Title: The Market Setup for the 2nd Half of the Year Show: CNBC Halftime Report Guest: Joe Terranova (Virtus Investment Partners) Date: 2026-JUN-29 URL: https://open.spotify.com/episode/1Jo8H3XipxGQv91NjFwJrh Length: ~43 min Note: Audio podcast — NO (mm:ss) timestamps. This is the shared CNBC Halftime "Investment Committee" episode; this archive page covers ONLY Joe Terranova's (Virtus) calls. The full panel transcript is retained below so the link is complete. Joe Terranova = "Speaker 3" in the raw feed; speaker numbers are reused across segments, so speakers are attributed by content. Host: Frank Holland (in for Scott Wapner). Committee: Joe Terranova, Stephanie Link, Jenny Harrington, Jim Lebenthal. ===================================================================== [Frank Holland] Welcome to the halftime report. I am Frank Holland in for the judge Scott Wapner. Shifting sector, stocks are trying to snap a 5-day losing streak as rotating market leadership remains in focus. The investment committee: Joe Terranova, Stephanie Link, Jenny Harrington and Jim Lebenthal. Markets: Dow up ~230, S&P up ~3/4%, Nasdaq best up ~1.5%, Russell the outlier down ~3/4%. Joe — is this the end of the so-called rotation after a 5-day slide last week when the S&P equal weight outperformed? Quarter end is tomorrow. [Joe Terranova] End of quarter brings volatility and confusion — a lot relates to index rebalancing and institutional capital moving (maybe equities to fixed income). On the rotation: don't try to identify which is the winner at year-end, because you're rewarded for being in both places. S&P equal weight is up 10% YTD and recently pulled ahead of S&P market-cap weighted; during the Iran conflict market-cap pulled forward. Today equal weight is down, market-cap up 90 bps — here come the Mag 7 again, they're not really the "lag 7." Want something on the 52-week-high list? Energy — Valero. Healthcare — Lilly, Merck. Industrials — CSX, Honeywell. Technology — semi equipment working: Applied Materials, KLA Corp, Lam Research, Palo Alto Networks. Don't make the mistake of concentrating in one direction; the market rewards patience across a variety of places. [Stephanie Link] I agree, but keep it simple: other sectors/stocks are working because the economy is doing much better than expected, so earnings will be broader, not just tech. Tech is driving me crazy — flip-flop between semis one day, software another. Call it a day and own both as a basket. I like financials, technology, some materials, some AG stocks, some discretionary. Discretionary is getting hit hard today — opportunities in best-in-class names like Starbucks or Dick's. It all comes back to the economy: consumer is consuming (retail sales 2 weeks ago, personal income better than expected, wage growth 4-5%, low weekly claims), plus the AI industrial boom; PMI is picking up, best since 2022. Most important: oil prices down 39% from their highs — very positive for consumers and businesses, and maybe peak inflation (bond market yields coming down). [Frank Holland] Five of the Mag 7 are leading the S&P right now — Alphabet (joining the Dow), Amazon, Tesla, Meta. Jenny, is this a more attractive entry point for the Mag 7 after a ~6% pullback last week? [Jenny Harrington] I think so. In our discipline growth strategy we own Meta and on Friday, for accounts that didn't already own it, we bought it (the stock was in the high $700s; we didn't buy at $700 when we thought we could get it cheaper). On being broad: extrapolate Steph's "be broad within tech" to the broader market — there's a creativity finally at play that was missing last year. Last year there was a lack of creativity (only "where's the most obvious AI winner?"); this year people are broadening into REITs, healthcare, insurance, energy. AI, if it fulfills a quarter of its promise, will have huge breadth of beneficiaries. [Frank Holland] There's dispute about how deeply AI has impacted the consumer — Ed Yardeni wrote that boomers are holding up the consumer economy, giving money to kids/grandkids. [Jenny Harrington] Gas prices are coming down. At a real-estate conference 2-3 weeks ago I heard Mid-America and American Homes 4 Rent (apartment rentals) say the sub-35 younger cohort was holding up really well — not needing cosigners at the same rate, no delinquencies on rents. So it might be a little better than we all want to say. [Jim Lebenthal] The consumer is the least of my worries, and I don't have many worries. AAA national average for gasoline is down to $3.99 (topped at $4.50, ~11% reduction). Steph mentioned declining crude — gasoline trails that, so more relief is coming. Labor markets are strong (four months of job creation, low weekly jobless claims). Little to worry about with the consumer or the market. Joe, you're excellent at calling the rotation — but for a longer-term investor who doesn't want to play rotations, this is a period where I can pick my stocks and sectors and patiently get good returns. Healthcare six months ago was left for dead; now it's the hot sector. Energy is cold (crude decline) but you can wait patiently — dividends, buybacks, attractive valuations. [Joe Terranova] I agree with Jimmy — don't play the game of trying to pick the rotation. The analogy: platooning two players hitting .300 with 18-20 homers — keep platooning, don't force a starter. S&P equal weight is working AND S&P market cap is working; no need to pick the second-half winner. [Frank Holland] RBC's Lori Calvasina raised the S&P target to 8150 from 7900 (~10% upside), as long as recession fears stay low and Fed hikes stay moderate. Can the market move higher with moderate hikes? [Joe Terranova] I don't see hikes in 2026 — I think the high is in for yields. The Hawks' biggest concern was oil staying above $100; oil came back to $70 quickly (only $2.50 above where we were end-Feb before the conflict). That'll show up in inflation. Kevin Warsh did exactly what he was supposed to in his first press conference — worked against the narrative that he's an extension of the administration, spoke with a hawkish tone — but based on the evidence, no justification for a rate hike for the rest of '26. [Stephanie Link] It's about earnings. In a 2% GDP world you grow ~10-12% earnings; we're in a 3-3.5% GDP world expecting 20%+ earnings this year (last quarter was +28%, surprising even the bulls). Combine that with the AI revolution — if we do 20-25% earnings growth, the market edges higher and you keep seeing the broadening. [Frank Holland] We got a Supreme Court ruling today that Lisa Cook will remain on the Fed for now. [Jenny Harrington] The interesting thing the last 12 months: the disconnect in the market's reliance on two things — interest rates in your favor and earnings in your favor. Over the last year the market hasn't cared about rates because earnings were so overwhelming. As long as earnings stay overwhelmingly positive, rate hikes don't matter much. I agree we won't get hikes this year — and if we did get 25-50 bps, it'd only be because the economy is strong enough to handle it. [Jim Lebenthal] Let me address the elephant: why are the Mag 7 the "lag 7"? They're down on margin pressures — raw input inflation from chips going into data centers (good for chipmakers). But don't make it out like the hyperscalers (Amazon, Alphabet) are fatally flawed — expectations were too high. Mag-7 profit margins at 25% can't go much higher, so a little downward pressure on margins and share prices. This Mag-7 pullback is a setup for the next leg higher. [Stephanie Link] I agree on the multiples: Microsoft 22x (Azure grew 38-40% over three quarters), Amazon 24x (AWS grew 28% last quarter), Alphabet 24x (Google Cloud grew 63%). Meta is the only one with complications/things to prove on growth and monetization (unfortunately I own it). But it's more than margin contraction — it's free cash flow burn; some of these companies will have negative FCF this year. Hard to see operating leverage during an investment cycle, which all of them are in. [Jenny Harrington] I read something this morning that gave me pause — a WSJ article titled "Earnings forecasts are on steroids," about how much of the Mag-7 earnings came from their private-equity stakes in OpenAI and Anthropic bumping up earnings, and how that translated into the broader market. Pretty severe — gives me a little pause on future valuations. [Jim Lebenthal] It takes tech reported earnings growth last quarter from 40% (Herculean) to 25%. A valid point — it resets the baseline — but let's not lose the 25% growth in operating earnings, which is pretty darn good. [Frank Holland] JP Morgan note today: the Mag 7's forward P/E is at its lowest level in about 10 years. Chips and momentum have been powerful — the MTUM ETF and the SMH ETF pulled back recently, but both are having their best quarter ever. Joe, is momentum where you want to be in the second half? [Joe Terranova] The momentum factor will tell the story in the second half. If the bears are right that there's too much bullishness, the first crack in the bull trend will come from the momentum factor itself. Until then, stay with momentum. And momentum isn't just growth/high-beta hyper-growth — it's distributed into reasonable-valuation areas too. A lot of the financial sector is momentum: insurance companies Allstate, Travelers, Chubb are all doing really well YTD. Momentum has been the story of '26 and will remain. [Frank Holland] Micron — Citi note: not owning Micron today is like not owning Nvidia 2.5 years ago. Micron also on pace for its best quarter ever, up 228%. Jim, you bought this last week — do you share that opinion? [Jim Lebenthal] The comparison is exactly why I bought it. Adam Parker laid it out: if you won't buy Micron here waiting for a 5% pullback, you're saying it's a buy here. I called it a value stock at roughly 7x forward earnings with estimates going higher. People say "it's up 600%, so what" — doesn't matter, the fundamentals changed dramatically. Like those who refused to buy Nvidia in 2023. This is a cyclical stock — but on where we are in the cycle, middle innings. [Joe Terranova] Double-click on time. The cycle we're in is bullish and will be extended relative to the past — that's the difference. The strategic customer agreements are the validation for why memory is more secular than cyclical, a much bigger story. Derivatives off memory: KLA Corp, Lam Research, Applied Materials — and I gave a name the other day, Onto Innovation (ONTO), ~$17B market cap, a player in memory — a derivative trade to capture alpha after the parabolic moves in memory. [Jim Lebenthal] Coda to the Nvidia comparison: since I bought Nvidia in May 2023 when people said I was late, it's had more than triple the annualized return of the S&P 500. Don't let prior gains fool you — the fundamentals changed. [Frank Holland] Applied Materials and Lam Research are two leaders moving the S&P higher today (AMAT up ~12%, LRCX up ~8-9%). Steph — is the pullback a setup for a strong second half for the SMH/SOXX? Carson Group research: June has been the worst month for 20 years, July the best. [Stephanie Link] The Sox is still up 85% YTD; software (IGV) is down 17% YTD, so relative value is in software — but be careful, it has to be mission-critical software: IBM, Snowflake, Synopsys, a host of out-of-favor names. Momentum is still strong for the Sox. I own just two semis — Marvell and Broadcom. Marvell has $10 of earnings power by 2027; Nvidia invested $2 billion; there's a $2B buyback; the optical business can grow 50% for a couple years and the custom-ASIC business (80% share with Broadcom) is expected to grow 20-100%. At 27x it's not super cheap but I'd buy a bigger dip. Same with Broadcom — the one I've been adding to ($20 of earnings power; the stock hasn't done as well). [Frank Holland] [Steve Liesman segment] The Supreme Court sided with Fed Governor Lisa Cook, allowing her to stay for now (a 5-4 decision on narrow procedural grounds). FHFA Director Bill Pulte accused Cook of mortgage fraud (Aug 20); Trump fired her (Aug 25); she sued; SCOTUS heard arguments Jan 21. Pulte says Cook will be indicted; Trump says he'll take action. Does this change the Fed policy outlook? Liesman: probably not, but the question is whether the Fed's independence is secure from political pressure — OK for now. [Frank Holland] Jenny — you've got two new buys. [Jenny Harrington] First: NextEra — not the common, I bought the convertible preferred (the NextEra preferred "V" as in Victor) because I need the yield. NextEra is a super high-quality utility (largely Florida; wind, solar, everything). A few months ago they announced buying Dominion (which we also own) — Dominion popped 10%, and over weeks NextEra faded ~10%. So I can get back into the convertible preferred (~7.7% yield, matures 2029) with tight equity-like exposure — if NextEra common is undervalued, I participate on the upside. Maybe ~8% yield, maybe 8-20% return over the next few years. [Frank Holland] Comcast soaring today after announcing it will spin off its media and tech businesses. Jenny, you bought Comcast. [Jenny Harrington] I bought Comcast last week. The research question was how quickly the broadband subscriber "ice cube" melts (10 years or 50?) — competitive dynamics of latency, Starlink, fixed wireless, fiber-to-the-home. Comcast serves ~30 million homes; it's fiber to a node then coaxial to the home with a software upgrade — very low latency, efficient, in place, works for an enormous number of people for a long time, with huge cash-flow generation. They have a lot of debt; NBCUniversal and theme parks are great but pale vs broadband on revenue/profitability. The SpaceX IPO focused so much on Starlink that it knocked Comcast from ~30 to ~22 over the last few weeks — an opportunity. I valued it like a private-equity investor (not "should it trade at 5x or 7x earnings, like Disney or Charter") — significant upside on that basis. [Frank Holland] Charter is up on potential SpaceX/Starlink attention too. Jim — you own Disney. Does the Comcast spin change the media landscape, and is the spun-off business a takeover target for Netflix or another streamer? [Jim Lebenthal] I think it's takeover bait. We work at CNBC, part of Versant, which has similarities. We've seen a lot of M&A — Warner Brothers + Paramount, Roku somewhat adjacent going to Fox. M&A activity is clearly vibrant; in this industry size and scale matter. Maybe that's why Comcast spun off NBC — to put it out there as takeover bait. [Jenny Harrington] I don't think it was takeover bait. I think it was "there's value in these assets no one's appreciating — shine a spotlight on them." When you trade the whole stock at 5-6x, you're pretending those assets are worth nothing. [Joe Terranova] There are a lot of big tech companies with the capital to appreciate the value being highlighted. Netflix wanted to pay ~$83 billion for HBO/Warner Brothers — why wouldn't they come around again? Look at NBCUniversal/Peacock — why wouldn't Amazon or Apple step forward? The M&A story continues for a long time. [Frank Holland] [Contessa Brewer news update; then Dom Chu ETF Edge with Arne Nowak of FTSE Russell] SpaceX is joining the Nasdaq-100 effective next week and was included in the Russell 1000 rebalance Friday. Arne Nowak: SpaceX entered the Russell US index range (market cap above $17.5B = eligible for fast-track inclusion), but its weight is float-adjusted market-cap weighted, so only ~12 bps today (subject to lock-up periods; weight may rise as float is recognized). It was the largest reconstitution trade overall (~$550 billion traded), a record. Note: the Mag 7 by style have drifted from growth toward value (nearly doubling weight in the Russell 1000 Value), and that growth weight has been taken up by chip stocks — Micron, AMD and others. [Frank Holland] cnbc.com listed the most overbought stocks last week, including airlines Delta and United. Jim — you own Delta. [Jim Lebenthal] It is overbought. I don't want to take a big tax hit, and I think it has long-term legs, but as it rallied over the last month-plus as the Iran war de-escalated, its earnings estimates are basically flat. Worth paying attention two weeks from now at earnings. Nothing fundamentally wrong with the company — own it for the long run — but I wouldn't put new money here; it's overbought. [Joe Terranova] Fundamentally we're at the beginning of understanding Delta and United are a duopoly now (American Airlines won't like that). You're seeing market-share capture at Delta and United — a powerful, entrenched bullish setup. [Jenny Harrington] (laughing) The ridiculousness of turning down that JetBlue/Spirit merger way back — "it'll make the industry too small" — so dumb. [Frank Holland] Bernstein bullish on cybersecurity, initiating Okta, CrowdStrike and Palo Alto — if you have to pick between Palo Alto and CrowdStrike, they like Palo Alto. Steph, you own Palo Alto and CrowdStrike. [Stephanie Link] Palo Alto is up 78% YTD, a remarkable recovery from the Feb/March lows, hitting on all cylinders — revenue +31%, subscription revenue +31%, RPO +36%. We haven't even seen the synergies from the three deals (>$30 billion) they did in the last six months; platformization is just getting going. At ~22x price-to-sales it's not cheap, but CrowdStrike is at 35x — so I prefer Palo Alto. [Frank Holland] Costco named Bernstein's top pick for the second half. Joe, you own Costco. [Joe Terranova] We sold Costco at $1,015 at the end of October. Both Walmart and Costco have begun to break down — the valuation story got the best of each. We still own Walmart (since October '24 at $81). The best consumer-staple trade right now is not Costco or Walmart — it's Monster Beverage. [Frank Holland] ConAgra potentially cutting its dividend. [Jenny Harrington] There's a Barron's article warning about a possible dividend cut at the upcoming earnings call — something we've entirely anticipated. As we used to say in the '90s, if you're reading it in Barron's, the professionals already know. (ConAgra down ~18-19% YTD.) [Frank Holland] [Mike Santoli midday word] The Mag-7 (big consumer-tech platforms) bouncing today right on time — they were at risk of a deeper, more consequential breakdown if they didn't hold the line. They have a high burden of proof; one day's bounce won't convince you they'll carry the market. You don't want to let the biggest, best companies flounder too long, especially if it leaves you in the hands of the more volatile, overextended semiconductor-memory names. Investors don't want to reduce overall exposure — just shuffling things around; the S&P has been range-bound for six or seven weeks. The broadening isn't something to universally celebrate — it often leads to a more volatile tape. FINAL TRADES: [Jim Lebenthal] Vertex — a great healthcare name (biopharma, cystic-fibrosis franchise, other shots on goal). [Jenny Harrington] Verizon — down 6.5% today on a restructuring charge; buy it on sale, 6.5% dividend yield. [Stephanie Link] IBM — down 18% from its highs, ~18x earnings; mission-critical software you want to own. [Joe Terranova] Corning — not afraid of a 14% one-day rise (momentum); plays along in the AI story; more to come, reports end of July.