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Halftime Report
A Critical Week for Investors Ahead: Your Next Move 7/27/26
00:43:33
Mike Santoli and the Investment Committee debate how to position your portfolio ahead of a big earnings week for stocks. Plus, Health Care is a top sector over the last 3 months, the desk discuss how to trade it at these levels. And later, CNBC's Oliver Renick joins us with the latest Options Action in the energy market. Investment Committee Disclosures
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- [00:00]
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- [01:02]
Mike Santoli
Welcome to the Halftime Report. I'm Mike Santoli in for Scott Wapner. Front and center this hour, a critical week for your money as earnings from more than a third of the S&P 500 and a Fed rate decision loom large. We'll discuss and debate with the investment committee. Joining me for the hour, Joe Terranova, Jim Leventhal, Jason Snipe and Steve Weiss. Thanks for all being here guys. Thanks very much. Take a look at the markets backed off earlier attempts to rally on a broad based way. The S&P 500 just below the flat line right around 7,400. Nasdaq source of pressure was leading the way to the upside. Earlier chips have sold off really dramatic break in crude prices in response to the apparent de escalation in Iran over the weekend. 10 year treasury yield modest decline just under 465. Joe, I'll start with you here. This market processes every new bit of information as an excuse to to rotate or unwind the rotation. And it's apparent again today. Look, we didn't rally in a broad way on the de escalation so maybe no surprise we're not, you know, I mean vice versa, you know actually that we didn't actually get hit very broadly last week on the re escalation and so we're not seeing that the inverse now. However, anxiety about AI continues to filter through pressure on semis and a little bit of a short covering bid in software.
- [02:20]
Joe Terranova
Well first of all, Mike, great to have you here. A little bit of a frustrating day and I think that's been the consistent theme, hasn't it for the month of July. You identify it as rotation. The market I think is ultimately trying to figure out where the next leg of momentum ultimately goes. If you look at the momentum factor, we're seeing a precipitous decline, double digit in the month of July. Why is that? Because the momentum factor is directly allocated in the direction of the AI trade, memory, semiconductors and really growth and hyper growth. So I think the question becomes people will say, well momentum rolls over. That doesn't mean the end of moment momentum might go to a different place. And the appearance in the month of July is that it's maybe going to financials, maybe it's going to health care. That leads to a frustrating environment, no doubt. And we are in the midst of a very frustrating July period. If you want to try and find some comfort, look at the S and P equal weight. That's the one index that's up modestly for the month. But I think this has to play out over the next several weeks. I wouldn't be really aggressive in trying to identify where that momentum ultimately goes and taking positions. I think really right now patience is your best position.
- [03:29]
Mike Santoli
You know Jim, the tricky part of sort of saying this momentum factor unwind is obviously a strong mechanical force. It's been going on for a while. But it also means something else, which is there's a fundamental, there was a fundamental theme that drove momentum to be what it is and now you're having a rethink of that theme. And I think broadly speaking everyone is dealing with a market that at the end of the second quarter seemed over concentrated in AI. Semis were almost 20% of the index and there was maybe some over belief in the sustainability here. So are we, you know, how far are we in the process of trying to retreat from those extremes?
- [04:07]
Jim Leventhal
Yeah, thanks Mike, good to see you as always. But your question went right to where my head was anyway, which is what's the fundamental basis for what Joe, you're speaking about with momentum doing what it's what it's doing. And I think that explanation is very clear. Look at what happened to Google and Tesla last week. They reported high capex numbers and they got beat up for it. Look at a high capex spender like Space X. Relatively new, but they're going to do a lot of capex in the coming years and they're getting beat up as well. So clearly the market is Saying right now don't spend. And I think what you're seeing in the chips in particular is the flow through that. If these hyperscalers and the likes of Tesla and Space X don't spend, then a lot of the growth assumptions that are built into the price of the chips is maybe overblown. And I think what's also also feeding into that are the Chinese large language models, these open source models that are showing themselves to have some capabilities. All right, we can't just, we can't just throw out the idea that they're terrible, they have capabilities. We've got cost consciousness in corporate America that's starting to guide towards these Chinese models and it's making people wonder if the growth assumptions in Capex maybe are going to come down at some point. I think that's what the market is saying from a fundamental point of view. And of course this is not a good time in the seasonality of the year. That shouldn't, seasonality should not exist. But it does, it's real for sure.
- [05:25]
Mike Santoli
As much as I like to try to assume that we should all front run it and exist, it tends not to to happen. You know, Jason, a lot of folks expected earnings season to be a little bit of a savior and maybe it has in the sense that the average stock has done okay, but the reactions to earnings have not been necessarily as strong as the results themselves. I think only 50% of companies beating are actually having their stocks respond in a positive way. So as somebody who's looking company by company, what is it telling you?
- [05:56]
Jason Snipe
Yeah, it's interesting, Mike. I think on a lot of fronts, to your point, on the beat rate, I mean, you know, we have seen 80%, 82% of companies so far. But the price action hasn't responded to Jimmy's point. I think a lot of the story today has to do with capex. Right. We heard from Google last week and again there is momentum in CapEx, Joe. I think that's where we're seeing what's happening in terms of the spending another $15 billion from, from Google. And the reality is it's about the free cash flow, negative free cash flow, that's been the story and where the spending is in price appreciation on the cost across the supply chain. I mean, memory chips cost more today than they did six months ago. So I think that's something that we're closely following. But also to Joe's point, I think what, what is positive to me is the RSP working.
- [06:48]
Mike Santoli
Yeah, right.
- [06:49]
Jason Snipe
It is positive. So far this month where The S and P and the NASDAQ are negative. Breadth is a positive factor going forward with seeing health care financials industrials starting to perform. So I do like that as a setup going into the back end of the year.
- [07:03]
Mike Santoli
Steve, you know, one of the things that the folks at Alphabet said in reporting their numbers and giving their guidance is it's still early. And that used to be reassuring to investors. It's early. Okay. That means that there's so much more growth to come. Investors don't want to hear it's early anymore. They kind of almost want to feel like we're getting to a point where we have enough or we have enough for now and we're going to let the scaling laws give us some profits on the other end of it. And capex is like eating the economy. Right. We're worried about overheat in capital usage and what the Fed has to worry about in relation to it and, and what the corporate bond market has to, to deal with in response to it.
- [07:40]
Steve Weiss
Yeah, I mean there are a couple of things here. First of all, I don't think it's all about, I think it's about Iran and oil. And now we're seeing basically with oil coming down, the market not moving so maybe shaded more towards the trade.
- [07:56]
Mike Santoli
I mean, consumers up, industrials are up, banks are up today. Right. So I mean parts of the market that got hit on high oil are responding.
- [08:03]
Steve Weiss
Yeah, but, but the Iran problem is not going away. Right. The cessation in hostilities or actually firing rockets is only occasioned by a lack of supply in our part. So we're depleting supplies everywhere. Ukraine, they got our old weapons. So that really wasn't an issue because Dow requires that you get rid of your old weaponry before you can add new weaponry. So that, that works. They got some new stuff, but this isn't going away.
- [08:31]
Mike Santoli
Yeah.
- [08:32]
Steve Weiss
And that's going to be a constant overhang in the market. So that's one thing. Now when you go to AI, the question is not if they're going to stop spending because they're going to. And if you don't spend now, if you take a long term view rather than a short term view, what's my, what's my ROI today? You know, then, and you tell them stop spending then going out a few years, guess what? They'll be catching up to the ones that do spend. So you have no choice but to spend and you don't know what that spending will be like. Now you hope that you do what Amanda does, which is you can take that excess spend and build a separate business out of it. So they should be applauded. Now you have to, there's a disconnect and always is a disconnect between when the spending ends and when the stock, you know, the climbing of the stocks on the spending or declining ends. And I think that's where we're getting near now. I think you have to expect that Metta and the others are going to announce additional air spending. We already know that is going increased by 40 billion. Right. So I think the markets absorb that already. So it's come down to the fundamentals. When you have almost 100% cloud growth like Google Ad in the 80s, I think that should control what we're doing. You have to build the cloud because it puts so I put so much data out, you know that they, that has to go into the cloud. So, so look, nobody likes seeing the volatility but, but I took the opportunity and you know, front running myself. I added to Google on Friday, right because I think that it's extremely cheap and I want them to spend because I want them to be able to capitalize on AI as very, very few companies do. So, so look, I'm sort of saying good about what's happening. I'm not happy about, you know, the marks on the portfolio but you don't lose money until you sell something. So just ride it out.
- [10:23]
Mike Santoli
Let's get it to one of the big pressure points at least this morning which is in video Christina parts and Elvis taking a deeper look at how Nvidia is becoming the financial backstop of the AI build out. Christina.
- [10:34]
Christina Parts
Yeah, well Mike, Nvidia has always sold the chips behind the AI boom and now it's just helping pay for them to putting its investment grade credit behind companies that maybe can't borrow on their own terms guaranteeing their debt so they can raise cheaper financing to buy eventually Nvidia hardware. The biggest sign of that is in Ohio where a 10 gigawatt product project could end up the largest data center ever built. CNBC specifically Kate Rooney and her sources confirmed that Nvidia is in talks to backstop up to $250 billion in financing for OpenAI to lease it. To be clear though, that's not a check that Nvidia is just writing right away 250 buck billion dollars. It's a guarantee letting lenders underwrite Nvidia's credit instead of Open Air's. Smaller versions kind of already exist of this from revenue backstops for Neo clouds like Sharon AI which is An Australian firm to an to unsold capacity commitments with CoreWeave. And in its annual report, the 10K, Nvidia says it has roughly $3.5 billion in guarantees out to early stage companies with a plan to take over their leases if they default. So Nvidia backs the financing. The borrowers buy the Nvidia chips and that sale books Nvidia revenue, which is the concern about circular financing. The upside is locking in demand and tying itself to a top AI lab, which would be OpenAI. The risk, as wed would Wedbush just put it in a note, is that it's now exposed if AI demand slows or open air falls behind. But again, Mike, really important to reiterate this is just a headline right now and we don't have the actual confirmation for that $250 billion backstop, but it's definitely something for sure.
- [12:12]
Mike Santoli
And I guess to be clear, Christine, the three and a half billion dollars is, is just a tiny little blip in the context of Nvidia's balance sheet. this point, we're talking about half a trillion dollars of expected free cash flow this year and next. And I think one of the big questions is how are they going to deploy that? I guess the question is whether this. Well, many questions. One of them is is it entrenching in video in one version of how this develops from here? In other words, do they have, are they staking their future more toward open air success versus others? It feels as if it's kind of everybody is on some level, you know, in bed with everyone else.
- [12:53]
Christina Parts
So then you've just answered your own question, right? Because Nvidia is not just focusing on OpenAI. There are many, many other examples on a smaller scale, larger scale, and video is constantly signing these partnerships, extending these collaborations with firms. There's different price tags that are associated with it, but if anything it provides even more strength for Nvidia because it ingrains Nvidia in the entire buildup, not just on the hardware front. And the very good point that you raised is the free cash flow rate. Nvidia is still the main supplier of all of these hardware, chips and the networking. And they even said that their largest networking company in the world and the software that goes behind it. So they have the money, they need to do something with the money. And here's a great opportunity to invest in possibly the largest frontier lab in the world and do it in a way that does add some risk to their books, but not so much that they're handing out cash Blank checks.
- [13:50]
Mike Santoli
Right, Right, exactly. Christina. Thank you very much. Joe. To what degree, as an owner of Nvidia do you have a handle on, on their various exposures and collaborations and where their implied bets are?
- [14:06]
Joe Terranova
The reality is that none of us really do have a full, full handle on it. You mentioned being an owner of Nvidia. That is a personal position that I've put on in the last several weeks and I just want to kind of walk everyone through what's going on with Nvidia. Let's keep something in mind as it relates to moving into the summer months. It's very clear that volumes decline and not so much that liquidity conditions decline. But you see positioning come down and that's been the story in memory and semiconductors since we went parabolic with Micron's earnings. At the end of June, you had an opportunity to build momentum in Nvidia for the first time really since the fall of last year off of the June lows. And it looked like, like we were doing that. We were up to 214 on last Wednesday. We saw a reaccumulation of positioning from people that had stepped to the sidelines, frustrated with the sideways consolidation that's kind of now neutralized. That momentum that was recognized over the last several weeks. You're back to it being what I would call a yellow light. You're still working against what would be a supportive 200 day moving average down at 192 and a half or so. And below that you have the June lows at 189.80. So this position that I put on 198 and then an additional purchase up at 208, I will neutralize those positions, positions with a break below 192. And it's very clear that the momentum that we were building over the last several weeks has been neutralized.
- [15:35]
Steve Weiss
You know, here's what I'd say that I'd be more concerned about in video, which is trying to be an indirect recipient of revenue and more business by funding those like open AI then or data centers than I would about Meta or, or Alphabet or Amazon who are looking for direct benefit. So we don't know. It's a step removed from what the ROI could be and what they must see from this. The only reason they would do it is if they see competition, more competition on the horizon and they're looking to stake out their ground by tying companies up through finance, or if they see
- [16:17]
Mike Santoli
the possibility that we get a stutter step in demand for products because the rest of the world doesn't box at financing these.
- [16:25]
Steve Weiss
No, I disagree with that because if they saw a stutter step then they wouldn't be. Then these companies like OpenAI would not need those data centers. So they're not driving, they're worried about
- [16:37]
Mike Santoli
the rest of the world not wanting to finance every single box that these companies want to build.
- [16:43]
Jim Leventhal
You know, I like to think it from the point of view of free cash flow at Nvidia, which I'm going to say this calendar year, we know they're on a fiscal year ends January 31, but the calendar year 2026, they're going to generate about $200 billion in free cash flow. The year prior to this, almost 100 billion in free cash flow. These are big numbers. And I ask rhetorically, even though when I answer the question, what are they supposed to do with that free cash flow? Do we want them to start buying back shares and issuing a dividend? Because I tell you that would be a signal to the market that their best days of growth are behind, behind them. I don't want them to do that. Now we can question, I think it's a reasonable question. Are they choosing the right horse in funding Open AI? I actually have a question to that because of what I said earlier. These Chinese large language models that seem to be doing almost as good as OpenAI, Codex, etc. Not quite, but almost with a lot less cap expenditure. Look, what is Nvidia supposed to do with all this cash? I don't want them to start issuing a dividend. Let them try to pick their winners. And if it becomes a self fulfilling prophecy because they funded OpenAI. Okay, fine.
- [17:43]
Mike Santoli
Well first of all, they're hoping that no cash leaves, leaves the building.
- [17:47]
Contessa Brewer
Right?
- [17:48]
Mike Santoli
Right. This is a guarantee. They hope they don't have to actually be on the hook for it. So the 200 billion of free cash flow is going to still be there. And was, was, was Apple a sell in 2013 when they started buying back stock and issuing a dividend?
- [18:02]
Jim Leventhal
Rhetorical question. And in hindsight the answer is no. Okay. However, at the moment people said what are they doing? Sure. And Microsoft said about Microsoft too, slam dunk, 25 years ago, whenever it was, it was not looked at favorably. And I don't think it will be looked at favorably when Nvidia eventually will issue a dividend.
- [18:20]
Mike Santoli
Jason, the upside leadership today actually is the stuff that's maybe been pressured is Microsoft and it's, it's Alphabet to a degree. These have been sort of untrustworthy little rallies, you know because the charts are a little sloppy. On the other hand, Apple's been, you know, continue to hit new highs and it's also leading the way here.
- [18:37]
Jason Snipe
Yeah, absolutely. One, one other point on, on video I look at this deal, it's almost like it's circular light, right. It's kind of like making sure that they own the infrastructure. Backstopping a company like OpenAI to again from a credit perspective, ensure that the yield gets done is, does create some leverage for them. Ultimately it does. It is relying upon execution. Execution which has been the story like, like we're as we follow what's going on with Oracle and the CBS there. So I think, I think, you know, the market's probably overplaying this one and this could create an opportunity and also to Joe's point, of some of the sideways action we've seen over the last nine to 10 months. You know, I think this will be an opportunity for Nvidia in the second half of the year.
- [19:21]
Mike Santoli
We also have, I mean just been talking about the Chinese open source models. We also had this ipo, the Chinese memory chip maker. It goes to the moon on three on day one and us memory makers are down. I just wonder if this is kind of look, is more players, more capacity.
- [19:37]
Joe Terranova
Yeah, look, I mean the viewers might think I'm being too simplistic here, but I just think we got reached the point of exhaustion after Micron's earnings in terms of positioning. And then let's not forget you had the SK Hynix sure IPO as well. It's like, you know, how much can actually be allocated in the direction of memory at the expense of the rest of the market. Ultimately you're making such a significant concentrated bet towards memory as a portfolio manager. There's a limit to all of that. I think we reached a limit. I think the market is working off that oversold condition and the byproduct of that has to be the tape that you have in front of us. There's no other way around the math.
- [20:16]
Mike Santoli
Well, to that point on the math we have a chart on Apple relative to the NASDAQ 100. The monthly outperformance is basically as great as it's ever been in years. And it's sort of trading as whatever is the inverse to the anxiety trade. And it's kind of the all purpose defensive play. There it is. So Apple relative to the NDX on a monthly basis. You got to go, you know, back to the early 2000s to find something more dramatic. And I guess the question is, does that just be kind of a self perpetuating mechanical thing. Apple benefiting of course it doesn't spend as much on capex but it's also now really expensive relative to those other companies that are getting beat up in contrast to it.
- [21:01]
Jim Leventhal
Jim, I actually for quite some time have thought that the Mag 7 should not be treated like a monolith and
- [21:07]
Mike Santoli
I think we're way beyond.
- [21:09]
Jim Leventhal
Here's why I'm going with that. I agree with what you're saying about CapEx and the CapEx light at Apple. However, I will take tell you even though it's a market weight position which means six and a half percent I'm not very enthusiastic about Apple right now. I have a hard time buying it at this valuation. How did it get to this valuation? Well it's been the one Mag seven that's rallied while the others have kind of sputtered and that's not the first time that this has happened. And we go back a year and a half ago, Alphabet was sputtering and then it caught wind, it caught fire. This happens all the time. I wouldn't be surprised if Metta, which Steve I think is one of your, one of your favorite positions wouldn't be surprised if it caught fire. Last week it started to and then I think it's gotten pulled back on worries about capex that we saw and I was talking about with Alphabet and Tesla. My point on this is that yes, we can make a fundamental case and you did it. Why Apple should rally I will tell you, a stock analyst, I'm not enthused and I think it was just Apple.
- [22:00]
Mike Santoli
I don't know that I'm making a fundamental case. I'm trying to explain the narrative that gets applied in response to the stock doing what it's doing. Yeah we're deciding that's what people are buying it for when otherwise it's just kind of like you know, the button to push is by defense against AI
- [22:18]
Joe Terranova
over well it's also it's relative performance to its MAG7 peers and relative outperformance and it makes it in that regard the one MAG seven where you could say okay this is a momentum name but fundamentally it just continues to get the benefit of the doubt.
- [22:33]
Jason Snipe
Right.
- [22:34]
Joe Terranova
Coming off the world Wide Developers Conference the market was disappointed, stock price fell and quickly recovered. So why has it rallied now to reach a 52 week high? I think it's a relative outperformance versus its Mag 7 peers. It's the one name that has that embedded momentum by the way that was
- [22:51]
Mike Santoli
against NASDAQ 100 as a whole. And in my view, MAX 7 is gone. It's for hyperscalers. Okay, that's what we're talking about when you talk about Max 7.
- [23:00]
Steve Weiss
But bothers me about what you just said is that the market's seeking for momentum and, you know, following outperformance rather than looking at fundamentals. So I agree. And to me, that's never a positive sign in a market when you're chasing stocks because then you start chasing the junk and the junk moves up. We've seen this movie play out, so
- [23:24]
Mike Santoli
it works till it doesn't. And the argument is that momentum is the market registering fundamental improvement. So we're not going to have that with Apple, right?
- [23:33]
Steve Weiss
With Apple, you hear reports of slowing sales, right? People are waiting for the 18 to come out. And what the best story to Apple is they're not spending on AI because they can wait for AI to get cheap and then they're going to pick the winner. But that may, by the way, they
- [23:49]
Mike Santoli
also didn't spend on iPhone. They've never spent a lot on Capex. They never had to. You know, we got to run as
- [23:55]
Steve Weiss
a percentage of sales.
- [23:56]
Mike Santoli
We'll hit them all, guys. Up next, Robotaxi rivalry. The competition between Uber and Alphabet's Waymo is heating up again. We're following the latest as their truth truce breaks down, halftime is back in.
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Corporate Board Member
The board recommends approving regarding that seat on the committee. We're promoting quarterly earnings.
- [24:50]
Vanguard Announcer
Every day, shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say in the companies you invest in. With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index funds, which own shares of the companies they invest in. Available for Vanguard index funds that participate in Investor Choice. Vanguard Marketing Corporation Distributor.
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- [25:59]
Mike Santoli
Welcome back. Uber and Waymo's relationship showing more cracks as the Rover taxi partnership unravels Mackenzie Tagalos has the details.
- [26:06]
Mackenzie Tagalos
Mac hey Mike. So these companies have a long history industry. Waymo sued Uber over stolen self driving technology. Uber later shut down its own AV unit and the two eventually became partners. Now they are back on the outs as Uber revives its AV ambitions and pushes deeper onto Waymo's home turf. You've got Uber confirming to CNBC that Waymo will launch its own app in Austin and Atlanta in January 2028, ending Uber's exclusivity in the only two markets where riders still had to book Waymo through Uber. The relationship has reportedly deteriorated on both sides. Waymo blaming Uber for routing failures that made headlines and Uber raising concerns about the deal, economics and safety incidents it says it learned about too late now. That rivalry also playing out in competing lobbying efforts with Uber, pushing rules that would force Waymo to offer trips on rideshare platforms. While Waymo wants riders booking directly through its own app. Uber now said to be spending 10 billion to stay in that robo taxi race, cutting deals with Nvidia, Lucid and Rivian, and even buying its own AV fleets. But investors remain skeptical. Its market cap is now within a few billion dollars of Waymo's latest private market valuation.
- [27:19]
Mike Santoli
Mike Mac, thanks so much Jason. As, as an owner of Uber, I mean it's, it's bouncing a little bit today, but it did get hit late last week. It's down quite a bit, making new lows through this month. How does it fit into the to the big picture story in favor of Uber?
- [27:36]
Jason Snipe
Yeah, I mean obviously there's no doubt that Waymo wants to own the rider relationship and I think as as that point, Uber has diversified away for quite some time in their investments and partnerships with Zoox and Rivian, a lot of other smaller players. And I think the story there is these folks don't have scale and they had, they have the ability to help them commercialize their products. So I think that's what Uber's play has been and I think the market is probably overplaying this scenario that has to be this complete binary outcome. I think both players, AV and you know, a huge network like Uber can win here, you know, so I continue to like their space and all that they're doing in delivery and that acquisition they made with that German company, you know, this month. So I think there's a lot that can work with Uber going forward.
- [28:22]
Mike Santoli
I'm just struck by how depressed the valuation has become an uber, it's like 8% free cash flow yield on a forward basis. Market seems to be saying we're not really sure where the next growth wave comes from. I just wonder how that settles out because the streets still loves the stock. That's the other thing that gives me a little pause.
- [28:41]
Jason Snipe
Yeah, yeah, no, there's no doubt about it. And I think what's also a point for me is their profitability metrics have continued to improve quite drastically over the last several quarters. So I get that. But I continue to own it for those reasons.
- [28:54]
Joe Terranova
Hopefully the World cup acted as a catalyst for, for Uber. The thing I, I see with this strained relationship with Waymo is okay now does Uber have to spend more on AVs to protect the market share lead? I think that's probably, probably ultimately the case. Stock made a 52 week low this morning and it's having actually a nice intraday reversal. Maybe it got washed out. I don't have a position there, but there's a, definitely a needed catalyst for this company as they prepare to report earnings. And on a forward basis. They are very cheap.
- [29:27]
Mike Santoli
Yeah, for sure. Let's move to some committee. Stocks on the move. Robinhood reportedly in talks with crypto.com to expand the firm's foothold in prediction markets. All right, Josie, Own, own Robinhood. Everyone's racing to lock up this next pool of potential fervent activity.
- [29:44]
Joe Terranova
Yeah. So look, Robinhood has done an excellent job transitioning to be a more diversified financial services company over the last several years. They still have that reliance on crypto. They're going to report earnings, I believe Wednesday of this week and you're going to see that crypto, the revenue there was relatively soft. The excitement comes and what does the future look like for the prediction markets? Remember, the last quarter was not a good one. They had a miss. They eliminated 10% of the workforce. They're going to need to bring down the cost expense growth because it is significant at nearly 40% while revenue is only growing 30%. So in a little bit of a precarious position when you look at where the stock is currently down from 15% year to date. I'd like to see them do some more work on expense management.
- [30:32]
Mike Santoli
Yeah, I mean, I guess we can broadly define what financial services is. I mean, prediction markets remain dominated by sports. It's just kind of, you know, you can call it what you want. You could say it's somehow adjacent to other trading and portfolio work. But, well, I think they're Schwab is out there kind of ridiculing that position and saying we're not going to do it.
- [30:51]
Joe Terranova
They are an interaction active brokers. You know, it will be there ultimately as well. But I think the common denominator for all of these names, when you think is that it's the retail engagement and the strength of retail engagement. And clearly Robinhood will benefit in this quarter from that.
- [31:05]
Mike Santoli
Robinhood no doubt will benefit. All right, now to Contessa Brewer with the CNBC news update. Hi, contestant.
- [31:11]
Contessa Brewer
Hi there, Mike. Former FBI Director James Comey filed a motion to dismiss the indictment charging him with threatening to kill President Trump. Comey had posted an Instagram photo last May of seashells arranged to form the message 8647 on a North Carolina beach. The Department of Justice says that represented a threat to assassinate Trump. Comey's motion insists that post is protected by the First Amendment. Ukrainian President Volodymyr Zelenskyy is in England for a meeting with Prime Minister Andy Burnham, his first visit from a foreign foreign leader since taking office last week. Zelinsky has his work cut out maintaining relationships with Britain's leaders because Burnham is now the fifth prime minister since the Russia Ukraine war began in 2022. Zelinsky is expected to be in Washington, D.C. tomorrow. And Cracker Barrel CEO Julie Messino stepping down. She had faced an onslaught of criticism from customers, even President Trump, as she tried to modernize the restaurant chains locations, including that failed attempt to revamp the logo. Messina will be succeeded Aug. 10 by former Outback Steakhouse CEO David Dino. I can see it now blooming onions on the Cracker Barrel menu. Mike.
- [32:27]
Mike Santoli
Yeah, maybe some Australian touches at Cracker Barrel. We'll see how it goes. Contestant, thank you very much. Up next, your ETF edge with domestic. You don what's coming up?
- [32:36]
Corporate Board Member
All right. So, Mike, it's a big week for corporate earnings, of course, big week for bond traders and investors as the Fed gets set for its next rate decision on Wednesday. With Middle east tensions back on the front burner and inflation worries persisting, we'll speak to a bond ETF manager on what should be in your playbook that's coming up next on ETF Edge on the Halftime Report. Keep it right here.
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Contessa Brewer
The board recommends approving regarding that seat
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Mike Santoli
on the committee we're providing post quarterly earnings.
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- [34:32]
Corporate Board Member
Welcome back to the Halftime Report. I'm Dominic Chu with your ETF Edge. Bonds are back in focus with a hard to predict earnings season and an even harder to predict Fed decision this week. Joining me now is Christian Magoon, CEO of Amplify ETFs. The odds are saying we're going to hold Pat, but there's a lot of debate around it. Christian, what exactly are the bond markets telling you right now about just where to be with regard to fixed income?
- [34:57]
Christian Magoon
Yeah, Dom, it's really interesting. There's maybe about a 35% chance of a rate cut here coming up this week, probably more likely next month. I think from 80% chance the market is pricing in. You know, we really think a couple of ways to look at this are maybe looking at bond ETFs that have covered calls baked into them so you can actually implement a covered call strategy on a Bond ETF ETF. We have several ETFs that actually do this in Treasuries investment grade as well as high yield. So you can own these bond ETFs like Hygiene LQD TLT but have an automatic option income writing strategy that boosts your income and hedges against maybe some of the rate cutting uncertainty that could come be coming down the pike here in the next month or so.
- [35:42]
Corporate Board Member
And Christian, just how rich are those option premiums right now that you can maybe want to capture some of the upside by selling some options activity and collecting some of that income? Just how rich are they relative to where they have been?
- [35:56]
Christian Magoon
Yeah, they're quite rich actually given the volatility. So you know, we're targeting on our TLTP ETF a 12% yield for that TLT option writing product. And then LQD LQDM is our other ticker investment grade quality targeting 12% and that's option income plus interest income. So some of these ETFs you can get two to three times the actual underlying ETF yield by using this option income strategy and then hedge along the way against this uncertainty. So fairly rich we think for income investors.
- [36:30]
Corporate Board Member
All right, and one last point before we let you go. Is there a specific part of that kind of rates or credit complex that seems the most attractive outside of some of these option strategies?
- [36:39]
Christian Magoon
Well, you know, overnight cash rate, the SOFR rate is quite attractive if you want to sit out all this drama. You know SOFR is hard to access unless you're an institution. But we have the only SOFR ETS SSofR is the ticker yielding 3.6%. Not bad for an overnight duration play. You can sit out some of this drama and wait for things to kind of unfold.
- [37:01]
Corporate Board Member
All right, Christian Magnan, amplified, thank you very much. We are going to continue this conversation over at etfedge.cnbc.com Christian is going to be joined by Noah Wise, senior portfolio manager at All Spring Global Investments. We'll talk all things, well at least most things, credit and rates. Mike, I'll send things back over to you.
- [37:17]
Mike Santoli
All right, Don, thank you. Well, straight ahead, health care's recent run. The committee's ready to debate the trade ahead of more big earnings on deck Capcom.
- [37:25]
Carl's Jr. Announcer
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- [37:46]
Mike Santoli
Welcome back. Let's get a check on health care. It's a top sector over the last three months up 14 and a half percent. BTIG's Jonathan Karinsky saying it's close to breaking a multi year downtrend. All the chart readers kind of Love it. It's pretty, been emerging and basing and, and performing in a way that is anti tech. I guess it's useful in that sense. Jason put a storyline around some of this maybe with biotech in particular. Obviously deals have picked up and the acquirers have had their stocks do pretty well. So I guess encouraging more activity.
- [38:16]
Jason Snipe
Absolutely. So I think the major catalyst obviously for, for biotech is the patent cliffs. Yeah, right. I mean that's, that's what's driving all the M and A. These big pharma companies have to stopgap. Some of these revenue streams have been lost from like a, you know we always, we always talk about AbbVie and Humira. Humira was 30% of their revenue two years ago. They need to replace that revenue stream with the, you know, with the biosimilars now, you know, off, off the, off the balance sheet. So for me I think that's what been the major driver. IBB's up 12%, XBI is up, up even more. I know Joe, that's one you own but that's been the story in kind of by biotech complex from it.
- [38:55]
Steve Weiss
Health care is being remade. So there's a company in the private markets, timecare which handles so all the payers in varying levels human CVs, United Health outsource their cancer journey, their cancer care for patients. The companies grow, grown 100% a year, wildly profitable and the insurers make money. So it's being remade health care. So they're adding to the bottom line of Humana, of CVS, of UnitedHealth, of Aetna, meaningfully. So that's the way health care is going. All driven by value based care which is required for Medicare, Medicaid by 2030 where the providers have to assume the risk. So I think you have to watch for companies like timecare and others in the private markets when they go public because they will be huge winners.
- [39:48]
Mike Santoli
I mean it's been the promise for so long and it's happening. Yeah.
- [39:52]
Joe Terranova
And I think in the last several years investors and portfolio managers have wanted because of the size of the sector to see health care step forward and take some leadership. It hasn't but there are idiosyncratic stories underneath the surface that should have you allocating in the direction of health care. Whether it's a Bristol Myers or a United or a United or a Merck, they're all working well. The GLP1 story, Eli Lilly the biotechs have worked really well. I think at some point there is going to be AI oriented health Care opportunity, whether it's drug discovery, whether it's robotics, robotics, diagnostics, whatever the case may be. If, just if you think about the amount, the significant amount, the trillions of dollars that are going to be spent over the next five to 10 years
- [40:42]
Steve Weiss
already, I mean I sit in the board of a company where we're invested Digital Diagnostics, which had the first AI software that diagnoses diabetic retinopathy, leading cause of blindness, affects 450 million 440 million globally with over 90% accuracy, accuracy versus conventional exams which are 33%. So it's been happening, just not hearing about it as much because these are large companies and the inroads are really picking up steam.
- [41:08]
Joe Terranova
I think it supports the premise of be there, be allocated to health care. But I don't know collectively if the investment community has accepted it and said okay, we're moving to it. One name that's interesting, the private markets, they certainly have in the private markets and you see that, you have that visibility much better than I do. But look, if we could, can we show a chart of intuitive surgical over the last year because that's like the definition of what I should mean to health care. And that stock has struggled significantly. 52 week low.
- [41:35]
Mike Santoli
Yeah, the device stuff has been tricky. I mean up and down guys. Thanks very much. Coming up, options action. Oliver Renick is following the pullback in oil and the desk is ready with their energy plate. We are back.
- [42:05]
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- [42:19]
Mike Santoli
We are back with options action. Oliver Reddick joins us from CIBO Global Markets in Chicago.
- [42:24]
Corporate Board Member
Oliver.
- [42:26]
Oliver Reddick
Hey Mike. Encouraging signs for the broad market. I think if you look at how options traders are reacting to today's sell off in crude oil, we see a lot of put buying across the board in energy from crude oil futures to the USO and XLE etc ETFs where put buying outpaces call buying by a notable margin. The most volume is in USO where traders bought almost 16,000 puts versus just 4,000 calls. The most popular contracts by volume in USO are the 100 and 115 strike puts expiring mid September targeting at least a 12 and a half percent sell off the next month and a half. Positioning in the XLE ETF which is up much less than oil this year is more about some big call sellers than put buyers with one huge trader selling $10 million of calls at the 66 and 67 and a half strikes expiring March and June of next year. More a bet about energy stocks stalling out rather than crashing.
- [43:22]
Mike Santoli
Exactly, Oliver. Thank you, Jim. I mean a lot of whipsaws obviously in response to headlines. What matters for, for the energy stuff.
- [43:31]
Jim Leventhal
You own the thing that matters the most to me and I have to qualify this. I am a long term investor in these stocks like ExxonMobil Cheniere and I think you the viewer can be as well. Over the last five years, stocks like Exxon Mobil or the ETF the XLE have done better than the S&P 500 by more than twofold. That's five years during which a lot of time we were talking about crude oil well below $60 a barrel for a of lot lot of people who are saying that crude oil is going to go back below $60. I think there's an important point being missed. This is the answer to your question, Mike. Strategic petroleum reserves in the US and around the world need to be refilled. This is no longer a question of is this the right price at which to refill. These inventories are basically at the bottom of the barrel, pun intended. They need to be refilled. So these ideas, we're going to go back to a surplus and have oil prices crashing. They may crash today, but over the long run they are supported.
- [44:25]
Mike Santoli
The other argument though, Joe, is that this crisis has brought about a pretty quick demand response in some parts of the world. In China, EV sales surging and people you wonder about the longer term waves of potential oil shocks in the future, whether they're going to be as severe. Yeah.
- [44:43]
Joe Terranova
And whether the, the market participants and speculators will actually trust the spike spikes in oil. Because I got to tell you, talking to a lot of them, they don't, they believe any spike in oil will be met with a quick reversal lower. I think where you find the secular fundamental strength is in the refiner trade. More than anything else. This conflict has been about the price appreciation in jet fuel and reformulated gasoline. Look Today, Valero, Philips, 66, Marathon, they are all modestly higher with an energy tape that is on the decline.
- [45:14]
Mike Santoli
They're basically the memory stocks of energy.
- [45:17]
Joe Terranova
Great.
- [45:18]
Mike Santoli
Because you can't add capacity. There's a massive margin. It's a tax on the, on the consumer, ultimately on the, you know, the ultimate end buyer and nobody has a
- [45:26]
Joe Terranova
choice and, but without the excessive speculation.
- [45:29]
Mike Santoli
Right, Exactly. No, exactly. They're tethered still to some fundamental story. All right, stay with us. Final trades coming up on. We are back now with Final trades. Get us started, Steve. Yeah, look, meta.
- [45:45]
Steve Weiss
And if it doesn't work, blame Annie Kornbrooks from the one of our producers. Yes, but look, I think the increased spending is pretty well known and I believe they're going to show pretty good fundamentals in their core businesses.
- [45:58]
Mike Santoli
Yeah, I mean, I think there's blame to go around, but you know, we sort of know where it's mostly I'm going with her, you know, if it
- [46:04]
Steve Weiss
was works, you'll never hear her name from me again.
- [46:07]
Mike Santoli
Fair enough. Jason.
- [46:08]
Jason Snipe
I'm going to go with service now. Really like the quarter subscription revenue is up 24 and a half percent. Bumping a lot today. It's up 7. Still down 30 for the year. I think this is a solid entry point.
- [46:18]
Mike Santoli
Yeah, interesting. It's getting a little legs today, Jim.
- [46:21]
Jim Leventhal
Ebay, you know, for the last couple of months it's been whipsawed a lot on this GameStop offer. But I bought it before the GameStop offer because I think the fundamentals are intact. I think actually the GameStop offer may happen, but obviously it's been.
- [46:33]
Mike Santoli
Well, they have a new offer now. I mean this straight private equity thing, right, was nothing new.
- [46:38]
Jim Leventhal
Actually, I have haven't heard what you said, but okay, maybe I need to get a little remedial training here. Sorry to do that.
- [46:44]
Mike Santoli
All right, folks. Joe, what do you think?
- [46:46]
Joe Terranova
Insight Biotech company, they report earnings tomorrow morning. I only want you to buy it on a pullback. Be patient here.
- [46:52]
Mike Santoli
Don't. All right, guys, thanks very much. We'll see you again soon. Smith. Down a quarter of a percent. That does it for halftime. The exchange starts right now.
- [46:59]
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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 half time 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 halftime reportdisclaimer yeah, maxing
- [47:34]
Carl's Jr. Announcer
is so maxing right now, bro. Get ready for spicy chicken maxing because Carl's Jr. Is saving you big with a 5.99 maxed out double stack. Double stack, double stack spicy chicken sandwich. Seriously, just 5.99 double double stack Spicy Chicken this is unreal value in the bromosphere. The new Spicy Chicken Max Wallet Friendly Max Tasty only at Carl's Jr available for limited time at participating restaurants. Taxon included. Not valid for use within a combo or a combination with any other offered discount.