CNBC Halftime Report: "How Low Can Stocks Go" – March 11, 2025
Hosted by Scott Wapner, CNBC’s Halftime Report delves into the pressing market concerns of March 11, 2025. This episode, titled "How Low Can Stocks Go," features insights from top investors including Josh Brown, Bryn Talkington, Joe Chernova, Jim Lebenthal, and Steve Weiss. The discussion centers on the ongoing stock sell-off, the impact of newly announced tariffs, hedge fund deleveraging, and strategic investment moves amid heightened market volatility.
Market Overview: Continued Sell-Off and Downgrades
The episode opens with Scott Wapner highlighting the persistent decline in major stock indices. As of the recording, the S&P 500 was down by two-thirds of a percent, the Dow Jones by 1%, and the NASDAQ experiencing minor respite but remaining negative.
Key Points:
- S&P 500 & NASDAQ Declines: The S&P has fallen 7.3% since the inauguration, while the NASDAQ is down nearly 12%.
- Citi’s Downgrade: Citi downgraded U.S. equities to neutral, reversing its previous overweight stance since October 2023.
Notable Quote:
“We are hitting this moment where in Q1, 2025 earnings we will have seen a decline over the prior quarter, a sequential decline.” – Josh Brown [02:12]
Tariffs and Earnings Pressure
Josh Brown elaborates on the significant impact tariffs are having on the market, noting a record number of companies mentioning tariffs in earnings reports.
Key Points:
- Record Tariff Mentions: 259 S&P 500 companies discussed tariffs in the latest earnings season, surpassing the previous record of 185 in 2018.
- Sector Impact: Industrials are the most affected, with 55 companies highlighting tariffs as a potential earnings headwind.
- Valuation Concerns: The market is grappling with high valuations (now at 21 times forward earnings) amid declining earnings estimates.
Notable Quote:
“It's going to be the big theme as we get into this earnings season...” – Josh Brown [04:16]
Hedge Fund Deleveraging and Market Mechanics
Ben Rizzuto and Steve Weiss discuss the deleveraging of hedge funds, attributing part of the market weakness to large-scale unwinding of leveraged positions.
Key Points:
- Massive Losses: Millennium Management lost $900 million on an index rebalancing strategy, exemplifying the distress in multi-strategy firms.
- Leverage Impact: Multi-strategies typically use 3-6 times leverage, making deleveraging highly impactful.
- Concentration Risks: High concentration in certain momentum names exacerbates market vulnerability.
Notable Quotes:
“There's a lot of kind of concentration around these specific names and they've become so directional.” – Ben Rizzuto [05:00]
“No, I don't think retail comes in and steps and fills the void.” – Scott Wapner [16:11]
Private Equity Stocks Under Pressure
Jim Lebenthal and Bryn Talkington analyze the downturn in private equity stocks, citing significant losses among major firms like KKR and Apollo.
Key Points:
- Significant Declines: KKR down 31%, Apollo down 24% since inauguration.
- Structural Challenges: Concerns over IPO market delays and unfavorable investment themes.
- Investment Strategies: Bryn advocates for buying concentrated private equity stocks despite current sell-offs, anticipating future gains as fundamentals stabilize.
Notable Quote:
“They're going to continue to capitalize on that. And so I think this is a great opportunity when you get a sell off.” – Bryn Talkington [30:14]
Delta Airlines and Consumer Sentiment
The panel discusses Delta Airlines' recent performance, debating whether reduced demand signals an impending recession or a temporary slowdown.
Key Points:
- Delta’s Demand: Despite a 3-4% revenue increase for the quarter, demand softening raises recession fears.
- Growth vs. Contraction: Divergent views on whether Delta’s performance indicates broader economic contraction or isolated growth strategies.
- Stock Performance: Delta’s stock movements are scrutinized to gauge market sentiment on economic health.
Notable Quote:
“We do have to remember that for the quarter that we're in right now, demand is still, revenue is still going up 3 to 4%.” – Jim Lebenthal [37:38]
401(k) Trading Activity Surge
Ben Rizzuto highlights a significant uptick in 401(k) trading activity, with investors moving funds from equities to fixed income amidst market uncertainty.
Key Points:
- Increased Activity: A four-and-a-half-year high in trading activity observed during the sell-off.
- Shift in Allocations: Inflows directed to bond funds, stable value, and money markets; outflows from target date funds and large-cap US equities.
- Investor Behavior: Reflects heightened uncertainty and risk aversion among retirement investors.
Notable Quote:
“401k investors have been transferring money from equities to fixed income.” – Ben Rizzuto [44:11]
Best and Worst Performing Stocks Amid Volatility
Josh Brown presents his list of best stocks, noting McDonald's, Gilead, and Otis Worldwide approaching all-time highs despite broader market declines. Conversely, high-momentum tech stocks like Nvidia and Tesla continue to falter.
Key Points:
- Resilient Stocks: McDonald's, Gilead, Otis Worldwide showing strong performance.
- Tech Sector Troubles: Stocks such as Nvidia down 28%, Tesla experiencing a 50% drawdown from peak values.
- Investment Opportunities: Panelists discuss tactical buys amidst volatility, emphasizing opportunities in oversold stocks.
Notable Quotes:
“This could be a very, very tough period...” – Steve Weiss [08:57]
“Price usually leads fundamentals, Scott.” – Bryn Talkington [19:46]
Panelist Final Trades and Market Insights
In the concluding segment, panelists share their final trades and outlooks amidst ongoing market turbulence.
Key Points:
- Diversified Strategies: Scott Wapner emphasizes underweight positions in high-concentration stocks like the Mag 7.
- Tactical Buying: Joe Chernova and Bryn Talkington discuss strategic purchases in undervalued or oversold stocks.
- Optimism Amid Uncertainty: Despite prevailing bearish trends, some panelists identify opportunities for growth and recovery.
Notable Quote:
“I think this is your chance in the markets overall, you take them to heart.” – Bryn Talkington [20:23]
Conclusion and Forward Look
Scott Wapner wraps up the discussion by reiterating the importance of monitoring sentiment and positioning as key drivers influencing market movements. The panel remains watchful of political developments, especially tariff implementations, and their broader economic implications.
Notable Quote:
“You always want to focus on sentiment and positioning.” – Scott Wapner [16:11]
The episode concludes with teasers for upcoming discussions and expert interviews, maintaining the focus on navigating through current market challenges.
Summary: This edition of CNBC's Halftime Report provides a comprehensive analysis of the current bearish trends in the stock market, driven by political tensions, tariff implementations, and significant hedge fund deleveraging. The panel offers strategic insights into navigating these turbulent times, highlighting both risks and potential investment opportunities. Emphasis is placed on understanding market sentiment, the critical impact of macroeconomic policies, and the strategic positioning of investments to mitigate losses and capitalize on undervalued assets.