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Halftime Report
Markets React to the Iran Developments: How to Trade it. 7/8/26
00:46:41
Scott Wapner and the Investment Committee debate the latest out of the U.S.-Iran conflict as well as the momentum unwind in the market. Plus, the Committee share their latest portfolio moves. And later, we hit the latest Calls of the Day. Investment Committee Disclosures
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- [00:01]
President Donald Trump
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- [00:03]
Scott Wapner
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- [00:31]
Commercial Narrator
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- [01:01]
Scott Wapner
Carl, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the momentum mess. Whether it is any closer to a bottom, we will ask the committee how to trade the markets. Joining me for the hour today, Joe Terranova, Liz Thomas, Jim Laventhal, Bryn Talkington. We will show you what we're doing here in the markets today where we're just about at the lows of the session, certainly for the Dow, which is off by one and a half percent. You do have oil up sharply today saying that the cease fire with Iran is over. In fact, more on that because the president is expected to hold his news conference at the NATO summit any time now. And when we do see President Trump, we're going to take you live to Turkey at least to start things off today. But we'll talk to the committee before we get there. Joe, the real story does remain this momentum unwind. Goldman says the five day unwind now worse than Covid. It's the same places we've been looking chips. Some of the AI adjacent names. Caterpillar, for example, was lower earlier today. Micron now at risk of falling out of the trillion dollar market cap club. That's a story in and of itself. Sort of tells you where that trade has been of late. And just bear in mind that I may interrupt you at any moment for the President.
- [02:15]
Jim Laventhal
Yeah. So I think in the last several days the momentum factor has been leading the market and fostering an internal rotation. I think it is safe to say that enough deleveraging has occurred in the momentum factor. However, the momentum factor will vulnerable to Further downside if in fact the overall market and the Middle east tensions flaring up once again were to take equity prices down. So it would not be isolated to the factor itself would be more of the market. But I do think we're close to the bottom certainly as it relates to names like KLA Corp, LAM Research, Applied Materials and Micron.
- [02:56]
Liz Thomas
Liz, if we're talking about just semiconductors,
- [02:59]
Scott Wapner
I think there's a talk about kind of everything. I mean anything that's been in the momentum it is semis are the most high profile but like I said, it's the AI power names, it's the Caterpillars, it's sort of anything in that orbit has been the thing that's been the most upset and it doesn't appear that it's stabilizing anytime soon.
- [03:24]
Liz Thomas
Yeah, I'm probably a little less optimistic than Joe at this particular moment. I think that semiconductors in particular have more downside to go. Everybody's freaking out about the drawdown that they've experienced already but we quickly forget that they were up over 100% coming into this and then transition to looking at something like South Korean stocks. You've got the coast be in a bear market right now. Closed in a bear market for the first time, actually entered a bear market intraday on July 3rd. So when you're looking at that trend and just the momentum unwind across the globe, you have to decide whether or not it's rotating into other places in the equity market or it's coming out of equities entirely. I don't think it's coming out of equities entirely. The beneficiary of the South Korea unwind wine for example has been China. So there's buying opportunity there. In the US I think the beneficiaries continue to light up as health care and some of the other spaces that can provide growth opportunity. So I do think that some of this momentum still has more flush to go, but I don't think that this is the beginning of a large bear
- [04:26]
Scott Wapner
market in the U.S. yeah, Jimmy, Jonathan Krinsky at BTIG says more downsides coming. We're testing the 50 day moving average for the SOX for the first time since the rally began in April. It could hold in initially. We don't think this is the last of the correction. They see downside from here. So we'll, we'll have to watch that as again we're waiting on the president in Turkey at the NATO summit.
- [04:53]
Joe Terranova
Yeah, I mean the technicals don't look good. I think that's obvious. I go back a week ago and I think about what was the catalyst for this. To me, it was when Matter said they had excess compute capacity and they were going to start selling it. That gave concerns that maybe we've overbuilt. I don't think that's the case. By the way. I think this has been a correction, looking for a reason, and that was a convenient reason. But prior to that news from Metta, every other hyperscaler seemed to indicate that they just wanted to keep expanding, including data centers being built not by the hyperscalers, but independent ventures all over the place. There's really, outside of Metta, very little reason to think that this cycle is in any way over. And I do think that, you know, going back to what Brad Gerstner told you last week, Scott, and he said, look, this was a time where people had to take their foot off the throttle. To Liz's point, it does look to me like it's rotating into other sectors. But to the overarching question of is this a bottom, nobody will ever know if this is a bottom. I am adding, as you know, Scott, to Micron today. That's a position I started in small size about two weeks ago. And here it is, I mean, bad purchase two weeks ago, but here it is 20, 20% lower.
- [05:56]
Scott Wapner
I'm adding, because, you know, the cycle being over, I don't, I don't think we have to go to the extremes of saying something like that of why don't think the cycle's over. I don't think we're saying the cycle's over. Cycle over a near term top are two different things. You could have some upset in this area for a while before it picks up again. It doesn't mean that the cycle here in semiconductors is over because the cycle for AI spending isn't either.
- [06:25]
Joe Terranova
And so, and Scott, we should get confirmation of that. I agree with you. I don't think the cycle's over. I do think there are some people out there who have been calling this a bubble for quite some time.
- [06:34]
Scott Wapner
We'll see the president here at the NATO summit. Let's listen in.
- [06:41]
President Donald Trump
Well, it's important stuff. And you know, our team out here, they've all become stars, superstars actually. But we want to thank you very much. We've had a tremendous time and I think a great success. And we just concluded a very successful NATO summit here in Turkey. And I want to thank President Erdogan, who's really a great man. He's a great leader. He's a friend of mine. Been a friend of mine for a long time. He's a strong person, a very strong personality, and that's why he runs such a successful and good company country, and really a great, I would say, a great country. Militarily, he's very powerful. People leave him alone. But he's really done a fantastic job. And from the moment we got off the plane, you look at the airports were beautiful. They built a new terminal for our arrival. Everything was beautiful. And so I just want to thank President Erdogan, who's done a fantastic job in Turkey. And I also want to thank NATO Secretary General Mark Ruta. Mark is an extraordinary person, smart, great leader. It's not easy leading so many leaders like that. Got a lot of leaders and their strong personalities, every one of them. And Mark, Mark does an unbelievable job. Couldn't find anybody better. I just want to say there was tremendous love in that room. The press got to see the sitting, but they didn't get to see the speaking. And I actually said, it's too bad the press couldn't see this, because every one of them spoke for a little while, and I spoke for a little while, and it's a big. It's a lot of speeches. We kept it short. But it's too bad the press couldn't have seen what we. What we were doing in that room, because it was very smart people. And they have a lot of good in their heart, not evil good. And they're doing a great job for their country. The world is doing well. We have, as you know, the oil is down. We'll see whether or not we keep it down. We should keep it down. We're doing things that should have been done 47 years ago with Iran. And I just want to say that throughout my first term and over the past 18 months, the United States has led a historic effort to dramatically increase the defense spending and to have equipment that no other country in the world has. When you look at Venezuela, when you look at Iran, essentially demolished their military in a couple of weeks. They had a good military. They had a good Navy. They had 159 ships. Everyone's at the bottom of the sea. They had hundreds of airplanes. They were all gone. They were all lying burned up on the runways. They were totally decimated. Their radar is gone. Their. Everything's gone. Their leaders are gone, frankly. And their combat capability is pretty low. They have a small percentage of missiles left. They have some of the launchers, missile launchers left. Call them launching pads. But most of that's been destroyed, too. So we are. We have the strongest military in the world by far. Not even close. Everybody admits that last year's summit in the Netherlands was great also, and we achieved an unprecedented agreement to increase the annual defense spending. And it's the benchmark, raising it from 2% to 5% of GDP, which everybody said was. And now they're all thanking me. And most of the countries have agreed to it. We have a couple of. Couple of that didn't. But I have a feeling they're going to end pretty quickly. In fact, today they were very positive. One of them in particular was, I didn't think a good team player today was a great team player. As all of the leaders understand very well, the United States remains by far the largest contributor to NATO monetarily and maybe otherwise, and the strongest military anywhere in the world. And they respect us as a country. Again, they didn't respect us two years ago. They laughed at us. NATO laughed at us. Everybody laughed at us. They don't laugh anymore. There's no more laughing. This year we invested a record $1 trillion in our armed forces, and we're going to be asking for 1.5 trillion. Coming up, we have the money being spent on the best equipment anywhere in the world. In the working session this morning, we discussed the progress other members are making toward the 5% target. And they're making great progress. Many of these countries are very rich, by the way. We don't have to feel sorry for them, but it doesn't mean they're properly protected. There's a big difference. Some have truly answered the call, and others are making big changes and will be answering the call. I think I can say in all cases, they're going to be answering the call and we'll be taking in over a trillion dollars a year toward defense. And that's a tremendous amount of money. That's a big up. They were at 2%. They were actually at 1%. I got them to 2%. Then I wanted to get them to 5. And we got up to 5 the last time. And they're, you know, just again, if you could have seen the respect and the love in the room. And it's love, really, for the country, for our country. I don't want to say me because you'll say, oh, he's so conceited. He's such a conceited person. But they do, I mean, you know, they, they like the job I'm doing. They said, we love, sir, we love you. These are grown people saying that isn't that nice. Maybe, I don't know, maybe they're trying to get to me in a way they did because there was tremendous unity in that room. And I urge all nations to all
- [12:58]
Scott Wapner
right, our Megan Cassell is going to monitor that news conference there at the NATO summit. President Trump currently speaking bringing any news that develops out of that of course back to the market story which is reacting to the conflict in Iran, the fact that the president declaring the cease fire over oil is up sharply. Stocks have been down sharply. As we bring it back to our conversation about what's happening really within inside this market, the makeup of it. Brandon, I'll toss it to you on the idea of this momentum breakdown and what it means for the bigger story here.
- [13:30]
Bryn Talkington
I think that momentum generally, and we had talked about this on closing bell, had been bouncing off the 20 day moving average. Most of those stocks across the momentum index are now below that. So a lot of those names are somewhat in no man's land between the 20 day and the 50 day which is much further down with the exception of Micron. So I like Jim's addition to that because Micron is just about to hit the 50 day. But I think that when you distill even closer, Liz mentioned the cost and you look at memory, I think the irony when Samsung had their pre announcement, I mean their net operating profits were up 1800% year over year which is what a 19x the stock's up about 350 year over year. So to me I think that it's hard to get too bearish especially in those memory names because just the earnings power is incredible. And so the run up in these names has been justified. And I think while you have price deterioration you actually have earnings momentum accelerating. And so I travel a lot. I think this is an air pocket but the plane is still firmly in that direction and I think the spend is going to be strong. So I think this is a healthy correction in an otherwise plane on its destination to spending more in these areas.
- [14:46]
Scott Wapner
I want to just go back to Jimmy because I don't want to gloss over it. As we were waiting on the president at Naito, the fact that you were willing to double up your position right here in Micron when others are suggesting that, you know the, the downside that we've seen is probably not over. You've got some of the technical damage that's been done the stock which may have gotten well ahead of itself even with the strong backdrop that Brin is talking about here and why you are willing to make this move right now when others are at minimum probably just standing back and kind of watching to see what develops next.
- [15:21]
Joe Terranova
So here's the answer as you as you know and I already said I initiated the position two weeks ago. I was looking for an excuse to double it up. We spoke to about that on Monday, Scott. When I saw the price action this morning and I may have gotten snookered by this but this morning the stock was up as the markets were down and I thought aha, maybe that's the tell that it's ready to start going back up. So I've initiated the doubling of the. I'm sorry, not initiated. I doubled the position. Now I do realize it's down as we're speaking but what gives me comfort, I acknowledge the technicals don't look good is the fundamentals of this story year to date please.
- [15:53]
Scott Wapner
Thank you. Technicals, sorry.
- [15:55]
Joe Terranova
Trading at six times forward earnings. As I see earnings estimates doing nothing but going up. We've talked at length, at length about the strategic supply agreements which to me are going to elongate this cycle and then on top of it very soon they're going to be start returning cash to shareholders in the form of share buybacks. All of these things come together to create a very positive fundamental picture for me. I may have gotten the technicals wrong in terms of what I saw this morning has since reversed but I'm okay buying it at six times forward earnings.
- [16:25]
Jim Laventhal
I love this trade. The technicals on this suggest this is exactly where you are supposed to buy the stock. It is pulling back into support. It's testing your 50 day moving average. You don't have to believe in the 50 day moving average but as long as you understand that an overwhelming percentage of people are reacting to price and the 52 moving average relationship then you're doing something critically important. Important it is pulling back exactly to where you want to buy it. I support that trade.
- [16:55]
Scott Wapner
J.P. morgan's trading desk does too. They asked time to buy the dip in momentum unwind. They say it is was yesterday the bottom we think you buy the dip. It feels like we may have seen the end of the momentum unwind with typical corrections averaging a 10 to 15% decline and currently momentum is seeing about a 13% peak to trough decline. That is as a, as a factor a lot of the other names within the group are down More significantly obviously than that you're talking about declines of 30% off the 52 week high for a KLAC and Intel 26.5 micron's about 27% off of the 52 week high that we had shown you on the screen there in that year to date chart that I was telling you about. And the other losses are fairly significant in other stocks too.
- [17:42]
Joe Terranova
Yeah. And I think it's dangerous to say that this day right now is the bottom. I can't say that. You know, and I am reminded of in video, during the last five, six years of its run up, it's had multiple times where it's pulled back 40%. So just seeing micron back 20% doesn't necessarily mean that this is the bottom. What I'm really saying is I'm comfortable enough with the fundamentals and the valuation to double up here. I may have gotten the intraday technicals wrong. Thank you, Joe, for supporting me on your take on the technical wrinkles. But it's really the fundamentals overall that are supporting me. And to the point, look, it is down 20% in two weeks. So if I liked it two weeks ago, I like it a lot more now.
- [18:19]
Scott Wapner
Okay. No, that's fair. And I think it's the natural comeback. If you liked it two weeks ago, how don't you like it today? Now, that's different than, you know, buying more of it necessarily today, but you can still certainly like it. Which brings me back to you and the idea of buying Nvidia as you promised our viewers that you would do yesterday at the close. In fact, you did just that as others sort of weigh in today on the fact that they see it as a buying opportunity as well. Because that stock has done about nothing month to date. It's down 2%, it's 17% off of its 52 week high. Therein lies the opportunity according to Jyoti.
- [18:56]
Jim Laventhal
Yeah, every so often you'll look at a particular equity name and you'll begin to take a position and say, okay, I'm going to build this over a long term, it's an investment. Or then you could take the perspective of tactically, I am going to lever up and make this one of my higher conviction trades. And I think that's exactly what I am doing here. Let's first tackle the fundamentals on Nvidia for a second. You think about the forward multiple on the S and p. Scott, it's 20 times. Think about the forward multiple on the NASDAQ. It's 23 times. Well, guess what has happened because of the contraction you cite for Nvidia. The forward multiple on Nvidia now is 18 times. So I'm not making the valuation argument, I'm making The argument of from the perspective of if the multiple contracts on the market overall it's already done the work on Nvidia. Nvidia's multiple has already contracted.
- [19:51]
Scott Wapner
It's at a seven year low by the way. 18 times forward is why B of A today says they see the discount as an enhanced buying opportunity.
- [19:59]
Jim Laventhal
Also you're Talking about the fourth fastest revenue growth in the S&P 500 this year moderating from the levels we've seen the last couple of years. I will acknowledge that they still have 97% of the GPU server market that is expected. It can't go to 100% or maybe it can but it's. It's consistently in the upper 90s. So. So you look at that fundamental picture, you understand what this company has done and then you add upon that the fact that it has been part of this internal AI rotation over the last several months where capital went to semi equipment, capital went to memory and it moved away from Nvidia. So I think about positioning of my peers in the industry and I say guess what? They're not sitting at overweight the way they used to. You've been in a sideways consolidation range and what I'm tactically building the position for is that it is going to break out of that range and move back towards 240.
- [21:04]
Scott Wapner
All right. The other move that you made that I think we should get to because Apple's been now it's lower today but it's been trading near all time highs. It's up more than 9% this week. It's. You bought more of it again. You didn't get to talk more about it yesterday. So he decided to buy more of it so that he could talk about it today.
- [21:26]
Jim Laventhal
This is the fifth purchase that I've had since the end of March and thank you for the opportunity to talk about it. I truly believe what we are seeing in Apple is the classic example of two things. First of all, did they not receive just looking at price itself the benefit of the doubt after the war Worldwide Developers Conference. Because that's what the question was. Right? There was disappointment at wwc.
- [21:51]
Scott Wapner
That's right. Give me a month. You were there a month or one month on that guy.
- [21:54]
Jim Laventhal
There was disappointment and Rightfully so. In June 25th the stock fell down to 273.
- [22:00]
Joe Terranova
You had the price hikes of all things. Okay. So the stock.
- [22:04]
Jim Laventhal
And here we are pressing towards once again a new all time high. I believe my colleagues back in New Jersey have made a graphic. This is a great representation of where sentiment is for Apple. When I look at the analyst community, let's take the Max 7, put Tesla off to the side, take the Mag 7 and say what percentage of the analyst community has a buy rating on those stocks so universally across the board, Scott, it's your Amazon, your Nvidia, your Microsoft. We're all above or near 90%. Then you look at the price targets and they're all generous, well above where current prices today. Where are we on Apple? Apple was sitting at 61% buy rating. Oh in the 12 month price target, Scott, it's only going to 318, another $6 from here. That's a pretty disappointing year for a company that's being given the benefit of the doubt and seeing the revenue build in the geographic region. Liz, that you cited China, Josh Brown
- [23:06]
Scott Wapner
yesterday saying it's going to 400. It's really interesting. I'm glad you had our team make that up for us. Look, in part it's a show me thing for the analyst community. Right. Just get the Siri thing right, get it past beta, get it fully integrated. Let's see what the deliverables are on the new phones in the fall and thereafter with the folding phone. See how you deal better. I think with the, the memory issues, your gross margins being impacted, are you raising prices? How much is that going to offset the gross margin pressure that you're facing because you're paying up for the memory. What's the deal with China? I mean there's still a lot of things on the table here that need
- [23:46]
Jim Laventhal
to be figured out given the benefit of the doubt. And I think the announcement today with Broadcom is very interesting. I think it's an extension of the good relations that management driven by Tim Cook has had with President Trump and his administration.
- [24:01]
Scott Wapner
Apple committing 30 billion to Broadcom. Right. Which by the way is up about 5% is Broadcom. After you finish I want to hear from Brent.
- [24:08]
Jim Laventhal
And Apple said 600 billion made in America. Here we go. Here's the handoff to John Ternus. A really good relationship with the administration.
- [24:17]
Scott Wapner
Brent?
- [24:19]
Bryn Talkington
Yeah, I think one of the key reasons why Apple, I think Apple's had a great year, especially when you compare it to its tech brethren of Microsoft and Meta. And so I think that up 14% is actually incredibly solid. One of the reasons I believe that the market will continue to give it a multiple well above the S and P and well above the Metas and the Microsoft and the Amazons is because Apple today is just what the business model is the same as it was a few years ago. Solid gross margins innovate on the phone and then repeat, repeat buyback shares and repeat. The other companies are in this experiment of becoming cap heavy after being cap light. And so I think from an allocation perspective, people feel very comfortable owning Apple because you know what you're going to get. They are not going to spend that treasure trove of free cash flow burning money like Met has been doing on experiments which clearly are going to take longer to actually generate a return. So I love Josh's, I mean, I love, I love Joe's ad and I think, you know, there's a catalyst. I don't care about the foldable phone. I think like go away. Samsung's had that for years. It's who cares. But I think the consumer is going to use the Apple phone until we see otherwise. And that to me is where they have everything to win on the consumer side of the front, sure.
- [25:39]
Scott Wapner
But the gross margin issue is a real issue. And what was isn't necessarily what is or will be. The fact of the matter is, is the dynamic around their gross margins has changed, at least in the near term, because of the elevated cost of memory. That's why you have them talking about potentially getting chips from China and wherever else. That issue is not going to be abated anytime soon. We can't just brush it aside as if it's a nothing burger and doesn't necessarily impact the overall story.
- [26:07]
Bryn Talkington
But we know that's not structural, that's not going to structurally be the same for the next three to five years. I don't know if they'll get the, the China chip. To me that seems very unlikely. Maybe they'll get it for Chinese phones. I find that very hard to believe that anyone would want the China chip in America. So you bring up very good points. And that's where I'm saying to get to 400 where Josh thinks the price, the price target could be, you need to have a catalyst. And I agree with you in the short term, but I think people are going to look through those temporary hit to margins and they're going to continue to say, hey, this company is generating a lot of free cash flow, flow. Their capex is like flat. And so I think that's just is a very big paradigm shift versus the other hyperscalers that are doing the exact opposite. Which to me is why their PS are shrinking and shrinking because people are saying we don't know what the ROI is going to be. So meta could get cheaper and cheaper. It doesn't mean the stock's going to go higher.
- [27:02]
Jim Laventhal
Scott, don't we think that if they need to raise price to rectify the gross margin challenge, they'll be be able to.
- [27:08]
Scott Wapner
I think no, they already, they already are raising price, raise price further. But even the analyst community, the ones that we speak with aren't convinced that it's a full offset because it's probably not right. You're going to raise price to deal with it. But the chances that they're going to raise price again, you're going to take the price of an iPhone higher again.
- [27:28]
Jim Laventhal
I believe that.
- [27:29]
Scott Wapner
And again and again and again.
- [27:30]
Jim Laventhal
Well, again and again and again gets problematic but and again I think they actually have that pricing power that they can and I think that's why the Analyst community sits at 318 for a 12 months price target. And I'm positioning their wrong.
- [27:43]
Joe Terranova
I think, I think brand hit it on the nose that it's about free cash flow. Apple over the next 12 months is projected to have three times the free cash flow of Microsoft. Microsoft, we know what they're doing. They're building data centers. But the reason that Apple's a darling right now is because of that free cash flow that nobody else comes close to.
- [27:58]
Scott Wapner
All right, coming up next, we debate our calls of the day. Want to talk to you about the performing sector over the last week and Liz's thoughts on that as you have a number of calls related to the financial space today that I want to talk about too. Plus well, we're back in two minutes.
- [28:16]
Jim Laventhal
Thursday, July 16th CNBC Sport and Boardroom join Fanatics Fest for Game Plan groundbreaking ideas shaping the future of sports and entertainment. Request your invite@cnbc events.com game plan.
- [28:44]
Host/Anchor
Welcome back.
- [28:44]
Scott Wapner
Still down about 700 on the Dow Financials best performing sector over the last week speaks to what's been happening with some of that market broadening about a 4 1/2% gain. Now that's before obviously some of the slide that we've seen today. You do have bank earnings, Liz, kicking off next week. Does this confirm this move into the sector or make us rethink it?
- [29:04]
Liz Thomas
I think earnings will hopefully confirm the move. One of the things that coming into 2026 most of us were worried about was what would happen with the yield curve. One of the most promising aspects of what's happened in financials over the last few weeks is that even in a flattening curve environment, financials have performed well. So if we step back and try to answer the question which I think most investors are trying to answer right now, when we're watching this momentum unwind in the tech trade, the question is, okay, we know that markets typically top before earnings top. So if we have this momentum rollover, are we now on peak earnings watch and we should be concerned that things are rolling over elsewhere? I think financials are screaming, no, that's not the case. Price, it's not over yet. We have more upside in the broader market, more upside in the economy. And look at what investors have done in that momentum unwind I mentioned before looking for opportunities for growth in health care. I think they're doing it in financials too. It's the second cheapest sector in the index right now on a PE basis.
- [30:04]
Scott Wapner
Can't be at peak earnings. Watch for the financials.
- [30:08]
Host/Anchor
Right.
- [30:08]
Scott Wapner
I mean there when you look at the breakdown and I'm not sure if we still have the ability to show you this from the other day when we broke down the earnings growth by sector financials, last I checked are still like low single digits, maybe mid single digit earnings growth.
- [30:23]
Liz Thomas
Right.
- [30:23]
Scott Wapner
That's why people think there's a pretty fair amount of catch up, don't you think?
- [30:28]
Liz Thomas
Fair amount of catch up. And think about, I mean in markets in general, when there's some sort of pain in one place, it tends to be somebody else's gain. So the pain that we're worried about in some of this tech trade and all the supply that might come online for the rest of the year, who's benefiting from all of those transactions, all these equity raises, some of the M and A that's been going on financials are benefiting from that. So this increase in capital markets activity is good for financials and if we get another tailwind of a steepening yield curve, even better. So I think there's, there's a lot of upside and there are a lot of good things that can still happen in the financial sector.
- [31:03]
Joe Terranova
A lot of good things. You touched on some of the them. But let's not lose sight of the fact that credit quality should be improving both on the consumer and the corporate side. I would expect Liz to see loan loss reversals in the coming earnings reports. You mentioned M and A tractivity trading volume. Just think about we've got SK Hynix going or raising some American issues on Friday. There is trading going on to raise the funds for that. There are many things that are going right for the financial.
- [31:28]
Scott Wapner
Why do you think credit quality on the consumer, the consumer front is going to improve?
- [31:32]
Joe Terranova
Because the labor market is improving. I mean it's clearly improving. Now, some might say to me, improving
- [31:37]
Scott Wapner
or is it just not deteriorating?
- [31:39]
Joe Terranova
It's improving. And I know somebody might say, well, last week's labor report undershot, it was still positive. Look at the initial weekly jobless claims. Look at the employment subcomponent of the ESM survey.
- [31:50]
Scott Wapner
Consumer credit numbers are pretty high, by the way. Yeah, right.
- [31:53]
Joe Terranova
I'm sorry, what do you mean?
- [31:54]
Scott Wapner
The consumer confidence or consumer credit debt levels, pretty high.
- [31:58]
Joe Terranova
They are on an absolute level. They are not on a ratio to disposable personal income level. They are not in some nosebleed level. When you look at income ratios. That's from the Fed.
- [32:08]
Scott Wapner
Okay. You look perplexed.
- [32:12]
Jim Laventhal
Delinquencies are moving higher.
- [32:13]
Scott Wapner
Yeah. Okay.
- [32:14]
Joe Terranova
They have normalized. Listen, this one I'm not going to back off on. Consumer credit is good right now.
- [32:19]
Jim Laventhal
All right?
- [32:19]
Host/Anchor
Warning.
- [32:20]
Jim Laventhal
I'm standing down.
- [32:22]
Scott Wapner
Well, I'm standing down.
- [32:23]
Joe Terranova
Well, you listen. I'm looking at both of you and you're both looking at me like. Like you're lining up arrows here.
- [32:29]
Scott Wapner
Threat taken. Contessa Brewer has a CNBC news update for us. Hi, Contessa.
- [32:35]
Contessa Brewer
Hi there. Scott Cruz in Manhattan worked overnight to shore up a massive apartment building under construction. After support columns buckled, the floors sagged. What we're hearing is that the building once served as Pfizer's headquarters. As an official say it been stabilized. But some nearby buildings remain under evacuation order. Several midtown streets still closed. The problem was discovered Tuesday after inspectors found damaged support beams and sagging floors. The building was empty except for those workers. They later went back in for emergency repairs. Kentucky Governor Andy Beshear is calling on Senator Mitch McConnell's office to provide an update on the 84 year old Republican's health as McConnell remains in the hospital more than three weeks after being admitted. McConnell has previously announced he will not seek an eighth term. And 711 is suing Nike over a new Air Max sneaker it says looks too much like the convenience store chain branding. The lawsuit says Nike used 7Eleven's orange, green and red stripe pattern and even planned a July 11 release the same day as Free Slurpee Day. We're just showing you random Nike stuff, not the actual design. Apparently Seven Eleven wants the shoes destroyed and any profits turned over. I have so many questions about this, Scott, but I'm just imagining in my head this shoe designer standing in Beaverton in front of the rolling hot dogs and thinking, you know what's missing from sneaker culture? Convenience store chic.
- [34:00]
Scott Wapner
Yes. Big Gulp and some. And some Nikes. I Want to see the shoe? Find us the shoe. Find us the shoe.
- [34:07]
Contessa Brewer
Me too.
- [34:07]
Scott Wapner
All right, contestant, thanks. Contested brewer. We have more committee stocks on the move to get to first though. ETF Edge. Dom Chu has that for us today. Domino, what's up?
- [34:14]
Host/Anchor
All right, so Scott, with all the shifting storylines around momentum value, low volume others, which areas of the market should be on your radar as things get rolling for the second half of the year? We're going to speak with an ETF analyst who's keeping a close eye on a handful of trades that could be poised for outperformance in the coming months. That story up next on ETF Edge on the halftime report. Keep it right here.
- [34:39]
Commercial Narrator
You're more than just one thing and
- [34:41]
Bryn Talkington
your vehicle should have more too.
- [34:43]
Megan Casella
More connectivity when you're the boss. Hey Google, when's my next meeting? More space when you're the ringleader and we're good.
- [34:53]
Bryn Talkington
And when you're the mom.
- [34:57]
Megan Casella
Everyone in the all new Mazda CX5 or to move every side of you.
- [35:02]
Commercial Narrator
Learn more@mazdausa.com Google is a trademark of Google LLC. Sequences shortened and simulated Thursday, July 16
- [35:10]
Jim Laventhal
CNBC Sport and Boardroom join Fanatics fest for game plan groundbreaking ideas shaping the future of sports and entertainment. Request your invite@cnbcevents.com gameplan
- [35:24]
Scott Wapner
well, we found it. That's the 7 11, the so called 711 shoe, right? That Nike. Well you just heard it. It's like the University of Miami 711 is not happy. Does that really look like a 711 shoe?
- [35:37]
Jim Laventhal
Oh, it looks like the University of Miami like the hurricane should wear it.
- [35:41]
Scott Wapner
Well, that's what Nike should say. It's happened to be released on 7 11.
- [35:46]
Joe Terranova
Okay, Nike stock down on the news. Let's take a look.
- [35:49]
Jim Laventhal
Nike stock is down, Jim.
- [35:51]
Scott Wapner
It is, yes. Dom Chu.
- [35:53]
Joe Terranova
Sorry, is the market up?
- [35:54]
Scott Wapner
Dom has our ETF Edge. I'll let he can react to this hour later.
- [35:57]
Host/Anchor
I already know guys. Scott, I think Nike stock is maybe down because of the suede toe cap on there. But anyway. All right, so some ETF watchers are expecting returns to moderate in the second half of the year while others see further opportunity in catch up trades and overlooked areas of the market. Joining me now is one of the latter which is Mike Aikens who's the founding partner over at ETF Action. Let's talk about a couple of key points here. First of all, Mike, let's talk about the growth trades out there that might have more upside because they are being underappreciated compared to the tech Trade?
- [36:30]
Mike Aikens
Yeah, I think you know, if you look at the first half of the year is dominated by AI semiconductors primarily leading the market. And as a result there's been this story, this apocalypse, this SAS apocalypse, fuel SaaS apocalypse. And I think, you know, if you really look at the numbers, you look at the estimates, you've seen software names, cloud computing names come down from their nosebleed valuations to be in line or many cases below that of the broader market with still very strong growth scenarios. So I really like the software and cloud names heading into the second half of the year as the earnings come out and these companies prove that yes we still do need software to do our day to day jobs. And then I also think if you expand out a little bit further into kind of the mid cap small cap names, one of those names I threw up there, dtech, you know it's a thematic strategy across a number of different themes, disruptive technology themes, but it kind of plays a little bit further down market into the mid small cap range. And those names have been kind of left behind in this mega cap semiconductor LED market and I think those could do quite well when you look through to their earnings growth estimates by, by the analysts it's just a pretty rosy setup.
- [37:47]
Host/Anchor
And Mike, really quickly any other catch up trades that you might like for the back half of the year?
- [37:52]
Mike Aikens
Yeah, I mean I think you know, the first half of the year while the conversation was dominated by AI and semiconductors, we actually had a very broadening of the market. Right. I mean who thought that Meg7 was going to be flat year to date at the halfway market and we'd still be seeing you know, the market as a whole up 10%, tech up 20%. So I think there's a, there's an opportunity here to continue to see that broadening. I like emerging markets X China primarily. One concern there would be just how large of an allocation you've gotten into the memory chips just because they're crazy run. So you may want to look for some different weighting methodologies or active management in that. But the other side then is smaller mid caps. I think you know, to the extent that you have some sort of screen for quality, for profitability, I like that to continue to play out. Small cap growth has done incredibly well year to date but so is value blend. All of the kind of down market names are really starting to catch up and I think you could see that continuing throughout the year not just from growing earnings, growing revenue, but also from an expansion of multiples that are extremely Depressed over the last several years.
- [39:05]
Host/Anchor
All right, interesting catch up trades for sure there. Mike Aiken said ETF action. Thank you very much for that. And remember, you can catch all of our other content over at ETF edge.cnbc.com we'll see you again here next Monday. Scott, I'll send things back over to you. And those suede toe cap sneakers.
- [39:20]
Scott Wapner
Yeah, thanks very much. That's Dom Chu. All right, coming up, we do have options action today. Oliver Renick is flagging some big activity in a name that reports earnings this week. Both Joe and Jim are in it, which means we trade it next. Options action time, which means we go to Oliver Renick. He is live at the CBO Global Markets in Chicago with more.
- [39:57]
Host/Anchor
Hi there.
- [39:59]
Oliver Renick
Hey, Scott. Options traders are in a tricky spot ahead of Delta earnings Friday. On the one hand, it seems like the Iran war is getting refreshed. But on the other hand, airline stocks are up since the war began. Delta shares are up 25% year to date, almost triple the return of the S&P 500 as carriers cite warm weather and strong consumer demand. But don't forget about higher ticket prices and the supply we lost when Spirit shut down. Options traders expect a notable spot swing 6% in Delta after earnings compared to a median 4% realized move over the past year. Put buying more than tripled call buying in DAL options today. And call selling was the most popular directional trade. But the biggest dollar amount trader of the day actually took the other side, paying almost $800,000 to scoop up 800 of the 90 strike calls expiring in January next year. Contracts that need an 11% rally to pay off. Scott.
- [40:56]
Scott Wapner
Oliver. Thank you. That's Oliver Renick. Want to do this here? Are we okay? Oh, that's right. I'm sorry. We're trading Delta.
- [41:09]
Liz Thomas
Are you with us?
- [41:10]
Scott Wapner
I don't know. Apparently not. Jim, save me, please.
- [41:15]
Joe Terranova
Yeah, I don't know what was going on there.
- [41:16]
Scott Wapner
It's okay.
- [41:17]
Joe Terranova
Yeah.
- [41:17]
President Donald Trump
Okay.
- [41:18]
Joe Terranova
Stocks off 10% in a week. So whereas last week I was expressing to everyone that it was ahead of itself, now it's no longer ahead of itself, trading at 10 times next year's earnings, which I think is reasonable. It's a little bit on the high side. But remember, the debt on the balance sheet has been going down as free cash flow has been in the three to four billion dollars a year phase for quite some time now. So look, I think this is a level at which you can have good gains from Delta. I am willing to add it with new money that comes into accounts.
- [41:46]
Jim Laventhal
You didn't give any TSA statistics, but demand is remarkably strong, in particular for Delta and United. We own both of them. You will hear a lot about fuel cost, fuel prices, the direction of jet fuel. I think the spike in jet fuel probably led to the spirit situation and that benefited the market share of both Delta and United tremendously.
- [42:08]
Scott Wapner
Okay, thank you. Coming up next, we have more stocks on the move. Big business of the World cup, big ratings, even bigger broadcast rights are coming, we'll tell you. According to our Alex Sherman, who's reportedly interested next, The president wrapping up his news conference at NATO. Let's get to Megan Casella in Washington who has the highlights for us. Hi there, Scott.
- [42:48]
Megan Casella
As you can imagine, Iran was the dominant topic at this news conference. The president elaborating on his comments from earlier in the day that in his mind the cease fire is over and that the US Would be attacking Iran again tonight. Reporters were trying to get clarity from the president on what exactly will be happening next. But the president sidestepped that question, saying only that what happens next is that Iran will never have a nuclear weapon. He said that's more important than any rise in oil prices that we're seeing today. He was downplaying any impact on the markets from everything that we've heard so far today. This time he sort of softened the stance on the next attacks. He says the US Might hit Iran tonight, but that he doesn't think that the war is going to start again, at least not full scale war. But he also said that he's not sure he wants to make a deal with Iran at all. He says we can play games, but I'm not sure I want to make a deal. Let's just finish the job. So a number of comments now from the president, but it's really not clear what exactly is going to happen next. Clearly we're on shaky grounds with the Iranians. The cease fire is off and likely more attacks from here, Scott.
- [43:46]
Scott Wapner
Okay, Megan, thanks for that update. That's Megan Casella. All right. Some stocks on the move want to talk about Netflix and Disney and Google for, for that matter, said to be interested in the US World cup rights. The package, according to our Alex Sherman, could reach $2 billion. Jimmy, go to you first.
- [44:04]
Joe Terranova
Frankly, that doesn't seem like an expensive price. You know, here, here in America, the importance of soccer, football is continuing to grow outside of America. It's already the most popular sport in the world, $2 billion. If either of those companies gets it for that price, it as A bargain.
- [44:20]
Scott Wapner
You'd be happy if Disney.
- [44:22]
Joe Terranova
I'd be very happy if Disney pulled away with it. Very happy. I have a feeling, Scott, that price is so low. I have a feeling there's going to be a bidding war.
- [44:30]
Scott Wapner
Okay. FIFA apparently alerting the media companies that the English and Spanish language rights are likely to be sold together, which would be different, which would only obviously escalate, make a price tag that it would cost whoever is the winner. What do you think?
- [44:46]
Jim Laventhal
I think the rights to live sporting events exactly where the focus and intention of all these streaming companies will be. We've seen it the last several years with Amazon, with Apple, with others. I like the rivalry that is intensifying and continues to intensify with Disney and Netflix. And I said last week, I don't think you were on Scott, but. But Netflix. Go after NBC Universal. Go get them. Go after NBC Universal. And you want to talk about a rivalry 10 miles apart, we'll bring you back to baseball here in New York with the Yankees and the dodgers in the 50s. How about Disney and Universal Studios 10 miles apart, owned by Disney and Netflix?
- [45:31]
Joe Terranova
So I think you make a great point that that's one of the things that Disney has that Netflix doesn't is the theme park. So I'm totally with you. That's what Netflix should go after.
- [45:39]
Scott Wapner
Okay, how about this? SLB calls of the day initiated outperform. 62 bucks at Wolf. That's you.
- [45:47]
Jim Laventhal
Yeah, I mean, look, collectively you've had a nice pullback in energy. You have opportunity in Diamondback, in Devon, in Schlumberger and Halliburton. A lot of it's dependent, though, upon oil not falling and reversing quickly below $70.
- [46:00]
Scott Wapner
Okay, Bernstein says now a good time for integrated oil exposure. Brian, I'll come to you. They like Exxon, their top choice. Devon and Diamondback and Diamondbacks, yours, they say, has the most upside in their coverage.
- [46:14]
Bryn Talkington
I mean, I think in the MP space, you know, they've got the C suite, they've got the execution, they've had a lot of capital discipline. And so I think really none of these companies increase drilling very much during this Iran skirmish, etc. And so I just think that capital discipline is there and the stock market price should continue to be rewarded.
- [46:32]
Scott Wapner
Okay, what do you.
- [46:33]
Jim Laventhal
What do you think about this call again? I think it's dependent upon oil itself. We've took small positions at the most recent rebalance and a lot of these names, but I think it's more prove it would sustain prices above $70.
- [46:46]
Joe Terranova
I'm a big believer in ExxonMobil, but I don't think it's dependent on crude oil. I think this is a long term hold. If you look at a long term track record for an ExxonMobil, it has been stellar and it doesn't depend on
- [46:57]
Jim Laventhal
where Crew one area of energy.
- [46:59]
Scott Wapner
Real quick.
- [46:59]
Jim Laventhal
Valero.
- [47:01]
Scott Wapner
Okay. All right, we'll do finals next. All right. I hope you'll join me three o' clock Eastern today on closing bell. Blackrock's Rick Reeder will be right here at post nine. And then a big interview from the soccer world. Alexia Poteas leaving Barcelona joining London City. It's a huge move in the world of football. She joins us along with the London City owner and investor Michelle Kang. So I hope you'll join us then for that big interview. Bryn Final trade I like Jim's trade
- [47:36]
Bryn Talkington
but I'm gonna go dram but then I'm gonna sell the September 70 calls for $7. I think it's a great risk reward trade.
- [47:44]
Joe Terranova
Farmer Jim Vertex Pharmaceuticals Exciting acquisition yesterday Yesterday diversifies their product line okay.
- [47:51]
Liz Thomas
Liz Thomas Real estate I think valuations have bottomed and rate hikes get priced out for the rest of the year. That's the tailwind.
- [47:59]
Jim Laventhal
Joti Nvidia is going to prove that Lag7 moniker is wrong.
- [48:03]
Scott Wapner
Okay, I will see at 3 o' clock the exchanges now.
- [48:07]
Commercial 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 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.
- [48:42]
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