Unemployment triggers the 'Sahm rule', DraftKings CEO on new earnings: Catalysts

Today on Catalysts, hosts Seana Smith and Madison Mills break down the July jobs report, the Sahm rule, and the big swings in tech stocks.

The unemployment rate unexpectedly rose to 4.3% in July, the highest level in almost three years. The change also triggered a recession indicator called the 'Sahm rule'. Claudia Sahm, the creator of the rule and New Century Advisors Chief Economist, discusses where the economy currently stands regarding a recession.

Tech earnings led to big moves in the sector throughout the week. Ayako Yoshioka, Wealth Enhancement Group Senior Portfolio Manager, covers how increased CapEx spending from Meta, Microsoft, and Amazon dominated the conversation and market action.

DraftKings' mixed earnings report sent shares lower as revenue fell short of analyst expectations. DraftKings CEO Jason Robins joined the show to discuss.

This post was written by Cheyenne Reid

Video transcript

It's just after 10 a.m. here in New York City.

I'm Shana Smith alongside Madison Mills.

And let's dive into the catalyst moving markets today.

The strength of the labor market starting to fade here.

Unemployment coming in at 4.3% only 114,000 jobs added in the month of July falling far below the estimate which was 175,000 that triggered the some rule.

A key recession indicator.

Acting Labor Secretary Julie su join Morning Brief earlier this morning because what she had to say about that, there's just been a lot of indicators of a low levels of unemployment for a long time.

So yes, this was an increase.

This uh this month, there was also high levels of labor force participation rate still.

And so I think it's there's still a question, you know, the jury is out as to whether the rule and what it, what it has indicated historically would apply in this situation will be speaking with Claudia about exactly that she is the economist behind that role in just a few minutes.

And we see the reaction to the jobs report across the broader markets.

The attack of NAS that taking the brunt of the selling here to look at those losses of well over 2% on track for its worst week of the year.

That weaker than expected jobs are coupled with a disappointing earnings is really driving the NASDAQ into the right here this morning.

Plus chip stocks continuing their moves to the downside today and tell leading the sector lower down over 27% And what could be its worst day since the early 19 eighties and video also moving to the downside today following its rally earlier this week will dive into whether or not there's a buying opportunity in the chip stock.

But first, we want to take a closer look at the market's reaction to that weaker than expected jobs report.

We have the dow falling just over 400 points right now.

You've got the NASDAQ off nearly 2.5%.

We're seeing this move lower on the heels of that much weaker than expected.

Jobs report the market starting to price in bad news for the economy as bad news for the market.

So here with a closer look on someone that has been tracking some of this narrative very closely is our very own, Josh and Josh is the shift that we've been talking about now.

More and more here.

We're starting to see it continuing to see it play out in today's early.

You were, I was listening to you asked several guests this question yesterday, right.

Which was just simply when is the turning point, when is bad news for the economy going to be bad news for stocks?

And you were asking it because that hasn't necessarily been the case over the last year.

Right.

Bad news for the economy could have meant that growth is slower and it is not a problem for inflation.

But I think F Jay Powell actually gave us pretty clear guidance on this.

If you listen closely to what he was saying on Wednesday, he essentially said the labor market growth in the labor market at this point is not a concern or an inflation pressure that they are worried about.

So that gives you a pretty straight read here that you should want the labor market data to not come in weaker.

They're not rooting for the labor market data to come in and keep cooling as we were talking about over the last couple of years, right?

You're looking for the labor market to basically stay flat and normalize.

And so when you get data like this, it has people concerned about the trajectory for us economic growth.

And you're just seeing a clear trade over the last two days after that, jobless claims data, the manufacturing data.

Now we have the jobs report, there is just a clear trade here into defensives.

You have some defensive sectors up today, right?

Should note that action that you're seeing and you're seeing just pure sell offs in some of the rate sensitive areas.

I mean, the Russell 2000 is down over 3% I think right now might be up to 4%.

That had been something when you're pricing in more fed rate cuts that had been an index that was ripping through July.

Right.

As we were getting more positive about the rate cuts.

The why has changed?

We're talking about a why that might be a concern fed that is playing out in the market.

Well, just you mentioned the market reaction with the Russell 2000 and that's on your screen here.

You can see over the past couple months, it has turned into a positive territory, but as you mentioned today, it's down over 3%.

I'm curious what you are reading and hearing from folks about how long the market pressure we're seeing today is going to last.

Is this a temporary perhaps over reaction?

Well, I think it's an extension of some of the show you started to see last week, right, Shana and I actually both wrote about this last week talking to different group of strategists, right?

So we had a broad, a broad group of strategists that we talked to in that sense, team work.

We were on the same page, but they both highlighted to us, right, Shana, that essentially they thought there needed to be more of a washout in tech.

I spoke with Keith Werner over at truist.

And he had said, he thought maybe tech gets a little bit of a bounce off some of the earnings which you did see a little bit earlier this week.

Right?

You saw the NASDAQ fight back a little bit.

But he said in the long run, he was looking for something closer to probably a correction which we're hovering near today.

A 10% pullback.

He thought that we needed to fully wash out because you still had a lot of stocks trading above their 50 day moving average, still in pretty good position.

And it wasn't nearly as close to as far as we drew back in April or as far as we drew back last October, think about the other drawbacks we've had in this bull market.

It usually just goes a little bit further.

And so right now, a lot of folks are still talking about this being a rotation.

It's not a recession panic and everyone's getting out of the market.

You have four of the 11 sectors up today.

People are still looking to put money to work somewhere, but it's still that rotation and maybe we need a little bit more of that rotation for people to feel like they want to come back into tech.

It's a really good point, Josh and important to look at because, you know, as I put in our chat earlier, recession is like the top trending word on Twitter right now or X whatever.

So it's one jobs report.

Remember it's one jobs report but after jobless claims yesterday, so it's two pieces of economic data.

All right, Josh, thank you so much as always great reporting.

We appreciate it.

Sticking with that jobs report.

The unemployment rate jumping to 4.3%.

That is the highest level in nearly three years.

And it triggered a rule created by our next guest that called the song rule.

It says that if the three month moving average of the unemployment rate rises by half a percentage point from the previous year that signals the start of a recession.

You more is the creator of that rule.

Claudia on herself, the chief economist at New Century Advisor.

It's great to have you and thanks for joining us here as I just described, it is a recession indicator.

So help me in our audience out here on a 1 to 10 scale.

One being as far as possible from section and 10 being a recession territory.

Where would you say we stand today if I were to just look at the rule?

So there is a pattern that's held historically and it's been very reliable.

So the way you would interpret this rule normally is we are probably about three months into a recession.

Now.

Is there anything about the world right now?

That is normal?

No.

And so it the the so rule and many other indicators we've had of say recessions like two quarters of GDP declines.

We had that in 2022 we had no recession, right?

Like we really have to think about the particular context for now.

So do I think we are in a recession right now?

No.

Do I think that the increases in the unemployment rate and the softening in the labor market is worrisome and could, we could end up in a recession and say three months, six months.

Yes, I am very concerned about that, but the song is probably overplay it right now to some extent, just because of pandemic induced and labor force, we just had a lot of shocks we're working through.

So there's kind of some extra now but, but we should be very concerned.

So this is high up on the 10 scale, not a 10 though Claudia, talk to me a little bit more about that last part of that sentence that you just said just why it it it is different this time around.

Clearly, we saw shocks of the labor market throughout the pandemic and then even coming out of the pandemic.

Immigration also playing a massive role in some of that uptick that we have seen most recently, right?

So the recession indicator, it looks at changes in the unemployment rate, right?

Because as a country we've gone into recessions with really low unemployment rates and really high unemployment rates.

So it's looking at changes, looking at this momentum that once you get enough going, you're in a recession.

Ok.

So there are things that have happened that have really moved around that change in unemployment.

We had labor shortages earlier on when people dropped out of the labor force because of the pandemic that pushed the unemployment rate down really low.

So we're comparing to something really low.

And then in recent years, we've had a big surge in immigration and other people coming in from the sidelines of the labor force.

It takes time to find a job if you're coming in from the sidelines that does push up the unemployment rate as long as it does that temporarily, right?

And then we get people working.

That's great.

But so like that aspect of these big changes in the labor force that were not like big, they were fast has just made an indicator like this.

It's trying to figure out the momentum more challenging than we have seen in any of the historical record that the rule was created off of.

So Claudia squaring that then with what you answered to Mattie's question, the, the chances here that we could see a recession in the next 3 to 6 months, I guess.

What, what would you place those odds at now?

And when we talk about maybe the likelihood here, what would be you even more concerned?

Clearly, it would be at the unemployment rate increases and that sort of thing.

But is there anything else maybe outside of those metrics that you're closely watching.

That would be a bit worrisome here for the economy.

And so the odds of a recession are elevated in the next three, particularly six months or so.

I it's not my base case.

The reason that I see a, a path out of this, that's a, that's a good path is we do have in the Federal Reserve has some important policy levers that it can still pull in terms of gradually lowering interest rates.

We have a really healthy economy, we're just like pointed, not in a good direction.

So just take a little bit of pressure off or as much pressure off as they need to.

And we can get this back to more of a, more of a glide path like the problem is not where the US labor market is right now.

Close to 4% unemployment is good.

We've had a lot of increase in the labor force.

We need to stay in this place and we get month or month of this weakening.

That's the problem.

And I think the policymakers, there are some tools to help smooth that out and they're pointed in the direction of doing that.

Claudia.

We're hearing some commentary already this morning about the potential for the Federal Reserve to make a move before that September meeting.

And we're also seeing the market pricing in a higher likelihood of a 50 basis point cut comes September.

What is your base case?

My base case is they'll, they're gonna get going in September.

I, I think it's pretty clear that it's necessary they are the Federal Reserve outside of their regularly programmed meetings to make changes in the interest rates.

We would be in a crisis situation.

None of us should want a crisis situation right now.

And we are not in a crisis like this, this labor report is really disconcerting, it is not a crisis.

Right.

What we could see is fed officials coming out and as they give their guidance or communication, we can have them really talk up.

You know, we're, we're doing willing to do whatever it takes to make sure we don't see more weakness.

And I think that could, could give some support.

Uh and yet, you know, they wanna be measured.

They don't, they don't want to go into panic mode.

I think that's appropriate.

And yet just even two days ago, this is not the labor report that JP L thought he was going to see.

They were very clear, they don't want to see more weakening.

We saw more weakening and I want to end by talking about where we are heading come November in terms of the toss up with the, the White House.

I know that often your rule can get a little bit politicized.

But I'm curious what you want folks to know today who might be listening to commentary about your rule and how it could play into any sort of political commentary on both sides of the ale as we head into November.

I'm sorry, like the goal of the rule was to be able to put fiscal policy on autopilot and recessions and avoid some of the politics.

Right.

So I know that's not, uh that's being naive now.

I understand.

Uh but the, it's important like we, we don't wanna panic again.

I think there are some good reasons that, you know, this time has some unusual features and really the purpose of the rule was to take action to if we get in a place that is not a good place in the economy, we take steps to make it not as bad fight the recession.

And in this case, I think we actually have some runway and that we're not in that danger zone yet.

So I hope it spurs a conversation and let's pay attention to the labor market and this, this needs to get under control because it's so important and the labor market is so central to just the health and growth of the economy.

Claudia real quick before we let you go.

How are you looking at some of the other data that has been coming in?

More specifically, some of the reading that we are getting on the consumer.

There has been lots of questions about the pressure that consumers are under whether or not we're seeing some of that material weakness play out.

What do you think?

Right.

And that absolutely looking at all of the data.

So the SORA was designed to be this summary statistic that could roll it all up frankly right now, nothing is a summary statistic of the economy, right?

Like there's just, it's complicated enough.

And so when I say we're not in a recession, it's not just me being, oh, I don't want that to happen.

It's look at consumer spending, look at income.

No, they are not as strong as they were before in terms of growth, but they're still really solid and inflation is coming down and we can cover.

So it's like if you look at the whole landscape, we're still in a good place.

But the direction of travel is a problem.

But we can, I I that's not a done deal, right?

So I, I think, you know, if you look at everything, it can look pretty good, but it is easy to go out and pick like pick out a set of data points and be very downbeat.

And I don't think that's the message that we should be taking from today.

Claudia final question for you at the decrease in job believers.

And you noted that in your, in your recent substack post is now larger than it is in most recessions if you, if you had to put a percentage on it.

And I hate to ask you this again.

But what percentage likelihood do you think it is that if we do continue to see weakness coming into the next jobs or pain.

And if we see weakness in the upcoming CP I prints before that next fed meeting, what percent likelihood do you think we would have of the FED responding outside of the next policy, meeting responses outside of policy meetings are very rare and they're usually driven by a big disruption in, in financial markets, right?

Like in crisis.

So I don't, I don't see that happening.

You know, there's always a chance and that's but, but in terms of it being driven by some uh macro development, I just don't think they have other tools to be able to signal we can like move.

But I I, you know, again, the message is not crisis message just we there are some issues here.

This is not, you know, we need to get this straightened out.

Someone needs to tell the market that it seems like Claudia Claudia s it's great to have you, especially on a day like today.

Thank you so much for making the time for us, chief economist at New Century advisor.

Thanks Claudia.

Thanks.

Let's turn now to a big story here.

This week, we're talking, taking a closer look at the tech trade.

NVIDIA is the next big test for the market when you take into account earnings.

But as it stands right now, you got to look at the moves that we've seen in NVIDIA today and this week taking a look at today's moves, you're looking at another day of losses of nearly 7% as it stands right.

Now.

When you take a look at tech overall, the NASDAQ 100 is more than 5% this month, meaning that August is already tracking for the worst month of the year and we're only in day two of the trading day here for uh for the month of August.

So here to discuss what's ahead for tech, we wanna bring in aka Yoshioka, senior portfolio manager at Wealth Enhancement Group.

It's great to have you AOA and, and thanks so much for taking the time to join us here this morning.

Curious when we can start with NVIDIA because that certainly has been a wild volatile ride here this week.

I think the initial read on some of these uh big tech earnings reports was that the spending that's planned here for A I that, that, that, that is actually viewed very positively here for names like NVIDIA.

But since then we've seen some selling action.

So I'm curious what your big takeaway from this week's uh crazy week that has been is so far.

Absolutely.

It's been definitely a, a much more volatile week than we are used to in markets.

Um But we, you know, started, I think July with the Vics uh at, at 12 and so, you know, perhaps markets were a little bit complacent, um you know, going into earning season uh here.

And so, you know, now that we've had a good look at many of the tech earnings, you know, we did see that spend and most likely going to, uh NVIDIA for their GP US, however, you know, sentiment and the, and the earnings bar was very high going into earnings season.

And I think you're seeing a lot of that sort of come out just because expectations were very high.

Um, and the reports were ok, but nothing great is any dip that we see in NVIDIA still a buying opportunity.

So I think with NVIDIA, you have to be patient and you know, you don't have to go all in right here right now.

Um You know, when momentum starts to, to roll both on the upside, as well as on the downside, it tends to continue a little bit.

So, you know, for investors, we can, you should get comfortable with some of the volatility.

If you don't like seeing the stock down 6 to 7% on a daily basis, it sh it shouldn't be something that um you know, you should put in your portfolio.

However, you know, the long term aspect and again, depending upon your time frame, you know, it could be a great opportunity simply because, you know, A I has very long legs, especially as so many companies are investing in what the potential could be with A I and take a look at some of your top holdings here, Microsoft Amazon Meta, amongst the names in there.

Among the tech giants here.

I'm curious, coming off of these earnings prints that we've gotten this week, then, who do you think is best positioned at this stage?

At least for the next couple of quarters?

But, you know, funny enough, I think when you look at it from this capa lens that everybody's been talking about, you know, Apple is up today.

Um And, you know, Apple only spent $2 billion in Capex this quarter.

Um And you know, their Capex spend continues to stay pretty low, which means that they have a lot more free cash flow at their disposal to return to shareholders and in this environment in which the economy is moderating, and we're a little bit more concerned that the data is getting worse.

That's kind of the area that you want to be in because you know that you're gonna get that um return back as a shareholder right now.

Some of the other companies are growing quite a bit Microsoft Amazon and they will continue to grow, you know, over the next several years.

However, in the short term, you may not be getting that return back in, in terms of free cash flow for Apple, there is a lot of hope about an upgrade cycle to come with Apple Intelligence leading to, you know, an upgrade cycle because people want an iphone that has these A I tools.

How confident are you that that's actually going to come to fruition you know, it's, it's tough, I think, um, you know, behavior for most people is, is difficult and especially in the economic backdrop that we do have right now where people are scaling back on spending.

Um, and, you know, unless you really have a compelling argument meant to switch and upgrade your phone, um, it's, it's tough to shell out another $1000 or more, um, for a new phone.

So I think, um, Apple is really gonna have to demonstrate the value proposition of having all of those A I capabilities uh within their phone.

All right, we're going to have to leave it there.

Really appreciate you joining us A I ya, senior portfolio manager manager at Wealth Enhancement Group.

Thanks so much.

Coming up here draft games also out with their latest earnings print their CEO is going to join us right after the break.

Let's do a check on shares of the draft came right now.

They are down over 11% here.

This comes after a mixed earnings print results showing that the company missed on revenue expectations.

Draftkings also teasing out a new surcharge for customers in states with higher taxes.

More on the potential implications.

We want to welcome in draft CEO Jason Robbins.

Jason, thanks for coming on.

I want to start on your outlook because this was a key data point for investors when you're looking at the balance sheet and what changes you want to make to bolster that outlook moving forward.

What would you want to tell investors is the single biggest change that you're going to be able to make moving forward?

Well, I think really, it's less about uh a big change and more just investment in what is an incredibly strong customer acquisition environment.

Uh The big change we're gonna be making for next year is the implementation of the uh gaming tax surcharge which uh will not affect this year.

So, you know, Illinois, which raised taxes is going to be about a $50 million hit to IDA in the back half of the year.

Uh But we do think that there's some optimism that the gaming tax surcharge will help offset next year and maybe even deliver a positive Eva to tail one.

You know, Jason, I wanna talk to you a little bit more about that because the reaction, at least from the streets perspective was a bit mixed just in terms of how this could be used, maybe as an advantage by some of your competitors to gain market share.

Whether or not this is something that you could see some sort of backlash with when it comes to your users.

How do you view that?

Well, let's see what happens.

I mean, you know, I think most uh I would imagine most in the industry are looking at the same math we are and over the long term companies need to make a profit.

So, uh I think you know, there might be others that choose to invest less in product and other sorts of customer experience and that'll be a decision they're making and we're confident that, you know, listen, everybody has the same total uh margin to invest with.

So, um, you know, everybody has to make their decisions about where they put it.

And we've always said that we think product is the most important thing, customer experience, the most important thing.

And we wanna make sure that we can con continue to invest there because that's really, you know, forget even our legal competitors, that's the best way we can compete with the illegal market, which is paying no taxes.

Uh So really for us to be able to continue to make those investments, we have to be able to make a profit in states that have high tax rates.

And the reality is that it's not just New York.

Now, there's a few of them and Jason, that certainly makes a heck of a lot of sense from a strategy from, from your strategy standpoint.

I'm curious though, if we take a step back, maybe what this more tells us about some of the trends that we are seeing play out within, uh, the online sports betting space when you take into account that many of the states that have got, that have legalized gambling most recently have had higher tax rates.

Is that something that you think is going to be likely here as we talk about a wider adoption and more states legalizing, uh, sports gambling.

Well, it's not entirely true.

I mean, if you look at most states that have recently legalized, they have not had a higher tax rate than that 20%.

Uh, North Carolina, Ohio and Massachusetts, uh, which were, you know, three big ones over the last year.

All 20% states like Kentucky were below that.

Um, so it really hasn't been, um Illinois unfortunately raised their tax rate, but they have been, you know, live with a 15% tax rate for quite some time.

So, you know, it really is only four states right now that have had um, Washington DC as well.

But, uh, you know, you have to remember there's 25 states plus DC that, that have legal online sports betting.

Now, 38 that have some form of legal sports betting and only four have that, uh, you know, I think tax rate above 20%.

So it's really not most states.

And, um, you know, I think most customers won't be affected by.

This is the reality for those customers who are impacted by it.

Can you operationalize for me how you plan on including this in the platform moving forward and what that might look like in practice?

Yeah, so we have some shots of product visuals in our investor deck you can look at, but it's very small in Illinois, it'll be low, single digit percentage charge on the net winning.

So, um, for example, if you bet $10 to win 20 you know, you might be getting $19.60 something cents instead of 20 back.

Um, once the charge is deducted.

So, uh it'll be very transparent.

Um, you know, a lot of people ask me, why didn't you just bury it in pricing or something like that?

And the reality is that, well, certainly, you know, maybe people notice it more and, and I realize that might lead to, to more complaints.

Um, I think the trust and the, the, uh, ability for customers to know that we will always be transparent with them.

Um, that is sacred and, and so, you know, we're taking a very transparent approach.

It'll be clearly line item out.

Um, there'll be no question about it, but it's a small amount, you know, on that bet I mentioned tend to win 20 it amounts to about 30 something cents in, in Illinois.

So, uh, hopefully customers will not see it as a huge thing.

I think a lot of customers in other industries like hotels and taxis and many other things are used to paying, um, you know, fees in states that charge uh, taxes.

In fact, most of those industries charge 100 percent of the tax back to the consumer.

We're only charging a portion of it here, Jason, let's look ahead to the NFL season.

Critically important a season.

A couple of months here coming up for you.

What are your expectations just in terms of participation and, and, and how much growth you're expecting to see this year versus what you've seen in years past?

Well, I think this is gonna be our biggest NFL season by a long shot.

Um, just the momentum we have on the customer acquisition side and general activity side going into it.

And this is usually our least busy time of year.

I mean, you know, we do have Olympics a few other things, but for the most part, this is generally the slowest time of year for us, uh just due to the sports calendar.

So to be seeing the kind of customer acquisition, we're seeing an activity we're seeing now, I think bodes really well for what I think is gonna be an absolutely massive NFL season and then right on into the fall and the NBA NHL World Series and all those other great events.

It's, uh you know, this is the best time of year from my uh standpoint from a sports uh calendar perspective.

All right, Jason Robbins always good to talk to you.

Thanks so much for joining us here.

CEO of a, we appreciate it.

Shares of Bank of America are falling along with the broader markets and Martin to point out, but you're taking a look at losses here for Bank of America just about 4% on the headlines surrounding Bank of America specifically this morning.

That Warren Buffett's Berkshire Hathaway off Hathaway offloading more Bank of America shares.

When you take into account exactly what this ultimately means here for the stock.

It is under a tremendous amount of pressure.

Now, this is something that has been occurring over the last several trading days.

And I think at this point, investors are asking what exactly it is that Berkshire maybe sees coming down the pipeline, what it is that Berkshire sees if there's any sort of shift or change, maybe uh coming along for Bank of America, just what is sparking this uh selling, consistent selling of shares.

It is important to point out though they do remain an extremely large shareholder th Bank of America.

So their stake remains large are still betting very much on the success of Bank of America here going forward, but they have been trimming their stake pretty steadily.

Yeah, it's interesting to point out the kind of broader number here.

This is a total of $3.8 billion worth of Bank of America shares from mid July that makes it the biggest sale of the stock in its entire history and one potential driver of this.

There are of course many potential reasons that impact Warren Buffett's thinking.

But one could be the broader economic cycle that we are in right now.

We just got that latest jobs report showing potentially signs of continued weakness in the economy.

We are seeing in the broader bank space bank stocks sliding.

You can look at the benchmark KBW bank index down over 4% today.

That's the biggest move that we've seen since May of 2023.

So potentially this is Warren Buffett and the team over at Berkshire anticipating some of the economic weakness that we have been getting and the impact that that has had on some of these banks.

And as of Thursday's close Bank of America falling to the number three spot on Berkshire's list of top holdings.

Now it trails behind and American Express.

I was mentioning the fact that they do remain very large shareholder there in the bank.

It remains the top the largest shareholder still in Bank of America with a 12.1% stake.

It's a really interesting story to monitor just in terms of the degree of the sell off there.

We're going to stick in the banking space though with some CEO news at JB Morgan Chase Ceo Jamie Diamon Way in on the presidential race.

He wrote in an op ed for the Washington post that the next president needs to unite the nation.

But critical piece of information here that the next president should consider the private sector's quote indispensable role in the world by adding a cabinet seat diamond also not endorsing any specific candidate in the article.

Joining us.

Now to discuss this, we got our very own, Rick Newman.

So Rick, that cabinet position idea from Diamond really interesting here I mean, do you think that there is any likelihood of that suggestion being taken seriously by policymakers?

Well, I think that would require an act of Congress.

Uh and frankly, um I think the Washington Post got the headline wrong on this story.

I think the headline should be bromides from a billionaire.

Uh I think this is Jamie Diamond's weak, weakest take in memory.

Um It's like the JP Morgan Pr Department got their weakest writer and said, hey, string together some platitudes.

Jamie Dimond needs another byline.

I mean, I went through this.

Um, first of all, the, you know, the head, the president must restore our faith in America.

I think you asked Joe Biden.

Joe Biden would say that's exactly what I did.

I ended the chaos of the Trump years.

Uh Biden's, you know, Biden's administration, he's not popular, but his administration has been almost entirely scandal free.

There's been no chaos like we saw during Trump.

Uh, he wants to do things like reform the Supreme Court to make it more answerable to, uh American public opinion.

And then if you go through Jamie Diamond listed five points here, they're all vague and, uh, he's not real saying exactly what he probably means, but I read two of them to be, uh, let's make sure Trump doesn't get elected.

Like for example, he says we need to, uh, respect America's crucial role in world affairs.

Well, that is basically the opposite of what Trump said Trump the isolationist, but Jamie Diamond won't just come out and say, don't elect Trump.

I mean, this, he, he says, you know, our, our leaders need more courage and yet Jamie Diamond won't say what he probably means.

I mean, I could go through the, the rest of this but you know, it's one other thing.

We need more prosperity for more people.

Well, I'm not here to defend Joe Biden.

But if Biden would we were responding to this, he would say, well, guess what, Jamie, uh what I would like to do is raise taxes on the wealthy and raise taxes on businesses and redistribute some of that to uh to the uh to lower income groups.

And of course, Jamie Diamond didn't endorse that either.

So honestly, we take by Jamie Diamond.

Try harder, man.

30 seconds here, Rick, do you anticipate an endorsement coming from Diamond anytime soon?

And if so, what would be the catalyst for that?

Well, if he didn't do it here, what's he waiting for?

Um I mean, I mean, it's well known, Jamie Diamond leans democratic and yet he won't say what he obviously thinks, which is that Donald Trump would be bad for America.

So, um Jamie Dimon thinks America's political leaders need to be more courageous.

I think America's bankers need to be more courageous.

All right, Rick, great to speak with you as always.

Thank you so much.

And by the way, really important flag for you.

We've got a new Charlie X the Exxon.

So make sure you put that in the family group chat for the weekend.

Thank you so much for joining us.

We appreciate it coming up Exxon and Chevron out with their latest earnings.

We're gonna dive deep into the outcome of both.

When we get back, Chevron and Exxon both out with earnings this morning.

It was a bit of a different picture.

When you take a look at the two stocks, let's start off with Chevron that missed on estimates due in part to smaller refining margins and tax benefit losses.

Then when you take a look at Exxon actually, right now, it's trading just below the flat line, but they actually beat on their earnings estimates here after posting record oil production at their Guyana and Permian Basin site.

So here with more analysis, we want to bring in Brian Kessen.

He is Port a Tortoise capital advisors, senior portfolio manager.

Thanks so much for joining us here, Brian.

And I think when you take a look, at least in the headlines coming out of these two prints, it looks to me that Exxon's gap may be over, Chevron is widening a bit, but what's your read on the most recent quarter?

No, I think you hit it exactly right.

Both of the, from an earnings perspective, certainly, um that diverged this morning with, with Exxon exceeding estimates by a little over 10%.

And, and Chevron actually missed the estimates by uh actually a little over 10% came in down 13% I think.

Um, as it relates to the, the production of both, you mentioned it, Exxon beat uh overall in their, their production 4.4 million barrels per day versus 4.2 million.

Um That was expected, that's a pretty sizable beat.

Um And not only did they beat but it came through on kind of the three larger horses that they're betting on um over the longer term as as growth engines um that being their, their legacy premium position, um they just acquired pioneer natural resources and the synergies that are coming from that transaction appear to be uh coming to fruition and then there are Guyana Asset also, you know, continues to perform.

Whereas if you look at what Exxon or with Chevron um indicated from a production perspective, they had some unplanned downtime um in Australia and some of their other uh international operations missed sticking with Exxon.

I'm just curious how much more upside do you anticipate for the stock here?

Yeah, we uh we really like what Exxon in particular is doing from a capital allocation perspective.

Um We had anticipated that they would buy back about $3 billion worth of shares in uh in just the second quarter.

They upped that um exceeded that by about uh they came in about at about 5 billion and they've indicated that on an annual basis they want to buy 20 billion uh back in back in shares along with that they continued to grow the dividend.

Um From Exxon's perspective, we think that based on their production and their capital allocation framework, low double digits to mid teens type of a total return is our is our expectation for stock there.

Brian comparing that to what you're seeing play out at Chevron because we had some commentary from Ceo Mike Werth this morning.

He remained very confident in the Hes deal, but when you take a look at the timeline of that, now it's pushed out here to the third quarter of 2025.

Uh What what does that ultimately then do, how much pressure maybe could that potentially put on Chevron's business or, or challenge its ability to compete here with Exxon at least over the coming quarters?

Yeah, I it is a really big uh overhang for the for the Chevron stock.

Um He obviously is a very material um transaction and not only that, but with hes, they're trying to pick up another big growth engine that being Guyana and just the uncertainty of what ultimately happens with that um until that arbitration hearing happens um a little less than a year from now, but the next May is, is, is a long time um for Chevron to be dealing with the the he transaction, I I think from a business perspective, they're best just to keep their head down.

Um by through um and, and execute on their existing business um and try to put the, put the has acquisition, you know, aside as they focus on that and then obviously deal with it when it comes around next May.

Uh Right before you came on, Shawna smartly pointed out that uh Chevron talked about moving its headquarters from um to Texas from California.

Uh talk to me about how you kind of view that move.

And again, what it could mean for Chevron, the stock moving forward.

Yeah, I it's probably a long time coming.

Um frankly, they, they did remain in uh Maine in California.

Um for a long period, they have, they have gradually been building their an office in, in, in Houston.

In fact, I think today the Houston office section has more employees than their, than their Northern California office.

So it's probably probably not any big surprise um that, that they're making the move.

Um nearly most of the larger energy companies now are, are headquartered in, in Texas.

Um So, so no surprise and II, I generally think that that that'll be perceived pretty favorably um from the investment community and uh and investors making that move.

All right.

Well, as you're looking at across your screen, still some negativity today, but uh interesting points moving forward there.

Thank you so much, Brian for joining us again.

That was Brian Casson, senior portfolio manager and managing director at Tortoise Capital Advisors coming up here, we'll continue to monitor the market action that we are seeing on the heels of that jobs report, you're still looking at moves to the downside.

The S and P down about 2.5% of the NASDAQ down over 3%.

Stay tuned for more on that.

You're watching Catalysts Stock still moving to the downside here.

The dow falling over 700 point, you've got the S and P 500 down nearly 2.5% and the NASDAQ down nearly 3% here.

The NASDAQ 100 heading towards its worst month of the year.

Also taking a look at the V of all the, the index here.

We also see a spike in volatile after a record run of a lack of volatility given some of the macroeconomic data we've seen and the tech earnings that we have seen over the past couple of weeks here, all this coming after of course, that weaker than expected jobs report joining us in studio to discuss we got and the head of a active equity at all spring global investments.

And thank you so much for coming in studio with us.

So we're obviously seeing a negative reaction off of that, off of that jobs print.

I I just wanna get a sense of how you're viewing today's market action and the longevity that you think it's going to hold over this market.

Well, certainly we believe that volatility would increase because you have, you know, we're later into the election year cycle.

Um There was a lot of question mark about is the fed going to lower when they're gonna lower, how much they're gonna lower that's in play.

And we're also seeing if you just look at the micro environment and company fundamentals, some deceleration of growth, um particularly of those companies that really have been holding a high, um the high threshold for growth and so volatility.

We see it today.

A lot of people get a little frightened when they see things like this.

It can be a good thing to let some steam off because the market was pricing in perfection.

And it was pretty clear that, you know, even the attempt at a soft landing isn't easy.

So what does that tell us then about the downside pressure ahead?

Because I think that's the big question.

At least when you take a look at some of those tech names, they had been under severe amount of selling pressure here this week.

It's been pretty volatile here when you take a look at some of the a leader or had been a former leaders within that space.

Do you see more selling ahead before we see a return in that momentum?

I think we're gonna see a kind of a mixed bag.

You know, this has kind of been one of the most interesting quarters when you look at company fundamentals, I think the average stock move when companies report has been 5% which is pretty dramatic relative to what we've seen over time.

And so I think the market will continue to react to fundamentals both good and bad.

But when you see bad news, it's going to be bad news.

Um instead of, you know, bad news being good news, particularly as it relates to items within the economy, you know, when you see weakness, there is real fear that um the next risk isn't an inflation spike.

It's that we're closer to a recession and it just changes so quickly that narrative to your exact point, if we've gotten this unemployment print a year ago, it would have been.

Yeah, the fed is going to cut.

Having said that I want to pull up the Russell 2000 because it is under pressure alongside the other major indices today.

I believe it is down over 3% here in the morning trade.

You're looking at on your screen right now, the movements that we've seen over the past three months though, having said that, what is your thing on the pressure that we're seeing in small cap specifically?

And do you think we'll get that rotation narrative that we got a taste of coming back in here?

I I still think we'll see the broadening out of the market and we have been signaling to investors.

It was time to kind of think away from just the pure concentration and look a little bit more down cap part of the reason that we are seeing that is again, when you look at company fundamentals, people think about small cap and the also 2000 as the 40% of non profitable companies, but there's a lot 60% plus that are profitable, that have good growth and even more than that in the mid cap space.

And so underlying what you see, there are some really good co companies that we're trading at huge discounts to the rest of the market.

Um Even, you know, you all talk about this a lot, but those top 57 names in the multiples versus the, you know, the average um multiple the market versus the equally weighted multiple the market.

There's big, big differences and we believe that that would start to squeeze.

Now, the real question I think from this point is if those larger names continue to compress, can you get the smaller names to rise?

And I think that's a little bit more difficult as the market kind of, you know, struggles through this.

So we're focused on quality companies and making sure that investors are staying invested.

But, but staying invested in companies that can live through could be a much choppier cycle you mentioned uh earlier there and just about volatility increasing here, especially as we had uh i into the election cycle and election season.

I I guess what would your advice for investors be in order, what that strategy maybe should look like surrounding the chances of higher volatility.

It's a, it's a great question and one that we get asked all the time and I think the natural tendency of an investor is like, gosh, I gotta be right on my timing getting in and I gotta be right on my timing, getting out.

Well, I can tell you even professional investors are not experts at timing.

And so, um what I've learned over my career is the compounding impact of staying invested in the equity markets is really, really important.

And so again, just picking the area that you want to be invested in and at this point in the cycle making sure you're invested in quality, right?

And so instead of playing the interest rate rate trade where you go, ok, I think small caps are gonna rally, but that means I'm gonna go toward the most levered name.

We haven't been playing that game.

We're, we're playing the, we think the market could broaden out, but let's stay with quality because the macro world is pretty uncertain.

All right, and Mileti great advice there for uh all of our viewers watching right now.

We really appreciate you taking the time to join us here, especially on such a uh active volatile day here for the market this morning.

All right, head of active equity at all spring global investments.

Thank you, man.

Coming up new policies, protecting home buyers and sellers coming into effect later.

This month, we're gonna have the details for you.

What you need to know.

On the other side, big changes are coming to the housing market, new real estate policies that are aimed to protect home buyers and sellers are coming into effect later this month.

This comes after the National Association of Realtors settled a class action lawsuit earlier this spring for more on what buyers and sellers need to know.

We've got Yahoo finance and senior legal reporter Alexis Kenan Alexis, thanks for joining us on this.

So you know what exactly is happening here and, and, and how does it impact folks are looking, get into the market?

Ok.

So this is really consequential, this court decision and it's going to usher in a really new era of home buying and selling for buyers, sellers, agents.

And uh it's starting on August 17th.

So there's just a couple of weeks that we want to give our viewers and our readers a chance to be ready for what to come and know their rights when it's time to buy or sell a home.

So everybody's going to feel the impact of this monster decision.

It came out of a jury in Missouri and it ended in a settlement.

So this is how it goes, it really shifts the negotiating power for agent commissions.

These are the commissions that are paid to real estate agents on most home sales across the country.

It's going to shift it away from the agents and put it in the hands of buyers and arguably sellers too.

Now, the expectation is that this is not only going to drive down real estate commissions but also maybe home prices.

That was part of the argument, this is an trust case.

So the sellers here, a class of sellers were saying that this whole scheme was pushing up for decades.

The prices of homes across the country also possibly real estate services may become more of an A la carte offering here.

So what buyers and sellers need to know about these changes that if their home is listed on the MLS and that's about 90% of all homes sold in the US.

The seller agent is no longer going to be able to offer a commission to any other agents.

The buyer, it used to be that they'd offer a split there on the MLS.

They can't do that.

And instead they're going to have to have buyers, agents are going to have to enter into a contract, telling their clients exactly what they're going to pay.

So that gives buyers a lot of negotiating power.

The effect here is it really moves these negotiations out of the hands of agent to agent and puts it in the hands of buyers and sellers.

Now, these new rules don't apply to every real estate agent but a majority.

And the reason is because it replies to realtors and realtors are members of the National association of realtors.

That's who was one of the major defendants in this case.

And there are about 1.5 million real estate agents in the country.

1.4 of them, 1.4 million are realtors.

So it's the lion's share of these folks.

So it is absolutely going to change the way that homes are sold, possibly pushed on home prices.

But that is yet to be seen.

It's going to be a whole new era way of doing business in the real estate, uh residential market.

It's a great breakdown and you can catch uh Alexis's article coming up here on Yahoo finance.com.

Alexis.

Thanks so much for bringing that down for us.

We'll keep right here on Yahoo Finance again.

A sell off under way here on the heels of that weaker than expected jobs.

Sprint coming up next.

We've got wealth.

It's dedicated to all of your personal finance needs.

Brad Smith is in the driver's seat.

He's got you for the next hour.

We'll see you on Monday.

Have a good weekend.