Power Lunch - Stocks Sell Off After Soft Jobs Report 9/5/25

Episode Date: September 5, 2025

Shares of Lululemon slid after cutting its guidance. Stocks sold off after a weaker-than-expected August jobs report. And what should investors make of the proposed new Tesla pay package for Elon Musk? It's all right here on Power Lunch. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks heading for another warm week, even as the job market cools down. Welcome to Power Lunch, everybody. I am Brian Sullivan. Kelly is off again today. The NASDAQ set to post another up week, even as markets can't make up their mind today. We'll hit the real economic story and if the Federal Reserve completely missed the boat, Rebecca Patterson and Mohamed El-Ehran are here. Plus, why one big retailer may go from bad to worse, what some say could be the next, VINVIDIA and how OPEC may change the oil markets again when it meets this weekend. Happy Friday, everybody.

There is a lot to do. Glad you are with us. Let us start with the markets and your money. The monthly jobs never coming in much softer than expected. The government says that just 22,000 jobs were created in August. 75,000 was the median forecast. The unemployment rate, it ticked up to 4.3 percent. That, the highest, it's COVID and the lockdowns.

It is clear. U.S. economy has been slowing for some time. Don't believe us? Look at that. It's a little rough, but it's a three-year chart of job creation. You can see the gentle slope down. Outside of a couple of outliers, it is clear that things have been slowing down for some time. Maybe it's COVID money drying up. Maybe it's the impact of AI in the economy. Maybe it's immigration. Maybe it's something else or all the above. We can talk about it. But we also need to ask a basic question to kick off the show. How do you invest in what appears to be a slowing but still growing economy? Rebecca Patterson, former chief investment strategist and Bridgewater

Associates, also a senior fellow at the Council on Foreign Relations. Is it wrong to characterize this economy as slowing but still growing? From the labor market perspective, it's definitely slowing. I would even say stalling. You know, the challenge is going to be the disconnect between GDP reports and labor reports in the coming months and maybe quarters. But I think labor and consumption are what you want to be focused on. So to the degree the labor market keeps slowing, eventually that makes consumers more cautious, they have less income. And then the equity story topples over, the GDP story topples over. Why do you say there's a disconnect between GDP and jobs? Well, I mean, without getting too wonky on a Friday afternoon, Brian, you think about stuff like

trade, right? If we are importing more, that's usually a sign of a strong U.S. economy, but that actually takes away from GDP. So when you think about the GDP number, a lot of people will say, let's break it down and look at the pieces of it. So that's the only thing I'm saying now. When we get those headline GDP numbers, ignore the headline, go into the weeds and look at the components of GDP and what's supporting it. We know this year, for example, between the end of last year and the middle of this year, AI, effectively, data centers, CAPEX, that was a bigger contributor to GDP than the consumer, which was already starting to cool. So is it possible, then, to have a stable or slightly growing economy, but almost no or

little to know job growth? Can both things be true at the same time? For a period, for a period, probably yes. Again, the AI CAP-X, which has been like private sector stimulus, hundreds of billions of dollars a year coming year after year, that's a structural story. Eventually, the economy, if it slows enough, will probably slow down that CAP-X as well. But for the moment, that's going to be there supporting GDP, even if the labor market's cooling. So we can't see a disconnect for a bit, but eventually, I think, again, if people don't have jobs, they can't spend. And you and I both know that consumption makes up more than two-thirds. of the economy. So you need the jobs to have the spending, to have the GDP, ultimately. At some point, probably I need to talk about universal basic income, but that's a different segment for a different day on a different show. I know. It's a different segment, though. How do we invest? Let's say we have this. AI, companies don't know what's going to happen, so they're not hiring, but we kind of plug along. What does that mean for the stock market? Or does it mean anything, Rebecca, because AI and the energy trade has been what's

dominated everything anyway. So I think it's a great question. And I get nervous at a lot of the stuff I read, people assuming that the Fed will bail us out. And this will just be like the cycles we've had for the last 20, 30 years. There's something very different today about this regime, which is the level of inflation. And we're seeing this. We have stagflationary trends directionally. So growth is slowing.

Inflation is sticky. And I think rising. And I think we'll see more evidence of that in the next CPI report. So the Fed may cut, but they're not going to cut as much as what's priced in unless the economy slows so much that they cut despite inflation or that slowing economy pulls inflation down. If the economy is slowing that much, that's not great for stocks. But if we're just at stall speed, stocks can do okay. You just want to be careful about which ones you're in. You want to be large cap rather than small cap in a slowing economy, generally speaking.

Generally speaking, you want to look for what I call low beta markets. markets that have lower volatility than the S&P 500. Historically, that would include things like Switzerland and the UK, but right now in the current environment with tariffs and fiscal problems in the UK, I'm not sure that works so well. I think you need to look at structural trends, the AI beneficiaries. Yes, they're overowned and highly valued. So you've got to be careful there, but those AI beneficiaries have a structural support. I think global defense has some structural support.

utilities building out that energy demand. You need the supply. That's going to have some structural support. So there are some places to go. They are going to be sensitive to the cycle, but they do have some underpinnings that other companies don't. What do you make of the run on gold? We showed yesterday that I know it. That's not a random question, Rebecca. Over 20 years, and we stole this data from Charlie Bellulo at Creative Planning. Over 20 years, the American stock market and gold are both up exactly the same. 600, I think it was 654, 638%. I'm going off memory.

Yeah, that's what we said. It was wow, was our RBI yesterday. Gold, all it does is make record highs. What's going on with gold? Well, it's going up for different reasons at different points in time. When I first got bullish about two years ago, it was my expectation that China was both going to be diversifying

in terms of the central bank reserves, but that Chinese households were buying because they didn't know where else to go. They couldn't go into housing. They couldn't go into stocks. They didn't want to own deposits. Today, yes, you're still seeing central banks diversify. So that's an ongoing support. But now we're seeing, I believe, more global investors looking at gold as a hedge against upside inflation risks. And that could happen if we see the Fed politicized. They're looking as it as a hedge against fiscal unsustainability, bad language on a Friday afternoon. But they want hedges against a weaker dollar, that's going to happen as well if the Fed gets politicized.

So I think you're looking at it differently today than you did two years ago, but the story is the same. I think there are some pretty important supports for gold, and even here at these levels, I would still be bullish. I think it's a compliment to your fixed income today in this world of slowing growth. One last quick thing on that, this is a crazy one. It tells you the world we're in emerging market local debt. And you might say you want emerging markets if the world is slowing. Well, if the yield is that much higher than the U.S. yield, you're worried about dollar weakness. And these countries actually have low inflation now and can cut interest rates to support growth.

It's become a bit of a bond diversifier, if you will. And they're actually outperforming on days like today. A lot of money has been made in the Mexico market the last year or so, Rebecca. I mean, who would have thought, right? At the beginning of this year, big tariffs coming on Mexico, you know, threats that there's going to be, you know, U.S. soldiers in Mexico. And yet, here we are. The Mexican peso is significantly stronger against the U.S. dollar. And those, that yield story is helping drive money into some of these markets, not every emerging market, but a lot. So there are places to go right now and make money, even in a slowing, stalling economy.

Sometimes the stock market globally and does things that you'd never imagine that it would. Rebecca, we'll let you get away with the bad language because you didn't say transitory, so it's fine. Rebecca Patterson, thank you very much. Thank you. All right. Mehta, the bond market, seeing a move on the back of that jobs number, the 10-year yield, getting very close to breaking back below 4%. Rick Santelli, joining us now with more from Chicago. Rick. Yeah, this is a big day for a number of issues, and I'm going to go pretty quick, so buckle up. Intriday of twos and tens, obviously, after that really weak jobs report, yields drop. Right now, as we sit, we're down 13 base points on the week on a two-year. You're down 15 base points on the week on a tenure, and Brian nailed it.

Let's look at a chart that starts in early April. You see the left side there? That's the 3.999% low-yield close, and if you open the chart up, it's the low-yield close of the year. Now, if we take that out, we're going to be hovering at the lowest yield close possibilities, since October, a little over a year ago, I can't stress how important it is because 10-year, most treasuries love to have double bottoms. So if we hold the 4% area and start to move higher, technicians might start to sell what they've been buying the last couple of sessions. But here's

something really important. On the S&P 500 today, it has a higher high, which means an all-time higher high than yesterday, obviously, a lower low by a smidge than yesterday. If it now, closes below yesterday's low, they call that a key technical reversal. You really want to monitor that type of technical. It's easier presented on a bar chart. Brian, back to you. Rick, thank you and have a great weekend. All right, speaking of bonds, you may not care about bonds, but you might care about mortgages. Maybe you want to buy a home. Well, mortgage rates are also reacting to the jobs data in a big way. In fact, Diana Ollick, I saw a big red flashy headline on CNBC.com that said mortgage rates have their biggest drop in one year.

And you stole my headline, right, Brian? That is it. A biggest drop since August 1st of last year when we got a similarly weak jobs report and weak tech earnings. Now today, the average rate on the 30-year fix dropped 16 basis points to 6.29%. That's according to Mortgage News Daily. And that is the lowest rate since October 3rd. So we're finally breaking out of this high 6% range that it's been in for many months. Now, many lenders are priced better than this, actually, at 6.125%. And many will be quoting in the high fives today. That, according to Mortgage News Daily's Matt Graham, the C-O. It's a major difference, of course, from May when that rate went over 7%. So what does this mean for a home buyer? We're going to do some math. If you're buying a $450,000 home, which is around

the national median, using a 30-year fix with 20% down and not including your taxes or insurance, your monthly payment at 7% would be $2,395. Today, $2,226. That is a difference of $169 per month. And for some that may not sound like a lot, but it's definitely making the home builder stocks happier than the rest of the market. Names like Lenard, D.R. Horton, and Pulte, all up between 2 and 3% on the day. And check out the home building ETF ITB. It's been running hot for the last month as rates slowly moved lower. It is up close to 13% for the last month. Now, the big question is, will this be enough to really get homebuyers back in the market? It is Friday.

We've got open houses, Brian, this weekend, I guess we'll see. Did you have, what's the name? Is it called Property Play? What's the name of that newsletter? I just want to make sure we know, Diana. God, I love it that you said that. Yes, but now we don't have the big graphic up there. Property Play is our brand new CNBC focused newsletter,

which is really focused on the commercial investor in real estate. estate, not the housing part necessarily, but yes, it drops every Tuesday. It is cnbc.com forward slash property play. Thanks for the plug. Absolutely. Diane Oleg, thank you. Have a great weekend. You too. All right, we are just getting started and on deck. Could the world's richest man, one Elon Musk get even richer, maybe become a trillionaire? Yale professor. Jeff Sonafeld is here with his hot take. The world's richest man may be about to get a little bit richer or a lot richer. Tesla's board of directors asking investors to approve a new pay package for CEO Elon Musk

worth up to roughly $975 billion. A million, a billion. I would give him more than 423 million additional Tesla stock. Proposed plans made up a 12 tranches that's just carved up pieces. of shares to be granted to Musk if Tesla had certain milestones over the next decade. It would also give Musk increased voting power over Tesla, which he has demanded since early last year. Tesla shares, Buckingham Broader declined today higher by about 3.5% stock rebounding well off its 2025 lows jumping 23% over the past three months. Let's talk more about it. Jeffrey Sanofeld,

the Senior Associate Dean for Leadership Studies at Yale University School of Management, CNBC contributor, and, dare I say, a prolific writer who has, let's be honest, you've got some opinions about Elon Moss, Jeff. What do you take about this? Well, you introduced it before the break as hot takes, so I won't disappoint you. I'll make it so hot that I'll direct all the hate mail that comes in your way. Thank you. But I will say that if the Tesla board really wanted a bargain, I think I would. And maybe even you as a media star would still take it for a half a trillion dollars.

Oh, I can be had for a lot less. I just want to be very clear on that. I mean, now, I don't know, Jeff, if the 423 million shares, if that's existing stock, because then you've got to get it from somewhere, or if it's new issues, maybe you do, because if it's new issues, then we've got to get into this issue of dilution. And Tesla, by the way, and I've called it one of the most important stocks in the world, not because I'm advocating for the company, Jeff, but just because they have so many shares outstanding, and it's tied to so many different options. There's a stock market implication here, too.

Yeah, there is. There is an ancient area of securities law that you will remember from your dusty old law school days. I only took one course in it, but I pretend that I knew more on TV about waste and compensation. The term waste, you may remember, with Duke Duke was held to those standards and Duke Energy or Duke cigarettes, actually, tobacco. And they lost it because they pay their CEO too much. And we saw the big thing that took place with Musk recently at Delaware courts and the relocation to, charter themselves in Texas is I don't see there's a role for the government for courts in this. I think it's foolish. I think it's reckless. I think it shows illusional and delusional qualities of the board. But this is the shareholders problem. If they want to sell, they should sell. People who are shorting the stock, obviously. A lot of the shorts haven't done well. It's an issue of timing. But it's, listen, this is the biggest meme stock we've ever seen. Even at its peak, Amazon was nowhere near this level. The, the P.E. on this, well above two, is just crazy. When you've got stocks like Nvidia that are, the price earnings ratio is what,

around 25 or 30, and Apple is where are they around, maybe 35, 36, Microsoft around the same. I mean, this is way out of line to be 220 PE. It's crazy. And they've, I think, put a little too much emphasis on the magic wand of Musk. Let me ask you a different way because you're a professor of management, okay? And I've never met Mr. Musk. I'd love to sit down an interview with Elon. If you're out there, anytime, let's do it.

We're going to show some of the companies he's created. And whatever you think of Elon Musk, I think, Jeff, you would agree with this. There's no doubt that he's got a vision that not a lot of people have had an American or global business history, the boring company, Neurrelink, Twitter, SpaceX, Tesla.

But is any human even being worth a trillion dollars in compensation? No, I mean, we never saw Steve Jobs, you know, what do you have, 11% of Apple, Bernie Marcus of the Home Depot, Thomas Edison, is Bill Gates. I mean, this is crazy that he didn't need an incentive. If he were to leave, who's going to get hurt? He owns, you know, if the stock fell by 50%, he'd lose $100 billion. dollars. If his threats were serious, the board should call his bluff. If bets were serious,

he'd be the biggest loser. That'd be crazy. So, and how could his life be all that different, you know, his lifestyle? It's all the question of ego, not incentives. But you look at those companies. Yeah, he's a brilliant guy. I don't think we'll ever know, and I don't know him, by the way, anybody smarter than Elon Musk and more entrepreneurial. It's extraordinary. But you look at those companies, you know, where's Twitter? How much has it fallen? Is it Rockefellian? Can I make that into like a, is that a verb? Yeah. Rockefellian, but Rockefellian still didn't this heck, this kind of stranglehold.

And the performance across Rockefeller's portfolio was better. Solar City was a failing company that got absorbed. Twitter X, of course, is a disaster under him. The boring company, have to give him truth in advertising, lives up to its name. Where are these 26 cities he's supposed to lash together with these tunnels? They were supposed to be completed seven years ago. Norrlink, you know, anybody's got their nerve bragging about Norrink. These things were way overstated and inflated.

So those, but where it's the tech bros do love to pump up the value of this stock because of his name, a supposed magic wand. But wherever you look around the world, we're seeing the stocks are down 20, 30, 50, 60 percent in various countries. And the only, and the person they attribute the falling stock to is him. The question is, you know, how soon can they incentive to leave not to stay. and to develop a good succession plan. There are lots of people who could step in and take this fantastic company the next stage.

But even in China, BYD now is a third of the market. He once had almost a third of the market. He's down to only 4% in China. And the rest of Europe, he's plummeting in Europe, whereas BYD is dominating him in Europe. It's extraordinary. The Chinese company, BYD, sold some 13,000 vehicles last month. It's up like about 230 percent. Musk fell 40%.

There isn't a part of the world where Tesla is not falling under Musk. So this magic wand is way overstated. Again, he's brilliant, but it's time for every Bill Gates to move on. And it's time maybe to see a succession developed here. And there are some other brilliant titans out there that doesn't cost a trillion dollars. I just can't believe he would leave. By the way, again, he'd be the biggest loser. We're going to get you back on to talk about that.

And BYD, by the way, when you have almost no labor costs, very low labor costs like they do in China. You can do things that others can't, but we got to say goodbye for this segment, Jeff Sonnafeld. We appreciate your view, as always. Have a great weekend. Folks, we are watching Kenview. Kenview is the Johnson & Johnson spin-off.

Kenview stock is down 12.5%. The Wall Street Journal minutes ago reporting that Health and Human Services Secretary, RFK Jr., is planning to put out some kind of a report or a statement that links Thailand, use in pregnancy to autism. We're not agreeing with the statement or not.

We're simply saying what the Wall Street Journal is reporting may happen. Kenview putting out a statement saying, quote, there is no casual link between, or I think they said causal, between acetaminophen, which is the primary ingredient in Tylenol, during pregnancy and autism. Still, the market is selling first, asking questions later. J&J spin off Kenvue, parent of Tylenol, down almost 13% on that.

We're back with more right after this. Our brutal day for investors in Lulu Lemon. The stock is down about 18% right now, one of its worst days ever. Lulu cut its forecast for the second time this year. The CEO came on CNBC earlier and who's asked really about why do they keep missing expectations? It just means we need to play the game better than we've been playing it. There are new market shifts, a new paradigm. we're going to work through those. This management team has tripled this company in the last six years.

We've worked through a variety of challenges and come out ahead. And this is another challenge that we are fully embracing, leaning in to resolve. And then we have what we own and control, which is the product. Some working, some areas of opportunity, and that is the full focus of myself, of Jonathan, of our entire merchandising team. Your next guest has had a sell. rating on Lulu Lemon for more than three years. Randy Connick is a research analyst at Jeffries. Randy, thank you. What did you see in Lulu three years ago that others missed?

It was pretty simple. It's the core of the business was running out of gas. And the company, as a result, was trying to expand beyond the core, selling sweaters, sweatshirts with logos on them, Little House on the Prairie skirts that were down to your ankles. That's not Lulu Lemon. So the company we saw was basically trying to stretch for more growth, and it didn't work.

Pun intended. Pun intended, yes. And now it's running out of gas. Is it fixable? It's not fixable because when they were growing very quickly, there was no competition. It was Lul Lemon was the IT company in the IT space, especially during COVID, which accelerated the growth of athleisure. What has happened since is there's a ton of competition coming into the market. Allo and Viori are a big problem for this company.

There's an Allo store near me. There's a Viori, I get the catalogs, the Allo store. always appears to be packed. Yeah. I don't know who they are. If they're public, I don't think so. What are they doing right that Lulu maybe is getting wrong? Just no ankle length skirts, I don't know.

I think Allen Viori are, they're sticking to their identity. They have a good casual offering. Their fabrications are great. And their marketing is on point. So what's really scary today is both Alow and Viori separately have over 100 stores across the United States. That's a problem for Lulu because, again, five years ago, these companies, you've never even heard of them. A lot of people haven't even heard of them today, but they're... But we had Athleta, right?

Or Athleta? Yeah, well, that gets owned by the gap. That's more irrelevant these days. Even more irrelevant. More irrelevant. But the problem with Lulu is actually the key is where it is relevance. It's still a relevant brand, but it's becoming less relevant to the consumer. They're losing their core customer, and that core customer is going to Allo and Viori.

Well, let's talk about the consumer because we have the jobs on Brow out today, and it was much weaker than expected. You guys have had, it's a Wizard of Oz theme. Lions, tigers, and bears, oh my, on the consumer. What is that? And how do we read it? And who's going to win? Because somebody's going to win. Orden, maybe not? Great. Thanks for bringing up the Wizard of Oz. It's our negative thesis on the consumer. We talk about lions being negative mall traffic or choppy mall traffic. Tigers being rising inventory. So inventories are rising in the retail space for the first time. in a number of years, and they're now exceeding sales growth, which is pretty concerning. It's good for T.J. Max. Well, good for T.J. Max, yes, but not good for most of the mall retailers

that are finally bears, which are at peak margins and earnings. So if you really think about this, 2004 was the best year for retail in 20 years. So if you take that and say, hey, wait a second, mall traffic is starting to get choppy and going towards a declining trend line. If inventories are rising faster than sales growth, if comparisons are at peak, peak their best they've ever done. And finally, oh my, you bring in tariffs. That's going to be a problem for earnings per share and earn power. What happened? The consumer finally with $1.2 trillion in credit card debt finally get tapped out or is there something else here? Well, they're definitely spending a little less. They're getting more price sensitive. You could see, you said it yourself,

the job market wasn't all that great. That means lower wage growth is probably on the way. That means lower disposable income. That means we're going to have some problems ahead with spending. Listen, it's a great call. Sell on Lulu Lemon, and you're not changing that sell. You said it's still going to get worse. We think it gets worse before it gets better. Yeah, not good. Randy Connick, how about that to do a Friday?

Randy, but great call. We appreciate it. Appreciate it. Thank you very much. All right, still ahead. Your next guest says that after today's jobs data, a Fed cut this month virtually guaranteed, but has the Fed already whiffed gotten it wrong?

The legend, Muhammad L.A.N., will join us live next. All right, time for another big, here on Power Lunch, pleased to be joined by Alianz chief economic advisor, Mohamed L. Ariant, Mohammed, good to see you again. Listen, you have been... Well, thank you. You have been fairly critical of the Fed. You've also been critical, but fair. And as the job market has been slowing for over a year, some like the, you know,

the guy in the White House, are wondering why the Federal Reserve has not already begun to act on interest rates. Outside of those rather, some would say bizarre cuts last fall, we asked my ex audience, Twitter, what it thinks. I asked, by not cutting rates this year, the Fed is, A, doing it right, or B, getting it wrong, Muhammad, 67 percent said the Fed is getting it wrong by not cutting rates sooner or more aggressively. Would you agree with that take? I agree with the two-thirds who said that they have been getting it wrong. You know, there was a bunch of us outside and inside the Fed that were arguing for a July cut. And I agree with the Fed. And I'm not. our concern, which is playing out in the data, is that Chair Powell had taken too narrow

review of the jobs market, and by that he was ignoring the weakness that was starting to come to the surface. And the problem, as you know, Brian, is if you don't address weakness in the labor market, it becomes nonlinear. It accelerates, and it becomes much more damaging. So, yes, I think they have gotten it wrong. I think once again, they're late. they will cut in September.

And I suspect there will also be a discussion should they cut by 25 or 50. And where you end up on this depends on whether you think the labor market has a demand or supply problem and what you think the inflation dynamics really are. Can they make, let's assume that you are correct as you probably are.

I would, by the way, agree with you. Can the Federal Reserve make up for a policy, of not cutting rates already by overcompensating on September 17th, by cutting by a half a percent, not a quarter percent? Would that sort of make up for any sins of the past? We've seen this movie before. We saw it a year ago, where they refused to cut in July, and they did a jumbo cut 50 basis point in September. I think this time around, the risks to the economy are higher than they were a year ago.

because we've eroded, as you just discussed earlier, we've eroded the financial security of lower income households. So could they catch up? Yes, they could. Hopefully they will. But it's a more risky operation than a lot of people expected to be. Yeah, they made the cut last year. And then, of course, this year it's become overly politicized

because the president's gotten involved, had the public spat. You know, now they're trying to remove a Fed governor. It's just gotten so muddled. But let me ask a different question, Mohamed. Do we over-rely on the Fed? It's like, I feel like now we always view Fed as like Superman. Like, well, when things get troubled, don't worry, the Federal Reserve is going to save us. I'm not sure with AI and everything else.

The Fed matters to that level. But what say you? You're absolutely right. It doesn't. You know, I've often argued get off center stage and put the focus on. on other elements of government that can enable this economy to continue to grow. No, they've been center stage basically since 2008.

In the beginning, they had good reason to be sent to stage because the government was less functional at the time. You know, we shut down the government, there was issues. But more recently, and I think Secretary of percent writes about it in the Wall Street Journal today, is because they've had massive mission creep. So the stage center stage when they really should have been slowly going off and allowing not just the focus on the fiscal authorities, but more importantly, the focus on structural reforms.

That is the key to sustaining growth and productivity. What does that mean? What structural reform would you do? I would focus on better diffusion, faster diffusion, more even diffusion of these incredible innovations that are going to significantly increase productivity and that are not understood. enough and that we risk not having the sort of diffusion that would be consistent with the productivity potential. I'm talking of AI, life sciences, robotics. Yeah, I just don't know what the Fed, or maybe even the U.S. government as a whole, Muhammad, can do. If a machine is able to replace millions of people that do sort of, you know, sort of rote work, right? And the machine can

just do it in 10 seconds, doesn't take a lunch break, never get sale, et cetera. I'm not sure I'm aware of any policy that could be put in place, maybe besides a universal basic income that's going to mitigate the damage that might be coming. So first, the way you framed it is really interesting, okay, because you basically framed it as labor displacement. I would frame it as labor enhancing, labor augmenting. That is where the productivity is going to come from. if we view this innovation as simply cost-cutting,

then we're going to shoot ourselves in the foot. We should view this innovation as incredibly enabling in terms of productivity. And you need things. First, you need an education process so that people don't focus on one smaller element of it, labor displacement, and don't focus on the labor enhancement.

Second, you need the ecosystem, Brian. You need ecosystems. This is not going to spread. Where you can do the most progress in education and health are in areas, the lower income areas around the U.S., that don't have the infrastructure you need. So there's a lot that the government can do to enable this diffusion. And I agree with you. It's not the Fed. The Fed has nothing to do with this at all.

This is about government policy, but it's also about private sector enabling this adoption. We're really hoping for the Federal Reserve to quote-unquote save us, and I just don't know if Superman has a key. Cape. But we know you do, Mohammed L.R.A., and so we appreciate you coming on. Thank you. Thank you, Brian. Let's get out of Kate Rogers for a CNBC News update. Kate. Brian, the U.S. could reportedly take the lead on monitoring a buffer zone between Russia and Ukraine if the two sides reach a peace deal. It would be a large demilitarized area inside what is now Ukraine, according to NBC News. People familiar with the plan say the U.S. would use drones and satellites to watch the zone, which would be secured by troops from one

or more non-NATO countries. Texas Governor Greg Abbott signed several bills into law today requiring summer camp operators to provide detailed emergency plans. It also bans cabins in flood zones. It comes after July's devastating floods in Texas' hill country that killed 27 campers and counselors. And later this afternoon, President Trump plans to sign an executive order giving the Department of Defense the secondary title of Department of War.

That was its name for 158 years until it was changed after work. World War II. An official name change requires congressional approval and Republican senators Rick Scott, Mike Lee, and Representative Greg Stuby are introducing legislation in the two chambers in order to make that switch. Brian, back over to you. All right, Kate Rogers, Kate, thank you very much. All right, coming up, we've got some breaking news on Kenbue, the Tylenol maker. We're going to hit that as well. The stock's down 14 and a half percent. We'll talk oil and OPEC. They're meeting on Sunday. Lots to do. We're back right after this. crypto.com.

Crypto.com is America's premier crypto platform. All right. Let's talk oil. Oil down about 2.5% right now ahead of a critical OPEC plus meeting on Sunday. The expectations are growing. There will be some kind of new production hike from OPEC and its allies. The question is not just how much on paper, but how many real barrels might OPEC nations even be able to add?

It's bringing Clay Siegel, Senior Fellow for Energy Security at the Center for Strategic and international studies. A little tight here with this Kenview breaking news, Clay. Even if they raise output levels, which it's likely they will, do you think they would be able to follow up with real, meaning the actual barrels, or is it going to be a hike mostly on paper? Hey, Brian, happy Friday. Yeah, that's always the issue going into these supply hike decisions, and you and I have seen this a number of times throughout the cycle. The market is expecting them to hike a bit more, and that's why we're seeing this slump. And so we're going to get into the second tranche of supply curtailments and bringing that oil, at least gradually, back into the market.

They've already done about 2.2 million barrels per day. The next set of supply cuts to be rolled back is more like 1.7. But I think you hit on a really interesting point here. One of the side benefits of hiking now in an aggressive way is to actually provide a little bit of a reality check on how much spare capacity there is. Because that spare capacity, and the market thinks it's about 4 million barrels per day, acts as kind of a ceiling on prices. So if you actually allow people to ramp up and the number of new barrels hitting the market is less than we're expecting, and they don't get anywhere near four million barrels per day, then that rationalizes the market's perception spare capacity. It reprises a bit higher, I think, going forward. And when we get into future

cycles where they need to cut, the skeptical analysts out there like us will not be able to say, well, there's so much about this sort of paper and theoretical. They're really not going to do what they say they're going to do. They'll have more credibility in that way. Is that why oil is it, you know, it's down today. It's $62.5. But it's not a $40. Even with more barrels being added, demand seems to be strong enough.

And by the way, OPEC's been more bullish on demand than say the IEA, the I has been wrong with a lot of things. But that said, is that why oil is not a $45 bucks because there is still that underlying demand? Yeah, demand looks okay for. this year for sure, it looks to be a bit weaker compared to supply that's coming on stream in 2026. So that's one of the kind of like the yellow lights that OPEC has to pay attention to. But you're right. In the near term, there are signs that a bit more supply hike is justified.

U.S. crude inventories are at very low levels, I think at the bottom of the chart for this time of year. And that forward price curve is still holding up pretty tight, at least in the first one year plus out into the term structure. So there's reasons for optimism there, and they really just need to fine-tune this thing right so that they are not oversupplying the market in a way that demand can't accommodate in the new year. The Russian oil price cap has not slowed down their exports at all. They're still pumping and producing 9.9 million barrels a day in Russia. Are you surprised by that, Clay? Hasn't worked. Well, not really because Russia's buyers, India, China, some of the others on refined products are still buying, notwithstanding some of the

recent moves, like the Trump administration's imposition of that extra 25% tariff on India as punishment for continuing to buy Russia. The one kind of X factor to keep an eye on there is this Ukrainian military campaign against Russian oil refineries. There was a big spike in attacks in August. It has taken some units down. It is going to push maintenance programs deeper into. the fall and winter, so they could have problems on the diesel side. Of all the things you need to

keep all your eye on, it's the Ukrainian flamingo, that new cruise missile that's said to have a much more powerful warhead than the drones that they have been using thus far. If that gets employed successfully against those refineries, it could be a game changer for Russian oil supply, for revenues, and maybe even the outcome of the war. Yeah, all those things too, and definitely an impact on the oil and gas markets. Clay Siegel, thank you very much, OPEC meeting on Sunday. All right, quick programming note. Next week, all will not be here. I'm going to be summon it out in Milan, Italy for a giant conference called Gas Tech 2025. And we've got another big lineup for you. We've got the Secretary of Energy. Chris Wright, ask him about that. Doug Bergam's Secretary of the Interior

will ask him about drilling and production here in the United States and our friend and multi-billionaire, Tillman Fertita, who, by the way, is now the ambassador to Italy. We're going to get his take on what it's like going from business and basketball mogul to statesmen in one of America's most important allies. We're going to have a little fun with Tillman as well, that and more, maybe some surprises we'll see coming up on CNBC and Power Lunch all next week from Italy. All right, coming up here, it is suddenly the story of the day, Kenview, down 16 and that percent. the Wall Street Journal reporting that RFK Jr. is about to drop a report linking Tylenol use during pregnancy to autism. Kenview owns Tylenol. We're going to get an analyst take on it next. All right, it is Friday, so let us hit our stock of the week. And this week we are cheating just a little bit because it's actually two stocks. But they are very similar and they often trade together. And one of them was our mystery chart. They are Western Digital and Seagate Technologies. Both are in the storage business. Both stocks have soared this week. WDC up 14% since Tuesday.

Seagate up 11%. Both getting a lift on pure storages, big results. Recently, bolty stocks trading just off all-time highs. Morgan Stanley, raising its target on Western Digital to 99 from 92. Western Digital, by the way, was only a $23 stock less than three years ago. It is absolutely printed. money. Also, how could we not hit this? Who wants to be a billionaire? If you're feeling lucky ahead of tomorrow's big powerball drawing, you want to read one of the most read articles on CNBC Make It. Our colleague is breaking down the after-tax payouts from most states. Now, for federal tax, the lottery automatically withholds a base rate at 24 percent, but

you're going to pay more if you're in a higher tax bracket already. States with income taxes also impose their own range, two and a half, to 10.9%. eight states do not tax lottery winnings at all with nearly $2 billion on the line after tax, what you're going to clear, almost a billion, maybe a billion? I have a, me thinks there'll be a line at the lottery counter. All right, one minute left to go in the show, and we have to end it with this. It's a very serious story. Unfortunately, we just did not have time to get the analyst on.

Let's take a look at Kenview stock, KVUE. Kenview is the recent spinoff of Johnson and Johnson. fun off about two and a half years ago. Stock is down, what, 14, 13 and a half percent right now. It's at an all-time low. The Wall Street Journal exclusively reporting, it's only their story for now, that soon RFK Jr., who is the head of the Health and Human Services, is going to come out with a report linking Tylenol use in pregnant women to autism.

Again, we have not seen the report, we have not read the report, we are not commenting on the validity of the report. We are simply commenting on the fact that the Wall Street Journal is reporting that this report will be coming and coming relatively soon. Kenview makes and owns the Tylenol brand. That stock is being hit.

No doubt more on closing bell. Thank you very much for watching. I'll be off the next couple of days at the Gas Tech Conference in Italy. We'll see you next week.