Closing Bell - Closing Bell Overtime: Market Sell Off with Bob Elliott & Keith Lerner, Fundstrat’s Tom Lee, and Jefferies’ David Zervos 2/21/25

Episode Date: February 21, 2025

We have you covered from every angle of today's market sell-off. Unlimited CEO Bob Elliott and Truist Wealth Co-CIO Keith Lerner break down the market action. Fundstrat’s Tom Lee shares his take on the market, crypto, and his "Granny Shots" strategy. Housing analyst Ivy Zelman weighs in on recent weak housing data and homebuilders. Plus, Jefferies’ David Zervos on the macro outlook and Goldman Sachs’ Eric Sheridan on tech. 

That bell marks the end of regulation for the week. Jericho Project ringing the closing bell at the New York Stock Exchange. GSR3 Acquisition Corp. doing the honors at the NASDAQ. And speaking of Jericho, stocks falling hard to end this shortened trading week as UNH drags down the Dow. Tech tumbles, small caps sell off, and soft data spooks investors. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan.

We'll be all over the sell-off throughout the hour. Fundstrat's Tom Lee will tell us why he sees a contrarian bullish indicator in this pullback. Plus, noted housing analyst Ivy Zellman is going to break down the rough stretch for the homebuilders after more downbeat data on home sales today. And Goldman Sachs tech analyst Eric Sheridan will join us with his take on the dip for the technology stocks ahead of more earnings from the sector next week, including from NVIDIA. guys. Keith, we were at these levels, we're at what? At around, let's see, over 6,000 still on the S&P. Late January, late December, late November. I mean, so in a way, we're not, it's a bad day for the market, but not out of a range. You seem to be saying there's no reason to believe that stocks are falling out of bed here. Well, first, great to be with you, even though it's an ugly day. I think the big picture is

right. This market has been churning. It's been a split market below the surface. Our overall theme for this year was a bull in a China shop. We think the primary market trend is up, but we thought there would be some disruptions. And if you go back to November, initially the market was focused on all the potential positives as far as deregulation and taxes. And back then we said, you know, coming into this year, we think the market would start to focus on some of the other side, such as tariffs. And I think in the short term, the market's a little bit heavy here. There is that kind of a little bit of a growth scare with some of the PMI services numbers this morning, the Walmart numbers, consumer sentiment. So I think we are going to be in a choppy period. And don't forget, in March, we're going to start getting some of this event risk around tariffs

and the debt ceiling battle. So all in all, I think we likely have a little bit more downside here, but that's in the context of a bull market, in our view, that's still intact. Okay. Bob, Friday Bob, always good to have you here on set, especially on a Friday. Growth scare in a couple of ways. Growth stocks took it on the chin, particularly today. A lot of the larger tech names weren't hit as bad, but it was Nvidia, Tesla that were kind of growthy. But you think there's also a global growth challenge here? Well, I think what we're basically seeing is the market starting to recognize that the euphoric expectations that were built into the prices that we're seeing may not come to fruition. And all this belief of this being the most pro-business administration

that has existed in the post-war period, it's starting to be questioned. Why? For good reason. If you look at the actual policies that are being pursued, the priority is tariffs, decreasing immigration, and cutting spending. And all three of those things will lead to hits to nominal GDP. And if there's one thing that stocks don't like, it's hits to nominal GDP. And so we're just starting to see some signs in the data, but the big tightening effect is ahead. So in light of that, I mean, we saw a very defensive tone to the market, Bob. You've got, I'm looking at a 10-year treasury yield at 4.429 percent. You actually saw consumer staples finish higher in the S&P today and utilities basically flat. Again, speaking to this defensive tone in the market, is this the right way to be approaching positioning

right now, given the fact that there is this growth scare shakeout happening, or is it overdone? Well, I think the big question in the market is where is the mispricing in terms of the expectations? And if you look at something like the MAG-7, they have relatively high earnings expectations, but they're actually expected to slow their earnings over the course of the next couple of years. It's really a story outside the MAG-7, where you see earnings expectations are pricing in an acceleration, so hopes that either AI is going to deliver incredible benefits or that the U.S. economy is going to power forward in a pro-growth administration. And I think there's a lot of questions about whether that's really going to come to fruition. One of the most interesting things is we're starting to see those 25 year-end earnings just in the last couple of weeks start to come down in terms of the expectations.

So it's possible we're seeing a turn in that sentiment in the market. Keith, I want to get your thoughts on this, because are there buying opportunities when you see major averages down as much as they were today? I'm looking at the screen right now. We basically closed this session lows. S&P down 1.7 percent, Dow down 1.7 percent, but the Nasdaq down more than 2 percent. Russell 2000 down almost 3 percent here to finish the week. We're talking about the growth scare. You also had soft economic data this morning, most notably the Michigan sentiment numbers, options expiry. And as Mike Santolius pointed out, this five-year anniversary of the market peak pre-COVID, just the fact that we're lapping five years, a couple of weeks here on COVID,

what are you watching as you do have this wall of worry now for investors? Yeah, well, I think it's a little bit premature to say there's a lot of great buying opportunities. If you remember, we just hit an all-time high on Wednesday. And when you look below the surface, you know, small caps, actually now about 9% below where they were right after the election, making fresh relative lows. We still like technology long term, but I think that kind of corrective period likely has further

to go. And as I mentioned, you have a lot of event risk heading into next month. So I think the market likely will present a better buying opportunity, a bit lower from where we are today, that will present a better opportunity. I just think, again, 2% or 3% from all-time highs where valuations were and kind of where sentiment got a bit complacent. I think we're just a little bit early to say that. But, you know, you have to also remember this market is often two steps forward, one step back. And I think we're kind of in that one step back period right now. That's probably somewhat early in that step back. Oh, OK. Keith, Bob, thank you. Putting it into context for us. Well, let's turn now to consumer discretionary, the worst performing sector today with outsized drops for travel names amid reports about a new coronavirus discovery in China.

Contessa Brewer has more on those moves. Contessa. Yeah, John, and here Macau has not even fully recovered from the downturn that came with the discovery of COVID-19. MGM getting hit the hardest of the casino stocks with Macau exposure. You're seeing it down now 6%. Wynn, Las Vegas, Sands, Melco all getting pinched as well. The risk off environment is really taking a toll on other gambling stocks as well. They're plummeting. DraftKings off 7%. RSA, that's Rush Street Interactive, it was down 7%, 11% today. It's been on a tear over the last 12 months. We're looking at Caesars down 6%, Flutter off by 5%. So getting hit hard. And then the cruise stocks continue sinking as well. They got slammed yesterday after comments by Commerce Secretary Howard Lutnick

talking about raising the taxes on them under the Trump administration. Norwegian now off 6 percent. Carnival, Royal Caribbean feeling the heat as well. Global hotel brands Marriott, Hilton, Hyatt and Wyndham Hotel all off roughly 3 percent. Morgan. All right. Contessa Brewer, thank you. In what is down day for markets broadly, Dow Transports were also hit especially hard today, falling 2.6%. The transportation average now more than 10% below its 52-week high, led lower by airlines including Alaska, United, and Delta, but also FedEx, trucking firm Old Dominion and car rental firm Avis.

Now, transports were the big underperformers really all day after weaker economic data this morning. Reports that the Trump administration may be looking to change the governance process at the U.S. Postal Service and also amid rumors that Amazon is preparing to expand operations as a for hire LTL or less than truckload carrier, as it pushes further into freight services. And for the passenger airlines and car rental companies, similar to what Contessa just talked about, fears of this other coronavirus in China adding pressure as the sell-off in those names really accelerated through the afternoon. Overblown? Maybe. But on the freight side,

transportation carriers have been navigating tepid pricing, particularly in trucking amid a freight recession. You also got cautious commentary this week from TFI International's CEO that reinforced that. And on the consumer side, those passenger airlines, they've soared dramatically over the past six months. So perhaps some profit taking there as well. All right. Well, now let's bring in senior markets commentator Mike Santoli for more on the sell off. Mike. Yeah, John. So this this turn toward defense has been going on sort of subtly below the surface and now it's sort of popped out into the open. This is a little bit of a tortoise versus the hare race. This is the minimum volatility stocks within the S&P 500, the U.S. minimum vol ETF,

which is obviously, as you would expect, a lot of those defensive non-cyclical type companies. This is the highest beta stocks in the ETF. That's the fastest moving, often most aggressive, fastest growing ones. And you see here on a one year basis, even you see Minvol is now ahead of high beta at this point. It's interesting, even though Walmart is the largest holding in the minimum vol portfolio and has been pulling back the last couple of days, you've still got this advantage. So it's not going to outperform in a very exuberant tape where there's a lot of excitement about the improving fundamentals. But for now, it's doing its job and providing a little more sort of capital protection.

Take a look here at industrials relative to the S&P 500. In fact, transports are part of the industrials, probably the weakest part at this point. You see that it's kind of traveling along with the S&P 500 as a sort of bellwether of cyclical expectations for a while on the upside and has come back down. And I think it's kind of important to note that you're now basically at levels that are equivalent to approximately election day level. So all of those those trades that were about an accelerating economy or maybe other aspects of policy that were going to help this part of the economy, they've been unwound. It doesn't mean it's over, but it does mean that there's a rethink going on, guys. Well, Mike, with that backdrop, we've been seeing, if not a rotation away from mega caps, at least a broadening beyond them. On a daylight today with the market down, we saw some of the growthier names down more, including NVIDIA and Tesla. How important, tonally, direction-wise, do you think NVIDIA earnings are next week? I mean, mathematically important, psychologically important.

The chart looks a little bit challenged. I mean, it's really been struggling around these levels for, you know, since last June. So it is super important in terms of whether the market reads it as, OK, we have another kind of leg to this AI expansion story before we have to worry about the build. I feel like some of the commentary has been a little bit mixed or at least difficult to to kind of discern exactly what we should think about it. In other words, yep, we're all everybody's reaffirming their overall spending intentions. But they're also telling you they'd be doing the same amount of spending even if they weren't sure about the payoff on the back end. So I think that whatever commentary is surrounding what NVIDIA tells us next week, about 2025 into 2026, demand is probably going to matter quite a bit.

We'll be watching for it, and we'll see you a little bit later this hour. Dell and Salesforce will probably also matter quite a bit next week. But in the meantime, thank you, Mike Santoli. After the break, Fundstrat's Tom Lee weighs in on the sell-off and breaks down the contrarian bullish signal that he sees in this market right now. And homebuilder stocks getting rocked this week as soft housing data and Toll Brothers earnings spook investors. And the spring selling season might not bring much relief. We're going to discuss the outlook for investors with analyst Ivy Zellman.

That's when Overtime's back in two. Welcome back. Stocks selling off today as investors grow more concerned about a slowing economy. The Dow and S&P 500 turning their worst session of the year so far. Joining us now is Tom Lee from Fundstrat Global Advisors. He's also a CNBC contributor. And Tom, it is great to have you on a day like today where the major averages are not only lower on the day, they're lower on the week. And the Dow, the S&P and the Nasdaq are now also lower on for the month of February so far. We teased it ahead of this

conversation, the fact that you're seeing a contrarian bullish signal here. What is it? Well, it's a couple of things, but I'd say what really stands out to us is that the market has eluded extended periods of weakness because investors are bearish at the highs, at a time when there's record cash on the sidelines. So to us, this is a market that is very skeptical of these new highs, that bearishness and concerns about tariffs means there's a wall of worry. So I think this is actually a very positive setup for stocks. So you're not concerned about some of the data we've gotten?

I mean, that University of Michigan consumer sentiment reading this morning in particular seems to have spooked investors, given the fact that it cited broad declines across age, income, wealth groups. You also said that big spike in year ahead inflation expectations. That was unchanged, but the five-year expectations moved higher, too. At what point does that start to manifest into something more meaningful in terms of a slowdown here in growth? Well, these inflation expectation surveys matter to the Fed because they are concerned about whether or not consumers are actually raising their inflation expectations. And that would, in fact, be bad.

But we have to keep in mind the U.S. surveys do seem to be polluted by political affiliation. When you break down respondents by Democratic responses, they've gone from seeing inflation under 2% before the election to over 5% today. Republican respondents have gone from 4% to basically zero. In fact, if you look at the distribution of responses for those Democratic respondents, almost 7% think inflation is currently at 25%. So I think that there is a lot of pollution in that data. And I think it's probably pretty typical what happens when there is a change in administration. But I hope the Fed is aware of that political dynamic. So, Tom, if I recall, in Q4 last year, you were warning about market turbulence. And we've been right now at around

S&P 6,000. We're at the level where we were a month ago, a month before that, a month before that in late November. Should we also expect turbulence at these levels at this point, given that the macro narrative and the political landscape is still unclear? It certainly seems like it. I mean, I think investors can cite a lot of things top of mind why short-term they're expecting the turbulence. You know, we're coming off two back-to-back 20% years. We know there's significant uncertainty about tariffs.

In our latest client survey, 63% of our clients, and that's over almost 2,000 respondents, said tariffs or deportations is the biggest risk. That's up from 54% last month. But these are not things that have necessarily long-term negative effects. In fact, things like the number of Fed cuts is actually back towards two. And I think there's a possibility the Fed may actually make cuts sooner. I think one thing the market is being complacent on is thinking the Fed's on hold.

But if this turbulence causes hiring to slow, I actually think the Fed could actually be making cuts a lot sooner, which would be positive for stocks. these granny shots that you've got, you know, part of your investing strategy, some specific stocks, especially since growthy stocks seem to be especially vulnerable on days like today. And if we're going to get more volatility, it sounds like we might get more days like today. Yeah, that's possible. But investors really want to own stocks that actually have structural advantages. And that's best evidenced by revenue growth, margin expansion, earnings growth and reasonable prices. So the reason growth stocks will still outperform is that in a period like this, if we have macro uncertainty, they're going to be names with some visibility. It's not pleasant to own a growth stock today, but, you know, we know the lesson of 2025 is that these pullbacks have not been deep and investors have been buying these dips. So I don't think today is any different.

In fact, it's no different than the deep seek panic or the tariff day panic or the CPI panic. So, you know, I think this is going to be a buying opportunity. You know, it's interesting because Coinbase ended up finishing the day down more than 8 percent, but it started the day higher after it announced that the SEC said it was going to, you know, throw throughout its suit against Coinbase. You've talked about Bitcoin. You've been bullish on Bitcoin in the past. Just want to get your thoughts on whether it is BTC or other cryptos right now with this new administration coming in and some of these policy changes and legal

changes starting to take shape. Well, Bitcoin overall, I think, has made a lot of progress, especially as someone looks back at where it was a year ago. And, you know, I think Coinbase might have been selling off just, you know, it's one of those sell the news events. But we know that the outlook for crypto actually is really favorable. You know, Bitcoin is still very sensitive to the number of wallets and the number of activity levels per wallet. That's set to grow if the U.S. indeed really formalizes an approach to having Bitcoin as a strategic reserve. On top of that, we have a positive cycle underway with the halving. So I think Bitcoin is still set to be one of the best performing asset classes this

year. All right. Tom Lee, thank you. Have a good weekend. After the break, home builder analyst Ivy Zellman joins us to break down the big pullback for housing stocks and tell us if she sees any relief in sight. And later, is this the entry point you've been waiting for in mega cap tech?

Well, Goldman Sachs analyst Eric Sheridan will tell us the names he likes the most on these dips. We've got much more ahead on Overtime. Welcome back. The ITB home construction ETF falling more than 2% today during the market pullback and posting its worst week in two months. Existing home sales dropped sharply in January. That's according to a fresh data released today. That comes after builder sentiment dropped to a five-month low and after Toll Brothers reported downbeat earnings earlier this week. Well, joining us now is Ivy Zellman. Zellman and Associates Executive Vice President.

And Ivy, it's great to have you back on the show. And that's actually where I'm going to start with you with just a broader question on what we've seen. It's really been just a downtrend looking at the homebuilder stocks. It's the second worst performing subsector in the S&P since November, since the election. And we know the data has not been particularly great. Where does it go from here? Well, thanks for having me, Morgan. I think overall, the spring selling season is off to a soft start. And that headwind in itself is creating some fear and pressure on stocks.

With that said, though, you know, you have risk of inflation from tariffs. You've got deportation risk, which is certainly a concern with respect to construction workers, which could put more inflation in labor. And then you now have, you know, softer overall job growth with respect to federal layoffs. And, you know, you're definitely have a wall of worry. And builders today do not have pricing power. They're offering concessions. So if they have higher costs and certainly they have higher land costs that are running through the P&L, that's going to put margin pressure on them. So if your have higher costs and certainly they have higher land costs that are running through the P&L, that's going to put margin pressure on them. So if your investors are saying, why should I own these stocks now? Rates coming down will help. And some of the companies are doing better than others. So I think that they're you know, the the the Toll Brothers earnings got everybody thinking about where the spring selling season is going.

And right now it's not a disaster, but it's off to a slow start. So then would you buy Toll Brothers at these levels? Or what do you see as potentially doing better in this environment? Listen, the group as a whole is probably going to remain under pressure. When we look for where do we buy them blindly and say we want to buy the group, you probably have about another 20 percent downside. But if you have a longer term view and you're looking for which companies on a relative basis, we like Toll. That's our top performing.

That's our top performer that we think will long-term be the best stock to own because they have a more resilient customer base. Their consumer is at the high end where there's significant resiliency. So we like that. But I know in the near term that to own them right now is going to be difficult because the headwinds are not going to abate necessarily. February is off to a little bit better start, but I don't think it's going to be enough to overcome those headwinds that I mentioned earlier today. Ivy, given the overall environment and given, I feel like at least for the past three, four years, we've been like, well, the rich will bail out this company or the economy, et cetera. Is luxury a safe haven? Can you buy toll here and feel like it's not too expensive where you're really exposed still to a significant

further downside? You know, I think buying toll here fundamentally because of their customer base does make sense. But because of the way the group trades, they trade as a group. It's difficult to see toll outperforming today with respect to, you know, a lot of those uncertainties I mentioned. So if you had to own a name right now, I would buy toll. So what's the counterintuitive call in this situation? I guess, is there something that moves counter to overall these home builders that investors should be thinking about if they're thinking about hedging? Well, if I understand your question correctly, you're asking why they would own them. What's the bull case? Is that what you're asking? No, I'm really I'm really wondering if there's a particular home builder or something else out there that you see that you

watch where if the home builders are doing well, it's not, or if this thing is doing well, maybe it's a sign that the home builders are in trouble? Well, I think that the home builders, the ecosystem we have, whether it be real estate brokers, mortgage companies, multifamily operators, single family rental, I mean, the whole ecosystem right now is under pressure. And I think that today it's very difficult to think that the building product companies that we also follow are going to have pricing power to pass along the higher costs associated with tariffs to the builders that are going to push back. So I don't think there's an alternative area that we're really excited about. All right. Ivy Zalman tried to find a silver

lining. Yeah. But thank you. All right. Thank you. Still to come. Jeffrey's chief market strategist, David Zervos, is going to give us his first reaction to today's big pullback and how fresh uncertainty might impact the Fed's path. And up next, Warren Buffett's Berkshire Hathaway holding up well in today's sell off. We're going to look at how the stock stacks up ahead of earnings results that come out tomorrow. Stay with us. Welcome back. As Wall Street awaits Warren Buffett's annual letter, Mike Santoli is back to look at Berkshire Hathaway's run. And it has been a record run, right, Mike? It absolutely has, Morgan. It continues to perform pretty well. Obviously, it changes with different time periods. But here is Berkshire Hathaway over a three-year span against the quality ETF, which it often tracks, high quality blue chip stocks as well as the S&P 500.

I did the three year because it sort of shows this all weather nature of Berkshire Hathaway as it's built, meaning we had kind of a bearish phase in a couple of years ago. And we've we've come out of that in the last two years. Obviously, unassailable balance sheet, portfolio of really good businesses, as well as high quality publicly traded stocks, 300 billion in cash now. And obviously, that creates a defensive posture for Berkshire Hathaway. But the market doesn't penalize the company for it. Take a look at the valuation. Price to book value tends to be the best way internally and within Berkshire to measure how it is valued. And it's pretty much just off the highs of this 10 year period here. I kind of pointed out when we got up there toward one point seven times book value that it's at a level that looks pretty rich and

it's probably a little bit too high for Berkshire itself to want to repurchase much of its shares. It's really slowed its buyback activity. So maybe that's a net negative, but it also does show the company's discipline, as does that cash position. They just don't go out and put cash to use if they don't see a compelling place for it. Yeah, it's been a massive, massive pile of cash. And certainly Buffett has made comments repeatedly about the fact that he just doesn't see anything compelling to buy right now at these levels, as frustrating as that may be for investors. And we also get this annual shareholder letter from Buffett tomorrow. What do you think is going to matter most here, looking at this stock and at this legendary investor through the weekend?

Is it succession? Is it the cash position? Is it those investment opportunities, the buybacks, dividends? How to think about all of it? Yeah, I think, Morgan, first of all, I think he's normally pretty reluctant to make bold market calls these days anymore. But if he has anything to say about the macro, if he sees it as basically stable or risky, or if he's sort of saying that he observes too much expensive merchandise out there and that's why he's not putting the cash someplace, maybe that could have an effect succession we think we know what's going on he's going to lavish praise on his direct

reports and those people who are going to take over the company um but i think all those things and if he does talk about how look our stocks a little bit uh too rich for us to to buy back much obviously that'll get some attention i don't know that he's going to explain you know the trimming back of bank of america uh stake or or or anything like that, but we can always help. All right. We'll look out for it. Mike Santoli, thank you. Now it's time for a CNBC News update with Kate Rooney. Kate. Hey there, John. A lawyer for the man accused of ambushing and killing UnitedHealthcare CEO Brian Thompson on a Manhattan sidewalk told the judge earlier this afternoon that her client was illegally searched during his arrest. Luigi Mangione's lawyer said during the first hearing since his arrest that she would seek to exclude evidence from that search from his trial.

Meanwhile, Howard Lutnick has just been sworn in as the 41st Secretary of Commerce in a ceremony in the Oval Office. Moments ago, President Trump said the former chairman and CEO of Cantor Fitzgerald would, quote, look at a possible federal takeover of the U.S. Postal Office, a move that was earlier reported by The Washington Post. And Los Angeles Mayor Karen Bass has removed the city's fire chief, Kristen Crowley, amid tensions over the city's deadly wildfires and how those were handled in a statement today, Bass said Crowley's removal is effective immediately, citing her refusal to file an after-action report on those fires. Crowley was the first woman and LGBTQ chief of that department.

Guys, back over to you. All right, Kate Rooney, thank you. Up next, Jeffries chief market strategist David Zervos on the advice he is giving to clients following the Dow's worst week since October. Plus, tech stocks tumbling ahead of NVIDIA's earnings next week. A top analyst is going to weigh in on whether this is a buying opportunity for investors. That's coming up, too, in Overtime. Be right back. Welcome back to Overtime. Stocks plunging today and the 10-year yield falling to near 4.4%. Consumer sentiment softening more than expected in fresh data from the University of Michigan survey

as economic growth concerns are back in focus. Joining us now is Jeffries Chief Market Strategist and CNBC contributor, David Zervos. Happy Friday, David. That's right. After Election Day, stocks popped to about these levels. S&P is around 6,000 again. We've been higher. We've been lower. You've been optimistic about the Trump administration's impact on the economy and the markets. But is it's a major test, John. It's early days. There's a lot to chew on. I mean, we've got a, you know, people are going back and forth on the deregulation policies, on the tariff policies. You know, you've been going through everything this week.

We've got a lot of new things to think about, you know, everything from, you know, a possible outbreak in China to what's going on in Ukraine. It's a lot to chew on. I think people have a little bit of indigestion with the stories that are coming through, and it's going to take a while to plow through all that. But I remain steadfast in my optimism. I remain steadfast in my view that the dominant long-term force that this administration brings to markets. Is a positive supply side story which is stronger growth.

Disinflation- secretary Scott Besson said it earlier- in the week he said most. These policies are all of these policies are disinflationary in the end. I don't know that all of them are but the dominant force to me is the

disinflationary one and that just keeps me optimistic on everything from. Fed policy to just where interest rates are headed more generally at the long end. And and the strengthening that I see in corporate America that comes from the cutting of red tape and the smaller footprint of the government sector. David, I'm a bit puzzled by the messaging around the Department of Government Efficiency. I mean, I know that the messaging is cost savings, it's rooting out waste, fraud, etc. But those of us looking at the big picture know that saving a billion dollars here and there, well, you know, a billion dollars is a billion dollars. It's not

significant to the overall fiscal position that the U.S. is in. We got to address entitlements if we're going to do that. And right now there's a lot of dust and concern stirring up around these smaller potatoes. Does that give you any pause? It doesn't. I mean, I just like the direction. I think the market likes the direction that we're just slowing everything down. We're looking at fraud and abuse. We don't know yet. Maybe that's less significant, John. Maybe it's actually something that's more significant. We don't know about these Social Security names that may have been overcounted or multiple Social Security numbers or people that hung on the rolls a little too long.

All that's up in the air. Let's watch and see. I think it's healthy to go through and look at how the entitlements are delivered. And if there is an issue with how they're delivered, we don't cut entitlements, but we actually have an issue with cutting the cost of delivering the entitlements. Let's see. I think I like the direction we're going and we're going in a direction of let's sort of step back and take a look at everything and not just sort of go with the status quo. And I think the markets are going to like that. I think we are probably going to find a fair amount of things to cut back. And we may, you know, unfortunately find too many

things at one point and we'll find we went too far. But let's cross that bridge when we get there. Again, I want to stress, I think the market has overemphasized the risks on tariffs and immigration being stagflationary and probably underemphasized the benefits of a smaller government sector more generally and deregulation more specifically. I do wonder what you make of some of the growth scare concerns out there right now. I mean, there was a lot made of the disappointing Walmart guidance yesterday, for better or worse, and some of the other retail company earnings that we got this week. And then, of course,

we have seen soft housing data. We also had the flash PMIs this week. And then, of course, we have seen soft housing data. We also had the flash PMIs this morning. We've seen soft housing data. And Ivy Zellman was just on the show earlier, and she was saying that she actually doesn't see anything turning that around anytime soon on the homebuilder side. And when you're talking about something like housing, at some point, if you have weakness there, does it start to funnel out to the rest of the economy? You know, I'm OK, Morgan, with a little bit of weakness here. I think, you know, Tom Lee said it earlier in your segment before. Ivy, you've got a Fed that is in a restrictive position, believes it's in a restrictive position. And if things start to look a little weaker on the

demand side, we're going to really start to perk up those rate cut expectations which have been completely pushed back. From where they were a few months back or a few quarters back so. I think and that that should be quite positive for the long end of the yield curve. I I think we have a fed put structure in

place it may be a little bit. Dicey because of some political wrangling that goes on but I like the fact that it. But I like the fact that it's there. I like the fact that we could cushion any blows from, say, large misses on the employment side because we are seeing layoffs related to government contracts or government workers in general. That could be a story in the next three to six months. And the housing market in general looking like it's definitely having a bit of a struggle.

We have room to sort of offset that. So I feel good about that if it happens. I'm not saying it's going to happen, but if it happens. Okay. David Zervos, appreciate your thoughts. I'm going to have to get you back to talk about this Mar-a-Lago accord and whether there's any meat to cut our teeth into with that one. But I think we're out of time for now. David Zervos, always great.

I figured you'd have thoughts on that. All right. Up next, we will discuss how you should be investing in tech stocks after the Nasdaq's worst week in more than a month. And here's a bright spot on a rough day for Wall Street. Celsius Holdings, the energy drink maker, soaring after an earnings beat and announcing it is acquiring rival Alani New for nearly $2 billion in cash and stock. We'll be right back. Welcome back to Overtime. The Nasdaq 100 closing lower by just over 2% today ahead of NVIDIA earnings next week.

Joining us with his view on the tech sector is Eric Sheridan, Managing Director at Goldman Sachs, who does not cover NVIDIA. So I'm not asking you specifically about NVIDIA. Eric, welcome. But I can't help but notice today, after this rough day, Amazon's down 1% for the year, Apple's down 2%, Microsoft's down 3%, Google, Alphabet down about 5% year to date. Is this an opportunity or a warning? Well, I think it depends on the name, John, and thanks for having me on.

I think there is a clear shift going on in the AI trade away from purely investing in the infrastructure layer to also looking at the application layer. So if you were to look at meta year to date, that's a very different dynamic than maybe you've seen in some of the infrastructure stocks that benefited dramatically from the build-out of AI if you look backwards over the last six to 12 months. So I think there's a key shift started with DeepSeek and what came out of China a couple of weeks ago as people started to focus on maybe moving from training to inference and infrastructure to application. And I think those themes are broadly working their way through the market over the last

couple of weeks. So should we expect to see the AI names traded, the AI application names, I should say, particularly in enterprise software trading differently going forward than NVIDIA and the infrastructure names like even a Dell, Supermicro, etc.? Well, I think you are going to start to see some diffusion. You know, there typically are these market themes. Magnificent 7 has been a dominant theme in the market for most of the last year plus. But if you look at the year-to-date performance of some of those stocks, there have been some breakdowns. So within our sector, we would say having exposure to the digital consumer, we still like that exposure, even with some of the debate around consumer spending over the last couple of days. So Amazon and Uber, Uber, obviously not in that definition of the Magnificent Seven. Meta as a play more on playing offense than defense and a little bit more of the application layer than the infrastructure layer within digital advertising and the AI theme.

I would look somewhere in terms of some of names like that, as opposed to just painting all these names with a broader brush. DeepSeek said that it's going to make five of its code repositories public next week as it continues with a commitment to open source its technology. We saw Chinese tech names really led by Alibaba in particular the last couple of sessions, powering broader markets in that part of the world as well. Should we start thinking about this from a Chinese versus U.S. AI tech trade from this point on? No, I wouldn't look at it just as specifically as that. I think the broader theme, if you zoomed out, would be less about geographies

and a little bit more about that we're moving from training to inference. So, you know, we've built these huge foundational models. They will continue to get better. But what I've been on before, what we've talked about, Morgan, is the idea that the incremental improvements in these foundational models are starting to slow down. So like most computing shifts, what typically has to happen is what gets built on top of the infrastructure layer. You know, when we went through the mobile computing shift, it wasn't spectrum and network as to where all the value was derived. It was building businesses like Uber, Airbnb, and DoorDash on top of the mobile computing cycle as to where there was a

lot of return on capital that was generated. So, in the consumer side, which is where my focus is, what is the adoption rate that we're looking at over the next couple of years of things like ChatGPT, Google Gemini, Perplexity, Meta AI? That's where the proof points are going to be on the potential visibility and to return on AI. If they come through, the CapEx will continue to come through and the return profile will continue to become more clear. If they don't, then we'll have a debate as we get deeper into the year as to the sustainability of some of the CapEx trends. Okay. Eric Sheridan, thanks for joining us.

Thank you. Up next, much more on the market sell-off and what to expect from next week. And don't forget, you can catch Overtime on the Go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back. Next week, we reveal the CNBC Changemakers 2025 list. Our Julia Borsten caught up with changemakers from our inaugural list who have been making waves this year. That's right, John. One of our inaugural changemakers, Lead Bank CEO Jackie Reeses, is building the bank that she desperately needed when she was CFO of Square, now Block. While maintaining Lead as a St. Louis-based community bank in just two years, Reeses brought it to profitability by serving fintech giants, including Affirm and Ramp.

And now she's focused on scaling, leveraging the power of her unique team. Take a listen. I really want to change the way banking happens in the United States, full stop. I'd like to see financial services evolve to be a digital first future, a digital first industry. And I think we've only just started to do that. You would never know we exist from a consumer point of view. We are deeply, deeply in the weeds at the infrastructure level. But our clients know who we are. And we service some of the biggest financial services products in the world. Today, we're the second largest female-owned bank in the United States.

And we're run by a pretty diverse group of people. And that was not purposeful. We picked the best people for the job. My full interview with Reese's, part of our new Women's Leadership Vertical, will be published on CNBC.com in March. So look out for that and tune in Monday when we will reveal the CNBC Changemakers 2025 list. Guys, back over to you. Can't wait. Julia Borsten, thank you for teeing that up for us. John, I do also just want to note, because we're getting some headlines, it looks like they are tied to a statement from the Pentagon's acting undersecretary for personnel that they, quote, anticipate reducing the department's civilian

workforce by 5 to 8 percent, that, according to the Pentagon, we expect approximately 5,400 probationary workers will be released beginning next week as part of this initial effort, and that they are planning to implement a hiring freeze while they conduct a further analysis of personnel needs. Now, I suspect this is tied to an order that we did see from the Trump administration seeking lists of thousands of probationary Defense Department employees that have been expected to be fired in coming days. Just to put this in context, this is tied to the Doge effort and Elon Musk. And when you are talking about the Defense Department, you are talking about the government's largest department, more than 900,000 civilian employees and about 1.3 million active duty service members, nearly 800,000 who are in

the National Guard and Reserves. But I know at least based on the reporting ahead of these headlines today, reporting we got earlier this week about expectations that this could be coming, that it was really focused on civilian employees and not those service members. So we'll see how all of this continues to shake out. As it would seem, Doge is now setting its sights on another government agency in a bigger, more broader way. I wonder why. I mean, it's one thing to look for waste, fraud and abuse in general, but in the Defense Department, there's a lot of bureaucracy at a time when there's, well, there's a lot of bureaucracy in a lot of different places. But I wonder how they set this particular target at a time when there's so much

danger in the world. Yeah, well, I'll dig into this and see what additional reporting I can unearth here over the weekend. In the meantime, a big week for the markets as we sold off not only today, but on the weekend. We're now lower for the Dow, the NASDAQ and the S&P on the month. Next week, we get PCE inflation data and we get tech earnings, including NVIDIA, the headliner. That's the big one. That's the big one. But we do want to get Dell. We get Salesforce. There's a number of them. Sure, sure, but a lot. I mean, when the head, when the neck, I guess, of NVIDIA turns, the head turns after it. See how many different companies are in the head.

Yeah. In the meantime, happy two-year anniversary. Happy two-year anniversary. Being together on the show. That does it for us here at Overtime.