Fed Chair Powell Speaks at Harvard, Trump Threatens New Iran Strikes, Aluminum Spikes 3/30/26

Fedger Powell at Harvard today taking some questions there from the economic

students with some first-year students. I'm joking back and forth a lot of

questions around how the Fed works, what the decision making is like. I will say

that we are seeing a bit of a treasury rally to the highs of the day where yields

are lower. Not sure that Fedger Powell tipped his hand really in terms of

monetary policy but maybe he was more he was less hawkish than the market was

positioned. We're going to continue to monitor these remarks for you bringing

any headlines as they relate to the market. We're also streaming it right

now on CNBC.com. Let's bring in CNBC, senior economics reporter

Steve Leastman. Steve, he did talk a little bit about the rise in oil

prices and the war in Iran and said that the Fed

Fed doesn't have any meaningful tools when it comes to supply shocks. The Fed

usually looks through these kind of supply shocks but

again didn't didn't necessarily say so we're not going to

we're not going to do anything as a result. What was your take?

Well, I think you're underscoring the importance of what Powell said which is

the market had gotten itself a bit too attissue, a bit of a froth about the idea

of the Fed potentially raising rates. I thought Powell very specifically

decided to use this opportunity to bring the conversation back to the

center Sarah and the idea when he first started out said we have tensions on

both sides of our mandate on the job side and on the inflation side

and then he went on to say well our inclination in this case is to just look

through it and he made a very important point about

the differential between he talked about energy shocks they

work through the system quickly but policy takes a long time.

Again suggested the Fed was not going to do anything

knee jerk here in response to a high oil prices. Now some of us like you and I

who watch the Fed every day probably didn't expect that but certainly

the market was out there guarding against it. So what I see when and I'll just

double check while I'm talking to you Sarah when I look at the probabilities

a bit of a shift it's still in the center

70% 80% chance the Fed doesn't do anything

but the tail's a little bit more towards well maybe a cut and away from the

hike where the market had gotten itself into a froth than last week about.

Yeah he emphasized the both sides thing agreed and and did say you know as

you know we talked to Stephen Myron I don't know if you saw Fed governor

right before this and Myron said I'm looking forward to hearing

Powell talk about what the Fed usually does with it with a supply shock like oil

and you know right on cue right here Powell did talk about that and said we

we do usually look through that which is I think more in the Myron view

what they should be doing. It's an important point so do you think about it

what's going on we've had ghouls be in some other folks say you know what we

can't take a hike off the table but what we're looking for is where's the center of the board here

okay and I think what Powell brought it back to is and then layering in Myron on top of that

it's keep the rates the same with maybe a cut if we get an opportunity to do that

but the hike looks a little bit more remote listening to Powell this morning and certainly Myron's

on board with that and we'll have to hear what others have to say but right now I think that this

idea of 80% probability the Fed does nothing probably the more likely and right solution here

okay Steve thank you very much we'll come back to you if he says anything else

let's turn out to the broader market following those comments by Fed Chair

Jay Powell joining us now with some reaction is double line deputy chief investment officer

Jeff Sherman and we are saying the bond market rally especially the two year so the market just got

got a little too worked up about a hike coming Jeff yeah well I think the thing that we have to

remember too is that the Fed always looks at core inflation right and so that strips out commodity

prices even though they affect every consumer and every input in our economy and so I think what

what's happened with this oil inflationary shock is that people have been expecting the central

banks to respond in some manner we've seen this as a recent as a week ago you know the BOE was

pricing in or the the English market UK market was question in for hikes of the year you've seen

the ECB price in hikes as well remember that oil price shocks are actually a version of hawkish

policy itself right if the price of oil goes up right that is inflationary but that causes a

strain on the overall economy and so I think the right response here is for no reaction based on

the energy prices and ultimately go back to what what's the market's been focused on

is actually where we are in the cycle of the labor market you know we did speak this morning

just in the last hours and a half with Stephen Myron the Fed governor who's dissented at every

meeting he wants lower interest rates listen to where he says policy should be headed

at the moment I think that we could be at about a point easier but gradually done over the course

of a year so you'd like to see now 25 basis point cuts that's what I voted for the last two

meetings 25 basis point cuts I mean that's clearly not where the the center of the Fed is but his

point is that the Fed is holding back job growth at a time where we are seeing the job market show

some signs of weakness payrolls has gone negative and that if the Fed were easier you'd see better

results on jobs yeah I'm not convinced I mean Myron's been very aggressive in his cuts and he

seems to be some one of the lone wolves out there but that being said let me pause at the

question to you Sarah if if we ease 25 basis points does that get corporate America excited

about hiring probably not now you could say that if we got that path of potentially one percent

lower rates it would bring some of the stresses out parts of the market and you know some of this

would be the floating rate low market right which we know has had some challenges with private

credit with bank loans and etc so maybe there is some some true to that statement when it comes to

some addresses but I'm not convinced this change is the overall outlook for overall hiring

based on you know 25 to 50 or even a hundred basis points lower at the current cycle well I think

it does if it if it's able to move the market I mean if the tenure if it if the Fed went into

cutting mode still and you saw you know long term interest rates come down that would that

would certainly make things easier for housing for for corporates for all sorts all sorts of parts

of the economy that need lower rates you are correct but thus far since the Fed's been cutting you

know if you look at the last three rate cuts bond yields have not come down on the middle to the

back another curve and so from that perspective I'm I'm empathetic what you're saying here but

actually the bond market has to react that is correct why do you think that is why do you think

that yield tab risen even as the Fed has cut well I think that ultimately it's it's it's digesting

many things out there one is you know the overall fiscal overhang of not just the US but the overall

developed market and when you look at kind of back in yields let's call it like 30 year bonds we've

seen this dynamic of a rising yield or at least being near all of the cycle highs across the

developed world you have the UK near all time highs the US market where we're really close to that

as well you got to you're up and even Japan now as well so there seems to be a market rejection

for kind of the back end of the curve and to me that's really signaling that potentially there's

a longer term inflation problem not the 9% we experienced three years ago but maybe we're not

that 2% inflation rate plus the overall is a fiscal policy in the entire developed world so

I don't think it's as simple as cutting the front end of the yield curve brings the whole yield

curve down in fact it may just indeed steepen it it may not make back in yields rise but it also

may not make them come down and getting the desired effects that the treasury secretary of the

administration essentially wants country yeah Morgan Stanley has a tidbit today Jeffrey

recent data quote confirm a regime shift foreign ownership of treasuries has fallen to the 1997

lows making speculation about outright sales seem plausible you think that explains some of the

weak auctions lately it could be and essentially you've got to think about it as that the world is

voting not just on the outright payment of US treasuries or the fiscal stability there but it's

also potentially talking about our policies right here we are again mirrored in another conflict

that's once again wheat we help begin and so I think potentially there's some of that rejection

of our policy and if you really want to wake up the administration one one way you can do that

is through financial markets and so that can be through you know abstaining from purchases it could

be from outright sales you could sell you know corporate bonds you could actually sell stocks I

mean there's a lot of ownership of our assets so you never want to mess with what ultimately

can be the economic impact of your ultimate policy as well so sometimes I get lost in markets

through the day-to-day but potentially there's something about the rest of the world voting

against that so what are you guys doing at double line how are you positioning right now

yeah I mean we've been talking about potentially adding to a little bit of duration and buying

some of the kind of rate ingress not on the back of the curve but kind of that five to ten year

part of the curve because as I mentioned on the onset you know we're talking about a slowdown

because of this conflict and what it's done with oil prices and I'm very concerned about what

we've seen in the oil market thus far because it's not just the spike we've seen in potential

reaction back downward the conflict stops but it's the amount of disruption that has happened

a destroying supply chain so it's not just the straight itself but also the production facilities

and so if that continues to be an ongoing problem and there's more destruction which we've seen

now the aluminum plants get hit over the weekend you're seeing more of the LNG plants get hit as well

ultimately that leads to just not opening the spigots back up and being able to deliver

that supply so if you want the oil markets to calm down we need demand destruction at this point

and if they see in the commodity prices the cure for high prices is high prices

okay Jeff thank you for joining us with some first reaction there to Powell what we're seeing

in the bond market Jeff Sherman thank you speaking of high prices the WTI is higher today

Brent about flat as the Iran war goes into its fifth week president writes on truth social

this morning that if a deal is not reached and the straight of our moves is not immediately open

the U.S. will destroy Iran's electric generating plants oil wells carg islands some desalination

plants joining us this morning is Barclays energy analyst on our sing Amar it's great to have

you back thanks for the help today I am curious to get your take this morning on this sort of

narrowing spread between West Texas and Brent it's more like 10 bucks today I'm not 15 or 20

thanks Karl for having me so we break down the Brent WTI spread in two components the

onshore component is the cost of getting oil from pushing Oklahoma to Houston on the coast

and then the offshore leg is basically getting it from Houston to to UK where it

computes with Brent and what we've seen is because shipping costs have gone up we've seen the

offshore leg widen but more recently what we've also seen is market part spends probably betting

that there's going to be some export restrictions in the U.S. which has led to the widening of

the onshore spread as well do you expect that premium to last it depends on how things play out

I mean at this point shipping rates are very high obviously but we've not seen any formal

announcements from the administration about a potential restricting of exports out of the U.S.

so if that remains the case you could argue that it's just limited to the offshore leg and the

onshore leg goes back to normal it was about one buck on average last year but if we see like

sort of the era going back to 2015 and before where exports were out of the U.S. were restricted

then the onshore leg could widen a lot more and I mean and the overall spread as well

so when when we read exactly what the president is threatening here I'm obliterating their

electric generating plants oil wells and carg island and possibly all desalination plants what

is priced in exactly in terms of that risk right now in the oil market so we've laid out

three scenarios and where market pricing stands right now is in the middle of the first two so

the first scenario is in the most optimistic one right now that we get a normalization of

the state of almost situation by early April and that would get you to a full year average

Brent of 85 as of Friday closed it the forwards implied 20 only six average Brent was at 91

the second scenario is the straight normalizes by end April and that is consistent with

Brent averaging a hundred bucks this year and the third scenario is the straight normalizing by

May end and that would be consistent with Brent averaging 110 so as I mentioned we're basically in

between the most optimistic and a little bit more what is some scenario right now what about the

carg island option where where the U.S. takes control of Iranian oil is that is that is that a risk

for higher oil or lower so it I mean the wheels have to see how that plays out rhetoric on that

specifically has been extremely elevated with Iran threatening attacks on regional oil infrastructure

in in response and so far we've seen like sort of very limited effect on least on the oil side

I mean Jeff mentioned earlier attacks on aluminum sites and LNG sites but on the oil

side has been limited to oil depots and refining complex what we've not seen upstream infrastructure

or even mid stream or shipping terminals attacked to that extent yet but if that were to happen

then that could compound the duration effect that I was talking about is it pertains to the

state of firm who is itself when when you think about LNG and the vulnerability of some of these

say southeast Asian countries do you think they're going to start to turn toward coal over the long

term or even some renewables as a replacement for the unreliability at least for now with this LNG

episode yes I mean this is exactly what happened in 2022 and we're just seeing an extension of

that I mean the 2022 crisis was you know finally something that markets were beginning to like sort

of start put behind with with the expansion and Qatar coming online later this year but now

obviously with the facility in Qatar hit even the existing capacity in the country is now on the

question even if the trade were to normalize because of that that damage the facility will not

be able to ramp up fully and and obviously expansion plans are also in question so so the LNG

market might have you know a lot more sustained damage coming out of this conflict and yes that

would mean the power sector in Asia will have to adjust to that reality yeah because that's a big

debate on oil prices too now is is just the how long this will last even if the war does end and

and find some sort of resolution how long does it take to get back online and what will that mean

for prices or do you think prices just react really quickly to to any kind of end I think there's

going to be frictions but markets are generally like sort of very good at pricing that like when we

laid out those scenarios we just discussed there's obviously an assumption there that things will not

come back online as quickly as the ships start moving right so they don't need to be necessarily

coincide with each other but those scenarios have some friction baked in and it would depend

from country to country like countries where the production shutdowns have been more widespread

like and the countries and that's in the countries that do not have much capacity to

reroute supplies like Iraq and Kuwait you will see a greater lag in terms of resuming production

but there are countries like Saudi Arabia and UA where they've been available to reroute supplies

and so production can ramp up relatively quickly right brings speaking to the Saudis I wonder Amar

have you been impressed at the ability of their east west pipeline to benefit global supply and

did the Houthis news on Friday put some of that at risk yes so it's been inspiring to see that

and it's obviously you know great comfort that they've been able to reroute some of the supplies

from the east to the west terminal and Houthis who have remained silent so far you know joining

Iran's like sort of response is a concern although so far infrastructure in the Red Sea area

our shipping through the Red Sea has not been attacked but that is something you know that markets

are very eagerly looking at Amar appreciated obviously extraordinarily complex to read

and we benefit from your help thanks so much Amar sing over at Barclays thank you for that

when we come back this morning the leading driver behind the steep declines and shares of meta

Microsoft and alphabet to begin the year we'll take a look at that in a minute plus why new

attacks in the Middle East have aluminum stocks spiking aluminum now on pace for its biggest

monthly gain since April 2024 we'll be right back

aluminum the latest commodity to see a sharp move here as a result of the Iran war pipa stevens

tracking those moves for us this morning and pipa I've heard I've heard some of the beer companies

already start to mention this like a course but it's really moving yeah that's right Sarah so

aluminum prices are rising after Iran targeted the two largest single-site smelters in the Middle

East Amar its global aluminum saying that it's side an Abu Dhabi sustained quote significant

damage with aluminum Bahrain also hit no word yet on potential production losses but together the

facilities produce about 4 percent of global supply or roughly 10 percent of ex-China supply

according to JP Morgan and this comes after some smelters in the region had already announced

curtailments given the goal for lies on aluminum imports that passed through the strait of

hormones and more cuts could be coming as smelters work through their dwindling stockpiles in total

the region accounts are roughly 23 percent of ex-China global production and last year about

21 percent of US primary aluminum imports came from the region that's according to smp global

aluminum stocks including alcoa and century aluminum seeing a big gains today the JP Morgan

saying the metal could quickly run towards $4,000 per metric ton or even higher before a demand

driven unwind guys pipa aluminum is a really interesting collision of the Iran war and tariffs

kato did a piece last week where because of the tariffs on Canadian aluminum a lot of US buyers

sort of migrated to Middle East supply chains which of course have now come back to bite them

i think in the words of one piece it was the dumbest tariff ever created that's right and so the

the whole point of that is to try to boost production in the US and there is a new aluminum smelter

that was announced last year but the issue comes down to power and these are incredibly power

intensive factories even more so than a data center and so in places like the united states you

just cannot compete with tech companies that might be willing to pay far above wholesale prices for

power and actually we've seen that a smelter and mosey and beak that was a key supplier for europe

just earlier this month announced that they are shutting down because they couldn't secure a long

term power deal and so while those tariffs were meant in theory to try to increase US production

it's really difficult given that in the middle east for example the reason why so much production

migrated there was because of access to cheaper energy and so there is unlikely to be an aluminum

smelter boom in the US anytime soon but where does the US get most of our aluminum is it it's Canada

Mexico yeah yeah so Canada especially they also have access to that cheap hydro power so they

can have a lower at lower cost access to energy and then also from the Middle East but again like

the Middle East doesn't have the back side so they are having to import that from places like

Guinea and Australia and then it's cheaper to refine it into the end product the aluminum in

the Middle East so it's but it's hit on both sides both coming into the straight and then also

trying to exit the strength and so those supply chains have all developed based on where you can

get access to cheap energy and then you add on the tariffs in the US and then you know manufacturers

do typically have some supply and some you know some finished product in inventory but the longer

the stretch is on the more that's going to start to drive up prices.

Pippa thanks appreciate it very important story almost as important as energy itself

our Pippa Stevens when we come back YA social media post has shares of fanning and Freddie

jumping better than 30% plus the reasons the street might be punishing some of the biggest public

players in AI when we're back in a moment.

Welcome back let's get to some movers we're watching this hour. Fannie Mae and Freddie Mac are

surging after Bill Ackman wrote in a post on X that they are quote stupidly cheap. Michael

Burry also saying he quote cannot emphasize enough how rare this is in this market shares of

car rental company Avis plummeting after jumping jumping more than 48% last week. Following

investor bets that the car travel company could surge amid long airport lines and then there's

Cisco the biggest US food distributor to restaurants hospitals and schools it's under pressure on

news today that it is acquiring jet road restaurant depot for more than $29 billion pretty big deal

including debt stocked down 13% when we return why the market is punishing names like Meta

Microsoft and Alphabet to start this year Microsoft losing about a quarter of its value so far

stay with us.

Picking up a little bit of steam here in the major averages as you can see opened higher

kind of lost a little and now we're back on the ascent for stocks overall S&P 500 the

Dow's up a nice 430 points one potential reason that we're climbing here is that we are

forcing bonds rally and yields a little bit lower which has broken the trend because we don't

usually see that when oil prices are firmer we usually see the inflation trade on but it's going

the other way and perhaps because we did hear from Fed share Powell in the last hour so speaking

the kids at Harvard and you know not breaking any crazy new ground but he said inflation expectations

are anchored that's perhaps good for the bond market that was working itself a little bit into

maybe hikes he did say that we usually look through these kind of supply shocks and we can't do

anything about the supply shocks at the Fed so definitely not as hawkish as maybe the market was

positioned for and that's helping lead bonds rally and and the sentiment and stocks higher as well

right didn't hurt that he said no systemic clues of stress coming out of private credit and with

that we're trying to hold 6400 this morning. Many times some of the biggest public players in AI

are seeing some historic declines to begin the year our McKenzie-Cigallo says more on that

today's tech check morning Mac hey good morning Carl so alphabet meta and Microsoft deep in the

red year today Microsoft down as much as 24% in 2026 despite clawing back some ground this morning

and it comes as investors absorb three new mammoth data center deals tied to yet another wave

of catbex heavy AI expansion which together show big tech taking on parts of the build out

that private companies namely open AI and Anthropic couldn't fund on their own so first you have

Microsoft taking over data center campus in Abilene Texas that had been reserved for Oracle and

open AI stargate project before financing talks fell apart it's one of the clearer signs yet of how

far Microsoft and open AI have drifted they now have rival data centers right next door to each

other. Next alphabet reportedly nearing a deal to provide construction loans for a multi billion

data center also in Texas that Anthropic can't fund on its own here Anthropic signed the lease

but needed Google's credit rating to get the financing done at a reasonable cost which is pretty much

the dynamic for every frontier AI company right now they need hyper-scaler balance sheets to build

its scale and then there's a meta the company cut a deal with energy Louisiana to fund seven new

natural gas plants for its Hyperion campus tripling its power footprint though meta is covering

the full cost that ratepayers don't absorb it and what connects all three sites is natural gas

each of these projects run on it and the war in Iran has driven prices sharply higher since the

conflict began that's where investors start thinking about margin compression adding to broader

concerns about the catbex ramp these three companies are well off their 52 week highs for

Microsoft down 34% from its peak guys yeah I mean Microsoft has that added sort of software

headwind that it's dealing with Mackenzie I guess you know there are a lot a lot of the analysts

love these stocks who follow these stocks and they say they're they're safe haven and you're not

going to see growth like this in the rest of the in the rest of the S&P 500 especially with

these supply chain inputs precisely and to that point about supply chain inputs there's a big

concern that this could show up as a headwind as soon as Q2 because not only are you looking at

greater energy costs you're also looking at the price of helium going up and that

ripples into chip prices so already as of the last you know quarterly prints we had a collective

catbex spend of $600 billion across big tech and the question is is if they maintain those same

build out ambitions will the costs go up just because it's going to it simply be more for the

inputs at this point meantime we began the morning with Jim and David talking about open AI

and Sora which felt that like they had to make some tough choices because compute is that there's

such a premium on it and I wonder if you think any of those dynamics from the private markets could

migrate into public well certainly we already saw open AI revise down its catbex spending ambitions

from 1.4 trillion down to 600 billion dollars Sora ate a lot of compute costs we saw them

shutter that despite having a Disney investment tied to it but I mean you're looking at big tech

they don't know any signs of slowing down in fact that Microsoft campus meta put in a competitive

bit against it and meta despite the legal overhang also doesn't have a cloud business to justify

this kind of build out they just had their worst weeks since October last week and so there are

standing questions about whether or not that catbex spend four Mark Zuckerberg will bear out because

at this point it's really going into feeding their models and their algorithms something a change

that might be forced if courts say that they need to change the addictive nature of their platforms

okay Mackenzie thank you watch out all of these risks Mackenzie sagalos meantime stocks as we

mentioned our holding study their higher again bonds are higher so a little bit of different

correlations and we've seen over the last few weeks because oil prices are higher as well

today we'll get a lot of economic data and the data has taken a backseat to some of these headlines

around the war so let's see if that changes with some of the more heavyweight reports like a retail

sales and jobs report coming Friday on a market closed day job openings tomorrow it will be

interesting to see if retail sales are responding to obviously developments that were pretty fresh

when that data started getting collection during the course of the month higher gas prices now let's get

to the judge