Closing Bell - Closing Bell Overtime: Earnings, Economic Signals & the AI Divide 10/15/25

Episode Date: October 15, 2025

With the Beige Book out and fresh commentary from Treasury Secretary Scott Bessent and Fed officials, our Steve Liesman breaks down what the latest signals say about the economy. Alan McKnight of Regions Wealth Management and Michael Farr of Farr, Miller & Washington discuss stretched valuations, inflation risks, and whether earnings can keep stocks supported. Then, a look at why Salesforce may be getting left behind in the AI race with DA Davidson’s Gil Luria, and how Entrepreneurs First CEO Alice Bentinck is rethinking startup funding and focusing on talent over ideas. Finally, RBC’s Gerard Cassidy previews key regional bank earnings to watch. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Well, that's the end of regulation planet, ringing the closing bell, the New York Stock Exchange, Curiosity Stream, doing the honors of the NASDAQ. Stocks losing steam late in the session. The Dow's slipping into the red here, fractionally in the final minutes. The S&P 500 and NASDAQ both closing higher. Real estate communication services, utilities, the top-performing S&P sectors. Prologes helping lead the real estate sector higher after posting strong results, raising guidance. The warehouse companies seeing record leasing activity, a solid pipeline, improving consumer

sentiment. Materials and industrials were the worst performing sectors today. On the flip side, those rare earth and metals companies, which had been soaring as the U.S.-China trade tensions were flaring up, giving back some of those gains today. But cooking oil has become the new battleground, and that's helping Bungy and Archer Daniels Midland both make soybean oil for biofuels, which have been facing competition from used cooking oil, which is cheaper, and those shares jumped higher today. And that's the scorecar on Wall Street. But winner stay late. Welcome to Koso Bell overtime. I'm John Ford, alongside Morgan Brennan. Sales Force is lower today, despite holding its big Dream Force conference and announcing a bunch of big deals.

Stock has been an AI laggard along with many software names. We're going to examine that sector to see which companies might be the winners and losers. And we're waiting for earnings. United Airlines reporting shortly will be a strong beat. Will it be a strong beat? Like we saw from Delta, we're going to get you those numbers when they come out. We're also watching J.V. Hunt on the freight side and S.L. Green on the real estate side. Speaking of those United Airlines earnings are out. Phil LeBow has them. Phil. Morgan, you are prescient. They were a strong beat. United on the third quarter beating the street by earning 278 a share well above the street expectation of 263. Revenue was a slight miss, but not by much. 15.22 billion. The street was expecting 15.32 billion. The numbers within the numbers for the quarter, you've got revenue per seat mile down 4.3%.

cost per seat mile down 0.9% and a pre-tax margin of 8%. And then there's the metrics that tell people where is United making money or doing well relative to its peers. When you take a look at domestic revenue per seat mile down 3.3% in the third quarter, international revenue per seat mail down 7.1%. We saw a lot of flights and we saw some pricing pressure on some of those international markets that might explain the revenue per seat mile being a little lower compared to a year ago. Premium revenue, though, up 6%. Basic economy, up 4%. Loyalty, up 9%.

So they're crushing it in terms of the areas where you make money, both in terms of loyalty, as well as premium. And then there is the guidance from United for the fourth quarter. 3 to 350 is shared the street right now is at 287. By the way, if you take the midpoint guys of that 3 to 350, 325, extrapolate for the full year, earnings, that means they're going to be coming in towards the high end of their reduced guidance of between $9 and $11 a share for the full year. But again, they're united. Their guidance is 3 to 350. The street is at 287. And for the third quarter, they did beat by

a pretty good margin here. 278 versus the street at 263. Guys, back to you. All right. Philibaut, thank you. That stock now up by about one in the third. Let's begin now with the latest on the economy. We did hear from Treasury Secretary Bessent this morning, also several Fed officials, and the Fed releasing its beige book this afternoon. Steve Leasman has the details. Steve? Yeah, I got Bessent, Myron, Waller. And let's start with the beige book, telling a story of a lackluster economy suffering from uncertainty, low hiring, and inflation. The Fed's collection of anecdotes from around the 12 districts said the economy or economic activity was little changed from the previous report. Three districts reporting modest growth. Five said no change in four.

saw a slight softening. The Facebook said, consumer spending inch down when it came to retail, though EV demand was boosted for autos, of course, the loss or the expiring incentive helping that. But leisure and hospitality saw declines because of reluctance of international travelers to come to the U.S.

There was strong demand by high-income earners, but low-and-middle-income households, they were looking for discounts. Separately, Fed Governor Stephen Myron, saying that the ongoing conflict with China was another reason for the Fed to cut. You know, he's a big dove when it comes to cutting rates. He says that Fed should cut to insure against downside risk to the economy

from an escalating trade war. Treasury Secretary Scott Bessett telling CNBC, there are working meetings right now between the U.S. and the Chinese delegation, which is here for the World Bank IMF meetings. Fed Governor Chris Waller, meanwhile, speaking on artificial intelligence, generally bullish long term, but saying there could be job losses before there are job gains, specifically citing the possibility of white-collar job losses. The Fed officials, they've been talking more and more about AI and a potential effect on the economy and monetary policy. Waller's saying that while there are unique risks, like with cybersecurity, he expected to be generally positive, as many technological developments have been over time. It takes time, Jonathan, to see those results.

Yeah, Steve, I'll actually pick it up. I actually thought the Treasury Secretary's comments on this idea that the U.S. may exert more control over U.S. companies by setting price floors across a range of industries to compete with China was particularly notable today, especially given the fact that that was folded into the MP Materials, Rare Earth's deal that we saw over the summer. So I'd love to get your thoughts on that, but this is a twofer from me. Because the other thing that I've been hearing a lot in a lot of Wall Street notes is this idea of wage growth and whether that is outpacing the pace of inflation right now and if that showed up in the beige book.

It did not appear in the Bayesian. There was a pretty good comment about wage growth being marked. modest to moderate. I guess I'll do an editorial a little bit on the first question, Morgan, which is be careful when competing with your enemy not to become more like your enemy and the things you're fighting against. So I would be really concerned that in order to, and I'm not sure China is necessarily an enemy, but I guess I mean that metaphorically, this idea that if you're fighting somebody, for among reasons, because China is very a dictatorial, They're heavily involved in the economy.

How involved do we want to be in the economy? In fact, Waller's comments talk a lot about that where he notes that Europe was very strong in regulating technology and ended up behind the U.S., which took more time to do it and let it sort of run. And if you let the market take care of things, I'm frankly surprised in a lot of respects about this administration's, what we say, meddling in the private sector economy. I get that there are national security concerns. I think very serious decisions ought to be made between which ones are real national security concerns and which ones are those that we should let the market handle.

All right. Steve Leesman, thank you. With the earnings season kicking off, will the results be enough to give investors some clarity as they navigate the market with very limited economic data? With us now, Regions Wealth Management, CIO Alan McKnight, and Farr, and Farr, and Washington, President and CEO Michael Farr, also a CNBC contributor. Gentlemen, it's great to have you on. Michael, I'm going to start with you on this

because I was looking at your notes and you talk about flashing yellow lights and you say you're very cautiously bullish. What does that mean? White hair, Morgan. I've seen it so much. When prices get this high

and multiple start to expand, you always hear it's different this time and it's going to be more. And the naysayers are quieted and they're dismissed as not getting it, not understanding the new paradigm, the big paradigm shift, the power of AI. And as I say it, as skeptical as I am and maybe even a little bit cynical, I'm looking at the power of AI. I'm looking at some of these numbers and of earnings coming in. I'm looking at the bank earnings today. I'm listening to what Phil LeBoe just said.

These numbers are good. And I think that the path of least resistance for stock is higher. Boy, they're expensive, and you better know what you own and not let too much risk creep into your portfolio. Alan, I want to get your thought on this market here, especially as so far, earning season, maybe progressives, the big outlier, certainly today. But earning season so far has been pretty solid. Incredibly solid. You look at the numbers printed by the financial services companies, the big banks. The underlying theme is of strength.

And as we keep looking out over the coming weeks, as long as earning seasons can, you know, continue to deliver. And we don't hear CEOs and CFOs coming down and trying to talk down their expectations. We think that stocks can do quite well. We know it's not going to be easy based on the valuations and the fact that we've already had such an amazing rally this year on top of last year and the year before. But it's all going to come down to earnings for us. Michael, we're short on answers in this environment. Certainly when it comes to macro data, a lot of stuff that would normally be coming out of the federal government. But maybe short of answers we can ask the right questions. So here's a question for you. Valuations, yes, are high,

but when are the major challenge points when investors, when the market's going to be forced to determine whether it's worth it? Well, I guess the quick answer, John, is it's always worth it as long as it's going up. That's a very simple answer from stocks. Look, and I'd like to add on to what Alan said, too. One of the things we're going to be looking for hard and these earnings report is the appearance and effect and consequence of tariffs. If, you know, the Fed's been telling us they need to see, they want to see the data, and are those tariffs actually showing up? If we see prices going up, if we see inflation being driven by tariffs and trade policy, the Fed's got to stop and put the brakes on rates cuts. They can't be cutting

into a inflationary environment. So their hands get kind of tied. Right now, we've got a lot of tailwinds at our backs. So while there are warning signs out there, this market could continue to go up, could continue to go up a couple of quarters or a couple of years. I think a couple of years is pushing it, but it's more important than ever that you take a look at some of the positions that have gotten big in your portfolio if you're an individual investor and make sure that you're right-sized and that risk hasn't slipped in. Also going to Steve's point, I would say, look at some of the companies the government is buying, the government supporting. There are a couple of lithium companies, for instance. We know about Intel. As we set floors

and things, this is a new day for us in the United States, where the government's getting involved in individual companies. Maybe we need to take a look at making sure we own them as well as the government. Well, I guess if the government owns it in a way we do, I guess we need to figure out how justify that is, Alan, a version of this question to you, whether it's consumer performance during the holidays, discounting, you know, how well profit margins hold up into next year. What do you think the major decision points are going to be for the market to justify the valuations where they are and maybe even push them higher?

Well, I think you nailed it, which is a little bit later on in the year. We're going to have an acute focus on what's going on with margins. Are we going to see a hybrid approach where companies pass along? some and eat some, are we going to see companies really having to pass on the majority of those costs? But we think it even comes a little sooner. So in two weeks, we'll have a lot of the hyperscalers, Microsoft, Google, Alphabet, Amazon, all reporting on the 29th and the 30th. And the market is going to be very interested to hear, are we shifting from just pure aspiration on the AI front, or are we actually moving into growth? So it could be a little bit of a trick-or-treat

rally there if things don't go well with the hyperscalers, if they're not able to deliver on the future forecast for AI, it could be a challenge going into the end of the month. And so we want to watch that before we even get started with the conversations about the holidays, which seems like every year it gets a little bit earlier. All right. Some Halloween excitement, Alan, Michael. Thanks to you both. Well, it has been three years since the S&P 500 bottomed and the AI rally kicked off.

Over that time, Chips of Sword, big tech has jumped. Energy has been electric, but software, it's been a mixed bag. Up next, we'll look at which software will really be a service to its investors. And we just got results from J.B. Hunt, the trucking and logistics company with a big beat on earnings, a narrow beat on revenue. The stock is gaining right now in overtime. It's jumping 12% on these results. We're back in two. Welcome back. A tale of two retailers today, but both higher. On the luxury side, LVMH posting a big jump in the stock after reporting strong results, saying sales in China

showed noticeable improvement. Revenue rose 1%. That snapped two quarters of declines. With all divisions topping estimates, those shares finished up 7%. Dollar Tree on the flip side, standing by its guidance, seeing it expects steady growth for the next three years. But that outlook does exclude some items, including its tariff mitigation efforts. Nonetheless, those shares finished up About half a percent. Yeah. All right. Well, three years ago, this week, S&P hit a low.

A few weeks later, chat GPT came along and markets went off to the races. Tech lead, S&P is up 86% since then. Huge winners among the AI hypers include Microsoft. Chips, of course, big winners as well. NVIDIA's up 1,500%. Even energy names that nobody had heard of are now hot stocks. But pictures less clear in software. Salesforce and Adobe have lagged despite their best.

efforts, but Service Now and SAP have outperformed them. So which software names can catch the AI wave, which will be left behind? Joining us now is Gil Luria from D.A. Davidson. Gil, it seems to me like in the dot-com era, packaged software companies got challenged by web apps. Didn't so much matter what operating system you had, a foothold in. All you needed was a browser. Now, application software companies may be facing a similar challenge from AI platforms. How is it hitting differently across that space?

It's a very disruptive force and will continue to be for a while. I would say that it really hasn't changed the markets for a lot of these companies, that especially in the application software quite as much as the narrative is, and it may take time for the markets to change as well. This is a technology that's actually not a great fit for business software. Business software is very precise, it's very integrated. There's workflows, permissions, connections. So it's going to take time until new AI software startups are going to disrupt the application software companies in spite of the narratives.

But there are places in software where the benefit is very clear. Again, you have to have the data all in one place. That benefits Snowflick. You have to observe all the applications. That benefits data dog. You're developing a lot more code. Okay. So, but I guess a question is, is the benefit kind of moving up the stack? I mean, starting with the likes of Nvidia, the hyperscalers, then you've got, you know, the data sitting on top of that, and then eventually you'll have the application software. Isn't that these legacy names are just missing the boat entirely, or just that the AI benefit wave hasn't quite reached them yet?

It's a lot more of the latter. For now, they're all talking a big game. about AI, but it's actually going to take a really long time for it to have an impact. So it's really not an issue for right now. Right now the differentiation is between companies that have a core business that's doing well like Service Now, as opposed to companies with a core business that's not doing well like Salesforce. That's the differentiation application software and that will only change when these upstarts come up and disrupt the core business. Until then, it's going to be a slow role, which is why Salesforce got in trouble because they bet the farm on Agent Force before it was ready, and they

neglected the core business. And that's why you've seen this underperformance. Well, Service now continued to execute very, very well in its core business, and therefore the stock has done a lot better. So, Gil, let's just stick with Salesforce right now because it's been a dog of the Dow this year. They obviously just wrapped up an investor day and Dreamforce over the last couple of days in San Francisco. Is it that Salesforce bet too soon on Agent Force before it was ready and neglected their core business? Or is it that corporate America wasn't ready for what Salesforce was trying to roll out, which is what I think Mark Benioff might potentially be arguing recently in interviews, including on CNBC? Yeah, I think it's both. I think it's both. So they've been on it

before it was ready. Companies aren't ready because it's really complicated to change your business software. If you think about the software used every day at work, when's the last time it changed? It doesn't change very often. And you also have very high expectations for it. The results have to be exactly right.

When we know that when we use AI software, it's not exactly right, which we have a tolerance for as consumers and as employees, But in the technology stack, there's no tolerance for the numbers being wrong. And so it's going to take time until we can use it in that context. So, yes, that's correct. Companies aren't ready, but also Salesforce bet on it before it was even nearly ready, which is why the core business suffered.

All right. Gil Luria, thanks for joining us. Thank you. Well, coming up on overtime, we'll tell you what the Treasury Secretary said, that's sending aerospace and defense stocks lower. And the Russell 2000 hitting another all-time high. Mike Santoli is going to be looking at what's behind the big rally in small caps. Be right back.

Welcome back to overtime. Aerospace and defense stocks lower across the board today. Some of the biggest movers to the downside defense primes, as you can see right here. Well, Secretary Scott Besson speaking at the CNBC Invest in America Summit in Washington today, saying he would quote prod defense companies to do fewer stock buybacks. He was saying he'd rather see more of that money go to research. But he did say that he didn't think the government would take stakes in those companies, as has happened in other industries.

John, the other thing he said is all those stock buybacks is what got Boeing in trouble. Okay. Well, to note for sure. Small caps, though, making some big moves, but what's really driving the surge beneath the surface? Senior Markets commentator Mike Santoli is with us to examine the rally's momentum. Mike? Yeah, John, I think the textbook and maybe in the popular imagination, small caps are kind of tethered to the real world U.S. economy and interest rates, and it's very much a fundamental cyclical move when they go higher. Sometimes that's true, and to some degree maybe it is right now. This is a five-year chart of the Russell 2000 small cap. You've just broken out above that late 2021 high.

You want to point out, we also thought we were in the free and clear, perhaps, late last year after the election when you have that aggressive move higher. So you do see that it is prone to these very steep ascents and then a little bit of a sell-off. What I would point out, though, is there's been a big divergence between different small-cap measures. Russell 2000 massively outperforming the S&P Small-Cap 600 index, which aside from just being a subset of the 2000 requires that the companies be profitable to go into the index. A huge percentage of the Russell 2000 members are not profitable. And so you see that divide opening up here. It shows you lower financial quality is driving that upside in the Russell 2000. If you look at the top holdings, it's just a lot of the speculative stuff that we've

come used to. It's crypto related. It's drone tech. It's quantum computing and things like that. That's kind of what the Russell is starting to measure on a day-to-day basis. And so, Here, I would also point out on a sector basis, if you look at the Russell 2000 relative to small-cap industrials and small-cap financials, the industrials have kept pace. So that's kind of a reassuring macro message. Though, if you look at the particular industrials, again, Bloom Energy is the largest holding in the Russell 2000 right now. It's an industrial.

It's also kind of a sort of a moonshot alternative energy AI play. And then you see financials on the small-cap side have obviously lagged to some degree, certainly lag the larger financial. So kind of just sort of know what you're buying when you buy the Russell 2000 at a moment like this, John. Tell me if I'm reading too much into this, Mike, but it sounds like you're saying that low quality in large part is driving the Russell. On the flip side, I could argue that higher quality is driving the S&P in some of these mega caps. And so maybe it's dangerous for investors to expect them to offset each other, that because the large caps and the S&P have outperformed the Russell that, you know, if that pulls back, for some reason,

the Russell's going to do better. That's probably right. Now, look, I'm not going to push against the idea that the Russell 2000 has made an important upside inflection point relative to the S&P 500. Maybe it lasts a little while longer. It's definitely kind of monitor it closely, wait and see. I also, it's true as a general matter that the MAG 7 type stocks generally are higher quality, but I would also point out that high beta, which is basically the most violent.

volatile stocks in the S&P have really been racing higher. So, you know, I could point, you could kind of cut it either way. I don't think it's been principally about quality driving the S&P 500 in this last little phase. So, yes, the broader point, they're not going to offset one another. And I do think it all is a manifestation of a mature bull market with high risk appetites being evident in the action. All right. Mike Santoli, thank you. We'll see you later this hour. It's time now for a CNBC News Update with Kate Rogers.

Hi, Kate. Morgan, a federal judge in Oregon extended a block on the Trump administration deploying National Guard members in Portland. The judge extended the temporary restraining order by another 14 days, while the administration waits for an appeals panel to issue a decision. Bank of America and Bank of New York Mellon have been sued over ties to Jeffrey Epstein. Two lawsuits were filed today on behalf of a Jane Doe and other women who have accused Epstein of abuse. They allege the banks gave Epstein and his co-conspirators special treatment, allowing his trafficking operation to exist.

The banks have yet to comment. And the lights could go out on Broadway. The union that represents Broadway musicians overwhelmingly voted to authorize a strike after their previous contract expired on August 31st. Although it only triggers a work stoppage if negotiations break down. The union says the Broadway League is threatening

to cut jobs, wages, and health benefits. The League says it's committed to negotiating a fair contract. Morgan, back over to you. All right. Kay Rogers, thank you. Coming up on overtime, hundreds of billions of dollars of venture capital money flowing into AI startups this year. We're going to talk to a top VC about the types of companies her group is betting on right now.

Alice Bentick of Entrepreneurs First is going to join us right after this break. Welcome back to overtime. Markets faded late in the session. The Dow sank into the red in the final minutes. of trading s np and nasdaq held on to gains shares a progressive down six percent today earnings and revenue both came short of expectations piper sandler bemo and evercore isi there we go all cutting price targets this afternoon a wild week for sand disk that stock gained 15 percent monday lost five percent yesterday gained that back and then some whoa up 13 percent today

the company is part of a red hot data storage trade western digital sea gate the second and third best performers in the S&P this year, trailing only Robin Hood and earnings out this hour. United Airlines, we mentioned beat on earnings with a small miss on revenue, also raising its fourth quarter guidance, J.B. Hunt with a big jump in overtime now, up still 11% with its beat on earnings. Yeah, J.B. Hunt's interesting. It tends to be an early read on what we're going to get for earnings season on the freight side, which of course translates to goods coming into the holiday season as well. Well, meantime, 2025 is on pace to be. the first year where more than half of total venture capital dollars goes into AI.

That's according to the latest data from Pitchbook, that data also showing most of the money flowed to establish startups to the detriment of smaller and lesser-known companies. So joining us now is Alice Bentick, co-founder and CEO at Entrepreneurs First. She is live from the group's Demo Day in San Francisco. Entrepreneurs First focuses on finding talented individuals before they've committed to funding and working with them to create and build new companies. Now, to date, EF has built over 800 companies from scratch, valued at more than $13 billion and a star-studded list of investors.

I should also note for entrepreneurs first. Alice, it's great to have you on. Welcome. We just lost the shot. So we're having some technical difficulties here. All right. We're going to work on that. And in the meantime, we're going to head to break.

And we'll see you back in two. welcome back to overtime we talked about it right before the break but now let's get back to alice bentick to discuss the VC funding environment what's next in terms of early stage startups she is co-founder and CEO at entrepreneurs first she is live at the group's demo day in san francisco and alice it's great to have you on overtime welcome hi morgan thank you so much for having me so one of the things that i think is interesting if we just take a step back and before we get like broader outlook from you is the fact that entrepreneurs first, the way you would describe it is as a CIA for startup

founders, a CIA, of course, being a talent agency. So the fact that you're on the front lines of what's coming next with entrepreneurs and new startups, what are you seeing and how do you work with them? So the way we think about EF is that we are a talent investor. And what this means is that we're finding the very best talent from Europe, India, and across the US, helping them build start-ups from scratch. And yes, as you were saying before, what we're seeing is, at the moment, they want to build an AI. We have this very unusual process that enables these individuals to meet each other, form co-founding teams, and then move to the Bay Area to raise their seed rounds. As you said, we have our demo day here today, and you can see some of the founders getting ready

behind me. About 85% of this cohort is working on AI or AI-related products. And I think what's super interesting right now is seeing how many young founders are really excited about, using AI to disrupt some of the more traditional industries, whether it be agriculture, whether it be manufacturing, whether it be finding rare minerals. So yeah, the AI world is booming, but it is also recognizing just how big the opportunity is in AI at the moment. So it sounds like as Founders Day is unfolding in real time behind you, AI continues to be the headline. It really does. It really does. I mean, to give you an example of some of the companies that are going to be pitching today, We have a company called Daisy AI that is transforming how food processes work.

So you think about big food processes that take in a product like milk. They actually don't necessarily understand how much milk they're going to take each time they work with a different farmer. Daisy is able to increase efficiency by up to 80%. These are the kind of companies that we're seeing. And over the last 10 years, we've bought more than $13 billion worth of companies. And the majority of those companies are working on AI. I keep hearing from startups that open AI and anthropic others are eating their lunch or threatening to certainly happening with, say, code assist tools. How do you view this tradeoff in the marketplace now between the AI excitement being a boon to investor excitement in AI on one side and then a threat on the other when you've got these well-funded mega AI companies, you know, adding features that eat into what these entrepreneurs are building?

Well, it's interesting that you mentioned Anthropic. Jack Clark, one of the co-founders of Anthropic, is actually opening our demo day. We're doing a far side chat to kick off. We really see this as a complementary part of the ecosystem. You know, the big AI labs are producing absolutely incredible models. And there's a really exciting layer of application AI startups that are being built on top of those. As those models improve, it also improves the kind of products and the kind of services that those companies can deliver. And so we see this very much. as a positive thing rather than a competitive thing. What is your take on where so much of the capital is going within the venture cycle? I mean, there's so much focus right now on growth stage companies, late stage companies, companies that are staying private longer because there's so much excitement and they're able to tap into that capital without going public. What are you seeing within an early stage specifically right now? The early stage market is really hot right now.

We are seeing prices, so the valuations of the companies, going up every quarter. We're also seeing the speed to raise compress, so we're now seeing companies being able to raise, you know, five to seven million dollars within a matter of days post-demo day. This is great for founders, and it does mean that we're seeing more and more founders being pulled into the ecosystem, and particularly young people, seeing that founding is now becoming one of the most aspirational and attractive career paths for them. So we see this is a very positive thing. I think generally the more founders building exceptional companies in the world is a good. good thing. There is a question about whether there is an oversupply of capital. And actually what entrepreneur first is doing is we're increasing the supply of high quality companies that have built every year because we have this unique process that actually brings co-founders together

and helps them build startups from scratch. Okay. Alice Bentek, thanks for joining us. Thank you so much. Well, Apple CEO Tim Cook is walking a fine line during a tour in China this week where he's reportedly promising to increase investments, even as he plans to diversify, outside that country, which he's been doing for quite a while. Steve Kovac has a detail. Steve, there's a difference between, you know, looking like you're doing something brand new and actually doing something brand new.

I feel like China is still really, really important. Oh, big time. And let me lay out why, because we've seen Tim Cook do these tours and he's doing another one this week. And it's also, to your point, in the middle of a pivotal year for Apple's business there, he's also there to play a little politics and promote that new iPhone 17 lineup.

And this is Tim Cook really playing it, He's got to woo those customers and politicians in China while working on the side to shift production out of the country after those lessons learned during the COVID pandemic lockdowns and President Trump's tariffs this year. For example, state media reporting Cook promised new investments in China, though we did not get a specific dollar amount or what that money is going to go to. And over the last several hours, more evidence cooks moving away from China with writers reporting Apple is now lobbying to change a tax law in India to get a break on manufacturing equipment. Bloomberg reporting that upcoming gadgets like a security camera and tablet for controlling smart home appliances will be made in Vietnam. By the way, that all tracks with the vision Cook laid out back in May when the tariff threat was at its worst. Now, over time, you're going to see Apple planning to move as much production for US-bound iPhones to India. And by the way,

that strategy has been working with Jeffrey's analysts, estimating only about 9 million phones this quarter in the U.S. will come from China. Other products, though, like U.S.-bound Macs and watches in AirPods. They are already made in Vietnam. You're going to see that continue. By the way, there's still plenty of production going in China, including Macs and things like that, going to the rest of the world, to your point. And don't forget that labor force. They need those people making those iPhones thousands and thousands and thousands of jobs. It also really seems like a lot of Apple's primary competition on the phone side is coming out of China. Certainly if you're talking about Europe or certainly in China,

and Southeast Asia itself, right? So he's got to show up there. When you travel to Europe, it's so interesting. You see Huawei posters everywhere, Huawei stores and things like that. I was in Paris last year. I saw exactly that. And since Huawei came back online a couple years ago

and started making phones again, boy, did that eat into Apple's market here. We're seeing that change a little bit right now because of that iPhone 17-based model. It applies for those subsidies that the Chinese government is offering. It's a really nice discount, actually. And that seems to be juicing sales.

And we saw some evidence that China is bouncing back already because of those subsidies in the last earnings report. So, boy, am I going to be paying attention to that in two weeks' time? Because that is a huge thing for Apple right now to get that business back up to growth. That is well, well, well off its peaks from the middle of COVID. All right. Steve Kovac, thank you. That's a deep preview for those earnings on overtime in two weeks. I'll be there with you guys. Up next, Mike Santoli looks at whether the mega cat banks are starting to look mega expensive.

after significantly outperforming the broader market this year. Plus, one Wall Street firm says this chip stock's revenue potential is being underestimated even after it inked to deal with Open AI. We're going to reveal that name and the new street high price target it's getting when overtime return. Welcome back. President Trump making headlines this hour are Amon Jabbers. Has some details. Amen. John, that's right. The president took questions from reporters in the Oval Office. a couple of moments ago. A couple of items for our audience that I think are important to focus on.

One is the president said that leader Modi of India has assured him that he is going to stop buying Russian oil. So no additional details on that, but that might be geostrategically something to watch. As Modi is saying, he's no longer going to purchase Russian oil, at least according to President Trump. That conversation happened earlier today. Also on Venezuela, the president confirming that he has authorized the CIA, to operate in Venezuela, but he did not say and did not respond to a question about whether or not he's authorized the Central Intelligence Agency to take any action against Venezuelan leader Maduro. The president said it would be foolish of him to answer a question whether or not he's

authorized the CIA to take out Maduro. So some strategic ambiguity, I guess, there, as to what the CIA's mission in Venezuela will actually be, John. On the trade war, he was asked whether or not. Americans should expect a long trade war with China. He said, well, we're in one now. The point being that this recent flare-up of tensions in the president's mind is simply part of an ongoing trade war that's been happening all year. And lastly, John, the president said that he might go to the Supreme Court in November. That's when the Supreme Court is going to be holding

arguments over his tariffs and the legality thereof. The president said his tariffs are so important to U.S. national security to his administration that he might be. go to the Supreme Court to watch those arguments play out in person, something he's never done, John. Back over to you. Yeah, that's pretty incredible in of itself. And certainly the war on drugs continuing to cross more and more borders is a big story, too. Amen Javers, thank you. Wall Street's biggest banks are pulling away from the pack. The gap between the Universal Giants and Main Street lenders is only growing. How sustainable is the spread? Well, Mike Santoli is back with more. Yes, Morgan. So the results from the

those huge Wall Street banks, pretty unassailable. We knew investment banking and trading revenues are going to be great. They proved it. And here's a 10 year of the large banks, J.P. Morgan, Goldman Sachs, and Morgan Stanley, relative to the total regional bank sector, obviously massive gap the entire time those big banks saying, hey, we're overregulated, we hold too much capital. Take a look at the valuations, though. They are now fully appreciated, I would argue. You see that all three of these big banks are now above two times book value. go back before financial crisis, see a couple of them up there. Goldman Sachs was having a 30% ROE back then, around 15, 16% right now. They're more stable, safer, less risky institutions now,

not quite as profitable. So we'll see if there's further upside as their results come through, John. All right. Mike Santoli, thank you. Well, the big banks just had their turn, and now it's time for the regionals to report earnings. Up next, the top analyst on how you should be trading those names ahead of their results. We'll be right back. Well, let's get you set up with tomorrow's trade today. It's a big day for the earnings calendar, including Dow Component Travelers, Charles Schwab, U.S. Bank Corps, as well as railroad operator CSX, Interactive Brokers, those two will report after the bell right here on overtime. Interactive Brokers chairman and founder Thomas Petterfee will break down those results right here on this show in a first on CNBC interview.

Plus, we will get more regional bank earnings, Bank of New York Mellon, Kee Corps, M&T Bank. We will not be getting PPI or retail sales as scheduled due to the government shutdown, though, John. All right. Well, shares of Zion's Bank Corp lower here in overtime. The company is setting aside $60 million for potential issues with two borrowers. Zion says there are legal actions from several banks and lenders against those borrowers, which had loans from Zion's California Bank and Trust Division. Zion is set to report third quarter earnings on Monday.

Now, let's get into what we could hear from the regional banks. With us is RBC Capital Markets Managing Director Gerard Cassidy. Gerard, welcome. So regional banks, I tend to associate with small caps, which are doing well, smaller companies lending money to smaller businesses. But I wonder if some of the bad credit dynamics that we see out there in the economy could surprisingly hit some smaller banks, maybe some exposure. a private credit. What do you say?

John, thank you for having me on the program. And I would say that, you know, based upon what you just reported with Zions, from what we can tell, and as they mentioned, other banks or have got illegal actions, this might be the big fraud that has hit some of the banks like J.P. Morgan, for example. Tri-Color was the big fraud or alleged fraud. You also have first brands. So I don't, we don't sense it's any signs yet of real cracks in credit for the banks, because when you look at the overall credit picture, with these exceptions, it's been quite resilient. And everybody on the calls today and yesterday talked about the resiliency in credit quality. Gerard, how important is the steep and deal curve here?

Morgan, you put your thumb right on it. I mean, that's what really will benefit the regional banks as we go forward. If the Fed was to cut another 50 basis points over the next three to six months and you get a three and a quarter of the three and a half percent Fed funds rate with a four plus percent 10 year. We haven't seen that in 20 years and three percent fed funds with a 75 basis point yield curve. And the banks can do extremely well. Niditrous revenue growth benefits from that dramatically. And we haven't seen that, like I said, in 20 years. So it's very important. Jared, what's the main differentiator that investors should use to think about the difference in how these regional banks are going to do?

I think, John, one of the areas for all of us to look is to see who is starting to see the benefits of the Fed Fund rate cut that we just experienced a little early. Obviously, it was done at the end of the third quarter. But the commentary that we are going to hear about the benefits of that of lowering deposit costs. And we heard from some of the banks talking about Bank America in particular about the number of securities and loans that were made back in 2020 and 2021. very low yields are renewing. And when they renew, they pick up anywhere from 100 to 200 basis points, gets back to Morgan's comment about the yield curve. So I would say that that's what

we're going to be focusing in on and to see which banks can tell us who's going to get the best bang for the buck. Jared, what would you be buying right now? We would step in and be buying fifth third. We think that's one of the best managed regional banks. You might recall they purchased or announced that they're going to require Co-America in a deal that's not dilutive to changeable. book value per share, and it's immediately earnings accreted when it closes. Key Corp is another one. Key Corp, believe it or not, has a very strong investment banking presence for a regional

bank. Under Chris Gorman's leadership, they've integrated that very effectively, and I think we're going to get good numbers from them on investment banking as well as their net interest income growth. Biggest risk you see out there? The biggest risk, John, is, in our view, this inflation is not transitory. And we're sitting here in three, six months, and inflation is still hovering three and a half, four percent, not transitory. Fed has to pivot. And they start talking about raising short-term rates. That is the biggest risk to the banking sector. M&A. You expect more of it in the sector? We sure do, Morgan. And again, we saw that fifth third deal. It was a deal done earlier in the year that wasn't as well received by investors.

That was Cenovis merging with Pinnacle. But we are going to see. more M&A activity, we believe. It's a way for banks to drive economies of scale and improve profitability. And you might remember, Morgan, back in the 80s, we had over 18,000 banks and frifts. Today we have 4,300. So consolidation has been going on for decades, and we expected to continue, especially now with the regulators. The regulators are very supportive of it. Yeah, they certainly do seem to be much more supportive of it. Gerard Cassidy, thank you. Thank you, Morgan. Of course, a mixed picture today, John, for the major averages.

It was basically a mirror opposite of what we saw yesterday with the Dow down fractionally, the S&P and NASDAQ finishing in the green. Yeah, well, with these big tech earnings coming up, but I know it's a ways off, but we're talking about earnings now, I wonder if a big issue is how good the AI growth numbers have to be to justify the valuations here, and whether investors are still so keen for them to be saying they're spending these billions and billions of dollars.

Yeah, and perhaps not only that, but what those cap-back numbers look like as we talk about all of the secondary and tertiary AI infrastructure plays as well, which have had big years. That's going to do us for us here at overtime. Fast money starts now.