SOTS 2nd Hour: Musk’s Vision For Tesla, DC Deal Or No Deal, and Time To Break-up Google? 5/21/25

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Carl Quintanilla (1:08)

Good Wednesday morning, welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber here at Post 9 of the New York Stock Exchange, along with Morgan Brennan, who joins us today from CNBC's CEO Council Summit. Sarah Eisen has the morning off. Meantime, markets in a bit of a sell-off mode. Dow's down 300 Only one sector's green this morning. That's communication services and breadth fairly negative, about four to one. Today, Elon Musk teasing a future dominated by self-driving cars and Tesla robotaxis in this wide-ranging interview with David right here on CNBC. We'll get the headlines of what it means for investors later this hour. Plus, Google wrapping up its developers' conference today. Kind of a muted reaction from the street. The only Mag-7 name in the red over the last year. We'll talk to one analyst who says shares can rebound in a big way, but only if the company makes a radical and surprising move.

Morgan Brennan (1:57)

Well, we're 30 minutes into the trading session. Here are three big movers that we are watching this morning. We've got fresh results from a number of retailers this morning.

Including Target, Canada Goose, VF Core, TJX. We're going to talk more about what's driving declines for Target specifically in just a moment. Those shares are down about 6.5%. Meantime, Palo Alto Networks at the bottom of the S&P 500 this morning. Gross margins missed. Though earnings and revenue did top estimates, also down about 7%. United Health under serious pressure again today. The Guardian reporting that the company secretly paid nursing homes to reduce hospital transfers for ailing residents, saving millions in care expenses. The company is saying in a statement, quote, the DOJ investigated these allegations, interviewed witnesses and obtained thousands of documents that demonstrated significant factual inaccuracies in allegations. After reviewing all the evidence during its multi-year investigation, the DOJ declined to pursue the matter. Carl, those shares are still down about 25% since the start of the month.

Carl Quintanilla (2:59)

Morgan, thanks. UNH is weighing heavily on the Dow this morning, and stocks, as we said, broadly lower across the board, nearly every sector in the red. As some of these long-term yields move higher, our senior markets commentator Mike Santoli is with us this morning. He's watching that, some VIX expiration and everything else, right?

Mike Santoli (3:14)

Yeah. In a sense, we came in to this week, and we were supposed to be pausing or pulling back. That's where the market was poised because of how overbought we got with 23% up in six weeks in the S&P 500

The way that positioning was so radically wrong-footed among institutions near the lows, they had this sort of chase instinct that was just necessary. It's back up to around neutral. So people who bought don't feel as under-invested. And then when you had the de-escalation of tariffs, it felt as if, look, that's a week and a half ago right now. The last real move on that front was the pause with China and the reduction in stated tariff rate. Okay, we kind of used it up. So I think that's why yields are really the chief headwind and the main touch point for what equities are going to do right here. They're not blasting off, they're not fully unanchored, but they're high and they're globally high. Your 30s above five again, not really surging through that level, but uncomfortably sitting there. And we're at a moment when that definitely works against equities, because you're going to be testing the economy for the ability to absorb it. You obviously have a little bit of a valuation cap on this market, I would argue. We were traded up toward 23 times forward earnings in the February peak. You know, you're 21 and a half right now. How much higher are you going to go when you have these unknowns that are still in place where we didn't really know they were there in February?