SOTS 2nd Hour: PCE Breakdown, D.C.-Iran latest, & ServiceNow CEO's AI Warning 3/13/26

SPEAKER_1 (0:00)

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SPEAKER_2 (0:28)

Oh, could this vintage store be any cuter?

SPEAKER_3 (0:31)

Right? And the best part? They accept Discover.

SPEAKER_2 (0:33)

Accept Discover? In a little place like this? I don't think so, Jennifer.

SPEAKER_5 (0:38)

Oh, yeah, huh.

SPEAKER_3 (0:39)

Discover is accepted where I like to shop. Come on, baby. Get with the times.

Sara Eisen (0:43)

Right. So we shouldn't get the parachute pants?

SPEAKER_3 (0:47)

These are making a comeback.

SPEAKER_5 (0:49)

I think.

SPEAKER_3 (0:51)

Discover is accepted at 99% of places that take credit cards nationwide. Based on the February 2025 Nielsen Report.

Sara Eisen (1:04)

Good Friday morning, welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla and Mike Santoli. We are live, as always, at Post 9 of the New York Stock Exchange. David Faber's off again. We've got a big show coming your way. Former Defense Secretary Mark Esper will join us as Iran digs in around the Strait of Hormuz. And Defense Secretary Pete Hegset says, you don't need to worry about it. Plus, ServiceNow CEO Bill McDermott with us after ringing the opening bell this morning here at the Big Board. What he thinks the market is getting wrong about the software trade. And we will talk to the CEO of Rubrik, Fresh Off Earnings, about the company's results and cybersecurity implications of this war with Iran.

Carl Quintanilla (1:42)

Pretty solid breath to start the morning and we're getting some humish. Let's get to Rick Santoli. Morning, Rick.

Rick Santelli (1:48)

Yes, humish and jolts. On humish, 55.5 is our University of Michigan Summit March preliminary in a couple of weeks. It may get fine-tuned. That's better than expectations, but sequentially lower than our last final read. That will be the weakest since, well, Dece of last year. So we've had two months of 56 plus. We go a little bit in the wrong direction. If we look at current conditions, a different story. Much better than expectations. 57.8, much stronger than 56.6 in the rearview mirror. Strongest since Ock of last year. 34.1, 54.1 on expectations. That's light, and that is the lightest since Nov of last year. The inflation numbers, 3.4 on one year. Three-tenths less than we were looking for. We were looking for a bit of a pop there. Equals our last look. 3.4, well, to find a lower number, you're in Jan of 25 To find a higher number, you're in Jan of this year, of course. And if we look at what's going on with the 5-10 year, 5-10 year is at 3.2%.

We were at 3.3. Last look, 3.4 expected. 3.2 is good news. That would equal December of last year. To find a lower number, you're all the way back to December of 24 Now, maybe the moneyball number of the day. We're looking at job openings. 6,750,000 expected. A whisker under, well, about 54,000 under 6.946, under 7,000,000. 6,946,000. Much better than expected. That would be the strongest since October of last year.

And in the rearview mirror, a subtle positive revision. We see interest rates are going down primarily because the GDP numbers were definitely weaker than expected. We are now hovering at 423 in a 10-year. That's down three basis points from yesterday's 426, but it's up nine from last Friday's 414 Sara, back to you.

Sara Eisen (3:51)

OK, thanks, Rick. And just to put a fine point on the year ahead, inflation expectations, which did pop, as Rick just reported, the survey was taken between February 17th and March 9th. So that does incorporate when the war with Iran started and when gas prices started to peak. That's why consumers are expecting higher inflation, at least in the near term. The good news is long run inflation expectations actually inched down. Inflation is what we're talking about today, every day since this war, because we did get the PCE numbers. Rick mentioned the weaker GDP numbers. PCE numbers were a little hot. This is the monthly inflation numbers for, you know, we were expecting for March and they were up, you know, 0.3% month over month. 2.8% was the year over year.

The tougher number was the core number, which the year over year went up to 3.1 on that. And that was a big jump. We knew this number, these were kind of in line, which is the good news, we kind of knew these numbers were hot because of the composition of how PCE is determined and after we got the sort of unusually timed CPI number this week. So, look, I think that it shows that even before the war, there's some heat when it comes to especially services inflation. And that's going to be the message ultimately for the Fed. What I'm watching, guys, to see whether it's going to be, you know, a real problem, something they have to react to that could trickle into the rest of the economy as the inflation expectations. You can look at the five-year break evens, which is a good market-based measure of expectations. And we have seen a little bit of a move higher, as you can see recently, but nothing out of line. You're seeing it more in the one, two-year expectations, especially the one-year expectations. When you go out five and ten years, you're seeing a little bit of a push higher, but nothing extreme where the Fed would say, uh-oh, we have a problem.