10AM Hour: The Great Rates Debate, NextEra-Dominion Deal Details, & A Read From The Ground On AI 5/18/26

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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 David Faber. We are live as always from Post 9 of the New York Stock Exchange. Ahead this hour, stocks turning higher to start the week. Ahead of the key stretch for the market, highlighted by NVIDIA results, we'll talk about the setup with RBC's Laurie Calvicina. Plus, we'll get to the latest on the AI trade when we are joined by Jack Hittery from SandboxAQ, which just announced a new partnership with Anthropic this morning around quantitative computing. And Rockefeller's Ruchir Sharma with us to talk about the takeaways for global investors from President Trump's China trip.

Carl Quintanilla (1:39)

Let's get some housing data this morning. And AHB with Diana Olek. Morning, Diana.

Diana Olek (1:43)

Good morning, Carl. Homebuilder sentiment in the market for single family homes rose three points in May to 37 on the NHB Wells Fargo index. That's a beat. The street was looking for unchanged. Still, anything below 50 is considered negative. The index stood at 34 last May. And that's when mortgage rates were hovering around 7%.

Now, we're lower now, but not a lot lower. And rates have been rising in the past week. The NHB cited rates, as well as rising gas prices and economic uncertainty related to the war in Iran, which all continue to dampen buyer demand. Now, of the index's three components, all were higher by three points. Current sales conditions to 40, buyer traffic to 25, and future sales expectations rose three points to 45 The survey also found fewer builders cutting prices in May. 32% compared with 36% in April. The use of sales incentives was 61% in May. That is up slightly from 60% in April. Sara, we seem to be seeing a little bit of a late spring surge, according to the builders.

Sara Eisen (2:44)

Okay, that's hopeful. Thank you, Diana. Diana Olek, we'll take it. I'll tee off of Diana's talk about mortgage rates, and I think we have to hit global bond yields because there has been this move higher, and it's not just in the US, it's in the UK, it's in Japan.

The moves are a little bit more subdued today, but this continues a move that we have seen over the last few sessions that now has long bond yields, the 30-year US bond yield most elevated since 2007

We got the German 30-year at the highest in 15 years. In Japan, the 30-year is its highest ever since the 30-year was first sold in Japan back to 1999 Why is this happening? Well, the common thread here is that the inflation picture is elevated. The longer the war goes on, the higher oil prices stay. The more of these countries and economies have to deal with higher inflation. But there's also fiscal concerns that are right front and center, especially in the UK where there's a leadership challenge with Keir Starmer. Of course, there are questions about the fiscal picture there in Japan as well. This new budget that has to deal with elevated commodity costs means maybe we'll have to see more bond sales in Japan. They have to raise more debt. That's always a concern. These are very indebted countries, high debt to GDP in the United States as well. But inflation is the common thing. The reason I'm watching this really carefully is because you've got a bit of a disconnect between bonds and stocks. Bonds are telling you, uh-oh, worried about inflation, worried that central banks aren't going to be able to cut, may even have to hike. Stocks are hanging in just fine. Usually, stock market doesn't like to see higher bond yields. But this stock market has been okay with it. Why? Well, AI and earnings. I mean, I think we have to just show you what's happening. Citigroup has a great chart of earnings expectations and just what usually happens this time of year with earnings expectations. What's happening now with earnings expectations?