Stocks Hit Record Highs: Your Next Move 10/6/26

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1:16All right, guys, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour, new highs for stocks. And whether the record-setting rally is now rebooted, we will discuss and debate that with the committee today. Joining me for the hour, Stephanie Link, Jenny Harrington, Kevin Simpson, Brent Talkington. Show you exactly what's happening. We are green across the board. Every sector is green as well. Getting a little bit of relief on the bond front. Yields are down. There you see 526 on the 10. Oil's down. We got through the gauntlet of September, right, of sort of no earnings to lean on.

1:50We had to deal with a Fed meeting. They hiked. We had to deal with rising rates. We had to deal with rising oil. And here we are with record highs on the S &P 500 and the NASDAQ. How did we do that? It was driven by the mag sevens. They were up five and a half percent with the S &P 500 was flat. Most of the stocks in the S &P 500 were down three or four percent, maybe even more than that. So I get it. I understand we had a defensive tape and then hyperscalers did their thing. And I understand why you want to own them. And I own them. We all do own some of them on this desk. But I think that it's time to see a broadening out in the other sectors.

2:31If you look at the XLI, the XLF, the XLU, and even the material sector, they're all down 7%, 8 % in the month of September alone. That's where I think your value is. And at the very least, the food chain of AI should do better. And that speaks to the Constellation Google announcement today. We've had nine power deals this year since January. over$25 billion worth of power deals. That's going to lead to better backlogs, better orders. And so at the very least, these other sectors should do well. We talk about data centers. We talk about grid. We talk about power companies. And yet all these stocks are down.

3:10So at the very least, I think we can see a broadening out into them. And then parts of the consumer, Scott, we've talked about. You have to be very careful. But I do think the consumer continues to do their thing. They're consuming. and if interest rates were to come down and if oil prices were to come down, that makes me even more bullish about this beaten down sector. Getting a broadening? Broadening? Is that the next part of this story? Because, I mean, that's a tough view versus, I think, where the consensus is right now. Yeah, no, I'm totally on board with stuff, though. And I think it's really rebroadening because if you think about where we were just before September, small cap was up huge, dividend stocks were up huge, value was up huge, and then they were slacked in September.

3:52Yeah, well, they should have been, right? Because the 10-year backed up like 50 basis points in the last month. Yeah, but you know what? I think it's magnitude. I think it's magnitude of how much they should have been. And I have stocks in my portfolio that were down like 24 % just in September. And it's really kind of too much. So it is. It's a huge move in interest rates. And I think we need to figure out, and each investor needs to figure out for themselves, is this the beginning of a cyclical hiking cycle? or is this just like right sizing and reconciling what had been, you know, had been missed before?

4:22And then do they plateau? So presuming you think that it's like one hike this year, which is where the market's at. And I still think the market's thinking about December for another hike. I think you're right. Yeah, I mean, I don't think it's one. It's just not, you know, the market's kind of moved off of October. I think that's right. I think it's I mean, I've seen it's like 90 percent odds for a 25 basis point hike in December. Yeah, but that's going to be two. Oh, sorry. OK, two. Yeah. Yeah. So and then next year, like maybe what's what are they talking about? Like two or three, maybe. It's not an aggressive.

4:50It's not a tightening cycle. Right. And it's just getting back to normal or normalizing based on the growth in the economy. And, you know, it's interesting stuff, because when I started the dividend strategy back in 2001, you know what the 10 year was at? Five point two. And it did just fine. So this is the first time we've seen these numbers since 2002. It's been 24 years. And so I think it is kind of renormalizing rates, readjusting to it. But to your point, when rates moved that much, yeah, the stocks responded harshly. But I also felt like it was a very broad brush. You know, and that's what I thought was interesting on you saying XLI and XLE and or XL, whichever the region is.

5:26Yeah, yeah, yeah. Where the whole sectors were pummeled. They were just broad brushstroked. And they're not all not all those companies have the same interest rate exposure underneath them. So I'm looking at it right now like there are some really great opportunities and things that I've held off on for the beginning of the year. I'm finally able to stick my foot in now. Wolf says 8000 is intact. That's their target. So they feel like we got through the gauntlet a little bit. As long as the earnings story remains durable and robust and as long as the AI story remains durable and robust, do you have any reason to disagree with the thoughts here or the calls of 8000, if not more?

6:05I mean, we're at 7800. It's not like that's a tremendous call at this point. Yes, Scott, I've been pretty, I would say, defensive the past few months. And I think today maybe I'm a little bit more optimistic. I'm not ready to push my chips in or get the gazoos out. But I can think of a scenario in which we could see some broadening. And really, that all comes down to, I think, the price of energy. And if we can see oil come down and you get an abatement on inflation, it takes a lot of pressure off the Fed. And it's possible that we're in a scenario a few weeks from now, a few months from now, When we look back and we say, remember that 5.3 percent on the 10 year, 24 year highs for sure.

6:42But we look back and say maybe that was the high watermark. And if that happens, then you see the broadening story. If that doesn't happen, if we're in a rate hiking cycle, then it just continues to be those big tech stocks. Aren't we in a rate hiking cycle? Like, what's your definition of a cycle? Well, I think this obviously doesn't appear to be a one and done. I think it could be one and done. Yeah, I think it could be. I'm sure I'm out on an island on that one. But if energy prices come down, if inflation comes down, just because Calci says they're going to have one in December doesn't mean they have to.

7:13Well, you think inflation and oil prices are going to come down by the time the December meeting comes around? Yeah, I think they could. So you're starting to play for that? No, I'm still being very defensive, but I'm trying to paint a scenario where I think that could happen. And I think it's got a higher probability. If you had asked me that two months ago, I would have said that's insane. We're definitely in a right hiking cycle. we're going to get at least three or four. I'm at a point now where maybe they are one and done, even though that's never happened, or at least since the 80s. But let's say we get one more in December and they don't have to raise next year.

7:42That's still good enough. The whole market doesn't need an all clear. It just needs a little bit better tailwind so we don't have the worst case scenario. There's no reason that the 10-year has to go to five and three quarters or six. And if it doesn't do that, I think that's a positive. Yeah. And Goldman's right there with you. Like I just read a Goldman report that basically makes that same argument. Maybe one more and then potentially done after that, and then rates start to fade. That's my take. 50 basis points isn't going to be material to an economy that's grown at 3.5%, 4%. And earnings aren't going to deteriorate with 50 basis points of hikes.

8:17So there's that too. I mean, there's a lot of underlying momentum. Well, it cuts both ways. There are those who say, well, 25 or 50 basis points isn't going to do anything about the current state of inflation because of what's causing it. So that works both ways. That works both ways. Well, which is why if inflation remains elevated, they're going to be more aggressive. Bryn, what's your view? Yeah, it 100 percent works both ways. If we were to get I'm more in Kevin's camp, but I think the probability that we just get one in December, maybe we get one and done one more and done. But I think if we were actually to go into where we were projecting out multiple rate hikes, that broadening story will be dead in the water.

8:56And like I own like a CBRE, which just out of nowhere just fell out of bed, kind of to Jenny's points about stocks being down. But I do think right now I think we own RSP. I think the broadening trade, let's put a pin in that for October because earnings are going to start really in earnest next week. We're looking for 25 to 27 percent year of year earnings growth. The two sectors, energy will be up over 100 percent earnings. Tech is up 67. But to me, why do I think we'll put a pin in the broadening? Because you still have NVIDIA and Micron will be a third of the earnings growth for the S &P year over year.

9:34So people are going to go where there is earnings growth, and that still remains in energy and tech. And so I think the broadening out will have a reprieve right here, maybe in the November, December. But during earnings season, I think it's going to be all about tech and energy. Yeah, because you've got to get some relief on the macro to reopen the flow, if you will, to the broadening trade. Because right now it's hard to get investors to think about, well, I can play offense and defense with the mega caps. I don't know that I can do that in other parts of the market, which is obviously why the money has started over the last month to flow back towards the tech trade.

10:15I mean, Nasdaq's up almost 4.5 % in a month. Nvidia's market cap is now almost$6 trillion. Stock gets another new high. It's green yet again today. You know about how that trade's been working. In the last three months, by the way, in terms of what has primarily carried the mega caps, Microsoft's up 38%. No one's talking about it. I think they're blinded by Nvidia. The fact that Nvidia's woken up again, up 24%, and Meta's up 23%. They come out with Muse. Everybody's all fired up. Microsoft hasn't been the same, Bryn, since earnings. I remember because you talked about Amy Hood and what she said.

10:54They weren't going to go cash flow negative. Right. And that was the catalyst to why Microsoft over the last few months has ripped. Yet I don't feel like people are focused on that enough. Well, I mean, it's ripped, but still year to date. It's underperforming the S &P, right? Yeah, sure. You got to come back somewhere. Yep. 100 percent. Where to me, obviously, Amy Hood, like Amy Hood is amazing as a CFO, not going free cash flow negative. But remember, surprisingly, Azure is expanding. Like the growth story of Azure is kicking up. And so I feel pretty confident there's a good correlation between all of us using more agents, cloud growth accelerating.

11:40And so that's where you saw Google, Amazon, and Microsoft really just crushing their cloud growth. That's going to continue. And finally, you know, CoWork, so smart for Satya and team to pivot off of open AI and make CoWork, we'll say more model neutral, like perplexity, where it's going to pivot between the different ones. And so now I feel really good. We're going to see very strong adoption beginning to accelerate within CoPilot, CoWork, because it is that model neutral, and now it's really starting to work. And so I think Microsoft is going to have a wonderful quarter. And so it's great to see the pivot.

12:16And I think this is why it's so risky to get too negative on these individual hyperscaler names because they continue to pull rabbits out of their hat and show us wrong when we get too bearish. I'll tell you what hasn't really worked all that well, you know, respectively, against the other ones is Alphabet. Target goes today at Wells to 417. It's overweight there. But year to date, stocks up not even 10 percent. It's like right on the doorstep of 10 over the last month. It's only up three. The outperformance from the others, you know, is pretty much universal. Amazon's negative. But Alphabet really hasn't done all that much.

12:54Kevin, I'm wondering what the issue there is. I think it has absolutely everything to do with agents, because if you look at Gemini versus OpenAI, I mean, there's periods in which we've seen Gemini go far, far beyond it. But I think that the fear is they've dominated search for decades. And if there's a way to bypass it with agents where you don't need Google or Alphabet, that might be the one thing holding back the street on being as optimistic and as bullish on Alphabet. But I love the diversified business. I'm still in here. But I think specifically to your question, agents would be the one thing to keep me a little bit squirrely about it.

13:30You have a move regarding Alphabet. You came in right to our desk and you're so excited to tell us about these convertible preferred Alphabet that you bought. Because in your world, it trades sort of like the stock. Why did you make this move now? OK, so I have this dividend, this income constraint. The portfolio has to have a 5 % or better dividend yield. So I've been able to like these stocks. Everyone thinks I don't like them just because I don't own them, but that's not the case. It's because I haven't been able to buy them. So in June, Alphabet issued a convertible preferred. It's got a 6.4 % yield, and that's compelling.

14:10And then I look at Google. I'm just going to call it Google. I look at Google standalone, and here's what I see. I see a company that was up well over 100 % last year. So when we talk about why it's kind of flattish, only up 10 % this year, that doesn't bother me. I think it's okay that we pulled growth forward last year, and we're kind of consolidating this year. but where you're left with is huge earnings growth ahead, 17 times multiple. I'm wondering if we're not at peak LLM. If we are at peak LLM and some of the other players start to fade, that is going to be Google's game. They are going to win this race.

14:43And if it does play out kind of like a, we don't need a Netscape, we don't need an AOL, and there's only a couple LLMs in five or 10 years, you know that Google is still going to be there. I think they're offering a more diversified product line and a much more efficient search model. The way I've been thinking about Claude and ChatGPT is that they're both trying to build Ferraris when most people only need a CRV. And Google's giving you everything. They're like, hey, if you want the Ferrari, you can have that. But we also have the whole product line of CRVs. And when you buy that, you're going to be more efficient.

15:12By the way, the TPUs, that growth is unbelievable. And I think it's supposed to be about$100 billion of revenues by 2028. So if you start to worry about search and search being eroded by the AI, I think the TPUs could easily replace that. And I think if there's any slowdown, if there's any stumble as Anthropic and as chat come out with their IPOs, if anyone sniffs wrong at those financials, again, that's Google's benefit. They're basically self-funding, not entirely, or I wouldn't have had the convertible preferreds to buy, but they're basically self-funding compared to peers. So I just look at them as this like huge position of strength.

15:48I got lucky that it also wasn't up 50 % and that I could buy it at a decent valuation. Now, one thing that's really important on this convertible per herd. So it trades roughly in line with the common. So if in, oh, and by the way, it matures in 2029. So if in 2029, for example, Google's at 250, my return is an annual is negative 9.7%. If you had the Google common, your return is negative 26. The reason I'm better off is because I've collected nearly 18 % income in that period. If in when it matures in 2029, if it's at 500, my return on the preferreds is 34 percent. The return on the shares is 46 percent.

16:27So I am giving up some upside on the capital appreciation to get this super consistent income. But I know I'm getting 18 percent income between now and then. I literally haven't seen Jenny this excited when she walks in since she left the REIT meeting like a few months ago. So that tells you the enthusiasm. I think you can hear it, too, in her presentation. What do you think of this move? I think it's a great move. I love the fact that you can get this dividend yield in your portfolio. I'm so happy to listen to you rattle off all these statistics because it's fun. I think if you strip out the TPU, the one thing I would mention that's also backing and supporting your story is cloud growth would still be 81%.

17:04So in all seriousness, I think that the preferred move is excellent. I don't think you're going to see 250. You're going to see a really good return. So nice trade. All right. Very interesting. Now, there's another call today from Wells about where to position yourself within the AI trade. They say buy hyperscalers over semis. And there's a pretty good debate in the market, I suppose, about a lot of these semi stocks have done really great over the last month. You go down the list, 20%, 32 % gains in terms of an AMD. And then there's the semi stock. I feel like that people just don't talk about Microsoft is the hyperscaler.

17:41People aren't talking about enough. How about the semi-stock that not enough people are talking about? Marvell's holding its investor day to day. The stock's only up 220 % this year. Get that it's down 17 % from the June high. But that more than tripling for a name like that deserves more attention, which is why Seema Modi joins us now with the highlights about a name that we do have ownership on. But tell us more. Well, Scott, Marvell just raised its long-term revenue target, expecting sales of approximately$20 billion for the upcoming year and scaling rapidly to$70 to$90 billion by 2031. That's above the$47 billion Wall Street was estimating.

18:18What's driving demand are the hyperscalers. CEO Matt Murphy at the Investor Day saying hyperscalers are rethinking their network architecture as infrastructure scales across the industry, as is their appetite for custom silicon with Google, Meta, Amazon designing their own chips to rival NVIDIA's GPUs. Those custom chips can't function alone. And that's where Marvell plays a critical role, providing the key components like memory controllers, networking to connect the chips that then power the AI models. Now, executives now estimating the total addressable market for Marvell's data infrastructure solutions to reach 400 billion by 2030.

18:55That's why this investor day is getting a lot of attention on the street. We were seeing the stock surge. And yes, after you mentioned already tripling this year, Scott, currently the second best performing Philadelphia semiconductor stock constituent this year, right behind Micron. Great look there. Seema, thank you. Seema Modi. So you own the name. This is like last year's Broadcom, right? The Broadcom had that period of right where it ripped. This stock and everybody was still talking about NVIDIA mostly. Are we in that situation here with Marvell? Well, they have. They have killed it. It was off the radar screen for a lot of people, myself included.

19:31And I, to be fair, I actually sold a good chunk of this name a while back because I was up 150 percent in three months time. But clearly a re-rating because I think people are understanding that they have two ways to win, optical and custom. And they, I mean, last quarter they beat and they raised for 27 and 28. Today, now they beat and they raised 28, 29, 31. One, the visibility is absolutely incredible. And I think that we're all trying to get our hands around the Alphabet partnership. And that could be the next driver of growth for this company. I thought all along they had about$10 a share by 2028 in earnings.

20:11That number is probably like$15 a share now. So that makes the stock not that expensive. It's just had a nice run. And I took my money. And by the way, took the money and I bought NVIDIA for the first time. So I'm not really complaining at this point. Yeah. I mean, I don't hear too many bear cases. This is just like the bull case for that matter. I don't hear many people coming out and having a bearish view of Marvell. No, because I think their total addressable market is so underappreciated. Again, it's optical and custom. It's like a double whammy. And I mean, they're talking about, I mean, a$400 billion total addressable market in just one segment alone.

20:44I mean, that came out of nowhere. So they are certainly taking market share. And And I think that it's going to continue to run. I don't see any reason why it would kind of lose momentum. I think that their customers are growing. They're getting the business. They're sharing the business with Broadcom as well on the custom side. So I think both can win. But it just had a nice run. So I'm sorry that I took so much money off the table, but I still own a little bit. So I'm enjoying it a little bit. Speaking of AMD, Citi goes to 800. Mizuho goes to 705. They're going to increase their chip supply in 27 to meet demand.

21:16No big shock. You own the name. Twelve years ago, Lisa Su took over a bankrupt company. Look what this thing's doing. I think when you listen to the comments from her and these analyst reports, I think there were two upgrades today. I was looking at it like there could be a renaissance both in CPU as well as GPUs. And what's backing this AMD run, what's supporting it, is it's just up and down the stack, similar to Marvell. I'm surprised Broadcom hasn't participated quite as much. But this story is an incredible story. I'm happy we own it. It's a diversified name within our growth portfolio. We've got a lot of exposure here.

21:53But this has absolutely exceeded our expectations. And it's hard to argue against the 800 call. It just seems difficult to hear that coming out of my mouth. Micron, JPM overweight, target 1540. Micron's quarter was very good. And they talked about demand being much better than expected for 27 and 28. and that demand is going to exceed supply well into 2028, which is an extension. They signed up some new customer agreement accounts. They've got$100 billion plus in visibility in RPOs between now and 2030. The stock's had a nice run, though, so I think it's just kind of taken a breather. But I do think if you look at what I think their earnings power is of$40 a share, you're talking about a stock that it's like five times earnings.

22:37I mean, its historical average is 10 times. I know it's a cyclical company, but we're absolutely in the renaissance of right where they need to be. We are short everything in this world right now in terms of compute and memory and talk about commodities across the board. And so they should benefit if it takes a breather, might even add more back. You own the DRAM, Bryn. So you're getting exposure here and to others. Yeah, I mean, Micron's 26 percent. Samsung is 25. SK Hynix is about 16 percent. So it's a very concentrated basket, which I love. There's also a huge call premium. And so I agree with Steph.

23:13All these names have run a lot. And so like NVIDIA, but did really nothing between April and now, between go 235 to 200, 235 to 200 and breakout, I think you're going to see the same thing with these names. There's a lot of skepticism of where we are in this cycle. I think it's one heck of a cycle. And so I want to own the basket of names. And I can also get really nice call premium on selling like two to three months, 10 percent out of the money calls on DRAM. So I still think it's I still think these stocks have a lot to run. I just think they're resting right here after just a monster move over the past two years.

23:51And an interesting day today in cyber and software. A lot of the cyber names look pretty good. Palo Alto is up almost three. Fortinet's up. CrowdStrike's up. Oct is down, but Zscaler, Investor Day. We don't have ownership there, but it's another record high for CrowdStrike. Brynn owns the bug. You own CrowdStrike. Service now. Target goes to 160. That's at Stiefel. 150 at UBS. I mean, I love cyber. It's just that it's had a nice run. Every one of these stocks are up like triple digits year to date. And I was buying Palo Alto, for example, when it was trading at 11 times price to sales. It's now at 24 times price to sales.

24:35And I understand why. We're going to see cybersecurity spending accelerate between now and the end of the decade. I have no doubt about that. You've heard me say many times I think cybersecurity is bigger than AI because AI is not secure. That all being said, I'm going to hold on to Palo Alto and CrowdStrike. CrowdStrike is even more expensive than Palo Alto. I think that ServiceNow is actually your better value because you're talking about total revenues and earnings in the mid-20s. and the stock trading at about 25 times forward estimates. And 50 % of their net new business is actually consumption-based.

25:05And that's what has changed for this company. So it's very interesting to me to see this transition. And the stock is still down 10 % year-to-date, still down 24 % in the past year. A phenomenal management team. They're doing M &As. I think that, again, their total revenues and earnings can grow 20 % to 25 % over the foreseeable future. So this is the one I would add to on a bad day. Okay. You sold IBM. Tell Steph exactly why you did that. Well, you know I've been selling IBM for several months. This is an example of you can love a company but maybe not love the stock. There's a lot of things going right.

25:41We love Red Hat. We like AI. We love quantum computing. Good free cash flow. But when management came out last quarter and lowered their guy, that was a concern for us. Software sales were only 5%. Consulting revenue was flat. Infrastructure actually declined by 7%. We made a lot of money with it. But much like Stephanie moving from one name to another, we moved from IBM into NVIDIA. I feel really, really good about that, Scott. That move around the last earnings shocked the market. It did. And yet the earnings only came down 2 % to 4 % across the board. I was surprised they pre-enounced, to be honest with you.

26:15So now the stock is in show-me mode. I get that. But you're talking about a stock that's down 25%, trades at 18 times forward estimates. The free cash flow is actually going to be higher this year versus last year by a billion dollars. And I think they're going to get this thing right in terms of software. I don't think that their business is dead by any means. And oh, by the way, look at what Accenture put up last week and how much that stock went up just because expectations were low and it wasn't dire straits at that company. I don't think that it's at IBM either. Let's get one more in real quick before we take a break.

26:46You bought more UNH. Why did you do that? Well, again, walking away from the AI trade and looking for value, I think there's a turnaround story here. We started buying it about a month ago. We picked some shares up at$3.70. This is not an all-clear signal, but this is a story where we don't need to wait for that. I think that things are recovering. I like what I'm seeing from the last earnings report. We get a number next week. I want to buy it in advance of that. They raised the guy to$19.50,$20 a share for the year. I think it can be even higher than that. So this is a stock that we feel good about.

27:17We've made a lot of money with it over the past years, and we're getting back in. All right. All right. We'll take a break. We'll come back. We're going to talk about dividend stocks. Obviously, yields on the rise. So what does that mean for dividend stocks? They've underperformed. Our gang is all over that, as you know. We'll get their top picks right now. Are they standing by the names that they already like in this rising rate environment? They'll tell you next.

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29:03Google Workspace with Gemini skips that. You get Google's AI built right into the premium versions of Gmail, Docs, Sheets, and more. No new tools. No extra logins. Just one subscription that gives you personalized AI right inside your actual workflow. Make work less work. Try Google Workspace with Gemini at goo.gle slash workspace with Gemini. This is the perfect day to talk about dividends, given what Jenny and Kevin do for a living. The Schwab Dividend ETF and how many of you we know invest. One month down 5.5%, the Schwab Dividend ETF. S &P 500 up 1.5%. Not a big surprise, right? However, I was kind of surprised.

29:48in seven out of the last 10 rising interest rate periods since 1960, high dividend stocks outperform the S &P 500. Yeah, surprises everybody. Why is that? Well, I think they're high quality companies and generally, well, here's what I've seen happen. When interest rates start to rise, the bond equivalents, so utilities, REITs, midstream energy, they get slapped, right? Because everybody thinks, oh, geez, suddenly that 5 % yield is so much less compelling compared to bonds. And so they get slapped. and then reality sets in, which is generally in a rising rate environment, it's generally because the economy is strong.

30:23And what underlies those dividend paying stocks are companies with earnings. And when you're in this rising rate environment, because the economy is strong, earnings come in well. So then they have this really nice rebound and kick off of that. Also in a rising rate environment, the dividend stocks tend to be mature, right? They know how to handle their debt load. They know how to deal with rising interest rates with respect to their businesses. Newer companies may not be able to. Smaller cap, new companies may not be able to. So you see that kind of like quality maturity play out over the longer term.

30:56Now, there is one nuance to that statistic. And it was really interesting research done by GlobalX, which, believe it or not, I didn't know about until I found this, until this particular study. But there is one nuance. In the three out of 10 scenarios where the dividend stocks didn't outperform, it was because rates rose really quickly in what ended up being a very short increasing period. Are we kind of in that repeat? I'm not sure. I mean, that's not a similar analog, right? Yeah, it goes to our earlier debate. If Kevin's right and it's one and done, then maybe we've just had a lot of pain quickly and we're done with it.

31:27But if it does end up being like a longer cyclical rate hiking cycle, then maybe we end up in the 7 out of 10. But at this moment in time, we don't know which one we're in. Are you rethinking the actual names that you like the most or no? No. I mean, the strategy is the strategy, right? It's companies that pay on average 5 % or better. So I don't change my stripes for temporary periods. There's Bristol-Myers, Dominion, and Sabra are your three picks today. Right. They're all up year to date. And all down from their highs. So I actually bumped up for clients who either didn't own Dominion yet, where I'd held off.

32:03Same with Bristol-Myers. I bumped those up this morning. Or if people were underweight, I bumped them up. Oh, this morning you did. Yep, this morning I bumped those up. And then I just thought Sabra would be an interesting one, too. So you have Dominion that's sure it's still up, right? But it's down 15 % from its high. Bristol down 13 % from its high. Sabra also down 13 % from its high. They have a 4.5 yield, 4.5 yield, 6.5 yield almost. And they all have earnings growth ahead. So once this kind of knee-jerk response to bond equivalents and suddenly they're less attractive because the 10-year you can get 5.3 on, by the way, that 5.3 is tax disadvantaged.

32:35And that 5.3 yield that you're getting on your bonds will never grow. So if you're in an inflationary period, your dividend stocks will grow. and you will not have earnings-powered devaluation. But Sabra's got like 7 % earnings growth ahead of it. And it got down 13%. There are other names that you have. I mean, they seem more, I don't know if they're idiosyncratic stories. Home Depot down 17%, Kev, which you own. Obviously, you know, what's happening with housing is a direct play there. Jenny, UPS down 6 % year-to-date. Is that a rising gas price? Is that all? In part? I mean, in part, that's got to be somewhat at play.

33:15Comcast down 23.7 percent. Western Union down 34. Right. Western Union, that one's really tough. And that one's totally idiosyncratic. And that has to do with, like, software and immigrant deportations. Comcast, don't forget, I bought it at 22. So I actually took advantage of the fact that it was down so much. And I think that one's a little idiosyncratic, at least the move between 32 earlier this year and 22, which had to do with, like, the SpaceX IPO. But I think you can buy these now. Like, they are cheap. They have earnings growth, not huge. CPI plus a little earnings growth, some of them a little more.

33:46And you've got really strong coverage of the dividends. You're going to get your 5 % or 6 % or 7%. You know, obviously, NVIDIA sort of skews the performance look a little bit for you now that they pay a dividend. Caterpillar's up 51 % year to date. I mean, that's been very much an AI play. Freeport's up 43%. I mean, how would you assess dividends now in the rising rate environment? Same way? No, completely differently. And that's why it's good to have Jenny and I on here together, because they're very complementary. Jenny looks for a maximum, excuse me, a minimum threshold for yield. And we don't.

34:20We're more like in the aristocrat, dividend king space. I'm looking for dividend growth, not necessarily a minimum threshold for yield. Hence NVIDIA. I'm dividend income. Yes. Dividend growth. But that's why NVIDIA. I need to have some pulse there, Scott, because they used to pay a penny. And I thought that was kind of a rounding error to zero, sort of a cheat. But when they increase that to a dividend, then absolutely, a la Apple, it's kind of following those coattails. Show me a big buyback story. Show me a dividend growth story. Show me a commitment to shareholders. But most importantly in our portfolio, the dividends are important, but dividend growth is a result of earnings growth.

34:52Because I'm a simple guy. If you have a company that's earning more money next year than they did this year, generally speaking, I'm going to expect that share price to appreciate over time. That's how we manage money. Dividend growth, earnings growth. Then I love the complimentary perspectives even on a topic that I think a lot of people are thinking about. Mike Santoli's Market Memo, it's coming up after this break.

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36:47Welcome back to the Afton Report. I am Frank Holland with your CNBC News update. President Trump approved the execution by firing squad of former U.S. Army officer Nadal Hassan, who was convicted of killing 13 people in a shooting at Fort Hood in 2009. It will be the first time the military has executed someone by firing squad since the Second World War. A Defense Department spokesperson says that method was recommended by Defense Secretary Pete Hegseth. Secretary of State Marco Rubio urged Russia today to share more information about the death of a lab worker at Siberia's Plague Research Institute.

37:20Russian authorities have said the situation is under control and that no cases of plague have been detected among the workers' contacts. And protesters clashed with police today in Paris amid nationwide protest over understaffing and dilapidated school buildings. Labor unions rallied today in solidarity with students who have been demonstrating now since September. France's interior minister said 6 ,100 people have been arrested since those protests began. The majority are minors. Scott, back over to you. All right, Frank, thank you. Frank Collin back with senior markets commentator and overtime co-anchor Michael Santoli.

37:54It's another day where it's a pretty broad move. If I got every sector green and, you know, utilities up two and a half percent, industrials up more than one, discretionary up more than one, staples too. Yeah. What do you make of that? Things are lining up for you do have these sort of outbreaks of breath. Things are working because the leaders still lead and the laggers have bounce potential. And they only have bounce potential when yields and oil cooperate. We know that. But they also, because of the divergences that everybody has been pointing to, largely making the case that it's actually fragility underneath the market, you also means that a lot of the market got de-risked and cheaper over the course of the last month and a half.

38:34So we do have this tentative breakout above those August highs. I've been pointing out that we had a two-month trading range below the early June highs. Now we've had a two-month trading range below the early August highs. Maybe we can kind of carve out another bit of territory above 7 ,800. But it's definitely thanks to NVIDIA adding a trillion in market cap since July 31st. That's OK. That's the dominant theme of this bull market. You're not going to get very far if that particular theme really breaks. And it hasn't so far. I think the real question is, are we seeing a little bit of sort of late cycle characteristics filter into the market with credit spreads going higher?

39:14some of those sovereign debt issues, and obviously the Fed moving from easing last year to doing some tightening. Yeah. I mean, it is interesting to see some of these moves. You know, Marvell up 5 percent. Some of the cyber names continue to work. And now you just wait for earnings, right? So cyber is extending, I guess, the strongest part of a weak group. Things like Marvell, stuff that has kind of sat back a little bit, that is kind of interesting to me. And the market's been very discerning within semis right now. It doesn't really want the pure memory and it wants stuff with stories and with a little bit of a renewed momentum.

39:50And yes, I think the market desperately wants to just kind of white knuckle it to earnings season, even though earnings season as a whole is a lot of, you know, give and take type action inside the market. I'll see you at closing bill. Michael, thank you. Mike Santoli coming up with debate, our top calls of the day right after this.

40:08Show me shares, please, of SpaceX. FX, highest since June. Elon's a trillionaire again. Stephanie Link's feeling better about the position that she has. Goldman's feeling better about the stock. Buy at Goldman target to 230. It was at 220. We talked to you yesterday about it when Adam Jonas had nice things to say about it, including cheap and getting cheaper. What do you think? I don't know if it's cheap and getting cheaper, but it was a white knuckles moment for me when I bought it initially because it just went down straight 40 percent. So I bought it when it was down 40 percent. I bought it when it was down 30 percent.

40:47And then when it was down 25 percent, I just believe in this company over the long haul. You're seeing the growth. I'm not sure I can support it being cheap, but they just grew total revenues of 92 percent. EBITDA grew 191 percent. The connectivity piece is the most exciting piece because it's the most profitable for me, where they have gross margin expansion, operating margin expansion as well. And I think they're going to get to 250 million subscribers by 2030. That's what I can hang my hat on right now with this story. Then the other pieces are just kind of icing on the cake. All right. I got three bull calls today on Disney.

41:21I know, right? Not one, not two, three. B of A, 125, reiterated by. J.P. Morgan, reiterated overweight. Bernstein reiterated outperform. Targets anywhere from 125 to 129. What do you think? Well, I think what's important is the reason on why. And the why on those is that there's double-digit underlying EPS growth. The reacceleration in theme parks is strong. There's the multi-year sports drivers and a new re-energized senior management team. One of the things that kind of jumps out to us on Disney is that in this year where you have these blue-chip consumer stocks that are just dying, like Nike down 50%, McDonald's down 25%.

42:01Disney's really, really crushed it, right? And they've really delivered on expectations and they've been consistent. So where we're at is always back to the numbers. It's trading at 14 times earnings as a 6.1 % free cash flow yield. And those earnings should grow 17 to 18%, sorry, 17 to 8%, 17 this year, eight next year. But the point is it's really nice, positive, consistent, achievable earnings growth ahead. And my thesis on it's been The theme parks are tangible. They have tangible businesses that I think have less threat from AI than other areas of the entertainment space. So we feel pretty good about it.

42:35Now, I need to be honest, we're still down since we originally bought it. Oh, we know. Yeah, we originally bought it. Gosh, it's been six years already. It was$118. So we've been waiting for this to work for a really long time. Six years? Yeah, can you believe that? Why are you still there? Because every time we look at it, we say, hey, it's pumping out free cash flow. It's cheap. It's cheap. Hey, look, you know perfectly well that if I'd hung on to some other things just a little longer, right, maybe I would have made my money back. So sometimes you get your you get your kiss all at once after waiting for six years.

43:08There's a dream somewhere. Netflix target. I mean, it's like we always talk about these together. There's a call on it today. The target goes to 90 at Goldman, Kev, from 94. Yes. Sometimes good things happen to cheap stocks, Scott. We're hoping that's going to be the case here with Netflix. We're a little behind out of the gate. We're actually down about$10 on this in a very short period of time, like six weeks, not six years. But I like the story. Content's the problem. The valuations are low. Expectations are low. I think the call is right by Goldman. We continue to add to it. We have a small allocation here.

43:43I think we're ultimately going to be right. If they can get into sports and live entertainment, I think that's going to be the turnaround for them. But right now, this is a stock that no one wants to touch except us. Real quick, Jenny, Northrop by Rothschild and Redburn. Yeah, so here's another one where it's down 16 % year to date. And it's so easy to say in this like war-infused world that we're in, shouldn't Northrop be thriving? And they're not. So it's a little bit of a surprise. But you've got a 5 % free cash flow yield, trading at 16 times earnings. But you've got decent earnings growth ahead, like 10 %-ish, which isn't as good as I think one would think.

44:13But they also have a huge$105 billion pipeline. And they have the B-21 stealth bomber program. So I think ultimately it's a, you know, sorry, I need to say something on this one, too. This one we bought 13 years ago and we're up 400 percent on it. OK, so I think it's one of those like permanent compounders. And maybe you buy it now, but you don't buy this saying like, oh, with this warring world we're in, I'm going to have a double. You think, hey, maybe I'll get like 10 percent a year for a really long time. I got you. OK, we'll take a break. We'll play some options action next.

44:44options action time oliver renick joins us live from the sevo global markets in chicago what are you looking at hey scott pepsi it's been a rough year down more than 10 but the stock has actually rallied after four of its past five earnings it just doesn't last long trading volume today is elevated with more than 2600 calls purchased in the session so far which is quite a bit more than the 550 puts bought. And while it's far from big money, 70 % of the$5 million in options traded was tied to calls. Traders are prepping for a 3 % move after this report, which is a bit below Pepsi's average realized swing the past year.

45:26I should also add that the only single trade today that put up some real size was someone buying$500 ,000 worth of 130 strike puts expiring next September, not terribly encouraging, Scott. Okay, good stuff. We'll see. Oliver, thanks. We'll see you at three. Finals, they're next. Well, it's going to be a special one tomorrow. We're going to celebrate 15 years. Halftime report. You'll see the committee. I think all the members, most of them anyway. We'll talk about how we got here and what we think we're going to do next. Can't wait. It's going to be a special celebration, so I hope you all join us for that.

46:053 o 'clock Eastern time today, closing bell. Adam Parker, Anastasia Amoroso, Liz Thomas, Anka Crawford, Kristen Ols. So we've got a good lineup there, too. Brynn talking to you, what's your final trade? GPIQ, great income, 10.5 % plus the Q's upside. All right, Kevin Simpson. UNH is a turnaround story, and the fundamentals are starting to improve. All right, Jenny Harrington. Okay, Clearway Energy and the utility sector down 26 % in the last few months, 6.3 % yield, double-digit earnings growth ahead. Okay. And? Can't wait for tomorrow. Yes. It's going to be fun. EQT, natural gas winner. All right.

46:41Great stuff. I'll see you at 3. The Exchange is now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern, only on CNBC.

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