Hello and welcome to Market Domination. I'm Brooke Tama and we are live from our New York headquarters. There's just about one hour to go until the closing bell and stocks are moving lower as investors digest bank earnings and a chip selloff, also as volatile oil prices. And that's standing by us with the latest moves. And as I know earlier this morning, we're also following that South Korea's Kospi, which fell quite significantly as well. What do you make of all this?
Yeah, look, I mean, we started the morning out with mixed markets, but then we went into red territory when it went close to when it it's uh in terms of all three major averages. So, you've got the Dow right now that's lower. You've got the S&P 500 and the NASDAQ that's lower and we are seeing that chips have been selling off. But let's take a look at our Wi-Fi Interactive. So, you can see when when it comes to the 10-year Treasury yield that we've been paying so much attention to long-dated bond yields, those have been easing a bit. So you're looking at the 10-year at 5.22. But just looking under the hood at where we're at with the sectors, we are seeing that energy stocks have been the gainers today. So much volatility that we have seen with oil prices. But really, if you take a look at a year-to-date chart, it's been the energy stocks that have been the outperformers by far, followed by technology. If we take a look also at our NASDAQ 100 board, you will see that for today's action, a bit of a mixed picture. You've got the Mag 7 that are pretty little changed, I would say. You're looking at Tesla that's down more than 1%. Nvidia, that's in the green. Microsoft that's eating out some gains today, as well as Apple. Then you've got Meta that's up more than 2% but SpaceX down more than 4%. And as you were mentioning, oil prices, we have been watching those. They have come down a bit, so they have eased just a little bit. But look, now we're looking at Brent crude at 105. So there's still very elevated levels when it comes to these oil prices as well as WTI hanging around around $94 a barrel.
And as we mentioned it before, but once again to kick off this morning once again uh the South Korea's Kospi really took a tumble this morning that sort of trickling down into the chip market today. So can you dive a little bit deeper into the selling that we're seeing this afternoon in the chip market?
Yeah. So let's take a look because this is really an extension of yesterday of and also past sessions when you mentioned the Kospi, the South Korean market down more than 5% uh overnight. There's been intensifying competition from China or worries about intensifying competition from China from the company CXMT uh that announced a design, a cell design advancement. And so that's what's really spooked investors. And that announcement was made over the weekend. You saw Micron yesterday going lower. You saw SK Hynix here in the US also going lower as well. But over in South Korea, you saw SK Hynix uh going down as well as Samsung because look, Micron, uh Samsung and SK Hynix, those are the top memory makers in the world. They control around 90% of the market really. So if you have this intensifying competition from China, if they could do this more efficiently or perhaps um more more cheaply, then that would have repercussions for the rest of the memory maker market. So that's why you're seeing these memory chip makers that have been taking it on the chin really. You even have had Elon Musk that's weighed in on this basically saying that when China figures out how to manufacture a product uh they can scale uh better and um he basically said that they have found this out with lithium batteries and when it comes to solar. So really this has been going on for a couple of days this selloff that we've seen in these uh in the memory chip space particularly. But nonetheless I mean I'm pulling up here a five-day chart so you or four-day chart so you can see here Micron down 13% over the last four days and then you've got the the bleed over into the rest of the chip space as well.
Wow. Yeah. Broadcom, AMD seen some major declines over the past few days and that's right. Thank you so much for breaking all down. Appreciate it.
Wild swings in oil are set to rattle this week's inflation data, making the Fed's road map well a little bit messier here. Joining us now to break down what's driving the surge, Michael Reid, RBC Capital Markets head of US economics. All right, Michael, how bad is it going to be? Because has all this volatility within oil even been baked in yet?
So, the consumer is certainly feeling it at the pump. What we're seeing in terms of headline inflation is all being driven by higher oil prices. So the consumer is paying for it. For the Fed, uh we think it's going to be a little bit more benign. They're more focused on core. Uh so that strips out the more volatile components like food and energy, right? And you know, there we're looking for more modest print, 2.10 month-over-month and just a slight acceleration in the year-over-year pace. That being said, what we're concerned about looking ahead is how does the higher energy prices that are impacting not just consumers at the pump, but importantly things like diesel prices and transport uh prices, how is that going to hit the consumer? And more importantly, when might that show up in the CPI data?
I guess if you're looking at this CPI print tomorrow morning and you're trying to understand those areas that this does, I I know you're you just said that it sort of will take a while to show up, but are there spots where we can see it already?
Yeah, absolutely. Um, some of the surveys I like to look at include, you know, ISM manufacturing, ISM services, and they have a prices paid index. Both are very elevated. Uh, at that 70 benchmark we've seen, uh, the past couple readings have not shown any signs of retreating. This morning we got the NFIB uh survey that surveys small businesses. And what's concerning there is when you look at the share of businesses that have raised prices already and the share that expect to raise prices in the months ahead, those are both elevated around 30%. So that says to us these higher prices that are in the pipeline are going to be passed along.
What's interesting though is we're in this sort of environment where the consumer has been resilient, especially high-income consumers. Is there any signs of perhaps credit card delinquencies or just this not robust consumer moving into the to the fourth quarter?
So, I think you said it. You have the high-income consumer and and they're doing just fine. Interestingly, we we got some uh wealth data last week from the Federal Reserve and that showed those older consumers really benefiting from wealth, not necessarily income. And that's a huge tailwind. And when you when you factor in something like an interest rate hike from the Fed, that's another tailwind for interest income. On top of that, with the report for CPI tomorrow, we get CPI-W. Uh that headline number is used to calculate the Social Security cost of living adjustment. That's on track for three and a half percent come January.
So these older households, these retirees are are really in a good spot right now. And on the other hand, you have younger households, lower-income consumers who are feeling the pinch of inflation, and they're seeing their wage growth slow a little bit below uh this headline inflation, and it probably doesn't feel good for them. Really, the one area you can kind of see that most obviously is the saving rate, which has dipped uh declined notably since the start of the year.
Would you say that maybe we've even moved away from the K-shaped economy and it really is sort of becoming more of a generational divide then?
Yeah, absolutely. When we talk about it, I mean, just the the baby boomer generation alone is nearing something like hundred trillion dollars of wealth.
And when you kind of net out the the household wealth, that is what they what they have in terms of real estate, um it's still sizable, 40 to 50 trillion in kind of liquid to semi-liquid holdings. So all of this is showing up in a very real way in terms of spending right now. And importantly, they have less exposure to debt and and that can feel very different compared to those younger households. So, one of the metrics I love to watch is the share of your disposable income going towards non-mortgage personal interest payments.
Okay. So, what would that be examples like?
Credit card loans, uh, auto loans, student loans. Exactly. So, anything that's not going towards your house more or less, um, that you're having to pay interest towards.
Right. Sorry, really quickly, just because when the Federal Reserve has to take a look at all of this, I mean, they're seeing this this higher or older generation, they're going to get those benefits from the cost of living adjustment. They're already sitting on record equity, yet they have a younger consumer who's struggling. So, how do they identify this path forward with what is expected to be another hot inflation report? I mean, we've had 60-some months of higher inflation.
I think they they take their time and and that's what we expect. Now we are looking for a pause at their October meeting. Uh we do think they could be ready to hike by December. Uh if certainly if we see energy prices continue to climb higher, right? And you know again you have to take a pause in January and we think they go again in in March. But importantly, what they're doing strategically is, you know, collecting more data, maybe waiting to see what that pass-through looks like, what the bleed-through uh to the consumers from especially things like higher freight costs uh which are going to impact the good space.
And and we also are getting that PPI report I believe on Thursday. What can we expect there and how does that sort of trickle into their whole entire thought process?
Yeah, that's a really important one. I think uh in fact I was talking with my team this morning and I said okay we we should be more focused on PPI over retail sales which comes out the the same day. And that's because already you when you look at PPI and some of the the lead-up into uh the the consumer space it's already accelerating above uh what consumer prices are doing. And what does that tell us? Well, if you look at some of the other data, um it's a reflection of really margin compression in the wholesale space. And if you see that uh start to grow more rapidly in the in the coming months, that's a sign that they believe they'll be able to pass prices on to consumers.
Interesting. And you think that there still is this pricing power, consumers will be able to handle it?
Yeah, absolutely. Because I mean, just look at some of the the consumption data. It's been quite strong despite of uh some of the headwinds at higher prices. Uh you look at average weekly earnings in real terms that's actually been quite positive. So, you know, given the labor market's tight, folks have jobs, they have income, and that allows them to keep spending. It's not going to feel good, right? Uh but at the end of the day, if you think about what a real sign of of, you know, not being able to pass on prices to consumers, it would be cost-cutting measures like layoffs. And we're just not seeing that anywhere in the data.
Yeah, it'll be interesting to see how this all plays out. We even heard from the banks this morning that consumer spending continues to hold up. So, we shall see how this all plays out. I appreciate your time, Michael. Thank you so much.
And coming up, or rather, the International Monetary Fund is warning that global economic growth is set to slow this year. Yahoo! Finance's Jennifer Schamberger has the details on the recent report. Jennifer, what can you tell us?
Hey there, Brooke. Yep, that's right. The IMF is projecting that global growth will slow to 3.1% this year. That will be down from 3.5% in 2025, largely predicated on the large oil price shock that we've seen emanating from the Iran conflict. Though they underscore how resilient this economy has actually been. It could have been a lot worse. And that is because we have seen countries really tap their strategic petroleum reserves. They have been relying on diversifying their energy sources and rerouting exports of energy. Now they do expect that the global economy will rebound next year to 3.4%, but that thesis is largely predicated on the expectation that the Strait of Hormuz will reopen in March of 2027 and that energy production will be slow to come online because we have seen production facilities damaged in the Middle East. Interestingly, they think that AI will actually moderate next year and productivity levels will come back down to trend line because we have seen a bit of an uptick this year. So, everyone who has been waiting and calling for a productivity boom in AI at some point in the future, well, the IMF does not see that taking place next year.
Really interesting stuff there. Definitely something to watch. But Jen, the the IMF specifically pointing to the conflict in Iran as a major driver of inflation. So how severely do they believe that this will drag down global growth?
Yeah. So Brooke, this is creating a bifurcated global economy. We are seeing economies who are being hurt because they have not been able to diversify their energy sources and have been heavily reliant on exports from the Middle East versus countries that have been able to diversify their energy sources and have uh taken to alternative routes to getting their energy. I would point to the fact that the countries in the Middle East are expected to be slammed this year. Saudi Arabia alone expected to see its growth slashed by 3.3%. Now at the same time the economies that are investing in AI are also able to do better in uh offset some of the hit from uh the oil price shock and for that I would I would come here domestically to the US where the IMF expects that growth will be maintained at 2.3% this year and next. And that's largely because of AI.
And it it seems like perhaps that's a bit of concentration there. So so how is the IMF looking at the impact of AI on the economy then?
Well, the IMF says that AI is an investment boom that is contributing actually to inflation and they see potential concerns there for financial fragility. Believe it or not, they uh they call it a front-loaded demand shock, if you will. Right. We're seeing as you know spending on semiconductors, electricity, data centers, uh all of these uh electricity that's all going up right now. So to the extent that that continues to boost demand and we start to see a spillover from headline inflation over to core inflation, they think then that creates a more broad inflation threat at that point.
Now Jen, when you combine these geopolitical supply shocks from the Middle East with this massive infrastructure demand from the AI boom, you also have inflation looking incredibly sticky. So how does this really complicate the Fed's road map?
Yeah. So as you know, Brooke, the Fed has to look at, okay, we've experienced shock upon shock upon shock. We had the pandemic and we had the Russia-Ukraine war and we saw supply side shocks and oil shocks from that. Then we had tariffs. Now we have the oil shock and now we have AI. So at what point can you continue to look through this? At what point is it filtering through to broader inflation? I think that's why you were seeing a chorus of Fed officials who are saying look we have more work to do. We have to increase rates because inflation is not coming down in a timely manner. It has remained above our 2% target for more than 5 years and seems to be moving in the wrong direction. Now, they are content to sort of take their time and be flexible as to when those rate hikes may occur, which is why we saw a hike in September. We're likely to see a pause later this month and probably another hike in December. Of course, all of this is going to be contingent on the data, but right now, Fed officials not content with where the inflation picture stands.
And so many things to consider. Jennifer Schamberger, thank you so much for breaking it all down. I really appreciate it.
Coming up, Apple just unveiled this new line of smart home products. We dive into this with Yahoo! Finance's tech editor Dan Halley next on Market Domination.
Apple reinvents its smart home strategy with a new lineup of smart home accessories. Here with more on the iPhone maker's new business avenue, let's get Yahoo! Finance's tech editor Dan Halley on set with us. Appreciate you coming in because there was this big event today, Apple unveiling all these different home devices including some collaborations with LG. So, yeah, walk us through them.
Yeah, so the big uh kind of piece of this event was the Home View, which you can think of it as kind of I don't know if you've heard of the HomePod. Um it was uh or is a speaker that they had launched. Uh they now have a version two and they just launched the HomePod mini 2 today. That's another device. But essentially, if you look at this, it's a HomePod kind of with a screen uh and then additional functionalities as a result. And so, this is supposed to serve as your smart home hub where you can do everything from check your various cameras, turn on the fan, turn on the lights, listen to music, uh they show it in the kitchen, how you can uh look up a recipe on your iPhone, and then quickly tap the uh phone to the home view, and it'll just pass the recipe via uh Safari. And then
Yeah. And it breaks it down in like this really cool interface that I personally I was like I was usually standing there like a jerk going through my phone with like raw chicken on my hands.
All right, you're scrolling through.
And now this is something that'll that'll help with that. So it really is an impressive kind of setup. They have two versions. Uh one that has that little stand that you saw and another that mounts to the wall. The one with the stand sounds like it'll probably have better audio because it has that extra uh amount of speakers. Uh they said they tuned the audio for the one on the wall to work within that capacity. Um but I didn't get to hear that during during my my uh check-in with it. But it does seem as though they're this is a full reinvention of their smart home strategy just because they also launched their uh Apple TV 4K as I said that new HomePod mini and they're really really leaning into Siri AI. Now if you look at the rest of the industry right now, yes, Amazon has dominated this space. Yes, Google has dominated the space. You know, my nephew when he was little, he would say, "Okay, Google, set a timer," like, you know, something like that little Jersey accent or you know, you have kids saying, "Alexa, do XYZ." Yeah, but now this market is set for kind of a refresh because we're getting all of these new AI models uh being implemented and a lot of those old speakers just can't run them because they don't have the technology to do so, right? They're not as advanced, right? And so this is an opportunity for Apple to get in on kind of a new floor that that's being set up. And so they could, you know, with that being said, become a major player in the space, one that they weren't previously, cuz they would like dabble in like, you know, like dip their toe and be like, "Ooh, I don't know. It's a little too cold. Let's let's not do this all the way yet." And now I think they're doing, you know, the the full plunge and really going for the the smart home market.
I have to imagine that these have to be pretty pricey, which I know that they are somewhat.
They're You know what I mean? If you look at something like a low-cost smart home hub, sure it's probably expensive, but $299, you know, I thought that they would be a little more, maybe around 400. Uh $299 is nothing to sneeze at, obviously. Uh but, you know, interestingly, the the uh Apple TV 4K is also 299. And I would get, you know, a lot more out of this than the Apple TV 4K. Just use my PlayStation or whatever I have for my my uh TV stuff. Uh, but I do think that this is something that, you know, I live in an apartment. I, you know, it'd be difficult for me to set up an outdoor camera. I can't really do that in an apartment in New York, but I have an indoor camera to watch my cats when when I'm away, you know, and I have different uh smart home uh pieces that I could put together with this. And I think, you know, for me personally, this looks more like a premium device that I would want to have in my home rather than something that, you know, looks, let's just say, a little uh meh in your home. So, I think that's where this wins. And then
They they also had, like you said, that collaboration with LG uh and Schneider uh Electric that is I saw a couple of the products, the thermostats, the smart locks, things along those lines. They do look really, really good. And I I just want to say that, you know, I have uh set up uh uh my dad's um uh Google Home uh camera. Um you know, they have a Google Home. Uh it just, you know, this just kind of adds a more premium look to it, more sleek, more advanced.
Yeah. And so I I I think people would want that, you know, just just because it it adds a little something to your home if you're very interested in the smart home space.
Yeah. And I mean, we have the iPhones, we have the AirPods, we probably have the watch, we have so many Apple products, so perhaps this is an opportunity to step in. I guess one, you said that they've had a HomePod before. And two, we've heard so much about Apple really leaning into Siri AI. So, is the goal here for people to say like, "Hey Siri, do this, do that." What is the goal here?
That is exactly the goal. This is kind of a conduit to get them more into Siri. It's also, you know, once you get the the, you know, HomePod 2, the the Home View,
Are people even saying though, hey Siri, on their phone? Has that gone up lately?
I'm not sure. Apple hasn't released any numbers on that, but I can say anecdotally in my experience, it has proven to be pretty impressive. Um, you know, I would say, uh, what was the name of that restaurant that, you know, our friend Randy told us about or what what was dinner that he was talking about? It goes through your stuff and and pulls it up. You know, that that being said, you know, I have I've been using Muse as well. I'm going to Cape May for the weekend. Uh, and Muse has been telling me, "Hey, just so you know, here's the weather for Cape May this weekend. Just, you know, for your trip, get ready to pack, blah, blah, blah blah blah." So, you know, there's there's different elements to to both. Um, I think one of the things that's worth pointing out for all the smart home stuff, uh, and the the AI aspect is Apple's privacy stance. And so, that gives them, I think, a what is it? Walk us through it.
They don't share anything with anyone. Everything is locked down. Uh whereas Amazon and Google
Uh they're locked down but you know I mean there's there's certain metrics that they may use and and it's you know I think for a lot of people it's the confidence that Apple doesn't make money off of information. They make money off selling you stuff. So they don't care what you do on your device as long as you stay in that ecosystem. Uh for others it's you know for Google for instance it's what you do on their devices because that information is so crucial to keeping you on their services going forward to learning more about you to being able to sell ads against that and so I think you know for Apple they just say do what you want with the device it's yours uh but we'll keep it all secure and then we'll get you to buy more because of that. Google's like keep using the device we're going to need that info down the line.
Now do you think that this seriously makes Apple a key competitor then in the home services space to Amazon to Google. I know you say your dad is a Google but and so many people know that Amazon Alexa. So does Apple actually have a chance here to really get ahead?
I I think they have a chance to to compete. I think one of the things that's important to to note is that Amazon also has Alexa Plus and so that's their generative AI powered version of Alexa and they've had that for about a year now maybe a little bit longer. Uh and they have uh one of the executives who was formerly at Microsoft, Panos Panay. Uh he works on the the product side of things and I mean that guy, you know, took Microsoft's devices to a whole new level. Uh and so if he can, you know, was able to work that magic over there at Amazon or continue to kind of level them up, then that continues to be a formidable, you know, uh opponent for Apple. Uh I I think that you know the pricing the uh uh kind of ecosystem that may turn some folks off but you know I think for people who are Apple fans for a long time if you wanted just an Apple-centric smart home thing you were doing some real slapdash nonsense you know my friends uh took an iPad and basically just taped it to their wall so that they could control some of this stuff and I mean this is basically saying okay we know that we might have you know not done enough here and that you guys have repurposed old iPads and and things along those lines. Now, here's that device that you've wanted. Let's kind of, you know, reset.
All right. And when does this come out?
Uh, the end of this month.
Okay. All right. Well, we'll have to wait and see. Dan Halley, thanks so much.
And also, we want to know from everyone out there. I mean, is anyone going to get it? So, we're dying to know. So, coming up, we'll speak something different. Johnson & Johnson CFO discusses the company's latest results. That's next on Market Domination.
Pharmaceutical giant Johnson & Johnson is lifting its full-year earnings forecast amid a boost in third-quarter drug sales. Yahoo! Finance host Julie Hyman spoke with Johnson & Johnson CFO Joseph Wolk about what's driving those forecast increases. You guys raised your forecast yet again for the full year and I'm just curious kind of what keeps surprising you to the upside as the year goes on that is driving these forecast increases.
Yeah, Julie, it's nice to see you and thank you for your interest in Johnson & Johnson. Uh it's a great job by the team. They continue to do extremely well across the board, most notably in pharmaceuticals. Uh if you look at our three areas of expertise, our therapeutic areas of focus, oncology grew 17%. This is a a franchise that represents over $7 billion in the quarter, almost $8 billion. Neuroscience with two great drugs for depression, schizophrenia, bipolar disease, um Caplyta as well as Bravado continued to do extremely well. Uh and then immunology, even though it was facing a almost a $900 million headwind year-on-year for the loss of exclusivity on a product known as Stelara continues uh its growth pattern. It grew for the first time in a couple quarters. Great new products there. Tremfya for inflammatory bowel disease, Ixekizumab, an oral treatment for psoriasis is really having a pronounced effect. So the team continues to do well. It wasn't a perfect print for us. Uh medtech needs to do a little bit better than the two and a half percent growth that that posted. Um but it's really a tale of two cities. In the US, we grew a respectable 5%. Outside the US, it was a little bit flat. I would really attribute that to uh geopolitical macro types of phenomena.
Um I I want to dig more into the pharma side in a moment, which as you pointed out was the area of strength. But let's linger on medtech, right? How do you fix that? If it is indeed sort of macro geopolitical, you can only control what you can control. What can you control? How do you improve those medtech numbers?
Yeah. So, some of it is through great innovation. Uh there there's one area in heart recovery there there was a study done in the UK which um has given I'd say practitioners a reason to pause in utilizing the world's smallest heart pump that has saved over 400,000 lives. We're coming out with our own study next year that should be published that is going to have four times the number of patients. So 1,252 patients. We think that'll validate the use of this product of which there's nothing else like it on the marketplace. And again it saves lives. In terms of some of the the macro or geopolitical issues. If you think about the war in the Middle East, um it's not that the demand isn't there, it's just that budgets are now being allocated from some of the surrounding countries on defense versus healthcare. But because the demand is there, we think that passes over time because we know these are countries that do prioritize top uh premium healthcare. So, we think that'll that'll um that will remedy itself as we move into 2027. So we're on a path here with the contribution of medtech, the strength of pharmaceuticals to really be on a path to double-digit growth by the end of this decade. We'll get better each and every year uh as the decade unfolds here.
Um you mentioned um Ixekizumab which has been one of your areas of strength uh to treat psoriasis. Um prescriptions I believe for that just about doubled. You're not um revealing revenue from that yet, but I'm curious of those prescriptions, how much of them are sort of early free samples to get people interested and you know to find out that the that it's working for them and then when you expect to to release more clarity on on the revenue from that.
