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Halftime Report
How to Trade the Market Momentum 6/2/26
00:47:16
Frank Holland and the Investment Committee debate the best way to position your portfolio as stocks hover at record highs. Plus, the desk shares their latest portfolio moves. And later, Oliver Renick joins us with some Options Action in the crypto trade. Investment Committee Disclosures
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- [00:01]
Edward Jones Financial Advisor
At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. EDWARD jones, Member, SIPC At Venture Global,
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Venture Global Representative
we think about what can be done, not what's usually done through innovation. Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
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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.
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Frank Holland
Thank you, Carl and Sema. Welcome to the Halftime Report. I am Frank Holland in for Scott Wapner front and center at this hour. More parabolic price action and another big committee name raising some new questions about a brewing bubble in the air trade. Our investment committee is standing by to debate that and much, much more. Plus, our own Leslie Picker is about to take the stage with Goldman Sachs CEO David Solomon at the Economic Club of New York. We're going to take you there live once things get started. Joining me for the hour, we have Joe Terranova, Stephanie Link and Brian Belsky. Before we get this started, a quick check of the market. We were lower earlier. Right now in the green across the board, the major indices, the Dow, the S and P and the Nasdaq on pace for another record close. And really that's where we have to begin, Joe, Some of this momentum that we're seeing in the market, a lot of momentum in the market, a lot of questions about the trade. We're going to talk about Alphabet in a bit. I just want to talk to you about the action that we're seeing right now. Yesterday, if you remember, and I'm sure everybody does, the president said done with those talks with Iran, the markets closed higher. We seem to have a lot of momentum. No matter what happens geopolitically that continues to see these indexes go higher.
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Joe Terranova
Everything's related to AI and everything's related to the momentum that is witnessed in the most recent earnings. This the earnings have continued to be remarkably strong. We're carrying double digit Earnings now for the better part of the last seven quarters for the S&P 500, I understand it's largely attributable to technology. Yesterday I was sitting here, I was talking about a modest recovery in software, certainly cyber, but it extended into some other areas of software over the last several days. Today it's kind of back to the semiconductors story, back to the adjacent AI derivative trade. That's where the momentum is. The momentum factor once again Today I see it up 2 1/2% while quality is actually down. That doesn't mean you're not getting an opportunity to broaden. Small caps working well, value working relatively well over the last several days. Energy coming back into play. But the momentum is firmly entrenched in the market right now. And if you're going to tell me what is it that's going to be the number one indicator in which you understand that the market has reached a peak and we're about to correct. I don't think it's going to be oil prices, maybe it's going to be bond yields, But I think most importantly, it's the momentum factor rolling over.
- [03:37]
Frank Holland
All right, you know, can we show a chart, guys? I had them do a chart of the mtmu. I know you look at that since the start of the Iran war. I mean, you're going to see a very stark difference between now the S and P. And the momentum trade also added the spmo, another momentum focus etf. I mean, more than doubling the market over the time since the war started, since we. All this geopolitical tension. Stephanie Link, what do you make of this momentum trade going into June?
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Stephanie Link
Yeah, we're up 19% from the March 30 lows in the S&P 500. We're up 31% in the Nasdaq in the same time period. But that has a lot to do with what Joe just talked about. Anything tied to AI and the food chain that I've been talking about, or if you want to listen to the CEO of Nvidia, he talks about the five layer cake, app, applications, models, energy infrastructure and chips, all $90 trillion industries. So that is big and that is impacting the entire economy in various different sectors. I don't know if is it momentum? I'm telling you, it's. It's strong fundamentals. Here's the thing that would change the narrative. If the 800 billion that the big four mag seven are going to spend this year, if it doesn't go to 1.6 trillion next year, because that's what the expectations are. If they scale back, then you have many different industries that are going to be impacted. But in the meant time, we are seeing growth, companies are indicating they want even more to spend. Right? So that's what today is all about. And that is still fueling a red hot economy. The economy's growing three, three and a half percent because of that. But it's not just that. It's also the consumer that has actually hung in there as well.
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Frank Holland
So by the way, it's funny that you say that last hour they have Ben Snyder from Goldman Sachs on. He's been one of the people saying they're just spending too much. He believes that the hyperscalers are making a mistake.
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Stephanie Link
Not when you say not. Not when you eventually you see the roi, you're not seeing it today.
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Frank Holland
That's the big question.
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Stephanie Link
But you are going to. Okay, so then you have to go and read Andy Jassy, the shareholder letter. He is the CEO of Amazon and he goes through why they are spending so much because we haven't seen this kind of a technology revolution in our lifetime. I'm quoting him on that. He said it, not me. So if you don't believe me, that's fine. But listen to what he is saying and listen to what Jensen Huang is saying about the five layer cake. It's real. It's real and the numbers are real.
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Frank Holland
Speaking of some notable market voices talking about the trade of momentum when it gets to blackrock's Rick Reeder addressing the market momentum in an interview with our Scott Wapner just a short time ago at the CNBC CEO Council Summit, here's what he had to say.
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Rick Reeder
I worry about crowding in different markets. Not just, not just in overall markets, but in single name stocks where you see more crowding, more momentum trading than I've ever seen before. That being said, like when you step back and say, okay, these are the multiples I'm buying at. And I said, gosh, it's actually not that scary.
- [06:25]
Frank Holland
All right, again, that's Rick Reeder talking to our Scott Wapner down at the CNBC CEO Council Summit. Brelski, I'm going to come over to you on this one. Does Rick Reeder made a point? The multiples are, I guess, you know, benign or tolerable at this point. Even though it seems like this trade, a lot of people seem to think it's just getting ahead of itself.
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Brian Belsky
Well, I think he's also talking about PE to growth rates. If you take a look at PE growth rates for the market, they're nowhere as extended, let's say, relative to what was in the late 90s. Number one, I think in the early comments here, I think it's interesting to point out the return on investment comment. I think that's a really, really important thing. You know, our process for years has been looking at valuation, earnings and then the operating performance of these companies and all that needs to sift through into return on equity, return on assets and return on invested capital. And I think not enough people are appreciating that. And I think that's what's really going to be exploding in 27 and 28. Exploding like we have never seen before. You know, Tom Lee comes out with this big thing about the markets not going to see these returns that we've never seen in 2027. We think it's going to be fundamentally driven. But until then, there is no doubt, Frank, that the market is on stilts. From a common sense perspective, we have to peel back a little bit. We would be keeping some powder dry to move around some stocks. There's no way that value index should be doing what it's doing, especially given the fact that Micron and, oh, by the way, Amazon's a 2% position in the Russell 1000 value. Is that a value stock? I would say no, it's not. So some of the indices I think are fallacies and you can't just chase the indices right here. So we would say, yeah, we're fundamentally very bullish. Our 25 year secular bull market remains in place. However, we need a bit of a respite here.
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Frank Holland
All right, so you kind of speaking a language very similar. We're hearing from Wells Fargo today. They go on to say we're in the later innings of a sugar high rally. They say their sentiment indicator triggered a sell signal in May for the first time since November of 2021. And the fact that the put call ratio at two standard deviations, they say speaks to the euphoric sentiment in the market. They believe the macro cycles are concerned with potential slower growth. Something you guys were talking about, the growth potential and higher inflation in the second half of this year. Do you agree with this thesis that right now is a sugar high inflation? Some macro concerns could weigh on the market. I know you said longer term, you're bullish.
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Brian Belsky
Yes. I mean, so the very classic thing that I learned a long, long time ago is you never know where a top is until you pass from one and you never know where a bottom is until you pass from. That's why momentum's working because we've got V shaped bottoms and V shaped tops since 2008 for all intents, since March of 2009 for all intents and purposes. And that's why people are invested. So we think we need a normal type of correction that can be very positive. Kind of clear out the froth, 5 to 10%, we're not talking a bear market kind of reset and then go.
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Frank Holland
All right, Joe. To that same point, Barclays out saying it's time to hedge. Saying in part, in spite of a constructive long term backdrop, the risk for a pullback, just building it sounds like that would be a short term pullback. In their mind. They see the recent rally was driven by strong earnings, which is obviously a fundamental factor. Optimism and position and catching up.
- [09:28]
Joe Terranova
I mean, it would make sense that as you move towards the midterm election in particular during the summer, you get a little bit of a modest correction, get some elevated volatility. I wouldn't dismiss that at all. But as both Stephanie and Brian have highlighted, the Runway here for earnings growth is really strong. And for you to believe that we are at a significant inflection point or there's a peak in the market, then you have to believe that the earnings growth is going to decelerate and basically disappear over the coming four or five quarters. And I don't think any of us believe that's the case. So yes, the market feels a little bit overbought. Why is the momentum Factor up nearly 35% quarter to date? I don't think enough people give a fair understanding to the dynamic change in market structure. Market structure is becoming more and more quantitatively driven. It is about algorithms and it's about algorithms driving the marketplace, a lot of non discretionary capital. And in that environment, momentum is prioritized. You're chasing price. That's the common denominator for all of those quantitative type of funds. So they're looking where they find both technical and fundamental confidence and fundamental confidence reflected in earnings growth, technical confidence reflected in strong price appreciation in particular in the universe.
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Stephanie Link
So momentum is at a nice run and technology is that a nice run. But there are a lot of sectors that have not had a nice run.
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Leslie Picker
Run.
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Brian Belsky
Yeah.
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Stephanie Link
And that's where there is value. So if you're looking for places, I don't think you want to chase technology, to everyone's point, maybe you wait for a bit of a pullback if we get one. But the growth is real. So you do want to have exposure. But look at financials, what they have done Year to date, look at materials, look at discretionary. I mean, you have companies that are reporting really good earnings in Discretionary and the stocks are going down substantially. I don't want to touch staples that are too expensive for the limited growth that you get, but those also haven't done well as well. So I think there are places that you can find in this market that are attractive that you want to start to look at and pick up because. Because by the way, the earnings are pretty good.
- [11:32]
Joe Terranova
So you think the market rotates over the coming months versus a larger.
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Stephanie Link
I would like to.
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Frank Holland
Correction.
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Stephanie Link
I would like to see that. I don't know if you're going to get that, but that's what I would like to. That's a healthier market in my mind. I mean some of the reactions to your point in terms of the machines running some of these stocks, I mean, it's crazy what we're seeing. So I think you'd be silly to, to chase it. That being said, I want to have exposure to it. Am I selling, I'm not really selling those stocks at this point because they're working until they don't. But then there are other sectors out there that I can have much more confidence in and conviction and those are the areas that I'm adding to.
- [12:06]
Frank Holland
So. Speaking of enthusiasm, we look at Marvell today. I mean, I thought this was a mistake at first when I saw. We're going to show the chart right now. Yeah, shares are about 29%. This after Jensen Wong said he believes this is the next trillion dollar stock. A lot of ownership here on the desk. Anybody feel free to jump in? What do you make of this? I know chips are hot, but wow.
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Stephanie Link
Well, I think it's kind of interesting that that Nvidia has a $2 billion investment in the company. That's number one. But the quarter really was astounding. I mean it was an in line quarter, but the guidance was really substantial over there. You're right. Optical. Optical is run by inference and that is growing 50 to 55%. And their custom Asics where they have an 80% market share with Broadcom is growing 20% but is expected to grow to 100% by fiscal 29. That means that this company very likely could do $10 in earnings power. I mean it was just like a month ago. I thought maybe $5. So you're, you're seeing these revisions and the growth rate is there. Is the, is the reaction justified today? I don't think so, but it's nice as we own it.
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Joe Terranova
Well, it can be justified from the perspective of right now everyone is identifying the optical thesis surrounding AI and say, okay, maybe this looks a little bit like memory. So we're taking Corning higher and Corning has been moving higher for the better part of the year. And that's a name that, that I own and I also own Marvell. So I think that's a little bit of the story.
- [13:33]
Stephanie Link
But the Stock is up 232%, Joe,
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Joe Terranova
and it could be up 275%. How high is high? How low is low? That's a question you never really ultimately understand to find the correct answer for. But the justification as to why it's up so significantly today is that people have witnessed what went on with memory. And now saying, okay, maybe we're moving from copper to optical fiber.
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Frank Holland
Don't mean to cut you off. We want to toss it over to our Leslie Picker speaking with Goldman Sachs CEO David Solomon right now. Let's just listen in very quick and
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David Solomon
how, you know, the evolution of the world shifts, what we need to do to be successful as an enterprise. And so, you know, I think over 5 to 10 year increments and I would just say I am extraordinarily excited about the opportunity, particularly for our country to really grow productivity and grow the economy as this technology is deployed and gets wrapped into enterprises and you know, helps people be more productive in the context of what they can do. That doesn't mean that it's going to be a straight line and going to be simple. In fact, I'm sure, and I stated in the op ed that there's going to be dislocation as there always has been, as technology is scaled and it's deployed, you know, into our economy and as there are economic, you know, economic shifts, you know, over time. I decided, you know, to write an op ed. You know, you're putting yourself out there. There are a number of people that are talking about this and you know, I felt they weren't creating a constructive discussion about the gives and the gets and the balance. And I decided that it was. It's an important discussion. There's a lot of change in the world that's happening very, very quickly and that I thought it was important for Goldman Sachs, you know, to weigh in, you know, on, on some of that evolution. And so I don't believe that we're going to have massive structural unemployment, but I do believe that AI is going to interrupt jobs and dislocate. It's moving at a very, very quick pace. We're going to have to upskill people. The labor force is going to have to adjust. But I think it's important to really step back and understand the labor force, understand the construction of the labor force in the United States when you think about these things, because then we can make good decisions as we go forward. And one of the things that, that I stated very clearly in the op ed is if the disruption gets to a place where it's very dislocating to certain groups of people, then government and business has a responsibility to work on policy to soften that, you know, that journey. But I really do believe as we get 10 years out, just as other technologies have disrupted, we will have reasonably full employment. We will have a very, very productive economy. And in fact, I believe this is going to unleash, you know, a growth boom and a productivity boom that could be quite constructive. And I think it's really a generational thing. You know, we've seen this before with other technologies. I think one of the different things here is the pace of change, the pace at with which it's moving, which can make it more dislocating. But I'm incredibly encouraged. But it's going to be a journey and we want to be engaged and we want to have thoughtful discussions. We want them to be fact based. You know, people look at the labor force, they talk about, you know, technology jobs. For example, technology employment in the United States is 2.3% of the labor force. I mean, these are important things to think about. And so I'm glad I did it. The feedback I've gotten, first and foremost, and I was at a big meeting, private meeting of a large group of CEOs last week. People want to engage, they want to think about it, they want to talk about it. They don't like the doomsday narrative. They want a productive narrative about the goods and the bads and how we balance and how we move our economy forward, how we move our communities forward, how we move our society forward. And that's important.
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Leslie Picker
Absolutely. And as we think about kind of upskilling, I think in historical technological cycles, upskilling was all about learning how to code and learning how to do things and go to college and all that. Now it feels like the skills that could be more valuable are skills where you use your hands and things like that. Do you buy into that notion? And have you seen as a leader of a very dynamic organization with lots of people and lots of different types of jobs, have you seen AI replace any of them yet?
- [17:51]
David Solomon
Well, I, you know, I think Leslie, the way you frame that, it's just a little bit, to me, it's a little bit overly simplistic. Let's start with the fact that we live in a service economy. And 65% of all the jobs that are created in this country, this country is a very dynamic economy. Over the last 25 years, on average, every year we've created and destroyed 30 million jobs. 65% of all the job creation comes from small and medium sized enterprises, a lot of which is service based. There's an enormous amount of the economy that has to do with people serving people. Okay. And that's not shifting, you know, any time very quickly. So we're talking about, what's different is we're talking about certain white collar jobs.
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Leslie Picker
Right?
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David Solomon
Okay. And, you know, that's a different disruption, but we've seen disruptions to other jobs that were, you know, that people strove for. If you look and you go back 25 to 30 years ago, as we opened up the global manufacturing economy, we dislocated a number of people. And I think there are a lot of things that we can learn, you know, from those dislocations. And let's hope as there's change here, we find better ways, you know, to manage through some of the dislocation that will come. But the economy is very nimble. New jobs are created, new skills develop, and people will evolve appropriately. And it's just not black and white. People want black and white answers. We were talking about, you know, in the back room there about writing as a career. And, you know, it's not going away. It's not going away. And so it's just not simple. It's much more nuanced. And I think the economy is dynamic. I think people are dynamic and I think people, you know, will adapt, but they need time, they need help. And it's our job to figure out, you know, as that comes, how to operate. And we shouldn't be so sure about how everything plays out. There are a lot of people that are very sure. I'm very unsure, but I think the direction of travel is going to be quite exciting and quite positive when you look at it holistically over a moderate to longer term period of time.
- [19:46]
Leslie Picker
Yeah. One thing you mentioned in your op ed is just because a job can be replaced doesn't mean.
- [19:50]
David Solomon
Doesn't mean it will be. Doesn't mean it will be. Doesn't mean it will be.
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Leslie Picker
We've talked a little bit about the social impact of AI, but what about kind of beyond jobs? Large Data center builders will say that it used to be the biggest hindrance was capital. That's no longer an issue for them. Now it's permitting and going into these municipalities and facing some blowback from the residents of those communities. How do you, how do you kind of see that shaping up amid this kind of over and to the right trajectory that we're on with AI?
- [20:25]
David Solomon
Well, like any, like, I mean, there, there are different issues, you know, tucked in that, you know, first of all, you know, communities, you know, communities will wrestle with, you know, the parameters of benefits and drawbacks to having, you know, data centers in their communities. And it's different in different communities. And, you know, that's been the case with all sorts of infrastructure over time. And, you know, that will evolve. You know, that will evolve the way it evolves. But the thing that I'd highlight just when you talk about all this, that I know is true. Whenever you have a technological acceleration, everybody anticipates the journey as though it's a straight line in one direction, compounding and just the demand for the compute. It's just not going to go in the straight line that everybody's now currently projecting. And I think we have to be prepared for that to have and flow. Also, the technology will change, the productivity of the chips will change, the cost of manufacturing will change, the, the cost of distribution will change. And so, you know, all of this is in the early stages and there are going to be more data centers for sure. You know, I think that the implications for power infrastructure are real, and we're going to have to wrestle with that more because certainly it can't increase, you know, the cost of power. And of course, utility services to average Americans. That's not going to work. And so this will continue to evolve, but it's not going to be the demand curve that I think people are expecting will not go in a straight line as when you think about other technological evolutions. You know, we don't always get them right. I mean, you know, you think back to, you think back to, you know, kind of to demand for digital infrastructure back in the late 1990s and, you know, undersea cable and things like that. You know, people had enormous expectations of how the information would travel. Nobody imagined wireless. They thought everything would travel, you know, on fiber optic cable. And you know what? The world changed. And so the world will change here too. And we'll have to figure out how to evolve that over time, and we will.
- [22:23]
Leslie Picker
In the meantime, Gartner projects $2.6 trillion being spent to Fund that build out. Obviously you're in the center of these discussions. How is it impacting corporations, strategic decision making, the various trade offs, any type of crowding out that you see?
- [22:41]
David Solomon
Well, you've got two things going on. You have the infrastructure being built to supply the compute that ultimately has to be bought by enterprises to be used in their business. The one thing I know for sure is that enterprises broadly will go slower at that. They will be slower to change, they will be slower to adapt than I think some of the current, you know, expectation. And one of the things you're seeing that just is important, these, these tokens are super expensive. So you saw the article about Walmart saying yesterday, whoa, okay. Token spends going up like, whoa, okay. I'd also just observe as somebody that's talking to a lot of CEOs that there are a lot of things where this technology is helpful, but you don't need a super high powered expensive model, just a very base model will give you something that improves your operating processes and you don't have to pay a lot, you know, for that. And so if you're running a very high margin business, you probably have more propensity at this point in time to be experimental and aggressive with your token spend and using the technology in the enterprise. If you're running a low margin business, even if it's a low margin business at enormous scale, okay, you start playing with a half a margin point, it has a big, big implication. And so, you know, I, you know, I think enterprises are going to be cautious about this and the demand curve might be different than the demand curve that's now imagined. So obviously there's a lot of capital that's going in to build this. The hyperscalers and other big companies who have other businesses that generate a lot of cash are making what they see as a generational bet. And so even if the returns aren't as good as they'd like them to be, they want to carve out their price position and they're going to make significant generational bets. But then ultimately they have to get demand, you know, from other enterprises. And by the way, potentially consumers and the consumer model is a much more complicated model than the enterprise model. They've got to get demand, you know, to pay for all of that. And the one thing that I know is I don't know what that curve looks like. I don't know how that's going to play out. And you know, I think that there's going to be a lot of volatility around that but ultimately we'll find equilibrium and balance in both the amount of compute, the demand for that compute. Now it gets deployed in enterprises and how individuals pick it up in their
- [24:55]
Leslie Picker
daily lives and potentially over time getting more efficient and absolutely changing that equation as well. Yeah, a lot of the funding for this build out will come from the equity market. And Goldman Sachs, of course, has been the center of most, if not all of the big headlines that we've seen lately. We've got Space X aiming to go public next week that could raise, you know, 75 billion. We'll find out pretty soon here. Anthropic just confidentially filed for its IPO. OpenAI reportedly planning to go public. And yesterday Alphabet announced plans for an $80 billion equity raise. This is all kind of coming out around the same time. I know you can't talk specific deals that are currently ongoing, but I just wonder how you're thinking about the impact of the supply of equity funding this build out all around the same time.
- [25:43]
David Solomon
Well, global equity markets are about. These are rough numbers. Don't hold me to them exactly. Global equity markets are roughly 150 trillion. U.S. equity markets are 100 trillion. You know, U.S. money market funds are about 8 trillion. There's enough capital, there's enough capital for what we're talking about at this flow in this point. And while I'm not going to talk specifically about any of the deals, I just make an observation that any of you can make by looking at the screen today as Alphabet is going through the process of, you know, raising, you know, this $80 billion and we are in the middle of it. The stock is trading quite well. Okay. This is the largest equity deal, largest follow on equity deal that's ever been done. The stock's trading quite well, at least when I looked as I pulled in here, you know, the stock was down about 2%. Might, might be bouncing around, but the stock's trading very well. That's it. This is the first actual concrete data point for bringing something of this scale. And it's encouraging.
- [26:40]
Leslie Picker
Yeah.
- [26:40]
David Solomon
Okay. And so, you know, I think there's plenty of liquidity in the system if the world continues to remain as optimistic. And I do think we're in a period. And I know when I say this, you know, I'm pausing for a second to say it, but I know when I say it, it will get quoted. But I think there's, I think it's definitely true. It's something for us to reflect on. We are definitely in a moment where there's more greed than There is fear, okay? And, you know, that's one of the reasons why people that need this capital are coming to the markets, because the capital is available. And so if you're advising companies that need capital, one of the big piece of, like, base advice for 42 years of doing this, when capital is available, if you're capital consumptive and it's available, take the capital, okay, if you know that you're going to need it. And so, you know, given the way equity markets are robust, debt markets are robust at the moment, I think you're going, you are seeing a lot of activity, and I think you're going to continue to see activity. But I just say in the context, these are unprecedented in terms of the size. There's also unprecedented liquidity and wealth in the markets, you know, to absorb some of this. And it also, these things also create a virtual flywheel because you've got a lot of people that have made a lot of money, you know, in a bunch of these companies, and they're going to be monetizing and reinvesting that into the system, into other things and paying taxes, by the way, on those gains. And so, you know, there is a, there is a virtuous ecosystem, you know, in the context of this, too, that should support it. But it is unprecedented. You know, we'll see how it goes. But, you know, I'm encouraged, I'm encouraged by what I see so far. But that doesn't mean that something couldn't change that creates more volatility around this, just given the size of the, the scale, the amount of capital that's being raised.
- [28:22]
Leslie Picker
Yeah, because how quickly could greed turn into fear?
- [28:25]
David Solomon
It can turn into fear very quickly. That doesn't mean it will. You know, it's, it's, you know, history is always a great lens, and it's never the same, but it's never really different. Alan Greenspan started talking about irrational exuberance in markets in, in the fall of 1996, when the NASDAQ was like 12 or 1300. Three and a half years later, the NASDAQ was 5200. So. But then ultimately, the NASDAQ retraced by over 80%. So, you know, he was right. He was just three and a half years too early. So exuberance can go on for, you know, for big periods of time. You know, you know, at the moment, there is enormous opportunity to invest in these technologies. It's one of those, you know, generational kind of technological shifts. And, you know, I think there's a good chance that we're earlier in the cycle than later, but I don't know. And we could wake up in a couple of months and the lens would be different. Something will happen that will change the lens. But at the moment, you know, that seems less likely in the, in the, you know, in the short term. You know, you haven't asked me about just kind of the macro economy at all. You know, one of the things I'm watching very closely, you know, I in January or February, I was really, you know, quite supportive of higher nominal growth and therefore higher real growth with lower inflation than the market was kind of anticipating at the beginning of the year, you know, after the war started. I think we now have higher and better embedded inflation. We obviously have energy pressure. It's filtering through to supply chains that affect a whole variety of other things. And it hasn't yet, in ways that are tangible, affected consumer behavior that we're seeing. But I'm starting to hear whispers of it. And my expectation is you're going to see more of it in the second half of the year. You're going to see more shifts in consumer behavior because at the end of the day, consumers, 14% of their wallet, approximately average American, is gas, and they're spending more. And that will force choices and it will filter through in the economy. Also the supply chain pressures, because you think about the way energy gets into supply chains that increases prices on things that are made and that has to go through. And my own view, the capacity to keep passing that through is limited. And so you'll see that in that context. So I'm watching that. You could see some economic data in the next six months that shifts the sentiment and that changes the balance and all this. But for the moment, that's not, that's not coming through.
- [30:48]
Leslie Picker
Yeah. I was going to ask you what you saw as the biggest risk and
- [30:51]
Frank Holland
as our Leslie Picker interviewing Goldman Sachs CEO David Solomon the Economic Club of New York. We're going to continue to watch that. We're going to bring you more headlines from that discussion that they're having as warranted. I want to come back to the panel here. By the way, David Solomon mentioned lots unpack there. Lots unpack. He mentioned the private CEO meeting he was in. I was actually there myself was the business council. So the conversations were off the record. But I can tell you he's very optimistic about AI and the worker. But as you heard right there, he does have some questions about the spend when it comes to AI and Steph, I want to come over to you he in his op ed he said in part the historical patterns clear. The US economy can adapt to advances in tech. But what's also clear is that stark forecast, even by the most brilliant minds often miss their mark. He uses stark There can also the most optimistic forecast missed the mark. He talks about cable during the dot com boom and it ended up turning into a wireless revolution, not a cable revolution. Is that something we should be thinking about at least in the back of our mind? I know how optimistic you are as well.
- [31:45]
Stephanie Link
Well, I go back to the whole food chain thing, right? And if we see 800 billion in spend this year from the big four and maybe it's not 1.6 trillion next year, let's just call it flat. You still don't have enough data centers. You have only 11,400 data centers in the world. You need at least 30,000 data centers. It costs $45 billion to make 1 gigawatt data center, including all the stuff that goes inside it to the land and everything else. And then we don't have an updated grid. You know this more than I in terms of the grid being so old and not utilized the way we need it to, and then power. So there's just so many pieces here. Are the numbers going to be accurate? Maybe not, but the direction is going to be important in my mind. And I just don't see any indication, I don't hear any indication from any of the spenders that are going that they're going to change their mind. I mean, it makes me a little uncomfortable for sure. But I think, I mean, you got to just follow what they're doing. And what they're doing is they're actually increasing more dollars.
- [32:47]
Frank Holland
We got to go. But I want to give you one quick word. We use David Solomon's words. He says there could be something that could change the lens of how we view this investment. Do you see anything like that coming up on the horizon?
- [32:57]
Joe Terranova
I think he's communicating basically the feeling that everyone in the financial services industry has. We're very optimistic about the environment currently. It's being supported with solid evidence in the earnings growth. We're seeing monetization in the capex spend. If you look at Google cloud, their growth, if you look at us, the growth you're seeing there. But we also understand that it does feel exuberant. And we understand and I think what investors and the viewers really have to kind of wrap their heads around is you make the most money in the most intense momentum periods of a cycle. And that's what we're in right now. No one can time the end. The end is ultimately going to come. Whether it comes relatively soon or later into 2027, it's going to come. But I think that you have to also have comfort in knowing when it arrives. There are enough indicators that allow you to take action and edge out your portfolio at that time. It's not like you're going to wake up one morning and the market's going to be down 40% and you could do nothing about it. You'll know when it arrives and you'll be able to take action on it.
- [34:09]
Frank Holland
Just to quote David Solid more greed than fear in the market to talk more about that. But coming up, we're also tracking the trades and the committee moves from Joe and from Brian More Halftime. Back in just two minutes.
- [34:22]
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- [36:04]
Pippa Stevens
We're back on Halftime Report. I'm Pippa Stevens with your CNBC News update. Secretary of State Marco Rubio told lawmakers he's optimistic about resuming nuclear talks with Iran despite a shaky cease fire in the region. In his first public testimony since the conflict began, Rubio said the Iranians have agreed agreed to negotiate on nuclear points that they previously wouldn't address. But he said there is no guarantee it will lead to an acceptable deal. Five US Passengers who were aboard the cruise ship hit by hantavirus have returned to their home states following three weeks of monitoring at the National Quarantine Unit in Nebraska. Officials say the passengers will continue to be monitored for the next 21 days by local and state public health departments. Thirteen passengers remain under observation in Nebraska. And Congress is asking NFL Commissioner Roger Goodell to testify about the league's broadcasting deals. At a hearing on June 10, House Judiciary Chairman Jim Jordan said they would examine how antitrust exemption created by the Sports Broadcasting act of 1961 has been used by leagues to harm consumers. It comes after the DOJ launched an investigation into the league's use of the law back in April. Frank, I'll toss it back to you.
- [37:18]
Frank Holland
Our Pippa scheme is the latest headlines. Pippa, thank you very much. All right, we're back with some committee moves. Joe coming over to you. You made some buys. You made some sells.
- [37:25]
Joe Terranova
I did. So basically there's price stops and then there's time stops. And when you're buying stocks that are in a downtrend, and I think we could all agree that Uber and Netflix are in a sideways to lower type of downtrend. If you look at Uber over the last 24 months, the stock is only up 4%. If you look at Netflix over the last 18 months, it's basically running in place. Now. These are both companies that we know fundamentally we believe in the growth opportunity and we believe in the future. But when you buy stocks that are sideways to lower, you have to give yourself a time stop, not just a price stop. And that's what I did here. I gave myself one month. I said, let's see where I am after my purchases, which were post earnings for both of these individual equity names. Let's see where I am 30 days later. Well, guess what, I'm down on both. So you are time stopped out of that trade because it is not going anywhere. It's not proving itself in a momentum market in a higher S and P market. To want to participate, you have to take the funds in this type of market and allocate it to where you see the performance. And the two names that I purchased are Twilio software name that has worked remarkably well, benefiting from agentic, AI touching, messaging and voice. And then Generac. Generac, which is now participating in the AI power story as backup power to the AI Data Center Center. Both of those names, strong momentum, strong fundamentals.
- [38:59]
Frank Holland
Yeah. To your point, Trilo actually named a momentum name by bank of America today on their momentum list. Generac hitting a four year high, highest level since about June of 2022. Coming over to you, Brian, you also made some moves actually in the consumer space.
- [39:12]
Brian Belsky
Exciting. Well, we, we run a portfolio called the SMID and we owned a stock called Ross Stores for a long time. Ross has gotten up there in terms of market cap. So what we've done in our SMID across the board and we're talking about consumer in particular is taken some market cap out of Ross and bought two stocks, Dick's Sporting Goods because we believe that the integration of Foot Locker is working. We believe it's a fantastic retailer and it's done a really great job. Academy Sports and Outdoors is a smaller cap name in Texas for playing on the leisure camp and we really believe that comes company has some earnings power going forward.
- [39:48]
Frank Holland
But we worked at a Ross when I was in college. Stephanie Lane, coming over to you. You own Dick's Sporting Goods. What do you think about Brian's move here? Kind of getting into the name and seeing opportunities there. It's kind of interesting. Both of his names, kind of a sports theme there.
- [40:02]
Stephanie Link
Yeah, I mean Dix is very well run and they're seeing the results. I mean I was actually surprised at the reaction to the earnings report. Did a 6 comp in Core Dix, they did a point 6 in Foot Locker and they actually raised guidance as well. And they have this concept right now called the Fast Break store where they're which is helping footlocker which is going to lead to better sales. They're seeing double digit growth in this new concept which they're going to build out for back to school. So 15 times forward estimates, it's up about 9% in the year. I mean I just don't understand why it's not acting better. And I think it will. By the way, they did have weaker gross margins, but I think that that's this heavy investment in the World cup as well as in Foot Locker. Second half I think skews much higher.
- [40:45]
Frank Holland
Yeah, Dax. Up about a half a percent right now. All right, we've got a few more moves to get to. But first want to bring in our Mike Santoli to join us with his midday word Half Times back in just two minutes.
- [40:58]
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- [41:27]
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- [41:57]
Joe Terranova
A key moment for the economy. How might the May jobs data influence the first Warsh Fed decision?
- [42:04]
Frank Holland
Employment numbers and ANALYSIS squawk box Friday
- [42:07]
Joe Terranova
8:30am Eastern and streaming on CNBC plus.
- [42:27]
Frank Holland
And we're back on. At times, your markets commentator and overtime co anchor Mike Santoli joining us for his midday word. Mike Looking at the markets once again on pace to hit new record highs. The chip stocks are surging. Is this a bit too much of a good thing? Is this something we should be worried about, all this euphoria in the market?
- [42:43]
Mike Santoli
I think too much of a good thing is the thing to keep in mind that it is possible, right, to actually sort of overplay one's hand in aggregate in terms of what's going well. And part of that, of course, is semiconductor leadership. Always good to see. It's always the thing that confirms a bull market. But obviously the idea that it can be pushed beyond the normal limits and short term performance, you have to keep that in mind. Even the earnings story, I think as much as it's true that this move since, you know, especially the last six months has come with valuations coming down because earnings are rising faster than stock prices at the index level, that's a positive thing. But we should also keep in mind that historically when earnings growth is greater than 20% annualized, as it's on track to be, you've actually had subpar returns for the S and P if you're not coming out of a recession. So I think that there is this possibility that we all recognize the good stuff going on. Nothing in the market action is very alarming. I mean, bitcoin down, software that bounce fading a little bit, consumer cyclicals weak. That's been the case for a while. So I think you want to be just aware of of how what you're relying on to keep the market incrementally moving toward these records, as most stocks frankly have not been able to perform very well.
- [43:57]
Frank Holland
All right. By the way, our Ali Renick's coming up with more on that cryptocurrency Trade Mike Santoli with his midday word. Mike, it is always good to see you. Thank you very much. All right. Coming up next, more, more committee moves. Our Brian Belsky's ready with two more trades now in the travel space. We're back right after this. All right. Welcome back. Let's get some more committee moves. And Brian, I know I said earlier you did some moves in the consumer space. Well, here's two more. You bought American Airlines and also Hyatt Hotels.
- [44:34]
Brian Belsky
I did. I've owned both those names in the past. We have the very good fortune again of running a US SMID portfolio. And what we've tried to do here and we made a bunch of changes this month to show that is we want to increase the names that we own. We want to increase the names that we own, number one, and then take our overall market cap down. And the reason is, is that I think I'm a believer in the spreading out. I believe that broadening out of trade. I'm a believer that the earnings power of these small cap stocks are not being appreciated. What's really interesting about both these companies, okay, so we graduated our Hilton holdings to our dividend growth portfolio and went for a one for one swap from Hilton to Hyatt. Hyatt's been a massive performer within the hotel space. I think it's actually under owned by institutions. But from a perspective of where travelers are going to high, it makes a lot of sense. Now on American Airlines, I look back at my career like, man, I own three airlines, United, American and Delta I've owned for 10 years.
- [45:33]
Frank Holland
Now.
- [45:33]
Brian Belsky
Delta by far is the creme de la creme. And I think Joe owns it as well. But United has been on a tear and United during the month of May had this great move. So we used this is portfolio management. We used the position increase in United in and gave it to American to diversify out. Now the other interesting thing is on both these companies, they're exactly a quarter the size of the two names that we've replaced them. So American's a quarter of the size of United and Hyatt's a quarter the size of Hilton. So we're getting smaller and we're liking companies. We want to own more companies in small caps.
- [46:04]
Frank Holland
Really quick. It's yes or no. Are you buying American with the thought they might get acquired by United and the share price goes up?
- [46:09]
Brian Belsky
No, no. I think American could go on its own, number one. And I think given the strife that we've seen in the airline business the last year or so, especially with spirit and some of the other things, I think American can make a go on its own.
- [46:22]
Frank Holland
Joe, you do on Delta, your take on some of his moves here, specifically the airline?
- [46:26]
Joe Terranova
Well, if I could, I want to touch on the hotels. The airline trade is a strong trade right now. But Hyatt, what's interesting, Steph said this to me in the commercial break. Why don't you think Netflix is moving higher? Maybe too many people own it. And sentiment is important to measure both when stocks are going down and you have analysts rating, you're a 90% and then when stocks are 52 weeks highs like Hyatt and no one is recognizing it, no one's believing it. So only 54% of the analyst community have a buy rating on Hyatt. It's like very sneakily Hyatt's at a 52 week high. You can make the same argument for Marriott, near a 52 week high. Only 44% of the analyst community have a buy rating.
- [47:08]
Frank Holland
High it up 2 1/2 percent. Up next, options action or Oliver Renick, as mentioned, is standing by with a check in on the crypto trade as bitcoin hits its lowest level in two months. Ali's got a lot more. Stay with us. All right, welcome back to the half. Let's get to today's options action. Our Oliver Renick is live at the CBO Global Markets in Chicago with much more Ali.
- [47:44]
Oliver Renick
Hey, Frank. Crypto bulls look nervous if options are an indicator. Bitcoin's relative strength next to stocks peaked last July and that spread has now widened to more than 70. This latest sell off is extra painful though, because it's happening while the software sector is rebounding back into a bull market. After all, crypto is software and at
- [48:06]
Joe Terranova
the start of this year the two
- [48:07]
Oliver Renick
were trading in sync. Not anymore. Here's what we see in options flows in btc, etf, ibit, more puts traded than calls with more put buying than call buying and more call selling than call buying. In Coinbase, calls were popular, but three times more were sold than bought. And in Michael Saylor's strategy mstr, more than twice as many puts were bought than calls. And the most popular contract right now is currently the 130 strike put expiring Friday. That's looking for about a 6% sell off to break even. Frank.
- [48:41]
Frank Holland
All right, Oliver Renick down at the cbo. Oliver, thank you very much. Steph, want to come over to you, your own coin base. Just your thoughts on some of the action and some of the sentiment that seems to be around only crypto, but crypto related stocks.
- [48:52]
Stephanie Link
Well, I'm surprised that it hasn't rebounded with software because it is correlated, especially the unprofitable software name. So it's kind of strange action. Look, I own this thing for the long term. I don't know what the price of Bitcoin is going to do on a day to day basis, but I do know the exchanges benefit from having a buyer and a seller and that we do have. And they're also expanding their offering and they're also doing a really good job in terms of investing for future growth. So it's a small position. I like it for the long term. I kind of set it and forget it. We'll see what happens in a couple of years.
- [49:21]
Frank Holland
All right, today, Coinbase down about four four and a third percent. Stay with us. Final trades they are coming up right after this. On Final Trades. Brian Belsky, you're first.
- [49:33]
Brian Belsky
Eversource the play on air, the power grid, almost a 5% dividend yield.
- [49:38]
Stephanie Link
Stephanie Lane, I continue to like Alcoa. It's a fairly new position for me. I think aluminum demand growth is going to be 40% between now and 2030. These guys are the winners.
- [49:47]
Frank Holland
The Alcoa shares up almost 6%. Joe T. You get the last word.
- [49:50]
Joe Terranova
Stephanie could provide the fundamental reasoning why I'm suggesting Starbucks. From a technical perspective, you have a nice pullback here into the support of moving averages. Use the 200 day as you stop at 91.
- [50:01]
Frank Holland
Starbucks up over 1% as well. Quick, quick check on the markets before we let you go in the green across the board right now. Looks like we're on pace for more record closes. And that does it for halftime. The exchange starts right now.
- [50:13]
Scott Wapner
You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [50:25]
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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 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 Halftime 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 during sleep?
- [51:01]
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