Power Lunch - S&P 500 and Nasdaq hit record highs to start the week amid earnings optimism 7/21/25

Episode Date: July 21, 2025

Stocks moved higher on Monday as optimism around earnings overshadowed any investor fears over the latest developments in trade. We’ll cover all of the market angles for you. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

It is a new week, but it's more record highs for the markets and hopefully your money. Welcome to Power Lunch, everybody. I am Brian. She is Kelly. Stock sitting more record highs again, even as the tariff deadline approaches again. But some say there's a real risk of a big drop ahead. We'll talk about who and why. Plus, a big week of earnings is on deck, and this could be the real test for the rally as it takes center stage. With valuation, stretch and expectations, you could say, running high. Investors will be looking for strong results and solid guidance.

We'll break down what is at stake as we move through it and what it could mean for your money. All right. So while some are starting to call out the risks to this market, why don't we take a step back and enjoy the moment? Because we are at more record highs as the entire world reinflates. But we can also dig a little bit under the hood of this market to start off the week. And who better to do that with? And our friend, Senior Markets commentator Michael Santoli with, I don't want to say,

we don't want to, listen, we're record highs. But as we go up, there are some people that are saying, hey, take a breath. There's still a risk in this market. Well, for sure, Brian. I mean, there are always risks. I think the hazard comes when they're mostly kind of unacknowledged or people are forcibly looking away. It's not clear to me that we're quite at that point, although I think the market is now priced for some pretty good things to happen on the earnings front, on the financial conditions front, and arguably even on the tariff policy front. and doesn't say we're not going to get those things, but I do think that mostly we are postured for a relatively benign backdrop.

And sometimes look at a day like today, the context is the catalyst, right? The market's not reacting to any real, fresh, sharp, new, positive news. What it's saying is financial conditions are very accommodating right now. The trend is very friendly. We had a weekly record close in the S&P 500 to end the week last week. That tends to say, you know, strength begets strength. And then from there, it's a matter of figuring out if longer term, you've got to lower your return expectations because valuations have gotten up here, or if the rates market or something is ripe for some kind of an air pocket on one of these kind of global macro concerns. But you're not seeing that really filter into stress readings in the market.

What would be a stress reading in the market? When you say that, what specifically are you looking at? I would look at things like buy market volatility going up. it has actually been pretty subdued. I would look at credit markets, credit spreads relative to treasuries. They have very, very low. So these things both have kind of this dual meaning. One, that they're not sending a macro signal that you should be worried right now.

But it also means we're not priced for anything deviating from the positive script. And so, therefore, there's not a tremendous cushion in the market. So I'm not seeing that right now. We can harken back to last August. You had the unwind of that yen carry trade. It's a huge rally in the end. nobody was ready for it. Now, overnight, you did see a little bit of a bump in the yen relative to the dollar, not enough to disturb markets. But it's that kind of thing that I do think,

you know, you just want to have a general awareness in your peripheral vision that things might complicate the story. But we had a big election in Japan and the ruling party lost its majority. I don't want to go into Japanese politics. I don't even understand American politics, much less Japanese. How much do you look at the VIX, because the VIX, when we had that Liberation Day tariffs, we were at 70 or 80 on the same. CBOE volatility index, we're back below 20. The market has suggested there's not a lot of risk, or at least not a lot of risk priced in. Right. And, you know, interestingly, yes, it's down below 20. It's in the normal range. It's here in the 16s. But the historical volatility, meaning of the last,

let's say, 10 or 20 days in the S&P 500 is like the VIX equivalent of 10. So the VIX still has a premium over where the actual market volatility has been. I don't think that people are totally unhedged here. And in fact, you would sometimes see the market at all-time highs have a VIX going down in toward the 12 area. We're not seeing that yet because, of course, there's a little bit of a half-life of market shocks and we're only three months from the last one. Michael Santoli, always appreciate it. Thank you very much. Meantime, 140 nearly, S&P 500 companies report earnings this week. You can see the full calendar there. Includes Tesla, Alphabet, and more. And while earnings so far have been pretty good,

The markets are at record highs, so has it gotten ahead of itself. No one better to ask than Rebecca Patterson. She's the former chief investment strategist at Bridgewater and currently senior fellow on the Council on Foreign Relations. Great to have you here on set. It's great to be here. Welcome. Beautiful day outside.

I know. Markets at highs. Everything is awesome. What's there to worry about? So, you know, we were talking about this a little bit with Greg last. I mean, you could list a gazillion different things, but why do you think that this landscape, to Mike's point, has become so placid?

Well, certainly ahead of the August 1st latest tariff deadline, there's a sense that it might not be a real deadline, that the tariffs that actually are put into place to the degree they put the market or the economy at risk, they'll be pulled back. So the so-called taco trade, I think that's still alive and well, that perception. I think what we saw from the bank earnings last week is that the consumer is still spending. And given how important they are for the overall economy, I think that also creates some optimism or maybe complacency. You've got strong buybacks here to date. that is a support for the market, all else equal. And then I think structurally, you still have this very strong tech optimism around the AI longer-term trade and all the different companies that will benefit from that.

So I think there are reasonable reasons for this. The question is, are we overdone? And I would be on the cautious side, especially heading into August. Because it's just because it's a tough month that seasonally is. Well, certainly that doesn't help. But I think to me it's more about the tariffs. I mean, right now we're talking a lot about the European Union, and could it be somewhere between 15 and 20? So let's say we land, let's split the difference, 17 and a half percent tariff on the EU.

If you take that, that gives you a global effective rate around 15, add the sectoral tariffs, things like pharmaceuticals, semis, etc. We have a 20 percent global tariff rate. That is a big increase from where we are now and where we were at the beginning of the year. And while it'll take time to get passed through and not every bit of it has passed through to consider, consumer, it's going to push up inflation. You know, FDR said there's nothing to fear but fear itself, but I don't think he was referring to the stock market, because the only thing that makes me scared in the stock market is when everything is awesome.

Yeah, the lack of fear. We've been doing this all long enough. The lack of fear is when I start to get nervous. And I know in March, everyone's like, well, we're not going to do that with the tariffs. Don't worry. And then it happened, and the market's crashed. Why aren't we pricing in any of that risk? The fact that it recovered so quickly.

and that everything keeps getting pushed back on the tariffs. And even Scott Besson on your air this morning said, well, we care about good deals better more than quick deals. And I thought, oh, well, that sounds like the deadline might move again. But the end result is they have to have tariff revenue to help pay for the budget deficits. So 10% baselines a given. And then beyond that, I think we're hearing from President Trump and the administration, they want higher tariffs, period, full stop.

It's coming. We just haven't seen it come through a lot yet, except for some core goods. This is the same debate kind of discussion we were having last week with different people, but like is the effect just so disseminated so widely, you know, a little bit over here on the corporate side, a little bit over here on the customer side, a little bit here by the foreign exporter, a little bit in the currency adjustment. So far, right? But if they do clamp down on trans shipments and if what we're hearing from companies,

and the earning season is going to be really helpful on this, you know, we are hearing more companies saying we are going to raise prices. So we're going in that direction. More of it's going to get fed through to the consumer, and especially in things like back-to-school stuff. We all have to buy when it starts coming to holidays season, when it starts coming to food and food stuffs. And we saw that in the last CPI report, a little bit of it.

Definitely. We're going to see more of that. And you're going to see it hitting consumer sentiment and purchasing power, and the Fed's going to be stuck. Can I take the other side of that, though? I'm not advocating for or against tariffs, okay? But I will say that all of our viewers and listeners know that in the past four or five years, prices have gone up for everything. Yes. Shockingly so. I mean, shockingly so for a lot of things. Food, household goods. Just some of them seem like they've doubled.

And yet corporate balance sheets seem good. Corporate consumer spending seems pretty good. Is there a case, Rebecca, where we get another couple percent from tariffs? Some people are going to call for doom, but like during COVID and all the price increases we saw since then, somehow, we're still okay. Well, one of the things that was really important in the last few years that created an offset was labor supply. The addition of immigrants to our economy in 2023, 2024, probably added over a percentage point to GDP each year. They consume. A lot of them are paying taxes. We're now seeing that flow move out of the country very quickly. And people want to tighter borders. Everyone's on, you know, on point with that.

But the quick reduction of the labor supply is going to make it harder to have the growth and the tariffs to offset each other to a degree, which is what I think you're getting at. We need the consumer to stay strong even with higher prices. The consumer stays strong. If the economy's growing, there's jobs, you're going to have a harder time with that if you're pulling back on immigration. and you're going to have a harder time with that, although it's mainly next year, not this year, when you start seeing the government spending on things like food aid and Medicare pulling back, then you're going to have the lower end consumer, I think, really struggling. We haven't seen that yet. We won't see most of it until after the midterm.

No, true. So follow the checks or follow the stimulus as well, which we saw during COVID, kind of for people broadly speaking. Right. This time around today, it was interesting to hear Verizon call out the bill, the one big, what do we call it, OB3. Yes. They are shares up 5% today, best day in a year or two, and, you know, helping the Dow. And they mention that as one reason why they're raising the low end of their full year guidance.

Now, is it going to change their business model and make it the most exciting stock on the planet? No, but I wonder if we should be listening for more of that as well. Some of those business-friendly provisions that could offset what you're talking about. Yeah, I mean, look, the government is smart. They know how to time these things to get it within the reconciliation window, but also to increase their probability of winning in a mid-torn. So you're going to put all of the things that are going to support growth up front, all of the things that hurt consumers, upset voters after the midterm. And they have largely done that. So things like immediate expensing of research and development or capital expenditures, that's happening now.

That could lift GDP a bit over the next, call it year. And to your point, that could be an offset, all else equal with the tariffs. A lot of it's going to depend on how high the tariffs go, how much companies decide to pass through. We don't know yet. But I think for the equity market to come back full circle, you know, there isn't much of this risk priced in at all right now. Everything is awesome. For the moment, let's enjoy it. Like you said, beautiful.

Well, and I'm saying that tongue in cheek with a little bit of sarcasm because that, like I said, that's when I. We're saying it. We want to ring a bell. Say, hey, folks, everything is awesome. Ring the bell. And no one rings a bell at the top or at the bottom. And that's the whole point of investing, right? I learned this.

I was a CIO for a decade. When you've made a lot of money, say, thank you very much. Take partial profit. Lock it in. No one's going to fire you for monetizing partial profit. That's great, real-world advice. Yeah. And households don't even have to worry about getting fired.

That's what I really wonder. Let's say you're just in the market. I know we're a little top-heavy, but there's no reason for the average person to trim a position or do anything like that, right? And then there are tax consequences. Well, if you're longer-term capital gains, if you made a bunch of money, in three months, you're going to get a gigantic tax bill. But if it's past two years, maybe then think about taking some of that profit, right? And if you've gotten overweight tech or you've gotten overweight cyclicals,

then maybe you want to put some of that into something a little more defensive, utilities or staples or gold. Do you Bitcoin? Do you crypto? Do I crypto? It's a verb now. I follow it very closely and I have done. There's an ether. Back today.

Yes, yes. I'm following it very closely. And I would say I'm agnostic. I am an academic observer of crypto, and I'm looking at it more for the macro-global implications than the industry itself, but I'm fascinated. Did you see there was, and I can't confirm this, I'm not saying it as fact, but there was something going around the internet a couple weeks ago where there's some guy that bought 80,000 Bitcoin at like 80 cents. Good for him. And just sold it. It was like, and he sold it now.

It was a couple billion dollars. If accurate. People were setting screenshots in the wallet again. I'm not saying it's accurate. I don't know. But it made its rounds. To your point though, Brian, there have been... There are people that made a lot of money.

The media reports about the early retail holders who are now selling as the institutional players come in because... And I'm not saying all of them are most of the ones I know are hanging on forever diamond hands. But Rebecca, this is fast becoming an institutional asset class. And some of that turnover you're describing is happening. So stablecoin, I think, is becoming an institutional asset class. It remains to be seen if Bitcoin and some of the means. meme coins and the alt coins become institutionalized. Depends on the institution.

Yes, bingo. But stable coins, I mean, everyone and their brother wants to be in on the stable coin game now. And it makes sense. It's basically a complement or a substitute for a money market fund. And it gives you a window. You can put your little feet in the pool of the crypto world and you can tell your shareholders, I'm in it without taking the same sort of risk as if you were buying some of the meme coins. You get the glow.

That's a great way to put it. I like that. It's very smart. That's why we love her. Rebecca Patterson, thanks for your time today. Great to see you. All right, we are not done and on deck. A big moment for big tech and why stocks have really come roaring back.

But does that mean some overbuying is not gone overboard? J.P. Morgan raising a red flag. We'll tell you more about that. We are back on Power Lunch right after this. All right, let's get back now to the markets and your money because J.P. Morgan's strategist Dubrovco Lacos Buhas is on the tape today, saying some parts of this market could be at risk. risk for a fall. He notes that some stocks face what he calls extreme crowding right now,

driven by a combination of the Goldilocks outcome, what we just talked about. Everything is awesome and exhaustion from worrying about tariffs. Now, Lacos Buhas gives you this rather amazing stat. Quote, this crowding is particularly unsustainable as it soared from the 25th percentile to the 100th percentile in just three months. That's the rebound off the tariff flows. That is the fastest in 30 years. So, folks, that's a warning. But this is also all happening, even as Morgan Stanley notes, that capital spending is going to boom. You've heard it before, but listen to this. Morgan Stanley writing today at the annual spend on data centers, semiconductors, chips, and other hardware that go into that ecosystem will be about 900 billion per year, which is just a little

bit less than all the rest of the S&P 500's capital spending combined. In other words, Morgan Stanley says spending, just on data centers alone, will be nearly equal to that of every other company in the S&P 500 put together. Wow. Let's put this all together, joining us, Christina Parsinevilles, and I can see from your face that even as sort of a, I've seen it all Canadian. You are. You know, it has to come up. You are gobsmacked a little by these numbers. Are you not?

Oh, the JPMorgan Kappex spending numbers. You know what gobsmacked? So we're going to reverse it and start with that. You said the $900 billion. The other part of that is how are they going to finance all of those, you know, infrastructure? And it's not just going to be from cash flows. What really stood out to me in that note is that it's going to come from the debt markets. So going forward, we should expect a lot more on secure debt in the private markets, the public markets.

For example, Corweave. And maybe we can bring up CoreWeb's share price. That's up today because they announced that they're going to be issuing a $1.5 billion bond. You know, and some people will turn their nose up at Corweb saying, here it's more debt that they're taking on. But if they're going to finance that $900 billion per year on CAPX that you're talking about, Brian, they're going to have to do it somehow and it's not going to come from their, you know, financial statement or I should say free cash flows and any money that they're holding on hand,

it's going to come from these markets. So I think that also stood out to me as well, that more and more companies are going to be raising money from their debt markets. Now to go back to the beta conversation. Well, hold on, hold on. We'll go back to that. Hold on. Something we just talked about. What is the risk if that $900 billion number

is off by, I don't know, Kelly, couple billion, couple 10 billion. There's a lot of optimism and hope and valuation built into this equity market that that number is like lock solid. To that point, you could see people pull back on their

spending. We've seen some contracts and Micron, for example, is one where they were supposed to build in upstate New York, and that hasn't really been the case. So there are promises to build the construction Ohio plant for Intel as well. I know it's not exactly the same because these are chip companies that I'm focusing on, but overall people can pull back on those promises. But exactly what you're saying leads then into these high beta stocks. Look at some of these names that are trading, you know, what JPM says is maybe unsustainably,

Broadcom, Micron, AMD, Western, Digital. I mean, this is the same conversation. Yeah, it is. And it's just for our audience. The high beta stocks is just what these stocks that tend to move a lot more if the market's going up or tend to fall a lot more than when the market's going down. So it's a little bit different than momentum stocks. To your point, they actually believe in this note, J.P. Morgan,

that those that are not related to AI, so you just mentioned a bunch of AI names. But the non-A-I high-beta stocks will actually fall dramatically. You'll see more of a reversal. So I actually picked randomly five names on that list. There's United Airlines, Philip Morris, Tapestry, Goldman Sachs on that name. And so what they're saying is that the herd mentality, there's so many people crowded in these particular names, including those AI plays that you talked about, then any type of negative catalyst can really reverse the share price for a lot of these. And so he's raising the red flag because...

I like that distinction. It's a good distinction. Yeah. There might actually be more to the... Usually we say, well, that popular trend, the crowded trade, well, the AI trade might actually have... better fundamentals or at least some legs to it versus, I'm not saying Goldman doesn't or tapestry or knighted, but those are like pretty frothy kind of move. Yeah, and then it would go to your initial comment about capex spending, right? So that's what's driving all of these names higher because these are the picks and shovels for building out these data centers. But I'm less worried about

tapestry building a factory to make more person. No, but that's the point. So those are the names that in this JP Morgan note, because they're not linked to AI, that they will fall more dramatically. And that is the concern. They even, and I quote, high beta stocks. If AI spending is cut, tapestry's going to fall. No, no, high beta stocks that are not linked to AI are at a higher risk. Regardless of AI spend, they're just saying they're raising the alarm right now with these names, particularly, and yeah, and they're saying it's not on fundamentals. You have this Goldilocks scenario as one, because people are expecting earnings to keep climbing, the Fed to cut rates. Then you have the taco trade or just the, you know, the tariff situation that may not pan out. And,

And then institutional investors, which you talked about earlier on in the show that are getting back in because retail traders, you know, bought the dip. Institutional guys didn't really get in the first half of the year and now they're getting in. So these are all plays into why you're seeing so many of these names get become so crowded. So very interesting. And by the way, Julian Emanuel, thank you, by the way. Julian Emanuel of Evercore ISI also saying a 7 to 15% drop is their base case very normal, very healthy. Maybe we'll get Julian on. Maybe he's on this network somewhere else and I'm just not aware.

Or maybe he's up later this hour and we'll find out. Maybe he's listening right now and just got name dropped on national TV. Christina, thank you. Thank you. Christina parts a nevelist. J.P. Morgan is out with a new note saying negativity around this energy stock might be unjustified. Hint is we spoke to the CEO on Friday. Details when Power Lunch comes right back.

All right, welcome back to Power Lunch. Bond yields around the world are finally sliding today as investors digest a couple of critical events that could reshape the path of global monetary policy. In the U.S., that includes next week's Fed meeting, and any, by the way, are 10 years at 436 today. Any indication in a change in tone will see. There's also growing trade tensions, casting a shadow over the global outlook, renewed tariff threats aimed at Europe and Japan, feeling some uncertainty there. But again, you're seeing some relief. German tenure about 260.

Japan tenure still around one and a half. Rick Santelli joins us now with more in the bond report. Rick, I'll ask you what I asked someone last after. Why are global bond yields lower today? You know, I think they are lower today just from the standpoint of a trade, and I think that it's not necessarily going to be the stencil for all the activity coming forward. And there is some notion that the Fed meeting that's next week, most likely isn't going to be very dovish.

So it really, in my opinion, it's just a trade. And what's really strange is that the long end is leading the way, and the long end normally is more stodgy with regard to giving up yields, considering the global debt situation. Look at a two-day of twos and tens. And 30s will be the same way, if not bigger, the longer the maturity, the bigger the move to the downside today. So you're down about three basis points in a two-year.

You're down double that, down six in a 10-year, add another basis point in a half on the 30-year. Now, if we consider what is the driving force here, the U.S. has stronger data, so it really doesn't add up as much, but what does add up is short covering. And I think that has been a bit of a driving force. This may be the fourth consecutive session.

Ten year yields closed lower. And when did it all start? We'll open the chart up to June. Notice that four and a half percent. We came very close to that intraday last week. And as you can see on the chart, that is very good technical resistance. And finally, if you look at the dollar yen today, knowing that the ruling party lost an election, supposedly that was going to be negative because maybe some of their fiscal prudence will go out the window.

But what's really happening is it's more about the prime minister and other key government officials going to stay on and work on the U.S. trade deal despite that ruling party loss. So look at the dollar versus the yen. Going down on the 24-hour chart and on a technical perspective, this starts on Liberation Day. Right under $150 yen, there seems to be a lot of resistance you want to pay attention to that level. Brian, Kelly, back to you. All right, Rick Santelli. Rick, always a pleasure, especially talking about the yen. All right, time now for a power lunch energy minute where we hone in on energy-related news,

an SLB, the company formerly known as Schlumbergerz, seeing a little bit of a gain right now, but that's a big change from Friday where the stock sank after earnings. Market didn't like the numbers. But SLB CEO Olivier Le Pusch came on and joined us in a rare and exclusive interview right here on Friday. And he said that the market may be missing the rosier second half picture. earnings show resilience, resilience in our market, growth internationally, show margin expansion, and demonstrate the power of our brands. I think we're exposed to many markets, and despite the market volatility, despite the uncertainty,

available to pull it through, grow slightly, internationally, particularly, and then deliver further margin expansion. Very well set for the second half of the year. J.P. Morgan apparently agrees, saying investors may have gotten their earnings analysis wrong. J.P. Morgan actually liked the revenue guide and said that more sales are likely back-in-loaded, meaning coming later on this year. And the analysts also like some of the earning margin. By the way, the earnings margin, Kelly, 22.4%. That is higher than last year. J.P. Morgan remains overweight on SLB with the target of 44. That's just under 30% upside from here. And by the way, that $44 target is actually less than the macro market average analyst target of like 45 and change.

Energy stocks can go up and down. But the market, JBM's saying the market misread the SLB earnings. But I think that makes a lot of sense. These are difficult and complicated parts of the energy sector that you already have to contend with. Price forecasts on a barrel of crude oil. Good luck on that front. You know, it's incredibly difficult to unpack and actually try to figure out. out what do you know about these operating businesses and what don't you know and what are they

really worth. So I think it's a value ad to be able to try to dig into it a little bit. And if you ever figure out, Kelly Evans, how to predict where the price of oil goes, can you let me know first? I would. I would. And today it's slightly, I mean, the way that it's right, there's sometimes when it's been predictable, fine, geopolitical events and all the rest of it, but trying to pinpoint what the value should be, I mean, could love. My friend, a guy named Rob Flatley, who is a CEO of TS Imagine that's a trading Systems company. He used to be with Deutsche Bank, and he said, one thing you can do is you can watch the Saudi stock market, the Tadawall, and the Tata Wall will often reflect, I don't know if it predicts

the move of the price of oil, because it's thinly traded, but it tags along with it. So if you're frustrated with the price of oil, maybe watch Saudi stocks to be another way. It's a great point. And finally, if these businesses, SLB or any of the rest of them, if they can kind of prove to the market that you don't have to obsess about the price of oil or gas or whatever it is, and that the business can still deliver solid, I mean, that's the holy grail. We'll see. How do the Mag 7 measure up to each other? Our next guest says some tech names are more likely to deliver than others.

After the break, we'll explain that. Stay with us. Welcome back. We've got big tech earnings just around the corner with six of the Mag 7 to report in the next couple weeks. And Invidia, that's probably the big one to circle. I don't know, but then alphabet, look at the run it's been on. All of this could make or break, the rally that's mostly been carried by the AI trade. Companies need to show these massive investments are paying off. And our next guest says

they will, but some are better positioned than others. Here with us now is Daniel Newman. He's the CEO of Futurum. Great to see you. Just, I mean, Alphabet is up, I think, what is it, nine days in a row or something like that? It's the second longest stretch ever. It's longest stretch was 15 years ago. So where do you see the opportunities and where do you think things are a bit overrun? Yeah, well, first of all, Alphabet, it's a catch-up. It's been lagging. It's been behind. I think there's some regulatory overhang. People are concerned about antitrust. They're concerned about the search business.

Is it viable? Is it at risk? What happens does Open AI take it over? By the way, it was their earnings back in what was it, January, that kind of changed the narrative around this when their search results were pretty good, right? And they are still good. There was one period of time that they looked down just ever so slightly, and everyone's like, search is over.

It's dead. Their business model is in trouble. And they had a few little hiccups with their early AI play. Everyone remembers barred. But now their generative AI stack looks great. They're building their own infrastructure, their chips. They look really well positioned. And if I'm an investor, I'm looking at the whole situation.

And I'm saying, look, you know, you're seeing Tesla's out, you know, 100 plus, you know, forward. Google actually has all the tech. They've got Waymo. They've got YouTube. I mean, and I was going to say YouTube's dominating TV. She's a graphic in the journal this weekend? Like YouTube is becoming TV? Yeah, same with Netflix.

And yet, so here I am using chat GPT, honestly, more like Google than ever before. But it seems like the business not only can absorb that, but have other levers to pull on. Yeah, I really like that they've been able to be successful training their own models on their own infrastructure. I love Nvidia. There's no secret there. But if I'm Google and I want to build a vertically integrated stack, I want to increase my margin, I want to diversify the business and have more control of my longevity. I'm really liking that. And like I said, at the price, even with the recent run-up, there's just a lot to be optimistic about. So Alphabet looks to be in really, really good shape.

Like on the other side, though, you know, Apple's next week. Everybody's going to be watching. You've seen even the biggest bulls on Wall Street have come out and basically said, we don't know. I remember sitting here with you over a year ago. Apple intelligence was coming. And all of us kind of said they have this runway to get it right. And the first batch didn't look so good.

But now we're on to like three, four iterations. And it almost feels like they have no confidence. They lost their top researcher. That's going to be a big one to watch. But I still think this. Does it even matter? It's done so poorly. I mean, it feels like Nvidia or Alphabet or one of these other names would probably matter more.

But I take your point. Well, I think there's a lot of investors that saying is the selling of Apple, is the pressure overdone? They have $2.4-ish billion, you know, in their moat. Can they get it right? Are people going to defect? Is this going to be the next Blackberry? Are they going to have a Kodak moment and see everybody run away? I don't think that's going to happen.

So Apple has this longer period to get it right. But I think on one end, you've got Google, you've got meta. Meta's gone all in. hundred plus million dollar packages, bringing in the top researchers, taking them away from Open AI, taking them from Apple. They're doing the right thing. So we really like meta. We really like Google. On the other end, you know, we see Apple as a big risk. And then, of course, Tesla is one of What's Apple's biggest risk? What's the biggest problem with Apple? Well, the biggest risk is that they truly do not get this pivot to AI correct. They haven't gotten infrastructure. They don't have

their own, you know, stack in terms of their development. They don't have a tool. You've heard a lot of people come out, I came out six months ago and said the buy perplexity. And I'll be very clear, perplexity does not solve all of Apple's AI woes. Not at all. It's an intent thing. It's just showing that Apple wants to build a product right now. You know, you try to use Siri. And Siri's a mess. I think we've talked about this before on the show. And it wants to take you to open AI. What does it say when a company with Apple's balance sheets that spent, what, $600 plus billion on buybacks, cannot make the investment, cannot lure in the type of researchers and build the kind of technology that has made it the company that it is today. I think it comes with real risk,

but I think it's a lagging risk. With their install base, it's not going to fall apart in the next 12 months. It's just slowly they're going to continue to deprecate down that seven list. And all of a sudden, instead of being the top on those, I mean, there's a trillion dollars in market cap gap between them and Nvidia. They've lost a trillion, you know, in market cap basically since December. What would you do with Tesla then? Where do they fall? Elon is back in founder mode. And here's the thing is on a fundamental. I really struggle with the company. You're going to see a big fall in EPS. You're going to see a big fall in revenue. Their energy business is interesting. All the things he's doing with his,

you know, peripheral companies with SpaceX and XAI. And you start to see a world where all this comes together. And of course, he's not going to say that publicly. A lot of speculation. But he's generating hundreds of billions in valuation in these non-Tesla companies. But it's all a big story that comes together. XAI plus Tesla plus SpaceX. It gets really interesting. The valuation is eye-watering. It's really hard to get behind. and it's so much higher than everything else in the Mag 7. But at the same time, if he's back, if he's fully committed, but the investors are so scared of another tweet about the America's Party

or him deciding to go on the campaign trail again. And you can see that volatility. So I'm just kind of looking at them out in their own space. You have to have that appetite for discomfort and uncertainty. But the alpha there, the potential, if he says the right thing, does the right thing, is exponential. Well, Daniel, we appreciate you coming. It's going to be a fun couple of weeks to see how they all do.

Daniel Newman, a future. Thank you. All right, speaking of technology, take a look at shares of Sentinel One Best Day Ever. Unsourced reports online that the company could be acquired by Palo Alto Networks. I want to be very clear on this. Unsourced reports. That could mean made up. But the news is out there and the stock is moving.

So we're going to report on it. Palo Alto says, quote, there is no truth to the rumor. We obviously also reach out to Sentinel 1, but shares of that stock trading at the highest level since February of last year. I guess I think we're waiting on Sentinel 1, guys. Is that correct? We can't do it from here. So somebody at CNBC is reaching out. When we get a comment from them, if any comment, they'll probably say we don't comment on rumors and speculation. Again, you know I love a trial balloon. It's interesting to see Palo Alto shares actually trading higher on this. Sometimes the market gives it a thumbs down, but you can see that. It's a two and a half percent pop as we wait more detail.

In the meantime, let's get now with a Bertha Coombs for a CNBC News. update. Hey, Brian. The judge who heard arguments in Harvard's lawsuit against the Trump administration today says she's taking the case under advisement and will issue a ruling in writing. Harvard argued today the administration illegally cut billions of dollars in funding for research in an attempt to control the university's inner workings. The administration said the president has the right to cancel research grants when an institution is out of compliance. Former President Joe Biden's son says Ambien is to blame for his father's disastrous debate performance, which kickstarted Democratic pressure to drop out of the presidential race a year ago. In an interview released today, Hunter Biden said then President Biden was given the sleep drug to help him sleep following intense international travel.

Former President Biden dropped out of the race one year ago today. And the White House border czar said today, U.S. Immigration and Customs Enforcement will, quote, flood the zone in New York City. He said that means more ICE agents on the ground. Tom Holman also claimed that the agency has been blocked from speaking to undocumented immigrants in city jails. Brian, back over. All right, Bertha Coombs, Bertha, thank you very much. I think, first of all, why would you give Joe Biden Ambien?

and he was home for a week, I think, prepping before the interview. So I don't know. Anyway, speaking of air travel, jet setting, one of the biggest names in luxury that has a big time new investment. Robert Frank is up with that. CryptoWatch is sponsored by crypto.com. Crypto.com is America's premier crypto platform. All right, let's talk travel. Time travel.

Well, not actual time travel, because that's not possible yet. But the closest thing you can come to time travel these days, and that, of course, we're told, is flying by private jet. It's how the other half of the other half lives. And now the private jet business is getting some coin from private equity, an investor group backed by luxury giant LVMH, buying 20% of big private jet company FlexJet. Let's flex a little more. Robert Frank has more on what's going down at the mean streets of Teterboro Airport, Robert. Brian, good to see. Well, that group led by L. Catterton, that's the private equity firm backed by LVMH, acquiring a 20% stake in FlexJet for $800 million.

That is the largest ever equity investment ever in a private jet company. It's all part of the luxury industry shift from retail to the experience economy, like travel, dining, and events. Now, global sales of luxury goods fell 2% last year, but sales of luxury experiences increased by 5%. in sales of yachts and jets were up 13%. They presented us some ideas about where LVMH and Latterton see the future of luxury, and they basically see it around the luxury of the future is time. And they see that time, obviously, in private travel where you can recoup time. FlexJet's going to use the proceeds to buy a lot more planes, bigger planes, in fact,

and infrastructure, especially overseas. And it's going to partner with some of LVMH's 75 brands to build more luxury offerings for its more than 2,000 members at FlexJet. Now, for more in the whole private jet industry and how the wealthier is spending their money, and that huge shift from luxury goods to experiences, you can go to my newsletter at cnbc.com slash inside wealth. That's cnbc.com slash inside wealth. Brian, Kelly? I mean, what would you say, Robert, comes next? that there's a...

I would say your family needs a big private jet. You would need eight seats. We'll take it. Nine, maybe. Does this drive up valuations? Does this... What do you think the knock-on effects will be? Well, the valuation is impressive.

You know, remember, flex jet was going to go public via SPAC in 2022 for a lot less. It's now valued at $4 billion. So that kind of helps the whole industry. But I think, you know, after the pandemic, the wealthy especially, want to, you only live once, you want to enjoy your time now, so they're a lot more willing to pay that much larger cost for flying private. So we're continuing to see that growth in the private jet sector. And interestingly, one of the biggest trends that FlexJet has seen is that their customers are getting younger, more and more of their customers now are 40 or under. And so, you know,

you see the luxury industry like LVMH trying to get into experiences and that whole private jet industry getting younger, I think they're both poised for growth. I'm kidding. I just have to think about that one. Robert, thanks. We appreciate it. Robert Frank. Coming up, taking to the bank, our three-stock lunch trader says it's time to buy some shares of this mystery financial titan. We will reveal the name. Welcome back. It's time for three-stock lunch, where we hit three different names making headlines and ask our trader how the viewer should be investing.

Here with our trades today is Eddie Gabor. He's a partner at Key Advisors. Eddie, it's good to see you again. I want to start with J.P. Morgan. They are up 22% this year. The trading desk, like many, has benefited from this volatile market. Investment banking was up 7% in its second quarter. And just in the past hour, J.P. Morgan is now overhauling its quantum computing division and poaching a state streak executive to helmet. So if you liked it before, you're going to love it with quantum. What do you do here? We're buyers of J.P. Morgan. We think the environment over the next 12 months is going to be a perfect storm for bold. market and financials. And J.P. Morgan has one of the best CEOs on the planet. And we think the market still has 20% more upside, which means their wealth management side of the revenue is also going to increase. So deregulation, tax cuts, and the economy re-accelerating and booming over the next 12 months is going to vote real well for this name. All right. Next up, we've got General Motors.

GM is reporting its earnings tomorrow morning. But today, benchmark, a research firm, initiative and coverage of GM with a $65 target. The analyst saying the upside is underappreciated and actually they're bullish on GM's EV strategy, Eddie, because they say they get it right. They're not trying to be all things to all people. They want to right size the business for the amount of customer demand. Do you agree with the call? I'll take the other side of that.

We see them struggling in the EV space, especially in China. There are more and more people getting into the marketplace at lower price points. So we think they're going to continue to be challenging. The other problem is we're worried about the consumer maybe front-loading car sales in the first quarter to get ahead of tariffs. So that could hurt their sales here in the second quarter. All right. Then let's go to the last trade of the day, which is the materials sector, the XLB ETF. It's up 15% over the past three months. Eddie, what does that tell you and what would you do with it? We're buyers and materials here.

We really think there's a lot of upside in the next 12 months due to the fact that you've seen increased spending. As the EU just announced, they're going from 2% to 5% spending on defense spending. So that's going to do really well for this sector. So we're broadening out our portfolios and adding things like that and financials to those. All right. Eddie, appreciate it today. Eddie, good for you. Three stock lunch.

All right, as we had to break, Coinbase, riding optimism around crypto. We've got a stat around Coinbase, Kelly. I think it might even blow your mind. That's next. All right, let this blow your mind. With today's move up, Coinbase, Kelly, is now larger than the parent company of the New York Stock Exchange. Coinbase is a market cap, $107 billion, $3 billion more than the Intercontinental Exchange, parent of the NYSE and other exchanges. That is a sign of the Times.

Holy cow, it's a huge sign of the Times. Speaking of signs of the Times, have you checked out the trading and Open Door today? Is MeMania back? Because that stock, now it's a $3 billion market cap. It wasn't prior to this move. It's up 100%. Now it's only a $4.50 name, obviously. But on social media, people who had called, you know, Carvana years ago

are now saying that this one's going much higher on Brian to me. All of this is a sign of liquidity, momentum, and brings us back to the A block about whether to be cautious these days. Everything is awesome. Thanks for watching. And get better. Closing bell starts now.