Battle Over the Broadening 1/23/25
Update: 2025-01-23
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Scott Wapner and the Investment Committee debate the best way to play this bull market. The panel reacts to President Trump’s address to world economic leaders at Davos. The experts detail their latest portfolio moves. Josh Brown updates his best stocks in the market list.
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00:00:00
A Capella University, learning the right skills could make a difference.
00:00:03
That's why our business programs teach you relevant skills you can take from the courseroom to the workplace.
00:00:09
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00:00:12
Learn more at capella.edu.
00:00:15
First on CNBC Verizon CEO Hans Bestberg, earnings, outlook, and opportunities for growth, plus investing legend Mario Gabali, where he's putting his money to work now.
00:00:27
Stay ahead of the market, Squawk Box, tomorrow 6 a.m.
00:00:30
Eastern.
00:00:30
I'm Scott Wapner, and you're listening to CNBC's Half-Time Report, the podcast, the most profitable hour of the trading day.
00:00:39
You record this live weekdays at 12 Eastern, listen in.
00:00:46
Alright guys, thanks so much, welcome to the Half-Time Report.
00:00:49
I'm Scott Wapner.
00:00:50
And center this hour, the battle over the broadening, the Dow at a six week high, tech on fire lately, we will debate the best way to play this bull market.
00:00:59
Plus discuss President Trump's comments just a few moments ago to that crowd in Davos.
00:01:03
Joining me for the hour today, Josh Brown, Jenny Harrington, and Bill Baruch.
00:01:07
We are all here at Post 9 at the New York Stock Exchange.
00:01:11
We're holding gains here.
00:01:12
Dows up a one half, a one percent S and P's positive two.
00:01:15
That's that given a little bit back today, but I do want to begin, Josh, with some of the commentary that we just heard from the President, really making the case for America on the global stage.
00:01:25
And those that he was addressing, talked about economic confidence in this country, quotes soaring like never before, the things that we've heard before about his agenda in terms of re-upping the tax cuts,
00:01:36
deregulation, investment in the United States, asking the Saudis and OPEC to cut oil prices, doubling AI energy production.
00:01:45
All of this is why, to some degree, investors have been as optimistic as they are about where the stock market can go.
00:01:54
There's no question it's a vibe shift.
00:01:56
And your face with two choices here as an investor, you can be cynical about it because your politics are different than the presidents, and you don't like every single thing on the agenda, or you don't like Pete Hegseth or whatever.
00:02:08
You could do that, or you can say, hey, clearly this vibe shift is going to lead to an increase in M&A activity, maybe an increase in IPOs coming to market,
00:02:20
maybe an increase in companies thinking bigger, maybe better relations with international powers versus worse, given the way that we know President Trump likes to personalize the negotiations.
00:02:34
You just heard him talking about his relationship with President Shea.
00:02:37
So just be open-minded, regardless of your politics, and look at the market reaction not over the election, but over the comments that have been made just in the last 48 hours.
00:02:49
Starting the week, small caps up 4% on the year, the S&P is up just under 2%, so you've got leadership in the types of stocks that have been left behind.
00:02:59
They're basically neck and neck right now, and I think the Russell being as strong as it's been, I think it's meaningful.
00:03:06
Look at the small business owner optimism in all the surveys, and just think beyond whatever the politics of the moment are, to people being willing to take risk again,
00:03:17
do more, consider mergers, consider corporate transactions that would have been impossible, even three months ago.
00:03:24
And the financials really quickly as well, because they're starting to feel the momentum also once again.
00:03:29
In the first couple of weeks of January, 0% of the financial sector within the S&P 500 was above its 20-day moving average.
00:03:38
That's changed.
00:03:39
They have just exploded again, 79% of the names in the financial sector are above the short-term 20-day moving average.
00:03:48
Less than 5% of the index was above the 50.
00:03:51
Now that's 53%, so you're seeing within one of the most economically important sectors a renewed sense of momentum, and again it's not election-related,
00:04:02
it's new, it's based on comments that we've been hearing in just the past couple of days about the administration following through on what they said they wanted to do.
00:04:10
All right, Jenny, it's a good segue to the conversation that I really wanted to have, which is this battle over the broadening.
00:04:17
Because wolf research today comes out on small caps specifically, as Josh was just documenting the activity in the Russell 2000 and saying they could go on a massive run.
00:04:27
Entering the year, we thought small caps had a great shot to outperform.
00:04:30
They stick with that call, needs to get over the highs, there's resistance at 2450.
00:04:36
You take that out, and you could be off to the races in that part of the market that we finally get maybe the most acute sign of the broadening that many have been calling for.
00:04:48
I think so, I think it's so interesting too when we're talking about the broadening, just like really put numbers around, you've got S&P up three and a half, you've got Russell up 3.3, Dow and Nasdaq both like 3836,
00:04:59
so really is like everyone's winning this year.
00:05:02
And when we talk about small caps specifically, this is something I've been really hooked on, frankly since the third quarter of last year, when you look out to earnings growth this year.
00:05:11
What you see is you see the large cap growth companies, S&P 500 are expected to grow earnings about, by about 15% this year over last year.
00:05:18
And it's really consistent quarter by quarter.
00:05:20
You see like 15 to kind of has 17% growth, I think 12% in the middle.
00:05:24
But when you look at small caps, you see that growth rate accelerate wildly into your end.
00:05:29
So by the time you get to the second, third and fourth quarters, you see year over year growth rates of like 50% for small cap.
00:05:36
And I think that's where it takes off.
00:05:38
But we really need to see it happen.
00:05:40
And so when we look at those returns that are all clumped together in that three and a half percent range, I think people are still little sitting on the sidelines in the small cap and saying like, you really need to show this to me.
00:05:50
I really need to see those earnings reports.
00:05:53
When I think about the broadening too, I think, you know, I don't think that the broadening needs to come at the expense of anything.
00:05:58
So we've got the rich valuation companies like the mega cap tech.
00:06:02
But the thing is, there's still going to have earnings growth.
00:06:04
And they have fabulous fundamentals underlying them.
00:06:06
You look at the cheaper valuations, like small cap value, anything mid cap.
00:06:11
They're cheaper.
00:06:12
They're not cheap to history.
00:06:14
They also, for a nice change, have lovely fundamentals underlying them.
00:06:19
And beneath all of that, you've got an economy that's checking along, a consumer that's checking along.
00:06:23
So I really do think, Scott, I really do think the broadening is real, but I don't think it necessarily means rotation.
00:06:30
You know, I don't think anyone crumbles as something else takes off.
00:06:33
Phil Baruch, on this note, you bought more of the small cap ETF, the RSP, you're playing for the broadening?
00:06:40
Absolutely.
00:06:41
My first five portfolios, 80, 20, 60, 40, we have a sleeve.
00:06:45
It's 10% of the entire portfolio where we're tactical with ETFs.
00:06:48
We trimmed some other ETFs.
00:06:49
We hold about three to five in there on average.
00:06:52
We'll get to that.
00:06:53
But the IJR, we increased in RSP.
00:06:55
They're each about 40% now to couple with IVV, which is the S&P.
00:06:59
We're broadening our exposure as a very tactical play, and we think that's going to contend you here.
00:07:04
If you look back, I mean, the max seven, the big tech name is how to huge move into the fourth quarter.
00:07:10
I think it's time for some of those industrials, financials as Josh highlighted to really start making some moves here and lead the market maybe for the next couple of months.
00:07:18
Let's talk about the financials more specifically for a moment, because a lot of pickup from Davos at the very moment here has to do with a comment that President Trump made to Bank of America,
00:07:29
CEO Brian Moynihan, in which he was talking about opening his bank more to conservatives, suggesting that Moynihan and others within this industry have not been doing such,
00:07:40
quote, "I hope you're going to open your banks to conservatives because what you're doing is wrong."
00:07:47
That is what Donald Trump, the president, has said to Brian Moynihan right on the stage there at Davos.
00:07:55
I mean, look, we've seen sort of this kind of stuff before in terms of a president who at times can be heavy on hyperbole and light on specifics,
00:08:06
so I'm not exactly sure what that comment is regarding.
00:08:10
There's some suggestion that maybe he's talking about debanking related to crypto.
00:08:16
Your guess is as good as mine, nonetheless, it's notable that the president said it directly to Brian Moynihan on that stage, leading some to wonder sort of what the policies are going to be towards the banks in an environment I think which the market was by far giving the benefit of the doubt to these stocks,
00:08:37
suggesting animal spirits, deal making, deregulation are all going to be positive, but is there a darker side of some of the policy that needs to be considered to if these are going to be a target of the White House?
00:08:51
I don't-- Is that fair?
00:08:53
Yeah, so I don't think that should be a concern for investors.
00:08:56
I'm going to pull you out of all that because I see how-- I see how gingerly you were tiptoeing through the money.
00:09:01
I mean, I just want to say it for what it is, you know, he said it.
00:09:05
Yes.
00:09:06
There are no conservatives that couldn't get alone while Joe Biden was president, and I guarantee you, if you were to somehow establish a data set that said these people are further to the right,
00:09:19
how many loans they get versus, I don't think there's anything there, but the optics are important, Trump is a reality TV producer at heart.
00:09:27
He knows his audience, he understands the power of looking directly at one of the biggest bank CEOs in the country, making that statement, he knows they're going to lead with that on Fox News tonight,
00:09:38
and he knows it's going to be all over social media.
00:09:41
And it is effective, insofar as it keeps the conversation going, promises made, promises kept.
00:09:48
Does that relate to the earnings at Bank of America and City and JP Morgan?
00:09:53
Probably not.
00:09:54
I don't think they're going to have to do anything differently as far as how they make loans.
00:09:58
The DEI stuff, you could argue, maybe there are some expenses related to that that may be come out.
00:10:04
That's possible.
00:10:06
If you're an investor in these companies, this is not what you're worried about today.
00:10:10
Well, some are suggesting our own Jeff Cox, for example, who covers the banks for CNBC.com, is pointing to a podcast in which Mark Andreessen,
00:10:22
who obviously has a foot inside the White House in terms of these tech heavyweights who have made their way close to President Trump and the policies that may follow,
00:10:32
was on Joe Rogan's podcast and claim that the Biden administration and regulators in the administration had cut off tech and crypto companies from a financial system.
00:10:44
So maybe that is what is specifically being referenced here in a roundabout way, in the criticism directly to Brian Moynihan, who really didn't answer the question or respond to it specifically.
00:10:55
Because how do you respond?
00:10:56
I think it's a silly thing to say, and I think this is a beautiful case in point of what are challenges investors, as well as advisors who talked to our clients, is going to be for the next four years.
00:11:07
And it goes right back to the previous four years.
00:11:09
So as an investor, here's what I would do.
00:11:11
If I were researching Bank of America and I was thinking about investing in it, I would put this in the category of pure noise, nothing I need to think about.
00:11:20
That sentence would have zero impact on my investment process and how I was thinking about potentially investing in Bank of America.
00:11:27
Separately, now I have a pain in the neck on my hands because we've got a pile of clients who are going to hear it and read it and misinterpret it or think about it, overanalyze it and say,
00:11:37
"Do I want Bank of America in my portfolio?
00:11:41
Do I not?
00:11:42
I'm conservative.
00:11:43
I'm not conservative."
00:11:44
And that noise enters in.
00:11:45
So I think this is the challenge of the next four years, is when you hear lines like this figuring out which bucket to put it in, noise don't worry about it, or this is actually meaningful.
00:11:54
I agree with Scott, though.
00:11:55
It's not noise as it pertains to crypto, but I think it's kind of baloney to conflate crypto with conservatism.
00:12:03
Right now?
00:12:04
It's not, but generally it is.
00:12:06
Right, because that's when you're just a regulatory, like, you know, policy thing.
00:12:10
Because, you know, I don't...
00:12:11
Well, I...
00:12:12
I will say this.
00:12:13
I will say this.
00:12:14
I will say this.
00:12:15
I will say this.
00:12:16
There are some who do believe and who have made the case on that stage in Davos as well that the embracing of crypto by conservatives,
00:12:28
including the president and those close to him, is one of the reasons why the Republicans were able to have the sweep that they did in the House and the Senate.
00:12:39
Undeniable.
00:12:40
Undeniable.
00:12:41
That's a fact.
00:12:42
And that's out there because it's been said by people who do believe that that is true, that you had a very punitive administration and a punitive SEC led by Gary Gensler as a relates to crypto that might have cost the Democrats votes in the prior election.
00:12:57
Well, Operation Checkpoint is real.
00:13:00
Chokepoint is real.
00:13:03
I think you just look at a couple of races.
00:13:06
Look at how Sherrod Brown was tossed out of Ohio.
00:13:09
That's purely crypto money coming in and swinging that election.
00:13:12
So that is all real.
00:13:13
But to Jenny's point, question is, what do you do with this from an equity investing standpoint?
00:13:20
And the answer, probably, unless we're talking about Coinbase and Robin Hood and MicroStrategy, the answer is probably nothing.
00:13:26
We do know that he likes to play favorites.
00:13:28
The only thing you can potentially extrapolate is maybe he is not playing favorites to Bank America right now.
00:13:33
It's the other thing.
00:13:34
What do you do with that?
00:13:35
The other thing that President Trump said, as we bring in our senior economics reporter Steve Liesman, was this, quote, "I'll demand that interest rates drop immediately."
00:13:48
Now, Steve, we have discussed leading into the election and some of the, I don't want to say proposals because they're not official proposals,
00:13:59
but some of the things that have been thrown out into the ether about a shadow, Fed share, perhaps, some wondering of what the relationship was going to be between Fed share, Powell, and President Trump.
00:14:11
When the Fed is in itself at a sort of tricky point in its path here, trying to gauge what these new policies are going to mean for the path of inflation and figuring what all that means for the path of the Fed is a relates to interest rate cuts.
00:14:24
What do you make of that comment that the President made?
00:14:26
In short, I will demand that interest rates drop immediately.
00:14:31
I kind of woke up this morning thinking that the President had been through a lot of things and done a lot of what he said he was going to do on the campaign channels in the emergency orders.
00:14:42
And I said to myself, "And the President starts to criticize the Fed in 3, 2, 1."
00:14:47
And I thought this might be a day.
00:14:49
We might get that.
00:14:50
It's kind of interesting, Scott.
00:14:53
He had been somebody who was critical of the Fed and some of the things that you talked about were discussed.
00:14:57
And the President kind of stepped back from all that.
00:15:01
And so I was thinking about our Fed survey, which were in the field now, which last month came, or last meeting came back and said, "You know what?
00:15:09
People thought that Trump was going to respect the independence of the Fed.
00:15:14
And now I guess the pendulum has swung back.
00:15:17
He can demand.
00:15:18
Let's be clear.
00:15:19
Nothing stops him from demanding, and there's nothing technically wrong with him, basically jaw-boning the Fed.
00:15:26
And I think the Fed expects that, Scott.
00:15:28
I think with this President, they've come to the point where they know he's not going to be provide, I guess maybe you call it rhetorical independence.
00:15:36
He's going to be out there saying what he thinks.
00:15:39
But the notion, maybe the word "demand" is one that's a little worrisome when it comes to the President of the United States.
00:15:46
But are you now thinking that you could have a greater battle over Fed independence because of statements like this from the President?
00:15:57
I don't know how that issue in and of itself doesn't gain sort of a greater platform in the weeks if not months ahead.
00:16:07
I think that's probably right.
00:16:09
I will say personally, I didn't expect the President to back off from the idea of asking for or I guess demanding lower interest rates.
00:16:18
That's, I think, who he is.
00:16:20
It would be interesting to question him about that and say, Mr.
00:16:24
President, inflation's running above target, what is it exactly you want the Fed to do?
00:16:31
He's always a guy who has wanted lower interest rates, Scott.
00:16:34
And I think you correctly point out that the huge number of changes that he plans to make an economic policy is a lot of the reason why the Fed is not hiking in response to this.
00:16:45
It's just taking a step back and saying, let's see all this stuff work through.
00:16:49
I've been through this a lot, Scott, as you know, and thinking about all of the elements of the President's plans and there's questions about the impact of tariffs, there's questions about the impact of immigration.
00:17:00
But there's also on the other side, if some of his things to help out business spending, they could help supply.
00:17:08
And then there's this idea that Kevin Warschen, others that put forward that deregulation is a supply side disinflationary impulse to the economy.
00:17:17
And the Fed, I think, is going to step back and take a look at all this and try to account for it and figure it out whether or not it means higher growth or a higher neutral rate if that happens.
00:17:27
And I think at this point, Scott, the only choice that Powell has is to take these comments on the chain.
00:17:33
If the President demands lower interest rates, that's his right.
00:17:37
But it's not the obligation of the Federal Reserve to provide them.
00:17:41
You want to also, before I let you go, take a stab at what the President said to Brian Moynihan, because it's hard to figure out specifically what he is talking about.
00:17:53
There are some suggestions, as I said, about debanking conservatives.
00:17:57
There are said to be issues related to crypto.
00:18:01
I mentioned Jeff Cox passing some recent articles to me, 15 attorneys general last year, sent a letter directly to Bank of America, complaining about discrimination regarding politics and religion.
00:18:14
So rather than be outwardly and openly dismissive of what the President said as a lot of nothing, as long as there's a belief out there that there is an issue and that he confronted Brian Moynihan directly on that stage in Davos in front of world leaders and CEOs of global corporations that it needs to be discussed,
00:18:38
I think.
00:18:39
I find it remarkable, Scott, that Moynihan did not push back on the President.
00:18:44
I am reading Scott the same thing that you are.
00:18:46
It's not an issue that I covered at the time, back in April of 2024, and I'll read you from, I believe this is the letter or news release from the attorney general of Virginia,
00:18:59
Jason Myers, and he said, according to the letter, Bank of America is consistently discriminated against groups for political and religious reasons.
00:19:07
The nation's second largest bank has denied service to gun manufacturers, fossil fuel producers and contractors for U.S.
00:19:14
immigration and government enforcement.
00:19:16
It also canceled the accounts of Christian ministry groups, saying one such group that trains pastors is, quote, "operating a business type we have chosen not to service."
00:19:26
So I have to say, Scott, these kind of allegations strike me as remarkable.
00:19:30
I have to doubt their veracity, but somehow this has reached the presidential level.
00:19:37
It's been leveled publicly at Bank of America, the Bank of America President, or Chairman did not respond back to it.
00:19:44
So they are out there and they are now for reporters to follow up on and figure out if these are accurate.
00:19:50
We'll see, by the way, if we get a statement from Bank of America and whether or not they responded to this in any way, I've not had a chance, I must say to say what the B of A response is.
00:20:00
Yeah.
00:20:01
It's gone global, as they say, because that's indeed what's happened.
00:20:04
Steve, thanks.
00:20:05
I appreciate you.
00:20:06
That's Steve Liesman on that issue.
00:20:09
When we look at the market, it's dials up to 56, S&P, try to get a new closing high yesterday, couldn't quite get there, but did hit a new entry day high.
00:20:17
And the fact of the matter is, there's just a lot of optimism about what is likely to happen investors think in the years to come because of the agenda that President Trump was going over in Davos.
00:20:27
Industrials have been near a record high, so it hasn't only been all things tech.
00:20:31
I do that to you because you bought Caterpillar.
00:20:35
Just a month since December of 2023, why are you trying to get more exposure to industrials?
00:20:39
Well, this isn't a story that started last week when we bought Caterpillar.
00:20:42
This was back to October when our number three and our number five holdings, Westinghouse Airbreak and United Rentals, we slashed them and leaned into tech.
00:20:49
Now we're rotating back in to industrials here.
00:20:52
And what we really like about Caterpillar is China exposure.
00:20:56
I mean, you're seeing industrial production last week in China, GDP, both beat.
00:21:01
We do think the dollar is topping out a bit.
00:21:04
Otherwise, if multinational companies, they are going to benefit from this.
00:21:08
So we're moving back into the industrial exposure and we're doing that by getting Caterpillar.
00:21:12
We own other industrials as well and we're ramping that up.
00:21:16
How about industrials here?
00:21:19
I don't want to step on anything that we're going to do later in the show, but I am looking at a ton of industrials right now that are at breakouts or breaking out currently.
00:21:31
Some of them are midcaps and they're not all the usual suspects, but I think broadly speaking, these stocks are 100% reacting to things like, I don't know, $500 billion stimulus announcements and AI build out announcements,
00:21:46
et cetera.
00:21:47
Some of these companies are more relevant to that than others and some of them are just going along for the ride because of ETF flows, but so what?
00:21:54
You've got stocks working in the industrial sector.
00:21:56
They look like they want to repeat what the financials did last year.
00:22:00
And maybe you'll get that upside surprise in their earnings.
00:22:03
Maybe the AI story all of a sudden becomes a profitability or build out story for the industrials and they start to be on earnings the way financials did in the first and second quarter last year,
00:22:14
which led to such a torrential downpour of winners.
00:22:18
I would add though, you know, last year, the inflation reduction act, you started getting this infrastructure spending coming out, that was, that got us really bullish on names like your data rentals.
00:22:27
And then you really have a question, you know, what is the Trump presidency going to do about infrastructure spending and we're getting that answer now and the dusters are responding.
00:22:36
So a lot of questions are being answered here.
00:22:38
I think this is just getting started.
00:22:39
Jenny, you have a lot of exposure here.
00:22:40
We do.
00:22:41
And I think it's like a pond that's ripe for fishing in for all the reasons that Bill and Josh just talked about.
00:22:45
But when you look at the sector overall, you've got a really nice matchup of valuation, which is about 21 and a half times, so market like, but you've got 19% earnings growth on average.
00:22:54
It's tough.
00:22:55
I think to talk broadly, because for example, we own carrier, but we also own united rentals, you know, to your point, those are one's air conditioning, HVAC company, one's industrial equipment.
00:23:06
We own Stanley Black and Decker, which is tools and we also own JetBlue.
00:23:10
So within there, there's enormous divergence, but you can, you know, you can look, it's kind of ignored relative to the rest.
00:23:16
So you can sort through, you can find some great valuations that goes to my earlier point about broadening out, like there's really decent earnings growth underlying a lot of those companies.
00:23:25
All right, we're going to, that's what I'm going to do.
00:23:26
Let's take a quick break.
00:23:27
When we come back, I want to talk about tech as well.
00:23:29
Bill Baruch has another move right ahead of earnings of mega-cap tech next week and just as an influential analyst has come out to try and defend Apple shares, which have certainly not been trading well in the midst of the worst month in a couple of years.
00:23:43
For Apple, in jeopardy of losing its place as the number two biggest market cap company in this stock market, we will discuss all next.
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00:24:22
First on CNBC, Verizon's CEO Hans Bestberg, earnings, outlook, and opportunities for growth, plus investing legend, Mario Caballi,
00:24:33
where he's putting his money to work now.
00:24:35
Stay ahead of the market.
00:24:36
Walkbox, tomorrow 6 a.m.
00:24:49
Eastern.
00:24:53
Big week ahead for MegacapTech, as you know.
00:24:55
We're going to start earnings on the 29th, Meta and Microsoft are going to report that day.
00:24:59
Bill Baruch, you sold the cues.
00:25:00
Yes.
00:25:01
Ahead of these prints.
00:25:02
Why?
00:25:03
Well, this is about that rotation I spoke of.
00:25:05
In that tactical ETF sleeve, we're selling the cues, we're moving that money into industrials.
00:25:10
But we still own a lot of tech, and I believe in what we're going to see.
00:25:14
I mean, what we're doing is rotating.
00:25:15
We trimmed Apple.
00:25:16
I talked about on the show the first week of the year, we trimmed in video as well.
00:25:20
And I think what we're going to see is solid results.
00:25:22
I think these companies are going to perform.
00:25:24
But how much have we seen that being priced in here?
00:25:26
And the last week, you get a lot of this news about AI initiatives in the White House.
00:25:32
Yesterday, the numbers in videos up for Microsoft's up for, I mean, the Oracle has had a huge week.
00:25:38
So a lot of this is getting pumped in.
00:25:39
And I think as we take a look back, these names, they need to be in portfolios.
00:25:43
And if you want to outperform the S&P, you have to still hold these.
00:25:46
But it's how you rotate and how you manage it as things go.
00:25:49
All right.
00:25:50
Josh, how should we think about these names heading into a really critical earnings season here?
00:25:56
Look, these stocks, every time we think there's going to be some sort of a move out of these stocks in size, maybe you get one or two of these names fall like an apple or a Tesla recently.
00:26:07
But as a theme, they just continue to be bid.
00:26:11
And I think it's like not an accident that we've seen this internal rotation amongst the Mag 7, or if you want to broaden that out, like the biggest 20 technology companies throw like service now in there,
00:26:25
which looks unbelievable.
00:26:27
Alphabet looks great again, and maybe that's money that's rotating out of the Tesla's of the world.
00:26:33
Or maybe it's just people continuing to feel good about their purchases in these stocks because they give you the ability to play both offense and defense.
00:26:42
Alphabet's got an RSI of 64 right now.
00:26:45
It's above its 50 day.
00:26:46
It's above its 200 day.
00:26:47
It's up 6% on the year.
00:26:49
You see people saying, all right, maybe this is the time I want to own a cheaper of the Mag 7, so I'm going to buy Alphabet, 26 times trailing PE versus Apple closer to 40.
00:27:01
So you're going to see a lot of that go on during the course of this year.
00:27:04
It's been happening over the last two years.
00:27:06
Don't be shocked by it.
00:27:07
I also think Amazon looks great for the same reason.
00:27:11
Not one of the cheaper names in the group, but one of the names people are really excited about it for 2025.
00:27:18
Wolf Research says they expect continued tech dominance this earnings season.
00:27:23
The elephant of the room, frankly, is Apple, which has gotten a bunch of downgrades lately, as you know.
00:27:29
It's having its worst month since December of '22.
00:27:33
It was the largest market cap company in the world until recently, eclipsed by NVIDIA a day or so ago, now in danger of dropping to number three behind Microsoft because of the recent troubles.
00:27:46
Right on cue, Dan Ives, is defending Apple today, as you might expect, has fears over done.
00:27:51
I'm trying to turn around as in the cards.
00:27:52
Morgan Stanley's Eric Woodring is hesitant to call earnings season a quote, "clearing event" though he also doesn't believe there's reason to get tactically bullish around earnings either.
00:28:05
Bill, how do you think about Apple going in?
00:28:07
It's the one maybe with the most proof, I think, at this point.
00:28:10
Yeah.
00:28:11
Now again, we, this is his name.
00:28:12
I'm actually looking at it right now.
00:28:14
We trimmed it.
00:28:15
And I think when it falls out of love, that's when you have to get Apple in your radar.
00:28:18
And right here, I think there's a lot of support.
00:28:20
Yes, the iPhone 16 cycle is maybe disappointed.
00:28:23
But at the same time, I think when those disappointments start making it, you know, front-page news and driving the cycle lower, that's when you have to think about adding it here.
00:28:31
And I'm glad we're not seeing Apple trading 250 plus going into earnings.
00:28:34
It gives it room to beat and maybe respond.
00:28:38
I want to talk about when they say dominance, when Wolf research says dominance on these.
00:28:43
Like, I would love to hear them define that because dominance in 2024 meant the following.
00:28:48
And the top 10 stocks in the S&P that included these seven were up 48 percent.
00:28:53
All the rest, the other 490 in the market were up 10 percent.
00:28:56
Do they think dominance means 50 percent versus 10 percent or to our broadening conversation does it narrow dramatically?
00:29:03
And I think dramatically dramatically.
00:29:06
You think it's going to narrow dramatically?
00:29:08
Dramatically.
00:29:09
I don't see how that dominance continues that magnitude of divergence.
00:29:13
What?
00:29:14
No, no, no, no.
00:29:15
Why does it have to be of that magnitude?
00:29:18
You just said dramatically.
00:29:19
Yeah, I think it's insinuating that what was 48 to 10 is somehow going to be, you know, 15 to 13.
00:29:26
Yeah.
00:29:27
Doesn't that seem more reasonable?
00:29:28
No, actually it doesn't.
00:29:29
Okay, I'll tell you what I think it does.
00:29:31
So I think it does seem more reasonable for the following reasons.
00:29:34
One, if we look at the S&P collectively, so let's look at them together, those seven plus a couple others, plus like Berkshire, JP Morgan, they make up almost 40 percent of the S&P.
00:29:46
You can go back 50 years.
00:29:48
There's never been a time where such a small collection of companies has dominated that much market share.
00:29:54
You can go back to the 70s and look at the nifty 50, 50 stocks only made up 50 percent.
00:29:58
So there is no precedent for this kind of concentration.
00:30:02
Then you take that and you couple it up with the conversation that we were having about industrials and you look at things like Apple or frankly like Microsoft.
00:30:10
So you've got Microsoft trading at 31 and a half times earnings and when you look at their earnings growth, it's lovely.
00:30:15
It's 10 percent next year, it's 15 percent next year, it's 18 percent year after that.
00:30:19
But you look at industrials, they're in that other 490 and you're like, okay, they're trading at 10 multiple points lower and they've got collectively 19 percent earnings.
00:30:28
Gross margins are the puzzle piece you're missing.
00:30:31
You have the whole puzzle, you're missing one piece, it's on the floor under the couch.
00:30:36
Gross margins are the single biggest determinant on whether or not this type of outperformance can continue to the extent that it has.
00:30:45
A company like a service now has margins that no industrial in their wildest dreams will ever get to, wait, which is why rightly or wrongly investors continue to bid stocks like that up.
00:30:59
I'm just looking, I have three non-mag 7 tech stocks right now and you can't tell, and I have industrials too, Jenny, you can't tell me any of the industrials will ever have the gross margins that these companies have and that's why people are paying up for them.
00:31:14
I have, wait wait, I've read it, I've read it, I've crowd strike and I have samsara, IOT.
00:31:19
But there's a thing, there's a very, very important nuance, you said that people are paying up.
00:31:25
Well, I was about to tell you the degree to which they're paying up.
00:31:27
Okay, I would argue that they have paid up, right, they've pulled it forward.
00:31:31
And what happens?
00:31:32
And what happens, these companies come out, these companies come out with 20, 30, 40 percent earnings growth.
00:31:38
No, but they're not.
00:31:39
I mean, I was like 50.
00:31:40
You're talking about the ones you follow, I'm talking about names that you don't even know the tickers of.
00:31:45
Oh no, you're saying Microsoft.
00:31:47
You're saying Microsoft.
00:31:48
You are proving my point.
00:31:49
How so?
00:31:50
Because the ones that I've never even heard of aren't in the top 10.
00:31:52
Yes.
00:31:53
So we're talking about mega cap tech.
00:31:54
Ah, crowd strike is pretty big.
00:31:56
How big is crowd strike compared to the $3 trillion market cap.
00:31:59
It's not a trillion, but it's not $10 billion.
00:32:01
You think it's going to triple?
00:32:04
And like actually give Apple and Microsoft run for- Well, let me say this way.
00:32:07
We're going to be proving my point.
00:32:08
Let me say this.
00:32:09
Your point is that these earnings from the big tech companies, they're going to be great.
00:32:13
They're going to be solid, but at the same time, these industrial companies may not even have as good as earnings.
00:32:19
But the America first agenda that we're seeing and talking about this week is going to create the flows that's going to help these industrials outperform in the next couple of months.
00:32:27
The point.
00:32:28
So, okay.
00:32:29
But let me put you- Dominance is what percentage of the S&P 500's earnings are coming from industrials versus what percent are coming from not just Mac seven, semis, software,
00:32:40
it's like, it's night and day.
00:32:42
But let me answer that.
00:32:43
So, you could be bullish on both, but Dominance, according to Wolf Research, is probably still the right call.
00:32:47
But what magnitude of Dominance?
00:32:49
But let me ask you this.
00:32:50
So, when I'm arguing- It's high in December.
00:32:52
Oh, okay.
00:32:53
But- This is the last quick point.
00:32:55
Okay.
00:32:56
So, the question is, do you really think that Mac seven will be up 50 percent in 2025?
00:32:59
No.
00:33:00
There you go.
00:33:01
Okay.
00:33:02
What'd you win?
00:33:03
I don't understand.
00:33:04
All right.
00:33:05
We're going to have to leave it there.
00:33:06
Thanks, God.
00:33:07
Thank you.
00:33:08
Somebody had to leave it there.
00:33:09
Leslie Picker has joined us on the desk- Thank God.
00:33:12
Seriously.
00:33:13
Why, Leslie.
00:33:14
It's breaking news because you have a response from both Bank of America and JP Morgan about what the president said in Davos to Brian Morninghand?
00:33:25
We do.
00:33:26
And just for a little bit of context, taking a step back on the whole debanking issue as well.
00:33:31
It's been an issue for, I would say, a year plus at this point in time, kind of the backstory as it pertains to Bank of America is there was a group of 15 attorneys general who sent a letter alleging that Bank of America was dropping customers that were- had religious affiliations and more conservative political leanings.
00:33:52
The Bank sent a response to that.
00:33:54
This was back in April of last year where they said the specific examples that were highlighted were dropped as customers for reasons that had nothing to do with their political affiliations.
00:34:05
Other reasons.
00:34:06
One of the groups was allegedly doing business in Cuba, which is a sanctioned country.
00:34:12
Another one was doing debt collection services in Africa.
00:34:16
And typically the big, bulge bracket banks can't have customers who are doing debt collection services.
00:34:22
So they had to drop them as a customer as well.
00:34:24
Additionally, some additional context here, John Eastman, who was a former lawyer for Trump, was dropped by Bank of America and he says he was dropped by USAAA as well.
00:34:34
But that was due to his legal issues, I'm told, as opposed to his political affiliation.
00:34:40
So kind of the- just to take a step back, banks drop customers and don't typically give those customers a reason for why they are dropped.
00:34:49
That is usually to eliminate, you know, a back and forth, which may take place with their call centers and so forth.
00:34:53
So here are the statements that we received from those two banks that were highlighted.
00:34:58
Bank of America saying we serve more than 70 million clients.
00:35:01
We welcome conservatives and have no political litmus test.
00:35:05
JP Morgan also responded saying, quote, we have never and would never close an account for political reasons full stop.
00:35:12
We follow the law and guidance from our regulators and have long said there are problems with the current framework.
00:35:18
And then they go on to say Washington must address those problems.
00:35:21
We welcome the opportunity to work with the new administration and Congress on ways to remove regulatory ambiguity while maintaining our country's ability to address financial crimes.
00:35:31
So that kind of speaks to this broader issue of kind of why clients, why customers are dropped, may not have anything to do with their political ideology, may have more to do with kind of the business that they're- The other notation that you make here,
00:35:43
which I think is worthy of bringing up, is that after Bank of America sent its responses to the attorneys general on why the accounts were dropped,
00:35:55
the issue was essentially dropped itself by the AG's.
00:35:59
Yes.
00:36:00
Correct?
00:36:01
Yes.
00:36:02
And the letter I have it here, you know, they talk about how Bank of America, they say that they have banking and investing relations, approximately 120,000 faith-based clients in the United States and support their employees,
00:36:15
monetary donations and volunteering efforts in supporting such institutions.
00:36:20
So this is something where they say- one thing with these broad-based clients that kind of walk all spans of life.
00:36:28
I think one way to just put a bow on this topic, it's not that it doesn't matter, of course it matters.
00:36:34
Does it affect earnings for these companies and revenue?
00:36:37
No, it doesn't and bigger than that.
00:36:39
There was this whole outcry when everyone was doing the ESG stuff five years ago.
00:36:44
And it was like, "Oh, I insist on ESG because I'm socially woke or whatever."
00:36:49
It's like, so, all right, but leave the oil companies in because those pay good dividends.
00:36:54
Okay, no problem.
00:36:55
So what do you want to take out?
00:36:56
Gun manufacturers.
00:36:57
You know what the gun manufacturer percentage of the S&P 500 market cap is?
00:37:02
It rounds to zero.
00:37:03
It's like 0.001%.
00:37:05
So that's like what this issue is.
00:37:07
It's a big political issue.
00:37:09
Right.
00:37:10
Obviously, I don't think it's an investor issue that is really going to move these stocks around and to Jenny's earlier point, like, this is going to be the challenge of the next few months.
00:37:21
Every time there's a pronouncement, do we have to, well, I think the market will start ignoring it eventually.
00:37:26
No, it won't.
00:37:27
You're going to wake up every morning for the next four years and check your Twitter to see what came out.
00:37:32
If it might have a temporary impact on that stock and which of your clients is going to call you and be like, "Oh, my God, I want Bank of America."
00:37:39
Leslie, you have the last word on this.
00:37:40
I was just going to say, I absolutely agree with you.
00:37:42
These are kind of rounding errors for the banks in terms of client numbers.
00:37:47
That said, these banks are going to Washington and you saw Moynihan was a participant in this conversation today because they want this broad, broad spanning deregulation.
00:37:57
They're really pushing for this.
00:37:59
So they want the administration on their side.
00:38:02
So this is something they really, you know, if it is important to President Trump and his constituents, they have to make a very clear case that they are not doing this and need to make sure that he is on board.
00:38:13
You also don't want to be in a position, I think, as an investor in what has been a broad, brush, positive narrative about these banks to then have to think about things like what the president said,
00:38:25
what ramifications may be, and then have to be a little more specific in the kind of financial institution you're willing to buy in terms of stock because of all those issues.
00:38:35
I'm glad you flag this and great getting those responses.
00:38:37
Leslie Picker.
00:38:38
Up next, Josh Brown just added three new names to his exclusive best stocks in the market list.
00:38:43
We will discuss next.
00:38:45
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00:39:02
Learn more at Capella.edu.
00:39:05
First on CNBC Verizon's CEO Hans Bestberg, earnings, outlook, and opportunities for growth, plus investing legend Mario Caballi, where he's putting his money to work now.
00:39:16
Stay ahead of the market, Squawk Box, tomorrow 6 a.m.
00:39:19
Eastern.
00:39:20
[Music]
00:39:36
We're back on halftime.
00:39:37
I'm Deirdre Bosa with your CNBC News Update.
00:39:40
Federal workers are being told to report names of co-workers who work in DEI roles or face adverse consequences.
00:39:47
According to emails sent to government employees Wednesday night, obtained by NBC News, workers have 10 days to report colleagues who made changes to personnel position descriptions.
00:39:56
Since November, in order to hide connections to those programs, the White House has yet to comment on details of the directive.
00:40:04
The teenager who killed three girls at a Taylor Swift themed dance class in England was sentenced to over 50 years in prison today.
00:40:11
The attacks set off street violence and inquiries over how the system failed to stop the killer, despite being referred to law enforcement multiple times over his violent obsessions.
00:40:21
And Amanda Knox got a final chance to clear her name when Italy's top court heard her appeal today of a slander conviction for falsely accusing a Congolese bar owner in the 2007 murder of her British roommate.
00:40:34
It's unclear when a verdict would be announced, but if the court upholds a conviction, Knox will not risk more jail time.
00:40:42
Scott, back to you, quite a saga for her.
00:40:44
Yeah, Dei, thank you very much.
00:40:46
That's Deirdre Bosa for us.
00:40:47
All right, we told you Josh Brown just updated his list of the best stocks in the market.
00:40:51
According to the things that he looks at, Robin Hood makes the list.
00:40:55
Let's do that first.
00:40:56
Yeah, I wanted to do Robin Hood because it's one of the names that's been on for a while.
00:41:00
And I think it's notable because it's so extended, but it's still in this incredible uptrend.
00:41:06
So I want people to keep an eye on it.
00:41:09
And I think it's going to set up, but it's just got to get a little bit less extended.
00:41:13
I think it's going to do that through a correct through time rather than price.
00:41:17
But let's talk about what's happening here.
00:41:19
It's within one percent of a new of a new 52 week high.
00:41:22
The last time this stock was at an all time high was right after the IPO and then it crashed and it was never near one again.
00:41:30
It had gone public back in July of 2021.
00:41:33
It's about three years.
00:41:34
What's happening here is incredible gross margins, which in addition to the technicals is how it made the list.
00:41:41
Gross margin has been above 85% for the last three quarters, which is remarkable, especially when you consider it's in the brokerage industry.
00:41:50
It's had greater than 20% net income margin for the last three quarters as well.
00:41:55
You're over your revenue growth outstanding 60% three quarters ago, then 69% nice.
00:42:02
Now 72%.
00:42:03
So this is a company that effectively is is a tech stock in the financial sector.
00:42:09
So I want you to keep an eye on this, let it consolidate a bit more, but it's going to set back up.
00:42:14
You want to do the next one or?
00:42:16
Yes.
00:42:17
I will prompt you on that one.
00:42:19
Is that okay?
00:42:20
Yeah, let's go.
00:42:20
Okay, Emerson Electric, ladies and gentlemen.
00:42:22
Funny you should bring that up Scott Emerson Electric is industrial automation hardware software and power tools.
00:42:29
Basically, you can to code everything I just said and hear one word robots.
00:42:34
EMR is a stock I flagged on the show about a month ago, maybe a little bit longer back in November.
00:42:40
RSI of 64, not overbought yet within 4% of making a new 52 week high.
00:42:47
This is absolutely a Trump trade situation, but it's a bigger story if you pull the chart back.
00:42:53
It's 2% above its 50 day, 14% above its 200 day, not terribly extended.
00:42:59
And if we can take out those previous highs from right around the end of the year, there are no sellers here.
00:43:05
Nobody is down in the stock.
00:43:06
So this is a name that should be on your radar.
00:43:09
And if you have little to no industrial exposure, it's trading really well.
00:43:14
Okay, last but certainly not least a stock that just hit your list yesterday, HD.
00:43:20
Home Depot, it's weird because this thing is now diverging from the ITB names.
00:43:26
Positively, it just barely made my list that has an RSI of about 58, which is rising and good.
00:43:34
Four quarters in a row of negative year-over-year revenue growth from July of 2023 through the first quarter of 2024.
00:43:43
And so the bet here would be that that's about to bottom out and potentially reverse itself.
00:43:49
If you get lower rates, the stock looks like it's a powder keg, it could explode.
00:43:53
I really get excited above 420.
00:43:56
It's abundantly oven right now, not yet a breakout in progress.
00:44:00
Wait to see how it acts around those previous highs and if she wants to go, it's going to be really obvious.
00:44:06
So put this one on your screen.
00:44:07
It's outperforming the ITB by 9% over the last 90 days.
00:44:12
That kind of positive divergence is exactly the sort of thing that should get your attention technically so that you want to go do the fundamental research and try to figure out why.
00:44:21
All right, good stuff.
00:44:23
Thank you for that.
00:44:23
Take a quick break.
00:44:24
We will be right back.
00:44:26
We have more breaking news to Aiman Jaivers now at the White House,
00:44:45
Aiman.
00:44:48
Hey Scott, that's right.
00:44:49
Our Megan Kasella and I have been just trying to get the back story here to that dramatic moment earlier today in Davos when President Trump was speaking to a group of business leaders and addressing Brian Moynihan,
00:45:00
the CEO of Bank of America.
00:45:02
And Trump really went after Bank of America saying that Bank of America and also JP Morgan, he said, "Debank conservatives."
00:45:11
And he said, "What you are doing is wrong to Brian Moynihan.
00:45:14
Moynihan sort of ignored that and kept rolling with the commentary and the event."
00:45:19
But it was a real flash point in that conversation this morning.
00:45:23
Getting the back story now from people here in the building to the sense of where this came from.
00:45:28
And what we're told is that this is a longstanding view among conservatives and that the President himself holds.
00:45:35
And he said this a number of times at rallies over the past year that Bank of America and other major Wall Street players refused to do business with certain conservatives and have debanked specific conservatives because of their political worldview.
00:45:52
Now, we'll see what the banks have to say about that.
00:45:54
But that is a view that the President has held consistently for some time.
00:45:58
I'm told this was not a pre-planned attack on Bank of America in the sense that the President went out to Sandbag, Brian Moynihan today, but more of a target of opportunity in the sense that he found himself on live global television talking with the CEO of Bank of America and decided to make this point directly to him.
00:46:17
And I can tell you also that there is an expectation in the White House today that Bank of America will respond to this and will respond to this relatively quickly.
00:46:25
They take note here that a number of CEOs have been doing a lot recently to get out of Trump's doghouse and they expect that Bank of America will respond in kind today.
00:46:37
We'll see whether that happens in terms of any kind of formal peace offering or policy change or something statement maybe from Bank of America.
00:46:47
But that's the sense here, Scott, is that this was something that's been on the President's mind for a long time.
00:46:52
He's spoken about it in rallies in the past.
00:46:54
And he took the opportunity today to make the point directly to the CEO of Man to Man as it were.
00:46:59
Back over to you.
00:47:00
Yeah, I mean, in fact, they have responded as Leslie Picker was talking about with us, you know, a few moments ago when they said, amen, quote, we served more than 70 million clients.
00:47:10
We welcome conservatives and have no political litmus test, although as I'm sure you'll agree that this issue is not likely to die on the vine, so to speak,
00:47:21
anytime soon given how this was said and where it was said and to whom it was said.
00:47:27
And it's just going to put the onus more on Bank of America and the banks in general to further prove their case.
00:47:35
One could suggest, but you want to wrap that up?
00:47:39
Yeah, I want to just give you one more thought, Scott, which is this is a different issue.
00:47:43
This idea of conservatives being debanked is a different complaint from conservatives and from White House officials and from the President.
00:47:50
Then the one you've also heard from Mark Andreessen, which is about crypto people being debanked from the banking sector under FDIC regulations.
00:47:59
There is some concern that Mark Andreessen has expressed publicly about, you know, regulatory action being taken under the Biden administration to push people with a high concentration of value and crypto out of their banks for risk management reasons.
00:48:12
That's a separate set of concerns.
00:48:13
They may also share that here at the White House, but this is specifically about people's conservative ideology and whether or not they're allowed to stay inside the bank for a variety of reasons.
00:48:22
And clearly, this is something on the President's mind.
00:48:25
You know, a lot of folks in corporate America have said that they're excited about this administration because they have a seat at the table.
00:48:34
But as we just saw today, sometimes if you're at the table, there can be direct face-to-face criticism as well as praise.
00:48:42
Excited until you're called out on the global stage.
00:48:44
I suppose, Aiman thanks.
00:48:46
We'll see you soon.
00:48:47
That's Aiman Javers outside the White House force, as you see.
00:48:49
We're back right after this with finals.
00:48:51
All right.
00:48:51
Welcome back to week 27 on the Dow.
00:48:52
We're only a few points away, by the way, from a new closing high on the S&P.
00:49:11
So we will watch that throughout the rest of the day.
00:51:42
crypto.
00:48:57
It's been volatile lately.
00:48:59
You bought more of the Ibit.
00:49:17
Yeah, big ranges, but for all intents and purposes, hasn't done much since the middle of November.
00:49:22
I talked about the show.
00:49:23
We want to add to it, waited for a little shake out about a week and a half ago.
00:49:27
It was a new low, was rejected into the 50 day moving average.
00:49:30
Good strength off of that we added.
00:49:31
And I think this could be setting up to see 150,000 over the next couple of months, few months here.
00:49:35
Okay.
00:49:35
We'll follow that, obviously, as well as everything else over the final stretch today on closing bell.
00:49:40
We'll see if we can get that closing high on the S&P.
00:49:44
500 Dan Greenhouse will be with me, Lauren Goodwin, Goldman's me to Flynn, as well, and Christopher Rohn.
00:49:50
So I hope you'll join me in a couple hours time.
00:49:52
We got about a minute left.
00:49:53
Do you want to give me a final trade?
00:49:54
Yeah, FCX.
00:49:55
Today's earnings report.
00:49:56
It's come off the lowest, pretty good.
00:49:57
Indonesia Productions flushed out.
00:49:59
I think copper is going higher.
00:50:00
FCX will follow.
00:50:01
Okay.
00:50:02
Absolutely agree.
00:50:03
And I almost chose that.
00:50:04
Yeah, you think copper.
00:50:05
You're really excited about copper?
00:50:06
Well, it's cheap and the earnings growth is great and the free cash is unbelievable.
00:50:10
They be profits.
00:50:11
You own free port?
00:50:12
Yeah, in our growth portfolio.
00:50:14
All right.
00:50:14
Well, you missed your opportunity.
00:50:16
He front ran you.
00:50:17
No, no.
00:50:18
I'm glad.
00:50:18
I have another one.
00:50:19
Who's Clearway Energy?
00:50:20
Clearway, that's me.
00:50:21
So Clearway is a renewable power generation company.
00:50:24
It's down 6% with all the fossil fuel rhetoric that's been coming out, but it's not at Clearway's expense.
00:50:29
So now you get to buy this stock with a 7% yield.
00:50:32
Thank you very much.
00:50:33
Josh Brown.
00:50:34
Nasdaq successfully retested the breakout level and is now on the rise once again.
00:50:40
Keep an eye on this name for the IPOs that are to come this year, primary beneficiary.
00:50:45
All right.
00:50:45
We've been up 6 to 7 days.
00:50:46
We'll see if we can notch another positive day on the S&P and maybe a record setting one.
00:50:50
I'll see you at 3.
00:50:52
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