CNBC The Exchange
2026-07-15 · Hosted by Kelly Evans · CNBC
Executive Summary
Fed Chair Kevin Warsh delivered his first congressional testimony, pledging to restore price stability and independence from White House pressure, just as June CPI showed super-core inflation running below 1% annualized over three months. Economists Claudia Sahm and Greg Ip called the CPI data genuinely encouraging but noted the odd divergence between CPI and PCE inflation readings, with Ip predicting little chance of a rate hike this year. IBM shares had their worst day since October 1987, down almost 25%, after warning of AI-driven "paralysis" and mainframe deal delays; Jefferies analyst Brent Thill argued it's largely IBM-specific rather than an industry-wide software issue, dismissing the Starbucks-vendor-cutting narrative as "a rounding error." Bank earnings were strong across the board, led by Goldman Sachs' best day in over a year and JPMorgan's highest-ever quarterly profit in US banking history. Former Fed presidents Patrick Harker and Thomas Hoenig gave mixed grades to Warsh's testimony, both flagging underlying labor-market fragility despite his optimistic framing. Apple fell fractionally after a KeyBanc downgrade to sell, while Lucid shares halted after plunging ~46% on bankruptcy/going-private reports.
Key Stories & Changes
1. Kevin Warsh's First Congressional Testimony
Fed Chair Warsh testified before the House Financial Services Committee, pledging: "The Federal Reserve can and will deliver a price stability... we have the tools to deliver that"
Under questioning about presidential pressure, Warsh said: "My commitment to you is to follow the law and follow the data"
Warsh emphasized five internal task forces addressing communications, the balance sheet, and other reforms, saying "we have caused... a sea change in new thinking" in six weeks
Steve Liesman noted Warsh avoided giving hints on rate direction and stayed "away from providing any hint about the direction of monetary policy," while emphasizing AI's long-term economic promise
The probability of a September rate hike, per CME Fed Funds tool, fell to ~61% from ~72% before the CPI report and testimony
Former Fed presidents Patrick Harker and Thomas Hoenig gave broadly positive marks but both flagged concern that Warsh's characterization of the labor market as "broadly stable" understates underlying fragility
2. June CPI Cooling and PCE/CPI Divergence
Super-core CPI ran at just 0.75% annualized over the past three months, per Greg Ip, who called the CPI data "great" and said there's "no case for raising rates this month" and "not much strong case for raising rates at all this year"
Ip highlighted an unusual divergence: PCE inflation has been running well above CPI inflation, the reverse of the historical norm, and predicted PCE will eventually converge down toward CPI
Claudia Sahm cautioned "one month of a good CPI is not going to radically change the conversation," noting Warsh explicitly said today's data was not "mission accomplished"
CFRA's Sam Stovall said he believes the Fed "probably will not be raising rates some time this year" but is also "probably done cutting rates," expecting the S&P to "tread water"
3. IBM's Historic Plunge: "AI Paralysis" Diagnosis
IBM shares fell almost 25%, the worst day on record dating back more than half a century
Jefferies analyst Brent Thill attributed the miss to three factors: (1) a miss on mainframe deals as CIOs redirect capital to AI infrastructure, (2) "AI paralysis" as companies freeze spending while testing AI strategies, and (3) rising security spending crowding out legacy infrastructure upgrades
Thill: "Software has been a source of funds for the past year," but called this "more IBM-specific than... a software industry issue," while acknowledging others have echoed similar commentary
Thill dismissed the reported Starbucks vendor-switching story as immaterial: "it's a rounding error for IBM... they don't do really any business with IBM"
IBM missed software revenue estimates by over $300 million; Thill said the company needs to better manage "elephant deals" and build a bigger pipeline of smaller deals as a buffer
4. Bank Earnings: Records Across the Board
JPMorgan delivered the highest quarterly profit ever in US banking sector history, with nearly every major business line posting record revenue
CEO Jamie Dimon: "we are in a very healthy, active, exuberant market with very high prices and very high volumes... we just don't know how long it will continue"; Dimon also said AI has helped cut up to 40% of jobs in certain roles
Goldman Sachs had its best day in over a year; equities revenue soared 72% to ~$7.5 billion versus ~$5 billion estimates; investment banking fees up 55%; deal backlog at a five-year high
CEO David Solomon: "I think the firm is in a position where this moment, this environment, is just super aligned with what we do really well"
Bank of America saw double-digit gains in trading and investment banking; CEO Brian Moynihan cited resilient lower-income consumer spending and rising deposits
5. Other Notable Movers
Apple fell fractionally after KeyBanc downgraded to sell (from prior rating) citing fewer device subsidies, slowing upgrade rates, and recent price hikes pressuring user growth and services revenue
Lucid shares fell ~46% and were halted for volatility after a report the Saudi-backed EV maker could go private or file Chapter 11 before its August 5 board meeting
CleanSpark rose as much as 15% after signing a 20-year data-center lease with an unnamed "tech heavy hitter"
Alphabet has raised nearly $137 billion from capital markets since November to fund AI buildout, including an unusual ~$1 billion prepaid municipal energy bond deal with California's Pioneer Community Energy
New York announced the nation's first statewide moratorium on large data centers, pausing new permits for up to a year pending rules on energy demand, water use, and environmental impact
Apple is reportedly evaluating compressed AI model technology from startup Prism ML that could run powerful models on-device, potentially disrupting projected memory/DRAM demand (Morgan Stanley estimated Apple's memory costs could rise 190% next year)
Trends Identified
1. "AI Paralysis" as a New Corporate Spending Pattern
Jefferies' Brent Thill introduced the framing that enterprises are freezing legacy IT spending decisions while in an AI strategy "test phase," a dynamic distinct from simple budget reallocation. This suggests the drag on software vendors like IBM may persist until companies resolve their AI deployment strategies, not just until AI infrastructure spending normalizes.
2. Divergent Inflation Signals Complicate Fed Communication
The unusual CPI/PCE divergence — with PCE running hotter than CPI, reversing the historical pattern — creates genuine ambiguity about the true inflation trajectory, complicating Warsh's ability to commit to a clear reaction function even as headline data cools.
3. On-Device AI Efficiency Could Disrupt Memory Demand Assumptions
The Prism ML/Apple story and reference to Google's earlier TurboQuant paper reflect a recurring pattern where model-compression breakthroughs periodically spook memory stocks by suggesting AI infrastructure buildout could require less DRAM/compute than currently assumed — a recurring source of volatility in memory names.
4. Municipal and Alternative Financing Emerging for AI Infrastructure
Alphabet's use of prepaid municipal energy bonds signals hyperscalers are diversifying beyond traditional corporate debt/equity to fund AI infrastructure, potentially opening a new asset class as more tech companies seek creative financing amid rising capex needs. ---
Sentiment Analysis
Overall Market Sentiment: Cautiously Constructive
The combination of cooler inflation data and strong bank earnings supported a mildly positive tone, tempered by unresolved questions about IBM's software warning and skepticism about the durability of the CPI improvement.
Risk Factors Highlighted
CPI/PCE divergence unresolved: An unusual gap between the two inflation gauges creates uncertainty about the true underlying trend.
IBM deal pipeline opacity: Unclear whether delayed deals close in H2 2026, with IBM's own earnings call eight days away.
AI paralysis dragging on legacy IT spend: Corporate indecision on AI strategy could prolong software-sector weakness beyond a single quarter.
Fed communication vacuum: Panelists warned that Warsh's reluctance to give forward guidance could let markets or task forces "fill the vacuum" with their own narratives.
Labor market fragility beneath the surface: Both former Fed presidents flagged concentrated job growth in healthcare as a hidden weak spot.
Lucid solvency risk: Reports of a possible bankruptcy filing or going-private transaction before its August 5 board meeting.
On-device AI compressing memory demand: Breakthroughs like Prism ML's compression technology could undercut bullish memory/DRAM demand forecasts.
Data center moratoria spreading: New York's first-in-the-nation pause could be replicated elsewhere, constraining AI infrastructure buildout timelines.
This episode was covered in today's [The Market Signal — 2026-07-15](https://marketsignal.beehiiv.com/p/the-market-signal-2026-07-15), a cross-source synthesis of multiple podcast reports.