Markets' Losing Streak, Amazon's $4B Bet on AI, Writers-Hollywood Studios Tentative Deal 9/25/23

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Courtney Reagan (0:05)

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Courtney Reagan (0:12)

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Jim Cramer (0:31)

It's Jim Cramer here. You're listening to the opening bell of CNBC's Squawk on the Street. Don't miss a minute of the action.

Carl Quintanilla (0:38)

Good Monday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Courtney Reagan, Mike Santoli at the New York Stock Exchange. Cramer and Faber have the morning off. Final week of September and Q3. Futures red as we come off the worst week for the S&P NASDAQ since March. Busy few days ahead with global inflation data. Fed speak some earnings from Nike and Micron. 10-year 4.5 is a new cycle high. Our roadmap begins with the last trading week of the quarter. S&P poised to drop further from this three-month low at the open.

Plus StrikeWatch Hollywood reaching a deal with riders while the auto walkout enters its second week. Ford says significant gaps still remain. And Amazon's AI Move investing some $4 billion in a ChatGPT rival.

Let's begin though with a new market week for after four days of losses, Mike, and we lost the 100-day moving average on the S&P.

Mike Santoli (1:28)

Yeah, new market week, very similar dynamics so far. You have the 10-year yield poke above 4.5%. We closed pretty close to the lows on Friday. And now I think it's become, the debate point is, yes, we knew and expected that we were gonna have some seasonal weakness. We came into August overbought and overloved and everybody embracing the soft landing scenario. Now we've had a little bit of corrective mindset to that.

How deep we have to go is a good question in terms of trying to account for where rates are and why they're there.

So last week, I wasn't necessarily that alarmed at the specific changes the Fed made, where they sort of took away two notional rate cuts from next year and essentially higher for longer, they've been saying for a very long time. But the market reaction, the 10-year yield reaction caused people to say, wait a second, yields aren't going up because the economy is accelerating right now. The Fed's changing its own outlook because the economy has been strong, but we already knew that. So there's this kind of lag in the market perception of where we are, where the Fed says we have to go. And also if treasury supplies a part of the story on the four and a half percent, it causes everybody to say, can the consumer, can the economy handle rates and oil at this level?

Courtney Reagan (2:42)

And rates obviously are moving higher, but it doesn't seem as much as equities really sold off. Were you surprised by that reaction to your point about, look, they didn't tell us anything we didn't know, except for maybe make it a little bit more transparent?

Mike Santoli (2:53)

It's true. The absolute change in yield last week was not that dramatic. I think it was 11 basis points on the 10 year, a little bit less than that on the two year. But because we broke out to 16, 17 year highs, now you have everybody looking at the treasury charts and saying, well, the 10 year, it just five and 5.1 is right there. That's where the technical target brings you to. And again, I think it's why it's happening.

Again, if we were, hey, earnings estimates are racing higher.

We all are just accounting for a faster growth world. It's obviously not necessarily the case. So I'm not so much in that camp that says, well, we just plugged the 4.5% 10 year into the equity valuation model. And that's why we're down. And that's part of why we're down. Mostly that we're down because we're worried that the Fed is willing to see the economy weaken more than the stock market can handle.

Carl Quintanilla (3:45)

Right, yeah, not being accompanied with a better growth picture is why this particular round has been harder for equities to absorb.

Mike mentioned supply. We're gonna get new twos, fives, sevens this week, maybe another 20 billion in IG supply as well.

Mike Santoli (3:58)

Yes, and so we keep testing this market. Now the supply is not a long-term linear relationship that says every time the government's selling more treasuries yields surge. But there's enough of a worry that that's the case.