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Microsoft's ChatGPT-4o integration, ethereum surge, retail earnings: Market Domination

On today's episode of Market Domination, Yahoo Finance Hosts Julie Hyman and Josh Lipton break down some of the trading day's biggest stories and the AI boom's impact on the market (^DJI,^GSPC, ^IXIC).

Federal Reserve Governor Christopher Waller said he favors holding higher interest rates for longer, needing several months of favorable inflation data before pursuing rate cuts. Hennion & Walsh chief investment officer Kevin Mahn warns that this could be a slippery slope: "I think the Fed needs to be careful because if they keep rates too high for too long, they risk their own forecasted economic slowdown moving into a recessionary period."

Microsoft's (MSFT) Build event kicked off with a series of announcements, like new plans to integrate OpenAI's ChatGPT-4o into its Azure AI Studio offering. This is the tech giant's latest artificial intelligence push to make it a key competitor as the AI race heats up.

Ethereum (ETH-USD) prices are surging amid renewed optimism of the Securities and Exchange Commission (SEC) approving an ether ETF. Similar action in the crypto market was also seen in the lead-up to the SEC's decision on spot bitcoin ETFs at the start of 2024. Bitwise Asset Management CIO Matt Hougan expresses confidence, stating that the odds for a spot ether ETF approval are "up above 80% before the end of the year."

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On the retail front, Lowe's (LOW) and Macy's (M) both topped earnings expectations. However, shares of Lowe's are falling after the home improvement retailer saw a pullback among consumers in the do-it-yourself (DIY) segment, with sales in that category declining. Meanwhile, shares of Macy's are climbing after the company raised its full-year guidance amid weak consumer spending.

This post was written by Melanie Riehl

Video transcript

Hello and welcome to market domination.

I'm Julie High and that's Josh Lift in the live from our New York City headquarters.

We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.

And here's your headline blitz getting you up to speed one hour when closing bell rings on Wall Street, obviously as a poster child for the A I boom, not to mention the best performer within the magnificent seven.

I think it's important.

We know the bar is set high.

So I think an extrapolation problem could develop, but whether that starts tomorrow is hard to say the quarter was a little bit better than expected.

Uh Expectations were not very high.

If you mentioned the same score, sales numbers were still negative, but they weren't quite as negative as expected.

It was against a pretty easy comparison because the first quarter of last year was not particularly strong.

Um So I think people were a little bit um relieved that the quarter was better than expected, higher rates, less home activity, that home price appreciation that we're seeing get better.

Maybe that turns back for the worse if, uh, if turnover slows because of rates.

So, uh, the, the, the, the stocks and the businesses are, are definitely driven by rates, higher rates, higher foreigner is not a good scenario for these guys.

Uh, so they will react positively again.

Both the, the, the sales and the stock if and when rates start to come down, we've got one hour to go until the market close and we're taking a look at the major averages here.

Not much change today.

It feels like another waiting game kind of day here with the dow almost flat line here up to 24 points right now.

Remember any game that will be a record when we're looking at some of the averages here today, the S and P up 1/10 of 1% the NASDAQ, it's the case for them up almost 1/10 of 1% here and looking across asset classes, there are some interesting moves.

Today, we continue to see a little bit of downward pressure on yields here which continues to be a little bit supportive for stocks 4.141% there on the 10 year.

We continue to watch what's going on in crypto as well, another 1.5% upside for Bitcoin, which went above 70,000 and we continue to watch Ethereum very closely as well.

We're going to have more details on that later in the show, looking at some of the sector action that we are watching today in and Energy Week.

But utilities strong again, as are the financials and speaking of utilities, by the way, because we've been talking about this a lot lately.

Utilities now the best performing group on the year, they have been for a little bit here, 14.7%.

And as we do the drum beat to NVIDIA after the close tomorrow, its earnings, there's now been this narrative that has bound up power companies, utilities with A I because of the immense power needs that are going to be necessary going into the out years as we do more data center and compute capacity takes a lot of energy.

Josh.

That's right, Julie.

So stocks searching for direction here as investors hold steady following more higher for longer commentary from the federal reserve members fed Governor Christopher Waller said today he favors holding interest rates steady for longer and needs to see several more months of favorable inflation data before lowering rates.

First guest still sees a path of fed to get the three projected cuts in for this year.

Let's now welcome in Kevin Mann Hennion and Walsh Cio.

Kevin.

Good to see you.

Good to see you as well.

So let's start there again.

So stocks relatively muted today, right?

Which makes sense, you got NVIDIA earnings on deck.

Uh But we did have more fed speak Governor Christopher Waller made some headlines effectively.

Kevin saying, listen, I gotta see some more.

In fact, several more good inflation prints before I start cutting.

So it was more that higher for longer.

Mantra.

What did you make of it?

Yes.

I think the fed needs to be careful because if they keep rates too high for too long, they risk their own forecasted economic slowdown moving into a recessionary period.

If you recall just in March, the last stop plot chart suggested three rate cuts this year.

three rate cuts next year and three rate cuts in 2026.

Add that all up.

You got about rates about 225 basis points lower before the fed gets back down to inflation target of 2%.

So why would they be cutting interest rates if their inflation target isn't being met?

Because they're more concerned with the recession than they are with inflation staying above 2%.

Of course, they want to see more positive progress on the inflation front, but they're more concerned with that economy slowing too much and dipping into recession territory.

Is that to give the dots a little too much credence though?

You know what I mean?

I mean?

Even Jay Powell seems uncomfortable with the dots at best.

Right.

So there's what the dots say, there's what the market thinks and then there's reality of what's actually gonna happen and, and nobody actually knows the reality of what's gonna happen.

None of us have a crystal ball and chair Powell doesn't have a crystal ball.

No, definitely not.

So, you know, when you're looking at, if indeed you think that they're really focused on the possibility of recession, what are some of the signs you're looking for that might be?

You mentioned a couple of them.

What are you watching most closely to see if some of that is coming to fruition?

Sure.

So I look to first quarter GDP growth slowing to 1.6% well below expectation.

Then I look at the most recent consumer sentiment survey slowing to its lowest level since July of 2022 we saw unemployment tick higher the 3.9%.

And we're also seeing an over leveraged consumer now starting to slow down the pace of spending if they shift to servicing all of their outstanding debt at higher interest rates as opposed to spending the economy will slower.

Kevin, let me ask you another question on this.

So I, I look at commodities, right.

We were talking about this on this show.

Just the moves.

We are seeing copper, aluminum, silver, gold.

How does the fed possibly cut Kevin in the face of those kind of moves?

I mean, at the very least, do you think it kind of just it complicates Jay Powell's job?

Uh I think it goes back to the early seventies, right?

The last time the Federal Reserve cut interest rate before getting back to their 2% target, Arthur Burns was the chairperson at that time when he cut rates, what happened?

Inflation came roaring back, hit double digit levels.

Then Paul Volcker stepped in and raised short term interest rates jobs to 20%.

We think five and a quarter percent is restrictive.

He raised it to 20% killed inflation.

But it also brought on a pretty severe recession.

I think that's what they're trying to navigate right now and their job isn't easy, but I do believe that they wanna cut interest rates.

They just need more data to validate that first rate cut.

But when the first one comes, I would anticipate a multi year, slow, gradual interest rate reduction pattern.

Ok.

So what does all this mean for stocks?

I mean, we have had bear after bear on Wall Street saying, uh I was wrong, Mike Wilson and Morgan Stanley was the latest.

JP.

Morgan's Kano is the last one who remains somewhat bearish.

So, but it seems like no matter what these people's outlooks are, stocks are gonna go up.

Yeah, but I do think the market has got a little bit ahead of itself thus far this year price in the perfect execution of a soft landing by the Federal Reserve and we're clearly not there yet.

So each time a successive FO MC meeting goes where they don't cut interest rates, you could see some more short term bouts of volatility.

But once that first interest rate cut does occur, then I think you'll see a tailwind for both stocks and bonds.

Beyond just NVIDIA, all the talk this week is about NVIDIA and I do believe the stock market has been riding in the wave of NVIDIA for the better part of the last year.

And that wave is about to get bigger tomorrow.

Yes, that's, I, I was gonna go there, Kat, I wanted you to take a video on deck earnings after the bell tomorrow.

I, I wanna, you know, just kind of walk us through what you expect there and how important is this for the market?

It it's very important.

I expectations are for earnings per share of about $5.22.

If that comes through, that represents a 406% year over year increase.

And I do believe that there's gonna be more talk by NVIDIA about building out their own data centers.

Data centers is often very forgotten part of the A I ecosystem.

You mentioned ear in your earlier segment that tremendous electricity demand coming from data centers.

It's estimated by 2030 data centers alone will consume about 10% of our country's electricity.

That's tremendous, right?

But there's other companies that are stepping in to help address that very type of need.

A company like ver of which we like in the industrial sector.

What do they do?

They supply the electricity, the infrastructure and the cooling solutions to data centers.

How about a wrist and networks?

They supply the Ethernet switches that power and make data centers work efficiently.

There's so many other opportunities beyond NVIDIA out there, but everyone's focused on NVIDIA and rightly so, is it an or, or an and it's an ad?

It's clearly an ad.

I don't think you abandon NVIDIA by any means they could be the ultimate winner of the air race.

But there's so many more opportunities and just a specific question to NVIDIA because there was a report today in the financial Times that Amazon was sort of putting on pause its orders with NVIDIA.

Yeah, it's waiting for Blackwell to come out.

That's the next generation of NVIDIA chips.

And this has been a concern among some investors and analysts that because clients were saying, well, we've got the Hopper chip that's here, but we want the better one that's coming out later this year.

So we're not gonna order any more hopper.

We're gonna wait.

Is that a concern for an NVIDIA?

Is it gonna cause some hiccups or does it provide for more back loaded positive earnings growth later in the year, Blackwell is promising 25 times less cost and 25 times less electricity usage that's powerful.

Plus NVIDIA is trying to go go beyond just chips and offer the whole packaged A I solution plus getting more Capex spending in data centers, they're not stopping here and we're gonna continue to grow and Blackwell is also gonna be more expensive by the way.

So it's, but it's also the move it's made though Kevin into this print is a headline wrapper.

I mean, it's up 90% already this year.

I mean, expectations are just red hot.

I mean, clearly it's setting up for a potential disappointment, but I don't see that disappointment coming.

I think they're gonna guide forward looking ahead to projected Blackwell sales with the deliveries anticipated for the second half of this year.

And then once they start focusing now on data center expenditure and growing in that market as well, I think it could move even higher, which is tough for me to say because I'm a value oriented investor and they're trading at pretty rich multiples right now.

But if you factor in the earnings expectations, not too expensive, always good to see you, Kevin, thanks for coming in.

Appreciate it.

All right, is sticking with tech.

It's day one of the Microsoft build event.

Our Dan Halley is in Washington at that conference in Washington State.

That is Dan, what can you tell us about the event so far?

Yeah, Julie, I'm here in uh Seattle at the Seattle Convention Center.

Uh We had Satya Dela take the stage as well as uh Kevin Scott and special guest, Sam Altman of Open A I.

Uh Essentially what the, the big to do here is is A I I know you guys are just talking about NVIDIA.

It's trickling everywhere.

And Microsoft obviously with their, their team up with open A I being a huge beneficiary of it.

The, the big deal here is them getting uh GP T 40 in to their Azure suite, which means that companies will be able to build their own kind of copilots, which are essentially A I assistance using GP T 40.

And so that's a huge deal for Microsoft to be able to offer to its customers.

And in addition to that, they talked about how they're building out github as well and they're going to continue to offer various copilots across its different offerings.

But really, I think the main deal here is, is that GP T 40 is going to be available right away uh for Azure.

And that's something that Microsoft really does have as a big benefit over the likes of someone like Google or Amazon and Dan.

So you're there right now and, and Microsoft executives, they're on stage.

You're talking chat, G BT 40, giving demos.

How should we expect how that technology, Dan is gonna just kind of change the way we interact with our computers?

Yeah, I think the, the big deal with, with this in particular is the they, they call it multi modality.

But really what that means is that you'll be able to use video uh voice and text and it's the video aspect that's really kind of fundamentally different than what we've had before.

There's been video offerings in the past.

But the way it, it all comes together in this package is truly interesting.

And so some of the ways that they demonstrated on stage in some prerecords demos, albeit was a developer having trouble with a code.

They were, you know, doing their coding, they couldn't figure something out.

And so they pulled up the copilot on their, their phone or powered by GP T four and they said, hey, what's wrong with this code?

And they use their camera to show the A I the code on their computer screen.

And then it was able to say, oh, hey, why don't you try changing this aspect of the code to get the outcome that you want?

So those are the kinds of things that really start to get you thinking about.

What does the potential future of this technology look like?

It's not just H I GP T make me a dumb poem or something like that.

It's really a fundamental difference.

Now, when you add in the video as well as the voice.

And so I think that's where a lot of companies are going to end up going.

Now, obviously, the, the big question remains as far as hallucinations go accuracy.

That's something that they're continuing to work on different technologies like rag that they're using to cut down on hallucinations and the more they advance, the fewer they'll be uh that being said, this is still one of the most interesting technologies to come out of this and as you were talking about NVIDIA, it's going to need to be powered in some way.

And NVIDIA right now is the one that's doing it.

Indeed, they are.

And we're uh in case we didn't mention the reporting earnings after the close tomorrow.

I'm not sure if we know that Dan.

Thanks so much.

Appreciate it.

We're just getting started here on market domination coming up.

The, the and Bitcoin are soaring amid growing optimism that the ETF could be approved.

As soon as this week.

We're going to speak to the CIO a bit wise on the other side about his firm's efforts to get a TF approval plus shares of Tesla riding higher.

After the maker revealed new details about it program, we'll tell you when you might see Tesla tractor trailers on the roads later in the hour and at 430 Eastern time, it's the latest edition of our new show.

Asking for a trend.

I've got you covered with the latest market moving story so you can get ahead of the themes affecting your money.

Stay tuned, more market coverage after this.

The number two trending ticker on Yahoo Finance right now.

It's one that doesn't always make an appearance.

The fresh optimism about the securities and exchange commission approving spot the ETF ahead of the first deadline later this week and joining us now is bit wise asset management, Cio Matt Hogan that it's great to see you, you guys of course, an application in for Ethereum ETF, you got your spot, Bitcoin ETF approved along with the others earlier this year.

So I know that you're also encouraged by some other developments in Washington, which we'll get to in a second.

But I do want to ask about this first and what you guys are hearing and how close do you think it might be?

Absolutely.

It's great to be here, Julie, this has been a big change.

You know, I think last week the betting markets on P market had about a 10% odds of seeing a spot e approval and now those odds are up above 80% by the end of the year.

So the market is voting that this is likely we're seeing that as issuers update their 19 B four applications.

It's not a guarantee that we're going to get to approval, but it looks a lot more likely than it did last week.

And you're seeing that reflected in the price and the fact that the ticker is trending there on Yahoo and Matt though, you know, you think about Gary Gensler and how, you know, listen, he, he didn't want a spot Bitcoin ETF, there was a lawsuit.

I mean, do you think there ultimately is gonna have to be a lawsuit to see a spot Ethereum product?

You know, I thought that might be the case, but it looks like common sense might prevail.

We already have Bitcoin futures ETF S and we got a spot, Bitcoin ETF, we have Ethereum Futures ETF.

S and now the market is pricing in the likelihood that we'll get a spot Ethereum ETF.

And I think the important thing to remember is look at what the Bitcoin ETF accomplished.

It dramatically lowered costs, it made it safer and more regulated to access Bitcoin.

Those are wins for investors.

I thought we might need a lawsuit, but I do think common sense is going to win out here.

And, uh, and I think that would be great if it does.

What changed Matt, I mean, there's been some reporting here that the securities and exchange commission has now sent out requests for comments or follow up requests to some of the firms.

Have you guys gotten a follow up request from the SEC?

And why do you think that they did this all of a sudden?

I mean, it seems as you said, the, the, what's reflected in the, in the markets pricing this in, it's changed pretty quickly.

Yeah, obviously I can't speak to our specific filing because it's live at the SEC.

But you are seeing issuers update their filing bit wise, certainly plans to be competitive in this market.

I think it's a little bit what you hinted at at the top of the segment which is there has been a real sea change in Washington around crypto.

We saw the first piece of comprehensive crypto or positive crypto legislation passed both Houses of Congress with the S A 121 reversal.

We're seeing a coalition, a bipartisan coalition emerging around Stablecoins.

It looks like Washington has gotten the message that crypto is good for America and that it's popular with American voters.

And I think that's trickling through into different parts of policy.

I don't know that that's specifically what's driven this change around Ethereum.

But I think it's hard to look at what's happening in DC and not see a change taking place in multiple areas including in the ETF market.

I'm interested, Matt, you know, you're talking, there are a lot of about what's going on in the nation's capital and, and with this upcoming election, I I am curious to get your sense of how much you think crypto is gonna be an issue.

You can see Trump, of course, really positioning himself as, as a fan to the crypto faithful.

I think it's fair to say GOP broadly has become kind of more friendly uh Matt to the asset class.

Do, do you see crypto, in fact, during this election becoming this kind of, you know, ideological dividing dividing line?

Yeah, I, I think it's going to be an important factor.

I know that sounds crazy to some people.

How could something as relatively small as crypto influences something so massive as the US election?

But remember that there are very close contests in many congressional races and indeed for the presidency, handfuls of thousands of voters can really swing things.

And there are a lot of people who deeply care about crypto.

I think what you're trying to see is the Democratic Party move more towards the center on crypto, embrace it as part of America's future.

Uh And that's positive.

So I do think it is a major factor.

I think the other major factor is traditional Wall Street now wants to participate in the gold rush.

That is the crypto.

So I think you're seeing some lobbying forces from Wall Street, move the political discussion and you're seeing the growing political influence of crypto shape the nation's politics a little bit in those close markets.

I think it's a game changer for the crypto industry.

I think it's going to push us to do all time highs Matt real quickly.

Who's better for the crypto industry, Biden or Trump?

Look, I think crypto can thrive in any environment.

I think the worst possible outcome for crypto would be a democratic sweep of both houses of Congress and the presidency.

But absent that a mixed market either way, I think uh it's, it's a good, gonna be a good four years for crypto.

All right, Matt, always great to have you on the show.

Thanks for joining today.

Thanks for having me sticking with the prospect of another spot.

Crypto.

ETF Jared Blick is here now with a look at the lessons learned from what happened with Bitcoin Jared.

Yes, it's uh hard, easy to forget that.

Uh Only at the beginning of the year, we are still looking forward to the spot Bitcoin ETF approvals and I'm gonna put up a chart here of Bitcoin.

This is gonna be over the last year and things that rumor mill really got started last October.

We didn't get the approvals until let's say mid January.

And we actually saw a little bit of declined, sell the news on that, but then we rose to record highs and that's where we've been kind of languishing in this, in this upper end of this trading range here.

Now with Ethereum, really interesting that this comes right now.

It was only a week or two ago that President Trump himself came out as a pro crypto candidate.

And it's leading a lot of people to speculate that this reversal, this sudden reversal that we saw at the SEC with respect to the spot Ether is because the Democratic Party wants to be more competitive in crypto.

So whether or not that's the case, I do want to point out Jim Bianco has pointed out rather and I'll echo his sentiments here that the whole purpose of the spot Bitcoin ETF that there is going to be this wave of boomers and people just absorbing all this, all this Bitcoin into their 401.

This did not happen.

In fact, we see the Bitcoin ETF flows.

This is as of this year.

So this is year to date, largely just following the price.

Bitcoin topped out right in here.

And this is when it started trading in that range and that is when the flow started decreasing.

So we haven't seen the promised uptake in people's 401 that could happen.

But nevertheless, the fact that this is now a political football is just bullish for crypto, you're probably going to see a lot of favorable statements into the election.

So take that for what you will, Jared.

Thanks a lot.

Appreciate it.

We'll continue to be on top of this.

We're checking in on some of today's other trending tickers.

Let's talk about Macy's, those shares are higher after the company top first quarter earnings expectations and raised its full year earnings guidance.

The finance is Brooke Dipalma here with some takeaways from the last quarter as you pointed out, you write up this morning.

Yes, they beat, but the expectations were quite low.

The expectations were quite low for a department store chain that is in between a turnaround strategy or a buy out bid.

And so w was, and at the end of the day, somewhat in press shares up now, roughly 3%.

But what the CFO uh Macy's CFO Adrian Mitchell did tell Yahoo Finance was that in the early days of their new chapter or their new uh strategy that bold new chapter they call it.

They do believe that they're getting traction.

They did say that it's early days though.

And what gives them confidence that this turnaround strategy is working and giving the street confidence as well is that those 1st 50 stores that they invested in?

They saw sales uptick of 3.3% and they're introducing new brands, think free people, French connection, a more higher end brand that seems to be trending well with customers.

They're also increasing staffing visual presentation and digital investments at those locations.

Now, as far as uh the outlook for the company, they do expect sales to come in between a 1% drop to 1.5% lift.

But CFO Adrian Mitchell once again, citing that this is a difficult consumer background environment and they continue to believe that there's a lot of uncertainty and inflation continues to remain stubborn, perhaps pushing off uh customers from coming in more, but luxury brands continues to do well for them.

They're seeing a lot more ground there.

They believe Blue Mercury saw comps up 4.3%.

They plan to build out 30 stores in the next three years and Bloomingdale's comps are up 0.3%.

They plan to build out 15 stores across outlets in smaller format.

So people still liking and going to those luxury retailers.

I thought it was interesting, Brooke and you, you touched on there sort of the commentary and color we got about how they were thinking about the consumer Ceo Tony Spring, right?

He's talking Yeah, Tony Spring was talking about, listen, strong job growth and wage growth.

But to your point, he also talked about stubborn inflation and, and it's a headwind for his, for his customers.

Yeah, it absolutely is.

And what's interesting is we're seeing these two different dynamics play out under one.

You have those luxury brands that seem to be doing somewhat well, definitely better than the everyday Macy's customer.

Yeah, Lowe's also reported.

What, what you can tell us there, what was the take away?

Yeah, the company also beat earnings but once again, low expectations there.

So a similar saga and they're also citing a cautious consumer there on the call.

The CFO there said that consumers are digesting and adjusting to monetary tightening and they're kind of remaining on the sidelines.

Now, similar to what we heard at Home Depot that Diy that every day customers pulling back, Lowe's did see same source of sales fall 4.1% and the Diy customer actually makes up a larger customer base for Lowe's than it does for Home Depot.

It's about 75% of Lowe's shopper base.

And so the pro business on the other hand, think strength and roofing concrete and block drywall installation, that business offset that decline in the Diy customer and online sales also saw city of com sales for Lowe's.

They did announce that they are really investing in the Diy Loyalty program and they also expanded their C MD delivery with doordash and they also have a partnership with Instacart.

So they did see online sales do well for them.

The shares are down, shares are down off of that cautious consumer right now.

Exactly.

So, it's interesting, I guess it's just all an expect expectations game because in the case of Macy's, it was sort of similar in terms of what they're expecting and what they're seeing and the temperature from the customer, the Lowe's kind of saying the same thing and getting punished more for it.

But I guess it's, it's relative to expectations and what the stocks have done.

Yeah.

What Lowe's shares I should point out down now about 2.5% as you make your way to the close.

But really, uh Lowe's customer sort of says we have all the uh capability.

We're just waiting for that customer to be able to come back to the store, be able to have that actually your cash in hand to lean back into that home renovation.

He said that the customers are still looking for experiences over doing those Diy home rental pro projects and also the housing market.

That's really what they're waiting on it, that to rebound as well.

I wonder too Brooke, how much is like pandemic still hangover?

I mean, how many people?

Right.

Remodeled.

They did that.

They did all that, right.

And, and now you can still sit on it.

Yeah.

And a lot of people did buy new home during the pandemic and they really invested in those homes that they lot.

So now, once again, as I just said, Lowe is really waiting on the customer, the new customer to then buy a house and then have the money, you know, and thinking of interest rates, thinking about how much more customers are paying these days for housing.

They just at the, at the end of the day, even if they're getting that house, they simply don't have the money to put back into it.

Right?

All right, thanks a lot.

Appreciate it.

Brooke.

Well, shares of Trump media and technology.

That's another one.

that is trending DJ T of course, is the ticker.

There is chairs are sinking after reported net loss is nearly $330 million in the first earnings report.

Since going public here, their revenue fell from $1.12 million a year earlier to $770,500.

So that's not, you know, I mean, to be clear, this thing doesn't really trade on, on whether it makes money or not.

No, the New York, the New York Times had a good piece though.

Kind of looking at, I'm sorry, Julie, Howe sort of Trump's financial future is now kind of linked to this endeavor because we, we, we were talked about this when it debuted in March.

You know, it, it turned his stake into a $5 billion bonanza.

But of course, as, as the Times Notes, it's precarious because really, you know, there's no products here beyond true social which right now still has a small audience and, and the revenue trends you're pointing out.

Right.

Well, and he owns almost two thirds of the outstanding shares of this thing, but there's the lock up period so he can't sell shares until six months after that debut that you referred to.

So are the shares lower than they are now, you know, we'll see what happens if other people are buying the shares because they believe in him and then he starts selling when we get to that six month point who that's not gonna be so you know, comfortable for other people holding them.

We'll wait and see coming up shares of First Solar they're soaring today after getting price target raises from Piper Sam and U Bs and check in on some of the top calls of the day when market domination returns.

Let's get some calls of the day.

We start with Piper Sandler, U BS both raising their price targets on first solar yesterday, we spoke to first solar Ceo Mark Widmer and he told us about what has been driving the solar industry.

Look, I think it all started with the, you know, inflation Reduction Act, you know, that was announced a couple of years ago now, almost two years ago.

Now um that enabled kind of this first of a first of a kind opportunity for this industry, a whole of industry approach that could now see across the balance of this decade.

And when we talked about the investments that his company is making in R and D this year, they're also gonna be the beneficiary of a billion dollars worth of tax related subsidies as a result of the IRA.

And that seems to be what's behind at least one of the calls here.

Yeah, it was interesting.

So the team at U BS is saying basically A I driven electricity demand is gonna ramp and that's good news in their opinion for this name.

Take their targets use 70.

They reiterated by, they talk about how A I uses A I uses about 10 times more electricity than traditional Google search.

And they talk also about big companies, Amazon Microsoft Meta Google have kind of committed here to purchasing renewable power equal to their consumption electricity, right?

This push the subsidization, the incentives that are in place in to have them sourcing that power from renewable sources.

Um Kashi Harrison over Piper Sandler raising his price target to 219 from 195 and pointed to some of the inflation Reduction Act measures that will be helpful for the company.

Something just quickly that I want to point out from the U BS note from John Wyndham is the numbers.

He said he's estimating earnings per share will grow from $7.74 last year.

To $36.74 by 2027 and sees gross margins expanding too.

Yeah.

I mean, it's a long, it's a relatively long ramp, but that's a, that's a big jump.

You can see these investors piling and just pull back that chart.

Julie's stock is up about 30% now, since, since early March.

I mean, your point also seen as just one of the winners of these higher tariffs.

Yes, exactly.

Uh shares of Exon, let's check that out.

They are rallying today after the company reported better than expected first quarter earnings.

So Chinese ev maker Ju Lee, they reported it looks like a narrower than expected.

Q one loss revenue jumped about 60%.

That was better than estimated margins look like hang in there.

They delivered about 22,000 vehicles.

They're targeting 29 to 30 thou 32,000 vehicles this quarter, analysts had actually wanted to see something closer to 38,000 so I miss there but investors boomed in.

Yeah, and they didn't do great last year.

You know, we've seen some challenges among some of these Chinese ev makers, Lee Otto came out with disappointing numbers earlier in the week.

Exon uh does have partnerships with some other automakers like Volkswagen for example.

And it is talking about new products coming to market before the end of the year.

That will be in a pretty wide price range.

So designed to appeal to a pretty broad swath of consumers.

The question remains whether Chinese consumers are feeling spendy when it comes to these eb companies, the stock is higher today.

We should mention though this has been a slog.

I mean, the stock was down about 40 percent this year through Monday's close.

Here's what the team at.

Bernstein told their clients margin improvement is encouraging but they say more proof awaits on the core recovery.

They stick with their market reform rating.

In other words, they are on the sidelines.

Well, let us stick with electric vehicles and talk about Tesla shares of that company rising after it provided an update on its long awaited electric semi truck project or I should say semi truck project.

Here are the details.

Is Yahoo Finance is pro Superman and semi for truck, semi four conductors.

I think I've heard both.

Ok. Well, in any case we're talking about tractor trailers is what I what I always called them.

Tractor.

This is a weird term.

A tractor trailer.

I never understood the whole the whole concept.

But anyway, yes, update on the long awaited semi, semi, semi semi truck.

Yes.

Uh the car that a truck, sorry that came out that was debuted in 2017 still is in the pilot testing of that vehicle right now.

So basically uh uh the project, the project manager was speaking at the Act Expos or the alternative Clean Transportation Expo.

Someone how they're on track to deliver these by early 2026.

Um, there's a new facility they're building attached to Giga Nevada.

When that gets fully ramped up, they'll be potentially producing 50,000 units a year, which was, uh, I think, kind of a, uh more than we thought they would be kind of produced for this, such a big, big vehicle.

But anyway, uh early kind of specs here, the 500 mile range version, the long range one, we about 23,000 and the, the kind of the 300 mile kind of intermediate uh length uh truck, uh range truck is 20,000 sorry, a lot of numbers here.

So, yes.

Uh I think some, some bullish is there for that vehicle to tell us about how they have 3.5 million test miles done both with Pepsi co their original test partner and also they're using the truck to deliver batteries from their uh battery facility in Nevada to the Fremont factory.

So a lot going on.

They're trying to ramp up this truck.

It's working.

It's, it seems to be pretty efficient.

They, they're saying, um, they can do pull a full 82,000 load.

Uh The beginning runs of 250 to 500 miles, uh based on how the elevation changes, things like that.

So, uh, pretty kind of efficient there for this long haul, uh sort of uh truck real quickly.

When are we gonna see this on the road 2026 when they say early 2026 1st, real beyond production or beyond pilot spec models.

So we'll be looking for them.

All right, thanks for us.

Appreciate it.

Coming up.

The defense sector has underperformed the broader market so far this year.

But things may be better than they seem.

We will discuss in our investor playbook.

The US facing a grim milestone when it comes to the federal budget.

Our own, Rick Newman is here to explain, Rick, I watch these numbers pretty closely every month.

Guys.

The treasury puts out a monthly statement statement and it looks like something is gonna happen for the first time this year, which is that uh payments on the national debt, which is called net in net interest payments.

That's what the government has to pay to borrow.

It looks like that is gonna be higher than defense spending uh this year for the first time, it's also gonna be higher than Medicare spending.

So just a couple of years ago, this was the seventh biggest category of money going out the door in Washington DC.

Now it has risen to number three.

and we basically know why that is number one, the gov, the government is just borrowing incredibly large amounts of money.

And second, uh the interest rate the government pays has been going up because interest rates overall have been going up.

The government has to pay market rates when it borrows money uh it pays those interest rates to consumers, us investors.

Uh and we're getting more for our money these days.

So this is an unsustainable problem, like many other uh parts of the federal budget situation, but not surprisingly, nobody in Washington really wants to address it any time soon.

Well, so Rick, what are the implications of that?

I mean, you say it's an unsustainable problem.

There's a lot of quote unquote, unsustainable problems that have been going on for a long time.

So they seem pretty sustainable.

So like, you know, what, what, what are the implications of this?

What happens as a result of this?

Well, I mean, we've started to see the, the process, I think it's gonna be a slow process, but uh we've seen uh a couple of downgrades of the US credit rating.

That's one example, the first one came in 2011 and then not much else happened until last year when we saw a couple more downgrades.

Uh The thing that is going to force politicians to deal with, the problem is going to be an adverse market reaction.

It's going to be uh when investors and when financial markets just come to the conclusion that the fed is, excuse me, the treasury department is issuing too much debt.

Uh And that there's increasing question about the creditworthiness of the United States its ability to pay and that is gonna force interest rates higher.

Now we, we saw a few wobbles in the market for treasuries, uh, during a couple of auctions last year, and the Treasury department changed, uh, some of the things about the way it ran those auctions and it seemed to straighten things out.

But that was, I mean, a lot of people think that was a warning sign.

Uh, we saw interest rates a little bit higher than markets, um, would otherwise have driven them last fall and that is what a debt crisis is gonna look like.

Now, the Treasury seems to have um gotten that problem under control for now, but that was a hint of it and when it happens big time, uh that is going to be the thing that forces uh the the politicians in Washington to deal with it.

Nobody knows when it's gonna happen, but it is probably gonna happen.

Well, we've seen it happen in other places uh that have been on similar paths.

So Rick, thank you very much.

Appreciate it.

Bye guys.

Simply put geopolitical tensions are high amid the ongoing Russia Ukraine war escalating conflict between Israel and Hamas have threatened to spill over in the Middle East yet against this backdrop.

Defense names have failed to see significant upside the sectors underperformed the broader market this year.

But there could be opportunities ahead.

We're helping you navigate the big picture with the Yahoo Finance playbook and to discuss, we're joined by two senior analysts covering aerospace and defense.

Ronald Epstein from Bank America Securities and Jason Gy from city guys, thank you so much for being here.

It is a dense issue but one that is important to sift through when we look at these particular stocks.

Jason, I want to start with you because if you look at the US Department of Defense budget here, um you know, it's still going up into the right, so to speak, it is still growing.

Why have we not seen us Defense stocks benefit as much?

Well, uh it's all about expectations and what the budgets are going to look like uh going forward.

And I think they look at a couple of things uh that have, you know, given some pause uh to investors here of late part of the part of that's the setup uh that you just had leading into this conversation here, right?

The uh the potential crowding out effect of higher interest costs, um you know, this uh we, we've got choices here, right?

As uh at the federal government level, we can raise taxes.

Uh we can uh you know, decrease spending in, in, in other areas as interest costs become a greater percentage of the overall budget.

Um or we can reform ourselves um particularly on, you know, what's deemed to be the third rail of politics, which are the entitlement programs like Medicare, Medicaid uh and Social Security.

So that's, that's, that's one area, it's the crowding out effect.

And then the second part of it is political dysfunction and just watching what's going on in DC, uh seeing elongated periods of time in which it takes to get a budget approved, um seeing things like uh debt ceilings getting threatened, you know, going over some sort of gigantic cliff, you know, committing suicide kind of thing.

Uh and uh and then budget caps, um you know, coming out the other side of these, these things that, that often times uh in, at least in the very near term kind of ruin sentiment uh around uh defense spending because suddenly investors are afraid that there are artificial spending caps put on, on defense spending.

So those are the two things.

It's um you know, uh the crowding out of interest, uh cutting out of interest, expense and, and fear around the political dysfunction in DC Ron.

Let let's bring you in here as well.

Maybe we just our big picture, Ron broadly, you know, when you look at your, your coverage universe, Ron us defense names, how, how bullish are you on the sector, Ron in, in the kind of near to intermediate term here?

Yeah, I'm actually uh quite bullish on this sector.

Uh If you look at the the defense stocks during presidential election years or if you go back to 1980 anyway, and you were to look at say a basket of defense stocks, they tend to outperform during presidential election years, about 80% of the time and when they do, they tend to outperform by a AAA wide margin, uh almost over 1000 basis points.

And if you take out a couple of years, that were just kind of massive years, it's still hundreds of basis points.

And if you peel back the onion on that, uh during an election year, typically they outperform in the second half of the year and the bulk of that happens in the third quarter.

So no surprise around around election time.

So when I look at the underperformance of the sector relative to the broader market and maybe even things like commercial aerospace in the first half of the year, I think the set up into the second half of the year is, is actually pretty good.

Uh And then, and, and when you look at the, the outlays from the US Treasury, um they're a good coincident indicator for the sector.

Uh They've been up and accelerating.

Um that's good for uh good for the the defense stocks.

So, yeah, I my, my, my stance here particularly, you know, kind of short term in the second half of the year is actually quite bullish.

Um So it sounds like both of you see some uh some scenario for upside here, Jason in terms of the stocks that you think are perhaps best poised among the largest uh aerospace and defense companies.

I know you're looking at Lockheed and general dynamics.

What is differentiating those two?

Yeah, the first thing I'd say out of the gate here is II I am on board here with, with Ron's uh thesis that the back half of the year is going to be pretty good for defense stocks because I think we are going to begin seeing uh the the backlogs that have grown here 15% over the last few years begin to make their way through the revenue streams.

And important, I expect margin expansion to become an investor narrative as we move into the second half of the year because these companies are starting to roll off the pre panem backlogs that they had where they had to absorb inflationary costs as well as um uh supply chain bottlenecks that led to higher costs uh for them all over the last few years.

Those contracts are rolling off, signing up new ones that better reflect the current cost environment.

So we've got accelerating revenue and accelerating margins uh as we move into 25 and beyond.

So I think that's going to be good now, as far as uh Lockheed is concerned with this one right now is kind of all about the F-35 um that aircraft uh is not delivering today um in light of some technical issues they're having with the software on that aircraft that should work its way out here over the next 6 to 9 months.

And I think uh investors will breathe a big sigh of relief when that happens.

I think that's an identifiable catalyst for Lockheed in the second half of this year.

And look as far as GD is concerned, chip banker, uh chip budgets are going uh have gone quite a bit higher here.

We got a lot of work ahead of us.

Uh The supply chain bottlenecks that I just talked about are getting better that will benefit GD.

And then these guys also own a bi jet manufacturer called Gulfstream that just introduced a new product.

And I think we're likely to see accelerating revenue and margins uh in their aerospace segment as well.

So, um here again, uh pretty constructive on, on both these names.

And Ron.

Another question I have for you, I'd be real curious to get your take on.

This is, you know, how venture investors, Ron have discovered defense tech start ups and, and they've moved in, we had Andre's uh Palmer lucky on the show and it's, it's impressive what he and his team, the the portfolio they've built out, Ron in a short amount of time.

How much competitive pressure do you think these kind of smaller nimbler defense tech start ups actually pose to just kind of bigger, more established names you cover?

Yeah, I mean, they, they will potentially pose pressure one day.

Um They're not there yet.

However, um they are, you know, gaining some share.

I think a couple of really notable things.

There were a couple of contracts that were just awarded by the US Air Force recently.

Uh One was for the so called doomsday aircraft.

Boeing was up against S Sierra Sierra Nevada Corporation.

Uh It's a privately held company and Sierra beat Boeing.

Uh There's another one that was, you know, out for something called the CC A, the collaborative combat aircraft that was won by uh and, and is one of the companies that, that, that won it.

And General Atomics was Andre is one of the, the, the new kids on the block.

And General Atomics is a privately held company.

So you've seen some privately held companies in start ups gaining some share.

Now, it's just small pieces of the larger industry.

So we'll see where it all goes.

But what these, these new companies are bringing, uh, to the dod is, I think a fresh approach to defense contracting, a focus on software, a focus on the, the interplay between software and hardware that is to say, building hardware around software as opposed to stuffing software in hardware and there.

And, you know, we'll, we'll see where it all goes.

But, um, you know, if I were at one of the big contractors today, I most certainly would be looking at, uh, you know, and all shield A I among others as, you know, you know, a potential threat down the road.

Well, and sort of on a related point, Jason, do you think that these large defense contractors are doing enough internally to innovate to keep up with some of these, um, upstarts and, or do you think we're going to see some of the start ups being snapped up and being acquired by the public companies?

Yeah, probably more the latter, to be honest with you.

I mean, they all have, uh, you know, corporate venture capital arms.

They are, you know, looking to partner with smaller companies, uh, looking for technology plays, um, and, um, you know, just kind of like Cisco did back in the day or some of these tech companies done back in the day, right.

They, they use MN A as uh as their R and D budget.

So I think this is very well could be the way that plays out here in the defense uh world uh as well.

Ron quickly here.

I'm just interested to get your take on rocket lab.

Rough start.

Ron said about 20% so far this year.

But you say it's a buy Ron, I do.

Yeah, I mean, there was a, a whole cohort of spec funded space start ups that uh many of them, you know, were, how can I say?

Um very, very early stage, weren't, weren't quite quite ready for prime time.

Um Rocket lab is the real deal and, and rocket lab currently is working on a new rocket called the neutron.

Uh They are gonna, you know, test fire the engine for that uh that rocket called Archimedes in the second half of the year.

Once they test fire that, that engine and that's a, you know, bode very well for Neutron, once neutron goes into surface, which is supposed to be some say in the middle of next year, that will be a competitor to the Falcon nine.

And we've seen how successful SpaceX has been with the Falcon nine.

This will be another medium lift launch vehicle that will address that market and having there's plenty of launch.

Um there's plenty of demand for launch in that segment of the market.

So this is potentially a game changer for the company.

So yeah, when I look at what rocket lab is doing, uh they're doing some really amazing innovative things.

Uh And uh yeah, we, we have a ban them and uh it, it's one of the smaller companies we follow that I think is quite interesting guys.

Uh really good actionable stuff for viewers.

Appreciate it.

Ron and Jason have a good one.

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