SOTS 2nd Hour: Ray Dalio's Debt Warning, Sen. Warren Slams the Fed and Wells Fargo, Trump Tax Bill Scrutiny 6/4/25

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Sara Eisen (0:44)

Good Wednesday morning. Welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla. Live from Post 9 of the New York Stock Exchange, David Faber is off today. Take a look at stocks. We're going for three days in a row of gains here. S&P 500 up a tenth of one percent. The Nasdaq's up a little more than that. Another positive day. It is being led again by technology and communication services in particular. Meta's up two percent. Alphabet's up a little more than half a percent. Healthcare is gaining today. So are materials as those steel tariffs kick in and industrials. Financial's a little bit down and utilities, the worst performers, down one percent. As for treasuries this morning, we have some new jobs data to discuss going into big jobs day on Friday and there's buying. So relative calm in the bond market, 10-year yield 4.4 percent, two-year yield moving south. That's the one that's really sensitive to where interest rates go, 3.9 percent. We've got a big show coming your way. In just a moment, Bridgewater's Ray Dalio will join us with a new warning about America's ballooning deficit and how to avoid an economic crisis in this country. Plus, Senator Elizabeth Warren calling the Fed's decision to lift Wells Fargo's asset cap, quote, an outrageous giveaway to one of Wall Street's most derelict banks. She will be with us to discuss.

Carl Quintanilla (1:57)

Meantime, you can see markets responding to ISM Services. Let's get back to Rick Santelli. Hey Rick.

Rick Santelli (2:03)

Yes, boy, you're watching yields move down again. And the issue is our May reads for ISM Services PMIs. And here they are. 49.9. The headline was supposed to come in at 52 Expansion territory, but instead it moves to contraction under 50 And the last time it was under 50 was June of last year. And that's when we comp to on this number. If we look at prices paid, the opposite. They're moving higher from 65.1 to 68.7. That's definitely warmer than we expected. That's the hottest prices paid since November of 22

But the market certainly seems to be more focused on weakness than the inflationary implications of prices paid. New orders, 46.4. Once again, back in contraction mode. And that's the weakest all the way back since December of 22 And finally, on the employment front, and this is important because we had a weak ADP. And of course, Friday, we have the big job, job, jobs report. This one climbed over 50 50.7, the best since, well, just Feb of this year. But indeed, we retook expansion territory. Now, as we sit at 440, we're literally exactly down a half dozen basis points on a 10 Carl, back to you.

Carl Quintanilla (3:23)

All right, Rick Santelli, thank you very much. Meantime, some new data from the New York Fed this morning. A survey of some 300 businesses found that for those facing tariff cost increases, most passed on at least some of that to their customers with nearly a third of manufacturers, almost half of service firms fully passing along all tariff costs by raising prices. The others reported they were absorbing some of the cost hikes. Despite the uncertainty around the trade policy, businesses are reacting quickly. Over half of manufacturers and service firms said they raised prices within a month of experiencing those cost increases, many within a day or a week. Something we'll keep an eye on again. Again, we talked about the shift between survey data and the hard data, but this is certainly one way respondents are talking about what's happening.

Sara Eisen (4:10)

I guess we'll wait to see whether it shows up in the headline inflation numbers because it hasn't yet. We keep seeing softer inflation numbers and now we're seeing softer job numbers. So that's where ADP comes in today. Private sector jobs read, and it was much weaker than expected. Only 37,000 jobs were added in the month of May. Weaker than expected and a big step down as you can see from April. It's actually the weakest level in two years. What does this mean for Friday's jobs report? Well, there's not a really direct correlation. Some people see it as a leading indicator, but it is worth paying attention to because it gives us a snapshot of what companies are doing. And if you break that down further, you can see the job losses really came in the goods producing sectors, that 2000 negative on that, where services producing sectors were still gaining. That tells you it's about tariffs, right? Because that's where the tariffs are. They're on goods producing sectors. It's no wonder President Trump tweeted, ADP number out, too late Powell must lower the rate. He is unbelievable. Europe has lowered nine times. If he's making the argument to get ahead of the economic weakness and we're not seeing inflation, these numbers give him further fuel. And so do the recent inflation numbers.