Closing Bell - Closing Bell Overtime What Caused Today’s Dramatic Turnaround In Stocks? Michael Shvo On Reopening San Francisco’s Iconic Transamerica Pyramid 9/11/24

Episode Date: September 11, 2024

Stocks closed at session highs after a dramatic intraday turnaround, led by tech and chips. Goldman’s Eric Sheridan on what’s next for internet stocks and key takeaways from Communacopia conference. SHVO Ceo Michael Shvo on the journey behind reopening San Francisco’s Transamerica pyramid. Apllo’s Torsten Slok on the Fed. Sunnova CEO John Berger on the debate’s impact on solar stocks.  

That bell marks the end of regulation. The Folded Flag Foundation ringing the closing bell at the New York Stock Exchange on this September 11th. Answer the call during the honors at the NASDAQ and the major tech power comeback for the major averages. With the Dow climbing back from a nearly 750 point loss, the tech sector seeing the biggest jump today up more than 3%. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, coming up this hour, Apollo's Torsten Slocke shares his thoughts on today's CPI print that sparked an early sell-off and his predictions for next week's Fed meeting. Plus, Goldman Sachs Internet analyst Eric Sheridan on the big rally for tech

and where the sector goes from here. And solar stocks getting a boost today following last night's presidential debate. The CEO of Sanova will join us with how the outcome of the election could impact his industry. Now let's get right to our market panel. Barbara Duran of BD8 Capital Partners and Jose Rasco of HSBC Global Private Banking and Wealth Management. Welcome. Barb, what do you make of today's market action? I mean, extreme swings in some of the stuff that has moved the most lately.

And I'm not even talking about the chips yet. We'll get to that in a minute. But Affirm and Robinhood on the fintech end. Chewy and Shopify on retail. I guess the pets get some good news over the last few hours, finally. And Roku, names like that. What do you make of it? Yeah, John, I think September is living up to its reputation. You know, the last 10 years, it's been a down month and the volatility that hit right after Labor Day has continued. I think

if you look at it, we're going to talk about tech, but if you look at what's happened today in NVIDIA and the SMH, the semiconductor ETF, these were all in their own little mini bear market. NVIDIA, Broadcom, the SMH, a lot of other names were down over 25% from their highs in July. So they've had a big spring back today because really the fundamentals have not changed that much. Plus, you do have Goldman's technology conference yesterday with NVIDIA and other CEOs talking about what they're seeing out there. And it's pretty good stuff with a lot of demand and a lot of growth to come. So I'm not surprised about the technology bouncing back and NASDAQ. I mean, you had a big fright this

morning with, you know, a teeny little hotter number in the core CPI up one tenth, you know, sort of ignoring that the headline number of 2.5 percent was much better than even the month before of 2.9 percent. This is year over year. So you saw the Dow, which is a lot more industrial, sell off dramatically this morning. And I think that's because of the uncertainty about how much the Fed, when the Fed, we think they're going to cut next week, but how much? And then what's the path after that? And so there was a fright about, well, will the interest rate cuts be enough to save us from a downturn? But I think when you looked at the numbers and realize growth is still pretty darn good. The Atlanta Fed came out with a GDP forecast of two point five percent, you know, for the third quarter.

So growth is slowing, but it still looks pretty good. Jose, in your view, going back to CPI, which matters more? I mean, inflation overall, yes, coming down. Core inflation, particularly housing, which I guess you got to put an asterisk next to because of how it's calculated, has been a little bit more problematic. But in the culture, perhaps, certainly in the campaign, when Trump is talking about inflation, he's talking about bacon, which bacon's not core, even though it might feel like it to some of us. Well, speak for yourself. Bacon is pretty core and many with many friends I've got. But but long story short. Yeah. I mean, look, she's right. Barbara's right. Inflation is coming down. Growth is still strong. If you look at companies are maintaining margins. And I think

one of the most important things in terms of equity market participation, if you look at mag seven to non mag seven in the S&P 500, we have seen that peaked in mid-July, and it's been down ever since that ratio. More importantly, if you look at earnings as we go into 2025, MAG7 growth this year, about 45% in earnings. Non-MAG7, about 3%. If you look forward to 2025, MAG-7 earnings only 18%. And this is according to Bloomberg, and non-MAG-7, 13%. So that gap closes materially as we go into next year. And as was mentioned before, you look at not only participation, broader participation in the market, look at the tech sector.

Chips and AI have done very well. As we move forward here, we expect other subsectors of technology to begin to pick up not only with earnings, but improved performance because of better sales numbers. Because now if you want to deploy the AI, you're going to need new computers, new software, new hardware, on and on. And I think that's going to help broaden out this cycle and broaden out the markets, which gives us hopeful upside after we get through that September malaise. And don't forget, we have the potential for a government shutdown before we hit the end of the month. So it's going to be fun. Yeah. And that and of course, the potential for that actually jumped exponentially just today.

Something we watch when we talk about things like defense stocks, for example, that are tied to that. Barb, I want to just get back to the fact that we really have stocks climbing a wall of worry. And, yes, it was a big reversal in the market today. The S&P finished up 1 percent. We were lower earlier in the day. But we've got seasonality. We've got election volatility. We have those growth concerns simmering in the background.

And then, of course, the malaise around before we get to another earning season and all the question marks about what the Fed does and how quickly it does it. So if you are an investor and you should be expecting more volatility here into the end of the year, how do you navigate it? What do you keep in mind? Yeah, I first of all, I agree with your thesis there, Margaret, because I think the volatility will continue. I mean, we're going to look at the jobless claims tomorrow. We're going to be watching them every week for signs of a more radical slowdown that the Fed will have to respond to, because I think most people expect the Fed is going to continue to do this gradual easing. So it really argues for, like in the tech names, not to get, I own the NVIDIAs of the world,

and not to get shaken out or, you know, say I've got to sell this because it's not working out and have to know fundamentally what you own and have your shopping list ready because you are going to get more opportunities. As you said, we haven't started earnings yet for the next quarter and that's not going to start till mid October with the banks. So you can argue for a bit of a more diversified portfolio if you're not a growth investor. But it's I think just have your shopping list ready because there's going to be more opportunities opening up. This is probably just a nice rebound here. We'll see if it's sustainable or if there's much follow through tomorrow.

I would guess not a lot of follow through. OK, well, Barb and Jose, stay right there because we just want to talk a little bit more about NVIDIA specifically. Closed higher by more than 8% today. Here's what NVIDIA CEO Jensen Huang said about the company's demand earlier at the Goldman Sachs Communicopia Conference. Demand is so great that delivery of our components and our technology and our infrastructure and software is really emotional for people because it directly affects their revenues.

It directly affects their competitiveness. And so we probably have more emotional customers today than – and deservedly so. And, you know, if we could fulfill everybody's needs, then the emotion would go away. But it's very emotional. It's really tense. We've got a lot of responsibility on our shoulder, and we're trying to do the best we can. Emotional customers, Jose, and arguably emotional investors in light of that. I mean, maybe those comments are bullish for NVIDIA, and certainly we saw NVIDIA and Supermicro

and some of the other chip names have a big reversal and come back strong into the close here today, too. But if your revenue and your business model is tied up waiting for some of this infrastructure to make its way into your door for you to be able to realize returns on those investments as a hyperscaler, as some other type of tech or other company, then perhaps it is a little bit warranted, at least in the near term, for investors to be skeptical about the money that's going out the door and how quickly that return comes back in. Well, so look at the short term versus the long term. Short term, clearly the MAG-7 earnings are slowing from Q2 on, and there is tightness in those markets. So that speaks to a lot of that.

And you're going to get much easier comps in the rest of the market. So we think that speaks volumes as to a lot of the volatility you're going to see as we continue, as Barbara said, to reprice this market. Remember, however, the secular theme of the technology revolution, which is really just beginning, and the innovation that comes out of that, that leads to higher productivity, most importantly, better return on invested capital. And those are the two factors that are going to push this secular tech revolution forward. And remember, after we get through the problems with the government shutdown toward the end of the month, mid-October, we get the beginnings of third quarter earnings.

It's not that far away. It's the first full week of October. And most importantly, perhaps, is we get a new Taylor Swift tour beginning in mid-October. So we're going to be fine. Fourth quarter, remember, fourth quarter, we usually get a pretty good rally in the markets, especially in election years. And we think we're going to see the same this time. All right. Well, Jose and Barb, thanks for kicking off the hour with us. Thank you. Now let's bring in Cedar Market's commentator Mike Santoli for his dashboard. Mike.

Yeah, Morgan, S&P 500 had that nice reversal today. It put in perhaps a little bit of a low over the last few days. Friday's low, 5,400. It was also today's low. That, of course, is the low for the month of September. You can see how it looks, though, on the end of that chart. It really is starting to develop as almost a two-month choppy sideways trading range that's what we've gotten since mid-july look at last year i have it since mid uh 2023 here that was a july peak and you had basically uh three months really of chopping

around this by the way you got to a high point right at the beginning of september rolled over again i'm not saying we have to undercut the earlier lows from early August, but it suggests that this isn't that atypical of this type of action. The deal has been for most of September, as long as bond yields were going down, you were selling tech and cyclicals and buying defensive stocks. That reversed today. Now, take a look at the way the aggregate bond ETF has done over the last few years. I have three years because we've kind of broken out here above this range. It's really one of the longer, deeper bear markets bonds have had in memory. And it seems like this is just on a price basis. They're lifting out of that on a total return basis. They basically won back everything lost since the Fed started to tighten in March of 2022. So obviously progress there. If you have a balanced portfolio, bonds are acting

as a pretty good offset to a degree that's unusual recently. So what we saw today was as soon as bond yields started to go up, the stock market started to rebound. And that's been a little bit of a twist here because, of course, we've been in this regime over the past couple of years when we wanted bond yields lower for stocks to go up. You can kind of see that inverse relationship here. Yields up, stocks down, and vice versa as we go. And most recently, you've actually seen this little kind of coincident movement between bond yields and stocks. Why is that? Because if bond yields go lower from this level, let's say 3.75 on the 10-year yield, we're lower than that now, it probably means bad things for the economy and not just that inflation is coming down. So this is a way of saying the market feels like we won the war

on inflation. Time for the Fed to fight to make sure we preserve economic growth. So what does that mean in terms of the sectors that are most impacted as you do see this inversion in this relationship between the two asset classes, especially when you think about some of the more rate-sensitive parts of the S&P? Yeah, Morgan, rate sensitivity has been probably the best correlate with stocks performing well in the last few weeks. So financials have done very well until the last couple of days on a relative basis. And then staples and utilities and real estate have all been leaders as bond yields have been breaking down what was interesting is today you saw massive under performance by

sets let's say consumer staples relative to the S. and P. five hundred of course the Nasdaq so it's getting a little bit scrambled it's unclear if today was just a matter of. You had some short term crowding in the bullish bond trade and the

bearish tech trade and that just got a little bit of a switch back or if there's a maybe a real inflection point that actually happened here in the bullish bond trade and the bearish tech trade and that just got a little bit of a switch back or if there's uh maybe a real inflection point that actually happened here obviously we're still kind of waiting on pins and needles for what the fed does and how the market receives it all right mike santoli thank you see you again in just a bit well tech stocks handily outperforming the broader market today though still under pressure month to date. Up next, Goldman's Internet analyst Eric Sheridan is going to join us from the Communicopia Conference with his advice for tech investors. And later, solar outshining the broader market

today as investors weigh the clean energy trade ahead of the presidential election. The CEO of Sunova joins us exclusively to talk about how politics could impact his business. Overtime is back in two. Welcome back. Big tech and chips posting or boosting, I should say, theDAQ, empowering the remarkable intraday turnaround in the major averages. Well, joining us now is Goldman Sachs Managing Director Eric Sheridan, who is in San Francisco at the company's annual Communicopia Conference. Eric, it's great to have you. I mean, you led quite a number of conversations over the last two days, including with the heads of Google Cloud, AWS, and Anthropic. What are your takeaways? I think there are three main takeaways from the conference so far. First, the cloud computing environment remains very healthy.

That's driven by the AI deployment and AI enhancements that a lot of businesses are looking at in terms of driving productivity and efficiency gains and, frankly, experimenting with AI in their enterprise budgets. Second, the overall digital consumer is quite strong. We heard quite positive comments across the gig economy from companies like Uber, DoorDash, and others. And then third, on the digital advertising environment, things remain relatively stable slash healthy. So I know there's a lot of concern about the macro environment, and there's been a lot of questions about that out here,

but I think the digital economy is presenting as much more stable, strong than maybe some of the fears coming into the event this week. Yeah, we just earlier in the show, we played some comments from NVIDIA's Jensen Huang about emotional customers. We were talking a little bit about that. Your sense from out there about this return on investment where AI spending is concerned and how that's going to fan out, not only over the near term, which is what investors seem to be most focused on in the public markets right now, but also over the long term. Do we fully understand the ripple effects? So I think there's a couple of layers to this, and it's a more nuanced answer. In terms of return on spend, if spending on chips and capacity results in spend by enterprises that are experimenting with AI, we're already seeing those returns today. There's re-accelerating revenue growth at AWS inside Amazon.

There's re-accelerating revenue growth inside Google Cloud as part of Alphabet. The less linear, less visible piece is the dynamic around what's the killer consumer application, or what's the killer enterprise application. And there is low visibility into that. But in terms of immediate return on spend, in terms of enterprise, and coming back to the cloud computing environment,

we think there's been a lot of examples out here that have been very specific. A lot of companies are talking about already existing productivity and efficiency gains from AI. And I think that's what's bolstering a little bit of the confidence, at least in the medium term, that that's someplace you can look for some return on capital, while some of the longer term dynamics still remain a little less certain and a little less visible. Eric, three of the companies you spoke with, Uber, DoorDash, booking, all higher year to date, all under $150 billion market cap, Uber just barely. And that's the sort of company that I wonder about, particularly in the frame of AI, because we're talking about chip companies a lot. We're talking about the hyperscalers. They're really providing the

resources. It's going to have to be these application makers who are successful if there's going to be a real boom here. These three names really sort of grew up in the mobile era. Uber was a killer app for mobile. Are we yet seeing how AI affects their business and whether it's going to be a significant tailwind? No, it's a great point, John. I mean, they were the quintessential compute 2.0 companies, Internet 2.0 companies, and especially DoorDash and Uber benefited dramatically from the shift to mobile computing. All three of those companies that you highlighted talked about AI on stage. I think generally they believe that AI will affect how the user opens the app and experiences

that product going forward. A lot of that is in testing and learning mode. But in the back side of the house, I think a number of those companies talked about already driving operating and efficiency gains. You think about businesses like mobility or delivery, batching, routing, things of efficiency in what the driver and the delivery individual see. Those are all real-time examples about AIs being deployed today. So is there value for the investor in separating out, especially now, the mainstream of tech, you know, those under $200 billion in market cap, let's say, from these mega cap tech companies that have moved so much and powered so much of the S&P?

So I think there's an interesting way to think about this here. I think the biggest companies are going to continue to be the spenders, but because they also happen to be the hyperscalers and the chip companies and the cloud computing companies, that's where you're going to see the more immediate return. So I do think there'll be an upward bias on capital expenditures, but also a more immediate return profile that's measurable by investors in that pocket of technology. Investors are going to need to be a little bit more patient in terms of seeing return on AI in the longer tail of sectors like iCover, like internet, but those companies also aren't spending

as much money on AI. So I think a consistent theme out here is that a lot of technologies can piggyback as enterprise customers on the spend that's happening from those mega cap companies. So I think in a lot of ways you'll see the build dynamic and the enterprise dynamic continue to play out within the largest companies,

and then a much longer tail of companies see benefits of this over a duration that's measured in years, not necessarily in months or quarters. It's a key point. Eric, thanks for joining us. Eric Sheridan of Goldman Sachs. Thanks for having me on. When we come back, real estate developer Michael Schvoh joins us on the eve of reopening the iconic Transamerica Pyramid Center in San Francisco after a billion dollar investment. We're going to talk about the big bet on the city by the bay, and we're going to get his read on the broader real estate picture. And Apollo's Torsten Slocke shares his updated thoughts on the Fed's

rate path after today's inflation print and ahead of next week's FOMC meeting when overtime returns. We've got a news alert on OpenAI. Let's get to Kate Rooney. Kate. Hey there, John. So a source telling me that OpenAI is now raising money at $150 billion valuation. Again, this is according to a source familiar. They tell me that this company, AI company,

is raising between $5 and $7 billion in this newest funding round. Bloomberg did first report this news. They also report that OpenAI is, in addition to that equity funding, raising about $5 billion in debt, and that would be from various banks. We did reach out to OpenAI. No comment, guys,

but we'll bring you the latest if we hear back. Back to you. All right. Kate Rooney, thank you. It's time for a CNBC News Update with Bertha Coombs. Bertha. Morgan, former Alameda Research CEO Caroline Ellison is looking to avoid going to prison for her role in the FTX crypto collapse. Lawyers for Ellison said in a filing last night that at most she should be sentenced to time served and supervised release because she quickly cooperated with the government. Ellison was the DOJ star witness in prosecuting FTX founder Sam Bankman Freed. Last night's debate between Vice President Kamala Harris and former President Donald Trump drew in at least 57.5 million viewers, according to preliminary numbers from host network ABC. The debate between President Biden and Trump

back in June drew about 51 million viewers, according to Nielsen. Final numbers will be out later today. And prosecutors say Justin Timberlake is expected to enter a new plea on Friday in his drunken driving case in Sag Harbor, New York. While the details of the plea are unclear, the Associated Press reports Timberlake has agreed to plead guilty to a less serious offense than the original DWI charge. Timberlake's attorney declined to comment. Back over to you, Morgan. All right, Bertha Coombs, thank you. The Fed is widely expected to cut rates next week, but the market reaction to an easing cycle is typically based on one wild card factor,

and Mike Santoli is going to explain that next. Ooh, and here's a look at the names hitting 52-week highs today, including eBay, IBM, Nextera Energy. Overtime, we will be right back. Welcome back to Overtime. The iconic Transamerica pyramid in downtown San Francisco will reopen tomorrow. Developer Michael Schvo and his partners bought the building for $650 million in 2020, so in the heart of the pandemic, and completed a large-scale renovation with luxury amenities and expanded public spaces, bringing the total investment to $1 billion. Joining us now from the Transamerica Pyramid is Schvo founder and CEO Michael Schvo.

Michael, it's good to have you on the show. And that's exactly where we want to start because you have this billion dollar bet on office in downtown San Francisco. This is a city that's had one of the hardest times getting workers back into buildings. How do you combat that? You combat that like you do in every other city, giving them a great office to come to. The reason that we're seeing in general tenants not come back to work is because the option of being home looks a lot more attractive. Here we've created something of the Transamerica pyramid they can't have at their own home. We're at the heart of San Francisco. We created really a new downtown, a new powerhouse for people that want to come be together, not only to work, to work, to see art shows, to collaborate, to have restaurants,

to have a place where they can be together with not a far commute and really create a lot of energy for their companies. I mean, we've talked about the bifurcation that we've seen in major metro areas, in office, between Class A and everything else that's maybe perhaps lower quality. But what are you seeing in terms of leasing rates as you open this building, in terms of prices? And what are you seeing in terms of activity and who's driving it from a corporate sense in downtown San Francisco? So for us at the Pyramid, we're seeing leaders of industry. So it's not one industry. We're seeing family offices, hedge fund, private equity, VCs, but all tenants that want to be at the top building in San Francisco. Leasing rents have doubled since we purchased the building.

We purchased the building in 2019. Rents were between $60 to $100 a foot. We've printed leases here as high as $300 a foot, including three leases in the last two weeks at record numbers. So what it tells you is that the market is here for top quality, for flight to quality. You just mentioned super class A. Trophy assets are outperforming the market.

We have properties in Chicago and New York and Miami, and we're seeing the same trend everywhere. Top product is renting at top rates and occupancy is low. San Francisco is a market, as you said, that took quite a hit. But we're seeing a great recovery, particularly with the AI industry right now, that's populating a lot of this vacant office space. Yeah, I think that's really interesting, Michael. Being kind of familiar with San Francisco myself. I worked there for a bit. The Transamerica Pyramid is arguably the most iconic building, office building in San Francisco. And it's in a part of downtown that's not like that main part, the Market Street part that you've had issues about vagrants with. So

I wonder, as you target super luxury and as you thought about how to build in amenities there that would distinguish it, who do you see, whether it's finance, whether it's VCs, who do you see valuing that coming back and where are they coming from? So there's a couple of things.

One, we're seeing tenants move from other buildings in the neighborhood. There hasn't really been a new building in San Francisco beside our neighbor here that's been a Salesforce tower that's been years back. There hasn't been a new exciting building in San Francisco. So when we bought the building in 2019, I endeavored to do two things. One is to bring this building to the future. We just celebrated the 50-year anniversary, same as my age, born a few weeks apart. And we wanted to make this building relevant for the next 50 years. So we took this great architectural masterpiece,

partnered with Lord Norman Foster and his team to create a building that is operating as a brand new building with all the bells and whistles that you would have in a brand new building, and a beautiful historic architectural structure. That's for the office tenants. On the other hand, at the Grand Plain, it was really important for me that this building is not just famous for being photographed or the most photographed property on the West Coast. I wanted people to come here. With that, we're opening restaurants.

One restaurant is opening this week. Two more will open by the end of the year. We have a sculpture show going on, a Norman Foster architectural show, Transamerica kids show. So there's activities, concerts, lectures here for people to come. And the idea is not only to bring office tenants, but also to bring the people of San Francisco here to downtown. Michael, is there an ecosystem effect even beyond the building then? Because there's a separate sort of neighborhood around it as well. So for sure there's an ecosystem. You know, we're now, people refer to us as the Transamerica District

because we bring all these different neighborhoods together. If it's Chinatown or Jackson Square, we're kind of the melting pot of all these different neighborhoods together. If it's Chinatown or Jackson Square, we're kind of the melting pot of all these different neighborhoods. And the idea with the park that we own, the Transamerica Pyramid Park, even though it's a private park, it's open to the public with all these different activities.

What I really tried to do here, what we're looking to do, is have this be kind of the center focal point of downtown. So it doesn't matter from what neighborhood you're coming. If you want to meet a friend for coffee, or if you're coming to work, we are at the center of it all. So, Michael, I do have to ask you more macro question, because in addition to this building, you have commercial and luxury multifamily properties really around the country. It's all but sure that the Fed is going to begin cutting rates next week. But we also know that

there are still a lot of debt that needs to be refinanced within the real estate system right now. Is there still a reckoning to come? And how do you game that out with the Fed beginning to loosen? So you asked a very broad question. I'll give you two answers. Is there a reckoning to come? Yes and no. Yes, for properties that have to be reckoned. So if you're a B property, if you're over levered, those properties have problems. And until they go through the system, either being foreclosed, taken over by lender or restructured, those are clogging the system. On the other hand, if you look at super prime real estate, those properties

are doing well almost everywhere in every different market. I think that right now in the next 24 months is an unbelievable opportunity to buy office buildings. I know, you know, probably some people might think that I'm crazy for saying that, but I can tell you that we are actively looking at super prime real estate because it's very clear that interest rates are going to go down in the next 24 months. But you can still buy assets today that are problematic, assets that have that over levered or at cap rates that you're not going to see 24 months from now and definitely not 48 months from now. So this is the time to actually buy the assets when everybody's still worried. But there is light at the end of the tunnel. Michael Schvoh, thanks for joining us.

Thank you. Well, the market initially spiraled after this morning's August inflation report, but how will stocks react after the first rate cut? Let's ask Mike Santoli. Mike? John, well, that depends, and it depends almost exclusively on whether there is a recession following the first rate cut or, in some cases, you know, after the first rate cut happens, when a recession has already begun, whether we knew it or not. So this is from Deutsche Bank and it shows the median experience after the first rate cut when there's been no recession within the year. That's the perfect soft landing scenario. You see liftoff after that first cut, which is that vertical line.

There's the current cycle right there. We've done really well in the year ahead of that first rate cut relative to the average. So that's something to keep in mind as to whether we've already priced in a good scenario. Do you see the orange line there? That's when there's been a recession either within a year that had already been a recession started. And that shows you pretty profound weakness on a relative basis, considering that, you know, two thirds of all years are up for the S&P 500 with an average of, let's say, eight plus percent. So obviously, this is why we're in suspense. And this is why we're going to keep debating whether the Fed is right on time with its first cut. It's going to be the right amount or if, in fact, it's behind the curve. All right. Mike Santoli, thank you. Speaking of rate cuts, up next, Apollo chief economist

Torsten Slocke on how much he thinks the Fed will cut next week in the wake of the August CPI report. Stay with us. Our best guess is 25, but, you know, I think there's a case to be made for 50 based on a little bit more softening of the labor market. I think we'll see. I think the you know, I think the percentage chance was in the low 30s. That was Goldman Sachs CEO David Solomon on what to expect from next week's Fed decision. But our next guest has been calling for fewer rate cuts than the market expects. And joining us now is Torsten Slocke, chief economist at Apollo Global Management. Torsten, welcome. Does this CPI number, both the core and overall, still support your outlook on cuts? Absolutely. It confirms that the problem is that inflation is not coming down as quickly as the market has been expecting. So we also think that we'll have

a 25 basis points cut next week. And the general issue for the economy is that if you think about the dual mandate for the Federal Reserve, which is inflation at 2 percent, we're not quite there yet. We're moving in the right direction. The data today was not as good as we had hoped for, but still, it's still a decent move where inflation has come down to now today in the data, 2.5 percent. Likewise, the other part of the dual mandate, when it comes to growth, things are actually a lot better than what the market is seeing and expecting at the moment. You're seeing the Atlanta Fed GDP now is 2.5%. The Dallas Fed weekly model for GDP is 2.4%.

None of that is a recession. None of that on the growth side is justifying a lot of Fed cuts. So that's why, John, to your question, we think that they will have plenty of time to lower interest rates. And that's why a 25 basis coin cut next week should be more than enough. Torsten, I think you told us last month that the talk about a consumer crashing was completely misguided. But banks were jumpy earlier this week, including Ally Financial on some credit concerns. Are you not concerned about consumer credit at the low end?

Yeah, I know. Absolutely. Low income households are experiencing more distress as a result of interest rates still being at elevated levels. But if you look at the incoming data, for example, the open taping daily data for how many people go to restaurants, that's as of yesterday, still very strong. If you look at the daily data for how many people fly in airplanes from TSA, that's also strong. If you look at the Redbook, same-store retail sales, so this is Redbook going out and asking Walmart, Target, Dick's Sporting Goods, they are still saying that, broadly speaking, the consumer is actually doing just fine. So you're right, there are some issues, in particular for low income households,

but high income households, they have seen stock prices go up, home prices go up, and the cash flow you get in fixed income, in credit, including in private credit, has basically never been better in decades. So the support to high income households or middle income households from asset prices going up

and cash flow from bonds continues to give us incoming data that is still very strong and not showing signs of a recession. So, Torsten, the fact that you're making the argument that inflation is not the rearview mirror here, and to your point, look no further than core CPI, which actually was a little bit hotter month on month, and not just from shelter prices, but airline fares moving higher for the first time after five months of declines and a slower pace of deflation in used vehicles. What are the key areas that you're watching to have a sense on whether we're stalling out here in the disinflation narrative? No, you're absolutely right, Morgan. And that's why the issue really here is to watch what's going on throughout the earnings season in different industries. And exactly as you're

highlighting, the airline industry, they did several of the earnings calls from airlines. They did mention that there are some issues in economy in terms of the challenges, again, from lower income households. But when it comes to premium cabins across the board, the message was very strong that there's strong demand. Things are still moving along quite nicely. So the parts of the CPI we're looking at are, of course, those things that are most directly related to consumer spending. And, of course, the thing that also got a lot of attention this morning and still is a very important topic is also housing inflation. So taken together, this whole narrative of a recession is here or a recession is coming, it is completely misguided. The incoming data, again, if you look

at the GDP now from the Atlanta Fed and, again, their ownguided. The incoming data, again, if you look at the GDP now from the Atlanta Fed and again their own Dallas Fed weekly indicator, the data is just not slowing down with that pace. So therefore, there is no need for the Fed to lower interest rates. And if the Fed still decides to lower interest rates, that just means that we should get even a bigger boost to the economy. So that's why the bottom line in our view is that things are just fine and the market is just getting carried away with all these rate cuts that are still priced in today. So to dig deeper into that, then what do you foresee in terms of this trajectory of rate cuts and what that means for a neutral rate? And I ask that knowing we've had a couple of

bank CEOs in the last two days basically say it's not the journey, it's the destination. And that is so true. And that's why when the Fed argues about what not the journey, it's the destination. And that is so true. And that's why when the Fed argues about what is its destination, they always talk about our star or they talk about the terminal rate. And in the Fed's old calculations, the terminal rate is 3%. So if 3% is your destination, then five and a half where we are today, it is very restrictive. But the problem with that argumentation is that if

we really are in very restrictive territory for monetary policy, we shouldn't have strong data coming in. We shouldn't have, again, Atlanta Fed, GDP now predicting that GDP this quarter will be two and a half. We should see a much slower incoming data in terms of consumption, capex spending and more broadly GDP. So the answer to your question, Morgan, is that what I think markets should be focusing on is that, yes, we can begin to tick the box on inflation being under control, but growth is actually still relatively strong. So there is no need for rate cuts over the next 12 months as the market currently is pricing. We think there will be less.

And for that reason, I think the markets are going through the same roller coaster with pricing all these rate cuts and then suddenly not pricing anymore. And I think we are at the extreme part of that again, where the market is getting carried away with a lot of rate cuts coming with no justification from the incoming economic data. Okay. Torsten Slak, always great to have you on. Thank you. And of course, we get an ECB decision tomorrow morning ahead of that. Mm-hmm. Mm-hmm. Sure we do.

Solar stocks shining following last night's presidential debate. Up next, CEO of Sanova on how the outcome of the election could impact his business. Welcome back. A ray of hope for solar investors today. The Invesco Solar ETF posted its best day since May after positive comments from both candidates in last night's presidential debate. Former President Trump saying he's a big fan of solar. And Vice President Harris highlighting the Biden administration's past investments in clean energy. Outperformers today include First Solar, Sunrun, Sanova and SolarEdge. Well, joining us now is John Berger. He's Sanova's founder, chair and CEO.

John, it's great to have you back on the show. And that's exactly where I want to start with you right now, because not only did we see solar stocks, including Sanova, move higher today, but in the case of your company specifically, dramatic moves in the past month, the past three months. How much of this is tied to the election and presidential outcomes as we look to 2025? How much of it is a rebound in the broader market? Well, thanks for having me. Yeah, it was a great debate. We had a bipartisan moment there. I was really pleased to see that maybe President Trump was at four solar in the fields, but he certainly was four pleased to see that maybe President Trump was it for solar in the fields, but he certainly was for solar at rooftop and Vice President Harris readily agreed. So

I'm going to take that as a win moment here for our industry, given that we do rooftop solar and storage. Overall, we feel very strongly and have been that the election is going to, regardless of the outcome, be very fine for our industry. And we're going to continue to grow. We're seeing utility rates continue to move up. We're seeing equipment prices, solar panels, batteries, inverters continue to move down. We expect that to stay the case. We're seeing labor rates moderate, if not move down a little bit. And now we're starting to see the cost of capital really move down as well, with interest rates coming off and more liquidity in the market. You made reference, Morgan, to the stock prices moving up. So we've

had a nice period of time where I think people are coming back and realizing that regardless of the macro environment, there's been a lot of concerns about are we in a recession or not or headed to one, that regardless of the macro economic outcome here in the next few months and quarters, that our industry is going to continue to grow. So we see a very positive environment for us, regardless of the election outcome. And indeed, I just came back from Anaheim with the big annual solar and storage conference. And there was a great deal of optimism about where we're going, regardless of the outcome here in the next 54 days or so. Yeah. So it sounds like my takeaway from you right now is that after what was seen as a hard year or even couple of years with the Fed on the cusp of cutting rates and the economy still doing better than everyone expected. It sounds like the solar industry is at an inflection point. Where do you expect to see that demand grow more significantly on the business side or on the consumer side? Absolutely the consumer side. When you look at where the retail rates are going for utilities

and have been, they've been double digits for a couple of years there and mid to high single digits in the past year in terms of rate increases. And inflation has been falling tremendously, as we just saw this morning. Maybe not a little bit more in terms of desire to fall, to get to that 2% target from the Fed. But still, it's come down quite a bit. And yet, utility rates continue to move materially higher. And they're expected to continue to move higher as we move forward, regardless of what the economy does. So consumers are starting to see, again, equipment on solar panels and batteries are moving down. So that makes essentially utility rates moving up, equipment moving down and the cost of capital moving down really gives a powerful value proposition for homeowners in this country. John, quickly, what do lower rates do for your

own debt levels and how you would handle those? Well, in terms of our forward origination, we've been pricing at higher rates for a while now. And so higher rates don't really feed into and retard our growth necessarily on a forward basis. And when you look at a cost input, a number one or number two cost input for utilities is interest rates, right? Because that's why utility stocks trade with rates historically over the last several decades. When you look at the existing debt, it certainly helps us to have rates come down when it's time to refinance our debt. The vast majority, if not all of our debt, though, is multiple years in terms. So we'll look at refinancing probably sometime next year. It can always happen a little bit closer in if the opportunity arises. But when you look at measuring over the next few years as rates come down or at

least moderate a bit, that is positive for us. We will pay down debt. Sounds good. John Berger, thank you from Sanova Energy. Thanks for having me. Up next, how another key reading on inflation and new clues on consumer spendings have to be released tomorrow could impact the Fed's interest rate decision and your money when Overtime comes right back. Welcome back to Overtime. Wall Street will digest another key inflation reading tomorrow with the August producer price index. We'll get weekly jobless claims data as well. On the earnings front, new color on consumer spending when grocery chain Kroger and Signet Jewelers report before the bell. And in overtime, we'll get results from RH and Adobe. Speaking of Adobe, CEO Shantu Narayan will break down those numbers with us exclusively here on overtime before he dials into the analyst call. Morgan, following on ServiceNow's Bill

McDermott, who joined us earlier talking about the impact of AI. Adobe is a bit further along in that journey with Generative on the image side. We'll see how they're holding up. Yeah, and certainly we've seen some of these names spring back in the market, even on a day where you had a big rebound and reversal in the major averages that was in part led by all of these tech names. Yeah, big part tech. And how much more can tech do, I guess, is a question here, especially the marketing piece, which has been holding up for Adobe in the cloud era much better than it ever did when people were buying CDs and boxes. Yeah. Meantime, Fed in the background, ECB decision tomorrow ahead of that,

perhaps a precursor. That does it for us here at Overtime. Fast Money starts now.