Giant as oil jumps today is this beaten down sector finally about to move up the Investment Committee is ready to go. The Halftime Report with scott wapner begins right now. Welcome our Investment Committee today, joe terranova, steve weis, john and Pete Najarian. Lets begin with the markets and that semi surge. The chips on pace to close above a key level. Their 50day moving average for the First Time Since early may still a long way to go to get back to the highs but, pete, if this is legit, it could be extremely positive for the overall market it sure could people were leaning on this. This is exactly why this particular name moving everybody else, micron, thats why it was beaten down as much as it was. You look at yearoveryear numbers, this is abysmal but they priced in the fact they werent looking year over year but for this quarter can they beat, and they did. They beat on earnings and on revenue by a little bit, not a lot. And you look at the company. We all talk about valuations you can say that at micron on almost any level this Company Trades inexpensively. Are they executing and are they able to accomplish what said they gave some guidance that i think also gave people a little more encouragement in terms of the future the combination of all of that take a look at intel and xylink. The semis, theyre all reacting. That may not be the best reaction they may be overreacting i say it all the time on the down side. Youll pull some name out. Micro chip its burning down the semis. Who ever heard of micro chip who cares. But the reality is everything overreacts well, are we overreacting a bit in the semis off of a number that micron put up that was good and was a beat but year over year wasnt that great the top 30 gainers in the russell 2000 dominated by semis. Great gain today for some of these stocks pretty good gains over the month for these stocks but still well off their 52week highs. Lets not go to party city and start buying the streamers, all the plates and all that stuff. You cant even get helium because theyre getting short on helium the smh has become a trading vehicle. Evidence to that, the smh is 1. 1 billion in total assets. Yesterday 130 million came out of it. Thats basically 10 its become a trading vehicle to your point at the beginning of the month. The place to be. Ive been trading around i like what pete is saying about micron i would say microns quarter in agreement you have to worry about the inventory build. They did not work off the inventory build. The demand on the pc and smartphone side isnt there. Volatility Going Forward because 13 of the revenue is tied to huawei so youre going to get volatility there however, the other side, you stay in the semis. You stay in the smh which is what im doing because its about taiwan semi. Its about intel and qualcomm, nvidia, its about those bigger players in the semispace and right now the direction points higher for them. Micron says they expect demand for chips to rebound later this year thats a positive sign if you look at how far the stocks have to go to get back to their highs. Micron is 37 from its high. Nvidia 45. Western dig, 44. A. Mat 13. 5. Skyworks more than 26 off its high these things still have a long way to go. Exactly but if you think the market is going to continue to move higher or take another leg up, you need the semis to perform, dont you . Probably. But id say the big reason that the semis, more than other groups, would want to move right now today is not just about what micron said but what treasury secretary mnuchin suggested which is that perhaps theres a trade deal thats coming and these semis have been really hurt by the assumption theyll be hurt if you pay the tariff on every item they ship a group way down from its highs and something positive on the trade front which has been the biggest negative overhang to the market mr. Weiss, micron upgraded today to buy target 50 bucks. Western dig upgraded, target 54 bucks. Are you a naysayer on these gains . Are they way ahead of themselves first of all, micron ceo has never been able to predict the future as far as guidance. And theyre basically saying the same thing you said. Yet youve had an inventory build from 130 days to 150 days. Thats not good. I also believe youve had some stuffing of the channel not in the farious way but by the buyers in china buying in advance because of trade . Right and weve seen that that was said. Oems buying in advance microns inventories, we dont know inventories so, look, i dont think micron should recover to its old highs. Lets not forget about all that came out and said we have a 100 price target theyre jumping over themselves each day this is going to the moon. So i still own skyworks. I sold most of my smh. Still a little left because its a little overdone for now. Too much beta coming ahead of trump and g20. But if, doc, a lot of the negativity around this space i built around trade, if you get some positive headlines, to steves point coming out of the g20 this weekend, why wouldnt these stocks continue to work . Yeah. And they will if thats what i agree with that i think one of the key phrases in here, scott my point is if youre getting out of part or all of your smh, why do you want to be so negative in that space ahead of what could be a positive development this weekend i put smh on as a trade, and it was a good trade. I took my money off the table. I still own skyworks and bought more skyworks over the past week thats where im playing because i like the i like the play form Going Forward to the next gen. Thats why im there im not short i was shorting micron for a trade today hoping people would come to their senses and saying the quarter wasnt that good and the Short Covering would subside by about 10 30 so i covered doc, forgive me for interrupting want to make sure everyone was on the same page at least 12 different firms either reiterated or went to higher ratings today on micron and they did it because of, i think, a key word in here. Not trying to parse it like we do fed statement but in their statement they said if huawei continues, if this black listing of huawei and so forth continues, thats going to have a negative impact on fullyear 2020 and so forth. Everybody saw that and yet nobody cared in other words, i agree with mnuchin carries this much better than that if does on the negative side. So what youre talking about here is a lot of firms looked at what micron said, to petes point. Margins, i thought they were actually good, though, pete. They were up 1. 5 year over year thats great theyre at 29 give or take right now. The bill that steve cites is concerning but they were able to get a higher margin and held on to inventory rather than flooding the market with it which is a smart thing to do they also had lower cap ex. Do you go in and assume the risk in a micron on your belief you get a favorable resolution on trade, or do you stick with just basically the overall smh etf . And i think thats the better play i dont know if you want the risk assumption specifically in a micron what joe just said it important because if what were saying is this group moves because the market moves there are many other places to go in the market without the risk of whether you really get the trade resolution that you need for the chips to really im suggesting that maybe this group moves the market more than the market moves this group. Semis, you know, could lead to the down side or lead to the up side yes its an indicator. I think the huawei issue is separate from the trade issue. So just because you get an agreement on trade doesnt mean youll get a security issue settlement on huawei theyve made that clear that they are separate and distinct if you look at the analysts estimates hes got it going to over six bucks in 19. This year. And it goes out to 20 and he cut his estimates from 530 to 330. This should not sell at ten times except in a trough its fully valued. And when weve got all this back and forth like this, this is why i sold mine i dont know if pete cleared hi out. I was in micron. A lovely winter. God bless them and im taking the money and running. Same thing, except i only trimmed in wdc, western digital. Its up 10 from when i did that for unusual just a week and a half ago and you can imagine that the options moved a lot more than that 10 stock moved in a 35 stock. So im trimming in amd and wdc i took micron all the way off. Its a trading environment. Weve talked about it all year i continue to think its a trading environment. When we look at micron, to your point, im not interested in shorting it, but im long the stock as well. Im going to sell that ill probably be out by the end of the day because this is a great move and a nice violent move to the up side. Im not so sure that guidance has me enough excited right now to say, you know what . I see this persisting for a longer period of time. Id rather be in other parts of the semis but continue to trade them but im not married to any of them. Ongets that note, lets not act like todays move in the 50day moving average and this big gain for the smh is all of a sudden so rosy. Lets not forget the evercore isi note another leg down for memory in q4 19, we think so. The recovery pushed to the second half of 2020 . Yeah they took price targets down all the way across the space applied materials, kla tencor, and micron it took and i keep talking about the smh because thats the proxy for whats going on with the chinese and the u. S. Right now. And the trade dispute. It took the smh down to somewhere around 102 a buying opportunity thats where you jumped in and actually bought it so they can be right about the fundamental trend but to what i think the conversation is here, this is more about whats the nearterm direction of a trade overall for the semis as a sector industry. And i think that continues to point positively as long as we feel theres going to be a outcome thats somewhat favorable. You get to monday dow is on pace for its best june since 1938 s p is not quite that far back but its having a great june as well and so much seems to be hinging on now this dinner between trump and xi in osaka. And anything incrementally positive that comes out of that could be good for this space and the overall market in general. Its interesting you say that because i feel theres a doubleedged sword if theres a resolution to this, jay powell has to say, well, gosh, it was really trade and the potential negatives about trade that could slow the economy which could be the reason the fed lowers Interest Rates. And the whole rally, i think the rally over the last month has been based on an assumption that Interest Rates come down thats right. If theres a resolution to this, then you dont have necessarily that incentive to lower Interest Rates and the market isnt going to like that. What if trade has already slowed the economy not what if well, it has. But if it doesnt slow it more, if we dont have any resolution, i dont think theres a reason to, in july, cut Interest Rates thats why we made that scale. Yeah. Yesterday on our wall of the major sort of things that are balancing each other now you have got to get the rate cut the market is counting on. A resolution in trade or you have a potential problem a resolution in trade does not mean chairman powell automatically steps back because the damage has been done i think he gave some indication of that, though, yesterday. He did. Where he said if we he didnt say well be proactive. Led you to believe preemptive, i think. While they dont respond to political events that if trade is one, they are looking at. If we get a deal well not get a deal, but then i dont think they cut so you both raise the, i think the most critical issue. And maybe we did get a whiff of that yesterday as to whether the market is getting way ahead of itself on fed expectations and on that note, lets bring in Steve Liesman joining us today from d. C steve, so you had all this fed speak yesterday. Chair powell says baseline outlook remains favorable. Policy should not overreact to a single data point. Bullard says 50 basis point cut would be overdone. This doesnt sound like these two very important people on the fed are necessarily in line with where the market expects things to go next month i wonder if i disagree with you on that, scott the Market Pricing does expect a 25 basis point cut thats a good oddson bet and a possibility of a 50. When i look at the way the market is priced i see a 78 of a 25 basis point cut that seems about right i think the real issue, scott, theres, by the way, september 68 chance of a 25 and an 18 chance of a 50 i think the fed does not quite know what its going to do and thats because of all the things you guys are talking about if you can tell me exactly how the meet with xi and trump is going to go and how weak or strong the july jobs report is going to be and then tell me whats happening with gdp, i tell you what the fed is going to do. The fed is holding in reserve its options and possibilities because its not quite clear how weak the economy is. I think joe is right the Federal Reserve believes some damage has been done though they have not really revised their baseline outlook that the economy kind of plows ahead here at this 2 , 2 plus growth the question is whether or not that gdp growth forecast includes a cut or multiple cuts or does not. Still you have powell saying, he didnt say the base line outlook remains dicey. He said favorable. Yeah. And bullard said manufacturing is being affected by the global trade war. Yeah, let me tell you another place i disagree with you. I dont think you equate bullard and powell the same level, right . Of course not, but i dont think youre doing that but i want to be clear. Bullard is a president , a Voting Member the chairman, when you have doubts about what the real policy is or going to be, you should follow the chairman you know, as well as i do, though, that bullard has moved the market and bullard may very well have moved the market yesterday before powell even spoke he has. By the way he has that credibility within the marketplace jim was ahead of the rest of the fed in terms of pointing where the fed was going to be going. I think thats also worth pointing out ive seen president s move the market beyond their actual, lets say, strength or position on the Federal Reserve be that as it may, i think that that bullard is among those on the fed and caplan, by the way, you should also throw in who says hes worried about excesses but probably would be on board for 25 basis point cut i think that it depends on how you read the market to see if the fed is different from where the market is. The Market Pricing on a 25point basis cut. If i saw really strong job growth in july, but i will say i just got as we were speaking the rapid update were down 0. 1 to 1. 9 for Second Quarter growth. The fed could cut a quarter point in light of a growth forecast but i wouldnt be overly exuberant about the possibility of a 50. And what do you make of what ubs is saying today. If a cut does not happen in july, it might not happen at all. You know, again, id follow the data here. If the data were to show that there is strength and were on board with it. I dont know that i agree. I assume thats seth carpenter who is a fed observer. I didnt read his report this morning but i dont quite see that they can always come back and cut any time they want they have press conferences at every meeting. I think the issue is that the data is going to tell the fed which way to go. You have this weakness in Capital Spending you had a decline in Consumer Confidence the consumer has been fairly strong well see if we get a bounce back i think joes comment there is really one worth thinking deeply about which is how much damage has been done by trade, such that even if theres a deal this week, the fed has to address it. If it is extensive and it starts showing up in the data, then i think the fed is on course for a rate cut i think we i dont think its a stretch to say that it has done significant damage. I think all you need to do is listen and, frankly, from the very beginning of all of this, the commentary out of the c suites was this was damaging it was hurting their ability to see into the future and to open the bank account and write these checks let me also say in fairness to seth carpenter at ubs, i dont want to misrepresent what the note was saying. They do say that theyre forecasting a 50basis point rate cut in july and that its about risk management, not the base line. And its not a foregone conclusion but we think it would be hard to stop. Its not like youre saying its not going to happen. Theyre just saying against all of that, if it didnt right and with all due respect to what seth said the chairman yesterday repeated his comment about an ounce of prevention is worth a pound of cure thats the thinking behind the possibility of a 50. So he even held that out there, this idea of the fed acting preemptively when you dont have a lot of bullets to shoot. Shoot what you have often and do it more forcefully so i think thats really critical thats still on the table. But you cant really take it to the bank until you see what the data are going to be we appreciate it, steve my pleasure thats Steve Liesman from d. C. For us. I think the fed is in a difficult position it would be difficult to get intoxeraicated by strong headlis and step back and say, maybe we dont need to do anything right now but they run a risk. It goes back theres been economic contraction. If you do nothing in july, your next opportunity to do something becomes september and that could deepen further theyre in a tough spot. The use of insurance cut, thats the right terminology because basically from a perception standpoint, not the reality of fixing the economy, perception standpoint, maybe that helps you can make a credible case and i know that others have sort of spoke about this around the margins of if you cut rates. A reason why the economy is slowing has less to do with where Interest Rates are than it does with where the trade war is okay thats a fact. I agree so the president saying that wed be doing 4 or 5 , or whatever number hes throwing out this number if the fed cut Interest Rates there needs to be more focus on the fact the trade war has hurt the economy. Except theres one other point that i think what is a rate cut going to do as long as the trade war is raging right