Closing Bell - Closing Bell Overtime: Dow’s losing streak, Nvidia buying opportunity & To Cut, or not to cut 12/17/24

Episode Date: December 17, 2024

Today’s show features a market panel with Bespoke Co-Founder Paul Hickey & iCapital Chief Investment Strategist Anastasia Amoroso on the Dow’s 9-day losing streak, its longest since 1978 and whether this is a buying opportunity or a warning sign for the market. The once red-hot stock Nvidia closing lower for the 8th time in 9 days. Bank of America Securities’ Vivek Arya on whether now is the time to buy that dip. BMO Capital Markets Evan David Seigerman reacts to Pfizer’s encouraging 2025 guidance. The CEO of Defense Contractor Parsons on the outlook for her industry under the incoming Trump Administration. And SGH Macro Advisors Chief U.S. Economist Tim Duy on whether he thinks the Fed should cut interest rates tomorrow.

That's the end of regulation. X-Trackers by DWS ringing the closing bell at the New York Stock Exchange. Lovesack Company, not Lovesack, doing the honors at the NASDAQ. The Dow finishing lower for the ninth straight session. This is the longest losing streak since 1978 for the Dow Industrials. As attention turns to tomorrow's Fed decision, that's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with Jon Ford. And coming up on today's show, Nvidia falls deeper into correction territory. We'll ask an analyst if this is the buying opportunity you've been waiting for or if more pain is ahead. Plus, a number of big moves in the pharma space today, including a pop for Pfizer and a 25% surge for another big player.

We're going to discuss the best buys in the space heading into year end. And an under-the-radar defense winner. Shares of Parsons are up more than 50% this year. But will the Department of Government Efficiency put the brakes on that rally? Parsons CEO joins us to discuss. And let's get straight to the market action with iCapital Chief Investment Strategist Anastasia Amoroso and Bespoke Investment Group co-founder Paul Hickey. Welcome to you both. Another down day for the markets. Anastasia,

I'm going to start with you. We've had poor breath. We've got what's expected to be a, I'll say, hawkish Fed pivot, or at least a slowing pace of easing with the FOMC rate decision tomorrow. You've got sentiment and positioning that's particularly frothy and then risks factoring into the market around what Trump 2.0 is going to mean here for stocks. Yeah. How do you see 2025? Well, 2025 is definitely a positive story, and I can talk about that in just a minute. But you mentioned some of the key indicators, Morgan, which is some of the sentiment and positioning. It has gotten very buoyant. It has gotten very boomy and frothy, if you will. And so I do think

naturally the market is poised for some sort of a consolidation or at least a pause in the rally that we have been seeing. I mean, if you looked at some of the overbought conditions on some of the semiconductor stocks that have rallied recently, I think we need to take a little bit of a step back and work that off. And I think that's what the market is doing. So I think we might still gain ground into year end. But going into the 2025, I do see a positive outlook. I think the underpinnings of the economy are absolutely solid. We saw that in retail sales. We see that in real wages from the consumer.

We see that in the household net worth. And so all of those factors together with rate relief, deregulation, capital market activity, all of that should support 2025. Now, I do worry, having said all that, that the sentiment is universally bullish, it seems like. And everybody's conviction is that it's going to be a solid year. So I do start to wonder what might be the wild cards, what might go wrong, what might we be disappointed about come January. Okay, I want to dig into that a little bit more. But first, Paul, I want to get your thoughts on this market here.

We just opened up the hour talking about the fact that the Dow is on pace for its worst losing streak, at least based on number of days since 1978. Even as we are seeing certain pockets or corners of the market looking very, very frothy. I know Bespoke has been putting out notes on things like quantum computing and some of the crazy moves we've seen in stocks there. What does it tell you about the health of stocks right now? Yeah, so I think when you look at the individual stock level, it's been a weak start to the month of December. But let's remember that December is always or not always tends to be back end loaded.

Historically, mid month, it's unchanged on the month tends to be back end loaded. Historically, mid-month, it's unchanged on the month, tends to be. So this underlying weakness is more than expected. The average stock is down 4% in the S&P 500 this month, even as the index is flat to slightly higher. So I think there's quite a disparity depending on which way you look at things, how the market looks. So I think in that respect, it's a little bit concerning. But I do think that we're going to close out the year on a stronger note here. If you just look historically, the seasonal trends are in the market's favor. The last 10 trading days of the year tend to be strong, especially in years when the market is already up 20%.

Look at the NASDAQ. 17 years, it's been up 20% heading into the end of the year. 17 years it's been higher in those last 10 trading days. So that's a pretty consistent record. And I think going ahead to the Fed tomorrow, well, Anastasia mentioned sentiment being universally bullish or very bullish. I agree with her completely there that there is a lot of optimism on the part of investors. But there's also near unanimity that tomorrow is going to be a hawkish Fed statement and that we're going to see hawkish comments from Powell and, you know, dialing back of rate cuts.

And so when everybody's expecting that, it tends to be priced in. So that could be a positive surprise as we get into the statement tomorrow. So, Anastasia, back to your optimism for 25. So far, President-elect Trump's unpredictability has been a positive for markets. Of course, deregulation will happen, but maybe he won't implement tariffs and deportations in a way that causes inflation. What, if anything, could cause that unpredictability to maybe shine a red light for investors in 25? Yeah, and I think you say this very well. It is unpredictable, and that's why we call the outlook for next year is constructive, but with plenty of wild cards. And, you know, what does a wild card mean is you don't truly know which one you're going to get.

And you don't really know how it's going to go. For example, how fast are we likely to get tax reform? How fast are we likely to get tariffs? How aggressive are the tariffs are going to be? And that is truly unpredictable. So neither investors nor the Fed should actually react to that. So, you know, we have the baseline scenario for 2025, which is risk assets should have a positive outcome. We should hopefully maintain

a 22 times multiple on the S&P. You square that with $304 of S&P 500 earnings for 2026. That gives us about 6,700 on the S&P. So that's what I think the market should eventually trade to towards the end of 2025. But throughout that, John, I expect we will have periods of volatility. And, you know, investors should really think about what kind of Trump 2.0 are we going to get? Are we going to get this similar to the 2017 experience or similar to the 2018 experience? And the volatility backdrop was drastically different. 2017, the VIX was averaging about 11. 2018, the VIX was averaging about 18. So maybe we get somewhere in the middle. And so I do think investors should stay pro-risk, should stay

invested, but be ready for these boots of volatility. Okay, Paul, what should investors make of the fact that the Dow and the equal weighted S&P have both done so poorly lately? Yeah, so I mean, I think what you talked about in the intro, it's historic paces of consistency of declines. But you also look at what's happened to interest rates so far this month. And, you know, as interest rates have been rising pretty steadily, you've seen weakness in these cyclical stocks. So I think a lot of it has to do with interest rates here. And a lot of it has to do with concerns over the Fed tomorrow becoming more hawkish. And for all this talk about how, you know, we've heard a lot of people talking about

how the Fed should take a more aggressive policy based on what could happen in a Trump administration. I mean, since when has the Fed ever become anticipatory rather than, you know, reacting to what's going on? So I think for the Fed to take actions based on what might happen and what we all know is a very unpredictable environment would be foolish. And with regards to the Fed, the number one thing to think about here is not the pace of rate cuts. It's the bias. And the bias is still towards easing, a lot slower than we may have thought six weeks

ago. But as long as the Fed is biased that way and not towards hikes, it's a net positive for the market. All right. Paul, Anastasia, thanks to you both. Thanks. Well, let's turn now to the chips. NVIDIA's stock just logged its eighth loss in nine days and has entered correct. Well, do we enter correction territory for an individual stock? I don't know. But Broadcom has soared, meanwhile, more than 35 percent and surpassed a $1 trillion market cap for the first time after investors cheered its earnings report last week. Those shares did close about down 4 percent today. And joining us now is B of A

security senior analyst Vivek Arya, has a buy rating on both stocks. Vivek, good to see you. So I guess with NVIDIA doing what it has recently raises the question, how vulnerable is NVIDIA in the short and medium term to the market's overall risk sentiment? I mean, NVIDIA is lower since the election. Hi, John. Thanks for having me. I think NVIDIA is our top pick for next year. We like Broadcom and Marvell for that matter as well because these three companies are ideally positioned to capitalize on this demand for AI infrastructure. I think specific to NVIDIA, there are two issues that have been affecting it near term.

One is the execution on the new Blackwell product. The last two quarters, they have reported there have been execution on the new Blackwell product. You know, the last two quarters they have reported there have been some production issues with Blackwell that they have resolved. Then there were some delays in getting it out to hyperscalers. And I think those will also be resolved. So in our perspective, this is actually a very attractive opportunity to look at NVIDIA because these concerns will be short term in nature. When we look longer term and look at NVIDIA because these concerns will be short-term in nature. When we look longer-term and look at the situation that Broadcom mentioned, that in the next few years there could be greater demand for custom chips,

I don't think that is inconsistent with the way we have thought about the market, which is about 80% of the market will be merchant accelerators, where NVIDIA will dominate, and about 15% to 20% of the market will be merchant accelerators where NVIDIA will dominate and about 15 to 20 percent of the market will be more custom chips where Marvell and Vodcom I think will do extremely well. So we think of these as very complementary in nature and some of the issues around NVIDIA we think are very short term and the stock is trading at a very attractive valuation right now. Zooming out a bit we're in day two of the Qualcomm ARM trial, and ARM has been such a big part of the smartphone story, now the AI story. Is there any risk to semiconductors overall

in how that plays out? Sure. So I won't comment on the litigation per se, John, but with ARM, I think the one advantage they have is that it is impossible to make a mobile product without Arm. Number two, they are starting to take share on the data center server side. You know, we were just talking about custom chips. We have Amazon with Graviton launching chips based on Arm. On the server CPU side, we have NVIDIA with Grace. That's based on Arm. We have Google with Axion. That's based on Arm. So they are taking more share in server CPU side, we have NVIDIA with Grace. That's based on ARM. We have Google with Axion.

That's based on ARM. So they are taking more share in server CPUs. And then on the PC side, today at the early days, it was just Qualcomm with ARM-based AI PCs. Next year, I think we are going to see multiple players launch those. So we see ARM as just a beneficiary of this rising trend of adoption across these different parts of computing. So our assumption is that, you know, the litigation gets resolved one way or another. But the key for ARM is just broad adoption in a variety of these end markets. Vivek, I want to go back to NVIDIA here for a minute because I'm going to ask you the same question I asked somebody else on this show last week. I was speaking to a founder of an AI company that is really ground level when it comes

to all of this gen AI application adoption, the LLMs and the creation of them. And this person said to me that they think that the world is much more close to being oversupplied in GPUs than everybody realizes, or at least investors realize, and that 2025 could be a year where you see a dramatic swing in light of that. Flash forward to a couple of days ago, Satya Nadella from Microsoft is on a podcast and he says, power, yes, constrained, quote unquote, I am not chip supply constrained. Is there a possibility that we actually see this shift next year? And if so, is that part of why we're seeing NVIDIA sell off right now and that rotation into other names like Broadcom as some investors are anticipating this? Sure. No, Morgan, that's a fair point. But I think what many of these customers or partners are looking at is the

situation when it comes to NVIDIA's Hopper product, right? You know, Hopper came out two years ago, and we are just at the verge of making the crossover to Blackwell. Blackwell is just starting to get shipped, and it takes a minimum of two to four quarters, right, for customers to get their complete allocation. So it's very hard to see how they are overstocked when they have yet to deploy their first cluster, right, with Blackwell. The second very important thing that I want to mention, right, which is something that came out on Broadcom's earnings call is they are saying that we have line of sight to multiple hyperscale customers who want to build clusters that are one million accelerators each. You know, the state of the art today is a cluster that XAI is building that is only 100,000 going to 200,000, then maybe a million. And Broadcom is saying we will see

multiple million unit accelerators. That suggests that the market for training could last much longer and be much bigger than we think over the next few years. So what you said makes sense, I think, for NVIDIA's prior generation product. But Blackwell, they have just started to ship. And that's why it's hard to see that being overstocked anytime soon. And it's back to the point I made before that it's execution on Blackwell. The day they get Blackwell out and it is shipping without any hiccups to all these customers, I think interest will come back to NVIDIA just as quickly as it seems to have gone in the near term. All right. Vivek Arya, thank you. Thank you. Well, we're just getting started on overtime. Up next, Pfizer finishing at the top of the S&P 500 today after the company released its 2025 forecast.

We will talk about that name and other opportunities in health care for the new year. And later, the CEO of Parsons, this is a stealth winner in the defense space this year, joins us with a look at what's driving the big gains for shareholders. Overtime is back in two. Welcome back. Shares of Teva Pharmaceuticals and Sanofi are both higher after announcing positive trial results for their joint drug aimed at treating patients with ulcerative colitis and Crohn's disease, the most common forms of inflammatory bowel disease. You can see those shares, Teva in particular, finishing the day up more than 26 percent. Meantime, Pfizer closing at

the top of the S&P 500 today after releasing its 2025 outlook, which was in line with expectations. The company saying it expects 2025 sales of its COVID-19 vaccine and drug to be consistent with 2024 levels. And joining us now is BMO Capital Markets analyst Evan David-Siegerman. Evan, good to see you. So is this reaction relief that they're basically on track and have costs under control? Yeah. A lot going on here. So, yeah, for sure.

So we were very encouraged by the earnings guide of $2.80 to about $3 per share. At the midpoint, a little above. The midpoint of that is a little above where consensus was. So the key here is folks were concerned that they were going to stand by guidance like they did last year. They didn't. It shows that they're getting costs under control and that revenues are also supporting some growth. I think there's still room for next year for them to beat and raise, which investors like as well. How do you factor in patent risk? For sure. So a few things. I think Eloquist goes off patent um in 27 ibrance follows as well that's there that's why they acquired cgen last year on the call albert borla was talking about

how cgen could be 10 plus billion dollars of revenue you know additional by the end of the decade you still have a decent amount from covid and they're also launching some other assets um including a drug from multiple myeloma so they have good assets in development and being launched. There's going to be some patents, drug patents that roll over, but they are making really nice progress. Evan, what is Trump 2.0, RFK Jr., sort of this materializing administration that's coming into power come January going to mean for health care, especially with all the focus on PBMs, all the focus on drug pricing, focus on vaccines? So, yeah, most definitely. So Albert also indicated that he met with President-elect Trump

and I believe RFK recently in Mar-a-Lago. A few key takeaways there. One, you know, they worked very well together in Operation Warp Speed, so he has a good relationship. I think RFK could be as a skeptic on vaccines. But again, HHS is a very complicated organization. I don't see him disrupting the vaccine kind of, you know, the vaccine space that we have currently. I'd also want to add there's going to be new focus on PBMs. That was something that President-elect Trump said the other day. Albert Bourla reiterated that. And I could see that pressure in the PBMs. We saw that in the market today, which could be good for some of the

biopharma names taking the drug pricing spotlight off of names like Pfizer, for example. The fact that it would take the drug pricing spotlight off of the Pfizer's of the world, would it actually put pressure on them, though, in terms of prices? Or does perhaps cutting out or re-regulating the middleman actually mean that they're going to make more money in the process? Well, one thing that would happen is we wouldn't see these list price increases, which these companies get skewered for. And there'd be more transparent pricing and potentially more transparency for the patient at the pharmacy counter. There's a lot of talk around high out-of-pocket costs driven by the PBM. So if you

see rebates and discounts actually going to the patients, that could be good for someone like Pfizer. Of course, it is always going to be more complicated. And I'm sure there's always going to be folks complaining about the high cost of drugs, but getting some more transparency won't hurt at all. Yeah, for sure. Evan David Siegerman, thank you for joining us. Thank you for having me. Up next, the under-the-radar defense contractor that's 50% this year.

The CEO of Parsons joins us with a look at what's driving growth at the company and how the next administration and the Department of Government Efficiency could impact its business. And later, the CEO of $40 billion laboratory tech company Agilent joins us with his message for shareholders from Investor Day. Welcome back to Overtime. Defense contractor and infrastructure contractor Parsons has been an under-the- the radar winner this year, up 53%. But those gains came to a halt after Donald Trump's election, dragging the stock down 13% since November. Joining us now is Parsons CEO Kerry Smith. We have you here on set. It's great

to have you. Welcome. With that intro, I will add a little context, and that is we have seen all the defense contractor stocks and government IT and services stocks come under pressure since the election because there is this anticipation that Doge is going to mean compression of margins. How do you see it with the Trump administration coming in? Yeah, well, thanks. I'm happy to be here today. First, I would say our portfolio is very well aligned with the Trump administration. If you look at our federal business, we have a purpose-built national security company, which does cyber, electronic warfare, space, and missile defense work. And then if you look at our infrastructure

business, we're very well positioned with the infrastructure bill, which was a bipartisan bill. And I would say basically on the federal side of the House, what's key is the national defense strategy. And that really has not changed since Trump won to Biden to Trump, to basically focused on near peer threats. As far as the Department of Government Efficiency, they have three objectives, which were very well aligned with. The first is how do you reduce cost? The second is how do you get rid of unnecessary regulations? And then the third is how do you improve government efficiency? So we actually view this as an opportunity for our company. First, if you get rid of unnecessary regulations, a company like us can move very fast.

We're innovative. We're very agile. And we can get technology more quickly to the marketplace. As you look at reducing costs, we can come up with ideas like how you might privatize areas or how you might use different business models like as a service. And I think all those objectives are very well aligned. Interesting. And certainly it does seem like anything involving defense tech or efficiency, as the title, I guess, of the entity would suggest is going to be in focus. You're also very big in the infrastructure business. So whether it's from

a defense side or whether it's from a critical infrastructure side, I want to get your thoughts on what we're seeing with these drones here in New Jersey. Yes, I would say first from a defense perspective, we are very heavy in that and also protection of critical infrastructure. In fact, if you look at critical infrastructure, our portfolio is very unique because we provide cyber capabilities and we understand the domain knowledge. So for example, how a transportation system works, how an airport might work, but we're also very equipped to protect it. From an unmanned air system perspective, we provide counter-unmanned air systems. So we're basically looking at how do we secure and ensure the safety of personnel, facilities, and assets.

We're providing support today for both the Department of Defense as well as the Department of personnel, facilities, and assets. We're providing support today for both the Department of Defense as well as the Department of State. And we provide capabilities, including how do you detect, identify, track, and deter an unmanned air system. And I'd say one follow-on to that is we also have electronic warfare effectors, so we can stop an adversary from causing harm

with their weapons systems or communications. What are the biggest infrastructure opportunities you see outside of the U.S.? Definitely the Middle East. So if you look at our portfolio, we're about half within North America and half within the Middle East in the infrastructure side of the house. We've been doing business in the Middle East for six decades. We've been in Saudi Arabia for five decades. We have a Saudi Arabia 50-50 joint venture partnership.

We're involved in almost every major project going on there today, including Neon the Line, which will be as tall as Empire State Building, as long as Long Island. We're involved in Qadiyah, the world's largest entertainment city. We're involved in King Salmon Park, which will be five times the size of Central Park. It's quite exciting to help Saudi prepare for the upcoming events where they're going to be on the world stage, such as 2029 Asian Games, the 2030 Expo and the 2034 World Cup. All right. So much to talk about. It's a very big portfolio that you have. Carrie Smith of Parsons, we appreciate you joining us here on set. Thank you very much. Great to be here. Well, the Fed getting set to reveal its rate decision tomorrow. And while most on Wall

Street expect a cut, former Kansas City Fed President Esther George isn't convinced one is needed. So if you were in the meeting, you would say no cut? I think I'd be inclined to say no cut. Let's wait and see how the data comes in. Coming up, we'll talk about what a cut or a pause would mean for your portfolio. Overtime will be right back. Welcome back to Overtime. Agilent Technologies, the original HP, kicked off its investor day today where the laboratory equipment company reaffirmed guidance for the first quarter and full year as well. Joining us now is Agilent CEO, Poreg McDonald. Poreg, good to see you.

So the health care segment, a lot of your customers has been challenged. How do you see your way through that? Yeah, so we're in really attractive markets. Our overall total addressable market is 80 billion. We believe in a golden age of biology and science and advancing therapeutics. We see a long runway in that. And our key markets have applied as well, where we're looking at PFAS testing, has a really strong runway as well as therapeutic advancements in our pharma and biopharma markets.

So over time, we see the markets coming back slowly, but they're coming back. And we expect this to continue through 2025 and into 2026 and beyond. What are the most disruptive innovations you're betting on that are going to make the difference over the next three-plus years? Yeah, first of all, bringing AI into the company and bringing AI to our customers through our lab asset management software, making labs more productive. If you talk to every customer around the world, and I've visited many, lab productivity is really critical, and our AI capabilities are going to be critical to make customers successful.

And also cutting out science detection limits around PFAS testing or forever chemicals is going to be really important. But not only those limits, but our scientific expertise that we can get the results quickly and also efficiently. Warwick, you just talked about the golden age of medicine. What does policy of an incoming Trump administration mean for that? Yeah, look, there's a lot of change going on, but we see, you know, there's puts and takes, but we see more tailwinds than headwinds. We see, of course, maybe you can see FDA approvals

increasing and that would help the sector and help us. Also, regulations around PFAS and forever chemicals, that's something we see that's going to be a continued focus. And also, you know, for companies like us with a global supply chain on tariffs, we can move our supply chains pretty quickly. We have in China for China, but also we have manufacturing across the globe. So I think we need to wait and see. OK, you just mentioned China. It's what, nearly 20% of revenues. You're expecting mid-single to high single-digit growth. Yes. Is there more opportunity or more risk in China right now,

especially if you do think about the tensions between the two countries and things like tariffs? Yeah, I think what's really important is that, you know, it's the second largest tools market in the world. We've got the largest install base. What's really important is that, you know, it's the second largest tools market in the world. We've got the largest install base. What's really important is made in China for China. So manufacturing capability, all our products are now being able to be manufactured in China, which is really important. Strong technical teams that can bring science to life there is going to be really important and staying close to our customers. There's different puts and takes, of course, on the macros there.

But over time, we see it to be the high single digit growth and the Agilent team is ready to help our customers there's different puts and takes of course on the macros there but over time we see it mid to high single digit growth and the Agilent team is ready to help our customers there. For diagnostics and genomics did a little better than the street had expected even though it's under some some pressure in the latest quarter. Break down for us what's going particularly well there maybe in pathology. Yeah pathology is a very durable business, you know, mid to high single digit growth. You know, we're critical to cancer testing, pathology testing around the globe. We see what's really interesting is lab productivity and our Magna system is really important about it, helps pathologists get the information quicker. So very durable business, high recurring revenue and looking forward to the

future. Jorge McDonald of Agilent, thank you so much for joining us. Thank you. Smile for the camera. Coming up, why Walmart is turning to body cameras to combat theft and keep employees safe. But first, to cut or not to cut? That's the question facing the Fed right now. A top economist weighs in on what J-PAL and companies should do tomorrow when overtime returns. And take a look at shares of aerospace and electronics company Heiko. Pulling back sharply in overtime. Down about 4% right now after the company just reported fourth quarter revenue. That missed expectations. Stay with us.

Welcome back. The Fed meeting starts today and many on Wall Street expect the central bank will announce a 25 basis point cut tomorrow. But there is some debate on whether it should cut. Former Boston Fed President Eric Rosigren saying yesterday right here on overtime that he would dissent against a cut. And former Kansas City Fed President Esther George telling Squawk Box this morning that she would also vote against one if she were in the meeting. So joining us now is SGH macro advisors, chief U.S. economist and FedWatch blog author Tim Dewey. Tim, it's great to have you back on the show. I mean, everybody thinks the Fed's cutting tomorrow. It's basically 100 percent priced into the market at this point. But the framing seems to be that it's a hawkish cut

and that what's really going to matter here is the dot plot, the SEP and the forecast for next year. Your thoughts. Right. So agreed. You know, it would seem very unlikely the Fed's going to not cut rates at this point. It's pretty much all priced in. And that's been the signaling. What really is important here is what's what the Fed expects to do going forward. And I would say it's just more than just the dot plot. It's really the messaging that Chair Powell gives around the dot plot. So one place that we expect to see the move toward a more hawkish cut to evolve is in the three rate cuts projected in next year instead of the

four that's in the current SEP from September. And so that would suggest the Fed was much more cautious about the speed at which they're cutting rates going forward in response to the fact that the economy has not decelerated as quickly as they thought or as much as they thought. And they enhanced uncertainty, really, that they needed to do four-way cuts next year in order to, you know, sustain a strong job market. Looking at all the data, do you think a slowdown in cuts and easing is warranted here? So, it's a two-part question, right? Generally, I work with what I expect the Fed to do, being the most important thing. I would look into the first quarter and be thinking about, has the labor market really started to stabilize, and is it rebounding?

My view is that we don't see that stabilization in the labor market. The labor market seems to be still cooling. And if the labor market is still cooling at the same time, the Fed's measure of inflation, core PCE, PCE more generally, core PCE specifically, as a guide, if that really does come down in the first quarter, as we expect as some of those base effects move out, then the Fed could, in theory, have space to continue to cut. Really, it's the uncertainty, I think, going into the back half of this year, especially associated with the incoming Trump administration's economic policies, of which we really know very little about how to be impacted. Yeah. Speaking of, how long do you think before not just, say, tariffs themselves, but the anticipation of tariffs starts to show up in data and the Fed starts reacting to that? Right. And so that's a great question,

because first of all, we, as far as in tariffs go, we have very few details. We think the administration, incoming administration, will be committed to doing something about tariffs. So firms right now are kind of struggling about exactly how to incorporate those assumptions about tariffs into their outlooks. So one sense is that if I was uncertain about the outlook, I would be more cautious about hiring and I'd be more cautious about investment before committing new funding to employees and capital until I had more certainty. And so I think that's the question that firms are going to be asking themselves over the next quarter is what's going to happen here and really what's the appropriate way to respond. And so I think you could start to see that in the first quarter, if you don't get the sort of animal spirits that we expect to be, you know, show up in

hiring, if we don't get that, I think that would be a sign that firms are saying, hey, wait a second, we have to be more cautious going into this year. And that could show up, you know, within the first quarter. I suspect the Fed's going to want to skip the January meeting, slow the pace of rate cuts and come back to the question of should they cut again in March after they start to incorporate some of that first quarter data and some of the initial moves by the administration into their forecast more specifically. And I guess similarly, the potential impact of deportations on the labor market, you want to see if people are self-deporting, if there's a change in people's eagerness to come into the U.S. by less than legal means? Right. And that's another place where you'd be cautious. So if

you're, all right, I would say, for example, if you're a farmer and you have to start planting sometime in the spring with the assumption that you'll have a labor force available for you in the fall to harvest, I would think that you'd be somewhat cautious in how you, you know, choose what to plant because you'd be worried, you know, that the labor wouldn't be there and then you'd have to have a crop that you could do some kind of mechanical picking. And construction can be very similar. So, yeah, I would be very uncertain too about what the labor force was that I had to work with going into the back half of this year. And I would be worried that, you know, we wouldn't want, you know, your entire workforce suddenly

taken away on any given day. And you'd have to sort of figure out, well, do I rehire or is this just the end for this operation? So again, without sort of having some real specific ideas about A, what's going to happen and B, what kind of impacts is going to result from that. You know, I think you're, you're, what really, when I look out in the back half of next year, I say, I'm not sure that my base case should change that much toward, you know, following through on the Fed's basic model that they're going to continue to normalize policy as inflation falls. But the range of uncertainty about that outcome seems to be much broader. All right. Well, we're going to have to wait and see then and continue to be data dependent. Tim Dewey, thanks for joining us.

Thank you very much for having me. Up next, an up-close look at Lockheed Martin's new breakthrough test of its autonomous rocket launcher and the risks and rewards from unmanned military systems. And some big moves for Japanese automakers today. Nissan and Honda both revving higher after reports said the company were entering merger negotiations. We'll be right back. Welcome back to Overtime. Lockheed Martin recently completing its first ever autonomous demo of the HIMARS, driving and commanding the rocket launcher without human intervention. As you can see right there on the screen, HIMARS, which is used to launch

ATAKOMs and Gimler's missiles, is used in 20 countries, perhaps best known in recent years for its role in Ukraine's fight against Russia. Now, this is the first time, though, that this testing is being done and is being reported. Tim Cahill, president of Missiles and Fire Control for Lockheed Martin, calls this first autonomous test a breakthrough. This allows us to deploy them without crews, so it reduces the manpower requirements, first of all. And second, it starts to bring a capability of AI into these systems to allow us to deploy them flexibly in ways we might not be able to before. So you can imagine now these systems might be garaged or might be located somewhere offline, and we could rapidly bring them to bear. Any of our allies could rapidly bring them to bear without deploying a crew

or without doing something in the middle of the night that they might not be ready to do. So the autonomous systems don't care. They're ready to go 24 hours a day at a moment's notice. Now, it's early days still, but Cahill says Lockheed will be able to deploy some of these systems in months rather than years. It's a key step, according to Cahill, to Lockheed realizing its interconnected vision, one in which weapon systems can be flexible and operate either with people or without. This is something that's also evidenced by Sikorsky, where just earlier this year, I flew an autonomous Blackhawk helicopter. See that video on your screen right there. But on a day when the House released its long-anticipated bipartisan roadmap

for AI, a report that includes pages and pages on defense and national security, I also asked Cahill where policy is headed. I think the policy is going to now follow. You know, we approach this very carefully and very ethically. And we always make sure that we have complete control over any of the systems that we deploy, that we only give them the autonomy and the, in quote, decision making authority that's appropriate for the moment. So we're all learning together. Policy, I think, will evolve. But fundamentally, in the end, this is why we think it's so important to pair autonomous systems with manned systems, is that you always want a human somewhere in that loop that has the ability to intervene if necessary. And we expect that to be the case for many, many decades.

Autonomy and AI continue to take on greater importance on the battlefield. They add flexibility, you use Cahill's term, to missions, more accuracy, minimizing the impact on troops with fewer servicemen and women in the line of fire in some situations. But we've also seen the issues and risks that autonomous and unmanned systems raise, too. Case in point, the many drone sightings here in New Jersey for the better part of a month. That's a situation with many more questions than answers right now. And it goes back to the conversation we were having just a little while ago on the show with the CEO of Parsons, John. Although I will say there have been drones for a long time, but I never heard anybody talking about having seen a drone until people got worried about it. So there have been public safety drones.

There have been commercial drones. Like some of the stuff we're seeing was there all along. We just weren't looking for it. So there have been public safety drones, there have been commercial drones, like some of the stuff we're seeing was there all along. We just weren't looking for it. I think there's a lot of truth to that. But also you've seen and you've had reports of drones, some of them perhaps quite large, much larger than the hobbyist drones that people are deploying from their backyards, showing up over things like critical infrastructure and military installations as long ago as November 20th. But it certainly seems to be crescendoing now. There seems to be quite a crowdsourced effort around spotting them, reporting them, and now discussions around what to do around them. It really draws attention to the fact that the regulations around drones and also counter

drone capabilities, at least here stateside, need to be addressed. And there are a lot of questions around jurisdiction and everything else, how you can shoot a drone out of the sky, safety implications of that, et cetera. So we'll continue to cover that story as well. Yeah, it's going to land somewhere. Well, some news on MasterCard just crossing. The company announcing its board has declared a 76 cent per share dividend, up 15 percent over the previous dividend. MasterCard also approving a new share buyback of up to 12 billion dollars. Shares are fractionally higher here in overtime. We'll share it ahead. Why the next time you go to a Walmart, employees might greet you with both a smile and a body camera. And another earnings mover in

overtime, shares of Worthington Enterprises jumping after the building and consumer products company topped earnings and revenue estimates for the second quarter. Shares are up more than 13 percent right now. And don't miss Fast Money's exclusive interview with the CEO of data analytics platform Databricks. That's coming at 5 p.m. Eastern. The company just announcing it has raised $10 billion in its latest funding round, valuing that startup at $62 billion. It's a monster round. Stay with us. Welcome back to Overtime.

Walmart becoming the latest big retailer to outfit its employees with body cameras to help take on theft and combative customers. CNBC retail reporter Gabrielle Fonrouge joins us. Gabrielle, how much of this is about employees feeling safer versus just getting another clearer vantage on who's in the store? Yeah, it's a great question. Part of this, of course, is to appease concerns from employees that might be feeling unsafe, especially in big box stores like Walmart. But what my reporting has shown is that this is less about theft. It's more about promoting worker safety. It's about de-escalation. You know, think about you've got a hostile customer in your face. They're upset about a return. And the way that Walmart employees are being trained to use these devices, they're not always recording. When that moment happens, when they're getting more

hostile, they're instructed to turn that camera on and say, hey, we're recording now. And the idea is that it'll de-escalate. It's interesting because we had the CEO of Axon on Rick Smith on Black Friday. And this was one of the things we were talking about is that there's this big enterprise opportunity for their body cams and the software that's attached to it within retailers and other industries as well. Here's what he had to say. I'm just going to play this for you. Every enterprise has got to think about the safety of their patrons and they need to be able to coordinate with their local police department. And because we've created this network of cloud software and sensors that connects people and police officers to their agency, we can now connect, you know, retailers, casinos, health care

organizations, anywhere where people are gathering and they want to be safe. You have Walmart adopting this. Does it just does the floodgate open and now other retailers will follow suit since they're such a trendsetter in brick and mortar? Yeah, I mean, absolutely. The retail industry is paying attention to this. When the nation's largest retailer, the nation's largest private employer starts bringing body cameras to their employees, people are going to be paying attention. And we already knew that retailers were piloting this. They're trying it out. It's important to note that Walmart is in a test and learn phase. They're only deploying this in one market. They're going to see how it works. They may not deploy it across the chain, but certainly a lot of other retailers are going to be taking note. We had TJX companies

earlier this year say that they are using it, but they're using it for loss prevention. It's very much a theft thing with them. My people close to this situation say that Walmart isn't as interested in theft. But of course, no matter what, I mean, the experts that I spoke to, when people see a body camera, it's one more deterrent, right? People feel like they're being watched. They might be less likely to shoplift. I can see a scenario where it's not necessarily a de-escalating thing to be like, I'm turning the camera on now. So I guess it depends on how you do it. Yeah, exactly. We're going to have to see how this works out.

And, of course, we might see some footage that comes out from some of these things, you know. Well, remains to be seen. I mean, I know when a camera turns on, I tend to relax, Morgan. Because you're so used to it. Yeah, we just love cameras around here. Yeah, it's great to have you. Thanks. Thank you.

Meantime, tomorrow we get an FOMC decision. We get Micron earnings as well. FedEx and Nike on Thursday. So earnings season is not over. And then PC on Friday. Yeah, the chips have just been so interesting. We were talking about NVIDIA and how it hasn't been behaving the way bulls would expect thus far. And then the difference between that and Broadcom. So

how does that play out across the entire space? Maybe Micron will have an influence there. Yeah. Meantime, breath has been so weak. We talked about it at the top of the show. Dow now having its worst losing streak by number of days since 1978. Equal weighted S&P has been underperforming as well. So can big tech, at least for the broader S&P 500, continue to save the day here? By number of days. It's kind of weird, right? Like it's a pretty strong market. Nine straight days. Yeah, but like the Dow's still doing pretty well. Yeah. Well, that's going to do it for us here at Overtime.