Closing Bell - Closing Bell Overtime: Does Latest Inflation Data Throw a Wrench Into Plan For The Fed—And Markets? 8/14/25

Episode Date: August 14, 2025

Kristina Partsinevelos opens with the market theme before Rick Santelli breaks down bond market reaction to the latest PPI. Steve Liesman explains what drove the number. Former Fed Governor Frederic Mishkin shares insight on the economy and the Fed’s next steps.Earnings focus turns to Applied Materials, while our Leslie Picker covers 13F filings. Bob Elliott of Unlimited and Kristina Hooper of Man Group weigh in on market direction, and Chris Retzler of Needham highlights a big week for small caps. Angelica Peebles reports on Eli Lilly raising Mounjaro prices in Europe in response to Trump’s pressure. 

That bell marks the end of regulation. Meridian equity partners are going to closing bell at the New York Stock Exchange, the FDNY Foundation doing the honors at the NASDAQ and stocks closing basically near the flat line. Huh, well off the lows of the day, well off the lows. Anything in the green is a record for the S&P and the NASDAQ and it looks like the S&P made it. The producer price index number came in hotter than expected this morning, upsetting the Fed rate narrative that had driven the markets to record highs this week and communication services, the top sector driven by Netflix, consumer discretionary also higher, but that's mostly due

to Amazon's waiting in the group. And it was a wild day for Bitcoin. Big drop this morning after Treasury Secretary Scott Besson said the government won't be buying additional Bitcoin for a strategic reserve. Overnight, Bitcoin had hit a record high of just under $125,000. Intel popping late in the session. More than 7% on reports, the Trump administration is in talks to take a stake in the company. CEO Lipbutan visited the White

House, of course, earlier this week. That is the scorecard on Wall Street, but winters stay late. Welcome to closing about overtime. I'm John Ford. Morgan Brennan is off today. Coming up, we'll dig into today's data, the market move, and how it could change things for the Fed. Plus, we're awaiting results from applied materials. We're going

to bring you those numbers as soon as they cross. But first, let's get right into this market move as stocks closed a little lower, well off the worst levels of the day. The interest rate sensitive parts of the market were the hardest hit. Christina Parts Nevelas is at the NASDAQ. For us, Christina.

John, exactly. They were just taken off earlier weakness from a key inflation report that U.S. producer prices jump by the most in three years, suggesting broader inflation pressures may be building, and that creates a fresh challenge for the Federal Reserve. Why do I bring that up? Because rate sensitive sectors took the biggest hit. The Russell 2,000

small cap index closed down over 1%. Leading losses as pretty much smaller, more leverage companies, really face pressure from potential rate concerns. That's why they're very sensitive. And then you have home builders also struggling with higher mortgage rates, threatening to price out buyers while driving up construction costs. Those are all factors that would play into why you can see all of these names in the red right now. And then there's another theme this earning season, really telling a clear story. Guidance is everything. Companies like tapestry, advanced auto parts, deer, coherent, all delivered weak outlooks, citing tariff concerns, demand weakness, and so that's why their stock reactions

were so swift and punishing. What matters now with investors are substantial improvements in forward guidance. Companies that can't deliver on these future expectations are really getting left behind regardless of how they perform this quarter. Look at that coherent, for example, down over 19% tapestry 15. Deer, 6. You get the picture. Oh, for sure. Yeah, yeah, picture is clear. Christina, thank you. Well, now let's get to Rick Santelli in Chicago for the bond market reaction. to these wholesale price signals in PPI Rick yes John and you know yesterday's CPI was a smidge warm actually the day before yesterday today's PPI was definitely hot no doubt about it but it all wasn't equal let's go to the

whiteboard shall we there's six components to today's PPI you have month over month and year over year in these three categories here's the numbers so a month over month up nine-tenths up nine-tenths and up six-tenths final demand, X-Food Energy, X-Food Energy, and Trade. All three of these monthly metrics were the highest inflation numbers since March of 22. But when you go to year-over-year, what's fascinating is, yes, they were kind of shockingly higher than last month, but 3.3, we were higher in February of this year. 3.7, we were higher in January of this year.

2.8, we are higher in March of this year. The point is, is that even though this number was hot, it isn't as though we haven't been there done that. It's not as though all this is going back three or four years, and I'm not trying to make excuses, but do keep in mind, not everything in the CPI report and the PPI report are even tariff. Things like use cars, shelters, they move up and down, but they're not tariff. So it really gets confusing to pick out what many who are politically motivated by every number I deal with on emails and text. Listen, I do it straight. Hot's hot, colds, cold. And if you looked at the labor market numbers today,

224,000 on claims, super well behaved, quickly on the charts. Here's week to date of twos and tens. We're pretty much right back in the range, like none of this ever happened back to Monday and Tuesday. Same could be said for this chart, maybe the most important chart of all. Deas

Fed Fund Futures. They've completely written the last couple days off. They're back to where they were on Monday and early Tuesday, and what's really interesting is all markets have had a bigger move after the weak labor report early in the month. Interest rates are still well lower and Fed Fund futures are still way higher, meaning that

the market is putting more importance on the labor market weakness perceived in the jobs report than the last several CPI and PPI reports that were warmer. John, back to you. Well, the market's always right until it's wrong. Rick, thanks. So the market reaction to the hot inflation data maybe wasn't as dramatic as feared so far. So why will market so quick? To write this off is just a blip.

Let's bring in Steve Leasman now. Steve. Yeah, John, I think the market, you know, sell this morning, gave way to that flat line in part because the market's been focusing more on tech, AI. Also, because they still think, as Rick was telling you, despite this auto-reflage report, the Fed is still going to be cutting rates in September. Here are the numbers. Rick showed you those numbers. And really the shock is, yeah, we have been here before, but look at the estimate. We're quite a bit higher than the estimate in all three of those major categories there,

especially the ex-food energy and trade-up, 06. Fastest gains since the inflation of the pandemic. You take out food and energy and services, the gain is still a pretty good or still robust, 06. J.P. Morgan writing, the fact that there's upward pressure across all recent inflation reports that is not directly attributable to tariff goods may give some Fed officials pause. St. Louis Fed President, Alberta Musalum,

sounded like one of those officials with a little bit of pause inside of him, saying the Fed is still balancing the potential weakness of jobs at an inflation level running around three, and the Fed has a 2% target, despite the data. Here are the numbers that Rick was alluding to. 93 on September, the key right there, John, is that the 7% difference, yesterday was in a 50. Today it's in a zero. So that's where that flip is. October is down to the point where they're kind of odds, you know, a flip of a coin,

and December is being rid out. So they're written off. So they still have the one cut, but let's share about the two cuts. tomorrow morning at Squawk Box, we're going to talk to somebody, see how much pause or cut he has in him. When we interview Chicago for President Austin Goolsby, stocks could be confident in the rate cut or even think maybe they don't need any stinking cut. Maybe because things in your world are so great, the government's going to take over Intel. It's all beautiful.

Wow. Well, we're going to have to talk some more about that as well. But Steve, stick beside me for right now. Those wholesale inflation PPI numbers come as President Trump ramps up his search for a new Fed chair. One of those candidates is a familiar face on this network, David Zervos from Jeffries, who made the case earlier on on the exchange for lower rates. We are way above neutral in rates, and that getting rates back toward neutral would bring in many, many jobs. We have a 4.2% unemployment rate right now. We had, in 2019, a 3.5% unemployment rate with very little inflation.

There's no reason why we couldn't be going back there. joining us now is frederick michigan former federal reserve governor and currently an economics professor at columbia university uh frederick great to see you what what crossed your mind when you saw this ppi number this morning how much of this is clearly tariffs and how much does it complicate the narrative that well the fed of course has to cut in september and then we'll continue. So I don't put a huge amount of weight on a PPI particular number. It's very volatile. However, even before this, I'm a little bit less sure about a cut than the markets are. That the inflation numbers, you know, the core was not so great. Yes, the headline was a good

number, but the core wasn't great. And I think a key issue is the context, which is that the Fed is right now dealing with a situation where they've made some past mistakes, inflation is still above the target, and also there's a real threat to their independence. And in that context, it makes it a little bit less likely that they want to cut unless they have really very strong reasons to. And as long as the unemployment rate is actually a number which is really very close to full employment. If you look at things like vacancies relative to unemployment, it doesn't look like we're

in a situation of where inflation is going to be. going to be coming down a whole lot. So all of these things, I think, give the Fed pause. I think normally, if they had a one-shot deal on something like tariffs, they would actually be more likely to look through it and allow the inflation to rise a little bit. It's much harder to do that in a context of where you've made past mistakes, inflation got out of control. You have an administration that's really pushing hard on you to lower rates, and that threatens

independence. And so in this context, I think the Fed actually has a little bit higher bar than the markets, I think, in terms of cutting rates. Okay. So, you know, I think that they could be overestimating what will happen in that regard. Rick, it's good to see you. Good to see you, Steve. Yeah, it's been a bit. Love you, baby. Thanks, man. I've been making a point, and maybe I'm out of a limb and crazy about this, that the Fed is playing a role in keeping a lid on some of the inflation that's out there, and that it's doing some of what it has to do to make sure that tariff inflation doesn't become broader inflation, that the idea that tariffs are a one-time price hike is something that is determined by the Fed having the right policy

amid that one-time price shock. So I agree with you. I think a key issue here is that it's always thinking about inflation expectations. Right. That's really one of the key things that the Fed is really worried about. And in this particular environment, they're very worried that inflation expectations could rise. And that's particularly because of all the geopolitics, everything that's going on is a little bit crazy right now. And I think this is one of the reasons why they're actually less likely to say, oh, this is just a one-shot increase in the price level, and we can look through it.

So I agree with you on this, that the kind of thinking you're thinking about here is actually similar to some of the issues that I've been concerned about. But the Fed is not going to, John, I'll just throw this out. It's not going to go into a meeting where it's not going to cut with a 93% probability on a rate cut. Something's going to give somewhere along the line. Either people's expectations are going to shift. The Fed chair is going to come up and he's going to greenlight the cut or he's going to push against it and the data is going to push the market towards the Fed or the data will push the Fed towards the market. We're not going in with 93 with the level of rhetoric that we have right now, which is very split. you don't want to wake the baby, right? You don't want to shock the market. Fred, I wonder to what

extent trans shipments and that narrative within tariffs this time mean that it's taking longer to assess what the full impact of tariffs might be for businesses to understand exactly how the prices are changing of various components and what they can afford to pass along. And so it's going to take a while for the Fed even to understand what it might need to do. Yeah, I think Also, what's very unique about this situation is it's a huge change in tariffs, and also with a lot of uncertainty, what the outcome is going to be. So I think that this is, and you can also see that firms were very much able to front load a lot of importing before these tariffs take effect, and that means it takes longer for the

tariffs to actually cause prices to rise. So I think that's a key factor here. We see that in the trade numbers, where it's very clear that people are shipping a lot of stuff over here right now in order to avoid higher tariffs. And that doesn't avoid the problem of tariffs in a longer-run context, particularly because it doesn't look like Trump is going to keep tariffs lower than expected. He's raised them, and he's very consistent that he's going to do this. And if anything, maybe if he gets into fights with people, they could even go higher.

So all of this is such that it's going to take longer to assess the impact of tariffs on prices. Yeah, he didn't like that taco thing. at all. I'm Frederick, Michigan. Thank you. Steve Leesman. Thank you as well. Pleasure. Well, applied materials, earnings are out. Christina Parts and Ivel is back with those numbers. Christina. John, we're seeing a beat on the EPS top and bottom lines, revenues of 7.5 billion, but it's really the guidance that is hurting this chip equipment maker right now. Shares plunging almost 11%. That's because Q4 EPS guide is $2.11 is lower than the 239. We're also seeing Q4 revenues and gross margins falling short of estimate.

Applied Materials CEO pointing to the policy environment that is, quote, driving less visibility in the near term. And so the main factors impacting their Q4 guidance. First is digestion of capacity in China. And the second is nonlinear demands. I'm just calling it lumpy demand right now from leading edge customers, which is primarily linked to market concentration and fab tiny. The company also saying, though, that none of these near-term factors change their perspective for the long term. So perhaps they're just getting ahead of what they're. see is going to be a worse policy environment in the coming quarter.

And that is why you're seeing shares down 11%. John? Yeah, quite a drop. Christina, thank you. Staying with the chips, the White House reportedly in talks to take a stake in Intel, Amon Jabbers at the White House with the latest details. Amen, this is yet another step in the Trump administration's move to not just fuel economic activity in the country, but get, in a way, something back for it?

Yeah, get an ownership stake, according to this new report in Bloomberg news. No comment from the White House or the Treasury Department yet on this report. What Bloomberg is reporting here is that Intel and the U.S. government are in discussions for the U.S. government to take a stake, an ownership stake in Intel. The U.S. government would, according to Bloomberg, pay for that ownership stake, The amount of payment, the percentage of ownership, all of that unclear, and you can see what it's doing to Intel shares there as we talk about it in real time in After Hours markets. But the White House, this is a White House John that has not been shy about being aggressive with American companies, including that NVIDIA deal, taking 15% of their revenue from Chinese sales related to their export license, and then also that golden share in U.S. Steel earlier this year. This president sees, you know, the U.S. taxpayer and American voters as deserving of revenue streams,

ownership, stakes, and the like if the U.S. government is taking steps on behalf of these companies. To put this into context, A.man, Intel is one of the biggest domestic manufacturers with plants it has, Arizona, Oregon, et cetera. And making chips is something that is very much needed right now, but because of what's happened in AI recently, because Intel was behind in AI, their core business, their revenues are crumbling right as they need a whole lot of money to build up manufacturing capacity. Now, President Trump in recent months had been very critical of the Chips Act, which had been the government giving these grants to companies to stimulate chip manufacturing activity in the U.S., but now perhaps it seems it wasn't so much about not wanting Intel to have the money, but just perhaps that the government wasn't

getting enough benefit out of it, if in fact this is what the Trump administration is aiming at? Yeah, I think that's the right way to read this, John. I mean, the president feels like if he's going to give them some money, he wants something in return. That's just classic, you know, Trump-style deal-making. And I should say that we do have a statement from Intel. I think we can put it up on the screen here in which they say that they're not going to be able to comment. They say Intel is deeply committed to supporting President Trump's efforts to strengthening U.S. technology and manufacturing leadership. We look forward to continuing to work with the Trump administration to advance these shared priorities, but we are not going to comment on rumors or speculation. And I can also tell you,

John, that the CEO of Intel met with President Trump here at the White House on Monday. And the White House had been pretty mum about what happened during that session. Before the meeting, the president was calling for the Intel CEO to be fired from his job. After the meeting, he put out an entirely different tone on social media. I think we have that post as well, which we can use here. The president saying, I met with Mr. Lit Bhutan of Intel, along with Secretary of Commerce Howard Lutnik and Secretary of the Treasury, Scott Bessent. The meeting was a very interesting one. His success and rise is an amazing story. He says, Mr. Tan and my cabinet members are going to spend time together and bring suggestions to me during the next week. So you do wonder if this

ownership stake is one of the suggestions that's being kicked around as a result of the meeting. And if the ownership stake is the reason why President Trump did a 180 in tone on Mr. Tan in terms of whether or not he should be the CEO of Intel. All right. Well, we'll learn more as time goes on. Amen Jabbers, thank you. Working on it. Well, coming up, we are halfway through the third quarter, and it's been a pretty good start

for the markets, up 4% for the S&P 500, 6 for the national. everything we just talked about on the economy and the Fed, can stocks keep rising through it all? Overtime's back in two. Welcome back to overtime. Shares of CoreWeave down big again today, more than 15%. The lockup on the company's shares, expires tomorrow allowing insiders to sell. And even though the stock is down lately, it went public at 40 a share. Still right about at 100, just a little below.

Let's turn back now to the broader market, the S&P 500, managing to squeeze out a record closed today, and all the major averages are higher for the month and the quarter, led by tech stocks and the NASDAQ. But both of our next guests are somewhat downbeat about the next few months, given these current levels. Joining me now is Man Group Chief Market Strategist, Christina Hooper, and Unlimited Funds, CEO and CIO Bob Elliott.

Welcome. Christina, does... Does the morning's PPI, wholesale inflation number, change your outlook at all for multiple rate cuts this year? No, I don't think it does, because the Fed has to balance, it understands, it knows that there are going to be inflationary pressures created by not just tariffs, but probably immigration policy as well. So I think there's that recognition there, but I think the more immediate concern, the greater

priority, is growth. So I think they're going to make a decision not dissimilar to the Bank of England's decision, which was we are worried about both, but growth is our priority, so we're going to cut. So I think we'll definitely get a cut in September. I think we will get at least one more cut, possibly two. That will be more dependent upon how quickly growth data deteriorates, as well as how quickly we see inflationary pressures ramp up. Bob Elliott, are you more concerned about the growth data or the inflationary pressures?

Well, I think from the Fed's perspective, they're facing a challenging circumstance, primarily where they're seeing elevated inflation and labor markets that remain tight from their perspective because of limited supply. And so probably the most likely path we're going to see is weaker growth, weaker real growth, labor markets that remain roughly where they are, maybe an unemployment rate that's modestly rising, and a Fed that basically is stuck in a position. where they have to maintain their stand here for an extended period of time because the data supports not doing anything, not delivering any cuts. Look, if you look at the basic picture for them, unemployment rate's been stable for a year, core inflation is rising, that's not a time to cut, and if you compare what the conditions are today relative to the dots just a couple months ago, remember more than half the committee basically said there's going to be no cuts through the rest of the year. And we're penciling

out a 4.5% expected unemployment rate. We're not close to that yet. So it seems like the markets have gotten a little aggressive in their expectations of cuts here. So, Christina, given all that, how should we play defense? Well, first, I would just argue that the dots are already very stale. And we know that that can be a very fluid exercise for the Fed. So I think that the Fed will cut enough. I think that in this environment, we do need to be defensive. We need to be extremely well diversified. We need to have exposure outside the U.S. because there is so much vulnerability in high valuation aims. That doesn't mean blowing out of the U.S., especially not technology, where the earnings growth is coming from. You want to be very selective, but you want to be in

tech. But I think it's adding to exposure in Europe, in the U.K., areas where there is opportunity, lower valuations, and we're seeing significant fiscal stimulus, which is not what we're seeing in the U.S. right now. Bob, last word to you. How are you recommending that people rethink their portfolios at this moment? Yeah, well, I think it comes down to the same point, which is diversification, but probably finding it in a slightly different avenue. If we look at how, for instance, macro hedge funds are positioned, they're actually starting to

load up on duration here. And while it's a bit counterintuitive that the Fed may not cut as much as expected and at the same time bonds may be a good deal, it's essentially the inverse of what we saw last fall, where the Fed cut aggressively and bond yields rose. Here we may well see the Fed not providing that stimulation that's so expected and that that might be beneficial to bonds, particularly relative to stocks through the end of the year. All right, Bob Elliott, Christina Hooper. Thank you. Thank you. Well, Berkshire Hathaway and Appalusa, both out with their 13 aft, Leslie Picker, has the details, Leslie. Hey, John, yes, some interesting overlap between those two filings as well.

But let's start with Berkshire Hathaway, which revealed a new stake in United Health, amounting to $1.57 billion as of the end of Q2, also revealed a new stake in New Corps worth $857 million, so a bit over $2 billion for those two new stakes combined. Berkshire Hathaway also paired back its stake in Apple by about 6.7% and sold 4.2% of its stake in Bank of America. Charter Communications, that holding was cut in half by Berkshire and also increased Constellation brands and bought 7 million new shares of Linar and more than doubled its stake in Poole while also selling out of T-Mobile during the quarter. Going to Appalusa, that firm also increasing its stake in United Health. adding 2.3 million shares to hold $764 million worth by quarter-end. That is now Appaloosa's largest position. That firm also increasing its semi-exposure through increasing its stake in NVIDIA by 500% Taiwan semi.

That was also boosted as well as Micron. However, Appalusa did reduce its China Internet exposure, exposure cutting Alibaba by 23% PDD. was cut in half, but still sizable at $2009 million, and JD.com was also reduced there. Appaloosa also paring back some big tech names like Alphabet and Meta. I'll send him back to you, John. All right, that's a lot to digest. Leslie, thank you. Well, the SMP 500 has bounced back more than 25% from the April lows, but does the rebound still have legs? Up next, Mike Santoli is going to look at history for a hint, and shares of Terrell Wolf soaring on a data center.

deal. We'll tell you who's taken a stake in the company as part of it. Overtime, we'll be right back. Welcome back to Overtime. The White House, just responding to a report, it may take a stake in Intel. Amon Jabbers back with the details. Amen? John, that's right. The White House not confirming this report from Bloomberg that crossed just a short time ago about Intel saying discussion about hypothetical deals should be regarded as speculation, unless officially announced by the administration. That's a statement from White House spokesman Cush to Sye. Now, the White House not confirming this,

we should go back to the original Bloomberg report here, which suggested that the U.S. government was in discussions with Intel to take a potential ownership stake in the company. And they cited people familiar with the plan as there are sources for that, multiple people familiar with the plan, just to take you one layer behind the scenes sort of journalistically. That's generally not how you would describe and administration or White House source. It's more how you would describe somebody on the

Intel side or maybe the trade association side. So as we try to pin down this report, that's something to sort of factor into the mix here is where did the initial sourcing come from? Obviously, we don't know as we stand here. And it certainly could be anybody that Bloomberg talked to who had knowledge of the plan who would fit that category. But the White House, for their part, for now, saying that they're not willing to confirm it. And this is just speculation at this point, John. Okay, great context. Amen, thank you. You bet. Well, Tara Wolf shares soaring after reaching an AI hosting deal backed by Google. Terawolf signing a 10-year deal with fluid stack, which builds and operates high-performance computing clusters. Google taking 8% stake in Terawolf as

it helps fund the project. Terawolf started as a Bitcoin miner, but now operates massive data centers. Now let's bring in Senior Markets commentator Mike Santoli for a look at whether the market's rebound still has legs, Mike? Yeah, and really just looking for some instances in the past, John, that seemed to match up with what we've gone through in the last several months here. Back in the spring, when we were having a very steep sell-off, the which stopped short of a 20% loss in the S&P 500 on a closing basis. I was talking about this pattern in the markets of severe corrections of that magnitude

that are shock-based, they're not associated with a recession, and you often have V bottoms and comebacks. Well, that's what happens, at least in two of them that link up pretty. closely. This was the sell-off, the long-term capital management meltdown in 1998. And then 2018, we had a near 20 percent decline. It was sort of the tariff panic along with the perception the Fed was too tight. Kind of sounds familiar. And what you see here is we are there, up about 27 percent, pretty close to what we got in 2018 into 2019. Obviously, 1999, if you follow that path, ultimately, it goes much higher over the next several months, kind of flattens out

and then you were positive. So not to say this is at all deterministic, but it does show you that some of these periods can rhyme in terms of the market rhythms as they proceed from here, John. All right. Mike Sandoli, thank you. See you again in just a bit. And it's time now for a CNBC News update with Bertha Coombs.

Bertha. John, the Trump administration has been ordered to reinstate millions of dollars in terminated grant funds. A federal judge's ruling today applies to six grants that were issued to five nonprofits that sued the U.S. A total of about 600 grants were terminated in response to executive orders President Trump had issued. California will move forward with a plan to redraw congressional maps that could help Democrats win five more seats in the House next year. The move comes in response to the Republican-led effort in Texas.

Governor Gavin Newsom said today that he will call for a special election in November to put the new maps in. in front of voters. And the Supreme Court will allow Mississippi to enforce a social media law that will require age verification for children age 18 and younger on social media platforms. The High Court, with no dissents,

rejected an emergency request filed by an industry group representing nine entities, including Facebook, YouTube, and X. The law was enacted last year. John? All right, Bertha, thank you. Coming up, the big week for small caps hitting a speed bump, but if you still believe a rate cut is coming

in September, should you be looking at these names? We'll be right back. Welcome back to overtime. If you're just joining us, it was an exciting day for the markets, even though these final numbers might indicate otherwise. We closed well off the lows of the day after the hotter than expected inflation number. even got a record closing high for the S&P 500. Applied materials, a big loser in overtime, earnings and revenue both beating for the third quarter, but its fourth quarter guidance that's dragging on it. The CEO is saying the policy environment is creating uncertainty, particularly for its China business.

And Hems and Her is also getting hit after hours, reports that the FTC is investigating the company's cancellation practices. Well, small caps having a big week today excluded with the Russell 2000 outperforming the S&P 500, on hopes that the Fed will cut rates in September. But did today's hot PPI number disrupt that narrative? Joining me now is Needham Small Cap Growth Fund portfolio manager, Chris Retzler. Chris, what's been holding the small caps back and has it been cleared? Well, certainly small caps have evaluation disconnect with large caps over the past few years. And one of the things that we need to see in small caps is greater growth.

And I think, you know, you've got a lot of these large cap companies outgrowing small caps, So they're not returning what they should on a, you know, risk-adjusted basis. But looking forward, you know, a day like today is certainly a disappointment for the asset class. But we think that there's a lot of items out there where we've got the potential for interest rate cuts, whether that's September or later this year. That's going to put a lot of liquidity into the market. And it won't take much for small caps to go up with that liquidity rolling in, as opposed to some of the Mag 7, where there are trillions of dollars.

the Russell 2000 total market cap, you know, could move quite a bit, you know, with money coming in. We also have deregulation. We have now tax certainty, which I think a lot of companies were holding back on planning. So the companies we've been meeting with in the last two or three weeks, you know, they're still digesting that. They're digesting how do they manage the tariffs that are now more known, but still not completely clear. How do they manage that in their supply chains? What about AI? Right now, we tend to talk about it in terms of invidia and software and the companies that are taking best advantage of it. But similar to cloud, if you follow the AI narrative, the idea should be that it takes fewer people to get a whole lot of work done. And I imagine adopting AI should benefit smaller companies in that case.

There's certainly productivity gains that will be expected from AI. But I think companies are still trying to figure out who are the winners, who are the losers, what do they have to do to get on the side of being a winner? Software's one area, which I think has been covered quite well all week. You know, there's risk there, and is there destruction to their terminal values where they can survive the next two to three years? But years four and five, how do they look with the AI entrance into their areas? So companies are still figuring that out, and I think there's multiple compression in those areas. places we like are selling picks to the miners, you know, still building out data centers, semi-cap, power infrastructure, military modernization, communication. There's a lot of other areas

in small-cap that we tend to look for. What are some other filters that you're using, you know, beyond just the General Russell 2000 to decide where you're willing to be a little more overweight and place bets within the small caps? So one thing we look at a lot is technological moat, both for their products and services. Can they be defended in an environment that's a lot more competitive? Are they necessary? How long have they been around? Is it a good management team? I think that that's probably a key factor. How can management work through all the challenges that are in front of them? Because there's been a lot. And I think there still will be more. We've seen pull forward and probably some purchasing to get in front of tariffs. So it wouldn't

surprise us if there is a little bit slower growth in the second half, as people you know, work through that. But looking out for longer-term investors 12, 18 months, we think that the small-cap area is pretty interesting. All right. Chris Letzler from Needham. Thanks for being with me. Well, up next, a trio of top Wall Street executives explain how agentic AI is impacting everything from sales to customer engagement. Be right back. Welcome back to overtime. Agentic AI, software that acts like a team of workers completing multi-step tasks learning along the way, is a buzzy area of tech. That was the subject of my recent conversation today with members of CNBC's Technology Executive Council.

George Mataloney is MasterCard's CTO of operations. MasterCards using AI agents to not only help shoppers buy multiple items quickly from a chatbot interface, but also to roll out new features to credit card partners. We've employed agents and AI capabilities in terms of how we onboard products and customers into MasterCard. We've seen our product onboarding agent actually make things 11 percent faster for customers to onboard in our products. And we've enabled another agent to let our consultants actually surf through 40,000 sources of information much more rapidly.

At TIA, the Financial Services Organization, CIO of Retirement, Wealth, and Digital, Ajit Nidu, is taking care to think about the boundaries around the work AI agents do and how human workers will adapt to work with them. What we are doing is we've taken a very structured approach and looking at not so much what AI can do, but what AI should do. And based on that,

We are reassessing what will be the roles of the future. What kind of skill sets and talents are needed? We've set up internal guilds where existing talent can get trained on AI at scale. For Raj Sharma, EY, managing partner for growth and innovation, AI agents also open up the possibility of new revenue as the math around costs in business models changes. We are also looking at AI from what new businesses can we get into. which are agent-first models that are out.

We couldn't do middle market work before. Now, if I can do the work with agents at a different cost rate, I have a huge market of trillions of dollars in the mid-market that we can enter in that particular area. CNBC's Technology Executive Council is a membership organization for C-suite tech specialists across every industry. If you're interested in seeing if you qualify, go to CNBCC councils.com slash TEC.

Well, Eli Lilly, a big winner in the S&P 500 after announcing a huge price hike of its blockbuster diabetes drug, Manjaro, details, including the reason behind the increase are up next, and later, to cut or not to cut. That's the major question facing the Fed next month, and we'll look at what history says will happen to stocks if Jay Powell and co do cut interest rates. Be right back. We've got more news from Berkshire Hathaway's 13F filing. Leslie Picker, back with that. Leslie? Hey, John, yeah. Last quarter, we saw some language from the filing,

which indicated that the manager, being Berkshire Hathaway, had requested confidential treatment for one or more of its positions. And we just found out through a separate filing what those positions were. And there were three of them. The first is New Corps, which is increasing about, I believe that's a 6% in after-hours trading on the revelation that Berkshire took 6.6 million shares of the steel manufacturer worth about $857 million during Q1. That, of course, was revealed in its two Q filing today. Lenar, that position was increased but took stake in a different share class amounting to $799 million total for that home builder.

and then another home builder that was a mystery here, which was D.R. Horton. That one was of $1.5 million shares worth about $191 million as of the end of Q2. So some mystery stocks revealed here. We didn't know this in Q1, but now we do, John. All right. Leslie, thank you. Meanwhile, Eli Lilly is surging today after announcing a big price increase for its blockbuster diabetes drug, Manjaro, But Angelica Peoples, that hike is not happening here in the U.S. That's right, John.

Lilly's announcing that it will more than double the list price of its weight loss drug, but that's in the UK. So starting in September, the highest dose of Moundjaro will cost 330 pounds up from 122 pounds. And the change will only affect people paying for the drug out of pocket. It won't apply to the UK's National Health Service. Now, Lilly says that it's working to align prices across. developed countries, especially in Europe, amid pressure from President Donald Trump. It expects to make any changes to these foreign prices by September 1st.

And Lilly says that the rebalancing may be difficult, but it means the prices for medicines and other countries needs to increase in order for them to lower prices in the U.S. But I will add that Lilly at this point is not announcing any changes to the price of its obesity drug here in the U.S. where it's about $1,000 or $500 if people buy directly from Lilly. And, of course, that list price does not include any discounts that the company gives to pharmacy benefit managers, but it still gives you an idea of the gap that the president wants to close, John. Okay. Thank you, Angelica. And up next, Mike Santoli breaks down what history says could be in store for the market if the Fed does end up cutting interest rates next month.

We'll be right back. Welcome back to overtime. The July producer price index wholesale inflation report raised some concerns about whether the Fed will cut next month. But what will happen to stocks once the Fed resumes its rate cutting campaign? Let's bring back Mike Santoli for more. Mike? Yeah, continuing the theme of historical analogs to the current moment, John. This is a breakdown by Ned Davis research. It looks at all past instances when the Fed had been cutting rates, then goes on hold for six months or more, and then resumes rate cuts. That would be the the situation here if, in fact, we get a rate cut in September. That would be about a nine-month

pause. And this is what the S&P did, both before and after, that pause. So essentially, you see generally positive market experience after that new round of rate cuts began. And in this instance, you know, I found it interesting, if it's a nine-month spread between rate cuts, that would kind of be what the market did here, right? We went to a new high in February this year, sell-off for a couple months, then a recovery. And so usually these instances, the economy is either averted a recession or has emerged out of a shallow recession. These are two instances in the 70s, two in the 80s, one in 1990, two in the early 2000. So not a huge statistical sample, but somewhat interesting in terms of market memory, John.

Nothing from the 20s and 30s, though, right? Tariffs of the wild card here. A lot of stuff is a wildcard. Obviously, there's no way to generalize around all this stuff. This has been a weird cycle as well. I'll point that out. You know, we started this bull market when the Fed was actually tightening still. That hadn't happened before. So you have to, you know, take it with plenty of grains of salt in terms of, you know, setting your expectations for how it goes. But it also is somewhat intuitive that if the Fed goes on hold to see how things go because the economy's hanging in there. Maybe you have a little inflation. And then it sees clearance to cut again. Usually that's happening for net positive reasons. We'll see if that is also the case this time. long do you think before we figure out whether tariffs are one-time price shock or an ongoing inflation concern? I mean, I would think in the next three to five months, maybe, let's say by the end of this year, my suspicion, though, is it's going to be kind of this diffuse effect

where it's some of this, some of that, depending on the category, it's not necessarily going to be decisive at some moment to say, aha, we have our answer. Okay. Mike Santoli, as always, thank you. Now let's get you set up with tomorrow's trade today. No earnings on the calendar, but investors will be watching the latest reports on retail sales, industrial production, and import prices. And, of course, we'll be monitoring President Trump's summit with Russia's President Putin in Alaska that could begin right here during overtime. Running to stand still was a U2 song back in the late 80s,

and that's what the market did today. It looks flat, but boy, it was quite a trip. from the bottom to stand still. That's going to do it for us here at overtime. Fast money starts now.