Can Stocks Withstand the Rate Surge? 1/10/25

Summary

Halftime Report Podcast Summary Episode: Can Stocks Withstand the Rate Surge? | Release Date: January 10, 2025

Overview In this episode of CNBC’s Halftime Report, host Scott Wapner delves into the immediate aftermath of a robust jobs report that has significantly influenced market dynamics. With yields on the 10-year and 30-year Treasuries reaching their highest levels since November 2023, the conversation centers on whether the stock market can endure this surge in interest rates. The panel comprises top investors including Josh Brown, Joe Terranova, Jim Laventhal, and Bill Baruch, who provide diverse perspectives on the current economic climate and its implications for investors.

Market Reaction to the Jobs Report Scott Wapner opens the discussion by highlighting the market’s sharp decline following a blowout jobs report, with the S&P 500 erasing its gains since Election Day. He poses a critical question: "Are we now worried that the economy is too hot for stocks?" [01:01]

Josh Brown's Perspective: Buying Opportunities Amid Sell-offs Josh Brown counters the notion of the economy being "too hot," suggesting that market sell-offs driven by strong economic data present buying opportunities for long-term investors. He states, "Every time the market sells off because the economy is too good, it's a buying opportunity." [01:54] Brown emphasizes that despite short-term volatility, the long-term outlook remains favorable for investors who maintain their strategic plans.

Jim Laventhal and Bill Baruch on Economic Indicators Jim Laventhal acknowledges the complexities introduced by rising yields and the strengthening dollar, referencing insights from economists like Austan Goolsbee who downplay concerns of economic overheating. Bill Baruch adds that the correlation between equities and bonds remains a dominant force, stressing the importance of upcoming Consumer Price Index (CPI) data [04:45].

Joe Terranova: Expectations vs. Reality Joe Terranova discusses how market expectations have outpaced actual economic performance, particularly regarding inflation. He notes, "I do want to remind everybody the first quarter of last year we had three months of hotter than expected inflation. It kind of freaked everybody out. But then inflation started its march back down." [04:45] Terranova suggests that current market corrections are part of a necessary reset rather than indicative of a long-term downturn.

Small Caps and Interest Rates Debate A significant portion of the discussion focuses on the impact of rising interest rates on small-cap stocks. Joe Terranova argues that the traditional negative correlation between interest rates and small caps is being disrupted, stating, "The history of small caps has been made irrelevant by the amount of the trillions of dollars that are available to privately held companies." [17:54] Conversely, Bill Baruch believes that small caps will benefit from a recession, a viewpoint that Terranova challenges by asserting that economic cycle nomenclature may no longer apply as it once did [15:14].

Tech Sector Volatility and Stock Performance The tech sector, particularly high-growth stocks like AMD, Palantir, and Nvidia, is scrutinized for its recent downturns. Scott Wapner highlights, "If we finished out last year and had this nice little stroll higher into new all-time highs into December 31st, I would be much more scared here right now. But let's take a look at the scorecard." [09:14] Investors discuss whether the decline in these stocks represents a valuation reassessment or the beginning of a longer-term trend.

Delta Airlines and Regional Banks Performance Shifting focus to specific stocks, Joe Terranova praises Delta Airlines for its strong operational performance and debt reduction, predicting a potential re-rating of its stock multiple [26:50]. In contrast, the performance of regional banks is viewed as becoming more idiosyncratic, with Bill Baruch noting that "these stocks are on the retreat" despite their previous strong performance [46:43].

Bitcoin and Cryptocurrency Outlook The episode also touches upon the cryptocurrency market, with Silvana Henao discussing the mixed signals from impending Supreme Court decisions on TikTok and their impact on Bitcoin. Scott Wapner mentions potential bullish moves despite current volatility, stating, "I think this is a buying opportunity." [35:54] Josh Brown cautions about the easy inflow and outflow associated with Bitcoin ETFs, highlighting their integration into mainstream markets [39:14].

Supreme Court Hearing on TikTok Ban Eamon Jabbers provides an update on the Supreme Court's deliberations regarding the TikTok ban, addressing questions about First Amendment rights and the implications for foreign ownership of U.S. media entities [42:32]. The uncertainty surrounding the court’s decision adds another layer of complexity to market sentiments.

Final Thoughts and Investment Strategies As the episode concludes, panelists emphasize the importance of maintaining a diversified portfolio and focusing on long-term investment strategies amidst short-term volatility. Bill Baruch underscores the significance of understanding sentiment and positioning in the current market environment [47:09].

Notable Quotes

• "Every time the market sells off because the economy is too good, it's a buying opportunity." — Josh Brown [01:54]
• "The history of small caps has been made irrelevant by the amount of the trillions of dollars that are available to privately held companies." — Joe Terranova [17:54]
• "If we finished out last year and had this nice little stroll higher into new all-time highs into December 31st, I would be much more scared here right now." — Scott Wapner [09:14]
• "These stocks are on the retreat." — Bill Baruch [46:43]

Conclusion The panelists collectively suggest that while rising interest rates and strong economic indicators have introduced short-term volatility, there remain substantial opportunities for long-term investors. Emphasizing strategic positioning and diversification, they advocate for a measured approach to navigating the current market landscape.

Transcript

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[Scott Wapner]

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[Jim Laventhal]

I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. All right, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, that blowout jobs report sending yields higher, stocks falling sharply. We'll debate the fallout for the market and your money with the investment committee. Today, we're all at post nine. Josh Brown, Joe Terranova, Jim Laventhal, Bill Baruch, we'll take you to the markets. Carl just told you what was going on here. Down more than 700, but we're down across the board. Yields are way up the 10 year and the 30 year, the highest since November of 23. The dollar's up, crude's up. And by the way, Josh, the S and P gains since election day are basically all gone. Now. Are we now worried that the economy is too hot for stocks?

[Josh Brown]

So I don't worry about that. And one of the recurring themes that I've talked about throughout the course of the last couple of years is that every time the market sells off because the economy is too good, it's a buying opportunity. Go back and look at the last three years that's been the case. We've had these disturbances periodically as a result of, forget inflation, just purely on labor reports, where all of a sudden we'll see the belly of the curve moving a lot, which is what we're seeing today. Three years up 10 basis points to 443. Or we'll see this moment where wage growth surprises the upside or confidence is higher expected and they sell and they sell stocks off. And I understand the impulse because a 5% 10 year is real competition for an investor who's got a plan where they only need to make 7 or 8% a year to hit their retirement goals. Why would they want to take more risk? So there is that substitution factor and I totally get it. And I'm not dismissing the impulse. I'm just telling you it's not a moneymaker. It's wrong. Intermediate time, long term, it's wrong now if you tell me, could be a.

[Jim Laventhal]

Money saver, if you will, in the near term.

[Josh Brown]

For how long though? Because if the story here, we added 2.2 million jobs last year in total. That's the final reading with all the revisions now. Okay. There was this whole narrative starting in the beginning of the year and almost up until the election, which is that every jobs report is going to be the last one and then the bottom is going to fall out and it just won't happen. And so you're going to have people trot out seasonality, you're going to have people talk about it's holiday hiring and it's going to go away now, we're going to keep doing that. And the bottom line is if you want to sell stocks because the job market is materially breaking down, that makes more sense to me than I need to sell stocks because the job market's too good. I get that it might be the right trade for the next 10 days. I don't have a crystal ball. Neither does anyone else. I just think it's the wrong mentality if you're a long term investor. And that's what I am not, not talking to the traders, I'm talking to the investors.

[Jim Laventhal]

I think, Jimmy, it's just sort of unwinding expectations that many investors had. As you know, you go back to September, Fed's cutting rates, they're going to do the jumbo cut and you know, few cuts more and you're going to have rates go up. And that's what's happening now. Expectations for inflation are going up, as we saw today from you, Mitchell. Austan Goolsbee told Leishman earlier today there's no evidence of overheating in the U.S. economy. But Josh, I think makes the best point here that you have competition, you have competition again. You have the biggest inflow into cash according to bank of America's flow Since April of 2100 43.2 billion and you have the biggest inflow into Treasuries since August of last year.

[Joe Terranova]

Yeah, I think, I think expectations clearly got ahead of themselves as far as what the economy can do without a little bit of inflation rearing its head. I'm not convinced that inflation is back. I do want to remind everybody the first quarter of last year we had three months of hotter than expected inflation. It kind of freaked everybody out. But then inflation started its march back down. That may well be the case here. But in terms of expectations, and I like that word, I think it's healthy that expectations are being reset right now. The proximate cause is higher interest, interest rates. But what I mean to say is, and I said this last week, we may be in the middle innings of a correction. Nobody can time a correction. And like Josh, I'm not suggesting that you try. I'm a long term investor. I'm certainly not going to give up on certain great companies that I own because I think the markets might be punk for a month or two. But a correction which is long overdue will help reset expectations of where we go forward. And at the end of the day this, this whole paradigm of, of good news is bad news. It's not a paradigm I ever play with. And it's also one that is much short lived when you compare it to the good news is good news. We should focus on the good news is good news, people are employed. And on the inflation front, 3.9% in average hourly earnings increase year over year is below expectations and it's really not that high.

[Jim Laventhal]

Let me ask you a question. Did you buy the small caps when you did because you expected interest rates to be where they are today? That's kind of a rhetorical question because I expect you to tell me no, I didn't.

[Joe Terranova]

Of course the answer is no, I didn't. However, if you'll allow me to just extend people have I been saying this for quite some time, in my opinion erroneously equated higher interest rates with negative returns on small caps. The reason that higher interest rates could hurt small caps is if you get a recession which will hurt the top line. The idea that interest expense being higher than expected hurts small caps is not right. Interest expense as a percent of sales is around 4% in the small cap sector. Now it's clear, by the way, Scott, trade hasn't worked, I'll be the first to admit, but I think with the continued strength in the economy that it's on the cusp of working.

[Bill Baruch]

You go back to the 1980s. There's been, I think eight recessions. I might be off on that number. But what small caps need is a recession because small caps work coming out of the recession. A strong economic environment is not conducive to small caps. The Russell 2000 looks like it's about to break down below its 200 day moving average. Look, I just think we're in an environment where you have to understand sentiment, you have to understand positioning. The equity to bond Correlate, negative correlation is the dominant force in the market right now. It elevates the importance of CPI next week. It elevates the importance of equities over the coming weeks and it fosters a rotation internally in the market. Scott, it's hard not to talk about, quote, unquote, the market on a day like today. But I think you go underneath the surface and you're beginning to see that the rotation is actually happening. Energy, health care, some of the defensive, defensive oriented sectors that sat out 2024, but it's not. They're the flows of capital. Yes, and that doesn't save the overall.

[Jim Laventhal]

I was going to say neither of those factors are great factors for a positive equity market.

[Bill Baruch]

If you're looking at, look, where's the s and P500? No, that's not good because you have a day in which Apple and Nvidia and Amazon, they're all down 3%. So that's going to be the drag.

[Jim Laventhal]

On the S and P. Well, I mean it's not just those names. If you say, you know, Bill, okay, it's not just bad for small caps, higher rates. Take a look at tech. Nasdaq's on track by the way, to close below its 50 day for the first time since September. That sector in and of itself, tech down 2, 3/4% today from the S and P. And many of the higher multiple names within that space or ones that have run up a lot are the ones that are getting hit the hardest today. We'll show you a smattering of them that have some ownership on the desk. Applovin, which we said a thousand times when it was on the way up last year at some point it was up like 900% for 2024. Throw that stock up if you could please, because it's down a lot today. Down 5%, 15 or 16 bucks. Palantir has had a really terrible stretch here. It's down another three and a half. But there's Robinhood, there's Broadcom, there's Netflix. Bill sales.

[Josh Brown]

We freeze this, we know all five of these names are up 100% or more last year.

[Jim Laventhal]

Sure. But that's one of the reasons the harder you go up, the harder you potentially fall. When you have a rising interest rate environment, it unsettles stocks Bill like these.

[Scott Wapner]

Yeah. I think you look at some of these names and you know Broadcom on there. It's I think ultimate proved to be a buying opportunity. I think Mizuho, Mizuho came out, reconfirmed some of the price targets. They're going to introduce a 2 nanometer chip. Take a step back. I mean really it is about yields. I mean you're getting the 10 year closing in on 5% and some of these names that are high flying. It's sort of a valuation reassess. But I'm not sitting here scared. I think this is going to be a buying opportunity. If we finished out last year and had this nice little stroll higher into new all time highs into December 31st, I would be much more scared here right now. But let's take a look at the scorecard. We ultimately we had the Vix go through 20, surge through 20, go through 25. We had the fear and greed index hit extreme fear. You know the dollar index has been relentlessly higher for, for some time now and everybody's been talking about the 5 year, 5%, 10 year. So I think we've had a little bit of a cleansing already take place through the market but we haven't really had it on the calendar year yet. So I think this is, this is that little bit of a slip. I think it proves to be a buying opportunity. And so yeah, some of the names that have been flying like the app Lovens, it's going to be a reassess here and start coming in now. I gave my head of research some homework earlier in the week. I said Palantir, where do you want to buy it? Let's find a price target. When this thing comes down, where do we want to buy it? So I think this is that time to say get your shopping list ready.

[Josh Brown]

I want to make sure though nobody has any ever for Palantir, but I want to make sure nobody has amnesia. So right now there's only a 3% chance of, of a rate cut at this meeting. Let's not act like that was a 50% chance. Last week it was 11%.

[Scott Wapner]

Yeah.

[Josh Brown]

So it's not like the market was offsides. The bond market certainly wasn't, I should say was app love and offsides. I would argue every day you wake up it's offsides. So like we should just remember this is not that big of a shift in expectations relative to seven days before we got you just said it again.

[Jim Laventhal]

That it offsides like a lot of these stocks went up as much as they did not necessarily based on fundamentals but the overall momentum sentiment environment where sentiment was expectations that rates were going to continue to come down, that the economy was going to continue under a.

[Josh Brown]

New Trump administration but these stocks rallied with these stocks rallied with the rally in the 10 year on September 5th just last year, not that long ago the 10 year was at 3 spot 6 4. Today is at 109 basis points higher and those stocks ripped during that entire rise in the 10 year. So that correlation isn't as is inverse correlation is not as permanent as we'd like it to be. To the point where you could set up a trading algo and say rates up, sell high beta tech. It literally hasn't worked that way.

[Scott Wapner]

And you're right, it was the cyclical names, the a lot of these industrial names, the small caps that those are the ones that were. Remember the dow was down 11 or 12 straight days during that period as the 10 year ascended.

[Bill Baruch]

Applovin still has positive momentum. It's not even back to its 50 day moving average just yet. Netflix, Palantir, they've both broken below their 50 day moving average.

[Jim Laventhal]

Six month if you guys. I'm sorry John, I'm going to give it back to 2 seconds. Let's get a 6 month on app Lovin if we can.

[Bill Baruch]

I'm going to show this to to Josh. You want to buy that chart because that's not so bad.

[Josh Brown]

No, not 11.

[Bill Baruch]

Not so bad. That's not so good. Not so good.

[Scott Wapner]

But in a logarithmic view, see a little bit because when these, these names that run so much look at a percent change basis rather than just the chart, it makes it look a little more easy to digest.

[Bill Baruch]

But Scott, you said at the beginning of the show we've given back now the, what do we want to call it, the Trump bump after the election, all caps gone. No, you gave it all back. Right.

[Jim Laventhal]

Basically given all back everywhere.

[Bill Baruch]

And a lot of those stocks that we're talking about, they kind of went parabolic after the election. That's when I think you could say you had the exuberance and the excessive speculations in those types of names. So it's reasonable to see them fall back to where they were prior to the elect.

[Jim Laventhal]

But you think that's a great looking chart right there.

[Bill Baruch]

I'm looking at today.

[Jim Laventhal]

I Mean I'm looking, we're looking at Applovin, that's what we're looking at. I think you're looking at the same.

[Bill Baruch]

Thing I'm looking at Applovin over the last 12 months. That's applovin over the last six.

[Josh Brown]

Yeah, over the last six.

[Jim Laventhal]

Obviously if you look at it over the last 12 months you're going to say wow, unbelievable gains.

[Josh Brown]

There are no good charts right now. I have 16 names on my best stocks in the market list which is driven by tacticals primarily. There's only two tech names on there, Google and Roblox. I've got four energy names. I've got Baker Hughes which I'm Long Equity which I talked about on the show last week, KMI and LNG which I think is a Jimmy holding. Yep, that's it. And then, and then I got some random weird stuff on there. There are not a lot of great charts in the market right now because December we slumped into year end and now we've got this volatility that probably breaks a lot of uptrends. It's perfectly fine if you're an investor. Its new setups on the way is the rational way to think about this.

[Jim Laventhal]

By the way, Chris Harvey over at Wells Fargo talking about the small caps and the relationship to rates says you can expect another 2 to 3% small and mid cap sell off pushing that group into a correction.

[Joe Terranova]

Okay, 2 to 3% doesn't sound that further but further. Yeah, no, I got you, I got you. But you know something that Joe said on this topic I think is relevant.

[Bill Baruch]

Bears repeating better than what Josh said.

[Joe Terranova]

Just when you were talking about small caps need to come out of a recession. That's historically true. But I will say I think that the last three years we have seen a lot of historical patterns broken and the way I would describe it is this way what you're looking at is an economy that has been late cycle for three years. I mean literally for three years people have been talking about late cycle. Let's get the recession, let's clear the deck and then small caps will work. I don't think we're late cycle, I think we're mid to early cycle. I think the cycle, the cycle nomenclature and context has been broken. Honestly, I think the pattern that you accurately described historically is broken.

[Bill Baruch]

What if the economy is not the stock market? What if the, what small caps really need is a massive rotation out of technology? Because small caps don't have technology as a large.

[Joe Terranova]

Absolutely. But I, I do think the economy is the Stock market in the long run, over a quarter or even a year.

[Josh Brown]

I think I'm with Joe. I think I'm with Joe though, Jim, because I think you'd have to agree with me and you've been on the right side of this most of the time. We haven't had a cycle. We have. What we have now. We have now is we have events we don't have. We don't really have like a classical recession. Like inventory builds up a General Motors and they start laying off, they start laying off union employees and then we have a recession. What we have instead are these events. And I'm not saying one is better than the other, but for the last 15 years, we've only been in recession for two months.

[Joe Terranova]

I totally agree. So can economists and politicians actually micromanage the economy this well? I don't think so.

[Jim Laventhal]

There's a difference too. Let's, let's be clear. There's a difference between directionally correct and positionally correct. Right? Okay. So yes, you can be 100% right on where the economy's direction is going to be. You can be 100% wrong on how to play that within a stock market that is spooked by higher interest rates and ones that are likely to remain elevated for some period of time.

[Joe Terranova]

Yeah, I do acknowledge the small cap trade, Scott, has not worked. I still. Sorry, but make this quick. As you know, every day I wake up and I don't look in the rearview mirror, I say, what is the right thesis today going forward? I give you my best thinking. It has been wrong. I think it's going to be right.

[Scott Wapner]

Here's the problem. I think we acknowledge that small caps, as these companies get bigger and they grow there, they get out of the index. The S and P is the complete opposite of that index where the companies that are making money, the companies that are getting bigger become a bigger portion.

[Josh Brown]

Actually worse than that index. Actually worse than that. Anthropic just got a $60 billion valuation yesterday. Skipping OpenAI is worth 157 billion. They will never be small caps unless something goes really wrong post ipo. So it's actually the history of small caps has been made irrelevant by the amount of the trillions of dollars that are available to privately held companies. It might be a broken invest. People say, oh, doesn't it have a role in the portfolio? Yes, of course. The role of small caps in the portfolio is to make you not want to kill yourself over the em sleeve. That's what we do. That's the small cap role. It's very, very difficult for us to look at past history and say here's that traditional small cap role coming out of recession, going into a set. We just don't know if it's still going to be that given how many small caps don't trade on.

[Joe Terranova]

Just to accent your point, and this is for the viewers as well. I mean the IJR, the small caps, the S&P 600 is a position in my portfolio. It's roughly 5%. I'm not making my bed every morning saying go small caps. I mean I got a lot of large caps as well. This should be a part, this is the point you're making a part of the portfolio. But this shouldn't be your only position. I'm not calling for that at all.

[Jim Laventhal]

But I mean, if you look at this week, financials are down 3%. You can be outside of small caps and still areas where you thought were going to do well because of the strong economic expectations, but that rising interest rates have sort of thrown a lot of things out of whack. What's funny is as all this is happening as we talk about tech and the NASDAQ's down almost 3% on the week. You've had the first inflow into tech, Joe, according to bank of America and their fund flows in six weeks. So you know, we had a top heavy market again and now you had money chasing that trade just as it looks to be wobbly at best.

[Bill Baruch]

Yeah, and I think that's, I think it's the institutional investor taking advantage of the last several weeks and the correction that you've had in a lot of these names. I think you have to acknowledge and set the expectation. I'll go back and reference Applovin, Palantir, Netflix, the charts that we were showing before the near term momentum points lower. I've said that Palantir, upper 50s to low 60 Nvidia. We've tackled that all week. You had the keynote address from Jensen Huang. You had a reach to a new all time high. You had no follow through mid-130s. That's exactly where it is right now. So I think you have to understand what's very important always is what, where is sentiment relative to where is positioning? So capital is going into technology makes sense to me because we've reduced positioning over the last six weeks. There's room for capital to flow in there. What's interesting is the financial sector. I don't think the financial sector has worked off the bullishness from 2024 and the bullish positioning from 2024 just yet. And that actually speaks to my point when I say sometimes the economy is not the stock market because you would think about financials and you'd see a steepening yield curve. You'd see a pretty good economy. You'd say lending consumers in good, good place. That would be good for financials but it's not because sentiment and positioning doesn't align. You have to work off that bullishness.

[Jim Laventhal]

You'll get earnings next week starting with the biggies on Wednesday. Citi and Goldman jpm be careful on.

[Josh Brown]

Financials to these insurance companies had a good year last year. They've grown in market cap, they've grown in importance. They're not banks but they're in the index. Take a look at an all state that's getting whacked on the California wildfires.

[Jim Laventhal]

The whole space. Chubb and Allstate.

[Josh Brown]

Yes. So, so they're, they're a factor in the index. They're not as big as JP Morgan. I think Progressive is maybe the biggest right now or Chubb.

[Jim Laventhal]

Let me hit a couple of individual names that are, that are interesting to me today. AMD just to get back to tech for a second but just as a, as an individual story today, take a look at the stock down almost 6% percent the second downgrade this week. Joe downgraded today to neutral from buy Goldman Sachs. The Target goes to 129 from 175 stocks going to stay rangebound on a relative basis until the market regains confidence in AMD's future growth.

[Bill Baruch]

I'm chuckling because I'd like it to stay rangebound. We have it in the ETF. It's down 22% over the last 52 weeks. The stock has not worked, it has not participated in the semiconductor AI halo. Positive effect. The stock peaked in early March of last year and it's been in a downtrend, downtrend rather ever since. So it's clearly has negative momentum fundamentally. We could speak glowingly about this company backwards and forwards but it's just not performing fundamentally.

[Josh Brown]

Big competition coming from all of the other mag7 names that are now going to manufacture their own CPUs. Some of them are working with Taiwan semi but like in the end it's a, it's a market under siege. They just did a deal with intel where they're going to like both build things with the x86 architecture and that's literally what their former customers are now deviating from. So the ARM architecture is in ascendance and this is a dangerous name.

[Scott Wapner]

Well, you talk about working off bullish positioning and financials. How about there's how much, how much more bearish can AMD get at this point with these downgrades? Finishing last year, losing, being the biggest loser. I think at this point, I mean you could only have some surprise upside news. That's why we did buy it earlier. Highlighted on the show earlier this week, a small position with, with sizing it properly. I think there's tremendous upside in a name like this as the year evolves.

[Josh Brown]

AI stock that went down in 2024. That's like a Dave Matthews fan who doesn't get up when they play Ants Marching Bill. What is even going on with this time?

[Bill Baruch]

I'm looking at Analyst price target, 12 month price target 178.

[Jim Laventhal]

Yes.

[Bill Baruch]

Stock is 114.

[Josh Brown]

Yes.

[Scott Wapner]

They're like reaffirming these price targets.

[Bill Baruch]

52, 52, 77% of the street is bullish on the name. So I think the street is still in love with the name. I don't, I don't think you've, you've reset sentiment on it at all.

[Scott Wapner]

Well, you go through the end of last year being the only loser in tech. I mean how much, how much more tax loss harvesting could it, could it withstand? I think a lot of sellers had come in, look at this name. Maybe if that took place in middle through the end of December, wait 30 days, let's see how this thing looks come middle of February.

[Jim Laventhal]

Crowded positioning too. And it's very top heavy with Nvidia and Broadcom. Yeah, right. So there are only so many dollars to go around to the perceived winners. One of the suggestions about AMD this week, I think it was in the earlier downgrade was yeah, well, maybe they're not going to be as competitive as quickly as some had built their hopes on relative to Nvidia.

[Scott Wapner]

Well, cash flow wise, I think is really the exciting thing. If they can come through with some AI upgrades in the PC space that has been taken a little longer than everybody expected, AMD's going to be a big beneficiary. And then if you see, you know, talking about Nvidia being, being the, you know, the king of the ball here, if it starts to come down a little bit, you may see some rotation. Some people move out of Nvidia, they go to a name like amd.

[Jim Laventhal]

What about Tesla? Real quick before we take a break. The target got bumped up today at Deutsche. They reiterate their buy rating. You take a look at the stock, it's 420 is the new price target from 370.

[Josh Brown]

How clever.

[Scott Wapner]

Exactly.

[Jim Laventhal]

The first thing I thought of, obviously.

[Josh Brown]

You could skip all the rest after you say that.

[Jim Laventhal]

I know. I literally saw that. That's all I saw. And I was like really?

[Scott Wapner]

We own the name of course, and we've managed the position, you know, as it went through the three hundreds. We're basically just going to let it run here. I think if it starts breaking down into some of that gapping, breaking out area, 300, 350, I'd be worried. But when a name moves and doubles in the manner that it has, you have to expect some volatility. I think it settles and trades really well around here at 400 it's going to build for the next move. I mean it's obviously it's not, it's much more than a car company here with Elon Musk aligning himself with the White House. I think big things are to come, but I think volatility is still heavy.

[Josh Brown]

Going to be gets a 420. I feel good about 469.

[Jim Laventhal]

All right. We'll take a break. When we come back, we do have green arrows today. Believe it or not, in the sea of red, a couple of committee names are bucking the sell off, hitting all time highs. Right. We'll talk about it next. Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted?

[Scott Wapner]

If this sounds like you, you're stuck in the past.

[Jim Laventhal]

Discover is accepted at 99% of places that take credit cards nationwide.

[Scott Wapner]

And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn [e-mail] credit card based on the.

[Josh Brown]

February February 2024 Nelson Report at Capella.

[Edward Jones Representative]

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[Josh Brown]

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[Bill Baruch]

Wake up to Frank Holland at Worldwide.

[Jim Laventhal]

Exchange weekdays 5am Eastern. CNBC Live.

[Scott Wapner]

Ambitiously.

[Jim Laventhal]

We'Re down to seven handle as you see there on the Dow. We want to talk about some stocks on the move. Delta is bucking today's trend. Take a look at that near 10%. Jimmy, I'll give this to you first. Strong outlook record high for the stock today. What do you think here?

[Joe Terranova]

I think all things are going right at Delta. And you know, one of the things that I look at first in the earnings report is what's the leverage? They paid down 3.6 billion in debt last year from 21.6 to 18 billion in net debt. Probably going to do another 3 billion this year. Now why does this matter? It matters because this is the means by which the multiple is going to re rate. I do think as the debt continues to come down, this could go to a 10 multiple or higher. The guidance that Ed Bastian gave is $7.35 for this year. I think he's lowballing it. He knows better.

[Jim Laventhal]

Lowballing? He said that this year is going to be their best year ever.

[Joe Terranova]

Well, yeah, well, looks that way. But here's the thing. We all know this as airline investors, things can get out of control. You think about fuel prices, maybe they go higher, maybe there's a turn down in the economy. None of us, including me, see it.

[Jim Laventhal]

They have the refinery.

[Joe Terranova]

Okay.

[Jim Laventhal]

You know what I'm saying?

[Joe Terranova]

Like he is the best of the airlines.

[Jim Laventhal]

Yeah.

[Joe Terranova]

Unequivocally, it's the best of the airlines in terms of how it's run, the customer experience. Just to summarize the point, this should trade at a 10 times multiple or higher. I think they're lowballing the earnings estimates. Probably do. $7.5 75 becomes a target.

[Josh Brown]

4 billion in free cash flow next year, which would be 18% higher than 2024. How many, forget that it's an airline. How Many S&P 500 companies can you say that about? Not many.

[Bill Baruch]

I think what they have done better than any other airline is focus on the service of the customer.

[Joe Terranova]

Yes, absolutely, absolutely.

[Bill Baruch]

Over the last several years, that was low hanging fruit for the airline industry and they've embraced that. I know people that will only fly Delta say to them, I'm almost there. You go to Toronto, fly Air Canada. No, I got to find a Delta. Delta flight. And I think that's exactly what they have done. I was as skeptical when the rules took the strategy into these airline names. I was as skeptical as any position that we've ever held. Those airlines, are you kidding me? But United Airlines, Delta Airlines. Kudos, Jimmy. You've nailed these fundamentally all the way up. They have performed, they have worked well. And what's interesting about it is I keep hearing about all the concerns surrounding inflation and the impact of inflation on business travelers and consumers. It's just not happening.

[Jim Laventhal]

I was going to say you guys are waxing poetic over here about Bastion Scott Kirby's Throwing something at the television, say, what about us? Look at the stock chart. Look at United over 12 months.

[Josh Brown]

You know, it's the best performer because this is about the use. JetBlue has the worst record of on time departures of any of the airlines. They just got a big fine over last week.

[Joe Terranova]

Remember when it was the startup? Remember when it was the. Yeah, exactly. But look, I want to be careful here. I do think there has been a fundamental change in the airline industry, the biggest of which is restructuring the cabins. You go back 10 years ago, this was all about business travel. Charge multiple thousands of dollars to fly across country. Now it's not that anymore. It's charged maybe a thousand to get in that premium select economy plus whatever you call it, that's where these companies are making money. And I have to give it to management, whether it's got Kirby or Bastion or the rest of of them who have done this. Because go back four years ago in the heart of the pandemic, everybody said these things were dead. Business travel is never coming back. We're doing Zoom. They figured it out. Kudos to them.

[Jim Laventhal]

All right, Constellation Energy, they're officially now buying Calpine. 26.6, Bill. Record high for that stock today. Joe, you own it.

[Bill Baruch]

I do. We spoke about this the other day when, when the story broke.

[Jim Laventhal]

Yeah. The stock was down then.

[Bill Baruch]

The stock was 229 at the time. And we talked about that being an opportunity. I think there's something really important for investors to understand and that is that the utility sector in 2024 awakened. And it awakened in a magnitude as it relates to investor opportunity that that sector has never seen before. And I think it's a secular story. I think now investors have to understand that the utility sector is part of the AI story. And that's going to.

[Jim Laventhal]

I think now, I think it's well.

[Bill Baruch]

Known a lot of conversations that I have had with advisors in 2024 when I talk about utilities and I say you need to own utilities, they'll say this is just a one year fad. They're just reacting to some partnerships like we saw with Constellation and Microsoft. No, I think it's more than that. I think this is a big story that's going to play out over the coming years. And I think that having utilities in your portfolio is not something which, which it's been in the past where it's something where you dismiss Wynn Resorts.

[Jim Laventhal]

They're buying Crown London from Blackstone. Jimmy, you own that. Big disappointment.

[Joe Terranova]

This stock has been a big disappointment. And you know I saw again with Patty, the producer, this morning, and she said, well, is it under review? And I said to her, and I'm saying to everybody now, yes, it's under review. Here's my review. The company continues to generate fabulous operating reports and the share price stinks. It sucks. And I know that I'm going to stick with it because again, just going back to. I look forward. These operating results seem like they're going to continue, whether it's Las Vegas, the pickup in Macao, the Dubai operations. That should start next year. And I think that it's pretty soon that all of this will get priced into the stock. I can't tell you the exact timing, but the operational results are there to keep me in the name.

[Jim Laventhal]

Okay, that's great. Sweet Green upgraded to buy today. That's its city. Joshua City sold it in November and the Stock's down almost 20% since then. But you want to talk about it?

[Josh Brown]

Yeah. When I sold it, I basically said it was a consequence of how much it had run. Longtime viewers of the show understand that on trades, I'm usually rolling the stop higher as they work. I'm reviewing my stops each Friday. And what I don't want to do is turn winners into losers. Doesn't mean it's off my screen. Doesn't mean it's out of the question for me to get back in. I'm just not currently in. I. I do like the story a lot, and I do think that there are some interesting aspects to the story, including robot salad makers, which, if you want to go see one, I think the one at One Pen Plaza in New York. You can literally see this thing churning out like 100 salads an hour.

[Jim Laventhal]

You pop in there before the Knicks.

[Josh Brown]

I'm not a big salad guy, Scott, but I'm going to do CC Amo tonight, actually before the next, so shout out to Danny Meyer. But look, Sweetgreen's an interesting name from that standpoint, but it's going to have its ups and downs. And right now it's in a down and I don't own it currently.

[Jim Laventhal]

What about bsx? That's Boston Scientific upgraded today at Deutsche. They had a hold on it. They put buy now. That's good. Price target to 108 from 87.

[Bill Baruch]

So this is a stock and we often talk about this on the show. You want to look at relative performance. You want to look at an individual stock versus the the sector. What does the performance look like? And in a year of 2024 where health care underperformed, you saw a Boston Scientific actually outperform along with Intuitive Surgical. We own both those names in the etf. It plays exactly into I keep mentioning what Adam Parker has talked about, owning health care. It plays into it. And I think where we are today, January 10th, after the unemployment report, we really are in the midst of an internal rotation within the market that's going to favor energy, going to favor health care.

[Jim Laventhal]

Okay, Silvana now has the headlines for us today. Hi, Silvana.

[Silvana Henao]

Hey, Scott. Good afternoon. Officials in L. A say the death toll from the fires has now risen to 10 people as more than 150,000 remain under mandatory evacuation orders, with more than 160,000 additional people warned they might still need to flee. However, a small piece of good news today as officials say the Palisades fire is now 8% contained, marking the first time firefighters have been able to establish a fire line around its perimeter. Federal prosecutors recommended a sentence of at least 15 years in prison for former New Jersey Senator Bob Menendez's bribery conviction. In a memo filed late yesterday, prosecutors said the sentence would, quote, deter others from engaging in similar conduct. Menendez is set to be sentenced January 29th. And global banks could cut as many as 200,000 jobs in the coming years as artificial intelligence takes over roles currently handled by human workers. A report by Bloomberg Intelligence says back in middle office operations are likely to be the most at risk. But the report said, I won't replace jobs, but it will change the the nature of the job. Scott, I'll send it back to you, Silvana.

[Jim Laventhal]

Thank you, Savannah. Now coming up, a tale to crypto trades under President trump. Our Tenaya McKeel explains coming up next.

[Scott Wapner]

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[Edward Jones Representative]

At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn [e-mail].

[Jim Laventhal]

Bitcoin'S bouncing today it has been a shaky start to the year, to say the least. Our Tennay McGill says it could be a tale of two crypto trades under incoming President Trump. She joins us now to explain. Hi.

[Silvana Henao]

Tonight, hey, Scott. Yeah, that shakiness could definitely continue through the first quarter. That's what traders are telling me after tariff concerns dampened enthusiasm this week. Remember, crypto is of course, one industry that stands to benefit this year from a pro crypto White House and Congress. So bitcoin rallied more than 45% in the month after the election. So on the tariff concerns, that's a theme that extends beyond bitcoin, but it highlights these two opposing aspects of the Trump crypto trade now coming into conflict. So on one hand, the promise of better regulation that could help crypto companies versus parts of the agenda like tariffs that could strengthen the dollar but then weigh on bitcoin price. Those two things have an inverse relationship and of course, introduce risk to markets broadly. So a choppy quarter ahead before bitcoin makes a run at a new record. But I don't want to overstate the risk long term. It's been a year today since the approval of Bitcoin ETFs and I'm told their popularity combined with better regulation could still support a doubling in bitcoin price this year. That the market should feel confident that Congress is going to take up crypto issues like stablecoins and, and, or market structure. But even there, you know, the impacts may not be felt until the end of the year.

[Jim Laventhal]

Scott all right, Tenaya, thanks for setting that up for us. Appreciate that today. Mikhail, you want to talk about that? Bill?

[Scott Wapner]

Yeah, absolutely. We own bitcoin IBIT portfolios and we actually are looking to add to that at some point here over the next month. Increase. The positioning is right around just under about a 1% holding. I also trade in the futures as well. And you know, I think what we've seen here, obviously this big run up and a nice healthy consolidation on one hand, I think this in a technically bullish market, you get a pennant building the way it has and it leads to higher highs. On the devil's advocate side. The only concern I would have here is if we get sort of a buy the rumor, sell the news from the inauguration and we get a little bit of a shakeout of weak hands, which actually wouldn't be so bad. You shake the weak hands out and then you make the next move higher.

[Josh Brown]

I think the key thing here is a little bit of be careful what you wish for for like five years. One of the biggest catalysts for bulls was that at some point we're going to get crypto ETFs. And then of course, that day came a year ago. I bet BlackRock's product became the most successful ETF launch, any asset class in the history of the ETF wrapper and got up to like 54 billion. What happened last week though was its first really big daily outflow, 337 million came out. I think all of the Bitcoin ETFs in total are probably negative 2 or 3 billion since middle of December. And now these are financial assets. So I don't know that they'll be much less correlated than they used to be relative to the stock market. I think on risk off days they'll be treated like risk assets, which is what they are. So it's great, it's democratized, everybody could buy it, it's easy. But remember, what that means is the money comes out easily also. And that is a little bit of a, of a change from where we were prior to these ETFs with those as large as they have with those.

[Scott Wapner]

Outflows have been on long term taxable gains. It was over a year. Would that have anything to potentially do with outflows?

[Josh Brown]

I doubt it. I doubt most of the money that came out of the stock necessarily went in precisely one year to the day or one year and one day from the launch. But probably some. I look, we, we don't know how these things are going to trade relative to the market. All we can say now is they are now part of the mainstream market. They're in people's brokerage accounts and that's got really great attributes to it. And it also has potentially negative attributes to it.

[Jim Laventhal]

All right, we'll take a quick break. We'll come back with Santoli on the other side. He has his midday word for you. We're back. Our senior markets commentator Mike sent tollies here with his midday word. Is this a good news is bad news reaction again? Is that what this is?

[I]

I mean, on the surface level, yes, but I don't think it's as simple as that. I think ultimately once you've had treasury yields go up by a full percentage point in a few months as they had going into today's number, you don't want some realization that the job market is actually weak and it was some massive offsides move. What I think complicates the picture is the market is liking the fact that the economy is strong in general, but not confident that 250,000 monthly job gains is either fully representative, is not overstated, and it's a little bit nervous about the response of the bond market and the Fed to that number if it kind of bakes it in as the new trend and therefore keeps rates higher than the real economy can ultimately withstand. I know that's a lot of, like, turnabouts and pretzel logic, but I think that's what's going on here. If it were a steadily strong economy, rates were at this level and we could count on it staying this way for a while, and the housing market somehow could get off its back with this being the case, then I think we'd be fine with it. But in the reality, I think it's worried that we're overstating job growth in the short term. First quarter, you've had these kind of economic acceleration scares in the data, and then guess what you had after that, a growth scare. And then I think that the market's a little nervous as it chops around this election day range, that we're in for another one of those cycles.

[Jim Laventhal]

We'll see. I mean, we have earnings next week. You would think that, okay, we can rise above to some degree and say.

[I]

That and earnings next week and tens are right at four, three quarters. So I think there's the makings there of some relief at some point.

[Jim Laventhal]

All right, good stuff, Mike. Thanks. I'll see you on closing bell. That's Mike Santoli, and he'll do his last word for us a little bit later in the day. We'll do the setup next. We have some breaking news down from Washington, D.C. we'll get to our Eamon Jabbers. Eamon, the Supreme Court has been hearing arguments about the TikTok ban all morning long. There was a suggestion a short time ago that that court was likely to uphold the ban that was circulating among news reports that sent shares of Metta, for example, higher by about 1 1/2 percent, currently snaps up by almost 6%. What's your interpretation in terms of what you've heard this morning, what you think it all means relative to the moves that I just told you about, what some of the reports are?

[J]

Yeah. No decision from the Supreme Court here just now, Scott, in terms of the fate of TikTok, just nine days ahead of that deadline for ByteDance to divest. But we did hear some probing questions from the justices asking serious questions about whose First Amendment rights are impacted by this law passed in a bipartisan way by Congress, which requires ByteDance to sell off TikTok US to a new buyer that would be American owned. The question here is, does ByteDance have freedom of speech rights in the United States? It's a foreign company, so no, it doesn't. Justices seemed very skeptical of the idea that ByteDance could somehow buy its way into First Amendment protections by buying a U.S. subsidiary or having a U.S. subsidiary. So then the question is, does TikTok U.S. have freedom of speech rights that would be impacted by this? Do the creators, the content creators themselves who are on TikTok have freedom of speech rights? And then some other questions about whether or not foreign ownership of media in the United States generally could be impacted by this law. For example, the example of Politico was raised. A news organization that is owned by a German entity, Axel Springer, would that be impacted? Could Congress then come in and pass a law and say Axel Springer has to divest the news organization Politico and whether or not social media is different from newspapers and traditional media? A lot of questions here, Scott, about exactly where TikTok fits in us life and how the Constitution should apply to that. I think it's difficult to say where the Supreme Court is going to land right now. I've seen some media reports saying justices were skeptical, but justices jobs are to ask skeptical questions here. So we'll wait and see what this decision is. No timeline for a decision just now, Scott.

[Jim Laventhal]

But to be clear, and this is important, I mean, your own, after listening all morning long, your own interpretation may not be as conclusive as some of these other reports would suggest. Am I right?

[J]

Yeah. You know, I think it's hard to say what Congress will do. And I think the fact of the matter is that you've got a bipartisan piece of legislation that was passed forcing a foreign company to divest on national security grounds of a US Media entity because that foreign company doesn't have First Amendment rights inside the United States. It would seem relatively clear as a matter of law that that law might be upheld. And the TikTok's bid here to block it is a long shot. The political overlay on that is that Donald Trump has switched sides on this. He was for a TikTok ban when he was in office the first time. Now he's arguing that the Supreme Court should hold off here and wait until he gets in. Remember, the deadline is a day before his inauguration. Wait until he gets in and allow him to come up with a political resolution of this situation. So whether the court finds that timing argument, you know, important, I think will be one of the keys to where they're going to come down here and I just don't think we know right now, Scott, as to where they're going to decide. But it would seem as a matter of law, you know, ByteDance certainly doesn't have First Amendment protections inside the United States. Then you get all the follow on questions, questions, and that's where the nuance comes in.

[Jim Laventhal]

Lucky to have you, Eamon. Thank you. Appreciate your insight there as we look at this developing story and certainly the stock moves as a result. We'll do finals after this break. Well, try and get you set up for some earnings next week. Mentioned the big banks, a lot of others to blackrock. Jimmy, is Wednesday before the bell and.

[Joe Terranova]

Like a lot of financials, it's come off of its high, but it's certainly had a good run. I think this is a very simple story to understand. You've got asset levels higher overall regardless of what they've done over the last four weeks, and that equates to higher fees for BlackRock. I do see higher assets continuing with volatility through the rest of the year. I like the setup for blackrock.

[Jim Laventhal]

Got some regionals next week, Joe Citizens, Huntington regions, M&T, BNY Mellon.

[Bill Baruch]

Yeah, I really think this is going to be a big moment for a lot of these regional banks. They had very strong performance in 2024, but they're at this moment now where positioning is extreme, sentiment is bullish as well. And you're beginning to see these stocks are on the retreat. So I think this is going to become now an idiosyncratic story for each of these regionals to see who can outperform in this environment. It's not no longer an environment where all boats are going to rise.

[Joe Terranova]

They have to, they have to talk about a steeper yield curve benefiting across all of the space they have.

[Bill Baruch]

You would think that they would do. You would think that it would.

[Joe Terranova]

If they don't, the reality is they don't. It's a problem.

[Jim Laventhal]

Slb.

[Scott Wapner]

Yeah. This is, this is their moment. It's been a dog. I expect earnings growth, Deepwater deal, a shell, some momentum there. Now you got Trump's administration coming in. They want to drill more. This should be a tailwind to oil services at this level. I like the name. We own it and I think it can perform.

[Jim Laventhal]

Fastenal Joe, right? You're in that.

[Bill Baruch]

I am. Momentum's breaking down on this one. I can't say very much more on that.

[Jim Laventhal]

Okay. For obvious reasons, UnitedHealth is yours next week as well.

[Joe Terranova]

Well, this is going to be a story, isn't it? Because what, what are we hoping for? Are we hoping for blowout earnings? That probably doesn't help their PR case. I think more than anything I would point to a strengthening share price over the last two weeks. Stock got knocked down to about 485, is now at 530. Everybody knows. I thought that drawdown over the month of December was wrong.

[Jim Laventhal]

All right, I will see at 3:00. Obviously closing bell. Jeremy Siegel. The Wharton School is going to finish the week with us, which is great to have him here on a day like this where we've had a pretty big upset in the stock market. Rick Heitzman on tech, Avery Sheffield, Malcolm Methods, Shannon Sakosha. I hope you all will join me a couple hours from now. Let's do final trades. Bill Baruch, what do you got for me?

[Scott Wapner]

Meta? I bought call spreads here on the show while the thing was popping.

[Joe Terranova]

You did?

[Jim Laventhal]

Okay, that's nice to know. Jimmy.

[Joe Terranova]

I'll step into the battlefield with Citigroup reporting earnings next week. Not just the steepening yield curve, but better credit quality, corporate and consumer should help.

[Jim Laventhal]

Thank you very much for that.

[Bill Baruch]

Joe T. You want to own stocks that are higher? Specifically. Specifically on a day where the market is down so aggressively. DocuSign is one of those names.

[Jim Laventhal]

Thank you. And Josh Brown, Baker Hughes, one of.

[Josh Brown]

The few names clinging to that 52 week high. The real breakout is 45. I'm anticipating it.

[Jim Laventhal]

All right, so we got a dow down about 600. Again, economic data, the jobs report was really strong. Yields took a big jump and stocks took a big drop to say the least. Watching big cap Tech today and we'll continue to follow that. Nvidia is down about 2 1/2 percent. I'll see in a couple hours. The exchanges 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.

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