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Iran Deadline Looms, Under-Priced Oil Risk, and Opportunities in Semis 4/7/26
00:43:43
Equities under pressure after President Trump ramped up threats against Iran ahead of his Strait of Hormuz deadline. Crude hits $116 a barrel, but S&P Global's Dan Yergin says the oil market is under-pricing risk. Plus, we go stock picking in the semis sector.
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Kelly Evans
You're listening to THE Exchange. Here's today's show. Thank you very much, Scott, and welcome to THE Exchange. I'm Kelly Evans. Take a close look at the markets which are off session lows but still down 235 points right now for the Dow, that's a percent drop similar for the S&P 500. Hopes were fading for a deal before this 8pm deadline. We have seven hours to go, although there are reports from Axios that there is a glimmer of progress in talks. That's in the past half hour or so. We'll keep an eye on to see if that changes the trajectory here. And with the US Reportedly striking several targets on Iran's Kharg island where they export oil that has prices rising and stocks lower this hour. The Nasdaq was down 1 1/2% at the lows. The Vix volatility index jumping to nearly 27 as you can see there. As for oil, we hit 117 earlier on WTI. It's up 5% in two days and up 75% since the war began. The president in a truth social post this morning warning that a whole civilization will die tonight. He says, I don't want that to happen, but it probably will. Although he added, maybe something revolutionarily wonderful can happen. Who knows? On that note, let's get right over to Megan Casella. She is at the White House with the very latest at this hour. Hi, Meghan Kelly.
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Megan Casella
We are very much on the brink at this point of a vast escalation of this war. Both the US And Iranian sides ramping up their rhetoric and their action ahead of what the president says will be his final deadline tonight. And diplomatic talks do appear to be on shaky ground. A Pakistani government official close to the peace talks telling our colleagues at Ms. Now that there is no hope that anything will be confirmed today following U. S. Israeli attacks on Iran and Iranian attacks inside Gulf states. It's looking very unlikely. And then the only thing we've heard directly from the president so far today you mentioned this was that inflammatory true social post where he warned that a whole civilization will die tonight, never to be brought back again. He added that he did not want that to happen but that it probably will. And Kelly, it remains unclear at this point what sort of a deal to avoid escalation would satisfy both sides. The president saying that he needs to see free flow of oil through the Strait of Hormuz, but the Iranians saying that they will not open the strait in exchange for what they call empty promises and saying that they're not interested in a temporary cease fire. One point though, possibly in favor of a diplomatic resolution. Vice President J.D. vance earlier this morning saying that the White House is confident that it will get some sort of a response from the Iranians before 8pm tonight suggesting there could be potentially room for a way forward.
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Kelly Evans
Kelly, Megan, say that last part again real quickly to make sure we caught that.
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Megan Casella
That was Vice President Vance talking with reporters in Hungary where he is earlier today. And what he said was that the US Is confident that they will get some sort of a response from Iran before the 8pm deadline. He said he didn't know if it would be positive or negative, that sometimes it's slow to get a response from the Iranians, but he did think they would get something that suggests that at least negotiations are ongoing and that he believed as of this morning that there potentially could be room to move forward.
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Kelly Evans
All right, Meghan, thanks very much. Appreciate it. Megan Kisella, the energy markets, as you see, are on edge as time runs out to strike any kind of deal. Let's bring in Dan Jurgen for more. He's the vice chairman of S and P Global along with Charles Kupjen who is a senior fellow at the Council on Foreign Relations. Really great to have you both here. Charles, if you don't mind just kind of kicking it off with the latest diplomatic geopolitical analysis that you can have with this deadline looming.
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Charles Kupchen
Well, you know, Trump has walked back from deadlines before on Iran, on Greenland, on tariffs. I don't think he's going to walk back from this one. And I say that in part because of the start nature of the pronouncements today. Hard to back away from threats to end Iranian civilization, to hit them hard. And secondly, Trump's under time pressure. Right. This is war that has gone on longer than he expected. The impact on global energy markets is huge. And I think Trump needs to move quickly to try to, to end the war. I'm not optimistic that we're going to see a breakthrough in the next 12 hours or so. Let's, let's wait and see where we are at 8pm but so far, the Iranians don't appear to be ready to meet any of the demands that the Trump administration is putting forward.
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Kelly Evans
Dan, what does that mean for oil prices? If, you know, I've seen people now saying this could go on for a decade, we see that the price of oil has had a little bit of a delayed response as it shows up in the markets, kind of the shortages. So does it get worse from here?
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Dan Jurgen
Well, of course we are. Unless the strait opens up, it will get worse. It's already getting worse. You know, you have that futures price for Brent, but if you look at the price that Brent is actually trading at for physical cargoes, it's more like $140. And you have shortages, you have rationing in one form or another, restrictions being put on in Asia, you have jet fuel getting tight in Europe. And so we're already in it. And as long as this goes on, the longer the pressures in the marketplace.
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Kelly Evans
Is there any other way for the market, Dan, to clear the oil supply out of this part of the Mid East? Is the strait the only. You know, yesterday we spoke with Richard Haass who said maybe we should do some kind of blockade, I think at the port of Oman or the Gulf of Oman, which is slightly to the east. And because Iran now has a situation where they're letting cargoes through, I guess if they pay in one or stablecoin, and if they're not involved with Israel
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Dan Jurgen
or the U.S. and of course, the Iranian oil itself is getting sold and it's getting sold at higher prices going to China. So that's one possibility. The one relief valve that's really here is that the Saudis, because of the Iran Iraq war in the 1980s, built this pipeline system. So they're able to send a substantial part of their normal exports to west to the Red Sea and export them those barrels. The UAE has a pipeline that can get out, you know, maybe about 1.5 million barrels a day, except the Iranians keep attacking it. So on balance that maybe, you know, at the, at the minimum, maybe 10, 12 million barrels a day are not getting to the to the market, others are there, but these markets are disrupted. And I'll tell you, there's a real split between sort of the financial markets and which are kind of expecting some kind of short term, this will get resolved. But if you look at the physical constraints, I think you'll hear from the industry, and we heard this at our Syra Week conference, that risk is that the price is under, is underpricing, risk is underpriced Right now, given where we are and the kind of rhetoric and the language that we're seeing. And I think the other thing to say is the Iranians, I think, have made it pretty clear if they're basic infrastructure gets attacked, then the infrastructure of the Arab Gulf states gets attacked. And that's not only factories, that's not only military installations, but it's also desalinization plants.
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Kelly Evans
Charles, the sort of threats against bridges and power plants that the President is making, is that specifically so that it would keep the Iranians from having missile capacity kind of attack capability on the rest of the region? Would it actually, would it get directly to kind of stemming this retaliation that Dan talks about from happening?
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Charles Kupchen
Well, you know, I think the, the Trump administration expected that Iran would not have the ability to retaliate. Five, six weeks into the war, they're continuing to hit Israel, they're continuing to hit the installations that Dan was just talking about. They shot down a couple of American aircraft and others have been destroyed on the ground. So Iran is showing more resilience than I think anybody expected. I think Trump logic here is escalate to de escalate, hit them hard, hit civilian targets, hit people where it really hurts. Electricity, water, food, the ability to get around the country as a way of trying to get the Iranians to cry uncle. Is it going to work? We don't know. I think in the short term, Iran is going to do exactly what Dan was saying. They're going to go after energy infrastructure and desalination plants throughout the region and that's going to exacerbate the, the problem that we're now facing with, with global supply. I think Trump in some ways is in a tough spot here because he can't let this war go on and on and on. You can't really open up the Strait of Hormuz, which is narrow and shallow. And with a war going on, tankers aren't going to go through, warships aren't going to go through if they think they're going to get hit by Iran. So I think in some ways what Trump is doing Here is saying we need to end this war. We need Iran to agree to a deal at the negotiating table. I'm going to hit them harder and harder and harder until they say yes, let's see if it works. Let's see what happens after 8:00pm tonight.
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Kelly Evans
Dan, you want to respond to that?
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Dan Jurgen
Well, I think that's, that's true that the President from the beginning has said this would be a four to six week war. He doesn't want to see it going on. He knows what's happened to prices. And the US is not insulated from this. It's not only the price, that $4 a gallon or above that at the pump, but it's kind of the whole world economy. Because one of the things that has been discovered, you know, for all those years of war, gaming, people focused on the oil and gas coming out of the Strait of Hormuz. They didn't focus on the fertilizer, they didn't focus on the helium that you need for semiconductors. They didn't focus on the sulfur, they didn't focus on the aluminum. And they didn't focus on the amount of money of course that those countries, the Arab Gulf countries export. So this is, you know, this is, this is a big hit on the world economy and the US is not insulated from it. Even though we are in the enviable position of being the world's largest oil producer, which means we're not where the Europeans are, we're not where the Asians are. But at the end of the day, this is a global economy.
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Kelly Evans
Quickly, Dan, $4.14 is now the national average for the price of gasoline. Why is Brent, last time I checked, is Brent now back below the price of wti? Or to put it differently, why are the two trading where they are? Traditionally we see Brent trading at a little bit premium, a little bit higher price. That's gone away sometimes. WTI is trading a little bit higher. Both of them influence the price of the pump. So it's not like we need to focus on just wti.
- [10:48]
Dan Jurgen
But it may, it just may, it may well be because of course Brent oil is not WTI is not impacted, unlike Brent. But Kelly, keep your eye on that dated price because that tells you what's actually happening. Where people are trying to get oil and can't get it.
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Kelly Evans
Yeah. 140, as you said, out there in the markets, you know, for the physical product. Gentlemen, thanks. We appreciate your time. Thank you both. Dan Jurgen and Charles Kupchen joining us here. Talk about the impact this is having Stocks are sliding a cease fire. Hopes are fading somewhat and our next guest says the market is now firmly pricing in inflation and the next stop, if the war continues is stagflation. Michael Cantrowitz is the chief investment strategist at Piper Sandler. It's great to see you. I think it's worth highlighting that you've emphasized over and over again the importance of falling inflation and falling interest rates to the bull market. So where does this leave us now?
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Michael Cantrowitz
Well, Besides earnings in 23, 24 and 25, outside of AI relevant stocks, that was the big bull macro case that inflation, energy prices, interest rates, long short mortgage rates all came down for about two and a half, three years, which set up the economy coming into this year for a huge amount of tailwinds which we're still seeing. The Bloomberg economic surprise index is sitting at a three year high.
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Kelly Evans
Wow.
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Michael Cantrowitz
We've seen the services new orders component which came out earlier this week at 60, the highest also in about four years. So there's a lot of economic momentum. And our concern is not that we're going to see a sharp deterioration in the economy, but more so that we've been in a new inflation regime where inflation fears are driving risk premium, that is, they're driving market multiples. And as they came down in 23 through 25, it lifted multiples across size categories. And in the last month and a half, we've seen that multiple deteriorate roughly to where I kind of point out is the market pricing and inflation at about 18 times earnings. If this persists, we'll start to see negative economic data. And if you get demand destruction and oil prices remain high, the specter of stagflation becomes the word of the day.
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Kelly Evans
You know, talk through what this means for tech stocks, energy stocks. It was interesting last week. You saw, you know, oil prices doing what they're doing today. But energy as a sector was kind of taking a breather a little bit. There's questions about whether to get defensive if everything's going to soften like you describe, or if the economy is going to be able to have staying power and say, okay, maybe we're coming closer to the end of this thing and all of those positives you describe will carry us through.
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Michael Cantrowitz
Yeah, well, I see basically three different scenarios. Two of them are at the in the tails and they're very fat tails. And then our base case in the middle. And so you can position very defensively for stagflation and a persistent ongoing high price of energy or you can play for the Opposite that things do get resolved. The strait opens up, oil crashes down lower, all of these fears go away and the market multiple regains its strength and we get lower interest rates and we go back to where we were two and a half months ago. Pretty good backdrop with mortgage rates touching below 6%. The challenge in that for investors, it's a very binary situation and it's being controlled by policymakers, not the, the insides, the inner workings of the economy. So it becomes really tricky to position in one of those buckets. Our view is that we want to be more kind of in the middle, not trying to time the market, time oil prices, time the headlines, but recognize that we've now got this inflation fear that's building, that the economic data is going to start to deteriorate. We haven't seen much yet, but again, it's only been five weeks. That's, that's not a long period of time. And so positioning there is basically being really diversified and trying to survive this backdrop of headline volatility, inflation pressure to look for stocks that can weather the storm. And I don't think that means you want to be really concentrated. And even the stocks, there's a lot of questions about those names at the beginning of the year. And at the time we were seeing markets rotate into more cyclical names.
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Kelly Evans
What about. We're going to talk to Victoria Greene a little later this hour. She said she's kind of fire sailing international stocks and things like that, which I mean that. So going back to January like you said and everything kind of looked like full steam ahead. You wanted to go international, was outperforming the US and everything. And then we've kind of seen it backtrack as the Iran war has broken out. I don't know if you have anything to say about that positioning in a
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Michael Cantrowitz
way that's effectively being long oil prices because if we do get some relief. Where, where, where are you going to? Where Wherever the pain's been the greatest as a result of high energy prices. It's going to. And markets typically see the opposite on a rebound. You tend to get these V shaped bottoms and investors that were in the right area as the market was struggling can quickly lose all of that outperformance if you don't get out in time. So it becomes a market timing story. And again, I think you want to be diversified around the world. Yeah, there's countries that have much greater energy sensitivity, like Japan for example. Yeah, they're going to get hit hard. But the day things do find some relief that will probably be the best performing area. So I think you just got to be really diversified and pick your stocks and not pick stocks based on earnings more so than macro.
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Kelly Evans
And I thought we saw a little bit of almost head fake relief if you go back a couple of weeks. I mean, just about 10, 14 days ago we had WTI crude oil in the mid-80s and it looked like, okay, we had this peak of activity on a weekend. We've kind of come back from that. There were, that was when we had the since deleted tweet about kind of taking ships through the Strait of Hormuz. So we've had a taste of what that might look like.
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Michael Cantrowitz
Yeah.
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Kelly Evans
The problem now is that we're still $30 higher on the oil price than we were back then. And I'm not sure if there's going to be a moment if it's tonight or if it's in another week or maybe it's the first time a headline hits the tape that says Iran agrees to a deal and the oil price falls 20 bucks. I don't, you know, that would be an obvious all clear moment. I'm just not sure if we're going to get that.
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Michael Cantrowitz
Yeah, it's hard to know what an all clear moment is. And it's not, certainly not just seemingly just something that President Trump can do like he did last year with tariffs. This is at least a two party situation. So, you know, we've been hearing all this positive news out of the administration in the U.S. but you know, whether it's, you know, you want to hear that from Iran.
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Kelly Evans
Yeah.
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Michael Cantrowitz
As well. And that to me is the all clear in the scenario. So I don't think as, as analysts and I'm a strategist, I don't want to try to time the market here. You know, we shouldn't be timing the market in general, but in the short term, something that's very exogenous and is really something I think you just have to survive the period. And. But what your point about the how the market performed in those days where oil did come down, that shows you what's going to work. And it was homebuilders and consumer stocks and international names as well. But again, unless you have clear, clear clarity on when exactly that's going to happen, which nobody does.
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Bess Friedman
Right.
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Michael Cantrowitz
It makes it a very challenging environment. So our base case is that again, oil prices are going to remain somewhat elevated. I don't think we're going to get back to $60 very quickly. And if we do, that's great. But if we remain in an area where it's $80 and above. What the lagging concern of that's going to be is this persistent worry about inflation that all really started from 2022, that every time we see interest rates back up about four and a quarter, certainly for four and a half, equity markets don't do well. So you got to get not only oil down, you need to get the 10 year down as well. And that was may not perfectly correlate because of the investors focus on the data that some of the bigger, I
- [18:26]
Kelly Evans
mean I think about the bigger picture trends here, whether it's do other countries continue to use the dollar as the global reserve, do they need the Treasuries that they want to instead? I mean there's, I even look at the Medicare reimbursement rates, okay, we're back up to two and a half percent. The defense budget's going up 40%. It's. So there's a lot of things that could keep that from snapping back down, you know, along with the oil price.
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Michael Cantrowitz
Yeah. And it gets all of those conversations which we saw so many times in the last few years start to again weigh on the market. The deficit.
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Kelly Evans
Yes.
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Michael Cantrowitz
Really no one's been talking about that in my, you know that everyone's focused on oil.
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Kelly Evans
Right.
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Michael Cantrowitz
But it's not just oil. It's oil. It's mortgage rates. It's the fear of the deficit again, it's the fear of Fed hikes, which I don't see the Fed hiking at all from this scenario. But the market is obviously pricing that differently compared to the beginning of the year. So again, it makes it such a binary backdrop because all of those issues will just continue to percolate until oil prices begin to come back.
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Kelly Evans
The late great art cash and stay nimble, stay alert. That's what he always said. That was this tagline which seems appropriate right now. Michael Banks, thanks. Appreciate it.
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Michael Cantrowitz
Good to see.
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Kelly Evans
Michael Kanchowitz with Piper Sandler. Coming up, new deals with Anthropic and Alphabet have Broadcom shares jumping today. But another tech name could be the biggest beneficiary of these deals in the long term. We'll talk about that next. We're also keeping an eye on shares of Apple, which are down as much as 5%. Earlier on a report from Nikkei Asia that its foldable phone is experiencing some engineering setbacks. It does raise questions around its launch timeline with the iPhone 18 cycle in the fall. But just within the last few minutes. Bloomberg reports the September debut is still on track and the shares are down less than 3%. And while we wait to see how that plays out, bank of America notes this morning that app store growth has been slowing, and I've been wondering whether some iPhone fatigue could be setting in. For more, check out my newsletter. Just scan that QR code on your screen and the Exchange is back after this.
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Kelly Evans
We gather here tonight to bring women
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Kelly Evans
Welcome back to the Exchange. In a deal that could reshape the AI market, shares of Broadcom are moving higher on a deal to develop and supply Google's in house CH chips for the next five years. Mackenzie Seagalos brings us more in today's tech check. Hi Mackenzie.
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Mackenzie Seagallos
Hey Kelly. So Broadcom may be getting the bounce today, up around 5% right now as it becomes this new arms dealer for this AI custom chip era. But Google is the one turning that demand into a full stack moat now monetizing nearly every layer of its AI business. For a decade, TPU's were Google's in house edge built to optimize search and to train and run its AI models. But now Google's turning that into internal advantage into a competitive business. Anthropic Metta and Apple are all leaning into Google Silicon as a cheaper alternative to in video. And that's especially significant because for a while investors worried that I would cannibalize Google's core search business and instead ads have beat estimates the last several quarters Running revenue keeps expanding and Wall street is starting to buy into a more aggressive growth path for the company. With Google now flexing what's perhaps the most competitive vertically integrated stack in all of big tech right now, the AI models, cloud, platform distribution and a chip business, it's starting to look like a real revenue driver. Morgan Stanley estimating that for every half a million TPU chips sold to a third party data center, it could add $0.40 to earnings per share. DA Davidson's math puts Google's commercial chip business on Track to take 20% of the market, making it a roughly $900 billion opportunity, potentially worth more than Google Cloud itself down the line.
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Kelly Evans
Kelly wow, that's something to ponder. Mackenzie. Thank you, Mackenzie. Seagallos we have a couple other big movers today as well in the chip space on some notable calls. Morgan Stanley downgrading AAM to hold on a slow commercial ramp. They're talking about end market softness, DRAM shortages and a changing margin profile could limit earnings momentum. Those shares were down nearly 7% at the lows. Wells Fargo is also raising its price target on intel by 10 bucks, seeing positive setup ahead of Q1 results later this month thanks to strong server CPU demand. And those shares are popping about 3%. Our next guest, Bullish on Semis, has a few names in particular he's buying. What are his thoughts on the overall market here? Let's bring in Jeff Kilberg, the founder and CEO of KKM Financial and a CNBC contributor. Jeff, I'll start with you. We always watch the chips for two reasons right now because the AI trade has been one of the more sure things in a tough market. Market also it's typically a leading indicator and if we're running into some cyclical slowdown, you got to wonder about that. So how are you positioning?
- [24:20]
Jeff Kilberg
Well, I'm a little more optimistic than most, but semiconductors and all come a safe haven. But look what they've done this year. If you look at sox, which is very popular ETF for semiconductors and you see up about 14% year to date. So I get excited about some of the individual names. Intel, you know, you just talked about Broadcom in Google. You can equally talk today about intel in Tesla and XI in the tariff. So everyone's kind of racing towards the semiconductor space and making chips inside. So I look at some of the names and we manage our Mango growth ETF ticker symbol. Gary. We've been able to dance between the raindrops. That's why we're up 6% year to date when growth has really been repriced. If you look at the Mag 7 repriced in general down about 15% so think about some of the names. I know Microns are a favorite name. We also talk about applied materials, lam research. These are names that you have to be tactical in. But I look at intel for the first time getting above $53 there is some more room to run specifically in
- [25:15]
Kelly Evans
intel and you said you're more optimistic than most. What's your thoughts Jeff on kind of the whole trade you stick with with that segment of the market? I mean in arm's case they're having a little bit of a problem from the memory shortages. Do you still like the memory names?
- [25:28]
Jeff Kilberg
I still like memory but let's just look at the dispersion. If we look big broader. Take a step back. This has been the most unusual dispersion we've never seen S&P 500 sectors with 50% dispersion obviously energy leading the top end financials on the bottom there. But what we have is dispersion inside of tech. Software has been repriced somewhat could argue decimated but I think semiconductors and being considered what is going to move forward. The air race we don't think is going to be lagging. We love the fact that the valuations across the board have come down in the NASDAQ 100 but you still have to be a stock picker here. There's a lot of noise obviously we have to get through tonight 8pm Eastern. I'm going to be looking at their watch but I think bigger picture earnings season is me much better than expected and we're on our sixth potential consecutive quarter of double digit growth. So I have a little more enthusiasm. I know people are kind of cheering the market goes down a little bit but I think the market's come down far enough. Kelly, it's time to buy.
- [26:21]
Kelly Evans
What about that inflation concern? And you know, inflation, such a loaded word. This is different than 2022. This is is really a price shock in a couple of particular areas affected by supply shortages where that one we had fiscal stimulus, we had monetary stimulus.
- [26:35]
Jeff Kilberg
That's right.
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Kelly Evans
You know this time's a little. It's more like a tax which is. Which raises. So we have both this kind of price shock inflation concern and a slowdown concern at the same time. You know, are you dismissing those?
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Jeff Kilberg
No, I can't diminish that. There's pay at the pump right now. National average above $4. Remember in 2022, the national average was over $45. So this isn't new for the consumer. But what is interesting, when you look at crude oil at $115 a barrel, that duration is going to have an effect. However, everyone that was talking about the effects that tariffs were going to have just a year ago, they never came to fruition. We didn't see that inflation. So I'm kind of in the same camp. As long as the off ramp to Iran is in place in the next week or two, we have the ability to kind of make this a blip. If it goes further than that and we see WTI crude oil stay above 80 or $90. Yes, Kelly, that's a problem.
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Kelly Evans
Okay, so in the next week or two, above 80 or $90, those would be more of your, your watch points
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Jeff Kilberg
for now, yes, I think we break $90 and it's kind of the all clear. We talked about that last week. But we would see nothing but crude oil stay elevated. And yes, that is a problem for inflation, that's a problem for economy. It's probably the consumer. But I do think that there's some offsetting tailwinds. Lower interest rates are coming with Kevin Worsh. Don't know when, but they're coming. We also see an earnings season that's going to really hopefully knock the COVID off the ball.
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Kelly Evans
I don't know when he's coming at this point, but we'll get those confirmation question at least underway soon. Jeff, thanks very much. Appreciate it. Jeff Kilberg. Still ahead, UBS is the latest Wall street firm to lower their S and P target amid this market turmoil, taking it down 200 points to 7500. Still a nice upside from where we are today. We'll look at the impact the Iran war is having on Main Street. Plus, with just hours to go before President Trump's deadline for Iran to reopen the Strait of Hormuz, we'll get the names. Our trader says offer protection. In the meantime, the exchange will be right.
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Kelly Evans
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- [29:40]
Kelly Evans
Welcome back to the exchange with the markets as you see, still in kind of a sell off position. Really feels like a holding pattern, and a cautious one ahead of the president's 8pm deadline for additional strikes on Iran. In the meantime, take a look at the health insurers, which are getting a big boost today. UnitedHealth up 10% for its best day since August after the Trump administration finalized a nearly 2 1/2% increase in payment rates to privately run Medicare plans in 2027. That's what determines how much insurers can charge for monthly premiums for the plan, benefits they offer and for their profits. Remember, the original proposal was almost zero. This is a big turn of events. Shares of CVS and Humana are up as well. Let's get to Angelica Peebles for the CNBC news update. Hi angelica.
- [30:21]
The Testaments Narrator
Hey Kelly. ICE arrested more than 800 people after some TSA agents from the start of Trump's second term until February. That's according to Reuters. That number much higher than what was previously known, Reuters reported, citing internal ICE data. That data does not include President Trump's deployment of ICE to airport security lines last month. U.S. trade Rep Jamison Greer says the U.S. likely will not reach an agreement with Mexico and Canada for the USMCA by the July 1 deadline. The current agreement was agreed to in 2020 and is up for review this year. Greer said that Trump is dissatisfied with a lot of the outcomes of the usmca, and Samsung announced today that it is discontinuing its messages app on all of its Android devices by July 2026, the phone giant is asking all users to switch to Google Messages to maintain a consistent messaging experience. Users can check the Samsung Messages app for an exact date for end of service. Kelly, back over to you.
- [31:20]
Kelly Evans
It's funny, we were just writing about all of this. Angelica, thank you very much. Coming up, is the market approaching the point of no return? Our trader says we are getting close, especially if the US Follows through on the president's earlier threats. The names she's buying ahead of a potential recession. Yes, recession. We'll talk about that next. Is it too soon to start talking about recession? Not for my next guest. Even as many remain hopeful the Iran conflict will soon wind down, she is positioning for further economic fallout. Joining me is Victoria Green, G Squared private Wealth CIO and a CNBC contributor. Victoria, you know, again, in recent years especially we've heard so much warning about recessions that never came to pass. People are conditioned to buy the dips to stay long the market. And look, you know, this is the playbook. So I'm curious and it does bring my attention when you say you're positioning a little more defensively now. So I just love to know how are you reading the markets and what are you doing exactly?
- [32:23]
Victoria Green
Yeah, absolutely. So one thing is recessions occur about every six and a quarter years. And the last time we had a recession was 2020, 2022. We had a great bear market, a really solid sell off, but there was no technical recession. So number one, we're getting a little bit of length in time between recessions, which, you know, it can make and persist. I'm not saying that's the only thing we're looking at, but that's one indicator. It's been a while since, since we've had an actual recession here. Number two, oil above $100 a barrel is a tried and true recession trigger. Again, not always, but when you start piling these things together, you can make an argument that, hey, there's a potential a recession could happen. If this continues to drag on, our base case is still this conflict gets resolved, we can overcome this. We can think earnings growth is here, tax refunds, all the catalysts we've been talking about. My concern is the asymmetric risk going into tonight. So we did, we did start kind of pulling back a little bit on risk. We did start preparing and we also have an execution for how we're going to handle the rest of this week. If we do have an escalation tonight. Again, base cases, that's not what's happening. But I think you would also need to start considering the massive asymmetrical risk. If this does really, really escalate overnight, then you need to be prepared for what you're going to do tomorrow. And you should be looking at your portfolio and how much risk you have on the table right now.
- [33:34]
Kelly Evans
Still, I think a lot of people would fall back to the escalate to de escalate playbook, meaning the worse it gets now, maybe the swifter there's some kind of resolution. And those stronger economic crosscurrents that Michael Cantrowitz was talking about earlier on, those could continue.
- [33:48]
Victoria Green
Absolutely. Absolutely. There is a lot to be said for this bull market. We're not wholesale fire selling. We're not saying sit 30% in cash. All we're saying is be prepared. We de risked a little bit. We've taken a little bit of emerging markets off the table. We've loaded up a little bit on energy and real assets. But we still have cortech, we still have stocks. We're not sitting here saying the sky is falling. We're just saying we need to be prepared. Obviously the trade that has worked is by the dip that the best case scenario is going to play out, that we're going to find a resolution. That playbook has worked continuously for the first term and the second term so far. But I'm also thinking there is a lot of risk going into tonight and we also may not find a resolution tonight. We might punt it down the road 45 days. But we're not the only party in this situation anymore.
- [34:30]
Bess Friedman
Right.
- [34:30]
Victoria Green
We have Iran, we have Israel, we have our other Gulf allies. We have four parties we need to bring to a resolution that don't necessarily have the same goals. Again, all that's doing is is increasing risk and making me a little bit more nervous. And for me, I just wanted to reduce that exposure.
- [34:44]
Kelly Evans
So I'll run through it for people who want the specifics. We're showing some of this on the screen as well. But first of all, you would go over, you are going overweight energy. And you note Even in 2022, that was the kind of the bear market playbook. Energy was the only sector that worked. Obviously it's the best year to date. Had a pull but not softening last week. Energy, you like names like Exxon, Chevron, those are in here. All the majors that we think of you like aerospace and defense for obvious reasons. Same for cyber. So Palo Alto Crowdstrike and then you have some consumer staples names in here. A couple of nuclear ones as well. Yeah.
- [35:16]
Victoria Green
I think you want to be diversified. Look, you want some defense. We could see things like health do well, which they haven't done well year to date. You could see this flight to quality, to Staples, to health. Energy should be the place to be. If this continues to escalate, energy should be the place to be. The IEA just came out with their short term outlook today saying hey, we've got about 9.1 million barrels a day that's now shut in in the Middle East. That's significant disruption. It's going to take a while. Got a lot of infrastructure rebuild. Even if we say go tomorrow night, yeah, the market's going to take off. We still like energy. You're still going to have to invest in this. We still have the power demands, we have all of those catalysts behind it. So for me it's about hedging risks and putting eggs in a basket. I think could succeed both if we get a little bit of a resolution or if we don't.
- [35:57]
Kelly Evans
And you, as you said, the area where you are more fire selling, to use a phrase, is emerging markets internationally, say just not worth it to keep it as the energy crisis grows.
- [36:06]
Victoria Green
Absolutely. Asia and especially Europe I think are extremely vulnerable. I think you could see a large knee jerk down tomorrow in both of those markets because of how exposed they are to Middle Eastern energy. You're running out of floating storage. There's a lot out there.
- [36:18]
Kelly Evans
Right.
- [36:18]
Victoria Green
But you are starting to see could they have issues with, with jet fuel. We started to see maybe a little bit of shortages of jet fuel. All of that reverberates through this global interconnected economy we have. So even though, yes, we are well insulated here, the Permian's fantastic. We've got Guyana, we've got Venezuela. We have a lot going on in our hemisphere to help us with energy. We're not immune to costs.
- [36:37]
Bess Friedman
Right.
- [36:38]
Victoria Green
Diesel over 5, gasoline prices, what does that do to the consumer? We've got PC and CPI this week. We're expecting a little bit of a bloody number there on some of the headlines month over month. And if that continues to persist then it does eat into all of the catalysts we have. It eats in the tax refund. You've still got the issues with tariffs also out there. And so it just becomes a little bit too much of a headwind.
- [36:59]
Kelly Evans
It's not just California. Oregon and Washington State now have gasoline on average over $5 a gallon. So Victoria, thanks very much, appreciate it. Green coming up, Taylor Swift, Lady Gaga, Ariana Grande and Bill Ackman With Universal Music Group having its best day ever, the shares are up more than 11%. We'll dig into what's behind the billionaires push to acquire the record label when the exchange comes right back. Welcome back. Shares of Universal Music music are surging 11% after Bill Ackman issued a $64 billion takeover offer. It's a complicated story in some respect. Julia Borson has more for us. Hi, Julia.
- [37:41]
Julia Boorstin
Hi, Kelly. Well, Universal music shares are 11% higher today after activist Bill Ackman's Pershing Square proposed a $64 billion takeover deal that would be at a 78% premium to the company's April 2 closing price. Now, the world's largest music label is home to Taylor Swift, Billie Eilish Drake, Kendrick Lamar and Ariana Grande, among others. But its shares have been struggling amid slowing music streaming growth as well as the cancellation of U.S. stock listing, among other things. Now, even including Today's move higher, UMG shares are still down 17% in the past year and 30% in the past two years. Ackman saying that his changes would bolster the stock. Pershing's proposal includes moving the company to a listing on the New York Stock Exchange from the Netherlands, which would make it eligible for inclusion in the indexes. He proposes adding three directors, including Michael Ovitz as chairman of the company and using AI to drive operating operational efficiencies and legal analytics and marketing. Now, no comment yet from Universal Music Group, but TD Cowan weighed in this morning, writing, while the offer appears largely to be an attempt at financial engineering, it does highlight what we believe is severe undervaluation by the market given UMD's very strong business fundamentals. Now, this deal would require a two thirds vote of shareholders. Ackman saying that the initial response of the Bellora Group Group, which controls a 28% stake, has been favorable. Kelly can be a fascinating one to watch.
- [39:14]
Kelly Evans
Indeed. We'll see how it goes. Julia. Thanks. Julia Boorstin. And coming up, a rough day for the homebuilders. Seaport got downgraded. The sector. They cite weak job growth and slowing demand. Wolf and JP Morgan see downside earnings risk. You can see KB almost 5% lower. But it's not just Wall street rejiggering their housing expectations. Real estate agents are lowering their outlooks for the spring season as well. We have the results of the latest CNBC housing market survey after this. Welcome back. Hopes of the spring housing season had been high at the start of the year, with mortgage rates on the decline. But the Iran war has turned all of that on its head here on set with what we're seeing now as senior real estate correspondent Diane Olek. Dan Ollict, always good to see you. And this is the key moment for a lot of the industry. This is their Christmas, I guess you could say. And not off to a great start yet.
- [40:07]
Julia Boorstin
Exactly.
- [40:08]
Diane Olek
It is their Christmas. But mortgage rates are now much higher than expected and financial fears are front and center. Those concerns were already heating at the end of last year, but the war really turned up. The gas buyers in the first quarter of this year were more concerned about the economy and mortgage rates than they were in Q4. That according to real estate agents agents responding to the quarterly CNBC housing market survey. Just 9% of agents said their buyers were most concerned about home prices and that is a sharp drop off from the previous quarter's 18%. This even as nearly twice as many agents reported home prices rising in Q1 versus Q4. And the economy led even though mortgage rates during the quarter jumped sharply from a low of 5.99% on the 30 year fixed rate the day before the war started to now hovering around six and a half percent.
- [40:58]
Kelly Evans
They're fearful of the war.
- [41:01]
Bess Friedman
They're fearful of gas prices, their job security.
- [41:06]
Victoria Green
You know, with all this news lately about AI and taking over work, that
- [41:11]
Diane Olek
kind of thing, affordability is still playing heavily into why more buyers are leaving the market. 19% of agents reported buyer exits, compared with just 11% at the end of last year. More than half of agents also reported at least one contract cancellation.
- [41:29]
Kelly Evans
You're just seeing buyers that were on
- [41:32]
Jeff Kilberg
the fence and deciding to buy are now on the fence and going the other direction saying I'm not going to buy now.
- [41:39]
Diane Olek
There is so much more in the housing market survey and you can find it in this week's Property Play newsletter. Make sure you're signed up. CNBC.com property play but it's really the
- [41:48]
Kelly Evans
back the, you know, the turnaround in Morgan mortgage rates. You think that going on the rise again?
- [41:52]
Diane Olek
I mean honestly in the survey it was pretty close to economic uncertainty.
- [41:55]
Kelly Evans
It was really wow. Economic uncertainty is already.
- [41:58]
Diane Olek
Absolutely so. And don't forget the stock market too for higher end buyers who are looking for, you know, what's happening with the markets. Did they just lose a ton of money in the last couple of months? That plays in as well.
- [42:08]
Kelly Evans
All right, Diana, thanks for now. Diana Olek, our next guest says mortgage rates like we were just discussing, they're not the only headwind either. We still have tight supply is an issue along with those what Diana was mentioning, let's bring in Brown, Harris, Stevens, CEO, Best, Friedman, and Best, economic uncertainty, 6% handles. Just psychologically tough for people to kind of, you know, get used to. What else are you seeing in the housing market?
- [42:30]
Bess Friedman
I think it's a tale of many different stories. I do think, obviously, the fact that there's this war that's creating some volatility, but I don't think that's the reason why buyers are hesitant. I think rates are one thing, affordability is another. Prices have gone up since 2000, since 2020, almost 50% across the country. So that's playing into it. And wage growth has not caught up to that. So I think that's a part of it. There's not this. All of a sudden, everybody's panicked and nobody's buying. That's really not what's happening in the market. It's been a slow burn, a correction. It's been taking time. We're having a slower than usual spring selling season. And part of that has to do with the rates and the affordability and just the chaos that's ensuing all around.
- [43:15]
Kelly Evans
Yeah. What are you guys hearing from potential buyers and sellers?
- [43:18]
Bess Friedman
You know, buyers have been cautious because rates have gone up. They can't afford it. Prices are higher than they would like, and sellers are still locked into these lower rates. You know, they locked in a 3% mortgage rate, and therefore they don't want to sell right now because they don't want to lock in a 6% or 6 and a half percent. So that's creating some pause. But we are in what I would describe as a correction. And I think in markets like New York City, you know, the prices have been fairly flat. We are seeing buyers and sellers move product, which is decent. It's just not great. And I think it's going to take time for us to correct. And I would just encourage politicians to create policies that create more supply and more growth. Things like rent control and rent freezes, those sorts of things sort of disincentivize builders. And we need to make sure that we're creating things or policies so that we can get more supply into, especially the United States, because we have a deficit of nearly 5 million homes in this country, and therefore we need to build more. Is this the.
- [44:21]
Victoria Green
You know, when people talk about supply
- [44:23]
Kelly Evans
and goods supply, I mean, in these areas, in the Northeast, you know, my community, yours, Shore, is like, there's all these fights over affordable housing. And every time there's a proposal for any kind of, I mean, really anything it can be single family, townhome, just any kind of structure where zoning laws are now being changed or overruled in order to put up structures. And everyone is panicking for a variety of different reasons, from traffic to whatever. Is that what you're talking about when we talk about supply constraints, or are we talking about, you know, tracks in the Sunbelt where you can go out and just build, you know, entirely new communities of single family homes?
- [45:01]
Bess Friedman
I think it's both. I mean, you know, Mayor Adams was successful in getting past the city of yes, which is going to get us 80,000 more units in New York, which is great. We need to have more upzoning. We need to have tax incentives. We had the 421A, now we have 485X. We have to create policies that make sense tenants. And so zoning is a big piece of that. And rent freezes, which is something that Mayor Mamdani is looking to pass for about a million stabilized units, is going to totally disincentivize landlords from upkeep and doing anything that's going to help progress in the supply arena. So we have to sort of, I think we need a little more common sense in our housing sort of mindset.
- [45:42]
Kelly Evans
All of that said, what would happen if the mortgage rate were able to go back below 6%? And I don't know if that's. Honestly, I don't know if that's feasible with all the things we're seeing. But is that the most important thing that would start getting activity going again?
- [45:54]
Bess Friedman
It's a factor, I think psychologically it would help. Roughly 60% of people own homes in the United States have mortgages. So that could help, I think, persuade some. But it's not a purest sort of mindset. It will take some people and bring them into the market, and some people will still wait and see. See? But definitely getting below 6%. Studies have shown that people are more inclined to get into the market. But look, it's many factors. It's affordability. It's, you know, it's the rates. It's, do I find the home that I want to move into? It's all of those different things. And so people consider all of it. It's very circumstantial.
- [46:32]
Kelly Evans
All right, Bess, it's good to check in with you. Thanks for making the time. We appreciate it. Bess Friedman. And that's it for us. Thanks for watching the exchange. Coming up on Power Lunch and excellent exclusive interview with Transportation Secretary Sean Duffy. I'll join Brian Sullivan for that right after this quick break. You've been listening to the exchange. Make sure you're subscribed to get each episode every day, same time, same place.
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