Closing Bell - Closing Bell Overtime: The Return of Tech Leadership?; Former U.S. Ambassador to China On Global Risks 6/16/25

Episode Date: June 16, 2025

Despite mounting global tensions—from the Middle East to G7 trade diplomacy—the market grinds higher. Tony Roth of Wilmington Trust and Tim Urbanowicz of Innovator ETFs break down the resilience. Tech reclaims the spotlight in June. Tony Wang, Portfolio Manager at T. Rowe Price, weighs in on top picks. Former U.S. Ambassador to China Nicholas Burns joins to frame U.S.–China dynamics, G7 strategy, and Middle East risk and Jefferies’ David Zervos previews a key Fed meeting this week.

That Bell marks the end of regulation TK ringing the closing bell for New York Stock Exchange Marine money doing the honors at the Nasdaq and stocks are higher across the board markets rebounding from Friday's losses on hopes the conflict Between Israel and Iran won't boil over further and that cleared the way for big tech to resume its leadership Meta-jumping as it'll put ads on whatsapp AMD soaring on a Piper Sandler upgrade on bullish expectations for the GPU business. We talked to Lisa Su about Thursday. NVIDIA and Broadcom also gaining oil moving the other way after spiking last week, energy one of the worst performing sectors today. Defense names also pulling back after a recent rally.

Lockheed Martin, Northrop Grumman, and L3 Harris all lower, and we're seeing weakness in consumer staples. All these names hitting 52 week lows today. Brown Foreman, Campbell's, ConAgra, Kraft, Hines. You see Brown Foreman their lowest since 2013, a 13 year low for Campbell's Soup. And U.S. Steel higher as President Trump approves the company's partnership with Nippon Steel. The U.S. government will get a so-called golden share in the company with some unspecified but significant oversight. That's a scorecard on Wall Street.

Welcome to Close About Overtime. We're winners, stay late. I'm John Ford. Morgan Brennan is off today. Ahead, trade deals in focus at the G7. As world leaders meet, can we expect any progress? And the tech trade seems to be back this month. Will it last?

Also, is Fed policy actually in a good place or are labor issues ahead? Well, let's start, though, with the Middle East. As we mentioned, stocks jumped today on hopes the Iran-Israel conflict won't further escalate. Let's get to NBC's Matt Bradley in Tel Aviv with the latest. Matt. Hey, John. We have seen a lot of escalation. We've been seeing back and forth volleys for the fourth day now with a rising death toll. And while we've been seeing that a lot in Iran, more than 200 or nearly 225 people dead, this according to Iranian state media, the death toll here where I am in Israel has also been spiking, actually raising by orders of magnitude each night.

And that is troubling considering the weapons that Israel bring to bear defensively, especially the Iron Dome system and its other plied systems for swatting out these projectiles that Iran is firing. The Arrow system, David's sling, all of these designed to really put a bubble around Israel. And so far, we're still seeing missiles and weapons coming in and inflicting casualties and injuries and destroying buildings. So this is something that a lot of Israelis probably are surprised by. They're used to being in this cocoon of security.

But we're also seeing the Israelis escalating on their attacks in Iran. We've been seeing them now striking Iran's economic lifeline. Oil fields, oil facilities, gas fields. This was something that they haven't done really ever in history. And now it looks as though not just the nuclear program, but also economic assets are now within Israel's crosshairs. Now, this looks set to continue. We heard from the Minister of Defense, Israel Katz. He said today that as long as Iran continues targeting civilians here in Israel, that residents of Tehran, as he said, will pay the price. So we're starting to see a lot of bellicose

rhetoric on both sides. Israel today attacked one of Iran's main state television channels. There was a dramatic moment where we saw an anchor having to step away as debris fell around her as she was giving a broadcast. Now, Benjamin Netanyahu, the prime minister, said that they were attacking propaganda and would continue to attack all of the assets belonging to the dictatorship, as he called it, of Iran. So it looks as though both sides are digging in but for the first time we've seen Iran appealing to the United States and Israel to come to some sort of agreement, to some sort of negotiation that would end the fighting. But Israel has now announced for the past two days that it enjoys air superiority over

Iran's capital of Tehran. So it's yet to be seen whether, given the fact that Israel has so much of the upper hand, and despite the casualties that are growing here in Tel Aviv, in Haifa in the north, and in Jerusalem, whether or not Israel is going to wanna give up the gains that it's already been making. John. All right, a lot of destruction.

Matt, stay safe, thank you. Well, for more on how all of this could impact the markets going forward, let's bring in Wilmington Trust investment advisors, Tony Roth and Innovator ETS Chief Investment Strategist, Tim Urbanovic. Guys, good afternoon. Tim, major averages have been holding steady

despite this geopolitical conflict, S&P around 6,000. I know folks don't wanna panic sell, but should they keep buying here? Well, John, you definitely don't want to panic sell. And really the move higher that we saw today is really textbook for the equity market around these geopolitical events. Our team went back and looked at every major

geopolitical event back to 1986. And what you see is the day the event happens, the VIX spikes an average of 14% equities sell off, but they tend to fight back very quick. You look at returns a week, a month, six months later, they all tend to be positive. In fact, that one month mark, 78% of the time, you see the global equity market positive after these events. So you definitely don't want to panic sell.

Any volatility we'd be looking to add here to global equities. I think if we do take a step back and you look at this conflict, we want to be very clear. We don't think this is going to resolve itself quickly. Israel has been very clear that it wants to take out this threat once and for all. A big piece of that is going to be targeting the energy infrastructure within Iran, which is going to have an impact on energy prices. So for us, we're taking a step back and looking at how do we really inflation proof

our portfolios right now. Tim, I wanna talk to you more about that in a moment, but Tony, first, you've already said that you're seeing impact from tariffs on prices. How much is the energy market likely to continue to see an impact from this conflict overseas, you think? And how much are we going to hear about that from the Fed?

Yeah, John, well, I don't think that you're going to see an awful lot of impact from what's going on in the Middle East on prices. You are seeing, of course, an impact on goods already from tariffs counter to the predominant narrative that we're not seeing anything yet. But when you look at the goods print in the PCE component of inflation, what you see is that you are getting an increase in prices in things like imported foods, toys, photographic

equipment, clothing. And so you're seeing that impact as being more than counteracted though by services. So when you put all that together and you look at the situation with respect to energy, we don't really see Iran closing the Straits of Hormuz because that would probably pull the United States into the war. And right now, and for the foreseeable future, Iran is in a very weak position militarily. And so Iran is looking to shut down this conflict, not exacerbate it. And so we don't really see a scenario here where there's any kind of long-term upward pressure on oil prices, which is indeed why they came back today.

I think that the market got the memo on this scenario now that the dust has sort of settled in the first inning here. And so I think that at $70, even if we stay at this level, it's perfectly fine. And if you look at, for example, where we are in terms of the amount that consumers spend on gasoline at the pump today, it's probably 2.7% of monthly outlays, which is the lowest

it's been in over a decade. So there's even some room to go up a little bit without really pressuring the overall wallet from the consumer, although the consumer has its own problems otherwise. But when you look at what's going on with all those dynamics, not particularly concerned about that part of it.

Yeah, I wonder if that's just because of how much the consumer has to spend on rent nowadays. Tim, on the inflation impact that you are concerned about, how much does energy play into that for you going forward and what should investors do with their portfolios ahead of the budget haggling in Congress as we see that come to a close perhaps? Well John, I definitely think this is gonna have an impact. Energy has ramifications across the entire

CPI basket potentially, but for us this inflation narrative really comes down to what we're seeing out of Washington. The reconciliation package that's likely to be passed in this summer on top of an already $2 trillion deficit, we see that as inflationary in nature. So we're talking to our advisors right now about how do you inflation proof your portfolio. We really think it has a lot to do with leaning

into the things that have worked thus far this year. Stores of value like gold, like Bitcoin that have been very effective thus far. And then also leaning into or shifting away from fixed income and increasing equity exposure where companies have the ability to really pass on those price increases to their end customer. If you can lean into companies that have greater pricing power, that's even better. We see the AI infrastructure stocks as really a perfect play in that area. Demand is off the charts. You look at the last earnings season

from a lot of those mag seven names, it's very clear. Pricing power is very strong. So we think those three areas are really areas that you have to beef up in your portfolio right now to make sure that you're playing offense and defense. Tony, finally, you expect a bond market impact if Republicans get their way in Congress here and ripple effects for stocks?

Well, I guess we're talking about the House Republicans or the Senate Republicans getting their way. So I think that you're going to see the Senate pass a bill, their version of the big, beautiful bill. It's going to be less big and probably less beautiful from the perspective of the administration, but they're going to have a bill bill that's gonna probably result in a trillion and a trillion and a half dollars less deficit accrual over or debt accrual over a decade.

And so what will happen of course is we'll have some kind of reconciliation between the two houses and we'll see whose side we end up closer to. If it's anything remotely like where the house is today, then I think that you have a very inflationary impact to the point of, I apologize, forgot the name of the other guest, I would agree wholeheartedly. But on the other hand, if the Senate is able to effectively pare back that deficit spending, then I don't think that the bond market is going to be particularly perturbed. And I think if you look at where the bond market

is right now, 30 years staying below five, 10 years staying below four and a half, those seem to be the thresholds that set off the alarm bell, if you will, for purchasers of these bonds in the auction markets. I think right now, the market is handicapping that. The Senate will bring down that deficit by a material amount. So we'll just have to see how it plays out. That's Tony Roth on the other end. Tony Roth, thank you.

Well, let's turn now to one of today's big movers, Meta. Shares closing higher after the company announced it will finally bring ads to WhatsApp and will start monetizing WhatsApp's channels through search ads and subscriptions. The move widening the stock performance gap against Google, the long leader in digital ads. Let's bring in Mike Santoli for today's dashboard. Mike? Yeah, John, I always like to keep an eye on two things

that have been related, maybe should be related, but are acting in different ways. That's been the case for a while, meta versus alphabet here. This is a two year year and you see this lead that's widened out over five. It's not quite as dramatic, but it shows you that even news like today,

it's giving investors the green light to kind of further push into Meta, even though they're both feeding off the similar digital ad pie. And obviously we know that in the advent of chat GPT, Alphabet was immediately cast as a potential net loser from the AI revolution.

Now, take a look at the valuations because it tells a similar story. They pretty much had a pretty comparable price earnings ratio based on forward estimates for several years until we got to this divergence recently where you get this premium valuation being placed on Meta and then alphabet now at a pretty significant discount to the overall market and to its history. I'm a little bit hesitant, as anybody should be when you're looking at big tech stocks and saying, now they're cheap,

because sometimes valuation hasn't worked that well. Microsoft looked cheap for a decade before it really founded Second Act. IBM, you have all these stocks that have acted as value traps before they were good value, but I do think it's noteworthy that these two companies

continue to kind of, sort of split in terms of how investors are dealing with their longer term prospects and what they're willing to pay for them. There is a looming AI question mark as far as impact. Of course, both of them are working on it, but the argument I guess would be that OpenAI and some others, the impact would be more on search and how people find information

than it might be on social networks and that kind of social media browsing experience. And so therefore we have less than usual confidence perhaps in the growth trajectories, even in ads of each. Right. I think that's right. And look, I mean, Alphabet suffers from the fact that the source of almost all of its profits throughout its history is one of the greatest businesses of all time.

You're almost never going to improve upon the return dynamics, the secular growth dynamics that they've enjoyed in Search. And therefore, even if they kind of figure things out and can play defense and actually have their own growth initiatives in AI, is it going to dollar for dollar replace what they've had already? I think it's really fascinating to me. I've mentioned it multiple times. I think it's amazing. The market's willing to throw hundreds of billions of dollars onto Tesla's value because of RoboTaxi, Alphabet's got Waymo. Look at what the Netflix multiple is.

They've got YouTube inside of it, right? But the market doesn't wanna pay for the conglomerate that has sort of a play in all these areas, they'd rather go for the pure leverage. Sounds like a breakup argument, but not that you were trying to make one, we'll see you in a bit. Mike Santoli, thanks.

Up next, we've got a live report from the G7 Summit in Canada. President Trump meeting with Prime Minister Carney today as trade deadlines loom. Can we expect any progress there? And we'll talk to the former ambassador to China, Nicholas Burns. We'll look at where we are, where we stand when it comes to China trade deals and the

role they may play in the Iran-Israel conflict. Overtime's back in two. Welcome back to Overtime. The G7 Summit is taking place today with both tariff deadlines and the Israel-Iran conflict looming over those proceedings. Let's get to Megan Casella live in Banff, Alberta, Canada. Megan. Hey, John, those are absolutely the top two issues dominating discussions here.

And just in the last hour or so, some news to bring you, a White House official officially confirming to NBC News that President Trump will not be signing on to any joint G7 statement that urges a de-escalation of tensions between Israel and Iran. There had been reports earlier today that while the G7 leaders aren't planning an overarching joint statement because of so many disagreements between them that we might see issue specific statements and that this could be one of them on Israel and Iran. The president now making clear through this official that he will not be part of any statement

that urges that de-escalation. But the other big topic here, of course, is trade and tariffs, sort of the backdrop to every conversation that's been going on. And take a look, we can pull up here the size of the trade deficits with all of the G7 countries. And what you'll notice when you do see these is that all of these trade deficits with all of the G7 countries. And what you'll notice when you do see these is that all of these are deficits except for just one surplus and that's the UK. And you'll remember, John, that only the UK of all of these countries is the only one with a trade framework in place to potentially avoid higher tariffs taking effect next month.

Now we do know the UK Prime Minister Keir Starmer and President Trump are set to sit down together in the next hour sometime. We expect to see that on camera and we'll bring month. Now we do know the UK Prime Minister Keir Starmer and President Trump are set to sit down together in the next hour sometime. We expect to see that on camera and we'll bring that to you when we have it. But remember they did announce this framework about a month ago in the Oval Office Starmer on speakerphone and some of the details of that agreement we got at the time were somewhat hazy and didn't go too much further than what we already knew. It was about increased market access for things like US beef and ethanol. The UK committing to buy $10 billion worth of Boeing products.

Quota is instead of tariffs on UK steel and aluminum, but the US was maintaining that 10% baseline tariff. At the time, John, that that was announced, I was talking with a British official who was asked if he was disappointed by that deal. And he said at the time, and I'm quoting here, if this were to stop here, I guess I would be disappointed, but I think there is a genuine appetite for more.

That's what we'll be watching for ahead of this bilateral spray. What is the appetite for more? How much further is the US willing to go? Will that 10% baseline tariff fall away? There is some reporting on the wires now that the two leaders in this bilateral spray are expected to sign some sort of proclamation

Furthering that trade deal. We don't know exactly what it will entail yet But that's what we watching for here John in the next hour I have a feeling other countries will be watching as well since that was first out of the gate Megan. Thank you Well, let's talk more trade and rising geopolitical tensions joining me now is Ambassador Nicholas Burns, former U.S. Ambassador to China. He is currently co-chair of the Aspen Strategy Group and a professor at the Harvard Kennedy School. Ambassador, thanks for joining me. So we just heard from Megan Kisala,

the president is not seeking de-escalation between Israel and Iran. At the same time, the U.S. seems to be getting a lot of its goals addressed through some unusually aggressive means in Iran right now. What's your read? My read is that obviously the Israelis had a case to be made that Iran had turned away from negotiations and was speeding towards higher enrichment.

So the Israelis did, I think, what they had to do, and that is to begin a process to convince the Iranians to come back to the table. The only question I think now for the Israelis, the biggest question is, can they do enough damage to Iran's nuclear facilities in order to make this all worth it? Because it could be a very sustained conflict if that's not the case. But certainly I think the United States has been right, President Trump has been right to support the Israelis so far. Whether or not the U.S.

will push for a cessation of fighting, there's no indication they're going to do it right now. And your reporter in Alberta has confirmed that the U.S. is not going to join a joint statement. Ambassador, what would be the reason for Israel to stop at this point? Is it a certain level of negotiation, or really is it just a question of wanting to do a certain amount of confirmed damage

to Iranian infrastructure, and then perhaps talking? The problem for several decades now has been Iran's attempt to seek a nuclear weapons capability. We have tried, the United States, the Europeans, even Russian and China in past decades, to convince the Iranians to stand down. They did not.

There's been two decades of negotiations. I was part of that in the administration of President George W. Bush, and those negotiations have not succeeded. Sanctions have not succeeded. And when the Iranians essentially walked away from the negotiations with the United States last week, and then the United Nations issued a report condemning Iran's inability to live by its commitments. The Israelis obviously felt they had no choice but to take military action. And the question is, can they destroy Iran's nuclear facilities to such an extent that Iran could not enrich uranium further and go for nuclear

capability. Ambassador, it seems the factor here, perhaps, that the market is watching is whether not just this escalates, because it has been escalating, but it seems to be contained between Israel and Iran. Is there a factor that you expect would cause this to bubble over outside of the conflict between those two countries? At this point I don't think so. No it seems it's a conflict limited to these two countries. It is an intense conflict. It's one of the most serious wars that the Middle East has seen by two of the strongest

countries in the Middle East. There's no question about it. President Trump has been very clear that the United States is going to stay out of this, stay out of the fighting for instance, although of course we are supporting, I think quite rightly, providing defensive support for the Israelis in terms of air defense. What role do you expect China to take, given that it gets so much energy resource from Iran and has already spoken out against what Israel is doing there? Chinese are taking a very cynical position as they normally do on issues concerning the middle east

they are supporting iran they've been highly critical of israel over the last four or five days there of course the major purchaser of iranian oil exports at a discounted basis and they also have a partnership with iran and russia in some cases with north korea which is very much an anti u s and anti also have a partnership with Iran and Russia, in some cases with North Korea, which is very much an anti-US and anti-Western democracy partnership.

So I don't think the Chinese are gonna leave Iran's side, but neither do I think that China's gonna step forward in terms of what a normal great power would do and roll up its sleeves and try to convince the Iranians to stand down. In fact, some of the press reporting today is that Iran is looking for a way to end the fighting but working actually through Arab countries, not China, to do so. Interesting.

Ambassador Nicholas Burns, thank you. Pleasure. Thank you. Well, coming up on Overtime, stocks rallying back today, setting aside geopolitical tensions. Next item for the markets to worry about the Fed meeting What will chair Powell do and say on Wednesday David Zervos of Jeffrey's gonna join me right ahead? Welcome back to overtime stocks jumping on hopes the conflict between Iran and Israel will remain contained the S&P 500 up nearly 1%

Nasdaq up one and a half AMD the biggest gainer on the NASDAQ 100, getting an upgrade from Piper Sandler on hopes for its GPU business. Casino stocks also higher. MGM Resorts up 8%. It's Bet MGM Joint Venture with Intain, boosting its 2025 guidance. And shares of Surrupta though,

losing nearly half their value, down 42% today. A second patient died after treatment with the company's gene therapy for Duchenne muscular dystrophy. Well, time for a CNBC News update with Kate Rogers. Kate. Hi, John. As the conflict between Israel and Iran continues to rage, NBC News reporting the aircraft carrier USS Nimitz and its attending ships in Asia are being sent to the Middle

East quote without delay and joining the USS Carl Vinson. Separately other ships including Navy destroyers with ballistic missile defense capabilities are also headed to the region. A federal judge has ruled the Trump administration's cuts to National Institutes of Health grants are quote void and illegal and reinstated grants for which organizations and states had sued. The judge said today the agency violated federal law when it canceled more than $1 billion in research grants because they appear to be connected to diversity, equity and inclusion initiatives.

And with just 30 minutes left before liftoff, United Launch Alliance today scrubbed the second flight carrying a batch of Amazon's Project Cooper internet satellites. ULA said there was an issue with the rocket booster and that it will give a new launch date at a later point. Now in April Amazon successfully sent up 27 internet satellites. John, back over to you. Okay, thank you. Well the NASDAQ leading the way back today now up more than 13% in the second quarter. On track for its best quarter in more than two years, is tech leadership back?

That's coming up next on Overtime. Welcome back, we're halfway through June, and tech has taken a lead, with the NASDAQ beating the major averages this month. Names like Microsoft, IBM, Netflix, Broadcom, and Palantir have all hit new highs. So, can tech's momentum continue? Well joining me now is T. Rowe Price Portfolio Manager Tony Wong.

Tony, good to see you. So it seems like AI is both a boost and a drag, depending on the company you're looking at, even in big tech in this market. Certainly a boost for the likes of Nvidia, perhaps a drag for the likes of Alphabet with Google search perhaps coming under threat. How do you expect that to balance out, since a lot of the benefit arguably is already priced into Nvidia,

but we don't know what the disruption will be and how soon? Yeah, well, I think that's the debate that's going on is that, and the incumbent tech companies essentially benefit from AI, or is this a disrupting force? And so, you know, I think about, you know, investing in the lens of an essentially benefit from AI, or is it just a disrupting force? I think about investing in the lens of an S-curve, like where is the S-curve increasing in adoption,

the steepest parts? I think there's definitely areas where you think about Google Search, everybody does have Google Search, so they have more share to lose just optically. There's a lot of challenges right now to the field. You've got open AI that is perhaps changing the next generation's interaction with finding things on the Internet.

You look at the younger generation, I think a lot of them are using open AI as their mainstays. So I think about adoption curves and where are we in the different tech cycles, but I don't think you can count on Google. They have phenomenal technology and they have a lot of strong distribution to defend their share. How soon before agents really become a pretty clear and viable alternative to hiring people

able to reliably, consistently get tasks done across the breadth of enterprise software? get tasks done across the breadth of enterprise software? I think it'll be one of those where it'll seem like a really slow start, but then adoption will increase really rapidly once things start getting plugged in enterprises, once enterprises have the data that's connected, and I do think it does take technical chops and courage among enterprises to do that. But I think that once one company in that industry does it,

the rest have to fall soon. Otherwise, essentially they'll have a different cost structure that puts them at a disadvantage. I think about it as something that will happen probably pretty quickly, but maybe not happen tomorrow or next few months. You've got ServiceNow, you've got Salesforce, you've got Microsoft, who all seem to be in that category of likely large suspects to figure it out.

How far along are they? Who's ahead? I would say you got to talk about open AI in that group. So it's not just the incumbent software companies that are rolling out AI agents, but it's also like OpenAI and Propic. And I think that when you think about the cost of delivery, that's what's going to be really key is that I think right now the incumbent software companies are saying that

you're going to save so much versus seed-based model, but you have to compare what the AI's new startups are doing and delivering their costs that could be substantially lower. All right. Yeah. I mean, we'll see how profitably they can deliver that. They don't have to worry about it for a while, I guess, with all the money flowing in. Tony Wong, thank you.

Thanks. Rubbing salt in the wound. Up next, why the Senate and House could be in for a major fight over the salt cap and threaten the future of President Trump's budget bill. Plus, Jeffries Chief Market Strategist David Zervos with his outlook for the Fed's meeting this week. Overtime is back in two. Welcome back to Overtime. The battle over President Trump's budget bill

is getting salty in the Senate, where lawmakers are threatening to save money by pulling back on the compromise over the SALT tax and risk a revolution, a revolt anyway, among blue state House members. Emily Wilkins has the latest details, Emily. Hey John, well yeah, we are really waiting right now. The Senate is expected any moment to release their version

of that major Trump tax package, but House lawmakers are already warning that it's gonna fail if the Senate makes changes to key agreements and like you said, that big one is solved, the state and local cap. Remember, it was $40,000 in the House version of the bill that passed the other month, but senators have now been saying for weeks,

telling me and other reporters that they're gonna try for a lower cap in order to find some savings in the bill, savings they can use to extend business tax breaks, other things they want to do. Now that has been met with fierce pushback from a group of Republicans from high tax states who say it's no salt, no deal. Congressman Mike Lawler said in a statement today that the agreement was a $4,000 cap and quote, I will not accept a penny less. He says if the Senate reduces the salt number, I will vote no and the bill will fail in the house.

And Lawler's not the only one, at least three other Republicans this afternoon have also said that 40,000 cap needs to stay in place to get their support. Now the Senate bill is expected to provide a lot of details but not everything. We've been told that some contentious issues, potentially salt,

might actually have just placeholder text for now, while senators continue working to get a bill that can actually pass both chambers, and John, senators are returning to DC right now. We know they're meeting later this evening, and we're hoping to get some more details about where everyone stands. Now, would this just mean,

if they can't agree on this initially that the bill has to go back and forth more times than usual and this process just drags out longer? So the hope, because lawmakers do want to try and get this done by July 4th, although some of them are mentioning now that that's not really a realistic timeline,

they don't want to have the bill have to pass the Senate, pass the House, pass the Senate, pass the House. The hope is that they can kind of come together with leadership come up with some sort of agreement and that once the Senate passes It's something that the house can take up That's why you're seeing some of this horse trading and negotiating going on in public right now as house members are warning their Senate counterparts what to do or not to do to ensure that the bill will actually pass a lot of warnings in Washington, Emily Thank you to do to ensure that the bill will actually pass. A lot of warnings in Washington. Emily, thank you. Up next, Mike Santoli looks at the mixed economic messages the Fed is dealing with right now

and how it might impact their rate decision on Wednesday. Plus, Jefferies Chief Market Strategist David Zervos on whether he thinks a cut is in the works. We'll be right back. The Fed meeting begins tomorrow, and although members say their policy is in a good place, two economic indicators could complicate the Fed's rate decision. Let's bring back Mike Santoli for more. Mike? Yeah, John, I mean, Fed officials no doubt will try to dig in with their view that they

have the luxury of patience. There's no emergency to respond to either on the inflation side or the economic growth side. But there is a line of looking at the hard data that says maybe the growth picture looks a little bit more vulnerable and maybe in the absence of a tariff threat to inflation, they may be leaning more toward easing. This is from Morgan Stanley. In the blue here, it's the market implied number of rate cuts by September.

So how many rate cuts right now the bond market is pricing? And it's only one quarter point cut at this time by the September meeting. At the same time, the labor market surprise index has kind of given way a little bit here. It's softened up a fair bit. And obviously it's diverged a little bit from the expectations what the Fed might do.

So that's just one little data point to say that maybe the labor market is not as solid as the headline Fed might do. So that's just one little data point to say that maybe the labor market is not as solid as the headline numbers might suggest. And then in terms of the stock market's implied message about consumer goods in particular, it's showing you the relative performance of consumer goods retailers and consumer goods sellers in general has been pretty poor.

It looks like late cycle. This is not the stock market saying that consumers are willing and able to absorb whatever price increases might come through for tariffs. So again, it might be a net dovish signal about the economy. We'll see if that kind of registers in the ears of the Fed. And that's not an immediate action, but more of a hinting toward action. What kinds of language, if you're watching specific language, would you be watching or traders watching for from the Fed to imply that maybe they're getting a little less hawkish? I would say, well, first of all, if they say that

the balance of risks is now skewed more toward the labor market weakness than to inflation, because right now they're saying they look roughly in balance at this point. That would be one signal. And then just how they characterize what their treatment of any short-term price increases from tariffs might be.

You know, there's this, the line of thought that maybe they should generally look through the statistical effect of tariff increases as being one time. I don't think we're gonna get anything decisive along these fronts, but whatever incrementally looks like is kind of the way that the thinking is tacking right now is probably useful. But again, I do think they're going to really want to convey that wait and see

message until we have policy clarity. Well, likely. Mike, thanks. Mike Santoli. Now let's bring in David Zervos of Jeffries, who's hoping for a more dovish Fed this week. David, do you think we're going to get one? You know, I think, John, they're going to spin a little dovish, or at least in the press conference, I think there's a little dovishness. The narrative that Chair Powell has pushed forward kind of hasn't played out, or the worst case scenario of

what he was worried about hasn't played out. We've seen the inflation data come out better. Inflation expectations, which are probably a better leading indicator, have not really budged, even though we've had a pretty significant change in sentiment on tariffs and even now with energy prices a little bit higher. So I think this is a very short period of time where the Fed has a window to stay in that hawkish mode, but it's closing fast.

Yeah, speaking of windows, we've got those tariff windows that are still, you know, we're going to see what's going to happen with those in just a few weeks. No incentive, it seems to me, for the Fed to act not only before that shift But before we see what the impact is of whatever tariffs come on Well, I think that's right John, but there's so many variables here I think the administration and this I think was a mistake on many people's part in April The administration is actually saying that they want to try to get more cooperative trade. They want to try to open up markets.

We've heard the president say that we want to open China. We want fair but even more balanced trade. And that's not a negative. That's a positive. That would be freer trade in many models and in many ways of thinking about this. If that's the goal, I'm not sure why there isn't some probability weight in the Fed's thinking on sort of a more positive outcome from these trade negotiations, whereby we have more openness.

The U.S. is sending more products abroad, and maybe we have more investment and a sort of more balanced currency policy coming from some of our trading partners. HEDGES Do you think this Middle East conflict between Israel and Iran and the resulting energy market volatility plays into the Fed's commentary at all? KELLEY I'm sure they'll talk about it. I'm sure it will be an added risk. It's more of a growth-slowing but temporary inflation story.

So net-net, I'm not sure that it moves the policy needle short-term unless something is more sustained. But I would say they're going to take quite a bit of comfort, as the market has, with the idea that, you know, we're really only up a couple bucks in oil since these missiles started flying after a much larger rise to begin with. So the market's shrugging this off. The S&P's largely unchanged since this occurred. And bond yields haven't really moved too much.

So I think they're going to be quite comforted by the market not really pricing, and certainly any changes in their expectations on the outlook for equities. And even the fact that the energy markets couldn't sustain much of a rally on this is I think very surprising to many and certainly will be a Reason for them to maybe be somewhat dismissive of the risks. Do you think the same as? Usual is priced in to the markets right now meaning the S&P as far as the language from the Fed. I Think the market actually Probably expects Jay to be a little bit more hawkish. He's been quite confrontational in speeches during the post-April 2nd period, talking much more about the risks of inflation and the risk that the tariff feedback is quite

negative on the Fed's goals. That hasn't really happened. So I think the market has kind of got their sort of thinking that he's going to be a little bit confrontational. I actually think he may put a little olive branch out there. Let's see. You know, he put an olive branch out earlier this year by NICCQT on the Treasury side. That was, I think, a sort of at least something positive for the administration to chew on.

And then, of course, April 2 hit, and we saw a very hawkish tone develop from both the chairman and I think most people on the committee. So given that nothing much has happened since April 2nd to really corroborate their views or their worries, I think maybe a little bit of a pullback is necessary on the hawkish rhetoric, and I don't think the market's necessarily prepared for that. So I'm looking for a good day on Wednesday. Okay.

And perhaps most importantly, you're not looking for a bad day because you think most of the bad, potential bad news is already priced in? So I would say this, John, and this is important. It's something we've been talking about with a lot of our clients. I think there was a huge de-risking post April 2nd. I think a lot of emotions were running very high.

People got very nervous. We got very significant pullback. We saw Treasuries and the dollar move in unusual correlation patterns to equities, sort of a coordinated dollar rate and equity sell-off. I think a lot of people derisked, and I'm not sure that many re-risked. I think people will be looking for reasons to buy dips. I think people need to get back into this market and they don't have it. I think the positioning, both in the fixed income and the equity markets is light.

And I think that that means that pullbacks are gonna be shallow in any sell-offs that we get. And I think we saw that with what happened in this recent risk off move related to the Israel-Iran conflict. It didn't last long. That gives me quite a bit of confidence that there needs to be some re-risking as we go into the summer period.

All right. Investors on your marks. David Zervos, thank you. Always a pleasure, John. Up next, a thing of beauty. Find out why a pair of beauty stocks make up two of today's biggest winners on Wall Street. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back to Overtime. Beauty stocks Estee Lauder and Cody making pretty big moves higher today.

Courtney Reagan is here. Why are they rallying? Yes, Estee Lauder actually leading the S&P 500. So both these stocks, John, moving on unconfirmed reports and or speculation. So the son of Estee Lauder's founders, Leonard Lauder, he died on Saturday at 92 years old. At the time of his death, he was the company's chairman emeritus

and the most senior family member involved in the Cosmetics company. Now three analysts have told me shares are higher today because Leonard Lauder's death opens the possibility of a sale or takeout, or maybe just some general change in the direction or philosophy

of the company. Now, the most recent proxy does note that the family controls directly or indirectly about 84% of outstanding voting power. His son, William Lauder, is the current board chair. Leonard Lauder's brother is chairman at the Clinique business. His son, Gary, is on the board along

with his grand niece, Jane. Now, the company has had a rough go. As of late. It's undergoing a restructuring. Its quarterly results showed sales fell 10% with all categories and geographies lower year over year operating margin also fell sharply from 13.5% to 8.6%. Still shares closing up 11% again, potentially on speculation that some change could be coming separately. Beauty Company Cody, so its shares gained about 7% after trade publication, WWD reported, citing sources, that Kody is exploring a sale, and that could potentially mean a separation of its prestige and consumer divisions.

Though talks, the report says, are in the early stages. Now, Kody has no comment on the speculation of this report. Estee Lauder and I responded to my request for comment when I reached out. Courtney, why is there so much M&A in beauty these days and how does the influencer effect go into the mix? Yeah, I mean look, I think beauty was the strongest category and retailer subcategory for a very, very long time. And then we started to see some bumps in the road.

I mean, even Ultata which is a beauty retailer. So it aggregates the brands that doesn't own the brands per se but was just seeing phenomenal same-store sales. And I think everything that goes up that high at some point has to have some level of a pullback. Influencers, extremely, extremely important to all of these beauty brands and when there was fear that TikTok may be closing or shutting down at least in its current form in the United States, we actually did see some bumps

in the share prices of some of these cosmetic companies because so much of their marketing messages are getting out.