Closing Bell - Closing Bell Overtime: Esmark CEO On Why His Offer For US Steel Is Superior To Cleveland-Cliffs; Cava’s First Report As A Public Company 8/15/23

Episode Date: August 15, 2023

Major averages closed lower today after weak Chinese data overnight. Bespoke’s Paul Hickey and JPMorgan’s Phil Camporeale break down the market action. Cava reported its first numbers as a public company; Neuberger Berman’s John San Marco and Coresight Research CEO Deborah Weinswig break down the numbers and what it means for the rest of the consumer names this week. Esmark CEO James Bouchard on why his company’s bid for US Steel is better than Cleveland-Cliffs. CFPB Director Rohit Chopra on new consumer data rules for the AI-age. Plus, Sunrun CEO Mary Powell reflects on 1-year since the IRA passed and its impact on the solar industry. 

Well, stocks tumbling today. Every S&P sector in the red as the 10-year yield tested its October high. That is the scorecard on Wall Street. But the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Coming up this hour, Kava serves up its first report as a publicly traded company. The Mediterranean chain is about to post its first quarterly earnings release since it did go public in June. And the stock has more than doubled from its IPO price. We're going to bring you those numbers as soon as they cross. Plus, an inside look at the race for a steel deal. We'll be joined by the CEO of privately held S-Mark, which late yesterday made what looks like a $7.8 billion offer for U.S.

steel on paper, topping the $7.3 billion bid from Cleveland Cliffs, but short on details on where the money's coming from. All right. So we're going to try and get some more of those today here. Let's begin with the market action and more pain for the bulls. Weak China data and a ratings agency warning about the banks set the tone for a downbeat session. Joining us now to discuss is Paul Hickey from Bespoke Investment Group and Phil Camporelli

from J.P. Morgan Asset Management. Good afternoon to you both. Phil, you're here on set. I want to get your thoughts on the market at these levels. I mean, the S&P closed right near session lows, down about 1.2%. We could talk about the weak data coming out of China. We can talk about more concern around the banks, but we can also talk about yields, testing the October highs. Yeah, so the yield story for us is probably

the biggest risk. It has to be because, you know, there's you get to that 420 level based on two things. Either inflation isn't cooperating or growth is cooperating. And it's a growth story, Morgan. So that's very, very different from where we were when you said test the October highs. Last October, we were between six% and 8% on inflation. People worried about inflation back then. Now it's a story of, OK, now it's almost impossible to get two consecutive quarters of negative GDP growth with jobs pulling back this year. The recession is off the table. And then the 4.2% yield hitting that back in October, I think that makes some sense. One more thing. I don't think

the Fed really has any kind of need for the 10-year Treasury to fall because of the housing market. They really need a 7.25% mortgage rate because the last thing that they need is a reignition of something like owner's equivalent rent that can create just another bad story on inflation. So I think that story. But again, this is a high class problem because of the growth story. It's very, very different from where we were last year when inflation was still between six and eight percent. Yeah. Paul, I want to get your thoughts on this, especially because you've started to see this narrative trickle into the market of not just the possibility of a soft landing, but also of no landing,

which might actually put the Fed in a conundrum. Yeah, no, I mean, I think when you, to Phil's point, the biggest issue, I think, for the market in the short term here is the increase in interest rates staying higher for longer. That's going to weigh on things in the short term here. But, you know, you just have to take a step back also. We're in the month of August, historically weak period of year. Towards the end of July, investors started to get offsides. We saw what was some extreme readings in overall market strength. The NASDAQ 100, 25% above its 200-day moving day moving average the s p 500 overbought since memorial day the nasdaq overbought since cinco de mayo five month winning streaks for the s p 500

and the nasdaq so these are all uh factors that led some investors maybe to believe that the market could only go higher here and coupled with the weak seasonality, I think investors getting a little bit of a reality check, which is good for the market overall. Longer term, though, what you have to remember is these types of extreme readings we've seen in overbought levels are indicative of bull markets and not bear markets. And so I think from a long term perspective, you see a short term pullback, which is healthy here. And as I said last time, we don't know where the market is going to be in the short term, but we're pretty confident this can be higher by the end of the year. And we still feel that way now.

Oh, OK. Well, Phil, these rates are a danger if you're looking for an excuse to buy stocks, right? But if you're kind of constructing and strategizing over your portfolio, why doesn't it make sense to acquire bonds, bond funds here, right? Where you'll make a good amount of money off the yield if things stay roughly where they are. But if the Fed does cut rates later, you can sell some of that and make some money and then, you know, do something with it, right? John, you're hired and you're speaking my language here. I run a multi-asset portfolio where I have to beat a 60-40 index. That 40 part of the index, we think, is very, very attractive because we haven't even talked about how inverted the yield curve is. So in the one to five year part of the curve, John, I can get close to 8% in high quality, high yield. That is an anti-recession trade.

I think that's a really important point. And if we avoid recession rates- And that 8%, that almost kind of historically beats the S&P. Yes. The long-term capital market assumption for the S&P is below 8%. Yeah, that's right. So that's part of it. The other part of it is, okay, let's say we head into next year and one or two things happen. The hard landing happens, rates are going to fall. But if the soft landing happens and we avoid recession, stocks will be OK and I still get the yield. So, John, I think it's a really important point that you just made, the asymmetry in fixed income at this point. The only thing that keeps me up at night would be if the Fed had to come back and do 25 or 50 basis point cuts because inflation was accelerating.

We assign a very low probability to that right now. Okay, so Paul, I know you say from a technical, historical perspective, this looks like a bull market, but what about, how much risk is there that we don't go much higher from here? I mean, it's not binary, right? So how are you factoring in the risk, given what we're seeing in the strength of the economy, what is or isn't likely to happen with rates? So, I mean, I think, you know, you look at valuations of the market, you know, the overall market valuation is rich relative to history. But again, we talk about the Magnificent Seven, so to speak. They're driving a lot of that valuation premium.

You look underneath in mid caps and small caps, you're seeing multiples in some cases in the high single digits to low double digits. And when you make the this or that choice between stocks and bonds, a mix is definitely a good idea for a lot of investors. But when you talk about high yield, like the yields that you get in treasuries or some corporate bonds being higher than the earnings yield of the S&P 500. We saw that situation from the early 80s to the late 90s, where the earnings yield of

the S&P 500 was routinely less than the yield on treasuries on the 10 year yield. And during that period, it was a great period to be invested in equity. So just the fact that you have an attractive yield in the fixed income market doesn't necessarily mean that stocks should be avoided. So we just talked about short duration bonds and the opportunity there. If you're trying to beat or outperform the 60-40 portfolio, what are some of the other ways that you do that? So in near term, it has to be yield. It has to be getting more yield. And yield is a less glamorous form of alpha, but it is a form of alpha yield. The other piece,

Morgan, and he mentioned, Paul mentioned the Magnificent Seven. You know, under the hood, if we avoid recession, as I call it the S&P 493, so everything else, right, that has better valuations, you can security select inside of the index and make alpha that way. So I don't think this is a major move in the index through the end of the year. I think most of the alpha is going to come from fixed income. But the stuff that got left behind, as folks are now warming up to the fact that we're probably going to avoid recession over the next six, nine months, that stuff we think can outperform just the index of the equity market. All right. Phil, Paul, thank you both. Great way to start the show.

But now right on to the next. Agilent earnings are out. Pippa Stevens has the numbers. Pippa. Hey, John. Well, Agilent beating earnings estimates on both the top and bottom line. EPS coming in at 143 per share on an adjusted basis ahead of the 136 that Wall Street was expecting. Revenue a slight beat here at 1.67 billion.

However, what seems to be weighing on the stock here is that the company did cut its full year revenue and EPS guidance, which is now short of Wall Street estimates. And the CEO pointed to a challenging macroeconomic market condition and said that that was especially true in China during the latest quarter. John. Interesting. Pippa Stevens, thank you. Now, tomorrow is the anniversary of the August 2022 market peak. Let's bring in senior markets commentator Michael Santoli with a look at how the market has performed since then.

Mike. Yeah, John. Well, badly and then very well and now kind of in the middle, actually. Yes, it was just above 4,300 on August 16th of last year. We had that summertime peak. It's basically the high point for the second half of 2022. That was also when Fed Chair Jay Powell at Jackson Hole more or less sternly told the market not to expect any acts of generosity from Fed policy anytime soon. And rates were also screaming higher. Treasury yields were, however, going above three percent toward three and a half, not four percent toward five and a half. I think that's very important. The absolute level might

not matter that much. The market just has to get accustomed and internalize what it means to have rates at that level. Now, where does it bring us? This level, what we were kind of flirting with much of the day and then ultimately cracked just slightly below was last week's low. And also what I keep pointing to is that July 12th pop higher on a really benign CPI report. So we've now gone below that level, also closed below the 50 day moving average. So definitely a little bit of backing and filling at minimum down three and a half or so, three percent from the from the closing highs. So it's not necessarily like it's cut into muscle just yet. I would also point out these other levels in the in the forty threes, forty three fifty area that would also be watched.

I think a lot of folks thinking that we might get down there and then be kind of oversold and have basically done what we needed to do with this August pullback. Take a look here at the subsector of the market that Agilent Technologies belongs to. It's the lab and medical and scientific devices subsector. So this is Agilent. Mettler Toledo is another one. Waters Corp is another. They've actually had a very tough year as a group, as you can see, underperforming the S&P 500 significantly. A lot of spending cuts from some of their customers in pharmaceuticals and biotech and some other areas.

Very much a favored group of growth investors in recent years. The PEs on forward PEs were up around 35 and above for some of these stocks just a couple of years ago. Now they're down in the 20 zone, but clearly they still have a little work to do to figure out exactly what the current run rate of demand is going to be in this subsector, John. Yeah, not like the AI stocks. They're having a different feel. If you're playing on the other hand with me at the moment, what would be the argument for the market really being in a rough spot here and going below 4,300, if you had to make one? Oh, sure. I mean, I think it's basically that yields become unanchored because inflation is going to remain high and the Fed decides that it has to really suppress demand that much more. I personally don't think the Fed going at the pace it's going right now is necessarily the

enemy number one of the stock market. But I do think the idea that the Fed going at the pace it's going right now is necessarily the enemy number one of the stock market. But I do think the idea that the Fed's not done in combination with maybe we're sort of in a reacceleration in the economy for now, but that's going to raise the likelihood of a hard landing later. That to me is the equation that gets the market concerned. Yeah. It's also worth noting the S&P 500 today closing below its 50-day moving average. First time we've seen that since late March. Mike Santoli, we'll see you later in the hour. Thank you.

H&R Block earnings are out. Let's get to Pippa Stevens with those numbers. Hi, Pippa. Hey, Morgan. That stock is higher after H&R Block beat on the top and bottom line during Q4. The company earned $2.05 per share excluding items, which was ahead of the $1.88 estimate. Revenue coming in at $1.03 billion, slightly ahead of expectations. H&R Block also announced a 10% increase in its quarterly dividend

and said that during the latest quarter, repurchased $200 million worth of stock, meaning that in the past year, the company has repurchased 9% of shares outstanding, that stock up 6%. John? Pippa, thanks. Speaking of, Kava earnings are out. We are going through them. That stock has at least initially popped higher, almost 6%. After the break, we'll have that. And what do these results from Home Depot we got this morning tell us about the state of the consumer? And what should you expect later in the week from Target, Walmart, TJX. We will ask a top portfolio manager who owns many of those names when Overtime comes right back. Welcome back. Kava's earnings are out and Kate Rogers has the numbers. Hi, Kate. Hey there, Morgan. So this is the first report once again for Kava since going public. We've

got a 21 cent gap EPS number here. Revenue a beat 173 million versus the analyst revenue estimate of 163.2 million. Kava's average unit volumes 2.6 million. That is compared to the 2.4 million it had in the prior year quarter. Its same restaurant sales growth, 18.2 percent, and its digital revenue mix was 31.6 percent. As you can see, the stock is higher right now, also giving some guidance. Full year same-store sales growth up 13 to 15 percent, and the call is at 5. We'll bring you any updates as we get them, Morgan. Back over to you. All right, sounds good, Kate. We know you'll be monitoring that. Kava's CEO will break down those results tomorrow at 10 a.m. Eastern on Squawk on the Street. And now let's get reaction on Kava and the rest of retail.

Joining us now, John San Marco, research analyst, portfolio manager of Neuberger Berman's Connected Consumer ETF, along with Deborah Weinswig, CoreSight research CEO. Let's see. Deborah, first, your take on Kava here. I mean, the bar was kind of high. It had rallied since its IPO, and they appear to have cleared it. I mean, you look at the top line growth, you look at the gross margins, I mean, at 400 basis points year on year, you know, net new store openings. And I think on the same store sales level, it certainly exceeded in all directions. So everything seems to be from a efficiency perspective, technology perspective, firing on all cylinders, really. Okay. So John, taking a step back into retail in general, I'm really interested in TJX and Ross

later this week, because Walmart's got the whole grocery thing going on. That's kind of a different story. But I'm curious whether the treasure hunting aspect of the consumers spending continues, even as we're seeing these credit card balances reaching levels higher than they've been in recent years. What are you expecting to see? Sure. Off price is broadly very well positioned. There's a great supply story in that what's been very challenging for full price retailers is the inventory misses and the merchandise misses you've seen in on-mall retailers, et cetera. All of that supply accrues to TJX. They'll be able to buy better. So they should have great merchandise at great prices. And then they're also positioned well for this trade down dynamic where consumers are looking to stretch their their

dollar a little further so we're pretty optimistic particularly on tjx which is one of our larger holdings yeah deborah want to get your thoughts on walmart versus target especially since we know walmart has a formidable grocery business that has helped power those results in recent quarters and target tends to lean more discretionary and has felt the impact of that. It's perfect timing on this. We actually published a piece about how their financial health is thriving. We've done, gosh, for years, a weekly survey of consumers, and we've seen a significant increase in consumer shopping in the last five weeks at Walmart, not only for grocery, but also for non-food apparel, footwear, accessories. And so we think that they're poised incredibly well for the quarter. They've had less

shrink issues than Target has. Target seems to be pretty steady as she goes. I think there is kind of definitely more of obviously a discretionary story there. Also, you have a younger customer and the concerns there right now around is these kind of loan repayments are waiting in the wings. But the impact will be on Target and its core customer. OK, Deborah, though, has has Target gone down enough? Are expectations low enough that it could do something here? I yes, absolutely. I think that it I think that expectations have decelerated enough that, you know, there's been so much talk around what they've seen on shrink and also the discretionary side.

I do think that that is absolutely waiting in the wings for them. And they continue to focus on efficiency and productivity, which I think is getting them outsized gains versus some of their competitors. Yeah. John, I just want to circle back on CABA for a second here because I know you have a small stake in your fund tied to CABA as well. So I do want to get your reaction to those in the ETF. So I do want to get your reaction to those results and just expand it out a little bit more broadly to say, what does it say about a digital first or a digital inclusive strategy, whether it's on the restaurant side or, by the way, whether it's on the e-commerce side with some of these big retailers? Sure. So perhaps firstly, I'll say we wish we had a larger

stake, but valuation is quite demanding. That makes it kind of difficult from a valuation discipline perspective to be too aggressive there. We love the long-term story, the quarter, whether it's the digital piece you mentioned or the average unit volume improvement that I think was mentioned before our discussion, all sort of confirms the longer-term story here, which is there's an enormous amount of white space for them to triple or quadruple their restaurant count where they drive really great returns. And that digital piece is really important. I wouldn't undersell that. It's critically important to their core consumer, which is a Gen Z, Gen Y consumer interested in their differentiated offering and want to engage digitally. Deborah, how important is back to school and that season? And is it a tell for the all-important holiday season later this year? Absolutely. There's a direct connection between, actually, it's interesting,

back-to-school Halloween and holiday. We've actually seen a very early strength in Halloween sales. We actually have retailers who've told us they're already out of stock on some of the highly discretionary items. And what we're seeing is that back-to-school has started off, once again,

better than people have expected. You know, a lot of it is around basics, but that still is a very, and, you know, what we're seeing too, right, I think Target has had 12 quarters of positive growth. Once again, we're seeing strong traffic there for back to school as well. John, how are you factoring in the degree to which the consumer is stretched on credit for what you expect to happen in retail? I mean, we see this dynamic, especially with Walmart, where when times are tough, people go there for groceries who normally might not, and then maybe they pick up

other sales as well. But are there follow-through effects on other retailers? Sure. The credit piece specifically is one of, it's a new challenge to the big ticket discretionary purchase, which has really been under pressure for the last year and a half or so. And to the extent it gets harder for the consumer to access credit and make some of those purchases, that's a problem that will persist. It's part of the equation. I think the net of all the positives for the consumer, like the labor market and disinflation, and the negatives such as credit, which you mentioned, I think the net of it is slightly positive. I think the consumer is going to kind of continue to crawl along. And we are very much favoring some of these trade-down names, such as Walmart. Dollar Tree is actually the largest position

in the portfolio who can benefit from consumer distress by offering great value. All right. John and Deborah, thanks offering great value. All right. John and Debra, thanks for joining us. Thank you. Up next, the Case First Steel deal. The CEO of privately held Esmark talks about his company's bid for U.S. Steel, which followed a rejected offer from Cleveland Cliffs. And later, solar stocks haven't exactly been shining

since the passage of the Inflation Reduction Act one year ago this week. We'll talk to the CEO of Sunrun about the impact from the climate change funding included in that legislation. We'll be right back. Welcome back to Overtime. The battle for U.S. steel heats up. Privately held steel firm S-Mark offering $35 a share in cash for the company. This comes after U.S. Steel rejected a cash and stock offer from Cleveland Cliffs. Some analysts questioning if S-Mark has the cash to do this. And Cleveland Cliffs CEO Lorenzo Gonsalves telling CNBC, quote, I don't believe this is a credible offer. Joining us now in an exclusive interview, S-Mark CEO Jim Bouchard. Jim, it's great to have you on

the show. Welcome. Hey, Morgan. Thank you very much. So I want to start right there. Your response to the response from Cleveland Cliffs CEO on why this is a credible offer. Well, it's great. He has a ton of debt. He's paying his debt down. It's good. We have no debt. We run off of cash. I've been with U.S. Steel for 20 years. I was the chairman and CEO of Wheeling Pittsburgh Steel, and we had a tremendous amount of debt. So I have based my company off of no debt. We have tremendous credit facilities that are untapped.

So this is not a big transit. This is actually the reason Cleveland Cliffs is offering cash in stock is because they don't have cash. Okay. We have the cash. Yeah. I guess. So two questions for you here, then. Have you heard back from U.S. Steel on your offer? U.S. Steel, I believe, is I think they were having a emergency board meeting this afternoon. And I think they are. OK. Again, the board will make whatever decision they make. However, we are supportive. You know, I've been with U.S. Steel a long time. Yeah.

Love U.S. Steel. So we're supportive of U.S. Steel. So this is not a hostile offer. And if we have to sit down at the table with U.S. Steel to help reconstruct it, we will do that. Yeah. And you talked about the fact that you have the cash. And I know you're a privately held company, so you're not necessarily disclosing the same type of financials that that's your public. It's all federally documented because we were a public company. Got it.

Under Wheeling Pittsburgh Steel when we acquire them. So everybody there's no secrets here. Got it. So so when analysts like, for example, those at Gordon Haskett say, you know, question whether this is a real offer and they say, quote, unquote, lack of financing deals and flowery press release are red flags. You would say that that's not true. Just go to all federal documents. The United States government's all federal documents they documents. It's all there. Okay, so Jim, why doesn't the Steelworkers Union want you to get this prize then? What are they missing?

Yeah, why not? They say they only want the other deal to get done. That's a very good question. I've had talks this afternoon with Tom Conway, Dave McCall, and text back and forth. So it's very complex because all of our plants are United Steelworkers plants. Okay. We have been joined and engaged, and we have fairly bargained and recently put in united steel workers agreements

even over the last 12 months all right so you say this is they know i am a union friendly guy all right okay so we don't have to make places non-union we can can make money. We have profit sharing. Even though the market's bad, GDP's down, we have continued every month to pay profit sharing to our union employees. So how much debt are you going to have to take on in order to make good on this $7.8 billion offer? I mean, I take it you don't have $8 billion in cash just sitting around. So how is that going to work? Are you going to have to put some of your commercial real estate holdings up as collateral here? That's a good question. Unfortunately, we have $10 billion in cash committed to the deal, and we are not putting up any of Esmark's assets, period, as collateral. So, Jim, let's talk a little bit about the strategy here, because it is unusual

to see a company such as yours, which is focused on processing and distributing steel products, make a play for the actual production of the raw metals. Why does this make sense? And what does it enable that's not already out in the marketplace? I mean, that's the perfect question. So we did this at Wheeling Pit. So a little old Desmark.

We bought Wheeling Pit as a service center and we bought out a big production public company. However, I'm just going to tell you, I don't want to be sexist writing on this thing, but when you mate a dinosaur with a dinosaur, you get a dinosaur. And that's what Cleveland Cliffs is going to do with U.S. Steel. So all they're going to do is create another dinosaur and they're going to continue to shrink. So one thing I learned from the CEO

and chairman of U.S. Steel, Tom Usher, which is my biggest fan, and Roy Dorrance, vice chairman, is we have to create a gazelle. So when I created Esmark, we deliver our steel products in 24 to 48 hours. Well, I'm thinking that that's not sexist because you didn't say which was the male and which was the female dinosaur in that scenario. Though I guess it's shade at the existing steel producers. How long are you going to give this?

And really, it seems like the union's opposition to you being a part of this transaction is a pretty big hurdle. So how long are you giving yourself to clear it? It is not a hurdle because we have an agreement signed with the United States Steelworkers. They will live by that agreement under federal law. So there is no hurdles. It's my understanding that they have the right under collective bargaining to say we don't like the deal. You say no? No. I guess we'll see. Jim, thank you. Time for a CNBC News Update now with Bertha Coombs. Bertha. Hey, John. Senate Majority Leader Chuck Schumer is asking Congress to approve a supplemental package to help Hawaii recover from the wildfires.

The 13 billion dollar package would replenish the federal disaster funds. Last week, the Biden administration requested that amount in overall disaster funds as part of a 40 billion dollar package that includes money for the war effort in Ukraine. A former high-ranking FBI counterintelligence agent pled guilty to a conspiracy charge for aiding a Russian oligarch. Charles McGonigal admitted to working for the oligarch after leaving the agency. Sentencing is scheduled for December. The ex-agent could face up to five years in prison. And yet another sign that the way we watch TV is changing. According to Nielsen, broadcasting cable TV viewing in July dropped below 50 percent of the total share of viewers for the first time. Never happened before. One big beneficiary, the legal drama Suits. Meghan Markle and her co-stars had the most streamed show in America last month,

watched collectively for 18 million minutes. I would imagine no small part of that is the writers' and actors' strike, and that could likely continue into the fall. Who knew that that would boost Meghan Markle's popularity? Bertha, thank you. Up next, mixed signals in the housing market. Home builder sentiment dropping sharply, according to new data. But Warren Buffett mixed signals in the housing market, home builder sentiment dropping sharply according to new data. But Warren Buffett is buying in the sector. Mike Santoli takes a long

term look at the space next. And as we head to break, check out the biggest decliners today in the S&P 500. Discover Financial was at the bottom of the list. You saw a leadership change there, followed by PayPal and First Solar. We'll be right back. Welcome back to Overtime. Rising mortgage rates driving homebuilder sentiment downward in August. That's according to today's results of the NAHB survey. This comes after Berkshire Hathaway bought shares of D.R. Horton, NRV, and Lennar in the second quarter. Mike Santoli is back with a look at the sector, which did, at least with those names, buck the downtrend we saw today, Mike. It did, Morgan. In fact, the whole group was up in a weekday for the market, up about 0.7 percent, the ITB home builder ETF.

Now, it has flattened out a bit, as you can see, huge gains on a one-year basis, over 40 percent compared to the market. And of course, it's feeding off of all those dynamics, the tightness of the market, the fact that there's no existing home supply to speak of out there. And they're able to buy down to some degree interest rates in the face of high mortgage rates. However, as you mentioned, the NIHB survey, that downturn in the latest months, it brings it right back to the middle of its very long term range. You can take a look at it right here. So even though the longer-term fundamentals and demographics are in favor of homebuilders, talking about higher construction costs, very difficult affordability equation for most buyers,

yes, those mortgage rates are a part of that, and difficulty of finding workers. So you see a kind of middling. It seems as if you could basically say the housing market is off the bottom, but it is definitely not a strong engine of further growth. And maybe it's just having this kind of fitful recovery out there. And it's hard to see if rates stay where they are, how that's necessarily going to change anytime soon. But at least it's not an outright drag on overall economic activity at the moment. All right. All right. I was going to say, Mike, I just I wonder if there is a point at which we were just having this conversation with Phil Campreale on set earlier today, this idea that the Fed would actually like to see mortgage rates

staying at seven and a half percent potentially or seven percent and, you know, continue to see a drag on housing as one area where inflation could continue to tamp down. I guess I'm trying to wrap my head around how that math continues to work in an environment where the market is waiting for or hoping for peak disinflation or peak inflation, I should say, narratives from the Fed at Jackson Hole next later this month. Yeah, it's I mean, I would say the Fed certainly probably doesn't mind seeing interest rates up here at 7 percent, doesn't mind the fact that housing itself is not driving further push higher in inflation. I'm not sure it's the

central objective is for them to really weaken the housing market much more than it is right now. Mostly, I think what we have to wait for is a lot of those lagged effects of the inflation measures to work their way through. It's probably going to happen over the next few months. The question is whether that's going to be enough. Again, I don't think that the Fed has to be very militant about the message next week at Jackson Hole, but they clearly are not going to offer a kind of a mission accomplished one either. All right, Mike, thanks. Up next, the director of the Consumer Finance Protection Bureau on his plan to crack down on data brokers and whether he's concerned about American credit card debt hitting a record $1 trillion. We'll be right back.

Welcome back. The CFPB announcing stricter rules for companies that track and sell people's personal data. At an event today at the White House, the agency saying the explosion of AI into the mainstream and the data it requires has sparked the need for more oversight. The big three credit bureaus in the U.S., Experian, Equifax, and TransUnion, all finishing lower. Joining us now is Rohit Chopra, director of the Consumer Financial Protection Bureau. Rohit, welcome. So I actually want to start a step back with the consumer credit situation right now. I think the average consumer carries a credit card debt of close to $6,000, the highest in a decade. And the rate of new delinquencies has surpassed its pre-COVID level. So what are you seeing from consumers and perhaps some in the market trying to take advantage

of consumers in this situation? Well, so far, we've seen an aggregate trillion dollars that American consumers owe on credit cards. It's still one of the biggest lending products people have. One of the things we're looking for is when student loan payments restart, is that going to create some additional stress for credit card borrowers? We're also looking hard at what are the rates people are paying. We see real impacts of higher interest rates and also other pieces of the consumer credit market, including auto loans. So, so far, we're not panicking in any way. It has returned to normal, but there are slices of the public who are experiencing stress, and we're trying to make sure that everyone is following the law and,

frankly, that consumers know what they're getting into. I noticed that you've taken actions lately against some lease-to-own companies, some auto lenders who you say are engaging in practices that are not great for the subprime market. I wonder what you're seeing from Buy Now, Pay Later, right? Because they presented themselves as a more consumer-friendly alternative to some of the other products out there. Are they relatively straight and narrow so far? Well, what we have said is that we would like the Buy Now, Pay Later firms to really observe

some of the same protections as credit card companies when it comes to disputes and returns, when it comes to disputes and returns, when it comes to fees, we want consumers to have a lot of choice, but we don't want there being a lot of arbitrage around the rules. So what we are doing is we are supervising those firms to make sure they're playing by the rules and looking at ways in which their business model is evolving. We are seeing some signs that they're creeping toward more of a Chinese-style model that we see with Alipay and other firms, WeChat Pay, and how they might be combining payments and data surveillance into their business model. So it's certainly a place we're keeping our eye on.

Yeah. It's great to have you back on the show. I do want to get to the news of the day and specifically when we talk about the need for more oversight of the data broker industry, what's constituting a data broker in this day and age when data is the bedrock of everything, particularly from a digital standpoint? And how do you apply a 1970 law to that, since the world is so different now? You know what's interesting? We've had laws on the books for not just decades, but actually over 100 years in certain circumstances about how we put and draw the line around invasive surveillance practices. We've had state peeping Tom laws, other privacy laws. So what we wanted to look at was how were some data brokers copying the firms that were more

like credit reporting agencies or background screening companies? We found incidents where data brokers were assembling very, very detailed profiles on people, monetizing them, and often feeding artificial intelligence predictive analytics. So I think we're looking at what are the types of business practices they're using to harvest our data? And if so, shouldn't they abide by some of the same transparency, accuracy, and other standards that have long been observed in our country? So at a time where everybody's focused on AI and some of these new applications like generative AI and what this is going to mean from a regulatory standpoint, this news today is basically, should we call it kind of a first shot out of the gate, at least from your purview

within your part of the government to actually regulate and set some guardrails on it? Well, where I think we're going is we're going to be proposing some rules that I think level the playing field between those that are already acting as credit reporting agencies, as well as the other firms that are copying them. We're also doing other things when it comes to algorithmic and AI lending to make sure that it's on a level playing field with those that are in brick and mortar. I think the end result of this is that consumers will have a little bit more control and confidence on how their data is being used and that we won't have innovation that's just exploiting

loopholes and will close them so that there really is fair competition in the markets. Rohit, what's going to happen to the lower income consumer in this AI-driven data environment? How closely are you watching that in particular? Well, we are. And I think the concern that many have is, is AI reinforcing longstanding biases that have already existed? If there's groups of consumers who have been shut out of the system, is AI going to be putting forth more ways for lenders and others to use transaction and payments data and create a more open banking ecosystem so that consumers can get credit for their real cash flow rather than these inferences that are mysterious and are more opaque. Raheet Chopra, director of the CFPB. Thanks for joining us. Thanks, Morgan.

The Inflation Reduction Act was supposed to be a boon for solar stocks, but one year later, it's been nothing but dark skies. The CEO of Sunrun explains why huge solar incentives have not turned into big gains for shareholders, at least not yet. That's coming up later on Overtime. Welcome back to Overtime. Let's get a check on some of today's after-hours

movers. Kava topping revenue estimates in its first earnings report as a public company, saying it sees seam store sales climbing 13 to 15 percent for the full year. Those shares are up about 11 and a half percent right now. Meantime, shares of Agilent are lower despite a beat on both lines, though its full year outlook did come in light. Those shares are down 2 percent. And H&R Block beat on both lines as well and announced a 10 percent dividend increase. Those shares are popping 6 percent. Oh, well, up next, the CEO of Sunrun on why the Inflation Reduction Act, which was packed with clean energy incentives,

hasn't turned out to be a huge win for solar stocks. We'll be right back. Welcome back to Overtime. It has been one year since the Inflation Reduction Act passed, bringing in a wave of investments to the solar sector. Despite the boom in investments, the sector has underperformed in the past year. The TAN ETF is down more than 30 percent and finished the day lower as well. Solar stocks had a rough session today, specifically as rising rate fears hit the sector. But joining us now is Mary Powell. She is the CEO of Sunrun. Mary, it's great to have you on. I do want to get specifically the impact from IRA. It's one year out this week. Have you seen it have a meaningful impact on your business or given the fact that this is going to be an investment that plays out over many years?

Is it something to think about over the longer term? Oh, my gosh. Yes. So, again, it's so nice to be on the show with you and to talk about the work that we're doing across the country to help Americans have a more affordable, resilient, clean energy future. And there is no doubt that the Inflation Reduction Act was just really powerful and accelerating this customer led revolution to an energy system that's more affordable for all. So, yeah, so we're really pleased. In fact, the Inflation Reduction Act, a lot of the incentives are actually geared towards communities and homes and customers that we already have been building deep relationships with over a number of years. So we are deep in low and moderate income homes across America. We've been selling in energy communities. So we're really pleased that the Inflation

Reduction Act is going to help us accelerate that work for Americans and give them a cleaner, more affordable energy future. Yeah. And of course, when we talk about Sunrun, we're talking about a company that's offering solar power as a service. You essentially rent homeowners a system that is going to eventually pay for itself through lower or eliminated energy bills in general. How do you balance? We're a lot more than that, too, though, because we're also leader in the nation in providing storage to homes. And we're seeing rapid adoption in storage. So we're not just providing solar. We're really providing clean energy as a service for customers all across the country in a way with low friction, you know, no money down, and they can move into, you know, a cleaner, more affordable energy future that is also more

resilient because they're able to store their energy and then use it to back up their home, or in many ways, work with us to provide energy back to the grid to make the entire grid more affordable and resilient for all. Yeah. So how do you balance that against something like higher interest rates, which have, for better or worse, dragged the entire sector down and all the stocks with it? Yeah, for sure. I mean, I think what you always do is you use these opportunities to make your business stronger. And that's what Sunrun has done. You know, we just posted really strong results in our last earnings call. We're very focused on sustainable, profitable growth. And, you know, we laid out a really good path towards cash generation. So Sunrun has used this time to make ourselves faster, better and stronger for all of the

customers that we serve and ultimately for our shareholders. OK, very, very quick question for you here because we're up against the end of the hour. But is enough solar equipment being made and storage equipment being made in the U.S.? Well, one of the things that the Inflation Reduction Act does is it's bringing more production and more manufacturing into the United States, which is wonderful because it provides more options for Americans. And we also already use a lot of products that will benefit from the domestic content adder and, again, make energy more affordable for the customers that we're bringing these solutions to. All right. Mary Powell, CEO of Sunrun, thanks so much for joining us here.

Thank you. Well, quite a day we've got ahead. We've talked a lot about retail. We've got TJX before the bell. We've got Target also before the bell. So that cost-conscious consumer. But Synopsys and Cisco after the bell. Synopsys in particular performing well. Software for building things like chips.

Yeah, and of course China was in focus today with weaker than expected data. Again, Cisco, we know that's a market for that company among so many others. So something to watch. That's going to do it for us here at Overtime. Fast Money starts now.