Jim Leventhal (2:32)

Well, I'll start with we entered this phase a couple of weeks ago of bad news is good news and I hate it. Most of us hate it. When we get into this phase we want good news to be good news. But we are where we are. We got the lousy jobs report and now the odds of rate cuts are going up. Looks like maybe even three this year. I'm looking right now at the CME Futures monitor here and there's even a chance, an 11% chance of a 50 basis point rate cut in two weeks. I don't think that's what's going to happen at and I don't think disaster is befalling the economy or the stock market right now. What I think is happening is yes, there's a little slowdown in the economy but if we look at first quarter GDP, three, excuse me, second quarter GDP 3.3% we're tracking at 3% on the Atlanta Fed GDP for this quarter. 4.3% unemployment rate is still low. Here's what I think is going to happen though, Frank. I think next week you're probably going to get hot cpi, PPI just as the tariff front running has run through its course and now you're going to see the effects of the tariffs and what will will happen probably until you get the Fed meeting is a lot of hand wringing about stagflation ultimately. Think about what I just said. You've got a three handle on GDP growth, you've got a four handle on the unemployment rate. You've got profits growing, you've got the Fed cutting, you've got deregulation coming. And I say this is a pretty strong picture into the end of the year but we've got to get through a week, a week or two of hand wringing about potential stagflation. Don't pay attention to it.

Frank Holland (4:00)

Stephen, you wringing your hands at all about this nonfarm payrolls report came in at 22,000, estimate was 75,000. We are seeing a big market reaction but we're seeing a move to the downside. Just to keep it in perspective though, S and P about 1% away from an all time high. The composite, the Nasdaq still about 1% away from an all time high as well.

Stephanie Link (4:19)

Oh Frank, I think there were puts and takes in the labor market. The ADP was soft the nonfarm payroll numbers were soft, but the weekly jobless claims are actually just fine. So I think it's very mixed on the labor front. But this is what the Fed is watching. This is what the Fed is focusing on. This is why the Fed is going to cut two or three times between now and the end of the year, because it is cooling, but it's not collapsing. And that's very important. And there are other parts of this economy that are actually very solid, to Jimmy's point. So you have the ESM services expansion for a long time, two years actually, in expansion. You had new orders in the ESM report up six points. That's very encouraging. And then you had prices paid actually come down. That's a very nice combination. We know that services is 70% of the consumption in the economy. So business investment also is picking up. The first six months of the year, you've seen 10% annualized growth, and that's an investment in shipments, up 6% annualized growth. That's very healthy. That's exactly what the Trump administration wants to see. And then you have non financial corporate profitability at 3.4%. The first annualized, the first six months of the year, it was 5.7% last quarter alone annualized. So very healthy on other parts of the economy, to the extent the Fed does cut and cut more, that's going to spread, transfer life into sectors that we haven't seen any help for, which is housing, which is 10% of the economy. But there's a multiplier effect to housing. You buy a house, you have to buy stuff in the house, outside the house, and then autos, you have to buy a car to get from the house to wherever you're going. So I think that could spur different kinds of demand. So maybe different sectors start to do a little bit better.

Frank Holland (6:08)

You know, Steph, I know we're a services economy these days, but I'm also looking at the ISM manufacturing number that missed the estimate, still in contraction. Do you think that's a sign of possible cracks in the economy and something that equity investors in particular should be worried about?

Stephanie Link (6:22)

Well, it's been in contraction for a really long time, Frank, and you know this better than I because you cover the industry so well. So I think, though, that you are seeing slow progress. It's in contraction, but slow progress. I think there's pockets of manufacturing that are doing quite well. We've talked about the renaissance due to onshoring and reshoring AI datacenter power grid. That's all combined together and those areas are doing very, very well. The rest of industrial economy not so well. So it's a mixed picture on manufacturing, but I'm encouraged by the onshoring reshoring theme because it's a big theme. We're going to spend $4 trillion on electric electrification between now and 2050. That is a huge tailwind for the manufacturing economy.

Frank Holland (7:07)

All right, Malcolm Method, you want to come over to you bank of America with a note. Michael Hartnett and those guys always put out great notes. Headline here is that Fed under great political pressure to cut but and usually when somebody does a button there, the rest doesn't matter. But then he goes on to say but US Data weakening sufficiently to allow the Fed to cut credibly. So today I think most people on Wall street think the Fed's at least on the track to cut, at least as of today. We haven't gotten the CPI report coming up and the markets are still lower. Is that concerning that we're on pace for that cut still? We didn't get a jobs number that took us off that pace and the markets are moving lower.

Malcolm Etheridge (7:40)

I'm curious if the rest of the street maybe is seeing something different than what Jim laid out and Stephanie after, which is that maybe this four handle in the labor market unemployment number really does matter a little more than we initially thought. Right. Maybe it is a positive for interest rate cuts, but that also to your point, no news was good news before. Now we have the news and that's bad news. I think that maybe we should consider the fact that since the recovery from COVID we've been making the case that yes, all of these things are happening under the surface, but as long as the labor participation rate stays high, as long as unemployment stays something with a three handle on it, the rest of the party can keep going. Now here we are firmly at something with a four handle and I think maybe we're starting to see the market adjusting and saying that could be indicative of something less positive coming down the road.

Frank Holland (8:29)

So you're saying that some, some investors at least are saying something different than bad news is good news. Kevin, I'm going to come over to you One of the just quick data point dimension, another B of a note. Biggest inflows into cash last week, biggest inflows in the cash since January of 2025 over five weeks. Is that possibly another sign that investors are getting worried about not only the economy but about the path of the market?

Kevin Simpson (8:50)

Yeah, it used to be that that would be a contrarian indicator Frank, you would say that the retail investor is usually a little late to the party, but I think that at this point they're getting it right. They're looking at markets that have been tracking at all time highs. The undercurrents of the economy still being strong or valid. But can you get another 10, 15, 20% run into year end? Probably not. And if you do have speed bumps or air pockets, we already know from the past few years really since COVID that the retail investor will come in when there's a buying opportunity. So I think it's a smart move what they did last week and I would expect to see see them buy on pullbacks.

Frank Holland (9:24)

Another smart move, wearing eagles colors. Go Birds. I'm just going to mention it. We're going to keep going. All right, when we get to our chart of the day right now, of course, that's Broadcom rallying to a record high after better than expected results and guidance. Christina Parts and Evil has joins us now with more details. Christina?

Stephanie Link (9:38)

Well Frank, demand really continues to float all boats, especially Broadcom. The custom chip maker said they will see ongoing 60% growth from existing customers and a fourth customer is expected to add 10, $10 billion in sales in fiscal 2026. Those AI updates are why we're seeing the stock what soar to an all time high today, up a 9% and actually overshadowing what Truist calls imperfections like weaker non AI revenue that we did also see in the corner. CEO Hock Tan revealed that the chipmaker has locked in this fourth customer for custom AI processors. With shipments ramping up in 2026. Analysts at JP Morgan, Morgan Stanley and the Financial Times say the customer is actually OpenAI joining Google, Metta and ByteDance on Broadcom's roster. This deal though with OpenAI really underscores a shift in AI compute by betting on custom chips over Nvidia's powerful and we can say pricey GPUs. OpenAI is making a pretty clear break yet from Nvidia's ecosystem. And this could threaten the margins behind Nvidia's run as Wall Street's most valuable chip company, adding to shares which are lower today, down six out of the last six, seven business days. Hock Tan, the CEO of Broadcom, did renew his contract through 2030, suggesting he sees something worth sticking around for. And so that's why you're seeing so many analysts racing to increase their Broadcom estimates with citing potential room for further upside to come. And that's why the shares are higher, right?

Frank Holland (11:06)

Christina Parts and evil is live from the nasdaq. Christina, thank you very much. Link, I'm going to come over to you. I had a Web Bush analyst on my show earlier today. He said best earnings call of this entire quarter. He said Hock Tan was basically one of the best salespeople on Wall Street. Do you agree? Is this more of a sales pitch than a real fundamental reason for this stock to be hitting a record high and up 9% right now?

Stephanie Link (11:27)

If you know Hock Tan, he's not a sales guy at all. He delivers. He's excellent at doing M and A. And this company has really transformed. It's not just AI, which was obviously the bright spot, growing 63% year over over year, but it's also software that where they're growing. And that was basically better than expected. That's VMware. That's the acquisition that nobody liked that he is actually transformed for his company. And that's a big reason in my mind why you have, why they have industry high gross margins. And gross margins were up 99 basis points year over year to 78.5%. That is unheard of. And so I think, yeah, the, the reason the stock is up is because they did announce this new fourth customer. I think there's another customer coming next year. And they could get to $100 billion in AI revenue by 2027. And that is up substantially from just two years ago when it was like 10 to 30 billion. So Hock Tan staying, I think is absolutely critical for this company to deliver and to execute and to do more M and A, but to continue to grow above expectations. And it's just not as owned as Nvidia. There's something wrong with Nvidia. I don't own it because everybody owns it and people and Broadcom is getting more popular. But I do think there's more upside to the numbers.

Frank Holland (12:50)

By the way, you missed your chance to say mystery customer. This is like everybody gets to say mystery customer today like you didn't do it. Kevin, I want to come over to you. You also own Broadcom, but can we show like a 24 hour chart? Because a lot of analysts came out with quick reaction notes to the, to the quarter. And it was a good quarter overall. But the stock, it really seemed to kind of move higher after that news came out about the quote, unquote, mystery customer. Reports are, it's open air. I want to get your take on the quarter. And the idea of this customer coming in and buying $10 billion of chips. What does that mean for this company.

Kevin Simpson (13:18)

I mean, Stephanie hit all the high points of the earnings report, which were excellent. This is what we were expecting to see from Nvidia and to a large extent we did. But to your point, Frank, it was the post game presser, it was the guidance that really took this stock up in the aftermarkets and it held today through trading, even when the rest of the market's rolling over. So I think it's really compelling that there is a competitor to Nvidia and one that has won a large contract. Probably you're right. I don't think the secret might be out that it's open air. Not that many other candidates at this point, although there are certainly a few. And then when you look at the guidance for 25q4, 26, very, very positive. So why is Nvidia down and Broadcom up? Is this the death of Nvidia? I don't think so. I think what happens oftentimes is that there's a lot of portfolio managers who are going to dress their book heading into October. This is a scenario where maybe they were under weighted into Broadcom. I know Stephanie was and I'm glad we own it. Heavy in Nvidia. So maybe there's a little bit of a rotation there as you, as you do a little window dressing.

Frank Holland (14:16)

So a little rotation. I mean, Nvidia is on a four week losing streak.

Kevin Simpson (14:19)

If you're a portfolio manager and you have a ton of Nvidia and nobody Broadcom, and now you're going to have to report at the end of the quarter. What you want to make sure is that you've got Broadcom on your books for your quarterly report. So you have a lot of Nvidia, a little bit of Broadcom, you're going to be rotating. I think there's a large part of that happening.

Frank Holland (14:35)

Jim, you own Nvidia concerned about this four week pullback. Concern that maybe, just maybe that moat that Nvidia has is shrinking a little bit or is there enough room for everybody in this party?

Jim Leventhal (14:45)

Yeah, the latter. I mean this is, this is a total addressable market that's of big enough size and Nvidia is supply constrained. Excuse me. You know, they just can't produce enough chips to satisfy demand. I don't see that changing anytime soon. I do want to quickly say congratulations, Stephanie. Congratulations, Kevin. You guys have talked about Broadcom for quite some time. Stephanie, I remember when you're talking about the dividend Yield was like 3 1/2 percent. This was a value stock at one point in time. So really well done. But there is definitely enough room in the the sandbox for a sandbox for both players. And I see in video at a 30 times forward multiple a peg ratio of 1.4 and people still can't get enough of its chips. And look out if you actually do get any China orders which are absolutely not priced into the estimates. So I'm comfortable holding in video here and holding it in size.

Malcolm Etheridge (15:35)

Frank, can I just add to that though? I think that you painted a picture where we've got month high cash hoard that's been accumulated. And I think part of what was contributing to that story is a lot of investors have been waiting, anecdotally waiting for the next drop. We're waiting for the next April because we feel like we missed out pre liberation day. Right. And I think that what you're seeing is a lot of investors who have been building up cash, building up cash, waiting for an opportunity to step in and buy something. So to Kevin's point where we're getting this sell off in Nvidia from folks that know they better rotate into Broadcom to say hey, we were there too before they have to report in October, you're going to see folks step in starting next week to buy shares of Nvidia to pile back into that trade because this was the opportunity they were waiting for.

Frank Holland (16:20)

By the way, you're also an Nvidia shareholder as well. No concerns about a four week losing streak. Kevin seems to think it's a rotation. The stocks has a lower 4p E than Broadcom does, supposedly has a moat. China orders should be coming in even though you know Nvidia has to give about 15% of those revenues to the government. It's not concerning at all with all the tailwinds for Nvidia to see it pull back for four straight weeks.

Malcolm Etheridge (16:42)

Thank you. I don't want to sound like I'm not concerned at all. I was raising the case this time last year that Nvidia's biggest issue was the fact that it has four customers that make up the lion's share of its revenue. If one of those stopped spending, Microsoft I think is estimated to be 23% of that revenue number. So if they were to pull back or shift to some other competitor, say a Broadcom, for example, and start to have their relationship for chips go there, that definitely is concerning as an Nvidia shareholder. But I think the thing that you really can hang your hat on as an Nvidia investor is the fact that for the last two years at least Their accounts receivable has been two times, their inventories consistently quarter after quarter. That is the thing that really should matter to you because they can't keep it on the shelves. To oversimplify. And that is the thing, I think that helps to convince you that that moat is real.

Frank Holland (17:35)

Jimmy, I know you want to go, but isn't the idea that you can use the, the Broadcom share chips. Not shares, the Broadcom chips, to do some of the things that Nvidia can do? And while they can't keep it on the shelves, if people continue to try to work with other chips, whether it's a, you know, deep Seq, which didn't really seem to be real, but just other chips and other things, I mean, doesn't that just shrink not only the mode around Nvidia, but just the aura around it?

Malcolm Etheridge (17:58)

Sure, but that's today, right? We're talking about Nvidia being the 80% dominant company when it comes to the global AI chip demand. Right. But we also have to consider Jensen Huang's ability to find the next parade and get out in front of it. He's already talking about their shift to autonomous driving. He's already talking about the fact that AI is going to move from in data centers today onto mobile devices and that requires a different chipset. So I think at some point we've got to consider at least the leader. The winner here is likely to keep on winning more so than they are to cede too much ground to a competitor like a Broadcom. But to the point I think Kevin was making, there's room for everyone here, right? There's not necessarily a finite demand yet for anyone.

Frank Holland (18:41)

That was your same point, Jim. I know you said something else you wanted to throw in the mix.

Jim Leventhal (18:43)

Yeah, well, first off, I want to point out he's Mr.

Kevin Simpson (18:45)

Cool.

Jim Leventhal (18:45)

He doesn't get.

Frank Holland (18:46)

I can see. That's why I asked two times. I mean, no concerns whatsoever.

Jim Leventhal (18:50)

And you did truffle it. Look, if you want to be in a stock, any stock that gives the returns that Nvidia gives, or frankly Broadcom, you have to be prepared for downturns. And the stock, albeit four week losing streak, is off only 9% from its fifth all time high. You know, it's up what, 55% in a year, 25% year to date, you have to be prepared for drawdowns like this. And this is nothing. I mean, in Nvidia, down 9% from its recent high, that's nothing compared to drawdowns. Remember in the beginning of the year when Deepsea came out and stock was down below $90 a share. I don't think this is anything other than what Kevin pointed out as a rotation. And I didn't hear you say this, Kevin, but it's kind of like a one or a few days worth of rotation that we're going to be talking about here before people are done with the move into Broadcom. Broadcom will still continue to do well, but people are going to look at Nvidia and say this is a buy the dip moment.

Malcolm Etheridge (19:41)

And three or four times a year Nvidia falls 20% or more. Maybe this is one of them.

Frank Holland (19:45)

One of the chips that we got to hit. Very quickly, ASML upgraded to buy from neutral ubs. They make kind of the equipment that you need to actually produce these chips. Malcolm, you own this one. Is this just a bounce off Broadcom earnings or do you think there's also a broader tailwind when it comes to asml?

Malcolm Etheridge (20:01)

I think it's a broader tailwind. I think it's. So I made the case probably exactly a month ago, initiated a buy myself, bought shares personally in ASML because I want to own the bottom of the supply chain as this rotation that I just got done talking about from data center chips onto mobile devices. And I think the mid step is going to be on the networks themselves. T Mobile, Verizon and AT&T. But as devices get smaller and smaller, the chips have to get smaller and smaller, right? Moore's Law. ASML is perfectly positioned so that as companies Taiwan, semi, their biggest customer tries to get smaller and smaller nanometer chips onto those devices. That runs through asml. And each time they sell a new machine, their flagship machine now is selling for something like $400 million. So it's not nothing. Every single new machine they sell is going to be additive to that revenue number. So as that device refresh happens, as an ASML shareholder, I think that's going to send those shares in the other direction again.

Frank Holland (21:00)

Like I said talking to Wedbush earlier today on my show, they said this Broadcom report is good for everything. It's good for infrastructure, it's good for power, it's good for software. Speaking of software, Stephanie Link, you've actually made a software by buying some Snowflake?

Stephanie Link (21:14)

Yeah, the stock has had a nice run year to date it's up about 40%. But it fell 5% yesterday after the company announced that they have a new CEO that will be joining the company. He has no massive experience in the industry. The old CFO is simply retiring. I have no Issues whatsoever with the transition. I think it's going to be great. This company is growing earnings at 94%. They're growing product revenue growth at 32%. Operating margins just rose 610 basis points. And I just think the company is just in the beginning stages given that in terms of data, data and collecting data and having the size and the scale. And they're going to continue to gain momentum as we're all talking about AI and data centers and all that stuff. And so to me, a 5% drop on something that I think was kind of silly after such a great quarter, Frank, it was just too tempting.

Frank Holland (22:12)

So right now where it's at, right now we're looking at a year dates up about 45%. Right now it's up about 1%. So you see even more upside for this name going forward. Is this again off the back of Broadcom or just generally you're seeing just more kind of win in the sails for the trade. And Snowflake being a beneficiary.

Stephanie Link (22:29)

Yeah, they, they launched about 200 new products in the past year. They have a CEO that's been there for the, for the past year underneath these new products and they're delivering and they're gaining more and more market share and they're very, they're a very unique player. There are not a lot of them out there in this particular particular space as a pure play. I wouldn't even be surprised down the road. Maybe they get taken out. I don't think they would sell. But they have such a unique product and the execution is the thing that has actually changed. And so it's been very impressive for the last four quarters. The CEO has beaten expectations and I think numbers are going higher. And what I think is really interesting is operating margins are still in the 7, 8%, 9% range. I think that can get to 15% over the coming years. And so if you have that top line growth from all of this momentum and then you get the margin expansion, you're going to have huge operating leverage to the bottom line, which is why I say earnings grew 94% in the quarter and revenues overall revenues grew 31. Product revenues 32. That's the operating leverage story that I'm talking about.

Frank Holland (23:36)

All right, got another buy here on the desk. Malcolm, you actually made, you kind of made a switcheroo when it comes to the cybersecurity space. You bought the bug etf, you sold out of the cibr. I think a lot of people probably asking, what's the difference? They're both cybersecurity ETFs. Why make the change?

Malcolm Etheridge (23:50)

I appreciate you framing it that way because on its surface, you would think that based on its mandate on the etf, you would think that. But CIBR has gotten a little bit too overweight. Everything but cybersecurity. Its number one holding right now is Broadcom, which last time I checked was about 10, 11% weighting. It's probably massively higher than that now that the shares have popped. And number two on that list was Cisco. So I would have to go down to the number three holding to find the first one that's a pure play cybersecurity name. And so I just decided to sell out earlier this year, take those early wins and call it a day. And have rotated now throughout this week back into cybersecurity using Bug, because I see it as a more clean way to play the consolidation that I think is going to continue to happen in the cybersecurity space. So we've seen, you know, the announcement of the deal with Cyber Arc and Palo Alto. We saw the acquisition of Whiz by Google. I think that that wave is going to continue this year and into next year. And so Bug to me looks like an opportunity to play that consolidation without having to pick which will be next up on the list.

Frank Holland (24:53)

Really quick to see the yes or no, because we got to move on now. About 10% of CTF is a. Essentially Palo Alto because it was 5% cyber arc. Five and a half. And it was already 6% Palo Alto. So 11%. Just one stock. You okay with that?

Malcolm Etheridge (25:05)

It'll get rotated. It'll have to get rotated.

Frank Holland (25:08)

Out of coolest customer. Jim. Cool this customer. This isn't our chart of the day, but we've got to show you this chart right now, the Tesla chart. Take a look at Tesla shares. They're up just about, I think, two and a third percent, two and a half percent right now. Big spike announcement today about Elon Musk pay package. Stephanie, like I'm going to come over to you. $975 billion, nearly $1 trillion. But that's at the highest end. In all fairness, he's got to grow at the market cap, I believe, to a trillion, eight and a half trillion dollars. A lot of really good things have to happen for to get that 975 billion. Just your take. The idea here is to keep Elon Musk focused. Do you think this is what it takes to keep it focused?

Stephanie Link (25:45)

Would keep me focused. It would keep all of us focused for sure. But this Obviously, is to keep him focused. And that's something that he hasn't been over the last couple of years. And so I think this is certainly motivation. I think that there's still a huge opportunity for Tesla. I don't own it, but I do think that this is certainly a smart move. I think it still has to get approved though, so we'll see what happens. But yeah, no, I mean, this is a great incentive to get one of the smartest geniuses in the world to get, get focused and figure out how to be consistent with execution.

Frank Holland (26:20)

Speaking of getting it approved, Kevin Simpson, you're a shareholder. Are you voting yes on this pay proposal for Elon Musk?

Kevin Simpson (26:25)

Yeah, 100%. I wish we were shareholders in 2018, the last time there was an impossible, ridiculous hurdle to, to achieve because as shareholders think about what that's done now. You talk about 7.5 trillion. That's, that's pretty crazy. But it's 10 years into the future. He's got to have 20 million autonomous vehicles. He's got to have AI robots. But the one thing in this shareholder vote that's interesting that we didn't touch on is that there's an opportunity for Tesla to invest in X AI and I think for the robotaxi and everything to work for Elon's full vision to come into practice. And again, we own this for autonomous vehicles, robotics, not necessarily for the car company. Having that investment approved by shareholders shares would be a real coup. So you get Elon Musk focused, you get him for 10 years. And I think as a shareholder, I'm going to make that bet.

Frank Holland (27:13)

All right. Tesla shares up over two and a half percent again on the news of that Elon Musk pay proposal. We want to turn to some breaking news. Our Steve Liesman joining us now with that breaking news. Steve, over to you.

Jim Leventhal (27:25)

Frank, thanks very much. Treasury Secretary Scott Bessen has published a broad and sweeping criticism of the Federal Reserve in an issue which is now online. And we've read the whole thing, or most of the whole thing, in the magazine called the International Economy. In the article he calls for an internal Fed review of its policy and all of the things it does and even suggests that the regulatory function, the bank regulatory function, should perhaps be stripped from the Federal Reserve. Says the FDIC in the office that comes to the currency are better situated to fulfill these bank regulatory functions. He several times notes the failure when it comes to Silicon Valley Bank. He says Fed policy has led to inequality, undermined its credibility. He talks about mission creep, gain of Function policies and all of these, he says, has threatened the Fed's independence. The Fed, he says, needs to scale back distortions it causes in the economy, which is not even a veiled reference to the idea of the, of the Fed's balance sheet, says the Fed must establish its credibility as an independent institution. He accuses the Fed of having political biases in its models. In other words, what its models tell him about the outlook for growth when it comes to government spending versus tax cuts. The Fed, he says, has become beholden to its self interest at the cost of national interest. Monetary policy says, should not be made in the White House or on Capitol Hill. So he's still backing Fed independence. But he said it's the obligation of leaders to point out the Fed's shortfalls. He calls for QE to be used only in true emergencies and in coordination with the rest of the government. So this is a 3,000 word piece. I think I've read all but the sidebars. One of the sidebars is going to find it here. It's called Capitalism for Everyone's Socialism for the Markets. So Frank, I don't know. The bigger question is is this a precursor to some big changes that might be suggested by the treasury or is this just the treasury sector giving his thoughts and feelings and no political consequences? But certainly this could be a context for action in Congress, Frank, when it comes to the Federal Reserve.

Frank Holland (29:35)

Yeah. Very interesting timing as well, our Steve Liesman. Steve, thank you very much, Jim. I want to come over to you. It's the timing of this is, is very interesting as we know that the Treasury Secretary said this is a quote, he's going to interview an incredible, incredible group of potential Fed chairs this week right around Labor Day to come out with this scathing criticism of the Fed, its independents, while he's interviewing a potential Fed chair or an incredible group of them. Yeah, interesting at least.

Jim Leventhal (29:59)

Yeah. I'm not, I'm not happy to hear this news at all. You know, Treasury Secretary Bessant has been the smartest, most sane, most sober person in the Cabinet. He was the one who effectively kicked out Peter Navarro when Liberation Day went went the way that it did. But perhaps Treasury Secretary Bessant knows that he's got to at least appear to be singing from the same page in the hymn book if he wants to stay in the Cabinet. I hope that's what this is. I think he knows, I think he knows that Fed independence needs to be upheld. I'm also hopeful, but this, this may sound terribly naive. I'm hopeful that the president understands it as well and that what he's trying to do is kind of jawbone interest rates down leading up into the midterm election so he can kind of goose the economy, solidify his, his, his, his majority in both houses of the legislature and then maybe back off of this campaign against the Fed. Make no mistake, removing Fed independence in a bad idea. It will lead to higher interest rates, higher inflation. So I can just only hope that this is temporary and that Mr. Bessant knows it as well and is playing along.

Frank Holland (31:08)

All right, so that just came out. Looking at the 10 year right now still at 4.07. So we're not seeing any real movement in the bond market, at least not with the benchmark. We're going to have to continue to keep our eye on this story. All right. Coming up here on Halftime, Lululemon shares they're really feeling the squeeze after cutting Outlook. We're going to see where the committee stands on the state of Reg. Kevin Simpson is also making a move in that space, that trade and much more. Coming up Halftime. Back in just two minutes.

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Kevin Simpson (33:04)

For the biggest news and exclusive.

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Frank Holland (33:10)

Get the CNBC Sport newsletter delivered weekly to your inbox. Sign up for free@cnbc.com sportnewsletter and welcome back to Halftime. Take a look at Lululemon shares under quite a bit of pressure after cutting its outlook as tariffs take a bite from profits. You can see right now shares are down more than 18%. CEO Calvin McDonald told CNBC he's not happy with the company's growth, especially especially in the US we're going to trade this one step. You don't own Lululemon, but you do own the Gap. They have a subsidiary, Athleta, very similar to Lululemon, at least comparable. What do you make of this quarter? What does that say to you about the state of retail and possibly even the Gap?

Stephanie Link (34:00)

I don't think it has anything to do with the state of retail. I think Lulu has missed the mark on product, product quality, reliability, pricing and you have huge competition, competition. So to the point of Gap. So they own Athleta. Their comps this past quarter were down 9% and they knew that that business has been, has been so weak that they just actually hired an executive From Nike, a 20 year old exec, a 20 year person who was at Nike for 20 years to run Athleta and to turn it around. It's going to take time but the problem is Frank, there's just so much product out there. Viori and Aloha Alo is a huge hit with Gen Zs. I love and live in Vori and it's just there's a competitive environment that is was never there prior to the last say three or four years. So I think it's going to take a really long time for Lulu to get its act together. Its pricing power I think is diminished because you know, there's again a lot of competition and, and no one really wants to buy $100 t shirt, that kind of thing. So plus it's not even all that cheap and so I think it's going to take time for it to recover.

Frank Holland (35:05)

Yeah, Lulu shares pulling back about 18% right now. I want to come in over you, Kevin. You're making a move in the retail space. But it's specialty retail, it's Home Depot. So is this a play on the idea that we're going to get these rate cuts, we're going to see more liquidity in the housing market, or are you seeing something else there?

Kevin Simpson (35:21)

No, I think it's just as pure as a lower rate environment. Because if you think about the retail consumer, we've been waiting since the pandemic for massive upgrades, appliances, wall coverings, floor coverings. But it's not just the retail consumer. If you think about it a little bit further, multifamily homes, commercials, they haven't done much in three years just waiting for rates to come down. So we're going to see a big overhaul for new lobbies, new elevators, all of the things that you would do in your home, you're going to see in multifamily. So yes, this is a lower rate play. Get almost a 3% dividend while you wait. We picked it up the other day in advance of today's new news at 407. I know it's popped the past few days, but as an investor, I think you want to own this for the next couple of years.

Frank Holland (36:01)

All right. Home Depot shares up over one and a half percent right now. When you get to the headlines with our Silvana Hanow back at CNBC hq. Hey, Silvana.

Stephanie Link (36:09)

Hey, Frank. Good afternoon. All right. The Department of Homeland Security says a multi agency rate at a construction site for a new Hyundai NLG joint venture in Georgia is the largest single site operation in the department's history. A DHS official said today the 475 people arrested were in the US illegally and most were Korean nationals, officials added. No charges have been filed. Warner Brothers is suing AI company Midjourney for copyright infringement. In the lawsuit, the studio accuses Midjourney of allowing its users to create AI.

Jim Leventhal (36:44)

Generated images and videos of its copyrighted.

Stephanie Link (36:47)

Characters, including Superman and Batman. Warner Brothers is the third Hollywood studio to sue Mid Journey following Disney and Universal's join suit in June. Midjourney has yet to comment and two of the biggest names in the boxing world have agreed to a match next year. Last night CSI Sports announced 59 year old Mike Tyson and 48 year old Floyd Mayweather signed contracts for a fight in the spring. However, CSI didn't share details about the bout such as the day broadcasting partners and potential professional sanctioning. Halftime report returns after this break. Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella. Edu.

Malcolm Etheridge (37:56)

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Jim Leventhal (37:58)

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Stephanie Link (38:05)

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Jim Leventhal (38:12)

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Jim Leventhal (38:19)

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Frank Holland (38:39)

And we are back on half time. Senior markets commentator Mike Santoli joins us with his midday word coming from EC. Mike, we're used to seeing you right here.

Jim Leventhal (38:47)

Yes, you know, I'm with you there in spirit still, Frank, look, I think we got a little bit of an on the fly rethink of the, the jobs numbers as we digested them today. Now I think the market, what we have to keep in mind was priced for a relatively ideal scenario of, you know, soft enough labor market that we get our Fed rate cuts. But it doesn't really raise too many questions about the underlying strength of the economy. I think there's enough in here. The market is trying to kind of back off the idea that the consumer will be perfect and banks can, can rally through. This hasn't really been, I don't think decisive in that regard. But it definitely shows you that the market felt the need to add in just a little more doubt along those fronts. I will say their market breadth is relatively, relatively positive today. The small caps are trying to hang in there. The rate sensitive parts of the market are trying to do some work and then of course trying to absorb this pullback in Nvidia and Microsoft which is really weighing on the S and P very quickly.

Frank Holland (39:43)

Mike, Nvidia on a four week losing streak, on pace for a four week losing streak. How concerning is that about the strength of this market? Just the weighting of Nvidia and a four week slide.

Jim Leventhal (39:52)

Obviously it's going to be a drag on the market cap weighted index. It's suggests also that the AI story is getting a little more nuanced in terms of maybe it not being everybody wins all the time because Broadcom obviously seems like it's, it's stealing a little bit of the Thunder. And then, you know, technically speaking, I know you guys might have been speaking about this earlier, but Nvidia has been trying to fight this war at the 170 level for quite a while like the last several days. And you know, we've given that up, see if it really matters. For further downside.

Frank Holland (40:21)

Yeah. Related note, Broadcom actually hitting its consensus price target right now at the 337. Mike Santoli with your midday word. We'll see you coming up on the exchange in just a bit. Thank you. All right. Coming up next, another committee move. Stephanie Link has a new buy in the financial space. We're going to give you that trade coming up right after the break. And welcome back to halftime. Let's talk the banks. The XLF hitting a new record high today. Steph, you got a new move in the space?

Stephanie Link (40:59)

I do. A capital one. I've actually never owned this stock before. But it's a couple of things. It's a play on the consumer which I am in the camp that the consumer is in healthy, fairly healthy shape given labor market. They have jobs, wages and good, fairly good credit. But more importantly, it's the decent Discover deal that they completed in July. It's going to be massively accretive. I think this is a case where you have one plus one equals three synergies of 2.5 billion leads to double digit earnings growth, $26 a share in earnings power by 2027. More importantly, I think it gets a rerating because they just bought the payments network with scale and you need scale in the payments business. American Economy Express has it now. Capital One has it. And so that I think is going to be very positive. And even if we do stumble a little bit with consumer or the economy, I think we fall back on the synergies of Discover. They also have excess capital, so a lot of excess capital. And so I think you're going to see buybacks, increases of dividends and that sort of thing. So 14 times earnings, this historical average has been anywhere from 4 to 22 times. So somewhere in the middle. It's had a nice run year to date, but I still think there's more to go.

Frank Holland (42:12)

All right. Keeping we're going to continue talking about banks. What's up Goldman a bit. Kevin, you on this one. Goldman yesterday said it's going to invest as much as $1 billion in T. Rowe Price to team up with the asset manager to sell private market products to retail investors. Your thoughts on what this could potentially mean for Goldman and just the idea of selling these private market products to retail investors.

Kevin Simpson (42:32)

Well, I think I'll pass on giving you my opinion on selling it to private investors because I think there's so many layers of fees that I doubt it's ultimately going to benefit the 401k participant. But that being said, I think it's a fantastic move for Goldman. Goldman and David Solomon were criticized in the past for going into the retail space. I think this move is Fantastic. They pay $1 billion to get a 3.5% stake of T. Rowe Price, which is a company that certainly isn't the household name that it used to be. And this gives Goldman the ability not just to put their spin on things within the 401k market, but also to get those private investments into the 401k space, which is massive.

Frank Holland (43:08)

All right, Goldman pulling back about one and a half percent right now. Straight ahead here on halftime, your health care playbook. Stephanie is ready with her latest trades in this year's worst performing sector. We'll debate it. That's coming up right after the break. And welcome back to halftime. Health care is the worst performing sector this year. Steph, length, you're taking advantage of this weakness by making a few moves in the space.

Stephanie Link (43:42)

Yeah, I'm still underweight health care, but I've owned GE Health Care in the past and recently the Stock has fallen 21% from its highs. So it got me looking into the fundamentals. And the fundamentals are actually pretty good. Good. They beat, they raised last quarter. They increased organic growth, gross margins, operating margins, earnings, free cash flow. They're reducing their debt. They have a billion dollar buyback. And I think the China supply chain issues are well known. And that's your catalyst probably for 20, 26 and beyond. But it's well known factored into the valuation in my mind in the book to bill is over 1 and the factor log is at 21.3 billion. So I'm kind of scratching my head. It doesn't really make a lot of sense to me that why it's down so much. And oh, by the way, Frank, you know I like spin outs, right? And this is a spin out from GE where because management's management of the spin co can be 100% focused on growth. And I think that's what they're doing. I just don't think it's appreciated right now. So I bought that and I use the proceeds from Intuitive Surgical to buy GE Health Care. Still like Intuitive Surgical. Just that GE has fallen so much, I wanted to take advantage.

Frank Holland (44:54)

All right, Health Care was performing sector. Jim, coming over to you, but you own some big winners in the space, at least this year. AbbVie is up about 19%. AstraZeneca up nearly 25%.

Jim Leventhal (45:03)

Yeah, I think it's a space that has been maybe unfairly tarnished with regards to its performance because so much of the index is Eli Lilly, which is just having a off year. It's actually clawing back from the depths of last month. And then, of course, UnitedHealthcare. And what's happened so so far this year to UnitedHealthcare. But if you pick stocks within the space, as Stephanie is, as I do, you can find these winners like AbbVie, like AstraZeneca, and there are others out there, pharmaceuticals in particular, that are attractively priced both from a multiple point of view and from a dividend point of view. So pick your stocks in the space. Don't get scared off just. Just because we keep labeling it as the worst performing sector.

Frank Holland (45:42)

All right, we're going to leave it there. Stay with us. Final trades are coming up on Halftime right after this break. You don't want to miss those.

Jim Leventhal (45:50)

Are you following the Halftime Report podcast? What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast now.

Frank Holland (46:12)

And we are back on Halftime with final trades. First up, Stephanie Link.

Stephanie Link (46:17)

Uber total addressable market of 5.7 trillion. They dominate the space. New products and new end markets.

Frank Holland (46:24)

Kevin Simpson, your pick, Home Depot.

Kevin Simpson (46:26)

The stock is a perpetual compounder. Will benefit from lower rates.

Frank Holland (46:31)

Malcolm?

Malcolm Etheridge (46:31)

Yeah, rocket companies. The stocks pop up the day because the Mr. Cooper deal was approved by shareholders. But also interest rates being cut later this month should be additive.

Frank Holland (46:40)

So I paused there for a second. I'm seeing Jim's pick down there at the bottom of the screen pulling back one and a half percent. Jim?

Jim Leventhal (46:45)

Yeah, Citigroup. You know, I was on Wednesday and I talked about the relative merits of Citigroup. Probably don't have time to go through that again, but as you pointed out, it's down one and a half percent. When life gives you lemons, make Citigroup. That's all I got. That's the best I got. Sorry, Frank. You want to go to commercial?

Frank Holland (47:01)

We're going to look at the markets very quickly. At the markets in the red across the board, the S. And pulling back under half a percent. The Dow down a half a percent. The NASDAQ fractionally lower. That does it for halftime. The exchange with Melissa, Millie and Mike Santoli starts right now. You've been listening to CNBC's Halftime Report.

Stephanie Link (47:18)

The podcast you can always catch us.

Frank Holland (47:20)

Live weekdays at 12 Eastern only on CNBC.

Stephanie Link (47:26)

All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their 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 an 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 halftime reportdisclaimer sometimes an.

Jim Leventhal (48:06)

Identity threat is a ring of professional hackers, and sometimes it's an overworked accountant who forgot to encrypt their connection while sending bank details. I need a coffee and you need Lifelock.

Malcolm Etheridge (48:17)

Because your info is in endless places. It only takes one mistake to expose.

Jim Leventhal (48:21)

You to identity theft.

Malcolm Etheridge (48:23)

LifeLock monitors hundreds of millions of data points a second. If your identity is stolen, we'll fix.

Jim Leventhal (48:28)

It, guaranteed, or your money back. Save up to 40% your first year@lifelock.com special offer terms apply.