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US indexes open mixed, pharmaceutical stocks climb: Morning Brief

On today's episode of Morning Brief, hosts Brad Smith and Madison Mills analyze the market open and break down the biggest stories of the trading week.

The major indexes (^DJI, ^IXIC, ^GSPC) opened mixed in Friday's session, with the Dow Jones Industrial Average leading gains early in the trading day.

Nvidia's (NVDA) reign as the US's most valuable publicly traded company was brief. The semiconductor giant shed $118 billion in market capitalization, allowing Microsoft (MSFT) to reclaim the top spot. Moor Insights & Strategy founder, CEO, and chief analyst Patrick Moorhead emphasizes that Nvidia's continued dominance hinges on sustained enterprise demand for its offerings. If customers stop buying Nvidia's offerings, he warns, "then this whole gravy train comes to a screeching halt." Wells Fargo Investment Institute senior global market strategist Scott Wren notes that while the computer services and technology sectors are currently "very highly valued, very momentum driven," investors should consider trimming some of their gains in these areas and reallocating into sectors like industrials, energy, and healthcare.

The pharmaceutical and biotech sectors are making major moves as Sarepta (SRPT) received expanded approval from the Food and Drug Administration for its muscular dystrophy drug, and Gilead (GILD) saw encouraging results from its twice-yearly shot to prevent HIV.

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Meanwhile, Oppenheimer has upgraded Nike (NKE) from Perform to Outperform and raised its price target from $110 to $120. Meta (META) also received a bullish call, as KeyBanc raised its price target from $475 to $540, citing sustained advertising momentum. Keybanc Managing Director Justin Patterson explains that Meta's ad revenue is "accelerating sequentially" despite intensifying competition, indicating that "demand for Meta's advertisements remains very high."

This post was written by Melanie Riehl

Video transcript

It's 9 a.m. here in New York City.

I'm Brad Smith alongside Madison Mills this morning.

This is Yahoo Finance's flagship show, the morning Brief Stock Futures slipping a bit this morning looking a little bit mixed after the S and P 500 closed in the red.

Despite reaching an intraday high over 55 in yesterday's trade could the so called triple which be to blame for the pressure that we are seeing on equities.

Let's get to it.

The three things that you need to know this Friday morning as you prep for the trading day.

Yahoo Finance is Jennifer J and on have more shares of the video extending losses this morning after falling 3.5% in Thursday's trading session, the declines wiping out $118 billion in market value for the video from the prior day ending the chip makers brief run as the most valuable public company Microsoft is now back in the number one slot.

So in the video still poised for a winning week and there's also a big test for the market today with a five and a trillion dollar triple which a triple which occurs when options on individual stocks, options on indices and on stock futures contracts, all of those expire on the same trading day.

In addition, it's S and P rebalance day with the tectonic shift in apple versus in video holdings and video has been setting records for options activity and all in all.

It's expected to be the highest volume day of the year, the defining liquidity events of the summer.

Meanwhile, we're watching a big move and bio tech shares of the therapeutics are a triple digits pre market after gaining a full and expanded after the approval for muscular dystrophy drug and shares of Gilead sciences are also higher after announcing its twice yearly vaccine to prevent HIV has demonstrated 100% efficacy in late sale trials in Africa.

Meanwhile, the Danish Bir is higher on early stage, positive results from its weight loss drugs.

Well, our top story this morning, shares of NVIDIA extending losses this morning after Thursday's trading fueled more than $118 billion of losses in market cap, pushing Nvidia's market cap back below.

Microsoft's the chip maker no longer the most valuable public company.

Some jousting for sure, taking place for that number one spot as Ludacris would say, of course, little music reference for uh Friday.

But anyway, all things considered, it's more than just Invidia that you're gonna see.

You've got individual stocks, indexes ETF S contracts, weekly contracts and monthly options contracts set to expire on Friday.

So this the famed triple witching, the uh premier event of the summer, I think Jared B we just called it.

I know the, the highest liquidity that we're gonna see of the summer after the longest day of the summer you can see on your screen right here.

The explanation what happens with expirations today.

You're looking at stock options, stock index, futures and stock index options all expiring today.

Now, this is interesting to look at when we think about the downward pressure that we saw in NVIDIA yesterday heading into triple, which are the two related and some reports and notes this morning saying yes.

And that is because you do tend to see a little bit of an opportunity to sell off and some of the biggest players in the stock market heading into a triple which day.

But interestingly, a study about some of the kind of uglier reversals that we've seen historically heading into triple, which day does indicate that those high flying names do tend to be moving to the upside in a pretty big way.

A couple of months later after we get through the next 24 hour period.

So it's interesting you can't really separate the individual stock price action that we're seeing from that broad broader triple witching picture.

And I wonder if that is why NVIDIA has lost its number one spot in the stock exchange versus any kind of idiosyncratic reason.

Yeah.

And with a volatility event or a volume event, which can also prove and transition into a volatility like event.

Uh I'm looking at some of the options A I data that's actually looking out even into next week and trying to predict that expected move post triple witching for NVIDIA and as uh as well, a bunch of other names and indexes in the market and it looks like there's an expected move of about 7.2% in either direction.

Post triple witching for NVIDIA by this time next week, June 28.

So that's gonna be interesting to track because of course, that, that would mean, uh, that we'll also be rounding out the second quarter by that juncture as well and staring down, uh, the third quarter.

My goodness, third quarter of 2024 begins in just, you know, 9 to 10 days time here.

Right.

We're, we're almost ready for earning season to restart again.

It hasn't even finished yet.

Why not?

It's always earnings season.

It's always, except for like two tiny weeks where we have nothing to talk about or we get to just pitch whatever ideas we want.

Having said that what we do want to talk about.

Of course, NVIDIA, those shares still under pressure clawing back some of the downside pressure that we've seen that stock looking like it's down about 2.5% as we head into the market open in about 30 minutes time, more experts comparing this recent A I craze to the.com bubble of the early two thousands joining us now to discuss, we have Patrick Moorhead, more insights and strategy founder, Ceo and chief analyst, Patrick.

It is always a pleasure to speak with you.

You are the foremost expert in this space.

I like to say.

So I appreciate you coming on this morning.

There's this question out there comparing NVIDIA to a Cisco.

You've been in the game long enough, talk to me about your take on that comparison.

Yeah.

So I grew up in the.com era, I think I was about 10 years into my career and there are definitely parallels, right?

Cisco was the driver and the builder of the infrastructure for the uh internet age.

Uh And there was overinvestment in this space and NVIDIA is clearly one of the biggest uh builders for infrastructure of this generative A I days.

And we do need to be very careful and look for what I call the precursors of something that could pull back.

Now, first off, I don't see anything changing for 6 to 9 months, but we do need to look at the downstream profitability that people in the ecosystem are making or not making.

These are the software companies like Adobe Salesforce Sap and Service now because if those enterprises and those consumers aren't paying more for those new A I features, then this whole Grady train comes to a screeching halt like we saw in those the internet bust.

And so all these things considered, what, what is NVIDIA going to need to continue to prove on a sequential basis at this juncture that's gonna be critical to cement this broader story that they've been able to sell the markets on.

Yeah.

So growth, it's growth, growth and and more growth.

And this next generation of NVIDIA growth, the new growth will be all about the enterprise, 80% of data for companies and businesses is still on site or on the enterprise edge.

So what they're doing is they're enabling companies like H Pe Dell Technologies and pure storage and Lenovo to build that out.

And this week uh I actually personally attended the HP and the pure storage event.

This is what it was all about.

This is the second layer of this data center build out well.

And it's interesting in your notes to us, you explained that this is a private cloud play how bullish of a signal is that for the chip sector in general, but specifically here for NVIDIA.

Well, it's very positive.

First of all, there's a little bit of a diversification of risk because if the only enterprise A I plays are in the public clouds, then it's pretty much a winner.

Winner take all and I I view this enterprise play as a, there's something really here and then what you do is you have the VM Ware that's owned by Broadcom, the red hats uh of the world uh IBM software and even software from H PE that will get a, a lift and a juice from this infrastructure build out.

And, and here's the thing that uh the enterprise data center play is more durable than let's say the public cloud play.

It's kind of the gift that keeps on giving.

So if NVIDIA and its partners can stick this landing and enterprises can start either leveraging the benefits from enterprise SASS companies like I talked about or building their own.

Then this is going to be uh a 5 to 10 year run and maybe we won't see uh the.com bust like we saw uh uh decades ago, you mentioned all the players in the space Patrick and it makes me think about the competition of it.

All.

I'm curious if you can talk about the biggest risk to NVIDIA when it comes to pricing power on its chips and just give us some context on, you know, the pricing of Nvidia's chips versus some of their competitors.

Yeah, some of the earlier data center uh chips that NVIDIA had, they might sell for 5 $10,000 a piece.

But now we're looking at 30 to $40,000 per chip and that is astronomical.

Uh It's probably over 1000% gross margin, but the longevity here, so you've got co two levels of competition first.

You have the merchant silicon providers, uh the, the AM DS and the Intels of the world and then you have the homegrown ones uh from Aws, uh from Azure, uh and, and from Google.

And what it is a race right now is NVIDIA is trying to get a lock in through their software.

I do believe that chip may and, and a MD in particular have come up and have, have as competitive or almost as competitive chips for training 100%.

There are competitive chips for inference, but it's that software lock in that's referred to as CO A or NVIDIA Nims uh that A MD uh NVIDIA is trying to stick.

So regardless of who has the better chip, you have to go with NVIDIA because of its software, eventually, every dinner table is gonna know about compute unified device, uh whatever the last, whatever the A stands for, but uh applications, something like that.

But anyway, at the end of the day and I'll look that up and give that back to our viewers here.

Architecture, architecture, that's what it is.

But anyway, all these things considered Patrick, it's been one of the most overcrowded or de facto as Goldman Sachs has called it A I trades here.

So as we think about NVIDIA going forward and, and the 10 year horizon that you were just looking at, I mean, we're right now in the ballpark of a $3 trillion market cap.

What do you think it could get up to?

I don't see any reason.

It couldn't get up to four trillion.

And again, a lot of this is based on expectations because you look at, at um uh pe it's pretty uh astronomical, right?

And if we can see some positive signs from the downstream players, because other people have to make money, not just NVIDIA, again, otherwise this comes to a screeching halt.

But I don't see any reason uh why this couldn't get to four trillion if we continue to see those positive signs uh down in the uh uh uh in the channel.

And we see, keep seeing positive news coming out from NVIDIA with its partners, Patrick Moorhead, who was the more insights and strategy founder, Ceo and chief analyst, Patrick.

Great to speak with you as always.

Thank you, Brad Matty.

Thanks.

We're seeing some big moves in biotech today.

Sarepta shares surging after receiving expanded us approval from the FDA for its muscular dystrophy drug Yahoo Finance's Angelique Kani has all the details on this one.

Hey, and that's right, Brad uh Cup.

Uh This is one of its four commercial products and getting that expanded approval from the FDA.

Really good news.

Obviously, you can see that in the stock today, the uh Du Shane Muscular drug elev is um was approved last June and it was approved for uh with a limited label that means that it could be used only with those who could already walk and uh were was sort of limited on who could be used in the younger population, but that's where they saw the most benefit.

And so the FDA coming out today saying that it is approved for those four and older and, and for those who can walk as well as those who are wheelchair bound is a huge move for the company.

Lots of upside there analysts are saying and uh important to note that this drug already since the approval brought in about $334 million for the company.

It already brought in 100 and 34 million in the first quarter alone.

And that's about 40% of the company's revenues in that first quarter.

Uh It is a bit of a controversial drug.

There are still some uh FDA experts who think that it has not proven it benefit in this population because it doesn't slow down the progression of the disease.

But what it does do is allow mobility and that's the key by which one top official allowed this to be approved.

So that's where the controversy is according to that.

But we do see this as good news for Sarepta.

Obviously, Angela, I wanna get your take on another story that we're watching this morning while you're with us.

And this is coming from Gilead seeing some really positive results from early trials with regards to an HIV drug.

Can you talk to me about that?

That's absolutely right.

It's a twice yearly shot, uh has proven 100% efficacious in women in a study, a late stage study in Africa that's for women and adolescent girls.

Uh It, this adds to Gilead's sort of dominance in the HIV market and they are known for their work with the pre exposure prophylaxis known as prep, that's a huge market for them.

Jay analysts saying that this is why uh Gilead's HIV portfolio is going to be and continues to be contributing to their market cap cap being the largest contributor to their market cap currently $85 billion.

And so that is something to keep an eye on when it gets approved.

How much it adds, in fact to the bottom line for the company.

100% efficacious.

My goodness.

O OK. All right.

The thing works.

Thank you.

Appreciate it.

Everyone.

We're just getting started on the morning brief coming up, Nicola announcing a one for 30 reverse stock split.

So we're going to break down some of the trending ticket, the top trending ticket there and me getting a bullish call from Key Bank.

We've got the analyst behind it in this hour and stay tuned for our 10 a.m. hour of catalysts where we'll bring you a day in the life of Boston fed President Susan Collins, you won't want to miss it.

Imagine it's been a good time for her up there in Boston with that new world championship by the NBA finals winning Boston Celtics.

Anyway, all that much more.

You're watching Nike getting a bullish call from Oppenheimer this morning, the firm upgrading the stock from perform to outperform.

Also lifting the price target from $110 up to 120.

Reinstating this retailer as a top mega cap pick the analyst behind the call saying that near term financial expectations for Nike are largely the risk.

Also, I thought the kind of quote to call out from this is Nike is on the mend.

That is a direct quote from analyst Brian Nagle writing this note saying that yes, Nike has had a slew of tough quarters, particularly given the slowdown that we've seen in consumer spending coming out of China.

That's been a key kind of data point to watch when it comes to Nike's earnings.

But in this note, they're saying that it's time to turn more constructive based on general intermediate to longer term views.

This price target here implying a 26% increase in the stock moving forward.

Brad.

Yeah, this is the second major call that we've heard on Nike over the course of this week, we had Morgan Stanley earlier this week.

Uh They were out adjusting their outlook, they were still ultimately optimistic, but they did adjust their price target down by about $2.

Morgan Stanley did and I think for Nike, what they're going to try and communicate over the course of their results when they report for this quarter and look forward ultimately to the current quarter that we're in right now is the Olympics, quite frankly, this once every four years phenomenon where Nike is gonna have major athletes, they're gonna be a lot of major US brands that have their athletes performing.

I've already seen a lot of the promotional elements going on, uh, around, uh, Cindy mclaughlin who of course is with new balance.

Of course, it's gonna be amazing to say.

I mean, golf is the one area where I think the US with their own kind of annexation to apparel has missed the mark.

They've got uh JL uh that's doing and that's a Sweden based company, I believe doing that.

So interesting move there.

But anyway, all these things considered, it's because Ralph Lauren didn't want that contract um because of a Ryder Cup debacle.

Anyway, all these things considered for Nike, they're going to really be telling and selling the street on all of the advancements that they're putting forward on an innovation stance within the Olympics.

And they're gonna see that, that investors and uh customers will see that play out and that it will be eventually a creative, more long term to the customer lifetime value beyond just what they've been able to do and leaning into some of the more successful brands I'm looking at specifically Jordan brand and how they've made that even more of a basketball more than a retro play even though the retro is holding me up well, but also diversifying that, taking it out into, I just bought some Jordan Cleats for some reason.

I haven't stepped on a football field, not play.

Oh, my God.

I mean, it's just like a roulette of sport references from Pratt.

You trying to keep, once you turn 30 you gotta play them all.

They're like Pokemon, the sports, you gotta, you gotta play them all at a certain point after you turn 30 it's very impressive.

Try and maintain some type of physical activity.

Yeah.

Well, I mean, and in your new balance piece, we learned that you can run while doing an interview.

Well, everybody must be able to do that.

You must, you simply must in this business.

Yeah, I mean, I told our executive producer, I stretch every morning.

She was surprised anyway, I can't do anything.

Yes.

Yes, we have so many skills here.

We've also got driving skills here this morning here watching shares of Car Max after reporting a 33% decline in profit during the first quarter, the shares are actually up by about 2.9%.

The company is saying in a statement that headwinds due to quote widespread inflationary pressures, higher interest rates and tighten lending standards continued to impact sales.

And yes, they did.

Um, ultimately, they bought 314,000 vehicles from consumers and dealers that was actually lower.

That was down by about 8.6% versus last year's first quarter.

They said that was impacted by lower year over year seasonal appreciation here.

Um But the retail used unit sales decreased by about 3.1%.

Comp store used unit sales also decreased by about 3.8% from the prior year.

First quarter.

It was kind of a pick what data point you want to prove your narrative print.

I felt this note from R BC kind of sums up the bull and bear case pretty well.

I think the Bowls uh according to this note are gonna focus on gross profit per unit stability and continued cost discipline for the company and that the worst of the macro environment pressuring this name is gonna be in the rearview mirror.

Having said that the kind of uh bearish view is gonna be focused on the retail comp this coming from this earnings print and the car max is kind of remaining the market share loser here.

Uh When it comes to some of the data points that we got in from this print, having said that the analyst behind that and bear case that was just laid out Steven uh Smees from uh R BC.

He is saying that uh he still maintains his outperform rating on the stock, but I mean, it it's certainly been struggling here.

You can see that over the past three months is down 14% year to date down just 7% after having a little bit of a run over the March and April months there.

But interesting to see what's gonna happen with Carmax moving forward.

Absolutely.

All right.

Well, we're gonna track them throughout this trading session.

Also.

We're tracking shares of Nicola Nicola shares version.

Of course, after originally plunging on news of its plans for a one for 30 reverse stock split, the move set to go into effect after the market closed on June 24th shares of Nicola are down over 60% so far this year pre market.

We're catching a bit of a breather as we mentioned, reversing course here from those deep declines that we've seen on the announcement of this.

Uh but I think for Nicola, I mean, look, i it's giving documentary.

Eventually there's going to be some type of wework ask or Uber E story that's told about this company and, or, or, or I, I mean, dare I say, uh fire Festival type of business story that, that comes together just with everything that's taking place.

The investigation into the founder, Trevor Milton, what that eventually led to after the um legal proceedings.

And then of course, just the fraudulence in trying to go out to investors and tell them, hey, yeah, we've, we've got this, it's ready to be produced and uh I'm taking on massive amounts of capital in order to produce something that eventually years later did not.

I think we just, last year finally saw the first vehicle hydrogen electric truck get delivered.

I mean, we've been talking about this for like 34 years.

No, it's a great point, Brad.

And as some contacts here, this is the company that provides battery and hydrogen fuel cell electric vehicles.

To your point though, just delivering that truck last year.

And this comes amid a week that we've seen a couple of lines that have been negative for just the broader EV industry.

You've got Fisker finally kind of shutting its doors, filing for that official bankruptcy that led to a little bit of downward pressure for Tesla and some smaller EV stocks as well.

So a tough week when it comes to some of these EV related names.

Now coming up, we got the opening bell on Wall Street.

We're going to see where stocks start the day trading and help you parse through the biggest movers of the morning right now.

You're looking at a mixed picture, the S and P just below the flat line as that just above.

We cover all the for you after the break.

Welcome back, everyone.

We are just seconds away from the opening bell here on this fight.

Yay.

Taking a look at the Dow Jones industrial average flat just barely to the downside.

We'll see if we can get into positive territory on that opening.

Cross might be a photo start, not a photo finish.

Of course S and P 500.

You're taking a look at that.

That's down by about 2/10 of a percent that's probably gonna open in the red.

And then the NASDAQ futures right now.

Ah, that's hyper oscillating, waffling if you will, coming into the start of today's trading activity.

Here's a live, look at the opening bell at the NYSC and the NASDAQ.

Where at the NYSE?

You've got info, sis.

Wow.

I haven't seen them in a little bit up there ringing the opening bell.

Great bunch of folks.

You've got the SB A is that the Small Business Administration we see at the NASDAQ, it might be, might not be SB A can mean a lot of different things.

But anyway, all these things considered, you got two great bell ringers.

You got a little fun fetting and you got a Friday opening bell who could be upset.

Anyway, taking a look at the major averages out of the gate here this morning.

Let's take a look at our major averages that are calibrating.

The dow just barely opens the day in positive territory.

You're seeing it flat just barely to the upside.

We'll call it about a 1/10 of a percent gain here.

Uh Let's just populate this chart here.

So you can see what's taking place throughout the course of this week.

Ultimately, we're still seeing gains in excess of about 1% there.

The NASDAQ composite right now barely holding on to gains over the course of this week by the hair of its chinny chin chin here today down S and P 500.

You're seeing that here today at the gate down, but fractional gains over the course of this week, Mattie, should we take a look at the Dow 30 components?

We don't always do it.

Why not look at Papa Dow here.

It's interesting to see Microsoft continuing to kind of have hold over this market.

And I was just looking to at the Philadelphia semiconductor index down a little over one and a quarter percent.

You can see here that the kind of more traditional tech names are dominating that dow 30 here, not necessarily some of those tech NASDAQ names that we talk about all the time.

So it'll be interesting to see how the triple witching of it all impacts this.

As we go throughout the trading day, we are going to get over to Yahoo Finance's Jared Blicker for a broader look at what is it moving markets today, Jared, what do you got?

Well, thank you, Maddie and thank you for the shout out to Papa Dow.

I just did a webinar with JC Perez a few days ago and that was his message for traders.

You cannot ignore Papa Dow.

Now, here we're looking at the indices, but I'd be remiss if I didn't add that the S and P 500 the NASDAQ are now poised to be up eight out of the last nine weeks.

That's an incredible run.

And so a lot of people are wondering, well, is it getting a little bit long in the tooth could be the case.

We do see some warning signs but we haven't seen the materialized really uh in the price action just yet.

So let's take a look at the sector action which I have up here.

That's consumer discretionary XL Y is in the upper left that's leading but only by 4/10 of a point here to the downside, we got financials down, almost half a percent.

Industrial is a quarter, tech, a quarter materials down too, but not a lot of big movements.

I do want to focus on you for a second.

Now, you can see it's down another 2% today.

And what's concerning some traders on X and other medium is this big red candle right here and this is actually a bearish engulfing candle.

Uh This is when the body of it engulfs the prior day.

So the high is higher and the low is lower and that happens after an day.

So uh that is a candlestick formation and you'll note this is a year to date.

It's hard to see here.

But we had another one of those at the ultimate high at the then record highs March and then we saw a bit of a consolidation.

So what I would might expect from here is just a little bit of a pause, some sideways action and then uh usually the trend resumes, but it doesn't always have to app end that way.

Uh We're also seeing micro down about 4%.

So let's skip over to the semiconductors here, arm down 3% as well.

So kind of a red board when we're taking a look at tech, uh remember XL K was down a quarter of 1% and we're gonna take a look at software, look at all the screen.

Now, it's interesting to me is that software and chip stocks have from time to time recently been trading on opposite ends.

So today we're seeing that dynamic in play where we got software, uh more software up than down.

Meanwhile, we got the key, we got the semis kind of mired in the red.

And finally, for our lack for our look at tech, I do want to look at disruption now, Tesla is uh marginally there.

But if I look at the equal weight, you can see a lot more red than green.

So still kind of risk off with the fringer aspects of the market here guys.

All right, Jared, thanks as always, really appreciate it and great point on the kind of bifurcation that we see in the software and chips sectors as well there.

I really appreciate you as always the S and P 500 the NASDAQ pulling back from record highs, the NVIDIA driven rally taking a bit of a here.

Our next guest says it might be time for investors to rebalance their portfolios amid all the tech concentration Scott R Wells Fargo Investment Institute, Senior Global Market strategist joins us now, Scott.

Great to have you with us.

Thank you so much for being here.

Look in your note, you say the thing that makes us all set up.

It's time to trim tech and cal services to neutral ratings as the S and P 500 is making new highs and investors should rebalance.

Why now for that call, why not just enjoy the tech gains of it all for another six months or so?

Well, mad, you're right.

And, and you know, if you could pick the top and a momentum market before you have a halfway decent correction, it would make it a lot easier.

But I think right now is what we're trying to do is we think those two sectors that you mentioned com services and tech very highly valued, very momentum driven.

And what we want to try to do is trim some of those gains and buy things like industrials and materials, energy.

Uh We've also been buying a little bit of health care.

So we think those sectors are undervalued.

The other ones are overvalued.

You know, we'd be very hesitant to just go out and buy the S and P 500.

But I think you have to look under the hood and do a little bit of work under the hood and, and a lot of this is, you know, you need to be uh patient and you need to realize that, you know, picking the top in any particular run is always difficult.

You know, we want to be invested here.

Uh the market we think will be higher than where we are right now at the end of 2025.

But we think we'll probably have a bumpy road that will provide some opportunities and equities between now and then, Scott Big themes are typically easy for investors to try and wrap their minds around what what the runway might look like.

And that theme has largely been A I to this point and generative A I what what is though if we were to see some type of rotation or profit taking even and spreading the chips around elsewhere?

What are other comfortable themes that investors can be comfortable with for a long term time horizon right now?

Well, you know, Brad, I think one thing you want to point out is that, you know, industrials and material, you know, all this A I build out whether it's data centers, updates to the electrical grid, all those kinds of things, you know, the companies that are going to be building, those are in the industrial sector and and certainly there's going to be a lot of copper and other types of industrial metals used, which is in the material sector.

So, you know, those two sectors play out with those themes.

But I think overall, you know, you need to think about the economy here probably for the next few quarters, 34 quarters, you're going to see sub 2% growth in GDP, somewhere between a percent and a half and 2%.

Inflation is going to come down, but it's going to take a little bit of time.

So I think right now you want to position um for what might or start to position for what might happen after this slowdown.

I think you're going to see the second half of 2025 be be better, be better globally.

I think you'll finally see these developed international markets, maybe emerging markets uh start to do better, but the US is going to lead the charge.

So I think for now you still want to be overweight US relative to industrials.

You still want to play the large cap theme.

Um You know, we've been underweight, um small cap stocks, the Russell 2000 for a couple of years.

I think that still has a ways to go.

So I think right now you want to just make some moves around the edges.

You want to be a little cautious here, but you want to have a plan because when the pullback occurs and, and, and, you know, I'll say, you know, right up front that, you know, we thought we'd see another 10% pullback uh by now and it hasn't happened, but it's going to happen at some point.

You need to have a plan.

A lot of investors, retail investors have cash on the sidelines, you need to know what you want to buy.

And then of course, when you see a 10% pull back, you have to do the hardest thing.

Uh uh for most retail investors is just to kind of hold their nose and stick their toe in and execute the plan.

So we're trying to be patient here.

We think you'll have a opportunity at higher rates, a higher 10 year yield to, to, to buy some longer duration bonds.

We also think you'll have an opportunity to buy stocks at lower levels.

Scott, what causes the 10% decline in the market?

Well, Mandy, I think it's gonna continue to revolve around.

Um is inflation going to come off fast enough for the Federal Reserve to cut?

We're only looking for two cuts this year.

And I'm telling you if we're wrong, I think it's going to be fewer cuts.

Not more.

We're only looking for one cut next year, which of course, the feds, the median dot was at four.

So I think it's going to revolve around inflation staying higher for longer and then at some point, you know, consumers are starting to back off.

We think that'll happen more as the economy slows.

So I think it'll be a combination of higher inflation and a slower economy that'll spook, spook a few people and cause a little bit of money to come out of the market and give you that opportunity, Scott with the opportunities.

We love it, Scott Wren Wells Fargo Investment Institute, Senior Global Market strategist.

Thanks for joining us here on this Friday.

Scott.

Great to see you have a, have a great weekend guys.

Thank you.

You too.

Meta getting a bullish call from Keybank will speak to the analyst behind it.

That's next meta shares are up over 40% so far this year as investors double down on the A I trade.

And our next guest says that there's more room to run, raising its price target from $475 to $540 driven by a momentum.

Justin Patterson managing director joins us now, Justin.

Great to speak with you here.

Ok.

So take us into the thesis here and what's what's shifted in the ad landscape in terms of what you're seeing for the, the load demand that would benefit meta versus some of the other competitors.

Yeah, definitely.

And thanks for having me.

So when you look at just pricing data, uh so data just on what a meta advertising prices are going for right now, they're actually accelerating sequentially.

So you saw about an eight point improvement from Q one to Q two quarter date and that's actually against a tougher comp.

So what that means is that demand from meta's advertisements remains very high.

It's an ox you're seeing more advertisers bid higher rates to reach uh metas customers and that just really shows you that the returns from this A I advertising cycle are still very strong.

So we looked at the second half of the year.

We don't think the deceleration in growth against some tough comps will be as severe as investors think.

And we think there's still potential for mid teens growth in 2025.

When you roll that together, that speaks to earnings upside free cash flow upside even against all this Capex investment.

Let's talk about that Capex investment because you mentioned in your case here that meta is investing aggressively in A I and that could improve the core business.

We talk a lot about all of these companies investing A I.

What is it about?

What meta is doing specifically under the hood that you feel is bullish signal for the company?

Yeah, I think it's a couple of things right now.

First, you're already seeing the benefits in terms of engagement.

So if you go back to the Q one call meta in several stats, in terms of just how this recommendation engine powered by A I is driving more video consumption more uh time spent on meac sites.

And that just means there's a lot more ad impressions to serve.

Uh the second piece that's real happening is under the hood on the ad fact side.

So as you really refine what type of ads people are seeing, provide them more relevant ads that really boosts the return for the advertiser and encourages them to spend a little bit more on ads, which is what we're seeing in that pricing trend right now.

So we really think there's a just powerful flywheel going on at meta as these capital investments get some returns, you're seeing better revenue growth come in and that just fuels a little more investment in terms of data centers and just, you know, on this while we've got you, there's the larger concern about what will happen.

And if tiktok does get banned, if there is no suitor that steps in and purchases and allows them to remain operable here in the US.

What does that mean for Meadow?

What's that mean for the advertising windfall that they may start to get from that too?

Yeah, it's a great question.

So if you just consider Tik Tok, you're getting roughly 90 minutes of time spent per day on the tiktok app that has to get real located somewhere.

So when we look at it, we generally think that meta uh alphabets of youtube and Snap are the biggest winners from that.

Um Just because they all have short form video apps and that time spent will go back to the Instagrams, the uh Facebook reels, the youtube shorts, so on and so forth.

Justin, you also cover Spotify, they are hiking prices again, how much is too much, you know, it's uh an area that we're always very focused on with our survey where uh Spotify has been one of our top ideas for quite some time.

Now, we look at our last audio survey which is published uh just right around the time of that price increase, we actually saw that uh consumer willingness to absorb another price increase remained very strong.

So you kind of step back and look at it.

Spotify has added a lot of value to its service over the past year with audio books uh with new features around gen A I playlist recommendations in there that it looks like this should be going through uh relatively easily.

Do they need to take another stab at video, Justin Spotify on video.

I mean, you're seeing it already a little bit today where if you go in the app, you actually see a lot of music video embedded within there.

Uh The podcast side actually does have quite a few podcasts and video advertisements around it right now.

So there's a lot of ways to win with Spotify here.

Right.

And, and, and I guess I asked that because of the success that they've seen podcasts, a lot of those podcasts are becoming very common podcasts now.

So it seems like there could be some type of potential play where they would see even more of those core users say.

All right, I wouldn't mind viewing the same podcast that I'm listening to, especially when those podcasts are popping up in different cities doing their own tours and whatnot for sure.

For sure, you certainly see it with the uh Ringer Bill Simmons and his platform on Spotify where uh there's a lot more just live streaming of video on there.

And that does result in a higher, higher price ad because a video ad is usually worth more than an audio ad in there.

So that's one leverage to just drive engagement, drive revenue on the Spotify side.

And actually just going back to your tiktok point from earlier, there was an investor concern that tiktok Music would come to the US.

So you can actually view Spotify as a beneficiary from this too where if uh tiktok, you know, is held up on the US side on the social front, you're certainly not going to see a music app here anytime soon.

The competitive landscape for Spotify still looks very strong today.

Interesting.

Ok, Justin Patterson, key bank managing director, thanks so much, Justin, appreciate the breakdown and walking us through both Meta and Spotify here this morning.

Thank you everyone.

We've got all your markets action straight ahead.

Stay tuned.

You're watching the morning brief the vibe check today.

Hacks cause a lot of problems, auto retailers across the US.

And Canada could face days of outages due to back to back cyber attacks this week on CD K Global.

That's a software provider for 15,000 car dealerships in North America.

So why does this matter?

Well, it shows the impact of cyber security on both small businesses but also the broader economy.

And Brad, so many of the guests that have come on, our show have talked about this in the text of the A I rally, which is something that is a little bit less tangible but cyber attacks and cyber security is going to be so critical to watch.

Moving forward.

These hacks really making that clear as we're hearing reports from small businesses across the country at these retailers saying that they're having to resort to pen and paper.

Some of them proactively shutting down their systems saying that they don't have an estimation of when things are going to be worked out with this cyber incident, but kind of swath of the impact of this attack on car dealerships again, just one example, but showing the kind of impact and importance of cyber security and software moving forward.

I'm going to summon a blast from the past name into this chat in Blackberry and they had listed out earlier this year.

The most attacked industries in the cyberspace here.

Finance resulting in about 50% of the attacks, health care about 20% which is actually an improvement for health care, which used to be the most vulnerable two cyber attacks and cyber threats here.

And then you've got that in third place followed by the government and public sector.

But all these things considered it, it kind of takes me back to our conversation that we were having on wealth yesterday.

Um really with regard to some of the ETF plays that are potentially out there for investors, especially given the trove of data that is going to be influenced and, and leveraged with regard to these new data centers and the the new cloud landscape because of generative A I and now needing to layer on cyber security and a much larger or multiple type of realm here.

So that's something that we were discussing yesterday just with regard to some of the opportunity within cyberspace or cybersecurity investments, particularly, there are two that continue to come to mind for me over the years, I've been tracking Cibr and then H AC K as well.

Those two of the largest cyber security ETF players that have been out there and most discussed by some of the experts in the industry as well, especially as you see any type of ramp up in spending to be more proactive in protecting consumers data or business data as well here or just grids.

Uh uh I mean, there's gonna be so much more cyber spending uh that is done and there you're taking a look at the first trust, NASDAQ Cybersecurity Cibr on your screen right now.

It's down here on the day though.

Yeah, it's interesting because we are seeing some of the cyber names up on the day, but that could be part of kind of the macro discussion that we were even having with Jared earlier today that the chip sector and software sector tend to move in different directions.

We're seeing a lot of pressure on the chips names this morning, seeing some upward movement in the software and cybersecurity space.

You've got Palo Alto moving to the upside up about 1.5%.

You've also got a name like data dog up as well.

So it's interesting to see kind of that upside movement coming from the those names given that the uh, cyber security question continues to be a big problem in the overall market space.

I mean, this is just one of several stories that we've heard about over the course of the past year.

Right.

I think about an AT&T hack.

We don't have the final word on what that was but seems like it was probably a cyber attack.

It's just, it leads to this question about the importance of cyber security moving forward.

Well, coming up here, we're gonna dive deeper into the catalyst, moving markets later.

Yahoo Finance sits down with Boston fed President Susan Collins for.