Closing Bell - Closing Bell Overtime: Charles Schwab’s Liz Ann Sonders on Fed, and Where Apple Stands in AI Race 2/19/25

Episode Date: February 19, 2025

Vital Knowledge Founder Adam Crisafulli and Carson Group Chief Market Strategist Ryan Detrick break down the latest market trends. Charles Schwab Chief Investment Strategist Liz Ann Sonders weighs in on the Fed minutes and what they mean for investors. Needham’s Laura Martin provides key insights on Apple and where it stands in the AI race after its new phone release. Plus, earnings coverage from Carvana, Klaviyo, and Host Hotels, with CEO James Risoleo joining to discuss the hospitality landscape. Also, defense stocks react to Pentagon budget concerns.

That bell, that bell marks the end of regulation. Klaviyo ringing the closing bell at the New York Stock Exchange as it gets set to report earnings this hour and Exxon's doing the honors at the NASDAQ. It is another record close for the S&P 500. As Fed minutes, well, they don't spook investors. The defense names and Palantir falling late in the session. That is the scorecard on Wall Street, but winners stay late.

Welcome to Closing Bell Overtime. There's the music. I'm John Ford with Morgan Brennan. Well, ahead on this hour, Charles Schwab, Chief Investment Strategist. Lizanne Saunders opens up her playbook as stocks sit at these record levels. Tells us the one factor she says is driving the market action. Plus, we are awaiting earnings this hour from Carvana, Toast, Cheesecake Factory, Klaviyo, as I mentioned, Host Hotels and Resorts and more.

And we're going to bring you all the numbers and exclusive interview with the CEO of Host Hotels before his call with Wall Street. And noted tech analyst Laura Martin joins us with her take on Apple's new iPhone and the one key demographic she says the company is targeting with its less expensive model. Let's talk about the market and this push to record highs with Vital Knowledge founder Adam Crisofulli and Carson Group chief market strategist Ryan Dietrich. Guys, welcome. Ryan, this market's broadening out, and we didn't get any kind of freak out with these Fed minutes. What does that tell you about what's to come post-mid-February?

Yeah, John, thanks for having me back, and good afternoon, everybody. I mean, listen, we've come on for a while, probably like a lot of other guests, and we expect to see broadening out. It's happening, right? Year-to-date, 11 sectors, all of them higher. Year-to-date, seven sectors are doing better than the S&P 500 here, John. I mean, it's been a heck of a run. We know two years in a row up 20%. Now we're up well over 4%, almost 5% so far this year. You know, it's a bull market. The way I learned it a long time ago,

surprises in a bull market happen to the upside. We've been saying for a while we're in a bull market, and now that that baton's being passed around, I mean, tech's up, yes, but tech is actually lagging. It lagged last year. People don't remember that. Tech did worse at the S&P last year, not by a lot, but by a little bit. And we're seeing that again, but now we're seeing that rotation. Lifeblood of a bull market again, rotation, John. It's nice

for investors, I think, to finally have a diversified portfolio that is doing well, to see all the groups doing well. It's a great sign. Adam Christofoli, speaking of potential broadening, we've got Toast and Klaviyo reporting here in overtime. And when I think of these two names, I think about digital payments and marketing. I think about, you know, potential omni-channel and the idea that data is driving loyalty and business in a new economy. How important are these stocks, you think, to investors who are watching how AI gets integrated into the workings of business? They're definitely both critical companies. Fundamentally, they're each performing well.

It's just a question of valuation, kind of back to the broader theme of broadening. I think really what you're seeing is a reversion on the valuation front for some of the very high multiple stocks, like pretty much a lot of the names up on the screen right now, Carvana, Toast, Clavico, you know, those stocks have extremely elevated multiples. And you're seeing some of the cheaper, relatively cheaper parts of the market start to catch up a little bit in terms of multiple expansion. And that's really what you're seeing. So fundamentally, investors will be watching them

very closely for a sign, you know, for Toast, for a sign of how the restaurant market's doing. Clavico gives some insight into small business. But it's really, I think, kind of about a multiple equalization between really two barbells of the market. Ryan, it's interesting because we're seeing the S&P at record highs. We're seeing the Nasdaq 100 at record highs. The DAX hit a record this week, and so did the Stocks Europe 600 index. But the other thing that's been trading at record highs is gold. Do you buy in at these levels or do you feel like that trade has already gone long in the tooth? Specifically with gold, we actually added some gold to our tactical models for our Carson advisors back in March of 23. Added a little bit more gold when gold pulled

back violently right after the election when the dollar went higher. So listen, we know why gold's going higher, right? The indecision, central banks are buying. But I'll tell you also, I think the U.S. dollar is making a major peak, if not already made a major peak. Coming into this year, everybody said the dollar had one way to go that's higher. We know when everyone's thinking alike, someone isn't thinking. We think inflation's getting better. Fed's going to cut a little bit more than being priced in, meaning the dollar goes lower. So to us, if you have a 60-40 portfolio, that 40% part, you might not want to have all fixed income.

You might want to have 3% or 4% gold. It makes sense to kind of be hedging and getting gold. We think it'd do better in bonds last year. It did. We think gold will still do better in fixed income as a dollar goes lower. And some of that indecision is still out there. We're still bullish. We're still over at equities. I mean, very clear, but it makes sense to diversify your diversifiers, what we say, and gold. And one more quick one on this, we actually added some long-term treasuries for the first time in multiple years. All right. We didn't want to touch that. But we think rates are going lower. So maybe have some treasuries, have some gold, still be over at equities. That's how we're looking at portfolios here. Interesting. Adam, I want to get your thoughts on that,

especially some of the gyrations we have seen in currency markets and the bond market. I mean, tariff talk has sort of been dictating a lot of the moves, or at least some of the moves, I guess I'll say. And yet, here in the last couple of days, investors seem to be shrugging the latest comments we've been getting from President Trump off, at least for now. Yeah, no, and I think in the minutes today, there was a very critical component about, so the focus for the Fed has been on the funds rate, but the quantitative tightening process looks like it's nearing its end stages. And so to the extent they shut that off, that'll be another big tailwind for Treasuries, in addition to further deflation. And so that's something else to keep in mind. That's really

why you saw the rally this afternoon in equities and Treasuries as well. It was that quantitative tightening language within the minute. So you have the funds rate plus the quantitative tightening process. Both of those are heading in a direction supportive of Treasuries pushing yields lower. I want to mention that Tanger and Toast results are both out and we are going through them. Can't quite see yet, unless you put it on the screen, what they're doing in their initial movements. But I'm particularly interested in Toast here, not because I'm hungry, but because of that transaction stuff I was talking about. Ryan, there it is. Yep, I had a feeling that there would be some strong move. Ryan, Walmart's in the morning. And of course had a feeling that there would be some strong move. Ryan, Walmart's in the morning. And of course, we're focused on what's reporting here in overtime. But that's a big name that has more than doubled over the last two years after it was just kind of

bumping along for a while. I wonder how much we're going to learn about not just the mainstream consumer, but also about Omnichannel from those results? You know, Walmart's an interesting one. First off, it usually means earnings season's about over and it was a really solid earnings season. Walmart's that one where if it's good, it means the consumer's tapped. If it's bad, it means everyone's, you know, it means the opposite. It's, you get whatever you want with Walmart, but I'll say this much. You know, when you look at the consumer, right, we had their weak retail sales last week. It's really cold. Like I haven't left my house today. I'm in Cincinnati. It's freezing. People aren't spending

as much, but the consumer is still strong. The labor market is still strong. Wagers are still strong. Productivity is still strong, John. So when you look at Walmart, that's a beacon of our economy. We expect once again, probably pretty solid overall numbers and to say the consumer is still really healthy. That's what we've been seeing this from corporate America, this, this earning season, we expect it to continue as the earning season winds down with Walmart tomorrow. Yeah, eventually this darn polar vortex will pass. Ryan Dietrich and Adam Christofoli, thanks for kicking off the hour with us with another record close for the S&P 500. Now let's turn to Senior Markets Commentator Mike Santoli for a look at the broadening out

of the rally. Mike. Yes, Morgan, and there's lots of evidence for it, although it's happening in a very specific way. The broadening of the market doesn't mean that most stocks are up in a really strong short-term trend. It means that the very largest stocks have backed away, and other large caps, even in the same sector, have picked up some of the slack. So here you have the equal-weighted technology sector of the S&P 500 really outperforming on a unit basis. The Magnificent 7, which obviously has outperformed for multiple years. So some of this is a mean reversion move, but it shows you that it's been this relatively painless transition from mega cap dominance within tech to all the rest. Something similar happening in consumer discretionary, equal weighted, starting to outperform the market cap weighted version. I remember the market cap weighted version very heavily skewed toward Amazon and Tesla, both of which have actually gone into

pretty stiff pullbacks, actually. And so the macro message here is still OK, that the consumer seems OK. Take a look at Amazon directly, along with Costco. Actually have moved pretty well in sync for a while. Really strong moves. Hey, they're both membership fee retailers. Right. Until recently, when you had this divergence, Amazon's in like a six and a half percent pullback after that really strong post earnings move. And Costco has just barely maybe flattened out after this very aggressive move. So take it up to slack. It's been this elegant rotation so far. We'll see if it can continue to happen in gear this way, guys.

I feel like you could have put Walmart up on that last chart, too. I was reading this stat. It isn't quite magnitude-wise, but same angle, yeah. Yeah, because I was reading the stat in Barron's this week. They're saying that Walmart, Costco, and Amazon, those three big retailers, have 35% to 40% of U.S. food and consumables sales. And they have continued to take the market share, to your point, as more and more demographics focus more and more on the affordability aspect of this. For sure. And they're in that way,

instruments of disinflation, we hope, on things like consumables. And yeah, there's no doubt about it. Really expensive stocks. Walmart and Costco also. I mean, the only reason that the staples sector doesn't look even worse because they are both in there and dominated. All right. Mike Santoli, thank you. Let's get those toast results from Steve Kovach. Steve. Hey there, John. Yeah, we got some mixed results here for toast. EPS was a miss by just a penny here. Five cents. EPS Street wanted six cents. And then revenues were a slight beat here at one point three, four billion dollars. I'll also note there's some strong profit guidance in here. We see shares were up a little more significantly earlier, now up about half a percent. They were up 10 percent. Yeah, now it's about flat. Yeah.

All right. Big moves here in overtime. We've got more earnings to bring you as well. Steve, thank you. Klaviyo results are out and Seema Modi has those numbers. Seema. Morgan, a strong B for Klaviyo. This is the AI software name that leans heavily in the retail sector. Seven cents adjusted versus the estimate of six cents. So a penny B with revenues topping Wall Street consensus at two hundred and seventy million dollars. It's full year revenue guidance also ahead of what analysts were predicting for this company. Strong commentary from executives about how it was its strongest

Black Friday and Cyber Monday yet. A $1 billion revenue run rate and new clients featuring Ted Baker, among others in the retail space. So momentum seems to be picking up here and just interesting to see the AI applications being widening out beyond technology. Guys, back to you. All right. Sima Modi, thank you. Shares up 10.5%. Carvana earnings are out as well.

Phil LeBeau has those numbers. Phil. Morgan, this is a beat on the top and the bottom line for Carvana in the fourth quarter. A big beat in terms of the bottom line. 56 cents a share. The street was expecting 29 cents a share. Revenue coming in at $3.55 billion, well ahead of the expectation of $3.31 billion. And then if you look at the numbers within the numbers, these are strong across the board in the fourth quarter.

Vehicle sales, 114,379, about 5,000 more than the street estimate. That's up 50% year over year. Profit per vehicle, $6,916. That is up $1,388 compared to Q4 of 23. EBITDA margin of 10.1%. And then in terms of the guidance for 2025, they're going to keep the party going at Carvana. They expect significant growth both in unit sales as well as adjusted profits. Guys, I'll send it back to you. All right, Phil, thank you. It's bumping around between the red and the green, but it's up more than 75% year to date.

So I guess that makes some sense. Phil, thanks. Well, after the break, Charles Schwab, chief investment strategist, Lizanne Saunders is going to join us to talk about the market's march to record highs. Her read on the Fed Minutes and the one factor that's driving the action in equities. And we've got much more ahead on today's After Hours action, including an interview with the CEO of Host Hotels and Resorts before he talks to analysts on the earnings call. Over time, we'll be back in two. Well, Tanger earnings are out. This one popped, and now it's lower. It's a theme, Steve Kovac.

What do the numbers look like? It's not my fault, John, but there are beats here on the top and bottom lines for Tanger. EPS was a beat at 23 cents. Street won at 20 cents. Revenues also a beat, 141 million. Street was looking for 129 million. And it looks like the full year guidance is pretty strong here. They're guiding towards an EPS of 94 cents to a dollar two. Street was estimating 91 cents EPS for four-year guidance. And we got a big old unch here for Tanger. Morgan, I'll send it back over to you. I think you just want to say unch. I love saying unch. All right. Steve Kovac, thank you. The S&P 500 closing at a record high for the second straight session following the release of the Fed Minutes from the January meeting. Let's bring in Charles Schwab,

Chief Investment Strategist, Liz Ann Saunders. Liz Ann, it's great to have you back on the show. Welcome. Thank you. That's exactly where I want to start. The fact that stocks continue to turn to these record levels despite what I would call a wall of worry for investors. Well, that might be part of it. But I think that because there is yet to be any true meat on the bones in terms of policies, the uncertainty right now, but what it will actually mean to things like corporate earnings. We know that tariffs were mentioned on earnings conference calls to a much greater degree than even what we saw at the peak in the 2018 trade war. So there is that uncertainty. But given that we're still now at the tail end of

earnings season, it was a stronger earnings season. I think that's been supportive of the market. But there is a heck of a lot of churn going on underneath the surface. I mean, today is a perfect example of that. Materials and financials are leading year to date, at least for yesterday's close. They're the only two sectors in negative territory today. So it is a tricky environment to navigate at the sector level. The fact that we have seen this broadening out in the market and the fact that you have seen some of these more cyclical sectors being the leaders, at least up until today, what does that signal about the health of stocks? Well, some of it, I think, is just a move to areas that have not been leadership areas, you know, financials being among them. Materials, I think, is a

function of the strength in commodity prices. So I think that there are sort of individual stories behind what's working. In fact, what's interesting is that studies have been done recently showing that macro is becoming less of a driver of the market broadly, even groups of stocks. And it's individual company fundamentals that are driving individual stock performance, be it earnings or whether you're domestic or international, what industries you're in. And I think that's arguably a good backdrop for active managers, not overpassive, but it levels the playing field a little bit when you have that price discovery and you have that reconnection of fundamentals to stock prices. Lizanne, U.S. markets have been doing so much better than a lot of international markets over

the past couple few years. But this year, there's been a little different action. So how should investors who are maybe outside of the traditional portfolio balance toward international stocks and markets think about that? Well, we typically espouse having international diversification. That's part of the across asset classes and within asset classes. It's been a harder sell when you have the concentration and performance, not just in the U.S., but within the U.S. market until recently, the concentration in areas like the Magnificent Seven. And I think a year like this is a healthy reminder of the risk associated with that concentration, the risk associated with not rebalancing, whether it's

from the strength in the U.S. to overseas or some rebalancing within the equity market, not allowing that concentration risk to exist in your portfolio via the absence of rebalancing within the equity market, not allowing that concentration risk to exist in your portfolio via the absence of rebalancing. So I think action like we're seeing this year with international outperformance over U.S. with the Magnificent Seven showing a lot of dispersion and general weakness relative to the overall market, I think it is a somewhat healthy reminder to investors about that concentration risk. So how do you and folks at Schwab talk to investors about the process of doing that kind of rebalancing? It's not always, I guess, as simple as just going into an international fund

that's spread across everything. Should investors think about particular themes, whether it's demographics or whatever it is that they believe in and decide how to apportion things? Well, it depends on who the investor is. You know, we have a wide array of what we call strategic asset allocation models that run from very conservative up to very aggressive. And that is dependent on the individual investor, where they sit on the risk spectrum, what their time horizon is, what their income needs. I mean, the list goes on, et cetera, et cetera. The more risky end of the spectrum, that's where you're going to maybe have a little bit more exposure to emerging markets, maybe even frontier markets versus developed markets

that may be more appropriate for a slightly more conservative portfolio. But to the first part of the question with regard to rebalancing, one of the opportunities that comes when you have a lot of churn inside the market is it gives you the opportunity to do portfolio or volatility-based rebalancing. A lot of investors will do calendar-based rebalancing. They might do it quarterly or they might do it annually. When you get some of this churn, it gives you an opportunity to do what rebalancing affords you the ability to do, which is not so much buy low, sell high, but add low, trim high. So using it as having that rebalancing be driven by and a guide from your portfolio is one unique way to think about rebalancing versus just doing it based on the calendar. We had the Fed minutes today that

reiterated the fact that monetary officials here in the U.S. are basically on hold and continue to be data dependent and think inflation is sticky here at these levels. We've seen Treasury yields move higher. I mean, 10 years still at, what, 4.5 percent are stubbornly stuck around there right now. We also know that that's had an impact on housing, too. So it raises the question, how much can this economy and then perhaps thus the markets continue to power on if housing doesn't become a part of the equation? So I think housing is a key area that needs to find some stability and obviously strength. And we're not seeing it in much of the data. You saw some weakness in the

housing market index that came out this week. And that is driven by the mortgage rate leg of the affordability stool. And even when we had the housing downturn in the early part of the pandemic before you saw the lift again, it really wasn't in prices. It was in sales because of that mismatch between supply and demand and how many existing homeowners were locked into their homes. Housing had a recession during the early part of the pandemic. Manufacturing had a recession. Manufacturing looks like it may be trying to crawl its way out of a recession.

We saw the ISM Manufacturing Index pop back above 50. The hope was that we would see it in housing, too. But that is a function of longer-term interest rates coming down. And given the inflation backdrop, that doesn't look to be a near-term likelihood. All right. Lizanne Saunders, thank you. Good to see you. Good to see you. Well, cheesecake factor earnings are out. Steve Kovach has the numbers. Steve, a spike and a drop or no? No, not this time, John. Shares of Caker looking a little bit sweeter now, actually up about 1% after these beats on the top and bottom lines. We got EPS coming in at $1.04.

Street wanted $0.92, so a healthy beat there. And then revenues also beating estimates at $921 million. Street was looking for $9.13. And then same-store sales up 1.7%, slightly beating expectations of 1.6%. Shares up about 1%, John. All right. Sugar levels spike and drop. There we go. Eat that, Steve. Thanks. After the break, Needham analyst Laura Martin is going to join us with her thoughts on Apple's launch of the iPhone 16E and if she thinks the less expensive

model can help drive adoption of Apple's AI services. Plus, defense stocks and Palantir turning lower mid-session after reports said big budget cuts could be coming to the Pentagon. We're going to discuss the impact for investors. That's ahead on Overtime. Muted reaction from the street today to Apple's 16E iPhone announcement. The new cheaper offering is going to be available to run AI, Apple says. And joining us now is Laura Martin. She is Needham Senior Entertainment and Internet Analyst, has a buy rating on Apple.

Laura, this is interesting to me. I think there might be some opportunity for investors to think strategically here. Tell me what you think. I covered Apple for a long time, starting about 25 years ago. This decision they've made on the 16E is they want Apple intelligence to be broadly available. They're putting the latest generation chip in one of their cheapest phones now and differentiating on camera. How do you take that strategy-wise? Well, first of all, I think it's a price increase because remember the one it's replacing is that SE, which was last updated in 22, that was $450. This low end iPhone is 600 bucks. So well below the, it is the lowest

cost iPhone, but it's 150 bucks more, which is like 30% more than the phone it's replacing. So that's interesting. Secondly, I think they're, they're bringing a lot more components in house to your point about Apple intelligence. It's not only using its own chipset, right, the same chips that are in the rest of the 16 series for Apple, but it's also using its own modem chip. So that's interesting. So its margins are higher because it's paying less out to third parties and the price is $150 higher than the end it's repricing. So better economics here all the way around, seems to me. Right. That's why I said one of their lower cost phones, not their lowest, because we don't know what they'll do with the full lineup,

especially because they've got some pricing pressure overseas, I imagine, with a strong dollar and whatnot. But what does it say about Apple's likely desire to push that Apple intelligence capability within the next two to three years to their whole line of phones? And perhaps what does that say about services and AI in services as a potential continuing revenue stream? I got to tell you, I think in this kind of stuff, Apple is trying to keep up with Google, right? Because Google Android has that huge large language model that's captive. So it's doing a lot with its Android phones a lot faster than Apple. And I think Apple is trying to keep up, actually. I don't think Apple's ahead here. It's behind. So I think everything going forward for all iPhones has to have large language model access.

It has to have AI. I do not think this is Apple getting ahead. I think it's trying to keep up with its primary competitor over here at Android. So does that mean that you would be buying Alphabet over Apple right now? And how much does something like DeepSeek factor into all of this? Yeah, DeepSeek's a thing. We've had a number of companies report over the last three weeks in tech, in ad tech specifically, they're all moving their large language models. A

lot of them were open AI because it was first, which is the Microsoft-like variation, over to DeepSeek because it's so much cheaper. I think that's an interesting question. The bigger question is, does it hurt Meta? Because Meta is the open source competitor to DeepSeek, but DeepSeek is just a lot less expensive, so DeepSeek says, so it asserts. So that's interesting. If there's only going to be one winner of the open source large language models, is it DeepSeek? Because they're in the market today with quite a bit less expensive product than any of the U.S. large language models. Meta had this record run, I think, 20 trading sessions, trading at record highs, and a lot of that bid caught in the midst of the deep seek shakeout. Have you been, I realize it finished lower today and yesterday, but have you been surprised to see the move that we have seen in Meta? And if so, does it change your call on the stock?

You know, I have been surprised because I think the fundamentals imply that that Meta is adding a lot of costs much faster than his revenue growth. He's actually projecting decelerating revenue growth, accelerating expenses and capital spending. So the fundamentals feel very poorly positioned there. But boy, the sentiment here is really hard to fight. So the sentiment in the stock and its charts look really strong. So we'll see. Sometimes, you know, sentiment corrects sometimes when fundamentals catch up. We'll see, though. What do you make of what's happened to the trade desk over the last few days? Oh, my gosh. So trade desk down 30 percent on its earnings, continuing to sort of. So the problem is that it traded at a massive premium to the other ad tech stocks.

And when the CEO, who's the founder and worth $6 billion himself in these shares, when he came out and said, oh, we missed the quarter, but we'll never do it again, he then listed 15 things they're going to fix in 2025. So people think, well, if it was a one-off, why are there 15 things to fix? So that was a good question he sort of left everyone with. So, I mean, I think this is a guy that's a good listener. He's founded this company. My gut feel is his bench isn't deep enough,

that some of it, and he said this, his employees that founded the company with him, he has very excellent longevity records, that they aren't qualified to run a company that's become as big as him. He has $12 longevity records that they aren't qualified to run a company that's become as big as him. He has $12 billion of revenue that go over his platform, and he keeps about $2 billion. Some of the people that came were working on much smaller businesses. So probably he needs to replace some people, and that's always hard for a founder CEO to do, which means he needs to hire a chief operating officer who's a little meaner, I guess.

Next. All right. We'll be watching for that, Laura Martin. Thank you. Nerd wallet earnings are out and the stock is surging. The small cap name reporting revenue for the fourth quarter of one hundred and eighty four million dollars. That's versus estimates of one hundred sixty nine million earnings coming in at fifty one cents per share. Now, it's unclear if that compares to the estimates of a one cent profit. First quarter revenue guidance was strong as well. You can see the shares are up 12 percent right now. Now it's time for a news update with Kate Rooney. Kate. Hey there, Morgan. Two people are confirmed dead after two small planes collided midair at an Arizona airport this morning. Officials said the airport operates as an uncontrolled field,

meaning that it doesn't have a traffic control tower. Authorities said both planes were occupied at the time of the collision and that the NTSB is leading that investigation. A federal judge reserved his ruling on the Justice Department's request to dismiss a criminal corruption case against New York City Mayor Eric Adams. At a hearing this afternoon, the judge questioned top DOJ officials as well as Mayor Adams. The judge scheduled the hearing after seven top prosecutors resigned rather than carry out a demand to toss out the case. And California Governor Gavin Newsom has proposed a $125 million mortgage relief package for the victims of the Los Angeles wildfires and other recent natural disasters. That plan, which has yet to be approved by a state board, would make the money available for people at risk of foreclosure. The governor says

the package would be funded from existing mortgage settlement money. Guys, back over to you. All right. OK, thanks. Well, host hotels earnings are out. Contessa Brewer has those numbers. Contessa. John, we're seeing a top and bottom line beat here for host hotels. Earnings per share of 15 cents adjusted. The street had expected 13. Revenues of 1.43 billion versus consensus expectations here of 1.37 billion. And the company forecast total rev par, which includes food and beverage and other ancillary guest spending, to grow between 1% and 3% this year. And its forecast for revenue this year comes in slightly higher than the street. But guidance on EPS for the year is

light at $0.6877 versus the $0.87 that the street's expecting. Analysts are likely to drill down on expenses and whether those expenses are outpacing growth. As you can see, the shares are down by one and a half percent, John. Contessa, thank you. And coming up, Post Hotel CEO is going to break down those numbers exclusively with us before he dials into the analyst call. After the break, though, red flags at the margin. We're going to talk about one potential warning sign for stocks as the S&P 500 sits at record highs. Stay with us. Welcome back to Overtime. Mike Santoli returns with a look at the recent rise in investor borrowing. What that means for the market.

Mike? Yeah, John. The first thing it means is that it's a bull market. We've been in an uptrend, and it always happens that margin debt, the amount that's borrowed by investors in their brokerage accounts, does go up somewhat related to how high the market is going. That's the top one right here. That's outstanding margin debt balances. By the way, this is a logarithmic scale, which means it's basically percentage gains on the way up. And so right now it's more like $900 billion at last report total market margin debt.

That's a little bit less than 2 percent of the S&P 500 market value. And then Davis Research, though, looks at the rate of change, how fast it's growing or shrinking to see if it's in sort of the danger zone. And this is sort of the level over a 15 month period when you get these massive gains higher, this acceleration in borrowing, where it's been sometimes a bit of a cautionary flag. This right here, that's about the top of the year 2000 bull market, that final lunch higher. The last peak right here was in 21 into 2022, right before that bear market. This one, no problem. That was in the early to mid 80s. We were coming off very depressed levels and there was really nothing that indicated it was some kind of a market top. So I would say it's one of those things you monitor. It's not yet

flashing red, but it does show you that we do have broader participation and risk taking in this market. It seems to me, Mike, that with higher margin debt, especially among retail investors, that if there is any kind of a prolonged move lower, just the pain for people and maybe the extreme nature of their reaction might be more. That's always the case. There's no doubt about it. It creates dislocations on the case. There's no doubt about it. It creates dislocations on the downside. I would say, though, because it's not that high relative to the total value of stocks in brokerage accounts, it's probably not necessarily some kind of an acute issue. Just as a benchmark there, we're around the same levels we were in 2022. Market is up huge from there. So the absolute value of stocks is up a lot more than the margin balances are. All right. Mike Santoli, thank you.

Well, shares of host hotels are volatile after a disappointing profit outlook offset an earnings beat. Up next, the company's CEO discusses those results with us exclusively before his call with analysts. And President Trump reportedly getting set to drop a bomb on the Pentagon's budget. What that means for defense stocks later on over time. Shares of host hotels and resorts are slightly up right now after reporting fourth quarter results that came in better than expected. Joining us now is Jim Rizzolio, CEO of host hotels and resorts. And Jim, it's great to have you back on the show. And that's exactly where I'm going to start with you. You put up stronger than expected results for the fourth quarter. But in terms of your 2025 outlook,

the total rev par growth of one to three percent, what is driving that? And perhaps just as importantly, what does the picture say with the EPS guidance about expenses versus growth this year? Morgan, it's great to be back. Thank you for having me. So we did, let me start with 2024. We had a fantastic 2024, beating all consensus metrics. And I think the company is set up very well for 2025 and beyond. What we had in 2024 that's going to impact the operating statement in 25 are a lot of one-time events. We had hurricanes in Florida, Hurricane Helene, Hurricane Milton. We were lapping the wildfires in Maui. And for 2025, we're going to have a fairly significant increase in wages and benefits across the portfolio. We think this is a one-year phenomenon and that as we work our way through 2025, that our performance will improve in 26.

And frankly, even as the year unfolds, it's a little early in the year right now to really drill down on guidance levels. So when I look at your portfolio, I mean, you have quite a few properties across quite a few major cities and also I would say leisure centers. You tend to be more skewed looking at these properties, too. I would say a higher-end consumer or business

traveler. What are you seeing in terms of travel appetites right now, and what does it say about the health of the consumer? Well, the consumer is very healthy. Our consumer, the affluent consumer, is very healthy. We continue to see increases in out-of-room spend, ancillary revenues, whether that's outlet revenues, revenues at the spa, revenues for golf. Consumers are showing up at our properties, and they're spending money. Our leisure transient rate for 2024 was still 44 percent higher than it was in 2019. So we're not seeing a lot of resistance of the consumer spending money. And in point of fact, given the quality of the assets that we have, when when the consumer visits one of our properties, they tend to stay longer and they tend to spend more money in the bars and the restaurants and elsewhere.

Jim, two things in particular I'm curious about as we're now in 2025, how they look right now and then into the year. One is business mix and the other is international demand, given the strong dollar. Sure. Well, business mix, we're going to be about 60 percent transient this year, John, 36 percent group. The balance will be contract business. It's fairly consistent with how the portfolio has been positioned over the last several years. Of the 60 percent transient business, roughly 60 percent of that is business transient. And we are seeing a slow, steady rebound in spending by the business traveler. So we saw an uptick last year. We're

anticipating we'll see an uptick this year. Our group segment is very strong. We're pacing well ahead where we were last year at this time. And we feel very confident with the health of the group customer. We continue to see group spend out of room increasing on a regular basis. The leisure customer, this goes to your question about international travel. There is an international inbound versus international outbound imbalance. And right now it's about 125% elevated international outbound and international inbound. While that's improving, it's still not where it was pre-pandemic levels. We think a lot of that has to do with the strong dollar. We believe that, again, our consumers, our customers are the affluent consumers.

They want to experience other jurisdictions outside of the U.S. But the pendulum is going to definitely swing back to the middle. Okay. Now, on business, and you talk about how that's been rebounding, I wonder if the nature of that has changed post-pandemic as at least there's the message out there, the idea that you have more hybrid and remote work environments that are gathering their workforces together occasionally for culture, for bonding, et cetera. I imagine you guys, you at Host Hotels, would be seeing that if that were a significant new ongoing segment. Are you seeing it? We definitely are seeing extensions

of business trips. You know, the phrase used during the pandemic was bleasure. We're still seeing bleasure. We are seeing small group meetings, given the fact that a number of companies have allowed their employees to relocate or to work remotely several days a week. So, you know, we are seeing people show up at the hotels and have group meetings that would otherwise have been business travel. Jim, quickly, there's been talk about you potentially looking to sell some of the hotels that are considered non-courtier portfolio. Is that something you will do? Morgan, we're very opportunistic. We're opportunistic on the disposition side as we are on the acquisition side. If the price makes sense, we'll sell them. Last year,

we didn't sell any hotels. We bought four incredible pieces of real estate, the Ritz-Carlton Oahu, Turtle Bay, the One Hotel Central Park, the One Hotel and MSC Suites by Hilton in Nashville. Really terrific properties that are all performing according to our underwriting expectations. So it's not that we have to sell anything. The company's in great shape. We have a fortress balance sheet. We're sitting here at 2.7 times leverage today, and we are in a unique position to take advantage of opportunities that may present themselves down the road. All right. Jeroen Mazoglio, we appreciate you joining us here on Overtime Before the Call. We'll let you get ready for that.

Thank you, John. Take care. Thank you. Well, up next, much more on this wild hour of overtime earnings with some under-the-radar results that you need to know about. And Palantir plunging on reports that President Trump wants to slash the Pentagon's budget. We'll look at the potential winners and losers a little bit later on Overtime. Welcome back. Let's check in on some overtime earnings movers.

IMAX is pulling back nearly 5% after missing on the top and bottom lines. Carvana is moving lower by about 10.5% despite beating on earnings and revenue. Klaviyo popping about 5% after topping expectations for earnings, and revenue guidance. And Bosch Health is higher by about almost 8% after adjusted net income and revenue for the fourth quarter beat estimates. Well, President Trump may be on the verge of slashing the Pentagon's budget. Up next, why that could be bad news for Palantir. Could it really, though? But potentially good news for makers of military drones.

We're going to dig into all that. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Defense stocks taking a leg lower in the final hour of trading. On a report that the Trump administration is ordering the Pentagon to plan for sweeping budget cuts. Now, The Washington Post reporting Defense Secretary Pete Hegseth is telling senior leaders in a memo to prepare for 8 percent defense cuts in each of the next five years. The memo reportedly includes a list of 17 exempted categories, including one way attack drones, also known as kamikaze drones,

border security, missile defense and nuclear modernization, and even acquisition of submarines. Proposed cuts are expected to be drawn up by February 24th. Now, investors have been skittish about defense stocks amid perceived uncertainty of what the Trump administration will mean for policy for future defense dollars and also what will be acquired and perhaps just as importantly how. Two stocks moving in opposite directions on the heels of this report today, AeroVironment, which makes kamikaze drones. That bounced back and ended the day higher up about 2 percent, while Palantir plunged on this report, finishing down 10 percent, though it has been on

a monster run over the past year. So maybe some profit-taking here. Analysts have been and continue to be cautious on the group, but what does it all actually mean for defense contractors? Well, it's pretty nuanced. We're going to be finding out when Jim Taichlet, the CEO of Lockheed Martin, which is the top weapons maker, joins me exclusively tomorrow. That's going to be on Power Lunch, which kicks off at 2 p.m. Eastern. You don't want to miss that, especially because it's the first time we're hearing from one of these

big major defense primes in a broadcast interview since President Trump was elected. When I think about types of companies that might suffer from defense cuts, I don't naturally think of Palantir because I think of the military as needing more software versus some of the more outdated hardware. But then at the same time, Palantir has been making progress by, as you've shown us, teaming up with some of those defense primes and its valuation. We'll just say it's very strong. So, you know, maybe investors shouldn't be surprised to see pullbacks when there's some question about this. Even a Palantir itself might not be the main target. I think that's the right way to think about this. And I think when you talk about productivity and efficiency and software adoption,

only something like 2% of the top-line defense budget goes to software, there's room to run there. But stocks up more than 300% in a year. Big deal that Apple launched a new cheap iPhone, not the very cheapest that it ever has. But I really think there's a lot to unpack here about Apple's strategy and why AI, it really wants to spread across the line. Yeah. Meantime, we get Walmart earnings tomorrow morning. That's going to be a major market mover to watch. That does it for us here at Overtime. Fast money starts now.