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Halftime Report
Rising Rates and Falling Stocks 1/13/25
00:44:13
Scott Wapner and the Investment Committee discuss rising rates and whether the bullish backdrop has now changed. The experts detail their latest portfolio moves. Josh Brown revisits his best stocks in the market list. Investment Committee Disclosures
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- [00:01]
Scott Wapner
What does it mean to be rich?
- [00:03]
Josh Brown
Is it having more stories to share or time to give? Is it being able to keep your loved ones close or travel somewhere far away?
- [00:12]
Anastasia Amoroso
At Edward Jones we believe the key to being rich is knowing what counts.
- [00:17]
Josh Brown
Your dedicated financial advisor will take a comprehensive approach to your financial strategy to help support what truly matters to you. Edwardjones.com FindYourRich Edward Jones Member, SIPC Are.
- [00:32]
Joe Terranova
You still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99 of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson report, I'm Scott Wapner.
- [01:01]
Stephen Weiss
And you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, rising rates and falling stocks and whether the bullish backdrop has now changed. We will discuss that with the investment committee today. Joining me for the hour, Josh Brown, Joe Terranova, Anastasia Amorosa and Steven Weiss all post 9th. Good to see everybody. Let's check the markets here. We do have stocks under pressure, certainly when you look at the S and P and most specifically the Nasdaq, which is down 1.5%. Why? Well, the 10 year hit 4.8% today. Josh has the highest level since November of 23. Nasdaq is already coming off the worst week since mid November. Bitcoin's below 90 today. Oil is up, energy is leading. I want to talk to you at the beginning here about this Bloomberg story that I saw today that was suggesting Goldman has seen a big change in equity positioning from institutional investors, pension funds, hedge funds, asset managers, for example, that they have been big net sellers of equities over the past few weeks, mostly because of the change in the Fed's rate cut path. I wonder what we should make of that as we sort of reassess where we are from both a Fed and rate perspective and where we think we might go and what the fallout could be for what's been a pretty darn good market.
- [02:28]
Anastasia Amoroso
So I'm glad you came to me on this because I have a strong point of view. We literally told you this was going to happen two weeks ago and three weeks ago on this show. And it's not about necessarily just the rates. There's a massive wealth management driven move happening here that is 100% related to private clients telling their advisor, don't you dare drop a tax bill on me in the last two weeks of this year. We're taking our massive NASDAQ gains next year at the earliest. And I know this for a fact because I live in that world and I talk to all of the big players. We're managing billions and billions of dollars and these are the conversations that my CFPs are having with their clients. The tax loss selling element was easy to see coming. You had a year with no corrections. You had a 35% rally in Nasdaq after another 35% rally in Nasdaq the prior year. And you add gigantic stocks that went up 50 to 100%. And I'm telling you now, when you talk about institutional investing, you need to remember who owns the actual underlying that the institutions are managing. The answer to that question is wealthy people who have given the money to asset management firms which then transforms it into institutional money. In the end, people did not want that tax bill from last year. It's not an accident that you're seeing this level of mean reversion between Energy, last year's worst group of stocks and Tech, last year's best. And then they flip flop. Right now, 86% of S&P 500 energy names are above their 20 day moving average. No other group you can say that about. So what you're basically seeing is this rebalance. Sometimes it happens in December, but everybody pushed into January and now you've got people buying the laggards from last year, Energy being the prime example coming out of tech. If you're making it into a bigger story than that, maybe you'll be right. But you're jumping the gun. It's tax. Listen to me now, I know this. It's tax.
- [04:31]
Stephen Weiss
It's, it may be that and for sure you see it. You see the flows. You know, you know who you're talking to and what you're talking about. But Anastasia, it's also the change in interest rate. It's the, it's not so much the level you can't say well over history, the 10 year at 4.8% has not been a deal killer. But when rates are up 100 basis points since September and the rate cut that we got, it's the rate of change in that and I think most importantly that a change in expectations of where rates were going to go and what the Fed was going to do. And now we're trying to assess, well, if we were all wrong about that, were we wrong about the Runway for the rally? And that's what I think we're trying to figure out.
- [05:20]
Scott Wapner
Well, I don't think we're completely wrong about the Runway for the rally, but one of the things I said coming into January is that this might be a struggle in this tug of war between the positives and negatives. And let's talk about the negatives first. Scott, you're right. When you have a 10 year rising by 100 basis points or over 100 basis points in a short period of time, it's going to derail, is going to deter any sort of rally. And by the way, it's not just the move higher in the 10 year that's growth related, it's a move higher in the 10 year that's inflation related and the inflation expectations rising by about 50 basis points. The other stat that I saw just this morning, it's not just about phasing out rate cuts, but it's actually the increasing odds of rate hikes. I'm not saying we're going to get one, but if there were zero percent chance in September of a rate hike in 2025, today it's about 35%. So those are all the negatives the markets are having to grapple with. But Scott, what I would say to that, in this process of focusing on yields, I think we're overlooking the positives, which is we're just coming off a great CBS conference last week where momentum was clearly on the side of artificial intelligence. And Josh, I think you talked about this not just in digital chat bots, but also, you know, really making its way into the physical world. So that momentum is continuing. And Scott, this week, of course, we get the kickoff of fourth quarter earnings and I think financials are going to deliver not just solid results but also solid guidance as well. So the last quick thing that I'll add to Josh's point, yes, maybe it's the tax bill and by the way, I completely agree with that. But what's also happening is pensions funds, for example, are selling because they have to, they're fully funded or more so, you know, now the bond yields have backed up their buyers of bonds and they're sellers of equities. So there's some mechanics.
- [07:02]
Stephen Weiss
It's like a perfect early year storm of sorts. You get the tax reasons that Josh said and what he sees and then you have the flip of positioning and maybe in some respects sentiment over the moving rates. And that's why you have the market that you do, at least to start this year. And it's still very young, by the way.
- [07:23]
Carl Quintanilla
Yeah, no, I mean we're not even a month into it, two or three weeks. I mean, we'd all talk about what Josh talked about, which was that not selling before the year ended, delay paying your taxes. And this was particularly emboldened, the selling by the huge profit you had in tech. So why not take profits there? Having said that, they're down marginally. Sure, you have a down 10% here and there. But the real issue is we got to look at the symptoms and the causes of this. It's not bond spiking on their own, it's bond spiking because tariffs are reality. Now I agree with talent tariffs because I do think it's a matter of national security and I do believe ultimately it will create jobs and increase the onshoring activity we've seen. But in the interim, it's like any other thing that's good for you. Right. If you want to lose weight, you got to put in the effort, you got to put in the pain and that's what we're going to see. So I personally believe that whether it's 10% or 20% that you're going to see tariffs. And that is hugely inflationary. So why not sell stocks when you see bonds? I mean, we're seeing the 10 year for eight, just under, as you'd mentioned, it's a good alternative at this point. So I continue to be very cautious on the market in terms of AI. Yeah, I normally agree with that, but we pulled so much of that a benefit forward to see these stocks aren't trading based upon where the fundamentals are today, they're trading based on what the fundamentals are going to.
- [08:50]
Anastasia Amoroso
What.
- [08:51]
Stephen Weiss
What Josh is talking about though, sounds to me like a more shorter term phenomenon. Right. You get the mechanics of this out of the way. The, the rate issue though has the potential to be a longer term issue for the market to grapple with.
- [09:08]
Anastasia Amoroso
Yeah, I think both things can be true. I don't think rapidly rising rates are going to be great for the growth trade. Although they're not necessarily like a wooden stake through the heart either, which I'll get to in one second. But just look at the leaderboard today. It's just one day, but humor me. Best performing name in the S and P, Humana, CF Industries, Valero cvs. It's this mix of Energy and health care. And again, I told you this was where everyone had losses last year. Valuations are suppressed. And so when you are rebalancing out of your Apple and your Oracle, that's where the money's going to. I don't think anyone woke up this year and said, oh, you know what I want to do? I want to buy Humana and cvs. It's just, it's just even simpler than you think. It's ETF flows and model portfolios. And when I talk about the primacy of wealth management flows, pay attention to me because the RIA channel has been growing 20% a year for 10 years. It's now 7 trillion. So if we think about a 6040 portfolio of 7 trillion, it's trillions of dollars. That's way out of bounds from where the allocations are wirehouse channel, probably 10 trillion, so 17 trillion, 60% of that equity portfolios. Not every dollar moves, but a lot of dollars move, move. And if we want to take this narrative that all of a sudden the market's afraid of 6% on the 10 year and that's why they're selling, I'll take the other side of that any day of the week. Within two days we'll be halfway through this month and I think that mechanical selling will come to an end and then we'll all take a look and see what's what. This is not a rate panic. The Dow is green. Guys, focus, Focus, Joe.
- [10:49]
Jim Cramer
So I look at all of this, agree or disagree. I mean, I always think of everything in terms of is, is the market offsides or is the market not offsides? And I will say that the first two weeks of the year, the environment that we're in right now is the choppiest, one of the poorest environments to be transact, transacting in that we have seen since probably 2022. I agree that this is a short term for the phenomenon. I agree with that. But that doesn't mean I'm running in to try and transact in an environment right now where we're unwinding the Trump trade. The last piece of the Trump trade being unwound is oil going up. Remember, being short oil was part of the Trump trade. The other thing you have to think about in bonds is yields are going higher. So speculators are being rewarded because as I've said on the show over the last several weeks, the increase in open, open interest continues to show that speculators are adding to their short positioning in the treasury market. So you say to yourself, okay, at what point does that get unwound? No one knows the answer to that. But when that ultimately does, that's going to begin the process of reverting back some of the positioning that we're seeing early in the year, which is going more defensive, more value, more energy, more materials, more health care away from technology. And I agree with you. I think it's going to happen at some point. The question is, is happen this afternoon, does it happen next week? No one knows the answer to that, but it is a short term phenomenon. And ultimately when you unwind those treasury positions, the money's going to go back into tech, it's going to go back.
- [12:21]
Stephen Weiss
Into the other thing, Josh. I mean if you want to make and say, well, the Dow is green, so sit down, rest easy, everything's fine, that's ridiculous. I mean, but let me finish the deck. The only point, point I'm going to make on that is that you start Unite United. It's United Health and it's Amgen and It's because the J.P. morgan Health Care Conference is happening. If you take UnitedHealth and Amgen out today, Amgen's up five bucks and UnitedHealth's up 22. You probably have a negative doubt. That's my point. It's not representative of anything other than those two stories on this particular day. You want to disagree with that. I mean, you could throw in some of the energy stocks too out of the Dow. But you don't think that this has to do with unsettling over the move in interest rates, especially where interest rate expectations were in September when the Fed was beginning to cut rates. And here we are more than 100 basis points higher on the 10 year. And the Fed's policy path is certainly much more murky than it seemed to be then.
- [13:22]
Anastasia Amoroso
No, not really. I get, I get the premise of the question and it's not the wrong question. I just would say no, not really. I think people look at stocks going down, find a culprit and then they write something up and tweet it and they say look at what the 10 year is doing in the stock market. I could point to plenty of days last year where we had these pro cyclical rallies where rates were rising and so were stocks. And if that ends up happening tomorrow, we're all going to forget about this conversation today. Look at your intraday chart. Hold on. Look right next to my face if you can bear to look away from me me for a minute. Look at the intraday chart. So you're Telling me when rates, when rates go red on the day bonds catch a bid and stocks are still down, then you're going to say, oh well, it's actually correlated to both.
- [14:03]
Stephen Weiss
No, because it was.
- [14:05]
Jim Cramer
I think you would agree, I think you would agree with this.
- [14:07]
Anastasia Amoroso
Okay, we're about to find out.
- [14:09]
Jim Cramer
Pull the Lens back to December 18, the date of the Federal Reserve meeting. That's when the momentum on all of this broke. That's when the momentum on equities broke. That's the day where yields look at a 10 year treasury yield, I think it was 4.
- [14:21]
Stephen Weiss
4.
- [14:21]
Jim Cramer
So yields have rallied 40 basis points since then. If you pull back the lens, there was an effect from that recalibration of the Federal Reserve meeting that impacted equities, impacted the treasury market and we're feeling the lingering effects of it still to this day on January 13th of 25.
- [14:38]
Stephen Weiss
But, but the point also that, that I would take the next step on from Josh is that then this is a great buying opportunity. Right, because you're going to get past this tax selling that Josh suggests is.
- [14:49]
Anastasia Amoroso
The majority by January 15th. That'll be the Nvidia is down.
- [14:54]
Stephen Weiss
Nvidia is down 14% from its high. Microsoft's 11 and a half percent from its high. Apple's 11% from its high, Amazon six and a half, Alphabet six and Metta is five and a half percent from its high dot Most of those highs happened either in December or at the very beginning of the year. In Nvidia's case on January 7th.
- [15:11]
Scott Wapner
I think, Scott, you're right that this is shaping up to be a buying opportunity. And I do want to say that this is a process. I think, Joe, you said in the process of unwinding, maybe it's the retail clients that are part of the process, maybe it's the pension funds, maybe it's the hedge funds, the commodity trading advisors. And all of those players have been gradually unwinding. But at some point you have to stop and take the stock of where some of the things are trading. So if we look at the S and P, you're probably at 5% pullback today. Maybe that doesn't sound very attractive, but on an equal weight basis, you're about 7 or 8% down. If you start looking at stocks within the AI theme, for example, you can find things that are trading to your point, Scott, on Nvidia, 10 or 12% down. So I think you have to look at those opportunities. Regional banks are down about 15% and you have to look at those and say what is actually fundamentally change other than the fact that we have strong economic growth and I think the economic growth momentum looks even better. So why would you not.
- [16:05]
Stephen Weiss
Here's what the rate dynamic has changed against a valuation backdrop that has not right. For the most part the stock market was already being questioned in terms of its valuation which looks to some more egregious the more that rates creep up in the path of the Fed changes. No.
- [16:22]
Carl Quintanilla
Yeah. Look I used to have boss that whoever was the last person to get to him and said something that became his narrative and same thing here. Everybody's so used to markets going up while rates are high that that's what the saying well look at that. When rates were higher last year when they were going up, Mark was going up. But that's when the Fed was thought to be easing on a strict easing policy. It's when inflation was coming down. Inflation has stabilized at these levels for the most part. Most recent reports show inflation is ticking up and then you've got a Fed who it's a coin toss where they cut it all this year and whether in fact they have to tighten.
- [17:03]
Stephen Weiss
Well, we'll see. Look, you're going to get inflation reports this week out of the labor report on Friday. That was much hotter than expectations. Wages were not so let's just say.
- [17:12]
Carl Quintanilla
That they were not hotter but they also weren't down. As a matter of fact if you look through some of them they ticked up. So it's up sky. Look, that's the direction you're. You could shrug your shoulders out. That's the direction inflation's the problem. And guess what?
- [17:28]
Stephen Weiss
So are you super. I mean I don't know man. I can't figure where you are super bearish now.
- [17:33]
Carl Quintanilla
No, I'm not, I don't know. I'm not willing to say that this is a buying opportunity just yet. Do I think by the end of the year that you could see tech do better maybe mid year? Absolutely. That's why I'm not selling. But I would.
- [17:45]
Stephen Weiss
Well, you're selling Apple. What do you mean you're not selling? You sold all of Apple.
- [17:48]
Carl Quintanilla
Apple, Apple. I sold because of China and I said this price when I was shaving it. I've been selling since November that Chinese government came out and said to government agencies you can't use Apple phones anymore. Tim Cook is saying we're moving the supply chain chain to India and elsewhere. IPhone sales are down because Apple intelligence hasn't proven to be the intelligence that people need.
- [18:12]
Stephen Weiss
IPhone sales dropped 5% in the holiday.
- [18:14]
Carl Quintanilla
Quarter right so that I sold Apple today for fundamental reasons and it was a small position regrettably. But just back to this. You could say that commodity prices are rising because they rise when inflation rises. So it all adds up. Not saying super bearish.
- [18:29]
Anastasia Amoroso
And you guys a question though.
- [18:30]
Carl Quintanilla
Hold on, let me, let me finish. What's hold on. And it's okay to come out and say oh the market will go up, it goes up 80, 90% of the time. Are you eventually going to win? For me as somebody who also trades a portion of my portfolio and somebody who spare capital to put in that I'm waiting for a better opportunity, I see no reason to clarify.
- [18:51]
Anastasia Amoroso
What do you think would have been the market reaction if the jobs report on Friday would have disappointed to the downside to the same degree that it outperformed to the upside. So because effectively we got to blow out jobs number without an upside to the inflation metrics, the wage gain metrics like that sounds really good to me. Except it takes away one more Fed rate cut this year. At least that's how it looks like the market interpreted. Would it have been better to underperform the jobs number expectation by 65 or 70,000 jobs? Would the Dow have rallied 700 points with the Nasdaq have gone up 2%?
- [19:27]
Scott Wapner
Well I don't think so. I don't think so. I don't take a week or late market is a good thing for this earnings for financials for this economy. But yes, I could see the scenario where we disappoint payrolls and therefore we price in more rate cuts and I guess that juices the regional bank trade. But I think people are missing out on the fact the US economy is a solid underpinning for that. And yes we're going to have wild cards but I think you have to use this policy related volatility to step in and buy things. They have you think we rallied on.
- [19:57]
Anastasia Amoroso
A, on a down jobs number on.
- [19:58]
Carl Quintanilla
I have no idea. And that's why I'm not putting capital in.
- [20:00]
Anastasia Amoroso
What do you think?
- [20:01]
Carl Quintanilla
Because I'm going to tell that. Let me finish asking the question. But the jobs, the strength in the jobs number, what do you think happens to wages if you continue to see strength in jobs number?
- [20:11]
Stephen Weiss
They go up.
- [20:12]
Carl Quintanilla
Right. That's inflation.
- [20:13]
Jim Cramer
Not talking about the ETF strategy. I'm talking personally. I own DocuSign, I own Twilio, I own Datadog, I own Zoom. If yields continue to rise those positions are not going to be good. I am looking at those four positions. I'm looking to add to those positions because I truly believe we are near the top in treasury yields. I think the speculative short is nearly full at this point and I think the first bit of news that indicates yields can move lower. You are going to see an unwind of positioning in that treasury market that will force you so inflation.
- [20:47]
Stephen Weiss
We've highlighted many, many times the outperformance of software versus semis. If you back it up to, you know, I don't know, three, four, five months. If you, if you look at the IGV versus the semiconductor etf, you can see where the gap is being closed. The software has taken a downturn now. Chips more recently have two, as you know. But the software ETF Joe's down 13 and a half percent from its December 9th high. It's what you're speaking to as you know, as rates have gone up a lot of high. Multiple software stocks like many of the ones that you were talking about have come down a bunch.
- [21:30]
Jim Cramer
In addition to Adobe and Salesforce and Oracle and the names that are quote unquote, reasonably valued relative to the emerging software names, they're highly sensitive to the move in rates, they're sensitive to the tax selling that Josh is talking about. They were heavily owned. They are popular names in the hedge fund and speculative community. And those positions have been reduced since December 18th. December 18th was the beginning of this process. I'm with Josh. I think we're coming to the end of the process and I think the most clear signal that we will come to the end of this process is what yields are going to do and I think that are near their high.
- [22:09]
Stephen Weiss
Well, J.P. morgan continues to suggest that the Fed pivot is the main risk for stocks again because of where expectations were and you see it playing out areas hiking, you know, the fact that they're just going a lot slower and smaller than people had once thought. I mean, it matters if you look at the rollover too in the, you know, again, those high valuation names, the Palantirs, the World, the App Lovins and things like that. Look, you are feeling it from being out of block. Now you had a stop and block. Yeah. You got stopped out because stocks like that have been hurt.
- [22:42]
Anastasia Amoroso
Agreed.
- [22:44]
Stephen Weiss
It's no more simple than that. Right. I mean you just had to stop on it. So you're no longer in. But I mean, do you, if you like the company before. Well, do you look to get back in on this dip if you think that it's near the end?
- [22:54]
Anastasia Amoroso
Yeah, but it has to set up. So that's. That's a trade is a stock breaking out. When a, when a breakout fails, you don't change your reason for why you own it. You don't say oh actually I like Jack Dorsey's beard. I'm going to stick with it. It's, it's, you make an entrance. I'm buying this because relative strength is high. It's breaking out. When that goes away, you either have risk management, you don't. So put that aside. It's not me expressing a macro view. Scott, you're 100% right and so is Joe. When you have a higher 10 year it's a mental hurdle for somebody wanting to buy the 10th momentum stock on their screen so they don't buy it. Maybe they sell 987 and just stick with their top six or whatever. That 100% is what happens. And I do think the only way you're going to get relief in that segment of the market is if we get some sense that we've seen the high in, in the 10 year at least in the short term. Look at, I mean look at that intraday chart. You could already be saying well that.
- [23:48]
Stephen Weiss
Will end some of the volatility. The Vix is above 20 today, 100%. Okay, so post like on electronic what was, what was the VIX the morning after the election results by 14. Yeah, I don't remember top my head but that's probably what it was in 14 because that, that shows you where sentiment was on that day that we've got a smooth glide higher now. This Trump administration is going to mean tax cuts, re up deregulation and a more heavy focus on bear hugging the economy. Yeah.
- [24:14]
Carl Quintanilla
And by the way, I'm not saying we won't have a bounce. When you see selling that's been this violent, particularly in the NASDAQ over a week, you typically do get a bounce at some point, particularly when you remove one of the catalysts. All I'm saying is that it's not that smooth sailing by is making it out to be and that and by the way rare earths, what if China says we're going to pull a nuclear button there and stop exporting rare earth to the semi manufacturers? What happens then?
- [24:45]
Jim Cramer
So here we are, the middle of the month, you've got energy up 5%. We know what technology is doing, we know what the Max 7 is doing. I'm sorry, I'm just not going to say I want to own energy and I don't want to own the.
- [24:55]
Anastasia Amoroso
I think you faded.
- [24:55]
Jim Cramer
If I lose, I think I Agree with you, Stephen, 100%. I think you fade that move. I think you look at what's going on the Max 7, you find an opportunity if your position can afford you that opportunity. But I would not be making this pivot believing that. Here we go, it's 2022 do energy is going to crush the max one stabilizing.
- [25:13]
Anastasia Amoroso
I'm sorry, one stabilizing factor we haven't gotten to and I think is going to become a little bit of a recurring theme of this winter and spring is merger Monday. We had two deals today. Number one, Bill Ackman now wants to take control of the stock in Howard Hughes Corp. He doesn't already own. That would effectively give him control of South Street Seaport. If anybody cares, it's fine with me. But the other one that's more interesting to me is J and J made a bid for a biotech company and I think an infectious disease company to $14 billion deal. When was the last time we could say multiple mergers coming on a Monday. I would love for this. We don't have IPOs back yet but getting merger is pretty cool.
- [25:55]
Carl Quintanilla
You bring a great point but We've got the J.P. morgan Health Care conference going on when we typically see mergers. Let's do the tally after the conference about how many were announced during the conference and we'll see if it's back.
- [26:06]
Anastasia Amoroso
I think that's, that's supportive of the markets and not just tech. That's a market wide phenomenon and I would love for us to come in every week and say oh, it's another merger Monday. Look what we got.
- [26:18]
Stephen Weiss
Which is why once you get past the rate volatility you get past to the story that has been told and believed in wholeheartedly since election night. As I said, tax cuts, deregulation, animal spirits, which Todd Boley was talking about to me out in Beverly Hills. That's six months whenever that was that he was foreseeing an environment where you're going to have dealmaking, where private equity was going to have realizations for the first time in seemingly forever because you know the environment is going to be better.
- [26:47]
Scott Wapner
That story could be back. CPI is this Wednesday. That could put the stop to cpi.
- [26:52]
Stephen Weiss
We take a quick break. When we come back, we do have more committee moves to get to. In fact, Rob Seachon has three new buys and a couple of sells. He is going to join us with his trades coming up and and later, Josh Brown's best stocks in the market list. He's going to talk to us more about the names that just hit for Back in two.
- [27:15]
Anastasia Amoroso
And now a next.
- [27:16]
Joe Terranova
Level moment from ATT Business.
- [27:18]
Anastasia Amoroso
Say you've sent out a gigantic shipment.
- [27:19]
Joe Terranova
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- [28:14]
Josh Brown
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- [28:42]
Stephen Weiss
All right, welcome back. We do have some moves, as I said, to get to and Rob Sechin joins us now with a bunch of new things in his portfolio. It's good to see you. Let's go through some of these. So we're talking about this upset of the market and dip buying and you bought, which is a new buy for you guys, which I find really interesting. Amazon, tell me why we did.
- [29:03]
Rob Seachin
It's not cheap relative to the discretionary or technology sector, Scott at 31 and change times earnings, but it's cheap relative to its history. And that history over the past 10 years trades at about a 40% discount. And this is a great example of a company that has strong earnings momentum. You're seeing earnings be revised upwards by about 8% over the last three months. Meanwhile, earnings for some of the other tech darlings have been being revised down across the same time frame. So we thought it was a good time to get engaged in Amazon.
- [29:40]
Stephen Weiss
Okay, you bought NRG and Qualcomm as well briefly on both.
- [29:45]
Rob Seachin
So NRG, we like the fundamentals, trades it 13 times. As you know, we owned Vstra, we bought that at 10 times. Now trades at 24. This is a great Way to get exposure to the same secular growth theme which they're focused on, which is the data centers. Qualcomm, another example of that trades at 14 times forward. It's a value play within technology does trade at a discount to its 10 year average. Most people don't know that their products are essential for almost every device that connects to the Internet. They're consistent innovator. And while we agree that there's some risk to China out there as it relates to this company, we think that is priced into the fundamentals.
- [30:30]
Stephen Weiss
You sold Regeneron, which hit a 52 week low today. We are talking about healthcare and biotech obviously with the conference in San Francisco. And you also sold Cadence.
- [30:41]
Rob Seachin
One. We did well on one. We were flat on Regeneron. We kind of round tripped. It was a darling performer for a while. There's increased competition from other biopharma companies and new drugs in this valuation reset enabled us to get out of it with limited tax consequence and go into names that we were more excited about. Cadence Design, great business. It's up 100% since we bought it. It's outpaced the S and P by about double and we just felt there were better opportunities for forward growth. Scott, if you want to know the things that we've been doing, it's trimming our winners that have their earnings growth has slowed a little bit in going to names where we're excited about earnings growth prospectively.
- [31:33]
Stephen Weiss
Okay, yeah, things like Nvidia, adding to eog, trimming Apple, Microsoft, Broadcom, Vistra. I got you on that. Rob, I'm gonna let you run. I gotta bounce. I got some other things I want to get to. But I appreciate you joining us and going through these. This Rob Seachin. I just want to point out a couple things guys that's interesting. I just mentioned Broadcom, Broadcom's green, Uber's Green, jpm, Citi Salesforce, Berkshire Green. You do have what looks to be about half of the S and P sectors that are green on the day as well. Again suggesting just because rates have moved so much doesn't mean the overall story has changed. It's just an adjustment recalibration. I don't know you want to use that word. That seems to be the word of the moment. Whether you're talking about Fed policy or whatever else.
- [32:13]
Anastasia Amoroso
We're still looking for 14% earnings growth over the next 12 months. 79% of S&P 500 companies are expected to see positive earnings per share growth expectations over the next 12 months. This is the highest level we could have said in years of that many companies that should grow earnings and that level of earnings growth, including in the Mag 7, but also outside of it. And you need to remember that on days where you're down 2 or 3% in the NASDAQ or you're down 1 1/2% in the S and P and you're groping for answers and explanations of what the next 5% will be, there's no way to know. But remember, earnings are growing and interest rates are not rising, may not be falling, but not rising. It's a pretty good still.
- [32:57]
Stephen Weiss
Yeah. Tell Tesla up, Nike up, and we'll follow all that. Silvana Hanaud is following the news headlines for us today. Hi, Sylvana.
- [33:05]
Scott Wapner
Hey, Scott. Good afternoon. The owners of Purdue Pharma are reportedly offering to increase their financial contribution to a bankruptcy settlement for opioid lawsuits. The Wall Street Journal reporting some members of the Sackler family have agreed to raise their contribution to $6.5 billion. That's up from $6 billion from a previous plan. Purdue and the Sackler family are at the center of things. Thousands of lawsuits that allege the company fueled a deadly addiction crisis through deceptive marketing of OxyContin. President Biden announced today that his administration is forgiving student debt for an additional 150,000 borrowers. This round of relief includes borrowers who attended schools that defrauded their students, those with permanent disabilities and public service workers. And the US Designated today an exchange extreme right wing online network called the Terror Graham Collective as a terrorist group. The State Department alleges the group promotes a violent white supremacism and provokes attacks against perceived adversaries. The designation freezes the group's US Assets and bars any American from engaging with it. Scott, I'll send it back to you.
- [34:17]
Stephen Weiss
All right, Silvana, thank you. That's Sylvana Hanow. Up next, your crypto playbook. Weiss trimming some of his exposure as bitcoin dips around 90,000, about 92 right now. Plus, Bob is on the one year anniversary of the first bitcoin ETFs. We're back in two minutes.
- [34:35]
Joe Terranova
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- [35:04]
Josh Brown
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.
- [35:36]
Stephen Weiss
We'Re back. Bitcoin breaking below 90 earlier today. You see it's at 92 obviously right now as we mark the one year anniversary since the crypto ETFs hit the market. Bob Pisani with today's ETF Edge has more.
- [35:48]
Bob Pisani
Scotty, good to see you. The bitcoin ETF launch was one of the most successful product launches in financial history. Now roughly $113 billion of Bitcoin ETF. So what's next? Let's talk with Samara Cohen. She's the chief Investment officer of the ETF and index investment business for BlackRock. She also runs the largest Bitcoin ETF, that's the iShares Bitcoin Trust. Congratulations. From almost nothing to over $100 billion in assets, an amazing achievement. Achievement. In one year, BlackRock has half of those assets. How do you explain the success? Is it retail enthusiasm? Is it just. The ETF wrapper is great. What accounts?
- [36:22]
J
It's both of those things combined, Bob. And it is amazing to think it's been a year. I spoke to you a year ago on the first day I bet was trading. It had been trading for about five hours now. It's been trading for a year. And as you said, the category crossed 100 billion in November and I bet itself crossed over 50 in December. And what we knew we were doing was building a bridge between crypto and traditional finance. I think what really we saw this year was how important that bridge was on both sides. It was important and it was largely driven, as you said, by individual investors. But I think one of the big surprises was that this was a two way bridge. We had traditional finance investors who were excited about having the opportunity, opportunity to incorporate bitcoin in a familiar wrapper. We also saw a lot of interest in, I bet from crypto native investors who were new to the ETP ecosystem. So there was two way interest in this bridge.
- [37:19]
Bob Pisani
Yeah, I want to talk about 2025. 2024 was the year of Bitcoin ETFs. But it seems a good part of 2025 is going to be Bitcoin. Plus, that is ETFs to combine Bitcoin with things like active management or leverage or options or even downside protection. What do you see? Is this good news? It seems to be getting more complicated for 2020.
- [37:39]
J
Look, innovation and complexity sometimes go hand in hand. And I would say 24 was a big year for innovation that will continue into 2025. But what's important for investors right now is diversification, alternatives. And that's what this category is providing. Whether it is alternatives like derivatives, embedded ETFs, crypto ETFs, even how investors are looking to gold right now. That's how I think of the category.
- [38:02]
Bob Pisani
So what, what do we expect from the policy front from the Trump administration and Congress?
- [38:06]
J
I'm really excited and optimistic about the path forward to do what we do best, which is really combine a clear regulatory framework that's supportive for innovation with really smart investor guardrails that create confidence and commitment from investors.
- [38:22]
Bob Pisani
Now how about the flows for 2025? A lot of the flows last year was retail and hedge funds. It seems like getting institutions interested is the key to increasing the aim this year. Is that going to happen?
- [38:32]
J
I think we'll see increase across the board. But to your point, with institutions, there's a fair amount of plumbing that has to happen, board approvals, new infrastructure. So there's a longer tail we got to go.
- [38:43]
Bob Pisani
But Quickly, Bitcoin's about 15% off the highs. Any thoughts on the price action?
- [38:47]
J
I think bitcoin is a long term asset that you look for in your portfolios. It had a great run at the end of the year and it's a volatile asset. So we will see volatility but we will see long term adoption drive. Where it goes from here.
- [39:00]
Bob Pisani
Okay. Much more coming up on the future of Bitcoin and Bitcoin ETFs on ETF Edge. That's 1:10pm Eastern Time. Samar is going to be there. She's going to be joined by Mike Aikens from ETF Action. That's ETF Edge. That's cnbc.com Scott, back to you.
- [39:13]
Stephen Weiss
All right, Bob, thank you. That's Bob Pizzani Weiss. We said in the tease that you were you're selling trimming bitcoin trim.
- [39:20]
Anastasia Amoroso
Yeah.
- [39:20]
Carl Quintanilla
And it sounded like what Josh did with with Square. Basically I bought it for the momentum and also for changes in regulations when Trump takes office. I still think the latter is going to occur. But it was an uncomfortably large speculative position, so I cut it back.
- [39:38]
Stephen Weiss
So how much?
- [39:41]
Carl Quintanilla
10%? Maybe not. Not a big deal. Actually, I'd say a little higher than that. But I still think all that's alive. But the question is, and I'm making a decision that based upon my near term view in the market, you know, again, I'm not long term bearish, I think I can get a cheaper replacement.
- [40:01]
Stephen Weiss
All right, well, coming up next, we'll talk about those new names that Josh Brown just added to his best stocks in the market list next. All right, welcome back. Josh has updated his list of the best stocks in the market and we're going to focus on energy ones and airlines that you have. Tell me about the energy ones first. There are four.
- [40:27]
Anastasia Amoroso
Yeah. So anytime there's a bout in market volatility, there are two different mentalities. I want to buy what just got hit the hardest. I totally understand that. But there are traders who would say no, actually, I want to see what's holding up the best. The energy names that I want to talk about are in that category. We've talked about these on the show. I own Baker Hughes. I know a bunch of us own lng. I'm not one of the people on the show, but a bunch of people. EQT is a name that keeps coming up as well. And Kinder, Morgan, kmi. These are stocks that have the characteristics that make them the best stocks in the market currently. If you're a trader, what you're looking at here are clear breakouts. And you want to come up with a risk management strategy where you're trailing these stops with some sort of a mechanical stop loss. Not an emotional one, but something where you say, okay, this breakout is now completed. I've made the money I'm going to make. If you're an investor, you see one of these names hit the list. It doesn't mean just go out and buy it. It should be the starting point of your research because obviously the market has made up its mind that there are good things happening at these companies. And Baker Hughes is an example of that. For me, it first hit the list in the low 30s. I've ridden it all this time. It is one of the only names that's green on the year right now, market wide. And I think you have a breakout. Look at this that I'm showing you right here. You see this name taking out the early December highs as we speak. There are fundamental reasons for why that would be taking place that we will probably find out later when the Company reports earnings this quarter. So this is my approach to the market. When there's volatility, I'm looking at what's holding up the best. I'm not looking to play triage and look for the companies that have had.
- [42:09]
Stephen Weiss
Their limbs hacked off the airlines. Tell me about. So it's American, United and Delta. United and Delta. I don't remember what AAL has done, but United and Delta have been just crazy Good.
- [42:21]
Anastasia Amoroso
Yeah, 100%, Scott. And what's really interesting to me is when you see a bunch of names all in one industry group all hitting the list at the same time again doesn't mean automatically buy or buy them all. This should be the starting point for how you think about the names that you want to be in the current, the current outperformance of these airline names I think demands our attention because there was this idea that rising rates were going to in some way impinge upon the consumer or the business person's desire to travel. And in fact what we've seen in the results these companies have reported is the exact opposite. These names are under substantial accumulation right now, even at 52 week highs. And when you see that, it should have your attention.
- [43:03]
Stephen Weiss
All right, we'll take a quick break, we'll come back, we'll talk about Shake Shack because the company pre announced today. Josh was on the call just before the show started, which means we'll find out what the company said. More importantly what he thinks and might be doing with that stock next. All right, let's talk about Shake Shack. So they pre announced their sales and margins. Their preliminary Q4 revenues topped expectations. Stocks down 7% though. What's the story here?
- [43:39]
Anastasia Amoroso
This is one of the best performers of last year. So I do think there's a little bit of profit taking today, a little bit of sell the news, but the news is great if you're a long term investor here they are absolutely crushing it. Rob lynch, the CEO again joined the company from Papa John's where they ran 5,000 units, raised the longer term target on how many shacks he thinks the world can sustain. The original target 10 years ago on the IPO was 500. Now they're talking 1500 units. And not only did they have good things to say about revenue versus expectations, but margins 22.7% versus 22% adjusted EBITDA was up almost 50% year over year. This is a fundamental transformation at the company going from trying to prove the concept to to trying to scale the concept into a much bigger business. And if things go well, the analog that I always point to is Chipotle. I think this has the potential to get to that type of a company. Not tomorrow, but I'm staying long because I liked everything Rob shared at the ICR conference this morning.
- [44:45]
Stephen Weiss
Okay, quickly, Netflix today. I just want to hit that price target to a thousand at Cowan to 950 at Guggenheim. Joe, you both buy ratings from from.
- [44:54]
Jim Cramer
Both places still in technically good position. This is your first dip towards the 100 day moving average since October. They report next week. It's going to be an interesting call to learn. Not so much. Tyson Paul, NFL games. That's the prior quarter. What's the plan for live sports as we move forward in 2025? I think they're going to uncover more.
- [45:13]
Stephen Weiss
All right, we'll take a quick break. We'll do finals on the other side. All right, we got a little activity in the market. Dow's up 230 now. See what happens over the final stretch on closing bell. I hope you'll join me then. Rick Reeder from blackrock will be with us today. Eric Woodring, he's the Morgan Stanley Apple analyst, will join me as well. Mike Mayo, Jonathan nothing Krinsky on the technicals inside this market, Stephen Weiss, what's your final trade?
- [45:49]
Carl Quintanilla
Government contractors got destroyed with Elon Musk coming out with Doge and we saw that in in Booz Allen and Leidos. So I buy Leidos here. I think the worst behind it, he's dialed back expectations of how much he will cut. So I think it's cheap stock right here.
- [46:06]
Stephen Weiss
Thank you.
- [46:07]
Scott Wapner
Anastasia, do you know something different which is publicly traded BDCs, they have a yield of about 11% floating rate and I think it's a good environment for it given a high for longer Federal Reserve.
- [46:17]
Stephen Weiss
All right, thank you so much, Jyoti.
- [46:18]
Jim Cramer
If you're waiting for a chance to buy JP Morgan on the pullback, I think that chance has come.
- [46:24]
Anastasia Amoroso
I take a position Amazon lots of upward earnings revisions. I'm long.
- [46:28]
Stephen Weiss
All right, we will see what this market does. I hope you'll join me in a couple of hours on closing bell. The exchange begins now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at at 12 Eastern only on CNBC.
- [46:46]
Josh Brown
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 halftimereportdisclaimer Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relative 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 Eduardo.