Bloomberg Surveillance 7/15/2026

THE POWER OF EARNINGS IS TOO STRONG. AT SOME POINT, VALUATIONS WILL BECOME AN ISSUE. WE HAVE BEEN WARNING INVESTORS THAT A CORRECTION IS COMING ACROSS THE BOARD. PREMATURE TO GET TOO WORKED UP.

THIS IS BLOOMBERG SURVEILLANCE WITH JONATHAN FERRO, LISA ABRAMOWICZ, AND ANNMARIE HORDERN.

JONATHAN: GOOD MORNING. BLOOMBERG SURVEILLANCE STARTS NOW. WRAPPING UP BIG BANK EARNINGS. MORGAN STANLEY SET TO REPORT AS WELL AS BNY. PPI, THE NEXT DATA POINT TO DROP AFTER CPI COMES IN MUCH COOLER THAN EXPECTED. DAY TWO ON CAPITOL HILL FOR KEVIN WARSH FACING DOWN THE SENATE.

LISA: THE MESSAGE COMING FROM KEVIN WARSH YESTERDAY WAS MISSION NOT ACCOMPLISHED. WE WILL HEAR MORE OF THAT TODAY EVEN IF WE GET ANOTHER SOFTER THAN EXPECTED PRINT ON PPI. WHICH MISSION IS HE TALKING ABOUT? MISSION INFORMATION, HE SEEMS TO BE WINNING. WE LOOK AT THE TWO YEAR INFLATION EXPECTATIONS, THEY ARE THE LOWEST SINCE 2024. EVEN THOUGH KEVIN WARSH DID NOT LAY OUT HIS PLAN GOING FORWARD FOR EXACTLY HOW HE PLANNED TO ANCHOR INFLATION EXPECTATIONS, HE'S DONE SO WITH CARE.

JONATHAN: WE KNOW WHAT HE DOESN'T LIKE, WE DON'T KNOW WHAT HE WANTS TO DO ABOUT IT. IS THIS JUST A COMMUNICATION EXERCISE OR REAL INTENT? OR HOLDING THIS AT THIS LEVEL FOR A LOT LONGER? JUST ASK HIM IF YOU SUFFICIENTLY RESTRICTIVE OR NOT BASED ON THE POLICY RATE NOW AND THE ECONOMY WE HAVE. ARE WE SUFFICIENTLY RESTRICTIVE OR NOT?

LISA: DO YOU THINK RIGHT NOW BY DOING NOTHING, WE CAN GET INFLATION TO THAT PATH? HE WILL PROBABLY SAY THERE IS A TASK FORCE ANALYZING INFLATION. THIS WILL BE THE KEY QUESTION. WHEN YOU TAKE A LOOK AT WHERE INVESTORS ARE POSITIONED, THE BANK OF AMERICA FED SURVEY CAME OUT FOR THE JULY. 83% BELIEVE THE FED WILL NOT HIKE RATES BEFORE THE MIDTERM ELECTIONS. AND THEY SAY THE EXPECTATION FOR RATE CUT IN 2027 AND BEING ON CALL THIS YEAR. DESPITE MARKET PRICING, THE SENTIMENT SEEMS DIFFERENT.

JONATHAN: U.S. EQUITY OVERWEIGHT IS THE BIGGEST SINCE 2024. CASH LEVELS FELL TO A LOW. CHECK OUT WTI AND BRENT. $85 ON BRENT THIS MORNING. WTI AT AROUND $80. THE STRESS IN THE MIDDLE EAST CONTINUES AND THE FLIP-FLOPPING AROUND POLICY DOES AS WELL.

LISA: FLIP-FLOPPING IN TERMS OF THE POTENTIAL 20% REIMBURSEMENT THE PRESIDENT WANTED TO CHARGE VESSELS. HE NOW SAYS IT CAN BE DONE IN TRADE DEALS. IF YOU ARE A GULF COUNTRY, INVEST MORE IN THE U.S. CLEARLY, HE'S BEEN ADVISED THE UNITED STATES CHARGING A TOLL WILL NOT WORK THE SAME WAY THE IRANIANS ARE TRYING TO CHARGE A TOLL. THE STRIKES CONTINUE AND THE PRESIDENT SAID NOT ONLY WILL THEY HAPPEN LAST NIGHT BUT AGAIN THIS EVENING. HE FORESHADOWED ENERGY TARGETS IN IRAN WILL BE LEFT FOR LAST.

JONATHAN: WE HAD THE BIGGEST DECLINE IN GASOLINE PRICES SINCE 2022. HOW MUCH COMFORT CAN YOU HAVE WITH CPI YESTERDAY, PPI LATER THIS MORNING?

LISA: I DON'T REALLY UNDERSTAND WHY INFLATION EXPECTATIONS ARE AS LOW AS THEY ARE. WHY THE DISINFLATION AND BELIEF SEEMS TO BE PREVAILING ON WALL STREET EVEN THOUGH WE HAVE RISING OIL PRICES.

JONATHAN: CHECK OUT ASML AS WELL. THEIR STOCK IS DOING WELL. THAT IS THE AI TRADE. ASML THIS MORNING UP IN EUROPE I CLOSE TO 4%. CAPEX FOR THE FEW AND NOT THE MANY. IBM CERTAINLY NOT GETTING THE SPEND NOW.

ANNMARIE: THE TWO STORIES ARE HIGHLY INTERTWINED WITH PEOPLE INVESTING IN THE HARDWARE OF ASML AND NOT THE SOFTWARE OF IBM. THE IDEA THAT THEIR GUIDANCE FOR TOTAL REVENUE FOR THIS YEAR CAME IN ALMOST $9 BILLION ABOVE THE BIGGEST EXPECTATIONS FOR THE FULL YEAR. IT GIVES YOU A SENSE OF HOW MUCH OF A BEAT YOU ARE GETTING.

JONATHAN: IBM GETTING HAMMERED THE LAST 24 HOURS. COMING UP, WE WILL CATCH UP WITH STEVE CHEVRON, ANNA ROSENBERG, AND STEFAN SLOWINSKI AS IBM LOSES A QUARTER OF ITS VALUE IN ONE DAY. WE WILL BEGIN TODAY WITH MORGAN STANLEY AND BNY. DESPITE ALL THE HEADLINE RISK AND VOLATILITY, THE RELENTLESS MARCH OF EARNINGS GROWTH CONTINUES TO DRIVE THE MARKET HIGHER. STEVE JOINS US NOW. HOW HIGH IS THAT EARNINGS POWER GOING INTO THE SEASON?

STEVE: IT IS THE HIGHEST IN A WHILE. EXPECTATIONS ARE THEY WILL GROW THE STRONGEST QUARTER SINCE Q4 OF 2021 COMING OUT OF COVID. GENERALLY BEAT 5% TO 8%. IS IT IMPOSSIBLE TO SEE A 30% YEAR-OVER-YEAR EARNINGS GROWTH? I DON'T THINK IT IS LIKELY BUT IT IS POSSIBLE. IT IS BROAD-BASED. TECH AND ENERGY ARE PLAYING A BIG PART BUT 10 OF THE 11 SECTORS ARE LIKELY TO SEE POSITIVE GROWTH. HEALTH CARE IS THE ONLY ONE NOT JOINING THE PARTY. WHAT WE ARE SEEING IS MARGIN EXPANSION AT A RATE EQUAL TO OR BETTER THAN ANY OTHER PERIOD WE HAVE SEEN IN OUR CAREERS. I CAN SAY THAT SAFELY FOR ALL OF US. THAT IS THE BIG STORY THAT STRIVING MARKETS HIGHER.

JONATHAN: IT DEPENDS ON HOW WELL PRICE THAT IS RIGHT NOW. IT WAS TOUCH AND GO JUST YESTERDAY MORNING WHEN IT FELT LIKE THE BEATS WERE NOT REALLY BEING REWARDED BUT THE MISSES WERE BEING PUNISHED. IBM IS A GREAT EXAMPLE. IS THAT TOO PREMATURE?

STEVE: I DON'T THINK IT IS JUST ABOUT BEATS AND MISSES. THE NATURE OF RISK IS CHANGING. IT USED TO BE A GROWTH OR VALUE STORY. IT IS WHO ARE THE AI WINNERS AND LOSERS RIGHT NOW. YOU ARE FUNDING YOUR AI CAPEX BUT NOT SPENDING ON MAINFRAMES. AS THE MARKET LOOKS THAT, IS THIS SOMETHING THAT WILL CONTINUE FOR AN EXTENDED TIME? BECAUSE YOU CANNOT REALLY START TO ASK IF AI CAPEX IS GOING TO PEEK UNTIL THE HYPERSCALER STOP RAISING CAPITAL TO INCREASE EVEN MORE. WHEN YOU LOOK AT THINGS LIKE THE CHIP TRADE, I THINK THEY HAVE ROOM TO GO PICK IS DEMAND CONTINUES TO OUTSTRIP. I THINK IT WILL GET MORE VOLATILE BECAUSE THE FIRST LEG OF THIS WAS EARNINGS MOVING HIGHER. YOU CAN SEE THE CHIP STOCKS EARNINGS JUMPING. NOW THE QUESTION THE MARKET IS WRESTLING IS LONG-TERM CONTRACTS, SHOULD THE MULTIPLE REVALUE? ANYTIME YOU ARE IN A MULTIPLE REEVALUATION STORY, IT TENDS TO BE VOLATILE.

LISA: ON THE MICRO LEVEL, WE GOT THE EARNINGS REPORTS YESTERDAY. WE DID SEE PRETTY TREMENDOUS BEATS AND THEN SOME OF THEM WITH PRETTY PALTRY GAINS. GOLDMAN SACHS IS A PERFECT. EXAMPLE THIS SHARES GREW MORE AND MORE. IT WAS THE COMMENTARY BUT ALSO THIS IDEA THAT DISINFLATIONARY PRINT ON CPI WOULD GIVE THE FED MORE ROOM NOT TO HIKE RATES. HOW MUCH OF THIS IS A HIKING RATES STORY AS MUCH AS IT IS A MICRO STORY AND THE STORY OF AI?

STEVE: I THINK THE BIG STORY IS EARNINGS. AS IT RELATES TO THE FED, I AGREE WITH THE SURVEY. I THINK WHAT YOU CAN MISS READ FROM CHAIRMAN WARSH IS I DON'T THINK HE'S ACTUALLY BEING HAWKISH OR PIVOTING IN A HAWKISH DIRECTION. I THINK WE ARE GOING BACK TO A DIFFERENT KIND OF FED GUIDANCE. THAT IS I AM GOING TO BE STAUNCH IN MY DEFENSE OF PRICE STABILITY IN MY COMMENTS AND I AM NOT GOING TO TELL YOU WHAT I WILL DO. I REMEMBER BEING A YOUNG ANALYST ON WALL STREET AND HEARING GREENSPAN SPEAK. HE SAID PLEASE DON'T ASK ME ABOUT MONETARY POLICY, I MIGHT BE FORCED TO LAUNCH A 30 MINUTE ANSWER WHERE I TELL YOU NOTHING. I THINK THAT IS WHAT YOU WILL SEE FROM WARSH. HE'S TRYING TO BREAK THE MARKET'S DEPENDENCY FROM BEING SPOONFED GUIDANCE. I THINK WHAT WALL STREET IS LOOKING AT IS JUST AS IT WOULD HAVE BEEN RIDICULOUS TO CUT RATES IN THE FACE OF RISING OIL PRICES EARLIER THIS YEAR, IT IS EQUALLY RIDICULOUS TO REALLY BE CONSIDERING HIKING RATES UNTIL WE SEE HOW ALL THIS PLAYS OUT.

LISA: PUTTING ASIDE KEVIN WARSH, IT SEEMS LIKE THE LONGER THEY REMAIN ON HOLD, THE MORE THE PUNCH BOWL IS AVAILABLE TO INVESTORS ON WALL STREET. THE MORE THAT YOU GET THESE EARNINGS THAT CONTINUE TO OUTPERFORM. WHY WAS THAT NOT HOW YOU SEE IT?

STEVE: I THINK WHEN YOU LOOK AT THE BULK OF THIS EARNINGS GROWTH, IT IS NOT COMING FROM RATE SENSITIVE COMPANIES. IT IS NOT COMING FROM SMALLER CAP COMPANIES. EVEN THE BANKS. WHILE THE NUMBERS ARE GOOD AND THEY WERE VERY GOOD, THEY ARE NOT REALLY DRIVING THE KIND OF 30% YEAR-OVER-YEAR GROWTH. THAT IS REALLY COMING FROM TECH, PLACES LIKE MATERIAL AND INDUSTRIALS. THE COMPANIES THAT ARE SPENDING ON CHIPS HAVE MORE MONEY THEN THE LORD HIMSELF. THEY DON'T NEED TO BORROW AT THE FEDERAL FUNDS RATE. I THINK THAT EARNINGS GROWTH IS IN A LOT OF WAYS AT THIS POINT REALLY INDEPENDENT OF RATES. WHAT YOU SEE IS LARGE SWATHS OF THE ECONOMY, MIDDLE AND LOWER INCOME AMERICANS, SMALLER BUSINESSES THAT DO CARE ABOUT RATES AND THEY BEEN UNDER PRESSURE. WE CAN QUIBBLE ABOUT THIS, BUT INFLATION RATE IS 2.6% IN THE FEDERAL FUNDS RATE IS 3.75%. THOSE ARE REAL RATES THAT ARE HIGH RELATIVE TO HISTORY AND I THINK THEY PROBABLY DON'T NEED TO BE THERE. WE NEED TO GET THROUGH SOME OF THIS NOISE.

ANNMARIE: DO YOU THINK IT IS THAT COHORT BEING AFFECTED BY HIGHER RATES THAT WILL HOLD THE FED BACK FROM HAVING A POTENTIAL HIKE?

STEVE: I THINK THAT IS RIGHT BECAUSE WHAT YOU WOULD DO BY HIKING RATES IS PUNISH THOSE ALREADY BEING PUNISHED. WE WILL NOT SLOW DOWN AI SPENT WHICH IS PUSHING UP MEMORY PRICES. YOU ARE NOT GOING TO SLOW DOWN HIGH-END CONSUMER WHERE HIGHER RATES MEANS MORE MONEY FROM THE MONEY MARKET ACCOUNT OR SAVINGS AND THEY ALL HAVE FIXED RATE, 30 YEAR 3% MORTGAGES. I THINK IT WOULD BE COUNTERPRODUCTIVE.

JONATHAN: DO YOU THINK THE MULTIPLE WILL GO UP?

STEVE: THE THING THAT I THINK WE'VE GOTTEN RIGHT OVER THE LAST COUPLE OF YEARS IS THAT IF YOU ARE IN AN ENVIRONMENT WHERE MARGINS ARE GROWING AND THE S&P IS GETTING MORE PROFITABLE BECAUSE OF MIXED SHIFT, BECAUSE OF MORE SUBSCRIPTION-BASED MODELS, IT IS UNREASONABLE TO THINK THE MULTIPLE DOES NOT FOLLOW. IF YOU LOOK AT WHERE MARGINS HAVE GONE, SO TOO HAS THE MULTIPLE FOLLOWED. UNTIL THAT STOPS, I THINK THAT'S RIGHT. WHAT USED TO BE A 16 TIMES FAIR VALUE, WE THINK IT IS SOMEWHERE BETWEEN 20 AND 22. THAT DOES NOT MEAN THAT LAST FOREVER, BUT UNTIL THESE MARGINS STOP GOING HIGHER, THERE'S REALLY NO REASON TO THINK THE MARKET WOULD PAY LESS FOR A HIGHER --

JONATHAN: INVESTORS ARE OBSESSED WITH POTENTIAL DOWNSIDE. WHAT KIND OF UPSET ARE YOU THINKING ABOUT?

STEVE: 9000 BY THE END OF THE YEAR ON THE S&P. IF YOU LOOK AT WHAT THAT REALLY REPRESENTS, THAT SOUNDS LIKE A BIG NUMBER.

JONATHAN: IT SOUNDS LIKE A MASSIVE NUMBER.

STEVE: IT IS A YEAR AND A HALF RETURNS. I SINGLE-DIGIT, LOW DOUBLE-DIGIT RETURNS. THAT IS ON AVERAGE WHAT THE S&P DOES. WE THINK THAT IS THE DIRECTION OF TRAVEL. THE CAPEX CONTINUES TO BE THERE, THE BOTTLENECKS CONTINUE TO BE THERE, THE PRICING POWER CONTINUES TO BE THERE. THIS IS THE LARGEST INFRASTRUCTURE BUILD SINCE THE RAILROADS. AND THE CAPACITY THAT CAN COME ONLINE THAT COULD DERAIL THIS, THESE ARE HARD ASSETS. THIS IS NOT LIKE A SOFTWARE UPGRADE. IT IS THREE TO FIVE YEARS TO BUILD THAT SHIP CAPACITY THAT MAKES THESE PRICES GO THE OTHER WAY.

JONATHAN: IT IS GOOD TO SEE YOU. STEVE AT FEDERATED. NASDAQ FUTURES UP. S&P IS POSITIVE. SPEAKING OF BIG BEATS ON WALL STREET, BLACKROCK DELIVERS ANOTHER ONE.

LISA: HOW MAY BE WE ARE UNDERESTIMATING HOW THE EARNINGS MARGINS COULD KEEP INCREASING. THE SECOND QUARTER, 3.91 VERSUS THE ESTIMATE OF 2.66. THIS IS A MASSIVE UPSIDE BEAT. NET INFLOWS OF 191.7 BILLION DOLLARS. WHEN YOU TAKE A LOOK AT THE TOTAL ASSETS UNDER MANAGEMENT AT BLACKROCK, 5.3 TRILLION. IT WAS EXPECTED TO BE BELOW 5.2 TRILLION. WILL IT BE THE SAME PROTECT? ASML GIVING A SENSE OF THAT. YOU HAVE TO GIVE CREDIT TO HOW MUCH THIS IS BLOWING EXPECTATIONS OUT OF THE WATER.

JONATHAN: A SERIES OF UPSIDE SURPRISES OVER THE LAST 24 HOURS. ANOTHER WANT TO START THIS MORNING. LET'S GET AN UPDATE ON NEWS ELSEWHERE WITH VONNIE QUINN.

VONNIE: FED CHAIR KEVIN WARSH RETURNING TO CAPITOL HILL AFTER TELLING POLICYMAKERS THAT SLOWING INFLATION IN JUNE DOES NOT MEAN THE CENTRAL BANK HAS ACCOMPLISHED ITS MISSION. >> THE MEMBERS OF OUR COMMITTEE HAVE NO TOLERANCE FOR PERSISTENTLY ELEVATED INFLATION AND WE SHARE A RESOLUTE COMMITMENT TO ENSURE PRICE STABILITY.

VONNIE: WARSH TESTIMONY BEFORE THE SENATE THIS MORNING. ASML SHARES RISING IN EUROPEAN TRADING, LIFTING THE ANNUAL SALES FORECAST FOR THE SECOND TIME YEAR AND LAYING OUT PLANS TO INCREASE PRODUCTION. THE COMPANY SAYS A SURGEON AI SPENDING IS DRIVING DEMAND FOR THE CHIPMAKING MACHINES. SPAIN IS HEADED TO THEIR FIRST WORLD CUP FINAL SINCE WINNING THE TOURNAMENT IN 2010. THEY BEAT FRANCE 2-0 AFTER THE FAVORITES ONLY MANAGED THREE SHOTS ON GOAL. SPAIN WILL FACE EITHER ENGLAND OR ARGENTINA ON SUNDAYS FINAL.

JONATHAN: LOOKING FORWARD TO LATER THIS AFTERNOON. UP NEXT, DROPPING THE TAX ON HORMUZ.

>> SAUDI ARABIA, UAE, QATAR, AND KUWAIT WOULD LOVE TO INVEST MORE MONEY IN THE UNITED STATES AT RECORD AMOUNTS. THIS WAY THERE IS NO FEE.

JONATHAN: UP NEXT, ANNA ROSENBERG LIVE FROM NEW YORK CITY THIS MORNING. GOOD MORNING.

♪

JONATHAN: EARNINGS SEASON ON WALL STREET IN FULL SWING. BNY AT 6:30 EASTERN, 7:30 MORGAN STANLEY. OVER THE NEXT 60 MINUTES OR SO. AT 8:30 PPI DATA. 90 MINUTES LATER KEVIN WARSH TESTIFYING BEFORE THE SENATE BANKING COMMITTEE. LOOKING FORWARD TO THAT. EQUITY FUTURES INTO ALL OF THOSE RISK EVENTS. EQUITY FUTURES POSITIVE BY 0.2%. ON THE NASDAQ 100 HIGHER BY .5 PERCENT. SOFTER THAN EXPECTED CPI DATA YESTERDAY. 2'S BACK TO 4.20. THEY WERE PUSHING TO 4.30. 10'S OF A SINGLE BASIS POINT. THIS IS NOT A MASSIVE GAME CHANGER. THIS MAYBE REMOVES THE URGENCY TO HIKE BUT DOESN'T SETTLE THE DEBATE, ESPECIALLY WITH THESE NUMBERS IN THE COMMODITY MARKET. CRUDE, WTI, BRETT AROUND $85. WTI AROUND $80. A TARGETS NOTABLE INFLATION EXPECTATIONS OVER THE NEXT TWO YEARS KEEP FALLING EVEN AS OIL PRICES START TO CLIMB AGAIN. THIS GOES TO THE QUESTION OF CREDIBILITY GAP FOR BOTH WHAT WE SEE AT THE FEDERAL RESERVE AS WELL AS HOW QUICKLY WE CAN BRING OIL PRICES DOWN. PEOPLE SEEM TO BELIEVE THIS IS TEMPORARY AND YET ANOTHER BLIP ON THE PATH TO DISINFLATION.

JONATHAN: CRUDE HIGHER BY 0.8 PERCENT. UNDER SURVEILLANCE, DROPPING THE TAX ON HORMUZ.

PRES. TRUMP: I DON'T LIKE THE CONCEPT OF A FEE, BUT AT THE SAME TIME IT'S NOT FAIR WE ARE PROTECTING THE STRAIT FOR THE ENTIRE WORLD, SAUDI ARABIA, UAE, QATAR, BAHRAIN, AND KUWAIT WOULD LOVE TO INVEST MORE MONEY IN THE UNITED STATES AT RECORD AMOUNTS. THIS WAY THERE IS NO FEE.

JONATHAN: THE PRESIDENT REVERSING COURSE ON A CHARGE FOR HORMUZ CARGO, THREATENING THE NATION'S ENERGY INFRASTRUCTURE. TYLER KENDALL HAS MORE. HEY, TYLER.

TYLER: IT FEELS LIKE PRESIDENT TRUMP IS DROPPING ONE THREAT HE IS EXPANDING ANOTHER SAYING THE U.S. COULD HIT IRANIAN POWER PLANTS AND BRIDGES BY NEXT WEEK OF THE COUNTRY DOESN'T COME TO THE NEGOTIATING TABLE. AT THIS POINT WE'VE DONE VERY LITTLE INDICATION THAT IRAN IS WILLING TO BACK DOWN WITH THE IRGC SAYING IN A NEW STATEMENT ON IRANIAN STATE TV OVERNIGHT THAT THE STRAIT OF HORMUZ WILL REMAIN CLOSED UNTIL FURTHER NOTICE. ADDING IN PART "THE REGION'S OIL AND GAS EXPORTS ARE EITHER AVAILABLE TO ALL OR AVAILABLE TO NON-." WE KNOW REGIONAL ALLIES ARE URGING FOR A SOLUTION. YOU HEARD PRESIDENT TRUMP OUTLINE THAT HE SPOKE DIRECTLY WITH OFFICIALS FROM THESE COUNTRIES LIKE SAUDI ARABIA, QATAR, UAE, AND KUWAIT ABOUT DROPPING THE 20% REIMBURSEMENT FEE IN FAVOR OF TRADE AND INVESTMENT DEALS. AT THIS POINT, IT IS UNCLEAR IF THERE ARE ANY NEW COMMITMENTS. WHAT IS CLEAR IS THE U.S. IS OPTING FOR THAT ECONOMIC PRESSURE TO TRY TO PUT THE PRESSURE ON IRAN WHEN IT COMES TO THE STRAIT BY RENEWING THIS U.S. NAVAL BLOCKADE. OUR ANALYSTS A BLOOMBERG ECONOMICS ESTIMATED COSTS THE U.S. MILITARY BETWEEN 31 AND $45 MILLION PER DAY TO KEEP THAT BLOCKADE INTACT. JON, THAT IS RENEWING THE SPOTLIGHT ON U.S. RESOURCES AND STOCKPILES, WHICH PRESIDENT TRUMP IS SET TO ADDRESS TODAY WHEN HE COMES TO PENNSYLVANIA FOR SPEECH FOCUSED SOLELY ON BOLSTERING THE U.S. DEFENSE INDUSTRIAL BASE, MADE EVEN MORE URGENT AND THAT THIS CONFLICT WITH IRAN.

JONATHAN: LOOKING FORWARD TO YOUR COVERAGE, TYLER KENDALL FROM THE DEFENSE SUMMIT IN PENNSYLVANIA. JOINING US IS ANNA ROSENBERG OF AMUNDI. IS THIS A NEW POLICY OR NOT FROM THE PRESIDENT?

ANNA: A NEW POLICY TO DROP THE TOLLS? I THINK THAT IS A RATHER SURPRISING DEVELOPMENT TO THE DEGREE THAT THE U.S. HAS BENEFITED FROM FREE WATERWAYS, THEIR FREEDOM OF NAVIGATION, FOR THE LAST 80 YEARS. TO DROP THE PRINCIPAL AND INTRODUCE A TAX FOR THE WATERWAY WOULD UNDERMINE THAT CORE U.S. PRINCIPAL. HE WAS NEVER REALISTIC IN THE FIRST PLACE. I WAS SKEPTICAL WHEN I HEARD THE PLANE IN THE FIRST PLACE. I'M NOT SURPRISED HE ENDED UP DROPPING IT.

ANNMARIE: NOW HE IS SAYING THAT GULF STATES WILL BE MAKING DEALS INTO THE UNITED STATES. IS HE TRYING TO SQUEEZE SOME OF THESE RICH ECONOMIES TO MAKE MORE INVESTMENTS IN THE U.S. OR WILL THERE BE SOME SORT OF CARROT AND STICK APPROACH WHERE YOU WILL SEE THESE DEALS MATERIALIZE?

ANNA: I MEAN, WE KNOW THIS ADMINISTRATION IS KEEN ON GETTING MORE INVESTMENTS INTO THE U.S., AND WE HAVE HEARD ABOUT MANY DEALS AND INVESTMENT PROMISES IN THE PAST, BUT NOT ALL OF THESE HAVE MATERIALIZED. I THINK REALISTICALLY THE SITUATION IN THE STRAIT OF HORMUZ IS COSTING THE GLOBAL ECONOMY A LOT AND THE U.S. IS TRYING TO GUARANTEE ITS SECURITY. YOU CAN ARGUE THIS ISN'T FAIR, BUT NONETHELESS THIS IS THE SITUATION IT IS. THE U.S. IS THE GUARANTOR OF GLOBAL SECURITY TO MANY COUNTRIES, ITS ALLIES, ETC. ULTIMATELY, THE U.S. STARTED THIS ESCALATION ALONGSIDE ISRAEL. SO OF COURSE WE MAY SEE SOME OF THE DEALS MATERIALIZE, BUT MANY MAY NOT. ULTIMATELY, YOU WILL SEE OTHER COLLABORATIONS CHART I GET MORE SHIPS PASSING THROUGH HORMUZ. I THINK ULTIMATELY THE TRUMP ADMINISTRATION IS HELPING ITS NEW CAMPAIGN, MILITARY CAMPAIGN, IS WEAKENING IRANIAN MILITARY CAPABILITIES THAT THEY CAN ESCORT MORE SHIPS THROUGH, BUT THAT'S DIFFICULT AT THIS POINT.

ANNMARIE: THE PRESIDENT SAID ENERGY TARGETS WOULD POTENTIALLY BE LEFT FOR LAST. YOU TAKE HIM AT HIS WORD OR IS THIS A WAY HE COULD POTENTIALLY PUSH THE IRANIANS INTO EITHER STOPPING GOING AFTER SOME OF THESE VESSELS OR POTENTIALLY BACK TO THE NEGOTIATING TABLE?

ANNA: FIRSTLY, THIS IS NOT JUST IN TRUMP'S CONTROL. WE HAVE SEEN FORCES UNLEASHED OUTSIDE OF ANYONE'S CONTROL, EVEN IN IN IRAN. THERE ARE COMPETING FORCES. YOU HAVE THE IRGC WHICH IS MORE IDEOLOGICALLY MOTIVATED. THEY THINK THE ONLY WAY TO GET MORE RESOURCES IN IS TO CONTROL THE STRAIT OF HORMUZ. YOU HAVE WITHIN IRAN THOSE WHO ARE STILL INTERESTED IN NEGOTIATING. THOSE ARE NOT ON THE SAME PAGE. IF ANYTHING THE LAST WEEK HAS MADE THE IRGC ARGUMENT MUCH STRONGER. IF YOU WANT TO GET ANY KIND OF INCOME YOU NEED TO CONTROL THE STATE OF HORMUZ BECAUSE YOU DON'T TRUST THE U.S. IN DELIVERING ON SANCTIONS RELIEF AND ASSETS UNFREEZING, ETC.. THAT ARGUMENT IS PRETTY STRONG. THERE ARE FORCES THE U.S. ADMINISTRATION CANNOT CONTROL, FIRSTLY. SECONDLY, THE IRANIAN STILL HAVE THE UPPER HAND. THEY CAN ATTACK REGIONAL OIL AND GAS INFRASTRUCTURE AND CAUSE BIGGER ECONOMIC CHAOS RIGHT NOW. WE ARE IN A SITUATION WHERE THINGS HAVE CHANGED SINCE THE MOU WAS SIGNED. THE TRUMP ADMINISTRATION IT'S A LITTLE MORE CONFIDENT THEY CAN ESCORT SHIPS THROUGH THE OMANI ROUTE BUT T THE IRANIANS HAVE BECOME MORE HARD-LINE. THIS IS MOVING OF THE ESCALATION PRETTY FAST.

ANNMARIE: WHY DO YOU THINK THE MARKET HAS NOT COME AROUND TO THIS? YOU HAVE SEEN A CREEPING UP OF OIL PRICES BUT STILL BELOW WHERE THEY WERE LAST MONTH. THERE IS A SENSE AMONG A LOT OF INVESTORS THAT THIS HAS ALREADY PASSED IN TERMS OF THE RISK OF THE EXTREME 20 BAIL TYPE OF SITUATIONS. DO YOU AGREE?

ANNA: A LOT OF THE OIL HAS BEEN REROUTED ALREADY. WE HAVE SEEN SOME STILL PASSING THROUGH HORMUZ. THAT HAS EASED THE PRESSURE ON THE OIL PRICES. THE FOCUS SHOULD PROBABLY BE MORE ON GAS BECAUSE REROUTING IS A LITTLE MORE DIFFICULT TO THAT DEGREE AND OTHER CRITICAL THINGS PASSING THROUGH THE STRAIT OF HORMUZ, LIKE HELIUM, FOR EXAMPLE, AS WELL. BUT IN TERMS OF OIL PRICES, WE HAVE SEEN SUCCESSFUL REROUTING. AS A RESULT THIS IS EMBOLDENING TRUMP AS WELL TO BE A LITTLE MORE AGGRESSIVE AND TAKE MORE RISKS BECAUSE THE OIL PRICE IS WHAT IMPACTS THE U.S. VOTER THE MOST. BECAUSE PRICES ARE SOMETHING THAT MORE CONCERNS THE EUROPEAN CONSUMER THAT ARE OBVIOUSLY NOT AS IMPORTANT FOR THE MIDTERM ELECTIONS. THE OIL PRICE WILL LIKELY GO UP IF THE STRAIT OF HORMUZ STAYS CLOSED, BUT IT IS NOT WHAT MOVES THE NEEDLE. IT IS THE OTHER THINGS PASSING THROUGH HORMUZ AND HAVE A BIGGER IMPACT ON OTHER. REGIONS OF THE WORLD.

JONATHAN: SOME HEADLINES DROPPING FROM U.S. CENTRAL COMMAND. 6:00 A.M. EASTERN TIME TODAY, U.S. CENTRAL COMMAND FORCES BEGAN LAUNCHING IT WAVE OF STRIKES AGAINST IRAN. THE STRIKES ARE DESIGNED TO FURTHER DEGRADE MILITARY CAPABILITIES IRANIAN FORCES HAVE USED TO ATTACK COMMERCIAL SHIPPING IN THE STRAIT OF HORMUZ. THE LATEST FROM U.S. CENTRAL COMMAND. CRUDE ON THE BACK OF THOSE HEADLINES A LITTLE HIGHER. 80 DOLLARS ON WTI. BRENT CRUDE AROUND $86.

ANNMARIE: WE HAVE HEARD AROUND 6:00 A.M. EASTERN, 25 MINUTES AGO, 1:30 P.M. IN IRAN, LIKELY GOING AFTER THE ASSETS ALONG THE COAST.

JONATHAN: TENSIONS SIMMERING ALONG THE MIDDLE EAST. WE WILL CATCH UP WITH STEFAN SLOWINSKI OF BNP PARIBAS.

JONATHAN: STOCKS ARE POSITIVE THIS MORNING. HIGHER BY .1% ON THE S&P. AS LISA MENTIONED, FANTASTIC NUMBERS OUT OF BLACK. STELLAR NUMBERS ACROSS WALL STREET OVER THE LAST 24 HOURS. OR STILL TO COME. IN THE NEXT HOUR WE WILL HEAR FROM MORGAN STANLEY. LOOKING FORWARD TO ALL OF THAT WITH THE BOND MARKET LIKE THIS. WE HAVE YIELDS HIGHER BY TWO OR THREE BASIS POINTS. TENDS STILL NORTH OF 4.60%. YOU HAVE NOT SEEN A MASSIVE CHANGE, EVEN WITH SOFTER THAN EXPECTED CPI DATA YESTERDAY. THE DEBATE HAS NOT CHANGED THAT MUCH.

LISA: ULTIMATELY A LOT OF THE SOFTNESS AND FIRST DROPPED GOING BACK IN SIX YEARS REALLY CAME FROM THE ACTIVITY WE HAVE SEEN, OIL PRICES COME DOWN. WE HAVE OIL PRICES RISING AGAIN AND INPUTS RELATED TO ARTIFICIAL INTELLIGENCE. MISSION NOT ACCOMPLISHED. THOSE WERE THE WORDS THAT RING TRUE TO WALL STREET YESTERDAY.

JONATHAN: LET'S LOOK AT THE PRICE OF ENERGY. WTI PUSHING HIGHER BY MORE THAN 1% THIS MORNING. THROUGH $80 ON WTI. TOOK A SMALL LEG HIGHER OFF THE BACK OF THESE HEADLINES FROM CENTRAL COMMAND. 30 MINUTES AGO U.S. CENTRAL COMMAND FORCES BEGAN LAUNCHING ANOTHER WAVE OF STRIKES AGAINST IRAN.

ANNMARIE: CENTCOM IS SAYING THIS IS TO FURTHER DEGRADE MILITARY CAPABILITIES THEY HAVE BEEN USING TO ATTACK COMMERCIAL SHIPPING. WE UNDERSTAND THE KINETIC WARFARE OF ALL OF THIS. WHAT THE UNITED STATES IS GOING TO BE STRIKING. THE PRESIDENT EVEN PUT ENERGY TARGETS POTENTIALLY -- HE SAID THAT WOULD BE THE LAST WE WOULD GO FOR. WHAT IS MORE UNCLEAR IS, WHAT ACTUALLY IS THE POLICY NOW? WE WENT FROM A 20% REIMBURSEMENT TO THE UNITED STATES AND NOW IT IS INVEST IN THE UNITED STATES AND WE WILL HAVE SOME DEALS.

JONATHAN: I DON'T THINK WE HAVE GOT MUCH OF A POLICY RIGHT NOW. THE NEW NORMAL IS A MESSY SET OF NEGOTIATIONS, SOME PROPOSALS THAT DEFINED THE LAST 24 HOURS. WHICH WAY TO BUY MORE STRIKES THIS MORNING AND HE KEEPS ENERGY PRICES ELEVATED. THAT IS THE STORY IN THE ENERGY MARKET. AS WE COUNT YOU DOWN TO THE OPENING BELL, LET'S GET YOU SOME MORNING MOVERS.

YAHAIRA: WE START WITH PAYPAL. SHARES ARE SEARCHING ON TAKEOVER REPORTS. REUTERS IS REPORTING THAT ANOTHER FINTECH, STRIPED, AND ADVENT HAVE MADE A $53 BILLION DEAL FOR THE COMPANY, WHICH THEY WILL JOINTLY OWN. IT COMES AS PAYPAL, THE ORIGINAL FINTECH DARLING, HAS BEEN STRUGGLING TO TURN AROUND ITS BUSINESS AS NEW ENTRANTS INTO THE FIELD. WE ARE SEEING SK HYNIX FALLING 6.7%, GIVING BACK SOME OF YESTERDAY'S GAINS. THE STOCK CLOSED THE DAY UP ABOUT 27%, SO IT IS NOTABLE AT THAT POINT THE ADR HAS TRIGGERED MORE THAN 50% ABOVE THE KOREAN SHARE PRICE. AN UNUSUALLY-WIDE GAP IN THAT IT -- AND THE REASON IS BECAUSE OF STRONG INVESTOR DEMAND IN THE U.S., PLUS TEMPORARY RESTRICTIONS THAT HAVE PREVENTED ARBITRAGE TRADERS FROM CLOSING THAT GAP. WE END ON LUCID. SHARES ARE SINKING ANOTHER FOUR POINT 4% AFTER A ROLLER COASTER SESSION YESTERDAY. THE COMPANY HAD TO REALLY COME OUT AND CLARIFY IT WAS WORKING WITH RESTRUCTURING ADVISORS TO TURN AROUND THE BUSINESS. NOT BECAUSE IT WAS CONSIDERING BANKRUPTCY. IT CALLED THOSE CLAIMS COMPLETELY FALSE. BUT NOT BEFORE SHARES PLUNGED AS MUCH AS 57%. ITS WORST INTRADAY DROP ON RECORD.

JONATHAN: MORE EARNINGS STILL TO COME. BLACKROCK. LISA WENT THROUGH THE BLACKROCK NUMBERS. FANTASTIC RESULTS. BNY DROPPING MOMENTS AGO. IT IS BACK-TO-BACK QUARTERLY REVENUE RECORDS FOR BNY. WHEN NUMBER THAT CATCHES MY ICON ASSETS UNDER CUSTODY AND/OR ADMINISTRATION. $62.6 TRILLION. THAT IS MORE THAN THE ESTIMATE AND A RECORD FOR THIS COMPANY.

LISA: IT IS VERSUS THE ESTIMATE OF 61.3 TRILLION DOLLARS. I'M LOSING CONCEPTION OF THE NUMBERS WE ARE TALKING ABOUT, BUT BNY IS ONE OF THE BIGGEST ASSET MANAGEMENT COMPANIES AND CUSTODY HOLDERS. INTERESTING TO SEE AGAIN, THEY BEAT ACROSS THE BOARD WITH RESPECT TO THAT INTEREST MARGIN OF 1.45%. NET INTEREST INCOME ALSO BEATING. YOU ALSO HAVE TO WONDER HOW MUCH PEOPLE ARE SEEING THESE AND EXPECTING EVEN MORE. NONETHELESS, ACROSS-THE-BOARD, BEAT, BEAT, BEAT, BEAT. THAT IS WHAT WE HAVE SEEN THIS QUARTER.

JONATHAN: ON THE YEAR THE STOCK IS HIGHER BY MORE THAN 30%. AROUND 8:15 WE WILL CATCH UP WITH THE CFO ON THE LATEST RESULTS. TO YOUR POINT, THE WEATHER HAS BEEN FANTASTIC. THE WEATHER HAS BEEN GREAT AND EXECUTION ACROSS A NUMBER OF BANKS ACROSS LAST 24 HOURS APPEARS TO BE TREMENDOUS.

LISA: PEOPLE ARE LOOKING FOR THINGS TO WORRY ABOUT AND EVEN THE CFO OF J.P. MORGAN SAID, OF COURSE WE ARE GOING TO LOOK FOR THINGS TO WORRY ABOUT, WE SHOULD ALSO WORRY ABOUT BEING TOO WORRIED BECAUSE WE HAVE SEEN THESE UPSIDE BEATS. PEOPLE ARE TRYING TO WRING THEIR HANDS AND FIND HOLES IN THE STORY OF CAPITAL MARKETS. THEY CANNOT FIND THEM JUST YET.

JONATHAN: THIS IS ALL I CAN FIND. THAT IS THE QUESTION RIGHT NOW ON WALL STREET. IS THAT IT? CAN IT GET ANY BETTER THAN WHAT WE HAVE SEEN AT SOME OF THESE BANKS?

LISA: THEN HE GOES ON TO SAY, WE DON'T KNOW HOW LONG IT IS GOING TO LAST. NOBODY KNOWS. THIS IS THE PLACE WE ARE LEFT IN. CAN THIS REMAIN THE CASE FOR A LONG PERIOD OF TIME?

JONATHAN: THINGS ARE PRETTY DECENT RIGHT NOW. BNY HIGHER BY 1.2%. MORGAN STANLEY, THOSE NUMBERS DROP IN AN HOUR FROM NOW. PRESIDENT DONALD TRUMP PLEDGING TO ESCALATE ATTACKS ON IRAN.

PRES. TRUMP: WE ARE GOING TO HIT THEM VERY HARD TONIGHT. WE ARE GOING TO HIT THEM VERY HARD TOMORROW NIGHT. YOU'RE GOING TO HIT THEM HARD TONIGHT AFTER AND THEN NEXT WEEK IT GETS REALLY BAD FOR THEM BECAUSE NEXT WEEK COMES THE OUR PLANTS. NEXT WEEK COMES THE BRIDGES.

JONATHAN: THE U.S. LAUNCHING A FIFTH DAY OF STRIKES ON IRANIAN TARGETS AFTER RESUMING THE LABEL BLOCKADE IN THE STRAIT OF HORMUZ. FED CHAIR KEVIN WARSH SAYING, CALLING INFLATION DATA DOESN'T MEAN IT IS TIME TO DECLARE VICTORY.

CHAIR WARSH: THERE MIGHT BE SOME THAT LOOK AT THIS DATA AND SAY, MISSION ACCOMPLISHED. THAT IS NOT MY VIEW. THE FEDERAL RESERVE CAN AND WILL DELIVER PRICE STABILITY. WE HAVE THE TOOLS TO DELIVER THAT.

JONATHAN: THE FED CHAIR FACING THE SENATE BANKING COMMITTEE LATER THIS MORNING. FINALLY, ASML BOOSTING ITS SALES FORECAST, SURGING DEMAND FOR AI CHIPS PUSHING IT TO AGGRESSIVELY SCALE UP CAPACITY.

LISA: ULTIMATELY IT IS ALL ABOUT HARDWARE. ASML VERSUS IBM. IBM HIGHLIGHTING THE CONCERN THAT MONEY IS GOING TO BE DIVERTED AWAY FROM THEIR SERVICES TOWARD HARDWARE OF THE WORLD. ASML'S BEAT, NET SALES WILL GROW BETWEEN 30 BILLION EUROS AND 45 BILLION EUROS. THAT IS UP FROM THE 43 BILLION DOLLARS OR $40 BILLION THAT WAS EXPECTED. SO, INCREDIBLE BEATS AS PEOPLE CONTINUE TO HOARD SOME OF THIS TECHNOLOGY.

ANNMARIE: IT COMES AS THEIR CUSTOMERS CONTINUE TO LINEUP. CUSTOMERS CONTINUE TO ACCELERATE THEIR EXPANSION CAPACITY PLANS. THAT MEANS ASML WAS ALSO HAVING TO EXPAND THEIR CAPACITY.

JONATHAN: THIS IS A THING ALREADY AND IT IS AN EXPECTED ONE. IT WAS A LOT OF SPENDING, A LOT OF CAPITAL-RAISING, AND THE BENEFICIARIES OF THAT ARE A SMALL GROUP OF COMPANIES. IBM IS A FANTASTIC EXAMPLE OF THIS. THE PHRASE THEY USE, RE-PRIORITIZATION. THAT IS THE ISSUE RIGHT NOW FOR EVERYBODY ELSE VERSUS THESE HANDFUL OF COMPANIES. ONLY A FEW ARE RECEIVING IT.

LISA: IF YOU LIKE IT IS A ROLLING BALL OF CHOKEPOINTS. YOU SEE PRIORITIZATION OF HYPERSCALERS, THEN IT WAS RUNNING TO THE LARGE LANGUAGE MODELS THAT COULD DISRUPT THEM. THEN IT WAS MOVING TO THE HARDWARE AND ENERGY SECTOR. WHERE IS IT GOING TO GO NEXT? THAT ANXIETY IS UNDERPINNING SOME OF THE MASSIVE MOVES WE ARE SAYING.

JONATHAN: ASML HIGHER IN TRADING. IBM LOSING A QUARTER OF ITS VALUE. STEFAN SLOWINSKI OF BNP PARIBAS KEEPING MACRON UNDERPERFORM RATING ON THE STOCK, WRITING, WE BELIEVE IBM WAS NOT A CANARY IN THE COAL MINE FOR SOFTWARE, BUT MORE OF A CASUALTY, OR ITS MAINFRAME BUSINESS SUFFERED FROM CROWD OUT. OPEN TO THE PROGRAM. DO YOU BELIEVE THAT IS A ONE OFF AN ONGOING, DURABLE STORY FOR THE TIME BEING?

STEFAN: GOOD MORNING. I THINK THAT WAS THE CONFUSION YESTERDAY AROUND IBM. WE CAN UNDERSTAND THE CROWD OUT JUSTIFICATION. CUSTOMERS LOOKING TO SPEND ON SERVERS AND MEMORY AHEAD OF EVEN MORE PRICE INCREASES. BUT THEN IBM ALSO DID SAY THERE WERE ISSUES AROUND CYBERSECURITY. WE ASSUME THAT RELATES TO THE MYTHOS MODEL FROM ANTHROPIC AND THE GLASS WING EPISODE IN Q2, WHERE BANKS IN PARTICULAR, WHICH ARE BIG CUSTOMERS FOR IBM, MAY HAVE PRIORITIZED MORE CYBERSECURITY SPENDING. THAT LOOKS LIKE IT HAD AN IMPACT AS WELL. IBM ALSO CALLED OUT EXECUTION. THEIR OWN EXECUTION, WHICH LED TO NUMEROUS STEEL SLIPPAGES. I THINK THAT CAUSE CONFUSION AND NERVOUSNESS. AS YOU POINT OUT, WITH THE STOCK DOWN YESTERDAY, THERE ARE A LOT OF NERVES. EVEN IF THERE ARE JUSTIFICATIONS , INVESTORS JUMPED RIGHT TO, IS THIS SOMETHING DEEPER AROUND AI DISRUPTION? IS THIS FINALLY THE DISRUPTION OF THE MAINFRAME COMING? YOU GET THOSE NERVES COMING THROUGH AND THE SHARE PRICE PERFORMANCES.

LISA: EVEN IF YOU DON'T HAVE BIGGER OVERRIDING EXISTENTIAL THESIS HERE, THERE IS THE REPRIORITIZATION AND HOW LONG IT WILL LAST. IT ISN'T GOING AWAY, THE INVESTMENT IN HARDWARE AND CYBERSECURITY, WITH NEW MODELS COMING OUT. WHAT IS YOUR SENSE OF THE TIMELINE FOR WHEN CAPITAL WILL GET REPRIORITIZE BACK TO THE SOFTWARE NAMES?

STEFAN: THAT IS THE TRICKY QUESTION FOR THIS QUARTER IN SOFTWARE. YOU KNOW, AS YOU POINT OUT, WE ARE SPENDING ON CAPEX. WE ARE SPENDING ON CYBERSECURITY. AND AS A COME BACK TO MORE TRADITIONAL HORIZONTAL SOFTWARE? WE SAW THE SOFTWARE STOCKS UP MID SINGLE DIGITS. WE DON'T THINK THIS IS THE QUARTER WE SEE THAT REPRIORITIZATION BACK TO TRADITIONAL PLATFORM SOFTWARE. WE JUST PUBLISHED THIS MORNING OUR BNP PARIBAS GLOBAL SOFTWARE RESELLER CHANNEL CHECKS. THEY ACTUALLY TOOK A STEP BACK FROM APRIL. THE TREND IS STILL BETTER FROM 2024 AND 2025, BUT SLIGHTLY WEAK. WHEN YOU NOW HAVE A REKINDLING OF THE WAR IN IRAN YOU ARE PROBABLY GOING TO SEE COMPANIES CONTINUE TO BE CAUTIOUS ABOUT THE OUTLOOK FOR Q3. IT IS HARD TO SEE THAT REPRIORITIZATION NEAR-TERM HAPPENING. THAT IS WHY INVESTORS ARE SAYING ON THE SIDELINE FOR A LOT OF YOUR TRADITIONAL SOFTWARE STOCKS.

LISA: HOW MUCH PARALYSIS IS THERE TO GET THESE DEALS DONE MORE BROADLY IN THE SOFTWARE SPACE? A LOT OF COMPANIES ARE WONDERING, CAN WE DO THIS WITH OUR OWN STAFF, GIVEN ADVANCEMENTS IN LARGE LANGUAGE MODELS?

STEFAN: THAT CONTINUES TO BE A DEBATE, WHICH IS THE DO-IT-YOURSELF AI. OF COURSE, YOU HAVE HAD MORE RECENT DISCUSSION AROUND PUSHBACK AROUND TOKEN MAXING, TOKEN OPTIMIZATION. AND SO, POTENTIALLY SOME PUSHBACK ON THE OPENAI AND ANTHROPIC SEND WHAT THEY ARE CHARGING. AND SO, YOU KNOW, YOU ARE SEEING MICROSOFT, YOU ARE SEEING AMAZON, SOME OF THE MORE TRADITIONAL PLATFORM PROVIDERS TRYING TO STEP IN AND SAY, THIS IS NOT SOMETHING YOU CAN JUST DO YOURSELF WORKING DIRECTLY WITH THESE MODELS. THAT IS COMPLICATED. THERE IS LOTS OF RISKS, RIGHT? WE SAW SAW TINA DELLA OVER THE WEEKEND WITH HIS ESSAY AROUND THE RISKS OF WORKING WITH THESE AI MODELS. WE SAW DENNIS HASSABIS YESTERDAY TALKING ABOUT THE NEED FOR REGULATORY FRAMEWORK AROUND AI. ALL OF THAT IS CERTAINLY SOME OF THE BIG PLAYERS TRYING TO PUSH THEIR CUSTOMERS BACK INTO THEIR ECOSYSTEMS TO DO THIS WORK.

JONATHAN: IBM WAS PUSHING THE MONEY ELSEWHERE. CROWDSTRIKE RALLIED YESTERDAY BY MORE THAN 10%. OUT OF IBM, THEIR CUSTOMERS WERE DISTRACTED BY CYBERSECURITY. THE ISSUE WITH A LOT OF COMPANIES WHEN THEY ARE REPORTING EARNINGS IS TRYING TO WORK OUT WHAT IS REAL, WHAT IS AN EXCUSE. IS THAT WHAT YOU SEE TOO?

STEFAN: IN OUR SURVEY CYBERSECURITY WAS NUMBER ONE IN TERMS OF PRIORITIZATION'S LAST QUARTER, BUT IT USUALLY IS. SO, THAT IS THE FIRST WE HAVE HEARD OF THIS IN THE QUARTER. IT MAY BE SKEWED FOR IBM BECAUSE THEY ARE DEALING WITH THE BANKS. IT IS A BIG CUSTOMER BASE AND THAT IS PROBABLY WHERE YOU HAD MOST OF THOSE CONCERNS. BUT WE DO THINK THAT WAS AN ISSUE IN Q2. TODAY WE HAVE HIGHLIGHTED COMPANIES LIKE MICROSOFT, WHICH IS THE LARGEST CYBERSECURITY COMPANY IN THE WORLD. AND ALSO A SERVICE NOW WHERE THEY PERFORMED WELL IN OUR SURVEY. THEY JUST CLOSED THE ARMIS DEAL IN APRIL, SO THEY NOW HAVE MORE OF THEIR OWN CYBER AND SECURITY BUSINESS AND THEY ARE STARTING TO HIT SOME EASIER COMPS IN TERMS OF U.S. FEDERAL, WHERE LAST YEAR YOU HAD THE DOGE EFFECT AND THE GOVERNMENT SHUTDOWN EFFECT. WE DO THINK CYBERSECURITY IS A DURABLE GROWTH DRIVER FOR THE PURE PLAYS, BUT ALSO SOME OF THOSE OTHER COMPANIES I MENTIONED.

JONATHAN: IT IS GOOD TO SEE YOU. STEFAN SLOWINSKI OF BNP PARIBAS. CROWDSTRIKE DON'T REPORT UNTIL THE END OF AUGUST. WE WILL SEE WHAT HAPPENED LAST QUARTER.

LISA: AND WHETHER IT IS A RESULT OF THE BIG BANKS GETTING SPOOKED BY WHAT THEY SAW FROM MYTHOS. AND ANECDOTALLY TALKING TO BANK EXECUTIVES, THERE WERE WEEKLY MEETINGS WITH THE TOP EXECUTIVES OF THE BIGGEST BANKS FOR THE FIRST TIME SINCE THE FINANCIAL CRISIS ABOUT THIS. IT WAS A MAJOR ISSUE. CLEARLY THERE IS SOMETHING REAL. HOW MUCH OF THIS IS ALSO EXECUTION?

JONATHAN: NASDAQ FUTURES HIGHER THIS MORNING. SCIORRA AN UPDATE ON NEWS WORLDWIDE WITH YOUR BLOOMBERG BRIEF.

VONNIE: BNY REPORTING EARNINGS THAT BEAT ESTIMATES ACROSS THE BOARD. BLACKROCK SHARES RISING IN THE PREMARKET. SECOND-QUARTER EARNINGS BEATING ESTIMATES, TOPPING THE 5 TRILLION MARK. BLACKROCK ALSO SEEING RECORD NET INFLOWS IN THE FIRST HALF OF THE YEAR. BANK OF AMERICA RELEASING ITS FUND MANAGER SURVEY FOR JULY, FUNDING INVESTOR SENTIMENT REMAINS MORE LUSH ON A MACRO ROOM. AND THEY HAVE DOVISH FED EXPECTATIONS. MORE THAN 80% OF INVESTORS SURVEYED FIND GOING LONG GLOBAL SEMICONDUCTORS IS THE WORLD'S MOST CROWDED TRADE. THAT IS YOUR BLOOMBERG BRIEF.

JONATHAN: I'M SHOCKED. APPRECIATE THE UPDATE. A SERIOUSLY BULLISH ONE THIS MORNING.

LISA: NOBODY THINKS THERE IS GOING TO BE A RECESSION. THE PEOPLE SURVEYED BELIEVED THERE WOULD BE A HARD LANDING. MOST PEOPLE ON RECORD BELIEVED THERE WOULD BE NO LANDING. WELCOME TO THE RECESSION-LESS NIRVANA THEY WERE ALL LIVING IN.

JONATHAN: MISSION NOT ACCOMPLISHED.

>> I REVIEWED THE DATA ON CPI. I'M NOT GOING TO SHOW UP HERE AND SAY "MISSION ACCOMPLISHED." THE REASON I CREATED A TASK FORCE ON DATA IS I DIDN'T WANT TO CHERRY PICK DATA.

JONATHAN: NEXT WE WILL CATCH UP WITH KRISHNA GUHA OF EVERCORE. YOU ARE WATCHING BLOOMBERG "SURVEILLANCE."

♪

JONATHAN: STOCKS ARE DOING OK. EQUITY FUTURES POSITED BY .1% ON THE S&P 500. VERY BULLISH OUT OF BANK OF AMERICA. MORE BULLISH ON THE SO-CALLED MACRO BOOM. THE NASDAQ HIGHER BY 0.4 PERCENT. LET'S TALK ABOUT EARNINGS OUT OF BLACKROCK, 15 TRILLION. CRAZY NUMBERS OUT OF BLACKROCK THIS MORNING. THE STOCK IS UP BY 2.5%. BNY, BACK TO BACK RECORDS. THE OUTLOOK BETTER, A BEAT AND A RAISE FOR THEM LOOKING FOR TOTAL REVENUE UP BY 10%, 11%. THEY HAD SEEN IT AT 5%. BRAMO, IT IS ANOTHER MORNING KIND OF LIKE YESTERDAY.

LISA: TO GET PERSPECTIVE ON THE ASSETS UNDER MANAGEMENT FOR BLACKROCK, IN 2020 FOR THE ASSETS UNDER MANAGEMENT WERE 10.6 TRILLION DOLLARS. THEY INCREASED IN TERMS OF THEIR ASSETS UNDER MANAGEMENT ABOUT $5 TRILLION OF ASSETS ADDED. TO GIVE YOU A SENSE OF THE MOMENTUM UNDERPINNING SOME OF THESE NUMBERS.

JONATHAN: BLACKROCK HIGHER BY 2.5 PERCENT. ELSEWHERE IN THE ENERGY MARKET, BRENT AND WTI PUSHING HIGHER THIS MORNING. THIS CAME FROM U.S. CENTRAL COMMAND EARLIER ON. 6:00 A.M.. 50 MINUTES AGO. U.S. CENTRAL COMMAND FORCES BEGAN LAUNCHING A WAVE OF STRIKES AGAINST IRAN. ANOTHER WAVE. JUST THIS MORNING.

ANNMARIE: THE PRESIDENT SAID YESTERDAY IN AN INTERVIEW WE WILL HAVE MORE STRIKES THIS EVENING, POTENTIALLY. HE EVEN SAID IT CAN GO ON TO THINGS LIKE POWER PLANTS AND ENERGY AT SOME POINT. THAT WILL BE THE LAST IT COULD HIT. MAYBE EVEN BRIDGES. POTENTIALLY MORE CIVILIAN INFRASTRUCTURE, WHICH WOULD BE CONTROVERSIAL. CENTCOM TOLD US AT 6:00 THEY ARE DOING THIS BUT HOPEFULLY LATER TODAY WE WILL GET A LIST OF TARGETS.

JONATHAN: THE PRESSURE STILL BUILDING ON THIS FEDERAL RESERVE. MISSION NOT ACCOMPLISHED.

>> I REVIEWED THE DATA ON CPI AND IT WAS POSITIVE RELATIVE TO TWO EXPECTATIONS. I'M NOT GOING TO SHOW UP AND SAY MISSION ACCOMPLISHED. THERE'S PLENTY OF WORK TO DO. THE REASON I CREATED A TASK FORCE ON DATA IS I DON'T WANT TO OVERREAD OR CHERRY PICK DATA.

JONATHAN: KEVIN WARSH PREPARING FOR A SECOND DAY ON CAPITOL HILL BEFORE CONGRESS TO CURB INFLATION. WARSH'S COMMENTS PLUS A JUNE CPI MAKE US MORE CONFIDENT IN OUR BASE CASE CALL THAT THE WORSHIP THAT WILL NARROWLY AVOID RAISING INTEREST RATES THIS YEAR BEFORE CUTTING ONCE NEXT YEAR. YOU ARE A VERY WELL FOLLOWED FED WATER. WHAT DID YOU LEARN YESTERDAY?

KRISHNA: FIRST I THOUGHT KEVIN WARSH WAS EXTREMELY ACCOMPLISHED AND EFFECTIVE IN DEALING WITH CONGRESS. REASSURED ON PARTICULAR UNFIT INDEPENDENT SPIRIT WAS NOT SEEN IN ANY WAY AS PARTISAN. SECOND, I THINK IT'S WHAT HE DIDN'T DO. HE DIDN'T START TO PREPARE THE GROUND FOR THE NEAR-TERM RATE HIKE. HE DIDN'T RULE ANYTHING OUT AS WE LOOK FURTHER OUT. THIRD, HE DREW ATTENTION BACK TO THE BALANCE SHEET. I THINK THAT'S A REMINDER THAT THERE IS STILL A LOT TO COME. NOT IMMEDIATELY, BUT A LOT TO COME OVER TIME ON THE FED BALANCE SHEET.

LISA: HOW MUCH POWER DO WORDS HAVE AFTER A WHILE IF THERE IS NO ACTION? THIS IS SOMETHING PEOPLE ARE INCREASINGLY ASKING AS THEY ARE TRYING TO GLEAN IF THERE WILL BE A RATE HIKE OR RATE HOLD.

KRISHNA: I THINK KEVIN WARSH HAS COME OUT OF THE GATES MAKING VERY STRONG STATEMENTS ABOUT CREDIBILITY, ABOUT THE FED'S COMMITMENTS TO BRINGING INFLATION LOWER. WHETHER HE HAS TO THEN OPERATIONALIZE THAT BY RAISING RATES IS A CLOSE CALL. MY HUNCH IS HE IS AT LEAST PUTTING SOME SPACE BETWEEN THESE TWO. ASSERT CREDIBILITY FIRST, OBSERVE THE INFLATION DATA OVER THE SUMMER, SEE IF IT IS STARTING TO MOVE THE RIGHT WAY. I THINK IF IT IS NOT HE WILL GET CALLED AT THE SEPTEMBER MEETING AND WILL HAVE TO GO THROUGH WITH A HIKE. WE DON'T SEE THAT IN OUR BASE CASE. WHY? WE THINK THE INFLATION OUTLOOK IS STARTING TO TURN. BUT IT IS VERY CLOSE. I CERTAINLY DON'T THINK THAT YOU CAN RELY ON STATEMENTS OF CREDIBILITY ONLY WITHOUT ACTION IF THE DATA DOESN'T COOPERATE.

LISA: EVEN IF HE DOESN'T WANT TO GIVE GUIDANCE WE ARE HEARING FROM ROSTERS OF FED OFFICIALS SPEAK. HOW DO YOU UNDERSTAND THEIR WORDS? ARE THEY AS RELEVANT, MORE RELEVANT, LESS RELEVANT?

KRISHNA: I THINK THE UNFORTUNATE REALITY IS WHEN THE FED CHAIR REFUSES TO DISCUSS HIS STRATEGY IN ANY DETAIL AT ALL, THEN THAT CREATES A VOID. THAT VOID IS INEVITABLY FILLED BY COMMENTS FROM OTHER FED OFFICIALS. THERE IS A HIGHER RATIO OF NOISE TO SIGNAL BECAUSE YOU CAN'T BE CLEAR EXACTLY WHO IS SPEAKING WITH AUTHORITY FOR THE COMMITTEE. I DON'T THINK THIS IS HELPFUL, AND I DO HOPE OVER TIME WARSH WILL BE WILLING TO FLESH OUT HIS STRATEGY SOME MORE.

ANNMARIE: YESTERDAY HE SAID HIS COMMITMENT, THE ENTIRE COMMITTEE'S COMMITMENT, WAS TO TAKE STICKY PRICES AND UNSTICK THEM. HOW CAN HE DO THAT WITHOUT A HIKE?

KRISHNA: YEAH, THAT WAS NOT A PHRASE I THOUGHT WAS PARTICULARLY WELL UNPACKED, LET'S SAY. LOOK, I ACTUALLY DON'T THINK THE U.S. AS A STICKY INFLATION PROBLEM RIGHT NOW. IF IT DID I WOULD BE CALLING FOR RATE HIKES. THE REASON INFLATION IS CONTINUING TO RUN SEVERAL CLICKS ABOVE 3% ON CORE PCE IS BECAUSE YOU HAVE 31-TIME WAGE ROLLING THROUGH ON TOP OF UNDERLYING INFLATION, TARIFFS, OIL, THE PKI COSTS SPILLOVERS KEEPING INFLATION HIGH. THESE ARE DIFFERENT THINGS ROLLING IN, PEAKING, ROLLING OFF. SUPPOSE THEY ARE STICKY, HOW DO YOU UNSTICK THEM? IN THEORY YOU COULD HAVE SOME SHOCK TO EXPECTATIONS, REINSURANCE THE FED IS SO POWERFUL THAT PEOPLE NO LONGER ANTICIPATE, FACTOR IN, SOMEWHAT HIGHER INFLATION. AS YOU INDICATED EARLIER, I THINK THE IDEA THAT YOU CAN STOCK EXPECTATIONS TO UNSTICK STICKY PRICES WITHOUT MOVING RATES POTENTIALLY NOT JUST ONCE BY ANY MEANS, I THINK THAT SEEMS A BIT FAR-FETCHED.

JONATHAN: GOOD TO CATCH UP AS ALWAYS. LOOKING FORWARD TO DAY TWO. IT SOUNDS MORE LIKE AN ARGUMENT TO HOLD RATES AND NOT HIKE WHEN THEY SAY INFLATION IS ABOVE TARGET AND WE WON'T TOLERATE IT. I GUESS AT THAT POINT IT MEANS WE ARE NOT GOING TO CUT. IT DOESN'T MEAN WE ARE NOT GOING TO HIKE.

LISA: AT A CERTAIN POINT, YOU'RE NOT GOING TO TOLERATE IT BUT IT HAS BEEN THERE FOR FIVE YEARS.

JONATHAN: YOU HAVE BEEN TOLERATING IT.

LISA: AND YOU WILL CONTINUE TO TOLERATE IT. LOTS OF QUESTIONS.

JONATHAN: LOOKING FORWARD TO DAY TWO AT 10:00 A.M..

LISA: ARGENTINA VERSUS ENGLAND.

JONATHAN: THAT KICKS OFF A LITTLE LATER, UNFORTUNATELY. IF IT WAS AT THE SAME TIME I DON'T THINK IT WOULD BE MUCH OF A SIDE-BY-SIDE, IT WOULD BE ONE SCREEN. KEVIN, OF COURSE.

♪

>> WE THINK INFLATION ACTUALLY IS COMING DOWN.

>> OVERALL, WE DON'T HAVE AN UNDERLYING INFLATION PROBLEM.

>> THIS PRINT DOES GIVE REASON TO BELIEVE THAT COOLS DOWN IN THE SECOND HALF OF THE YEAR.

>> THE FED SHOULD ACT WITH MORE FORCE TO REINSTATE THAT LEVEL BACK TO 2%.

>> I DON'T THINK THE FED CHAIR HAS A LOT OF POWER TO LIMIT THE ABILITY OF PEOPLE TO TALK ABOUT THEIR OUTPUT FOR MONETARY POLICY.

>> THIS IS "BLOOMBERG SURVEILLANCE."

JONATHAN: LIVE FROM NEW YORK CITY THIS MORNING, GOOD MORNING, GOOD MORNING. THE SECOND HOUR OF "BLOOMBERG SURVEILLANCE" STARTS NOW. EQUITY FUTURES ON THE S&P 500 FIRMER BY ABOUT .1%. THE EARNINGS COMING OUT ALREADY THIS MORNING. BLACKROCK, RECORD AUM. BNY, RECORD ASSETS UNDER ADMINISTRATION. NY DOWN ABOUT 1%. A UM, 5 TRILLION FOR THE FIRST TIME. CRAZY NUMBERS COMING OUT OF THE BACK. WE ARE GOING TO BE TALKING ABOUT PPI. THAT DROPS LATER THIS MORNING. TWO'S, TENS, AND 30'S. YIELDS STILL ELEVATED IN THE BOND MARKET. WHEN PPI DROPS AT 8:30 THAT SHOULD SET THE STAGE FOR CHAIR WARSH, DAY TWO ON CAPITOL HILL. GOING IN FRONT OF THE SENATE BANKING COMMITTEE.

LISA: OR WILL IT? YESTERDAY WE GOT THAT CPI THAT CAME IN BIGGER THAN EXPECTED. HE SAID, MISSION NOT ACCOMPLISHED. SAID ONE MONTH OF DATA IS NOT GOING TO CHANGE OUR VIEW THAT WE WILL NOT TOLERATE ABOVE 2% INFLATION. THEY HAVE AND THEY ARE GOING TO CONTINUE, CONSIDERING THE FACT THAT JULY'S NOT GOING TO BE A RATE HIKE. NONETHELESS WE ARE EXPECTING TO HEAR SOME QUESTIONING THAT GETS HIM TO ELABORATE. I WASN'T EXCITED BECAUSE I DIDN'T THINK ANYTHING WILL COME OUT OF THEM AND SO FAR ESSENTIALLY THERE IS A TASK FORCE TO TALK ABOUT.

ANNMARIE: WHAT DID THE HEAVY LIFTING FOR HIM YESTERDAY WAS CPI. GASOLINE PRICES ARE DOWN SOME 10% ON THE MONTH. ISSUE THE FED IS GOING TO HAVE GOING INTO THE SUMMER IS WE HAD FRESH TRACKS LAST NIGHT. THE U.S. MILITARY, 6:00 A.M., THEY STARTED STRIKES ON IRAN. ALL OF THIS IS GOING TO ADD TO THE GEOPOLITICAL RISKS YOU ARE SEEING IN OIL PRICES.

JONATHAN: THIS CAME FROM U.S. CENTRAL COMMAND. THIS IS THE ISSUE FOR ME. WHETHER YOU PAY FOR IT, WHETHER YOU INVEST IN AMERICA OR NOT, DO WE HAVE THE CAPABILITY RIGHT NOW TO HAVE THE ENERGY FLOW THROUGH THAT STRAIGHT?

ANNMARIE: WHAT THE IRGC HAS BEEN ABLE TO PROVE IS THEY ARE ABLE TO GO AFTER SOME VESSELS THAT ARE GOING ALONG THE U.S.-PROTECTED ROUTE. LAST NIGHT WHEN SYNCOM SAID THEY FINISHED THEIR STRIKES THEY WENT AFTER THINGS LIKE FIGHTER AIRCRAFT, DRONES AND NAVAL VESSELS THAT LAUNCHED PRECISION MUNITIONS AGAINST IRANIAN MISSILE AND DRONE SITES. NAVAL CAPABILITIES, DEFENSE SYSTEMS. THEY ARE TRYING TO DEGRADE ALL OF THESE ASSETS IRAN HAS THAT GO AFTER THOSE VESSELS. A LONG IS IT GOING TO TAKE? WE DON'T KNOW.

LISA: THERE IS AN INTERESTING DIVERGENCE. YOU ARE HAVING OIL TRAVERSE THROUGH THE STRAIT OF HORMUZ AND PIPELINES THAT HAVE BEEN CREATED. YOU ARE NOT SEEING NATURAL GAS, SOME OF THE REFINED PRODUCTS GETTING HIT MUCH HARDER IF YOU TAKE A LOOK AT DIESEL PRICES. THEY HAVE CONTINUED TO INFLECT A LOT HIGHER. AND YOU START TO WONDER ABOUT HEALING. WHAT ARE THESE OTHER ASSETS? FOR GASOLINE IT SEEMS LIKE THAT IS GETTING THROUGH, OR FOR OIL THAT IS GETTING THROUGH ENOUGH TO AMELIORATE SOME OF THE BIGGER CONCERNS THIS YEAR.

JONATHAN: COMING UP THIS HOUR, WE WILL CATCH UP WITH CAMERON DAWSON OF NEW AGE WEALTH. HE WILL SPEAK TO GENERAL ROBERT WALSH, WARNING THAT THE WAR HAS REACHED ITS MOST DANGEROUS PHASE. FINALLY, WE WILL SPEAK TO GERARD CASSIDY OF OUR SPCA. A RECORD-SHATTERING WEEK FOR THE BIG BANKS. WE BEGIN THIS HOUR WITH STOCKS ADDING TO KANE'S FOLLOWING STRONG RESULTS FROM ASML. REIGNITING CONFIDENCE IN THE AI TRADE. CAMERON DAWSON WRITING, GIVEN HIGH EXPECTATIONS THERE IS NO ROOM FOR ERROR. CAMERON, GOOD MORNING. WHAT IS THE LESSON OF THE LAST 24 HOURS WITH REGARDS TO THESE EARNING STORIES?

>> IF YOU BEAT YOU GET REWARDED A IT. IF YOU MISS, YOU GET PUNISHED A LOT. I THINK WE WILL CONTINUE TO SEE THAT OUTSIZED PUNISHMENT, SIMPLE BECAUSE THE BAR IS HIGHER. WE HAVE TO RESHAPE THE TWO Q EARNINGS BAR IS HIGHER THAN WHAT WE HAD IN ONE Q. ON CUE YOU WENT INTO THE QUARTER EXPECTING 9% GROWTH AND YOU GOT 29%. THIS QUARTER WE ARE GOING IN EXPECTING 23% GROWTH AND IMPORTANTLY YOU HAVE SEEN THAT NUMBER FOR TWO Q EARNINGS MOVE UP THROUGH THE QUARTER. TYPICALLY YOU SEE ESTIMATES GET CUT THROUGH THE QUARTER, BUT INSTEAD ESTIMATES HAVE GONE FROM 18% START, AND NOW SITTING AT 23, WHICH MEANS, AGAIN, YOU HAVE THIS HIGHER BAR THAT COMPANIES WILL HAVE TO JUMP OVER, AND IF THEY DON'T THEY WILL GET OUTSIZED PUNISHED.

JONATHAN: WHEN I HEAR THINGS LIKE THAT TYPICALLY I WOULD ASK YOU, WHAT DO I WANT TO OWN? DOWNS LIKE I NEED TO ASK YOU, WHAT SHOULD I AVOID THIS EARNINGS SEASON?

CAMERON: WE WANT TO AVOID PLACES THAT HAVE NOT HAD GOOD EARNINGS MOMENTUM AND CONTINUE TO BE IN PLACES WHERE THERE IS BUDGETS OR FOR FURTHER UPSIDE. THE CHALLENGE TO EARNINGS EXPECTATIONS, THE CHALLENGE IS YOU HAVE RAISED FORECAST SO MUCH FOR THOSE AREAS, THEIR EARNINGS FORECAST FOR 2027 ARE UP 72% THIS YEAR. HOW MUCH MORE UPSET IS THERE TO ESTIMATES? WHAT WE THINK IS MORE IMPORTANT IS NOT WHAT HAPPENS IN TWO Q, BUT, WHAT DOES THAT MEAN FOR ESTIMATES? 2027 ESTIMATES IN 2026 ESTIMATES ARE UP ABOUT 14%. THAT IS WHY THIS MARKET HAS BEEN RESILIENT. THAT IS WHY WE HAVE BEEN ABLE TO THROW SO MUCH NEGATIVE

HEADLINES AND HAVE A CONTINUE TO TREND HIGHER. THIS BULL MARKET TO CONTINUE. WE NEED TO CONTINUE TO SEE THAT UPLIFT TO 2026 IN 2027.

LISA: ONE OF THE CONFUSIONS HAS BEEN HOW CONCENTRATED THIS HAS BEEN IN THE AI TRADE VERSUS A BROAD-BASED EXPANSION. WHAT WE HEARD FROM BANKS IS CONSUMERS ARE DOING REALLY WELL. IT IS A REAL ACCELERATION. YOU ALSO ARE SEEING THE TECH SIDE OF THINGS, AT LEAST THE HARDWARE, CONTINUE TO OUTPERFORM. BOTH PERFORMING WELL OR IS IT ISOLATED TO AI?

CAMERON: 66% OF THE NAMES IN THE S&P ARE ABOVE THEIR 50-DAY MOVING AVERAGE. YOU HAVE A WAY TO CAPTURE HOW MANY STOCKS ARE PARTICIPATING IN THE BULL MARKET VERSUS NOT. THAT IS HITTING NEW HIGHS. THAT SUGGESTS IT IS NOT JUST AN AI STORY. BECAUSE THE GAINS AND RETURNS HAVE BEEN SO POWERFUL WITH AN AI INFRASTRUCTURE SPECIFICALLY, THAT HAS BEEN THE BULK OF THE EARNINGS GROWTH AND THE UPSIDE SURPRISE. BUT THAT DOES NOT MEAN YOU ARE NOT SEEING OTHER AREAS OF THE MARKET SEE EARNINGS REVISIONS MOVE HIGHER. HAVE SEEN ABOUT A 10% INCREASE TO EARNINGS REVISIONS FOR THE EQUAL WEIGHT S&P THIS YEAR. IT IS NOT JUST THE CAP-WEIGHTED INDEX BENEFITING FROM THESE NAMES, BUT YOU ARE STARTING TO SEE IT IN THE AVERAGE STOCK AS WELL.

LISA: HOW DO YOU EXPLAIN PEPSI? PEPSI IS THE OUTLIER. JON SAID, WHAT ABOUT PEPSI? IT IS CHERRY-PICKING SEASON. CONSUMERS ARE PUSHING BACK AND THEY ARE MUCH MORE DISCRETIONARY WHEN IT COMES TO HOW MUCH THEY ARE WILLING TO SPEND. WHICH SIDE OF THAT STORY POTENTIALLY IS ONE TO WATCH MORE?

CAMERON: CONSUMER DISCRETIONARY AND CONSUMER STAPLES ARE TWO SECTORS THAT HAVE SEEN EARNINGS REVISIONS AS WE MOVE THROUGH Q2, BUT WHAT IS FASCINATING IS IF YOU ADD UP BOTH OF THOSE SECTORS WITHIN THE S&P, IT IS STILL SMALLER AS A WEIGHT THAN THE SEMICONDUCTOR INDUSTRY GROUP. THE INDUSTRY GROUP WITH SEMICONDUCTORS IS A 19% WEIGHT NUMBER ON THE S&P. THAT IS WHY THIS MARKET IS SO BIFURCATED. THERE IS PAIN WITHIN THE CONSUMER BECAUSE YOU HAVE ELEVATED GASOLINE PRICES. THEY ARE STILL $.80 HIGHER THAN THEY WERE PRIOR TO THE WAR. ON A WEIGHTED BASIS IT DOES NOT MATTER AS MUCH AS THE ABSOLUTE ROOM IN EARNINGS YOU ARE SEEING WITHIN SEMICONDUCTORS.

ANNMARIE: HOW MUCH IS THIS GOING TO LAST?

CAMERON: THAT IS THE ULTIMATE QUESTION WHEN WE THINK ABOUT THE SEMICONDUCTOR TRADE. IT IS NOT WHETHER OR NOT EARNINGS ARE STRONG TODAY. LOOK AT ASML. THEIR EARNINGS ARE POWERFUL. IT IS HOW LONG IT CAN LAST. THE THING ABOUT THESE BUSINESSES IS, THERE IS SO MUCH OPERATING LEVERAGE. EARNINGS WILL BE UP 35% THIS YEAR, BUT EARNINGS WILL BE UP 135%. LAST YEAR YOU HAD MARGINS THAT ARE GOING TO BE 44% THIS YEAR. IT IS GREAT WHEN YOU HAVE TOPLINE REVENUE GROWTH, BUT THE WARNING STORY IS IF YOU SEE TOPLINE WOBBLE EVEN A LITTLE BIT, YOU GO FROM HAVING INCREDIBLY POWERFUL INCREMENTAL MARGINS TO REALLY PAINFUL DETRIMENTAL MARGINS. THE QUESTION IS WHETHER OR NOT YOU SEE A PEAK IN REVENUE ANY SOON.

JONATHAN: 26 YEARS AGO WE WOULD BE ASKING THE QUESTION WHETHER THERE WAS A BUBBLE IN PRICE. 26 YEARS LATER LIZ ANN SONDERS IS ASKING THE QUESTION WHETHER IT IS A BUBBLE IN EARNINGS EXPECTATIONS. DO YOU THINK THERE IS?

CAMERON: THE DEFINITION OF BUBBLE IS FASCINATING. PRICE ACTIONS OR EARNING POWER CAPACITY? YOU ARE SEEING SO MUCH EARNINGS GROWTH WITHIN THE SEMICONDUCTOR NAMES THAT IT IS A QUESTION OF HOW SUSTAINABLE THEY WILL BE. I THINK THE BIGGEST CHALLENGE YOU HAVE IS THAT THE PRICES OF THE STOCKS WILL PAY FOR THE EARNINGS. IF YOU GO BACK TO 2000, WHEN WE WERE YOUNGER, THE PRICES PEAKED 12 MONTHS BEFORE EARNINGS PEAKED. WE WERE GOING TO HAVE A 12-MONTH PERIOD OF COGNITIVE DISSONANCE WHERE THE EARNINGS ARE GOING TO BE INCREDIBLY POWERFUL, BUT THE PRICES WILL BE FLAT. AN UNDERSTANDING OF WHETHER YOU SHOULD BE SELLING OR BUYING IS GOING TO BE THE ULTIMATE QUESTION AS WE MOVE THROUGH THAT PERIOD. THAT IS WHERE WE HAVE TO USE THE TECHNICALS. IF WE START SEEING THINGS LIKE THE LOWER HIGHS BEING ABLE TO TAKE UP PRIOR HIGHS THAT THE MARKET FEELS WE ARE NEARING UP A.

JONATHAN: I'M GOING TO ASK YOU THE IMPOSSIBLE QUESTION. ARE WE NEAR IT?

CAMERON: I DON'T THINK WE CAN CALL IT. IT IS INNOCENT UNTIL PROVEN GUILTY. IF YOU LOOK AT THE LAST 3.5 YEARS YOU HAVE SEEN SIX CORRECTIONS, AND EACH OF THOSE HAVE BEEN GREAT BUYING OPPORTUNITIES BECAUSE PEOPLE HAVE BEEN UNDERESTIMATING THEIR EARNINGS POWER. LOOK AT 2026. EARNINGS ESTIMATES WERE 50% TOO LOW FOR THE SOX EARLIER THIS YEAR. IT WAS VERY POSSIBLE THAT YOU START TO SEE SOME MORE TERMS. PEOPLE START THINKING THAT 2027 IS THE PEAK, IS THERE ANY EVIDENCE WE ARE SEEING THAT? I DON'T THINK THERE IS YET.

JONATHAN: CAMERON DAWSON OF NEWEDGE WEALTH ON THE PRICE-EARNINGS RIGHT NOW.

LISA: THERE IS A QUESTION OF WHO IS GOING TO PAY FOR THIS. HE TALKED ABOUT THE TRANSFER OF WEALTH FROM THE HYPERSCALERS TO THE SEMICONDUCTORS. PEOPLE ARE STARTING TO PUSH BACK. WAS GOING TO PROVE THEY HAVE ENOUGH RETURN ON INVESTMENT FROM DEPLOYING SOME OF THESE LARGE LANGUAGE MODELS TO PAY THE HIGH PRICE VERSUS, SAY, BEING COST-CONSTRAINED? WHICH YOU ARE HEARING ON A LOT OF CALLS. PARTICULARLY FROM COMPANIES IN THE BANKING SECTOR.

JONATHAN: RATIONING USE. DON'T USE IT FOR THE EASY STUFF.

LISA: BE MINDFUL OF WHICH MODELS YOU USE AND YOU HEAR THIS MORE AND MORE. EVEN CUTBACKS TO THEIR BUDGETS BECAUSE THEY ARE NOT NECESSARILY ABLE TO CUT STAFF OR CREATE OTHER EFFICIENCIES ELSEWHERE.

JONATHAN: ASK FOR A RAISE.

LISA: THEY ARE. ESPECIALLY IF YOU WORK IN SOME OF THESE INDUSTRIES. THAT IS WHY PEOPLE ARE WORRIED ABOUT EXPENSES. THEY ARE FEELING THEIR WORTH RIGHT NOW.

JONATHAN: HUGE BONUS COMING AT THE END OF THE YEAR.

LISA: THAT IS WHY NEWEDGE WEALTH IS DOING SO WELL.

ANNMARIE: A LOT OF THE JEWELRY IS DOING REALLY WELL.

JONATHAN: FUTURES UP .1% ON THE S&P. LET'S GET YOU AN UPDATE ON NEWS. VONNIE QUINN HAS MORE.

VONNIE: U.S. CENTRAL COMMAND SAYING IT BEGAN A FIFTH DAY OF STRIKES AGAINST IRAN AT 6:00 A.M. EASTERN THIS MORNING. PRESIDENT DONALD TRUMP SAYING THEY STRIKES WILL INTENSIFY UNTIL IRAN AGREES TO OPEN THE STRAIT OF HORMUZ. IRAN, RETALIATING AGAINST THE U.S. OVERNIGHT, HITTING BASES IN GULF ARAB STATES. OPENAI IS DEVELOPING ITS FIRST DEVICE. SOURCES TELLING BLOOMBERG IT IS A SCREEN-LESS MOBILE SMART SPEAKER WITH INTEGRATED AI CAPABILITIES. PLANS FOR THE DEVICE HAVE BEEN COMPLICATED AFTER APPLE FILED A LAWSUIT ACCUSING THE DEVELOPER OF STEALING TRADE SECRETS. SPACEX SHARES ARE ON THE VERGE OF FALLING BELOW THEIR IPO PRICE. SHARES OF ELON MUSK'S COMPANY CAUSING ONE DOLLAR ABOVE THEIR IPO PRICE YESTERDAY. THE STOCK HAS PLUNGED A THIRD FROM ITS POST-LISTING PEAK. ERASING NEARLY $850 BILLION IN VALUE. THAT IS YOUR BLOOMBERG BRIEF.

JONATHAN: UP NEXT ON THE PROGRAM, THREATENING ESCALATION. PRES. TRUMP: I WILL SAVE THE ENERGY TARGETS FOR LAST. ULTIMATELY WE WILL HIT ENERGY TARGETS. NEXT WEEK IT GETS REALLY BAD FOR THEM BECAUSE NEXT WEEK COMES THE POWER PLANTS, NEXT WEEK COMES THE BRIDGES.

JONATHAN: UP NEXT, GENERAL ROBERT WALSH. FROM NEW YORK CITY THIS MORNING, GOOD MORNING.

JONATHAN: FUTURES POSITIVE 5.1%. IN ABOUT 15 MINUTES WE WILL HEAR FROM MORGAN STANLEY, FANTASTIC FOR FINANCIALS. BNY DOING WELL, STOCK IS DOWN ON THE SESSION HIGHER 30% ON THE YEAR. WE WILL CATCH UP WITH THE CEO LATER THIS MORNING ABOUT 60 MINUTES FROM NOW.

LISA: TO GIVE YOU A SENSE OF HOW GOOD THE BIG BANK EARNINGS HAVE BEEN SO FAR, TOTAL TRADING REVENUE GENERATED BY THE SIX LARGEST BANKS IN 2019 -- ACTUALLY, LAST YEAR, WAS $13.5 BILLION. MORGAN STANLEY IS EXPECTED TO SURPASS $25 BILLION SO FAR TO GIVE YOU A SENSE OF HOW FAR THEY HAVE EXPANDED. BNY IS NO STRANGER TO THAT DYNAMIC. IT HAS BEEN A BLOCKBUSTER QUARTER.

JONATHAN: THE NUMBERS HAVE BEEN FANTASTIC. MORGAN STANLEY IN ABOUT 15 MINUTES. BRENT IS HIGHER BY 0.9 PERCENT. UNDER SURVEILLANCE THIS MORNING, THREATENING ESCALATION. PRES. TRUMP: I WILL SAVE THE ENERGY TARGETS FOR LAST, BUT ULTIMATELY WE WILL HIT ENERGY TARGETS. BUT WE ARE GOING TO HIT THEM VERY HARD TONIGHT. WE ARE GOING TO HIT THEM VERY HARD TOMORROW NIGHT. WE ARE GOING TO HIT THEM VERY HARD THE NIGHT AFTER. AND THEN NEXT WEEK IT GETS REALLY BAD FOR THEM, BECAUSE NEXT WEEK COMES THE POWER PLANTS. NEXT WEEK COMES TO BRIDGES.

JONATHAN: THE LATEST THIS MORNING, U.S. CENTRAL COMMAND SINGH THE U.S. LAUNCHED A FRESH WAVE OF STRIKES AGAINST IRAN AT 6:00 A.M. THIS MORNING. THE PRESIDENT VOWING TO CONTINUE THE ATTACKS IF TEHRAN DOESN'T COME TO THE NEGOTIATING TABLE. BLOOMBERG'S TYLER KENDALL HAS THE LATEST. HEY, TYLER.

TYLER: CENTCOM CONFIRMED THE LATEST WAVE OF STRIKES LAUNCHED WITHIN THE LAST HOUR ARE FOCUSED ON DEGRADING IRAN'S ABILITY TO TARGET COMMERCIAL SHIPPING AMID VERY LITTLE INDICATION THAT IRAN IS WILLING TO BACK DOWN AT THIS POINT AS THE IRGC SAID IN A STATEMENT OVERNIGHT TO IRANIAN STATE TV THAT THE STRAIT OF HORMUZ WILL REMAIN CLOSED FOR NOW. WE DID GET AN UPDATE FROM THE INTERNATIONAL MARITIME ORGANIZATION, A U.N. BODY THAT HELPS OVERSEE THE TRAFFIC IN THE STRAIT. ON BLOOMBERG RADIO SAYING THEY DEEM THE STRAIT TOO DANGEROUS TO TRANSIT, INCLUDING THE FACT WE'VE SEEN SOME OF THE SHIPS THAT HAVE TURNED THEIR TRANSPONDERS OFF EVEN BE HIT BY YOUR RON IN RECENT DAYS. TODAY MARKS THE FIFTH STRAIGHT DAY OF U.S. ATTACKS AGAINST IRANIAN ASSETS AS PRESIDENT TRUMP RENEWS HIS THREAT TO HIT CRITICAL INFRASTRUCTURE IF IRAN DOESN'T COME TO THE NEGOTIATING TABLE BY NEXT WEEK. HE MENTIONED POWER PLANTS AND BRIDGES BUT SAID THE U.S. WOULD SAVE ENERGY TARGETS FOR LAST. WHAT IS CLEAR IS THE U.S. IS TRYING TO PRIORITIZE THE ECONOMIC PRESSURE AT THE MOMENT WHEN IT COMES TO RING IMPOSING THAT U.S. NAVAL BLOCKADE, EVEN IF IT MOVES FORWARD WITHOUT THE PLAN FOR THE 20% REIMBURSEMENT FEE. JON, OUR ANALYSTS AND BLOOMBERG ECONOMICS ESTIMATES BECAUSE THE U.S. MILITARY BETWEEN $31 MILLION AND $45 MILLION PER DAY TO KEEP THE BLOCKADE INTACT WHICH IS RAISING QUESTIONS ABOUT U.S. RESOURCES AND STOCKPILES, WHICH PRESIDENT TRUMP IS EXPECTED TO ADDRESS AND REMARKS LATER TODAY HERE IN PENNSYLVANIA.

JONATHAN: LOOKING FORWARD TO YOUR COVERAGE LATER TODAY IN PENNSYLVANIA. THE WORDS OF THE PRESIDENT, NEXT WEEK, IT GETS REALLY BAD FOR THEM. GENERAL ROBERT WALSH WRITING THE CONFLICT HAS ENTERED THE MOST DANGEROUS PHASE THEN IT ANY PART EARLIER THIS YEAR. GENERAL, SOME PEOPLE MIGHT BE SURPRISED BY THAT STATEMENT, THAT THIS IS WORSE THAN WHAT WE SAW MARCH INTO APRIL. FOR YOU, SIR, WHAT MAKES IT WORSE?

GEN. WALSH: THANK YOU FOR HAVING ME TODAY. WHAT MAKES IT WORSE IS WE WENT INTO A PERIOD OF NEGOTIATIONS WHERE WE THOUGHT IT WOULD BE IN AGREEMENT, MEMORANDUM OF UNDERSTANDING. THE KEY PIECES TO THAT WAS THE U.S. WOULD STOP THE BLOCKADE, WHICH WE DID AND IRAN WOULD OPEN THE STRAIT OF HORMUZ, AND THAT DIDN'T HAPPEN. TRUMP WAS REALLY TRYING TO GET TO NEGOTIATIONS TO GET TO A DEAL. NOW, THAT IS ALL BROKEN DOWN. YOU SO NOW THAT HE IS ESCALATING THE U.S. REACTION TO THIS, TAKING IT TO A MUCH HIGHER LEVEL. I THINK THE CHALLENGE NOW WHICH MAKES IT MORE RISKY IS THERE REALLY IS NO SIGNS THAT THE NEGOTIATION WILL START. HE WILL PUT THE ECONOMIC PRESSURE, YOU SEE WITH THE BLOCKADE RESTARTING, SANCTIONS REINSTITUTED. NOW, MUCH MORE MILITARY POWER GOING AT STRATEGIC SITES NOW TO OPEN UP THE STRAITS BY NOT ALLOWING IRAN COMMERCIAL SHIPPING AND THE OTHERS TO HIT THE BALLISTIC MISSILE SITES THAT CAUSE THE ABILITY OF IRAN TO RETALIATE AGAINST U.S. BASES IN THE REGION AND OUR GOAL STATE PARTNERS.

ANNMARIE: YOU HEARD THE PRESIDENT POTENTIALLY TALKING ABOUT GOING AFTER CIVILIAN INFRASTRUCTURE, ENERGY AND BRIDGES. YOU THINK THAT'S A CREDIBLE THREAT?

LT. GEN. WALSH: SOMETIMES WHEN YOU GET TO THIS POINT -- OBVIOUSLY WE ARE TRYING TO OPEN THE STRAIT OF HORMUZ. THAT IS THE MILITARY TACTICAL PROBLEM. YOU ALSO SEE IRAN, THE IRGC LEADERS ARE WILLING TO TAKE A LOT OF PAIN. YOU HAVE TO RATCHET UP, ESCALATE TO BRING MORE PAIN TO THEM. ONE OF THE WAYS TO DO THAT IS TO START GOING AFTER THE INFRASTRUCTURE TARGETS. THINGS LIKE THE PRESIDENT MENTIONED BRIDGES. BRIDGES THAT CAN SUPPLY THE MILITARY BASES. IF YOU LOOK AT ENRON'S TERRAIN, A LOT OF MOUNTAINS, THEY HAVE BRIDGES THAT SUPPLY THEM. CUTTING THAT OFF IT NOT ONLY CAUSES PROBLEMS FOR THE MILITARY BUT FOR THEIR CIVILIAN INFRASTRUCTURE AND IT STARTS TO GET SO PAINFUL. INFRASTRUCTURE GRID AND HITTING THEIR CAPACITY HE WOULD HOLD OFF ON FOR NOW. THOSE ARE THE TYPES OF TARGETS HE WANTS TO GET TO THE POINT WHERE THERE WAS A REGIME CHANGE WE WOULD LIKE TO BE ABLE TO HELP IRAN REBUILD AND NOT HAVE LOTS OF DAMAGED CAUSED BY THE ATTACKS WE WOULD DO. HE IS STARTING TO RATCHET UP THE ESCALATION, TRYING TO PUT PRESSURE ON THE IRGC, AND THIS IS TURNING INTO AN ENDURANCE CAMPAIGN. CAN WE EXTEND THIS CAMPAIGN? HOW LONG CAN IT GO? THE PRESIDENT TOLD CONGRESS HE WAS GOING TO EXTEND THIS FOR 60 MORE DAYS, START THE CLOCK ON JULY 10. IN WRONG PLACE WOULD LIKE TO EXTEND IT RIGHT THROUGH THE MIDTERM SAID BECAUSE THE PRESIDENT LOTS OF POLITICAL PROBLEMS. THAT'S THE SITUATION WE HAVE GOING ON NOW. IRAN WANTING TO CONTINUE, TRUMP WANTED TO PUT THE PRESSURE ON THEM TO BRING THEM BACK TO THE NEGOTIATING TABLE TO NEGOTIATE IN FAIRNESS, TO OPEN UP THE STRAITS, AND HAVE DISCUSSIONS ON NUCLEAR CAPABILITIES.

ANNMARIE: IS NOT A CEASE-FIRE BUT THE PRESIDENT WILL STOP SHORT OF CALLING IT AN ALL-OUT WAR.

LT. GEN. WALSH: IT IS A CONTINUING OF THE CONFLICT. IT'S NOT THE SAME HEIGHTENED PHASE AS THE FIRST FACE THAT ENDED ON APRIL 8 WHEN WE WERE HITTING TARGETS ALL ACROSS THE COUNTRY. THIS IS NOW MUCH MORE FOCUSED ON HITTING THE TARGETS THAT WOULD CAUSE THE STRAITS TO CLOSE OR PUT RISKS ON COMMERCIAL SHIPPING. IT'S A VERY FOCUSED PHASE ON THE STRAITS OF HORMUZ. THE PRESIDENT IS OPENING THAT UP MORE WITH HITTING INFRASTRUCTURE TARGETS NEXT WEEK. THAT WOULD TAKE IT FROM THE PHASE OF JUST FOCUSING ON THE STRAIT OF HORMUZ AND OPENING IT UP TO A STRATEGIC CAMPAIGN TO HIT MORE OF THOSE STRATEGIC INFRASTRUCTURE TARGETS. THEY TALK HOW UNIFIED ARE THE IRANIAN LEADERS GIVEN THAT IT SEEMS LIKE THE U.S. IS STRUGGLING TO NEGOTIATE WITH ONE VOICE. THE FLIPPING AND FLOPPING. CAN NEGOTIATIONS BE A SOLUTION WHEN IT'S NOT CLEAR THE PARTY'S THE NEGOTIATING?

LT. GEN. WALSH: THAT IS A GREAT QUESTION AND WE ARE TRYING TO SEE HOW IT PLAYS OUT. THE POLITICAL LEADERS MAKING THE DEALS HAVE NO CONTROL OF WHAT THE IRGC IS DOING. IT ALMOST SEEMS TO BE THE POINT YOU HAVE TO DEAL WITH THE IRGC. WHENEVER YOU COME TO ANY KIND OF AGREEMENT WITH THE POLITICAL OR DIPLOMATIC NEGOTIATORS IT UNRAVELS VERY, VERY QUICKLY AND ANOTHER OF THE NEGOTIATIONS HAVE STAYED INTACT. THE KEY THING HERE IS NOW TRYING TO BRING PRESSURE ON THE IRGC. TAKING AWAY THEIR POWER, THEIR TOOLS. THE THINGS THEY USED TO BE THE CREDITOR OF THE REGION THAT THEY HAVE BEEN SO LONG. NOT ONLY ATTACKING THE GULF STATES BUT RESUPPLYING THEIR PROXIES THROUGHOUT THE REGION. THAT IS WHAT HAS ALLOWED THEM TO BE THE PREDATOR. THAT ALLOWS THEM TO INTIMIDATE AND COERCE OTHER NATIONS. THAT'S WHAT THEY WANT TO DO AND THAT'S WHAT THEY SEE THE STRATEGIC CAPABILITY OF CLOSING THE STRAITS ALLOWS THEM TO BE MORE OF A PREDATOR IN THE REGION AND THAT IS WHAT I THINK THE KEY THING THAT WAS TO BRING PRESSURE AND SEE IF HE CAN GET THAT. THIS IS GOING TO BE VERY DIFFICULT AND IT'S GOING TO BE HARD TO SEE WHETHER PRESIDENT TRUMP CAN DO THIS IN THE TWO MONTHS. HE HAS ABOUT TWO MONTHS. NOT ONLY IN THE 60 DAYS HE HAS TOLD CONGRESS, BUT HE PROBABLY HAS ABOUT TWO MONTHS BEFORE WE GET CLOSE TO THE MIDTERMS AND THE IRGC KNOWS THAT. NOW, IT IS HOW MUCH WILL HE RATCHET IT UP, HOW MUCH PAIN CAN HE BRING TO THEM TO SEE IF HE COULD BRING IT UP TO THE NEGOTIATING TABLE?

JONATHAN: WE APPRECIATE YOUR INSIGHTS AS ALWAYS. GENERAL ROBERT WALSH OF ACADEMY SECURITIES. YOU NAILED IT. THAT'S WHAT MAKES THIS SO MESSY RIGHT NOW.

LISA: HOW DO YOU GET TO A SOLUTION IN NEGOTIATIONS IF THERE ISN'T A RELIABLE PERSON YOU ARE NEGOTIATING WITH? WE'VE HEARD REPORTS ABOUT HOW ONE DEAL IS STRUCK IN THE IRGC DOESN'T AGREE AND IT GETS REVOKED. PEOPLE INTERNALLY TRYING TO STRUGGLE FOR POWER. IT IS A VERY DIFFICULT MOMENT. HOW DOES THIS GET RESOLVED? THERE IS NOT AN EASY PATHWAY IN SIGHT.

JONATHAN: MORE EARNINGS, THIS TIME FROM MORGAN STANLEY. SO FAR BLACK, RECORD. BNY, RECORD REVENUE PLUS MORGAN STANLEY NEXT.

JONATHAN: THE STORY SO FAR THIS MORNING, THE BANK EARNINGS. BLACKROCK, WALL STREET, RECORD A.U.M. FOR THEM. WE SAW THIS YESTERDAY AS WELL. J.P. MORGAN, RECORD REVENUE. BANK OF AMERICA, RECORD STOCK TRADING. THEY’RE SMASHING WALL STREET RECORDS. WHEN YOU GET TO MORGAN STANLEY, YOU’RE NOT EXPECTING ANYTHING DIFFERENT. THIS IS WHAT WE GOT. WEALTH MANAGEMENT FOR THE SECOND QUARTER, $8.6 BILLION. THE ESTIMATE, $8.68 BILLION. THE BEAT, EQUITY TRADING REVENUE, $6.3 BILLION. THE ESTIMATE, $4.47 BILLION. THEY SMASHED IT TOO. THE STOCK IS HIGHER BY 1.5% ON THE SESSION. ON THE YEAR, UP BY 30%.

LISA: RIGHT NOW, ALL THE TRADING VOLUME COMING IN WELL NORTH OF $25 BILLION FOR ALL THE MAJOR BANKS, LED BY EQUITIES TRADING. ALL OF THAT ROTATION UNDER THE SURFACE, A PADDLING DUCK OF R.B.C. TALKS ABOUT HAS BEEN A COMPLETE BOON FOR THE BANKS, PARTICULARLY THOSE ON THE UNDERWRITING SIDE 6 A LOT OF THESE I.P.O.’S AND SHARE SALES IN GENERAL. MORGAN STANLEY AND GOLDMAN SACHS TOGETHER HAVE GENERATED SOME ALMOST 4 BILLION OF JUST EQUITIES TRADING REVENUE FOR THIS QUARTER. THE NUMBERS ARE ABSOLUTELY SHOCKING. RECORD ACROSS THE BOARD.

JONATHAN: NOTABLE EQUITY STRENGTH IN ASIA, IS THAT SOUTH KOREA?

LISA: THE INSTABILITY THAT WILL NEVER STOPS GIVING. IT WOULD SEEM THAT’S A LIKELY CANDIDATE.

JONATHAN: RIGHT NOW FOR VOLATILITY. WHAT A BACKDROP FOR THOSE PARTICULAR FIRMS, BEAT ACROSS THE BOARD ON WALL STREET. MORGAN STANLEY JUST A LITTLE BIT SOFTER. BUT THAT WAS THE STORY YESTERDAY AS WELL. A BIT TOUCH AND GO THAT SOME OF THE BEATS WEREN’T REALLY REWARDED IN THE WAY YOU EXPECT THEM TO BE. BUT THE GAINS SO FAR THIS YEAR, THE BAR WAS ALREADY VERY, VERY HIGH. GOLDMAN DID GET REWARDED LATER IN THE DAY, SO WE’LL SEE IF THIS MOVE STICKS THIS MORNING.

LISA: GOLDMAN HAD ONE OF ITS BEST POST-TRADING DAYS IN YEARS. A QUESTION, A COUPLE OF QUESTIONS THAT WE’LL BE ANSWERING THIS MORNING, I’M SURE. PROVISIONS FOR CREDIT LOSSES ACTUALLY CAME IN A LITTLE BIT ABOVE EXPECTATIONS. NOTHING TO WRITE HOME ABOUT. AND SALES AND TRADING, WE HAD SEEN A COUPLE OF UNDERPERFORMANCES THERE AND OTHER BANKS ALSO COMING IN JUST A LITTLE BIT LIGHTER. THESE ARE MACE, SO IT’S NOT EXACTLY AS IF THIS IS SOME SORT OF MISS OR LOSS. THE FORWARD LOOK ABOUT THE PIPELINE, IS THERE THE SAME KIND OF RESILIENCE AND CONFIDENCE THAT THIS CAN CONTINUE FOR A LONGER PERIOD OF TIME?

JONATHAN: I THINK IT’S SAFE TO SAY THE MOVE THIS MORNING IN THE FREE MARKET, DOWN BY ABOUT A TENTH OF 1%. TO YOUR POINT, WE HEARD THIS FROM BANK OF AMERICA, THE PIPELINES REMAIN STRONG. WE HEARD THIS FROM DAVID SOLOMON. BACKLOG INCREASE TO ITS HIGHEST LEVEL IN FIVE YEARS. SO THERE’S A LOT MORE BUSINESS STILL TO EXECUTE FOR THE YEAR AHEAD.

LISA: AND IT WASN’T JUST BANK OF AMERICA. WE ALSO HEARD FROM GOLDMAN SACHS, J.P. MORGAN, A SIMILAR KIND OF TONE, AND THAT’S REASON WHY EVEN JAMIE DIMON IS LOOKING FOR ALL THE POTENTIAL RISKS ON THE HORIZON, SAYING WE HAVE NO IDEA WHEN THEY’LL ARRIVE. BUT IT SEEMS LIKE THIS CAN’T LAST FOREVER. NONETHELESS, AS FAR AS I CAN SEE, THINGS LOOK PRETTY GOOD.

JONATHAN: FUTURES POSITIVE BY A TENTH ON THE S&P 500. NASDAQ 100, HIGHER BY .5%. A WRAP OF THE MORNING MOVERS, SINGLE NAMES, YAHAIRA HAS MORE.

YAHAIRA: WE’LL STICK WITH THE FINANCIALS, BECAUSE WE ARE SEEING BLACKROCK SHARES RISING 4% AFTER IT DELIVERED A BLOCKBUSTER QUARTER. IT ATTRACTED 92 BILLION IN CLIENT ASSETS, PUSHING ITS ASSETS UNDER MANAGEMENT TO 5 TRILLION FOR THE FIRST TIME EVER. EARNINGS ALSO BEAT EXPECTATIONS, HELPED BY STRONG DEMAND FOR E.P.S., STRATEGY AND PRIVATE MARKETS. MEANWHILE, JUST LIKE WE SAW YESTERDAY WITH SOME OF THE BIG BANKS AND TODAY WITH MORGAN STANLEY, BANKS ARE NOT NECESSARILY GETTING REWARDED FOR BEATING EARNINGS. B.N.Y. IS DOWN NEARLY 1% IN THE PREMARKET, DESPITE POSTING A PROFIT BEAT AND RECORD REVENUE. BUT THE STOCK, LIKE MANY OTHERS, HAVE ALREADY BEEN ON A HUGE RUN. JUST YESTERDAY IT HIT A RECORD HIGH, SO EXPECTATIONS WERE CLEARLY HIGH FOR THIS NAME AND HAVE BEEN FOR THE REST OF THE FINANCIALS. AND WE END ON PAY PAL. THOSE SHARES SOARING 20% IN THE PREMARKET. REUTERS REPORTING A STRIKE HAVE OFFERED TO BUY THE COMPANY IN A $53 BILLION DEAL. IF IT CLOSES, THE TWO WOULD OWN IT JOINTLY. IT HAS BEEN, PAYPAL HAS BEEN STRUGGLING AS OTHER FINTECHS ENTER THE MARKET AND TAKE OVER THIS DARLING, THE ORIGINAL FINTECH.

JONATHAN: THANK YOU. THE STOCK IS HIGHER BY 20%. OUR TOP STORY ON WALL STREET, WRAPPING UP BANK EARNINGS, MORGAN STANLEY ADDING TO A RECORD-SHATTERING WEEK FOR THE BIG FINANCIALS. JARED CASSIDY OF RBC JOINS US WITH MORE. JARED, WELCOME BACK. GOOD TO COVER THIS WITH YOU. LET’S START WITH THE GOOD STUFF, WITH EQUITIES TRADING REVENUE AT $6.3 BILLION AGAINST AN ESTIMATE OF $4.50 BILLION. WHY IS THE BACKDROP SO GOOD FOR THAT PARTICULAR PART OF THE BUSINESS, NOT JUST MORGAN STANLEY, BUT ACROSS WALL STREET?

JARED: YOU’RE ABSOLUTELY RIGHT, JOHN. ACROSS WALL STREET, THE TRADING REVENUES AND EQUITIES HAS BEEN EXTRAORDINARILY STRONG. AND THERE’S A COUPLE OF FACTORS THERE. FIRST AND FOREMOST, THE VOLATILITY IN THE MARKETS. OBVIOUSLY COMING OUT OF FEBRUARY WITH THE CONFLICT IN THE MIDDLE EAST AND WHAT HAS HAPPENED WITH THE PRICE OF OIL, THAT IS ONE FACTOR. BUT THE OTHER FACTOR, TOO, AND YOU GUYS HAVE TALKED ABOUT IT ON THE PROGRAM, IS THE STRENGTH IN THE TECH SECTOR, ESPECIALLY LINKED TO A.I. AND WHEN YOU THINK ABOUT THE SEMICONDUCTOR STOCKS, WHAT THEY DID IN THE SECOND QUARTER IN PERFORMANCE WAS EXTRAORDINARY. AND THIS ALL SHOWED UP IN THE EQUITY TRADING NUMBERS. VOLATILITY IS GOOD FOR EQUITY TRADING, AND WHAT WE SAW WITH THE TECH SECTOR WAS ANOTHER CONTRIBUTING FACTOR.

JONATHAN: NO DOUBT WITH SPEAK FOR HIMSELF LATER THIS MORNING ON THE CALL, BUT THIS IS WHAT WE HEARD FROM JAMIE DIMON OF J.P. MORGAN. IT’S GETTING AS CLOSE TO AS GOOD AS IT GETS. GERARD, IS IT FAIR TO SAY THIS MIGHT BE AS GOOD AS IT GETS WITH SOME OF THESE NAMES?

GERARD: YOU’RE ABSOLUTELY RIGHT. THE NUMBERS ARE VERY, VERY STRONG. THIS IS PROBABLY AS GOOD AS IT GETS. WE WON’T KNOW FOR CERTAIN, OF COURSE, WE’LL LOOK BACK TWO YEARS NOW IF YOU AND I ARE CHATTING ON THE PROGRAM TWO YEARS FROM NOW, AND WE MIGHT SAY, MY GOSH, THE SPACEX DEAL, THE I.P.O. WAS THE TOP OF THE MARKET FOR EQUITIES. WE JUST DON’T KNOW, BUT IT IS STILL STRONG. WE’RE NOT EXPECTING IT TO DROP OFF, BUT SEASONALLY IT WILL SLOW DOWN, OF COURSE, IN THE THIRD QUARTER. BUT IT’S STILL A VERY ROBUST MARKET.

LISA: HOW MUCH CAN YOU TAKE FORWARD IN TERMS OF FORWARD PRICING? GIVEN THE FACT WE’RE SEEING SHARE BUYBACKS, DIVIDEND INCREASES, AND JUST, YES, MAYBE WE’LL SEE A DECELERATION, BUT JUST TO THROW THIS AT THIS, THE FIVE BIGGEST U.S. BANKS REPORTED A COMBINED $50 BILLION JUST IN THE TRADE REVENUES IN ONE QUARTER. THAT’S MORE THAN A THIRD OF ALL TRADING REVENUES LAST YEAR FROM THESE BANKS. I MEAN, IS THAT ENOUGH TO GET TOO EXCITED ABOUT THESE NAMES, EVEN IF THERE IS A SLIGHT DROPOFF IN ACCELERATION?

GERARD: LISA, VERY GOOD POINT, AND WE HAVE TO LOOK THROUGH THE VALUATIONS RELATIVE TO EXPECTATIONS, AND YOU’RE RIGHT, THE STOCKS HAVE HAD VERY GOOD MOVES AND THEY’RE TRADING AT VERY RICH VALUATIONS. MORGAN STANLEY IS OVER FOUR TIMES TANGIBLE BOOK VALUE, GOLDMAN AND J.P. MORGAN ARE OVER THREE TIMES TANGIBLE BOOK VALUE. SO YOU REALLY HAVE TO EXPECT FOR THESE STOCKS TO REALLY WORK GOING FORWARD, LIKE THEY HAVE IN THE PAST 18 MONTHS. YOU HAVE TO EXPECT THAT THESE ACTIVITY LEVELS ARE GOING TO CONTINUE, AND THAT COULD BE A BIG ASK.

LISA: AT THIS POINT THERE SEEMS TO BE A LITTLE BIT OF NERVOUSNESS, AND I STRESS A LITTLE, ON THE PART OF INVESTORS THAT THERE’S AN OVERBUILD GOING ON IN THE A.I. SPACE AND THAT MAYBE THEY DON’T WANT TO BACK ANYTHING AND EVERYTHING RELATED TO A DATA CENTER, AT LEAST NOT WITHOUT SOME PRETTY STRICT TERMS. IS THERE ANY SENSE OF HOW MUCH THAT COULD POTENTIALLY CRIMP ACTIVITY HEADING INTO THE REMAINDER OF THE YEAR?

GERARD: IT’S A GOOD QUESTION, AND I’VE BEEN ASKING THAT QUESTION ON THE EARNINGS CALLS THAT WE HAD YESTERDAY. WE’LL LIKELY ASK THAT QUESTION TODAY. HOW DO WE FRAME OUT THE IMPACT THAT A.I. IS HAVING ON NOT JUST THE MARKETS, BUT THE ECONOMY? AND I DON’T MOON JUST THE BUILDING OF DATA CENTERS, BUT THE WHOLE ECOSYSTEM OF A.I., HOW IS IT IMPACTING? IT’S ENORMOUS. AND I HAVEN’T RECEIVED A GOOD QUANTIFIABLE NUMBER TO SAY IT’S A THIRD OF THE BUSINESS OR ANYTHING LIKE THAT. BUT THAT WE HAVE TO KEEP IN MIND, BECAUSE WE KNOW IT’S A BOOM CYCLE FOR A.I., AND EVENTUALLY IT WILL SLOW DOWN, NOT OVER THE NEAR TERM, BUT EVENTUALLY IT WILL HAVE AN IMPACT ON THE CAPITAL MARKETS BUSINESSES.

JONATHAN: IN JUST A MOMENT, WE TALKED ABOUT THE AMOUNT OF EQUITY SUPPLY WE’VE HAD IN THIS MARKET, COMING TO MARKET, ALPHABET WITH A MONSTER EQUITY CAPITAL RAISE. WE HAD ONE FROM SPACEX WITH A RECORD I.P.O. SK HYNIX, THE BIGGEST EVER FIRST-TIME ISSUER FROM A FOREIGN COMPANY. ALL OF THAT IN THE LAST MONTH. GERARD, THERE IS A QUESTION, STILL AN OPEN ONE, AS TO WHETHER WE WILL SEE THE LIKES OF OPENAI FOLLOW ANY TIME SOON OR WHETHER WE START TO SEE CROWDING OUT THAT WOULD PUSH THESE DEALS BACK. WHAT ARE YOUR THOUGHTS ON THAT?

GERARD: IT’S INTERESTING, JOHN, BECAUSE IF YOU LOOK AT WEALTH OF THE UNITED STATES, FOR EXAMPLE, BACK AT THE BOTTOM OF 2008-2009 DURING THE FINANCIAL CRISIS THE COUNTRY’S HOUSEHOLD WEALTH WAS $61 TRILLION. TODAY IT’S 83 TRILLION. THE FED’S BALANCE SHEET BACK THEN WAS $700 BILLION. IT PEAKED AT $9 TRILLION AT THE PEAK OF THE PANDEMIC. IT’S NOW ABOUT $6.50 TRILLION. THERE’S ENORMOUS AMOUNTS OF LIQUIDITY LEFT OVER FROM THE PANDEMIC. AND SO WE’LL SEE. IT’S HARD TO REALLY GAUGE WHETHER THERE’S A CROWDING OUT. IT DOESN’T APPEAR THAT WAY. THE DEMAND SEEMS TO BE STRONG. AND AS LONG AS THE MARKETS ARE MOVING HIGHER, I THINK THAT’S GOING TO CONTINUE, THE SUPPLY WILL CONTINUE TO SATISFY THE DEMAND.

JONATHAN: CAN I JUST SAY, WE WILL BE HERE IN TWO YEARS. YOU’LL BE HERE IN WORRIES YEARS. UNLESS WE’RE REPLACED BY ROBOTS, AND I HOPE THAT’S NOT THE CASE. BEFORE YOU GO, NEXT QUARTER WHEN WE COVER ALL THESE NAMES TOGETHER, WHAT’S THE FAVORITE PICK THROUGH THE SUMMER?

GERARD: THROUGH THE SUMMER, BANK OF AMERICA WOULD BE THE PICK TO GEAR TO.

JONATHAN: GERARD THANK YOU, GERARD CASSIDY FROM RBC. CAPITAL RISES HAVE BEEN SO OVERSUBSCRIBED. THE AMOUNT OF WEALTH IN THIS COUNTRY, COULD THIS BE AN OPENING? MORE STILL TO COME.

LISA: AND THIS IS THE REASON WHY YOU’VE SEEN SUCH INCREDIBLE EARNINGS. IT’S THE UNDERWRITING SIDE AND THE FACT THAT THERE’S A WHOLE LOT OF MARKET MAKING THAT COMES ALONG WITH THIS. YOU ASKED A REALLY IMPORTANT QUESTION. HOW MUCH MORE IS TO COME WITH THE LIKES OF OPENAI? REAL QUESTIONS ABOUT THE COMMISSION BETWEEN OPENAI AND ANTHROPIC. AND ARE PEOPLE GETTING EXHAUSTED? RIGHT NOW IT SEEMS LIKE THEY’RE JUST GETTING STARTED. AND BASED ON THESE RESULTS, YOU KNOW, REALLY GOOD BONUSES ARE COMING.

JONATHAN: WHAT WAS THE NUMBER FOR TRADE AGO CROSS FIVE BIG NAMES?

LISA: $50.53 BILLION FROM TRADING IN THE SECOND QUARTER.

JONATHAN: MORE THAN 0 BILLION WHAT WAS EXPECTED.

LISA: CORRECT, AND IT COMPARES TO THE ENTIRETY OF 2025, THAT IS MORE THAN A THIRD. THESE NUMBERS ARE ABSOLUTELY ASTRONOMICAL, RECORD AFTER RECORD AFTER RECORD IN OF SINGLE UNIT, AND THAT IS WHAT ALL OF THESE C.E.O.’S KEEP TALKING ABOUT.

JONATHAN: I SAW A STAT THE EQUITY BUSINESS AT GOLDMAN, Q2, WAS BIGGER THAN ALL OF 2019. ONE QUARTER, Q2 BIGGER THAN ALL OF 2019.

LISA: I SAW THAT AS WELL. IT GIVES YOU A SENSE OF HOW BIG THIS BEAT WAS. THEY COMBINED WITH FIXED INCOME AND THEIR EQUITIES TRADING, NORTH OF 3 BILLION IN TERMS OF REVENUE. JUST INCREDIBLE NUMBERS. YOU START TO SEE 5.3 TRILLION OVER AT BLACKROCK, AND YOU START TO TALK ABOUT REAL MONEY.

JONATHAN: THIS MARKET, IT WILL CREEP HIGHER, RIGHT? IT DEMANDS A REPEAT AGAIN AND AGAIN, AND THAT’S THE ISSUE. THAT’S WHY WE’RE ASKING THE QUESTION, IS THIS AS GOOD AS IT GETS FOR SOME OF THESE NAMES?

LISA: AND IS IT ENOUGH? IF IT LASTS FOR A COUPLE OF YEARS, IT’S JUST HARD TO FEEL REALLY OPTIMISTIC WHEN YOU START GETTING SURPRISED AGAIN AND AGAIN AND AGAIN, AND YOU START WONDERING, YOU KNOW, AT SOME POINT, THE MUSIC IS GOING TO STOP. IT JUST MAKES PEOPLE FEEL UNCOMFORTABLE.

JONATHAN: UP BY .10. KEEP DANCING, RIGHT? CHECK FOR SOMETHING LIKE THAT. LET’S GET AN UPDATE ON STORIES WORLDWIDE THIS MORNING WITH YOUR BLOOMBERG BRIEF. VONNIE QUINN HAS MORE.

VONNIE: THANK YOU. MORGAN STANLEY, SHARES RISING IN THE PREMARKET. THE BANK’S SECOND QUARTER EARNINGS TOPPING ESTIMATES. TRADING REVENUE COMING IN WELL OVER EXPECTATIONS AT $6.3 BILLION. ASSETS ACROSS WEALTH AND INVESTMENT MANAGEMENT TOPPING 0 TRILLION. NEW YORK ISSUING THE FIRST STATE-WIDE MORATORIUM ON NEW HYPER SCALE DATA CENTERS. >> I WANTED TO MAKE SURE THAT WE TAKE THE TIME TO HAVE A COMMUNITY INVESTMENT FRAMEWORK FOR LOCALITIES. BUT ALSO, YOU HAVE TO BE ABLE TO POWER YOURSELVES, BRING YOUR OWN POWER SOURCE, OR YOU HAVE TO PAY A PREMIUM TO USE OUR GRID. AND THOSE ARE THE BASIC FOUNDATIONS OF WHAT WE’RE DOING WITH THIS MORATORIUM.

VONNIE: GOVERNOR HOCHUL IS EMPHASIZING THE PAUSE IS NOT A BAN. AMERICANS MAY BE KEEPING THEIR TALKS ON SUMMERTIME. THE HOUSE PASSING A BILL THAT WOULD MAKE DAYLIGHT SAVINGS TIME PERMANENT. THE BILL HEADS TO THE SENATE. STATES COULD OPT OUT IN FAVOR OF PERMANENT STANDARD TIME. THAT IS YOUR BLOOMBERG BRIEF. JOHN?

JONATHAN: VONNIE, THANK YOU. UP NEXT, WE’LL TALK TO JILL FORD. THAT CONVERSATION UP NEXT.

JONATHAN: EQUITY FUTURES POSITIVE BY 1/10 OF 1% ON THE S&P 500. SHAPING UP AS FOLLOWS. EARNINGS FROM WALL STREET'S BIGGEST NAMES IN THE LAST WAY FOR HOURS PRINTING RECORD AFTER RECORD AFTER RECORD AND THIS MORNING NO DIFFERENT. BLACK ROCK WITH RECORD A UM. BNY WITH RECORD ASSETS UNDER ADMINISTRATION. MORGAN STANLEY SELLING ANOTHER QUARTERLY RECORD FOR STOCK TRADERS. MORGAN STANLEY HIGHER CALLING JUST 20 MINUTES AGO.

ANNMARIE: NORTH OF 6 BILLION DEBT.

LISA: ALSO SAYING THEY HAD RECORDS IN EACH OF THE GEOGRAPHIC SEGMENTS. IT'S ALL MUST GETTING EXHAUSTING. WHO ISN'T HAVING A RECORD. AT THE SAME TIME IT'S A SUSTAINABILITY AND SO FAR WE HAVE SEEN ONGOING RESILIENCE FOR THE BIG BANKS. THE PIPELINE IS BIG AND THERE'S A LOT TO GET FINANCE. THE WEATHER'S BEEN FANTASTIC THE SUN IS SHINING BRIGHTLY. SO THE ONLY THING YOU CAN ASK IS DOES IT GET BETTER THAN THIS. SOMETHING WE SPOKE TO ABOUT UBS THIS WEEK. IS THIS AS GOOD AS IT GETS.

LISA: ARE THEY GOING TO GET PENALIZED FOR HIGHLIGHTING JUST HOW MUCH FURTHER IT CAN GO. IF THIS IS A GOOD AS IT GETS IN A GOES FOR A WHILE LONGER KEEP DANCING. THIS IS THE QUESTION A LOT OF PEOPLE HAVE. IT SEEMS AXIOS DON'T HAVE THE DUTCH FOR INVESTORS FOR BEING PUNISHED.

JONATHAN: THUS THE STORY UP FOR THE BIG BANKS. UNDER SURVEILLANCE THIS MORNING SUSTAINING A HIGH SPENDING. HERE'S THE LATEST BIG TECH RAISES CAPITAL FOLLOWING ALPHABET MONSTER EQUITY CAPITAL RAISE. SPACEX'S RECORD IPO AND THE BIGGEST FIRST-TIME ISSUE FROM A FOREIGN COMPANY FROM SK HYNIX. WELLS FARGO WRITING MARKETS WIDE OPEN IF YOU HAD ON THE RIGHT THEME WHICH IS EVERYTHING WITHIN WITH THE MARKET RECEIVES IS THE GOLDEN HALO OF AI. THAT IS WHERE THINGS LAND. GOOD MORNING, GOOD TO SEE YOU. I THINK YOU'VE GOTTEN TO AN IMPORTANT POINT. EQUITY MARKETS WIDE OPEN BUT IS WIDE OPEN FOR ONLY THE COMPANIES THAT TAKE CERTAIN BOXES?

JILL: IT HAS BEEN AN INCREDIBLE FIRST HALF OF THE YEAR WITH RESPECT TO THE EQUITY CAPITAL MARKETS. VAIS SUPER CYCLE IS TAKING HOLD. THEY ARE USING THE TOOLS IN THE TOOLKIT ACROSS THE AI ECOSYSTEM FROM THE HYPERSCALERS TO THE SEMICONDUCTOR COMPANIES ALL THE WAY DOWN TO THE REAL INFRASTRUCTURE OF THE DATA CENTERS AND THE POWER BEHIND THAT. AS THEY USE THE TOOLS IN THEIR TOOLKIT THE EQUITY MARKETS ARE MEANINGFUL PART OF THAT. IT'S NOT JUST STRUCTURED PRIVATES IT'S NOT JUST THE BOND MARKETS AND YOU'RE SEEING THAT OBVIOUSLY WHAT YOU JUST MENTIONED IN TERMS OF FOLLOW-ON'S AND CONVERTS. IN THE PRIVATE MARKETS

JONATHAN: AND THE IPO'S AS WELL. WE SEE MASSIVE ISSUANCE FROM CERTAIN COMPANIES. SOFTWARE, IS THE PATH AVAILABLE FOR THOSE. IBM GOT HAMMERED YESTERDAY. CAN YOU WALK US THROUGH THE CONTAGION EFFECT THE CHILLING EFFECT THAT MIGHT HAVE FOR SOME COMPANIES TO COME TO MARKET?

JILL: THE FLAVOR OF THE YEAR IS AI NO QUESTION. ALL EYES ARE ON THAT WHEN IT RELATES TO TECH. THERE ARE SOFTWARE COMPANIES IN THE PRIVATE REALM WHO CAN AND SHOULD BE PUBLIC. CYBERSECURITY TYPE NAMES, THOSE SOFTWARE COMPANIES THAT ARE OWNING THE DATA HORIZONTALLY AND VERTICALLY. THERE ARE ALSO MANY WHO I THINK WILL HAVE TO SIT IT OUT AND MAY HAVE TO CONSOLIDATE WITH OTHERS OR NOT EXIST. YOU CAN LOOK AT THE PUBLIC MUTUAL FUNDS THAT HAVE TO MARK THEIR PRIVATE POSITIONS. THOSE FUNDS HAVE BEEN INVESTING FOR QUITE SOME TIME NOW. THEY ARE MARKING THOSE DOWN 20% PLUS. THERE IS DEFINITELY RE-RATING IN VALUATION. SOME WILL BE MADE OBSOLETE BY AI AND THOSE EVENTUALLY WILL BECOME PUBLIC. ALL EYES ARE ON AI AND EVERYTHING AROUND THAT ECOSYSTEM.

LISA: THEY ARE NOT NECESSARILY JUST BUYING BLINDLY. WE'VE SEEN THIS WITH OTHER ISSUANCES WHERE THERE'S BEEN PUSHBACK ON THE EDGES ON THE DEBT SIDE OF THINGS. WE'VE SEEN SK HYNIX WITH AN INCREDIBLE AMOUNT OF VOLATILITY. AS WELL. I WONDERING IF WERE STARTING TO SEE THE BEGINNING OF THE PUSHBACK. IF THERE IS A BIT OF SUPPLY INDIGESTION THAT'S COMING DOWN THE PIKE AS SOME OF THESE ISSUES PREPARE TO GO TO MARKET.

JILL: SPACEX WAS AN INCREDIBLE EXHIBIT REMINDER THAT THE U.S. PUBLIC MARKETS ARE INCREDIBLY DEEP. FOR A DEAL THAT WAS THREE TIMES THE SIZE OF THE LARGEST IPO AND TO HAVE MULTIPLE TIMES OF OVERSUBSCRIPTION. TO GARNER DEMAND FROM ALL CORNERS OF THE WORLD ALL DIFFERENT TYPES OF INVESTORS WITH DIFFERENT LENSES AND STILL BE ABLE TO NOT ONLY ABSORB THAT SUPPLY BUT TO KEEP ON TRUCKING IN TERMS OF ADDITIONAL SUPPLY AS YOU POINT OUT WITH ALPHABET IS REALLY A TESTAMENT TO THE FACT THAT THERE ARE DEEP POCKETS. I DON'T THINK WE HAVE EXHAUSTED THE AMOUNT OF THAT DEMAND BECAUSE PEOPLE ARE MAKING MONEY. IT'S BEEN INCREDIBLY VOLATILE, BUT PEOPLE MADE MONEY ON THAT. THE AVERAGE IPO COHORT IF YOU LOOK OUT RIGHT NOW IT'S CLOSE TO 15%. I DON'T THINK THE MUSIC STOPS BECAUSE OF SUPPLY. I THINK IT STOPS IF WE DON'T HAVE THE INCREDIBLE BACKDROP.

JONATHAN: WHAT WOULD CAUSE THAT TO BE LESS INCREDIBLE? IS IT SOMETHING MACRO OR SOMETHING WHERE PEOPLE REALIZE WHO IS GOING TO PAY THE BILL FOR ALL OF THESE BIG HYPERSCALERS AND FOR THE LARGE LANGUAGE MODELS BEING LEVERED AT A SIGNIFICANT RATES EVEN THOUGH COMPANIES ARE PULLING BACK ON EXPENSES OR RATIONALIZING THE TOKEN USE.

JILL: WE HAVE A LONG WAY TO GO WITH AIN WHERE THE CHIPS WILL FALL. THAT BEING SAID I STILL THINK WE ARE ON THE PRECIPICE OF CHANGING THE WAY THE WORLD DOES BUSINESS, CHANGING THE WAY WE LIVE AND WHAT HAS TO COMPANY THAT IS INCREDIBLE. WHAT CAN DERAIL THINGS ARE MORE MACRO. WE HAVE INCREASED TENSIONS IN THE MIDDLE EAST. THE MARKET IS SHAKING IT OFF. THE CONSUMER STILL APPEARS VERY HEALTHY. RIGHT NOW INFLATION APPEARS RELATIVELY UNDER CONTROL. ALL OF THOSE MACRO INDICATIONS THAT WE CAN BE PRICED FOR PERFECTION. THE BACKDROP HAS BEEN RELATIVELY CALM. IF THAT WERE TO CHANGE PARTICULARLY IN THE BACK HALF OF THE YEAR WHERE THE CALENDAR STARTS TO SHRINK IN TERMS OF THE WINDOW TO GO PUBLIC YOU CAN START TO SEE SOME MARGINAL PUTTING OFF OR PERHAPS A RATIONALIZATION ON THAT AS WELL.

ANNMARIE: WE SAW THIS MORATORIUM ON AI DATA CENTERS. DO YOU THINK POLICY COULD HAVE INDIVIDUALS THINKING I'M IN A WAY TO SEE HOW THIS SHAKES OUT.

JILL: I THINK INVESTORS ARE WORRIED ABOUT IT AND AS WE SPEAK TO ISSUERS MANY WANT TO GET AHEAD OF IT. THEY DON'T WANT TO HAVE TO BE IN THE MAELSTROM OF HEADLINES WONDERING WHAT THAT MEANS. I DO THINK IT'S ON PEOPLE'S MINDS AND WE WILL SEE WHAT COMES UP.

ANNMARIE: YOU THINK MORE PEOPLE MAY WANT TO GO BEFORE THAT DAY IN NOVEMBER.

JILL: WHAT YOU'RE DEALING WITH IS THE AUGUST DOLDRUMS, THE LABOR DAY IS A WEEK LATER THAN USUAL. THEN YOU HAVE THE JEWISH HOLIDAYS, THANKSGIVING AND THE MIDTERMS. I ALSO THINK INVESTORS MAY CLOSE THEIR BOOKS EARLY BECAUSE THEY HAVE DONE SO WELL. THEY WON'T WANT TO RISK IT GOING INTO YEAR-END. THERE'S A LOT ON THE TECHNICAL SIDE THAT PEOPLE MAY WANT TO ACCELERATE THEIR PLANS AND COME IN EARLIER IN THE LAST QUARTER VERSUS WHAT THEY NORMALLY WOULD. THEY MAY WAIT UNTIL 27.

JONATHAN: I'M WITH THEM, TAKE THE YEAR OFF. IT'S BEEN A GREAT YEAR ALREADY JUST SHUT IT DOWN.

JONATHAN: JILL FORD OF WELLS FARGO, THANK YOU. ANOTHER UNDER STRIKES ACROSS THE MIDDLE EAST. THOSE DETAILS DROPPING MOMENTS AGO.

ANNMARIE: WRAPPING UP THE MORNING ROUND OF STRIKES AT 7:30 A.M. EASTERN. THE U.S. LAUNCHED PRECISION MUNITIONS AGAINST COASTAL DEFENSE SYSTEMS, CRUISE MISSILES BASICALLY GOING AFTER ANYTHING IRAN HAS THE CAPABILITY TO ATTACKED VESSELS THAT TRY TO TRANSIT THE STRAIT OF HORMUZ.

JONATHAN: CRUDE THIS MORNING HIGHER BY 1/10 OF 1%. BRENT CRUDE AROUND 85. WE RETURNED TO THE BOND MARKET, YIELDS HAVE BEEN HIGHER UP BY A COUPLE OF BASIS POINTS. ON TENDS JUST NORTH OF 4.60. NOT JUST ENERGY, BUT PPI DATA DROPS IN ABOUT 35 MINUTES TIME. WE WILL CATCH UP AND SPEAK TO THE BNY CFO, WE WILL CATCH UP WITH STEPHEN STANLEY OF SANTANDER PLUS THE FORMER U.S. COMMERCE SECRETARY GINA RAIMONDO.

>> THE POWER OF EARNINGS IS TO TRUONG. >> AT SOME POINT, VALUATION WILL BECOME AN ISSUE FOR INVESTORS. >> WE'VE BEEN MOURNING OUR INVESTOR THAT A CORRECTION IS COMING ACROSS THE BOARD. >> THIS IS "BLOOMBERG SURVEILLANCE" WITH JONATHAN FERRO, LISA ABRAMOWICZ, AND ANNMARIE HORDERN.

JONATHAN: LIVE FROM NEW YORK CITY THIS MORNING. GOOD MORNING. GOOD MORNING. THE THIRD HOUR OF BLOOMBERG SURVEILLANCE STARTS RIGHT NOW. EQUITIES HIGHER BY THE 10TH OF 1% ON THE S&P. NASDAQ UP BY 0.4. EARNINGS SEASON COMPLETED ON WALL STREET. BLACK ROCK THIS MORNING, RECORD AUM. THAT STOCK IS UP BY 4%. BE ALIVE, RECORD ASSETS UNDER ADMINISTRATION. MORGAN STANLEY ALSO HIGHER, AROUND 30 PERCENT. BY 1.8 PERCENT. THE RECORD, THIS TIME AGAIN FOR THE STOCK TRADERS AT MORGAN STANLEY. WE HAVE SEEN THAT ON REPEAT OVER THE LAST DAY.

LISA: THESE ARE MASSIVE BEATS, COLLECTIVE BEAT ACROSS WALL STREET IS UP BY SOME 0 MILLION IN THE TRADING REVENUES OVERALL WHEN YOU COMBINE THE TOP FIVE BANKS. THE QUESTION IS HOW GOOD WILL IT GET? IS THIS SOMETHING THAT CAN BE REPEATED AGAIN AND AGAIN? HOW BIG IS THE PIPELINE GOING FORWARD? THE VISIBILITY WE HAVE IS ALL SYSTEMS GO UNTIL THE END OF THE YEAR. FOR PEOPLE THAT WANT TO BE NERVOUS, THAT POSITIVITY MAKES THEM NERVOUS. NONETHELESS, THE DATA SEEM TO BE BACKING IT UP AND AT LEAST THIS INFLATING ENOUGH TO KEEP IT ON THE RAILS.

JONATHAN: IT WAS A BIT TOUCH AND GO YESTERDAY MORNING WHERE THESE BEATS ARE NOT BEING REWARDED AND THE MISSES WERE GETTING MASSIVELY PUNISHED. THAT CHANGED AT 8:31 CPI CAME IN SOFTER THAN EXPECTED. RIGHT HEIGHT EXPECTATIONS IN THE NEAR TERM STARTING TO SOFTEN UP A LITTLE BIT. IT ALLOWED THE EQUITY MARKET TO GO A LITTLE BIT MORE. I DON'T THINK WE WOULD HAVE THE MOVES THAT WE HAD AT THE END OF THE DAY WITHOUT EIGHT: 30 EASTERN TIME.

LISA: THIS IS BOTH A MACRO STORY AND A MICRO STORY. HOW MUCH IT IS FUELING SOME OF THE CAPITAL MARKETS ACTIVITY. ON THE MACRO, THE FED NEEDS NOT GET IN THE WAY FOR THESE MULTIPLES TO SUSTAIN THEMSELVES. IF THE FED TAKES AWAY THE PUNCH BOWL, AND THEY CAN IF THEY HIKE ENOUGH, THAT POTENTIALLY BRINGS AN END TO THE PARTY. IT SEEMS THE CPI REPORT WE GOT YESTERDAY DOES NOT CREATE URGENCY TO RAISE RATES IN THE NEAR TERM, ALLOWING THE PARTY TO KEEP GOING, ALLOWING PEOPLE TO GET ENTHUSIASTIC.

JONATHAN: 2S UP TWO BASIS POINTS. 10S,, 4.61. CREW STILL ELEVATED THIS MORNING, UP A HALF OF 1%, ABOUT 80 ON WTI, BRENT CRUDE AT 85. U.S. CENTRAL COMMAND SAYS THEY HAVE WRAPPED UP ANOTHER ROUND OF STRIKES.

ANNMARIE: WE ARE GETTING MORE DETAILS ON WHAT U.S. FORCES WERE TARGETING, GOING AFTER COASTAL DEFENSE SYSTEMS, CRUISE MISSILE STORAGE LAUNCH SITES, ALL OF THIS TRYING TO DEGRADE IRAN'S CAPABILITY TO GO AFTER COMMERCIAL VESSELS IN THE STRAIT OF HORMUZ. I WAS VERY IMPRESSED WITH WHAT GENERAL WALSH SAID THIS PAST HOUR. HE MADE THE POINT WITH IRAN THE OBJECTION IS DISRUPTION, NOT DENIAL. THERE IS ONLY A LITTLE BIT OF THE IRGC NEED TO DO TO DISRUPT WATERWAYS AND STOP VESSELS, HAVING THEM SECOND-GUESS THAT THEY CAN GO THROUGH. WHICH IS WHY IT MAY TAKE LONGER TO GO AFTER A LOT OF THESE SITES AND SCARE THEM BACK FROM DOING A LITTLE BIT OF DISRUPTION.

JONATHAN: IT DOESN'T COST THAT MUCH EITHER. WE ARE CATCHING UP WITH ED YARDENI ON REDUCED URGENCY TO HIKE INTEREST RATES. WE ARE CATCHING UP WITH A B IN MY CFO AS WALL STREET CRASHES ESTIMATES. THE FORMER U.S. COMMERCE SECRETARY GINA RAIMONDO ON WHAT IS AHEAD FOR THE DAY BUILDUP. INVESTORS CAN'T. DO FRESH INFLATION DATA AND DAY TWO TO KEVIN WARSH'S TESTIMONY ON CAPITOL HILL. AND YOU'RE DENNY RUNNING THE FED'S CORE MESSAGE IS THAT THE FED MUST STAY FOCUSED ON INFLATION WHILE RECOGNIZING AI'S POTENTIAL TO SUPPORT STRONGER GROWTH. IN OTHER WORDS, HE ENDORSED OUR MOORING 20 20'S NARRATIVE. WELCOME. WE ARE MORE THAN HALFWAY THROUGH IT AT THIS POINT. DO YOU NEED THIS FED TO STAY ON HOLD?

ED: THIS IS ACTUALLY THE SEVENTH YEAR OF THE ROARING 20 20'S. IF WE MAKE IT THROUGH THIS ONE, WE CAN LOOK BACK AND SAY THAT IT TURNED OUT TO BE AN AMAZING DECADE. THEN WE CAN START TALKING ABOUT THE ROARING 2030'S. I'M VERY PLEASED TO SEE THAT FED CHAIR KEVIN WARSH SHARES OUR OPTIMISM ABOUT THE OUTLOOK FOR TECHNOLOGY DRIVEN PRODUCTIVITY. THAT MAY EXPLAIN WHY WE ARE GETTING LOWER THAN EXPECTED INFLATION BECAUSE UNIT LABOR COST, WHICH IS HOURLY COMPENSATION OFFSET BY PRODUCTIVITY, THAT IS UP ONLY ZERO POINT 5% ON A YEAR-OVER-YEAR BASIS DURING THE FIRST QUARTER. THAT DOES CORRELATE WITH THE CPI. CPI CAME IN REMARKABLY COOL.

JONATHAN: PLEASE YOU HAVE VISIBILITY INTO THE 30'S. I CANNOT SEE BEYOND NEXT WEEK. THE POSITIVE EARNINGS SHOCK THAT WE WITNESSED AT THE START OF THE YEAR THAT TOOK A LOT OF PEOPLE BY SURPRISE, HOW WELL PRICED IS THAT POSITIVE EARNINGS SHOCK NOW?

ED: THAT IS REALLY THE ISSUE FOR THE NEXT FEW WEEKS. WE ARE IN THE SECOND QUARTER EARNINGS SEASON. THE PROBLEM IS, THE MARKET MAY ALREADY BE DISCOUNTING REMARKABLY STRONG EARNINGS. ON A YEAR-OVER-YEAR BASIS, ANALYSTS ARE PREDICTING SOMETHING LIKE 20, 25% INCREASE IN SECOND-QUARTER EARNINGS ON A YEAR-OVER-YEAR BASIS. HOW MUCH BETTER COULD POSSIBLY BE? IF IT TURNS OUT THE ANSWER IS THAT THEY ARE ONLY AS GREAT AS EVERYONE EXPECTED, YOU MIGHT HAVE SOME PROFIT-TAKING, BUT THEN WATCH THE DIP PLAYERS COME BACK IN. WE HAVE SEEN THAT OVER AND OVER AGAIN. THE REALITY IS THE EARNINGS PROSPECT REMAINS VERY POSITIVE. SECOND, THIRD, FOUR QUARTERS, ANALYSTS ARE LOOKING FOR 20, 20 5% INCREASES IN EARNINGS.

LISA: IT SEEMS LIKE A LOT OF THIS CAN CONTINUE HINGES ON THE INFLATIONARY BACKDROP, POLICY RESPONSE TO IT. YESTERDAY, WE SAW A DISINFLATIONARY PRINT UNLEASH A BIGGER RALLY IN EQUITIES. I WONDER HOW MUCH YOU TOOK FROM YESTERDAY'S CPI PRINT? MAX KETTNER SAID THE DOWNSIDE SURPRISE WAS PRETTY BROAD-BASED, THEY THINK THE FIRST SIGN OF U.S. EXCEPTIONALISM UNWINDING, UNLOCKING LOWER YIELDS. DO YOU AGREE WITH THAT?

ED: I DO ACTUALLY. GOING INTO THE CPI NUMBERS, WE THOUGHT, WE DID EXPECT THE PIVOT FROM EASING BACK IN APRIL TO TIGHTENING IN JUNE BUT WE ALSO THOUGHT THERE WAS A RATE HIKE POSSIBILITY IN JULY AT THE END OF THE MONTH. NOW I THINK CPI TOOK THAT OFF THE TABLE. INTERESTINGLY, THE TWO YEAR AND 10 YEAR TREASURIES ARE STILL ANTICIPATING NONETHELESS THAT THERE WILL BE AT LEAST ONE, IF NOT TWO RATE INCREASES OVER THE NEXT SIX TO 12 MONTHS. THAT STILL POSSIBLE. THE MORE IS NOT OVER. WE STILL HAVE POTENTIAL UPSIDE IN OIL PRICES, ALTHOUGH THAT HAS ALSO BEEN A REMARKABLE SURPRISE. THEN WE HAVE THE AI SITUATION THAT AT LEAST IN THE SHORT IS TURNING OUT TO BE INFLATIONARY. ALL IN ALL, YOU HAVE TO SAY THERE MAY BE SOME REAL MAGIC IN PRODUCTIVITY.

LISA: ARE YOU NERVOUS THAT PEOPLE ARE SO OPTIMISTIC INCLUDING YOURSELF? I KNOW I SOUND LIKE THE ULTIMATE BEAR, LOOKING FOR SOMETHING TO BE BEARISH ABOUT, BUT I'M LOOKING AT THESE SURVEYS THAT SHOW JUST 2% IN THE BANK OF AMERICA FUND SURVEY SEE A HARD LANDING AS POSSIBLE IN THE NEAR FUTURE. DOES THAT GIVE YOU PAUSE?

ED: I DO TEND TO HAVE A CONTRARY STREAK, BUT I DON'T GO CONTRARY UNLESS THE FUNDAMENTAL SUGGEST TO ME THAT THE CROWD IS MISSING SOMETHING HERE. I'M NOT DISMISSING THE POSSIBILITY OF A SIGNIFICANT PULLBACK. WE HAD ONE DURING MARCH WHEN THE WAR WAS RED-HOT. WE COULD HAVE ANOTHER PULLBACK IN THE CURRENT EARNINGS SEASON IF SUDDENLY ONE OF THE HYPERSCALERS SAYS, YOU KNOW WHAT, WE ARE FINDING IT DIFFICULT TO BUILD THE DATA CENTERS. MAYBE WE HAVE MORE CAPACITY THAN WE NEED. ALL OF THESE THINGS ARE POSSIBLE. THERE IS STILL A LOT OF NERVOUSNESS ABOUT THE WHOLE AI SITUATION FOR SURE. OBVIOUSLY, LESS NERVOUSNESS ABOUT INFLATION, LESS THERE ABOUT WHAT THE FED WILL DO. BUT BETWEEN THE ONGOING WAR IN THE MIDDLE EAST, POTENTIAL FOR HIGHER OIL PRICES, THE FACT THAT INFLATION ISN'T BACK TO 2%, WARSH HAS PLEDGED HE WILL GET IT BACK TO 2%, THE QUESTION IS WILL YOU HAVE TO RAISE INTEREST RATES TO DO THAT OR WE'LL PRODUCTIVITY DO THE JOB FOR HIM? EVERYONE KNOWS THAT THEIR CASE. IT WOULDN'T TAKE MUCH TO BRING IT TO THE FORE. I WILL STICK WITH A STORY THAT WE'VE BEEN TELLING SINCE THE BEGINNING OF THE DECADE, THE ECONOMY IS RESILIENT, CONSUMER IS RESILIENT, AND THEREFORE EARNINGS ARE RESILIENT.

ANNMARIE: YOU ARE CALLING THIS THE IRAN WORK TWO POINT KNOW. WHAT DOES THE MARKET NEED TO KNOW ABOUT THIS VERSION, WHERE WE ARE IN THE CONFLICT VERSUS WHEN IT STARTED?

ED: THIS VERSION SEEMS TO BE MORE FOCUSED ON CHINA GETTING IRAN TO FINALLY GIVE IN. THE PROBLEM WITH IRAN IS IT IS NOT CLEAR WHO IS IN CHARGE. THERE SEEMS TO BE SOME SORT OF GOVERNMENT, BUT THERE IS ALSO THE REVOLUTIONARY GUARD. THE END OF THE RECENT CEASE-FIRE SEEMS TO HAVE BEEN TRIGGERED BY THE REVOLUTIONARY GUARD'S UNILATERALLY DISAGREEING WITH THE GOVERNMENT SAY AND WE ARE NOT

ON BOARD WITH ANY PEACE TREATY WHATSOEVER, ANY UNDERSTANDING WHATSOEVER. RIGHT NOW, THE WORST SITUATION IS FOCUSED ON ONCE AGAIN SHUTTING DOWN THE PORTS OF IRAN IN ORDER TO EFFECT THEIR ECONOMY. THE PROBLEM IS, THE REVOLUTIONARY GUARD DOESN'T CARE IF THEIR PEOPLE SUFFER. IT COULD BE A PROTECTIVE SITUATION WHERE THE UNITED STATES HAS TO PROVIDE MILITARY ESCORTS TO GET SHIPS OUT. IN THE MEANTIME, EVERYONE IS SCRAMBLED TO FIND OTHER SOURCES OF OIL, GETTING OIL DISTRIBUTED THROUGH OTHER MEANS. THAT SEEMS TO BE WORKING. IT SEEMS LIKE CHINA'S ECONOMY IS FUNDAMENTALLY WEAK. THAT IS DEPRESSING THEIR DEMAND FOR OIL. THE OIL MARKET HAS ACTUALLY BEEN FAR LESS TROUBLESOME THAN WIDELY ANTICIPATED.

JONATHAN: GDP WEAKER OUT OF CHINA. FINAL QUESTION BEFORE WE GO. YOU COINED THE PHRASE BOND VIGILANTES. DO THEY STAY ON VACATION THROUGH THE SUMMER?

ED: IT SEEMS SO. I HAVE BEEN THINKING THE BOND YIELD IS PRETTY MUCH WHERE IT SHOULD BE, WE ARE BACK TO NORMAL IN THE BOND MARKET. NORMAL IS ABOUT FOUR POINT 5% PLUS OR MINUS ABOUT 15 BASIS POINTS. 4.5% I DON'T THINK IS A PROBLEM FOR THE ECONOMY. QUITE THE OPPOSITE. IT'S A SIGNAL THE ECONOMY IS BACK TO ITS OLD SHAPE. IT CANNOT ONLY HANDLE THESE RIGHTS BUT CAN DO BUSINESS QUITE READILY AT THESE RATES.

JONATHAN: CLOSE TO THE MIDDLE OF THAT RANGE THIS MORNING. GOOD TO SEE YOU, ED YARDENI OF YARDENI RESEARCH. WE ARE DOING OK IN THE EQUITY MARKET OFF THE BACK OF THIS. PPI DATA IN ABOUT 20 MINUTES TIME. LET'S GET YOUR BLOOMBERG BRIEF. VONNIE QUINN HAS MORE.

>> U.S. CENTRAL COMMAND TO GET A FIFTH DAY OF STRIKES AGAINST IRAN THIS MORNING LASTING FOR 90 MINUTES. PRESIDENT TRUMP SAYING THE STRIKES WILL INTENSIFY UNTIL IRAN IT AGREES TO OPEN THE STRAIT OF HORMUZ. IRAN HAVE BEEN RETALIATING AGAINST THE U.S., HITTING BASES IN GULF ARAB STATES. JENSEN HUANG SAYING THE COMPANY'S NEXT ACCELERATOR SYSTEMS ARE ON TRACK FOLLOWING REPORTS THAT THE ROLE THAT COULD BE DELAYED DUE TO MANUFACTURING ISSUES. HE SAID VERA RUBIN IS ALREADY IN PRODUCTION AND IS ON PACE FOR JOINT PRODUCTION VOLUMES. THE FOSSILIZED SKELETON OF A TORONTO SOURCE REX SOLD FOR A RECORD $50 MILLION OUT OF SOTHEBY'S AUCTION. IT IS DESCRIBED AS ONE OF THE LARGEST AND MOST COMPLETE DINOSAUR SKELETONS EVER DISCOVERED. THAT IS YOUR BLOOMBERG BRIEF.

JONATHAN: THERE WAS ONE GUY I THOUGHT OF. KENNY G. WE DON'T KNOW IF IT IS HIM.

ANNMARIE: MAYBE HE HAS A COLLECTION. THAT WOULD BE SO COOL.

JONATHAN: AS AN EIGHT-YEAR-OLD KID, IF I GIVE YOU A BILLION DOLLARS, WHAT WOULD YOU DO? BUY DINOSAURS.

LISA: RE-CREATE JURASSIC PARK.

JONATHAN: I HAVE NO IDEA IF IT IS HIM OR NOT. CATCHING UP WITH THE BNY CFO DERMOT MCDONOGH AS THEY DELIVER ANOTHER RECORD QUARTER. THAT CONVERSATION UP NEXT.

♪ >> ACROSS WALL STREET, THE TRADING REVENUES IN EQUITIES HAS BEEN EXTRAORDINARILY STRONG. THE NUMBERS ARE VERY STRONG AND THIS IS PROBABLY AS GOOD AS IT GETS. YOU REALLY HAVE TO EXPECT FOR THESE STOCKS TO WORK GOING FORWARD LIKE THEY HAVE IN THE PAST 18 MONTHS AND THAT COULD BE A BIG ASK.

JONATHAN: WEIGHING IN ON THE FINANCIALS EARLIER THIS MORNING. EQUITY FUTURES UP BY 1/10. ON THE NASDAQ UP BY A THIRD. LET'S GET YOU SOME MORNING CALLS. MORGAN STANLEY RAISING ITS PRICE TARGET BETTER-THAN-EXPECTED GUIDANCE. YOUR SECOND CALL FOR BARCLAYS RAISING ITS PRICE TARGET ON GOLDMAN HIGHLIGHTING BETTER-THAN-EXPECTED TRADING IN INVESTMENT BANKING FEES PAID WELLS FARGO RAISING ITS PRICE TARGET ON B A STRONG FINANCIAL TRENDS. THAT STOCK IS UP AGAIN THIS MORNING. STICK WITH OUR TOP STORY, WALL STREET DELIVERING A BLOWOUT EARNINGS SEASON. AMERICA'S OLDEST BANK POSTING BACK TO BACK QUARTERS OF RECORD REVENUE AND SALES. JOINING US TO DISCUSS IS DERMOT MCDONOUGH. WELCOME TO THE PROGRAM. RECORD PERFORMANCE IN Q1 AND AGAIN IN Q2. WHAT'S BEHIND THE ACTIVITY AND THE QUESTION THAT APPLIES TO YOUR BANK AND SO MANY OTHERS IS CAN THIS CONTINUE?

DERMOT: GREAT TO BE WITH YOU. WHEN I WAS GETTING READY FOR THE PROGRAM I WASN'T SURE WHETHER TO PUT THE TIE ON OR PUT THE ENGLAND SHIRT ON. I CHOSE THE TIDE BUT HOPEFULLY THEY BRING IT HOME TODAY AND ENJOY THE MATCH THIS AFTERNOON. BNY TODAY GREAT RESULTS WE ARE REALLY PLEASED WITH THE PERFORMANCE. WE FEEL LIKE THE FIRM IS HOPPING AT THE MOMENT. WE HAVE BUILT THE COMPANY FOR DURABILITY AND TO TAKE ADVANTAGE OF OPPORTUNITIES LIKE THIS AT THE MARKET HAS PRESENTED OVER THE LAST QUARTER. THE U.S. ECONOMY IS STRONG AND CONTINUES TO BE POSITIVE ON THE U.S. ECONOMY. THERE'S A LOT TO BE OPTIMISTIC ABOUT IN TERMS OF WHAT'S HAPPENING, FULL EMPLOYMENT, OF THE YIELD CURVE IS BEHAVING WELL. FLOWS ARE STRONG AND WHEN YOU HAVE A COMPANY LIKE OURS, AND HAS BEEN WITH US FOR A LONG TIME 20% OF THE WORLD'S INVESTMENT FLOWS THROUGH YOUR PIPES EVERY DAY, THIS SHOWS UP AND RECORD NET REVENUES. POSITIVE. AS A COMPANY WE ARE VERY PLEASED , WE FEEL LIKE WE HAVE MORE SPACE TO GO AND MORE OPPORTUNITY AND WE WILL KEEP PUSHING INTO THE SECOND HALF OF THE YEAR.

JONATHAN: NORTH OF 60 TRILLION, THAT'S A RECORD FOR THE FIRM AS WELL. YOU JUST ALLUDED TO IT THERE. HELP US DRAW A DISTINCTION BETWEEN THE BACKDROP AND EXECUTION. THE ENVIRONMENT AND HOW THE BANK PERFORMED. WHAT'S HAPPENING THERE?

DERMOT: WE STARTED ON THIS JOURNEY FOUR YEARS AGO AND I CAN SAY CONFIDENTLY UNDER ROBBINS LEADERSHIP THAT BNY TODAY IS A MATERIALLY DIFFERENT COMPANY FROM A FEW SHORT YEARS AGO. I WILL GIVE YOU A COUPLE OF EXAMPLES. WE WILL TALK THIS MORNING ABOUT THIS BEING OUR 14TH QUARTER OF CONSECUTIVE'S YEAR ON YEAR SALES GROWTH. THIS YEAR ALONE THE FIRST HALF WE HAD TO RECORD SALES QUARTERS. 10 PERCENT OF OUR SALES THIS YEAR'S. THAT POINTS TO THE FACT CLIENTS ARE SEEING WHAT WE ARE DOING. THEY SEE THE IMAGINATION OF THE FIRM. THEY WANT TO PARTNER WITH US MORE IN MANY DIFFERENT WAYS AND THAT'S SHOWING UP IN THE NUMBERS.

LISA: ONE THING WE SAW WAS A SENSE OF REAL UPGRADE IN TERMS OF GUIDANCE YOU PUT UP ABOUT 10 TO 11% YEAR-OVER-YEAR VERSUS THE 5% PREVIOUSLY. WHAT GIVES YOU CONFIDENCE HEADING INTO THE SECOND HALF THAT THE MOMENTUM CAN CONTINUE TO THE DEGREE WE SAW IT THIS YEAR?

DERMOT: I LIVE AND BREATHE BNY. I SEE THE PEOPLE WORKING TOGETHER AS ONE FOR CLIENTS AND THAT RESULTS IN STRONG PIPELINE, STRONG BACKLOG. WE ARE A BETTER FIRM TODAY THAN WE WERE A YEAR AGO AND SO I THINK FOUR YEARS AGO IF WE HAD THIS BACKDROP WE ARE EXPERIENCING FOR THE LAST QUARTER WE WOULDN'T HAVE PERFORMED AS WELL AS WE HAD. WE ARE MAKING ABOUT 1% BETTER AT THE FIRM EVERY DAY AND THAT COMPOUNDED OVER A LONG TIME IS GOING TO GIVE US THE CONFIDENCE THAT WE CAN DELIVER FOR SHAREHOLDERS AND CLIENTS AND FOR EMPLOYEES OVER A LONG TIME, SO WE ARE VERY BULLISH ON THE U.S. ECONOMY WE ARE VERY BULLISH AT BNY, WE FEEL LIKE OUR STRATEGY IS WORKING AND WE HAVE A GREAT OPPORTUNITY AHEAD OF US. THERE'S NO SHORTAGE OF WORK TO DO TO MAKE THIS COMPANY BETTER.

LISA: ONE THING WE SEE ACROSS BANKS IS EXPENSES CAME IN HEAVIER THAN A LOT OF PEOPLE EXPECTED. I WONDER HOW MUCH OF THIS IS STRUCTURAL. THAT THERE IS A SENSE EVERYTHING IS GETTING MORE EXPENSIVE, WHETHER IT IS PERSONNEL POTENTIAL DRIVING CHANGE IN THE PERFORMANCE AS WELL AS TECHNOLOGICAL ADVANCEMENTS THAT YOU NEED TO BE INVESTED IN.

DERMOT: I OBSESS ABOUT EXPENSES EVERY DAY AS YOU WOULD IMAGINE ME TO DO. THE EXPENSE GROWTH WE'VE SEEN THIS QUARTER WE UPDATED OUR GUIDE FOR THE FULL YEAR TO 67 PERCENT IS LARGELY REVENUE RELATED PLUS INVESTMENTS. OVER THE LAST THREE YEARS WE HAVE ROUGHLY INVESTED HALF MILLION IN THE FIRM AND STRATEGIC GROWTH INITIATIVES. THAT'S BEEN OFFSET BY OUR EFFICIENCY AND TRANSITION TO THE PLATFORM OPERATING. YOU CAN SEE THE INVESTMENTS WE'VE MADE OVER THE LAST THREE YEARS YOU SEE THAT PROOF IN TODAY'S RESULTS AND WE WILL INVEST IN AN IMPROVEMENT MANNER AND THAT WILL DELIVER RESULTS OVER THE LONG TERM. I WILL SAY THIS ON THE CALL TODAY, WHETHER IT'S BY SIDE TRADING, BORROW PLUS, PRODUCTS THAT AREN'T THAT MEANINGFUL TO THE OVERALL REVENUE PIE FROM A COUPLE YEARS AGO. NOW DELIVERING MEANINGFUL CONTRIBUTIONS TO THE REVENUE. BNY IS INNOVATING AS WELL AND PARTNERING WITH CLIENTS AND STITCHING THE FIRM TOGETHER TO DELIVER INTEGRATED SOLUTIONS WE BELIEVE WILL ALLOW US TO GROW REVENUE IN THE FUTURE.

>> 10 CONSECUTIVE QUARTERS ON SOME OF THE THINGS YOU SAID COST DISCIPLINE AND INVESTMENT. THE FOCUS RIGHT NOW IS FIRMLY ON AI. SOME COMPANIES SEEM TO BE RATIONING SPENDING. YOUR SPEND ON THE INVESTMENT IS TRANSLATING INTO REAL BUSINESS IMPACT. CAN YOU SHARE WITH US WHERE THAT IS TRENDING?

DERMOT: WE TALKED A LOT ABOUT AND HAVE A SLIDE ON OUR DISCLOSURE IN Q1 ABOUT WHAT WE ARE DOING IN AI. IN THE CONTEXT OF BNY, OUR INVESTMENT IN AI IS MODEST IN THE CONTEXT OF THE OVERALL BUDGET. WE HAVE A GOOD STRATEGY AT BNY, WE HAVE BEEN ADDED RIGHT SINCE THE START SINCE THE LAUNCH OF CHATGPT. WE ARE PROUD OF THE PLATFORM WE BUILT. FEEL LIKE WE HAVE THE RIGHT STRUCTURE IN PLACE. WE HAVE BROAD ADOPTION WITH PEOPLE AROUND THE FIRM. PRETTY MUCH 100% OF PEOPLE AT BNY KNOW HOW TO USE AI IN TERMS OF THEIR DAILY WORK. WE THINK ABOUT ENTERPRISE PRODUCTIVITY AND INDIVIDUAL PRODUCTIVITY. ROBIN SAYS US A LOT OF TIME. AI EVERYWHERE FOR EVERYONE AND EVERYTHING. IT'S ABOUT CREATING CAPACITY AND PRODUCTIVITY SO WE CAN ALLOW THE FIRM TO GROW AND USE AI TO ENABLE THAT. WE ARE AI OPTIMISTS. WE BELIEVE IT CAN UPSCALE OUR PEOPLE ALLOW THEM TO DO INTERESTING WORK AND PARTNER WITH CLIENTS.

JONATHAN: THANK YOU SIR PAID THE BNY CEO FOLLOWING ANOTHER RECORD QUARTER.

>> TALKING ABOUT HOW IT IS BOTH OF THE BACKDROP FOR THE WEATHER BUT ALSO SOME OF THE CHANGES THEY HAVE MADE TO THE INSTITUTION OVER THE PAST THREE OR FOUR YEARS. I'M INTERESTED ABOUT SOME OF THE NAMES. ELIZA, CLAUDE. THIS COMES AFTER ELIZABETH HAMILTON WHO WAS ONE OF THE PEOPLE WHO WAS INVOLVED IN CREATING THIS. WILL THERE BE ANY CHILDREN BETWEEN ELIZA AND CLAUDE. THIS MAKES PERFECT SENSE.

JONATHAN: A LITTLE NOD TOWARDS HISTORY.

LISA: THANK YOU, I APPRECIATE IT.

JONATHAN: COMING UP, WE GET SOME BREAKING INFLATION DATA. WE WILL CATCH UP WITH STEVE OF SANTANDER. EQUITIES DOING OK ON THE S&P 500 JUST ABOUT UNCHANGED IN THE BOND MARKET YIELDS HAVE BEEN HIGHER FOR THIS MORNING. YOUR TWO-YEAR THIS MORNING. UP BY A COUPLE OF BASIS POINTS AND CRUDE STILL ELEVATED. WTI 18, BRENT CRUDE AT 85.

♪ JONATHAN: IT'S GOING TO BE A HOT ONE LATER ON, GETTING INTO THE 90'S IN NEW YORK CITY. IT WILL BE HOT WHERE ENGLAND IS PLAYING AS WELL.

LISA: I WAS GOING TO. I COULDN'T STAY AWAY. ESPECIALLY BANK EARNINGS. I DON'T KNOW WHO HE IS TAKING BUT I TRIED TO THROW OUT, I WOULD BE INTERESTED.

JONATHAN: IT WILL BE HOT ACROSS THE EAST COAST. S&P POSITIVE BY 0.1. PPI DATA JUST CROSSING. MIKE MCKEE HAS THE NUMBERS.

MIKE: GOOD MORNING. WE HAD GOOD NEWS FOR THE CPL YESTERDAY, AND TODAY WE HAVE GOOD NEWS IN THE PPI AT LEAST FOR THE FEDERAL RESERVE AND THE INFLATION FLIGHT AT THE MOMENT. PPI FOR FINAL DEMAND DOWN 0.3% ON THE MONTH. EX FOOD AND ENERGY, A TICK LOWER. FOOD, ENERGY, TRADE UP JUST 0.1 PERCENT. THAT LEAVES THE YEAR OVER YEAR NUMBERS AT THIS POINT, FINAL DEMAND, HEADLINE 5.5, DOWN A FULL PERCENTAGE POINT FROM LAST MONTH'S 6.5. CORE 4.7 DOWN FROM 4.9. PPI EX ENERGY AND TRADE, 5.1 PERCENT. THE INDEX FOR FINAL DEMAND GOODS MOVING DOWN 1.4% IN JUNE, THE LARGEST DECREASE SINCE JULY OF 2022. LEADING THE DECLINE, PRICES FOR FINAL DEMAND ENERGY. TWO THIRDS OF THE INDEX THEY SAY FOR FINAL DEMAND GOODS CAN BE TRACED TO PRICES FOR GASOLINE WHICH WERE DOWN 12%. THE INDEX FOR SERVICES ROSE ZERO .2%. 60% OF THAT IS FOR FINAL DEMAND TRADE SERVICES WHICH IS OF COURSE THE PROFIT MARGIN FOR WAREHOUSES AND RETAILERS. THEY WERE UP ONLY 0.4 PERCENT. HALF THE INDEX IS ALSO FOR THE SERVICE SIDE MARGINS FOR PEOPLE WHO STOLE FUELS AND LUBRICANTS. THE SUSPENSION OF THE MORE PLAYING A BIG DIFFERENCE IN WHAT IS HAPPENING IN THE PPI THIS MONTH, AS WELL AS THE CPI. ONE OTHER NUMBER THAT WE GOT QUICKLY, EMPIRE MANUFACTURING INDEX REBOUND NICELY. BIG DROP IN THE PRICES PAID INDEX. FALSE TO 52.3 FROM 61. WE ARE SEEING THAT IMPACT OF SNOW DONE IN PRICES DURING THE MONTH OF JUNE. NOW THE QUESTION IS CAN WE KEEP IT?

JONATHAN: ANN MARIE THINKS YOU LOOK LIKE A PARK RANGER. WHERE ARE YOU?

MIKE: ROCKY MOUNTAINS SUMMIT IN VICTOR, IDAHO. I WILL SEE IF I CAN FIND HER A BEAR.

JONATHAN: STAY SAFE, MIKE MCKEE. KEVIN WARSH DOESN'T THINK MISSION IS ACCOMPLISHED, BUT BASED ON THAT, HE IS TAKING THE REST OF THE YEAR OFF.

LISA: HE CAN JUST HEAD OVER, GET ANOTHER JOB AS A PARK RANGER.

JONATHAN: EQUITY FUTURES POSITIVE BY 0.2 ON THE S&P. NASDAQ HIGHER BY 0.5. YIELDS A LITTLE BIT LOWER ON THE FRONT END OF THE CURVE. 4.17. YIELDS LOWER BY A SINGLE BASIS POINT.

LISA: A LOT OF THIS DRIVEN BY ENERGY BUT THE IDEA OF EX FOOD AND ENERGY COMING AT 4.7% VERSUS THE EXPECTED 5.1 PERCENT, DOWNWARD REVISIONS TO THE PRIOR MONTH. THIS ALL GIVING A SENSE OF SUPPORT FROM YESTERDAY'S CPI. THAT SAID, THE FACT THAT OIL PRICES ARE INFLECTING HIGHER AGAIN, GIVEN THE ROBUSTNESS WE ARE SEEING FROM WALL STREET, EXPECT TO HEAR MISSION NOT ACCOMPLISHED, QUESTIONS ON CAPITOL HILL, WHICH IS WHY YOU ARE NOT SEEING A MUCH BIGGER MOVE IN THE BOND MARKET.

JONATHAN: THANK YOU FOR MANY SO PROFESSIONAL. STEPHEN STANLEY JOINS US NOW FOR MORE. THANKS FOR WEARING A TIE. WE APPRECIATE THAT. WHAT IS THE REACTION OF CPI, PPI, ARE WE CLOSE TO MISSION ACCOMPLISHED?

STEPHEN: THE INFLATION SITUATION IS EXTREMELY COMPLICATED. IT FEELS LIKE WE ARE GETTING PAST THE TARIFF PASSED THROUGH, SO THAT IS ONE THING WE CAN SET ASIDE FOR NOW. WE STILL HAVE THE QUESTION OF HOW MUCH THE OIL SHOCK WILL PASS THROUGH MORE BROADLY INTO THE CORE NUMBERS. I DON'T THINK WE HAVE AN ANSWER TO THAT JUST YET. AS LISA SAID, YOU MIGHT HAVE THOUGHT A COUPLE OF WEEKS AGO THE OIL SHOCK WAS OVER, NOW WE ARE BACK UP AGAIN. I THINK THAT QUESTION IS STILL BEFORE US. THE BIG ISSUE, IT WOULD BE ONE THING IF THE CORE PCE DEFLATOR WAS RUNNING YEAR-OVER-YEAR 2.4, A LITTLE ABOVE. WE ARE AT 3.4. WE GET ONE GOOD INFLATION NUMBER, TO WASH'S POINT, IT IS NOT MISSION ACCOMPLISHED. WE HAVE SUCH A MARGIN THAT WE ARE MISSING BY, IT WILL TAKE A LOT TO GET US BACK.

JONATHAN: WE KNOW WHAT HE DOESN'T LIKE, WHAT WE DON'T KNOW IS WHAT HE IS WILLING TO DO ABOUT IT. WHETHER HE BELIEVES WE ARE SUFFICIENTLY RESTRICTED OR NOT, HAVE YOU GOT ANY UNDERSTANDING OF THAT AFTER A DAY OF TESTIMONY?

STEPHEN: THE MAN OF MYSTERY, CHAIRMAN WARSH.

JONATHAN: IS THE AMBIGUITY STRATEGIC? WHAT IS THE STRATEGY?

STEPHEN: HERE IS WHAT I THINK IS HAPPENING. CHAIRMAN WARSH WOULD ARGUE STRONGLY, MOST PEOPLE ON THE COMMITTEE WOULD AGREE, THE FED WAS USING TOO MUCH FORWARD GUIDANCE. IF YOU THINK TO THE POWELL REGIME, MORE THAN LIKELY, IF THE FED WERE THINKING ABOUT HIKING IN SEPTEMBER, THEY WOULD HAVE ALREADY BEEN TRYING TO SIGNAL IT IN JUNE. HE WANTS TO DO AWAY WITH THAT. AT THE SAME TIME, HE HAS MOVED TO THE POLAR OPPOSITE EXTREME OF I'M NOT GOING TO TELL YOU ANYTHING, NOT GOING TO TELL YOU IF THE ECONOMY IS STRONG, WHAT MY REACTION FUNCTION IS, WHAT I'M PAYING ATTENTION TO. ALL I WILL TELL YOU IS THAT WE ARE MEETING IN SIX WEEKS AGAIN BASICALLY. THERE IS A HAPPY MEDIAN IN BETWEEN. MY SENSE IS HE IS TRYING TO WEAN FINANCIAL MARKETS OFF OF THIS STUDY DIED A FORWARD GUIDANCE. WE ARE GOING COLD TURKEY FOR A WHILE. MAYBE AFTER WE GET THE WORKING GROUP RESULTS BACK OR WHATEVER, HOPEFULLY WE GET TO SOMETHING IN THE MIDDLE.

LISA: HE HAS THE LUXURY OF GOING COLD TURKEY BECAUSE THE FED IS NOT IN THE DRIVER'S SEAT, THEY DON'T HAVE MORE VISIBILITY THAN THE MARKET DOES. THEY ARE NOT ON THE HOT SEAT TO TAKE IMMEDIATE ACTION. THAT SAID, I'M STRUGGLING WITH THE COGNITIVE DISSONANCE OF THE DISINFLATION WE ARE SEEING IN THESE NUMBERS, EARNINGS FROM THE BIGGEST BANKS SHOWING ABSOLUTE BOOM TIME PROFITABILITY, AND A SEPARATE REPORT FROM THE NEW YORK FED, GENERAL BUSINESS CONDITIONS, SHOWING EMPLOYMENT COMPONENT RISING TO THE HIGHEST SINCE 2022. ALL OF THESE SIGNS OF THE ACCELERATION OF THE CONSUMER, SIGNS FROM EXECUTIVES, HOW DO YOU SQUARE THAT WITH DISINFLATION ONGOING?

STEPHEN: DISINFLATION FROM WHERE? WE WERE IN THE HIGH TWOS MOST OF LAST YEAR FOR CORE YEAR-OVER-YEAR INFLATION. WE ARE CURRENTLY AT FOUR. IF WE DISINFLATION BACK TO THE TWOS, THAT IS STILL GOOD BUT NOT MISSION ACCOMPLISHED, STILL ABOVE TARGET. THERE ARE A COUPLE OF THINGS I WOULD SAY FROM TRYING TO LOOK AT IT FROM WARSH'S LENS TO THE NARRATIVE YOU EXPLAIN. WE KNOW THE EMPLOYMENT SITUATION IS A LOT BETTER NOW THAN IT WAS PERCEIVED TO BE LATE LAST YEAR. WHEN THE FED WAS EASING LAST YEAR, THEY THOUGHT THE LABOR MARKET WAS SOFT. THAT IS OFF THE TABLE NOW WHICH ALLOWS THE FED TO FOCUS ENTIRELY ON INFLATION. ANOTHER POINT THAT WARSH HAS BEEN EAGER TO MAKE, HE IS NOT A PHILLIPS CURVE GUY. THE FED AS AN INSTITUTION HAS ALWAYS BEEN OF THE VIEW THAT INFLATION COME FROM THE LABOR MARKET. CLEARLY, THE INFLATION WE ARE GETTING NOW IS NOT COMING FROM THE LABOR MARKET. WAGE GROWTH IS NOT ACCELERATING, YET INFLATION HAS MOVED UP INTO THE MID-THREES. WHAT WARSH WOULD SAY, AND THIS IS WHY PEOPLE THOUGHT HE WOULD BE SUPER DOVISH BEFORE HE TOOK OFFICE, GOOD GROWTH IS NOT A PROBLEM NECESSARILY FROM AN INFLATION STANDPOINT, PARTICULARLY WHEN IT IS BEING DRIVEN BY INVESTMENT. A SHOULD DRIVE PRODUCTIVITY IN THE LONG RUN. IN AND OF ITSELF, IT IS NOT INHERENTLY BAD. BUT IF IT LEADS THE ECONOMY TO OVERHEAT, YOU GET INFLATION. HE IS WILLING TO SIT BACK AND SEE HOW THINGS PLAY OUT. THE WAY THINGS SEEM TO BE PLAYING OUT IN MY VIEW IS WE ARE GETTING INFLATION AND THE FED HAS TO RESPOND TO THAT.

LISA: ONE OF THE PUSHBACK'S WE GET IS THAT IF THE FED WERE TO RAISE RATES 25 OR 50 BASIS POINTS, IT WOULD NOT CONSTRAIN THE MAIN NID ODES OF INFLATION. THAT SAID, WHENEVER WE SEE THE PROSPECT OF TIGHTENING, WE SEE STOCKS SELLOFF, WHICH IS FINANCIAL CONDITION DOING THE WORK FOR THEM. DOES IT HAVE AN EFFECT OR NOT IF THEY WERE TO HIKE 25, 50 BASIS POINTS?

STEPHEN: IT CLEARLY HAS SOME EFFECT ON THE MARGINS, AFFECTS THE ENVIRONMENT. RIGHT NOW COME BY ANY MEASURE, YOU COULD SAY FINANCIAL CONDITIONS APPEARED TO BE EXTREMELY EASY. I THINK IT IS HARD TO MAKE THE ARGUMENT AS A POLICYMAKER THAT THE FUNDS RATE AT ITS CURRENT STANCE IS RESTRICTIVE. THE CONSENSUS VIEW ON THE COMMITTEE PRIOR TO WARSH COMING IN WAS THAT THE FED WAS MODERATELY RESTRICTIVE, IF THEY COULD JUST HOLD AT THAT LEVEL FOR A LONG ENOUGH PERIOD OF TIME, THAT WOULD BRING INFLATION DOWN. CERTAINLY FINANCIAL CONDITIONS WOULD SUGGEST THE FED IS NOT REALLY EASY RIGHT NOW. THAT IS WHY THEY WILL ULTIMATELY HAVE TO NUDGE RATES HIGHER.

ANNMARIE: WHEN IT COMES TO MIND THIS COULD HAPPEN, DO YOU THINK THEY WOULD MAKE A MOVE BEFORE THE MIDTERM ELECTION?

STEPHEN: THAT'S A GOOD QUESTION. THAT WOULD ACTUALLY BE EXHIBIT ONE IN WARSH'S ARGUMENT THAT WE ARE INDEPENDENT. IN SOME WAYS, HIKING IN SEPTEMBER, WHICH WOULD BE SOMETHING THAT THE FED TYPICALLY HAS AVOIDED MOVING RIGHT BEFORE THE ELECTION, BUT I THINK MOVING IN SEPTEMBER ACTUALLY BOLSTERS HIS CREDIBILITY IN A WAY, ESPECIALLY IF THERE IS A STRONG CASE FOR THE MOVE. WHERE THE FED GETS IN TROUBLE IS WHEN THEY GET REALLY AGGRESSIVE AT A POINT IN TIME WHERE THE CASE FOR DOING SO IS IT SO GREAT. THAT IS WHAT HAPPENED IN 2024, THE FED GOES 50 BASIS POINTS RIGHT BEFORE THE ELECTION, AFTER THE FACT, TRUMP IS SAYING YOU WERE BEING POLITICAL. IF THE CASE FOR MOVING 50 BASIS POINTS HAVE BEEN CUT AND DRY, NOBODY WOULD BE SAYING THAT. IT DEPENDS ON THE CIRCUMSTANCES, WHETHER IT IS JUSTIFIED, BUT I THINK GOING IN SEPTEMBER WOULD ACTUALLY BE SOMETHING THAT WOULD BE GOOD FOR THE FED'S CREDIBILITY.

ANNMARIE: BUT WHEN THEY NEED TO SEE?

STEPHEN: THE NUMBER ONE THING THAT'S IMPORTANT IN TERMS OF INFLATION GOING FORWARD IS THIS ISSUE OF WHETHER THE ENERGY COSTS ARE GETTING PASSED THROUGH. THE FIRST COUPLE OF MONTHS OF THE ENERGY PRICE SHOCK, THE TRUCKING FREIGHT LINE ITEM IN THE PPI OVER TWO MONTHS IT WENT UP MORE THAN 10%, NOT ANNUALIZED. UP MORE THAN 10% IN TWO MONTHS. EVERYONE THOUGHT THAT WOULD SHOW THROUGH IN THE FOOD PRICES HAVE ANYTHING THAT HAS TO BE SHIPPED. WE HAVE NOT SEEN THAT YET. FOOD PRICES WERE UP 0.2 IN MAY, JUNE. PRETTY NORMAL NUMBERS. THE JURY IS OUT. WE ARE STILL WAITING. FOR ME, AS A FED OFFICIAL, WHAT I'M TRYING TO ASCERTAIN AT THIS POINT, HOW MUCH PASS-THROUGH IS THERE GOING TO BE? WE MOVED LOOKING AT THE DATA OF COURSE BUT ALSO ANECDOTES, TALKING TO BUSINESSES IN THE DISTRICT, FIGURE OUT WHAT IS GOING ON BEHIND THE SCENES.

JONATHAN: THANK YOU. STEPHEN STANLEY OF SANTANDER ON THIS FEDERAL RESERVE AS A SOFTER PPI PRINT FOLLOWS A SUPPER CPI PRINT, TAKE SOME HEAT OFF OF THIS FED CHAIR. EQUITY FUTURES POSITIVE. WITH AN UPDATE ON NEWS WORLDWIDE WITH YOUR BLOOMBERG BRIEF, VONNIE QUINN HAS MORE.

VONNIE: U.S. PRODUCER PRICE INFLATION UNEXPECTEDLY DECELERATING IN JUNE, FOLLOWING 0.3% MONTH OVER MONTH. EXCLUDING FOOD AND ENERGY INCREASED 4.7% FROM THE YEAR BEFORE. THE DATA SUGGEST THE FALLOUT FROM THE IRAN WAR MAINTAINS A SOMEWHAT CONTAINED SO FAR. SPACEX SHARES ON THE VERGE OF FALLING BELOW THEIR IPO PRICE. CLOSING ONE DOLLAR BELOW THEIR 35 A SHARE IPO PRICE YESTERDAY. THE STOCK HAS PLUNGED ONE THIRD FROM ITS PEAK, ERASING NEARLY $850 BILLION IN VALUE. IN SPORTS, SPAIN IN THEIR FIRST WORLD CUP FINAL SINCE WINNING THEIR LAST IN 2010 AFTER DEFEATING FRANCE. SPAIN WILL MEET EITHER ENGLAND OR ARGENTINA IN SUNDAY'S FINAL.

JONATHAN: LOOKING FORWARD TO THE GAME. NEXT ON THE PROGRAM, WE WILL SET YOU UP FOR THE DAY AHEAD, PLUS, CATCHING UP WITH THE FORMER U.S. COMMERCE SECRETARY GINA RAIMONDO ON SHAPING THE NATION'S AI FUTURE.

♪ >> THE U.S. ECONOMY IS STRONG WE CONTINUE TO BE POSITIVE ON THE U.S. ECONOMY. THERE IS A LOT TO BE OPTIMISTIC ABOUT. WE ARE VERY BULLISH ON THE U.S. ECONOMY, WE FEEL LIKE OUR STRATEGY IS WORKING AND WE HAVE ENOUGH OPPORTUNITY AHEAD OF US.

JONATHAN: THAT WAS THE CFO OF BNY FOLLOWING A FANTASTIC ROUND UP OF WALL STREET EARNINGS. EQUITY FUTURES JUST ABOUT POSITIVE GOING TO THE OPENING BELL. STOCKS UP BY .5 ON THE NASDAQ 100. SOME SINGLE NAMES.

YAHAIRA: MORGAN STANLEY IS BUCKING THE TREND WE'VE SEEN WITH OTHER BIG BANKS. NOT ANYMORE, SHARES DOWN 3/10 OF A PERCENT EVEN AFTER THE COMPANY HAD POSTED A STRONG QUARTER. JUMPING 69% TO A RECORD 6.3 BILLION DOLLARS. INVESTMENT BANKING GOT A BOOST AFTER THE BANK CO-LED THE SPACE X IPO. THIS WRAPS UP WHAT'S BEEN A STRONG QUARTER FOR THE BANKS AND YET A LOT NOT SEEING THE JUMPS YOU WOULD THINK GIVEN THE STRONG RESULTS. BLACK ROCK, WE ARE SEEING THOSE SHARES MOVING HIGHER UP 5% AFTER THEY DELIVERED A BLOW QUARTER. 192 BILLION DOLLARS IN NEW CLIENT MONEY. THAT BRINGS ASSETS UNDER MANAGEMENT TO MORE THAN 5 TRILLION FOR THE FIRST TIME EVER IT WAS HELPED BY STRONG DEMAND FOR ITS ETF'S. ACTIVE STRATEGIES IN PRIVATE MARKETS PRINT ALL AREAS THAT TARGETED. BNY SHARES SLIPPING DOWN 1% IN THE PRE-MARKET DESPITE POSTING A PROFIT BEAT. ANOTHER RECORD QUARTER FOR REVENUE BUT THE STOCK HAD ALREADY BEEN ON A HUGE RUN JUST YESTERDAY CLOSED AT A RECORD HIGH. IT SEEMS A LOT OF THE GOOD NEWS HAD BEEN PRICED IN.

JONATHAN: THANK YOU. LET'S TURN TO THIS. THE AI BUILDOUT GROWING. NEW YORK STATE LEADING THE PUSH BACK THE FIRST IN THE NATION TO ISSUE A MORATORIUM ON NEW HYPERSCALER DATA CENTERS. THE LARGEST GRID OPERATOR IN THE COUNTRY SAME DATA CENTERS OF INCREASED SUPPLY COSTS BY MORE THAN 60%. GINA RAIMONDO LEADING A NONPARTISAN ORGANIZATION DESIGNED TO HELP THE AMERICAN LABOR FORCE ADAPT TO AI. WELCOME TO THE PROGRAM. LET'S START WITH THE KIND OF WORK YOU ARE DOING AND WHAT WE NEED TO KNOW THIS MORNING.

>> GOOD MORNING. RAISE US IS THE NEW ORGANIZATION WE ARE LEADING AND OUR MISSION IS VERY SIMPLE. WE WANT THE U.S. TO LEAD THE GLOBAL AI COMPETITION. BUT TO HAVE A STRATEGY SO EVERY AMERICAN WORKER GETS INVOLVED. NOW WE AREG NOT HEADED DOWN THAT PATH. IT IS SOMETHING I AM DEEPLY WORRIED ABOUT. WE ARE EXTREMELY OUTDATED INFRASTRUCTURE, SOCIAL INSURANCE, INCENTIVES FOR COMPANIES TO RETRAIN AND REDEPLOY INSTEAD OF JUST LAYING PEOPLE OFF. SO I THINK IT IS TIME THAT WE GET TO WORK, WE ARE WORKING WITH GOVERNORS AND BOTH PARTIES, THIS IS A NONPARTISAN NONPOLITICAL EFFORT WITH BOTH COMPANIES TO TRY AND FIND CREATIVE SOLUTIONS BECAUSE I WILL TELL YOU ONE OF THE WORRIES IS EVEN IF AMERICA HAS THE BEST CHIPS IN THE BEST MODELS AND THE MOST DATA CENTERS BUT DOESN'T HAVE AN INTENTIONAL PLAN TO MANAGE THE TRANSITION AND FALLS INTO A PERIOD OF VERY HIGH UNEMPLOYMENT WE WILL LOSE THE AI RACE BECAUSE THAT WILL BE TO DESTABILIZING.

ANNMARIE: WHAT'S YOUR REACTION TO WHAT KATHY HOGLE IS DOING IN TERMS OF THE MORATORIUM. THIS COULD POTENTIALLY SLOW DOWN HOW QUICKLY THE U.S. CAN ADVANCE IN THE AI SPACE.

GINA: I THINK THIS IS A PERFECT EXAMPLE OF WHAT WE ARE TRYING TO DO WHICH IS TO SAY AMERICANS ARE WORRIED. WHEN THE AVERAGE AMERICAN HEARS AI, WHAT THEY HEAR IS I AM GOING TO LOSE MY JOB. MY ELECTRICITY PRICES ARE GOING UP MY KIDS WON'T HAVE A JOB. THOSE ARE REAL LEGITIMATE VALID ANXIETIES AND WE HAVE TO FIND SOLUTIONS TO ADDRESS THEM. SO WHILE I DON'T -- NO ONE IS HAPPIER THAN THE PRESIDENT OF CHINA THAT WE ARE SLOWING DOWN DATA CENTER CONSTRUCTION. THAT BEING SAID, IT IS NOT OK IF PEOPLE'S ELECTRICITY BILLS ARE GOING UP, THEIR WATER BILLS ARE GOING UP OR ECONOMIC SECURITY IS GOING DOWN BECAUSE OF AI COMPANIES. SO WE MUST FIND A WAY TO DO BOTH , STAYING AHEAD WITH DATA CENTERS AND TECHNOLOGY AND MAKE SURE THESE COMPANIES PAY THEIR FAIR SHARE SO OTHER FOLKS ELECTRICITY BILLS DON'T GO UP AND FRANKLY HAVE A JOB, A MEANINGFUL JOB IN THE AI ECONOMY.

ANNMARIE: YOU WROTE AN OPINION PIECE BETWEEN OF A NEW GRAND BARGAIN. WHAT YOU MAKE OF THE TRUMP ADMINISTRATION LOOKING AT TAKING EQUITY STAKES. ANOTHER VERSION OF INDUSTRIAL POLICY THAT SOME OF WHICH STARTED UNDER THE BIDEN ADMINISTRATION.

GINA: I DO THINK IT IS A GOOD IDEA FOR THE AMERICAN PEOPLE AND THE AMERICAN GOVERNMENT TO SHARE IN THE EXTREME PROFIT AND COMMERCIAL BENEFIT OF AI. THAT BEING SAID, I PERSONALLY HAVE ALWAYS BEEN A BIT OF A CRITIC ON THE GOVERNMENT TAKING EQUITY SHARES OF COMPANIES. I AM STILL A BELIEVER IN CAPITALISM, HOWEVER MANY FLAWS IT HAS IN AMERICA. THE GOVERNMENT OWNING THE MEANS OF PRODUCTION IS THE DEFINITION OF SOCIALISM BRITAIN I THINK IT CREATES A LOT OF POTENTIAL FOR CORRUPTION. I THINK THE INTENTION IS A GOOD INTENTION. I JUST GET VERY NERVOUS IF WE ARE STEPPING DOWN THE PATH OF A STATE OWNED ENTERPRISE. SO I WOULD LIKE TO FIND ANOTHER WAY.

>> HOW DO YOU BALANCE THE IDEA OF TRYING TO CREATE SOME SORT OF PACT WITH THE U.S. WORKER OR AVERAGE CITIZEN WHILE ALSO MAINTAINING A U.S. EDGE VERSUS CHINA. DO YOU WANT TO CREATE THIS SENSE THAT THERE IS ISOLATION BETWEEN THE TWO? I WONDER WHAT THE ULTIMATE GOAL IS, WHAT THE APPROACHES FROM SOME OF THE FOLKS ARE SPEAKING WITH.

>> IF YOU TALK TO THE TECH COMPANIES. MANY PARTNERS WITH US, THEY FEEL THEY ARE IN A GLOBAL ARMS RACE TO GET AHEAD OF EACH OTHER AND ALSO GET AHEAD OF CHINA AND OTHER TECHNOLOGIES. I UNDERSTAND THAT. BUT I WILL SAY THIS. IF WE AS A NATION PUT OUR BLINDERS ON AND IF EVERY COMPANY JUST MOVES FORWARD AT A PACE TO IMPLEMENT AI, TO INCREASE PROFITS WITHOUT A STRATEGY. IF WE END UP IN A COUPLE OF YEARS WITH TENS OF MILLIONS OF AMERICANS PUT OUT OF WORK BECAUSE OF AI, WE WILL LOSE THE GLOBAL AI RACE. BECAUSE THERE WILL BE MASSIVE REGULATORY BACKLASH. THERE WOULD BE MASSIVELY DESTABILIZING TO OUR ECONOMY, IT WOULD BE RECESSIONARY, IT WOULD BE MASSIVELY DESTABILIZING FOR OUR POLITICS. SO WHAT I AM TRYING TO SAY TO BUSINESS LEADERS, TO GOVERNORS AND CONGRESS, TO EVERYONE IN AMERICA IS LET'S FIND SOLUTIONS. LET US BE INTENTIONAL ABOUT HOW WE TRANSITION TO AN AIE ECONOMY. EVERY AMERICAN DESERVES TO SEE THEMSELVES PRODUCTIVE AND HAVING A GOOD JOB IN THAT ECONOMY. AND UNTIL WE CONVINCE THE PEOPLE OF AMERICA THAT THERE IS A FUTURE FOR THEM IN AN AIE ECONOMY YOU WILL CONTINUE TO SEE WHAT YOU JUST ASKED ME ABOUT. MORATORIUMS ON DATA CENTERS, OTHER KINDS OF UPRISING AND THAT IS BAD FOR AMERICA. THAT'S BAD FOR EVERYONE.

JONATHAN: NO DOUBT THAT DEBATE WILL CONTINUE. FORMER U.S. COMMERCE SECRETARY GINA RAIMONDO. MADAM SECRETARY, THANK YOU. THAT DEBATE FOR THE SHORT TERM HAS BEEN HIJACKED BY THE POLITICAL CYCLE WITH THE MIDTERMS VERY MUCH TOP OF MIND.

LISA: AND HOW MUCH PRIORITIZING TRYING TO WIN VERSUS UNDERSTANDING HOW TO CREATE A MORE SUSTAINABLE PATH GOING FORWARD. YOU FEEL THIS TENSION FROM SOME OF THE EARNINGS AND CEOS TALKING ABOUT RETRAINING PEOPLE. YOU'VE SEEN CANNIBALIZATION FROM SOME WHERE THEY'VE RETRAIN PEOPLE TO GO ELSEWHERE.

JONATHAN: THAT WRAPS UP HER EARNINGS SEASON ON WALL STREET. TAKE THE REST OF THE SUMMER OFF. KEVIN WARSH COMING UP ABOUT AN HOUR FROM NOW. FULL COVERAGE ON BLOOMBERG TV. FANTASTIC LINEUP OF GUESTS TOMORROW INCLUDING THE UNITED AIRLINES CEO. FROM NEW YORK CITY, GOOD MORNING. THIS WAS BLOOMBERG SURVEILLANCE.

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