The S&P 500 is experiencing a sell-off due to fading momentum in December, with the market narrowing to concentrated performance from the 'Magnificent Seven' stocks. This has led to frustration for both bulls and bears, as the Santa Claus rally is in jeopardy.
The 10-year yield at 4.5% indicates rising interest rates, which has put pressure on the market, particularly on high-beta momentum stocks and small-cap indices like the Russell 2000. This has contributed to the broader market sell-off.
Natural gas prices have surged due to colder-than-expected weather forecasts, reduced excess supply, and increased demand from utilities partnering with mega-cap companies like Microsoft for power generation. This has made natural gas a key focus for investors in 2025.
Potential headwinds include the risk of a Fed policy error by not cutting rates, high tariffs from the Trump administration that could hurt growth, a potential rethink of the AI story if spending doesn't lead to earnings growth, and the threat of bond vigilantes forcing higher interest rates.
Microsoft is investing heavily in artificial intelligence infrastructure, including NVIDIA chips, data centers, and global training programs. This spending is aimed at meeting the growing demand for AI, though it raises concerns about when the return on this massive investment will materialize.
The housing market faces challenges due to mortgage rates above 7%, which are higher than expected. Builders are offering incentives to attract buyers, but this is impacting their margins. However, pending home sales have shown growth, indicating some consumer recalibration to higher rates.
Tesla is facing pressure due to concerns about its Q4 deliveries falling below consensus and its high valuation. While the company is seen as more than just a car manufacturer, with potential in robotics and AI, its earnings growth has been decelerating, leading to bearish sentiment.
The MAG-7 stocks (Microsoft, Apple, Google, Amazon, Nvidia, Tesla, and Meta) have driven 85% of the S&P 500's gains since Election Day. Their concentrated performance has raised concerns about diversification, as they account for 40% of the index's weight.
The ITB is under pressure due to rising mortgage rates above 7%, which are impacting affordability and builder margins. Despite some positive data on pending home sales, the sector faces challenges from higher rates and potential labor shortages.
Natural gas is expected to be a key focus for investors in 2025 due to its role in power generation for data centers and utilities. With colder weather forecasts and reduced excess supply, natural gas prices are poised for continued strength.
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Before
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.
Thank you, Leslie and David. Welcome to the Halftime Report. I am Frank Holland in for the Judge Scott Wapner. Front and center today, the sell-off in stocks as we get ready to close the books on December. The S&P on pace for one of its worst months of the year. We're going to debate this and a whole lot more with our investment committee. Joining me for this hour, we have Joe Terranova, Jason Snipe, Bryn Talkington, and Rob Seachin.
But first, a quick check of the market. We're well off the session lows, but still, as you can see, red across the board. The major indices in the red. Also, the 10-year yield at 4.5%. We also want to mention the Russell under quite a bit of pressure, something that Joe was looking at last week. I think that's where we've got to begin, Joe. The sell-off has continued. A few days ago, we were sitting in the same position saying, well, it was low volume. Maybe the algos are playing some games with the markets.
But we're starting to see a bit of a trend. And in fact, the Santa Claus rally is in jeopardy. We're going to show a chart. The S&P moves from Tuesday. Does that mean anything? I think what we're learning as we approach the end of the year is that we can't pretend to
holds in store in terms of the actual trend the actual direction I think what has happened here at the end of the year. Is it's been very complicated for bulls and it's even complicated for bears and that's why I think it's important to kind of set the expectations they look. I think the next eight to twelve weeks are going to be a little bit more complicated than
are going to be difficult, not in terms of price, but just in terms of gaining confidence in which particular direction you might want to move with the marketplace itself. I think it's ultimately going to turn to earnings, which will be the catalyst, which will give us the insight in terms of where the particular direction is ultimately going to be. I think of this 8 to 12 week period, maybe you're trying to identify single stocks
that is your opportunity to generate alpha. But if you think about it, if you're bullish, to your point, right? If you're bullish, we're going into the end of the year. We're fading in terms of the momentum trade. We're clearly fading in the month of December in terms of broadening out. Now it's a narrow, concentrated...
performance from the bag seven once again and on the other side of it if if you're bearish you're looking at the marketplace right now you challenge last Friday's low at fifty eight thirty two early this morning I think we got down to fifty eight sixty nine were at the highs for the day we have some areas of the momentum trade take for example app loving that's one of the favorite stocks in momentum app love entire
Take Nvidia. Nvidia is higher today. So I think there's frustration on both sides for the Bears and the Bulls. And I think the lesson is, as you go into 2025, just be really judicious, be really conservative, and allow things to play out before you get too aggressive in making allegations. All right, so Joe, you're looking at momentum right now. Brent, I want to come over to you.
Earlier today, we had BTIG come out with a note, Krinsky out with a note talking about momentum to just really Joe's point, saying from a momentum perspective, the S&P is on its first weekly sell signal since back in September and that those high beta momentum stocks have broken their uptrend. And then goes on to say the bottom line, there are enough underlying concerns to warrant some caution into January. I agree with this take that this momentum story has become shaken up, if not broken.
Well, I think Jonathan's just stating facts, right? So I think you have to agree to it. And just to give some context around there, around some momentum names, I mean, Joe mentioned Applovin, but if you look at MicroStrategy, MicroStrategy hit 550. I believe it's at 303 today. So talk about a momentum reversal. It's still at 380% for the year. But if you look at these names, even Tesla earlier this morning was around 12% off its high just a couple of weeks ago. And so I think
As this like speculative broth is coming out of the market, that is such a healthy thing to happen because should MicroStrategy be at 550 and Tesla be at 480? So there's a lot of pull forward happening, a lot of zero date to expiration. And I think that's just getting fleshed out right now.
And so I think about when we look towards next year, I think that the 10-year, you know, hitting that 460 plus and then now coming down is really important technically because you really don't want to see the 10-year starting to make higher highs and going back against earlier this year.
I also think, though, when I look at what I think next year, I think from forecasting, it's a fool's errand. You know, that being said, we're probability-based investors. The markets go up 75% of the time. And then if you look at rolling three-year returns, it's even higher, around 82% of the time. So I would say directionally, the market's going higher. But I agree with Joe about really, you know, being judicious and not really leading in just
immediately in January because I do think we didn't see much volatility this year. I do think we're going to see more volatility next year, especially as Trump and his team are getting settled in.
You know, really to your point and Joe's point as well, if you look at Palantir, best performing S&P stock this year has pulled back about 2% over the last week. Year-to-date, up more than 350%. So you have to keep these downside moves certainly in perspective. Jason Snipe, I want to come over to you. Interesting tweet from Bespoke earlier today. According to their data, if the S&P closes down 1% today, it'll be the first time since 1952 that the S&P closed down more than 1% in the last five trading days of the year. We're talking about the Santa Claus rally. We're talking about this trend right here.
Is this starting to become meaningful outside of just seasonality, low-volume trading, algos again? Is this starting to become meaningful to see some of these historic trends break? Because we've had algorithmic trading for at least a decade, and we've had other trends for decades. And this market right here seems to be breaking some of those trends.
Yeah, no, I think Joe and Bryn touched on a lot of those points, right? I mean, if I'm thinking about BREF, BREF in the short term has been negative. It hasn't really been good to kind of lead the market forward. Obviously, we've seen the price action, the RRSP. We already have talked about interest rates and we've talked about the 10-year. I mean, the 10-year is up 100 basis points since the September 50 basis points cut, right?
right on the dollars up seven percent in the last quarter so on for me I I at like Joe mentioned I'm turning towards the beginning of the year earning start in earnest in the next two weeks starting with financials and again if we're thinking about the Trump administration and the hallmarks of what we're all
thinking about is obviously pro-business deregulation. We've looked at capital markets activity, who obviously have been troughing. We heard in the earnings calls last quarter. So I think that's going to be positive for the markets. And I think that's where we'll start to see the next catalyst going forward. All right. So you're thinking about the new administration. Rob Seach, I'm going to come over to you. Snipes out the only person thinking about the new administration, Tom Lee as well. New note out today saying that weakness into year end is
arguably positive for gains in 2025. He then goes on to say that buying dip, that's been profitable all year long. And the fundamental tailwinds from the Fed and the White House, they both remain intact. Do you agree with this thesis that this weakness, not concerning, is actually an opportunity?
You know, it's tough for me to disagree with Tom Lee, my good friend, and he's been one of the best strategists out there. But with readings for outperformance in the beta, momentum, low quality, all in their 95th and 98th percentiles, and value and high quality being left in the dust, we see the potential for a mean reversion trade. And this was eventually going to catch up.
The economy was just too strong. And it's part of the reason why our team reverted to taking away our macro overweight to those momentum names and moving into the value names. Now, what I will tell you, that needs to be corroborated by earnings, but it's certainly value is in an oversold condition.
and momentum has been the top performing factor this year it's on its best pace in over 20 years so anybody that's surprised to see some of this unwind from these elevated valuations should not be surprised I mean you look at one of our grade holdings Vistra Energy it's down 15 percent for the month there's many more names that
they're giving up some of their gains for the year and this happening the day before your end speaks to people trying to get ahead of it it suggests to me that the online might be able to continue because so many people were lopsided in their position and that's why we decided to make that did that change now what i will tell you is the earnings aspect to this is definitely in favor of the growth and still
Twenty two was interesting because value earnings that year and growth underperformed, obviously, that year. But value earnings slightly outperformed growth. That is not expected this year. So I think it's a wait and see around earnings. I believe Joe talked about that a little bit, but at least in the interim period, at least for the short term, I suspect we suspect you're going to see a slight reversal of that.
All right. By the way, energy stocks really leading the S&P 500 today. I want to kind of press on one thing you were talking about. Earnings are coming up. Q4 earnings are coming up, obviously, in January, February of next year. So if you're just talking about the rise of the dollar quarter to date, a tremendous upside move, more than 7 percent higher quarter to date for currency. That's just phenomenal.
Are you concerned at all about earnings coming up and the fact that multinationals might be impacted and some other energy names, you know, as part of that group as well, but also consumer facing names might be impacted by some of the inflation that's been more persistent than many of us thought it would be?
Yeah, there's no doubt about it. Obviously, you know, with the dollar surging as much as it has over the last quarter, that obviously affects commodities and affects the multinationals. And if we look at some of the generals that have been holding us up with some of the, you know, the hyperscalers, which have great exposure overseas, you know, yeah, maybe that is a little bit of a blemish on earnings. And maybe there's
there's some currency headwinds there. But for all intents and purposes, I think we're in the early stages of a productivity boom when I think about AI and all that's going on and all the pieces and how it affects across industries. So for me, I still remain positive and constructive on the market. I think the dollar will start to pull back some and start to even out. But yeah, I mean,
It is something obviously we followed over the last quarter for sure. You know, you're disagreeing with Professor Siegel, your neighbor down there in Philadelphia, believes the IABU might be a little bit overhyped. Joe, last week we were talking about landmines coming up for the year ahead, the quarter ahead. Is the dollar starting to become a landmine? Is that something that you're worried about when we talk about earnings coming up?
Well, I think clearly after the Federal Reserve December 18th announcement, you saw the spike in the dollar. You saw the troubles surrounding your ability to geographically diversify. Because I think the biggest challenge is how do you say, OK, I'm going to go outside of the U.S.?
I'm going to diversify the portfolio. I'm going to look at holdings outside of the U.S. where you have that dollar-denominated debt challenge owning emerging market debt or even thinking about owning emerging market equity. So I think that takes you right back to the United States. A higher dollar takes you to the U.S. Now, what's your impact on
On earnings, I don't know that we're necessarily at the point right now where we see that as an impediment or a significant headwinds for S&P 500's earnings. I think you have to be fully aware of the challenges surrounding earnings. I just think overall, your biggest landmine, if we want to use that word in 2025, is the inability to meet what is very high expectations.
expectations for earnings itself. And I think it's represented in the technical formation of the three major indexes. And again, we started talking about small caps and the Russell. Do you want to allocate in the direction of the Russell, which right now sits only 2.5% above its 200-day moving average? So technically, not in the greatest position. Fundamentally, it's
Still not really seeing the earnings growth that you need to get excited as an investor to allocate in that direction. To me, it looks like the NASDAQ right now is where you have the earnings strength. It's where you have the technical strength. The NASDAQ 100, the NASDAQ comp, both still above its 50-day moving average. The S&P has now traced below its 50-day moving average. I think the 100-day moving average is...
is at 57.86 so we're sitting above that we're still six and a half percent above the 200-day moving average itself so you look at the technical formation of these three moving averages you combine that with where you're going to see the earning strength and i think that takes you back to ownership of the nasdaq which is u.s centric
Is that ownership of the NASDAQ or is it the top stocks in the NASDAQ like the MAG-70? Do you want to own the whole NASDAQ or the NASDAQ 100? I mean, when we're looking at this, there was LPL Financial. They came out with a note last week. This was on Thursday. I know where you're going with this. Do you know where I'm going? Everyone's coming out with the notes saying, look, 40%.
of the s_ and p_ five hundred right now is basically the max seven and that doesn't give you the divert the quote unquote diversification that you need right yet look warren buffett said all you need to do is by the s_ and p_ five hundred as an index but what do you really buying you're buying the earnings of in video buying the earnings of many of buying the earnings about the bed so no on equally weighted i know brin shares that belief as well
I have an equally weighted strategy. I don't want to have 40% exposure to the MAG-7. Does that mean that the MAG-7, the last two years, have not been the place to be? Without question, they've been the place to be. And they've had the earnings growth. But at some point, that story is going to change. And I think I kind of want to get a little bit ahead of that.
Well, I think they've been the place to be the last few weeks. According to the note, you and I were kind of seeing eye to eye on this one, but the note actually said about 85% of the gains in the S&P since Election Day were from the MAG-7. That was on Thursday when the S&P was up 4.5% since the election. Bob, I want to come over to you. I know you had a comment about what we're looking at. We're going to get to the rest of the stuff you want to talk about in a second, but I want to come over to you.
Well, I think the important thing, Frank, is that for stock investors, the handoff for 2025 is about as good as it gets. But there are significant potential headwinds. Let me just give you the good news. First and foremost, we have this still strong economy. Three percent GDP is a great handoff. Second, we have record profits. They're expected for a second year in a row. 2025, we're talking up 15 percent. We were up.
10 percent in 2024 and by the way it is not just from the tech sector undervalued sectors like healthcare and materials and industrials they're all expected to see profit increases in the high teens in 2025 so it's not just tech and by the way it's not just
profits themselves that are profit margins are expected to remain near a record 12%. And what that means is corporate America is keeping a larger portion of the revenues that they take in as profits on the bottom line. Put that together, and this is why the market's up 25% in 2024. But there's some headwinds out there. They include first the risk that the Fed will make a
policy error by refusing to cut rates to combat inflation and will let the job market deteriorate. That is a risk. Second, the Trump administration's strengths, that they are business friendly, that they are deregulation oriented or M&A friendly and tax relief oriented,
could be countered by tariffs that are too high and might hurt growth. Third, with tech prices near record highs, there is the potential for a rethink of the AI story as investors may revolt against endless rounds of spending without demonstrable increases in earnings or productivity. A more likely scenario here would see tech prices stagnate even as the profits continue to improve. What that would mean is you'd have lower valuation levels for technology stocks and
perhaps higher valuations for undervalued sectors like healthcare and materials. Finally, there is the threat from the bond vigilantes revolting against higher spending and the possibility they could force interest rates higher. And Frank, we saw this in the middle of December as rates moved up. That's not happening today, but as rates moved up, the market had a big problem. The simple way to look at this is 2024, 25% increase in the S&P 500, and yet we had only a 10% increase in profits.
Well, what happened is we had a multiple expanse. The S&P 500 one year ago was 19 and a half times forward earnings. Today it's over 22. That accounts for that 15% difference between 25% price increase and 10% profit growth. Now the question is, are there other areas of the market where you might find better values overall? And like I said, 17, 18% for materials, 17, 18% for healthcare, industrials in the mid-teens as well. I think there's possibilities elsewhere.
as well. But who knows? People may simply continue to stay with the Mag 7. Frank? You know, Bob, you're not the only optimistic one. Ed Yardeni out with a note today saying he expects profit margin for the S&P to reach a record of 13.9, basically 14 percent in 2025. So a lot of optimism out there. But that last full screen you had, quite a few what we might call landmines there as well. Our Bob Bassani, great reporting as always. Great to see you. Thank you.
Brent, I'm going to come over to you. What did you make of what Bob had to say? Just basically this handoff going into 2025. He laid out a lot of opportunities, a lot of earnings growth in some sectors that went kind of unloved this year. But again, back to that last full screen, there were quite a few what we might call landmines in there as well.
Yeah, I think we'll also just start on the Ed Yardeni with profit margins. We're probably entering 2025 as we'll call it as good as it gets. Profit margins aren't going to stay in the low teens. It's just like there's no history that says that. But I think that you definitely have, I'll say, the Trump put, you have the Fed put. And so I think that we can talk about the bad things, but when we talk about earnings going forward,
I think investors need to be really careful about that because long-term earnings definitely drive returns. But look at Apple, for example. Apple's revenue has been anemic for years. Their earnings grow because of the share buyback. And look at Apple. It's up 31%. Look at Tesla. I own Tesla. Their earnings have been falling for the past two years. They flattened out. And I think in Q1, they're going to grow at 7%.
But what? Tesla's up 70% year to date. So there's so much more than just earnings quarter by quarter that drive a stock. It's really like technical sentiment positioning the future. And so that's where I think at the end of the day, individual stock picking is just so hard to do. And that's why the S&P continues and the Q's really continue to outperform pretty much all investors.
because these individual names are so many different components. But I think when I summarize 2025, I'll still go back to, I think we have a Trump put, I think we have deregulation, I think we have government efficiency.
And also don't forget about the debt ceiling. About 20 or the deficit, about 20 percent of our debt is actually in T-bills. And that is incremental. So as rates have come down and we have to refinance it, that should be naturally lower if they stay on that short end.
All right, C.J., I want to come over to you for one more quick word on this. Based on everything that Bob had to say, he's saying it's just a really good handoff into 2025. We've been kind of kicking it around, but do you agree? Is the setup really good for stocks in 2025? Are you worried about some of those landmines on the last full screen?
Of course the setup is great and of course I'm worried. But the setup being great is what I see in the markets today. I mean, valuations are stretched, sentiment stretched, positioning is stretched, growth expectations are high. And so you have this environment where
with the mag seven expected to decelerate from 55% growth in 24 to 20% in 25, it implies an acceleration in everything else. So we better hope so and for value to outperform, we better see better earnings growth out of financials, industrials, healthcare. In one parting shot, healthcare is a great warning story. We came into this year with a street expecting 20% growth and we delivered three.
3%. We have the same expectations for this year. So I think it's a show me story around earnings. And I think it's too early to take an early prediction and carry it out for the balance of the year. That's a fool's game right now. There's too much that can change.
I thought that first 3% was like a drop the mic. I thought he was going to leave it on 3%, but then he had more. Speaking of mega cap tech and the Mag 7, one of the biggest questions for mega cap tech next year is when will all that AI spending, when is it going to start to pay off? Tech correspondent Steve Kovach joins us now with a look at Microsoft's blockbuster CapEx spending. Steve. Yeah.
Frank, these numbers are pretty eye-popping here. Let's talk about Microsoft specifically. Ending 2024, spending at least $53 billion in capital expenditures. That's, of course, through the September quarter. We won't have the data for the December quarter until later next month. Anyway, nearly all of that spending is for artificial intelligence, NVIDIA chips, data centers, and all that.
other related infrastructure. And Microsoft's not going to stop anytime soon. Microsoft has implied to expect around $20 billion in these capital expenditures each quarter going into 2025. The risk, of course, investors losing their patience for a return on all of this massive spending. And Microsoft, by the way, doesn't even know when that's going to happen.
And Satya Nadella, the CEO and CFO, Amy Hood on recent earnings calls have said the AI demand is there and Microsoft will keep spending to meet it. They'll dial back if they need to, of course. Over the last year, Microsoft has also announced at least 20 investments of a billion dollars or more at various locations around the globe. That's not just for data centers. That's also for training programs and other AI related investments. These are countries like Spain.
India, Indonesia, UK, London specifically, United States, and so many more. In the meantime, we don't have a clear view how well Microsoft's suite of AI products are selling. Microsoft has said it's on track to generate $10 billion worth of AI-related sales this year, but with $70 billion of CapEx, that's not really making a profit yet. Most of the sales are coming from the Azure cloud business and still no concrete disclosures from Microsoft on the rest of the AI products. That includes
copilot plus PCs, which launched this year, but without the marquee artificial intelligence feature called recall. Also, Microsoft said in May, 50 million copilot plus PCs would be sold over the course of a year. No indication it's on pace to meet that goal. Also, no clue how well copilot for
businesses is selling after more than a year on the market. I've heard from a few CTOs that 2025 is going to be the year they assess with their CFOs if Copilot is worth the enormous cost. And then there's OpenAI. Its losses are now bleeding over to Microsoft, its biggest benefactor. Microsoft said it expects OpenAI's losses to shave a couple cents off its EPS in the December quarter. That'd be about $1.5.
billion. And finally, the consumer outside of the core enterprise business, Microsoft hired Mustafa Suleiman to be CEO of AI at Microsoft. But right now, he's really reliant on open AI for product development of the latest and greatest AI features that eventually make their way into Microsoft products. He's one to pay attention to in 2025 as well, Frank.
All right, our Steve Kovach back at CNBC HQ. Steve, thank you very much. A lot of ownership of MedCap Tech here. Joe, might as well start with you. What do you make all this CapEx spending? I don't know if you remember a few quarters back, remember Meta got dinged for spending too much on CapEx and then everybody else ramped up their CapEx spending. They were rewarded. So it seems like sometimes the street likes a lot of CapEx spending. Sometimes the street doesn't like a lot of CapEx spending. Well, I think, look, Microsoft has had a little bit of a difficult year in the sense of most of the gains for the company came in the month of January.
So in January, you had the stock up basically 10%. Now for the year, it's up 13%. I think it's kind of running in place. And I think it will, once again, restart the positive momentum. But you have to see some benefit coming from what they're doing right now with that AI spending. So you look at the MAG-7 and you say to yourself, OK, oh,
the Mac 7. Am I going to try to identify which one maybe is the winner? In the near term, it looks like Alphabet, Amazon, Nvidia, those are the winners near term. I don't think you want to lose sight of what Microsoft can do for your portfolio over the long term. I just think you have to set the expectation that it's a period where you've got the elevated spending and it's reflected in muted performance relative to everything else.
Oh, Snipe, I want to come over to you. So any concerns about the CapEx spending? Again, you have a lot of mega cap ownership. One interesting report that came out today, NVIDIA, they're pivoting over to humanoid robotics because they're saying the reports are at least that the AI chip race is getting a little bit crowded. Is that at all a sign of concern that maybe it's getting a little bit too saturated and maybe the demand isn't quite what we may think it is?
Well, I mean, the first thing I think about is clearly the arms rate. This is real, obviously. The hyperscalers have to do what they need to do to keep pace, right? And as it relates to Microsoft, $80 billion in CapEx spend at a minimum, by the way, for 2025. That's more than the GDP of Luxembourg, right? So these are real numbers.
And it's obviously been an overhang on the stock. The stock's, to Joe's point, up only 13% year to date. You know, co-pilot, we haven't seen what that's, you know, we don't know what's going on enterprise. We don't know what's going on retail there and the efficiency. But what I will say about Microsoft and what I do like about Microsoft is their suite of services had been always aimed at operational efficiency for business. And, you know, I believe
I believe that AX could be an additional gasoline on their products. They just haven't quite figured that out yet. So we'll see. We'll see how it plays out in the next couple of weeks. We'll have to wait and see. GDP of Luxembourg. That's an interesting data point. I like that. Yeah, it's a good one. All right, coming up here on Halftime, more committee stock moves plus the setup on housing and energy in the year ahead. Halftime back in just two minutes. Stay with us.
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And welcome back to Halftime. Let's get to some committee stocks on the move, starting off with Coinbase. Shares under some pressure today as Bitcoin falls below 93,000. Joe, you own this one and the JOTI ETF. Yes. So the end of October, October 31st, we purchased it. We still have a little bit of a profit on it. I'm just staring at the chart.
in disbelief how much it's fallen off of where it was at 348 in early December. So it's pulling back. It's pulling back with Bitcoin. Look, it's a volatile, volatile equity name for sure, just like MicroStrategy, which was mentioned previously by Bryn. And knowing that
the volatile nature of bitcoin if you're going to be investing in equities that have that correlation to bitcoin you have to accept the volatility and understand whether it's seeing it up significantly that could reverse or whether it's down significantly and seeing that it that could reverse
it's just a volatile asset. Yeah, also to the earlier point, looking at the chart right here, up for the last three months, up about 40%. So even with today's pullback, you've got to keep that all in perspective. It's doing not as good as it was, like I said, into early December, but
It is what it is. Moving on to Tesla, also under some pressure. Shares down just about 2.5%. UBS sees Q4 delivery slightly below consensus. Brent, I want to come over to you. One thing I do want to point out about this, UBS, they have their price target at 264. That's about half of where the stock's trading at right now. So very bearish call on Tesla. But, Brent, I want to get your take.
Yeah, I mean, if you're just looking at earnings growth or lack of and revenue, you would say this company's earnings have been decelerating, like I said earlier, the last couple of years. They've now flattened and are going to start to grow again. We're looking for earnings to grow 7%.
But you understand this name is a name that people get excited about, about the future of robotics, of full self-driving, of AI, of solar, et cetera. And so this is not just a car company. And so I think you continue to have a few bears out there. I do think, though, I had sold probably in the 200s the January 400 car.
strike price. I assumed it would get called away on January 17th, but we'll see. I mean, if the market continues to sell off, this Tesla has a beta of two. So you're going to get a magnified exposure to the upside and downside. But I would be more cautious and I will be more cautious in my positioning going into their earnings on January 23rd, because I do think there's still some hype in the 400s on this name. I would like to see it come down a little bit more in the 300s
I feel like that would be more normalization than these mid to high 400s that it's been trading out the past couple of weeks. All right, again, shares down 2.5%. I want to correct myself also. UBS has the price target at 226. Consensus is 296. So still a very bearish call when it comes to Tesla. Moving on to MasterCard, hovering near a 52-week high. Rob, you own this one.
Yeah, it's done well. It's a little expensive right here at a 32 times forward P.E., but this is a great business. Continues to post double digit top line growth, mid-teens earnings growth despite a challenging macro environment, illustrating the strength of their franchise. And, you know, what's helped these companies a little bit, both them and Visa, the duopoly, is the cross-border travel volume. Continues to exceed expectations.
uh... consumers are generally benefiting also from positive real wage growth and wealth tax of high asset values these companies have been beneficiaries in his no no surprise to see them performing like that have lately all right master car pulling back almost a percent but your data more than twenty percent
All right, time now for some headlines with our Contessa Brewer. Contessa. Hello there, Frank. Today, President-elect Donald Trump endorsed House Speaker Mike Johnson as the Louisiana Republican campaigns to remain in the position. There was some question whether Trump would support Johnson's bid because Johnson voted to pass legislation to prevent a government shutdown, and it did not include...
Trump's desired provision for a debt ceiling increase. The speaker election is Friday. Earlier today, South Korean authorities requested a warrant to detain impeached President Yoon. They're investigating Yoon's brief imposition of martial law this month. That corruption investigation office leading the joint investigation with police and military authorities confirmed it requested the warrant to question Yoon on charges of abusing his authority and orchestrating a rebellion.
New data from the CDC shows norovirus cases in the U.S. are rising. The agency reports 91 norovirus outbreaks during the week of December 25th. That's a significant jump from the 69 outbreaks reported just the week prior. The CDC says the virus is the number one cause of foodborne illness in the country. Nothing says Happy New Year like a stomach bug.
Yeah, you know something's going around just in general. A lot of sniffling, a lot of sore throats in general. Yeah, I think everybody can hear it. Contestor Brewer, it's great to hear you though. Good to see you as well. All right, coming up next on Halftime, Mike Santoli joins us with his midday word. We are back right after this.
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And we are back on Halftime Senior Markets Commentator Mike Santoli joins us now with his midday word. Mike, great to have you here. I mean, kind of interesting day. Santa Claus rally seems to be unwinding. Markets under some pressure, but off of their lows. What do you make of what we're seeing? Interesting because, you know, the expectation normally is kind of like calm and upward drift. And that obviously has been shaking the last couple of days. However, I mean, with the benefit of a few hours hindsight, it really did look like this kind of quick trend.
kind of rotation type of trade in the pre-market. No real headlines attached to that drop that we got in the equity futures right after 7 a.m. Eastern time. You did have a bid. You still have a bid in Treasury. So it suggests to me a little bit of reallocation, pulling forward some of that January profit-taking. It didn't really disturb too much in the way of the trends. In fact, I'm looking at the volatility index down like two points off its morning high. That suggests to me that the options traders are at least saying, okay, we got to –
the sparrows scattered at the open. There was a little bit of a scare, and it hasn't necessarily come into anything else. It still leaves us a little bit in a funny spot, though. We've lost momentum at the index level. The average stock has definitely struggled a little bit, and there's a little bit of a peeling off of profits on the
the mega caps. I do think it's worth asking, though, if that just sort of gives you a little bit of a better start point for 2025. Because I think there was going to be a risk a couple of weeks ago that we were going to go in there running full speed, the frothy speculative stuff continuing to rip, which was happening a couple of weeks ago, sentiment getting really over its skis. I think you've pulled back from that a little bit. So if the bond market behaves
maybe we're not in a little bit of a better footing so i think here we are today and they were invidious higher so that the the the prevailing question for portfolio managers you've had this narrow concentration in the month of december where here we go it's all about the mag seven again and you look at the twenty five in the city self okay am i am i just accepting that am i going with it or do what can i believe that value i can have
the type of year in which it'll see the growth and you'll see the outperformance. I was talking to Frank and Jason about this before. I don't think value has outperformed growth in an up year since 2016. So you're talking about a very long period. It's a pretty rare combination of things that have to work. I think you have to get relief on yields at the same time that the macro data start to kind of turn up again.
You know, I mean, everyone keeps saying, oh, 3% Atlanta Fed GDP. But relative to forecasts, the economic data have been soft. And so I think if you get those things moving together, it probably can work. I heard you say earnings season might be a catalyst. You probably do need that to actually kickstart the conviction for the fundamental value case. All right, Mike Santoli with his midday word. Mike, thank you very much.
Coming up here on half, the setup for housing in the year ahead, how the committee is positioned as home construction stocks. They're tracking for their worst month in more than four years. More halftime after this. And we're back on halftime with a look at the housing trade, the home construction ETF, the ITB. It is tracking for its worst month since 2020. Our Diana Olick joins us now with a look at what's ahead for that space in 2025. Diana.
Well, Frank, we're going to start 2025 on a mixed footing in the housing market. Let's start with mortgage rates. After a pretty volatile year, we're back at the highs with the 30-year fixed well over 7%. Expectations last year were that rates now would be in the low sixes, heading toward a five-handle.
That is no longer the prediction. As a result, the home construction ETF ITB is down close to 17% month to date, on pace for its worst month since March 2020, which of course was the very start of the pandemic. Now, builders have been buying down mortgage rates, but it's really hitting their margins.
One outliner, though, Toll Brothers, the luxury home builder, it's down for the month but still way up year to date. Its high-end buyers are, of course, less dependent on mortgage rates. All that said, on the existing home side, we just got the read on pending home sales in November, up 2.2% month to month and up 6.9% from November of last year. That's the fourth straight month of gains. Now, the count is...
is based on signed contracts with people out shopping in November when the average rate on the 30-year fixed spent much of the month over 7% before coming down in the last week of the month. NAR's chief economist, Lawrence Yun, said in the release that consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory. The one problem, though, Frank, is that home prices are still gaining.
Certainly, mortgage rates above 7%. Who would have thought that? Diana Olick, thank you very much. Rob, coming over to you. You own two stocks related to the housing market, Lowe's and Home Depot. Yes, and this has really been of late ground zero for rates doing what no one expected them to do, which is to continue to climb and climb at a pace that was pretty significant. These continue to be high-quality businesses. We've owned them for quite some time.
It is a small part of our portfolio, but they have healthy profitability, great capital efficiency. They're going to be beneficiaries if rates start to come down, but that's a requirement for this sector. So I think it's going to be a bit, but we're being patient with the names.
Jason, coming over to you on D.R. Horton. I'm just looking at the earnings. I mean, selling prices have been flat for the last couple of quarters. Look at a lot of these home builders raising incentives as we've gone on quarter to quarter. I mean, it doesn't seem like it's a really great business right now, even with the shortage of about four million homes in the U.S. There's no doubt about it. Obviously, DHI has suffered this year's down 7 percent year to date.
This is a completely affordability issue. As you see, 30-year mortgage rates above 7%. We're going to need those names to drift lower. And we know that the 10-year is a proxy for mortgage rates. And we have a 10-year floating above 4.5%. It's going to be tough.
for those numbers to come down on the interest rate level. So for me, obviously that's where DHI plays. 69% of their homes that were delivered over the last year are lower than $400,000. But when you have mortgage rates at 7%, it's a tough hill to climb and that's why they're struggling. - Look, I agree with what Rob said about the potential positive catalyst, but you have to acknowledge that they were in a great place, the home builders in '23 coming into '24. '24, they're in a very difficult place
broken momentum and 13% of the home building construction industry is undocumented workers. With the conversation surrounding immigration going to intensify in the new year, that's a challenge for labor costs. Yeah, a lot of people have cited that as potentially raising the prices of homes because of a potential labor shortage in home building and the housing market overall. So certainly something to think about with that new administration. All right, coming up here on Halftime.
The state of energy, NatGas prices popping on this down day. How the committee is navigating that trade. That's coming up next. Natural gas up over 17% right now. And welcome back to Halftime. Natural gas, it is soaring today. You can see it's up over 18%. It's up 50% this year. And that puts it on pace for its best year since all the way back in 2016. Speaking of 2016, Joe, you have some exposure here at EQT. Yes, I'm going to continue to talk about natural gas as the fuel element.
in the energy sector that investors and our viewers should be focusing on in 2025. I truly believe that's where the opportunity is. I think in terms of existing inventories, we're beginning to work off excess supply. Now you have a colder than anticipated weather forecast over the next 15 days. In addition to that, remember that natural gas offers the solution in terms of power generation for all of the utilities that have this
insatiable demand coming from data centers and they're partnering with the mega cap companies like we saw with Microsoft, Three Mile Island and Constellation Energy. So natural gas is the solution in that formula in terms of providing power generation. I think natural gas in '25 should be an investor focus.
All right, natural gas hitting a 52-week high today. Brent, I want to come over to you. You have a lot of broad energy ownership, energy transfer, Diamondback, Viper as well. I just want to see how you see the energy trade overall when it comes to this month and going into 2025.
Yeah, so we talked about the strength in the dollar. Obviously, that in energy materials is a really big headwind. I think in this space, you really got to pick your spots. I mean, we see energy transfer up there. Energy transfer is a pipeline like Kinder Morgan. Energy transfer and Kinder are up like 45% and 55% year-to-date. Energy transfer also is like a 7% distribution yield. I also like the mineral right companies, which are very capital.
tap light, like a Viper Energy, up almost 60% year-to-date. And so I think you really have to pick your spots. You know, I sold Devin earlier in the quarter. It just been an underperformer for a couple of years, relative or on an absolute basis. And so I think stay capital light, stay in the toll road of hydrocarbons, which are the pipelines. And I think that will be another good year for both sectors, subsectors within energy.
Okay, Rob, I want to come over to you. You're looking at energy as a hedge to geopolitical risk. You have to explain that because we've seen geopolitical risk rise and the oil market still trade lower. In fact, a lot of the year WTI below 70 bucks a barrel. Ignore it. There's no question. I think that's a little bit of a signal from the markets that there might be some worries there.
coming but no question that there they are have historically been. A great hedge against geopolitical attention. Tensions against up the upside surprises in inflation I think the key story here is the companies are more efficient operators and capital allocators.
They're focused also on returning cash to shareholders. Valuation is reasonable, but the big question for energy is how much do they deteriorate if economic growth deteriorates, causing prices to break below? And so far we've seen lower prices support consumption,
what happens with growth. So we have a diversified basket and trades at 12 times earnings. We're very excited about that. I think it's an overweight for us, and it's a place that acts as this barbell hedge with potentially some economic leverage. All right, WTI is up almost 5% month to date. All right, stay with us here on Halftime. Final Trades, they're coming up. And we are back on Halftime with Final Trades. Rob, you're up first.
Yes, Jeffries. We like the setup for financials. They continue to gain market share under Rich Handler and should benefit from business optimism and more favorable M&A at 17 times forward PE.
NVIDIA, 2025 is going to be a year of black whale and the hyperscalers are going to continue to spend. Jason. Goldman Sachs M&A environment will open up in 25. Joe, last word. Interactive brokers, volatility elevated, range expansion happening over the last 30 days benefits the brokers. All right, that's going to do it for halftime. The exchange, it starts right now. Thanks for watching.
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Stripe helps many of the world's most influential companies grow their revenue and build a more profitable business. Whether it's Hertz making checkout a smooth ride for their customers, OpenAI answering unprecedented demand, or PGA chipping away at back office inefficiency, Stripe's financial infrastructure platform helps companies achieve ambitious goals. No matter what success looks like for your business, Stripe helps ensure the complexity of financial systems doesn't get in your way. Learn more at stripe.com.