Closing Bell - Closing Bell: Overtime: BHP CEO On Commodities Cycle; Blue Origin Names A New CEO; Rare Interview With JP Morgan Global Chairman of Investment Banking Jennifer Nason 9/25/23

Episode Date: September 25, 2023

The major averages closed near highs of the day; SEI CIO Jim Smigiel and Baird’s Ross Mayfield break down the market action. Our Phil LeBeau on the latest from the UAW strike. A rare interview with JP Morgan Global Chairman of Investment Banking Jennifer Nason on the state of capital markets and health of IPO pipeline. Jefferies’ Brent Thill on Amazon’s AI investment Anthropic. CEO of metals and mining giant BHP Group Mike Henry on the global economy and commodity cycles. Plus, Blue Origin names a new CEO and it’s a familiar name to the Closing Bell: Overtime audience. 

That's it. Stocks closing near highs of the session. The S&P and NASDAQ both breaking four-day losing streaks today. That is the scorecard on Wall Street. The action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is on assignment today. We have got such a big hour ahead with rare can't-miss interviews. In just a moment, we'll speak with Jennifer Nason, the global chairman of J.P. Morgan Investment Banking, who has more than 30 years of experience at the firm. We're going to get her read on the fledgling IPO market, the outlook for M&A and much, much more. Plus, the CEO of $150 billion metals and mining giant BHP Group joins us to talk China, the global economy, the impact of the UAW strikes on his business. And we'll also get some after hours action when RV maker Thor reports results.

Big ticket consumer discretionary. Key reading there. We're going to bring you those numbers as soon as they cross. We begin with the markets as stocks try to claw back following their worst week since March, though rising yields putting a cap on sentiment. Joining us now is SEI chief investment officer Jim Smigel and Baird investment strategy analyst Ross Mayfield. Good afternoon to you both. Jim, I'll start with you. Yes, stocks closed higher today, but we also had the yield on the 10-year at a fresh high going back to 2007. Can these two things coexist? Thanks for having me, Morgan.

And I think you're right to focus on that. That relationship is usually a lot more stressed than we've seen thus far. It's really been the year to date story, quite frankly, as the markets have been absolutely resilient, even in the face of higher yields and a more hawkish fed the market as perceived- early on. We think eventually-

this breaks a little bit- we are very very cautious on equities as it stands today we definitely prefer a broader. A kind of more diversified exposure in large cap- and a bit of an underweight to those magnificent seven names- oh and

really those kind of top tier growth names that tend to have higher interest rate sensitivity. So you're certainly right to point out this has been an unusual year from that perspective. We think eventually this all gets caught up and we see the interest rates eventually weighing on these top names into year end 2023. So seasonality, we've been talking about it that, you know, September, historically the weakest month of the year. But then you have these undecidedly or these decidedly, I should say, unseasonal factors that could make Q4 extra messy. Impact of higher

interest rates, student loan repayments, higher energy prices. You got the UAW strike and oh, perhaps this government shutdown. Ross, I want to get your thoughts on what it is to climb this wall of worry right now and how investors need to parse what could be a pattern versus what might be uncharted territory. Yeah, absolutely. Well, first and foremost, I do think that having a wall of worry as an equity investor is a good thing. If sentiment is unequivocally bullish, you might want to look the other way. There obviously are some big headwinds. You know, government shutdown isn't something that has historically been a big weight. The student loan repayments is uncharted territory.

We'll see how much of a headwind that is to the consumer. We can see consumer discretionary stocks taking it on the chin lately. Part of that is higher rates, but I think part of that is the market sniffing out that the consumer might finally be close to tapping out after carrying the economy for the better part of 18 months. I do think, though, that the markets are set up to have a strong Q4 if we can get an assist from rates and or energy prices. If both of those continue higher through October into November and December, it's really going to be hard for equity prices to get that rally in. Those higher rates are

huge headwind. And obviously, those energy prices weigh on consumer sentiment and consumer spending via gas prices. So if one of those can crack, I think we're set up well. OK, so how would you be advising investors to set up right now then, Ross? What are you betting on? Well, look, we're not scared of equities right now. I think, you know, there could be some volatility in the near term, but there's a pretty strong setup longer term that we still like. At the same time, you know, most of our clients are wealth management clients. They've been investing and saving for long periods of time and haven't had an opportunity to get yield from fixed income for the better part of 15 years. I think we're probably at or near peak rates.

Obviously, saying that over the last few months has led to some pain because rates have marched higher. But at some point, the Federal Reserve will reverse. We think grabbing some high quality fixed income treasuries, maybe adding some duration to capitalize on both real yields being at 10 you know, 10, 15 year highs, but also getting that pop in prices when the Fed eventually reverses and yields come down, you know, whether that's a soft landing or a more typical recession progression. So I would be, you know, talking to folks who are in the right demographic and risk profile

about adding to fixed income here and high quality fixed income, to be sure. Yeah, Jim, I'll ask you the same question, especially since we get that final GDP reading later this week. And there's this sense that perhaps we are seeing signs that economic growth is going to continue to soften here with rates higher for longer. At some point, there's an expectation that yields are going to have to move lower because it becomes a safety trade again. So how would you advise investors to position? Is it stocks? Is it bonds? Is it something else? It's going to be both for sure. We're definitely closer to the end of the rate hiking cycle than we are at the beginning. We think there's still one more hike kind of in the tank between now

and the end of the year. So again, we are kind of shying a little bit away from the very concentrated parts of the equity market. We like things like value. We like sectors like materials. We like sectors like industrials, those that have slightly less interest rate sensitivity. Diversified is always the way to go. That's always what we're going to be preaching to our clients. And that's the right position between now and the end of the year. You know, we do have GDP, but we also have the PCE. And that's really kind of the key issue. That's the Friday number. Is that coming in at 3.9 percent, which seems like expectations?

You know, these are still very, very high numbers. These are still well above the Fed's target. Chairman Powell went out of his way to say that they're not going to be adjusting their 2 percent target for inflation. And that's going to keep them higher for longer. Okay. And, of course, industrial is one of those beaten-down areas of the market right now. Jim and Ross, thanks for kicking off the hour with me as we have the S&P finishing the day up 0.4%, 43.37% is the level there. Let's turn now to the latest on the big labor disputes in America.

The writer's strike appears to be heading towards a Hollywood ending after a tentative deal was struck over the weekend. But auto workers are still striking Detroit's big three. And tomorrow they'll be joined on the picket line by President Biden. Phil LeBeau has the latest details for us. Phil. And Morgan, I think we're in a bit of a pause, if you will, between the UAW and the big three. They're still talking, but I don't think we're going to have any major announcements until after the president's visit to Detroit and probably not all day tomorrow. Maybe we're looking at Wednesday or Thursday. With that said, there is

progress being made, at least between the UAW and Ford. I've talked to people who are familiar with the discussions that happened over the weekend. They were very active talks and that they did make progress, though Ford put out a statement saying, look, there are still some gaps that need to be cleared before we're close to an agreement. Encouraging news nonetheless. GM and Stellantis, a couple of people have emailed me today. They said, are they not talking right now? Yes, they're still talking. They're still in negotiations, but they probably are not as far along as Ford and the UAW. And then you've got President Biden visiting tomorrow. By the way, this is a move that a number of Democrats have said, get out there, show even more forcefully that you are with the strikers in this clash between the UAW and the big three. To that end,

Illinois Senator Dick Durbin was meeting with UAW strikers in Illinois today. We heard from Rashida Tlaib, who is the Democratic representative who has a number of auto plants in her district just outside of Detroit. She spoke at our UAW rally last Friday. So for all of the members, tomorrow is going to be an important point where they can say, look, the president stands with us and we deserve more. You've got 59,000 UAW members at Ford. There you see the numbers for GM and Stellantis. And as you take a look at shares of the big three, keep in mind that approximately 15% of their production is shut down right now. Just 15%. Now that's important production. You certainly would rather have it than not have it. But 85% of the production that

we usually see from the big three here in the United States, Morgan, that continues. There is still work going on at all of those assembly plants. Will be interesting to see what the next move is from the UAW after the president's visit. And to your point, certainly become a key stop on the campaign trail for Biden and for others. OK, whether we get a resolution to the strike sooner or later, it would seem that prices eventually are going to have to go up here for new vehicles because the cost to make them is going to go up. Am I thinking about this the right way? What does this do to prices? Eventually, I think we do see prices move higher, not just because of this agreement, but just because the market's so tight right now, Morgan, that's the bottom line. Even though we have seen an increase in production, we are not yet close to where they were before the pandemic. They're getting there, but they're not there yet.

And that's a bigger driver than anything else. And that's why we haven't seen a major pullback in prices. Do we expect new vehicle prices to pull back more this year? Yes. Almost everybody in the industry says that's going to happen. But I'm not expecting them to go back to where they were two years ago. That's just not going to happen. There's so much demand that is still out there. Call it pent up demand. Call it whatever you want. That's still out there and that's still driving the relatively strong pricing that we have

for the new vehicles. And of course, it's so key to the broader inflation discussion. Philip, thank you for bringing us the latest. Stopped struggling for direction today before ending with modest gains, but one corner of the market just hit 10-month highs. Let's head over to Senior Markets Commentator Mike Santoli for more. Mike. Yeah, Morgan, along with things like crude oil hitting, I guess, 11-month highs, you have obviously Treasury yields, as you mentioned, making, I don't know, 15, 16, 17-year highs.

You have the U.S. dollar index up at the highest level since last November, around 106. The last time we were close to here, right there, that's March 8th of this year. What happened on March 9th? Silicon Valley Bank went down, or at least began to, and it created this huge kind of rush to sell the dollar, in part because it was seen as if the Fed was going to be done sooner than anticipated. Well, we've rebuilt those Fed expectations. Obviously, U.S. economy also holding up better than some world markets. You just have outright weakness in things like the yen, the Chinese currency,

and now the euro after it seems as if their economy might struggle, too. So it's a headwind. I don't think it's kind of make or break at any given level because we do have mostly a domestic economy, a domestic driven economy. But it is something to watch along with other tightening financial conditions. Now, take a look here at transports, the S&P 500 transport sector relative to energy. Obviously, energy has been on a pretty good roll of outperformance, even if it's backed off a little bit. So this goes back a year. And what I find interesting is you'll see all these periods when both were able to go up in tandem, right? This is when there was a lot more confidence developing that the economy could grow with decent momentum for a while.

So both of them were cyclically geared. That's been a little bit of a change here, right? Transport's down, energy mostly continuing higher. And that kind of gets at the fear, which is that supply driven gains in oil prices are not reflective of the economy's ability to kind of power through that. And it might become a little bit more of a restraint. Still not really critical. You know, you still see transports having had a pretty good move in the last year, but it's a dynamic to watch, Morgan. It's a dynamic to watch. And it's interesting, too, Mike, because when you talk about the freight side of the equation with

transports, those are companies that have fuel surcharges that push out to their customers. And yeah, it may be on a lag and it may show up in earnings with some noise. But ultimately, if prices go higher, customers pay that. When it comes to the airlines, it's the airlines themselves that have to absorb those costs. And perhaps that speaks to the fact that we've seen so much weakness in that part of transports where you've had guidance trimmed in part because of higher fuel costs. Definitely a factor. No doubt about it. And I almost wouldn't even read it always as, well, higher fuel costs mean that the transportation companies themselves are going to be kind of victimized by. Yeah, sure. It does happen, as you say, around the edges. I think it's a little more about

end demand is going to be dictated by how strong the consumer and corporate economies are. And that's something that can, you know, wear on transports and other cyclicals. Key shift in the bigger picture, at least sentiment around the bigger picture. OK, Mike, we'll see you later this hour. Thank you. Earnings from RV maker Thor are out. Bertha Coombs has the results. Hi, Bertha. Hi, Morgan. A big beat on both the top and the bottom line from Thor Industries, the maker of Airstreams and other RVs. Earnings coming in at $1.68 a share. That's well ahead of the estimate of 96 cents a share. Revenues of $2.74 billion, also well ahead of the expectation of $2.42 billion.

Guidance a little bit light in the sense that their range goes from $6.25 to $7.25 per share for the full year. The street is looking for $7.12, so a little bit below there. Same on the revenues, $10.5 to $11 billion in revenues. The street looking for about $5 to 11 billion in revenues. The street looking for about 10.8 billion in revenues. Nonetheless, CEO Bob Martin says they were able to, in spite of issues with inflation and some supply chain, they were able to overcome that being very efficient. And they also saw their European segment achieve another quarter of record performance, while North American operating teams, he says, made further progress with our independent dealers to reduce and rebalance inventory ahead of the 2024 model year rollout.

Again, stock there higher here in after hours. Morgan? A little pop, and now it's flatlining. Bertha Coombs, thank you. Of course, we watch Thor because this is big ticket discretionary. Interest rate sensitivity gives us a read on the consumer. All right. After the break, an exclusive interview with Jennifer Nason, the global chair of investment

banking at J.P. Morgan, who doesn't do very many television interviews. We're going to talk about the outlook for the IPO market following shaky starts for Arm, Instacart and Klaviyo. She's got a lot of key insights. You want to tune in. We're back in two. Welcome back to Overtime. Check out the moves on recent IPO listings today. Arm and Klaviyo in the green while Instacart finished flat on the day. The deal is also robust pricing and a first day surge. However, as you can see on this chart, Arm and Instacart are actually down significantly since that pop. Joining us now for an exclusive interview is JPMorgan's global head of investment banking, Jennifer Hayes, and she's been with the

firm for more than three decades, working on deals, including Cisco's recent offer for Splunk. It's so great to have you here. Thanks for being on set. Thank you for having me. Okay, there's a lot for us to talk about. I do want to start with IPOs, though. And I guess first, sort of a week and a half, two weeks in, three weeks in, depending on which company we're talking about, can we say that these have been successful and that the pipeline is reopening?

Yes, we can. Three deals, three very different IPOs sort of have reopened the IPO market. And now we need to build from here. And I think we have three happy clients with what they've accomplished. Yeah. And JP Morgan was a book runner on all three of those offerings. So other companies that you work with, are you having conversations about them going public now? Yes.

So we have a robust pipeline. It's all a question of timing and when to go to market. I think we'll see a few take advantage of the fourth quarter, but most will push things to Q1 or Q2, I think, largely because you can work off 25 metrics at that point. So that'll be one of the reasons why people push it. But it's an election year. There's market risk. So there's a lot of tradeoffs in all this decision making right now, which I think is super interesting.

Not to go through all 25, but when you say 25 metrics, what do you mean? What's special about Q1 versus the last quarter of the year? Well, I think people can look as people talk to investors and position their story in the market, they can look further forward. As we cycle through this year and get into next year, then investors will be having conversations about financial performance in 2025 as companies tell their story,

either on the road or just in positioning ahead of time. Has the traditional playbook, IPO playbook, is that still in effect here or is this a new world order? Yeah, so I think it's a completely new world order. So I think in 2021, not that it was rinse and repeat, but the market and issuers and investors kind of had their playbook together. You knew what to expect from investors if you were taking a company public. So while the factors haven't changed, I think the tension between them and the trade-offs you have to make, it's all been sort of thrown up in the air in my view.

So, for example, deal size. What do you need to make sure to have appropriate liquidity? But how much of your company do you actually want to sell right now? Cornerstone investors, sort of unheard of in the US market for a long time, now very much part of the routine. And we saw that with at least two of the deals that happened last week. Retail versus institutional lockups. What can you, you know, where can you push the market? Where can't you push the market? So what we believe to be true in 2021 is no longer true today. And that's sort of determined in market.

So I've been around a long time. This feels more normal to me when I think back over the arc of history than the playbook we were using in 20 and 21. Is it a lot of retail investor engagement around these IPOs? And I ask that because these are IPOs that priced higher than or at the high end of their ranges. We saw that first day pop, but then we saw things fade from there. So I just wonder, is success in the eye of the beholder here? What does it mean for a retail investor? Well, I think retail investors are always a factor, always have been, always will be.

And they were in the three IPOs that we've been talking about. And certainly when you have a big retail brand name like Insta, that's definitely going to attract retail attention. So I'm not particularly I don't think there's anything to be particularly concerned about there. I think it's just understanding how the market is moving around. And let's face it, this was a big week, three big deals. The market's got to get its muscle memory back a little bit around some of these deals. So I think we're going to see some of that volatility. But you had a guest on earlier today who made a very good point that, you know, we shouldn't judge these IPOs after a handful of days. Let's have the

conversation in the weeks and months ahead and speaking of i guess for lack of a better term exit strategies m&a we're starting to see that pick up a little bit too uh jp morgan was involved in the cisco deal for splunk last week which is the biggest ever acquisition uh by that tech giant expectation that we're going to see more of that type of deal making pick up, especially given the fact that regulators, the FTC, for example, have had some kind of high profile setbacks in the courts. Yeah. So the regulatory issue has been a real dampener on M&A, certainly in the tech sector, which is where I spend most of my time. So let me just give you a few statistics. So usually the tech M&A market averages about half a trillion a year. That's a sort of five-year average. In 21, we spiked at a trillion and currently we're running at about

a quarter trillion for the year. The big problems in the first half were regulatory, general macro and the fact that sponsors were sort of out of the market. They're 40% of the M&A market usually. They stepped back because rates were rising and capital was suddenly very expensive. But you see the Splunk deal happen. You see the IPO market open. And I think that's going to be a bit of a shot in the arm. And if Microsoft gets Activision done,

if Broadcom can get VMware done, if we see a little bit of a path through some of these regulatory challenges, we could really see it open up. When we see some secular growth trends, whether it's AI, whether it's cyber, I mean, is this the area where dealmaking or you would expect dealmaking to sort of take shape the most aggressively? Well, a lot of the AI acquisitions, quite frankly, at this point would probably be relatively small, although there could be a lot of them.

Cyber is still a key area, and that was largely the reason that Cisco acted. But I think we could see some more scale plays. I think there's some good old fashioned industrial logic in a lot of these deals, a lot of synergies to be had, which hopefully Cisco will extract from the Splunk deal. So I actually think we might see some big deal making as we move through the rest of this year and into next year. Corporate issuance, we saw a flurry of it in the debt markets earlier this month. Does that continue as well? Yeah, I feel very good about the debt markets.

I think September will be the best month in the leveraged finance market in terms of volume of issuance in 18 months. $60 billion-ish, I think we're going to hit. We saw we worked for WorldPay and then raised the $9 billion that GTCR needed to finance that deal. That all went very well well and in some other deals in leverage finance as you know as you move down the rating spectrum it can become a little more hand-to-hand combat with the market and we saw NCR get a you know a deal done to affect their corporate separation. So markets are open, capital's available and the the fact that we could see $60 billion out of leverage finance in September is, I think, a real shot in the arm. We finally have some stability. Nobody

wants to pay 9% on their debt, but there's just less volatility now. So that's encouraging people back into the market. Just quickly then, would you say that this is a new normal among higher rates or is this a window for some of these types of deals and funding to get done before the markets take a leg lower? Yeah, well, if you listen to my boss, Mr. Diamond, he's cautioning everybody about further rate rises and inflation still not being tackled. So I think I think if you need capital and have good investment choices, I would be I would be getting ready to tap whether it's the IPO market, a leveraged finance market, whatever capital you need. I would be head up and eyes wide open right now. Jennifer Nason, JP Morgan. So great to have you here on set. Thanks for joining me. Thank you. Well, Amazon moving higher today, speaking of deals, after making a multi-billion dollar move in the AI space, investing big bucks in a company we profiled on overtime back in July.

We're going to bring you those details and we'll ask an analyst if this new approach to AI will move the needle for the company. And as we head to break, take a look at one of today's biggest winners, William Sonoma, jumping on news that Green Equity Investors has taken a passive 5% stake in that company. Shares finished the day up almost 11.5%. Big move. We'll be right back. Welcome back to Overtime. Amazon burnishing its AI credentials today. The stock closing higher after the company and open AI competitor Anthropic announced a partnership. Amazon will invest up to $4 billion as part of the deal, while Anthropic will use AWS design chips for training its models. Anthropic co-founder Daniela Amodai joined us on Overtime in July.

Here's what she had to say about the cost the company faces. It's just very capital intensive to kind of train these larger models. And so we've been very lucky to be able to partner with GCP to be able to train these models and make sure that we have reliable and enough capacity for our users. And of course, this is just an area that industry-wide is something that's evolving. All right. Joining us now, Jeffries analyst Brent Thill. Brent, what do you think, especially given the fact that this is not an exclusive deal and we know Anthropic was invested in by Google just earlier this year?

Amazon needed this. They were way behind Microsoft, way behind Google and AI. And this was badly needed. The industry has been looking for a catalyst to let Amazon open up an AI. So we think this is really good for Amazon. They needed the AI expertise. Anthropic obviously gets the largest cloud computing install base, 85 plus billion dollar run rate at Amazon EWS. So it's a win-win. Look, we're really early. This is

very, very early. It's not really going to have a big impact until 2024. So we think for the industry, a lot of this is hype. No enterprise is rolling this out in mass market yet. So we're at the beginning of this game, if you will, and it's going to take some time for this to play out. But everyone is aligned. Microsoft with OpenAI, Google with their own internal initiative, now Amazon with Anthropic. You've had others, Databricks bought Mosaic AI. So you're seeing the big tech vendors align with different AI partners. And I think ultimately, many of these models will actually coexist at multiple platforms. So good move by Amazon. They needed it.

They needed a jumpstart. We'll see where it goes. And we're bullish that Amazon can figure this out. But they're, again, really behind in the game. But the game is just getting going. Okay. Are they really behind or is it the optics that they seem to be behind? And I ask that because Andy Jassy was on the show, you know, over the summer and talked about AI and all of the efforts and how this is playing out, not just in AWS, but really across the company.

And then he sort of sees it as three different tiers. He also kind of threw some shade on NVIDIA in terms of those homegrown chips at Amazon. So I wonder, especially the chip piece of this, how meaningful that is. It's meaningful, but remember, NVIDIA is the dominant supplier, so there's a little bit of an odds. You know, is NVIDIA going to supply Microsoft and others, or are they going to go to Amazon, who's also trying to compete? I think when you think about it, I have huge respect for Jassy and what AWS has done, but in the AI race, they are behind. There's no way to look at this.

Multiple companies that we work with, I'll use Workday. Workday on Amazon, they had to go to Google because they couldn't get the AI tech expertise that they needed. Monday.com on AWS had to go to Microsoft with OpenAI to get the AI expertise. So the question would be, if Amazon's actually on the front, why are all these companies that we cover, and we talk to all executives doing a dual cloud source model and they've gone away from Amazon and AI. So I can't, that's the direct proof they're not in the game the way they should be. Again, we're not ruling them out. We're not saying they're left behind forever, but this was a great move and we need to see stronger referenceability. We need to see customers come up

live and that they can demonstrate those wins. But right now, you know, those are two examples of, you know, AWS customers that went other places because they didn't have it at Amazon. So where does Meta fit in all this, especially as we have this Connect conference that kicks off on Wednesday and there's a strong expectation that that company is going to roll out its own AI chatbots and sort of take another step forward in this AI arms race? On the social side, they're in an amazing spot. And then from a Lama perspective, they have talked about this. They're not even really monetizing it, but it's kind of a hidden growth engine over time where they could effectively roll another company

based on that technology. It's getting great reviews in the open source community. We had some partners on this morning that talked about their excitement over what Meta is doing. So, again, really, really early, not necessarily their fastball, but effectively using it for their own use and their consumers in Instagram and the core Facebook app, I think will make the site even better. So super early days for Meta, but a great call option long-term with Lama. All right. Brent Thill, thanks for joining me. Speaking of Amazon and specifically Amazon's founder, Jeff Bezos, the company's sister company, Blue Origin, having some news break right now as well.

I will cite an anonymous source here because it looks like Jeff Bezos has sent an internal email at the space company announcing a change in leadership. So Bob Smith, who's currently the CEO of Blue Origin, it looks like will be stepping aside on January 2nd. And a name that this show knows well, Dave Limp, will join Blue Origin starting December 4th as CEO. So there will be an overlap. And I think this is very much meant to ensure a smooth transition. Dave Limp, we know, ran devices over at Amazon, was on this show with John Fort just last week, and actually also ran Project Kuiper, the broadband satellite constellation, multi-billion dollar constellation

that Amazon is building out as well, for which Blue Origin has some of the launch contracts. Now, in this email, it looks like Bezos saying that he wanted to provide some background on Dave, but also recognize Bob and the significant growth and transformation that they've experienced during his tenure, noting that Blue has grown to several billion dollars in sales orders with a substantial backlog for vehicles and engines and that the team has increased from 850 people when Bob joined back in 2017 to more than 10,000 today, noting the expansion as well from an office in Kent to a launch pad and five million square feet of facilities across seven states. This, of course, is very notable, not only because we're seeing this move by a very prominent now former Amazon executive, but also in terms of Blue Origin. This is a company that privately owned with almost fully funded by Bezos, as well as government contracts and customer contracts. We don't really get a lot of detail, including this detail about the backlog and about $7 billion in sales orders. So it'll be interesting to see how this transition plays out over the coming months. It is time now for a CNBC News update with Contessa Brewer. Contessa.

Morgan, scientists have found evidence there are differences in the blood of people with long COVID. The findings published today in the journal Nature could offer clues as to what causes the disease and could be the first step toward developing a test to diagnose the illness. Long COVID, of course, has left millions of people with lasting fatigue and memory problems, severe symptoms, really. The principal investigator in the study said the research is some of the first to prove long COVID is a biological illness. Spotify is partnering with OpenAI to translate podcasts into foreign languages, the new AI-powered voice translation feature will clone podcasters' voices and then automatically produce their show in a new language. The company's already translating English episodes to Spanish and plans to roll out French and German translations in the next few weeks.

A piece of space has now touched down on Earth. NASA returned the largest asteroid sample ever collected, a little less than nine ounces of rocks and soil from the asteroid Bennu collected during a 2020 mission. The sample capsule parachuted to Earth. It landed in the Defense Department's Utah test and training range. And speaking of the origins, Morgan, we can hope for clues to the origins of the universe. That's right. This is a major moment for NASA. It has been many years in the making, so it'll be scrumptious to find out some of these details and some of the scientific data that we get

from this sample. A delicious discovery. Contessa Brewer, thank you. We're going to stick with the space theme here for a moment, because to get back to the Blue Origin news, the company's CEO stepping down, outgoing Amazon SVP of Devices and Services, Dave Limp, will become CEO come December. John Fort joins us on the news line. John, you had a conversation with Limp just last week. Yeah, yeah. And he was saying that the next job he took wasn't going to be consumer. And I guess in a real way, it's not quite consumer yet.

But this is a really interesting move because Dave Limp has history at Apple, at Palm, and certainly a long time at Amazon. And their devices and services is really very much about technology transfer, about taking research and making it practical and making it usable by people. And that's sort of, as you know better than anybody, what the space industry needs to do. Also, Dave Limp is used to managing multiple projects and multiple people and multiple managers across Amazon and working with Jeff Bezos. So, I mean, it makes a lot of sense. It makes sense. And certainly we know that Bezos is spending quite a bit of his time now that he

is no longer running things on a day-to-day basis at Amazon, focused on his space ambitions, continues to invest into this company. And it is a company that is at a key juncture for a number of different programs, whether it is the engines that they're building that are going into their own orbital rocket that has yet to make its maiden flight or being supplied into United Launch Alliance for that company's new rocket that's under development, whether it is the suborbital space tourism business that has been grounded for the better part of a year with New Shepard or even the Lunar Lander or the commercial space station that is under development as well. This is a company that has a lot afoot, but not a lot yet to show for it.

Yeah, and over the years, I've talked to Dave Limp about supply chain issues. As you can imagine, there are plenty when you're dealing with consumer devices at the scale that Amazon has them. And the linking together of hardware, which, you know, if you're shooting stuff into space, it's all about hardware, but also service. How much do you charge for stuff? How do you build out the business models in different ways than the conventional ways to give people what they want, but also to make sure that there are profits for the entire effort at the end of the day. So not what I would have guessed Dave Lemp would go into after running devices and services for Amazon. A lot of people will go into VC or investing or something and sit back and scratch their chins for a while

and figure out what they want to do. But, hey, maybe that wasn't necessary. Maybe he got a call from a certain multibillionaire saying, how about this? Yeah, it would seem so. It also, I think, speaks to the fact they're at this key moment for investing in space, John, which you know I talk about every week. Oh, we love it because really it's the full spectrum and really shows the innovative ambitions of so many of the folks along the West Coast and certainly beyond there who are, yes, dealing with day-to-day technology issues. Elon Musk, you know, early on was dealing

with PayPal, but ended up dealing with SpaceX. You know, this is that really tough, long-term science problem that sometimes Silicon Valley and Seattle types got accused of overlooking and favor of tweaking advertising outcomes, not thinking big enough. This is a big problem to solve. It is a big problem to solve. We'll see how all of this plays out now. John, thanks for joining us on the Newsline. Good talking to you.

From Assignment, we'll see you back on set tomorrow. After the break, what the yield curve and Google search trends can tell us about the odds of a recession in America. Mike Santoli digs through that data when Overtime returns. Welcome back to Overtime. Let's get back to Mike Santoli taking a closer look at recession odds in America. Mike. Yeah, Morgan. I mean, when was the last time we weren't in some way on recession watch? A lot of people fixate on the message from the Treasury yield curve. This is the 10-year yield minus the three-month yield. New York Fed's recession model is based almost entirely on

this, if not entirely. And when it's negative, when this spread is below zero, it in the past has preceded a period when you've gone into recession. So when it's below zero, that's only happened a few times. So right here is around the year, late year 2000. What's always happened is people will tell you this, that it actually starts to uninvert. So basically the spread starts to narrow in advance, like say four to six months ahead of a recession. That's been the pattern. This is also here 2006 into 2007. Now, this also happened in 2019. I'm not going to give it credit for calling the COVID recession. But nonetheless, we've been deeply inverted for a while. And now you see we've started to un-invert or kind of reduce this spread as long-term yields have gone higher. Now, the difference is those

prior times when it started to un-invert, it was because the three-month yield started to crash as people anticipated Fed recuts. It wasn't because longer-term yields were going up. So that's a difference right now between what has historically been the message of the yield curve in advance of a recession. So you can call it either an ambiguous or a non-signal. Now, take a look at Google Trends for the word recession, the search term, the news term, and you see a massive spike last year. That was when everybody expected a recession

as the Fed was tightening. You've crashed down to pretty much pre-COVID levels, relatively normal, although it's interesting to see this spike here, which was in 2019 when we didn't get a recession. So still feels like late cycle, but at the moment, it doesn't seem as if the public is as panicked about the prospect of recession. However, still very annoyed by inflation. It's not shown here. But the search terms for inflation in Google Trends remains elevated, as you would expect, Morgan.

Yeah, not surprised by that. Mike Santoli, thank you. Yeah. When we come back, we'll hear from the CEO of $150 billion commodities producer BHP Group about why you see signs of optimism in China and the impact on his business from the United Auto Workers strike. We'll be right back. Welcome back to Overtime. Chinese property developer stocks tumbling overnight after embattled giant Evergrande said it would have to delay a debt restructuring meeting and that

an investigation into one of its subsidiaries is preventing it from offering new debt notes. The trouble in the Chinese property sector was one of the topics I covered in my conversation with Mike Henry, CEO of mining and metals company BHP Group. When I spoke with him exclusively earlier today, I started by asking him how a slowdown in that part of the Chinese economy could impact the company, which counts iron ore as its largest and most profitable business. We've seen that slowing in the second quarter. There's still some sectors of the Chinese economy that are performing quite strongly. So you look at automotive, you look at green infrastructure, all performing well. But the sector that everybody focuses on, which is really important

to BHP because it's a steel intensive sector, is the property sector. Sales have been strong, but new starts are lagging. And what we're really keeping an eye on is how quickly some of these stimulus measures the government's put in place translate through to improve confidence. Not yet quite seeing that pull through, but if we start to see that pick up, then we would expect growth momentum to increase over the remainder of this calendar year, strong growth into 2024. If that building of confidence lags, then it could take a little bit longer. But as I said, even in the face of this uncertainty, the company is still performing quite well. Yeah. And steelmaking is up. The demand is up for it in China right now, although it does seem like more of their steel that's coming out of that country is being exported versus being used domestically. What does that mean for iron ore

prices? And I ask that because I realize they're up 30 percent since May, but a lot of speculation, at least on Wall Street, on whether they can sustain that. So, of course, it's both demand and supply. Now, on the demand side of the equation, we're expecting the fifth year running of over a billion tons of steel production in China. Exports are up a little bit. They're up at about 80 million tons per annum currently. But a lot of steel intensive sectors domestically are performing quite well, as I said. Green infrastructure, automotive. So it's really the property sector that's lagging. And property does have an impact on steel. But where that's being felt is in electric arc furnace steel production.

So it's one type of steel production which doesn't use iron ore, not to the same extent as blast furnace steel production, where you've seen utilization rates hold up quite quite strong. So that's what's driving iron ore demand. Of course on the production side of things we are seeing production pick up a little bit, but overall the supply-demand equation has remained pretty balanced and we've seen healthy iron ore prices. And so you expect the iron ore prices to stay at these levels? It's always hard to call the short term,

but one thing I would say about our business is we've worked really hard over recent years to become the low-cost supplier, so lowest-cost supplier of iron ore globally in terms of major producers, which means that we're resilient. We've got this great business in all seasons, where even as we see iron ore prices cycle as they will over time, this business will generate pretty healthy margins. We're seeing a lot of supply chain diversification to India.

Have you been a beneficiary of that? For some commodities. So I was in India probably about six weeks back, and I came away really optimistic about the outlook for India because there's this energy in the people that you meet, a lot of confidence in the various industries and in government there. So I met with a couple of key government ministers. They have a clear plan, particularly in the steel sector, which we focus on. They've increased steel production to about 130 million tonnes per annum, looking to over

double that by 2030. And the thing is that they probably don't need iron ore, but they need high quality metallurgical coal or steel making coal. And that is one of BHP's businesses. So in BHP, we have high quality iron ore business, metallurgical or steel making coal business, copper, nickel, and we're building out a potash business. And so for one of those five segments, India is expected to be a key market going forward. It's already our biggest market for metallurgical coal, and it's going to grow from here. You mentioned copper, you mentioned nickel.

These are two other commodities that are going to be key to the future and this energy transformation, decarbonization globally. I guess walk me through what the mix more broadly looks like for the portfolio for BHP in the future. So let me start with copper and nickel because many people don't realize this. The world's going to need two times as much copper in the next 30 years as the last 30, four times as much nickel. And BHP holds the world's largest copper resources, the world's second largest nickel sulfide resources.

And so we're right at the forefront of this growing demand for copper, nickel, and some other commodities that the world needs for decarbonization. So copper, Dr. Copper, or even any of these other industrial commodities that we've been talking about right now, what is it telling us about the state of the global economy? So the global economy overall, and BHP is a long-term company, so obviously, of course, we need to be ready for the cycles, but we're looking long-term and everything that we're seeing on the copper front, so

on the demand side of the equation, two times as much copper demand over the next 30 years as the past 30 years. On the supply side of the equation, things are pretty balanced over the next couple of years, but beyond that, copper resources are becoming harder to find, they're becoming lower grade, which means generally more expensive. And there's all sorts of ESG concerns that need to be met in developing new copper resources. One more question for you, and that is your outlook on the auto industry. I mean, UAW, the strike that's going on here in the U.S., very much in focus, whether it's

steel, whether it's nickel, whether it's copper. Are you exposed to it? So, look, I haven't been following too closely exactly what's happening in the US here, but if I bring it back to what we see happening in automotive more generally, strong shift towards EVs. And we're seeing that here in the US, we're seeing it in China, seeing it elsewhere. And as that plays out, there's going to be a lot more need for nickel, copper and other metals and minerals. And so we've been working with a number of the automotive manufacturers on supply of those commodities sustainably. And we think that's going to be good for the BHP business over time.

So BHP has been taking steps to transform that portfolio, shedding its oil business a few years ago, acquiring Oz Minerals as it expands into copper and nickel, which you just heard their key to the green tech ambitions. Shedding lower quality metallurgical coal tied to greater emissions. Bringing a potash project online in 2026. Henry says all this means less cyclicality. Still, shares of BHP are down about 9.5% this year because investors are still focused on commodity prices and growth concerns which are pressuring economically sensitive parts of the market, including metals and mining. When we come back, we'll tell you why tomorrow

is shaping up to be a key day for the consumer. Welcome back. A number of consumer-focused events will be front and center for Wall Street tomorrow. Before the bell, we'll get earnings from Whole Foods supplier United Natural Foods. Later in the morning, we'll get new home sales, consumer confidence data and on overtime. So right here, consumer bellwether Costco reports quarterly results. That stock is up more than 20 percent on the year. And of course, in focus will be how consumers are splashing money out if they are, how discerning they're going to be, especially as we do see student loan repayments start later this week. We have the impact of higher interest rates and a number of other factors, including still persistent inflation. Markets finishing the day higher.

The S&P and Nasdaq snapping a four day losing streak. That's going to do it for us here at Overtime. Fast Money begins right now.