The Edgy Markets 6/17/25
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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. Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour. The edgy markets, retail sales weaker, the VIX rising, tensions high.

high, of course, in the Middle East. We're trading all of it with the investment committee this hour. Joining me, Josh Brown, Stephanie Link, Shannon Sakosha, Brian Belsky. We will go to the markets and have a look at where the trade is at noon in the East. And we are modestly red across the board. Steph, our retail was weaker than expected.

biggest monthly drop since March of 23. Figured it probably would be because the big pull forward going into the trade war and the tariffs. And Roth Capital today says the bull trend, though, is underway. There's plenty of support. Breath continues to improve. Last week, the percent of Russell 3000 names above their 50 day reached 80 percent. That's a key characteristic, they say, of a bull market.

The consumer is just fine. We did see pull forward because of the tariffs, but the average number year over year was 3.13 percent. And that's still pretty healthy. The average for the full year so far, every month, five months, actually, it's been 4.4 percent. So you're down a little bit, but you're not down a lot.

the consumer is still just fine given the labor market, given that inflation is coming down. And oh, by the way, the control group actually was pretty decent. So the GDP number is going to stay strong, which bodes well for earnings. So I still come back to the facts that we got a couple of weeks ago, personal income and personal savings. And personal income at 0.8% was three times what people were expecting. And personal savings, excuse me, spending was 0.2%.

So a little soft, but that means your savings rate is actually much higher than the normal, and that's a good thing in case we do slow down. I think the consumer is in better shape at this go-round in the cycle. The other point we brought up yesterday I'm just reminded of is that Goldman report of

people having like 48 or 49 percent of their financial assets in equities in the stock market. And if you're 2 percent from a new high, you're feeling pretty good, I think, through all the trials and tribulations of where we've been already this year. Josh, the Bank of America Global Fund Manager Survey calls sentiment at a Goldilocks bull level.

They say the trade war and recession fears have abated. The cash levels have dropped to 4.2 percent, was 4.8 in April. Maybe there's a little more buy-in to this story, feeling like it's gotten a little better.

The thing to understand about the Global Portfolio Survey is that these are people whose livelihoods depend on them not missing out on massive rallies. So it's okay to have more cash when the President of the United States lifts up a piece of cardboard and says, "We're going to tariff the rest of the world 100%," or whatever the number is, on their goods. But once that piece of cardboard comes down and the real numbers start to surface,

uh... you you can't just sit there and be like no actually i think he was serious and and we're gonna wait until the actual tariff news once the market figures out pay this is not going to be a worst case scenario this is not going to wipe out two quarters worth of earnings this is not going to crush the u_s_ consumer which is the most important engine of global growth uh... then then you have to decide okay maybe i don't want to be seventy percent cash

Maybe I want to be 30% cash and I'll find some stuff to buy. So that's exactly what's playing out. In the end, global portfolio managers are portfolio managers professionally. And if they sit completely in cash, completely risk off, and the market tells them they're wrong, the clock is ticking.

they've got to ratchet up. So I don't look at them as a contrarian signal. I don't worry too much about this. Not one of these people who sees other people being bullish and instinctively has this knee-jerk reaction where it's like, well, that's it, time to take profits. Everyone else is long.

I just don't look at it that way. The way that I look at it, the stocks that matter are delivering. Magnificent Seven stocks are part of the formula that saved this market from a full-blown bear market when they reported earnings in late April and early May.

27.7% growth for that group. That's versus 9.4% growth for the rest of the S&P 500. And most importantly of that group is what Nvidia did. Nvidia is 26% of the S&P 500's total return year to date stock price. And it'll be about 17% of this year's earnings growth.

If you understand that the AI story and the US consumer are the only things that matter, you could stop wasting your time reading a lot of other data and focusing on a lot of other reports. And those two things, to Stephanie's point, the consumer is fine and the Mag7 AI theme is intact. If I told you nothing else, that would be enough to understand why we're on the verge of a new record high. I mean, Brian, 50% off the April low.

is Nvidia. The other Mag 7 stocks aren't quite that big, but they're big. Meta, 37.5% off the April low. Microsoft, 35. Amazon, Alphabet are 27 and 22, respectively. Apple's been lackluster relative to a lot of other names in this group, but even that stock's up 15% from the April low. Are you poised to believe Roth Capital and say there's plenty of support, that the bull trend is indeed underway?

Well, I think the bull trend is underway. We're very lucky to remain bullish through all of this. But I would say that there seems to us on a very short-term basis, you're going to be surprised at this, I think there's a lot of bulls out there.

And one of the guideposts that we've been looking for is kind of more company guidance going forward and guidance is falling off a map still. So we're a little bit worried in your term on that. Do I think stocks are higher at year end? Yes. Do I think they're significantly higher a year from now? Yeah. But I think you, even within the Mag 7, I think you have to be even more stock picking. So like we would be adding to Apple here because we think Apple's going to have a big catch-up trade. And we've maintained our overweight stance in Microsoft and Amazon. So

that's what's helped our portfolios April, May, June to significantly outperform. - Shan, it's time to just lean in to this market and, you know,

Institutional investors and hedge fund managers, and I like what Adam Parker delivers when he shows up, because he meets with and he has dinners with, and these idea dinners and whatnot. And there was a lot of pessimism among the professional crowd. Now, if you look at the fund manager survey and you think about where the narrative has come to, is it time to just be less fearful and cautious and just lean in with stocks 2% from a new high?

Well, I think the pessimism was likely warranted because it felt like the uncertainty that was being created was really outside of the control of any of the portfolio managers of which you speak. I think the other thing that's happening, Scott, is that we have a tax bill that's weaving its way through Congress that has some very specific and explicit and potentially transformational changes in terms of at least tax benefits.

over the next four years or so for businesses. And so if you're looking at, and I would say it's somewhat tangential even to the AI trade. If you look at being able to expense capital expenditure on software over the course of the next four years, 100% in the year of your purchase, well, that actually could create some of this monetization of the AI trade outside of the MAG7. I think the other thing that's happened is that

You know, we have seen tariffs and we've seen that expected tariff rate continue to come down week over week over week over week. And as that continues, what we're getting is, to Brian's point, we're going to start to get some real guidance in terms of, OK, we think the tariff rate is going to be 12 percent or 13 percent or 11 percent, maybe 10.

But now I can start to price that in and so I think that this season is going to this earnings season is gonna be very critical in terms of getting the guidance in the hands of investors and that that could would allow professional investors who are more discerning around the fundamentals. I think that's why they're getting more optimistic. The big part of the story is that no one truly knows how the Trump tariffs are going to fully play out. Will deportations that we've seen hurt the economy?

There's a story today new from the Washington Post that says Trump officials reversed guidance, exempting farms, hotels from immigration raids. ICE agents have been told to continue conducting enforcement operations at ag businesses despite concerns about negative effects on the food industry. I wonder if we morph our concerns from...

what was the trade war and tariffs to just messing up a bunch of industries because you have this policy in place and you don't appear to want to waiver from it at all. Right. We're not out of the woods on tariffs at all, but we are getting more certainty. We think that, I mean, it looks like Trump wants to get stuff done quicker than expected, but it's probably going to take longer than expected. But in the face of all that, I'm just so amazed that

the GDP numbers at 3.8% or 3.8%. And I know it's directional and I know we have to average first quarter and second quarter. That's two, two and a half percent GDP growth. And by the way, I don't talk about it enough. I know you guys do, but the weak dollar,

That's really good for U.S. multinational companies. So that's going to be another tailwind for earnings. I just care about earnings. But there are two sides to that. First of all, I feel like you didn't answer my question. So I'm going to come back to you on that. You didn't answer my question. So let me just go to the dollar since you went there. It is the largest underweight right now in 20 years. The dollar has lost 10% of its value since President Trump took office. Now, you can...

go one of two ways on that. You could say, well, that's good for multinationals like you did. Or you could look at it and say, well, there's a direct line of evidence to a lackluster belief in the American exceptionalism trade. You guys are

nodding your head like you agree with that. Wait a second. Let me answer your question on the whole messing up industries. In the face of this happening, we aren't messing up industries. Well, how do you know that? Because earnings just grew 12% last quarter. In the face of all of that. Did you get a bunch of farm earnings reports and hotel and restaurant earnings reports? Did you see deer? Did you see caterpillar? Did you see...

Chipotle, did you see? I mean, there's a lot. There's a lot of companies that have done it the best that they can. Either they are giving very conservative guidance. Sometimes they're not giving guidance. A lot of my companies did, and I was shocked that they just reiterated. How about the whole financial services industry? Every single bank reiterated guidance. Not one of them lowered, and that is really quite impressive because they're at the forefront of what's going on on the tariff side. Now, the dollar thing is a legit part of the story.

Part of part of the story falling dollar may be good for multinationals because it traditionally has been But if you think it's falling for the wrong reason Then you sit back and you take a look at the at the whole big picture of where we are You know in our view it was at first falling for the wrong reason with respect to international investors losing faith in the United States that's clearly why

You had Europe massively outperform. And why industrials, by the way, are the most eclectic sector in the U.S. market, have also been one of the best performing sectors. And obviously, there's a big international component of that. However, one could say that the majority of the dollar's weakness is beginning to slow down. I mean, the trend is beginning to change pretty dramatically. Well, I mean, 10%.

is a big move. Well, if you look from where it was, but now we're starting desolification. Also in the Global Fund Manager Survey, we had the good fortune of being in France and in England to see our great institutional accounts in April. And a lot of those clients have massively overweight Europe, Scott. Well, you know what they said since

since you went back to the survey, that international stocks are going to be the best performing asset over the next five years? Yeah, first of all, they're talking their book, number one. Number two, that they don't have the fundamental attributes to be able to match what's gone on in terms of stock price. They don't have the economic growth. They don't have the stock price.

or earnings growth. And so many of the people that we talk to are actually becoming, dare I say, reluctant buyers of U.S. stocks again, Scott, because they have to perform. You can't criticize people for talking their book. You talk your book all the time. So does every single person who comes on the network. Otherwise, do you have any belief in your book?

What are you going to come on and contradict your book? I talk my process and my discipline in terms of publishing. No, but you talk about why you think your view and the stocks you have are going to work. Is that talking your book? When you're talking to an institutional client that has been, for all intents and purposes, a reluctant buyer of U.S. stocks for 20 years, and they finally were right on Europe,

for the first time in 15 years, Scott, of course they're taking a victory lap. So yeah, they're going to continue to be on with that because they do have an overall hatred for the United States. And yeah, I would call that talking their book and being emotional about it.

Mean reversion in the dollar. Scott, everybody came into this year saying the dollar was overvalued. Nobody said that was even before the inauguration. It was before the tariffs. It's before this tax bill and the court and the deficit. So, you know, to talk about the fact that all of a sudden just what's happened politically in the last three months is why people are rotating, again, rotating away from the dollar is

I think that's somewhat short-sighted. But the point is, is that this crisis in terms of fiscal sustainability has been building for some time. Now, to Brian's point, people latched on to the German

fiscal stimulus as rationale to get excited about Europe. And there's likely some likes to that. There's a tail to that. There's a transmission to the rest of the continent. But I think, you know, in terms of it's not a binary decision to move out of the dollar just because of what's happening in politics. There's other alternatives. ECB is cut like 10 times.

versus the U.S. cutting zero. So if you look at, you know, they went into recession first, they're coming out first, and then you have the stimulus of rate cuts. Don't fight the ECB. I mean, I don't know what to tell you, but why would you only not fight the Fed? In an economy that's much more interest rate sensitive than the U.S. economy, absolutely. There are multiple tailwinds here. But to Brian's point, what they don't have is the transformational aspect of innovation. Well, speaking of rate cuts, we do not expect anything tomorrow.

other than some commentary that's going to be closely watched, as it always is. Steve Leisman joins us now with more, our senior economics reporter. I read one bit of commentary today of this Fed tomorrow saying, quote, they're going to sit back and see what worsens first, the labor market or inflation. And once they see that, then they'll know which way of the mandate they need to react to more. Yeah, that's a very easy way to think about it, Scott. That's pretty much it.

boiling down what Chair Powell has said. He essentially said, look, we're going to watch which one ends up being further from our mandated level and which one will take longer to get back to that mandated level and address that one. In our CNBC Fed survey today, Scott, which you can read online, we asked people,

How does the Fed essentially, I'll boil down the question, which side of the stagflation does the Fed address first, the stag or the flation? 54% say, you know, it pretty much is going to address the employment side. But that's down from 65. So the market, not quite so sure, especially because jobs have held up. And it looks like to the extent that we are going to have a problem, it may end up being the

inflation part of it where most economists are convinced that the impact of the tariffs in the CPI are yet to come. Let me just ask you a simple question. I mean, do you think, if not for the president's trade war and the tariffs, that the Fed would be cutting tomorrow? No doubt in my mind.

these nice inflation reports we've had do clear the way for the Fed to take off a little bit more, maybe a quarter, maybe a half, considering that half to be the restrictive part of policy here. And I think it's important, Scott, I think

The Fed still wants to take that half point of restrictiveness off of the top line. It just does not want to be cutting into either a temporary or worse yet, permanent rise in the inflation rate or more broader, more broad rise in the inflation rate that could be caused by tariffs.

Talking to some CFOs this morning, as we do in our normal Fed Day call, Scott, what we hear is that people are charging what they call the weighted average price, or some are anyway, which is, you know, you don't take the tariffed good and immediately raise all prices to that because you have an inventory of stuff. What we saw in retail sales was interesting this morning. It's kind of like the end of the front-running sale that was out there for the consumer. They spent a lot of time and money investing

front running the tariffs and now things came off in May. Doesn't mean the consumer is giving it up. It's just likely not as strong as they were before. And then come the summer, they'll likely confront higher prices. Evidence from the import prices is that we are not getting discounts, essentially. So those tariffs are being passed on to U.S. importers. Whether they make their way down to the consumer, that's going to be a matter of time.

Right, right. It's a tax on somebody. I mean, whether it gets to the consumer level is the great question. Respondents in your survey also predict two rate cuts equal with what the market is hoping happens. I want to read you something that David Rosenberg said on social media regarding the outlook from the Fed and why he views it being so flawed. I have some advice for the Fed, he wrote. Ditch the dots.

In fact, do what many CEOs have been doing in general and pull out of the guidance. In the context of the supremely high level of economic uncertainty, any numbers this group purchases, publishes, excuse me, will be completely meaningless. That sounds like kind of a reasonable perspective from him, because how could they possibly have an idea of the outlook when the CEOs of this great country don't?

I think the trouble is you get into a consistency issue here, Scott. I think there are sort of, I guess I'd call the procedural problems with the Fed saying, oh, now we're not going to do DOTS. And I would remind you of the history here because we're a little spoiled by even having the DOTS. The DOTS were what everyone wanted.

back 10 or 15 years ago before they started publishing them, we were like, "Okay, tell us where you think policy is going." It really is a luxury. You can criticize them. They can be wrong. But just like doing a survey, Scott, the survey numbers don't mean that they'll be right in the future. They are a 100% correct average of where people think they're going now.

It is the current view that is what's informing us about where things are going. And it's accurate in that regard. So the dots tell us where the average or the median Fed officials believe things are going right now. And that is actually an input. And David Rosenberg, in his very commentary, gives a solution to the problem.

which is that if there's all this uncertainty and the Fed chair and other Fed officials characterize it as that, we'll take them with the massive grain of salt that's implied. I was going to literally say those words right after you mentioned Rosenberg again. Steve, thanks. We'll see you down in D.C., obviously.

Good stuff. Steve Leesman's going to be in the room. He's going to ask a question. He always does. And when Chair Powell's done, just like we always do, we're going to speak to Jeffrey Gundlach of DoubleLine exclusively right after that news conference ends. Let's go back, circle back to the MAG7s for a moment before we take a break. Because the MAG7 ETF is coming off its third positive week. That's the best streak of the year. Josh highlighted NVIDIA.

50% off of its low. The target raised to 200 today. Amazon is going to extend its prime day. Everybody on the desk owns Amazon. So how are we thinking about this idea that they are trying to take on Nvidia with a chip?

Christina Partsenevelos, is she ready for us? She's down in Austin today at a AWS event and can give us more details on this growing competition. And then we're going to follow with a story about another mega cap tech company. Speaking of competition, that could be in a little bit of a situation. But what about AWS and what's happening where you are? Okay, so I am...

in the lab where chips are born for Amazon Web Services is called Annapurna Labs and just an example this young man behind me he's looking at a wafer right now this is literally 30 percent of the thickness of a human hair so he's just testing this for clients and the news today is that they've updated their CPU chip to increase the networking bandwidth is going to be the fastest in the public crowd. Timeline is still we're still waiting to hear about that but this is just a step up in terms of technology

and really shows how the custom chip strategy is really competing with the likes of Intel and AMD. But the real battle, the real battle, like you mentioned, Scott, lies with Nvidia. And that's why just recently, AWS announced a project, Project Rainier, where they're gonna be offering

hundreds of thousands of chips to build the largest AI supercomputer for Anthropic. And Anthropic will run its latest model on these chips. This is just an example of the Tranium 2 chips that compete directly with NVIDIA. The bread and butter of these chips, though, of course, is obviously performance and all that. But we know NVIDIA charges a lot more for those scarce chips. The secret weapon for AWS here is really the

price performance and they're offering these on the market with Tranium 3 soon, just around the corner, Scott. So that's the difference in why we came here because normally this lab is top secret, you know, it's very hard to get in and they're slowly opening it up as they open up everything and you can see the lovely employees all around me.

All right. Great stuff. Christina, thank you. Christina Partsenevalos. So that's one part of the big tech story. The other part of the AI story today is what appears to be, according to reporting anyway, a boiling point's worth of tension between OpenAI and Microsoft. They sure seem like friends at the beginning, but I don't know what's going on. Maybe they shouldn't have tied the knot, Steve Kovach, because they seem headed to...

a separation of sorts. What's going on here? It's like a slow motion divorce happening right now, Scott. No one expects this partnership to last the way it originally was for the long term. So what's happening here? The Journal reported yesterday as OpenAI is making this transition to a for-profit company, it has to renegotiate everything with Microsoft. Remember, Microsoft owns about 49% of the company. And on top of that,

It gets access exclusively to a lot of the latest and greatest technology coming out of OpenAI. And in this case, the quibbling seems to be over this company called Windsurf. It's an AI coding startup that OpenAI wants to buy for $3 billion. Of course, Windsurf would also help

co-pilot GitHub, which is a coding product that has 15 million subscribers that Microsoft offers. So the two sides seem to be arguing over that a little bit. It seems like Microsoft, though, Scott, has all of the leverage here because of the way the agreement was originally designed at the

At the same time, though, you're seeing the slow separation of the two companies. Earlier this year, they negotiated a new deal where Microsoft is no longer the exclusive cloud provider for OpenAI. They get the right of first refusal, and we're already seeing companies like Google and Oracle take advantage of that, plus that big Stargate thing. And then at the same time, Microsoft needs that technology to inform its co-pilot product.

And that is super important, too, because they are very slow to make their own frontier models. I want to play a quick clip here. I interviewed the CEO of AI over at Microsoft a couple months ago talking about why they still rely on open AI's technology so much. Listen to this. I'll get you back on the other side.

It's very important to us that, you know, maybe we don't develop the absolute frontier, the best model in the world first. That's very, very expensive to do and unnecessary to cause that duplication. Once you've waited for the first three or six months for the frontier to go first, we call that off frontier. That's actually our strategy.

So Scott, basically they're saying we don't want to make our own technology right now because it's just cheaper to do. And at the same time, Microsoft's Azure cloud service is just making most of its revenue from open AI. They're on a $13 billion a year run rate for that AI business. A lot of that's cloud stuff going on. And we're seeing Microsoft open up to other AI models that includes Meta's Lama model and most recently Elon Musk's XAI model Grok. So Microsoft is definitely playing all...

parts of the field here but they have all the leverage in this and if they can't work this out opening i could miss out on 20 billion dollars in funding from softbank if they don't uh switch to that for-profit model scott yeah i'm sure they could find the funding elsewhere yeah thank you very much which is kind of to the point here brian belsky the microsoft shareholder microsoft as steve said may have all the leverage now in my mind they have by far the most to lose in this relationship

How couldn't they? They do, especially given the visibility and what so many people are banking on OpenAI. But again, Microsoft, with all that cash and the way that it has become really the consumer staple of tech, this decision or what's going to happen with this supposed breakup is not going to change our view on the stock owning it longer term. We have some breaking news. I want to get to Megan Kinsella out of Washington. Megan, what do we know?

Hey, Scott, we have just gotten a series of posts from the president about Iran, giving us a little bit more insight into his latest thinking on how to proceed in this conflict. The president posting just in the last few moments on Truth Social that we know exactly, he says, where the so-called supreme leader is hiding. He is an easy target, but it is safe there. We are not going to take him out, kill, at least not for now. But we don't want missiles shot at civilians or American soldiers. Our patience is wearing thin.

Thank you for your attention. He went on in a second post to post unconditional surrender in all caps. Scott, both of those coming just a few minutes after he had earlier said something along similar lines, saying that we now have complete and total control of the skies over Iran, that Iran had good sky trackers and other defensive equipment and plenty of it. But it didn't compare to American made, conceived and manufactured skydivers.

stuff. Nobody does it better, he said, than the good old USA. A couple of things to notice in that post, the foremost one being in all of those posts, the use of we. The biggest question today, Scott, has been whether and just how far the U.S. might be willing to go to help the Israelis

in this conflict, whether they were willing to wade in to more fully support those attacks against the Iranians. Using "we" in both of these posts, raising a lot more questions about the U.S.'s involvement here. In the initial post, talking about the use of American military equipment, he had already praised the Israelis late last week for doing that, so not as much new there.

but a lot going on in both of these saying now that we assume presumably both the US and Israel now know exactly where the Iranian supreme leader is hiding. Scott. It's still pretty extraordinary when you just consider it in total that

that conducting this level of foreign policy by social media post. I mean, especially when you're talking about the leader of another nation, friend or foe. That's not even my point. It's more so conducting this wide out in the open on social media.

Absolutely a huge question there about what's the point of telegraphing it? Is this to give Iran a heads up? Why would he want to give them a heads up about what is coming? Is it more about making the threats publicly so that they viewed them as a message and started to responding respond accordingly? Is this all about getting the Iranians to the negotiating table? We just don't know that yet. What we do know is that this is a huge break from what we normally see in US foreign policy, which is much

operated much more closely behind closed doors. We expect, Scott, that the president is in the Situation Room, will be later today holding a meeting with his national security team. These posts may be coming before that meeting. We don't know the timing exactly, but a huge, huge question as to why so much of this, as you say, is playing out out in the open. Yeah, he let everybody know about that meeting as well.

Megan, thanks for keeping us up to date. It's Megan Casella at the G7. More committee stocks on the move coming up next. Plus, Josh is ready with his best stocks in the market once again. We have an update for you. We'll do it after this break. Welcome to the new Hollywood Casino. What can I get you? A new Hollywood is coming where endless possibilities await. Hollywood Casino Joliet, coming August 2025. Must be 21. Gambling problem? Call 1-800-GAMBLER.

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Upfront payment of $45 for three-month plan equivalent to $15 per month required. New customer offer for first three months only. Speed slow after 35 gigabytes if network's busy. Taxes and fees extra. See mintmobile.com. Got a lot of stocks on the move today that the committee needs to discuss, starting with Live Nation. Targets of 162 from 157, reiterated by Josh at Goldman Sachs.

Yeah, this is part of my forever portfolio. Michael Rapinoe has really done an incredible job threading this needle. You've got a really strong consumer that wants live entertainment. They're willing to pay up for it. But then you've also got all these issues with bots buying the tickets, crashing the sites. You've got stuff going on in Congress about how strong this company is.

And he is just persevering. And you see that in the result. This thing has just been rallying for three years straight. I don't know what other superlatives to attach to it. Great company, even better stock. Brian, Nike. Target cut to 61 from 70. Reiterated equal at Morgan Stanley. You own the stock. You're...

verbal reaction to the name sort of tells the whole story other than why are you still in it? Well, we bought it around $56 and we bought it in our value portfolio. A big part of a value discipline, quite frankly, is to be contrarian, to think differently. I think from an operational perspective, they have a lot of work ahead of them. So that's why I bought it. So

We'll see how long it lasts. UNH cutting commissions on some Medicare Advantage plans, according to reports. Steph, you own the stock? Yeah, it's not surprising. Medicare Advantage is what got them in trouble in the first place. So it's going to be volatile until we get guidance. We are going to get guidance, by the way, in next month. I think if you assume a 1% Medicare Advantage margin, that gets you $20 a share this year. And I think you can actually see expansion next year, small.

And that gets you to $25 in earnings power. And that makes the stock at 13 times earnings. And I think it's just too cheap for the number one player in the industry. Let's go to Spotify. Because the target goes to a street high of $900 today. From the prior $800, it is reiterated a buy at Pivotal. Record high today as well for that stock.

Guys, maybe we want to show a longer thing. Yeah, that tells a good story there. Belsky? Oh, I love this company. I love this company. I used to own it in my mid-cap, and then it graduated to my large cap. I've owned it for seven years. Who would have ever thought I'd like a company better than Apple on a particular product? Spotify's got a better music product, better...

everything. I think this is a fantastic company. And because it's not listed in the U.S. and it's not in the index, you can actually increase your tracking year in your portfolio. And that's why we like names like this. Yeah, 60-plus percent year-to-date. Up next, an update to Josh's best stocks in the market. But first, the headlines this hour with Courtney Reagan. Hi, Court.

Hi, Scott. Well, Federal Appeals Court will hear arguments today on President Trump's deployment of Marines and members of the National Guard to Los Angeles in response to protests against his immigration crackdown. The court put on hold a lower court's order to return control of California's National Guard to Governor Gavin Newsom. The district judge ruled last week that the president's National Guard deployment was unlawful.

A federal jury on Monday found MyPillow founder Mike Lindell defamed a former voting equipment company employee after the 2020 presidential election. The employee sued after Lindell called the Dominion Voting Systems director a traitor and streamed accusations of him stealing the election on social media.

And General Motors unveiled a new high-performance hybrid version of its signature sports car. The automaker said today the 2026 Chevrolet Corvette ZR1X Hypercar is a souped-up version of the Corvette hybrid that went on sale in 2023 with a 0-60 time of less than two seconds. The company said the model is the most advanced Corvette ever produced. Halftime Report. We'll be right back.

CNBC News Update is sponsored by Morgan Stanley, where old school hard work means bold new thinking.

Yeah.

Yes, indeed. And it doesn't stop there. We have got a lot to say. So join our group chat, Come to Life. Follow and listen to Vibe Check wherever you get your podcasts. Dealing with hydrogenitis superativa, HS, is tough. But you're not alone. Before I started Cosentix, I looked at the website and saw it had many years of clinical research. That made me feel confident.

Cosintix Secukinumab is prescribed for adults with moderate to severe hydrodinitis suprativa, HS. Don't use if allergic to Cosintix. Get checked for TB before starting. Increased risk of infections and lowered ability to fight them may occur, like TB or other serious bacterial, fungal, or viral infections. Some were fatal. Tell your doctor if you have an infection or symptoms, like fevers, sweats, chills, muscle aches, or cough. Had a vaccine or plan to, or if IBD symptoms develop or worsen.

Serious allergic reactions and severe eczema-like skin reactions may occur. Learn more at 1-844-COSENTIX or cosentix.com. Don't wait. Ask your dermatologist about Cosentix. We are back with an update to Josh's best stocks in the market. I'll send it to you for that. What do you want to talk about?

I think, obviously, the thing that we have to talk about is the defense sector. We've got a bunch of these names on the best stocks list. We've been talking about them. And last week, of course, they broke out on the heels of the conflagration in the Middle East getting hotter. We talked about Axon and we talked about RTX on May 19th. From that date, RTX is up about eight and a half percent. Axon's up five.

Both stocks were breakouts in progress, and they have broken out. So that's the update I wanted to give people. In the column at CNBC Pro, I'm talking about moving up stops and what to do when you've got a winning trade on your hands, depending on whether you're a trader or you're a little bit of a longer-term investor. But those rallies are significantly greater than the Qs, which were up 2% in that time. SPY is up about 1%. I think it's important to just acknowledge the fact that

The market sniffs these things out before they happen in many cases. The median return, Judge, for an aerospace and defense sector stock year-to-date is 17%. The median year-to-date return for every other stock in the S&P 500 is just 0.7%, not even 1%.

Every single aerospace and defense stock is above its 50-day moving average, and only two of them are below their 200-day, meaning not yet rallying. Those would be TXT and LMT, Lockheed. So when you're looking for, like, where is the strength in the market? What stocks am I supposed to be in?

This is a really smart way, I think, to just say, okay, I'm not going to be ahead of the curve on everything. What is the market already figuring out? These are just two examples of many where the market has already figured out things are heating up in some of these conflicts, orders are coming in, and these stocks are going to work. And lo and behold, something happens, a catalyst, you get that breakout, and now you're playing with the house's money. Belsky, you own Lockheed, you own Northrop Grumman, and Hunter...

Honeywell, so you believe in the aerospace and defense trade? We do. We look at these as the OG defense contractors, plus, you know, we're aligned obviously with Josh, but I think you also have to think about cybersecurity along with defense contractors. But these companies are amazing because of the cash flow and the dividends and the consistent earnings, guaranteed revenue from the U.S. government, so that's why we've owned them for a long time. GE Aerospace for you?

Yeah, but it's small defense. It's only about 25% of total revenue. But they delayed their analyst day this week because of the Air India crash tragedy. I do expect them to have another one soon in the next month or two. And I think they're going to increase their EBIT growth rate from $10 billion to $13 billion by 2028, free cash flow and mid-20s margins as well. So I still want to be long this stock, but I have to

But I have to say, I do prefer Boeing. It's cheaper and it's more of a turnaround story. GE, it's already turned itself around. - All right, Santoli is next with his midday word right after this break. Senior markets commentator, Mike Santoli at the desk post nine here for his midday word.

Feels like a wait around, see what happens with Middle East, see what Powell says tomorrow. Yes, for sure. I mean, you know, and in doing so, the market is kind of hanging around the goals, you know, kind of implicitly betting it's not going to have to sprint back on defense, usually before Fed meeting, before some other widely anticipated potential catalyst. Market wants to, I always say this, get into some kind of a neutral footing. That kind of means 6,000 on the S&P, give or take.

I do think you can observe that the rally has held together pretty well, but also slowed and narrowed. And you have these kind of tighter ranges day to day. We're up 1% in the last month. Got like 59.70 pretty much this time last month. So it's incrementally positive. But I do think you have to assume that the market is building in.

the prospect of some upside risk and some good things happening, whether that means on trade, whether it means, you know, this, you know, this conflict is going to be kind of fleeting and not something that really causes some kind of stress. VIX at 20 definitely means like you're on alert, but you're not super worried. Yeah. Oil at 72, at least WTI. You

You know, it's obviously had a decline yesterday. And it's even as uncertain as the situation is there. It's not like it's moving right back up into the perceived danger zone like the level Friday. Yeah, it's really not a scary level. I mean, even Friday's highs in mid-70s, I mean, that's something this economy has been able to handle without trouble. So I do think you can look at Friday's levels, you know,

the lows in the equity indexes, the highs in oil, where we were in the VIX and say, OK, if we're not breaching those levels, it means that we are, you know, we have nothing new to be further concerned about. All right. We'll see you later on The Bell. That's Mike Santoli up next. The energy trade, oil prices. We just talked about what they have been doing. We'll see where the committee stands. We do have some specific names to lay out as part of Josh's Best Stock Spotlight, too.

Welcome back. Oil up again today after that decline yesterday. So 73.80 is where it currently is. Energy is the best sector today and the top performing sector this month. You're probably not surprised by that. Josh Brown, you looked at some of these stocks and your best stocks in the market. You do have four. EQT, 52 week high today. Expand Energy. Talk to Belsky about that in a minute because he owns it. Kinder Morgan and the Williams companies.

Yeah, so Kinder Morgan and the Williams Companies, let's start with those. Those are lower beta. These are midstream firms. They're not as sensitive to the price of crude, and they're really more pass-through of income vehicles. The ones that are sensitive to the price of crude that are on my best stocks list, EQT is up 27% year-to-date. Expand EXE is up 19%. Doesn't sound crazy until you consider the rest of the sector is flat to down.

um so these are the the best stocks in the market in the oil segment they've both obviously reacted well to the fact that wti crude entered the month of june at 60 a barrel it's up substantially from that level remaining elevated i i

I have no edge on geopolitics. I don't know if we're doing a bunker buster or if Iran's going to surrender. I have no idea. I'm just telling you, most of the stocks are not in my best stocks list. But I think the longer we see WTI crude in the 70s, the more of those stocks start to join the list because you'll see buyers come into them looking for opportunity. So I would be very alert.

in the oil names right now for the next leg of this rally. How about that, Brian? I mentioned you own EXE. Yeah, we've owned it for about a year. We like the stock because it's primarily natural gas, and we've been worrying about WTI for a while. And remember, when WTI is negative on a year-over-year basis, it typically...

portents to the sector underperforming. Now, obviously, we have geopolitical events that are driving energy stocks higher, but the EXE, which is a combination of the former Chesapeake and Southwestern, has a lot of play in terms of a pure play with respect to natural gas. Yeah. Shan, what about energy here?

It's the most undervalued sector in the S&P 500. And to Brian's point, I mean, you don't necessarily have to love oil. You can just really like natural gas, which is where a lot of this electrification and transformation is coming from. Diamondback and SLB, still your best? I would love to just trim SLB. It's up 13% from its lows. It is very cheap, but lower oil prices means lower activity. And I know we've seen a bounce in crude, but it's still down 22% from two years ago. We'll do finals after this.

Josh Brown, your final trade is what? Oh, so I'm just changing mine now. I actually want to lead with IEO. These are the energy stocks that I think have the best potential to break out from here. The whole space, it's ready to go. All right. So crowd strikes the substitution. Yeah, that's working. But yeah. All right.

All right. Belsky. Southern Comfort, ESO, play on traditional utilities. Southern Comfort? Is that what you said? Southern Company. Well, I mean, I could use some Southern Comfort. Let's be honest. I thought you had SoCo on the brain. Sol. Shan. Materials benefit from inflation, but also an inflection higher in economic and industrial activity. All right. Steph.

Uber, it's down 10%. Industry leader, dominant market share. All right. We're going to watch this market, see if we can get out of the red dials, down about 140. As it looks, there's the S&P about one half of 1%. The exchange begins right now. 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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Dealing with hydrodinitis superativa, HS, is tough. But you're not alone. Before I started Cosentix, I looked at the website and saw it had many years of clinical research. That made me feel confident.

Cosintix Secukinumab is prescribed for adults with moderate to severe hydrodinitis suprativa, HS. Don't use if allergic to Cosintix. Get checked for TB before starting. Increased risk of infections and lowered ability to fight them may occur, like TB or other serious bacterial, fungal, or viral infections. Some were fatal. Tell your doctor if you have an infection or symptoms, like fevers, sweats, chills, muscle aches, or cough. Had a vaccine or plan to, or if IBD symptoms develop or worsen.

Don't wait. Ask your dermatologist about Cosentix.