10AM Hour: Is Wall Street Misreading China's AI Threat? Report of New Google Chip, Middle East Tensions Intensify 7/20/26

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The board recommends approving...

**Oliver Renick** (0:01)
Regarding that seat on the committee, we're promoting......to most quarterly earnings...

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**Sara Eisen** (1:06)
Good Monday morning, welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla and Mike Santoli, live from Post 9 of the New York Stock Exchange. David Faber has the day off. Stock's mostly higher this morning, and oil's staying in check despite an escalation and fighting in the Middle East. We'll talk to a market expert, Eddie Ardeni, about the setup for the week. Plus, anthropic investor Byron Deeter tells us why Wall Street is getting the story wrong around the competitive threat from those Chinese AI models, and details on the chip headline that's moving out of that higher right now, up more than 3%.

**Carl Quintanilla** (1:36)
Let's get some LEI from Rick Santelli this morning.

**Sara Eisen** (1:38)
Hey, Rick.

**Rick Santelli** (1:40)
Hey, good morning, Carl. Yes, this is our June reading on leading economic indicators. Expecting a negative number, down 1 tenth of a percent, comes in down 2 tenths of a percent. That would be the biggest negative month over month change since it was down 6 tenths in March of this year. But what's noteworthy here is we haven't had three consecutive positive readings in a row since the end of 2024 And this would have been the third positive in a row if it was positive, just to demonstrate how negative leading economic indicators has been running. Now, if we continue to monitor interest rates, we see that 2-year yields are at the high yields of the day, 420 That's up 2 basis points. Their high water mark on this cycle, well, it was the 13th of July at a yield of 429 The curve continues to wiggle a bit as we see long rates leading higher, flattening the yield curve 457 in a 10 years up to its high water mark, 10 basis points above current level at 467 And that's from May 19th. Carl, back to you.

**Sara Eisen** (2:49)
All right, I'll take it, Rick. Thank you very much. Rick Santelli, perhaps one of the reasons behind those higher pressure yields is the higher oil prices that we've seen of late. And the big headline, of course, is pointed AAA. The national gas price average is back above $4 a gallon. So that's the first time we're at that level in about a month. And the renewed fighting between the US and Iran, that has prices elevated, it has traffic slowing in the Strait of Hormuz.
You know, we've been here before. And actually, I think the biggest surprise was that the economy and the consumer was pretty resilient to the higher gas prices. Though psychologically, you know, I think it raises questions about how they feel, what that does to confidence levels, to political polls in the election. Here's Goldman Sachs on what could happen next. Though their base case is $80 a barrel for Brent. This is the international benchmark. They say there's definitely upside. And you know, if we continue to see the escalation in the Middle East, they could go above the $80 a barrel, the risk to the forecast for higher oil price could go up to $120. But I think the key here is that they see also a path toward very quick recovery of oil prices. And that is something everybody learned and sort of surprised everyone when there was a ceasefire and when the fighting stopped, oil prices came right back down to the place where they were before the war. And so that is something maybe to take comfort in why it's not as big of a market and economic risk if we do see oil prices rise again as we're seeing.