Closing Bell - Closing Bell Overtime: Title: Global Mining Giant BHP on Global Economy; Jim Grant Previews Jackson Hole 8/20/25

Episode Date: August 20, 2025

Navigate today's market landscape with Kristina Partsinevelos setting the market theme while Rick Santelli breaks down critical bond market movements. Scott Wren from Wells Fargo Investment Institute and Brent Schutte from Northwestern Mutual share their global market outlook. BHP CEO Mike Henry discusses earnings, tariffs impact on the global economy and more. Legendary bond observer Jim Grant weighs in on the bond market ahead of Jackson Hole. Plus, CFRA's Arun Sundaram previews Walmart's upcoming earnings.

Well, that's standard regulation. NYSE, Texas. We're going to closing about the New York Stock Exchange. Link Home Holdings doing the honors at the NASDAQ. And stocks finishing mixed today with the Dow, the only index posting gains, albeit barely. The NASDAQ once again the laggard, but closing off the lows as the rotation out of high-flying tech names continues. The composites now down four of the past five sessions. The S&P closing lower for the fourth straight day as well, though largely range-bound, as tech lost some steam. some of the safe haven sectors outperforms, staples, healthcare, real estate, helping to lead

those gains. Oil moving higher today as well after both the EIA and API reported a surprise drop in U.S. crude inventories, also in gasoline inventories today. Brent also seeing a move of more than 1% higher. That helped energy stocks too. A reversal in the crypto space today, Bitcoin and ether, both moving higher with ether jumping more than 3%. It is still down more than 8% in the past week, though. That is the scorecard on Wall Street. Welcome to closing bell overtime. I'm Morgan Brennan. John Ford is off today. Well, the Fed and the bond market. We're going to talk to Wall Street legend Jim Grant about what this Friday's Jackson Whole speech by Fed Chair Powell means for the markets and for rates and why there are plenty of reasons to raise rates right now.

Plus, a commodities check with the CEO of BHP. This is the world's largest minor. We're going to dig into its latest earnings, the outlook for copper. His visit just earlier this week with President Trump on the future of American production of copper and is targets fall, Walmart's gain. We will get you set up for those results that come tomorrow morning with that stock of 13% this year. The tech sell-off continued today, though, as those recent high flyers continue to lose momentum. Christina Parts Nevelas is looking at some of those moves for us from the NASDAQ. Hi, Christina. Hi, Morgan. Well, you mentioned the NASDAQ closed off its worst. levels. Once again, it's all the Mag 7 AI names really finishing in the red. Super Micro,

AMD, Nvidia, Broadcom all declined. Infotech was actually the worst performing sector this week. The first time we've seen that since April's big sell-off, remember that? There's definitely debate brewing on Wall Street about this tech sell-off. Is it AI fatigue or is it just investors rotating into forgotten names? But the fatigue case definitely has ammunition. For example, Palantir has run up, what, over 106% this year, while Super Micro, Oracle, Oracle, are are both nearly 40% higher. Chip names, Micron, KLA, Lam Research, AMD, all up over 35, 40% year to date.

But again, they closed lower today. Analog devices was the only chip outlier, closing higher after stronger guidance than peers like Texas instruments. But you have opening ICEO Sam Altman recently warning that we're in an AI bubble, and a new MIT study shows 95% of companies aren't getting returns on their generative AI investments,

both of those just adding to that fatigue around A.I. But Mizzouho and a few others offer a different take. When people take profits in the debt of August, it creates dislocations in volatile stocks. The problem is everyone seems to own the same core basket. Nvidia, AMD, super micro, let's even throw core weave in the mix. So when they sell it looks pretty ugly. Today's action, less volatile though, does remind us how reliant the market has really become on tech and AI. The rotation, though, suggests maybe investors are just questioning concentration bets

and looking for opportunities in areas that have been left behind. Morgan. All right. Christina Parts and Avelas, thank you. Let's turn out to the bond market with yields holding steady ahead of Fed Chair Powell's speech on Friday. Rick Santelli joins us from the CME with more. Hi, Rick. Hi. Well, you know what? Five, six, seven, tens, 20s, 30s, they did hold steady. One thing that didn't were two-year notes. The most sensitive maturity on the curve with regard to the Fed. Look at a 24-hour chart. What happened when the minutes came out? Yields? moved higher. They were definitely hawkish minutes because the feds worried about inflation and the markets worried about the labor market. And if you look at everything in the context of that job, job, jobs report on the first few days of August, it explains everything. We're having a showdown right now. Let's look at two-year note yields since the jobs report. You see how yields have fallen and yet we had two warm CPI, hot PPI.

I don't see any bumps. there. Now let's move to the dollar index. What happens when interest rates go down? The dollar goes down, right? The market wants the Fed to ease. Over 80%. Look at the dollar since the jobs report. It definitely hasn't rebounded despite the fact that inflation was warmer and that's all the Fed wants to talk about. Finally, let's look at the Fed futures themselves. This is the December contract. When it goes higher, it puts in more easing. And there you. you go. That's after the jobs report. Fed talks inflation, markets concentrating on jobs. Less than a month, we have the Fed meeting, and we have another jobs report. 80%. The market

knows that the Fed doesn't like to disappoint. So the key here is a couple of days before that meeting, if we're still solidly in the easing camp, you can count on an ease. Why? Because that's my opinion, and I think I'll be right on it. Morgan, back to you. Rick Santelli. Thank you. Well, let's get back to the markets overall. All major averages are in the red so far this week. This comes as tech continues to struggle, and investors are awaiting more from FedChair Powell on Friday. So to give you an idea of the recent rotation we've seen, the three worst performing stocks in the Dow this year are the three that are up the most in the last week. Joining us now, Brent Shudy from Northwestern Mutual Wealth Management and Scott Wren from Wells Fargo Investment Institute. Great to have you both here. Brent, I'll kick this off with you. Does this rotation have legs?

I think so longer term. So I'm not for sure in the near term, but longer term, you have to look at small cap, for example, where there's been some rotation. It trades at the second cheapest valuation the last 25 years. And that time period was 2000. And if you look at the return since then, even including the last six years of large cap outperformance, small caps outperformed by 1.8% annualized. And so to me, I think investors need to look for other opportunities, especially given the uncertainty that's out there. and the reality that we don't know which path is forward. So Rick mentioned inflation and unemployment. It's not often that I can come on a show and talk about higher probabilities for both inflation and potentially labor market contraction.

And that's where I think the tails are wider. And so that argues more for diversification, not concentration. Okay. Scott, how do you see this market right now? I know you continue to like large caps. Yeah, Morgan, I think really you hit the nail on the head when you use the terms high flyer and momentum. And, you know, high-flying momentum stocks, they don't just keep going up every day. It seems like it may be with the group that's led the market higher.

But I think it was interesting yesterday that the S&P equal-weighted index was actually up while the S&P was down. So I think this is a, you know, a very concentrated sell-off. I think that there was a lot of money on these names. This speech on Friday is a big deal for these tech stocks. Hopefully we're going to get a hint, a good hint, one way or the other, as far as what the Fed's going to do in September. But, you know, clearly, you know, Rick said it, the market, various indicators reflect it. But the market expects the Fed to ease, you know, personally, I think 84% probability of a cut is too high. But, you know, we'll see.

I hate to think that the most powerful central bank in the world is going to make a rate cut decision or possibly several rate cut decisions based on one CPI report and one employment report. I mean, you know, they need to be looking at, you know, much further out than that, but it doesn't seem like that's the case. Okay. Brent, what do you think? Because the market is pricing in a very high probability of a cut in September, albeit maybe 25 basis points, not a jumbo cut of 50. And Almanac trader saying that the small cap Labor Day rally is going to be fueled by these Fed cut expectations. You obviously they like small caps here. Is that why? Potentially. I mean, even if there is with potential contraction, think about the opposite

side of that where the economy actually broadens back out because of rate cuts. And so one way or the other, if you stretch your valuation or your stretch your time rise, and I think valuation points to it, look, you can tell me what the jobs data is on September, on September second, and I'll tell you if the Fed cuts rates or not. I think the market's going to be looking at Powell's speech because the Fed was erring on the side, most participants thinking that higher inflation was a bigger risk. That was before we got those revisions. And so to me, I think people are going to be looking on Friday for any change in that tone based upon those jobs revisions that came out. Scott, what specifically do you like here, sector-wise?

And how much of that is U.S. versus the rest of the world? Well, Morgan, for sure, we're leaning toward U.S. over international. We've been actually trimming money from small caps. You know, we've been underweight for a while. Small caps kept pace with the S&P 500 for a few months period. We think that's overdone. So we're underweight small caps. We're trimming money there. We're trimming money from the consumer discretionary sector because let's face it, two stocks really run that sector. We think they're fairly valued at the very least. What we're trying to buy here is financials. We like utilities. We like technology too, but, you know, this pullback here doesn't surprise us. And, you know, I mean, if the tech sector pulled back a few percent, five percent, eight percent or something like that, I think we'd have, we'd certainly have some interest there, but we're trying to be patient here. We took some movement, we moved some money into stocks in April when the market came off.

We'd like to see another pullback because really by the end of this year, I think stocks probably will be pretty close to where they are right now, but the end of next year we're looking for $7,000. So we definitely want to buy on pullbacks. Stocks aren't cheap. We'll see what happens with the Fed. I think that's going to give us an opportunity possibly. Okay. Sounds like we're going to have a very eventful potentially second half of this week as we do read those tea leaves from Powell and everybody else over there in Jackson Hole. All right, Scott Wren, Brent and Shudy, thank you for joining me. Well, let's turn today's big mover target.

The stock tumbling after reporting sales and traffic declines year over year announcing a major executive shakeup. CEO Brian Cornell will step down after 11 years at the helm. He'll become executive chair of the board of directors, current chief operating officer and 20-year veteran Michael Fidelke, will take his place on February 1st, 2026. Morgan Stanley points out that an internal hire could create uncertainty around the durability of the company's earnings base, given the market's perception that Target needs to revamp. D.A. Davidson, with a similar takeaway, saying that the announcement lacks the, quote, pop that an external hire would have given. Now, he is already looking forward to telling investors, this incoming CEO, that he wants to reestablish targets reputation and close, provide a better customer experience, better utilized technology. The stock's up more than 60% under Cornell's tenure, but it is down 26% for the year,

and you could see it closed down another 6% today. Well ahead. The CEO of Mining Giant BHP, the company reporting full-year profit fell to the lowest level in five years. as softer Chinese demand pressured prices, but we're going to discuss that, his meeting with President Trump yesterday. Plus, Walmart has outperformed its big competitors so far this year. What do investors need to hear from earnings tomorrow to keep the momentum going? We've got your preview and the trade ahead. Overtimes back in two. Welcome back. Hertz moving higher today after announcing it will start selling pre-owned cars on Amazon autos.

The company is saying the goal is to reimagine the car buying experience and, quote, meet customers where they are, whether online or in person, Hertz entered bankruptcy during COVID-19, but is turning around. The first quarter of 2025 marked its strongest quarter ever for retail vehicle sales. The rollout is currently limited to customers who live within 75 miles of the four initial cities, which are Dallas, Houston, Los Angeles, and Seattle. The move pushing shares of Carvana lower today. Also, Avis on this news, but you just saw a few moments ago on your chart. It hurts up about 7%. Well, head on overtime. Could the recent move from momentum to not, to nomentum, be setting the stage for a broader index pullback?

Mike Santoli's going to look into that next. Plus, is there a case to be made for raising rates rather than cutting them? Jim Grant joins us. He gives us four reasons why the market may be wrong on the need for cuts. Stay with us. Welcome back to overtime. Let's turn to this week's broader reversal in the momentum trade. Could it bring a broader index pullback?

Well, Senior Markets commentator Mike Santoli is looking into that. Joins us now. Hi, Mike. Yeah, Morgan, so far, the broader market is managing to absorb this real, significant unwind in that momentum, high beta sector of the market. Here's one way to measure that. This ETF is, it tracks the IBD-50. That's Investors Business Daily, the long-time newspaper that looks for growth stocks with great technical patterns. And a lot of times that translates into some of the most crowded momentum stocks. This is, they show lots of sales and earnings momentum,

as well as strong technical momentum. And so you see a couple of times in the past year really got to these extremes. One was at the February peak. in the S&P 500 before the tariff panic. That was the momentum on wind there. And then you see basically an equivalent amount of air between the equal-weighted S&P and this sector of the market. Doesn't mean you have to go all the way down.

Doesn't mean you're at the start of a nasty correction, but you have the ingredients there for some of these flows to turn a little bit more disorderly if things break that direction. Now take a look at another piece of how the scene was set for this type of move. So this is from Goldman Sachs's Hedge Fund,

research area. What this is showing is the difference between how far the median stock in the market is from its 52 week high, subtracted from how far the S&P is from the high. Remember, we're at S&P high just a few days ago. The median stock was more than 10% below its own high. And you see, that's relatively extreme to have that weak breath within an otherwise strong market. So how does that take care of itself? How does the market try to correct for that? well, you'd sell the big index winners or the index itself and maybe buy some of the lagger sucks. That's what's been going on for a few days. Not every one of these episodes causes the overall market to spill, but that's the moment we're in right now, Morgan. Yeah, I guess along

these lines, I was reading that the performance of the equal weight S&P 500 compared to the cap-weight index, at least before this week, had dropped to its weakest in 22 years, and that the previous extremes of concentration came with a bursting of the dot-com bubble in 2000. and the market crises of 2008 and then the pandemic of 2020. So is there anything to be read into those moments where we've seen this type of concentration in the past or now? Mostly what there is to be read is that ultimately kind of the rubber band snaps back. But to me, it doesn't have to completely break. It doesn't have to, you know, it doesn't have to rupture.

And that's why, you know, you want to be careful here of thinking that there's something big picture consequential. Last July, we had one of these episodes. And so the market tries to, again, relieve these extremes through rotation, through reallocation, as opposed to just, you know, an exit. And, you know, today the afternoon, there was a lot less urgent rotation. Maybe it was just sort covering in the beat up stuff like crypto stocks and Pallantier and the rest. But we'll have to wait to tomorrow to see if that's the case. Okay. Mike Santoli, we'll see you later this hour.

Thank you. Well, global mining giant BHP announcing its latest results earlier this week. Annual profit falling to its lowest levels in five years after sluggish demand. from China, but the company is saying that it expects overall demand for commodities to remain resilient. BHP's main products are iron ore, coal, copper. They're also working on a big potash development up in Canada. Copper represents nearly half of its cash earnings and volume has grown almost 30 percent over the last three years. Separately, CEO Mike Henry meeting with the President Trump at the White House yesterday, along with Rio Tinto executives to discuss a delayed copper mine

project in Arizona. So joining me now in an exclusive interview. interview is Mike Henry, B.HP's CEO. Mike, it's great to have you back on the show. Welcome. Great to be here. So let's start right there because you did just put out your fiscal 2025 results. Profit came in a little softer than expected by the street, but you did pay a bigger than expected dividend, and you did say that global demand for commodities remains resilient. Why is that the case? Where are you seeing it? Look, so we're seeing pretty strong growth in China. They came in over 5% for the first half, and expectations are that they're going to achieve their 5% growth target for the full year.

Growth in India, of course, remains a bright spot as well. So underlying demand for our commodities remain relatively healthy, certainly in the case of steelmaking raw materials and in copper. But the real story here in our earnings is how well the underlying business is done. Unit costs of production down by almost 5% versus headline inflation of 3%. And we've achieved record production in both our copper business, where we achieved 2 million tons of copper production for the year for the first time, and in our flagship iron our business in Australia.

The last time you and I spoke back in February, you were talking about green shoots in China. Does that continue then? Well, it certainly does in the sense that there's segments of the economy in China that are performing quite strongly. Infrastructure being one of them, automotive and other. And these are all metals-intensive sectors of the economy, and so we're pretty pleased with how those are going.

And the economy there remains on track in spite of some of the headwinds. How are trade and tariffs factoring into what you're seeing? for this demand for commodities and where they're flowing to, where the demand is coming from across the world. So it's certainly giving rise to more uncertainty, but at this point in time, it's not having a detrimental impact on underlying demand for the commodities that BHP produces. It's something that we're keeping a really close eye on, of course, is to where it may stimulate further investment in certain jurisdictions or may impede trade flows in others.

So let's talk about some of those investments, especially here in the U.S., especially where copper is concerned with this resolution project that you're working on and have been working on for more than a decade with your partner in this Rio Tinto. Is this finally close to the beginning of being developed? We really hope so. This is one of the largest undeveloped copper deposits in the U.S. It's a project that when it's developed can supply up to 25% of the U.S.'s copper demand for decades to come. And copper is a critical commodity to use in all walks of life.

And so we're really excited about the prospect of this project and the support from Secretary Bergam and President Trump to get mining and processing back up and running and going again in the U.S. has been very strong and very welcome. It looks like there was a land exchange process supposed to happen yesterday, actually. That's been stymied and held up in the courts. How long do you expect that delay to carry out? This could be days to months in terms of the administrative

of injunction that's been put in place. But we're quite hopeful that gets cleared and we're ready to go. So if the land exchange had occurred, there would be activity on the ground today. And this is a project that's going to create thousands of jobs locally in Arizona. And like I said, it's an important building block in the U.S. achieving better supply chain security for copper, which is a critical mineral. Yeah. Have you seen a decoupling between U.S. copper markets, steelmaking markets, aluminum markets, some of these other, you know, commodities, domestic. because of trade and tariffs and some of the policies that are being implemented versus the rest of the world? Certainly a bit more volatility in pricing.

This is the uncertainty I mentioned earlier as speculation has risen around certain tariffs and then that's been clarified. We've seen prices be a little bit more volatile than they've been in global markets in response to those measures. Potash in Canada, how is that project going? So it's going well. And this is another exciting new business for BHP, when both phases of it, so it's a two-phase project that we're developing currently, or two phases of the project are underway.

Total investment in these two phases, about 11 billion US dollars. When it's fully developed, this is going to supply about 10% of the world's potash markets. And of course, that's going to be critical for farmers right here in the US to help them with growing their products more sustainably. We did have a little bit of an overrun

that we announced in terms of costs for, for phase one of this, or stage one of this project in our results. But we're on top of that, and we'll be seeing first production from that mine in the next year and a half or so. And finally, how are you assessing the portfolio? Are you still acquisitive here? Are there certain businesses you'd consider exiting? So look, we've got a great portfolio right now. We like the commodities that we're in.

There are commodities of the future. We're in really good assets. We're running them well. And we have this amazing pipeline of growth ahead of us now in copper. So we're expecting copper demand to almost double by 2050, up by 70%. And we have big growth opportunities in Australia, right here in the U.S., down in Chile, and across in Argentina. And that's starting from a strong base of growth of almost 30% over the past three years. And BHP is currently one of the world's largest copper producers, number one or number two.

So we've got a lot of growth ahead of us there and in potash, as I mentioned earlier. Another commodity that the world's going to need a lot more of in the coming years. Mike Henry. Great to speak with you. Thank you for joining me. Thank you. CEO of the world's largest minor, BHP. Well, coming up, the calls for the Fed to make a September rate cut are getting louder. Our next guest says recent economic data could be pointing to a hike instead. He's going to explain that next. Welcome back to overtime. It is time now for a CNBC News update with Julia Borson.

Hi, Julia. Hi, Morgan. A federal judge just ruled Texas cannot require public schools to display the Ten Commandments in classrooms. A group of Dallas area families and faith leaders brought the legal challenge, arguing that it violated the separation of church and state. The judge's decision applies to 11 school districts named in the suit, including the state's largest in Houston. State Attorney General Ken Paxton said he will appeal. County officials issued an air quality warning in South Florida today as two fires in the Everglades have merged to burn more than 19,000 acres. Forecasters say smoke from the fires expected to spread east towards Miami and other metro areas, thanks to winds from Hurricane Aaron, despite being 500 miles away.

And the former Los Angeles fire chief is accusing the city's mayor, Democrat Karen Bass, of, quote, orchestrating a campaign of misinformation when firing her to shift, blame away from herself during the L.A. fires in January. An illegal claim today, former Chief Kristen Crowley accused Bass of knowing of the fire's deadly potential when she left the country for a ceremony in Ghana. Bass in the city have yet to respond. Back over to you. All right, Julian Borson, thank you. While the market is pricing in a September rate car, our next guest says economic signals could easily make the case for a hike instead. Joining us now is Grant's interest rate observer, founder and editor Jim Grant. Jim, it's great to have you on the show. Welcome. Thank you, Morgan. Nice to be here.

So let's start right there. Why do you think that the case could be made for a hike rather than a cut? Well, a part of it is the old William Chesney Martin Punchball analogy. You know, you wonder what, take away a punchball and the party let's get started. But the financial party has been roaring, and I've seen all the manner of symptoms and data and indices from value. to the return of the smack king and little tiny rugpole stocks creeping out from under the carpet. So I think that, and, you know, the economy seems as it's going okay and inflation is still problematical. I'm not sort of a compelling case for a cut.

In fact, I doubt that. And, you know, the Financial Conditions Index of the Chicago Federal Reserve Bank itself means one of the easiest readings in many years. So I think it's not a foregone conclusion. The market is treating it as such. And I think part of that has to do with the political narrative created and marketed so fervently by the White House. I mean, I think there's a lot of anticipation and expectation baked into this market right now, arguably, or at least among investors, that you could have a pal that shifts a little more doveish when he speaks at Jackson Hole later this week. Sounds like you don't think that's the case. Well, I certainly don't know what the chairman's going to say.

I think he would be superhuman if they were not affected to a degree by the voices surrounding him like cannon fire that he must cut. And that's quite extraordinary thing. Not unprecedented, by the way. I mean, President Andrew Jackson was just as abusive towards Nicholas Biddle in the day as, well, subtly abusive than Donald Trump is towards Jay Powell. But in the 21st century, this is something unusual. So I think that the chairman feels that. He resists it with great dignity. But I think that there's kind of a preference cascade for lower rates worldwide.

And I don't think it's necessarily advisable, but it's a thing. So I think the case can be made for higher rates, but almost certainly there will be some concession to the lower rate, zeitgeist, so maybe a quarter percent since September. If you, if the Fed does start to cut rates, does it actually bring lending rates for consumers and businesses lower? We've been talking about, and Rick Santelli's been covering this fervently, the steepening of the yield curve and what's driving the, you know, the longer dated part of the yield. No, it, mortgage does not necessarily mean better lending rates for, you know,

for borrowers, it all ends the yield curve if the market decides, perhaps based upon a very poor CPI print or another hot PPI print that inflation is not in fact behind us, which by the way, I agree that inflation is not behind us. In that case, we might see what is known in the trade and say that's a steepening yield curve in which long rates rise faster and higher than short rates do. And I think that's, I think it's a likely thing. I think that there's a lot of magical thinking concerning the inflation situation. You know, in the 70s, I should preface it by saying we are not in the 1970s, but in the 1970s,

inflation came in waves. And I do think that the inflation bug is out of the bug case. I don't want to say out of the genia of the bottle that's I'm trying. I think that inflation has become to a degree embedded in our affairs. Indeed, the Fed itself propagates inflation at Portman's

sponsors it since 1912. It has sought to achieve a the tune of 2% a year. I think that inflation, if you define it, as I think it's right to define it as a general overstraining of the productive apparatus. That's what the Fed wants. It's what the administration wants far more than the Fed does.

The administration is all for running things hot. So I think that inflation is lurking and they will make a reappearance of most in our opportune time. Yeah. And I have to correct my question. I think I said longer dated yield, and I meant longer dated part of the curve. Finally, quickly, Jim, I just want to get your thoughts on what we're seeing in terms of this

rotation out of these AI-related high-flying names, because you actually called this back in July with an article and some skepticism, if you will, about how this spending cycle could play out. Yes. Well, my confere, Eva Lorenz did that work. And what he found is that the cost of building these data centers is truly humongous. And the narrative surrounding the companies that are leading the charge has been, the narrative has been, that they are cash machines that are living examples of that 1970 book entitled capitalism without capital.

They didn't need a lot of physical plants and generate capital. You know, meta platforms being a fine example. But the ratio of cap X to sales is rising these things dramatically. And margins we might expect are commensurately about to disappoint profits too. And I think the entire story surrounding the Mac 7 in this day. an age of massive data-centered investment is going to be in for a rethink. And I think that the action yesterday and today in NASDAQ is only a foreshadowing one of things to come. Okay. Jim Grant, great to get your insights today. Appreciate it. Thank you for joining me.

Well, still ahead. Target earnings and revenue numbers hitting the bullseye this morning, but sales missed the mark. Could Target's pain be Walmart's gain? We're going to discuss what to expect in the retailer's results tomorrow when Overtime returns. Welcome back to Overtime. Take a look at shares of Cody, following and after hours on the back of earnings, not about 11.5% right now. Earnings overall, revenue beat, but revenue at its consumer beauty division was lighter than expected. The CEO saying that amidst the shifting global tariff landscape, they are actively transferring production of a large number products to their U.S. manufacturing plant. She also added that consumer demand for beauty

continues to grow at a solid pace with ongoing performance in the fragrance category. Sticking with retail, though, Walmart reports earnings tomorrow before the bell. The stock is headed for its best months since April. It is outperforming its main competitors so far this year, including Amazon. Let's bring in our next guest, who is bullish on the stock. CFRA research Arun syndrome. It's great to have you here, Arun. And let's start right there. Why are you bullish going into this print? Hey, Morgan, thanks for having me. Yeah, no, I think it's shipping up to be another strong quarter for Walmart.

You know, the consumer has been more resilient than many have expected. And, you know, generally we've seen some pretty strong results across the retail scape. You know, but the bar is higher for Walmart than a lot of its retail peers, especially compared to Target. So I think investors will want to see not just an earnings beat, but also for Walmart to raise their full year outlook. I think they will. I think they could raise their full year outlook. but we'll see how conservative Walmart chooses to be. But, you know, certainly the outlook has improved

since the beginning of the year. Tariffs have come down, you know, especially tariffs with China have come down. You know, also I'd say that back to school season, back to college season has been off to a strong start so far. So that's a good sign for the holiday season as well. So I think there's opportunities for Walmart to raise its full year outlook, but again, we'll see how conservative they want to be.

I mean, it's worth noting. I feel like everybody focuses on things like grocery for Walmart since it is the biggest grocer in the U.S., but they also have these higher margin businesses as well. And I guess in other words, other leverage to pull because they are diversified under the hood, whether it's advertising all of the AI and automation investments and realizing those, the third-party selling and logistics, how do you factor those in? Yeah, so that's really the investment thesis behind Walmart is not just this year or next year, but over the next few years, we think that Walmart will expand their operating margins.

And that's because of these higher margin revenue streams that you were talking about, namely the advertising business. You know, advertising for Walmart right now is just, it's only a $4 to $5 billion business, whereas their total sales is about $700 billion. So still a very small portion of their entire business, but it's growing rapidly. Their e-commerce business is also growing rapidly. They're seeing more higher-income households shop at Walmart. And that's evident in the fact that a lot of these households are paying up for even faster delivery. speeds. So it goes to show you that they're gaining higher income households. Groceries really their stronghold and people want groceries delivered to their door within an hour or two

and they're paying up for that. So yeah, we're forecasting about 4.6% operating margins this year. And then next year we see 4.7% operating margins. So despite all these tariff risks, we think Walmart still expand their margins. What did you think a target today, both in terms of the print and in terms of the leadership change? Yeah, so I mean, the quarter itself was encouraging in our view. There were a lot of positives in the quarter. Yeah, comparable sales did fall year over year, but it was an improvement from Q1. I think the big highlight of the quarter was actually the inventory levels at Target is much cleaner than it was a quarter ago. So that to me means that there's going to be less gross margin pressure in the coming quarters. The stock is down. I think it's largely due to the new CEO change. You know, investors really wanted to see an external. CEO hire, but investors also want to see a quick turnaround for Target. So I think it's hard to have both. And with an internal CEO hire, you know, I think you can potentially see a quicker turnaround. So I think you have to give Target the benefit of doubt here. And, you know,

what's one of the reasons why we think the sell-off today in Target shares is a bit overdone. All right. Finally, I just want to ask about Costco because we get those results too. And that obviously has been a darling among investors. Yeah, I mean, Costco is leading the industry in terms of comparable sales growth. So we expect that trend to continue as well. Also, their membership base is growing. More members are signing up for the executive membership as well. So really a lot to like about Costco. Really, the only kind of bare thesis I get from investors for both Walmart and Costco is the valuation. Walmart's trading out about a 40 times PE, Costco about 50 times of a forward PE. But we also believe that these premium multiples are justified, given all these

margin expansion opportunities that I was talking about before. Yeah, they also have those gold bars and other types of bars. Ruins under them, thank you. Thank you. I had services over stuff. A look at the growing divide between the stocks that provide experiences and those like Costco,

like Walmart, like Target, that sell you goods. Plus, accumulating crypto assets has been a big trend this year as more companies look to get in on the recent rally, and investor appetite grows. But the strategy hasn't worked for all of the players.

We're going to dive into that one next. Welcome back to overtime. Let's bring back Mike Santoli. He's looking at the breakdown of consumer cyclical stocks and the valuations of the big box chains. Mike. Yeah, Morgan, so we've known this relationship for a while, right? Consumers spending more heavily on services rather than goods.

You can see it here. This is the ETF for the kind of leisure and entertainment consumer parts of the market. restaurants, airlines, things like DoorDash, and obviously it's held up better. It's made new highs more recently. XRT, traditional retail, and it's actually pretty well diversified, which means the very largest chains are not driving the whole thing. So it shows you a little bit more subdued, challenging the old highs, but not quite there. Now, within the traditional retail change, now you just had a conversation about Target, Walmart, Costco. Look at the market's estimation of how sustainable profitability is and how much they're willing to pay.

per dollar of sales. This is price to sales ratio for all these different chains. Target, obviously, the most interesting because it's gone from being among the more premium valued ones to being a huge discount to the average. It's down around 0.5 times forward-looking revenues. That's pretty close to Best Buy at this point. If you want to look further down than that, something like a Coles would be even more depressed in terms of price to sales. And then Walmart's gone the other direction, right? You see Walmart in, Target were pretty much on par about three years ago, Walmart has been revalued higher toward Costco, which has always had the premium.

So essentially, this means the market is saying both sales growth is more reliable at those more expensively valued firms and margins are probably more sustainable. But as we see with this chart, those conclusions can change over time. Yeah. I mean, I was at my local Target last weekend, and Target is no Best Buy in terms of what foot traffic looks like and the buzz inside the store. So it is interesting to see that. I guess you could say it's value versus growth

or at least within this sector for investors right now. Yeah, there's no doubt about it. I mean, Best Buy is actually interestingly a good operator and a survivor in a really tough category, but the market is just not willing to believe that it's going to have that kind of secular tailwinds out there that's applying a similar amount of skepticism toward Target right now. All right. Mike Santoli. Thank you.

Coming up, names across the crypto ecosystem taking a leg lower over the past week. We're going to discuss what's got that space moving south ahead. And don't forget, you can catch us on the go by following the closing bell overtime podcast on your favorite podcast app. We will be right back. Welcome back to overtime. Crypto Treasury firms, who shares once stored, they're not tumbling, at least for the month of August. Today, McKeel is here with a look at the big winners and losers and why there has been such a turn in sentiment. Why has there been such a turn in sentiment?

Yeah, Morgan, so the summer rally in some crypto treasury firms has cooled dramatically this month, but that could resume depending on how dovish the Fed sounds in Jackson Hole later this week. With the pullback, we took stock of their performance, Eats Dilla, which is backed by Peter Thiel, and Tom Lee's Bitmine, which is also backed by Peter Thiel, are the outperformers this month.

Solana focused DeFi DevCore is the biggest of the winners this month, month. Strategy is the biggest loser. No surprise because it's been tracking Bitcoin instead of ETH. Now, these are not apples to apples comparisons. These companies buy different coins. Some have really high profile teams and backers, which it turns out is one of the most important things for investors to consider about this cohort. Investors I spoke with from Pantera, Galaxy, and others behind big deals like BitMine, Sharplink, Reserve 1, really underlined that point. Also, these firms announce their crypto strategies at different times, so it should be noted that changes, that changes the performance drastically over the short period.

So by that measure, going back to the date of the announcement, no real losers who are actually in the negative yet, but Defi DevCore, which buys Solana and got an early start in April, is the big winner. Strategy, of course, a bigger return since its announcement a whole five years ago, but not by very much, Morgan. I think about 2,800 percent since 2020 versus DeFi DevCore's 2,600 percent, gains since this April. Oh, no, but $2,800, $2,600. There's a lot of noise here. There's a lot of

excitement. There's a lot of buzz. I guess just to put a fine point on it, how do you cut through that to figure out what's in the realm of possible and in terms of making an investment here versus what might just be more hype than reality? Yeah, so I've talked to a lot of VC types who are behind big deals. A lot of names that have gotten a lot of attention, but haven't even started yet. So we have that coming at the end of the year. And they really emphasized the big high-profile backers, whether that is someone like Tom Lee or Peter Thiel, or even just big investors who have experience in the capital markets, because thus far, crypto has not really been in the public realm. So it's something that you do get a lot, you know, when you're

looking at stocks, you don't see it a lot in crypto. So to see people who have that capital markets experience backing or supporting deals like this is what is going to separate the ones that last, which could be a handful, from the many, many that, you know, are bound to not last. And I think that these VC types, the Pantera's of the world, you know, they say they're talking to dozens and dozens every couple of weeks. All right. Tenea McKeel.

Thank you. Thank you. Well, let's get you set up with tomorrow's trade today. In the morning, we will get Walmart earnings. But right here on overtime, we're expecting reports from Intuit, Workday, and Raw Stores. On the economic front, we'll get jobless claims, existing home sales for July. But perhaps most importantly, the Fed's Jackson Hole Symposium kicks off. And just taking a look at the markets in the meantime, we continue to be very range-bound here ahead of Jackson Hole

and the Powell speech that we're expecting from the Fed chair on Friday. The NASDAQ was the big loser today, down another half a percent. The S&P down a quarter of 1%. And the Dow up fractionally, about 16 points here. Energy, consumer, staples, and health care continued to lead as we continue to see this rotation play out, at least for now in the market. We'll see if that has legs. We'll continue to monitor it.

In the meantime, that's going to do it for us here at overtime. Fast money begins right now.