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Halftime Report
The Summer Setup for Stocks 6/2/25
00:43:51
Courtney Reagan and the Investment Committee debate the Summer setup for stocks as we kick off a new trading month. Will there be a June swoon or surge? Plus, Oppenheimer downgrading the banks, it’s our Call of the Day. And later, the Committee share their latest portfolio moves. Investment Committee Disclosures
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- [00:00]
Courtney Reagan
What does it mean to live a rich life? It means brave first leaps, tearful goodbyes, and everything in between. With over 100 years experience navigating the ups and downs of the market and of life, your Edward Jones financial advisor will be there to help you move ahead with confidence. Because with all you've done to find your rich, we'll do all we can to help you keep enjoying it. EDWARD jones, Member, SIPC.
- [00:33]
Jim Leventhal
As America's leading business lender, bank of America is on your corner and in your corner. With $215 billion in business loans and.
- [00:41]
Steve Weiss
Over 3,700 business specialists across the nation.
- [00:45]
Jim Leventhal
We help businesses thrive so communities prosper. What would you like the power to do? Learn more@bankofamerica.com LOCALBUSINESS bank of America Official bank of FIFA Club World Cup 2025 Copyright 2025, bank of America Corporation. All rights reserved.
- [01:03]
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.
- [01:19]
Courtney Reagan
Thank you very much. Welcome to the Halftime Report. I am Courtney Reagan in today for Scott Wapner. Front and center this hour, the set up for stocks as we kick off a new trading month. The investment committee is standing by, of course, with their playbooks as always. So joining me for the hour today, we have Joe Taranova, Steve Weiss, Jim Leventhal and friend Talkington. Let's get you a quick check on the market here on this first trading day of the month of June. The Dow Jones Industrials are the laggard here on the session down about 4.10of a percent s and P500, though just almost marginally negative here. And the NASDAQ composite leading the way higher by 2. 10 of a percent. And of course, over the weekend, just dom of tariff headlines and officials talking on different shows trying to figure out where we are with China or where we aren't with China, I suppose. Jim, I want to start with you because I know you've been watching a lot of headlines in geopolitics, not just tariffs. It's got you a little concerned despite the markets generally shaking it off right now.
- [02:15]
Jim Leventhal
Yeah, I've said for some time, Courtney, by the way, welcome. Good to be here with you. I've said for some time that trade policy uncertainty is the biggest thing facing the market. Well, this weekend geopolitics said I'd like a word. And there's some things that happened this weekend are pretty dramatic. The Ukraine strike on the Russian Air bases is one hell of a blow. And I think we've got to be careful here. Now, I'm not pushing the panic button. I don't want anybody watching to feel that the panic button is being pushed. What I am saying is this would be a good time for geopolitical hostilities to ratchet down, not further upward. It's not just the Russian Ukrainian strike. It's the comments that Peter Hegseth was making on Friday. That's the Secretary of Defense regarding China imminently being prepared to do something about Taiwan. And then there's the ongoing intractable situation between Hamas and Israel. And Israel getting more and more concerned that the US Is going to make a deal with Iran, that it's going to allow Iran to eventually get a bomb, which to Israel is unacceptable. So there's a lot of geopolitical hostilities here that we would like to see ratcheted down. There is maybe, maybe Courtney going to be a talk between Presidents Xi and Trump. That would be a step in the right direction. I'd like to look for that. In the meantime, it is still trade policy uncertainty. I don't want to lose sight of that. We've got one month more or less until the pause on reciprocal tariffs goes away. We need to see some trade deals come through before those reciprocal tariffs come back in in force.
- [03:40]
Courtney Reagan
Yeah, go ahead, Joe.
- [03:41]
Scott Wapner
The market's trading pretty well though. Despite that trade news, we've got a lot of resiliency. Three weeks ago coming off of the Geneva trade and economic meeting between the Chinese and the US market gapped up higher from 5691 to somewhere around 5767. Since then we've been in a range 5832, 5968. That's what we're doing. We continue to see stocks making 52 week highs. You look at the S&P 500, I think there's 15 of them today making a new 52 week high. 52 week lows, only four today. So you have momentum right now is a very strong factor. And what's interesting about it is it's not in the normal places. We're not sitting here talking about, oh, Apple's making a new 52 week higher, Alphabet's making a new 52 week high. It's names that we really haven't spoken much about over the last several years. It's names like Zscaler and Spotify and Palantir and Netflix and Rollins and CME and Chewy and Hood and how Met. These are the stocks that are moving the markets higher. You have equal weighting working once again. And logically you say to yourself, okay, we've had a remarkable run from the April lows. It would make sense that the market now would maybe moderate those gains. And Correct. At some point. I wouldn't be surprised to see that. But you have to have the market dictate to you that that's actually what's going to unfold. And I just don't see that in the near term.
- [05:09]
Courtney Reagan
Yeah. There's so many crosscurrents going on right now, Weiss. And it does seem like we were reactive to tariff headlines in March, April, maybe less so in May because the S&P 500, NASDAQ both coming off their best months since November of 2023. The leadership is changing. What's your playbook right now to manage the cross currents.
- [05:26]
Steve Weiss
Yeah. So we had a great month. Then we just barely in. In the S and P. Not so in the others covered the losses that we had. So it's kind of. So you can't look at one data point say the market's been great. It actually hasn't. It's bounced back significantly since lows. In terms of. I agree with everything Jim said. I mean, you've got heightened issues across the globe. I don't know if you mentioned Poland or not, but that's another. That's another one throw in there.
- [05:54]
Courtney Reagan
Sure.
- [05:55]
Steve Weiss
Because we don't know what happens now with Poland and Ukraine. Poland and Russia. Right. Polling. In my mind, they'd be. They'd be insane to not support the war in Ukraine. And in fact, the person won the presidential election has historically been supportive of it. But now there's a question. Because they're next. Right. They're on the board of Ukraine. Look, you know, we're sort of immune to the tariff noise at this point. Because of Taco. Right. Because it always comes back. And everybody's not getting worked. Nobody's really getting worked up out the 50%. It's positive for Cleveland Cliffs if it happens. But who knows? Tomorrow it could be 10% or it could be us paying them to export here. So you just don't know. But what you do know is that the market has done well. It has momentum. The places to be that I think are defensive. Can you be where. Where most of my portfolio is is in Big Cap Tech. It's not nap, although because of their unique China issues. But I still think that that's the most defensive place to be. Health care. Typically defensive. It had the Worst month last month. Right. So all bets are off there. Every part of health care is up.
- [07:04]
Scott Wapner
A lot of that, though, is because of UN agent Eli Lilly. That's 20% of the health.
- [07:08]
Steve Weiss
It's also about Medicaid. It's also down.
- [07:11]
Scott Wapner
I'm saying, when you look at the performance of health care.
- [07:13]
Steve Weiss
Yes, no, agreed, agreed. But I'm just saying that it's not a safe place to be.
- [07:19]
Courtney Reagan
It's an interesting position that you're taking because Roth Capital thinks tech's losing momentum. The new money is focusing on defensive. JP Morgan thinks there's going to be a leadership change. They're not all in on the Magnificent Seven.
- [07:29]
Steve Weiss
Right. And I'm not all in on, as I said, not Apple, not Apple. Okay. Google, I think is. I think it's actually okay here. But to me, it's meta. To me, it's Netflix, which is not part.
- [07:39]
Courtney Reagan
Sure.
- [07:40]
Steve Weiss
So that's where there's a leadership change.
- [07:42]
Courtney Reagan
Okay.
- [07:43]
Steve Weiss
So. But to me, they've got defensible moats. They could be taxed 10%. You know, as talk is around the world, just tax these tech companies 10%. Bottom line is that's where you want to be as far as the rest of the market is just way, way too tough. And anybody can be sanguine about this market going forward when you've got valuation levels that are where they were a year ago, where you didn't have, you know, a lot of this nonsense, you can't tell me why, reasonably that the market should be valued. And keep in mind the course of people saying that we were overvalued that and due for a correction. Now that's on steroids. So just throw a number out there. If you're throwing. If you're putting all the things that Jim talked about, some things I've talked about, some things Joe mentioned into the market. To me, maybe the multiples. 26 times you're seeing a record cut in earnings estimates. And I'm just throwing out there to make a statement, not to say it's the actual multiple. So, so look, I'm not, I'm not adding here unless you get phenomenal opportunities in certain names. I just think that you want to.
- [08:42]
Courtney Reagan
Wait and see Jim jump in.
- [08:44]
Jim Leventhal
There's one saving grace here which has to be acknowledged, which is the strength of the lab labor market. Because I understand Steve, and unfortunately agree with a great deal of what you kind of, for lack of a better word, your negativity. Right, right. I mean, whatever word we want to use. But what has not happened so far, and this is really important, is that companies have not been laying people off. Let me be a little more specific on that. Small businesses are having a hard time. If you read the Fed Beige book, small businesses, particularly in manufacturing, are laboring to maintain profitability in light of higher costs of raw goods because of the tariffs. But large companies are not laying people off. We're going have an important tell on this on Friday. But so far, the initial weekly jobless claims are hanging in there. This is important because it's allowing GDP to continue to expand. Now, the Atlanta Fed GDP has a lot of net export, net import noise in it, but still consumption is growing. That's the biggest part of the economy. And until we see initial weekly jobless claims start to spike, then it looks like we can get through all of.
- [09:44]
Steve Weiss
What'S and that's not, that's not part of my thesis, by the way. And it is cautious and there is a big difference between negative cautious but and that's because the cost to recruit, to rehire, they went through that in the pandemic. They don't want to go through it again. So that's going to be the last to go. Cap spending Capex, which is a big part of gdp, also is the first to go. And we're seeing that already. If you talk to CEOs, they're frozen.
- [10:07]
Courtney Reagan
I mean, Brent, it's very, it's very interesting. Ed Yardeni sort of makes this point and saying the economy remarkably resilient really, despite sort of everything that's happening with Trump's policy or potential policy that we're hearing from. I am, though, to the point that's being made on the desk, starting to worry about, about jobs. Obviously you all know that I cover retail as a reporter for the Network. And so I'm really thinking about how they're going to manage the costs. And look, if a cost goes up here, one way to lower cost somewhere else is to cut some of your labor pool. What are your thoughts generally on where we're starting the month of May, we're trying to balance all month of June rather as we're starting trying to balance all of this.
- [10:45]
Brent Schutte
Well, May, May was the best year for the S and P in 35 years and obviously April was probably one of the worst. So they do balance each other out. As Steve said. I think it relates to retail. We have to be careful. As you see, Abercrombie had great numbers, yet Macy's is closing 150 stores. So I think retail has its own retail issues and is Not a broad depiction of the jobs market writ large. I think the jobs market is going to remain strong. It's going to remain strong. And we're a consumption economy, we're a service economy and so we have so much resilience and really there hasn't been much change. We keep talking about all these tariffs, etc. But really we haven't seen a lot of, a lot of implementation I think as it relates to like how do you play this market? We're in this, let's say 5,000, 750 on the low, 6,000 on the high. We couldn't, you know, punch through that. And so now we're in this middle ground. I think what's interesting though is you have, you know, certain stocks and sectors are below their 200 day moving average, like an Apple Google Joe's point on health care. You've got energy and so I think you need to be mindful of those sectors. And security Salesforce is below the 200 day of being mindful of that ceiling versus if we get a little pullback. You have technology, you have the financials, you know, you've got so many stocks above that tuner day. And so from a buy the dip mentality, I think you want to stick with those stocks that have punched through that tuner day and buy the dip. If you see them come down and still like fade, fade those names that are underneath the tuner day because I think that's going to continue for, for the summer at least.
- [12:25]
Courtney Reagan
We've been talking about cautiousness or negativity. Brennan, J.P. morgan's Jamie Dimon of course, made some comments on Friday with our Morgan Brennan and he's worried about cracks in the bond market, basically saying it's going to happen and when it's happening, when it happens, you're going to panic. That's what he says. He's telling the regulators. I mean, we listen when this man speaks, right? I mean, what do you make of this commentary? We focus obviously so much on equities, but the bond market has really dictated a lot of what's playing out sort of writ large in the economy.
- [12:54]
Brent Schutte
Yeah, well, I think he probably echoes what Rand Paul, Ron Johnson also believe. And so he did say six months or six years. And I do think we're all concerned about from both sides this unregulated spending and the lack of cuts because growth, if we, if, if we get GDP growth at 3%, that's great, but it's a big if. And so I do think as Congress is coming back Today to talk about this bill, you're going to have once again Rand Paul, Ron Johnson, four other senators on the Republican side all pushing back, saying hold on a minute. And so I think that's going to start taking front stage and that I believe that they are going to, like Jamie Dimon, continue to have that narrative, that drumbeat of we have to have some semblance of fiscal responsibility because a 3, a 3% GDP is a maybe not a certainty.
- [13:45]
Scott Wapner
There's two things that you have to concern yourself when you're thinking about asset allocation and what sectors you want to go into for a portfolio. First of all, the market still wants growth. I'm talking about there being dispersion where an equal weighted strategy can actually work. But that's not to say that the value names are working so far, year to date, S and P value is down. The market wants growth and it wants growth in sectors like industrials, like financials. Utilities are leading sector year to date in an environment where yields are actually moving higher. Why is that? Because there are some utilities that are experiencing growth from the data center demand as it relates to AI itself. So I don't think you trade down. I don't think you look at an equity size class like small caps. I think you stay high up, mid caps, large caps. And if you find a company that's able to deliver growth in this environment where it's clear to me the biggest challenge. I don't know if you guys agree or Brynn agrees with this, but I don't think the concern really should be so much about inflation in front of us. I think it's growth. I think growth is the biggest concern. And let's remember something, earnings were good. And as you look forward, you say to yourself, okay, what's the margin compression ultimately going to be? If in fact my concern is about growth and economic conditions deteriorate, Joe, it.
- [15:03]
Jim Leventhal
All leads back to trade policy uncertainty. I agree with you, but we're not, you know, we're not enjoying the benefits of what is a lowering inflation environment. The Fed can't cut until it sees the impact of tariffs. Said it won't. Okay. And right now it's projecting or the markets projecting that September is the first cut. That's if we get all this tariff worked out. You know, the Fed needs to see what the tariff levels are. And it's for this reason this month, the month of June is critical to get these trade deals in place. Steve, I can kind of hear you, forgive me, I'm putting words in your mouth, but I'm pretty sure I'm accurate. You're going to say these trade deals are a bunch of hooey and I'm going to agree with you. But nonetheless, get it done with, move on. That's what we need to do.
- [15:40]
Scott Wapner
But I'm not even, I'm not suggesting that I need the Federal Reserve to save profitability and earnings. And I also think, you know, put, put the nonsense as it relates to tariffs and the mercurial nature of the way this is being implemented off to the side for a second because there are companies that have the ability to still grow in that very uncertain environment. That's what I'm speaking towards, trying to identify what those companies are. I don't think it's universally where you say to yourself, oh, the entire s and P500 is going to be challenged because this is such a mercurial process.
- [16:16]
Jim Leventhal
But Joe, you've got a restrictive, I'll make this really quick. You've got a restrictive Fed interest rate environment. It's restrictive. It's factually restrictive and to your point is well made. I'm just adding that if you want the rest of the market, like value, small caps, everything else to start to participate, you're going to need some Fed rate cuts.
- [16:32]
Steve Weiss
You need growth. Let me get in here. First of all, I don't think it's a bunch of who. I actually think that the trade discussions are incredibly important because that's what's chilling the Capex market market. It's irresponsible for CEO to make an investment because he thinks it's going to be another taco trade. How do you allocate billions of dollars based on that? You can't. Right. And in terms of inflation actually does matter, as we've heard what the Fed has said. And inflation bleeds into the other things, the other parts of the market. So including retail, like who's passing on the cost, the auto stocks again today, right back and forth, forth that.
- [17:09]
Jim Leventhal
What do you think?
- [17:09]
Scott Wapner
We're not seeing it just yet because.
- [17:12]
Steve Weiss
I think there's many times the market goes up 80, 90% of the time. So we're not seeing it in the market. We are seeing it.
- [17:18]
Scott Wapner
I mean the inflation. Why do you think we're not seeing? Because it really well being inflation, I.
- [17:23]
Steve Weiss
Don'T know why it's not coming through, but I can tell you that, you know, there's, I know a couple people in this business, there are a few firms that do it and they've got to write bonds based upon what the, what the projected duty will be. And those bond costs, for example, on retail goods, you know, on steel, on others, have gone up tenfold. That money will come from somewhere. So it's only a moment of time that you're not seeing yet. Some companies have said, let's just keep business as usual and then we'll decide what happens. But I wouldn't be lulled into this false sense of security that it's not going to matter. Of course it's going to matter. And investing, as you all know, is composed of not what's happening today, but what's the future going to be. So I'd say to put rough percentages on it, 75 to 90% of what the future is going to be and 25 to 10% of what the history was, such as the pedigree of the company. So we don't know what the future is. Anybody says they do, even from the administration, is out of their mind. So how do you deploy capital? Again, going back to my central question, anybody who's bullish should be able to answer this question. Why are you investing at the current multiple in the market when it was deemed to be overvalued last year by a lot of investors at the end of the year looking to their end of 25, 26 targets justify it when you've got so many more issues here apart from the administration, the uncertainty, and part from geopolitical issues globally which impact that. So if anybody. I'm throwing that out to anybody, anybody want to.
- [18:54]
Jim Leventhal
Let me.
- [18:55]
Scott Wapner
Let me respond by saying different people are looking at different things. And you could look at the market right now and find things that will give you the confidence to be bullish. Let me just.
- [19:06]
Steve Weiss
Idiosyncratic risk to this market.
- [19:08]
Scott Wapner
So in the near term, you could find things where you get confidence to be bullish and stay bullish for a little bit. Right.
- [19:14]
Jim Leventhal
But.
- [19:14]
Scott Wapner
But, you know, the best investors change their mind. The best traders change their mind when conditions ultimately change. That's what this business is, is all about. But for me, what I see in front of me right now is that momentum is powering the market higher. And that's probably, probably troublesome to a lot of people who are watching the show who are in the financial services industry because they do a lot of real fundamental analysis. And if you do the fundamental analysis, there's challenges in front of you. But let's not forget momentum right now is a powerful force and it's taking us higher. And I respect your view. And I'm pretty certain, and I'm not disagreeing with you. That you probably think the lows for the year are not in and that.
- [19:55]
Steve Weiss
I have no idea.
- [19:56]
Scott Wapner
And that in fact, that in fact you might revisit them.
- [19:59]
Courtney Reagan
Yeah, we'll find out. Brent, here we are sitting at the halfway point, right? June 2. Tom Lee, of course, we know he's very bullish, but he still calls us the most hated rally. He's looking at the S&P 500 to reach 6,600. By year end, we're just above 5,900. What do you think that's a step too far?
- [20:15]
Brent Schutte
Well, June, June 1 and December 32. December 31, there's a lot of space between those two, so we'll see. I think it really depends. I think it depends what happens with bonds. I think it depends what's happened with these trade deals. If you go back to 2018. Well, first of all, I think the lows are in. I think that April Was it, April 2, surprise. That was it. That was an exogenous event that. It made no sense. Those numbers made no sense. Everyone was like, what is he talking about? So I think that exogenous event will not repeat itself. And so for that reason, I think the lows are in. I think that like 2018, we had lots of volatility with multiple 5 to 15% drawdowns. And so I do think, though, later on in the year there's definitely bandwidth for the Fed to cut rates because once again, we, to Jim's mind point, we are very restrictive and the Fed doesn't need to go into a 1% rate cut. It's like 2550. You can start bringing down that level. And so I just think there's a lot of variables that if we hit that 6600, you're going to have seen a lot of things go into place. I do think the one area that I would say where tariffs are a negative, we really need to start hearing more about the deregulatory nature that, that the President and Besson etc. Are going to implement in the economy. We hear a lot about it, but from the people I talk to in utilities and infrastructure, everything is still very, to Jamie's point, blue taped and nothing really has been pushed through. So to me that's, that is going to be another, another piece of growth, but it has not even remotely started to happen yet.
- [21:52]
Courtney Reagan
Sure, that could get, that could sort of remove some handcuffs, definitely on part of that. I mean, we've talked a little bit about tech and whether or not we think that that's going to lead the way. But if we drill down a little bit further, we've got Broadcom that's going to be reported reporting on Thursday and the SMH semi ZF actually coming off the best month since February of 2024. I know there's Broadcom in the, in the Jyoti. What are you thinking about ahead of this? Can the semi trade continue right now?
- [22:19]
Scott Wapner
I think it's a mean reversion trade.
- [22:20]
Courtney Reagan
Okay.
- [22:21]
Scott Wapner
I'm skeptical somewhat about it because there's been a significant outperformance from software over semis over the last year. We've seen now a narrowing in that outperformance where semis are actually beginning to work. I think certainly I was a little disappointed in the response from Nvidia. After earnings, not much follow through. We'll see how it trades in the coming weeks. Broadcom is close to a 52 week high. I think it's important for the company really to go out and to underscore the diversified model that they have. It's not just about AI for this company. They've done such a remarkable job. They did an acquisition in 2022 for VMware that's now accretive. It's working very well. They've got a $10 billion buyback plan that's in place. Let's see what they do with that the fourth quarter as we look towards next year. So I think right now for semis and our exposure is isolated to basically two names. It's in video and it's Broadcom. And what the strategy has been doing is actually been moving, moving away from a lot of the semiconductor names. So that's why I'm greeting this mean reversion, recovery rebound with a degree of skepticism. We'll see on the other side of Broadcom. We'll see as we navigate through the third quarter if in fact we're able to see semi equipment names like KLA Corp, Lam Research, Applied Materials continue the rally and at that point we build more confidence to re establish positions.
- [23:48]
Steve Weiss
I think I like Taiwan Semi still like it. Goldman upgraded in Asia today or put in their conviction list in Asia said by on it now you have to own the risk of China here.
- [23:58]
Courtney Reagan
Right?
- [23:58]
Steve Weiss
But with Vance coming out and saying that hey we're going to defend him, don't try anything. Adopting a saying from, from the Shiites saying you will regret it. This will be like the mother of all and it should be. So I think that's very necessary to come to the defense which they had not before. Trump before it said, you know, maybe we don't care. So it's critical. It's one of the cheapest semis out there. It's got part, it's got some of the fastest growth out there and they are always capacity constrained. So plus they're putting up plants here. So I, so I still love it. Still in my top positions. But you have to have a strong stock.
- [24:35]
Scott Wapner
I don't know, I don't know. Real quick. I don't know if Brin still has roadblocks, but on the, on the software side, you guys, you've got Palantir. Great, great job with that trade. Brent, you have Palantir, you have Snowflake making 52 week highs and obviously I've mentioned Roblox. So I don't want to make the inference that software is breaking down entirely because there are software names that are still working. Sorry, Jimmy.
- [25:01]
Jim Leventhal
That's, that's okay. But there is still an overhang in the semis. Just going back to the semis.
- [25:05]
Scott Wapner
Yeah, I'm skeptical.
- [25:07]
Jim Leventhal
You talked about the Nvidia price action. Now I'm going to draw an incomplete analogy which is a couple of weeks ago I was on the Cisco earnings call and I'll tell you, the earnings were a blowout. The guidance was a blowout. When you listen to analyst questions, we all know this. If you listen to analyst questions on a conference call, you get the zeitgeist. And the zeitgeist from Cisco applies to Nvidia. It applies to the whole semiconductor space, which is this. The analyst community thinks there's a finite end to all of the AI trade. Okay? We don't know when it is. Cisco, by the way, was very clear. It's years out there. The analysts were like, ah, we're not quite so sure. Deep Seek definitely put that question out there about how long the spending will go on. And unfortunately the only way to answer that question is the elapse of time. You got to get a few more quarters of all the hyperscalers saying, we're spending this much, stop worrying about it. Few more quarters of Nvidia blowing it out of stock. Francisco saying, what are you guys worried about? You can only, you can only solve that with time.
- [26:01]
Scott Wapner
Well, if you're right on that thesis, go sell utilities because utilities believe thesis.
- [26:06]
Jim Leventhal
In case it wasn't clear, so do I.
- [26:09]
Courtney Reagan
It was mentioned earlier and I want to circle back before we lose that train of thought. Why Netflix? It's an area that you've been paring back, but it's actually done very well. So you're just taking some profits there. What's your main thesis? I lose track of that thread.
- [26:22]
Steve Weiss
Excuse me. I wouldn't say I've been, you know, paring back generally. In fact, I haven't. Netflix was my largest position.
- [26:29]
Courtney Reagan
Okay.
- [26:30]
Steve Weiss
It's still right up there is one of my largest positions. But just from portfolio management position, I tend to run large positions. Jimmy runs a concentrate book about 20 stocks.
- [26:39]
Jim Leventhal
25.
- [26:40]
Steve Weiss
25. I'm less than half of that. So when it gets to such a level that it's just again, irresponsible. Keep it at such a level. I see nothing wrong with the company. I matter of fact I've got, I think they've got some of the best growth prospects out there. So it's just a question of portfolio management rather than opining on the fundamentals.
- [26:59]
Courtney Reagan
Okay, got it. Well, we're going to wrap that up here for a moment. Coming up that we've got our call of the day. It's a downgrade for one group of stocks that just broke a three month losing streak. We will see where the committee stands on that next. Halftime is back in two minutes. Stick with us.
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- [27:40]
Jim Leventhal
Retail companies deliver profitable growth. EY Shape the future with confidence. Our state has changed a lot in the last 140 years. We know because MultiCare has been here guided by a single making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org 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. Welco to the now it pays to discover. Learn more at discover.com/credit card based on the February 2024 Nelson Report.
- [28:49]
Courtney Reagan
Welcome back to Halftime. It is now time for our Call of the Day Oppenheimer Downgrading bank stocks to market weight from overweight. Joe, you own several banks in the Jyoti. You also personally own some names. What do you make of this call?
- [29:00]
Scott Wapner
I agree with the call.
- [29:01]
Courtney Reagan
Okay.
- [29:02]
Scott Wapner
And a lot of the major momentum in regional banks, banks rather, is breaking down significantly. We own third, we own regions, we own citizens, we own M and T. It's Cincinnati, Cincinnati Financial. I'm sure you know that one do. Oh, momentum is breaking down. And I think one of the reasons why is speaks directly to my comments before. I think the biggest challenge economically in front of us relates to growth, not so much inflation. And if you're going to see, see the contraction in growth, it's going to be a difficult environment for regionals. One name that does stand out that we own is bank of New York that seems to be trading well. Even pnc, which is a super regional, is really struggling as of late. So we're now, we're seeing the narrowing, we're seeing concentrated performance. It's really isolated to your JP Morgan's, your Goldman Sachs, your Bank of New York and beyond there. There is a significant deterioration, deterioration in that momentum. And I think a lot of it is predicated on the concerns of, okay, have these companies reached their peak in terms of profitability and margin expansion?
- [30:06]
Courtney Reagan
You don't think it's caused anything to do with more risks to the financial bank, the regionals like we saw, I don't think, two years ago, No, I don't think they're strong.
- [30:15]
Scott Wapner
I don't think we're in a, in a place where you have that systemic risk. But yes, you could say to yourself, you know, we're going back and we're analyzing your assets to your liabilities, and when you're seeing the long end of the curve, staying uncomfortably high, certainly that creates a difficult environment for a lot of those regional banks.
- [30:35]
Courtney Reagan
Jim, they're reiterating JP Morgan is the top banking idea and you own that one. So.
- [30:38]
Jim Leventhal
Yeah, well, I think that's just a sort of tautology to say Morgan is the best in the industry. And if you don't mind, I'm going to move on from that because it's just so obvious. And I would say I was caught a little bit surprised, Joe, by your pessimism, but I understand it sounds like you're localizing that to the regional banks.
- [30:53]
Scott Wapner
Yes.
- [30:54]
Jim Leventhal
To which I would say not to you, but to everybody. Like, I don't even know why on the regional banks right now there's such opportunity in the big money center banks that why Take the added risk of being in smaller companies that have more monoline businesses to begin with. And I think there's plenty of big banks. You mentioned Goldman Sachs, Morgan Stanley, Citigroup Group is one that I own and I just don't share this pessimism. When you as I was saying earlier have a labor market that's strong which should help delinquencies capital markets. Steve, your point is well made but hopefully this tariff stuff does eventually get worked out and companies can make decisions that will enhance capex and lending and the capital markets itself. In the meantime you do have volatile markets which are helping trading. So I see a lot to like including valuations in a lot of these water larger banks.
- [31:37]
Courtney Reagan
Before we end the conversation Brent, I want to mention to you of course that Visa has been initiated by $400 price target at Truist. I know this is one that you own, obviously not a bank but still in the financial groupings. What do you make of that $400 price target?
- [31:53]
Brent Schutte
I think it's, I think it's solid. You know Visa has basically no capex, very high margins. They basically have a moat, they have a global presence. And so this is a company that just like consistently quarter after quarter after quarter delivers. There's not a lot of surprises on the downside. So I think like at Costco which is in a totally different sector, the valuation people look at the P E and say well that looks expensive but because the consistency, the durability and the margins of this company, I think it will continue to trade at a well above market multiple for all the right reasons.
- [32:26]
Courtney Reagan
Jim, you've got, you've got visa to MasterCard also initiated by $640 target.
- [32:31]
Jim Leventhal
Also there two companies just keep hanging in there and outperforming as stocks. They will continue to do so until and unless. Courtney, we have a recession which just doesn't appear in the immediate horizon.
- [32:43]
Courtney Reagan
Well, let's get the headlines with Christina Parts and Ellis. Hi Christina.
- [32:46]
Jim Leventhal
Hi Courtney. Well a massive eruption today at Mount Etna in Sicily forced tourists to flee the volcano as ash and rock filled the sky. According to scientists monitoring the volcano it's the the biggest eruption since 2014. At this point, no injuries have been reported. Neurotech startup Paradronics announced today it has implanted its brain computer interface into a person for the first time. The competitor to Elon Musk's Neuralink says once regulators approve it, the company will begin a clinical trial later this year to study the system's technology and long term safety. And speaking of Musk. The Financial Times reports his AI company Xi, which is a competitor to Sam Altman's opening, is launching a $300 million share sales that would value the company at $113 billion. The tender offer expected to be followed by another investment round where the company will offer equity to outside investors.
- [33:40]
Brent Schutte
Not bad.
- [33:41]
Courtney Reagan
Not bad, Courtney, that that face off continues. Well, straight ahead, today's ETF edge, Dominic Chu is standing by with the man behind the I bet ETF as bitcoin becomes or comes, I should say off a record setting month. Stay with us.
- [33:56]
Brent Schutte
We'll be right back.
- [34:00]
Jim Leventhal
How will you shape the future of energy with confidence? What does it mean to deliver affordable and reliable energy for all?
- [34:07]
Scott Wapner
From evolving supply and demand to pricing uncertainty, EY understands the disruptions energy companies face and how to drive the outcomes that matter.
- [34:16]
Jim Leventhal
So whether it's in the plants, at.
- [34:17]
Scott Wapner
The pipeline or on the grid, EY's full spectrum of services help energy companies maximize operations to drive profitability and performance.
- [34:26]
Jim Leventhal
Ey shape the future with confidence. 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.
- [35:02]
Courtney Reagan
We are back on halftime. We're going to send it over to Dominic Chu with today's ETF Edge. Dom, take it away.
- [35:07]
Jim Leventhal
All right, thank you you very much, Courtney.
- [35:08]
Courtney Reagan
So as we kick off a new.
- [35:09]
Scott Wapner
Trading month, can two of the biggest.
- [35:11]
Jim Leventhal
ETF themes from last month, which is.
- [35:14]
Scott Wapner
AI and then Bitcoin, continue to hold.
- [35:17]
Courtney Reagan
Up amid general market pressures?
- [35:19]
Jim Leventhal
Joining me now is Jay Jacobs, the.
- [35:21]
Scott Wapner
US head of equity ETFs at BlackRock.
- [35:23]
Jim Leventhal
The world's biggest asset manager.
- [35:25]
Courtney Reagan
Jay, this is an important discussion because.
- [35:28]
Scott Wapner
ETFs have become so hyper specialized, but AI is one that a lot of investors still have a lot more more interest in.
- [35:35]
Jim Leventhal
What exactly can they do to gain a specific exposure? Well, I think a lot of investors see the opportunity in artificial intelligence. I mean this is one of the biggest technological revolutions since either the Internet or the Industrial Revolution. But the challenge investors face is just allocating to big broad exposures like the tech sector or core indexes is only giving you a narrow slice of the pie. So allocating to a fund like bai, which has brought in over a billion and a half dollars this year. It's an actively managed ETF where our portfolio manager, Tony Kim is picking stocks that are leading in artificial intelligence across the value chain, from large language model developers to data owners to data centers and semiconductors, really providing that value chain.
- [36:19]
Scott Wapner
Exposure to artificial intelligence. Jay, that's a hyper specific way of playing AI specifically. Then of course, there are all the.
- [36:26]
Jim Leventhal
Offerings out there with regard to gaining exposure for specific cryptocurrencies, especially bitcoin.
- [36:32]
Courtney Reagan
You manage one of the bigger ones.
- [36:34]
Scott Wapner
One of the bigger funds out there. Other providers also have, you know, Bitcoin related ETFs. Just how important is this model becoming for, for, for advisors to maybe allocate towards cryptocurrencies?
- [36:48]
Jim Leventhal
Well, we're seeing a lot of advisors have started that educational journey around what is Bitcoin and what is the role that it could play in portfolios. And I think what's really spurred this along is two things. One is their clients are asking them about Bitcoin, particularly millennial clients who have been digital asset native. And then secondly, in this environment where you have more global uncertainty, there's more interest in assets that behave differently from traditional assets like gold and like Bitcoin that are more diversifiers in a portfolio. All right, so there's a lot more coming up on the show later on.
- [37:17]
Scott Wapner
Today on with regard to AI and.
- [37:19]
Jim Leventhal
Bitcoin and then some of the moment.
- [37:21]
Scott Wapner
Momentum ETFs that are out there as well.
- [37:24]
Jim Leventhal
Just head over to etf edge.cnbc.com Jay.
- [37:27]
Scott Wapner
Is going to be joined by Nathan.
- [37:29]
Jim Leventhal
Jurassi, the president of the ETF Store.
- [37:31]
Courtney Reagan
To have a bigger discussion about just.
- [37:33]
Jim Leventhal
How important specific and more general ETFs are in a portfolio.
- [37:37]
Scott Wapner
Courtney, I'll send things back over to you guys.
- [37:39]
Courtney Reagan
Relative ETF certainly has blown up and changed along the way. Thank you, Dom. Well, coming up, more of the day's biggest movers, including the population and oil. Now the committee is navigating the energy trade. That's next on halftime. Welcome back. Energy is the leading sector today, higher by about 1%. Oil higher on news that OPEC please plus will continue increasing output at its current rate. Brent, you own several names in the space here. I know. Katera, Energy is leading the way here today, up three and a half percent. Equity also up more than 3%. But you've got Energy Transfer, Diamondback, Viper Energy. Where do you want to go with this? I mean, obviously you've made some really good plays there. You know, the space you're in Texas. Tell us what you make about the moves in energy here today and the short term future at least.
- [38:37]
Brent Schutte
Yeah, well, the vast majority of my whole holdings have distribution yields between let's say 7 to 9%. So definitely cash flowing. I think you also have one of the reasons that energy rallied today is because as Jim walked through what happened over the weekend, you know, with Ukraine and Russia, I think how you play this though is unfortunately the whole sector is well below the 200 day. So if I look at actually I probably have 7 to 8% more upside, which would be nice. But I do think that this is one of these sectors below the 200 day. On top of that, Trump wants low energy prices. That is a key component to inflation. And so I think between his relationship with the Saudis wanting low energy prices, mind the technicals. You can play this up to the 200 day as a trade, but then I think you want to fade it after that.
- [39:22]
Courtney Reagan
Jim, you've got Cheniere, Exxon, Transocean, you obviously were hot on the geopolitical sort of transcurrence here this morning. What do you think of this?
- [39:29]
Jim Leventhal
Well, well, Brent said it. I definitely think that's why oil is up today is because the geopolitical situation OPEC is, is rapidly increasing output and that should be a reason for oil prices to go down as they have. You know, I do think you can see a further recovery in oil here, but it has to come from oil demand. And again, this gets back to, sorry to be beating a broken drum here, but you have to get the tariff situation under control so that not just the US Economy but the global economy economy can grow. You need demand growth right now to get a sustained rally in oil.
- [40:00]
Scott Wapner
Be careful thinking that the increase in supply from OPEC is going to continue to pressure oil lower. I think it's beginning, we use the word last week, desensitized. I think you're beginning to see that reflected in what OPEC is doing on April 3. They shocked, they shocked markets with 411,000 barrel per day increase, increase for the month of May. They followed that through in June. They followed it through again here in July. Guess what? August, September, October, you're going to see another 411,000 barrels added per day. So I think ultimately that'll get them to their goal of 2.2 million. But I think at a certain point that gets priced in. And I also think when you look at right now positioning in energy, I think it's pretty light. So in fact I think CTAs are.
- [40:46]
Courtney Reagan
Short so, so if you are, if you are desensitized to that as the market, what do you, what do you change in your portfolio? Nothing. Just positioning.
- [40:53]
Scott Wapner
No, I think you're going to see a turn in energy over the coming quarter where you'll see rebuilding in terms of sentiment, which is bearish and in terms of position, which right now I think is being carried at an underweight.
- [41:05]
Steve Weiss
So just to be clear, are you desensitized to the announcements or until or to the actual commodity? I think the announcements don't mean anything.
- [41:14]
Scott Wapner
Yeah, I think, I think at this point OPEC continuing to say, okay, we're going to, we're going to keep raising, we're going to raise production, we're going to raise production. The market knows that that's priced in. I don't think that's going to force the market lower. I think if the market is going to get forced lower in energy, it's going to be because growth is going to contract.
- [41:30]
Steve Weiss
Global growth was in today's announcement because the cuts weren't as bad as feared.
- [41:35]
Scott Wapner
Versus the cuts were consistent with previous months. It's, it's basically the same amount that was cut last week.
- [41:42]
Steve Weiss
They were talking about a much larger.
- [41:44]
Scott Wapner
Yeah, they would talk about the possibility of increasing it, but because they're, they.
- [41:47]
Steve Weiss
Want to, they want to make it very difficult. They want to shut down production.
- [41:50]
Scott Wapner
They want to show that they want.
- [41:51]
Steve Weiss
To, they want to do.
- [41:52]
Scott Wapner
I think they want to show other OPEC members that they're in control and I think, I think the Saudis are in control when you're looking at OPEC for sure.
- [41:59]
Courtney Reagan
Joe, real quickly, before we run out of time here, you got a couple names on the move there in the Jyoti. So Rollins getting an upgrade to buy from hold at Jeffries and Church and Dwight upgraded to outperform from sector perform at rbc.
- [42:10]
Scott Wapner
More excited about Rollins, Church and Church and Dwight seeing a little bit of a bounce off the low. And that's more of a recent position that was established in the etf. The industrial sector is a very strong sector year to date. Rollins is participating, but there's other names as well. There's Cintas, there's Axon, there's Uber, there's How Met, Fastenal, Trane, Heiko. These are all industrial companies that we really haven't spoken much about over the last several years. But guess what? They have the profit margin expansion and the earnings growth and a premium is being paid for their share price now as a result. And that's why the industrial sector looks so good.
- [42:45]
Courtney Reagan
Got it. Well, coming up next, Mike Santoli, he's going to join us with this midday word. We're back right after this. We are back on halftime. Senior markets commentator Mike Santori joins us with his midday word. We were talking, Mike, obviously about the impact the tariffs and the discussion therein has on the markets. It seems like we were obviously very rattled after the April 2 announcement, but maybe we've calmed down a little. That being said, I don't know, this weekend kind of made us nervous with some other geopolitical tensions rising. What do you mean?
- [43:31]
Jim Leventhal
You can't get too far away from.
- [43:33]
Scott Wapner
Each little incremental test of that hypothesis that we built up some calluses against the trade headlines.
- [43:40]
Jim Leventhal
That was to a large degree the story of May though.
- [43:42]
Courtney Reagan
Yeah.
- [43:43]
Jim Leventhal
Is that the market just did not.
- [43:45]
Scott Wapner
Really allow, allow itself to sell off heavily in a sustained way when you did get the tariff headlines and sort of trade frictions to the fore. Now why is that possible? Well, it's because Mag 7 to some degree came to the rescue through earnings season. The earnings performance of the Mag 7 has sort of provided a bit of support and we've priced in some level.
- [44:06]
Jim Leventhal
Of resolution in a favorable direction of the tariff situation.
- [44:10]
Scott Wapner
I think the market is thinking 10.
- [44:12]
Jim Leventhal
To 15% blended net tariffs across the.
- [44:14]
Scott Wapner
World somehow is absorbable. We'll see if that's true. But the other reason we've been able to handle it is the hard economic data have not buckled yet. Now the ESM number today, not good by any estimation. It's a matter of whether that becomes a snowball effect or if it's considered.
- [44:31]
Jim Leventhal
To be a one off because of.
- [44:32]
Scott Wapner
Whipsaw from the tariffs. If I think on Friday the market wants, wants a generally positive jobs number, should want a positive jobs number as opposed to rooting for weakness, which maybe.
- [44:44]
Jim Leventhal
Brings the Fed off the sidelines.
- [44:45]
Courtney Reagan
It's a lot to consider. We still have a lot of time to go, but obviously starting off the month of June. Mike, thank you so much. Stay with us though everyone. Final trades are coming up next on halftime. We're back with the setup on CrowdStrike. It reports tomorrow after the bell. Joe, you own it in the Joe.
- [45:06]
Scott Wapner
Team Cyber is very strong right now. Whether it is check point, Zscaler, Fortinet, Palo Alto, all of these names are working really well tomorrow night. If in fact CrowdStrike misses I still think it's an opportunity that you buy the company because you're looking at the long term vision for Cyber which I believe is a very strong one for this specific company as well as the other names I mentioned.
- [45:31]
Courtney Reagan
Bren, very quickly you're nodding. I know that you own the cybersecurity etf.
- [45:36]
Brent Schutte
Investors have continuously been rewarded when they bought the dip in these names. So I agree with Jeff. It happens. Definitely buy the dip.
- [45:43]
Courtney Reagan
All right, we get to start off with you, Brennan. It's time for final trades. What do you got?
- [45:48]
Brent Schutte
Yeah, I saw. I was talking about Silver doing a catch up trade. It's breaking out and I think Copper is going to join the party. So FCX for a breakout.
- [45:55]
Courtney Reagan
Okay, Jim, you're up next.
- [45:57]
Jim Leventhal
Yep. In a lot of these trade deals, the low hanging fruit is LNG exports and that's going to play very well.
- [46:03]
Steve Weiss
To Cheniere Energy Weiss FTAI Aviation. It's just got, you know, it's a great story. It's done well since Lowe's and, you know, I think keeps going. Aviation is one bright spot.
- [46:14]
Courtney Reagan
Joe, bring us home.
- [46:15]
Scott Wapner
I mentioned software before and I got the approval to mention this name from Steve. We don't talk about box often, but you want to buy box here. Be nice. Nice post earnings rally box here around 30.
- [46:27]
Courtney Reagan
Thank you all for joining us. That does it today for halftime. The exchange starts right now.
- [46:32]
Scott Wapner
You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [46:44]
Courtney Reagan
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer.
- [47:26]
Brent Schutte
Hey, I'm journalist Sam Sanders.
- [47:28]
Jim Leventhal
I'm poet Saeed Jones. And I'm producer Zach Stafford. And we are the host of a podcast called Vibe Check.
- [47:34]
Scott Wapner
On Vibe Check, we talk about everything.
- [47:36]
Brent Schutte
News, culture and entertainment and how it all feels.
- [47:40]
Jim Leventhal
That's right. We talk about any and everything on our show, from real life issues like grief to music and movie critiques. And that barely scratches the surface.
- [47:48]
Scott Wapner
Yes, indeed.
- [47:49]
Jim Leventhal
And it doesn't stop there.
- [47:50]
Scott Wapner
We have got a lot to say so join our group, chat, come to life, follow and listen to Vibe Check.
- [47:56]
Jim Leventhal
Wherever you get your podcasts.