Closing Bell - Closing Bell Overtime: Markets Close Out Wild August 8/31/26

Episode Date: August 31, 2026

It was a mixed August for the market. JPMorgan fixed-income guru Bob Michele breaks down some of what’s driving the moves across assets, including how the bond market could be playing a role in the wavering of some AI stocks. Meantime, Brookings’ Michael O’Hanlon sorts through the weekend geopolitical headlines and what it means for investors. Our Kate Rooney reports on OpenAI’s rapidly growing ads business before Evercore’s Mark Mahaney discusses divide between Meta and Alphabet. Our Mackenzie Sigalos reports on Tim Cook’s final memo and the challenges ahead for incoming Apple CEO John Ternus. Fairlead’s Katie Stockton reads the technical tea leaves on some key macro charts. UBS analyst Michael Yee on the wild August for biotech. Piper Sandler’s James Fish looks ahead to Dell’s results. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Closing Bell Overtime Live from Studio B at the NASDAQ market site. I'm Mike Santoli. Well, this is off today. Stock's lower across the board today. The Dow down more than 300 points. S&P 500 down by about a quarter of a percent, little more. The NASDAQ composite off slightly. The NASDAQ 100 squeaking into the green, a bit of a spurt in Tesla helping that late in the day.

Tech was one of the only two S&P sectors in the green today, and that's despite losses for most of the MAG7 names. Amazon, down 2 percent. as the FTC sues the company for allegedly deceiving advertisers, and could the ad businesses of meta and Google be under threat from AI? We'll discuss that. The only other sector in the green today, energy. Oil up more than 2% as fighting escalates between the U.S. and Iran. More on that coming up.

And this concludes trading for August. Another good month for the markets, 2.5% gain for the S&P 500, though basically all in the books by August 4th, more than 3.5% for the NASDAQ composite and NASDAQ 100 heading into September. Let's begin with the G20 meeting of finance ministers. Megan Gisela joins us now live from Asheville, North Carolina. Megan. Mike, hello from the Blue Ridge Mountains.

It has been a full day of programming here where Treasury Secretary Scott Bessent has been convening finance ministers, central bakers, as well as some top CEOs for a number of meetings throughout the day today. Now, the U.S. has said that it's stated goal for this presidency of the G20 is on promoting, including global growth. But of course, many policy discussions dominating the topics here as well. The top of mind being the war with Iran, Treasury Secretary Besson saying that in every meeting that he's sitting down with foreign finance ministers, he's pressing them to get on board with the U.S. and cut off all economic ties with Iran. You told us reporters earlier in the day that he thinks it could be just weeks or months before Iran's economy collapses, but he also says the U.S.

does not have to see that happen in order to achieve its goals. Here's more from Besson. The goal here is to create the conditions that they will want to come to the table. And the president's been very clear. They have to give up their nuclear program. They have to turn over the highly enriched uranium. And they have to stop their support of proxies. And the straight has to be open. Now, Mike, the other big story here this week has, of course, been the bond market.

And especially this question of whether Secretary Besson and Fed, Chairman Kevin Warsh might be pulling the market in opposite directions. But I'll say from being here that at least outwardly, the two men are really putting on a very unified front. They traveled together here to Asheville on the same government plane from Andrew's Air Force Base. And then three times earlier today, we saw the two men sitting side by side, both of them giving opening remarks at three different sessions. Here you can see them getting down from the plane that was yesterday afternoon. So at least trying to send the message that they are unified on this. And Besson told CNBC that they are on the same page when it comes to the bond market,

that they both believe the U.S. bond market is the most resilient in the world right now. Mike? Yes, and of course, Secretary Besson essentially saying, look, the Treasury buyback actions are not meant or really capable of changing the equilibrium level of bond yields, but maybe we can make it more liquid and have them stay closer to fair value. Megan, is this the kind of a thing where we expect any kind of, you know, action? items to be executed or a communique among all these finance ministers? Yeah, it's a good question. We are expecting a communique by the end of the day tomorrow. We'll also see a closing press conference late tomorrow afternoon, early evening with Secretary Bessent,

so we could hear more from him then. Another thing that we're really watching is that a number of bilateral meetings are happening on the sidelines here. I was told by a Treasury official that Bessett is expected to have at least 11 of those meetings. Some of them have already happen, but we might get further redouts from each of those. And then we're also set to see later this evening a G7 finance minister's meeting. So from those group of seven economies getting together that's hosted by France, which is the G7 presidency this year. That's where we might see more discussions on trade and tariffs, given that Canada will be in the room with the U.S. We might see more on Iran there as well. So I'm looking to see if we might get more readouts, but at least

the communique will come tomorrow. And that's where we'll see if they are on the same page on any number of these topics. You know, as you know, the news is often what's not in the statement in addition to what's in it. Oh, for sure. Yeah, there's a lot of, you know, joint and collective efforts going on between the sanctions and the currency intervention. So hopefully we'll get a little light on some of that. Megan, thank you very much. Now let's get to the reaction in the bond market as the 10-year yield rises to key level. Rick Santelli, joining us now from Chicago. Hi, Rick. Hi, indeed, Mike. It's not only a key level. It's just sitting right on this four and three-quarters area. and the reason it's important before we get to the charts

is because not only the psychological issues, but the fact that it's been a stopper right around that 4.74% area on a number of occasions, while many other sovereigns around the globe on the long-dated side continue to move higher, like in France, the EU, and to a lesser extent, the UK and Japan.

Now, if you open the chart up, what you'll see is, should we close at 470? and you need to close above 474, it would be the highest yield close going back to January of 25. And do remember, real technicians aren't going to use the 4 o'clock Eastern close with the equity markets. They're going to be using the 5 o'clock Eastern close. That's the true close of the U.S. cash market. So now let's open the chart up going to October of 23.

And the reason we're doing this is because not only did I show you 474 back to Jan and, 25, but the next level would take us back to October of 23, and that range is 493 to 499. 499 occurred on October 31st of 23. We might have traded intraday above 5%, but we didn't close above it. 499. The last time a 10-year note closed above 5%, or at 5%, goes all the way back. 19 years to July of 2007. And I think it's important to point that out

because many other sovereigns have moved up more aggressively than the U.S. However, the long side of the U.S. has really woken up over the last several weeks. Mike, back to you. Oh, for sure. Rick, thanks a lot for all the context there. Oils move higher having an impact on both stocks and bonds today. Pippa Stevens has the latest on the energy trade force. Pippa.

Hey, Michael. Brent is back above $90 after the first military strikes between the U.S. and Iran in a month over the weekend, but a pretty muted move, given the market has sort of become accustomed to these flare-ups. Although CIBC's Rebecca Babin noting the shift from purely economic pressure back toward military action is significant and does show even if kinetic action isn't the U.S.'s preferred path, Iran still has ways to escalate that force its hand. Now, we are seeing more oil get out of the Middle East, thanks in part to ship-to-ship-transfers, but we do need to look at the types of ships that are transiting because it is way to twaseless.

oil. LNG vessels are not transiting at the same rate. They are highly specialized and much more expensive than VLCC's, meaning the insurance burden is higher, so we're seeing a bigger response in those prices. Plus, Qatar owns a fleet of ships, one of which was targeted last month. Now, product tankers are also not moving through as quickly as VLCC's contributing to tight fuel markets. Meantime, President Trump announcing what he called a historic deal with Venezuela for 65 billion barrels of oil reserves, but many are quick to point out that if this comes to It's much more of a long-term story with many barriers until there's any type of meaningful increase in production. Mike?

Pippa, thank you. Well, as Rick mentioned, the 10-year yield touching its highest level since January 2025. Is the market right to start pricing in more rate hikes? And what might that mean for stocks and other markets? Joining me now here is Bob Michael. He is head of the Global Fixed Income Currency and Commodities Group at JPMorgan. Bob, good to see you. Happy to be here, Mike.

A lot of things are always going on and built into, you know, bomb prices. How much of this is a re-evaluation of the Fed after Kevin Warsh's comments? And I guess how much is it just sort of the trending move we've gotten from other places? It feels like the trending move. I think what was interesting about today, it's a continuation, the backup of real yields. Inflation expectations remain relatively anchored at about 2.3%, which is surprising, considering that Chair Warsh, highlighted inflation, and yet oil prices rise. The backup in real yields tells you that bond investors want to be compensated for a couple of things. One is the competition for capital. You've got

sovereigns globally, not just the U.S. looking to fund themselves. They're competing with hyperscalers. And the second is, frankly, policy confusion. We still don't know what the Fed Chair's reaction function is. We hear different things from the Treasury seemingly every week, and also, also the geopolitics keep moving around. So us in the bond market want a higher real yield to accommodate that. Yeah, it's what I've been categorizing as sort of like the what if premium, right? You have to have some kind of some compensation or cushion in there for a lot of these unknowns. That being said, I mean, obviously short-term yields went up along with Warsh's comments. We have the implied probabilities of a hike in September rising, I guess, you know, a fair bit above 50%. Does that make sense to you? Obviously,

obviously we have some data before we get to that meeting. Yeah, it sounded like a very hawkish Jackson Hole speech. And when we step back, we said, okay, he's talking about inflation. He's talking about it clearly and with sufficiency moving to their target of 2%. There isn't out. There's PCE comes in before the next FMC meeting. You could look at the three-month annualized rate of core PCE. if it comes in at two-tenths of a percent, the three-month annualized rate drops from 3.1 to 2.4

percent. I would say that's a sufficient improvement. But I also step back, and I wonder, he gave such a compelling argument. Did he just talk the rest of the FOMC into hiking rates? Which didn't seem like it would have taken very much necessarily, right? They were on the border. They were leaning kind of that way. In any case, I guess, you know, one conclusion you'd have to draw, or at least one call you'd have to make is what happens to longer term rates if they do hike, whether it's September, December, down the road or whatever. I know that there's some camp that says, well, that'll show inflation resolve and maybe yields come down on the long end.

But longer term yields have been going up as the hike probabilities have risen. So where's that interplay? Yeah, we've had a pretty significant backup in yields. It wasn't that long ago. We were at 3.9%. We're now at 475. So we've had 85 basis points in backup. I think we're going to test 5%.

The fact that everyone's talking about 5% means we probably don't get there. Do we get to 490, 495? I think so. So I think we're getting to a point where a lot of the cash on the sidelines is looking to come into the market. What do they want to see from the Fed? They do want to see some commitment to rate hikes. They do want to see some commitment to trying to rein in inflation. And that's not a decorative one or two.

They want to hear from the FOMC that if they have to go three, four rate hikes, they're willing to do it. And in terms of, you know, sitting in this seat as an investor, is there value having been created in the bond market by these moves at this point? Yeah, there's a lot of value. Even if we look at the backup and yields so far this year, it's about 75 basis points on the five year, the bond markets return zero. So, okay, it's not great. it's not the equity market. You didn't lose money. That's the value of all the yield.

Now you could put money into a core bond fund, get close to a 6% yield. You could put money into a municipal bond fund. It's a 3.8% yield. That's on a taxable equivalent about 6.3%. So there's a lot of value in the bond market today. Yeah, it does seem as if there's definitely a buffer in there, as you say. And, I mean, bond prices are going to go up more if yields go down 100 basis points. they'll go down if yields go, right? Because you have that yield.

Yeah, absolutely. We get it. There's yield in the bond market again. How about that? All right, Bob, good to see you. Thanks very much. While the G20 meeting, of course, is underway in North Carolina. Russia's President Putin and China's President Xi have met on the sidelines of the Shanghai Cooperation Organization Summit. It's a sign of pushback against U.S. influence. Brookings Institution Foreign Policy Research Director Michael O. Hanlon is here to explain how this fits into a comprehensive complicated geopolitical landscape. Michael, I mean, what's your, I kind of headline read on that meeting and what it implies for the rest of what's going on in North Carolina?

Greetings. My headline read is that it probably won't achieve great things. Often the G20, struggles. There are a lot of competing priorities in the world and 20 different countries aren't going to see them all eye to eye, but especially now when it's, you know, the key issues really involve people who aren't there or who aren't talking to us, aren't interested really in working with us, especially Putin and the Iranian leadership and, you know, the war in Iran and the war in Ukraine being the particularly serious problems that are affecting everything else, including most of the other issues you've been talking about with the world economy. And yet, how much progress can we make on them if we're not even able to deal with the main cause of either,

of either, you know, initial conflict in the first place? And so I think people can talk about mitigating harmful effects. They can anticipate where the Iran crisis may go this fall. They can talk about how to commonly respond to growing shortages of oil if that materializes, as well as food, because now shipping is being threatened in the Black Sea even more than has been the case for a while. And so those kinds of issues can be discussed, but we can't really know where they're headed, and we're not going to be able to solve them with this kind of a meeting. Yeah, I mean, I would note just the kind of the broad commodity indexes are now above where they were in that initial surge after the invasion of Ukraine. So it clearly is being felt in various things like agricultural commodities as well as energy.

And in terms of this meeting between President Putin and she, I mean, is that just accentuating that they seem like they want to maintain some kind of connection as a counterweight? or is there anything more tangible happening there? You know, that's a good question. I mean, I'm still hoping. It's a hope against hope that someday somehow Xi Jinping tells Putin, enough's enough. I don't really think China likes this war. Of course, they recognize there are some ways in which it hurts us more than it hurts them. And all the resulting violence in the Middle East and Ukraine deplete us of inventory of

weapons we would need if we ever fought them. But I think China sees the threats to the world economy as even more. immediate and relevant. And I'd love to see Xi Jinping used a little bit of the tough love he's got with Putin or the potential for it to strongarm him into recognizing this war has been ridiculous and there are no benefits to anybody to continuing it. Having said all of that, I'm not optimistic that Xi Jinping will do so because, as I think you insinuated, Russia and China both feel they need each other against us, against the Western world. And ultimately, they've got each other's strategic backs. They may quietly voice a different preference to each other

and gently, you know, chastise the other or at least gently critique the other for certain policy moves. But I don't think they're going to use leverage in any meaningful way. China's not going to stop providing machinery to Russia with which it can build weapons or it's not going to stop buying Russian oil and gas. You know, I just don't think we're going to get much of benefit to us out of that meeting. Yeah, I mean, of course, there have been the reports, you know, whether President Xi tells Putin to quit it or not, that the CIA director flew to Moscow to convey the message that the U.S. intelligence says that Russia maybe should look for a way out, but who knows if that'll happen. I guess we all have to circle back to the straight again because, you know, there's a lot of talk about who's going to come to the table and talk about what. But now it just seems a little bit of a standoff, a status quo, and we sort of don't know exactly. if we're getting to a critical point in terms of world reserves or we've just figured workarounds.

Right, exactly. And that's, I can see what the Iranians are doing. Obviously, I don't agree with it, but I can sort of get it. They know full well that we found a way to deal with the first six months of reduced oil and gas flows through the straight with global reserves, China using less oil, etc., etc. But there's also, as you're well aware, a lot of concern among economists and specialists in oil that this fall could be worse, that we could start really hitting the lower levels of strategic reserves and other kinds of issues could really drive prices much higher. I think Iran wants to see if that happens and if that can then put them in a better position for any negotiations that happened down the road, whether it's overcharging tolls in the Strait of Hormuz or for their

nuclear program or what have you. I'm a little bit perplexed as to what Putin still thinks he's fighting for. I think he's so dug in because he made such a disastrous mistake in 2020. and so many people, including his own countrymen, have died, that now it's sort of a cognitive dissonance where he can't really admit that the war's stuck and that the war has been a mistake. And so he doubles and triples down. But, you know, four and a half years in, I just don't know what he's really hoping for. It's such a crying shame. Right.

No, exactly. It's amazing the degree to which we've, I guess, just gotten used to that being the case. Michael, always good to catch up with you. Thanks so much, Michael O'Hanlon. Thank you kindly. Does Meta's landmark social media settlement put pressure on Google to make similar changes to YouTube? That is coming up. And we want to show you the closing bell at Cebo in Chicago, ending the regular trading day for options.

You're watching Closing Bell overtime, live from the NASDAQ markets. Google and Meta both lower today. Could their advertising businesses be facing a threat from Chad GPT and others? Kate Rooney has new numbers on OpenAIs ad business. Kate. Hey, Mike. So Open AI this morning to disclose. I should say some new momentum, and it's relatively new ad business. The annualized run rate

for advertising revenue topped $1 billion. It does come less than 200 days after this business launched. It was around $100 million back in March. That was the last time they disclosed numbers around this. So up 10x or so in that amount of time, the AI giant saying the ramp up is evidence of a, quote, diversified business model that is crucial, of course, ahead of an IPO. It also comes as the company is trying to justify hundreds of billions of dollars that it's been spending on infrastructure and data centers. It is also a way to monetize one billion weekly active chat GPT users. They can leverage a free but also ad-supported tier. Ads they say are now available in more than 40 countries. They also say they're going to be

expanding ad buying across India, Europe, Middle East, and Africa. The growth does also now pit Open AI as a real competitor against Google and meta for digital ads spending and then OpenAI's initial launch. If you remember, it was a big controversial, rival Anthropics. at the time made the decision to run ads, or to talk about ads, I should say, in its own Super Bowl campaign. I'm sort of joking around that decision, although it doesn't have as big of a consumer side of their business for Claude. Open Eye does say explicitly, though, ads are clearly labeled.

They say they don't influence chat GPT's answers, and the advertisers do not get access to private user conversations, Mike. All right, yeah, just dipping in, I guess, Kate. Thank you. So while Google and Meta face that potential threat from OpenAI, there's also another issue that companies are grappling with. Meta agrees to a big settlement over teens and children on social media. Is that putting pressure on Google to do the same?

Joining me now to discuss these issues is Mark Mahaney from Evercore ISI. Mark, good to see you. I guess on one level we could have expected perhaps the settlement that Meta reached to have been a little bit of a clearing of the air for the stock. It's not clear it's been taken that way. How is that fitting into the case for these stocks? Yeah, I would have thought, Mike, I agree with you. I would have thought it had been more of us of a clearing event.

And actually sort of surprised that it hasn't been. Look, this was a major overhang on meta shares. Now, maybe they're still concerned that you have other pending cases. There's a school suit case and a lot of individual lawsuits against meta. So it's not out of the woods by far. But this was the biggest, if you will, bear in the woods when it came. to meta and legal issues. And then the other concern is, well, what happens to the users here? Are you going to, is there a risk here to the teen engagement with meta? Now, Meta's consistently

said that teen engagement is less than 1% accounts for less than 1% of their overall revenue, low single-digit percentage of their time spent. That's a hard. Those numbers always sounded a little low to me, but, you know, what I found so interesting about the settlement is that there's kind of this contingent payment segment in there, which is essentially, incentivizing the state's attorneys general to go after YouTube and TikTok. And I assume they will because $5 billion is a lot of money. Yeah, for sure. Now, it's a lot of money, certainly for states that are looking to come up with these settlements, but maybe not that much for Alphabet and Meta. And, you know, same situation, really, I suppose, with the chat GPT incursion

into the ad business, a billion dollars. I don't know that they would have felt it. I think together, Google and Meta are going to add 150 billion in revenue this year versus last year. But how does the digital ad market evolve if AI is a part of it? Well, AI is absolutely a part of it. And, you know, Meta, I think, is done, and Google, both done great jobs. But particularly, Meta has been using AI to really help marketers. It really helped the business of advertising. And sometimes here out Silicon Valley, advertising gets a hard knock, bad knock, whatever. It shouldn't. I mean, Advertising allows businesses and consumers to find each other efficiently.

That's a wonderful service to both sides, to consumers end to businesses. Anyway, a meta has used AI to improve the targeting of the ads, to make the more relevant to cause a lot of people to kind of view ads sometimes as content, like engaging content. That's a real success story for all parties involved. Anyway, you know, OpenAI is also applying AI, obviously to improve ad targeting. There's still a lot more. They have to do a billion is really nothing compared to the $500 billion in total that Google and Meta put together.

But you've got to watch OpenAI. They certainly have the – they're going to have enough usage of the platform, enough users. They're going to have enough inventory and targeting. And I think a lot of people – a lot of advertisers will seriously consider allocating at least part of their budget to Open AI over the next two to three years. But it's going to take multiple years for it to impact Google or meta. And then just in terms of how the market is – viewing these things. It feels like you think meta is a bit of a fat pitch here in terms of owning it at these valuations. Yeah, it's my number one pick, Mike, and I may be wrong on this,

but, you know, at 17 times earnings, seems to me that a lot of negativity is priced in, both in terms of the regulatory side, but also on the kind of skepticism that they can really get a return on all of these AI investments. And look, my simple take on it is we may be wrong, but meta's proven to me that they can use AI very successfully to improve their core business, you know, user engagement and advertiser returns. So I don't think it's that much of a stretch to think that they can use AI in new areas like business agents and consumer agents. And I think the market's just way too skeptical. You know, at 17 times earnings at a discount to a market where a business is growing 25 to 30 percent top line with 30 percent operating

margins while in an investment mode. You don't find that too often. So to me, it's the most interesting, most attractive risk reward opportunity in the Internet space now. Yeah, it is totally fair. It feels like there's a pretty big overhang of worry and lack of faith. We'll see if it pays to bet against that. Mark, thank you very much. Thanks, Mike Mahaney. Tim Cook's final day as the CEO of Apple. Up next will tell you about his final words for the company's employees, plus the executive who's following him out the door. Plus is Nvidia about to face a valuation clip similar to what once happened to Apple. To read about that and more of my market thoughts, subscribe to my.

market memo newsletter. CBC.com slash market memo. We'll be right back. On his last day as Apple CEO, Tim Cook, releasing a final memo, and he's not the only executive leaving the company. Mackenzie Seagallos has those details. Matt. So Mike and Tim Cook's final words to employees as CEO, he looks past Apple's financial record and instead focuses on the culture that he believes will outlast his tenure. In a letter obtained by Bloomberg, Cook also says that he takes enormous comfort in handing the company to John Turnus, one of the few people he says, who understands how to build products to change the world. And it turns out that this is a last day of sorts for another significant name at Apple. Phil Schiller is stepping away from his

two remaining responsibilities. The App Store now goes back to Eddie Q after an 11-year break, and Schiller gives up oversight of the events team. Now, he'll become an Apple fellow sticking around as a sort of de facto advisor. Now, I'm hearing from internal sources, that employees were told about the move in mid-August, part of a long-planned handoff that mirrors this highly choreographed transition that we've seen with Ternus in the C-suite. It also further elevates Eddie Q, already one of Apple's most powerful executives, as he adds even more of the services business into his remit in this new Ternus era, Mike. Yes, so it is interesting how I guess we're having a little bit of a reset in multiple ways at Apple.

You know, it occurs to me that the stores themselves get really relatively little commentary anymore. There was a time when people were kind of owing and eyeing at their productivity and how big an employer they were domestically and all the rest of it is the idea that they're kind of fine as they are from Apple's perspective and doing what they mean them to do, or is there some kind of change in strategy in that direction? Well, it's so interesting that you bring that up because I've been thinking a lot more about that retail footprint because there's reporting out there to indicate that they're actually doing a lot of these. in the retail stores, changing up those galley ways, essentially where they line up the new products. This is a really important part of understanding the new lineups, especially when you have a form factor change. And so we'll see what comes out next Wednesday at the Big September Hardware event, but typically you would do that if you see a new product lineup coming.

And of course, we had a leak from Apple that we talked about on Friday, Mike. Potentially, we might see the foldable phone come out in just over a week from now. So that would be something where it's just tangible exercise. You want to be able as to consumer to go into a physical store, test it out. There's also, as part of this leak, 10 devices, unnamed devices that were a part of this product roadmap. So even if they don't all come in a week from now, kind of further out, you might see stores have to re-lay out how they're organized in order to give consumers that experience.

Boy, I suppose there better be a foldable phone pretty soon when they have that event. If they've built up a lot of this expectation, we'll see if they deliver Mac. Thank you very much. Time for a CNBC News Update with Brandon Gomez. Hi, Brandon. Hey, Mike. The Supreme Court just ruled that President Trump can continue construction on the White House ballroom while a legal challenge proceeds. That follows a similar ruling more than a week ago, letting it continue. The National Trust for Historic Preservation is suing the administration over the construction. Los Angeles County today sued State Farm over its handling of insurance claims after last year's deadly wildfires,

alleging survivors were forced to wait too long to receive benefits they paid for in counting. on. State Farm has said more than $6 billion in claims have been paid off, and the number will eventually top $7 billion. And the National Hurricane Center issued a tropical storm warning today along the Gulf of Mexico from Galveston, Texas to western Louisiana. The storm is expected to strengthen into a name storm overnight and make landfall tomorrow in Texas. Forecasters say some areas could get as much as nine inches of rain. Mike, send things back to you. Okay, Brandon, thank you. Up next, Katie Stockton breaks down the charge to see. if the S&P 500 will be able to keep moving higher in September,

which of course, historically, the worst month of the year for stop. A lot of churn below the surface, but the S&P 500 remains less than 2% below its record high. So what's the technical take on the next move for the index? Joining me now is Katie Stockton, Fairleet Strategies founder and managing partner and a CNBC contributor. Katie, you know, the market obviously is kind of holding trend here, but pretty much sideways for a few weeks. How's the S&P set up to you?

I think that's a good way to put it, Mike, holding trend. The S&P 500 did confirm a breakout in early August, and it held on to that breakout by remaining above support, which was then formerly resistance, right around 7620. So as long as that support level is intact, it does preserve the breakout and also preserve the potential for the breakout's objective of about 8,000 to be achieved. We still do have. positive momentum from an intermediate term perspective, but it's not very strong, as you can see. The short-term indicators do collectively point higher as well. So while we don't necessarily have a brand-new upside catalyst, the chart looks kind of fine right now. And obviously, it would be good to see some leadership come from the heavy weights of the market. Yeah, obviously, the market has kind of declined a few excuses to maybe pull back harder in the last several weeks. One of those maybe is what's happening with yield. So how's the 10-year look in terms of whether it continues higher from here in yield?

It's into very strong long-term resistance right around 4 and 3 quarters, so it's effectively testing that as we speak. A breakout would be a big deal, and the long-term indicators do support an eventual breakout. For one, the monthly MACD for the 10-year treasury yield flipped to a buy signal, which means it shows improved long-term momentum. in July, and that's a major shift. It had been on a cell signal for a long, long time. And if we then see a subsequent breakout, we would be a believer of that breakout because it would lift 10-year yields out of their long-term range and put the next resistance above 5%, and that's not even a major

hurdle. But our short-term indicators are more mixed, even though the long-term momentum has certainly shifted, the short-to-intermediate term indicators are really more neutral in their take away. So we don't necessarily believe that we're going to see an imminent breakout, but ultimately we should see that breakout. Yeah, obviously, over the past few years, bomb buyers have shown up when yields got up to these levels. You mentioned the heavyweights in the market, Mag 7. You know, you could trade it as one, even if there's a lot of divergence within that group. How does that look? It's kind of interesting to me, because I feel like I'm not getting a lot of questions right now about the mega caps, which is curious. It's really all about the AI trade. So that almost,

intrigues me and that these have been mostly out of favor at times over the past few months. So the MAG-S, that relative underperformance, means that it's not that overbought and its appearance not as overstretched. And if we just see a little bit more of an advance from the MAG's ETF, it would break out from a triangle formation. And triangles are high-probability setups that tend to see immediate follow-through. So let's say we saw in video. I get up to a new high, that would probably be enough to drive that breakout for the broader space. Apple is acting very well, Microsoft, too. Interesting.

Well, Bitcoin, it struggled to hold that 80,000 level that it popped up to last week. But what are you seeing in some of the alt coins here? Bitcoin is holding onto those gains. And the breakout, to us, is likely the start of a long-term turnaround phase. And with that, we have seen sentiment shift more positively behind the alt coins, which we see collectively as higher beta than Bitcoin. And indeed, there's been some sources of upside leadership in that world. We highlighted today in an article Zcash and Solana is two good examples of that, both of which have the same types of positive technical catalyst as Bitcoin. We're seeing breakouts above resistance levels, including the 200-day moving averages, Zcash. in particular, broke out from a triangle formation to a new high. And when that happens, it just removes resistance from the chart and access that positive catalyst. So we think this is a broad-based

move within the cryptocurrency market. Interesting. Yeah, that chart looks like it woke up after a long nap there, Solana. Anyway, Katie, thank you so much, Katie Stockton. And for more of Katie's technical read on the crypto stocks, visit cnbc.com slash pro. Up next, the top analyst on whether President Trump's new drug pricing deals are a threat to the big rally in biotech stocks this year. Closy Bell overtime. We'll be right back. The White House announcing drug pricing agreements with several biotech companies today. Annika Kim Constantino has the details. On again.

Hey, Mike. President Trump just announced that he reached deals with nine drug makers to voluntarily sell their medications for less in Medicaid. These are mid-sized companies, including Estella's Pharma, Teva Pharmaceuticals, Bridge Bio and B-1 medicines. the latest string of deals under Trump's most favored nation policy, which pushes to link drug prices in the U.S. to cheaper ones abroad. If you remember, Trump announced drug pricing deals with 17 other pharma companies over the last year, including names like Pfizer, Lily, and Amgen. But now we have 26 total, and the deals today specifically involve companies providing discounts to state Medicaid programs so that prices are matched with those in foreign countries. And four of the companies also agreed to donate active pharmaceutical ingredients

for key products to the nation's strategic reserve that aides to reduce reliance on foreign supply. And this all comes as the White House touts health care affordability efforts ahead of the midterm elections, Mike. Attica, thank you. While the health care sector has been a strong area of the market lately, the best performing sector in the past three months, in fact, for more on where the sector goes from here, let's bring in Michael Yee, UBS, Senior Pharma and Biotech analysts. Michael, good to see you. Great to be here. So it seems these drug pricing agreements have kind of worked well mutually, right?

The administration, you know, making some efforts on affordability while the industry gets some level of certainty. Maybe the terms aren't particularly onerous. Is that how you see it? That's right. And so for investors that are looking at this space, we've been quite bullish because two things are happening. The administration is working reasonably well with the industry. to attempt to lower areas of drug pricing, Medicaid, a certain smaller subsegment of the population, but striking a deal, that's good. But importantly, for investors that this has removed

a lot of overhang and uncertainty that the administrations are trying to have dramatic, you know, overhauls of the system. So because these are not dramatic overalls, not going to dramatically change things that are important for investors. And there's been a lot of M&A, and we might even view this as a bit of the. anti-AI trade. Please take a look at the XPI and some of these pharma stocks like you just talked about. They're starting to break out and we're having a renaissance. Yeah, there's no doubt that it has value by some investors' estimation in a portfolio for that anti-AI kind of characteristic. But, you know, this wave that we've seen, maybe it's just anecdotal or it feels like it's coincidence of

relatively big approvals, a lot of kind of clinical trial progress in very, in very, areas. Is there anything to make of that? Is anything tying that together, whether it's, you know, sort of technologies now being realized or something else? Well, I think that first and foremost, pharma, you know, has the most cash ever, has been spending more and more in R&D over the last few years and is desperate, obviously, to put up some great new blockbuster drugs. So there's been a lot out of that, obviously, for the stellar success of obesity, you know, in GLP1s, which have driven a lot of profitability. and success for Lilly and others.

Obviously, in oncology and all of the things that you've heard about with the Moderna Merck cancer vaccine just two weeks ago, a big success out of that. And so while people weren't really paying attention, you know, there have been over the past few years in a bar market, people are starting to appreciate in value and give credit for a lot of this is happening. So given that the space has been so cheap,

so underappreciated, and there's a striking amount of good news, and there's a striking amount of good news, and M&A, these stocks can move. And I think that we're going to move higher because people are appreciating this. And the valuation is not expensive. So that leads to all a good recipe of tailwinds. And I think really this charts are starting to break out. People are paying attention.

And they sort of have to, you know, really because the sector is breaking out. Where within the group would you emphasize where there seems to be better leverage to a lot of the favorable trends you mentioned? I think in two spaces. One, obviously, we've been super bullish on Merck. We got a little bit lucky with the Merck Moderna news two weeks ago, but that's just one of seven things across Merck's portfolio that you're going to hear. And that sort of has been the old sleepy pharma with the big patent cliff, and they're really transforming that company into a growth company.

So we think there's a multiple expansion. You think you hear a lot about their new chemo, ADC, SACT, TMT, cancer drug later this year, along with the Moderna Cancer vaccine. So that's one big one that's off that play. We also think RevMed, Revolution Medicine, the other big story earlier this year that I'm sure you heard about with their breakthrough pancreatic cancer drug.

That continues to put a big day in lung cancer. So we've really just sort of been early in where the potential is for RevMed. And I think Bristol, Bristol Myers we've talked about too, which is playing in both those areas, is another big. All right.

Michael, appreciate the ideas. Thanks so much. Michael D. Good stuff. Thank you guys. All right, Dale, the big name on tomorrow's earnings calendar up next. We'll discuss how to trade this red hot stock ahead of those results. Dale is the big name on tomorrow's earnings calendar. Analysts will be closely watching AI server demand, which has been a key driver at the company's growth story.

Stock is up more than 260 percent this year. Joining me now is Piper Sandler, senior research analyst Jim Fish. So, Jim, a relatively kind of recently anointed major AI hardware play. what are you going to most be looking for in these results? Yeah, thanks for having me, Mike. Obviously, the focus is on AI server, which has climbed to about two-thirds of their server business there in Q1. We're looking for it to be about 75% of the server business here in fiscal Q2

and continuing to climb. You're obviously seeing a ton of demand, whether it's from Neocloud to like Corweave. Now you're certainly even see the large enterprises contribute. So overall, that AI server numbers can be what everybody focuses in on, and secondarily, I'd argue probably gross profit dollars, given the focus in on gross profit margin right now with memory costs and component costs. I was good to get there. Yeah, memory costs, I mean, is the market have a good handle on what the impact is going to be, both on margins and I guess demand on whatever exposure they still have on the consumer side?

Yeah, so Dell still has one of the best supply chain teams there. And last quarter, they even talked about having enough supply to hit the guide for the year. So overall, we think that they can meet the demand with their supply team. And you're talking about really a cost plus kind of model overall. So with this memory price increases that we've been seeing actually through July and August here, we think that they're able to pass on through demand. You've heard from others like an ever-pure remain really strong despite memory price increases. And meanwhile, you know, PCs are still in demand as you're talking about Windows refresh.

And then in terms of just how the stock is both, positioned and valued. It's kind of gone sideways for a few months after that huge jump. And, you know, it's, I guess, getting a little more of a growth valuation. Yeah, it is. And let's face it, you're talking about a name that is doing over 40 billion of revenue a quarter right now grew nearly 90 percent. Larges beat in its history last quarter and setting up nicely for the rest of the year. So you're, yeah, you are trading at an above-average historical multiple, about 14 times EBITDA, 22 times earnings. But let's face it, we're also growing that bottom line at a very strong rate that on an earnings growth adjusted basis,

you're actually only in about one turn, which we would argue is fairly cheap when you kind of normalize for things. So a lot of earnings are underneath and room for up with revision. Yeah, definitely cheaper than some others. We'll see what we got. Jim, really appreciate you getting a setup for that, Jim Fish. That it's going to do it for overtime.