A November to Remember, and What Nvidia’s Pullback Means for Markets 11/22/23

0:01Live from the Nasdaq market side in the heart of New York City's Times Square this is fast money. Here's what's on tap tonight. Stocks gaining even more ground heading into Thanksgiving. The Nasdaq 100 hitting its highest level of the year during the session. The Dow and S &P close to doing the same. But will November's gains yield to pain in December or is it all clear ahead for the markets? Plus, on the sidelines, NVIDIA sitting out today's broad rally despite a strong earnings report and strength in the rest of the semi-space. What it means that this stock isn't coming along for the ride. And later, crude crumbles.

0:31Chipotle shares spice up and Deere digs itself into a hole. The headlines behind those moves and a lot more. I'm Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Guy Adami, Steve Grasso and Stuart Kaiser, head of equity trading strategy at Citi. And we start off with what is turning into a November to remember major markets all on pace to log their best month of the year with the NASDAQ up more than 11 percent so far. The biggest winners to date, tech, communication services and consumer discretionary stocks all up double digits in November. The moves coming amid a sharp decline in rates.

1:04The yield on the 10-year dropping from 4.8 percent at the start of the month to 4.4 percent now. The benchmark is seeing its biggest monthly basis point drop since 2019. So do these trends continue through year-end or are tides set to turn after the holiday? The holiday meaning gobble gobble day, turkey day, tomorrow. Tim. Well, a trend for Yields also one of the highest moves higher in yields the month before. But yeah, I mean, lower yields mean lower risk, at least they have for the market. And if you look at the VIX, the first place I would start is just say VIX is now below 13. It's down 44 percent in 20 sessions where equities are down, excuse me, are up almost 12 percent.

1:46You outlined how great a month it's been. The semiconductor space, which has had some extraordinary runs over time, has had its best month ever. And that's crazy when you think about it. And what it tells me also is as great as this is, we've had an incredible run and there may be some complacency again. I don't know if this is bullish. I'm not bearish. But I do think you have a case where the market hasn't really widened out. There isn't a lot of breadth. There's a lot of concentrated trades that are crowded that I think a lot of folks into year end are chasing. So I think we can go higher. But I don't love the setup here.

2:18It's been it's been such a great run. There are mixed signals, too. I mean, you highlighted semiconductors, which had an extraordinary run. But that cyclical sector's move is not being confirmed by commodities, for instance, Stuart. Yeah, I think that's right. Look, our view is you're going to be higher into year end. We do expect the leadership of the year to kind of lead us into the end of the close of the year as well. Don't expect PMs to take a whole lot of risk outside of what's worked, you know, this late in the year. And look, if you look at it, lower yields, tighter credit spreads, lower oil, that's all equity positive.

2:46It has been narrow leadership. But our view is that narrow leadership is for a reason. The stocks that have won this year are the stocks that are generating earnings. So when you link it back to fundamentals, I think it becomes a little less scary. So, yeah, I mean, our view is continuing to move higher into year-end. Seasonals are strong. You know, hopefully we get what we expect out of a solid jobs number, decent CPI print, Fed on hold, and markets and leadership work into year-end. Yeah, and Steve Grasso, as I recall, you're still leaning into the MAG-7 here. Yeah, you know, about a month ago, I said, you know, if I had my wish list, I would like for lower rates, lower oil, lower dollar.

3:23And we got all of that. So I think that it was about positioning to the downside. It's about positioning to the upside. So I don't think there's a reason to sell the market. But I do think that things are a little expanded to the upside right now. So maybe a little bit of reversion or maybe a little bit of sideways action at the year end. But I don't I am not getting bearish just yet. I think this is really the start of something new. Guy, I believe you're long term bearish, but shorter term. Are you bullish? Well, I'm bullish on Naugahyde vests. I mean, the thing Tim is wearing is tremendous.

4:03I think it's a wool product. I wish you could come and actually put your hands on it, Guy, because it's not Naugahyde. But yeah. It's nice to the touch, isn't it? It's like wool. It's pretty remarkable. I mean, leading economic indicators have been drifting lower for the last 18 months. Personal savings rate down. I mean, if you listen to a lot of these retailers over the last couple weeks, they all seem to paint the same picture, yet the market just levitates. And, you know, kudos to everybody on the desk but me, because I think they've all been pretty constructive into year-end. Yields moving lower is clearly a factor.

4:37But yields are moving lower because things are slowing down. So, you know, I don't really know how to game this out. If you had told me yesterday, Mel, that NVIDIA would be trading in the mid-480s, where's the S &P? I'm like, we're down 50 handles. And here we are. We closed up 15 NASDAQ at levels we last saw, I think, in March of 2022. So it's a pretty remarkable run in the face of some pretty, I think, ominous signs. You thought you would think, to your point, Guy, that the one stock that symbolizes the really big sector that was a huge catalyst for the markets at the time when the markets really needed a catalyst this year.

5:12But that stock trading lower on the back of an OK earnings report, pretty good earnings report, but not knocking the cover off the ball earnings report would take the stocks lower overall, especially semis. Well, I think like I think a great earnings report. We all know that it had run 24 percent into the numbers. We all know where the street is. We know that the buy side was probably a little higher than the sell side on this one. We know that there's nothing about what they said in terms of demand in their core business, and there's nothing what they said in terms of margin that's deteriorated.

5:38Really, it's just a sense of, you know, the market's finally caught up. It's kind of figured it out. So NVIDIA down 2.5 % today. Semis trade pretty well. I think the things that we have to think about going into year end, first of all, we can all remember, markets probably peaked December 1, 2021. 22 was a terrible year. And equal weighted since that point has had a terrible run. But the reason that the market had a terrible 22 and 23 for the rest of the stock market other than the MAG-7 is because interest rates were going higher. Fed policy was still unknown. How aggressive? Still somewhat unknown.

6:12Now we come out of the third quarter. We know we've had annualized GDP at 2.9%. I know it's backward looking. But we had jobless claims numbers today. And what they tell you is the job market's still not that weak. Today is somewhat of a coincident indicator. I know the labor numbers often are backward looking. But until the consumer falls out of bed, the economy is not falling out of bed. And this is an environment where I think just, again, the sequencing and the timeline for absolute reason to be cautious about next year. But it's not now. Right. And that's sort of your thinking, too, right?

6:41As long as the consumer is good, as long as the jobs picture looks pretty good, you want to be along the market. But it seems like that turn could happen just like a light switch flipping. Yeah, 100 percent. I think if U.S. labor market and services spending is solid, then you want to run long equity risk. I think both NASDAQ and NVIDIA as well highlight really the underlying risk to the market here, which is positioning. I mean, you went into that NVIDIA print at an all-time high, very crowded positioning. Options markets also very, very bullish. And I think it meant even if you beat the consensus number, I think you hit the buy side number largely.

7:12And that kind of created a little friction for the stock. If you transpose that to the overall market, what you have really now is the market max long NASDAQ and S &P still kind of short Russell. So I don't think we're going lower into your end. Do you like Russell? Because two weeks ago, everyone was saying I did again, but you're finally getting that lift. It's not our favorite. It's not our favorite trade sort of three to six months out. I don't think it has the credit or interest rate risk you want. But tactically, over the next month, it is the part of the market that's under owned right now.

7:40And you could see a little bit of a chase there. And related to that is bond market. And, you know, CTAs are very, very short bonds. So you could really see if positioning really gets stressed here into the end of the year, you're going to see small cap catching up and you could see yields actually overshoot to the downside as those folks are forced back in. But you want to be in that crowded side of the boat in terms of large cap tech going into your end. Yeah, we do. You're not concerned about that. No, not too much. I think at the beginning of 2024, we have a much different discussion because I think a lot of what's driven leadership, as I mentioned, has been the scarcity of earnings.

8:11Our equity strategists next year have a much more broader base to earnings for the S &P 500. And I think that allows like equal weight maybe to catch up because you can find earnings at a lot more places. But into your end, I just don't see PMs kind of going out on a limb here the last month. It's been really a hard year, to be honest with you. Guy, when does your bearish view come to fruition, if and when it does? Yeah, I thought it would be, you know, in the spring of this year. And now we're basically, you know, we're approaching winter. And I'm surprised, you know, that the lag effects haven't kicked in more.

8:44But, you know, if you again, if you just listen to the commentary, the commentary you hear out of retailers. Listen, look, we'll talk about John Deere, I'm sure. But, you know, it's across a swath of industries now that are extraordinarily cautious going into next year. But it hasn't manifested itself in the price. And, you know, Carter's talked about this. I agree a couple of things. At a certain point, lower yields is probably going to be detrimental to stocks. I think we're probably on the precipice of that. And that last gap, and Carter talked about earlier this week, on the upside, the S &P was actually filled today.

9:15And now there are nothing but gaps on the downside in terms of the S &P chart, which at some point will get filled. So I wish I could answer that. All I'll say is I've been wrong, you know, in terms of timing, but it doesn't mean it's not going to happen. Well, yeah, and it has to happen. I mean, to me, at some point, I feel like part of what 22 was and part of what 23 was really paying for this flood of liquidity and monetary and fiscal policy. Sorry to interrupt. It has to happen, meaning a recession has to happen, a bigger pullback has to happen? I think ultimately we pulled forward a lot of demand.

9:49We pulled forward a lot of consumer spending. Consumer, I think, is working through a lot of that buffer. I think the economy, the Fed is targeting the labor market. They don't need to come out and say it. They want to see unemployment north of 5%. That's going to have an impact. How big of an impact? Boy, it would be extraordinary if this Federal Reserve, and I'm not saying that they can't do it, it's just never happened before, was able to execute whatever kind of landing you want to talk about from the greatest monetary experiment of all time. We have no idea. We were saying a decade ago we had no idea how they were going to take some of that liquidity out of the markets, and then it got worse and worse.

10:22So we had kind of the war economy of COVID without all the pain and suffering, and it really led to what has been this tremendous run. It's not over, but I do think we're going to pay the piper. And at some point, yeah, we will get there. Steve, as part of your bullishness, do you see the soft landing or does it progress into the next stage of the business cycle, meaning a recession of some sort? Or do you think the Fed has achieved what no other Fed has achieved in the history of the Federal Reserve, and that is a soft landing coming out of this rate-tightening cycle? not not through not through any fault of their own though so i i i think they're they'll never tell you when they're going to become dovish they'll the first time you hear that they're dovish is when you hear that they cut rates they will not lead into it at all but melissa late october markets fell 10 from near-term highs this is the second fastest time the market has jumped 10%.

11:19And it did it in 16 days. The first fastest time was done in 1998 in six days. That tells you something. It's because the consensus was for this never to happen. We're supposed to be in a recession. We're supposed to be falling off a cliff. That hasn't happened. And that's the reason why until you see people capitulate, that's the reason why the market will go higher. Things in the Middle East are horrific, but they're less horrific than people thought they would be at this stage. China, less horrific. There's a couple of things in this that are less bad. And I think less bad is just enough with rates coming in to have the market push higher.

11:58Is there a piper to be paid eventually, Stuart, when it comes to this hiking campaign? I mean, hundreds of years of research would say yes. I mean, I think, you know, Tim makes the great point, which is, you know, our view is stay long while that labor and services bet happens. The second that starts to weaken, you want to get out and you want to get out quick. And I think you need to be very cautious about reentering. Is there a magic number? Imagine number for payrolls or payrolls, right? Whatever it is. If you're printing negative payrolls, you need to get out of this market. And to this point, the Fed wants that to happen.

12:29So I think you get one or two negative prints. The market's going to look at the Fed and the Fed is going to be patting itself on the shoulder and saying we finally sort of accomplished this, which is why I think you want to get out and be very careful about getting back in if and when And you do see that that weakness. So when we see that, though, we have most of the market and we were all acknowledging here that that already has sold off. That's in a bear market that's down 20, 30, 40, 50 percent. Have those. Do they have more to price in? Or in other words, would that be a time to just run to the fixed income market, which has been pretty attractive?

12:57Or do you think that the broader part of the market can actually do OK in that environment? Because it's already been pretty, pretty ugly outside of this concentrated market. I mean, I think you could sell off further, honestly. People try to cite the early 1990s recession as this nice, easy, shallow recession. You had 11 consecutive months of job losses and a total of 1.6 million jobs lost during that period. Equal weighted S &P is not going to hold in if that's happening, in our view. That's why we'd be cautious in that scenario. And XRT, that equally weighted retail, is how we would hedge that kind of contingent risk.

13:26In that scenario, when the job market starts to weaken and you want to back off equities, what is the Fed doing? Is the Fed remaining restrictive at levels, or is it pivoting? The Fed will pivot. Our view is just they're probably going to pivot a little slower than the market would like them to, because they've basically stated they want the labor market to soften. So let's say in the past they would have gotten dovish after two negative prints. Maybe this time it's three or four. And that window of time, I think, is when equities will be under the most pressure. Yeah. Steve, do you think that the political cycle plays into any of this?

13:59Yeah, well, first of all, when you talk about oil, you know, I think that we have to actually refill the SPR. So they have a vested interest in us having lower gasoline prices. They have a vested interest. This administration has a vested interest in lowering inflation because people vote with their wallets. Right. People vote with their pocketbook. So if people don't feel in good shape, whether it's jobs on the jobs front or in the inflation front, they want change of leadership. So I think I would be weary of things getting extremely negative in an election year. I think the market is probably safe in the first first couple of quarters.

14:38Do we need to have yields, Guy, remain where they are or go lower in order for us to have the Santa Claus rally, if you want to call it that? You know, I've been doing how long have I been doing this show, Melms? If you if you hear me say that ever, that's time for me to probably time for me to pack my bag. So, look, clearly there's, you know, in the absence of bad news, there's this levitation that typically goes on. I get it. It makes a lot of sense. Unemployment rate is going higher. The problem, of course, is it's not going to go higher in a linear way. I think it's a surprise to people how quickly it does.

15:14And if the Fed thinks somehow they can control unemployment the same way they could control inflation, They're just wrong. And I think people will be, you know, I think it's going to happen. Four and a half to five percent is going to be a quick jump. And the market's not going to like that. At a certain point, Tim was alluding to this. Bad news is going to be bad news. And lower rates will suggest that things are slowing in a pretty significant fashion that stocks won't like either. But that goes to positioning, because if everybody's on one side of the boat in terms of being max bullish on high growth, and this changes, you know, like a light switch in terms of going higher very suddenly, we could really see some some messiness out there.

15:52Yeah, we could. And that's going to be a really tricky combination there. Right. Because, you know, our view on value growth is you buy what's scarce. What's been scarce this year is growth. If you're going into a recession, growth is still scarce, but it's also what's held. So you're going to have this sort of trade off between people wanting to be in shorter term treasuries and in growth stocks because that's where they feel safest versus if they do need to sell positioning. That's what they own. So I think that just creates the potential for a lot of volatility. I think January of 2024 is going to be fascinating.

16:19The last two years, we've seen these very sort of violent, turbulent Januaries. And in this case, you have very narrow leadership. So if that happens in this time, it's a little extra. And I think that leadership within that concentrated group is also starting to shuffle. I mean, you can't tell me Apple is going to show you leadership. And I think it's going to be more sympathetic to what the consumer is doing. We've seen a monster run out of Netflix. And again, Netflix continues to print money. They're raising prices. Their content levels are down. So it is fascinating. There will be a January effect.

16:48Sorry, guy. We'll throw another one at you. And I think you're going to have a dynamic here. There's no question there is a chase into your end. And you have, as Steve framed, as we've said, you've got peak inflation, peak rates, peak dollar, essentially peak Fed. And I still think that there are some people that need to own this market. But these have been extraordinary times. We turn out to the developing story in Niagara Falls where a car ran into a checkpoint near the U.S.-Canada border. The governor of New York is giving an update right now. Eamon Javers has got the latest. Eamon. Melissa, Kathy Hochul is speaking in Niagara Falls, New York, at this moment.

17:22And she has just said that there is no indication of a terrorist attack in this incident that took place on the Rainbow Bridge just between the United States and Canada. You can see her there addressing reporters. She's also said that three out of the four bridges between the United States and Canada that had been closed in the wake of this incident have now been reopened. What we know as of this point is that NBC News has obtained exclusive video of the incident itself. And if we play that video, you can see at the very top of your screen, we're going to have to play it here a few times to see a white sedan is coming into the border area at a very high rate of speed and gets airborne there.

18:03It looks like it hits a bollard or some sort of obstruction. And then you can see it goes, you know, two or three times higher than the vehicles nearby it. That vehicle must have been moving at the point it hit that bollard. We don't know anything about the intent of the people in the car. We do know there are two dead here, and those are the occupants of the vehicle. NBC News is also reporting, according to four sources familiar, that investigators are looking into whether the driver of the vehicle in question here was in the vicinity of a nearby casino shortly before the car crash. Also saying investigators continue to investigate the scene and the previous route of that vehicle before the video that we're looking at right here, where you see that white sedan just taking off into the air moments before it crashes into the border area, bursts into flame, and then explodes.

18:54Two dead in that vehicle today. Governor of New York now saying, Melissa, no indication of a terrorist attack. Back over to you. That is good news ahead of the holiday. Eamon, thank you. Eamon Javers, coming up, NVIDIA's China problem. The chipmaker's earnings blowing away expectations, but it's the China sales warning that has investors losing face. So could the standout semi-stock finally be losing its shine? That's next. Plus, deer caught in the headlights. Shares dropping after earnings, but climbing back from its lows of the session. How investors were moving into the company's forecast, mowing into the company's forecast when fast money returns.

19:33Welcome back to Fast Money. NVIDIA shares noticeably sitting out today's rally, falling nearly 2 % today despite posting an earnings beat last night. The chipmaker warning that Q4 sales could take a hit due to China export restrictions. The weakness, though, did not bleed into the broader semispace. The Sox ETF actually ended the day up, and AMD was one of the best-performing stocks in both the S &P and Nasdaq 100. Grasso, how are you feeling about the report and the pullback here? Yeah, so I think the report, as you mentioned earlier, was good on every front. You said it wasn't a blockbuster.

20:06It was probably a home run. It wasn't a grand slam. We've been used to grand slams for NVIDIA. So they set the bar pretty high for themselves. The one line was the was the China worry. So I guess 20 to 25 percent of their business. But just imagine if there is a workaround or a headline. We saw we saw Biden meet with Xi and that seemed to work out better than we had thought. So if things start to soften around the edges with China, the stock probably rips higher. The guidance is actually exponentially better than than people thought it would be anyway. So even in a worse world, NVIDIA still is probably the best place.

20:46Still, the commentary specifically on China was very, I don't know, maybe it's conservative, but the CFO saying that they do not have good visibility into the magnitude of the impact in terms of the export controls in the long term guy. I mean, it just sounds like they don't have a handle on it. They can't possibly have a handle on it. But if that is the case, then how can investors actually factor in what those China revenues will be? Yeah, which I think if you look, it's interesting you say that because the knee jerk reaction, when those comments came out was to take the stock. And I saw this print last night, I think down all the way down to 475.

21:21So there's clearly some concern around it. And listen, it was a remarkable quarter. We talked about the metrics last night. Christina started the show talking about all the wonderful things. Their margins are off the chart. I mean, obviously, you know, the concern for me at least is, you know, price to revenue, if you look at it, is a staggering number, even given the fact that next year you're looking at$88 billion or so. It's still a company that's going to trade close to 16 times revenue, which historically is very expensive in that industry. So people will say they'll grow into it. That's fine.

21:55They're being handsomely rewarded for it in terms of valuation. And I think to a certain extent, that was some of the consternation around the stock today. And I think we had a similar conversation last night when I wasn't wearing the vest that Guy is very jealous of. But I think what I said... Everybody is that. Well, look, it's, you know, again, it's Thanksgiving. Let's let's not be showy. But I think back to NVIDIA and I think about their EPS dynamic, maybe on a price to sales. But if they're going to do 20 bucks a share in 24 and they're going to be close to 30, 26, 27, there's there's half the analyst community.

22:28And again, you can say what you want about people that have chased the stock that, you know, 150, they, you know, they thought the stock was worth 75. Now they think it's worth 600. But I will say that a lot of the analyst community says this stock is cheap, and they say it's cheap on an EPS basis. And based upon the margin profile of the company that still, I think, is 6 to 12 months ahead in terms of product line, I think they're going to hold these margins. All right. There's a lot more fast money to come. Here's what's coming up next. Oh, dear. Shares of the industrial giant getting moved down despite crushing earnings.