Yahoo Finance

Welcome to Catalyst. I'm Madison Mills. We're 30 minutes into the US trading day. Let's get you the 3 catalysts for watching this hour. First up, we'll break down the market action and whether investors can find safety in big tech. Plus, in just moments we're going to go live to Capitol Hill to hear from US Treasury Secretary Scott Besant. We'll also break down the Fed's rate path trajectory as the FOMC meeting kicking off in Washington.Half an hour into the start of US trading, let's get a check on the markets brought to you by Tasty Trade. Let's take a look here at the major averages under a bit of pressure, you've got the S&P 500 off about 1%, a little bit of a risk off sentiment taking hold here. You've got utilities and energy, the only two.Moving to the upside tech, the second biggest laggard in the S&P 500 this morning. But let's take a look over at the bond market here. You've got treasury on the longer end of the curve moving up just a touch. You've got your 10 year up a basis point, your 30 year yield is up about 3 basis points this morning.And we are just moments away from Treasury Secretary Scott Besson's testimony in front of Congress. Joining me for the hour, we have Chris Verone. He is the head of technical and macro research at Strategic Research Partners, and with us live from Capitol Hill, we also have Yahoo Finance Fed correspondent Jennifer Schomberger. Jennifer, let's start with you this morning. What can we expect to hear from the

Treasury Secretary?Good morning Matty. I'm here right outside the House Appropriations Committee on Capitol here where the doors have just been closed after Treasury Secretary Scott Besson walked in to take his seat. I asked the secretary if he had any updates on the trade or what his message to lawmakers is this morning. The Secretary did not comment to me though I am expecting many questions on trade tariffs as well as taxes and deregulation.expecting to hear about the treasury market this morning. There is one member representative Lucas, who is expected to ask about the yield on the 10 year treasury as well as the liquidity and health of the treasury market, given the volatility that we've seen, we can see that supplemental leverage ratio also be brought up again a big focus today on taxes with the secret this hearing getting underway just now on Capitol Hill back toyou.

All right, Jennifer, thank you so much. I appreciate it.head over to Chris Verone, who is my guest host for the hour, and Chris, I'm so excited to have you today because I do feel like the technicals, which I know you are an expert in are really important to look at right now. We saw the market regaining the post-April 2nd losses and now we're seeing some selling off the back of that. Is that the new pattern for this market hit to where we got before April 2nd and then see some immediate selling? Well, I think

ifyou go back a month ago to early April, there were certainly all the conditions brewing for a very good rally. We had.Extreme sentiment conditions. We have indiscriminate selling very capitulative price action, but we've gotten that rally. I mean, S&P is up 15, 16% off the lows back to a challenging spot, this 5650 to 5750 zone. I do think it's a challenge. And when you look kind of at the character of the rally over the last month, what we were uncomfortable with is that the leadership never really reassumed a pro-cyclical message. Machinery stocks rally, but not as leaders, transports for a week, even semis which have bounced off the lows have not done.So as leaders, so if you're looking to the messaging of the market to tell you about how it perceives the economy, I'm a little uncomfortable with kind of the state of the rally here.

Yeah, it's interesting that you bring that up because I was taking a look at some of the earnings results as well and even still, we've seen the likes of consumer staples be under a lot of pressure, and that makes me wonder if investors are actually pricing in a recession. If they were, wouldn't we see a little bit more buying of those sectors? Well,

I think this is the challenge right now for the Treasury Secretary andFed, I think you have a Fed who is really not listening to the message of the market here. I mean, 2 year yield last week got as low as 360, 365, you know, something like 75 basis points below the Fed funds rate. I think the market is saying that the Fed is too tight here. You know the mistakes of second half 21 and 22 with the transitory language, I actually think is hurting them this time around, uh, reluctant to view tariffs in the same light when they're actually probably transitory, and I think when you look at the leadership messaging of the.Oil weak, weak, basic resources weak. If inflation was about to make some bold recovery, I don't expect that those groups would be as weak as they are. So I think the messaging of the market here is saying growth is a much bigger risk than inflation. And

wheredoes that leave the Fed then? Does that leave them on a path where they are too late?

I think they're heading down a path of being too late here, and it will really confirm that view for us if we're sitting here in a couple of weeks and the 2 year yields right back to 350 or 360, I think.You know, we always joke on our work. Who needs Fed speakers when you have the 2 year yield. The 2 year yield has been a very, very good guide in judging when the policy rate is out of bounds, and I think the policy rate here is out of bounds relative to where the economyis,

and that's something that Treasury Secretary Scott Besson has talked about as well, and we're expecting to hear from him a bit later this morning, but I want to stick on the Fed's path forward because I'm curious if the Fed is a bit too late, do you think that they will.Cut more than they originally were thinking of cutting heading into this year and is that a positive catalyst for markets? Well,

I think when you look at the history of this Fed, I mean we had the Powell pivot in 2018. They went from we are nowhere near neutral in October of that year to emergency cutting in December. Then you look at 21 and 22. They were late, so they had to do more on the upside. So I worry.In a similar position here as well where they'll be late to ease and therefore will ultimately have to do more. Well,

I'm interested too. You talk a lot about the 2 year yield. Another asset that we've of course been watching is the dollar, which has not rebounded. What do you make of that?

Yeah, youknow, it's funny when you think about this cycle, there's always a tendency in this business to fight the last war or focus on the indicators that mattered in prior cycles.And in '0708 or even 2011, 2012, it was all about credit, right? What is credit messaging? I think this cycle, given that we're talking about capital flows, it's all about FXs. And when you think about this rallying risk assets the last month from 4800 S&P back to 5750, what really hasn't been impressive is the dollar. The dollar has not bounced to any meaningful degree. Uh, we've long been of the view that dollar yen is the most important pair in the world.I don't think it's a coincidence that dollar yen peaked July 10th, the same day that tech relative S&P also peaked. So the degree to which stronger yen is influencing how money moves around the world, I think is way underestimated by the street here. Dollar yen's right back to 142, 143 this morning. We think that's going lower. I'm a dollar bear. Don't think that bodes particularly well for risk

assets. So for tech investors, watch the yen.

Absolutely, um, for the last 12 or 13 years when Yen was weak, weak, weak, weak, weak, it ran along parallel with techron shrunk strong, and that relationship I think is really tied at the hip. It began to change last summer. We have a very, uh, anti-intellectual, very simple view, uh, in our process that very simply says big moves mean something, and this has been a big move in Dayan. I would be hard pressed not to think there's some big leadership.Implications from that, the most overt of which is tech relative S&P on the weaker side. Remember this is the first correction that we've had in a decade where tech didn't protect you on the way down. That's a major, major change in character. Why do we think it's going to come out the other side as leadership? We don't. Well,

let'stalk about that because I get a lot of questions in from our audience of retail investors at Yahoo Finance about whether they can really rely on tech as a safe haven, as a defensive play.It sounds like you do not think that they can.

I thinkwe're past the days of tech as some homogeneous sector where they all look the same, they all outperform. This is a very, very split group right now. Just kind of go through the mag 7. I mean, Apple, while it's off the lows, barely, I think made new relative lows yesterday. Amazon, as we know, kind of tech adjacent has weakened. Nvidia hasn't even recovered 50% of its decline.So when you, you know, um, start going stock by stock here, I think you're left underwhelmed. Uh, Growthor's value has rolled right back over. So I'm underwhelmed with, with what tech has shown us both during the drawdown and in the subsequentrally.

And and how do you think about valuation as part of that? Like, does a certain level of discount change your thesis at all?

Well, I, I think ultimately, um, but we're only, you know, a few months removed from the high.In both valuation and in price, so I think there's more to go there, certainly more to repair before I would be comfortable making, hey, techs a value. I don't think we're at that point yet.

And then how do investors, particularly retail, think about exposure to tech in their portfolios?

Well, I mean, let's focus on what the market's message is and what we always say kind of in these corrective drawdown periods is as you start to rally what stocks or what groups are making the new relative strength high.Right, what is the market telling you? Where is the, uh, where is the baton of leadership being carried within tech? Security stocks, that's CrowdStrike, that's Fortunate, uh, Palo Alto. Those have really, um, been impressive, uh, off the low here. I, I still think traditional kind of boring tech, IBM as an example, Microsoft as an example.

Chris, we're gonna have to go to Capitol Hill now to hear from Treasury Secretary Scott Bess,

members of the subcommittee.I'm grateful to join you today. Treasury is eager to work with members of Congress to fund key priorities to strengthen our economy, and we look forward to coordinating with you on the president's budget as soon as it is released. Today I wish to highlight the department's efforts to boost US economic growth, improve government efficiency, and target illicit actors that threaten our national security. The core components of the Trump economic agenda are trade.Tax cuts and deregulation. These are not standalone policies. They are interlocking parts of an engine designed to drive economic growth and domestic manufacturing. Tax cuts and cost savings from deregulation raise real incomes for families and businesses. Tariffs create an incentive for reshoring jobs and fair trade.And deregulation complements tariffs by making it easier to invest in energy and manufacturing projects. Already this agenda is bearing fruit.In the 1st 100 days, the new administration, 464,000 new jobs were added to the economy. In April alone, over 177,000 American jobs were added, more than 40,000 more than economists predicted. All the while, unemployment remains low while real hourly wages continue to grow.As important as spurring job growth is wrangling inflation, and in this endeavor, the administration continues to make tangible progress. The CPI for energy goods declined in March, as did the price index for core goods, and the CPI for all items declined for the first time since the COVID pandemic. While the cost of goods is decreasing, so are energy prices.Complementary to our efforts to grow American prosperity, we are focused on improving efficiency across all levels of government, but especially the IRS. We just concluded a successful tax filing season, but the IRS still needs significant reforms to deliver efficient and cost-friendly results for the American people.In this endeavor, we have successfully cut $2 billion from the IRS IT budget without any operational disruptions. We achieved these cost savings by eliminating, renegotiating, and de-scoping wasteful IT and professional services contracts and addressing long-standing inefficiencies such as auto renewed licenses unused for years.This intervention alone will save taxpayers hundreds of millions of dollars each year.We are also taking steps to the IRS to reduce administrative costs with a particular focus on paper processing, which has been a long standing bipartisan goal. Last year, the IRS spent approximately $450 million on paper processing with nearly 6500 full-time staff dedicated to the task. Through policy changes and automation, Treasury aims to reduce this expense to under 20 million by the end of President Trump's second term.In addition to making government more efficient, Treasury's committed to working alongside the White House to make America safe again. To that end, we have launched a maximum pressure campaign against violent cartels and terrorist networks. We've assessed tens of millions of dollars in civil penalties.Against organizations facilitating money laundering along the southern border, and by leveraging sanctions, we are choking off the financial lifelines of terrorists, criminals, and hackers from Mexico and Guatemala to China and Iran.In the 1st 100 days of the new administration, we have set the table for a robust economy that allows Main Street to grow. With Congress and the White House working hand in hand, we expect to see even more positive results over the next few months. Key to expanding economic opportunity for all Americans is making the Trump tax cuts permanent. We look forward to working closely with the members of this committee to pass this bill into law.Together, we can build a stronger, safer, and more prosperous America. Thank you.

Thank you, Mr. Secretary. I now recognize myself for the first questions.Uh, secretary, let's fast forward a year. Where do you see the US with respect to tariffs and the overarching strategy? Do you anticipate all trade deals being bilateral or could there be multi-country trade pacts of which groups of countries agreed to a tariff schedule?

Uh, Mr. Chairman, this will be passed dependent on our trade partners. Uh, as I said before, there are 18 very important trading relationships. Uh, we are currently, uh, negotiating with 17 of those trading partners. Uh, China, we have not engaged in negotiations with as of yet, uh, so.I, I expect that we can see a substantial reduction in the tariffs that we are being charged as well as non-tariff barriers, currency manipulation, and the uh subsidies of both labor and capital investment. So that is proceeding very well, uh, many of our trading partners.Have approached us with very good offers and we we are in the process of renegotiating those uh with the economy, you know, I, I would say that this is a three-legged stool trade, tax and deregulation. Trade was first the this, uh, a house.According to Speaker Johnson, expects to move their portion of the bill over to the Senate, uh, on or about the Memorial Day, so we're looking forward to that. And then deregulation necessarily takes longer to affect the economy, but I would expect in the 3rd and 4th quarters, uh, we would see uh substantial benefits from deregulation that by this time last year, uh, could be in full force.

We've seen a few numbers discussed in terms of how many countries with whom you have started tariff negotiations. What is the actual number? What is the status of those negotiations? How many deals do you anticipate by the end of the year in the first quarter of 2026 or the second quarter? And what are the biggest challenges you see to negotiating tariffs and getting trade deals done?

Again, sir, approximately 97 or 98% of our trade deficit is with 15 countries. 18% of the countries are major trading partners, and I would be surprised that if we don't have.More than 80 or 90% of those wrapped up by the end of the year and that may be much sooner that I, I would think that perhaps as early as this week we will be announcing trade deals uh with some of our uh largest trading partners. Uh, they have come to us with very good offers and you know what, what I will tell you is that in negotiating with some of them.They may not like the tariff wall that President Trump has put up, but they have them. So if tariffs are so bad, why do they like them? And then more insidious, uh, we can see that from a practical matter and from academic research are the non-tariff barriers. Uh, if, if you were to look, uh, prior to the escalation, I believe Chinese tariffs are only 5%, so clearly there's something else going on, uh, if they're accumulating these gigantic surpluses.

The president released his skinny budget for the year, uh, school year 2026 on Friday. Budget calls for approximately $2.5 billion cut to the IRS. As you know, Congress has been pulling back money from the IRS over the last several years, somewhere in the range of about $41.7 billion. Some may ask what's left to cut from the IRS? What would you talk about your vision for the IRS and why streamlining operations will benefit taxpayers and not hurt them.

Uh, well, Mr. Chairman, uh, the IRS is 30 years, 30 years behind on an IT modernization project, uh, where perhaps up to $50 billion of taxpayer money has been wasted.Uh, we are right sizing that so the substantial decrease, uh, in the IRS budget is largely in IT, uh, we have had a large number of employees, uh, take the, uh, take the option for, uh, early retirement or for retirement, and again.Let, let's look at the numbers. Uh, we are just taking the IRS back to where it was, uh, before the IRA bill substantially bloated the personnel and the infrastructure.

Thank you and now recognize ranking member Hoyer for any questions he may have.

Mr. Chairman,Um, let me ask you a broader question, Mr. Secretary, at the outset. The president has been talking about, uh, recession and, uh,The acceptance of a recession in the short term. Do you believe we're in a recession now?

Uh, congressman, uh, I believe in data, and there is nothing in the data that shows that we are in a recession. As a matter of fact, the jobs report has surprised to the upside.

Uh, the, the job report, of course, less than the average, uh, uh, for the Biden administration last in 2024. Um,But the GDP, uh.Went down in this first quarter of the Trump administration.Um, if we have a negative growth in the 2nd quarter, which is, I suppose, the traditional definition of a recession, would you agree that we are in that recession of which the president speaks?

UhCongressman, uh, these economic numbers are noisy and subject to substantial revision. So, I, I, having looked at a detailed analysis, would believe that the first quarter GDP would be revised upward.And you know I would also with regards to your remark about where we were last year, uh, last year, uh, we were spending 6.7%, we had a 6.7% fiscal deficit, the largest we've ever had during peacetime or non-recessionary times. So the easy thing would be to do would be to keep spending to keep the economy running on an unsustainable path of government spending.

Uh, let me remark because I, you, you mentioned this, uh, I think in our meeting, uh, we had a spending problem.Uh, not a revenue problem. I wanna talk about the revenue problem. Let me suggest to you, my view is it's neither a revenue nor a spending problem. It's a pay for problem. If we would pay for what we buy and whether it's defense or non-defense, uh, we wouldn't increase the deficit. So I think looking at the, I'm a big proponent of paying as you go, unfortunately we haven't pursued that on either side of the aisle, maybe for different objectives.Let me go to IRS. Um, I wanna, you, you probably know these figures, and these are somewhat old at this point in time, but what they reflect, as you will see is a substantial decrease in the resources of the IRS, particularly in enforcement.Um, as the blue representing an increase, uh, in filings, uh, the orange, uh, representing the nominal and theDotted line, the uh net.Actual value of the funding for IRS, particularly enforcement, um.The budget proposes substantial cuts.Have you or anybody done an analysis of the ramifications of those cuts, both in the short term and in the long term in terms of your ability to collect revenue? Let me paraphrase, not paraphrase, but uh give a, uh,In your discussions, you said you were not going to sabotage that we had in my office, sabotage collections.Um,Are you confident in light of the fact that any IT, and I agree with you, we've wasted a lot of money on IT and that any IT will be accomplished within the next 36 to 48 months?And thereforeJustify a reduction in personnel.

Uh, congressman, let, let me work backwards there. So, uh, I, I am confident that we will make substantial progress in the IT and, uh, right size the payments.The payment system, the collection system, as I've repeatedly said, my priorities are collections, privacy, and customer service.And you know, again, the, the substantial increase in the enforcement group uh there is nothing that shows historically that by bringing in unseasoned the collections agents that that the results in more collections or high-end collections it would be like sending in a junior high school student to try to do a college level class that they.Uh, becoming a high-end IRS collections agent, uh, is something that one grows into. So I believe through smarter IT through this.AI boom that we can use that uh to uh enhance collections and you know, I, I would expect that collections would continue to be very robust as they were this year.

Chair now recognizes the gentleman from Arkansas. Mr. Womack,

for any questions. Thank you, Mr. Chairman, um, and thank you, Mr. Secretary, for your service and, uh, for being here today, uh, in front of my colleagues. Uh, I'm gonna ask a question that I'm sure you've never been asked before, but I'll give it a, a try here.When is X date?

Uh, congressman, we are, as I said earlier, we still take in a large amount of the paper returns. So every Friday, I, I get a summary and if you can believe it, uh, as you know, uh, tax day was April 15th, we are still tallying that, uh, so.That we don't have, we will share with Congress when we believe we are approximating that date so that that will be forthcoming, but I will tell you, uh, just as an outfielder running for a fly ball, uh, we are on the warning track and when you're on the warning track, it means the wall is not far away.

So it's not today, uh, may not be next week, but it is fast approaching.

And, and of course, uh, the United States government will never default, that we will raise the debt ceiling and Treasury will not use the any gimmicks. uh, we will make sure that the debt ceiling is raised.

You, um, have already answered a couple of questions about the, the president's budget and, and I'm gonna ask, uh, maybe a little differently, um.The president's budget request for fiscal 26 looks very different from President Biden's budget just last year, and I have been a longtime proponent of getting our fiscal house in order, and I applaud the president's attempt, uh, to get our fiscal house in order. Uh, during my tenure as chairman of the House Budget Committee many years ago, I co-chaired the Joint Select Committee on Budget and Appropriations process reform.And many of our recommendations are included in Trump's requests.It's no secret we're heading toward a big and needed change within the federal bureaucracy. That said,His budget request for the treasury is 11.5 billion.Uh, compared to FY 25 enacted at 14.2%. Now that's a 19% decrease. You've already mentioned that we have savings achieved in, uh, contracts regarding, uh, IT services and this sort of thing, and we've saved the American public life but you also said.That IT remains one of our biggest challenges, particularly within the IRS, uh, so how is it that you're going to operate with a smaller budget that still serves the needs of the American people?

UhSir, part of that has been bringing people back to the office. So on March 10th, we reinstituted a work from your, your office program and again I think it's going to be efficiency. Uh, we have raised, we have asked for more money for many of the priorities of the Treasury, uh, Foreign Intelligence network.And the Office of Foreign Asset Control OFAC, so we will be keeping the American people safer and again uh we think through efficiency gains, the, the federal government historically does not have productivity increases and as I've continually pointed out, uh Doge is the office of government efficiency, not the Office of Government extinction or eradication. So, uh, I think that it is.But not a big leap to do much more with less.

Are there$2.5 billion worth of efficiencies.

Well, again, just two of two of it is in the IT department. And if you were to look, Treasury processes about

one and that was Treasury Secretary Scott Besin testifying before Congress. We're going to bring you live updates as headlines continue to cross, but let's get some reaction here. We've got Steven Stanley. He's Santander's US capital markets chief US economist.Still with me Chris Verone. He's the head of technical and macro research at Strategic. Thank you both for being here. Stephen. I want to bring you into the conversation first because it's interesting we heard the Treasury Secretary talking about deals on trade that could come as soon as this week and conversations with up to 17 trading partners here. To what extent do you feel that we're going to get those deals this week and what does that tell you about where trade policy is heading?

I think the most important thing is that we keep the ball rolling forward. So if you think about what sort of trade deals we're likely to see in the near term, I think they're going to be scaled down. I mean, you think about something like the USMCA. I mean that took years to negotiate. It has an incredible amount of detail to it. It sounds like what they're working on now would be more scaled down, um, deals, you know, with maybe a handful of specific steps.Each country would take, but in a large sense that's enough, right, because that keeps the ball moving forward. It probably forestalls the reimposition of reciprocal tariffs, and I think the markets would be pretty satisfied. I think markets are eagerly awaiting that first deal just to get proof ofconcept.

Yeah, and Chris, let's go to you on this. To what extent do you think we would have any substantial rally or bounce off the back of that first deal that's announced?

I think it's important toWe've we've basically have rallied on no news so you know what would actually make me uncomfortable is if we got some good news and the market didn't respond as maybe the consensus would expect, and I think the challenge and maybe Stephen, if I could ask you, what do you make of this considerable daylight that's opened up between the soft data the surveys which we know have been very weak, and the hard data which frankly looks OK here, how do you think that resolves itself?

I, I mean, I, I think the, the, the key thing is the passage of time. Um, I mean, for the most part, the hard data that we've had up until a few days ago was for March, which of course predated Liberation Day. I think April is probably too soon to see much of an economic impact. We've seen a lot of anecdotal reports and survey findings that firms were.The best that they could were holding the line, at least temporarily on pricing, so the inflation numbers for April may not be that terrible. Obviously we saw on Friday the jobs numbers suggests that firms weren't pulling the trigger on layoffs just yet either. So I think it's a matter of time. People are braced for the worst and you see that in a lot of the soft data and a lot of the survey.Whether it's surveys of consumers or businesses, but it seems to me that the worst, the window for when the economy could be at its worst is probably closer to the middle of the year or into the summer than it is in the very near term.

So Stephen, sticking with you here, the Treasury Secretary just said nothing in the data shows that we are in a recession. Do you agree with that?

Do for now. I mean, I think you know the the question really stemmed from the fact that Q1 GDP was negative and it was, but that was primarily because or really solely because of the huge front loading of imports in advance of tariffs. Consumer spending was stronger than expected. Business investment was stronger than expected in the first quarter.I think that those key underlying elements of the economy are going to slow down considerably in Q2 and as I said before, especially probably in Q3, um, but if you know, if, if we're gonna go with the congressman's definition of two consecutive negative quarters of GDP, I, I actually think Q2 GDP is going to be very strong, uh, again, it's gonna be a loser.Because it's going to be the reversal of that that import surge that we saw in the first quarter, but I would say at this point, no. Let's see, you know, how the jobs data evolve, how the consumer spending data evolved, but certainly at the moment it feels like the economy is still expanding.

And Chris, how are you thinking about how the market is responding to soft versus hard?

Well, I actually don't think the market's making much of a distinction in the sense when you look through the lens of leadership as we talked about, the very pro-economically cyclical groups are responding like ultimately the hard data will soften or certainly that's what the market anticipates here. I almost wonder if the softening of the hard data will actually be a bullish catalyst if it reawakens the Fed. I mean, you go back to September when.The Fed cut 50, you know, which has the impression of an emergency cut with stocks at all-time highs, with credit spreads at all time tights and gold up. I struggle to see how the set up today is not demanding of a cut if it met the threshold back in September.

Yeah, Stephen, let's bring you in on that to wrap here. Where do you see the Fed heading this year? What do you think happens to give the Fed a reason to cut later this year?

I mean, look, if things get bad enough on the real side of the economy, the Fed will respond, but I think for the moment until that happens, unless or until that happens, the Fed is a bit hamstrung. You guys were talking about it earlier, in some ways maybe hamstrung a little bit more by the fact that they got it wrong in 2021 and 2022. They can't really go with the transitory story again, having having.Um, inaccurately deployed that one a few years ago, so I think the Fed is kind of on hold waiting to see in which direction they need to go. More than likely the next move is downward, but, but I don't have the Fed cutting until September. And again, if, if the economy responds it deteriorate.It's much more sharply than I expect, and certainly they could move faster, but, but I think they would like to take their time before having to having to commit one way or the other.

Yeah, it'll be fun to see if Transitory comes up again in the meeting this week. Stephen, thank you so much for sticking with us and for your patience this morning. Steven Stanley of Santander, appreciate it, and Chris Brown is going to stick with me as well.Coming up we're talking venture capital, trade, and AI with Graycroft's co-founder at the Milken conference. More when we come back.It's now time for some of today's trending tickers. This morning we are watching AMD, Data Dog and Ferrari. First up, AMD is reporting first quarter earnings after the close. The chip maker offering a window into the AI landscape, particularly of note ahead of Nvidia earnings. Investors will be keeping an eye on AMD's guidance. The company is saying in April that it could take an $800 million hit thanks to tighter export controls. Chris Bro from Strategic.Still with me to discuss and Chris, it's interesting the Philadelphia semiconductor index down about 14% year to date. How are you thinking about semis right now? Well,

I think it'simportant to remember the Sox is very Nvidia heavy. When you look at the group of semis equally weighted, they didn't peak in January with Nvidia. They peaked last spring and last summer. So this bear market in cyclical semis is almost a year old, so we kind of subscribe.to the view maybe first in first out. So I'm actually looking for when some of these more analog names AMD obviously today others can actually start to respond to bad news well. I mean that's the first step of putting in a real tradable low when you become immune to bad news. I'm not quite sure we're at that point yet with some of these. They're still largely your relative laggard. Software has generally traded better than semis. It's an important kind of.To guide for us. So I'm not convinced that the more analog semis are quite ready to be bought yet.

All right, really great context there. We're going to continue to talk a little bit about the AI trade in particular looking at Data dog topping expectations in its first quarter, lifting guidance for Q2 as well. The company adding over 3000 customers with average recurring revenues of $100,000 or more amid macroeconomic uncertainty still.You see the shares just below the flat line this morning, not necessarily enough to excite investors, but a name like this makes me think about what you were saying earlier, Chris, about how you may want to look for other opportunities within the tech trade and not kind of the same names that we talk about all the time.

Well, you know, I think given where the stock opened, I think it was down 4 or 5% of the open actually trading well in light of what was kind of squishy earnings.I think the longer term question about AI is what we've seen in phase one is the Nvidias and all the obvious. What is phase two of AI? I'm so reminded of the lesson from.The tech bubble in '99 and 2000 is that the ultimate winners of the internet race were companies that didn't exist yet then. I mean, it wasn't, I don't think Alphabet went public until '03 and all the like of those going forward Facebook in 2012. So my suspicion is the real winners here are still yet to be known. I think in the interim, play the power story, these the, the, the, the price response from CEG today is impressive. G Evernova continues to trade well.Natural gas is a way to play this as well. So I think the power story remains the most potent part of the AI story, right?

Those kindof picks and shovels to a degree in the space really interesting context there, Chris. We do also want to talk about Ferrari reporting a 15% year over year rise in profit in its first quarter on strong demand personalizations for its luxury vehicles. Still, the company reiterating that tariffs could hurt its profitability to come this year. The shares up nearly.1.5% is luxury enough to beat any negative impact of macro uncertainty and tariffs.

Well, it's notable how different Ferrari is trading from the other European luxury stocks. If you looked at LVMH or Keuring or Dior, I mean, they are weak. So there seems to be something going on at Ferrari that's very, very different than going on with the majority of the other Euro luxury names. Now those others are a read into China.They've been very, very weak. So perhaps some impact there. What we like to look at domestically is discretionary for staples. I think if the market and the economy is going to come out of this unscathed, you want to see the discretionary stocks really take the leadership baton from the staples. Now that really hasn't been the case much of this year, so important that shifts movingforward.

Yeah, really important context there, Chris. Thank you so much for that. You're going to be with us for the rest of the hour for more context as well.Let's get to the latest from the Milken Institute annual global conference. Our executive editor Brian Sai sitting down with Ray Croft co-founder Dana Settle to discuss her decades-long career in venture capital, the future of AI, and how trade is reshaping tech. Take a listen.

I'dsay for the last decade, 15 years, I mean, um, everything that we were investing in, we'd say is there a global t for that?And I think, you know, then it was sort of was there a global t maybe less China and now it is sort of well jeez, you really do have to be the the winner in the US at least and I think um.I, I, you know, we do believe that some of these markets are bigger than they seem, especially again in AI because they, they are, they're taking what historically was sort of like the software revenue, say for a given area, let's say for, you know, CRM.And now they're actually moving up the stack into some of the services and so they're probably bringing on shore some of those services and building them into kind of the the platform if you will and so um you know I think some of the markets and the domestic markets are expanding, but I also like having very you know in venture we have a very long term perspective and so what I guess will happen is things will change again.

Well, in this backdrop, are you?Willing to pay up to own growth or now you have to question those growth rates of certain businesses and this backdrop.

I, I mean, I think the growth that we're seeing specifically because of like the full re-platforming that's happening is is so significant. I mean I you know I've never seen um growth rates like this in my career I mean I don't think anybody has.

What are you looking for

in that next amazing tech leader?

So it really depends. I mean, just as a, a reminder, we, we have 3 separate strategies, so we have an AI strategy which I've maybe mentioned a few times.We have a consumer brand strategy and then we also have a sustainability strategy that we do in partnership with Coca-Cola and 8 of its bottlers globally and um and so in each of those areas I'd say the the one thing that is important for any company right now is are are they thinking about what artificial intelligence means to their business and so that would be a cross to any of them.And in terms of leader really we are looking for leaders that either are technical or or have technical leaders as part of the founding team. I think it's that important and if there's an AI native company really they have to be able to attract the most incredible, you know, sort of technical talent research minds, you know, in the world and so we are looking for founders that are deeply technical but but that are able to attract and also really.Through a commer like think commercially, I think you know if you look at OpenAI and I think what they've managed to do the technology side of it is uh is is incredible, but in some ways the go to market is what's even more impressive and I think that's taking, you know, taking pages out of playbooks from.You know, AWS and, you know, from Google Cloud and sort of from what all these companies, these hyper scalers have managed to do, but just applying it at a rate that, you know, is, is prettyunprecedented.

I think someday Open AI is the most highly valued company in the market.I think it could be.

We just heard from Graycroft's Dana Settle and our executive editor Brian Sai speaking at the Milken conference. We're gonna have all of your markets action ahead, so stick around for more. You're watching Catalysts.US stocks moving lower for a second day after the S&P 500 came off its best winning streak in 20 years, which did help erase all of its Liberation Day losses. But is there more upside to be made? Still with me, Chris Verone with Strategic. He is here in the studio as my guest host for the hour. And Chris, I'm wondering if there's some optimism being ignored by this market. Could the tariff policy, could the economic backdrop actually leave us unscathed?

Well, the answer is, of course, and I thinkThe problem sometimes in this business is you get very focused on the present set of facts and you don't have the imagination to imagine what could go right and think about what's going right actually in front of us. Oil prices are meaningfully lower than where they started the year. That is a tax cut already for consumers. You see it with gas prices down here as well, um, rates lower, uh, albeit marginally so. Nevertheless is, uh, I do think ultimately a longer term to tell and if we can get bond yields down. And then thirdly, maybe most importantly, sentiments still really bear.So almost everywhere we go, there is almost a reluctance to imagine what could go right. So that is the constructive story, a combination of weak sentiment, lower oil prices, and lower rates may certainly conspire for this ultimately to not end so bad. I think the challenge in the near to intermediate term is a lot of damage has been done for 4 or 5 months, and it predates April 3rd, right? Cycicals peaked in November, internals peaked in December. I think it takes some time to fix that.But I am very open to the idea that there's a happy ending on the other side of this.

So if we wanted to have insight into what the happy ending clues are, what might we start to see if we are getting that happy ending?

I think the most important thing that we're on guard for is some relative performance life from cyclicals over defensives, and that really hasn't happened on this rally. You haven't seen overwhelming strength from the very economic cyclical groups. I think that would be a very good message that the market is now.To look past or is optimistic about how the trade landscape ultimately materializes goingforward.

Yeah, and it's interesting. I just got a text from one of our Yahoo Finance subscribers in the break saying how do I short the US economy, which I am not poised to answer, but I wonder about the opposite. What is the trade for investors who are bullish US? Yeah,

Iwatched two things. I mean, I think the strength of this country from a capital markets perspective are our industrial companies and our financial companies, so.I think it's notable industrials have actually held in OK here. Financials have held up OK as well. This has really not been about a financial crisis. The banks are down but not down disproportionately. Credit has been weaker but not disproportionate. So you know what, what gets us really uncomfortable is when an economic event turns into a financial one, and I, I, I, I don't think that's whatthis is.

And it makes me think about something Mark Rowan said during Apollo's earnings that the US is going from highly exceptional to merely exceptional.

I think it's a very good observation. Uh, I was in London last week. I, I haven't seen in 20+ years of doing this such negativity on the US economy, uh, US, uh, the dollar, US assets. You have to begin to wonder when is that rubber band stretch a little too far. I mean, at the end of the day, if you're an entrepreneur, where you're gonna start your company? So I don't want to lose sight ofthat.

Is there concern to be had in the sort of flight to international asset classes?

If you're reordering global trade, you're logically reordering how capital flows and so this is more about capital reorganization and I think that it is trade, um, so I understand at the margin you have fewer dollars moving east to west, but I don't think it's a wholesale change, and I think at the end of the day this is still the country where it's best to do business. I think the laws are most agreeable to that. I think it's the, the, the place of the world with the best universities, um, it's why we've been at really the crazy.Of all these great companies, I don't think that changes in any real lasting fashion on the other side of this.

Let's end by talking about tech then, which you talked about a lot today, but one of the things that some of my sources tend to point out is the patents that are created in China versus the US, and we have seen a little bit of a dynamic flip to that end. How do you think about China versus US when it comes to tech? Well, it's

interesting if you look at Chinese imports into the US, they didn't peak 4 weeks ago. They peaked 8 years ago in.1.0 and we could have a debate that that's actually a pretty good thing that our reliance on, you know, poorly made Chinese imports that probably have taken American jobs is not a bad thing that that that is being reduced in a very meaningful way. So I, I'm, I'm sympathetic to the idea while um while there may be some pain from point A to point B, this is a very necessary and important structural change to how we reorder global trade as it relates to tech here.Um, at the end of the day for the last 12 or 13 years, tech has largely been your leadership. That's a long time for any sector. I don't think the next phase of a bull market needs tech as your leadership, but I probably can't be going down in price. So what we're encouraging clients and investors to do is think about candidates. What are the other groups or other sectors that can carry.Flag of leadership moving forward. We like financials here. We like industrials here, even commerces, I think is a good antidote to some of the big stress in tech. Really

great overview, Chris, and great insights throughout the hour. Thank you so much for joining us and giving us so much of your time. We do appreciate it. Coming up, we've got wealth that's dedicated to all of your personal finance needs. Brad Smith has you for the hour. Stay tuned.