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Halftime Report
Trading the Tech Bounce 3/19/25
00:42:17
Frank Holland and the Investment Committee debate trading the tech bounce ahead of the crucial Fed decision. CNBC’s Senior Economics Reporter Steve Liesman joins us with what he’s expecting from Fed Chair Jerome Powell. And later, the desk discuss the latest Calls of the Day. Investment Committee Disclosures
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- [00:00]
Bank of America Representative
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- [00:32]
Discover Representative
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- [01:00]
Scott Wapner
I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Welcome to the Halftime Report. I am Frank Holland in for the judge. Scott Wapner front and center this hour playing the tech bounce as we await a critical Fed decision, our investment committee standing by to break the entire thing down. Joining us for the hour we have Jim Leventhal, Sirat Sethi, and Steve Weiss. But first, a very quick check of the markets. Taking a look, you see markets in the green across the board. The dow up about three quarters of 1%, the Nasdaq up nearly 1% as the Nasdaq doing the best up about one and a quarter percent. And that's really where we begin that bounce when it comes to tech. Jim, I'm going to start with you. You're right next to me. A lot of this seems to be off of this Nvidia GTC conference. Even though Nvidia traded lower yesterday, today we're seeing a bit of a rebound. Did you have a takeaway from the conference and why do you think we're seeing this tech bounce today?
- [01:58]
Discover Representative
Well, the unexpected. You know, as expected, it was a positive announcement. And I think what I'm surprised by is the fact that the response is not bigger. It's frankly muted compared to what I expected. And I think that is sort of an omen of what the markets overall are going to be like for the next couple of weeks. I mean, it doesn't matter what in video says we're in this overhang of waiting for April 2nd and tariffs that's going to apply to China even though those tariffs are already in effect. I mean, it just has the overall ring of the trade war which is weighing on stocks like Nvidia. I know we're up today, Frank, but. But we've been down in tech and Nvidia for the last several weeks. And as much as we're up today, it's hard to get really bulled up either on Nvidia or the markets for the short term because we've just got to wait and see what April 2nd brings.
- [02:45]
Scott Wapner
All right, so Jim's in. Wait and see. Surat, where are you at? Do you believe in this bounce, this very short term bounce, just a couple hours into this trading day, in all fairness, the markets have been up about three of the last four days. But we've seen a lot of volatility, a lot of weakness before that.
- [02:58]
Jim Leventhal
Yeah, look, the markets are now down 8%. And so the last four days you had three updates. But I'm with Jim. We're kind of in no man's land because good news is not being rewarded because nobody knows where that news is going to lead. And if you're in video today, yes, the good thing that you heard and the reason you have support for the stock, I would argue, is that they do have a great pipeline going forward now. You just don't know where the earnings are going to be based on all these uncertainties. One is tariffs, but the other one is if you do see top of some slowdown, the big boys are not going to spend as much as they are. So you've got kind of that going as well. And then the other one is here, we're just waiting to hear other news. I mean, you have negative news. You see General Mills today. You see anything negative, you're going to get sold off. And you need positive news just to get so there's no more climbing this wall of worry. It's we're in this place, valuation is a little high. Let's see where we settle up.
- [03:47]
Discover Representative
I just want to make this point really clearly. No man's land is right. I'm not overly negative. I mean, there's a lot of positives. We do still have an economy that's growing.
- [03:54]
Scott Wapner
But isn't being stuck in the middle the worst place to be when it comes to anything in life? Don't you want to actually have a.
- [03:58]
Discover Representative
Position for a couple of weeks? We'll get through it. And look, the thing that I Think about the most is that the banking system is so stable right now. Now hopefully I'm not jinxing it by bringing it up, but I'm part of the Ed Yard Denny School of Economics which says that recessions are really brought, brought about by a banking crisis where lending goes down and companies have to pull in their horns. We're nowhere near that.
- [04:18]
Jim Leventhal
Frank, let me also add something to this. In this volatility that we're seeing, there could be opportunities. If we get a couple of down days, I could see myself putting some more money to work. But you know where we are between 8 to 10%. Yeah, there are some opportunities but you get another quick downdraft like you did this quick really draft that we had.
- [04:35]
Scott Wapner
So I sound like you're talking about an attractive entry point to get bad in the markets. Steve Weiss, I want to bring you into this conversation. I also want to bounce something off of you, a note from UBS when it comes to in video and I think it really kind of applies to a lot of different parts of the tech trade. Analysts say in part recent fears over the structural demand for AI computers created an attractive entry point for Nvidia shares. Near term results may be uneven, but we believe the demand for compute power remains structurally intact and we see Nvidia as well positioned. Some of the commentary here about an attractive entry point, I think that can potentially apply to the rest of the tech tree. But I want to get your take on Nvidia and what we heard from Jensen Wong yesterday and today.
- [05:13]
Steve Weiss
What we heard from Jensen Wong is what we've heard from him in every meeting, whether it's investor meeting or quarterly meeting, etc. Over the last number of years. And he's right that there's insatiable demand for AI and that they are right in the, in the middle of this and it's very good for the company. But that's sort of like the baseline case right now. So we heard nothing new relative to that. So I'm not surprised Nvidia didn't have a major move higher. Keep in mind it bounced over the last days before pretty nicely. So. So I think it acted appropriately as I believe tech appropriately today. I don't believe what you're seeing today is tied to in video, nor do I think the market move in tech is tied to Nvidia. It's tied to that the market was oversold. So it's a continuing bounce off, you know, off the lows. Now having said that, the question is how long will the bounce continue? In fact Will it continue until the close today or reverse as we've seen before? And if you tell me what Trump's tweeting schedule is for the day or as Truth Social is of a better idea on which to base my view. So right now, yes, we are in no man's land. The certainty that I see is, is that we're clear on the uncertainty. So frankly, big rallies are to be sold. I think you'll get a better opportunity to put money into the market. Don't Forget, we have April 2nd coming along. That's going to be a very interesting day that I don't think will necessarily be positive for the market unless Trump, the administration, walks back the tariff stock. And I think that's a long shot bet. So for right now, I'm sticking my tech holdings. I do believe that you can own the permanent compounders such as matter, such as Microsoft, such as Alphabet and the others. And but now's not the time. I really feel that I want to add to those positions.
- [07:10]
Scott Wapner
You know, we have to get back to the idea of big rallies are often sold in this market right now. But we're paraphrasing Jensen Wong quite a bit. Why don't we get to a sound bite, our Jim Cramer actually sitting down with the man himself just a short time ago.
- [07:22]
Discover Representative
We're building AI infrastructure for the world. And it is very clear now that we are about $150 billion of AI infrastructure into a journey of trillions of dollars of infrastructure.
- [07:37]
Surat Sethi
And so we've got, we've got a.
- [07:39]
Scott Wapner
Lot of AI to build. All right, that's trillions with a T. Just to clarify right there, Jensen Huang, bullish, I mean, talking his own book, in all fairness, is his business. Why wouldn't he be bullish about it? But when you're looking at the rest of the tech tree, whether it's chips, whether it's software, whether it's names like Dell that Jim was also talking to while he's out on his west coast swing. That commentary, isn't that commentary very. Also bullish for their business?
- [08:00]
Discover Representative
Well, I think, yes, I think it's bullish for tech overall. And I think you have to add to this discussion the fact that multiples on technology stocks, mega cap technology stocks have come in. So, you know, we're talking about Nvidia with a 26 times forward multiple for earnings per share growth this year. That looks like it's going to be at least 50%. Now, Frank, to what you're saying about talk in your book, and I'm not going to start disparaging Jensen Huang. But I will say I think it's hard for anyone to predict what's going to happen in 2026, 2027 and beyond. But for the near term, the rest of this year, earnings projections like what I just said look pretty solid. And to extend it, as I think you want us to, with the discussion of broader technology, last week I added to Microsoft. Why did I add to Microsoft? I mean, we all know what it does. There's nothing structurally wrong with it, but the stock's down 8% over the last 2012 months. During that time frame, the multiple, forward multiple has come down from 35 to 26. It becomes an attractive entry point. So the point I'm trying to make here is not just what the projections for demand are, but that the multiples on this sector have come in quite a bit.
- [09:04]
Scott Wapner
Jim, you're making a great point. Actually. You know, us and the team, we kind of work this up right here. We're looking at the forward P of Nvidia from the start of the year to right now. Start of the year is about 32 times forward earnings. Right now it's about 25. This according to fact said if you look on the screen, we use a different program for that is at 26 times. But you really get the idea. Valuations have come down. So sir, I want to ask you, I think it is very emblematic of the rest of the tech trade. Valuations have come down a bit. So is this an attractive entry point? Are you worried about what Weiss was talking about? A lot of people are using these rallies to sell.
- [09:31]
Jim Leventhal
Nvidia is my, our largest holder. So I mean, I like the stock, but 25 times earnings today, you just have to be careful going into competition. Kind of the volatility. And I think if you've got new cash, you could look at it today, but you probably get a better chance in the next couple of weeks and then you can add to it. Because I definitely do look to add to it when it comes down. The other thing about Nvidia that's a little different from Microsoft and some of the others is you don't really have that recurring piece of revenue that you do in some of the others. Right. You can afford a higher multiple. And we own Microsoft as well because they do have, you know, sales as a service and other things like that in terms of software. But the price you've got for, for for today is cheap relative to kind of the good growth rate. And I think even if you get to the Midpoint of the growth rate, the stock is cheap. You just have these bumps along the road till April 2 and then the tariff issue as to where we're going to go.
- [10:21]
Scott Wapner
You talk about these bumps along the road, but I mean a couple of things remain true. You know the quote unquote moat when it comes to Nvidia. I think they have 80% of the chip market and then is there anybody else that has a full stack software hardware combination?
- [10:33]
Jim Leventhal
No, look, they are definitely the leader and they showed yesterday that they are ahead in terms of their technology. What I'm talking about is the fear of double ordering the amount of that matter. Google, everybody has ordered the fear that some of the demand from overseas slows down because as soon as that happens then you see a multiple expand really quickly because the E comes down. I'm not saying that's going to happen, but I just want to talk to you about what are some of the other sides that it's just not bull, bull, bull on one side.
- [10:58]
Scott Wapner
All right, Weiss, I want to come over to you before we get off this tech conversation. You brought up Metta. I think it's important to note that Meta turned negative for the year. Was the last of the Max 7 stocks to actually turn negative. Wells Fargo's Chris Harvey out with a note saying basically he believes the sell off when it comes to max7 names. It might be kind of coming to an end very soon with the rebalancing of the Russell and some other rebalancing. Do you agree with that? Is a lot of the pain that we've seen when it comes to these MAG7 stocks. Is it close to an end in your mind? Specifically, Specifically matter?
- [11:25]
Steve Weiss
Yeah, I do believe it's close. I believe it's. And again this is just a reference to this and how they're going to perform versus the market. So it's not necessarily an absolute comment on the performance of the Max 7 because I think everyone's vulnerable here. But there has been massive selling. The multiples have reset dramatically. And I do think there's a danger in the danger now is taking the inflated multiples that we seen such as in video 32 times. I'm not saying they don't deserve it, but taking those inflated multiples at a moment in time and regarding that as the norm where whereas it's not the case. So we saw multiples on matter on Microsoft and others that we typically don't see. So I do think it's the end. We're not getting any lift. Maybe today in Microsoft for example, for their transition to 200. So right now everybody's on 10. They sent out notices, we're going to stop supporting 10. So you have to upgrade to 11, particularly businesses. So that'll be countercyclical. So I think there's a lot that's good about these companies. I think for the most part they're not, as you know, prone to two negative, two to negative impact on their financials from tariffs and from some of the other stuff that's going on. I mean matter, their real exposure to tariffs is based on building out their data centers. So, so I like matter here. I think it's very, you know, fairly priced. But again, to, to Surrott's point, it's where do you get want to get in? Because your point of entry defines your return and I believe that you'll get a better chance to add to this. I'm not looking for significant downside in max 7. Coming back to your original question and then think and believe actually they might at some point outperform the rest of the market in not the too distant future.
- [13:21]
Scott Wapner
All right, important to know, Metta actually one of the few tech names right now, actually lower, fractionally lower right now. I want to move on. We get the Fed's next rate decision and an updated economic forecast that comes up later today at 2:00pm our senior economics reporter Steve Liesman. He joins us now with more and what to expect. Steve?
- [13:38]
Steve Liesman
Yeah, Frank, I think what we're looking for is the Fed to perhaps mark down somewhat its growth outlook, mark up somewhat its inflation outlook, with an interesting question about what they do with the rate outlook. They had two rate cuts penciled in at the last meeting and this is the first time they get a chance to weigh in since President Trump was elected and put forth his rather extensive agenda that looks for deep cuts in federal spending, immigration policy as well as tariffs. So that's really the question here is how do they weigh in? How much do they think all of this changes the macroeconomic outlook?
- [14:16]
Steve Weiss
Frank?
- [14:17]
Scott Wapner
Yes, Steve, so a lot of questions about that, what you just described right there, lowering their growth forecasts, raising their inflation expectations, isn't that what the market and really everybody in the economy is kind of worried about a potential move towards stagflation.
- [14:30]
Steve Liesman
I think that's right. That's something that has increasingly been priced into the market certainly talked about. And yesterday as I reported, the UCLA Anderson forecast said, look, if all of these things happen, it's going to be a recession. And the question is the extent to which all of these policies constitute a shock to the market and how business can adapt to it. So there's a awful lot of lack of clarity here. Anderson has invested never issued a recession watch ever since 1952. So it's an interesting move by them. I'm hearing a lot more talk about it, Frank. I don't think that's where the Fed is. And I just to be clear, all of the things that the Business Cycle Dating Committee at the NBER looks at, none of those indicators are near recession. Essentially, a recession call right now is on the come. If you ever play craps, that is Frank. And the issue here is, is that you have a higher but still low recession probability. You have some softness in the consumer. But the indicators that are looked at by the Business Cycle Dating committee, they're not near recession levels at this moment.
- [15:34]
Scott Wapner
You know, Steve, I don't gamble. We're going to add gambling to fly fishing and playing the guitar to your hobbies. I'm personally not a gambler at all. But I do want to correct you. It's very rare I get a chance to correct you. This isn't the first chance that Jay Powell has had to address some of Trump's policies and trade policies in tariffs. It's the first time we're actually expecting it. So I want to ask you, you're saying that none of the indicators are indicating recession, but we're hearing a lot from businesses. We're hearing from Delta Airlines, Kohl's. There's an economic slowdown. I've talked to some of the CEOs that were actually at the business roundtable and a lot of them went there just to kind of voice their concerns, not only to the president, but other members of the administration. How do those real time data points come into play when it comes from business leaders? Because you got to remember the federal districts, they also have their own advisory panels which where they're here for business leaders. And I would imagine they're hearing the same things about consumer slowdown, hesitancy to make business decisions, etc.
- [16:24]
Steve Liesman
So Frank, I'm making a distinction here that's very important for policymakers, for economists and I think the markets, you can have a slowdown and that's not a recession. A recession is a very distinct economic condition where the economy reverses its normal proclivity to increase and grow economies grow. If you don't screw them up and you don't have either shocks or poor policies, you can have a slowdown inside that growth. That's not a recession or a contraction and in fact, for business, it's less of a big deal. Businesses are used to business cycles. What they have to think more carefully about to be much more prepared for is an actual recession where the pie ends up shrinking. And that's really what my thinking is about a slowdown. You know, I think the guys on the table, they would say, hey, I can deal with a slowdown. Tell me it's a recession. And it's probably a different order of magnitude, a different set of decision making decisions that would be made.
- [17:23]
Scott Wapner
You know, Steve, to your point, if you look at GDP now from the Atlanta Fed a couple of weeks ago they had first quarter GDP down 2.8%. It's been revised to down 1.8%. So a bit more optimism, upward revision there. I think we got to leave the conversation there.
- [17:38]
Steve Liesman
Steve, I know you real quick throw that out. Don't, don't follow that. I say we take that off the screen. That is not where the street is. That is not the expectation. Most on the street, one and one and a half percent. There's a peculiarity in the Atlanta Fed numbers that they even acknowledge, by the way, I've been talking about this for a couple of years. In this case, it's a shipment of gold into the United States states that ended up depressing the trade numbers. Throw that number out the streets between one and one and a half. Bright side is to.
- [18:07]
Scott Wapner
All right, Steve Leeson, we got the conversation there. You will be in the room when Jay Powell speaks. We'll be looking forward to his commentary and your questions. Senior economics reporter Steve Liesman. You have a great day. I think Steve kind of put out some thoughts. We want to bounce over to you guys. Are you worried that this slowdown could accelerate into a recession? How big is a slow slowdown to you when you're looking at your portfolio, the stocks you want to invest in?
- [18:29]
Discover Representative
Yeah. So right now I don't believe that this is going to be more than a slowdown. I mean a slowdown is clearly happening. There is a hesitation. You can take a look at Delta or anyone else, there's a hesitation that is being acknowledged. Does that turn into a recession is the big question. I think Steve just did a good job of vigorously pushing back on the Atlanta Fed. And I want to say this really for the benefit of everybody who's watching because people get caught up in this. Oh my God, the Atlanta Fed is down 2.8, 1.8. When we talk about a recession, what we're talking about is consumption and jobs. Ok, recession is where both of those things go down. Leave aside net imports, leave aside inventory adjustments. We had this happen in 2021. We had two quarters in a row of negative GDP and everybody started waving the recession flag. Employment was strong and consumption was strong. Right now, that seems, seems to still be the case. Employment is strong and consumption is hanging in there. Yes, retail sales on Monday were disappointingly below expectations. They were still growing. And yes, Delta revised expectations down, but they still have 3 to 3 to 4% revenue growth. So we are not at recession levels yet. A growth slowdown. Listen, I kind of, I'm going to toss to Surrot because I'm sure he's going to agree with me. That happens.
- [19:40]
Jim Leventhal
It happens. And we had so much stimulus in the system. Right. So you're going to have that. And by the way, to the point of Delta, they're still going to have a billion 5 of cash flow this quarter. So it's not like things fell off a cliff. They just said things were not as good as when they were in December when things were really growing. The other thing to look for is, yes, you do have a Fed now who's going to be looking at where growth is. You do have at the back end of the year a potential tax cut coming that we're not really talking about because you do have an administration that even though they're talking down the economy right now, at the end of the day, that's what they're going to be looking for to get growth back. And the growth is going to come back in the private sector because where are they cutting in the government sector at this point? So I think yes. Will it happen? Are companies seeing a little bit of a slowdown? I think that that's, you're going to see that, but that could also counter inflationary because you can't be raising prices as much as you did in the past.
- [20:32]
Scott Wapner
All right, Steve Weiss, I'm going to give you the last word. These two. Yeah, yeah, of course. I'm getting to you right now. These two seem to think some of these slowdown fears are maybe a bit overblown. Do you share that opinion? Do you see it differently?
- [20:44]
Steve Weiss
No, I don't share their opinion. So let me offer some balance that the FDA has to submit a list for a cut of one third of their entire staff by April 13th. Those are job losses. We're seeing other job losses. We are going to see inflation. So it's not. I'm not obsessed about the word recession, however, because once we're in a recession, the Market's already coming out of it. The direction of the economy to me is undeniably lower. And I don't see less regulation offsetting that. For example, you talk about less financial regulation. That money will come to the economy very indirectly. It'll come in through buybacks, not from them. You know, basically lowering their risk standards to lend more. So you are going to see a slowdown in spending if you're a CEO. We heard Gary Cohn talk about this. You don't know where to spend, what's going to be the right area, where the right time, when I'm comfortable allocating capital until I know what the rules of the road are. Right now, we don't even know if there's a road. So all those, all that economic uncertainty for CEOs and business models is leading to a slowdown. So I can't focus on looking backward. And the other point is I'm looking forward. But the other point is, is that markets trade in expectations. Companies trade in expectations at the expectation that Delta was going to grow at this rate. Now they're growing at a slower rate or flat or declining. Sure, it's a solid company, but. But the valuation has to reset. So the question is, have they finally or fully reset relative to what the economic outlook will be? And I will tell you, I do not believe so. Brian Moynihan talked about increasing spending from the consumer that that's up even from the fourth quarter. You don't know where that's going. It's no secret that prices will go up, that inflation will go up, that labor costs will go up. So what are they buying? Maybe they're stocking up because they don't want to buy at higher prices in the future. I think that's more likely it. We've heard, we've heard Wal Mart talk about trading down. So the consumers worry. We see it in the reports. There's not a direct correlation immediately to consumer sentiment and spending habits. But you can read between the lines. Of course we're slowing.
- [23:11]
Scott Wapner
Yeah, we have to wait and see if the Fed decides to read between the lines. Coming up next on Halftime. As we await that Fed decision, we're going to focus on the banks. We have a downgrade of one big name today. The committee is going to debate the state of the banks trade. And then later, Seurat is ready with his latest portfolio moves in the top performing sector this year. Halftime's back in just two minutes.
- [23:30]
Bank of America Representative
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- [24:31]
Scott Wapner
Today on overtime, instant reaction to the Fed decision what it means for your portfolio with Dan Niles, David Zervos and Sarah Malik, John Ford, Morgan Brennan Closing bell overtime today for Eastern cnbc. All right, welcome back to halftime. Goldman Sachs getting downgraded today. Today over at Oppenheimer, the firm says the M and a rebound is likely delayed or even canceled due to fears over tariffs and what they're calling a fiscal detox. The Weiss you on Goldman?
- [25:01]
Steve Weiss
I do and I can only imagine that that, that analysts are either started this week or was on vacation last month. There's nothing in there that's new. That's why the stock is lower and time to downgrade was obviously a while ago. So at this point we're not talking about, you know, about the M and a cycle going away. We're talking about a delay. We're not talking about equity issuance, the IPO market going away. We're talking about waiting for to to emerge. So it's probably unlikely that that is in the next next six months. As you remember, the forecast by most bankers, which I talked to, most of the ones we've heard publicly was for 2H25. So we're not there yet. We weren't expected to be there yet. Now that probably gets pushed out for six months or so until there's, you know, again, the rule of rules of the road are laid out.
- [26:01]
Scott Wapner
I think Goldman here, one fair point, you're really focused on the M and A part. I don't know this guy's vacation schedule, but you focus on the M and A part. But he also hit on the fact that investment banking has been muted Expecting investment banking to be muted for the next three quarters as well. I mean isn't there a point to be made there?
- [26:19]
Steve Weiss
Well, that is the point. That's M and A. M and A, you know, the merger market. That's part of investment banking. I think the bigger issue and the bigger risk, not with Goldman but with the other banks and not with Morgan Stanley is, but with Citi and B of A2 companies not borrow. Does the lending growth slow down or reverse? Do the defaults pick up? All of that is really at play here depending upon the slowdown in the economy. But the M and A market, you know, we were waiting for rates to come down. Don't forget when you forecasted, you know, M and A market coming up from the all time death depths of it, it was rates were down. That makes a lot more acquisitions more viable than when rates are at this level or even higher. So, so what he's talking about is, is a three quarter delay. As I just told you, it's going to be, was going to be a 1/4 delay delay. Now we're going to see that pushed out. So again it's going to happen. It's not just going to happen in what was predicted six months ago.
- [27:23]
Scott Wapner
All right, so Goldman downgraded. Goldman also downgrading a number of other banks, trimming bank of America's price target from 54 down to 50 cities price target from 90 down to 80. Also JP Morgan from 308 down to 288. Both of you guys own JP Morgan. What do you make of the call?
- [27:38]
Discover Representative
I very much like the financials here. And you know, in any sector that you're going to invest in, you have to be in the creme de la creme which is JP Morgan. So that's kind of, that's kind of a given. I mean I think the Citi call is more interesting to me because here's a company that at the last quarterly update said they're buying back $20 billion of shares and that's about 15% of the market cap outstanding, currently trading at about 80% of tangible book value. That's immediately accretive my hope and frankly my expectation is that they're doing that buyback in an exceeding accelerated fashion. So that when we see the next quarter's results in the quarter after that we're going to see a lower share count and a higher earnings per share. Add to that lower compliance costs as regulation goes down, lower capital costs. And whether it's Citigroup, JP Morgan, Goldman Sachs or the sector I Think this is where you want to be.
- [28:26]
Scott Wapner
So Rob, we got to button this up really quick. Morgan Stanley announces some layoffs today. About 2,000 people, but no financial advisors. What do you make of it?
- [28:34]
Jim Leventhal
The key point, no Financial Advisors. 70% of Morgan Stanley's earnings come from their wealth business. So yes, M and A slowing down and that is kind of the icing on the cake. But the wealth management business is strong, strong balance sheet, 3% dividend yield that's growing. I like the stories they've come off. Morgan Stanley's down 15% for the month, 5% for the year. If you're going to buy these, that went into a huge run at the end of last year. This is the time to buy The Morgan Stanley's, JP's of the world.
- [28:59]
Scott Wapner
All right, got to leave it there. Morgan Stanley, Stanley share is actually up about one and a quarter percent right now.
- [29:04]
Steve Liesman
All right.
- [29:04]
Scott Wapner
Coming up next on Halftime, a trade update. Sirod is ready with his latest moves in the energy space. Halftime is back right after this. Stay with me. Tonight, a Mad Money exclusive. Kramer interviews Nvidia CEO Jensen Huang and OpenAI CFO Sarah Fryer. Tech moves to watch Mad Money out west tonight, 6 Eastern, CNBC. And we're back on Halftime. We have a couple portfolio moves in the energy space. Seurat, you are selling apa.
- [29:32]
Jim Leventhal
I am getting out of APA was a speculative buy for us. They're in the gas business offshore. I'd rather put the money into Schlumberger, which I think is where the money's going to go as we get more drilling, as we get more focus on energy, especially in this administration. I want to be in the picks and shovels and Schlumberger is right there whether it's in the US or globally.
- [29:53]
Scott Wapner
By the way, you mentioned the administration. About a dozen or so oil execs expected to meet with the president today about mid afternoon. The attendees not 100% confirmed the meetings that be in accordance with the president's energy council. When you're hearing about energy executives meeting with the president, I mean, what does that make you think about the energy space generally when it comes to investing and maybe making moves bullish because I.
- [30:13]
Jim Leventhal
Think this administration wants to take away all the regulation that we've had to drill before for. And I think as you do that the companies can be more profitable because they actually know that they can do things. Once you take that uncertainty away, it's better for profits in this industry.
- [30:29]
Scott Wapner
But if you, if it's drill baby, drill, how does that help with profitability because the prices are going to go down. And also you both are worried about a slowdown, not a recession. We made it clear it's not a recession but a slowdown. So won't oil demand be lower? You're increasing capacity. When demand is lower, it takes a.
- [30:43]
Jim Leventhal
Long time to increase cap capacity.
- [30:45]
Discover Representative
There will be a middle ground. Yes, there will be a middle ground between drill baby drill and what Surat and I believe, which is that there's capital discipline, Frank, at these companies. They're not going to do what they did in 2014 through 2016, which bankrupted the smaller private companies. And you know, we have to point out that this sector was priced for disaster coming out of last year. It really was. That's why the oil, the energy sector is up yet year to date, you know, roughly 8%. I'm looking at ExxonMobil as an example. Whereas oil is down about 6% year to date. It was priced for disaster. Look, these, these stocks I'm going to focus on. ExxonMobil, just as you know, emblematic of the space, have had a good five year run. They've had a good one year run or at least year to date. But they've had that middle period of 2024 that basically stink. You have to be in these for the long term. They produce good, good returns on capital and they give it back to you in the form of dividends and share buybacks.
- [31:39]
Scott Wapner
All right, bubble, you alluded, but I was going to clarify. You think Exxon is the top pick in the energy space?
- [31:43]
Discover Representative
Well, here's my feeling on Exxon Mobil. Unless you're going to be totally out of energy, I think you have to own ExxonMobil. It's the 800 pound gorilla in the space and scale is going to matter. Size is going to matter at whatever oil and natural gas prices are. You want to be able to spread your costs out over as big a base as possible. That's why X ExxonMobil to me has to be the first position that you have in the energy sector.
- [32:05]
Scott Wapner
So coming to the year, you're saying it's price for disaster. But was has the energy market already priced in the idea that OPEC is going to increase production coming up in April and there's potential for more increases of production going through.
- [32:15]
Discover Representative
I think that's a positive. Now look, it is production in what you just pointed out is a slowdown and we'll agree, Surat and I will agree that it's a slowdown. We don't think it's worse than that. But okay. I think at this point point that removes an overhang. The OPEC overhang was on the markets for probably 18 months. Now they finally ripped the band aid off. They're going to increase production. That's about a month old. That news right now. The markets both for the commodity and for the sector has had time to adjust to it.
- [32:41]
Scott Wapner
All right. One other point that I think you probably didn't get around to. I think you mentioned it earlier today. But also dividends. A lot of people moving into dividend paying stocks looking to Exxon about three and a half percent. So certainly something that has the potential to help the stock even with some volatility in the market.
- [32:54]
Discover Representative
Love it. And the buybacks, you know, they made a big acquisition, they're paying down some debt but they're going to get back into the buybacks too.
- [33:00]
Scott Wapner
All right. Still ahead, we got our calls today. But first we want to get to the headlines with our Courtney Reagan. Courtney?
- [33:05]
H
Hi Frank. Well, President Trump said he had a quote, very good telephone call with Ukrainian President Vladimir Zelinsky earlier this morning and a post on Truth Social. The president said much of the one hour phone call was based on Trump's phone call with President Vladimir Vladimir Putin yesterday to get Russia and Ukraine on the same page for the requests and needs for a potential cease fire deal. The Trump administration is pausing $175 million in federal funding to the University of Pennsylvania over its transgender athlete policies. The university made national headlines in 2022 when transgender student athlete Leah Thomas competed on the school's women's swim team. The university has yet to respond to Coronavirus Common and Ben and Jerry's alleges its parent company Unilever illegally removed its CEO over the company's social and political activism. In a federal court filing Tuesday, the ice cream company alleges Unilever violated its merger agreement with the company when it's told when it told Ben and Jerry's board of CEO David Stavers removal without constantly his consultation. Unilever has yet to comment publicly. Halftime report. We'll be back after this.
- [34:11]
Scott Wapner
Well, back to Hampton report. Let's hit some of the calls of the day B of a bullish following Adobe Summit investor meeting. They reiterated their buy rating. They believe Adobe's product introduction suggests that some momentum is building. Jim, you own this one. Shares pulling back just about a half a percent.
- [34:25]
Discover Representative
Well, the stock's been an absolute disaster, Frank. And I think there's one reason for it, which is the fear that Adobe's products are facing significant competition now quarter after quarter quarter. Adobe's results come in better than expectations and those aren't expectations that are being lowered along the way. And it's and, and it's thus an easy bar to clear. It's, it's clear to me at least that the competition isn't as bad as people expected. People that I talk to on the street, analysts, other portfolio managers agree with me that this is a ridiculously cheap stock. Unfairly so for the growth rate that it's seen in revenue, ebitda, free cash flow and you just got to stick with it and wait it out along the way. They are buying back shares at this cheap price. So I feel comfortable holding it here.
- [35:08]
Scott Wapner
I mean it is cheaper but not actually significantly. I'm looking start of the year was 21 times. Now it's about 18 times. So you're saying that decline in valuation that makes it much more attractive to.
- [35:17]
Discover Representative
You for a software stock not capital intensive. I mean these guys aren't out there building data centers an 18 times multiple and for a stock that's showing high teens growth rate and earnings per share going forward, I'd say that's pretty cheap.
- [35:30]
Scott Wapner
All right. By the way our John Ford coming up on closing by overtime he's going to have an interview with the CEO of Adobe. A lot to talk about there again coming from their investor meetings. Shantonandu Ryan, John Fort sitting down coming up at 4:00pm Eastern Time on closing bell overtime we get some more of our calls today. Vulcan Materials upgraded to overweighted JP Morgan, Surat yo and Vulcan and also Martin Marietta.
- [35:52]
Jim Leventhal
I do I like both of these. I like this material space. I think the demand for construction is still going to increase and these stocks really haven't done too much the last couple of years. There's really no other competition here. So these are companies we like as prices kind of come down in this space they're going to do well. Earnings are going to grow.
- [36:10]
Scott Wapner
So earnings going to grow is this earnings going to grow on the near shoring idea here that you know we're going to see more actually on shoring because of this new administration building more things here. What's the catalyst for this earnings growth?
- [36:21]
Jim Leventhal
Well there's really no these are long term contracts that they have and the stocks go out of favor especially when money goes to growth stocks other areas but people are realizing that the construction contracts that they have are such long term that you want to owe these are serial compounders over time.
- [36:36]
Scott Wapner
Weiss, any thoughts about the Materials, space.
- [36:39]
Steve Weiss
Yeah. So onshoring has been a trend, by the way. It's been a trend for a number of years and it is going to accelerate with, with the current administration. Let's keep in mind that my view at least is that local budgets, state budgets will be pressured, particularly if they push medicare costs onto the states, which seems like they want to do, then where are they going to get the money? Plus, if you see an economic slowdown, construction contracts with the governments and with private industry, industry generally get pushed out and some get canceled. So. So I don't think it's that easy. I do agree that it's somewhat of a good compounder over the life of owning it, but that may not be one, two, three or five years.
- [37:25]
Scott Wapner
All right, we've got a number of other calls I'm going to just skip around here. So I want to go to one of stocks that you own, Salesforce, initiated at equal weight by Stevens salesforce, another company that seems to be facing some disappointment. Location disruption, a lot of questions about their agents and if AI will just kind of replace different parts of their business.
- [37:42]
Discover Representative
Yes. What do you got to say about that?
- [37:44]
Jim Leventhal
You know, I think, look, salesforce is in the sweet spot for AI. What do they have? Customer data. What can I help you with? Customer data. That's where they can go back to their customers and really make things a lot more efficient using the analytics they have. They have such a large installation base. The stock has really come off, especially in the last couple of months when you've had the sell, the sell in, the tech start.
- [38:08]
Scott Wapner
So he's giving you a hard time. PG&E downgraded to neutral from buy a UBS. Jim, you own this one. So what's going on? Why do you own this one? Downgrade.
- [38:17]
Jim Leventhal
Yeah, why do you own this?
- [38:20]
Discover Representative
Fair. Fair play. Look, it's. It's a utility. It's a utility mainly in northern California that's been beat up on the precipitation that they are somehow responsible for the terrible L. A fires. They are not. It's in a high growth area, northern California. It's attractively priced. It's done a lot to turn around coming out of bankruptcy. I'm going to stick with this one.
- [38:41]
Scott Wapner
All right. Shares actually down just about 1% right now. Coming up next, Mike Santol. He's going to join us with his midday word ahead of the fed decision. We are back right after this break. And we are back on halftime. Senior markets commentator Mike Santoli joins us with his midday word. Mike, markets trading higher going into this Fed decision.
- [38:59]
Surat Sethi
Yeah, trading higher still within yesterday's range. I feel like we're kind of just kind of coasting into neutral into the Fed meeting, which often is the case. I feel like this overall rebound attempt is pretty credible. You know, last week as a trading low is. You look at the X's and O's, a lot of things lined up to at least get to that point where you said we're primed for a bounce. What's beat what, what's to be proven here is. I mean, first of all, Yesterday's highs, like 5,700 in the S and P, got to see if that means anything to you. And there's just a lot of these moments where we have to see if we can be resistant to unfriendly policy headlines, I suppose. And I don't know the Fed's going to give us that. I could see a scenario where the Fed really tries to stay out of the way with its commentary and maybe volatility comes down a little bit again and you can see some clearances to make more of this bounce.
- [39:48]
Scott Wapner
You know, isn't that kind of the nightmare for the market, at least a neutral Fed? I was talking to former Fed Vice chair Roger Ferguson a worldwide exchange earlier. He thinks we're going to see a neutral Fed. I mean, that seems like almost the worst case scenario.
- [39:58]
Surat Sethi
Well, a neutral Fed, if it's, if it's because conditions remain generally okay and there's no emergency to be responding to is okay. You know, if you go back over history, when the Fed holds in a meeting, when it does not make a rate move, it's almost as strong on that side single day in the S&P 500 as when they cut. So usually it's happening for benign reasons, but I can see a scenario where people feel like it's essentially they're kind of pinched on both sides of their mandate and neither one looks great. And I think what the Fed, what the market would most react to is if they really go out there and say tariffs are going to tie our hands and the inflationary impact is going to keep us from responding to a weakening economy, I cannot imagine, imagine they're.
- [40:40]
Scott Wapner
Going to explicitly say, is that basically neutral? I mean, isn't that the same thing, but neutral neutral?
- [40:46]
Surat Sethi
Because you're saying, if you're saying the economy is still okay and it's expanding, we still believe inflation is moving toward our goals, therefore no reason to move just yet, that's fine. If you say we're trapped, that's not fine. But they're not going to say they're.
- [41:00]
Scott Wapner
Trapped a lot of expectations about that. Summary of economic projections dot plot, what do you expect? I know you don't have a crystal ball, but two cuts already priced in. A lot of people thinking that they might indicate towards a third cut and show some dovish ness. I think that would give a boost to the market, right?
- [41:15]
Surat Sethi
It probably would. I don't know that I would bet on that. I feel like what the projections are going to essentially ratify where the market is, which is growth is a little slower than we thought at the beginning of the year, inflation is a bit stickier and hopefully it's no real surprise to traders.
- [41:31]
Scott Wapner
All right. By the way, markets off of their highs of earlier today. Mike Santoli joining us with his midday word. Mike, thank you very much. Final trades, they're coming up on Halftime. Make sure you stay with us. Welcome back to halftime. Nvidia shares hitting session highs up over 2%. The company's analyst Q and A at GTC just wrapping up. And look who's there. Christina Parts nebulous has that and the headlines coming out of that Q and.
- [41:53]
I
A. Christina Frank, he actually started late because he was busy chatting with Kramer for too long because he's going to be on Mad Money later. But there's three major takeaways. The first one he really talked about demand and how a lot of it is unaccounted for. Two reasons for that. The first reason is that data centers as a whole need to be revamped across the entire world. And it's not just about GPUs. It's also about all of that networking capabilities that connect the GPUs and HP, Dell and Cisco got a shout out for being those networking providers. The second point he pointed to was AI factories, which sounds quite obscure for maybe just the regular person watching. But really think of it as a more advanced data center. A data center will keep all of your data, your web hosting, etc. Whereas the AI factory can do parallel processing, is so much more complex and therefore requires so much more power and more advanced hardware. A second point was about the rumors of cloud capex cuts he did point to. He did say it was a lot of noise out there, specifically Microsoft. I know we heard about Microsoft possibly cutting their leases. He said he underrepresented the demand in his speech in his keynote yesterday. And I just wanted to show the top four CSPs, those are cloud service providers are fully invested. So he was really hammering in that point to the financial analysts. Clearly the team was a little bit worried, which is why they kept pushing that sentence. And lastly, Deep Seek he said it's really just a distillation, so it's a copy of a much larger model. So you didn't seem too fazed by.
- [43:23]
Scott Wapner
That back when Christina perts never said GTC Nvidia shares up over 2% and of course, as you mentioned, Jim Cramer going to sit down with Jensen Huang again. Coming up on Mad Money, Sarah Fryer from OpenAI also joining the conversation with Jim out on the West Coast. All right, very quickly, time for final trades. Weiss, you're up first.
- [43:41]
Steve Weiss
Microsoft going with the 11 upgrade, so I think it's worth buying here.
- [43:46]
Jim Leventhal
Sarat Morgan Stanley, as we talked about wealth management business.
- [43:49]
Scott Wapner
Jim, you're getting the last word.
- [43:51]
Discover Representative
Crh. We were talking about materials companies earlier. This is the biggest of the bunch.
- [43:55]
Scott Wapner
Alright, that's going to do it for halftime. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [44:09]
Bank of America Representative
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 affiliate 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 tonight, a Mad Money exclusive.
- [44:51]
Scott Wapner
Kramer interviews Nvidia CEO Jensen Huang and OpenAI CFO Sarah Fryer. Tech moves to watch Mad Money out west tonight, 6 Eastern CNBC.