Closing Bell - Closing Bell Overtime: Fed Cuts Rates & Oracle Reports; Plus Bank of America CEO 12/10/25

Episode Date: December 10, 2025

David Zervos of Jefferies shares his take on what the Fed’s move means for markets and the economy. Earnings from Oracle, Adobe and Synopsys, with Rishi Jaluria of RBC Capital Markets breaking down Oracle’s results and Sassine Ghazi, Chief Executive Officer of Synopsys, discussing the company’s outlook. Brian Moynihan, Chief Executive Officer of Bank of America, weighs in on the broader Fed and economic backdrop. Barbara Doran of BD8 Capital and Brent Schutte, Chief Investment Officer of Northwestern Mutual, unpack what the Fed, Oracle and earnings season mean for investors. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

That bell marks the end of regulation. Greek American issuer day. We're going to close the bell with the New York Stock Exchange. The National Kidney Foundation doing the honors at the NASDAQ and stock shooting higher after the Fed cuts rates a quarter point. The Dow's up more than 500 points. The S&P 500 very close to an all-time closing high. The NASDAQ with a gain of less than a half a percent. The best performer today, the Russell 2000.

The small caps hit another record high. Industrials and materials. The basics are the top sectors today. gains also in discretionary and health care, the yield on the 10-year note, pulling back to 4.14 after this rate cut, gold and silver higher again, another record for silver, gains for crypto, Bitcoin back above 94,000, and oil, closing at the highs of the day after the president confirmed that a tanker has been seized on the coast of Venezuela. That's right, keep an eye on geopolitics, but that is the scorecard on Wall Shee. Welcome to closing bell overtime. I'm Morgan

Brennan, along with John Fort. A couple big names reporting results this hour. Remember the fireworks after Oracle's last report? We're going to see what happens this time. We have Adobe also set to report earnings. And synopsis also due out with results. The company's caught in the middle of U.S. restrictions on chip exports to China. We're going to talk to the CEO before the Adel's call. And Bank of America's Brian Moynihan is set to join us. We're going to get his take on the Fed, on the economy, and so much more. But first, let's get to Christina, parts of nevertheless right here for the stock market reaction to the Fed decision. Well, the Fed cut took censor stage, along with plans to start buying treasury bills.

Again, the less hawkish tone really helped lift. Like you mentioned, the rest of 2000 to a fresh all-time high. Small caps tend to do well when rates come down since these companies lean heavily on borrowing to grow. Regional banks, looking at the KRE, we're a big two closing almost three and a half percent higher. The larger names like Truis, M. M.T., Huntington, citizens, really leading the charge. And that's because lower rates ease the pressure on their funding costs. and could help stabilize those deposit outflows. Wall Street's big banks also joined the party of Morgan Stanley and Goldman Sachs, closing

on an all-time high today. Over in individual movers, GE-Vernova was the S&P 500's top performer after updating its financials at yesterday's investor meeting. An upgrade to perform from Oppenheimer didn't hurt either. Then on the flip side, Uber was one of the day's worst performers on the S&P 500. And lastly, Warby Parker kept climbing today on that Google AI partnership announced just over the last week. They're working together on AI-powered glasses that are set to launch in 2026.

Citizens also upgraded the stock today to overweight. Shares closed 27% higher. AI-enabled hardware. Seems like it's going to be a big trend looking at 2026. We'll see. Christina Ports and Avales. Thank you. Now let's get to the bond market and to the moves that we saw on the Fed today.

Rick Santali is in Chicago with more. Hi, Rick. Hi, Morgan. Indeed, it was an exciting day in the Treasury complex. If you look at a two-day of two-year and ten-year, what you'll notice is that after rising right before all the meeting information came out, early in the session, we hit a 420 yield in tens. Then both maturities dropped the entire curve drop, and we had a bullish steepening, meaning we're down nine basis points on that two-year, we're down five basis points on the ten. Those four basis points represent steepening. As you look at the 12-hour Tuesdays 10 spread, you can see how it jumped up.

It's hovering at 61. When was the last time we were up there? Go back to early September. So it's been a while three months plus. Now, let's look at what's going on with the dollar. The dollar really got hit on today's news. As a matter of fact, where it currently sits now, should it close here, it would be the lowest close since the 20th of October. John, back to you.

Rick, thank you. Well, the dials up 1% after the Fed cut rates and Fed Chair Powell saying the real division within the Fed now is whether to hold or cut versus any potential hike in the near future. Joining us now is Jeffrey's chief market strategist and CNBC contributor, David Zervos. David, the president wanted a half a point cut here. Is this quarter enough? I think the quarter's, you know, being rejoiced a little bit in the market just because the market was set up for this hawkish cut and they didn't get it. You got the QE announcement or the soft QE announcement. But more importantly, John, what you really got was a message about how this Fed sees stronger growth without a lot of inflationary pressures.

That's what we see in the SEC. And that subtly really changes the ballgame for the potential of a Fed that would get hawkish. Because what gets a Fed hawkish? Strong growth, retail sales, everything's starting to kick in. But what the Fed's telling you is that growth is probably coming from productivity. It's coming from not a lot of job creation, actually a semi-week labor market, and there's no need for them to fight that. In fact, they may need to be looking at cuts because there's too much job destruction as that productivity growth increases. So I thought it was a very dovish forecast.

Do you think that the market estimates are being too pessimistic then, if you're on that side of it, about no more cuts until Powell's gone? And are you still in the strongly risk on camp? Still in the strongly risk on camp. Certainly excited about our risk parity trades in 2026. And I do think the market is probably on the mark for some slowing of the risk of cuts as Jay's last three meetings come into play for the beginning of the year. But recognizing that as this Fed composition changes, as we learn more about the Lisa Cook trial and other things, this Fed is turning dovish and in 2026 will be a more.

more of a tailwind to risk assets than a headwind to risk assets. The beginning is a little risky, but I actually think we took a lot of that off the table today with their forecasts. This was a really, really, to me, a very dovish forecast, a strong growth, dovish forecast, which is hard for people to process, but what they're saying is the inflation risks are really not going to be persistent. And he said that a couple times, Morgan, in the speech, that this was really tariff-related and one-off related in all like. likelihood inflation. Yeah, and he kept talking about services inflation coming off as well. Stay right there, David, because we've got breaking news out of Washington.

So let's get to Amon Javers for that. Amen. Morgan, that's right. President Trump, as you take a live look, still speaking to reporters in the Roosevelt room at the White House. He was having a meeting with CEOs, that event ongoing. President's just been talking about the Fed, as you guys have been discussing the Fed. He confirmed that he has a meeting with Kevin Warsh. That's been sort of widely speculated about or reported. The president also said, I sort of have a very good idea of what I'm looking for in terms of a Fed chair candidate.

He says, I'm looking for somebody that will be honest with interest rates. He says, honestly, our rate should be much lower. He says he's not going to be asking the candidates to commit to lowering interest rates, but he says he's going to ask them questions and he'll know what he's seeing in terms of the answer there. So it's clear that the president is putting a low interest rate threshold here on his selection of Fed share. He is meeting with Warsh, although HACID has been reported to be in the lead for that job, the president's saying, I sort of have a very good idea of what I'm looking for. One other note here from this meeting, guys, on the Warner Brothers sale.

The president was asked about CNN and what he thinks of the prospect of CNN being either included in that transaction or not included in that transaction. The president said he thinks that no matter what happens to Warner Brothers that CNN should be sold either to the the new buyer, that is Paramount or Netflix, or should be sold to have new ownership in charge of CNN. That's because the president says he doesn't like what he sees as CNN's political bias. He doesn't like the content that he sees on CNN. He wants them to change it. He wants new ownership there. And ultimately, the president's saying that he thinks CNN should be sold as part of this transaction. Now, how does that shake out in terms of Netflix, not making an offer to buy CNN. Paramount making an offer to buy CNN. All that's going to have to sort out,

guys. Okay. Amen Jabbers. Thank you. We've got Oracle earnings out as well. Sima Modi has the numbers for us. Hi, Sima. Hi, Morgan. Second quarter earnings from Oracle coming in better than expected at $2.26. That is a non-gap figure versus the $1.64-cent adjusted estimate. But revenue coming in slightly below expectations at $16.1 billion, likely due to a weakness in software revenue, which again just came in slightly light. If we look at AI and cloud, the remaining performance obligations, which is the key bookings number, up $523 billion in the second quarter, up 438%. That is a higher growth rate than the previous quarter and above street estimates. Cloud infrastructure seen gains of 68% year over year, stocked down

about 5.6%. We have comments here from CTO and chairman Larry Ellison, how the company is selling and peer, because we no longer, he says, think it is strategic for us to to continue designing, manufacturing, and using our own chips in our cloud data centers. He adds that we are now committed to a policy of chip neutrality, where we work closely with all our CPU and GPU suppliers. Of course, we will continue to buy the latest GPUs from Nvidia, but we need to be prepared and able to deploy whatever chips our customers want to buy. They are going to be a lot of changes.

He says, in AI technology, I would perhaps look at shares of Nvidia to see if they're responding. But some interesting comments here from Ellison, I don't see. any specific comments on financing, which, of course, is a big topic of discussion around Oracle, the funding of its massive data center build out. But I imagine that will be a big topic when the earnings call starts at 5 p.m. Eastern analysts asking for more transparency on whether this company will continue to lean into the debt market or use other tools, Morgan and John, like vendor financing, equity, or bringing in a sovereign wealth investor.

Again, shares of Oracle now down 6% in overtime. Okay, Sima Modi, and we know you'll be watching and bringing us those headlines when that call does kick off. Appreciate it. David Zervis, I want to get back to you. There's a lot we just covered right there, but I actually want to bring this back to some of the reporting we just got from Amman Jabbers. I mean, it's widely seen that Powell is a lame duck fed chair at this point, but he still has three more meetings where decisions will be made. We did just get that SEP and the dot plot. How does all of this shape up and how much of this hinders? on who the president ultimately picks to be Fed chair. And I ask that as the U.S. continues to keep cutting here, or at least right now, cut and be a little more doveish, but the rest of the

world seems to be tilting a little more hawkish now. Well, I don't know. I mean, the Japanese are obviously in a slightly different position, as they almost always are. But I wouldn't say the ECB, although there was some hawkishness in certain circles. I don't think that's something to get excited about. But I think everybody's kind of getting close to stable. As Jay said in the press conference, they're in the range of neutral, although at the higher range. And the debate now, Morgan, is really going to center on what neutral is. There's some folks who have shifted their neutral visions up dramatically, over 100 basis points since the pre-COVID level, all without actually changing their neutral growth rate assumptions, which have stayed the same at about 1.8 or 1.9.

So we've had this huge shift in the neutral expectation. My personal belief is the folks that are coming in under President Trump, and there will be a number of them, I think, in next year, two and possibly a third, depending on what happens in the Lisa Cook trial, and of course, depending on whether Jay leaves, which I believe he will, I think you're going to have a view that neutral is lower. And that'll be the debate. The debate will be how far are we from neutral, and there's going to be a push away from this raising of the neutral interest rate that has

happened. And I think that's right. I certainly am at the bottom end of that range and would probably put myself as one of the lowest in neutral rate expectations. But we were at 2% pre-COVID in neutral rates, 2, 2.5. And I think that number is where we're going to ultimately settle after a lot of debating. But right now, we're still fighting that battle. So I think that's the dovish change that comes in 2026 and ultimately in 2027 as well. Okay. David Zervos. Thank you. With a Fed-induced rally here for the major averages and the dollar coming off and the lower end of the bond curve coming off as well, the yield curve coming off as well. At meantime, Adobe earnings are out. The stock moving around a bit,

slightly lower here, fractionally in overtime. The company reporting earnings of $5.50. cents a share, beat of 11 cents a share. Revenues of more than $6 billion also topping estimates. First quarter guidance topping the estimate as well. Company says remaining performance obligations, a measure of backlog, stands at more than $22 billion. The CEO, Shantino and Orion, crediting strong adoption of AI tools. Well, shares of Oracle moving lower in overtime, that's the market reaction right now. We're going to get an analyst's take on the numbers we just heard with shares down about 5%. That's coming up next on overtime. Welcome back to overtime.

Synopsis earnings are out. The stock is up around 6%. The company reporting EPS of $2.90 non-gap versus estimates of $278 revenue coming in at $2.26 billion versus estimates of $2.25. Synopsis sees full year, 2026 revenue of $9.61 billion. That's above the consensus. of 9.58. The company is ending 2025 with an $11.4 billion backlog. Keep in mind they have the ANSIS acquisition to factor in here as well. Coming up, the CEO of Synopsis is going to join us exclusively to break down the results before he dials into the call with analysts.

Well, let's get another check on Oracle meantime after Q2 numbers that were out just moments ago. Shares are under pressure down about 4% right now off the worst levels. Joining us now is Rishi Jaluria. He is RBC's software analyst. He has a sector perform rating, a 310 price target on Oracle. Rishi, your initial takeaway on what we got from this earnings report. Yeah, absolutely. Thanks so much for having me. Always a pleasure to be here. Look, I think it was a pretty inline quarter. You know, they obviously telegraphed a lot at the analyst day, which wasn't that long ago, although it feels in an AI lifetime, you know, ages ago. But, you know, the RPO was very much in line with they had kind of pre-announced. You know, numbers were relatively in line.

on the top line, you know, but overall, I would say, you know, in line with what people expected, but we don't have answers to the big question, which is how are we going to pay for all of this build out? How are we going to pay to meet those RPO demands? What's the certainty around this? And I think this is going to be a very eventful earnings call in about 40 minutes. As we get more color into those questions, what does a timeline look like, anything like that? I think that's why you have the stock down a few points, but realistically, I mean, the implied volatility heading into the quarter is a lot more than that. And maybe the earning call will change that. I mean, that focus on potential financing alternatives and what paying

for all of this looks like. I mean, is that ultimately what's driving the stock, at least here in the near term? I think that's exactly right. I mean, all the enthusiasm around the large deals, including with Open AI and everything like that, that's all there, right? And that's all embedded in the stock. Now the question is, okay, well, how do they get this out there? What can they do beyond debt? Are they willing to lose their investment credit credit aid rating? Are they going to delude shareholders? Are they going to, you know, look at alternative financing, look at maybe sovereign wealth funds? I think there's a lot of options on the table and I don't know that they're going to give

a very definitive answer, but I think they can do a lot on the earnings call in that hour to really calm fears that there's not going to be a huge delay in the recognition here that the margins on this deal and on similar AI deals are in fact something that's going to be accretive to profitability over call it the next five years. Rishi, I guess we knew that Oracle was offloading Ampier to SoftBank. And the idea behind Amper was chips sort of designed specifically for AI. This is a departure from what we see the big hyperscalers doing, who I know Oracle would like to be held in the camp of, at a time when there are already questions about what kind

of margins Oracle is going to be able to get out of its data center strategy. long-term. How are you modeling what they're going to be able to do, especially given how successful their hardware strategy was in another era when it raised eyebrows? Yeah, you know, look, I think it's a great question, one that we need to ask, because as you correctly pointed out, all the other hyperscalers, Amazon, Microsoft, Google, are all designing their own AI chips and using third-party vendors alongside that. And I think the rationale there is to reduce dependency on Nvidia over time. And, you know, obviously that can have near-term implications, but over the long term, no one wants to be all in on AI infrastructure and only

have one supplier behind that. Oracle, I think they recognize that all the fortunes here are very much dependent on them being a big vendor or middleman of choice around these Nvidia chips. Their close partnership with Nvidia and with Jensen. And I think that's why, right, is just kind of calming those fears that Oracle would design something competitive with Nvidia, and I think that's why they're doing that. So not surprised to see that, just given I think Oracle does have a higher degree of dependence on Nvidia than others. Okay, Risha Joluria, thank you. Thank you. Well, synopsis, also reporting results, the stock rising here in overtime. We're about to talk to the company CEO, ask him about the numbers, the latest on US-China chip export rules

after the Nvidia news earlier this week. Overtime, we'll be right back. Welcome back to overtime. Shares of air environment getting hit hard today after missing on earnings. You can see their shares finished down about 13%. The military drone maker did post record sales, in-line guidance, at least on the revenue side. There may be some profit taking here as the stock has done well this year. It's up 60% even after today's drop. The other thing I would note, John, is some of what's in this report is government shut down

and the fact that higher margin foreign military sales were delayed. So expect that to start to roll out next year. An important caveat. All right. Meantime, Synopsis shares are up 7% in overtime. Joining me now in the first on CNBC interview, Synopsis CEO, Sassine Ghazi. Sassi, the numbers overall looking good here. And, of course, you got Anciss as part of the picture now.

Last quarter, a lot of talk about the IP business. So tell me, is that getting any more predictable? and how does that affect not only this quarter, but how you're looking at the coming year? Hey, John, great to be here. Yes, for Q4 and the FY26 guide, you can look at it as a combination of meat and beat on the top line and bottom line, which is very exciting. As far as Q3, we did hit a bump with some of the China restrictions. We could not sell to China for about six weeks, which is half the quarter, and it had an impact on our IP business in particular. But as we look ahead, we're continuing on derisking China, and we're taking this as part of the guide for FY26.

So how should investors understand that? Because we got some news this week that sounded like relatively good news on China when it comes to chip restrictions. And one might think, oh, well, that could be good for synopsis. But then again, the wind has a way of changing direction rather quickly these days. Yeah, so you're referring to the NVIDIA H-200, I'm assuming. Yes. Yeah, which is very good news. And the reason is very good news, because the more you can build the AI stack on the foundation silicon that is U.S.-based, like the Nvidia or AMD or whomever, it's good news because it has stickiness to it.

Because the more you develop software on the hardware layer that the U.S. provide is good news. From a synopsis perspective, NVIDIA, of course, as they're designing the H-200 or whatever chip they're shipping, it's using synopsis technology. Now, inside China, the race is on. There are many companies that are developing alternative chips, and if these companies are not under government control or restrictions,

we can sell to. But increasingly, these companies, we cannot sell to them, and they're trying to find local alternatives to design these chips. to design these chips. So what do you do about that? And how long before that becomes a problem and a ceiling to growth? Are there other ways that you can expand

into various other markets and blunt the impact? Exactly. So that's how we're looking at it. For FY25, our business in China was declined, was down about 20 plus percent. So as we're looking at FY26 guide, we're assuming the environment in China is not changing, meaning we're not guiding or taking into account in our forecast an uplift in the

market in China. So we're taking a more balanced pragmatic view. However, the increase in investment in chip design and now with the ANSys portfolio increasingly at the system level across the globe in the U.S., in South Korea, in Europe, et cetera, we're seeing a very nice tailwind that is making up for the headwind that we're assuming in our guidance for China. How much momentum potentially comes out of that ANSIS acquisition sooner, given that digital twins, the ability to really model what a design, what impact a design will have on operations is now very much in your portfolio. Are you finding that customers around the world are leaning into that kind of investment,

or is it going to take more time for that to materialize? John, I know you and I discuss this topic quite often. If you believe that the future of AI is going to move to the physical world, meaning an intelligent car, robot, drone, and many, many applications, aerospace, et cetera, you need a more sophistication in designing these complex products. Therefore, you need more use of the synopsis classic, the semiconductor, as well as the ANSIS portfolio in order to create a digital twin to be able to simulate in order to reduce the cost, improve the time. Most of these markets traditionally have engineered these products

through physical prototyping. You know that's expensive, that takes time. It's not intelligent, does not take into account an AI-powered product, more software content, and that's where we see significant opportunity. And that's where the endorsement of NVIDIA a couple weeks ago is a validation of that direction. It's tended to be a nice endorsement, indeed. Sassine, thank you, with the stock higher by more than 5%. Let you get ready for that analyst call. Thanks for joining us first on CNBC. Thank you, John.

Well, it's time now for a CNBC news update with Bertha Coombs. Bertha. Hey, Morgan. President Trump says Ukraine requested he meet with his Ukrainian counterpart for Lodomir Zelensky. He said Kiv requested a meeting over the weekend in Europe and that he would make a determination based on what Ukraine comes back with. Zelensky said earlier today that Keev will. would submit an edited peace plan to the US today.

Canada has launched a $1.2 billion initiative to bring leading researchers to the country after the US started charging $100,000 for new H-1B visa applications. Canadian officials say the funding will be used to attract and retain more than 1,000 highly skilled workers, such as doctors and scientists. And YouTube is making a move to

unbundle the cable package. Company announced today, it will unveil 10 genre-based packages to customers starting next year in a bid to let customers tailor their subscriptions. YouTube did not share pricing or what the plans entail, but said one will be geared towards sports and reportedly another towards family viewing. Of course, there are cable providers like Spectrum

that are actually bundling all of the streaming into their offering. So there's a lot of war here in terms of bundling. All right, 2.0. We'll keep watching it. Bertha Coombs, thank you. A big day for the markets following the Fed decision. The Russell 2000 jumping to an all-time high. So is the S&P mid-cap index.

We've got much more on the markets coming up. And Bank of America CEO, Brian Moynihan, joins us after this break. The Fed seems to be turning its attention from fighting inflation toward boost in the economy. Does he agree with the Fed's approach? Over time, we'll be right back. Welcome back to overtime. A big day for the markets with the Dow gaining nearly 500 points that's following the Fed's decision to cut interest rates and policy decisions, outcomes that were seen as more dubbish than expectations. The S&P 500 finishing just a few points shy of a record closing high.

The NASDAQ of a third of a percent, we did see a record high for the Russell 2000, the small caps. The Dow transports jumping nearly 3% truckers, such as Old Dominion and J.B. Hunt leading the way. But airlines, including Alaska Airlines and Southwest, also seeing big gains. Shares of Oracle sinking in overtime, though, those earnings were 62 cents per share. That was better than expected. Revenue did come in a bit light. Its software unit was one culprit for that revenue miss. Those shares are down about 7% right now. Planet Labs, those shares are doing the opposite.

Those are soaring here and after hours, up 14%. The satellite imaging company and AI-enabled analytics company had a break-even quarter compared to the estimate for a small loss. Revenue was also better than expected. Also came in at a record. Revenue guidance seen ahead of forecasts as well. And the company says its backlog is up more than 200 percent from last year. I did speak with co-founder and CEO Will Marshall over the weekend. You can check out that interview from Planet Labs on cnbc.com.

Well, the major averages are ending the day higher after the Fed cut interest rates for the third time in a row, which might be a tailwind for bank stocks. One of those stocks is Bank of America, up double digits this year outperforming the broader market. Leslie Picker is at Goldman Sachs Annual Financial Services Conference, and she joins us now with Bank of America CEO, Brian Moynihan. Leslie. Hey, John, thank you and thank you, Brian, for joining us today. An important day from a macro standpoint as well as from an industry standpoint. The Fed, of course, cutting for the third time this year, but indicating that preemptive easing is done,

based on what you're seeing in terms of the labor market, in terms of inflation, do you think this is the right call? Well, I think let's separate those two things because they're two different things. So our team, our research team, which is the best there is, came to Fed cuts later than everybody else because they really believed the inflation was the issue. What got them there was the labor market softening. And so they didn't think the Fed, they still were of the opinion of the Fed may not cut rates

just today last, a couple weeks ago. So they came to this last cut. So, but they do believe they cut a couple more times next year and they bring it down to around 3% round numbers, three, three and a quarter. And the reason why is the softening of labor market. So it's not like people are new claims or employment shooting through the roof or continuing claims. It's just that when you watch the numbers of people being reported being employed, the job formation is low and so that that's going to be on their mind because they have that dual mandate and they have to make sure an unemployment's moved up to 4.4 which is still low in a relatively historic context but is moved from 4.1 to 4.4 so our team thinks that they cut a few

more times by the data they'll see between now and then meanwhile the consumers in good shape they're spending money we just your team had Liz Everett on earlier and she does a great job describing it when you look at the broad base of what they're doing about 4% of the money year-over-year, November, November, when in the economy. The consumer's healthy. There's money in deposits. It's a little bit, they were talking about case shape or alligator shape. They had all different points, but a little bit faster, the upper tersile of income

versus the lower. But it's all healthy. They're all growing. They're not growing fast, and they're worried about affordability and all the things you report on and talk about. But the reality is a consumer's in pretty good shape. If that continues on, then that might put more purchase power into the economy, and that might be inflationary.

But that'll change quickly if they believe their job. jobs are not strong. And when we look at our data, we're not seeing unemployment move a lot, but we're not seeing a lot of people adding employees because we can see the paychecks coming. Yeah, how do you square all of that? Because if the labor market looks kind of bad enough to justify a cut here and potentially some more cuts next year, but the consumer is still spending, do you see a tipping point where that kind of inflex and you start to see maybe some deterioration in the labor market affecting consumers in a bigger way? Well, we haven't seen that yet, and that's what they have to watch out.

But one thing is they've got to get the official data out there than everyone will have a more common view. So whether you see the ADP data or data like our firm puts out and stuff, you see a little bit running to stay in place on the labor market. You're seeing not a lot of job formation. You're seeing the numbers of jobs slow down. But the question is whether that's temporary around just because of the dynamics, the end of the year, people setting their budgets for next year. People start to think about will AI have a big impact or not. Maybe I should slow down my hiring anticipation. But I think you've got to see it sustained.

And I think our team believes that that sort of weakness in the labor side will continue to cause them to reduce rates next year. But again, we're getting this great debate about a quarter here or a quarter there. But if you think about it overall, there's not a lot of debate about getting it down around 3%, but no lower. That people have to focus on because that's a different rate environment that will have a 3% round numbers plus or minus Fed funds rate and a 4, 4.5% 10-year treasury rate. that's a real rate environment, the real, you know, a steepness of the curve. We haven't had an invert curve for a number of years now, but also it's been since before the financial crisis

that we had a rate environment that predominated at that level, except for the narrow period in 17, 18, 19. Yeah, and that's what I was going to kind of pivot toward your business and what that might mean for your business from the standpoint of loan demand, of financing demand, because against that backdrop, you have markets near record highs, you've got kind of this risk-taking appetite with MS. coming back, IPOs coming back, you know, how does all of that factor into your business,

especially given, you know, some of the uncertainties that are out there as it pertains to labor? So I'd sort sort of the consumer, small business, medium-sized business clients away from the capital markets or any clients, because there's a whole lot of discussion there and look at two parts. So if you look at the consumer spending, we talked about it, money and accounts, credit quality good, equity in their home strong, a lot of good fundamental things. that's going to come down to labor and wage growth. If you look at small businesses,

they're doing a pretty good job of earning money. But on their mind is labor availability, which is kind of interesting when you think about the first, the Fed's question. So can we get the labor availability up so they can have people to work and do a good job with it? Then you go to mid-sized clients, and what they're doing is you're seeing

they're not using the lines of credit quite as active as they did pre-pandemic. If you think about that, what would be the condition if you borrowed a 40% average juices that you're borrowing at 35-36. That means you're not aggressive in the cost of borrowing limits. So rates come down, that'll favor the small business middle market borrower because they borrow off a short-term rates, and that'll be good, and that'll probably have them be slightly

more aggressive. When you go to the market side, the IPO market is opening up. The private equity firms have businesses that they've held for a long time. They need to sell them, so you're seeing some strategic activity go on. You're seeing some large mergers that you talk about all day long in your shows. But, you know, there's a lot of activity. But I think if you think about that, that's going to take a good environment. And we think the economy grows at 2.4% next year. That's an environment where steals and things should take place. And strategically, what does that mean for Bank of America?

I know you had your investor day about a month ago. And yesterday we heard some guidance from one of your biggest competitors, J.P. Morgan. Mary Ann Lake, they're providing guidance on expenses yesterday that surprised the street, at least temporarily, it bounced back a bit today. How are you thinking about their increased expenses? in the context of what many analysts are describing to be this uniquely competitive environment for the banking industry? With 4,000 people competing in the banking sector,

then the non-bank sector, then the private equity funds, and the private capital funds, and the fintech. There's been lots of competitors, so I don't think that changes. I think the end of the day, as we think about expenses, and we've thought about it across time, the first way we can manage expense growth the most is about people, headcount and we manage that very carefully because what we always are trying to do is make our process more efficient and take the savings out of that and plowed into the front end client

development both people products new technology capabilities so if you think about over the last five or six years our head count looks like it's relatively flat but in that process we added 4,000 technology coders we added 2,000 people in the relationship manager business going out in the field and covering clients so you're adding people but what are you doing you're engineering other processing capabilities and as a management team our team has a task of managing the human being aspect that so we have about an 8% turnover rate a year that's 16,000 people if we hire 14,000 we go down 2,000 people so we have opportunities to shape the head company you got to be ahead of it and do it

our expense growth rate I told the analyst earlier was year over year 25 to 20 over 24 was about 4.5% fourth quarter we said it's a year every year it's about 4% plus but if you add back We had a credit from the FDIC, all of us got last year, fourth quarter. It's like 2.5.3%. In a 2.5% to 3% inflation environment, that's pretty good management. But you have to be on the process of engineering. We're investing a ton in the front.

I mean, literally we have, we're up to about $4.2 billion in annual initiative technology spending. This isn't the base. The base is $10 billion. This is just to put new products out there. And we're investing in people all over the world, our international business, local business, salespeople. So you've got to have that. the nature of our businesses, there's 4,000 competitors.

So if you look across long periods of time, the competitive nature of the industry has had us make the same sort of returns across time, even though the return on assets on our industry has come down, because the competitiveness leads you to giving that to the customer. Real quickly, on the competition side of things, reports indicate you're scheduled to meet with senators from both sides of the aisle to discuss crypto legislation, particularly this idea of allowing interest payments on stable coins.

What would something like that mean for the traditional banking industry? Well, I think this is more broadly about the issues that affect us, that's said stable coins and making sure they get the other parts of the legislation passed, and which we've got to make sure if you're going to have an industry, it's got to have great structure to it, and it's got to have great industrial strength to it in times of stress. It's got to have an understanding of how the market, they call the market infrastructure works.

We don't think twice about DTC and stock trades and they go on all day, and billions of shares trade, and billions of quotes are quoted. We don't think twice about it, because that's been added for a lot of years. it used to be paper, go down the floor exchange, all those people run around now. You know, there's very few people and it's automation. So the question of good, that market structure is a critical thing, and we gotta get it right

because if there's a bounce in this and it's a new technology, people may walk away from it. And that's what we wanna make sure it's set up right. And so whether there's interest paid in this stuff, we gotta make sure that especially small, medium-sized banks are not disfavored by this type of activity. We as Bank of America, we can compete with anybody,

but you wanna make sure deposits don't flow out to go to only be able to by treasuries or cash, which if you look at the money market funds, $6 trillion cannot be lent. So the only borrow for that amount of money is the federal government. And I think we ought to calm down the federal government's borrowing and have them borrow less. But if you think about it, you don't want to take a bunch of deposits and move them outside the industry in a way that doesn't allow them to be relent to generate small business loans

with the largest small business loan in the country, not by a lot and have been for many times. With the largest small business lender, most markets out there, we're very proud of that. drive that, that's what you want those deposits to go to. Yeah, certainly an area to watch. Brian Moynihan, CEO of Bank of America, thank you so much for joining us today. Guys, I'll send it back to you. All right, thank you. Leslie Picker

to you as well. Coming up, the latest developments on the battle for Warner Brothers Discovery, Overtime, we'll be right back. Welcome back to overtime. We've got an update on the battle for Warner Brothers Discovery, Julia Borson, has that for us, Julia. Well, we've seen a letter from Paramount Skydance, which has just gone out to Warner Brothers Discovery shareholders

urging them to accept the $30 per share tender offer. Some key notes here in this letter. The letter says to suggest we are not good for the money or might commit fraud to try to escape our obligations as certain reports have speculated is absurd. They go on to say that absurdity is underscored by the fact that Warner Brothers Discovery and its advisors never picked up the phone or typed out a responsive text or email to raise any questions or concern or to seek out any They go on to say, for the avoidance of doubt, our $6 billion synergy estimate does not rely on cuts to content budgets at our studios and they intend to continue running both separately post-close. They say those synergies will be from technology, linear networks optimization and real estate rationalization. They also criticize Netflix's strategy when it comes to regulatory approval, saying Warner Brothers transaction with Netflix appears to be in for a long and bumpy ride as it navigates the global regulatory review process.

They say that the argument being advanced publicly by Netflix and its proxy states that regulators should ignore the streaming video on demand market and instead utilize a gerrymandered market definition that includes services like YouTube, TikTok, Instagram, and Facebook going on to say Netflix's claim boils down to trying to mask its dominance in streaming video on demand by grouping together all internet enabled video media and social media or otherwise saying no regulator has ever accepted such a broad. approach to market definition and to do so would require regulators to give up on merger enforcement in media and social media alike. Quite harsh words here in this letter that Paramount Skydance is sending to Warner Brothers Discovery shareholders urging them to tender their shares. And we will reach out to the parties for comment, especially the criticism of the regulatory potential. Back over to you. Yeah, it's super fascinating, especially when you see shares a paramount up more than 1% on this reporting. Julia Borson, thank you. Up next, we will discuss whether the Fed's latest rate cuts could spark in December to remember year-end Santa Claus rally.

Welcome back. Stocks got a boost into the close after the Federal Reserve cut rates by 25 basis points is the cut, the cut, the spark investors needed for a year-end rally. Well, joining us now, Barbara Duran from BD8 Capital Partners and Brent Shudy from Northwestern. mutual wealth management. Great to have you both on. And let's start right there. Barb, given what we saw and we heard from the Fed today and from the Powell Presser, is the Santa Claus rally starting early. I think it may very well be. I think going into this, and the market was discounting a 25-bif basis cut, basis point cut. And the question is, would the market sell off if they were hawkish and what would happen if they were more bullish? And I think we got some very unexpected commentary. I mean, they talked about GDP growth next year, raising at half a percentage

point from 1.9 to 2.5 percent. That's a big jump. And he also went out his way to talk about how unusual to see five to six years of productivity growth of 2 percent. And this is before the expected AI productivity improvements kick in. And basically productivity means you're getting growth without inflation. And when he talked about, you know, we're still in this inflation is sticky, but you don't see it running away. Labor we're watching. It's slowing down. So I heard a very bullish call. And I think the market could really continue strongly on this. Yeah, it was interesting, too, to see those forecasts that signal that maybe inflation starts to come off a little bit in 2026 as well. Brent, what's the biggest risk to this market here? Well, I think the

dissents on the Fed show that the economic environment is still very uncertain where you have this narrow path, the economy is on, where there are risk on both sides of that mandate. So there is certainly the risk of a economic contraction that is still out there. That's typically where the labor market weakness shows, which he did mention his belief that jobs gains have been negative for the past five months. On the other side, you have a potential for a rise in inflation, which could actually throw off Fed rate hikes or cuts in the future and turn them into hikes. And so to me, the near term is uncertain.

The longer term, to me, still back to your question of a December to remember, I think it's going to be a time period to remember for those that remember diversification. And so to me, if you saw the market action today, you saw small cap stocks move up over 2%, around 2%, while broader parts of the S&P did better than the previously Mag 7, which are more tied to the AI theme. And so to me, I think going forward, small and midcap stocks offer potential for investors to remember just given the fact that they trade at really cheap valuations. Plus, if rate cuts do hold, you will see the market broaden out because the economy will broaden out. Barb, do you agree, and is there a subtle shift beneath the surface in 2025 that some people might have missed the broader implications of with international picking up and perhaps small and midcaps showing that they can gain traction? Because that wasn't a great bet over the previous years.

Yeah, no, I think that that is happening. And you're seeing that in terms of its value over growth right now, small cap over large cap, international because the dollar weakness. you know, and the interest rates coming down, but question is, is this a sustainable trade, is a sustainable investment? And I argue that it's not. I mean, we've seen this before, the MAG 7 will get out of favor for a little bit, profits come out,

and small cap, you certainly have the Russell 2000 making new highs, you know, and it's hard to argue with that. But I think that trade comes off, because you're gonna see, yes, growth will be good next year, how much will broaden out. I don't think interest rates are down enough, and you still got a very sticky long end in terms of rates, and that's probably more tied

to the fiscal deficit and the amount of interest payments that we're having to pay on that. Okay. Well, Brent, for those who are leaning toward taking your side in this within international, what particular regions do you view as the best bets? I think developed markets offer more, at least a better risk-adjusted rate of return because I do think risk are still high in emerging markets. And so on the international developed front, I would lean towards those developed markets

or international front of the toward towards the developed markets. to me, if Barbara's right, perhaps she is, but I think history would suggest that relative valuation matters. And that's where you have that backdrop for if you decided to invest today. And it's not perfect timing for that to occur. I think at least historically relative valuation has one. And that's where small midcap stocks at least offer that for intermediate to longer term focused investors, the ability, I think, to harvest higher than expected returns than large cap in the coming years. We're sub two minutes from this conference call from Oracle. Barb, want to get your thoughts on what we've

seen in that print, how it sets us up for Broadcom tomorrow. We're also expecting an open AI reasoning model to drop before a week's end. How much does this AI trade hinge on all of this? Well, I think it is important because everybody is, you know, is very spooked by the amount of spending. Is it going to be over capacity? I mean, you saw what happened with Oracle in the last earnings call. The stock popped up 36% on this huge increase in backlog, some 350%. This time it looks like it's even more at 430 some percent. You know, but the question is then they realized it was Open AI. Open AI right now has spending commitments of a trillion. And can they make that? Will they be able to do that? And so I think those concerns may not be alleviated so soon.

We'll have to see the Oracle call. They will talk about, we hope, alternative financing because they have a lot to finance. They added some 37, 38 billion in debt on top of 105 billion. So they've got huge, you know, their coverage ratio, though, is good at six times. But there's a lot we need to know about the, how you're going to fund all this. And that's not an issue. I think it's going to go away anytime soon. All right. Barbara Duran and Brent Chudy, thanks for joining us. Thank you. Well, Thursday will be another big day for earnings after the bell. We just mentioned where you get results from Broadcom and three big consumer facing names as well, Lulu Lemon, Costco and R.H. On the economic front, we will get weekly jobless claims and the

September reports on U.S. trade deficit and wholesale inventories. And of course, we'll see how the market It continues to react to and digest what we heard from Pal and Co. today. Yeah, Broadcom, a big one for the overall AI trade. It's one that we were talking about yesterday over the year-to-date, one year, even two years. It's outperformed NVIDIA, so we'll see how much hinges on it. Yeah, S&P flirting with a new high, Russell 2000 at a record high, and the midcaps at a 52-week high. That does it for us here at overtime.

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