Rethinking the Risk of Recession 3/31/25
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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, guys, thank you very much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour, right from post nine.

the markets. Big week for your money, as you know. We trade it and debate it with the investment committee. Tariffs, jobs, and just about everything else. For the hour today, Joe Terranova, Jim Laventhal, Steve Weiss, Shannon Sikosha. We will check the markets here. NASDAQ was getting hit harder than it is now. And as Carl and Court were just saying, we have rallied off the lows quite substantially. In fact, the Dow has gone green. As Joe, we try and figure out, you know, how much worse is it going to get?

Has it gotten bad enough? Jeff DeGraff, you just heard him, renaissance macro. I mean, I like the way that he looks at the markets in total and says sentiment's gotten to the point where it's bullish at this point. We've just priced in a lot of negativity. Credit spreads aren't blowing out. Let's just take a deep breath and really think about where we are.

So I think potentially that means you could get a little bit of a bounce in the market, similar to what you had after March 13th. But I think it's very obvious to me, Scott, the personality of the market has changed dramatically over the last eight weeks. And it's a personality that, while changing, has moved leadership away from opposition.

offensive-oriented stocks, semiconductors, technology, momentum, more towards a cautiousness, more towards a defensive nature, whether that's staples or utilities or even bonds themselves. So if I'm trying to identify where could I find momentum in the marketplace, I think the momentum I find in the marketplace is in the cautiousness. I do think right now the right strategy to have

is not to feel as though you're on the power play. Feel as though what you're trying to do is score the goal because you have a man advantage or a two-man advantage. I feel like right now you have to approach this market from the standpoint of you're on the penalty kill. And on the penalty kill, you're constantly defending. And I think that's the environment we're in right now. You could try and find...

opportunities in the equity market. I have no problem with that. But you better be sure that you're finding opportunities in the area that's away from semiconductors, the area that's away from technology, because I don't think that offensive-oriented type of ownership is right in this environment. Jimmy, Kramer today said, quote, I can't think of a dumber day to buy just because of all that's going on. Deutsche Bank says they could see a move down to $52.50.

you know, the 10-year has been pushing lower, gold's been pushing higher. Where does this leave us? As Megan Casella, you know, our own reporter at the White House, says of the tariff plans and April 2nd that they remain in flux.

Yeah, that's not good. That's not good. That's the problem, Scott. I'm not comfortable. All right. I see the danger. All right. I like your analysis about the penalty kill. And that would lead me to say, OK, well, it's just a matter of time. Kill the penalty and move on. But it's not. It's not. Things can get worse. And it really comes down to look.

The problem and the solution are the same thing. It's this tariff uncertainty. It's very specific what's bothering the markets right now. And if we get to big if, OK, if we get to April 2nd and there's some finality, OK, I'll feel better. But let me tell you what the bad scenario is and where the 5250 becomes reasonable.

Analyst estimates have hung in there for the full year earnings on the S&P 500. I, for one, don't see how somebody like Delta Airlines, Ed Bastian, and I know we're going to talk about them later. We can talk about them in more detail. But they're the first to report next week, right? I don't know how they can come out and still maintain their full year optimism if, big if, I'm looking at you, Scott, if the tariff uncertainty remains the way it is right now. I just, it's, it's

very simple the tariff uncertainty has to come down so everybody whether you're a company where your consumer whether your investor I can start planning accordingly and I'll close on this let me be clear I miss I was uncomfortable as I've been in years

At the end of the day, where my analysis comes down to is I don't think the president's stupid. I don't think he's crazy. I can't think of a rationale for driving the economy into recession, which is what continued tariff on. I mean, you get yields lower like they want. You know that that's a big deal that the Treasury secretary has been talking about. You want to if you want to get the patient is that you want to get rates down by a lot in a hurry.

You let the economy weaken to a point where you hurt demand and you get a 10-year that's lower. I hear you on the, boy, that's a risky game to play. I don't like it. I know, but they kind of telegraph. I hear you. Aren't they telegraphing it? Well, I don't know.

I mean, look, we don't know is the answer. I mean, to me, four and a quarter on the 10-year, like, let's be real. In the history of my life, four and a quarter is a low rate. The world can do just fine at four and a quarter. If you're driving it, not you. If one is saying, I need three and a half,

Well, it's not enough. Like the long end, right? They need to, they're fixated on the deficit. They need to get the long end of the curve down. They want to get the housing market working again. It's been all but frozen. This is one way, Weiss, that you do that. Now, speaking of April 2nd, Tom Lee talks about it being a clearing event for stocks. And there's a legitimate debate as to whether it will be.

Of course, Goldman's Tony Pasquarello, in his latest note, isn't so sure of that. And he almost agrees with Joe in part. The quote is, the big dynamics in the game have changed. And it's not obvious to me that April 2nd will prove to be a clearing event. And he continues to say, preservation of capital is the name of the game right now.

Yeah, and that's what I've been saying for a while. Look, you know, last week, the week before, we all came out, and I agree with that, with saying, okay, that's going to be a by-the-news event, because it's not going to be talking about the tariffs on Wednesday, because it's not going to be as bad as people think. And we referenced Brexit, we referenced the Trump election the first time around, where it was so negative going into, and then, bang, it turned.

This is different, and I'll tell you why this is different. It's different because those were one-off events, one-instance events. Brexit, there's nothing following Brexit around.

Trump being elected, that was the election day that everybody was going to. Here, it's going to be an ongoing atrophy of the market to think that they're causing this havoc. The administration has this great plan behind the scenes causing this havoc to drive rates down.

is ludicrous. Okay, rates are coming down because people are going to hide in bonds. They're not, and it's not going down because they want to drive the housing market. They don't care about that. So I'm not saying that some of these policies aren't good. What do you mean they don't care about that? They do care about the economy.

You don't think they care about it? They don't care about it near term. They don't care about it near term. And if they do care, I'm giving them the benefit of the doubt, okay? I'm saying they don't care about it near term. If I thought they were doing this...

because they thought this would drive the economy, then I'd have a different adjective for it. But they do. They just think that you need to go through. I'm just telling you what they've said. This is not my point of view. You need to go through the detox period so that you can come out stronger on the other side. So let's talk about the detox period. The detox period is going to go on for a long time because there'll be ongoing uncertainty.

So, yeah, we'll get to periods where the market may rally because it gets oversold from some emotional moves in the short term, like Joe says. And I believe that. And could it be Wednesday? Could it be Thursday? Sure. But on an extended basis, no. The economy is atrophying. The market will go lower. Earnings estimates will be coming down. And again, I don't care if we go into recession or not. I do care economically. But

I don't care about that dialogue, that narrative. What I care about is the direction of the economy, which is definitely going lower. So again, the policies, cutting bloat, great policy. I agree that we should.

Cutting, you know, matching tariffs. I don't know if we want to match them exactly because there are reasons why there are higher tariffs. Great. But it's like being in, to go to a sports analogy, it's like being in the offensive, you know, coordinator going through the game plan and running a play in practice. Nine times out of ten in practice, that play is going to be a touchdown, a pass. But when you get to a game, it's a toss-up.

Is it going to be a touchdown? Is it going to be incomplete? Or is it going to be an interception? My view is, my call is, it's an interception and that we're screwing up on the execution. It's going lower. Shan, David Koston cut his price target again on the S&P to $5,700 from $62. Also at Goldman, Jan Hatze is the economist there. 35% chance of recession.

Now, Larry Fink in his annual letter, of course, the head of BlackRock, I hear it from nearly every client, he writes, nearly every leader, nearly every person I talk to, they're more anxious about the economy than any time in recent memory. Of course, you recall as well, Rick Reeder of BlackRock telling me just the other day that it's time to hunker down, that this level of uncertainty has just put a paralysis

on the business and investing and consumer community.

Yeah, clearly, Scott, there needs to be a shift in the focus. And I think the challenge is here is that, you know, that shift in focus probably doesn't come to us until, you know, June, July, when we really start to focus on taxes and the extension of the Tax Cut and Jobs Act. I mean, that is the second half of the year agenda item that President Trump needs to deliver. You talked about in terms of what the administration is trying to do. And actually, I would

argue a bit with Steve on that yields point. If you think about, if you listen to Treasury Secretary Besant, what he's trying to do is he's trying to alleviate some of the pressure from the fiscal perspective. He's trying to bring down that deficit. Tariffs can do some of that. But if you look at the three main pillars of that, it's the interest expense, so therefore lower yields; it's defense, which trying to move out of some of these conflicts in which we have been quite involved; and

The third thing is entitlements, and everyone knows that that's really difficult to touch coming into a midterm year in '26. And so I do think that coming back to lower yields, yes, that's going to be good for the consumer, but it's really around that interest expense and then lower oil prices. And so I think this uncertainty, Scott, the challenge is, is that whether April 2nd or it's April 10th or it's April 20th,

What you really need to look for is you need to look for a more prescriptive approach in terms of tariffs, coupled with a more prescriptive approach in terms of what's happening in Washington on the spending side, and then most importantly, looking for some of that stimulus, stimulative activity in terms of the Tax Cut and Jobs Act to come through in the second half of the year. This limbo period is going to be very challenging, but we continue to believe

that the transmission of deregulation changes in some of these departments and some of the more pro-business aspects of the new tax cuts could create that sentiment impulse that we're looking for to drive gains in the second half of the year. The hardest time to buy, as everybody knows, and I just say it, I don't act on it, you all do. The hardest time to buy is when

It's the worst when the pain is the most acute, when the uncertainty is arguably the greatest. Scott, if you think that in the long run, we're going to be better off and that we've already come down enough. Sorry, you saw me jumping in on you there because it's a great point. It's like one of the biggest points I make with clients. This is why you don't market time. I can't say this any more clearly. Getting the exit right is easy. Walking into 2025 and saying stocks are expensive, I'm going to get out. I'm happy.

Sorry, there was a cut in there. Okay, just getting out is easier, but getting in at a period like this, which is when usually maybe it's a, you know, buy the news on Wednesday, whatever it is, which is usually when the big days come, is hard to do. It's why I don't do it. So, Scott, even though I've been talking with concern earlier in this session, you don't see me selling small caps. You don't see me selling Delta. I'm not going to try to do that because it is exactly the wrong time to be selling.

So I don't know if I agree. What do you do to make the distinction?

between just saying, okay, we're just always going to buy the market any time it's down because it always goes up versus where you began the show saying, listen, I'm really concerned about what I see in front of me. Look, I am concerned and I'd be a fool not to be concerned. But the answer to your question is you have to be ready as an investor, not a trader. And I know you, Steve, you're an excellent trader. Okay. As an investor, you have to be ready to get through a downturn. And I've been saying this again and again and again, if you bought

the S&P 500, just the S&P 500 in October of 2007. Probably the worst time you could think of going into the great financial crisis. And if you held it through that and came out the other side and held it through everything, peripheral debt crisis, Fukushima, COVID, you'd have a 9.5% annualized return through to the current date. I mean, I

Look, if you want to say that by market timing you can do better, that's great. But most people who market time do worse than that, not better. There's a little difference. There's a difference between market timing. So I actually did very well in coming out of 08, but I didn't do very well until 2010 because I was short going into 2008. So I couldn't make the turn. I flattened out, but I couldn't make the turn. And the reason why I was short, because so many things were going on, right? It just wasn't one event.

to make my point before. So there are some times, it's not called market timing, it's called preservation of capital, it's called controlling risk. So the market is now, it's been drunk on the Fed put for years and years. As a matter of fact, for a lot of years and most of the years, a lot of people have been investing in the market. The Fed's in a different position, okay? The Fed's in a different position because inflation going up and going up quite a bit is a real threat. Now,

you know, Shannon can talk appropriately about, okay, we'll pay less, you know, in debt costs, federal government. But I would doubt that anybody, I know it hasn't come into my thinking,

that's taken that, how much are we paying, you know, to pay our loans, essentially, the federal government, how is that influencing my investment case? It hasn't at all. So to say it will affect it now, it's just, it's just poppycock. What about the idea that the most powerful person on the planet knows it, knows that he can flip the switch

at a moment's notice. But I think we're past the point in time where the market responds positively to that. And I think you're giving a... What do you mean? Because I think he's done it too many times. Well, what do you mean? If there's a... If the tariffs, these reciprocal tariffs are in flux, as Megan Casella was reporting yesterday,

at the white house what happens if they just aren't as punitive as everybody expects what happened to that what what happens if the tariffs are more temporary than permanent what happens if we start focusing on the good stuff the deregulation in the tax cuts you don't think the markets gonna respond in an instant to that and you don't think the president knows that no i i first i don't know what he knows what he doesn't know okay so

As I said, you're giving him more credit than I am. It's not Democrats, not Republicans. It's just facts about what's going on. 200% tariffs one day later in the afternoon? No, just a joke. So when you take, again, it's not one isolated. So if there are one switch to turn on and that switch turns on for the rest of his term, meaning that no tariffs, et cetera, et cetera, then buy it, buy it, you know, with impunity. However.

That's not what we're seeing. You don't think that what happened with Signal feeds into investor confidence. You don't think what happened with Waltz feeds into investment confidence. You don't think what's happened with the third term feeds it. All this feeds into it. So my point is, it's not clearing up one thing. I just think that tax cuts and deregulation and...

trying to get the deal market open feeds into it more. I don't. If you put them all on a scale, I feel like all that outweighs it. I don't because I think it's a very short-term phenomenon. Let me finish. I think that the uncertainty stays. The uncertainty with entitlement stays. The uncertainty with Medicaid, Medicare stays. So you can't clear all that up. And then you've got midterms, which virtually every president loses the midterms.

So that'll be a whole different issue to reverse some of the stuff. I don't see how regulation, getting rid of it really helps. It's not going to help the oil industry. It's not going to help the banks. Why isn't it going to help the banks? Well, it will help the banks in terms of buying back stock. And that's my bet. But it's not going to help the banks in terms of them deciding, and help is the wrong word. They're not going to decide, we're going to open up our credit underwriting standards.

and make them lower. No, but they'd probably be able to lend more. There'll be a more open and engaged deal market. What do you mean they won't? If they see an opportunity, they're going to. I think for the high quality credits that they will lend more. But we've seen this cycle and loan credits have loan lending have been OK in the environment. But I do believe, again, that we will maintain high interest rates. Let's kick around the idea also that, you know,

The NASDAQ this morning was horrific. It's still ugly. It's just not as horrific as it was. NASDAQ's been down 10% in one month. You haven't seen that in a long time. Nvidia is looking at a new closing low on the year.

Kramer's Charitable Trust is selling Alphabet. They did it at the open today because of competition in the search space from the chat GPTs, the Geminis, the Groks. Google search business makes up more than half of the company's total annual revenues as the main source of its profits. If there's long-term secular pressure here, which we think there is, we do not want to own that stock.

They obviously had more than 100% gain in it. So they see an opportunity to take some profits, too. Price target gets lowered there. Tech holds the key right now, don't you think? Absolutely. Tech holds the key. And if you think about where the SMH is right now relative to the August low, it's only about 3% or 4% higher. The same can be said about Alphabet, 3% or 4% higher. So, look, I think setting the expectation for this year, I think the environment that we're in, you want to call it chaotic, volatile, a series of palpitations.

I just think overall in understanding where we are, it's going to be a lot of the S&P looks like it's 5% higher. The S&P looks like it's 5% lower. And at the end of the day, if you're chasing beta, if you're worried about the S&P, I think you're going to be very disappointed because I do think the MAG-7 are going to significantly underperform the other 493 this year. Well, the hedge funds are betting on that. I can tell you that. Last week, according to some data from Goldman Sachs' Prime Book,

Hedge funds last week ditched tech at the fastest pace in six months and the second fastest in five years. So there obviously is a de-risking as it relates to these stocks. My, I guess, question is, if you lose this and you continue a narrative of

Chaos, weak economy, possible recession, blah, blah, blah. You can't possibly tell me that the rest of the markets, the broadening trade is going to work. So what do you got? What do you have? Well, I think you're exactly right, Scott. And I think so. I'll go to your premise. I don't think you are going to lose this much more than you already have. Obviously, you already have. Look, many of us you talk.

We talked about the hedge fund and we know that the hedge fund community had crowded trades into Mag 7. We saw it last August when the yen carry unwound. We heard about Millennium about a month ago, concentrated, you know, when concentrated positions needed to be unwound for whatever reason risk was coming down. That's where they went.

Where I have more of an insight is into the private individuals, the retail investor. And let's face it, after two years of mega gains in these mega cap stocks, many of them walked into 2025 saying, phew, I made it. Let's lighten up a little bit. I do think there is a little bit

of just good old-fashioned profit-taking. And some may say, if you look at Nvidia as a bellwether, okay, it's now only up 17% over the last 12 months, but over the last three years, annualized 56%. Five years, 77%. There are major profits. People are a little worried right now. Some people are taking money out of the market, even though that's not my call. I mean, there are a bunch, because as I said, it's working on a new closing low. It's at 105. It's down another 4% today. By the way, Jefferies today,

took the ax to tech targets across the board. Microsoft to 500 was 550, Meta to 725 was 810, Amazon to 250 was 275, Alphabet to 200 from 235, and they did the same for some other software names like Snowflake, Adobe, and Salesforce. But the point is, there's a reality check going on from, I don't know, hedge funds, strategists, retail, kind of everybody.

Yeah, I guess the question I have, Scott, is, you know, do you think those price targets are being brought down because of a growth scare in the overall economic picture? Are those price targets being brought down because there is, you know, a question about capital allocation and the expansion of AI monetization to other companies? I think that's really the question. Earnings, growth slowing. So if you're telling me...

Right. But is that the bellwether then for the rest of the market? I mean, I guess that's what you're saying is like, okay, that these are actually coming down to more naturalized levels and perhaps like setting a different foundation for earnings growth. That to me doesn't indicate that there aren't actual...

in the other sectors, by the way. Where? Most of which are actually positive this year. Financials, health care, both positive year to date. Outside of the U.S., positive year to date. EM, Germany, U.K., Japan. I mean, we're talking about this death knell. If you're an S&P 500 investor, yeah, if you're in the passive benchmark, it's pretty hard

right now because of the concentration. But if you've been lightening up, to Jim's point, and you have exposure in almost any other sector in the S&P 500 year to date, Scott, you're in positive territory. Fair point. I mean, yeah, staples are up 4%. I know energy's gotten a big lift, health care, et cetera, more defensive areas of the market. There's no doubt about that. Speaking of the outside the U.S. trade, it's this

What happened to U.S. exceptionalism idea? Is it still on the table? Many people think that the outside the U.S. is just getting started, like Citi, which talks about inflows into the European markets, that there's plenty of room for rotation further into Europe.

Well, the composition of the European market is not tech heavy. We're talking about the tech industry right now evolving from two years of significant outperformance to a period of underperformance. And that's what I see in front of us. I see that for 2025. So it's only natural that you're going to look in other geographic areas and find

markets that are not tech heavy, that are more focused on financials, more focused on other industries, and they're going to perform. You didn't even go through the...

You didn't even mention the trade that you made at the top of the program to reflect your more negative view of buying more TLT, assuming that rates are going to continue to move lower. I said this to you a couple of weeks ago, and you said to me, really? So far, I think it's the year of the bond. I really do. And I think when you're talking about defending, the first thing that you want to look at is ownership of TLT.

bonds, whether it's taxable fixed income or Treasury itself. I think we are about to learn in the upcoming earnings season that there has been an effect from the volatility we experienced in the first quarter. And I think that comes in the form of CapEx pulling back. I think CapEx intentions are not going to be as aggressive

as they were we've heard from companies like walmart costco and others they're building inventory you have to be concerned that if the economy continues to contract further that they're going to be stuck with that inventory so i don't i don't understand how guidance can be overwhelmingly optimistic in the upcoming quarter guidance is going to be bad guidance is going to be bad so if guidance is going to be bad i think that's going to put pressure on the treasury market

And to your point earlier, I think the administration clearly believes that we are in an economic detox period, cleaning up from what they believe was an economy that wasn't in the right place for the previous administration. What is their true pain threshold?

We don't know that yet. Was it 10% down? Maybe not. I don't know. But they can't control what the pain threshold is and what the outlook for CEOs will be. So, for example, go back to Google. We talked about search. Search is not a secret. It's not today's news. They've been losing share in search. But the first thing that CEOs do, one of the first things, they look to hold costs steady before cutting. And that will impact and

enterprise spending that won't impact cloud spending so you'll have a double negative with google you'll have the negative with amazon you'll have negative with microsoft where they'll come out and say cloud growth which had just recovered really last two quarters last two quarters i've reported is going to decline again you know i'm absolutely convinced of that because that's an easy lever to pull all right so that's another reason to hit tech let's take a quick break uh

Coming back, we will do our calls of the day. And coming up later, we have our committee quarterly report as well. Winners, losers, the things you need to know about. We'll do that later.

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All right, welcome back. Let's do some calls. Joe, as JP Morgan points out today, the fastest momentum unwind in some 40 years. Two years worth of gains. Bye-bye. When I think of momentum, I think of names like the Trade Desk. Target cut to 72 from 101. Wells still likes it. They reiterate overweight, but the stock's at a 52-week low. Thoughts?

We own it in the JOTI ETF. I don't understand how someone could have an overweight on this. I'm sorry. We spoke about this one month ago after they reported earnings. It fell from 120 to 80. At that time, Josh and I discussed it with Brian Belsky when it was 80. I said, if you have a risk management strategy, you have to move out of the name. I understand. You're going to put it on a sell now? I can't get out of it.

I can't get out of it. I understand that. I know you can't. I can't get out of it. I know you can't, but you can tell the viewer to put a sell on it now. Okay, so we're going to... The stock's down 50-something percent. Yeah, it is. And how low is low? It could keep going lower. So when we had the conversation in February, when it fell from 120 to 80, everyone said, no, no, no, no, you can't sell it here. Really?

Okay, now it's down to 54. I can't sell it here. What if it goes to 45? Or better yet, what if it goes to 50 and it just basically stays sideways between 55 and 65 while the rest of the market carries forward higher and I have the opportunity cost of missing out on something else? Is Applovin on that list too? Top pick today at B of A.

580 is the price target. You have a new short seller, Muddy Waters. Add that to the list of shorts in the name. Speaking of stocks that have gotten destroyed, what about that one? So last week, someone asked me the question about Applovin. Well, your strategy went into Applovin. When did you do it and at what a price? We did it last July at $76. And I'm sitting here saying to myself,

Are we literally going to give back the entire profit on that before we're able to get out of it? And to put it into context, so there's Applovin, 264. Do you know the 200-day moving average is down to 217? That's how much further this stock can actually fall. So I'm not going to sit here and defend the fundamentals. It was the technicals. It was momentum that took us into this. And by the way, just one other point on momentum itself. Momentum.

Momentum is something that you measure in the near term and in the longer term. And if you think about where we are in the near term right now, let's take as an example a 20-day moving average, right? Because that's a good reflection of the near term. Right now, 38% of the S&P 500 stocks are above their 20-day moving average. At the low in March, that figure was 20%.

So that kind of just tells you, I don't know if we're necessarily in the place where we're completely washed out just yet on momentum as the factor. Yeah, I mean, there are a ton of names in the market that are down well more than 20%. Deckers. Why people like Josh made the case the other day that don't talk about the bear market as if it's something that we might get into. It's already here for a great portion of names within the market.

And that's why, look, I want to own equities. I will own equities. But I'm going to own equities focusing on, number one, are they quality? Number two, I'm going to be a little bit cautious. I'm going to be a little bit defensive because the only momentum I see in front of me is in the cautious nature. I got a name on that list. Weiss Netflix, right? Yeah.

Outperform, Evercore, $1,100 is the price target. That's what they say. In the event of a recession, Netflix's $7.99 ad-supported offering might be the single greatest entertainment value in the land. In the land. Yeah, look...

I haven't really touched my Netflix lately. I still think it's a unique asset with and they're a winner in the category. But obviously it's not immune from going down. So it has gone down. It's down, you know, almost 10 percent, but less than of all the other tech stocks you think of. So I still like it. I'm not adding to it here. There's some point I will add to it. But right now, frankly, I hate losing money so much.

I'm in Jomo mode, not FOMO. So I'm there for the joy of missing out, to quote my friend Ollie Weisberg. He coined that. I love it. That's where I am. So look, I hope it gets to 1,100. Hope it gets there tomorrow. I just don't think it's likely. All right. Bertha Coombs has the headlines for us this hour. Hi, Bertha.

Hi, Scott. The bodies of three of four American soldiers who went missing in Lithuania last week have now been found. U.S. Army, Europe and Africa Public Affairs Office said today that search and recovery operations for the remaining fourth soldier are ongoing. Soldiers were conducting tactical training in the country when their armored recovery vehicle sunk in a heat fog.

A trial is set to begin today over the $600 million class action settlement connected to the 2023 train derailment in East Palestine, Ohio. Norfolk Southern says the rail car owner and the chemical manufacturer should share the costs of the settlement.

claiming that they are partly responsible for the crash. The trial will not affect the terms of the settlement itself, but rather who writes the checks. And in California, rapidly growing fire has forced thousands to evacuate. According to Cal Fire, a wildfire in eastern California that ignited on Sunday has spread to at least 1,250 acres now.

The National Weather Service has said a high wind warning for the area today, which could further spread the fire. Hate to see that. Scott, back to you. All right, Bertha. Thank you, Bertha Coombs. Straight ahead, active investing picking up steam this year. Papazani follows that action in today's ETF Edge. Halftime, we'll be right back.

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All right, we're back. Bob Pisani has today's ETF Edge. Bob, we're talking about active management today. Yep. All time record, Scott. The market volatility this year has corresponded with a rise in active ETFs. Last week, active ETF assets under management surpassed $1 trillion. That's the first time ever. It's now about 10% of ETF assets.

Let's talk about that with Matt Bartolini. He's head of Spider America's research at State Street. They run the world's largest ETF. That's the Spider S&P 500. Matt, good to see you. 30 percent of the inflows in the ETFs this year have been into active funds. This is another record. Is this rise in active stock ETFs in general correlated to the recent volatility in the markets or is there something else going on?

I think it's a little bit of something else. I think it just speaks to the versatility and flexibility of the ETF structure and the type of strategies that can be provided now in this type of format, because it's really not a lot of just sort of deep-rooted, fundamental, active strategies. There's a lot of different types of approaches within the active ETF market

like ones that can manage volatility, like ones that can seek higher income opportunities, like ones that are more cash plus type vehicles. So I don't think it's a result of the market volatility. I think these are secular changes and trends that we've seen play out over the last few years and are now being accelerated this year as more investors are becoming comfortable

in using active ETFs in their portfolios. - So when I think of active management, and most of us do, I think of old fashioned stock picking like Cathie Wood's ARK Fund. But you're saying that's not entirely what's going on. There's other kinds of active management, people seeking protection against losses or people seeking income, for example, and that's considered active management, right?

Yeah, they're using an active construct, so filing under exemptive reliefs that give them the ability to be active for that flexibility. Or they're doing it because it maybe is a better way to approach a certain type of marketplace. So for instance, the number one category that has had the highest amount of flows this year is the ultra-short bond category.

That's a category that's trying to eke out more returns over cash and you can actually find some real good inefficiencies by using securitized products and not just owning sort of your T-bills or whatnot. So the ability to use active in some markets is because of the flexibility. And then again, some of these constructs, they're really rules-based and they're only being active in terms of when their trading strategies would kick in. So it's not that sort of similar historical 30 stock portfolio active that a lot of people think about.

So there's, this is a good point, big inflows into active fixed income because investors are flocking to these ultra-short fronts. Now, is this because the yields are in the 5% range? I mean, why is there suddenly a big interest in ultra-short active management?

Well, this is where there is a little bit of recency bias to the market volatility like you mentioned on that first question. I think you're starting to see some folks go into that space just to sort of hide out during this period of pretty sizable market volatility within equities where a lot of investors also have a lot of concentration into. So I think part of it's that also, but to your point, your yields are looking pretty good at this point as well in that 5% range. And that active sort of flexibility can maybe get you a little bit more from that perspective.

Okay, much more coming up on how to play active ETFs. That's coming up 1.10 p.m. Eastern time on ETF Edge. Todd Sohn, head of ETFs for Strategas. Nature AC from the ETF store will lay out the active ETFs in the fixed income and equity space with the greatest inflows this year. We'll name all of them. That's coming up on ETFEdge.CNBC.com. Scott, back to you. All right, good stuff, Bob. Thanks. Look forward to that. Coming up, we have the Halftime Quarterly Report. What's working, what's not. It's been a volatile month, as you know. We'll document it next.

All right. Last trading day of the first quarter. We want to go through some winners and losers. Let's do winners. Let's do some. Alibaba is up 54 percent in the quarter. Amgen's up 20 and Uber's up 19. What do you think? So the best name of that group, the one you have the most confidence in. We turn the page here. I like what I'm seeing from the health care sector.

I want to be specifically clear on something. I am not bearish. I am cautiously bullish, and that's the reason why I own some treasuries, some taxable fixed income, and I'm going to other places, not technology like healthcare. You don't sound cautiously bullish at all, but anyway, go ahead. You sound cautious. I'm cautious for sure, but I want to own stocks. It's just the type of stocks that I want to own. I don't want to own the stocks which are on the loser's list.

like Zoom, like DocuSign. Like Amazon? Amazon, unfortunately, look, I bought Amazon two weeks ago at $194. I wish I didn't buy it. I bought it personally. Oh, okay. I wish I didn't buy it. I'm not going to get out of it now because the ETF owns it. We'll see what the ETF does with the rules effect at the end of April, and I'll do something at that point. But I'm not going to buy it two weeks ago and then sell it ahead of that. Jimmy, I mean, Oracle and Adobe have not worked in the quarter.

Berkshire has, which we talked about. We know about Energy and Exxon has, and MP Materials is up 50 some odd percent. But what about the software names, Oracle and Adobe? I mentioned earlier about Jefferies taking a bunch of price targets down in that group.

I think Oracle has caught up in the whole AI mega cap tech sell-off. I think that at its valuation and for what it does, I really like it. I said this on air about a week ago that, you know, it's a hybrid here. You do get the AI trade, but you also get the basic software, the database software that goes with it. So I like that. On Adobe, look, I continually scratch my head on why this stock

outperforms on the earnings call, and then just gets slaughtered afterwards. I see tremendous value here. I don't think the competitive picture is as dire as people say. I'm going to stick with it. Weiss, health care names in your book are up. The space has done well. Vertex, UnitedHealth. We know about Vertiv, right? The momentum names have gotten crushed. Mega caps like Alphabet have too. Taiwan Semi. Chips have been in a tough spot. But what about Vertex and UNH?

Yeah, Vertex, I'm not up. The market may be up on it, but I'm not up on it. I bought it late. UNH, look, to me, that's just, that's the gold standard of being a defensive company. Now, there's obviously a regulatory cloud above it, but I still think the stock's inexpensive. I do believe they do good things. I mean, I've had claims tonight as well, but overall, they provide a great service, which is insurance, medical insurance. So I'm still there. Quick break. Santoli, he'll give us his midday word next.

Senior markets commentator Mike Santoli here at Post 9 for his midday word. We're searching for something within this market to sort of hang on to, right? Yeah, for sure. And, you know, it's a matter of whether we keep thinking we might have gotten one of these moments where it's kind of so bad, it's good. So much of the market is down. Sentiment is so sour. You know, it'd be interesting to see once you have a full day's worth of trading data to say, OK, now we're going to

figure out if this retest of the lows from this morning was on less intensity, whether it really does fit the description of what you'd want to see for a revisit to an old low. I do go back to what we were saying after two and a half weeks ago, the S&P 500 goes down to 5,500, bounces from there, which is to get it below there sustainably, you probably needed the hard data to get a good deal worse in a hurry. We'll see if that's still the case.

So I think you could respect exactly how the market responded here. You got this opening flush on a Monday. The thing is, it's really defensive stuff leading. It's low vol that's up today. The NASDAQ 100 is still down 1%. So the broken stuff has not been repaired. It's just that there's an offset within the market. I mean, the jobs report is obviously beyond the tariffs of April 2nd, is looming really large.

Hard press to think that it's going to be some great report. I mean, given all the uncertainty that everybody's been talking about. You would think if it is, it would be kind of dismissed as fluky. And we'll get jolts on Wednesday, maybe set up the Friday number. But yes, the market craves reassurance. The economy's hanging in there. We'll see if we get it. Yeah, I'll see you on Closing Bell. It's Mike Santoli. We're back with finals next.

Biggie coming up, closing bell, 3 o'clock Eastern time. That man right there, Tom Barkin, the Richmond Fed president, is going to join me for a CNBC exclusive interview. Steve Leisman's going to be here, too. Looking forward to that. Chris Verone, Stacey Raskin, and Chris Heisey are going to join as well. Shannon, what do you got for your final trade today?

Although not one of the seven sectors that's positive this year, industrials are only down a little bit and offer some opportunity in a cyclical rebound. All right. Thanks so much for that. Steve Weiss. Two-year treasury. It's a good place to hide. I agree with Joe's view that rates are going to go lower.

OK. Farmer Jim. I'm with Shannon on industrials and defense stocks are part of the industrial sector. Lockheed Martin, I feel at this point there's an awful lot of bad news priced in. And I'm also very happy to see Joe's final trade because I was debating whether I should use that. Tell us, Joe. Well, energy price is about to be higher for the year. Figure out why. I'll leave that to all of you. That's difficult to do. But ExxonMobil, that gets you the energy exposure that you need. You got a quick comment on that? Go where the strength is.

It's clearly there. It's 7% off an all-time high. That is a strong sector. All right, I'll see you on closing bell, 3 o'clock. The exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

Thank you.

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