Trading the Downgrade 5/19/25
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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.

All right. Thanks a lot, Carl. Welcome to the Halftime Report. I am Frank Holland in for the judge Scott Wapner. Front and center this hour, trading the downgrade. Stocks are dropping. Yields are popping as Moody's downgrades America's credit rating. Our investment committee is standing by to break down the fallout and much, much more. Joining me for this hour, we have Joe Terranova.

Steve Weiss and Jason Snipe. But first, quick check of the markets. As Carl just mentioned, we are off of our lows of earlier right now. The Dow essentially flat. The S&P down about a quarter of 1%. The NASDAQ falling just under a half a percent. We also have to look at yields. Yields have been the story of this morning so far. Taking a look at yields, when you look at the 30-year, it actually just kind of tipped across that 5% mark before the opening bell right now. We're actually in the 10-year at 4.5. It was a couple basis points higher. The 30-year pulling back

below that 5% mark right now at 4.96. And really, that's where we have to start, Joe. The Moody's downgrade seeming to pop yields. They were much higher earlier, kind of easing back a bit right now. What's your make of the downgrade and the impact on the bond market? I said last week, we talked about the equity market rebuilding bullish momentum and the fact that really sentiment and positioning didn't align with a very quick

price recovery that we were witnessing. I said the risk was yields moving higher. And I really believe that the bond market got kind of caught leaning, if you would, almost where it picks off the equity rally. And the news over the weekend

brings yields higher. We go up to at 902 this morning, I think a 10-year got to 4.56. Now we see that yields have fallen back about eight basis points. And equities find comfort in that. So I think the message for investors is this near-term bullish momentum of the last several weeks, it

It can continue if the bond market allows it. If yields do not rise significantly higher, if you don't see the two-year break well above 4.1%, if you don't see a 30-year going towards 4.25%, then equities can continue the near-term bullish momentum.

But I don't think any of us believes that that erases the fiscal challenge that we have in front of us that clearly has been highlighted since Fitch did the initial downgrade in 2011, S&P falls in 23, and here comes Moody. We don't have a perfect credit score anymore. J.P. Morgan's Jamie Dimon is talking about our debt.

debt to GDP right now, we've got a fiscal situation that at some point we are going to have to pay the price for in the equities market. You know, speaking of Bank of America out with the notes, Steve Weiss, Jason Snape, I want to bounce this off of you. This is Bank of America on the Moody's downgrade earlier today. They said with tax cuts and tariffs hanging on the balance, Moody's appears to be sending a message that it thinks these policy changes will, on net, put the U.S. on an even worse fiscal trajectory

That is, tariff revenues won't fully offset the cost of the proposed tax bill. Bank of America goes on to say, we agree. Do you agree with Moody's and apparently Bank of America?

You know, I do. I mean, you've got a $3.5 trillion addition to the deficit from the tax bill. Right now, if we continue to go as we have been going with these great, big, beautiful tariff deals, they're going to do really nothing to bolster our revenues, and definitely not meaningfully. So, look, I agree, but I'd also say this, that

We've seen these downgrades before. Joe just quoted two of them. Where's the market versus no downgrades? The market's higher. So the U.S. debt is still the preferred debt in the world, whether it's AA1 or whether it's AAA, doesn't matter. Still the deepest market and most attractive debt. But that's not the only news that came out this weekend. And, you know, first of all, we had that very important call.

PROCLAMATION FROM DONALD TRUMP HIMSELF ABOUT TALLIS SWIFT NOT BEING HOT ANYMORE. SO THAT SET OFF THE MARKET. AND THEN YOU HAD THE TRADE AGREEMENT BETWEEN THE U.K. AND E.U. WHERE WE'RE STRENGTHENING OUR FORMER TRADING PARTNERS IN DEFENSE. NOW, PART OF THAT'S A GOOD THING. THE OTHER THING IS THAT MAYBE IT'S NOT SO GOOD. SO OVERALL, WE CONTINUE TO MOVE FORWARD WITH THE CHAOS THAT WE'RE SEEING IN THE UNSETTLEMENT -- UNSETTLING ENVIRONMENT THAT I STILL THINK

is dangerous for the U.S. and throw in the tax bill. And sure, that's going to drive some investment, but not until, not until the trade issues are settled.

Momentum may die a little bit, but the markets also had a peak valuation. So, having some concerns about momentum. By the way, markets off of their lows of earlier as bond yields have eased back. It's dramatically off their lows. Jason, coming over to you, do you agree with Bank of America, Moody's, the idea that we're on a worse fiscal trajectory and that there's more troubling signs ahead?

I would agree. I think, you know, in the long run, we can't continue to kick this road, kick this ball down the road, you know, in my opinion. When I think about, as an example, in interest alone, we paid $1.1 trillion in interest alone on the federal debt last year. You know, what I will say with these two downgrades in the last 15 years, you know, we've had talks about American exceptionalism and all the concerns around that.

you know sovereign nations have increased exposure um in that time frame it doubled their holdings in that time frame and added 1.5 trillion dollars in holdings um since 2023 since the last downgrade so for me it is a fiscal problem there's no doubt about that one but when we talk about the markets and kind of concerns going forward to joe's point i think the concern around yields and where they are i think we are an inflection point the tenure at four and a half percent

The 30-year at 5% provides a formidable option away from equity. So that is something that I'm watching very closely in terms of the momentum with yields. I'm a buyer of 10 years. I mean, it is great while you're waiting out. You don't see the yield on the 10-year moving higher? Is that what you're saying? You want to buy at this point?

I mean, I wouldn't buy some at this point. Four and a half is a great rate for a 10-year. It's certainly a great rate. But I think a question for all three of you is House Speaker Johnson hopes to get that big, beautiful bill to a floor vote at some time this week. Does that equal a spike in yields on the bond market and potentially another sell-off in the equity market? Would you want to hold off on buying bonds until you see that reaction? Look, I got crushed in the TLT. I've talked about

that on air, basically 10-year level of around 4.30 is where I entered the TLT. I got out of it last week here, so I took about a 3% loss on it. I think the momentum right now points and positioning points towards higher yields. And you could fight against that very easily. Fundamentally, I agree with your perspective, Steve. But I think what's important in this entire conversation- I'm not buying a whole position here. No,

But it's a good place to start. But I think what's important in this entire conversation is I think people hear about the U.S. losing its perfect credit rating. And they say, well, how could I buy stocks? Well, here's what you need to understand about buying stocks versus buying.

a fiscal position that continues to deteriorate. And, you know, it's not just the president administration that this fiscal condition is deteriorated under. It's prior administrations as well. And no one seems to care. But it's about out-acts.

accessing the debt market and who needs to access it. Does Microsoft really need to access? Do the Mag7 really need to access the debt market? And I think that's important to understand. So you could have a stock market that continues to move higher

because you have these mega cap trillion dollar companies that don't need the debt market but then underneath the surface the consumer the consumer who's going out there and has to acquire a vehicle whether they're leasing it or financing or tries to buy a home that's the real economy and i think that's where

that continued challenge is going to be presenting itself in the coming years if you don't get the retreat in yields that this administration clearly wants. It's undeniable you need to get the deficit under control. But the last two downgrades, borrowing costs spiked like they are right now, then they came back down. What's going to dictate ultimately where the yields go is the Fed

in the economy. If the economy weakens, Fed's going to cut. So that's really what you have to watch for.

I just want to address Joe's point. Joe, I think the general point you're trying to make is that tech could be a safe haven during some of this volatility. These companies are less cost of capital sensitive, less interest rate sensitive. Steve Folau with a note. I'm just bringing this up here. We continue to expect sharply slowing U.S. core GDP and believe that tech is defensive narrative. That's at risk in the second half of 2025. And in all fairness, if we've seen some of this volatility, we have seen the tech trade unwind.

I don't think it's fair to-- I don't know that anything's defensive. I think reality, people think, look, in 2008, the world got a global margin call. Was anything defensive at that point? You were supposed to own assets that were uncorrelated, and basically everything went down. So I don't know that I buy that premise that it's defensive. My point is, just try and understand that you might be puzzled

by a fiscal condition of the United States that doesn't look so good, and even the rest of the world, but yet equities continue to move higher, in particular these mega cap companies, because they don't need to access the capital. And Steve brings up a really good point. Ultimately, where you get the 10-year lower is because the consumer is pressured by the private sector borrowing costs. The demand for consumers begins to contract

And what does that lead to? That leads to an economic climate maybe doesn't look so good, and the Federal Reserve has to step in. So I guess the succinct way to say it is the stock market sometimes is not the economy. And I think this is a moment where you really need to see that.

play out because I think it's somewhat puzzling to people that you're seeing equities remain high. It's not the double A1, right? It's what the future is, right? You know, borrowing costs, you mentioned you're four or five last week, right? You're still at four or five.

So look, where companies can take the opportunity to stick with the consumer and say higher borrowing costs, they will, and improve their net interest margins, their spreads, financial institutions. But functionally, I think the impact is that it's another reason for the consumer to hunker down as we've seen. And I think that's going to continue with the two-thirds of the economy. All right, so a number of issues obviously facing the market. There's trade, there's tax policy, there's the deficit.

Jason, I want to come over to you just talking more about the broader market. Canaccord, I was to know earlier, saying we would not be surprised to see a sideways market for the next two months with volatility gradually increasing as we approach mid-July tariff deadlines. Of course, that's referring to the, quote,

quote reciprocal tariffs that deadline ends on july the 9th is that something you agree with that we may be on pace for kind of a sideways market during this time definitely i mean we're 20 off the hot off the lows i should say in april i mean the market is now the multiple on the market is 21.7 times you know prior to that when trump was elected you know we were at the high at 22.7 so we're only you know about a point off in that and and you know when i think about the catalyst going forward the fed is obviously out of the game now with

delays on tariffs. So there's likely not going to be a move until later on this year. We're looking at earnings. Earnings have been revised downward. We're looking at this next quarter at about close to 6% earnings growth. A couple of weeks ago, it was over 10%. So for me, it is a kind of a trading range market for sure in the next few months. But as I kind of turn the page into later towards the end of the

end of the year and into next year, I think it also could be an accumulation phase. All right. Both of you just mentioned the Fed, by the way. Steve Lee's been great interview with Atlanta Fed President Rafael Bostic earlier today. Bostic kind of hinting that he doesn't really see a cut until December. So you talk about the Fed. I think you also mentioned the Fed rescuing the market. Doesn't seem like that's a likely outcome. All right. We want to switch gears a bit. Turning to J.P. Morgan, J.P. Morgan CEO Jamie Dimon just finished speaking at J.P. Morgan's Investor Day. Leslie Picker is there and joins us now with much more. Leslie, good afternoon.

Hey, good afternoon to you, Frank. At Diamond Fielding, questions related to everything from Bitcoin to regulation to private credit to succession. Very closely watched element here. However, Diamond said nothing has changed on succession, noting his timeline is up to the board. He did share some updated thoughts on the fiscal picture and the, quote, huge deficits he sees. And he spoke about the trade war as well.

My own view is you know where people feel pretty good because you haven't seen an effect of tariffs. The market came down 10 percent, it's back up 10 percent. I think that's an extraordinary amount of complacency. That's my own view. That when I've seen all these things adding up that are on the fringes of extreme kind of thing, I don't think we could predict the outcome and I think the chance of inflation going up and stagflation is a little bit higher than other people think.

He said even if those tariff rates stay where they're at today, the tariffs are still, quote, pretty extreme. And he notes, we still don't know how many countries are going to respond and in what magnitude. Diamond said he thinks the geopolitical risk is very, very, very high. He thinks the odds of a recession with inflation, stagflation, are about two times the level that

the market thinks. And he says credit losses in a recession will be worse than other people think. He said he's not a buyer of credit today or he wouldn't be a buyer of credit today that it is a quote bad risk. Frank.

Our Leslie Picker live from the J.P. Morgan Investor Day. Leslie, thank you very much. Joe, I want to come over to you. You own shares of J.P. Morgan. What did you make of what Jamie Dimon had to say? What do you make of the bank in this current environment? Well, again, it's two different scenarios. The first scenario is what do you think of J.P. Morgan, the company, as an investment, as a current shareholder? It's clear that investment banking revenue in the quarter

probably sees a little bit of a downtick. Steve's been doing a good job talking about how activity is somewhat frozen because of the volatile environment. Trading revenue, though, equities, fixed income, I think your expectation there is that can remain strong because of the elevated volatility. So I think collaboratively you put that together and you continue to believe that JP Morgan can continue to move higher. In 2020,

In March of 2023, the acquisition of First Republic, that proves to be a very strong acquisition. They played from having a position of strength and being able to get those assets. The other side of that is Jamie Dimon's remarks. And if you hear those remarks, you kind of have a degree of skepticism

as it relates to investing itself, right? Because he's talking, and what stands out to me very clearly is that credit spreads, he's not comfortable where they are right now. Credit spreads are very tight. He believes that there potentially, as I read it in front of me, he would not be a buyer of credit today. That does not...

portend particularly well for risk assets overall if we begin to see credit spreads blowing out. So I think it's two distinctly different narratives, and you kind of have to maintain those positioning where you say, OK, I like JP Morgan, the company. I like the way they're executing.

I am aware and I'm understanding that here is a CEO of one of the world's largest, if not the world's largest money center banks. And he is speaking with very strong caution about the overall economic climate

and the credit markets in particular. That's troubling to me. Very troubling to you. Snipe, I want to come over to you. You own Goldman. Do you see a similar setup when it comes to Goldman trading activity spiking with some of this volatility, uncertainty, but other areas like investment banking suffering? Oh, there's no doubt. I mean, we see it in the numbers. Obviously, investment banking hasn't done...

well so far this year. But we have seen some very successful IPOs hit the market, CoreWeave and a bunch of others that have done well. Still anemic to a certain degree. But as I think about the macro starting to light up, I think

Obviously, that's been the overhang with IB. But as we start to get more clarity there, I think IB can come back meaningfully in 2026. Trading revenue is obviously going to continue to benefit from the volatility in the market. We'll still see names like GS, which is up 6% year-to-date and up 30% over the last year. So I continue to like these names in this environment.

Why is he on Goldman and Bank of America? I do. I do. And Goldman's my preferred holding. It's a much larger position than Bank of America. Look, what we're seeing is a timing difference. I mean, every bank you spoke to said that second half of 25 is going to be the IPO cycle. Nobody, of course, counted on tariffs, everything else. You'll still see certain IPOs make it through. As we did last year, it's not going to be a zero in terms of IPOs.

but I think that it's going to remain at a very low rate. So I don't mind playing for next year. And yes, we've seen the spike in trading volume in the first quarter. They've all done well. And actually today in fixed income, you can see a big spike in trading. So the good thing about chaos coming out of Washington is that you create some volatility and that's great for these banks. You know, I've said the put is in the bond market. And I think

17 and a half minutes into the show, everything we're talking about relates to the bond market allowing the equity market to continue to move forward.

As we move to the end of the year, there's a significant amount of debt that needs to be refinanced. And the question really is going to be, at what level will that refinancing activity occur? And if you don't get the retreat in yields that you and I expect, I expected it clearly one month ago and didn't get it, you're talking about potentially getting it here in the near term. No, I'm talking about a meaningful retreat at the end of the year.

You're going to need, I don't believe that where yields are now, if they moved another 25 basis points higher, that the equity market can sustain the levels that it is at currently, even with very strong earnings growth. See, what's important to understand- But wait, really, I want to go back to Joe's point for a second. If we see the bond market continue to move higher, do you expect to see that influence the administration's policies when it comes to trade?

Treasury Secretary Scott Besson was on Meet the Press yesterday with some very tough talk about tariffs. That's why the put is in the bond market. On April 9th, when the president says time to buy, it's because he has spoken to the Treasury Secretary and yields are moving higher and saying, Mr. President, we need to address something very clearly. The put is in the bond market. So I don't know what, in fact, they're able to do, but

They're going to have to do something to get yields lower because it's critical in the equation

of the totality of the economy participating here, not just the high end, but the lower end, Main Street America that needs to access private sector borrowing costs, they're too high. And that means Fed's policy is way too restrictive and the Fed doesn't have an inclination right now to move out of that restrictive territory. - One other thing, obviously we've seen yields move higher on the downgrade, but one other thing I think that the bond market might be reacting to are Besson's comments.

He said that countries that aren't negotiating in what they call good faith will see their tariff levels go back to that April 2nd level. I think that's something the market's very concerned about. And the idea that maybe these negotiations aren't going as well as we've heard from some people based on Besson's comments. He said some countries essentially are not negotiating in good faith. And I think that might be another concern for the bond market. Let's ignore what's being said, right? And let's look at the facts. Because if you take what's being said at face value, we would have had 20 deals announced last week, right?

Right. And that's what I'm saying. Right. I know. I know. That's why I'm saying there's no credibility of what they say. So I do believe that they're finding it tough or they're being surprised by the timing on negotiating trade deals, which I don't get because they typically take years to negotiate.

So the Fed's in a very tough place because companies just aren't going to cut labor. We've talked about that before. The cost of hiring labor is just too daunting because they'll keep it. So they go to the other part of the mandate. The mandate is that so you won't see lower unemployment measurably. And the other part of the mandate is inflation. There is inflation coming.

You know, the tariffs, even as Jamie Dimon said, at 10%. I think maybe that's what bond investors are saying. We're seeing yields be higher. Absolutely. We're going to have to switch gears. By the way, this might have been the longest segment on bonds on halftime in history. Quite a lot of talk about bonds. We're going to switch gears a bit now. Turning to tech. We're watching shares of NVIDIA right now. You can look at those. They're up just fractionally right now. NVIDIA CEO Jensen Wong speaking overnight in Asia. Christina Partsenevelis joins us with much more on that. Christina.

Frank, there were two really major announcements at Computex. Their next generation Blackwell Ultra chip. This would be the B300. And this is an architecture that Jensen Wong did say is going to be on track to ship in Q3. And the second thing, they're opening their data center platform to chip

rivals, which is really a shift acknowledging the growing in-house chip development by tech giants like AWS and Microsoft. And so what's this product? The NVLink Fusion, which allows customers to integrate their own central processing unit, CPUs, into NVIDIA's ecosystem for the first time. And that's moving away from a completely closed system approach. Marvell, MediaTek, Qualcomm were some of the partners listed. Competitive Broadcom, though, AMD, Intel notably missing from that. This, though,

opens up the system and could unlock significant revenue growth for Nvidia, but Wedbush analyst Matt Bryson questions whether it would really grow market share given limited demand for third-party CPUs like Qualcomm and the fact that hyperscalers' preference is for internal network products. So in response to all this, though, Qualcomm CEO told CNBC this morning

that the company will soon launch a new data center CPU specifically designed to work with NVIDIA's GPUs and software, though without revealing when. NVIDIA also opening up another office in Taiwan and building a supercomputer. Notably missing from the Computex speech was the anticipated AI PC chip to rival Intel and other CPUs. NVIDIA shares, though, up

Well, nah, they're slightly down on an even more down day. Keep in mind video shares surged 16% just last week as momentum traders really piled in after all of those Middle East deals. So it's starting at a high point.

Frank? All right, Christina Partzenopoulos, live from the NASDAQ. Christina, thank you very much. Everybody here owns NVIDIA. Snipe, I'm going to start with you. What do you make of this news? What do you make of the chip trade right now? After a huge week last week, some deals in Saudi Arabia and over in the Middle East, and then we see Jensen Wong do a keynote talking about investing in Taiwan and also some pretty notable partnerships with Foxconn and also Taiwan Semi.

Yeah, no, I think as it relates to even last week, the momentum with obviously what happened with the Middle East and all the investments there. And I just think about the AI factory build again. He mentioned this a couple of weeks ago in terms of what the CapEx potentially will be, $1 trillion over the next few years.

So, again, I say this a lot, but they are absolutely in the beltway for all the CapEx building and the need and demand for their chips. So it's interesting to see this kind of open source model now where other players are allowed to kind of participate and work with them. I think that will actually continue. We'll see continued momentum and upside for NVIDIA as a result of some of these partnership deals. So I like this. I like this opportunity for them. All right.

Weiss, by the way, Joe, I'm going to get to you in a second. Weiss, by the way, one of some of the momentum for NVIDIA has been the White House saying they're going to ease those export controls on shipping chips to China. At the same time, we see Jensen Wang making investments in Taiwan. Now, during the trip to the Middle East, the president essentially slapped Tim Cook's hand for not being there. Jensen Wang was there with him, and then he left and announced an investment in Taiwan, where this administration is trying very hard to move chip production from.

Any concerns about that when it comes to the stock regulation anything else when it comes to Nvidia? No, none. I think that they're they're also going to make investments in creating chips just for China that will be passable for the US government. So

NVIDIA is doing exactly what they should be doing. They're hedging their bets away from the U.S., which, by the way, is what our trading partners are doing. So the downside of that, I think, is obvious in terms of the U.S. But to me, the big issues with NVIDIA, or it's not a big issue, where I get uncomfortable is as it reaches the old high. Because things couldn't be better at that point in time than when they reached the old high, roughly around 150%.

So for me, it's a decent sized trading position. I'm most likely to get out before earnings. For no other reason, I've got enough tech exposure. I might take the risk in something I'm not committed to. 18,000 chips going to Abu Dhabi data center, Middle East last week, really highlighting demand is coming from other places around the world. This is a man who's leading this company, who is speaking with a lot of confidence in the last year.

several days ahead of next week's earnings report. I think a lot of positive momentum has been restored once again in NVIDIA and in the entire semiconductor industry itself. And I also think we mentioned at the top of the show, always look at positioning. You're now rebuilding positioning in semis. A lot of people move to the sidelines in semis.

You're rebuilding semis. I would be very surprised that after next week, we weren't talking about Nvidia with a stock price that's higher than where it is today. I think the important thing to take away from that is Jensen Wang doesn't seem to have any concerns about the threat from China to either do a massive blockade around Taiwan or to take over Taiwan in 2027. And he doesn't care about the bond market either.

NVIDIA shares down about a quarter of a percent. We're going to move on. We're going to get to a very quick committee move. Bill Baruch, he just bought Edwards Life Sciences. He joins us now. Bill, what's going on? What made you do this vibe?

Well, we're underway in healthcare. And we take a step back, we look at what's performed in the last couple of weeks. It's been the semis, it's been some of the discretionary, but healthcare certainly has it. And you take a step back too, you look at what's holding it down, names like UnitedHealthcare, that fallout, some of the fears around biotech. And again, we're underweight with only, this gets us to about a 6.5% position in healthcare. What we like about Edwards Life Sciences is

is it's a multi-year compounder. This thing was 10x from 2013 to 2021, and it's really become going to sleep since. I think we could see a sleeping giant awaken, if you will. The multiple has come down significantly, still with a forward at 30. You're paying for this growth. They've done a lot of acquisitions, and the market was really telling you

enough of these acquisitions. The thing here that's important too is I think that they are going to start to see integration of artificial intelligence and some of the innovation that they have sort of come to fruition, but with increasing free cash flow. So that's what we really like here. There's some resistance above from its July fallout of 2024. But if this thing gets above $95 or so, it can really start to run and that compounding will happen again.

So Bill, really quick question. By the way, this is a heart valve company. They make heart valves. It's kind of their main business. In earnings a couple weeks ago or a couple days ago, I should say, they maintained their guidance, but they only had an estimate of a 5 to 10 cent negative impact on full year EPS. They also based that on a 10% tariff. It doesn't seem like a 10% tariff is going to be the baseline when it comes to tariffs. Concerned about that?

You're not really concerned about that. I think overall, I think the health care space has, from a flow standpoint, has been sort of on the back burner. And I think we'll start to see flows into health care. And that's going to be a beneficiary, could offset some of the negativity around a 10% tariff. But what we're really focusing on, too, is that free cash flow. And I don't think in the elevation over the quarters to come in that free cash flow, I don't think we'll be impacted too much by the 10% tariff if that's low balled.

Bill Baruch buying Edwards Life Sciences. Great to see you, Bill. Thank you very much. All right, coming up next on Halftime, President Trump taking on Walmart. What do you have to say about potential price hikes at the country's largest retailers? We have a shareholder right here on the desk. We're going to get their reaction. Halftime back in two minutes. Are you looking to invest in municipal bonds? For extra protection, buy bonds insured by Assured Guarantee. It guarantees that 100% of your principal and interest will be paid when due.

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We're back on Halftime Report. Hello, everybody. I'm Contessa Brewer in with your CNBC News update. Former President Joe Biden thanked Americans this morning for their love and support. Following the announcement Sunday, he has an aggressive form of prostate cancer. The former president's personal office said that cancer has spread to bones and added that the president and his family are reviewing treatment options with Biden's doctors.

Dawn Richard is back on the stand today in the sex trafficking trial of Sean Diddy Combs. She is a former member of the music mogul's girl group, Danity Kane. She testified this morning that Combs threatened to kill her if she told anyone that she saw him beat longtime girlfriend Cassie Ventura.

And the president and CEO of CBS News is stepping down. In a memo to staff today, Wendy McMahon says it's clear she and the network did not agree on the path forward. Her words, McMahon's exit follows last month's departure of 60 Minutes executive producer Bill Owens. CBS faces a $20 billion lawsuit from President Trump and its parent company, Paramount Global, is trying to get federal approval for an $8 billion merger with Skydance.

Frank, I'll send it back to you. Contessa Brewer, live back at CNBC HQ. Contessa, thank you very much. Turn our attention now to retail. Walmart feeling some heat from the White House. President Trump posting on social media over the weekend that the retailer should stop blaming tariffs as the reason for rising prices, adding it should, quote, eat the tariffs. Joe, you own Walmart and the Joe T ETF.

I do. Walmart's going to continue to move higher. I think that's what the viewers need to focus on. Stock will reclaim $100. It hasn't been there since February. The last earnings report was very strong. The spending has been the concern. That was the concern in the quarter that was reported in February. It was elevated spending. Why are they doing that? They're focusing on growing their market share and e-commerce. And this earnings report is

is providing the evidence that in fact that reality is presenting itself. They have proven in the past that they can capture market share when they want to utilize the weapon of scale. They've done it in grocery. I expect they'll be fine in e-commerce. As it relates to the rhetoric back and forth with the administration surrounding raising prices, not raising prices, I think Walmart will be smart enough to know if they are going to raise prices, they're going to raise prices

on the non-necessities, on the things that are discretionary, on the things that are bigger ticket purchase items, not on the staples that the everyday consumer needs. I would expect, and they've indicated that in the past, I would expect that will be their mannerism to manage the inventory. All right, let's move on to some other retails reporting. Lowe's reporting this week, Snipe, you own that one.

Yeah, so I mean, you know, as it relates to kind of the earnings, you know, revenues expected to be down, you know, around 2%. EPS is down, expected to be down around 5%. We're expecting around $2.89 of earnings, you know, and $20 billion of revenue. I think my concern here, you know, not to bring up the whole yield story again, but

The 10-year is obviously the proxy for mortgage rates, and that, for me, is mobility. So when people are not moving around because rates are higher than they need to be, that serves as an overhang for stocks like this. So what I do believe, though, Marvin's doing a good job. There is room for margin improvement. They have been steadily growing that, and I think they continue to hit on the pro segment and taking market share from Home Depot. So I like that.

stock for this reason. You and CEO Marvin Ellison on a first-name basis. That's good to know. By the way, 30-year fix right now above 7%. Certainly something that weighs on the business there. Low shares out fractionally right now. All right, coming up next, how investors can get an edge or a hedge by using alts ETFs. Our Dominic Chu is here to break it all down in today's ETF Edge. Coming up next. Are you looking to invest in municipal bonds?

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And we're back on halftime now to Dominic Chu with today's ETF Edge. Dom? All right. Good afternoon, Frank. So if we talk about the ETF Edge side of things, we have continued market uncertainty. One of the biggest new trends in the business has been the packaging up of hedge funds, hedge fund style strategies in an ETF wrapper. So joining us now is Paisley Nardini, managing director and portfolio manager at Simplify ETFs.

And Paisley, one of the interesting things that I'm curious about is just how much more demand, how much more popular have these types of alternatives-based ETF strategies become?

Yeah. Well, thanks for having me, Dominic. Happy to be here. I would say a big catalyst for the interest and adoption of a lot of these alternative ETFs, mutual fund strategies on the market is really what we saw started in mid-2022 with the increase in interest rates. And I think we're dealing with that exact same theme today, almost two years later from when the Fed first started to raise rates is, are bonds providing that ballast in a portfolio? Are they offsetting your equity risk?

And as we've seen all of the volatility year to date and really the return of diversification, I would say diversification is absolutely back in the portfolio. And so using alternative sources of risk and return to help hedge against that equity drawdown risk and really protect when bonds are just adding more volatility to the portfolio. All right. So Paisley, the other question I have now is,

Where do you think a lot of the demand is coming from with regard to these types of products? Is it from individuals, high net worth, ultra high net worth, family offices, pension funds? Where exactly what's driving the demand there?

I would say all of the above. Every week, we're having conversations with all of those allocators that you just spoke to. And I think a lot of this was maybe born out of the retail investor space with some of the inverse ETFs or the highly levered ETFs. And that's not really what we're talking about here. We're talking about institutional caliber strategies, strategies that have historically been in those sovereign wealth funds, in those institutional pension portfolios,

and now are available in ETF wrappers. And so as a result, we're seeing very sophisticated RAs, high net worth advisor firms, platforms offering these strategies as another way to build kind of a more robust portfolio for these allocators. So really all of the above. And again, this is like truly an institutional type strategy that's being brought to investors. And historically, those long, short strategies, absolute return focused strategies are

is really what's in question here. All right. It's a fascinating discussion. Paisley Dardini at Simplify. Thank you very much for that. We've, by the way, got lots more coming up on the recent explosion of these new ETF products. That's going to come up at 1.15 p.m. Eastern time. Just go to CNBC.com slash ETF Edge. Paisley will be joined by financial futurist Dave Nadig. So we'll keep an eye on that. I'll send things, Frank, back over to you guys.

All right, thanks a lot. Our Dom Chiu with today's ETF Edge. Coming up, our calls of the day, a big downgrade for one stock that's been on an absolute tear this year. We're going to give you the name and the trade coming up next. Stay with us. More halftime coming up. Welcome back to the Halftime Report. We're going to look at Netflix downgraded to neutral at J.P. Morgan. The stock had been hitting all-time highs. Jason and Weiss, you both own it. Jason, I'm going to come over to you. Analysts saying gains harder to come by after the recent run.

Yeah, listen, I mean, they've been hitting on all cylinders, clearly. I mean, the stock's up 32% year-to-date with all the kind of concerns and the macro coming into the year. I think what's been cool about Netflix is, number one, the optionality, right? So there's trade down. You can go from the top tier to that supported tier, and there's almost a difference of $20, right? So I think that's been...

a huge winner for them. Obviously, they had a really good quarter, 25% EPS growth, 12% revenue growth. They're no longer talking about the subs or reporting the sub additions. So for me, this is a reasonable call with the run that they've had. There are obviously other streamers. Disney had a pretty solid quarter, and I think folks are kind of looking to them now for some accumulation. But

I continue to like this name going forward. - Why is she on this one as well? - Yeah, and it's my largest position, which I'm gonna cut back at some point, 'cause it's just much too big.

But look, it's been a safe harbor in the storm that we've seen in the equity market. So while the other tech stocks trading down, it's actually moving the other way. And that's because it will do well in a, not as well as it's doing because people are loathe to spend money in a recession, but it'll do well in a recession. And it'll also do well in the growth economy.

So you typically don't see that. You see more of a double-edged sword. But look, there's no reason. It's not terribly expensive. It's not cheap. But it's a unique asset and a pure asset in terms of streaming. Maintain your positioning here. This is not the type of stock you get out of. We have a nice recovery intraday from the

There are news earlier in the day of what we don't want to discuss anymore. The Dow is now higher. Spotify is at an all-time high as we're speaking. Microsoft is pushing towards that 468 level, all-time high. Meta is higher. Amazon is higher. This is the type of environment where if you own a stock like Netflix, you stay anchored to that raw

the winning trade. And to be clear, it will still be a core position, perhaps my largest core position. But, you know, when it dipped, I bought quite a bit. And it's uncomfortably large. Important note, even with the JPMorgan downgrade, Cowan actually raised their price target on Netflix, going from $11.50 up to $13.25. So also some bullish sentiment when it comes to the name as well. All right, coming up next, Mike Santoli joins us with his midday word. We are back right after this break. ♪

And we are back on Halftime. You can see the Dow moving into positive territory. Senior markets commentator Mike Santoli joins us now with his midday word. Mike, you've often been on this desk saying that bond yields don't directly impact the equity market. I've heard you say something just to that effect. I don't want to mischaracterize what you're saying, but we're kind of seeing that relationship today, inverse, of course. What I'm saying is that the bond market is there's not some magic level of treasury yields that basically completely determines what happens with stocks going up or down.

Also, there's not a certain class of stocks that are magically more sensitive to bond yields than others. But I do think right now, given the fact that the debt downgrade for the U.S. could have really scratched at this raw nerve that the market has had for a while, which is our bond yields going to get unanchored? Are we going to actually finally have a little bit of a tantrum about the fiscal situation? And the answer is not yet, if at all.

So I do think that the fact that the bond market is pretty calm here, we obeyed last week's highs in yield, people bought treasuries at those levels again, meant that you have this just persistent bid in equities activated again. This has been the

pattern for weeks right now even a heavy open gets bought and all it does to me is tell you exactly how underexposed to equities lots of big institutions became and they just have to top it up every time they get a chance. That's the story. That is the message of today is the clear responsiveness and resiliency of the equities market. We're going to go positive as we're speaking. Seven of 11 sectors are higher on the day and it's kind of like okay the bond

market is letting the equity market do what it needs to do to your point which is rebuild the positioning which doesn't match how fast the price and at some point

They fill up the tank again and they don't need to buy any more. And maybe something comes along that disturbs the, you know, the big setup. But right now, that's that's what's at work today. So I think you have to be mindful of that. Be mindful of some of the retail trading activity that's starting to get a little frothy. By the way, it's pulling back today. Palantir down, Tesla down. All of those tells of kind of the public investor excitement are cooling off a little bit here.

Yeah, Portnoy volatility is still pretty low right now. Looking at the VIX, still under 20. Yeah, it's pretty much in the normal range. As the markets kind of ease towards positive territory, at least the Dow does. Mike Santoli with his midday word. Mike, thank you very much. All right, coming up here on Halftime, we've got your final trade. Stay with us. Much more coming up right after this break. You saw it there, the S&P just getting into the green, and we are back on Halftime with final trades. Jason, you're up first. I like Qualcomm here. I like this new deal with NVIDIA to build CPU chips. I think this is an opportunity. Qualcomm. Steve Weiss.

I am going with, as you see there, IBIT. I think the momentum continues, particularly as we get closer to regulation, as Trump family gets more steeped into the crypto business.

Joe T. thinking about all time highs. Absolutely. Momentum is such a powerful force. We're seeing it on display today. I said all of last week and others have said as well. I think we're in the near term. We're making a run at all time highs. Stocks that are making all time highs. You want to stay with those. A great example of that is what we're seeing today in TJX. Look at the 11 S&P sectors. See the strength there.

find the winners, and continue to own them. Yeah, a lot to watch there. That's going to do it for Halftime Report. The Exchange, starting right now. Have a great day. 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.

Are you looking to invest in municipal bonds?

For extra protection, buy bonds insured by Assured Guarantee. It guarantees that 100% of your principal and interest will be paid when due. Assured Guarantee has demonstrated reliability and financial strength for nearly four decades. That's why the bonds they back are one of the safest investments you can make. Visit assuredguarantee.com. Assured Guarantee. A stronger bond.