SOTS 2nd Hour: Jones Act Waiver, Iran Market Latest, & LIVE: Docusign CEO 3/18/26

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Good Wednesday morning, welcome to Squawk on the Street. I'm Carl Quintanilla with Mike Santoli, David Faber here at Post 9 of the New York Stock Exchange. Sara Eisen co-hosting The View today, although no flipping. Coming up this hour, we'll talk to Evercore's Julian Emanuel on this Fed Day, as the latest read on inflation comes in much hotter than expected. Why, he says, we're in one of the riskiest moments of the century. Goldman's Co-Head of Commodities is with us. Investors tracking these new developments in the Middle East. We'll get his prediction for where oil prices might be heading. And there's a new boss of Disney officially today. We'll talk to former Disney Executive, former TikTok CEO Kevin Mayer on the challenges facing Josh D'Amaro. First, though, some breaking economic data that is just crossing. Rick Santoli has that for us. Rick. Yes, thank you, David. These are January reads, fresh reads on factory orders. We're expecting up one-tenth and it delivers exactly up one-tenth. And the rear view mirror, at least now still unrevised, was down seven-tenths. That was the weakest going back to July of 25 Now getting changed, it is now revised to down four-tenths. And down four-tenths would still be the weakest since July of last year. So a decent rebound up one-tenth. Strip out transportation, we could see transportation pushed it lower because it rises to up four-tenths. Up four-tenths has now back-to-back up four-tenths. Those are the best back-to-back reads since July when it was up five-tenths. Now, let's switch gears. Let's go to durable goods. These are final reads replacing mid-month January reads. So unchanged remains unchanged on durable goods. Extransportation, it rises to four-tenths and stays there. That's where it was our first look. And up four-tenths actually is a pretty nice read considering up four-tenths would be the best level going back to last year's December read, which was up 1.3, which was a very powerful read. If we strip out air, capital good orders, non-defense, x-air up one-tenth from the mid-month read of unchanged, and finally shipments remain down one-tenth of a percent. These readings haven't changed the trajectory of interest rate much as the hot PPI did this morning. We are now up a couple of basis points in both twos, excuse me, in tens, up three basis points in twos. And of course, on the day of the Fed meeting, the inflation numbers really were a very big obstacle to any type of lower interest rates or, of course, greener equities. Carl, back to you. All right, Rick. Thank you very much, Rick Santoli. Mike Santoli, what does ten-year not getting back to four-and-a-quarter tell you? Not quite back to four-and-a-quarter, but more or less hovering around these kind of seven-month highs. It goes back to August. I think the two-year note yield is pretty instructive there, too, back above three-seven. And what that means to get back to August levels is you're going back to before rate cuts resumed, which was in September. We got three of those cuts. I mean, the PPI numbers reinforce this kind of squeeze on the Fed, reducing its room to maneuver. We knew that, though. I think the overall market has been able to handle this kind of stagflationary backdrop that we have here, which is really just about restraint on growth and elevated inflation in the short term, because we didn't really expect much in the way of Fed movement for the next few months. It's going to make it a rhetorical challenge, obviously, after the results. I think the interesting part of how the stock market is trying to digest all this is, you know, it continues to try to lengthen the tether between stocks and oil. With mixed success, maybe it's indecisive, maybe it's unconvincing, we got this little two-day low-volume rally in stocks, even as WTI and Brent have kind of leaked higher. It's happening again today. Some of that is the AI trade kicking back in. Some of it, I would argue, is the damn majority that's happened below the surface to the cyclical parts of the market. So if you look at a six-month chart, equal-weighted S&P versus financials versus consumer discretionary, they've kind of taken some of their medicine at this point. So I think the big question now is, has there been this subsurface correction? Obviously, investors don't want to get too far away from the idea that you could get some kind of de-escalatory move, or maybe we've seen the moment of peak uncertainty. I know that's hope-infused. It's not purely based on the objective facts, but that's where we are. I think it's also a hedged-up market. I think that's one thing we're seeing the result of. People were paying up for downside protection for weeks, and therefore, you don't have to sell what you own if you feel like you're cushioned on the downside a little bit. The upside hurdles, if the S&P is going to rally here, we're not, you know, you got to break this downtrend. You have these lower highs for a few weeks right now. 68.5 on the S&P is probably where you have to go to suggest that, you know, you're kind of out of this trough. Blackout window, blackout window on buybacks begins. Not going to help. I suppose. I always feel like... I just don't know how decisive that is, because buyback volume in general has not been particularly impressive relative to market cap for a while right now. What about single stock volatility? Has that continued or has that quieted a bit? Well, it's funny because relative to index volatility, it has come in a little bit. It was at these massive extremes. What's really amazing is that because the S&P has been basically sideways for half a year, its trend is like sort of this narrow path. It's really gotten compressed, so all the statistical breakdowns of what would qualify as an extreme move and what makes the market oversold really don't need big moves in the index to get to those triggers. And that's where we are right now. I mean, a lot of folks say, oh, we're oversold, even though it's like 3.5% from all time highs. I don't know if that matters in terms of where we go tactically from here, but it is interesting that one way of writing the story is, you had the massive mini crash last April. You had a 40% six-month ramp off of that, and now we've had basically a five to six-month flattening out period to digest the 40% as we absorb and saturate ourselves in all of the private credit stuff and the oil risks and what might happen with, you know, the interplay of the economy and the Fed. All right, let's turn now to the latest on the war. We've got some breaking news as well around the Jones Act. Damon Jabbers joins us. He's in Washington, DC. Good morning, Damon. Yeah, good morning to you, David. The White House says it is suspending the Jones Act in a statement to CNBC just a couple of minutes ago. White House Press Secretary Caroline Levitt had this to say. She said, President Trump's decision to issue a 60-day Jones Act waiver is just another step to mitigate the short-term disruptions to the oil market as the US military continues meeting the objectives of Operation Epic Fury. She says this action will allow vital resources like oil, natural gas, fertilizer, and coal to flow freely to US ports for 60 days, and the administration remains committed to continuing to strengthen our critical supply chain. So the White House are arguing here that this rule, a suspension, remember the Jones Act is the law that says that ships transiting from US port to US port ought to be US owned and US operated. That's been blamed for high shipping costs because allowing international ships into those lanes would presumably lower costs. That is expected to have some impact, although it's not exactly clear how much on oil prices, particularly on the East Coast of the United States. So we'll see what that impact is as the day unfolds. Meanwhile, the president has been expressing some frustration on social media. Take a look at his Truth Social post from earlier this morning. The president sort of considering the idea here of just abandoning the Strait of Hormuz. He says, I wonder what would happen if we finished off what's left of the Iranian terror state and let the countries that use it. We don't be responsible for the so-called strait that would get some of our non-responsive allies in gear and fast. The president really frustrated here over about three days with the refusal of NATO allies to send naval support to the Strait of Hormuz to help the United States Navy clear that strait and reopen traffic for global oil supplies. The president there sort of venting that frustration saying, well, what if we just leave it? They'll have to do something then. We heard Caroline Levitt, the White House Press Secretary on TV a short time ago this morning saying, you know, look, the United States doesn't need ultimately the Strait of Hormuz because that's for global oil supply. The United States is a net oil exporter and so the energy exporter and so therefore the US is fine in terms of supply. It's global prices that we have to worry about. So a lot going on here on the oil markets that clearly the administration is sensitive though to these high oil prices at this point. The Post makes you wonder, Aiman, whether the White House knows that oil is priced globally. Yeah, right. I mean, global markets are a thing. So there is that. You know, I think what Levitt was suggesting on television today is, you know, this is Europe's problem. And if Europe wants to continue to get oil out of the strait, you know, they're going to have to deal with it. And the United States clearly continues to want US allies to put military resources in the area to help clear the strait. But it's just not clear what that military operation would look like. Would that be, you know, mind clearing? Would that be some kind of seizure of the Iranian coastline? You know, that's a mountainous, rocky terrain there overlooking the Strait of Hormuz. If you look at pictures of the strait, you know, it's one thing when you look at it flat on a map, but it's another thing when you look at it in three dimensions. I mean, the Iranian side of the strait is really the military high ground, looking down on that piece of water. So the operation to seize it would be extraordinarily complicated, to say the least. And so how we would coordinate that with NATO allies at this point, really an open question, given the sort of tensions and hostility between Europe and the United States over the past year. There are not a lot of good feelings there. And there's some resentment on the European side that they weren't consulted on this operation to begin with. Yeah, exactly what Germany's Chancellor said about half an hour ago, that we were not consulted on any of this. Eamon, thank you. Eamon Jaffers. More on the broader market today, joining us here at Post9 is Julian Emanuel, Evercore's chief equity derivatives and quantitative strategist. Jay, it's good to have you back in. Always good to be here. Yes, yes. All right. So a little Jones Act, some reserve releases, the possibility of escorts. Is that enough to improve the supply picture much? Look, price is telling you that we may have seen the peak a week and a half ago when you got close to 120 You saw epic volumes, epic speculation, sort of the way you did when silver peaked at 120 in January. But the volatility is still high and it is still an issue. And again, as you said, oil is priced globally. Yes, we are energy self-sufficient for the most part, but that doesn't mean that there aren't going to be material drags if oil remains at this level. There's the other question this morning, which we talked about with Jim, was market may be de-risking from crude volatility, but there's also product, right? Which is a different story when you're talking jet fuel and diesel and gasoline. So from our point of view, the biggest thing to anchor on is $4 at the retail gasoline pump, okay? If you look back and you think about 2020 and then you think about 2008, once you went to $4, it was the thing that changed the psychology of the consumer and led to both an economic slowdown and a market turn down. So from that perspective, you would expect sensitivity from the administration in observing the price. But clearly, when you think about the totality of it, and this is the strange part about the markets, but you think about the totality of it, both the left and the right tail outcomes of everything that's going on are much bigger, and yet the market stays within this range. What's your immediate takeaway from that? Because the market seems to want to walk this line. It's so many of the indicators I look at when you're trying to figure out if you've had kind of a deep enough pullback, if the market's gotten oversold enough, if sentiment has turned enough, it's sort of going right to the border of all of these triggers. And it's saying, yeah, there's concern, but there's not a fat pitch that says we've discounted some of the downside. So the level of hedging across stocks and across credit is as intense as I've ever seen in my career. And that includes Y2K, that actually includes some of the early Gulf Wars. And the same actually applies in terms of bullish hedging to oil. So literally what you have is the longer that the market goes sideways, the more you lose money day after day on your hedges and nothing happens. You know, look, what we don't want to see is the market go down and people take their hedges up. We don't think we're going to see that. We think ultimately, and again, there has to be some thought that this is going to resolve itself such that oil drops below 90 eventually because 93 in our work is the break point in terms of the stock market. If you're there for two or three months, you're going to run into problems, but the assumption is that's going to ease. Does anything change in terms of Friday being a big expiration and we're going to kind of roll a lot of that off? You feel like people feel like they're buffered still? No, not really. It's still very much a standoff. And the fact is, is that when you look at the market in general, and you spoke about this earlier, the dispersion among stocks has been extreme enough such that long short managers don't feel compelled to take off their single stock positions. But again, they've got these massive downside hedges that in our mind, ultimately, if you get a little bit of good news and you get a sustained break below 90 in WTI, those will start to come off and propel the market towards the upper end of the range. Finally, we have gotten a touch of corporate commentary on this from DAO, BASF Today, the airlines yesterday. Do you see it tilting one way or the other in the coming weeks? I will say this, what's amazing is the commentary from the airlines. When you think about everything, the energy price, the TSA issues with the homeland security, and in fact, the weather in the last couple of months, which has been absolutely miserable, the fact that demand and our proprietary airline surveys confirm this corporate commentary, they're very strong, that bodes well for a consumer that's got resilience. Julian, come back soon. Good to see you. Julian Emanuel. Our roadmap for the rest of the hour. Still ahead, Goldman's Co-Headed Commodity is going to join us, talk about the news that we just got from Eamon, about the Jones Act, see if that will move the needle for oil prices. Plus, Docusign is down sharply this year, as the name gets caught up in the AI disruption narrative. We'll talk to Docusign's CEO, fresh off earnings, about whether those fears are misplaced. And after the break, former Disney executive Kevin Mayer is going to join us. Of course, this says Josh D'Amaro takes the reins today over at Disney, replacing longtime CEO Bob Iger. Squawk on the Street is right back.