Closing Bell - Closing Bell Overtime: Stocks Rally To End Week After Strong Jobs Report; United Launch Alliance CEO On Working With Amazon’s Project Kuiper 10/6/23

Episode Date: October 6, 2023

A Friday surge sent the Nasdaq and S&P 500 higher for the week while the Dow remained fractionally in the red. Morgan Stanley’s Andrew Slimmon and Quadratic’s Nancy Davis break down the market action as we head into earnings season. Apollo Chief Economist Torsten Slok reacts to the September jobs report coming in red hot and the impact strikes are having on the labor market. Wells Fargo’s Roger Read and Roth analyst Leo Mariani on what rumors of Exxon buying Pioneer Natural Resources means for investors. Hispanic Association on Corporate Responsibility CEO Cid Wilson talks the unique aspects of the Latino jobs market. United Launch Alliance CEO Tony Bruno on today’s launch with Amazon’s Project Kuiper. 

A rollercoaster week for stocks and bonds with a Friday rally to finish it off. Every major average gaining 1% or more today. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today. Coming up this hour, Apollo's Torsten Slocke joins us to weigh in on another spike for Treasury yields following today's red-hot jobs number and how that complicates the Fed's path towards a soft landing. Plus, will the mega deal of the day actually get done? We'll talk about Exxon's $60 billion bid

for pioneer natural resources that could reshape American energy. And two Amazon satellites launching to space this afternoon. The first step towards competing with Elon Musk's Starlink Internet service. We're going to talk to the CEO of United Launch Alliance, which launched that mission for Amazon today. Let's begin, though, with the market as we wrap up this wild week on Wall Street. The spike in yields following the jobs report initially weighing heavily on stocks today, but we've had quite the rally throughout the session. Enough to push the Nasdaq and S&P 500 into positive territory for the week. The Dow just barely negative.

Some sectors were still sharply lower this week, though, including energy, utilities and consumer staples. Let's bring in CNBC's senior markets commentator, Mike Santoli. Mike, I mean, just an incredible rally going into what's going to be, I'll call it a pseudo-holiday weekend since the bond market will be closed for Columbus Day on Monday. What really got my attention here is that in terms of the sectors that gained, it was communications services and tech, which we've been seeing with the big cap tech names, but health care also caught a bid this week. So maybe a more defensive sector actually acting as a defensive sector.

Certainly going into the midday action today, that was the case, especially a lot of the pharma stocks. There has been this trade internally in the market of pro pharma and anti consumer staples and things that might get hurt by these weight loss drugs. That's a sub theme. But I also think that the leadership has been pretty consistent on the way up this year in the big growth sectors. So people just grab for that when you are afraid of maybe missing a rally. Definitely, though, saw some recovery in the really washed out things like utilities as well. So this has been a market that's been tested pretty heavily over the last several weeks by the higher bond yields, by the fear that the economy was going to buckle under the weight of those higher bond yields. The data today, just basically good enough that people decided we're not going to sell off stocks on good economic news unless the bond market tells us to.

And it didn't because it did not go above the week's high in yields on the 10-year. Yeah, although the volatility we have seen in the bond market has been kind of breathtaking this week. If you just look at the 10-year Treasury yield, we started the week at 4.61. The high in the middle of the week was 4.87. I mean, right now we're at, what, at about 4.797%. But I mean, that's an incredible move for the 10-year. It is an incredible move for the 10 year. It is an incredible move. Bond market volatility is something that really destabilizes all asset classes for a lot of reasons. But it definitely has been the theme. I do think that's why you probably need a more pronounced decline in the 10 year yield and all maturities, really, to get people convinced that this melt up in yields is not. Is not continuing. So I've

been saying maybe get it under four six. And then stocks could really probably find more traction. We'll see if that's necessary. At this point I do still this sense out there that they might just be consolidating run this over now.

There's nothing uniquely. Challenging or unacceptable about this particular yield level it It is just how fast we got here and the unknown as to whether it's going to destabilize something in the economy. OK, Mike, we're going to dive deeper with you in just a few moments, so don't go too far. In the meantime, what should investors make of today's turn higher? And is this a signal that the worst is now behind us? Let's bring in our market panel. Joining us now is Nancy Davis from Quadratic Capital Management and Andrew Slimmon from Morgan Stanley Investment Management. Good afternoon to you both. Andrew, I'm actually

going to start with you because we kicked off this week talking about support for the S&P 500 at 4,200. And now we're back to talking about resistance at 4,400 with the average finishing today at 4,314. Is the worst behind us? Do we go higher from here? How do you see it? Well, it's interesting. When I sent my notes this morning, the market was down and now it reversed.

I thought the rally would start next week because I do think the inflation numbers next week will remind us that inflation is coming down. And then immediately following that, we go into earnings season. And the best earnings season is when expectations are low going in. That's what we have. And I think it's going to be a pretty good earnings season. So it's a reminder the economy is strong, but inflation improving. I think that makes for a good setup. But as Mike said, and he's absolutely right, the risk is not a level of interest rates. The risk is that the 10-year has gone up, you know, 60, 70 base points in a matter of a month and a half. And that's a big move and does the risk that something breaks. But going into next week,

I think this sell-off has been a great entry point. Yeah. And I want to stick with that, Nancy, because the 2.10 spread, it's the least inverted in a year. And it's the least inverted because we have seen the 10-year, the yield on the 10-year move as quickly as we have. We've had folks on the air who have said when you start to see a de-inversion of the yield curve, that that's actually a recessionary signal. How do you think about it? Definitely. Historically, Morgan, as you pointed out, as the yield curve un-inverts, still inverted, it typically means a recession is coming. And so I think it's definitely the most important thing to be keeping an eye on. But it makes sense to me that the yield curve is

un-inverting because think about it, you sense to me that the yield curve is uninverting, because think about it, you know, with the inverted yield curve, the Fed controls the policy rate, but where we lend money to the U.S. Treasury is the yield curve. And so even with the 10-year where it is right now, it's still lower than the overnight policy rate that the Fed has set. So having a normal upward sloping yield curve is not some tail event. It's just more normal. Okay. And it's definitely, it's a little more unusual to your point because this is happening with a bear steepener, not maybe the typical dynamics that we've seen in the past. Andrew, I want to play a soundbite from you, from Marco Kalanovic. Yes,

I realize you're a competing company, J.P. Morgan, but have a listen. You are starting to see the stress in consumer if you look at the sort of the delinquencies in the cards, in the auto loans. And basically, inflation is there and rates are higher for longer. You know, like so this thing will eventually come. And so then we look at sort of upside versus downside. And could there be another 5%, 6%, 7% upside in equities? Of course. But if there is a downside, it could be 20% downside.

And now you compare that to the cash, 5.5%. So now how much equity upside above 5.5%? So maybe 3%, 4%. But then downside 20 percent. All right. You said you think we're here for poised for a rally through the end of the year. I'd imagine perhaps you disagree with that. But I do wonder if we're higher for longer with a Fed, is there a point at which this actually does begin to extract more pain through earnings and with stocks and on the consumer and on the economy writ large. Yeah. Yes, you're absolutely right. What Nancy mentioned, the steepening of the yield curve, look, the yield curve is steepening because the

10-year is going up. Normally what happens is re-steep of the yield curve because the two-year is plummeting, which is telling you the economy is weakening. So I think, yes, it does suggest a slowdown out there, but I think it's further out. And to Marco's comment, when you get five and a half on the money market, that's over a 365-day period. I'm talking about a rally in this quarter. So I think you have to be a little bit careful. But I sense talking to our financial advisors that clients are very comfortable sitting in money markets. And so I think that cash is still sitting off the sidelines, is not going to get sucked back into the market until ultimately the market is higher or rates are lower. Okay. So now I'm going to ask you both how you play

this. Nancy, I know you are very focused on volatility. We've seen a lot of that. The return of the VIX above 20, though short-lived earlier this week. How do you position? Well, I think the thing for people to keep in mind is that every bond portfolio that is benchmarked to the ag index used to be the Lehman Ag. Now it was the Barclays Ag. Now it's a Bloomberg Ag. But the ag has no inflation protected bonds in it. And the ag, because it's market cap weighted, has a third approximately of the portfolio allocated to U.S. mortgages. And U.S. mortgages, homeowners are the option to prepay. Owners of financial mortgages are short volatility. Now, this is not

the VIX, right? That is just equity vol. They're short fixed income vol. So I think it's super important to be looking for positive convexity strategies, things that are long fixed income vol in this market, because we have a new era with the Fed reversing the QE that they've done for years since the financial crisis going into quantitative tightening. And we have a tremendous amount of fiscal spending and the Treasury has to refinance a third of our debt in the next year. So it's a super important time to be focused on anything that has an options market, has a vol market. And there are lots of different types of volatility. But I personally think interest rate volatility is something that most people are only short from their mortgage exposure. And it's time to wake up and not just be short vol.

All right. We've got to leave the conversation there. But Nancy Davis and Andrew Sliman, thanks for kicking off the hour with me. Let's bring back Mike Santoli for a look at cyclical bellwether groups. Mike. Yeah, Morgan, industrials and consumer discretionary, we're sending a pretty reassuring message for much of the past year, though there's been a little bit of complication to that if they've given back some gains. These are both the equal weighted consumer discretionary you see right there. That has now fallen to be underperforming the S&P since a year ago, whereas industrial is really making a better stand, up 17 percent over that period,

still outperforming. They were up pretty strongly today. So it's a mixed message. But I do think the market is fully registering at least that what if scenario of if the consumer kind of runs out of that savings cushion and maybe can't can't spend quite as freely. So I would still say that this is more like a verdict is not quite in just yet. One feature of today's action, though, was pretty sudden declines in some of the big defensive big box stores, particularly Costco and Walmart. Now, Costco has been one of the best stocks in this market. People clearly kind of hiding there who were concerned about consumer spending in other formats. But big one day drops and also in Walmart to agree. You see it up against Home

Depot, which, of course, was very sensitive to what's been going on in rates. And it still sort of leaves you questioning as to whether anything housing related is going to be able to come back. Obviously, you need some relief from yields right there. But when it comes to the Costco's and Walmart's, I still would view them as a little bit of the safe haven trade. So when they weaken, it's not outright a negative message on the economy. I mean, things like, you know, Kohl's was up today and Best Buy, which were clearly cheaper and maybe a somewhat more challenged change of formats. Yeah. And much more pure play discretionary, too.

I mean, that Home Depot chart is really something to watch. And what's curious to me, and I wonder what kind of color we're going to get on this when earnings do happen, is if people are locked into low rates on their mortgages and not moving as much, at some point, I would think that's going to stir demand for more home improvement projects. No, that has been part of the bull case, without a doubt. Now, clearly, some people will tap home equity lines and things like that, which do have maybe floating rates. But there has been, I think, a little more resilience in Home Depot's actual sales numbers relative to, you know, pure home building type activities. So we'll have to see. I did also

notice, though, that new home that home listings, existing home listings did curl higher a little bit, even though rates are up. So people are having to maybe lower their asking price and get things moving if they absolutely have to move. OK, Not necessarily a bad thing, at least if you're the Fed looking at inflation data. Mike, we'll see you later this hour. When we come back, Apollo's torst and slock on why today's hot labor report will make the Fed's job even more difficult and why he thinks a soft landing is a hard sell. Overtime, back in two.

Welcome back to Overtime back in two. Welcome back to Overtime. It was a stunning jobs report for September, blowing away expectations with the addition of three hundred and thirty six thousand jobs plus upward divisions to August. This report comes as the economy is dealing with numerous labor negotiations. Cornell University's labor action Tracker has recorded 300 labor strikes since the start of the year. Today's jobs report arrived nearly a month after members of United Auto Workers stepped onto the picket lines against Ford, GM and Stellantis. That number is now around 25,000. Shares of GM, Ford and Stellantis getting some relief today, as you can see right there on your screen, after UAW President Sean Fain said they would not expand the strike for now. Meantime, employment in the motion picture and sound recording industries continues to

get hit as a result of the Hollywood strikes. The Writers Guild is back to work as of this week, but actors are not. That sector saw a loss of 7,000 jobs in September and a total of 45,000 since May. Also this week, 75,000 Kaiser Permanente workers walked out, making it the largest health care strike in U.S. history. So what has been the impact of all of this work stoppage? Well, the number of workers participating in a strike reached 412,000 this week. That's according to calculations by the Bureau of Labor Statistics. The Bureau also estimates that more than 8 million workdays have been disrupted so far this year. That is the highest since the turn of the century. For more on jobs and what this means for the Fed,

let's bring in Apollo Chief Economist Torsten Slak. Torsten, it's great to have you back on the show. And this is exactly where I'm going to start with you, because we had this strong top line number addition of jobs today. But we also saw that wage growth is continuing to slow and labor participation is holding steady at a slightly higher level than what we've seen in months past. Your take. Yeah, no, I mean, the headline number was certainly higher than consensus expected and also what I would have expected. If you look at the household survey, they came in much weaker at 86,000 jobs created. So it was a little bit mixed when you compare what's going on in the establishment survey, meaning the survey of companies relative to the survey of households. The other dimension, other than exactly what you're highlighting, the strikes, is also that the response rate

for the establishment survey that gives us the main number is only around 40 percent so there's all kind of before the pandemic that was more like 60 70 percent so there's all kinds of statistical issues you can begin to worry about but that doesn't deny the main issue here that as you're highlighting it was a reasonably strong report it was still the case the unemployment rate moved sideways at 3.8 again in September. We're also at 3.8 in August. So combined, as you highlighted, with wage growth still getting a little bit better from 4.3 to 4.2. Yes, at least this was not the month where the economy was starting to really slow down more meaningfully. But still, let's not forget that the Fed is trying to slow the economy down.

That is having implications for the liquidity rates for consumers. It's having implications for high yield and loan default rates. So viewed in the broader perspective, we should still see this as a process where we'll have some bumps on the road while the Fed still tries to get inflation under control. Yeah, I want to get into that a little bit more. But first, is it clear that wages actually fuel inflation? And I ask that because, yes, we're seeing wage growth moderating. But for the longest time, inflation was outpacing that wage growth. And maybe that's changed a little bit here now, but it also seems like as workers are able to ask for more money, that's also keeping the economy in a better place than I think many people, at least at the start of the year, would have expected. Oh, that's absolutely correct, Morgan. I mean, wage growth is very critical, of course, for income growth and therefore for spending,

and therefore with spending making up 65, 70 percent of GDP, therefore for the overall economy. There are some issues about, to your question, what matters for inflation, in particular services inflation, is indeed wages. Think about it. When we go to a restaurant, even when you stay at a hotel, the vast majority of costs for companies are labor. And that means that when wage growth is still strong at 4.2, that's still a reasonably high level when you compare that with from 2010 to 2020. Wage growth for that period was between 2 and 3. So, yes, it is coming down. But I still think that it's completely in line with the messaging from the fed more recently that it's just it's too early to hang up the banner of saying mission

accomplished because there's still too many problems with wage growth is still a little bit too high inflation that came out last week 3.9 on core is still a little bit too high red to the two percent target so the fed would look at this and say, well, if this is the case, we'll just keep on being hawkish and saying higher for longer, which is what the market is reacting to today. Yeah. I mean, there's so much attention and focus paid on whether we're going to get another 25 basis point hike or whether the Fed is actually done. But to your point, higher for longer and how that extends into 2024 is really going to be the key because of the impact that's going to have on things like corporate debt and then in turn, ultimately, the labor market and the state of the soft landing.

Do you think a soft landing is actually going to be attainable? Or if when you think about higher for longer and a Fed funds rate at, what, 5.25%, 5.5%, even as inflation comes down, is recession inevitable? No, I do think that recession is inevitable because the whole reason here why markets are getting a little bit more optimistic is that we still have incredibly tight credit spreads in IG, high yield loans across the board. But think about it. What's going on is that yields in fixed income have become very juicy because the base rate has gone up because the Fed has high rates so much. So once we do begin to see the results of the Fed trying to slow the economy down, we will begin to see bad data in a number of different

areas and most importantly in the labor market. And once that happens, credit spreads will start to widen. That means the cost of capital will begin to go up. Yes, the Fed may begin to respond to that by lowering the base rate. But if we do continue to see the slowdown, which is the logical consequence of what the Fed is trying to do, you run the risk that, yes, base rates might go down, but credit spreads will then be widening. And therefore, the cost of capital in level terms is not going to go down. In other words, the Fed only controls the base rate and not the spread in credit markets. And that's the reason why I think that a soft landing is very difficult because we have a lack between the Fed so far

saying hawkish, hawkish, hawkish. And then the data starts to weaken. And then they need to turn the supertank around and begin to say, well, now we'll be dovish. And in that period, we will have spreads widening, even if base rates start to move lower. OK, this is going to be a key dynamic for us to watch for. Torsten Slak, great to have you on this Jobs Friday. Thanks, Morgan. After the break, new energy in the M&A market. Exxon and Pioneer could be heading towards a major $60 billion deal that could change the game in the energy sector. We're going to discuss the

likelihood that that merger gets done and passes regulatory muster. And what other names could be takeover targets? Stay with us. Welcome back to Overtime. CNBC's David Faber reporting today that ExxonMobil is nearing a deal to buy shale giant Pioneer Natural Resources. It would be Exxon's biggest acquisition since its merger with Mobil in 1999. Shares of Pioneer soaring on the back of this news, finishing the day up 10.5%, while Exxon trading lower, finishing down about 1.5%.

But will a deal actually get done? Joining us now is Roth MKM Managing Director Leo Mariani. He covers Pioneer. And Wells Fargo Securities Senior Analyst Roger Reed, who covers both Pioneer and Exxon Mobil. Good afternoon to you both. Roger, I'll start with you. I mean, just looking at the way

both of these stocks traded today, it would seem like investors are betting that we actually get a deal struck and maybe even get a deal done here. Your thoughts? Yeah, I mean, we put a note out to take a look at that, you know, what a transaction would look at. And, you know, you have to make some assumptions at all, but essentially kind of a neutral transaction to Exxon on a 2025 basis. And this transaction has been rumored for, in one way or another, for you could almost say two years, but aggressively most of 2023. So it doesn't happen. We'll see. But is the potential there for it to happen? I'd say yes, fairly high. Okay. Leo, what would Exxon get by buying Pioneer? Why is it such an enviable company, given the fact that it has all of these assets in Texas? Yeah, look, so Pioneer is definitely one of the largest players there in the Permian Basin,

pure play Midland Basin company. Arguably, it has the longest inventory in the space, as well as the highest quality inventory, very strong balance sheet as well. It's always been seen as kind of the premium E&P company in the space. So certainly Exxon is kind of getting a gem out there at the end of the day. Exxon obviously has significant operations in the Permian already in the Midland. So this would be very complementary to what they already own as well. Okay. Roger, two thoughts on the Exxon piece of this puzzle. The first is, with a regulatory environment that we know has not been particularly immutable to big companies doing big deals, can this actually get done from that standpoint? And second, hasn't Exxon been talking about the fact that it's transitioning beyond hydrocarbons for the long term? What does this do to that?

Yeah, I mean, it's two separate items, but I think they go together fairly well. One is, look, I'm not going to second guess regulators for a deal even gets there. But if you look at the size of the two companies and the Permian, the size of the Permian, the Permian relative to total U.S. production, we don't look at a market presence issue here. We think you'll be fine from a FTC, HSR review standpoint. In terms of energy transition, energy security, does this fit? I would say it does. Number one, shale production tends to be better in terms of its GHG footprint than a lot of people think, and a lot of times better than a lot of alternatives

overseas. Secondly, if you go back to just a couple weeks ago, Exxon had a spotlight on their downstream business. And one of the things they highlighted is some of the long-term changes you'll see in their refining businesses, potentially in the chemical side, and ways that we'll end up using oil and gas that, you know, could be very different 20, 30 years down the road. But you're going to need the oil and the gas, and you're going to need the chemicals and the refining downstream to make that happen. So to us, plus carbon capture, it all fits really well with Exxon. Okay. Leo, key question for you now. If we see this deal get struck, what does this mean for the possibility of more M&A in the sector?

And what do you think is a takeover target? Yeah, so look, we've certainly seen a handful of deals already this summer among some of the public E&Ps getting taken out, as well as a couple of them merging. There's been a number of private companies in the permanent have also been sold to some of the publics as well. So look, M&A has been sort of heating up. I generally think you're going to continue to see some more deals. It's always kind of hard to predict timing. But I think the bottom line is we're kind of in a sweet spot with respect to oil prices where they're not the 100 plus they were in 22. But now we're kind of sitting just over 80 on WTI. Next year's prices are closer to kind of mid to high 70s.

I think that's a reasonable mid cycle level where more deals can get struck over time. And I think you've got more sellers also coming out of the woodwork right now because the view is that the global economy could turn south over the next year. And it's probably a decent time for us to put our companies up for sale. And I think buyers want a lot of these premium assets, in particular in the next year. And it's probably a decent time for us to put our companies up for sale. And I think buyers want a lot of these premium assets that in particular in the Permian. So I think some of the other Permian publics, Matador Resources, ticker MTDR, Permian Resources, ticker PR, Diamondback Energy, ticker FANG,

are all potential consolidation candidates in the Permian. Okay. Love names. Names for our viewers to check out. Leo and Roger, thank you both. Have a wonderful weekend. Of course, WTI did end the day and end of the week down 8.8 percent. It was the worst week for crude for American crude since March.

It's time now for a CNBC News update with Courtney Reagan. Hi, Morgan. Good afternoon. Kevin McCarthy is considering resigning from the House of Representatives before his term ends. That's according to a political report quoting two sources. In a closed-door meeting after he was removed from his position as Speaker, McCarthy hinted he wants to return home. The sources said the ousted former Speaker has said he plans to stay through the next Speakership election to help the party steady itself. The vote to elect a new Speaker is scheduled for next week. Well, the U.S. expelled two Russian embassy officials after Moscow removed two U.S. officials from the American embassy there.

The State Department said it will, quote, not tolerate the Russian government's pattern of harassment. And the post office is raising first class mail stamp prices to 68 cents. That's up from the current 66 cents. The price will go into effect January 21st. The 2% hike proposal or two cent hike proposal needs to be approved by the Postal Regulatory Commission. Stamp prices are up 32% since early 2019. Actually, you better stock up on those forever stamps now. Morgan, back over to you. Courtney Reagan, thank you. Thanks. Up next, learning a lot from the lot. Mike Santoli

breaks down the latest reading on used car prices and what they say about the battle against inflation. And as we head to break, check out Disney near the top of the Dow today after Seaport and Bernstein both initiated the beaten down stock with buy ratings, finishing the day up two and a half percent. Stay with us. Welcome back to Overtime. Let's steer into autos. The Mannheim used car index ticking higher in September, but it's still down almost 4 percent from a year ago. And O'Reilly and AutoZone are well off their lows after Oppenheimer downgraded both stocks to perform. The firm citing a less upbeat stance on auto parts retail. Let's bring back Michael Santoli for his take on all things

car related. Mike. Yeah, I mean, it's actually very mixed picture, Morgan, as you mentioned. First of all, very dramatic chart of the Mannheim used car price index. We know about that surge we got during the pandemic, supply chain issues, all the rest of it. So it's been reassuring that they've been a downside factor in terms of disinflation at the core level for most of the last year, year and a half. You do see maybe you can sort of see that latest little tick higher on a month over month basis, as you mentioned, 3.9 percent down year over year. So it's one of those things we have to monitor. We know the Fed is really fixated on non-housing services, not goods, but services inflation as the key factor. Now we'll see if it bleeds over into other things, especially when you have potential

strikes and production delays that could raise the cost, again, of used cars. So AutoZone, O'Reilly, two of really the strongest retail stocks out there. I mean, just in general, auto parts retail, auto service retail has been very resilient. One of the bullish points about the sector is that the average age of cars on the road is older. And there is a little bit of a stickiness to the demand for those sectors. So we get a downgrade on the idea that they're not going to be able to necessarily leverage pricing very much more, and also just general maybe consumer fatigue in that area. So all of it is thrown into the pot. You have to watch exactly how it does develop. I still think right now it's OK. It's not something that you really have to be alarmed about. But this is a pretty delicate moment where you need help

from wherever you can get it on the inflation front. Yeah, I like the word delicate. You know, Morgan Stanley, Adam Jonas, or Morgan Stanley had a note out on this today, too. And he basically said, well, we've seen a firmer used car market in 2023. We're beginning to see normalization. That's the word he used. Expect to see the trend continue in the second half of 23. He also talked about seeing the dealers as exposed to a decline in pricing. But but to your point, we're sort of at this crossroads here. And the strike is kind of the, I guess the, I don't want to say signpost. I'm trying to find a good metaphor. I can't. But like it's the billboard. It's the blinking light.

Exactly. It's all about how much we're going to have to shut down in terms of production. But the other side of it is people worried about auto loan delinquencies. Maybe consumers can't afford as much in the way of newer used cars. The chart of CarMax, we don't have it here. But that's been really weak. It's been a very direct play to a degree on used cars. Okay. Mike Santoli, have a wonderful weekend.

You too. Thanks. Up next, the CEO of the Hispanic Association on Corporate Responsibility on how to help lower Hispanic unemployment, which remains nearly 1% higher than the national rate. Plus, the information just reporting that NVIDIA could have a new competitor coming in the AI chip space. We'll bring you that developing story on the other side of this break. Stay with us. Welcome back. We have a developing story at this hour. The information just reporting Microsoft will unveil a new AI chip at its developers conference next month. Steve Kovac is here. He has the details. I feel like everybody's doing this.

Yeah, this is not unusual. We knew Microsoft was already working on their own AI chip. But by the way, so are all their other rivals in both cloud and AI. You have Amazon working on their own. I believe it was last week when they did that anthropic deal with Amazon. Part of that investment was, hey, they're going to use our chips to start training their AI models. Google's doing it as well. And now we have Microsoft. And why are they doing this? It's because those NVIDIA chips are so expensive, Morgan, $40,000 a pop. Microsoft even said in their last earnings call where our capital expenditures in this fiscal year are just going to be so high because it costs so much to build out all the capacity to power all these AI tools are launching. So it would make sense that they're doing this. The real trick is, is it good enough to match what NVIDIA can do with their chips?

Yeah, and it's interesting because we're seeing it right now. NVIDIA is under a little bit of pressure in after hours trading on this report. The other piece of it, expense, cost, as you just mentioned, the other piece of it is supply and whether people can get enough of what they need from NVIDIA too. But I wonder if,

because we've seen this with semiconductors in general, very cyclical, you can go from not enough to too much very quickly. We saw that during the pandemic. Exactly. Is that a situation that can play out here or because it's in-house and it's vertical for everybody, maybe not, it's a more controlled supply? Well, potentially, yes. But the real challenge here is what we see with NVIDIA with

the TSMC and spinning up and fabricating those chips. You know, sometimes they have a backlog doing that. We heard that from NVIDIA before, whether or not, you know, they can get that capacity to fulfill what Microsoft needs. But it really sounds like this is just an early inning for them. I can't imagine that they're going to completely divorce themselves from Nvidia. We saw Google do this. They just signed another deal, I think it was with Broadcom, for their AI chips as well. So just because these companies are making their own chips, you can see it as more of a sort of like hybrid solution that they're working towards.

I'd also note there was a headline out, if not this morning, it was last night. OpenAI, the chat GPT maker, they want to start making their own chips, too. Easier said than done, but it's really interesting to see everyone trying to go in-house and compete with NVIDIA. By the way, AMD pretty soon going to have their own chip as well. That's right. Steve Kovach, thanks so much. All right, we're going to shift gears now. The U.S. unemployment rate held steady in September,

but it did dip for Hispanic workers, ticking down to 4.6% from the 4.9% in August. And the labor force participation rate rose slightly to 67.3%. So can this trend continue or does more work need to be done? Well, joining

us now is Sid Wilson. He is the CEO of the Hispanic Association on Corporate Responsibility. They advocate for greater Hispanic participation on the corporate boards, and they just rang the closing bell at the New York Stock Exchange. Sid, it's great to have you on. And I do want to start with this labor report we got today and what it does mean and why we are starting to see the unemployment rate tick lower, although still much higher than the broader 3.8 percent that we talk about. Well, thank you, Morgan. It's great to be here. And, yes, it was a great day to ring the closing bell at the NYC today.

The unemployment numbers is showing that Hispanics and Latinos are continually making increasing strides in our U.S. economy. And while the full unemployment rate held steady, Latino unemployment rate was dipped. Latinos are continually making increasing strides in our U.S. economy. And while the full unemployment rate held steady, Latino unemployment rate was dipped. And so that's a sign that we're entering the workforce. The average age for Latinos is 30. So I believe that this trend will continue. And we want to make sure that that gap is closed so that the Latino unemployment equals the unemployment for this at a very low level, because we want everyone employed. Yeah. And certainly we have a tight labor market, so it's good to see that participation increase

as well. How do you continue to close the gap? Well, the first thing we have to close the gap is recognizing that Latinos are the present and the future of corporate America. We know that we are a large community with 20 percent of the population, $3.2 trillion of economic GDP. But we have to close the gap by recognizing that corporate America needs to make sure that they're acculturating to an increasing Latino community rather than asking us to assimilate into a very old corporate structure. We know that we can

contribute to every part of our economy, from the corporate board to the C-suite to the front line. And as Latinos go, so does the American economy. Okay. You know, it's not just the Hispanic population that has seen a higher unemployment rate than the broader one. It is also the African-American population. Black unemployment, I think, 5.7 percent last month, again, so still much higher. Is it similar dynamics at work within that demographic, too? So there's been a long

concern that Latinos, African-Americans, particularly women of color, have always had unemployment rates that were higher than the overall general population. And this is a continued concern of what we must do to make sure that we're creating equal opportunities for Latinos and African-Americans to be able to capture the full potential of what we can contribute to the economy. And so corporate America must do more to address those disparities and making sure that we're getting equal opportunity for groups. But that's a continued concern that we have, that Latino unemployment is too high,

African-American unemployment is also too high, and more must be done by corporate America. Okay. Sid Wilson, thanks for joining me today. Thank you. Great to Sid Wilson, thanks for joining me today. Thank you. Great to be here, Morgan. On Monday, CNBC hosts Equity and Opportunity ExecConnect in partnership with HACER, where the leaders of today and tomorrow will gather for an evening of networking to inspire and empower the next generation of Hispanic and Latino executives. So you can learn more at cnbcevents.com slash exec connect. Meantime, United Launch Alliance sending Amazon's first two broadband satellites into

low Earth orbit today. The latest challenge to Elon Musk's Starlink. Up next, ULA's CEO discusses what this means for the highly competitive commercial space industry. Stay with us. And we have liftoff. United Launch Alliance successfully carrying Amazon's two prototype broadband satellites today from Cape Canaveral, Florida, to low Earth orbit. These are the first satellites, their test satellites satellites for Amazon's Project Kuiper, a 3,200 plus constellation of satellites that will offer high speed internet service. It's expected to cost upwards of $10 billion to build out. Joining us now exclusively is Tori Bruno, CEO of United Launch Alliance, which is a joint venture between Boeing and Lockheed Martin. Tori, congratulations on another successful launch today. Good to have you on.

Thanks, Morgan. Good to see you. So is this a milestone for commercial space and for ULA? It absolutely is. This is part of that huge new thing in commercial space, which are these high-speed internet mega constellations. And for ULA, being part of this Amazon team really diversifies our portfolio from being traditionally a government provider to now being kind of 50-50. So I guess just walk us through some of the details of the launch and the placement of those satellites into orbit and what happens next. Sure. This was, of course, our mighty Atlas mission. Amazon's going to fly nine times on that. This is the 501. We call it the slick Atlas, so no solid boosters on it because it's a quick 15- insertion so that they can test the technology. It was our 158th consecutive successful mission, 99 atlases, and we are absolutely thrilled to be a part of this.

Yeah. You and I have talked about this before, and that is the fact that we have gone very dramatically from an overabundance of rockets and launch capacity in the market to not enough over the coming years. And one of the key reasons is actually because of Amazon. Amazon last year struck the largest commercial launch deal in history. ULA is one of those providers. It's all for Project Kuiper with thousands of satellites that are going to be sent to orbit. I guess walk me through what this means for the economics of the industry as we look through the rest of this year and beyond. Yes, well, you've summarized it very well. For the first time in probably 30

years in space launch, we have more demand than we have supply on a global basis. Perfect storm. Two things happened. First, the supply went down with the exit of Russian launch vehicles due to the Ukraine situation. And then at the same time, we added this whole new mission area, this whole new market of thousands of satellites going to LEO to provide ubiquitous global high-speed internet. So supply down, demand way up, and now launches in scarcity, and it will be in that condition for a solid decade. Yeah, you used an Atlas V, as you mentioned, to do this launch, but you're also developing this next-generation vehicle, Vulcan, which these two prototypes were originally supposed to be on. Are you still planning to do the maiden flight of that new rocket before the year is out? We are. We're targeting December now, and the Vulcan is doing

well. The booster is already down there. We're just waiting on the upper stage, which is finishing up right now in Decatur. We'll ship it in November, and then we will take a lunar lander to the surface of the moon for astrobotic as our maiden flight, along with a memorial from a company called Celestis, where you can have a loved one's ashes or your own DNA or anything like that put in a heliocentric orbit for forever, basically till the end of time. Yeah. I wonder what I wonder what all this means for the competitive landscape. I mean, ULA competes with, among others, SpaceX with the Falcon rockets and eventually at some point Starship. Amazon is going to now, as it builds out the satellite network, compete with SpaceX and Starlink, which certainly has a head start and

has more than two million customers already. How does it speak to the evolution of this commercial space economy? And is there room for everybody? Yes, well, there is room, certainly room for more. There are dynamics within the launch place, the launch marketplace, where we have heavy launch vehicles. And for a long time, we had a large number of small or micro launchers trying to enter the market to service these mega constellations. Those have largely fallen away. That market has evaporated because the economics really favor the heavy launch vehicles literally by a factor of 10. And what this will do more broadly is provide this ubiquitous high-speed

internet almost everywhere on the planet. And that's going to be a game changer, especially for underserved areas. And then what it does for our country in terms of launch infrastructure with this contract, for us, it was seven atlases and 38 Vulcans. We have to ramp up, we have to quadruple our launch rate to do that, and we will essentially double the launch infrastructure present in the United States as a result. Tori Bruno, great to have you on. Congrats again on today, CEO of United Launch Alliance. My pleasure. For more on the business of space, check out my podcast, Manifest Space,

wherever you get your podcasts. Okay, believe it or not, earnings season kicks off next week. Big banks are on tap. We will look at what those results and some more key inflation data could mean for Wall Street and for your money. Welcome back to Overtime. The bond market will be closed Monday for Columbus Day, but there's plenty of action coming later in the week. We have two September inflation readings, the producer price index on Wednesday,

the consumer price index on Thursday. Earnings season will begin in earnest, starting with Pepsi on Tuesday before the bell, JP Morgan, Wells Fargo, and Citi all reporting Friday before the bell. Plus, we'll be monitoring the expected public debut of Birkenstock next week, too. You know, psych, Mike, I wish you a happy weekend, but I'm not done with you yet. So I'm bringing you back here. I thought you were releasing me. That's OK. Just I do want to start with the banks, right, because they are seen as an indicator of the broader economy, the broader markets. We have seen these big moves in the Treasury market and

mark to market accounting, unrealized losses. Also, whether we see any kind of uptick in delinquency rates for loans, I would imagine those are going to be key things on tap. Yeah, I think investors are looking for maybe no bad surprises will be good enough in terms of the banks as a group. They're down something like, I don't know, 14 percent in the last month or so. So clearly people are braced for the potential for more drag from those paper losses on the bond portfolios and all the rest of it. And you would think there's low expectations going in. But you mentioned the uptick in credit delinquencies. That's something that's going to be in a lot of focus. And of course, what this is going to mean for how the banks feel

about lending and extending credit as well. Absolutely, 100%. I'll just put in a word for Pepsi. Normally a non-event, no drama, but the staples have been under such pressure, and what they have to say about snacking and soft drink demand might be interesting. All right. We'll have to watch Birkenstock, too. We've got Fed Minutes next week as well. Mike, now I'm going to say it.

Have a great weekend. Happy Friday to everybody. I'll be here if you need me in the next hour or two. Okay, sounds good. Meantime, stocks finish the day higher. That does it for us here at Overtime. Fast money begins right now.