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Halftime Report
The Record Rally's Road Ahead 10/2/25
00:43:40
Frank Holland and the Investment Committee debate whether the government shutdown will affect the market negatively and how you should navigate it. Plus, the desk debated the hottest sector this week, healthcare. And later, we hit the latest Calls of the Day. Investment Committee Disclosures
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- [00:00]
Edward Jones Financial Advisor
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Frank Holland
I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Thank you Carl and Courtney. Welcome to the Halftime Report. I am Frank Holland in for the judge. Scott wapner, the record rally. It's front and center stocks at all time highs. The investment committee is standing by with their playbooks for these very lofty levels. Joining me for this hour we have Jim Leventhal, Shannon Sokotia and Jason Snipe. Before we get the discussion going, quick check of the market. You can see a bit of a mixed picture right now. The NASDAQ the best performer hitting a new intraday high up about a quarter of 1%. The S and P P pulling back very slightly from its all time high, still above 6700. It closed above that level for the first time yesterday. The Dow pulling back fractionally as well. Jim, you're right here. Why don't we start with you? Right now we're seeing a market that continues to hit highs even as we enter a shutdown. We entered a shutdown yesterday without any clear end to it in sight. Is this a non for the market? It may be an event for the economy. We'll talk a bit about that some more. But is this just officially a non event?
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Jim Leventhal
History shows that government shutdowns are indeed a non event both for the economy and for the markets. Now in the short term, there may be some effects on things like maybe a rise in jobless claims Depending on how furloughs are treated, maybe lowering airline traffic, things like that. But very temporary, not things that are going to interrupt the overall trend. And the use of the word trend, Frank, I think is very important here. You know me, you know, I'm a fairly analytical person. I like to use numbers. I don't like to engage in the banal, trite sayings, like I'm about to say, which is that the trend is your friend in the markets right now.
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Frank Holland
Which trend, though, are we talking about the trend of the Fed cutting rates? We're talking about tech hitting new highs. Is it artificial intelligence? You got to name one trend.
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Jim Leventhal
Well, I was going to, my friend, start off with keep it simple.
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Frank Holland
You did. It was trite.
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Jim Leventhal
The equity markets, all right, the trend is higher. And you have to think, I mean, now I'll go a little deeper. Let's go into the trade. If you're out there and you're saying to yourself you're going to sell in video, like really with this amount of momentum behind it. Sure. Get behind whatever bear argument you want to make, whether it's deep seek or capex, one day is going to fall off. But really, with this momentum going, you're going to, you're going to sell it. Good luck with that. And I think when I speak to the trend, being your friend, what I'm specifically speaking to is that any dip in the markets is highly likely to be bought. Now, of course, the markets can go down and probably will sometime this month, but consider that something like 25% of professional managers are beating their benchmark this year so far. That means the other 75 are feeling a little bit desperate right now and they're going to buy any dip. And actually it's not just a I. So again, Frank, giving you more on this and not to take anything away from Shannon and Jason, what you may want to say, but if you look at the strong recent rally in pharmaceuticals and health care, little give back today. I got it. But still a strong rally. That is people saying, okay, I've got to catch up. Maybe this is a way to do it without having to take the ad add to the AI that most people already have. I can look at health care, I can look at financials, any of a number of areas. Meaning the trend really is towards an everything rally here.
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Frank Holland
All right, Shannon, I want to come to you with kind of dovetailing off what he had to say. If you look at the trend over the last week, short time frame, but over the last week, the S&P equal weight outperforming the market cap weighted S and P another area of the market that's hitting an all time high. We talked about tech utilities. Now I think a question for you. Is that a broadening or is that simply a trade related to AI where people are seeing the incredible amounts of power needed and utilities of the beneficiary or is it a safety trade, a broading? I mean interpret this one for us.
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Shannon Sokotia
So if we're talking, if we're talking specifically about utilities then Frank, I would say you could look over the last year and there's been significant correlation to the trade in terms of how utilities have performed. So if you look at from a year to date perspective, utilities are one of the top sectors in terms of performance out of the S&P 500. However, what I think that it's important here is that there's more than just the trade as it relates to utilities. So we talk a lot at Neuberger about the potential for a global industrial impulse to help drive growth in 2026. And so you think about the power demand that exists not just from the AI trade obviously more pronounced in terms of talking about data centers and the power that's necessary to be able to to fuel this AI revolution. But you look at the sort of the backlog of infrastructure improvement that is, that is necessary. You look at the necessity of improving infrastructure not here, just in the United States, but also abroad. And you look at things like the fiscal stimulus that's likely to unfold in Europe. So there is a bit of a push or a tailwind in terms of utilities. I would say I would be hard pressed to find people looking at the broadening trade as an example of people looking to potentially hide out in def expensive sectors. That's really not where we've seen that. If you look at something like consumer staples for instance, the performance just isn't there. In terms of wanting to potentially diversify away some of the beta that you're getting in the US large cap names, particularly technology. And so for me when I look at this there are certain sectors that are no doubt potentially kind of the second derivative of what's happening in the trade. This broadening out though has really encompassed sort of the next trend, if you will, in terms of there's been a lot of capex put forth in AI. Where's. Where is the next phase of that capex and that's really going to be in sectors outside of technology that are going to start to integrate and implement some of this innovation in their businesses.
- [06:24]
Frank Holland
Is valuation also an issue when we're looking at the broading? If you look at technology, right now is trading at about 31 times forward earnings. The 10 year average is about 21 and a half. Do you think investors potentially at least getting some religion about these valuations specifically in the tech sector?
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Shannon Sokotia
I would say it's less about getting religion because honestly we haven't seen the deceleration in earnings and technology that we maybe anticipated coming into this year, which we thought was going to be a driver of the broadening out. Instead, what I think you're seeing is that, you know, there are opportunities outside of those technology names. I would also point to the earnings picture. If you look at third quarter earnings, Frank, by many accounts those look fairly conservative. And so if you think about the potential for a continued earnings growth from technology, but also maybe more conservative estimates in some of these other sectors, I think it speaks to getting, getting ahead of some of the positioning. We only have two weeks until earnings season kicks off in earnest with the financials and so kind of positioning ahead of that. That's what I, that's what I'm looking at in terms of maybe less concern about valuations, more positioning for what could be another strong earnings season. In terms of percentage of the Jason.
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Frank Holland
Sniper, what moves are you looking to make? Are you looking to trim maybe some winners? Because we can't forget we don't really know the outcome of this shutdown. And while historically, historically doesn't have a big market impact, the longest shutdown ever was under the Trump first administration was 35 days. That would certainly have an economic impact that could impact a lot of these big name tech companies and other parts of the market.
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Jason Snipe
I mean it's 35 days in 2018, but the market, the S&P was up 10% during that time and we've had 14 shutdowns since 1981. It's been historically a non event. Right. GDP is up over close to 3.8% as Shannon described. You know, we have earnings starting in earnest in two weeks. You know, we're expecting close to double digit earnings growth for, for the, you know, for, for the broader sector, for the broader segment. So for me as it relates to, you asked me what would I be doing here? You know, I think Jimmy makes a great point on the chase. The chase is real. You know, obviously portfolio managers, a lot of lag there where we're not performing as they had expected for the year. So you know, we have to submit those report cards at 1231. Right. So I think that that's a real story. I think as it relates to the earnings story, clearly it's been a lot of concentrated growth in the AI names. I do think some of the more cyclical oriented sectors, health care obviously has had a nice bump this week, has been a lagger so far all of this year. But I would be looking to reorient some of my exposure into some of the sectors who have not grown.
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Frank Holland
Where's that money coming from? Are you trimming some of your winners to get into those sectors that have been unloved or are you simply just widening out your bets?
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Jason Snipe
I think there could be some. I think obviously it's always prudent to take a little bit off the top from, from tech, you know, tech as you, as you described. I mean 30 times earnings, I mean these are, these are lofty valuations but the earnings have supported it. That's why we've seen the expansion that we've seen thus far. So I think it is, it's a little bit of, a little bit of trimming from, from some of those sectors. But I think also, you know, for folks that have some cash on the sidelines, it's looking to more the circle oriented names.
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Frank Holland
All right, so a little bit of trimming but you still want to stay with what's working. I want to bounce something off you, Jim. I'm going to get your take on this First. Tom Lee out with a note earlier today. He says among other things, history shows probabilities favor the S and P at 7,000 by the end of the year. He goes on to say there's a strong seasonal tailwind underway and the upside is higher given the Fed is dovish. Now I want to ask you guys about that. Are we sure the Fed is dovish without the information from the jobs report, potentially from cpi, potentially from ppi, but I'm going to continue. We urge looking through the messiness of the shutdown and even the lack of data, stocks are weak. He says he would buy the dip. Don't go defensive, Tom Lee saying do not go defensive. Agree or disagree. And is every dip viable? I mean at a certain point doesn't that strategy have to not work?
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Jim Leventhal
Yeah, of course it has to work at some point in time. And again, I don't want to be carefree in saying that right now the dip is viable, but the dip is viable right now. Look, and I read Tom's notes, they're always worth reading. And one of the things he pointed out, and this is to your question, Frank, is that with the Fed kind of now flying blind and all of us flying blind. In terms of data, they're likely to err on the side of caution. That is they are more likely to cut than not cut. Now, the next meeting is when? October 29, I think. October 29.
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Frank Holland
Decision on the 30th.
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Jim Leventhal
Yeah. So we, you know, we may have the shutdown over by then, but still, if you look at the probabilities, I believe they're close to 100% that we get a cut in, in this month. And I think again, this shutdown really corroborates that. With the Overall target of 7,000. Sure, why not? That's roughly 4% higher from here. Again, I don't mean to sound carefree, you know, I'm kind of an analytical person. We all know that, we all are. But this, this factor of people chasing performance, it's not to be trivialized. It's happened in many years like this where you've had a strong year, whatever. We're up 14 odd percent year to date on the S&P 500. And especially with that whoosh down that we had post Liberation Day. Let's face it, some people, some managers raised cash and now they're struggling to catch up. That was just simply, it turns out, the wrong move. I'm not judging them. It just was the wrong move. So any dip here is going to be viable and as I think we're all saying it in yours, to more than just the AI company's benefits.
- [11:50]
Frank Holland
All right, what about some other parts of the market? You're saying the dips viable? What about some of the areas of the market that have really run up, like small caption, like small cap. Is that a trade? Is this the time to get off board? Now, again, we don't know what the outcome of the shutdown is, but if you, according to Moody's at least rough estimate for every week of a shutdown, it impacts quarterly GDP by 0.1%. I'm not saying that's the end all be all. But small caps are especially economics economically sensitive. They've had a huge run up. Is this maybe the time to cash your chips on the small caps?
- [12:17]
Shannon Sokotia
They're also, at least from a trading perspective, incredibly interest rate sensitive as well, Frank. So I would say, you know, yes, economically sensitive, we've actually been overweight small cap for the entire year. And so one of the things that you really need to look at though is, is that there's a lot of discussion about the quality of the small cap universe. There's a Significant number of companies within that universe that are, have, have low earnings or no earnings growth, frankly. And so there, that has been a pushback, Frank, in terms of people allocating to small cap this year. What we have seen in this rally is that we're actually seeing some of those lower quality stocks perform in this rally. So if you look at quality small cap companies who have earnings, who are growing those earnings, those have really lagged this more recent, recent trade. So I would, I would offset some of the enthusiasm in terms of let's take this trade off the table with the fact that we're only actually in the first phase of small cap performance. The next phase is really what's going to be driven by those improving borrowing costs and what we do think is going to be an improving economic environment into 2026. So we would caution not to move too early on this. Given that you've only seen one part or really that first phase of the small cap trade outperform in this period. Being able to see those quality companies in the small cap universe start to pick up that, that mantle of performance, I think is where you're going to see that kind of move into 2026 and where you're going to want to be positioned.
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Frank Holland
But you got to trim somewhere, I would think, right? You got to either take some profits or make something, a trade, I think.
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Shannon Sokotia
I mean, I. Listen, I don't disagree with Jason. I mean, could you see some, you know, some tech profit taking over the course of the next number of weeks? Absolutely, you could. Especially as you see maybe some rotation into some of these other sectors, you know, particularly the financial sector for those, for those investors who might be underexposed to financials. I could see trim, you know, trimming off some of your tech to fund that. The other thing though, I do want to talk about what Jim said. There were a lot of people that took money off of the table and were waiting for one of these overhangs of political uncertainty, the brinksmanship in the brinkmanship in Washington to create another dip opportunity this year. And we really haven't seen that come to fruition. So there, I do think there's still some cash on the sidelines that could be repositioned in the fourth quarter.
- [14:26]
Frank Holland
Very clear though. Haven't seen or haven't seen it yet. I know generally the fourth quarter is the strongest quarter of the year, but there's just so many possibilities. We also have elections coming up later this year. Not saying it's not that important of an election compared to the presidential election. That seems to have really changed the business, business culture here in the United States. We have earnings, as you mentioned that while estimates are low, we saw a big surprise to the upside last quarter. There is a potential for a disappointment. And then we have potentially a surprise from the Fed that could come up. I know you're saying 100% priced in for this October meeting, but we might not have the economic.
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Shannon Sokotia
I didn't say that. Jim said that. But I would agree with that. I would agree with that. I want to give, I want to attribute that.
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Frank Holland
Are we sure there's not a bump in this round?
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Shannon Sokotia
I'm not at all Pollyanna in this, in this policy environment. In this policy environment, Frank, we would all be remiss to sit up here and say that there's not going to be something that comes out that could potentially unseat this, this rally. However, if you go back to the fundamentals which drive the equity market, that's earnings. And right now from our seat, we think that those earnings estimates are conservative. And so you know that asymmetric opportunity sort of exists when you just boil it down to what does earnings season.
- [15:37]
Jim Leventhal
Look like for the Shannon's making point, but I want to accent it. We are talking about the future and believe it or not, we are actually humble and we admit we don't know with great, with 100% certainty what the future will hold. We give you our experience, we give you our professional expertise and we make the predictions because that's what we're asked for. But by no means is anything about the future of slam dunk.
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Frank Holland
That's a Ferris. It's almost a dead poet society. Right.
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Jim Leventhal
I'll take it.
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Frank Holland
Jason, I'm going to come over to. You mentioned some of the unloved sectors. One area I've been talking to CEOs in is the materials sector. Double digits, earnings growth expected for Q3. It's kind of that secondary play that Shannon was talking about when it comes to AI. If you're going to build a $500 billion data center, you need rocks, you need water, you need concrete. Are you seeing opportunities in the material sector?
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Jason Snipe
So I'm not there yet. And I think one of the things for me is there's been severe inflation kind of building materials. I mean, you know, to build now, it's up 30% year over year from what it was last year. So I think there will be opportunities. I think energy is another space. I think, obviously, as I mentioned earlier, health care, I mean, we saw the deal. Well, I know we'll Talk about that a little bit later. The Trump deal with, with Pfizer and what that will be, you know, for the health care sector in general. But I just think like to, to, to echo my points earlier, I just think that these other sectors that have been unloved, I think breadth will be better in 2026. I'm also thinking about the big beautiful bill that will be stimulative to the economy and I think there will be other sectors that will participate that have not as of yet.
- [17:10]
Frank Holland
We had a side eye from Jim. Jim and I have been talking about this. No, not a bad one.
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Jim Leventhal
It's a good side crh.
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Frank Holland
You're a shareholder, one of the CEOs I talked to their investor day this week. Stocks up about 5% this week. One of the things they really talk about about was just organic growth about 7 to 9%. And on top of that they're saying hey, we're an AI play. We get low to single digit, single digits of every AI build out. So go ahead Jeff, this is your.
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Jim Leventhal
Okay, sorry. You made me laugh on the AI thing because these guys are building roads and runways and they're putting water supply. I got just made me chuckle. Okay. And I was there the day after you you interviewed Jim Minturn who is a very no nonsense, get it done kind of guy. Now I'm speaking specifically about CRH here and but it applies to the material sector in general. So if we're building stuff, we're going to need paving material, we're going to need steel, we're going to need copper. And yes, there's that mine closure that's gone on that's pressing up copper prices. But this is a simple trade. We're building things whether it's data centers, whether it's infrastructure, whether it's manufacturing, reshoring. And you've got a company in CRH that as I said is no nonsense. With a 55 track record of setting goals and then exceeding them, I think they're going to continue to do that.
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Frank Holland
If we're going to build data centers, not else, we need semiconductors. Semiconductors hitting another record high today. We have Christina Parts and Evil is joining us now with a look at what's driving this big move in the semis.
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Christina Parts
Christina, I thought you'd say you needed me too. But chip stocks like you said, back in the spotlight, the sector has really outperformed software just over the last three months. And this morning seven chip names accounted hit 52 week highs. Applied materials, ASML, those are equipment makers. Intel KLA Lam Research Micron and Nvidia look at that, a sea of green on your screen. Nvidia is though up for the fifth straight session yesterday it closed at a.
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Shannon Sokotia
Record high while ARM and Micron both.
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Christina Parts
Grading down ground I should say intel up what last I checked almost 3% on reports of potential foundry talks with AMD. I emphasize potential because AMD declined to comment on what it called speculation. AMD though up about 4% now and the catalyst really driving this is sustained AI spending enthusiasm. NeoCloud nebulous for example up 6% on new details of the $19 billion Microsoft deal which would now involve 100,000 Nvidia high performance. Grace Blackwell chips OpenAI just yesterday announcing its partnership with Samsung and SK Hynix. These are memory makers to make advanced memory chips and build more data centers. SK Hynix and Samsung both jumping on the news overseas. This really matters for the memory supply chain. Micron supplies advanced memory chips to Nvidia AMD and with expectations that this next generation of high bandwidth memory pricing is going to be significantly higher. So Micron is not, you know, is still part of this conversation even if they didn't sign that deal yet with OpenAI. And when you keep getting spending announcements each day like the OpenAI partnership or the nebulous Microsoft deal, it really enforces that hyperscaler capex isn't slowing down. Even this is key. If the promises and headlines lack a lot of details or as Jim just said, nothing about the future is a slam dunk.
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Frank Holland
Christine apart and evolis again smhing a new all time high today up about one and a third percent. Christina, thank you very much. All right, I want to toss it over to you Jim. Looking at chips, chips have actually been outperforming software last couple of months. That's been something a lot of people have been looking at. Are you still bullish on chips which are a cyclical sector? We're talking about financials, materials. This is also also a cyclical part of the market. Do you think this rally continues?
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Jim Leventhal
I think it's a good question and even more so this is not a slam dunk. But yes, I'm still bullish on chips. And the reason it's not a slam junk is because we all know about the valuations. If we take a look at Nvidia, just as the bellwether, probably 30 times forward earnings on plus or minus one on that. That's traditionally not where a semiconductor sells. However the growth rate is there at some point point that growth rate in earnings per share will fall off. I don't think it's in the next two, three or four quarters. So I can live with it. And to the point that Christina was making, it's not just in video. One of the names that has been on the move, which I own, it hasn't set a 52 week high, so she didn't mention it. But it's Qualcomm. And Qualcomm, obviously we know it for the smartphone chips that it produces, but it's been getting more and more into automotive and dare I say, into data centers. It has been. I see your eyes grew wide. Yes, it has been getting into data centers. My point being is it's not just Nvidia and by the way, a valuation on a Qualcomm something around 14 times. It's not like Nvidia.
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Frank Holland
All right. It's not just a video, but it seems to be chips pretty broadly. One of the things that we are, Christine was looking at was a kind of a shorter time frame for this chip rally. If you look at a longer window, chips are outperforming software over the last three months. Outperforming cybersecurity. Jason, you're a big cybersecurity investor. If we're looking at that second leg, is it maybe time to jump off the chips and move over to the software? I was actually talking to JP Morgan's head of private investments earlier this week. She believes that the next rally, I mean, the next leg of this rally is going to be in software, actually in the private markets, but in software more broadly.
- [22:08]
Shannon Sokotia
There's going to be some cyclicality here in this trade. Frank, if you think about, you know, sort of the enabling of AI that really has been driving the chips trade. If you think about what the next like of that, in terms of that, you know, integration of that innovation, software is going to play a big role in that. And so companies are going to be looking to make those investments. I do think we just see some ebbs and flows in this. You know, there might be a period where people think that, you know, semis are extended and maybe they feel like they're anticipating that next phase of the actual business implementation of this. But I think where, you know, I think all of my colleagues would agree here, active, you know, stock selection within software is going to be critically important because there are going to be some winners and losers in terms of AI implementation and innovation. And so I think you really need to be careful where you put those eggs in the basket. And it might be a bit different than what we've seen in the last 10 years.
- [22:57]
Frank Holland
It's going to be winners and losers. Are you talking about chips in particular?
- [23:00]
Shannon Sokotia
Software? No. Yeah, and software. Because I do think that there is some disruption that is going to create, especially for companies that rely on the, you know, a lot of those seats, probably fewer seats, but also seats that are going to need to do more with less in terms of the enablement from AI.
- [23:17]
Frank Holland
All right, Jason Snipe, I know you own a number of cybersecurity names. Looking at the bug etf, that's one of the more popular ways to track the cyber sector down about 3% over the last three months. What's going on? Because the AI revolution, if you will, was supposed to superpower cybersecurity because you would need more of it. Instead we're seeing investors get a. Away from that trade.
- [23:36]
Jason Snipe
Yeah. So I mean, for me, Palo Alto is obviously the name that we're highly invested in. It's a little bit cheaper than CrowdStrike and some of the others. There has been a little bit of a pullback in that name. But I really like the deal that they just did with Consummated with Cyber Arc, which I think is kind of in the identity business, which I think it will be accretive for them in the long term as it relates to kind of the overhang of AI and getting back to a little bit of the semi discussion, I think part of the growth has been, you know, maybe this, this, this story of an AI bubble was a little bit overdone.
- [24:11]
Frank Holland
Right.
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Jason Snipe
And I think at least in the tactical, in the short run, I think the other thing that, that kind of comes to mind is, you know, the capex story is at least a two to three year story. Right. So I think there's very tangible earnings in the semi space. I think that's clear to me. And then the last thing I would say is just on the SMH, I mean, the SMH is up almost 40% to Jimmy's point on some of that selling that was done in April. It comes back to that narrative of the catch up. And I think if you're looking at that and you're saying, wait a minute, I need to be here, because at least from a tactical perspective, the earnings are durable. Let me, let me go ahead and make an allocation, Frank.
- [24:48]
Jim Leventhal
Integrity demands that. I admit I'm getting my face rearranged in Adobe. Okay. And that's representative of the non Palo Alto Networks. That's DocuSign, its Salesforce. And there's a question here about whether these are cheap stocks that we should be picking or whether there is a secular decline with AI replacing not only the products but also the seats from which something like Adobe gets its revenue. And my call on this is I'm sticking with Adobe for now. It has consistently outperformed to think we can say the same thing about Salesforce. I don't know if you're smirking, Shane. I got to tell you, I'm smirking at myself with just how badly I'm doing at Adobe. I'm sticking with it for now. But I have to admit I'm just, whoa. Not having a good time with it.
- [25:29]
Frank Holland
Frank, it doesn't look like it. We're looking at the year to date chart just now. We're going to hit on one of the sectors we've been alluding to. We're going to dig into it. That's health care is the sector it tracks for its best week in more than three years. Committee is ready with their playbooks half times back in just two minutes.
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- [26:19]
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- [26:49]
Shannon Sokotia
Taylor Swift just came off her record breaking eras tour.
- [26:53]
Jason Snipe
What can she do to top it?
- [26:54]
Frank Holland
The pop superstar announcing a brand new album.
- [26:57]
Shannon Sokotia
Literally everything she touches.
- [26:59]
Frank Holland
People won't know about the Swift Effect. Cnbc premieres Saturday, October 4, 10 Eastern. Welcome back to that time. We got a news alert on Humana. The stock rallying right now. You can see it's up about 4 and a half percent. The company says preliminary 2026 Medicaid Advantage star rating data shows 14% of Humana members are now enrolled in 4 and a half star rated plans for next year. It's up from only 3% in 2025. The company also reaffirming its guidance for the current year. UNH also moving higher in sympathy. UNH is a stock that you own. Jason, what do you make of this announcement from Humana and just possibly the knock on effects for you.
- [27:48]
Jason Snipe
And I mean that Medicaid enrollment is obviously going to be significant. I mean you just mentioned the numbers 3% to 14, 14%. That's a pretty significant difference. You know, as it relates to UNH broadly. You know, obviously there's been, there's been a lot of concern around the stock. A lot of, I think a lot of the bad news is priced in, they're kind of dealing with Medicare expenses. And, and, but what I would say also to Optum is a very profitable sector for them which I think will be, will continue to grow going forward. I think Helms as, as at the, at the leading the helm again pun intended, is a known commodity and I think will be good for this stock going forward. So this has been a name I've kind of held into through the sell off. It's popped some since kind of the lows, you know, through Liberation Day. And we know our friend Mr. Buffett is, has made a position in there and I think that will also be.
- [28:40]
Frank Holland
Helpful to the next more broadly in health care. We kept talking about it and we wanted to wait until now to really bring it up. Health care is the best performing sector this week. Shannon, what do you make of that? Is that a safety trade or do our investors seeing a catch up trade?
- [28:52]
Shannon Sokotia
What is it that it's cheap, right? Yeah, I think right now people are really looking at health care because it's cheap. I also, I would be, you know, there's also seems to be the potential for some of the overhangs on the health care sector to start to become more clear. So that doesn't necessarily mean that analysts won't have to adjust for things like vaccine volume and things of that nature. But what you're hearing about from the administration, excuse me, what you're hearing about in the administrations, you're starting to get a little bit more clarity. And so once you can get more clarity then you can start to see if the valuations are truly attractive or there's more downside to come in terms of prices. And so I think what's happening is that number one, people are looking for for parts of the market that are cheap. Number two, there is a very clear demographic tailwind for health care. And so it's where, you know, I've always, I always like investing in that sector because there's both growth and defense and offense in terms of, of that sector. But number three, three, I think you're getting a little bit more transparency in terms of, you know, what the government is really going to be focused on here in the US in terms of pricing and pass through it.
- [29:56]
Frank Holland
Sound like you're also talking about that deal that Pfizer made with the administration on pricing. A lot of other big names have also decided they're going to build manufacturing facilities here in the US Journal story out today saying that pharma through Pfizer and some of the other deals, they may have found a playbook to avoid tariffs. Do you think that's also a tailwind for the sector?
- [30:12]
Shannon Sokotia
Sure. And I think that this, you know, companies that have made arrangements, if you will, with the federal government over the course of the last month and a half to two months, you've seen their stock prices react to that. But again, I think it just comes back to clarity. The hardest thing for investors to do is invest against a wall of uncertainty. And I think you're starting to get a little bit more clarity on some of these companies and their potential, you know, and perhaps mitigating the downside versus you know, really amplifying the upside.
- [30:39]
Frank Holland
We're showing a stock that a pretty big jump this week. It's AbbVie. Jim, you on that one.
- [30:42]
Jim Leventhal
Abby has been good all year frankly. And you know this is first off, you nailed it. Shannon, unsurprisingly, I can't really add too much to that. But what I will say is that there have been names within health sector, the health sector that have been doing well all year. AbbVie AstraZeneca. So this has definitely been a stock pickers market. There's obviously been others. And Jason, I've been with you earlier this year in UnitedHealthcare. Last year, year with CVS, there's been other sector or subsectors of the health care trade that have not done well. What you're now seeing is that the whole sector is moving. That's overdue. Shannon gave many reasons why and I completely agree with it. But it has been a stock pickers market within this sector and now it's.
- [31:21]
Frank Holland
Becoming more broad really quick sector wise. Is it a catch up trade or sustainable? A lot of people thought that I would be a big boost for health care as well. Shannon's mentioning it's very cheap.
- [31:30]
Jim Leventhal
Look, I think it's both. Okay, it is very cheap. That gives it room for the catch up. But let's face it, the demographics of the developed world are such that there is more and more need for drugs and there is more and more need for health care insurance.
- [31:42]
Frank Holland
All right. The XLV though, pulling back about a quarter of a percent right now. All right. Coming up next, Mike Santoli joins us with his midday word. We are back right after this.
- [31:53]
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- [32:55]
Jim Leventhal
Halftime Report.
- [32:56]
Silvana Hanao
I'm Silvana Hanao with your CNBC News update. UK officials declared the attack that killed two people and injured four others today at a synagogue in Manchester, England, a terrorism incident. According to authorities, the suspect drove a car into pedestrians and started stabbing people while a large number of worshippers were inside For Yom Kippur, the holiest day in the Jewish calendar. Police say the assailant was shot and killed by officers before he was able to get inside. An immigration judge has denied Kilma Rodrigo Garcia's bid for asylum. The judge on Wednesday rejected Abrego Garcia's application to reopen his 2019 asylum case, but he has 30 days to appeal to the Board of Immigration Appeals. Kilmar Abrego Garcia was mistakenly deported to El Salvador by the Trump administration in March. And Ukraine's foreign minister says Russia deliberately cut external power at the Zaporizhzhia nuclear power plant and is preparing to Connect it to its own grid. It is the biggest power plant in Europe and has been under Russian control since the early days of the war. Frank, back to you.
- [34:04]
Frank Holland
Savannah. Get bonus points for that pronunciation. Are Savannah now back at CNBC hq, thank you very much. All right, turning out to senior markets commentator Mike Santoli joining us with his midday work. My kind of a muted day on the markets. We're a couple of days into this government shutdown. It doesn't seem to have a big impact. Remember the markets finished at record highs yesterday. What do you make of the moves we're seeing today?
- [34:24]
Mike Santoli
I wouldn't say a big impact. Obviously duration matters. Market seems okay with the prospect of not getting this jobs report tomorrow. Having a pretty good fix on the fact that we are getting this rate cut in October. Very mixed action below the surface. It's kind of one of these 40% up, 60% down days. And yet even with that, even without any kind of major stimulus, I keep focusing on just sort of these piping hot areas of the market, these thematic speculative zones such as, you know, drone technology, quantum computing, things like that. There's this retail bid out there that doesn't want to quit on that front. I'm not sure it spills into everything else, but it does, I think keep sellers on a little bit of the defensive. So we're sort of digesting where we've been. 6700 on the S and P did cap the market last week. Yesterday we got above it. We'll see if there's any significance to that after we get past the very beginning of the quarter.
- [35:17]
Frank Holland
You know Mike, speaking of thematics and I also been looking at the sp, hp, the high beta ETF down the market week to date. What does that say about investors right now that they're still making what a lot of people consider speculative bets in the market despite all the uncertainty. No jobs report, potentially no CPI ppi if this shutdown continues, basically just says.
- [35:35]
Mike Santoli
That people are emboldened by the unexpected expected strength of this six month rally or almost six month rally we've had in stocks. A lot of what you'll see in that high beta part of this market is semis and semis just have their own sort of energy source that seems renewable every day with these announcements. So I think that's probably the way you would want to think about it. Obviously at some point things start to run too hot and it becomes a little bit more erratic and fragile. That really isn't happening right now. The tape has managed to keep things orderly at this point, bond markets not doing anything to cause equities any stress at the moment.
- [36:08]
Frank Holland
All right, Mike Santos with his midday word. Mike, thank you very much. Coming up next on Halftime, Warren Berkshire's biggest acquisition since back in 2022. We'll debate it. Stay with us. And welcome back to halftime. Let's get to some stocks on the move. Berkshire to acquire Oxychem for $9.7 billion. This is the chemical business of Occidental. $9.7 billion all cash deal. You're seeing Berkshire pull back a little bit. Oxy pull back a lot. But you're a Berkshire Hathaway shareholder. What do you make of this deal?
- [36:50]
Jim Leventhal
I think it's intriguing. I like it. But I have to put it in perspective. That versus a 300 billion plus dollar cash pile, this is, you know, 3% of that pile is probably what he earns in about eight months. So it's interesting, but it doesn't move the needle that much.
- [37:04]
Frank Holland
All right, interesting. Why doesn't it move the needle? Clearly this is very adjacent to the materials sector. The idea that you need raw materials for a lot of the production that.
- [37:12]
Jim Leventhal
We'Re seeing, it's a tuck in acquisition. I like it, don't get me wrong. But this isn't, I mean they've got a huge energy, they have a chemicals business in lubrizole already. So it's a tuck in. It doesn't, it just doesn't change the thesis. If they were putting something together that had like many tens of billions of dollars involved, then I'd be like, whoa, what's going on?
- [37:32]
Frank Holland
Okay, fair enough. Again, Berkshire Hathaway pulling back about 3/4 1%. Accidental actually down about 7% right now. Want to move on to some other calls. Colgate, Paul Mollard, target cut from 91, excuse me, from 98 down to 91, but maintains the outperform of BNP Paribas. Jason, you own this one. We were talking a little bit about this earlier. Staples under quite a bit of pressure. Yeah, actually a really good note is not specifically about Staples, but from bespoke on consumer facing stocks over the last couple of months, really talking about retailers. But I think it fits the bill with Staples too. Under a lot of pressure. What do you make of this?
- [38:04]
Jason Snipe
Yes, so for Colgate, it obviously is down 13% year to date. I think for me, you know, there's obviously there's some deceleration growth, growth in personal care. I think that's hurting the stock. Persistent inflation in raw materials. We were talking about raw materials Earlier So I think that has been a problem. But you know, for this particular Stock I like 3 to 5% organic growth, sales growth for the, for the names raising dividend in 60 straight years. So the dividend now is at two and a half percent. Their management team also is focusing, has multiple levers on managing costs and, and extracting inefficiencies. So I think for me this is one that obviously has been in the penalty box so far this year but I think the earnings recovery will come through into next year.
- [38:45]
Frank Holland
All right, we were just kind of showing that chart. We showed it for a second. With the retail names under pressure over the last couple of months. I want to talk about the consumer. Shannon, is this a troubling sign that these stores that they not only they don't only cater to lower income consumers but a large part of their customer base is lower income consumers. Is this a warning sign about the broader economy? The fact that, that these stocks have been moving considerably lower, almost a straight line down?
- [39:06]
Shannon Sokotia
No, I think I see it a little bit differently in terms of the margin that these companies operate in. And so if you think about the, the slim margins on many of the SKUs that they have on the shelves, I think that investors continue to be concerned about, you know, potential continued tariff transmission. And so I, you're also you know, potentially looking, looking for a continued trade down which we really haven't seen from higher income and higher middle income households into these names. But I think this is more on just concerns that there we maybe we haven't seen the full margin impact of some of the tariffs. That's just in my view.
- [39:41]
Frank Holland
All right, not a call, but some news. BlackRock actually launched an AI tool for financial advisors. Its first client, Morgan Stanley Wealth Management. Jim and Jason, you both own blackrock. Jason, I'm going to start with you. What do you make of, of this?
- [39:54]
Jason Snipe
I think it's a very interesting tool. I think it speaks to innovation for BlackRock. You know, listen, I mean a growth is up 15%. Revenue growth was up 13%. You know it's the largest player in the ETF business. So I continue to like this name. I think they're, they're focusing on the right segments and we'll continue to hold it as a financial core holding in the financial sector for us.
- [40:15]
Frank Holland
BlackRock shares up just about a half percent right now. Coming up next one half time I look at some of the committee's biggest winners this year. As we enter the final stretch we will debate if there's room to run in These names. More halftime coming up right after this. And welcome back to Halftime. Let's take a look at the committee's portfolio winners for the year as we head into Q4. Shannon, I'm actually going to start with you because we've just been talking about it, the small caps. Now it's very interesting. The Russia 2000 coming off its best quarter in Q3 since late 2023. So a big resurgence. How do you feel about the small caps going into this fourth quarter?
- [40:48]
Shannon Sokotia
Yeah, I think if you look at it from a benchmark perspective, the Russell 2000 definitely has more of those unprofitable companies in it. The S&P 600. If you just want to look at a universe and probably want to be selective within that universe, more higher quality companies, they really haven't out formed to the same pace. I think the other thing to think about is that you really hit the nail on the head earlier, Frank, in terms of our view is that the economy is toward is reaccelerating and that is a critical piece of this trade. It's not just rates. It really does require that economic reacceleration which is part of our thesis.
- [41:21]
Frank Holland
All right, Jason, Snap going to some of your winners. You have one winner in common with Jim, it's Oracle. The other two are Uber and Snowflake.
- [41:27]
Jason Snipe
Yeah, so I mean it's simply on, on Oracle, $455 billion in RPO. That's what a capital B by the way, up 359% year over year. There was quite a move on the earnings report. So I'll give some meat to leave some meat for Jimmy on that one. As it relates to Snowflake, I think they're just hitting all, all strides on this one. You know, data warehousing has gone really well, you know, up 54% year over year. EPS has doubled, revenues up 32%. So this is a name that especially as the tailwinds continue to grow. Snowflake is exactly where you want to sit.
- [42:04]
Frank Holland
All right, Jim, really quick though. Oracle, is it time to trim? I mean we're just hitting it 70% higher year to date. Is this the spot for me?
- [42:10]
Jason Snipe
Demand continues to outstrip supply.
- [42:13]
Frank Holland
Rpo, we heard you.
- [42:15]
Jason Snipe
Thank you.
- [42:15]
Frank Holland
Jimmy, same question for you. Oracle is one of your big winners. Is this a spot right here? I mean, is this where you want to take some significant money off the table?
- [42:22]
Jim Leventhal
No, no, I think this dip roughly 15% from the high that was set just a few weeks ago. It's under understandable, Frank, in terms of the numbers, the returns that we've been talking about. But I think this is where it bottoms and goes higher. And I think as you get into year end, there will be that window dressing that will be that chase for performance. And Oracle's likely to benefit.
- [42:40]
Frank Holland
All right. One of your other winners is when the other one City. But you're not talking. We already talked about City. We talk about City every time you're on the show.
- [42:46]
Jim Leventhal
When I feel about it, not every time, but. Okay, your point's made. Win. I think this is indicative of what many of us have talked about, of this being inevitable. Everything Rally. This is a stock that for many years was doing very well operationally and the share price languished. And this is the year in which finally its merits are being reflected in its share price. I think it continues as the Dubai, the Dubai resort starts to come online early 27.
- [43:10]
Frank Holland
Yeah, people like the gambling. They like the gambling shares of when they're up more than 50% year to date. Coming up here on Halftime Crew crush oil pacing for its worst week since late June. We'll see how the committee is playing it coming up next. And welcome back to Halftime Crude currently on pace for its worst week since late June. Jim, you're kind of our crude expert here. You're on Cheniere, Exxon, Transocean, what do you make of the moves in the oil market? We've seen some geopolitical volatility, some tension between Russia and Ukraine, but still we see oil weaker.
- [43:40]
Jim Leventhal
Yeah. Bottom line is I think you can make money in the energy stocks and you've got of a lot, lot of different ways to play it. ExxonMobil or Chevron are frankly the biggest names and therefore, relatively speaking, the safest. I'm not saying they're safe. I'm saying they're the safest within the energy space. They're all up and down the product cycle from exploration to refining to marketing. I think if you want to take a little more risk, you've got the offshore drillers like Transocean, which I own. I mean it's dirt cheap. And there's some news today that indicates that the majors are still, still spending on offshore drilling. But certainly if oil prices go lower from here, Transocean is not going to do well. The bottom line is you can make money in this space regardless of where crude oil prices are.
- [44:21]
Frank Holland
Shannon, talk to you about the oil market. We keep talking about the strength of this economy. Everybody says the economy is pretty strong going the Atlanta Fed GDP now tracker, it's going to show relatively strong GDP forecast. Why aren't we seeing oil catch a bit?
- [44:36]
Shannon Sokotia
So on the supply front, I mean, I think if you look at the next 12 months or so, this has been coming. This has been a known, a known issue is on the supply side. So even though we have seen what we believe to be signs of improved demand, the other thing to think about is that, you know, it's oil versus natural gas. And our view is that natural gas is much more attractive, especially given some of the electrification and changes that are being made in the grid. So I think you can be selective in this area as well.
- [45:00]
Frank Holland
Yeah, I believe it was Sam Altman that says some of their data center is going to be powered by natural gas as well. All right, stay with us. Final trades are coming up on Halftime. We'll be right back.
- [45:11]
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- [45:14]
Jim Leventhal
What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast now.
- [45:24]
Frank Holland
Trades. Jason Snipe, you're up first.
- [45:26]
Jason Snipe
ServiceNow stock is down 14% year to date. They are starting to monetize their AI tools.
- [45:32]
Frank Holland
I like this one, Shannon.
- [45:33]
Shannon Sokotia
I'm going to hold with my small cap trade, Frank. I don't know if I've made a strong enough case, but I feel like this is a trade you should stick with if you've been in it.
- [45:41]
Frank Holland
All right, Jen.
- [45:42]
Jim Leventhal
Vertex. We talked about health care earlier. We didn't get to Vertex. Now, it's got a great drug profile here, but I think the important thing is it has just gone into positive, positive territory for the year. That's important. That takes it out of the tax loss harvesting category.
- [45:56]
Frank Holland
This is the name you already own, so you're buying more.
- [45:58]
Jim Leventhal
It's a final trade.
- [46:01]
Frank Holland
I'm just asking, Jim. That does it for halftime. The exchange starts right now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [46:20]
Edward Jones Financial Advisor
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.com.
- [46:59]
Frank Holland
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Jason Snipe
I need a coffee.
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Frank Holland
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