SOTS 2nd Hour: Volatility Abound, 'AI-Proof' Software Stocks, & The Warner Bros. Discovery Saga 2/17/26

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Carl Quintanilla (0:58)

Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Seema Mody and David Faber here at Post 9 of the New York Stock Exchange. Sara Eisen has the morning off. Coming up this hour, Mohamed El-Erian from Allianz will be with us as we come off that downbeat week for the major averages, pressured by some AI disruption fears. Speaking of AI fears, we'll talk to a fund manager who focuses on software. Sector is down around 20% on the year and sees a little more pressure today. Much more on the media news of the morning as Netflix, as Warner Bros.

gives Paramount an additional seven-day window to reopen Deal Talks. We'll get to David on that.

David Faber (1:36)

All right. First of all, let's get some new housing data. It's just crossing Diana Olek has that for us.

Diana Olek (1:42)

Home builder sentiment in the single-family market dropped one point in February to 36 on the NAHB index. Now, the street was actually looking for a one-point gain. This is the second straight month of declines. The index stood at 42 in February of last year, even though mortgage rates were significantly higher last year. Builders cite persistent affordability challenges, including high housing price to income ratios and elevated land and construction costs helped push builder confidence lower for the second straight month to start the year. Now, of the index's three components, current sales conditions were unchanged at 41 from January. Buyer traffic fell two points to 22, and future sales expectations fell three points to 46 The survey found fewer builders cutting prices though, 36 percent down from 40 percent in January. That's the lowest share since last May. The use of sales incentives was 65 percent in February. That's unchanged from January and marking the 11th straight month that this share has exceeded 60 percent. The builders did note that although demand for new construction has weakened, remodeling demand is solid. Of course, thanks to a lack of household mobility, nobody's moving. Carl.

Carl Quintanilla (2:51)

Pick up your own place if you can't change. Diana, thank you for that, Diana Olek. Stocks under a little pressure here this morning as early trade begins coming off of that downbeat week. Let's bring in Mohamed El-Erian today, Alian's Chief Economic Advisor, former PIMCO CEO, who actually wrote a lot over the weekend, Mohamed, about what you're calling a jobless boom. Interesting set of tables that you assembled over the weekend.

Mohamed El-Erian (3:16)

Yeah. Carl, this seems such a confusing time. Think of last week's market development. Normally, when you have a softer than expected inflation report and a stronger than expected employment report, you would expect the markets to do well. They didn't.

Take a longer term view to the employment market, it is decoupling from strong GDP growth. I think that there are lots of questions going on. One of the simple way to explain it is we have lost unifying narratives. We no longer have unifying economic narratives, we no longer have unifying market narratives. So that the bottom up disruptions are starting to be much more impactful in terms of economic outcomes and in terms of market outcomes.

Carl Quintanilla (4:07)

So when you think about the lack of hiring, Mohamed at the moment, is it about reversing the over hiring that came out of the pandemic? Is it about trade and policy uncertainty? Is it about the promise of AI? How would you ladder those three things?

Mohamed El-Erian (4:24)

It's about all three and I would say the first one is the first one you mentioned. Companies are now resizing after the employment boost they had after the pandemic and they're resizing. They're no longer worried about will they find workers. The second is anticipation of AI. Unfortunately, too many mindsets in the corporate world about the labor displacement side of AI, not the labor augmentation side. And then the third element is policy uncertainty here and in the rest of the world. And these three things mean that we are seeing increases in layoffs and firms are more hesitant to hire.