SOTS 2nd Hour: Fed Chair Race Developments, WBD-Netflix Latest, & LIVE: Robinhood, Oklo CEOs 12/17/25

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Good Wednesday 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. Coming up this hour, two big CEO interviews you can't miss. Robin Hood's Vlad Tenev will join us as the company announces new prediction market features around the NFL. Plus, we'll be joined by the CEO of Oklo after the nuclear company completed a key plutonium test as the AI industry demands more and more power. And David will bring us the latest, of course, in the Warner Brothers Discovery drama, highlights from interviews with two of the central players he had this morning. But guys, the race to see who will be the next Fed chair is on. And there's a new twist, and that is that Fed Governor Chris Waller is going to be interviewed by the White House today. That was first reported by The Wall Street Journal. Our Steve Leesman just speaking to him at the Yale Conference. Just want to show you the cal she odds here on who the next Fed chair will be. Remember, Powell's term doesn't end till next May. So, next June meeting will be the first of the new Fed chair. But the odds have been all over the place. Kevin Hassett is still the favorite here, 55 percent, 50-something percent odds or so, 54 And then Chris Waller and Kevin Warsh are sort of around 20 percent. Again, this is just the betting markets. They don't know much, but going on some of these words of rumors of who's at the White House, who's doing the meetings. We know the president himself has mentioned both Kevin's being front runners. You know, Chris Waller, the fed governor, did speak this morning to Steve about his views on monetary policy. So, you know, since he is going to be talking to the president about it, one of the key questions right now to sort of gauge whether you're a hawk or a dove or how many cuts you might want is where he thinks neutral is. And that's something Steve asked him. Listen. I still think we're probably, you know, maybe we're 50 to 100 basis points off of neutral. We still got some room we could bring things down. Neutral is the level of the fed policy rate that doesn't that's that's kind of doesn't hurt the economy and doesn't help the economy. It's sort of the baseline of where they're trying to get to. And when he suggests we still have another 50 to 100 basis points to go, that means that he's suggesting that there's more cuts to go. And then we sort of went back and looked at some of his his old speeches. The last speech was November 17th to sort of signal whether he wants more cuts ahead. But he was very dovish in that speech. Did say that he was more concerned about the labor market, the K-shaped economy and not so much inflation. Here was the money quote, I thought, Carl, with the evidence of slowing economic growth and the prospect of only modest wage increases from the weak labor market, I don't see any factors that would cause an acceleration of inflation. IE he's probably not a holder and definitely not hawkish at all. And that's going to go down well, probably, with the president. We had him on this show in the spring, I think, at the time he was arguing for about four cuts for the year, which seemed aggressive at the time, actually ended up not being all that aggressive compared to what we got. And to your point about one year inflation swaps, that's a fresh 52-week low today at two and a quarter. Wages are coming in. Shelter looks like it may well come in next year. If you listen to Goldman, for example, energy is obviously already in play. So today, notwithstanding. Right. No, there's a lot of evidence for why inflation is not a bigger problem than the labor market, which is the dovish view on the Fed. And I think that Governor Waller makes that point credibly because he doesn't say, you know, the economy is booming, we need more rate cuts. He says, actually, the economy is hurting and the labor market is showing weakness and the consumer is showing signs of strain and therefore that means we should have weaker economic policy. In other words, I think that there's a little bit of a credibility factor in there versus some of the those that are close to the White House and now I don't I don't fault Kevin Hassett. He is the head of the National Economic Council working at the White House right now. But the difference is Waller is not talking about a booming economy. He's talking about a soft economy, which actually is a better argument, I think, for lower interest rates. And I do wonder how that's gonna resonate with the president. I'll just leave you with one more chart on this, which I think helps prove his point. It comes from Bank of America. They look at small business hiring and the first half of the year, so the majority of the year, it has turned south. And that suggests that there's some pain and that it's, you know, sure, maybe it's labor supply because we don't have as many people in the labor market and the labor force because of immigration. That could be one reason, could be the tariffs, could be the just general sentiment shift. But either way, small business hiring is cooling. They say it's not collapsing, but it is cooling, and it took a further step down in November. Payments to hiring firms then fell 4.6% from last year on a three-month moving average, confirming the weaker small business labor market. So it's happening. There's the argument. I mean, that's something that I think Waller would point to and say, look, our cuts are helpful and we need to keep going. Let's get to the broader markets this morning as well. Our next guest has a cautious outlook for the new year, joining us here at Post 9 Today, Steve Sosnick, chief strategist at Interactive Brokers, has a 6,500 year end target for the S&P in 2026 That's a curious number, Steve. Good to have you. Good to see you, Carl. What would lead us to that? A lot of, a confluence of different factors. First of all, I'm an inherent contrarian. So let me start with that. And I believe I'm kind of an outlier and I'm being a little lower. But history, I think, points to caution. Number one, second year presidential terms or midterm elections, however you want to slice it. We've only had two bear markets in the last 15 years. Guess when they've happened? Second year presidential terms. And I think very specifically as a long term options trader, February of 2018 was Valmageddon, which was truly scary. But I think we have, you know, sort of everybody's on one side of the boat on this regard. Secondly, new Fed chairs tend to get tested in their first year or so. It's just that doesn't happen very often. All these are low-frequency events, so it's tough to draw too many patterns. But just historically, it's the case. Bernanke took office in 2018, really just around Valmageddon. Yellen had a pretty smooth time. Bernanke came just in time for the financial crisis, and Alan Greenspan came in literally just before, like a month and a half before the stock market crash of 87 So the track record there is just tricky. I think because you get into the situation of excitement, as Sara was just saying, it's sort of dove, dover, doveishist kind of thing is where we are now, and so any upset to that could cause some problems. Then I think we're also just reassessing the AI trade that's brought us so far where we are, and I think the market is going through that, and this is why I don't have like a 5,500 or 5,000, it's just more of a cautious number, basically on the thought that, okay, these companies have brought us so far so fast, but they're also if there's any pullback in them, it takes an awful lot of rotation to make up if they're losing ground or even just treading water. You think Broadcom is a good example to point to? Exactly. Coming out of pretty positive earnings. Well, that's it. The only thing Broadcom could have said that was better than what they said was that guidance tops the highest end of our estimate. By any normal stretch of the imagination, Broadcom said everything they needed to say to get a stock to do well. Instead, they fell double digits in two days. You've got a good take on, I was waiting for the Broadcom chart, but I'm not sure we'll get it. A good take on pre-market trading trends, meaning traders who are looking to buy weak futures in the hopes of a rally at the open. Absolutely. You can almost set your watch by it now. 4 AM, just look at a chart, 4 AM you see the futures jump. I've been starting to, the term hit me yesterday after I wrote my piece, Pluto rallies because I thought of the movie Animal House, where like Belushi goes running out of the room and nobody follows him. We've seen this a lot of times where there's this big run up into the open and we're seeing it today, and there's no follow-through. Doesn't mean it's not going to happen. What it also means is, it probably bodes well for the Santa Claus rally because then you don't have the institutional sellers, you don't, the old dull, don't short a dull tape applies, so maybe they can get away with it more in the week between Christmas and New Year's, but it's clearly a pattern right now. Everything you're pointing to, the Broadcom, it points to a market that's tired and that has run up very strongly, but for a shift in terms of direction or even into a bear market or anything like that, wouldn't something fundamental need to change? Not necessarily. That's why I'm not looking. You'll notice the call isn't for a bear market. The call's really for a pullback. And you're right, because I don't see right now that there's the big pullback. The thing that scares me is the fact that the employment trends are going so far in the wrong direction and that they may be getting out of control a little faster than the Fed can react to them. So we can argue where neutral is, and I'll leave it to the economists. I think we're probably closer to neutral, given the data point now than where they see it. But on the other hand, we might score well below that faster than the Fed can even react to it. That to me is a big fear. So there's all these little nagging points at me. The preponderance of naggingness is sort of getting to me instead of the, in contrast to the preponderance of bullish arguments that are out there. Yeah. Now your point on unemployment, we're up 1.2 points in 30 months. That's starting to get people's attention. Steve, thanks. Talk soon. Steve, take care. Wanted to come to one of the big stories we're following this morning. Of course, we got that 14 D9 filing from Warner Brothers. Essentially, it's response to that tender offer from Paramount, which is seeking to put in front of shareholders its $30 all cash offer for Warner Brothers, when you include the likes of debt as well as well over $100 billion. No surprise Warner Brothers saying it of course continues to favor the Netflix deal that it signed and has a merger agreement with. It did give us a lot of explanation in terms of what gave it pause and what gave its board of directors pause as it considered Paramount's offer. Much of that coming back to the equity financing and the lack of guarantee, at least on the part of at least Warner Brothers and its advisors, they felt from Larry Ellison and those who are behind that equity, $40 plus billion that would help finance Paramount's bid for the company. I did speak earlier to Sam DiPiazza. He is the chairman of Warner Brothers and he explained what was lacking.