Closing Bell - Closing Bell: Positioning for a September Rate Cut? 9/5/25

Episode Date: September 5, 2025

Does today’s bleak jobs report seal the deal for a September rate cut and how should you position around it? We discuss with Bank of America’s Savita Subramanian, Invesco’s Brian Levitt and NB Private Wealth’s Shannon Saccocia. Plus, we break down the big bounce in Broadcom with star analyst Stacy Rasgon and shareholder Bill Baruch. And we drill down on the drop in Lululemon with analyst Brian Nagel. 

Welcome to closing bell. I'm Leslie Picker in for Scott Wapner today. This maker break hour starts with the record rally coming to a halt as a weaker than expected jobs report weighs on stocks. But one notable bright spot in the market today, Broadcom shares soaring to an all-time high on blowout earnings. And that's weighing on shares of Nvidia. Top Chips analyst Stacey Razkin joins us straight ahead to break down that action. Here is a scorecard with 60 minutes to go in. the trading session. You can see it's right across the board here. The Dow down about half a percent, S&P down about half a percent, NASDAQ down about two-tenths of one percent. Rate-sensitive sectors like real estate materials leading the way today while we're seeing a notable pullback in energy. It's the worst performing sector right now down about 2.2 percent, which leads us to our talk of the tape. Does today's bleak jobs report seal the deal for September rate cut and how should you position ahead of it. Joining me now is Bank of America, Savita Submaranian. Savita, you've been looking at how a softening labor market impacts corporate margins,

and I'm assuming they impact margins in different ways. How do you kind of connect what you saw from today's report with how investors should be positioning for different sectors moving forward? Yeah, I mean, I think today's report does not necessarily mean that we are in a downward spiral in terms of economic growth. In fact, I think things still look pretty healthy. We've had a deceleration in labor inflation, which is actually positive for corporate margins. I mean, think about it. The U.S. is a service economy, and our number one cost is labor. So a little bit of a softening in labor prices is actually positive for margins. Meanwhile, real wage growth is still positive, and that has been linked with continued healthy spending.

So I don't know if I would necessarily write everything off at this point. I do think that the Fed, you know, kind of more likely to cut interest rates more aggressively in the next few months is something to think about. Because what this does is it put some pressure on cash yields. And I think that that's an area where folks have just sort of parked a lot of capital in this era where you can actually make money on your cash balance. And if those yields are getting trimmed, I would expect to see some of that capital flow into other sources of income, not necessarily bonds, but I think that we could see equity income catch a bid here. So I would actually be looking at some of the more beaten down rate sensitive sectors and think about them as, you know, potential beneficiaries of inflows from retirees who aren't making as much on their short duration bonds and cash. balances. Going back to this dynamic of labor market weakening and potential benefits for corporate margins, at what point does that threshold kind of

surpass the point where the labor market weakening means people aren't buying things, which means corporate margins get squeezed? I mean, is there kind of a period in time where it might be beneficial but then ultimately pivots and becomes more of a headwind? Yeah, so I would watch for like mass layoffs. So one One thing we've been kind of just slavishly washing in our earnings transcript feeds is, you know, are we seeing companies really aggressively lay off workforce? And what we've really seen is kind of a pause. So no hiring, no firing, not necessarily, you know, kind of that broad spread weakness where

consumers are, you know, really starting to suffer and losing their sources of income. I think that's what is most important in terms of the consumption story. because, truthfully, U.S. consumers tend to spend, regardless of what the rate backdrop looks like, regardless of what they say in these surveys, they tend to spend until they lose their source of income, and that's the number one driver. So, you know, if we start to see broadspread trends in terms of job cuts, I think that would be the negative for margins, for pricing, for demand. But at this point, you know, with real wage growth still positive, with, you know, unemployment,

at still kind of healthy levels, sustainable levels, I don't necessarily see this as doom and gloom for margins. In fact, I think if anything, it just shows us that, you know, we're seeing a little bit of an alleviation in labor pressure. There are also structural reasons that the labor market is tight. You know, we've got demographics, we've got immigration reform. So I think that those offset some of the potential softening in the labor market as well. Yeah, absolutely. In terms of the overall market, does the timing indicator suggest to you that it's good to stay long here, despite what we've seen in terms of valuations today aside? You know, it's interesting because I think valuations, it doesn't feel great to buy the

S&P 500 at these types of multiples, but I do think that a higher multiple for the S&P is warranted by the fact that, you know, companies are actually pretty healthy right now. They've cut down a lot of their leverage risk from the global financial crisis. They're managing margins quite ably despite the fact that we've seen massive inflation volatility and rates volatility. You've seen corporations exert a lot of these efficiency gains. So I don't necessarily think this is the environment where, you know, typically the end of bull markets are where everybody is telling you to back up the truck on stocks. And stocks are the best game in town. they're riskless. Nobody's saying that today. I think we're still in that worried environment

where the more typical questions I get are, you know, I've been underweight U.S. equities, but it doesn't feel great to buy here should I deploy capital, which means there's capital on the sidelines. Right. And that speaks a little bit about the cash sweeping dynamic. Maybe a 180 is in store if rates go lower. Savita, stay with us. Treasury Secretary Scott Bessent making some fresh comments about the Fed. earlier today. Steve Leesman joins us now with the latest. Hey, Steve. Hey, Leslie, Treasury, Scott Bessett, pending a sharply critical essay in the magazine International Economy talking about the Federal Reserve. This is another piece of an unprecedented

administration campaign against the Fed. No sitting Treasury has ever so publicly and sharply criticized the Fed, especially not in such detail. Bessett in the article says Fed policies that inequality, undermine its credibility, and threatens his independence. He calls for an federal review of its policies, calls for scrapping the forecast, the SEC, talking about stripping the Fed of bank regulatory functions and suggests scaling back quantitative easing. While continuing to back an independent central bank, Besson said the Fed had, quote, become beholden to its self-interest at the cost of the national interest.

Context of this, of course, the President's extreme repeated criticism of the Fed for not lowering interest rates and the effort to remove Fed Governor Lisa Cook for alleged mortgage fraud, which she has denied. FHFA director Bill Pulte yesterday has called Fed Chair J Powell a corrupt swamp rat based on his actions relative to Cook. Well, the impact of Bessence article

depends on whether the Fed embraces any of these recommendations or if Congress sees the article as a blueprint for Fed reform. Yeah, it is a good question here. And one thing that I thought was really interesting in the op-bed was the distinction that he made by extending its remit into areas traditionally reserved for fiscal authorities, the Fed has blurred the lines between monetary and

fiscal policy. To you, does that take aim at the dual mandate nature? I know there's been some commentary about, you know, maybe the Fed should just focus on price stability and let the Treasury do its job when it comes to the labor market. Like, would you go so far as to say that? Most people I've spoken to think the dual mandate serves the Federal Reserve well. Most central banks, of course, only have an inflation mandate, but the idea of being that the Fed cannot only focus on inflation, which is really, it would be interesting for Besson to advocate that, because focusing on inflation is something that would certainly benefit capital.

And he talks a lot about how investors have done well, but not Main Street has done well under the Fed's policy. Of course, the Fed disputes a lot of the criticism in here. So a fuller debate would take more time here. But the Fed would argue that the quantitative easing it did helped everybody by essentially saving the banking system at the time. But there's quite a bit of interesting stuff in there about this idea of mission creep, the idea that the Fed used that tool and kept it around for too long,

both in the great financial crisis and in the pandemic. Right. And there's also serious limitations in terms of the amount of fiscal stimulation Treasury can do just given where debt and deficit levels are leaving the Fed as an important weapon when it comes to a slowing economy. Steve, thanks so much. Appreciate you breaking that down for us. Sure. We're getting a news alert out of Washington. Megan Kassella has that for us. Hi, Megan. Leslie, that's right. President Trump on social media going after the European Union right now, after the EU moved earlier today to hit Google with a major fine.

threatening a new trade investigation against the EU because of that fine. So in this long truth social post, the president saying, Europe today hit another great American company, Google, with a three and a half billion dollar fine, effectively taking money that would otherwise go to American investments and jobs. He says this is on top of the many other fines and taxes that have been issued against Google and other tech companies. He also names Apple and a recent fine against Apple in this post and goes on to say these companies should get their money back.

We cannot let this happen to brilliant and unprecedented American ingenuity. And if it does, I will be forced to start a Section 301 proceeding to nullify the unfair penalties being charged to these taxpaying American companies. So, Leslie, a Section 301 trade investigation is pretty open-ended. It would allow him to go after a trading partner, an individual trading partner, like the EU, for sort of broadly unfair trade practices. So we could launch this investigation into the EU, and it could lead to further tariffs down the road that would be legal. And he would have the authority to do that if his investigation turned up that there were, in fact, unfair trade practices. So just as we thought we might be getting to some sort of a stalemate and a daint with the EU, the president now threatening new tariffs and a new investigation. That's what I was going to say, Megan.

It seems like a bit of a 180 from what we were expecting there. Thank you for bringing that news to us, Megan Cassella in Washington. Let's bring in Invesco's Brian Levitt and CNBC contributor, Shannon Sacocia of NB Private Wealth, Savita Supermanian, is still with us as, well. Brian, you kind of raised your hand in terms of a reaction to the President Trump's comments during that news alert that Megan shared with us. Do you have any thoughts? Yeah, I mean, you're absolutely right that we're looking for clarity with regards to policy. And so my view on tariffs is ultimately you will have a cost for tariffs. You will have some slowdown in growth. You will have some increase in prices. But it doesn't have to be

catastrophic. The bigger challenge is the uncertainty around it. And so, For these markets and for businesses, we were getting to a better point of clarity. That's what's most important here. This may derail that a little bit, but I don't think it derails markets. This market's used to the president putting something out there and then, you know, negotiating from that starting point. The taco trade. Shannon, one area that is also looking for clarity here is small caps. And I know that there's been this conventional notion that once those rate cuts do ultimately get announced,

if they get announced in September that that could be beneficial for small caps. Do you agree with that? And is 25 basis points enough to kind of support this cohort? I think 25 basis points, you know, as the end point, probably not Leslie. It's great to talk to you, by the way.

I think that what you're looking at, though, is you're probably looking at something more on the order of a cumulative 100 basis points at least by, you know, maybe the end of the first quarter next year at this rate, given the jobs report today. But I think it's also, you have other tailwinds for small caps, the valuation tailwind and the differential between the S&P 500, which, as we've already noted in this show, is a bit expensive. That exists. We also have the tailwind of the one big beautiful bill, which from a capital expenditure perspective, it has a lot of benefits that potentially could be utilized by small cap companies.

Then you have, you know, the M&A tailwind. We're starting to see an uptick in announced M&A or announced transactions, not necessarily closed transactions. And so all of those things combined, you know, you probably need or, and it's predicated on that lower rate environment for a number of those to hit. But we believe that the momentum that we've seen in small cap stocks in August is likely to continue, given some of these tailwinds and that changing interest rate environment that we discussed. Yeah, leverage finance, acquisition finance costs have not been cheap at this point. It's good to point out that the Russell 2000 is the one major index actually in the green today. Brian, you're also looking for additional catalysts for small caps from here. Do you think rate cuts are it, or do we need to ensure that the economy is on stable footing

before we really go all in on small caps? Yeah, rate cuts are a good first start. You'd like to see a reacceleration in economic activity. I mean, we follow a leading indicator index for the United States. That's been generally flat for the last couple of years, kind of pointing towards below-trend growth and no real catalyst. And in that type of environment, you want to be larger capitalization, growthier, more quality. So no surprise that for the most part of the last few years,

it's been a handful of really big companies that have driven markets. What you see here is the opportunity for perhaps for lower rates, as we move through towards the end of the year to start to lift sentiment, start to lift leading indicators of the economy, that type of a recovery trade should bode well for small cap. So rate cuts are a good first start. It's not everything. We'd like to see a, you know, the economy's clearly slowing. We'd like to see a pick-up and economic activity as well.

Yeah, I believe it's about half of the Russell that has floating rate debt that could be beneficiaries of that. So it's not all treated equally. Savita, what's your take? So look, I think that a rate cut is a good first step, but I think that increased tariff uncertainty is bad for small caps. Because think about it, they're the sole suppliers to multinationals. They're at the whimsy of multinational companies that are going to squeeze them if they're facing higher costs. So I think that's another part of this sort of malaise in the small cap arena,

not to mention 30% of the companies in the Russell 2000 just don't make any money. This is a very high percentage of losers. So I think those are some of the factors that are weighing on small caps. And I think rate cuts, you know, 25 basis points, even 100 basis points will help. But it's not the entire solution for that small cap sector. Yeah, profitability has been in focus, increasingly important as the markets look at that. I'm curious, Shannon, we get CPI and PPI next week. You know, that could potentially pour cold water on the market's prospects for rate cuts, the magnitude of rate cuts, the amount of rate cuts.

What are you watching? Well, I think if you look at the economic. Oh, sorry. That was to Shannon. Sorry, love. That's okay. I think one of the things is to really look at the, you know, the economic projections that obviously Treasury Secretary doesn't think we need anymore based on his editorial this earlier today. But I think if you look at the economic projections coming out of the June meeting, what was really important is that if you looked at how the Fed, the FOMC voted, they were balanced in terms of their concerns about inflation versus the labor market.

I think what you're going to find coming out of the September meeting is that's going to be a little bit more out of balance. And you're seeing perhaps more concern about the labor market slowing and the deterioration than perhaps the sort of transitory impacts of tariffs. I think that in some ways, the decision by the Supreme Court on the IEPA is going to impact that. But I think most importantly, this idea of rolling tariffs and this transitory nature, and more importantly, the way that companies are spreading out the impact of these tariffs, I think what you're going to find is that the emphasis is going to get, continue to be at least in the next few months on the labor market. And so unless it's, you know,

you know, an outsized print on both of those and a meaningfully outsized print, I don't see anything upsetting the narrative in terms of the September meeting. Yeah, Savita, you agree with that? And sorry about that. We have two S names, so it gets confusing. No, yeah, I agree. I mean, I think that there's a lot of worry right now about stagflation. And I don't know if that's really the base case we should assign a lot of probability to. I do think that, you know, we could be in an environment where we see a mini reacceleration in pricing and labor as we see companies come back and start planning again and spending that money that they paused in spending during this tariff-related uncertainty. So I think maybe what's more important than the Fed, dare I say, anything is more important than the Fed, is, you know, kind of where companies,

are certain about the future and can actually put new capital to work. I think where we are right now is a big pause that's potentially more damaging than anything the Fed can do or not do. Yeah, and that speaks to that uncertainty dynamic. Brian, last word here? Yeah, the challenge we're going to have with the Consumer Price Index report is that prices are going to rise. We know that as a result of tariffs. And you are already at or at the upper end of the Fed's comfort zone. So we should expect inflation year over year to climb. above the Fed's comfort zone. That's a little bit of a challenge,

but I'm shifting my focus to inflation expectations in the bond market. Watch the three-year inflation break-even. Watch the five-year. If those remain generally stable, then it's all systems go with regards to rate cuts. That should be positive for markets. If the three-year break-even bursts out of the comfort zone,

that's a very different outlook. I don't expect it to happen. I expect the bond market and the Fed to believe that tariffs lead to a one-off inflation. Yeah. Like the price of our washing machine in 2018. It went up once, right? And then it...

And you only need to buy it once every 20 years or so. You certainly hope. Yeah, exactly. Thank you so much, Brian Savita, Shannon. Appreciate your time on this very important Friday. We are tracking a big move in shares of Kenview today. Let's send it over to Angelica Peoples for more here. Angelica, this is quite a remarkable development.

Yeah, Leslie, well, those shows. shares of Kennedy are having their worst day on record on a report from the Wall Street Journal that Secretary Kennedy plans to link Tylenol use in pregnancy to autism. Secretary Kennedy's autism report, we're expecting that at some point this month, will also reportedly link low levels of folate during pregnancy to autism as one possible cause. Now, Kenby in a statement saying that nothing is more important to us than the health and safety of the people who use our products. We have continuously evaluated the science and continue to believe there is no causal link

between acetaminopin used during pregnancy and autism, and an HHS spokesperson saying that until we release a final report, any claims about its contents are nothing more than speculation. Now, whether there's been a link or whether there is a link between Tylenol used during pregnancy and autism has become a focus of research and lawsuits in recent years. It's become a hotly debated subject like vaccines, so although for most viewers it might sound surprising, this has actually been a simmering issue for quite some time now, Leslie. Yeah, it was surprising to me, but I'm not as steeped in the subject as you are Angelica. We appreciate you bringing your expertise today, Angelica Peoples.

We are just getting started up next, a big bounce in Broadcom. That name hitting an all-time high. We'll discuss with shareholder Bill Baruch and star analyst Stacey Raskin. We're live from the New York Stock Exchange. You're watching closing bell on CNBC. Welcome back. We're getting exclusive new reporting on what led to the abrupt departure of Adriana Kugler from the Fed. Amon Jevers, breaking that story for us.

Hi, Amin. Hey there, Leslie. Former Federal Reserve Governor Adriana Kugler's abrupt resignation from the board on August 1st and her unexplained absence at a key meeting two days later. later left the financial community shocked and confused. And the mystery surrounding Kugler's resignation has gained a new urgency in the week since, especially because President Trump has attempted to fire another board member, Lisa Cook, based on allegations of mortgage fraud. In her August 1st resignation letter addressed to Trump, Kugler offered no explanation

for why she was leaving her job months before her term ended. She said simply, I'm writing to notify you that I am resigning from my position as a governor of the Federal Reserve Board, effective August 8th, 2025. The Federal Reserve said in a press release also that day that Coogler will return to Georgetown University as a professor this fall. For his part, President Trump suggested that Coogler had resigned because she disagreed

with someone from her party. She disagreed with somebody from her party. She disagreed with too late. You know who too late is? She disagreed with too late on the interest rate. So we'll see what happens. But we just found out that I have an open spot on the Federal Reserve Board. I'm very happy about that.

Now, Leslie, I can tell you that I spoke to a person authorized to speak on Coogler's behalf last night, but that person said that Coogler is declining to provide an explanation for why she stepped down. That person says that Coogler is also declining to answer a question about whether anyone pressured Coogler to resign. But a CNBC review of Coogler's personal financial disclosures and her Maryland state tax records, revealed two seemingly incompatible descriptions of Coogler's primary residence. Coogler told CNBC Thursday that the apparent inconsistency in her real estate records was an error made by county tax officials. Coogler's financial disclosure forms list a mortgage on a personal residence.

But state tax records for that property say it is not her principal residence. Now, there's no indication that Coogler's done anything improper, nor that she realized any undue financial gain here. Coogler's situation differs significantly from Cooks in that the records here don't include mortgage loan applications, only tax records, and federal disclosure reports. In a statement to CNBC provided by a person authorized to speak on her behalf, Coogler said, my primary residence has always been listed in my financial disclosure, and this residence has never been rented. We filed a change of address in July of 2021 with Montgomery County after we moved to this residence, but it appears that Montgomery County, failed to update it in its records. We are advised that Montgomery County is in the process of correcting their records to reflect the 2021 change of address request. Now, a spokesperson for

Montgomery County said to me today that the county does not have the ability or authority to change a property owner's status. That's handled by the Maryland Department of Assessments and Taxation. Now, what's striking here, Leslie, is that the inconsistency in Cougar's records here is over precisely the same issue, primary resident status, that Trump is using to try to force Cook off the board. And Coogler is declining to answer our questions about why she resigned or whether anyone pressured her to do so. Back over to you. Yeah, that's fantastic reporting there, Eamon. What comes next at this point in time? Well, what we know is that Coogler has not yet filed her 2025 financial disclosure. The rest of the members of the board have done that.

Cougler is going to have to file that filing, as well as another document, which lists all of her disclosures year-to-date for 2025, in addition to the 2025 filing that covers 2024. We're expecting that she will file that, although it's been extended, the deadline here, that she will file that this month. So we may learn more about her holdings and her real estate in that document when that comes. Fantastic work. We know you'll be all over it when that filing drops. Amen, thank you so much. And you could read more of Amon's exclusive reporting right now on CNBC.com. Up next, Broadcom's big bounce. That's not kidding. All-time highs today. Up nearly 10%. We'll speak with top chip analysts and a shareholder. Closing Bell will be right back.

Welcome back. Shares of Broadcom soaring to a record high on blowout earnings and revealing it secured $10 billion in new order. for custom chips from a customer. Joining me now is top chip analyst, Bernstein, Stacey Raskin, and Broadcom shareholder Blue Line Capitals, Bill Baruch. Thank you both for being here.

Stacey, there are, you know, reports out there that it's open AI that's working with Broadcom to develop a custom AI chip. What do you see as the implications of that? Yeah, you know, by the way, it's been speculative that's open AI. It's plausible.

Whoever this is is moving very, very quickly. Seems to sort of fit with their persona. No, this is really important. You have to remember, Brodcom had three customers that were shipping these AI chips. It was Google and Meta and ByteDans. They had four others that were prospects. So one of those prospects, this one, is now converted into a customer. And it is a tremendous amount of revenue.

They said $10 billion next year, which is a very fast ramp relative to anything we've seen before. And they're, I mean, they're implicitly guiding, you know, effectively their AI revenues next year, well over $40 billion, it was like $30 billion as of last quarter. And I don't know that it stops in 26 either. They sounded fairly positive that it would continue into the years beyond. And so, you know, frankly, it starts to remind me a little bit of the revenue ramp we started to see for Nvidia, like several years ago when this really started to kick off. And if you think that those numbers are anywhere plausible, all of a sudden, you know,

the earnings power of this company starts to go, like, up very, very strongly. And, you know, the stock has been fairly expensive, but, you know, it's... it starts to realize maybe it's not as expensive if you actually think the earnings up prospects are as strong as as maybe they are suggesting. And so I'm actually not surprised that it's up as much as it is today. And I don't know that the story at this point is done. Yeah. And on the flip side, you've got Nvidia down, potentially a bit on this idea of diversification

of the supply chain. Stacey, I'm just curious whether you think Nvidia has some real competition and whether its share is seriously threatened at this point. I mean, look, so the whole GPU versus ASIC debate goes, it goes back and forth, right? Right now, the narrative, at least today, is clearly shifting toward Broadcom. They do go back and forth.

I actually don't think that the right question right now is necessarily who's winning or losing. I actually think personally the question is better off to be put. Is the opportunity in front of us still large, or is it not? I think ASICs will take share. They're coming from a smaller base.

I don't think they dominate. And I think if the opportunity in front of, if this is still big, if we're still early in this, as I think we are, I think they can both thrive. Because think about this way, if the opportunity in front of this is not still big, like they're both screwed. Right. So that's the right question right now. I think not as much who is winning or losing. But in the heat of the moment, I mean, clearly that narrative today is going to shift more toward broadcom. We're in that phase of the cycle. Well, let's ask Bill that question about the rising tide lifting all boats and potentially the tide watching out there. Bill,

a shareholder of both NVIDIA and Broadcom. What do you do with today's developments? I don't think that they're going to compete against each other and one would harm the other. I think that what you're seeing here is the multiple, the high multiple in Broadcom, you're paying for this flexibility. You know, they help Google or Alphabet ramp up the TPU.

And although that relationship has changed, you know, the flexibility here in helping open AI potentially ramp up what could be the XPU, an inference chip, And I think that pivot allows, takes some pressure off the lack of GPU chips that are on demand for Invidia. Now, we don't look at this as there's a one winner. We own both, although currently we're a little underweight Nvidia to the S&P. And we're quite a bit overweight, Broadcom to the S&P.

I think there's a lot of runway here. And I do agree with Stacey that this is, this does remind me of what we saw in 23 where the revenue growth, the ramp up that's coming next year in 2026, for Broadcom. It reminds me of Nvidia. I mean, we're seeing 60% revenue increase forecast for 26. But let's not forget, you have the software infrastructure, and that's still nearly a 50% revenue forecast increase, too. So you've got the diversified revenue streams, and we love Brockcom. I'm a little patient here. We wouldn't be chasing it. I do want to increase. We trimmed it recently, just because we were so overweight. I would be looking for a pullback you know, somewhere, you know, at least the 315, 312 area, but we could get a move to 300.

The broader market kind of softens a bit. Yeah. So what does this say then, Bill, about the amount of gas left in the tank for the AI uptrend? It sounds like neither of you really believe that, you know, there's much of a slowdown as was feared a week or two ago. I mean, this is the early innings. I mean, I think you're starting to see it right now. I mean, look at the market itself broadly with the NASDAQ. I mean, it's continued to run.

And, I mean, not only that, you're starting to see, you're starting to see green shoots within the economic data. Look at the non-farm productivity yesterday. That could really be tied to starting to see AI being implemented. I'm also, you know, hearing that, you know, from a, from a MAG 7 company, that you're starting to see some of the lower echelon employees being forced to work on these AI workflows. You know, I think down the road, you're seeing a lot of those jobs being taken over by AI. and they are essentially training AI right now. So there's going to be a lot of haves and have nots within the market and who's going to benefit from it.

But right now it's an AI arms race. The spend has to come in. And these companies, the market is appreciating. And it's giving way to the spend. It's increasing the market itself. So I think there's a lot of runway here. And I'm excited to see how this year finishes. But really, 2026 could be a tremendous year.

Yeah. And the spend continues. to be eye-popping. Broadcom up about 10% today. Invitya down about three. Stacey and Bill, thank you very much for being here this Friday. We are getting some news on Anthropic. Mackenzie Sagalos is that for us. Hey, Mac. Hey, Leslie. So there is a new filing in the class action lawsuit against Anthropic. They are going to pay $1.5 billion to settle a copyright case that was brought by authors who said that the AI startup downloaded millions of pirated books. Now, the company had faced the risk of more than a trillion dollars in damages if they didn't settle.

A San Francisco judge does still need to approve the deal. Anthropics Deputy General Counsel telling me in a statement that this case established a key legal precedent, saying that in June, the district court issued a landmark ruling on AI development and copyright law, finding that Anthropics approach to training AI models constitute fair use. Now, that is a big win for the AI industry, Leslie. It's a pretty large amount for a, what is it, four-year-old? old company there. Mackenzie, thanks for staying on top of that for us. McKenzie Segalos.

Up next, your retail rundown. We'll hear from top analyst Brian Nagel with how he's navigating the sector, including that big drop we are seeing in Lulu Lemon stock today. Currently down about 18 and a half percent. Closing bell will be right back. Welcome back. Shares of Lulu Lemon getting slammed after cutting its outlook as tariffs take a bite from profit. Joining me now after downgrading the stock and removing his price target altogether is Oppenheimer's Brian Nagel. Brian, thank you for being here. Why downgrade just to perform? Why not underperform if you're removing the price target with the stock and freefall today?

Well, look, it's a good question. I mean, the point where I've been talking to our clients all day on this, you know, look, Lulu has hit a speed bump, right? There's merchandise issues at the company. I think management is now more aware of this. They're turning more aggressive in their efforts to fix the problem. But this is still a Lulu one. This is a real brand, and you look over any length of time, you know, I think there will be a recovery here. So our message to clients is step to the sidelines now, but very much keep an eye on Lulu Lemon

because we do believe that at some juncture, you know, there will be a forthcoming recovery. And, you know, that could be as early as 2026 when they start to reset this product. So that was going to be my next question is, what do you think needs to happen to have that recovery in place? One thing that Sarah Eisen asked CEO Calvin McDonald about was the longtime absence of having a creative director in place. Now Lulu has named Jonathan Chung to that role. Did that set the company back? And now that they have someone who can kind of create that creative vision for the company and make sure that it's appeasing to its brand and all of that, does that help Lulu really turn things around or does it require more than that? No, look, I think that's a significant first step. Okay, so to answer

your question, in my mind, again, it's easy for an analyst, sit here and say what the problem is, right? I mean, I'm from the cheap seats, if I will. But, I mean, the issue is merchandising. And, you know, look, I spend a lot of time in Lulu Lemon stores. I know a lot of their customers really well. And the product, as great as it is, has gotten stale. You know, what's interesting, if you look at, you know, how Lulu Lemon's performing right now, international markets continue to perform very well.

For instance, China, it's still a relatively new brand. But in these more mature markets like the United States, where Lulu Lemon's been around for a while, their core customer has a collection of product. they need to introduce more new, more innovative product. And that's what's been missing. And I think, look, and this is not, you know, I follow a number of companies within the space, including Nike, Under Arm, and others. This is not unique to Lulu Lemon.

You know, there was very much a lack of innovation post-pandemic. You know, these companies, I think they were disrupted. You know, they got in kind of the mode that their products were selling well without innovation. And now the rubber's hitting the road. Okay, but what you need to see from Lulu Lemon is more fresh product. And that will come. It's just going to take time. Yeah.

And then, of course, there's the question of price elasticity, given the tariffs and all the competition out there. Can they afford to meaningfully raise prices in this environment? I know Jim Kramer was talking this morning about just competition from Costco, which is tremendous there. Look, that's a $64,000 question right now. Okay. And just stepping back from the Louvo Lemon for a moment,

I think one of the reasons the stock is performing as weak as it is, is the market's basically saying, and I think correctly, that, you know, here's a turnaround for all intents of purposes, happening in what is becoming an increasingly difficult, precarious, if you will, consumer spending backdrop. And exactly the point you're making, Leslie, I mean, you're seeing a lot of companies, and I think we're still, I think we're early in this, where we're seeing a lot of companies start to raise prices. And, I mean, my work and, you know, the work my team and I do on the U.S. consumer, what we're basically seeing clearer evidence that as 25 progresses, as we move into the holiday season, there's going to be a lot of, of companies simultaneously raising prices. You know, in that action, you know, could crowd out discretionary spending. So a company like Lulu Lemon, which is a discretionary product, you know, already suffering from some internal issues, that's another big pressure point. And they're going to have to really question to what extent they can raise prices, particularly on legacy items. Now, they start introducing new products, that gives them a little leeway, if you will, to raise prices. But these legacy products should be more difficult.

Yeah, $120, $120 Leggings in competition with some pretty good dupes on Amazon and Costco. It's a tough competition out there. Brian, appreciate you breaking it down for us. Brian Nagel of Oppenheimer. Thank you. Up next, we are tracking the biggest movers as we head into the close. Closing bell. We'll be right back.

Nine minutes until the closing bell. Let's send it over to Christina. for a look at the key stocks to watch. Christina. I need to start with Tesla because those shares are on the rise up 3% after revealing a massive new pay package for its CEO, Elon Musk. The board is asking investors to approve a total package worth about $975 billion as a maximum payout. That's almost a trillion bucks. The full award would give Musk more than 423 million additional shares

and would nearly triple his already staggering net worth. You can see Tesla up 3%. Sam Sarah's stock soaring more than 16% after the company reported second quarter earnings and revenue that beat expectation, the dash cam and GPS maker, also boosting its outlook and that's contributing to shares climbing higher. Sam Sarah's CEO will join closing bell overtime next hour for an exclusive interview to talk earnings and of course much, much more. And last but not least, one more name, Doc E-Sign, known for e-signatures, is also an earnings

winner today after better than expected results in a strong outlook, the company said its largest customers are definitely contributing to growth. Shares are up over 5%. Leslie? Yeah, big day for movers. Christina, thanks so much. Christina Parts-Nevilus. Up next, we'll run you through the big move and rates

following today's jobs number and what it might mean for the housing space, that and much more when we take you inside the market zone. Welcome back. We are now in the closing bell market zone. CNBC Senior Markets commentator Mike Santoli is here to break you down the crucial moments of the trading day. Plus, Diana Oleg here with more on the big move in mortgage rates. And Steve Kovac standing by with Roblox's new AI bet. Diana, let's start with you.

You're following mortgage rates. We've seen some moves this week in particular in the Treasury markets. That's right, Leslie. And today we haven't seen a one-day drop this big since August 1st of last year when we got a Similarly, weak jobs report along with weak tech earnings. And of course, that is making the builder stocks very happy today. Names like Lenard, D.R. Horton, and Pulte, all up between 2 and 3% on the day. And the home building ETF, ITB.

It's been running hot for a month now as rates move slowly lower, now up close to 13% on the month. And again, all because the average rate on the 30-year fixed dropped 16 basis points this morning to 6.29% according to Mortgage News Daily. That is the lowest rate since October 3rd of last. last year. Many lenders are priced better than this at rates of 6.125%. And many will be quoting in the high fives today, that according to Mortgage News Daily's Matt Graham. It's a major difference from May when we saw that rate over 7%. The big question now is, will this be enough to really get home buyers back into the market? Leslie. Yeah, it seems like that unlock at least

has the equity investors happy in some of those home builder names. Diana, thank you. Steve, tell us about what's going on with Roblox. What's going on with Roblox? Artificial Intelligence. I'm here in San Jose, California, at the convention center here. This is Roblox's annual developers conference. Slew of new features announced. I'll stick to the AI stuff to keep it simple here. We have this new, what they're calling 4D AI, which lets you generate items within the game that you can sell. Usually there's a lot of work that goes into making these virtual items. This makes it easy to do with the prompt, just like you generate an image in chat GPT, for example. Also, a real-time translation tool. that when you use chat, you can speak to someone in English and German or whatever, what have you, and it'll do the translation automatically.

And some new safety features, that's always an overhang when we talk about this name. Lots of work still to be done there, but they did announce this week, a new age verification feature that you take a selfie with and it can estimate a user's age based on that and then based the experiences on that person's age. By the way, Leslie, I have CEO Dave Bazooki of Roblox

coming up next to. hour in an exclusive interview here on Closable Overtime. That's at 4.15. You're not going to want to miss that. We have a ton to go over with him. Leslie, I'll send it back to you. Excellent, Steve. Thank you. Looking forward to that. Mike Santoli, let's give you the last word of this very interesting trading day. It has been, Leslie. I would say overall, a pretty nuanced and measured response to what could have been a pretty profound disappointment on the jobs front. I think that there was enough within the jobs report to pull people away from the idea that it's absolutely this pre-recessionary trend over the last three and four months.

So you have more stocks up and down. You have small caps trying to rally. You talked about the rate-sensitive names going up. Against that, the big banks did suffer. Consumer cyclicals are registering a little more maybe doubt about whether the consumer can hang in there. Overall, market has stayed on trend. We haven't had even more than a 3% pullback in the S&P 500 in over four months. Yeah, no, it's a great point.

The questions about the lower-end consumer are definitely. and the hot time since tonight. We're really running today. The outperformance, as Mike mentioned, real estate, communication services, and materials. Got done with the closing bell. Let's get it to overtime. It's Morgan Brennan.

We can see.