Trading Ahead of the Apple iPhone Event & the CPI Report 9/8/26

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0:38See Jared.com backslash radio for details. Jared, make the holiday last forever. Shop Jared Jewelers. Carl, thank you. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the big week for stocks and key inflation data is looming. Apple's iPhone event is taking place tomorrow. We discuss and debate the markets with the Investment Committee. Joining me for the hour, Joe Terranova, Jim Leventhal, Brian Felsky. We're right across the board. You know the story by now. Oil's up, WTI highest since June. The global energy ETF is at an all-time high. Goldman's talking about$120 a barrel if things intensify in the Middle East.

1:15Labor Day talk dominated by a record high for gasoline above$4. Yields are up. CPI is looming. We'll get to Apple in a moment. 60 % chance in the market of a 25 basis point hike. So that's kind of the stuff that's going to be in your face this week, right? It is pushing up against very strong, very strong tailwinds. And those are the earnings, right? The earnings really have been spectacular. I don't know. I feel pretty good today. The momentum factor, which we identified last week, is kind of being washed out. It's actually rebounding today. I've got the semis up. I have optical up. I've got the infrastructure higher.

1:55The weakness today, to me, it's attributable to Amgen. Amgen's 5 % of the Dow. Amgen's down 9%. We'll get into the reasoning behind that later. But I feel pretty good about the fact that momentum seems to have found a little bit of a temporary bottom. And if the market wants to rotate here, wants to move away from where we kind of held serve in financials and health care, and go back into that momentum AI trade, I think the market will be comfortable with that. comfortable unless, you know, unless oil gets away from you, less yields get away from you, 10 days from the Fed meeting, unless that sort of gets away from you.

2:33And what is a 60 percent chance in the market? I don't know that people really believe that it's that high. I'm sure you probably don't, nor does probably anybody sitting on this desk today. But that's going to be dominating the narrative as we figure out what to do from here to there and see what happens in the markets, Middle East and everywhere else. I like the term that Joe said about holding serve, not just because of the U.S. Open, but it really makes a lot of sense because we're in this vacuum of no news from a fundamental perspective. Earnings clearly are the key. We don't know what the Fed's going to do, but we kind of know what the Fed's going to do.

3:09Fed's not going to cut. And we'll see what happens. They're definitely not going to cut. They're not going to cut. Thank you. They're not going to hike. You're wrong, but you're right. I'm wrong with my God. Perfect. But you know what's really interesting? You take two steps back and you look at all the macro stuff thrown your way. You get higher oil prices. You get higher bond yields. Why are small caps still doing so well? You would have never thought that. Well, I think it's because of fundamentals, because of earnings. They were really the first earnings driver and the price to free cash flow driver.

3:36That has really been the fundamental backing of these small caps. And now the revival of the MAG-7, and we're going into Apple tomorrow. It's set up perfectly to, again, outperform. And so we're very positive on the market near term. That's a good point that, you know, Brian brings up what we were discussing last week quite heavily, the resurgence of the MAG-7. We'll show you the chart again over the last six months to make the point that Mike Santoli was making on Friday morning, which set up our entire conversation jump off. The fact that the MAG-7 had underperformed the S &P by a fairly good amount over June and July.

4:12And you can see the blue dip low, right? Right. And the orange line is the S &P 500. That gap narrowing and then to the point where they're basically even. Mag 7 doesn't have to outperform the S &P 500 to make this point. It's merely the fact that was a very uneven trade for a good period of time has corrected itself. And these stocks have come back the biggest in the market. We'll get to Apple in a minute. But that's been a trend worth watching. Absolutely. And the valuations are, frankly, supportive. I think we've just gone through a consolidation phase in these names, Scott. You know, whether it's Alphabet, whether it's NVIDIA in particular, which out of the seven is the one that I look to most for leadership.

4:56Now, I realize it's down today. It did start the morning up. It's within a hair's breadth of an all-time high. I think it's very likely that it takes that out. And once it does, we're going to be talking about that. It's not going to look back and go down from an all-time high. It's likely to go further higher on around roughly 19 times forward earnings. We know what they said two weeks ago about revenue growth rate in the coming year, 70%, which, by the way, is supply constrained. So it could be higher if things on the supply chain become a little bit unstuck. All this is not to say that the other stocks don't have something going for them.

5:28We've talked about Microsoft a lot. Very forgiving valuation. And most importantly, Joe, maybe you'll back me up on this. The sentiment is coming back to Microsoft. This was a stock under$400 just a few months ago. And people were looking at it, actually tossing it into the heap of the SAS names and thinking that it might somehow become disenfranchised. I think that will be looked back as folly. The point being is each of these names has their own idiosyncratic reasons for going higher. And the valuations give support. Before we go sort of heavy into the MAG-7 idea, if you on the general market idea that, OK, You have what feels like a new degree of risk introduced by rising oil, rising yields, rising Fed risk, at least as the market's concerned.

6:15And if you put all of that onto one side of a scale and then on the other side of the scale, all you have is earnings. But the weight of earnings is so substantial that it, at minimum, balances out the risks that I put on the other side, if not outweighs them in terms of why the market would continue to go higher in the face of the risks that we put on the other side. Is that fair? Does it still exist? And if it does, then essentially what's on this side is all noise until it becomes something more. Accurately stated, that's exactly how I look upon all of it. The strength of earnings for me outweighs the rise in oil prices and the rise in yields.

6:59My perspective is, I think for the Federal Reserve to respond with a 25 basis point rate hike will literally do nothing as it relates to inflation. And the only thing it will do, it will further freeze this residential housing recession that we're in. You're just going to damage housing more. Why would you do that? I think a lot of people look at the price of oil in somewhat of disbelief to see it where it is here in the mid 90s and think that by Election Day in November, you're going to be looking more at a seven handle on the price of oil. And I kind of in one of those. So I think you look at everything in totality right now.

7:38And to your point, until you tell me that there's earnings degradation, I think you still have to wave the tailwind of earnings over everything else. That's why HSBC today goes to 8 ,100 on earnings. They say it, OK? Mike Wilson talks about earnings and the momentum that is still behind this market. Deutsche Bank, sentiment has turned bullish again for the first time in seven weeks. That's how they are reporting things. UBS, market outlook still bullish, growth not fully priced in. What do you make of that? Now, look, I get that as far as when we're in the fourth quarter of the year, but I'm going to slightly take the other side of what you were just saying.

8:22What do you mean in the fourth quarter of the year? Isn't that where we are now? I mean, not in the fourth quarter, but everything that these people are talking about is the here and now, that earnings continue to drive. So in the here and now for the month of September, I'm not as convinced. And here's why. You know, you're talking about oil, Joe, but I think you agree, and I'm sure Brian probably will, too, that it's not oil. It's diesel, which is at a record and shows no sign of abating. There's no inventories to fall back on. There's no China cutting demand in diesel. Diesel factors into everything.

8:50It's truck shipping, it's farms, it's crop prices, things like that. And so to the extent that we're hoping if the Fed does nothing this meeting and that they won't, I mean, hopefully one week before the election, hopefully they won't. But that diesel price is going to factor its way through into inflation. And I think we're going to be talking about inflation and the Fed for the rest of the month. And we don't have earnings. Scott, to your point, we don't have earnings to talk about this month. It won't really start until a month from now. So I think it leaves us in a sort of no man's land for the month of September with the trend to the downside as inflation figures continue to disappoint.

9:27You do have an air pocket of not much going on other than all these macro events, which do have the ability to push the market around. Though volumes are probably going to pick up. People are back now, right? People are back. Typically and historically when you have a good August, you have a better September. And more aptly, if you have a more negative August, the difference happens. We know historically that September is the worst month of the year. We know, like I said in the very beginning, we have no earnings news. However, I think the key is rates. The key is rates for sure. And so if the Fed signals that they want to be more dovish and says something different, yields are going to rally.

10:10Yields are going to go up, and that's going to spook the market, I think, more than people are anticipating. That's kind of number one. But just listening to the talk, you think about technology. Remember how many times on this network we sat here and talked about 30 to 35-time multiple, and the S &P 500 is where everything peaked in 99, 2000? You have NVIDIA at 17.5 times, the largest stock in the market. That tells a lot. We're not talking about valuation risk anymore. But you're nitpicking or cherry-picking on one name. I'm just saying. The S &P's multiple is higher than 17 times at a time when yields are rising.

10:46Look at the weight of that stock. That's why you have the MAG-7 matching the performance of the S &P 500. Yeah, it's got a big weight in that. But what's also rallying are the earnings numbers of the other 493 stocks. And I don't underestimate how strong the cash flow is in the earnings revisions and the rest of the 493 stocks, including areas within, let's say, financials and communication services. I think you're going to have very strong revisions the last part of the year. I get it. But if yields remain elevated, if not continuing to back up, you do have to question the multiple of the market relative to that.

11:27Well, that's the risk over the next three to four weeks. I think that's the risk before we start hearing about earnings. The first week in October, which will be crushed by the financials, are going to kill it. But in the next three to four weeks, we have a little bit of vacuum. So what's this double talk? Here is the biggest thing. Why do you think they're going to kill it, by the way, the financials? They haven't traded very well lately, have they? Well, when we hear about the deal flow, more importantly, when we hear about how strong wealth management was in the third quarter, because in the second quarter, they didn't really talk about wealth management across the board relative to what they usually do.

12:05It was really all about deal flow. We've had a decent commercial baking cycle and a very strong wealth management cycle in the third quarter. I think that's not being told in the financials. Going back to what I was going to say in terms of the next three to four weeks, there's a healthy amount of skepticism still, Scott. Nobody believes this rally. Yeah, we've got, we talk about Deutsche Bank and all this kind of stuff. I don't think that's true. The skepticism? Yeah. Oh, I think it's true. When you talk to institutional clients, they're still not fully invested. They're still worried. They're worried about the election.

12:34They're overweighting the midterms. They're overweighting the bond market. And so there's still a fair amount of money on the sidelines waiting to go. I think the conventional thought has become, I mean, as you see targets. How many days on the show did we see targets just continuously go higher? The whole reason we start having a conversation about, well, the market hasn't cared about higher oil. It hasn't really cared that much about the Fed. It's dealt with the idea that yields have backed up. Why? Because people are so bulled up on the earnings story. I feel like a lot of people now are on the same side of the positive boat.

13:13Only as we entered September and they looked at the calendar and said, oh, I'm supposed to be bearish now. Yeah. The season alley is the reason to be bearish. Brian, I disagree respectfully. I don't think the skepticism is out there. I think there's a lot of people, to Scott's point, that are incredibly bullish, built upon the earnings. I think what's interesting is if you're going to be concerned about something, and look, for the month of September, I couldn't tell you up or down the next 50 handles for the S &P 500. I really don't know where we go this month. To your point, it's a very clean window with a lack of significant catalysts.

13:50You lose the blackout. You have the blackout period, so you lose the buybacks. But if you're going to be troubled by something, are you more troubled by oil rising or yields? I think it's actually yields. And that's why I think it's such a mistake for the Federal Reserve to raise interest rates and to position themselves overtly dovish why yields rise. Because if if yields begin to rise, that's when you get the earnings degradation. And in addition to that, that's when you get the technology and the hyperscalers begin to pull back on issuing the debt. Now, you could say, OK, maybe that's a good thing.

14:25No, it's not, because that affects the entire AI universe. There's a price sensitivity. There's a point at which you're not going to issue debt because the yield becomes unattractive to the buyer and those hyperscalers are going to step back. I think that's the biggest risk. Yardenny's talking about a Fed hike being in play still. So I don't know. We'll see. Like I said, we have 10 days away from all of that, as the Wall Street Journal today says. The stock market's breezy summer's over. Investors, beware. Maybe that gives them, the Fed, a reason to beware. We're going to have to wait and see.

14:58We get a wait and see until tomorrow for Apple. I want to talk about that now. Let's take a look at the stock because they have their big iPhone event, big for many reasons. You're going to get that new phone. It's going to be a pricey phone. It's going to be John Ternus' debut on the stage where sort of all the marbles are going to land in his bucket now. Right. That's kind of where we are. How are you feeling about this stock? Forget the event. We'll see what happens. We know what's going to happen in terms of phone. But, you know, the stock is going to, according to many, be a sell the news on this event, because that's what it has typically done, according to those who typically watch this name.

15:43What do you think? I think it sounds obnoxious to embrace a product that's going to have a price point somewhere between, call it$2 ,100 and up to$3 ,000. This is going to be significantly more than other Apple products. But I actually think there's a possibility that this gets some traction. Tim Cook, when he went to China in 2020, he observed what Samsung was doing. He observed what Huawei was doing. You had in 2019 the Galaxy foldable phone. He went back and said, we have to have a foldable phone. And that is ultimately what's going to be delivered. If they're able to execute on that and this product gets traction, then not only do you have a foldable iPhone, you have a foldable iPad at some point, which I would be interested in myself.

16:31So I don't think you want to be very quick to dismiss this as not being a product that could gain some traction. Because if there is one thing that Apple has proven, they have a really strong ability to take existing technology and improve on it further, deliver it to the consumer and have the consumer embrace it. But BTIG is sort of making the September point of what I was suggesting. In the last 10 years, according to BTIG's work, Apple's been negative in September seven times for an average return of minus 3.15 percent. It's the only month with a negative return. And they say it's perhaps sell the news after the seasonal iPhone launch.

17:12Remember, the event always happens in September. Stock traditionally doesn't trade that well. Now, it's not trading that great going in. It had a really great stretch until earnings. Until earnings. That's right. And it hasn't traded really well since then going into this marquee event. Maybe some of that has to do with the uncertainty around Tim Cook leaving as CEO and John Ternus moving into that office. I mean, it could be, Scott. But, you know, Tim Cook is still hanging around in the chairman's position. So it's not like he's gone to Tahiti. I really think this is about earnings. I think that's what knocked the stock off of its pedestal.

17:46It was a pretty lofty pedestal in terms of the valuation. It was priced for perfection. I don't think there's anything they could have done last quarter to match the expectations in the multiple. And that's still the problem now. I don't think that gets solved until you get another earnings report. I mean, there's nothing that's going to happen this week with the product launch that isn't already expected. And thus, in my opinion, should be in the stock. The only thing that's unexpected and to look forward to is the next earnings report. Now, that will be going into the fourth quarter, going into the holiday season in what has been a good year, notwithstanding inflation and the effect on the consumer.

18:21This has been a consumer that has consumed throughout the year, is well employed, as we saw last Friday, and is likely to have a good holiday season, including buying Apple phones at whatever the price is. I disagree with all of it. Look, could the stock... Well, I mean, the fact is the fact. No, no, no, wait a second. Hold on. The stock is traded well in September, period. That's 100 % and the stock can go down. But when I say this product might get traction, you're not going to know in the month of September. This is something over the long term that's going to add incrementally another reason why you want to own this company.

18:54Well, let's see when they let's see when they tomorrow when they come out and they say the phone's going to be available as of X date. And then you'll, you know, do you get the big lines outside of the Apple stores? OK, you do. We'll see. I do. Look, it's got it's got the potential to go sell 10, 7, 10 million phones somewhere in there. I also think the stock, look, yes, after earnings, it was disappointing. Remember where the stock was going into earnings. It was literally sitting at an all-time high. And at a mid-30s multiple. Okay, but since then, it's had a very steady, gradual recovery, a series of higher lows.

19:30It's doing what you want it to do. It really hasn't broken down. I still have a trading 315. The all-time high is what, 334? We're not that far away. Listen, it's a valid point. I mean, we were showing the two-month and the three-month chart there, and I will say you can really, on those charts, make of it what you want. It's almost a Rorschach test. Yeah, look at it right there. I mean, yes, you are correct that it's trying to rally there, but if you look at a two-month chart there, it's gone nowhere. I just think it's too expensive. I think it's a great company. I think the product will sell.

19:58I just think it's too expensive. That's why I trimmed it at 330, and I'm in no rush to put it back in. So it's reiterated hold at Needham. Laura Martin has been cautious on that name for a good while. Reiterated, 380 is the target. Buy it, be a vey. Moffat, Nathanson, neutral. So, I mean, the street, you know, isn't falling all over itself to express its bullishness around the stock. I guess they want to see what happens with all of that. We want to see what happens, too, with Oracle, which is this week. Let's talk about that for a moment because the company does have earnings. We've had a really critical couple of weeks for software earnings.

20:34Well, it continues this week. reiterated by Deutsche talks about that biggest question on investors' minds. What in part seems to be weighing on shares or around funding requirements? We talked about that endlessly. How are you guys? Belsky, you with us? What are you doing? The index finger on the phone is hard at work. You with us? I'm reading what's coming up next so I can be prepared. I want to make sure you're present. Okay. All right. Jimmy, you're first. No, you know what? Belsky's first. Belsky, you're first. You guys own Oracle. Oracle. No, we do. You remember what they do? You should own Oracle.

21:09Yeah, their software company, I think. Okay. They got thrown out with the SaaS. They got thrown out, baby, at the bathwater with respect to this funding. I think the company is already bottomed. It's starting to get a little bit more traction, becoming a little bit more convincing with respect to their recovery. I think, to me, this stock is, if you're looking for value in tech, this stock's providing some value in a tech space that obviously is very, very expensive. So we still like it. It's one of our core names in a couple portfolios. And we expect things to be a lot better in terms of the funding mechanism.

21:45As long as there are questions around the funding, there's going to be questions around the stock direction? Yes, I think so. Well, one of the funding questions is going to go away, because I don't feel like they're going to leave anytime soon. Do you? No, I think they will. Well, the more clarity, I think this is going to be an earnings report that they're going to provide more clarity in terms of their funding mechanism. They are. I would like to see them not raise their CapEx expenditures for this year. I think it's at$70 billion, but that's really what's kind of weighing on the stock. Yes, I agree the SaaSpocalypse, it was kind of caught up in that.

22:13But the real story here, I mean, the SaaS business or the software business is their cash cow, and they're using that to fund the CapEx along with external financing. Don't raise that because they've been issuing a lot of debt. The five-year credit default swaps are over 200 basis points. Don't want to see that going higher. But ultimately, what you look for in this report on Thursday is the top-line growth there. Okay, let's just start there. Let's get the top-line growth because this fiscal year, ending in May, we're expecting 33 % year-over-year top-line growth. If they can hit that, then we can worry about the margins as these data centers are built.

22:47We know the Abilene, Texas one seems to be coming online. We should be getting a report on how that's doing in terms of margins. But overall, top line growth. We can't disappoint there. OK. Kanner's calling a bottom, by the way, in AI infrastructure. Maybe they're talking about the whole fervor around the data center pushback, which Wells today says is at a fever pitch. Did note that Eaton got upgraded. The stock hasn't traded all that well, along with a lot of the other energy names. I want to hit a couple more things before we take a break. What's the Qualcomm takeaway from this deal with Amazon, speaking of data centers?

23:26Okay, so more progress in the Internet of Things for Qualcomm, which de-emphasizes the smartphone business. It's good. That's great news. And I'm tempted to buy today, but because September is, as I've already said, a heavy month, I'm not going to do it today. I also have to note that over the last year, there have been several data center announcements for Qualcomm, and it hasn't really gained traction in the share price. So I'm going to wait. But believe me, I was tempted to add today. I trimmed this, Scott. You may remember this during the parabola season. I trimmed it in half. I think that was around 230.

23:57I'm not going to look right now to make up for the taxes that our taxable investors would have to pay. I need a price below 196. So at 176. Yes, I'm tempted, but it's a heavy month. And that's my thesis. You're you're not doom scrolling anymore. You're you're good with this. Listen, Qualcomm, I think this is a structural change for Qualcomm. This is a very good signal that they're getting in business with AWS. And I think given what happened historically with their Apple position, I think this sets Qualcomm in a very, very good stance in a space that they've been kind of behind on. Yeah, I mean, I would agree.

24:32They need to diversify away from the smartphones, and that's exactly what they're doing. To Jimmy's point, they already have an existing relationship with Meta. The price action today, I'm a little bit surprised. It's up right now 4-5%, let's call it. I would have thought it would have rallied even more given the way it's traded, how poorly it has traded since the end of May. This is not a unique deal. You're seeing a lot of the hyperscalers like Amazon going out, trying to get relationships to secure these customers. Well, if it's not a unique deal, then why would the stock rally more than 5%, which seems pretty nice to me.

25:03Look at that chart. That is one heck of a base warming. I mean, I'm not even the greatest technician at all on this desk, But that is one heck of a base warming. So I do need to add to this. Also a very cheap stock. And as I said, this is about the third announcement this year of data center business. By the way, what if Apple does do well in the fourth quarter? What if those sales pick up? I mean, I know Qualcomm is shrinking its business, not voluntarily with Apple, but still that's going to inure to Qualcomm's benefit. We don't want to emphasize the smartphone business. There's a lot going well for Qualcomm.

25:33I will add to it, just not in September. All right, we're going to take a break. We'll come back. Pharma in focus. One big player in that space tracking for its worst day in six years. All over that move, how to play it. We'll talk about it next.

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27:10VGW Group. Void where prohibited by law. CTNC's 21+. All right, welcome back. Big news today on a couple of fronts in the healthcare space. Annika Kim-Constantinos following the action in Novartis and AstraZeneca joins us with more on what's happening here and why the stocks are moving the way they are. Hi. Hey, Scott. Let's start out with Novartis, which shares pacing for one of its worst days on record after the company had yet another trial setback. Today, Novartis said its drug for a muscle wasting disorder failed to meet the main goal in a late stage study. And that treatment was the centerpiece of the company's roughly 12 billion acquisition of avidity biosciences last year.

27:51The other key trial setback we saw came on Friday when Novartis said its cholesterol lowering drug failed to meet the main goal in a phase three trial because it did not significantly improve cardiovascular outcomes. And these two studies were seen as high-stakes readouts for Novartis, so the results are putting more pressure on the company's efforts to navigate upcoming patent explorations of blockbuster drugs. Now let's turn to AstraZeneca, which posted full Phase III data on its drug for a progressive lung disease called COPD. The biologic treatment showed benefits across a broad population of current and former smokers, including a group that currently isn't eligible for existing biologics for COPD.

28:28And AstraZeneca CEO told me this morning that's why the company sees the drug raking in more than five billion in peak annual sales. Scott. OK, good stuff. Annika, thank you. Annika Kim Constantino. So Amgen, gents, is lower on the Novartis news. It makes a rival treatment to the one that failed. So that's a move in sympathy that you see right there down near 10 percent. What do you what do you do with this? Well, the Maritide is in stage three. So they they really think that it's going to be a competing drug. That's number one. And you've got to remember why people were buying Amgen about 18 months or two years ago anyway, because there was so much market cap, Scott, that left Pfizer, Merck, J &J, the traditional kind of the vaccines, and then they went into biotech.

29:10So where did they go? They went to Amgen, Gilead, and AbbVie. And so Gilead, with their new drugs and with their pipeline, with their balance sheet, very strong. But Amgen has become this juggernaut in terms of cash. So it's not surprising that they're being stepped on here a little bit with respect to this GLP stuff. But I think Amgen, from a longer term perspective, has the pipeline, has the balance sheet, and has the continued wherewithal to do very well in that biotech slash pharma space. Yeah, I would agree with that. Downgraded, by the way, guys, to hold from buy 450 BMO. Your old firm, BMO.

29:45It's a great call by BMO. We love the BMO. Probably goes into a little bit of a consolidation phase. But I don't think you want to move away from what health care could provide to you in your portfolio. You've seen a little bit of a revival here in the third quarter. We own 15 names in the Jyoti ETF in health care. The common denominator is you have to have the revenue growth. If you're a health care company in this type of market, you have to deliver on the revenue growth. There's only three of the names that we own that don't have double-digit revenue growth. So Amgen's right there at around 10%.

30:17I kind of take the other side of it. The industry that's interesting in health care that over the last several years we've always talked about on this show is medical devices. And they are trading awful. They don't have the revenue growth. It's your striker. It's your Baxter. It's intuitive surgical. They're not giving you that revenue growth. So I urge everyone, you're going to make a move into health care. I want you to be there because of what the characteristics are, what it could offer in a portfolio. But make sure you have the growth. B of A likes AbbVie, reiterated by Target to 282. It's up a little bit from where they were, 276.

30:50And you're essentially there, 30 bucks away. Again, 282 on AbbVie at B of A, which Jimmy you own. And I've held it for a long time. I really like AbbVie. Mid-teens multiple, about a 3 % dividend yield. Diversified product line. And remember, this was a stock that had a very single product. It has migrated away from that with SkyRizzy and Rynvoke. There are always competitive threats out here, but AbbVie does a good job. It doesn't bat 1 ,000. Nobody bats 1 ,000. But they do a good job of in-house product development and acquisitions to make sure that they have a diverse pipeline, not a single product, single point of failure in their portfolio company.

31:27Goldman Belsky likes Merck and J &J among a basket of names that they say are best positioned into year end. They're cautious on Pfizer, which is part of your ownership as well, but J &J and Merck make their list of best positioned. J &J has done an amazing job post the whole vaccine issue in terms of really thinking about diversifying out their product line. Of those big three, J &J by far is our favorite. Of course, we like Merck because it's been up so much. But Merck has had the biggest turnaround because of their pipeline, because of their pipeline and the drugs. Pfizer is just a bottomed out kind of turnaround value play.

32:06But in terms of where the fundamental growth is, it's J &J and Merck. All right. Frank Holland has a CNBC News update. Hey there. Hey, good afternoon, Scott. A sharp escalation in tensions between the United Kingdom and Israel today after the U.K. announced it would ban imports of goods produced in Jewish settlements in the Israeli-occupied West Bank. The UK's foreign minister said the government did not want British companies to finance, construct, or advertise any new settlements, which are seen as undermining a two-state solution in that region. Israel said it would close Britain's consulate in East Jerusalem in response.

32:36The Trump administration asked the Supreme Court today to allow it to use a voter verification database blocked in June by a federal judge. In the ruling earlier this summer, the judge said the system was haphazardly assembled and contained unreliable citizenship data. The Department of Justice said in a filing today that decision threatens the integrity of upcoming elections. And New England's Christian Gonzalez has reportedly become the highest paid cornerback in NFL history. He agreed to a$135 million contract with the Patriots, according to the AP. Gonzalez celebrated that history-making deal on social media, writing, thank you, Lord.

33:10Scott, back over to you. All right, Frank, appreciate that. That's Frank Holland. Coming up calls of the day. Got five bull calls on five committee stocks, which means we trade and debate them coming up.

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34:46Let's do some calls of the day. Shake Shack, outperform RBC. It's an initiation coverage there. 89 bucks is the price target. So a nice upside here. You have the stock. You own McDonald's and Starbucks as well. What do you think about the call? Where do you rate this stock relative to the others you have in this space as well? Three very different stocks in our view. Shake Shack is, to us, more of a thematic play on Gen Z. I think to Shake Shack is, as Gen Z, what Chipotle was to millennials. I think that the headwinds of beef prices are being, quite frankly, mitigated with respect to their higher margin business, with respect to the kiosks and the drive-thrus.

35:26And I think Shake Shack is a secular play on that. McDonald's is a steady-eddy value play, in our view. Comfort Food has done well longer term, not as much as the last six months or so. The charts look pretty similar. What was Shake Shack, down 15 % year-to-date? This one's down 16 % year-to-date. Up 30 % Shake Shack the last couple months. So, I mean, I think the bottom is in place with respect to Shake Shack. Starbucks is a secular operating recovery story, period. And Brian's come in and completely reshaped the operating standpoint of this company. Brian Nickel. Brian Nichol from Chipotle. And we sold it from our value portfolio a month ago and put it in our tactical because we firmly believe that this is going to be a long-term winner in that consumer discretionary space.

36:16One thing I don't understand, all these quick-serve restaurant names the last several years, they have not been trading well. I don't hear anyone present the reasoning that potentially these GLP-1 is contributing to quick-serve, not seeing the type of demand that it soared five, six, seven years ago? I think, number one, quick-serve restaurants is a tough business. Those businesses, longer term, are very tough stocks to own. Restaurants in general are very tough stocks to own. I don't know what the GLP, I've never thought about the GLP-1 side of things, but I think more on the thematic basis when you're buying small mid-cap consumer discretionary names, which I would throw Shaq into a mid-cap discretionary name, that has a secular theme behind it.

37:00What do the two-year charts look like on these, guys? Can you quickly throw those up if you're able to do that on Shaq and McDonald's and some of the others? Chipotle, McDonald's, Shaq, Wendy's. It's universal across the board. I think you could even throw up Domino's, DPZ. Look at Domino's over the last couple of years. That's not trading well either. So Shaq down 27 % over two years. I mean, there's probably something to, there's your two-year chart there as well. Yeah, I mean, I think, well, again, Domino's has had problems with respect on the operating side. Chipotle has as well with respect to a lot of headline risks they've had and issues from the leadership standpoint.

37:38You don't think GOP, GOP ones have had a significant impact over the last couple of years? Let's say if that's when, you know, they became more mass market. Well, then you can say that. Then you can throw out. Then you can throw in Mondelais. Mondelez, let's throw in Coca-Cola, let's throw in General Mills. Yeah, you can if you want to read the broader theme. Consumer Staples has been kind of lousy. Right, Consumer Staples has been lousy because at the end of the day, people are not eating those names. I would say that that would be more of a risk. I think it's all this GLP stuff. I mean, I'm guessing that the lily chart against those looks like it's in the opposite direction, right?

38:17Yeah. Again, I haven't put a lot of thought in terms of what that means with respect to those. Maybe you will now. Maybe I will now. Maybe I'll stop strolling. That's one of the things that happened on this program is that maybe you will now. I've learned something. Thank you. Hey, man, we try. Oh, we got one more I want to get to. Airbnb upgraded to outperform. $200 is the price target. Josh recently put it on his best stocks in the market list. Said he had to do a double take when he did so. So we're upgrading today. What do you think about this? Did he look at the JOT ETF and see it in there first?

38:48He probably might have. And realize it's got a really strong momentum on August 7th. Educate Belsky on Airbnb. So on August 7th, Brian. Guy's staying in the same. I'm not even going to say the brand. He's staying in the same hotel every time he comes here. Yeah. Humilous Capital. I mean, you need to. We've got to keep the expenses tight. That's why, you know, Airbnb versus that five-star property that you stay in every time you come to town. Early August, second time this year, they increased their annual revenue forecast. They are having price moves after earnings that they have not seen since 2020.

39:25it's fundamentally oriented about a traveler that is very resilient, has not stepped back, whether it's Europe or here in the United States, and also the World Cup was very beneficial for them. I just don't want people waiting outside the hotel for you if I say where you stay. No, but do they have a coffee maker in the room for me? Clearly, I need more coffee today, but my coffee maker in my room at an Airbnb. I'd like you to study more of the effect. I think the chances that they have a coffee maker in the house are probably pretty good. Do you don't think so? I don't know. I guess I don't know.

39:56Have you ever stayed in Airbnb? This is more important than your stock conversation. You ever stayed in it? Pre-COVID, yes. Pre. Okay. Are you impressed? Not really. Santoli's next.

40:32Senior markets commentator and overtime co-anchor Mike Santoli is at Post 9. And before we get to your views on the market, we want to highlight your market memo. Yes. I'd say anytime you publish anything on the markets, it's a must read. Tell us more about that. Yeah. So this is, I guess, the formal official launch weekly newsletter kind of packages up a column I've done on markets for a long time, but also adds to it, creates a little more kind of data items and observations, sort of a little more color than just a straight kind of state of the markets snapshot. So, you know, free to subscribe.

41:08And it's going to show up from here on out Tuesday mornings as we get a little bit of a read on how the week is shaping up. Oh, great. So how is this week in your mind shaping up? I find it interesting that it's as if people came back and said, wait a second. Software was rallying huge. Everybody piled into health care. What about semis? Have they been de-risked enough to actually go back? So I think it's a little staticky in terms of whether this is going to be the new mode of things. You know, last week we were talking, Scott, and you talked a little bit about Mag7 sort of reasserting itself.

41:43I like a slightly broader basket. that I read about this over in the newsletter, the Q-top, which is the 30 largest stocks in the NASDAQ 100. It's kind of what we think of when we describe AI, because it's got Micron and AMD in the top 10, and it trades more like it. So I have my eye on that. It's still 4 % below its record high. It has not printed a new high in about three months. So that, to me, is to tell as to whether AI is going to kind of take control of this market again, or if it's still going to be kind of, you know, one day it's broadening, one day it's mega cap. I mean, oil and yields today, primarily the story, do you think?

42:20And CPI has come in. And as we said, the Fed decision is 10 days away. It's oil and yields. And again, the market attempts to reach for the semis and the things that are not necessarily so exposed to those things to try and hold together. So I do think that's the story. But the stakes do build as we get toward the inflation data this week. All right. Good stuff. We'll talk again at three. I look forward to that. Congrats again. Mike's market memo. Don't miss that. Up next, we'll play some options action with Oliver at the SIBO in Chicago.

42:55All right. Welcome back. Oliver Rennick joins us live from the SIBO Global Markets in Chicago with today's options action. We mentioned at the very top of our program, oil moving higher. You, interestingly enough, have some bearish bets in energy today. Mixed at best, Scott, despite the move in crude oil and energy stocks, the trading and options around USO and XLE has been quite nuanced. Volume in the USO ETF is about 50 % above the 30-day average, but in XLE it's just average. And in both, there's a healthy two-way trade going on. Puts outnumber calls by volume in the USO ETF, Though some of the richer, higher premium trades lean towards the bullish call side.

43:41But two specific names really stand out that I want to focus on. Among oil producers, Exxon shows distinctly bullish trading. The most popular contract there today is the 170 strike call expiring Friday, which means a 6 % rally into the weekend. But the real star of this sector is arguably Bloom Energy, ticker BE, The fuel cell business up 11 % today. Options there are booming with 50 % more calls likely bought versus puts. And$350 million almost in options traded today already. That is more than SpaceX, Scott. Wow, Oliver, thanks. I'll see you at three. That's Oliver Rennick. So I mentioned top of the program the Global Energy ETF.

44:24That's the IXC, all-time high. The XOP, highest since June of 2015. 52-week highs, ConocoPhillips, Valero, Marathon. You've been talking a lot about the refiners of late. ExxonMobil outperformed today, 182 at Bernstein. Take it where you want. I could see that there would be some hedging against oil prices at$93,$94. So I have no problem with that. I think you stay with the refiners. And collectively, just the theme of commodities is a very strong one right now. Copper prices moving towards highs. Agriculture, which we talked about last week. It's all of it. The commodity trade is probably arguably the strongest trade in the market.

45:03Gold's come back a little bit as well. Exxon's just a juggernaut in terms of what they're doing, businesses overall, not only on how they pay out their dividends, but how they're diversifying out their business lines. But the refiners are a great business. Why no refiners for you? Because I've got it in ExxonMobil. ExxonMobil is the world's third largest refiner, but it's tucked into an integrated oil company. I think to expand on what Brian and Joe just said, that even if oil prices do come down, They're probably not likely to come below$70, and there's a lot of money to be made all along the product pipeline above$70.

45:36We'll have finals when we come back.

45:45Liz Thomas, Dan Greenhouse, Abby Yoder, Aswath, the motor, and Kara Murphy. The NASCAR CEO, Steve O'Donnell, the USA Sports President, Matt Hong. The chase is on. We'll talk some racing coming up at 3 o 'clock as well. What's your final trade? Pinnacle Financial Partners, Bank of the Southeast. Okay. Chenier is down on a technical factor. Here's your opportunity. I like Freeport MacMoran to move into the 80s. All righty. I'll see you at 3 o 'clock. The exchange begins right now. 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.

46:22You 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. To view the full Halftime Report disclaimer, please visit cnbc.com forward slash Halftime Report disclaimer.

46:56issues and bodily ailments. With that kind of drama that seems to follow me, you never know what's going to happen. You can listen to Jeff Lewis live at home or anywhere you are. Download the SiriusXM app for over 425 channels of ad-free music, sports, entertainment and more. Subscribe now and get three months free. Offer details apply.