Closing Bell - Closing Bell 5/15/25

Episode Date: May 15, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

All right Kel thanks so much welcome closing bell Scott Wapner live from Post 9 here at the New York Stock Exchange this make or break hour begins with this market on the move again and what might upset this comeback for the ages we will

ask our experts that question over this final stretch stocks now positive for twenty twenty five the S&P is here is your scorecard with sixty to go in regulation major averages extending their gains this week even after a retail sales report

showed consumers barely spent in the month of April yields dropped a bit on that news which probably helped a little bit today for stocks still somewhat defensive to staples and utilities are the best sector today. Nice gains across the board for those two

spaces elsewhere. How about United Health. Those shares sharply lower on reports it's now the subject of a criminal probe by the Justice Department over possible Medicare fraud. We will track those shares into the close today down some 12%. It does take us to our talk of the tape, this run in stocks and whether the recent backup and interest rates is something to start worrying about. Let's ask Chris Harvey. He is the head of equity strategy for Wells Fargo Securities back here at Post 9. It's nice to see you.

Good to be back. I always talk about the fact that you've been really optimistic. You have a high target still. You were not moved enough to reduce it. No. Thought we could still do some good things in this market. But now we have rates backing up. You got your eye on that?

We do have our eye on rates. What we're worried about is, what is this telling us? Is this telling us that recession is a lower probability, or is this telling us that we have a problem with a deficit? And if it's a problem with a deficit, this can keep going. At the end of the day, we are seeing rates come in a little bit on some of the economic numbers, but it's a concern, it's a worry.

What about if it is in fact the latter, concerns about this ever escalating deficit? We're talking about a budget on the hill, close to the finish line on that, and it's gonna be an expensive price tag. Is this the bond market saying, whoa, a little too high? I think so. I think the bond market's saying,

guys, we need to do something here, right? We talked about the doge, I thought you guys were gonna get this under control, now we're spending more money, why are we doing this? We don't want you to do something here, right? We talked about the doge, I thought you guys were gonna get this under control, now we're spending more money, why are we doing this? We don't want you to do this, we want you to show some fiscal discipline, let's see it. So you were, like I said, you were optimistic even before last weekend, right?

Yeah. Where we had the rollback of the tariffs on China. So I was expecting you to come in today with a bit of a flex saying, hey, this is why I've been optimistic. I figured this too shall pass. We'll get on to better things like tax cuts and deregulation. Are you not more optimistic than you were just last week despite the moving rates?

It's a long year. We're not out of the woods. We'll get some more volatility. A lot of things we expected to see are beginning to happen. We're happy about that. But we're one tweet away from something going wrong. What if India comes out and says, yeah, we really can't come to this table. We can't get to an agreement.

What if Japan says the same thing? Then we have a problem. We're heading in that direction. I'm pretty constructive on it. And I do think that the second half of the year is going to be much better. We haven't seen the benefits from deregulation. I do believe the year is going to be much better. We haven't seen the benefits from deregulation. I do believe the Fed's going to be cutting rates. And we've had a pretty good repricing of risk.

That AI trade has looked more attractive. Starting to move once again. But that's a great secular trade that's very US-centric that we like a lot. You just said, did I hear you right, the Fed's going to be cutting rates? I did say that. I mean, the market's not necessarily so sure anymore. We pushed it out to September. Some say we might not might not get any and if we do it's for the wrong reasons now. So this is what we think. We think we're going to get more and more progress on trade and tariff.

What has held up the Fed? Uncertainty about trade and tariff. We resolved that there's not much for them to do except normalize rates in our estimation. We are seeing from what we're looking at, we are seeing inflation come down. We are worried about a slowdown. We think people can, one of the reasons why we're positive and optimistic is we think people can look through that slowdown if you make progress on trade and tariff.

And again, it appears to be true, but one of the reasons why we're not here flexing and saying, oh we knew it was great, is because there's still a lot of risk out there. Yeah, right. I mean like the rates thing which which we're talking about, like the Fed, which maybe the calculus has changed. Hang on for a second, I want to bring in Steve Leesman, our senior economics correspondent, with more on that. It's been an interesting backup in rates. You know, you can debate the reasons and maybe it isn't all of the above.

Growth can be better now because maybe you don't have as many trade fears as you did. Deficit's still big, tax cuts are gonna increase it, so maybe the bond market's screaming, just wait a minute. And then, Powell, the chair, speaking today too on the overall environment, tell us more. Well, first of all I kind of agree with Chris which is sort

of a counterintuitive thing. The market Scott seems to be very focused on employment outcomes to figure out what the Fed is going to do. And so when jobless claims come in today the way they've been it backs off the market's belief,

I think, that the Fed is going to have to quickly cut. And now it's, I just want to double check the probability, but it looks like a 75% probability now of that first cut coming in September. Again, that was June, July, and now it's September. But I actually think that clarity on the inflation front is and on the tariff front is going to be equally if not more important to the Fed. And the reason is I do think if you go back to the December summer of economic projections, the Fed was forecasting cuts before the tariff situation developed. So if you can get back to there and if we see these tariffs,

like we did see today by the way, some of the tariffs being absorbed at the wholesale level before they get to customers, no guarantee that continues, but after a fashion, if that becomes clear, I think the Fed might be free at some point to get back to its sort of regularly appointed rounds of cutting interest rates the way it wanted to or thought it was going to in December of last year. You think rates are a worry for the Fed, Steve, if they continue to back up like they have been? Obviously, getting a little bit of relief today after hitting 455, I think it was, now we're 10 basis points lower than that.

How does that factor into it? Well, it does factor into it, but it's not, shall we say, the absolute decisive factor. The Fed will look at the totality of financial conditions and the stock markets come back a long way. That's an easing of financial conditions. And the bond market, Scott, I don't know if you remember this, but it seems so long ago that we were worried under the Biden administration about the idea that there was going to be too much deficit spending and rates rocketed back up into that. I don't know how far back you go with that 10 year, but if you can go back a year or so even to the fall, you'll see we were back up in these ranges and even higher.

I think we were, you know, sort of up in that fort there we go how nice is that. So we've been there before so to speak and the reason was because concern of the deficit. Well what's happening in Congress what's happened with the budget that President Trump has submitted is one that does not really address the deficit in a meaningful way. So those same concerns are back. I think that's one part of it. We also have some questions I think about the consumer right here. March was payback, or sorry, was front running for consumer. April was payback. So there's a lot of moving parts right now and I think the market might be focused right now on the deficit situation when it comes to bonds. It'll factor into the Fed, but they'll watch it. We've been here before. I don't, but they'll watch it. We've been here before.

I don't think they'll panic about it. All right, good stuff, Steve, thank you. Our senior economics correspondent, Steve Leesman. So back to you for a minute, Chris. I mean, yes, we've been here before, but it's the rate of return that we've come back here now, especially at a time where the treasury secretary is laser focused on keeping the 10-year

from going this direction. That's right. That's an issue. So here's the bull case. The bull case is you have the tax story out there and it won't get worse from here. So this is as bad as it's going to get. Some people will say well the Senate will expand it. I'm not sure of that. If that's true, if this is your stop down at this point in time, if that's as bad as it gets, you can start to put on some duration and be pretty comfortable with it. The other thing, you go start to put on some duration and be pretty comfortable with it. The other thing, if you go back to that chart,

let's just call it four and a quarter plus or minus 25 basis points, that's where we've been for the last two, two and a half years, and that appears to be the right cost of capital, at least for now, and that's fine. All right, well, retail sales today, I mean, there are obviously a lot of questions about the consumer, we're all sort of thinking about that,

retail sales really didn't do much of anything, And then there's Walmart too that we need to think about. Courtney Reagan's following both for us today. Court? Hi there, Scott. Yes. So retail sales, excluding autos and gas in April, fell but just two tenths of a percent from March. March then, of course, getting that upper revision overall. America's dens were the most at restaurants. That was the strongest category of the month of 1.2 percent. Of, that's services, not goods. But building material and garden supply sales, that was the second best category of 0.8%.

Sporting goods, hobby and bookstores, that was the weakest, down 2.5%. Now, that so-called Liberation Day tariff announcement came on April 2nd. So the slight retail sales decline seems relatively solid to me, knowing sort of the worry that consumers have expressed in these softer day reports, like the sentiment and the consumer confidence report. He was relatively solid to me, knowing sort of the worry that consumers have expressed

in these softer data reports, like the sentiment and the consumer confidence report. So I asked Walmart CFO John David Rainey today his assessment of the U.S. consumer. And he said, consumers right now are, quote, discerning, mindful, maybe a little concerned about possible looming price increases, but their behaviors have not changed. And he said he's concerned about consumers and the price increases from tariffs, what that's going to mean to them as they start to come down the line, potentially very, very soon at Walmart and other places. All right, Courtney, thank you.

Courtney Reagan, let's expand the conversation once again. Bring in CNBC contributor Malcolm Ethridge of Capital Area Planning and Wealth Enhancement Groups, Ayako Yoshioka, Wells Fargo's Chris Harvey, of course, is still with me. Ayako, I'll go to you first. I mean, the consumer's also been hanging in there and continues to hang in there. How much is that a key to where we go in this market next? It's definitely a key here, Scott.

I think this is why everybody's so laser focused on the labor market side of the things. As long as everybody's employed and you still have that income, you're able to spend. And so consumer spending can be okay. But once the labor side starts to weaken more so than we've seen, and it's been more gradual than anything else, you know, I think the economy can take that. I think anything that speeds up, you know, the unemployment rate and then the pace of unemployment, I think the economy can take that. I think anything that speeds up the unemployment rate and then the pace of unemployment, I think that's gonna be more problematic.

But then the Fed might step in because I think they're more focused on that side, at least for now. Malcolm, we can take higher rates, can't we? To Leesman's point, all right. So they backed up a little bit, but we're back to where we were. What's the big deal?

Yeah, I think that it is important to where we were. What's the big deal? Yeah, I think that it is important to keep an eye on what's happening in the treasury markets. I think that it frankly gives us a little bit more of a read on how long the housing market is gonna stay frozen, because obviously there's a direct linkage there, and it's been very restricting for anyone

who's been wanting to buy or refinance in that space. But I'm looking at what's happening right now, and I'm hearing what's coming from Walmart regarding the consumer. And I'm wondering if maybe there's not a broader trend happening that we're not paying enough attention to and maybe we don't have enough data points to find out yet. But I'm wondering if the sell America trade

isn't more responsible for that spike in the 10 year. And maybe we're seeing investors from outside of the US take some gains here now that things have come back to the year to date neutral point, let's call it, and maybe they're also selling out of those US bonds and we won't really know until we can look back a few more days at the trading activity. Chris, what do you think about that?

So, there is a question, well, I would say during the, during a lot of the stress, there was a question of confidence, there was a question of confidence, there was a question of credibility. If you look real rates, we're really pushing nominal rates. And there was a question of are people over indexed to the US? And I think all that combined to push rates up and to some degree, you're still pushing it up.

I would say right now it's a combination of, hey, we're reducing the probability of recession, but we're also worried about the credibility, the confidence, and part of that is the we're reducing the probability of recession, but we're also worried about the credibility, the confidence, and part of that is the balance sheet and the deficit. You worried about the confidence, if you want to play that one, of consumers? Being able to hang in there? So, Scott, something very... So I talked to a lot of our analysts, and our credit card analyst, Don Fandetti, and I go back and forth all the time.

Right now, if you look at some of the trends and some of the credit with the credit card companies, it's actually quite strong. You're not seeing weakness that you would expect, right? We're all looking for things on. Yes, the consumer is the linchpin, no doubt about it, but when we talked to our economics team and they're going out and they're visiting middle market players, hey we still are holding on to our workers. We still can't find enough workers. We went through, we combed through transcripts and we're looking for it and we can't find it. And for the most part, what people are saying is, yeah, you have one office where people

are reducing exposure or reducing labor, but for the most part, people are comfortable where they are or at some point they feel they need to hire more people. Malcolm, we're not, you know, none of these issues really suggest that we're suggestive of, or ignoring issues that are still out there. I think we're all real about that, but it does appear that the fog has lifted from the road, the roadway. We can see better out our windshields now. Doesn't that give us

a little bit more road to travel before we maybe have to deal with some of the possible issues that crop up we're 4% away not even a little bit less than that from a new high on the S&P yeah I agree it certainly makes it a better Q2 for all those corporate CEOs who are trying to figure out whether they were going to give us two separate cases, whether one was in a recession and out of a recession, or one was tariffs at 145% and the other was something lower. But I do think that it's important to keep in mind

that even tariffs coming from 145 down to 30 is still restricted for a lot of Walmart suppliers. It's still restricted for a lot of online retailers who might even be going out of business right now and we can't see it yet, because again, those data points just aren't clear to us. So I think to your point, we can feel a little bit better.

It wasn't as bad as feared because Trump did pivot a lot sooner than I even thought he potentially would, but it's definitely not, you know, the road is completely clear for us here. We'll know that once we dig into Q2 numbers and really get a chance to understand how much damage has already been done underneath the surface. Well, speaking of President Trump, I mean the other talker, and it remains to be a talker,

almost every day now, is the president taking aim at Apple CEO Tim Cook again. Steve Kovac is here with more on that. This is like, what is it, three out of the last four days it feels like? Maybe more? That's exactly, actually there was a second comment that he made today too, but look, Scott, Tim Cook may not be in the Middle East

with President Trump and his big tech peers, but he is certainly on the President's mind. Here's the President from earlier today bringing up Cook publicly and really blasting him for this India stuff. Take a listen. I had a little problem with Tim Cook yesterday. I said to him, Tim, you're my friend.

I treated you very good. You're coming in with $500 billion, but now I hear you're building all over India. I don't want you building in India. And look, Scott, just two days ago, the president was in Riyadh with a who's who of big tech executives. You had Sam Maltman, Andy Jasset, you name it, they were there.

And the president couldn't help but point out Tim Cook's absence publicly. It seems like NVIDIA's Jensen Wong is really his new best bud in tech these days. And what you're really seeing here is the president putting enormous pressure on Cook to bring more manufacturing back to the United States. It's the opposite of what we saw in the first term when Cook was the one who wrote the playbook for managing the relationship with Trump. Today though, no matter how much Apple gives

to appeal to the president, he just seems to want more. You got that $500 billion invested in the US over the next four years, a new factor in Houston building AI servers. Well, that's just not gonna cut it. And the president keeps saying this week he wants to see more from Apple. In the meantime, Apple is the only Mag-7 name in the red

since Liberation Day on April 2nd. And Apple has largely been underperforming its peers all year, Scott. Yeah, it's an interesting wrinkle into this story now. Steve Kovach, thank you very much for that. Malcolm, you're the shareholder. What do you think? Thank you very much for that. Malcolm, you're the shareholder.

What do you think? Live we've seen something like 8% in Apple shares since inauguration day includes a $90 billion plan buyback by Apple, right? Something like 25 or so billion dollars has already been executed, so it could be a lot worse. But I think that Tim Cook will do a very good job of getting the messaging out there

and making sure to put out some press releases that are enough red meat to satisfy the fact that you know Manufacturing is being done here in America. I think only one or two of their PCs are manufactured here in the states right now They're not going to move their flagship product out of Asia It just doesn't make sense But I think that Tim Cook will do enough and say enough and put out enough in the next few days To help just kind of calm things there and make sure that he stays out of the crosshairs Chris does that's been killing it lately, right? This week alone up six and a half percent just trade back and back now in a big way

So let's just talk hardware. We're underweight hardware. We've been underweight hardware A lot of that is Apple and and there's a concern there. The AI trade, I think, is back, right? So can we just say all of tech is back? I don't think the answer is yes. A lot of tech back, the answer is yes. Semi's been ripping, right? Big part of the AI trade, I think it will continue,

maybe we take a pause here, but at the end of the day, as we were talking about, that AI diffusion Act that's been diffused at this point in time was exceptionally important. And what Jensen was saying about our exporting is we want to be, we want US technology to be the standard. In order to do that, we need to export some of this technology to the rest of the world so it does become the standard and we do have that advantage. And if we don't, somebody else will step in. And that's really important. I see we have some news from the White House on the latest deals coming out of President

Trump's trip to the Middle East. Amon Javers with the update at this very moment. What do we know here, Amon? Scott, that's right. President Trump has wrapped up his day in Abu Dhabi and the White House has just put out a list of some of the deals that have been secured as a part of that trip, including some big name companies that we'll all recognize.

They say Boeing and GE Aerospace have secured a $14.5 billion commitment from Etihad Airways to invest in 28 American-made Boeing 787 and 777X aircraft that are powered by GE engines. They say that Emirates Global Aluminum will invest to develop a four billion primary aluminum smelter project in Oklahoma. They also say that ExxonMobil, Occidental Petroleum and EOG Resources are partnering with the Abu Dhabi National Oil Company for expanded oil and natural gas production valued

at the White House says $60 billion. It's a whole long list of deals here. Scott in this press release from the White House, there's some wheeling and dealing in the Middle East going on this week. The president said earlier today that he expects to fly back to Washington, D.C. tomorrow, but he also sort of laid out a hint that he might not fly to Washington, D.C. tomorrow. He might go to parts unknown. So there's some question about whether he'll go to Turkey to try to participate in some deal making there in terms

of the Russia-Ukraine war. That piece, obviously, still TBD, Scott. Back over to you. And just since you went there, and we'll end there, the idea that the president would go, but Putin would not, that seems to be where we are at this moment? It's a possibility, and we'll have to wait and see what the president decides to do. I mean, a lot of foreign policy experts in Washington say, you know, the U.S. should not reward Putin with or should not reward Russia with a meeting if Putin's not there. That indicates a lack of seriousness on the part of Russia. So we'll see what the president does.

Zelensky has arrived in Turkey and he looks like he's willing to hold meetings. The question is whether any of this can accomplish anything given that the strategic goals that the Russians have are not met and the strategic goal for the Ukrainians is to push the Russians out of all parts of Ukraine, right? Those two objectives are just incompatible and how you split that and come up with some peace resolution is a real quandary. Interesting. Eamon, thanks for the update there. Eamon Javers.

You bet. With the very latest in Washington. We'll steer our conversation back to tech. I see a headline too moving, Malcolm, and I don't think you own Meta. At least I don't have it in front of me, so I don't think you do. That the Wall Street Journal is reporting that Meta's to delay the rollout of its flagship AI model,

Behemoth. I bring it up because we're literally having a conversation before we went to Eamon in DC about whether this AI trade is back. The issue for some is it just doesn't remain on schedule. Yeah, I'm a little bit surprised to hear that there's going to be a delay, especially because The issue for some is it just doesn't remain on schedule. Yeah, I'm a little bit surprised to hear that there's going to be a delay, especially because Mark Zuckerberg has basically raised the stakes as of their last earnings to let us know they were going to dump another $7 billion into infrastructure related to developing AI.

But I will say that the stakes are very high for companies with these rollouts. We saw that with Apple Intelligence and the disappointment in how they managed to roll that out. And so maybe the focus there is we'd rather delay and launch a great product instead of falling flat on our face and launching something that wasn't ready for the market. So I'll give them the benefit of the doubt. They've been right this far. And so we'll just have to see when the product is ready if it does meet expectations. We'll watch it for the rest of the program obviously down two and two-thirds percent.

Looks like we're at the lowest of the day for shares of Metta on this news. The market can be punishing as we've learned if it has expectations about your deliverables related to this great trade, and if they don't come, as I said, on schedule, you're gonna be punished. I think that's right. But when you're dealing with a new technology, you're always gonna run into bumps and bruises.

So to me, this is not unexpected. Things don't run like a Swiss watch when you have this new technology. So should the market punish it? Should it trade it down? Yeah, I think that makes sense. But longer term, Meta seems to be in the right spot in the AI trade and seems to be a pretty big winner.

Right, you get a headline or a comment from an Eddie Q for example of Apple as we did a week ago and you saw what happened to Alphabet shares really immediately following that. So we'll keep following this story for you, try and get more on it, but there is Meta. is meta lows of the day two and a quarter percent down Malcolm thank you Chris Harvey thanks to you and I will talk to you soon we had some issues with with I is feed so we'll try and get her back one of these days soon

I go Yoshioka let's send it to Christina parts of Neville us now for looking the biggest names moving into the close hi Christina hi Scott well let's start with United Health because that stock is plunging right now in a Wall Street Journal report that the company is under a DOJ investigation for Medicare fraud, specifically its Medicare Advantage business. The insurer tells CNBC that it has not been notified of a DOJ investigation, and it called the journal's reporting irresponsible, saying it stands by the integrity of its Medicare Advantage program.

But it has been a difficult week for the company, which suspended guidance and of course, whose former CEO Andrew Woody stepped down just on Tuesday, shares down 12%. And some positive news, Visa rising for the seventh straight day, hovering around a record close, that would be a $362.71. Still a little shy of that, which is set back in February. You can see it's at $362.15, so a little shy of that. Scott? We back in February. You can see it's at 362.15. So a little shy of that. Scott? All right, we're back to you in a bit.

Christina, thanks Christina, parts of Nebelos. We're just getting started here. Up next, shares of Coinbase sinking today on news of a SEC investigation. We're just getting a response as well from that company with shares down 7%. We'll tell you what this is all about and what they're saying this hour.

We're live at the New York Stock Exchange. You're watching Closing Bell on CNBC. All right. Welcome back to Developing Story. We're keeping an eye on this hour. Coinbase stocks sinking on news of an SEC investigation. Taneya McKeel is here with more. Stocks been in this company's been in the news a lot this week.

What do we know about this? Yeah, big week for Coinbase, Scott. The company confirming the SEC has been investigating whether it has misstated its user numbers. The inquiry focuses on the number of verified users reported by Coinbase. The New York Times reported this afternoon Coinbase has claimed as more than 100 million dollars, 100 million verified users in various securities and filings and marketing materials. Paul Greywall, their chief legal officer, explained in a statement that was shared with us that that includes anyone who has verified their email address or phone number with Coinbase. So the

number may overstate the number of unique customers. Now, the investigation began during the Biden administration, which Grayball also points out that administration was famously hostile toward the crypto industry and has continued under the Trump administration's, of course, more crypto friendly SEC. Grayball also said this is a holdover investigation from the prior administration about a metric we stopped reporting two and a half years ago, which was fully disclosed to the public. While we strongly believe this investigation should not continue, we remain committed to working with the SEC to bring this matter to a close.

Schaer is taking another leg lower on this story, already under pressure after this morning's reported hack, Scott. Yeah. So, I mean, so much for riding the high of being added to the S&P 500, which Brian Armstrong just yesterday was talking so highly about and what it meant for, in some respects, the credibility of not only crypto, but this company. And on that note, I was at the Sone Conference, you know, yesterday, and I spoke to famed short seller Jim Chanos and he told me he is short coin and here's one of the reasons why.

All the things that Coinbase did as a leader and as a pioneer in this industry, others are now doing. You can now buy Bitcoin ETFs anywhere. You can trade Bitcoin places like Robinhood and well said. So in effect, you basically have a broker, a broker dealer in crypto. And broker dealers generally trade at relatively low multiples and ultimately have very low margins. What's your take? I mean, you know, commoditized business in his view. Do you have a view? It's interesting.

And I remember when he first started talking about this a couple of years ago, just looking at the difference between then and now, it sounds like he's really talking about Coinbase as sort of a brokerage. And of course, when you talk to investors and analysts on the street, a crypto company, people are so long on this name because of the nature of crypto. There's just so much more toward their business these days, which we're finally getting to see ramp up. They may be businesses that didn't really matter very much two years ago, like staking, like stable coins. We have Bitcoin ETFs now, which of course,

Coinbase does the custody on so many of them. So it is, I think, important to keep in mind that there is so much to this business beyond the trading. Yeah, and speaking of Bitcoin, let's look at it, because it was back above 100K, like 103. It's been an incredible return to these highs. Yeah, absolutely. I had been talking to so many analyst investors who said, we think that around now

100K is in sight, but this may not be the breakout to the all-time high that people are expecting. I think also because of how different the market is now with so much institutional demand, we might see this four-year cycle extended. So if you're going by the four-year cycle, 2026 would be the barrier. And we might actually not see all-time highs or peaks of this cycle until next year. You might see new highs later in the year. Third quarter I think is something that people are eyeing a lot because of the

deadline for legislation getting signed and put on Trump's desk. But because we've got so much institutional demand we just might see the peak not happen for a while now. Alright Thanks for helping us understand this better That's today and mckill right here at post 9 on closing bell. We'll see you soon. Thanks, Scott up next We'll have much more on that developing story around meta the stock at the lows of the session trying to come off of that level Still down two and a third percent on reports. The company is delaying its AI rollout. Gene Munster joining us next. All right, welcome back. Shares of Meta falling on a new report from the Wall Street Journal

that the company is delaying the rollout of its flagship AI model. Meta declining to comment on that report. Deepwater Asset Management's Gene Munster joins us now for more. It's good to have you. Thanks for running on with us on the phone here. So this was gonna happen apparently according to internal targets in June. Now it's gonna be pushed to the fall or even later. What's your reaction to that?

Well, first I just wanna level set what they're talking about. The product is that he met and it is reportedly a four hundred uh... billion parameter model something that the size of the brain and the latest gpt models are rumored to be around a trillion parameters but they get this is half the size of what we're seeing from opening i and the reason why it's important because uh... metas for a big stake in

what's going on with the. So from the respect to Meta, this is a black eye, undoubtedly, and I think it speaks to how hard this is. But it's important to note, if you look across all of big tech, is that Meta is actually seeing the benefits of AI at scale, even with these smaller models. For example, in the March quarter, they grew their daily active users at 6%. This is a 3.2 billion number, a daily number, versus 5% in the December quarter. And so we see that fractional acceleration, but that's part of more content, better targeting.

So I think it's important for investors to recognize they're making progress. But that's one track, is a headwind, but it doesn't change, I think, their opportunity. The second, and I think the more important takeaway here is these models are really hard to advance. And when we rewind to January, when Deep Sea came out and this view that these models could miraculously improve through some level of diffusion, distillation, that what we're seeing is that's not the case. And why that's important, first, is investors should be more, slightly more tempered in

terms of how these models are advancing. And second is they're going to continue to spend, because when you're not seeing these improvements, they're going to have to throw more hardware on it. I mean, the subtle positive here is Nvidia. I mean, it's interesting. You raise a number of good points on what investor expectations need to be. We're talking about multiples, right? Multiples have gotten expanded on the idea that this is the biggest growth engine

that's ever existed potentially for these companies. And then there is the money that they're spending to try and realize the power of this incredible technology. There's been almost a lack of patience, wouldn't you say, from investors? You're painting a picture at which we, the collective investor, needs to be a little more patient about how fast these technologies may come to fruition.

The ROI is yet another part of this equation. It is, and there's almost like a question of faith that this all boils down to is do you believe? And I think that the skeptics will point to this and say look at the path of these models improving, we're just not seeing this exponential step up and the improvements of the models. We are seeing exponential increase in the usage of them that's I think important but as far as the step up and I think the the second piece is if you look at the use

cases around AI today I mentioned that scale I think meta is the best example of AI working but it's still largely like coding and customer service so why somebody like me, like on what grounds can I be so optimistic about this? And ultimately I think what we're seeing here is that this is really hard to do and there's just going to be a handful of companies that are essentially going to power intelligence at scale in the future. And I continue to believe that despite this setback what Apple's going through with some of their delays around Apple intelligence with some of their delays around Apple intelligence,

some of the changes in the ramp up of GPT-5, all these are in that same thing. It's just really hard, but that's good for these big companies because when it's really hard, no one's gonna touch them. No, but they have to get it right. And expectations are high that the performance level of these models is going to meet the moment.

And that appears to be the principal issue here. According to the journal story, engineers at Meta and researchers were concerned that the performance of behemoth wouldn't match the public statements about the capabilities. That's a key issue here. So, and just to reiterate, the key issue is that the models aren't as smart as what optimistic

people like me believe that they should be at today. And so that is something to factor in. But I do believe that ultimately you're right, they have to do it. But they're going to do it. And the reason why they're going to do it is they have to do it. Because if they don't do it, they risk, I mean, these are average market cap of the Mag-7s, just over $2 trillion. There's a lot of market cap of the MAG7's just over 2 trillion. There's a lot of market cap at stake here for them not to deliver this future because

there's, I believe, so many benefits to it. And so that's the, I think the piece that is difficult is that yes, it's taking longer and harder, but ultimately I think that they will get there. And one other piece that's important about what's going on with llama. Keep in mind, this is an open source model. And based on our scoring, this has always scored the lowest of the top five models. And so there is a piece around this too, which is important is you could argue

they should be making more progress faster because, but by definition it's open source, which does limit. There are some limitations about how fast you can improve the model, given your operating in an open source, which does limit, there are some limitations about how fast you can improve the model, given you're operating in an open source environment. Pluses and minuses, remember on the Deep Seek Day, Meta was the one that didn't go down because of the very fact that it is open source.

Gene, thanks. We'll continue this conversation for sure. We'll track the movement in those shares. Most of the big tech names are down. Microsoft is hugging the flat line, the chips are down, and maybe some of that this late day is related to that. Christina Parts-Navoulos is standing by

with the other movers that she is watching right now. Yeah, not chips this time around with Scott, but a major sporting goods retailer set to acquire a footwear giant will have those details and much more after this short break. All right, we're 15 from the bell. Let's get back to Christina Partsenevolis now for the stocks she's watching. Tell us. Dick's Sporting Goods.

They're going to be acquiring Foot Locker for $2.4 billion, that's 24 bucks per share. And that is why you are seeing Foot Locker shares up 85%, 85%. Dick's saying the acquisition will expand its international presence and strengthen its foothold in the Nike sneaker market. Dix also says it expects to operate Footlocker as a standalone business. Dix down about 15% and hurts regaining some momentum after it missed expectations in its Q1 report earlier this week, but Susquehanna raised its price target amidst a broader reshuffling from analysts.

The stock is still well off its 2025 highs though, that it hit in April when Bill Ackman's hedge fund purchasing square disclosed that it had taken a stake in the company. You can see shares up about 8% though. A lot of analysts changing the price targets and such just in the past 24 hours. Go.

All right, Christina, thank you. Christina Partzanova, though still ahead of rundown of what to watch for. When Applied Materials reports results in OT, we are back on the bell next. Christina thank you Christina parts of Neville are still ahead of rundown of what to watch for when apply materials reports results in OT we are back on the bell next. Coming up next we get set up for all the big earnings hitting an

OT market zones next. We are now in the closing bell market zone CNBC senior markets commentator Mike Santoli is here to break down these crucial moments of the trading day plus Leslie Picker with headlines from the latest 13 F filings. We're also looking ahead to two

earnings reports at OT today. Steve Kovac back on take two Christina Parts and Neville is back on applied materials. Michael I'll begin with you've got a pretty decent day. Tech was due for a breather. Yes, and in fact the fact that we rotated around the weakness in the Mag 7, also some backup in the kind of retail favorites names. If you look at Robin Hood, Palantir, Applovin, Hymns and Hers, all down and the market in general

is kind of just churning. And so it's, you know, boring is bullish more often than not, and that's what we have, this kind of low drama, rotational action. It all happened though, after Treasury yields retreated just a little bit from the highs. So, you know, the second trip to 5% of the 30 year, not as irritating as the first, found some buyers, for now that's enough.

Yeah, 10 basis point move today. Maybe on the retail report was soft, obviously. Leslie Picker, whale watching for us today. It is, after all, 13F season. Yes. Yeah, today's the deadline, Scott, for those first quarter 13F filings. These show how fund managers were positioned

on the long side of things at the start of the year, but before Liberation Day. Co2 had some mixed positioning. That finally came out earlier. As it pertained to Chinese tech names, the firm bought 3.6 million shares of Alibaba in the quarter to hold roughly half a million dollars worth at the end of that quarter. And then Co2 sold 86 percent of its stake in JD.com and significantly paired back

three Chinese fintech companies. COTU also sold out of a relatively small position in PDD holdings. Tiger Global, on the other hand, boosted its stake in PDD holdings by 68% to hold roughly half a million dollars worth at quarter end. Now we're expecting a lot more of these filings within the next hour and a half or so and remember these positions are as of

March 31st they have likely changed in the six weeks since then Scott. All right good stuff Leslie. Thank you You'll let us know as they break. That's Leslie Picker Steve Kovac is back to talk about take two What are we looking for? Yes got take two got the big news out of the way earlier this month that Grand Theft Auto 6 delayed from this fall until May 26th of next year. That's expected to be the biggest entertainment property launch ever, surpassing only the current Grand Theft Auto game, of course. Analysts have been cutting their expectations because of that delay. EPS estimates have dropped about 80 cents and revenue about 500 million bucks since the delay was announced. Always the risk with gaming companies though delays for

blockbuster titles are quite common. It's never if a title launches, but when? But the good news here, Take-Two did provide an actual date for the GTA 6 launch, so it's less likely to be delayed again. We'll see if we get more details on the call, Scott. All right, thank you very much for that. Christina, how about AMAT?

Well, Applied Materials really stands as the biggest chip equipment maker globally. Industry giants like TSMC, Intel on their client roster, and looking at how their competitors did, like LAM, research as well as KLA, they shared optimistic outlooks. We'd also probably expect Applied to follow the same positive trend in their guidance. Applied Materials typically only looks ahead one quarter in terms of guidance at a time, and yes, there's still that trade and tariff uncertainty hanging around, but Stiefel analysts think their China sales might actually hold up better than many feared. We saw something similar too with Cisco yesterday in their earnings report that cooling off of the tariff battle between China and the U.S. really helped them ease cost pressures and boost their margins. So applied materials might see the same benefit.

The street likes this name though. I was just checking out of 35 ratings, there's about 27 buys thus far. Scott. All right, Christina, thank you. We are just about two minutes away from this close. You will hear the sound effect in the animation in a moment. I want to get your take on Meta. Let's show these shares, which hit session lows

during our hour on news that that company, according to the Wall Street Journal, is going to delay the rollout of its flagship AI model. As we were discussing with Gene Munster, this just shows you this is not easy work. And you might have to wait as an investor a little bit longer for a return on all of this capital investment that these companies are making.

And Meta had been given a lot of credit, I think largely because it's just so tangible how their platform is able to utilize what AI we have right now, and obviously the advertising kind of feedback loop. But I do think this also shows, look, it doesn't take much to kind of pick at that nagging concern

that investors still have about just exactly how big is this pie. There were also some numbers going around about how open AI, total queries, it's just absolutely swamping all the other models. And yeah, maybe they're better, maybe they're contenders, but it just doesn't seem like there's room for everybody's effort in terms of

how much they're spending on it. So I guess it makes sense. Meta's not an expensive stock. I do think that all the leading AI names have seen their peak valuation because people are not gonna just give credit for open-ended growth. That being said, I don't know if this really means

a trend change for the name. You really do have massive current earnings power and all the rest of it. So it's interesting, and it did come on a day that when there was a little bit of a sell instinct in the whole Mag-7, and you know, really benefiting other areas of the market like FACTS.

So the Nasdaq, thank you Mike, that's Mike's end, totally. Nasdaq will be red today and it's a rare one of late, as you know, down one third of 1%. Dow is gonna go out green S&P is positive for the year remains that way above 5900 don't forget about these earnings we're waiting for in OEC take two and applied materials we're on that case in overtime with John Taylor