Squawk on the Street 2nd Hour 4/8/26

SPEAKER_1 (0:01)

You don't change the game without asking big questions like what would you like the power to do? My answers motivated me to help lead the first US women's national team and bring home two FIFA Women's World Cup trophies.

SPEAKER_2 (0:17)

Bank of America champions US women's soccer legend, Michelle Akers, and everyone who dares to ask, what would you like the power to do? Bank of America, proud to be the official Bank of US Soccer. Bank of America NA member, FDSE.

Dr. Guy Winch (0:30)

Men are struggling with their mental health at some of the highest rates we've ever seen, but most aren't getting the support they need, and that needs to change. I'm Dr. Guy Winch, your host for season three of The Visibility Gap, presented by Cigna Healthcare. This season, we're focusing on men's mental health, bringing together real stories and expert insight to explore the pressures men face every day and why opening up can feel so difficult. Join us for the new season, wherever you stream your podcasts.

Sara Eisen (1:06)

Good Wednesday morning, welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla and David Faber. We are live as always at Post 9 of the New York Stock Exchange. Stocks are surging and oil is tanking on news of this two week ceasefire with Iran, with outside gains for airlines, semiconductor equipment, and discretionary stocks, which all got beat up over the last few weeks. Coming up this hour, Evercore's Roger Altman with us to talk about the major relief rally and why he's advising investors to be cautious. Plus, we'll break down Delta's results as that stock jumps, despite the CEO warning of a meaningful cut to growth plans. And the CEO of Levi's with us, as shares get a big boost on results driven by strong direct to consumer sales. But guys, this is a big market move, and there are macro implications of this move as well that I just want to point out, which is lower oil prices, five-year break-even inflation rates come down. This is the market expectations of inflation. And you can see directly, there's already a really big impact. This is what the Federal Reserve pays attention to to determine our, you know, this is Fed speak, our inflation expectations anchored well. They were rising a little bit on the back of these higher oil prices. They're coming down sharply. Look at the 10-year break-even as well. Again, there was nothing really hugely worrisome in the last few weeks on the oil rise, but you can see just the dramatic pullback that we're seeing this morning. And along with that, there are now increased odds of a Federal Reserve cutting rates and not hiking rates. I mean, the market has really flipped its positioning on this one. You can see it in the two-year yield, which yields are coming down right now, which implies that the Federal Reserve can be easier. They don't have to worry as much about inflation and these higher oil. We do have a chart here, thank you, Peter Bookbar, that shows just what we're looking at going down the road. And as you can see, the market is really excited about cuts going into 2027

This year, now, there's about 50% odds that the Federal Reserve cuts rates by December. That's a big change. That was at zero on Monday, David. So we've gone from 0% of a cut on Monday in December to 50% now, odds of a cut, because that's the magic of lower oil prices. And then this is the outlook for the next few years, I would say, next few months and years. And the market's expecting...

David Faber (3:24)

If, in fact, things change geopolitically, could we expect that this will change as quickly?

Sara Eisen (3:29)

Yeah, I mean, clearly, oil prices were what was standing in a way of the Federal Reserve cuts and what at least the market expectations. And it's not just in the US. Look at what's happening in Europe. The two-year yields in places like Germany and France and the UK. I mean, these are big moves that we've seen just overnight. Because in Europe, they were expecting as much as potentially three rate increases to deal with the higher inflation. They've got a single mandate around inflation.

And just to tell you just how much a move like this changes the economic outlook out there at Yardeni, who we follow of Yardeni Research, he's even taken down his recession odds on the back of what's happened here. He says, we are lowering the risk of recession back down to 20% from 35 Recently released data suggest the US economy was on a resilient growth path heading into the latest oil price shock. And even through March, when the war was raging, the labor market seems to be improving by some measure. So, look, things are looking a lot better this morning, but there's a big if, and that's, you know, if the ceasefire holds, if the ships continue to pass through the strait, you know, all of this is riding on this reduced price in oil and completely better outlook.