Closing Bell - Closing Bell Overtime: Defensive Play or Bullish Stay? Markets Digest Nvidia, Microsoft & Debt Drama 5/19/25

Episode Date: May 19, 2025

Markets weigh mega-cap momentum against rising caution with Ryan Detrick of Carson Group and Richard Bernstein of RBA debating. Key takeaways from Nvidia and Microsoft’s moves, while Jason Furman, former CEA Chair, breaks down budget bill risks and the deficit. Plus, Dan Niles weighs in on tech and the economy and why he sees fresh lows later this year and our Leslie Picker on the quiet race to succeed Jamie Dimon.

Well that Dow marks the end of regulation. North Point Bank shares ringing the closing bell for the New York Stock Exchange. EnAct doing the honors at the Nasdaq and markets ending the day higher with the Dow the best performer third up day in a row. S&P eking out a little bit of a gain roughly flat notching its sixth straight day of gains technically. Treasury's in focus with the 30 year yield crossing 5% touching that level. That's the highest level since 2023, though

it did close below that and healthcare was the sector leader today with UnitedHealthcare leading those gains, adding to Friday's gains posting its best two-day rally for that stock since 2020. Well, home builders and home-related stocks, though, moving lower today as the 30-year fixed mortgage rate crosses 7% again, and a number of names hitting all-time highs today, including Visa, TJX, IBM, MasterCard, and Booking Holdings. Well, that's a scorecard on Wall Street. Welcome to Closing Bell Overtime, where winners stay late.

I'm John Ft. Morgan Brennan is on assignment. Markets shaking off that Moody's debt downgrade. If you would deny, debt and deficits are a problem. That is we got a battle in Washington trying to get a budget bill passed. We will talk to former Council of Economic Advisers Chair Jason Furman about what's next there. And stocks have rallied strongly off the early lows.

Is it a continuation of the bull market or just a bear market rally? Dan Niles is going to join me with his take. Well now a mixed session on Wall Street with the Dow finishing the day in the green, the S&P, the NASDAQ flat, yields spike following that Moody's downgrade on Friday, putting some pressure on stocks today. So could a sell-off in Treasuries

lead to a sell-off in stocks? Joining me now is Carson Group Chief Market Strategist Ryan Dietrich and Richard Bernstein's Advisor CEO, Richard Bernstein. Guys, happy Monday. Back at it. Richard, yields and the tax cutting that Congress is doing, this was supposed to stimulate the market,

but this Moody's ratings cut, if nothing else, raises the specter of fiscal issues pushing the other way. So what should investors do here and why do you think European quality is part of the answer? So John, great to be with you. I think, look, the thing that hasn't gotten, I think, enough attention has been yet another downgrade of the US Treasury, right?

That we are no longer investment grade. This started more than a decade ago. It's continuing. There's nothing good to say about that. That we are no longer investment grade. This started more than a decade ago. It's continuing. There's nothing good to say about that. And I think even though day to day, the 10-year may trade in one direction or another, the reality is for like the past 14 years, the Treasury has sold at a premium yield, in other words, a risk premium, relative to AAA-rated sovereign debt.

So we're already being penalized as a nation. It's clear that what's going on right now is not going to help that, whether it's a downgrade, whether it's going on in Washington or anything like that. On the stock side, I think you're absolutely right. I think one of the things that we have to come to grips with here, tariffs, no tariffs, downgrade, no downgrade. The profit cycle in the United States is peaking. That would happen no matter, regardless of what's going on in Washington. And I think that's the most important investment issue right now, because it really argues that

people should be looking at quality. They should be looking at defensiveness. They should be looking at cash flows. And if you want quality, the cheapest quality in the world is in Europe right now, and it's doing very well, and still nobody cares. So I think there's a tremendous opportunity there. Okay, okay, we'll talk more about that. But Ryan, first, you were bullish through those dark market days in April. You say the trade woes are behind us now,

but there are still significant tariffs on either way, and some fear there's gonna be a reckoning with stretched consumers. Why shouldn't they worry? Yeah, John, thanks for having me back. Happy Monday, everyone. You know, I would think I was on to you exactly a month ago, April 22nd,

so about 20 trading days ago. The S&P's been down only three of them. And when you think about what's going on, I mean, listen, all these worries and concerns are real. We're not ignoring everything that's out there. But are we listening to what the market's doing, right? The previous 27 trading days, the S&P is up close to 20%. Okay, what does that mean? That's not a bear market rally. That's not a shortcut rally. Times we saw that much strength, John, in one month, off the 74 lows, off the 82 lows, off the 2009 lows, off the 2020 lows, and right now.

Okay? You know, I mean, I get it, right? All these worries, but all this over-the-top negativity, yes, earnings probably are not as strong as they were going to be at the start of the year. We get it, right? But all the people thinking that how bad everything's going to be, well, they're going to avoid all this negativity, and that is why, you is why those markets come back like it has. And I will say, we like Europe also, we like Europe.

We like it developed international. We've got some European exposure and the money we run for our Carson partners, but we clearly are still overweight equities and have a good deal of US large caps in there as well. So we still think US gonna play catch up with the rest of the globe here the rest of this year, John. Okay, so Richard, investors still love risk in in this market even if Moody's doesn't. You

spotlight the biggest tech stocks here, X NVIDIA, as being unworthy of their multiples. Tell me more. Yeah so John I think you know we can argue all day long whether the Magnificent Seven or Magnificent companies, but the reality is they're not unique. And by that I mean if you look at the median forecasted growth rate for the Magnificent 6, take out Nvidia, because Nvidia skews the data a little bit, you look at the forecasted earnings for the Magnificent 6, they're supposed to be up about 8% over the next 12 months. Their earnings are supposed to be up about 8% over the next 12 months. Their earnings are supposed to be about 8% over the next 12 months.

The median company and the remaining 493 of the S&P is supposed to be up 9%. Their earnings are supposed to be up 9%. So the magnificent six of the seven are actually inferior growers relative to the remaining of the market. So the question has to be like, what's so special about these companies? And I would argue the answer is nothing. They're clearly not going to grow faster. They're much more expensive. They don't offer dividend yields. There's a clear differentiation starting to appear here. And I think that's very important. The other thing I would just say, and just to push

back on what Ryan said a second ago, you look at 82, you look at 90, you look at all these other periods 2009, you would not find individual investors carrying a beta in their portfolios of 1.7, which is where we have right now. We have credit spreads incredibly narrow, not wide. We have individual investors taking risks like they've never taken before. That's a little bit different from, I would say, from the periods that Ryan is talking about. Ryan, what do you say?

Well, it's so unique, and Richard's got a good point here, because off this rally, who's really been buying it? Mom and pop, retail investors, hedge funds are still short. Most institutions have missed it. That Barron's big money poll, where'd all the bulls go? That was just two weeks ago. So this is a really unique situation, but one more thing that has caught us

and why we're optimistic here, market breadth leads price, right? We went over five months without a new all-time high on the NYSE, advanced the Klein line, just hit a new high last week. Once again, when you go a while without a new high, it only happens six times. One year later, up double digits every single time

on the S&P 500. So can we have some near term volatility? Sure, but six to 12 months from now, we think we're gonna avoid a recession and this is still a lot of upside for investors and that's something to be grateful for, given where we were six weeks ago. Richard, I think the argument for a better multiple

for the Mag-6 would be AI. The idea that you got hyperscalers in there, you got Apple and if this AI story is true, and if this transition is similar to the one that we saw from the web to mobile, the big names actually didn't get crushed. They benefited more than many people expected. You think that's not worth betting on? Two things to push back on there, John.

Number one is if the profit cycle is indeed peaking, capital spending is a big part of the profit cycle. It's fueled by the profit cycle. If profits are starting to slow, profits growth is starting to slow, corporate capex starts to slow. What's corporate capex supposed to be all about? AI. So it may be that people are a little too optimistic on the forecast for that. Second thing I want to point out is there's kind of this notion that AI is vastly different from any other technological innovation we have ever seen in history. And I'm not sure that's true. I think certainly technology always changes the economy, but the key word is always changes

the economy. And if you look at the 20-year period since the advent of the Internet and everything that was supposed to happen there, U.S. productivity actually, marginally, marginally, got worse. So I don't know what everybody's doing on the Internet, but it's not enhancing productivity demonstrably the way people argued it was going to. Well, I know some of what they're doing on the Internet. Richard, Ryan, thank you both. Well, Microsoft and Nvidia speaking of

are big tech's first movers in this current era of AI. Both are making moves this week that investors can dissect to better understand their strategies to stay ahead. The bottom line, they're both adding tools to knit their offerings into the essential fabric of AI's expansion. Microsoft today kicking off Build in Seattle, its annual conference focused on hardcore developers.

The biggest news for investors, I think, in Microsoft is embracing model context protocol. It's a way for third-party AI agents to take the wheel and steer windows or other apps. And meanwhile, over the weekend at Computex, NVIDIA CEO Jensen Huang unveiled NVLink Fusion, a way for other chip makers to hitch their custom CPU chips to Nvidia's AI specialist GPUs.

Qualcomm, Marvell, Synopsys among the early partners there. If it works, the tools might serve as a strategic moat similar to what the App Store did for Apple's iPhone. It was just easier to build and sell games on iOS through the App Store, so developers offered their best products there, which fueled iPhone demand. We'll have to see if it works for Microsoft and Nvidia in AI. Well, House Republicans approving the President's big tax and spending bill for the path forward is rocky, with Fiscal Hawks saying the bill doesn't go far enough.

What chance does the bill have if it makes it to the House floor? We will ask Jason Furman, former CEA chair. Plus, the race to replace Jamie Dimon, a big focus of JP Morgan's investor day. The market has loved Jamie at the helm with the stock up more than six acts during his tenure. We're going to have the latest from today's meeting when Overtime comes right back. Welcome back to Overtime. The market's mostly shaking off the Moody's downgrade of the United States credit rating, but the $36 trillion and growing national debt is concerning to many, especially on Capitol Hill,

as a new budget bill is getting negotiated. Emily Wilkins has the latest, Emily. Hey John, well yeah, the Moody's downgrade, it's really given fiscal hawks leverage to push for even more spending cuts in this mega bill And look the mega bill it cleared a hurdle It was approved by the Budget Committee last night But four Republicans voted present and that's a warning sign that while discussions are progressing they have yet to get to yes

One of the four congressmen Ralph Norman told me on Friday that the downgrade puts extra pressure on speeding up cuts, like cuts to clean energy tax credits and implementing work requirements for Medicaid. Well, we've been downgraded three times. We have problems with the money in this country, the debt. And it's not just the four on the budget committee either who have opposition to the bill. Congressman Scott Perry also tweeted that Republicans need to work harder this week to get the job done right, especially since America's credit rating was just downgraded again due to historic fiscal mismanagement and we're careening two trillion more in

debt. The Trump mega bill is likely to add about 3.3 trillion to the debt. That's according to an estimate from the committee for a responsible budget. But of course, that's just the House bill. We expect the Senate bill to change. But the White House this week really starting that push for the House to get their bill done this week. We've learned that Trump will be on the Hill tomorrow morning meeting with Republicans,

and we will certainly be covering that meeting. John? Emily, is there any sense of what it would take to get the necessary Republicans to yes, and then the degree to which that would endanger the bill in the Senate? John, it's really a tricky balance, because if you want some of these cuts that the fiscal hawks have been talking about, say, take these energy tax credits. If you make sure that they phase

out as quickly as they possibly can, there's another group of about a dozen Republicans who say, hey, these tax credits are benefiting our districts. They're creating jobs. We want to have them. That could jeopardize them on

the bill. Or if you go further on Medicaid cuts, that leads to another group of Republicans who say, hey, we need to have them that could jeopardize them on the bill or if you go further on medicaid cuts that leads to another group of republicans who say hey we need to make sure that these that some of these programs remain in place they benefit our constituents so it's really a delicate balancing act here we know that speaker mike johnson is having many meetings throughout this week he expects the bill to be on the floor floor on Thursday and he has said that he expects negotiations on this bill to be going right up to the time that they have that critical floor vote. All right, Emily Wilkins, thank you. Well, let's talk more about that debt deficit and fiscal road ahead. Joining me now is Jason Furman, former chair of the White House's Council of Economic

Advisers, currently a professor at Harvard's Kennedy School. Jason, good to have you back. So it seems like there's, even beyond the details here, this ongoing disagreement between the left and the right, Democrats and Republicans over whether this is more about cutting government down and keeping taxes down, or if it's about bigger government and more, you know, the upper middle and upper classes paying more.

Isn't that the real issue here that this administration and this Congress is trying to shift the balance? Look, there are two separate issues. One is what is going to happen to the deficit and debt. And here every single plan put forward by the Republicans this year would increase the deficit, would increase the debt. And in fact, the Senate plan would increase it even more than the House plan, which is currently under debate.

Then there is, as you said, a separate issue of to what degree do you want to address things on the tax side or the spending side. Here's something notable, the House bill does cut spending. The Senate budget template actually increased spending on things like security and border, even more than it cut spending in areas like Medicaid. So the Republicans are clearer,

much clearer about cutting taxes than they are about cutting spending. What about the argument that extending the tax cuts is gonna allow for growth that eventually pays for this? Why doesn't that work? The original tax cuts that passed in 2017 had two parts. One, cut the corporate rate from 35 to 21%. I think that was pro-growth, it was important.

That was also permanent Everything that's coming up now was the more family-friendly But less pro-growth part of the tax cuts They then added to it things like tax-free tips over time and Social Security That has nothing to do with economic growth. There's no tax reformer I know that was calling for those those are really campaign promises So I do not expect very much growth to come from these tax cuts. There's the issue of Medicaid cuts in here. For a long time, that's been a third rail in American politics to talk about cutting

Medicaid. Is it healthy to at least be talking about it? And are these cuts not reform? Look, I think if it was putting everything on the table, I'd be for that. I'd put Medicare, Medicaid, Social Security, I'd put it all on the table. The issue here is the Medicaid cuts in this bill are designed to offset about one-sixth of the cost of the tax cuts, assuming they were made permanent. And so the Medicaid isn't about deficit reduction,

it's just about paying for just a piece of the tax cuts. And I understand why a Democrat would come along and say, you know, why do you need to take 10 million people's health insurance away to help pay for tax cuts? Let's put everything on the table. What about Doge? I mean, we spent quite a bit of time over the past few weeks and months talking about that and one of the issues that I

continued to raise was, hey aren't entitlements really the big issue here? How much are these cuts that are cutting scientists, cutting sure bureaucrats but very knowledgeable bureaucrats in some case? How much of a difference is that really going to make to the numbers? It sounds like it's not making that much of a difference here. Yeah, look, the doge cuts aren't very much. Some of them will actually hurt growth through innovation. Some of them will hurt tax collections by scaling back the IRS. So it may end up costing us money, not helping us. And yes, you're absolutely right. I would love to see the type of bipartisan budget deal that's been talked about in the past where everyone comes to the table, everyone sacrifices, everyone says, I need to give

up a little bit. So for Republicans, they'd need to accept taxes going up. For Democrats, they would need to accept Social Security, Medicare, Medicaid reductions. That is the template that we should have. That's not what we're doing right now. But cooperation is a bad word right now. I mean, we can't even talk about bipartisanship. It seems like in either party right now, the idea is, hey,

while we've got any kind of advantage, we've got to jam our agenda through because the other side is evil. Yeah, no, that's exactly the attitude. And I get that. That's been the attitude for a long time. But the issue is life is long. And two years from now, there's probably gonna be divided government.

And now is the time to start building up some of the muscles so you can work together. They're gonna have to do annual spending bills. They're gonna have to do annual debt limit bills or regular debt limit bills Even better would be if they could aspire to do something more social security trust fund that's exhausted in a decade No one's talking about that. It is going to run out of money ten years from now The time to act on something like that is right now

You say that there's gonna be most likely a divided government, and I guess just historical precedent would suggest that, but I haven't heard much of a coherent economic agenda from the Democrats, have you? Look, midterm elections are generally referendums on the incumbent, so the Democratic message I expect to mostly be, you know, here's the ways in which the world was made worse in the last two years, and if we do end up with these tariffs sticking, families really are going to be paying bills. They're going to notice it.

I don't know that buying two dolls instead of 30 for the family that wanted to buy 30 is going to seem like quite as easy an adjustment as the president made it sound. I don't know any families buying 30 dolls, but we'll see. We bought that many stuffed animals over the last year, and I'm not proud of it. Right. Jason Furman, thank you.

You can afford it. Ahead, Mike Santoli breaks down why institutional investors may be racing to catch a moving train in the midst of this aggressive market comeback. And speaking of the turnaround, is this nothing more than a bear market rally, or is it the start of another long-term bull run? We're going to discuss when overtime is back in two. Welcome back to overtime. First, solar closing down 7.5 percent,

biggest loser in the S&P 500 today. That after reports Republican lawmakers reached an agreement to end clean energy tax credits earlier than expected as part of the deal to pass President Trump's tax and spending package. Other names like Sun Run, SolarEdge, and Enphase falling as well. You know, all in the shade, the recent rally from the lows has been one of the fastest in history, and many institutional investors were forced to aggressively add exposure.

Can that continue? Mike Santoli, what do you say? Well, it can, John. We'll see if it will. This is a look at the composite investor positioning calculus by Deutsche Bank. So they maintain this indicator of Boyle's institutional and retail different types of institutions into a single positioning indicator, equity exposure. You see it had one of its biggest ever jumps in history in a single week to that level,

which is just below neutral. So you see how negatively positioned people were near the lows, of course, very steep on the downside and the upside. It's really kind of looked like a V bottom in risk appetites. Now at these extremes, it serves as a contrary indicator. So this is like the very early part of 2018. That was a kind of a major short-term peak.

Obviously you see the low in the sell-off in COVID in 2020. So there is room for institutions to buy back more. But which types is an interesting question? The types that are most underweight are these kind of mechanical systematic trading firms that basically just follow a set of indicators, whether it's the volatility level, whether it's a trend following kind of mode

or something like that. People who've made a decision, whether it's the volatility level, whether it's a trend following kind of mode or something like that. People who've made a decision whether to be long or short stocks are more long and they're kind of in. So it's all conditional, but we haven't yet gotten to that point where you say, okay, everyone's tank is full, nobody's left to buy, John. Well, these exposure lines, is this showing US equities or global?

It's US at this point, I believe. So it's essentially, you know, again, it's a kind of a guesstimate of exactly how people are positioned. But yeah, it is pretty much focused on the US. So what about this idea, and it's not just about flee the US, but we've had a couple people already talking about the attractiveness of quality in Europe. Might people buy in, but just've had a couple people already talking about the attractiveness of quality in Europe.

Might people buy in, but just not where they were before? There's a chance of that. It certainly you saw a kind of gesture in that direction early part of the year. I still think though that you would see this migrate higher if people were topping up their equity exposure in general, because it mostly feels as if that, you know, those things move more in tandem than they don't. And a lot of this is people closing out short positions, at least in the initial phase of this.

So, you know, there's nothing that says it has to go to the top end of the range here anytime soon. And mostly that's gonna depend on how the market itself behaves. But I do think it's gotten outsized importance simply because it was so dramatically skewed to the negative and the strength of the rally as you guys were just talking about retail investors never really wavered. The strength of the rally

did leave a lot of the professionals flat-footed. Yeah, a lot of them got their ankles broken in April as we say in the NBA finals. Mike, thanks. We'll see you in just a bit. Well, time for a CNBC News Update with Kate Rooney. Kate. Hey there, John. President Trump signed a bill this afternoon that bans the distribution of non-consensual sexually explicit images and videos,

including those created by artificial intelligence. That bill, called Take It Down Act, includes harsher punishments for those who post images or threaten to do so, and it also forces online platforms to take the images down within 48 hours of being noticed. Notified rather. The New Jersey man though charged with starting the massive Jones Road fire last month. The wildfire says he should not be held responsible because he tried to put out that fire before he left.

After a brief court appearance today, Joseph Kling told NBC Philadelphia that there were others there with him that should have snuffed it out. Prosecutors say Kling set wooden pallets on fire and left without extinguishing the flames, which ended up burning more than 15,000 acres. And the USTA is making its largest investment ever.

In the US Open, the tennis organization said today it's investing $800 million to modernize and upgrade Arthur Ashe Stadium in Flushing, New York, without the help of taxpayer dollars. That project is expected to be done just in time for the 2027 US Open. John, back to you. All right, Kate, thank you. Now, I had another big week of retail earnings on deck with Target Home Depot and some high-end names Like Ralph Lauren set to report were Walmart's earnings a harbinger of things to come Will we hear more companies warn of price hikes the retail read is ahead?

Welcome back to overtime. Let's get a quick recap on the markets the down with a more than 100 point gain the broader averages on the markets. The Dow with a more than 100 point gain, the broader averages overall were higher. S&P 500, NASDAQ both closed the day up but only by a few points on those but good enough to continue a winning streak for the S&P now at six straight sessions. United Health, the big reason the Dow ended higher, that stock rebounding once again following last week's big sell-off. It's now up 14% in the past two days. That amounts to a small portion of what it lost. Gold, also a winner today, steered by softer dollar and safe haven demand on that Moody's US credit downgrade. Treasury's also on the move on that downgrade.

The 10 and 30 year yields both higher, just short of four and a half or 5% on each of those. Well, JPMorgan down about 1% today as it holds its investor day. It's a chance for Jamie Dimon, CEO, to share his views on the economy and perhaps a chance for the rest of us to see who might replace him someday.

Let's bring in Leslie Picker for a look at what we've learned. Anything, Leslie? It was a chance, John. I don't know if we got that chance, but Diamond certainly fielded questions related to everything from Bitcoin to regulation to private credit and yes, to succession.

He did say nothing has changed on succession, noting his timeline is up to the board. He shared some updated thoughts, though, on the fiscal picture and the quote, huge deficits that he sees and spoke about the trade war as well. My own view is, you know, where people feel pretty good because you haven't seen an effect of tariffs. The market came down 10 percent, it's back up 10 percent. I think that's an extraordinary amount of complacency. That's my own view.

That when I've seen all these things adding up that are on the fringes of extreme kind of thing, I don't think we could predict the outcome. And I think the chance of inflation going up and stagflation is a little bit higher than other people think. He said even if they stay where they're at today, the tariffs are still, quote, pretty extreme. And he notes, we still don't know how many countries are going to respond. Diamond said he thinks the geopolitical risk is, quote, very, very, very high.

He thinks the odds of a recession with inflation, stagflation, in other words, are about two times the level that the market thinks. And he says credit losses in a recession will be worse than other people think. He said he's not a buyer of credit or wouldn't be a buyer of credit today, that it is a bad risk, John. Leslie, on succession, it's starting to remind me of the Bob Iger situation

over at Disney, where it's almost, they're insulted that you would bring up the idea that one day they might not be CEO. Is there a situation at J.PPMorgan yet where they're losing top talent who would be good CEO candidates because they think it's not coming anytime soon? Not in recent years. It's funny because the question that was posed to Jamie Dimon in this back and forth was essentially the analyst or investor had asked chat GPT, who

was kind of the pop culture icon that Jamie Dimon reminded them of. And the AI, the chat bot kind of responded that it was Ironman. And then the investor said, well, Ironman never retired. Why do you need to? But it does seem like that's certainly something that's on the board's mind, it's on Jamie Diamond's mind. And it's pretty clear that the heads of the business are the ones that they're at least looking at at this point in time as potentially taking that job.

The question is more around timeline, which there was a B of A note out actually this morning which said that, you know, if there were indications that he planned to stay two or three years, that would actually be bullish for the stock. So it seems like it's one of those situations where there is this collective agreement among the analyst community and the investor community that they want Diamond to stay, and it really kind of comes down to the board and their timeline. Okay. Well, Ironman did retire after the blip, but we won't be marveling there too bad.

I never saw the movie, and apparently Diamond didn't either won't be marveled. I never saw the movie. Apparently Diamond didn't either. He's like, I've never seen that movie. Leslie, thanks. Well, the S&P 500 rally more than 17% since the early April lows. So is the bull market back on or will this turn into a bear market rally? Dan Niles joins us on the other side of this break with his take. Stay with us. Welcome back to overtime.

Treasury yields are spiking today following a downgrade from Moody's on US credit rating, sending the 30-year yield above 5%. That's a level not seen since November of 2023. My next guest believes that the rise in yields carries higher inflationary risks rather than signaling an economic slowdown. Joining me now is Niles Investment Management founder and portfolio manager, Dan Niles. Okay, Dan, I know that you've been skeptical

of this market's overall direction, though allowing for some of the spikes we've seen. Well, what's your take, fill that out, on what's happening with yields right now and how it affects stocks? Sure, I mean I was expecting a rally you had me on an interview on April 7th I said look I think we might see a short-term bounce because you get these bear market rallies in the midst of These sell-offs and you know if you go back and you look at the global financial crisis as a good example

You had two rallies in the S&P of 18% to 19% on your way to new lows. You want to go back further to the tech bubble, you had three rallies actually between 19% and 21% in the S&P 500 on your way to new lows. So you think we're getting new lows? I wouldn't rule that out in the fourth quarter. And here's the reason why, John. So you brought up yields earlier, obviously. That's something you've got to pay attention to

when the 30 year is bumping up against 5% and the 10 years bumping up against 4.5%. And the question you asked is, well, if you look at those yields, why are they doing that? Well, yes, tariffs thankfully on China have gone down from 145% or so to 30. I think they ultimately will go closer to 10. But at the end of the day, tariffs overall are going from about 3% to start the year

globally to probably low double digits. That's inflation in the pipeline. So I don't think the Fed's going to cut at all this year. The more important thing is if you look at the US economy, we're about one quarter of the world's GDP. We had a 41% increase in imports in Q1. When you pull for that much demand because people are scared of tariffs, Apple airlifting 600 tons of iPhones, and you have consumers going out and

buying PCs and cars and whatever else, you're going to have a payback during the holiday period. And to put it in perspective, during COVID, you had an 88% increase in the third quarter. But that's because you had imports go down 12% in the first quarter and 54% in the second quarter. So you're just doing 10 jobs. To clarify, you're saying we probably ended up pulling everything into the US, not everything, but almost everything we need for the entire year in these first two quarters in the first half because people are trying to get ahead of tariffs? Yeah, absolutely.

I mean, you heard it on the Walmart conference call where they're like, you know, we can't adjust to this and we're going to have to start raising prices. And you've seen this interesting thing where imports surged in Q1. Then they collapsed in the month of April. Then when the tariffs got rolled back, they've started to surge again. And so all you're doing is you're just pulling forward an unbelievable amount of demand. I mean think about it, one quarter of the world is the United States and imports were up 41% in Q1. You don't think that pulled forward some demand? So then what's the impact on things like jobs, whether we're talking ports or warehouses etc. when the demand for new goods from overseas dries up regardless of what domestic consumer demand

is doing if the supply is already here. Well, and that's the problem because you go into the holidays, what's amazed me is how many companies on their conference calls for Q1 because remember, Q1 earnings came in better than most expected. I expected them to be good. If you go back and read what I said going into this earnings season because I thought the pull forward and demand will make companies sound optimistic. I thought there'd be a rally through early May.

We've obviously gotten that. But the thing is now, people just, you look at the estimates for the full year and the third and fourth quarters haven't been cut. So either you believe tariffs have no impact, inflation coming through the pipeline has no impact, yields up here have no impact, and you're going to get double-digit earnings growth for the full year, or you're going to walk into a situation much like, if you remember in 2021, the S&P went up 27%, even though inflation surged from 1.4% to 7% because everybody wanted to believe it was transitory. Then you got into 2022, and the S&P got clobbered for 19%.

And I think that's kind of the situation you're in. I think because of under-positioning, you're gonna see guys chase. It wouldn't surprise me if you get to new highs on the S&P because people wanna believe that everything's great, and then you've got a huge issue in the fourth quarter when holiday sales don't come in. So that's absolutely the picture you see

what you think is happening. So that's absolutely the picture you see what you think is happening. So give me the scenario, low percentage though you think it is where you're wrong here. Is it there's some stimulus in domestic demand that actually chews through that inventory and therefore that buildup isn't a big deal? Is it that there hasn't been as much pull in

as you expect there has been? How are you wrong? You look at 41% import growth, John, on 25% of the world's GDP. How are you going to spur that much demand? So I think the question is, how bad is the holiday quarter going to be? Because this is just to me like thinking inflation was transitory in 2021, which I was on your network plenty of times saying there's no way this is transitory. I think this is one of those situations where under positioning, Mike Santoli did a great segment on that earlier, is going to have guys having performance anxiety, people want to believe it's good. I don't know how you get out of this very easily because it's not like the Fed's going to be able to cut with tariffs in the pipeline.

Obviously they're trying to put through tax cuts or make them permanent, et cetera, but in general, the government's trying to cut back spending because of the deficits, which look like they're going to go up. And so it's hard for me to figure out how you get out of this when the S&P PE is at 23 times. In the short term, enjoy it. It could go up some more, but then I would get very cautious as you head into the holiday quarter, especially given companies are saying, oh yeah, we didn't have much pull in on their

Q1 earnings calls, which makes no sense. All right. Well, we're going gonna watch the numbers, of course, as we always do, Dan Niles, thank you. Thanks, John. Coming up, comparing the two biggest companies in the world by market cap, Microsoft has the lead over Apple in market caps,

has been a clear out performer this year. Will that trend last? Mike Santoli's got more. The battle of these two mega mega caps. You can guess the other one, it's Nvidia, when Overtime returns. Welcome back to Overtime. Shares of Reddit closing lower today,

about four and a half percent, after Wells Fargo downgraded the stock to equal weight. The firm says disruptions in search traffic will be permanent and will accelerate when Google fully integrates its AI search capabilities soon. Stock has had a rough 2025 down 33 percent, but a nice 12 months up more than 45. Another name closing in the red today is Apple among the biggest losers in the Dow, whereas

Microsoft is one of the top gainers. The company's outperformed Apple not just today, but so far this year. Mike Santoli is back with a look at the ebb and flow between Apple and Microsoft. Mike? Yeah, John, that Microsoft outperformance really happened in a burst recently. Here's how the two stocks shape up.

I dated it back to effectively the start of the chat GPT era once that was launched. And obviously, Microsoft raced out to a lead. It was obviously considered the biggest, most obvious AI leverage stock out there. Then it gave it back, really did nothing for about 12 months. You had other players catch up.

The story got a little bit muddied perhaps. And then of course that was pre tariffs. Apple, you had excitement over the iPhone cycle last year for a bit. And now of course they're considered to be net losers, potentially, on a lot of the trade tensions, and who knows what's going to happen with their own AI efforts. There's been some skepticism there.

It also seems a little bit like people wanting to get back into the market and trying to find easy vehicles for it. Microsoft is a pretty good tariff-insulated name to grab onto, having not acted too much in a while. So you see it's kind of challenging the old highs. That could be significant. Take a look at how the valuation has shaped up.

Also very similar in terms of the relative positioning of these two. But Microsoft has kind of rebuilt this premium that it had for a while in terms of forward PE. It's about 31 times forward earnings. So below its peak, 32 is the most recent peak, obviously got up to around 35. Pretty high for the company over the last 25 years. Apple obviously not able to sustain as much of a valuation.

One issue, if put it out, is when it comes to the likes of Microsoft, also Alphabet, while they're going to have earnings growth, they're not going to have much free cash flow growth, of course, because they are putting so much money in terms of using that cash for CapEx, John. Yeah, certainly are. To my eye, it looks like Microsoft's chart kind of in a way following the overall S&P rebounding to those levels of late last year, early this year, whereas in its AI story hasn't

so much change, whereas Apple has those AI woes with Siri and maybe that's the reason why it fell off? It does seem that's the case, John. The other thing about, you know, Apple had gotten well more expensive versus its own history. You know, as a hardware company, it notoriously kind of has these years when it doesn't really grow very much on the top line.

And so the idea that Apple was trading above 30 times earnings was a little bit of an anomaly for it. So maybe had a little more to give back right there. Yeah, that super cycle didn't come. Mike Santoli, thank you. Well, Walmart tells customers prices may go up due to tariffs. And President Trump tells Walmart to eat the tariffs. What will others retailers say or not say

about the tariffs when they report this week? That's next. 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. Shares of Dollar General among the top performers today,

up almost 5%. After the stock got two price target hikes, Goldman Sachs raises its target to $96 a share, maintains its buy rating, Morgan Stanley raises its target by $5 to 85 a share, citing signs of trade down behavior by consumers. Speaking of, a long list of retail companies reporting results this week,

but the numbers are backward looking. What really matters is what tariffs could do to this quarter and the next. Our Courtney Reagan has more on what we should expect to hear. Courtney? Isn't that always the case, right? We always want to hear about what's to come, but Walmart's tariff impact, obviously, still making headlines from Thursday morning. And if Walmart isn't able to absorb the entire cost of tariffs at these levels. It's unlikely competitors

can as well, at least and maintain some level of profitability. Tomorrow, Home Depot reports early in the morning. And then Rival Lowe's and Target, those are out Wednesday along with TJX, VF Corp, Urban Outfitters and Canada Goose. Thursday, we are from Ralph Lauren, Ross Storrs, Decker's and BJ's wholesale. Now, Lowe's is likely more adversely impacted by tariffs than Home Depot, according to analysts, but adverse weather and interest rates at about 7 percent, that could be a drag for both. Now, Target warned in March, you might remember, when Brian Cornell was on CNBC, that tariffs would likely cause price increases on produce within days.

That was when the prevailing wisdom was that we were expecting higher tariffs on products from Mexico and Canada. And while broad-based North American tariffs are now less of a concern after what we learned on April 2nd, others, of course, do remain an issue, including China, and that is, of course, even still a moving target. No pun intended. John?

Court, after what the president said to or about Walmart, however you look at it, do you think companies are going to pause on passing through intended. John? Court, after what the president said to or about Walmart, however you look at it, do you think companies are going to pause on passing through tariffs or just pause on talking about it? I hope that they don't pause on talking about it because I think it's important, obviously, that we learn about what's going on both for consumers but also as investors so that we can make appropriate decisions. I think Walmart, you know, did the right thing by sort of being as honest as possible. They are the world's largest retailer by revenue when you're looking at their retail business.

And they're saying, look, we're going to do what we can to absorb them. And we know that some vendors are also being asked to do the same. They haven't outright canceled entire orders, but they have lowered the number potentially of some orders. They've shifted around exactly the products. They don't want shortages, but they also don't want higher prices. So we'll see what other retailers do.

If anybody can keep prices low relative to others, it's Walmart. That's what they said they intend to do. I don't know if other retailers are going to be as lucky. I hope everyone is as forthcoming as Walmart. I think that they really opened the door for that. We'll see. All right.

Yeah, they opened the door for a lot of things. Courtney Reagan, thank you. It was a day where all the major indices were higher, but only the Dow, convincingly so. We'll see what tomorrow brings. That'll do it for overtime.