Power Lunch - Disney's Magical Stock Run, More Chip Tariffs on The Way? 8/5/25

Episode Date: August 5, 2025

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Welcome to Power Lunch. I'm Morgan Brennan. Stocks losing steam after the July ISM services report came in softer than expected, raising fresh questions about the strength of the economy. But one earnings mover is bucking the trend. Palantir, hitting a record high today after a blowout earnings report and a billion dollar quarter. Plus the countdown to Disney earnings. Those shares are up nearly 30% in the last three months. And investors are watching for signs of continued outperformance. We've also got the two key areas to focus on. And coming up, up, a big interview you will not want to miss. Andrew Ross Sorkin sits down with Bank of America CEO Brian Moynihan for an in-depth interview, his take on the economy, the markets, the political landscape, and those provocative comments made by President Trump just earlier this morning on CNBC. But first, we start with the markets, where stocks are mixed at this hour. Mike Santoli is at the New York Stock Exchange for more. And Mike, we're basically talking about fractional moves here with the S&P down slightly and the Dow up. 27 points. What's driving the action? Yeah, Morgan, as you mentioned, the ISM services print,

which was below expectations, showed eroding employment outlook, also some higher prices paid. It did knock the market back on its heels, but it was temporary. I think a lot of these things, you can almost see the, on the one hand, on the other hand, debate happening in the market in real time yesterday and today, which is, okay, maybe the economy is showing some slippage here. We saw that in Friday's labor market data, but it's hastening the likelihood of a September rate cut. Yields are holding their lows from Friday. So you did see, you know, bank stocks, for example, taken on the chin in the morning and now they've clawed their way back. We're seeing this kind of calm rotational action in the market. Yes, below the highs in the

S&P 500, but for example, the Russell 2000 has a bid today. So it's still indecisive and it's still range bound and everybody knows August is supposed to be a give-back month because of seasonal patterns. But I think the knowledge of that is keeping people from making two. brought a conclusion about little bits of weakness that we see along the way. Mike, we know seasonalities at play, particularly in the first half of August. And we also know that stocks have had a massive run to get here. So how much of this is just consolidation and the market taking its cue from the next key catalyst? Yeah, I mean, until further notice or until proven otherwise, it seems pretty normal.

It seems like digestion. At the same time, you know, you still see this very, very, very. aggressive bid from smaller investors, some more aggressive hedge funds in some of the higher volatility stocks out there. So Pallinger is the biggest among those. But then you just sort of see this flow yesterday and today in a lot of these sort of maybe, you know, high risk, high reward type names. That's almost immune to macro influences. So I think everybody's working on the premise of we, you know, we have a three to five percent pullback potential at any time. But if everybody's expecting it, do you get it on time or is it going to take a bolt from the blue to really

have some genuine selling hit this tape. That's what we're waiting to say. Yeah, and of course, we're looking at shares of pounds here of 7.5% after those earnings that we reported on overtime last night. Axon's similar story, by the way, dual-use technology, security, applications, AI applications. That stock's also hitting a record high in trading today. It's up something like 15, 16%. But then you have a name, Mike, like Eaton, which also had a beat and raised quarter. It's actually trading lower. So I guess how are investors picking and choosing what the winners are post earnings here? I mean, my initial answer to that is we're talking about different pools of investors.

I think Eaton, you know, it's going to be, it's an old line name, industrial company that now has this extra driver, you know, the sort of build out for a lot of, you know, AI infrastructure and things like that. And I think in general, we haven't seen great responses to lots of earnings reports, even though overall they've been coming in better than expected. That's just another thing that tells us the market was expecting this level. of beat rate in general, and, you know, it's needed to justify where valuations got to. Yeah, and of course, we get more earnings after the bell, including AMD, to see what that AI trade is looking like as we move through the rest of earnings here.

Mike Santoli, thank you. President Trump hinting toward a new round of tariffs on semis coming as soon as next week. Here's what he said on Squawk Box this morning. Within the next week or so, we're going to be announcing tariffs on specifically, this is a, you know, This is a separate class and the 15% tariffs on sort of everything. These are excluded classes, I call them. I like to call them excluded, like steel, aluminum, et cetera. Well, we're going to be announcing on semiconductors and chips, which is a separate category,

because we want them made in the United States. Well, let's talk about this and about the semi-space in general. Christina Partsenevolous joins me now with more. Hi, Christina. Hi, Morgan. It's funny. When he said that, you did see the reaction in the chips. sector, many of the, you know, the common names,

NVIDIA, Broadcom, the SOX ETF all falling today. There was one outlier, and that was Intel. Intel shares are actually positive today. That's because President Trump really brought up the point of building on US soil. When you think about all the options to build on US soil, there aren't many. There's TSMC in Arizona, there's a few other locations.

You have Samsung, specifically more towards memory, global foundries, which is more lagging edge. And so for Intel, it would seem like that would be the obvious answer. The problem is Intel's foundry business, and Morgan, I know you know this because we talked about it in the 4 o'clock show just is really been struggling. Their most recent earnings report, they posted a 10Q, and they said that if they do not get an external customer for the more advanced process they're working on called 14A, then they're willing to forego all of their production plans specifically for that line, that more advanced line. They also said they were willing to work with other foundries if they can't get that line off the ground. And then another report today, Reuters saying that there's issues with 18A and that there may not be as many chips made on this advanced process.

So that just goes to show the lack of confidence in this foundry business. So it's difficult to see how President Trump would say that it's going to be Intel coming to the rescue when Intel itself is struggling so much to build advanced chips on U.S. soil. Yeah, I thought the move in global foundries after their earnings today, speaking of foundries in the U.S. was very interesting as well. Christina, how is this going to set us up for AMD earnings? Yeah, there's one point I wanted to add to that in regard to the foundries, though. Intel, there is a rumor coming from Taiwanese outlets that, you know, TSM is being used as a middleman right now for between Taiwan and U.S. negotiations. They're saying that TSM could potentially have to take a 49 percent stake in Intel in order to get their tariffs lower to 15 percent.

Right now, it's at 20 percent. So it's just interesting how they're using that as a chip. chip in their negotiations. For AMD to answer your question, which is what you want to know, AMD stock has really run up about 46% year-to-date more than any other chip out there.

So expectations are very high. Why are expectations high? Because investors believe that AMD can finally get a piece of that AI pie. There's the MI-300 series, more advanced 355X. That is moving forward. You have the China sales

that are coming back into play now that they are able to ship with a license. You have these rations. solutions, AMD acquired ZT systems, and that's allowing them to provide an entire rack versus just the chip, and that allows them to better compete against Invidia. And then you also have the CPU gains against Intel. So there's many reasons for this bull thesis, but as we saw, Morgan with so many other

chip names, expectations are so high, Texas instruments, on semi, lattice. The list continues that you really saw their stocks drop dramatically post-earnings when it just didn't hit that threshold of expectations. Okay, we'll see what we get after the bell. I saw what you did there too. Chip in negotiations? Yeah, yeah, yeah, yeah. Thank you.

Christina Pertznavelas, thank you. Let's turn out to the broader markets, which are mixed on some weak economic data, more tariff threats. Your next guest is still sticking with big tech, some industrials too, but expects the tariff impact could be more significant over the next few months. So joining me now is Margaret Petrano. She is portfolio manager at Clear Bridge Investments. Great to have you here on set. Welcome. Thank you. So what is your take sort of on the broader market?

right now and the role that tech has been playing and weather can continue. Yeah, well, I mean, tech and the AI theme is a big one. We're going to be talking about it for the next 10 years. That's an enormous theme. But what we've been spending a lot of time thinking about is what else is going to happen as the market broads out, right? I mean, right now you absolutely see the impact of tariffs. You see the economy slowing.

We're going through a little bit of a soft patch. We think it's a little bit of darkness before dawn because 2006 looks pretty good to us in an industrial capacity. I mean, we see early cycle companies starting to see green shoots. Don't, you know, can't take it to the bank yet, but we're starting to see Eaton this morning, talked about improvements in their machinery business. That's good.

Rockwell Automation, starting to see some green shoots. The reconciliation bill is going to be important for this to continue. We think it's about 50 basis points accretive to GDP growth next year. And that, I think, is the fuel that's going to help the economy broaden out, that's going to help some of those investments in our country that's going to help some of this industrial. economy, early cycle movers work. Do you think investors are overlooking the impact that that bill is going to have in terms of the industrial space, material space, manufacturing space?

Yeah, because the reported results aren't that good. I mean, with the exception of an Eden, which is clearly benefiting from the AI trade and data center buildout, you're not seeing terrific results in the auto sector. You're not, ISM is still negative. I mean, you're still seeing weakness broadly in industrials. Also, restaurants, other early cycle kinds of companies are still talking about a value-oriented consumer who isn't spending. So I think people are looking a little, a little shorter term into what's a soft patch right now, but perhaps not really seeing how a creative the stimulus is going to be for next year. That's our thought. And to your point, Young Brands this morning, which I think is trading lower. What's interesting to me is this convergence

we're starting to see between AI, between technology and the industrial space. Yeah. It's something that came up with Palantir's earnings last night after the bell, and Alex The CEO talked to me quite a bit about it and his focus right now on the blue-collar worker and this idea of AI-enabled factories and, you know, re-industrialization, et cetera. But it's also something that came up in my conversation today with Honeywell's CEO, Vimil Kapoor. And I asked him on the heels of those earnings whether industrial AI, the promise of it is finally being realized. Take a listen. One thing I hear now, what I've never heard is customers are short of people. And it sounds, you know, they don't have skilled people to run their operations.

and they are looking for a substitute that what to do differently because you can't have more people, because they don't simply exist, the kind of skills we are looking for. So I really see that industrial AI is going to enable our customers to run their operations better and fill the skill gap what exists. And we are basically in year zero of that. So what was interesting to me about this conversation is Kapoor is not just stressing increased productivity. He's stressing increased growth from the promise of industrial AI. We talk about the so-called picks and shovels, the inventors.

videos of the world and even the application layer with Palantir, but do we need to be focusing more now on some of these other physical manifestations? Absolutely. I mean, if you think about it bigger picture, it's great for companies to be reshoring and investing in factories in the United States, but they have to be competitive globally, right? And it's hard to make them competitive globally unless you have automation. So that automation and that investment in factories and rethinking what a factory floor is supposed to look like and what it is going to look like is part of, I think, what we're going to see. I mean, I really think that the way we think about reshoring is different than the old way we think about bringing back labor and labor-heavy kinds of factories.

And that's absolutely what we're hearing companies start to talk about. AI and the returns that we're going to get on that, the productivity returns, they're very, very broad. We're just scratching the surface of what we're going to see and the amount of improvement that we're going to see in productivity everywhere. It's not just industrials. Of course, we're hearing people talk about developers and early stage developers being automated. But that's absolutely going to get into car factories and all sorts of traditional industrial investment. So whether it's that theme or just others that we've touched on here in this conversation, looking across the broader market, what do you invest in right now? What are your picks?

Well, look, we're looking at early cycle. We're looking at early cycle, and that means industrials. So for growth managers, this sounds very strange, but we're overweight industrials. think that those companies, they have had a multi-year slow patch. And I think if we're right, that we have a better economy in 2006, the industrial economy, we are going to see a broadening out. And that's a place that's really interesting. We're also been looking in consumer discretionary because another early cycle, right? That's restaurants. If we're right that the economy improves next year, restaurant sales are going to get better as well. So those are some places where we're

looking. Of course, we own a lot of tech. We are a growth manager. But, But a lot of those companies are very well loved and very well understood. As you see with Eaton today and the reaction with very good numbers, because a lot of people are crowded in that trying to find another way to play AI that's not a magnificent seven name. Interesting. So in light of all of this, I just gave me some top picks here, what are you watching?

What do you think is the next big catalyst for the market more broadly? Well, I mean, we do think that the back half of 2025 could be rough. We think that people may not be really understanding the impact of tariffs. And so that's the opportunity. That's the weakness where you take advantage of that weakness. But, you know, what you've seen thus far is that you haven't really seen an enormous impact of tariffs. You've seen S&P companies that have reported March has been flat. And what does that tell you?

That tells you that a lot of companies aren't really sure if tariffs are going to stick. And so they're saying, we'll just eat it for now and then we'll see. Well, the longer they stick, the more companies are going to say, we're going to pass along these higher prices. And that is, I think, going to lead to more challenges in the back half of the year. But that is the darkest before dawn. That's where you kind of take advantage of what you think is going to be better in 2006. Okay. Margaret Bertrano, thank you for joining me.

Great to have you here. Take care. Well, turn to the bond markets. Treasury issuing $58 billion in three-year notes today ahead of its record $100 billion auction of four-week bills on Thursday. The government is pushing to increase liquidity after Congress raised the debt ceiling by $5 trillion back in July. For more, let's turn to Rick Santelli in Chicago.

Rick, what are you seeing? Well, you know, Morgan, you touched on something important, and it wasn't only the bills were expecting $100 billion, $4-week bills on Thursday record size. We had bills today. We had one-year bills today, $50 billion, second $50 billion ever, one in July now, never been a bigger one. We also had a six-week bill auction, $85 billion, never been a bigger one. And if you look at that three-year auction, it was $58 billion.

There's never been a bigger one. It's the 17 consecutive auction at $58 billion. We had 10 of them and $21 at $58 billion, but never bigger. The point here is size keeps growing or staying at historic levels. Why bills? You know, Janet Yellen was issuing a lot of bills. This administration before it was elected during primary season. season kind of pointed to that as a negative, but they're doing it as well. Why? Because there's

this optimistic view that down the road, interest rates are going to be cheaper. Coupons live longer, so they're issuing shorter bills because they will disappear and supposedly interest rates go down, then we'll issue more. Let's see how it turns out. Price is paid today, a whisker under 70. You see it on the chart. That's almost the highest in three years. That changed everything. You heard Mike Santoli earlier? Yes, ISM was weak. Markets paid attention to that, but one market didn't pay attention to that. Short maturity treasury yields. Look at twos and tens on the same chart.

Tens kind of ignored it. They were looking at the weakness. Tews, twos went up. It definitely flattened the curves you see, which steepened dramatically on Friday. So what's going on? Friday it made the Fed look like, wow, imminent easing cycle, maybe a growing easing cycle. Prices paid went the other direction. So this is something we really need to pay very close attention.

to Morgan, back to you. All right. We'll keep an eye on it. Rick Santelli. Thank you. We've got lots more show to come. Here's what's on the menu. First, a checkup on the health care space.

Plus, Disney on deck. What's the most important thing to watch? And a big interview. Bank of America's Brian Moynihan live on Power Lunch. We'll be right back. On pharmaceuticals, we'll be putting a initially small tariff on pharmaceuticals. But in one year, one and a half years, year's maximum, it's going to go to 150%, and then it's going to go to 250% because we want

pharmaceuticals made in our country. Well, that was President Trump weighing in on pharmaceutical tariffs earlier this morning. Lots more news in the health care space today. We're starting with news that just crossed a few moments ago, Novo Nordus expanding legal action to protect patents from unsafe non-FTA-approved semi-glutide. And joining us now is CNBC Health and Pharmaceuticals reporter Angelica. Bulls and CNBC's Brandon Gomez. Let's start right here. And Brandon, I'm going to kick this off with you. You're on set with me because we did see hymns and hers. They reported earnings after the

bell last night. It was ugly. They clawed back to the flat line and now they're down again on this headline. Yeah. And there was this conversation too about would Novo take additional legal action in order to protect its rights to produce these drugs and to really fight back against the compounders. Look, you saw the breakup happen earlier in the year where Novo joined as a partner and then said, look, if you're not going to supply our branded drugs to the consumer base, then we have no interest in this partnership, right? And so they actually broke up that deal. There was a question on the earnings call last night as well about how they're navigating this space. I mean, Andrew Dutton, the CEO said, you know, we saw the meaningful step down primarily as a result of off-boarding

for their own commercially available decisions of GLP 1. So basically, he's saying that there has been consumers who have now been transitioning over to these branded drugs like the OZEZEA. Zempix and the Wagovi that Novo supplies. The question is, is how is the company then going to still push its compounded drugs that still legally can, right? That's still part of the conversation. But how is that going to impact results long term? And Angelica, I want to get your thoughts on this. We've got a bunch to talk to you about with earnings. But first, the read through to Novo and also to Eli Lilly and just sort of these giants in the GLP one space in general. Yeah, well, I don't think we should be surprised by this action from

Novo. Remember last week, they significantly took down their full year guidance because in part of the compounded GLP-1s. And they're saying that they expected that that compounding was going to go away earlier this year when technically mass compounding was supposed to stop and that did not happen. And they've said that they're going to pursue more legal actions. So like you said, 14 new lawsuits. And they say that they've now filed 132 lawsuits in federal court. And so this is going to be something that's going to remain an issue for them. Tomorrow they report earnings, so we'll get a better idea of exactly what they saw in the second quarter and what they're expecting from the rest of the year.

Now, this has been an issue primarily for Novo. It's weighed on them. And we also do hear from Lilly on Thursday, but analysts are not expecting that this will be as big of an issue for them because really the compounding that we have seen has been focused on salmaglutide. That's the main ingredient in Ozempic and Wagovi. So much more to hear on that from both of those companies this week, Morgan. Meantime, Angelica, Pfizer beat and raised this morning.

What's the re-through, especially as the president is talking about these tariffs that are coming? Yeah, this was a really broad beat for Pfizer. The company saw strength across really most of its drugs and vaccines, some of the ones that I would call out, Vindicil, that's a heart drug, also eloquist, that's a blood thinner. And really, we also saw a surprising COVID beat as well. but they didn't raise their full year sales guidance. They said that they wanted to be conservative going into the fall when we do see the bulk of those COVID sales. They did go ahead, though, and raise their full year adjusted EPS, and that's really due to cost cutting.

Remember, they've been on this path. They're planning to cut about $8 billion in cost, and they also saw a lower tax rate in the quarter. And that also does, it does incorporate the impact of tariffs. they didn't want to spell out too much of what they're seeing, but they are assuming some some tariff impact as well as possibly lower prices as a result of that letter they got from President Trump last week. Remember, the president sent letters to 17 large drug makers asking them to lower the price of drugs in the U.S. so that they're closer to levels that we see in other countries. And analysts tried to ask a CEO, Albert Borla, probably a thousand different

ways about how those conversations are going. And he really didn't want to say much beyond that those discussions are ongoing and that they remain productive. It sounds like he's talking to pretty much everyone in the administration, from the president down to the secretaries and anyone who will listen. So, you know, we tried to get more, but we'll have to see exactly what happens with those. Yeah. So it looks like some changes afoot on the policy side for vaccines, too, which could be impactful for them. Angelica Peebles and Brandon Gomez, we have to leave the conversation there. Thank you both for joining me. Well, coming up, there is lots of angst this August.

Many expecting bearishness over the next few weeks. So how should you prepare? Market Navigator is next. Welcome back. Turning now to today's Market Navigator. It is August. It's the start of the two-month period where Wall Street typically has its worst performance of the year.

But are there certain sectors or types of stocks that could buck that trend this time around? My next guest says yes. He's here to fill us in on his picks. Joining us now is Jay Hatfield. He's the CEO and CIA and Infrastructure Capital Advisors. Jay, it's great to have you on. And let's start right there. What are you looking at? What do you like in this market environment? Thanks, Morgan. It's great to be back. As you mentioned, really throughout the segment, it is a more problematic time of year. We're more neutral on the market than negative. We have a 6,600 target, and we think we'll probably exceed that target. But the big point is by year end, not during the fall. So it's good to have a diversified portfolio. And so some of our funds are more dividend-focused. And so, for instance, in our AMZA fund or pipeline fund, one of our biggest overweightes is LNG

Chenier. They're the biggest exporter of LNG in the United States, only a 0.6 beta stock. So, for instance, on Friday, it was actually up when all the tech stocks are getting smoked. And, by the way, other high beta stocks like financials, Goldman, Morgan. We also hold some of those in our ICAP fund. But so defensive, great long-term gross story, underappreciated. Natural gas is the critical transition fuel. Our natural gas is 80% cheaper than the rest of the world.

It's going to be exported. And then finally, the president and his team is out there promoting U.S. exports. And the easiest thing for people, for other countries to agree to, is to buy a product that's 80% cheaper than the rest of the world. So we think that's an additional growth driver, not that there needs to be a whole lot more tailwinds on the natural gas export business. Yeah, energy and also weapons. Defense seems to be one of those negotiating tools as well in terms of the trade dynamics. I've been hearing a lot from investors that we're seeing a bifurcation in the market.

Do you see it the same way? And if so, what does it take for some of these, for example, dividend players to catch up to some of the high flyers? Well, it's really, there's an easy indicator. If you want to know whether it's a tech day or old economy slash dividend stock day, just look at interest rates. That's the best indicator. So, for instance, say small caps are actually up there, interest rate sensitive because they own a lot of utilities and REITs and other interest rate sectors. So I would follow that. We are bullish on rates.

We have a 375 target on the 10-year. So we do think that these old economy stocks and dividend stocks will perform well. It's just that if the market's way higher, of course, tech stocks are outperformed. But they have much higher risk. Like most tech stocks have twice the risk of the market. And most of the conservative stocks, at least we're talking about today, are half or less. Okay. Jay Hatfield.

Thank you for joining me. Thanks, Morgan. Well, coming up, Disney Plus or Disney Minus? ESPN. How important will sports be for the company's earnings? We're going to discuss that next. Welcome back to Power Lunch with Disney sets to report third quarter results on Wednesday before the bell. Investors will be keeping a close eye on theme park revenue and streaming subscriber growth. Disney shares have jumped nearly 30% over the past three months, but the stock's recent run has cooled off as of late. It's falling about 4% over the past month. Julia Borson joins us now to break it all down and give her predictions on what we may or may not here tomorrow morning.

On the call, it's so good to have you on set. It's great to be here. All right. So is that it's parks and streaming? Those are the two key areas of focus. And I think if you look at where Disney has made its big bets, it's really in these two areas. It was almost two years ago that Disney said it would be investing $60 billion in its parks and experiences division over the next decade. And here we are two years into that.

And they have some new competition in Florida and Epic University at Orlando. So the question is, is that starting to impact the results? And what are the Parks and Resorts Division and the Parks and Resorts Division and the, and the, exposure around the world seeing in terms of the strength of consumer spending and the bookings, how much are people spending at the park? What are they planning for the rest of the summer? Pricing for the parks? I know that we had years of that going up and then consumers pushing back on it. Is that something that's been adjusted? I think that the question is not whether the price increases are going to stick around. I think they're here to stay. The question is how much more are people spending

once they're at the parks. Are people shortening the number of days they're going to Orlando because maybe they want to spend more time at Epic Universe? And what are we seeing elsewhere? What's happening in Paris? What's happening in Asia?

So that's the key thing for the parks. And when it comes to streaming, the reason the stock saw such a pop three months ago when they reported is because they added about 1.4 million streaming subs instead of losing subs, which is what was expected.

This time around, they're expected to add about 1.5 million subscribers to Disney Plus, and we're also waiting this new bundle. ESPN is launching its full streaming product. We're expecting that within the next month. We'll see how that bundle ESPN combined with Hulu,

combined with Disney Plus, really not only drive subscriber growth, but minimizes churn. Disney wants to make sure that its bundle of services, plus some perks they're now offering, really keep people locked in, so you have no reason to ever drop that bundle of three services. And we've had those conversations about speculation of the end of the cable bundle with the launch of ESPN Plus.

Overdone? Well, I think there's going to be some bottom. I think there's going to be some limit to how low cable subs will go. There was some question. Maybe it's around 50 million subs. We've also seen companies like Charter weave in streaming subscriptions to their cable bundle. And in a way that both bolsters streaming subs and also protects the number of people who are subscribing to the cable bundle. All right.

Julia Boreston. Thank you. It's great to be here. Good to have you here on set. We'll be tuning in tomorrow with all those headlines from those Disney earnings. Let's get over to Bertha Coombs for a CNBC News update. Hi, Bertha. Hey, Morgan.

Russia is reportedly weighing an air truce with Ukraine in an attempt to deflect President Trump's threat of secondary sanctions. Russian President Vladimir Putin is not expected to meet demands for a general ceasefire before the president's Friday deadline. But Bloomberg reports a pause on airstrikes could be a de-escalation gesture offered by Russia during talks this week with Trump's envoy, Steve Whitkoff. Media mogul Rupert Murdoch agreed to share. regular updates on his health with President Trump as part of an agreement to postpone his deposition in Trump's $10 billion defamation lawsuit. The president filed that lawsuit over a Wall Street Journal article which said he had sent the late sex trafficker Jeffrey Epstein a birthday card in 2003 for Epstein's 50th birthday. Trump denies writing the note. And the Trump administration is

getting rid of Elon Musk's initiative that, Ask federal employees to summarize their five workplace achievements from the week. The Office of Personnel Management tells NBC News it will email HR representatives today to announce the end of that requirement. Morgan, if the president were going to line his, it would have to start with his interview this morning with CNBC. That was so extensive. It was extensive. Bertha Coombs, thank you. Well, coming up, we're going to head live to Aspen.

Andrew Ross Sorkin is sitting down with Bank of America's CEO Brian Moynihan. We'll be right back. Crypto Watch is sponsored by Crypto.com. Crypto.com is America's premier crypto platform. Welcome back to Power Lunch. The Aspen Institute's annual Economic Strategy Group meeting is underway where leaders in business and public policy are gathering to promote solutions to the economic challenges in the country. Our Andrew Ross Sorkin has been reporting from there all day and joins us now.

with a special guest. Andrew. Good morning to you. I should say, really good afternoon. Joining me right here in Aspen is Bank of America's CEO, Brian Moynihan. And I originally planned to talk to you about the economy. I still do. But I have something that was not on my bingo card this morning because we talked to President Trump on Squawk Box about this executive order that he's planning around banks

who he thinks discriminated against conservatives. And your name came up. And so I just wanted to show you what he said. and wanted to get your reaction to that. What happens is I call a Bank of America routinely, because when I was president, this was after I got out by the way, I call a Bank of America routinely,

and I speak to him, and I speak to a couple of people, and they have zero interest. Brian was kissing my ass when I was president, and when I called him after I was president, to deposit a billion dollars plus, and a lot of other things, more importantly to open accounts. And he said, we can't do it. No, we can't do it.

You heard it. Were you watching TV when this was happening? So I got up early because we're on East Coast time. I was working out, and I was watching Your Wonderful show, and he came on, and I'm telling you, I'm still trying to unsees some of the visuals that he created with his commentary. But look, the president's after the right thing, which is the laws, rules, and regulations around our industry became used to cause things to happen. It's what it's B-S-A-M-L, whether it's K-Y-C, whether it's reputational risk.

And you hear Tim Scott quote about it, it is right to go look at these rules. Because the end of day, they are causing decisions to be made that can be looked at in retrospect and differently. We should get these rules right. So our company, my colleague company's industry, has been working with the Treasury Administration today in this administration, trying to figure out how to get these rules balanced so that we're not subject to this swinging back and forth, and it's after the fact, look. So the president's on the right issue. He asked me about it in Davos.

We were there. He asked me, he talked about this morning, and I'd welcome getting this fixed. At the end of the day, we bank 70 million consumers, more small business than anybody else, 12 million small businesses, more middle market companies. We bank everybody. But the reality is we want to make sure that the rules and regulations don't cost, decisions we made, that then are looked at in the aftermath and dealt differently. Do you worry, though, at all about either your firm or other banks, a form of sort of retribution?

I mean, one of the things we did see was in the context of, for example, the law firms. Yeah. Look, at the end of day, we'll get through this and get some rules written, and then we can follow them. And let's lay it all play out. But I think that the presence is on the right issue, which is we've got to stop the regulars behind the scenes of whipsawing back and forth and forcing our companies and companies like ours to make decisions, which Congress hasn't passed on or he hasn't passed it. Let me pivot to the economy, which is the topic and debate that's happening here, which is really just how strong it is or is not. You saw the jobs numbers on Friday. But there's a lot of folks here who have sort of varying views of what's really going on. You actually have the data. So I'm curious what you're actually seeing. So look, our economists believe there would be no recession. They believe the economy in the U.S. would go about 1, 1.5% this year.

They believe that the Fed will not cut rates because inflation will take longer to get down. That the Fed will not cut rates? During 25. They'll cut them to 26. And they've been on that for a long time. And they believe that, and even with the tariffs came in, they said, all that would cause less economic growth this year than they were other than scheduled, but still no recession. As you go forward, though, what we have that's unique is we get to see the data what our consumers are doing. And so if you look at them during the second quarter, April, May, June,

April, May slowed down a little bit of Liberation Day. June kicked back up, and July has been stronger. So for the month of July 2025 versus the month of July 24, our consumers pushed 5% more plus into the economy from their accounts. In terms of spending? Credit card, debit card, checks written, money out of cash out of the ATMs and spent Zell payments, wires, ACH, all those things, five, five and a half percent more, which shows you that they're still in the game and pushing. Now, it's interesting, a little bit more quick service of restaurants versus, you know, higher-end restaurants or a little bit more at close because of the summer building of the school versus something else. Entertainment strong. Flights have come back a little bit. So a lot of

different nuances, but the end of the day they're just spending more money, and that's not a small sample size. It's $2.5 trillion so far this year. And what do you see between the distinction of people's actual outlay of cash versus looking for credit from you? The credit quality of our customer base is very strong, and in the industry is very strong. You just saw the Fed stress test. So the credit quality is strong. The capacity to be able to borrow is high. Lines of credit usage for consumers for the home equity loans are still down 30% from where they were pre-pandemic.

And house prices have gone up. So the capacities there, the delinquencies are good, are trailing down. And so they have capacity. When you look at different segments, the median income, twice-mead income consumer, gets a little more stretched. And you can see them move around a little bit more. You can look at Gen Z spending a little bit less growth over last year, all growing,

but you can see older cohort spending more, probably because they're cash flowing. So all the issues are out there, all the hearings, but I always say, don't listen to what people say they're gonna do, listen to what they do, and what they're doing is still spending money, which bodes well for the, even with the tariffs, that this thing keeps working through the system. Okay, so that's a question though.

If you look at those numbers, the spending numbers, and you sit around and then look at the employment numbers, you see a disconnect and what would your economy when you sit around the table look what do they say to you well the disconnect is job growth not and that's what got restated and we can talk about that but the real factor is the unemployment rate in the u.s at 4.2 plus or minus is through full employment and what our economists actually say is the supply of labor is going to be a constraint on job growth not the demand for labor and so that frankly leads to potentially wage inflation so they're saying because of changing immigration rules and regulations,

because of just the dynamics that we have to grow workers every year to keep this great economy going. And so they're saying that the hesitancy around corporations to act given all the uncertainty they're facing, hiring and stuff is slow down hiring, but doesn't mean they're letting people off in mass. And that's the distinction gets lost. So yes, you saw a revaluation of the job growth.

Yes, that, but unemployment is still 4.2%. Andrew, for most of our business careers, five and a half, five, it was considered to be full employment. We're way through that. Tariffs. Do you think we've actually seen an impact? And do you think that we're going to see an impact? Meaning is it already baked into the market or not?

I think what our clients, I was just in Midwest in a bunch of Midwestern cities in the last month talking to middle market companies and smaller businesses. And if you listen to them, the number one thing about the tariffs is they just want to know what the answer is. And if it's really bad, maybe they don't want to know the answer. But as long as we're in the range that's being talked about, they can adjust to that.

that they can start to make it but it affects everybody affects people from the standpoint everybody is buying inputs either to remanufacturing take out or importing and selling or frankly the pricing around them is affected and it's because it's different countries have different rates if i got my stuff from vietnam and somebody else got their stuff from mexico we might have different pricing so they just want to know the answer what i think has happened from liberation data now you're starting to see the goalpost set the outside goal post to maybe 30 or something like that seems to be the high end and then the low end 10 percent so people are starting to okay I can at least plan but they've got to plan their business cycle for next year

they're already making the plans as they move into the fall for 26 and what they'd like to see certainty and so I think you hear that and Secretary of percent and they're saying we're going to get these deals done so people then can plan and then you can see the economy come out the other side one of the reasons the market seems like it's been as resilient as has been AI and you're investing hugely in AI but I'm also curious do you probably have a lot of clients coming to you saying I want a big loan because we got to go build some data centers how are you thinking about making loans in the data center

or even around the sort of AI ecosystem when it comes to energy and energy companies, because there is also a question as to whether we are living in some kind of enormous bubble that we don't know it. So looking ourselves as a consumer of data information, data center capacity, we have 30 data centers, and we also buy outside. You can see there's just a relentless need for information technology, computer processing, and now these GPUs a special case. So that's going on. How we actually underwrite credit is we look at it.

What's different about these is a lot of them being built with big purchase commitments for very powerful companies on the other side. In other words, I will take the 100% of the data center down. And by the way, I'll buy the power for the data center, which is a little different than building something on spec. So think of a fully tended up building. It's a lot easier to lend against that

than it is against it. Look, the power of AI is interesting, but it's a continuation of a thing. In 2010, when the team took over, we had 3,000, 285,000 people. We went up to 305,000 people. We have 212,000 people. That's all application of technology.

Our company's bigger, more transaction, more regulatory rules. You have 8,000 people in risk. We probably had 3,000 people back then. You know, we have 1,000 auditors, we had 400. So all this infrastructure, yet the head counts come down. So the amount of people work on a retail system that is almost triple in size is basically half of what it was back then. That's all application technology.

What AI gives you is a place to go that is far different because it takes people like you and me who read stuff, put it through our brains and came out with what to do about it. It provides the ability to make teammates who can use it. teammates who can use it much more effective. That's why I think the promise is there because it goes against jobs that are different. Now, our job is to manage that human being questioned carefully. And we did it for the last 15 years,

going down 80,000 people in total. And we've got to manage it. And that's why I say to my team, we should not be hiring people unless we're sure they're going to survive our application technology. One topic that I keep hearing about here is the issue of treasuries, who's going to buy treasuries,

and this idea that folks who are in the stable coin business, and you're about to try to be in the stable coin business, are going to end up buying lots of stable coins, or rather, I should, lots of treasuries to back the stable coins, and that there's going to be a whole sort of new set of buyers. And I don't know if you think that that creates a new market for treasuries, or it's just a replacement cycle for those who are leaving. I'm more on a ladder because if you think about the money's got to come from somewhere, right? So if it comes out of the banking system into the stable coin system, like it did with money market mutual funds years ago.

So today, there's six trillion in money market future funds, like $18 trillion of deposits, right? So if you took another $6 trillion out, that would go into the stable coin environment. But it would probably be, there might be a little bit of incremental growth. It might be a little foreign growth. But the reality is, it's not much because all that money was in the banking system. And at the margin, those of us are not loaned up, we end up buying treasuries at the margin. We owned a half trillion dollars of treasuries today. Not theoretically.

We already own it today. And that's because our deposits, which grow faster in our loans are $2 trillion, and our loans are trillion. So we have excess money to put to work. So I think it does introduce a marginal buyer. But the thing I think we have to think through is that marginal buyer can't support the economy other than to buy treasuries or cash. And so money market mutual funds, they take the money to keep the dollar state, the buck stable. What do they do, they do that.

What a bank does is it takes the deposits and lends them, and that helps the economy grow. And so the implications as to the banking system are that when we have less lendable dollars. And therefore, that might put constraints on lending. That's what people need to think through because the stable coin environment cannot take risk or else it's not going to be dollar certain. And then finally, capital markets, we saw the Figma IPO. Yeah. How many calls did you get after that to say, okay, we got to go take, we got to do this now? The pipelines have been full.

After the election with enthusiasm of a new regime and a less better regulatory regime, which is still coming ahead of us, a more robust thing, getting the tax law. So the pipelines have really been full now for six months or so. The problem is, is liberation day, every step back. The pipelines are full. You're seeing the IPOs go through the system. You're seeing the MNA deals get done. we still got a lot of room to do to make up the trough that was put in the second quarter.

We thought we were going to do X and we did 200 million that quarter more in investment banking fees. So we feel very good about the pipeline. The team is out there. The conversation is going on. Now the question is price. So you're starting to see this bid and ask between the buyers. So that's what we ask you. Do you look at that IPO and say that's a successful IPO or do you say that that was a complete mess?

I mean, a lot of people looked at it two different ways. You'd have to ask the investor side how they felt, how they'll feel two weeks from now. But the end of day, the company got a great price for its stock. and the investors got a good return. The good news is that as the deal got done where money went back to investors because that's been a lockup. But I think in a broader IPO,

I mean, that IPO is a little unique, but in the broader IPO market, the ability to get companies public will help the private equity firms start to liquidify their portfolios. But when I go to talk to buyers, strategic buyers, they look at the price and they say,

I've got to get this line. And then they have to wait for the tariffs and stuff to set up, because if I buy in a company whose margin depends on imports, I've got to figure it out. So there's a little bit of, watching and waiting. We're going to continue to watch and wait, but we appreciate you spending

time with us today. Thank you. Appreciate it. Back to you, Morgan. All right. Our thank you to Andrew Ross Horkin and Bank of America's CEO, Brian Moynihan. A lot there to unpack. Power Lunch will be right back. Well, before we go, we have a big show coming up on closing bell overtime today. That kicks off at 4 p.m. U.S. including Endrell, co-founder and executive chairman, Trace Stevens. He's going to talk about that defense tech startup, some news there. Also, Palantir. He was an early employee there and the booming defense tech industry and funding across the private markets, because he's also at Founders Fund. Also, Animal Health Care Company, Zouettes, seeing its shares under pressure today, despite raising its annual forecast, it was a beaten, raised quarter for Zouettis.

And CEO, Kristen Peck is going to join me in overtime exclusively to break down those numbers as well. Also, keeping an eye on IPOs. We just heard it from Bank of America's CEO Brian Moynihan. He said the, quote, pipelines are full, talking about the IPO pipeline and also what he's seeing with M&A. Now the question is priced. We get Firefly Earth space later this week. I'll be tracking that one. Also, it's some interesting comments on the labor market. Basically said, we're at full employment that the disconnect is job growth. It's a supply of labor. That's the constraint, not demand, which could mean wage growth. That's going to do it for us here at Power Lunch with major averages under pressure except the small caps. Closing bell starts right now.