The Close is on — everything you need to get the edge at the end of the market day.
A surge in Treasury prices and a backup in crude oil. I'm Romaine Bostick.
I'm Jess Minton. The Nasdaq is having the worst day since late June. The S&P 500 staples sector, the best performing today, up 3%, for the best-performing group this month alone. At the rate of change the last 15 days, up 3%. We have not seen that since the depths of Covid. The U.S. 10-year Treasury yield trading below 5%, very key. Brent crude trading around $113 per barrel, up more than 4%. Energy stocks still lower today.
The Philadelphia Semiconductor Index down about 6%. With no big tech earnings out at least another week, the rotation we have seen out of semiconductors and big tech will be left to spiral on its own for a few more days. A risk-off day to be sure. The outside bids into consumer staples and health care. Tech heavyweights.
Nvidia down the most since August, AMD following the most since July. Look at Meta shares, having the fourth worst session of 2026. Its five-year credit default swaps hitting the most extreme intraday since they started actively trading one year ago. Remember, it's a AA company. Stock sliding deeper into bear market territory.
The Nasdaq 100 testing the convergence between 50-day moving averages. The technical level might give us more insight into whether today's weakness becomes tomorrow's rebound. I should point out the insight on a technical level will still have to be reconciled to a certain extent with fundamentals.
Fundamentals are good, but increasingly leave investors unprepared as they set an almost impossible bar for companies: spend enough to win the AI race, but not so much you hurt returns. For folks like John Gray, the debate is a bit academic. The way he sees it, the baby is being thrown out with the bathwater, and people aren't fully appreciating the long-term AI demand story.
When you think about a bubble, you think about building capacity and helping demand. What comes paired with AI, you are building capacity and helping so you can keep up with demand. Today, there is an indisputable shortage of computers, and it is hard to deliver that. It is preventing some of the excesses we have seen in past bubbles.
Speaking earlier on Bloomberg Television, and joining us is Gene Munster, managing partner at Deepwater Asset Management. I want to start with today's moves and the knee-jerk reaction on a day when Meta is punished for spending too much on AI and Tesla is punished for spending too much. What do you think the market wants out of the companies now? What do they want to hear that will give them more confidence to bid prices back up?
I don't think there is much they will hear next week or today that will re-instill confidence. I like the theme around academics winning in the conversation now. There are two basic investment camps when it comes to AI: academics and visionaries. The academics are people like investors, sell-side analysts, third-party research like Gartner last week when they came out with a piece that said 80% of neoclouds will not be around by 2030, and it is just because the math does not work. It is the academic side ruling the roost today.
When you think about the visionary side, those are the companies making bold predictions about how much they will be investing. The visionary piece is so early. I want to put that into perspective.
There is no comment that will save the trade for now. What I sense will happen is that academics — part of it is the undeniable usage trends.
To quickly frame an example of what is going on now: Meta comments about this, probably somewhere in the order of 10 million daily users. They have 3.7 million. Zuckerberg is saying they will center the whole business around Muse next year. Why on earth would he talk about that kind of a shift off of such a small set? Getting enough evidence from that in terms of how usage is growing. They can make these bull bets around the flux going on with the spend. It is important to stay focused on the vision so early.
On the point about the vision, that raises the question whether at this inflection point investors are invested in the wrong names. A lot of them are tethered to chipmakers and optical equipment makers, etc. You talk about the use cases for AI. It's not to say Nvidia does not benefit. Other companies could potentially benefit. Companies that have not seen the same phenomenal run-up in share prices the others have.
There is a doubt piece. There are things — there is that piece. The software security space will benefit. I can say with a high level of conviction the next six months we will have a big security breach somewhere that will spook the market and bid up AI security companies. There are companies like that.
One of the benchmarks of next week is hyperscaler spending and how their increase will change next year. Calendar '26 is 86%... 86% to 38%. You look at the comments Zuckerberg had yesterday and what SpaceX said. There's a good case numbers will be close to the 86 for next year. That sounds difficult to wrap your head around. Maybe that's why debt markets are having issues here. My sense is it is 70%-80% growth.
The companies I think are getting hit so hard right now, we are not selling them. The size of the trade has not started. The really big buckets — the reason this can keep going on, when you look out to 2028, the street is looking for 11% growth. Probably closer to 40% ultimately.
You can still own the broader AI trade. Pockets will be bigger beneficiaries. It makes a ton of sense over the next few years to stay long the AI trade.
The price of five-year default swaps on the company's debt are trading around records. How much does that concern you for a company like Meta as well as its peers?
It's concerning because the cost of capital goes up. This is where the friction point can become a self-fulfilling prophecy on the negative side. If the cost of capital does go up, we look at the hyperscalers paying 6% for debt a few months ago, a couple months ago. Something in that range.
Does that change, going from 6% to 8%? I mean, it is this odd conversation today around Meta. That does not matter. What matters is, are the companies going to... If the cost of capital moves up to a point where it really starts to unwind, the probability of that is low. In part because, as they do the announcement and interim costs of debt, there is a relatively massive transformation on the horizon.
Trying to help us make sense of the plunge we are seeing in the big tech space, moving closer to the closing bell. A lot of activity is going on now. Some of the biggest drops in benchmark yields in several months. We catch up with Rob Waldner at Invesco for more on his strategy.
From interest rates to a group closely tied to their moves: bank stocks on the rebound this month.
And outside the world of tech, retail: earnings out of Deckers. Concerns about the state of the economy and just exactly how hinged these companies are on that spending. Stick with us. This is The Close on Bloomberg.
Risk premium around the Fed. You notice today outside the long end of the yield curve the move is pretty much parallel. We are taking the risk out at the front end and everything follows. Third, we're starting to see what can break higher yields, and France is one of those examples. French spreads are much wider today... French spreads are much wider. That tells you where we are starting to get problems from rising rates, and reducing somewhat the possibility that rates go higher. In terms of the overall weighting average for investors, bringing yields down.
There is a broader question about geopolitics, and the market had been looking through that, at least prior to the last couple of weeks. Oil backup, a lot of questions right now about the situation in the Strait of Hormuz. Now the fiscal and debt situation in Europe — has this proven some of the naysayers wrong with regard to what the U.S. Treasury will need? It sounds like the first time of real trouble, there was one area the world flocked back to, and that was the U.S. debt market.
JGBs have been in a multiyear trend to higher yields and have stabilized income down in the 10-year. It's those core government bonds. Treasuries are the safety in the system when we get into these kind of situations.
Looking at the 10-year trading yield back for the first time in about a month: peak yields, or is it temporary?
For the short term we figured out how high it could go. We now know the new range, but what is going on here, we've discovered if we go much higher than that we will start to get some of these problems.
What do you think the bond market is telling us with today's move lower in yields?
Overall level of rates are limited how high they can go before they start getting into trouble. You start to see some of those problems, so we know we can expect the Treasury market to continue to sell off. Two, I think there's a little bit of risk around the Fed and what the Fed might do. One of the key things the Fed has done over the last six months or so is take away forward guidance. So we can see since then we've had more Treasury volatility and much more risk premium at the short end of the curve. That's not necessarily how many hikes we are expecting. Now we can modulate that risk premium, and today we are bringing it down.
I have to ask you about AI credit specifically. It started a couple of weeks ago, but then you see a company like Meta, which has a AA rating for both S&P and Moody's, and we've seen their credit default swaps kind of blow out. What are people afraid of? Is it bad credit, with maybe a company like CoreWeave, or is it more just a crisis of confidence about the overall trade that a company like Meta would be thrown into that same basket?
It's helpful to understand it. When we think about credit, there's fundamentals, valuations, and liquidity and technicals. Fundamentals and valuations look good. Liquidity — how much new issue is coming, how much cash is going to buy it, and how it's going to trade — that has most investors cautious. I don't have to point out that in this AI capex buildout, some of it has been messy, and that creates investor caution. I don't think it's necessarily fundamentals or valuation. It's more concern about liquidity and technicals in the market.
When Anthropic comes to market, I think most people will anticipate what happens in the next few weeks. Does that become a fixed income event for the AI trade?
It's important for the overall AI trade that deal comes successfully. Where they have to come in terms of overall market cap, I think, will be important to get that modulated so it comes successfully. If these new issue deals, whether equity or fixed income, if it doesn't clear and is not successful, that will be a big confidence problem for the market. If it's successful it will be a big confidence boost both for fixed income and for equity.
We will have to leave it there. Coming up, shares of Chipotle sitting at their lowest level in four years after a downgrade. We will break it down ahead. This is The Close on Bloomberg.
Let's get right to our top calls, the big movers on the back of analyst recommendations. We start with Netflix, following third-quarter earnings, arguing competition within the economy is rampant. Shares up today by about 3%.
Next up, Kohl's, the only firm with a buy rating on the retailer right now, raising the price target to $27, saying successful capture of former customers will pave the way for a holiday season success. Those shares up 13% here on the day, now on a three-day winning streak.
Chipotle, a downgrade from buy to hold. The analyst cutting the price target down to 32, saying the weak start to the third quarter sets the stage for a challenging 2027. Shares lower by about 0.6%. And the analyst behind that call, Andrew Charles, joins us now. When I look at the health of this company on the comp sales basis, give me a sense as to what you're looking at with regard to the quality and durability of what we see, and why you don't think that's necessarily enough.
In 2026 they had a lot of compelling, creative ideas on same-store sales. We've seen a new chief marketing officer hired a couple of months ago. We've seen them keep a steady foot on the gas when it comes to value activity. The challenge is that we think this fourth quarter it should all come to fruition and start seeing a return to positive sales revisions that we are used to. It sets the stage for a challenging 2027 with these creative drivers. You need new drivers to accelerate same-store sales in 2027.
You have among the lowest targets on the street for this name. Are we talking more massive drop-offs in credit card transaction data, or is it foot traffic heading lower?
We use Bloomberg's second measure data; it's a great data source with a strong correlation historically. It suggests October is seeing a little more of a slowdown than originally forecast. We think the street numbers will be an even higher forecast. The bigger challenge is that it will require new efforts in place when we move to less proven efforts to help accelerate sales back to where they need to be. Later this quarter, as we've seen before, this typically drives a lift in sales before we see decay after that.
Do you have a sense of what she will prioritize? Will they focus more on traffic, maybe at the expense of pricing?
I think you're hitting the nail on the head with our case. Our view here is that the pricing — these guys have priced more ahead of the limited service CPI. The street is embedding about 2% price per year over the next few years. We know they are pushing hard on value initiatives as part of the loyalty program. It seems like there may be less pricing needed as we go forward, and prioritize traffic instead, which is what investors are looking for.
I have to ask about the rumors and speculation about Starbucks maybe being interested in buying Chipotle. The stock with regard to Chipotle is really in the doldrums right now. Do you think it is a possibility? Is there a realm where we might see this happen?
That was a pretty bizarre 100 hours we saw a couple of weeks ago. We were skeptical that something could happen. We didn't see a lot of industrial logic for how Starbucks is enhanced by owning Chipotle. I think it is effectively dead at this point.
Always a pleasure, Andrew Charles, who covers restaurants over at TD Cowen. A big change on Chipotle. Next week we'll hear from Starbucks as well.
We will see if it is more Chipotle or some of its peers, but staples are the best sector today, up more than 2%.
We talk about the economic issues heading into the election. A lot of people are saying we know there's a bifurcation, but as long as the higher earners are still spending, that will be enough to keep the economy going. So far that has proven to be right.
Procter & Gamble, better than expected earnings. It will be interesting to see at the grocery store.
The broader market off the lows of today, but still deep in the red. Nasdaq indices down almost 3%, the S&P down 1%.
Huntington Bancshares out with earnings this morning. The shares are little changed after a miss on revenue, on in-line earnings per share. The company telling investors that the results show confidence and we are on track to meet financial targets and deliver sustained growth in earnings. Joining us with more on this quarter is Steve Stein. Thank you for joining us once again. I was delving through the earnings call today, and you were talking about commercial lending driving growth. Walk us through more why you missed on revenue there.
We have been growing significantly, and we've had two partnerships, Cadence and Veritex. We are pleased with what we've been able to achieve. But the market has gotten more competitive. We believe the competition does not warrant the lending activity. We talk about that in the earnings in terms of indirect auto lending and residential mortgage lending. The spread is just not attractive to us. We can't get the returns we want. We would rather hold the capital and ultimately return it to shareholders, or invest it elsewhere over time, as opposed to lending at these very low returns.
I love delving through these reports because it's always a good tell on the economy when it comes to regional banks. When it comes to loan growth, especially with yields around decade highs, what does that look like to you, and what does it mean for your customers, and what you're seeing for the economy?
We have seen significant loan growth, as most banks did. The summer tends to be sluggish. A lot of people on vacation, decisions get delayed. But the period of loan growth was significant. As we go into the fourth quarter, that is usually the best quarter. We are the third or fourth largest bank equipment finance manager in the country, and there's a lot of activity in the fourth quarter traditionally. This year is set up to be just like prior periods.
I do have to ask about the rate environment. I know rates are down today, but structurally we are higher than where we were for quite some time. I am curious as to how you will model out when the elevated rate environment becomes a little less of a help on your bottom line, and maybe more of a hindrance when it comes to deposit rate basis.
We run the company in an asset-neutral position, so spreads should be holding in as well as if they increase. We said on the earnings call we expect the net interest margin to be flattened in the fourth quarter and substantially going forward. We will be able to moderate cost of deposits on rate declines, somewhat in a rate increasing environment as well. The offset is the asset yields.
Give me a sense: are you seeing more competition on the deposit side?
We have seen more competition throughout this year. The last few years, there has not been a lot of deposit growth, coming out of the Silicon Valley failure. This year is more competitive than the prior several years, and that is in line with what we saw in the second quarter. Maybe a little more around certificates of deposits now. It is always somewhat competitive. This year, and particularly, it's competitive.
What about on commercial operating deposits?
That would be true on commercial. We move a lot of larger deposits off balance sheet, $25 billion to $35 billion, to sweep and other projects. We have the highest level of insured total deposits of any bank of $50 million or more in the country. We don't take a lot of liquidity risk. As a consequence, we don't get caught up in major swings. We operate the institutional net basis.
You mentioned SVB. Do you think there needs to be additional regulations put in place? Are you seeing any red flags still?
No, I don't think we need more regulation. I think it needs to be perhaps a bit more focused. We run a very diversified model in terms of assets, and a very restrained model in terms of liquidity risk. We have one of the best, if not the best, liquidity profile in the country. As I look at the next few years, if anything, I think there may be a little too much commercial real estate concentration in some of the smaller banks, because higher rates are going to mean lower valuations on real estate.
Having been in the industry for four and a half decades, we have seen it's where there can be a more meaningful commercial real estate challenge. Think back to 2008, 2009, and 20 years before that in 1989 and '90, etc. So the balance sheet is restraining some of the net growth we otherwise would have.
To be clear, you are still standing by the organic loan growth number.
Absolutely. All of that is factored in. In the past three years, we had the fastest growing average loan growth in our peer group by a lot. We are above peers on average about 6.5% over an extended period of time. We just think 17 years into recovery, things are a little frothy and spreads in some products are tight, that this is a time to be a little more careful and restricted in terms of how much net growth do we want at this stage.
Do you see anything worthy of concern when it comes to credit, like auto loans, or other things like that?
Not at this stage. We are super-prime, prime lenders; our portfolio will hold up very well. As you think about a K-shaped economy, the lower end of the curve is feeling more and more pressure. So the subprime, nonprime lending I think is going to have more challenge, maybe much more challenge in the years ahead. Inflation, energy, food, etc., is crippling the consumer on the lower side of the K curve.
The Huntington Bancshares CEO Steve Stein, pleasure to have you back. Coming up, shares of Moderna and Merck sinking after a data leak. We will take you to the moves in the stocks next. This is The Close on Bloomberg.
Time now for our stock of the hour. Moderna, having its biggest intraday drop ever, some losses being pared but still down about 19%. Merck also down on the day, falling on the back of a data leak around their widely anticipated melanoma vaccine. Those findings were reported by one key investor, and that sent the shares on the move. We should point out they did confirm the context of that data, which they plan to present this weekend at the presidential symposium. Michelle Fay Cortez joins us. Let's get right to it. What do we know about the data itself with regards to how successful they found this bespoke medicine to actually work in trials?
Right. It's important to keep the context and perspective here. The company said in August that they have done this amazing result, that they actually stopped melanoma from returning after it had been removed in patients. They did not give any details, and everybody was really looking forward to the results. Those are supposed to be coming out this weekend in Madrid, but there was the leak. The results show a 42% reduction in the recurrence of the cancer, which is astonishing. We have never had a cancer vaccine like this before. Not only that, it is an mRNA vaccine, the technology we are familiar with from Covid, to make this great reduction in the risk of cancer. The problem was it had been built up pretty significantly from the results in August, and some investors are looking at these findings and saying, a 42% reduction in the risk of the cancer returning, 38% risk of it returning in metastases, not as good as they were expecting, and that's sending shares down.
Is this something that can be explained away once they make the presentation, or is this already in the data, and this is what we get until we get a more substantive or expensive study or use case?
Great question, that's what everyone is looking at. What we had here is some leaked data, bits and bobs of information, and people parsing it based on what they were expecting, not actually what they found. The presentation itself will be really important, and that will tell us not only how melanoma patients are going to do but how the companies will be able to build with an entire platform that they thought was going to help fight cancer, a variety of cancers well into the future. They are not just looking at melanoma, they are looking at lung cancer, bladder cancer; they want to go after a lot of different cancers. There's a lot of questions; the vaccines are bespoke and made individually for each patient. They will be incredibly expensive. Hopefully they work really well. But this was kind of an early phase three trial result. Really pivotal data that people would be able to take their teeth into. You can't really do that when you're looking at data that leaked out over X.
Even with the steep declines, Moderna is still the best performing stock in the S&P 500 this year, up more than 500%. When speaking with your sources, do you think this will have a material impact on stock prices and revenue growth?
For Moderna in particular, this is the company's entire future. They are working on mRNA vaccines and they need to make this work. The shares are down dramatically from the early Covid spikes, when it was through the roof. But if they actually are able to make a real difference in cancer, the long-term outlook for a company like Moderna is pretty dramatic. The problem is that we don't actually have good insight in terms when we are just looking at this early stage data. I will tell you the sources we are talking to, the doctors and people on the ground dealing with patients who have melanoma, patients who often don't have any other treatment options, they are very excited about this. The doctors are thrilled that they will get something like this that they can offer to patients. But the Wall Street analysts, the people looking for long-term sales, are pulling back pretty substantially today.
Great point. There is an investment case but also the more human case. On a personal level, I know a lot of folks are really hoping this thing actually does work, and even at 30%, that may be all the hope these people need. Moderna shares taking it on the chin right now as we get closer to the closing bells. The story of the day is not about health care or staples; it really is about the tech selloff coming in the face of what has been a string of good earnings reports over the last 48 hours.
The equal weight S&P 500 is relatively flat, marginally higher earlier, and even the Russell 2000 not down that much. It's really more stocks higher than lower today over the S&P 500.
More than 300 S&P stocks in the green. Dow transports up 2% for a third straight day. And the S&P equal weight outperforming.
The size of this trade still hasn't started. The reason why this can keep going on, when you look out to 2028, it's 11% growth, closer to 40%. The use is so nascent. You can still own the broader AI trade; it still makes a ton of sense, at least in the next couple of years, to stay long the trade.
That AI trade under pressure here on this Thursday afternoon. Kicking us off to the close 15 minutes ago, not a lot has changed. We are around session lows on the Nasdaq and the stocks.
The Nasdaq 100 down about 3%. Looking at the sector function, staples up 3%, the best-performing sector in the S&P 500, whereas the three worst-performing sectors, communication services... The U.S. 10-year Treasury yield still below 5%, and of course Brent crude trading around $113 a barrel. Again, we've seen energy stocks still down more than 0.5%.
To put a finer point on the yield picture, it's pretty dramatic, and it shows you exactly the haven status they are supposed to offer: 15 basis points lower, 17 or 18 basis points lower on the five-year, but a relatively parallel move lower. Also the equal weight index on the S&P 500, that's in the green, now outperforming the cap-weighted index by the most since July 2024. Tiffany Magee joins us right now to count us down to the closing bell. Tiffany, how are you?
I don't think there's a concern. At the end of the day, performance has not been strong when it comes to earnings, but the bar is set high. A lot of us are talking about this idea of translating capex into actual revenue. We saw positive results last night with earnings, but the bar is being set high, and a lot of analysts increased expectations, so the bar is being set even higher. So when these companies do meet expectations, it's almost like the market is a little bit disappointed. They want to knock it out of the park.
At this phase of the capex cycle, are companies rewarded for spending more and pretty much nothing else? When I look at some of the numbers and some of the restraint we saw with regard to bumping the numbers up, it didn't seem to generate reward. I look at Meta, it was a relatively modest bump up, showing some progress with Muse and some of their other products.
I think Meta is the great story of AI spend turning into AI revenue. That's what we need to see. But again, the AI trade and the AI story is like a fairytale, and we just need to see results.
You like to look at companies with pricing power. What specifically are those companies you are investing in day to day?
We think about everything from a total portfolio perspective. Number one, it's very important to have asset allocation targets, also for individuals. Thinking about, especially if you are invested in tech, which most people are, thinking about balancing and hitting those targets. It's about the strategy and not necessarily the company. Clearly, when we think about the AI trade, we definitely want to be in Meta and Google. We also want to start investing, if you are not already, in AI infrastructure and what powers the infrastructure. So getting into oil companies, energy companies: those data centers are extremely expensive and require so much power.
That S&P 500 up more than 2% again today. Also we will be hearing from credit card companies: tomorrow we have Visa, and Mastercard next week. Are those companies you like to invest in?
We look at earnings season not just as a way to figure out what stocks to invest in, but also to figure out and determine what is it telling us about the economy and the consumer. Credit cards are an excellent way to do that. We will be seeing if people are spending more on their credit cards. It's still a tough economy. The stock market is not the economy. Those are two separate things.
We want to see what is the consumer behavior: spending and saving? Are they paying off their credit cards or carrying a balance? That gives us more insight into the real economy. I think the Fed is one of... people keep talking about the election. I don't think the election is going to matter more than the Fed and oil price. Those are the two things building into the next year that by the end of the year will make the biggest difference.
We will have Microsoft, Alphabet as well as Amazon. Obviously two of those are coming after the Fed decision, with Alphabet on Wednesday. Which is more important, the Fed decision or big tech earnings?
I'm glad you brought that up. All three are incredibly important. Next week it's all about the Fed, continued pricing on oil, and those big tech companies. That will really give us a deeper indication about the direction of the AI revenue.
When you look at some of the names selling off today, does that become a buying opportunity, particularly in the tech space?
Yes, and investors should look at what they are invested in. We like a diversified portfolio — not just the portfolio but in the theme. Are you investing in the creators, the builders and adapters? Are you investing in the hyperscalers and the chip companies, memory companies? What does that look like? Making sure you are diversified. When things are on sale, it's a great buying opportunity.
Tiffany Magee, we're moving closer to the closing bells. Off the session lows, much of the damage is done. You make a good point: we talk about a selloff in the markets at the index level, but the majority of stocks are in the green. Some of those heavyweight names are creating the biggest drag.
Those AI and chip-related names... and the stocks down around 7% since late June. The Russell 2000 flat.
The S&P down about 1%, the Nasdaq Composite down 2.6%. We will break it all down for you with our global simulcast.
The closing bell: Bloomberg's comprehensive cross-platform coverage of the U.S. market close, starts right now.
Right now we are two minutes away from the end of the trading day. We are taking you to the closing bell. It's a global simulcast. Welcome to our audience across all of our Bloomberg platforms. It's a decidedly down day for the broader market; the broad market decline is very narrow in what is dragging it down.
We're just talking numbers and names. More than 330 names in the S&P are gaining ground today. Go to the Nasdaq 100, which is down more on a percentage basis: 49 names are higher and about 52 are lower. You taught market weight and all that good stuff, but number by number...
I'm just saying. Don't take my gainers right now.
I will take the other position, which is that the Nasdaq 100 being down close to 3% in a single day is the worst of the month. At one point it was the lowest going back to the beginning of August.
We were at a chateau. [Laughter] To answer your question.
