B (2:57)

Overspending? No, no, no.

A (2:59)

It's when does the, when does the return on SPE spending actually happen? If you think about it, the operating cash flow for Amazon, they spend 90% of that operating cash flow on building out data centers. And us the return on that spending, that's really the question. As you begin to look forward, we're going to hear from all of these companies over the next 10 days.

B (3:23)

What's interesting, Steph, is that many of these names are running into the prints, which does something to the bar. Maybe it raises it, I'm not sure because the stocks had performed all that well going into the numbers. However, if you look at the one week performance from many of these, Metta is up 11% over one week. You own that. Nvidia is up six and a half. Apple's up. This is one of the few periods, you know, really recently where you can look over any kind of short period of time and say, wow, they're all up because they haven't been trading all together as a monolith, but they have over the last week trying to potentially anticipate what I think the street thinks is going to be a good reporting from these companies.

C (4:06)

Companies. I think the reports are all going to be good. But to your point, on the performance of these stocks, yes, they've had a good week or two, but they are all, except Google. They are all down from their highs. Metta is still down 15% from its highs. Microsoft down 12%, Apple down 10%. I actually like the setup of that when they're down. And yet they are starting to see a recovery. I do think that Joe is right about the spend. I think the spend is going higher. But to me the most important thing is free cash flow after the spend. And all of these companies are going to still have considerable free cash flow. So Meta is going to have 16 billion this year. Amazon is going to have 41 billion in free cash flow this year. Microsoft at 77 billion, etc, etc. So they're all going to still have free cash flow and flexibility to continue to invest as they should, given the revolution as a whole. Earnings are running at a bounce 9% so far. They are.

B (5:10)

That's ahead of expectation.

C (5:11)

That is ahead. And I actually think you're on track to do something like 12, 13%. There are some aggressive targets, Scott, out there of 16, 17%. I'm not there. I'm in 12, 13 in a 3 1/2, 4% GDP world. And it's not just revenues, it's not just earnings, it's not just revenues, it's also margins, which, you know, I pay very close attention to.

B (5:31)

Yeah.

C (5:32)

And I think the economic data still is very supportive of all of this. And so you want to pick your spots. I don't think it's just going to be Mag seven that take over. I think I can name a whole bunch of companies that reported in the past week that are down because. Because earnings is stupid season.

B (5:46)

No, no, I'm glad you raised that point because I was literally going to go there next that Wolf points out today what they call punishing price action to start earnings season, that even very solid results, these are their words. The share prices of companies beating on the top and the bottom lines have witnessed negative relative price action after reporting. They do not think it's sustainable, though they expect double beats to exhibit positive price action as more companies report. It is interesting, though to see good reports not being greeted well on Wall street and that leads to maybe some trepidation heading into these numbers over the next couple of days.

E (6:26)

Well, there's the potential that this is just a sort of rerating in terms of valuation that investors are looking at. But I would agree with Wolf in that, that that paradigm cannot persist in our view. And so we have 81% of companies that have beat on earnings so far for the S&P 500. That's a pretty darn good number. And I think what you're doing is you're looking at these earnings releases that are likely to come in the next few days. And Scott, there's really no reason that given the broad strength, there's no reason for the Mag 7 to upset that trend. I mean, there's absolutely no reason that they cannot continue to grow their earnings in this type of environment. I think more importantly though, Scott, there's some of these exogenous weights on the, on the market right now. There's some concern about a potential shutdown. There's concern about what's happening with the Fed and will they continue to be accommodative. And one could say that as we get further into earnings season, you're going to see companies in, for instance, in consumer. I actually think that's going to be really important from an inflection point perspective. The consumer confidence data today was pretty weak. And so I would say as we, if we can get through earnings for tech and then we have consumer on the horizon, I actually think that that's where you could start to see some of this double beat really start to catalyze a stronger move to Joe's point earlier in the broadening direction.

B (7:44)

I just come back to you for a moment when you, when you say, you know, the question is not about the mega cap companies growing their earnings, it's not about that at all. It's about the growth rate.

E (7:54)

Right.

B (7:54)

People aren't worried about them growing their earnings. It's can you still grow your earnings at 50% or whatever that you had been to justify the appreciation of the stock and the multiple in these names?

F (8:09)

Yeah.

B (8:09)

That is what investors are grappling with as they look at the breakdown of the market, the broadening of it. Questions about, well, can tech still lead the way if those growth rates are slowing in any way whatsoever?

E (8:22)

That's what we've been talking about, those valuations potentially being vulnerable for six or seven quarters now, Scott. And yet we continue to see the growth. And I think to Stephanie's point, if you look at the, the, the narrative from these hyperscalers in particular, they are still willing to put forth the spending, they are still willing to meet what they think is still in undersupply, to Joe's point earlier, of this infrastructure. And so therefore there's no reason to think that without any evidence of a dissipation of demand which we don't have, see for AI, there's no reason to think that they can't continue to grow them. Most importantly though, however, that Delta is compressing, we're seeing the rest of the market grow their earnings and therefore that Delta compressing, I think is going to be representative of that broader.

B (9:07)

I got a developing story I'm going to get to in just a second because it's, it's interesting. I know you're going to want to hear about it, but I want to hear from you first.

C (9:13)

Yeah.

B (9:14)

As we said, the stack this week is the earnings. The Fed decision. I'm not expected to do anything is the Fed. But.

G (9:20)

Right.

B (9:21)

You know, the questions to Chair Powell in the conference, the news conference could be interesting not only on Fed direction but Fed investigation. So you know that's going to be hanging over the market a little bit.

F (9:30)

Sure.

B (9:31)

We're looking towards Friday. Are we going to get another government shutdown? Markets sort of yawning a bit at that. Yeah. What's on your top, top of Your mind?

F (9:39)

Yeah, no, I think all those, all those pieces loom large but I think for me it's definitely mega cap tech. Right. We're hearing from Apple, Metta, Microsoft and Tesla this week. I think to Joe's point, Capex is a very important piece for me. I mean $400 billion of spend in 2025, 500 billion plus planned on spending in 2026 and north of 600 in 2027. I think the return on this Capex is going to be critical. Free cash flow again, what Steph mentioned I think is important as well. Margin expansion. What does that story look like? We need to see these companies continue to grow. I think the other concern for me a little bit last year was the debt market right from Amazon. The rest, Oracle as well in starting to dip into the debt market to raise funds to continue to build and the innovation that we're seeing. So I think that's what's really on my mind. We'll see from many of these names. I think Amazon will be solid. I think Microsoft hasn't traded well. It'll be interesting to see what goes on with Azure. And, and also I think there's some, some interesting thoughts playing out in the market in terms of Microsoft having a legacy product. And what does the real integration story look like? I think it's, it's been a story of AI first names really starting to continue to perform. So I'm really anxious to see what Microsoft reports.

B (11:00)

Let's, let's jump to a newsy item. We'll come back to this, I promise you. And we'll also discuss what's been happening with some of these health insurance stocks today because that's a dramatic move. But this is New at noon and it is Daniel Loeb's Third Point stepping up its activist campaign today against CoStar as they continue to be unhappy with how that company is operating, especially with its strategy around residential real estate and its investment into homes.com so the stock is up 2% today because Loeb sending a letter today to the board writing in that letter, quote, from its inception five years ago, the company's plan to build a dominant online classifieds Business in the U.S. residential real estate industry was deeply flawed with structural problems affecting both sides of Management's proposed two sided marketplace. Now this all comes after Third Point and CoStar had entered into a standstill agreement last April along with D.E. shaw which resulted in the company appointing independent directors to its board. I spoke with Mr. Loeb last hour who made it clear to me that little has changed since then. And in the letter, he says, quote, our dim view is plainly shared by other shareholders, underscored by the abysmal stock performance of the past five years, down 27% versus a 94% total return for the S&P 500. Mr. Loeb also writing that the homes.com investment by CEO Andy Florence was a misallocation of capital, quote, overseen by a feckless board rewarding him with exorbitant pay packages like an elementary school child who wins a prize even for finishing last. Mr. Florence's bonuses are perhaps the costliest participation award our firm has witnessed, end quote. So the standstill agreement expired at midnight, and now they will go right to shareholders with their own slate unless something happens by March 13th. Mr. Loeb telling me earlier today, quote, we've heard from numerous shareholders who see us as doing God's work, including keeping this board and management accountable for this misallocation of capital. We, of course, did reach out to COSTAR as well, which provided this statement. We intend to continue to engage with our stockholders, including Third Point, to help them better understand our strategic plan, which has already garnered support from many stockholders and analysts. Maybe so. And the stock is up 2% today. But, Joe, as you know as well as anybody, because you. You're in the name.

A (13:28)

Yes.

B (13:28)

And you got into it in the summer and you told me off camera, not good. This has not been good.

A (13:35)

So I share, as a shareholder, I support everything that Dan Loeb is saying in this letter. But let's take it from two different perspectives. I'll talk about the position, what happens with it in a second. But just from a fundamental perspective, I don't understand why a company who has for decades profited from the commercial real estate market has made this pivot towards residential real estate through the vehicle being homestcom. They're trying to almost be Zillow, and they're spending a tremendous amount of money in doing it. Now, it does not mean that Mr. Florence and the board will not ultimately be successful, but the strategy needs a pivot. And I think Dan Loeb here getting involved and pushing them towards some form of a pivot is a good thing. They've made some very good acquisitions in the past. The acquisition, remember Matterport? I think Josh was in that name for a while. There was a $1.6 billion acquisition earlier in the year. That's been a good acquisition. So they have the ability to change course here and go in the right direction. I like what Dan Loeb is doing. I think if you are in the name. You want to stay in the name and see this through. From the perspective of our position, we bought the stock at the end of July. Anyone that has a chart in front of them knows that was a horrible time to buy the stock. On Friday we were rebalance on a one year basis. The stock is down 11% one year performance is very critical in our momentum formula. So at the end of Friday, there is a chance that this name is no longer in the portfolio. But that doesn't mean for you, the viewer, if you're listening today that there can't be a successful pivot on the part of Mr. Florence and the board as it relates to his residential real estate being pushed here by Dan Loeb. Because I think it can be.

B (15:23)

I mean Loeb didn't see it necessarily having to get to this point. They tried to reach out prior, the company didn't respond to prior letters which led to this one, as we said today. And it sounds like you Wholly agree where Mr. Loeb says as he's targeted what he deems as the problems, these are his words, a horrendous return on capital. Investors not fooled by management's continued excuses about missed targets and what Mr. Loeb writes are desperate attempts by management to buy more time and that shareholders clearly see through. That sounds like you do.

A (16:04)

And everything is centered on Holmes.com and its ability to compete with Zillow. And there has not been a successful navigation right now of that strategy. That's clear. Is spending a tremendous amount of capital. Is spending it probably in the wrong direction? And if you think about it for a second, is residential real estate so strong right now? Is there that degree of traffic that we need? Do we feel confident about where residential real estate ultimately is going to go over the next 18 months unless the administration gets very active in trying to spend, stimulate the increase in traffic and in activity? I think residential real estate is in a transactional recession. So why focus specifically on building out a business that right now is frozen?

B (16:48)

All right. We'll follow the story and see what transpires next and you'll obviously let us know in terms of your rebalance if anything happens there. Let's I just want to get that news out. But let's go back to the conversation that we were having about all these mega cap tech stocks in these earnings reports that are looming large because you do have some calls on the street today that I want to bring to your attention because as I said, these names have been running and they've been running for about the last week or so into these prints. So Meta has a deal with Corning for up to $6 billion for fiber optic cables. They're going to test premium subscriptions. Meta is on Instagram, Facebook and WhatsApp. So I know Steph already spoke about Metta. You where your hopes lying as we head into a quarter that you know, you talked about. Well, it's going to be all about the spending is not going to be a problem. Last quarter the issue was spending. The fact that there was like too much of it according to investors.

A (17:44)

The spending I said is not ever going to be the question. The spending is not the question. It's the return on the spending that's the question. Spending is a problem when we're spending it from places that we're questioning to Steph's point where the free cash flow is not president. So just, just present rather so just Oracle. Ask Oracle about that. By the way, met a $6 billion worth of spending through 2030 with Corning. I think people have fallen asleep, myself included on corning ticker symbol GLW. Stock is up a lot today. Any pullback 9500 that area I will buy the stock. I think you want to buy the stock and I think it really validates the fact that companies like Corning, like Cisco are now participating in this infrastructure buildout. The fiber optics that are needed are so incredibly important and so integral. Other mega cap players now are probably going to step forward and understand Corning's business is really well diversified. When you think about their premium glass for consumer products, we've known about that for several years. So Corning today exceeded its September of 2000 all time intraday high. It pierced above it somewhere around 113 and a half. I think the stock goes much higher.

B (19:04)

It's.

A (19:04)

There's a lot of excitement. Up 16% today. Let it settle in and I think.

C (19:08)

You could buy just back to Metta. Matt is going to post probably 20% earnings growth, 26% total revenue growth. They are going to see metrics that are going to show our ROI on AI good in that time spent it's going to be time spent and time spent is going to go higher. There's no question about it. Now the biggest question is what is the guide for Opex and capex? And opex $150 billion is the expectation and for capex it's 115 billion. If it's any higher than that stock's going to have problems.

A (19:40)

Is the ad revenue going to continue to be the cash cow to fund.

C (19:43)

It all of course, absolutely.

G (19:45)

Okay.

B (19:45)

Doesn't matter though. I mean it's not like the street doesn't know where that's coming from. The ad market continue to be strong. There's obviously volatility. There's volatility, uneasiness with a company quite frankly that has had according to investors in the investment community a spending problem before. Yeah, they have, there's a little bit.

A (20:05)

Of lack of trust surrounding management's ability to spend properly.

C (20:09)

What about of course.

B (20:12)

Well, right. That's why you see on the far left side of your screen what happened after earnings. What about Amazon? Target gets lowered today at B of a to 286. Jason, you own that name. Stifel says you want to own it. Into the print I guess. Okay. The stock's woken up too. Like everything else it's up four and a half percent in a week. But last year it did not, did next to nothing.

F (20:31)

Did nothing.

B (20:32)

Now what now?

F (20:33)

Yeah, so I like Amazon and even coming into last year Amazon was, was a favorite of mine. You know the retail business op margins have continued to grow and accelerate. I think what's exciting for me about Amazon is AWC is also reaccelerating. We're expecting 20% year over year growth there. You know I think that it's going to be an interesting play thinking about the consumer.

G (20:55)

Right.

F (20:56)

We're talking about government shutdown potentially. I think the government shutdown in last the end of last year was hurtful to a lot of these retail adjacent e commerce type of names. But I do think Amazon has some tailwinds above the, and in particular on what I, what we continue to experience with us through this year.

B (21:14)

All right, so let's, let's finish this block of the show with the other big news item and that's the Fed meeting. It's underway. Obviously the decision coming tomorrow, Senior economics correspondent Steve Liesman will be headed to D.C. and he will be in the room asking questions. You did your CNBC Fed survey which is interesting. The, the average outlook is only for two more cuts this entire year and no cuts in 2027 no matter who the new Fed chair is.

G (21:50)

I continue to be confused by that, Scott. There is, look, the market is looking for a rate cut as is the survey come June when the new Fed chair is put in. But right now, despite the expected arrival of a new Trump appointed Fed chair in the coming months, the survey is showing we're only forecasting modest changes to the funds rate over the next two years. So take a look. Two rate cuts priced in. Here's the Fed expectations zero expected in 2027. That would bring the rate, the funds rate down to 313 on average according to the survey. And it really comes, Scott, with a boost in the outlook for the economy. 23% say overset 23%. The recession probability over the next 12 months, that's down from 30%. There is a contingent though that does want to cut at this meeting of 31% and it's that improved growth outlook, Scott, that could explain why there's only limited rate cuts ahead this year and next. Take a look at what's happened in the forecast. GDP this year now 2.4%. That's up a bit from where we were in September. For example CPI getting down close. Remember you just up down half a point to kind of come up with a PC. And the unemployment rate four and a half percent, little change. So Scott, Richard Bernstein, CEO of Richard Bernstein Advisors writes in Economists should admit the economy is cooking and cutting rates is quite imprudent. We'll leave it there.

B (23:13)

I mean it's so interesting that you know, obviously I think you probably would suggest Powell, Powell thinks that the Fed is in a great spot, right? They, they've managed their way through this, mistakes along the way, etc. And here we are and growth is going to be better than expected and inflation, though sticky is, is coming down. So he thinks they're in a great spot while absorbing all of this criticism and the broadsides from the White House that they're so off course and misguided in where interest rates should be. What a unique period.

G (23:47)

Well, let's, let's put it to some context, Scott. The President wants the funds rate brought down to 1%. Assume the Fed achieves its 2% inflation target. 1% minus 2% is minus 1%, which is to say the President wants a recession type stimulative funds rate, a negative real funds rate. And I don't know anybody who's calling for that. I mean if you go to 2, you're at 0 real and if you're at 3, you're at 1 real. And that's kind of where most people think the Fed ought to end up. And the key here, Scott, is it doesn't look or feel to anybody like an economy in the need of that kind of emergency stimulus.

B (24:31)

Let me lastly ask you, because as I said, you're going to be in the room and you'll ask a question as you always do. In the past the chair has refused really to entertain any questions regarding what the president thinks about either him or, or policy. But then of course, you had the announcement of the investigation and the unprecedented response that we saw from the chair himself via video. I'm wondering how you think that's going to impact what the chair's willing to say tomorrow when he undoubtedly is going to be asked more than one time about this relationship with the president and the investigation itself, how that's going to impact what's actually said tomorrow.

G (25:18)

I mean, you raise a great point, Scott. He had held back and now at least some part of the dam is open. I don't think he's going to get away by saying I'm not going to talk about that. That's outside of my lane. He's talked about that for quite a bit and now there are some questions to answer. And the question is how does he answer and respond to that? My guess is he will keep to the investigation, which is the one thing he's talked about. And of course, he attended the Supreme Court hearing of Lisa Cook and whether or not he's willing to talk more specifically about the challenge to the Fed's independence presented by the President. And also, by the way, coming appointments. I mean, I'm wondering, Scott, if he's now ready to talk about is he, is he planning to stay or go when it comes to the his term as governor? That had been a dead end question, but at some point maybe he's going to tell us if he's going to stay and why he may or may not.

B (26:17)

Yeah, new levels of intrigue, no doubt about that. At a meeting where we're not really expecting any intrigue at all regarding the actual move itself in rates. We'll be looking for you tomorrow, Steve. Thanks.

G (26:29)

Thanks.

B (26:30)

That's Steve Liesman. We'll see him down in D.C. of course, tomorrow. Up next, we have a bunch of committee stocks on the move today following earnings. We have our top calls of the day as well. And we're back in just week a minutes.

D (26:43)

We all take good care of the things that matter. Our homes, our pets, our cars. Are you doing the same for your brain? Acting early to protect brain health may help reduce the risk of dementia from conditions like Alzheimer's disease. Studies have found that up to 45% of dementia cases may be prevented or delayed. By managing risk factors, you can change make brain health a priority. Ask your doctor about your risk factors and for a cognitive assessment. Learn more@brainhealthmatters.com this episode is brought to.

A (27:14)

You by Schwab Market Update, an original podcast from Charles Schwab Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.

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B (28:55)

Got to talk some unh. I mentioned at the top of the program some of the health insurance names. This one's down almost 20% despite the earnings beat. They give a soft revenue guide, but the Trump administration is proposing keeping Medicare Advantage rates flat next year. Humana's having its worst day since 09. It was down 24% that. But look at that. You Steph have a comment here? You own UnitedHealth.

C (29:20)

I think it's a buying opportunity after you actually let it settle for a couple of days. I think this is the first proposal from cms. In two or three months, we'll probably get a revision. It's not going to be the 5% that people expected. It's going to be a lot less that the industry gets in terms of overall funding from the government will be about 700, $800 million versus billions that they were expecting. But something's got to give. Scott. Something's got to give. I mean you can't have something is giving you.

B (29:49)

Something definitely is giving.

E (29:51)

Have flat price.

B (29:51)

You know what's going to happen that ain't giving. I don't know what giving is.

C (29:54)

You know what they're going to, you know what the seniors are going to lose. Okay. People on Medicare are going to lose because they're, every one of them are going to cut back. And for United, it's only about 13% of their book. They have a very diversified book. And I thought, Jason thought of you this morning that what.

B (30:10)

Yeah.

F (30:10)

You wanted to what.

C (30:11)

Yes, you do. I thought what a shame. They finally are showing progress on the turnaround that we're waiting and they gave guidance actually for the full year of 1775, which was way better than I thought. I thought you were going to see like 12 or $13. So you're talking about a stock that is the leader in the industry with a very diversified book and pricing power and a great management team. So I understand the stress of today. I do. And numbers might have to come down, but I think before they come down, I actually think they're going to go. They're going to start scaling back on the business.

B (30:45)

We back this up for a year to please, let's see a one year. Jason, what's your, what's your comment here?

F (30:49)

Yeah, so I mean, obviously it's not good at all.

G (30:52)

Right.

F (30:52)

The stock was up 7% last week. Right. So there has been some momentum building. I think Hemsley as a known commodity will be responsible for this turnaround. And to Steph's point, this is the, this is a diversified business. It's not like Humana. Right. So I think, you know, not to say that it's an overreaction and there absolutely will be a revision in April from cms.

B (31:12)

Right.

F (31:13)

That I do think will kind of lift the number. And last year when there was a 5% reimbursement rate, you saw in the midst of all that was going on with unh, you saw the stock pop.

B (31:21)

So I understand. But, but you guys may correctly suggest that this is an overreaction of in it for a one day move. But I asked for the one year chart for a reason.

F (31:33)

Yeah.

B (31:34)

To show you that the stocks cut and.

F (31:37)

Yeah.

B (31:37)

And that was. Is that whole thing an overreaction?

C (31:40)

That's old management. That was a terrible CEO doing a terrible job.

B (31:44)

When did the new CEO come in?

C (31:46)

I think it was like April. I think it was like April, May.

F (31:50)

Around the springtime. Last spring.

B (31:52)

Okay, well, where's the new CEO?

C (31:56)

It takes a long time to reprice.

D (31:58)

By the way.

C (31:58)

He bought $12 million the day he started of stock. So that's kind of telling too. He has a very proven track record. He grew Optum Health when he was the CEO. So he's back. He's got a new cfo and I think they're being prudent on guidance. But guidance was better than I thought. Margins were better than I thought. Medical loss ratio better than I thought.

F (32:17)

Yeah, yeah, yeah.

C (32:18)

I mean, that's why I say it's such a shame that this news came out and it was a shock. It really was. That's why the stock is down. But it's 13% of their book. So to me, Humana is much more at risk in terms of this announcement versus UnitedHealthcare. And you're talking about stock now trading number one in the industry, 16 times earnings.

B (32:35)

Well, I did say Humana worst day since 09 and that's, that's when it was down 24%. So, I mean, the day is still young, I suppose, but we'll see. Yeah, but in the last gesticulating over there, like you want to make a.

A (32:47)

Comment, but we've, we've had these names in the portfolio in the past. I know them well. I guess you could look towards elevance or Centene, which we've owned in the past, which is less dependent on Medicare. But Steph, I'm not questioning at all your position and I think you're probably right. But when you say that prices have to go higher, if you think about the last two years of President Biden's administration, those were negative years and these companies were able to, to thrive in that environment. So I think, I think the shock is that the expected figure was 5% and it's going to come in flat to down. And guess what, it's a midterm election year. Yeah. So it's going to be flatter now.

C (33:24)

Lutely. I mean, the Trump administration was supposed to be their friend.

E (33:28)

Right.

C (33:28)

This industry's friend. And obviously they're not. It's a shock. It really, it really is a big surprise. But I'm telling you, you're going to see a lot of exits in this business if you can't make money on this business and you're not going to be able to at flat pricing.

B (33:43)

What kind of time frame do you have in your mind that you say if this is a buying opportunity, CEOs gotten new, CEOs got no credit. When do I need to come back to you and say, okay, what, what's up now? In three months? Yeah, Jeff, Fair. We look at it in three months and see what's happened.

C (33:56)

Yeah, I'm trying to be a little bit longer term in terms of, because I think this is number one company on sale. They'll get through it.

B (34:01)

By the way, that's serious question too.

C (34:03)

I mean, I know what they also reiterated, reiterated there today. They reiterated their medium to long term earnings growth of 13 to 16%. They didn't have to do that today and they did in the face of this news. So.

B (34:17)

Well, maybe they're just trying to like, hey, we got a little something to hang your hat on.

C (34:20)

No, that's not this management team. Come on, that's silly.

B (34:24)

I don't know. No, I don't know the motivation. I don't know the motivations of a CEO who sees their stock doing what it is doing doing today.

C (34:32)

Well, he's feeling it too.

B (34:33)

All right, let's get the headlines with Contessa Brewer. Hi, Contessa.

H (34:36)

Hey there, Scott. Family members are suing the US Government over the killing of two Trinidadian men in a military boat strike. The government said they were smuggling drugs. Families accused the government of wrongful death and extrajudicial killings. It's the first lawsuit stemming from the Trump administration's military campaign in the Caribbean and the eastern Pacific. According to the Defense Department, 125 people have died in that campaign since September. The Pentagon is not commenting. President Trump met with Homeland Security Secretary Kristi Noem and her top aide Corey Lewandowski last night for almost two hours. A White House official confirmed that meeting to Ms. Now saying it centered on Minneapolis and how strategically to move forward following the killing of an ICU nurse by federal agents on Saturday. Border Patrol Chief Greg Bovino is expected to leave Minneapolis today as the president reshuffles the immigration operation there. And D.C. delegate Eleanor Holmes Norton confirmed she's retiring at the end of her current term. She has held that non voting role since 1991 and served 18 terms as the sole representative of the nation's capital. You know what they love to say in D.C. scott? Taxation without representation. They're the only ones.

B (35:53)

This is true. Contessa, thanks, Contessa Brewer. Up next, Mike Santoli. He joins us with his midday word next.

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I have no fear of failure.

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Forms, it really does come down to just trusting yourself.

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G (37:01)

We're back.

B (37:02)

Mike Santoli joins us now for his MIDDAY Word. I mean, I can't imagine it's much different from what it's been the past couple of days because we're still waiting for the stuff we've talked about we're waiting for.

I (37:14)

That's right. And it's also day three really of the kind of migration back toward the top of the index, the mega caps. You know, my long standing position, you can have a broad market or you can have The S&P 500 attack new records. It's hard to get both at once and you're kind of seeing that today. So it is light volume today. It seems like there's a lot of sort of placeholder buying in the stuff that's been beaten down, the high quality stuff like Apple and Microsoft. Meantime, I have to give the market credit for sidestepping a lot of these potential volatility events that are ripping through the currency markets. Obviously silver down 7% today. So also for that matter, the you know, what you guys are just talking about in the health insurer. So so far market is rotating away from those hazards and it's, it's staying intact. But yes, waiting for whatever the Fed's going to tell us in terms of guidance. I think the market's also done a good job of staying supported when the market based expectations for rate cuts has been diminished. We are not expecting even two cuts this year at this point. So we'll see. Also, you know, absorbing a bad consumer confidence number today as well.

B (38:19)

All right, I'll see you in a little bit on closing bell. I look forward to our conversation. That's Mike Santoli. Coming up, me Mania turns five Arcade Rooney following the money on how retail investors have become a force that Wall street can no longer ignore. Welcome back. Been five years since Meme Mania swept Wall street cementing retail's role in this market. Our Kate Rooney is following that money for us five years and counting.

J (38:58)

I know Scott, feels like yesterday. So Gamestop at the time really did bring some negative attention to retail investors. The incident became synonymous with stock market gambling and so called dumb money and consensus if you remember was really that retail would retreat after that frenzy. Not the case. We have seen the opposite in the past five years. This group is more active than ever And a much more important force in the markets at this point. Last year, JP Morgan found that retail flows were 17% higher even than the peak we saw in 2021. Around all of that meme trading, retail participation in US equities is near on average 20% at this point of daily volume. It's up from low single digits before COVID That's according to BlackRock and then Robinhood. Steve Cork telling me volume on higher days it tends to be closer to 40% of retail participation. He also says that 90% of Robinhood's two and a half million clients that joined just in that month of January 2021 are still on the platform. They stuck around and they've had this outsized appetite to buy into dips. They've been concentrated in some of the Mag 7 names. Palantir, Nvidia, which did help them outperform at least last year. Vander Research this week noting a record move into commodities. You got silver, which has seen more turnover than in video. This week institutions are paying closer attention to especially hedge funds, really rethinking some of the short selling. After Gamestop. Tom Lee, who I spoke to, says his clients are really watching social media and sentiment called retail difference makers at this point. He did underline a massive impending wealth transfer to 76% of household wealth he said is held by people over the age of 60. He estimates $120 trillion will be inherited over the next few decades. You've also seen brokerage firms really trying to adapt and cater to this younger generation of traders. 24, 7 Trading predictions Markets, for example, are booming. Also more private market offerings.

B (40:43)

Got Kate, thank you very much for that. Look, that's Kate Rooney. I mean, you know, to Kate's point, at the beginning of this whole meme thing, it's like from ridiculed to resolute and right. Retail's been right on this rally for most of it and resolute to stay with it when others maybe had wavered. Now there were period of time, periods of time obviously within the last handful of years when there's been turbulence that maybe retail had ran for the exits. But man, they've been right.

A (41:18)

This is a profession that if you choose it, you have to understand that it is constantly teaching you and you have to be willing to accept the learning process. And I think that's what's happened. I think it's a wonderful thing this evolution, the learning curve that we've seen seen. We have right now a younger generation who is far more financially literate than I was when I was at their age. We also have the introduction and hat tip Brad Gerstner on this of these Trump accounts which is going to fund accounts for children until they're 18 years old. So their eyes are going to be on the market. That's a good thing. Financial literacy is really good and I think we, we're at a place right now where we should welcome it, we should applaud it and we shouldn't say anymore oh institutions, smart money. Retail's dumb money. No, that's not the case anymore. I think we've balanced that.

B (42:12)

I think you can bury that at this point.

A (42:16)

The accessibility of information too is also empowered the retail community.

E (42:21)

We should be encouraging, not discouraging as advisors in my seat. The next gen is incredible. Incredibly interested and engaged in the market. That's actually a positive, Scott because it gives us a better, stronger investor to help them build their wealth over time.

B (42:34)

We'll do the setup after this break. Let's do the setup. Beyond mega cap earnings. IBM tomorrow before after the Bell. After the Bell.

C (42:59)

Stephanie Link so the only thing that worries me about IBM is I wonder if the software red hat number comes in as expected. It has been running soft. I think you're going to see a reacceleration for 2026 but I worry a little bit and the stock is not cheap at 26 times forward estimates. I still like it very much.

B (43:17)

A lot.

C (43:18)

It is up a lot. It's had a really good couple of years. I like it. I just think the expectations are quite high and I just worry a little bit about that software piece.

B (43:25)

Okay. Lam Research is after the Bell as well tomorrow. Joe T. Mentioned it at the top.

A (43:31)

Of the show at an all time high. This is a company where you're going to see most likely the seventh consecutive quarter of revenue beat. Look for China to be strong. The foundry business is remarkably strong. EPS somewhere around A$17 probably about 5.2 billion in rev.

B (43:47)

Talk about a chart leading into a print.

G (43:49)

Wow.

B (43:50)

Raymond Raymond James Jyoti, that's also you. After the Bell tomorrow it's engagement and.

A (43:55)

That'S why this stock I think this Stock's up about 5% so far year to date. But it's engagement in the trading community. It's a reason that we own cme NASDAQ Interactive Brokers and Charles Schwab.

B (44:08)

All right, service now Jason Snipe that is tomorrow and it is after the Bell as well.

F (44:12)

Yeah, no doubt about it. So ServiceNow is obviously caught got caught up in the the software slide, didn't have a great year last year down 13% year to date. So I think for me, RPO is going to be a very important, I think 21% RPO growth is expected around 27% subscription revenue growth expected. Fourth quarter is typically their strongest quarter. I think a concern for me was a potential headwind is shorter government contract. So I'll look to see what happens there.

B (44:39)

LVs tomorrow after the bell.

C (44:40)

Stephanie Link, I think Singapore is going to continue to hum. I think China though, obviously it's a bigger part of their EBITDA, almost 70% that has to recover. I think you are starting to see a recovery. We're seeing it from other companies like Estee Lauder, like Starbucks. So I think the consumer in China is recovering and I expect a solid number.

B (44:57)

Okay, we will take a break. We'll come back on the other side with final trades. All right. We're back and excited to announce today our next CNBC Pro Live event, Wealth for Women on May 28 at the Nasdaq market site in New York City. It is all about financial strategies for women who are investing for themselves and for others, featuring some of our top female CNBC contributors, including Stephanie Link and Shannon Sokosha. For more, scan the QR code on your screen or visit cnbc events.com wealth for Women, please do it. We'll do finals next.

A (45:39)

Are you following the Halftime Report podcast? What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast now.

B (45:53)

All right, he is back. Jeffrey Gundlock will join me once again tomorrow because it is Fast Fed decision day and it's the first one of 2026. We look forward to catching up with Mr. Gundlach after Jay Powell, the chair, finishes his news conference. And of course, we can digest what happened in that meeting and what was said today at 3 o'.

C (46:12)

Clock.

B (46:12)

We'll lead you into the rest of this big week, of course, with Chris Harvey, Anastasia Amoroso, Kevin Gordon and the former Dallas Fed president, Richard Fisher. So we're looking forward to all of that. Let's do final trade though, before we leave you on this day. Jason Snipe.

F (46:28)

I like Skyrizi actually at V. I'm sorry. I love Skyrizi. And ring broke 31 down. Those commercials.

B (46:35)

Yeah.

F (46:36)

Hey, look, those numbers look good to me.

B (46:37)

I like, I like.

F (46:38)

Abby, stay long.

B (46:40)

All right, Shannon, top that.

E (46:46)

Very catchy, actually. Healthcare, you know, I think, I think we talked a little bit about, you know, managed care here, but the affordability challenge is real. And so whether it's drug price overhang or reimbursement rate overhang, there is going to be something the government's going to do about attempting to make health care more affordable, and I don't think that's just going to hurt insurers.

C (47:04)

All right, Stephanie Link, SLB I like oil services. They beat on revenues, earnings, EBITDA raised guidance. They're buying back over $4 billion of stock and dividends and all that.

B (47:14)

Okay, Joe, Amphenol alright, good stuff. I will see you on the closing bell in a couple hours. The exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.

D (47:32)

All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer the New Year.

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