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Iran Conflict Continues, Energy Erupts, and a Market Sell-Off 3/3/26
00:43:13
President Trump says Israel did not force his hand to enter the Iran conflict, now in its fourth day. Oil and natural gas prices surge as the Strait of Hormuz effectively closes. Plus, an ugly day on Wall Street as the Dow falls nearly 1,300 points.
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- [00:00]
Kelly Evans
Everyone deserves to be connected. That's why T Mobile and US Cellular are joining forces. Switch to T Mobile and save up to 20% versus Verizon by getting built in benefits they leave out. Check the math@t mobile.com switch and now T mobile is in US cellular stores. Savings versus Comparable Verizon plans plus the cost of optional benefits plan features in Texas and fees vary.
- [00:25]
Peter Bocvar
Savings with three plus lines include third
- [00:26]
Kelly Evans
line free via monthly bill credits. Credit stop if you cancel any lines. Qualifying credit required. 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 Market Update podcast or find Schwab Market Update wherever you get your podcasts. Scott thank you very much and welcome to the Exchange. I'm Kelly Evans and take a look here at an ugly day on Wall street at its lows. The Dow was dropping almost 1300 points a short while ago as the conflict with Iran escalates. We've come back a ways from that. Dow is down about 600 points right now, 1.2%. Worst performer Russell 2000 the NASDAQ down 1 1/2%, little less so for the S and P. The real story today is in energy with oil spiking another 8% to $77 a barrel or so. Nat gas up about 5%. Nat gas up 70% in the last two days and trading at more than six times U.S. prices. And here in the U.S. prices at the gasoline pump are up 11 cents in just the past two days. Now as for yields, the 10 year top 409 at the highs it's around 406 right now and the dollar is at a six week high, pacing for its biggest weekly gain since October of 2024 that is pressuring commodities. Even gold is down nearly 4%. But we begin with the latest out of Washington. President Trump meeting with the German Chancellor moments ago. Eamonn Javors has all the latest from Washington.
- [02:08]
Eamonn Javors
Amen Kelly. We heard from the President in the Oval Office, as you say, alongside the Chancellor of Germany. It was his opportunity to lay out his latest thinking on the war in Iran. And the President was asked in that question and answer session with reporters what the worst case scenario would be in his mind for for this military operation. Here's what he had to say.
- [02:30]
Kelly Evans
I guess the worst case would be,
- [02:32]
Peter Bocvar
we do this, and then somebody takes
- [02:34]
Kelly Evans
over who's as bad as the previous person.
- [02:36]
Peter Bocvar
Right.
- [02:37]
Kelly Evans
That could happen. We don't want that to happen. That would probably be the worst.
- [02:41]
Peter Bocvar
You go through this, and then in
- [02:44]
Kelly Evans
five years, you realize you put somebody in who was no better.
- [02:47]
Eamonn Javors
Kelly, despite that concern that you heard the president voice there, that you could put somebody in who's no better than the person you just took out. The president did say that he's looking to break with the model that the United States used in Iraq, in which, you remember that de Ba' athification process in Iraq really removed all of the top layers of the Iraqi bureaucracy and really created a power vacuum. The president said that created ultimately isis, because all of those people were out of power and angry and hostile, and a lot of them were armed. In this case, the president's suggesting that he has in mind a model much more like Venezuela in which you can leave the existing power structure in place to run the government and sort of all the military operations that the government wants to run as long as there's somebody at the head of it that the United States can deal with. That is a big question at this hour whether anything like that could emerge. But that seems to be the president's thinking. Kelly.
- [03:42]
Kelly Evans
Right. And so now, of course, even we've heard his sort of thinking or clarifications on some of those fronts, including he did clarify a little bit about what Marco Rubio was saying vis a vis Israel and whether they forced our hand or as the president said, no, maybe we forced theirs.
- [03:56]
Eamonn Javors
Yeah, that coming off of those comments from Marco Rubio, the Secretary of State yesterday, Rubio said that the United States was facing an imminent threat from IRAN because the U.S. knew that the Israelis were going to strike Iran, and when they did that, the Iranians would strike back at US Targets. Rather than absorb that blow, Rubio said the United States decided to get in alongside the Israelis and their military campaign. That sparked a whole bunch of anger, particularly on the maga, Right. That the president had been led into this war by Bibi Netanyahu and the Israeli government. The president here in the Oval Office this morning very adamant that, no, it was the other way around. He was the one who forced Israel's hand. He was the one who made the decision. The president eager to stamp out any impression that he wasn't the ultimate decision maker here.
- [04:45]
Kelly Evans
Kelly. All right, Eamon, thanks for now. Appreciate it very much. Eamon Javors in Washington. If not for Iran, we would still be worried about private credit it's under a lot of pressure today with shares of Blackstone down four and a half percent, and that's about half the losses we saw earlier on. Let's bring in Andrew Slim and he's Senior Portfolio Manager at Morgan Stanley Investment Management. And Peter Bogvar is Chief Investment Officer at one point, BFG Wealth Partners. Welcome to both of you. Peter, how important would you say the ripple effects from the ongoing situation in software and private credit are relative to now this oil price spike that we have to deal with?
- [05:20]
Peter Bocvar
Well, you take private credit generally and the credits are lower quality, so much more sensitive to the economy around them. The interesting thing about private credit is that according to Fitch last week, their biggest default rates are actually in health care providers and consumer products. Software was number three. So this is wider than just a software thing. And if the global economy gets negatively impacted because the sustainability of higher oil prices, which I'm not necessarily thinking that's going to be the case, but if it is, well, then again you're dealing with lower quality credits that are with, with less quality balance sheets that are going to be much more susceptible to an economic downturn.
- [06:01]
Kelly Evans
Right. I mean, look at some of the issues with, you know, the KKR fund. That was a lot of 2020, 2021 loans. And we know the biggest issue before the software problem hit was higher interest rates. On that front. Peter, do you expect that on the margin we're going to have higher or lower interest rates as a result of what's going on with energy prices?
- [06:18]
Peter Bocvar
Well, it's an interesting response that the global bond markets, and I emphasize global, because we've seen a rise around the world in sovereign yields because of the worries about higher inflation driven by energy costs. If you look at the Fed funds futures this morning last Friday, we were pricing in 100% chance of two cuts and 40% chance of a third. And now we're down to just one cut with about a 65% chance of a second. So the bond market is quickly adjusting and saying, hey, with this jump in oil prices, whether it's sustainable or not, there's no way the Fed could be cutting interest rates going into this, which is important because if this leads to something more economically and oil prices and other commodity prices stay elevated, the Fed's going to have much less ability to address it via rate cuts.
- [07:05]
Kelly Evans
Andrew, this reminds me a little bit of the 2000 cycle where there was this whole debate about whether interest rates were too low or should go higher because you had oil prices and energy prices moving up while at the same time the housing bubble was building. So I don't know if, if you would say that that episode is instructive at all for what we could be going through now. And whether you think inflation or basically a consumer shock are the bigger possible sort of issues here to deal with because of what we're seeing with oil and gas prices, I don't think you're
- [07:36]
Andrew Slim
going to have a consumer shock, Kelly, because we also have tax refunds that are starting to hit. So maybe more of those tax refunds will go towards gas at the pump. But I do think that that is an offset. So I'm not, I'm not as worried about that. But what I do think is happening is there was such a consensus that the dollar was going to weaken this year that, you know, it doesn't surprise me. We're having a strengthening of the dollar and with that, you know, on a relative basis, you're seeing more money come back into kind of the very large US Stocks.
- [08:13]
Kelly Evans
What, Andrew, does that make you want to do positioning wise, the stronger dollar mean? You know, let's look at what was working the past couple of months. It was international stocks, commodities. Does the stronger dollar upset that Apple cart?
- [08:25]
Andrew Slim
Yeah, I think it does. And I think what is intriguing is if you look at, you know, really every quarter last year these companies reported, US Companies reported great numbers, but money, you know, kind of went elsewhere and the result was the S and P was only up by the magnitude of earnings growth really last year. And now you have companies that reported fourth quarter and they were great again and their stocks are down. So I think this is an opportunity really look for companies that, that continually raise estimates and the stocks are weak. And there's a lot of US Companies. I do agree though with, you know, some of the comments about software. Look this, it's, we're early in how that industry is going to be turned upside down. I'm not sure I would necessarily bottom fish in that area.
- [09:13]
Kelly Evans
I was just about to ask, so if you had to pick between tech and energy, where would you go? Or would you go somewhere else altogether?
- [09:19]
Andrew Slim
I wouldn't, you know, I'm not, I'm not a big believer. I'm a believer you own enough energy to not get hurt in these typ types of instances. But over time it's a commodity. And so I think this is the opportunity as the market is selling off other areas to really look for that dislocation between fundamentals and stock prices. So I would not chase energy. And I do know today, you know, Oil is up a lot, but the stocks are not up a lot. You know, I wonder whether, you know, that's kind of showing some tiredness already in that area.
- [09:53]
Kelly Evans
Peter, what would you say?
- [09:55]
Peter Bocvar
Well, even with this rally in energy stocks over the past month, and it's been one of my favorite groups that we own coming into the year, it's only about 3% of the S&P 500. So while tomorrow the strait of Hormuz can open up again and oil prices are going to fall right back down again, I still think that there's a fundamental bull case for the price of oil. And when the price of oil was in the 60s, I was arguing that it's one of the cheapest assets in the world. So I still like oil stocks. We're long then and but I also think that the non AI trade, which has clearly been a trend, is going to continue. So I think focusing on other boring things like consumer staple stocks which were long, is also a strategy and that the overall tech trade is exhausting itself and investors need to look at other places for returns.
- [10:47]
Kelly Evans
Yeah, like things that can't get gen, to use a phrase from Peter Bocvar, who I who was talking about this earlier on. Andrew, then just a final comment about some of the issues is we're probably going to hear from Aries and some of the other private credit vehicles for the remainder of this week. And you know, I guess it's the impetus is on these companies to keep I don't want to call it a panic, but to keep people from panicking, to keep these withdrawals from spreading. And to the extent they can say you want your money back, you can have your money back. Whatever we have to do to make that happen and keep this contained, probably the better it is for the broader markets.
- [11:21]
Andrew Slim
Look, I mean, I agree with what Jamie Dimon said. If you look at the problem so far, it sounds to me like too aggressive lending caused company banks to cut corners on due diligence. And that's what's gone so far. I'm not sure as a commentary on all of private credit, but we know a lot of money has gone into that area and some of it's in the retail area. So this doesn't surprise me. There is a shakeout. But you know, to me that creates an opportunity, you know, in the banks. And look, I think Staples, you know, my response to Staples is very expensive for their growth rates. They've had a very good run, but the growth rate of other areas that are down are much higher over time. You know, than staples. So I think this is an opportunity to, to take advantage of what the market has knee jerk reacted to. Don't chase the staples that have already done well.
- [12:19]
Kelly Evans
Just give me a quick kind of. Whether it's a name or a sector, Andrew, if, if you're not that big on, you know, energy or Staples or technology, we're, we're kind of ruling stuff out.
- [12:28]
Andrew Slim
I like technology.
- [12:29]
Kelly Evans
So, like, look at it, just not software.
- [12:31]
Andrew Slim
Nvidia is trading at 18 times, you know, 20, you know, next year's earnings, I mean, for a company is going to grow, continue to grow. And we've seen this movie before where they keep beating numbers and then people question the demand and it comes through and it goes up. I mean, the stock, you know, everyone says run out of steam. Well, Stock was up 40% last year. So I think this is your opportunity because they just came off a great quarter. But the market is focused on macro. So they're selling these big types of stocks. So I think those are the opportunities. You know, I would put Eli Lilly. How is Iran going to get in the way of our conflict in the way of GLP1 rollout? You know, I just think there's, you know, the macro is overtaking some of the stories that are very attractive from a micro standpoint.
- [13:19]
Kelly Evans
Love it. And thank you for getting specific. Always appreciate it guys, thank you. We'll leave it there for now. Andrew Slim and Peter Bocvar talking us through these markets. You heard them talk about energy prices there which are spiking across the board as the Iran conflict enters the fourth day. Crude up nearly 9% before paring some gains. Brent above 80 a barrel. Even more extreme moves in nat gas. Let's bring in Pippa Stevens with a run through. Pippa.
- [13:41]
Sima Modi
Hey Kelly. So let's start here with oil because you are seeing some big moves off the best levels of the day, but still up about 6% with Brent at 8212, WTI at 7526. As ship activity in the Strait of Hormuz comes to a standstill, there is now more than 95 and a half million barrels of oil loaded on tankers that are just sitting in the Persian Gulf with nowhere to go. According to Kepler Matt Smith noting that Iraq has started shutting in production because they are out of storage space. OPEC spare capacity, which is a lever for balancing global markets, also passes through the strait, meaning that is not necessarily available now because of the bottleneck. Costs for ships in transit are surging. The time charter equivalent for Very large crude carriers, which is essentially daily. Average revenue is now at $318,000 per day. That's up from just $38,000 per day at the start of the year according to the Baltic Exchange, up 740%. But the big mover is natural gas Europe. European price is now up 66% in the last two days, hitting $54 per megawatt hour. That is more than six times higher than here in the U.S. qatar is the world's second largest LNG exporter and their production is offline after an Iranian drone attack. Now, last year the US accounted for some 57% of Europe's LNG imports. Finally, take a look at gas, oil or European Diesel. More than 30% in the last two days. Diesel, often called the workhorse of the economy since it powers trucks and trains. And those costs, Kelly, will get passed along to consumers.
- [15:15]
Kelly Evans
It's like everywhere you look, really big moves there, Pippa. Thanks. Pippa Stevens, our next guest says as the closure of the Strait of Hormuz drags on, the issue becomes not just that ships can't leave, but that they can't even get in. Let's bring in Denton Cinco Grana, chief oil analyst at OP is Denton. Good to see you. What's the latest? We know.
- [15:33]
Denton Cinco Grana
Kelly, how are you? Good to see you again. Yeah, kind of the same thing. About 900 ships just sitting there waiting to wait to make their move. And like, like, like you mentioned, the issue necessarily isn't the ships leaving, it's the ships coming in. If this continues to drag on and on and on, you're going to see ships or countries have to shut in production because they're not going to be able to load, load barrels onto ships. It's going to back up into storage. They're going to use all the storage available. They're going to use all the storage tanks and pipeline line fill. And then the last resort is you have to start shutting down production.
- [16:07]
Kelly Evans
I thought I saw some headlines about Iraq on that front earlier on. So, you know, in the very, very short term, you know, when you have, you know, stockpiles being filled, that usually puts downward pressure on the oil price. But again, if they're going to have to stop producing because of this, how much higher could the oil price go?
- [16:22]
Denton Cinco Grana
Yeah, that's, that's, that's the million dollar question. Right. But again, we've seen go up 9, $10 over the last, you know, basically 48 hours WTI, not much less than that. It could go up into, into the 90s. If this continues, say a week and a half from now, we could be well into the $90 $95 per barrel area as this issue continues.
- [16:43]
Kelly Evans
And you know, this morning we spoke with one analyst who said, look, if they can kind of degrade the capability that Iran has to launch drones and missiles and kind of reopen the strait, maybe that could be done within 10 days. I don't know if that's an overly optimistic forecast, but you're kind of saying that, look, that's about the time frame that maybe the markets will give them the benefit of the doubt. Otherwise we're going to start seeing oil in the 90s and possibly even higher. It sounds like.
- [17:10]
Denton Cinco Grana
Yeah, that's absolutely right. And again, the strike could reopen and that would be great, obviously. But really the biggest thing is insurance. I mean safety and insurance. That's, that's what it boils down to which ships being stuck right there right now. Some of the, some of the options potentially for the administration is obviously backstop the insurance costs, but also naval, naval escorts through there. That could obviously get messy as this continues. So just kind of have to wait and see what happens. But for now, with the Straits being effectively shot now, Iran didn't do anything to shut it. It's basically the insurance company saying, hey, drop anchor and sit there.
- [17:47]
Kelly Evans
Is there anything else the US can do? I mean, obviously we don't have a huge cushion in the Strategic Petroleum Reserve and you'd need a very, very big one to get through something really prolonged like this. What else can we do to try to insulate consumers here from the fallout?
- [18:00]
Denton Cinco Grana
Yeah, I think there's several things that could happen. And again, I want to, want to definitely make it known that US Refineries are operating just fine. We don't import as much crude oil from the Middle east as we used to. I think based on the latest EIA data and they do a weekly preliminary thing, there's about 450,000 barrels a day that came from Saudi Arabia primarily that was going to a refinery on the Gulf Coast, I believe. But a couple of things that the administration could do is, and this happened in 2022 with several states, but offer a gasoline tax holiday that would save consumers some. Additionally, you know, we're in the midst of the switch over from winter grade gasoline to summer grade gasoline.
- [18:39]
Andrew Slim
Now.
- [18:40]
Denton Cinco Grana
Refiners are already starting to make some of that summer grade gasoline, but they could delay the start of the summer, summer grade gasoline being available on the street. So that could be something else that they could do as Well, I don't think a release from the SPRO would actually, would actually do much considering refineries don't necessarily need the extra crude oil right now. They're doing just fine. If anything. I think if there was a release from the spro, that oil would ultimately be exported.
- [19:03]
Kelly Evans
Right, Exactly. And that'd be a hard case to make I think for national security. Although at some point, if it's moving the oil price, maybe you come back to it. Denton, thanks for now. Appreciate it. Thank you, Denton. Cinco Grana joining us there from op is coming up a reversal in the tech trade as software outperformed semis so far this week. We'll talk more about that and which horse to bet on ahead. But first we'll talk the fallout for the global economy. With traffic in the Strait of Hormuz grinding to a halt. You heard 900 ships waiting as Denton just told us. How much longer can it continue? Get into that next on the exchange. This is the exchange on cnbc. Powerful doesn't just happen. You have to make it happen. So the moment Total Wireless offers a free Samsung S25FE with Galaxy AI when you switch to total 5G or 5G plus unlimited 3 month plan, you take the network as powerful as you with unlimited 5G data that won't slow you down. Now that's a total power move. Visit your neighborhood Total Wireless store device taxes and fees may apply. Requires new activation on a total 5G unlimited 3 month plan or higher. External port in and ID verification available only in Total Wireless stores. Limit devices per account. 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.
- [20:45]
Katie Stockton
Why have we asked our contractor we
- [20:46]
Kelly Evans
found on Angie.com to be our kid's legal guardian? Because he took such good care when redoing our basement that we knew we could trust him to care for our kids, all eight of them, should something happen to us?
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Katie Stockton
Are you my dad now?
- [20:59]
Andrew Slim
Uh, no, sorry.
- [21:01]
Kelly Evans
I do basements.
- [21:04]
Andrew Slim
Connecting homeowners with skilled pros for over 30 years. Angie, the one you trust. Define the ones you trust. Find pros for all your home projects@angie.com
- [21:14]
Kelly Evans
market is off the lows, but defense stocks are on pace for being slightly in the red today as well. It actually would be their worst day in about a month. And maybe that's, I don't know, a good sign. Or maybe it comes as concerns about America's supply of missile interceptors crop up. Capital Alpha Partners says those fears are being realized as Iranian missiles are impacting Israel. And there are reports the US Is relocating missile defense units from South Korea. If American assets are pulled, analysts warn the allies will have to reduce their dependency on the US Diversify suppliers, maybe even build their own capacity. My next guest says those concerns are partly driving today's market action. Joining me here on set is Michelle Crusoe Cabrera, the CEO of MCC Global Enterprises and a CNBC contributor. It's great to see you.
- [21:56]
Michelle Crusoe Cabrera
Good to be here.
- [21:57]
Kelly Evans
So it is a bit odd that we have a market that at least this morning was, let's not call it a panic, extremely concerned about what's going on, and yet the defense names are selling off a little bit. And so just kind of explain what you think is going on here.
- [22:09]
Michelle Crusoe Cabrera
So there's a huge difference between today and yesterday. Right. The market seemed to take everything yesterday in stride, and now things are very different. I think that has to do with the report that you just said. So I think there's two reasons. First, you know, Iran clearly sees this as an existential threat.
- [22:23]
Kelly Evans
The regime does.
- [22:24]
Michelle Crusoe Cabrera
And like a cornered animal, they're going to do everything they can to survive. So what have they done? They've attacked their neighbors. Bill, ask why would you attack your neighbors? It's not that they're attacking their neighbors. They are going after the energy supply
- [22:35]
Kelly Evans
for the entire world.
- [22:37]
Michelle Crusoe Cabrera
They want the cost of, of this war to be very, very high, so they're cutting off supply in any way they can. And the second reason related to that are there are assertions, unproven at this point, that they have many, many more drones than perhaps originally expected. And one of those drones, if they are successful at perhaps taking out Saudi supply, you now have oil above $100, never mind above 85.
- [23:02]
Kelly Evans
Right.
- [23:03]
Michelle Crusoe Cabrera
Remember, the concerns about Iran have always been threefold. First, the nuclear program. Everyone is familiar about that. Second, their sponsorship of terrorism all over the world, as far away as Argentina for them. Right. And the third has been their ballistic missile program, which wasn't covered under the original agreement under Obama. And afterwards, a lot of people agreed, geez, we shouldn't have just gone after the nuclear enrichment. We should have also gone after their
- [23:29]
Kelly Evans
ability to project that power.
- [23:31]
Michelle Crusoe Cabrera
And they do that with missiles and the Navy.
- [23:33]
Kelly Evans
And that came to the fore a little bit with the President's State of the Union, where it seemed like he wanted to put front and center. Look, this missile threat is now also, it seems, a more serious one.
- [23:42]
Michelle Crusoe Cabrera
Yes, they have been testing missiles and there have been concerns also assertions, unproven, that perhaps the Iranians were on the verge of creating an inter ballistic missile which could reach the United States. That was the justification in terms of the national security of the United States. But they do have a strong and impressive ballistic missile program, short range, medium range. And that's what this attack is about, is trying to get rid of that. That's why you want to eliminate the Navy too, because you can project missiles from ships out in the sea.
- [24:10]
Kelly Evans
And so as perhaps we are figuring out how much supply they might have, if that number is bigger than we thought, on the drones piece, the missile piece, what's going to happen to our allies? Some were saying that Dubai has seven days left, for instance, of interceptors to defend itself. I don't know if that report is, is true.
- [24:28]
Michelle Crusoe Cabrera
Right. So the concern about interceptors are these are the things that intercept the drones, they intercept the missiles. These are the things that stop those drones. They're very expensive. They are limited, just like missiles are. If there are more drones out there, then we're going to need more interceptors. And how are we going to get them? And are there enough? Does this war become longer than what the President said? Because right now, if it's just an attack on missiles that's contained, the reason war can go on and on and on is if they decide they're going to have ground troops, this is going to be a ground war. The President has promised that that is not going to be the case. We've heard that repeatedly. And the Iranians know that. Right. So they know that there's a short amount of time. This is the window. So in one way it's good politics and important for the President to say that. At the same time, it's also, you know, gives the Iranians a measure of what we're willing to stand.
- [25:20]
Kelly Evans
In other words, people kind of wonder if we, if we in Israel, who have enough technology to stop Iran.
- [25:26]
Michelle Crusoe Cabrera
That is the question. I would still always bet on the side of the United States. I mean, the military continues to surprise with a capacity and capability that people didn't realize. I mean, the arrest of Maduro was this unbelievable thing that people have come to realize just how strong our capacity and capabilities are. So, you know, I would bet on the side of the United States.
- [25:49]
Kelly Evans
You'd think if nothing else, we have some kind of broad based capacity to keep manufacturing supplies, whereas if the whole point is to take theirs offline at some point you have to imagine that we have enough, we or Israel to take those facilities offline that they have,
- [26:03]
Michelle Crusoe Cabrera
that the U.S. administration and the Defense Department have. Excuse me, the Department of War has thought of these things as well. And I think perhaps the concern about the defense companies is are they making the right stuff? Are we going to go to different suppliers as a result of the change that we are seeing in warfare around the world because of drones? We've had a drone war going on for a long time. It's called Ukraine and Russia.
- [26:28]
Kelly Evans
Exactly.
- [26:28]
Michelle Crusoe Cabrera
And we have been learning a tremendous amount about what happens on the battlefield there. I would think the US Military, which has been involved there, understands what those issues are and how to confront them.
- [26:38]
Kelly Evans
That's a great point about whether we're making the right kind of, you know, of stuff. Also, we've. Dan Clifton was on yesterday and he's just asking him about kind of any fallout for Russia. We're talking a lot about the knock on effect for China potentially. He said, look, Russia's drones are largely coming from Iran. And so if that supply is redirected or not available, could that lead, I don't know, to some kind of positive development on that or maybe that's thinking a little bit too.
- [27:03]
Michelle Crusoe Cabrera
No, no, I think that's certainly possible. Certainly possible. You know, when it comes to Venezuela, when it comes to Iran, people have said, well, where's Russia? Russia is bogged down in its own war.
- [27:14]
Kelly Evans
Right.
- [27:14]
Michelle Crusoe Cabrera
That's why they couldn't help Syria when Syria needed help. So yes, absolutely.
- [27:19]
Kelly Evans
Is there a weird situation though where if they, if there were some kind of of truce or something in that conflict because they no longer had access to the drones, could they get more involved with, for instance, propping up Iran or something to keep that conflict going or is.
- [27:33]
Michelle Crusoe Cabrera
I think they would try to help for sure. Still, even if there was a cease fire, even if there were better relations with the United States, certainly they're a longtime ally of Iran and I don't think that would change unless there is regime change in Iran, which is a whole other question that we're waiting to see.
- [27:47]
Kelly Evans
And is there anything quickly on that topic you would add before we go? Because it seems some. Regime change is an interesting word because there's only one regime. There's been only one regime there for 40 years. It's hard to to see what so
- [27:59]
Michelle Crusoe Cabrera
the one thing I would say is I think when President Trump talked about regime change, a lot of people said, oh, that's the goal. Absolutely. The president wants regime change in Iran, there's no doubt about that. I'm not sure that's the goal of these attacks. The goal is the navy and the missiles. However, I think the message was when he talked about that was it's up to the Iranian people. We can't do everything for you. And to anyone within the upper echelons of the government that wants to to try to mount a coup, this is
- [28:27]
Kelly Evans
your moment, right, man? We'll see if they can seize that moment. And to what end, Michelle Thanks, Michelle Crusoe Cabrera Coming up, why the battle between AI startups here in the US could be driving more traffic to the competition in China. Big fight there with the Defense Department or War Department as well. And speaking of AI, Target having its best day since April after the retailer said it's on track to end its recent sales slump. The shares are now up seven and a half percent. We're back after this. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford 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 UPD update wherever you get your podcasts. Why have I asked my electrician I
- [29:28]
Stacey Rasgum
found on Angie.com to bury my pet hamster?
- [29:30]
Kelly Evans
I was so moved by how carefully he buried my electrical wires. I knew I could trust him to bury my sweet nibbles after his untimely end.
- [29:36]
Andrew Slim
This is very strange, Angie. The one you trust. Define the ones you trust. Find pros for all your home projects@angie.com Close your eyes.
- [29:43]
Kelly Evans
Listen to Monday.com Feel the sensation of an AI work platform so flexible and intuitive it feels like it was built just for you. Now open your eyes, go to Monday.comstart for free and finally breathe. You just saw some of the market laggards on your screen there and here's a look. Broadly we are well off. The session was very similar action to what we saw yesterday. Obviously we started the day down big and then we're recovering throughout the afternoon. Don't want to make too much of it. The dow still down 435 points though, the NASDAQ down a percent. The Russell down one and a half percent and Bitcoin is hovering around 68,000. The crypto related stocks are under some pressure on that. And the metals are falling sharply. Gold coming off its highest level since January. The dollar having a very strong day has something to do with that. The dollar index back into positive territory on the year now trading over 99. Speaking of which, that's also exerting some pressure on emerging markets which are having one of their worst days in years. Let's bring in Sima Modi with more on that move. Hi, Sima.
- [30:43]
Sima Modi
Hey, Kelly. And those, those moves that we're seeing in the emerging market, ETF selling accelerated after President Trump's latest comments. This is now the biggest intraday plunge since March of 2020. So dating back to the pandemic. And yes, the Middle east conflicts has certainly injected fresh layers of uncertainty on what was once a winning trade for investors. Right. Losses really being led by South Korea. The bigger names there like Samsung and Sky Hynix. So these memory companies that have ridden the air wave are leading the losses today across emerging markets. The focus though has primarily centered around the oil importers like India and China, the duration of the conflict and how quickly inflationary pressures could start to hit these two economies. For India, Bernstein writing that a $10 per barrel increase in oil prices translates into roughly 12 to $13 billion dollars of additional import costs. It's expensive, not to mention complicated with its Middle east partners like Iraq, Saudi Arabia, UAE and Kuwait accounting for roughly 55% of its total purchases. And they all use the Strait of Hormuz. So we're watching that passageway closely. According to the latest information we have from New Delhi, the the country has, Kelly, about 74 days of strategic petroleum reserves as it stands right now.
- [32:00]
Kelly Evans
Now yikes. You know, when we start counting the days of reserves is not, not a great place to be at Japan. Korea obviously feeling some pressure there as well. The Korean market, SEMA was down what, 7%?
- [32:09]
Sima Modi
Exactly 7% today. And the loss is primarily tied to the automotive sector, technology as well. Because if we take a step back, South Korea has been one of the best performing stock markets so far this year. A lot of it being ridden by artificial intelligence and looking for those opportunities and companies that are based outside the US and that's where SK Hynix and Samsung have played a leading role.
- [32:30]
Kelly Evans
Yeah. All right. For now, Seema, thanks very much. Definitely an unwind of the patterns we've seen so far this year. To Christina Parts and Evilus now for the CNBC News Update. Hi, Christina. Hi Kelly. Homeland Security Chief Kristi Noem refused to retract her earlier statements, calling two people killed by immigration officers, immigration agents, I should say, in Minneapolis, domestic terrorists. She said she was just relying on information from people on the ground following the fatal shootings of Renee Good and Alex Preddy. Today's congressional appearance that you're seeing right now is her first since their deaths. A Georgia jury decided today the father of an accused school shooter should be held criminally responsible for the actions of his son. Colin Gray's case is one of several where prosecutors have charged parents whose children
- [33:15]
Michelle Crusoe Cabrera
are accused of fatal shooting.
- [33:17]
Kelly Evans
Authorities say the 14 year old Colt Gray took an AR15 rifle out of
- [33:22]
Michelle Crusoe Cabrera
his home in September 2024 and then
- [33:25]
Kelly Evans
gunned down four people at his high school. And Anthropic's Claude Chatbots has surged to the top of Apple's free app chart since its public fallout with the Defense Department. The company says free users now have access to its memory feature, which allows Claude to remember past conversations. Anthropic will also use it to make it easier to import conversation histories from other chat bots. They're all Kelly, Christina. Thank you, Christina. Parts and evil is coming up. Why are the semis under pressure? They're among the worst performers in the NASDAQ 100 today, the SMH severely underperforming the software names. We'll debate that next. Back look at the Nasdaq. Coming back from steep losses still down 8. 10 of a percent. The software names helping though to reverse course. The sector ETF turning positive in the past hour with names like Adobe, ServiceNow and Workday all driving the big reversals. On the flip side, the semi stocks are falling hard and unable to turn positive. Micron is down 7% now, 4 1/2% drop for Intel. Having some more trouble finding their footing along with the broader market. The performance gap in the past two days between the software and the SMH is now the widest in favor of Software and since 2025. Let's bring in Stacey Razg on. Stacey, it's great to have you here. We're going to talk kind of technicals with Katie Stockton in a moment and she's going to look at Micro. I don't want to steal her thunder, but warn a little bit about what's going on with the semiconductor names here. So from your fundamental point of view, do you think these stocks ran too far?
- [34:59]
Stacey Rasgum
They can argue too far, not far enough. But I mean they've had a very big run year. I mean the stocks overall are still up 10 or 11% year to date. Top, I can't even remember 7, 75 or 80% year over year. And you compare that with the software names, your software is probably down 20% year to date. I mean, it's been a really nasty couple of months. I find it actually very interesting. Some of these dichotomies, like a lot of the software have been trading like AI is an existential threat to their business. And yet some of the semis more recently have been trading like AIs in a bubble. And one of them presumably is wrong. And even within the semis we've seen a bit of reversal, like some of those compute names in video and Broadcom, for example, that have actually been lagging the memory names and the semi caps. I mean, Nvidia is still down today, but it, but it's outperforming the stocks like pretty markedly. So we've got even some of the reversals of these trends even within semis.
- [35:53]
Kelly Evans
Exactly.
- [35:54]
Stacey Rasgum
As well as the broader trend between the perceived AI winners and AI losers semis and software and everything else.
- [35:59]
Kelly Evans
Look at Broadcom.
- [36:00]
Stacey Rasgum
I don't know if they run too far or not, but I mean, you know, some of the, you put this within the context of the broader, you know, you know, the Iran war and people worry about oil prices and macro and you know, just broader worries about disruption. I'm not surprised to see a bit of, of, of some of these reversals.
- [36:19]
Kelly Evans
Broad comes up 68% in the past year, by the way, Nvidia is Now up about 46% over the past year. So you know, we keep teasing it, saying, oh, you know, hasn't done anything in nine months. Well, I mean, I'd still be happy to own this versus some of the other things going on. And to your point, if the second or third derivative plays here like in the memory chip space are going to be much more volatile maybe. Look, our investor, top of the hour, said Nvidia he thinks is like a screaming buy here. Is there any reason why you would disagree with that?
- [36:50]
Stacey Rasgum
I really like Nvidia here. I mean, you know, we can argue, you know, it's are we at peak or not? Some of the arguments are it's just so big, it's hard to get more money in to it. Like I get all of that at the same time though. I've never seen it, you know, it certainly hasn't been this cheap, especially relative to the broader semiconductors industry, probably in a decade, maybe longer. And I mean, numbers are, I mean, look, numbers are Going up. I still think we're early on the ramp. I still think that worries about peak are overblown, these valuations. Yeah, I'd be an owner. Absolutely.
- [37:23]
Kelly Evans
Can both of these things be true? That we're early on the AI ramp, which. Which seems kind of obvious, but also that the memory names are priced for. Maybe you can describe it better than me.
- [37:35]
Stacey Rasgum
Yeah. You know, so you have this, like, is interesting dichotomy. The compute names have been, you know, they're up a lot year over year, but they've been sort of lackluster for the last couple of quarters. And in the meantime, a lot of the peripheral names, memory and semi cap and optical and everything have just been ripping. And I think investors have been playing the constraints rather than the drivers of this, the compute. But you sort of look at this divergence between the two, and one of them presumably is wrong. It's unlikely, in my opinion, that what is getting priced in for memory or semicap or whatever can happen if the compute names, you know, if the scenario that seems to be pricing the compute names actually happens. So I suspect that there is opportunity for normal, for normalization one way or the other as we go forward. And again, I'm a big fan of Nvidia here.
- [38:24]
Kelly Evans
Yeah. Today that normalization seems to be resolving itself in favor of Nvidia, you know, in that direction. So we'll see. Stacy, thanks for now. Appreciate it.
- [38:33]
Stacey Rasgum
Yeah, you bet.
- [38:33]
Kelly Evans
Stacey Rasgum Bernstein. Coming up, OpenAI and Anthropic turning the AI trade on its head. But is China about to flip the script on them? How the battle over a Pentagon contract could give way to Chinese AI dominance next. Welcome back. The drama between the Pentagon and our AI companies is highlighting the broader risk for the US that China's unified strategy in military AI will give it the ultimate edge. Deirdre Bosa has more in today's tech check. Deirdre. Hey, Kelly. So the AI trade, it was built on a core assumption, American dominance. But. But that is falling apart just as geopolitics are picking up and Wall street is noticing. Investors have already been asking whether the trillions of dollars being poured into American air infrastructure will pay off. Now at this, the American air labs supposed to justify that spending are fighting with the Pentagon, they're fighting with each other, and they're losing users to Chinese competitors in real time. The government, of course, not helping. Instead of building a coherent national AI strategy, the Pentagon is blacklisting American companies over safety guardrails while fast tracking a deal that even the winner admits was rushed. Now even worse, America's infighting over the last few days, it is accelerating. This shift, when Cloud crashed Monday after hitting number one on the App Store, an executive at Chinese Airlab Jeep who posted that traffic to their model was surging to absorb the users. Then Deep sea saw its US downloads jump 20% in a single day according to sensor tower data. And of course, its next major model is expected next time to China's biggest political meetings of the year. You also had Emil Michael, undersecretary of defense. He was on our air this morning essentially writing off Anthropic, one of America's top AI labs. The contrast, Kelly, with China's unified strategy. It could not be starker coming out of the events of the last few days. Important reminder, Deirdre, as this goes on. Deirdre Bosa, thanks. In today's tech check coming up, we might be off the lows of the day, but our technician says stay on the sidelines for now at least. Those details next. Welcome back. Stocks repairing their losses today. The dow is only down 305 points right now. But my next guest says she doesn't see today's sell off as a buying opportunity. Let's bring in Katie Stockton, Fairlead Strategies founder and managing partner and a CNBC contributor. Katie, it's good to see you. And look, I don't know if the market action has already kind of changed your view on that at all. Welcome.
- [41:03]
Katie Stockton
Thank you. You know, today is really not a breakdown, but nor is it something that's generating short term oversold conditions. The S&P 500 has been rangebound for several weeks now and that range is still intact as long as support, which is right around 6750, remains intact. We've upheld a neutral short term bias, so that still stands. But of course, we've seen momentum deteriorate over all different time frames, short term, intermediate term and even long term now. So we're somewhat concerned by that. And we don't think it's right to rush into the market, especially with the volatility pickup that we've seen. The vix, which we of course track as a gauge of transactional sentiment, has broken out to the upside. And that's a contrarian negative for the S&P 500.
- [41:52]
Kelly Evans
And while many have been talking about broadening or going small, you're actually saying the small cap action could be even worse.
- [41:59]
Katie Stockton
When you look at the ratios of these small cap proxies like the Russell 2000 index to the S&P 500, they've done very well. The 200 day moving averages have turned to the upside, meaning that the phase of outperformance is likely a significant shift favoring small caps. However, the ratios got a little overextended based on our measures that demark signals that we track flash sell signals recently to suggest that we'll see not only pullback in absolute absolute terms but also relative terms, small caps versus large caps. And I think we saw inklings of that this morning. When referencing the S and P futures and the Russell 2000 futures, you would see that the oversized declines were certainly there for small caps.
- [42:40]
Kelly Evans
What about this sort of semis versus software? But no one's making people choose sides. But do you find it noteworthy the way that like micron down 7% today, Broadcom, I think they have earnings coming up. What do you think?
- [42:55]
Katie Stockton
I think it's really interesting. I mean it's been the ultimate pair trade, right to be long semis and short software. But finally we're seeing signs of exhaustion that are more than just short term the ratios. If you take SMH as a, as a proxy for semis and IGV as one for software, the ratio has a new sell signal to suggest that we'll see nine weeks of counter trend performance. Meaning that semis pullback in relative terms to software we're already seeing in cleans of that. Micron is a great example with its pullback, but not just a pullback today, it's also a gap down. And the gap down to me looks somewhat of the breakaway nature, meaning that we should see immediate downside follow through and that would then jeopardize Micron's 50 day moving average and put next support almost 15% below, which is simply a function of how far and fast Micron had rallied ahead of this pullback. So that's what happens with these high flyers and upside leaders. The pullbacks can be pretty dramatic, I can imagine.
- [43:55]
Kelly Evans
So maybe we can pivot and talk a little bit about oil prices now nat gas. Do these breakouts suggest something significant to you and sort of ongoing upward price momentum or is it a wait and see?
- [44:08]
Katie Stockton
Yeah, you know we've expected crude oil prices to rally for some time. I think right now with these gaps up and all the volat volatility out there, I don't know if now is the time to add crude oil exposure. We're looking for a pullback in many of the energy stocks that have run up so far in fast as well. We have some signs of short term exhaustion there, but we believe that these are Major breakouts in the energy complex that we've seen. Natural gas is more of an oversold upturn and does look poised for short term upside follow through. And if you zoom out on NAT gas, it does appear to have maybe a trading range or basing phase in place. But it's those short term swings that traders seem to want to take advantage of with the volatility in NAT gas. And this next swing we think will
- [44:52]
Kelly Evans
be to the upside or maybe look to alternative sources like Cole. My words, not yours. You know, we don't have to get too in the nitty gritty here, but you can kind of follow people's line of thinking as they look to energy shortages and what usually steps up to fill the gap. Bitcoin. Katie Gold. What? And maybe the dollar. I don't know if you'd lump them together. There's.
- [45:12]
Katie Stockton
Well, the correlations kind of break up and then get back together. But we have seen stabilization, interestingly in bitcoin at a time when you wouldn't necessarily expect it just from a risk on, risk off type of perspective given market sentiment globally. And yet they're trading much like the software complex and they've been very positive. Or Bitcoin and other crypto currencies have been positively correlated to the software sector. So I would almost use that correlation to guide my near term position positioning. We have a neutral stance given signs of downside exhaustion but still no real major relief in terms of downside momentum from anything more than a very short term perspective for bitcoin. But Gold you would think would be kicking in here as a safe haven asset class. It had inklings of that, but it had run up pretty nicely ahead of this news. And now we have a gap down and some downside today that would lead us to not want to chase the rally that we've seen in precious metals. There's some signs of exhaustion there that we think are meaningful and inform for more consolidation over the next few weeks, if not longer.
- [46:20]
Kelly Evans
All right, I'm getting defensive after this. Going like a turtle hideout in the software names. Who would have thought? No? Katie, thanks very much. Appreciate it today. And that's it for us here on the Exchange. I will join Brian Sullivan for power Lunch right after this quick break. Look at these reversals. Why have I asked my H Vac guy I found on angie.com to change my grandpa's trachea tube Because I was so amazed by how quickly he replaced our air ducts. I knew I could trust him to change Pop Pop's tube while I was on vacation. Make it quick, young man. Aw, See, Pop? Pop trusts you. I think we should call a doctor.
- [47:01]
Andrew Slim
Connecting homeowners with skilled pros for over 30 years. Angie. The one you trust to find the ones you trust. Find pros for all your home projects@angie.com.