June PMI, SCOTUS overturns Chevron deference: Catalysts

Stocks (^DJI, ^IXIC, ^GSPC) move higher in the first full trading hour of Wednesday's session. The trading session is shortened today in lieu of the July 4th holiday. Madison Mills and Brad Smith sift through the leading market stories and economic themes in today's episode of Catalysts.

For starters, June's Services Purchasing Managers' Index (PMI) data fell short of economist expectations. The Institute for Supply Management (ISM) services index registered at 48.8, below the anticipated 52.7.

S&P Global Ratings chief global economist Paul Gruenwald joins the show in-studio to tackle what the latest PMI print and other economic data may say about the Federal Reserve's willingness to cut interest rates.

Brownstein shareholder and co-chair of financial services practice Leah Dempsey discusses the Supreme Court's decision to overturn the Chevron deference, which for nearly 40 years required courts to defer to government agencies' interpretations of ambiguous laws rather than interpreting them independently.

Other top trending tickers on the Yahoo Finance platform include Tesla (TSLA) and Amazon (AMZN).

This post was written by Luke Carberry Mogan.

Video transcript

It's 10 a.m. here in New York City.

I'm Madison Mills alongside Brad Smith.

Thank you for joining me at the top of the hour here, we're going to dive into the catalyst that are moving markets today.

That's right.

This holiday shortened week has been packed with data from the labor market to manufacturing and now services PM I crossing will discuss with the latest numbers could mean for the feds pathway.

That's right.

And the latest sales data from Tesla GM and Ford showing positive signs for demand.

We're going to dive into the outlook for the broader industry.

Plus President Biden blaming a jet lag for his disappointing debate performance as Trump comes out on top in fund raising efforts.

We'll dive into the next big catalyst for the general election.

That's right.

First, we got a break into these June services PM I data that we've got from IM coming in at 48.8 versus the 52.7 expected.

So coming in below expectations here, I just want to run through some of these numbers because we are actually seen treasury surging following these Im Services number coming in again, lower than anticipated.

But running through these numbers, we got factory orders for April actually revised down 2.4 per.

That's according to the Commerce Department.

New orders, ex transportation, falling 0.7% in May after rising 510 7%.

The prior months, we've also got capital goods and non defense X aircraft.

New orders for May falling 0.6% after rising in April so seen several reversals there in terms of numbers coming in, I do want to run through.

Actually some of these IM Services numbers in particular business activity falling to 49 point versus 61.2 new orders.

Also a big drop off there coming in at 47.3 versus 54.1.

And then prices paid also falling to 56.3 versus 58.1.

So seeing quite a few of these data points here, Bradley falling off in terms of this broader print that we got from June U SI M services and also may factory goods orders that was running through there.

Also coming in below expectations, just take a look at the reaction as of right now, we're still to the upside across many of the in fact, all of the major averages here in the US, the dow holding on to gains by the hair of its chinny chin chin, but just kind of to zero in a little bit more on that June Services is M report that you were running through some of the numbers so well on some context here, economic activity in the services sector contracted in June.

This is the second time in the last three months.

It's done that says the purchasing and supply executives in this latest on business and then this to them also indicating sector contraction for the third time in 49 months here.

So that potentially something for people to really kind of take away top line from this report.

As we're seeing markets remain pretty steady, holding on to gains as we mentioned here.

But this some critical activity in terms of the contraction.

And then just lastly here, the business activity index registering 49.6% in June 11.6% point lower than the 61.2% recorded in May the first month of contraction since May 2020.

So just want to highlight that real quick.

Yeah, this is the lowest ISM services print that we have gotten since that, that critical time period.

Really the heart of the COVID-19 pandemic just a couple of months after surge here in the US.

So here to help us with this conversation around the services sector, we've got Paul run wild and P global ratings chief global economist Paul, thank you for being here.

So good morning.

So the services data coming in and mirroring what we saw in a really tough economic moment for this country.

Does that lead us to any type of concern that's similar to that moment.

Well, you know, we've been waiting for some time for the economy to slow down and the surprises have been on the upside even on inflation.

So now we've got a couple of really soft prints and the focus is going to be on the language coming out of the fed.

We've got a late cut, a rate cut coming later this year, but they've been waiting for a series of numbers that show a clear deceleration of the economy.

This is part of the story.

So one number is not a trend.

But if we get a couple of more prints like this, I think the rate cuts are going to come into focus.

And so, and we brought up this question earlier.

Is it a trend in the quantity of data points that we see or the quality in perhaps the decline or the contraction that we continue to see?

They're trying to put it all together, right?

They're really looking at financial conditions which is confident its lending rates, it spreads its asset prices.

So the whole thing together, do they have the right policy settings now to guide the economy to 2% inflation and full employment or are they going to need easier settings if we get a couple of more prints like this, that's a clear signal that they may start to ease off on rates.

And you said in your own note here that the main risk on your base case scenario would be a drop off in either services spending or in labor demand.

At what point?

Like how many data points would you see that were similar to that would cause you to say, oh, that's a drop off versus the type of soft that we're looking.

We've been right, you're right.

We've been in soft landing cap for a couple of years now, but the, the the full crew of that or the support to that has been services spending in the labor market.

So those are the two things we're watching.

If we get a string of prints like this, that could call into question.

But you're right in the recent report for our credit conditions, we did identify that the main economic risk is a crack in this sort of solid labor market services, uh demand we've been seeing and this not a great print today.

We'll have to see if we get a couple of more like this.

Does this increase the odds of a rate cut coming sooner rather than later?

Yes.

Again, it's one data point.

But if we extrapolate from here, I would say yes, we're in the December camp now, but September, December is kind of 5050.

If we get a couple more like this, the fed could potentially go earlier.

I mean, we basically only have a couple more readings too, right, in order to really get a sense of what the FED may do even as Fed chair, Jerome Powell speaking in Portugal saying that they would need to see more in order to potentially put a cut in play here in September.

It seems like that's the highest probability at this market was kind of 5050 last time I looked, but after this morning, I, I suspect it's drifted a bit, but remember we've had kind of false starts before and again, we're going to need some more evidence.

Next move for the fed is down.

Question is when it happens.

Yes.

Well, and it's, it's interesting too because he's chair power really did sound like he wanted to cut yesterday, right?

He said the word progress at least five times from my word count.

So.

Well, we know the global cutting cycle has started, right?

We've got the ECB and we had, you know, Bank of Canada Bank of England is probably next.

But the fed, the US economy, the US economy has been outperforming.

Inflation, pressure has been strong.

So we need the economy to slow down, but we need it to moderate, not to, not to fall off quickly.

So this is what do the global elections we've been tracking thus far and especially in France.

But also thinking about where we're seeing some movement as well politically in the UK even.

How is that impacting the different rate cutting cycles that we're seeing emerge across the world?

Yes.

Well, I guess there's two things that kind of go in the opposite directions.

One is, if you've got populist, they like to spend money.

So the fiscal juice is going to be more baked into the forecast and that would tend to pump up activity and inflation.

But on the other hand, there might be a confidence effect.

What's going to happen to trade, what's going to happen to industrial policy, what's going to happen that could shape markets, which would go in the other direction.

So we'll see how the elections come out.

And most importantly, the policy platforms and when what they're going to get out of those?

Right, are they going to be able to enact some of these things?

But you know, there's a scenario there where things slow down, quicker and the rate cutting cycle accelerates as well.

Right.

It's this question of politics or policy which is going to do, I mean, the the geopolitics is up near the top of the list that we, as we showed in our recent report is not just traditional macro risks we're looking at.

Right.

Right.

It's always a new, always a new regime.

Thank you so much for joining us.

We really do appreciate it.

There was some great commentary there from Paul Gruden.

He is S and P global ratings chief, global economist.

Thanks so much.

We just saw a handful of big tech names, leading stocks higher in the first half of this year and into market all time highs at the close on Tuesday.

So can we expect the rally to broaden out more from here?

Joining me now to discuss we got K Nixon Northern Trust, Chief Investment Officer Katie.

Thanks so much for being here with us.

Look, the big question is of course, whether or not we can keep relying on a handful of names to drive this market higher and higher?

How does the macro environment play into that question?

To what extent does the fed and the macro environment particularly when we are starting to get in some of this data that's showing softening way on a market that is driven by just a handful of names.

Well, uh first, I will say that, you know, we are also in the soft landing cap and that's a really important underpinning for our thesis that the, the market will broaden out as we get further and further into 2024.

And if you think about it there, it's logical that we've had the leadership that we've had.

If you look at last year's earnings, um without the mag seven, earnings would have been steep, deeply negative.

Um, they were responsible for more than 100% of the earnings growth and even, uh that pulled forward into the first quarter where those stocks were responsible for more than 100% of the earnings growth.

But with a soft landing forecast for the economy, we do see a broadening out of fundamental strength beyond those mag seven stocks.

So it really comes down to the earnings growth converging as we get closer to the fourth quarter where both the mag seven as well as the other 493 are, are really forecast to be kind of right on top of each other in terms of contribution of earnings to to the overall market.

Where is the next sector where that natural broaden out might take place or be evident?

Well, you know, it's pretty broad actually, what we see in 2024 is nine of 11 sectors in in the market are expected to uh to grow um to grow earnings and four or five of them are expected to grow double digits.

So I think it's a it's a real broadening out and that's really healthy because we don't want to have the market so dependent on just a small handful of stocks in a very small handful of sectors that tend to be very highly correlated.

I also want to talk about the earnings broadening that you guys are are mentioning here because we are starting to see some signs of coolness.

Obviously, the services im data coming in at the lowest level since the heart of the pandemic in May of 2020.

How does the softening of inflation impact the ability of companies to have pricing power and therefore their earnings?

And is that a story that has yet to play out and could be a potential head wind on earnings in the next couple of years even.

Well, you raise a really good point and I do think pricing power has propelled, um, a lot of revenue growth, certainly, um, for, for many companies in the S and P 500 we do see we actually see margins remaining pretty stable at around 12%.

Um, even after sort of this pricing power has waned a bit.

So margins are, are, are expected to be strong.

And it's interesting because if you think about the first quarter earnings releases, what we heard from many companies was efficiency, operation efficiency.

So we know that companies are being very, very careful about how they spend their money in order to really preserve margins in the absence of that really broad based pricing power.

But I will say as inflation comes down, that will allow the fed to start easing policy.

And I think that would be a nice tailwind for again, the other 493 and the S and P 500.

What do you think of the, the theme of this earnings season might be that prevails?

I think it's going to be operational efficiency.

I think companies have been ahead of the curve here.

Um In, in thinking about the contours of the economy, I think companies are seeing gradually a weakening in top line growth, whether it's real or nominal.

Um you know, consumers are are consuming less and they're willing to, they're not as willing to pay higher prices.

So that's really gonna press your top line.

So I think the theme is gonna be operational efficiency and operational resiliency.

Katie.

Thank you so much for joining us.

We really appreciate it.

That was Katie Nixon Northern Trust's Chief Investment Officer turning now the one of the biggest stories of the week, perhaps the year, the all the fallout of President Biden's debate performance, the president now blaming Jet lag at a donor event last night for that performance.

So joining me now to discuss, we've got Yahoo finances, senior columnist, Rick Newman.

Rick, thanks so much for being here.

Talk to me about the latest commentary from President Biden on what he is blaming his debate performance on and how that's landing with folks.

So he said this at a private gathering with donors, but I'm sure the Biden campaign meant for it to get out into the news.

Uh And he said, well, you know, I, I took two trips around the world right before the debate and II, I left me so tired that I almost fell asleep on the debate stage.

Um So, uh, you know, I guess everybody can, who's traveled overseas can identify with Jet lag.

Uh And if you combine that with the arduous schedule of a president and so forth, yes, uh maybe that contributed to Biden's terrible performance.

But on the other hand, Biden returned from his last overseas trip on June 17th and the debate was on June 27th.

So, uh let's see, 12 days to recover from jet lag.

Um Is that really the problem here?

Um I think that a lot of people will remain skeptical and here's another problem for Biden, 40 million plus people saw his terrible performance on June 27th at the debate during prime time and nobody saw any Avis explanation from Biden about why he did so bad.

So what Biden keeps doing is he bombed in front of a major national audience and he wanted that audience, he asked for that debate to be to happen early and he got that.

Uh so he bombed there and then he recovered the next day at a campaign event that almost nobody saw he was, he was energetic and vigorous at that event, but nobody saw it.

So, you know, the, the people who say well in private, he seems alert and so forth.

This doesn't really matter anymore how Biden seems in private, it matters how he seems in public and in public, he looks terrible.

Now, I'll just one other thing here.

He's going to be making some public appearances in the coming days.

He's doing an interview with ABC news on Friday.

So the Biden campaign gets the idea that he needs to start showing up in public and proving that he is as capable as he says he is.

But that could go south for him just as the debate did he could end up bombing in those things too.

So important things are going to happen during the next few days.

Well, Rick, another thing that's really important here, of course, is fundraising because Trump's campaign did out raise Biden in the second quarter here.

What can you tell us about how donors have been responding to the debate performance from Biden and how that could impact his campaign?

Well, Biden did take in a lot of money after the debate.

Um You know, we don't, we don't always know in the days after one of these uh events where there's a lot of fundraising.

It's usually what the campaign tells you because they haven't yet fired, filed their official record.

So we kind of have to take their word for it and we don't know exactly where all that money is coming from.

That a lot of that could be small donors uh go to the campaign.

But the big money that goes to the pacs and the super pacs, you know, there's some a fair amount of reporting from among those people that no, nobody really wants to come out.

None of Biden's rich backers want to come out, come right out and say he needs to withdraw, but they clearly are having, they're very concerned behind the scenes.

And I think in coming days, we're going to find that there are a lot of uncomfortable discussions happening, perhaps with some of these rich voters telling Biden it is time for him to pass the mantle to somebody else.

Lastly, Rick, I want to talk to you about an Ipsos poll that recently came out with voters asked about hypothetical democratic candidates.

When asked about the potential for Michelle Obama to run against Trump.

50% of those said they would vote for Michelle Obama.

Rick.

What does that tell us?

Is this, is there any chance of that becoming a reality for those votes?

That question shouldn't even be in the poll because this is an urban myth that Michelle Obama Barack Obama's wife would ever want to run for president.

This is wishful thinking there are, she has never run for political office.

She has never indicated that she wants to run for political office and why the world would she?

I mean, look at the great life, the Obamas.

Have they go around?

They, they hang out on Martha's Vineyard with the most fabulous people in the world.

They, they make movies.

They're rich as can be.

They don't have to worry about anything and they don't have to answer to anybody.

Why would Michelle Obama want to give that all up?

She doesn't and everybody should stop thinking that there's any chance at all that Michelle Obama will ever run for president.

She won't.

All right, Rick.

Well, you really put the final nail in that coffin for those voters.

So thank you so much as always.

Thank you for joining us and for the great insights Rick always appreciate speaking with.

You have a great fourth.

We're gonna have all of your Markets Act ahead right here on Yahoo Finance.

You broader gains actually across the major indices.

The S and P up over about 1/10 of a percent.

And same with the NASDAQ.

We're going to keep covering all this and more on catalyst.

We are keeping a close eye on Amazon shares fairly muted this morning down about 1% after hitting its highest point ever.

The stock closing at $200 on Tuesday's close.

This is a good sign for the CEO is going to have a, he will have been in the job for three years as of Friday.

Yah, finance tech editor Dan Howie is here to weigh in Dan.

Thanks so much for being here.

Look, obviously, it's been a record breaking year for Amazon hitting that record breaking market cap.

What could potentially drive this stock to even further highs and how much more pressure is on the name given this record?

Yeah, Matty, I think a lot of this has to do with Andy Jasse and his kind of uh cost uh controls that he put into place.

Obviously, there were a lot of layoffs.

Uh part of the, the reason why they had that pullback uh last year um was because in the year before it was because of the over expansion that they during COVID.

So they basically figured, look, everybody is inside now because of this pandemic, everyone's gonna stay inside forever.

It turns out that that is not true.

People like going out and shopping and doing other things.

Um And so they needed to pull back.

Um They've since done that.

They've also seen uh more growth in Aws, something that uh Wall Street was nervous, had kind of hit its peak and was now just going to kind of slowly grow over time.

But A I has helped to drive new expansion there and the investments that they're making in A I is helping with that as well.

So that's really, I think where a lot of people are going to be looking or Amazon to kind of drive its next level of growth, that kind of ability for them to tap into their A I capabilities.

Uh They do have tough competition.

Microsoft obviously is basically, you know, best friends with open A I. Um and Google has its own A I capabilities that it's pushing uh in their cloud services as well.

So, you know, it's not as though this is going to be easy for them.

Um You know, when you think about A I right now, frankly, a lot of it is, you know, Microsoft and Google uh Amazon however is there and they are pushing it.

Um And so that's something that could be really uh uh their next growth driver on the, the, the storefront, the the retail side of things they're trying to take on uh tu go along with the, you know, low cost direct shipping kind of goods uh that could help them on the retail side of things.

Uh And then they have uh prime day coming up.

Uh I believe it's on the 16th and 17th.

Uh And so that should give an indicator of how much people are actually shopping uh on the retail side.

But really, I think it's all going to be about as everything in tech is right now A I All right, Dan, thanks so much as always for joining us on all things tech and of course, the A I impact in the room.

Appreciate it.

Now, coming up the latest auto sales reports from Tesla and General Motors showing the demand for electric vehicles might be back on the rise.

Tesla's deliveries came in better than Wall Street anticipated.

General Motors also seeing its ev deliveries increased by 40% compared to a year earlier.

Let's discuss it with Stephanie Valdez Street.

She's the director of industry insight at Cox Automotive.

Stephanie, thanks so much for being here.

I wanna start on Tesla because there's been this question as you know, for many years about whether or not this is a stock that is gonna move off of a story that the CEO tells or the business fundamentals.

We're seeing it move off of these fundamentals is that indicative of a new era for Tesla?

Yeah, I think Tesla is navigating the waves, right?

They're between these growth waves and I think in terms of for automotive sales, right?

They haven't had any new products except for the cyber track, which is pretty low volume.

And if we're looking at this Q two, as you reported globally in the US, we're probably anticipating a 15% decline in sales.

They're still a dominant player.

And as you know, they're really positioning on A I robotics, they're going to have their unveiling of the robotic robo taxi in August.

So it will be interesting to see how Wall Street reacts to that.

And I'm interested too in the fact that you even bring up the A I and robotics piece for a name like Tesla.

There have been some folks who come on our show and said they want Tesla to really just dive deeper into owning that they are a car company and others saying, no, they need to hold on to the A I of it all, which do you think is a more successful route for the company?

Well, I think right now they need to focus on both, right?

Because the A I robotics, it's, there's a lot of challenges with it with whether it's uh you know, like safety concerns regulations and there's still a dominant player in the EV marketplace.

They just need to have some more product, right?

And they had talked about having an affordable EV roll out.

Um I think next year, but I'm not sure the timeline on that and that's going to be key for them to keep focusing on their product.

Um, but I think they're definitely prioritizing A I and robotics as well.

Yeah, you mentioned some more affordable evs to come down the road.

What do you think that could do for the consumer uptake and adoption of evs?

Yeah, I think that's huge.

You know, we've been doing an ev path to adoption study for many years.

And as you can imagine, affordability is always the top barrier.

And so I think if you think about more options for consumers, if we can have more affordable evs, that's going to be a game changer right now.

The average transaction price for an EV is close to 50,054 1000.

And so that's still, you know, that price premium over an internal combustion engine.

And so I think if we can start to get more of these affordable evs that's really gonna help.

Um one of the things I wanted to mention for, you know, providing more affordable is used evs as we start to see more of those enter the marketplace, I think that's going to give consumers some more options at different price points and, and that brings up the point about competition.

I'm curious in 10 years.

Do you think that the EV space is gonna be crowded to a degree that Tesla just feels like maybe a drop in the bucket compared to sort of the market leader in the space.

Yeah, I think that's the challenge with Tesla, right.

They've been the dominant player.

They still have the market share, right.

Um, potentially could go below 50% this quarter.

But you have all the traditional automakers having a lot of product in the pipeline.

And so I think it's, there's a lot of competition and it's all about what consumers like.

They like something new, right?

Some new fun affordable.

And so unless Tesla can start to get more product, they're gonna start to have other automakers eat into that uh market share.

Yeah, and, and, and you know, uh in, in your notes that you sent over to us that consumer uncertainty about the economy and the election could potentially be a headwind.

And I was so fascinated by that.

Uh explain to me how the upcoming election could impact ev sales.

I think one of the things that consumers are thinking about, you know, right now we have the Inflation Reduction Act, right?

There's incentives for consumers, the 7500, not all vehicles are eligible.

Uh but consumers can get that if they lease a vehicle.

So I think there's some uncertainty about, should I buy?

What if you know, there's a, you know, something with the IRA gets eliminated, there's not the incentive anymore.

So I think consumers are a little bit kind of like waiting it out to see what I should do depending on the outcome of the election.

So I think that's one of it as well.

All right.

Well, thank you so much for joining us.

We really appreciate it, Stephanie, that was Stephanie Valdez Streety.

She's the Director of Industry Insights at Cox Automotive.

Thanks so much.

Have a good day.

You too.

Now, coming up after the Supreme Court overturned the Chevron deference precedent last week, we're gonna talk about the implications for the financial world moving forward.

That's next here on catalyst.

The Supreme court overturned a 40 year old precedent known as the Chevron deference, which ruled the courts should defer to a government agencies reading of any ambiguous laws or statutes rather than interpreting it for themselves.

So here to explain the potential ramifications of this ruling, particularly on the financial world.

We welcome in the Dempsey.

She's Brownstein's shareholder and co chair of Financial Services Practices Group.

Uh Thank you so much for being here with us, Leah.

I wanna start just on the kind of interpretation of this news.

So as a reminder to folks, this is the idea that, you know, there were limitations within the degree to which lawmakers and political appointees could interpret certain laws, they would defer to experts on each individual uh type of doctrine and decision.

This used to be a bipartisan issue.

What changed Leah.

Yes.

Well, so interestingly, this came out under justice Scalia during the Reagan administration in the eighties.

It was an interpretation of the Clean Air Act.

But over time, I think the conservative wing of the court thought that it became a separation of powers issue where, um you know, Congress wasn't necessarily delegating certain authorities to the agencies, but the agencies were seeing um a silent or ambiguous statute as the opportunity to promulgate rules that, you know, may align with a certain political party.

And there has been a lot of litigation on this issue.

I think over 1800 cases have 18,000 cases have cited the Chevron deference and over time, um different courts have have looked at this differently.

Really, the Supreme Court in recent years has not necessarily relied on Chevron as much.

They've relied on a new case, the West Virginia versus EPA which introduces a whole number uh issue called the Major questions doctrine.

Um But you know, this ruling is significant and we um have a, a number of ramifications for the financial services industry.

Ok.

So talk to me about those ramifications, Leah.

Thank you so much for that great explanation there just giving us the context on how this has really changed politically over time.

But what is the most important thing that investors need to know about how this could impact financial regulations moving forward?

Yes.

Well, and so especially in the last year or two, there have been an onslaught of um both financial services and housing regulations.

Dozens and dozens of new regulations have been coming out of the Biden administration, many have already been challenged in court and are in the process of litigation, but this certainly will uh give ammo to others that are looking to challenge new regulations particularly in an area where an agency may have gone beyond its statutory authority.

So I think, you know, that's one area to look at an increase in litigation which will probably elongate the rulemaking process and um create a bit of uncertainty in terms of whether rules are, are going to go into effect or not.

Uh There's also the, um, the process of seeking clarity through regulators which will change.

Um, you know, for, in something like A I, there is not a, a law on the federal books that tells people exactly how to operate in that area yet and the agencies in many instances have stepped in.

Um, here, now it's, it's now questionable, uh how far the agencies may be able to go if Congress doesn't first tell them what to do on those issues.

You bring up a great point though, in terms of A I, which we constantly talk about as the main driver of this market rally, given the impact of Supreme Court overturning Chevron here.

Does that mean that government officials are going to be able to decide what A I regulation looks like moving forward without needing to consult with A I experts themselves?

Well, you know, Congress has a number of pieces of legislation that they're considering in this area.

Um The regulators have also put out several pieces of guidance, this the CFP Bhu others have um put out guidance on this issue.

But going forward, depending on what that guidance says from agencies, it could be subject to a challenge.

Now that Chevron is, is struck down.

I I wanna zoom a decade ahead with you if we can kind of read the tea leaves here because I remember in high school, like the key sticking point in my US history class and economics classes where um we talked constantly about citizens united and the impact that that was going to have on our country moving forward.

This feels like the case that the next generation of history students are going to have that exact same commentary on.

If you were teaching that history class, what would you tell those students about how this would impact them just in terms of their daily lives and what this country would look like for them?

Well, I certainly think it's going to change the way Congress has been operating over the past few decades.

In recent years, they've been leaving a lot of the details to the agencies in many instances.

Um you know, doing that on purpose because they don't want to take a tough vote or get involved in an issue that may not look great in their next election.

Now, um they're, they're going to have to step in and, and fill in with those details.

So the way that Congress operates and you know, hopefully comes together in a more uh bipartisan fashion, we will hopefully change going forward.

Because if things continue as they have this Congress, uh this Congress, I believe it's one of the lowest number of pieces of legislation ever passed in history.

Um because of the divide, because of the fact that the speaker of the House was asked to step down at one point if things continue that way and, and you know, Congress doesn't legislate on these issues and, and agencies have a more limited authority to step in.

Um Things will get cut.

Ok.

So I think there's gonna have to be a shift in how things are done going forward and, you know, agencies as well are gonna have to have a mentality shift in the way that they probably gave rules.

Yeah, and you make the point as well in your notes over to us that typically uh Congress would try and push through some legislation heading into an election cycle.

Uh So this could complicate that moving forward here as well.

Leah, thank you so much for joining us.

We appreciate it.

That was Leah Dempsey.

She's Brownstein shareholder and co chair of Financial Services Practices Group.

Thanks so much for having me.

We're gonna have all of your markets action ahead right here on catalyst.

You're looking at a mixed board here, seeing some pressure on the dow the S and P and the NASDAQ holding on to games.

But pairing the upside movement that we saw a little bit earlier in the session.

Stay tuned for more.

You're watching Catalysts.

So we're at the downtown Manhattan Heliport.

And what we're gonna do is we're going to take off.

All I want you to do is pull back with your right hand that will make you go up, just pull back hard.

Yeah.

there you go.

Now you're flying, I'm flying, we're not actually flying above the Statue of Liberty.

That's a simulator from Joby Aviation, which is used to train traditional pilots on how to fly this battery powered aircraft with the backing of Toyota and Delta.

It's one of the largest companies looking to bring battery powered air taxis to market.

These aircraft are called EV Tolls which stands for electric, vertical takeoff and landing.

At first glance, it may look like a helicopter with extra propellers on top.

But unlike choppers, tos run off electricity rather than fuel.

This is for charging.

It took us about six minutes to get from JFK to downtown Manhattan.

Over $22 billion in investments over the last 20 years from names like Uber, STIs and Honeywell have now made this kind of a commute closer than ever.

Thanks to advancements in technology, high performance propeller blades that are very light.

In addition to Delta aerospace names like United and Boeing, see the potential and have invested with the hopes of one day adding eal rides to their list of offerings getting and now makes sense.

One research firm estimates the air taxi market could be worth more than $65 billion.

By 2028.

The tech has proven to work and it could be even closer to commercial launch in Europe here in the US regulation, lack of infrastructure and customer affordability could be what keeps these companies from taking off.

Yahoo finance went inside jobs 130,000 square foot assembly facility to learn more about how the company hopes their aircraft and their business strategy will win the air taxi race.

This is what's next in the business of electric, air taxis flying above traffic in a congested city sounds like fiction from the Jetsons.

But air taxi companies believe they can make this a reality as soon as 2025.

This is as close as we've seen.

I think in terms of the technology coming together to make something that you could use on a daily basis to go where you want to go and do the things that you want to do, which is kind of what a car is all about.

I think that is something that can be practical and available to people in the pretty near term.

The jobby aircraft has completed more than 1000 test flights.

The aircraft can fly five people including the pilot up to 150 miles what can you do with the way you design and build an aircraft if you have a world class electric propulsion system available, which no other aircraft have really been designed around in some ways.

The six motors on the aircraft are powered by four batteries which were developed by a team of ex Tesla employees.

What that lets you do is fly very, very efficiently, which makes all electric work and makes all electric safer too.

Redundancy was built into the aircraft.

Everything has backups in place.

So this is a battery.

This is a battery does that exist on the other side too?

So the air has got four batteries.

You've got that redundancy you can afford to, I mean, we can lose a battery and we still fly perfectly fine.

Electric aircraft face similar challenges to electric vehicles which don't have the added hurdle of launching into the sky.

Among those challenges, battery charging times, Joby can go up to 100 miles on a single charge, meaning it could do two trips back and forth to JFK from NY CS downtown Heliport before needing a recharge.

Joby says almost all of their trips and target markets would allow for recharging that takes about as long as de boarding and boarding passengers.

According to one report, ol batteries would ideally charge in under 10 minutes about as fast as Tesla's latest superchargers.

OL companies hope safety measures will give them a leg up as they try and bite into the 10,000 traditional rotorcraft trips per day happening in the US.

But first up getting cleared to fly.

A representative from the Federal Aviation Administration told Yahoo Finance that while tolls could launch commercially as early as 2025 2028 could be more realistic, at least for a scaled and competitive market.

The Fa A's innovate 28 initiative outlines requirements for launch that includes hitting certain safety criteria and flying under a variety of conditions.

It's the same approach applied to traditional aviation.

Still.

Certification is not guaranteed.

We don't know when certification for FAA uh will happen for any aircraft.

The FAA changed them to special condition, aircraft essentially putting more rigorous uh certification processes on top of that.

So I can't imagine that we're going to see an eal in the air certified flying around folks in 12 months.

Time does pre 2030 seem realistic.

I do think late in this decade we'll have that until then.

Tolls are focusing on countries with looser regulations.

Joby plans to launch flights in Dubai by 2025 through a deal that was supposed to be exclusive though Archer Job's main competitor later announced their own plans in the region.

Back in the States.

Joby is on track to hit the FAA S proposed line for approval.

They've just completed stage three of a five stage trial but with testing comes setbacks.

The US National Transportation Safety Board released a report on a Joby crash from February of 2022.

I know that there was a test flight that did end in a totaled jobby aircraft.

Can you talk to me a little bit about what happened there and how you as a leader kind of transitioned the tech moving past that we were flying pretty high and really fast, right, the edge.

We were doing it remotely though.

So that's actually one of the really interesting early use cases of autonomy that I think is a little underappreciated, taking care of it in all of the future designs.

But we found it earlier because of the use of that remote piloting and autonomy in a way that I think ultimately is pretty beneficial.

I think autonomous has its own issues.

Right.

The fact that people will feel comfortable not only getting in an aircraft that they've never been on before and having it have no pilot seems like the riskiest proposition still autonomous flight could boost profits.

Pilot salaries aren't public, but the average annual wage for commercial pilots in 2022 was a little over $100,000.

That's according to the Bureau of Labor Statistics, we think that's definitely going to come.

We just don't think it's the right way to go to market to start with because this gets us to market as fast as possible.

And then that's something that will make it even better down the road for now.

Joby is partnering with companies like Toyota and even Uber, which sold off their own air taxi unit to Joby.

Back in 2019, I led the Uber elevate team, which was Uber's effort to build a flying car in some sense ecosystem of different companies.

We actually demoed this with helicopters in New York City in 2019.

When we launched.

Maybe you remember there was something called Uber car.

You'll be able to, to in our app or in the Uber app essentially choose Joy, a Joy flight as one of the types of products.

But it won't just be a flight alone.

It's actually a multi modal integration, that integration will be needed since Jobby won't have many locations available for flights at the start.

Here's how it would work in one of their first target markets.

New York City users would open the Uber app and select the air taxi option.

Then a car would come to the customer's door, drive them to the nearest Verde airport which is a converted heliport that can handle the charging and storing of tolls from there.

Users would hop in the to and land at a nearby airport.

Joby says in New York City, the flight would take about seven minutes.

Uber isn't the only major company getting in on the action.

Toyota invested nearly $400 million into Joby and Delta invested 60 million.

Archer Joy's biggest competitor has a $1 billion conditional order from United Airlines and raked in 100 and 50 million from STIs as well as some well known investors including Kathy Wood via her Arc Innovation.

ETF and serial entrepreneur, Mark Laurie, major air taxi firms, Joby Archer and Lilliam have all had gains on the S and P 500 this year to see this investment put to work.

Yahoo Finance went inside Joy's assembly facility which following the Toyota investment now runs a lot like a car assembly line.

So this overall is our final assembly facility.

So we are bringing in all sorts of parts, all of the many different parts that go into the aircraft, many of them get built here.

And then we have a process where we put them sequentially in the right order in some sense onto the aircraft to build out that full aircraft, we are vertically integrated, we build the parts and then we assemble the parts together into structures.

And so what we have behind us is one of our structural assemblies for a fuselage, which is the body, the main body of the aircraft that Fortical integration is part of what attracted Delta to Joby.

We spent at least 18 months looking at over 20 different vaal uh start ups really looking at what each one had to offer because of the technological strength that Joby had the financial strength that they had as a start up.

We felt that that made a, a great match for us to be able to collaborate.

Take a look at how the markets are doing about 90 minutes into your trading day here.

I want to take a look at the broader and major indices looking at the NASDAQ.

There it is up about 3/10 of a percent.

Let's see if I can get the other markets to pop up here.

Because what's interesting to me is that we are seeing the NASDAQ composite up higher than the S and P 500 though this is the highest that I've seen these indices be on the day here.

Interesting in comparison to what we are seeing in the treasury space, see treasury falling off a bit following that IM data coming in at the softest levels in the past four years.

That's also why you're seeing a little bit of weakness in the dollar as the market starts to price in a higher chance of the fed cooling off interest rates earlier than anticipated, likely seen an uptick in the rate, hiking great cutting belief for September there as well.

I also want to quickly take a look at oil because we know that oil moving after I A did announce a drop in inventory as you can see that impacting the futures here for crude and, and brand and wetiwt I rather as well.

So taking a look at your broader market though still see some gains in the major indices, we'll see how that shakes up for the rest of your shortened holiday trading day coming up here, we've got wealth that's dedicated to all of your personal finance needs are very on.

Brad Smith is going to have you right here for the next hour.