AI Safety Concerns Pushe Tech Stocks and the Market Lower: Your Next Move 9/14/26

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1:15Thank you, Carl. Welcome to the Halftime Report. I'm Mike Santoli in for Scott Wapner today. Front and center this hour, AI stocks sell off. The 10-year yield cracks 5%, and a Fed decision looms large this week. We will trade all of it with the Investment Committee. Joining me for the hour, Joe Terranova, Liz Thomas, Stephen Weiss, and Jim Labenthal. Let's get a quick check of the market. The index is still lower, but well off their lows from earlier. S &P 500 got down below 7 ,600. It's up about half a percent from where it kind of retested last week's lows. NASDAQ has been the underperformer, but MAG7 helping that come back.

1:52Ten-year yield, you see, has come off the boil. It did crack 5 % and a few little fractions of a basis point now back to 495. We're going to have more on that move in yields in just a moment. But first, let's get to Kate Rooney with more on what's driving the slide in A.I. stocks. Kate. Hey, Mike. Well, it goes back to what we saw over the weekend. Anthropic CEO Dario Amadei really shocked the tech world with an essay out on Saturday. The CEO proposed a three-step plan aimed at tempering how fast some of the most powerful AI and AI models out there are going to be improving. He talks about third-party evaluators as part of this, safety standards, and then international coordination as well.

2:31Amadei has argued for safety in the past, but he does talk about this with some new urgency, given some of the recent panic around the risk of this technology. did snowball last week after anthropic researchers tweeted about the existential risk of AI labs and said that they are, quote, gambling with our lives. Two new concerns from Amadei that he flags. He talks about AI developing a lot faster than expected. And then an example of open AI agents hacking into the startup, hugging face if you remember that. He called those agents a fanatically devoted collective. Major AI leaders agreed with Amadei.

3:06You don't see that every day. Elon Musk saying that Dario is right, said that on X, Sam Altman, the CEO of Anthropics' biggest rival, OpenAI, tweeting his support as well. At the same time, though, Altman told Fortune over the weekend an IPO right now would be ill-advised. He did say 2027 for their own listing, although we have reported that the AI giant, OpenAI, was already likely to list next year anyway. So grain of salt there. I did speak to some people over the weekend who argued that the safety push could actually help Anthropics' IPO, positioning the company now as a responsible player, reducing some regulatory and liability risk.

3:40And then multiple investors told me the growth rate still off the charts. They do expect the IPO to go forward. I also confirmed with a couple of sources that Anthropic has seen back to back quarters of at least adjusted profitability and then a new wrinkle in all of this. President Trump weighing in this morning, slamming Amadei, saying that the only guardrails AI needs is a strong and smart president. He goes on to say there's a sick conspiracy going on against AI and data centers that the only one that's happy about this, Mike, is China. So, Kate, you know, among the many questions that pop up here is what it would mean in a practical sense for there to be a slowdown in the pace of development at the frontier in the terms that the market cares about.

4:22Right. You know, what does it mean, given what we already were assuming about maybe some some kind of snags in the data center trajectory of build out and just exactly how much we've already kind of put in the ground and is already in the pipeline. So I just wonder where this all comes in, if it's more just messaging that, hey, we have to be careful here. It's a great question. The big thing I heard from investors over the weekend, Mike, the big question that they have is training, is how much of the committed capital for compute is going to have to shift and maybe pull back if they stop training the models at the same rate.

4:56Within that essay, Daria Amadei says that they're not going to necessarily slow it down and tries to put some nuance behind it. But the headline is a slowdown. So investors are really trying to parse through what that actually means and who is going to agree to this because he talks about having safety standards, but it's not clear that everybody in the industry is going to see that the same way. And it comes at a time, of course, when this company is going public, OpenAI is looking to go public. They are tasked with impressing Wall Street growing their revenue. And a big way to do that is to have the best and most expensive model.

5:27And so they really are walking this tightrope of holding back a bit, which, again, from a perception standpoint and them avoiding legal liability, regulatory pressure, they need to do that. And they've had to react to what we saw last week and some of the risk factors. But at the same time, they want to impress investors. And the big thing that investors have been focused on and is likely to be front and center for the IPO roadshow is that revenue growth rate. If that starts to get dented, that's where you're going to see the risk of the valuation. And it's all about future earnings, future profitability.

5:57I think the hangover and the question of what does this actually mean if this moves slower is the big unknown, at least for folks that I'm talking to. Yeah, for sure. Kate, thanks so much. So, Joe, the market is finding something to react to here, right? Semiconductors, the socks is down 5.3 percent. That's not nothing, obviously, especially since it came into the week down 20 percent. Where do you view this? I guess along the spectrum of nothing burger to game changer? I think it's consistent with the 2026 playbook where the market just wants to rotate. And that's what I'm seeing today. Let's remember for the semis, specifically the SMH, the high was back in June.

6:36So it's never been able to exceed its previous highs. And in the interim, the market has played this game of kind of cat and mouse believing that there would be a restart. The momentum factor in semis itself, that kind of stalled out. When that occurs, it seems as though the market wants to go to the mag sevens. You have Apple once again advancing today, approaching that all time high at three forty. It's the software names that are performing really well today. Health care as well. So I still think it's this game of rotation that's being played in the market. One other point at 1026 this morning, A 10-year touched 5%.

7:14And we are seeing if you could show an intraday chart of the 10-year that we have pulled back about five basis points. Look, that's a pretty big move in basically a 90-minute window. For sure. No, that's a definite element of what's going on today. And it was interesting, Liz, because it came into the day saying that the market's premise of why it was able to stay near the highs was almost attacked on two fronts, right? You had the yields oil story. But then, you know, the AI earnings power story. And if the market is happy to say, well, maybe the spenders are going to be OK, even if the vendors have to do with less in the future, you know, we can get to that point of having built out quicker.

7:56That's OK for hyperscaler type earnings. Well, I think, first of all, on the point about the 10-year, we hit 5%. I think the market is making a bet that the Treasury, the Fed, isn't going to let the 10-year get much more above 5%. I'll take that bet. And I started talking about buying the 10-year around$480. I would still buy it here. So I think the 10-year piece of it, right now, we're sort of flirting with danger, but everybody is aware. In the AI trade, I'll answer the question for Joe, too, that you gave him. is this really an issue that changes the game? I don't think this statement changes the game.

8:32I mean, in reality, he's talking about hoping for collaboration among AI companies, among countries around the world, among the government. I don't think that's going to happen very easily. So the solution is not going to be put in place that way. But the market trend was already in place before this essay that we were going back to the mag-7, right? The market cap weight at S &P has caught up to the equal weight this year now. and small caps are sort of losing their footing. Investors are going back to, and I've said this many times, it's that muscle memory, this entire cycle, the muscle memory of those Mag7 names, of some of those hyperscalers.

9:07And right now, yes, they're a little freaked out about semiconductors because that's the high beta play. But I think if there's a buy that comes out of this, it is cybersecurity for the long term. I mean, where else can you say in technology that demand is going to absolutely stay high other than cybersecurity? That's all true, Steve. That's how the market is digesting this. On the other hand, semis themselves are a big part of earnings growth projected into next year. And so it's really hard to sit here today and say, you know what? We think 2027 numbers are too low, at least harder today than it was Friday, if this matters at all.

9:42And I guess the other piece of it is the market, you know, the Nasdaq hasn't made a high, as Joe suggested, since June. It's like 15 weeks. And part of that is that the amazing earnings season we just saw represent some degree of pull forward, some kind of over-earning and all the rest of it. So how does that all shake out into the here and now? It shakes out with not much credibility right now. And I'll tell you why. For not only the pull forward, but when you take a look at crude, it's such a big feedstock to so many things that we do away from semis. look at that in a second, that that's going to impact margins, and that will impact earnings.

10:22And then you've got demand. And the funny thing here is, ironic funny, not ha-ha funny, is that even the Fed tightens, tightening to reel in a supply shock doesn't work. And what we're seeing with oil is supply shock. So the question is, how much can they really tamp down inflation by raising rates. So, and then what you see in the last half hour is the president came out for the 30th time, maybe it's the 50th time, said that Iran's looking for a quick deal. Sure. That's just an asinite statement, as we've heard so many other times. And the market, if they're stupid enough to believe it on the 51st time, let them do it.

11:04In my view, we're going to go through 5%. You know, the Fed's not going to be able to help that. and that the market's going to be in a trading range favoring the lower end. As far as semis go, yeah, there's a lot of air there. I still think that the AI story, the spending is not going to stop. Are they going to slow it down a little? Possibly. What you see, and you alluded to this before, is that we're seeing Meta and Microsoft and Alphabet move up because say, OK, great, they're going to slow down spending. So you see both sides of it. The market's really taking both sides, whereas I think if you went back six months, they would say everything's down.

11:44So it's kind of a mixed market. I just still don't believe you put new money in here. Now, take a look. Let me just give this one. So Broadcom. Broadcom missed, right? So they missed arguably this time. They missed last time. You can say, okay, they reported good numbers, guidance, squishy things in their margins. The stock has never bounced. It bounced for brief time, right? I bought it after the prior quarter, bounced a little bit, sold it flat, and it traded at 4.10. Now it's back down to, I mean, or below where it was before, 3.46. To me, that's the message in the market. You can pick a falling knife here, particularly when you still have valuations that are too high.

12:26Jim, you own Amazon Alphabet, Microsoft. So, you know, that's the port in the storm today. whether it really holds water in terms of, OK, we're going to stop spending. We're going to stop borrowing so much to spend. The CapEx plans for 2027 maybe are kind of skewed to the downside. I don't know what conclusions we're drawing, but somebody wants to own these rather than Broadcom. Yeah, I mean, it's hard to get awfully negative on the markets, Mike, when those names that you just reported are actually up. Now, Amazon's obviously red. We see that. But Alphabet and Microsoft. And Microsoft, let's not forget, has had a heck of a nice bid recently.

13:04So, you know, when something as big as Microsoft is performing as well as it is, again, really hard to get negative on this market overall. And for all that's thrown at it, Steve, you pointed out very aptly where diesel prices are and crude prices. You know, that's a lot. Joe, you pointed out the tenure. That's a lot for a market to digest. And yet we're only 3 %-ish off from the all-time high in the S &P 500. Only 4 %-ish off from the NASDAQ's all-time high. Ultimately, this is a market that goes higher. You can wait if you want to. You can do the September seasonality thing. But ultimately, I think this is a market that will crescendo into year end.

13:39That's usually the pattern when you've had a strong year and then you fade a little bit in September. Profit growth. Labor markets are more than stable. They're good. I'm going to say that. You've got an economy that's growing nicely. So that's a good combination for a strong end to the year. I guess the big question is, if it happens, by the way, is what level we're ramping off of. But you go into midterms. Midterms. Yeah. Always unsettle the market, particularly now. Usually. Okay, always a generalization that we use here in Halftime Report. But I'll just say usually, not always. And so that's something else to figure into the calculus and what happens, right?

14:16And do we pay down any debt right now? Best in saying, we'll grow into it. When are you going to grow into$4 trillion to the negative? That's ridiculous as well. So there are lots of other headwinds here, with the base case being your optimistic case. So the question is, does that hold up? Right. If I could, Mike. So if you look from a secular perspective, I think we would all agree there's an overwhelming bullish bias. I maintain that bullish bias as well. Here we are in September. You have headwinds in front of you. You have no visibility in earnings. So this market could go anywhere. I said that last week, Jimmy, 50 up, 50 down.

14:51Who knows the answer to that? So you say to yourself, what's the risk as you move forward? And I hope the scenario doesn't unfold. The risk actually is, is that the market is still 3 % from the high. The market has not caved just yet with oil prices, with what we're hearing from AI, what we're seeing from yields. It is not because people believe 60 to 90 days from now, this all resolves itself. And the bull narrative is back. And candidly, that's kind of the biggest risk in the market. Yeah. Because in that scenario, everyone is positioned one way. And if they're not receiving what their expectation was, they are very quickly exiting from what will only be one door.

15:32That is the inherent risk in the market right now. I don't subscribe to it. I hope it doesn't happen. But you always have to know it's there. Let me back that up. And this goes with what Steve was saying is what's happening in the oil markets is exactly what the CEOs of ExxonMobil and Chevron said would happen back in April. They said you can get away with drawing down on inventories. You can get away with China curtailing its demand, but only for so long. And we're seeing that without Iran resolved, you have this perpetual problem now, particularly with diesel, which is going to factor through into food prices, into transportation costs.

16:06Steve, you made a point. It's a good one. I want to repeat it. That the Fed is raising to adjust to a supply shock, which is not a good way to raise rates. They can't open the Strait of Hormuz. They can't solve this problem. Nonetheless, they are probably backed into raising rates more than once based on what Chairman Walsh has said at Jackson Hole and just based on what the inflation numbers are. It may be a mistake to raise into a supply shock, but that's likely what they're going to do. So the biggest risk then, Joe, is stagflation. Yeah. Where you have a slow economy and raise and rising prices.

16:37And I think that we're going to start hearing that word more often now. But the number of times we've heard that word in the last six years. Agreed. Agreed. Honestly, is I mean, you know, we're starting from a place of like six percent nominal GDP growth. I mean, first, we're worried about an overheat from from CapEx. And now, I mean, maybe it could be that we lose some of those, you know, the cyclical drivers from behind. I do think, though, Liz, you can look subtly and say, yep, the S &P 500 taking like a champ down less than three percent. Equal weight cracked a little bit, broke the 50 day moving average.

17:12So the median stock has actually been, I guess, succumbing a little bit to the macro pressure. Absolutely. And in fact, you've seen some defensive parts of the market start to wake up a little bit. OK, so a couple of points that were made earlier in the show. When you look at midterm election years, the sectors that tend to do the best are health care and staples because they're defensive. This year, health care is absolutely living up to that. And I think it will continue to, maybe not from a defensive perspective, but because it's been a beneficiary of the rotation trade out of tech into growth, the areas like pharma and biotech.

17:44When you look at the 10-year Treasury, I think it hit 5 percent because, yes, we have a supply shock issue. Yes, we have oil problems, not because the economy is overheating. So even with 6 % nominal GDP growth, the Fed hiking into an economy that's just doing meh, in my opinion, we got 1.5 % to 2.5 % real GDP growth, is the biggest risk right now. I don't think it's what we've already talked about. I think the biggest risk is that the Fed puts the dampen on this economy in places that it can't hold up. So the market's strength right now is not as broad as it's been throughout the year. And we've, as investors, been hanging our hats on this broadening of the economy.

18:24Look at what's happening in industrials. There are some cracks going on right now that are to be concerned about. And I think we have to pay attention to them. It doesn't mean that they're permanent. It doesn't mean that they're the canary in the coal mine of a recession. That's not at all what I'm saying. But the market going back to a concentrated large cap leadership is a more fragile place to be. So I think we do have to be careful. I think the Fed has to be careful here. And it's becoming more of a political battle, which is, again, a risk. I would. Yeah, I guess it's debatable as to whether it's more fragile.

18:54It certainly has fewer legs to stand on. I do want to get to the industrials, though, Joe, because AI levered industrials are getting smoked because that's the area where it really matters what's going to happen in three, four or five years. It's not just next year's numbers because they're sold out for next year. We all know the story. AIPO is is the AI power and infrastructure ETF. It's got the Vertives and G. Vinovas and Eatons and all the rest. So I know you have some of those in the portfolio. We sure do. How are we thinking about that? No, not particularly happy about it and troubled by the fact that the momentum factor has broken down late in the second quarter and has had this inability to rebuild upon what was a really first half of 2026.

19:40That inability is going to put a lot of these power names in a difficult position as we move forward through the end of the year. It's very easy to come on the network and say, OK, this is a buying opportunity. You want to be long these names. And that, in fact, is where we sit. GE, Vinova, Virta, Quanta, Eaton. We sold out of Caterpillar in the last rebalance. But we're sitting there and we will remain there until the next rebalance. But they are in a much more perilous position when you're relying on the momentum factor itself relative to where they were just three months ago. From a fundamental standpoint, you also have to obviously call into question for whatever the motivation might be.

20:20If OpenAI is saying, OK, let's take a pause and maybe and my perspective is I think it has a lot to do with maybe putting Anthropic in a position that we don't see them IPO in 2026. Maybe that's the motivation behind the scenes. But whatever it might be, if you tell me we're slowing the rate of spending and if you tell me that yields are going to remain high, that's a disincentive to see more supply in the debt market hit the market. That is absolutely going to affect these industrial names, Mike, because they have lived. They have thrived over the last eight quarters on the continual spend and the bills.

20:57Well, they're living off of the forward order books for which nobody has the money to pay for. So that's the has the money has to be raised. The revenue has to grow for the ultimate buyers. Which includes members, right? For sure. It definitely does. Now, I mean, you mentioned the IPO store. I mean, obviously, this is the CEO of Anthropic, who's the one who's actually out there saying, let's slow down. I don't know that it's meant to be a signal about the pacing of its IPO. But, you know, Steve, it's funny. One of the bear talking points coming in was, oh, no, too many big IPOs. It's going to swamp the market with new equity supply.

21:30And now people are saying, oh, no, the deals might not happen. because that means capital is not going to be raised. Where do we think this is going to hit? Well, right now, the market thinks that it's going to slow down all IPOs so we can take a look at Goldman Sachs and see that down, which is sort of like a practice for the IPOs. I think there'll be less supply coming on, and I also believe that that'll be a function of the private markets. So the private markets are really where AI lives and breathes much more so than the public markets. And if you're saying spending is going to slow down, these companies aren't profitable anyway.

22:05They've got to extend the timeline to when they are profitable, which means they're going to have to raise more capital. So I think you'll see a thinning of the herd if this, in fact, goes on, if there is, in fact, a slowing in the private markets, which will put up less candidates in the pipeline to come public. So that's going to be we haven't really seen trouble in the private market. I think the key will be assuming Anthropics S1 goes public. We see the numbers and then we'll debate what the numbers mean, how they're characterizing, you know, their actual profitability adjusted for everything they pay for.

22:40And then we can, you know, we'll have a better debate on all of it. Which can be the most interesting in the S1s is seeing what they talk about as the risks. Yeah. So David Sachs mentioned today the product liability risk from their agents. So what does that do to your valuation? Yeah. Mostly for IPOs, the risk factors are immediately ignored. And so probably nothing, but we'll see. All right. Still ahead. Gaming out the Fed's next move and what it means for the financials. Halftime is back in two minutes.

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25:15Welcome back. Market continues to narrow its losses, S &P and NASDAQ down just a quarter of a percent right now. It's a big week for the Fed with a rate decision coming on Wednesday as the 10-year crosses 5 % for the first time since October 2023. Wells Fargo out with a note saying that J.P. Morgan Bank of America and Citi are among those set to benefit. Steve, a quick word here. First of all, Wells Fargo, that's Mike Mayo. He loves the big banks, always loves the big banks, likes them here. That being said, the market seems OK point to point with the clarity that we're getting a Fed rate hike on Wednesday.

25:50Yeah, I think so. I mean, it's been it's been talked about for a while now. And I think it was messaged by Warsh, even in his first meeting, who said, let's let the market talk. Well, the market's spoken. You're at 5%, so you're going to raise rates. I think it is good for the bank. We've seen some steepening of the yield curve over the last month or two. So that means they can make more money. Minor. It's not a lot, but it's going the right direction. And I think you could possibly see that continue. So, look, I think the banks look great here. I mean, to me, it's also a hedge on the economy in terms of if the economy, if I'm wrong, the economy doesn't slow down.

26:29I'm looking for a major slowdown. The banks, and I own Goldman Sachs, the only one I own. I am looking at Wells Fargo, but they continue to do well. So today, aside because of the IPO, I guarantee you they've got enough M &A to do, and they've got enough other high-margin business to do, including IPOs, they're going to be fine. I don't know. I'm not worried about Goldman Sachs at this point. Liz, you suggested you think a hike's a mistake for, I guess, the main street economy or the sort of non-financial market dependent one. How would that play into the outlook for banks? Well, banks usually do well when when the Fed hikes rates, but a flatter yield curve is problematic for banks over the long term because it crimps their net interest margin.

27:13And I'm not worried necessarily about what it does to the financials. I do still think that a hike would look like a mistake in hindsight. I think right now it would be a reaction to the market, not to the economy. And that's where you see the pain longer term. Now, if we want to compare it to the 90s, it depends on whether you think this is 1997, where they hiked once, 25 basis points, or this is 1999, where they kept going quite a bit. And that was the beginning of the end. And I happen to think that this would be more like 1999 because Kevin Warsh has committed so much to that 2 percent inflation target.

27:46Twenty five basis points isn't going to get us there. So I think it starts to look like a hiking cycle. And that's the real problem, which eventually is not good for just to just to get into the details of 99 June of 99. They start to hike again after the 1998 financial panic. By February of 2000, markets up huge. Economy is ripping. Greenspan says, I thought it would have more of an effect. It didn't work. Another 75 basis points. And then it's over. So that's kind of how it goes. Like you think it's you think it's fine tuning until it's something else. And Joe, I think a key point here is I know that there's a conventional wisdom developing that Fed rate hikes, we get one, two, three, whatever it is, it's going to control the long end.

28:31Right. So I don't know. That's a pretty debatable issue. So I think we all appreciate that encyclopedia of knowledge. I just was looking it up last week. That's pretty good, Mike. But here's what I would say about a rate hike. I think the minute you get the rate hike, the market begins to price in when you're going to get the rate cut to take it back. Because I think that's the game we're going to play. I think we're going to get the rate hike and then everyone's going to say, OK, oil price is relaxing. We've got yields moving lower. Now we need to take the cut. We need to take the hike back and put in a cut.

29:05Does it depend what they say, though? I'm sorry? Does it depend what they say? I think the market gets in front of everything. I think the market got in front of the rate hike. Well, it got in front of the rate hike, but we got three cuts last year, and then we came into the year pricing in three more. It's not like the market says, oh, the turn's coming. I mean, I think that one and done is exceedingly rare. It's not going to happen one and done. Right. So the reason to go is if you think you need to do more than 25. Right, Jim? I mean, so if we take it back to three, three cuts from last year, consecutive heights are a problem.

29:41Liz pointed out, though, that Chairman Walsh painted himself in a corner and he did. He did. He's got to go or he loses credibility. We can debate and we are debating whether it's the right move to make in terms of hiking into a supply shock. But I think it's pretty sure he's going to go. Then you've got October coming up and you're one week before the midterm elections. Look, we know the Fed is not a political animal, but they're not oblivious to the optics politically of raising rates one week before the election. They're not going to do that unless they're incredibly stupid. The Fed was hiking every meeting from April of 2022 through the midterm elections.

30:16But they were hiking in 2006. Much different. Of course, everything's different all the time. Yeah. And right now, inflation's been above target for X number of years. The two years are four and a half percent. What are we doing? Listen, look, I think they raised this week. Oh, yeah. Oh, they skipped. Fine. Whatever. I think they'd be crazy to raise one week before the elections, notwithstanding the point you just made about history. And then the question is, what do they do in December? Unfortunately, I'm of the camp, I've already said it twice, that these energy price spikes haven't yet flowed through in terms of the overall inflation.

30:49I don't like saying that, but it's just what the logic to me says is that diesel price is well at a record and really no sign of capacity coming online. It's not like Russia can all of a sudden fix their refineries and start exporting diesel again. I think we're going to be battling with this for the next couple of quarters. The quickest way for the Fed to lose credibility is to let hint at all in any of their talks. I know they're not doing what we had Jay Powell doing with all the constant dialogue. But for the market to get the perception, the next move is going to be a cut. That would destroy all credibility the Fed has.

31:24I think you have a series of rate hikes and your bull thesis and my bull thesis and the general bull thesis that we close the year going back towards the high. I think you have to really take a very strong look at that because I don't think that's what's happening. You're telling me we're getting multiple rate hikes. All right. We'll see you three steps in a stumble. We got all the old sayings we can go back to. All right. Coming up, our top calls of the day, bullish analyst activity on gold, software and more. We'll debate it all.

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33:43Well, we're back on Halftime Report. I'm Contessa Brewer with your CNBC News update. a shocking new report that reveals detainees were confined in small metal cages at the now shuttered immigration facility in Florida. It was known as Alligator Alcatraz. According to the Department of Homeland Security's independent watchdog, these outdoor cages about the size of phone booths were used as so-called calming areas. The report called this practice highly unconventional and said it did not align with standards for humane treatment. A group of mostly Democratic states has filed a lawsuit federally to stop a new Trump administration green card policy from taking effect Friday.

34:23The new rule would give immigration officials wider authority to deny green cards to people using public assistance programs. The states argue that's illegal. And the European Union once again is looking at tougher guardrails for children using social media. A new proposal would create a tiered system for social media access for those younger than 15. France, Austria, Denmark and a number of other countries are not waiting. They're just pushing ahead with their own social media laws fueled by growing concerns over the effects on mental health. That's the news now, Mike. I'll send it back to you.

34:58All right, Contessa, thank you. Well, let's get some calls of the day. Citi bullish on gold, eyeing forty eight hundred dollars an ounce in the next three months. So, Liz, the iShares Gold Trust was your final trade last time you were on. You've been been on this one. Higher real rates, in theory, should should hold it back. But how are you thinking about it? It was my final trade last time and the time before. So on August 19th and September 2nd, it's down one to three percent, depending on what your start date is since then. I think it's more attractive now and I would still buy it, continue buying it.

35:30It is generally a zero yielding asset. So when rates rise, gold is less attractive. But I think now it's become a geopolitical hedge again. We are worried around the globe about what central banks might do, what inflation is doing. And I think this is an attractive entry point with gold trading below 4 ,300. I remember when we were so worried about it being 5 ,000 and people were calling for 7 ,000 and 8 ,000. So I think 4 ,300 is a good place to be. I'm still long and bullish. One of the questions, Joe, is if we'll get back to that point when it really became also a retail kind of momentum play.

36:05So we have a chart of spot gold. If we could get spot gold up, you could see that it was back in January where you had that parabolic peak in the precious metals. What I'm seeing in near term is that over the last 30 days, you had this little reflex momentum driven bull move higher in the context of a larger downslope for 2026. So a little bit different than your perspective, just looking at it from a technical and momentum oriented standpoint. I don't trust the rebound that we had recently. I think you could fall back towards the lows that we made in June and July. On some individual names, Morgan Stanley cutting App Lovins target to 450 from 650.

36:51I mean, obviously, this is just kind of marking this to market. The stock peaked above 600 a few months ago. Joe, you on this one? This is a broken momentum stock. It's now 42%. If you're looking at a 12-month momentum score, if you're looking at a three-month momentum score, it's down as well. So from the perspective of it residing in the JOT ETF at the next quarterly balance, accordingly, based on what the rules are for momentum, we'll figure on the position. As far as advocating it to buy it here, I don't think you want to do that. I don't like buying stocks that are near a 52-week low, despite what might be the vision of some really good fundamentals ahead.

37:25allow the stock to stabilize and begin the recovery period, then step in, buy it. I think the same thing could be said for what we talked about before with those industrial stocks. Same thing. If you have them, OK, let's see what happens as we move forward here, if you're going to have to liquidate them. But don't step in and buy what is near a 52-week low. Let it prove itself first. Let's get to Disney, Rothschild cutting Disney's price target. I mean, it's a trim to 125 from 160, Jim. So nobody thinks that Rothschild, this one's going to run away from you. I'd be happy at 125. I mean, let me start there.

38:03The stock has had a little bit of a rally since they reported earnings in early August. Now, a little bit of a rally, up 10-ish percent. Obviously, the market's been flat to down in that period of time. There's a lot of rotation, to use Joe's terms, going on in the travel sector. We've seen Marriott roll over just as Disney is coming up. When I get to the end of the analysis here, what I look at is a stock that's trading at 14 times forward earnings for a well-known brand, one that does have consumer appeal. And I'm going to stick with this for now. Netflix, Weiss, at Evercore, just raising the price target to 110 from 100.

38:38Did notice it was among the S &P leaders. It kind of gets stuck in the AI disruption basket along with some other stuff. So we got a little bit of a nice bounce today. You sold it a little while ago. Yeah, I did, actually. And I'm glad Scott's not here because I neglect to mention I brought it back. Is that the only reason you're glad he's not here? No, there are many, many, many, many others. I brought it back not far from here, actually. Yeah. Because I do have a lot of cash. Yeah. I thought this was a safe one. I'm not so sure about the upside on it, but I think the downside's been taken out.

39:12As you see other streaming services raise prices, they actually are close to the value player on the street. So I think it's OK here. I'm not sure it gets to 100 anytime soon. All right. We have some breaking headlines crossing on mortgage rates. Let's get to Diana Oleg. Diana. Well, Mike, the average rate on the 30-year fix jumped yet again. Five basis points this morning to 7.17%, according to Mortgage News Daily. That is the highest level since January 2025. Mortgage rates, of course, loosely follow the yield on the 10-year Treasury, which did cross over to 5 % to a multi-year high. Now this, after the August Consumer Price Index Friday came in right along expectations but was still way above the Fed's goal of 2 % inflation.

39:55Now mortgage rates are now up 29 basis points in just the past week. The timing not great as the Labor Day weekend marked the start of the fall housing market after a pretty slow summer. Inventory is rising but affordability is weakening with every push higher on the 30-year fixed. Mike? For sure. Yeah, well, we'll see if that 10-year yield has peaked, and I guess mortgage rates would only then follow. Diana, thank you very much. Up next, your ETF Edge with Dominic Chu. Dom, what's coming up? All right. So, Mike, the rise of retail traders in the markets has taken off in the years post-COVID pandemic.

40:28But it's not just plain vanilla index products they're using anymore. A wave of ETF product innovation has given traders a lot more tools in the kit. We're going to take a look at some of the big trends driving the retail trade in ETFs. That story is coming up next on ETF Edge on The Halftime Report. Keep it right here.

40:48Welcome back to The Halftime Report. I'm Dominic Chu with today's ETF Edge. Skyrocketing demand from retail traders and investors is drawing and driving a new wave of ETF products. But are all of them well received or are some just missing the market amid the frenzy? Joining me now for this conversation is Justin Schack, the Rosenblatt Securities partner and head of market structure. Over the years, Justin, you've seen a lot of things develop in markets with regard to products being unveiled and kind of what happens in times of calmness and stress. ETFs have come a long way. What exactly are retail traders doing these days with the ETF products that are out there?

41:24And how exactly are they trading them? Well, we tend to see a lot of interest in products that offer the opportunity for like a quick movement in a short period of time to capture that if you want to trade short term. If we look at the products that were most active, the ETPs in the month of August, eight out of the top 10 were leveraged or inverse type products, ultra long, ultra short. The other two were Bitcoin. So fitting into that category. Then if we back out even more and look at just the top five stocks, not just ETF stocks in the entire market, four of them were ultra long or ultra short single stock ETFs.

41:57The other one was Bitcoin. Five of the top 10 were ETFs in that category. And what do you think is driving that kind of sentiment, I guess? Is it that retail traders versus institutional, as much as you can draw a generalization, are more geared towards kind of those bigger moves and are willing to tolerate the risk that they have with them? Yeah, I think there's a segment of the retail base that's definitely geared toward that. And that's a difference between what we see today and what we saw maybe with the first wave of online brokerage 25, 30, 35 years ago. There's more of a sense that like, hey, I need to get involved with these really sort of high risk, high reward type products because maybe I can't afford that first house.

42:37Maybe I can't afford that middle class lifestyle the way that my parents or grandparents could. So I'm turning to these markets and sports books and everything else out there to try to make up that difference. All right. Well, this is an interesting conversation. We're going to continue it over at ETFedge.cnbc.com. Justin's going to be joined by Sylvia Jablonski, the CIO co-founder of Defiance ETFs. And Mike, what we're going to talk about is the advent of recent and reset hourly ETFs that are levered and inverse. It's a mouthful. But there's products like that that are being in the pipeline and coming to market.

43:13It could be an interesting move on market structure in the coming years. I'm sure when six and a half hours is just too long to wait for the reset. There you go. All right, Dom, thanks very much. Up next, options action. Oliver Rennick is tracking a move in rates today. We'll take you live to Chicago. Halftime is back in two.

43:46The Dow turned slightly green out to the Russell 2000. Let's get to today's options action. Oliver Rennick joins us from SIBO Global Markets in Chicago. Oliver. Hey, Mike. Options traders look a lot more responsive to AI scares than they do bond market scares. VIX popped to 18 this morning, and VIX options volume is more than twice the 30-day average with a lot of call buying. That is basically the opposite of what we saw on Friday when VIX crushed despite the bond market, all but locking in an interest rate hike for Wednesday's Fed meeting. We even saw a heavy call buying in the TLT ETF this morning with more than five times as many calls bought versus puts before treasuries reversed and rallied.

44:27One argument is that bonds present a slower moving and known threat now, whereas big changes to the AI path might be reason to buy up crash insurance. And we absolutely saw some of that this morning with someone buying, in addition to other bullish VIX contracts, $2.7 million of the 31 strike calls expiring in mid-November. Contracts going for about a buck each right now and need a big sell-off to pay off. All right. Upcrash in long-term treasuries. Haven't heard a lot of talk about that lately. Oliver, thanks. Good stuff. Coming up, we are trading the airlines. Those stocks also under pressure today.

45:03How the committee is positioned next.

45:19airline stocks losing altitude over the past month. Jim, talk a little bit about Delta here. Yeah, well, you know, it had a great run up until earnings. I did say at the time that I thought it was a little bit ahead of itself. I didn't know that oil prices were going to rise this much. And look, that offsets the gain that you're seeing from the demand side of this equation. All you have to do is take any flight going to any airport. I don't care if it's Indianapolis or JFK. They are packed. So the demand is there. You are seeing in the CPI Friday that airline ticket prices are going up. But oil's a headwind, and it will be for the foreseeable future.

45:53Joe, any technical damage done here, Delta, or any of the others? Remember, we own Delta and United in the ETF. Why? Because they are momentum players. So they're in all of the major momentum funds, and that's been punishing over the last several months. I think Delta is in a much better position. Technically, it sits above the 200-day moving average. United's broken down. I like Delta's loyalty rewards program, premium flyer, and they also have the refiner exposure. Yeah, I mean, that's been why it's been able to kind of separate a little bit from the pack. All right, stay with us. Final trades coming up on HapFast.

46:43We are back with our final trades. Jim, get us started. Well, in a topsy-turvy market, we're not quite sure which way it's going to go. I am, with what Liz said, going with health care. AstraZeneca is right in the middle of the fairway for that space. Weiss. I'm going with Leidos. It's up today, but it's off the previous highs. I think it's got a very attractive offering going forward. And it's defensive, being a defense company as well. There you go. Liz? I'll take a 494 yield on the 10-year. I would have rather taken 5, but 494 is still pretty good. We'll give you credit for catching the 5. You liked it coming into the day.

47:16And I guess the bond math starts to work if you start it with a 5 % yield. Thank you. I appreciate that. All right, Joe. Expeditors International of Washington is a$25 billion company with over 68 % revenue exposure overseas. and hitting a 52-week high today as we speak. All right, we'll see how the afternoon goes. You have the S &P 500 down just 0.2%. The Dow is slightly positive, Russell 2000 as well. It does it for halftime. The exchange starts right now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC. All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, internet, or another medium.

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