Halftime Report: Are Stocks and the Fed on a Collision Course? (August 14, 2025)
Host: Scott Wapner, CNBC
Guests: Joe Terranova, Shannon Sakosha, Kevin Simpson, Bryn Toffington
Release Date: August 14, 2025
Introduction and Overview
In this episode of CNBC's Halftime Report, host Scott Wapner delves into the intricate relationship between the stock market and the Federal Reserve's monetary policy. The central theme revolves around whether rising stocks and the Federal Reserve's potential rate cuts are heading towards a collision. The discussion is anchored by recent economic data, particularly a hotter-than-expected Producer Price Index (PPI) print, which has significant implications for future rate cut narratives.
Market Reaction to PPI Data
Scott Wapner [02:04]:
"Records and rate cuts and whether stocks and the Fed are on a collision course. Now we'll ask the committee how to play the markets after a much hotter than expected inflation print."
The latest PPI data revealed the largest monthly increase in three years, challenging the prevailing narrative of low inflation. This unexpected surge raises questions about the feasibility of the anticipated September rate cut.
Joe Terranova [02:04]:
"I think it takes 50 off the table and I think the market effect of that is the optimism that everyone had yesterday... I still think you're going to get a 25 basis point rate cut in September."
Joe Terranova suggests that a 50 basis point cut is now off the table, with the market likely adjusting to a more moderate 25 basis point reduction. This shift affects investor optimism, particularly in sectors like biotech, small caps, and homebuilders, which were previously buoyed by expectations of more substantial rate cuts.
Rate Cuts and Federal Reserve Policy
Shannon Sakosha [03:39]:
"...some of that investment is probably predicated on a more accommodative rate environment because they're still going to need to be borrowing, particularly for smaller businesses in order to make those investments."
Shannon Sakosha emphasizes that lower interest rates have been a key catalyst for small and mid-cap stocks. However, the recent PPI data introduces uncertainty regarding the likelihood and magnitude of future rate cuts, potentially dampening investment in these segments.
Scott Wapner [02:48]:
"...if you're going to debate 25 or nothing, that there's going to be a fairly sizable pause in the idea that those stocks can work now."
Scott highlights the market's reevaluation of rate cut expectations, suggesting that smaller rate adjustments may lead to a halt in the previously strong performance of certain stocks.
Small Caps vs. Large Caps
Shannon Sakosha [03:39]:
"...the underlying momentum we've had over the last couple of weeks, it has been very inextricably tied to this rate cut."
Shannon points out that small caps have largely benefited from the anticipation of rate cuts, but this momentum is now at risk due to the new inflation data.
Scott Wapner [05:16]:
"...the small cap trade didn't get totally ignited when the big beautiful bill was passed. It didn't do anything until we got the idea of a bad jobs report, the tremendous revisions that we had and then the belief that you're going to cut that's the only thing that started this trade."
Scott criticizes the reliance on rate cuts as the primary catalyst for small cap stocks, noting that other potential drivers have been insufficient in fueling sustained growth.
Kevin Simpson [07:34]:
"...I see no reason to own small caps ever. But I say that as a large cap manager, so at least take it with a grain of salt."
Kevin Simpson offers a critical view of small caps, suggesting that their recent rally lacks fundamental support and may not be sustainable.
Federal Reserve's Future Moves
Bryn Toffington [08:02]:
"...by the end of the year we will have one or two rate cuts. But... rates are just going to be higher than they were the past 10 years."
Bryn Toffington provides a longer-term perspective, anticipating that the Federal Reserve will implement one or two rate cuts by year-end but maintains that interest rates will remain elevated compared to the past decade.
Joe Terranova [10:56]:
"...volatility is pretty low on a relative basis... you could buy some volatility just as protection against your overall portfolio."
Joe advises investors to consider volatility as a hedge, given the current low levels and the uncertain trajectory of interest rates.
Specific Stock Discussions
Apple Inc. (AAPL)
Kevin Simpson [12:30]:
"We wrote a 245 call and this only goes out for two weeks. So to Joe's point of a 240 ceiling, if we can get out of this at 245 in two weeks, I'll take the trade."
Kevin discusses his bullish stance on Apple, highlighting a strategy to capitalize on short-term price movements with call options.
Joe Terranova [14:07]:
"...this is a company that is going to appreciate significantly over the coming quarters."
Joe expresses confidence in Apple's long-term growth prospects despite recent price volatility.
Amazon.com Inc. (AMZN)
Joe Terranova [15:10]:
"So it looks to me like the momentum is beginning to build and will accelerate over the coming days and weeks in Amazon and make that push towards 242."
Joe identifies Amazon as a strong candidate for significant appreciation, predicting a move towards a $242 target.
Kevin Simpson [16:23]:
"...we love Robinhood because of what they own and what they control with the Gen Z and the Millennials. That's why we love Roblox, American Express, Robinhood."
Kevin ties Amazon's growth to broader consumer and demographic trends, particularly among younger generations.
McDonald's Corporation (MCD)
Kevin Simpson [28:10]:
"We own Home Depot and not a traditional homebuilder... we see McDonald's as a better investment for us longer term."
Kevin explains his strategic investment in McDonald's, emphasizing its global footprint and resilience in a challenging economic environment.
Joe Terranova [30:08]:
"...clearly, that's value. There is an effect right now for sure."
Joe reiterates the value proposition of McDonald's amidst broader challenges faced by the fast-food sector.
Ulta Beauty (ULTA)
Joe Terranova [39:54]:
"...this is a recent buy that we added to the strategy. The concern here is their ability to lift growth and number one, work down a lot of the promotions."
Joe discusses Ulta Beauty's strategic moves, including its acquisition of Space, and addresses concerns about sustainable growth amid promotional activities.
Software and AI Sector Insights
Bryn Toffington [17:44]:
"I think investors need to understand like I'm sure hedge funds are just pounding these sectors, this sector every day. But if you take a step back and say... I do think there's an opportunity to look here."
Bryn encourages investors to consider undervalued software and technology companies, despite short-term volatility and sector rotation.
Joe Terranova [19:30]:
"...we have significant software exposure in the strategy... it's clearly not working out."
Joe reflects on the challenges within the software sector, particularly with momentum-based investments not performing as expected.
Shannon Sakosha [23:07]:
"...you're going to continue to see some dispersion amongst these names depending on where those end markets are in particular."
Shannon highlights the varied performance within the software sector, influenced by specific end-market demands and technological advancements.
Crypto Market Analysis
Bryn Toffington [24:17]:
"So this is a good way for me to get into the name. I don't know, it's still so early and it's trading. Should this be trading at 40 or 80? And so I want to watch the technicals more as they build out longer term."
Bryn discusses strategic investments in cryptocurrency, particularly Ethereum-related assets, emphasizing technical analysis and long-term prospects.
Joe Terranova [43:32]:
"...over the last 12 months, the stock is up 26%. So the contribution of up 26% from the one year time frame is supporting the stock we're seeing that is deteriorating in the near term."
Joe addresses the inclusion of crypto assets in momentum ETFs, balancing long-term gains against short-term performance declines.
Energy Sector Insights
Shannon Sakosha [23:38]:
"...natural gas futures have been under a ton of pressure and so you're not going to be able to alleviate the supply considerations for energy next year."
Shannon discusses the ongoing challenges in the energy sector, particularly with natural gas prices and supply constraints impacting future earnings.
Bryn Toffington [37:43]:
"...these are two high-quality companies. Excellent C suite... but finding that catalyst to move past these low energy prices which doesn't seem like that's going to happen anytime soon."
Bryn underscores the value in energy stocks like Viper and Diamondback, while noting the difficulty in finding catalysts to drive significant price movements amidst sustained low energy prices.
Upcoming Earnings and Market Movements
Kevin Simpson [35:34]:
"...McDonald's with an amazing dividend, strong dividend growth. And they really understand their consumer."
Kevin previews upcoming earnings reports, particularly highlighting McDonald's as a key player poised for potential growth.
Joe Terranova [40:21]:
"...the concern here is their ability to lift growth and number one, work down a lot of the promotions."
Joe anticipates that upcoming earnings reports will focus on growth sustainability and the effectiveness of promotional strategies, particularly for companies like Ulta Beauty.
Scott Wapner [41:01]:
"TJX is Wednesday before the bell. There's also a considerable conversation being had not just about restaurants, but retail too."
Scott outlines the schedule for the upcoming earnings reports, emphasizing the importance of companies like TJX and their impact on the retail sector.
Conclusion
The Halftime Report episode "Are Stocks and the Fed on a Collision Course?" provides a comprehensive analysis of the current economic landscape, highlighting the interplay between inflation data, Federal Reserve policies, and stock market performance. Experts express a cautious outlook on the sustainability of recent market rallies, particularly in small caps and the software sector, while identifying key opportunities in large-cap stocks, energy, and emerging sectors like cryptocurrency. As the Federal Reserve navigates potential rate cuts amidst rising inflation, investors are advised to adopt strategic hedging and remain vigilant of sector-specific dynamics and upcoming earnings reports that could significantly influence market directions.
Notable Quotes:
- Joe Terranova [02:04]: "I think it takes 50 off the table... I still think you're going to get a 25 basis point rate cut in September."
- Shannon Sakosha [03:39]: "...they're still going to need to be borrowing, particularly for smaller businesses in order to make those investments."
- Kevin Simpson [07:34]: "I see no reason to own small caps ever. But I say that as a large cap manager..."
- Bryn Toffington [08:02]: "...rates are just going to be higher than they were the past 10 years."
This summary captures the key discussions and insights from the August 14, 2025 episode of Halftime Report, providing a detailed overview for those who haven't listened to the full podcast.