Closing Bell - Closing Bell Overtime: Breeze Airways Founder David Neeleman On Record Summer Travel; Carlyle’s Jeff Currie On Energy 7/10/24

Episode Date: July 10, 2024

S&P 500 closes above 5600 for the first time ever as that index and the Nasdaq set fresh record closes and Apple notched its 7th straight record close. BD8 Capital’s Barbara Doran and Bespoke’s Paul Hickey break down the market action. Carlyle Group’s Jeff Currie on the setup for the energy trade heading into the second half. Breeze Airways founder and CEO David Neeleman on TSA record numbers, the busy summer travel season and new routes and destinations of his new airline.  

Well, that bell means the end of regulation. The Invesco MSCI Global Climate 500 ETF ringing your closing bell at the New York Stock Exchange today. And Sunrise Realty Trust ringing the bell at NASDAQ. And the S&P 500 and NASDAQ setting record closes again as Apple and Tesla extend their win streaks. And the rally broadens out. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Thought Overtime. I'm John Fort with Morgan Brennan. Well, coming up on today's show, serial airline entrepreneur David Nealman joins us in an exclusive interview with news on his latest venture, low-cost carrier Breeze Airways, as TSA screenings hit new highs during this busy summer travel season. Plus, commodities expert Jeff Curry breaks down the action in oil and the one

metal he's watching closely right now. But hey, we've got to get to this market. More new records for the S&P 500 and Nasdaq. Let's bring in our market panel, Barbara Duran of BDN Capital Partners and Paul Hickey of Bespoke Investment Group. Guys, good afternoon. So, Barb, it seems like maybe what happened here in the market is Powell gave us a signal that if CPI and PPI inflation reads come in cool this week and if the rest of the data next month behaves, we can expect a September cut. Is that how you take it? Yeah, that's exactly how I take it, John. I think the Fed has gone out of its way starting last week to start signaling that a September cut is very likely given the recent spate of economic news we've all seen. And that's whether it's jobless claims, continuing claims, the ISM manufacturing services and

contraction territory. I think last week's comments and this week's on the independence of the Fed is clearly, to me, setting up for a September cut if they see, if, as you said, if the inflation data tomorrow and Friday and in the month of August come in showing lower inflation. So I think he's trying to fend off any criticism that in an election year, it would help if Biden is still the incumbent helping there. And so I think the other thing, you know, is the is earnings growth. You know, earnings look strong going in. This will be the fourth quarter of up earnings having troughed last third quarter. And so I think that's that's going to be a real positive for this market.

But I think the Fed was was very clear saying, look, we don't need to get to two percent inflation for us to start cutting rates. And it made a point of everything looks good in terms of the economy growing at 2%, but it is slowing. And so he's making it clear that they're now starting to worry about going too far, admitting that they are restrictive. And so I think they're setting up for a cut again, assuming these inflation numbers come in in an attractive way. So, Paul, heading into earnings season, earnings look decent. The Fed's looking a little dovish. It's one thing to say you're not going to completely dump out of the market broadly because things are looking like they could go higher. But for new money coming

in for a multi-year strategy, what do you do? So I think from a multi-year strategy, well, it could be painful in the short run here, is you have the rubber band being stretched in favor of the mega caps over the smaller caps within the S&P 500. You have the S&P 500 equal weight index underperforming the S&P 500 market cap weight index by the most over a six-month period. There's only been 10 days since 1990 when the six-month gap has been wider, and they were all in late 1999 and early 2000. So I think you could see some broadening out here. Over the last year, only two sectors have outperformed the S&P 500.

That's tech and communication services. Eight sectors are underperforming the S&P 500 by more than 10 percentage points. So the only other sector that's even close to performing in line with the S&P 500 is financial. So in that respect, it could be painful in the short term, but you will see some broadening out in the market eventually. And if we do get the Fed cutting rates sooner rather than later, that should only help those sectors as long as we're doing a gradual rate cutting cycle rather than some cycles that we saw in 2000 and 2007 into 2008. OK, Barb, what are your thoughts on that? Do we see this broadening out? And I ask that on a day where we've just had Apple close for a seventh straight

trading day at a record. It has been one of the biggest movers in the S&P and the Nasdaq over the past month, surpassed only by Tesla among the magnificent seven. So we could talk about rotation, but right now it seems like so much of the rotation is just within this group of seven stocks. Yeah, I think so. I mean, Apple had been a big laggard. There's lots of reasons why it's been perking up. But I think it's been it's been a real problem in terms of rotation. You know, you've seen since the April pullback, which was what, five, six percent. You've seen the industrials, the cyclicals all have and consumer discretionary have stayed flat. And the question is why? You know, it looks like it's really concerns over growth slowing.

You know, how much will it slow and will it help these yes now we've got more visibility on a rate cut. And that should. Help you know rotation to these sectors but I think there's still concern about how you know is the Fed gone too far too fast- are

too long in terms of the rate hikes- so you know we'll see and I think it's gonna be tough so it's been continues to be as I said. In the past the stock pickers market. And it's always been a question with these names. They've run so far, so fast. You know, how much more can they go? And they keep going. So, you know, the fact is because there's real growth, they're real secular growth.

And the valuations are getting a bit full. But as rates come down, those P.E.s can expand more in these long duration assets. Paul, you just mentioned financials. I mean, we have seen a bit of a rally in the big banks ahead of earnings that kick off on Friday for some of those heavyweight names. How much hinges on earnings here, especially when you do talk about this broadening out and given the fact that expectations are very arguably lofty coming into Q2 results? Well, in some ways they are, in some ways they're not. But so financials, we always look at financials as a bellwether for the rest of earnings season. We can go back to last earnings season on that first Friday of earnings season, when all the banks reported, all of them went down in reaction to their results on that Friday.

The market was up 2% during earnings season. So we wouldn't put too much weight into that. But if you look within the S&P 1500 and you look at analyst revisions, more companies have seen downward revisions in their estimates over the last month than upward revisions. And typically, when you see that kind of trend coming into earnings season, it sets the bar low and people will criticize it. Well, analysts are always setting the bar low. But when you have an earning season, when you have more negative revisions and positive revisions, the median return of the S&P during the earning season is a little over 2 percent, whereas when you have more positive than negative, it's about 0.6 percent during earning season. So there's a noticeable difference. And, you know, I would say, you know, going back to these mega caps, you know, Tesla and Apple here, those were the laggards that have really been, you know, coming back. You know, you have the mag seven back together again. And,

you know, Apple seven days in a row and Tesla 11 days in a row. So it's it's tomorrow, 7-11 day. And so everybody have a slurpee. So in that respect, they're celebrating Slurpee Day a day early. Okay. Paul Hickey, Barbara Duran, thanks for kicking off the hour with us. As we had all the major averages finish higher, we saw a particularly big surge higher in the final moments of trade, the S&P finishing at a record closing above 5,600, 5,623, it looks like, for the first time ever. Yeah, it's big.

Well, now let's bring in CNBC Senior Markets Commentator Mike Santoli for a broader look at this rally and one potential warning sign. Mike. Yeah, Morgan, maybe just a short term. Let's just see how far we've come in a short period of time at the index level for the benchmark S&P 500. Pretty much an unassailable trend. That's the first thing you would say. There's really no missteps here along the way in terms of the very modest pullbacks. The fact that even if it's been narrow leadership and poor breadth at times, it shows you that when the market plays defense, it buys the best quality stocks and it defends

the overall benchmark against a lot of problems. Now, what we see here is this spread between the index and its 50-day average is now about 5%. That's pretty stretched, at least relative to this last little phase here. If you go back to last July 31st, which preceded a little bit of a pullback and eventually a correction in the market, you actually had less than 5% stretch. So it seems like it should surprise nobody if we slow down a little bit, pause, pull back, something like that. But that doesn't mean, again, that it's a trend changer. Now, the other thing you look for is sentiment. Is it getting a little bit too frothy? Are people getting excessively bullish and having their expectations too high? Take a look here. This

is a running tally of the spread between the bulls and the bears in the weekly investors intelligence poll. These are professional investment advisory services. It's been running a very long time. So now you see the spread is above 40 percentage points. Now, when people are bullish, it doesn't mean the market's going down, right? During all of 2021, people were all in psychologically in the market. The market kept going up. However, above 40, at least when you first get there,

it does sometimes precede a flattening out of the market or some kind of a pullback as it did in the early part of this year. So that's just the backdrop. That's not really a catalyst. You have to be aware of people getting a little bit too overexcited in this short term, although I will point out the average S&P, I mean, the average S&P target for Wall Street strategists is now, again, below where the index is trading. So that hardly speaks to people having their eyes be too big about what the market can deliver. We'll have to see if we get more revisions in light of that. I mean, the other thing I've been watching today, Mike, is the fact that you've got a 10-year Treasury yield that's pushing

lows for the month. And it seems like 4.25 is really the level that traders are watching, because we're just above that right now. But if you break below it, maybe it spurs more equity buying. So I wonder how that factors into the picture here when you start talking about stretch technicals and sentiment. And also, I'd argue, seasonality as we come through to the second half of July. Yeah, exactly. It gets a little bit noisier, I think, in terms of the seasonal factors. Now, Y yields are going down. That's another thing you want to be careful of. Is it really responding to softening economic

numbers? Once you've more or less priced in in terms of expectations, a September Fed rate cut, if that's what we're doing after tomorrow's CPI number, do you really want to see massive rallies in long-term treasuries? I mean, in terms of what the macro message is, it's not clear to me. What I would just say is it's benign at this level. In this range, it's perfectly hospitable for stocks to be well-supported. But I don't know if you want to see it really crack below 4% from here. All right, Mike, we'll see you again in just a little bit, our Mike Santoli. Meanwhile, oil prices today moving higher and a record day for equities. Up next, Carlisle's Jeff Curry is going to share his outlook for crude, plus his take on where the copper will resume its rally after a pullback over the last couple months. And later, Breeze Airways founder David Nealman on the state of the airline industry.

Ahead of Delta earnings tomorrow, overtime is back in two. Welcome back to overtime. Oil settling higher today after trading lower this morning. WTI earlier hitting its lowest level in two weeks, while the energy sector is on pace for its worst week in nearly a month. Joining us now is Jeff Curry, chief strategy officer of Energy Pathways at Carlisle. Great to have you, Jeff. Now, if I understand kind of the Energy Pathways thesis correctly, you're really looking primarily at energy supply, energy security, energy cost as major factors here. So what should investors look at? What is the market under appreciating here as a factor? Where should they put their money. As a result of this point. I. You know yes oil is off a little bit in the last

several days but let's look at it over the last let's say three to four weeks it's well off the lows and I think it's important to point out. It's off the lows with out investor participation. There's been a little bit of recovery of the investors but this has been an unloved rally. And it's important we look at the structure of this market the term structure it's backward dated when markets are backward it tells you you're tight inventories are still expected to decline two million barrels per day as we go into the third quarter which should push us well

above ninety into the mid ninety dollar barrel range and I think with that type of a fundamental backdrop there's still a lot of opportunity to get into this market. And it's not just what we see in terms of, you know, the supply side on oil. You know, the big question coming down the pipeline is what kind of stimulus is likely to come out of the Fed, but also likely to come potentially out of a bullet barrel meeting in China. We put that together on the demand side and then also on the supply side. You know, we're teed up for a pretty good rally going into the end of the summer. So, Jeff, it sounds like and clarify for me here, if I'm reading you wrong at a time when we're

really concerned about U.S. consumer demand overall, the demand picture you seem pretty bullish on and it affects not just oil, but the whole commodities complex. Well, I mean, let's put it in perspective. It was off to a bad start. I'm not going to say that, you know, but I think the bottom line is you're still tracking growth this year of one point one million barrels a day. That is trend demand growth historically. So there's a lot of concern about economic slowdown, youdown, the green transition eating all of this demand growth away. The bottom line, in a really bad year, we're at historical trend level. So you have that core demand base there.

Combine that with the OPEC production cuts, supply disruptions, and they're already low inventories. This market is relatively tight. But I do want to emphasize the investors are not seeing I think the reason why the investors are absent. Is they don't have a strong grasp of what's happening in China

right now- particularly given the fact that the Politburo is running out of potential options to stimulate the Chinese economy by my point being here. Is you don't need a return to the strong momentum before. Just keep this baseline going against that supply picture. These markets are

going to get tight. Yeah. And of course, deflation concerns in China are also in focus, especially given the data we got overnight. It's pretty typical historically to see in a U.S. election year oil prices actually softer, weaker, come off. The fact that we've seen this move higher in recent weeks, could this trigger another release from the SPR? Well, they're running out of time to, you know, have a significant back. And I don't want to get into the politics because, you know, historically there's, you know, a precedent of using it going into a political situation or an election but that that said I the near term to do much about this summer

and and I think what a lot of people are resting on a why the volatility is so low may sell the ball up there towards a hundred dollars a barrel is the excess capacity sitting in OPEC the OPEC will chase any market that goes substantially higher. Bring on the supplies tame it bring it back down. Which we mostly agree is why it be really difficult for the state to search that far above you know

a hundred dollars a barrel- but I think you know to move from let's say eighty five to ninety five. You know over the course of the summer months- that can be achieved without doing too much damage to. The economic environment concerns about

inflation. And I am unlikely trigger that big of a response out of OPEC. OK, got to get your thoughts on copper, especially as we do hear some of the momentum building around this structural supply demand. I guess I'll call it a shortage in this new era of electrification and infrastructure build out and everything else. Well, when you look at copper, the one thing that's different between copper and oil, it has an anchor. And as you point out, all of that electrification and that infrastructure build out around AI in the green transition. I want to throw in, you know, defense spending in there because a lot of copper goes into munitions. That longer term structural

story makes people comfortable to buy. There are investors still in copper, unlike in oil. And I think it really goes to that point is investors are really lost with that long term story on oil, but are comfortable with with copper. Now, the big thing of the copper market is focused on in the very near term is the stimulus question. Will the Fed cut and by how much and what will the Chinese do? The one thing to keep in mind about the Chinese is they're really running out of options. They've been using green capex, you know, EVs, lithium batteries, solar panels, growth there to offset the weakness in the property market. And when we look at the property market

is getting worse not better. And that in the fact that the W. you know with the U. S. and Europe are pushing back on EV exports. Means the Chinese are starting to run out of options all right we'll continue to argue. Certainly go. To watch

that- then Jeff thank you lots of great insights. Jeff Curry from Carlisle. Up next, low-cost carrier Breeze Airways announcing new routes and destinations today as the TSA sets records for air travel in America. We're going to talk to serial airline entrepreneur and Breeze founder David Nealman about how long he thinks this travel boom can last. And from planes to rockets, Boeing giving an update on the two astronauts stuck aboard the International Space Station after mechanical issues with Boeing's Starliner spacecraft. We've got those updates next. Plus, earnings from WD-40 just crossing, and that stock is jumping higher. It's up 9. a half percent right now.

Ring's coming in at a dollar forty six per share on revenue of one hundred and fifty five million dollars, both better than expected. Companies saying it has engaged an investment bank, which is in discussions with potential suitors for its U.S. and U.K. home care and cleaning product portfolios. Stay with us. Welcome back. Low-cost airline Breeze Airways announcing several new nonstop flight routes and two new destinations today, including Portsmouth, New Hampshire, and Telluride, Colorado. The news comes amid a travel boom. The TSA reporting it screened a record number of passengers on July 7th, topping 3 million in a day for the first time ever. Joining us now is Breeze Airways CEO and founder David Nealman.

He started four other airlines as well, including JetBlue. It's great to have you on the show. Welcome. Thank you, Morgan. It's always great to be with you. So Breeze is really an upstart, came on the market a couple of years ago. You're quickly expanding these routes. Walk me through why and how it speaks to how you're assessing market dynamics right now. Well, you know, I've started a lot of airlines. And, you know, one of the things that's really important for me is there needs to be a market. There needs to be a place to go. And when I looked at the U.S. market, you know, I saw there was just a lot of small and medium-sized cities that were losing air service.

Places like Portsmouth, New Hampshire, that were announcing service today, and Montrose Telluride. They were cities that needed non-sub-service, and so we came in with a great product. We've got first class. We have extra legroom seats. Our customers love us. When we started, I said, I want to get you there twice as fast for half the price, not having to go through a hub. And so it's really resonated with our customers. We're up to 200 routes, 58 cities in 29 different states. And we couldn't be happier with the way things are going today.

We just talked about the fact that consumers are still spending money on travel. We're poised here for another summer of records, of record air travel. Tomorrow we get earnings from Delta, but we also get CPI. And what we've seen in the inflation data in the last couple of months is that airfare pricing has actually come down year on year, perhaps in part because more capacity has been coming online. Can this dynamic continue? Depends. In some markets, no.

In our markets, absolutely. We just have unlimited number of markets we can fly. Morgan, we fly a smaller airplane that has 137 seats. We can go between markets that others can't. The ULCCs are under pressure right now. They're in big hubs. The bigger airlines are putting the screws to them. Fares are coming down.

But we're not seeing that in our markets where we have exclusive routes primarily. So it's kind of a tale of two airlines today. Those are the ULCCs trying to fight against the majors and the majors doing basic economy, kind of going after them. And it's interesting to watch, but it's the consumers benefiting from that for sure. David, I'm curious what you've seen in the labor market for a brand new airline over these three years, because it certainly was different in May of 2021 when you were trying to launch across both pilots and flight attendants in particular. How has the market shifted? How does that affect the rate at which you can expand? It's gotten so much better, John.

You know, we're we used to just work really hard to hire pilots. And there was about 7000 pilots that left and retired early during covid helped by the money that these airlines received from the government. They said, okay, you guys retire. And then they said, holy heck, we got to rehire 7,000 pilots. We'll put a lot of pressure on. But that whole situation's changed. I don't know of any airline other than us and maybe a couple of others that are even hiring pilots today. We have a pool of over 500 applicants and growing every day. We can be really choosy. I just came from our training center and addressed a new class of 40 flight attendants. So we're enthusiastic and excited to be with our company. No problem on the labor side for us at all. And

which is which is really great. What do you think is the defining differentiator for the next decade making a special airline? I mean, Southwest is certainly going through a shift. It seemed to have whatever it factor it was for a period of time. And now a number of airlines seem to be looking for it. I think for us, it's kind of doing things others aren't doing. That's really important. I'm not going to sit and fly into a hub and go on top of other airlines. We want to expand markets. We want to go into a market that maybe has 30 people flying a day through hubs and expand that to a couple hundred a day just because of convenience. And so I think that's really where it is for us. For the other guys, I'm not really sure. It's

going to be interesting to watch because the market has to expand so quickly. And, you know, I'd certainly rather be in markets with the premium product. You know, yesterday, Travel Leisure announced that we were the third best airline in America. Not bad for a little upstart airline that flies to places like Portsmouth and Huntsville, Alabama, and Telluride Montrose now. And Westchester County, where the presence of breeze has basically transformed that airport. David Nealman, great to have you on. I think, let me just say one thing about that, and that's Vero Beach. We just announced our fifth destination to Vero Beach out of Stewart, which is just in the Hudson Valley. So we do

white plains. It's a great market. All right. Thanks for being with us. We're going to hear more on the summer travel season when a Delta Airlines CEO at Bastion joins Squawk Box tomorrow after its latest quarterly earnings. Well, now from planes to space, we're going to stick with the aerospace theme. NASA hosting not one but two press conferences today on Boeing Starliner to update when and whether the space capsule and its crew can come home. Starliner and its first ever astronauts, Butch Wilmore and Sonny Williams, docked with the International Space Station on June 6th amid mechanical problems including helium leaks and thruster issues.

A visit originally expected to last a week, the astronauts still don't know when they will return to Earth from the ISS. But in their first media appearance since launching, expressed confidence that Boeing's capsule can get them back safely. We've been through a lot of simulations for this spacecraft to, you know, go through all sorts of iterations of failures. And I think where we are right now and what we know right now and how the spacecraft flew as it was coming in to do the docking as Butch described. I feel confident that if we had to, if there was a problem with the International Space Station, we can get in our spacecraft and we can undock, talk to our team and figure out the best way to come home. Well, NASA and Boeing officials also saying that some of the data

suggests, quote, optimistically, a planned return could happen by the end of this month. The goal for NASA, get this done ahead of an ISS crew turnover in mid-August. John, we could call this data dependent. OK, OK. Well, we've got a news alert on Costco. The stock is up about two and a half percent in overtime. Kate Rooney has the details. Kate. Hey, John. Yeah, that's after Costco reported June sales, and it plans to increase the price of its annual membership. We'll start with the sales numbers.

Total comparable sales jumped 5.3%. That was year over year. E-commerce comparable sales up 18.4% from a year ago. And then that annual membership fee, this is for U.S. and Canada Gold Star members. It's going to jump by $5, going to an annual fee of $65. That's effective September 1st. And then executive memberships are jumping from 120 bucks to 130. But you can see shares up here after hours, John and Morgan, back with you. All right. But the hot dog price not changing. Kate, thanks. Time for a CNBC News update with Contessa Brewer. Contessa.

John, the Biden administration will begin shipping 500 pound bombs to Israel. U.S. officials said those bombs are being prepped for shipment, according to The Wall Street Journal. Israel says it needs them to destroy Hamas tunnels. The delivery ends a two-month pause the U.S. imposed over concerns that Israel did not have a credible plan to protect civilians in its invasion into Rafah. Florida Governor Ron DeSantis is now expected to speak at the Republican National Convention after a scheduling change, according to NBC News. The former challenger to Donald Trump originally was left off the lineup, so this is a switch. Ex-NBA player John Tate Porter pled guilty to conspiracy to commit wire fraud in the betting scandal earlier this year that got him banned from basketball forever.

An NBA probe found the former Toronto Raptors forward bet on games and gave other bettors confidential information about his health. Porter could face up to four years in prison, according to his lawyer. And we're told Porter's cooperating with authorities and is getting treatment for a gambling addiction. John, I'll send it back to you. Contessa, thank you. Coming up, Mike Santoli reports on the home front with a deep dive on shelter inflation. What the charts are saying next. Welcome back.

As Wall Street waits for tomorrow's June inflation report, Mike Santoli is back with a preview on what to expect from shelter inflation. Mike. Yeah, John, of course, that's been one of the more stubborn areas of inflation shelter. We had the high cost of home ownership as well as rising rents or at least rising rents that are filtered into the CPI report. This shows you the homebuilders ETF that's ITB has really surrendered its lead or built up over the prior couple of years as you've had mortgage rates go up and in general activity slowing. Existing sales also starting to uptick. This is the residential real estate ETF. And interestingly, it's not all apartment rents.

It largely is. It basically has overtaken homebuilders. So that actually suggests maybe we've seen the greater part of the disinflation in rents already happen in the market. However, as I said, it's still to be to be seen in the CPI report. So this is where the market's trying to price in the current situation. We're waiting for the lag effects on CPI. And then just a quick snapshot of the 30 year fixed mortgage rates. We do have the 10 year Treasury yield declining again after its recent rise. And it's finally again brought the 30-year fix down below 7%. That might not be any magic level, but certainly takes a little bit of the pressure off potentially if we get some downside from here, John.

All right. Lots of people feel like the rent and the mortgage rates are too high. Mike, thanks. Up next, why rising credit card balances could be of concerning interest to investors when the big banks start reporting earnings later this week. And Honeywell getting a bump today. On news, it's buying the LNG technology and equipment business from Air Products for $1.8 billion in cash. RBC notes that it's the fourth deal for Honeywell this year, with M&A totaling roughly $9 billion year to date. It's also another deal for CEO Vimal Kapoor, who took the role just over a year ago. Stay with us. Welcome back. Intuit ended the day down 2.5% after announcing a 10% cut to the workforce, affecting 1,800 people. CEO Sasan Ghadarzi says this cut isn't

about reducing costs. It's about spending differently in the AI era. In fact, he says the company's next going to hire about 1,800 new people in engineering product and go to market roles. Went into it, reported earnings May 23rd. I asked Ghadarzi about whether and how he'd be looking at workforce cuts. And here's what he said. I'll give you three examples, actually, the areas that we're looking at. You know, one is, although we're going to be adding to engineering, our engineers are actually far more productive now with all of the AI capabilities that they are using. So we'll be shifting engineering off of certain work where AI is not going to do the work to more important work.

Another area is our investments that we've made with AI across our customer success operations. We're able to have AI do a lot more of the work and reduce the manual entry for our customer success folks. And so therefore, we'll be able to do more with less investments. And then the other, I would just say, is content generation. We're leveraging a lot of our AI capabilities to generate content internally that others would have to manually write. And so those are areas where, based on investments, we're going to be more efficient, more productive, and move the dollars. weren't meeting performance expectations. He's cutting 10 percent of executive roles, closing offices in Edmonton and Boise and eliminating 300 other roles. Intuit stock is up 36 percent over the last 12 months, about flat, a little bit higher than that year to date. All right. Well, breaking news on the trial of Bill Huang. Leslie Picker has the details. Leslie. Hi, Morgan. Yes, we have a verdict in this trial of Archegos founder Bill Huang, who has been convicted on 10 of 11 counts.

Those include market manipulation, fraud and racketeering. This, of course, is one of the most high profile white collar trials that we have seen in years. It encompasses the 2021 collapse of his $36 billion investment firm. It ultimately led to losses totaling about $10 billion in global banks. And at the heart of this trial was this idea that he had engaged

in market manipulation and had not been truthful with the banks in order to kind of get these outsized stakes and outsized exposure to certain positions that ultimately he was convicted of market manipulating here. In terms of sentencing, we are expecting that to be handed down in months time, but each of those face a maximum sentence of 20 years in prison for each of those charges. Again, convicted on 10 of 11 counts here. This is the trial of Archegos Capital Management founder convicted of market manipulation, fraud and racketeering. Morgan. All right, Leslie Picker, thank you.

This year's top state for business will be unveiled tomorrow. Scott Cohn is in that mystery state with another diabolical hint. Scott. Actually, Morgan, we're going to reveal, yeah, another diabolical hint as we tell you a little more about what our study is all about and get set for the big, big, big reveal. It's coming up. That's next on Overtime. Welcome back to Overtime. This year's top state for business will be crowned tomorrow. And Scott Cohn joins us with another, as we just mentioned before the break, diabolical hint about this year's winner. Scott.

Yeah, Morgan, and a little more about what we do every year. You know, I start on this study every year in February. We put all 50 states through their paces, 128 metrics in 10 categories of competitiveness, which brings us here to America's top state for business. With all that work, we're not going to just tell you where I am am. We gotta drag it out with those diabolical hints. We did our first hint this morning on Squawk Box, and that was, take a hike. Take a hike. Later in the day on the exchange, the next hint is the cure. The cure. What does that mean?

Well, let's give you another diabolical hint here on Overtime. Shell game. Shell game. Remember, they're diabolical hints. You can read more about our study, all about competitiveness. We will unveil where I am, the top state for business, tomorrow morning on Squawk Box, and you'll be able to see where your state ranks at topstates.cnbc.com. Guys? Okay. Okay, Scott. I'm gonna put my my guess in here i'm gonna

guess georgia because the appalachian trail ends in georgia you know take a hike and shell game shell cracker fishing on lake seminole is big there i don't know about the cure part though yeah how do you know that? Have you done that? No, I have not. I was just going to say, looking at your background, it's coniferous. You've got a pine tree, I would say, or something along those lines. So maybe not one of the more tropical climates of the U.S., but beyond that, I really, I'm at a loss here.

I can never trust his trees, though. You guys are good. I feel like he finds, like, odd trees for the location just to throw us off. Yeah, you know what, John? We learned one year where some, like, amateur or not-so-amateur botanists figured out where we were based on the background. So this may be indigenous. It might not be. You just have to find out tomorrow.

He's like a supervillain, Morgan. He is. I mean, this is truly diabolical. And you say the cure. I think of the British rock band. So that can't possibly be it. I guess we're just going to have to tune in tomorrow. Scott, thank you.

We're looking forward to it. OK. Up next, the conference board's chief economist on how tomorrow's key reading on inflation could impact the Fed's interest rate strategy and your money. And check out shares of AMD. It's one of the top performers in the S&P 500 today after announcing it is buying Silo AI, that's Europe's largest private AI lab, for nearly $700 million. And Alcoa just releasing preliminary second quarter results. Adjusted EPS between

eight and 19 cents per share. Revenue between 2.85 billion and 2.925 billion dollars. That was largely above fact set estimates. You can see shares are popping up more than two and a half percent right now. Stay with us. We've got breaking news on Citigroup. Leslie Picker back with that. Leslie. Hey, Johnny, I want to draw your attention to shares of Citi down a bit in after-hours trading. On this release from the Federal Reserve and the Office of the Comptroller of the Currency, about a new fine for Citi of $135.6 million. This is according to the Fed in response to what they say is Citi's violating of the board's 2020 enforcement action. The Fed says that Citi has made, quote, insufficient progress remediating its problems with data quality management and failed to implement compensating controls to manage its ongoing risk. We also have a statement from Citi CEO Jane Frazier on these regulatory actions

where she says, quote, we have acknowledged that despite making good progress and simplifying our firm and addressing our consent orders, there are areas where we have not made progress quickly enough, such as our data quality management. We've intensified our focus and increased our investment in those areas over the last several months. We will get these areas where they need to be, as we have done in other areas of the transformation. She's talking about the transformation of the firm broadly. Just a reminder, guys, Citi is one of the three large banks that is reporting earnings on Friday. So we can expect to hear more on the regulatory actions at that time, hopefully on the various calls.

Guys? All right. We know you'll be covering all of it for us. Leslie Picker, thank you. Recent data has shown a cooling U.S. economy, prompting many to believe the Fed is going to be cutting this year. So could tomorrow's June CPI report make the case even stronger for a cut

sooner rather than later? Well, joining us now is Dana Peterson, chief economist at the conference board. Dana, it's great to have you on. I'm going to ask you that very question, especially as we're coming off of two days of Powell testimony on the Hill, where he did seem to imply that the path was set potentially for a September cut. I'm not sure that's actually what he was saying. He's still saying that the Fed needs to feel comfortable that we're heading towards 2% inflation. So remember, going back to the first quarter, we saw a stalling out in that progress. We saw a little bit of improvement in the second quarter, but I'm not sure if tomorrow will definitely seal the deal for a September cut. We definitely need to see further deceleration in inflation and also the fact that the labor market still continues to hold up,

despite the fact that, yes, the broader economy is slowing as the Fed is impacting demand. Over the past week or so, though, whether it's Powell or even some of the other officials from the Fed, there does seem to have been a little bit more emphasis on the fact that you do see this softening, this cooling in the labor market. So are you in the camp that September could happen, depending on the data we get tomorrow and in the coming weeks or no? Not really. We still have our focus on November and December if we're going to see one or two cuts. I think the key thing is that the labor market has gone from raging to robust. We're still seeing outsized payroll gains. On average, in the second quarter, we saw a net gain or average gain of 177,000. That's really strong. And the unemployment rate

at 4.1% is still very, very low. The key thing is we're not seeing hours come off, which would be a canary in the coal mine for more serious contraction in the labor market. And wages are still elevated. Most people who want to work are working. And we're still hearing that corporations are holding on to their workers and they're not looking to let people go right now. Dana, what about rents, you know, housing? How much does that matter? That matters a lot. Indeed, the one element of services inflation, and again, most of the inflation we're seeing is from services. A huge element is housing and rents, those shelter costs. But past declines in rents and home prices

are signaling further weakening in shelter costs. And that's going to be important for getting us back to 2 percent, especially because you have supply drivers and other elements that are working against the Fed's actions to rate to cut interest rates. So everybody seems to be focused, you know, perhaps it's our fault a little bit on when's the Fed going to cut. But even once the Fed maybe does cut for the first time, how often do you think the Fed cuts after that? Is it just going to be one and pause for a while? What kinds of numbers would it take for there to be a more discernible path? Yes, it could very well be one and then a pause. We're seeing that among many other central banks, Canada, ECB, where they're going once and they're

saying well let's wait and see so that could be the fed's tactic as well especially towards the end of this year there's almost always some kind of a budget uh impasse and then certainly the debt ceiling um comes due in january through extraordinary measures Maybe the X date is later in the year, but still in all those things, along with the path of inflation, how well GDP and the labor market are doing, are all going to factor into how many times the Fed cuts. They may do one and done or do one and wait. We shall see. All right. Dana Peterson, thank you. Gives us a lot to think about, Morgan, especially, I mean, on a day when we've figured out a new way to reach all-time highs on the S&P finish up more than 1%. We haven't seen a 1% move in either direction for the S&P in quite some time. I believe 22 trading sessions. So that's notable in of itself. Tomorrow, we get a consumer read. We get ConAgra, Delta,

and PepsiCo earnings in addition to CPI. Yeah. And CPI really important, of course, because I mean, we're also just getting ready to start earning season. And after tomorrow, we get banks, some big banks, including JP Morgan, starting on Friday, and then it's off to the races from there. It's off to the races from there. CPI Friday, as you mentioned, you also get consumer sentiment. You're going to get PPI. All of this funnels into the Fed's preferred inflation reading, PCE. We're going to continue to watch all of it as the markets do climb, though, to record highs. And the mega caps continue to have a big role in that, including you can't count out Apple. You can't even count out Tesla. That's right.

Seven straight days of record closes for Apple. That does it for us here at Overtime.