Can Stocks and Rates Rise Together? 1/14/25
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Equal Housing Opportunity, CADRE, number 01521930. I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

Okay, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the battle between rates and stocks and what it means for where the markets might go from here. Some interesting price action this hour. We will discuss all of it, of course, with the investment committee today. Joining me for the hour, Josh Brown. Stephanie Link is here along with Jason Snipe and Jim Laventhal. We'll take you to the markets. What was an early green picture has now turned red.

and it's turned right across the board. There's the Dow, the S&P, NASDAQ all under a little bit of pressure here.

Took a little bit of a downward turn on that better than expected PPI report. But take a look at the 10 and the 30 year and yields were actually higher a moment ago. So we're watching all of that. And Steph, therein lies the issue for the stock market. You had a little bit of a cooler read on inflation, but rates barely budged. And it's because we're still kind of assessing what Trump 2.0 policies are going to mean and if they're going to be more inflationary or not and what the market's going to do.

as a result? Yeah, the unknowns, certainly. There are a lot of unknowns. But remember the Trump administration 1.0, the inflation number was 1.9% under his administration. So he does not want inflation. And I don't think that tariffs are going to lead to inflation, especially if they kind of phase them in. I don't think they're going to be as bad. I think it's going to be more than offset by the pro-growth

policies, lower taxes, less regulation, that sort of thing. And he's also inheriting a strong economy. The economy is growing two and a half, three percent. And so you asked the question yesterday to Rick Reeder, can stocks go up if rates are going up? I think they can. I don't think they can go up 20 percent. But I think they can. And I think they can if rates are going higher because of better growth, which I just mentioned, and stickier inflation. But you know what?

The peak PPI number two years ago, 11.6%. We're now at 3.3%. We're making progress. And the reason we're seeing inflation higher is because growth is higher.

I as an investor, all three of us, four of us with Josh on the line too, we would much prefer better growth and a little bit more inflation from the earning side of things. And that's what we care about as investors. Rick Reeder, since you bring him up, you know, we talked about the fact, and he firmly believes this, that rates are going up for the right reason.

It doesn't mean the stock market's not going to have volatility associated with it. But now that you brought it up, Steph, let's listen to what BlackRock's Rick Reeder told me yesterday on Closing Bill about what he thinks can happen in this market. We're still moderately long. And I think, I still think if you look at tech and the return on equity, the stock buyback and the amount of cash that's out there, pretty hard to see the equity market not finding its footing and having a decent year, not like last year.

All right. Decent year, not like last year. So we're not going to do 20 percent, Jay, but he said you can do 15. Yeah. Right. You can still do mid double digits, which I think everybody in this viewing audience would accept. Right. And I would agree with that, Scott. And I think when I look back to the NFB report last week, which obviously was an explosive number,

The number I paid most attention to was unit labor costs, which are back to pre-pandemic levels. And for me, what that spells is productivity, which then leads to margin expansion. We're earning start in earnest tomorrow.

So we'll hear from the banks, and then we'll continue to hear from a lot of other companies. And I think it'll be a margin expansion story. Obviously, there's a higher hurdle to jump over, 14% earnings growth for 2025. But I think with what margins can do, I think we'll be able to jump over that hurdle. So, Jimmy, Tony Pasquarello, Goldman Sachs, I cite his research all the time and his notes, which go out to very well-connected people.

clients, large clients, hedge funds, etc. He passes a note along just before we came on the air today, which he says, quote, the character of this trading environment has changed and the distribution of potential outcomes has seemingly widened. What I mean here, market participants are actively debating the sequence and impulse of Trump 2.0 policies, as well as the attendant path of monetary policy. And with all that comes some friction in markets.

that manifests in risk reduction. How does that playbook change? Well, it's still a bull market, he says. Primary trend is higher, he thinks.

But I suspect that moderately higher volatility is here to stay for a bit. Would you agree with that assessment of where we are, along with Reeder's perspective that, quote, it's pretty hard to see the equity market not finding its footing and having a decent year? I would agree with what he says. I think he throws his punch a little softly when he says we're still in a bull market. I'll try to say it a little bit more strongly. The economy is very strong right now.

We've been clocking 3% real GDP growth for several quarters. That's fabulous. We've got unemployment at 4.1%. Again, another fabulous number. The Fed, look, they're not talking about raising rates, and they won't unless inflation starts to pick up. We're talking about the rate at which inflation is coming down and the impact that that's having on interest rates. Now, Scott, you've brought up

the Trump policies, we can't answer the question right now of what the impact of those policies are going to be. We need to see the policies. We need to see what their intent is. But we have to remember that backdrop of a strong economy. What we've gone through in the last month is not even a correction, even though several of us have been thinking that a correction is overdue. This speaks to Mr. Pasquarelli's

a past relish on a comment about uh... higher volatility we've had an adjustment we've had an adjustment to higher interest rates in the equity market which has happened several times in the last three years since the feds are to make interest rates relevant again and i will point out that the it bears perspective it was about six months ago that the fed passed on cutting rates in july and the market freaked

out. Remember people talking, Scott, you remember this, right? Talking about, hey, we need an emergency rate cut because we got some tiny uptick in unemployment. Let's have a little perspective here. We didn't need emergency rate cuts then. We don't need emergency rate cuts now. Frankly, we don't need a rate cut this month. The economy is awfully strong. And to Steph's point about profits, that should eventually follow what the economy is doing. Reader suggested you may just get one this year. And you're not going to get one for a while either. And that, you know what?

That's OK. And Josh, you know, where Pasquarello suggests that the character of this trading environment has changed, I guess it's and the outcomes are, you know, more wide than they were because essentially what was relatively easy in quotes over the last year is just going to be a little more difficult as we assess these new policies, as we assess whether they're inflationary or not on top of what is already a still elevated inflationary

inflation situation. You're not back at target fully. So we still have to keep that in mind as we assess what you think we can do in the face of all of that.

Yeah, I read Tony's stuff as well. And I think the key phrase that you just repeated is the trading environment. And I think one of the more important things to talk about when we talk about the trading environment is whether or not that's necessarily relevant to all of the people who are watching this. At my firm, one of the things we do on the wealth management side is run an in-house meeting.

tactical model and there are no interest rate or inflation inputs in that tactical model. Last year it was 100% invested, 100% of the time. There were no tactical sales of equities and we got questions, Scott, what about the 10 year? Or what about inflation readings? And we leave that entirely out of that decision making process

on the tactical side, and thank God we did because it's just so noisy. But when you pull the lens back, and we do this for clients all the time, what you realize is that there is no set in stone negative correlation between the returns for the stock market and whether or not the tenure is going up or down or the absolute level. From 1950 through the end of the pandemic era, when the S&P 500

The S&P 500 with a 10-year yield up 1% or more had an annualized return of just shy of 11%. If that number sounds familiar, that's the same as at all times, meaning it really doesn't end up being a factor. And when you think about a 4% to 6% 10-year yield, which is where we are today on the 10-year, in 55% of all three-year periods, the S&P is higher. It's a coin flip, but...

But in 100% of all five-year periods, it's up, which should tell you this is normal. The median 10-year Treasury yield, the median is 4.6. The average is 5.2%. This is what it's supposed to look like.

And I think you have to decide, am I trying to trade the next rate decision or do I want to actually accomplish something with my longer term investments? We make that decision with people. Others might choose to react to this or that PPI number. It's just not what we do. - I mean, you know, Steph, Bank of America, as they track their flows and what their equity clients are doing, you've had the 10th straight week of buying.

Net buyers for the 10th straight week, private clients' biggest purchases were in healthcare, a big lagging sector of a year ago. As we all know, right, healthcare has lagged. I know it's not as sexy to talk about as the mega caps and some of the other high-flying sectors in this market, but nonetheless, it's where a lot of action is, including from you. Yeah. Because you bought UnitedHealth.

Tell me about that. Yeah, I've owned it in the past, but I haven't in the past year and a half. It's always been, it's always sold at a premium to the group, and it should. It's the number one managed care company in the industry, and they have a gem with Optum, and they have been doing lots of M&A to build up Optum.

which is 24% of their total revenues, and they're going to do 12% operating profit just in this one segment alone. And the stock is now, has not really done anything in the past year. And it is, the whole sector, as you mentioned, is so out of favor. I kind of like that as a contrarian. And what got me interested is it's trading at 17 times earnings.

And historically, the stock has traded at 21 times forward. And when I owned it, it was trading at something like 25 times, because every quarter was a beat, a raise, a beat, a raise. Now, I don't expect the quarter to be great tomorrow. In fact, I think they're probably going to miss on medical loss ratio, because utilization rates are so strong, so high, and that hurts their costs.

I do think it's temporary. I think they're going to be able to handle it. They're going to see double digit growth in earnings and revenues. And they have an $18 billion buyback program. So you get number one company on sale. I think that this

the company, the visibility going after this quarter gets better and better. And by the way, I think the PBM regulation and the concerns there, I think it's, we've had 26 different kinds of regulations in the last two years out of Congress and nothing has gotten done. So I think it's noise. So I always find it difficult to talk about this stock without acknowledging what happened with the UnitedHealthcare CEO. And then the subsequent anger that

that bubbled over the top from the surface to the surface, obviously, about these businesses. And I just wonder if what has been judged to be at times from several of you on this desk who own the stock or bought it after that event, if this is not so much a this too shall pass sort of an event, and if it's enough of a changing event that

This stock is going to be under scrutiny as the industry itself is for a longer period of time than some would like to believe. I don't know how else to really say it. You framed it well. I feel as though...

We need to address it anytime somebody buys this stock, especially as a new position, because I feel like the environment around this whole thing has changed. You have framed the question well. You've done it delicately as befits what happened last month.

I think there's an important piece of news last week and there was a excuse me yesterday and there was a lot going on yesterday. I'm not sure we covered this but United Health and others like CVS and Humana were up big yesterday because Medicare came out with some projected reimbursement rates that were much larger than expected. And while the debate that you framed Scott is not going to be answered today, tomorrow in earnings, it's going to be answered over time. I think there's a pretty big clue.

that yesterday's news, which comes well after the debate, the debate has been framed for a month, and we got better reimbursement for the government, I think it's a tell. I think it's a tell that the government realizes that in order to administer Medicare, they need UnitedHealth and CVS and Humana and others. They need these companies to administer Medicare. Look, the debate

debate will continue, but I think that's a pretty good sign. - Because you own the stock and you've added to it in recent weeks too, you own the stock as well. - You got it. - Decent buy right here in light of everything that we're discussing. - What Jim just said, which is,

I think paramount because Medicare and Medicaid funding is always on the docket for this stock. That news yesterday was huge in terms of the reimbursement rates. Utilization is as well, that Steph mentioned. But for me, this has always been an earnings compounder. They're talking about 13 to 16 percent EPS growth over the next five years. You know, and Optum is a juggernaut. So I continue to like this stock.

The big thing too, Steph, and I applaud the buy, is they

guided conservatively in 2025. So there is definitely room for upside surprises. To your point, though, Scott, this is one of the reasons why the stock is trading at the multiple that it is. It's derated and we don't have answers to it. You could see it from the, if you bring the chart out wide again and you will see what was a $650 stock or $30, whatever it was.

has, in fact, re-rated. And you can see, you can broaden it out further than that, please, to get a picture of a stock that had run up. And you can see the decline in it a little bit more. There you go. More clearly, obviously. But that's exactly why I bought it, right? Because it's down so much. And a premier company, I know it's not perfect, but a premier company, number one, with a number one management team, they'll get through this. And I

think the multiple over time will go back to where it historically has been. And I mentioned 17 times versus 20, 21 times for the average. It's also trading at 12 times EBITDA versus 15 times for the average. So any metric that you look at, along with the stock price coming down,

I think it is a buying opportunity as delicately as I can say that, right? I mean, I know it's messy, but when you can get number one on sale because of something is messy, I think the management has proven that they will re-engineer and get back to double digit earnings growth and revenue. You have a new buy in the space too, Jim, and it's AstraZeneca.

Why did you take a position in this stock? Number one, I wanted to get bigger in health care. We know that health care had a terrible year last year, and that's what usually happens in an election year. So I start from the point of view of I want to get bigger in health care. I do like the pharma space. There tends to be very nice dividend yields. These are a cheap valuation, but there's something specific about AstraZeneca. They were refilling its pipeline over the last couple of years, and it was starting to get some respect for that.

until the late summer, early fall when there was a lot of news coming out of China about investigations into AstraZeneca's business in China. That knocked the stock down from the high 80s to the low 60s. It's now in the mid 60s where I'm picking it up. I think that knockdown, look, there's a knockdown in UnitedHealth for a totally different reason. Steph's buying into it. I look at that knockdown and I see it as an attractive entry point to a very good franchise that has a diverse pipeline and a

It's a diverse business beyond just oncology. It's got cardiovascular, it's got rare disease, and the China business gives me the opening. - All right, we have some movement too, not necessarily new buys or sells, but we have additions in terms of Josh Brown's best stocks in the market list. So we have some additions here and a few subtractions too, Josh, that I want to address because we've been highlighting these for our viewers

And we do have some ownership around the desk. So in to the new list, the best stocks in the market is 3M, Becton Dickinson, and EOG. Do you want to talk about those first, please?

- Yeah, so let's start with EOG because this one has not broken out yet. This is a stock that's been consolidating at give or take roughly the same level going back to early 2022. It's at the higher end of the range. It just popped onto the list. And I think this is the type of situation where you can anticipate the breakout. I think if you're a trader, you sort of want to play this with a stop.

What I would do here is utilize the high one teens, like 118, 119 as my downside protection. If this were to break down, that's where you want to be out of the name. But if this stock can break above 135, there's really not a lot of resistance here. You have to go back a couple of years to find sellers at that level.

And it's in a sector that's starting to reawaken after just horrendous relative performance to the rest of the market.

The other one we should do is 3M, which I personally own. I've been in this stock for a while. This has been the type of situation where it had a huge breakout. Stephanie's in it way earlier than I am, but I'm still there. It's been consolidating since September, and now I think it's ready to take its next big leg up. It's right at the upper end of that range.

within a percent or two of 52-week high. And RSI is fairly cool, which means it's not overbought and it hasn't made its move yet. So these are two names that I think both for traders and investors belong on their radars.

Okay. You want to comment on 3M, Steph, real quick before we do the Becton? Yeah. I mean, the new CEO, he's in the job for like a minute and he has a great track record. Operating margins are the story in the short term. Eventually, they have new product growth, about 10% growth. That should help 2025 as well. But watch the margins because I think that's what's going to drive the short term positively. Okay. So give me something on Becton Dickinson. What about it makes it worthy of this list?

This is another long-term consolidation, sort of trading relatively near the older highs. Again, this is medical and surgical products. So it's in a sector that just, to Jim's point, was absolutely left for dead. Nobody wants to be in these names while there's potential for negative rhetoric online.

on, on campaigns across the country. But that moment passes and these names get rediscovered. So it's a modest dividend payer. Um,

It's a $67 billion market cap. It's in an area that people haven't been focused on. But again, it's been trending higher. If you take a look at the way this stock has performed since December, you can tell the tax loss selling here, people that just wanted it off the books by year end, in a year with huge winners that they needed to offset, that

That probably peaked the first or second week of December and ever since it's been like a beach ball you've been trying to hold underwater and it's just been kind of levitating higher.

I don't think there's anyone left here to sell. A breakout above 225 would be really interesting for a short-term trade. So in terms of leaving the list, I mean, there was an event around Constellation Energy, so I get it. The airlines United and Delta have had amazing runs, so I get it. What about Ariston Networks?

- Look, this is a pure momentum name. It's obviously highly caught up in the AI story. A lot of the people who quote unquote missed Nvidia grabbed onto this thing as kind of a life preserver amongst growth mutual funds who didn't wanna buy a stock that was up 500%. I understand that mentality and I understand that instinct,

And it worked. This has been one of the better performers over the last year. I just think whenever you have a name with a beta like this that is so much more volatile than the overall market and you have a hiccup in the market, this is exactly where you're going to see selling. And that's all that happens here. I think the longer term trend is intact. And I wouldn't be surprised if this stock...

if we get a healthy tech market, doesn't get back up toward the highs of a week and a half ago. So I wouldn't be despondent over it exiting the list, but it definitely needed to cool off and that's what happened over the last couple of days. - Jason, you own this stock, right?

Totally agree with what Josh is saying. The stock was up 80% last year. It's the number one cloud network solution switchboard provider. So for me, the momentum is broken. It will come back. There's so much CapEx spend in the AI and cloud space. So maybe it's taking a little bit of break, a little bit of digesting.

but this will be a long-term hurt for us. - Okay, Jimmy, I wanna get to a quick move of yours as well. We barely have referenced mega cap tech and Apple's been about 10% off of its high, its most recent high. You're trimming the stock, which I find interesting considering, as I said,

You're trimming it when it's already down almost 10%. Why? Well, of course, it's had a great run here. I think we'll all acknowledge that. So starting from the point of view of it's a sector rotation, I was buying into healthcare. We talked about that earlier. I'm going to trim the technology sector, which I think we'll all admit has had a fabulous run. There's a little bit...

of another level down when you look at the Mag 7, which of course Apple is a core member of. I'm trying to say with my moves that I'm picking spots within the Mag 7 that I want to accentuate. Those include Amazon and Google. They are de-emphasizing, or I am de-emphasizing Microsoft and Apple by the trims that I've done. Now to a more specific comment on Apple, I think all

All the news that's coming out on the name is showing that the much hoped for super cycle upgrade just isn't happening at least anytime soon. And I don't think that's fully priced into the stock. - So, Jason Snipe, I mean, how are we feeling right here about MegaCap?

which had really resumed its leadership role, which made some people uneasy that it was a top-heavy market again. But we've had a rollover. As rates have gone up, a lot of these mega-cap names have come down. Temporary? What do you think? I do think it's temporary. And I think, obviously, they don't trade as a monolith. That's absolutely clear. I like the play. I like what...

Jimmy just mentioned, I mean, the names that we also like in this space are Amazon and Google. Amazon, for me, their operating leverage continues to grow. I think retail is back. They have kind of brought back those pre-pandemic gains that they had.

You know, when I look at AWS, you know, as one of the number one players in the cloud space, I mean, their margins were the largest margins growth since 2015. So I think there's momentum there. When I think about Google, I mean, they hit on all cylinders, retail, advertising, YouTube, all were strong, and cloud revenue. So I just think, yeah, the Lena Kahn story, the DOJ, that will probably go into the

into the background as this new Trump administration comes into play. So those are the names that I continue to like, and I think there will be continued growth there. All right. We'll take a quick break. We'll come back with a double dose of deal news, moving to of Jim's names. Today, we'll document those trades and later a Josh Brown hot take, this time on housing. We will discuss coming up.

Global markets, up to the minute, front page news. Wake up to Frank Holland and Worldwide Exchange. Weekdays, 5 a.m. Eastern, CNBC. Live ambitiously. All right, committee stocks on the move today. Pfizer, J.P. Morgan Securities says Pfizer to sell 700 million ordinary shares in the British health care group, Halion. Also, the CEO, Josh, downplaying that dispute with Starboard Value, says it has support, in fact, of major shareholders. You own the stock. What's the read here on this?

He could downplay it all he wants. If this stock is still in the 20s, two quarters from now, I think he's gone. This is a company that chose to speak at the biggest healthcare conference in the country and spend most of the time talking about cost cutting. This is in the context of a world where we are literally transforming the shape of obese people's bodies

and performing miracles with robotic surgery, et cetera, et cetera. You can't run a company of this size and have as uninspiring of a pipeline as they have for very much longer. The good news is they're doubling down on oncology. They still think they're in the weight loss drug chase. The bad news is nobody believes them. Look at the share price. That's your...

Mr. Borla, that's your scoreboard. So that's what you need to focus on now. What is it going to take to move that higher? $4 billion in cost-cutting, $60 billion in revenue is not doing the trick. Nobody's excited. I mean, this was a stock that was once on the best stocks in the market list, too, but had since been removed. SLB, let's talk about that, Steph. Under pressure, apparently, or reportedly, I should better say, from lawmakers to withdraw from Russia amid new sanctions there.

Russia is about 5% of their business and they've actually talked about that coming down over the next couple of years. Maybe not zero, but maybe like 1%. So whether they exit now or they just let it drain out, I don't really care. I care that this is the number one oil field services company trading at 11 times earnings, returning $7 billion in cash to shareholders.

last year this year next year they've all they do is beat and raise they're very very good in terms of execution technology is underappreciated so down 25 in the past year i think 11 times it's a buy all right cleveland cliffs uh this has been an interesting and still developing story the ceo your buddy um attacking japan as he reiterates interest in acquiring u.s steel may partner with new core in a potential bid now i want your take on that

Because you, if I recall correctly, at one point said you didn't want them to do this deal because you're worried about the price that they were going to pay.

It's not that, well, now it's not the price that we're going to pay because the original or the last offer they made was 54. And now we're talking about something in the mid 30s. But the balance sheet, you know, only has so much room. Lorenzo Gonsalves and the team there certainly knows that. They don't need me to tell them that. As an investor, the reason that I would like to just get U.S. Steel behind us is because Lorenzo and team have just bought in November Stelco and they bought it.

it as the steel price cycle was bottoming. It looks like steel prices should go up in the new Trump administration. And I'd rather just see the execution of the new acquisition bring the share price higher. Now, all that said, Lorenzo and team are going to do what they want to do, not what Jimmy wants to do. If they end up

buying pieces of US Steel and I think it's pieces in conjunction with Nucor. I don't think they're going to buy the whole thing. That will obviously make them bigger, but it will bring balance sheet stress. That's just the way it goes. I'll close this by simply pointing out that Lorenzo himself bought a million dollars worth of shares in May of last year. He bought it at $14. He's not dumb. He didn't make that purchase thinking that the stock would be down at $10.

It's going to be dramatic. It's going to be volatile. I think from here to year end, you're going to see positive returns on the stock. You want to give me something on Wabtec's deal, Evidence Inspection Technologies Division, for $1.134 billion? Yeah, Wabtec couldn't be any more in the sweet spot of where I want to be in this market, which is to say industrials. You've heard me say for quite some time, industrials are going to benefit from supply chain onshoring infrastructure. That is certainly going to continue in the new Trump administration for Wabtec to get bigger

bigger doing that makes sense to me. This is the quintessential industrial. It's where I want to be. All right, let's get the headlines now with Pippa Stevens. Hi, Pippa. Hey, Scott. President-elect Trump said today that he will create a new department to collect tariffs, duties, and all revenue from foreign sources. In a social media post, Trump said the external revenue service will be created the day he is inaugurated. Trump has pledged to impose steep tariffs on the country's three largest trading partners, China, Canada, and Mexico.

NATO will launch a patrol and surveillance operation to help protect critical infrastructure in the Baltic Sea. At a news conference in Helsinki, NATO Secretary General Mark Rutte said it would work to deter future acts of destabilization. The operation comes in response to a string of recent incidents of suspected sabotage on undersea cables.

And Kate, the Princess of Wales, said today that she is in remission from cancer. The Princess's announcement on social media comes as she visited the hospital where she was treated for cancer and thanked the medical teams who treated her. The Princess announced back in September that she had completed chemotherapy treatment. Scott, back to you. Thank you. That's Pippa Stevens. Straight ahead, Josh Brown's hot take on housing, why he is so fired up over this space today. We will explain next.

Weekdays at 5 a.m. Be first on World Markets. First to the global business conversation. Get a jump on the investing day every day with Frank Holland. Success starts early. Worldwide Exchange, 5 a.m. Eastern, CNBC.

Welcome back. We have a news alert. Eamon Javers has that for us. Eamon, what do we know? Hey, Scott, that's right. NBC News is now reporting that Elon Musk, Jeff Bezos and Mark Zuckerberg will all three attend Donald Trump's inauguration next week. They'll have a prominent role in the ceremony in the sense that they'll be sitting up on the platform. They'll be visible alongside members of Trump's cabinet and they'll all three be sitting together. Each CEO of the tech companies is

worked in various ways to curry favor with Donald Trump. Elon Musk, of course, closest to Trump and reporting overnight that Elon Musk may even get an office in the executive office building adjacent to the West Wing in the Trump administration. But all three men in various ways have made moves closer to Donald Trump. And now they'll be physically enacting that in terms of attending the inauguration and sitting up on the platform with prominent members of the Trump cabinet. Back over to you.

We'll see if any of the other tech CEOs are added to that list in the coming days as well. Something to watch for. Some who have also visited with the president-elect. I'm thinking of Tim Cook, of course. But we'll see. Eamon, thanks for the update. Appreciate that. You bet. That's Eamon Javers in D.C. for us. We are watching today's shares of KB Home as well after delivering a beat on the top and bottom line during its earnings, revenues driven by an increase in home deliveries. No one owns that stock, but Stephanie Link, you've been so bullish on housing. Yeah.

and still are? I made a lot of money in DR Horton last year and even in Home Depot. It pulled back in December, but I still think that these are two really great stocks to own for the long term. As interest rates stay high, it's going to be a challenge for housing. We can all understand that. But I do think eventually interest rates are going to come down and the supply and demand dynamics are really very attractive. I've said this many, many times. We're 5 million homes short.

homes in this country. And now you're on the 15th consecutive year where the homebuilders have underproduced. Just ask KB Homes. And oh, by the way, I thought KB Homes, the numbers were really impressive. You're looking at deliveries up 17 percent, homebuilding revenues up 19 percent, and ASPs in the face of higher interest rates up 3 percent. Really good. So everyone last quarter, all of them, they lowered gross margins because of incentives, because of the softening demand. That's a short-term phenomenon, but I

think this is a decade-long theme that I want to have exposure to. These are very, very cheap stocks. You own DR, too. Yeah, yeah. And, you know, it was encouraging to see the report from KB, obviously. Net orders were up 41% year over year. So, you know, DR is a

A little bit of a different player, obviously, dealing with the first-time homebuyers. Sixty-nine percent of their homes are sold for less than $400,000. And there are five million of those out there, though, that want to own a first home. So that's a big deal. I don't want to own them at these rates. Well, they're five million. Can you imagine the pent-up demand, though? Yep. Thirty-year mortgage at seven and a quarter is a hurdle. And that's the issue here. And they're also giving away, you know, with the incentives. That's like a high-cutting insurance. Yes, it is. There's no doubt about that.

You can get over a hurdle pretty easily. I don't know about the high jump. Pole vault may be better said. Don't be too short. All right, so we have teased this multiple times, saying that Josh has an especially hot take on this space today. I'm not sure why, but why don't you tell us? Tell our viewers, more importantly. Judge, all I have are hot takes. That is true. Those of us who know you best know that is true, but why this today?

My friend Doug Bonaparte has a great joke where he says, thank God the Fed cut interest rates. Now I can refinance my 6.5% mortgage at 7%. And it's kind of crazy that we just had four rate cuts last year and the 10-year went up 100 basis points and mortgage rates along with it. I don't think this is going to last.

I don't think the economy is as strong enough to support rates at that level. I think the Fed is going to cut maybe not four times this year, but not zero times. And I think the Goldilocks scenario for the housing market would be for the labor market to stay strong, but not too strong, and for mortgage rates to gradually work their way down to a five handle. And if

those things happen, I think Stephanie and Jason will make money in KB Homes and DR Horton. I think those stocks will work. They have been absolutely killed, Scott. Only one name of the 35 names in the XHB is right now

is right now above its 50 day. The rest of this, and it's Williams Sonoma, which is not even a home builder. The rest of those names have just been completely annihilated. The median percentage off a 52 week high for the XHB name is negative 26%. So I think that trade is a good setup. But I wanna talk about even worse stocks, if you can imagine. We have a chart. Patty, can you fire chart one?

I'm showing you the yield on the 10-year treasury versus one of the bigger mortgage companies, Rocket, RKT. You can see these things are perfectly inverse. It's like a through the looking glass sort of thing where when the rate on the 10-year comes down, this stock shows signs of life and then vice versa.

The next time you see mortgage rates drop, this thing could be up 20%. I don't really know what's stopping it. I have one more for you. That's Dan Gilbert owns that, also owns the Cavs. His rival, this is United Wholesale Mortgage. This thing's in even worse shape. This is Matt Ishbia, also owns a basketball team, the Phoenix Suns. Inexplicably, they're both from Detroit, they're both Jewish, and they hate each other's guts.

That's another story. This is a stock that could react very quickly if and when mortgage rates come down. So I like the home builder trade, but if you really want juice, the place to speculate might be in the mortgages themselves, which is just a completely frozen market right now that desperately needs rates to come lower. Okay. All right. Well, thank you very much for highlighting that. We'll take another quick break. When we come back, we still have some calls of the day.

We want to do a price target hike for a stock that Josh bought back in November. And Goldman Sachs' top strategist is out with his top stocks and strategies for 2025. We're going to go through some of the names, see if you own them, debate whether you want to buy them. If you don't, we're next. Calls at daytime. We start with Reddit.

Target raised to 197 from 150. Overweight, Piper Sandler. They see upside to EBITDA and gross margins through 2025 and 2026. Best idea in the small mid-cap space, they say. Which, Josh, you bought in November.

Yeah, it's a relatively recent IPO. It's still probably very under-owned compared to the giant social media platforms, but it's been around for 20 years and it's launching new products now that I think are game-changing. One of those is Answers, so a chat GPT-like feature where rather than

searching message boards with millions of messages. You can just ask it a question and Reddit data will surface the answer to that question and some footnotes as to where that came from.

This is really important as far as the evolution of the product. But big picture, you're talking about a company that on some days hits 100 million daily actives. There are almost no other companies you can say that about. Cash flow is positive and growing. Revenue is 60% growth this year is what's expected. Goldman upgraded in December. Loop Capital, Bank of America, everyone following it was forced to. And I just think it's a story that's being discovered. So I remain long-winded.

I expect volatility. It's OK. I can live with it. All right. A couple of GEs we want to talk quickly about. Aerospace, top pick into earnings, 228 is the price target at Deutsche Bank. For Nova, price target 415 at B of A, 374 at JPM. GEV hitting a new record high today. You got both, right? You have both still? I do have both. I recently trimmed GE, though, because it's had such a nice run. It's up 68% in the past year. But it

And I trimmed it because I bought more Boeing, because I actually think this year Boeing plays catch up to the GEs, if you will. But there's nothing to complain about for GE. Larry Culp is doing everything that he said and then some. And I think the free cash flow is poised to work higher. GE Vernova is really much more of a margin recovery story. GE already saw the margin recovery. I still think you'll see it.

The big leverage is going to be in GE Vernova, where I think they can go from something like 2.4 percent margins to 13 over the next 10 years. And free cash flow will double as well. So I still play on the electrification theme. And, you know, I own Qantas Services, Eaton and GE Vernova. That's 9 percent of my portfolio because I believe in the long term theme. All right. We'll take a quick break. We will come back and we will do those top stocks and strategies from Goldman's top market strategist. And we'll do it next.

Goldman's David Koston out with a list today, his top equity strategies for 2025. I want you to benchmark the MAG7, own the S&P Midcap 400, also what he calls the art of the deal, own US M&A candidates. He talks about Zoom and Twilio and OnSemi and Take-Two and Molson Coors and TripAdvisor.

He wants you to own stocks with small and medium-sized business exposure. Stephanie Link, like Elanco and like Zoetis. Yes. Well, that's animal health, and that is one of my favorite long-term themes as well. The U.S. consumer is going to spend about $150 billion.

this year and for the next several years until 2030, which is about a 25% CAGR on animal health. I personally spend more money on my animals than probably my 17-year-old, but that's just me. So you can own Zoetis. That's the number one best in breed, but it does trade at 27 times estimates. Elanco is a turnaround story, and it's a new product innovation story, 12 times earnings. So you have

have a little patience on that one, but I like them both. - Okay, toast and block are both on the list, which Josh has been stopped out of in recent weeks. Jimmy Deer's on that list. And then if you look at apples on the list,

Meta's on the list. Snowflake is on the list. Jason, ServiceNow is on the list when he talks about AI phase three stocks. Yeah. So, I mean, for me with ServiceNow, we did recently trim it. It had a phenomenal year last year. But when I think about use cases and all the cloud spend and CapEx that's going in that arena recently,

companies like ServiceNow will continue to benefit from making companies and enterprises more efficient. So that's why I continue to like that name. You want to hit Deere real quick? Yeah, I mean, I've got questions about this stock, to tell you the truth. What we're pricing this on is the basis that hopefully crop prices have bottomed, that dealer inventories have been rationalized, and the company can start growing again. But if you look at the financial figures over the last couple of years, they're kind of terrible. So this is on watch for me.

Josh, quickly, Uber on the list as well on these AI Phase 3 stocks, AI-enabled revenue beneficiaries.

Yeah, I think Uber is very misunderstood and mispriced. It should not be trading 30 times forward earnings when they're going to post earnings growth that's significantly above that level. So I agree, obviously. And Kostin got a lot right about 2024. His price target was way off. He only thought 5% return, but he called the resolution to the election being bullish. He said, stick with

big names stick with what work like he had a pretty good track record last year and i agree with what he's saying this year i think we're going to see a lot more m a you want to be in russell 1000 you want to be in mid cap quick break and finals on the other side all right dan greenhouse courtney garcia swat demotor and dean evaluations brian levitt he'll be with me uh they'll be with me um i should say at three o'clock closing bell i hope you will too josh final trade is what

Reddit, stick it around. All right. Thank you. Jimmy. Delta Airlines. Jay. Thermo Fisher. And Stephanie Link. I bought more Eli Lilly. I think it's way overdone today. Thank you. Okay. We will see you in that final stretch. See what stocks do. See you at 3 o'clock. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

Thank you.

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