Squawk on the Street 7/26/24

David Faber (0:00)

Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Good morning, welcome to Squawk on the Street. I'm David Faber with Sarah Eisen and Mike Santoli. We're at Post 9 of the New York Stock Exchange. Carl and Jim have the morning off. Let's give you a look at futures as we get ready to begin trading for the final session of the week. You can see we are looking for a sharply higher open. And our roadmap does start on those markets, as you very well might expect. Stocks looking, as you just saw, to open higher.

It's been a somewhat wild week of trading. Investors perhaps optimistic. The latest PCE print suggests the Fed remains on track to cut rates shortly.

Sara Eisen (0:37)

Plus, plenty of earnings reports to monitor this morning. Bristol Myers, Charter, 3M, among the biggest movers here in the pre-market.

And Bitcoin rallying, closing in on its March record. The move higher coming ahead of Trump's appearance at Bitcoin 2024 conference. We're live for you in Nashville with the latest.

David Faber (0:55)

All right, let's start with what is the Fed's preferred inflation gauge, PCE, rising 2.5% in June from a year ago. That was in line with expectations.

This, as the broader markets all sit lower on the week after another volatile session yesterday. Who better to discuss this with than Sarah Eisen and Mike Santoli? All right, I mean, I know it's the preferred gauge because of you, so what do we think of the number? What does it say for this ongoing debate about when we get the first rate cut?

Sara Eisen (1:20)

It's the preferred gauge and it's a preferred reading on inflation, which means no upside surprises, pretty much in line with consensus and shows that we're not getting that kind of inflationary spurt that we got in the first quarter. And I know we've been saying that now for three months in a row, but it's always good to see that we're not seeing inflation flare, especially because there was a little bit of an upside surprise on yesterday's GDP, PCE report, little bit. And you can chalk that up to a May revision higher in this report, but the June numbers are out and they look good, both on core and on the headline numbers. If anything, it just, you go into next week as a Fed member with more confidence that you can start to signal a September cut because the economic data is okay, good, not great, showing that we're slowing, incomes come in a little bit worse than expected, spending comes in a little bit worse than expected. The savings rate goes down, which is a sign that Americans are tapping into their cushions from post-COVID.

And so it's appropriate, I think.

If you're a Fed member, and a lot of economists here agree that you should be paying more attention to the downside risks of the economy now, because inflation does look like it is coming down to that target. It's not at the target yet. We're still what? Two and a half percent on the headline number, but it's getting there.

Mike Santoli (2:42)

Two and a half percent. By this point, by the Fed's own collective projection, they're talking two six by the end of the year, maybe two five. So in other words, it's right in the zone where they thought it should track. And of course, the premise is because Fed funds rate is at five and three eights right now, there's a lot of room to cut. And I do think the market certainly has greater attention on the deceleration of the actual economy and some choppiness in consumer behavior. And you look at housing really looking bumpy right now, drying up of activity. You're seeing the automakers have not such great things to say about the immediate outlook. So it all does fit together.

It also hits a market though, that I think at the end of the second quarter and then with that kind of lunge higher in tech into the first two weeks of July, really did crystallize around a perfect soft landing scenario. So to me, it's exactly at the end of the first quarter where you finished at this record high point, tech leading the way, but you also had the soft landing and earnings growth expectations all working together. And you've had reasons to just have a little bit of doubt around those edges.

Have we overpaid for tech earnings is a big question.

David Faber (3:49)

Yes.

Mike Santoli (3:50)

And what does it mean that we can rotate around them? What does it mean for the stability of the market and the ability of the rest of the market?