Closing Bell - Closing Bell Overtime: ServiceNow CEO On New AI Offering; Financials Sell Off 9/10/24

Episode Date: September 10, 2024

Tech outperformed on the session as stocks try to claw back last week’s losses. Vital Knowledge’s Adam Crisafulli and Truist Co-CIO Keith Lerner break down the market action while T. Rowe Price’s Tony Wang on the tech trade and top under-the-radar picks. ServiceNow stock hit an all-time high after introducing its newest AI offering: Xanadu. CEO Bill McDermott talks adoption of the company’s products in the new AI age. Piper Sandler analyst Scott Siefers on what happened today to drag down the financial sector stocks. 

Well, that's the end of regulation. Korea Electric Power Corporation ringing the closing bell at the New York Stock Exchange. Campbell's doing the honors at the Nasdaq. It was a seesaw session for the major averages, but closing near the best levels. The S&P finishing up almost half a percent. Tech outperforming after a big pop for Oracle. The Dow seeing some pressure. That was dragged down by the big banks. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And coming up this hour, an exclusive interview with ServiceNow CEO Bill McDermott as the company rolls out a new enterprise AI platform called Xanadu.

That's the stock sits at record highs. Plus, is Wall Street getting caught flat footed on the banks? Well, J.P. Morgan sinking today after cautious commentary at an industry conference. We will talk about whether or not this is a buying opportunity. And the granddaddy of meme stops, GameStop, out with earnings this hour, along with Petco and Dave and Buster's. We'll bring you the numbers as we get them. Haven't been getting a lot of info, though, lately.

We sure have. Let's get straight to the markets, because joining us now is Truist Co-CIO Keith Lerner and Vital Knowledge founder Adam Crisafulli. Great to have you both here. Keith, I'll start with you. We're watching for CPI tomorrow. We have PPI later in the week. But in general, just looking at what moved the markets and some of the cautious commentary we're getting from the financials in particular today? Where do you go from here? Yeah, well, great to be with you.

Listen, we still think the underlying bull market trend's intact, but we've been thinking there's going to be a sloppier period. Everyone knows it's a seasonally weak period. We're heading into the election. Also, for context, we were up nine of the past 10 months. When we've seen that historically, the next month is only up about 33 percent of the election. Also, for context, we were up nine of the past 10 months. Well, we've seen that historically. The next month is only up about 33 percent of the time. So, again, we're going to this kind of sloppy transition from a strong economy to a cooling economy. You're also seeing that with some of the bank comments specifically as well. So I also would be remiss to say we just made a fresh 52 week high in the banks earlier this week. So I think expectations were

high. You're seeing a bit of a reset as a whole. But to us, it's the same thing we're seeing in the overall economy, a cooling in this transition, and it's just a sloppier period. And Adam, I want to get your thoughts on this, because there does seem to still be some jitters in the market here, especially when you look to the bond market with a 10-year Treasury yield at 3.64 percent. Mike Santoli was just talking about it. We're bouncing around 14-month lows. What is the bond market signaling and what is the read-through then for stocks and other asset classes? Yeah, I think the bond market's reflecting kind of this soft landing trajectory that both growth and inflation have been on. And, you know, we're going to get the CP see chat tomorrow you're going to see a pretty sizable dose

of this inflation on the headline number. Where about a week away from the Fed where they're going to start using process it's going to continue for several quarters so. Places using globally growth growth is cooling globally-

you know I think if you listen to a lot of the bank presentations will you know we'll get into some of the specifics a little later but. The macro commentary was actually relatively encouraging that again. Point to an economy that's still on a soft landing trajectory,

which is what stocks want. Now, granted, risks are high. You know, as growth pulls, the risk that that process can accelerate or deteriorate further is certainly something to be cognizant of. And the fact that valuations are still so elevated doesn't leave a lot of room for error, which is why I think stocks have been struggling a little bit the last couple of weeks. But for the most part, the fundamentals are still supportive of equities as far as monetary policy, growth, inflation and corporate performance earnings. Well, Adam, you gave us a nice tease there on the banks. Stay with us. Keith, stay with us as well.

Let's bring in Leslie Picker for a closer look at why the banks went lower today. Yeah, John, there were a lot of cross currents affecting bank stocks today, proving to be net negatives in the trading session. Day two of the Barclays Financial Services Conference showcasing some weaker than expected guidance on net interest income, particularly from J.P. Morgan and Bank of America. That's that profitability metric for loan making. And several executives spoke about a muted trading environment. Goldman Sachs CEO David Solomon saying yesterday at the Barclays conference that that division would be trending about 10 percent lower in the third quarter. J.P. Morgan's Pinto said that his firm's markets business would be flat to slightly higher due to fixed income currencies and

commodities, weaker performance in a tough macro environment. LA Financial shares also plunging today down significantly after the CFO spoke about credit challenges intensifying due to high inflation and worsening labor market. Regional banks falling in sympathy with those comments. But then on the flip side, Fed Vice Chair Michael Barr gave remarks this morning where he revealed plans to repropose capital rules that had been met with fierce opposition by the banking industry. Barr said capital requirements under the reproposal for the eight largest banks in the U.S. would increase by 9 percent, half the level from the original proposal last July. July, guys. So, Leslie, is it fair to look at this and say maybe the banks are expressing this vice between higher for longer on the interest rate side and the economy actually slowing down? The

data has been mixed, but it's definitely slowing. And on consumer credit, folks would be feeling that. And then on net interest income, I imagine, you know, if you're banking with somebody somebody after a while, you notice that interest rates are high and you ought to be getting more of a return on your savings. Yeah. And we've seen that. And then on the flip side, when you do see, you know, perhaps a rate cutting environment like we're expecting in the market is pricing in that actually takes some time before the banks do, you know, decrease the amount that they are paying depositors. That's not just an immediate thing that takes place. You do see more of an immediate impact on loan rates, and they're expecting volumes to go up on that front.

But because of this interesting dynamic and because of what we've seen with regard to monetary policy, there's a lot of questions about when we'll see net interest income trough as a result of that. And so I think the comments from today poured a little bit of cold water on this idea that we could be kind of at or beyond the bottom. There may still be a little bit of choppiness to go as we settle into this new regime. And so I think that part of that has is what has the markets a little kind of sitting up and paying attention today. Interesting. Leslie, thank you. Keith, want to get to you on that and on the question of some of the mega caps that have had.

I mean, NVIDIA hasn't been straight up, certainly, but those had been a huge part of the market overall and certainly would have been guiding the S&P around and maybe not as much at the moment? Yeah, we actually still like tech. We had downgraded tech in June. We upgraded it during that August sell-off earlier this month. And it is a reset in position. But the one thing that keeps us kind of more positive, especially as we move later in the year, is the earning trends for the sector are still the strongest among the sectors that we follow as far as the revisions moving higher. And we do think as you move into the fall, we still think they're more likely to see a fourth quarter rally.

And as you saw with the Oracle numbers yesterday, there are some positive trends that we're still seeing in AI. I think things got ahead of themselves. NVIDIA obviously had a decent reset, but those stocks, I mean, if you look at semiconductors, still down 15% from their highs, technology down about 10%. I mean, obviously,

valuation is still rich, but we still think this bull market cycle is still backed by AI. If you believe the bull market is intact, I think you have to believe the AI cycle is still intact, which we do. So we would not give up on tech. It may be a bit of a bumpy period, but in a cooling economy where earnings momentum will likely move down somewhat, we think tech on a relative basis still makes a lot of sense. And of course, Adam, it's not just tech. I mean, you look at what's actually leading for the S&P sectors year to date now. It's not infotech, it's utilities. And that, too, perhaps speaks to not just the defensive nature of utilities and the fact that everybody's expecting rate cuts to start coming through here, but the fact that when you talk about the AI investment halo, utilities and the need for power are part of that picture.

Look no further than Oracle earnings after the battle yesterday and the announcement about a big data center and nuclear reactors to help power it. Yeah, absolutely. I think, you know, you definitely, people are looking at utilities through a different lens now, as you do see power start to grow for the first time in many, many years in the U.S., driven by all this new data center construction. Like you said, Larry Ellison on their call last night spent a lot of time talking about the specifics about how data centers are built and the power consumption that's required for them. And that's definitely bolstering utilities and especially kind of these independent power producers that are going to be major beneficiaries as these new facilities come online. All right. Adam, thank you. Thanks to you both.

The GameStop earnings are out. Meantime, Kate Rogers has the numbers. Kate. Hi, John. That's right. And the stock has been kind of bouncing around on this report. It was down as much as just under 3%. Now it's down just around 2%. For the second quarter here, EPS, one penny adjusted on revenues of $798 million. We are not comparing EPS or revenue numbers due to light analyst coverage. We should note there's no conference call. There's no guidance in this release, and there's also no statement from leadership. But the stock has been up around 30 percent plus year to date and once again lower by just under 2 percent on this report. Guys, back over to you. Kate, that's what I was talking about when I was saying not a lot of info out of them.

Thank you. And again, goodbye and thanks to Adam Christofoli and Keith Lerner. Let's turn now to senior markets commentator Mike Santoli for a look at inflation proxies in the market ahead of tomorrow's CPI report for August. Mike. Yeah, John, certainly still a bit of suspense as to exactly how CPI will come in. But the markets right now really been swamped by a disinflationary tide here. You see the Goldman Sachs commodities index right here, along with the 10 yearyear Treasury yield, just a very similar kind of rolling downhill type cadence over the last year or so, pretty much going out at the low.

So goods-based inflation is clearly receded as an issue. You obviously have 10-year Treasury yields reflecting in part that, but also perhaps some slowdown fears in the economy and, of course, expectations of what the Fed's going to do about it. Here's the market-based five-year projected inflation rate. This is derived from inflation protection treasury securities. And it goes all the way back to about 2017. Wanted to do that to capture some of the routine levels before the pandemic. We're below two. It's like one point eight eight percent or thereabouts right now. This is not some kind of divine forecast of what inflation is

going to be, but it shows you what the market's willing to price it at right now with real dollars. And that takes you all the way back to, you know, as they say, 2018 levels, and that's below the Fed's target for PCE inflation. So we'll see if we get any kind of a surprise there, but the markets have sort of moved on from the inflation threat, John. Well, Mike, and just for all the folks sitting at home who are feeling it, important to draw the distinction between prices aren't going higher at an extreme clip. That doesn't mean that prices are coming down. That's right. In almost no cases are they coming down,

although I did see actually a little bit of a year-over-year decline in some grocery prices. But no, that's exactly right. There's a higher price level, and essentially that has to be worked through. So, you know, over time, wages can outpace that and all the rest of it. I also always felt that in the public awareness of what the economy is doing, whether good or bad, it has this sort of lagged effect and it has this persistence to it. So, yeah, everyone can see gasoline prices are down or something like that, but they generally don't feel as if their dollar is going farther. That's something that obviously we're going to have to deal with.

And does that translate into consumer behavior? Arguably, we're seeing some signs that that's the case right now. Yeah, and rent hikes, things like that hit you when they hit you. Mike Santoli, thank you. Well, after the break, ServiceNow CEO Bill McDermott is going to join us exclusively with the real-world use cases for his company's new enterprise AI platform as that stock touches a record high. And later, tech making a comeback today, but it's been a rough month for investors in the sector. T. Rose Tech Portfolio Manager tells us the names he likes right now, and they are not part of the Magnificent Seven. So stay with us. Overtime is back in two.

Welcome back to Overtime. Shares of ServiceNow hitting an all-time high today as the company announces its latest update to the Now platform. It's called Xanadu. New features include an AI agent that autonomously performs tasks and seeks approvals. First rollout of these agents for customer service and IT service management coming in November. Joining us now for an exclusive interview is ServiceNow CEO Bill McDermott. Bill, good to see you. Always good to talk to you around earnings time, of course, but now this is the product. This is where the rubber meets the road.

Tell me, agentic AI, I think some people might have trouble conceiving of what this is. I watched a little video that shows how behind the scenes the software can, say, for customer service, check some boxes and get ready to perform a task, but then check in with an approver to say, do you want to go ahead and do this? What kind of time and money does this save and how much is the cost savings a part of the pitch here? Thank you, John. Great to be with you. As you know, John, ServiceNow has really become the AI platform for business transformation. So the goal here is to automate business, make it run a lot better than it is now. And we've been building these large language models for over seven years. Today, we introduced 350 net new generative AI

innovations, which represents about 5 million engineering hours. And the productivity is truly amazing. So when you think about these ServiceNow AI agents, they're specialized agents. They're going to work together with each other and with humans to proactively and predictively resolve tasks and help you run your business. And what's quite amazing, John, is the advanced reasoning that these agents have. And of course, people say all the time, you know, is humans involved in overseeing them? The answer is absolutely. You can program the model for the agents to do what you want the agents to do. But of course, we want the agents to work for people. We're putting AI to work for people with one platform, one data model, and one architecture. So on an end-to-end basis,

you can run your company a lot better. Okay, looking at the revenue, looking at the stock, ServiceNow has sort of been the poster child for enterprise software growth at scale. But there are a lot of questions right now about whether AI is really being sold and deployed and the use, the value is coming out of it, or if that's going to slow down in 25. So from Vancouver, the release before to Xanadu, what can you tell me about not just the pace of people trying it out, but the results that people are getting that would give any confidence that this momentum is going to continue? It's a great question. CEOs are transitioning, John, from AI fascination, where it's interesting, it's exciting, to AI-led business strategies. So AI now has become front and center in executing your business

strategy. So for example, you mentioned the AI agents. Just think about these agents. They work for you seven days a week, 24 hours a day, 365 days a year, and you don't have to pay them or take care of them. And in our case, they can run your IT department, your customer experience, your employee experience. They can make procurement decisions for you. And if you're in a telco industry, as an example, they can elevate the customer experience by providing AI generated summaries that literally resolve cases exceptionally fast, same for financial services, including banking and insurance and retail and public sector. And what's the big idea? The big idea is you're going to take a lot of cost out of your business. And the idea is to radically, exponentially improve productivity

on the cost outside. But also, the GDP of the world is predicted to go up $11 trillion in the next three years as a result of AI. So you're going to lift your revenue gate. You're now going to be able to improve your business model and drive top line. So this is a both and, not an either or. So, Bill, I just want to go back to something you said earlier, which is that this idea of putting the agents to work for people. I mean, you've come on the show. You've talked about the need for reskilling of workforces as AI takes a firmer hold in companies and on the economy. I mean, we've got a presidential debate tonight, policy certainly potentially on the table with an election coming up here in the coming weeks. What needs to happen for those workers to get that reskilling? And how does that ultimately affect the workforce?

Yeah, that's a great question, Morgan. Look, we have to put AI to work for people. And this country enjoys a privileged position as the world's greatest technology powerhouse. And it's all about innovation. You know, just today, for example, we introduced an entirely new database, RaptorDB, and we have a pro version that's going to fundamentally develop a completely new data paradigm in the enterprise where you can get data from any system of record, any lake, or any hyperscaler, process that data 27 times faster on the analytics that you're looking for, and you can produce transactions 12 times faster than ever before. So what I would say is any policy should always lean in to help innovation, help technology.

It's the only way through. You know, if you look at a great company like NVIDIA, we have an unbelievable partnership with Jensen and his company, and we've centered our innovation on NVIDIA's GPUs and their NIMS services stack so we can take enterprises and literally give them a new blueprint for an AI-first enterprise, an AI-first world. And I would like to also shout out to Microsoft because we've taken Copilot from Microsoft and coupled that with ServiceNow's Now Assist. So companies have to work together. Bill, speaking of Microsoft, there's some chatter about a Microsoft exec in the past few hours making comments about if AI is going to, these projects are going to stay funded, there's going to have to be this cost shift from some other functions.

Some other areas are going to have to give up that investment because it's going to have to go into AI. How much is that a part of the conversation of being able to say, hey, all right, AI is going to save you money. You cut back over here in order to spend over here and it'll end up benefiting you down the line. Well, John, I think you have to have platforms that matter. So there are a lot of pretenders out there and that has confused the market because every CEO or CIO has to listen to the story. But I can give you real examples of our single pane of glass that cleaned up the mess above 55 years of point solutions where we integrate enterprises and we drive amazing outcomes. So take a situation like a BT, for example. They're using generative AI for better experiences for the

agents and the customers. So now they're reducing case closure by 55 percent. That's productivity. That's cost out. But it also frees up resources to do other things. So if you're working with ServiceNow, you're going to save money, you're going to increase productivity, and you're going to increase your top line. So, John, yes, I do think we have to avoid the pretenders, focus on platforms that absolutely matter, and stop doing what you've always done. Because if you always do what you've always done, you're going to get what you always got. And this is a chance for exponential improvement. We're listening. Got a big announcement today. The stock touching all time highs. Bill McDermott, CEO of ServiceNow. Thanks for being with us here on Overtime. Thank you for having me. We've got more earnings just crossing. Dave and Buster's and Petco. Kate Rogers has the numbers.

Hey, Kate. Hi again, Morgan. Yeah. And both of those stocks higher. Last I looked on their respective reports here. So Q2 for Dave and Buster's a mixed quarter. Ninety nine cents gap EPS better than the 84 cents estimated by analysts. Revenues amiss. Five hundred and fifty seven million versus five hundred and sixty one million estimated by analysts. Comp store sales also decreased six.3 percent compared to this time last year. The company's CEO saying our fully programmed remodels continue to perform well, and we're excited about the remodels that have recently opened and will throughout the remainder of its fiscal 2024 year and beyond. And as you can see, the stock is higher by just over 7 percent on that report. And then moving over to Petco for the second quarter here, two cents adjusted loss.

That is in line with estimates. Revenue is also right in line, 1.52 billion. The company also giving some Q3 2024 guidance, adjusted EPS loss of between three and four cents. That is basically in line with analyst estimates rather. And revenue guidance, 1.5 billion also in line. And the stock is higher by around four and a half percent on that report. Back over to you guys. All right. Kate Rogers, thank you. When we come back, T. Rose, tech portfolio manager on the volatility in the technology sector and the names you should be watching outside of the Magnificent Seven. And much more on the action in the banks today and

if the pullback in names like J.P. Morgan and Goldman Sachs is a buying opportunity. We'll be right back. Welcome back. Tech outperforming today, led by Oracle, which hit an all-time high. But under the surface, there are some winners and losers. So check out the three-month performance of the tech hardware versus software. Hardware's up 11% and software up just 2%. So joining us now is Tony Wong, T. Rowe Price, Science and Tech Equity Strategy Portfolio Manager. Tony, it's great to have you back on. I'm just going to paint the juxtaposition here in what we've seen so far this week. You had Apple with its event and Apple Intelligence yesterday.

You had Oracle with its events and Apple intelligence yesterday. You had Oracle with its earnings. It does seem like there is a very different adoption curve playing out, at least right now, between the CEOs and enterprises that are willing to spend money on adopting AI versus consumers where, at least right now, maybe a little more caution, maybe it'll take a little longer. How do you invest? Is that the right thesis? Yeah,. Yeah absolutely I mean I think that's a key question that everybody's trying to wrestle with you know in terms of Apple I think that we'll see how the AI features roll out but the potential and opportunity for an upgrade cycle is definitely pretty big for them a lot of people have a pretty old iPhone that can get upgraded and you've got

the right AI features you know it'll be it'll be pretty compelling. I think that what we saw from the event is that it probably will be a little bit more of a phased out approach versus a bunch of AI features immediately available at once. And I think that what we saw from Oracle is pretty exciting. I mean, I think that Oracle specifically has something pretty idiosyncratic going on in that they're emerging as a fourth cloud player. And I think that they've got a pretty impressive technology stack that has advantageous software as well as networking. And so I think that you're seeing them really build that out. We're seeing a lot of traction there. So I think there's different dynamics going on with each company. But in terms of how consumers are embracing it versus enterprise demand, there are a little bit of cross-currents there.

So we've teased you coming on as you're going to talk to us about this rotation, this broadening out that we've seen in the market, not just across sectors but across tech. When you start to exclude the Magnificent Seven, on a day where ServiceNow is at an all-time high too, we just spoke to Bill McDermott. Where do you see opportunities in the cloud space or in the software space where there has been underperformance this year? Yeah, I think that's pretty natural in the kind of market cycle. You generally have like a small group of companies leading us out, and then you get a broadening as there's more things that are investable. And so, you know, when I think about where there's some opportunity, like software has been,

as you pointed out earlier, a little bit of lacquer. And so I think we're seeing Workday kind of find a little bit more traction there. There's a big margin opportunity and we've got an interesting opportunity there where they can really kind of increase their returns. And I think we'll look forward to their analyst state coming up. I think there's other idiosyncratic movers like FICO, for example, where there's a pricing opportunity where they're able to like achieve more value for their products.

And so there is a little bit of broadening out, I think, and then there's also like these kind of macro depressed kind of areas like IT services that have gotten, you know, perhaps like a little bit more traction in terms of their fundamentals really bottoming. And so, you know, perhaps like a little bit more traction in terms of fundamentals really bottoming. And so, you know, I think it's an exciting time for the market and

for active management. Tony, when it comes to smaller software names in particular, like I'm looking at MongoDB, it's trading where it was in late 2020, early 21. Even Samsara, we had on a few days ago, doing really well. And it just sort of broke above 40 and looks like it might stay there. It's almost as if some of these smaller software stocks are trading as if we're in the mid 2000s and people don't know what the next catalyst is going to be. If you believe that AI has broad, far reaching implications, are some of these industry-focused, smaller software companies priced well? Yeah, well, I think IoT, specifically Samsara, I mean, they're growing

really fast. And so it's impressive that they are growing at that rate. They've sustained it. They continue to deliver on multiple quarters there. We like the company long-term. And they're also in a relatively underpenetrated area of industrial equipment monitoring. And so from that perspective, I think that is right. And they've been executing for a while, too. It's not like, you know, that's particularly anything new. But I agree, there's definitely things outside of the MAG-7 that are interesting, and especially at a time where MAG-7 earnings are kind of, you know, perhaps like not growing as much as they were a year ago.

All right. Tony Wong, thank you. Always good to have you. Well, it's time now for a CNBC News update with Bertha Coombs. Bertha. John, Missouri's Supreme Court ruled an amendment enshrining abortion rights in the state's constitution will go before voters in November. The measure would reverse a near total abortion ban in the state's constitution will go before voters in November. The measure would reverse a near total abortion ban in the state. The Republican secretary of state decertified the measure yesterday from the November ballot following a circuit court ruling. About a quarter of all oil and natural gas production in the Gulf of Mexico is shut down today as the region braces for impact from Tropical Storm Francine,

according to the U.S. Bureau of Safety and Environmental Enforcement. About 15 percent of all domestic oil production and 2 percent of natural gas output come from the Gulf of Mexico, according to federal data. And 13 service members who were killed in a suicide bombing in Kabul in 2021 were honored posthumously in a congressional gold medal ceremony at the Capitol today. The service members lost their lives in the attack, which took place at Kabul airport during the disastrous withdrawal from Afghanistan. The congressional gold medal is the highest award from Afghanistan. The Congressional Gold Medal is the highest award from Congress. Back over to you. Bertha, thank you. Up next, J.P. Morgan sending a chill through the banks today after the company's president said net interest income expectations were too optimistic. We'll ask a bank analyst if Wall Street's reaction today was justified. And check out some names hitting 52-week highs today.

Verizon, ADP, Centus, and Sherwin-Williams are all at the top of that list. We will be right back. Welcome back to Overtime. Bank stocks under pressure today after J.P. Morgan's president said expectations for net interest income and expenses were too optimistic. That follows comments from Ally saying consumers are under stress. So let's bring back Mike Santoli for a closer look at what we're seeing across the financials. Mike. Yeah, Morgan, that warning from Ally Financial did come before the market opened today, and it set the tone, especially among other consumer credit lenders here.

And you see how that group traded today. American Express, as would make sense, holding up better on a relative basis. This is a quarter-to-date chart than the others because of its higher-end clientele, a little bit less reliance on revolving credit. And then, of course, Ally itself down almost 18%. Over the course of the day. Discover and Capital One Financial, more mid-range lenders, did actually come up off the lows. So maybe it's not seen as directly comparable. Ally also lots of auto loan exposure. Remember, it's the old GMAC. So it does seem as if there are distinctions here. But in general, people very

much on alert for the idea there's been wear and tear in terms of household finances and ability to service debts. Now, take a look at one of the results from yesterday's New York Fed Consumer Expectations Survey. And one of the questions asked is, is your household financial situation better or worse the same versus a year ago? So this is the breakdown of those who said it was either much worse than a year ago or much better. Much worse. You see hovering there above 8 percent ticked higher in the latest reading, whereas much better has curled lower. Although I do want to emphasize, look at the absolute numbers here. Eight percent of all households responding, saying that it was much worse. Something around 4 percent saying much better.

The point being, the vast majority of households don't see radical changes going on versus a year ago. But it does show you the direction of change has been a little bit concerning. Morgan, it is going to be interesting to see how this reading plays out once you have a Fed that starts to cut. And then I realize that we always talk about the lagged effects of monetary tightening. But what monetary loosening is going to look like, especially when you are thinking about things like auto loans and credit cards and refinancings? Well, for sure. I mean, this certainly is an answer to that question of, you know, where has the restrictive Fed policy had its effect? Because clearly a lot of these loans are directly tied to the Fed funds rate. Obviously, it's been elevated for quite some time, for like 14 months. And so if you do reduce it,

I mean, on paper, it does bring those rates down. It doesn't necessarily immediately mean people with balances that have gotten out of hand can catch up, but it should take some of the pressure off if employment remains okay. All right, Mike, thank you. Now for more on the banks, let's bring in Piper Sandler,

Managing Director, Scott Seifers. Scott, I'm trying maybe too hard to find a thread here in the different bank headlines that we've got. And I just wonder if this higher for longer situation that we have for interest rates, sure, it looks like we're getting a quarter point cut, but that's not as much as some were hoping for. The credit crunch on the ally side of the net interest income, are we seeing the effects of that across the banks? A little bit. So thanks for having me, John. So it is interesting. You know, generally the backdrop for the diversified banking space is actually pretty good. You know,

you've got revenues beginning to inflect higher, credits holding in OK, banks are building up capital hordes. At some point we should get better lending and more consolidation. But the reality is this group's story is just always kind of riddled with fits and starts. So as anyone who's been looking at banks for a while knows, even with an improving backdrop, you're going to get plenty of days like today. So if I'm going to buy banks broadly tomorrow, let's say, what is it that I have to believe? Do I need to pick and choose at a micro level or is there a reason to believe overall in the financials that you see? Yeah, so that's an excellent question. I think a lot of investors actually buy them sort of as a basket. You know, people tend to look particularly at the regional banks as sort of

either a rate play or a macroeconomic play. So what you asked, what kind of the backdrop or what you have to believe is, you know, I think really you have to buy into the notion of a soft landing. You know, right now it looks like we're kind of threading the needle and we'll have something that looks like we can kind of lick inflation, but, you know, not necessarily cause the economy to go into some sort of tailspin or really wreck the employment market. So if we can engineer a soft landing, that should be all right. And the reason I say that is because you should get some relief on deposit costs. Hopefully lower rates would ignite lending momentum, would ignite the capital markets, and would relieve a little pressure on credit as well. I mean, the fact that you had Diamond and Moynihan both basically saying it's not the journey,

it's the destination where rate cuts are concerned, how much does that matter, especially at a time where you're seeing this un-inversion of the yields curve, which historically I would think would actually be good for the banks and things like net interest income. Yeah, another good question. And there's an element of let's not miss the forest for the trees, I guess, if you're sort of playing for the long game. You know, the issue, I think, is the following. Longer term, lower rates at this point are going to be better for the group for the reasons I highlighted a second ago. But that doesn't mean we won't take a step back before we take a step forward. The reason I say that is the following, and this is what sort of makes a lot of portfolio managers head spin. You know, before we get lower deposit

rates that will help net interest income, we're seeing the belly of the curve kind of come in quite a bit. And that means lower yields on loans, lower yields on securities. So your asset yields may actually come under pressure before you get relief on deposit costs. So it's, you know, there's a lot of nuance in there that can be really confusing to investors. And of course, Basel III and what we saw in terms of these, you know, updated guidelines and regulations, the fact that it became a sell the news event, is it just the fact that this was already baked into the stocks or is the shrug off overdone here? No. So I think this was a buy the rumor, sell the news. You know, the media started to report on late Friday after the markets had closed, at least here in the U.S.,

that we were going to get some relief and we would get some clarity in the next couple of weeks. So, of course, you know, Fed Vice Chairman Barr gave a speech today that really outlined the contours of what we can expect over the course of the next couple of weeks. Indeed, you know, I think the capital hit that the large banks will have is going to be, you know, let's call it round numbers, about half of what we would have thought or feared a year ago at this time. So that's, in my opinion, a win for the group. So it's a good thing. Unfortunately, got kind of caught up or swept up in an otherwise kind of red day and some unfortunate timing in there. A big theme in the culture right now and one might argue in the economy and in politics is the rich getting richer and the working class sort of struggling to get by. If that trend continues, looking at the financials, who does better? Who does worse?

Well, you know, I mean, wealth managers or companies with big wealth management operations come to mind immediately. So that's a good thing. And I would say, you know, within my coverage universe, names like JP Morgan, a Bank of America, even Citi is turning around its own wealth management operations. So those are the names that come to mind immediately. More broadly, though, you can also say that we're seeing the ramifications in credit performance. For example, within credit cards, I think a lot of the banks would say that the consumer overall is actually holding up pretty well, but is really being buoyed by that upper end consumer. Whereas by contrast, the lower cohort of consumer has been under stress for a while. So thankfully, most of the large banks with big credit card operations, they tend to cater toward wealthier and higher quality clientele. So that's

good. But that's not to say that there's not some underlying stress under the surface. All right. Scott, thank you. Scott Sufis from Piper Sandler. Up next, the CEO of DevOps software player JFrog on his new team up with Microsoft and NVIDIA to bring new tools to developers. And Hewlett Packard Enterprise, the worst performer in the S&P 500 today after announcing a nearly $1.4 billion convertible preferred stock offering. Now, HPE will use those proceeds to fund its acquisition of Juniper Networks. You can see shares finished down about 8.5%. Stay with us. Welcome back to Overtime.

The whole process of writing software is changing in these early days of the AI era. I spoke with JFrog CEO Sholmi Ben-Haim about three announcements the company made at its SwampUp conference today. One was a partnership with Microsoft's GitHub to improve tools for building and delivering code securely. And the third one, which is announced here today at SwampUp, is also the integration with Copilot. How can I chat through Copilot with the JFrog asset? Tell me about security. Tell me about the popularity of this software package.

Tell me about this version versus other. And this going back to your previous question, how developers become even stronger and smarter with the power of the machine. So we are very excited about the integration with GitHub. JFrog also announced integration with Nvidia to speed up the deployment of generative AI models and a new offering called Runtime Security. I just have to acknowledge the fact that their event is called Swamp Up and their name is JFrog. It's amazing.

Yes. Well, the Polaris Dawn mission finally lifting off after several delays. Up next, what this historic mission means for the future of the space industry. And a check on our overtime earnings movers GameStopStop, Dave & Buster's, and Petco. We'll be right back. Copy, one alpha. At 523 Eastern this morning, the all-private Polaris Dawn crew blasted off from the Florida coast atop a Falcon 9 rocket for a history-making five-day mission operated by SpaceX. On board, Shift 4 founder and CEO Jared Isaacman, the mission's commander, as well as Kid Poteet and the first two SpaceX employees, Sarah Gillis and Anna Menon. Now, Polaris Dawn is flying in the highest Earth orbit ever achieved by a crewed spacecraft, as Elon Musk wrote on X. An altitude three times higher than the space station, the furthest that humans have been from Earth in over half a century.

And on Thursday, they are poised to conduct the first-ever private spacewalk. They're going to be testing SpaceX's new suits. So ahead of that milestone, ahead of this milestone launch, I spoke with the crew last month. And Isaacman talked about this, what he called joint partnership. If we're going back to the moon and Mars, we're going to have to get out there farther into space where you've got, you know, more micrometeorites, you've got higher radiation environments, and there's a lot to learn about that.

You'll probably need some new spacesuits. You're going to want to get outside the comfort of your vehicle and explore the Moon and Mars. You're going to need new forms of communication when you've got tens of thousands of people in space. There's a lot of real development to do, And that's what Polaris program is about. So Polaris Zone is the first of three planned space flights for Isaacman and SpaceX, which will culminate in the maiden flight of Starship

with crew on board. As for Isaacman's day job, Shift 4, that stock finishing today fractionally lower. Isaacman takes his short short as he takes his quote-unquote short vacation um he did tell me it's not a new development since he's been to space before with inspiration for almost exactly three years ago and perhaps the fact that you didn't see the stock sell off or bounce back in response to that speaks to it so for more on polaris dawn check out my podcast manifest Manifest Space. That is available

wherever you get your podcasts. Kid Poteet, now my favorite astronaut nickname. Up next, exclusive new data on inflation ahead of tomorrow's key consumer price index report. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Wall Street will keep an eye on what Donald Trump and Kamala Harris have to say about economic policy tonight during their first presidential debate, but investors will closely watch new information on the state of the consumer tomorrow when DSW owner-designer Brands reports earnings as well

as we get the August CPI report that's a key reading on inflation. Speaking of which, according to exclusive new data from NIQ, the prices of consumer packaged goods increased by less than 1% last month, unchanged from July, and now trending lower than pre-pandemic levels. Despite easing prices across most categories, dairy and meat prices continue to weigh on

consumers, led by a 44% increase in chicken egg prices. Meanwhile, consumers are hunting for bargains, increasing their shopping at discount retailers by 3 percent. Promotional item sales rising by 5 percent. Private label purchases higher by 3 percent. And I guess that's part of why you see names like Walmart continuing to do well. That's exactly where I was going in my head because there was that whole debate in the market last week with the dollar stores selling off. How much of this is the consumer continuing to tighten their belt versus Walmart and others taking market share from some of those names? So perhaps when you see data like this, it speaks to that. And Walmart doing well kind of on two sides of it, it seems, because

the omni-channel trend and, of course, that meaning doing sales both online and in-store and sort of buy online, pick up in-store, They're amping that up as well. So more people needing to go there for the bargains on food and staying for bargains on other things as well. It was interesting. I mean, they're smaller names and their names have been hit pretty hard. But to see the positive reactions to earnings from both Petco and Dave and Buster's today, perhaps speaking to some of these dynamics we're seeing among consumers and how they're spending money and what that means for some of these, I guess, more value play names in the market. Look at that Dave and Buster's chart for more than a day, though. Zoom out for about six months.

You see how low the expectations were. That's not a high bar that they had to. Yeah, there we go. No, absolutely not. Not a whole lot of lives stored up. So debate tonight, CPI tomorrow. We're going to keep an eye on all of it. That's going to do it for us here at Overtime. Yeah. Fast money starts right now.