Trading Trump’s Tariffs 5/23/25
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Welcome to the Halftime Report. I'm Scott Walker front and center this hour. Here we go again. The president ramping up his tariff rhetoric. Stocks are falling. Apple's under pressure today. We'll trade all of it, of course, with the investment committee joining me for the hour today. Stephanie Link, Jenny Harrington, Jim Laventhal and Kevin Simpson will show you the markets. We are lower, as you'll see. We are not as bad as we were yesterday.

at the open today. We are tracking still though for the worst week since April. So Steph, we have the ramping up of the rhetoric. We'll show you what's going on with Apple and the rhetoric there in a moment. It's interesting the price action today.

The market may think that this is more bluster than anything, the old fool me once, shame on you, fool me twice, shame on us. So maybe we're not exactly believing that the bark is going to be the actual bite.

Right. So is that right? I mean, is that fair? I kind of think that's fair. We think he's negotiating and it's probably what is going to happen. But we have come a long way. We're still up 16 percent from the April 8th lows. So I would not be surprised to see us just backing and filling for the time being until we get answers, because

Guess what, Scott? We don't have any answers. That's the whole point, right? So today is disappointing, but we have to wait to get more clarity. In the meantime, it's kind of a bummer that earnings are done for the most part. I know we're going to talk about NVIDIA next week, but...

earnings are done so now we're hostage to the macro and to the headlines again. So I am watching the bond market and yields, we all are. I happen to think that yields are going higher for the right reasons because growth is better. We have a 2.4% Atlanta Fed tracker. We had a very good ISM services number. Once again, another week with great weekly jobless claims. So I think rates are going higher for the right reasons. Maybe part of it is a little bit of deficit concerns but

I'm not surprised about that. I don't think any of us should be surprised that the Trump administration is spending money. Both administrations were going to spend money no matter who got in. So anyway, I think that there's a lot of unknowns here. And so maybe we just sit. Maybe we have a little bit of volatility. But I'm still very comfortable with the stocks that I bought. And I am looking for any pullbacks in stocks to be adding. It was a nice respite, wasn't it, from, you know, the

the daily tariff headlines and the threats and this.

you know maybe it's a way to get the crypto dinner in the jet off of the top of the headlines you go back to the the trade war which you know you dance with the brown yeah I is where we're at today I will say vital knowledge if you you know they're a market intelligence and analysis company says at the post today quote the absurdity at the threat undermines its credibility it speaks to maybe have the price action is reacting today on though they point out that quote an economy can't have a loaded gun pointed

at its head for months goes to what Steph's saying. We got to get past this uncertainty, right? We have to get past it, don't you think, for the market to really feel like it can dig in and do something special? Absolutely. And that's why over the past couple of weeks when when despite the market being up, I haven't been cheery.

because I've been nervous because we know that this is, that there's going to be another shoe to drop. And Scott, when you say we need to get past the uncertainty, I think we could have three and a half more years of uncertainty because that's to some degree what we had in round one in Trump 1.0 where there was just new information launched throughout that whole four-year period. Yeah, but I mean, that's not, be careful the point you're making though. It's not like the market was a disaster in Trump 1.0. No. In fact, it was good and the economy was really good. COVID,

upended a lot of things that were happening. Fine, but here's my point as an investor. I woke up every morning for four years and checked Twitter to see what new news I had to deal with.

And that's kind of where I am again. And I don't think that we're, you said it was a nice respite. It was a nice respite. I was very distrusting of the respite. I'm going to be distrusting of the respite whenever we have it again. So what are you not going to do? You're not going to get more invested in the market because you don't trust it? No, you know I'm fully invested. Here's what you do. What's the payoff for the viewer then? Okay, here's the payoff for the viewer. You stay invested because I think the American business

will overcome whatever political uncertainty is thrown our way. It doesn't make it easy, but what it means is that you need to go into the next three and a half years emotionally prepared to not overreact when we're at an April 4th, to not overly celebrate when we're at a May 11th, and just keep your wits about you. I think valuation matters. I think how your position matters. But I think if you can go into this saying, bum

are going to be, not actual bombs, right? News bombs are going to be dropped on us. Don't get too despondent, right? Euphoric statements are going to be made. Don't get too excited. I think you can actually get through the next three years with decent returns because, again, American business has a very long history of overcoming whatever's out there. And I completely believe in America.

I completely believe in companies to continue to generate earnings growth. We'll talk about one specific company that's in the crosshairs yet again today in a minute. But what's your view, Kev, based on how we started the program and how the market's reacting to those posts this morning?

Well, I think that's the dance that we've been accustomed to, to Jenny's point. And I think we need to continue to expect that volatility for the foreseeable future. When we were sitting here last week, it was a little bit too calm. And the VIX is up 30% just in a week. So the volatility is something you can play. To Stephanie's points, we're going to buy the dips. We're going to sell calls into the strengths. This volatility may continue easily for the next three years. But I would venture to guess certainly until the summer is over, especially now where we've got a little bit of a lag in terms of earnings.

with the exception of Nvidia coming out. You came in yesterday feeling pretty good about things. Still do. Today change anything? No, no. Because of how I painted the picture at the top, you know, the fool me once? A little bit.

A little bit. Look, we're playing the hand we've been dealt. There's no room for moralizing about this, no room for complaining about it. This is the hand we've been dealt, and I'm going to characterize it. I'm not trying to be provocative, but this is kind of thuggish behavior. Apple has been told today, pay up. That's what they've been told. And now the negotiation comes. I'm sorry, Scott, did you not want to go there? Because I can talk about EU. Since you just mentioned that, let's show what the president posted this morning about Apple. Quote, I have a long, I long ago informed Tim Cook.

that I expect their phones will be sold in the United States, will be manufactured and built in the United States, not India or any place else. If that's not the case, a tariff of at least 25% must be paid by Apple to the US. You mentioned the EU threat as well. It's the same thing. So we got that as well. It's the same thing. Everybody has to get their checkbook out. And there's optionality in how it gets paid. I mean, Apple had $100 billion of profit last year.

President Trump is looking at that and saying, I want some of it. Now, by the way, this isn't so awful, right? I mean, there are tax cuts on the way, so it's not that terrible. But basically, he's saying, I want some of that. And it will be in part up to Tim Cook to decide how to pay it. It might be a check. It might be lower gross margins if he actually does try to manufacture iPhones here in the U.S., which I think

is somewhat farcical, but basically what President Trump is saying is I want more money for the federal government. We can moralize about whether that's thuggish behavior. We can complain about it, but that's what's happening. And it's best for everybody to deal with it as the market is today, down less than 1%. At a time too, by the way, where you just in the house passed a $4 trillion tax bill, the bond market obviously has

you know, throwing its hands up in the air at a point this week and said, you're never going to get serious about spending cuts. So I don't even think that what happened this morning is a coincidence related to any of that. I think you're exactly right. I think you're, thank you, Scott. I think you're exactly right. Uh,

the world now knows we are not going to cut spending. I mean, again, let's not complain about it. Not only that, but he wants whatever revenue he can get from whomever he can get it from. That's exactly right. To help offset the cost of the tax bill, which he's not going to waver on at all, despite what the Senate might do to it in the days ahead. That's exactly right. He's squeezing everybody he can squeeze. I don't know if I can add more to it. You just said it. I totally agree. Well, the question is whether, you know, look,

It's not like the Apple threat is out of the blue because he's been, the president has been talking about it. Steve Kovach joins us now.

I don't know if we need to get our screwdrivers out again because we had tucked those away, figuring that that wasn't going to happen. But here we go with the threats again. What do you do? What do you make of it today? Yeah, a massive escalation, Scott. I mean, last week you had President Trump in the Middle East on that trip, bringing almost every day, mentioning Tim Cook's absence there, calling out Jensen Wong as his new favorite tech executive. And now we're saying he has a little problem with it.

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one, the labor force in which to do it. Tim Cook has spoken about this, that the Chinese labor force and now increasingly the Indian labor force is capable of doing this. We can't, we don't have hundreds of thousands of workers here that we can move throughout the country like they do in China and India to start building those iPhones. So what are the

options here that apple has and everyone right now is saying well i guess they can try to eat these costs or raise prices that's already been kind of floated in a wall street journal article i believe it was last week or two weeks ago that maybe the next lineup of iphones will get a price increase uh... likely due to tariffs but they can you know give whatever reason they want for that and then also

Tim Cook is not stopping with India. There was a headline overnight from the Financial Times, $1.5 billion being invested again into India for a Foxconn plant to just expand that footprint even bigger. Remember what Tim Cook told investors, Scott, just a few weeks ago on that earnings call, saying we're going to move as much production from China to India as we can for those U.S. iPhones. That's a problem.

Approximately 65 million of those a year. They're not there yet. But again, that spending is going to get them there. And then Vietnam is going to be the source for things like accessories and MacBooks. So that is not the United States. It doesn't seem like it's going to happen. Now, the question for investors to really think about is how serious is the president on this? He's already backed off numerous times and flip flop on this issue numerous times after saying there are no exemptions. Then he gives Apple an exemption after Liberation Day.

And so really, it might be just a kind of wait and see thing here, Scott, to see if the president really means what he's saying here. I mean, Dan Ives today calls it a fairy tale. Yeah. Sort of your your idea, the idea that iPhones are going to be produced in the U.S. And Wells Fargo takes a look at this, Steve, and says that Apple would have to raise iPhone prices by one to two hundred dollars. Yeah.

I don't mean to sit here and spend other people's money, obviously, but $100 to $200 increase in price is not exactly the $3,500 price tag.

that we've heard bandied about by the skeptics and the critics of all of this. If Apple actually did raise its phone prices by one to 200 bucks, you do have the carriers involved here too to think about, and whether that would hurt demand in any way for a premium product.

- Exactly. - That I don't know. - Just map the math out here. If you're Tim Cook this morning, looking at that true social post from the president, you're saying, "Hmm, 25% for those US iPhones or 100% for a US-made iPhone, which one are you gonna choose?" And to your point, that is exactly right. And that's something Apple has been doing for many years now. Either these trade-in deals that you get from the carriers or Apple itself, or these kind of buy now, pay later plans. You can finance any Apple product pretty much, not just the phone.

through Apple itself and do a buy now pay later. They have to deal with a firm in order to do that as well. Zero interest and make your payments over time. We've become used to that. Yes, sure, the sticker price might be a thousand bucks on an iPhone Pro, but you don't pay that. Not everyone is paying that right off the bat. So this might be something Apple feels like they're willing just to take the hit on, on margins.

and things like that in order to do it. We already know they're gonna do it this quarter, $900 million charge related to all these tariffs just for the June quarter. What that looks like beyond that, who knows? We'll have to wait for the next post from the president. - Yeah, we're two weeks from Monday.

You and me are going to be sitting together out in Cupertino as well at WWDC, supposed to be all about the developers and AI and everything. But this is the overhang. And I suspect we'll be talking about it a lot between now and then. Steve, thank you. That's Steve Kovac back at our HQ. So we're below three trill in market cap yet again for shares of Apple, below 200 bucks. Eight straight down days would be the longest streak since January of 2022. Kevin, what do I do?

I think you hold Apple here. I don't think that's going to skyrocket in the next few days. I blow this off. Just what do you think? I wouldn't blow this off short term. But Scott, what I'm more worried about intermediate and longer term is what happened yesterday with OpenAI, ChatGPT and Johnny Ive.

Because the Guardian said it best. They said that the next great iPhone moment may not even come from Apple. Because if they're building the next generation of hardware that we can use this chat GPT product and bypass the phone, to me that's a lot more scary than a threat on a tweet for 25% tariffs made in China. Can I ask Kevin a question on that? By all means. Okay, so you think you hold Apple. What do you think if you hold Apple in an IRA?

versus a taxable account? Because everyone who has it in the taxable account has a huge capital gain. So you kind of need it to go down 15 to 30%, right? So I never let the tax tail wag the dog. It's irrelevant in all of my thesis because it just comes down to math. But certainly in an IRA, you know me really well. I would want to write covered calls against it actively because you have no short-term capital gains in the IRA. We do the same thing in taxable accounts.

But this was a stock that we sold out in December around $247.50. It was too expensive. Last month on April 9th, we bought it at $3.50.

177. So here at 200, I'm still OK holding it. But for your clients that have low cost basis, I think writing covered calls or at least putting in stops, paying the tax is better. Think of Nvidia when it was 150 and went to 88. No one sold it because no one wanted to because of the tax consequences. If I could also just opine on here. I mean, maybe expectations just need to be brought down for Apple in general. We had that period of time through 2021 where it annualized at 45% annual returns. Remember this for like three, five years?

And since then, it hasn't had anything. I'm looking at the three-year return. Well, okay, three-year return 10% annualized below the S&P 500. But what if it just grows at the S&P 500? And it should because of how representative it is in the passive ETFs. Whether it's below $3 trillion or not, it's still a huge part of the VOOs and even huger part, sorry, the SPDRs, and even huger part of the triple Qs. So as money comes back into this market, it automatically goes to Apple.

I think it's a touch overpriced. We've obviously seen the AI hasn't come out the way it should. The super cycle has been blown off, appropriately so, but it's still a major part of the U.S. market, and as the U.S. market goes, so will Apple. Why would you pay 28 times for mid-single-digit revenue growth at best? This is where I'm at. That's the thing, right? The one thing they do really good. You don't have to. They don't own it. They do really good. I don't. I don't own a single share. No, that's a good question. Let her finish. My point is, what they do really well,

is gross margins and margins in general. They do very well, exceptionally well. But you're running revenues in the mid-single digits at best. iPhones are actually declining year over year. China, iPhones are 20% of their sales.

So you have so many headwinds and it's traded 28 times. I mean, I just think out of any other Mag 7 or any other technology name, there's just so many other things to choose from. This is double what the, more than double what the valuation used to be. Yes, right, yes. When you back out the cash, obviously. We had a...

mid, low, double-digit P.E. on the stock, ex-cash. You mean like 10 years ago? Yeah. But I mean, they have still a mountain of cash. Their revenue growth, to Steph's point, has slowed. You know, I brought this up, the multiple yesterday. We talked about it because, remember, like 10, 15 years ago, it traded at like 11, 12, 13 times earnings when it really was a consumer products company. I thought about this in the last 24 hours, and the big difference here is the services. I mean, the margins there are meaningfully different. 25% of revenues, though.

I'm not going to over-applaud the stock. I don't want to give you that impression. I mean, the reason to be in it is more technical than fundamental. Stephanie, I will agree with you. I don't like it at 28 times. But at the same time, I submit to you that I do think it's going to go up, at least with the markets, because of the reasons that I mentioned. More technical than fundamental. I mean, let's not act like this company is dead in the water. They still have the most powerful installed base in the history of consumer products by a lot.

And then if you add the services business on top of all of that, the notion that they're just not going to get AI right enough to have a larger upgrade cycle, I think is a bit far fetched. No, we just I do own the stock at all.

You know, I owned it. Sounds like you don't even like it. I know, I know. It's a valid question because I'm asking myself this. But do remember the trajectory here that I was underweight for quite some time. And in the downturn in April was when I built it up. I bought more shares at 189. Now we're just barely above that now. So believe me, I'm not patting myself on the back. And Stephanie, believe me, I hear you on the multiple. I'm not coming back to you and saying it really is worth that. What I am saying to you...

I'm not so sure they get AI right. Okay. I think there are a lot of threats out there, just like we've been talking about threats with Google. I got it. But I do think there are still quite a bit of intellectual property there at Apple. They have a long history of innovating after the fact of catching up with innovation. I think it's more likely than not that they will do that. And when I say technical, I know this is third time I'm saying it, but when money flows into the markets, it's going to flow into Apple. And see, that's

where I disagree with you because the market's flat on the year and Apple's down 21%. So it's not necessarily true. And I think your argument is largely predicated on that it should participate with an S&P-like return. And I think that's the dicey part of the argument. So for me, because I don't do covered calls like Kevin, so I don't have that option to make it work and make it productive for me. I look at it

everything. And I like this conversation because it's representative of way more than just Apple. It's representative of all the Mag7 that people are sitting on. Well, Microsoft is having its best month since March of 23. Right. So more than two years. So you can make an argument that there's more growth. But hold on, let me just finish this one thing and then I'm done, I promise. But

If I had Apple in an IRA, I think you need to be very, very cognizant of what the opportunity costs of holding it are. And if you don't believe it's going to have an S&P-like return, and you don't have the ability to write calls, and you don't have a capital gain, maybe you want to get out of it. Because I don't think...

Jimmy, I don't think you're right on that one part that as goes the market, so goes Apple. And certainly over certain time periods, that's right. But I jumped when you said Microsoft because let's not forget that before this roughly six-month surge, Microsoft was as a stock left for dead for about 12 to 18 months. $5.50 is the new price target at Jefferies today as they reiterate it, a top pick.

Kevin, you own it too. Oh, I think it's a great company because you're talking about trying to integrate AI and monetize it. And we've talked about it for a really long time, the co-pilot experiment, but I'm still so ingrained in the office ecosystem that if they get it right, just like the Apple product, I'm not going to go elsewhere to try to find an alternative.

Amazon. Yeah, it's a monetization opportunity. Amazon's interesting today, too. Pershing adding it, Ackman's firm, a new stake in April. What do you think about this one? I mean, it trades at 13 times EBITDA. And the historical average is 17 times. And you win a lot of different ways. They're absolutely a—we have haves and have-nots in retail. They are absolutely a have, right? And, I mean, they grew their sales in North America 8%.

in retail when many companies are struggling. International grew 5%. AWS, people were complaining about it, only growing 17%. They're the behemoth. 17% is massive. And it's more than half of the profit. Absolutely.

Absolutely. And so is advertising, the margins in advertising. So I think there's a lot of ways to win. The stock has done pretty well, but I still like it. And on any dips, I've been adding. Well, what about since you went retail? So Target was a disaster this week. I was on the show earlier this week. I wasn't here. I know, but I got beaten up, silly. I'm reminding you and myself at the same time. I know. Well, what are you going to do with it? No,

No, I'm just going to hold it. I mean, it's down--

It's down 40% in the past year, so I was not happy. I actually came on and said it was a really hard stock to defend at this point. It was the first quarter in a year and a half where they had negative traffic. I always made the case that at least they had traffic growth. Okay, so the game's changed. Why isn't your game changed? Because I think the stock is down so much, and I think the numbers, even at the low end of the range that they're giving, by the way, they gave a range as opposed to Decker's, not today, not giving a range, so at least they gave a range.

seven bucks, you're talking about 12 times earnings with a 5% dividend yield. Yeah, it's not going to go anywhere near term, but I just have a hard time selling it because I do still think that there's value to the brand at the company. I do still think they are doing a decent job in terms of what they can control for the most part, but it's been disappointing. There's no question. But this is the hardest part of the investing game. It's hard to sell emotionally a stock that's down a lot

You want to think that it can recover. There have been times in this trajectory where it's gone down a bunch, you defended it, it's recovered a little bit, but now we're back to, I think, even lower stages than when it was embroiled in the whole controversy of the products, some of the products that it had. Maybe, I mean, how do you get to a point, I guess, how do you go from point A to B?

It's down a bunch. You feel terrible about it. You don't want to sell it because it's down a lot and you don't want to take the L. But at some point you may come to the realization that you have to take the L, but mentally it's hard to take the L. It's hard to take the L, but that's not the reason why I'm not taking the L. I mean, I think that they do still have a good brand. I still think that the mix...

has to shift more towards like a Walmart where it's 50% consumables, 50% discretionary. Right now they're 62% discretionary and that's come down over the years. And I think the discretionary stuff they've actually done pretty well. It's just not a discretionary kind of an environment in this economy at this moment in time. It's all about services and consumables and they're on the other side of that. So I do like the restructuring that they announced,

And we'll see. I'm surprised by the CEO and this management team that they haven't been consistent. But I'm not taking the L because of emotion. I'm not taking the L because I still believe in the brand and I still believe in the enterprise value over the long term. Gap's going to report next week. How do you feel about that going in? Well, that stock's up 22%. So actually, I've won on that name so far. And I was just asking our analysts this week, should we take some profits in it? But I

I DON'T THINK SO. IT'S STILL TRADING AT 12 TIMES EARNINGS. IT YIELDS ABOUT 2.5%. THIS IS A TURNAROUND STORY. ONCE AGAIN, SCOTT, AS YOU KNOW, I LIKE TURNAROUND STORIES, BUT THIS CEO HAS DELIVERED. THEY'RE GAINING MARKET SHARE IN THREE OUT OF THEIR FOUR BRANDS. THEY HAVE NEW MANAGEMENT TEAM IN THREE OUT OF THEIR FOUR BRANDS.

Zach Posen as their creative director. I mean, so I think that this stock can still continue to grow. And this is without Athleta. And I do think that Athleta is going to actually improve in the second half of this year. So a little nervous just given that it's had a run in a very difficult discretionary tape. But I like the story long term. OK.

Up next, we have several committee moves to get to Kevin Simpson with a new buy in this year's best performing sector. Stephanie is also adding a name that got hit on that mega tax bill clearing the house. We are back right after this. With a great selection of new Toyotas, everyone knows your summer starts here at your Toyota dealer, even your pet parrot. Your summer starts here. Well said. Dealer inventory may vary. See your participating Toyota dealer for details. Event ends June 2nd.

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Ryan Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same premium wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you to Mint Mobile today. I'm

I'm told it's super easy to do at mintmobile.com slash switch. Upfront payment of $45 for three-month plan equivalent to $15 per month required. Intro rate first three months only, then full price plan options available. Taxes and fees extra. See full terms at mintmobile.com. Time for some moves. Kevin Simpson bought AXP American Express at the open today. Why? We've been really active in this name, Scott, for the past few months. We picked up some shares last month at 235, got pulled out at 255 to trim it.

We wrote calls on it at 290 and had it called away. So this morning on the pullback with the tweet news, we added some shares at 282. It's an aspirational younger person trying to get gold cards, platinum cards, some old Wall Street elite with your black cards. It's a subscription model, a service model. That's right. I love it. Labenthal, Labenthal, and Labenthal definitely on the black card. There'd have to be three of us spending to rate the black card.

I can help. I've seen how he rolls. Jenny, you own AXP. Yes. Goodbye here? Yes. I mean, this is such a long-term holding for us. And I actually added it the other day to portfolios who had come in with new money and we'd held off because it was up so much and now it's down so much on the year. So added it here. The earnings growth is just remarkable. You know, it's consistent mid to high teens kind of forever. So...

Yeah, and economic resilience, sorry, to your point. All right, Steph, you bought Quanta Services. Yeah. PWR. I just keep buying it. Like, every time it goes down, it was down 5% on, you know, the phase-out of the clean energy bill. We have no idea what's going to happen with the clean energy bill, but this company does not need it to grow. They had a record backlog last quarter at $35 billion. They beat...

they've raised. We're going to spend $4 trillion on electrification and the grid upgrades between now and 2050, and they are absolute beneficiary of that. And 70% of their customers are utilities, which have to help in that upgrade cycle of the grid. So anytime it's down a lot, I'm adding to it. -Vernova, you also own still? -Yes.

Constellation Energy? No, I don't. That's not you. No, I never did. But I do own GE Vrnova. I own Rockwell. Oh, Eaton. And Eaton. Yes, I own a lot on this theme. That's what I was thinking of. I got it confused. No, it's all about the same thing. I mean, look, if you believe in AI, then you have to believe in the data center. And we're undersupplied in data centers globally with 11,000. And you need an upgraded grid to make the data centers work.

And then you need power to make it all work. And so that is those are four themes right there that I am hugely bullish on for the next decade. OK, Kev, you bought Boeing also. We did. We bought this in the growth strategy because it doesn't have a dividend. We think this is a return to normalization. You put Stephanie on the hot seat for Target.

Five years ago, we owned Boeing, and this was during a global pandemic. She's been on the hot seat for Boeing, too. I was on the hot seat for a lot of things. Boeing's going to be a nice turnaround story. That's how you make money, though, by the way.

It can't all be that easy. We can't look at it for the dividend strategy. They cut the dividend five years ago also. But I look at this like we did exiting UnitedHealthcare last week. We exited Boeing in 2005. It can always come back to a name. If they reinstate a dividend, we'll look at it in the dividend story also. But this is a stock that couldn't get anything right. Every headline was horrible. Same as UnitedHealthcare. So I think...

Given enough time, we're looking at this as a new trajectory, and I like the way the administration is pro-Boeing. Maybe their best salesperson. You obviously still own Boeing. I do. You like some headache stocks. I have a lot of headache stocks, but when they work, you feel really good. I'll tell you that. Kelly Ortberg is really a rock star so far. Last quarter, they had a decent quarter, but it's the first time I actually saw their margins.

in their commercial aircraft business up 290 basis points year over year. It's been years since we can say that. So they have a great backlog, over 5,600 planes in their backlog, seven years worth. And I think the story is really just beginning. I don't think a lot of people own this stock

for obvious reasons. They were right not to. But I think this has changed and the culture is changing. It has never been a demand problem. It was always a supply problem and an execution problem. And that's really turning quality control problem. Absolutely. Right. One hundred percent. All right. Let's get the headlines now with Silvana. And now, hi, Silvana. Hey, Scott. Good afternoon. A district judge has just blocked the Trump administration from revoking Harvard University's ability to enroll foreign students.

The judge's orders means Harvard's international student body can remain enrolled there for now. Earlier today, Harvard filed a lawsuit against the administration arguing the government's action violated the First Amendment and was carried out without process or cause.

Two Democratic senators are calling on the Justice Department to prosecute Boeing in a criminal fraud case stemming from two fatal crashes involving the 737 Max jet. In a letter today to the DOJ, Senators Elizabeth Warren and Richard Blumenthal wrote the department shouldn't sign a tentative deal that would allow Boeing avoid pleading guilty as it would let Boeing quote weasel its way out of accountability. And in Norway, a man woke up

Wow. Wow. Yeah.

No kidding. That's what you wake up to. I'm wondering if the farmer ever has anything like that come on the farm. Sometimes bad things happen at sea, and it scares the hell out of you when you lose control. Bad things can happen. I hope nobody got hurt in that thing. All right. Silvana, thanks. Silvana, says the former Navy officer.

Yeah, I mean that Mexican sailing ship that went under the Brooklyn Bridge. I mean, sometimes you lose power. The Key Bridge in Baltimore, sometimes you lose power and it's out of your control and it scares the hell out of you. You say submariner or submariner?

Submariner is the way Navy people say it. Submariner is the way non-Navy people say it. Okay, that's why I said it both ways. I was covered. All right, coming up, rising rate winners. Bank of America out with a list of names they say will benefit from higher rates. There's a number of names on this list that you might own, which is why we debate it next.

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All right, welcome back. Big story this week, as all of you know, was the backup in interest rates.

Bank of America today is out with a new list they say will benefit from higher nominal rates, that they are not uniformly bad. They put together a list of 50 S&P stocks with the most positive statistically significant relative to the S&P 500 on the list with ownership in our group today. Wells Fargo, SLB and Diamondback.

What do you make of this list and those stocks being on it? Higher rates, not that big of a problem for them. No, and actually earlier this week, JP Morgan, Jamie Dimon talked about higher interest rates helping them and their net interest income business.

And so to the extent we do see the yield curve continue to be like this, I think all the banks should do well. But the companies that have more exposure to NII will do better. And Wells Fargo is certainly one of them with 70 percent. Truist also should be on this list, too. By the way, JPM is on the list, too.

Oh, okay. Yeah. So, but there are a lot of banks that should be. And I think the regional banks actually will benefit more. For the energy stocks, I mean, I guess if rates are going up for the right reasons because growth is better, maybe that's the whole rationale. But I don't really correlate higher rates with energy stocks specifically, but I'll take it because I do own SLB and Diamondback. Yeah. I mean, there are Conoco's on there.

Halliburton's on there, EOG, Exxon. In terms of regionals, M&T, Fifth Thirds, your point's really well taken. Regions Financial makes the list. There are several. Yeah.

Hess on the list. PharmaGym, ExxonMobil and JPM. You don't have to give me anything on JPM. I think Steph covered that well. But what about Exxon? I mean, this clearly is a list that is talking about pro-growth reasons for nominal rates to be higher, in which case, okay, ExxonMobil benefits probably from both sides. Prices are higher and volumes are higher. And look, there's some curious names on this list besides this. United Airlines,

This is airlines are highly indebted companies and same with ExxonMobil, which has 30 billion in net debt. So this isn't because they benefit from higher interest expenses. No, this is saying that we're going to have higher nominal rates because the world is growing, which is what we've seen interest rates across the globe going higher, presumably because growth is going higher with it. Are you are you suggesting by.

It sounds like you're criticizing the fact that United's on the list, but your Delta is not on the list. Delta's got debt too. Am I warm? You're warm, but let's extend it because Delta's actually been paying down debt at a rapid clip. So it might, you know, that might be interesting, uh,

how it I think it actually would be a bigger beneficiary because it's going to have the same boost if you've got pro-growth more travelers but it's not going to have as much interest expense. I think the list is very curious and one I'd like to keep track of because this is clearly because of pro-growth. If you get stagflation, if you get higher rates inflation and poor growth, this is not going to work. Does United have a larger global flight footprint?

They're comparable and Delta does they're comparable and and to the extent that any of these The top three American Delta or United has a space missing whether it's Korea or Italy or whatever There's all the code shares that go on with it Those three have excellent global coverage particularly through their partnership Charles Schwab is on the list to me This is the easiest and the most obvious of all the stocks on the list Schwab growth shrubs growth is

is predicated on their assets growing. And their assets can grow two ways. They can bring in new business from new clients, or they can have the existing assets grow. So in a pro-growth environment, they're just the most easy direct beneficiary. They've got...

33, 19, 18% earnings growth ahead. The more we grow, the higher those numbers get. It's easy. Do you want to do something quick on JPM since that's yours? I would only reiterate what Stephanie said about net interest margins. If you have banks that are lending and interest rates go higher, their profitability increases on all the banks. All right. Santoli's next with his midday word. We're back right after this.

Senior markets commentator Mike Santoli here with his midday word. It's good to see you. Do you think there's credence to this idea that vital knowledge puts forth today that these, you know, 50 percent tariff on the EU or 25 on Apple sounds in their words, you know, so absurd that the market's just not going to fall for it yet?

I do, to a large degree. I mean, I think that was the case with the 145% on China. I mean, once there was a very quick rethink, but those cycles are shortening now in terms of when we reassess. That said, I do think that, you know, what we got as an example today of just exactly how relaxed this market's going to be able to become

even in rallies, even in kind of calm circumstances, when we still are unsettled on the final trade policy stuff. We never got below 18 on the volatility index, even with this 23% rally. Now you're at 22 on the VIX.

heading into a three-day weekend when the market's not going to move and in theory you should be bleeding premium. So the hedging instinct was reactivated and I do think that's probably a pretty good excuse for the market to have cooled off 3% coming into this year. But it does show you though, the market's just not going to be quick to sell everything in panic.

just that soon after we got the backpedaling on the tariff policies a few weeks ago. And the fact that the S&P is clinging to this 5800 level, it just won't go far from there intraday today. It probably tells you that there is a little bit of that reflex in there that says,

We don't want to lean too far against it. Yields down and therefore rate sensitive stuff is also lending some support. Well, especially not ahead of Nvidia earnings next Wednesday. Yeah. Which is going to be a market mover you would have to believe one way or the other just by virtue of how big it is. I mean, you think so. I actually went back and looked February. What happened was the market was already in pullback mode and the impending Nvidia numbers kind of held the index in place for a while, even through the Nvidia report.

So it's not to me saying that that's going to define where we go, but it probably makes sense that we'll stay on even footing in terms of heading into that catalyst. All right. I'll see you at 3 on Closing Bell. It's Mike Santoli. All right. NVIDIA, not the only one coming next week. We've got the setup for you next. All right. The setup for next week, it is not just NVIDIA's week. It is also Salesforce, which is after the bell next Wednesday. You own that stock.

Yeah, we're not expecting too much out of this. I wouldn't be buying it in advance of the print. We trimmed the position back in September. There was a few downgrades today. Once you're in the ecosystem, you're stuck here. When the agent force really comes to fruition, I think this company is going to be terrific. But right now, I'd wait it out before earnings. Okay. Stock not doing too much ahead of it, maybe waiting for the number. We also thought it fun to look at some of the biggest winners and losers in May for the committee. Snowflake

was a huge one within the last week. As a result of that, it's up 26% in the month of May. Just wanted to do a segue there because it's another software name. And they had a really good quarter too. So they beat and they raised and earnings were up 71%, revenues up 26%, product revenues up 28%. That's what everyone cares about, product revenue growth. They're gaining momentum and they got it higher for product revenue growth. And operating margins beat

by 300 basis points. So across the board, great quarter. CEO, new CEO over a year now at the helm and doing just an exceptional job.

Hey Kev, both Robinhood and Roblox were big winners so far this month. We're not over yet, obviously, but Robinhood up 31%, Roblox up 22 and a half. So these names are our growth strategy, Scott, and both of them have an amazing infrastructure long term. It's the user base that you want. The daily active users on Roblox was up 26% year over year. And there's not enough that I could say about Robinhood in terms of their growth, their user base, their AUM.

Stock's up almost 100% in a month, so be careful chasing these names. They're great option candidates to write calls against. But what they own in terms of the youth longer term is amazing, amazing company. I'm going to throw one more out there that we have time for. Organon, I'm just noticing this, is down 34.5%. This is so unfair. Why? Because you give them the winner and you give me the loser. I had plenty of losers. You have the biggest loser on this list. Wait, did you say?

Did you say that my Disney's up 20% and my Apptiv's up 14% and my Meta's up 14%? Thank you, Seth. No, I want to focus on Organon because we don't have that much time. Oh my God. What about it? So I went on the show maybe three weeks ago when Organon cut their dividend. And they had a perfectly good quarter, right? Numbers were good, reiterated guidance. But they're like, oh, we're going to take all of our cash. You were mad. Like you were straight up mad. I was super pissed off. But you said you were going to sell it. I haven't sold it yet. And the reason I haven't sold it yet is because it's trading at three times earnings and the earnings growth is still there. It's idiotic. But what

But what's happening right now is there's a sorting out of all the shareholder base who were in it for the dividend. You guys ever think a stock is just maybe trading where it's supposed to be trading? Not at three times. Yeah. And I sell things all the time because of that when it's trading. I sell them on the plus side and on the negative side. And you think because they're growing earnings that the stock is just mispriced? At three times earnings? At three times.

At three times earnings, it's mispriced. Usually when a stock cuts a dividend, it's a bad thing. I think you should sell the stock. Okay, I will sell the stock. That's not even a question. I have to sell the stock. I don't have to sell it today.

And where it is today is ridiculous. And you've seen it too, Kevin. When a company cuts the dividend, you have a resort of the shareholder base. So you need the dividend guys to leave and you need the growth or distressed guys to come in. And that's happening right now. The stock stabilized, so it's terrible. But I really appreciate you highlighting the one loser for me. It's my pleasure. Thank you. Thank you. You know you made my week. Final trades are next.

I hope you join me on closing bell three o'clock Eastern Time. We'll see if this market tries to make a run at positive territory. That's going to be the best part of the final hour. And I hope you'll join me with Gabriella Santos, Low Tony and Warren Pies.

Kevin Simpson, your final trade is what? My final trade is Nvidia in advance of earnings. They beat top and bottom line for the past four quarters. I expect them to do the same next week. All right. Good stuff. Farmer Jim. Cisco Systems, I think it's in the process of upgrading its rating. I know Kevin just got back into it. Stephanie, when you were talking about power and data services, data centers.

Cisco is going to benefit from data centers as well. Okay. Who's Rio Tinto? That's me from our international strategy, Rio. Nine times earnings, 6% yield, new CEO coming on at year end who could unlock some value at the company. Okay. And Chipotle? Chipotle. Quality on sale has been really a dispointer this year, but I do think unit growth and margin expansion are set to expand. You own this? I do. Painfully. All right. Deliciously. Deliciously. All right. I'll see you on the bell.

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