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Welcome to Catalyst. I'm Madison Mills. 30 minutes into the US trading day. Let's get you the 3 catalysts we're watching this hour. First up, we break down today's trading action as the market rally loses steam. How should you position your portfolio? We'll discuss. Plus we sit down with the CFO of Walmart to break down the company's results and the headwinds it faces from tariffs, and we'll dig into the AI trade in the latest results from weave as it reports earnings for the first time as a public company.Half an hour into the start of the US trading day. Let's get you checked on the markets brought to you by Tasty Trade. Taking a look at the major averages here, seeing a little bit more selling your S&P 500 off about 2.2%. Your tech heavy Nasdaq off about 6%, snapping 6 days of gains here off the back of a couple of headwinds this morning here you had retail sales pretty meh, but the PPI.Print really being the star of the show this morning indicating that maybe companies are passing through costs to consumers. Will that hurt profit margins going forward? That's the key question, of course, for our investor audience here. But let's look at the bond market, how it's responding to all of the data coming in here. You've got your 10 year hitting below that 4.5% mark down about 5 basis points. We've been hearing our source.is telling us use any momentum in that 10 year yield to the upside to buy, especially as we potentially see that 10 year creeping above that 45 level again, of course, do your own research and make your own financial decisions with an advisor. But finally here, let's take a look at Bitcoin. It is down over 1.5% after some significant gains, keeping it above that key 100,000 level.Well, I'm going to bring in my co-host for the hour, Tim Urbinowitz. He is the chief investment strategist at Innovator ETFs, and he's going to be with me for the hour. Tim, great to speak with you. Really appreciate you making the time today. We are seeing a little bit of this pullback after we obviously had a rally. How do you advise clients in an environment like this? What are you telling them about allocationright now?

Well, Mattie, I think it's still about being cautious at this point, you know, the last.Few weeks we've had this big rally, you know, everybody thinks Trump's reversing course on tariffs, and what we're talking to our clients a lot about now is yes, tariffs are going to be lower, but they're not going back to zero. You really need to start thinking about that 10% level as a floor. We're not going to zero and and I think a lot of investors have interpreted, you know, we're we're going to zero, and right now we kind of have this tug of war going on, right? You have the good news uh with, with the tax bill that's been introduced.Which we think will really help the lower end consumer that's been struggling here over the last, you know, several years or so and then you pair that with tariffs. So you have this tug of war ultimately we still think it's an environment where the S&P can tick higher and stocks can can do well, but it's not going to be just straight up intothe right.

Yeah, well, let's talk about that market action and the momentum. Our colleague Jared Blicky pulled a chart. I want to pull up indicating that a lot of this rally has been.by institutional investors more so even than retail. Take a look on your screen here. The institutional buyers that's in the white, the green is retail. Obviously the white line above the green meaning institutional driving the majority of the rally. Is that something that gives you a little bit more confidence in the rally because it's the so-called smart money buying in? Well,

it does, but I think if you look at the retail investor, we saw, you know, some very interesting.Activity you know over the last several weeks and even when the market was bottoming there as well, you really had a split on one end you saw a lot of traders that were stepping in there and just buying the dip markets going down, we need more in our portfolio you had others, maybe those that were um a little nervous they're nearing retirement, they need some short term spending needs. They were like, get me out of here. What is going on? What was also interesting, a lot of the advisors that we worked with were telling us that they were seeing a split.Based on voting preferences, a lot of their Democratic clients were like, we don't like this. We got to get out, whereas, you know, a lot of the Republican clients were saying, hey, keep us in, you know, we have faith, which was very interesting. I don't, I don't think it's something that we've necessarily seen before and

notsomething I feel like we've talked about enough, but ultimately if you did get out, you just locked in your losses and missed the rebound that we've currently had.

That's exactly right. And one of the things I think is interesting, you know, everybody talks about this gold rally and people that have been in gold have been doing very well.But if you look at the flows into GLD, most of those flows came after the market bottom, so you did have a subset of investors that were coming out of equities into the safe haven assets at the wrong time, and that's why it's so important that we think you have to have risk management in your equities really at all times so you don't have to be in the situation to try to figure out when to get out because not only do you need to know when to get out, you also have to figure out when to get back in, which is the difficult piece.

Let's, let's talk about that because I had a source yesterday telling.He's advising clients to go back to 60 40%, but not 60% stocks, 60% bonds because he wants a little bit more safety for his clients. How are you thinking about that right now? Well,

I definitelywould disagree with that, and I think if you look at, if you look at fixed income in general, you look at what are the biggest risks to the market. Inflation is still number one in our view, especially introduction of the tax bill, tariffs, you know, deregulation, even boosting growth. We still see inflation as a big risk, which inflation and.You know, fixed income returns don't bode well, but I think also you have to think about this in the standpoint of what's your after-tax return gonna be looking like and and fixed income, quite frankly, is just very disadvantaged. You look at most of your gains coming from yield. Well, that's tax at ordinary income rates. That's, that's not exactly right. So you know we are constantly encouraging clients, let's find a way to get more equity exposure into our portfolios but do so in a manner that has been controlled. So the trend into the buffer ETFs that we've seen $8 billion coming in this year.A lot of those investors are using those strategies as a way to get more equity exposure but still remaining in control of risk, making the portfolio a little more tax friendly.

Great overview. Thank you so much, Tim. Appreciate you're going to give us that great context throughout the hour here, but let's move to our next conversation. While April data shows inflation pressures easing corporate statements, and Fed Chair Jay Powell painting a bit of a different picture. Walmart is saying that it'll begin raising prices as early as this month as increased tariff costs do set in, plus Fed Chair Powell warning that inflation could be.going forward as we see more frequent and potentially more persistent supply shocks. So how can investors hedge against the cloudy macro backdrop? Joining us now, we've got Brian Nick, Newedge wealth, head of portfolio strategy. Brian, great to speak with you here. Look, the headline we're going for how to inflation proof your portfolio? What is the single best strategy for that?

Yeah, well, it's not, it's not easy at all. We can go back to the last, uh, year where inflation was really a persistent market theme. That was 2022. I think that this year looks a lot different than that. At 2022, we had very fast economic growth. We had the Fed raising interest rates very quickly, and we had a lot of the inflation driven by energy. So the types of stocks, the types of sectors that did well, like energy was really the only game in town that year, isn't necessarily gonna perform well in a scenario where the inflation we're going to see is going to hit growth through pass through to consumer real incomes falling.Potentially through narrower profit margins as well. Um, it's easier for us to kind of cross things off the list that we don't think are gonna work well. If we're in a stagflationary type environment, I don't want to use that word too lightly, just an environment where inflation is on the rise and growth is somewhat softer, um, defensives have a chance to perform well, provided that we don't see a further rise in interest rates. That's one area where you can go. There's some pricing power inherent in some of those sectors too, uh, like utilities. Um, and the other place you can go, um, investors have been going.Is, uh, technology and specifically large cap uh US growth stocks and that's been one of the reasons we think the Nasdaq's been rallying is that if you look like you're in this environment in which it's going to be a very growth constrained year, potentially with some inflation on top of that, um, where do we see profitability, where do we see high quality.Where we, where do we see a little bit less leverage on balance sheets, and that's one reason investors have been going in that direction as well.

So I'm hearing from you that large cap tech may be back as the defensive play, but I know in your notes you also talked about Chinese tech being attractive to you. Which of the two, if you had to pick one, is more attractive?

Well we are currently overweight China in our portfolios, and again that's despite the noise around the tariffs we kind of written that through. Um, a lot of the exposure we have is not particularly, uh, companies that are, uh, in competition directly with, with the US and companies that have pretty diversified export bases. So it's not just about what the tariffs between China and the US are, although now that they've been lowered to 30%, this is less of a pressing concern. Um, valuations are again are gonna for the most part, look more attractive outside the US. We think that there are parts of the US that look quite.Dream and that's why talking going back to your your previous question about the 6040 portfolio turning into 4060, um, that makes sense only when you look at very, very long term valuations right now, equity risk premiums in the US are very low. A lot of that is big tech kind of dragging up valuations. So if you're looking short term, if you're looking to be, uh, you know, somewhat insulated from the trade war, somewhat insulated from the slowdown, this may be the, the right sector in the US, um, if you're looking kind of beyond that.5 years, 10 years, it's hard to get excited about US stocks where they're currently valued and so we have been deploying more both in Europe and in China to try to get some diversification in terms of the valuation that we think is appropriate to invest at.

And Brian, my guest host Tim has a question for

you. Yeah, Brian, you know, one of the things you talk about here is really avoiding some of the junkier parts of the market, whether that be high yield bonds or skeptical of the rally that we've seen in small caps thus far. What would change your mind and really to get more bullish on some of those pockets?

I think we need to see high yield spreads go wider, so I guess what I'm saying is things need to get worse before I think we'd get really excited. There was that brief moment, um, where, you know, right after the, uh, liberation Day tariffs were announced, where high yield spreads really gapped out, um, there was a lot of things that really weren't working well during that period. Um, that was one area, one area that we looked at, you know, speaking of bonds was municipal bonds that looked attractive, again, much more highly rated tax advantaged. Those gapped out as well because of liquidity concerns, basic kind of market functioning concerns, those ofRallied back as well to get excited about high yield, we need to see spreads in the the 500 to 600 basis point range at least. Uh, the last couple of days we've seen them dip below 300, so we're not excited yet except for investors that really need a lot of yield and don't have a lot of tax, uh, sensitivity in their portfolios. I think this is in sympathy with the small cap, uh, kind of underperformance that we've seen as well. Um, these two asset classes tend to perform similar to one another in a relative sense. Um, a lot of the small cap index.It's simply not profitable. So one thing we tend to focus on is, again, really emphasis on profitability, low leverage, especially if it doesn't look like we're gonna get an interest rate reset here, um, in the, at least in the United States. It's gonna be a really tough environment for any companies that we're counting on kind of that, that, that Fed cut environment, that soft landing, uh, or even a hard landing environment where we had a chance to reset and kind of bounce back. It's gonna be tough for any investors that are sensitive to valuation and are sensitive to where we are in the cycle for these asset classes to, to lead.

Well, you know, speaking of interest rates, Brian, you, you, you look at the US, you have the Fed that's pretty much on hold. You, you have a favorable tilt toward Europe here. Can you talk a little about that? Is it anything beyond rates that that gets you excited there?

Yeah, we, I mean, we still think the evaluation is attractive in Europe. It's obviously closed a bit with Europe outperforming so much this year. We're not leaning quite as hard at the things that have absolutely been working. If you're looking at like German cyclicals, we think that that story may be again for now largely priced in. But there is definitely a difference in the environment here. Europe is not at war with the rest of the world in a trade sense, um, the way that the US is. So that's an advantage for.European companies and as as you alluded to, the European Central Bank has been much more aggressive. They're not alone. It's been really the other developed market central banks have been able to cut interest rates a lot more and can create that reset that's really positive for cyclical company. That's why it's so hard to get excited about cyclicals in the US when you look at the economic growth forecasts. I think we've probably see in the bottom in terms of the downward revisions, but if you're growing at 1.3% or even.1.5, that's below potential. and with the Fed not cutting because there's concerns about inflation, that kind of puts us in a very tough spot again, relative to the rest of the world. So we're not saying that Europe is the long term answer here for for clients, but we do think it's worth if you, if you've been underweight international stocks, especially MSCIEA developed markets, including Europe, um, now is the time to look at at least getting back to that.Strategic way.

Brian, I want to end on something you mentioned at the end of your notes here that the US, a big risk is a constrained workforce, and a story I've been monitoring this week is CLARNA saying that they could cut about 40% of their staff because they can AIFI their staffing. To what extent do you think that that is a risk for the economy, but then also a potential upside for companies as they could potentially cut costs?

Yeah, I think the AI AI trend is going to be generally positive for productivity growth and should actually, uh, loosen up some of the concerns that I've been concerned about in the, in the short term, which is that we, we simply have a sort of historic high numbers of people and percentages of working age people actively employed. And so it's hard to know where we're going to get more workers from at this point. Part of the, the way that we managed to, I think, but some would say miraculously avoid recession in 22 and 23 was that we had this.Large expansion of the US labor force we had high productivity growth that kind of carried us through and allowed us to get rid of inflation without getting rid of growth. The concern now is that with the Fed still in sort of a restrictive tilt here, we've seen productivity growth come down. We've seen labor force size sort of sort of cap out here and unless there are kind of innovative technologies that are gonna.Increase productivity growth, loosen up the available pool of workers. I think we could be in trouble here and we could be seeing, you know, any efforts to stimulate the economy go towards more inflation and less towards growth because we simply lack the capacity on the supply side to fill all the jobs that are being promised here.

Great overview, Brian. Thank you so much. Appreciate it.Coming up, recent moves in the 30 year yield could be bullish for US stocks. We'll tell you why next on Catalyst ground.

Monday, the US 30-year Treasury yield, the rate of interest that borrowers charge Uncle Sam for its debt for 30 years, it climbed to within inches of that big 5% level. So let's dig into why it's important and what it means for stocks. I'm Jared Blicky, host of Stocks in Translation, and before we get started, we need to break down the Treasury yield into its two basic components. What drives the bond market? First, it is the real yield. That's the piece.after you strip out inflation, a signal of strength and growth, and also it's due to Fed policy. It's also called the tips yield after the Treasury inflation protected securities, and I know that's kind of wonky. Now the second part is called the break even inflation yield. This is the gap between the full yield and the real yield, and it's like the market's built in inflation forecast. So now let's check out the trends of these two components.This chart, by the way, goes back about 4 years, and you can notice that real yields in green have been climbing sharply and this has to do with relatively tight Fed policy and big fiscal deficits. Meanwhile, inflation expectations, and those are in white, that has been choppier, but real yields back to those are now at multi-year highs, pushing the 30-year yield. That's the total yield close to that critical 5% mark once again.Now here's the puzzle. Every time the 30 year yield nears or touches that electric 5% fence, the bond buyers, they, they step in. That sends yields down while stocks they launch higher. Now the first peak on this chart is in October of 2022. Ice cold CPI, it cooled rate hike fears, real yields, they plunged, and a new bull market in stocks, they kicked off. The second peak.October of 2023, a debt diet surprise. Treasury signaled they would issue fewer than expected bonds. Real yields collapsed and stocks surged. The third peak in April of 2024 is a growth scare that gave us real yields another quick drop, refueling the stock rally. Fourth peak, and we're getting close here, January 2025, and that is when real yields they hit the Fed's ceiling.As a cool CPI print and a new bond friendly White House brought rates back down. Finally, April 2025, this time inflation heat got turned down fast by a tariff pause by President Trump keeping the market rally alive. But notice that each yield pullback has gotten shallower and shallower and shallower. That tells us that pressure is building and a breakthrough that critical 5% that might be coming.So what happens if we break that fence? If it is a hot inflation spike, then commodities are going to pop and stocks, well, they should struggle. If there's a rise, however, in real interest rates, then the PE ratios of stocks, they drop and tech stocks, well, they probably less.So you got the mag 7 more like the lag 7. But then if yields hold below 5% as they are now, it's probably a soft glide and stock sales smoothly higher. Bottom line, bonds at 5% is the line in the sand for stocks, and it might just be that simple. Tune in for more jargon busting deep dives on stocks and translation, new episodes on Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcasts.

Jared, thank you as always.Time now for some of today's trending tickers. This morning we're watching Alibaba, eToro, and Coinbase. First up, Baba missing estimates for his fiscal 4th quarter, with revenue growing a disappointing 7% from a year earlier. Analysts were hoping the Chinese e-commerce giants bet on AI would provide a bigger boost. The shares down about 7.5%, and this is really an indicator of.The Chinese consumer and the health of that consumer as well, obviously not holding up given the fall here and the mist on 4th quarter revenue, but Tim, I want to bring you in. How do you think about a name like Baba amid the uncertainty on the Chinese economy and America and China'srelationship?

Well, Matty, I mean, obviously this was disappointing growth today, but I think you do need to step back and look at the different business units. Retail, there's a lot of competition, might be challenging, but I think what makes us excited on the stock is this is literally.The the the potential to own the AI infrastructure market in China. The, the long term growth potential is a story you want access to and we sit here looking at the stock trading 13 times earnings.It's probably undervalued for the growth potential that we see there. So yes, it's not what we wanted to see in the short term. They've disappointed, you know, several of the last few quarters, but long term I think you have to take a step back and look at the the major tailwinds that the stock has.

So you think ofit more as an AI play than a Chinese economy impacted name.

I thinkthe e-commerce side is going to be a little tougher. There's a lot more competition on that side, but yes, you know, China is looking to scale up AI just like the US is, you know, if not.So you want to be in a name like that. A lot of tailwinds from that side of the business.

All right, well, let's move to another stock we are watching here eToro pulling back after its strong Nasdaq debut. The stock and crypto trading app, raising nearly $310 million in its initial public offering on Tuesday. The shares down a little over 6.5% at the moment, and Tim, I had an analyst tell me this is the next Robin Hood yesterday, which is up over 50% year to date.Is this a normal pullback on day two, or is this something more sinister? Well,

I thinkif you look at the rally yesterday, it gave us a lot of confidence that you know the IPO market is very strong. Everybody was excited about it coming into this year. Tariffs kind of killed that. This was not the first time they tried to go public. They were very selective about when they did it, and I, you know, look at the rally in the context of the last two days, um, you know, we think that that's still very strong, and again they're, they're aligning with some of these longer term trends, more trading, crypto, uh, you know, a lot to like.About the stock, but I think it's it's more about what it tells us about the health of the IPO market.

Certainly, yeah, that has been under a lot of pressure, so it'll be interesting to see if we start to get a little bit more on that end. But finally, here, let's look at Coinbase saying hackers bribed its workers outside the US to steal customer data, then demanded a $20 million ransom. The company is saying it has not paid the demand and it's cooperating here with law enforcement. The crypto exchange also saying it could cost up to $400 million to fix the problem, the shares down.A little over 5.5, 5.5% and initially off the back of this news, we didn't see too much of a share reaction. Obviously a huge run up in coin also because it was just added to the S&P 500. How are you thinking about the risks? I mean this is a classic crypto risk that is unfolding here.

Yeah, you have to understand the risks as an investor, and I think this is just growth pains, right? It's it's an industry that's developing. You're starting to see, you know, these other risks creep in. How do you mitigate them. But again, I would say you look at the long term trend more.More investors, whether it be institutional or retail like we talked about earlier, want access to the space. This is a good way. Coinbase is is a leader here and when you look at security, they're they're leading the charge as well. So short term blip here, it's gonna happen as the industry grows and evolves, but I don't think it changes the long term uh growth narrative of the stock. All

right,you heard it here first, folks. Thank you so much, Tim. Appreciate it for our audience. You can scan the QR code below to track the best and worst performing stocks with Yahoo Finance's trending tickers page.On the other side of this break, we're gonna discuss Walmart's latest quarter with the CFO Jon David Rainey. That's next.An event in the Middle East, President Trump said India has offered to remove all tariffs on US goods. This comes as US and Chinese officials met in South Korea. It's the second known round of talks since the two nations agreed to a 90 day pause on reciprocal tariffs. So what does this mean for the future of trade between the two nations.Now Leland Miller, China Beige Book co-founder and CEO. Leland, great to have you here. Uh, I could use some help getting clarity on whether the negotiations are going to look like any potential deal. How much confidence do you have that this 90 day truce could look more permanent?

It all has to do with what a deal means. If it's simply a deal that, you know, freezes the situation at, at these levels indefinitely, sure, the Chinese will be glad to take it. If it's building to a phase two deal, then what does that look like? Is it just more commodities buying in which, you know, maybe some sprinkled on top, fentanyl cooperation, a little.Give on TikTok. The Chinese would love to take advantage of an offer like that because it's going to just drive more bilateral flows in China's direction and relieve the pressure. If if there's more of an ask for structural structural changes, those are things that the Chinese are not going to grant in a trade negotiation. So all of it has to do with what the administration's demands are for a deal. If they want any deal, they can get a deal. But if they want a good deal, that's a different, that's a different story.

Who who has the upper hand right now, Leland?

Well that's a little bit tricky. So in in a in a strictly bilateral face off, the United States would have enormous advantages. Uh, but on the other hand, you know, this isn't just a bilateral face off. There's a lot of other tariff negotiations going on in the background, and one of the things that I think is being ignored right now is that with China's tariffs being brought down so significantly, but the threat of Southeast Asian tariffs and others staying elevated, you have the.Potent that if they don't have deals done in the near future, then all the production that had been moving out of China to diversify supply chains for national security purposes and other and other reasons, all the production that's gone outside of China could flow right back in. And so the administration while trying to play tough on Southeast Asia, could end up empowering China and blowing out the bilateral trade deficit.By the end of the year, so a lot of, lot of forces at play here.

And my guest host Tim has a question for you aswell.

Leland, I guess, yeah, you look at this 90 day pause that we've seen. I think obviously investors have gotten very excited about that. Longer term, what does this look like? Is it, is it 30%? Is it 40%? What would the US, uh, you know, or in China be happy with where it's a win-win situation?

Well, happy is a happy is a relative term, but I think that the contours of this are quite wide. When you have tariffs that are above 60, 70%, then it's prohibitive. You're effectively decoupling the economies. There's a lot of economic hits, which means there's political pain, you know, if you want to get much lower, then of course you're looking around the world and you're saying, wait a second, why are we giving China, which is supposed to be the big bad guy, uh, a better trade deal than some of these other countries. So you know there's a.There's a rather wide window depending on what the administration wants in terms of how this settles, but again, it all depends on what else do they want. If this were just about tariffs, there's a level we could probably, we could predict. But if it's about other aspects of the relationship, it's if the phase two deal is going to be about more purchases or about, you know, sexual decoupling, it's about, you know, other things, then, then tariffs aren't the whole story.

Well,Let's talk about exactly that because there are these non-tariff barriers and things like chip export controls are coming up. Beijing officials calling the US bullying on AI chips as legislation is put forward to continue to curb China's access to the most powerful AI chips. How do you see that impacting a company like Huawei going forward, a Chinese-based company amid the engulfing of chips' names in the trade war.

Well, the mistake on Huawei is not that we didn't identify the problem a number of years ago and crack down on it. It's that their loopholes developed. Huawei found ways of getting these chips, both directly and especially indirectly, that it needed in order to build back up its empire, and US administrations have sat idly by and let them do this. And so now we have Huawei returning as a powerhouse.The Chinese tech sector has got all the the chips it needs with with multi-year stockpiles. It shows a lack of seriousness on export controls. A lot of talk, not that much action when it comes down to it. So if folks want to get serious about this, they have to realize that export controls can't be Swiss cheese. They need to actually cut the problem off that they want to cut off.

Well, uh, Leland, you looking at this from an investment lens here, um, you know, let's say, you know, we, we do get to a 30 or 40% level. What type of impact on growth does this have for the US? What type of impact does growth, uh, does it have uh over in China?

It depends on what tariffs are on the rest of the world. If if the purpose of tariffs on China is to diversify supply chains out of China because you don't want Beijing to have a stranglehold or choke points on your supply chain, then you shift the production to other places. Plenty of countries are ready to take it. You've got.India, Southeast Asia, you've got Mexico, plenty of other ones. If you've got elevated tariffs elsewhere, then it sort of changes the nature of the game. You have to figure out what your priorities are when you're doing this. There's a short term hit from tariffs at times, but that doesn't need to be a long term hit. There just needs to be a thoughtful sequencing of these tariffs.

Leland, thank you so much. I really appreciate you joining us this morning.

Pleasure.

Walmart delivering solid sales and earnings growth in the latest quarter, but warning on its call that tariff pressures could mean higher prices soon as early as next month. I'm joined now by John David Rainey, Walmart CFO, alongside Yahoo Finance's executive editor Brian Sai. Brian, take it away.

For us, uh, thanks so much, Madison John David, always nice to see you here. So lots of headlines this morning on uh Walmart's call out of having to raise prices to offset these tariffs. I know you don't take this decision lightly. Um, can you talk to us, you know, your thinking behind it, and then how much on average will prices go up at Walmart?

Oh it's good to speak with you, Brian and good to be on the show. You know very well we're wired to keep prices as low as we can for our customers. Everyday low prices is what we stand for, and we're gonna keep prices as low as we can as long as we can, but when you look at the magnitude of some of the, the cost increases on certain categories of items that are imported.Uh, it's more than what retailers can bear it's more than what suppliers can bear, and so we'll work hard to try to keep prices low, but it's, it's unavoidable that you're gonna see some prices go up on certain items and so we'll work to try to keep that as low as we can and, and certainly look to try to gain share and be aggressive and play offense in this environment, uh, to keep prices lower than others. But, uh, given that you've got 30% tariffs on certain categories of items that are gonna be imported, you're likely gonna see some price increases go up there.

Uh, Jon David, so when I walk into a Walmart store in a few weeks, where, what department where I see some of the, I guess the highest price increases, and you know, secondarily, you know, we see tariffs, we've been talking about tariffs all year. I hear tariffs are 145% in China and your first thought is, well, prices are going to go up 145% in furniture. I know that's not how it works, but like what would, uh, uh, in the current environment, what would it cost to buy some new furniture in Walmart today compared to this time last year?

Yeah, so a couple categories that stand out, Brian would be electronics, toys, those are one where we're more dependent upon imports and certainly China, but vacuum cleaners is another example, baby strollers, car seats, and, and some of these items when when you're buying a car seat or.Baby stroller, that's not really a discretionary item. That's a necessity, which is why we've been so emphatic that prices are still too high, but when you, when you look across the basket of the goods, certainly there's going to be some areas where you see prices go up on these items like double digits.Uh, well, if you've got a 30% tariff on something, um, you're likely gonna see double digits, but it's also, it's why it's so important for retailers to really understand the elasticity of demand around this because if you were to go back, as you, as the example you gave with a 145% tariff, if you're selling patio furniture at $2000 and you apply 145% tariff to that, I'm pretty sure you're not gonna sell a lot of patio furniture units.You know that that's where a company like Walmart is probably going to absorb a lot of that price increase to try to still be able to sell units, but it makes it challenging for retailers to absorb all of that given the magnitude of some of these price increases that that have gone up. I, I will say one more thing, Brian, um, we're very appreciative of the progress that's been made by the administration to try to lower tariffs from what were originally proposed in early April, but we still think.are too high and we're still hopeful that further progress can be made and prices could come down to something lower than where they aretoday.

And John, great to speak with you to that and analysts keep telling me that lower tariff rates make pass through costs to consumers more likely. How did your thinking on pricing changes shift off the back of this 90 day truce with China? Are you more likely to pass on the 30% tariffs than you were at the 145%?

It really depends upon category, um, you know, if you think about bananas is something that we import all of our bananas from, uh, Latin America and a price per pound has gone from 50 cents to 54 cents. We can absorb a lot of that. It's one of our highest selling items, but as the previous example with, uh, patio furniture, it gives you a different dynamic and you, you really have to understand the elasticity of demand around all these items. But again we're wired to keep prices as low as we can for our customers and so we're gonna try our.Very best to do that for as long as wecan.

And when you think about these price increases, do you think you might disperse them across the board to items that maybe aren't as negatively impacted by tariffs and import costs to lessen the impact of price increases that you may have to do because of tariffs on something like technology? How are you thinking about dispersing the price hikes?

Practically speaking, that's what all retail.will have to do if you go back to what was proposed in early April that's more money than likely the entire retail industry made last year. It can't be fully absorbed by retailers. It also can't be absorbed by suppliers and so you'll see merchandisers um um work to to mix the merchandise in the categories to try to absorb this in a way that is least impactful to customers.

John David, I, I, um, you know, I normally wouldn't be asking about Federal Reserve policy, and I'm not, but we do have a speech out this morning from Federal Reserve Chief, uh, Jerome Po He saying this in DC, and I think it applies to Walmart said, quote, we may be entering a period of more frequent and potentially more persistent supply shocks. Now you're the world's largest retailer. Do you agree with what Jerome Powell said here and that's what, uh, is coming to us in the future?

Well, I, I haven't read all of his comments yet, but certainly we want to be very mindful of, uh, supply chain shocks. We don't want to get back into a situation like we were into the 2022 time frame. So one of the things, Brian, that we're monitoring really closely is the flow of containers, the flow of inventory through ports as we sit here today, it's flowing just fine, but that could change as you think about retailers trying to optimize their pricing, whether it be maybe.Parking inventory on a container ship off the port waiting for lower tariff rates or or doing something different that may disrupt that flow. So it's very important to keep an eye on that as we sit here today inventory is still flowing though.

All right, fairenough. And then you know we came off the first quarter GDP in this country fell 0.1% from the vantage point of your business, are we at that same rate for the second quarter? Does it feel like, you know what, this economy is not growing and it's not where it needs to be.

I can only tell you what we see with our customers and our customers have continued to be discerning, choiceful, uh, maybe a little bit more concerned than they were a year ago at this point in time because there is an awareness around the impact of tariffs and so as you look through the, the 3 months of the first quarter for us, February was not that great. We were impacted by unseasonably cool weather, uh, that impacted store.Traffic, but we also detected a little bit of negative consumer sentiment and that changed some shopping patterns. March felt, um, more on plan. It was more what we expected, and April was actually really strong. We had a strong Easter seasonal period as we've come into the first couple weeks of May. May feels a lot like April, so there's nothing that we can see looking in the rearview mirror that would indicate that there's a difference or.Inconsistency in consumer behavior, but I, I think that's only half the picture. You've really got to look forward because a lot of the price increases that we've talked about with tariffs have not taken effect yet. We'll begin to see some of this as we get into the back half of May and then also in a more pronounced fashion in June and so I don't, I don't know that we can, uh, look at the first quarter and use that as an indicator of what the second quarter is going to look like.

Yeah, that makes a lot of sense, but I am curious more specifically about any potential shortages that you may be able to predict at this time. Jean Siroa of the Port of LA telling me that consumers can no longer take full shelves for granted in the United States. Any products that you're worried about shortages on?

We're not canceling orders related to the tariffs. I think any retailer in the normal course of business is gonna make some changes and cancellations here and there and, and that's true for us as well, but it's not as if we've sent out an edict that says cancel orders now what we have done is uncertain of the the.Items that are higher price we may have adjusted quantities to match the expected demand, but it's very important to us that we have our merchandise and goods on the shelves for our customers because we want to be there for them in these times when value matters more than ever.

And I know you mentioned there is an interest from Walmart to have these tariffs lower. Have you talked to the White House recently about that?

Fortunately we we have had um a dialogue with the the administration and we're very um um thankful to have that opportunity to be able to share our perspective on what's happening with the customer and what could happen with the the customer um and and look we're we're um.Very encouraged by the progress that's been made, that tariffs have come down from the the prior level, but we're hopeful that further progress progress will continue to be made and they'll come down even more.

Walmart's Jon David Rainey and our own Brian Salzi, thank you both so much. Really appreciate your time. Thank you. We're gonna have all your markets action ahead. Stick around. More catalysts when we come back.AI cloud competing company Core weave out with earnings results, topping estimates in its debut quarter, but causing investors a little concern in its CapE plans to spend $20 billion to $23 billion this year on AI infrastructure capacity. Joining us now with the reaction, Nick Deldeo.is a managing director for Moff and Nathanson. Nick, great to have you here. Interesting in terms of the market action because when they initially reported revenue that beat estimates, we saw pop in the stock. But then this capex number a little bit disappointing for investors. Where do you net out on this name today?

Yeah,well, thanks for having me, Madison. Yeah, I think that's, I think that's the right interpretation is initially when folks saw the ears report, um, there was a revenue beat, which was very encouraging.When the company provided their 2025 guidance, uh, their operating income expectations and were a bit lower than expected, capE a bit higher, um, quite a bit higher actually. I, I think the, the, the team explained that as wanting to accelerate their investments in the business to pull forward some of the revenue growth they expect.Uh, which I think is, is, is sensible in that this is an infrastructure business where you have to have infrastructure deployed to rent it out and generate revenue. To the extent you can speed that up, makes sense. But obviously you need to spend money, uh, to deploy that infrastructure before you can monetize it.I think, I think it's supportive of the longer term growth outlook for poor weave, um, you know, which combined with their, with their revenue backlog is, is, you know, suggests healthy revenue growth ahead.

So you would be bullish, it sounds like going forward. I am curious though about the reaction to the debt and what that signals to you about the market and whether or not there's kind of a shift to a little bit more pessimism around AIAX where initially maybe last year they got a little bit more of a pass for some of that.

Yeah, well, certainly Corry's model to a large degree is predicated on being able to finance its acquisitions of property and equipment with debt, debt and customer prepayments associated with their contracts. That's enabled the company to really scale their business without necessarily having to front a lot of their own capital or or put in a lot of their own equity. Um, it's a bit of a unique financing model.Where they can effectively factor the contracted revenues that they have from their, from their customers. I think that that model worked really well with um say Microsoft, which is the bulk of the company's revenue today, given it's a AAA credit and you're willing to find lenders to uh to lend against that revenue stream.I think it, I think it's more interesting going forward as the company diversifies its revenue base and perhaps picks up more companies like OpenAI which has signed a lot of deals with uh with where we've recently, other AI labs where the credit profile isn't necessarily as strong. I think it remains to be seen sort of the terms under which where we can borrow against that contracted revenue to to fund their growth.

And my guest host Tim has a question for you, Nick.

Nick, when, when you look at this report or you know some of the comments from Amazon, Meta, Alphabet, this earnings season, it's very clear that demand is is not slowing down, which I think is is very encouraging. You know, the question I have is, is, is really where does this end? Like what, what does this total AI infrastructure market look like? And when you look at a company like Core weave, what's their role in that? What type of market share do you see them ending up with and margins as well?

Yeah, good question. I, I think the market share depends on the type of customer, right? I think what we've seen to date is that Coral Reef has benefited from supply shortages, uh, uh, for GPUs. So you've seen customers like Microsoft lean on suppliers like Core weave to augment their capacity because they were able to get their hands on the chips that they needed and bring them online quickly. I think as we see a normalization of, you know, chips supply versus demand over time, we're likely to see the hyperscale customers pull that in-house, you know.Uh, Microsoft CEO Satya Nadella said not long ago that they viewed the arrangement with Forwe as a one-time thing.Um, I think Coral Reef does have opportunities among folks like AI labs, um, or to some degree enterprises, um, to lease out infrastructure to them. Again, I think that will replace or more than replace what you might lose from a hyperscale perspective over time. Um, but again, it does come with a different credit profile, um, bit of a different demand profile.

And Nick, why do you, why do you think the stock is pulling back today? Obviously you had, you know, some of the, the cap X concerns, but why is that a problem when it's really driven by just excess demand and they're pulling some of those forward? Why is the market reacting the way it is?

It's a great question. I mean, for, you know, bear in mind that the stock is up, you know, over 50% since the IPO. So it's against, you know, the expectation of very strong performance. I think the revenue trends were encouraging.I think that when you're at the sort of evaluation where we've trades at, you really need to see everything line up revenue, margins, cap backs for the stock to work, um, going forward. Uh, you know, so to the extent that there were some questions around that or, or some numbers coming in a bit light versus expectations, I think that easily explains the uh the downdraft.

Nick, I also want to end with any expectation from you on any read through we can get from this print to Nvidia earnings. I know it's not a direct comparison here, but that's something that our audience is keenly interested in, of course. Any read through?

Well, sure, you know, again, it's a bit of a unique circumstance because Core is effectively an Nvidia only shop, and they've had a lot, a lot of support from Nvidia over time. I think Nvidia have used Core Reve as an important counterweight to the hyperscalers to diversify the base into which they sell and kind of hedge against the risk of custom silicon from the hyperscalers.You know, if you look at Cory's numbers, it, it points to rapid growth. If you look at their planned data center capacity, they have 420 megawatts online today. I think they've contracted for about 1.9 gigawatts. They're going to fill that with Nvidia gear.You know, so I'd say generally speaking that's a positive signal. I don't know that what we'd see at a core weave is enough to, you know, materially influence how you think about Nvidia one way or another.

Yeah, great overview, Nick. Thank you so much for joining us. Appreciate it.

Yeah,

thanks

for

having me. We're going to have all your markets action ahead here at Yahoo Finances. Stay tuned. You're watching Catalysts.Dick Sporting Goods buying Foot Locker for $2.4 billion. The company looks to expand its international presence. Foot Locker is expected to operate as a standalone business unit and keep its brands. Dick's financing the deal with cash and new debt. Joining us now, Arun Sundro, CFRA research's senior equity research analyst. Arun, great to speak with you. Talk to me about what your take is on this deal for both Dick and Foot Locker. What do you think of it?

Yeah, I mean, certainly for Foot Locker shareholders, it's uh it's a good day. The stock is up by 85%. Um, you know, Foot Locker, uh, as many know, is, has been struggling for, for quite some time now, especially recently with all the tariff risks uh going on, butUh, Dick, on the other hand, has been performing really well and executing, uh, pretty well as well. Um, and I think this acquisition, um, helps Dickson in, in a few ways. One, there's, there's differences in demographic customer demographic basis. Dick's customers tend to skew more middle to little higher income, Foot Locker, maybe a little bit more of that lower to middle income households. So it does broaden their, their reach there. Um, it also helps Dick, uh, expand international.Foot Locker has an international presence. Uh, but I think, uh, first and foremost, this, this is gonna help Foot Locker, uh, compete better in this new digital era. Uh, Dick has been, uh, executing and doing really well in in e-commerce, uh, whereas Foot Locker hasn't. And I think this, um, uh, uh, Dick could help Foot Locker really, uh, grow and expand its presence in the, in the e-commercespace.

Any regulatory concern

here?Uh, we don't see it, uh, much regulatory issues here. There's, there's not much overlap, uh, in, in terms of the, the, uh, even the store locations, for example, for locker more mall-based and, and, uh, Dick is more standalone, and even the categories and goods that they sell, it's uh it is uh diversified.

Arun, my guest host Tim has a question for you aswell.

Arun, when, when you look at the, the health of the consumer, I know, uh, you know, there's been a lot of focus here over the last several months on tariffs and the impact that's gonna have. I want to talk a little bit about the, the tax bill that you saw introduced from the House, uh, just a couple of days ago. WhatWhat do you see this having on retailers, you know, you look at especially some of the tax break proposed for those making under $160,000 a year. Does this really help propel and start get going that lower end consumer that's been struggling over the last few years?

Yeah, certainly, I think right now the the lower consumer, uh, really needs to see some relief, especially given now, you know, uh, high inflation risk given all given all the tariffs, uh, but certainly I think any, any, uh, policy relief will be welcomed by retailers and consumers, um, especially the retailers that do compete on more of the, the lower income side. I, I cover a lot of the dollar stores and, and these dollar stores have been struggling for, for a number of years now.Um, for companies like Walmart, for example, they do, you know, skew a little more to the lower income, but they've also been getting a lot of higher income households, which has been helping offset some of this pressure. But yeah, certainly I think any, any tax relief will be, you know, uh, welcomed by, by these retailers.

And who, who do you see really as the biggest beneficiary from a lot of those tax cuts? Is it, is it, is it really the catalyst to spur the, you know, that lower end, the Dollar General, the Walmarts of the world forward? Um, what do you see there?

Yeah, I think, I think most retailers will be, will benefit from, from any policy relief, even if inflation, um, or tariffs uh come down even more. But right now, you know, in our view, uh, we really see 3 retailers best positioned to navigate through the rest of this year. That's Walmart, and that's Amazon, and that's Costco. Those 3 retailers, uh, we see are gaining a significant amount of market share, and, and, and we see that continuing uh through the course of thisyear.

Arun, thank you so much, really appreciate you making the time for us.

Thank you.

I also want to thank Tim Urvinowitz, innovator ETF's chief investment strategist, for joining me for the hour. Really appreciate your insights, Tim. Thank you for for being here and giving us some really important context for our audience. Really appreciate you. It was a lot of fun the time. Thank you so much. I'll have you back soon and we're just gonna do a quick check on the markets here. It's looking like we've got losses across the board for the major averages still maintaining this morning, but coming up we've got wealth that's dedicated to all of your personal finance needs. Our very own Brad Smith is going to have you for the next hour here, so keep it here at Yahoo Finance.