Squawk on the Street 2/10/26

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This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com/marketupdatepodcast, or find Schwab Market Update wherever you get your podcasts.

Carl Quintanilla (0:59)

Market moving insight and analysis join Jim Cramer, David Faber and me, Carl Quintanilla on the opening bell hour of CNBC Squawk on the Street. Good Tuesday morning, welcome to Squawk on the Street. I'm Carl Quintanilla with Mike Santoli and David Faber at Post 9 of the New York Stock Exchange. Cramer has the morning off. Future's a bit soft after a decent start to the week on Monday. Today, mostly on this disappointing retail sales print, it's the worst ex-autos since May. 10-year goes to 415 That's about a one-month low ahead of the jobs number tomorrow. Our roadmap begins with this tech rebound as the S&P scores back-to-back gains and the Dow hits new highs.

David Faber (1:39)

Plus Alphabet's massive debt raise fueling expectations for a record year in corporate bond sales. We're keeping an eye on shares of Coca-Cola. They're under a bit of pressure this after the company missed revenue estimates. It did forecast modest growth. Bank of America kicking off its financial services conference in Miami. We're going to have an exclusive with CEO Brian Moynihan. That's just a few moments from now.

Carl Quintanilla (2:02)

Let's begin with the markets. Obviously, going to be a busy one with a lot of eco data, retail sales today, jobs tomorrow, CPI Friday. But this is kind of an across-the-board miss on retail sales.

Mike Santoli (2:12)

It is, yeah. A miss on retail sales. You can look at the control group, which tries to get to the core trend, and it was also a bit of a shortfall. This is December numbers. It's definitely going to mute the fourth quarter GDP estimate. So maybe we didn't come into the year with quite as much of a head of steam as we thought. Bonds have definitely responded. And also, treasuries have been pretty sensitive to any of these downbeat economic hints, such as the talking down of the labor market data and things like that. So we're now pricing it a little more Fed. We may get to pricing in three cuts. We'll see how that settles out once we get a lot more data. We get the non-farm payrolls and all the rest of it. And so far, it's happening in a way where labor seems to be still the soft point within the economy. I think the markets are okay with that general notion, because that's what the Fed's going to take its cue from. And if corporate spending carries the rest of the economy and earnings are still holding up, we can live with that. I do think it's potentially a challenge for how people are positioned coming into this year, though, because it was such a popular trade to say, buy Cyclicals, and we're going to be off to the races and we're going to run it hot. And anything that kind of clashes with that is going to challenge, I think, the way the market is postured going into this next period.

David Faber (3:25)

Guys, I did want to step in here just to update new news involving the battle for Warner Brothers Discovery from Paramount.

They have not raised the overall consideration of $30 all cash that they're paying, but they have answered at least some of the concerns that have been expressed by Warner Brothers Board in terms of, let's call it, enhancing and or tightening up the contract as it currently exists. And so we've just learned from Paramount that they, for example, in the $2.8 billion breakup fee where there had been concern about whether it really would be paid or not or come out of the $5.8 billion reverse termination fee, they say we're going to make it a separate payment. We're clearing up any lack of clarity around that. That is a separate payment that will be paid the minute you say no longer to Netflix and that deal. And by the way, the $5.8 billion reverse termination fee, should Paramount fail, for example, to actually get to the finish line, would still be paid in full. Paramount will also, and this was another concern raised by Warner Brothers Board, eliminate the potential billion and a half financing costs. They'll cover that, essentially, is what they're saying, for the exchange offer that's going to take place for the spun-off entity that is the global networks of Warner Brothers Discovery. And they go on from there to also say there's this $15 billion bridge financing. If JP Morgan doesn't step up and provide it, we will find alternative sources. So Paramount this morning coming out, perhaps not unexpectedly, with enhancements to its current deal. By the way, that also includes the so-called ticking fee. In other words, at Paramount, we're unable to get its deal closed with Warner Brothers. By the end of this year, every quarter from then on, you'd increase the consideration by 25 cents, about $650 million each quarter. So a ticking fee is also added. Will this be enough to actually get the Warner Brothers Board to say, okay, we will talk to you, we believe this would lead to a superior offer? Very much unclear at this point. But one thing it may do is enhance their argument with the still influential proxy advisory firms that are going to be important in terms of the upcoming vote of Warner Brothers shareholders to vote on the Netflix deal. And by the way, we did get a date on that. Now it's preliminary. They filed a preliminary proxy yesterday, another one, an updated one, Warner Brothers did. And we got March 12th as potential date on the proxy card at least. So we can work with that saying it's about a month away. Paramount now has enhanced its offer. For those of the words it's trying to use here or is using here to say that. And we'll see what, if any response they get from Warner Brothers board, but importantly, it also is something that will be a key for shareholders of Warner Brothers to decide as they vote on the Netflix deal on the 12th. And by the way, to that note, this gets somewhat complex, but I did want to quickly share as well in that proxy. They do for the first time, give us at least a range of the debt, not just the debt on the spun off entity, which is going to be as much as 17 billion, but say it could be reduced by between nothing and 2 billion dollars. And remember, for every dollar of debt that goes back to studio and streaming, Netflix reduces the value of its bid. With 2.6 billion shares outstanding, in other words, if you were to take down 2 billion more in debt on the studio and streaming, well, you'd reduce the overall consideration. How low could it get? Well, if you took all 17 billion dollars in debt off of the spun off entity of Global Networks, you'd get to a price of $21.23 from the current 27.75, a share all in cash that Netflix has a deal to acquire Warner Brothers at. Gonna have more later in the program. I'll be joined by Jerry Cardinal, of course, founder of Redbird, also part of the group here, him and Paramount, that are trying to buy Warner Brothers Discovery. Don't wanna miss that.