Monday's Morning Movers: Energy Volatile, Bank PT Cuts, Senators Target Prediction Markets

0:00Let's bring in our first guest, though, help us with some of these initial moves. We welcome in the host of Morning Movers here on the Schwab Network, Diane King Hall, Diane. Busy morning. I'm sure reacting to the news is always fun, but right now we're watching a market open up here. What's a little bit of green on the screen? Yeah, absolutely. And listen, as you mentioned, you watched that kind of minute by minute action as you're watching futures in the morning. We were initially prepared for a down drop with that quickly change, as you mentioned, around the 7 a.m. hour when we got that post from President Trump on True Social, talking about basically productive conversations with Iran. There's been some pushback from Iran, but not enough to shake up where some confidence and momentum is returning to the markets because you recall, we had another down week last week. We're on the verge of correction territory. We already hit that with small caps, but you're seeing certainly some recovery today, not the extent of the off to the races after you initially

1:00saw the big pop that we saw after the post that happened on True Social, but investors seem to be focusing on the positive that there is this effort and this push towards de-escalation versus the disruption that was occurring in markets. As you know, President Trump had announced that temporary pause on planned U.S. strikes against Iranian energy infrastructure. We thought that was going to be the conversation that we were having today. So it gives time for diplomacy to play out versus the disruption that we've been seeing, right? We expected there to be a deadline of later today, but now that can get kicked down the rows and a shift in the heating up of both rhetoric and action with regard to the war with Iran. We've been obviously closely watching the oil moves as well because as you see some risk on sentiment, you see a pullback and crude oil prices as we approach $90 a barrel on West Texas Intermediate. Obviously denting some of the energy stops here

2:00this morning, Alex. Yeah, and no surprise, right? I mean, the only sector lower is the energy sector, Diane. It's a smaller sector of the S&P 500, but it's also up over 30% so far a year to date. So it's doing just fine. Those, you know, axon mobile investments have still been big winners for those who were positioned ahead of this move. But Diane, you look at sort of that shuffling of the deck here. You also see a pretty swift bounce back in financials, which have been one of the worst, actually the worst performing sector so far a year to date. Does that reaction function make sense to you this morning? It does make sense in terms of this shift, right? Just to dive into energy a little bit more. That has been the outperformer. I'm so glad you mentioned it because if you look at XLE, you're to date up more than 30%. As you mentioned, even with a pullback today, that one's been a key outperformer. Yes, it's not, you know, the top waiting in terms of sectors, but that's where investors have been hiding out and mid all the volatility here.

3:01It hasn't been the only performer within the S&P 500 to have a game this year, but it is the standout there. And then so we're not seeing complete carnage as well, even with a pullback today. So you have a pullback, not just in. You have a pullback in Chevron as well, and X on mobile, and Occidental and petroleum. As we know, that's been a big outperformer so far this year. That's stocked up more than 40% even with a pullback today. You've also got a pullback and conical fillups as well. As you see some of this pressure within the energy sector, as they track this pullback and oil prices, but not surprised to see the move and banks moving higher today. Even this even comes amid some price target cuts from a Goldman. Now Goldman, with them cutting price targets, is not that they're becoming bearish on the sector. This is more of a valuation reset, because they're still pretty bullish on several of the names that they cover. So for instance, they, Wells Fargo, they've pulled back their price targets in 93 from 109, but they've still got a buy rating on that.

4:02Same thing for JP Morgan Chase. They've still got a buy rating, and they've pulled their price target back to 352. Bank of America, they've lowered their price target as well to 57, but still maintaining a buy rating. Again, it's more of a reset on valuation assumptions, is the view from Goldman here. Morgan Stanley, they've also reduced their price target to 172 from 196. They've got a neutral rating on this. So the key driver here is there's some proposed changes to Basil 3. So the takeaway is they have reduced their targets as a result of this. They see better capital flexibility overall, but they just think that there needs to be a reset, especially with a regulatory shift around the banks. Alex. Yeah, and I was just looking at the performance here to date kind of across the sectors. You know, we might be surprised to realize, you know, more sectors are actually in the green on the year than red. It's just the breakdown. Is this rotation happens? We've talked about this. It's the movement from some of the higher beta,

5:02the movement from some of the bigger market cap names, into other parts of the market that had underperformed, industrials, staples, materials, real estate, to name a few energy, of course. But communication services, IT, discretionary financials, certainly punch above their weight and all down on the year, explains why you have a little bit of weakness at the broad index level. Final thing, there was this Wall Street Journal story, I guess, kind of circling this sports betting meets prediction markets world. Yeah, listen, we know there are a lot of critics around this and lawmakers are taking aim at prediction markets. This is based on the Wall Street Journal report. According to the journal, Bipartisan Group of Senators is introducing a bill today that would ban federally regulated platforms from offering sports betting waiters. The proposal is targeting exchanges like Carl Shee and Polly Markets U.S. operations here. Now, the bill would prohibit also, so-called casino-style contracts,

6:04like Blackjack and slot-style games on the exchanges. It comes as regulators in states, you know, clash over who should oversee prediction markets. There's been all these questions around that. You've had some recent legal action to vatten Arizona that's adding to the pressure. There is a growing popularity, as we know, of these platforms, which is putting them in more direct competition with the traditional sports book players, like Fandall and draft games. And we've seen some pressure on those companies as Carl Shee and Polly Markets bump in on their territory, Alex. Yeah, interesting times, as we watch this ever-changing landscape of financial markets and, I guess, betting platforms. Thank you, King Hall. Appreciate it. Thank you. Make sure to check out Diane later on this morning on Fast Market.