Yahoo Finance

Welcome to Catalysts. I'm Julie Hyman. We are 30 minutes into the US trading day, so let's get to the 3 catalysts we're watching this hour. First up, we break down the market action, and if the rally has legs as investors enter wait and see mode on trade, plus a floodgate of AI deals taking place during President Trump's visit to the Middle East will break down the risks and rewards of those agreements, and retailers rushed to restart production and shipments amid the 90 day tariff pause. We'll get the latest read on the industry later in the hour.Half an hour into the start of US trading. Let's get a check of the markets brought to you by Tasty Trade. Let's first of all take a look at the major averages, and we do see a very modest rally. We call it little change for the Dow and the S&P 500. The Dow is up 30 points here, not even 0.1%. Ditto for the S&P 500 tech leading as it has been, but just up about 0.25% today. So not seeing huge gains here, not any new dramatic.Headlines coming out of either the Mid East or more generally on trade, at least not yet. So not seeing much movement here. Taking a look also across other asset classes here and at the bond market again, not seeing much movement there. Treasury yields very slightly down and then want to take a look at the dollar and at gold. Now gold prices have been coming off the boil because we had seen money pouring into gold on concerns about tariffs now that that.Has sort of abated. We have seen the gold trade come off a little bit, and I'm keeping a close watch on the dollar today. We're going to talk more about this later in the hour, but there is a report on Bloomberg this morning that maybe the dollar strength or weakness might be at play in some of these trade negotiations. That seems to be pushing the dollar down a bit this morning, but again, we're going to get to more on that later.First, I want to bring in my co-host for the hour, Thomas Hayes, Great Hill Capital chairman and managing member, and Tom, obviously we've seen markets rebound and recover a lot of ground in a short period of time. The S&P 500 now a little bit positive on the year. What happensnow?

Well, we have a lot of what we call trapped bears. OK. The data shows that in early April you had $1.1 trillion of selling in US equities that was predominantly.Funds and CTAs. So first you had the short covering rally after the tweet, the famous, it's a good time to buy stocks on April 9th. Now the market's up 15%. So they've covered their shorts. They're now chased and forced buyers. So I think as we continue to see more deals cross the tape and there have been rumblings, more deals are on the way, that you're gonna have forced buyers. That said, from a trading standpoint, I think you move 15% in a few weeks. You probably consolidate a little bit and a lot.People have jumped in Johnny come lately. Sometimes you get a 3-4% pullback just to kind of shake the weak hands out before we move higher, but earnings are super strong. The earnings growth rate was twice what we expected for this quarter. We were expecting 6%. We got 13%. Estimates have held up even in the face of all of that uncertainty. Now that some of that uncertainty is removed, we could start to see guidance rip higher and to your point on the dollar, that's gonna help earnings in the back half. It's been weak.

I mean some of the uncertain this sounds awfully bullish here Tom. I mean some of the uncertainty is removed, but we got 90 days. There's still 30% tariffs on Chinese goods coming in. There's still 10% tariffs on everything else, you know, these companies that came out and pulled their forecasts, I don't hear them coming out and saying actually now we have a forecast for you, right? So has the, has the equation change? I mean how much has has the equation for.Decision makers at corporations reallychanged.

Yeah, well, if we look at things were in their worst case a few weeks ago and 2026 earnings still held up above $300 per share on the S&P 500, which is 18.5 times next year's earnings. The 10 year average is 18.3 times. So I would say the tariff news has only gotten better in the last few weeks. So if guidance was able to hold up in the worst case scenario as uh companies start.To report again in the following quarter, which we're far they're not gonna come out mid quarter and say, hey, by the way, we did no guidance now we're gonna throw some guidance out, uh, uh, but they'll start to talk to analysts. Analysts will start to upgrade. You're seeing it now. All the people, you know, it's, it's funny seeing these reports from different, different sell side houses. One week they're saying recession chances high. The next week they're saying no recession, and they're just adapting to this and companies now are going to come off the sidelines. They've been paused.They've just been saying we're not doing anything, we're not making any investments for the last 4 or 6 weeks. Now you're gonna see CEO confidence, CFO confidence, and by the way, what's so interesting, we had record buyback announcements year to date, $665 billion. So while hedge funds were selling in the hole, guess who was buying? Corporations believe in the future. Even in the face of all that uncertainty, they were putting their money to work to buy shares in. This is gonna be a.Positive thing prospectively,

um, the other thing I'm curious about is additional trade deals. None of them are actual deals, by the way. They're all frameworks. They're all plans to make a deal. Yeah, well, they're not details. All I'm asking is are we going to get diminishing returns from these announcements going forward? I mean, China was really the big one. China

was the big one. Europe will be very, very important, but at the end of the day, here's the thing if, if President Trump had come out and said.We're gonna charge everyone 10%, OK? There's no way he would have ended up with 10%. So he came out, he threw a grenade in the room, he blew up the entire system. He said, we're gonna tariff you 145%. We're gonna tariff you 80%. Now 10% looks like the deal of the century, and it's an additional 30 to $400 billion into our coffers. So, uh, with that said, that we're paying for, well, that's questionable.Because you know we had tariffs that were put into place in 2018, 2019 and you

actually avery different place for inflation you

saw disinflationary, so like washing machines, whirlpool, the price went up like literally short term for a matter of months. Two years later, the price per unit was actually lower. So there's something to be said. I, I think it's the perfect balance. You get a little rebalanced. Look, China wants to move to a consumption led.Economy by 2030, that is an explicit government mandate. They want to move to 70% consumption just like the rest of the developed world. We want to increase our manufacturing percentage. We're, we're already at that level of consumption, so this rebalance is natural and it makes sense. I'm very interested in what they're talking about as it relates to the currency kind of kind of lowering the value of the US dollar because that also helps alleviate some of the imbalances they were rumbling.Earlier in the year, remember the Mar a Lago Accord where they'd have a, a, a, a summit like they had in the, in the mid 80s where they you know, devalued the US dollar. I don't know that that's gonna be part of it per se, but I think that's the trend. We're gonna get a counter trend bounce here in the dollar because everyone's bearish on the dollar now after everyone was bullish, and then we're probably gonna continue lower, which is gonna be great for S&P earnings, which is gonna help rebalance the trade and we're gonna be OK.

What could go wrong with you like you sound like everything is perfect, Tom. Well,

look, I look at businesses company by company. We did a client conference call April 7th, OK, and I went through every single company. I went through their balance sheet, their liquidity, their cash flow, their revenues, and all of these things were going up. The only thing that had changed is the headlines and the price relative to that. Yes, huge tariffs would have impacted the cash flow. OK,

what, what's the big risk here? Is there.

Thebig risk is you buy companies that don't have a large enough margin of safety. The tariff war has brought down so many companies 30%, 40, 50% on the fears of the worst case scenario. Now that scenarios out, positioning cyclicals relative to defenses is at all time lows. So it's, it's got to be what do you buy on the surface. The valuation of equal weight relative to cap weight is one standard deviation below the mean. Your money is gonna be made finding those things that have been hit hard.By tariffs, worst case scenario. No longer worst case scenario. These things can double over the next 234 years.

OK. Tom Hayes, you're gonna stick her out. We're gonna do more of this. The House of Representatives is back in session this morning as lawmakers debate the GOP's tax bill. One major sticking point, the state and local tax deduction cap SAT, as it's known. After failing to reach a deal last night, House Speaker Mike Johnson hoping to find an agreement today. Yahoo Finance Washington courses.Ben Work has been tracking this closely. He's been readying his salty puns, and he brings them to us now. Hi Ben, goodmorning.

Morning, morning, Julie. Yes, so Mike Johnson, it's worth noting that Mike Johnson was was talking about salt yesterday and he said he was hoping to have a deal by yesterday evening. That deadline is obviously flipped and switched into today, and it's kind of emblematic of how this, this salt issue has emerged as one of the biggest sticking points in Trump's overall big beautiful bill which theyRepublicans are trying to at least get the bill into shape this week ahead of a vote in the House of Representatives next week. At issue here is the Mike Johnson and his plan to triple the current salt deduction. The current salt deduction is $10,000 annually. This, this bill, as it, as it's written now would triple that to $30,000 for, for everyone making under $400,000 a year. There is a sort of GOP salt caucus here that's a, it's, it's about 5 members, so it's very small, but theyHave, have rejected that out of hand. They're floating much bigger numbers like a $62,000 credit, $60,000 deduction for individuals, um, and, and a whole, and a whole lot of back and forth there. There was a closed door meeting last night that that saw sort of some members asked to leave and, and then critiquing those that remained, and then this, this kind of core salty five, as they describe themselves, sort of holding out for now. We're expected to hear more from Mike Johnson in the next hour, so we may have developments on this. The real deadline here is kind ofof the week as what Johnson wants to do is have a final bill that he can then sort of put on the floor by next week. So expect a few more days of back and forth on this for sure.

Well, and is this sort of the biggest sticking point? Are there other things and then the bill entirely, is that a realistic goal to sort of get that finalized version by the end of next week?

So this has definitely emerged as one of the key sticking points right now. There's a lot. This is a huge, this is a huge bill that'sIt's going on multiple fronts. There were two what's called here in Washington markups that went all night last night. The first side was on taxes. The second side was on Medicaid cuts. That's, that's a real giant issue here. They're trying to find about $600 billion in Medicaid cuts to help offset some of these costs, and that's, that's a big issue that's, that's also going as, as, as part of this. So it's SALTA is definitely not the only one, but it's, but it's a big piece of this. Um, it, it, it, it, it's all sort of leading to this hopeful Memorial Day deadline.For Johnson in the House, I will say that the Senate hasn't yet kind of weighed in, and they would they would revise this. The key deadline for everyone to watch here is this summer. So this is going to be a big process heading expected to be heading through July to kind of get this whole big beautiful bill through the House, to the Senate, and to the President's desk.

Ben, thank you very much. Appreciate it. Tom Hayes of Great Hill Capital still with me here because I want to get your take on this tax bill, right? AndThe way that I've been sort of thinking about it is that if this didn't happen, it would be a big problem for the markets. It happening doesn't seem to necessarily be a big catalyst because it's expected. Or what do you think would be in there that would that could move the needlemore?

I think it will move the needle once it's done. It's going to be pushed through with reconciliation like, yes, they got relief corporate tax rates, the impact on earnings power, the impact on the consumer having more money. So this is,

but they're not gonna havemore money than they do now,

right? Waitresses are.Look, uh, no tax on tips. You, you've got corporate tax rate, you've got, um, we, we're basically shifting now from the apocalypse into growth and deregulation. Growth and deregulation is the happy place, OK, so welcome to the happy place. We're now focused on growth. Companies can start to invest. The tax bill is one more, uh, cherry on the, on the cake, uh, and, and this is gonna be the second half theme. So when.Trump says stocks are going a lot higher. First off, his first tweet was right, OK, on April 9th. His second tweet last week when people were nervous before the UK deal was right. Yesterday he's in Saudi Arabia saying stocks are going a lot higher. Um, this is one of the few regions of the world right now that has an explicit growth program on the plate, deregulation, tax cuts.Billions upon billions, trillions of dollars investment in the United States incentivized for these businesses go that's gonna create a huge amount of jobs. And if you remember Trump 1.0, guys who run money like me, we did OK. It was a good 4 years, a lot of volatility, we ended up fine, OK.Everyday people, middle class working class people, if you look at the employment rate, real wages, they did better than ever, and I think you're gonna see that cubed in this uh Trump 2.0. I think you're gonna see the middle class, upper middle class, the lower class, working class do exceptionally well. I think, by the way, it's interesting. I think you're gonna see a continued out.Performance of international stocks even despite all of this growth programs, US stocks are gonna do great. International stocks are gonna start to do well. It's, it's a cycle that happens every 10 to 15 years. We started it in the first quarter of this year, so it's

a show today. I'm gonna get you to say something negative. That's my challenge of the deal. All your markets action straight ahead. Stay tuned. You're watching Catalyst.

Bitcoin's rally has resumed in recent days, nearing those old January all-time highs. So what is next for the cryptocurrency? Let's take a look at seasonality. I'm Jared Blickery, host of Stocks in Translation. Well, first, our seasonality definition here. This is a predictable and recurring change in data that tends to happen at the same time every year, and the emphasis is tends to. It's not a guarantee and it accounts for about 1/3 of price action if everything goes well.2/3 of the time life can intervene and we saw that this year in April when stocks which were supposed to be going up, they went down because of tariff realities and the same was true for Bitcoin. So let's take a look at this Bitcoin seasonality map. And first to back this up, I just want to show you I'm using the 2018 to 2024 median and averages. Why not go all the way back to the beginning 2010, 2011? That's because in the early days of crypto.And especially Bitcoin, things were a lot wilder and this seasonality chart would just be off the charts. So I think this is a more realistic view because in late 2017 we got Bitcoin futures for the first time. This kind of marked the beginning of the institutionalization of cryptocurrencies and so that's why I'm using 2018 to modern times. So back to the chart here, let me just dig through what's going on. This white line is what has happened so far this.and you can see we took a pretty big dip there while seasonality would have said we're supposed to rally into early May throughout the late April but we did still get a rally. It just went down to lower levels than we would have thought if seasonality had held. So there's no guarantee that seasonality is going to hold going forward, but let me just outline where these potential turning points might be because we are at one right now. So right now we have a little bit of a headwind.Into mid June and then things tend to turn around into about mid August and then in late September we get a nice rally according to history and that lasts into about mid November. Then we come down a little bit and then maybe a little bit of a Santa Claus rally into the end of the year raining tokens on everybody, but that's just the tendencies. So let me go to now a price chart of Bitcoin and show you what's actually been happening this year in a little bit more detail becauseWe have an interesting potential rounding bottom, and this could turn into a cup and handle. What happens is when price approaches a prior resistance level, and in this case we're talking about the all-time highs from earlier this year in January, a lot of times things stall out and you have people looking to get out because they were late buyers. They're finally back at break even and so price stalls out. Then it comes down a little bit and you get that handle and then things tend.Turn up and you see that zigzag higher once again. That could be the case. And so I would be looking for a resumption of the rally maybe in a little bit over a month. Anything can intervene in the meantime. Trump could come out with new pro crypto policies that could shift the tides and we could see a breakout here, but this is just the historical tendency. I also want to show you what has been happening in some of the other tokens which got really depressed. Ethereum took a nasty 2/3 hit.Cut more than in half this year and you can see only recently did it finally break out of this trend line, but over the last month it is up about 60%. And speaking of this time frame in the last month, I'm going to put all of these individual tokens here and sort by performance so you can see we have a lot of these outperforming some of these smaller ones from Moro to Dogecoin to Solana, all of these participating in a nice rally over the last month.And what I've observed historically is that when you have broad part participation in crypto, it speaks as to the strength of the entire group. So I think uh the potential for a crypto rally is in place. We just need some seasonality to align and maybe in the coming weeks to a month we'll finally see another turn up in price. Tune into more stocks and translation for more jargon busting deep dives, new episodes on Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcasts.

Thanks, Jared.Now time for some of today's trending tickers. We're watching CBOE, Newbank, and Aurora. Um, let's get first of all to shares of CBOE Global markets declining after Morgan Stanley doubled downgraded the stock. Analysts wrote that a greater than expected de-escalation between the US and China limits upsides for options volumes here at the company. So double downgrade going to underweight from overweight here, um, and the analysts saying that the company had benefited from the volatility that we have seen.Surrounding the tariffs, volatility, good for CBOE good for options volumes. Tom Hayes still with me here. So interesting call here on the effect that more calm has in the markets, which for many investors is like thank goodness. But if your options or if you rely on options for your business, maybe not as

positive. Yeah, when when volatility ticks up, you buy CBOE. That's a no brainer, uh, volatility, huge crush in the last 4 weeks.So their revenues are going to be a little bit lighter. Double downgrade, it's a little aggressive. It's such a great business. It's got kind of a monopoly in the space, so I think long term it's OK. I think short term I actually like the sell side call, which I don't say very often.

Oh, interesting. OK. And then also we're looking at new holdings. That's the holding company for new bank and watching that stock. It's a Brazilian digital lender here and it posts a slight miss in its adjusted profit for the first quarter of the company.did see strong revenue growth of 40% year over year during the quarter, but higher spending on new clients dragged on its profit. The shares were down before. Now they've turned higher by a little more than 1%. It's among the most valuable lenders in Latin America. Warren Buffett's Berkshire Hathaway is among its shareholders. That's usually Tom's mood music, uh, when he hears that kind of thing. Um, we've talked to the company before and it really has seen big growth. We also recently talked to Mercado Libre, another Fintech and e-commerce.Company that's big in Latin America and the theme that they emphasize over and over again is just adoption. In other words, they're much, you know, they're not as far along as we are here in the US with everyone on devices shopping, banking online, and so there's a lot of upside.

Yeah, well, uh, I got rich investing in South American banks is something no one's ever said. I, I will say this look, they're growing customers. They've got a new technology. Buffett owns like a sliver. One of his underlings bought it.Uh, but as far as it goes, what you saw was their credit reserves went up in terms of, uh, expecting bad losses, and this is the same story over and over in Latin America. Brazil hasn't benefited from the international outperformance because of the political climate, so you really need to see a change in political regime. They're expanding into Colombia that's weighing on costs. They're expanding into Mexico.So they have to invest a lot. This thing has been kind of dead money for years. Everyone said, Well, Buffett bought it. It's gonna be great. Well, Buffett didn't buy it. His, his underlings did. And, um, I, I, it wouldn't surprise me if they do get the growth, if they get the momentum, if all the ingredients come together, uh, but it's not there yet. So for me it's a pass.

OK,I mean, it's the stock hasn't, I don't know, I guess it has, it is, it had a big run up and now it hasn't.

That's why we're talking aboutit,

yeah.And let's talk about Uber offering a billion dollars of exchangeable notes tied to shares of self-driving truck company Aurora. Aurora was one of the first autonomous vehicle startups to go public, a listing it achieved in 2021. Uber was the company that is the company's largest shareholder, couldn't sell its shares for 4 years. Aurora is a really interesting company. We actually had the chance to talk to the CEO recently.Um, and to be clear, Aurora doesn't make the cars, the vehicles, it doesn't even make cars at all. It's software is for self-driving semi trucks and it actually is one of the first ones that actually has, um, trucks using its software on the roads in Texas, so that was a big milestone.For the company Uber still owns over 300 million shares of it, 23% of the stock, but what you get is when you get a convertible offering, it can dilute the value for existing shareholders. But still, Aurora kind of an intriguing, you know, we keep talking about Tesla, Waymo, da da da. I mean this company.Its software is already driving out there.

I think this offering is just a way for Uber to raise a billion dollars of cash without selling the stock, and Aurora doesn't want them to dump a billion dollars of stock on the market. So, uh, this is a great way to converts at a at a 10 to 15% up into Aurora stock. So that means that stock or into cash. So that means that stock would be pulled away from Uber. So this is, you know, it's a way for them to monetize that position.Without destroying the market for Aurora and maintaining that partnership, so I think it's a smart move by Uber. I think uh Aurora likes it and uh and it's a bet that this could be the future because we, we do need truck drivers and we do need that logistics.

Areyou invested in any kind of autonomous driving? Is that a theme that you're into? I know you're sort of more on the value side, so I don't know if thisappeals to you.

I think.The greatest international value in AI right now and one of our largest positions is called Alibaba. No one wants it, yeah, no one wants it. It's up, it's doubled off the lows. People are still not talking about it because the Republican Senate and House is saying we're gonna delist it again every 2 years we're gonna delist it, so we own it in Hong Kong. They're gonna report earnings tomorrow, OK? You saw JD earnings are gonna be good.This is the cheapest way to own AI in the world because not only are there models beating Deepeek and beating open AI, but they're the largest cloud provider and what they say to all these AI startups in China, every single one of them, we'll help you out. We'll give you a free sample. We will give you cloud computing which you need and you can't afford. You will give us equity. So Alibaba is effectively an AI ETF in China. They own a piece of all the AI startups, so that's the way I'm playing it so indirect.I probably have a lot of autonomous driving, but I have it through something with a huge margin of safety, $80 billion of cash on the balance sheet, generating $20 billion of free cash flow, buying in stock like there's no no tomorrow and a leader in AI. So, oh, and by the way, they're the number one retailer to the middle class. So as the Chinese push consumption bonus, they're a toll taker.

Um, that was a very adept pivot, Tom Hayes from autonomous driving in Alibaba and the stock is up almost 60% over the last year, so not too shabby on that front either.Let's get to some breaking news that was crossing the wire. A wave of deals being announced amid President Trump's visit to the Middle East. This time it's Boeing. President Trump saying Boeing has won its largest ever order in the company's history. Qatar Airways said to have purchased 160 aircraft from the US company, and again, Trump saying that this is the total, the largest Boeing order in its history. Of course there's some other plane headlines that the president made with a Qatari plane, but we'll leave that.Side for the moment, as that country gives him a plane, um, but, um, Tom, Boeing is a company you

own it's

you

like. This is a big one, OK. We owned it around $150. It dropped down to $129 with all the tariff barriers and all everything else. We bought it like the lights were going out. I mean, we have because here's the thing, we bet on jockeys, so they call me Turnaround Tom. I like to buy great businesses when they're temporarily marked down. Kelly Ortberg ran Rockwell Collins, OK, defend.Contractor 7 years for bagger for owners. He's actually an engineer on the floor, so it's it's nice to have Boeing run by a guy who actually goes on the floor and knows how planes are put together versus a salesman when the doors fall off midflight. That doesn't work, OK? So Kelly is going to turn the business around. He's already done that. The stock is 129 4 weeks ago. It's 200 today. They just got a huge order. This is icing on the cake. This guy can deliver. They'll sell some of the space business and at at the.Uh, at the margins, but they operate in a duopoly. It's like it was hysterical when the Chinese said, we're not going to take your planes during the tariffs. China needs Boeing's plane like a diabetic needs insulin. OK? I mean, they can, they can go to Airbus and Airbus will say, we're so happy to have you as a new client. Uh, your wait is 21 years. Uh, how many would you like? And, and so now as soon as this was done, China went back to Boeing and said, can we get back in line? And Boeing said.Yeah, we'll open the door. We like you as a customer, so China's back in the game. Saudi Arabia is back in the game, and they're gonna build the planes better than they've ever built them because Kelly Ortberg actually understands the business. OK,

well, I hope, I hope that's so for all of our 6 who fly on Boeings. Tom Hayes is gonna stick around with me and we're gonna have more on President Trump's deals from the Middle East coming up after the break on Catalysts.President Trump's visit to the Middle East unleashing a wave of AI deal making. The Trump administration clearing a path for Saudi Arabia and the United Arab Emirates to pursue their artificial intelligence ambitions as deals with companies like Nvidia, offering Saudi Arabia and the UAE wider access to advanced AI chips, data centers, and AI infrastructure. What are the risks associated with those.Deals joining us for more Mohammad Suleiman, senior fellow at the Middle East Institute. Mohammed, thank you for being here. So I guess let's, you know, there's a lot of fanfare around all of these deals. It's not just about AI. We just heard about a big deal for for Boeing planes from Qatar. So what, how are you viewing this sort of wave of deal making that that we're hearing about?

Great to be with you. Let me start by saying that the relationship between the United States and the Gulf has changed in the past 10 years. It started gradually in the mid 2010s when the Gulf countries started to diversify their economies away from oil, and they believe and they think that their future of their countries as a sovereign states, as, uh, economies that's wired for the 21st century is all about AI infrastructure.So the Gulf countries are going to see that sort of trend of those of those uh Gulf countries, Saudi Arabia, UE and Qatar trying to become the back end for compute power that fills the AI, AI ecosystems globally, and this means that they have access to uh low cost energy, they have access to, uh, capital, they're able to invest in AI infrastructure on top of all of that.Also secure partnerships with the United States when it comes to chips, so they have what I call the computer triangle, chips, data centers, and capital and that what makes them very powerful player in the AI ecosystem globally. And this is why you see a lot of excitement around the president's trip to the region because it's more of a new era of relationship between the United States and the Gulf wired around compute, not really crude.

And Mohammed Tom Hayes is with me as a guest host for the hour, and he wants to ask you a question as well.

So Mohammed, what do you see as the magnitude of the, the amount of data centered centers relative to the rest of the world, uh, and, and how are they cooling them? Uh, is, is a key question in the Middle East, uh, moving forward? What, what do you see as the future? Is it gonna be the data center hub of the world, or is it just gonna be a major player along alongside the US and and other nations?

Excellent question. I would say I would say the United States and China, the Gulf is clearly emerging as this third theater of AI power. They are willing to invest heavily in AI infrastructure, and the question that you pose about cooling is extremely important. I would say cooling today is not particularly about the question of access to water. It's about what cooling technologies that you have access to. We have seen a lot of new technologies, uh.Submersion cooling, uh, directed chip cooling that are reducing the cost, uh, broadly the space needed for these sort of data centers, and I believe that the Gulf countries through their energy companies are investing in these sort of new chemicals for cooling because this is extremely important question for them. But to add on top of that, I think right now we're acting in an environment where energy is the real bottleneck for AI computing that.Uh, you would, I would argue that even ships, even ships with all the discussions around export controls and China, uh, able to access uh restricted AI ships from the United States, I don't believe that ships are the bottleneck. I think you through, uh, cash, R&D, huge market, I think it's very fair to say that you're gonna have other countries able to have that sort of capability, but I think the question of energy, abundant energy to fool the AI ecosystem.Is the main center, decisive factor here and this is where the Gulf is finding its own niche.

So if that's true, then effectively the the two winners by default have to be the the uh the Middle East and the United States because we have effectively unlimited access to energy and, uh, and natural gas being the derivative play to to see that in the first stages. Is that a fair way to think about it?

I think it's a very fair way to think about that. I think the Gulf countries have been investing heavily in building the electricity grids around this sort of major, uh, hyper scale AI infrastructure. I agree with you. The United States is clearly ahead in the AI race. We have more than 60% of the global.AI compute inside the United States we have the abundant energy and with the new discourse trying to streamline permits inside the United States to do major data center build up, I think we are gonna hopefully maintain our lead

and and moving forward that puts China at a relative disadvantage.

I wouldn't say that yet, but for a couple of reasons. China is a huge market, uh, and they're able, and they were able to prove that they're able to innovate and even exceed expectations when it comes to their own innovation ecosystem. We have seen the how we release of uh AI ship that send AI ship, and that has been doing actually, uh, um, uh, better than expected, so I wouldn't really discount China. I think China.Is a competitor in the IRA. I think they have the determination. They have the R&D spending. They're willing to go the extra mile, and I think you're gonna see a lot of breakthrough inside inside the Chinese AI ecosystem.

Mohammed, to come back to my original question about sort of the risks here, are there any national security concerns about some of these deals sending chips, sending other infrastructure, um, to, uh, the these Gulf Coast nations?

This is an excellent question, and we do have two cams when it comes to the question of ships. You have the cam that says we have to restrict uh uh uh ships exportation to any part of the world. We only have to export, we should export ships to very trusted allies, uh, 5 eyes partners, even NATO, even not, not the entire NATO nations were part of what we call the AI diffusion rule that was released under the present.Uh, Biden, so this is a cam. There's another cam that's saying that, well, OK, sure, we're gonna restrict, uh, sending these ships overseas, but that comes at a cost that means we're gonna prevent, we're gonna undermine our American companies when it comes to their own profits. These are the profits that Nvidia uses for, um, uh, for R&D. So you have to come with a balance and I think that the scourse were.right now is how to come up with a government to government AI agreement with the countries that matter in the AI race like the Gulf countries when we have agreement on uh access on security protocols and uh by this we're able to protect our own uh IP and our own ships. I think this is the way this is the way we're thinking about the question of ships and export control right now.

Mohammed, thank you so much appreciate it.

Happy to be with you.

Another stock that we are watching, it's the best performing stock in the S&P 500 this year. Might be a little bit of a surprise. It's NRG Energy. It's up about 71% this year. It announced recently announced a $12 billion deal to acquire a fleet of natural gas fired plants from LS for about $12 billion as we said, including debt. Betting the fuel will be crucial to meet electricity demand from data centers. NRG is a Houston-based power producer. It's.Been a key beneficiary of the AI-driven boom in the US power system. Now it's fine to take a bigger share of that growth. So basically what we're seeing here is this big increase in NRG, this expansion. Energy already owns gas-fired generation. It also owns solar and other types of renewable generation here and the changing sort of.Tom Hays still with me obviously the changing face of what energy generation looks like in the United States has been really interesting as we've seen it powered by this data center boom.

Yeah, I think NRG is interesting. It's a great business. You've seen the stock go up quite a bit, but the problem is they rely on the kindness of strangers. They have to go to the regulators every year and beg them for price increases. That's the bad news. They've got to make all this investment in the face of.Not knowing what those price increases are going to be. However, they're gonna, they're gonna boom from this. They're going to continue to boom, but the run is already priced in a lot of that good news.

Yes, but the difference with the rates is when they make those sort of out of, you know, they make the side deals with the data center operators like we've seen to some extent, right, Microsoft made the deal to reopen the reactor at Three Mile Island, but, you know, so I think that's what they and investors are banking on.

I think so. I'd rather play the feedstock. I always try to play the arms dealers, not the warring factions. So for me, I'd rather play natural gas companies that have been left for dead like Comstock Resources. Jerry Jones owns 71% of the stock. They've got the Haynesville shale, and by the way, not only are you going to benefit from the unlimited demand from the data centers and from the utilities for that natural gas, but guess what, the EU trade deals are gonna all.Be about with the tariffs is all going to be you take our natural gas, we will lower your tariffs. They're in the Haynesville Shale which is right right there where they can ship. So, uh, so that's a good way to play. We started coming out on that aggressively at $8 or $9. It's $23. We think you can double again from here. Why is that? Well, uh, they have to report to the SEC, uh, all energy companies, PV 10, proven reserved for 10 years. What they do.Report is they've got 15 excess years of drilling that's not in the price of the stock, which is probably double plus from here. So we think this has a long runway driven by the AI theme. So when people say, what are your AI investments, I say, Well, Alibaba is a derivative play and I say Comstock resources, and people say what do you mean? I said natural gas and that's the story. And NRG is gonna be an equal beneficiary for sure, right,

interesting. Thanks, Tom. I appreciate it. All your market action straight ahead. Stay tuned. You're watching Catalysts.A temporary U.S.China trade truce now in effect, with the US lowering its tariff rate on China to 30% from 145%. China reducing its US rate to 10% from 125%. This agreement stands for 90 days while the two nations work to finalize their trade deal. So what are retailers doing during this 90 day pause? They're shipping hand over fist with more Yahoo Finance senior reporter Brooke De Palma.

They're doing exactly that. They're jumping on this opportunity to.at this lower tariff rate of 30% and what experts are telling me is that this went from being an impossible situation to a much more manageable one as retailers can now take action. I want you to take a listen to what Bernstein analyst Aisha Sherman told us yesterday afternoon.

What we have seen leading up to this announcement was that retailers and brands were stockpiling product in China and not loading it onto ships to come into the US because the effective date of the tariff is the date in which the product boards the inbound vessel. So there were stockpiles of containers.in China, not boarding ships. With this announcement, we're now going to see the reverse where we're going to see a surge of imports coming into the US over the next month, month and a half, and probably even a pull forward of some of the holiday merchandise before that 90 day mark expires for fear of tariffs going back up.

So does that mean that companies now everything the coast is clear, everything'sgreat?

No, absolutely not, especially for specialty retailers who have these larger exposure to China. And what we're hearing today from a brand like American Eagle is that this is certainly already impacting their first quarter results. They actually were supposed to report on May 29th this morning we got preliminary.Results from the specialty retailer, they withdrew their fiscal year 2025 guidance. They said that this macro uncertainty is hard for them to evaluate exactly how this upcoming year could play out. We also saw those preliminary results show that Q1 sales are expected to decline, revenue down 1.1 billion.Uh, they also said that comparable sales are expected to be down in the first quarter, down 3%, and they also had to do more promotions during the quarter. They had to do more, uh, you know, sales because of this excess inventory that they now have in stock because consumers.Pull back. They were nervous about how this would all play out this impact of tariffs.

And if we're gonna get more inventory, there's gonna be more markdowns, which is disinflationary along with gas, which means it could be true that Powell is too late. He's 150 basis points too restrictive. He's got to go in June. Maybe, maybe,

maybe lots of unknowns. I like how

you made this about Powell.

Look, you got to look through 1 and 2 quarters. This is a short term bottleneck. AEO is a random anecdote. Uh, I think, I think, but it's

not the only anecdote. There are a lot of other retailers where we're seeing similar,

we're seeing a huge divergence between hard data and soft data. OK, so on balance, when we look at retail sales, consumers are saying the world is ending, they're depressed, OK, but they're out spending like there's no tomorrow. If you look at the, if you look at.The actual data, so you have an AO. Could it be their mix was off, you know, I, I'm, I'm saying on balance I agree with what you're saying.

Could theirmerchandise not have been exactly what consumers wanted, and they, they even admitted that they got a got it a little bit wrong in this quarter.

Yeah, Lulu had the wrong color a couple quarters ago and everyone said, I can't wear yoga pants that are off green, you know, I mean, I only wear purple yoga pants personally, but uh.But I, I, you know, you look at the markets a discounting mechanism, so it's, it's a lot of these consumer discretionary stocks when you look at the positioning relative to defensive, it's at record lows. People, this is known, right? So this is it looking in the rearview mirror when we look through the front window and we look at a better, uh, tariff climate, when we look at consumer confidence coming back soft data to start to meet the hard data.I think you're gonna see a boom, especially the wealth effect with the stock market back up is a very, very constructive thing for the consumer. I don't have to look out

for, yeah, so you'll be buying plenty of purple yoga plants.

That's right.

Thank you. Um, of course you're gonna stick around. We got much more coming up. You're watching Catalyst.The S&P 500 and Nasdaq have erased their year to date losses as investors flock to US equities in the wake of a pause in steep tariffs between the US and China. Our next guest is ETF flows into international stocks hit $7.4 billion. They're holding up even in the face of the US rally. Let's bring in Julie Guns, Alliance Bernstein, global head of ETF strategy and.Partnerships for this week's ETF report brought to you by Invesco QQQ. Thanks for being here, Julie. Thanks for having me. So we've talked a lot about the sort of balance between international and US just generally in assets, but how is it played out through the lens of

ETFs? Sure, so over, you know, there's been a lot of volatility over the past few weeks, and I think, you know.Uh, April, even within, you know, this week we've seen inflows into international ETFs and so, you know, US still dominates US large cap has been been the biggest flows, but I think people are are looking to international both from a valuation perspective and and performance and also to diversify their portfolios, um, as you know, trade and tariff risk, you know, has been.Muted for the time being, but I think we'll still be out there as the yearprogresses.

Yeah, it, it seems like international, you want two things in play. Number one is a weaker dollar, so that's helped. I think uh XU US relative to the US is outperformance of some 15-16% year to date. So now people, this was a big theme for us coming into this year. How do you see that playing out in coming.Years because if you look at, you know, zoom out and look at the long term data, these run in normal 10 to 15 year cycles and we've had this zero interest rate policy so large cap tech has outperformed the last post great financial crisis. That's over. We're, we're in kind of a normalized uh interest rate environment. So do you see that as a favorable environment for the next handful of years for international relative to the US or you still king US equities?

I mean, I, I think there's a place for both in portfolios um I think international, you know, has the opportunity, especially with, you know, if larger tariffs come into place, you know, maybe there's more of a a home bias in in European countries or other places throughout the world, um, and so you know.Clients and and investors should probably diversify and have access to both, um, depending on how things play out.

uh, I wanna ask you about the active ETF landscape which has been a big trend over the past few years. It's still a small little sliver of the overall ETF market, but it's been growing. um, why are people so interested in it and, and.How big do you think that part is going to get? Yeah,

I mean active ETF flows we've seen 380 billion net flows into ETFs this year in the US, and active ETFs have been 40% of those flows, so only 10% of the market, but 40% of the money in motion, and I think the benefits are.You take these traditional active investments that were in maybe mutual fund wrappers or or different things and you give them the benefits of the ETF so you know transparency, liquidity, um, intraday trading, and so you get the best of both worlds of active management and the ETF wrapper and so I, I think that trend will continue and, and we'll continue to see the growth in in active ETFs.

Julie, thanksso much for coming in. I appreciate it. Thanks.Just want to get some final thoughts from Thomas on the US dollar and this after there was a story today that Bloomberg reported that the US and South Korean in Korea in their discussions over trade had brought up currency as a possible lever. We did see the dollar pull back, particularly against the South Korean won on this. There's a lot of debate over whetherA weaker US dollar is a good thing ornot. Uh,

it's going to help earnings in the back half of this year for sure. That's already happened. The dollar's been weakening. We're going to get a counter trend bounce because everyone's bearish on the dollar right now. Uh, however, the Chinese were pretty smart about this tariff negotiation because what they effectively did was they devalued the yuan by 20% ahead of talks. So it's like, OK, you want to do 20% tariffs, we're kind of flat. It's fine. Uh, so I, I think you're going to see a trend. Uh, there has been a theme earlier in the year they were rumbling.About the Mar a Lago Accord where they would devalue the dollar to balance out trade. Uh, I think you're gonna see some pockets of this. I think the trend for the dollar moving forward is going to be a little bit lower in the coming years. That's gonna help, uh, S&P earnings. That's gonna help our trade rebalancing, and it's gonna be a positive thing all around.

We'll see, Tom. Thanks so much for being here. Appreciate it. Uh, that's for Catalyst. Coming up, Brad Smith has you for the next hour on wealth. Stay tuned.