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Trading the Downgrade 5/19/25
00:43:48
Frank Holland and the Investment Committee debate the Moody’s Downgrade of America’s credit rating and discuss what it means for the market. Plus, Bill Baruch buying a biotech name, he calls in to share the details. And later, the desk cover the latest Call of the Day on Netflix. Investment Committee Disclosures
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- [00:02]
Frank Holland
As America's leading business lender, bank of America is on your corner and in your corner. With $215 billion in business loans and over 3,700 business specialists across the nation, 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.
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Steve Weiss
Hey, Fidelity, can I get a second opinion on stocks in the Fidelity app?
- [00:36]
Frank Holland
With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then when you're ready, trade US stocks and ETFs with no commissions.
- [00:47]
Steve Weiss
That's right.
- [00:48]
Frank Holland
I am always right.
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Steve Weiss
Investing involves risk, including risk of loss.
- [00:52]
Frank Holland
Online US equity trades and ETFs and retail fidelity account sell order assessment fee not included some account types and securities excluded.
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Steve Weiss
Details of fidelity.com commissions fidelityburg.
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Frank Holland
Brokerage Services, LLC member NYSE SIPC 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.
- [01:14]
Steve Weiss
Listen in.
- [01:18]
Frank Holland
All right, Thanks a lot, Carl. Welcome to the Halftime Report. I am Frank Holland in for the judge. Scott Waffner, front and center this hour. Trading the downgrade. Stocks are dropping, yields are popping as Moody's downgrades America's credit rating. Our investment committee is standing by how to break down the fallout and much, much more. Joining me for this hour, we have Joe Terranova, Steve Weiss and Jason Snipe. But first, quick check of the markets. As Karl just mentioned, we are off of our lows of earlier. Right now, the Dow essentially flat the S and P down about a quarter of 1%, the Nasdaq falling just under a half a percent. We also have to look at yields. Yields have been the story of this morning so far. Take a look at yields. When you look at the 30 year, it actually just kind of tipped across that 5% mark before the opening bell. Right now we're actually in the 10 year, 4.5. It was a couple of basis points higher the 30 year. Pulling back below that 5% mark right now at 4.96. And really that's where we have to start. Joe, the Moody's downgrade seeming to pop. Yields, they were much higher earlier. Kind of easing back a bit right now. What's your make of the downgrade in the impact on the bond market?
- [02:15]
Steve Weiss
I said last week we talked about the equity Market rebuilding, bullish momentum and the fact that really sentiment and positioning didn't align with the very quick price recovery that we were witnessing. I said the risk was yields moving higher. And I really believe that the the bond market got kind of caught leaning if you would almost where it picks off the equity rally. And the news over the weekend brings yields higher. We go up to at 902 this morning, I think a 10 year got to 4.56. Now we see that yields have fallen back about 8 basis points and equities find comfort in that. So I think the message for investors is this near term bul momentum of the last several weeks it can continue if the bond market allows it. If yields do not rise significantly higher, if you don't see the two year break well above 4.1%, if you don't see a 30 year going towards four and a quarter percent, then equities can continue the near term bullish momentum. But I don't think any of us believes that that erases the fiscal challenge that we have in front of us that clearly has been highlighted since Fitch did the initial downgrade in 2011 S&P files in 23. And here comes Moody. We don't have a perfect credit score anymore. JP JP Morgan's Jamie Dimon is talking about our debt to GDP right now. We've got a fiscal situation that at some point we are going to have to pay the price for in the equities market.
- [03:52]
Frank Holland
You know, speaking of bank of America with a note, Steve Weiss, Jason Snipe, I want to bounce this off of you. This is bank of America on the Moody's downgrade earlier today. They said with tax cuts and tariffs hanging in the balance, Moody's appears to be sending a message that it thinks these policy changes will on net put the US on an even worse fiscal trajectory. That is tariff revenues won't fully offset the cost of the proposed tax bill. Bank of America goes on to say we agree. Do you agree with Moody's and apparently bank of America?
- [04:18]
Joe Terranova
You know I do. I mean you got a three and a half trillion dollar addition to the deficit from the tax bill right now. If we continue to go as we haven't gone with these great big beautiful tariff deals, they're going to do really nothing to to bolster our revenues and definitely not meaningfully. So look it's. I agree but I'd also say this, that we've seen these downgrades before. Joe just quoted two of them. Where's the market versus downgrades? The market's higher. So the US Debt is still the preferred debt in the world. Well, it's double A1 or whether it's triple A doesn't matter. Still the deepest market and most attractive debt. But that's not the only news that came out this weekend. And you know, first of all, we had that very important proclamation from Donald Trump himself about Taylor Swift not being hot anymore. So that set off the market. And then you had the tariff, the, the trade agreement between the UK and EU where we're strengthening our former trading partners in defense. Now, part of that's a good thing. The other thing is that maybe it's not so good. So overall we continue to move forward with the chaos that we're seeing in the unsettlement, unsettling environment that I still think are is dangerous for the US and throwing the tax bill. And sure, that's good, that's going to drive some investment, but not until, not until the trade issues are settled. So momentum may die a little bit, but the markets also had a peak valuation.
- [05:55]
Frank Holland
So having some concerns about momentum, by the way, markets off of their lows of earlier as bond yields dramatically off their lows. Jason, coming over to you. Do you agree with bank of America, Moody's, the idea that we're on a worse fiscal trajectory and that there's more troubling signs ahead?
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Jason Snipe
I would agree. I think, you know, in the long run we can continue to kick this road, kick the, kick this ball down the road. You know, in my opinion, when I think about as an example, in interest alone, we paid $1.1 trillion in interest alone on the federal debt last year. You know what I will say with these two downgrades in the last 15 years, you know, we've had talks about American exceptionalism and all the concerns around that, you know, sovereign nations have increased exposure in that time frame and doubled their holdings in that time frame and added $1.5 trillion in holdings since 2023, since the last downgrade. So for me, it is a fiscal problem. There's no doubt about that. But when we talk about the markets and kind of concerns going forward to Joe's point, I think the concern around yields and where they are, I think we are at an inflection point. The ten year at four and a half percent, the thirty year at five percent provides a formidable option from away from equity. So that is something that I'm watching very closely in terms of the momentum with yields.
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Joe Terranova
Yeah, buyer of 10 years. I mean, it is great. While you're waiting out, I mean you.
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Frank Holland
Don'T see the yellow on the 10 year moving higher? Is that what you're saying you want to buy at this point?
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Joe Terranova
I mean I wouldn't buy some at this point. Four and a half is a great rate for.
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Frank Holland
It's certainly a great rate. But I think a question for all three of you is House Speaker Johnson hopes to get that big beautiful bill to a floorboard at some time this week. Does that equal a spike in yields on the bond market and potentially another sell off in the equity market? Would you want to hold off on buying bonds until you see that reaction?
- [07:38]
Steve Weiss
Look, I got crushed in the TLT. I've talked about that on air. Basically 10 year level of around some of around 4.30 is where I entered the TLT. I got out of it last week here. So I took about a 3% loss on it. I think the momentum right now points and positioning points towards higher yields and you could fight against that very easily. And I fundamentally, I agree with your perspective, Steve. But I think what's important in this.
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Joe Terranova
Entire hold position here, but it's a good place to start.
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Steve Weiss
But I think what's important in this entire conversation is I think people hear about the US losing its perfect credit rating and they say well how could I buy stocks? Well here's what you need to understand about buying stocks versus a fiscal position that continues to deteriorate. And you know it's not just the president administration that this fiscal condition is deteriorated under prior administrations as well and no one seems to care. But it's about accessing the debt market and who needs to access it? Does Microsoft really need to access do the Mag 7 really need to access the debt market? And I think that's important to understand. So you could have a stock market that continues to move higher because you have these mega cap trillion dollar companies that don't need the debt market. But then underneath the surface, the consumer, the consumer who's going out there and has to acquire a vehicle, whether they're leasing it or financing or tries to buy a home, that's the real economy. And I think that's where the continued challenge is going to be presenting itself in the coming years. If you don't get the retreat in yields that this administration, clearly it's undeniable.
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Joe Terranova
You need to get the deficit under control. But the last two downgrades, borrowing costs spike like they are right now, then they came back down. What's going to dictate ultimately where the yields go is the Fed and the economy. If the economy weakens Fed's going to cut. So that's really what you have to watch for.
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Frank Holland
I just want to address Joe's point. Joe, I think the general point you're trying to make is that tech could be a safe haven during some of this volatility. These companies are less cost of capital sensitive, less interest rate sensitive steel out with a note. I'm just, I'm just bringing this up here. We continue to expect sharply slowing US core GDP and believe the tech is defensive narrative that's at risk in the second half of 2025. And in all fairness, have we seen some of this volatility. We have seen the tech trade unwind.
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Steve Weiss
I don't think it's fair. I don't know that anything's defensive. I think reality people think, look, in 2008 the world got a global margin call. Was anything defensive at that point? You were supposed to own assets that were uncorrelated and basically everything went down. So I don't know that I buy that premise that it's defensive. My point is just try and understand that you might be puzzled by a fiscal condition of the United States that doesn't look so good and even the rest of the world, but yet equities continue to move higher, in particular these mega cap companies because they don't need to access the capital. And Steve brings up a really good point. Ultimately where you get the 10 year lower is because the consumer is pressured by the private sector borrowing costs, the demand for consumers begins to contract. And what does that lead to? That leads to an economic climate maybe doesn't look so good and the Federal Reserve has to step in. So I guess the succinct way to say it is the stock market sometimes is not the economy. And I think this is a moment where you really need to see that play out because I think it's somewhat puzzling to people that you're seeing equities remain high.
- [11:11]
Joe Terranova
It's not the double A1, right? It's, it's, that's what the future is, right? You know, borrowing costs. You mentioned you four or five last week, right? You're still at four or five. So look where, where companies can take the opportunity to stick to consumer and say higher borrowing costs they will and improve their net interest margins, their spreads, financial institutions. But functionally, you know, I think the impact is that it's another reason for the, for the consumer to hunker down, as we've seen. And I think that's going to continue with 2/3 of the economy.
- [11:46]
Frank Holland
All right, so A number of issues obviously, facing the market. There's trade, there's tax policy, there's the deficit. Jason, want to come over to you just talking more about the broader market. Can, of course, I with a note earlier saying we would not be surprised to see a sideways market for the next two months with volatility gradually increasing as we approach mid terror, mid July tariff deadlines. Of course, that's referring to the quote, unquote, reciprocal tariffs. That deadline ends on July the ninth. Is that something you agree with, that we may be on pace for kind of a sideways market during this time?
- [12:13]
Jason Snipe
Definitely. I mean, we're 20% off the high, off the lows, I should say, in April. I mean, the market is now, the multiple on the market is 21.7 times. You know, prior to that, when Trump was elected, you know, we were at the high at 22.7. So we're only, you know, about a point off from that. And, you know, when I think about the catalyst going forward, the Fed is obviously out of the game now with delays on tariffs. So there's not, there's likely not going to be a move until later on this year. We're looking at earnings, earnings have been revised downward. We're looking at this next quarter at about close to 6%. Earnings growth, you know, a couple of weeks ago is over 10%. So for me, it's, it's, it is a kind of a trading range market for sure in the next few months. But I, you know, as I kind of turn the page into later, towards the end of the end of the year and into next year, I think it also could be an accumulation phase.
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Frank Holland
All right, both of you just mentioned the Fed. By the way, Steve Liesman, great interview with Atlanta Fed President Raphael Bostick earlier today. Bostick kind of hinting that he doesn't really see a cut until December. So you talk about the Fed. I think you also mentioned the Fed rescuing the market. Doesn't seem like that's a likely outcome. All right, we want to switch gears a bit. Turning to J.P. morgan. J.P. morgan CEO Jamie Dimon just finished speaking at J.P. morgan's investor day. Leslie Picker is there and joins us now with much more. Leslie, good afternoon. Hey, good afternoon to you, Frank, at Diamond, fielding questions related to everything from Bitcoin to regulation to private credit to succession. Very closely watched element here. However, Dimon said nothing has changed on succession, noting his timeline is up to the board. He did share some updated thoughts on the fiscal picture and the, quote, huge deficits he sees and he spoke about the trade war as well.
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Jason Snipe
My own view is you, you know.
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Steve Weiss
Where people feel pretty good because you.
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Frank Holland
Haven'T seen an effective tariffs.
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Steve Weiss
The market came down 10% is back up 10%. I think that's an extraordinary amount of complacency.
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Joe Terranova
That's my own view that when I've.
- [14:09]
Steve Weiss
Seen all these things adding up that are, that are on the fringes of.
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Joe Terranova
Extreme kind of thing, I don't think we could predict the outcome. And I think the chance of inflation.
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Steve Weiss
Going up and stagflation is a little higher than other people think.
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Frank Holland
He said even if those tariff rates stay where they're at today, the tariffs are still, quote, pretty extreme. And he notes we still don't know how many countries are going to respond and in what magnitude. Dimon said he thinks the geopolitical risk is very, very, very high. He thinks the odds of a recession with inflation stagflation are about 2 times the level that the market thinks. And he says credit losses in a recession will be worse than other that he's not a buyer of credit today or he wouldn't be a buyer of credit today. That it is a, quote, bad risk. Frank, our Leslie Picker, live from the J.P. morgan Investor Day. Leslie, thank you very much. Joe, want to come over to you. You own shares of J.P. morgan. What did you make of what Jamie Dimon had to say? What do you make of the bank in this current environment?
- [15:09]
Steve Weiss
Well, again, it's, it's two different scenarios. The first scenario is what do you think of JP Morgan, the company as an investment, as a current shareholder, it's clear that investment banking revenue in the quarter probably sees a little bit of a downtick. Steve's been doing a good job talking about how activity is somewhat frozen because of the volatile environment. Trading revenue, though, equities, fixed income. I think your expectation there is that can remain strong because of the elevated volatility. So I think collaboratively you put that together and you continue to believe that JP Morgan can continue to move higher in 2023, in March of 2023, the acquisition of First Republic, that proves to be a very strong acquisition. They played from having a position of strength and being able to get those assets. The other side of that is, is Jamie Dimon's remarks. And if you hear those remarks, you kind of have a degree of skepticism as it relates to investing itself. Right, because he's talking and what stands out to me very clearly is that credit spreads, he's not comfortable where they are right now. Credit spreads are very tight he believes that there potentially, as I read it in front of me, he would not be a buyer of credit today, that that does not portend particularly well for risk assets overall if we begin to see credit spreads blowing out. So I think it's two distinctly different narratives, tariffs. And you kind of have to maintain those positioning where say, okay, I like JP Morgan, the company, I like the way they're executing. But I am aware and I'm understanding that here is a CEO of one of the world's largest, if not the largest world's largest money center banks, and he is speaking with very strong caution about the overall economic climate and the credit markets in particular. That's troubling to me.
- [17:04]
Frank Holland
Very troubling to you. Snipe, I want to come over to you. You own Goldman. Do you see a similar setup when it comes to Goldman trading activity spiking with some of this volatility and uncertainty, but other areas like investment banking suffering?
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Jason Snipe
Oh, there's no doubt. I mean, we see it in the numbers. Obviously, investment banking hasn't done well so far this year, but we have seen some very successful IPOs hit the market. Core weave and a bunch of others that have done well. Still anemic to a certain degree. But, you know, as I, as I think about the macro starting to light up, I think obviously that's been the overhang with ib. But as that starts, as we start to get more clarity there, I think IB can come back meaningfully in 2026. Trading revenue is obviously going to continue to benefit from the volatility in the market. We'll still see names like GS, which is up 6% year to date and up 30% over the last year. So I continue to like these names in this environment.
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Frank Holland
Why is you on Goldman and Bank of America?
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Joe Terranova
I do, I do. In Goldman's, my preferred holding, it's a much larger position than bank of America. Look, what we're seeing is timing difference. I mean, every bank you spoke to said that second half of 25 is going to be the IPO cycle. Nobody, of course, counted on tariffs. Everything else, you'll still see certain IPOs make it through as we did last year. It's not going to be a zero in terms of IPOs, but I think that it's going to remain at a very low rate. So I don't mind playing for next year. And yes, we've seen the spike in trading volume in the first quarter. They've all done well. And actually today in fixed income, you can see a big spike in trading so the good thing about chaos coming out of Washington is that you creates the volatility and that's great for these banks.
- [18:49]
Steve Weiss
You know, I've said the put is in the bond market. And I think 17 and a half minutes into the show, everything we're talking about relates to the bond market allowing the equity market to continue to move forward. And as we move to the end of the year, there's a significant amount of debt that needs to be refinanced. And the question really is going to be at what level will that refinancing activity occur? And if you don't get the retreat in yields that you and I expect, I expected it clearly one month ago and didn't get it. You're talking about potentially getting it here in the near term.
- [19:27]
Joe Terranova
No, I'm talking about retreat, meaningful retreat. At the end of the year, you're.
- [19:31]
Steve Weiss
Going to, you're going to need. I don't believe that where yields are now, if they moved another 25 basis points higher, that the equity market can still sustain the levels that it is at currently, even, even with very strong earnings growth.
- [19:48]
Joe Terranova
See what's important to understand.
- [19:50]
Frank Holland
But wait, really, I want to go back to Joe's point for a second. If we see the bond market seem to move higher, do you expect to see that influence the administration's policies when it comes to trade? Treasury Secretary Scott Besson was on Meet the Press yesterday with some very tough talk about tariffs.
- [20:03]
Steve Weiss
That's, that's why the foot is in the bond market on April 9 when the President said has time to buy. It's because he has spoken to the Treasury Secretary and yields are moving higher and saying, Mr. President, we need to address something very clearly. The put is in the bond market. So I don't know what in fact they're able to do, but they're going to have to do something to get yields lower because it's critical in the equation of the totality of the economy participating here. Not just the high end, but the lower end Main Street America that needs to access private sector borrowing costs. They're too high and that means Fed's policy is way too restrictive. And the Fed doesn't have an inclination right now to move out of that restrictive territory.
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Frank Holland
One other thing, obviously we've seen, you know, yields move higher on the downgrade. But one of the things I think that the bond market might be reacting to are best his comments, he said that countries that aren't negotiating in what they call good faith, we see their tariff levels go back to that April 2nd level. I think that's something the market's very concerned about and the idea that maybe these negotiations aren't going as well as we've heard from some people. Based on Besson's comments, he said some countries essentially are not negotiating in good faith. And I think that might be another concern.
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Joe Terranova
Let's ignore what what's being said. Right. And let's look at the facts because if you take what's being said at face value, we would have had 20 deals announced last week. Right. And.
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Frank Holland
Well, that's what I'm saying. Right.
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Joe Terranova
I know, I know. That's why I'm saying there's no credibility of what they say. So I do believe that they're finding it tough or they're being surprised by the timing on negotiating trade deals, which I don't get because they typically take years to negotiate. So the Fed's in a very tough place because companies just aren't going to cut labor. We've talked about that before. The cost of hiring labor is just too daunting. Still keep it. So they go to the other part of the mandate. The mandate is that so you won't see lower unemployment measurably. The other part mandate is inflation. There is inflation coming, you know, the tariffs even as Jamie Dimon said, I.
- [22:04]
Frank Holland
Think maybe that's what bond investors are saying we're seeing.
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Joe Terranova
Absolutely.
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Frank Holland
It's we're going to have to switch gears. By the way, this might have been the longest segment on bonds, on halftime in history. It was quite a lot of talk about bonds. We're going to switch gears a bit now. Turning to tech. We're watching shares of video right now. You're looking at those. They're up just fractionally right now. Nvidia CEO Jensen Huang speaking overnight in Asia. Christina Parts novelist joins us with much more on that. Christina Frank, there were two really major announcements at Computex, their next generation Blackwell Ultra chip. This would be the B300 and this is an architecture that Jensen Huang did say is going to be on track to ship in Q3. And the second thing, they're opening their data center platform to chip rivals, which is really a shift acknowledging the growing in house chip development by tech giants like AWS and Microsoft. And so what's this product, the NVLink Fusion, which allows customers to integrate their own Central processing unit CPUs into Nvidia's ecosystem for the first time. And that's moving away from a completely closed system approach. Marvell MediaTek, Qualcomm, where some of the Partners listed competitor Broadcom though AMD intel notably missing from that. This though opens up the system and could unlock significant revenue growth for Nvidia. But Wedbush analyst Matt Bryson questions whether it would really grow market share share given limited demand for third party CPUs like Qualcomm and the fact that Hyperscaler's preference is for internal network products. So in response to all this though, Qualcomm CEO told CNBC this morning that the company will soon launch a new data center CPU specifically designed to work with Nvidia's GPUs and software, though without revealing when Nvidia also opening up another office in Taiwan and building a supercomputer. Notably missing from the Computech speech was the anticipated AIPC chip to rival intel and other CPUs. Nvidia shares though up well now they're slightly down on a even more down day. Keep in mind Nvidia shares surged 16% just last week as momentum traders really piled in after all of those Middle east deals. So keep it starting at a high point. Frank. Christina Parts and novelist live for the Nasdaq. Christina, thank you very much. Everybody here owns Nvidia. Snipe, I'm going to start with you. What do you make of this news? What do you make of the chip trade right now after a huge week last week, some some deals in Saudi Arabia and over in the Middle East. And then we see Jensen Huang do a keynote talking about investing in Taiwan and also some pretty notable partnerships with Foxconn and also Taiwan. Semi.
- [24:24]
Jason Snipe
Yeah, no, I think as it relates to even last week the momentum with obviously what happened with the Middle east and all the investments there and I just think about the AI factory build. Again he mentioned this a couple of weeks ago in terms of what the Capex potentially will be $1 trillion over the next few years. You know, so again, you know I say this a lot, but this they are absolutely in the beltway, you know, for all the Capex building and the need and demand for their chips. So it's interesting to see this kind of open source model now where other players are allowed to kind of participate and work with them. I think that will actually continue. We'll see continued momentum and upside for Nvidia as a result of some of these partnership deals. So I like this, I like this opportunity for them.
- [25:05]
Frank Holland
All right, Weiss, by the way, Joe, I'm going to get to you in a second. Weiss, by the way, one of some of the momentum for Nvidia has been the White House saying they're going to ease those export controls on shipping chips to China. At the same time we see Jensen Huang making investments in Taiwan. Now during the trip to the Middle east, the president essentially slapped Tim Cook's hand for not being there. Jensen Wong was there with him and then he left and announced an investment in Taiwan where this administration is trying very hard to move chip production from. Any concerns about that when it comes to the stock regulation. Anything else when it comes to Nvidia?
- [25:35]
Joe Terranova
No, none. I think that they're also going to make investments in creating chips just for China that will be passable for the US Government. So if it is doing exactly what they should be doing, they're hedging their bets away from the US which by the way, is what our trading partners are doing. So the downside of that I think is obvious in terms of the U.S. but to me, the big issues with within video, it's not a big issue where I get in comfortable as it reaches the old high because things couldn't be better at that point in time than when they reached the old high roughly around 150. So for me it's, it's a decent sized trading position. I'm most likely to get out before earnings for no other reason. I've got enough tech exposure. I might take the risk and something I'm not committed to.
- [26:24]
Steve Weiss
18,000 chips going to Abu Dhabi data centered Middle east last week really highlighting demand is coming from other places around the world. This, this is a man who is leading this company who is speaking with a lot of confidence in the last several days ahead of next week's earnings report. I think a lot of positive momentum has been restored once again in video and in the entire semiconductor industry itself. And I also think we mentioned at the top of the show always look at positioning. You're now rebuilding positioning in semis. A lot of people move to the sidelines in semis. You're rebuilding semis. I would be very surprised that after next week we were in talking about Nvidia with a stock price that's higher than where it is.
- [27:07]
Joe Terranova
I think the important thing to take away from that is Jensen Huang doesn't seem to have any concerns about the threat from China to either do a massive blockade around Taiwan or to take over Taiwan in 2027.
- [27:21]
Steve Weiss
And he doesn't care about the bond market either.
- [27:23]
Frank Holland
Apparently Nvidia shares down about a quarter of a percent. We're going when you get to a very quick committee move, Bill Baruch, he just bought Edwards Life Sciences. He joins us now. Bill what's going on? What made you do this?
- [27:34]
Jason Snipe
By underway health care and we take a step back. We look at what's performed in the last couple of weeks. It's been the semis, it's been some of the discretionary but health care certainly has it and you take a step back to look at what's holding it down. Names like United Health Care that fallout some of the fears around biotech and again we're underweight with only this gets us to about a six and a half percent position in health care. What we like about Edwards Life Sciences is it's a multi year compounder. This thing was 10x from 2013 to 2021 and it's really become going to sleep since I think we could see a sleeping giant awaken if you will. The multiple has come down significantly still with a forward at 30, you're paying for this growth. They've done a lot of acquisitions and the market was really telling you enough of these acquisitions. The thing here that's important too is I think that they are going to start to see integration of artificial intelligence and some of the innovation that they have sort of come to fruition but with increasing free cash flow. So that's what we really like here. There's some resistance above from its July fallout of 2024 but if this thing gets above 95 bucks or so it could really start to run and that compounding will happen again.
- [28:45]
Frank Holland
So Bill, really quick question. By the way. This is a heart valve company. They make heart valves. That's kind of their main business in earnings a couple of weeks ago or a couple of days ago I should say they maintained their guidance but they only had an estimate of a 5 to 10 cent negative impact on full year EPS. They also based that on a 10% tariff. It doesn't seem like a 10% tariff is going to be the baseline when it comes to tariffs. Concerned about that?
- [29:07]
Jason Snipe
You're not really concerned about that. I think overall I think the health care space has from a flow standpoint has has been sort of on the back burner and I think we'll start to see flows into health care and that's going to be a beneficiary could offset some of the negativity around a 10% tariff. But what we're really focusing on too is that free cash flow and I don't think in the elevation over the quarters to come in that free cash flow I don't think will be impacted too much by the 10% tariff.
- [29:33]
Frank Holland
If that's low ball Bill, Baruch buying Edwards Life Science is great to see you, Bill. Thank you very much. All right, coming up next on halftime, President Trump taking on Wal Mart. What do you have to say about potential price hikes at the country's largest retailers? We have a shareholder right here on the desk. We're gonna get their reaction. Halftime. Back in two minutes. Psoriatic arthritis symptoms can be unpredictable.
- [29:57]
Joe Terranova
I had joint pain and I couldn't move like I used to.
- [30:01]
Jason Snipe
I needed relief.
- [30:03]
Frank Holland
I got Cosentyx.
- [30:05]
Joe Terranova
It helped me move better.
- [30:08]
Frank Holland
Cosentyx Secukenumab is prescribed for people 2 years of age and older with active psoriatic arthritis. Don't use if you're allergic to Cosentyx before starting, get checked for tuberculosis. An increased risk of infections and lowered ability to fight them may occur. Like tuberculosis or other serious bacterial, fungal or viral infections, some were fatal. Tell your doctor if you have an infection or symptoms like fevers, sweats, chills, muscle aches or cough had a vaccine or planned to, or if inflammatory bowel disease symptoms develop or worsen serious allergic reactions and severe eczema like skin reactions may occur. Learn more at 1-844-COSENTIX or cosentix.com Ask.
- [30:49]
Jason Snipe
Your rheumatologist about Cosentix.
- [30:54]
Frank Holland
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 at discover.com creditcard Based on the February 2024 Nelson Report as a salesperson, the search for the right buyer or buying groups can feel like you're endlessly sifting through leads and hoping they're ready to buy. Thankfully, LinkedIn Sales Navigator is more than just a tool, it's your strategic sales partner. LinkedIn Sales Navigator is a sales intelligence platform that helps professional effectively prospect and engage high value customers, drive higher revenue and increase sales performance. Sales Navigator helps you target the right buyers, surface key signals such as job changes or which accounts you should prioritize, and shows you hidden allies so you can find those buyers that are most likely to convert. Whether you're looking for new clients or strengthening relationships of current accounts, LinkedIn Sales Navigator has new AI features designed to help sellers find the right people and get right to the right conversations, all at scale. Fueled by LinkedIn's 1 billion-member platform sales navigator gives you the most up to date first party data enabling you to unlock conversations with the people that matter. Ready to get right to the right conversations? Try LinkedIn Sales Navigator now with a 60 day free trial at LinkedIn.com Halftime Report. That's LinkedIn.com Halftime Report for a 60 day free trial. Terms and conditions apply. We're back on Halftime Report. Hello everybody. I'm Contessa Brewer in with your CNBC news update. Former President Joe Biden thanked Americans this morning for their love and support following the announcement Sunday he has an aggressive form of prostate cancer. The former president's personal office said that cancer has spread to bones and added that the president and his family are reviewing treatment options with Biden's doctors. Dawn Richard is back on the stand today in the sex trafficking trial of Sean Diddy Combs. She's a former member of the music moguls girl group Danity Kane. She testified this morning that Combs threatened to kill her if she told anyone that she saw him beat longtime girlfriend Cassie Ventura. And the president and CEO of CBS News is stepping down. In a memo to staff today, Wendy McMahon says it's clear she and the network did not agree on the path forward. Her words. McMahon's exit follows last month's departure of 60 Minutes executive producer Bill Owens. CBS faces a $20 billion lawsuit from President Trump and its parent company Paramount Global is trying to get federal approval for an $8 billion merger with Skydance. Frank, send it back to you, Contessa Brewer live back at CNBC hq. Contessa, thank you very much. Turn our attention out of reach retail. Wal Mart feeling some heat from the White House. President Trump posting on social media over the weekend that the retailer should stop blaming tariffs as the reason for rising prices, adding it should, quote, eat the tariffs. Joe, you own Wal Mart and the Joe T ETF do.
- [34:08]
Steve Weiss
Wal Mart's going to continue to move higher. I think that's what the viewers need to focus on. Stock will reclaim $100. It hasn't been there since February. The last earnings report was very strong. The spending, spending has been the concern. That was the concern in the quarter that was reported in February. It was elevated spending. Why are they doing that? They're focusing on growing their market share in East Cop E Commerce. And this earnings report is providing the evidence that in fact that reality is presenting itself. They have proven in the past that they can capture market share when they want to utilize the weapon of scale. They've done it in grocery items Expect they'll be fine in E Commerce. As it relates to the rhetoric back and forth with the administration surrounding raising prices, not raising prices. I think Wal Mart will be smart enough to know if they are going to raise prices. They're going to raise prices on the non necessities, on the things that are discretionary, on the things that are bigot bigger ticket purchase items, not on the staples levels that the everyday consumer needs. I would expect and they've, they've indicated that in the past. I would expect that will be their mannerism to manage the inventory.
- [35:21]
Frank Holland
As we wanted some other retailers reporting. Lowe's reporting this week. Snipe you on that one.
- [35:26]
Jason Snipe
Yeah, so I mean you know as it relates to kind of the earnings, you know revenue is expected to be down, you know around 2%. EPS is down, expected to be down around 5%. We're expecting around $2.89 cents of earnings, you know and $20 billion of revenue. I think my concern here, you know not to bring up the whole yield story again but the 10 year is obviously the proxy for mortgage rates and that for me is mobility. So when people are not moving around because rates are higher than they need to be, you know that that serves as an overhang for stocks like this. So what I do believe though Marvin is doing a good job, there is room for margin improvement. They have been steadily growing that and I think think they continue to hit on the pro segment and taking market share from Home Depot. So I like that stock for this reason.
- [36:09]
Frank Holland
Uncle Marvel, Marvin Ellison on a first name basis that's good to know. By the way, 30 year fix right now above 7% certainly something that weighs on the business there. Low shares up fractionally right now. All right, coming up next, how investors can get an edge or a hedge by using ALTS ETFs. Our Dominic Chu is here to break it all down in today's ETF Edge coming up next. 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. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying, no judgments. But that's weird. Okay, one judgment anyway. Give it a try@mintmobile.com Switch upfront payment of $45 for 3 month plan equivalent to $15 per month required intro rate first 3 months only, then full price plan options available, taxes and fees extra. See full terms@mintmobile.com and we're back on Halftime now to Dominic Chu with today's ETF edge. Dom.
- [37:35]
Steve Weiss
All right.
- [37:35]
Frank Holland
Good afternoon, Frank.
- [37:36]
Steve Weiss
So if we talk about the ETF edge side of things, we have continued market uncertainty.
- [37:43]
Frank Holland
One of the biggest new trends in the business has been the packaging up of hedge funds. Hedge fund style strategies in an ETF wrapper. So joining us now is Paisley Nardini.
- [37:53]
Steve Weiss
Managing director and portfolio manager at Simplify ETFs. And Paisley, one of the interesting things that I'm curious about is just how much more demand, how much more popular have these types of alternatives based ETF strategies become?
- [38:09]
Jason Snipe
Yeah.
- [38:09]
Frank Holland
Well, thanks for having me, Dominic. Happy to be here. I would say a big catalyst for the interest and adoption of a lot of these alternative ETFs. Mutual fund strategies on the market is really what we SAW started in mid 2022 with the increase in interest rates. And I think we're dealing with that exact same theme today, almost two years later from when the Fed first started to raise rates is are bonds providing that ballast in a portfolio? Are they offsetting your equity risk? And as we've seen all of the volatility year to date and really the return of diversification, I would say diversification is absolutely back in the portfolio. And so using alternative sources of risk and return to help hedge against that equity drawdown risk and really protect when bonds are just adding more volatility to the portfolio.
- [38:53]
Steve Weiss
All right.
- [38:53]
Frank Holland
So Paisley, the other question I have.
- [38:55]
Steve Weiss
Now is where do you think a lot of the demand is coming from with regard to these types of products? Is it from individuals, high net worth, ultra high net worth, family offices, pension funds?
- [39:05]
Jason Snipe
Where?
- [39:05]
Frank Holland
Exactly what's driving the demand there? I would say all of the above. Every week we're having conversations with all of those allocators that you just spoke to. And I think a lot of this was maybe born out of the retail investor space with some of the inverse ETFs or the highly levered ETFs. And that's not really what we're talking about here. We're talking about institutional caliber strategies, strategies that have historically been in those sovereign wealth funds in those institutional pension portfolios and now are available in ETF wrappers. And so as a result we're seeing very sophisticated RIAs, high net worth advisor firms, platforms offering these strategies as another way to build kind of a more robust portfolio for these allocators. So really all of the above. And again, this is truly an institutional type strategy that's being brought to investors. And historically those long short strategies, absolute return focused strategies is really what's in question here.
- [40:00]
Steve Weiss
All right.
- [40:00]
Frank Holland
It's a fascinating discussion. Paisley, Dardini at Simplify, thank you very much for that. We've, by the way, got lots more coming up on the recent explosion of these new ETF products that's going to.
- [40:10]
Steve Weiss
Come up at 1:15pm Eastern Time. Just go to cnbc.com etfedge Paisley will be joined by financial futurist Dave Nadig. So we'll keep an eye on that. I'll send things Frank back over to you guys.
- [40:22]
Jason Snipe
All right.
- [40:22]
Frank Holland
Thanks a lot. Our Dom Chu with today's ETF Edge. Coming up, our calls of the day, a big downgrade for one stock that's been on an absolute tear this year. We're going to give you the name and the trade coming up next. Stay with us. More halftime coming up. Welcome back to AFTER report. We're going to look at Netflix downgraded to neutral at JP Morgan. The stock had been hitting all time highs. Jason and Weiss, you both own it. Jason, going to come over to you. Analysts saying gains harder to come by after the recent run.
- [41:02]
Jason Snipe
Yeah, listen, I mean they've been hitting on all cylinders clearly. I mean the stock's up 32% year to date with all the kind of concerns on the macro kind of coming into the year. I think what's been cool about Netflix is number one, the optionality.
- [41:13]
Frank Holland
Right.
- [41:13]
Jason Snipe
So there's trade down. You can go from the top tier to that supported tier and there's almost a difference of $20. Right. So I think that's, that's been a huge winner for them. Obviously they had a really good quarter, 25% EPS growth, 12% revenue growth. They're no longer talking about the subs or reporting the sub additions. So for me this is a, this is a reasonable call with the run that they've had. There are obviously other streamers. Disney had a pretty solid quarter and I think folks are kind of looking to them now for some accumulation. But I continue to like this name going forward.
- [41:44]
Frank Holland
Why is your one as well?
- [41:46]
Joe Terranova
Yeah, and it's my largest position which I'm going to cut back at some point because it's just too big. But look, it's been a safe harbor in the storm. We've seen the equity market so while the other tech stocks trading down was actually moving the other way. And that's because you know it will do well in a not as well as doing because people are loath to spend money in a recession, but it'll do well in a recession and also do well in the growth economy. So you typically don't see that. You see more of a double edged sword. But look, there's no reason. It's not terribly expensive, it's not cheap, but it's a unique asset and a pure asset in terms of streaming.
- [42:27]
Steve Weiss
Maintain your positioning here. This is not the type of stock you get out of. We have a nice recovery intraday from the news earlier in the day of what we don't want to discuss anymore. The Dow is now higher. Spotify is at an all time high as we're speaking. Microsoft is pushing towards that 468 level. All time high. Net is higher. Amazon is higher. This is the type of environment where if you own a stock like Net Netflix, you stay anchored to that ride the winning trade.
- [42:55]
Joe Terranova
And to be clear, it will still be a core position, perhaps my largest core position. But yeah, you know, when it dipped I bought quite a bit and it's uncomfortably large.
- [43:04]
Frank Holland
And for not even with the JP Morgan downgrade cow and actually raised their price target on Netflix going from 1150 up to 1325. So also some bullish sentiment when it comes to the name as well. All right, coming up next, Mike Santoli joins us with his MIDDAY Word. We are back right after this break. And we are back on that time. You can see the Dow moving in a positive territory. Senior markets commentator Mike Santoli joins us now with his midday Word. Mike, you've often been on this desk saying that bond yields don't directly impact the equity market. I've heard you say say something just to that effect. I don't want to mischaracterize what you're saying, but we're kind of seeing that relationship today inverse.
- [44:13]
Steve Weiss
What I'm saying is that the bond market is there's not some magic level.
- [44:17]
Frank Holland
Of treasury yields that basically completely determines what happens with stocks going up or down. Also, there's not a certain class of.
- [44:24]
Steve Weiss
Stocks that are magically more sensitive to bond yields than others.
- [44:28]
Frank Holland
But I do think right now, given.
- [44:30]
Steve Weiss
The fact that the debt downgrade for the US could have really scratched attached at this raw nerve, that the market has had for a while, which is our bond yields going to get unanchored? Are we going to actually finally have a little bit of a tantrum about the fiscal situation? And the answer is not yet, if at all.
- [44:47]
Frank Holland
So I do think that the fact.
- [44:48]
Steve Weiss
That the bond market is pretty calm here, we obeyed last week's highs in yield. People bought Treasuries at those levels again meant that you have this just persistent.
- [44:57]
Frank Holland
Bid in equities at activated.
- [45:00]
Steve Weiss
Again, this has been the pattern for weeks right now even a heavy open gets bought and all it does to me is tell you exactly how underexposed.
- [45:09]
Frank Holland
To equities lots of big institutions became and they just have to top it up every time they get a chance.
- [45:14]
Steve Weiss
That's, that's the story that is the message of today is the, the clear responsiveness and resiliency of the equities market. We're going to go positive as we're speaking speaking 7 of 11 sectors are higher on the day. And it's kind of like, okay, the bond market is letting the equity market do what it needs to do to your point, which is rebuild the positioning which doesn't match how fast the price and at some point they fill up the tank again and they don't need to buy anymore. And maybe something comes along that disturbs the, you know, the big setup. But right now that's, that's what's at work today.
- [45:50]
Frank Holland
So, so I think you have to.
- [45:51]
Steve Weiss
Be mindful of that. Be mindful of some of the retail.
- [45:54]
Frank Holland
Trading activity that started to get a.
- [45:55]
Steve Weiss
Little frothy by the way.
- [45:56]
Frank Holland
It's pulling back today.
- [45:57]
Steve Weiss
Palantir down, Tesla down. All of those tells of kind of the public investor excitement are cooling off.
- [46:04]
Frank Holland
A little bit here. The important volatility still pretty low right now. Look at the still pretty much in the normal range as the markets kind of ease towards positive territory. At least the Dow does, right? Mike Santoli with his midday word. Mike, thank you very much. All right. Coming up here on halftime, we got your final trade. Stay with us. Much more coming up right after this break. You saw out there the S P just getting into the green. And we are back on halftime with final trades. Jason, you are first.
- [46:39]
Jason Snipe
I like Qualcomm here. I like this new deal with the Nvidia to build CPU chips. I think this is an opportunity. Welcome.
- [46:45]
Frank Holland
Steve weiss, I am going with as.
- [46:47]
Joe Terranova
You can see there, ibit, I think the momentum continues particularly as we are closer to regulation as Trump family gets more steeped into the crypto business.
- [46:57]
Frank Holland
Joti thinking about all time highs.
- [46:59]
Steve Weiss
Absolutely. Momentum is such a powerful force. We're seeing it on display today. I said all of last week and others have said as well, I think we're now near term, we're making a run at all time highs. Stocks that are making all time highs, you want to stay with those. A great example of that is what we're seeing today in TJX. Look at the 11s and P sectors, see the strength there, find the winners and continue to own them.
- [47:22]
Frank Holland
Yeah, a lot to watch there. That's going to do it for Halftime Report, the exchange starting right now. Have a great day. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC. 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 today Investor Dan Niles his take on the recent.
- [48:24]
Steve Weiss
Rally, Time to buy in market outlook.
- [48:27]
Frank Holland
And time Top picks for investors right now John Ford, Morgan Brennan, closing bell overtime 4 Eastern and streaming on CNBC Plus.