you didn't see the picture >> that's right. we have a picture. by the way, tonight we'll look for more results out of microsoft. that will be a big talker as we head into friday obviously the dow and chewy tonight as well. with the dow down 129, we will see if it is a false breakout or more consolidation let's get to melissa lee and the half the big debate on the day focuses on a faang stock, 72% off its 52-week high is there opportunity in netflix? >> the great netflix debate is on is today's drop your chance to buy in or does in company have an over saturation problem plus, another big bank beats this time morgan stanley but is something lurking underneath the surface for the financials one "halftime" regular has a serious warning about the group. the double call of the day, apple and a key supplier the investment committee is ready to go.

"the halftime report" starts right now. ♪ it is great to be with you on this thursday our investment committee today, joe terranova, steve weiss, jon najarian so the question here is what do you do with netflix. is it a preview of what is to come in the coming year when netflix faces more competition doc? >> well, it is interesting, mel, that their pricing power we all -- at least many of us, i was one of them, thought that he had that pricing power, that disney offering even though it is not, of course, fully rolled out at all, that disney offering is i think perhaps causing some folks that, and the lack of programming which they cited on the call last night. they didn't say lack of programming. they didn't say it that way. >> a weak slate of programming. >> a weak slate, that's very -- that's the best possible way to say it but, you know, now they're getting back "stranger things" and a bump of the popular as well as, of course, "the crown,"

the second versions of that are coming on to netflix those are all drivers, i think, mel, for them to hold on to and/or build but to see u.s. subscribers down for the first time going back to at least maybe 2011, maybe 2010, i hadn't seen that. >> what concerns me is there are not competing streaming services yet. we know they're coming down the pike, but this happens in a traditionally seasonally weak quarter. but netflix knows it is a seasonally weak quarter, and yet it was so off. >> i have a hard time justifying the negative count in the u.s. look, i haven't been in the stock. that is not going to surprise anymore. there's a phenomenon when you're invested in a stock and bad news comes out to rationalize it away i have watched all -- read all of the analyst notes today that are doing exactly that this is bad news, and you can't get around the fact that competition is coming. they're going to have to spend more on content. this is not the netflix of three, four years ago when they

had the marketplace to themselves so, look, if you own this stock, frankly i think this is an opportune time to get out of it. i wouldn't stick around with this don't fall in love with it. >> you know, i would say that this is the netflix of old because to your point they don't have the competition yet. >> nothing has changed. >> right, nothing has changed. >> especially since the april forecast. >> it is coming now. >> when they gave the april forecast, what has changed since then >> i agree with that. >> so that again to your point, when companies try to play it off-seasonality, seasonality happens every year, every second quarter. yet they're too optimistic i have been in the stock, i'm out of the stock, i am out of it now. i thought i sold early, apparently i haven't i would not go into your point because competition is coming. now, they're monthly so you can get out. it is not like disney has been taking their revenue or people say, oh, i have to get out before my renewal is coming in, you know, or i'll sign for another year no, they can get out the day

before disney launches to me the biggest concern should be not from netflix but from disney, from apple, from hbo and the like, because they're not going to have near the content we've got netflix spending 9 billion a year in content. apple has earmarked a billion dollars for it what are you going to do with a billion dollars in content then you have to have laser-like focus on those particular shows and entertainment doesn't work that way. >> let me just give a punch line here okay this stock has very much a growth multiple. you can't justify a growth multiple if you have a negative subs quarter. >> i was going to get to that. the valuation is much too high to pay for this company when they just don't perform. >> your long calls in netflix as well as disney >> i am long disney i am not long call in netflix. >> that's you. i missed the js here. >> a grand on that last night. >> i will try to help my friend

jon out as it relates to the calls. i think the mechanics, first of all, of how netflix has been trading is important here. it is important to understand, may 1st you may the high for the year, somewhere around 386 in the last couple of weeks we talked about it on the show. we made the attempt technically to breakout above 386. you failed last couple of days, netflix has traded kind of weak. so i think you have positionally, you have a lot of people that came into this earnings report to begin with long you have to go back to the model of 2011, quick ster -- remember quickster? >> of course, one of the biggest black eyes for netflix in the history of the company. >> exact live. they lost 800,000 subs they went to the dvd by mail model, stripped it away from streaming, and over the next three months the stock was punished i think the formula is in place that from a price standpoint you're going to see netflix replicate that.

>> you're comparing it to quickster because it was a self-inflicted wound, it pulled back, scrapped that plan and was able to go back. in this quarter what can they actually reverse that has happened >> not very much. >> okay. >> not very much. >> okay. so the stock trading pattern after quickster versus what has happened now should be completely different. >> i don't hoe -- >> or should be different. what do you think? >> i'm not sure about that i think it takes longer for netflix to recover as it did with quickster where it bottomed in october. >> what do you think, brenda >> i think it will be interesting to see how the industry evolves with the streaming service because netflix might be forced to change some of its model and have a longer commitment in subscription rather than offering a monthly subscription, which allows people to pick and choose based on what is coming down the pike in terms of new content coming out so i think it is going to be interesting. unless there becomes a point where there's a whole bundling that happens all of these

eventual services and that kind of keeps everybody in, it is going to be interesting to see how it evolves. >> how do you interpret what's gone on with netflix to your position in disney. >> we prefer disney because the content there is lasting it is content that people watch over and over again for generations. it is licenseable. we think that disney has an advantage over somebody like a netflix that's now losing some of the content. >> how much has disney gained since the launch of its streaming service market cap roughly? $40 billion, 50, some order of that >> 20% additional growth. >> okay. let's think about this 6.99 a month. >> cheaper. >> so have we gained that -- i mean what have we put on in market cap when you try to back out how many subscribers you think they're going to have i mean we are at a point now where you think, has it run up too much on the back of the hopes of the streaming service >> i think prior to the announcement disney was

underperforming the broader market, so it was more of a catch-up that was happening as well it is not as though it packed on additional -- >> but it is not like it was underperforming for no reason. disney always performs the fundamentals weren't there igor is signing on again to usher it through the introduction is why disney moved. if you are a disney investor now, you have to worry, okay, dw$7 is better, but they don't have the amount of content netflix has, number one. >> they're not trying to be netflix, and they don't have to be netflix to win, right >> they don't. but they also don't have the breadth of menu to appeal to so many different people. >> right they have legacy content, and the legacy content is very familiar to the families in this country and it is something that people want. so i agree with you. >> absolutely. >> they don't have the breadth, but i think there's more value in their content versus what netflix is curating. >> but who is writing the check?

is the 8-year old watching "beauty and the beast" writing the check each month. >> you have children you understand with junior comes up and says, i want to watch whatever it is on disney, you're going to write that $8 check, right? >> no, i'm not going to tell him, no, look, you should watch "lou black" instead. >> exactly. >> mel, you want to draw a parallel, or maybe you did, joe, with quickster i don't think that's the right one. you may want to find this provocative. i'm not doing it to be provocative. some people may be angry when i say this. >> i can't wait to hear this. >> i'm already upset. >> what is it? >> green mountain coffee roasters anyone remember that, ten years ago, how that thing shot to the moon >> yeah. >> then what happened? competition came in. it got knocked down. it was a growth darling and then it became a fallen angel if you want a parallel, that's

what i see here. i know i'm going to take brick bats for that. >> no, you're not. >> but i'm going to tell you what i think. >> you don't pay as much for a company that owns the market as -- >> you are talking about a market where everybody and their brother came out with the same product. >> originally it was innovative, mel, but that's the parallel. >> you are banking in terms of the parallel all of the content is somewhat comodotized. i would make the case it is differentiated. >> i think it is a difference of opinion, which is fine. >> okay. >> what i'm saying is general is competition went up. you wept through tnt through thm not doing it again, but competition is coming up. >> go ahead, joe. >> maybe because of possible competition we will get a market price determination on what streaming should cost for a month. should it cost $6.99 as disney

is suggesting or is it $15.99, the upper end for netflix. i think in terms of pricing, collectively you are going to see it come together at some point. maybe the right price is $11.99. >> and it depends on where you are, the india service, mobile service only, cheaper to bolster international sales. one parallel that could be made is weakness in the second quarter category 3 have seen r quarter the past three years the stock is now 20% since then. you know who bought then shannon shikosa who joins us on the phone. what did you make of this mess here, shannon saccocia do you believe the management when they say, you know, the third quarter will be better >> i do believe that the third quarter will be better, and it is not a ep whhope it is more on the basis of what we have seen in the second quarters i bought the stock last year

following the difficult second quarter miss they had, and, you know e when i look at this earnings report i think that, you know, i think the points made by the rest of the investment committee have been great. but i'm really looking at it in terms of where i see our viewership going as not only here in the united states but more importantly internationally. you know, i think the miss on the paid net ads internationally was more concerning for me, but i also feel like it is so under saturated outside of the united states so even with this significant subscriber miss, i'm still looking at this in terms of there can be multiple winners in this space i like -- you know, i like the content platform that netflix has now. we have been talking about the price of content and how that' going to increase over the next several years, and that's been a reason for people to have moved out of this stock 12, 18 months ago. yet we still continue to see the fact that, you know, when you look at the subscriber services that you are using in your household, netflix is still at

the top of that list for many of us so i know that there's going to be more competition next year. i think we have some good content coming online this quarter that will help with the third quarter earnings i still see this as a company that can continue to innovate and spread their footprint, particularly outside of the united states. >> i want to zero in on international because we haven't really talked too much here on the desk about the international aspect, and i agree with you that is a huge growth driver for the bull case in netflix when you hear netflix saying, you know what? we want india, we want to gain market share in india, and for that we are willing to cut the price there, do you like the fact they're willing to go all in for the land grab in an emerging market like that or does it make you think twice that they're willing to give up on price in order to gain the subscribers? so there are more costly subscribers to gain. >> i think there's an inflection point between growth, you know, is netflix still the subscriber growth acceleration story versus profitability.

i actually like the bifurcated approach here. i think that they're making the right decision as far as being able to grow usage of the service outside of the united states at, you know, a much less profitable rate. here in the united states, i mean we have seen this when they've increased prices it is something we have to grapple with you know, i think that they're approaching this properly in order to get themselves into spaces where, you know, they're seen as the market leader. i think we've seen this, you know, across multiple industries over the last five or six years, particularly in the emerging markets. you want to be -- you want to have that brand recognition and you do that by making -- by increasing your subscriber numbers really at any cost. >> so, shannon, let me ask you a question one of the things i liked about the story was that they had this pricing power, that the service is so cheap particularly relative to the other offerings out there that they could raise prices and they did. the company stated that where they lost, where they missed on

subscribers were the areas where they raised prices so keep in mind that their balance sheet -- i am sure you are very well aware of this -- is a bit damaged, and yet when they've been buying content, they've been the main buyer of content away from the traditional avenues, the network. now they're competing with content. the company also said it is a great environment for those making content because they can play us off one another. so my point is the pricing power, as doc said initially, is not there anymore. the content costs are going up, and at some point there's an inaffordability to buy the content without coming to the market and raising more capital. will the market pay this price to buy stock in the company, knowing that the competitive landscape has changed markedly >> well, i think we have some down side risk here, and i think you look at that down side is maybe 300 or so, you know, we're looking at that revenue number being, you know, somewhere

around six times 2020 revenue is where it is troughed in the past i think you make a great point on content i do think that there was, you know, two things that happened this quarter we saw the price increases and, you know, frankly we saw the fact that we didn't see great, new content coming out in the quarter. again, i think this becomes less of an innovative approach story and more of a how do we -- how do companies produce and acquire content? how do they balance the cost between those two, and how do they remain relevant for us as subscribers when we have so many choices now, and we will have even more choices 18 months or 24 months from now. so i don't -- i mean my view is not that there's no risk in this particular stock and that there couldn't be additional disappointments, but as i think about the number of players that are going to be successful in this space two, three, four years from now, i still think it is a long-term play and that's why i wouldn't -- you know, to jim's point, i wouldn't be a seller here on this particular

news >> shannon, thanks so much for calling in we appreciate it shannon saccocia of boston private wealth you mentioned that your long call is going into in? >> i was. >> $18,000 you said? >> yes i bought 100 of these 385 calls, talked about it on the show yesterday, mel. >> yes. >> sold the 390s against it, ended up a net of 1.85 times 100 option and every option is on 100 shares, so 18 grand like that however -- >> sell a ring, huh? >> might have to hock a ring i have a ring here for sell. >> what finger >> but i think the average price cut here, mel, by the street was 10% from goldman sachs, credit swis, rosenblatt. >> because they got it all right going into the quarter. >> none of us did. >> that's true. >> none of us did, except those of you who were short. i certainly didn't have that but i'm with shannon i like it down here right around 317ish, mel. that's not it but that's the line. >> do you have a trade

>> we saw unusual activity, people buying 330s and 350 calls aggressively, but out in january. they're not looking for a v-shaped bounce but a longer term play. >> morgan stanley shares on the move at this hour after recording quarterly results bead morgan stanley's results cap off a busy week for financials which saw all six major u.s. banks report beats on their top and bottom lines you know what bank stocks did for the week >> nothing. >> nothing down 2%. jim. >> well, but it's been a good user for a lot of the bank stocks. >> sure. >> if you look at the xlf, that's up about 17% on the year-to-date i think you have to put into perspective what you're expecting from this sector are you expecting something like technology growth rates in earnings per share or share price? i'm not, okay. what i'm looking at in this sector is a sector that's so beaten down, i really don't think it goes lower. i see upside potential of the 10% to 20% range over the next year, but i'm not looking for it to shoot the lights out. most of these stocks are trading

at or around book value. that gives a margin of safety in my eyes. they're buying back shares you know, citi, shrinkage at 10%. those things get me enthused to buy the stock. >> consumer banking is winning on wall street you saw it with citi you are seeing it with other banks that -- >> -- migration. >> you have to be able to diversify away from trading. trading is not going to move the needle for you in a 2019 marketplace anymore. well i wealth management will create value but it is about consumer business, and i think that's where the opportunity is for the banks. and i think there's a clear message from morgan stanley. >> brenda, you are in visa, so you are looking for tech like returns in financials. >> yes one thing we heard from many of the banks was the credit card business was healthy and saw

great volume growth. it is a great sign for visa and an affirmation that business is continuing to do well. even though there are pockets of weakness in the economy, the consumer seems to be doing fine. >> i own visa. i agree, i like it it has been a steady performer versus some of the crap in m portfolio so i intend to stay there. i think consumer is very strong. >> i like that crap in the portfolio. let's bring in another voice to the financials conversation chris whalen, the chairman of whalen global atdvisers. he sees trouble lurking. what kind of trouble do you see. how big trouble are we looking at >> i agree with what you were just saying about the consumer side, citi it is probably the most interest earnings to the large banks. on the counter party side we are seeing a lot of rough water simply because the fed is still tightening you know, i had laughed when i hear people talking about easing because we're still running off the balance sheet. repo rates have been going up since the end of june on falling

volumes so money walked out of the market. >> does it end because they already cutting? >> i hope so. >> and the run-off on the balance sheet will end at a specific time. >> i am short the cut, i have to tell you i think jay powell made kpleclee is stopping the portfolio run off first which brings him back to neutral and later in the year we see a cut. >> later so this 100% pricing in on the markets are wrong? >> i think so. you have to remember it is not just about the target for fed funds. it is about what they do with the balance sheet. we haven't had to deal with this, and i don't think most equity analysts who never think about the fixed income market, never think about repo, are missing the point here ultimately it is about what does it mean for the shortened of the money market right now it is going up. >> so just to be clear, you are saying -- you're not saying he shouldn't because i agree he shouldn't. >> no, i don't think he should. >> you are saying he won't, right? >> i don't think he will i think the politics and also the technicals, there are a lot of people in the fed system who

don't think a cut is needed for the economy. the markets obviously -- >> i agree, that's a separate question. >> i agree. >> politically, does he want to endorse the president's position i don't think any fed governor wants to do that. >> he is allowing himself to be political if he does it. >> you realize it is a miracle on ice call because it is basically 100% right now. >> i have been out on twitter saying -- look, i work in the fixed income world i work in credit, i sit across from repo traders. i'm telling you, it is tight if there was a reason to cut, it is because of what is going on in the money markets right now. >> to that point, you mentioned the balance sheet run-off. >> right. >> let's talk about liquidity in the system and cobbs st of capi. what are the optics? >> the optics are liquidity walked out at the end of june, it didn't come back. we are thinking, who took their money off the table and left we are seeing a lot of managers worried about funds with low liquidity and other issues, and they're looking to get their money back you saw in the taxes, you saw

h2o. these are both little runs we had things like this in 2007. at the time, remember, everybody thought, it is not a big deal then we had the bear sterns fund go down. even then people didn't think it was a big deal all i am saying is you are starting to see really rough water. for me, what do i own? i own safe stuff in banks. i bought u.s. bank in december i own a lot of crafts and trucks there's not a lot of visibility on revenue or earnings going into next year. >> i agree with you, but -- >> i think, by the way, that's why we haven't gotten the pop despite the earnings. >> but the most important question goes back to the cut. so i don't think he should cut, but here is why i'm convinced he will that's because what's the biggest criticism? the biggest criticism is not so much that he tightened in december that's there, but right above that is that he miscommunicated, right? poor communication. >> very much so. >> so despite you have the fed future showing 100% chance of a cut, he went in front of congress and he let everybody believe there will be a cut,

knowing that he had to communicate, can't afford another misstep. >> this is why they should communicate less i think the open kimono policy was a mistake. they should speak and keep it as limited as possible. after the crisis they felt the need to be more open with the dot plots and everything else. >> if you believe that the fed is not going to cut, would you be short this market here? >> yes. >> that seems to be the slam dunk column here, right? >> that's my worry i think the miscommunication and the lack of focus by the fmoc on the shortened of the curve, what is happening there every day runs the chance of repeating december >> repeating december. so down 20% or so. >> yes, and also more importantly a complete drop-off in new issuance, corporates, abs. abs didn't come back corporates and mortgage came back, thanks god, but the one thing i will remind everybody about my banks is that, yeah, they have big volumes on

mortgage but they're not making money on those loans the only loans they make money on are refinances. the purchase mortgages are dead loss. >> sounds like you are in the bunker, chris. >> i'm a credit card coal makes it go up, credit makes it go down remember that. >> what do we see on the bond side of things in what you are predicting could be a 20% in equity -- >> it will go back down below two on the ten year. >> i thought you were going to be more than that. >> i thought you were -- >> exactly. >> it is a strong bid anyway for that that's what took us back down the tube, right, remember? >> if you are a credit guy, you worry about leveraged loans? >> i am. i am worried about the ratings effect when they're bunched on the edge of bbb and they are downgraded, boom, suddenly the audience is cut by 90% in terms of liquidity again, a lot of managers are getting antsy. they have big gains in some of the funds and they want their money back. >> you know, one thing i was surprised about more recently is

we haven't seen a flight to quality within the fixed income market instead, you have seen more reach for yield where some of the higher yielding, risky assets are out thebond market really is not signaling your view. >> well, yes and no. i mean the sealed off volume haven't come back to where they were we cleared out the backlog from december, which is good. you are not seeing the kind of demand we saw before again, i think some managers are comfortable taking their money off the table, especially before year-end i think year-end is going to be really, really interesting because people don't want to have the same situation we had last december when there was no bid. you literally had big banks pulling back to prove to the regulators that they're liquid guess what that means they're cutting off their customers. how wonderful is that? who came up with this idea >> chris, i think i'm thanking you for coming by. good to see you. >> thank you. >> chris whalen.

>> my pleasure. >> bank of america ceo brian moynihan will be on "mad money" with jim cramer at 6:00 p.m. eastern. quickly, are you buying what chris was selling, a drop in equities, credit problem ahead >> if chris is right about the communication that's what would happen but i believe the fed has painted themselves into the corner, can't get out, and they're going to have to dump it. >> i'm not selling my banks. >> hey, i said goodbye to you. we got to go to break. chris is coming up next on "the halftime report. next up, a double call of the day. why one analyst just got very bullish on apple and one of its key suppliers. jon najarian just found unusual activity in the options market he's been on a major roll. see what he is seeing now. also ahead, debating microsoft before today's key earnings report the stock is this year's second-best performer in the

dow, up 34% year-to-date before the break, our data partners show that on earnings day microsoft is up 63% of the time by an average of almost 2%. for more, go to cnbc.com/kensho "the halftime report" is back in two minutes. tell him we need this merger. (in dutch) it's happening..! just ok is not ok. especially when it comes to your network. at&t is america's best wireless network according to america's biggest test. now with 5g evolution. the first step to 5g. more for your thing. that's our thing.

>> rahel solomon here is your cnbc update at this hour a federal judge denied bail for

jeffrey epstein, rejecting his request to stay in his new york city mansion under guard until his trial for sex trafficking. the judge said he is a danger to the public and might free the country, calling his bail package inadd quantity by 239 to 109 vote, six dems opposed it, three republicans supported it the measure would gradually hike the wage to $15 by 2025. the chances for passage in the senate are dim a federal appeals court upheld the fraud conviction against martin shkreli he was sentenced to prison after looting a drug company he founded. southwest pushing back the day he expects to fly the 737 max jet. it is taking out until november 2nd that is the vng update at this hour let's send it to dom any chu for

a market flash. >> thanks, rahel we are watching shares of anheuser-busch inbev, up about 1.7%, this on the heels of headlines from the "wall street journal"/dow jones saying that ab inbev is exploring sales of assets after calling off the big ipo of the asian operations. private equity firm kkr teamed with the japanese brewer approached ab inbev in may about buying assets according to the source familiar. they looked to raise about $10 billion from possible asset sales and they're looking to sell assets in korea, central america and australia as well. again, source reporting from the journal, but it is moving the stock to the upside, melissa that's the reason we are watching it. back over to you. >> thanks, dom chu jim, you are in consolation? >> yes, this news is kind of a neutral to me. when you get into a stock like constellation you know that anheuser-busch is the big one out there. nothing new to that. the news today doesn't change

market trends, it doesn't change consumer taste i'm in constellation for far more than the corona brand you know they have wine and more importantly this option more or less in the marijuana business with canopy growth i'm neutral as far as this news on bud wiser goes. let's get to unusual activities betting big on a semiconductor name as well as a pick in the financial sector jon, what are you looking at >> taiwan's semi-conductor this is a longer term play again like we said with netflix people were not betting on a quick jump to the upside but more of a longer trade to the upside from where it is now. how do we know that? because they're buying january calls. so -- whoops now that we popped up enphase but i had taiwan semi up there a second ago here we go taiwan semi, as you see, working up from 42.55, buying january calls in this name

january '46 calls. mel, i bought those calls. they traded an awful lot of them, coming up on 18,000. that's a big number. probably will be in these two months or so now i will get to enphase which is basically a company working with photovoltaic and in other words solar. they are based in san francisco, stocks 20.55 today, in here buying calls that expire in august love this activity this one doesn't normally see such big buying, but august 22.50 strike, i saw 5,000, 7,000, now this one is pushing to 18,000. love that activity this is a shorter term trade though, mel. so, again, i'm looking for a move pretty quickly. i'm in these i will probably be in them about a month, and i like the activity today. >> all right, doc. why don't you come over to the desk. >> thank you we're going to do our plits. honey well, higher after beating bottom line estimates. joe, you're in it.

>> the revenue was light because 18% of the business is the safety and productivity solutions division that was light but, listen, you are talking about a company that is hitting on all cylinders in a very choppy macro environment. yesterday the stock sold off, so i think it took away a lot of the high expectations for the stock. today you are seeing the stock recover once again it is trading right above the 100-day moving average i don't think you get out of it. i think the fundamentals are strong i think the guidance for the second half is conservative and it elevates towards 180. >> phillip morris is next, having best day after four years, raising the four-year forecast as well jim. >> i'm not a buyer of this stock. it is not a moral thing, although plenty of people will have that. the problem here is that it is a declining market, right? less and less people are smoking. yes, these companies, whether it is philip morris or others are trying to get into things like vaping or marijuana but moving slowly in that regard. basically it is a dwindling market they're participating in.

>> russell 2000 sliding further into correction territory. small caps continue to struggle. brenda. >> i think small caps throughout the current economic cycle we're in have been interesting in that they actually lagged large cap stocks even over a rolling five, seven, ten year period which is not normal during those cycles you would see outperformance for taking the additional risk. looking at it here, i think the reason they're down is they tend to be more economically sensitive companies that are not as financially sound as larger cap counterparts when there's a risk-off move that happens, small caps bear the brunt of that. so i would say tread lightly here we still have exposure we think it is important to have exposure that in terms of adding to small caps here i would be a little more cautious. >> does it worry you though when the markets more broadly were at record highs small caps were in correction territory some people will say that's a huge problem and it was a signal perhaps the market rally is a little tenuous. >> yeah, i think also it is a

signal that large cap stocks have been such a huge force, almost unstoppable compared to everything else in this cycle, versus international stocks, emerging market stocks, large cap stocks they just beat everything. i don't know if it is necessarily a small cap problem as it is a signal that large cap -- in our view large cap stocks could see a bit of a correction in general. >> go with the middle child, mid caps >> union pacific in the green after earnings doc. >> yes, well, i'm glad i didn't pump this one out yesterday, mel. when we were talking about it, that was the bad information out of csx that really put the pressure on the sector unp fell along with norfolk southern they all fell yesterday, not as much as csx but this one making a nice rebound today it is up 24% year-to-date on long calls in here happy i held. >> united rental is under pressure after cutting its revenue outlook. weiss, you are in this one boy, it was a doocy when it

landed. >> yes, and i think it was over done the weather was a big part of it, but they only lowered the top end of the guidance. the lower end of the guidance still is intact and it is still a very cheap stock i think also when you look at a stock, like you say, well, the economy, that he weighing on and participate of the issue i don't think that's the issue i think the company is continuing to do well and now is a great buying opportunity i'm sort of full in the stock. i may buy a little more for balance, but stocks aren't bouncing like they were a little while ago so i would wait a bit but compellingly cheap. >> we have two for one, two fehr the call of the day. s&p 500 sector check, you can see there communications services worst performing on the index. more "halftime" in two minutes

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...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade. >> welcome back to "the halftime report". sky works up saying most of what could go wrong important the stock has happened the chip company can rally the analyst behind the call upgraded apple to outperform it is the call of the day. steve, you own skyworks. the keyst that the 5g phone will

be stronger than expected, skyworks will be the primary gainer in the upswing in the cycle. >> i think 5g isthe place to be it is the one theme in technology you can go, like cloud was a few years ago. that's why i own it. they're the most leveraged, too. not only for their leverage to apple, which is one reason why i wouldn't buy it this quarter because apple sales i believe will be disappointing, even though i own stocky own piuts on it skyworks is uniquely positioned. they have preannounced also based on exposure to huawei so i think that's out of there. the management of the company would have to be pretty -- i don't want to say stupid, stupid to really miss a quarter after they preannounced. >> can we remind you said you had puts in apple so you don't necessarily believe 5g iphones will be as robust for apple but you're a believer in skyworks >> i think it is too soon. they have to get through this

quarter and next quarter. >> you can believe in skyworks and not in apple is what i'm asking >> exactfully. >> brenda, what do you think >> i agree that 5g is a huge theme that will withstand no matter what the economy is doing. it is a theme that will continue when you look at the projections made for apple in particular, i don't agree with the multiple being applied to get to the price target it is using a 19 1/2 times multiple which i think, you know, apple is a more mature company. i have no doubt they're going to benefit like everybody else from 5g, but i just don't think they're going to get that higher multiple rather than a market multiple that they're getting today. >> and so, melissa, i owe corevo which is a competitor as well and iphone manufacturer. they all produce non-iphone stuff including other phone manufacturers. look, i think it is a good call. none of the stocks recovered to where they were a year ago, that's number one. number two, i think you have another 15% in this whole sector after that you have to be very careful because apple has a way

of cutting off their suppliers at the knees you may remember about a year and a half ago this british company, dialogue semiconductor, apple just cut them out of the picture and the stock was down two-thirds in about six months you have to be careful about that i don't see it happening to any of these now, but 15% is what i would be looking to take profits on. >> which is why my bigger position is in smh. >> on june 5th, steve will be right. it will continue to move higher. >> thanks. i'm selling it now. >> you should. june 5th i suggested playing a little offense in the marketplace. i bought the smh it was one of the ways to do it. i wanted the diversification of etf. i mentioned at the time i thought you probably could get 7% out of it of. i'm not sure exactly what we got, but i know somewhere -- >> 17%. >> somewhere above 15% so now i want that capital, because we've got technology companies that are individually reporting, my ownership of faangs is not basically zero

i want the capital to allocate towards good, fundamental earnings stories in individual stocks that i'm going to hear about over the next couple of weeks. not a referendum on the smh itself. >> you sold the smh and bought what >> raised the capital. i'm waiting. technology companies are going to report and we'll find something interesting. >> what is top on your radar >> i'm looking at the faangs because i don't have any here. >> okay. the desk answering questions on crown castle, coca-cola, chewy and you can reach out to us at cnbc.com/halftime. we are back in two behind the b

silver >> i think it is moving with the reps of metals and cryptocurrencies it is a trade away from fee yacht currency with interest rates globally so low people are moving into alternative currency being the metals and cryptocurrencies so silver seems to trend. gold is outperforming over the last year since the china tariffs took place, silver underperforming gold it might be an area to look for if you are looking to trade the metals i prefer it over silver but both seem to be moving higher and continuing that way. >> jim, i imagine a stronger dollar could complicate silver's move >> there's no doubt a slotronge dollar does. when the fed moved towards

dovishness i think it gave a signal you want to own things anti-feea ant ant anti-fiat as brian said. it has come to 16.20 and 16.50, in the level 16.20 to 16.50 it's not going to be able to chew through these and i'm going to be looking for a spot to sell it i'll talk about that next on the digital show >> check out our live show at the top of the hour. we'll be joined by david rosenberg who says this earnings slump is pointing to a recession. and why oil could be headed back to the 2019 lows all that and more futuresnow.cnbc.com. let's get to eamon javers with an alert from the white house. >> the president is going to be meet with airline ceos in the oval office at about 3:30 this afternoon. phil lebeau reporting among the topics to be discussed are subsidies from countries like qatar to their airlines and also the open skies agreement

not clear who all is going to be in this meeting, but we're working on find out. the president clearly talking to a number of ceos around the country on a range of different topics today it's the airline ceos in the oval office. and we'll bring you more as we have it. >> thank you, eamo jim, you own some airlines >> i own alaska airlines this is something where trump wants to help out the industry that's fine, although over the last 2 1/2 years i've grown tired of the executive action on industries the airlines are a competitive industry let them fight it out themselves >> i own united airlines this could be good and bad to every action there's a reaction so if -- so to me, i'd much rather be in domestic airlines which ual is primarily that. because foreign countries, the other countries, could close their gates. so they could raise landing fees so i don't see a lot of good of trump's actions coming out in the short term

>> stay out of it is what you're saying >> stay out of the foreign airlines fundamentals too good domestic to stay out. >> they don't have the netflix problem which is the loss of pricing power. these airlines have pricing power. the industry has never been as strong from that sense but i think the surprising part of the airline industry is the international. the international in a weak macro environment has remained incredibly resilient i know jetblue reports on tuesday. trading somewhere around $19 it's been sleepy the last couple of years it really has not performed like a ual. this is the opportunity if jetblue is going to break out. this could be on the earnings report wait until you see what those results are. >> doc, you're in and out. >> i believe pete is in united, but i just -- i have been trading them i haven't been investing in them >> brenda, where do you stand on airlines >> don't own airlines, no. >> let's get to break. we've got questions. you have questions we've got answers hopefully. final tradeslsne ao xt

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the story is online now. cnbc.com/invest in you welcome back to the halftime report traders answering your questions. first up, a question for weis from clyde in atlanta. why crown castle is moving lower after earnings weis, you're in it >> i am. i still like it. i have no idea i looked around. all i can see is the ten-year ticked up. i don't think that's it because others are up. so i don't know. i thought the quarter was a very good quarter >> you're still in it. dennis in atlanta. wants to know if coke is better than pepsi as an investment not a beverage >> it's a tie, dennis. you hold them both the only reason coke has underperformed over the last year is because of a fourth quarter earnings number where they guided for this year and nobody liked it. it got hit for that. you look at a one-year chart, two-year chart, five-year chart, ten-year chart they're basically a tie.

bz in dallas asks for the views on chewy >> popped to 36 on the first trade. it's been bleeding off basically ever since 31 now amazon's competing against them aggressively and i got to believes they could be a disappointment, mel, and maybe 22 again not overnight but not too far. >> one viewer in california asks palo alto networks or fortnet or wait to enter? >> that takes us back to our days on fast money we used to talk about that all the time >> cyber was in. >> to your point, these are such volatile names, both of them it's like a roller coaster right now momentum is in cyberarc you don't seem to have the volatility you have in the other two names. that would be the one name i'd look up at a small position. proctor & gamble dave in michigan asks if it's a longtime hold for an i.r.a you hold it? >> after years of organizational

changes, the company has seen great organic growth more recently and that's fully reflected in the stock price which the stock has done well. if you're looking over the next five years and you want something that's going to be defensive, i would say this is probably still a good bet. so, yes, if you have a five-year time horizon and think this economic cycle is likely to come to an end during that time, it's probably a good holding. >> we mentioned chewy after the bell microsoft is also reporting after the bell full coverage of that at 5:00 on "fast money. let's take our positions here. doc, are you trading this one? >> our futures now guys were talking about silver hitting a record in the short term i like this one, slv that's the way i'm playing it, mel. unusual activity and slv today >> oh, i was asking about microsoft. >> oh. >> sorry >> but i can answer that i was confused >> i'm worried about this. i am long microsoft. i've been long microsoft for quite some time. it's been probably over the last three years my best position i'm worried about it, though

the expectations are high. the boat is fully loaded everyone is basically long so i'm expecting microsoft to actually fall after the earnings i would be surprised if it didn't i'm not getting out. but -- >> so i own the stock. today i bought puts that expire tomorrow very cheap this was worth doing i'll even make a ton of money or lose a little. >> final trade time. doc was -- >> microsoft microsoft, mel microsoft and silver the silver version of microsoft. >> only kidding. ual. look, momentum is going to continue the stock is doing well. does well in down days i still think par is a target. >> brenda? >> disney. one thing we didn't mention earlier is hulu. hulu plus disney plus will be a winning combination. >> goldman sachs they had a very good earnings report i like the sector. but the 50-day moving average is

crossing the 200-day moving average to the up side that's called a golden cross it's wonderful this is the time to own goldman sachs. >> abbott labs stay with the stock. this is exactly what you want from your company. delivering buy more >> thanks, all thanks for being with us that does it for us on the halftime report. "the exchange" begins right now. it sure does thank you. hello. i'm brian in for kelly today here's your lineup at this hour. the market's next test no, it's not earnings. it's the debt ceiling. nancy pelosi says that they need a deal by tomorrow to pass it before congressgoes on its lon august recess. if you make it, will they come not if it's not good the netflix takeaway and the lessons for all the other streamers from a quarter to forget and say good-bye to the family trucksters and hello to grasshopper juice. get ready to bone up on dog food