Closing Bell - Closing Bell Overtime: Major Rally Heading Into The Weekend; What Talks Between President Biden And China’s Xi Could Look Like 11/10/23

Episode Date: November 10, 2023

Major averages ended the week higher for their second straight positive week and the Nasdaq had its best day since May. Gentrust’s Mimi Duff helps break down the market action while 3Fourteen’s Warren Pies talks the move in oil. Council on Foreign Relations President Michael Froman on next week’s APEC meeting and what could come out of sideline talks between President Biden and China’s Xi Jinping. FICO CEO Will Lansing on the America consumer and spending levels heading into the holiday season. Matt Desch, Iridium CEO, on what’s next for the company after Qualcomm ended its 10-month partnership. BTIG’s Marie Thibault on the major moves in weight-loss drug companies. Plus, our Kate Rooney on the hottest new trend in investing: T-Bill & Chill.

Well, there you have it. Session highs into the close as stocks rebounded to finish their second straight week with gains. The Nasdaq just finished its best day since May, up 2% right now. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford has the day off. We will be all over this rally throughout the hour. And also ahead, Warren Pies from 314 Research joins us to talk oil as crude notches its third weekly decline in a row. Plus, Council on Foreign Relations President Michael Froman ahead of his appearance next week at the APEC Summit. As news comes today about an official meeting there between President Biden and China's President Xi Jinping.

We begin with this rally, though. Stocks resuming their uptrend today and adding to strong gains on the month. The tech-heavy Nasdaq was the standout winner this week, as we just mentioned, but small caps did continue to pull back. Let's bring in our market panel. CNBC's senior markets commentator Mike Santoli and Gentrust senior client advisor Mimi Duff. Mike, I know you were just chatting about this coming into the bells ringing, but just to re-rack here, the fact that we had such a strong end to the day and to the week, we haven't seen that very often, at least before last week. We had been seeing these sell-offs coming into the weekend. What has changed now? Well, I think, Morgan, the tenor of the market coming off the late October low did give you some sense because it was so broad, so strong, so persistent.

We talked about the eight straight updates in the S&P days was any urgency of buyers, any real follow through, any sense out there that people were willing to chase into a year end rally as opposed to just sort of wait and see what developed. So I don't want to make too much of today, but there was encouraging that you did have people willing at the end of a week to add or take on a little more equity risk. Some calm in the bond market allows for that. It's really unclear how high the ceiling is on this move. You can really see a scenario where you get back up toward the July highs, perhaps. It's a couple, 3% up from here. And all of a sudden, people are talking about valuations,

and aren't we still in the late cycle again? But in the here and now, today's action was more encouraging than the rest of the week before it led you to believe we were in for it. Okay. Tech certainly leading the way today, up 2.5%, 2.6% among the S&P sectors. But every sector did end the day in the green, and the S&P actually closed above 4,400, 4,415. Mimi, does this rally have legs? Well, we're a bit more cautious on the equity side, but to the extent that we see more rate stability, which I think is a good part of what's behind this week's rally, and obviously

also we have seen the earnings beats come in. So if we can find some rate stability here, we are overweight in the fixed income and we've started to term out some of those positions. I think that, you know, we could, that lend a hand to the equity, stability and strength. OK, Mike, the fact that we did close above 4400, which had been seen as key resistance here. How how bullish is that, at least in the near term? It's another box that we checked off, you know, that the that the rally does have a little something behind it everyone's going to be watching to see if you maybe get a little bit better distribution of these of these gains of the buying interest something that is interesting is that we also if you go back to late september

when we were last at these levels we essentially went through the entirety of an earning season when companies generally beat at an 80 percent beat rate, the estimates for the current coming 12 months have gone higher. You know, New York Fed tracking for the fourth quarter GDP is now two and a half percent. So you would think the growth metrics should be supportive in here as long as yields calm down. And that probably does underwrite, you know, 4400 being a level that level that we can live with without any surprises from the bond market. Mimi, you sound cautious on equities. Where would you be putting money to work right now? So we're overweight fixed income, as I mentioned. We haven't seen these rates, you know, since 2006. So there's no reason to be underweight here.

We, you know, we still see some instability in the back end. The bond auction yesterday was points to that. But in terms of on the equity side, we still we do like infrastructure. We like some of the real assets like uranium. We do see pockets there that we think can have sustained strength. Interesting. We had Mary Daly, San Francisco Fed President Mary Daly, on CNBC earlier today. And Steve Leisman basically asked her about the neutral rate and said, is it right to say that we're in a world of permanently higher government deficits and borrowing,

that this is a world of higher interest rates and a higher neutral rate? Would that be fair to say? Here was her response. So the way the neutral rate works is very simple. It's the demand for funds and the supply of funds. So savings and investment. And if the governments across the globe are using some of that investment along with the private sector, well, then the supply of funds is the same. The neutral rate is going to rise. So Mimi, I want to get your thoughts on that and what it means for how you are thinking about the treasury market, which the stock market is taking so much of its cues from longer term, whether we do see a higher neutral rate and what that means for fixed income overall. So I think if we do see a higher neutral rate as

we come back, right now we're in restrictive territory. I don't think anybody would argue with that with funds at five and a half percent. But as things move forward, if the Fed does at some point ease, where do they stop? It probably also argues for higher rates out the curve over time relative to, say, two and three years. Because remember, in a normal environment, you have an upward sloping curve where the front end is anchored more by that neutral over time. And then you have some term premium. You're rewarded by extra yield to move out the curve. So and to Mary's and your points, the deficit right now is problematic. The Treasury is forced to fund these numbers and issuance is up quite a bit as a result. So I think that that's the longer term impact. We're probably not likely to go back to these

extraordinarily low yields that we saw in the last 10 years. Okay, Mimi Duff, thank you for joining us. And Mike, stay close because we're going to see you back here in just a moment. In the meantime, oil prices rising with the rally today, but still turning in their third straight weekly decline. That's the longest losing streak since mid-April, both Brent and WTI down about 4 percent since Monday. Joining us now is 314 Research co-founder Warren Pies. Warren, I want to get your take on this, because you had turned bearish on crude before we saw this move lower. What did you see then that changed your mind, and how is it playing out now? Yeah, thank you for having me. Just to review, we were long from early summer, like early July-ish through mid to late September. And really what we've been

playing this entire year in the crude oil market is the speculator, fading the speculators within the futures market. So hedge funds get really short and you want to take the other side of that trade. And when hedge funds get really long, you want to take the other side of that trade. And so at the summertime, really, you had hedge funds betting on recession. And then they've all kind of come around to our view. Triple digit oil was kind of something all the banks were talking about. And it became consensus. Then we had the Middle East crisis with Hamas invading Israel. And that kind of gave another boost to the speculators. And by the time we got into late September, the whole situation had reversed itself. And we'd gone from a situation where

hedge funds and speculators were really short the oil market to long. And so I think we're in the process now of working off that excess sentiment. And it's really, there's a lot going on, as always, in the oil market. That would be the main thing going on right now, in my estimation. So this is really more about trading behaviors and the technicals, and it's less about the fundamentals. Because that was my next question for you, especially given the fact that data has been pretty mixed, economic data, is how much of this was being driven, this move lower in crude, is being driven by economic uncertainty and worries about demand versus, to your point, geopolitical risks and worries about production? Yeah, I think

that it's hard always to disentangle that. In the oil market, we like to say inventories are kind of the scoreboard for oil fundamentals because it's the nexus of supply and demand. And that's where that nets out. If I had to guess, like our studies show, we went back all the way to 1987, every single kind of major crisis event in the Middle East. And what happens? Usually you get oil. We bid it up. Everyone's worried.

No one wants to be short oil going into a geopolitical crisis. And so that's the behavior around the first month of a crisis. And then as long as we're not directly impacting oil production, say Russia, Ukraine, for instance, or the Iraq war series outside of those, you basically give those gains back. And I think that's what we're in the process of doing. If you want to get really technical, I think November is really the seasonally weakest part of the year for crude oil. It's coming right on the heels of Mexico hedging all of their crude oil production. It makes banks and dealers really skittish. For technical reasons, they have to sell futures into any weakness. We call that negative gamma in the crude oil market. And so these things have all kind of come together seasonally into November.

We have an OPEC meeting at the end of this month. I don't expect them to do anything more, but they are going to probably jawbone and try and talk the market back into better balance. And so net-net, I think it's really just an adjustment of positions, and everybody wants to explain after the fact what's going on. So if you're not invested in oil, at least not right now, where are you putting money to work? What is exciting you right now? We're overweight fixed income after a long time of avoiding the space. And so this is where we've added some duration back on. And we did that on October 19th when the 10-year hit 5%. I still like that. I mean, we've had a huge rally in rates.

We've gone down to 4.5%. And I think that's kind of the bottom end of fair value on the 10-year. And so it's less attractive here, but that's still probably my preferred area. And the thing that makes the current environment so difficult is I think that it's kind of all one big trade right now. Equities are taking their cue from the rates market and the rates markets ultimately looking back at the Treasury and the funding and all the stuff that's been going on for the last week. And how is the Treasury going to fill this record hole that they have going forward next year? We estimate $2.5 trillion funding hole. I think 5%, 4.5% to 5% on the long bond, though, is enough where you're going to start getting some flows and those bonds start looking more attractive. Okay. Warren Pies, great to have you. Thanks for joining me. Thanks for having me, Morgan.

After the break, will geopolitics derail the rally? The much anticipated meeting between President Biden and Chinese President Xi will take place next week on the sidelines of the APEC summit, where our next guest will also be speaking. We're going to talk to Council on Foreign Relations President Michael Froman about his read on U.S.-China relations and the geopolitical tensions that matter the most to the market. Overtime's back in two. Welcome back to Overtime. President Biden and China's Xi Jinping will meet next week in San Francisco on the sidelines of the APEC summit, the White House announcing just today. This is Treasury Secretary Yellen and China's economic czar began two days of talks. Yellen telling reporters, quote, this is not just communication for communication's sake.

That happened just this past hour. Joining us now is Michael Froman, Council on Foreign Relations president and a former U.S. trade representative. Michael will be speaking at APEC next week and joins me now. It's great to have you on the show. Thanks for having me, Morgan. I do want to start with that comment from the Treasury secretary. It's not communication for communication's sake. I mean, we've seen a flurry of senior Biden administration officials make the trip to go meet with senior Chinese officials this week, all in the name of thawing communications and some of the tensions around the lack of communication. If it's not that, what will it be next week?

Well, I think that's a reflection of the fact that for a long time we had extensive meetings with the Chinese, lots of communication, but very little was produced. And I think what the Biden administration is trying to do is use these communication channels to get some concrete things done. The preparation for the summit, which has now been confirmed, that's happened over the last several months with several U.S. officials going to Beijing, some Chinese officials coming here as well. It's not going to be a meeting that produces some big grand bargain or resolves any of the very significant major issues like Taiwan or the South China Sea. But they hope to make progress on some more modest issues, still modest but important issues, and to create some processes for dealing with the other ones. It almost feels like there's three interconnected events that are going to happen next week. It's like a Venn diagram of

events. You've got the actual APEC forum itself, but then you also have this meeting between the two presidents, which is going to be watched very closely. And then you also have this dinner with business leaders as well. What where are we going to see the most meaningful, whether it's policy or whether it's commentary or something else, where are you going to see the most meaningful transactions happen? Well, I think the key question will be whether the bilateral summit between Biden and Xi succeeds in drawing a line under the relationship and conveying a sense of stability in the relationship going into next year. Next year is very important. You've got Taiwanese elections in January, our own elections in November. China's likely to play a role. The China issue is likely to play a role in both of those.

I think both leaders have an interest in trying to create mechanisms of stability going into what otherwise could be a volatile year. So I would keep my eye on that meeting in particular. Okay. From the business standpoint and corporate America standpoint, and we have seen this rising geopolitical risk. We've seen concerns around doing business in China or continuing to invest in China, perhaps even some pullbacks from some companies and some leaders as well.

Is this situation next week going to help calm those fears? Or is this a dynamic that is secular in nature and going to continue? China has asked the U.S. to clarify how they intend to implement their data and anti-espionage laws, because on one hand, they're trying to attract American CEOs and American companies to come back to China to invest more in China. On the other hand, they're detaining foreign executives and they're raiding their offices in China. And that's sending a very chilling signal back to American business. So some clarification, and I would hope coming out of the summit meeting, there could be at least some

agreement to a process where China would clarify how it intends to implement and enforce these laws that are having a chilling effect on the U.S. business community. And of course, we're having this conversation, and the focus is on China, but the stakes have never been higher on the world stage in the sense that the U.S. is on the verge next week of a government shutdown. Worst case scenario, best case scenario, maybe we get a continuing resolution. You have this perceived stalemate of sorts in Ukraine with Russia right now. And then, of course, a hot war between Israel and Gaza with inflammatory rhetoric out of Iran, with strikes on American bases and other parts of the Middle East that's threatening to expand in terms of the size of the conflict. How does all of this come together to sort of give the picture of the geopolitical landscape that we're living in right now

and what this is and what this does to this discussion between these two countries? Well, as you said, Morgan, I think we're facing the most complex international environment that we've faced in perhaps 75 years right now. And I think how it relates to what's going to go on in San Francisco next week is that this is an opportunity for President Biden and the United States to demonstrate that it is engaged, that it's committed to being a leader in the Asia-Pacific region, even while wars are raging in Europe and in the Middle East. And there are several other issues on the U.S. agenda. So it's the capacity to show that the U.S. is a leader, we are a Pacific nation, and we're committed to working with our partners and allies in the region to ensure that they have all the support that they

need. Michael, it's great to have you on the show. Thanks for joining me ahead of all of these meetings next week. Michael Froman. Thanks for having me. On the topic of geopolitics, a military milestone today is the U.S. Air Force's new bomber, the B-21 Raider, flew for the first time. This is a key step in rolling out a new fleet of long-range nuclear-capable stealth bombers built by Northrop Grumman, the company confirming today's flight from the storied Plant 42 in Palmdale, California, which is where I was less than a year ago, on site there for the public unveil of that very aircraft. For investors, flight testing will, as Northrop's CFO Dave Koeffer noted earlier this week at the Baird conference, quote, lead to an opportunity for the first lot of the LRIP phase, the low-rate initial production phase,

to be awarded. CEO Kathy Worden had told me just last month that they're on pace for flight before year's end. And Jeffries says the B-21 accounts for $3.7 billion of sales for Northrop this year and will grow to, by those analysts' estimates, $5.9 billion in 2026. Well, inflation expectations from the University of Michigan survey alarmed some investors today, but other metrics are perhaps painting a rosier picture. Let's bring back Mike Santoli for his take. Mike. Yeah, Morgan, the University of Michigan inflation number definitely unwelcome, maybe a little bit hard to square with the fact that energy prices were down over the course of the prior month.

But if you look at the market based inflation expectations, this is derived from how Treasury inflation protected securities are valued. You see really not that much going on here. Two point three percent. This is on a five year horizon at this point, of course, well down from where we were in the latter part of twenty twenty two, well above three. This isn't necessarily some kind of ironclad prediction that you can rely on and say that's what inflation is going to be over the next five years. But it is what the market has to work with and also why the market has not been particularly alarmed on some of the CPI and PCE ratings readings recently. We'll see how that goes with next week's CPI. Now, the other input to what we should be thinking about the fundamentals and how we should be valuing stocks, it's the earnings trajectory, which has turned higher.

Now, we did have basically a profit recession. You see we went below zero there. This goes all the way back to the mid-80s. It's from Fidelity. Most of these troughs are associated with recessions. This one in 2015 and 16 was not. It was just a profit and industrial recession. We did climb out of it.

So one thing I would take away from this chart is that you tend not to go back positive and then completely backslide. You did have a stutter step there. But the point is, once you're tracking higher, even if the projected forecast, let's say for the second and third quarter of next year for S&P earnings is a little bit too high, usually they're managing to stay positive at this point. We'll see if that plays out. Yeah, I mean, that's been sort of like a key debate point for so many of our market guests is whether the 2024 numbers need to come down, especially when you see what's happened to fourth quarter guidance coming through this earnings season. Yeah, in fact, fourth quarter numbers have been radically cut a little more

than they usually are even during earnings season. So it's absolutely a dynamic we have to watch. But the pattern has been you cut into the reporting season and then beat by, you know, four or five, six percentage points in aggregate. I wouldn't be surprised if you did have to see consensus come down for next year. But that's usually the normal way of things. The average trajectory of the forward earnings is a downward curve and then it curls up again once you get the reports. I wonder what would happen if you stripped the Magnificent 7 out of that diagram. Yeah, it would be lower. The trajectory would definitely be lower. I wouldn't say specifically just Magnificent 7,

but if you look at communication services, tech, and the big consumer discretionary stocks like Amazon, they do account for a lot of the upgrade to the earnings outlook. All right. Mike Santoli, thank you. We'll see you later this hour. One-time meme stocks like AMC and GameStop are sitting out today's rally. But lately, investors think bonds have more fun in this market anyway. Up next, find out why retail traders are fueling a comeback in so-called lazy investing. Stay with us. Welcome back. The market moves have been captivating lately, including today's push higher, but retail investors are getting boring. Kate Rooney joins us with this story. Kate.

Hey, Morgan. So yeah, boring investing is having a bit of a moment here. Retail investors are rediscovering the philosophy made famous by Vanguard's founder, the late Jack Bogle. He pioneered low cost passive investing with indexes. Fans have long called themselves Bogle heads. The group also has a Reddit page at this point where they describe the strategy as lazy investing. One member tells me that he feels vindicated after avoiding meme stocks, watching them surge from the sidelines. He has a more boring strategy. The Bogleheads, they're well positioned for this market where timing can be difficult. As Bob Bassani has pointed out, just eight days have accounted for all of the S&P 500 gains this year. Robinhood's founder and CEO, Vlad Tenev, also told me that he is now seeing more chatter about Robinhood in that Bogleheads Reddit group instead of the more famous

Wall Street Bets group and that more flows lately. He's seen more flows into higher yielding products on Robinhood. Bond ETFs are especially popular. The iShares 20 plus year bond ETF has seen almost 20 billion of inflows this year. Then Vanda Research rather pointing out that the bond ETF, BIL, that was the third most bought fund last week, as they put it, income-seeking retail investors are now trying to take advantage of the high-rate regime, calling the strategy T-bill and chill, Morgan. Yeah, I feel like we've got Jeff Gundlach among us with the T-bill and chill commentary there. Exactly. It really is fascinating though, Kate, because what's old is new here.

And the term, term premium, hadn't been really said very often for many, many years. And now it's everywhere. Yeah, it's interesting, Morgan. It seems like there's this group of investors who really got in during the pandemic. So things that might seem like old news for a lot of longer term investors who've maybe been in the market for decades. These really are new things to a newer investor who got in during the pandemic when interest rates were zero. The fact that you could earn higher yields on your cash or money market funds or get into some different areas like bond ETFs. This is absolutely new. And so they're sort of rediscovering what a lot of investors may have known. But it is absolutely a new paradigm, a new regime that you've seen a lot of the brokerage firms and apps try to keep up with. Robinhood, for example, launching retirement funds and some of the more boring investing out there

that is a way to grow long-term wealth versus just kind of capture the momentum, which really is what they were known for when they started. Yeah, you arguably have two generations that have never experienced market conditions like this and interest rates that are higher. Kate Rooney, thank you. Time for a CNBC News Update with Eamon Javers. Eamon. Hey there, Morgan.

FBI agents seized electronic devices from New York City Mayor Eric Adams earlier this week. The New York Times, citing two sources, first reported that it included at least two cell phones and an iPad. The seizure came after the home of Adams' chief campaign fundraiser was searched by the FBI. The mayor's attorney released a statement writing that the mayor has not been accused of any wrongdoing and continues to cooperate with the investigation. The Big Ten is banning University of Michigan

football coach Jim Harbaugh from the team's final three regular season games. The move comes as the school battles accusations of sign stealing. According to the conference, Harbaugh will be allowed to attend practice and other team activities. Harbaugh has denied any knowledge of the sign stealing operation. And the National Toy Hall of Fame announced this year's inductees. Fans voted the Fisher-Price Corn Popper onto the list after being named a finalist more than once. The toy is joined by baseball cards, Cabbage Patch Kids, and Nerf foam toys. But despite a huge year, Barbie's sort of boyfriend, Ken, did not make the cut.

I guess that's because he's just Ken. Back to you. I guess that's why. Amen just Ken. Back to you. I guess that's why. Amen, Jabbers. Thank you. After the break, the CEO of credit score giant FICO joins us with reactions to today's consumer sentiment number, which fell to its lowest level in six months, even as credit scores have been rising. And how's this for a rally? Bespoke pointing out today that FICO's stock is up nearly 70,000 percent since the company went public in the late 80s. 70,000. Welcome back.

Stocks rising today, but consumer sentiment slipped for the fourth straight month in November. The University of Michigan survey showed a reading of 60.4. That's lower than the consensus. Let's bring in Will Lansing. He's CEO of FICO, the company who reported fourth quarter earnings earlier this week. Will, it's great to have you on the show. Thanks for being here. Oh, it's great to be here. Your stock finished today up 3.5% at a fresh 52-week high today. A lot to get to, including what you're seeing with the consumer. But the fact that your business is broken down into two, it's really scores and software revenue. And the fact that

you're continuing to grow as strongly as you are got my attention, given the fact that we do have higher interest rates and we do have some signs that credit is tightening here. and yet you're powering along. Why? Well, you know, both businesses are in great shape. Consumer credit is the foundation of a consumer economy, and our business has really benefited from that. I mean, we're a 68-year-old company, but over the course of that time, our scores become so deeply embedded in the credit evaluation process for lenders that we're really the we're what makes the economy go. And so the scores business is very strong. And then we have a new newer business, which is our software business. And that's also booming. That's all about helping B2C companies optimize their interactions with their consumer customers. Both both businesses are just on fire. Yeah. And of course, both businesses, to your point, tie back to the consumer. So what are you,

are we seeing cracks in the consumer yet or is it resilient? The consumer is pretty resilient. I mean, I guess I would start by saying FICO scores are lagging indicators. So there are other indicators that would give you a little more of a forward look. What we see is stability around the FICO score. It's around 718 right now, which is up a couple of points over the last few months. But that's a stable score and the consumer's doing OK. There's a little more data out there. But we see a pretty stable consumer. What's killing us is interest rates, of course. I mean, that's really decimated the refi market, the mortgage refi market. And it's also a challenge just on new mortgages. I mean, we've seen that credit scores are at all-time highs. What's been fascinating to me is the fact that during the pandemic, folks were able to pay down some of their debt. They were able to boost their savings. You had stimulus checks coming in, not able to spend as much at

the time, maybe strengthen their credit standing, and thus be able to take on larger lines of credit. And now they're starting to spend in this higher inflation environment. It's almost acted, I think, as a second wave of stimulus. Am I right to think about it that way? Well, I think there's some truth to that, absolutely. The nice thing is that consumers are increasingly sensitized to how important it is to maintain a good FICO score. And so responsible behavior is now paramount.

I mean, consumers really think about the impact of their payment behavior on their credit score and what it means for the price of credit and the availability of credit in the future. So I think they're just a lot more sensitized now than they have been in the past. So what is higher for longer from the Fed? Because we know that's been the message. What does that mean to this entire picture looking to 2024 and for your business? When we look at the score side of the business, we see mortgage volumes are about as low as they've been in decades. And we don't see it coming back very fast. We do see it coming back. I mean, sooner or later, people will be buying houses again. And if we have a one or

two point decrease in mortgage rates, which could be a while in coming, but if we have that, we're going to see the refi market come back, too. That could be towards the end of the year. That could be next year. I mean, it could be some time before that comes back. OK. Appreciate the time. Will Lansing, thanks for joining me. Thank you. All right. The CEO of FICO. Up next, Mike Santoli looks at whether the narrative around big stocks driving the rally actually holds holds water, I should say. Stay with me. Welcome back to Overtime. Michael Santoli returns with a look at what's really driving the recent stock market performance. What is really driving the stock market performance?

Well, Morgan, as people keep speaking about with alarm, it is to a degree the very largest stocks. And it's not just about, oh, it's only tech. Even within sectors, there's a real preference for the very largest and perceived most reliable stocks. So here's the market cap weighted technology sector of the S&P over two years compared to the equal weighted version, but also small caps. So it's not just like, oh, we love tech. No, we love the stocks that dominate the tech sector and market value. That would be Apple, Microsoft, NVIDIA and not a whole lot else. How about within pharmaceuticals? Health care in general has not worked well as a defensive sector. Even drug companies have not really benefited from the macro uncertainty. What you

see here is Eli Lilly, which is, of course, considered to be have a category killing drug with the weight loss treatments really pulling away from Johnson & Johnson, Merck, Pfizer. And even in market cap terms, it's almost at $600 billion. It dwarfs the rest of those. So it's really about the few disruptor winners and secular beneficiaries and everybody else. Now, has the Nasdaq 100 really dominated the market? Well, not really over our two-year basis. November 19th, 2021, we're going to reach the two-year anniversary of that next year.

That was the peak of the NASDAQ. Since then, compared to the equal weight S&P 500, not a lot of dramatic difference, right? Okay, seven percentage points. That's not nothing, but it's not the gaping gap that you would have seen if you just looked at a year to date. Because last year, look at how bad the Magnificent Seven were relative to the average stock. We really just had not much more than a typical correction in everything but mega cap tech last year, Morgan. What's fascinating to me is that you just highlighted Lilly. What's fascinating to me is that we saw this in part secularly fueled move tied to AI and some of these big tech names earlier this week.

And we saw sell-offs in other parts of the market associated with it, all of it in anticipation of what was coming with this new technology. I wonder if we're seeing something similar now with the GLP-1s. For sure. Those are the two themes people are incredibly confident in that are going to be huge economically, but also perhaps have more kind of victims than beneficiaries. So we know what companies are most clearly going to benefit from them. Everybody else seems to be suffering by comparison. Okay, Mike, stay right there because we're getting some breaking news

here out of Moody's. Steve Kovach has the details for us. Steve. Yeah, Morgan, Moody's downgrading its outlook on the government of the United States. I'm just reading right here from the report that just came in here. It's saying ratings to negative from stable, but still affirming the long-term rating of triple A. Some of the reasons behind this, Morgan, are the downside risks to the U.S. fiscal strength and also continued political polarization within the U.S. Congress raises the risk. I'm quoting directly here, raises the risk that successive governments will not be able to reach consensus on a fiscal plan. And, of course, we're a week away from a shutdown where this is all playing in. And, of course, this comes a little over three months after that pitch down, Greg Morgan.

OK, Steve Kovach, thanks. Mike Santilli, I'm going to go back to you because some of the other headlines here. Political polarization exacerbates fiscal risks, absent policy action, fiscal strength will decline, debt affordability to be significantly weakened. None of this is necessarily breaking news, and there had been a lot of anticipation that maybe you could see a move like this by Moody's, but how significant is it that we are getting it? We're getting on a Friday, a week to the day before the current continuing resolution that the government is operating on is set to expire.

Yeah. So it doesn't bring with it any tangible direct impact in terms of, you know, any big institutional investors having to change their willingness to hold U.S. government debt. It does crystallize the concerns, though, as you say, we've been dealing with for a few months, not just this huge supply of government debt that's been pushed on the market because of these large deficits in a time of economic expansion, but also, and this gets back to what Fitch said around the debt ceiling standoff the last time, which just does seem like politically it's not about the ability to meet our debt obligations. It's sort of the willingness to kind of place the fiscal situation on a more secure path. So I would say it's basically giving words to what the market has been struggling with since July when yields

started to really ramp higher. And by the way, that whole move higher and ramp was not all about supply, but that definitely was an exacerbating factor. Yeah, it kind of takes us back to the beginning of this hour as well, where we rehashed those Mary Daly comments about the neutral rate, too. Mike Santoli, thank you. Up next, breaking the connection, Qualcomm ending its partnership with Iridium for satellite-to-phone service. It's a move meant to counter Apple's sat phone SOS feature. We're going to hear from Meridiem's CEO weighing in on the end of that deal. And as we head to break, check out the stocks that hit 52 week closing highs today.

Microsoft, Broadcom, Adobe, Costco, Walmart and Micron all making that list. We'll be right back. Welcome back. Chipcom, Chipmaker, I should say, Qualcomm, ending its 10-month-old partnership with Iridium Communications to offer a satellite SOS feature for Android phones that would have rivaled the one provided by Apple with GlobalStar on the latest iPhone models. The tech had been successfully tested, but Qualcomm saying smartphone makers have, quote, indicated a preference towards standards-based solutions for satellite-to-phone connectivity. It's something I discussed further just earlier today,

exclusively with Iridium CEO Matt Desch. Well, I think it means that smartphone providers, well, at least Android ones, didn't want to really pay much extra for satellite access and and providing access to remote, you know, off the grid is really being left open kind of to Apple primarily today as really all the standard-based solutions that are potentially out there right now are inferior. You know, they're regional at best. They come from geostationary-based operators with all the issues that those entail. So, you know, we've announced and we are developing standard-based interface to our satellites. So this now allows Iridium to work with others. And Desch thinks that there may be some smartphone

providers who do want to implement the tech in a shorter time frame. It also doesn't change Iridium's financial guidance. Apple's providing it for free today. Others have talked about it free, but someone has to pay for satellites and satellite service over time. So, and exactly what will you pay and what will it be? What will it look like when you get it? So there's still a lot of questions about that. Our solution is really focused on doing something and doing something very well and doing something extremely global. And that's really what was, I think, appreciated here. You know, the technology worked really well. No one's denied that just like everything else we do, it works. It works fine. It's just perhaps

the business model still isn't quite there yet. So it's not a matter of if, but really a matter of how when it comes to this nascent market to connect unmodified phones directly to satellites. There are a number of device makers, service providers, satellite operators that are all focusing on this, even beyond Apple, including SpaceX, T-Mobile, AT&T and AST Space Mobile. Now, to listen to the full interview, check out my podcast, Manifest Space, wherever you get your podcasts. We actually have a two-parter here with Matt Desch. In the meantime, shares of Iridium did finish the day down 3.5%.

When we come back, we'll preview the huge week of retail earnings ahead and the weight loss drug news coming this weekend that needs to be on your radar. And tonight, on Last Call, don't miss SAG-AFTRA president Fran Drescher. The end of the Hollywood strike, that's at 7 p.m. Eastern right here on CNBC. You will not want to miss that. Welcome back to Overtime. Retail takes center stage next week on the earnings calendar with results from Home Depot on Tuesday, Target and TJX on Wednesday, and Walmart, Macy's, and Gap on Thursday. We also get the closely watched CPI inflation print on Tuesday and PPI on Wednesday.

But before that, this weekend, we will get news from Mozempic and WeGoVee maker Novo Nordisk. The pharma giant will present the full results from a study examining if its weight loss therapy can reduce the risk of heart attacks and strokes. Top line data released in August showed patients had a 20% lower risk compared with a placebo group. This comes as Eli Lilly's weight loss drug was approved by the FDA just earlier this week. And I asked CEO David Ricks yesterday about the impact all of this could have, the GLP-1s, on the demand for medical devices. Have a listen. Clearly in health care, our goal is to displace other types of health care.

That's clear. I mean, we are doing with our GGG asset I mentioned that harnesses three different incartan pathways. We're doing a phase three study, it's announced, to show benefits on osteoarthritis. In the end, that could change knee replacements in America. Wouldn't that be a good thing, to have fewer surgeries and fewer knee replacements? Of course, we are aiming to reduce cardiovascular risk and kidney risk and other things that have other consumption points in healthcare. So that is our direct goal. Well, joining us now, BTIG Managing Director Marie Thibault, who covers the medical device sector. Marie, it's great to have you on the

show. And that's exactly where I want to start with you, because I thought those comments from Rick's were very disruptive or that he is maybe I should say what's implied by those comments is that he sees GLP-1s as very disruptive. Your take. Yeah, absolutely. And thanks for having me, Morgan. These are extremely disruptive drugs, very exciting to have. But I don't want to sort of overstate what this does for the population, right? When we think about the number of patients who could benefit from these drugs, there's 175, 180 million U.S. adult people who

could, you know, fit into that category of overweight or obese, right? And even the most bullish forecast for these drugs are looking at 10 to 15 million people taking them by the end of the decade. So while I agree with David that this is an exciting time, I'd also point out that other leaders, like Novo's leader, has pointed out that these diseases are often progressive, and you can't completely stop some of the progression. And that's what we want to point out, is that there are still folks that are going to have diabetes, unfortunately, and cardiovascular diseases, unfortunately. We're really just scratching the surface with these drugs. Yeah, and of course there's also the notion of access and supply, which are key, at least in the

near term, for rollout of these actual drugs. I mean, we've had some medical device makers like Abbott, for example, on the show who have said, actually, it's complementary, the relationship between some of these drugs and some of the diabetes, for example, devices that could go along with it. Is this actually a net positive for some of the device makers that are in these markets? I absolutely think it is. And you've heard that from Abbott's CEO, Robert Ford. You hear that from Dexcom, which is another one of our buyer recommendationsrecommendations, we're seeing that these are complementary technologies. If you're on a GLP-1 drug and you're on a CGM, which is a continuous glucose monitor, you can check your blood sugar continuously, you're actually seeing better adherence between

the two. You're staying on the drug longer. You're having more success with it. And we're actually hearing from doctors anecdotally that say, we want to extend sort of the benefits people would see from these drugs. We don't want them to take drugs forever. And these CGMs can help them maybe sustain some of the weight loss and change some of their behavior long-term. And I think that's really important to think about. Very quickly, especially given the sell-off we've seen in some of the names that you cover, what would you buy right now? I would be buying Dexcom. I'd be buying Abbott. I'd be buying Insulet as well. So they're all names that are highly disrupted by some of the headline data from Select. We think talking with investors that while the data this weekend we see will be good,

there's not that much that's going to change kind of the trajectory of things. We think a lot of these names are going to be a bit more stable in the weeks to come. So we will be buying those names. Okay. Marie Thibault of BTIG, thanks for joining me here. We did just get a few moments ago news that Moody's is cutting the U.S. outlook to negative, citing higher interest rates and deficits. As we head into Veterans Day, though, I do want to take a moment to thank all of our veterans, past and present, for their service to our country this day and every day. We honor you. So have a wonderful weekend.

That's gonna do it for us here at Overtime, with the markets finishing the day higher.