Closing Bell - Closing Bell Overtime: White House’s Jared Bernstein On POTUS Joining UAW Picket Line; Connecticut AG On Why He Is Part Of FTC’s Lawsuit Against Amazon 9/26/23

Episode Date: September 26, 2023

White House Council of Economic Advisors Chairman Jared Bernstein on President Biden joining the UAW picket line today. Amazon shares fell after the FTC, along with 17 states, announced a monopoly lawsuit against the company. Dealmaker and TMT banker, Guggenheim’s Eric Mandl, on what effect the lawsuit will have on M&A. Connecticut AG William Tong, one of the states joining the lawsuit, makes the case. Meanwhile, it was the worst day for the Dow since March. Vital Knowledge’s Adam Crisfulli and Raymond James’ Matt Orton break down the market action. Earnings from retail giant Costco along with instant analysis from CFRA analyst Arun Sundaram. Real estate company Ferguson stock pops on earnings; CEO Kevin Murphy joins to break down the numbers and talk what he is seeing in his sector. Cloud computing company Nutanix announced higher long-term sales and free cash flow targets. Jon speaks with CEO Rajiv Ramaswami on what’s behind the increase. 

Ouch! Saved by the bell maybe? Well there's your scorecard on Wall Street. Winners stay late. Welcome to Closing Bell Overtime. I'm John Fort back with Morgan Brennan here on set. And we've got full team coverage of today's sellout coming your way, plus what to do tomorrow. Also ahead on the show, Connecticut's Attorney General joins us to break down why his state is joining the FTC's lawsuit against Amazon as those shares tumble today. Plus, Guggenheim dealmaker Eric Mandel tells us if the latest regulatory probe will deter M&A in the tech space. And we are awaiting earnings results from Costco due out any minute, following a weaker than expected consumer confidence print earlier in the session. We're going to bring you the results and the instant reaction. We begin the market with the market, though, and another rough session on Wall Street as the September sell-off intensifies. The S&P 500 now sitting at its lowest level since June, as yields sit near their highest level in 15 years. Let's bring in Senior Markets Commentator Mike Santoli at the New York Stock Exchange. Mike, I mean, rough session for the S&P, but the Dow

also having its worst day since March. Sloppy. I think that's the word you've been using today. Yeah, it has been. There's very low conviction, even though you're down 7% off the highs in a month and a half, month and three quarters. You're not seeing that dip buying instinct. In part, I do think it's seasonality. It's in part, traders will survey the landscape and see bond yields, the dollar and oil prices at least hovering near their multi-month, if not multi-year, high thresholds. And that's been the perceived source of pressure on this market. I think the big thing the market's been struggling with for weeks is, can the economy handle what rates are throwing at it? And also, bond yields going up, arguably for not the best of reasons.

It's not because we're for not the best of reasons. It's not because we're massively upgrading, you know, the strength of the economy in real time. It's because we're concerned about Feds being sticky longer. Maybe inflation is more of a threat. Maybe it's about Treasury supply. And so I think that has, you know, gotten into investors' heads. We are in the last month of September. And the S&P is rushing really what I would argue to its next test. Today was challenging this whole uptrend line from the October lows. 200-day moving average is just

a percent and a half or so below where we are right now. And we are starting to get a little bit stretched to the downside by a lot of these measures. Not quite a washout, but maybe approaching such. But we're still above 4,200 on the S&P, which is part of that range that you told us. Yeah. If we're in there, in there, no need to freak out. Anything changed? Not really. I mean, not in the big picture, John. I think the issue is every truly nasty downturn that goes well more than a 10% correction

starts looking out something like this. So the majority of them don't get there. I think there have been about a dozen pullbacks between 5% and 10% over the last 20 years. There's nothing particularly special about what's happening right now, arguably except for some of the pileup of macro concerns that seem relatively novel in the moment, which is yields. I wouldn't really put the government shutdown in there, except that it's just yet another thing psychologically to pile on this market. But no, short answer is we're still in that zone where it seems as if we're just descending to an upward trending pattern. And, you know,

we'll see if it if it does hold. And then right in the here and now, it's about have we done enough selling in the short term to discount whatever is waiting for us in terms of the economic impact of yields? All right. That's a great setup. Mike, we'll see you again in just a minute or two. And for now, let's talk more about the sell-off with our panel. Joining us now is Vital Knowledge founder Adam Chris Fooley and Raymond James chief market strategist Matt Orton. Guys, welcome. Matt, utilities and enterprise software both got hammered in today's session. So is this the beginning you think of a new mindset in the market with high rates? Or is this just the typical last week of September before a Q4 rebound? Hey, John, good to see you as always. And I would describe the market as going through a process of

normalization. I mean, the market has been off sides literally throughout this entire year of pushing back against the narrative of the Fed that rates are going to have to remain higher for longer. And we have a pretty benign, good enough, I would say, economic environment. And as a result, I think the market and investors are finally starting to get that message. But what I've been reminding our clients is that we haven't had a 5% plus pullback since SVB in early March of this year. It's been a really, really long uptrend for this market. And investors really should be opportunistic because the economy is still, I'd say, in good enough shape. And what we're seeing is that

there's a lot of opportunities for those who actually want to look and do their homework. Valuations are compelling in a lot of parts of the market. So I recently, for the past couple of months, have been very favorable on energy. I think that still makes sense. And what investors should lean into going forward is quality, because real rates are going higher. That was probably the most hawkish message from the Fed. And so you want to own profitability. You want to own stronger balance sheets. Health care also provides a lot of that. Energy checks a lot of those boxes. And so you want to own profitability. You want to own stronger balance sheets. Health care also provides a lot of that. Energy checks a lot of those boxes. And lean into some of the megatrends that we're seeing, such as investment in CapEx, reshoring. A lot of that goes to some

parts of the industrials complex. And a lot of those parts of the market are cheap. So I think we're getting to the point where it makes sense to start buying the dip. Okay. Adam, I want to get your thoughts on this. Because, yes, I mean, the major averages, the S&P, the Nasdaq on track for the worst month of the year. The Russell 2000 is on its on track for the worst month since September of last year. There's definitely seasonality at play here. And yet, if you look at some of the places that have been hit the hardest, it's some of the most economically sensitive. Right. It's been small caps. It's been mid caps. It's been banks. It's been transports. It's been retail. You have seen industrials roll over as well. Is the market pricing in the possibility of recession? And I realize I'm asking that ironically, since we just saw so many price

targets revised higher because of stronger economic growth. No, it's you're getting a lot of mixed signals right now. You know, just taking a step back and looking at the landscape since the Fed on Wednesday, you haven't seen really any movement in the funds rate forecast, either for the end of this year or the end of next year. So the Fed's been coming under a lot of criticism or people have been complaining about the Fed being excessively hawkish. But you haven't seen funds rate forecasts move at all, really, in the market. And then on treasuries, you've seen kind of this pretty dramatic steepening in the curve where the long end yields are moving up. It's usually indicative of a better macro

sentiment. But at the same time, like you just mentioned, I think in equities, there's a lot of anxiety that you're going to start to see a more pronounced slowdown in economic momentum for a variety of reasons. The biggest one is just the lag effect of prior monetary tightening. And then you have kind of all these one-off issues with excess savings being extinguished. You have student loan payments, you have excess, you have elevated gas prices, shutdown risk. So you have a lot of kind of mixed signals and cross currents. I think the biggest problem right now is we're just in this vacuum. We're in a vacuum of liquidity. This is a very poor seasonal time, like you mentioned, towards the end of Q3, the end of September. We're in a vacuum of news also. We're waiting for this inflation number,

these inflation figures on Friday. You get a huge Eurozone CPI and you get the big US PCE in the morning. And that's really going to be the next major catalyst since the Fed on Wednesday. Since Wednesday, we've kind of all just been flailing around waiting for some type of confirmation to either refute or confirm Powell's message about rates and higher for longer. And that doesn't come until Friday. And then just one last comment on the shutdown. I don't think markets are all that concerned about the government or the shutdown. The only exception being if there is a shutdown, we're going to have to wait longer to get the September economic data. So the September jobs report next Friday and then the September CPI in about a week and a half.

So if the shutdown does happen, those numbers will be deferred and that's going to kind of just create more anxiety in the market. Yeah. Well, Matt, about that sort of what about the consumer? You mentioned energy, industrials, health care as areas of interest. You sound kind of relatively optimistic overall, but we're heading into Q4 in just a few days. And the consumer, you sort of need consumer strength in Q4 a lot of times. What do you expect to happen? Yeah, John, it's a really good point, because one thing I've learned over time is never bet against the American consumer. But from a tactical perspective, a lot of the consumer plays are extended. So I think when you look at airlines, they're going to be negatively impacted by some of the higher

energy prices. Some of the hotel companies with student loan repayments coming up, those are all areas of the market that are both expensive and where I think the ability to continue to grow earnings is a little bit more challenged. So I'd be looking to rotate out of some of those consumer names into some of these bigger megatrends, like I talked about CapEx reshoring, because those are durable over the long term. And a lot of those parts of the market have really been beat up lately. So I just I don't want to be making that bet right now when there's so much uncertainty around the consumer. But long term, the consumer household balance sheets are still in very good strength. OK, Matt Orton and Adam Christofoli, thanks for kicking off the hour with us. S&P finishing down almost one and a half

percent, 42.73 every sector in the red today. Let's get back to Mike Santoli with a look at the correlation between stocks and bonds. Mike. Yeah, Morgan, it's been pretty tight, at least very recently. We have just a few days left in the third quarter. Here's how the total U.S. stock market and the total U.S. bond market, if you had one of these long-term retirement portfolios, you'd probably have these in there. They're very much in lockstep on a quarter to date basis.

So what this means in part is that as we get to the end of the quarter, you won't necessarily see any of that sort of mechanical rebalancing out of stocks or bonds into the other asset class because the performance discrepancy has been wide. That's sometimes what you look for toward the end of a quarter to just see if you're going to have that sort of automatic trade into or out of stocks. Doesn't seem like it right now. But I did want to highlight over a two-year basis, if you look at the connection or disconnection between stocks and bonds, very close throughout all of last year. During 2022, bond yields racing higher, the Fed tightening in a headlong pace, inflation racing ahead. All of that stuff had stocks and bonds both under pressure in a sequenced way. And then this year you saw some separation. Some people are going to say, well, that's just AI hype.

That's the big tech stocks taking the indexes higher. The other thing, though, is inflation peaked at a rate of change basis last October. Earnings estimates went from falling to increasing over the course of the last several months. So all that together has enabled stocks to separate from bonds. And over the long period of time, it waxes and wanes what this relationship actually is, Morgan. Yeah, I mean, this is a great chart. It sort of shows what we've seen in terms of this reversal in the market. I am interested, though, in why you chose these ETFs and not the TLT,

which is getting so much attention right now after it broke below 90. Yeah, strictly because the TLT is very long-term treasury debt. It's 20 years and beyond. So it's absolutely at the whip end of what's been going on right now in terms of longer-term treasury yields really having the most pronounced increase. But in general, in terms of what people own collectively, and if you were to be kind of a pension fund or a long-term asset allocator, you're probably using total bond market or something like it.

All right. Mike, thank you. With a total view from Mike Santoli. Yeah, not exactly what a lot of people expected to happen with bonds this year, but still a whole quarter left to play. After the break, Guggenheim dealmaker Eric Mandel weighs in on the possible fallout across tech from the FTC's anti-monopoly lawsuit against Amazon. And we're still awaiting Costco earnings.

Those are due out any moment. We're going to bring you the numbers. We'll talk to an analyst who says there is one key consumer headwind facing the company. Stay with us. Overtime's back in two. Welcome back to Overtime. Amazon closing sharply lower after the long awaited FTC lawsuit against the company was filed today. The FTC, along with 17 states, alleging Amazon illegally wields monopoly power, quote unquote, that keeps prices artificially high, locks sellers into its platform and harms its rivals. Will this latest regulatory move hurt dealmaking in tech? Joining us now is Eric Mandel, Guggenheim Securities Senior Managing Director in the

tech, media and telecom sectors. He joins us on set. It's good to have you here. I mean, we have to start here. Everybody had been anticipating this, but does this just throw cold water on a marketplace, particularly big cap tech, which over recent years has been some of the biggest acquirers of other companies? Does it change things? Listen, it's a great question. First of all, it's wonderful to be here with both of you. I'd say a couple of things. Number one, the FTC, the DOJ and Europe have tried really hard over the last year or two to get in the middle of big tech. They may end up being successful.

And in this case, we're going to have to get very deep and we're going to see what the facts are and where the law takes it. But there is a view that the FTC takes a position that can be very aggressive and then is pushed back. And that pushing back process is healthy. That should happen. That's a process that boards have to deal with and public investors have to deal with. What I can tell you is every public board we're talking to right now is super focused on this topic. And if they make an M&A move or if they're even contemplating an M&A move, they are spending a fantastic amount of time, not just with their corporate development team or their comms team, but with their legal team to determine if the transaction is really anti-competitive and where are they really going to be able to take that deal. And

the last kind of part of that calculus is, are they willing not just to spend the money, but the time? You might remember, John, the last time we were on, it was a while ago and Activision had just been announced. Hasn't closed yet. But if you look at what the ARBs are saying, there's a very high likelihood that that deal closes. We don't know. We'll never know until it actually does. But there's a calculus that those organizations, that those chief executives have to make to say, am I willing not just to spend the money but the time? Deals that used to be able to close in three, four, five, six months might take more than a year and you have

to be okay with that. Your customers have to understand why that is and there's always the risk that it doesn't close. But to answer your question, I think it is a very important part of the M&A calculus but I don't think it is in any way hindering the conversations we're having at the moment. Okay. So when you say Cisco buying Splunk last week, biggest acquisition in that company's history, IBM, AppDio, some of the other deals that we've seen announced here in recent weeks or recent months, are you seeing more deal flow start to come through despite that calculus or I guess factoring in that calculus?

Right. Morgan, it's a great question. The short answer is yes. So there are two major things going on right now. There's this massive pressure that we're all experiencing on interest rates. And it's not just the higher level of interest rates. It's the unknown. You have Jamie Dimon coming out and saying Fed funds may go to seven. You know, some of us are old enough to remember that, you know, seven is not wild compared to history. So as you think about the M&A process, as interest rates are pushing up, the natural inclination is to pull back and say, am I going to do this deal? But we've actually seen the opposite for a very simple reason. The other side of the equation is valuation.

Eric, hold on just a minute. Costco earnings are out. We want to get to those. Courtney Reagan has the numbers. Court? Hi, John. Yeah, Costco turning in a better report for both the top and bottom line for its fiscal fourth quarter. Costco reporting earnings of $4.86 a share.

The street was looking for $4.79 on better than expected revenues of $78.94 billion. The street was looking for $77.90 billion. We already know those comparable store sales because they give them to us monthly. But as a reminder, for the entire quarter, for the entire company, up 1.1 percent. E-commerce comps down about 0.8 percent. Membership fees, that did increase slightly more than expected to a little over 1.5 billion dollars there. And we'll get a lot more detail, we hope, on that conference call here that's coming up at five o'clock Eastern time. Shares are down just slightly here. Back over to you. Indeed, Courtney, thank you. We're going to have analyst reaction to those numbers in just a few minutes. Also, don't miss Jim Cramer's exclusive interview with Costco's CEO. That is tomorrow, 6 p.m. on Mad Money. And Eric, of course,

want to get back to you and the state of the markets, but particularly when it comes to valuation and some of the metrics that investors should be looking at here. You say for software companies, free cash flow is more important than growth right now. We just had Nutanix, a hybrid multi-cloud company, come out, update their long-term targets today. 20% top line. Also some strong free cash flow. Is that the kind of thing that investors in this environment sort of need to hear? What do you think?

John, great question. So it doesn't feel like that long ago. But you kind of have to go back two years as to the way the market used to work. And the market was entirely focused on growth. You could do anything. You could spend as much as you wish and you would be rewarded. You have to turn that on its edge. And I think you hit the nail on the head. There is a free cash flow mantra that's flowing through every conversation right now. And let's just take valuation for a moment. If you look at some of the fastest growing technology companies, they are software companies. And within that segment, companies that were growing north of 40 or 50 percent at the height

of the COVID valuation spike, they could enjoy north of 30 times revenue from a multiple. They're now kind of in the teens, 10 to 12 times. The companies that trade more in a reasonable range are the ones that grow 15 to 20 percent. It's very counterintuitive. You're saying to yourself, and the Nutanix point is rather fascinating, that 20 percent number. There's this concept which both of you have used often, which is called rule of 40, right? You've heard it a ton of times. You use a lot of times and very simply is the addition of your free cashflow percentage and your revenue percentage. And it has to equal at least 40. I think what

we're seeing now is people get nervous when they see this outsized growth. They kind of say to themselves, well, what's your strategy around free cash flow? I don't want 40% growth and no cash flow. So what does this mean, say, for the WCLD, which was down more than NASDAQ, 2% today? MongoDB is the biggest weighting in that, growing pretty well, but do investors need to hear more, even more than they have on that cash flow line, to your point? Yeah, absolutely. And I think there are two stories that are being told here. There's a public equity trading story, and then there's an M&A story. The public equity trading set, like MongoDB very well may be more of an acquirer than being acquired. And it's okay that

they are spending a ton of capital to grow as quickly as possible. But you look at a company like Splunk, which you mentioned, or Aptio, which we sold to IBM, the amount of pressure that is on the buyer universe to be able to go to their board, but also go to their investors and say, I am buying this company because I believe that this is going to do three things for me. I can plug it into my go-to-market strategy. I can immediately demonstrate real accretion, not just at the EPS level, but at free cash flow. But I can also tell a story that I'm adding talent to my team that's going to change the trajectory as to how I attack my TAM, my total addressable market. So I think the pressure is still there. But from a from an M&A practitioner perspective, we're very excited about the focus on margin because that is very demonstrable to be able to say, what is my value going to be if I buy company X? All right. The spigot's open for M&A, as you declared. Eric, thanks for joining us here. Great to be with you both. Now let's get back to those Costco numbers. The stock is jumping right now. Let's see. Now it's down about 1% right now in overtime. Joining us

now, CFRA analyst Arun Sundaram. He has a whole rating of 540 target price on the stock. Arun, how much do the membership fees matter here? How much is this a read overall on the consumer? Hey, thanks for having me. Yeah, no, overall it was a good quarter. No surprises in the top line since Costco tends to release monthly sales figures. But they did slightly beat on the bottom line and that's largely due to gross margins expanding. And a lot of that has to do with the fact that freight and transportation costs have come down significantly for Costco, which is great for Costco as well as for consumers because what Costco tends to do with the fact that freight and transportation costs have come down significantly for Costco, which is great for Costco as well as for consumers, because what Costco tends to do is reinvest some of that benefit into lowering its prices for its members. But yeah, I mean,

the big catalyst for Costco still is a looming membership fee increase. We think it's imminent, likely to happen by the end of the year. Costco said that they're waiting for inflation to moderate before it raises its fees. And now that inflation is moderating, we think a membership fee increase is imminent. So why is the stock down right now? It had a beat on the top and bottom lines, 1.1 percent increase in same-store sales, which I think had been largely projected since they put out those monthly numbers. Membership fee in the pipeline, but not necessarily expected, it sounds like from you with this earnings report. So why are shares under pressure? Yeah, I mean, we'll likely hear a lot more on the call of when Costco is thinking about a membership fee increase. You know, if I am picking through the earnings, you know, one headwind, you know,

is the fact that comp sales are slowing. We knew that was going to happen, but the impact to profits is a little bit more unknown. You know, Costco is still facing wage pressures. And now that comp sales are moderating, it's going to be harder to leverage that operating expense line. That's probably going to be the case next fiscal year, given that comp sales are likely going to be harder to leverage that operating expense line. That's probably going to be the case next fiscal year, given that comp sales are likely going to be in the low single-digit range. You're still having to pay your employees, and wages are still going up. So that's going to be a headwind on overall profitability. Okay. We'll see what comes out of the call.

Arun, thanks for joining us. Thank you. When we come back, Council of Economic Advisors Chair Jared Bernstein joins us to talk about the macro impact from labor strikes and the looming government shutdown. And we take a look at another earnings mover just crossing the tape. Office furniture maker Miller Knoll is surging after a big beat on EPS up there 15 percent, also topping revenue estimates. The firm raising full year EPS guidance as well. We'll be right back. Welcome back to Overtime.

There's news on two macro events troubling investors today. As the government heads towards a shutdown, the Wall Street Journal's Nick Timoros pointing out that a government stoppage could blindfold the Fed because key economic reports might not be published if a shutdown is ongoing. Meantime, President Biden was on the picket line with UAW workers earlier today in Michigan. Wire headlines said he answered in the affirmative when asked if UAW members deserved a 40 percent raise, though it was difficult to hear his response in that crowd. Joining us now is Council of Economic Advisers Chairman Jared Bernstein. Jared, I do want to start right there with you. Does President Biden support a 40 percent increase for auto workers? The president has consistently said the following. Record profits should mean

a record contract. He has stood for unions for his whole career. He did something historical today, and I don't think we want to lose sight of this historical moment. We've never seen a president go out on the picket lines. And the reason he's there is because he knows, as he said, that the middle class built America and unions built the middle class. So when it comes down to the actual negotiations and the numbers, that's going to be between the union and the big three, and that's ongoing. But you know where this president stands on the larger issue of supporting the unions in this, as he talked about today. So, but what does support look like? What would fair share be from the president's standpoint on this topic in these negotiations?

Yeah, that's a great question. So if you actually look at the profitability of the big three and you compare that to real wages, even real compensation in the sector, the former has gone way up and the latter has actually gone down. I mean, it's remarkable. We had a period where, you know, wages grew for many other workers, many other production workers, but for auto workers, really not so much. So this is one of the things that unions have historically been very good at, is getting their members a fair share of a pie. And I think actually one of the good definitions of Bidenomics is that if you're contributing to the growth of that economic pie, you'll get a fair slice.

And that's where unions come in. And that's why the president made the historic visit he did today. Interesting. I watched the tape, and it didn't appear to me that the president answered in the affirmative. It sounded like it was somebody else's voice saying that, but I guess we'll see. Now, Jared, when we look at the possibility, looming possibility, of a government shutdown, traditionally, government shutdowns haven't been that bad for the market, but what's the administration's take on what it would mean for the market and the economy here? Our take is that this is a completely unnecessary risk, one that causes real disruption to families, to communities, to businesses, all again,

not only unnecessary, but a deal's a deal. And a few months ago, overwhelming bipartisan majorities in both the Senate and the House, I include House Republicans, made a deal on spending levels, of discretionary spending levels. This was the Fiscal Responsibility Act, took a trillion dollars of long-term deficit and agreed to, made a spending agreement that was supposed to avoid this very situation. And to this day, you have Republicans who are saying, let's not go there. And of course, Democrats are very solidly there.

So this is unnecessary. In terms of its economic impacts, there's a range of estimates. I'm sure you've seen them and reported on them in terms of the hit to GDP. And look, it could be 0.1, 0.2 percent per week, which when you take it down to the billions, you know, that's real money. So unnecessary, disruptive. I mean, today we've been focusing on the fact that you're talking about, you know, 1.3 million active duty troops working to keep this country safe without receiving their paycheck. If anybody who can hear

the sound of my voice thinks that fair, that's fair, I'd be pretty surprised. Jared, though, did you really expect and the administration really expect this to be smooth? I mean, this is a unique situation we have with House leadership and Speaker McCarthy's kind of historically tenuous position. Is the Biden administration going to have to approach economic policy and even the budget differently given that? Well, to answer your first question, I don't know about smooth. I certainly wouldn't call the whole debt ceiling debate, you know, particularly smooth, but it did have an agreement that Speaker McCarthy agreed to, and he agreed to it with a majority

of his members. So, yes, we expected that deal to be a deal. And the fact that it's been revoked is something that just plain out shouldn't happen, just like this shutdown shouldn't happen. Remember, we're talking about, as I mentioned, 1.3 million active service members. We're talking about travelers who could face delays at the airport, food safety inspections that could be delayed. We're talking about jeopardizing nutritional assistance for seven million economically vulnerable women and their kids. All of this could be avoided, should be avoided. And a very recent bipartisan deal under that deal, it would be avoided. So

I don't consider this business as usual at all. Jared, quickly, I realize that a shutdown would be very disruptive. There's an agreement in place, but doesn't spending need to be reined in? We've got $33 trillion in debt. We're continuing to run a deficit. Interest rates have gone up. So servicing that debt has become much more expensive. How do you take steps to avoid the possibility of a debt crisis? You work together to do precisely what you said, to cut spending where it can be cut. And we have very aggressive plans in that space, which I can take you through, although we know we only have a few seconds. And we also have significant revenue raisers that touch nobody under $400,000 in terms of their AGI. So you have to raise revenues, you have to cut spending.

One area where we've been quite successful in cutting spending is in health care. And this redounds directly to consumers' standard of living and to the prices they face. Lower insulin costs, lower costs of prescription drugs, lower costs of health coverage. That's all on the books. That's in the system. That's the IRA that has been passed. And this group of Republicans actually wants to repeal this. So let me just say this about this whole issue. If you're not willing to help sustain our tight labor markets, to sustain our real wage gains, if you're not willing to contribute to lowering

cost of prescription drugs, insulin, health coverage, lowering costs of clean energy. If you're not willing to work with us to reverse decades of disinvestment in this economy and stand up a domestic manufacturing sector in clean energy and semiconductors, then get out of the way and let us do our job. That simple. All right. Jared Bernstein, thank you. Thank you. Don't miss much more on the UAW strike tonight on Last Call, live from Wayne, Michigan. And time now for a CNBC News update with Christina Partsenevelis. Christina.

Thank you, John. Well, Wahel Hanna, a co-defendant of Senator Bob Menendez's bribery and corruption case, pleaded not guilty today. The New Jersey businessman was charged with bribing the U.S. Senator. Hanna was arrested this morning at JFK Airport. Menendez and his wife have also denied claims of wrongdoing. Pressure, though, is mounting in this case as more than a dozen Democratic senators have now asked Senator Menendez to step down.

Intelligence agencies are preparing to roll out their own chat GPT-style chatbot. The program will use artificial intelligence to help sift through public information for clues. The move is part of a broader government campaign to utilize the power of AI to compete with China and powerful foreign intelligence communities. A picture-perfect fall getaway is closing its roads to tourists and influencers for the season. Pomfret, Vermont, has become a top tourist destination with its key attraction,

Sleepy Hollow Farm. TikTok videos of this location seen on your screen have over 800,000 views. The decision to block access follows residents' claims that tourists have damaged roads, had accidents, and trampled gardens. Darn TikTok. Morgan? This made me laugh a little bit because there are many beautiful quintessential fall things to videotape. OK, Christina Parts Nevelis, thank you. Thank you.

When we return, Connecticut's attorney general joins us to explain why his state joined 16 others in the FTC in suing Amazon on antitrust charges. Stay with us. Welcome back to Overtime. Let's get back to the big stock story today. Amazon, one of the worst performers in the S&P 500 after the FTC in 17 states sued the company, alleging illegal monopolistic power. Joining us now on the Overtime Newsline is Attorney General William Tong, Democrat from Connecticut. He's part of the suit. Attorney General, thanks for calling in.

So this strikes me as unusual, the argument here, because Amazon insisted on having the lowest prices on its site and handling logistics if third parties wanted into the prime program. Do you view this as a traditional approach to antitrust enforcement or something different? Yeah, I don't think it's unusual at all. Thank you, John, for having me on today. It's a very traditional case. You have a dominant market player here who has monopoly power over the dominant online marketplace and superstore using its power to eliminate its competition, to punish sellers that don't play by its rules and ultimately charge an Amazon tax that all of us have to pay. I mean, I'm a regular user of Amazon like most Americans. I love Amazon. But that doesn't mean that Amazon doesn't have to play

by the rules and provide prices and a marketplace that is fair and free and open to all. So Amazon, of course, is pushing back on this. Andy Jassy has told us that he does not believe that Amazon has monopoly power in online markets. They don't have enough share. The market isn't behaving, he would say, in a way as if they did. Why is that wrong? It's wrong because it's what we all know as Americans to be wrong. Every one of us lives in a world dominated by Amazon. I mean, ask the people on your set or the people watching today,

do they think that Amazon is dominant? Of course it is. And what Amazon has done is it's created this incredible, unprecedented marketing and fulfillment and delivery system, which it uses to bring all of these sellers and customers in. And we all have to play by the rules. And even as it feels like we have choices, these are choices that Amazon provides on its marketplace, and it dictates who gets the best results in the products of its searches, and it dictates who gets the buy button, and it dictates who gets to use Prime and its unprecedented delivery and fulfillment service. Okay. So we know that this now goes before a judge there will be a whole process i'm sure many steps that unfold in that process the judge will decide whether

uh... amazon is liable in this announcement though the notion of structural relief is raised so not explicitly calling for a break-up or divestitures but that term typically signals that that would be a suggested remedy is that what should be calling for a breakup or divestitures, but that term typically signals that that would be a suggested remedy. Is that what you'd be calling for? We want Amazon to play by the rules and to stop leveraging its market power, again, to eliminate its competitors and to force sellers and customers into a system that it completely dominates and shuts out other people and other sellers.

It has this price discipline system where it makes sure that it's charging an anti-competitive price lower than its competitors. And the sellers on its marketplace, if those sellers don't play by the rules and try to undercut other sellers, Amazon will punish them. So we want Amazon to stop using its market power to punish those that don't play by its rules and stop using Prime as a competitive weapon. If it stops doing that, we don't have a problem. Okay. So when you say it stops doing that, how would it stop doing that? What do you want to see? So we want them to allow sellers, for example, to use fulfillment systems other than Prime. We want them to stop using this price discipline system to punish sellers who try to charge lower prices and stop excluding sellers from getting Prime, for example, the designation

or the buy button when they won't play by Amazon's rules. Okay. Attorney General Tong of Connecticut, thanks for joining us. Thank you so much. Shares of Amazon did end the day down at 4%. It has been just anthropic yesterday, antitrust suit today, crazy week for Amazon. I wonder how they're going to explain Walmart if Amazon's got monopoly power. Up next, an under-the-radar housing play that jumped in today's session, the CEO Ferguson, which makes plumbing jumped in today's session, the CEO

Ferguson, which makes plumbing supplies, water heaters and HVACs breaks down the demand he is seeing from the housing market. Stay with us. Welcome back to Overtime. Shares of Ferguson, a distributor of plumbing and HVAC products, popped today after beating consensus its full-year earnings results. This morning, shares finished up almost 5% in what was a down tape for the broader market. The company saw its net sales drop in the fourth quarter due to declines in the residential sector, but it was partially offset by growth in non-residential sales. Joining us now is Ferguson CEO Kevin Murphy here on set. Kevin, it's great to have you. Great to be here. Thank you so much for having me. So we did see this decline in residential. About half your business is or half your portfolio is residential. The other half is non-residential. We saw this decline

in residential, but it wasn't as bad as feared. I guess walk me through what you're seeing, especially on a day where home sales fell another 9% and home prices continue to move higher. Yeah, so couldn't be more thankful and appreciative of our associates who delivered a fantastic result. You look at the full year, up 4% on a 25% growth comp the prior year, and growing EPS in what is a challenging market, to your point, especially on the residential side. And you're right, just over half our business is residential, just under half non-residential. And so if you look at what we're seeing right now, we're seeing a little bit of stabilization, some signs of stabilization in the new construction housing market, but we're still pretty cautious about that. Are we a bit better, especially with the trade professional, especially with what

our business skews to, which is a bit more of the higher-end consumer and that connected consumer to the professional. And then like we say, the non-residential side of the business, albeit maybe a bit of an air gap as we come through the next couple quarters, there are some non-res tailwinds with mega projects, large construction projects that quite frankly we haven't seen in, I've been in this industry for 30 years and we haven't seen this kind of tailwind aided by fiscal stimulus and onshoring. The industrial and other stuff, is that enough to make up for what's happening in office right now? CoStar CEO was telling us a couple of weeks ago that vacancies are actually higher than they look. Yeah, that's what we're talking about in terms of knock-on commercial, that air gap. There's going to be some pressure in the next couple

quarters. But when you start to look at what really is, we look at projects north of $400 million in construction value. There's $1.8 trillion in construction value, either in the planning process or in process right now. And so when we look at what that can do, longer gestation period, it's going to take longer to put this out. It'll probably hit its stride, call it 25, 26, but it's a tailwind that'll be very supportive and start to offset what that knock-on commercial looks like. When you talk about industrial and these mega projects, is this a U.S. phenomenon or is this, are you seeing this in other parts of the world right now too? Yes, we're very U.S. focused. Our business is in the U.S. and Canada. And quite frankly, when you look at on-shoring,

re-shoring of manufacturing, the Chips and Science Act and what that means for chip production, when you look at sustainable energy solutions, things like EV, battery plants, when you look at data center activity that's out there, this is some seriously large project that is complex and is tailor-made for our business because we're involved in everything from underground water and wastewater infrastructure up through mechanical piping systems, fire protection, and heating and cooling. So you talk about the pipeline paying off in 25-26. There's a whole year in between there in 24. Should investors be prepared for some turbulence then? We're already seeing a massive increase in bidding activity, and we're seeing that play through in the revenue

line. It's just a little bit slower to develop than traditional knock-on commercial activity. But we saw it in fiscal 23 for us, and we're starting to see it as we trade into fiscal 24. All right. Kevin Murphy of Ferguson, thanks for joining us here. Thank you for having me. Kind of gets back to the whole industrial policy conversation we're having with Jared Bernstein. Well, speaking of real estate, I'll be speaking with Kathleen McCarthy, Blackstone's co-head of real estate at CNBC's Delivering Alpha conference on Thursday in New York to register. Scan the QR code that is right there on your screen right now. The White House has just released a transcript from President Biden's event with UAW members earlier today. The transcript says there was a question, quote, Mr. President,

should the UAW get a 40% increase, unquote. Participants said yes, and the president replied, yes, I think they should be able to bargain for that. A lot of confusion over those comments today. Seems like the White House looking to clear up some of that confusion. Nutanix finishing in the red today, but outperforming the tech center sector. Coming up, the company's CEO discusses why he's hiking some key growth targets. We'll come back. Costco shares under pressure despite an earnings beat. We will count you

down to the company's earnings call at the top of the hour when overtime returns. Welcome back. Nutanix shares touched a 52-week high today, then ended fractionally lower as the company held its investor day here in New York, upping its targets for long-term sales and free cash flow. I spoke with CEO Rajiv Ramaswamy about the details. We said that we would drive our ARR, annual recurring revenue, growth at 20 percent CAGR between now and then. We also said we believe we could drive $800 million of free cash flow by fiscal year 27, a range of 700 to 900 million. And then we also said that we were going to be focusing on our stock-based compensation, which is to bring that down to less than 10% of revenue by fiscal 27. And all that on top of our recently announced share buyback of $350 million, which really is an indicator of the strength and excitement we feel about our long-term prospects. And that guidance factors in how enterprise customers are slower to sign off on deals as they pencil out the payoff.

Deals take a little longer to close because they're going through more inspection and making sure the customers are validating and the approval levels are at a bit higher level than what they used to be. But tech spending is there. They need to spend because that's how they are going to be. You know, that's their future, right? Every company in some way, shape or form is becoming a software company, whatever their vertical is. And so they have to spend money on tech. And I don't think that's, we haven't seen a significant slowdown. Morgan, these targets raise some eyebrows in this uncertain environment, very much rule of 40. Yes, it's really interesting to see that. It sort of, in some ways, goes back to the conversation we're having with Eric Mandel earlier today, too. It does, because it doesn't take a lot of capital,

right, to grow as a software company. It's not like you have to build the data centers and whatnot yourself. And so in a high rate environment, it's a different kind of bet. And Eric would argue you need to build that into the valuations you expect. Yeah. In the meantime, we got micron earnings tomorrow. We'll continue to keep an eye on yields. Markets obviously having a really ugly day. Dow's worst day since March. The chips were all over the place today. NVIDIA actually wasn't down that much, but Lamb Research was. And then you had, you know, Intel down.

So, you know, that's an interesting setup for Micron, which has had some inventory woes to worry about and to some extent tied into overall demand. Yeah, Costco call kicking off soon. Consumer, super in focus. That's going to do it for us here at Overtime. Fast Money starts now.