SOTS 2nd Hour: The Fed’s Road Ahead, Accenture CEO on Earnings, & Fmr. Trump Defense Secretary Esper 6/20/25

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Sara Eisen (1:02)

Good Friday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and Mike Santoli today, live from Post 9 of the New York Stock Exchange. David Faber has the day off. Stocks are higher again today, looking set to close out the week stronger. Third up week in the last four for the S&P 500, a 1% gain for the week looks like for the NASDAQ so far. Today, actually, some of the defensive names or groups are leading. Real estate utilities, staples, they're all performing well, but it's a broad-based rally. The chip stocks are yet again fueling some of the gains. Apple, AMD, Netflix, Tesla, those are some of the big winners right now on the NASDAQ. Take a look at treasuries right now, selling off with yields a little bit firmer. This is reaction to Fed Chair Jay Powell, who was out Wednesday afternoon with the market closed on Thursday. The two-year yield wavering just below 4% there, the 10-year yield a little firmer at 4.4. Coming up this hour, former Trump Defense Secretary Mark Esper joins us to talk about the latest developments in the Middle East.

As President Trump says, he will make a decision about US direct involvement in the next two weeks. Plus, Accenture shares on the move this morning on the back of earnings, falling hard despite a beat. CEO Julie Sweet will join us to break it all down. But guys, the Fed is the topic du jour after the message from Fed Chair Jay Powell that he's not in a hurry to cut interest rates despite political pressure and despite evidence that inflationary pressures have come down. Here's just a few ways the Fed Chair signaled that he still is worried about inflation popping back up because of tariffs.

Jay Powell (2:35)

Increases in tariffs this year are likely to push up prices and weigh on economic activity. Many, many companies do expect to put all or some or all of the effective tariffs through to the next person in the chain and ultimately to the consumer. One of our jobs to make sure that a one-time increase in inflation doesn't turn in to an inflation problem. And that will depend on the size of the effects, how long it takes for them to come in and ultimately on keeping inflation expectations anchored.

Sara Eisen (3:09)

He wants to be more confident that tariffs aren't going to spark inflation. And that was clearly, I think the message from the Fed Chair, Mike, I thought it was hawkish. He mentioned tariffs 30 times. Thank you, producer Chase Manzi, for pointing that out. It was a different message we'll hear about Governor Waller this morning, who spoke, talked to our Steve Leesman. But another sort of further hawkish data point, and I know we don't want to make too much of the stupid dots, which are the forecast for the Fed cuts, and even Fed Chair Powell said it's a foggy kind of environment. But while they maintained the median of two cuts this year, seven officials said no cuts. And in March, it was three officials that said no cuts.

And in December, it was one official that said no cuts for the year, which is telling you there's a growing concern about inflation and wanting to wait and see before cutting rates on this committee.

Mike Santoli (3:58)

I think it's the baseline orientation of this committee is they want to just hold and wait and see and let a lot more shoes drop. And the way to do that is to say that you're concerned about potential inflation effects on tariffs. Yes, there's no doubt that the kind of the lean of the committee has gone toward let's do less, not more. You know, Waller this morning, obviously very dovish and saying he even sees a window by July. It's not going to happen based on how this committee is oriented unless you get some pretty poor data. And again, even saying we'll get two cuts this year when in fact you might see some cosmetic headline effect on inflation in the next few months. Maybe that's not super hawkish, but in the interim it is. They want to defer any potential movement to at least September.