainly just the premium side? I think so, John. I think so because the premium market is typically the market first that drives these features. But these AI capabilities, people are going to want them in the mid-range and even in the low end. And the phone market, for example, as you mentioned, iterates very fast annually, as does PCs. I expect over the next number of years that the vast majority of PCs will be what's called AI PCs, meaning they have to have some level of capability. So it starts in the premium segment, but waterfalls its way down.

Starting point is 00:16:03 There's been some talk that perhaps you would start making your own AI chips that you would sell out into the market as well. Can you confirm that? Masa was asked the same question last Friday, and I can't comment on any future roadmap products, unfortunately. OK. Rene Haas, thanks for joining us. CEO of Arm. Thank you. After the break, stocks are sitting near record levels,

Starting point is 00:16:26 but TIAA's Wealth Management CIO is warning investors to be more risk aware in the second half of the year. He will join us to explain why. And later, NVIDIA shares pulling back hard today, but partner Recursion Pharmaceuticals is jumping after its investor day. The company's CEO will join us to break down how recursion is using ai to speed up drug research and development overtime is back in two start of this year we saw inflation kicking back, and we've been trying to figure out and determine from the data, is that a sign of re-overheating, or is that just a blip?

Starting point is 00:17:14 I think if we get more months like what we have just seen in the last month on inflation, coupled with slowing conditions in some of the other parts of the real economy, then you would have to start questioning, should we remain as restrictive as we've been? That was Chicago Fed President Austin Goolsbee earlier on CNBC with some cautious words on the economy. San Francisco Fed President Mary Daly echoing similar concerns this afternoon, saying at this point, inflation is not the only risk we face. Joining us now is Neil Mukherjee. He is the chief investment officer of TIAA Wealth Management. Neil, great to have you here. So what do you make of it? I mean, higher for longer to get down to 2 percent, or is that just more job-warning? Well, I think that,

Starting point is 00:18:03 generally speaking, the U.S. economy should continue to slow down in the back half of this year. And the disinflation process should play out. So I agree with the comments, which is the Fed is flying at a pretty high altitude at the moment. And they need to move to a slightly lower altitude because as inflation is coming down, and if you stay at that level of interest rates, you're just becoming much more restrictive. So the Fed is now shifting focus from fighting inflation to worrying about growth on the margin. They're not there yet, but I think at some point over the next few months, we'll talk much more with conviction about the Fed cutting rates. So at this point, talking about slowing down is a good thing, would you say? Because a couple of weeks ago, there were some jitters in the

Starting point is 00:18:45 market that slowdowns might not be so great. Yeah, it's interesting. The Fed obviously pivoted pretty hard back in December. That led to a meaningful financial conditions easing. I think that contributed to inflation firming up. Now we're beginning to see the slowdown that we had been expecting. I think almost a year back, many people were calling for a major slowdown to take place. So you're beginning to see the labor market cool down. You're beginning to see manufacturing again cool down, maybe even falling back into a contraction. And you're beginning to see mixed signals in the labor market, which is interesting. And the Fed is paying very close attention. The Fed knows that their interest rate policy is a blunt tool, and it's way, way lagged, the impact it has on

Starting point is 00:19:25 the economy. So this is the right time to start preparing the market for eventual rate cuts. I think July is early. September is in play because the Fed will look at three inflation prints between now and then. If the data breaks in their direction, they will cut rates. One more thing I will say, it's not just the inflation data they will be looking at. They want to see the economy weaken a little bit as well, because they want to be absolutely sure that inflation doesn't come back and reaccelerate. So these two conditions, the data on inflation moderating and the economy weakening, are the perfect conditions the Fed is looking for.

Starting point is 00:19:58 Of course, we get that first inflation read this Friday with PCE, which we know is the Fed's preferred inflation data. Just to go back to that, though, we also know that labor data can be a lagging indicator and that that can change very, very quickly. So what would you be watching to know that this is just a healthy, cool-down, softening of the economy and not something deeper and harsher? It's a really good question, and I think it's a question that many people will be asking over the next several, several months. I think initial jobless claims is the one data that one needs to look at. Obviously, that has started to move higher a little bit now. A modest increase in claims will tell us that the demand for labor is cooling,

Starting point is 00:20:39 people are not voluntarily quitting their jobs as much as they used to. That's a healthy slowdown in the labor economy, and the balance is taking place between supply and demand. Obviously, if we go up to like 300 in a hurry here, I think the Fed will be very concerned about the growth side of the equation very quickly. Now, throw an election into this process. We get this first debate between the two presidential candidates later this week. An expectation, at least from some on Wall Street, that you could start to add some volatility to the market here as well. How are you factoring that in? And if you take this whole big picture you've just laid out, what does that mean in terms of how you're invested through the second half of the year? Yeah, it's a great question. So elections, interestingly, hasn't really factored into asset

Starting point is 00:21:18 prices as of yet. That could change, like you said, next week or this week. I would say that investors should not change their portfolios based on a view they might have on the elections or a particular candidate who might come in. I would just say that keep the focus on the fundamentals. The fundamentals are still pretty decent for risk assets. When I go back and look at the last 24 presidential elections, go back to 1928, equities on average has produced a return

Starting point is 00:21:42 of about 10% in those election years. And sometimes clients ask us, how does that happen? Because everything seems so uncertain during election years. And the reason that happens and equities can continue to grind higher is because equities ultimately revert back to the fundamentals. And the fundamentals that the equities look at are corporate earnings, economic growth, productivity, innovation, and standard of living. When those things move up, equities tend to move up. And I still think that over the next three to four years, which is our investment horizon, equities are in good shape. Neil, thanks for joining us. It's great to have you here on set. Thank you. Well, we have a news alert on chipmaker Wolfspeed. Pippa Stevens has

Starting point is 00:22:20 those details. Pippa. Hey, Morgan, That stock down 2% in extended trading after the company announced that it experienced an equipment incident at its Durham 150mm device fab facility that resulted in a temporary capacity reduction while the incident was being remediated. The company said that production has since resumed and they do expect the capacity utilization to return to previously targeted levels by August. This, of course, the latest incident at this facility that has been plagued by operational issues. In terms of guidance for the first quarter, the company said there could be a potential negative impact to fiscal first quarter 2025 revenue of approximately $20 million. Once again, that stock down 2%. Morgan? All right, Pippa Stevens, thank you.

Starting point is 00:23:06 When we come back, two big movers in the pharma space today. The CEO of Recursion joins us with the big takeaways from that company's investor day, where NVIDIA CEO Jensen Huang is a featured speaker. Plus, we're going to tell you why shares of $28 billion biopharma company Alnylam surged more than 34% today. Overtime, we'll be right back. Welcome back to Overtime. Alnylam Pharmaceuticals closing up nearly 35% today after announcing positive trial results for a drug that treats a heart condition impacting about 300,000 people worldwide.

Starting point is 00:23:51 The drug cut the risk of death and heart incidents by around 30% after three years. Full results of the trial won't be shared until later this year, but for now, this is a huge win for Alnylam and could take them from a money-losing biotech to a profitable company. Be sure to catch Alnylam's CEO coming up on Fast Money 5 p.m. Eastern in just a bit. Well, sticking with pharma, Recursion Pharmaceuticals getting a pop today.

Starting point is 00:24:16 The biotech company announcing guidance on seven clinical readouts at its investor day, as well as updates on its partnership with Bayer. NVIDIA is also a partner and an investor. CEO Jensen Huang will be speaking later at today's event. Joining us now in an exclusive interview, Recursion Pharmaceutical CEO Chris Gibson. Chris, it's great to have you back on the show. You joined us almost a year ago, last July, when it was announced that NVIDIA was going to be making a $50 million investment into the company. You were going to be working with the company. Shares soared in response to that announcement. As we flash forward here to your investor day today,

Starting point is 00:24:52 walk me through some of these key announcements that you made today and why this is an inflection point. Well, Morgan and John, thanks for having me on. It's great to be back. Yeah, we have given updates today around our pipeline, our partnerships, and our platform. On the pipeline side, we've given guidance that we're going to be giving seven readouts in the next 18 months in our clinical programs. Five of those will be efficacy readouts, which is what everybody's going to be looking for from recursion. On the partnership side, we announced that Bayer, one of our close partners, is actually going to be using one of

Starting point is 00:25:23 our LLM software tools called Low as part of the infrastructure for our partnership. And I think this really represents one of the first times a large pharmaceutical company is going to be adopting these kinds of tools, these AI tools, into the way they discover and develop medicines together with us. And then, as you mentioned, Jensen is going to be joining us. They've been an incredible partner for the last year and even before. And we just announced a few weeks ago that we are now operating the fastest supercomputer in all of biopharma, Biohive 2. NVIDIA was a huge part of that. And he's going to be joining me on stage here in Salt Lake City in just a few minutes so we can talk to investors and analysts about how critical it is to bring together both tech and bio for this next generation of

Starting point is 00:26:06 biopharma. And we have so many conversations on the show about the fact that biotech is really sort of one of the first real areas where you're going to see some of these new generative AI applications realized, whether it's the supercomputer or some of the other products you have, this partnership with Bayer, for example, what does it do? What's the value proposition? And what does it realize being able to have these applications in the mix? So we've been able to demonstrate that using these tools, we can roughly 3x the speed of discovering and developing medicines towards the clinic and dramatically reduce the cost. So we're really scaling and making discovering and developing medicines more efficient. But ultimately, the most

Starting point is 00:26:47 important lever is going to be improving the probability of success because, as we talked about last time, Morgan and John, 90% of drugs that go into clinical trials today fail. And that's despite incredible scientists dedicating their entire career to advancing these medicines. And it's because biology is so complex. And machine learning and AI are the right tools when you bring the right data and the right compute to bear to help us make sense and really decode biology. And when we do that, we think over the coming decade, recursion in companies like us will be able to demonstrate an increase in the probability

Starting point is 00:27:19 of success. And that's ultimately the lever that everybody wants to see pulled. But Chris, it's really, the jury's still out, right? Because we're talking about sort of money balling biopharma, like being able to get a measurably better result, bang for the buck using AI. And we're still not clear whether and how that actually emerges, right? Absolutely. And that's why we're here running the experiment. We think somebody's got to go first. Somebody's got to take these medicines into the clinic,

Starting point is 00:27:48 and we're going to have successes and we're going to have failures. But ultimately, we're going to learn from both. And I think when you look back at a company like Recursion in five or 10 years, it's going to look like this was all so obvious. It was going to look like this was the way it was always supposed to go. But somebody's got to be first. Somebody's got to pioneer. And we feel like we're the company that's doing that for this new tech biospace. So what's the greater opportunity for you here in the near to medium term? Is it your own pipeline where you're using these technologies to make your own drug discoveries? Or is it basically industrializing this process for other companies?

Starting point is 00:28:23 Well, I think both, actually, Morgan. So we have these seven programs that are going to read out over the next 18 months, but all of those are focused in relatively small areas of biology. They'll affect hundreds of thousands of patients, much like the Alnylam program that you just talked about. And that's really important. But with Roche Genentech, with Bayer, we're going after some of the largest, most intractable areas of biology, things like neuroscience, where there have been failure after failure over the past decade. And so we think over the medium to longer term, those partnerships might have a bigger impact on society.

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Starting point is 00:39:28 Something that people are going to want to see taken forward. Something that people are going to want to see taken forward. Something that people are going to want to see taken forward. Something that people are going to want to see taken forward. Something that people are going to want to see taken forward. Something that people are going to want to see taken forward. Something that people are going to want to see taken forward. Something that... It allows things like the vast majority of products coming to the United States to not get inspections. That has implications for fentanyl coming into the country.

Starting point is 00:39:51 It also has implications for things like as we try to enforce bans on Xinjiang, the far western province in China that is embroiled in massive human rights abuses. Very hard for us to control whatever's coming into the U.S. market that way, as long as that the the overall price of that product is under $800. Companies like Amazon benefit massively from that. It hits manufacturers really, really hard. Both Trump and Biden have made indications that they're looking at de minimis. I hope that they close it. It's an easy way to begin to level the playing field between us and our Chinese competitors. The same does not hold true for me.

Starting point is 00:40:30 If I want to ship my product into China, I get hit with really hard tariffs. So that's a simple one that would make the playing field a bit more easy. And I'll say this, that if we could just get a bit more even playing field, I'm betting on the American worker. Their ability to respond to this is phenomenal. We just need a more level playing field than what we have today. And right now, it is not level. Well, we'll leave it there. American made from what's American grown. Bayard Winthrop from American Giant.

Starting point is 00:40:52 Thank you. Just in time for America's birthday. Well, UBS is shipping out one of its businesses to a rival for much less than it paid for that unit nine years ago. And it's sending shares of the buyer sharply higher. We've got those details straight ahead.

Starting point is 00:41:20 Welcome back to Overtime. UPS closing higher today after announcing the sale of its Coyote logistics unit to RxO for a little over a billion dollars. UPS bought Coyote for $1.8 billion back in 2015. The acquisition would make RxO the third largest player in freight brokerage in North America. So a big move for that company. this is consistent with UPS's management's strategy of focusing on core small package and reallocating capital to higher margin and less cyclical segments like health care. For RxO's part, the deal is expected to be immediately and significantly accretive to its adjusted diluted earnings per share and adjusted free cash flow.

Starting point is 00:41:58 Today was the best day ever for shares of RxO, which finished up 23 percent. And speaking of delivery companies, will FedEx deliver for investors when the company reports earnings tomorrow? That's next. Welcome back to Overtime. Cruise ships and shipping, a pair of big earnings on Wall Street's radar tomorrow. Carnival reports before the bell, and we'll get FedEx results right here on Overtime. Investors will also digest the April Case-Shiller Home Price Index and the June Consumer Confidence Report expected to fall slightly from May. Yeah, there's going to be a lot to watch for that has outsized impact potentially, including some of these earnings reports we get this week, including FedEx. I mean, for FedEx specifically, cost cuts, this drive program they have,

Starting point is 00:42:50 consolidating the express and ground companies, what all this means for margin improvement, what they're seeing in terms of volumes. But even more broadly from FedEx, the read-through to the global economy and things like retailers and semiconductors and some of these parts of the market that are goods that they move around the world. It's been a lot of cost-cutting. Those results have been driving the stock, it seems, more than any top-line impact. Just how well are they doing at driving efficiency? And we're going to have to see what they say in overtime tomorrow.

Starting point is 00:43:24 In general, freight market's been pretty soft, but transports were the outperformer in a mixed day for trading today for the major averages. Yes, indeed. That's going to do it for us here at Overtime. Fast money starts now.

Closing Bell - Closing Bell Overtime: Arm CEO On AI Demand; American Giant CEO On Walmart Partnership 6/24/24

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