Closing Bell - Closing Bell Overtime: Stocks Wipe Out 11 Months of Gains 4/4/25

Episode Date: April 4, 2025

The sharp two-day selloff has wiped out more than 10% in both the S&P 500 and the Nasdaq. Bob Elliott, Unlimited CEO, and Keith Lerner, Truist Wealth Co-CIO, kick off with a deep dive into what’s driving the decline and where markets go from here. Pippa Stevens reports on the energy sector’s role in the drop, while Kristina Partsinevelos covers the hit to tech. Paul McCulley, Former PIMCO Chief Economist, discusses the impact of tariffs, jobs data, and Fed policy in the wake of the selloff. Microsoft AI CEO Mustafa Suleyman weighs in on how AI sentiment is being tested in the downturn. Richard Haass, President Emeritus of the Council on Foreign Relations, addresses geopolitical risks amid the volatility. And Jim Paulsen of Paulsen Perspectives closes the show with his outlook on whether the worst is over. 

Stocks falling off a cliff for a second straight session and closing right about at the lows. All the major averages off five and a half to six percent with the Nasdaq closing in bear market territory. S&P 500 wiping out more than four trillion dollars in value in two days. Crude sinking to 20-21 lows and the 10-year yield dipping below four%. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford with Morgan Brennan. We've got you covered all hour

with the most important angles of this selloff that matter to your money, including the latest on the economy and the Fed and how China and other countries are responding to what we saw from President Trump this week. We've got your first move on Monday and how you prepare for it. But let's get straight to the sell-off.

Joining us now is Bob Elliott, CEO of Unlimited Funds, and Keith Lerner, the co-chief investment officer at Truist Wealth, along with CNBC's Christina Parts-Nevelis on the pain for tech we've seen, and Pippa Stevens on the plunge for crude oil and energy Courtney Reagan on the move for retail stocks and Diane Diana Olek on one bright spot in the market, which has been the home builders. But first we go to our market panel. Bob, I'm gonna kick this off with you because it has been

just a major flush out here for the market. How much further could we go, especially when you look at an S&P that has lost so much value here, 9% this week now, but is still arguably trading at multiples higher than what you'd expect with recession, despite what we're seeing in the bond market with the 10-year treasury yields falling below 4%.

Yeah, when you scan across the markets right now, obviously the short-term market moves feel extremely large, and they are with any broader context, but the levels matter in terms of where we are in this market. And with PEs still at 19 and bond yields still at 4%, none of this pricing looks like pricing in the sort of recession that would come if

these tariffs remain in place for an extended period of time. And the reason why that is, is that basically everybody is betting on the fact that the new administration will roll back these tariffs in short order. If that doesn't happen, it means two things. One, a lot more pain for the US economy and the consumer. And second, escalating retaliatory efforts abroad, kicking off a global trade war. And if that happens, the moves that we've seen so far

will look pretty modest in comparison to the wreckage that will come if those tariff policies persist. Keith, what do you think about this market right now, especially given the fact that we did have a better than expected jobs report this morning, but investors seem to be looking through that. We had commentary from Fed Chair Powell in the middle of the day that, you know,

continues to lean hawkish and a number of other Fed officials as well. And then of course we continue to get these headlines, not only from Washington with the Trump administration and the back and forth with other countries, but also in terms of Congress and lawmakers and the fiscal part of this, as things like tax policy begin to take shape

and perhaps maybe not as stimulative based on what we're getting in reports as had been previously expected. Yeah, well, you just raised a lot of different points and a lot of things that this market is contending with. So our view is this, you know, back in February when we were closer to the highs, we downgraded stocks because there was a lot of complacency and our work was suggesting there wasn't a lot of bad news priced in ahead of all this event risk. At least on a short term basis, you know, we're still more neutral in our overall view, but we're telling our clients, we would not be selling here today. Because at least the market is at least on a short term basis starting to price in some of these uncertainties that you just raised.

So we're down 17% from an all time high. The typical recession is down around 24%. So effectively you're pricing in about a 60% recession probability already. At the same time, you are seeing some things get a bit stretched. You're seeing, as mentioned earlier, put the call ratio spike, the VIX spike. I'm not saying this is the end, and I think we have a long slog ahead of us. But on a short-term basis, I think, yes, there's risk of more downside, but you're also at

a point where a little bit of good news could go a long way as far as any type of movement on the terrorist at all. Again, longer term, I think this is going to take some time. But again, after two big down days, at least the risk reward is a little bit more favorable than it had been when nothing was being priced into this market. Yeah, we had a little bit of good news trying to break through today, but got faded each time. I want to talk the nature of this sell-off, Bob, for those tempted to buy the dip and retail investors have been. As dramatic as the sell-offs have been the last couple sessions, I hesitate to call it

panic selling. The VIX did spike to I think 45 at today's highs roughly above the yen carry trade levels of last August, but does this strike you as overdone in the nature of it or rational based on the facts on the ground? In the grand scheme of things, the sell off that we've had while large in size has actually been pretty orderly in terms of seeing broad-based

intermarket action working largely as you'd expect. For instance, a good indication is the fact we're continuing to see bond yields fall in response to equity market weakness. That's a sign that the market is moving to price in a weaker growth environment rather than creating a broad forced deleveraging. I think the main question in terms of what is holding up the equity market is whether the buy the dip trade and the vol sellers, which have been so prominent in this market for the last couple of years, are they going to start to capitulate? And as you highlighted, data that was out from yesterday suggested some of the biggest

buying by retail investors into the sell off. If those folks evaporate and we have institutional money and hedge fund money that is already scaled back and is hesitant to come in until there's much more value in the market, that risks creating a significant air pocket between where we are today and where we'll get those value-based buyers coming into the market. Now, Keith, as investors look at their portfolios, kind of survey the damage over the weekend, think about what to do next week. We've talked policy, we've talked macro a bit.

I want to go more micro, talk about earnings because we're going to start to get bank earnings toward the end of next week. We've talked policy, we've talked macro a bit. I wanna go more micro, talk about earnings because we're gonna start to get bank earnings toward the end of next week. As you mentioned, 44 days ago, we were near 61.50 in the S&P record highs. We're down about 17% from there. But what happens to guidance from here and perhaps the calculation on earnings per share

for the rest of 2025 based on that, at some point, perhaps even during this earnings season, do we have to start pulling in those estimates? Does that affect valuation calculations? Absolutely. And that's one of the reasons why we had downgraded equities in February, because we started to see the economy weaken, but forward earnings estimates for the market continue to make 52-week highs.

So there's a disconnect. And now, as the economy continues to likely cool, those forward estimates need to be cut. Now I will say the difference now is that we're down 17%. Part of this action right now is that we have uncertainty about the valuation level, but also about the E. So I think right now this market is anticipating that we are going to see some weaker guidance. If you are a CFO of a company or a CEO, especially of a global multinational, I don't think you're going to step up and really have a lot of confidence in what the outlook over the next 12 months or

even the next three months. So I think what's going to be just as important is areas that have been hit already as far as a stock basis, how do they act on the news of the guidance cuts? Cause we all gonna get some cuts in guidance likely coming up. All right, Keith, Bob, thank you. Quite a week, rough week for the market. 2200 point move lower for the Dow today. We've only seen that three other times in history.

All three of those times were during the heart of the pandemic. So back in 2020, this is the third worst from a point drop a third worst drop for the Dow in its history Quite something to see the nasdaq closing in on a bear market down More than 20% that is bear market territory from its 52 week high our Christina parks nevelis is at the nasdaq market site Look at some of the most shocking declines. Christina? Where do I begin? Well, the market plunged really accelerated

among tech names just this afternoon. I'm gonna look specifically at the NASDAQ 100, which really looks at the largest 100 non-financial firms. Lululemon and MicroStrategy, only those two names. MicroStrategy, a big holder of Bitcoin. The only two names to close in the green out of 100 names. And ever since tariffs were announced on Wednesday, Mondalise is the only stock on the Nasdaq 100 in the green during the last two sessions and just barely up

maybe 1% over the last two days. And half the index, 50 names down at least 10% or more. Nvidia, off to talk about it, plunged more than 14 percent over the last two days, and I say that because that's when the tariff news came out. Wiping out nearly 400 billion dollars in market cap, that's like wiping out an entire Netflix or Oracle. Amazon, seeing its longest weekly losing streak since 2008, remember those times. Apple, down 13 percent week to date on supply chain disruptions, demand uncertainty, you can see double digits on your screen for both those names. And since I covered chips really hit hard post tariff news, the SMH ETF dropped about 15% in almost two days, far outpacing the broader market decline of 10%

during the same period. And so traders really now are questioning if this sell-off marks a meaningful shift in market sentiment. I know you just discussed that or merely a Temporary correction which might not be the case guys Christina parts nevelis Thank you also raises questions about what happens to AI capex in this environment and the ripple effects there if we continue to see Uncertainty well oil prices plummeting today again falling to their lowest level in more than three years The energy sector is down 14 percent in a week Pippa Stevens has more on the fallout. And Pippa, tariffs are one piece of it,

but we've also seen some policy moves from abroad this week as well. That's right, Morgan. And WTI did drop to $60.45 at the low today. Tariffs and demand concerns are the overarching bearish backdrop here. But as you noted, the surprise announcement from OPEC and its allies to raise output by

411,000 barrels per day come May, effectively three months worth of production increases is accelerating that bearish sentiment. Goldman Sachs cutting its oil target saying the two key downside risks of tariffs and OPEC supply are here, with JP Morgan adding, quote, for oil prices, the trajectory is unmistakably one way. Now, energy stocks are tracking for their worst week in almost three years. Drillers, APA and Diamondback are the biggest losers this week because of exposure to oil prices, while the OIH, which tracks the services names, is down significantly more than the

XLE, thanks to fears that a drop in prices will cut drilling and therefore operations for names like SLB Halliburton and Baker Hughes. Now NatGas had been a bright spot thanks to AI power demand expectations but they couldn't escape the selling dropping 7% today as we head into the mild shoulder season for demand. John? All right Pippa thank you. Now let's get to Courtney Reagan for a look at the moves for retail stocks court Hi, John, so the XRT down just over percent kind of feels like a relief rally really after Thursday's route I mean there are a number or were a number of positive discretionary retail stocks on the session some moving higher on the possibility of potential negotiations with Vietnam to lower the newly announced tariffs or that Southeast Asian countries

May also deploy some strategies to ease production pressure for the manufacturers there. Now Victoria's Secret as an example shed 18% of its value on Thursday but actually finished the day up by about 14%, down about 7.5% only for the week but actually after those two days not so bad. Similar action with shares and other apparel names like Abercrombie, Gap, Kohl's. U.S. imports about 19% of its apparel sold here from Vietnam, so just slightly behind Chinese apparel imports. Vietnam is the largest country of import

for footwear at 34%. So if those tariffs I mentioned are lowered, that does benefit shoemakers like Nike, On, Skechers, Crocscs and others, which sold off so sharply yesterday to the tune of 20% or more in some cases. But for the week, we should note that five below, still down about 20%, RH down 38%. It had some disappointing earnings too,

so not all a tariff issue there. Capri Holdings, VF Corp, both down 26% for the week. So some relief in some names today, certainly not all. Morgan? Morgan Housel, CEO of Alibaba, Inc. Huge moves within the retail space and consumer space. Courtney Reagan, thank you for breaking it down for us. Let's now get to Diana Olek with a look at the outperformance in home builders as rates have also fallen this week. Diana? Diana Olek, CEO of Alibaba, Inc. Yeah, that's right, Morgan. Housing stocks rally today because interest rates, as you said, were falling. The average rate on the 30-year fixed mortgage dropped eight more

basis points this morning to 6.55%, according to Mortgage News Daily. That's down 20 basis points in just two days, or since the tariff announcement, and it's the lowest rate since October 4th of last year. Now, the homebuilder stocks sold off yesterday, but they rallied back today. The homebuilding ETF ITB, which includes builders and building product stocks, was up. Names like Lennar, Pulte, and even luxury builder Toll Brothers are also up on the day. But consider the impact on the recent drop in rates on a monthly payment versus where we were just at the start of this year when rates were a little over 7%. The difference on that monthly payment is about $125 on a $400,000 home with 20% down. So, you know, when you're paying over $2,000 a month on that mortgage, is $100 really going to make

that much of a difference? Apparently, the builders thought so today. We'll see going forward. Back to you. Diana, thanks. Well, now let's turn turn to senior markets commentator Mike Santoli for a look at whether markets are due for any relief after this week's ugly print Mike. Yeah it's not a matter of whether we deserve any relief but whether we're set up for it I mean arguably yes and I think one way to look at it is just how much downside've been we've basically endured over a short period of time and therefore how far back in time we go and the nasdaq 100 you guys are mentioning, you know down 20% off a high so that's one threshold definition of a bear market But it happened so quickly that in fact the 200 day average I don't have it here

But it's basically just started to flatten out and go down only over the course of two or three days. Usually a bear market means okay the trend is lower. This really has just gone vertically lower. We're back to levels first seen in January of 2024. So that's like 15 months of upside. More or less undone and you know valuations have they reset enough if you take Tesla out of the mag seven maybe it looks like they're sort of getting not as expensive 22 times earnings or something like that so you know it's in this in-between zone hard to conclude whether you have any

fundamental support coming in but definitely getting very oversold and there was a get me out at any price type of vibe today take a look at the Russell 2000 I spread this one out to a 10-year chart why at the lows of the day we were only two or two and a half percent above there that's the 2018 high in the small cap russell 2000 so you see we've sort of shuttled back to the lower end of this multi-year range we've had in there for you know since pandemic times and interestingly as i mentioned in the last hour you actually saw russell 2000 outperform today by like one percentage point of the s&p 500 that's often a sign that you know some of the hardest hit areas that really were in

the lead of this decline are maybe getting some relief. We've moved on to some of what seemed like the safer stuff that was sold. Look this is all in the lifecycle of a nasty correction that we're in right now market-wide. Now take a look here at the riskiest or most volatile stocks in the S&P 500. That's the high beta ETF. You know, I kind of show this once in a while. This is the low volatility basket, which obviously has lived up to its name. And just the way that we've absolutely just had this trap door move in high beta stocks,

and it's essentially gone back to where they were two years ago. A lot of this is things like semis and some other really kind of levered type plays, lower quality type stocks. Now this is telling you the market wants relative safety and quality for the moment. Just know that on any relief bounce that we get on any snapback in an oversold market, it's this kind of stuff that will probably fly

the fastest and the farthest on that initial burst higher, even if it's not something that's going to sustain the next durable move. Now, Mike, tell me what, if anything, this says about Monday? I counted three times during today's trading session. The major averages tried to rally once on a Vietnam headline, twice on TikTok headlines, yet we still closed right about at the lows. How does that set us up for Monday? The playbook says that's not ideal. It basically means that that you did not see any kind of institutional money,

which often will trade the close as opposed to the open, which is considered to be retail, was not willing to sort of step in and add to exposure over the weekend. I don't think it's determinative, but it does tell you that this is a market that's been off balance and there's a lot of these dynamics in there when you have that final burst lower in the indexes. Once you've had a huge move in a day or a week, these kind of leverage ETF products and all these other things that have to be more or less settled, they have these maybe

self-reinforcing moves at the close. It's not excusing it because nobody wanted the other side of that, but it's telling you that sometimes you do get a little bit of that mechanical acceleration to the downside that may or may not mean something or may or may not need to be tested on Monday. Wow, all right, party's over at least for now.

Mike Santoli, thanks. Well, stocks just posted, as we've been saying, their biggest weekly percentage drop since 2020. With worries about the fallout from these tariffs, those concerns were reflected in comments from Federal Reserve Chair Jerome Powell earlier today. While uncertainty remains elevated, it is now becoming clear that tariff increases will be significantly larger than expected. And the same is likely to be true of the economic effects, which will include higher inflation

and slower growth. The size and duration of these effects remains uncertain. While tariffs are highly likely to generate at least a temporary rise in inflation, it's also possible that the effects could be more persistent. Joining us now, Paul McCulley is former chief economist at PIMCO. Paul welcome. Jobs report was strong, tariffs bigger than expected. What's the scenario where the Fed cuts more than three times this year given that?

What has to weaken or improve? What's the scenario? Obviously, three or more, particularly more, would be that we move into a recession and then I don't know what the right number is. But I thought that was a great clip that you played from Chair Powell. And essentially what he told us is we've moved from a soft landing very quickly into a stagflationary purgatory. And it was really triggered everything by Wednesday and the tariffs, which are truly noxious in the standpoint. They pushed the Fed away from both sides of its mandate. They don't know how much each way,

but they know that it's more than they thought before Wednesday. So Mr. Powell was quite negative, I think, in being definitive about the fact that the stag is gonna be worse, and the inflation is gonna be worse as well. But he was very agnostic on how this purgatory ends, in part because it's not his job to forecast that, but more important, he doesn't

actually know. And therefore he's going to sit there and let the information come in and tell us how nasty it is. And the bottom line is that he's not going to be preemptive. When we were in the soft landing era, you can think in terms of the Fed seeing nasty stuff on the horizon and trying to head it off. We're not in that world anymore. They're not going to be preemptive. They're going to want to see the data and they will respond on the easing side if it looks like purgatory is going to morph into hell. But they don't know yet and they're not going

to do anything immediately. Well, give me your wide angle lens now if you will. Paul, what country in the world, maybe what region, what market is the least likely to get damaged over the next three to five years? Where should investors look? Wow, wow. Obviously, something besides China. And I would tend to think more in terms of Europe, declared that they're more willing

to use fiscal policy than, quite frankly, I ever thought that Germany be willing to do. So when we think in terms of the trade war, it will tend to be with the developing countries, and that's going to be messy. But from the standpoint of a positive surprise going forward is I think we could have a lot more homegrown growth in Europe as Europe effectively gets engaged with deficit-funded infrastructure and military spending. So I'm not table-pounding about about this but I lean more towards Europe as

opposed to Asia which has a Merkel history. Paul I'm going to ask what is maybe a very basic question here but given the fact that the market particularly the bond market, Fed funds futures market with all the rate cuts that are now being priced in there, is pricing in a very real possibility of a recession here. Can you see a sustained spike in inflation with the implementation of these tariffs if consumption is falling and we do go into recession? At some point, does that inflation come off because Americans just aren't buying stuff?

I'm with you 100 percent, Morgan, in that if you go into a recession, it is definitionally deflationary. The issue is deflationary from what level? So your tariffs effectively give you a one-time jump in the price level, which looks like nasty inflation as you're going up. But once you've absorbed the one-time hit, if you have a recession, in part because the one time hit has eroded real purchasing power of consumers, then it doesn't stick and you actually get a disinflationary, deflationary bias on the other side. So you can actually paint a good scenario on the other side, but between here and there is truly

Noxious so Paul it brings me back to something you just said before what would it take to go from? Purgatory for the Fed to I think the word you used was hell because there's a lot of focus right now on what happens next With these tariffs we've gotten a lot of commentary from the administration, some of it including right here on overtime yesterday, contradictory. There's a lot of focus now on Congress and whether Congress potentially starts to ruminate enough and get upset enough to step in, whether tariffs get challenged on the court side too

and potentially go away that way. But putting all of that aside, it almost seems like to me, the real face off here potentially over the next couple of weeks and Next couple of months is really going to be between president trump and fed chair powell One holding steady with powell and the other pushing for rate cuts Which by the way, we've seen these types of dynamics with populist presidents through history with fed chairs in the past I through history with Fed chairs in the past? There's certainly conflict between Mr. Powell and Mr. Trump,

but I really don't see that being critical and determinative in the next couple weeks because the market is already priced in a lot of easing. So the positive effect that you'd be getting from easing effectively is being brought forward by what the mortgage market is already done. I think the real conflict that we have right now is between the president and the legislature in that the president is doing what he's doing on tariffs, which are taxes. And taxes are a congressional prerogative by the Constitution. So what I would be looking at intensely is, does the legislature, and in particular, does the House and the House Republicans effectively say, sir, you

have lost your mind, you've got to knock this stuff off and effectively have Mr. Trump blink. So if you've got a game of blink or a game of chicken going on, it's not really between the Fed and the Oval Office, it's's between the oval office and the House of Representatives. All right. Paul McCully, thank you. Thank you. Don't know how likely that is. Well, bespoke pointing out it's the first time... You see a number of senators come out, Republican senators come out in the last 24 to 36 hours.

And just the fact that there's even certain comments being made, it's my understanding, speaks to how much angst is probably happening behind closed doors. So we should keep an eye on that commentary. Yeah, but he said the House. The House is different. He said the House, but I'm saying senators. Pointing out it's the first time the Dow has fallen

1,500 plus points in back-to-back sessions. But our next guest says he's starting to get bullish. Jim Paulson, Paulson Perspectives author, joins us now. Jim, give us some good news. Why are you bullish? Well, thanks for having me, John. It's such an interesting day here. There's a lot of bad things going on.

I totally agree with that, but there are some good things. One of those things is we finally got to total panic stage here. And that's often a sign that you're getting close to the bottom of a market. You know, even a few days ago, we had a lot of people that said they were bearish, but they still had a big commitment to the stock market. Well, I bet when those new numbers came out, we're going to see that equity exposure has come down a lot, cash has gone up a lot, holdings. In other words, there's not, it can't go down as much in the future simply because there's not as many

people left to sell. That's a very good thing. Another good thing that's going on is even though the Fed is yet to ease, there's a lot of stimulus already being brought to bear on this situation. Bond yields have dropped almost eighty basis points for their highs just a couple months ago on the ten-year across most of the yield curve it is they've come down a lot that's a lot of easing already present the dollar unreal terms is down a fair amount here over the time again another easing move that's been put in place we've had a significant drop just the last few days in commodity prices. Oil, I

think, fell this morning on futures to like a four-year low. Industrial commodity prices are in a plummet overall. Again, that's a stimulant coming to the situation here. So it's nice to see that happening. We don't have the Fed, but I think they're going to come sooner than we think okay back you know you said close to total panic stage tell me how you're measuring panic versus rational reaction

and how earnings guidance will factor in well i i think that uh... uh... panic it's partly a gut-feel john there's no doubt about that because we we've had a lot of these surveys that would say pessimism for quite a while i didn't really buy that but but just the behavior in the in the field the last couple days is totally different that's kinda what i was waiting for and then if you want to quantitative evidence you can look at the vicks

blowing out today post-50 and really ending the day on its highs uh... suggesting a fair a fair amount of panic there going on overall. So I think that's, you know, it's scary, but that's what brings about an end to the situations, in part because people have adjusted already and now their sentiment is so low, even bad news is better than fear, rather than bad news being even worse than they thought and i think that that changes the dynamics also the stupidity of what we're doing becomes more obvious if you will

you know the stupidity of of and enacting a massive tax increase on the entire global economy at this point doesn't make much sense and i think it doesn't make much sense for the Fed to stubbornly not wanna ease. I look back this morning at all the two day movements since 1965 that have dropped, you know, at that point, 9.3%. And there's only been about seven other

two day periods like that. And every one of them, the Fed almost instantaneously eased. And in addition to that, look what the commentary is coming from some reliable sources. No inflation is seen in the bond market. Breakeven rates are in freefall across the market. No inflation is seen in the commodity market. I just mentioned they're plummeting. No inflation is seen in the inflation sensitive stocks

in the stock market. Energy stocks were terrible today, for example. Yeah. My point is that the Fed's gonna lose many voices in its favor. I think it's gonna be forced to ease. So the fact that you've seen borrowing rates come down, we're just talking about it

and the positive impacts here it's had on home builder stocks today for example. So the fact that borrowing rates are coming down, the fact that crude oil has come off to multi-year lows now, the fact that the dollar has weakened, and I realize we can debate why it's happening, but you're making the point, I'm just going to put a pointed angle on it here, that this is deflationary right now and that those moves in and of themselves are stimulative. Is that the way to think about this? Yes, they're absolutely all those moves are stimulative. You know, if you think about it, you drop commodity prices. What are we worried about? What about prices

going up? What's happening? Prices are coming down. I think this idea, the biggest fallacy in the public discussion, in my view, is somehow that tariffs are inflationary. I think that's nonsense. Tariffs, SmartHooly Bill was passed in 1930 and led to the Great Depression. It was a deflationary event. If you put on these tariffs, they're going to slow the economy down and bring inflation down on so many other products, much more than the rise on specific tariff related products.

So I just think, and that's what all the financial markets in unison at this moment are telling you loudly is the deflationary event needs assistance. Jim Paulson, thank you for joining us. Thank you. Don't miss the CNBC special report on this market sell-off that's going to be Sunday at 7 p.m. Eastern as we get you set up for a new week of trading. We have a new alert on obesity drugs. Angelica Peebles has the details.

Angelica. Hey, Morgan. So we just got word from CMS that it is going to drop the Biden administration's plan to allow Medicare to cover obesity drugs that would have included Lilly's Zepound and Novo Nordis some would go we some agglutide as many people know it as and so this is of course a big deal those companies had been hoping that the Trump administration would go ahead and implement this rule that would have allowed Medicare to cover these drugs because right now Medicare cannot.

So if you are covered by Medicare, you're a senior, you cannot get these drugs. You can get them if you have diabetes, but not for obesity. You can take a look. Shares of Novo and Lilly both down about 1% or so. So not a huge deal at this moment. At least the market's not taking it as such, but still not great news for them. Morgan. All right. Angelica Peebles, thanks for bringing that to us. not a huge deal at this moment, at least the market's not taking it as such, but still not great news for them. Morgan? Alright, Angelica Peebles, thanks for bringing that to us.

Well, today's plunge gaining steam in early pre-market hours after China slapped retaliatory tariffs at 34% on all U.S. goods imported into the country. On the other end of the spectrum, President Trump posting on Truth Social that he, quote, had a very productive call with a leader of Vietnam boosting shares of retailers like Nike and Lululemon that have big supply chain footprints in that country. Other countries that have sought a diplomatic tone include Sri Lanka and Israel, according to Reuters reports. Let's bring in Megan Casella for more on the global response and what the White House is saying. Megan.

Hey, Morgan, lots of action today from foreign nations. We're seeing some countries acting defiant, vowing strong responses, China's of course being the most significant so far. One more to add to that list. The trade chief for the European Union says he spent two hours today talking with the US Commerce Secretary and the trade representative. He says the EU is committed to meaningful negotiations, but it also is prepared to defend its interests.

Now what we don't know at this point is just how open the White House is to any of these negotiations. That post that you mentioned from the president about his discussion with Vietnam offered the strongest sign yet that there is potentially some room for dealmaking. It shows that Trump himself spoke with at least one world leader today about the tariffs, but it also came just a couple of hours after the president posted to kick off his day that his quote policies would never change. So some mixed messaging on that front about where we go from here. All of this happening guys with the president down in Florida. He left

Washington midday yesterday, less than 24 hours after rolling out his tariff plan. He spent about six hours today at his golf club. You can see in this footage here, that's him leaving just in the last hour. The White House has already said, we will not see the president again today as he heads to a fundraising dinner tonight for his super pack. Guys.

Megan Casella, thank you. Up next, retail investors have been buying the dips, but could that actually be a sign that the bottom isn't yet in? We're going to discuss. Plus, Council on Foreign Relations President emeritus Richard Haas tells us why he thinks China could end up being a big winner from the tariffs and Tesla Falling more than 10% today now down more than 50% from its 52 week high hit back in December. We'll be right back

Welcome back JP Morgan flagging in a note that retail investors bought the dip at historic levels during the market sell-off. Let's bring back Mike Santoli to discuss. Mike. Yeah, it's been an interesting pattern, Morgan. It's been in play most of this year. So take a look at this. This is from yesterday.

So this is yesterday's intraday action. JP Morgan calculating the net retail buying. And you can do this by types of order flow. That's the orange line here over the course of the day. As the market sold off, that's the S&P 500 index fund, the imbalance, the net buying power of retail investors climbed, and you see it actually remained relatively firm

and positive all day as the market declined. And we've seen some other things from Bank of America's Wealth Management Unit that there has been this dip buying instinct among many retail investors. I think of it more this as retail traders, people who are really in the game, who are basically got the bug and are sort of this high turnover type activity. Now, those are the clients of something like Robinhood. And the question is how long that can sustain if the market remains weak and whether we

even want to see the dip buying instinct remain active or does everybody have to just give up before we clean this market out. So the steers of Robinhood over two years, you can see that just massive mountain of appreciation in the post-election excitement. You've given almost all of it back, although it's still well above where it was a year ago.

It shows you that at this point, the market is expressing some skepticism as to whether this activity can possibly remain quite this fever, guys. All right. Mike Santoli, thank you. Well, the NASDAQ plunging nearly 10 percent just this week, but Microsoft held up relatively well, falling only about 5 percent. Today, the company unveiled new copilot tools at

its 50th anniversary celebration and our Steve Kovach is there, along with Microsoft's AI CEO, Mustafa Suleiman. Steve? Hey John, thanks so much. Yes, like you said, joining me right now is Mustafa Suleiman. He is the AI CEO at Microsoft, and those co-pilot announcements,

this is your baby, right? This is co-pilot, this is what you were brought here a year ago to do and bring it really to the forefront of consumer AI and to recap a little bit of what was announced today, you have this new idea of actions, this agent that goes out there and uses the web for you, whether that's booking a table, an open table,

you also have this more personalized version of copilot now that can remember things about you. At the same time, if people who follow these chat bots and this generative AI technology, these aren't new features. We've seen a lot of these before from OpenAI, your partner and the like. I guess my question for you is, what do you need in order to move faster to stay ahead of your partners in the case of OpenAI and the competition right now? I think the thing that everyone's got a ground on

is that this is just the very beginning of a massive tectonic shift in the way that we all use computers. Computers are about to become much more personalized, have real perfect memory of everything you've talked about in the past, and actually do things on your behalf. So in Windows today, for example,

we now have Co-Pilot Vision that can select areas of the screen that you should click on to help you fix bugs, turn on a specific setting. You might wanna do your Bluetooth or your WiFi. It's really quite magical to have this thing working alongside you integrated into the core operating system. So I think it's just the very first glimmers

of what is really a seismic shift. Now, what you announced today is something we've heard before also from Apple. They were talking about doing very similar things in Siri, and then a few weeks ago, they come out and say, oops, we can't do it. We don't have it ready right now in order to ship. What did you think when you saw that?

Knowing you were working on this, knowing that you were gonna announce this more personalized co-pilot, when you saw Apple kind of flub on their version or their take on this, what went through your mind? You could download the app today, download Copilot in the App Store in Android,

and you have all those features right there available literally today and over the next week or two. Main feature that I'm super excited about is Copilot Vision. You can point it at anything in your physical environment, on your phone, and it will see what you see in real time. Understanding the scene, able to talk to you about everything that it's seeing,

that is a completely different way than we've ever used computers before. I think it's really magical. So iPhone users don't necessarily need to wait for that new version of the series, what I think you're telling me right now. Let's move on. I want to talk about the infrastructure investments.

This has been a huge thing. People have been watching closely. And just this week, we got even more reports about Microsoft sort of backing away from their infrastructure investments, maybe delaying some contracts or canceling some contracts. We know what your investment looks like, at least through the end of this fiscal year. But looking forward, it seems like you guys are changing, either slowing down the pace, and then we got hit this week, tariffs. That announcement from President Trump,

which is going to impact not just chips and the computer parts you need to make these data centers here, but it's also things like steel, cement, everything you need to do to literally build the physical structure. Has this changed the conversation? What kind of conversations are you guys having now internally at Microsoft in light of

these new tariffs about building it out? If you just step back and consider big picture, the shift that is happening is from CPUs to AI accelerators. We are going to need many, many, many more times these accelerators than we have today over the next five, 10, and 15 years. All we're trying to do is sort of pace ourselves. We put options on many, many different data centers and many different environments.

And we're just trying to steady the pace because, look, we're making seismic investments, huge investments relative to what has been spent on capital infrastructure in the history of companies, not just our own, but in the industry across the board. So I'm very, very optimistic that this trajectory is just going to continue as these models get more and more valuable and more and more integrated into our day-to-day life. Are the tariffs complicating that picture in any way? We're all still trying to make sense of what's been happening in the last 24, 36 hours. The markets are trying to make sense of it.

We are too. So it'll take everyone a little time to just digest it and absorb it, but you know, I'm pretty confident on what the overall trajectory looks like. Let's talk a little bit about what your work and your team is doing here internally. A couple weeks ago, your boss CEO, Satya Nadella, told an outlet in Tokyo that you guys do need to build your own frontier model.

Eventually you're gonna have to start thinking of ways to sort of separate yourselves from OpenAI, lean on them maybe a little bit less, that's at least how I interpret it, for your product development and the features that you eventually incorporate and co-pilot. What do you need to make that happen? What resources do you need in order to make

the Microsoft frontier model that will one day set apart from these others? Yeah, I mean, look, it's absolutely mission critical that long-term we are able to do AI self-sufficiently at Microsoft. At the same time, I think about these things over five and 10-year periods. Until 2030 at least, we are deeply partnered with OpenAI

who have been an enormously successful relationship for us. So we're also now very focused on how do we actually build our own models internally. We have an incredibly strong AI team, huge amounts of compute, and it's very important to us that maybe we don't develop the absolute frontier, the best model in the world first. That's very, very expensive to do and unnecessary to cause that duplication. But building models that are three or six months behind often have many advantages. You can build them more cheaply.

You can train them on specific data for specific use cases, and they're actually cheaper to serve as well. So the questions they ask at any given moment is cheaper to give a specific answer. Once you've waited for the first three or six months for the frontier to go first, we call that off frontier. That's actually our strategy, is to really play a very tight second,

given the capital intensiveness of these models. Now, just really quickly, Copilot, again, like I said, it's your baby. Your job really is here to make consumer AI stick at Microsoft and stand out. Copilot was one of the first of these chatbots out of the gate, but since then, we've seen a number of others, including DeepSeek, which only came out a few months ago and is far eclipsing as far as the number of others, including DeepSeek, which only came out a few months ago and is far eclipsing as far as the number of people using it.

What needs to happen for Copilot to catch up as far as people using it? The big difference with something like DeepSeek is that's really a question answer engine where you're really looking to solve a specific task. It's focused on reasoning. So I think everyone's sort of got a little while to catch up on how these models are really quite different.

We're creating a lasting, meaningful AI companion. Remembers your name, remembers your style, remembers everything about you, gets to know you over time, adapts to you, grows with you, lives life alongside you. That is fundamentally different to what ChatGBT is doing or to what DeepSeek is doing. Now we're only taking the first steps in that direction

and it's gonna take us several years before we really unfold this roadmap. But you can now start to see our models have exceptional emotional intelligence. They're funny, they're kind, they're even-handed. They can look like Clippy if you're really into that kind of nostalgia. But that is a remarkable thing. I mean, they really have a very, very interesting fun personality and style.

All right, Mustafa, we're going to have to leave it right there. Mustafa Suleiman from Microsoft AI. Thank you so much for joining us. John, I'll send things back over to you. All right. Steve Kovac, thank you as well. Well, much more on this MarketSale Off, still ahead, including a look at which countries could actually be winners from this trade war.

We will look at the awful week for financials, with just days to go until the start of big bank earnings. Stay with us. Got breaking news on TikTok because it's Friday. Eamon Jabras has the details. Eamon. Hey, John, we're getting a couple of media outlets now reporting that there was a TikTok deal earlier in the week and that effectively blew up as a result of the China tariffs. New reporting here from Reuters. Reuters is saying that a deal to spin off the US assets of TikTok was put on hold after China indicated it would not approve the deal

following President Trump's reciprocal tariffs announcement. That's Reuters says, according to two sources with the matter. So this is the first now that we're learning that there were extensive negotiations to the point of a deal behind the scenes. And the suggestion here is that that deal was blown up. We saw the president earlier today indicate that he would extend this deadline for another

75 days to continue negotiations. So the fate of TikTok continues to hang in the balance, John, as we wait to see whether that deal could maybe be patched back together or put as part of an overall tariff deal or some other trade involving TikTok could take place. Back over to you. Okay. Amen, Jabbers. Thank you. Joining us now is Richard Haas, president emeritus of the Council on Foreign Relations, also senior council with Centerview Partners.

And Richard, it's great to have you on. And that's really where I want to start with you because obviously we saw the tariffs announced by President Trump this week and China really the first one out of the gates this morning with retaliatory tariffs of 34% but perhaps even more notably given the fact we don't really export that much stuff to China versus what they send to us. Rare Earth export controls to certain US companies, more companies added to their entities list. And now it looks like GE healthcare, a anti-dumping investigation, DuPont.

China regulators open an antitrust probe and this TikTok deal, it sounds like on hold. How does it speak to dynamics between the two countries and the fact that it's not just about tariffs now, but about these non tariff retaliatory measures specifically where China's concerned I Think it tells us a couple of things one is the Chinese government is mindful of its own domestic politics And what happens on social media there and the fact that these tariffs were put on unilaterally?

publicly social media there and the fact that these tariffs were put on unilaterally, publicly. In some ways the Chinese government, I would bet, feels compelled to respond forcibly. Second of all, just because we went at them with tariffs, though a few days before we went at them with export controls, we expanded the entity list. China also has a whole menu of tariff and non-tariff barriers, and we're seeing them go after select American companies. So this is just their way of pushing back. China, over the last few years, as you know, has also done certain things to try to insulate

themselves a little bit from the policies of the United States and others. But my guess is this is setting up a broad negotiation between the United States and China quite conceivably, as your report suggested, with TikTok forming part of that as well. So is the U.S.-China trade relationship and how it fits into this possible broader negotiation atypical, or do you expect that more countries are going to take a similar measure to or similar tack to China in terms of retaliation and possible escalation now? Well, it's both atypical and typical. It's atypical given its scale and given the strategic stakes between the United States and China. So it's an economic relationship embedded in a much larger competitive relationship and potentially confrontational relationship.

But I think your point's a good one. Other countries as well will feel domestic politics, and they're going to push back. What'll be interesting to see is whether they push back, how would I put it, rather than escalating, they push back and they don't do exactly what we've done. And the idea is to try to avoid a ratcheting up because again no one's going to benefit from this. We're not going to benefit from a tariff war. Others are not going to benefit from a tariff war.

So my guess is other countries are going to look to thread a needle, respond strong enough to manage domestic public opinion and give them some bargaining room on the other hand to try to avoid further escalation. Richard, it's tempting to look at these as individual chess moves, but how long before the global pressure campaign from the Trump administration, of which tariffs are a part, causes a permanent change in the way the U.S. relates to its post-World War II allies? Well, I think it already has. If you take what's happened economically you see you saw a meal

under the previous administration because of the republicans in the house to cut off of a t u crane questions now about whether this administration is tilting towards russia the comments of the vice president of the munich security conference i would say that if you add up the strategic geopolitical say and now the economic most of our traditional friends and allies see this as a very different United States. They no longer feel the geopolitical relationships are automatic.

They look at the economic relations, which they thought gave them some protection, and instead now the United States is using them as a source of vulnerability. So what's the point of no return then? What sorts of things might they do that will be very, very difficult to reverse or, if you're in that mindset, repair? Well, they're going to look to diversify their economic portfolios. They're going to be willing to retaliate with tariffs against us. They're going to try to take more of security into their own hands, which will reduce American influence.

Essentially, we're beginning to see elements in Europe of a post-NATO, post-American, post-transatlantic European security order. And I think around the rest of the world, you'll see a diversification of portfolios, both in the economic realm and the geopolitical realm, where countries will try to not eliminate the American role, but dial it down to reduce their vulnerability. Richard Haas, thank you for joining us. Thank you. Let's turn now to the bank stocks.

Those are getting crushed this week with the financial sector sinking more than 10% and bigger moves under the surface. So let's get to Leslie Picker for more on what we saw. Hey, Morgan. Yeah, analysts say that even

though banks aren't directly impacted by the tariffs, the policy puts a cloud over much of their client base, which can thwart loan growth. aren't directly impacted by the tariffs the policy puts a cloud over much of their client base which can thwart loan growth and deal making and wealth management and Potentially later in the year. You could see some cracks forming in terms of credit quality a week from today We actually get earnings from JP Morgan Morgan Stanley and Wells Fargo and should get fresh macro color From executives as these at these firms and will also get a sense of how they're assigning

the probability of a slowdown based on what they do with things like buybacks, how much they're reserving for soured loans. The recent market volatility, which may be helpful for the bank's trading units is already creating a chilling effect on that capital markets revival that we've heard about for quite a while now.

A whole host of IPO candidates are putting their plans on ICE from Parna to StubHub, which were expected to start marketing their respective deals next week. And in the first quarter, US IPOs were actually up by 43% in terms of combined offering size and 74% in terms of the number of listings. M&A activity, though, has remained dormant. But if there's continued market volatility, higher likelihood of a recession, overall uncertainty and lack of C-suite confidence, you can expect that capital markets to stay relatively shut, guys. All right, Leslie Picker, thanks for joining us. A week from today, we'll get more of those details and more of that commentary from some of those big bank CEOs, which will also set the stage, John, for Q1 earnings season, which is sure to be noisy, perhaps,

amid everything we saw this week with policy changes and impacts to markets. Or maybe a little quiet in some areas, particularly when it comes to guidance. I wouldn't be surprised if, of course, banks give guidance. But what about some of these multinationals that have a significant amount of business overseas? Will they even guide? What will they say about demand from customers who might be feeling different about America? From governments perhaps with their customers who might be feeling different about American companies? We'll see. Yeah, consumer confidence, business confidence, all of this is going to matter. We've got

a tenure that broke below 4% today. We've got a NASDAQ in bear market territory that does it for us here at Overtime.