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Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the detox trade. Stocks resuming their sell-off to start the week. We're going to debate how much more pain could be ahead with the investment committee. Joining me for the hour today, Joe Terranova, Stephanie Link, Jim Laventhal, Surat Sethi. We will go to the markets where it is not a pretty picture on this Monday. Dow down by near 500. NASDAQ getting bludgeoned today, down more than 600 points. That's more than 3%.
So, it's ugly across the board. As we say, Joe, the detox continues. And it is remarkable how quickly the markets have moved from optimism over Trump 2.0 to pessimism over how this thing is all playing out. Sort of the chaotic D.C., the spike in uncertainty from business and consumer.
How low do stocks need to go? That now becomes the question. If we are on recession watch, what does that mean? We're 8% off of the February 19th high for the S&P 500. We've got this confluence of factors. First of all, you have reduced government spending. You have moderating revenue growth for the MAG-7. Then as it relates to the tariff, you have the growth concerns. It seems as though we're putting inflation off to the side right now.
I do believe that positioning and sentiment is reaching a point where you are set up for a tactical bounce. A tactical bounce. Nothing more dramatic than that. I think that could unfold. I think when you look at this week and you're looking at the weakness, you want to be a buyer. On the close today, I've talked about that I wanted to buy Amazon. On the close today, I have an order in. I will buy Amazon. I will buy more of my own ETF. I think this week is a week about positionalism.
positioning towards getting ahead of what I think could be a tactical rally into the spring. Wow. Okay, so now's the week to put money to work. Steph, I know you're doing the same and we'll get to some of the moves you've made, but if we're now entertaining the idea that we could go into a recession, which by the way, the president was given the opportunity this weekend to call that off and he did not do that.
So the market is sort of adjusting to what might actually happen. My question is this: If we say that the so-called animal spirits multiple on this market was at least 22 and a half times, right? That's fair because that's where we were trading. As all of this optimism was building, where's the recession multiple? I mean, if we're at 20 times now, what do you want to put on this market? The average Wall Street estimate for earnings is $269.
20 times is 53.80. Where are we now in the S&P? Take a look.
16 times? Is that the right number? I don't know. That's 4,304. That's ugly compared to where we are now. Right. So the data is slowing. We've been talking about it, but I'm not in the recession camp at all because I still think that the consumer is hanging in. And I look at the jobs numbers and we talked about this on Friday, right, on Closing Bell. And the numbers were actually better than Whisper. Wages are continuing to be good. We're slowing. There's absolutely no question about it.
The biggest question I have is what happens to earnings. So if I think of 1.5%, 2% GDP world, which I know seems extreme, but I still believe that to be the case, you're looking at 7% to 10% in earnings growth. Right now, if you look at what earnings have been doing, actually earnings are hanging in.
and they're running at about 10% for the full year, all right, haircut that by half. You're still looking at growth of 5%. You're still looking at many, many stocks and sectors that are going to grow more than 5% in earnings. And so to me, it feels bad because the NASDAQ is down so much, because technology, as Joe mentioned, down so much. But there are sectors and stocks out there that are not down that much. Could we go lower? Sure. I
I had 9% cash two weeks ago. I now have 6% cash. I still have a lot of cash. That's a lot for me. But I'm looking, I'm picking. I have no idea when the bottom is going to be, Scott. But I look at companies with good franchises, number one or number two positions in their industries, and where earnings are actually going higher. And that's how I make my shopping list, because I have no idea about the timing. Okay.
Big calls today from HSBC, which says they are, quote, flipping the script.
They say, "Prior to U.S. elections, we assumed that a Trump victory would reinforce U.S. exceptionalism. Today, we're upgrading Europe to overweight and downgrading the U.S. to neutral." BCA Research says as much—they say about the same. They tactically downgrade U.S. equities to underweight. You already had Jim Truist downgrading U.S. equities a couple of weeks ago, two, three weeks ago, when they did that. Is it time to do that?
Is it time to tactically downgrade the outlook for the U.S. stock market? To me, it feels like there isn't much juice left in that orange. I mean, we've already had one heck of a start to the year for international. To me, it seems like that is based mostly on international stocks being very cheap.
relative to the US. I don't think that the dynamism of the US economy is set to be surpassed by, say, European economic dynamism anytime soon, even with increased defense spending. But if the thesis on European stocks, international stocks, is that they're cheaper, then I would submit to you, and I think this is where Steffi was going, that the average stock in the US is a lot cheaper than the market overall.
You don't have to go abroad for this. The equal weight S&P 500, Scott, it trades at 17 times this year's earnings. So to your question, rhetorically asked but wisely asked, what's the multiple? What's the multiple at the bottom? You can look at the average stock and see it's trading at 17 times. Obviously, the S&P 500 market cap weighted is a heck of a lot more than that. My point, though, to answer your question is I am not going abroad.
to look for stocks that I think will gain nicely from here. I'm also with Steffi on the idea that this is just a growth scare. Now, let me say something about this for a second. There's a comparable that we've all made in the past few weeks to August of last year, a growth scare. We got through it. Things could change. That was different. Things coming out of Washington could make this a lot worse. So it could change. But right now, I'm firmly in the this is a growth scare. Now, let me ask you this.
If you made that argument, which you did, when stocks were at 22 times, that, well, if you strip out the mega caps and strip out the distortion mode for the S&P and you looked at all the others, they were cheap relative to that. If they were cheap then and they were viewed by you as an obvious buy, we weren't talking about recession then.
Now, if we're talking about a recession, how do you know that they're cheap enough? Well, we are talking about the recession or a potential recession. I don't agree with it. So if I did agree that a recession was far more nigh than I believe, then I would be reducing stocks. I would be raising cash. I'm not.
I will also point out, because I think your question sort of generates this, that if we look at the S&P 500 year-to-date, down 4%, NASDAQ year-to-date, down 8%. Those are big declines in just a two-and-a-half-month period. The RRSP, the equal weight S&P 500, which again, average stock, is up 0.5%. The average stock is not telling us a recession is coming.
Sarad, I mean, Treasury Secretary said on this network that we need a detox. We're going through a detox. He said that. That's his word. Is it time to flip the script, so to speak, like HSBC says? And forget—let's not have a conversation about Europe or outside. Let's just focus on the market here.
If the Treasury Secretary tells you we're going through a detox, if the president refuses to say that we're not going to have a recession, if he says during his
joint speech to Congress, you know, we're going to have a little bit of an issue. I forgot the exact word he used, but you know what I'm talking about. The sentiment. Musk talked about the pain that we're going to have to go through back in October during a town hall. I think it was.
They're telling you. They're telling you that more volatility and turbulence could be ahead. It could be worse before it gets better. Yes. So a couple of things to that. What was interesting before all that was said was there was a Trump putt.
Every time the market go down 2% and then we'll walk back the tariffs at the end of the day or there would be a message through somebody else saying, I think what they're saying now is we need to get some of this stuff done and don't expect us at the end of the day or the end of the week to come back to save the market in the short term. It's not what you think they're saying. The Treasury Secretary told Squawk Box there is no from put. So you don't have that temporary floor right now. What you do have is...
And the points are being made here. But the other one that we have not talked about is interest rates are coming down.
And when interest rates at 22 times earnings, we weren't talking about interest rates at all. We were saying they were going to be higher for longer and we're not going to, the Fed is out of the picture. The Fed is slowly starting to come back into the picture, especially if inflation starts to come down and they're seeing a slowdown. And you'll see the two-year, you'll see the short term of the curve, and you're seeing the longer term of the curve. The 10-year now is down. And if you're looking at valuations at when it was 22 times earnings was four and a half. It's now closer to four. So you've got other things that will come into effect.
We're not talking about a Powell put yet. Well, that's what you're insinuating. You're insinuating the fact that there is a Fed put. There will be at some point because the Fed will say, hey, growth is slowing. We can't accelerate this at the same time. Maybe. But what if inflation remains elevated? Because now the word of the month is stagflation.
It's true. But we've got one side of it on a slowdown, and we'll see if the inflation numbers come down over time. We've got a lot of cost cutting going on. We've got a lot of people losing jobs. That could bring pressure down. Oil is down much lower than it was when we were at 22 times earnings. So inputs are coming down as well. And so you could have that. I'm not saying it's, but it's something to watch for in the markets. And then when you get these sell-offs, Scott, as all we know, there's huge momentum on
on the downside as well. So we look for good companies, just like all of us are sitting here and saying, "Hey, what can we look at? What can we add that we haven't added in the last few months?" Just because valuations have been high. - It's amazing to me where we've gone, really, in 125 days. So we sat here on election night,
I did, and some of you did. And we talked about the market, and there was a tremendous amount of optimism that night when it became clear that it was going to be Trump 2.0. Animal spirits and all these other terms were thrown around because people thought that this was going to be a great renaissance for the economy, for American business. The stock market was going to follow suit.
From Election Day to Inauguration Day, to make this point even more clear for you, the S&P was up near 4% from Election Day to Inauguration Day. NASDAQ was up 6.5%. From Inauguration Day to now, everything's down. The NASDAQ's down 10%. The Russell's down 10%. The S&P's down 5.5%.
Now we have the word detox thrown into the mix, Steph, where Wolf Research says the path of least resistance looks lower.
J.P. Morgan says risks are drifting towards a, quote, ugly U.S. exceptionalism. Yeah, by the way, I was just going to mention that gasoline prices are down 13% year over year. That's actually a really good thing for the consumer, too, and good for inflation. So to Sarath's point on input costs coming down, I think that's actually a positive that's not getting talked about enough. In terms of overall the action in the market, yeah, it does not feel good, as I mentioned earlier. But...
Do you remember that two years ago the QQQs were up 55%? And last year they were up 25%? And the S&P 500 has had two straight years, the past two years,
20% plus. I know, but that feels like meaningless. Yeah, but I'm just saying, like, it's easy to take profits. It's easy to get scared. It's easy to sell when there's uncertainty. And we have it in spades, no question about it. But I got to think that some stocks that are down 15, 20% on the year are really getting very interesting to me. The free cash flow stories and technology hasn't changed. A,
The AI has not changed. Maybe the froth was there. Sure it was. But it's coming out. And now is the time when you have to look for opportunities, not for a day trade, but for the next year, because you're getting best in class on sale across a lot of sectors. People have a hard time looking at some of these
resets in the stocks and deciding that the worst is behind it. I mean, Tesla is a perfect example of what we're calling the Tesla chainsaw massacre. It's down again, 50% drawdown from its high, seven weeks in a row, the longest losing streak ever. Target to 225, reiterated sell UBS.
Target 160, Redburn, reiterated sell. You talk about a narrative change, an outlook change. This is case in point, Joe, of a stock that still sits in your ETF because you can't do anything about it. No, there's nothing that I could do about it. That ETF is a reflection for what Stephanie just said, where you're investing for the long term. And you're trying to identify areas of the market that you believe over the long term you're going to be able to generate the alpha. In the case of Tesla,
It's very clear to me that the momentum is broken down. It's very clear to me that a lot of discretionary and non-discretionary funds are in the process of deleveraging. And that's part of the overall deleveraging process that we're experiencing in the marketplace right now. Look, I think you have to understand that this is a very difficult environment.
And it's almost comical to me where I think there's so many people, whether it's on social media or in the business media, that have this inference that it's a great environment and everyone's making money. This is a very difficult environment. I don't hear anybody saying that. I don't know where that's coming from. Well, I said on social media. I don't know where that's coming from. But anyway, go ahead.
If you think about the optimism that we had moving into the end of the year, everyone was caught offside with that optimism. Now it seems as though we're dramatically pivoting. You have this inflection point where you're moving towards this kind of universal bearishness in the near term. And I just think it's a reflection of you have to understand when you're thinking about positioning that right now you have large funds that are in the process of
losing money. And when they are losing money, they are doing nothing more than reacting to price. They're not looking at fundamental analysis. They're not looking at valuation. I'm not saying that's right. I'm just saying this is what you have to understand and you have to acknowledge. The point, the overarching point to all of this, I think, is that people weren't positioned for this. Yeah. That's the point we make, okay? From election night to the inauguration, there's a whole heck of a lot of optimism.
From the inauguration to now, there's not that much optimism, at least in the near term. There still is longer-term optimism. People are keeping some price targets. We're still going to go 6,600 by the end of the year, says UBS. We'll still go 6,500 by the end of the year, says Morgan Stanley. First half is just going to be more messy, I think, than people thought. Case in point, look at Nvidia. It's down 18% in a month. You want to know why the NASDAQ can't find its footing in any way, shape, or form? Well, Tesla.
NVIDIA, still called a top pick at Morgan Stanley or by one firm after the TMT conference that Morgan Stanley had. What do you want to do with this one? Look, I like NVIDIA. And for clients who don't own it, it's getting to a point where I'm going to start adding to it again because
They talked about it last week at the conference saying, look, we see demand out there. And the point that people were saying is, well, your margins are coming down. Well, that's what happens when you start expanding. But Scott, coming back to this, I think
The narrative's changed so much from a growth agenda of the administration to now a recession agenda. But the administration, longer term, is looking for growth. And I think if you believe that growth is going to come, these are air pockets that we have to buy really good companies like the NVIDIAs
and add to them at times when we haven't been able to do this in the last year. - You said you're getting close. Well, what's close? It's gonna test 100 bucks maybe. - I would say around 100. I will go back in for clients who have new money and I don't have the position that I want. - Alphabet's down sharply today.
Justice doubling down on a request to break up that company. We can take a look at that stock because it's one of the ugly ones today as well. Jimmy, what about Alphabet? Alphabet, I have a very big position. But, you know, breaking news, as we've been talking, something that I was going to do yesterday morning, I'm just doing it now. I just fired off an email to my trading team asking them to raise the position in Microsoft. I know you asked about Google, Alphabet. That's okay. Allow me to, you know, improvise here.
I do think, and I think we're all saying this, that this is a buying opportunity. Joe, you made a very good point about institutional buying. And you said it doesn't matter whether it's right or wrong, excuse me, institutional selling. It doesn't matter whether it's right or wrong. To a fundamental person like we all are, it's a great opportunity. Now, I will look at the chart of Microsoft and say it looks pretty terrible, but it looked pretty terrible for a long period of time. Folks, I'm not saying that this is the bottom. What I'm saying is Microsoft
is a great company. Nvidia is a great company. You're getting these stocks now at really good prices that if you, I'll just finish in a second, that if you just look back from a year from now, you're going to probably feel these were very good buys. I bought Nvidia two weeks ago. Right now it looks stupid. I get it. I'm willing to hang on for a month and see how it looks after that. Well, the other side of it is because these are the most liquid stocks, that's where the money's coming out of. It happened on the way up too, because if you owned it and all the liquidity comes into the market, people buy.
the S&P, but they don't buy equal weighted, they buy market weighted. It goes down the other way too. You're liquidating S&P positions.
What are the first ones that come out? And you're getting the most liquid stocks, whether it's Apple, Microsoft, Nvidia. Let's sell those. In the meantime, you've got defensive stocks that aren't going anywhere because they're not that big part of the index. Yeah, but that's obviously representative, the defensive stocks about where the overall tone and tenor of the market has switched to. That's why you have things like Staples and Healthcare doing well at the expense of everything else. What are you going to say about Alphabet?
that quality is outperforming once again, and quality had kind of disappeared in the last six months of 2024.
but qualities outperforming equal weight is outperforming once again up in the case about the bet look it's it's this universal max seven be leveraging that's going on right now it's indiscriminate selling pick the winner on which one you believe over the long term you want to be allocated towards I personally don't have ownership of these names I just haven't through the ETF I like Amazon here I believe in what Amazon's doing with anthropic I believe what Amazon's doing in terms of the AWS growth and I think
ultimately you're going to see Amazon make a significant push in the direction towards live sports programming beyond where they are currently. You guys see Apple today down near 6%. You don't see that every day. They delay their Siri AI update. Jimmy, you own this one too. Yeah, but this has been a clear outperformer. I mean, when you say I own this one too, what I think to myself is I don't own enough of it. It really has outperformed the rest of them. Obviously, I just made the call on adding to Microsoft. I think the
The problem, if you can label it a problem with Apple, is how do they generate the growth rate that its multiple currently implies? And Scott, this is writ large for the market. This is what you've asked about three times so far today. Is the multiple too high? For Apple, it probably is a little too high. But by no means am I going to sell. It's been trading at like 31 and a half times. Now, it's probably a little bit less with the pullback. But the knock on it was it was trading on premium fundamentals.
that weren't even premium. So it was given a premium multiple when it wasn't even trading on premium fundamentals. I completely agree, which is why I've been underweight. And as I already said, it's been wrong to be underweight. But I apply the same ideology that you just expressed to Microsoft at now 25 times, excuse me, 26 times forward earnings. Give me that. Give me that. I'm not going to add to Apple right now. Microsoft, yes. The problem with Apple, too, is that you could look at the fact that it did, like Jimmy said,
hold up better than a lot of these other names in the mega cap space and throw your hands up in the air and say, well, I don't get that. Why? China's near 20 percent of their revenues. Now you're going to talk about tariffs to China, where a lot of their components come from to go into the phone. Why does the stock continue to get that premium of a multiple to the market when the fundamentals don't necessarily scream out that they should?
Despite the fact that they have this incredible installed base, everybody knows that story to this point. Does that justify 31 times earnings? And I've said it before, we own it, but not in size, but I haven't added to it because of the multiple. It needs to come back. And you had a few catalysts there, which, you know, people were saying, well, now...
Now they just delayed it in terms of AI. They also don't have to spend as much money on AI as all the others have to do because they can just use the other models that are out there. So what you were getting was a premium multiple for a consumer staple stock in the technology world. And today, when they come out of announcement, you're going to see more source of funds out of it. Wolf today says there's further downside likely for tech in the coming weeks.
Raymond James says mega caps are going to continue to be under pressure. If you look beyond that to momentum, which we were talking about too, the losses there are not abating at all. We could throw up any number of stocks in this group, and guys in the control room, I'll leave it to you. Applovin, Palantir, whatever you want to pick, because a lot of them are down substantially yet again. Like Applovin, which Citi is sticking with,
Keep calm and carry on, they say. Price target, $600. Joe, you ran this thing way, way up, and now you've been stuck sitting, writing it down. Are you keeping calm and carrying on in this name? You've heard me the last several weeks telling the viewers, don't catch the falling knife. It's going to continue to go lower.
And names like Applovin, that's exactly what's going to be going on. So keep calm and carry on. That sounds like someone that's just an eternal bull and buy, buy, buy when the market's down all the time. It doesn't acknowledge that at times there's an opportunity to pare back positioning. And sometimes the best trade is sitting on your hands and doing nothing. And I think for all of these momentum names that you keep talking about, Vertiv, rightfully so, by the way, Palantir,
all of these names, they are in a significant unwind of positioning, a very dramatic correction. And from where they go beyond that is not something that I think the viewers should prudently participate in. - Okay, Vistra is down 5 1/3% again today. Palantir is down 7 1/2% today. Applovin down 9%, the Trade Desk down three.
You've had Vertiv, which is down in that group as well. Stephanie Link has bought more Eaton and Qantas services. Yeah, not at 11. Stephanie is not going near at 11. I am not going. You continue to buy more Eaton and Qantas services. Why so?
Because I still very much believe in the whole data center build out. I still very much believe in the grid upgrade and we haven't spent money on the grid in over 50 years, incremental money at least. I still think that's going to be powered by AI. So AI, data center, grid and then power overall.
Those are the themes that I like very much. And Eaton reported data center growth of 45 percent. Their orders were up 75 percent. They're talking about $1.7 trillion in mega project spend over the next several years, and only 15 percent have started.
haircut that even if you want to haircut it by a trillion. You still have a lot of momentum and they have long term contracts and they have very steady and stable customers. Over 70 percent of their customers are utility companies. So I think the stock being down as much as it is trading at a discount to its historical average. I think I'm just going to continue to buy. I've been wrong. It goes down every day. But I still like the theme and I still like their execution.
Let me ask you this. So when you say that you still believe in the AI story, in the beginning part of 2000, you could say, well, I really believe in the internet story. And when you had in May of 2000, I guess, when you had the crash, you could say, well, I still believe in the AI story and the stocks continued to go lower because they went up in
in such a ridiculous fashion that it just wasn't justified. Well, the companies weren't earning anything. That's the difference. Companies are earning. And we talked about this last week. Broadcom, that was the best semiconductor company and absolutely focusing on AI. I know it's a diversified company, but AI is exactly what they thought it was going to be, a total addressable market or a serviceable addressable market of $60 to $80 billion today.
between now and 2027. And they are signing up custom ASIC customers more than people thought. And so if they're doing that, AI still is very much in the early innings. And this company earnings, I think earnings power is like $11, $12 a share. That's what's different than 2000. Companies were not earning money and you couldn't really focus on earnings power with any kind of clarity or confidence. But you could still look at...
at a lot of these names and suggest that they were dramatically overpriced because all the hype around AI. Yeah, you're right. Well, look, we talked about the multiple and how Broadcom is just the example I have because it's the only semi I own, but it went from 14 times a couple of years ago to 34 times. I wasn't buying it at 34 times. The stock now has come back to 26 times. Still not cheap, but I just think after
After the earnings report last week gave me so much more confidence in the earnings power store. And it's not just AI also. It is also VMware, software, and the legacy businesses that are troughing at this moment. But look at quantum services, for example. You go from, let's throw the, I don't know, a one year. You go up to 365 on that name, and now you're down to 236. Right. What's the right stop point?
How do we know? It was up 40% last year. You're right. I don't know, but I can look at the numbers and I can look at what they're delivering and thinking that the pullback is overdone and it's an opportunity. EBITDA grew 40% year over year. Backlog up 14% year over year. Long-term contracts with the utility companies are actually going a lot higher. And so to me,
The numbers speak for themselves. The trends, the total addressable market and the trends that they're involved in have a long way to go, Scott. Does it go down another 15, 20 percent from here? Maybe it does. But I think in the next three to five years, it's going to be a winner and it'll be a lot higher than where it is today. You get a lot of credit for putting your money where your mind is. I'll tell you that because you bought more Bank of America after Friday. You told me you bought more Wells. Yeah.
If you want to look at where the most acute pullbacks have been in the so-called recession trade, financials are coming off their worst week since March of 23. So again, you did Wells on Friday. Now you bought more Bank of America, which you told us right before we came on the air. Tell me more. Yeah, well, so the stock is down 14% from its high.
So well put in terms of the correction. Wells Fargo also down a lot as well. But I do think that trading at 10 times forward estimates, when the long-term average is 12 times, 1.1 times book, when the long-term average is 1.4 times book, you're getting value. I like the capital markets business. I still like the capital markets business. I still like M&A. I think it's going to work.
but it's going to take longer than we expected. But the most important is net interest income, which is 58 percent of their total revenues. That actually is troughing. And I think you're going to see better net interest margins. And oh, by the way, in earnings, we have seen earnings revisions lower in a couple of sectors, like the tariff-rich sectors, right? Autos and aerospace, personal care as well. One area that actually numbers are not going down is financial services. So one name that did go down, and that was American Express, and I sold it and I used the
the gains that I had to be buying some of these other companies within banks where I see better value. Surat, the one month declines in the financial stocks, pretty telling. Citigroup's down 15, Morgan Stanley 14, Goldman and Wells 13, Bank of America 12 and JP Morgan 11. That doesn't even get into the private equity names, which have reset even more dramatically, well into correction territory for almost all
of those names, but you've got a lot of exposure. Bank of America, Blackstone, Citi, JPM, Morgan Stanley, Prudential, Broadbridge. Look, I think when you look at these companies, look at a Morgan Stanley, look at a JPMorgan, Bank of America, you also have very strong fundamental wealth businesses. And you're not getting enough credit for those because that's where people are calling their advisor saying, where do I put my money? How do I make money? Whether it's, I mean, different products like the Blackstone products or KKR products,
net interest margin is going to be better and these stocks have sold up for the two fundamental reasons one is rates come down financials get hurt and secondly a short-term blip on any m a or capital market activity which i do think is going to pick up in the future so people are again taking money off but fundamentally and valuation wise these companies are cheap they've got strong balance sheets and dividends discretionary has gotten crushed it's by far the worst sector year to date
Airlines, anything consumer sensitive is getting hit yet again. United Airlines price target got bumped down. Chipotle, you bought more of that. Part of the story here. - It's back to where it was when the CEO left the company. It's ridiculous. This company is growing mid single digit, same store sales. I think they have pricing power.
substantial pricing power to offset the tariffs that's going to hurt. And that's why the stock is actually down. They've got new products. They've got a great management team. And I think down 25 percent trades expensively at 25 times EBITDA. I'm not going to tell you it's cheap, but relative to its historical average, 38 times EBITDA. So I think you're getting best in class on sale down 25 percent. And I just think that there's an opportunity there.
The other area we need to discuss with you, Jimmy, and we've done a thousand times, but it's a thousand and one now, is the Russell. I mean, it's down 17% from its high. It's down 11% in a month. This trade was already a little dicey before, to be honest with you, when there was a lot of optimism around the economy. This trade still didn't work.
And then now we're having the recession fear. Yeah. And now it's going to work? Well, what's going on right now is two things. One is the recession fears, which fundamentally brings into question whether the top line will crater at small caps. And then, quite frankly, I think the biggest factor right now is technical. And, Joe, second time I'm going to allude to what you said, that institutions, anybody who's selling right now, anybody who says...
I need to raise liquidity. They're probably going to take it from the riskiest spot, which is small caps. And it's also the less liquid spot within the markets. Now, again, if you're like me and you say that you don't think that there's a recession and you're looking at these stocks, which as a whole, the Russell 2000 selling mid-teens multiple with low teens year over year earnings growth. If you don't get a recession, that is the place to be.
And look, I know it's down. Is it down as much as NVIDIA? No. Is it down as much as the NASDAQ year-to-date? No. So, yes, it feels terrible, but it's also in line with the rest of the market. Yeah, but it's also right in the...
the spot of if you're going to sit here and continue to be worried, not you, but the collective you is going to sit here and continue to be worried about a bigger slowdown, even if we don't have a recession, this...
How's this trade work? You're absolutely right. If you think there's going to be recession, this is not the place to be. I just said even if you don't think there's a recession, but you think that growth is going to continue to slow, how's that trade going to work? Well, because of what I just said. Okay, so multiple on small caps in general around 15 times. Earnings growth this year after an earnings recession for the last two years projected at 12%. Yeah, but they're cheap for a reason. When the rest of the market was going up and these weren't working, then they were cheap then too.
I'm going to take issue with that because there have been plenty of times when the Russell rallies hard. OK, there have been plenty of times. Yes, there has for a very short period of time. You're right. And it's true. And you're absolutely right. It's very short period of time. Very frustrating that as soon as there's a whiff of a recession, it gives it back up.
up. Still, I'm seeing the fundamentals remaining intact, and that's why I'm staying with it. Now, again, though, man, if there's a recession, no, this is not the place to be. Same with airlines, which I'm sticking with. I'm looking at you. I assume you're still with me on airlines. You can look at a lot of these sectors that we've talked about in this first half hour that are recession exposed. Recession is just a word. It doesn't mean anything. The fact is that there's more optimism, but I think there's a lot of uncertainty between business and consumers, okay? If
If that continues, does it matter if we get into an actual recession or not? The stocks are reacting like we're having a slowdown. Well, OK, slowdowns. We don't get into a textbook recession that is going to impact these stocks for some reason. If we get down to half percent growth, these stocks are going to work.
I understand your point. And the point I'm making back is that these stocks are traded as if a real recession is going to happen, not a growth slowdown. OK, not something like it's a quarter to a real recession where we're talking about coming out of this two years from now. That's the way these stocks are trading. I'm not going to sell into that. All right. We will have some more committee moves coming up and we will be all over the sell off, of course, on Wall Street yet again. We'll do that next.
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All right, still down a 500 handle there on the Dow. Stephanie Link, you bought more India. I did. That's interesting to me. It's really lagged China and Europe. It's down 7% year-to-date, the INDA. That's what I own. It dramatically outperformed them. Of course. For a nice run. For many years, right. And I think the reason it's down, though, you have money going back into China and back into Europe and all that.
But the growth rate is slowing a little bit. Their GDP is going to grow about 6, 6.5 percent this year. Maybe it's down from 8 percent. But 6 percent is still very, very strong. And I really like the demographics, 1.46 billion people in the country, 40 percent of which are under the age of 25 years old. You have Prime Minister Modi is very pro-growth, pro-business, and he's going to spend $1.7 trillion on infrastructure between now and the end of the decade. I like that setup. It's a very long-term position for me, Scott.
But I do think it's lagged so much, I think it's really an opportunity. All right. We have another move from Surat today. He bought into it. That's a new position? It is a new position. 21 times earnings, maybe a little lower today. 80% of the business is QuickBooks, 20% TurboTax, both growing double digits. I really like the tax business as well, as you...
look into more people doing their own taxes, that they can upsell as well. The stock has free cash flow, very little debt. I think you're going to get a great return out of this one. It's out of favor, and I like it.
Now, Stephanie Link, back to you. You bought more Boeing. It's been a busy couple of weeks, actually, yes. Why Boeing now? Well, it's down 25% from its highs. This is not a demand problem for the company. We know it's an execution problem. Still? They're ramping up production. Well, the CEO is only there for a couple of quarters. I know, I know, but it seems like it doesn't even matter who the CEO is. It does matter. It does matter. They have seven years of backlog. Seven years. Between Airbus and Boeing, they have
13,000 planes in their backlog. I thought you were going to say seven years of bad luck. Well, it's been a bad luck. It's been a bad trade. Look, I'm going to tell you that. There's a lot of mirror breaking over there. I still like it for the year. It's still my favorite name for the year. Favorite name for the whole year? Yes, it is. I've said it in the beginning of the year. All right. We could pivot off that to defense, which Deutsche Bank says the fundamentals are deteriorating for the primes, as they say, for a defense. Jimmy, you have Lockheed.
You have thought this was going to be the place to be for all the wrong reasons. You know what I'm alluding to. Now it seems like the whole calculus around defense has changed. What do you think now? I think it's really this simple, that yes, we may be cutting the defense budget here in the U.S., but it's being more than made up for, or at least being made up for internationally, particularly in Europe. And when you look at Lockheed Martin, that F-35 program, which is the core
of the business, European countries are on backlog for this. So to the extent that the U.S. Air Force doesn't take orders, which, by the way, I don't think is the case. I think the U.S. Air Force really wants the F-35, regardless of what Elon Musk professionally thinks about it. But let's just say the U.S. Air Force pulls back on orders. They're like all of Europe wants to fill those production slots. And I think that's why it's rallying. Stock's up 9% in a month.
S&P is down, I think it's 7%. I'm only choosing a month because that kind of encapsulates the whole Ukraine thing. All right, let's get the headlines now with Contessa Brewer. Hi, Contessa. Hi there, Scott.
There are more than 30 casualties after an oil tanker carrying jet fuel for the U.S. military burst into flames. It collided with a container ship off the coast of the U.K. in the North Sea earlier today. The chief executive of the port of Grimsby East told Sky News 32 people were brought to shore alive. We don't know what their conditions are. The manager of the tanker, M.V. Stina Immaculate, says the vessel was anchored when it was struck by the Portuguese flagged So Long container ship.
More than 30 countries will participate in the Paris talks to create an international security force for Ukraine. A French military official told the Associated Press today the security force will keep Russia from launching another offensive after any ceasefire. The official added that the U.S. was not invited to the talks.
And the Trump administration is taking another step in deporting migrants who are in the U.S. illegally. The administration launched today a new app that gives people in the U.S. without proper documentation an option to self-deport and leave with the chance to return to the U.S. through legal measures. We'll wait and see how that goes. All right, Contessa, thank you. That's Contessa Brewer coming up. The biggest upgrades and downgrades in today's sell-off. We'll do our calls of the day next.
And now, a next-level moment from AT&T business. Say you've sent out a gigantic shipment of pillows, and they need to be there in time for International Sleep Day. You've got AT&T 5G, so you're fully confident. But the vendor isn't responding, and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. AT&T 5G requires a compatible plan and device. Coverage not available everywhere. Learn more at att.com slash 5G network.
Are you still quoting 30-year-old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now. It pays to discover. Learn more at discover.com slash credit card based on the February 2024 Nelson report.
All right, let's do some calls. There are many today. Lilly and Novo, they're under pressure. Novo's latest weight loss drug trial disappointed. Joe T., you take Lilly first. So Lilly has been in the ETF for quite some time, and it's really not about the momentum. It's been about the revenue growth. The revenue growth is the story here, and the revenue growth in the upcoming quarter could really hit dramatically.
45, 46%. That's something that this company really has not delivered on in the past. Another name I think it's important for the viewers to look at is Amgen. I bought that last week. They are going to be participating in the weight loss drug conversation as well. All right. Sherwin got downgraded today, Joe.
That's you. No, that's discretionary spending. That's a softening home environment. And it's reflected in what the stock has done here over the last several weeks. It's in the midst of a little corrective pullback. I would say the momentum on it is really scoring somewhere around. You like the red, yellow, green light. I would call it a yellow light. And there's concern.
For sure. All right. You okay? Yeah, I'm fine. Just a little down. Down? You good? I'm good. Yeah. I'm just making sure. Just looking out. I'm good. Right? Doesn't he? I'm good, Kev, right? All right. I'm good. All right. I mean, you know, it's tough. Momentum. Yeah, I get it. D.R. D.R.
D.R. Horton. Overweight Wells Fargo, Stephanie Link. Yeah, I mean, the stock is down 13% in the past year because higher interest rates. Well, guess what? Rates are coming down. That is a positive for the home builders and the stock trades at nine times forward estimates. And they have the large capture of the up-and-coming homeowner and buyer, like the new owner. And I think they're positioned quite well when Gen Z gets into the marketplace. Okay. Here's something to make you feel better, Joe. What's that? Fastenal and Grainger.
Both upgraded it out to outperform at Blair. You own both of those in the ETF. We do. Fast and All is green on the screen today. Look at you. WW Granger, though, longer term, is the better name, I believe, to own. It's been more consistent in delivering the revenue growth. The return on equity is good. The debt to equity is good. And guess what? Goods over services. Manufacturing bottom might actually be in place that benefits these companies. Santoli, he's next with his midday word.
All right, we're back. Senior markets commentator Mike Santoli joins us now with his midday words. Good to see you. Just tell us what's on your mind today. Yeah, I think the game here is just how indiscriminate it looks on the downside. And frankly, not very. A third of all stocks are up today. It's not clear to me that's what you want to see tactically in a very short term. Yes, it's good. The market's being selective. Yes, it's mostly about liquidation intensity in the formerly most crowded names, the momentum names.
But I do think at some point, I think of a lot of people waiting to see when it just looks kind of overdone and sloppy. So maybe we're getting there. I think there's some relevance to the fact that we broke the fourth quarter low in the S&P 500 in the first quarter of a new year. Historically, that's not great. It's not necessarily disaster.
But I think that, you know, you're in that mode of first rally attempt from here, probably close in time. It's probably going to be a ripper, but it's going to face a high burden of proof. I mean, do we need to speaking of proof, do we need to wait for some kind of proof that we're not going to have a recession before we we settle down? No, because that proof is, you know, weeks or months away. Right. I mean, you can't kind of prove a negative in the near term. I really think the market is rushing ahead.
of the data to some degree here. And let's be honest, it's really not the economically sensitive names that are driving us to the downside here. And so I do think that there's multiple things going on at once. This is a kind of a kind of interplay of a lot of negative drivers. Yes, the growth scare and the recession fear is one of them. And then you have, you know, just the kind of positioning shock that continues to bleed out. It actually seems like it should be culminating soon or now.
that piece of it. But I think that it's a lot to ask for it all to kind of give people reassurance psychologically. I think the market is going to do that job for you when it ultimately gets a bounce. All right, good stuff. I'll see you on Closing Bell in a little bit, Mike. Thanks. That's Mike Santoli. We have the setup next.
Setup time. Oracle, Surat, you own the stock. It reports after the bell today. I do. And it's going to be interesting to see what they say about demand and if they're seeing any softening, because I think that's what people are expecting. Stocks like Workday, Salesforce all sold off as well. So we'll see if they come in the same camp. OK. Wolf. I mean, Joe, Wolf goes to 190 from 210. They take the price target down just a little bit. I can't see how the guidance is going to be good for this name.
Look, we have it in the ETF. We've had it for two quarters. Not particularly excited about where it sits technically. And like I said, I don't think the guidance is going to be good. It's going to get better, Joe. It's okay. Oh, it's going to get better. I promise. Okay. It's all good. It's all right. My goodness. You all right? All good. Weiss isn't here. Adobe, Wednesday after the bell, Jimmy. Uh,
It's been an underperformer, to say the least, for quite some time. But I actually think the product hangs in there. The question is competition. That's the big question. Are people eating their lunch? We're going to find out. I don't think so. I think the concerns about competition are overblown with Adobe and PDFs. All right. We'll do finals after this break. All right. We'll take you through the final hour today on Closing Bell with Anastasia Amoroso, Jeff DeGraff, Mira Pandit, Mike Rode.
And we just got the former Fed Governor Rich Clarida, too, to join us. Tell us what he thinks all of this means for what the Fed does from here. Is there a Fed put in this market? We'll get his perspective at 3, and I hope you'll join me then. Let's do finals. Mr. Sate, you are up first, sir. I will go with my value play. Delta down 16% year-to-date. All right. Farmer Jim. ExxonMobil, thank you, Mike Santoli, for pointing out the economically sensitive stocks are hanging in there. All right. I may have to put that new tractor purchase on hold for a little bit, Jimmy.
I feel good. Maybe I'll go get a new track. That's a great idea. I mean, maybe it'll be on sale. Steph? The gap is on sale. They had a great quarter. They beat. They raised. The trade's at 11 times earnings. The turnaround is just getting going. All right, Joe T. Let's end the show on a positive note. Look at that CME chart. Are you talking to yourself? You're telling yourself that? CME all-time high. Remember I told you. I think this week, I think it's a tactical buying opportunity. I perked up with 59.55. All right, I'll see you on the closing bell.
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