← Halftime Report
Halftime Report
The Stock Selloff 12/30/24
00:44:11
Frank Holland and the Investment Committee debate the selloff in stocks as we get ready to close the books on December. Plus, we discuss some Committee stocks on the move today. And later, Nat Gas is up 58% year-to-date, the desk debates the energy sector. Investment Committee Disclosures
Loading summary
Transcript102 lines
- [00:00]
Scott Wapner
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide and every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report what's your boldest.
- [00:31]
Bryn Talkington
Truly ambitious life goal? Everyone has one and everyone deserves a.
- [00:34]
Scott Wapner
Way to get there.
- [00:35]
Bryn Talkington
That's why State street offers a wide.
- [00:37]
Frank Holland
Variety of ETFs to give all investors access to the market and the chance to reach their goals.
- [00:41]
Bryn Talkington
Like with DIA where you get 30 US blue chip stocks in a single trade.
- [00:45]
Frank Holland
Wherever you're heading, getting there starts here with State Street. Before investing, consider the fund's investment objectives, risks, charges and expenses. Visit ssga.com for perspectives containing this and other information. Read it carefully. DIA is subject to risks similar to those of stocks.
- [00:56]
Scott Wapner
All ETFs are subject to risk, including.
- [00:58]
Frank Holland
Possible loss of principal Alps Distributors, Inc. Distributor.
- [01:01]
Joe Terranova
I'm Scott Wapner and you're listening to.
- [01:03]
Frank Holland
CNBC's Halftime Report, the podcast the most.
- [01:07]
Scott Wapner
Profitable hour of the trading day.
- [01:09]
Frank Holland
We record this live weekdays at 12 Eastern.
- [01:13]
Joe Terranova
Listen in.
- [01:16]
Frank Holland
Thank you Leslie and David. Welcome to the Halftime Report. I am Frank Holland in for the judge Scott Wapner. Front and center today, the sell off in stocks as we get ready to close the books on December, the S and P on pace for one of its worst months of the year. We're going to debate this and a whole lot more with our investment committee. Joining me for this hour we have Joe Terranova, Jason Snipe, Bryn Talkington and Rob Seachen. But first a quick check of the market. We're well off the session lows but still as you can see, red across the board. The major indices in the red. Also the ten year yield at four and a half percent. We also want to mention the Russell under quite a bit of pressure, something that Joe was looking at last week. I think that's where we got to begin. Joe, the sell off has continued. A few days ago we were sitting in these same positions saying well it was low volume. Maybe the Algos are playing some games with the markets, but we're starting to see a bit of a trend and in fact the Santa Claus rallies in jeopardy. We're going to show a chart the S and P moves from Tuesday. Does that mean anything?
- [02:08]
Joe Terranova
I think what we're learning as we approach the end of the year is that we can't pretend to think we know what the future holds in store in terms of the actual trend, the actual direction. I think what has happened here at the end of the year is it's been very complicated for bulls and it's even complicated for bears. And that's why I think it's important to kind of set the expectations. Say, look, I think the next eight to 12 weeks are going to be difficult, not in terms of price but just in terms of gaining confidence in which particular direction you might want to move. With the marketplace itself, I think it's ultimately going to turn to earnings, which will be the catalyst, which will give us the insight in terms of where the particular direction is ultimately going to be. I think of this 8 to 12 week period. Maybe you're trying to identify single stocks. That is your opportunity to generate alpha. But if you think about. If you're bullish to your point, right. If you're bullish, we're going into the end of the year. We're fading in terms of the momentum trade. We're clearly fading in the month of December in terms of broadening out now. It's a narrow, concentrated performance from the Mag 7 once again. And on the other side of it, if you're bearish, you're looking at the marketplace right now. You challenged last Friday's low at 5832. Early this morning I think we got down to 5869. We're at the highs for the day. We have some areas of the momentum trade. Take for example Applovin. That's one of the favorite stocks in momentum. Applovin's higher take in video. Nvidia is higher today. So I think there's frustration on both sides for the Bears and the Bulls. And I think the lesson is as you go into 2025, just be really judicious, be really conservative and allow things to play out before you get too aggressive in making allegations.
- [03:58]
Frank Holland
All right, so you're looking at momentum right now. Brent, I want to come over to you. Earlier today we had BTIG come out with a no Krinsky out with a note talking about momentum to just really Joe's point, saying from a momentum perspective, the S and P is on its first weekly sell signal since back in September and that those high beta momentum stocks have broken their uptrend and then goes on to say the bottom line, there are enough underlying concerns to warrant some caution into January. Agree with this take that this momentum story has become shaken up if not broken.
- [04:27]
Bryn Talkington
Well, I think Jonathan's just stating facts, right? I think you have to agree to it. And just to give some context around there, around some momentum names, I mean Joe mentioned Applovin, but if you look at MicroStrategy, MicroStrategy hit 550, I believe it's at 303 today. So talk about a momentum reversal. It's still up 380% for the year. But if you look at these names, even Tesla earlier this morning was around 12% off its high just a couple of weeks ago. And so I think as this like speculative froth is coming out of the market that is such a healthy thing to Happen because should MicroStrategy be at 550 and Tesla be at 480? You know, so there's a lot of pull forward happening, a lot of zero date to expiration and I think that's just getting fleshed out right now. And so I think about when we look towards next year, I think that the 10 year, you know, hitting that 460 plus and then now coming down is really important technically because you really don't want to see the 10 year starting to make higher highs and going back against earlier this year. I also think though when I look at what I think next year, I think from forecasting it's a fool's errand. You know, that being said, we're probability based investors. The markets go up 75% of the time and then if you look at rolling three year returns, it's even higher around 82% of the time. So I would say directionally the market's going higher. But I agree with Joe about really, you know, being judicious and not really leaning in just immediately in January because I do think we didn't see much volatility this year. I do think we're going to see more volatility next year, especially as Trump and his team are getting settled in.
- [06:12]
Frank Holland
You know, really to your point and Joe's point is whether we get Palantir, best performing S and P stock this year has pulled back about 2% over the last week. Year to date up more than 350%. So you have to keep these downside moves certainly in perspective. Jason Snipe, I want to come over to you. Interesting tweet from Bespoke earlier today. According to their data, if the S and P closes down 1% today, it'll be the first time since 1952 that the S&P closed down more than 1% in the last five trading days of the year. We're talking about the Santa Claus rally. We're talking about this trend right here. Is this starting to become meaningful outside of just seasonality, low volume trading algos again, is this starting to become meaningful to see some of these historic trends break? Because we've had algorithmic trading for at least a decade and we've had other trends for decades and this, this, this market right here seems to be breaking some of those trends.
- [06:57]
Jason Snipe
Yeah, no, I think Joe and Bryn touched on a lot of, a lot of those points. Right. I mean if I'm thinking about breadth, breadth in the short term has been negative. It hasn't, hasn't really been good to kind of lead the market forward. Obviously we've seen the price action rsp. We already have talked about interest rates and we talked about the 10 year. I mean the 10 year is up 100 basis points since the September 50 basis points cut. Right. The dollar is up 7% in the last quarter. So for me, I, like Joe mentioned, I'm turning towards the beginning of the year. Earnings start in earnest in the next two weeks starting with financials. And again if we're thinking about the Trump administration and the hallmarks of what we're all thinking about is obviously pro business deregulation. We've, we've looked at capital markets activity who obviously have been troughing, we heard in the earnings calls last quarter. So I think that's going to be positive for the markets and I think that's where we'll start to see the next catalyst going forward.
- [07:51]
Frank Holland
All right, so you're thinking about the new administration, Rob Seach, and I'm going to come over to you. Snaps out the only person thinking about the new administration, Tom Lee as well. New note out today saying that weakness into year end is arguably positive for gains in 2025. He then goes on to say that buying debt that's been profitable all year long and the fundamental tailwinds from the Fed and the White House, they both remain intact. Do you agree with this thesis that this weakness not concerning is actually an opportunity?
- [08:16]
Rob Seach
You know, it's tough for me to disagree with Tom Lee, my good friend and he's been one of the best strategists out there. But with readings for outperformance in the beta momentum, low quality, all in their 95th and 98 percentiles in value and high quality being left in the dust, we see the potential for a mean reversion trade and this was eventually going to catch up the economy was just, just too strong. And it's part of the reason why our team reverted to taking away our macro overweight to those momentum names and moving into the value names. Now what I will tell you that needs to be corroborated by earnings, but it's certainly value is in an oversold condition and momentum has been the top performing factor this year and it's on its best pace in over 20 years. So anybody that's surprised to see some of this unwind from these elevated valuations should not be surprised. I mean, you look at one of our great holdings, Bistro energy, it's down 15% for the month. There's many more names that they're giving up some of their gains for the year. And this happening the day before year end speaks to people trying to get ahead of it and it suggests to me that the unwind might be able to continue because so many people are lopsided in their positioning and that's why we decided to make that, that change. Now what I will tell you is the earnings aspect of this is definitely in favor of the growth name still. So 22 was interesting because value earnings that year and growth underperformed obviously that year, but value earnings slightly outperformed growth. That is not expected this year. So I think it's a wait and see around earnings. I believe Joe talked about that a little bit. But at least in the interim period, at least for the short term, I suspect we suspect you're going to see a slight reversal of that.
- [10:20]
Frank Holland
All right. By the way, energy stocks really leading the S&P 500 today. Siege. I want to kind of press on one thing you were talking about. Earnings are coming up. Q4 earnings are coming up obviously in January, February of next year. Snipe, you're just talking about the rise of the dollar quarter to date, a tremendous upside move, more than 7, 7% higher quarter to date for currency. That's just phenomenal. Are you concerned at all about earnings coming up and the fact that multinationals might be impacted and some other energy names, you know, as part of that group as well, but also consumer facing names might be impacted by some of the inflation that's been more persistent than many of us thought it would be.
- [10:56]
Jason Snipe
Yeah, there's no doubt about it. Obviously, you know, with the dollar surging as much as it has over the last quarter, that obviously affects commodities and affects the multinationals. And if we look at some of the generals that have been holding us up with some of the, you know, the, the hyperscalers which have great exposure overseas. You know, you know, maybe, maybe that is a little bit of a blemish on, on earnings and maybe there's, there's some currency headwinds there. But for all intents and purposes, I think, you know, we're in the early stages of a productivity boom. When I think about AI and all that's going on and all that, all the, the pieces and how it affects across industries. So for me, I still remain positive and constructive on the market. I think that, I think the dollar will start to pull back some and start to even out. But yeah, I mean, it is something obviously we followed over the last quarter, for sure.
- [11:42]
Frank Holland
You know, you're disagreeing with Professor Siegel, your neighbor down there in Philadelphia believes the IBM might be a little bit overhyped. Joe, last week we were talking about landmines coming up for the year ahead, the quarter ahead. Is the dollar starting to become a landmine? Is that something that you're worried about when we talk about earnings coming up?
- [11:57]
Joe Terranova
Well, I think clearly after the Federal Reserve December 18th announcement, you saw the spike in the dollar, you saw the troubles surrounding your ability to geographically diversify. Because I think the biggest challenge is, how do you say, okay, I'm going to go outside of the U.S. i'm going to diversify the portfolio. I'm going to look at holdings outside of the US where you have that dollar denominated debt challenge, molding emerging market debt, or even thinking about owning emerging market equity. So I think that takes you right back to the United States. A higher dollar takes you to the U.S. now what's your impact on earnings? I don't know that we're necessarily at the point right now where we see that as a, an impediment or a significant headwinds for S&P 500 earnings. I think you have to be fully aware of the challenges surrounding earnings. I just think overall your biggest landmine, if we want to use that word in 2025, is the inability to meet what is very high expect expectations for earnings itself. And I think it's represented in the technical formation of the three major indexes. And again we go, we started talking about small caps and the Russell. Do you want to allocate in the direction of the Russell, which right now sits only 2 1/2% above its 200 day moving average. So technically not in the greatest position fundamentally, still not really seeing the earnings growth that you need to get excited as an investor to allocate in that direction. To me, it looks like the NASDAQ right Now is where you have the earnings strength. It's where you have the technical strength. The NASDAQ 100, the NASDAQ, com, both still above its 50 day moving average. The S and P has now traced below its 50 day moving average. I think the 100 day moving average is at 5,786. So we're sitting above that. We're still six and a half percent above the 200 day moving average itself. So you look at the technical formation of these three moving averages, you combine that with where you're going to see the earnings strength and I think that takes you back to ownership of the Nasdaq, which is US Centric.
- [14:01]
Frank Holland
Is that ownership of the Nasdaq or is it the top stocks in the nasdaq like the MAG 70? Do you want to own the whole Nasdaq? The Nasdaq 100? I mean, when we're looking at this, there was LPL Financial, they came out with a note last week. This was on Thursday.
- [14:14]
Joe Terranova
Everyone's I know where you go.
- [14:15]
Frank Holland
Do you know where I'm going?
- [14:16]
Joe Terranova
Coming out with the notes saying, Look, 40% of the S&P 500 right now is basically the Mag 7. And that doesn't give you the diverse, the quote unquote diversification that you need.
- [14:27]
Steve Kovach
Right.
- [14:27]
Joe Terranova
And look, Warren Buffett said all you need to do is buy the S&P 500 as an index. But what are you really buying? You're buying the earnings of Nvidia, you're buying the earnings of metal, you're buying the earnings of Alphabet. So no, I'm equally weighted. I know Brin shares that belief as well. I have an equally weighted strategy. I don't want to have 40% exposure to the Mag 7. Does that mean that the Mag 7 the last two years have not been the place to be? Without question, they've been the place to be and they've had the earnings growth. But at some time, at some point, that story is going to change and I think I kind of want to get a little bit ahead of that.
- [15:01]
Frank Holland
Well, I think they've been the place to be last few weeks. According to the note. You and I were kind of, we were kind of seeing eye on this one. But the note actually said about 85% of the gains in the S and P since election Day were from the Max 7. That was on Thursday when the S and P was up 4 1/2% since the election. Bob, I want to come over to you. I know you had a comment about what we're looking at we're going to get to the rest of stuff you want to talk about in a second, but want to come over to you.
- [15:23]
Bob Pisani
Well, I think the importance here thing, Frank, is that for stock investors, the handoff for 2025 is about as good as it gets. But there are significant potential headwinds. Let me just give you the good news. First and foremost, we have this still strong economy. 3% GDP is a great handoff. Second, we have record profits. They're expected for a second year in a row. 2025, we're talking up 15%. We were up 10% in 2024. And by the way, it is not just from the tech sector. Undervalued sectors like health care and materials and industrials, they're all expected to see profit increases in the high teens in 2025. So it's not just tech, and by the way, it's not just profits themselves that are profit margins are expected to remain near a record 12%. And what that means is corporate America is keeping a larger portion of the revenues that they take in as profits on the bottom line. Put that together. And this is why the market's up 25% in 2024. But there's some headwinds out there. They include, first, the risk that the Fed will make a policy error by refusing to cut rates to combat inflation and will let the job market deteriorate. That is a risk. Second, the Trump administration strengths that they are business friendly, that they are deregulation oriented or M and A friendly and tax relief oriented could be countered by tariffs that are too high and might hurt growth. Third, with tech prices near record highs, there is the potential for a rethink of the story as investors may revolt against endless rounds of spending without demonstrable increases in earnings or productivity. A more likely scenario here would see tech prices stagnate even as the profits continue to improve. What that would mean is you'd have lower valuation levels for technology stocks and perhaps higher valuations for undervalued sectors like health care and materials. Finally, there is the threat from the bond vigilantes revolting against higher spending and the possibility they could force interest rates higher, higher. And Frank, we saw this in the middle of December as rates moved up. That's not happening today. But as rates moved, moved up, the market had a big problem. The simple way to look at this is 2024, 25% increase in the S&P 500, and yet we had only a 10% increase in profits. Well, what happened is we had a multiple expansion. The s and P500 one year ago was 19 and a half times forward earnings. Today it's over 22. That accounts for that 15% difference between 25% price increase and 10% profit growth. Now the question is are there other areas of the market where you might find better values overall? And like I said, 17, 18% for materials, 17, 18% for health care industrials in the mid teens as well. I think there's possibilities elsewhere as well but who knows, people may simply continue to stay with the Mag 7. Frank.
- [18:02]
Frank Holland
You know Bob, you're not the only optimistic one. Ed Yardeni out with a note today saying he expects profit margin for the S and P to reach a record of 13.9, basically 14% in 2025. So a lot of optimism out there. But that last full screen you had that quite a few what we might call landmines there as well. Our Bob Isani, great reporting as always. Great to see you. Thank you. Brent, I'm going to come over to you. What did you make of what Bob had to say? Just basically this handoff going into 2025. He laid out a lot of opportunities, a lot of earnings growth in some sectors that went kind of unloved this year. But again back to that last full screen, there were quite a few what we might call landmines in there as well.
- [18:36]
Bryn Talkington
Yeah, I think we'll also just start on the Ed Yardeni with profit margins mean we're probably entering 2025 as we'll call it, as good as it gets. Profit margins aren't going to stay in the, in the low teens. It's just like there's, there's no history that says that but I think that you definitely have, I'll say the Trump put, you have the Fed put. And so I think that we can, we can talk about the bad things but we talk about earnings going forward. I think investors need to be really careful about that because long term earnings definitely drive returns. But like look at Apple for example. You know Apple's revenue has been anemic for years. Their earnings grow because of the share buyback and look at Apple, it's up 31%. Look at Tesla, I own Tesla. Their earnings have been falling for the past two years. They flattened out and I think in Q1 they're going to grow at 7%. But what Tesla's up 70% year to date. So there's so much more than just earnings quarter by quarter that drive a stock. It's really like technical sentiment, positioning the future. And so that's Where I think at the end of the day individual stock picking is just so hard to do. And that's why the S and P continues in the QS really continue to outperform pretty much all investors because these individual names, there's so many different components. But I think when I, when I, when I summarize 2025, I'll still go back to, I think we have a Trump put. I think we have deregulation, I think we have government, government efficiency. And also don't forget about the debt ceiling about 20 or the death, the deficit. Around 20% of our debt is actually in T bills and that is incremental. So as rates have come down and we have to refinance it, that should be naturally lower if they stay on that short end.
- [20:17]
Frank Holland
All right, I want to come over you for one more quick word on this. Based on what everything that Bob had to say, he's saying it's just a really good handoff in the 2025. We've been kind of kicking it around. But do you agree is the setup really good for stocks in 2025? Are you worried about some of those, those land mines on the last full screen?
- [20:33]
Rob Seach
Of course the setup is great and of course I'm worried. But the setup being great is priced in the markets today. I mean valuations are stretched sentiment stretched positioning is stretch growth. Expectations are high. And so you have this environment where with the Mag 7 expected to decelerate from 55% growth in 24 to 20% in 25, it implies an acceleration in everything else. So we better hope so. And for valued outperform, we better see better earnings growth out of financials, industrials, health care in one parting shot. Health care is a great morning story. We came into this year with the street expecting 20% growth and we delivered 3, 3, 3%. We have the same expectations for this year. So I think it's a show me story around earnings and I think it's too early to take an early prediction and carry it out for the balance of the year. That's a fool's game right now. There's too much that can change.
- [21:37]
Frank Holland
I thought that first 3% was like a drop the mic. I thought he's going to leave it on 3% but then he had more. Speaking of mega cap tech in the Mag Style 7, one of the biggest questions for megacap tech next year is when will all that spending, when is it going to start to pay off? Tech correspondent Steve Kobach joins us now with a look at Microsoft's blockbuster Capex.
- [21:55]
Steve Kovach
Spending Steve yeah Frank, these numbers are pretty eye popping here. Let's talk about Microsoft specifically ending 2024 spending at least $53 billion on capital expenditures. That's of course the September quarter. We won't have the data for the December quarter until later next month anyway. Nearly all of that spending is for artificial intelligence, Nvidia chips, data centers and all that other related infrastructure. And Microsoft's not going to stop anytime soon. Microsoft has implied to expect around $20 billion in these capital expenditures each quarter going into 2025. The risk of course, investors losing their patience for a return on all of this massive spending. And Microsoft, by the way, doesn't even know when that's going to happen. Satya Nadella, the CEO and CFO Amy Hood on recent earnings calls have said the AI demand is there and Microsoft will keep spending to meet it. They'll dial back if they need to, of course. Over the last year Microsoft has also announced at least 20 investments of $1 billion or more at various locations around the globe. That's not just for data centers, that's also for training programs and other AI related investments. These are countries like Spain, India, Indonesia, uk, London, specifically United States and so many more in in the meantime, we don't have a clear view how well Microsoft's suite of AI products are selling. Microsoft has said it's on Track to generate $10 billion worth of AI related sales this year, but with $70 billion of CapEx, that's not really making a profit yet. Most of the sales are coming from the Azure cloud business. And still no concrete disclosures from Microsoft on the rest of the AI products. That includes Copilot Plus PCs, which launched this year but without the marquee artificial intelligence feature called Recall. Also, Microsoft said in May 50 million copilot plus PCs would be sold over the course of a year. No indication it's on pace to meet that goal. Also no clue how well Copilot for businesses is selling after more than a year on the market. I've heard from a few CTOs that 2025 is going to be the year they assess with their CFOs if copilot is worth the enormous cost. And then there's open air. It's losses are now bleeding over to Microsoft, its biggest benefactor. Microsoft said it expects OpenAI's losses to shave a couple cents off its EPS in the December quarter. That'd be about one and a half billion dollars. And finally the consumer outside of the core enterprise business. Microsoft hired Mustafa Suleiman to be CEO of AI at Microsoft. But right now he's really reliant on OpenAI for product development of the latest and greatest AI features that eventually make their way into Microsoft products. He's one to pay attention to in 2025 as well, Frank.
- [24:33]
Frank Holland
All right, Steve Kovak back at CNBC hq. Steve, thank you very much. A lot of ownership of megaptech here, Joe. Might as well start with you. What do you make all this Capex spending? I don't know if you remember a few quarters back, remember Meta got dinged for spending too much on capex and then everybody else ramped up their capex spending. They were rewarded. So it seems like sometimes the street likes a lot of Capex spending, sometimes the street doesn't like a lot of Capex Capex spending.
- [24:54]
Joe Terranova
Well, I think, look, Microsoft has had a little bit of a difficult year in the sense of most of the gains for the company came in the month of January. So in January had the stock up basically 10%. Now for the year it's up 13%. I think it's kind of running in place and I think it will once again restart the positive momentum. But you have to see some benefit coming from what they're doing right now with that spending. So you look at the Max 70, you say to yourself, okay, of the Max 7, am I going to try to identify which one maybe is the winner in the near term? It looks like Alphabet, Amazon, Nvidia, those are the winners near term. I don't think you want to lose sight of what Microsoft can do for your portfolio over the long term. I just think you have to set the expectation that it's a period where you've got the elevated spending and it's reflected in muted performance relative to everything else.
- [25:40]
Jason Snipe
Yep.
- [25:41]
Frank Holland
Snap, I want to come over to you. So any concerns about the Capex spending? Again, you have a lot of mega cap ownership. One interesting report that came out today, Nvidia, they're pivoting over to Humanoid Robotics because they're saying the reports are at least that the chip race is getting a little bit crowded. Is that at all a sign of concern that maybe it's getting a little bit too saturated and maybe the demand isn't quite. We may think it is.
- [26:02]
Jason Snipe
Well, I mean, the first thing I think about is clearly the arms rate. This, this is real. Obviously everyone, the hyperscalers have to do what they need to do to keep pace. Right. And as it relates to Microsoft, $80 billion in, in CapEx spend at a minimum, by the way. For 20, 25, that's more than the GDP of Luxembourg. Right. So these are real numbers and it's obviously been an overhang on the stock. The stocks to Joe's point, up only 13% year to date. You know, co pilot, we haven't seen what, that's what, you know, we don't know what's going on. Enterprise, we don't know what's going on. Retail there and, and the efficiency. But what I will say about Microsoft and what I do like about Microsoft is their suite of services had been always aimed at operational efficiency for business. And you know, I felt, I believe that as could be an additional gasoline on their products. They just haven't quite figured that out yet. So we'll see, we'll see how it plays out in the next one.
- [27:00]
Frank Holland
GDP of Luxembourg, that's an interesting data point.
- [27:02]
Joe Terranova
I like that.
- [27:03]
Mike Santoli
Yeah, it's a good one.
- [27:04]
Frank Holland
All right, coming up here on halftime, more committee, stock market moves plus the setup on housing and energy in the year ahead. Halftime. Back in just two minutes. Stay with us.
- [27:17]
Scott Wapner
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report.
- [27:46]
Frank Holland
Ryan Reynolds here for Mint Mobile.
- [27:48]
Steve Kovach
You know, one of the perks about having four kids that you know about is actually getting a direct line to.
- [27:53]
Scott Wapner
The big man up north.
- [27:54]
Steve Kovach
And this year he wants you to know the best gift that you can give someone is the gift of Mint Mobile's unlimited wireless for $15 a month.
- [28:02]
Scott Wapner
Now you don't even need to wrap it.
- [28:03]
Frank Holland
Give it a try.
- [28:04]
Bryn Talkington
@Mintmobile.Com Switch $45 upfront payment required. Equivalent to $15 per month. New customers on first three month plan only taxes and fees, extra Speed slower above 40 GB on unlimited. See mintmobile.com for details.
- [28:18]
Scott Wapner
@ Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu.
- [28:36]
Frank Holland
And welcome back to halftime. Let's get to some committee. Stocks on the move. Starting off with Coinbase shares under some pressure today as bitcoin falls below 93,000. Joe, you own this one and the Joe T ETF.
- [28:48]
Joe Terranova
Yes. So the end of October, October 31st, we purchased it. We still have a little bit of a profit on it. I'm just staring at the chart in disbelief how much it's fallen off of where it was at 348 in early December. So it's pulling back. It's pulling back with Bitcoin. Look, it's a volatile, volatile equity name for sure. Just like MicroStrategy, which was mentioned previously by Brin. And knowing the volatile nature of Bitcoin, if you're going to be investing in equities that have that correlation to Bitcoin, you have to accept the volatility and understand whether it's seeing it up significantly, that could reverse or whether it's down significantly and seeing that that could reverse. It's just a volatile asset.
- [29:33]
Frank Holland
Yeah. Also to the earlier point, looking at the chart right here, up for the last three months, up about 40%. So even with today's pullback, you got to keep that all in perspective.
- [29:41]
Joe Terranova
It's doing not as good as it was, like I said into early December, but it is what it is.
- [29:46]
Frank Holland
Moving on to Tesla, also under some pressure, Shares down just about 2 1/2 percent. UBS sees Q4 deliveries slightly below consensus. Brent, I want to come over to you. One thing I do want to point out about this. UBS, they have their price targeted to 64. That's about half of where the stock's trading at right now. So very bearish call on Tesla. But Brent, I want to get your take.
- [30:05]
Bryn Talkington
Yeah, I mean if you're just looking at earnings growth or lack of and revenue, you would say this company's earnings have been decelerating. Like I said earlier the last couple of years, they've now flattened and are going to start to grow again. We're looking for earnings to grow 7%. But you understand this name is a name that people get excited about, about the future of robotics, full self driving of AI, of solar, etc. And so this is not just a car company. And so I think you continue to have a few bears out there. I do think, though I had seen sold probably in the 200s the January 400 strike price. I assumed it called away on January 17, but we'll see. I mean, if the market continues to sell off, this Tesla has a beta of two. So you're going to get a magnified exposure to the upside and downside. But I would be more cautious and I will be more cautious in my positioning going into their earnings on January, January 23rd. Because I do think there's still some hype in the four hundreds on this name. I would like to see it come down a little bit more in the three hundreds. I feel like that would be more a normalization than these mid, mid to high 400s that it's been trading out the past couple of weeks.
- [31:15]
Frank Holland
All right. Getting shares down two and a half percent. I want to correct myself. Also UBS has the price targeted to 26. Content consensus is to 96. So still a very bearish call when it comes to Tesla. Moving on to MasterCard hovering near a 52 week high. Rob you on this one.
- [31:31]
Rob Seach
Yeah, it's done well, it's a little expensive right here at a 32 times forward P E but this is a great business. Continues to post double digit top line growth, mid teens earnings growth despite a challenging macro environment illustrating the strength of their franchise. And you know what's helped these companies a little bit this both them and Visa. The duopoly is the cross order travel volume continues to exceed expectations. Consumers are generally benefiting also from positive real wage growth and wealth effects of high asset value. So these companies have been beneficiaries and it's no, no surprise to see them performing like they have lately.
- [32:15]
Frank Holland
All right, MasterCard pulling back almost 2% but year to date up more than 20%. All right, time now for some headlines with our Contessa Brewer. Contessa.
- [32:22]
Diana Olick
Hello there, Frank. Today, President elect Donald Trump endorsed House Speaker Mike Johnson as the Louisiana Republican campaigns to remain in the position. There was some question whether Trump would support Johnson's bid because Johnson voted to pass legislation to prevent a government shutdown and it did not include Trump's desired provision for a debt ceiling increase. The speaker election is Friday. Earlier today, South Korean authorities requested a warrant to detain impeached President Yoon. They're investigating Yoon's brief imposition of martial law this month. That corruption investigation office leading the joint investigation with police and military authorities confirmed it requested the warrant to question Yoon on charges of abusing his authority and orchestrating a rebellion. New Data from the CDC shows norovirus cases in the US are rising. The agency reports 91 norovirus outbreaks during the week of December 25th. That's a significant jump from the 69 outbreaks reported just the week prior. The CDC says the virus is the number one cause of foodborne illness in the country. Nothing says Happy New Year like a stomach bug, Frank.
- [33:32]
Frank Holland
Yeah, you know something's going around just in general, a lot of sniffling, a lot of sore throats in general. Yeah, I think everybody can hear it. Contester brewers, great to hear you though and good sound. Good to see you as well.
- [33:41]
Diana Olick
All right.
- [33:41]
Frank Holland
Coming up next on halftime, Mike Santoli joins us with his MIDDAY word. We are back right after this.
- [33:58]
Scott Wapner
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report. Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella. Eduardo Foreign.
- [35:14]
Frank Holland
And we are back on halftime. Senior markets commentator Mike Santoli joins us now with his midday word. Mike, great to have you here. I mean, kind of interesting day. Santa Claus rally seems to be unwinding. Markets under some pressure but off of their lows. What do you make of what we're seeing?
- [35:27]
Mike Santoli
Interesting because you know, the expectation normally is kind of like calm and upward drift and that obviously has been shaken the last couple of days. However, I mean, with the benefit of a few hours hindsight, it really did look like this kind of quick kind of rotation type of trade in the pre market. No real headlines attached to that drop that we got in the equity futures right after 7:00am Eastern Time. You did have a bid. You still have a bid in Treasury. So it suggests to me me a little bit of reallocation pulling forward. Some of that January profit taking didn't really disturb too much in the way of the trends. In fact, I'm looking at the the volatility index down like two points off its morning high. That suggests to me that the options traders are at least saying, okay, we got the sparrows scattered at the open. There was a little bit of a scare and it hasn't necessarily come into anything else. It still leaves us a little bit in a funny spot though. We've lost momentum in the at the index level, the average stock has definitely struggled a little bit and there's a little bit of a peeling off of profits on the mega caps. I do think it's worth asking, though, if that just sort of gives you a little bit of a better start point for 2025, because I think there was going to be a risk a couple of weeks ago that we were going to go in there running full speed, the frothy speculative stuff continuing to rip, which was happening a couple of weeks ago, sentiment getting really over its skis. I think you've pulled back from that a little bit. So if the bond market behaves, maybe we're in a little bit of a better footing.
- [36:56]
Joe Terranova
So, Mike, here we are today on a day where Nvidia is higher.
- [36:59]
Mike Santoli
Yeah.
- [37:00]
Joe Terranova
So the, the prevailing question for a portfolio manager is you've had this narrow concentration in the month of December where here we go, it's all about the Mag 7 again. And you look into 25 and you say to yourself, okay, am I, am I just accepting that? Am I going with it or do I can? I believe that value can have the type of year in which it'll see the growth and you'll see the outperformance. I was talking to Frank and Jason about this before. I don't think value is outperformed growth in an up year since 2016.
- [37:30]
Mike Santoli
Yeah.
- [37:30]
Joe Terranova
So you're talking about a very long period.
- [37:32]
Mike Santoli
It's a pretty rare combination of things that have to work. I think you have to get relief on yields at the same time that the macro data start to, to kind of turn up again. You know, I mean, everyone keeps saying 3% Atlanta fed GDP, but relative to forecasts, the economic data have been soft. And so I think if you get those things moving together, it probably can work. I heard you say earnings season might be a callous. You probably do need that to actually kick start the conviction for the fundamental value case.
- [37:58]
Frank Holland
All right, Mike Sentinel with his midday word. Mike, thank you very much. Coming up here on half the setup for housing in the year ahead, how the committee is positioned as home construction stocks. They're tracking for their worst month in more than four years. More halftime after this. And we're back on Halftime with a look at the housing trade, The Home Construction ETF, the ITB, it is tracking for its worst month since 2020. Our Diana Olik joins us now with a look at what's ahead for that space in 2025. Diana?
- [38:28]
Diana Olick
Well, Frank, we're going to start 2025 on a mixed footing. In the housing market. Let's start with mortgage rates. After a pretty volatile year, we're back at the highs with the 30 year fixed well over 7%. Expectations last year were that rates now would be in the low sixes heading toward a five handle. That is no longer the prediction. As a result, The Home Construction ETF ITB is down close to 17% month to date on pace for its worst month since March 2020, which of course was the very start of the pandemic. Now builders have been buying down mortgage rates, but it's really hitting their margins. One outliner though, Toll Brothers, the luxury home builder, it's down for the month but still way up year to date. Its high end buyers are of course less dependent on mortgage rates. All that said on the existing home side, we just got the read on pending home sales in November, up 2.2% month to month and up 6.9% from November of last year. That's the fourth straight month of gains. Now the count is based on signed contracts with people out shopping in November when the average rate on the 30 year fixed spent much of the month over 7% before coming down in the last week of the month. NAR's chief economist Lawrence Yun said in the release that consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory. The one problem though, Frank, is that home prices are still gaining.
- [39:51]
Frank Holland
Certainly mortgage rates above 7%. Who would have thought that? Diana Olich, thank you very much. Rob, coming over to you, you own two stocks related to the housing market, Lowe's and Home Depot.
- [40:02]
Rob Seach
Yes. And this has really been of late, ground zero for rates doing what no one expected them to do, which is to continue, continue to climb and climb at a pace that was pretty significant. These continue to be high quality businesses. We've owned them for quite some time. It is a small part of our portfolio, but they are, they have healthy profitability, great capital efficiency. They're going to be beneficiaries if rates start to come down. But you know, that's a requirement for this. So I think it's going to be a bit. But we're being patient with the names.
- [40:41]
Frank Holland
Jason, coming over to you own, Dr. Horton, I was just looking at the earnings. I mean selling prices have been flat for the last couple couple of quarters. Look at a lot of these homebuilders raising incentives as we've gone on quarter to quarter. I mean it doesn't seem like it's a really great business right now. Even with the shortage of about 4.
- [40:56]
Jason Snipe
Million homes in the U.S. there's no doubt about it. Obviously DHI is, has suffered this year, is down 7% year to date. This is a completely affordability issue. As, as you see 30 year mortgage rates above 7%, we're going to need those names to drift lower. And we know that the 10 year is a proxy for mortgage rates. And, and you have a ten year floating above four and a half percent. It's going to be tough for those, for those numbers to come down on the interest rate level. So for me, obviously that, that's, that's where Dhi plays. You know, 60% of their, 69% of their homes that were delivered over the last year are lower than $400,000. But when you have mortgage rates at 7%, it's a tough, it's a tough hill to climb and that's why they're struggling.
- [41:35]
Joe Terranova
Look, I agree with what Rob said about the potential positive cat catalyst. But you have to acknowledge that they were in a great place. The homebuilders in 23 coming at 24, 24, they're in a very difficult place. Broken momentum and 13% of the home building construction industry is undocumented workers. With the conversation surrounding immigration going to intensify in the new year, that's a challenge for labor costs.
- [41:58]
Frank Holland
Yeah, a lot of people have cited that as potentially raising the prices of homes because of potential labor shortage in home building and the housing market overall. So certainly something to think about with that new administration. All right, coming up here on Halftime, the state of energy nat gas prices popping on this down day, how the committee is navigating that trade. That's coming up next. Natural gas up over 17% right now. And welcome back to halftime. Natural gas, it is soaring today. You can see it's up over 18%. It's up 50% this year. And that puts it on pace for its best year since all the way back in 2016. Speaking of 2016, Joe, you have some exposure here. Equity.
- [42:35]
Joe Terranova
Yes, I'm going to continue to talk about natural gas as the fuel in the energy sector that investors and our viewers should be focusing on in 2025. I truly believe that's where the opportunity is. I think in terms of existing inventories, we're beginning to work off excess supply. Now you have a colder than anticipated weather forecast over the next 15 days. In addition to that, remember that natural gas offers the solution in terms of power generation for all of the utilities that have this insatiable demand coming from data centers and they're partnering with the mega cap companies like we saw with Microsoft, Three Mile island and Constellation Energy. So natural gas is the solution in that formula in terms of providing power generation. I think natural gas and 25 should be an investor focus.
- [43:26]
Frank Holland
Natural gas hitting a 52 week high today. But I want to come over to you. You have a lot of broad energy ownership, energy transfer, Diamondback, Viper as well. I just want to see how you see the energy trade overall when it comes to this month and going into 2025.
- [43:40]
Bryn Talkington
Yeah, so we talked about the strength in the dollar. Obviously that in energy materials is a really big headwind. I think in this space you really got to pick your spots. I mean we see energy transfer up there. Energy transfer as a pipeline like Kinder Morgan energy transfer and kinder up like 45 and 55% year to date. Energy transfer also is like a 7% distribution yield. They also like the mineral. Right. Companies which are very cap light like the Viper energy up almost 60% year to date. And so I think you really have to pick your spots. You know I saw Devon earlier in the quarter. It just been an underperformer for a couple of years relative or on an absolute basis. And so I think stay capital light, stay in the toll road of hydrocarbons which are the pipelines. And I think that will be another good year for both sectors, subsectors within energy.
- [44:30]
Frank Holland
Okay, Rob, I want to come over to you. You're looking at energy as a hedge to geopolitical risk. You have to explain that because we've seen geopolitical geopolitical risk rise and the oil market still trade lower. In fact, a lot of the year WTI below 70 bucks a barrel ignored it.
- [44:45]
Rob Seach
There's no question. I think that's a little bit of a signal from the, from, from the markets that there might be some worries about growth coming. But no question that they are have historically been a great hedge against geopolitical attention, attentions against upside surprises in inflation. I think the key story here is the companies are more efficient operators, capital allocators. They're focused also on returning cash to shareholders. Valuation is reasonable. But the big question for energy is how much do they deteriorate if economic growth deteriorates causing prices to break below. And so far we've seen lower prices support consumption. But what happens with growth? So you know we have a diversified basket. It trades at 2012 times earnings. We're very excited about that. I think it's an overweight for us and it's a place that you know, acts as this barbell hedge with potentially some economic leverage.
- [45:47]
Frank Holland
All right, WTI is up almost 5% month to date. All right, stay with us here on halftime. Final trades they're coming up and we are back on halftime with final trades. Rob, you're up first.
- [46:02]
Rob Seach
Yes. Jeff Reeves we like the setup for financials. They continue to gain market share under Rich Handler and should benefit from business optimism and more favorable M and a at 17 times forward PE BRIN Nvidia.
- [46:17]
Bryn Talkington
2025 is going to be a year of Blackwell and the hyperscalers are going to continue to spend.
- [46:22]
Jason Snipe
Jason Goldman Sachs M and A environment will open up in 25.
- [46:27]
Frank Holland
Joe Last Word.
- [46:28]
Joe Terranova
Interactive brokers volatility elevated range expansion happening over the last 30 days benefits the.
- [46:34]
Frank Holland
Brokers all right, that's going to do it for halftime. The exchange, it starts right now. Thanks for watching. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays.
- [46:46]
Joe Terranova
At 12 Eastern only on CNBC.
- [46:51]
Scott Wapner
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.