CNBC’s Halftime Report: The State of Stocks – April 28, 2025

Introduction

In the April 28, 2025 episode of CNBC's Halftime Report, host Bryn Talkington, along with analysts Joe Terranova and Jim Leventhal, delved deep into the current state of the stock market. The discussion centered around the delicate rally in equities, the impending jobs report, mega-cap earnings, trade tensions, bond market dynamics, and specific stock performances. The episode also touched upon the burgeoning popularity of actively managed ETFs and the impact of geopolitical developments on market sentiment.

Market Overview

The episode opened with a portrayal of a volatile trading morning, noting that the market was "red across the board" at session start (01:03). Despite this, the S&P had recovered 50% of its losses from the February all-time high to the April 7th post-Liberation Day low. JP Morgan highlighted a "tactically bullish" stance, suggesting potential continuation of the rally for multiple weeks, though acknowledging the pain trade could intensify (01:03).

Key Drivers for the Week: Jobs Report and Mega Cap Earnings

Joe Terranova emphasized the critical nature of the upcoming jobs report and the earnings from four mega-cap companies (Microsoft, Meta, Amazon, and Apple). He pointed out that the recent market rally was precarious, driven by short-dated options rather than long-term conviction (01:59). Terranova noted, "If there was real conviction, you would see the longer-dated options rallying," highlighting the rally's fragility (02:55).

Jim Leventhal concurred, describing the market as a "delicate" balance influenced by uncertain trade deals. He stressed that while the equity markets remain optimistic about delaying further tariffs, the underlying economic damage remains a concern (05:01).

Trade and Economic Factors

The analysts discussed ongoing trade tensions, emphasizing their significant lag effects on the economy. Terranova explained, "The bond market is driving everything," and suggested that economic cooling is necessary to manage corporate bond maturities and issuance (12:58). Leventhal added that trade disruptions continue to hinder supply chains, with South Korea expressing doubts about securing trade deals by July (04:43).

Bond Market and Yields

The bond market's role was a focal point, with Terranova warning that a ten-year yield reversal to 4.50% could signal major problems. He asserted that bond yields need to stay lower to support the corporate issuance market and mitigate Federal Reserve rate cuts (12:58). Bryn Talkington echoed this sentiment, noting that lower yields would positively affect bond markets but negatively impact equities simultaneously (13:18).

Mega Cap Stocks Analysis

The discussion shifted to mega-cap stocks, with a particular focus on Microsoft, Meta, Amazon, and Apple:

• Microsoft: Leventhal highlighted Microsoft's pivotal role, describing it as a "long-term compounder" capable of weathering market storms. He remained bullish on the stock, despite acknowledging potential challenges in cloud services (17:33).

• Meta: Terranova expressed concerns over Meta's revenue growth and competition from companies like Huawei and Nvidia. Despite the stock's recent price reduction, he viewed the management of margins positively and remained cautiously optimistic (18:21).

• Amazon: Terranova maintained a bullish stance on Amazon, citing strong momentum behind AWS and diversification into streaming services as key strengths (19:51).

• Apple: He expressed caution regarding Apple, noting its decelerating revenue growth as a potential headwind, although acknowledging upcoming exemptions from the administration could provide relief (18:55).

Sector Analysis: Health Care

The episode also covered significant movements in the health care sector:

• Lilly: HSBC downgraded Lilly's rating from "Buy" to "Hold," reducing its price target from $1,150 to $700. Terranova discussed concerns over revenue growth deceleration and increasing competition from Amgen's weight loss drug (27:15). He remained open to reassessing his position based on upcoming earnings (28:57).

• UnitedHealth: Piper Jaffray downgraded UnitedHealth, cutting its price target from $592 to $552. Despite the downgrade, Terranova noted that he purchased more shares, viewing it as a "permanent compound" in his portfolio (30:19).

ETF Trends and Strategies

A significant portion of the discussion was dedicated to the explosive growth of actively managed ETFs. John Mayer from JP Morgan Asset Management highlighted that actively managed ETFs now represent about 40% of total market trading. He discussed the success of JP Morgan's JEPI, an actively managed ETF offering approximately a 9% yield, attributing its success to downside protection and income generation through strategic options trading (35:32). Terranova and Mayer emphasized the importance of active management in navigating market volatility and capturing upside opportunities.

Geopolitical and Other News

The podcast briefly touched upon recent geopolitical developments:

• North Korea: North Korea confirmed sending troops to support Russia in the Ukraine conflict, a move criticized by both the State Department and South Korea (32:04).

• FCC Review: The FCC announced a review of spectrum-sharing rules among satellite systems to enhance space-based telecommunications, favoring companies like SpaceX's Starlink (32:04).

• Columbus Day: President Trump claimed he was reinstating Columbus Day, despite it never being officially canceled. In 2021, President Biden recognized Indigenous Peoples Day alongside it (32:04).

Specific Stock Performances and Downgrades

• Chipotle: Argus downgraded Chipotle to "Hold," citing slowing same-store sales, rising costs, and fierce competition. Terranova acknowledged the resilience of the stock despite negative news, pointing to strong earnings growth and technical support (30:19).

• Spotify: Bill Baruch upgraded Spotify, highlighting its momentum play and impressive earnings growth. Terranova noted the stock's technical setup and potential for significant upside pending a strong earnings report (37:59).

• Qualcomm and Sherwin Williams: Upcoming earnings reports were discussed, with analysts offering mixed outlooks based on sector performance and market conditions (43:14).

Conclusion: Market Sentiment and Future Outlook

The episode concluded with a cautious yet optimistic outlook. Analysts agreed that while recent rallies are fragile and driven by short-term factors, upcoming jobs reports and mega-cap earnings could provide the necessary catalysts for sustained growth. Terranova emphasized the importance of active management and staying invested to capture long-term returns, despite short-term volatility. Leventhal and Terranova also underscored the necessity of awaiting concrete economic indicators rather than relying solely on headline news.

Notable Quotes

• Joe Terranova (01:59): "If there was real conviction, you would see the longer-dated options rallying."

• Jim Leventhal (05:01): "Costs are going to stay high for the companies while revenues come down."

• John Mayer (35:35): "When the market moves 5%, 7% down, you should expect that a few days later... you'll see an upside movement in the market. And if you miss those upside days, they're gone."

Key Takeaways

• The current market rally is fragile, reliant on short-term options rather than long-term investor confidence.

• Upcoming jobs reports and mega-cap earnings are pivotal for determining the market's direction.

• Trade tensions and their delayed economic impact remain significant risks.

• Actively managed ETFs, particularly those offering high yields and downside protection, are gaining popularity.

• Specific sector and stock performances, especially in health care and technology, are under close scrutiny with mixed outlooks.

Investors are advised to stay informed, maintain diversified portfolios, and consider active management strategies to navigate the uncertain market landscape.

Timestamp Reference

• [01:03] Bryn Talkington introduces the episode and discusses the market's recovery.
• [01:59] Joe Terranova explains the delicate nature of the market rally.
• [05:01] Jim Leventhal discusses high costs and declining revenues for companies.
• [12:58] Discussion on bond market dynamics and economic cooling.
• [17:33] Analysis of Microsoft and other mega-cap stocks.
• [18:21] Tiernova’s outlook on Meta and Amazon.
• [18:55] Concerns about Apple’s revenue growth.
• [27:15] Double downgrade of Lilly.
• [30:19] Terranova's stance on UnitedHealth.
• [35:32] John Mayer on actively managed ETFs.
• [32:04] Geopolitical news and FCC review.
• [37:59] Discussion on Spotify and its earnings report.
• [43:14] Upcoming earnings reports for AstraZeneca, S&P Global, and Sherwin Williams.