Fed eyes new bank regulations, Apple expands ecosystem: Catalysts

On today's episode of Catalysts, Hosts Seana Smith and Brad Smith break down some of the biggest stories of the trading day, from new capital requirement regulations for banks to the Federal Reserve's rate cut path.

The Federal Reserve Vice Chair for Supervision Michael Barr outlined revised capital requirement regulations for banks in a speech on Tuesday morning. The policy, named Basel III Endgame, proposes easements on banks' capital holdings while scaling back other requirements. Yahoo Finance senior reporter Jennifer Schonberger explains the Fed's new policy proposal and comments on Barr's speech.

Chairman of Whalen Global Advisors Chris Whalen argues that the focus of this regulatory effort should have been on market risks rather than capital. He points out that since the Supreme Court overturned the "Chevron deference" doctrine, which previously gave regulatory agencies the benefit of the doubt when interpreting ambiguous laws, federal regulators are now more "vulnerable to losing in court" if banks choose to challenge their decisions legally.

After last week's tech-heavy sell-off, many investors took the opportunity to buy the dip. Slatestone Wealth chief market strategist Kenny Polcari points to Nvidia (NVDA) as a buying opportunity as shares are down about 25% since its June high. He does not expect the stock to rally back up to its high, but rather, he sees it as "on sale" for long-term investors. "Now, if you're worried about further downside for the broader market and you think it's going to get dragged with it, well then just sit back a little bit and wait. I think, you know, for most of the clients, that's the conversation I'm having, just about being patient, because patience, in this case, could be a virtue," he explains.

As Nvidia's (NVDA) stock tumbled in August after failing to meet investors' sky-high earnings expectations, many are now wondering if this is the end of the chip giant's reign over the S&P 500 (^GSPC). Yahoo Finance Markets Reporter Josh Schafer breaks down how the index's leadership may change moving forward and how investors can best navigate the market as the Federal Reserve begins its rate easing cycle.

The Biden administration has invested nearly $34 billion in building out domestic semiconductor manufacturing sites in just two years since the CHIPS and Science Act was passed. Former White House CHIPS Coordinator and Duke University professor of business and public policy Aaron "Ronnie" Chatterji commends the government's efforts over the past two years, stating "the government's done a great job" in attracting investments from major players like Intel (INTC), Samsung (005930.KS), Micron (MU), SK Hynix (000660.KS), and Taiwan Semiconductor Manufacturing Company (TSM).

After Apple (AAPL) held its "It's Glowtime" event on Monday, unveiling the new iPhone 16 along with next generation AirPod and Apple Watch devices, Bank of America senior IT hardware analyst Wamsi Mohan explains that the company is "broadening out the ecosystem," highlighting the health and fitness features on the new Apple Watch and AirPods. "The number of applications that you're seeing is starting to broaden out, which brings in new users into the ecosystem and that's not even including the phone," he adds.

Yahoo Finance Executive Editor Brian Sozzi sits down with Goldman Sachs chief economist Jan Hatzius at the Goldman Sachs Communacopia and Tech Conference to discuss the Federal Reserve's rate cut path. Hatzius believes that a 25-basis-point interest rate cut will be the likely outcome at the September meeting, explaining, "I think that's more consistent with the data that we've seen since the weaker-than-expected jobs report a month ago." However, he wouldn't rule out a 50-basis-point cut, arguing that there is a "solid rationale" for the larger cut. He explains that the fed funds rate is "really high," the highest among the G10, despite the US making more progress on inflation than other countries in the group. "So you could certainly make the case that they should be bringing down that rate quickly," he explains.

This post was written by Melanie Riehl

Video transcript

Welcome to Catalyst.

I'm Sean Smith alongside Rad Smith.

We're just about 30 minutes into the trading day.

We're watching three Catalyst impacting markets.

The crackdown on big tech that proposing new banking regulations and the first presidential debate.

All right, eu regulations logging big wins against Apple and Google.

The big tech firms each losing court battles and will be forced to pay billions in penalties.

Shares of both companies, they're pretty much flat today and Fed Vice Chair of Supervision, Michael Barr is unveiling a new proposal for regulations at America's biggest banks dropping the requirements for bank assets.

We'll give you the latest in just a few moments.

Plus Vice President Kamala Harrison, former President Donald Trump face off for the first time tonight with the two candidates neck and neck in some recent polling, investors are looking for a clearer picture on each candidate's economic policies.

Well Fed Vice Chair for supervision, Michael Barr is speaking right now, previewing a proposed package of revised rules for the country's biggest banks here.

With the latest.

We've got our very own Jennifer Shan Burger Jennifer.

Great to see you.

What do we know so far?

What are we hearing.

Good morning, Brad.

Great to see you as well.

The Federal Reserve unveiling its planning, sweeping changes to massively scale back a proposal to raise capital requirements for the nation's largest bank after politicians and banks had pushed back on an initial plan warning that it could restrict lending and hurt the economy.

The new proposal known as BASEL three would increase capital levels for big banks like JP Morgan and Bank of America by 9%.

That's down from half of the original plan for more than a year ago.

That set the capital increase at 20%.

Now, banks with assets of between 102 150 billion, which were initially subject to the stricter standards of the largest banks would no longer be subject other than the requirement to recognize unrealized gains and losses of their securities and regulatory capital.

This is a major reversal following a string of regional bank failures last year, led by Silicon Valley Bank Fed, Vice Chair of Provision Michael Bar laying out his vision this morning in a major speech here in Washington at the Brookings Institution saying quote, capital has costs too as compared to debt.

Capital is a more expensive source of funding to the bank.

Thus higher capital requirements can raise the cost of funding to a bank and the bank can pass higher costs to households, businesses and clients engaged in a range of financial activities.

This is certainly an about face for Bar, after even colleagues on the Federal Reserve Board, including fed, Governor Mickey Bowman had voiced concern about this.

In addition to the Banks Bar says that today's proposal reflects public comment and that it improves the tearing of the proposal and better reflects risks.

Now, these changes were made in concert with the FDIC and the Office of the Comptroller of the Currency.

All three of these institutions would need to vote in concert to finalize this new proposed rule bar says, however, this is just an interim step at this point and that the fed is taking comment on this new proposal, guys.

You Jennifer, thanks so much for laying that all out and we would be remiss not to say happy birthday, Jennifer.

Thanks.

So thank you so much.

Appreciate it.

We'll talk later.

All right, let's turn now to the broader market.

Our next guest saying that the dip buyers came in for the sale yesterday.

But will the buying continue joining us now?

We've got here on set, live in Living color, Kenny Polcari Slate Stone Wealth Chief Market strategist.

Great to see you here, Kenny and thanks for taking the time.

So as we're thinking about some of the dip buying opportunities that some investors are trying to take advantage of right now.

What, what are you kind of lining up and where you would be putting additional chips on the table?

So I think you have to take a broader, a broader look at where we think the market's going over the next six or seven weeks just because we're in that seasonally weak time in the market.

August through October.

Um I think that, I think that the August lows of 5160 you are likely going to be tested again, which means that, you know, as an investor, as a long term investor, you just need to be a little bit cautious, but look na key names NVIDIA, that's down 25% off its June high is a place that I would actually be putting, I would put money to work there.

Now, do you think it rallies back to the high?

Well, I don't think it rallies back to the high, but I think it's on sale 25% as a long term investor.

I'm not a trader, so I'm not looking for it to rally 232 point or 10 points and then sell it.

I'm in there to buy it to hold it, right.

But when something goes on sale at 25% down off the recent high, then you have to at least look at it.

Now, if you're, if you're worried about further downside for the broader market and you think it's gonna get dragged with it.

Well, then just sit back a little bit and wait, I think, you know, for most of the clients, that's the conversation I'm having uh uh just about being patient, right?

Because patient in this case could be a virtue, Kenny.

What do you think the outsized influence this is going to be for NVIDIA looking forward for the broader market?

Can I bring that up because we were talking to City's, uh, Scott Kroner earlier in the show and he was talking about that shift that we certainly have started to see over the last couple of months.

Does that continue?

Yeah.

Uh, listen, I think, I think it's a little bit overdone that shift that everyone's worried about.

Look, I, I think we're at the very infancy stages of A I, I think NVIDIA sits at the nexus of, of this tech revolution that's happening.

Uh NVIDIA for me is a key name right now.

Do I think there's gonna be fits and starts and is it's a high growth name.

So it's got lots of volatility.

Absolutely.

But over the long term, I think NVIDIA is just a core name and a core portfolio and I think investors have to take depends again on who they are.

What their time frame are.

They a trader looking the day trader?

Are they an investor looking for a good entry point to either add to or initiate a position?

We're looking at consumer discretionary this morning, one of the leaders here and it's jousting with technology right now here, at least during today's trading session when we think about the consumer though right now, there have been flashing warning signs, especially ahead of what is either gonna be a soft landing, a hard landing and potential recession.

How should investors be thinking about the consumer with relation to some of that discretionary spending and the stocks that, that will show up in.

So I'm much, uh, in this, uh, to that point, I'm much more about consumer staples than I am about discretionary because I think the consumer is stretched.

I think the consumer is gonna run into problems.

I think we're already seeing consumer run into problems, seeing people live on credit cards and discretionary is just that it's discretionary spending, those are wants versus needs, right?

So I would be cautious on that sector at the moment.

Uh And I'd be more focused on the staple sector while it's boring and not sexy.

I think it'll, it plays, it plays nicely in an environment where you think it's gonna be a little bit of a pressure uh on the broader market and on the consumer.

So what does that tell us about your view then of the overall US economy and whether or not maybe some of that slowing of the, that we have seen that continue?

I, I think that does continue.

And by the way, I'm not necessarily against the slowing of the economy because I think a lot of it was juiced up because of the, the, you know, injection of uh monetary policy injection as well as fiscal spending.

I think a lot of it.

So I think the, the economy has to slow a little bit.

And by the way, I wouldn't even mind if we had a little bit of a mild recession.

Not a deep one because a mild recession will reset it.

Right.

You'll see prices actually come down if we have a mild recession right now, prices while they, while inflation is slowing, prices are still rising.

But if you have a recession, then you'll see the prices of things that we care about.

Food, energy utility bills will all start to come down a little bit.

So I I'm not necessarily in the camp that we shouldn't go through that cycle.

So then what does that tell us about the positioning of small caps right now?

Because that certainly has been some of the trades that we've been hearing a little bit more about but continues to last, right?

But small caps will typically benefit if, if rates go lower, small caps will typically benefit because they, they end up using and borrowing a lot of money, right?

Even in a swing.

So, so there's the, there's the rub, right?

You just have to be a little bit careful in terms of which small caps uh kind of you're looking at what space they're in, right?

Because they could be small caps in a range of sectors.

Um And so you have that, I think just be a little bit cautious on which names you're looking at.

But overall, I think we're in for a semi soft landing, not a hard one, but I don't think it's gonna be completely soft.

And so therefore, I think you just have to be conscious of your time frame where you are in the life cycle where you are in the, in the investment cycle, right?

If you're 30 years old, it's a very different conversation than if you're 60 years old, right?

In terms of how you wanna be weighted and where you wanna have your exposure.

So, wouldn't that mean then that the economy is actually more resilient than markets are pricing in right now?

I'm looking at a note from Blackrock saying us earnings growth are, are broadening beyond early A I, I think the economy is fairly resilient, right?

I don't think we're going over the edge.

I think all this panic about we need 50 basis points because we're going over the edge.

I think that's baloney.

Um because I don't think we're going over the edge and, and like I said, I think actually a slow down would be better for the, for the economy long range because we can't keep going at the pace we were going because then if we do, then the correction is gonna be even more difficult, right?

And so I, I would actually welcome a little bit of a, a little bit of a mild recession.

All right, Kenny Polcari.

Always great to have you here on set with us.

Thanks.

So much for taking the time to be here to join us this morning, Kenny Polcari of Slate Stone Wealth, NVIDIA may no longer be the king of the market.

At least some are saying that the stock has been under a bit of pressure since its earnings release in the S and P 500 has been out of step with the stock since.

So is invidious outsized impact on the market behind us here to discuss our very own.

Josh Schafer and Josh, you wrote about this in this morning's morning brief.

We talked to Scott earlier uh on Yahoo Finance here this morning.

But I'm curious, is your takeaways from this and maybe what the signals about some of that leadership going?

Yeah.

To me, it's about what's driving the market right now, right?

And what's been driving the market since basically, we'll call it July 1, the start of the third quarter, right?

So if you take a look at will be what is our chart of the day to go along with the brief this morning?

We're looking at sort of what's been outperforming and under performing the S and P 500.

So we've got quite a few lines here, but orange is your S and P 500.

It's a little under flat and you look at uh sorry, real real estate utilities, financials, all well above the S and P 500.

Then below that, you see tech, you see NVIDIA and so what this is telling us that for a while these charts were really flipped, right?

You had NVIDIA well above the S and P 500 significantly outperforming and sort of pulling the index up.

Well, now what's keeping the index from sort of the floor falling out?

It's the other sectors that don't necessarily involve tech that don't necessarily involve A I, we could have a nuanced discussion about how much utilities involves A I.

But we'll table that for now.

But I think largely when you look at that chart, what you're seeing is a market that is pricing in rate cuts and a market that is pricing in a slowing but still stable economy, a soft landing and it's macro that's driving the market right now, not Nvidia's earnings.

This was the second straight quarter that we saw.

NVIDIA have one move and the market have a different move.

NVIDIA fell on earnings.

The market didn't really fall, go back last quarter.

NVIDIA shot up 20%.

The market didn't rise with it.

So it seems like right now we are in a macro moment where something like CP I matters more to the index.

Some that comes out tomorrow, the fed next week matters more to the index than this A I story.

And this earnings story which as we know wasn't really the case for the 1st 18 months of this book market.

So it seems like we're in a little bit of a different moment right now, I mean, regardless of what CP I looks like is 50 points, 50 basis points clearly going to be enough or not even enough.

Is that even on the table at this juncture here?

Because that's what Kenny was talking about.

I think his exact words, 50 basis points is baloney, which means that for the tech sector that relies or at least has been a beneficiary when there's a cutting cycle that you could see.

Tech just continue to have some of the favor that's fallen in its direction, broaden out to other areas of the market.

Yeah, Brad, I mean, it's gonna be interesting.

It feels like 50 is on the table depending on who you talk to, right?

And maybe we'll see what the inflation print does with that.

But it seems like if you were in the 50 basis point camp before the August jobs report last Friday, you're still in it, right?

So for those people, it's still alive and I think it comes down to what the questions are going on right now inside the Fed and we don't really know the answer to that of how interested they are and so of getting back in line here.

But I think again, talking about sort of the market action we've been seeing and what that would mean if we don't get 50 it doesn't feel like the Fed is going to be aggressively cutting.

It will be interesting to see what happens to a sector like real estate that has really been rising because of the hopes that you're going to get 100 basis points and cuts this year.

If you don't get 100 basis points of cuts, what happens to some of those sectors, maybe even the financials, it will be interesting to see, maybe even utilities, right?

We mentioned there's an A I there, but that's a sector that benefits from lower rates.

And so does this broadening trade really falter if the fed goes 25 next week and maybe doesn't signal that they're that itching to go 100 over the year to meet the market.

That's going to be probably the trend to watch post Wednesday's FO MC meeting on Thursday and Friday and see what the market leadership is there because we know when people have gotten worried, they've gone back to tech.

Right?

It's been, oh boy, let me go by the companies that have done well.

So if you see that rotation, you could argue, it's actually a little bit defensive from investors.

Yeah, exactly.

And we have seen that be a defensive play like you're talking about and I, I think you bring up a great point, right.

Is there too much optimum optimism priced in to some of these sectors when you talk about the performance recently of real estate of financials versus maybe what reality we've been pricing in the soft landing, right?

When you look at that chart, the soft land that's pricing of the soft landing, right?

So if that narrative changes, then you're probably gonna see leadership shift.

Certainly.

All right, Josh, great stuff.

Thanks so much.

Let's take a quick check of the markets just about 45 minutes into the trading day.

This market check sponsored by Tasty Trade.

We're seeing a bit of a reversal for the major averages.

You now have the S and P 500 back below the flat line off just about 1/10 of a percent.

The dow still in negative territory off just about 250.

The NASDAQ though the low major average holding on to gains well off the highs of the session.

Now up just about 1/10 of a percent flipping over to the action that we're seeing play out in yields in the bond market.

We are seeing the 10 year yield slightly moved to the upside here, just barely still hovering right around 37 brad.

Let's also check in on a sector basis here.

Tech, let's go there first, we were just talking about it.

XL K as of right now.

It's one of the outside performers here on the day's activity.

It's up by about 6/10 of a percent.

Additionally, let's check in on consumer discretionary that was leading the pack at what point.

Uh It is still jousting for one of the top positions on a performance basis.

Percentage wise here.

It's up by about 4/10 of a percent and then also communication services.

This has been an interesting one.

We've seen this one kind of hyper oscillating between gains and losses here.

But as of right now, you're seeing it down by about 1/10 of a percent.

45 minutes into trade.

We've got all your markets action straight ahead.

Stay tuned.

You're watching Catalysts now time for some of today's trending tickers throughout the trading day, you can track the best and the worst performing stocks of the session with Yahoo Finance's trending tickers page, scan the QR code below to check out the latest.

Well, let's kick it off with Apple One analyst saying that health safety and convenience shining at yesterday's event.

Joining us now is the analysts behind that note, Bank of America's WSI Mohan maintaining his buy rating on the stock price target of 256 bucks a share.

Wy I it's great to talk to you again.

So I'm taking a look at your note here.

You're saying that new devices, the focus here is on driving more users to the ecosystem.

Do you think these new devices is that actually going to do that here for Apple?

Yeah, thanks for having me.

Great to see you again.

Uh Look, I I think that uh absolutely.

Uh we're, we're running out the ecosystem here with a bunch of new products and when you look at the breadth of what's being offered, right?

For the watch, for instance, uh sleep apnea is, is, is a new feature that that would be interesting to some people.

I think when you look beyond that into the health and fitness category in general, that's very, very broad, right?

Like now they've incorporated diving and their things very specific with respect to uh to diving, for instance, that, that, that um you know, diving enthusiasts can use.

But beyond that, like, you know, the features editions for golf, for, you know, a wide variety of sports.

Um and the ultra two in particular is is very uh compelling for, for an upgrade for users who haven't had that experience yet when you look at airpods.

Uh yeah, those are very compelling too, right?

Like both, both in terms of um the hearing ability to be toned down when, when uh your environment is too loud for instance, but also uh functioning as a hearing aid for, for milder or uh maybe even uh medium uh hearing issues for people.

So I just think that, you know, the the the number of applications that you're seeing is starting to broaden out, which brings in new users into the ecosystem.

And that's not even including the phone really right on the phone obviously has got a whole bunch of new features including this visual intelligence, which I think will will become a real thing very quickly as consumers find it super easy to with just one press of a button.

Now starting to get information as opposed to previously having to go into apps and then ask what, what does this image really represent?

Right.

So you're, you're just making it so much more convenient for users to use some of this new technology, what you're doing and on a daily basis, it's, it's a convenience factor, but where's the wow factor?

I mean, if you're looking across a lot of some of your colleagues who are analysts covering Apple as well and what the rest of the industry is saying right now, it seems like the mode in the reaction is there's a lack of positive surprises.

Keybank saying that Morgan Stanley saying no major surprises.

So where is that?

Wow factor.

And does that extract some of the pricing power that Apple has had in the past?

Yeah, I think that we have to look at the wow factor a little bit differently this cycle and what's really different this cycle is it's a software driven cycle.

Right in the past, we've never really had uh cycles that were software driven per se.

What you've had is hardware upgrades, whether it's larger uh screen size form factor changes, whether it's OLED all very hardware centric upgrades.

The difference this cycle is that software features will really make productivity and usage of your phone better over time.

So is there a killer app that got announced that at yesterday's even?

No, but the killer app and my mind is that this is actually a productivity enhancing tool over time.

So you invest in this device and then you're going to get enhanced productivity as the software upgrades kick in.

And by the way, the notion of agile is going to be front and center because we're very used and accustomed to major Os updates once a year, right?

Like it's I OS 18.

But before that 1716, the annual cadence has been very predictable.

But what we're going to see now is these intermediate, fairly significant increases in capacity and capability as they integrate both Apple Intelligence but also other third party LL MS like whether it's open A I or going to be Google Gemini over time and others.

And so the functionality that you can get from the device is actually changing through the course of the cycle, which is super interesting and it hasn't really happened in prior cycles.

So yes.

Is there a wow factor from yesterday?

Well, I think the technology is quite amazing and will drive upgrades but to say that you know, what is going to be the next catalyst, I think it is the software upgrades that will actually kick in over the course of the next 369 months that will make the device so much more useful and user friendly.

Well, M we also got an announcement uh from Huawei just after Apple's event, they held their own.

They have that brand new phone.

Lots of excitement surrounding that we know that Apple has faced some challenges within China.

I'm curious from a competition perspective, how big of a headwind is that a larger headwind that may be what has already been factored in?

Yeah.

No, it's a great question.

Look.

I mean, um Huawei obviously in China is a formidable man.

Uh when when us sanctions went into place uh back in uh you know, 56 years ago, five years ago, uh what you really saw was uh the China market was shrinking in absolute terms from a smartphone market perspective.

Uh and Apple was taking share over there and the share gains came because there was no other true alternative of a high end phone.

And so we estimate about 15 to 20 million uh Chinese smartphone switch uh to Apple over that period of time.

And now Huawei is coming back with uh a product, obviously, the volumes of this product are still a little unknown, right?

It's going to be challenging because there are a lot of constraints on on their chip manufacturing facility um abilities.

And and I think what that does ultimately is constrain the uh total amount of volume and the performance that you can get if you're not at the leading edge of the product.

We also heard something interesting from Apple yesterday, which was uh they mentioned that support for the Chinese language was coming in 2025.

So that might be an indication that Apple Intelligence actually does get rolled out in 2025.

So the combination of Apple intelligence rolling out and the fact that you are going to uh yeah, give up some share with, with respect to Huawei that you took over the last five years.

The combination of those two is relatively net neutral.

We think that Apple will continue to take share in China in the long run.

Uh Obviously, you're giving up some cyclical share that you took over the last few years in the very near term, longer term where we're actually very optimistic about the China potential because the middle class is actually increasing a fairly significant amount in emerging markets and in China and all of that is going to add incremental losers into the Apple ecosystem.

All right, we'll see if they have to launch a TRD phone to be able to compete as well.

Even furthermore, uh Wam Zi, thanks so much for taking the time here with us, Wam Zi Mohan, who is the Bank of America Senior.

It hardware analyst.

Appreciate the time.

Thank you for having me.

Certainly.

And a few other tickers that we're following this morning, Southwest Airlines Board getting a major overhaul, six members will retire in November and the executive chairman, Gary Kelly will step down in 2025.

The shake up comes amid pressure from activist investor, Elliott management shares right now are down by about 4.5%.

This was a significant effort from Elliott to really try and reshape the board towards some of its own inclinations.

And um ultimately, there was a letter that was put out to uh address some of the corporate governance changes and uh that was sent to the employees internally, really just speaking about.

And shareholders, as you say is who that went to really talking about how Elliot investment was met with.

Uh the objective was to meet and then ultimately commence productive dialogue.

Uh That dialogue led to some of the overhaul that we're talking about here today.

And it's a larger question of what the future of Southwest Airlines looks like as a service, especially if Elliott's position is we need to extract even more profits from this business.

Does that mean consumers are paying more for those tickets or getting nickel and dimed at certain corners and turns through their flight experience?

Yeah.

And I think Elliott would also like to see a bit more changes coming to leadership as well because we know that they have been pushing for ousting of Ceo Bob Jordan that in fact has not happened, Southwest reaffirming its support for Ceo Bob Jordan.

But again, remember that Elliott pushed for even more than this.

They proposed 10 new directors for the 15 member board and they have accused Southwest of refusing to modernize their operations.

Therefore, that hurts shareholders, leaving Southwest really unable to stand some of the operational and competitive challenges that we are seeing from others within the industry.

So Elliott still searching for even more changes than what we are seeing from Southwest Southwest coming out saying that they are trying to work with Elliott here to find a solution here going forward.

They wanted to be a quote unquote collaborative resolution with Elliott here and they have proposed again the 10 new directors for the 15 member board.

So again, continuing to be a stock to watch here.

At least today, we're seeing a move downward in the stock.

We know it has been an underperformer, especially when you compare it to the broader S and P. Well, shares of Hewlett Packard Enterprise H pe taking a hit after the cloud services provider in $1.3 billion stock sale to fund its purchase of Juniper Networks.

You can see that stock off just about 7.5%.

Now, this is really to no surprise or funding this deal that they had announced here for Juniper, obviously setting sights on that company here in order to expand its business, the push further here for this company going forward.

But again, I think the question going forward is exactly surrounding the momentum may be behind H PE S business.

They had put out uh pretty solid results here most recently last week, raising their annual profit forecast as say, the increased demand for A I servers.

A lot of that driven by higher enterprise spending on A I infrastructure So again, raising some money here for this deal, a $14 billion in all cash deal and its intents here to try to enhance some of their A I offerings.

Yes, a sense of urgency, especially on the H PE side and especially considering the valuation right now for Juniper Networks market cap sitting just shy of about $13 billion here.

So some urgency to get this deal done so that they don't face too much higher of a premium that they would need to make sure that they're able to offered to Juniper Networks for the purchase here.

The stock, it's up by about 30% year to date.

So at this juncture H pe just trying to get the deal done in any kind of financial capacity and way possible here.

Uh So we'll see exactly how this comes to full fruition for the company.

Both of them at that all your markets action straight ahead.

Stay tuned.

You're watching Catalysts, Vice Chair for supervision, Michael Barr today outlined regulators revised proposals for Wall Street banks.

After industry pushback, it is critical that banks have the capacity to continue lending to households and businesses through times of stress.

Bank capital is a key component of this resilience and bank capital rules help to ensure that banks are holding capital, commensurate with the risks of their activities and the risks that they pose to the US financial system.

So under the new rules, capital requirements for the nation's biggest banks would increase 9%.

That's less than half of what was originally proposed.

Still many on Wall Street are dissatisfied with the revised proposal, including our next guest with us.

Now to discuss, let's bring in Chris Whalen, who is the whaling global advisors, Chairman Chris, thanks so much for taking the time here.

So you think it shouldn't have gone this far?

Why is that, the whole focus of basel is on capital, which is what it's been focused on for 30 years.

Um I think they should have focused more on things like market risk.

Silicon Valley Bank, for example, is a, a case in point and some, you know, the FED was caught flatfooted when the industry pushed back.

And then since that time, we've had the Supreme Court decision in Roper, which essentially eviscerated any notion of deference to federal regulators.

So if the rule is not supported explicitly in the statute passed by Congress, then the federal regulator is, is vulnerable to, to losing in court if the industry chooses to sue them, you have a case right now where the industry is probably gonna sue the Fed and the other regulators on a rule regarding brokered deposits.

Uh You may also see the mortgage industry sue the Consumer Financial Protection Bureau over a revision to the the regulations for mortgage servicing.

So, you know, the Supreme Court decision has changed the landscape and the fed knows it uh the basel process in particular is very vulnerable because it's not really enshrined in US law.

It's, uh, an understanding among finance ministers.

It goes back almost four decades more than that really.

And it doesn't have any basis in statutes.

So, if JP Morgan decides to sue them over basel, they'll probably win.

No, it's interesting there, Chris, but a lot to get into, I, I guess my first question is even though this is watered down, I know you don't agree with it.

You're saying it doesn't address some of the risks or doesn't address the issues that need to be addressed.

But what we have here, how, how big of a challenge is this going to be given the fact that we did see this watered down version versus what had been already been priced in?

Well, the capital piece that you just referred to in that, in that piece from Barr is a big part of it.

The large banks were not happy seeing a 25% increase in capital because they don't need it.

These banks are giving back capital to investors every quarter.

In fact, they would like to give back more.

The banks are under levered in terms of opportunities and most of the new business expansion, where has it gone?

Non-bank finance?

You guys have been watching that process along with me for the past five years.

So I think that the regulators are still not looking forward to future risk.

They're looking behind and there's so much detail that has not been addressed yet by Vice Chairman Barr and his comments that I think the industry would like to see the fed junk this entire proposal and re propose it.

Uh The Republicans in the House have already said that.

And I think if you see Trump win this whole basel rule process is gonna go by the wayside and we're probably gonna start again.

I have said for a long time, the US should withdraw from Basel.

There are so many points of friction between Europeans in the US, particularly in areas like housing finance that I just don't understand why we're trying to make our banks fit into their world, which is very different.

What about government finance?

What do you think it would look like that more specifically under Trump?

I think you would probably leave capital rules where they are.

I think that you would see less effort led mostly by the Yellen Treasury to limit banks lending to non-bank financial companies.

There's a big uh proposal buried inside Basel that has not gotten much media attention, but it would severely hurt the residential mortgage sector.

So there's a lot of pieces to this that don't make sense and just re proposing it, I I think might not be adequate.

I still think you might see the industry fight, believe it or not.

I mean, Yellen probably is not going to be there most likely as well.

So this would be under a different Treasury secretary.

Most likely.

Uh There's much more in this conversation, Chris, we gotta leave things there on the day.

Chris Whelan, who's the will and advisors.

You too.

Uh advisors, chairman, appreciate it.

We've got all your market section ahead.

Stay tuned.

You're watching Catalysts.

Two years after the Chips Act passed, the Biden administration has invested roughly $34 billion in building out the US semiconductor manufacturing sites.

But China is moving quickly to ramp up their own capacity, importing more semiconductor equipment than any other country this year to discuss where things stand.

We want to bring in the architect of the Chips Act, Ronnie Chatterjee.

It's great to have you back on the program here with us, a former White House chips coordinator and a Professor of Business and Public Policy at Duke University, Ronnie.

I it's great to see you.

So, so I guess as we lead up to the of the debate tonight, looking ahead to November elections, I'm curious just to get your assessment on where things stand, given the money that's been deployed and given the future growth that we are expected to see from some of those larger names like Intel.

Well, it's great to be here.

I think two years on you have $30 billion over roughly 15 projects across many different states.

So the government has done a great job in terms of making the announcements, these preliminary memorandums of terms, they've reached with all these different companies and they've done a good job of getting the major players in there.

That was a big question early on.

But you're seeing that now with Intel, with Samsung, with Mike from, with SK he and TS MC, we're the only geography in the world that has the top five advanced logic and memory producers all in the same place.

So that stuff's gone really, really well, I think what you got to watch going forward is the cyclicality of the chip industry.

Something you talked about in the show before, how that affects the government strategy going forward.

I doubt it will come up on the debate.

It's a little wonky but it's gonna be really important to watch over the next four years.

Yeah, we're gonna be talking about that for sure in a hot second here.

But when you think about the future cycles uh of chip purchases as well, I mean, you have companies like NVIDIA talking about million chip data centers, you had oracle and their earnings yesterday talking about needing nuclear reactors to power data centers in the future as well and they're already breaking ground and ready to design one.

So what is that signal to you about?

Just the types of purchases at least a new baseline that we should expect for chips purchases from this point forward.

Well, I think the A I infra that which you're talking about is huge and you're seeing companies from the hyper scalars on down making massive investments in A I infrastructure and that includes data centers and GP US and as you know, the energy to power them, and we're still figuring out some of these deep technology problems in terms of how we're gonna power the data set we're gonna need in the future.

I see that really positive for the chips industry.

I mean, honestly, we need the chips act before the A I boom.

And now with the A I boom, we're going to have a chance to participate in manufacturing some of those high end chips here in the United States.

So I see it as both a great tailwind for the industry but also a really important sort of goal for the US government to make sure that the US plays a role in manufacturing those chips.

And that's what I see happening in the future.

You know, there has been some reports and some covering just in terms of some of the uncertainties surrounding when the money is going to be delivered specifically here to Intel, Intel, facing this unclear path here to some of the biggest awards from the subsidiary program.

I'm curious just to get your perspective on that and it may be what that would ultimately or the challenge that that then poses to Intel here at least in the near term.

Yeah, the good thing from the chips program perspective is it's a diversified bet you have Ts MC Samsung and Intel, all at the leading edge, all who received PM TS these preliminary memorandums of terms to get the money, but the money hasn't come out yet.

And that allows the government to use milestones and traning to make sure that if you're not hitting those commercial or technical milestones, you don't get the money that you were supposed to get.

And I think that's really going to be the key thing to watch going forward.

You know, Intel has a big board meeting, cutting up September, they've still publicly committed to hitting their technological and product milestones.

That's going to be a big story to watch.

And Ts MC has reported they've reached some yields that are really close to what they get in Taiwan, out of their Arizona fat and many people weren't expecting that.

So you're going to see positive news, you're going to see negative news in this kind of industry.

It's really important to have a lot of options.

And you see that with the US chip strategy, watch those projects in Texas, in Arizona, in Ohio, in upstate New York, they're all going to have ups and downs over the next 10 years.

But at the end of the day, be producing more chips in the United States than we were before, particularly on the most advanced notes and then for the globalization and, and the partnership efforts on those chips.

I mean, do you think especially as we're looking forward to tonight's debate to see what business themes are discussed.

Chips could be one of those, to what extent do you think a de globalization effort on one side of the aisle versus maybe kind of securitizing some globalization?

Uh On the other side would impact chips specifically, my view is that chips given it was passed with a bipartisan consensus is going to be really durable.

Why is that?

Because when it comes to microelectronics, we're thinking about national security and economic security and that's why so many folks rallied around it.

So I think no matter, you know what the administration looks like in the next four years or after that, there'll be a strong by bars and consensus for chips because it is a matter of national security that we produce some of these most advanced chips and some of the more mature chips that go into our defense and weapon systems.

And so I think chips is gonna be just fine in terms of the political environment.

I think the big question is execution risk and that's something that we're gonna need to watch going forward.

I have confidence that they've done a good job up to this point, but we gotta keep it up.

All right, Ronnie Chatterjee, who is the Duke University Professor of Business and public policy.

Ronnie, thanks so much for taking the time here with us today.

Thank you for having me.

Certainly.

Well, economic issues are expected to be much of the focus of tonight's presidential debate, housing costs, taxes and inflation at the front of minds of many voters.

With this possibly being the only opportunity to see former President Trump and Vice President Harris debate each other this election season.

What should both voters and investors be listening for when the two candidates hit the stage this evening?

For more.

We welcome in Tobin Marcus Wolf Research, head of us policy and politics.

So for what we're expecting here, how much strength in agenda and and actual tactical approaches, do you think we'll hear from both candidates to?

So look, I think in large part, this debate is going to end up being a contest of who can define the other candidate as the bigger risk.

Uh Harris certainly is the candidate that voters are heading into the debate with more questions about.

So Trump is going to be trying to characterize her agenda and her record as well and far left and out of the mainstream, out of step with voters values, she is going to uh you know, try to explain this much more moderate agenda that she's running on now relative to where she's been in the past in terms that can connect with voters.

So I think the the room for kind of uh policy talk for incremental um policy explanations primarily comes from Harris's side because they're both gonna be uh vying to define her and to talk about what it is that she stands for and will do.

Um But I don't think that from an investment perspective, we're really gonna learn a lot more about uh what it is that she's proposing beyond what she's already laid out.

You know, she's done this series of policy rollouts in recent weeks.

Her campaign put up an issues page just this past weekend.

So I think we've seen their considered judgment about what agenda they want to lay out to the American people.

The question now is, you know, can she explain that in terms that, that are believable to swing voters who haven't yet tuned in Tobin when you take into account what's been priced into the market.

We have, we have certainly seen a shift right?

Ever since uh Kamala Harris joined uh the race here and we've seen her poll numbers rise obviously versus Trump versus what we saw when Biden was in the race.

How much I guess in terms of what investors are rooting for or hoping for?

What is the best outcome for the market is one clearly better than the other or how should investors be evaluating that?

So I wouldn't say that there, that one is clearly better than the other.

Uh I think that there's a mix of risks and opportunities in both scenarios.

You know, to me from an investor perspective, thinking about the policy outlook in 2025 the most important thing to keep in mind in this very, very tight race because I do think that we're gonna, you know, it's gonna continue to be not too far from a toss up all the way through election day is that Trump will probably have unified Republican control of Congress if he wins.

Whereas Harris will probably have a Republican Senate.

So the policy outcomes in a Harris win scenario are divided government outcomes.

She'll have control over personnel, but all the fiscal policy is going to have to be bipartisan deals.

So there's no need to worry about things like uh taxes on unrealized capital gains, likely no need to worry about an increase in the corporate rate, which would be the big kind of market wide headway you need to worry about under her.

I don't think any of that stuff is getting through a Republican Senate.

Whereas in a Trump scenario, you know, he might be able to get Republicans aligned behind a corporate rate cut.

Although I I think that's probably challenging fiscally, but you do have to worry about his tariffs which are um both a direct headwind for a lot of industrial and consumer names as well as a a macro influence that could prevent the fed from uh cutting as quickly as it wants to.

Um as well as you know, some of these more sector specific, both risks and opportunities, you know, deregulatory benefits in sectors like financials uh but also potential headwinds in sectors like clean energy where he may try and cut or, or scale back some of the Ira benefits.

So, you know, a lot more room for change under Trump.

Uh, some sectors look a lot better than others as winners and losers from Trump.

But I don't think it's a sort of uniform one's better than the other.

It, it's interesting, especially on the corporate side, the differing in backing and support, that's, that's adding up for Harris versus Trump here and, and how that's kind of shifted uh versus what we've seen in past elections as well.

So what are you anticipating to be the net weight that corporate America throws around in this election?

So, I mean, I think a lot of corporate leaders are trying not to get caught cross wise, you know, if I were advising the c suite of a company, uh that, that had no need to get involved in the election, I would probably advise them to try to stay out of it.

Uh If for no other reason than because there's so much uncertainty about the outcome and you don't really want to get caught on the wrong side given, uh you know, in particularly given the possibility of vindictiveness, I think more so from a Trump administration.

Um But, you know, Trump certainly has lots of business support.

I think much of that is coming from outside of the corporate sector.

Um You know, a lot of, you know, major leaders in the financial industry who have their own funds have been backing him.

You know, a lot of, uh, the, the Silicon Valley, you know, kind of BC communities split with, between the two, you know, out and out, you know, corporate leadership, CEO S executives, folks that are responsible for big organizations, you know, many of which are, are staffed by personnel that have their own loyalties.

Um, you know, I think some of them have sided with Harris and she does have some business voices on her side.

But a lot of folks have, have frankly been trying to stay out of it.

I mean, the educational polarization in the country has definitely changed the lines around, you know, where um where business leaders tend to go in terms of their support for the two parties.

Increasingly, Democrats are the coalition of uh kind of highly educated um America, which is where of course the workforce for uh you know, most big corporations draws very heavily from.

So that I think changes the considerations relevant to how folks would have thought about it a generation ago.

Yeah.

Uh having to try and game out how vindictive a president might be if they win.

Uh not something I envy or anybody does from uh what corporate executives are having to go through right now as well.

Tobin Marcus Wolf Research, head of us policy and politics.

Thanks so much for taking the time here.

Thanks for having me.

Certainly all your markets action straight ahead.

Stay tuned.

You're watching catalysts.

This is a stock market hanging on every single economic report as the economy slows down.

Let's dive into all things.

Economy with Goldman Sachs, chief economist John Hazus.

John, always great to get some time with you, especially at the, at your big conference uh here in September.

Thanks for joining us.

Maybe you can help us settle a debate we're hearing about in the markets.

Uh If the fed will, will front and load rate cuts.

Where do you stand on that?

Whether they will, we are still in the 25 camp?

I think that's more consistent with the data that we've seen since that the weaker than expected jobs report a month ago.

I think Friday's numbers were while a little softer than expected.

Nevertheless, they did show a rebound.

Q three GDP is still tracking 2.5%.

Jobless claims have come down.

And then if you look at the Williams and Waller remarks on Friday, I think they were more consistent with 25 basis points in on September 18th.

I wouldn't rule out 50 but 25 does strike me as more likely.

Now, in terms of what the rationale might be for doing more, I think there is a solid rationale for doing 50 the rationale is that five and 38 s five and a quarter to 5.5% is a really high funds rate.

It's the highest policy rate in the G 10, it is, despite the fact that the US has actually seen more progress on inflation than most G 10 economies.

So you could certainly make the case that they should be bringing down that rate quickly.

Now, I think 25 is also defensible though, because the way that monetary policy affects the economy is via financial conditions, it's not the level of the funds rate itself that matters mostly, but really financial conditions and they depend on, on the path, you know.

So if they do 25 basis points, I would expect them to signal clearly that there's going to be a series of cuts.

I would also expect them to signal clearly as Governor Waller did on Friday that they'd be very willing to scale up the pace if the data disappoint.

So it's, you know, I think 25 is defensible 50 you could certainly make a case for, but more likely 25.

What would a 50 basis point rate cut signal to investors?

Would it signal that this is a fed word that the economy is slowing down more than expected?

Well, that's one of the challenges and I think this is one of the reasons why the committee usually wants to go gradually because that can be sold more.

As look, we're just making some adjustments here.

There's no reason to panic.

And I think the people in the room that will be arguing against the 50 basis point cut probably will say what does it say to the markets if we're doing 50 here, I think you can manage around that.

You can say for example, that this is really about just the level of the funds rate, economy is doing fine, but the inflation emergency is behind us.

And so therefore we just think the current level of funds rate is no longer appropriate, but it's always a risk and you could get at least in the near term a more negative reaction because those kinds of concerns are prevalent in the market.

Why is the economy slowing down?

Is the economy slowing down because of all the rate cuts that the fed took or there's something else at play here.

I don't actually think that the economy is slowing down all that much.

Yes, it is slowing relative to where it was maybe six months ago for sure.

But that was very rapid growth of 3% or more.

We're still tracking 2.5% growth in the third quarter.

Our forecast for next year is only a few 10th below that two and a quarter percent.

Those are very solid numbers.

I think the main thing that's happened is that the unemployment rate has by 8/10 of a percentage point after the latest number on a spot basis.

But a lot of that has been increases in labor supply.

You've had this very large immigration wave, especially in 2023.

A lot of that, unauthorized immigration.

And a lot of those people have entered the workforce and now are still entering the workforce and it's taking some time to absorb them.

And in the meantime, the unemployment rate rises.

That's my hypothesis for what's going on.

And I, so I think that's it.

It's more the labor market, rebalancing labor market softening rather than a big slowdown in growth.

It's not lost to me.

A lot of the leaders that are in this room.

Uh NVIDIA, Ceo uh Jensen Wang will be here.

We're talking to am DC O Lisa Liu.

A lot of A I focused companies when you're talking to these executives and you're in a conference like this.

Are you going to come away thinking that A I is really going to impact the economy maybe more than a lot of folks think and, and then what is A I, you know, mean to the US labor market a couple of years from now.

So I'm definitely in the camp that A I has will have a very meaningful impact on the economy.

I do think that it's important to distinguish between particular sectors of the economy where that impact is very visible now, certainly in our data centers and energy.

Those there are significant effects from A I at this point in time and then the broad $28 trillion of US nominal GDP where it's still going to take.

We think several years before we see major effects.

So that, that's, that's sometimes the reason for the disconnect between maybe what the macro people say and what the uh what corporate leaders say in the space, I think in terms of the macro impact, say 5, 10 years down the road, we lifted our long term growth forecast for the US on the back of A I from 1.8% per year to 2.2% per year, sort of in the early 2030.

And that's a pretty sizable number.

Obviously, it's not as dramatic sounding a number as some of the, you know, more, more maybe micro sectoral effects, but you know, $428 trillion economy, it's or whatever that number is going to be five or 10 years down the road.

It's a lot.

All thanks to Brian Sazi for bringing us that interview.

Let's do a quick check of the markets 90 minutes into the trading day.

We're looking at a bit of a reversal right now.

You do have the S and P back above the flat line.

It's kind of meant uh searching for direction for most of the trading day here this morning.

We got the dow still in negative territory although off the lows of the session now, I just about 200 the NASA continuing to lead the way up just about 2/10 of a person.

All right, where catalyst ends, wealth begins dedicated to all your personal finance needs.

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