Closing Bell - Closing Bell Overtime: Arm Files For Its Highly Anticipated IPO; Getting Ready For Nvidia’s Report 8/21/23

Episode Date: August 21, 2023

Tech was the outperformer today, powering the Nasdaq higher. Ned Davis Research’s Ed Clissold and AlphaSimplex’s Kathryn Kaminski break down the market action. Bertha Coombs reports on Teva’s price fixing settlement. CFRA analyst Keith Snyder gives us the top investor takeaways from Zoom’s earnings. Ben Reitzes, Melius analyst, previews this week’s Nvidia’s report and why the market is watching it so closely. Plus, Richard Haas on China’s economy and MKM’s JC O’Hara on the technical signals from the 10-year. Arm filed for its IPO.

Carl, thanks. Well, you got your scorecard finally on Wall Street, but winners stay late. Welcome to Cl as that country cuts a key interest rate a little bit to try to spur its economy, well, quite a bit. Let's see. Our market panel is ready. Joining us now, Ed Clissold from Ned Davis Research and Katie Kaminski from Alpha Simplex. But before we get to you guys, we've got some breaking news on Teva Pharmaceutical. Bertha Coombs has the story. Bertha? John, the Justice Department announcing a deferred prosecution agreement with Teva Pharmaceuticals and Glenmark Pharmaceuticals this afternoon to resolve charges of price fixing involving the generic cholesterol drug pravastatin. Under the criminal antitrust agreement, Teva will pay $225 million in a criminal penalty, the largest ever for a domestic

antitrust cartel, and donate $50 million to a humanitarian group. Glenmark's U.S. division will pay a $30 million criminal penalty. But in an unprecedented move, both companies will be required to divest those product lines, sell the businesses within three months under the supervision of the DOJ, and they will be prohibited from entering into the pravastatin market in the U.S. for five years. As part of the agreement, Teva also admitted to participating in price fixing on two other drugs, clotramazole for skin infections, and tobramycin used to treat cystic fibrosis. The deal's resolve, an indictment brought three years ago

involving seven companies in all, and with today's fines, John, the group has collectively agreed to pay $680 million in criminal penalties. Back to you. Bertha, what background can you give us on this? I'm looking at the chart on Teva after hours. It kind of went up and down. Now it seems to be headed down a bit. It spiked a bit since the beginning of August when it was more in the 825 per share range. Now it's up

around 950. Was this expected? Is this good news? Or is this perhaps more than expected? It does resolve the case. This is something that has been pending and out there. They were charged in August of 2020. And if they had gone to trial and if they'd lost, they would have been prohibited into doing any business with government plans. That's Medicare or Medicaid. So that would have been even worse. But, John, it just speaks to the fact that you are seeing pressure on these drug makers, whether they are the branded drug makers who next week will learn which 10 drugs will be the first to be negotiated under the IRA by Medicare, or in this case, the generic pharmaceutical makers, people are fighting back over what they perceive as overly high prices on drugs, either on the legislative, the regulatory,

or in this case, the antitrust front. All right. Bertha Coombs, thank you. You can see that stock down just over a percent and a half. Let's get back now to our market panel. Ed Clissold from Ned Davis Research. Katie Kaminsky from Alpha Simplex. Guys, welcome.

Katie, right before noon in today's trade, it seemed like things changed. The 10-year above 434? I think that's what's so exciting today. I mean, really, it was a huge day for the Treasury market. And we're seeing a positive return in the stock market, something we didn't see last week. What is interesting for us is we think rates are going to be higher for longer, and maybe the stock market's okay with it. I mean, maybe that's what's going on. Okay, so Ed, is that good news for the rest of the week, or does it put more pressure both on NVIDIA, which was up significantly today to turn in earnings and a guide Wednesday on

overtime that makes people continue to feel good? And then does it put more weight on Jackson Hole? Well, I think in terms of these really large tech stocks, if you say take the eight largest tech stocks, they as a group account for 28% of the S&P and about 18% of earnings. And that 10% gap is about the largest on record. So can they continue to rally? Yeah, but they really need their earnings to come through to justify the rallies that they've already come. So I think the pressure has been ratcheted up on those companies to deliver. But specifically, Ed, if you can talk about NVIDIA, we were just showing the chart. It was up about 8. a half percent today. AI has been fueling a lot of the excitement, not just behind NVIDIA, but also behind Microsoft, some others. I mean, do these bigger tech names need for the AI narrative to continue to have momentum? And is that tied to NVIDIA or no?

Well, our compliance doesn't allow us to talk about individual companies, but in terms of AI in general, that has been the big sentiment driver. And there does need to be something behind the sentiment and the fundamentals need to start coming through to justify what has already happened. Now, a lot of times whenever there's a big move, people compare it to the dot-com bubble. This is a long way for that in terms of the kind of gains

that we've seen so far. And these companies, a lot of them do have good businesses behind them in addition to AI. They have something to fall back on. So we don't want to get too draconian in our conversation about it. But if they're going to continue to outperform B market leaders, they're going to need to start to put some better earnings growth behind what they've done. I want to mention here, we've been awaiting Zoom earnings. They are out. That stock looks to me like it's popping about more than 7%. We're going through those numbers. We'll bring them to you as soon as we have clarity on them. Katie, where, if at all, does China fit into this puzzle for you? A little bit of a hike here on the rate that they need some growth.

There are concerns about whether global markets get dragged down if China worsens. How does that factor into your outlook, how you're investing right now? Well, I think the challenge has been you've seen such a divergence I mean the U. S. is looking very strong while China. Has definitely been disappointing recently we've seen that particularly in the oil markets this month- you're

seeing some mixed results there and it's also affecting some of the currency markets so we're definitely seeing. That some big moves in terms of the Chinese Yuan- and that's providing some interesting opportunities for trading around that divergence between what's going on here and what's some big moves in terms of the Chinese yuan. And that's providing some interesting opportunities

for trading around that divergence between what's going on here and what's going on there. But what about China as a market itself and its impact? For example, back half of this year, the likes of Apple. I mean, greater China is an important market for them. We've seen the luxury market in China hold up better than the economy in general. Should we expect to hear more about China weakness affecting some of the expectations in these companies' numbers? Or is there enough insulation from renewed growth elsewhere, higher than expected growth in the U.S., for example, to sort of shield from that? Well, I think this is where this month has

been important. This month, we've seen that negative or disappointment in China turn from what was a relative positioning for the U.S. to, oh, no, this could actually leak into somewhere else. And particularly oil prices, copper prices and other raw commodities were showing some of those moves. So I think it's definitely a new narrative to start thinking about. Is there some contagion that might also leak over into U.S. companies as well? All right, Katie, Ed, thank you. Now, as I mentioned, we got those Zoom numbers ready. Pippa Stevens has them. Pippa? Hey, John, the stock is hop jumping here after the company beat on the top and the bottom line for Q2. EPS coming in at 134 per share on an adjusted basis.

That was 29 cents ahead of estimates. Revenue at 1.14 billion, slightly ahead of the 1.12 billion forecast. Now, in terms of guidance, the company sees EPS for Q3 and the full year ahead of expectations with revenue for Q3 in line with analyst estimates. Now, the company did say that its enterprise revenue was up 10.2% year over year, and that its operating cash flow grew 30.6% year over year. That stock up 6% now. John? All right. Pippa Stevens, thank you. Let's get some instant analysis with CFRA analyst Keith Snyder. Keith, it appears to be really the cost consciousness that's benefiting this stock as much as anything. Big beat on EPS,

revenues a little better than in line, maybe enterprise doing well, which is what you want to see, their core business. Why is it up? Yeah, I mean, that EPS number is fantastic. The revenue, obviously a little bit of a beat, but, you know, cost cutting has been a huge initiative for them for the past few quarters, especially as growth has really slowed following, you know, that huge jump we saw during the pandemic.

And then with enterprise growing like it did, you know, that's a really important future area for them. They're going up against, you know, a lot of huge companies. You have Cisco with their WebEx platform. You have Microsoft with Teams. You know, these platforms are ingrained in a lot of enterprises, and to be winning customers is huge for Zoom because a lot of us in the analyst community have, you know,

been looking to what's next. You know, what does Zoom 2.0 look like and how are they going to reignite that growth that we saw during the years of the pandemic? And so to see them grow and beat top and bottom like this is certainly a positive step forward for the company as a whole. So what do they got to do here? Do they need to do M&A? I think RingCentral just bought Hopin, or at least most of its assets, a couple weeks ago. That's moving them more into, you know, events and webinars and streaming meetings. Zoom has tried to do some acquisitions in the past, 5.9 most notably.

They weren't able to do that. Do they need to do something smaller? Does this perhaps, these results give them the sort of credibility with shareholders that they need in order to get something like that done? Yeah, I mean, the 5.9 deal especially, that was really disappointing for the company because a lot of, you know, the talk that they've been giving has been getting into the call center market. And while they have done this, gaining a foothold from nothing in that market is very difficult. And Five9 would have given them a huge customer base right off the bat.

What really surprised me is they didn't come back to the table with Five9. The deal fell through because it was an all-stock deal. The stock was trading far lower than when they first struck the deal. And so we were just surprised. The company didn't go back and use the five and a half billion of cash on the balance sheet. They have no debt. They could have come back and

restructured the deal. And so with that falling through, we do think M&A is a strong possibility for the company. They really need to acquire new technologies. We're seeing a lot of talk about AI. They could push deeper into that space with an acquisition. They could push deeper into functionality for their platform to compete with the likes of Microsoft team who have the office tie-in. So on the call, I just want to be sure to get this from you, but before we got to let you go, on the call, what's most key? Is it that trajectory of enterprise growth? Is it making sure that that consumer business isn't too much of a drag? Is it international expansion? I mean, so enterprise is going to be critical, and I'm very curious to see what their commentary around enterprise growth is and where that growth came from. The other key factor that I'm especially going to be looking for is that they have a clear vision for where the company is headed rather than just kind of throwing cash at different technology and hoping something sticks. I would like to see a

very clear roadmap for the company of what it's going to be doing over the next two, three, four years to expand their markets, to expand their customer base, and to expand their product offerings. Okay, I'm told we got time for one more. So let me ask, what's the biggest threat to them? Is it the larger players like Microsoft? Is it smaller ones that are still sizable like Atlassian or even like Asana that are doing collaboration in a different way? Is that an area they need to get into? Yeah. I mean, the collaboration tie-in is extremely important. We've seen it with Microsoft. We see it with Cisco. They have an entire ecosystem of tools that, you know, can help a team get a project through the finish line that Zoom really doesn't have. They just kind of have a

conferencing platform. And don't get me wrong, it's a great platform, but it lacks that functionality that really makes it a one-stop shop for an entire enterprise. And so, you know, it's a very, very crowded space. It's extremely competitive. And the companies they're going up against, Microsoft, Cisco, are huge with massive cash balances and the ability to go buy. You know, if they wanted to, they could have just walked in and bought 5.9 in cash and they would have suddenly been in the call center space. So they're just facing a lot of competition from much better capitalized companies. Yeah. Well, stock is popping up better than 7% at the moment after hours.

We await that call. Keith, thank you. After the break, we're going to talk about the one earnings report everybody's going to be watching this week. And that is, of course, NVIDIA. It has been the poster child of AI-driven tech gains in the market, climbing more than 200%. That's 3x year-to-date. We will bring you the latest big expectations with an analyst who says this is the most important print to watch all year.

Overtime's back in two. Welcome back to Overtime. NVIDIA surging today as it gets set to report earnings on Wednesday. Investors will be closely watching the results of this poster child of the AI winners. Analysts were out with bullish notes on the stock today and over the weekend, including HSBC, Baird, KeyBank, and Bank of America. Our next guest says NVIDIA's print could be the most important earnings event of the year so far. Let's bring in Ben Reitzes of Mellius Research.

Ben, okay, three months ago, this thing was at $3.05. It's at around $4.70 today after popping 8.5% on no news today. How good does this print have to be? Well, there was a little news today, actually, John. At TSMC, there was some worries they were going to cut their forecast. And TSMC said that was a false, at least a falsehood. And that came out in Taiwan. I think that provided a little relief as well.

But a lot of people have been out bullish, including ourselves. And we're still very upbeat. We think long term there's $20 in earnings power here. Not sure which quarter they'll demonstrate that. And that warrants a $625 target. Okay. So kind of like a lack of bad news is good news in this case when it comes to NVIDIA. But I mean, this move has been dramatic. And the move a quarter ago was based on really a huge, huge guy. What was it, like $7 billion above what was expected? Does the guide have to be another upside surprise, or are we at a point of sort of equilibrium in expectations right now in NVIDIA? Oh, I don't know about equilibrium. I mean, this is a go-go stock

right now. I think that this quarterly call needs to be different than the last one. The last one was like a fall off your chair guy. Literally, I almost did. It was $4 billion above what anybody, you know, above their above expectations. And it really showed that AI was taking off. I think this time, they need to be a little more careful. They need to make sure we don't get out over our skis, and they need to answer a few questions. First, they need to talk about supply. Packaging supply has constrained TSMC. So they need to kind of walk us through in a little more detail on how they're going to ramp at TSMC so that we know the demand will eventually shift. The demand is out of sight. Second, they need to talk about China, because there's some concerns that China got pulled forward with panic buying before Biden does any more curves.

So we need to see what how we're going to navigate China. And I think that that needs to get into a little more detail so people don't get out over their skis. Ben, and yeah, go ahead. I worry that the demand, some of it for these accelerators isn't real in the sense that people are using these chips as currency almost, stockpiling them because they know they're in demand and sort of using them as a form of value in and of themselves, not as chips, but I know everybody wants these.

Do they have to explain that? Is there a concern out there that the demand is partially based on hype as well as based on the real demand out there for AI? Yeah, I think that's a really good point, John. I mean, we had some checks during the quarter where NVIDIA was actually asking a lot of questions of their customers being, hey, is it real? I actually think the company is doing a really good job of trying to figure out what their customers are using everything for so they actually can avoid that problem. Obviously, though, you can't control everything. So I do think they're going to need to talk about

that, John. But I do think there is an effort at the company to make sure that they know what people are using the chips for so that there can be follow through on demand. And not only that, so they could probably upsell more stuff as we go throughout the year. And to put the finest point on it, if the demand right now is significantly not real, which you don't know, I'm just raising the question, it causes an inventory issue later, right? I mean, there's supply out there in the market that has to get digested and eventually, right, the sell through then is not as strong. You know, John, I'm going to pivot you, though, a little bit like a little bit of the demand. A lot of the demand right now is from these startups, right, that are getting funding and then they're rushing to buy the GPUs.

That is true, John. But what we need to have them articulate is the handoff to enterprise demand. And a lot of that demand is going to go to the cloud giants as well. And what we need to do is be shepherded a little bit from the hype cycle right now to the real enterprise demand cycle, where we're going to have AI apps, both for enterprise and consumer, that we're really going to use. So I do think there's upside in the quarter. I mean, the demand is almost infinite. So, let's just say it could be up to a billion plus. And the talk about the next quarter is significant upside as well. But that has to go hand in hand with a mature conversation about the three points we talked about.

China, capacity, and what you're talking about. The handoff to the real demand in the marketplace. And we do see real demand right now. Yeah. Okay. Mature, but at the same time, you want to keep people somewhat excited because there's a lot of good stuff going on in AI. Ben Reitzes, thank you. Thanks, John.

Take care. Take care. Up next, Richard Haass from the Council on Foreign Relations says China's economic troubles are largely self-inflicted and leave Beijing leadership with three options, one of which could be very bad for global stability. He will join us to explain. Plus, summer's nearly over, but green shoots are just starting to emerge in the deal space. After a barren year so far, we will tell you about the latest move in the worlds of M&A and IPOs when Overtime comes right back.

China Central Bank cutting its one-year loan prime rate a little bit, the second cut in three months. This comes after one of its leading property developers, Evergrande, filed for bankruptcy protection in the U.S. on Friday. Joining us now, Council on Foreign Relations President Emeritus Richard Haass. Richard, welcome. So deflation is a big problem in China right now because it's making people feel poorer and want to spend less right when the government needs confidence. When will we know exactly how serious a problem this is for them? We already know it's a serious problem. That's not in doubt. The patient, shall we say, is ill, and these small cuts in rates is like giving aspirin to someone

who's in the emergency room, not close to being enough. So the real question is what the Chinese leadership does when it becomes clear these partial measures aren't enough, and either they've got to double down and essentially increase repression and try to get through this, or they're going to have to do something like they did during COVID, which is change policy dramatically and go back to a much more open economic model. I think that's unlikely. So the most likely course for the time being is pretty much more of the same. OK, more of the same for now. But then you also say a third thing that they could do is ramp up the tensions with Taiwan.

And I guess part of the theory here is if you've got a young, largely male, idle workforce, that's not a good thing. Best to distract them with something? That's exactly right. They've got over 20 percent, probably higher, youth unemployment. Their response to that is to stop publishing the data. That's unlikely to solve the problem. No, the danger is that they turn to foreign mischief or to aggression. I mean, think about it. The bargain between the Chinese Communist Party and the people for decades was, we will deliver to you high levels of economic growth, better lifestyle, and in return, you give us 100 percent of your political loyalty. You don't worry about your rights. Well, if they can't deliver significant levels of economic growth, and I think that era is over, what then?

And that's the challenge they face. And sure, what worries people like me is they will look to distract through satisfying nationalism. That's where Taiwan comes in. What we need to do, we, the United States, Japan, Australia, Europe, is need to indicate to China that that would be folly. That is not their answer. The only way they can really deal with their economy is through serious economic reform. So is it, Richard, by making that option look bad, by saber rattling and saying, if you cause trouble for Taiwan, here's how it will respond? Or is it by making something else look better, by tying them somehow more closely to

the West, even though this idea that economic cooperation was going to make China friendlier hasn't worked out so far? Yeah, I don't think tying China more closely to the West is a serious option right now. What we're trying to do is create more barriers in the way of technology flow there. There's too much of what China's doing at home or abroad for us to open things up. So no, I think what we need to do is discourage aggression on their part. That's what deterrence is all about.

And then what we need to do is essentially force China to essentially make their own economic choices. And again, there's two. One is more of the same. I don't think that's very attractive, but it is hard to imagine this Chinese leadership agreeing to significant economic loosening, because they obviously worry that would lead to pressures for political loosening. And that's the last thing they want. The word dilemma is overused. China's leadership,

Xi Jinping, have a dilemma here. Yeah, doesn't seem like he's retained power for this long to be forced into making big changes now. Richard Haass, President Emeritus, the Council on Foreign Relations. Thank you. Time now for a CNBC News update with Contessa Brewer. Contessa? John, hello. Former President Donald Trump has agreed to a $200,000 bond after his lawyers were spotted at the Fulton County District Attorney's Office in Georgia. When asked by NBC News if they'd reach agreement on the bond, a Trump lawyer just said just about. First, McDonald's and Starbucks left at the start of the war with Ukraine and now Domino's is getting out of Russia, too. The company that owns the fast food franchise rights in Russia and several nearby countries announced today it will file for bankruptcy and close all 142 stores in that country.

And for everyone out there with an extra $30 million to spend on a set of wheels, this is the Royce drop tail, the Rolls Royce. The Roadster was inspired by high-speed sailing yachts in the 1930s. It's expected to cost more than 30 million dollars because, one, the company will only make four of these two seaters, but also because buyers can fully customize the vehicle to their liking. So, you know, it's different, John, than if you just buy a regular Rolls Royce and then have it tricked out. Yeah, as I do. Contessa Brewer, thank you.

We've got a news alert now on Schwab. Pippa Stevens has it. Pippa. Hey, John. Well, Schwab's saying it's going to cut jobs and also reduce its real estate footprint. The company said this will cost it between $400 and $500 million, and those costs will be incurred throughout the second half of this year and into next year. But ultimately, Schwab said that this streamlining of operations will save it $500 million per year on a run rate cost savings basis. Shares are up about a quarter of 1% here.

John? All right, Pippa, thank you. 10-year Treasury yields resuming their march higher today, as we mentioned, touching levels not seen since before the financial crisis. Up next, we'll talk to a technical analyst who says rates could make a push even higher. He'll tell us the level to watch. And take a look at two of today's tech winners, Broadcom and VMware, both getting a boost on news that the U.K. has cleared Broadcom's massive takeover of VMware in a deal worth more than $60 billion. Do not miss our exclusive interview tomorrow with VMware's CEO right here on Overtime.

Be right back. Breaking news on Arm Holdings. Deirdre Bosa has the details. Dee? Hey, John. Arm just revealing its F1 as it plans for a public offering in early September. The company intends to trade on the NASDAQ under ticker name ARM. No surprise there.

The lead bankers are, and this is in alphabetical order, Barclays, Goldman, J.P. Morgan, and Mizuho. Now, Arm is a chip designer known as the Switzerland of chips. It both designs its own chips that power the majority of smartphones around the world, but it also works with mega cap customers in terms of building their own in-house silicon. Revenue during its last fiscal year was $2.7 billion. That is a decline year over year. Net income in fiscal 23 was $524 million. That's also lower than it was in 2022. Remember, Arm was bought by SoftBank and taken private back in 2016 for $31 billion. It was last valued at $64 billion in a private transaction. That was back in 2019,

according to sources. Now, it has been reported that they're looking at a valuation of somewhere between $60 and $70 billion on public markets when it does file to go public. We'll continue to go through this more than 200-page document. We'll look at risk factors, competition, key stakeholders, and bring it to you as we get it. But, John, this is a big deal. This is a big one. This would be the biggest IPO of the year, and it could open the window for other tech IPOs to follow. I think it used to be ARMH, if I recall, back when it was public the first time.

Changed hands a lot of times. I mean, what do you see as the big question for them going forward in their growth trajectory? I mean, I imagine it's got to be AI and how much of their IP they can get into that mix since the traditional CPU is less important than the accelerators now. I think that's exactly it. We know what has happened in the tech space and the chip space in particular this year. It's really had this AI underpinning this boom. And ARM is going to make the argument, they're trying to make it in this document, that they're AI-centric, not just AI-adjacent. That's what Mazasan has been saying over the last few months as he has focused on bringing this company public. So, you know, we're at this show-me moment, John, as you know very well, where investors, they want to see that the revenue related to AI is already there.

The fact that revenue declined in its last fiscal year, year over year, perhaps not a positive sign, but again, it was last valued at $64 billion. That would be at the higher end of that range. And that was, what, four years ago. So we'll have to see what the market thinks this is worth. But again, AI is going to be so important because the majority of its revenue is certainly tied to the global smartphone market, which is in decline.

But AI is this powerful force that seems to have investors' imagination right now. So if it can capitalize and prove to investors that it is going to be a big beneficiary of this shift, not to the extent, certainly, of NVIDIA, but at least a player in this, then it could reach those valuations. Yeah, you want to see them able to make the argument that their IP is getting greater share as AI gets bigger. We'll see what they can do. Dee, thank you.

And arms filing just now, just one of the green shoots emerging in the deal space. Leslie Picker has that story. Leslie? Hey, John. Yeah, this is exciting. Signs of life and IPOs. You've got Arm and Instacart also expected

gearing up for its public debut. In M&A, you've got effectively a bidding war for U.S. Steel and now hedge fund Sculptor Capital as well. And in activism, you've got Starboard engaged in Blumenbrand. So clearly it's welcome news for a market that's been effectively dormant for a year and a half now. North American mergers and acquisitions came in at $960 billion during the first six months of the year, according to PitchBook. That is about 16% below the pre-pandemic first half average. And IPOs didn't fare any better. Despite well-publicized debuts by, say, Kava and Kenview, U.S.-listed IPOs are raking in about a tenth each quarter than they did in 2021, according to KPMG. And

while the engines appear to be turning back on, especially just a few moments ago, it's not quite full speed ahead. Bankers and other sources I talk with say that a lot of companies are effectively in wait and see mode. They want to assess some of the larger IPOs in the pike. They want to see how ARM does. And then they want to get a little more comfortable doing deals, especially in this regulatory environment that's more applicable to M&A before they do anything major. But as the prospect of a recession seems further and further away, consensus really kind of pricing in a soft landing or no landing at this point in time, then you could start to see more activity, particularly after Labor Day. John?

All right, Leslie. I know some people out there waiting to see what happens with valuations on enterprise software. Haven't gotten high enough for them yet. Leslie Picker, thank you. Let's turn now to treasuries. The 10-year yield hitting its highest level today since 2007. Our next guest says might not stop there.

Joining us now is JC O'Hara. He's chief market technician at Roth MKM. JC, this was puzzling to me today because it seemed like the market was moving based on the 10-year last week for quite a while. Big spike today, and then it just backed off a bit, not even a whole lot, and the S&P and especially the NASDAQ started running. What does that tell you? Well, I still think there's a high degree of correlation between yields moving higher and the stock market moving lower. We didn't necessarily see that play out today. And I think that has something to do with, you know, NVIDIA and some of the earnings taking place. But from a longer term picture, if you look at yields, specifically the 10-year, look at the 30-year, look at real yields, they are breaking out.

A lot of our attention has been over the last 18 months, and rightfully so, on the front end of the curve. What is the two-year doing? What is the two-year yield telling us about Fed policy? But the two-year has been more or less anchored over the last few months. All the action from a technical perspective is on the long end. And when you start seeing rates break out to multi-year highs, that's telling us something that we need to pay attention because typically we just don't break out and stop. You typically break out and continue moving higher. Okay. So is this effectively, do you think, pressure on the equity market or no? Because does this put, with the 10-year being where it is, 434, does it put more pressure on the overall market with NVIDIA earnings,

perhaps reacting to those, whether they're good or not good, more pressure on what we get from the Fed out of Jackson Hole or no? Well, listen, I think that absolute level of yields, you know, can apply some pressure, right? You know, higher the yield, more pressure. But I think more, it's the rate of change, right? Go back to last year. If you look at the 10-year, we had almost a 200 basis point move between August and October. During that time, when yields were screaming higher, the equity market pulled back 20%, right? So now we're in another situation where the equity market was getting

comfortable with yields at around that 3.5%, 4%. That's where the market was trading this year. Now we're moving to a new level. And when you move to a new level with this degree of fast rates of change, the market gets uncomfortable. The market steps back and you have to reassess, especially when you start looking at valuations. So yes, I do think the movement of yields right now will apply some pressure to the equity markets for sure. So how should we think about the next level to watch? I think we're at what, 434 right now. Is it a matter of touching a certain level? Is it a matter of staying above a certain level for a certain amount of time? So technically, we had the 30-year breakout last week. We have the 10-year today breaking out above those October highs. So holding above 4.33, technically, that's key to us.

Now, this is where we have to be careful. Where can we go? Well, when we look at longer-term breakouts, we have longer-term price objectives. We have to go all the way back to 2007 to find levels that we could point to to say, hey, this is where the 10-year can go. And for us, that means we have to be open to a 10-year moving closer to 5%, and if not, move above 5%. Above 5%. Okay. We'll watch for all of that. Talk about holding above 433. JC O'Hara, thank you. After the break, the alternative to TINA, one particular part of the market having a moment right now offering investors an option for steady return. We'll explain next as we take another look at Zoom as well. That company beating on both lines with a sizable beat for EPS. That call kicks off the top of the hour up more than four and a half

percent at the moment. Overtime will be right back. Welcome back to Overtime. Yields are on the rise, and that's giving investors something they haven't had in a while. Options. Savers are rushing into money market funds and savings accounts with yields topping 5%. And that is the subject of the latest piece from our next guest. Joining us now is Gunjan Banerjee, CNBC contributor and Wall

Street Journal lead writer for MarketsLive. Gunjan, welcome. So I'm in a way confused because I thought investors, retail investors, were getting bullish on equities again, but now they're rushing into money market funds. Is this in a way good for equities if investors are into money market funds now? Thanks, John. You know, I do think the hottest investment out there for all types of investors, retail, institutional, it's not Bitcoin. It's not Tesla. It's not even NVIDIA. I think it's the money market fund.

And these yields are just too attractive for a lot of investors to pass up. We saw money market yields touch 5.15% recently. That's the highest level since 1999. And it's a move that has huge, huge ramifications for our entire financial system. We're just now starting to see that play out. And I think, as you pointed out, the big question is, what does it mean for the stock market? So far this year, higher yields have not dented the stock market rally. But I think we're starting to see that change a little bit in August. There's that old metaphor about peeing in the swimming pool to keep warm. It doesn't work for long. Aren't money markets kind of like that, though? I mean, it's not like you're going to when rates go down, your money market fund doesn't stay above 5%.

Well, I think we're seeing yields keep rising, right? Just today, we saw 10 year, 30 year yields jump to some of the highest levels since 2007. And I think one thing that's caught a lot of investors off guard is how high rates are going and how long they're going to stay there. You know, by this point, a lot of investors were already expecting rates to go down. But I think the continued strength of the U.S. economy is just something a lot of people did not expect. So it seems like right now we are in this higher yield environment. And it's one that a lot of savers just haven't seen. You know, this is the first time in a generation that people can park their cash in a safe investment and generate 5% yields. At the same time, today we saw NVIDIA up like 8.5%. So what, if anything,

does this signal about retail investor attitudes about risk? What are you seeing in options activity and leverage? That's right. I mean, one really fascinating thing is that there are kind of these parallel tracks, right? You are seeing people turn to money market funds, such funds recently recorded their biggest weekly haul since May. So people are turning to safety. They are kind of ditching that TINA trade. Yet at the same time, Tesla, NVIDIA saw huge pops today. And I think part of that is this AI media. You know, part of that is driven by NVIDIA's earnings are on Wednesday. And I think a lot of people don't want to be caught off guard. They don't want to be left behind. And that makes this week, you know, a really important one for that AI trade, for that tech trade that has really powered the market higher.

NVIDIA alone has accounted for more than a tenth of the S&P 500's gains this year. That's playing out here on Overtime. Thanks for setting it up for us, Gunjan. Appreciate it. Gunjan Banerjee. Up next, the big three automakers are making preparations for a possible strike from the United Auto Workers. But their usual playbook around labor unrest might be hard to pull off this time around. We will explain why when we come right back. Arm Holdings filing to go public moments ago. Our dear Drabosa continuing to look through that filing. Dee joins us now with some updates.

What do you have? Yeah, John, like I said, this is a more than look through that filing. Dee joins us now with some updates. What do you have? Yeah, John, like I said, this is a more than 200-page filing. We're making our way through it, though, and I'm currently looking at the risk factors. So I wanted to bring our audience some of those. Among the risk factors in this prospect is one competition. It cites from free open-source RISC-V architecture. RISC-V is a similar company as ARM. However, it operates in an open source architecture, whereas ARM is closed source. And some see the benefit of that and that this could potentially provide more competition. Another risk factor, a lot of its revenue depends on its commercial relationship with ARM China.

And we should note, ARM China operates independently of Arm. So a lot of revenue comes from there, but it doesn't necessarily have control. Finally, another one that I want to bring you, but this is, again, just a few of many different risk factors cited, says SoftBank Group's interests may conflict with their own interests and those holders of their ADSs, so their American Depository shares. Remember that SoftBank will still be the owner of this company, and it says that their interests may not necessarily coincide with their own. John, we're going to continue to look through this, and I'll bring you more as I get it. All right, Dee.

Thank you. Now, a sad note here on overtime. Some things seem so fundamental that they should have always existed, like the idea that we can type something into a computer, change the font, print it out. But it took two mid-career engineering researchers at Xerox to dream that into being. Friends John Warnock and Chuck Geschke frustrated that innovation wasn't making it out of the lab, left, and in 1982 started Adobe Systems in John's garage. Adobe stock today is worth $235 billion.

Its Photoshop program has been a verb for decades. Its PDF is the digital document standard. And now its data and analytics software have made it a central player in e-commerce and marketing. I met John Warnock 23 years ago at Adobe headquarters when I was assigned to cover the company. When Warnock stepped down as Adobe CEO later that year, Steve Jobs volunteered to talk to me about how important John was.

The rare time Jobs wanted to talk about something other than Apple. That's because without Warnock and Adobe, the Mac and desktop publishing couldn't have happened. John Warnock was a bold technologist, compassionate leader, and trailblazing entrepreneur. He died Saturday at age 82. The United Auto Workers expected to hold a strike authorization vote this week. The results could have major consequences for automakers, dealers, and consumers.

Our Phil LeBeau joins us now with the details. Phil. John, if there is a UAW strike come September 15th, the ability of the big three to weather the storm will come down to inventory, and they've been building up their inventory over the last several months. In fact, the latest, according to Cox Automotive, shows Stellantis inventory all the way up to 115 days. There you see Ford and GM. By the way, inventory overall for the industry, it's lower than it was back in 2019, the last time there was a UAW strike. Auto sales in the U.S. right now up almost 13 percent compared to last year, a reflection of the fact that demand is out there. So how long will that inventory last?

Look, if it's six or seven weeks for the 145,000 workers of the UAW, keep in mind, if there is a strike, it's unlikely they're all going to go on strike. It'll be a small portion who go on strike, but the implications would be real for the automakers and ultimately for the 150, approximately 150,000 approximately members of the UAW. As you take a look at shares of GM and Ford and Stellantis, keep in mind, as you mentioned, John, there is a strike authorization, but we expect that to pass. It always does. Ninety, ninety five percent of the members usually say, yeah, go ahead. Call a strike if you think it's the right thing to do. So, Phil, I saw a recent piece that posited that the days of higher inventory in the auto market are over. That is more efficient for automakers and for you to just do a sort of deliver after you order scenario. But doesn't that make them more vulnerable to labor in a situation like this?

Well, they're no dummies. They know that this deadline was coming up and they know the rhetoric and they know that the UAW is going to want a much richer contract than in past years. So they've been building it up over the last couple of months. So this is not a normal environment. This is what we see every four years as the UAW contract comes up. All right. Well, such an important, it seems like we're talking about strikes all over the place, potentially Amazon, UPS, now this. I mean, it's a tight labor environment in so many ways. And that, what the UAW says, that works to their advantage.

They believe that it's time for organized labor to get a bigger piece of the pie. Yeah, we'll see how that trickles through into inflation based on those kinds of wages. Phil LeBeau, thank you. And as we've been talking about, big week. NVIDIA earnings coming up not tomorrow, but the day after. And, of course, Jackson Hole at the end of the week. That's going to do it for overtime. Fast Money starts now.