Markets Rebound as Treasury Moves to Rein In Yields | The Close 8/19/2026

>> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS THE CLOSE. >> THE FIGHT OVER ACCESS TO CAPITAL. I'M ROMAINE BOSTICK. >> KICKING OFF TO THE CLOSING BELL, MARKETS STAGING THE REBOUND AFTER THE TREASURY ANNOUNCED PLANS TO BUY BACK LOWER DATED BONDS. YIELDS HIT ALL-TIME HIGHS. THE S&P INCHING HIGHER BY 0.3%, CHIPS ARE THE BIGGEST LOSERS DOWN BY 2%. WE HAVE THE DOLLAR HITTING ITS LOWEST IN THREE MONTHS. >> SCOTT BESSENT NINE MONTHS AGO FAMOUSLY SAID IT IS HIS JOB TO BE THE NATION'S TOP BOND SALESMAN AND TREASURY YIELDS WOULD BE THE BAROMETER. HE HAS STRUGGLED QUITE A BIT. WHEN HE GAVE THE SPEECH TO A CONFERENCE IN NOVEMBER, 20 AND 30 YEAR YIELDS WERE BELOW 4.7. NOW THEY ARE 5.2 AND WOULD BE HIGHER IF NOT FOR SCOTT BESSENT TRYING TO LIFT THE CAP ON HIS AGENCIES BUYBACKS FOR LONGER DATA AND NOMINAL COUPON SECURITIES. >> THE MARKET REACTION SUGGESTS THIS IS AN IMPORTANT TACTICAL MOVE ON THE TREASURY. A LITTLE UNEXPECTED SO YOU ARE PROBABLY GETTING AN OUTSIZED REACTION RIGHT NOW. BUT I DON'T THINK IT CHANGES THE FUNDAMENTALS. BIG FISCAL DEFICIT AND A ON THE SIDELINES, WHICH IS DRIVING LONGER-TERM YIELDS HIGHER. ROMAINE: THE LAST POINT IS KEY BECAUSE MANY TRADERS SEE THIS AS MORE OF A BAND-AID. THE FISCAL DEFICIT, THE TREASURY BORROWING AND LOPSIDED DURATIONS ADDING TO CONCERNS ABOUT INFLATION, PUTTING THE FLOOR UNDER YIELDS THAT WILL TEST SCOTT BESSENT'S ATTEMPT AT A CAP. LOOKING AT LAST MONTH'S FED MEETING, PAY ATTENTION TO THE TONE OF THE FOMC POLICY MAKERS. GOVERNMENT BONDS OCCUPY A SMALLER PLACE IN PORTFOLIOS THAN A DECADE AGO. PRIVATE ASSETS NOW 40 OF THE 6040 PORTFOLIO. HYPERSCALERS CONTINUING TO FLOOD THE MARKET WITH RECORD ISSUANCE. ISABELLE: A FLOOD OF RECORDS AND I WANT TO BRING YOU TO THIS CHART. THE WHITE LINE IS CORPORATE YIELDS WHICH STAYED ELEVATED. THE BLUE LINE IS LONGER DATED INVESTMENT GRADE BOND ISSUANCE MATURING IN 15 YEARS OR MORE. WHAT IS THE TAKE AWAY? IS THE AI BOOM CREATING COMPETITION? TECH COMPANIES ARE BORROWING TO CREATE AI BUILDOUT CREATING OPPORTUNITIES IN THE BOND MARKET. TECH ACCOUNTS FOR 40% OF YOU -- U.S. IG ISSUANCE. INVESTORS HAVE A CHOICE, TAKE THE EQUITY RISK OR LOCK IN HIGH YIELDS FOR THE SAME AI BOOM. ROMAINE: LET'S KICK THINGS OFF WITH THE HEAD OF INVESTMENT STRATEGY AT J.P. MORGAN. YOU KNOW A LOT ABOUT THIS. YOU TALKED ABOUT AI INFRASTRUCTURE FINANCING AND HOW MUCH IS COMING FROM PRIVATE MARKET. BOTH ARE SHARING THE BURDEN. WHEN IT COMES TO HOW IT IS RECEIVED, IS THE ACTIVITY IN THE PRIVATE MARKET MORE REPRESENTATIVE OF DEMAND FOR AI FINANCING AS OPPOSED TO THE PUBLIC SPACE? >> I THINK WHEN WE TAKE A STEP BACK TO THINK ABOUT WHY THERE IS THIS AMOUNT OF ISSUANCE IN PUBLIC OR PRIVATE MARKET, IT IS BECAUSE WE ARE STILL IN A TIME WHEN WE ARE TRYING TO SOLVE FOR THE BOTTLENECKS ON INFRASTRUCTURE, THE POWER OR COMPUTE SIDE. THE WAY TO INVEST IS, PEOPLE ARE TRYING TO RAISE CAPITAL THROUGH DEBT MARKETS. IN TERMS OF THE NEXT FIVE YEARS, WE THINK A LOT OF THAT ISSUANCE WILL COME FROM PRIVATE CAPITAL. 25% OF THE MULTIPLE TRILLIONS OF DOLLARS WE EXPECT OVER THE NEXT FIVE YEARS WILL BE FROM PRIVATE CAPITAL. THE TENSION TAKING PLACE RIGHT NOW IS NOT THAT THERE IS NOT DEMAND. BIDS ARE CONTINUING BUT IT'S WHETHER I'M COMPENSATED FOR THE RISKS. WHAT DO I MEAN? FOR THE MOST PART THERE IS A LOT OF INFRASTRUCTURE ORIENTED FUNDS INVESTING WITHIN DATA CENTERS TODAY AND GETTING THE BID FOR A LOT OF THOSE LOANS AND THE ISSUANCE ON THE EQUITY OR DEBT SIDE. THE DIFFICULTY WE COME BACK TO FROM AN INVESTMENT PERSPECTIVE, AM I GETTING PAID FOR TECH OBSOLESCENCE RISK? IS INFRASTRUCTURE ORIENTED RETURNS WITHIN THE DATA CENTER SPACE, HIGH SINGLE DIGITS ARE LOW DOUBLE DIGITS, IS IT ENOUGH TO COMPENSATE FOR THE FACT THAT MAY BE THESE DATA CENTERS DEPENDING ON WHERE THEY ARE BUILT AND WHERE THEY ARE ON THE VALUE CHAIN, IS THAT COMPENSATING FOR THE RISK? THAT IS THE QUESTION. ROMAINE: CAN THE PUBLIC MARKETS YOU SEE THAT PLAY OUT PARTICULARLY WITHIN ISSUANCE FROM COREWEAVE OR SOME TYPE OF ISSUANCE FROM THE NEO-CLOUD OR SOMEBODY THAT DOESN'T HAVE THE CLOUT THAT ALPHABET OR NVIDIA WOULD. I ASSUME THAT IS PLAYING OUT IN THE PRIVATE SECTOR. SITARA: THE SPREADS ARE THERE. ROMAINE: DO YOU THINK WE WILL SEE THOSE SPREADS WIDE NOW MORE? ARE WE GETTING CLOSE TO EQUILIBRIUM? SITARA: I THINK WE WILL CONTINUE TO SEE THE SPREADS REFLECT THE RISK EMBEDDED IN ANY INVESTMENT RELATED TO AI. WE SEE THAT WITH INFRASTRUCTURE. THE OTHER WAY TO THINK ABOUT IT, THE TENSION MARKETS ARE TRYING TO DIGEST IS TWO DIFFERENT TRADES GETTING PRICED AT THE SAME TIME. IT IS WHETHER OR NOT THE INFRASTRUCTURE PLAYERS ARE STARTING TO SEE, WHETHER OR NOT THE CASH FLOW BURNED IT TAKES TO BUILD THE INFRASTRUCTURE, COMPUTE AND DATA CENTERS AND CHIPS, WHETHER THE PAYOUT WILL END UP COMING ON THE APPLICATION SIDE. WE ARE BUILDING ALL OF THIS. HYPERSCALERS, PUBLIC AND PRIVATE MARKETS ARE BUILDING AND STRUCTURE IN THE HOPE -- INFRASTRUCTURE IN THE HOPE AI WILL BECOME A PLATFORM THAT MOVES BEYOND THE TECH SECTOR IN TERMS OF ROI IMPACT AND WILL MOVE TO THE SERVICE BUSINESS. YOU SEE MARKETS TRY TO PRICE THAT. ISABELLE: WHAT ABOUT PRIVATE MARKETS? YOU SAY THERE IS STRATEGIC NECESSITY. ARE INVESTORS BEING PUSHED TOWARDS IT BECAUSE PUBLIC MARKET VALUATIONS ARE TOO HIGH? SITARA: MY FAVORITE QUESTION. THERE ARE TWO THINGS THAT A LOT OF ACTIVITY SO FAR THIS YEAR, IN TERMS OF THE LONG END OF THE YIELD CURVE IN TODAY'S PRICE ACTION AND MORE BROADLY. THE MARKET IS TRYING TO FIGURE OUT WHAT THE NEXT PHASE OF ARTIFICIAL INTELLIGENCE WILL BE AND THE ULTIMATE IMPACT OF GEOPOLITICAL FRAGMENTATION, WHAT THAT MEANS FOR SUPPLY SHOCKS TO INFLATION AND STOCK BOND CORRELATIONS. WHEN INFLATION VOLATILITY IS HIGHER, STOCKS AND BONDS MOVE IN THE SAME DIRECTION. WE SAY PRIVATE MARKETS ARE A STRATEGIC NECESSITY, THEY FILL TWO BUCKETS. IT IS TRYING TO ACCESS ALPHA RETURN DRIVERS BEYOND U.S. MEGA CAP TECH. THAT HAS DOMINATED PUBLIC MARKET PERFORMANCE OF THE PAST THREE YEARS. PRIVATE EQUITY AND BUYOUT, THAT IS SECONDARIES AND VC AND GROWTH IN TERMS OF LEGGING INTO THE NEXGEN DISRUPTORS. IT IS ALSO DIVERSIFIED THE DIVERSIFIERS. THE 40 PART OF YOUR PORTFOLIO USED TO BE I'M TRYING TO FIND YIELD AND CARRY WHEN RATES WERE LOW. RATES ARE NOT LOW. WHERE CAN I GET YIELD THAT WILL SURVIVE AFTER INFLATION VOLATILITY? THAT IS WHERE REAL ESTATE COMES INTO PLAY, INFRASTRUCTURE COMES INTO PLAY. AND WHERE NONDIRECTIONAL HEDGE FUNDS, DESPITE JULY'S PERFORMANCE, IT HAS BEEN A STRONG YEAR FOR HEDGE FUNDS IN TERMS OF PROVIDING LESS CORRELATED RETURNS WHERE YOU CAN GET ALPHA GENERATION WITHOUT SACRIFICING VOLATILITY BENEFITS. ROMAINE: GREAT STUFF, SITARA. GOT TO LEAVE IT THERE. KICKING US OFF TO THE CLOSE ON WEDNESDAY AFTERNOON. A LOOK AT ONE OF THE BIGGEST MOVERS OF THE DAY, ESTEE LAUDER, A TURNAROUND STARTING TO TAKE ROOT. WE WILL HAVE AN INTERVIEW WITH THE CEO TO FIND OUT WHAT HE SEES AS THE NEXT LEG UP. ISABELLE: FROM BEAUTY TO BONDS. THE TWISTS AND TURNS IN THE TREASURY MARKET WITH THE CO-CIO OF PROPUBLICA AND PRIVATE -- PROPUBLICA AND PRIVATE -- ROMAINE: ROZ BREWER ON HER STORIED CAREER. ALL OF THAT IS NEXT ON THE CLOSE. . THIS IS BLOOMBERG. ISABELLE: LET'S CHECK THE AI SPENDING BOOM THROUGH THE LENS OF FINANCIAL TECHNOLOGY. OUR NEXT GUEST'S PLATFORM IS BRIGHT -- BUILDING INFRASTRUCTURE TO MANAGE AI SPEND, WORKING WITH AI MODELS. I'M PLEASED TO SAY JOINING US LIVE IS ERIC. THANKS FOR JOINING US. AI SPENDING IS UP. OUR COMPANY'S GETTING A RETURN ON THAT SPENDER DO YOU THINK THEY ARE AFRAID OF FALLING BEHIND? >> WHAT YOU SAID BEARS REPEATING. OVER THE LAST 12 MONTHS COMPANIES ARE SPENDING NEARLY 21 TIMES MORE ON -- AND NEVER IN HISTORY HAS SOMETHING GROWN SO QUICKLY. PART OF THE REASON FOR THE GROWTH IN SPEND IS THERE ARE MOMENTS WHEN YOU PLUG-IN AI AND IT IS EXTRAORDINARY RETURNS. THE FEAR BUSINESSES HAVE ARE, ARE THE EMPLOYEES TOKENMAXXING? MAYBE THEY SPEND $15 WHEN THEY COULD HAVE SPENT $.15. WHAT RAMP ROUTER IS AIMED TO DO IS HELP COMPANIES NOT WORRY ABOUT THAT. COMPANIES ARE SAVING 40% ON DAY-TO-DAY QUERIES. ISABELLE: YOU RAISED MONEY AT $44 BILLION VALUATION. WHAT DOES RAMP NEED TO DO TO JUSTIFY THE VALUE? STEPHANE: OUR CUSTOMERS -- >> OUR CUSTOMERS ARE SEEING VALUE. WE LAUNCHED THE BUSINESS SEVEN YEARS AGO AND 3% OF CORPORATE CARD TRANSACTIONS IN THE U.S. IN ONE OF -- AND 1% OF CORPORATE TRANSACTIONS IS GOING THROUGH RAMP. IT COMES BACK TO WHAT ARE WE DELIVERING FOR CUSTOMERS? LAST MONTH WAS THE FIRST MONTH WE HELPED OUR BUSINESSES SPEND $1 BILLION LESS THAN THEY WOULD HAVE. FOR BUSINESSES, THEY CAN I THINK IF WE CAN KEEP HELPING CUSTOMERS SAVE, INVESTORS WILL CONTINUE TO BE VERY EXCITED. ROMAINE: THERE IS TALK ABOUT A POTENTIAL IPO UP AHEAD. I HAVE TO ASK YOU ABOUT THE $13 BILLION VALUATION. ERIC: IT IS REALLY JUST THE CORE OF IT. WE ARE GENERATING MULTIPLE BILLION DOLLARS A YEAR IN REVENUE, MEANINGFULLY LARGER THAN THE PLAYERS YOU PROVIDED. AND WE ARE GROWING FASTER, OVER 100% PER YEAR, AND THAT RATE OF GROWTH HAS ACCELERATED LAST YEAR AND THE YEAR BEFORE. IT IS UNUSUAL TO SEE THAT LEVEL OF GROWTH AT THIS SCALE, AND AS FAST AS WE ARE GOING, THERE ARE BUSINESSES THAT ARE LARGER. AMERICAN EXPRESS IS A $230 BILLION COMPANY. JPMORGAN CHASE IS NEARLY A TRILLION DOLLAR COMPANY. SO IT IS VERY SMALL FOR THE VALUE WE THINK WE CAN BRING TO CUSTOMERS. ROMAINE: YOU ARE KIND OF ONE OF THE FEW INDEPENDENT AT SCALE PLAYERS IN THIS SPACE. I GUESS IT RAISES THE QUESTION AS TO WHETHER YOU WILL STAY INDEPENDENT GIVEN YOU SOLD YOUR LAST COMPANY TO CAPITAL ONE, CAPITAL ONE JUST BOUGHT BRACTS, YOU KNOW THERE IS A LOT OF SPECULATION. WHAT IS YOUR NEXT STEP? ERIC: I THINK IN A WORLD WHERE COMPUTERS CAN THINK BUSINESSES ARE OUT THERE THINKING WHY AM I BEING BILLED FOR BY HAND, AND BEING ABLE TO GO WITH A COMPANY LIKE RAMP, WHICH IS COMMITTED TO BEING INDEPENDENT, MEANS THAT BUSINESSES CAN KNOW THAT PIECE OF INNOVATION IS NOT GOING TO BE SLOWED DOWN BY M&A THE WAY THIS IS HAPPENING WITH OTHER COMPANIES. DO WE CONTINUE TO DELIVER FOR CUSTOMERS? I THINK ROUTE 2.COM IS ANOTHER GOOD EXAMPLE OF THIS. ISABELLE: ARE CFOS OR CO-CEOS CEOS BECOMING MORE WORRIED ABOUT THE BILLIONS INVESTED WHEN IT COMES TO AI, OR ARE THEY REALLY WILLING TO SPEND WHATEVER IT TAKES? ERIC: FOR CFOS, IT HAS BEEN A DEEP AREA OF EXCITEMENT BUT ALSO A BIT OF A NIGHTMARE. WHEN YOU THINK ABOUT IT, IT WOULD BE UNREASONABLE TO OPERATE A BUSINESS TODAY WITHOUT THE SOFTWARE TO RUN YOUR PAYROLL. IT WOULD BE UNREASONABLE TO RUN WITHOUT A SOFTWARE LIKE RAMP TO PAY YOUR VENDORS. THERE IS THIS MAJOR THIRD CATEGORY OF SPEND, AI AND MERGING. BASIC THINGS LIKE ACCOUNTING, YOU GET A BILL FOR $300,000 WITH NO LINE ITEMS. IT IS HARD TO SPLIT UP BY DEPARTMENT AND LOCATION APART -- AND PART OF WHAT RAMP IS ABLE TO DO THROUGH OUR PRODUCTS IS MAKE THE ACCOUNTING FOR THAT EASY, BEING ABLE TO DELINEATE WHERE IS RETURN ON INVESTMENT. AND TOOLS LIKE ROUTER.COM HELP CEOS AUTOMATICALLY ROUTE TO THE RIGHT MODEL FOR THE RIGHT TASK. WHEN YOU NEED THE MOST ADVANCED MODEL, WE DIDN'T ROUTE 2 IT, BUT WHEN YOU NEED A SIMPLER MODEL AT A FRACTION OF THE COST, WE WILL DO THAT TOO. ROMAINE: ERIC, THANK YOU. WHEN WE COME BACK, WE ARE GOING TO TALK ABOUT TARGET. IT SHARES UP ABOUT 5% ON THE BACK OF THE RETAILERS LATEST EARNINGS. SOME EVIDENCE OF THE LONG TIME SALES SLUMP? THIS IS THE CLOSE ON BLOOMBERG. ♪ ROMAINE: TIME FOR OUR TOP CALLS. WE START TODAY WITH CORSAIR GAMING. GOLDMAN SACHS DOWNGRADING IT, CALLING IT SOFTWARE FOR HOBBYISTS THAT ARE FACING A LARGE MAGNITUDE OF NEAR-TERM HEADWINDS FROM ELEVATED PC COSTS AND PRESSURE ON CONSUMER DISCRETIONARY SPEND. THOSE SHARES SLIDING FOR A FOURTH STRAIGHT DAY. NEXT UP, KLARNA. INVESTOR SENTIMENT HURDLES. POPSICLES RAN OPERATIONS AND SENTIMENT REQUIRE MULTIPLE QUARTERS OF CLEAN EXECUTION TO STAVE OFF INVESTOR FEARS. THOSE SHARES, WHICH FELL 23% YESTERDAY, DECLINING FURTHER TODAY. FINALLY, DOLLAR TREE. TRAFFIC TRENDS IMPROVE. THE FIRM ALSO TAKING ITS PRICE TARGET TO 135 FROM 85, WITH JEFFERS SAYING IT DOES NOT EXPECT FURTHER NOTABLE SHARE LOSS. THE SHARES NOT LOSING ANYTHING TODAY. THEY ARE UP TO THEIR HIGHEST LEVEL TODAY SINCE FEBRUARY. THAT BRINGS US TO TARGET, ANOTHER BEHEMOTH IN THE REAL TERROR SPACE. THOSE SHARES HAVING THEIR BEST DAYS SINCE MARCH. SALES OUTLOOK BOOSTED AS A COMEBACK BEGINS TO TAKE HOLD. MICHAEL BAKER IS MANAGING DIRECTOR AND SENIOR RESEARCH ANALYST AT DA DAVIDSON. HE'S GOT A BUY RATING. PUTTING THIS QUARTER AGAINST THE LAST COUPLE OF QUARTERS, IS THIS A TURNAROUND? >> IT HAS BEEN TWO QUARTERS IN A ROW OF BETTER SALES, BETTER MARGINS. IT IS CLEAR THAT SINCE MICHAEL TOOK OVER IN EARLY FEBRUARY, THEY HAVE GOTTEN BACK STRENGTH, REALLY LEANING INTO WHAT TARGET IS KNOWN FOR, WHICH IS STYLE, CREATIVITY, VALUE, AND BEEN NEGLECTING AN EXCITING THE CUSTOMER. WE THINK WE ARE SEEING THAT IN -- REALLY EXCITING THE CUSTOMER. WE THINK WE ARE SEEING THAT IN REAL TIME. ROMAINE: FOR THE LONGEST TIME, THE THOUGHT WAS THEY DID NOT HAVE THE GROCERIES, CONSUMER STAPLES AND THE LIKE THAT SEEMED LIKE THE HALLMARK FOR WALMART. IS THERE A DIFFERENCE BETWEEN THE DISCRETIONARY ITEMS AND THE NECESSITIES, IF YOU WILL? MICHAEL: TARGET WILL ALWAYS LEAN INTO THE MORE DISCRETIONARY PART OF THE MIX, AND THAT IS WHAT THEY ARE KNOWN FOR. THEY ARE NEVER GOING TO BEAT WALMART ON THE GROCERY. THEY HAVE BEEN INVESTING IN FOOD, THOUGH, AND TRANSFORMING THEIR MIX WITHIN FOOD TO ADD MORE HIGHER END SNACKS AND INTERESTING THINGS LIKE THAT. BUT REALLY, TARGET IS A DIFFERENT SHOPPING TRIP, A DIFFERENT CUSTOMER. IT IS MUCH MORE ABOUT DISCRETIONARY SALES. THEY LOST THEIR WAY IN THAT A LITTLE BIT. THE MERCHANDISE IS NOT AS COOL AS IT ONCE WAS. THE CEO HAS REALLY FOCUSED THE TEAM BACK ON THAT. THEY HAVE RENAMED THEIR HARDLINE BUSINESS TO FUN 10 ONE. THAT SAYS IT ALL RIGHT THERE. THEY ARE LEANING INTO WHAT MADE TARGET IN THE PAST. WE THINK THERE IS ROOM TO GROW. THEY ARE NEVER GOING TO BECOME A GROCERY STORE. THAT IS NOT WHAT THEY ARE ALL ABOUT. LEAVE THAT TO SOMEBODY ELSE. ISABELLE: THAT CAUGHT MY EYE AS WELL, AND IT IS UP AROUND 11%. I WANT TO GO TO TRAFFIC, WHICH IS UP 3.6%. IS TARGET WINNING CUSTOMERS BACK, OR ARE YOU SEEING CAUTION, ESPECIALLY WITH INFLATION INCREASING? MICHAEL: TRAFFIC IS UP. THAT TELLS US THEY ARE WINNING BACK CUSTOMERS. WE ARE SEEING IT AGAIN IN A LOT OF DISCRETIONARY TIME PERIODS. I THINK A GREAT EXAMPLE OF THAT WAS LEGOS, UP 30%. THEY ARE SEEING GREAT GROWTH BECAUSE THEY ARE ADDING TO WHAT CUSTOMERS WANT. WE DO THINK THEY ARE PUTTING BACK CUSTOMERS. THE CONSUMER QUESTION IS HOW WAS THE CONSUMER -- WE SAW THE RETAIL SALES NUMBER LAST WEEK, BUT I THINK IT WAS NOT AS BAD AS IT LOOKED IN TERMS OF THE RETAIL SALES ON FRIDAY. THE WAY IT WAS REPORTED WAS ON A SEASONALLY ADJUSTED SEQUENCE WILL CHANGE, AND ON THAT BASIS IT WAS DOWN AND DID THIS. BUT WHEN YOU LOOK AT A NONSEASONALLY ADJUSTED ON A YEAR-OVER-YEAR BASIS, BECAUSE THAT IS THE WAY RETAILERS LOOK AT IT, WHEN YOU LOOK AT IT NONSEASONALLY ADJUSTED YEAR-OVER-YEAR, JULY WAS A REALLY GOOD MONTH FOR RETAIL SALES, AND WE HAVE SEEN STRENGTH ALL YEAR. THE CONSUMER, YOU GIVE THEM WHAT THEY WANT, THEY ARE SPENDING. ISABELLE: YOU ARE GUIDING TO 5% SALES GROWTH FOR THE YEAR. WHAT WOULD HAVE TO GO RIGHT FOR TARGET TO BEAT THAT OUTLOOK? MICHAEL: 36% IN THE FIRST HALF, SO WE THINK 5% FOR THE FULL YEAR IS PRUDENT. WE THINK IT MAKES SENSE TO BE PRUDENT. THERE IS STILL A LOT TO GO. BUT I THINK THE WAY THEY WILL BEAT THAT IS BY CONTINUING TO REVAMP THE MERCHANDISE IN AREAS THAT THEY HAVE NOT YET. THEY HAVE DONE A LOT OF CHANGES, AND THOSE WILL CONTINUE IN THE BACK HALF, BUT THERE ARE STILL A LOT OF AREAS THEY HAVE NOT TOUCHED. KEEP DOING THAT AND WE THINK THEY CAN BEAT ON THE TOP LINE. ROMAINE: MICHAEL, ALWAYS APPRECIATE IT. A CLOSER LOOK AT THE SHARES OF TARGET, UP MORE THAN 5% ON THE DAY ON THE BACK OF THOSE EARNINGS. WE ALSO KEEP IN I ON THE BROADER MARKETS. THE S&P UP ABOUT 0.3%. THE GAINS RELATIVELY MODEST, BUT ALL THE TALK RIGHT NOW IT'S ABOUT WHAT WE ARE SEEING IN THE TREASURY SPACE AND WHETHER THIS DROP WE ARE SEEING IN LONG-TERM YIELDS HOLDS BE ON. ISABELLE: THERE IS A SAYING THAT THE BOND MARKET IS SUPPOSED TO BE QUIET AND IT IS A BIG DEAL WHEN IT IS NOT, AND NOW IT IS DEFINITELY NOT QUIET. ROMAINE: THAT MIGHT BE THE UNDERSTATEMENT OF THE DAY. WHEN WE COME BACK, WE WILL ACTUALLY GO BACK TO THE REGIONAL SPACE. BEAUTY PRODUCTS. THE CEO OF ESTEE LAUDER IS GOING TO BE JOINING US. ♪ ROMAINE: 3:30 P.M. IN NEW YORK, THIS IS THE COUNTDOWN TO THE CLOSE. TAKING A CLOSER LOOK, ONE OF THE BIGGEST MOVING STOCKS IS ESTEE LAUDER AFTER THE COMPANY'S RECENT EARNINGS REPORT, A TURNAROUND WITH THE OWNER OF BRANDS LIKE CLINIQUE, UNDER CEO STEPHANE DE LA FAVERIE. GREAT TO HAVE YOU HERE. YOU TOOK OVER ALMOST TWO YEARS AGO AT THE START OF 2025. THERE WERE QUESTIONS AS TO HOW YOU COULD GET THE COMPANY BACK ONTO A PATH OF ORGANIC REVENUE GROWTH. FOUR STRAIGHT QUARTERS OF ORGANIC GROWTH WITH REGARD TO NET SALES. 6% OF THE RECENT QUARTER. YOUR GUIDANCE FOR THE NEXT FISCAL YEAR IS 3-5%. DO YOU HAVE CONFIDENCE YOU WILL MEET THAT? STEPHANE: ABSOLUTELY. WE ARE -- WE MADE A PROMISE. TODAY I'M HAPPY TO REPORT PROMISE MADE COME A PROMISE KEPT. WE ARE REIGNITING GROWTH, ACCELERATING INNOVATION, EXPANDING MARGIN, AND REALLY INVESTING IN CONSUMER ACQUISITIONS. WE ARE HAVING GREAT MOMENTUM INTO FISCAL 26. FOUR CONSECUTIVE QUARTERS OF GROWTH, THE STRONGEST WAS THE LAST ONE, OVER 5% GROWTH. THAT GIVES US GOOD MOMENTUM WITH THE PLAYBOOK. WE HAVE THE RIGHT BRANDS, THE RIGHT TEAM, AND ARE READY TO ACCELERATE. ROMAINE: THERE ARE CONCERNS DESPITE THE BIG MOVE IN THE SHARE PRICE, ABOUT INVESTORS ABOUT MOMENTUM GOING FORWARD. WHEN I LOOK AT THE GUIDANCE FOR THE FULL YEAR, THE 3-5%, IF YOU HIT THE LOW END OF THAT RANGE THAT IS NOT AN ACCELERATION IN GROWTH. I'M SURE YOU ARE AWARE. THE QUESTION, ARE YOU LOWBALLING THIS SO YOU CAN MANAGE EXPECTATIONS? STEPHANE: IN FISCAL 26 WE HAD GUIDANCE 0-3. WE HAVE THE TOP AND. AS OUR OBJECTIVE, THE PRESTIGE BEAUTY MARKET IS ACCELERATING AND WE WANT TO TAKE THE OPPORTUNITY AND WE HAVE A SLATE OF NEW INNOVATION COMING TO MARKET. MY AMBITION IS ALWAYS TO WORK, MINIMUM TO DELIVER THE MINIMUM OF THE GUIDANCE, IF NOT MORE IF WE CAN. WE ARE PUTTING OUR BRAND WHERE THE CONSUMERS ARE TO ACCELERATE. ROMAINE: LET'S TALK ABOUT THOSE CHANNELS. YOU DID A PARTNERSHIP WITH TIKTOK AND AMAZON, A DEPARTURE FOR ESTEE LAUDER. YOU CUT A LOT OF JOBS, PRIMARILY IN THE ONE-ON-ONE DISTRIBUTION SIDE. IS THIS THE FUTURE OF ESTEE LAUDER DISTRIBUTION? STEPHANE: WE ARE ADAPTING OUR DISTRIBUTION, AS THE CONSUMERS ARE EVOLVING. OUR JOB IS TO MEET THE CONSUMER WHERE THEY ARE, IN CHINA, THE U.S., EUROPE. OUR IDEA, THAT IS THE FIRST PILLAR OF BEAUTY REIMAGINED IS TO ACCELERATE EXPANSION WHERE THE GROWTH IS. WE ALWAYS DO IT BY PROTECTING QUALITY AND EXPERIENCE WE BRING WITH OUR CONSUMERS. TODAY WE ARE FEELING WE ARE IN A GOOD PLACE. FROM SOCIAL TO COMMERCE TO DIRECT TO CONSUMERS, OBVIOUSLY THE DEPARTMENT STORES, WE HAVE THE RIGHT DISTRIBUTION CHANNEL THAT ALLOWS US TO CAPTURE BOTH ON RECRUITMENT, BUT ALSO ON RETENTION WITH CONSUMERS ACROSS THE SPECTRUM. ROMAINE: WITH REGARDS TO SOME PARTNERSHIPS, DO GET THE SAME MARGIN? DO YOU HAVE TO SACRIFICE MARGIN IN SOME OF THOSE PARTNERSHIPS AS OPPOSED TO NORMAL RETAIL? STEPHANE: WE WANT NOT ONLY THE DISTRIBUTION TO BE MARGIN CREATIVE, BUT TO BE EQUITY DRIVEN FOR OUR BRAND. THE DECISION WE TOOK, FIRST AND FOREMOST, WILL WE BUILD EQUITY WITH THE BRAND WE HAVE TODAY? TODAY WHAT WE HAVE DONE, YOU MENTIONED AMAZON, TICTAC -- TIKTOK SHOP, WE ARE WORKING WITH PARTNERS TO DEVELOP THE EXPERIENCE AND HARNESS THE EQUITY AND DESIRABILITY OF THE BRAND. I FOLLOW CLOSELY WITH MY TEAM, THE DESIRABILITY RANKING IS ONE THING. MARKET SHARE IS ANOTHER. BRAND EQUITY IS ALWAYS THE FIRST THING WE LOOK AT. WHATEVER MOVE WE DO FROM DISTRIBUTION TO INNOVATION TO CAMPAIGN, THE KEY INDICATOR IS ALWAYS TO CREATE MORE BRAND LOVE WITH THE CONSUMER TO KEEP THEM FOR A LONG TIME. ROMAINE: LET'S TALK ABOUT SKINCARE. FISCAL Q3, THAT WAS FLAT AND REBOUNDED IN Q4. WHAT CHANGED? STEPHANE: THE INNOVATION PIPELINE. IN QUARTER THREE WE HAD A SOFTER INNOVATION PIPELINE. WE RAMPED IT UP AND FINISHED ON A HIGH NOTE, 4% IN SKINCARE FOR QUARTER FOUR. WE HAVE A SLATE OF NEW INNOVATIONS WITH ESTEE LAUDER, CLINIQUE AND THE ORDINARY. AND WE HAVE THE ENTRY PRICE POINT WITH THE ORDINARY. WE HAVE THE MIDDLE, AND PRESTIGE, LA MER GOING AFTER THE LUXURY CONSUMERS. I ALWAYS LOOK AT THE FULL 12 MONTHS OF INNOVATION. NEXT YEAR WE HAVE 200-250 BASIS POINT IMPROVEMENT ON INNOVATION LED BY SKINCARE. YOU MAY HAVE SOME QUARTERS THAT ARE SOFTER, BUT WHEN YOU LOOK AT 12 MONTHS, WE FEEL GOOD ABOUT THE INNOVATION PIPELINE IN THE NEXT FISCAL YEAR. ROMAINE: HOW MUCH OF THAT MIGHT APPLY TO HAIRCARE? THAT WAS DOWN. I WAS SURPRISED BY THAT. IS THAT CYCLICAL OR SOMETHING SECULAR OR SOMETHING YOU ARE DOING? STEPHANE: FOR HAIRCARE WE ARE POSITIONED IN THE RIGHT CHANNEL. FOR A BRAND LIKE AVEDA, WE SEE MOMENTUM IN NORTH AMERICA. WITH THE MOVE WE HAVE DONE WITH AMAZON AND TIKTOK SHOP BUT REPOSITIONING THE BRAND IN THE SALON NETWORK, WE ARE SEEING IMPROVEMENT IN PERFORMANCE. INNOVATION IS ALSO HAIRCARE. WE HAVE INNOVATION ON SKINCARE, MAKEUP AND HAIR CARE. PART OF THE STRATEGY IS THE DIVERSIFICATION OF OUR GROWTH. IT DOESN'T JUST COME FROM CHINA. IT COMES FROM CATEGORY, FROM BRANDS AND FROM THE TYPE OF INNOVATION WE BRING TO MARKETS. YOU WILL ALSO SEE MORE COMING INTO HAIRCARE GOING FORWARD. ROMAINE: THE FRAGRANCE BUSINESS WAS THE STRONGEST ON GROWTH BASIS. IS THIS, SHOULD WE THINK OF ESTEE LAUDER AS A FRAGRANCE COMPANY? IS YOUR GOAL TO HAVE EVERYTHING BALANCED OUT? STEPHANE: DIVERSIFICATION OF GROWTH IN THIS MOMENT, FRAGRANCE IS ONE CATEGORY THAT IS THE FASTEST GROWING. WE HAVE A STRONG PORTFOLIO OF LUXURY BRANDS FROM FORD, JO MAL ONE, KILIAN. WHAT WE ARE DOING IN FISCAL 27 IS ACCELERATING WHAT WE HAVE DONE WITH LUXURY FRAGRANCES THAT ENTERING INTO PRESTIGE FRAGRANCES WHICH IS THE BULK OF THE MARKET. WE STARTED WITH A STRONG START IN THE MARKET LIKE THE U.S., THE U.K. AND EUROPE AND FOR THE FIRST TIME IN OVER A DECADE WE HAVE A STRONG LAUNCH WITH THE ESTEE LAUDER BRAND. AND KILIAN IS LAUNCHING A PRESTIGE LINE SO IT ALLOWS US TO CONTINUE STRONG MOMENTUM INTO 27. WE HAVE HAD ONE OF THE BEST-PERFORMING IN THE MARKET. ROMAINE: GLIMMER IS HALEY STEINFELD'S BRAND. IS THE STRATEGY TO BUILD THINGS UP WITHIN THE ESTEE LAUDER SYSTEM OR TO BUY? I ASK IN CONTEXT, THERE WAS A POTENTIAL TIE UP. WERE YOU IN FAVOR OF THAT DEAL? STEPHANE: IT IS VERY SIMPLE. WE LOOK AT ORGANIC GROWTH INTERNALLY AND THAT IS WHY WE ARE ACCELERATING DIVERSIFICATION WITHIN OUR OWN BRAND. WHEN WE LOOK AT M&A, FIRST, IS IT A GOOD BRAND? IS THERE SOMETHING THAT WILL BE COMPLEMENTARY TO THE PORTFOLIO? FROM JO MALONE TO LE LABO, THEY ARE ALL DIFFERENT. THEY HAVE DIFFERENT DISTRIBUTION AND PRICE POINTS, DIFFERENT BUSINESS MODELS. SO WE MAKE SURE IT IS COMPLEMENTARY. WILL IT ALLOW US TO DIVERSIFY GROWTH? FROM GEOGRAPHY TO A CHANNEL. IS IT AT THE RIGHT PRICE POINT? THAT IS ALWAYS THE RIGHT THING WE ARE DOING. ROMAINE: YOU WALKED AWAY BECAUSE OF PRICE? OK. THE CFO SET ON THE CONFERENCE CALL TODAY, TALKED ABOUT DELEVERAGING AND CAPEX AND DIVIDEND, NO BUYBACK MENTIONED. WHAT ABOUT M&A? THERE WAS NO EXPLICIT TALK ABOUT BUT DO YOU PLAN TO PURSUE OTHER M&A DEALS, ASSUMING THE PRICE IS RIGHT? STEPHANE: WE ALWAYS WILL BE PART OF THE M&A CONVERSATION. ROMAINE: LARGE ONES? STEPHANE: I THINK ONE WE ANNOUNCED RECENTLY, THE LEADING PRESTIGE BRANDON INDIA. I HAVE BEEN CLEAR I WANT TO ACCELERATE IN EMERGING MARKETS. WE SEE GREAT POTENTIAL. AFTER THE WAVE OF K BEAUTY, WE SEE INDIAN BEAUTY GAINING GREAT POTENTIAL. FOR US, IT IS THE NEXT ACQUISITION. WE ARE WAITING FOR REGULATORY APPROVAL TO LAUNCH THE BRAND BUT THAT IS THE TYPE OF ACQUISITION WE ARE LOOKING FOR. ROMAINE: LET'S TALK ABOUT JAPAN, KOREA, CHINA. SIX STRAIGHT QUARTERS OF SHARE GAINS THERE. YOU ARE WELL DIVERSIFIED GEOGRAPHICALLY. DO YOU SEE MORE OPPORTUNITY FROM ASIA TO EXPAND THE BUSINESS WHERE IT BECOMES A LARGER SHARE OF TOTAL SALES? STEPHANE: WE ARE EXCITED TO SEE THE RECOVERY OF CHINA. AS A MARKET IT IS VERY STRONG. WE SEE ACCELERATION IN THE HIGH SINGLE DIGITS. SIX QUARTERS IN A ROW WE HAVE GAINED MARKET SHARE SO IN A DYNAMIC MARKET WE SEE ACCELERATION AND MARKET SHARE GAINS IN JAPAN. KOREA IS A MARKET IS COMING BACK AFTER A FEW YEARS OF SOFTNESS. WE ARE SEEING GREAT POTENTIAL IN ASIA. THEY LOVE BEAUTY AND WE ARE PART OF IT. ROMAINE: YOU TALKED ABOUT CHINA MOVING AWAY FROM BEING A GROWTH MARKET TO A MATURE MARKET. HOW DO YOU FIT IN? YOU HAVE AN R&D CENTER IN SHANGHAI, CREATING THINGS WITHIN CHINA. THAT IS A STRATEGY? STEPHANE: ABSOLUTELY. 40% OF OUR INNOVATION GLOBALLY IS COMING FROM OUR CENTER IN CHINA. THE STRATEGY WAS TO CREATE AN R&D CENTER CREATING INNOVATION IN CHINA FOR CHINA. THE CHINESE CONSUMERS HAVE DIFFERENT HABITS. THEIR SKIN REGIMEN IS DIFFERENT SO WE ARE DEVELOPING MORE PRODUCTS THAT ALLOWS US TO BE MORE LOCALLY RELEVANT AND ALSO, TO BE MORE INTO CULTURE IN CHINA. THIS PRODUCT, HELPING US TO SUPPORT THE GROWTH IN CHINA AND ACROSS ASIA. ROMAINE: TRAVEL RETAIL. A FEW YEARS AGO THIS BASICALLY DESTROYED ESTEE LAUDER AND IT CAME BACK. WILL THAT BE SUSTAINABLE? STEPHANE: I SEE TRAVEL RETAIL, TODAY WE ARE THE WHITE LABEL. WE HAVE 15% OF OUR BUSINESS FROM TRAVEL RETAIL WHICH IS A LOWER PERCENTAGE THAN WE USED TO BE. THAT ALLOWS US TO NAVIGATE VOLATILITY IN A BETTER WAY. TRAVEL RETAIL IS A WINDOW TO THE WORLD WHEN IT COMES TO DISCOVERING OUR BRANDS. WE SEE A LOT OF POTENTIAL. WE ARE GROWING DOUBLE DIGITS BUT IN KOREA, HONG KONG, THAILAND, WE ARE GROWING. EUROPE HAS BEEN SLIGHTLY DISRUPTED THIS FISCAL YEAR BECAUSE OF THE CONFLICT IN THE MIDDLE EAST BUT WE HAVE SEEN AMERICA DOING WELL. I SEE TRAVEL RETAIL AS A GROWTH POTENTIAL FOR US BUT MORE IN LINE WITH INDUSTRY STANDARDS, WHICH IS 15% OF THE BUSINESS. ROMAINE: CAN YOU QUANTIFY HOW MUCH THE CONFLICT IN THE MIDDLE EAST IS COSTING YOU BUSINESS? STEPHANE: WITH THE MIDDLE EAST AND TRAVEL RETAIL IT IS LESS THAN 2% OF THE BUSINESS SO IT HAS BEEN MANAGEABLE TO NAVIGATE. IT IS ONE REASON WE CALLED OUT, WHILE WE HAVE STRONGER GROWTH IN THE FIRST HALF VERSUS THE SECOND HALF DUE TO THE INNOVATION PIPELINE, IT IS NOT CORRECT IN EMERGING MARKETS BECAUSE WE EXPECT A REBOUND IN THE MIDDLE EAST THAT WILL ALLOW US TO HAVE A STRONGER SECOND HALF. ROMAINE: YOU ARE FRENCH, RUNNING PROBABLY THE BIGGEST IF NOT THE MOST WELL-KNOWN U.S. GROWN BEAUTY PRODUCT COMPANY OUT THERE. WHAT DOES THAT SAY ABOUT WHY YOU ARE THEY ARE AND WHAT ESTEE LAUDER IS LOOKING FOR? STEPHANE: I WAS BORN IN THE U.S. DESPITE MY FRENCH ACCENT. I FEEL, THE STORY OF THE ESTEE LAUDER COMPANY, TO MANAGE WHAT IS ONE OF THE MOST BEAUTIFUL PORTFOLIO OF BRANDS IN THE WORLD, I HAVE AN AMAZING TEAM THAT IS DELIVERING OUTSTANDING RESULTS AND I HAVE NO DOUBT WE WILL CONTINUE IN 27 AND BEYOND. ROMAINE: AND YOU WILL KEEP UP THE REST -- THE RELATIONSHIP WITH SAKS. STEPHANE: OUR HISTORY IS IMPORTANT AND WE ARE WORKING WITH PARTNERS TO CONTINUE TO REINVENT THE EXPERIENCE IN THE STORE. ESTEE LAUDER WAS THE FIRST ONE WHO CREATED BEAUTY AS WE KNOW IT IN MANY WAYS AND WE WILL CONTINUE TO DO IT BUT WE WILL USE NEW CHANNELS AND MEDIA TO CONNECT WITH CONSUMERS AND DELIGHT THEM. ROMAINE: YOUR RELATIONSHIP WITH THE NEW SAKS, IT IS OUT OF BANKRUPTCY. YOU ARE PROVIDING PRODUCT TO THEM? STEPHANE: ABSOLUTELY. WE RESUMED SHIPPING AND ARE HAPPY WITH THE PARTNERSHIP. ROMAINE: THANK YOU SO MUCH. STEPHANE DE LA FAVERIE, THE PRESIDENT AND CEO OF ESTEE LAUDER COMPANIES. ISABELLE: FANTASTIC CONVERSATION. ESTEE LAUDER RESULTS ENDED A RUN OF THREE STRAIGHT DECLINES IN ANNUAL REVENUE. LET'S SHIFT GEARS BECAUSE WE HAVE A BIG MOVER HERE. THE STOCK OF THE HOURS MODERNA. SHARES DOUBLING JOINING US LIVE IS MADISON, WHO COVERS EVERYTHING IN THE SPACE. DOES THIS PROVE MRNA SUCCESS BEYOND COVID, OR IS IT TOO EARLY TO TELL? >> INVESTORS ARE VERY EXCITED ABOUT THIS, AND THEY SEE IT AS A BREAKTHROUGH FOR MRNA TECHNOLOGY BEYOND THE COVID-19 VACCINES THAT WE KNOW IT SO WELL FOR HER. THE TECHNOLOGY HAS BEEN SUCCESSFUL IN OTHER INFECTIOUS DISEASES, BUT IN TERMS OF A BUSINESS OPPORTUNITY, THIS IS SOMETHING POTENTIALLY REALLY BIG AND BRINGS MODERNA INTO A NEW AREA BEYOND INFECTIOUS DISEASES INTO POTENTIALLY ONCOLOGY, AND THAT IS A PRETTY TRANSFORMATIVE MOMENT FOR THE COMPANY AND FOR SCIENCE. ROMAINE: THIS IS A LATE STAGE TRIAL. WE STILL NEED OBVIOUSLY THE FDA TO PUT A CHECKMARK NEXT TO THIS AT SOME POINT. WHAT IS THE TIMEFRAME? >> THE COMPANY SAID THEY ARE DISCUSSING WITH REGULATORS SOME OF THIS DATA. THEY ARE GOING TO UNVEIL MORE DATA AT SOME POINT LATER THIS YEAR AND THEY WILL FILE FOR APPROVAL THAT WILL GET FDA REVIEW, AND THE COMPANIES HAVE SAID THEY SORT OF EXPECT TO GET SOME TYPE OF DECISION BY NEXT YEAR, SO 2027. ISABELLE: HOW BIG IT COULD THIS BECOME IF MODERNA -- IF MELANOMA IS ONLY A STARTING POINT? MADISON: THEY ARE TESTING IT AND OTHER TYPES OF TUMORS, IN BLADDER CANCER, LUNG CANCER. THAT IS WHERE THE OPPORTUNITIES ARISE. MELANOMA IS A REALLY DEADLY FORM OF CANCER, BUT THERE ARE OTHER OPPORTUNITIES, AND THAT IS WHAT, AT LEAST IN TERMS OF WHAT BLOOMBERG INTELLIGENCE THINKS, THAT IS WHERE THE FINANCIAL OPPORTUNITY WILL BE FOR THESE COMPANIES, EXPANDING INTO OTHER TYPES OF CANCER. ROMAINE: LET'S TALK ABOUT THE FINANCIAL COST OF THIS. MY UNDERSTANDING IS THIS WILL BE A PRETTY EXPENSIVE DRUG. WHAT IS THE COST BENEFIT RELATIVE TO MORE TRADITIONAL TREATMENTS THAT YOU WOULD HAVE FOR MELANOMA OR OTHER CANCERS, SHOULD IT PROGRESS? MADISON: BECAUSE THIS IS A PERSONALIZED VACCINE, AND WE DON'T KNOW ANYTHING ABOUT PRICING YET, A LOT OF CANCER TREATMENT CAN BE EXPENSIVE ANYWAY, SO THE THAT -- SO THE THOUGHT IS THIS COULD BE A MORE THE AFFORDABLE OPTION. THIS VACCINE IS TAKEN IN COMBINATION WITH K EYTRUDA TO KEEP THE CANCER FROM ADVANCING, SORT OF TRAINING THE BODY'S IMMUNE SYSTEM ON HOW TO FIGHT THESE CANCER CELLS. WE ARE WAITING FOR ADDITIONAL DATA ON HOW THIS VACCINE FARES IN TERMS OF ACTUALLY EXTENDING SURVIVAL. WE KNOW THAT THIS TRIAL WAS SUCCESSFUL. WE DON'T KNOW OF THE MAGNITUDE OF HOW SUCCESSFUL HE WAS IN TERMS OF HOW LONG WE ARE ACTUALLY EXTENDING LIFE. THAT IS THE NEXT DATA WE ARE WAITING FOR. THAT WILL BE IMPORTANT FOR INSURANCE COMPANIES AND PAYERS WHEN THEY ARE THINKING ABOUT REIMBURSING THIS AND WHETHER TO COVER IT. ROMAINE: A GLIMMER OF HOPE FOR SOME OF THE PATIENTS OUT THERE. MORE THAN A GLIMMER OF HOPE FOR INVESTORS WHO HAD BEEN LOOKING FOR A TURNAROUND IN THIS STOCK. MADISON MULLER THERE. MODERNA SHARES UP 171%, THE BEST DAY ON RECORD AS A PUBLIC COMPANY. MOVING IN THE OPPOSITE DIRECTION IS SPACEX, DOWN ABOUT THREE PERCENT. SHARES WERE ALREADY LOWER, BUT WE LEARNED A LITTLE WHILE AGO THAT THE FIRM ACTUALLY APPROACHED DECODING START UP COGNITION AI ABOUT A POTENTIAL ACQUISITION. ED LUDLOW JOINS US TO TALK A LITTLE BIT MORE ABOUT THIS. WHY IS THIS IMPORTANT? WHAT WAS ELON MUSK FISHING AROUND FOR? >> IT'S IMPORTANT BECAUSE COGNITION IS ONE OF THE HOTTEST PROPERTIES IN AGENTIC AI RIGHT NOW. IT WAS IN TALKS TO BE VALUED AT ABOUT $40 BILLION. AT SOME POINT IN THE LAST COUPLE OF MONTHS, SPACE XAI APPROACHED COGNITION AND MADE AN OFFER, A PROPOSAL TO ACQUIRE THEM. MY UNDERSTANDING WAS COGNITION REBUFFED THEM, SAID NO, THERE IS NOT A PRICE THAT COGNITION WAS WILLING TO SELL ITSELF OUT. BUT IT IS JUST RECOGNITION FOR SPACEX AND ELON MUSK THAT THE GROWTH OF THE FUTURE IS AI. COGNITION'S CODING TOOL HAS BECOME SUCCESSFUL, QUITE PERVASIVE IN THE ECOSYSTEM. IT IS A VERY INTERESTING STORY. THE ADDED DETAIL IS THAT OUR UNDERSTANDING IS THEY ARE CONTINUING TO TALK ABOUT ABOUT TECHNOLOGY. SPACE XAI HAS THE BUSINESS OF RENTING OUT COMPUTE CAPACITY. THOSE KIND OF TECHNOLOGY TALKS CONTINUE OUTSIDE OF THE M&A CONTEXT. ISABELLE: THIS IS A FANTASTIC SCOOP FROM YOU. TALK ABOUT ELON MUSK'S WILLINGNESS TO SPEND HEAVILY ON AI. THEY JUST RECENTLY ACQUIRED CURSOR AS WELL, A FAST-GROWING STARTUP. ED: OUR UNDERSTANDING AS THERE ARE NO ACTIVE M&A TALKS RIGHT NOW BETWEEN SPACEX AND COGNITION, BUT THEY JUST CLOSED THE CURSOR DEAL, A 60 BILLION OTHER DEAL. OUR LATEST REPORTING IS COGNITION IS IN TALKS TO RAISE MONEY TO A $40 BILLION VALUATION. THOSE COMPANIES ARE VERY SIMILAR. THEY ARE BOTH CODING PLATFORMS. CURSOR IS BASICALLY AN AI POWERED CODING TOOL THAT CAN REWRITE CODE, AS OPPOSED TO DEVON BEING A MORE FULLY AUTONOMOUS AGENT. THE POINT IS COGNITION MOVES VERY FAST. THEY HAVE THIS ARMY OF FORWARD DEPLOYED ENGINEERS THAT HAVE ALLOWED THEM TO GET INTO PRETTY RUN-OF-THE-MILL STANDARD FORTUNE 500 COMPANIES THAT USE DEVON. TO ELON MUSK AND SPACEX, THAT IS ATTRACTIVE. MAYBE THEY SAW COGNITION AS A WAY INTO THAT DIFFERENT FROM THE PURE PLAY TECHNOLOGY ACQUISITION OF CURSOR. ISABELLE: THANK YOU. THAT WAS A GREAT EXCLUSIVE. LET'S TAKE A LOOK AT WHERE MARKETS STAND AS WE GET READY TO CLOSE OUT THE DAY. THE BOND MARKET STILL REMAINS THE BIG STORY. I FEEL LIKE WE HAVE NOT TALKED ABOUT THE FED JUST YET. ROMAINE: CAN IT REALLY IS THE ONLY STORY OF THE DAY, APOLOGIES TO EVERYONE ELSE. WE TALKED ABOUT WHAT WAS A SURPRISE MOVE BY SCOTT BESSENT, PROBABLY SHOULD NOT HAVE BEEN GIVEN THE LAST BUY BACK, BUT HE HAS MADE IT CLEAR IN SOME OF HIS ACTIONS THAT HE WAS THERE TO DEFEND TREASURY YIELDS, TO KEEP SOME SORT OF CAP ON THEM. THE QUESTION IS, WHAT DOES THIS DO? YOU GO FROM 2 BILLION TO 4 BILLION, CHARACTERIZE IT AS BEING ABOUT LIQUIDITY. A LOT OF PEOPLE ARE LOOKING TO THIS AND SEEING THE ISSUES THAT PLAGUE THE TREASURY MARKET RIGHT NOW TO A CERTAIN EXTENT ARE OUT OF HIS CONTROL. THIS IS A FISCAL ISSUE, AND IF HE WANTS TO ADDRESS IT, MAYBE YOU SHOULD HOP IN AN UBER TO CAPITOL HILL AND TALK TO THEM THERE. ISABELLE: AT THE END OF THE DAY, IT IS A REMINDER THAT THE TREASURY DEPARTMENT IS PAYING ATTENTION AND WILL DO WHATEVER IT TAKES TO KEEP YIELDS FROM GETTING TOO HIGH TOO QUICKLY, MAYBE. ROMAINE: WE SAW THE FED MINUTES SHOWING CONCERNS STILL PAY HER ASSISTANT ABOUT INFLATION. THAT IS SOMETHING -- STILL PERSISTENT ABOUT INFLATION. THAT IS SOMETHING BESSENT WILL HAVE TO DEAL WITH. WE ARE JOINED BY A SENIOR PORTFOLIO MANAGER OVER AT NEWBERGER. THAT'S WHERE I WANT TO START HERE, WITH THE RATES STORY. OBVIOUSLY NOTHING HERE IS EXTREME ON THE SURFACE, BUT THERE HAS BEEN SOME TALK FOR YEARS , FIRST FROM A LOT OF THE POLLYANNA'S ABOUT THE FISCAL SITUATION AND ITS EFFECT ON TREASURIES, BUT NOW WE ARE REALIZING SOME OF THOSE POLLYANNAS WERE NOT CRAZY AFTER ALL. IF YOU ARE AN EQUITY INVESTOR, DO YOU WORRY ABOUT THIS NOW OR JUST WAIT UNTIL THE SHOE DROPS? >> FIRST OF ALL, GOOD TO SEE YOU. SECONDLY, THE NUMBER OF FISCAL ISSUES AS WELL AS THE AMOUNT OF FISCAL STIMULUS THAT HAS BEEN PUMPED IN IN ADDITION TO THE MONETARY STIMULUS, YOU GUYS SUMMED IT UP, IT IS A BAD DAY. IT IS A NOTHING BURGER, AND THE REALITY IS THE YIELDS WILL GO WITH THE FISCAL SITUATION AND WILL ALSO GO WITH THE ECONOMY AS WELL AS INFLATION. WITH THE AMOUNT OF FISCAL AND MONETARY STIMULUS OUT THERE AND WITH THE ECONOMY DOING AS WELL AS IT IS AND THE LACK OF EXCESS CAPACITY AND THE HIGHER INFLATION, YIELDS ARE STILL GOING UP. THIS IS A ONE-DAY MOVE, MAY BE A TWO DAY MOVE, BUT INEVITABLY WE THINK YIELDS ARE GOING UP FROM HERE. ROMAINE: WHAT DOES THAT ACTUALLY MEAN FOR EQUITIES? I AM PRETTY MUCH TALKING ABOUT SOME OF THE LONG DURATION EQUITIES THAT HAVE THE LED THIS BULL MARKET RALLY. DOES THAT KNOCK THEM DOWN A PEG, OR CAN THEY NAVIGATE THROUGH WHATEVER THE NEXT LEG UP IN YIELDS MIGHT BE? ELI: SHORT DURATION IS VALUE, LONG-DURATION'S GROWTH. WE ARE VERY BULLISH ON VALUE OVERGROWTH HERE. WE THINK THE LONG-DURATION STOCKS GET HIT HERE. AS THE 10 YEAR GOES HIGHER THAN THE FIVE YEAR, WHICH WE THINK IT IS GOING TO, NO QUESTION, LONG-DURATION STOCKS GET HIT, WHICH MEANS VALUE OVERGROWTH. VALUE AHEAD OF GROWTH THIS YEAR BY ONLY 20%. WE THINK IT IS GOING A LOT FURTHER. ISABELLE: AND HIS SHOW SEVERAL OFFICIALS WANTED A HIKE. DO YOU THINK THE MARKET IS STILL UNDERESTIMATING THE RISK OF RATE INCREASES THIS YEAR? ELI: I THINK THEY ARE. I DO NOT EXPECT THE INCREASE TO BE UNTIL AFTER MIDTERMS, BUT WE EXPECT OVER THE NEXT SIX MONTHS, AND I AM SPEAKING ON BEHALF OF MYSELF AND THE LARGE-CAP VALUE GROUP, WE ARE EXPECTING RATES TO BE UP PROBABLY 100 BASIS POINTS OVER THE NEXT SIX MONTHS. WE ARE LOOKING FOR WARSH TO TIGHTEN PRETTY DRAMATICALLY AT THE END OF THIS YEAR OR EARLY NEXT YEAR. ISABELLE: IF RATES STAY HIGH FOR LONGER, WHY SHOULD INVESTORS KEEP PAYING UP FOR MEGA CAPS TECH STOCKS? ELI: BECAUSE THOSE SO CALLED LONG-DURATION GROWTH STARTS ARE CLEARLY GOING TO GET HIT BECAUSE AS THE TENURE GOES UP, IT CAUSES COMPRESSION. YOU ARE ABOUT TO SEE A LOT MORE. ROMAINE: WHEN WE TALK ABOUT AN EARNINGS SEASON THAT IS ALMOST THROUGH -- IT HAS BEEN A PHENOMENAL EARNINGS SEASON, BUT PEOPLE ARE WONDERING WHETHER WE HAVE REACHED THE PEAK -- MY QUESTION FOR YOU IS ON THE VALUE SIDE AND THE VALUE OF THIS EARNINGS GROWTH, WHICH HAS GONE FROM THE BIG HYPERSCALERS AND NVIDIAS AND CHIPMAKERS TO A LOT OF OTHER PEOPLE PARTICIPATING IN THAT GROWTH STORY. IS THAT ELI: SUSTAINABLE? THINK --IS THAT SUSTAINABLE? ELI: WE THINK IT IS ABOUT THE LEADING ECONOMIC INDICATORS. WE EXPECT DAILY EYES -- L.A. I - - LEI'S TO HEAD UP. THE BROADENING SHOULD OCCUR. AND VALUE WILL EXPAND ITS LEAD RELATIVE TO GROWTH. ROMAINE: WE HAVE SEEN THAT SHOW UP IN SOME OF THE FACTORS WE TRACK ON THE BLOOMBERG TERMINAL. ANY CONCERNS ABOUT SEASONALITY, GIVEN A LOT OF FOLKS ARE SAYING WE MIGHT BE AT PEAK VALUATION? IT IS NOT NECESSARILY LONG-TERM, CERTAINLY IN THE SHORT-TERM, IT IT MADE HEALTHY PROFITS FOR THE FIRST SIX TO EIGHT MONTHS OF THE YEAR. HOW MUCH ACTIVITY CAN WE EXPECT IN THE LAST TWO MONTHS? ELI: IT IS A REALLY GOOD QUESTION. AUGUST AND SEPTEMBER ARE TYPICALLY ROUGH TIMES FOR THE MARKET, ESPECIALLY SEPTEMBER. SEPTEMBER IS NEVER A GREAT TIME FOR THE MARKET. WE CAN'T WORRY ABOUT THAT SHORT-TERM. WE THINK OVER THE NEXT SIX TO NINE MONTHS, NOT ONLY IS THE MARKET GOING HIGHER, AND WE ARE NOT CALLING THE MARKET, BUT WE THINK VALUE IS GOING HIGHER. ISABELLE: I WANT TO GO BACK TO THE FED. WARSH IS CONSIDERING CUTTING MEETINGS FROM EIGHT TO SIX. HOW DO YOU RESPOND TO THAT AS A PORTFOLIO MANAGER? ELI: OBVIOUSLY WE ARE ALWAYS CURIOUS ABOUT WHAT THE FED HAS TO SAY, BUT WE ARE LOOKING AT THE ECONOMIC DATA. THE REALITY IS WHEN WE LOOK OUT, WE ARE THINKING HORIZONTALLY ABOUT THE AMOUNT OF STIMULUS OUT THERE. WHAT WARSH DOES IN A MEETING OR NOT IN A MEETING, THAT IS ONE THING, BUT IT IS MORE IMPORTANT ABOUT THE ECONOMY IN THE END IS WHAT DRIVES EVERYTHING, AND THE HIGHER ECONOMY, THE HIGHER INFLATION, WE ARE VERY CONCERNED. WITH THAT CONCERN COMES VALUE OVERGROWTH. CONCERN ABOUT LONG-DURATION STOCKS, WE THINK LONG-DURATION STOCKS ARE GOING TO TAKE IT UP THE 10 YEAR. LONG-DURATION STOCKS ARE THE GROWTH STOCKS. ROMAINE: ELI, GREAT TO CATCH UP WITH YOU. COUNTING US DOWN TO THE CLOSING BELLS WITH THE S&P 500 JUST HOLDING ONTO FRACTIONAL GAINS ON THE DAY, GIVEN THE BIG BUMP FROM APPLE AND AMAZON. THE NASDAQ NOW POISED FOR A FOURTH STRAIGHT DAY OF LOSSES, LARGELY BECAUSE OF THE BIG DECLINE IN NVIDIA. ISABELLE: CHIPMAKERS DROPPING ONCE AGAIN. WE ARE SEEING MORE GAINERS IN THE S&P, BUT THE BIG CAP TECH STOCKS ARE DRAWING THEM DOWN. ROMAINE: WE HAVE TALKED A LOT ABOUT MODERNA, ESTEE LAUDER, AND MERCK, ALSO GETTING A BOOST FROM COINBASE AND CARVANA. A FULL BREAKDOWN OF THE DAY'S MARKET ACTION STARTS RIGHT NOW. >> >> THE CLOSING BELL STARTS RIGHT NOW. ROMAINE: TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. TAKING YOU THROUGH TO THE CLOSING BELL, IT IS A GLOBAL SIMULCAST. EMILY IS IN FOR TIM STENOVEC. WELCOME TO ALL OF OUR VIEWERS. THE S&P 500 TRYING TO RECOUP LOSSES FROM THE PREVIOUS THREE SESSIONS BUT ONLY UP 0.2%. >> DIDN'T GET MUCH FROM THE FED MINUTES. THAT IS HOW WE KICKED OFF THE 2:00 HOUR. THE MINUTES SHOWED MANY OFFICIALS SHOW -- SAID RATE HIKES MAY BE NEEDED BUT THAT SOUNDS LIKE THERE IS A BIT OF DEBATE. >> THERE IS A DEBATE AND FOR THE TWO YEAR YIELD, IT DOES NOT MAKING MOVES RIGHT NOW BUT A LOT OF FOCUS ON THE FLATTENING IN THE YIELD CURVE AND THE LONGER YOU -- LONGER AND YIELDS MOVING LOWER. ISABELLE: THE BOND MARKET IS SUPPOSED TO BE QUIET AND WHEN IT IS NOT, IT IS A BIG DEAL. IT HAS BEEN MAKING NOISE. LONG-TERM YIELDS CLIMBING. FRANCE, GERMANY AND THERE IS ONE COUNTRY I'M FORGETTING BUT DEFINITELY MOVEMENT. ROMAINE: IT SETS UP THE IDEA, WE HAVE TALKED ABOUT IT A LOT, THE OUTSIZED IMPORTANCE OF THESE BACK ROW ECONOMIC ISSUES HAVING ON THE MARKET RELATIVE TO WHAT WE SAW IN THE FIRST FEW MONTHS OF THE YEAR, WHERE IT WAS ABOUT, LOOK AT THE AI SPEND AND RIDE THAT WAVE. THAT MIGHT BE CHANGING. CAROL: THE NARRATIVE AROUND AI IN TOTAL CONTINUES TO EVOLVE. YOU CAN SEE IT PLAY OUT. ROMAINE: A DROP IN LONG-TERM YIELDS ON THIS WEDNESDAY AFTERNOON. THAT IS PUTTING PRESSURE ON THE DOLLAR WHICH IS DOWN ALMOST 1% ON THE DAY. THE BLOOMBERG DOLLAR SPOT INDEX, FOR EVERYTHING ELSE IT IS PROVIDING A BOOST. MOST EQUITIES IN THE S&P 500 ARE IN THE GREEN. THE S&P 500 FINISHES IN THE GREEN, AROUND 7708 AND CHANGE, 0.2%. THE DOW UP 0.2%. THE NASDAQ COMPOSITE IS UP 0.2% BUT THE NASDAQ IS -- 100 IS DOWN. THAT IS YOUR RELATIVE OUTPERFORMER. CAROL: I WILL GO BACK TO LARGE CAPS, THE S&P 500, IF I LOOK AT THE INDEX, ALMOST AN EVEN SPLIT, 285 NAMES GAINING GROUND. 216 TO THE DOWNSIDE, TWO UNCHANGED. EMILY: TECH IS OUR BIGGEST LOSER. TECH DOWN BY NEARLY 2%, OR MORE THAN 2%. COMMUNICATIONS SERVICES AND FINANCIALS IN THE RED. THE BRIGHT SPOTS ARE CONSUMER STAPLES, ENERGY, MATERIALS HIGHER BY 0.2-0 .3%. CAROL: LET'S GET TO THE INDIVIDUAL GAINERS. MODERNA IS AN OUTPERFORMER. THE TOP GAINER THAT WE SAW IN THE S&P 500 TODAY, UP 30%. IT IS UP ABOUT 375% YEAR TO DATE. 13% OF THE FLOAT IS SHORT. I WILL CHECK IF THAT IS THE YEAR TO DATE. ROMAINE: YOU DIDN'T CHECK THIS IN ADVANCE? CAROL: I DID. IT IS IN MY NOTES AND LOOKING AT IT I DON'T BELIEVE IT. IT IS UP 491% YEAR TO DATE. THERE YOU GO. OUTPERFORMING, 13% OF THE FLOWCHART. THIS AFTER THE BIOTECH COMPANY SAID IT PERSONALIZED -- A PERSONALIZED CANCER VACCINE CUT THE RECURRENCE OF MELANOMA IN A LARGE LATE STAGE TRIAL. IT PROVIDES THE STRONGEST EVIDENCE YET THAT MESSENGER RNA TECHNOLOGY WILL HAVE A SUCCESSFUL SECOND ACT AND THEY WILL DISCUSS FILING FOR APPROVAL WITH REGULATORS. THIS PROVIDES TAILWINDS FOR THE COMPANY THAT HAD ITS UPS AND DOWNS. ESTEE LAUDER, LET'S GET TO THAT WHEN. THIS WAS A TOP GAINER AMONG THE S&P 500, NUMBER TWO GAINER. THE STOCK, WE WILL BRING UP ESTEE LAUDER. THAT WAS MODERNA SO LET ME BRING UP ESTEE LAUDER ON MY TERMINAL. ESTEE LAUDER. ROMAINE: WHAT DO YOU DO WITHOUT ME? SHARES UP 16%. BEST DAY SINCE NOVEMBER 2011. I JUST HAD AN INTERVIEW WITH THE CEO ON HOW HE KEEPS THE MOMENTUM GOING. CAROL: WOULD YOU LIKE TO DO THE REST OF THE LIST? ROMAINE: NO. CAROL: SHARES JUMPING AFTER THE RESULTS BEAT ESTIMATES AND ENDED A RUN OF DECLINES. THE COMPANY REPORTED REVENUE OF $3.6 BILLION IN THE FISCAL FOURTH ORDER AND ORGANIC SALES GROWTH ACCELERATED TO 5%. THE COMPANY OWNS MANY BRANDS. THE STOCK WAS DOWN 74% FROM A HIGH IN EARLY JANUARY 2022 SO STILL SOME ROOM TO GAIN BACK. TWIST BIOSCIENCE AND THE LIFE SCIENCE AND TOOLS AREA, TWIST BIOSCIENCE UP 22% IN TODAY'S SESSION. THE COMPANY ROSE HIGH, ROSE TO ITS HIGHEST AND MORE THAN FIVE YEARS AFTER ANTHROPIC CHOSE THEM AS ONE OF ITS INDEPENDENT EVALUATORS TO PRODUCE AI DESIGNED PROTEINS AT SCALE AND TEST THEM FOR BINDING. IT HAS TO DO WITH DNA, SO KIND OF AN INTERESTING TRADE. DIDN'T MEAN TO BE SHARP WITH YOU, ROMAINE. ROMAINE: IT IS MY FIRST DAY BACK. CAROL: I KNOW. I SHOULD MENTION HYPER-LIQUID WAS ALSO A LOT HIGHER. FORGIVE ME, THAT WAS MY BAD. UP 30% IN THE SESSION AFTER PRESIDENT TRUMP SAID THE CFTC SHARE IS BRINGING HYPER LIQUID TO THE U.S.. STACY MARIE SAID THAT WAS INTERESTING. THIS HAS OUTPERFORMED. ISABELLE: LET'S GO TO THE DECLINERS. EMILY: TJX, THE PARENT COMPANY OF T.J. MAXX, HOME GOODS, FELL TODAY ABOUT 4% INCLUDING SECOND-QUARTER COMP SALES FOR ITS MARBACH'S SEGMENT. THAT IS THE PARENT OF T.J. MAXX AND MARSHALL'S. THE TOP LINE COMP SALES DUDE BEAT, AND THE HOME GOODS COMP SALES ALSO BEAT ESTIMATES. LOTS OF PEOPLE GOING OUT AND BUYING LITTLE FIGURINES, MUGS, AND FRAMES. ROMAINE: WHAT ARE YOU TALKING ABOUT? HAVE YOU EVER BEEN TO A HOME GOODS? ? IT IS MORE THAN FIGURINES. CAROL: IT'S PILLOWS. EMILY: PISTACHIOS. CAROL: WE HAVE TO TAKE YOU TO A HOME GOODS. THERE IS SO MUCH. THERE IS FURNITURE. EMILY: THERE IS A LOT. CAROL: TOWELS. EMILY: THERE IS A RUNNING JOKE ON DID -- ON TIKTOK ABOUT SPECIFIC THINGS YOU CAN ONLY FIND IT HOME GOODS. ROMAINE: WHERE ELSE WILL I GET MY LIVE LAUGH LOVE WOOD PANEL? EMILY: WITH SANTA ON THE SIDE. CAROL: FAMILY MEANS EVERYTHING. EMILY: TJX GROUP LOWER, VIKING HOLDINGS WAS A DECLINER. THE SHARES DOWN 8%. MANAGEMENT OF THE RIVER CRUISE COMPANY TRYING TO SOOTHE INVESTOR CONCERNS ABOUT THE IMPACT OF LOW WATER LEVELS IN THE DANUBE AND RYAN RIVERS. THIS IS AN ISSUE THAT PROMPTED THE CRUISE LINE OPERATOR TO ISSUE VOUCHERS TO SOME TRAVELERS. SHAREHOLDERS NOT HAPPY ABOUT THAT UPDATE. THE COMPANY DID SAY 53% OF ITS CAPACITY FOR 2027 HAS BEEN BOOKED WHILE INCREASING ITS OFFERINGS ACROSS RIVER AND OCEAN PRODUCTS BY 15%. THIS IS A LUXURY CONSUMER SIGNALING SOME RESILIENT DEMAND FOR THE LUXURY SIDE. THE T.J. MAXX GROUP, I FEEL LIKE THAT IS KIND OF FOR EVERYONE BUT KNOWN TO BE MORE ON THE LOWER INCOME SIDE. NOT A LUXURY PRODUCT. BUT NOT LOOKING TOO HOT IN TODAY'S TRADE. WHITE FIBER IS A SMALLER CAP NAME. IT IS ABOUT $1 BILLION IN MARKET CAP BUT IT FELL ABOUT 21% TODAY. THEY PRICED A PRIVATE PLACEMENT, $270 MILLION OF SENIOR NOTE OFFERING, TO BUILD OUT AI INFRASTRUCTURE. THIS STOOD OUT BECAUSE WE ARE SEEING AI COMPANIES OF ALL DIFFERENT SHAPES AND SIZES TAPPING THE DEBT MARKETS. EVENTUALLY YOU HAVE TO SEE MAY BE SOME QUESTIONS FROM EQUITY SHAREHOLDERS ABOUT WHAT THIS IS. ROMAINE: LET'S TALK ABOUT THE BIG DROP WE SAW ON THE LONG END OF THE CURVE, DOWN 10 BASIS POINTS, 11 BASIS POINTS ON THE 20 YEAR YIELD, 10 BASIS POINTS ON THE 30 YEAR YIELD, THE BIGGEST ONE DAY DROP ON THE LONG BOND SINCE JUNE, TIED TO SCOTT BESSENT LIFTING THE TREASURY'S BUYBACK CAP, DOUBLING UP FROM $2 BILLION TO $4 BILLION. LIQUIDITY MEASURES AS HE PUTS IT BUT LOTS OF QUESTIONS ABOUT WHAT TYPE OF MECHANISMS THE FED IS USING TO KEEP THE CAP BOND YIELDS, AND MORE IMPORTANTLY WHY. CAROL: SOME STORIES ON OUR RADAR, ALEXIS TALKED ABOUT IT ON SURVEILLANCE THIS MORNING. . WE KNOW THE PUSH BACK ON A LOT OF THE AI DATA CENTER BUILD. LIQUID DEATH AND GARAGE BEER ANNOUNCED A CAMPAIGN CALLED WE WANT YOUR PEE TO HELP AI DATA CENTERS COOL DOWN. IT FEATURES A SPOT WITH JASON KELCE SINGING A SONG ABOUT SENDING PEE TO DATA CENTERS. WHAT HAPPENED IN THIS WORLD? KEEP IN MIND IT IS A JOKE. ROMAINE: OBVIOUSLY. I WOULD HOPE SO. CAROL: WE LIVE IN AN INTERESTING TIME. ROMAINE: WE ARE GETTING ATTENTION. RADIO VIEWERS, YOU ARE WALKING THROUGH A METAL WITH A FARMER AND A SKATEBOARDER HOLDING UP LARGE BOTTLES OF THEIR OWN LIQUIDS. EMILY: ONE OF THEM HAD A TUMBLER WITH A STRAW. ROMAINE: A GUY WITH A BRIEFCASE, A GUY WITH A MOBILITY SCOOTER. CAROL: AND WEAK POINTS OUT SEVEN OUT OF 10 AMERICANS OPPOSE DATA CENTERS IN THEIR COMMUNITY SO IT IS HAVING SOME FUN WITH THIS, REMINDING EVERYONE OF THE IMPACT. ISABELLE: I NEVER THOUGHT I WOULD TALK ABOUT THIS IS A MARKETS REPORTER BUT THERE IS A FIRST TIME FOR EVERYTHING. CAROL: WE TALK ABOUT EVERYTHING HERE. THAT IS A WRAP. WELCOME BACK, ROMAINE. WE DID KIND OF MISS YOU. RADIO, TV, YOUTUBE, AND WE ARE BACK ON BLOOMBERG BUSINESSWEEK DAILY. SAME TIME, SAME PLACE TOMORROW. ROMAINE: WHEN WE COME BACK, COVERAGE CONTINUES ON THE CLOSE. A CLOSER LOOK AT THE BIG DECISION BY THE TREASURY WITH REGARDS TO BUYBACKS AND HOW THE MARKET IS STARTING TO PRICE THE NEW TREASURY DEPARTMENT IN. WE WILL CATCH UP WITH GREG PETERS ON THE CLOSE. THIS IS BLOOMBERG. ♪ >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE OF THE MARKET DAY. THIS IS THE CLOSE. ISABELLE: WELCOME BACK TO THE CLOSE. ROMAINE: MARKETS JUST CLOSED ABOUT 12 MINUTES AGO. THE S&P TRYING TO SHAKE OFF THE DOLDRUMS FROM THE PAST THREE DAYS. . THE INDEX FINISHING HIGHER BY 0.2% ON THE DAY BUT THAT BRINGS IT BACK ABOVE THE 7700 MARK. PHILADELPHIA SEMICONDUCTOR INDEX DOWN FOR A SECOND STRAIGHT DAY AND WE HAVE TO TALK ABOUT THE YIELD SPACE AND THE DOLLAR. 30 YEAR YIELDS DROPPING 10 BASIS POINTS ON THE DAY. WE WILL GET THAT TO JUST A SECOND. THE DOLLAR TAKING A LEG DOWN, THE BIGGEST DROP FOR THE DOLLAR SPOT INDEXING THREE WEEKS. IT HAD BEEN ON AN UPTREND IN MAY AND JUNE AND BY THE TIME YOU GOT TO MID TO LATE JULY IT STARTED THE DOWN TREND AND THAT ACCELERATED TODAY WITH THE ANNOUNCEMENT BY THE TREASURY. ISABELLE: THE STORY OF THE DAY IS REALLY THE BOND MARKET. EVERYTHING IS ABOUT THE BOND MARKET TWO WEEKS AFTER RELEASING THE PLAN SCHEDULE FOR BUYBACKS THIS QUARTER. IT IS INCREASING BY AT LEAST DOUBLE THE SIZE OF LIQUIDITY SUPPORT BUYBACK OPERATIONS. SOME DEFINITELY BIG NEWS. WE ARE LOOKING AT CARVANA, SHARES CLOSING IN THE GREEN AFTER REPORTS SHOWED MARK WALTERS STAKE IN THE COMPANY WAS PLEDGED. THIS MEANS HE WOULD NOT BE ABLE TO SELL THEM AS HE CONTENDS WITH THE FEDERAL APPROVAL OF HIS INVESTMENT EMPIRE. MODERNA SHARES JUMPING AFTER A CANCER VACCINE HELPED CUT THE RECURRENCE OF MELANOMA IN A LATE STAGE TRIAL. TARGET SHARES ARE IN THE GREEN AFTER THE RETAILERS COMPARABLE SALES AND ADJUSTED EPS FOR THE SECOND ORDER BEAT EXPECTATIONS. ROMAINE: LET'S TURN BACK TO WHAT WE SAW IN THE TREASURY MARKET. THAT IS OUR TOP STORY. IT IS A FRESH ATTEMPT TO REIN IN LONG-TERM BORROWING COSTS. SCOTT BESSENT AND THE TREASURY SAID TO RAMP UP BUYBACK STARTING NEXT MONTH OF ONE DATA GOVERNMENT DEBT SAYING IT IS INCREASING BY AT LEAST DOUBLE THE SIZE. LIQUIDITY MEASURES AS HE SAID AND THAT WILL FOCUS ON THE 10-30 YEAR SECTOR. THIS COMES TWO WEEKS AHEAD OF A PLANNED SCHEDULE FOR BUYBACKS AND LONG DATED BOND YIELDS AROUND THE GLOBE ROSE TO SIGNIFICANT LEVELS THIS WEEK. THE U.S. 30 YEAR, CAMPED OUT AROUND ITS HIGHEST LEVEL SINCE 2007. GREG PETERS JOINS US. GREAT TO SEE YOU HERE. WHAT WAS YOUR REACTION THIS MORNING? GREG: I WAS NOT SURPRISED. THE THREAT WAS OUT THERE FOR A WHILE. MARKET PARTICIPANTS KNEW THAT. THE ADMINISTRATION WOULD LOOK TO DOING THINGS THAT ARE UNCONVENTIONAL, AND THIS WAS DEFINITELY ON THE TABLE. THE REAL QUESTION IS, WHAT DOES IT MEAN FOR LONG-TERM VIABILITY? THERE IS A DIFFERENCE BETWEEN A TRADE AND AN -- BETWEEN A TRADE AND INVESTMENT. THIS WAS GREAT FOR BESSENT, BUT IT IS A VERY DIFFERENT MECHANISM THAN THE FED, BECAUSE ULTIMATELY THAT MONEY HAS TO BE REPATRIATED BACK INTO THE SYSTEM, LIKELY THROUGH TBILLS. THE REAL QUESTION IS, WHAT DOES THAT DUE TO THE LONGER TERM PREMIUM IN THE TREASURY MARKET? WILL IT BE SELF-DEFEATING NOR SELF-LIMITING? MY SENSE IS IT WILL BE. WE WILL DO NO MORE OVER A LONGER TIMEFRAME. ROMAINE: WHEN WE TALK ABOUT THE TERM PREMIUM, AND LET'S TALK ABOUT WHY WE ENDED UP WITH YIELDS IS HIGH TO BEGIN WITH. THERE ARE STRUCTURAL ISSUES IN THIS NATION THAT HAVE NOTHING TO DO SPECIFICALLY WITH WHAT THE TREASURY ARE DOING. IT IS MORE WHAT CONGRESS IS PASSING AND WHAT THE PRESIDENT'S SIGNING OFF ON. THAT IS NOT A QUICK FIX. IF YOU ARE LOOKING AT THE 30 YEAR OR 20 YEAR AS AN INVESTOR, BUT ACTUALLY COMPENSATES YOU FOR THAT RISK, THE INFLATION RISK AND THE FISCAL RISK? >> MEANINGLESS DISTRACTION, ULTIMATELY. PAY ATTENTION TO THE BUYBACKS OVER HERE. OVER HERE WE ARE NOT DOING ANYTHING ABOUT THE ROOT PROBLEM, THE DEFICIT. THAT IS WHY I THINK IT IS ALSO SOMEWHAT OF A LIMITING STRATEGY. I UNDERSTAND THE ADMINISTRATION IS FOCUSED ON THE LEVEL OF YIELDS, BUT AT THE SAME TIME IT IS A FUNDAMENTALLY DRIVEN MARKET , AND OVER TIME THOSE FUNDAMENTALS START TO ASSERT ITSELF. TODAY IS THE CLEANSING OF THE SHORT BASE. ROMAINE: WITH REGARDS TO THE YEN INTERVENTION LED BY THE U.S. A WEEK OR SO AGO, WAS THAT ABOUT U.S. TREASURY YIELDS? GREGORY: I THINK SO. WHAT WAS INTERESTING TODAY AS YOU SAW KIND OF ANOTHER MOVE IN YEN, DOLLAR-YEN, WHICH SEEMS TO SUGGEST THERE IS A YIELD COMPONENT BUT THERE IS ALSO A BELIEF THAT THIS TREASURY DEPARTMENT IS PRONE TO INTERVENTION. YOU HAVE TO WATCH OUT FOR WHETHER IT IS IN FX MARKETS OR THE RATE MARKET. BUT I BELIEVE THE INTERVENTION ON THE INSIDE WAS MORE TO DO WITH U.S. TREASURIES THAN IT WAS ON THE LEVEL OF THE CURRENCY. ISABELLE: HOW MUCH CAN THESE TREASURY BUYBACKS ACHIEVE IF CORPORATE ISSUANCES ARE PUSHING YIELDS HIGHER? GREGORY: I THINK IT IS A DROP IN THE OCEAN, ULTIMATELY. AT THE END OF THE DAY, YOU WILL SEE A PICKUP IN ISSUANCE, AND THAT ISSUANCE IN THE BACK HALF OF NEXT YEAR AND INTO THE FOLLOWING YEARS. THIS IS A DEBT AND DEFICIT PROBLEM. LESS TO DO WITH AROUND A -- KIND OF THE ISSUANCE, RIGHT? I THINK THE U.S. HAS BENEFITED VIS-A-VIS OTHER JURISDICTIONS, BECAUSE I DO THINK THE U.S. TREASURY DOES A MUCH BETTER JOB AROUND THEIR ISSUE AND PREDICTABLE AND ALIKE, AND THAT HAS HELPED THE U.S. THE QUESTION HERE IS, BY CHANGING THOSE DYNAMICS OF THE BUYBACKS FROM REGULAR TO PREDICTABLE, DOES THAT HAVE THE OPPOSITE EFFECT, WHERE THE BACKEND STARTS TO UNTETHERED AND NO LONGER DOES THE U.S. YIELD CURVE GET THE BENEFIT OF THE DOUBT? THAT IS AN OPEN QUESTION. WE DON'T KNOW. BUT THESE ARE KIND OF THE RISKS ON THE TABLE AS I SEE THEM. ISABELLE: DO YOU THINK THE MARKET IS GOING TO SEE RIGHT THROUGH IT? GREGORY: OVER TIME, BUT LOOK, THERE WAS A BIG SHORT BASE IN THE MARKET. THE STORIES WORRY ABOUT THE LEVEL OF YIELDS. THE ADMINISTRATION IS CLEARLY FOCUSED ON THE LEVEL OF YIELDS. MAYBE IT SETS A CEILING OVER THE SHORT TERM, BUT OVER THE LONG TERM I THINK IT IS HARDER. I THINK IT IS ABOUT THE FUNDAMENTALS AND LESS ABOUT THE INTERVENTION. INTERVENTIONS RARELY WORK. THERE HAS TO BE SOMETHING STRUCTURAL. MAYBE THAT IS ON THE COMMENT, WE JUST HAVEN'T SEEN IT YET. ROMAINE: ONE OF OUR COLLEAGUES WROTE A GREAT PIECE TODAY ABOUT THE TREASURY MAY BE BEING CROWDED OUT OF THE BOND MARKET BECAUSE OF ALL THE ISSUANCE COMING FROM THE AI INFRASTRUCTURE BUILDOUT AND THE IDEA THAT YOU HAVE REAL COMPETITION RIGHT NOW, BOTH IN TERMS OF ACTUAL BUY AND HOLD YIELD BUT EVEN TRANSACTIONAL VALUE ON SOME OF THIS AI DEBT AS OPPOSED TO SOME OF THE LONGER DURATION TREASURY DEBT. IS THAT VALID OR JUST KIND OF, YOU KNOW? GREGORY: I BELIEVE THERE IS A CONFLUENCE OF EVENTS. I BELIEVE THE AI BUILDOUT IS AN IMPORTANT PIECE OF IT. THAT IS LONG-DURATION DEPTH HITTING THE MARKET. THAT IS PUTTING A LOT OF DURATION DOLLARS INTO THE SPACE THAT DOES EQUAL CROWD OUT U.S. TREASURIES, ESPECIALLY GIVEN THE DEAL SIZES. YOU HAVE TO PAY ATTENTION TO IT. THEY ARE RIVALING THE SIZE OF AUCTIONS AT THIS POINT. BUT THERE ARE OTHER THINGS GOING ON. JAPAN IS ANOTHER KEY PIECE WHERE THOSE YIELDS ARE HIGHER. YIELDS ARE HIGHER EVERYWHERE, SO THE COMPETITION FOR CAPITAL IS MUCH MORE PRONOUNCED. IN JAPAN OVER THE PAST COUPLE OF DECADES, THAT MONEY WAS ROLLED OUT INTO THE INTERNATIONAL MARKETS. OVER TIME, I THINK YOU WILL SEE THAT REPATRIATED INTO JAPAN. THERE IS STILL A PRESSURE POINT THERE. I DO THINK THIS CROWDING OUT STORY IS A REAL STORY. >> WE GOT THE MINUTES FROM THE LAST MEETING KIND OF CONFIRMING WHAT WE ALL KNEW, BUT IT DOES RAISE THE STAKES TO A CERTAIN EXTENT AS TO WHAT THE NEXT COUPLE OF MEETINGS LOOK LIKE AND WHETHER WE SHOULD BE TALKING ABOUT THE POTENTIAL OF RATE CUTS OR WHETHER THERE IS STILL AN ARGUMENT TO BE MADE -- RATE HIKES, EXCUSE ME, OR MAYBE AN ARGUMENT TO BE MADE FOR RATE CUTS. GREGORY: THERE ARE A LOT OF CONSPIRACY HERE IS GOING ON, BECAUSE THE MORE PRESSURE YOU PUT ON THE FRONT END, THERE IS A CLEAR DESIRE TO HAVE MORE TBILL ISSUANCE. THAT PUTS MORE PRESSURE ON THE FED KEEPING RATES WHERE THEY ARE OR WERE MOVING THEM DOWN. I AM NOT CONVINCED THAT IS A STORY, BUT ULTIMATELY AS THE FED RAISES RATES , WE HAVE TBILLS THAT COST MORE TO THE U.S. TREASURY. THERE IS THAT DYNAMIC. I THINK IT IS SEPARATE, BUT TIME WILL TELL. ROMAINE: DO YOU THINK WE WILL SEE A MATERIAL FLATTENING OF THE CURVE? GREGORY: I HAVE BEEN CALLING FOR A CURVE STEEPER FOR YEARS NOW. I WOULD LOVE A LITTLE EVENT. BUT FLATTENING IS THE RIGHT TRADE. ISABELLE: IF THE YIELD BREAKS 4.6%, WHAT WOULD BREAK IF THAT HAPPENS, STOCKS, CREDIT, THE ECONOMY, OR NOTHING? GREGORY: A KEY PIECE OF WHITE INTEREST RATES ARE WHAT THEY ARE IS THE NOMINAL GROUP STORY. -- OF WHY INTEREST RATES ARE BUT THEY ARE IS THE NOMINAL GROWTH STORY. YOU COULD QUIBBLE AROUND THE VALUATIONS, BUT THE FUNDAMENTAL EARNINGS DRIVER PIECE IS QUITE STRONG. THAT IS IN PART WHY YIELDS ARE WHERE THEY ARE. I THINK THAT IS A GOOD STORY. THE LESS GOOD STORY IS THE UNCERTAINTY PREMIUM, THE INFLATION CONCERNS AND ALIKE, BUT ULTIMATELY THE NOMINAL GROWTH STORY IS A FANTASTIC ONE, AND I THINK THAT IS WHY RISK ASSETS ARE DOING AS WELL AS THEY ARE. THAT MAKES SENSE TO ME. THAT IS HOW IT SHOULD BE. ROMAINE: WE HAVE SEEN THE ECONOMIC DATA, AND I THINK IT SHOCKED SOME PEOPLE BECAUSE THERE WAS A LOT OF DOOM AND GLOOM AFTER THE WAR STARTED IN THE MIDDLE EAST AT A YEAR AGO WHEN IT WAS THE WHOLE TERROR THING, AND YOU HAVE SEEN THE ECONOMY REMAIN RESILIENT, BUT CONSUMER SPENDING HAS HELD UP. ARE YOU CONFIDENT GOING INTO 2027 ABOUT THE ECONOMIC BACKDROP? GREGORY: I AM. THE WORRY IS THE SINGLE FACTOR MODEL ASPECT OF IT, WHICH IS TO SAY AI. THAT DRIVES NOT ONLY THE SPENDING, WHICH IS 1%, 1.5% OF GDP, BUT IT ALSO FUELS EQUITY PRICES WHICH FUELS THE WEALTH EFFECT WHICH FUELS THE OTHER PIECE OF IT. WHAT I FRET ABOUT OR WORRY ABOUT IS IF YOU START TO SEE A PULLBACK ON THE AI SIDE, WHAT KIND OF EFFECT WILL THAT HAVE COME A KIND OF THE UNWIND EFFECTIVE NOT ONLY ON THE SPINNING SIDE -- ON THE CAPEX SPENDING SIDE, BUT ALSO ON THE WEALTH SIDE. THAT IS A TALE RISK FOR SURE. ISABELLE: CREDIT RISKS ARE HISTORICALLY TIGHT. DO YOU THINK INVESTORS ARE GETTING PAID ENOUGH TO COMPENSATE FOR THEIR RISKS, OR NOT ENOUGH? GREGORY: I THINK CREDIT IS TELLING YOU THE FUNDAMENTAL STORY IS A GOOD ONE. I THINK IT ALL FITS. AT THE SAME TIME, AS A CREDIT INVESTOR, I DON'T NECESSARILY LOVE CREDIT, BECAUSE I AM NOT GETTING PAID FOR THE TAIL RISK. AT THE SAME TIME, WHAT WE ARE SEEING ON THE CREDIT SIDE IS INCREDIBLE DISPERSION AND OPPORTUNITY. WHILE THE INDEX LEVELS ARE REALLY TIGHT AND UNINSPIRING, THE DISPERSION IS QUITE WIDE. THIS AI BUILDOUT IS A TREASURE TROVE OF RELATIVE VALUE FOR BOND MANAGERS SUCH AS OURSELVES. IT IS KIND OF A PARADOX. ON ONE END, I THINK CREDIT IS KIND OF TIGHT AND I DON'T WANT TO OWN IT IN KIND OF A BETA WAY, BUT FROM AN ALPHA GENERATION STANDPOINT WITH THE AI BUILDOUT, IT IS A TREMENDOUS OPPORTUNITY. ROMAINE: GREAT TO HAVE YOU. GREGORY PETERS, ONE OF THE BEST IN THE BUSINESS. COMING UP ON "THE CLOSE," WE ARE GOING TO CATCH UP WITH THE FORMER CEO OF WALGREENS BOOTS ALLIANCE, ROZ BREWER. THAT IS COMING UP NEXT. THIS IS "THE CLOSE." ROMAINE: TAKE A LOOK AT THE BROAD MARKETS. THE S&P 500 BOUNCING BACK MILDLY OFF OF THREE STRAIGHT DAYS OF LOSSES. IT RAISES A LOT OF QUESTIONS AS TO WHAT THE NEXT CATALYST MIGHT BE TO TAKE THE MARKET TO THE NEXT LEVEL. ISABELLE: PROBABLY ANOTHER TREASURY MOVE. THIS TOOK US BY SURPRISE TODAY, BUT I WANT TO TALK ABOUT SOME MOVERS. ESTEE LAUDER, WE HAD A GREAT CHAT WITH THE CEO TODAY, AND THEY HAD GREAT EARNINGS. ENDED THREE STRAIGHT DECLINES ABOUT THE CACHE OF ANNUAL REVENUE. ROMAINE: I THINK THE KEY WORD IS ORGANIC. ISABELLE: IT IS ALMOST 200%! THAT CAUGHT ME BY SURPRISE. ROMAINE: WE ARE GOING TO TALK ABOUT TJX IN JUST A SECOND, SET YOU UP FOR WHAT TO TALK ABOUT WITH THE BULL MARKET TOMORROW, AND WE ARE GOING TO TALK ABOUT ROBOTICS WHEN WE COME BACK. ROMAINE: SOFTBANK IS PUTTING $200 MILLION INTO A CONSTRUCTION TECHNOLOGY STARTUP. THE INVESTMENT COMES FOLLOWING REPORTS SOFTBANK MAY BE CONSIDERING AN ACQUISITION OF THE ZURICH-BASED FIRM. THE CEO OF GRATIS ROBOTICS JOINS US NOW. GREAT TO HAVE YOU HERE. I GUESS WHAT I THOUGHT WAS INTERESTING WAS THIS IS SOFTBANK GOING ALONE. WHAT HAS MASAYOSHI-SAN WHISPER IN YOUR EAR ACT -- IN YOUR EAR? >> THERE'S THIS BIG BOOM GOING ON IN AI INFRASTRUCTURE. WHERE WE COME IN AS WE ARE ESSENTIALLY THE FIRST MOVER ON THE GROUND, BRINGING IN AUTONOMOUS EXCAVATORS THAT ARE ACCELERATING THAT BUILDOUT, LITERALLY PHYSICAL AI INFRASTRUCTURE, BUT AT THE SAME TIME, WE SEE A SPIKE IN DEMAND ACROSS ALL KINDS OF INFRASTRUCTURE. ROADS, QUARRIES, MINES EXTRACTING THE MINERALS BEING USED TO MAKE THE PRODUCTS. WHAT WE ARE DELIVERING HIS PRODUCTIVITY ACROSS THAT ECOSYSTEM, AND I THINK THAT BROAD IMPACT OF AUTOMATING THINGS LIKE EXCAVATORS AND WHEEL LOADERS, THESE THINGS YOU SEE ON CONSTRUCTION SITES, CONSTRUCTION ITSELF BEING 13% OF GDP, WE CAN HAVE A MASSIVE IMPACT BY DELIVERING PRODUCTIVITY IN THIS SPACE. ROMAINE: YOU ARE BASICALLY RETROFITTING EXISTING EQUIPMENT TO BE FULLY AUTONOMOUS, SEMIAUTONOMOUS, IS THAT RIGHT? >> EXACTLY. WERE PUTTING CAMERAS ON EXCAVATORS TO GIVE THEM THE PERCEPTION TO UNDERSTAND THE SAFETY ENVIRONMENT, BUT ALSO DO THINGS LIKE MEASURE USING A 3D SCANNER THE SHAPE OF THE TERRAIN TO BE ABLE TO TAKE ACCURATELY BUT ALSO EFFICIENTLY AND PRODUCTIVELY IN THOSE CONSTRUCTION ENVIRONMENTS. ROMAINE: WHAT IS THE DEMAND FOR RETROFIT IN THESE SPACES VERSUS CUSTOM-BUILT AUTONOMOUS MACHINES? RYAN: EXCAVATORS ARE A BEAST OF THEIR OWN. THEY ARE A COMPLEX HYDRAULIC MACHINE, AND THE MARKET IS BROAD. THERE'S A LOT OF OEM'S. THE TOP THREE OEM'S ONLY ACCOUNT FOR ABOUT OF -- A THIRD OF THE OVERALL MARKET SHARE. WE HAVE BEEN ABLE TO GO ON A DOZEN DIFFERENT BRANDS, AND WHAT'S IMPORTANT IS IT IS GIVING CONSTRUCTION COMPANIES THE CHOICE OF MACHINE TO USE. THESE MACHINES OFTEN TIMES LAST MORE THAN FIVE YEARS, SO THEY ARE NOT HAVING TO GO OUT AND BUY A NEW PIECE OF EQUIPMENT. AT THE SAME TIME, AND A LOT OF CONSTRUCTION PLAYERS ARE LOYAL TO SURVEY PROVIDERS WHO HAVE BEEN ABLE TO COME OUT AND SHOW THAT SAME DAY, THEY CAN MAKE REPAIRS WITHOUT DELAYING THE JOB. IF YOU HAVE SPENT TIME IN A HEATED ENVIRONMENT OF A CONSTRUCTION SITE, YOU KNOW THE LAST THING YOU WANT TO DO IS STOP OR BLOCK PRODUCTIVITY. THAT IS WHAT GIVES A LOT OF LOYALTY TO DIFFERENT BRANDS BUT ALSO OUR OWN SOLUTION. ROMAINE: YOU ARE NOT NAMING THEM, BUT I GUESS YOU'RE TALKING ABOUT CATERPILLAR AND OTHERS, SO THE QUESTION IS WHAT STOPS THEM FROM BUILDING THEMSELVES AND CUTTING OUT GRAVIS? RYAN: WE WORK WITH A LOT OF OEM'S, AND WE ARE WORKING TO BRING THAT TECHNOLOGY OUT IN AN EFFICIENT WAY TO CUSTOMERS. WHEN YOU MENTION, FOR EXAMPLE, THE MINING TRUCKS, THOSE ARE VEHICLES WHICH HAVE TO DRIVE ESSENTIALLY FROM POINT A TO POINT B, AND THEIR REQUIREMENT IS DON'T CRASH INTO ANYTHING. A ROCK IN THE ROAD, A WHOLE, A PERSON, YOU WANT TO HIT THE BRAKES. AN EXCAVATOR OR WHEEL LOADER OR ANYTHING WITH AN ARM ON IT, IT IS INTENTIONALLY CRASHING INTO THE ENVIRONMENT, CHANGING THE ENVIRONMENT AS IT NAVIGATES THROUGH IT, AND IMPORTANTLY, THE GROUND IS ROCKY AND FROZEN AND CHANGES IN AN INSTANT, AND WE ARE ABLE TO USE LEARNING-BASED CONTROL TO TEACH THESE MACHINES TO FEEL THE EARTH, WHICH LETS THEM DIG VERY PRODUCTIVELY, LETS THEM TAKE A FULL SCOOP UP DIRT -- SCOOP OF DIRT. WE ARE ABLE TO ACCELERATE THE AMOUNT OF EARTH THAT CAN BE MOVED ON THESE REPETITIVE TASKS. ROMAINE: I AM CURIOUS ABOUT THIS IDEA OF THESE NEWCOMERS, ON THE SAME DAY WE LEARN ABOUT SOFTBANK'S INVESTMENT, A ROBOTICS COMPANY BUILT BY FORMER EMPLOYEES OF WAYMO, THEY ARE SAYING THEIR ROBOTICS ARE FULLY AUTONOMOUS. IS THAT A COMPETITOR TO YOU? RYAN: WHAT WE ARE SEEING NOW IS DEMAND IN CONSTRUCTION HAS NEVER BEEN HIGHER. WE'RE EXCITED TO HAVE MULTIPLE COMPETITIVE PLAYERS, BE THAT OEM'S OR OTHER COMPETITORS IN THE SPACE WHO WILL WORK TO DELIVER A COMPETITIVE AND SAFE PRODUCT TO CUSTOMERS, AND THAT WILL ACCELERATE THE ENTIRE ECOSYSTEM. I HAVE SPENT MY LIFE COMMITTED TO THE BUILT ENVIRONMENT, AND I'M EXCITED TO SEE PLAYERS COME IN AND BE ABLE TO PUSH. WHERE WE STAND OUT AS A COUPLE OF THINGS. WE HAVE A PRODUCT THAT DELIVERS FULL AUTONOMY BUT ALSO EXPOSES ALL THE INFORMATION THE ROBOT USES TWO OPERATORS, SO IT CAN BE USED LIKE A COPILOT TO SHOW THEM WHERE AND WHERE NOT TO DIG, SO WE LET OPERATORS GRADUALLY ADOPT AUTONOMY AT THEIR OWN PACE. BECAUSE OF A LEARNING-BASED SYSTEM TRAINED HEAVILY IN SIMULATION, WE ARE LITERALLY TRAINING IN LIFE TIMES CONSTRUCTION OPERATORS' EXPERIENCE, SO WE ARE PUTTING IN BILLIONS OF CUBIC YARDS IN THOSE SIMULATIONS OF EARTH MODELS, AND THAT LETS US EXCEED AN AVERAGE OPERATOR WHEN WE DEPLOY THESE SYSTEMS. WE ARE SEEING 30% OR 40% OF EXPECTATIONS EXCEEDED WHEN WE DO THESE. YOU HAVE A LOT OF DIFFERENT OEM 'S, AND WE ARE THE ONLY PLAYER THAT HAS BEEN ABLE TO SHOW WE CAN GO ON PRETTY MUCH ANY LEARNING MACHINE AND DEPLOY THE SAME LEARNING-BASED CONTROL. ROMAINE: I HAVE TO END THIS BY CIRCLING BACK TO SOFTBANK AND MASAYOSHI -SAN. HE DOES NOT JUST CUT CHECKS LIKE THIS WILLY-NILLY. THEY EXPECT BIG RESULTS AND FAST. RYAN: WE ARE EXCITED FOR VERY BIG SCALE, AND WE HAVE SHOWN A COMMITMENT TO OUR CUSTOMERS TO PROVE THIS OUT IN REAL ENVIRONMENTS. WE ARE OPERATING IN FOUR CONTINENTS RIGHT NOW. WE HAVE CUSTOMERS WITH HALF A DOZEN MACHINES. WE HAVE CUSTOMERS COMING BACK TO US FOR MORE, SO WE ARE EXCITED AND DOUBLING DOWN ON DISTRIBUTION RELATIONSHIPS. WE ANNOUNCED LAST WEEK AND $8 MILLION PROJECT TO BRING A TURNKEY RENTAL SOLUTION TOGETHER WITH THE LARGEST RENTAL COMPANY IN THE U.K., SO WE ARE REALLY USING THIS OPPORTUNITY WITH SOFTBANK TO DELIVER AUTONOMY AND USE ALSO THIS AI BUILDOUT TO SLINGSHOT MORE CAPABILITIES TO BE ABLE TO DELIVER TO ALL THE OTHER CONSTRUCTION DOMAINS WHICH NEED THIS. BUILDOUT HOUSING MASTER. BUILDOUT RENEWABLE AND RESILIENT ECO-INFRASTRUCTURE FASTER. WE SEE THIS AS A MASSIVE OPPORTUNITY FOR AUTONOMOUS CONSTRUCTION. ROMAINE: GREAT TO HAVE YOU, RYAN LUKE JOHNSON, CEO OF GARAVIS ROBOTICS. NET REVENUE OF BEAUTY COMPANY CORTY EXPERIENCED ITS SEVENTH STRAIGHT DECLINE, BUT THE LOWEST DECLINE IN ABOUT A YEAR AND A HALF. WE WILL BE BACK IN A MOMENT. THIS IS BLOOMBERG. ♪ ROMAINE: ROSALIND BREWER HAS SPILLED -- BUILT A STORIED CAREER AT SOME OF THE WAS MOST ICONIC BRANDS -- SAM'S CLUB, STARBUCKS, WALGREENS. I HAD A CHANCE TO SIT DOWN WITH HER MARTHA'S VINEYARD. I ASKED ABOUT SOME OF THE PIVOTAL MOMENTS THAT SHAPED HER CAREER FROM THE LAB FLOOR AT KIMBERLY-CLARK 30 PLUS YEARS AGO TO THE CEO SUITE AT WALGREENS JUST A COUPLE YEARS AGO. TAKE A LISTEN. ROZ: I JOINED KIMBERLY-CLARK AS AN ORGANIC CHEMIST. THAT'S ALL I WANTED TO DO. I FELT LIKE I WAS A SCIENTIST, BUT CORPORATE INTRODUCED ME TO SOMETHING. THE BUSINESS SHOWED ME THAT I CAN WORK IN M&A. I MOVED OVER TO THE M&A SIDE OF THE BUSINESS, AND AFTER THAT, I RAN SOME OF THE COMPANIES THAT I PURCHASED, SO I NEVER LOOKED BACK TO THE LAB, AND THE HISTORY AS THEY ARE, BUT THAT WAS NEVER THE PLAN. ROMAINE: DID YOU LEARN SOMETHING FROM THE LAB THAT WAS APPLICABLE TO YOUR FUTURE CAREER AS A BUSINESS LEADER? ROZ: I DID. FIRST OF ALL, BEING A CHEMIST, YOU ARE DEEPLY EMBEDDED IN THE ELEMENTS, AND I LEARNED HOW BEST TO PROBLEM SOLVE IN THE LAB, AND IT IS RELEVANT WHEN YOU ARE IN A BUSINESS SETTING. THE WORK THAT I HAVE DONE ON MY CAREER ON TRANSFORMATION IS AROUND LOOKING AT THE PROBLEM AND FLIPPING IT ON ITS SIDE AND THEN SOLVING IT. I WOULD SAY THAT I GAINED THAT FROM MY TIME AS A CHEMIST AND AT SPELMAN. ROMAINE: YOU LEFT KIMBERLY-CLARK AND WENT TO SAM'S CLUB? ROZ: I ACTUALLY WENT TO WALMART STORES AND RAN OPERATIONS ULTIMATELY WERE ABOUT 50% OF THE COUNTRY, AND THEN I WAS MADE THE CEO OF SAM'S CLUB. ROMAINE: I'M CURIOUS ABOUT THAT. WHEN I LOOK AT THAT, YOU ARE BASICALLY RUNNING A DIVISION OF KIMBERLY-CLARK. YOU GO TO WALMART. WAS THAT A PROMOTION OR A STEP DOWN? ROZ: IT WAS ACTUALLY QUITE A DEMOTION. I KNEW I WANTED TO CREATE A NEW SKILL SET, SO WHEN I JOINED WALMART, I TOOK A VICE PRESIDENT'S ROLE IN OPERATIONS, RUNNING STORES IN THE STATE OF GEORGIA, AND IT WAS TOUGH WORK. I HAD TO LEARN RETAIL, BUT I WAS WITH ONE OF THE BEST RETAILERS IN THE WORLD, AND I WAS IN THE ROLE FOR ABOUT FOUR MONTHS AND I TOOK OVER SOUTHEAST OPERATIONS AND OVER A SHORT TIME RAN HALF THE COUNTRY FOR WALMART STORES. ROMAINE: FOR PEOPLE OUT THERE LOOKING AT THEIR CAREERS AND LOOKING AT NEW OPPORTUNITIES, WHAT DOES IT MEAN TO MAYBE TAKE THAT STEP DOWN WITH THE IDEA THAT THAT LEADS TO A STEP UP IN THE FUTURE? ROZ: YOU HAVE TO CONSTANTLY LOOK AT YOUR SKILL SETS AND THE DEFICITS, AND SOME INDIVIDUALS DON'T WANT TO RECOGNIZE THAT THERE IS STILL LEARNING TO BE HAD, THAT YOU ARE NOT AS GOOD AS YOU THINK YOU ARE AND YOU DO NEED TO EXPAND. I LOOKED AT MYSELF AND SAID, YOU ARE NOT GROWING ANYMORE. I SAT ACROSS THE TABLE FROM WALMART IN MY ROLE AT KIMBERLY-CLARK IN SUPPLYING THEM DIAPER MATERIAL AND FINISHED PRODUCT, AND I ADMIRED RETAIL. WHEN I JOINED RETAIL, ONE THING I LEARNED ABOUT IT WAS IT IS ABOUT OPERATIONS AND DETAIL, AND THAT IS MY BACKGROUND. ROMAINE: YOU EVENTUALLY RETIRED FROM WALMART. THAT WAS A PRETTY SHORT RETIREMENT. YOU ONLY RETIRED FOR A FEW MONTHS. YOU ENDED UP ON THE BOARD OF STARBUCKS. DID YOU KNOW THAT WAS COMING? ROZ: I HAVE NO EARTHLY IDEA. IT WAS ONLY IN MY SECOND BOARD MEETING THAT I LEFT AND THEY WERE CALLING ME BACK. I ACTUALLY THOUGHT I LEFT AN UMBRELLA OR SOMETHING. THEY WERE CALLING ME BACK TO ASK IF I WOULD BE INTERESTED IN WAS DESCRIBED TO ME I WAS THINKING, THIS COULD BE INTERESTING. I DO LIKE TO OPERATE AND I DECIDED TO FIRST OF ALL MAINTAIN MY SEAT AS A MEMBER OF THE BOARD AT STARBUCKS AND TAKE THE CHIEF OPERATING OFFICER ROLE. ROMAINE: YOU DID AND I CAN SAY BASED ON WHAT WALL STREET VIEW, IT WAS LAUDATORY. THERE WAS THE FAMOUS INCIDENT IN 2018 WHERE THE TWO GENTLEMEN IN A PHILADELPHIA STORE, YOU SHUT DOWN THE STORES, ALL STARBUCKS STORES FOR AN AFTERNOON OF DIVERSITY TRAINING. MY UNDERSTANDING IS THE TRAINING STILL CONTINUES. THAT WAS 2018 AND THAT WAS PRETTY BOLD. ROZ: WE LOST MONEY. ROMAINE: YOU DID. WOULD A MAJOR COMPANY MAKE THAT CALL TODAY? ROZ: I DON'T THINK SO, I THINK IT WOULD GET NEGATIVE PUBLIC ATTENTION. WE RAN THE RISK OF THAT IN 2018 QUITE HONESTLY BUT WE KNEW WE NEEDED TO DO THAT. TODAY I THINK THAT WOULD NOT HAPPEN AND IT'S SHAMEFUL. THERE ARE STILL INSTANCES WHERE OLD MOVES LIKE THAT ARE NEEDED AND PROBABLY MORE REQUIRED TODAY. ROMAINE: YOU DID LEAVE STARBUCKS. MOST OF THE TALK, INCLUDING OUR OWN REPORTING AT THE TIME WAS THAT YOU WERE THE HEIR APPARENT. WHY DID YOU LEAVE? ROZ: AT THAT TIME THERE WAS A LOT OF WORK HAPPENING AT STARBUCKS IN TERMS OF THE FOUNDER, HOWARD SCHULTZ, AND HIS ASSENT -- ASCENT TO A PROFESSIONAL ROLE IN POLITICS. I CONSIDERED WHAT SHOULD I DO AT THIS POINT? AND QUITE HONESTLY WALGREENS KNOCKED ON THE DOOR AND I HAD DECISIONS TO MAKE. I LIKE TO THE OPPORTUNITY OF PHARMACEUTICALS. I LIKED THE OPPORTUNITY TO BE IN A NEW CATEGORY AND SPACE. SO I TOOK THE OPPORTUNITY. ROMAINE: DID YOU GET A FAIR SHAKE AT WALGREENS? YOU WERE THERE A COUPLE YEARS, YOU INHERITED A STRATEGY FROM THE PRIMARY OWNER. I'M CURIOUS WHETHER YOU EVER FELT TRUE OWNERSHIP OF WHAT THE PLAN WAS TO TURN WALGREENS AROUND. ROZ: I CAME INTO THAT OPPORTUNITY WITH EYES WIDE OPEN EARED I KNEW CLEARLY WHAT I WAS APPROACHING AND IN THAT RESPECT I'VE LEARNED A LOT ABOUT TURNAROUND. IF YOU'RE AWARE OF THE TASK IN FRONT OF YOU AND TO POWER YOURSELF UP WITH STRONG PEOPLE AROUND YOU, YOUR CHANCES OF WINNING ARE VERY STRONG. WE DID ALL THOSE THINGS. DURING COVID -- I JOINED DURING COVID, FIRST OF ALL. JOINING DURING COVID, I KNEW THAT WHEN THERE'S A CRISES THAT'S THE BEST CHANCE FOR CHANGE TO HAPPEN. THAT'S WHAT WE DID. WE BROUGHT TECHNOLOGY INTO WALGREENS IN ORDER TO PUT 70 MILLION SHOTS IN THE ARMS AND WE DID THAT BECAUSE WE WERE ABLE TO DO TWO THINGS -- WE MANAGED THE COLD CHAIN PROCESS OF PFIZER OF DISTRIBUTION TO RETAIL TO 70 MILLION SHOTS AND ARMS. THAT'S WHAT I LEARNED. ROMAINE: THAT IS ROZ BREWER, FORMER CEO OF SAM'S CLUB, FORMER COO OF STARBUCKS AND FORMER CEO OF WALGREENS. THAT'S PART OF OUR NEW VOICES EVENT THAT BLOOMBERG PUTS ON THIS MONTH. WE HELD IT FOR THE FIRST TIME IN MARTHA'S VINEYARD. WE WILL BE BACK IN A MOMENT AND WE WILL CONTINUE TO TALK RETAIL. THIS IS BLOOMBERG. ROMAINE: BREAKING NEWS ON THE TARIFF SITUATION BETWEEN THE U.S. AND CANADA, WE ARE LEARNING BASED ON BLOOMBERG REPORTING THAT THE PRESIDENT OF THE UNITED STATES IS POISED TO REDUCE TARIFFS ON AUTOMOBILES FROM CANADA TO 15%, DOWN FROM 25% THE PRESIDENT PUT ON FOREIGN-MADE CARS AND TRUCKS LAST YEAR. THERE'S BEEN A LOT OF BACK-AND-FORTH WITH REGARDS TO THE U.S. AND CANADIAN NEGOTIATIONS. WE WILL UPDATE YOU ON ADDITIONAL INFORMATION WE GET AND DON'T FORGET, THE BALANCE OF POWER TEAM WILL BE HERE AT THE TOP OF THE HOUR WITH MORE. WE WANT TO TURN BACK TO THE RETAIL SECTOR. YOU WILL HEAR FROM WALMART TOMORROW, THE GRANDDADDY OF THEM ALL. I DON'T KNOW WHERE EXPECTATIONS ARE WE WILL FIND OUT. OUR GUEST JOINS US TO TALK ABOUT WHAT TO EXPECT. EXPECTATIONS FOR ABOUT 3.5 TO 3.7% GROWTH, IS THAT IT? >> A LITTLE STRONGER, 3.8% IS WHAT WE ARE EXPECTING. IT'S IMPORTANT TO LOOK AT ALL THE COMPONENTS. I THINK IT WILL BE A GOOD QUARTER OVERALL FOR WALMART. IN ADDITION TO ITS SCALE AND PROXIMITY TO THE CONSUMER, ONE OTHER ADVANTAGE WALMART HAS IS THE HIGH-MARGIN BUSINESSES LIKE ADVERTISING AND MEMBERSHIP WHICH ARE EXPECTED TO GROW OVER 25% FOR THE QUARTER. IT'S THESE HIGH-MARGIN BUSINESSES THAT GIVE THEM THE FINANCIAL POWER TO DO THE EVERYDAY LOW PRICES. ROMAINE: THAT'S HAVING A MEANINGFUL IMPACT? >> IT IS AND THAT'S HELPING -- LAST QUARTER WE HEARD FROM WALMART BUT THEY ARE HIT BY HIGHER FUEL PRICES, ENERGY, AND THE BAR HAS BEEN SET A LITTLE LOWER FOR WALMART BUT GIVEN THE CIRCUMSTANCES AND HOW MUCH MEMBERSHIP AND EVEN ADVERTISING IS EXPECTED TO GROW, THIS IS MAKING IT SLIGHTLY MORE DIFFICULT FOR TRADITIONAL RETAILERS AND SUPERMARKETS TO COMPETE WITH THE LIKES OF WALMART. ROMAINE: TALK ABOUT COMPETITORS. WE HEARD FROM TARGET EARLIER TODAY AND I KNOW IT'S A DIFFERENT STORY WITH THE TURNAROUND -- ARE YOU BUYING INTO THE TURNAROUND? >> YES, ESPECIALLY BECAUSE WHAT STOOD OUT TODAY WAS THE TRAFFIC NUMBERS. REVENUE GREW OVER 5% INTO THAT CAN BE ATTRIBUTED TO HIGHER PRICES BUT TRAFFIC GREW 3.6%, THE CONSUMER IS GOING MORE TO THE STORES AND PURCHASING MORE. ROMAINE: WHAT ARE THEY BUYING? I'M TEREUS WHAT WALMART HAS TO SAY -- I AM CURIOUS WHAT WALMART HAS TO SAY, THERE'S THE THOUGHT THAT THEY ARE BUYING THE SUBSIDIES, OR ONE SPLURGE. >> TARGET HAS REALLY REMODELED IT, SO YOU WALK INTO BY TWO THINGS AND YOU BUY MORE. ONE THING THAT'S REALLY HELPING IS THE BACK-TO-SCHOOL ITEMS THAT ARE LOWER. 95% OF THE ITEMS ARE LOWER THAN THE PRICES LAST YEAR. THIS IS CRUCIAL BECAUSE RIGHT NOW IN COLLABORATION WITH CENTRIC MARKET INTELLIGENCE, WE DISCOVERED THAT BACKPACKS AND FOOTWEAR ARE SIGNIFICANTLY HIGHER THAN A YEAR AGO OR THE PREVIOUS SIX YEARS. ROMAINE: STILL NOT ON THE SAME VALUE SCALE AS A WALMART. I'M CURIOUS ABOUT WALMART SPECIFICALLY AND THE IDEA THAT THEY WERE NOT NECESSARILY DIRECT COMPETITORS BECAUSE THERE WERE DIFFERENT GEOGRAPHIES. WITH THE BUILDOUT OF THE E-COMMERCE BUSINESS WALMART HAS DONE WELL, OR THEY NOW MORE OF A DIRECT COMPETITOR? >> THE IMPACT WALMART HAS COMPARED TO AMAZON'S PROXIMITY TO THE CONSUMER. 90% OF THE U.S. POPULATION IS WITHIN 10 MILES OF A WALMART AND THAT IS HUGE. AMAZON JUST DOESN'T HAVE THAT. ANOTHER THING WE'VE NOTICED THIS EARNINGS SEASON IN GENERAL AND THIS IS WHY TARGET IS DOING BETTER, TARGET TOLD US THEY HAD A 25% INCREASE IN SAME-DAY DELIVERY. SAME THING WITH HOME DEPOT AND LOWE'S, THEY DIDN'T DO WELL IN GENERAL BUT THE E-COMMERCE GREW DOUBLE DIGITS. CONSUMERS ARE ALL ABOUT INSTANT GRATIFICATION. THEY ARE BEING VERY SELECTIVE THIS EARNINGS SEASON WHERE THEY ARE SPENDING BUT IF THEY CAN GET THE CONVENIENCE FACTOR, THAT'S WHERE WE ARE SEEING THE STRENGTH. ROMAINE: ALL RIGHT, OUR GUEST. WALMART EARNINGS OUT TOMORROW. AFTER THE BELL TONIGHT, KEEP AN EYE ON MODERNA. STILL MOVING HIGHER IN THE POST-MARKET ON THE BACK OF A LATE STAGE STUDY FOR A VACCINE RELATED TO MELANOMA. BALANCE OF POWER IS NEXT. ♪