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Trading Trump’s Trade War 04/16/25
00:44:06
Scott Wapner and the Investment Committee discuss the continued fallout from Trump’s Trade War as Nvidia shares fall sharply on the new export rules. Plus, the Investment Committee make some portfolio moves. And later, the desk debate the latest Calls of the Day.
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- [00:01]
Fidelity Representative
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- [01:01]
Scott Wapner
Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson Report. 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. All right, Carl, thanks very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, more Trump trade fallout. Nvidia shares falling sharply today on those new export rules. We're trading that stock, of course, and the markets at large with the investment committee. Joining me for the hour. On the show today, Joe Terranova, Anastasia Amoroso, Steve Weiss and Kevin Simpson. Let's check the markets. NASDAQ leading the declines today. You know about that Nvidia, obviously, and the chips are dragging things lower. Gold is at a record high again. So we have the Nvidia news. Weiss, you know it's obviously sinking on the export rules. The charge $5.5 billion. Piper Sandler takes the price target to 150. Raymond James takes it to that same level. You sold half your position today this morning on this news.
- [02:30]
Steve Weiss
I did. As you recall. I put it on about a week ago and I said when I was on the show last that it was trading position. So the reason for holding on to the trading position at this point escapes me now on a day like today which is part of motion and mostly reality is what the future may hold for them in terms of perception we obviously we don't know factually what it holds. I just said let me get rid of half of it and wait for a better opportunity to get rid of the rest of it. Because my bearish sentiment on the market has not changed. And as a matter of fact it's fortified by announcements like that in video. Will not be the last one to do this. Well AMD already did.
- [03:17]
Scott Wapner
I mean AMD is getting hammered today to amd.
- [03:19]
Steve Weiss
Well and you'll see others do it.
- [03:21]
Scott Wapner
Micron Marvell are down.
- [03:23]
Steve Weiss
It's going to be across the board. It's going to be across the board and there's just you know, haven't attended you know, a few different conferences, small conferences haven't spoke to many bank bankers, many people, many single family officer invest directly in the cap table CEOs. Nothing is going on, everybody's frozen. And what you're using your capital for is to protect the companies you already own. If you're a CEO, you're using it, you're not spending it. Capital, you know, expenditures are grind to a halt except necessary ones. And frankly I think we're going to see this when the hyperscalers report and talk again about a slowdown in in cloud spending. So look, this just is another warning sign and I think that you know, plenty, plenty trouble ahead.
- [04:14]
Scott Wapner
I mean are you suggesting that chips at this moment are I don't know if the right word is uninvestable but unanalyzeable at minimum just because you really just don't know where this is going.
- [04:28]
Steve Weiss
Yeah. And there's another element. So with the embargo and that's my term but it's accurate that China's putting on ra earth and with Ukraine not mining rare earth yet and with the US sole mine already committed frankly comes on the end of the year you can't make semis without rare earth. So even if you've got facilities up running in the US which really don't, I mean you got Skyworks or something.
- [04:52]
Scott Wapner
Yeah.
- [04:52]
Steve Weiss
Etc. You're not going to be able to make chips anyway. So. Yes. So they're unanalysable. It doesn't mean I'm selling Taiwan semi because ultimately we will get through this. I'm not buying more because I'm Full number one. I wouldn't buy more anyway.
- [05:05]
Scott Wapner
Yes.
- [05:05]
Steve Weiss
I think you get a better point of entry.
- [05:07]
Scott Wapner
Joe, you have in video, obviously. What do you make of this move? Selling half the position on this news? Nvidia is down 7% right now.
- [05:14]
Joe Terranova
As Steve said, it's a trading move and in a very mercurial environment. That's exactly what you're doing right now. You're trading. Everything is mercurial right now. The policy, the market, a read on the economy, soft data, hard data, retail sales comes out. People are buying cars, people are buying electronics. Is it because the economy is good or is it because they're getting ahead of the tariffs?
- [05:35]
Anastasia Amoroso
Yes.
- [05:36]
Scott Wapner
Loading.
- [05:36]
Joe Terranova
Right. We talked about on Monday semis technology leading the market higher. Now you have a day where they pull back. So I think in totality, what does that all mean? I think you're stuck with a trading range. I think we've seen the upside. We've capped the upside for now at that 5482, 5500 level. We've defeated what was six consecutive days where the S and P, the intraday low was higher than the previous day. And then if you look on the downside and you say to yourself it's a very challenged environment. I keep using the word mercurial. Why not think we're going lower? Well, because you're probably going to get a tweet at some point.
- [06:12]
Scott Wapner
Yeah.
- [06:12]
Joe Terranova
So why are probably going to get some reaction from the Treasury.
- [06:15]
Scott Wapner
So then why isn't it, Kevin, a 22% discount year to date on Nvidia is a buy relative to what their position is. What their position is going to remain to be the fact that the hyperscalers suggest they're still spending all this money, there's no reason to believe that demand is going to tail off anytime soon. Why isn't $104 and change a gift?
- [06:38]
Kevin Simpson
I think it is. I think we had a better gift last week when I think what got down to 88, maybe that was a little bit more attractive there. But it's very difficult to pick bottoms and tops. So to Steve's point, from a trading position this could be dead money for another year in a range bound stock. But I think to your point, Scott, at 104, when you look at all of the metrics that they can predict and there's a lot that they can't and your word, unpredictability, I may have to steal that and borrow it because there's so much uncertainty. But yes, if you're an investor and You've got a little bit more than a few month time frame. I think 104 is a buy.
- [07:07]
Scott Wapner
What do you think of the, the chips here?
- [07:09]
Christina Parts and Avalos
Yeah, I think the word you use got on investable for now it actually.
- [07:14]
Scott Wapner
I wasn't, I said unanalyzeable. I don't know if you would go as far. I mean that's not for me to say but, but for me you do this for a living.
- [07:22]
Christina Parts and Avalos
For me at the moment they are actually uninvestable and it's for a couple of reasons. You know, first of all chips are completely a bargaining chip in this trade war and we're seeing that on full display today. And then there's this longer term consideration I think of us China decoupling and there's a long term intent to not let those chips go to China. So the other reason why I think chips at the moment are uninvestable because they're highly cyclical and so they're going to get caught up in what Steve is talking about which is lack of capex, lack of, you know, any sort of cyclical momentum. And if you look at the last instance of the trade war in 2018, chips really did, did take it on the nose. They were down 30, 35%. So I think we may still have more downside to go. And yes I like the valuation which is the lowest levels but in a market like this you can't look at valuations purely, you can't look at technicals if you can't identify a catalyst. And right now I can't.
- [08:13]
Steve Weiss
Yeah, I'd say valuations are moving target because this, things change. So you know, look, I think you can predict the playbook for this market is that you'll see agreements in principle announced with former partners but counterparties in trading market will bounce. But there's no there there with the principal agreements in principle it takes years to negotiate a trade agreement but you'll get that headline bounce and eventually the market will tire of it. Right. So it's going to be what's the new flavor?
- [08:42]
Scott Wapner
So but I mean there is, there is a, there is a very positive still fundamental backdrop around Nvidia Capex.
- [08:49]
Steve Weiss
There is, but you're also seeing a slowdown in capex to data centers as well. That's an end market and China is a huge market for them. Right. So China's Chinese had this playbook to wean themselves off dependent.
- [09:03]
Scott Wapner
You're not really seeing that much of a slowdown yet though. I mean you have talked about potential if Things go bad with GDP and the growth in the economy, then of course you could potentially see it. But you haven't really seen definitive pull. We are, we are, we are from, not from hyperscalers.
- [09:23]
Steve Weiss
For the hyperscalers, you're seeing delays. You're seeing more importantly like, you know, one company once you talk to who's looking to build out a warehouse, not a data center warehouse, switch their supply chain, their vendors from China to India and they've been told that those supplies which are critical to them are going to sit on the ocean for four to six months. So it's going to take a while to get things here.
- [09:48]
Scott Wapner
The juicy part of this story is a Reuters exclusive report today that suggests Nvidia didn't warn at least some of its major customers in advance about all of this. And it was told a week ago. That's according to a couple of sources that Reuters cites in what they say is an exclusive report. It leads to the question, of course, what did Nvidia know and when did it know it? Who better to chase that down than Christina Parts and Avalos? Do you have any insight in that very question?
- [10:21]
Pippa Stevens
Yeah, the answer is Chinese hyperscalers, they've been apparently anticipating these restrictions and I say that because They've been stockpiling H20 chips before this ban was even announced. Supply checks. And this is not coming from me, but from sell side research has confirmed big players which we would assume Tencent Alibaba were actively purchasing these H20 chips throughout this entire quarter. And there was even a report from the information indicating $16 billion worth of already sold to China. I'm unsure if that it's 16 billion, but we could assume it's in the billions. So to your point that Reuters report some saying some Chinese customers are frustrated because Nvidia didn't warn them despite knowing a week in advance. This really suggests two things, Scott. Either Nvidia selectively informed major customers, which would explain the stockpiling, or was genuinely surprised by the shifting White House position because keep in mind, Jensen Huang, the CEO, was just in Mar a Lago at a supposedly $1 million dinner. But analysts estimates are coming down today across the board, lowering price targets. And I know Weiss was just talking about how much China represented of Nvidia's total revenue was about 13% fiscal 2025. So this write down of $5.5 billion is substantial and indicates a big thing that Nvidia really has little confidence in securing export licenses which could take up to a year to process. In other words, a Ban and I'm using the word ban. I took that from ubs. So a lot of people agree with me. And Mizuho calculates this loss at about 7 to 9 billion dollars which is approximate of total July quarter revenue which could be explaining the 7% sell off and maybe why. Scott, to your question, why people may not be interested in buying into the stock just yet.
- [12:00]
Scott Wapner
Yeah, yeah it's really interesting story in the total of what we're talking about today. Christina, thank you very much. It's Christina Parts and evolves. We'll watch the 7% decline there. By the way, another lower target for Nvidia 160B of A has taken their targets down like across the board for semis which have a lot of rain clouds over them. Today I mentioned AMD Micron, Marvell, asml. They missed their orders expectations. The CEO suggesting that US tariffs are creating a lot of uncertainty. No kidding. Reuters again says that tariffs may cost chip equipment makers more than a billion dollars. Those are what the industry is estimating. Lam Applied kla, you've got a MAT and klac which by the way are part of that bank of America target cut.
- [12:55]
Joe Terranova
They are look collectively universally when you look at semiconductors you have to question now does this change the entire narrative? And I think there's some uncertainty in answering that question because you don't know if the policy remains entrenched. Is this something that is going to be permanent or is this part of a temporary negotiation? I don't know the answer to that. Maybe, maybe you guys know the answer to that as well. But I think if you could unlock that answer then you could make a clear determination on where we're going if in fact it's permanent. It's very obvious to me that a 166 price target for video which is literally 58 or 59% higher than where we are here. I mean that that is extremely ambitious. So well what about the others?
- [13:38]
Scott Wapner
The amounts that you have which is Target goes to 190 at B of A KLA goes to 805 as part of that call as well. And Lamb lam goes to 90. Right.
- [13:48]
Joe Terranova
But Nvidia is the leader. Nvidia leads everything else. I don't think you're going to be able to see a bifurcation in terms of the performance. Wherever Nvidia goes, it's going to drag the rest of them down with it. So you're looking at the semiconductor industry in totality when you're making a determination where you want to invest there. If you Want to say, okay, I can pick a winner here. I could look at KLA Corp. I like the valuation, I understand that. But there is so much uncertainty in front of us right now surrounding the narrative surrounding the Capex. It's not clear. Permanent, temporary. Which direction do you go?
- [14:24]
Christina Parts and Avalos
Yes, I would add that maybe there's a little bit of good news here, which is, yes, you know, China is 13% of Nvidia sales right now, but that number was a lot higher several years ago. And I think that's true also for some of the other semiconductors. So in a way we have de risked some of that foreign revenue exposure. So we can take some soles in that. But the thing that still keeps me cautious on the likes of Nvidia and others is that I think the hyperscaler spending that Joe is talking about, I think that is very much a question mark because if you look at some of those largest companies, they're not immune from a consumer slowdown, they're not immune from any sort of retaliation from other countries. So I think they're going to start to worry about the top line. And what do you do when you worry about the top line? You think about cutting your cap back. So that's, that's why I still say for now I need a positive catalyst and I haven't seen it yet.
- [15:11]
Scott Wapner
I mean, there's been so much gloom and doom Kev around the tech space of late. Wells Fargo Investment Institute has seen enough, okay? They've seen enough of the negativity. They upgrade the space to favorable. Favorable. They had it at neutral. Everybody seems to have it at neutral right now, at least. And they say, quote, we believe the sector's quality characteristics will serve investors well. While the tailwind likely has legs to continue to drive above market sales and earnings growth for years, in our view, the sharp sell off provided a potentially fleeting opportunity to add exposure. What do you think is a lot of these stocks from Tesla all the way down are down a bunch from their 52 week highs. Is enough enough?
- [15:56]
Kevin Simpson
I mean, they perfectly said it. For investors, there's an opportunity here and there is. So last week we bought Apple at 177, we bought Metta at 510. I mean, I think you can lean into these positions here if you're willing to hold them through volatility. Because Joe's point is perfect. We don't know what the outcome is. And that's what makes it so much fun. If we had all the variables, then we would know the outcome. But I think the, the old Adage of wanting to make investments and buy cheap stocks is something that you want to lean into here at least a little bit. The biggest mistake you can make is trying to time it or to go all in. So just follow our lead. We put a little bit in. If it goes down another 10%, we'll put a little more. And I don't think any of these businesses are in jeopardy of really rolling over at this point because to your point, Scott, they're down a lot.
- [16:40]
Scott Wapner
You can still, Weiss, think that something is a buy here and temper your expectations on what you once thought was the possibility of a gain. That's what a lot of price target cuts would suggest. Like Microsoft, for example, BMO, okay. Its target is cut to 470 from 490. Expectations tempered, but they still reiterate it. Outperform. You can still outperform what may be a slower growing stock market.
- [17:09]
Steve Weiss
Yeah, and, but outperformance is not my benchmark. My benchmark's absolute performance.
- [17:15]
Scott Wapner
But I mean, you own, you own Microsoft. It's kind of my.
- [17:17]
Steve Weiss
I do, I do. And I have gains in Microsoft and so I'm not selling it, you know, but the return, I think is unquestionably going to get extended. So at some point. Sure. And it really depends on what your horizon is. Again, as we discussed, you know, the other day. Depends if you're the asset allocator or if you're being allocated to, to put in equity is completely different, you know, view of the market.
- [17:44]
Scott Wapner
In that case, I'm going to guess that a lot of our viewers are not, you know, tactical fast traders in a lot of these mega cap names. Yeah, they probably lean a little bit longer term.
- [17:56]
Steve Weiss
Right.
- [17:57]
Scott Wapner
In terms of those stocks.
- [17:59]
Joe Terranova
And they're most likely long.
- [18:00]
Scott Wapner
Well, yes, yeah, yeah. I would say the great majority are long, those stocks.
- [18:05]
Steve Weiss
Where you are, though, it depends where you are. Depends how old you are, depends if you're retired. You know, it depends how much risk you take. Everybody's got a different risk appetite. I can tell you though that I did sell calls against Metta, I did sell calls against Netflix. They're far out of the money. But their near, near term expiration, the April 17th, I think that's the date. No, I'm sorry, not 17. That's tomorrow. April 24th, 25. I forget what it was you sold.
- [18:35]
Scott Wapner
Covered call on Microsoft the May 4th 30th.
- [18:37]
Kevin Simpson
So let's talk to our viewer who is the long only investor in Microsoft. We've owned it for over 10, 12 years. We sold a one month covered call. So just standard expiration. It's 7.5% annualized return. We sold a call 10% out of the money. We brought in $2.75 dividends. So imagine doing that each and every month and we do it most months, but you're getting a seven and a half percent cash flow over and above anything that the stock may generate in dividends. And essentially that gives you a little bit of a buffer for another 7% downside protection.
- [19:07]
Scott Wapner
I have some breaking headlines I want to get to right now as well because there is a Fed speaker who is making some headlines. Our Steve Liesman has flagged those for us. Beth Hammock, what's she saying?
- [19:20]
Anastasia Amoroso
Yeah, the new Cleveland Fed president ex of Goldman Sachs at the Treasury Department says there's a strong case to hold monetary policy steady. Scott. She says the currently modestly restrictive stance of policy is appropriate. But she goes on to say this, if the economy falters and inflation declines, it may be appropriate to ease on the other side with steady labor market. But higher inflation, the Fed quote, may need to follow a more restrictive trajectory. She's one of just a couple Fed officials who have said maybe the Fed needs to get tighter if inflation's a problem and employment doesn't decline. It's important to ensure inflation expectations remain well anchored, she says, echoing the ideas of Fed Chair Powell. The Fed faces a difficult set of risks, possibly higher inflation and slower growth. We follow her in part for her comments on the financial markets and she said the rise in bond yields and the decline of the dollar are not not a typical risk off episode. Scott, I'm interested. This morning bank of Canada came up with two scenarios, United Airlines, two scenarios. It looks like the quarterback is faking out his own team, maybe the other team too.
- [20:30]
Scott Wapner
Yeah, I mean there's a lot of ifs and maze in the comments from Hammock as well, which seem rather obvious to market participants, I would think, don't you?
- [20:43]
Anastasia Amoroso
Yeah. I mean what's unique about this whole situation is generally a company, a Fed picks a forecast and goes with it. You may be wrong, but it's your best guess of the, you know, lowest, lowest risk scenario, low risk, lowest risk path to follow. The problem we have right now is that nobody seems able to pick that forecast and go with it. So you have to talk in multiple scenarios, which sounds to me like the way a lot of people around your desk there are talking these days. Scott.
- [21:14]
Scott Wapner
Yeah, but I actually think that you can paint like, okay, that's good, like don't pick a forecast actually and go with it. Be, be able to adapt to what could be a changing environment and then decide what you have to do when you have to make that decision. I don't necessarily think that's a bad thing when it comes to the Fed at this point.
- [21:35]
Anastasia Amoroso
I think that's right, Scott, for given the situation. But it's, it's interesting to think about. If we were in a place where a whole bunch of economists saw enough risk to the economy that they were forecasting a recession or an increase in the unemployment rate, the Fed could be in a position right now to be cutting rates or signaling rate cuts. It's not in that position now. So. Well, its ability to preemptively.
- [22:02]
Scott Wapner
What about Waller?
- [22:03]
Anastasia Amoroso
Yeah, Waller. Waller is, is, is alone in that situation. So far, he's the only one to say that in both of these scenarios rate cuts are coming. I'd say the vast majority of the board, Scott, is not on board with that. Where if they see, as you just heard Hammock say, who I think is much more in line with where the center of the board is on this, on this particular issue, that if you have this surge in inflation while the unemployment rate remains steady, you may have to hike more. So she's not on board with cutting in either case, the way Waller seems to be laying out.
- [22:35]
Scott Wapner
Yeah. Now Waller doesn't mind being an outlier from time to time. Can I ask, speaking of all this, Steve, the Fed chair speaks today and in Chicago, I think in a little more than an hour from now. What's the context of these remarks, do you think?
- [22:52]
Anastasia Amoroso
Well, it's sort of why I brought you the Hammock remarks, because I wouldn't be surprised if. If what, what Hammock is saying echoes what Powell is saying, echoes what others have been saying, which is that the Fed is in this very, very unclear situation. I really think the operative metaphor comes from Tom Barkin who said this is just a regular fog where you put your fog lights on and your windshield wipers. This is the kind of fog where you pull over, turn on your hazard lights and stop driving. I think that's where we're at. I think you actually just correctly characterized that words. Just, just do nothing now to your clear the way things are going, Scott, we've had crazy data like this morning's retail sales report. Heavily flattered by auto sales, which are front running. You went up to nearly 18 million units on an annual basis. Now you have to tell me what's going to happen to auto sales in the coming months, how much of a drop off do we get? Same thing where we had a surge of imports, all this front running. So now you have the front running and then you have the bounce back or the bounce down from the front running. All of that makes it very unclear as to how the economy is going to operate. And you just don't know. Are these 90 days of successful negotiations, unsuccessful negotiations? More so than that is when you talk about what happens with negotiations with Japan. This notion of currency manipulation being out there could involve changes to exchange rates. And I'm not even sure the market has started to embrace that idea that there's more at play than just the tariff level here, but also things like exchange rates and the way that monetary policy may react to all of this. Bank of Canada saying there may be potentially deep cuts later in June if there's a fall off in the economy. And we puzzle, of course over how the Fed could react to all of this.
- [24:40]
Scott Wapner
Yeah, all great points, Steve, thank you. We'll see what the Fed chair himself says in a little more than an hour. In Chicago at Steve Liesman, our senior economics correspondent. He did reference retail sales. It just leads me to a move that Goldman today made on Target. They're done with it. They're done with Target, at least for now, because they cut it down to neutral and they say, quote, we're concerned about seeing a recovery in growth for discretionary categories, which was a key tenet of our original buy thesis. Nobody owns that on the desk. But you have tjx, you have Wal Mart. So you take Target somewhere in that context, don't you?
- [25:17]
Joe Terranova
Well, I have tjx, I have Wal Mart, I have Costco. These are all whether it's off price with TJX or whether it's the scale of Walmart or Costco. These are retailers that in this environment are able to manage through the issue. And the concern I have surrounds building inventory, a contraction in the economy and then that inventory just kind of sits there. That, that's the, that's the negative to the, to the individual stocks which are in the etf. ETF rather as it relates to Target. I just think they have idiosyncratic problems. I mean, the stock is down literally 32% so far year to date. I understand the long term investment thesis and the brand recognition that this company's afforded. But you know, for me, something is down 32% in 90 days is not something that is going to be appealing to me.
- [26:03]
Kevin Simpson
Joe owns the right stocks. He's got the big three You've got Costco, Wal Mart, TJ Max. If we go into a recession, I hope that's where the consumer can spend down. So TJ Maxx, the one that we own, we think that does well and great at times. It does well in slower times. It stalled a little bit for a few years after the pandemic, but this is a stock I would be adding to on any pullbacks. And I like your other two names as well.
- [26:24]
Scott Wapner
All right, we're going to take a quick break. When we come back, Excuse me. Interactive Broker shares are tumbling after earnings today. Joe Owners the name, as you probably know. We'll find out what he's doing with it now. Next this episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
- [27:06]
Fidelity Representative
Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single purpose making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org As a salesperson, the search for the right buyer or buying groups can feel like you're endlessly sifting through leads and hoping they're ready to buy. Thankfully, LinkedIn Sales Navigator is more than just a tool, it's your strategic sales partner. LinkedIn Sales Navigator is a sales intelligence platform that helps professionals effectively prospect and engage engage high value customers, drive higher revenue and increase sales performance. Sales Navigator helps you target the right buyers, surface key signals such as job changes or which accounts you should prioritize, and shows you hidden allies so you can find those buyers that are most likely to convert. Whether you're looking for new clients or strengthening relationships of current accounts, LinkedIn Sales Navigator has new AI features designed to help sellers find the right people and get right to the right conversations, all at scale. Fueled by LinkedIn's 1 billion-member platform, Sales Navigator gives you the most up to date first party data, enabling you to unlock conversations with the people that matter. Ready to get right to the right conversations? Try LinkedIn Sales Navigator now with a 60 day free trial at LinkedIn.com HalftimeReport. That's LinkedIn.com HalftimeReport for a 60 day free trial. Terms and conditions apply.
- [28:54]
Scott Wapner
All right, welcome back. Let's take a look at shares of Interactive Brokers, which are lower, as you see, following earnings. I thought this was supposed to be a really good environment for those who are capitalizing on the increased volatility and the increased trading around it.
- [29:08]
Joe Terranova
What happened, in fact? It absolutely is. And we'll get to the good stuff in a second. Let's acknowledge the bad stuff. Why is it down? It is down because they missed by 4 cents on EPS. They missed net interest income. They had elevated ad expenses to the tune of about $8 million. And then, Steve, margin loans were down 10 to 12% which they should be in a deleveraging environment. So if you tell me that we're going down another 15 to 20% really fast in the market, okay, we've got a problem because margin loans are going to be down again, 25 cents to 32 cents. Dividend increase 4 for 1 stock split. Here comes the good stuff and here's why. I think you can buy this stock against 140. Over the last six months, it literally traded below 140 for 15 minutes. It got down to 131 on April 7th. So I think you want to buy it here against 140. I'm maintaining my hold position and the trading activity was ridiculously strong. Customer accounts up 32%. Stock trading up 47% as I said you would. Options trading up 25% as I said. Futures trading up 16%. So I'm focusing on the trading and I don't know, I'm pretty confident what's been going on so far with trading activity, pretty good chance it continues.
- [30:17]
Scott Wapner
All right. You know, Goldman obviously capitalized and some of the others on this increased trading environment. Speaking of a couple of calls on banks today. Wells Fargo, top picks, jpm, Citigroup, B of A. That's from Mike Mayo at Wells Fargo Securities. Big banks should benefit. That's sort of the Goliath is winning perspective that he's had for for many months. Weiss, you own B of A, you've got jpm. And then we'll get Anastasia's view on the banks in general in the current environment. Weiss, B of A. Yeah, B of A.
- [30:48]
Steve Weiss
Look, we heard the report. I thought it was a good report. It's important to understand that jpm, B of A, Goldman, same people who navigated the other crises and they are in just unbelievably great shape on Their balance sheets, they're literally can weather any, you know, any recession, any downturn and they just run those scenarios every day. So to me, there are no safe place in the market in terms of stock price, but there are safe places in terms of business models enduring. And I believe it's Goldman, it's V of a, it's J.P. morgan. I don't know about the others.
- [31:27]
Scott Wapner
Anastasia, good environment for the backstory.
- [31:29]
Christina Parts and Avalos
Now, I think the banks are relatively well positioned given everything else that we have going on. You know, first of all, they have the domestic tilt and we don't have to worry about their supply chains. We don't have to worry about except for maybe, you know, with the exception of Citi, we don't have to worry about a huge customer base outside of the United States. So I like the domestic focus. If you also think about the rate environment in which we're in, you've got the yield curve that is steepened and maybe we will get a rate cut or 2 this year. So that actually could spur lending demand. And we mentioned car sales being fast tracked in retail sales and that requires a loan. You know, the Trump administration wanted to bring down the 30 year mortgage rate, so maybe consumers will actually start to take advantage of that. So lending could pick up. So no capital market activity. But I do think that the domestic nature and lending could be catalysts.
- [32:16]
Scott Wapner
Joe, of Travelers, Citizens, USB and pnc, which all either had earnings or, you know, calls today on the street, which one do you like the best? Travelers, Citizens USB or pnc?
- [32:31]
Joe Terranova
Without question, I love insurance business. Insurance for Travelers was ridiculously strong. I think when you're looking at the banks, the opportunity is beginning to narrow. I'm not excited about the regional banks and we own a bunch of them. We own fifth, third, we own regions, we own Huntington. As far as super regionals, pnc, usb, I see it narrowing. I think the opportunity got to stay high up big is best there. Goldman Sachs, Morgan Stanley, JP Morgan, bank of America.
- [32:58]
Scott Wapner
All right, let's get the headlines with Pippa Stevens.
- [33:00]
Anastasia Amoroso
Hey, Pippa.
- [33:01]
I
Hey, Scott. California is suing the Trump administration in federal court over President Trump's tariffs on the country's trading partners. In the lawsuit filed today, the state argues President Trump doesn't have the power to unilaterally impose tariffs. In his latest podcast episode, Governor Gavin Newsom said because the state was the number one manufacturing state in the country, the Golden State in particular was feeling the impact of the tariffs. A federal judge has temporarily blocked the Department of Energy from cutting federal research funding it gives to universities. The judge said she will consider issuing a longer term preliminary injunction later this month. On Monday, a group of universities, including MIT and Princeton University sued to block the White House from cutting funding meant to support general research costs. And Ferrari CEO says the company will continue to develop gas powered hybrid and fully electric vehicles. He made the comments during the Luxury Sports Carmakers annual shareholders meeting today. Ferrari started selling hybrid models in 2019 and will unveil its first electric vehicle in October. Scott, back to you Pippa.
- [34:07]
Scott Wapner
Thank you very much. Pippa Stevens. Coming up next, Kevin Simpson making a move in a commodity play hitting a record high. We'll give you the details. We will debate it as well. Plus we have our calls of the day coming.
- [34:22]
Kevin Simpson
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Scott Wapner
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Kevin Simpson
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Joe Terranova
Mobile to meet you where you are.
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Kevin Simpson
It's built by the trading obsessed to.
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Scott Wapner
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Kevin Simpson
Learn more@schwab.com trading Ryan Reynolds here from.
- [34:55]
Steve Weiss
Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good.
- [35:00]
Scott Wapner
In this world, stop with Mint. You can get premium wireless for just $15 a month. Of course if you enjoy overpaying. No judgments. But that's weird. Okay, one judgment anyway.
- [35:12]
Steve Weiss
Give it a try@mintmobile.com Switch upfront payment.
- [35:16]
Fidelity Representative
Of $45 for 3 month plan equivalent to $15 per month required intro rate.
- [35:19]
Christina Parts and Avalos
First 3 months only, then full price.
- [35:20]
Fidelity Representative
Plan options available, taxes and fees extra.
- [35:22]
Christina Parts and Avalos
See full terms@mintmobile.com.
- [35:40]
Scott Wapner
We'Re back. Always active. Kevin Simpson has another move for us. A mining name record intraday high today. What do you. What'd you do?
- [35:48]
Kevin Simpson
Well, I don't know if this was a good trade or not, Scott. We covered it up about a week ago, week and a half ago on the 120th, expiring tomorrow on the 17th. Then yesterday we covered it again on the 125s. Also expiration expiring tomorrow, thinking we would be able to take some real nice premium in which we did. But with gold at a $3300 price target or current price, this Agnico Eagles at a 52 week high of around 124. We may have to roll the 125 tomorrow, we'll see about the 120s. But believe it or not, this thing's up almost 60% year to date.
- [36:19]
Scott Wapner
Wow. Wow. Because you can't say that about a lot of names.
- [36:22]
Kevin Simpson
There's always opportunities.
- [36:24]
Scott Wapner
What if you had thrives? Kramer says there's always a bull market somewhere. There's some interesting calls today as well that we want to get to. Morgan Stanley making several related to machinery and construction. Caterpillar is an interesting call today. I'm coming back to you because Morgan Stanley's taken off their sell rating. They upgrade it to equal weight, but nonetheless it's not a sell anymore. They do dial back the price target their expectations to 283 from 300. And they say after the stock's recent underperformance, they think the market is more appropriately calibrating the near term risk. What do you think? Yeah.
- [36:59]
Kevin Simpson
So unlike Agnico Eagle, this is down 20% year to date. So we did add to it last week. You have to look at this as a longer term investment, not a trade. Especially considering everything that's happening globally. But they have a management change, a leadership change. The CEO is taking over on May 1st. So he's going to succeed. Jim Umpley. Joe Creed has been at the company for a long time. Really, really well positioned to lead this into the next, the next phase of growth. But I wouldn't expect it to move quickly. I think this is again a little bit more of a grind.
- [37:28]
Scott Wapner
Okay, Joe, part of this call all stocks you own here. United Rentals, Paccar, Cummins, Vulcan. Price targets taken down everywhere. Now they may like still some of the, some of the names, but they.
- [37:41]
Joe Terranova
Just reduce everything thing and they should reduce everything. So in the industrial sector, United Rentals, Paccar and Cummins, these are three of the worst performers that we have. We'll see what we do with them at the end of the month. The same can be said in the material sector for Vulcan. So in the material sector, what do I prefer? I prefer Echo Lab over Vulcan Materials. In the industrial sector, I would look at Rollins or Republic Services over the three names they cite.
- [38:07]
Scott Wapner
There's an interesting call on Alibaba today. You know, we talk about this trade war with China every day. Weiss used to own the name. I don't think you do anymore, Joe. Still does. And it was called a top pick at jpm. Quote, some of the China Internet stocks could be even more countercyclical. They say in general we think the impact on online consumption will be insignificant. Baba is their top pick. They like Trip, they like Tencent as well.
- [38:30]
Joe Terranova
Sold a little bit. I think I sold half my position at 138 when I came back back from Florida. I spoke with Steve the other day about buying back some of it. He talked me out of it, I think. So I'm just going to sit with the half remaining position that I have currently and see how this environment plays out because I don't think, I mean Baba has a clear sensitivity to what's going on.
- [38:49]
Steve Weiss
And what if you, what if they get delisted? Right. You their variable insensitive, won't go into long detail. But you only own a revenue stream. You don't own any assets. So if they get delisted listed and you have to own the listing in, in Hong Kong, then, then you can have issues, you can have issues collecting. Definitely the companies that can't own foreign stocks will be investments in mutual funds will be mass sellers right away. So I just don't see the upside here.
- [39:20]
Scott Wapner
Right now I'm looking at some stocks, three stocks in front of me here that have done really well year to date. And one of them, Kevin, is T Mobile, Verizon, AT&T Mobile. We can throw all of them up year to date if you guys want to cycle through those. Just to show our viewers what I'm talking about. BofA reiterates their buy rating on TMUs. They take the price target up to 295. They had it at 255.
- [39:47]
Kevin Simpson
Maybe this is the lesson, Scott, in going back to the chips and the semis to buy them when they're down because there were three or four years in which these stocks couldn't get out of their own way and you were just clicking coupons for dividends. T Mobile is up over 60% the past 12 months, over 20% this year. They have earnings on the 24th. We expect them to be really good. So I'm behind the call and I'm glad we're in the space.
- [40:06]
Steve Weiss
Yeah.
- [40:07]
Joe Terranova
I think another message that we could share with all the viewers is look, center court is clearly semis and technology names. It's been that way for the better part of the last several years. But look at the performance of equal weight today. Ms. Dallas slightly down a couple of bips. And I think there's the message really for the long term investor is okay, maybe 20, 25 is the year that you maintain positioning in some of these semis and technology names. But, but look elsewhere, look into other sectors, look into health care, look at Sancora look at Boston Scientific Financials. We talk about all the time some of these insurance names, but there's other names like Arthur J. Gallagher, WR Berkeley. So I think there's an opportunity to kind of go to places that have been underappreciated the last several years.
- [40:49]
Christina Parts and Avalos
I think there's some interesting trends around these calls. You know, first of all, defense has been the way to approach this market and that's why telecom, Staples, utilities I think will continue to outperform. But one quick comment on the industrials and if I'm looking at the Goldman Sachs US onshoring beneficiaries basket, it has names like Caterpillar, it has names like United Rentals. So if you're playing the long game, if you can stomach some of the short term volatility and if you think that the end game is actually going to bring supply chains into the United States and we're going to build those factors here and they're going to be factories of the future, that's going to require a lot of that technology. I think maybe that's the buying opportunity right now in some of those industrials.
- [41:27]
Scott Wapner
Okay. Well speaking of short term, coming up, the booming business behind short term options. Kate Rooney breaks down who's driving it, what the risks are are around it as it relates to your portfolio. We will discuss next.
- [41:58]
Anastasia Amoroso
All right.
- [41:59]
Scott Wapner
Welcome back to the Halftime Report. A lot of talk lately about the role of certain type of options trade might be playing in this increased market volatility. RK Rooney following the money for us and has more from San Francisco. Hi Kate.
- [42:11]
I
Hey Scott. Yeah, so these short dated options have seen an explosion lately in popularity, especially those that expire the same day. It is partially thanks to more hedging traders wanting to take a more defined risk. But they've also become widely available to retail investors who now make up the majority of action and what can be a really risky corner of the market. In April, JP Morgan noted reported about a 23% jump in zero days to expiration options tied to the S and P. These expire, the name suggests at the end of the session, same day. They are designed to trade intraday moves and they're volatile. They're really all or nothing trades. And five years ago if you look back, these made up 17% roughly of all options. Now it's closer to 54% of all of the activity. Part of this is wider availability on exchanges and brokerage firms. Robinhood was the latest to roll these out the same day options earlier this year. Cbo tells me 60% of those short dated options volume is coming from individual traders. That is well above what you see for retail participation in other types of options. It's closer to 40% overall. The options market has been growing. Interactive yesterday during earnings mentioned a quarterly record for their options volume. And it's not all gambling investors do use these for downside protection. The bond market I'm hearing is also one factor here for the recent boom. Treasuries you guys have talked about hasn't been the greatest hedge. So options appear to be picking up some of that slack. Scott?
- [43:36]
Scott Wapner
Yeah, a really good tee up for us, Kate. Thank you. Kate Rooney out in San Francisco for us. You have thoughts on this?
- [43:42]
Joe Terranova
I know, look, I do. I think market structure has changed so dramatically. Personally I think it's to the detriment of market conditions. But you have to acknowledge institutions have, have embraced the usage of zero dated options. I know we're reporting on that. Retailers participating and here's the degree that they're participating. You're talking about options volumes that exceed 1.5 million on a daily basis. Talking about just alone halfway through the day. Options expiring tomorrow have exceeded 1.5 million in Nvidia. Institutions have embraced them. What does that mean? That means algorithm algorithms are being written. Algorithms are being written surrounding the zero dated options and literally towards the end of the day the movement between 2:00 and 4:00 is being driven without any news. Not on a Fed day, not the White House stepping in on a day where there's no news flow. From 2 to 4 o'clock the direction of the market is being driven by zero data.
- [44:44]
Scott Wapner
So you, you agree then with the concept that it has added a degree of volatility in an already hyper volatile market environment?
- [44:54]
Joe Terranova
Is that fair to say exacerbates volatile conditions and in non volatile conditions it actually suppresses the volatility. It is the dominant force as we move towards the close. Every day between 2 and 4 o'clock you watch those options, the underlying on individual names and on the spy, the qqq, the iwm. And you could see where we're going to go into the close.
- [45:20]
Scott Wapner
Well, all right, we got to take a break but we come back. We'll find out from Kevin. Another move. Stock that reports earnings tomorrow. It's in the setup next. All right, the setup. Amex. So it's going to report tomorrow before the bell. You bought more a week ago Monday and you actually sold some yesterday. Take us through what's going on.
- [45:42]
Kevin Simpson
Yeah, just real quickly, we have a $300 call that's going to expire tomorrow on it. It pulled back a lot last week at 235, we added. It's run quite a bit. I think it's 256 now. Yesterday, Scott, we were forced to trim it back. It was up $20 and it became a too large a position for us. I think the earnings are going to be stellar. It's going to be outstanding. But the problem is it's backwards forward looking and I don't know how much that's going to matter to the markets moving forward.
- [46:06]
Scott Wapner
Yeah, good point. We'll see what they say as well. You know, the numbers maybe are sort of insignificant, but it's the commentary. What do you think? You own it too, right?
- [46:16]
Joe Terranova
I do. I think Kevin did an eloquent job explaining of the setup for it. I think on any decline though, I'm a buyer.
- [46:23]
Kevin Simpson
Yeah, 100%.
- [46:24]
Joe Terranova
I want to stay in the stock.
- [46:25]
Scott Wapner
What about UnitedHealth? Because that's going to report as well. Weiss, you still on that?
- [46:29]
Steve Weiss
I do own it and it's, it's a pretty decent sized position. Look, I don't know. I don't know what the quarter is going to be. There are challenges. I don't know what the future is going to be near term in terms of what the government does with Medicaid. So there's definitely risks and there's also opportunity when it comes to it. You know, aside from social, socialized medicine in the UK Elsewhere, it's the largest insurer in the world for health care. It's a critical business that they're in. So I think the future continues to be extremely bright for them.
- [47:00]
Scott Wapner
All right, we'll take a break. We'll do finals next. I'll see you at three. On the bell. Robert Kaplan, Jeff Richards, Lauren Goodwin, Chris Harvey. I hope you'll join me as well. What's your final Robin Hood?
- [47:12]
Kevin Simpson
Joe gave us the great bull case on interactive brokers. I think Robinhood will have great numbers.
- [47:16]
Scott Wapner
Okay, thank you very much for that, Steven Weiss.
- [47:18]
Steve Weiss
I like the safety of two years year Treasuries.
- [47:21]
Scott Wapner
Okay. Okay. Anastasia Software.
- [47:23]
Christina Parts and Avalos
It's been a remarkably resilient month today and I think it continues. The margins are high and sticky.
- [47:28]
Joe Terranova
Jyoti and one of the software names that has been very resilient to the rest of the industry, Datadog.
- [47:34]
Scott Wapner
Okay. We will see what this market does. The NASDAQ is the big drag, as you know, down more than 2%. That's 367 points. I'll see on the bell. Now the exchange with my man Wilfred Frost. Hey Wilf, you've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [48:01]
Fidelity 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 in other medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer introducing CNBC.
- [48:42]
Kevin Simpson
Plus the new streaming platform from the.
- [48:44]
Scott Wapner
Number one source in business news. Watch live or on demand. Access any market, anytime, anywhere. Start Streaming.
- [48:52]
Joe Terranova
Go to cnbc.com stream now.