Yahoo Finance

Hello and welcome to market domination. I'm Julie Hyman live from our New York City headquarters, and stocks have been ripping higher once again today as a tariff relief rally sweeps through Wall Street. Here's your headlines late getting up to speed one hour before the closing bell rings on Wall Street.

Breaking news from The Wall Street Journal. The Trump administration is considering slashing its steep tariffs on Chinese imports in some cases by more than 50% in a bid to de-escalate tensions with Beijing that have roiled global trade and investment.We're selling the market on one thing and then we're moving the market back on the same news in reverse.Our view on a big picture perspective is yes, you got a little bit of an oversold condition before this, right? You were down about 5 or 6% off those recent highs. Listen, the market probably can push a bit high. I think 5500 on the S&P is the first level to look at and then around 5800. I think probably the upside is likely capped in our view around that 5800 because I think in the backdrop you still have uncertainty on this policy. You are likely facing an economy that will likely slow down.

You're balancing on one side what was fundamentally a quite a weak quarter, gross margins that was a little better than anticipated, we're still in the absolute one of the worst levels we've seen in a decade plus a reduced volume.Outlook, weaker commentary on margins as far as tariff impact, etc. But on the other side, you're balancing it against a more engaged Elon Musk and a robotax the opportunity that is overall, I would say fairly intact.

We got one hour to go until the market close. I'm being joined by Dave Maz, a Round Hill Investment chief executive officer. He's going to be with me for the entire show today, which is very exciting. So let's talk about what's going on in the markets here today, Dave. Really interesting session again, right? Strong out of the gate here this morning. The Dow right now is up about 429 points, 1.1%. The S&P 500 up about 1.7%. The Nasdaq up 2.8%, the strongest of the three, but we were.Up as much as more than 3% earlier in the day before fading out and of course we're following once again all these tariff headlines and reports. The Wall Street Journal sort of reporting at one point that the US was considering paring back the China tariffs to as low as low as 50% to 60%, as though that's really that low, but markets rallied strongly on that. Then Scott Best of, the Treasury Secretary, speaking at an event today and sort of.Not backpedaling that, but saying there's not any active negotiations and that they're not prepared to right now out of the gate lower those tariffs. What do you make of all of this back in?

Well, there's also reports that it could be a 2 to 3 year time period he said as well execute on these tariffs. So definitely some cold water reported in the markets, but I think again what we're seeing is a couple of things. One, kind of a classic bear market rally we've seen these days before. To me it's positive that we're holding on to a lot of these games.Even after some of those comments came out, so today, of course a positive day, a lot of green on the screen. People have been calling for the bottom. Personally I think that may be a little bit too soon, but I think we'll take today's gains if we can.

Yeah, and it's also interesting to an instructive perhaps to look at what is moving, right? We see a lot of action in the so-called Magnificent Seven here. Tesla, which we just heard about, of course, coming out with its numbers, but the reassurance, the confirmation.That it sounds like Elon Musk is going to step back a little bit from Doge and back to Tesla seems to be really the primary thing that's that's driving the stock. Yeah, look,

I think you can't separate Tesla from Elon Musk, at least to date. And so the fact that the quarter itself was actually by many accounts probably bad, if not horrible. Some would say stocks up nearly 7.5% kind of heading into the closing hour because investors heard what they wanted to hear is that the CEO, Musk, who built the company.It's his dream is coming back and sort of righting the ship, and Tesla's move in the after hours last night coupled with, of course, those tariff headlines really helped drive the market higher, especially the mag 7.

And and as you say, the rest of the mag 7 we're also seeing a pretty strong rally here today. Just a quick glance also at the sectors in the S&P 500 here it's a more mixed picture. We have consumer staples, energy, real estate, utilities, materials, all those down. tech and consumer discretion are the are the two groups that are outperforming the S&P 500. Yeah.

Exactly. So you got last year's winners, sort of the cyclical sectors all outperforming, and then your defensives, especially consumer staples on the underperforming side. Some of this is because of what's going on in the rates market, of course, because they're very rate sensitive sectors, but this is a risk on day by all accounts. Yeah,

just since you mention rates, might as well take a quick look at what's going on in the treasury market here. The 10 year yield right now is unchanged, which we haven't seen much happen much lately in any market, let alone the treasury market, but 4.39% is where we.Stand there and the dollar strengthening a little bit here today, which is also interesting because just taking a gander at the 5 day for example we've seen a lot of volatility but mostly downward movement in the US dollar. So seeing a very on this chart, the year to day chart, it looks very small by comparison to what we'vebeen seeing. Yeah,

so I don't know if anyone was planning on a European vacation this summer, but your dollar is certainly not going to go as far, at least on these levels. But look, a lot of this is strictly because of the headlines, right?And the fact that we have rates in the dollar actually moving stocks tells you sort of all you need to know that this is a headline driven market. We're going to be reliant on sort of what we hear from President Trump and other members of the administration, at least for the time being.

Yeah, definitely. And speaking of what we have been hearing from members of the administration, we want to turn now to Yahoo Finance's Jennifer Schonberger. She was in the room with US Treasury Secretary Scott Besson and other reporters earlier today. So Jen, what were your takeaways from his comments and what he told the reporters there?

Hi Julie, good to see you. Yes, Treasury Secretary Scott Besson says that tariffs between the US and China need to come down first before both countries begin talking. Besson telling me and a group of reporters earlier today in Washington that neither side believes that these are sustainable levels. This is the equivalent of an embargo and a break between the two countries in trade does not suit anyone's interests. Now at the.At the same time, Besant denied that the Trump administration is considering unilaterally slashing tariffs on Chinese imports, telling reporters that high tariffs imposed by both sides need to come down mutually before talks can begin between the two economies. So it will be a two-step process when it comes to trade negotiations with China. First de-escalation, then talks, and those talks are going to occur at the highest level becauseHe says that is where the relationship is strongest between President Trump and President Xi. Now Besson also stressed that the US's goal is to first get trade deals with the largest 15 economies. It's not like economies will rise and fall with trade deals with the economies of the Bahamas or Costa Rica. He said that the US is very close to a trade deal with India, echoing comments from Vice President JD Vance.Besson says the end goal here is to lower tariff and non-tariff barriers and to get free trade and to get fair trade, I should say. Now he also expects by the 3rd quarter we will get clarity on tariffs, a tax bill, as well as deregulation. And separately, he was asked about whether he has had talks with the president about firing Fed Chair Jay Powell before his term is up and what he advised the president.to do doesn't merely telling us that this is mostly a dragon that the press wanted to create so they could slay it.

Well, of course, Kevin Hassett, the economic adviser to the president, is one of the people who brought up the idea of perhaps the White House examining how they were looking intoit,

yes,

but be that as it may 1 of the things you mentioned is that Besson said we could have greater clarity by the 3rd quarter. Why the 3rd quarter? Why did he talk about that period of time?

I think the notion is that he believes that the US knows what non-tariff barriers it wants. We know the road map, and he doesn't expect that these discussions are going to be extended. However, he also noted that a lot of countries don't want to see their tariff rates ratchet back up to the levels announced back on April 2nd. So clearly a goal here to try to get something clinched by the end of those 90 day, the 90 day pause.And also Juliet, I want to just share that Besson was asked who the president takes advice from when it comes to tariffs, who he listens to, and Bessen of course said there is a range of stakeholders and advi advisors, but he zeroed specifically in on business leaders, noting that the president has met in the past week with the heads of Walmart, Home Depot, and German automakers.

Interesting, Jen, thank you very much, appreciate it.Well, these back and forth tariff headlines have been rolling in today as the US-China trade war continues. The Wall Street Journal first reporting that Trump administration is considering cutting the tariff on China to between 50% and 65%. Then US Treasury Secretary Scott Besson told reporters, as we've been hearing from our Jennifer Schonberger, that President Trump is not offering to unilaterally take down US tariffs on China. Joining us now, Shahzad Ghazi, international managing director at.Beige Books Shahzad, thank you so much for being here. So you are steeped in the Chinese economy. And so I, I, I'd really love your take on the positioning of these two global powers given what's going on in their economies. What I find fascinating for all of this is, you know, we keep hearing Trump and Xi are going to directly negotiate. What are they waiting for?Right, what's the hold up? Why can't like just get on the phone and get on with it already?

Well, I don't think Trump and Xi are going to negotiate directly at all because that is not something that Xi Jinping would want to do. It's incredibly risky that he has a phone call with President Trump, puts the phone down, and then a truth goes out announcing something, some action on China. So they're not going to do that. The meeting with Xi is always going to be a prize that's going to come at the end of a deal.not something that's going to kick start the process.

That's really interesting. And it's so does that mean then that we are at an impasse because that is the only way that President Trump will negotiate is with she directly.

So both sides certainly do want to have a conversation and do want negotiations to start, and this could absolutely begin, for example, from the US Trade Representative's office, which is very, very high up, and theSTR of course has had conversations with her Lifeng, who's a vice premier in China, so there is room I think both sides want to make it seem as if the other is conclusively folding for this to begin, which is why you're getting this impasse right now.

So it's clear kind of both sides, no one wants to probably show their cards or really kind of uh show any signs of sort of weakness. But so where does it go from here, right? Because we're hearing a lot of chatter, but from an investor's point of view, not really a lot of action.

Yeah, look, I think there are several off ramps on this US-China front, and there are other non-trade related things that could actually kick this off. You know, Fenttal cooperation and conversations are still going on, so there could be more action over there. Of course there is a TikTok deal that has now been put on ice, but a resumption on the TikTok deal front could also be a way for you.negotiations to begin. So there are a few avenues that are available if either side wants to take advantage of them. OK,

so let'stake the headlines that we got today or in the last 24 hours. The president himself last night also expressed some willingness to negotiate on that 145% tariff, that it wasn't sustainable.But we saw the markets obviously take off today. It was there, are you encouraged by what you heard today, or do you think that it's sort of a mistaken reading? Look,

Ithink markets need to understand right now the base case is that you get a series of many deals between the two sides. The idea of a big US-China deal where China is going to make structural adjustments to their economy and the trade deficit between the two sides are going to disappear, all the rest, that is not going to happen. I don't think that's ever going to happen. It's.Certainly not even going to happen within the 2 to 3 year framework that the Treasury Secretary laid out.

So basically one thing people should be looking for is sort of maybe these kind of mini deals, right? So I guess is the bigger point here that everyone's focused on trade, these, these huge tariffs that essentially are stalling sort of these two major economies, but actually there's sort of some small steps along the way that actually investors could cheer for.

They can certainly cheer for that, but then they have to wrap their heads around the fact that that leaves the situation and the relationship is still quite volatile to additional.Like, because I think it doesn't resolve the fundamental problems the two sides would have that they have with each other, and I think a lot of those problems cannot be resolved. Um, I think altering the trade relationship with China is probably the only way forward. Markets are probably not gonna enjoy that in the short term,

and it still sounds like, you know, they, uh, the officials involved have called this an effective embargo, right, where you could be seeing flows of goods just stopping entirely. Some have seem to have already.So this does imply that we could for the foreseeable future see product shortages, for example, Americans not able to get certain things from China, and that doesn't seem like it's going to change, at least not, you know, even maybe as we get these mini deals.

You know there's been a ton of front loading, but as soon as that stock starts to get depleted, absolutely shortages are going to become a big problem, which is why I think there's also pressure on the administration.Not only to strike deals but see what supply chains can get moving from other countries, uh, what can be done by Mexico also, by the way, what can be done by Vietnam, uh, and so forth. One other additional point we all talk about Chinese trans ship and so-called China rerouting it goes through other countries. That's really the primary mechanism through which China is going to still be relying on. I don't anticipate a lot of crackdown on that happening right away, and that really may be a bit of a silver lining for consumers in the short run.

And uh as we look at the you know the backdrop here, as I mentioned in the beginning, you are very steeped in the Chinese economy. It seems like they are prepared to hold fast on this. How much leeway do they have to do so? How much leverage do theyhave? Well,

they have quite a bit of ability right now to support the economy. They haven't done any kind of true large scale stimulus for several years despite expectations on the street, so they could start begin.Unrolling some of that providing support to their export economy, the industrial base, providing some amounts of support to consumers, although we'll see just how big they have the capacity to go in order to make sure that the economy can be as quote unquote stable as possible because they are looking at a pretty serious economic downturn with with the trade war being where it is rightnow.

Yeah, really interesting insight. Thank you so much for being here. We appreciate it.We're just getting started here on market domination. Coming up, stocks are jumping today, but is the relief rally and some of the actions behind it coming too late? We'll speak to a strategist about the latest moves on the other side. Plus, in the 4 p.m. hour, we'll be getting you the latest earnings results from IBM, Chipotle, and more, as well as a conversation with Chipotle CEO Scott Boatr directly following those results. Stick around all that and more when market domination returns.Stocks higher today as President Donald Trump seems to be softening his stance on China tariffs. Our next guest, however, says any attempts to reverse those tariffs may have arrived too late. For more, let's welcome in Drew Mattis, MetLife investment management chief market strategist. Drew, thank you so much for being here. So.The rhetoric that we got today seemed to be a little back and forth that nothing's changing right now. The tariff on China remains 145%. So sort of how, what is the timeline that we should think about as to when that would need to start to go down to prevent real damage, or is it too late?

Uh, so our view is that it's too late. Uh, you know, once the equity market really responded to the tariffs in the way that it did, uh, and we saw a big decline in equity evaluations. What, what happens is the wealth effect, so consumers spend some of the money that they feel like they're wealthier by.Uh, and the longer they feel wealthier by whatever amount it is, they'll spend a little bit more of it. And so with equities, you're talking about a high income consumer group, uh, that had up until the, the tariff announcement actually been seeing relatively stable and significant gains in equities. uh, and now, now they had to rethink the permanence of those gains and so it causes people to pull back a little bit.Um, now that being said, you know, China's not the only game in town. I know, you know, uh, your last discussion was a lot about China, um, but there's talk about, uh, the US pivoting towards India and cutting a deal with them first. Uh, and that's the best way to kind of get others to the table, uh, is, you know, uh, you ask out their best friend, uh, and so, um, not quite the great analogy there, but, you know, the US moving towards kind of an India story and working the trade barriers down with India.Uh, will naturally draw other countries to the table and will be good for equities as we move forward.

So Drew, I want to pick up on that wealth effect argument that you made a moment ago. So we know that there's obviously a lot of talk from the administration just about sort of the, you know, the push toward Main Street, but sort of what is the impact of sort of the the wealthiest Americans who own most of the stock is that we're actually gonna see a more material pullback first that then will lead through kind of lower income folks um kind of further struggling.

Well, well, that would be the worry, and, and it works because of this. Uh, upper income people tend to have the ability to choose to save or choose to spend. Whereas when we're talking about kind of, uh, lower income workers, they basically have to spend almost everything that they make. So they're not really making a savings, uh, decision every month. Uh, and so when you make upper income people nervous, they pull back on spending that otherwise would have been spent.Uh, and that reduces the potential need for labor to kind of, you know, sell them things, to, uh, serve dinners, etc. So that upper income group actually leads the, the, the delta in consumption, the change in consumption that can happen in any given month. And that's why we focus on them so heavily is they're the ones making the decision that can mean the economy continues to move forward or begins to pull back and retrench and people have to worry about losing their jobs.

And at the same time, Drew, that that, uh, is happening with the sort of wealth effect deterioration. We're hearing from companies now we're in the midst of earning season. Even on this day when stocks are rallying strongly, we're hearing from dozens of companies.Companies, I would, I think, um, who are commenting on the tariffs, commenting on increased costs that are likely going to come as a result of the tariffs. So as an investor, you know, are you cautious about those companies that are seeing those increased costs?

Well, we're certainly doing our homework in terms of, you know, who's most exposed to, to tariffs and how they might handle it. Uh, you know, I, I think one of the other key factors though is that, you know, we had tariffs and we didn't have tariffs and we have this and then we don't have this and there's a lot of significant policy shifts that are occurring and it makes it very difficult for firms to invest because in order to invest, you need to have some idea of what your return on your investment is going to be.Uh, and because of the significance of the shifts, uh, you can have a great idea. You can have the money to invest in that great idea, but you don't know whether that great idea is actually, uh, able to work, uh, if there's gonna be a significant policy change. And so what you're going to do is you're going to wait and see if there's going to be a significant policy change and of course in the current environment, you don't know how long to wait for.Um, you know, we adjusted our forecast to a recession on Wednesday morning once the tariffs went into place, and Wednesday afternoon they pulled the tariffs back. Um, you know, we didn't change our recession call after that, but we did lower the probability of recession because of that.Um, and now you actually take it instead of doing a forecast, like who cares what my forecast does? What if you're actually investing in a new plant or, you know, massive amount of hiring that you were planning on doing, you're just gonna take a step back and see if you can get some more clarity a little bit later down the line.

So Drew, are, are you all kind of taking this Q1 earning season with sort of the biggest grain of salt that you can find, right? Because most of it is definitely in the rear view mirror now, uh, and really is it just simply about focusing on guidance?

Uh, yeah, so it's Q1's earnings. I wouldn't actually even focus on guidance because who can provide it, uh, with any meaningful assurance. Um, you know, and then in terms of economic data, April's probably gonna look pretty good. People ran out to try and get in front of the tariffs, and they spent probably more money, right? And so we're really gonna have to wait until June to see the May data, and that's when we should begin to see more of a slowing, bearing in mind that the labor market was already slowing into this tariff announcement.Uh, and, and so, you know, there was some weakening in the economy that was beginning to take place, and we're gonna have to see how that all plays out now with the shocks to confidence, uh, shock to the equity space, but the shock to confidence, the potential price shock. Um, and when we modeled our recession, we actually looked to the 1991 experience because there were several shocks, both in terms of global world order and in terms of prices and equity markets, uh, that we think actually mirror the current environment pretty well.

So Drew, all of this said, how are you positioning then to try to insulate your portfolios?

It's less a matter of positioning and more a matter of trying to think about kind of what are your entry points to get back into some of the riskier assets that you might want to be invested in.Right? At what point do you begin to look at, uh, corporate credit when credit spreads have been so significantly tight, you know, you don't want to wait for them to get all the way out to where they might get in terms of a recession, uh, but you do want to begin identifying kind of at what point would you begin to add to those positions and how much would you like to add at each step, right? So it's more of a matter of planning for your future actions.So that when these things occur, and they will occur rapidly if they occur at all, you're properly prepared to kind of just know what you're going to do in advance, and it's especially important for a firm like ours where we have a very large portfolio. We need to actually think through, you know, what these decisions might be well in advance so that we make the correct decisions when the time comes.

Yes, have your decision tree well planned. Drew, thank you so much. I appreciate it.

Thank you.

Now time for some of today's training tickers. We're checking in on the Mag 7 rally as well as Vertiv Holdings following their earnings, and one analyst note that has Nhase energy sinking. Well, let's start with big tech stocks surging for a second day. Tesla and Amazon leading the Magnificent 7 stocks higher as the Trump administration hints at this de-escalation of the US-China trade war. Nothing concrete happening, but the stocks are moving, and Dave, you're a perfect person to talk about this. You are at a firm.That has a mag 7 ETF that is very closely followed. I was just looking at the latest stats. It's down about 20% year to date. We all know what's been going on with the mag 7, so a little bit of pop today, but you said earlier that this is a bear market rally, and I assume that goes for the mag 7too.

Yeah, no, absolutely right. I think you can't really disentangle the Magnificent ven from the market anymore, right, because of the concentration that we've been talking about now sort of for years, right? We saw the benefits of.That last year and now the downsides coming into play in a sell off um but what's interesting is that these names of course which were the leaders in revenue growth and earnings growth and actually this quarter they're still forecasted to be the same maybe Tesla aside, we'll see what Alphabet brings us tomorrow, but they're driven on sentiment, right? They were sort of the first to sort of be sold off before we even got the meat and heart of the sell off and in fact, um, some are saying, um, that they could be the first to lead us.Of it just because simply they're at the kind of tip of the spear, especially because it's sort of there are 7 stocks, but there are hundreds of companies under the hood and they're kind of a tangled web of companies whether it's on the pure tech side or on theconsumer side.

Yeah, and of course then they have all the other companies that rely upon them as well that go that are below. I mean, you know, we are seeing Tesla of course rally on its earnings, although it's as we talked about, it's probably more on Elon Musk's.Comments, but I do wonder how much upside some of the other Mag 7 participants could potentially get from earnings with the macro clouds hanging over them.

Well, it's interesting we haven't talked about valuation yet today, right? And so these names, of course, were, uh, it's hard to say that they weren't expensive last year. There was a lot of justification perhaps even by myself that they were trading at those levels because they were the only companies making money to.Be frank, if you excluded them from the S&P 500 and looked at the earnings there, it wasn't great, but they were, and so they were that valuation was almost justified. Now the valuations come in significantly. It's trading closer to its five year average relative to the market. However, the challenge is, well, are those earnings forecasts going to be anywhere close to fruition? I think those estimates have to severely come down. We heard it from Drew a moment ago that.This kind of Q1 and maybe even part of Q2 is almost going to be meaningless because how can a company give you guidance when they don't know what things are going to cost? Well,

but and the evaluations discussion gets the very crux of what we've been watching the mag 7, what we've been watching the market, which is when is the outlook priced in. Of course, the current moment's problem is you don't know what the outlook is because you don't know what each day will bring, but we're closer to pricing it in thannot.

Yeah, no, I think, I think that's a fair.Fair comment to put it. We certainly could see multiples continue to come down if we get to some of these worst case scenarios. From from my perspective, I think a lot of those worst case scenarios probably should come off the table, but what is the number going to be, right? A 50% or 65% tariff is a lot more than it is currently, and you have and you have to start modeling and pricing that in. And that's a really, really challenging thing to do.

Yeah, exactly. When we talk about the network below the mag 7.One of those companies is actually Vertiv. Its shares of that company are higher today after it posted strong first quarter earnings, raised its full year sales guidance, it makes cooling equipment for data centers. That's why it's in that network, raised its 2025 net sales guidance by $250 million at the midpoint, citing robust momentum and strong AI demand. And this sort of, obviously this is about virt of, uh, specifically, but more broadly there have been some questions about the.stability of the spending plans on the part of the data center operators, the hyper scalers, etc. So for those who are worried about this, maybe this is a little bit of an encouraging sign.

Yeah, I just said a moment ago, sort of Q1, maybe throw it away. However, these numbers are encouraging because the demand still seems to be there. Now there's a lot of question marks about what's really going to happen on the data center side, but for the time being we have not heard any material reports from the companies.Selves whether it's Microsoft or others that they're actually gonna pull back. I think there is broadly still a belief that this AI story and we're already kind of starting to see it in its utility come to bear so they're going to be investing there and a company like Vertiv um has been a huge beneficiary of that. Um now can it continue to grow at the pace it has been and will investors keep rewarding it? Hard to say, um, but if they were able to put up these numbers in what has been a questionable environment.I think it's a positive for the

space. Yeah, um, let's talk about a couple of stocks that are going in the opposite direction solar stocks, solar equipment stocks, specifically getting hit hard after Guggenheim cut its outlook on end phase energy and solar edge technologies to sell, flagging worsening fundamentals following N Phase's first quarter earnings report. And in that our first quarter earnings report, uh, the company talked about margins or end phase that is talked about a 6 to 8% decrease in its gross margin.In the 3rd quarter because of tariffs here um and then if you look at the commentary from Guggenheim, they had, they had just upgraded the stock to neutral not long ago and they said, well, never mind, this report was worse than we expected here and basically they don't think that end phase has sort of um been accurate or have foreseen the environment accurately and so that's also one of the reasons that behind the.Yeah,

no solar's kind of been a tough spot. There's been fits and starts of it being sort of a market darling, and then of course now we're kind of seeing the negative side of that. NFA is one of the worst performers in the S&P 500, and I think the challenge is that yeah, the tariffs, particularly in a company like that, are going to play a material impact. And so investors are kind of shooting first and asking questions later about questionable names and I think Nhase and other solar names are really emblematic of that trend.

All right, we're gonna, um, hang on and talk more about all this a little bit later. Coming up in the 4 p.m. hour today, we'll be getting you the latest round of earnings results from IBM, Chipotle, and many more. Stick around, all that and more when market domination returns.Stocks rallying after President Trump clarifies he has no intention of firing Fed Chair Jerome Powell. However, Trump did reiterate he would like to see Powell be more active in lowering interest rates. For more on what this means for the Fed and the economy, let's get to Shelly Antonievich, investment company in.Institute chief economist as well as Eric Rosengren, visiting scholar at MIT Gollop Center and former president and CEO of the Federal Reserve Bank of Boston, thank you both for being here. um, Eric, I want to start with you here because even if President Trump has removed this threat, can the Fed go forward and make non-political decisions or decisions that are not seen as political given this very public discussion?

Well, I think the first question is, is the threat removed? So what he has said is he has no intention of firing Jay Powell, but, uh, while Jay is the current chair, um, we really care about independence of the central bank over time, and that requires both the executive branch and the Supreme Court to believe that there are advantages to having an independent central bank. And so just by having the discussion that we've had over the last week,And some of the market reactions that we've seen, uh, there's already an issue about whether people are viewing, uh, the United States as a safe haven, and that can be seen when you see days where the stock market went down quite significantly, but the 10 year rate went up, and that's not what you normally see if you're a safe haven. So I think just having this kind of discussion.is actually a bit dangerous for financial markets. Jay is going to have his term come up in the spring of next year, May of 2026. Uh, the president gets an opportunity to appoint a successor. So to some extent, it's a little surprising that he picked this fight with somebody who has only roughly one year left in office.Um, but the bigger issue is, does he really believe that there is a role for an independent central bank, and I think that remains to be seen.

Eric, as a follow up to that, are there any concerns that you've seen in regards to actually the credibility of the Federal Reserve and kind of uh Chair Powell's comments, um, sort of guiding the economy going forward, especially with sort of the noise around his position?

I mean, it's a difficult time to provide forward guidance of any sort, as you've just discussed, uh, the tariffs are changing pretty rapidly, both up and down, and there's a lot of uncertainty in the economy. Uh, we haven't had tariffs like this at this level, um, since the Great Depression, so it's not in the statistical databases that most economists use to to do their modeling.So it's very difficult to provide a clear guide, but I think what the chair has done quite effectively is talked about what the mandate of the Fed is, which is to focus on uh getting inflation to 2% and having maximum employment consistent with that goal, and I think he's very clear in each of his press conferences that that's what they're trying to do, and not trying to overreact to announcements that uh can change over a weekend.

Shelly, I want to bring you into this. Um, talk to us about why it's so important to have this independent central bank and sort of what are the threats when you have the executive branch looming over it.

Well, you know, I have to completely agree with everything Eric has said. I'm, I'm a former Fed staffer myself, and, you know, it is clearly very, very important to have an a central bank be independent from the political process. The central bank has a dual mandate. The Fed has a dual mandate for inflation and full employment, and there can be tensions between those.Duual mandates and particularly now in this situation where if we are in a situation where it's a high tariff scenario for several years, we could have significant impacts on negative impacts on economic growth, on employment, and also increases in inflation and it's gonna depend what happens with inflation. It is a one time.Pop up, it's temporary, it comes back down. OK, then the Fed can focus on the employment mandate. If it is, becomes, if inflation expectations become unanchored at the long end of the, you know, at the long end, then you've got inflation spilling over. It's much tougher to bring it down as we've seen, we're still not at the 2% target.So then it, it is very difficult for the Fed, and they have to be independent from the political process to make those tough decisions for what is going to be best for the US economy in the long run.

So Shelly, the Fed has used sort of what's now become a dirty word transitory again when talking about these tariff potentially induced inflation. But if we look at the data, right, to your point, inflation wasn't necessarily trending down toward 2 anyway. So were they already tilted sort of on that inflation side and was going to lean in that way anyway and so maybe these rate cut forecasts which are still actually out there probably still need to be taken down.

I think again, you know, I'm gonna agree with Eric here. I mean, there is so much uncertainty on this, and yes, we've seen on the consumer survey side that year ahead inflation expectations have popped up to, I think it's 6% and 5 year ahead have also gone up to around 4.4%. Now, that's what we call soft data inThat might not necessarily translate into hard data. And the hard data is looking at where you are on nominal yields compared to sort of inflation index yields. And right now, we aren't seeing too much movement on that. Now, that could change depending upon how long we stay in this high tariff situation.

Um, Eric, do you think that we are heading for a recession as a result of these tariffs?

I think the probability has gone up significantly relative to where we were at the beginning of this year. So as we just discussed, tariffs can both slow down growth, which causes higher unemployment, and they can also raise prices and potentially start affecting the underlying rate of inflation. So I do think that it is an elevated risk of recession.And I would put it probably at 50% or 60% at this point. Uh, you go into any store and talk to people in the store, and they they're talking about tariffs. Very rarely do you see people so focused on economic data and pricing data.And that's attention of consumers, that's attention of small businesses, it's the attention of political figures, so it's front and center for most people, and to the extent that both businesses and consumers hold off on purchases because they're concerned about what the outlook is going to be and whether policies are going to change significantly, that alone can have a very a very big impact.So I am worried that we're going to start hearing more about layoffs, we're going to start hearing more about deferred decisions for investments, and so in many respects, the way the tariffs have been rolled rolled out has been quite counterproductive.

So Shelly, I'll kick it back over to you. Um, so you made a point earlier about sort of this disconnect between hard and soft data. Do you sort of have a view of sort of how that could resolve, right? So soft data surveys, um, but hard data is actually a reality, or are we just at a point, um, as both of you have said that right now there's almost just too much, too much uncertainty to say, well, when could those sort of um recouple.

I, I think we're gonna need to see more data in the coming months. I mean, we did have retail sales come out and the non-auto part of retail sales was a little bit lower than had been expected, but what is that from? Is that because people pulled forward their auto purchases in advance.to kind of get ahead of the tariffs, well, that would naturally have reduced some of their other purchases they might have made. Um, so I think it's just way too soon to say that the soft data right now, um, from the consumer surveys that we're seeing is feeding into the hard data.

We will wait a little bit longer and then check back in. Shelly Eric, thank you so much for your time. I appreciate it.

Thank you for having us.

Thank you.

Coming up, we're counting down to the closing bell, getting you set for another round of earnings. Stay tuned. Much more market domination still to come.We are on daily tariff comment watch this earnings season. Here are a few of the highlights that we've gotten in the past 24 hours or so. Of course, Tesla is on the list. It's become one of the latest companies to pull its guidance, and it comes after the EV maker reported first quarter earnings last night, saying, quote, We will revisit our 2025 guidance and our Q2 update. While no reason was explicitly given, CEO Elon Musk did mention the impact of tariffs on the company. He said, quote, tariffs are still tough on a company when margins are still low. ItFollows the broader theme we're following this earnings season companies highlighting the impact of tariffs on their outlooks in 2025 for Tesla. In particular, it had an effect on its battery business, and that brings me to GE Vernova talking about it on its earnings call. CEO Scott Strazik saying he's expecting costs to reach up to $400 million this year. The company didn't break down these costs in terms of what tariffs specifically are affecting them, but Strei did say on the call that the biggest tariff.to us really sits in the China base. Norfolk Southern expressing similar concerns this morning on its first quarter earnings call. The railroad reiterating its full year guidance, but CEO Mark George also noted on the call that there's no clear information on how tariffs may impact our end markets and revenues. And David, I want to bring you back in on this because it comes back to I think what Jay Woods, who was on the show yesterday called the word of the year, right, the theme of the year, uncertainty, and you know.Even if these tariffs are going to come down at some point, if you are a business and you're trying to plan, I mean these, these comments across these earnings calls make it abundantly clear it's really tough to do.

Well, yeah, I mean we, I think about it from an investment point of view, but when you put your feet in sort of uh the seat of a CFO, it gets incredibly challenging, right? So when you're modeling out sort of one, what is our cost case gonna be, um, and then what prices can we charge people for that? Are we willing to.Pass that on. Can we decrease our margins? These are really hard decisions to make, uh, coupled with the fact that that could then these tariffs we talk about them in isolation, but just like we heard a few moments ago, um, they're gonna they can impact the consumer and then will impact employment. So where does that leave you, right? So and and or can you again take your operations from China and then start building a plant in the US? That's gonna take years and so it's a really, really challenging time. So I think that word of the year makes a lot ofsense,

yeah, for sure.All right, well, investors are bracing for more volatility as tariff negotiations develop and as earnings season unfolds. Tech names get a lift as President Trump softens his tone on tariffs with also plenty of big tech earnings on deck. He with ways to trade, this is All Star Chart chief options strategist Sean McLaughlin joining us now for the optionsit sponsored by Tasty Trade. Sean, it's good to see you as always here.Obviously, a time when options can come in handy when we're seeing the volatility like we are seeing today. So I want to just jump right into the trades that you're looking at. One of them is about Amazon, which I think is really interesting. We've seen a lot of bouncing around in Amazon shares. We've got earnings coming up soon, so how are you thinking about it?

Well, you know, your previous guest mentioned the heightened risk of recession, and that trickles down. It affects consumers. It, it affects people whether they have a job or they think they're gonna have a job. And Amazon is one of those companies where we spend as consumers most of our money. I don't know about you, Julie, but I'm getting packages delivered to my house almost on a daily basis from Amazon. And if I feel like my earnings are gonna be pinched, I'm probably gonna cut back on spending and a company like Amazon is one of those companies I'll probably cut back on.And so you mentioned we're in earnings season here, we have earnings coming up. Uh, volatility has been, has been through the roof. We we've certainly come off levels that we were at just two weeks ago, but historically speaking, we're still at high implied or high volatility levels and in the options market, that's, uh, manifesting in high options premiums. So if I wanted to make a bearish bet on Amazon, just buying puts as an options trader, sure, I could do that and maybe that wins in a in a.Big cascading sell-off type situation, but I'm going to pay a lot of money to do that because of the, the premiums and the options. A better way for me to do it is to employ what I call a bear or what is called a bare put spread where I'm buying it in the money put and selling it at the money put in Amazon. So this trade I've got up here on the screen, uh, these are scheduled to expire on May 2nd, which is one day after Amazon announces earnings. They announced on May 1st after the market closes.And in this case, if Amazon.Even just go sideways. I, I don't see that happening. I think the likely move is down because in my experience, the way I've learned it, uh, if there's ever an earning surprise, it tends to unfold in the direction of the underlying trend, and there's no denying that Amazon's been in a downward trend over the last several months.Uh, so if Amazon moves down a barefoot spread obviously will, will win because of the directional, uh, position of it. But if Amazon just kind of stays put and kind of stays in this area, doesn't really make a big move as long as it doesn't move way higher, what's nice is that elevated premium and those options, particularly that at the money strike that I'm shorting in this trade.The premium comes out of that faster than the rest, and that would put my position in in an opportunity to win money. So really, uh, in 4 out of 5 possible outcomes of Amazon's earnings, I could potentially win as long if Amazon goes way down, just a little down, if it stays sideways, or even if it trades up just a smidge, I could still potentially make money in that trade. I really only lose if there's a big move higher in Amazon, which I don't know, call me a betting man, but I don't think that's likely in this tape.

Do you, so, um, I think it's an interesting trade that you're putting on here. Do you think that, um, these are the type of trades that you can actually do in other kind of magnificent seven names heading into earnings season?

Absolutely. I think all the Magnificent Seven names are at risk. They're all in down trends, certainly in the last 3 months or so. And like I said before, if there is an earning surprise, they tend to happen in the direction of the underlying trend. So I think trades like this trade I'm putting.And Amazon, you could put similar trades on in Meta, in Google, uh, in Tesla. Well, Tesla just had earnings, uh, but, uh, I think those all of those companies are, are vulnerable because as your previous guest was saying, we are at an elevated risk of recession. I'm not saying that.That we're in that we are certainly heading into a recession and I'm not calling for a major long lasting bear market but when there's all this uncertainty in the market, the markets hate uncertainty until we get some feeling that there's there's a plan in place that we could all kind of get our heads around and understand.I don't, I don't see a path forward for stock prices to move dramatically higher, and I think we're seeing that today, right? The way the S&P 500 is trading, the way the queues, we, we gapped higher today, big gap higher, but all we've done is trade lower. We're trading near the lows of the day last I checked, so I feel like we're at the upper bounds of the range for the broader markets, and, uh, we don't have much more upside from here until we get more clarity.

And that doesn't seem to be forthcoming. Sean, thank you so much. Good to seeyou.

Great to be seen. Thanks for

having me. Well, we wrapping up today's market domination. Don't go anywhere. We got you covered with all the action following the closing bell, including earnings from IBM and Chipotle. Stay tuned.