11AM Hour: Bank of England Chief, Q3 Tech Playbook, & Apple's AI Arms Race 6/30/26

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Carl Quintanilla (0:59)

Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Leslie Picker here at Post 9 of the New York Stock Exchange. Today, Sara is on assignment in Central Portugal, where she will bring us a first on CNBC interview with Bank of England Governor Andrew Bailey in just a few minutes.

Leslie Picker (1:12)

Plus US stocks closing out a blockbuster quarter, both the S&P and tech heavy Nasdaq on pace for the biggest quarterly rallies in six years. We'll dig into the outlook for tech in the second half with Citi's Heath Terry, why he says the AI infrastructure buildout continues unabated.

Carl Quintanilla (1:28)

AI cybersecurity fears reportedly forcing a strategy shift at Apple. We will explain that as well as we wrap up the quarter, the month of June, and the first half of the year, kind of a mixed bag sector wise today. You do have the VIX back to 17, health care lagging a bit, some nice gains in information technology and industrials, which of course are two of the best performing sectors of the quarter.

Leslie Picker (1:51)

Yeah, as we get set to wrap up this roller coaster first half for stocks, let's bring in Scott Wren, Wells Fargo Investment Institute Senior Global Market Strategist. Scott, thanks for being here. So I see you're recommending investor portfolios, trim energy equities and commodities, and rebalance toward IT and equities, precious metals and commodities. Why?

Scott Wren (2:14)

Well, you know, Leslie, when we started that trade, the beginning of April, and it's moved pretty quick, we felt like, you know, tech was down, it gave us an opportunity there, energy was up, which, you know, really, energy is still the top, the top-performing sector on a year-to-date basis, if you can believe that, with the most recent performance. But for us, you know, you had to make an educated assumption whether the straight was going to open relatively soon or not. We thought it would open relatively soon. It did take a little bit longer than what we thought. So oil prices being down here at 70, that doesn't surprise us. We want to try to take advantage. You know, we've seen some underperformance whether it's the MAG-7 or just technology and communication services sectors in general while some of these other sectors have done well. So on relative weakness, we want to buy technology. We think it is, you know, when you look at earnings, when you look at price participation, when you look at sector participation, we think that's all going to broaden out. And I think what you've seen over the course of the last month or maybe even two months is broader participation, which really the S&P hasn't made a new high. But some of these sectors, the Russell 2000, the equal-weighted S&P, they all have in the last week. So I think the underlying signal is good.

But we want to try to not chase tech, but certainly buy it on pullbacks, absolute pullbacks to be sure, and relative pullbacks as well.

Leslie Picker (3:42)

I'm curious if you think that broadly the trade is kind of over, because I'm just looking at quarter-to-date performance, and the best of those is information tech. About 30% and the worst, of course, is energy, down about 14% quarter-to-date. So do you feel like buying on a pullback will still be beneficial at this point in time, or should investors really look elsewhere?

Scott Wren (4:04)

I think for tech, yes, but you're right, because that trade, which normally, we're trying to look out six, 12, 18 months, and certainly we didn't think that cell energy by tech trade was going to work this quickly to this magnitude. So, I mean, that's something we're talking about all the time. But I think when we look out and we look at earnings, which clearly these big energy names are going to be making a lot of money here, but we're trying to look at sustainability and earnings this year, God, they're probably going to be close to 25 percent. They'll probably be 13, 14 percent in 2027 A lot of that's going to be driven by technology. So we want to try to focus on the companies that are benefiting from this AI theme, but also some other sectors. You know, you look at industrials, which have performed really well. Financials are coming along. Utilities we think will do better. Materials we think will do better. So, you know, they have all have an AI tie and they're certainly tied to decent GDP performance. A Fed that's not raising rates. I mean, we think the Fed's going to be on hold through next year. So I think there's some themes out there that are tied to AI that you can play and that still offer opportunities.