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Halftime Report
Can the Rally Outrun Semi Weakness? 7/28/26
00:43:56
Michael Santoli and the Investment Committee discuss the semi sell-off and whether the rally's rotation can offset further weakness in the AI trade. Josh Brown highlights his Best Stocks in the Market. Stephanie Link details her latest portfolio move. Oliver Renick joins with Options Action in SpaceX and Tesla. Investment Committee Disclosures
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- [00:00]
Edward Jones Financial Advisor
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- [01:01]
Scott Wapner
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.
- [01:16]
Mike Santoli
Welcome to the Halftime Report. I'm Mike Santoli in for Scott Wapner front and center this hour. The semi sell off. Is it showing signs of easing and can market rotation continue to offset any further weakness in the AI? The investment committee standing by with what it all means for your money. Joining me for the hour, Joe Terranova, Stephanie Link, Josh Brown will join us shortly as well. Thanks for being here for the hour. Let's check the markets. The picture has firmed up quite a bit in the last hour or so. The S&P 500 up about 4. 10 of 1%. It was actually negative by a similar amount at the lows. The NASDAQ composite a little bit higher semis, you see them down 3.8%. They're up 2 or 3% off the morning lows. Still, obviously the theme of the day, guys, has been starting with a South Korea sell off, a further crash in that market. It seemed to spill into a flush in some of the affected names. Related stocks in the US Open. I did note the S and P Philadelphia S and P Semiconductor ETF hit the 100 day moving average for the first time since early May. It bounced off that level. It has given back half of the gain it had in this huge surge it had from late March into the highs in June. So I guess the multiple questions 1. Have we seen a flush? Is it perhaps going to abate a little bit. Is it telling us anything about the fundamentals or is it just a repositioning momentum unwind and then can the rest of the market continue to hold the fort as it has been? Joe?
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Joe Terranova
So I think it's completely deleveraging and I think it's extreme positioning in the direction of memory and AI and towards the end of June and we're working off why do I feel comfortable that this is not some inflection point for the market where fundamentals are shifting? Think about the S&P 500 today. I think a lot of people are going to be surprised with what I'm about to say. 12% of the S&P 500 index today is recording a new 52 week high. It's not your technology names. Yes, Apple is participating, but it's your JP Morgan, it's your Visa, it's your target, it's your Best Buy. So we're seeing that momentum is shifting and going to in other different directions. If you want to go back and look at the memory trade, the name and the halo effect of the semiconductors itself and have some confidence that maybe it's bottoming out. A couple of weeks ago I took a personal position purely based on momentum in video Mike. It was up about 5 1/2 percent. Didn't want to lose 5% on the trade, had a stop down below to lose 5%. Guess what got stopped out this morning. Here comes the reverse.
- [03:55]
Mike Santoli
A few pennies now, higher by a
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Joe Terranova
few pennies and I'm saving America and everyone that's long.
- [04:00]
Mike Santoli
So we threw your position into the volcano as a sacrifice. I guess that worked. Steph, here's the thing with saying that it is a pure positioning unwind in the rest of the market has actually benefited from disrotation on the way up. It was largely a position stampede. It was a crowding into what was winning and we don't know where the equilibrium is. Right. You have Wells Fargo this morning saying that you know are semis discounting much slower growth and is that a correct thing that the market's doing, essentially compressing the valuations and saying we're not really sure how many years we can count on this earnings story.
- [04:37]
Stephanie Link
So if you think the semi cycle is over then you think that the capex cycle is over. And and I firmly believe that we are not at the end of the capex cycle. The hyperscalers are going to spend about $800 billion this year. I would not be surprised, Mike, if they go to $1.6 trillion next year because they have to, right? They see the growth, they see the momentum in their business. We are short everything from memory to compute to copper to aluminum to everything. So to me, I don't think the cycle is over. This could be a pause and maybe you don't want to own the hyperscalers because they haven't done that well this year. And maybe, maybe semiconductors do take a pause. What I think is interesting is like every day it's either the semis are on and the software names are off or the software names are up and the semis are down. So the way I've taken the approach is the semis that I own, they've actually been the laggards. It's Broadcom. I just initiated a position in Nvidia. Micron is not a laggard by any means, but it fell 30% and I thought that was a good time to take a little small position. But with, with Broadcom and Nvidia specifically, they have derated. Their multiples are actually quite attractive at this moment in time. And Nvidia's at 18 times, it's the cheapest since 2019. Broad comes at 21 times, its long term average is 28. It got as high as 45. So to me and both stocks have lagged the sector by 52% year to date. So to me, like if I can say they're a little safer, they feel a little safer and the fundamentals are very, very strong. So I think you want to pay attention to the semi is 19% of the S&P 500 software is only 7%. So you know, you got, you want to own both. I think that's the way I'm playing it. I'm having a, having a barbell.
- [06:27]
Mike Santoli
Josh. Semis are, you know, whatever, they are just under 20% depending on how we're taking the snapshot. If CapEx is going up and the semis therefore are undergirded by that earnings story, then what are we doing with the company spending the money? Because that's been the problem. We've sent all we know this. It's been just a broken record. The free cash flow is going from the hyperscalers to the hardware food chain. The hyperscalers used to trade at a higher multiple. The food change rates at lower multiples. It doesn't help the overall S&P 500. Let's not yet talk about the non tech parts of the market which are working. But how does this play out? Or does it matter for, for an investor,
- [07:08]
Josh Brown
I think the good news is that it's such a healthy bull market that in real time some of the leadership groups are going through this kind of alternating bubble burst, but it's not knocking the major secular uptrend off course. And what I mean by that is a lot of times you'll see a monster rally in one narrow area of the market and maybe we'll see some of those superlatives where that area of the market becomes 10% of an index, 20% of index and then the investor class gets so get so sucked into it that it almost has to cause a market wide event for that market to clear and sanity to return. We don't have that in this case because there are so many things working that we could see this bubble burst in real time and have the rest of the market within a percent or two of all time record highs. This is like what you pray for in advance. If I tell you there's a bull market coming. This is exactly the description of the bull market that you would ask for if you know anything about history. Every stock in the SMH is now below its 50 day moving average. The average 52 week drawdown for each SMH component is 30%. And the RSI, these names have been completely wiped out. They've gone from momentum darling one way trade consensus long must own as recently as June to an average RSI of 39. This is great news because we have enough strength all over the tape to absorb this kind of pain happening in what was the leadership group for this market in the first half. I don't see how you could be glass half empty on this.
- [09:00]
Mike Santoli
Well, I don't know if you want to be glass half empty. I basically am uncomfortable with how much people love this and it's how scripted it is, right? Everybody wants this and this is why I'm wondering if you get your bid in semis if in fact everybody the market ratifies the fundamental story. If we're going to have to deal with, as our friend from BTIG Jonathan Krinsky said this morning, if semis have had enough for now on the downside and they rip, you got to sell the equal weight. He says it's just, it's the other side of the seesaw and that's the equal weighted S and P is the top end of its trend channel and you can't have everything at once.
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Joe Terranova
But two things. Number one, the semi trade, the volatility is not going away. Just want to make the point. SK Hynix will be reporting. We'll hear from Them and then Samsung follows. Wednesday evening, 9:00 Eastern Time. They've already had preliminary results. You'll get the full results. But Mike, to your point, let's remember something. Crude oil is helping out. The formula of the market broadening this week for sure. We're now trading below $79 in crude oil. So if you tell me that crude oil is going to reverse and go back towards $90 again, there's going to be a little bit of static in front of that broadening out narrative for sure. For now it can work. And as long as crude oil stays below $80, consumer discretionary is clearly going to benefit. In that environment you're going to see the rebound that we've been waiting for the last several weeks. And the broadening narrative stays to Josh's point in play.
- [10:31]
Stephanie Link
And that's because the fundamentals are good elsewhere though. I mean in financials, financial services had 30% earnings growth. Materials had 96% earnings growth. So I know technology and comm services are the leaders in earnings, but earnings across the spectrum, throw in health care, utilities and real estate, they saw 15% in earnings growth. The average long term earnings growth for the s and P500 is 5 to 7%. These are phenomenal numbers and that's why the broadening trade is working out. I don't know why it has to be one or the other, Mike. I really don't.
- [11:02]
Mike Santoli
Well, historically it has been. I mean it's kind of has been. It's sort of. Look, four months ago we had four months of this. The end of October of last year was the peak MAG7 dominance and you had a correction in NASDAQ 100, just as we've had just now. And equal weight outperformed for four months until the day before the Iran conflict started. Yes. And the S and P went nowhere. So I do think you can have these interludes where you know, you get an assault on the leaders and they call up the troops and they, and they hold the market. Obviously you could have an all in rally at some point. I do want to get to one key instrument of this, this rotation and how it's worked, Josh, which is Apple. So Apple has acted as the anti semiconductor, anti capex tool of this market. It's been obviously on this huge run. It gets back to $5 trillion market cap. It also gets back to basically its highest valuation in the iPhone era. It's going back almost 20 years until you can see this thing traded at 35 times. So we can make up a story as to why it's working and it probably has some validity about the low capex intensity, but you know. Or is it just kind of filling the, filling the place while we regain conviction in the, in the trade?
- [12:23]
Josh Brown
I think when there are doubts about either continued hyperscaler capex or what the ROI is or whether or not OpenAI can actually come up with the money that it's got commitments for, etc. Etc. Like when that whole daisy chain of uncertainty fills the market. Apple is the no brainer pivot for managers who are large cap or growth managers or tech investors or whatever. Apple gives them that reprieve where they can put money to work. They know there's an AI story coming here, a consumer AI story. It'll have something to do with the App Store and incorporating your favorite LM etc. Etc. We've talked about that a million times. I'm not going to do it again. Yeah, but the added kicker is that there's a hardware cycle and so they're going to report Thursday after the close. The estimate is A$89 for the quarter on 108.9 billion and that is a return to last quarter. They returned to growth. We know the 17, while not the hottest iPhone ever, we know that it was meaningful and people did upgrade at higher rates than what was expected. Now the 18 is coming. Tim Cook's going to do his final conference calls, a seat as a CEO this week and then come September 1st it's the John Turner show and turn. This is a hardware guy. So there's a lot of excitement around Apple. There is growth once again. Obviously it's not a cheap stock and almost never has been. And people say, you know what, I do want large cap, I do want tech. I want the flavor of AI. I don't feel like the uncertainty of matter right now. I'm buying a app.
- [14:06]
Mike Santoli
I mean it was a dirt cheap stock in like 2010-2016.
- [14:11]
Josh Brown
Take a time machine back and buy it then.
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Mike Santoli
No, no, I'm just telling you it's not. It's not. Never is that. Never been cheap. And speaking of that, almost never. What's interesting, Berkshire Hathaway is up like 2% today. It's almost like, you know what would make that work? Well, insurance stocks are breaking out a little bit. Apples, US Cokes up big, you know, and Sherwood Williams beat and the stocks up and they own Benjamin Moore. I mean it's kind of like enjoy it today anyway Warren, we'll see if it, if it continues. I will say KeyBank did reiterate underweight on Apple today to 50 price target. Obviously that's pretty steep downside but more or less saying that, you know, this sort of change in go to market strategy is going to maybe have some pressure on iPhone cycle. I mean there's sort of these general things that are hovering out there on the name.
- [14:57]
Joe Terranova
Yeah. So let's focus for a second on the analyst community and let's. You know, I know you probably don't like the Max 7 as much anymore more you said yesterday you want to just focus on the hyperscale of 4. But universally across the board there's this love from the analyst community. If you look at the percent buy rating, take your pick, you want to turn towards Nvidia Alphabet, Metta. They're all 90% and above. I'm looking right now the 12 month price target for Metta. Wow, this is generous. 815 with the stock trading 596. Well, how do the analysts feel about Apple? Not so good.
- [15:30]
Mike Santoli
Yeah.
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Joe Terranova
Only 62% have a buy rating. The stock right now is 339. The 12 month price target. 323.
- [15:37]
Mike Santoli
Yeah, it's been that way for, for quite a while. I mean because you know, it just doesn't feel like there is that kind of effortless growth. You have to handicap the upgrade cycle. It seems like they're a little bit driven. Obviously the stock has kind of defied the that caution for a while here. You talk about Max 7. One thing I did see that looked like it might be a little bit bullish in a contrarian sense for the Hyperscalers in the max 7. Massive outflows from mag 7 specific ETFs. So people have kind of bailed on that to some degree. But it does bring us stuff to things like Metta. We're going to hear from what Microsoft's had a good couple of days might just be the other side of the semi trade. But I do wonder and everybody has to wonder if that trade has been de risked to some degree.
- [16:22]
Stephanie Link
I think it has but I mean you're going to see a deceleration in their ad business right this quarter just on tough compares. 6% tough compare. So 26% in their ad business growth but that compares to 33% the prior quarter. And of course everybody cares only about what they're going to say on Capex. And there are numbers that are floating all over the place. Mike, for next year I've saw as high as 240, $50 billion in capex for them next year on top of 125 to 145 this year. That is not going to go, that's not going to go well for the, for the stock, I don't think. I'm, I'm an investor, I'm a, I hold it. But I'm getting kind of frustrated with the fact that they're spending so much. They are seeing an ROI. And by the way, sorted out Alphabet saw an ROI in their cloud business. I mean they saw 82% growth. It just isn't enough. We just need them to kind of calm down a little bit. But that being said, you're talking about 15 times forward estimates and you know, 26% revenue growth.
- [17:23]
Mike Santoli
some point, all of this Capex actually does become relevant to the macro and the Fed, Josh. I mean, just because the demand for capital is so intense, it kind of has this look of an overheat or a potential overheat in corporate spending. And it's a similar thing where it's like, look, pain today, gain tomorrow in terms of profits and productivity. And on some level the doves on the Fed are going to try to bank on this idea that I can be the escape hatch from this inflationary zone right here. On the other hand, maybe the market's just talking itself into it tomorrow being a live meeting and we'll get past it and feel like what were we worried about?
- [18:02]
Josh Brown
So I talk to business owners who are spending money right now on AI, like actively sitting in meetings about what's our budget, what tools are we using, what's getting traction, what's not. And the things that I'm hearing echo almost perfectly the things that I hear when I listen to or read transcripts from conference calls. Non technology companies that comprise this new class of what I'm calling AI beneficiaries. But these are basically companies that have nothing to do with tech other than as a consumer of it. I want you to put up a chart of Allstate. So does the Fed have to consider that we could potentially be looking at a scenario where corporate profits spend the next two to three years screaming higher, validating all of the consumer and customer spend on AI and what that means to the economy? I think so. Sorry. So this is a company where all of their inbound emails are now being handled by AI agents and the agent is smart enough to know, okay, maybe I should pass this one along to a human agent, or maybe I can resolve this myself. This is one example. I've given many examples this year on the show of companies specifically citing their AI consumption as the reason for upward earnings surprises. There will be more Mike, and I'm going to tell you right now, they're going to come from every sector in the market. What does that mean from a macro perspective? It means we may not replay the 1999, 2000 capex boom bust. This might be different, this might be sustainable levels of capex as far as the eye can see, they may decelerate in terms of the pace. But companies like Allstate and there are so many examples I could give you, they're coming out and they're saying guys, there's an auto I now like we're, this is not a build out and three years we'll tell you how it went. Things are changing on the ground right now. I see it in my own business, in my little wealth management firm and we're seeing it all over the Fortune 500.
- [20:07]
Mike Santoli
I mean, I don't know that that can be doubted Joe, that technology always helps companies find better ways to do things at lower cost. The whole question has been does AI specifically and the amount of front loaded investment get you that much more of those enhancements than we would have gotten anyway by software iterating and all the rest of it. But also in the process it's turning Google from the best business ever conceived and a quasi monopoly into one of a few asset heavy companies that feels like they have to perpetually invest to earn a return in this new world.
- [20:46]
Joe Terranova
Yeah, and I think there is, there's exhaustion as it relates to the earnings expectation. I think the common theme for a lot of the hyperscalers will be during the course of the earnings season not only do you need to beat, but you need to beat and exceed even the highest whisper number. It seems as though the reaction to semiconductors memory hyperscalers has been one in which okay, good earnings but bad price action. And I think what the market is resolving is that there are areas that we haven't really thought to Josh's point just yet where you're going to see productivity benefit the bottom line, like in financials, like in health care. And we saw that recently in a lot of the financial services companies that reported. And there the opportunity lies to realize the potential for AI to benefit the bottom and top line and move positioning accordingly into there. And I think the expectations are much lower there. And I think that's what this earnings season really has been about is finding where you can exceed very low expectations and allocate in that direction and understand you have fatigue, you know, how much more can we know about these Hyperscalers growing at 60, 70, 80%. That level of growth cannot be maintained over an extended period of time. There's going to be maturity with that. And along with the maturity, I think comes fatigue.
- [22:13]
Stephanie Link
I've never seen backlogs the size of what they are in the industrial sector. The beneficiaries from the capex spend it. And I'm talking about the names I've talked about for the last three and a half years. It's Quantum Services, it's Eaton, it's Vertive. You own a lot of them, Joe. I own a bunch of them as well. But the backlogs are running in the third 30% range and accelerating on average. Backlogs at these industrial companies have been single digits at best. So to me they are benefiting from this whole spend and we are seeing a return and not only that, we're getting better visibility. So to me, if they sell off, and by the way, they are selling off today, you want to be adding
- [22:51]
Mike Santoli
to them cats down as much as semis from the high. So we'll see. While still ahead, we're tracking today's biggest earnings movers. Plus, Josh Brown is back with his best stocks in the market. Halftime. We're back in two minutes.
- [23:09]
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- [24:04]
CNBC Host
key Fed decision with the Fed chairman talking tough on inflation, what will be the Fed's next move, the policy statement and Fed Chairman Warsh's message to investors. Power lunch tomorrow, two Eastern and streaming on cnbc. Plus.
- [24:35]
Mike Santoli
The S and P breath solidly positive there with the index up a third of a percent. Boeing shares higher today as the company beat revenue forecasts and narrowed its net loss from last year. Our Philippe sat down with Boeing CEO CEO Kelly Ortberg this morning and joins us now. Phil.
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Scott Wapner
Mike, Boeing shares moving a little bit higher because on the face value here, you will look at these numbers and say nothing great about the second quarter, but there are some things within it that I think investors are saying. Oh, I kind of like what I'm seeing here. Let's give you the broad picture here. It was a wider than expected loss for the second quarter. There was a $280 million charge for work on the new Air Force One. That's the two planes that are being manufactured in Texas and not the current Air Force One or the Qatari one. That is at the center of so many headlines and free cash flow. Now this is what investors are looking at. Free cash flow of $631 million. The street was expecting negative free cash flow. So as you take a look at shares of Boeing, it's also important to keep in mind that the company is reaffirming its guidance of free cash flow of between 1 and 3 billion dollars this year. And I asked Kelly Ortberg, given the fact that you're optimistic about where you're headed, you're hitting the milestones, when do we see more guidance in terms of what you expect financially? Here's what he had to say.
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Joe Terranova
We kind of suspended guidance when our uncertainty was high relative to the production rates and the certification and our defense programs. There's no question that uncertainty gap is narrowing. And so we're going to go through our planning process with the on providing a better long term outlook for our investors.
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Scott Wapner
You heard Kelly Ortberg reference the defense part of the business. Look, it's been a drag on Boeing's bottom line over the last couple of years. This is from Jefferies, along with some of the data from Boeing. Look at the expectation in terms of where defense has been, in terms of a drag on the bottom line, where it's at and where it is expected to go. I point this out because their Q2 defense business revenue up 13% year over year. Bottom line is this, Mike. They're still a long ways from where Kelly Ortberg knows they have to get in terms of financial performance. But you can start to see them hitting these benchmarks, especially when it comes to things like production, correcting the defense side of the business. A number of these things are starting to line up for them. Again, they have a ways to go. But this is one of those quarters where you look at it and say, okay, I can see the future here.
- [27:02]
Mike Santoli
Yeah, they've gone away and still it's still a ways to go.
- [27:05]
Scott Wapner
Yeah.
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Mike Santoli
Phil, good stuff. Appreciate that, Steph. I struggle with how to think about. I mean, a year ago, the estimates for this year were like, oh, going to earn 350 or something. And now it's of course gotten ratcheted down to almost nothing again. The stocks where it was nine years ago. So what's your read?
- [27:20]
Stephanie Link
I mean, they're executing really well in a challenging environment. They're increasing their production, especially for the 737, and that's leading to better cash flow. I think they're being conservative of free cash flow guidance of 1 to 3 billion. The stock has always traded on free cash flow. And what was important on the call, they did reiterate they'll get to that $10 billion target over the next couple of years. That's super important. But that has everything to do with increasing production. Not Only on the 737, 787777 across the spectrum. It's a hard business to run and he's doing it really well.
- [27:51]
Mike Santoli
Yeah, it is. And they've got, they've thought they were making the term before. We'll see if this one sticks. Let's get to some more committee. Stocks on the move. Corning plunging on weaker than expected revenue guidance. So, Joe, what's, what's happening here?
- [28:05]
Joe Terranova
What's happening here is this is not exactly what we anticipated and have spoken about for the last six months. Corning has been one of the leaders in optical fiber and the universe, developing strong relationships with companies like Meta. This is disappointing because this is not the type of earnings report that you want to be delivered. So if this does not raise your awareness, if you're sitting in this name and you have a position, you have to be fully aware they've now disappointed you. If you're looking in terms of technicals, it's broken below the 200 day moving average. I see the high at 271 earlier in June. We've now cut that by nearly 60% and now 40. Fundamentally, this earnings report is not a good one. Yeah, we maintain positioning. Nothing we could do about until the next quarterly rebalance. But I'm not rushing in to buy Corning here until they prove themselves to me again in a future earnings report.
- [28:59]
Mike Santoli
I mean, it's crazy. Still up 38% year to date. It's interesting the old line companies that got a little bit of a pizzazz have, have struggled a little bit. IBM, intel to some degree last week and now Corning. So it's not as easy. I guess to to necessarily turn things in that direction. Let's talk about railroads Union Pacific and Norfolk Southern adding new commitments to convince regulators to approve their proposed merger. So staff, you own UNP.
- [29:27]
Stephanie Link
UNP. Yeah. A deal approval is not expected until 2027. And they've made many tweaks for the regulators. I think the biggest key last week when they reported earnings of Canadian Pacific. Sorry, sorry. Canadian national actually endorsed the deal. That is what we want to see from other rails. I think you will as they make more tweaks for the regulatory regulators. I think it gets passed. And in the meantime, the fundamentals are really strong. Was a very good quarter.
- [29:50]
Mike Santoli
Yeah. Fundamentals strong. So yet another thing going right for Buffett today with Burlington Northern Santa Fe. All right. Up next, Josh Brown's ready with his best stocks in the market.
- [30:03]
Stephanie Link
Foreign,
- [30:09]
CNBC Host
A key Fed decision with the Fed chairman talking tough on inflation. What will be the Fed's next move? The policy statement and Fed Chairman Warsh's message to investors. Power Lunch tomorrow, two Eastern and streaming on cnbc. Plus,
- [30:40]
Mike Santoli
We're back on Halftime report.
- [30:41]
Brandon Gomez
I'm Brandon Gomez with a CNBC news update. Officials in Japan are searching for survivors of a powerful 6.8 magnitude earthquake that hit the southern part of the country earlier this morning. Reports say at least 50 people were taken to the hospital with many more trapped inside a damaged shopping mall. A local police source told Japan's TBS that there were a lot of deaths in in the mall, but it would take time to confirm the exact number. Vice President J.D. vance and other top officials eulogized the late South Carolina Senator Lindsey Graham at a Capitol rotunda ceremony today. It comes ahead of a National Cathedral memorial service this afternoon and a private burial in South Carolina tomorrow. President Trump, Israeli Prime Minister Benjamin Netanyahu and Ukrainian President Zelensky are all expected to attend. And FIFA is exploring a plan to raise more than $4 billion by selling a stake in a new commercial venture. It would be valued at about $20 billion and include the group's broadcast rights and sponsorships and ticketing businesses. FIFA said it is working on the plan with bankers at JP Morgan. Investors are said to include Josh Kushner, brother of President Trump's son in law, Jared. Mike send things back to you with
- [31:44]
Mike Santoli
the team, Brandon, thank you. Now let's get over to Josh Brown's best stocks in the market. All right, Josh, what's first up today?
- [31:53]
Josh Brown
I don't know why, but this is turning into one of my favorite recurring segments on the show. Mike, I want to talk about buying the dip in travel I think this is, this has worked all year, will continue to work. We saw a lot of the travel related stocks come down on the most recent quote unquote Mideast tensions. And I think these stocks are automatic buys any time they give you that opportunity. And we're not talking about every travel stock but companies that are global are catering to the upper end of the K predominantly and are expanding in terms of the number of rooms we want to be in the growth names in the space. Marriott for me is the best of the bunch. This is the world's largest hotel company. They don't own any properties. 99% of the hotels are owned by developers. Marriott is in the points business. They're basically a marketing company. It's an asset light business that I think is completely tuned to a lot of things that we worry about with Capex for example and travel is not going anywhere in terms of being a major driver. Even when matter reports this week a lot of what's going on there is is travel related advertising. It's just in a boom that's not ending. So this is a name that's testing. The 50 day at 376. RSI is still in the 50s. It's a bit of a momentum reset but I think you can own it. Investors can look down at 330 the old breakout level as a line in the sand. You're risking 12% to stay in a quality name that I think makes new highs by the end of the year. The other name we're talking about is how met. This stock's been on the list the entire year. It's aerospace and defense. Pull, pull the chart back a little bit so I can make this point. Not a lot of people know this name. It's up 41% year to date, 55% over the past year. They've got a gas turbine business. Revenue was up 39% the last time they reported predominantly data center power demand. But then they're also involved in defense, they're also involved in in in jet orders, etc. And there are multiple drivers to the story. As you can see even in the pullbacks this year Helmet never even glanced at that rising 200 day. It's just been in this pristine uptrend flirting with the 50 day on several occasions but never broke down. And now the stock is approaching 300. I think it takes 300 out.
- [34:19]
Mike Santoli
All right. Josh by the way really glad that you know you were I know reluctant to take the spotlight and glad when the show came to you with this opportunity, you've embraced it and enjoying it. Travel Joe, Royal Caribbean up a little bit today. Is that one of your strong earnings? Yeah.
- [34:38]
Joe Terranova
CEO speaking about retaining pricing power. Really dismissing some of the concerns that were out there in terms of what the yield would look like reiterating double digit earnings and revenue growth. Travel is really strong right now whether it is Royal Caribbean, Expedia or look at Airbnb. That's at a 52 week high today day as well. So consumer discretionary certainly making a comeback.
- [35:01]
Mike Santoli
Yes stuff. I mean it's been a theme that this is the part of consumer where you know it's resilient. How are you approaching?
- [35:08]
Stephanie Link
Well, I'm overweight discretion but that's a lot of it is housing but it's also sports where like one of my biggest positions is. Is Dick's. I think that that stock is actually going to have a nice second half after they spent so much money on the World cup and investing Foot Locker and fixing that whole thing. So I think that you know companies would die for a 6% comp and that's what they're putting up in their core business. So that's my favorite name but I still, I'm not giving up on, I'm not giving up on housing. They're too darn cheap.
- [35:35]
Mike Santoli
Yeah, they've gotten there. We'll see. Maybe we get a little bit of rate help at some point. Joe, how every aerospace equipment company is also a power company.
- [35:45]
Joe Terranova
Industrial names have been remarkably strong as step point is out. But it's been the aerospace over the last several years where you've been able to allocate in that direction, find the strength, maintain over ownership, reasonable valuation with very strong earnings growth as we're seeing a reacceleration coming out of COVID in those sub industries.
- [36:06]
Mike Santoli
All right, well coming up can we get some committee moves? Staff will tell you which stock she just bought more of. Plus we'll debate our top calls of the day. Halftime. We'll be right back. We are back with a committee move. Staff bought more IBM I did Trying
- [36:25]
Stephanie Link
to buy low and sell high.
- [36:26]
Mike Santoli
Lowest cost basis wins.
- [36:28]
Stephanie Link
This is, this fell really hard. Obviously we all know that. Down 25% on the negative pre announcement. But then when we got the quarter I didn't think that the numbers changed that much to be down 25% and they also closed a third of the deals that slipped already. So I think it's positioned pretty well. They're talking about total revenue growth to be 4 to 5% instead of 5 so software 6 to 8 instead of 10, 11 and infra low single digits instead of mid single digits. Like I know the numbers are coming down, but I don't think they're coming down. That warrants down 25% and now the stock is at 18 times forward estimates down from 26 times. I just think that this is a, a well run company. This was a one off, really bad but now it's time to be buying it.
- [37:10]
Mike Santoli
It definitely was a dramatic reset all at once.
- [37:12]
Stephanie Link
They negatively announced, to be honest with you.
- [37:14]
Mike Santoli
It wasn't, it wasn't so glaring necessarily. You would have needed it. They clearly wanted to get ahead of the explanation for why. Well, let's move to some calls of the day. CrowdStrike was initiated as a buy. We got a 300 and what, $350 price target. Everybody owns CrowdStrike. Josh, you want to weigh in quick?
- [37:38]
Josh Brown
Yeah, Look, I think CrowdStrike is probably the company that has pole position in terms of the mind share of the Fortune 500 board that's trying to do the right thing in the age of AI. It's almost, it's almost like nobody ever got fired from for buying IBM from a prior era. If you're bringing in George Kurtz and the CrowdStrike team, you are probably doing the right thing for the health and longevity of your organization. That's got a lot of legs, Mike. Like the stocks up 55% year to date. It just did a four for one split. That's not a one or two quarter story. That could be a decade long story and I'm here for it.
- [38:20]
Mike Santoli
To me it's so I've said it before for it's very consensus that this is the safe place you could buy in software. Joe. Doesn't mean it's wrong.
- [38:28]
Joe Terranova
No, it doesn't. It doesn't mean it's wrong. But I think it's also evident and indicative to the earlier conversation we were having where we believe much of what's going on in the marketplace right now is about position rotation.
- [38:40]
Mike Santoli
Right.
- [38:40]
Joe Terranova
So let's take up the conversation on software. We have said over the last several weeks, while you have seen Oracle and Adobe and Salesforce decline, the place you want to hide out is cybersecurity. Over the last five days you're seeing the laggards in software rally and guess what? Palo Alto, Fortinet. Yeah, CrowdStrike, they're all down 5, 6%. Datadog is another name for the year. Right. It's, it's, it's pulling back. Twilio is another example. Strong software name pulling back as well. So that's where I don't think anything fundamentally has changed about what's going on in software. I think it's repositioning it. Will you tell me this is going to continue where it's time to buy your Adobe and it's time to buy your Salesforce, then guess what, go buy your Blackstone, go buy your kkr because they're going to be okay.
- [39:25]
Mike Santoli
By the way, that initiation was from Loop and It was a 230 price target, not 350 for CrowdStrike. You mentioned Datadog raised to 300 price target from 225.
- [39:33]
Joe Terranova
Morgan Stanley Joe Cloud infrastructure monitoring long term secular fundamental strength. It's a name that I believe you should own. But understand as this internal rotation goes on in software, you're probably not going to be happy with the near term returns.
- [39:47]
Mike Santoli
All right, up next, let's get to options action. Oliver Renick is standing by with activity in two big names under pressure. That's at this point as the country
- [39:58]
CNBC Host
celebrates 250 years, some of the nation's most influential business leaders joined CNBC to reflect on what drives American enterprise.
- [40:08]
Scott Wapner
If I had to describe American enterprise over the last 250 great years in one word, I would say optimistic.
- [40:16]
Zepbound Advertisement Voice
The word that comes to mind is innovation.
- [40:21]
Mike Santoli
Daring
- [40:24]
Brandon Gomez
America 250 years.
- [40:27]
Joe Terranova
To me this is the story of reinvention.
- [40:30]
Scott Wapner
It would be relentless possibility.
- [40:32]
Joe Terranova
This country is adaptable, it is agile and it is enabled.
- [40:38]
Stephanie Link
If I had to sum up 250 years of American enterprise in a single word, it would be openness. Open to ideas, openness to immigrants.
- [40:49]
Mike Santoli
Incredibly ambitious people come to this country no matter who they were and it could make the difference way and that opportunity, possibility is what makes America very different. I think it would be together.
- [41:05]
Joe Terranova
I think the DNA of the country
- [41:07]
Josh Brown
is built on entrepreneurship.
- [41:09]
Joe Terranova
The opportunity for people to be bring ideas, the freedom to be able to pursue those ideas. It's been an amazing run for our country and when I look ahead, that same opportunity is ahead of us.
- [41:22]
Mike Santoli
But we have to come together as people. We are back on halftime indexes near the highs of the day. Let's get to today's options action. Oliver Renick joins us from CBO Global Markets in Chicago. Oliver.
- [41:51]
Oliver Renick
Hey Mike. Space X is getting some relief today, but it's been a rough month, if there is such a thing for the world's richest man. Elon Musk's two companies have lost a combined 1.5 trillion in market cap since June 16 and SpaceX's biggest week since its IPO is probably yet to come. We've got earnings on Tuesday and the first opportunity for SpaceX to insiders to sell 20% of their eligible locked up stock two days later. That puts options traders who have been mostly still buying calls in a very tricky spot because usually one of the most reliable options trades in the market is betting on volatility falling after a stock's earnings. But if the lockup is the bigger event, SpaceX options prices could stay extremely elevated for at least another nine or 10 days. By the way, for context on just how unpredictable this stock is right now, implied volatility is currently 122 which right now, Mike, translates to a 15% swing after earnings.
- [42:54]
Mike Santoli
That is wild. A couple hundred billion dollar implied move I guess in market cap. Oliver. Thank you Steph. First earnings report. You kind of don't know what the, the presentation is going to look like. This is supposed to be be a multi decade galactic story. Not sure what three months is going to tell.
- [43:09]
Stephanie Link
That's, that's exactly right. I own this for the long term. I bought it. It was a small position. I said it, I forget it. I think there's a lot of ways this company can win their number one player in the industry. First mover advantage, cost advantage. They can win in space, Starlink or AI Compute. So I think you just got to be patient. I'm not even looking at it to be honest with you because I just feel like this is such a, it's to going to be a very well run company and there's a lot of options on the table.
- [43:34]
Mike Santoli
Josh. I mean, look, I guess one lesson I mentioned this yesterday is if somebody says an IPO is X times oversubscribed, it doesn't mean that the demand is going to be there for the stock necessarily down the road.
- [43:48]
Josh Brown
It's nonsense. Land I was a co branch manager at a firm that was doing IPOs all the time and the oversubscribed is like, like you call people for an indication of interest, they don't even expect to get it. So they swing for the fences. So if they want 100,000 shares, they say 2,000 shares thinking I better put in the 200,000 and if I'm lucky I'll get the 100. Then you got a deal like this where there's enough stock for pretty much anyone who wants it and all of a sudden that 4x oversubscribed, 8x over irrelevant. And we've seen that multiple times. We saw that with Cerebras too. So don't fall for the FOMO of that that oversubscribed number. Number one and number two, yes, the whole market knows about the lockups, therefore it should be priced in. Yeah, but no, it's not priced in.
- [44:38]
Mike Santoli
We'll see. We'll see. Sometimes after the hangover, 20 bucks off the offering price right now, you find some stability. Stay with us. Final trades coming up. We are back with final trades. Josh, get us started.
- [44:55]
Josh Brown
Netflix still in the name. Hanging on for dear life.
- [44:59]
Mike Santoli
All right, staff, Quantum.
- [45:02]
Josh Brown
Well, toast. I was toast too, but I know we're short of time, so that's all right.
- [45:06]
Mike Santoli
Two for one.
- [45:07]
Stephanie Link
All right, services. It's down 25% from its highs. Expect a beat in a race led by their electrical business, better margins and a book to bill of one.
- [45:16]
Joe Terranova
Joe Raymond James. It's an example of an asset manager that's kind of sat out the last couple of years. The rally now, strong earnings, retail engagement, institutional engagement. I like this name.
- [45:28]
Mike Santoli
Wealth management in Florida. Not a terrible business. All right, guys, thanks very much. It's going to do it for halftime. The exchange starts right now.
- [45:36]
Scott Wapner
You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekly days at 12 Eastern only on CNBC.
- [45:47]
Halftime Report Disclaimer Narrator
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 halftimereportdisclaimer Snoring, gasping for
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Shaquille O'Neal
air during sleep Daytime sleepiness I'm Shaquille o' Neal and this shouldn't be anybody's experience. Ask your doctor about Zepbound Tirzepatide, the first and only FDA approved prescription medicine for moderate to severe obstructive sleep apnea in adults with obesity.
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Shaquille O'Neal
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