Trading the Stock Surge 5/12/25

Summary

Halftime Report: Trading the Stock Surge (5/12/25) – Detailed Summary

Release Date: May 12, 2025

Hosts and Guests:

• Scott Wapner – CNBC Host
• Joe Terranova – Investment Committee Member
• Stephanie Link – Investment Expert
• Jim Lebenthal – Investment Specialist

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1. Market Overview

The episode kicks off with a discussion on the current surge in US equities, attributing the rise primarily to the 90-day tariff rollback with China. The panel highlights that this development has restored attractiveness to US stocks, countering recent bearish sentiments and recession fears that intensified since early April.

Notable Quote:

• "We are surging today. We know that on this rollback of the tariffs for 90 days. We'll meet again in a few weeks." — Scott Wapner [00:54]

2. Tariff Rollback and Its Impact

The temporary suspension of tariffs has significantly alleviated trade tensions between the US and China, fostering a more favorable trading environment. This pause has not only relieved immediate supply chain concerns but also redirected investor focus towards other critical areas such as tax legislation and deregulation.

Notable Quote:

• "The 90 day pause, what does that do? It now puts front and center the tax bill." — Stephanie Link [02:04]

3. Investor Sentiment vs. Market Momentum

Despite the robust market momentum, investor sentiment remains cautiously negative. The panel discusses a disparity between strong market performance and lukewarm investor confidence, suggesting that continued momentum may necessitate a recalibration of sentiment.

Notable Quote:

• "The momentum does not match sentiment because I don't think sentiment is as bullish or nearly as bullish that it needs to be given how strong that momentum is." — Stephanie Link [02:04]

4. Sector and Stock Highlights

Technology Sector:

• Amazon and Meta (formerly Facebook) are spotlighted for their strong earnings and growth potential despite recent downturns.
• Netflix and Spotify experienced declines without fundamental reasons, indicating a possible market rotation.

Retail and Consumer Staples:

• Gap, Target, and Best Buy showed significant gains, reflecting investor optimism in the retail sector post-tariff adjustments.
• Gold and Safe-Haven Assets: Gold prices fell sharply following the tariff pause, challenging its status as a safe-haven trade.

Notable Quotes:

• "If momentum stays as strong as it does, you have to have a recalibration on that Sentiment." — Stephanie Link [02:04]
• "The easy money has probably already been made." — Joe Terranova [04:37]

5. Federal Policies: Tax Cuts and Deregulation

The administration is expected to emphasize tax cuts and deregulation as part of its economic strategy. The panel anticipates that forthcoming discussions and legislative actions in these areas will play a pivotal role in shaping market trends.

Notable Quote:

• "You're going to hear the president, I'm sure, talk over and over and over now about tax cuts and deregulation." — Joe Terranova [04:03]

6. Economic Indicators: Inflation and Fed Policies

Economic indicators remain a focal point, with inflation rates showing progress. The Atlanta Fed tracker indicated a 2.3% inflation rate for Q2, suggesting continued improvement. However, concerns about interest rates and yield movements persist, potentially impacting consumer behavior and investment strategies.

Notable Quotes:

• "The Atlanta Fed tracker that we watch all the time, 2.3% for the second quarter. Inflation. We get big readings this week." — Scott Wapner [04:24]
• "Real interest rates are decidedly positive right now." — Stephanie Link [25:41]

7. Discussion on Gold and Safe-Haven Assets

The panel delves into the decline in gold prices following the tariff rollback, questioning whether gold still serves as a reliable safe-haven asset in the current economic climate. They explore the factors influencing gold's performance and its future trajectory.

Notable Quote:

• "Today, it is sharply lower. So what happens now?" — Joe Terranova [35:23]

8. Technology Sector: Apple, Amazon, Meta

Apple:

• Discussions revolve around Apple's potential price increases for iPhones, reflecting inflationary pressures and supply chain challenges.
• Concerns are raised about the reliance on China for production, despite statements from the administration about increasing domestic manufacturing.

Amazon and Meta:

• Both companies have experienced significant stock declines from their highs but maintain strong fundamentals, presenting buying opportunities for investors.

Notable Quotes:

• "They have pricing power... they haven't raised since 2017." — Stephanie Link [18:06]
• "Amazon is trading at 23 times forward estimates." — Scott Wapner [12:16]

9. Banking Sector: JP Morgan, Bank of America, Wells Fargo

The panel discusses the potential for major banks like JP Morgan to reach a $1 trillion market cap, citing their strategic acquisitions and efficiency gains. Wells Fargo is highlighted for its turnaround strategies, including a new $40 billion buyback program.

Notable Quotes:

• "We think JP Morgan could become the first trillion dollar market cap bank." — Stephanie Link [31:33]
• "Wells Fargo has a catalyst, the asset cap is going to get lower." — Scott Wapner [32:15]

10. Executive Order on Drug Prices

President Trump signed an executive order aimed at reducing drug prices by negotiating directly with pharmaceutical companies. The initiative seeks to align US drug prices with those of other developed nations, challenging the pharmaceutical industry's significant lobbying influence.

Notable Quotes:

• "President Trump put his executive order on drug prices in the context of his global trade war." — Eamon Javors [40:01]
• "The drug industry largely accepted that framing as Pharma CEO Steven Ubel said..." — Stephanie Link [40:26]

11. AI Investment Trends: Perplexity and Its Valuation

AI startup Perplexity is in the midst of a mega funding round, valuing the company at approximately $14 billion, up from its previous valuation of $9 billion. This reflects the investor frenzy and confidence in AI technologies disrupting traditional search engines like Google.

Notable Quotes:

• "Perplexity is now in the midst of raising another mega funding round. This is going to value the company at about $14 billion." — Stephanie Link [28:27]
• "As the models seem to be coming a little bit more commoditized, investors are saying they have a ton of confidence." — Scott Wapner [30:34]

12. Conclusions and Future Outlook

The panel concludes with an optimistic outlook for the S&P 500, anticipating it to surpass previous highs driven by reduced tariff pressures, strong earnings, and strategic sector rotations. However, they caution about potential challenges related to yields and inflation, emphasizing the need for vigilance as economic conditions evolve.

Notable Quotes:

• "I think we are going to get a new high this year on the S&P500." — Stephanie Link [12:38]
• "I think the market's going to keep going higher." — Scott Wapner [05:42]

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Key Takeaways:

• Tariff Rollback: The temporary suspension of US-China tariffs has reinvigorated the US stock market, making equities more attractive to investors.
• Investor Sentiment: Despite strong market performance, investor confidence remains subdued, presenting opportunities as momentum continues.
• Sector Rotation: Significant movements in technology, retail, and banking sectors indicate a strategic rotation driven by changing economic policies and market dynamics.
• Economic Indicators: Inflation is on a decline, but interest rates and yields remain critical factors to monitor.
• AI and Technology Investments: High valuations in AI startups like Perplexity signal strong investor belief in the disruptive potential of AI technologies.
• Regulatory Impact: Executive actions on drug pricing and international trade policies are poised to have substantial effects on respective industries.

This comprehensive analysis offers valuable insights into the current state of the market, strategic investment opportunities, and the overarching economic landscape shaping investor behaviors.

Transcript

[Scott Wapner]

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.

[Joe Terranova]

As America's leading.

[Stephanie Link]

Business lender, bank of America is on your corner and in your corner.

[Joe Terranova]

With $215 billion in business loans and over 3,700 business specialists across the nation.

[Stephanie Link]

We help businesses thrive so communities prosper.

[Scott Wapner]

What would you like the power to do? Learn [e-mail] LOCALBUSINESS bank of America Official.

[Joe Terranova]

Bank of FIFA Club World Cup 2025 Copyright 2025, bank of America Corporation. All rights reserved. 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. Thank you very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, surging stocks on the terr tariff pause with China. We are trading the markets today with the investment committee. As always. Joining me for the hour, Joe Terranova, Stephanie Link, Jim Lebenthal. We are surging today. We know that on this rollback of the tariffs for 90 days. We'll meet again in a few weeks. We say, and UBS today says US equities are once again attractive. You could have seen that coming, Joe. You had so many firms come out, cut their price targets, cut their view of US Equities. We have had recession fears ratchet up in the last handful of weeks, ever since April 2nd. Is that all now done? Are we, are we finished with all the fears?

[Stephanie Link]

I think people are going to come on the network today and try and present these various analogies to the environment. I'll just say this one word, mercurial. I've been using it all along, and that's the nature of what it is. Now, let's talk specifically about what the market is expressing and the market is expressing. That momentum is remarkably strong and the momentum does not match sentiment because I don't think sentiment is as bullish or nearly as bullish that it needs to be given how strong that momentum is. I think what we're seeing is the potential that if momentum stays as strong as it does, you have to have a recalibration on that Sentiment. And I think that really puts in perspective the opportunity for the S and P in the near term to trade back above 6,000. The 90 day pause, what does that do? It now puts front and center the tax bill. While we're sitting and waiting over the next 90 days to see what ultimately the deal could look like, you're going to hear a lot about the tax bill. The question lastly becomes does the personality of the market change as we approach 6,000 in the S and P? If you look at the tape today, the suggestion is yes, it will. Look at Netflix, look at Spotify. They're both down 3% with literally no fundamental reason why other than it appears as though we're seeing a little bit of a rotation within the market.

[Joe Terranova]

A massive relief rally on many fronts. Staff. But I ask you the same question. So does this mean that we're out of the woods, that we no longer have to worry about the worst case scenarios? Empty shelves. Right. That became untenable for the administration. You're not going to have a situation where consumers are going to go to the store and find empty shelves because no ships are coming from China. They know that. And that had been ratcheted up as well. So we get this pause and now we can, as Joe said, focus on the other things. You're going to hear the president, I'm sure, talk over and over and over now about tax cuts and deregulation.

[Scott Wapner]

Yeah, that's, that's true. But Joe makes a really good point about sentiment. It is still quite negative. Right? There was not a lot of people buying in February and March. And you know, I went from 9% cash in February and I'm at 2% right now. That's hard to do. But the sentiment was so incredibly negative. You would have thought by now, given the rally that we've had, that sentiment is better.

[Joe Terranova]

It's not give people a chance to like get through 24 hours since we found out about.

[Scott Wapner]

You do that, you're going to miss. You're going to miss the easy money. To be honest with easy to.

[Joe Terranova]

Well, the easy money has probably already been made.

[Scott Wapner]

That's what I'm people like you who.

[Joe Terranova]

Were not afraid to wade into a very shark infested sea.

[Scott Wapner]

It was hard, was very, very hard. But I still think that there is room for catch up. So we're not out of the woods, but there's room for catch up as that sentiment does change. And by the way, the economy throughout this whole thing has hung in there pretty well. You know, the Atlanta Fed tracker that we watch all the time, 2.3% for the second quarter. Inflation. We get big readings this week. I think you're going to continue to see progress on inflation. You just mentioned tax cuts, deregulation that has yet to really develop. So yeah, I mean, at the end of the day, all I care about really is what happens to earnings. Entering earnings just grew 13% in the face of all this stuff. So I do think that earnings are going to continue to do better and the valuations are pretty reasonable in future. The especially in some of the cyclical parts of the economy because everybody flocked to health care and staples and you have to make money elsewhere in my mind, if you think the economy is going to stay okay.

[Joe Terranova]

I'm wondering about that now. It's like gold's getting crushed today, right? The most safe of safety trades, at least as it was viewed in the environment. Gold getting crushed, as you might expect. China stocks are all up. Staples and utilities, to Steph's point are lower. Like is the defensive trade over? Need to start thinking about that. Stocks with China exposure, look what they're doing. You can roll through them. Nike, Caterpillar, Starbucks, throw up any stock that has huge global, especially China exposure. And that is what the chart looks like today. So now the goal posts have widened again, right. We started to get in a situation where you were closing in. It was really hard to get that ball kicked through because you're worried about how long are these tariffs going to be on? Are we going to go into a recession? Has too much damage already been done? The Fed's no longer, you know, ready, willing and able to cut yet. Now this deal just says, okay here, you can kick it, kick it into the ocean.

[Stephanie Link]

Now I think that's a great analogy. I mean, we were just a couple of weeks ago we were worried that the Fed chairman was going to be fired. You didn't mention that in the long list of things. But you know, since then we've, we've seen some more rational responses, or at least the market believes their rational responses from the administration to what the markets have been telling it. And Joe, I think your word mercurial is very good. Steph, great calls into this discussion about cyclical versus defensive. I'm positioned in the market with cyclical, so I'm enjoying something like a Disney rising today or a Wynn Resorts or whatever it is. But I think there's one bigger point that I would want to make to everyone, which is this, and I've said it many times, I don't know, mean to Be, you know, in any way condescending or arrogant, but please don't time the market. Please don't time the market. You're seeing evidence again today. It wasn't like we didn't know there was going to be a meeting in Switzerland over the weekend. What do we think was going to happen that was going to get worse? How much worse was going to get? We're going to go to tariffs of 245%. Let me put the sarcasm away for a second and back up what I'm saying with data. I had my colleague Joe go back to the beginning of 2022, which was the last really bad period of time. Time. Since that time, the s and P500 is up 25%. 25% cumulative. If you missed the best day, which happens to be April 9th of this year, the pause day, that return goes down to 14 and a half percent. Guess what if in that two and a half years that if you just stayed invested, you would have made 25%. If you missed the three best days, your cumulative return goes to 4.8%. Sure, but don't do it.

[Joe Terranova]

I know, but this seemed like a fairly unprecedented, unprecedented situation that many investors found themselves in with thinking, well, okay, it's like a self inflicted wound that we've suffered right from our bottom lines because of the policy. And then you're like, well, are they really going to take it to the depths? Are they really going to push the economy into recession?

[Stephanie Link]

I was there with you, brother. I felt it too. I really did.

[Joe Terranova]

Those moments, investors had no choice but to react to what in their minds might have been the worst case scenario. Wow. They seem intent on wrecking it.

[Stephanie Link]

For now, I'm going to, I'm going to say on message your point is absolutely true. Of course it's absolutely true. I was there. We were all worried. We're like, what the heck is going on? What is the plan here? And honestly, I really at one point did think maybe he just wants to wreck the economy just to wreck it. I mean there was, there were questions like that. The point that I'm trying to make is every crisis has, has its own unique flavor. Every crisis, I don't care whether it's Covid, the Great financial crisis 911 history stays true to this pattern that if you try to time the markets, you are more likely to get caught off sides when the market rallies. I'm sure we know there are some people who are excellent market timers out there. I am telling you, they are so infinitesimally small Compared to the rest of us, that. My advice, and I back it up with the numbers that I gave you, is don't try to do it.

[Joe Terranova]

So what do I do then? Do I do I lead the mega caps, Right. Tech and the NASDAQ's leading today, up three and a half percent, right? More than 600 points on the NAS. You look across the board, big caps, chip, software, whatever, all having a great day. Mega caps since the April 8 closing low, right? It's a little more than a month.

[Stephanie Link]

Yes.

[Joe Terranova]

Tesla's up 42%, Microsoft up 24. Apple 21. Nvidia 2026, Metta 22, Amazon 22. And Alphabet has its own issues and that's why it's only up 8. But does this clear the way now for these stocks to resume their leadership role in this market?

[Stephanie Link]

I don't know if it clears the way for them to have leadership on a sustainable basis, but in the near term, I think yes, you're going to see the recovery and I think the reasoning for that, again, it goes back to positioning, it goes back to sentiment. It doesn't align. You're seeing the areas of the market that have been underappreciated the last several weeks which are recovering the most. How about this trade? Less than a truckload. JB Hunt, can we pull up that chart if we could? How about xp? Oh, can we pull up that chart? How about Old Dominion? These stocks are all rallying aggressively. Why?

[Joe Terranova]

Why be driving with empty MD18 wheelers?

[Stephanie Link]

But that was. That was the perception. That was the belief, right?

[Joe Terranova]

Well, that was the reality until this.

[Stephanie Link]

Weekend was the reality. Now we have to unwork some of that. And I think, to your point, right, sentiment doesn't change that quickly. Sentiment on Friday believed that these three companies were going to face a very challenging economic climate. Now here we are on Monday, right? Things have changed dramatically. So I think the opportunity is there for the underappreciated areas of the market to recover over the next month or so as the market continues to march higher. And I think the market's going to keep going higher.

[Scott Wapner]

I think you want to focus on earnings, Scott. Right. Because I think Amazon and Metta both had the best of the Mag 7 in terms of earnings and it wasn't appreciated when they reported more. So Amazon went down after they reported. When they beat, they gave conservative guidance, but their operating margins grew. Their retail business continues to gain share. And so to me, I was adding to both of those names. I'm not sure if Mag7 is the leading group going Forward. But I think those two will catch up because the fundamentals are still so incredibly strong even in a challenging environment. So can you imagine as we do see a recovery and the economy continues to chug along and the consumer doesn't die, that people will go back and look at Amazon, by the way, Amazon is still down 14% from its highs and Metta also is down quite a bit from its high. So I think that there are areas within tech that you can actually add.

[Joe Terranova]

About the same amount that is 15% off its high.

[Scott Wapner]

Same with, yeah, Amazon, but that's still down a lot. My point being, you know, I mean, Amazon is trading at 23 times forward estimates. Matter is trading at 17 times forward estimates. And you have margin expansion as well as top line growth. That is a wonderful combination. And when you look at the valuations, I still think you can add to them.

[Joe Terranova]

We think in that we're now we have a shot at taking out the.

[Stephanie Link]

Old highs on the S and P. I definitely do. Now this, that's my, my definite attitude is predicated on one belief that has to come true. All right, the reciprocal tariffs that are on pause until whenever it is July 9, you're only 6.

[Joe Terranova]

You're only 6% off that number, by the way, on the S and P, five and a half and a half percent off the, off the high.

[Stephanie Link]

But I want to be clear, you can't have those, you cannot have those reciprocal tariffs come back into place. They're simply too punitive to global trade. And if they do come back into place, then, you know, all bets are frankly off. By the way, between now and the beginning of July, there probably will be a moment or two where we feel like, hey, maybe these trade deals aren't going to come through. But ultimately what this administration is saying is that they have a goal. It's to get more external sources of revenue with which to fund the government. And they're saying they're not going to crater the economy or the financial markets to get it. That, that to me says we are going to get a new high this year on the s and P500.

[Joe Terranova]

I'm thinking not just this year, but sooner rather than later as a result of this, this change.

[Stephanie Link]

I'm with you. I think if you look and see what's in front of us right now, I think there's a very clear path. I think people are going to try and fight this move higher. I think there's a, in particular people that are bearish. I don't think we're going back down to 4800. I think the call for 4000, I think those are unrealistic. I think we've reset the conversation back towards consensus at the beginning of the year surrounding tariffs.

[Scott Wapner]

Right.

[Stephanie Link]

The 30% number was really the consensus on what people believed the tariff would be for China. So we've kind of recalibrated back to there. And I think, to your point, Scott, I think what's in front of us over the next 30 to 45 days looks pretty good. The Runway looks pretty clear. And I'd be surprised if we don't take a run towards new highs, because.

[Joe Terranova]

Now you look at any economic data point that comes out and you're like, oh, well, that was pre rollback day, right? You start marking these moments in time and maybe you don't get the transformation from the soft data, which has been undeniably weak and weakening, and it doesn't show up in the hard data because you have a change in sentiment that maybe is better late than never. Speaking of, you had the sentiments high at the White House, obviously, today. The president speaking numerous times publicly earlier today, he said he spoke with Apple CEO Tim Cook earlier this morning. And that comes on the heels of a Wall Street Journal report about iPhone prices. Steve Kobach, what do we know about this conversation that the president and Tim Cook had?

[Stephanie Link]

First and foremost, yes, we know what the Trump side of the conversation was, or at least what he says it was. Again, he, he said he talked to Tim Cook after that retraction of those 90 of the tariffs on China from over the weekend and also just again touted that investment. Apple is already committed to that $500 billion over the next four years. Just a little wiggle room here, though, about what he also said. He said he thinks that Tim Cook is going to up that $500 billion investment and build a lot more factories here in the United States. I'll just point out Apple has not said anything about that. For there is one thing they did say they were going to build, and those are AI servers that are going to be built at this new facility in Houston. But every time we hear Trump or members of his administration Talk about building iPhone factories here or other product factories here, that has not come to fruition. Apple has not said anything about that. In fact, they've said the opposite, that they are focusing so much of their production to get around these tariffs on India and Vietnam. So a little bit of pushback there. And I also note that, you know, Trump has been saying this for years, including in his first term, that Apple Plans to build factories here and then those factories never actually materialize. So that's what's going on there. I would also note that on the tariff front for Apple, nothing has changed since over the weekend because it already got those exemptions about a month ago from those Liberation day tariffs, still subject to the fentanyl tariffs of 20% out there in China, but not the Liberation day tariffs. So as far as the tariff picture for Apple, looking forward, it's the same as it was when we were talking here last week. Now let's go to this Wall Street Journal report about iPhone price increases. And I'll also point out this may or may not be a tariff thing. Of course they would need to raise prices if these tariffs do continue just because of the reliance on China. But at the same time, Apple has not raised prices on the regular base iPhone in five years, since 2020. So it is kind of due for a price increase. As far as the pro line of iPhones or the pro line equivalent of iPhones, that's been at $999 starting price since 2017. So you can kind of argue, Scott, that they are due for a price increase, especially among these slagging shells. Look at this chart that I'm showing you right now about how sales are like down to flat basically over the last several years coming out of COVID there just hasn't been that big boost in iPhone sales that so many people have been hoping for. The miss was part of that, of course. But raising prices, getting the average selling price of each phone to increase by 100 or 200 bucks, that could help turn around that revenue picture. We're looking at iPhones so we'll see what they say at that iPhone17 event coming up where you expect it to happen September.

[Joe Terranova]

Scott, Good stuff, Steve. Thank you. Steve Kovac with a look at Apple, all things Apple today. What's more in the price action today, the story about iPhone prices because maybe they do have pricing power, especially about the, the subsidies or the rollback of the tariffs. Or is it a choice? See all the above.

[Scott Wapner]

It's a hard, I think totally rollback.

[Stephanie Link]

Yeah, absolutely. I think it's. But I think also too, it is a little bit hybrid. I think it's the expectation that they can and should, in my opinion, they should raise prices. It's the Netflix model, it's the Chipotle model. They have pricing power. I don't think people are going to flinch at all if they actually go and raise the price. In particular on the high end, which Steve Pointed out they haven't raised since 2017. So they have pricing power in that regard, for sure. And that product, when you think about it, ultimately it really is a consumer staple more than anything else. What are you going to do if they raise the price from 999 to 1199? You're not going to use your iPhone, but you need.

[Scott Wapner]

Their supply chains are still predominantly in China. They can say India and Vietnam all they want, but they can't do it fast enough. And 20% of the revenue, 20% of iPhone revenues come from China.

[Stephanie Link]

Right, but hasn't he already told US that's what, $900 million?

[Joe Terranova]

Yeah, but you need to have the content too, to be able to raise your price. Like Netflix has pricing power because they've got the content that people are willing to pay for and the prices can go up and people are going to continue to pay for it. Here we are having a, having a conversation about Apple potentially raising the price prices of its iPhone at a time when we've deemed their AI offerings to be subpar. So get one to match the other. You tell me you're going to have the best AI features available. Well, I might be willing to pay more for your highest end phone, not the other way around.

[Stephanie Link]

I think today's price action is less about the pricing, although it matters. And it's more if you had any China basket that you built, any long China, you know, short China. Apple was either long or short in that basket. I mean it, it absolutely pertains to China, the move today as well as by the way, I've said this all along, passive ETFs have massive holdings in Apple. So markets get money into them, goes to Apple.

[Joe Terranova]

Chips are up today. Obviously they've been right in the tariff storm. The eye of it, you look across the board. If you pull up the SMH, you want to just do it that way. Up 17% in a month. So it's come off the worst levels there. It is up six and a third percent today. Steph, you bought more Broadcom today.

[Scott Wapner]

I've been buying it for the last two months. Right. And the stock has, is still down 14% from its highs. It went from 14 times forward estimates five years ago to 36 times. It's now at 30 times. It's still expensive, but I like what they've done in terms of the diversification to their revenue mix. AI is 30% of their revenue mix, software is 40% of their revenue mix. That's a great combination. And oh, by the way, they just announced a $10 billion new buyback product program. It's not huge but it's actually an endorsement that they feel good about their business. And with the Stock down still 14% from its highs, I still think there's an opportunity there.

[Joe Terranova]

CNBC Pro looked at you know, non mag 7 names or they looked at names with the most China revenue exposure that could win if a long term deal between the two countries is reached. I'm talking X Mag 7. Broadcom's on that list as you'll note as is LVS, Las Vegas Sands, Qualcomm, KLA, Tencor, Jimmy's win, Intel, Corning, Aptiv, Teradyne.

[Stephanie Link]

Jim, look, I mean this is clearly it's not just the numbers of where the tariffs went to. There was verbiage going into it and coming out of it that both sides want to not delink, not decouple. That's very important that these economies want to work together. That means that there will be be cross border flows, albeit we don't know where the tariffs are going to be. There's a lot of negotiation left to be done. But you know, if we get down to 30% or less on China, I think that you'll see plenty of cross border flows that's going to inure to the benefit of a Qualcomm or a KLA or any of the chip manufacturing companies. You know WIN I think has been undervalued overall. Steph, you're in your Las Vegas sands. We have the same play going there but with wind there's four far more than just China. There's Macao, there's Las Vegas but it has been held back by China fears and now with China, hopefully this will help China's economy get on its feet and that can promote more traffic to Macao. At the end of April for the very first time since inception of the ETF we sold out of KLA Corp. Remember what we're doing is a reflection of price momentum. So if you look at all these semi equipment names, the technical formation looks awful. Klaus A Corp, Lam Research, Applied Materials. The fundamentals though of these businesses now that you get the rollback, that's why these companies are up 8, 9%. So listen, I'm telling you based on what I see in the momentum strategy. We spoke about positioning before. The positioning has probably been reduced to its lowest level since 2020. There's a lot of room to rebuild. Positioning in three names which are very very good quality companies.

[Joe Terranova]

Big day for retail as well as you might expect. RH is up 17 remember that stock got absolutely destroyed in the earliest days of the the whole tariff issue. Best buy up 10, five below up 11. These are all percentages that I'm giving. Stephanie Link Gap set up seven targets up even though it got a downgrade to a sell today. I guess you would expect these kinds of gains out of the discretionary space.

[Scott Wapner]

I mean Gap just got destroyed because 27% of their supply chains are Vietnam. So now if that gets resolved, that's obviously positive for Gap and others and you're seeing that today. But the stock still trades at 11 times forward estimates it yields about 3%. I like the turnaround story with the CEO. He's been there about a year and a half. Zach Posen is their creative director. That's good. So they've got a lot of momentum. They've been gaining market share. They're getting back to people basics at Gap. So to me I like that name a lot. Target. I think that's a silly downgrade. I mean the stock, my goodness, is down 38% in the past year. Where were they? So I've been suffering with it. But that stock to me seems like it's awfully cheap at 11 times forward estimates as well. And I think they are trying, they're also trying to get back to basics. I mean 50% of their business is discretionary. And we know that people haven't been buying a lot of discretionary. So I think they are going to fix, they'll get their margins back in order. That to me is a better buy than a sell.

[Joe Terranova]

It's all about the, excuse me, the no recession trade today when it comes to retail, Walmart, Costco, down the names we talked about up the airlines, the hotels, the booking, the casinos, the go out and spend money rather than hoard it or just get by with whatever you got. Because we don't know where any of this is going. Right.

[Stephanie Link]

23 minutes into the show I'm going to maybe present the fly in the ointment and that's yields. And where do yields go from here? Because remember I'm sitting with a TLT position which is not doing so well today as a 10 year is approaching 450. So the administration does not want yields to continue to spiral out of control. I'm not necessarily sure how they're going to be able to contain that. You and Jeffrey Gundlach had a great conversation about that last week. But what is actually going to be be the mechanism in which they bring yields down that could be the one challenge to the consumer. Well, if we continue to see yields move higher.

[Joe Terranova]

Also the narrative around yields tell me yields are going up because now we have the no recession trade on. Don't tell me yields are going up because you have money flying out of the U.S. right.

[Stephanie Link]

Exactly.

[Joe Terranova]

That. That dominated the narrative. Right. The anti US Exceptionalism trade dollar is, you know, crashing. You got yields rising because all this money's coming out. And now you can maybe take that off the table in its entirety. Looking yields going up and say, oh well, right. Reason.

[Stephanie Link]

Plus the other side of the equation, which is inflation. We'll see what inflation comes in at the CPI tomorrow, but it's projected on the headline to be 2.3 and core 2.8%. I've been a believer that this. You want to go ahead.

[Joe Terranova]

No, I was going to say the Fed now. Right. If you look at the cut all the all this plays into the yield story. September now leading the way where it was in the early summer.

[Stephanie Link]

Real interest rates are decidedly positive right now. The Fed feels that they are restrictive. There is room for interest rates to come down as long as inflation doesn't come out of control. We'll see if these tariffs get rolled back so we don't have to worry about coming up.

[Joe Terranova]

We do our call of the day. Noted analyst Mike Mayo says one big bank could be the first in that group to hit the trillion dollar club. We'll tell you what it is. We'll trade it. Plus Stephanie Link making a move in that space as well. We'll do all of that next.

[Scott Wapner]

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[Stephanie Link]

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[Scott Wapner]

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[Joe Terranova]

We're back and we have a news alert with Kate Rooney. What are we learning here?

[Stephanie Link]

Kate?

[Scott Wapner]

Hey Scott. We are learning that AI startup Perplexity is now in the midst of of raising another mega funding round. This is going to value the company at about $14 billion. This is according to a source familiar with that financing who asked not to be named because these details are confidential at this point. No comment from Perplexity and that person telling me it's a $500 million funding round that's going to put the company's price tag, as I mentioned, at least on paper, at 14 billion. Those numbers could change as these details are finalized in private markets. The round is being led by Excel from what I'm hearing. Excel Ventures and Wall Street Journal did first report this news earlier in the morning. It is a sign of all of the investor frenzy we're hearing around as some of the appetite to invest even at some of these higher price tags. The valuation, if you look at the last one for Perplexity, was closer to $9 billion. It does also underline this investor confidence, the potential for AI to disrupt Google and the entire search business. We're hearing a lot more of that. Google, of course, facing its own antitrust headwinds. Perplexity specializes in AI search. It does compete with OpenAI and Anthropic in some other areas. But that is the latest. Scott, back over to you.

[Joe Terranova]

And advertising too, right? I mean they have big plans on that angle as well. And yet another reason why we saw Alphabet shares do what they did last week, recovering a little bit today, but that remains sort of out there in the zeitgeist. Of how investors are thinking about things.

[Scott Wapner]

Yes, absolutely, Scott. So another way to monetize these. So in the early days of perplexity, some of these others were sort of called, you know, an AI wrapper. This is not one of the large language model companies. They were sort of built on top of other models. And so that was sort of a knock if you look at a year ago. But at this point, as the models seem to be coming a little bit more commoditized, investors are saying they have a ton of confidence. There's advertising, there's also just the consumer behavior that seems to be changing. More people are moving to AI Search. You also heard Eddie Q out of Apple. You know, perplexity was one of the names mentioned is, hey, we might look at an open air perplexity as people start to get more familiar and just go to AI instead of Google. So. Absolutely. The latest sign of a threat to Google and ads also a big part of that.

[Joe Terranova]

All right, good stuff. Thank you. That's Kate Rooney for us, our call of the day. We referenced it in our tease. It's Mike Mayo today saying JP Morgan could become the first trillion dollar market cap bank if it continues with its leading returns, efficiency and market share gains over the next three years. Joe, you got that one.

[Stephanie Link]

Over the next three years I could see that possibly happening. Talking about A company above 700 billion in market cap and they've just taken advantage of scale. I often cite what they did in March of 2023 and that was the moment that I personally took a position in JP Morgan. The ETF owns it now currently, but it was because of their flexibility, their ability to use their balance sheet. And do what? Go out and acquire at the assets related to First Republic. And we knew at the time that that ultimately was going to be beneficial to JP Morgan. So they've managed the scale opportunity better than anyone. They are clearly the leader. When you think about money center banking, that does not mean that there are not others out there that you can invest in. You can.

[Joe Terranova]

You're only saying that because Stephanie Link is buying more Wells Fargo. Trying to be nice.

[Stephanie Link]

Yeah, Trying to be nice a little bit.

[Joe Terranova]

Sky rolls, right?

[Stephanie Link]

No, but there are others that I think you can own.

[Joe Terranova]

You're, you're telling. So you're telling me that there are other banks. Yes. Besides J.P. morgan that you can invest in. You felt like you needed to qualify that, that statement.

[Stephanie Link]

Yes. And I think bank of America is one of those names. And one of the reasons why I believe that is because if you look at the ability for Morgan Stanley to realize the value in their franchise. I think bank of America at some point will understand they have a jewel there, and the jewel is Merrill lynch. And they will be able to realize the value of Merrill Lynch. And I think that'll take bank of America higher.

[Joe Terranova]

Okay, thank you, Steph.

[Scott Wapner]

Okay.

[Joe Terranova]

I knew exactly what was going.

[Scott Wapner]

I mean, Jay Gordon's great company, it just trades very richly, in my opinion, over two times book. It should, because they deliver. However, Wells Fargo at one point, four times book, they have a catalyst, the asset cap is going to get lower, lifted. That will be accretive to earnings and lending. And I also think the new $40 billion buyback speaks to a lot of confidence that the company has in terms of a the asset cap getting lifted shortly, but also the internal changes that they're doing, the productivity enhancements, the focus on credit cards, the focus on wealth management, market share and all that. So I like that story. It has a little bit more shorter term, I think, catalysts than JP Morgan does.

[Joe Terranova]

Speaking of getting lifted, do we get the cloud lifted? The clouds, plural, lifted, over private equity. Start thinking about realizations. Maybe the market moving in a way where it was paralyzed. Jim, you have Blackstone, but we do have ownership of Apollo, kkr. Those stocks are all up nicely today. You take a look there.

[Stephanie Link]

I think it may take a little more time, but it should happen. I mean, one of the things that I'd like to see is the Fed start to lower interest rates. That will help quite a bit. You know, we're now talking about maybe that, that September that they start, but that's not far away. And yes, to the extent that the trade uncertainty goes down and companies are willing to get back on the balls of their feet, there's no question that companies have been pausing in everything, whether it's capex, whether strategic acquisition, whether it's new finances, new business lines to go in. So as this trade policy uncertainty comes down, companies should rotate back to the balls of their feet, and that should include private equity acquisitions as well.

[Joe Terranova]

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

[Scott Wapner]

Hey, Scott. Good afternoon. The last American Israeli hostage who was held in Gaza has been released by.

[Stephanie Link]

Hamas, the militant group.

[Scott Wapner]

Confirming Idan Alexander's release was a move to help, quote, achieve a cease fire. The Israeli military says Alexander has been turned over to Red Cross representatives and that they are on their way toward the idf. Alexander was taken from his military base.

[Stephanie Link]

In southern Israel when Hamas mosque launched.

[Scott Wapner]

Its surprise attack on Israel in October 2023. President Trump said today he's considering removing.

[Stephanie Link]

U.S. sanctions on Syria.

[Scott Wapner]

He added that the sanctions do not.

[Stephanie Link]

Give Syria a fresh start.

[Scott Wapner]

The sanctions were put in place on former dictator Bashar al Assad's reign during the country's civil war. Assad's regime collapsed in December after he fled Syria in the face of a sudden advance by rebel forces. And the jury has been selected and opening statements are underway in Music Mobile.

[Stephanie Link]

Sean Diddy Combs sex trafficking and racketeering trial.

[Scott Wapner]

The jury is made up of eight.

[Stephanie Link]

Men and four women.

[Scott Wapner]

In their opening statements, prosecutors said Combs used his fame and wealth to abuse women. Combs has pleaded not guilty. Scott, back to you.

[Joe Terranova]

Okay, Silvana. Thanks, Silvana. Now up next, trade on gold following a tariff pause with China 2. I told you, it is sharply lower. So what happens now? ETF Edge tackles that next.

[Stephanie Link]

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[Joe Terranova]

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[Joe Terranova]

All right, we're back. Let's send it to Frank Holland. Now, who has today's ETF edge on what happens with this gold trade. From here, Frank Scott, we're going to.

[Stephanie Link]

Dig into that and much more so as we've been reporting, the US And China agreeing to temporary tariff cuts. That appears to be the groundwork for a more comprehensive trade deal. But where does that leave two of the big themes in ETF investing this year, international and gold. Joining us now is David Scheisler, head of multiasset solutions at Vaneck. David, thank you for joining ETF Edge. Thank you for having me. So David, previously with US Markets underperforming, we've seen international markets attracting some outsized attention.

[Scott Wapner]

Is that trend now over or are.

[Stephanie Link]

There still compelling opportunities for investors who believe there could be more volatility here in the US you previously mentioned an opportunity in India. Yeah. So big picture, we don't think the opportunity is over at all. Let's jump around a couple different things because they're all interrelated, starting with gold. This is the biggest bull market that most people have ever experienced in their lifetime in gold challenged only by the 1970s. So we're certainly in a great environment for gold decentral assets, assets outside the United States. That's how it all ties in together. So if we break that down a little bit further, our price target on Gold is $5,000. So we think we end up getting there. I couldn't imagine a better environment. So huge debt, persistent overspending, perpetually elevated inflation, geopolitical chaos, all that pushes towards de dollarization, decentralized assets, all that puts out bit underneath gold. US Centric investors are best suited diversifying internationally. A lot of the same theme there, valuation support. First off, the United States, US Markets not properly pricing in a recession. In our opinion, we think there's better values overseas. Alternatively in the yes. In a less US Centric world, we think that these countries are going to have to stand on their own two feet from fiscal monetary support. Another reason to look into diversify internationally. All right, David Shastra, thanks for that insight. When we're talking about gold, looking at gold right now down about 3%, the question now is is there still a way to go before all the details get hammered out and how should ETF investors, how should they position? We're going to talk a lot more about that with David Schassler, head of multi Asset Solutions at Vaneck, along with Todd Rosenbluth, head of research at Vetify. We're going to get into all of it. Just go to etfedge.com on cnbc.com, we're going to talk all about it at 1:10pm Scott, going back over to you.

[Joe Terranova]

All right, Frank, thank you. That's Frank Holland. Up next, we'll find out how the committee is playing the pharma trade. The president taking aim today at drug prices. Stephanie Link a few moves in that space as well to tell you about document all that next. Welcome back. Pharma stocks in focus big time Today, the president signing an executive order aiming to slash drug prices. Eamon Javors live at the White House with the very latest today. Eamon. Hey there, Scott.

[Stephanie Link]

President Trump put his executive order on drug prices in the context of his global trade war, arguing that European governments have been taking advantage of Americans for decades. The president said his goal is to get Europe to pay more even as the US Pays less for the same drugs. Basically what we're doing is equalizing. There's a new word that I came up with which I think is probably the best word. We're going to equalize.

[Joe Terranova]

We're all going to pay the same.

[Stephanie Link]

We're going to pay what Europe's going to pay. And the drug industry largely accepted that framing as Pharma CEO Steven Ubel issued a statement saying in part to lower costs for Americans, we need to address the real reasons US Prices are higher, foreign countries not paying their fair share and middlemen driving up prices for US Patients. So this is a change that previous presidents and Congresses have been unable to accomplish, largely due to the pharmaceutical industry's enormous lobbying power in Washington. The drug industry is far and away the biggest spender on lobbying, outpacing even such well heeled industries as tech and finance, as you can see there, insurance, oil and gas as well. The executive order the president signed sets up a negotiation period with industry after which the president said the US Government will simply set the prices for the drugs that the US Buys based on the lower prices paid by other developed nations. But expect the drug industry's lawyers and lobbyists to deploy some of that firepower on the implementation phase of this. SCOTT so this one is not done yet.

[Joe Terranova]

Okay, Eamonn, thank you. EAMON javers, North Lawn of the White House staff, I see some moves. Did you sell Lilly because of this?

[Scott Wapner]

No, no, no, no. I sold Lilly because I like intuitive surgical better. They had a better quarter. They raised their procedure volumes in the quarter. They de risk the gross margins and OPEX is coming down. I just think that there is a huge total addressable market for where they are at. LILLY I made a little bit of money. It's just expensive, but I still like it very much. I think if it were to pull back and get to more reasonable valuation, I might Buy it back. But this had no, no, this has had nothing with to do do with today's news.

[Joe Terranova]

It's up three and a third today. So obviously the market's not, not concerned in any way Joe, about this.

[Stephanie Link]

We own Lilly, we own Intuitive Surgical, both those names in the etf. I really think the news today most affects the pharmacy benefit managers. Look at CVS down significantly, signed down significantly, McKesson down Quest diagnostics, UNH is down. Yeah. But recently we I had a personal position cvs, which I sold. I think that's the area that you have to look at most and say to yourself, okay, I want to try and avoid it. You've got some other pharmacy names like Merck is up 5% today. So most of the pharma names are up, which is surprising. But you just put your finger on it. The pharmacy benefits managers are down. I mean that's the market saying that's where they think the squeeze is going to come in. And it makes sense. The middleman.

[Joe Terranova]

So the middle guy.

[Scott Wapner]

Yeah.

[Joe Terranova]

All right, programming note for you. Our friends at Fast Money are holding a little get together on June 5th at the NASDAQ. You can grab a front row seat and watch that show live. To order a ticket, you can scan the QR code on your screen right now or you can go to cnbc events.com fastmoney and we hope you do. Up next, Santoli. He joins us with his midday word. Senior markets commentator Mike Santoli is here with his midday word. It's pretty obvious I guess today but really how are you thinking about the move today in context of where we were and what what happens next?

[Stephanie Link]

We will were at this perfect even footing at the April 2nd levels. We spent all week there last week in terms of the S&P 500 in terms of the volatility index, in terms of credit spreads. It's as if we round tripped and said okay, does that make sense? Are we going to get incremental relaxation of the pressure on the economy or not? So whatever you thought about recession risk on Friday at 145% tariffs on China or 80 that you might have thought it's got to be lower at 30. I mean I think that's pretty linear. If you thought The S&P 500 was going to get smacked down by the 200 day moving average, well, it didn't happen today. You've kind of crossed above it. It's definitely one of the quieter, nearly 3% gains I've seen in a long time. We just kind of popped higher yeah, you mean the ETF volumes are not very strong. It's like 75% upside volume. That's fine, but it's not like. And the reason for that is we came up so much off the low.

[Scott Wapner]

Right.

[Stephanie Link]

You've already gotten long enough people forced in. No doubt about it. A lot of the hiding places getting exposed. Netflix is down today.

[Joe Terranova]

Gold.

[Stephanie Link]

I looked at gold, of course, big one. I looked at the top 20 losers in the S&P 500 just today. 16 of the 20 are up double digits year to date. So it's just rotating out of the safe winners, so to speak, and into other stuff. How far does it get us? That's a good question. From here, think the market's going to get pretty hungry for further incremental progress, substantive progress on the trade front. You know, you're above 21 times earnings again. I think you do get a pass on some of the near term economic data. So that's probably a net positive. But you know, we'll see what, what can carry us from this level, I guess.

[Joe Terranova]

I mean we've taken a lot of the intrigue in the near term out of the equation. Yeah, you've given a 90 day period here to have more conversations. You don't necessarily need anything of great substance in the very near term because we've reduced the level of tariffs so much that it was such a relief to the market that it popped and now it can hold earnings seasons over. The Fed meeting just ended. Yes, you're going to get CPI and you'll get retail. But as you said, and we said at the top of the show now when you get these data points, they almost feel old and irrelevant.

[Stephanie Link]

No, they're a little bit, they're a little bit stale and they're a little bit of a different time is where they're coming from. That's that all is true. I do think though that, you know, you have yields up in oil up, which is fine because they're coming from pretty depressed levels or at least benign levels, you know, 49 on the 30 year get above 5 again. Are we going to start to freak out again? We're going to be blowing out the deficit again. I'm not saying that those are reasons to worry right now.

[Joe Terranova]

Sure.

[Stephanie Link]

But you can imagine a world in which we look for something else to be anxious.

[Joe Terranova]

Of course, you look around, there's nothing really to find. Well, what about these yields? Joe mentioned that a little bit earlier though even the narrative now around that has changed a bit too up for the right reasons.

[Stephanie Link]

Yes.

[Joe Terranova]

Not the non recession trade versus the.

[Stephanie Link]

Net applies trade until some threshold which we're not quite sure about. And we'll see.

[Joe Terranova]

All right, I'll see you on closing bell. That's Mike Santoli, our senior markets commentator. We'll do finals next. All right, 3:00 clock Eastern today on the bell. We could have a very interesting last hour of trade. We'll do that with Liz Ann Saunders, Avery Sheffield, among others. I hope you'll join me then, Farmer Jim, you start us off with your final trade.

[Stephanie Link]

Well, Joe, you could have mentioned Citigroup when we were talking financials. That's okay. I'll take care of it.

[Joe Terranova]

Citigroup, your favorite one in the group. Group up 5%.

[Scott Wapner]

All right, Steph, Truist Financial 0.9 times. Book a 5% dividend yield. I like the turnaround.

[Joe Terranova]

All right, Regional relief today. Amazon.

[Stephanie Link]

Yep, quite a gap higher here in Amazon. I think it's going to benefit significantly from the pause.

[Joe Terranova]

All right, guys, good stuff. Thousand points plus for the Dow. I'll see you on the bell. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern only on CNBC.

[Scott Wapner]

All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal.

[Stephanie Link]

Their parent company or affiliates, and may have been previously disseminated by them on.

[Scott Wapner]

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.

[Stephanie Link]

Expression of an opinion.

[Scott Wapner]

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.

[Stephanie Link]

I'm Cyndi Lauper with fellow Kosentix advocate Chef Michelle Bernstein. We'll share our experiences with plaque psoriasis with psoriatic arthritis and Dr. Panico will.

[Scott Wapner]

Talk about the possible connection.

[Stephanie Link]

Cosentic Secukinumab is prescribed for adults with moderate to severe plaque psoriasis dose and adults with active psoriatic arthritis. 150mg dose. 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 are 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 cosentyx.com cindy.