Halftime Report: A Tariff Turnaround (February 3, 2025)

Host: CNBC’s Scott Wapner
Release Date: February 3, 2025

Introduction

In the February 3, 2025 episode of CNBC's Halftime Report, host Scott Wapner delves into the latest developments in trade policies and their immediate impacts on the financial markets. With a focus on the White House's decision to pause tariffs on Mexico for one month while maintaining those on Canada and China, the episode features insightful commentary from top investors Joe Terranova, Steve Weiss, and Jim Lebenthal. The discussion navigates through market reactions, sector-specific implications, and strategic investment considerations in the face of evolving trade tensions.

Market Overview

Scott Wapner opens the session with a brief overview of the current market standings:

• Dow Jones Industrial Average: Down by approximately 145 points (-0.33%)
• S&P 500: Decreased by over 0.75%
• NASDAQ: The most affected, down by 1.25%
• 10-Year Treasury Yield: Stable at 4.51%, showing resilience despite tariff uncertainties.

"The stocks are coming well off their lows as the White House pauses tariffs on Mexico at least for one month." [01:14]

Tariffs Discussion

The core of the episode centers on the White House’s strategic move to halt tariffs on Mexico temporarily. Panelist Joe Terranova emphasizes viewing tariffs as part of a broader negotiating strategy rather than as isolated macroeconomic factors.

"Tariffs are part of a negotiating strategy. Don’t make a macro call; instead, look for bottoms up opportunities in the market." [02:25]

Terranova advises investors to adopt a nuanced approach, suggesting that 2025 will be characterized by heightened volatility. He recommends focusing on areas with inherent opportunities despite the turmoil, advocating for an active, selective investment strategy rather than a strictly bullish or bearish stance.

Sector Analyses

1. Technology Sector

The technology sector is under scrutiny, particularly companies with significant exposure to China. Panelist Jim Lebenthal points out the resilience of the tech sector underpinned by strong economic indicators like ISM manufacturing data and low unemployment rates.

"Underneath the chaos is a strong economy that is likely to sustain the rally." [08:29]

Specific companies discussed include:

• Apple: Despite a 4% drop attributed to tariff fears, leaders like Jim Lebenthal remain cautiously optimistic, highlighting strong retail demand and share buybacks as stabilizing factors.

  "My perspective as an advisor is that retail demand for Apple remains extraordinarily strong." [22:39]

• Amazon: Analyst Kate Rooney discusses how removing the de minimis provision for tariffs could benefit Amazon by constraining cheaper Chinese competitors like Shein and Temu.

  "Growth at Shein and Temu could be significantly constrained, benefiting Amazon." [26:17]

2. Defense Sector

The defense sector remains a focal point, with companies like Marathon Petroleum and Valero showing resilience despite existing tariffs on Canadian oil. Jim Lebenthal underscores the importance of a robust economy supporting the sector.

"There is a strong economy allowing the rally to broaden across sectors like defense." [07:37]

3. Energy Sector

Energy stocks responded positively despite tariff uncertainties. Panelist Brian Sullivan elaborates on how companies like ExxonMobil and Valero are navigating the 10% tariffs on Canadian oil, with the consensus that the short-term impact is manageable.

"Oil stocks are mostly higher despite ongoing tariffs on Canadian imports." [32:20]

Specific Stock Discussions

General Motors (GM)

Joe Terranova discusses the decision to sell GM shares amid tariff uncertainties, highlighting the stock's recent volatility and diminished momentum.

"We’re selling out of GM because the momentum has collapsed, reflecting tariff-related fears." [12:11]

Qualcomm and Nvidia

Jim Lebenthal addresses chip manufacturers' exposure to China, noting that Qualcomm's diversified product pipeline and Nvidia’s strong positioning in AI reduce direct tariff impacts.

"Qualcomm’s exposure is built into their pipeline, focusing on automotive and AI rather than just smartphones." [13:17]

Caterpillar

The panel debates Caterpillar's prospects amid tariff concerns. While Steve Weiss is skeptical about the company’s future under prolonged tariffs, Jim Lebenthal appreciates Caterpillar's strong fundamentals but acknowledges short-term consolidation risks.

"Caterpillar is a great company, and selling high is nothing wrong with." [41:56]

Uber

Joe Terranova explains selling Uber shares due to stagnating momentum, despite the company's strong long-term positioning.

"Uber is running in place, and selling now positions us to buy low later." [42:34]

Inflation and Portfolio Strategies

John Davy, CIO at Astoria Portfolio Advisors, joins the discussion to emphasize the persistent threat of inflation exacerbated by tariffs. He critiques the prevalent tech-heavy portfolios for lacking exposure to inflation-resistant sectors like energy and materials.

"Most portfolios are tech and growth-focused with little exposure to sectors that benefit from higher inflation." [37:41]

Davy advocates for diversified investments across 50 different stocks and ETFs that inherently benefit from structurally higher inflation, such as oil and gas, industrials, and real assets.

"Our strategy allocates across sectors that benefit from higher inflation, maintaining a competitive PE ratio of 13." [38:15]

Final Trades and Analyst Opinions

In the concluding segment, panelists discuss recent trades and investment strategies:

• Cisco Systems: Jim Lebenthal praises Cisco for its consistent earnings and growth prospects, suggesting it as a strong holding.

  "Cisco has had several quarters of better-than-expected earnings and continues to show strong potential." [45:50]

• UnitedHealthcare: Steve Weiss highlights its defensive nature and promising price action, viewing it as a solid investment.

  "UnitedHealthcare is defensive and its price action is strong, making it a worthwhile holding." [46:12]

• Walmart: Joe Terranova reflects on Walmart’s robust performance, questioning whether it thrives in both bullish and bearish environments.

  "Walmart's new all-time high raises questions about benefiting in various market conditions." [46:31]

Conclusion

The episode of Halftime Report effectively navigates the complex landscape of current trade policies and their multifaceted impacts on the stock market. The panel collectively underscores the importance of a strategic, informed approach to investing amidst tariff-induced volatility. By focusing on sector resilience, specific stock potentials, and inflation-resistant strategies, investors are equipped with actionable insights to navigate the evolving economic terrain.

Notable Quotes

• Joe Terranova: "Tariffs are part of a negotiating strategy. Don’t make a macro call; instead, look for bottoms up opportunities in the market." [02:25]

• Jim Lebenthal: "Underneath the chaos is a strong economy that is likely to sustain the rally." [08:29]

• John Davy: "Most portfolios are tech and growth-focused with little exposure to sectors that benefit from higher inflation." [37:41]

• Steve Weiss: "UnitedHealthcare is defensive and its price action is strong, making it a worthwhile holding." [46:12]

This comprehensive summary encapsulates the essential discussions, strategic insights, and expert opinions presented in the Halftime Report episode titled "A Tariff Turnaround." It serves as a valuable resource for investors and market enthusiasts seeking to understand the implications of current trade policies on various market sectors and investment strategies.