The Slowing Economy and Stocks 6/4/25

Summary

Halftime Report: The Slowing Economy and Stocks (June 4, 2025)

Overview On the June 4, 2025 episode of CNBC’s Halftime Report, host Scott Wapner delves into the paradox of a stock market nearing all-time highs amidst tangible signs of economic slowdown. The panel, featuring experts Joe Terranova, Jim Lavin, Paul Surat, and Seth Bryn Talkington, navigates through current market dynamics, the implications of recent tax legislation, sector-specific performances, and geopolitical headlines impacting investor sentiment.

Market Snapshot: Highs Amidst Weakness The episode opens with a comprehensive overview of the current market landscape. Scott Wapner highlights the unusual scenario where stocks are flirting with new peaks even as economic indicators suggest a downturn.

Scott Wapner [01:02]: "Front and center this hour, stocks not too far from all-time highs. At the same time, the economy showing some signs of weakening."

Key indicators discussed include the Dow’s five-day winning streak, the ISM Non-Manufacturing PMI dipping below 50, and the lowest ADP employment figures in over two years. Notably, bond yields are falling, raising concerns about future Federal Reserve rate cuts.

Economic Concerns: Growth Over Inflation Jim Lavin expresses his primary worry:

Jim Lavin [03:46]: "My biggest concern is not inflation. It is growth. And I am concerned that growth is slowing rapidly."

The panel discusses the impact of these economic indicators on market sentiment and the potential for the Federal Reserve to adjust monetary policies in response to declining growth metrics.

Tax Legislation and Tariffs: A Double-Edged Sword A significant portion of the discussion centers on the newly passed tax bill and its interconnectedness with tariffs. Paul Surat provides an in-depth analysis of the Congressional Budget Office’s (CBO) scoring of the tax bill, which projects a $2.4 trillion increase in the deficit over the next decade. He challenges the CBO’s static analysis by highlighting the missing dynamic scoring elements that could account for economic growth stimulated by the tax cuts.

Paul Surat [04:34]: "We're of the opinion that there will be economic growth that comes from this."

Scott Wapner interjects to balance Surat’s optimism with caution regarding the longevity of tariffs:

Scott Wapner [04:36]: "... tariffs would cut the deficit... Anybody believe that you're going to have tariffs in place for 10 years?"

Surat acknowledges the uncertainty surrounding the permanence of tariffs but emphasizes the immediate fiscal impacts, dubbing the net effect on the deficit as a "wash."

Momentum in the Market: Tech and Semiconductors Lead the Charge Despite economic headwinds, momentum stocks, particularly in the technology and semiconductor sectors, are propelling the market forward. Jim Lavin underscores the resurgence of semiconductors:

Jim Lavin [10:44]: "There is near term momentum back in the semis and that is what the market is benefiting from."

The panel discusses key players like Broadcom, AMD, Cisco, and Qualcomm, analyzing their growth prospects and the role of artificial intelligence (AI) in driving earnings revisions.

Apple’s Anticipated WWDC: Navigating AI Challenges A focal point of the episode is Apple’s upcoming Worldwide Developers Conference (WWDC). Steve Kovac provides insights into Apple’s struggles with its AI initiatives, notably Apple Intelligence and the delayed Siri upgrades. The discussion highlights the pressure Apple faces to demonstrate substantial AI advancements to regain investor confidence.

Steve Kovac [18:16]: "The most notable one, Bloomberg reporting that developers will be able to tap into Apple's AI technology for their apps... Apple is going to have to show developers that they have the advancements that can keep them in Apple's AI ecosystem instead."

Paul Surat further critiques Apple’s recent performance and strategic challenges:

Paul Surat [06:10]: "I think all of us on this desk... admit that it's a difficult job to predict what the rest of this year is going to bring."

Sector Highlights: Consumer Staples and Healthcare on the Rise The report highlights strong performances in consumer staples and healthcare sectors. Companies like Church and Dwight, Monster Beverage, Visa, and healthcare giants such as Zoetis and Amgen are noted for their upward trajectories and solid earnings momentum. Seth Bryn Talkington points out Visa’s resilience:

Seth Bryn Talkington [28:41]: "Their multiple is going to keep where it is and the earnings are going to keep on growing as long as we have some inflation in our system."

CrowdStrike’s Stock Decline: A Case Study in Valuation CrowdStrike’s recent 7% drop despite previous gains is examined, with Jim Lavin defending the company’s long-term prospects despite a single quarter’s performance not meeting heightened expectations.

Jim Lavin [24:16]: "I think positioning was very full and you need to blow out the number. The same thing that... if positioning is full and the valuations full work off position, why does it have to be anything wrong with the report?"

Geopolitical and Economic Headlines The panel briefly touches on significant global events, including:

• The FBI’s arrest related to an explosion at a fertility clinic in California.
• Ukraine’s president proposing a ceasefire amid ongoing tensions with Russia.
• The UN Security Council’s vote on a resolution demanding a ceasefire in Gaza, likely to be vetoed by the US.

Midday Word: Bond Market Dynamics Senior markets commentator Mike Santoli discusses the bond market’s oscillation between deficit concerns and growth worries, emphasizing the market’s delicate balance in interpreting economic data.

Mike Santoli: "It's the perpetual pendulum in the bond market... based on what was happening over the last year."

Calls of the Day: Strategic Stock Picks The episode concludes with the panel’s top stock recommendations:

• Spotify (NYSE: SPOT): Outperform rating with a target price of $825. Jim Lavin praises Spotify’s momentum and user growth.

  Jim Lavin [43:21]: "It has been a clear winner as it relates to momentum and it has a lot of fundamental strength behind it."

• Honeywell (NYSE: HON): Buy rating with a target of $265, recommended by Citi.

  Seth Bryn Talkington [44:19]: "All three businesses are good businesses... it's a good call."

• Live Nation (NYSE: LYV): Outperform rating with a target of $185 by Bernstein. However, Jim Lavin expresses caution despite the bullish outlook.

• Lockheed Martin (NYSE: LMT): Buy rating based on increasing global demand for defense products.

  Paul Surat [45:02]: "Companies like Lockheed Martin and the rest of the US defense sector I think are going to benefit over the next several years."

• Dell (NYSE: DELL): Recommended by Seth Bryn as a favorite GARP (Growth at a Reasonable Price) name with a robust buyback program.

Conclusion Scott Wapner wraps up the episode by reaffirming the dichotomy of a robust stock market juxtaposed against an economy showing signs of slowing. The panel’s insights underscore the importance of momentum stocks in sustaining market highs, while also cautioning about potential economic headwinds that could impact future growth.

As investors navigate these complex dynamics, Halftime Report provides a nuanced perspective, blending market enthusiasm with grounded economic analysis to inform and guide strategic investment decisions.

Notable Quotes:

• Jim Lavin [03:46]: "My biggest concern is not inflation. It is growth. And I am concerned that growth is slowing rapidly."

• Paul Surat [04:34]: "We're of the opinion that there will be economic growth that comes from this."

• Paul Surat [06:21]: "The way you get out of this is not austere. You grow your way out of it... that's the quiet part out loud."

• Seth Bryn Talkington [28:41]: "Their multiple is going to keep where it is and the earnings are going to keep on growing as long as we have some inflation in our system."

• Jim Lavin [43:21]: "It has been a clear winner as it relates to momentum and it has a lot of fundamental strength behind it."

Transcript

[Scott Wapner]

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[Scott Wapner]

I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thanks very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, stocks not too far from all time highs. At the same time, the economy showing some signs of weakening. We'll tell you what that's all about. We'll discuss and debate and how to navigate these markets with the investment committee. Joining me for the hour, Joe Terranova, Jim Lavin, Paul Surat, Seth Bryn Talkington Dow's going for a five day win streak. ISM non manufacturing, PMI below 50. That was notable. The lowest ADP print in more than two years. Notable yields falling. Something to keep an eye on the president once again, all over the Fed chair to cut rates. ADP number out too late. Powell must now lower the rate. He's unbelievable. Europe has lowered nine times at the same time. Joe, the president says it's extremely hard to make a deal with China's President Xi. You have the drama over the tax bill. You have the musk versus Republicans on the Hill. Now Ray Dalio on CNBC earlier today agreeing that the debt's a big problem. Nothing new from him of course. He said, quote, we're going to be in a period of greater than normal risk, citing a number of factors for that point of view. And yet the S and P is 2.5% from a new high. And I think our viewers care more about that than any of the other surrounding noise. I dare to believe I would agree.

[Jim Lavin]

With that and everything you're identifying is going to be featured on the next episode of how the market continues to move higher. Because in the current episode right now, the market is running off of a rebuilding of sentiment and positioning. And that is absolutely what is driving the market in the near term, what you've identified, the concerns that are in front of us, the concerns surrounding. Absolutely, there is a hesitancy to transact. That was clear in the month of May. It is reflected in the services. It is obviously reflected in the ADP report. And tomorrow we're expecting 130,000 jobs in the May report, down from 177 in the month of April. I think we're going to see that there as well. So in the near term, the market has the ability to move towards the offset time highs. I acknowledge that. But I do see in the third quarter there is difficulty ahead and it's related to an economy that is going to cool. And I've said this for the last several weeks, my biggest concern is not inflation. It is growth. And I am concerned that growth is slowing rapidly.

[Scott Wapner]

Well, and I guess you have to be concerned that the, that tariffs are the contributing factor or the leading factor as to why growth would be slowing. You know, I don't know what you guys think about what the future of the tax bill means to the future of the market.

[Jim Lavin]

I think it means a lot.

[Paul Surat]

I'm going to. Here's my opinion. And we wrote this at Sarity Partners. It's up on our website that the cbo, the Congressional Budget Office, which scores this thing, says it's going to be 2.4 trillion over the next 10 years, 240 billion a year in deficit increasing. But there's two things that are left out of that. One is the fact that the CBO does not do dynamic scoring. It doesn't take into account any economic growth that may come from this. We're of the opinion that there will be economic growth that comes from this.

[Scott Wapner]

Well, the other part, the other side of this equation. I'm sorry to interrupt you.

[Paul Surat]

Are you going to steal my thunder?

[Scott Wapner]

I'm sorry to interrupt you. Is that they also came out because Megan Casella was doing this reporting earlier and saying that they said that the tariffs would cut the deficit.

[Paul Surat]

Thank you.

[Seth Bryn]

However.

[Scott Wapner]

Okay, let me finish. Because there's a big asterisk. By this second one, they say it would cut the deficit. The tariffs would by 2.8 trillion over 10 years. So let's just call it a net, a net net zero. That is assuming, of course, that the tariffs are in place for 10 years?

[Paul Surat]

Yeah.

[Scott Wapner]

Anybody believe that you're going to have tariffs in place for 10 years?

[Jim Lavin]

I hope not.

[Paul Surat]

Well, I. Wait a second.

[Scott Wapner]

You're even debating that they could be.

[Paul Surat]

No, I think. Well, 10 years, I mean, let's see what they said. I know.

[Scott Wapner]

And that's the scoring is based on.

[Paul Surat]

That is what the scoring is based on. I mean, I think all of us on this desk and the ones who are not today will admit that it's a difficult job to predict what the rest of this year is going to bring, let alone 10 years. We have to deal with the cards as they're dealt. And you just showed them to us, Scott. And that's what I was going to say is that right now in the month of May, tariffs ran at an annualized rate, 190 billion more than a year prior. That's just a fact. Okay, so that 190 billion up against the 240 billion of deficit increasing, again, not dynamically scored from the deficit. I call it it a wash. Will it, will it last? I don't know. I don't know if the tariffs will last. And I think frankly what I'd like to see before we discuss whether they last through next year's midterms is let's get them in place and move forward. This economy, this world wants to know what the rules of the road are. Corporate wise, investing wise and move forward.

[Scott Wapner]

It still leaves you, even if it is a wash, it still leaves you with the current state of the deficit, which is not good, not today, but tomorrow. The trajectory that.

[Paul Surat]

You want me to say the quiet out loud.

[Scott Wapner]

Yeah, go ahead.

[Paul Surat]

Yeah. The way you get out of this is not austere.

[Scott Wapner]

You grow your way out of it.

[Paul Surat]

You grow your way out of it. I mean, and I'm sorry, there's a little inflation involved in that too. That's the quiet part out loud.

[Scott Wapner]

Well, that's clearly their belief is that you can deficit spend your way out of it because you would ignite a level of growth that would eat into the deficit and get it off of this train wreck trajectory.

[Seth Bryn]

I mean that's the key question, right, as to if the growth is there. And I think the leading indicator is going to be the bond market. And when your tenure is now for four and kind of on the cusp of when you were talking about this tax bill. If the tax bill comes as where it is, the 10 year might move up and that will be having an effect on the stock market. So in the short term, I Think you can expect a lot of volatility.

[Scott Wapner]

Brin does this, how much of this matters? The market knows a lot of this already. And as I said, we're, what are we, two and a half percent from a new high on the S and P? I think there's like trade war fatigue, tariff fatigue, warning fatigue, Diamond Dalio, it's like, okay, we get it. We're two and a half percent away from a new high on the S and P. Can we get there in the face of all of that noise?

[Bryn Talkington]

As long as the bond market lets us get there. And I think that's where ultimately that will be the, the judge and jury around deficit spending and what the market is, the bond market, not the stock market will I think solve that equation. Obviously you have Ron Johnson, Rand Paul, other senators that are saying are doing the work that, that we're, we're all talking about. And so I think the bond market is what to watch. But I do think this wall of worry we're climbing that we're a whisper of at an all time high, I think that I'm in the consensus, which makes me a little nervous that everyone feels like we're in this rangebound market between 5,750 and a little bit over 6,000. And so I do, I do still think though that the pain is on the upside because people, I'll say not, not retail investors, not our clients, but a lot of people, institutional investors are underinvested. And so we'll see what happens. But to me, I do think we have trade fatigue. Absolutely, absolutely. And I will say within the numbers, what we haven't talked about is the jolts numbers, that the jolts numbers actually yesterday came out better than expected or however you want to look at it. And so unemployment is low, there are more job openings than were expected. And so as it relates to, you know, Trump and Powell, I just think he's barking up the wrong tree. There's really no data that says that he needs to cut right now and the tariff uncertainty is just going to even push that out further, unfortunately.

[Scott Wapner]

Right. Well, I mean the person's policy is the thing that's lighting the fire, that's hurting the economy. And that same person wants the Fed to come to the rescue of the policy that has caused the uncertainty to begin with. I mean that's the irony obviously of the whole thing. Irrespective of any of that, I don't want to spend the next 20 minutes talking about trade tariffs and all that other stuff.

[Jim Lavin]

Okay.

[Scott Wapner]

Because I think there's like we're two and a half percent from a new high on the S and P and that technology has been ripping. That trade is back in a very big way. So if I think we're getting to a new high, where do I want to ride that? What's the goal here?

[Jim Lavin]

Well, that's the current episode of how the market gets to the all time highs and it is really predicated on first and foremost the momentum factor. I think I've come on the show multiple times in the last week and talked about names like Netflix making a new high, like Exxon making a new high. I talked about Dash yesterday as a final trade. So it is very much the same equity names that are powering the market higher. What we're benefiting from is in addition to those names like Broadcom which is moving higher today, it is semiconductor names that have not participated over the last three to six months. It's semiconductor names in which positioning was reduced dramatically. The momentum factor moved away from the KLA core, but the applied material.

[Scott Wapner]

But there's momentum back in the semis. There semis are up.

[Jim Lavin]

The momentum is back.

[Scott Wapner]

Semis are up 15% over the past month.

[Jim Lavin]

There is near term momentum back in the semis and that is what the market is benefiting from. In addition to the momentum names that have been there for the last six months. Now you have the added benefit of, okay, let's go back into the semis. So I keep suggesting it's very important to watch the semis. This afternoon's Broadcom report is very important. Does capital go out of Broadcom into a name like AMD which has struggled over the last six months? Can the semi momentum carry forward over the next several months? And if it does, it's one of the primary catalysts. And we'll look back and say that's one of the reasons why we achieved all time highs.

[Scott Wapner]

I mean it's semis up 15% over the past month, cloud up nine, cyber up eight and a half, a new record high today. Software brin up five and a half percent and technology far and away the leading sector group over over the last month. Even as some try and suggest that the rally's complacent on both fundamental and technical grounds. I don't know. What do you think?

[Bryn Talkington]

I think that you want to kind of build on Joe's, you know, momentum area. If you look consistently what the areas you named are all above the 200 day moving average versus a Google or a Salesforce or an Apple or health care, which are all under the 200 day moving average. And so I think you've got to stay with who brought you to the party and not only with the momentum names but, but I feel like those companies in those sectors that are above the 200 day moving average, if we do get any pullback, which doesn't look like it right now, those are going to be the sectors and securities that continue to march higher. And so I think that's where once again Apple well below it, Google well below it, those names are going to struggle versus versus the Netflix except the Meadows, etc. That are well above that, that, that very simple but important 200 a line.

[Scott Wapner]

Seurat. I feel like if not everybody, certainly the majority and most of our viewers are thinking the same thing or wondering the same question. Is this market on a trajectory to continue to go up? Is there enough momentum to have a little bit of a sizzle here in the summer for stocks or is the you know what eventually going to hit the fan from the tariffs and now if there's drama extended over this bill, whether that's going to cut into whatever momentum seemingly existed for this market?

[Seth Bryn]

Yeah, I think you have to break it up into two parts. I mean the momentum stocks, the ones Joe is talking about, have earnings growth behind them. So right now as the market is moving, the money is flowing to earnings growth that we see in the next couple of quarters as opposed to the uncertainty as to what's going on in some of the stocks that like the Googles of the world where, you know, growth is slowing. However, what could happen to your point is if we get too much of this negative news, the macro effects, the algos come in and you just get equity selling a broad base. So that's when you pick up even more of these growth companies because they're on sale at that point even though they have growth.

[Scott Wapner]

It's not just a growth conversation. I mean if you like Jim is probably more positive on the state of the economy than anybody on the panel certainly today, then you must think that other areas of the market are going to work and get you to those new highs. Even if tech, maybe tech doesn't have to. It might.

[Paul Surat]

Well I think I take your words and I'd rephrase it this way. I think it's a stock pickers market. I mean we often say that. But I do think, and we're all saying, I think the same thing, that the market will set a new high. Maybe it goes a little further. So Scott, maybe we get a 5% rise from here in the S&P 500 and then it consolidates over the summer. I think you can find stocks out there there that might do 10% in that environment. I've added to a couple of them today. Cisco Systems and Qualcomm. You know, Surat was just mentioning about positive earnings growth. What I also look for, and I know Surat does as well, is positive earnings revisions. Cisco, if you look at the earnings revisions, is definitely going higher and it's with good reason. If you've listened to their last several earnings calls, they are definitely benefiting from AI, definitely benefiting from the data center buildout. And it's just not reflected in the multiple with Qualcomm. It's a little bit different in that the earnings revisions are very slightly upwards, but they are being anticipatory. And I think those earnings revisions are going to start marching higher. Not on the back of cell phones, which we all know waiting for this much heralded super upcycle is not happening. But where Qualcomm is going to really get the earnings revisions upward is in automotive and Internet of things, the latter of which also does play into the data center buildout. So my point being is that we. You can pick stocks and not have yourself involved with this discussion about whether the market's too high or it's going to hit a new all time high.

[Scott Wapner]

You can pick stocks, the payoff and all that. You didn't mention those two names by accident as we have on the screen. You bought more of both.

[Paul Surat]

Yes, I'm sorry, I thought, I thought I said that. But yes, thank you for pointing that out. Also here for I think you know, I'll also Stacey Razg on yesterday had a research note in which he called quality Qualcomm the Rodney Dangerfield of semiconductors. And that's they get no respect. I'm not sure everybody listening to one.

[Seth Bryn]

Of our largest holdings and it hasn't really gone anywhere. But what you're also getting through is this overhang period of every time people talk about well Apple's going to do this and Apple's going to do that, you're going to get secular growth in a Qualcomm in other areas that are not just dependent on Apple. And that's the thesis of that.

[Scott Wapner]

You trim some Microsoft at the same.

[Paul Surat]

Time you got to find money with which to put this, put the new money to work in Cisco and Qualcomm. And I looked at Microsoft, had a fabulous run. I still own the stock. I'm not saying anything terribly negative, but at 31 times forward earnings. I think it might be at fair price. So if I look for a source of funds, Microsoft is the one.

[Scott Wapner]

Amazon's target today in that group gets raised to 240. JP Morgan met as target gets raised JP Morgan to 735 as well. So there continues, Joe, to be optimism and a lot of it around these names. Analysts missed the the last run in May which was so significant they're going to chase it up even further.

[Jim Lavin]

They are. But let's keep in mind right now of the 11 major sectors technology is running in 8th place. I know recently we have a revival for semis and some of the Mag 7 but so far year to date it's been industrials, financials, utilities that are carrying the market higher as it relates to the Magic 7. The strongest momentum that I see in the near term and even if you pull back the calendar over the last year is certainly with Metta. Matter is up 16% year to date. It's up 6% in the last five days. Sorry Jimmy. I'm seeing very strong momentum for Microsoft which is pressing towards an all time high and looks like it wants to break out above there.

[Scott Wapner]

It's only 1% away. Yeah.

[Jim Lavin]

And you see remember positioning is so important, important in these names. You see rebuilding and positioning here in Microsoft because let's remember it struggled. It had the relative underperformance last year versus the other MAG7.

[Scott Wapner]

Well, we could turn now to Apple because a reminder, Monday of course is the Worldwide Developers Conference. So we're going to be live there for both halftime and closing bell. We'll have several guests on site and it really does come at an especially critical time for Apple. Over the next three days we're going to look at the most pressing items that Apple investors need to hear. What does Apple really need to address? We're going to tell you that as I said over the next three days. Well that man right there is Steve Kovac is thinking about this in a special report. Tell us.

[Steve Kovac]

Yes, Scott, well let me give you those three things to watch where we're going to be talking about this the rest of the week on your program. What's Apple's AI strategy now? What's it going to do with AI Search, which has been teased a little bit by executives the last several weeks and what can Apple offer developers to keep them in its ecosystem? Now WWDC is coming after that failure to execute with Apple Intelligence which was unveiled at last year's event. And just now this just came in, Scott, the Financial Times reports Apple Intelligence's approval in China is now being held up because of the trade war. Now, since last year's wwdc, they have indefinitely delayed the upgrade to Siri. Took Siri away from AI AI boss John Gianna Andrea chatgpt integrations there. But it's kind of lacking the service's best features and other AI features just aren't that impressive. You know that because, well, when was the last time you got one of those Gen Mojis sent to you by one of your friends on Apple Intelligence? Look, the real kicker, despite the hype around Apple Intelligence, it did not drive iPhone sales in a significant way as so many people predicted it would. So as for a clear AI strategy, not expecting a ton of fireworks here next week at wwdc, but the most notable one, Bloomberg reporting that developers will be able to tap into Apple's AI technology for their apps. But as we all know, Apple's AI models are not as powerful or as robust as those from OpenAI or Google or Meta and so many others. Apple's going to have to show developers that they have the advancements that can keep them in Apple's AI ecosystem instead. Now, tomorrow, Scott, we're going to dive into AI search and who Apple may be partnering with there after missing big time on that Siri AI update.

[Scott Wapner]

Scott, you get a feeling that inside that building, that beautiful building out in Apple park where this is all going to take place, that they're feeling the pressure of what didn't take place over the last year since we sat together at the prior wwdc.

[Steve Kovac]

Yeah, they have to. I mean, part of the reason that Apple Intelligence dominated last year's event, Scott, was because they were perceived to be behind in artificial intelligence after we saw so many of their peers and competitors put out just this huge cadence of products and innovations, one after another after another, especially at OpenAI. And then you have the jony I've thing that happened with OpenAI, that partnership that puts more pressure on Apple, it also puts pressure on OpenAI itself. So, and then look, let's even rewind two years, Scott. Two years ago they announced the Apple Vision Pro, that new headset, the new big computing platform that launched to so much hype and that has really failed to take off. So they're coming off of two really tough years where they kind of didn't deliver what they said they would. And so the expectations here are pretty enormous for them to show us stuff that is actually going to launch. But right now, expectations are relatively muted. So we'll see if they can kind of turn that around. It's a good chance for them to reset the narrative, especially on AI. Scott.

[Scott Wapner]

All right, we'll see you tomorrow with part two as again we do a three part series here leading up to this incredibly big event for Apple where once again we'll be live from WWDC at Apple Park. Live coverage is starting at noon eastern. Steve, thank you. Let's just go through brin this downgrade today. One more time from Needham on Apple. It's to hold from buy. They remove the $225 target and they do it because they say on a number of fronts. Threats to Apple's near term revenue and EPS growth. Every big tech competitor wants to take Apple's 15 to 30% platform tax. Gen AI innovations open the door for new hardware form factors that threaten iOS devices. Apple and Apple trades at a forward year 26 P E of 26 times which looks expensive on several metrics. Any one of those might be concerning taken in total. And there's the analyst who did it, Laura Martin. She's on the exchange at one o' clock today. So you can get more detail from that. But what about this call?

[Bryn Talkington]

I think it's a little bit late. We'll say the stock is not even near to 25. But I think that the first point about the threats to revenue and earnings growth, like I cut half the position back in December because it's like what revenue and earnings growth. The only earnings growth we've seen is because when their earnings per share come out, their per share number is lower, the denominator is lower because they're buying back so many shares. The challenge is there has not been revenue and earnings growth. I do think the app platform fee that they're charging, to me that is the biggest risk because that's those services, that is a huge cash cow for them. I think what happened with Epic and with games, I think that is a risk in the name and it's, it's the 225 is actually its 200 day moving average. I think it's a good call and I just don't see the catalyst to get this stock going again versus the other names like a meta or an Amazon that you just like consistently are just running on all cylinders, moving in this direction and executing. This is a hardware company that to me has a software problem.

[Scott Wapner]

Yeah, speaking of software, I do want to hit our chart of the day. It's crowdstrike. We're going to pivot there because it's down significantly today. And if we talk about it 10,000 times on the way up, that everybody loves it. We're going to talk about it on the way down. Joe, it's down six and a half percent. George Kurtz is going to be on with Jim tonight on Mad Money. So you want to check that interview out. What's the deal here? Why is the stock down 7% for other reasons then it had been straight up and to the right to a new high, as we pointed out, I think yesterday, if not almost every day recently.

[Jim Lavin]

Well, you can't dismiss that because when a stock goes up so significantly and you know that positioning is full, you need to see an earnings report and guidance that really blows away consensus expectations.

[Scott Wapner]

Is that the problem? The guide was weaker than expected.

[Jim Lavin]

I don't know that any of it was bad. I think it was a really good report. I just don't think it was an overwhelmingly great report. And I actually think it's somewhat healthy that it corrects.

[Scott Wapner]

ISI says Evercore ISI downgraded it today and they said it's a full valuation.

[Jim Lavin]

I disagree with that. I think this company is in the sweet spot, as is most of these cybersecurity names. I own the company personally and I've said I'm maintaining it for long term positioning. I'm not going to have a reflex reaction to a earnings report based on one quarter that I don't think was troubling. I just think positioning was very full and you need to blow out the number.

[Scott Wapner]

The same thing that, I mean, if positioning is full and the valuations full work off position, why does it have to be anything wrong with the report? Maybe the report was just fine. I mean, it's a valuation. Yeah, but the stock just. Stocks just don't go up into the sky forever.

[Jim Lavin]

Of course they don't. And that's why I'm saying this is healthy. Because a lot of times when positioning is full, you have hands that are involved in a particular equity name that are not comfortable maintaining positions. And you need to kind of work that off. Positioning is so critically important. I'm not saying that this was a fine report. It was okay. It needed to meet and go beyond the wildest expectations to go even further higher, which seems healthy.

[Scott Wapner]

All right, coming up next after this quick break, we're going to trade committee stocks that have been on a hot streak. Well, I mean, for the most part, there are some losing streaks that we need to get to as well. We're back after this. Your best restaurant location gets five star reviews. How do you make every location like your best location. Your best paper mill has been operating at peak productivity. How do you make every mill like your best mill? Your best data center has optimized every drop of water. How do you make every data center like your best data center? The answer is Ecolab. Better performance, better outcomes, better impact. Ecolab. Now every location is your best location. How will you shape the future of banking with confidence? Industry consolidation, crypto, the rise of fintechs all create a complex landscape for banks to innovate and grow. EY provides domain led insights to navigate today's fragmented banking sector. So whether you're tackling regulatory complexities, integrating digital assets or see pleasing M and A opportunities, EY sees your business from every angle working together to deliver outcomes that create strategic value. Ey shape the future with confidence. Are you still quoting 30 year old movies?

[Paul Surat]

Have you said cool beans in the past 90 days?

[Scott Wapner]

Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past.

[Paul Surat]

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 [e-mail] credit card based on the February 2024 Nelson report.

[Scott Wapner]

Sets off the program we are really not that far away from a new high on The S&P 75s and P stocks have hit new highs since the April 8 low. If not only come all the way back, They've hit new highs 18 today. As a matter of fact lots of stocks have been on hot streaks. Church and Dwight is up seven days in a row.

[Jim Lavin]

Joe Consumer staple name exhibiting strong growth and interestingly enough you're seeing that momentum funds are allocating in the direction of consumer staples. A lot of the reasoning behind it is because of the success. Previously allocating towards Wal Mart, allocating towards Costco. Now you have new names like Church and Dwight.

[Scott Wapner]

Monster Beverage, Visa, Surrott a six day win streak. It is a new record high for shares of letter V. I mean this.

[Seth Bryn]

Is a stock when you see more spending coming and if you get inflation in the system they make money. It's a toll. So their multiple is going to keep where it is and the earnings is going to are going to keep on growing as long as we have some inflation in our system.

[Scott Wapner]

It's interesting everybody owns this. Bryn why is Visa doing so well?

[Bryn Talkington]

I mean they're out of the crosshairs of the tariffs but I mean we've talked about this before. High Margins. No, Capex is an asset light company. They have a duopoly basically with MasterCard. And also as it's making new highs, is a really good rule to remember, don't short a stock making 52 week highs and don't buy a stock making 52 week lows. So I think the stock on momentum alone is going to continue to go higher.

[Scott Wapner]

Jimmy Wynn is on a five day losing streak. Uber is as well. But we did that yesterday.

[Paul Surat]

Let's do Wynn.

[Scott Wapner]

And I'm Ubered out. I want Wynn five days down in a row.

[Paul Surat]

It's stuck in this channel. From a technical point of view, it's stuck between 80 and 100. And I mean if you stretch that channel out for a couple of years, it's a long channel. I'm not a great technician. Joe, you may have something to say about this. That's fine. Not the dinosaurs in the desert thing, but when you get this long of a channel, it's breaking out one way or the other. It is. And I'm telling you from the fundamental point of view, not just of what Las Vegas is doing and what Macau might doing, but the growth properties in Dubai, some other things they may do internationally that I very strongly think that the breakout is to the upside side.

[Jim Lavin]

When it happens 15 the last five years.

[Paul Surat]

Okay. I mean, let me look at this chart. Like pull up the, pull up a five year chart.

[Scott Wapner]

He's already said he doesn't care about performance.

[Paul Surat]

Come on. It's in a channel. It's in a channel here. And it's going to break out one way or the other. Now if you honestly think, and this is fine, if you think that there's going to be a recession out there, we're going to start parking planes in the desert, we're going to be laying off staff at Wynn Resorts, then it's going to break to the downside. You know my economic point of view. That's not my economic point of view.

[Jim Lavin]

Your honor, can I respond?

[Scott Wapner]

Go ahead.

[Jim Lavin]

Down 20% last 10 years.

[Paul Surat]

Okay. I haven't owned it for 20 years. I haven't owned it for 10 years.

[Scott Wapner]

I don't care about what a stock's done for the prior 10 years.

[Paul Surat]

But unless that's. I know, unless that sound dismissive as a value investor. And this applies to Cisco, and this applies to Cisco and Qualcomm, which I'm building up more now. You build these things not knowing when it's going to hit. I don't know when it's going to hit. Obviously I thought Wynne would have taken off a long time before this. And I'm sorry, Scott, I say this a lot. It's why you build a portfolio. I can't tell you when wind's going to hit. That's why I have a lot of other things in there. A wob tech, but Cisco's actually doing well. Citigroup, you name it. But that's why you build a portfolio, because they're all not going to work at the same time.

[Jim Lavin]

Jimmy, if you're in a channel for that long, you send up a flare.

[Scott Wapner]

So Equinix, Equinox is up six days in a row, as is workday. Surat, both of those are yours, Both of mine.

[Seth Bryn]

Equinix is a data center play. And when you get more money and you get Amazon announced today, more money coming towards data centers, Equinix is in the sweet spot and you're going to see earnings momentum there as well. And then, and workday is just coming off a bottom. They had a quarter that they disappointed, but it's a great company that's got really good secular growth and I think it's a core holding that you want to own.

[Scott Wapner]

Joe Zoetis is up four days in a row. Amgen is as well. Aflac, amphenol, Lilly, Marsha McLennan. Amphenol hits a new record high today. All of those stocks are yours, some.

[Jim Lavin]

Of those names, those health care names. Lilly getting a little bit of a bounce. But I've said over the last week we're seeing momentum deteriorate there. Zoetis is a new position that we've taken, getting some positive momentum. Amgen as well. One more name I'd add there. Take a look at Veeva Systems. That's a healthcare system software name that today made a new 52 week high.

[Scott Wapner]

All right, let's get the headlines now with Silvana now. Hi, Silvana.

[Bryn Talkington]

It's got Good afternoon.

[Joe Terranova]

The FBI arrested a man at New York's JFK airport overnight in connection with an explosion last month at a fertility clinic in California. And that's according to NBC News, which reports investigators are looking into him to see if he helped provide materials for the bomb. Authorities say the man suspected of setting off the bomb at the clinic died in the explosion. Ukraine's president is proposing a cease fire between Kiev and Moscow until the country's leaders can meet. Vladimir Zelinsky said today he is ready for talks from Monday onwards in Istanbul, the Vatican or Switzerland. Russian President Vladimir Putin said he doubts a summit would be possible following Ukraine's recent attacks. Deep inside of Russia, which he called crimes against civilians. And the United Nations Security Council will vote later today on a resolution that demands an immediate, unconditional and permanent cease fire in Gaza. Diplomats say the US Is likely to veto it. The resolution also calls for the immediate release of all hostages held by Hamas and demands an immediate lifting of all restrictions on aid into Gaza.

[Scott Wapner]

SCOTT I'll send it back to you, Silvana. Thank you very much. Silvana. Now, next and totally, he's here with his midday word. When we come back, how will you shape the future of industrials with confidence? Whether you need to define your strategy, optimize your supply chain, or keep pace with data driven manufacturing, EY professionals understand industrials and the sectors they supply, bringing the insights that deliver real outcomes with a full spectrum of services. EY helps strengthen your business from factory floor to product development and beyond. So when the global market shifts, your business is agile enough to adapt. Ey shape the future with confidence. Are you still quoting 30 year old movies?

[Paul Surat]

Have you said cool beans in the past 90 days?

[Scott Wapner]

Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past.

[Paul Surat]

Discover is accepted at 99% of places that take credit cards nationwide.

[Scott Wapner]

And every time you make a purch.

[Paul Surat]

Purchase with your card, you automatically earn cash back. Welcome to the Now It Pays to Discover. Learn more at discover.com credit card Based on the February 2024 Nelson Report.

[Scott Wapner]

Some breaking news. Steve Kobach has that for us. It's related to CrowdStrike. Steve?

[Steve Kovac]

Yes, Scott, we just got this SEC filing from CrowdStrike where they say they've received requests for information from the Department of Justice and the SEC related to last summer's outage. You might remember that took down pretty much every PC around the world here. And they're saying this is related to what they call the company's recognition of revenue and reporting of ARR, that's annual recurring revenue for transactions with certain customers. They also say they expect to incur significant legal expenses as they go through this. Keep in mind they're also going through that legal battle with Delta and maybe some other partners as well. We don't see shares moving too much on this. The move that you're seeing right now in Crosstrek shares, that's all about yesterday's earnings. Shares barely budging on this notice. But again, that big fallout from last summer's outage.

[Scott Wapner]

SCOTT yeah, I appreciate that, Steve, thank you. Also glad that Steve reminded us the stock was under pressure already long before this news hit the tape. Mike Santoli is here, our senior markets commentator for his midday word. What do you make of the action today?

[H]

Running into a little bit of a headwind on the softer economic data. Sort of just challenging the market's ability to look through it. I guess it's hard to say exactly when you kind of have picked the bone clean in terms of big investors feeling like they need to re risk this sort of positioning squeeze that's been going on. That's been able to happen largely because you have had more reassurance that the consumer is okay and you know, even jolts. Data yesterday was fine, so it wouldn't overreact to the ADP and the ISM numbers today, I assume still kind of fits into the soft rather than hard data category. But I think that's where the market is and sort of up here a few more things have to go. Right. It can't just be, you know, we're kind of working off the negativity of that, of that shock.

[Scott Wapner]

It's interesting to watch the grind of the bond market.

[H]

Yeah.

[Scott Wapner]

You know, one moment concerned about the deficit, the next moment concerned about growth for sure.

[H]

I guess that's the perpetual pendulum in the bond market. My take has always been it hasn't been as concerned about the definition deficit as maybe people had made it out to be with the longer end yields going up as much as they have. But this definitely shows you're going to get traction if the cyclical headwinds pick up or if the perception that they are also with the jobs number coming on Friday, I do think, you know, it's like how negative do you want to be on bonds going into what could be an unpredictable print.

[Scott Wapner]

Yeah. And how much cred the market gives to that number based on what was happening over the last year. 30 days in the month of May.

[H]

Right. So we've been feeding off of this period where the data were de risked because, you know, it's sort of either it's before tariffs or it's pulled forward or it's in limbo and it's not yet affected by what's going to happen policy wise. So yes, it is true. I don't know that they're going to overreact to one month. But again, after we've had this nice run, you know, we almost get back to the highs and you know, it sort of has to give you a little bit of an exclusive excuse to back off a little bit. But really this is nothing. I mean, the market is really kind of won back the benefit of the doubt, especially the momentum and mega cap side.

[Scott Wapner]

All right, good stuff. I'll see you on closing bell. It's Mike Santoli. Coming up, calls the day, including a very bullish call in a stock that's already trading at all time highs. We'll debate it next. Welcome back. Our friends at Golf Channel are up north this week for the second oldest non major event on the PGA Tour. The RBC Canadian Open gets underway tomorrow. NBC Sports reporter Kyra K. Dixon joins us live from Ontario with what to expect this week. Hi, Kyra.

[Joe Terranova]

Hi, Scott. Yes, as you mentioned, there's plenty of history here at the RBC Canadian Open. Been playing been played on the PGA tour since 1904. And TPC Toronto at Osprey Valley is playing host for the very first time. We've got 21 Canadians in the field, but we also have the Masters champion in the field, Rory McIlroy, making his first start since a tied for 47th finish at the PGA Championship. Now if you remember, he did run into some challenges that week both on and off the golf course. He elected ultimately not to speak with the media. He also has a some challenges with his driver, but he's been spending the last couple of weeks getting back to baseline. Someone else in the field is Robert McIntyre, the defending champion. Now if you remember last year he created one of the most heartwarming moments on the PGA Tour when he won for the very first time on the PGA Tour with none other than his dad Dougie on the bag. At the time, Robert was going through some emotional things when it came to making the transition to the PGA Tour, figuring out life in America. And he said, you know what, dad, why don't you come over and caddy for me, caddy for him. He did to the point of winning. I asked Robert if Dougie was going to be back on the bag this week. He said no, absolutely not. That's far too stressful and something that is a little bit stressful coming up for all of the golfers is the U.S. open next week at Oakmont. This is last chance saloon to get your preparations done for the third major championship of the year. Rory McIlroy was just there actually on Monday, told me that is it is going to be an absolutely brutal test. He thinks that even par is probably going to be a great score. But all you have to do if you're in the field is just practice some acceptance.

[Scott Wapner]

Well, he's won this event twice in 19 and 22 and I did see that he met the media or at least he spoke today, which normally as you said, wouldn't necessarily be notable other than for the fact that that he didn't address the media at all following what happened at the pga. And then of course, he took a little bit of controversy, I suppose, for not playing Jack's event last week, the Memorial, and not telling Mr. Nicholas that he wasn't coming either, which became its own talker in its own right. KYRA.

[Joe Terranova]

Yes, that's right. Well, I spoke with Rory about these two topics and he told me when it came to the Memorial Tournament, first of all, that's something that he decided on for his schedule earlier in the year, that he was always going to miss the Memorial Tournament because he wanted to make sure to be able to play the Travelers, which is after the US Open. If he had had the Memorial Tournament on his schedule, that would have meant four weeks in a row. And he said, Look, I'm not 25 anymore, I'm 36. I can't be playing four weeks in a row anymore. So that's why he decided to prioritize this week. A place that you mentioned mentioned is a two time winner. He loves the RBC Canadian Open, then he has the US Open, then Travelers to follow up with that. When it came to the driver, yes, we didn't have an opportunity to hear from him about that at the PGA Championship. And what he told me about that was that he didn't want to speak about anything negatively, that it was quite a negative situation. Also, he wasn't playing his best. So it all added up to him deciding to take a step away from the media that week. He also told me he was trying to protect some folks. When that driver testing is conducted, those names usually are kept confidential and his name was the only name that was leaked. He told me that that annoyed him and ultimately he decided to take time away from the media. And he did speak today on the topic and answered questions both for me, for Canadian media assembled and for the press conference for the general media as well.

[Scott Wapner]

Yeah, he's a huge draw. A lot of eyeballs, obviously, are going to be on Rory this weekend. Kyra, thanks so much. This is Kyra K. Dixon up in Ontario for us and we look forward to that coverage this weekend. Be sure to follow Golf Channel's coverage of the RBC Canadian Open beginning tomorrow, round one, 3pm Eastern Time, as we said on Golf Channel. Up next, our calls of the day. Calls of the day start with Spotify outperform@ Bernstein. $825 is that price target. The stock's up 550, 15% in three years. It is a new record high. Today it's up 4%. Jyoti owns that name.

[Jim Lavin]

It has been a clear winner as it relates to momentum and it has a lot of fundamental strength behind it. Monthly active users up to 678 million add tier supported about 423 of that.

[Scott Wapner]

Have you owned since the inception of.

[Jim Lavin]

The Jyoti bought it on Halloween. We're up 85% since then. So you could argue that we missed a significant portion of that large jump. Yeah. Of that large advance that you. But one of the reasons why is the quality factor prevented us from owning it because you did not see consistent with what you saw on the momentum side, the technical side, a lot of the revenue growth in the balance sheet did not rather look as good as it does today.

[Scott Wapner]

Are there stocks that you've owned since inception that are still in there or did the the rules just not last that long?

[Jim Lavin]

No, I think we're down to maybe one stock we might have still have. I think we've had Amphenol since inception.

[Scott Wapner]

Wow. Okay. Honeywell. The target to 265 buy at Citi Surat.

[Seth Bryn]

Well, this is in front of a breakup that's going to come and you're going to get three different businesses. So all three businesses are good businesses. You'll get more value just owning it once they're broken up. So it's a good call given kind of where the of situations the Stock.

[Scott Wapner]

Live Nation outperform 185 at Bernstein.

[Jim Lavin]

Joe, I don't feel as good about Live Nation as I do about Spotify. The note that Bernstein talked about here is that they mentioned superfans powering a group of stocks, entertainment stocks higher Live nations kind of moving a little bit of sideways pattern.

[Scott Wapner]

What about Melius today turning more cautious on defense names. Jimmy owns Lockheed. The Jyoti's got North or Lockheed and General Dynamics and Surat Scott Transdigm. What do we think, Jimmy?

[Paul Surat]

I think that unfortunately the world is a dangerous place and not getting any safer. And I think there's going to be demand, particularly with the change in stance from the US versus Europe. There's going to be a lot of demand from Europe for defense products. They're not going to be able to supply them all internally. So companies like Lockheed Martin and the rest of the US defense sector I think are going to benefit over the next several years.

[Scott Wapner]

What's this stock up over over the last year?

[Paul Surat]

Lockheed?

[Scott Wapner]

Yeah. I mean even the ita because I mean the world, I guess when you're. When people say, well, the world's a dangerous place, so it's good to own defense stocks. I mean, if that was. The world's always a dangerous place.

[Paul Surat]

So, well, okay, my opinion is it's getting a lot dangerous. But that's okay. That all is not have that debate. I will say it's worth pointing out. I bought Lockheed Martin in December of last year. It's relatively new. It went down to begin with. It's coming back now. It went down on those F35 comments from Elon Musk. I don't know if everybody remembers them. I thought they were preposterous. I said so at the time. And I think the stock market is now catching up with that assessment.

[Scott Wapner]

All right, we'll do finals next. All right. Adam Parker, Ed Yardeni, Abby Yoder, Keith Lerner, I'll see you at 3 o' clock on closing bell. We'll see what this market does in the final stretch. Bryn, what's your final trade?

[Bryn Talkington]

Dell, one of my favorite GARP names. $10 billion buyback. Michael Dell, founder, owner, Great company to own long term.

[Scott Wapner]

Thank you. Sirat Data Centers.

[Seth Bryn]

Equinix is the company to play in that. I think you have so much secular demand here.

[Paul Surat]

Farmer Jim Wabtech, just a solid industrial.

[Jim Lavin]

And Joe Guidewire proofed itself today on a pullback. You definitely want to buy it.

[Scott Wapner]

We're not pulling back today. 15% does it for us. I'll see you on the closing bell. The exchange begins 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.

[Joe Terranova]

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.

[Steve Kovac]

To view the full Halftime Report disclaimer.

[Joe Terranova]

Please visit cnbc.com halftimereportdisclaimer the CNBC Disruptor.

[Scott Wapner]

50 list revealed meet the innovative company's shattering boundaries, shaking up industries and changing the game for good. Special coverage begins Tuesday in Squawkbox and streaming on cnbc.