Closing Bell - Closing Bell Overtime: Dow, S&P 500 record closes; Rare Microsoft downgrade 9/23/24

Episode Date: September 23, 2024

The Dow and S&P 500 closed at record highs – and our Mike Santoli gives a few market measures on why investor risk appetite is nowhere near stretched. Needham’s Laura Martin and LightShed’s Walter Piecyk on what their channel checks reveal from the iPhone 16’s first weekend of sales. DA Davidson’s Gil Luria issued a rare downgrade for Microsoft stock – he says rivals are catching up on AI. Plus, PIMCO chief emerging markets portfolio manager Pramol Dhawan on global hotspots to check out for your portfolio. 

That bell marks the end of regulation. The president of the Republic of South Africa ringing the closing bell at the New York Stock Exchange. Sigma Lithium Corporation doing the honors at the Nasdaq. Stocks higher as we begin the last full week of September with the Dow closing at a record high. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, coming up this hour, a rare downgrade for Microsoft. We will talk to the analyst who just slashed his rating on the stock and says there's one reason a premium valuation is no longer justified. Plus, is an iPhone super cycle looking less likely? Well, we'll discuss the early indicators on demand for the latest models, what it all means for Apple shareholders.

And PIMCO's emerging markets expert on the risks of investing in China and the one part of the world that he is watching instead. Let's get now to our market panel, Bespoke Investment Group co-founder Paul Hickey and Paulson Perspectives author Jim Paulson. Guys, welcome. Happy Monday. Jim, you say we got an everything rally going here. Why and what should investors do next? Well, I think, you know, this bull market's been the only one, John, that's lived under Fed tightening its entire existence, only one at least since post-war history. And I think what that's done is it's given us a bull, but with far less support than it normally has. Normally, when a bull starts, the Fed is dropping rates before the bull begins. And it

was short rates going down, long rates come down, the money supply is going up generally, fiscal juice is expanding. Normally because the Fed is worried about a recession or we're in a recession, disinflation is helping as well. And finally, confidence starts to improve as the Fed eases because people start to feel a little better. Well, this time around, because the Fed has held rates up the whole time, short rates haven't come down, long rates haven't come down, money growth's been really rather weak overall, confidence among consumers of businesses have been depressed. We've really

only had disinflation and positive growth in the economy. And it's resulted in a narrow market advance, very narrow bull market, just for a few parts of the market. Most of it hasn't even participated yet. The reason this is important easing is now that the Fed's dropping short rates, they're bringing the full support, making this feel more like the start of a new bull market. And everything market, everything about bull. At the start of a bull, everything goes up, and we're starting to see that. We now have short

rate stimulus, long rate stimulus, money growth's rising. Overall, disinflation's still in force. Fiscal is expanding. Confidence, I think, is going to improve. And what you're seeing is everything's going up. I looked at this over the weekend, John, and markets up about 10%. Six of the 11 sectors are up 10% or more within the S&P. 10 and 11 are up 6% or more. 88% of the stocks in the S&P are up over that period of time. And 43% of them are up 10% or more. This is like the start of a new bull. Okay.

So, Paul, market breadth also improving as all of that's happening. What message should we take from that? Yeah, I think it varies on what Jim was talking about there. We've seen within the S&P 500, every sector's cumulative AD line has hit a new high in the last month, and 10 of 11 have hit a new high last week. So you go back to July 16th, when the S&P last made its high, you had only two sectors outperforming the S&P 500 on a year-to-date basis. You now have four. So we're expanding there too. There's a couple of others which are pretty close. But so what we're seeing there is we've seen the market essentially go nowhere in the last two months. But the average stock is up over 3 percent. There's 140 stocks in the S&P 500 are up double digit percentages. So there's been a lot moving underneath the surface. And then when you look at the charts of the

mega caps, five of the six, besides meta, are all pretty well off highs. So you've seen the baton passed from these mega cap stocks, which Jim was talking about earlier. It was a narrow rally to the broader market. We're seeing this broadness. And it's just that coupled with the fact that we've seen two pullbacks in the last two months, which were bought immediately. You tend to see sharp declines and then gradual rebounds. We've seen sharp declines and sharp rallies back, whereas the time to regain what was lost is almost as quick as the initial decline. You don't tend to see V bottoms very often in sell-offs, but to see it twice in two months is pretty impressive, to say the least. Okay. Some good context there. Jim, we've had a flurry of Fed speak today. We're going to have more Fed officials commenting here as the week unfolds. And yet, Barron's writing,

Fed uncertainty is history. Now markets need to brace for election volatility. Do you think that's the next key catalyst that the market will be reacting to? I think there'll be some of that going on here in the next couple months. But I really think it's not going to be a primary driver. I mean, it's just hard to get that concerned about the election when whoever wins, they'll probably have sort of a split power anyway. It's going to be such a close House and Senate overall. And we're dealing with the first easing of this cycle and so much of the positive force coming at the stock market. I think that's going to overwhelm it. But I do think not so much that it'll bring it down, but I do think it'll reduce some volatility as we get close and the polls start to swing around and

grab investors' attention. I do think it was interesting as well that it looks like Treasury market liquidity is back to pre-tightening levels. That's something New York Fed has said here in the last 24 hours. Paul, you just laid out the breath backdrop. I'm curious about the seasonal backdrop, since I know you track these things. And typically, this is the weakest time of the year. Yeah, so this is historically the weakest time of the year. You saw some of this typical September weakness earlier on in the month. And then we saw a quick rebound. So fourth quarter historically is the best time of year, but it's hard to put too much emphasis on that now, given that this negative seasonals didn't quite work. But the question about, you know, everybody keeps talking about the Fed and is the Fed behind the curve or ahead of the curve? And what does a rate cut mean for

the market going forward? One of the best ways to gauge how the market is going to perform following a Fed rate cut is to look at how the market performed leading up to that rate cut. And when the market is selling off into a rate cut, that's a sign that the Fed is behind the curve. When the market is rallying, you tend to see strong returns going forward. And even when you've seen 25 percent gains in the S&P 500 leading up to a Fed rate cut, the S&P has been higher a year later every time. So I think that's an important gauge. You talk about whether or not we go into a recession or not is how the market performs positive or negative. But just as just as strong of a variable is how the market performs leading into that rate cut. And as we've seen, the market has performed very well over the last year. OK, Paul Hickey and Jim Paulson, thank you both for joining us with major averages finishing the day higher with the exception of the Russell 2000.

Let's turn now to Microsoft closing slightly lower today after getting a rare downgrade from D.A. Davidson to neutral from buy as AI competition heats up. Well, joining us now is the man behind that note, Gil Luria from D.A. Davidson. Gil, it's good to have you on. Why downgrade Microsoft now? Well, Microsoft has done phenomenally well in the last 12 to 18 months, and the reason is that they took that big lead in the AI market. They were early in on OpenAI, they commercialized products early, and that's why last year they accelerated

the growth at Azure faster than any of the other hyperscalers. Unfortunately for them, that narrative is still in place. People still believe that they have a huge lead over AWS and Google Cloud, when our observation is that that's not the case any longer. AWS is now adding as much business as Microsoft is in Azure.

Google Cloud is growing the same on a percentage basis. And importantly, going forward, Google and Amazon have done a better job of investing in their own chips, and they have a lot more availability of their own chips, which gives them a cost advantage over Microsoft going forward. So Gil, it occurs to me that if the others caught up that quick, that Microsoft didn't really have a big lead to begin with. I mean, maybe they came out with something faster. Maybe they were tied up with open AI, which was prescient.

But is that your argument, in essence? Maybe that as Amazon and Google were saying from the beginning, they don't have this big lead that maybe Microsoft didn't? Well, the lead closed quickly because this is such an important market that these companies are going to put as much capital and internal investment as they need to to win in this market. And that's what happened at Amazon. They changed personnel, they invested,

they're increasing their investment, and fortunately for them, they already had investments in their own semiconductors so did Google Google actually had as we know the technology in-house to begin with they just commercialized it a little slowly but as the urgency came in with Sergey Brin with red flags coming in a year ago they were able to invest as much as they needed to to close the gap. Gail, I want to shift gears a little bit here because you also cover Palantir.

Palantir just had its first day trading as a member of the S&P 500 today. Stock actually finished up 2 percent at a fresh record high. recent days won a $100 million contract from the Defense Department for its Maven AI platform to extend that out into all of the military branches. So from a dollar perspective, not the biggest contract, but still very significant in the shift and this adoption that we are seeing on the government side towards software, towards AI. I want to get your thoughts. That's right. So Palantir has been racking up these wins with government agencies, both in the US and outside of the US, because they are able to offer those agencies products

that they know are going to work, but those agencies don't have to develop the software in-house. Palantir has a long track record of delivering on these projects, and that gives them the pole position to win these contracts and renew them. On the government side that's working very well. On the commercial side they were at the right place at the right time with these AIP boot camps that attract companies to come in and ask Palantir to help them have an AI strategy and execute on it. And Palantir has been particularly good this year at getting that done for them.

Okay. Two names for us to watch. Gloria, thanks for joining us. Well, time for the market dashboard. Mike Santoli is here with us with a look at, we kind of front ran you a little bit here, but you're going to talk about seasonality and give us the Santoli spin. You absolutely did, but I have pictures, Morgan, and this one shows pretty clearly that tendency to have a little bit of downside chop

right around now into November-ish or so. This is the Ned Davis seasonal composite chart. That's what the orange line is for 2024. Now, this includes a regular annual seasonal pattern, the election year cycle, as well as the decennial cycle, which means years ending in four. You wouldn't think it would matter, but there's been some usefulness in looking at that as well. I will point out one thing. First of all, the levels are not what you pay attention to. They vary. It's much more about the cadences

of gains and losses throughout the calendar year. And the times when we've diverged this year relative to this seasonal composite, you'll notice the divergences have mostly happened to the upside, right? We were supposed to be flattish through the spring, and this year we were higher. Yes, we had pullbacks similarly where you would expect going into late summer and then recovered into this period of September. So, you know, you take it with a grain of salt. You be aware that these are the atmospheric conditions we're operating in, and maybe don't be surprised if, in fact, we do have a little bit of downside testing to do in the coming weeks. Along those lines, I mean, we're also coming off of a triple witching on Friday.

And according to Stock Traders Almanac, historically, this is among the weakest weeks of the year when you have that in September. So I do wonder whether we buck the trend here or whether, to your point, there's just some more consolidation and digestion that needs to happen in general. There has been definitely a pattern, not just in the September options expiration aftermath, but really after the monthly expirations in general,

the market can kind of slosh around a little more freely. And sometimes that has meant there's been some deferred selling or pullbacks. I would say that isn't necessarily going to define the trajectory of how this market goes from here. But you have to be, again, aware that it would not be surprising for there to be an excuse for some turbulence in the next couple of weeks, even if it wouldn't really change the overall trend. The trend this year is pretty clear. All right. Mike Santoli, thank you. Now, some news just crossing on Snowflake. The company announcing it intends to offer $2 billion of convertible senior notes due

in 2027 and 2029. Snowflake says it intends to use the proceeds in part for acquisitions or strategic investments in complementary businesses or technologies, though it says it does not currently have plans for acquisitions or investments. After the break, searching for a super cycle. We will talk about the early read on demand for Apple's latest iPhones and why one analyst says the company is at risk of being behind on AI. Plus, the Biden administration proposing a ban on Chinese tech in self-driving and connected cars, warning that certain technologies could allow adversaries to, quote, remotely manipulate cars on American roads. We're going to tell you which companies could be impacted.

Overtime is back in two. Welcome back to Overtime. Apple shares lower today as analyst reports come in from the first weekend of iPhone 16 sales. Several top analysts highlighting positive indicators from their channel checks, including Goldman Sachs pointing out continued customer premiumization. I'm not sure what that is. Premiumization. Premiumization. Boy. I'm still not sure that's a word either. They invent good words in these analyst reports and they have catchy headlines. The longest lead times for the higher margin pro models, while Bank of America not making up any words, saying ship dates are roughly similar to last year's. J.P. Morgan

writing, lead times expand, suggesting healthy demand. Joining us now is Needham & Company's senior internet and media analyst, Laura Martin, and LightShed partner Walter Pajczek. Guys, welcome. So, Laura, your checks say iPhone 16 demand is tepid. T-Mobile told CNBC last week demand is better than last year. And I guess they were talking about premiumization. The premium models are doing better. How do you reconcile the two? Bigger carrier discounts this year. I think they're trying to increase the, I think Apple's getting a lot more help this year. I think they're trying to increase the, I think they're getting, Apple's getting a lot more help this year because there aren't any product reasons to upgrade and

therefore the carriers are stepping in with bigger subsidies to try to take customers away from one another. Wouldn't that be a good thing? For customers, yeah, but not for Apple in the end. But if carriers are subsidizing, Apple still ships more. Yeah, as long as you think that they're going to be loyal. Yeah. I mean, ultimately, you want people to spend a lot of money buying extra devices, buying services. To the extent you're becoming a price discounting or a price competitor, you end up with lower

ancillary revenue because the iPhone's only 50% of their revenue. So really what you're playing for if you're Apple is the other 50 percent of revenue, the upsells, if you will. So price competing is bad for that 50 percent of revenue. OK, so, Walt, how do you see this cycle playing out, especially given the fact that with AI coming a little bit later in some markets, it could be longer than usual? Yeah, you know, John, people upgrade their phones really for a couple of reasons. Your phone breaks, your battery gets too low, and the operators increase their subsidies. And they aren't, in fact, increasing their subsidies. They're the same exact subsidies they had last year. It's very similar to what they had

recently. Software isn't really an issue for people upgrading their phones. You know, I think maybe sometimes if your phone gets so old that it can't upgrade to the latest version of iOS, then you have to upgrade your phone. So that's a portion. I think Recon Analytics does a good job at actually tracking these type of data points. But the AI features, even if they lived up to what was promised at WWDC, probably weren't going to enough to generate excitement. And then to your point, these features aren't even available in the phones today when they launch, and it's unclear how good they'll be when they do launch. I have some of the developer version of the product. Siri is still not good. Photos is still not good. These early versions of AI, I think, are going to be a disappointment relative to the hype that has been out there

in terms of this product right now. Laura, I mean, we're also coming into the holiday season. So how much is that going to potentially end this idea of software, AI-enabled software, not pushing out until later in the year as well. How much does all of this maybe perhaps distort the demand picture, if at all? I mean, you already saw it distorted. Sorry, Laura, go ahead. I'm sorry. No, I was just going to say, every year we have a fourth quarter, so there's gifting and there's upgrades. So that isn't different. I think a really important point is over the weekend, I went and asked everybody if they were upgrading their iPhone out here in LA

and the people who have an iPhone 11 or 12 are upgrading because their phone is too old. Anybody who has a 15, 14 or 13 is like, no not yet. And none of them have heard of Apple Intelligence. So I do think those of us who really study Apple think this is in the masses. I don't think most people know what Apple intelligence is who actually own an iPhone. Although if they walked into an Apple store, I'm sure that the salesman there would be telling them, but I don't think some of these products, there's no killer app yet that forces people like Facebook did to go and get a new iPhone. So I don't think the super cycle is iPhone 16. Maybe it will be 17, but we have to see what the killer app is for this

Apple-intelligent backbone. Well, it sounds like you've got thoughts on this, but I'm going to lay on another question as well, and that is the fact that Johnny Ive over the weekend confirmed that he's working with OpenAI's Sam Altman on a new AI-enabled device as well. Could this be more competition coming to the market? I mean, this speaks to the larger risk that a lot of these large companies have. Google on the search and Apple, obviously, with their iPhone, this new technology is going to change how people interact. It's interesting, right? At WWDC, the exact assistant feature that everyone got excited about and hyped up about, that if Apple actually doesn't deliver it and OpenAI can deliver it in a new device or even Google, like you can go to your Gmail today on your iPhone and get access to Google's version of AI. And if those things become the primary

interface that, you know, are valuable to you as a consumer and are as powerful as countless people get on CNBC and talk about, then that provides an opportunity for market share to change, which has obviously not happened in a very, very long time in this in this space. OK, well, I check in Laura Martin. Thanks for joining us to talk about Apple. Well, we have a news alert on Deere. Eamon Jabbers has the details for us. Eamon. Hey, Morgan, that's right. Take a live look in right now at former President Donald Trump, who's campaigning in Pennsylvania, just wrapping up an event there.

And I wanted to flag for you. He's standing just off the side of the picture there. He's standing in front of some John Deere tractors. And he just issued a warning to the John Deere company. There you see the tractors there. He said that John Deere is planning to shift John Deere company. There you see the tractors there. He said that John Deere is planning to shift some manufacturing to Mexico. And he says, I'm just notifying John Deere right now that if you do that, we are putting a 200 percent tariff on everything you sell into the United States. The former president predicting that if Deere concludes that he's

likely to win or if he does win the election this fall, then Deere is going to announce it's not moving any production to Mexico. So the former president taking on a high-profile American company here while posing in front of its products at a rally focusing really on voters in the rural area of western Pennsylvania here, an area where he really needs to rack up the vote in order to win that state. Clearly a very targeted message, a very protectionist message, and a former president unafraid to target an individual company for criticism. Guys, back over here. All right.

Eamon Javers, thank you. And, John, this feels very familiar. I think about Harley-Davidson when they were shifting some of their production or looking to shift some of their production, and the fact that they were targeted by Trump when he was last president. This is interesting, too, with Deere. They have shifted some of that production to Mexico. Also raises questions about USMCA, which will have to have some renegotiation to it here in the coming years as well. But we've seen many of these manufacturers shift their production in part because of that trade pact to places like Mexico, where perhaps it's less expensive. Raises questions about free market capitalism, too.

It raises a lot of questions. We're going to watch. We're going to see what happens. I think shares dropped and then came back. So there's a lot of ifs here. The White House, meantime, proposing a ban on Chinese tech and self-driving cars. We're sticking with policy here with a warning about adversaries controlling vehicles on American roads, the potential impact on the auto industry and national security straight ahead. Plus, PINCO's emerging markets expert on the risks of investing in China around the election and where in the world he sees the biggest opportunities for investors right now. We'll be right back. Well, today, the Biden administration proposing a ban on Chinese and Russian components and connected vehicles driven on U.S. roads, citing national security concerns, the Commerce Department rule could effectively ban Chinese automakers in the U.S. entirely if their vehicles use connected technology.

Why? Well, cars are essentially computers on wheels, cameras, microphones, GPS tracking and other Internet and satellite-enabled technologies. Commerce Secretary Gina Raimondo saying, quote, it doesn't take much imagination to understand how a foreign adversary with access to this information could pose a serious risk to both our national security and the privacy of U.S. citizens. In an extreme situation, foreign adversaries could shut down or take control of all their vehicles operating in the United States all at the same time. Well, in a call with myself and reporters, National Security Advisor Jake Sullivan adding, quote, we've already seen ample evidence that China pre-positioned malware in our critical infrastructure

for the purpose of disruption and sabotage. And with potentially millions of vehicles on the road, each with 10 to 15 year lifespans, the risks of disruption and sabotage increase dramatically. So if implemented, Chinese and Russian, software will be phased out with model year 2027 vehicles. Since Chinese software is still a, quote, limited part of most automakers supply chains, according to a senior official, hardware will take longer. Model year 2030 would be the phase out date since that's, quote, slightly more complicated. Now, officials saying they've been meeting with all of the top global automakers as they've crafted this over the past seven months. And it comes after the imposition of 100 percent tariffs on Chinese EVs back in May

to try to prevent China from flooding the domestic market. Who could be impacted? Ford has a deal with China's CATL to license battery tech here at its factory that's being developed. BYD is the biggest electric bus manufacturer in the U.S. Baidu's Apollo, Auto X, some others have been testing approvals in California already. So all names to watch. On the flip side, Tesla, with its vertically integrated supply chain, could potentially benefit. Perhaps that's contributing to the stock's bounce today with those shares finishing up 5 percent. We'll have more on this tomorrow when Commerce Secretary Raimondo joins me for an exclusive interview to discuss this and much, much more, John.

I'm skeptical, Morgan. I mean, just because imagine that China took control of Chinese vehicles on American roads, caused them to go hairy wire, that would be the end of that market and many more for China in the U.S. Shouldn't we be much more concerned about, I don't know, a social media app tracking people's preferences and maybe influencing them and perhaps having a sense of their location every single day? I mean, they can do that without, you know, tipping their hand. But can you imagine cars, Chinese cars start running off the road?

It would completely break down the economic relationship between the U.S. and China. And I think here's an important distinction because it wouldn't necessarily just be Chinese cars. It's automakers that are also implementing some of these Chinese technologies into their supply chain within their own cars. Right. But if they were to do such a thing and it would be and it were tracked back to China, which it would be, that's it. That's the end. Say goodbye to your economy, China. Right. Who in the Western world would trust them with heavy equipment ever again? But also, I think you need to understand from a national security standpoint, the U.S. has identified China, and this is very, I think, mutual labeling that as a strategic adversary and as sort of the key threat on the world stage for any

possible future conflict. And so in said possible future conflict, anything that's digitized, supply chain becomes a focus. Critical infrastructure becomes a focus. We've seen it even when Russia invaded Ukraine. They took key infrastructure, communications infrastructure down as they were implementing that invasion. And so this is why it matters. Sure. But I would guess we'd be more worried about video cameras, say, which are all over the place, manufactured in China. Well, let me also say that I don't think that heavy vehicles. I think I think this is an opening salvo for more connected devices and more policy crafted around them, for example, drones and other things.

But we'll talk much more to the commerce secretary about all this tomorrow and hear what she has to say and her argument around it. Yeah. For more on investing in China and other emerging markets, let's bring in PIMCO's head of emerging markets, Portfolio Management, Pramil Dhawan. It's great to have you on. That's where I'm going to start, because just today we saw rates cut in China. We certainly see an economy there

that officials are trying to stimulate. So is it investable? Or when we're having conversations like the one John and I just had about connected vehicles and more trade restrictions, is it too risky? Well, it is investable. Thanks for having me on, Morgan and John. It is investable, but we don't see a lot of opportunities there. And I think that speaks to the starting conditions. I think with the dialogue between the U.S. and China right now, the US clearly has an upper hand given its current state of its economy. China's really struggling to restart and reignite animal spirits in its economy. The policy cut is emblematic of that,

and they're going to have to do a lot more, both fiscal and monetary stimulus, to restart growth in that economy. And until they do, then I think that there's just better opportunities elsewhere in emerging markets. We can look at India, we can look at South Africa and Turkey as being investable economies with high single digit, low double digit nominal growth that provide much more attractive returns for investors. Interesting. I do want to get to Turkey with you. But first, I'm going to start with India, especially given the fact that you had Modi doing that CEO meeting over the weekend. I mean, here's NVIDIA's Jensen Huang, who caught up with our own Steve Kovach just yesterday.

Prime Minister Modi is inspiring. Every time I've seen him, he is such an incredible student, loves technology, loves artificial intelligence. He was one of the first people I ever explained artificial intelligence to. This is an extraordinary time for him and time for India because it's a reset of the whole computing stack. India markets have already had a very strong year. Does it keep going? Well, we think it does. I mean, the IPO cycle's in full swing. There's a lot of enthusiasm about investment in India. And part of that comes from remobilization of portfolios away from China and into India. It wasn't long ago before China had a much bigger weighting in the MSCI stock indices.

Now that that weighting is being diluted and India's is increasing, and we see that trend continuing going forward. Active portfolio reallocation from China into India and from other emerging markets into India, chasing that economic dividend, chasing some of those IPO booms that we've been seeing. Pramod, it's tempting to look at some of these international markets and think of them like stocks, like, oh, well, it's expensive now, so it has to correct. But when you look at India, the youth population, the population boom in general that they're experiencing and the adoption of technology, how does that influence the way you look at India as a market in which to invest? Yeah, it really does. I mean, we need to think as long term investors about the structure that's there.

You know who you're dealing with right now in terms of policymakers, the institutions. The rule of law is still pretty, pretty good and pretty strong in that particular country. And those will factor into long term investment decisions. But really at the crux of the investment discourse is what is my growth? What is the business model of that country? And I think India clearly has a very good one right now. And it's being able to capitalize on the fact that China is just going the opposite way, unfortunately, for China. But India, Mexico, Vietnam and some of the other emerging market economies are just in the right place at that period of time where investors are just looking for that return, but not willing to take that risk of investing in

China, especially ahead of the U.S. election. We don't talk about the BRICS as much as we used to. What about Brazil? You know, Brazil is a case in point where the fiscal policy in that particular country is really derailing any of the investment thesis. For emerging markets, they can't fiscally stimulate in any way, shape or form like the developed market economies can so they really rely on on fiscal discipline anchoring the investment thesis and in brazil it's clearly not the case you've had massive fiscal deficits twin deficits uh that are in double digits and when when fiscal is that profligate then monetary has to to accommodate and and that's what you're seeing the central bank is hiking rates in that country at a time where the Federal Reserve and most of the developed market and emerging market central banks are going to be cutting rates. It is effectively

tapping the brakes because the government is hitting the accelerator. And that becomes quite a fractious investment backdrop. So I would think that from Brazil, you know, the starting levels of yields are very, very interesting. The currency looks quite cheap. But until and unless the government can entail its fiscal spending, then it's difficult to see a longer-term investment proposition there. All right. Pramil, thank you. Great to get that international perspective.

Well, Mark Mobius called the basket cases with us last week. Brazil, South Africa, Turkey, and Mexico. Yeah, it's a whole different basket. Well, time now for a CNBC News update with Contessa Brewer. Contessa. John Morgan, the man accused of killing 10 people at a Boulder supermarket in 2021, has just been found guilty on all charges. The killer's lawyers had argued for not guilty by diminished capacity, saying that he couldn't tell right from wrong because he had schizophrenia. In a letter obtained by NBC News, a key Nebraska Republican state lawmaker

writes he's against switching how the state allocates electoral votes, effectively ending a push by former President Trump and his allies to change the state to a winner-take-all system ahead of this year's election instead of awarding them by congressional district. Often that gives the Democrats a win in Des Moines while the rest of the state largely votes Republican. Reggie Bush is suing the USC, PAC-12 and the NCAA in a bid for name, image and likeness compensation during his career with the Trojans 20 years ago. Bush argues they profited from his play and celebrity, but he wasn't compensated. Bush's lawyers say that suit is about setting a precedent for fair treatment of all college athletes. John, I'll send it back to you. Contessa, thank you. After the break, no signs of euphoria.

Stocks are near record highs with their signals that point to more risk-taking appetite among investors. Mike Santoli returns next to explain. Plus, we will tell you about the late-day news from Boeing that sent the stock higher into the close. Overtime, we'll be right back. Welcome back to Overtime. The Dow and S&P both closing at record highs today. Mike Santoli returns with a look at two indicators that there might be even more appetite for risk in the market.

Mike? Yeah, John, that means until we get to some euphoric, crazy level, absolutely. I think investors are reasonably optimistic and reasonably fully invested. But if you look at some of these indicators of just exactly how much risk and how much leverage investors are willing to take, there is room to the upside. So this is margin debt. This is debt that's taken out in brokerage accounts against the value of investments. That's the blue line. And you'll see it's well below the highs of early 2021. That was when you had all the IPOs and the SPACs, a real mini bubble at work in the market. And you see we have the S&P making a new high, but margin debt not doing so.

So it suggests that there is room for folks to start to get even that much more enthusiastic and show it by borrowing to get into the market even more. So it's not really so much the absolute levels. It's whether it's confirming the highs and whether the market is unlikely to peak when margin debt has not hit a recent peak. Now, take a look at the issuance of risky securities. This is from KKR, and it shows basically how much is being issued in the way of IPOs, high yield debt and leverage loans. It's bank loans to riskier borrowers relative to the size of the economy. And it suggests that, again, we are just sort of in a trough or coming out of a trough in the risk cycle circled here, the dates of the first Fed rate cuts in that cycle. So if things hold together in terms of markets and the economy, of course, you would expect there to be a little more activity here on the deal side of things. And presumably you'd have investors kind of willingly absorbing. Yeah, Mike, I mean, given how well so many different economic indicators are faring,

the fact that we're so low there in 2024 now, especially, you know, coming out of 2023, that's a bit surprising because when I look at some other points when we were so low, it's like the financial crisis on the other end of that chart. Right. Exactly. Financial crisis or some other kind of market shock or the sense out there that we're in the late cycle. So I do think you did have a bit of an earnings recession for most companies in the last few months. Also, during COVID, a ton of securities were issued. That includes longer term debt. So companies did term out their debt. So there were some reasons why there was some front loaded issuance in those pandemic years. But I agree. It seems as if you would have had the right conditions to have this turn higher earlier. Maybe we'll see it to come. All right. We'll be watching. You'll be watching. Mike Santoli. Thank

you. Up next, we've got the latest intrigue surrounding Intel as a struggling chipmaker receives takeover interest in a possible multi-billion dollar investment from a huge asset manager. And Regeneron shares under pressure after a federal judge rejected the company's motion to block Amgen from launching a generic version of its blockbuster drug, Ilea, which treats retinal disease. You can see right here, shares of Regeneron finished down about 4.5%. Stay with us. Intel, the top performer today in the Dow after that report that Apollo wants to invest as much as $5 billion into the chipmaker, possibly in return for an equity stake.

That's after Friday's news. We brought you here on Overtime that Qualcomm had approached Intel about a takeover. Analysts not as bullish on the headlines as investors are. Bank of America's Vivek Arya writing that the challenges overwhelm the potential benefits, pointing to regulatory headwinds, including China and the large cash burn of Intel investing in manufacturing. Yeah, you also had the Bloomberg report that Apollo is considering a $5 billion investment into Intel as sort of a bet on the company's plan and strategy and future. No comment from Apollo on this one. Obviously, Intel had sold part of a stake in a JV

in Ireland to Apollo over the summer. I would be suspicious about some of the details in that report and some of the numbers that are floating around right now. But we'll see how all of this unfolds. Well, smart capital, as Intel says, they want investment to help them build out manufacturing. So we'll see how that works. Boeing just giving its striking machinists union its best and final offer, so they say. Details straight ahead. And speaking of defense contractors, AeroVironment flying high after being allowed to resume work on a previously suspended U.S. Army contract worth nearly a billion dollars. You can see those shares right there on your screen finished up 12 percent. Welcome back. Boeing getting a nice pop after announcing it presented its best and final offer to its striking machinists. Stopped finished up 2 percent today. Phil LeBeau has the details for us. Phil.

Morgan, they say it's their best and final offer, but you know how this goes. We'll see what the union has to say after they look at this offer and theoretically are going to vote by the end of the week. Here is what the new offer is and how it differs compared to the one that was voted down by the machinist a little over a week ago. 30% raise over the next four years. Previously, we're offering 25%, restoring the annual bonus, which was not in the previous offer, doubling the signing bonus to $6,000. And the company says it will increase its 401k contribution. Is that enough to convince a majority of the machinists that they should vote for this contract? That's a tough call because right now you're looking at

95% of the machinists who said no to the previous contract. So you had only 5 percent who said yes. You need at least 50 plus 1 percent to get it over the finish line. And again, this offer is only good until Friday night. So for Boeing, the question becomes, well, do you get it across the finish line? We'll find out. We've reached out to the machinist Union to see when they are going to present it to their members. We suspect that there will likely be a vote Thursday or Friday. And then we have a decision by Friday, guys.

And if they reject it, the strike continues. All right. Philip Bowe, thank you. Up next, the earnings and economic data on tomorrow's calendar that could give investors new clues about the state of consumer spending. And we're celebrating Hispanic heritage this month. Here is former Commerce Secretary and former Kellogg's CEO, Carlos Gutierrez. Hispanics have made a great contribution to this country. And I'm not talking about just low skilled workersilled workers, but high-skilled workers and

even C-suite. I would urge corporate America to understand the skills of Hispanic Americans, their history, their experiences have given them skills that they can use in business. Welcome back to Overtime. It's time for your Wall Street look ahead. Consumer spending will be in focus tomorrow when we get earnings from AutoZone and RV maker Thor Industries before the bell. And in overtime, we will get results from KB Home. On the economic front, investors will digest the latest Case-Shiller Home Price Index, as well as the September Consumer Confidence Report. Well, we have a news alert on Anthropic, and Kate Rooney has those details. Hi, Kate. Hi there, Morgan.

So this is a report from the information. They're reporting here that Anthropic, this is OpenAI's rival in AI, has now floated a $40 billion valuation and that the company is in new funding talks. This, again, is according to the information we've reached out to the company. No comment yet, but it does say here that this would value the company between $30 and $40 billion. That would be roughly double its prior valuation at this point. But it does come on the heels of a massive fundraise that I'm told is still not quite closed from OpenAI that should, according to sources, value it at $150 billion. But again, OpenAI seemingly capitalizing on that massive fundraising interest in AI from

other investors. But we'll keep you posted here if we hear back and picking up the phones as we speak, guys. Back over to you. Kate, is it even worth talking about multiples of revenue when we talk about these possible valuations? It is, because if you look at the growth, I mean, if you believe that AI is growing as quickly as some of the founders say it is, then the multiples, you can underwrite that. They say that it actually makes sense in the scheme of things. So that is a real conversation that AI investors are having, even though the numbers seem so crazy and massive. They would argue that the growth is so massive and crazy that it does justify it.

There's also some FOMO, of course, going on here where they want to get in at any price. But that is a real thing that's going on. They are using real valuation and say that the growth justifies it. All right. And I would, Kate Rooney, thank you. And I'd imagine, I'm assuming, that they don't have the same sort of wonky structure in place that would cap returns at a certain rate that you have at OpenAI that's now being reviewed and possibly changed and challenged. So potentially, maybe it's a better investment if you're looking for bigger returns. I don't know. Debatable. I think we're going to see Sam Altman and OpenAI in a very different position in just a few months. And I'm most curious, I've said it before, I'll say it again,

about how much Sam Altman ends up pocketing in equity value in that process, because up to this point, he doesn't have much of anything. Yeah, we'll have to watch all of that. In the meantime, you had another good day for nuclear stocks and for uranium stocks on this AI energy play as that continues to play out. And then S&P 500 had a record close again. And we've got PCE this week and a whole lot of Fed speak. And plenty of room for more borrowing on margin to invest. Plenty of cash on the sidelines, though I can hear Mike Santoli in my head saying that part doesn't matter. But all these indicators that things at least have the potential to go

even higher. All right. Well, that's going to do it for us here at Overtime.