Amazon in Focus as the Nasdaq Slides 10/3026

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0:58Scott Wapner: I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast, the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in.

1:13Scott Wapner: Carl, thank you. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour, the latest on today's tech rec. Amazon, Intel, obviously, the earnings are weighing on the space. Many other names are being dragged down as well. We're trading all that with the committee today. Joining me for the hour, Steve Weiss, Jason Snipe, Jim Labenthal, Bryn Talkington. Check the markets. You'll see, obviously, tech's the biggest loser today. Down 2.5 % is the NASDAQ. Dragged by many, many names. It's red across the board. We can start with Amazon because you know by now what's happening with the stock, though it's important to note that it's well off the lows.

1:47Scott Wapner: The headlines, I think you're familiar with, too. Ad revenue missed, AWS fastest growth in five years. has still fell short of the whisper number, and that's kind of what this market's all about. Expectations are extraordinarily high. If you fall short, your stock gets punished. They're not the first to realize that. There have been many great earnings reports of this season, not so much great price action. I think that's a headline, free cash flow negative. You know, what you're spending to achieve the growth you want, that remains the overriding story, too. Jim, your read on what's happening with Amazon, then we can talk about the fallout elsewhere in this market?

2:20Oliver Renick: Well, I looked at Alphabet, as you know, Scott, yesterday, and I looked at the news and the price action, and I said, I want to trim it a little bit because I thought it would be in the penalty box, and it will be for the foreseeable future. I don't feel the same way about Amazon. I understand the concerns about the ad revenue, but I look at what's going on with Amazon Web Services, Andrew Jassy saying that's going to be a$1 trillion company, and I say to myself, I don't need to flinch at every little shot the market takes at me. So I did yesterday. That's fine. I'll find places to put that money to work.

2:51Oliver Renick: But the valuation on Amazon, by the way, you can say the same thing about Alphabet, which I did trim yesterday. I find these valuations very forgiving. There's no sign of CapEx letting up. So all of this to me is just the market flinching. That's the only way I can say it. I don't look at this. Well, you flinched

3:06Scott Wapner: yesterday in your own words. I already admitted it. I get that. But do you regret that?

3:10Oliver Renick: Not yet. I mean, first off, the stock's down Alphabet from where I trimmed it. And I wouldn't be surprised, Scott, if that money gets recycled back into Alphabet before too long. And my point being is that when I did that yesterday and the fact that I'm not doing it today with Amazon, it's because I'm not worried about the market overall. Others can have different opinions. Totally get it. That's fine. But I look at these CapEx plans that have come from Meta, Microsoft, Amazon, and Alphabet, and I say it's game on. I mean, this to me is what the large language model providers have been saying were at best in the middle innings and more likely in the first third of the ballgame.

3:46Scott Wapner: There is a corollary, though, between the two. Customer behavior, consumer behavior around search is obviously changing. Alphabet revealed that. And this, in some respects, with the Amazon ad number, kind of reveals that, too. The market's grappling with all of that. So it's not like apples and oranges. It's a Macintosh and a Gala in the same basket. They may taste a little bit differently, one sweeter than the other, but nonetheless, they're the same thing.

4:15Oliver Renick: Yeah, I think this is a very interesting point. I mean, I think the outsized reaction from Alphabet yesterday, Scott, I think was because obviously the search business is so much more vital in terms of the profit engine for Alphabet than it is to Amazon. I'm not saying it doesn't matter to Amazon. It's not what I'm saying.

4:32Scott Wapner: Bad revenues matter a heck of a lot.

4:34Oliver Renick: But not as much as Alphabet. And actually, I'm burying my point, which is to me, this seems solvable. And if it seems, I'll tell you how in a second, but if it seems solvable to me and I'm not working at Alphabet and I'm not working at Amazon, I'm willing to bet there are smarter minds that are working this out right now. As I think I said to you yesterday, Scott, you look at this AI mode for Alphabet. I know today's Amazon, but still, it seems so solvable. You just give half the answer and make them click through to get the rest of the answer. And that's where your ads pop up. This, to me, seems very solvable.

5:03Scott Wapner: Jason, what's your take? You have the stock.

5:06Oliver Renick: Yeah, so a couple of things. I think, obviously, it's a mixed quarter. I mean, slight miss on the top, slight miss on the bottom. But when I think about AWS, it was up 39 % year over year, which is a double from last year. I know the whisper number is in the low 40s. I get that. But record margins, 13.9 % record margins. Gravitron, as well as the Trainienship, are 20x what they were last year. And they will be made available to enterprise late part of 2027. So I think that's an interesting point to mention. The backlog grew from$497 to$578 billion. So I think there's a lot here. Again, CapEx,$75 billion.

5:48Oliver Renick: They're still reiterated the$220 for the year. But I think that this story from retail and AWS perspective, again, that's the largest business.

5:58Scott Wapner: But I feel like we're looking back as if the number just came out 10 minutes ago. We've had now time to digest. Now we need to think about what the ramifications of the report. I don't need to, you know, the metrics are the metrics. Bottom line, did they present you things to worry about as an investor? Are you tempted to do what Jim did with Alphabet here?

6:19Oliver Renick: I'm glad you mentioned that because of the pre-market, the stock was down 7%. It's now down around 2%. To your point, the digestion of the print is kind of coming online for the market. I would be tempted to lean in here, right?

6:33Scott Wapner: because I do think there's upside potential just given where the metrics are and the forward guy is going to fall. Ten target cuts today, a couple of hikes as well. And maybe the most profound thing that we got in terms of looking forward is Gene Munster pointing out that the move that Andy Jassy made in giving essentially two years' worth of AWS guidance, that they normally only give one quarter out, and they're talking about growth of 40-plus percent for two years. I mean, that gives you an idea of the kind of runway that they see exists for what is now undoubtedly, by virtue of giving those numbers, the most important part of the business, the cloud for Amazon.

7:14Scott Wapner: So what would your takeaway be? Dan Ives says it's not the time to panic and sell all the tech winners and head into the bunker. As painful as this week is, the underlying signs from enterprise AI buildouts are actually more validated than a week ago. And valuations across tech are not expensive. So how would you assess that? Because it's almost like he's speaking directly to you, right? Right. You've gotten more cautious. You've lightened up some of your positions. Today, in fact, you sold most of your NVIDIA. Correct. So you're doing what he says you shouldn't do. What's your thought process?

7:47Scott Wapner: Dan Ives is a permabull.

7:49Oliver Renick: That's fine. Okay. So it's necessary to have that perspective. Dan Ives makes his living being a permabull. But let me give you the reality. Numbers are the numbers.

7:59Scott Wapner: He's not the only one who would be saying exactly what he's saying. Just take the name out of it. I've been necessarily critical, I think, at times of that as well. But nonetheless, just deal with the concept, not the person delivering it.

8:14Oliver Renick: The numbers are the numbers. So there's strong growth everywhere. Obviously, Alphabet had some issues in their ad engine, which is important. But I look to the future, and I look at the tea leaves going to the future. So Andy Jassy is welcome to say what he says. He won't be the first CEO to have overstated what the actual numbers will be when they come out, if they do. But, you know, the reality is, is that cycles don't last forever. And what we've seen in these reports is, with the exception possibly of Meta and Microsoft, what we've seen is that the ROI is elusive. And even the ROI in that, those two companies, has been elusive.

8:55Oliver Renick: So I am absolutely, I have very little doubt, actually I have strength of that. I have no doubt that there's significant overordering in memory, in chips, and overbuilding in data centers. You see it in every single cycle.

9:10Scott Wapner: Let me just stop you one time. I mean, you say elusive. I mean, that's an interesting word to use with the connotation that you're going to continue to chase the return on the investment for everything you're spending, but you're never going to be able to catch it. I don't think that people believe that. You may have a more elongated road to chasing it down, but it's going to happen. It's obviously already happening to some degree. It's going to happen.

9:34Oliver Renick: There's no doubt in my mind. Spending on AI hasn't ended, right? All I'm saying is the peak is happening. You know, for the first time, we didn't see aggressive raises in CapEx spending.

9:46Scott Wapner: Well, see, I'm trying to figure out, is that good or bad for the market? Like, does the market want endless spending or does it want kind of, you know, coming to a little bit of reality here and reading the room? Which one is it? Because I'm not sure the market knows.

10:01Oliver Renick: Spending is still high. It's not as if they're saying we're not spending. Spending is still high. So it's still going to affect their balance sheets. It's still going to affect their earnings, their cash flow, what they would otherwise do with the money. So, look, I'm still, look, I sold Caterpillar. Caterpillar's narrative hasn't changed, right? It's the data center narrative. Stock's down more than a third or roughly a third from where I sold it. Yeah, I got smoked yesterday. Okay? It got smoked as it should have. So, you know, so look, so the market's really clearly lining up. Either you believe that spending is going to last forever and continue to grow, and they'll realize the ROI near term, or you think it's going to be like every, every other cycle.

10:47Oliver Renick: I believe that cycles are just that cycle. Steve, I think you're right. Although it's a cycle. Jim, let me finish. Let me finish. So you see it now in the private markets, right, where the Internet companies are having trouble raising capital, where they're having trouble financing. Recent ones where people have pulled away from the financing, say we're not going to do it, our book is full. And that's what happens. So the guaranteed, you know, the take or pay contracts are a figment of people's imaginations. They don't exist. They've been there every single, you know, cycle, including with Micron.

11:24Oliver Renick: And guess what? When it comes time to take it or pay it, they do neither.

11:29Scott Wapner: So this was a three-year cycle and it's nearing its end?

11:32Oliver Renick: No, I'm not saying that. I'm saying the growth in the cycle has near its end in terms of the equities. And now it's going to be back to the valuation. Now, you can value them on the numbers that you see in front of you today. But my view is those numbers come down, particularly for the ones that are CapEx, not spenders, but the ones that have been on the side of the CapEx, such as an NVIDIA. Now, NVIDIA is its own story. And why I sold it is, I'm not going to say it's a house card. It's got a great balance sheet and all that. But they're financing everything. I don't see a deal, and I see tons and tons of private deals where NVIDIA is not an investor, not a guarantor of the debt, or investing in debt, or doing all three.

12:14Oliver Renick: To me, that is just the height of circular financing, vendor financing, which hasn't ended well for a lot of companies.

12:22Scott Wapner: Let me get Bryn involved. Bryn, I think we fixed your audio. I hope you had a chance to hear that conversation. And if so, what's your reaction to it?

12:31Oliver Renick: Well, I think Steve's point of view is really important because I think he really articulates the skepticism is palpable in this market, which build out is still early. I think I agree with Steve. He didn't say this specifically, but I think he's getting to this. There's going to be a lot of money wasted with these hyperscalers with everybody. A lot of money will be wasted. But I think ultimately, when you look at Microsoft, they are threading that needle of still spending billions of tens of billions while also saying free cash flow positive. You must read the room as a publicly traded company.

13:11Oliver Renick: I mean, Google already looked terrible on the charts. The charts told you before earnings it was well below the 200 day that you can't just spend into infinity. And so I think that we are going to continue to see a separation of all of these companies. but I do think it's early days. And I think that skepticism ultimately is very healthy. It really like stops and dampens this like bubble from continuing to build. But I think with NVIDIA, NVIDIA is about to hit its 200 day. We want it to bounce off of that. But NVIDIA is building out this ecosystem because they're making billions of dollars every quarter.

13:46Oliver Renick: And so I think they, Jensen has said, this is a 10 year journey. They're building it out. Will all of these companies survive? No. But I do think the skepticism is positive. But I think cloud with Amazon, Scott, cloud with Google, cloud with Microsoft continues to be leveraged to AI. And those numbers are going to continue to grow. So I think a lot of these big sell offs are overdone because of that skepticism creeping into the prices of these stocks.

14:14Scott Wapner: Yeah. I mean, take a look at Microsoft, for example. Let's just I don't know, six months, guys, if you could in the back, please. Jeffries looks at all these results now that we've gotten everything but NVIDIA. I don't put Apple in that bunch, which reports next week. It's just not the same type of hyperscaler as the ones we're talking about. They say that the Amazon print that we got makes Microsoft look even better from what it was able to deliver. Jimmy, you want to take a shot at that? Everybody owns Microsoft. And, you know, Bryn rightly points out this idea of reading the room as, you know, the company seemed to do in the prior quarters report.

14:49Scott Wapner: Stock kind of took off a bit after that. Can we see it again? Thanks. And there's the move in the stock.

14:57Oliver Renick: So look at that chart really quickly. Remember that earlier in the year where it dipped down?

15:01Scott Wapner: Yeah.

15:01Oliver Renick: That was when they disappointed on a quarterly earnings report. We all remember this. They put up 38 % Azure growth and the market was looking for 41%. They said at the time we were supply constrained. The market didn't believe them. That's why the stock went down. In subsequent quarters, including the most recent one, it's clear that they can meet, or excuse me, they have more demand than they can meet with supply. And that's in part why the stock is going up. I think that's emblematic for the AI trade writ large. But to Microsoft in particular, what's different there? Free cash flow. Free cash flow is positive at Microsoft.

15:34Oliver Renick: And you can see that they recently did a debt deal. I think it was$25 billion. and that debt got scooped up really quickly to a degree that Oracle and Meta debt is not being scooped up. So that is the big difference, free cash flow positivity. Otherwise, I look at Microsoft's business and I say, not really that much different than Alphabet. It's really the free cash flow that matters. This is why I'm going on and on about this, is if the Alphabets and say the Oracles go free cash flow positive. Two days ago, Oracle said back half of fiscal 28, they go free cash flow positive. The market doesn't quit.

16:08Oliver Renick: And then gave it back because the market doesn't quite believe it. Give me one second, Steve. Here's the point. If you show positive free cash flow, you're in the winner's circle. It's really that simple. Go ahead, Steve. The market's always paid more for recurring revenues, which is the subscription model that Microsoft has. So based upon that alone, it should be valued more than any of these other companies. I think, Steve, with respect, that what Microsoft is going on is not the subscription model, which I look at as their operating system software, I think what Microsoft is going up on is the cloud business, which is, let me just finish, which is the same as Alphabet, which is the same as, one second, same as Amazon Web Service.

16:47Oliver Renick: What's the critical difference? You say it's subscription software? I didn't say that. I think it's free cash flow positive. I'm not saying that's the only difference. I'm saying that supports their base business in addition to cloud. Cloud's also a subscription model, by the way. Okay. So it's very supportive. So I just don't understand what the distinction is you're making on this. The distinction is that that's their whole business subscription model. Amazon has a retail business as well that's subject to the economy. They're not the same type of economy. The economy is great. Consumption is through the roof.

17:18Oliver Renick: Jim, you're missing the point. I don't think I'm missing the point. I don't think it's me. Jim, you asked me what the differences were in the economy. I didn't ask you. I told you what I said the difference was. No, you told me what I said also. Okay. You're wrong. you don't want to admit you're wrong, that's fine. We'll move on. It's unusual. The old Steve Weiss polemic. Go ahead, Steve. Tell us how you're right all the time and everybody else is wrong. Not all of that. I don't know if you're right all the time to look like a genius.

17:40Scott Wapner: Snipes works to you. Snipes wondering how the heck did I get in the middle of this nonsense. Let's move to Intel because it's plunging on a weaker guide. It's the worst day since 74, 1974. Sympathy sinkers are kind of everywhere on this one. Dell's down. Arista Networks reports next week down. Jason, you have that. Bryn's got Dell, AMD, Qualcomm. They're down ahead of their earnings next week. You got a bunch of chip names as well. We want to get to Twilio, too. It's important today. It's dropping on a weaker revenue guide. So there's a fair amount of red in the orbit of Intel today. Look at this, though, down 17%.

18:25Scott Wapner: Much slower AI-driven customer service adoption than analysts thought there was going to be. Companies are deploying AI-driven chatbots and voice agents, I think, more cautiously than some thought. They're kind of the middleman in the infrastructure AI highway. So that is what happens when you kind of disappoint to a degree, which they apparently have done. Joe Terranova bought the stock, what, 10 days ago? There he is. You got stopped out, so you're fortunate to have a stop. But nonetheless, the calculation was obviously wrong as to what you thought was going to happen here. Oh, for sure.

19:04Oliver Renick: And getting stopped out at one hundred and eighty eight dollars doesn't feel so good. But basically given back anything that I had ever profited on in Twilio over the last 10 years, this is a disappointing earnings report. It's very clear that for all of these software and A.I. adjacent names, you need to get a sixteen hundred on your SAT. Otherwise, you're going to get punished. The expectations were very high. They beat on earnings and revenue. But the outlook going forward for guidance was disappointing. And I think it's emblematic of what we're seeing during this earnings season for technology companies.

19:39Oliver Renick: And it really hasn't been the catalyst that I anticipated it to be as we move into November. And I've said, I think we get this return of optimism. I thought that return of optimism was going to be built on the foundation of really strong

19:53Scott Wapner: earnings, just not happening. I mean, you made the case yesterday that you expected Amazon to have a great report. You expected these mega caps to have great reports this week. They arguably did. You also expected that the price action would look good relative to the, you know, the microns and the Western Digitals and the land researches. And we didn't get that either, really. You know, Microsoft had pretty good reaction. But what do you make of that now? I think that the reaction

20:21Oliver Renick: to all of these earnings report suggests to me that positioning is probably a little bit more full, leaning more bullish than I anticipated.

20:32Scott Wapner: Full? No, but I don't think it's what you anticipated. We knew it was an undeniable fact that positioning coming into this week was cleaner. There was a lot of deleveraging by hedge funds and some institutional investors. That's just a fact. So it's not like getting that wrong. It's maybe thinking that the market was ready to move above and beyond some of the questions it had about the AI trade. And if nothing else, this suggests we're not.

21:03Oliver Renick: Well, I think there's a couple of things there, Scott. Number one, as it relates to positioning, I thought we were looking at a clean sheet of paper where we had done enough deleveraging. I think it's obvious that we have it based on the further deleveraging that we're seeing in the market across the board for technology and the momentum factor. So I was wrong about that. I also think that we need to elevate in all of our conversations the extensive supply constraint challenges that the industry is facing right now. And the only way you resolve that is through further spending and increasing spending.

21:38Oliver Renick: And I don't think you're going to pay a premium for a stock price if you're telling me. you're going to have to spend more to resolve a supply constraint challenge. So I think that's a combination of where my expectations for the week kind of went the wrong way. And again, look, it's going to happen. And what you're doing is basically you're neutralizing and reshaping the risk as best you can. I'm still not pulling away from the belief that I think in November we could have this return to optimism. But the market right now is not proving me correct.

22:08Scott Wapner: So you're going to play defense. Well, I mean, the crazy thing is, is because it's been such a cap weighted move in the market, for the most part, the S &P is only 3 % off of its high, which it has a feeling as though it's much worse off, even though it's really not. However, however, 60 percent of the S &P's constituents, Joe, are at least 20 percent, at least from their highs. It's kind of a sick market underneath the very, very highest levels of it.

22:51Oliver Renick: Yeah, Scott, I think it's a very difficult market because you have the absence of a real defined trend in either direction. There are days where, as a bull, which I've been over the last several weeks, you get very excited about the price action. And then there are days like last Friday where you're bare and you get excited about the price action. I think we're breaking down and evolving to a full-blown bearish trend for the S &P, and that doesn't evolve. I still see the market rotating internally. And obviously right now it's rotating to a more defensive strategy with health care and energy. It's not really rotating towards cash just yet.

23:27Oliver Renick: We'll see where we go here in the first week of November and the effect of the midterm election. But it still is playing off this theme, which has been the theme of 2026 of let's rotate between offense, defense and the various sectors in the market. That seems to be what we're doing right now. Unfortunately for me, it's rotating away from the momentum factor. Yeah.

23:48Scott Wapner: I mean, again, once again, a broken record, health care, staples, utilities, energy, energy among the big leadership groups. That's not exactly the greatest offensive sign in the market. Joe, thanks. Appreciate it. Good weekend to you. We'll see you next week, I'm sure. That's Joe Terranova. Jason, I'll go to you for the sort of broad thought to leave us before we take a break on where you think this market really is.

24:11Oliver Renick: Yeah, yeah. So, I mean, obviously, you were just talking about some of the software names Joe did. You know, looking at an Arista and a Qualcomm and looking at some of the pain there. I think for me, to your point, Scott, you know, the market taking a defensive tone, seeing staples, seeing energy, well, not necessarily energy, but staples, financials and other places in the market starting to really get some life. You could be viewed two ways, right? You want to view it as a positive in the fact that we saw some good macro data yesterday and GDP numbers are very positive, 3.4%. But if you're taking it from a defensive perspective, that's not necessarily a positive note going forward.

24:50Oliver Renick: So for me, I think you just got to kind of take a full breath, do your work, do your analysis. I think some of the premium out of some of these larger names that have run a lot are starting to come out. So you want to look at the multiples again and start to really reshuffle the deck.

25:06Scott Wapner: I can't remember a time where you could have, you know, the economic data looks pretty good. Yeah. Right. The Fed and the chair himself, not two days ago, would come out and upgrade the economic outlook, use the word strong in place of solid. And you would have such an incredible disconnect between what actually looks like it's happening in the economy and then the underlying market that plays into a strong economy. Cyclicals can barely get out of their own way. Consumer related names can barely get out of their own way. Materials don't look great. I mean, it's kind of strange.

25:44Oliver Renick: Scott, I mean, what a great setup. And I think this is a case for Occam's Razor, which takes the simplest explanation as the one you should use. So the question that I'm asking, and I think others are, are we headed into a recession bear market? Are we really now anticipating peak spending? Or is this a consolidative pause in the markets? The simplest explanation, based on the way you just set it up with the economic data, Scott, is that this is a consolidative pause. And that's how I'm playing it.

26:09Scott Wapner: Yeah. We'll take a break. We'll come back. We will talk about one sector that has been surging. It is health care. Record highs yet again. Yes, on the surface, defensive. Best year since 2021. So many names are moving. So many names are owned. We discuss next.

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28:13Scott Wapner: All right, welcome back. So let's talk about that healthcare surge. Again, best year since 21. Yes, it's defensive, obviously, but nonetheless, the IBB biotech ETF, record high today as well. You want to take the first shot at this? You got a lot of names in this orbit. some of which have reported earnings already. And then if you look ahead to next week, there are a number on the docket as well.

28:36Oliver Renick: Yeah, I think biotech has been obviously a great story. It's up 29 % year to date. And I think a concern for some investors around this trade is obviously with yield spiking and interest rates rolling up, sometimes that kind of takes away from what they do, what a lot of these businesses do and the cost of care and all that jazz. So for me, this has been a nice story. M &A and start to pick up a little bit in the space. Right. So I think there is continued juice in this trade.

29:03Scott Wapner: And I like this one going forward. OK, we got Moderna's next week.

29:09Oliver Renick: Moderna. I don't really care that much about the quarter, but I did have dinner with Stefan Boncel as CEO on Monday night at a dinner I host. And look, the excitement is just palpable. They've got thirty nine vaccines and drugs in the pipeline. The results that came out on the Keytruda combination were just fantastic. And that's just the tip of the iceberg.

29:34Scott Wapner: Best year ever, by the way, for the stock. Yeah. Right? I mean, that's pretty amazing. Yeah, it was phenomenal.

29:39Oliver Renick: Better than COVID. So the future's bright. There's also something that's going on. And what's going on is that with AI, you'll be able to help drug companies on their trials skip phase one and phase two and perhaps just go to phase three human trials. So the speed to mark will be greater, right? The cost savings will be tremendous. Those are expensive parts of the trial also. So I think overall for the IBD and biotech overall, it's a positive thing. They're also, investors are also looking for growth. So they get it in biotech because they can't get it right now in some of the AI trades.

30:14Scott Wapner: Got some breaking news regarding the Fed. Steve Leisman has that for us. What do we know here, Steve?

30:20Oliver Renick: Thanks, Scott. Adalberto Musalam, the St. Louis Fed president, saying additional firming of monetary policy will be necessary and soon. He's not a voter this year, but he could be a voter next year, depending upon if the Atlanta job is filled. Musalam saying moving sooner in smaller steps will reduce the impact on the labor market and the impact on economic growth. Monetary policy and financial conditions remain accommodative. That's an important assessment of where the Fed is right now. And he's not concerned by the recent tightening of financial conditions. In addition, Musan goes on to say inflation is too high.

30:53Oliver Renick: He sees it as broad base and risks on inflation are to the upside. The labor market, by contrast, is stable and he does not see it driving inflation. The U.S. economy is growing at or above potential despite a series of negative supply shocks. The most likely scenario, he says there's two scenarios out there. Most likely is the Fed has to hike further. A possible but less likely scenario, he points out, is inflation returns to target without rate hikes. That could avoid what would avoid rate hikes is falling energy prices, higher productivity or slowing demand. Just a couple more here where he says the A.I.

31:28Oliver Renick: boom is likely to remain a tailwind for some time. So, Scott, there's a little I think he's the first Fed speaker after the blackout period ended and pretty hawkish right out of the gate there, Scott.

31:39Scott Wapner: Yeah, but it's interesting, though. So there's no distinction to be made between Musalim saying that conditions remain accommodative and the Fed chair's commentary in the news conference where he talks specifically and so directly about, you know, how financial conditions have tightened. And he mentioned around the AI trade, around the funding of it, some of the impacts that we've seen in financial markets. They almost sound like opposing views.

32:11Oliver Renick: I could see how you would say that, Scott, but let me just push back a little bit where my recollection, and I could be wrong about this, is the chairman said that financial conditions were tighter but not tight. I think he said I would be unable and unwilling to describe them as tight. And that's an important distinction. God, it goes back, Scott, to the question I tried to get the chairman to answer two meetings ago where he said he removed a dose of accommodation. I said, so where are you now? Are you neutral? Are you restrictive, accommodative? He's not saying that. But Alberta Musalam, importantly here, is stepping up and saying he sees conditions as accommodative.

32:46Oliver Renick: And I'm here at the Shadow of Mark Committee meeting, and they're talking about a lot of intricate and complex stuff on monetary policy. But there's a very simple idea that's also here, which is that if you're growing nominally at 6%, your funds rate is too low. period, end of story. You're generating inflation in the economy. The economy is running hot. Maybe we don't have to think too much about it. If we're going to do 6 % nominal growth, you saw that GDP number yesterday, and we're doing 3 % plus inflation, maybe your funds rate is too

33:19Scott Wapner: low. Unless you're in the camp that says just let it run hot. See what happens till we figure out the full effects of AI. You make really good points, Steve. I appreciate it. That's Steve Leisman, our senior economics correspondent. We'll see you in the days ahead, of course. Coming up, more on what is working. Our top calls of the day will be debated next.

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35:03Oliver Renick: See terms.

35:07Oliver Renick: We're back on Halftime. I'm Hifta Stevens with the CNBC News Update. A Texas grand jury indicted an ICE officer today over allegations he hit an immigrant with his SUV during a chase earlier this month. The man's family says he was on foot and was left with hip, leg and ankle injuries. The officer is facing a charge of aggravated assault with a deadly weapon. The controversial attack ad run by Republican Governor candidate Vivek Ramaswamy featuring the estranged mother of his challenger, Democrat Amy Acton, is off the air. Acton has not seen her mother in 50 years after her husband and Acton's stepfather was indicted for raping her when she was 12.

35:44Oliver Renick: Ad impact shows Ramaswamy's campaign spent roughly$1 million to air the ad, much less than the$4 million it initially said it would spend. And Russia's top independent newspaper announced its closure today, saying it faced intense pressure from Russian authorities and Russian security services. Novoya Gazete first launched in 1993 with the help of former Soviet leader Mikhail Gorbachev, who used part of his Nobel Peace Prize money to fund it. Scott, I'll send it back to you.

36:12Scott Wapner: All right, Pippa, thank you. Pippa Stevens, calls of the day begins. Visa, price target goes to 465. It was 420, overweight, Macquarie. Best month since October of 22. So you're looking at four years, Bryn, for this stock. What's got it on the move like that?

36:29Oliver Renick: I mean, there are very few companies where it's a great stock and a great company very consistently. They have the operating, they have margins north of 60%. That's not going to change anytime soon. They have a very simple business, high margin, really a duopoly, stocks up 20%. So it's like, what's not to like? And I think the reason why it has a high multiple is just because of that consistency of margins and the durability of earnings, which very few companies can say that will say outside of Apple.

36:59Scott Wapner: Goldman raises JPM's price target, Jimmy,$405. It was$392.

37:04Oliver Renick: Well, if you believe in that setup we were talking about earlier, that the economy is fine, And if you believe that the AI build out is going to continue, then financials are going to benefit, period. And if you're going to own financials, as with any industry, you've got to own the best of the bunch. And that is JP Morgan. I know it sells at a premium. It sells at a premium for a reason.

37:22Scott Wapner: A lot of the data center power names have been really under some pressure in the last few weeks. GE Vinova did get upgraded today, though. Two buy from hold. Stock's down today. The target is 1 ,110. and 10. HSBC. There's no ownership. You do have Eaton, though, Jason Snipe. I mean, it's kind of the same conversation, isn't it?

37:46Oliver Renick: Yeah. Ish. Ish. Ish. Yeah. And I think, obviously, these names have been under some pain with the kind of the overall kind of AI drawdown and what's been going on there. But there's still a lot to be done from a power perspective. There's still a lot to be done from a grid perspective. So, yes, I think I agree with some of the earlier comes in terms of the overspend. But just to bring us to what is kind of necessary to move this kind of surge forward, I think there's going to be continued investment there.

38:16Scott Wapner: Jimmy, Disney, real quick, buy UBS 133, 20 % from here.

38:21Oliver Renick: Real quick, I almost threw in the towel before the last earnings report. I'm glad I didn't. It has shown signs of life. It needs to show a lot more signs of life. Let's see if it can follow through on the next earnings report. I'm in it.

38:32Scott Wapner: You almost flinched. I should have said that, yeah. You were? I was going to say that, yeah. He's a flincher.

38:39Oliver Renick: And a farmer. I trim once, by the way, I mean, Alphabet was up from 160 to 285 and I trim it, okay. He's a flincher during the week, a farmer on the weekend. I called it a flinch, but come on.

38:51Scott Wapner: Alright, we'll take a break. The memo, Mike's Market memo's next. Alright, we're back with Senior Markets Commentator and Overtime Co-anchor, Mike Santoli with his market memo. And, you know, maybe we have more things to resolve around the AI trade than we thought coming out of this week.

39:12Oliver Renick: Yeah, there's no doubt, Scott. And, you know, what really stands out to me is the degree to which we've been living with a lot of these concerns and the market has been wrestling with them for, you know, four to five months. And that's not to say that they're discounted already. That's not to say that they're going to continue to weigh on the market. But I keep going back to, look, the S &P 500 is down like a third of a percent this week. It's just still kind of trying to make the bottom of this range hold. But the bottom of this range goes to June 2nd. You've got a 9 % decline in the NASDAQ 100.

39:45Oliver Renick: And yet somehow this market, you know, in an impressive but I think maybe implausible way, continues to find ways to stay supported. So can Lilly and Walmart and Costco and Berkshire Hathaway, can that be the market for a while? maybe, but that only means it's supported. To me, it means the market is capped. Second straight quarter of blockbuster headline earnings growth and the market doesn't want to pay up for them. I'm definitely open to the idea that this is just we're getting through this testing period. The denominator is growing. Markets, you know, markets getting cheaper as we go. Fascinating to see bond yields come in and nobody wants to celebrate it because it means a cooling of the A.I.

40:22Oliver Renick: trade. But equal weight consumer discretionary is up like two and a half percent this week. So I don't know. The market still continues to try to rebalance itself here. And we'll see if it can succeed, you know, going into a new month.

40:35Scott Wapner: A market capped but not fully unraveled. I think a lot of people would take that till it sort of has the ability to reset itself.

40:45Oliver Renick: Exactly. I do think the big question is, do you at some point need a real washout type condition to set something up that's strong to the upside? Because one of the costs of constantly rotating is you never just get the cleansing pushed lower. So we'll see. You know, so far it's worked. I agree with you. Positioning was cleaner coming into this week. Hasn't been enough in a lot of the consensus names. But, you know, we'll see if everybody's expectation of a post-election relief rally takes hold.

41:13Scott Wapner: All right. Good stuff, Michael. I'll see you later. That's Mike Santoli. Options Action is next. We play with Oliver Rennick in Chicago.

41:23Scott Wapner: To Chicago we go. Oliver Rennick is at the SIBO Global Markets in Chicago with Options Action today. And where are you focused?

41:32Oliver Renick: Trying to figure out what works and what doesn't in this type of market, Scott. And the short is there's no slam dunk hedge for the AI trade rolling over like it is right now. VIX itself and volatility as an asset class is working. VIX is at 20 and The options trading on the VIX itself is way above average, about 80 % above the 30-day usual. There's lots of call buying, which means traders are preparing for a wider range of swings in the VIX. And as we speak, VIX pushing to highs of the day. Now, bonds have held in pretty well, as you guys discussed. We do see some call buying in the TLT, twice as many calls being bought versus puts.

42:10Oliver Renick: Energy of any form, crude oil or stocks, is also working. What's very notably not working is gold and even worse, silver. And amazingly, no matter how bad these charts get, in bear market territory now, the gold bugs and options traders just look intent on banging their head against the precious metal wall. Flows are leaning bullish in both SLV and GLD today. And finally, Bitcoin, which is down, but by Bitcoin standards and compared to stocks and the Binance hack, It's not a terrible day for Bitcoin, down 4.5%. And options traders in IBIT are actually leaning bearish, though, thinking it won't last.

42:50Oliver Renick: Back to you, Scott.

42:51Scott Wapner: All right, good stuff. Oliver, thank you. I'll see you later this afternoon. Oliver, run a countdown to Apple's next. They do report on Monday, so the setup is coming up. About a three-month low for the NASDAQ, which is pushing a 3 % decline right now. and significant losses for NVIDIA, which is down almost 5%. AMD is getting crushed down almost 12%. Marvell, more than 10%. Amazon's down 2.5%, so it had come off its worst levels. It's still under pressure, as most of the mega caps are as well. Apple's fared better than the others. It's the best-performing mega cap over the last month. It's up more than 4%.

43:34Scott Wapner: And it does report on Monday, not that it necessarily is going to get you out of the doldrums because it's just different than what all of these other hyperscalers do. Right.

43:45Oliver Renick: Yeah, it is different. Consumer products company that uses technology to sell their products that are embedded in there. Look, they're not going to be reporting what sales are for the new phone or for the duo because those are after the quarter primarily. But they will talk about how demand is very strong, even though the lead times, as is typical, have shrunk for the 18. You know, a month ago, it was a month wait or one a week ago. I had the next day. So but I think it's a support and a storm right here.

44:17Scott Wapner: Oh, yeah.

44:18Oliver Renick: But but that that's really about it. I think the market could just be in pressure. And my view, by the way, as you know, on AI is not a today, yesterday. It's been two months.

44:29Scott Wapner: Yeah. Yeah. Brynn, it is important all the time, obviously. And it's John Ternus's first earnings report as CEO as well. Yep.

44:38Oliver Renick: I mean, from an Apple business perspective, this is going to be a strong quarter. Revenues are going to be expected to be up over 10 percent. You know, don't forget a couple of years ago, they were just revenues were just anemic. Earnings were strong because of their buyback. So a little financial engineering. But that 10 percent plus revenue growth is like people are upgrading and buying these phones, whether it's a 17 or 18. And so I think from I think the call will be fine. Revenues will be great. I don't think the stock is going to make a big move like an Apple or an Amazon just because I don't think they have big catalyst.

45:10Oliver Renick: But we do all want to hear about the Google Apple partnership with Siri because Siri, I have the 17 is still really lame. And so that to me is like where the stock gets back going is once we get Siri actually acting more like Muse.

45:26Scott Wapner: All right, we'll do finals next. We're back. Some are pointing to an FT headline for the recent weakness in the Nasdaq. Anthropic may not secure investment grade rating after the IPO. Blackstone has told investors that is a direct headline on the FT, which has perhaps led to that last bit of a leg lower. We'll track all of it, obviously, when I see you at 3 o 'clock. We'll end on a positive note. Farmer Jim, not the man, but the horse, crossed the finish line in third place at Belmont Park just yesterday. I believe only his second race. First, I think, was sixth. So Farmer Jim, literally named after Farmer Jim, moving on up.

46:12Scott Wapner: What's your final trade? eBay. Brynn, what's your final?

46:16Oliver Renick: GPIQ.

46:18Scott Wapner: Jason Snide?

46:19Oliver Renick: AbbVie. All right. FTAI, it's an investment. Spokes company, things are unbelievable. I can't tell you what it'll do tomorrow, but long-term winner.

46:28Scott Wapner: All right, I'll see you at three. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

46:41Oliver Renick: 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. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.

47:10Oliver Renick: To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer. Real talent is defined by what people can do, not where they learn to do it. So by stopping at the education section of a resume, you might throw away the perfect hire. Skills First Hiring helps you see talent others miss, like more than 70 million stars. skilled through alternative routes. Let their story unfold and gain a competitive advantage because hiring managers who start with skills are 60 % more likely to find a successful hire. Hire skills first. Learn why at tearthepaperceiling.org.

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