A Seven-Week Win Streak for Markets, and Could Nvidia Actually Be a Bargain in the Semi Space? 12/15/23

0:01Live from the Nasdaq market site in the heart of New York City's Times Square This is Fast Money. Here's what's on tap tonight. Walls streaking. The Dow now second S &P all riding seven week heaters into the weekend. This week, nearly 20 percent of the S &P hit 52 week highs. The 10 year now has a three handle on it and the VIX at one point drop below 12. Can the good vibes last? We'll debate that. Plus, options action. FedEx has been delivering big returns of late ahead of earnings. Can it still be a stocking stuffer for your portfolio? We'll go inside the numbers. And later, traders set to take the wraps off their charts of the week, from burgers to builders to banks and beyond, the reveals and the reasons behind their calls.

0:40I'm Melissa Lee, coming to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Courtney Garcia, welcome back. Bonwin Eisen and Steve Grasso. I almost renamed you. Steve Eisen. And we start with a historic week for markets. While the major averages were muted today, the Dow managed to notch a record close for the third straight session. It is up 15 percent from its October lows. While the Nasdaq is up nearly 18 percent, all three indices closing out their seventh straight week of gains. Even with today's slight loss, the S &P put in its longest weekly winning streak since October of 2017.

1:13So how long can this seemingly hated rally keep rolling on? And, of course, the other backdrop to today's action is we had two Fed speakers today, Tim, trying to dial back. Exactly, just a little bit. Good luck. Yeah, it didn't really work. Well, look, when we got those dot plots earlier in the week, and I know people glaze over about this stuff because we've been doing this for so long, but there were no dots higher than where we are today. And in fact, all but two actually have things significantly lower next year. So this is you say what you want, but we now we have that look into into the room.

1:47We have a pretty good understanding. And back to the markets. Well, this has been historic by a lot of different measures, but almost by any measure, and 15.5 % on the S &P really since that market turned on the 26th into the 27th. What's probably most interesting is that you have the Dow Jones now really outperforming, and we kind of poo-poo the Dow. But the Dow certainly is revenge of the industrials, and that's what it feels like. And I think between airlines and between some of the shippers and some other parts of that complex, I actually do think you can get more outperformance. I think if you think about where we are in terms of overbought, Steve likes to talk about this stuff.

2:21I think we all kind of look at momentum in the markets. Overbought conditions can get worked off pretty quickly. But at one point today, coming into today, the Dow was at a 90 RSI, nine-day RSI, which means the relative strength indicator of this was as oversold as I've seen it going back five years. So, you know, just where we are here. And ultimately, I think what the Fed did this week is they opened really the doorway to other asset classes. And we're going to talk about those in our charts. I'm sure everyone's got a slightly different interpretation of this, but a huge week. Can I ask before we move on, show of hands, who thinks we're going to rally into year end?

2:57Raise your hand. Everybody. So the question is after the 31st of this year, if we rally into year end, Courtney, do you think we're just sort of setting up for disappointment next year? There are a lot of things that have to go right next year in terms of the soft landing scenario or narrative that needs to happen in order for this rally to be validated. We're definitely setting a higher bar, right? I mean, a lot of this was priced in even before the Fed came out this week and said that, well, they didn't say, but it indicated that they're going to be pivoting. So the bar is higher, but I do think that we're going to continue to see a good year next year.

3:28Realistically, I would have thought this would have happened earlier this year. There was this perfect setup for all of these value companies to outperform after there was a tech outperformance. But then AI was the big craze this year, and we kind of set that along the sidelines. But now we're finally seeing that, and I think we're just starting to see it come back around. A lot of these things, though they're rallying now, are still barely up for the year. And so they still have a lot of room to run. And I think we're going to continue to see that early next year. I think there's room to run.

3:50I remember a couple of shows back, I said, I'm begrudgingly finding ways to get long exposure. And it's been painful. But sometimes you have to determine whether you want to be right or whether you want to make money. And sometimes you have to just eat some humble pie and get involved. So I do think when you have people like me that have found various ways and interpretations of why there is a bear case to this market, I think when you start to see those people capitulate, I do think it should give you pause. We're still seeing the VIX at very subdued levels. And then going into next year, it really feels like there is no more possible pricing of the Goldilocks scenario.

4:23Even going into this, the Fed was still saying or the rhetoric was higher for longer. The dot plots now say the exact opposite of that. So I wonder what is the next thing to take us higher? We have AI. We have now cryptocurrencies that are rallying. We have a robust and resilient housing economy. We have a bounce back in the regional banking system that had some contagion. So all of the pockets where we thought that there was there was some concern, there has seemed to be some resilience. What is the next driver? And with the VIX where it is, it definitely gives me caution to just go in full steam ahead without at least taking some of that into consideration.

5:03Yeah. So last week when Carter was on, we had said, what was the next leg higher? And it was when the bears capitulate. So to Bono's point, when you see people throw in the towel and say, you know what? I was wrong. The market's going higher. Then that's your pause. And the Fed, they didn't walk back on stopping to hike. They walk back on cutting. That to me is still positive. We're still at the end of the rate hiking cycle, which means that the markets can go higher. So once they peak, I think Goldman put out the average the average increase in the markets was 18 percent once rates have peaked.

5:40Well, we've peaked. We still have more upside to go. The thing, you know, about this rally is that it's really predicated on this notion that the Fed will, in fact, cut rates. Wall Street's getting all giddy over three rate cuts next year. And that has to happen in order for that to happen. Inflation has to keep coming down. I would think oil prices have to remain low. The consumer shows no stopping at this point. Why are we to believe that inflation is actually in check? I'm not trying to be a bear here. I'm just trying to put out these points. You've got to figure this out here. Yeah, I think it's important to point out that the Fed is – I think we have some sticky inflation here, especially in the services side of it.

6:18If you look at where jobs are and we look at at least where wages are in some of the recent prints, the wage component and the work week have been better. Think about the economy we printed in the third quarter. And that's really why equities are having a good time here, because the economy is in a pretty good place and inflation is falling faster than the economy. If you think about where the growth has come from, this is where I think you should get most concerned, because the growth, there's there's the Mag 7 and then there's the sad 493. You know, I mean, you have this whole and the 493 have really been part of where the excitement is.

6:50And this is this is where I would get back to. I mean, look at the week that that airlines have had. Look at the week that the autos have had. And there are, of course, reasons why in both of those sectors that you have reason to feel like you've gotten some clarity and you've gotten past some some periods of uncertainty. But but there to me, there is a dynamic where I think there's a limit to how much farther we can trade lower. I go back to the three things that that that really I thought were the biggest ingredients in why rates were going higher. And that is an enormous amount of supply that is less buying.

7:18And that is a dynamic where I just think you still have some, at least, latent inflation that the Fed is still not comfortable with. These are ingredients that tell me that that 10-year, look, I think we've overreacted to the upside. I think we probably overreacted to the downside. I think you're going to settle in here. Look at eggs. Eggs are half the price. So getting back to the question about inflation, eggs are half the price. Gasoline went for$5, about$6 now. $6, it doesn't? They're less. Are you going organic? Don't put me on the spot. I don't pay for the organic eggs. I think it's a waste of money.

7:51You can get eggs for$2.99. Yeah. Well, I don't want to catch them on the street falling out of a chicken. So the eggs are half the price. Gasoline went from$5 a gallon to$3 a gallon. Costco talked about that last night. They said they see inflation 0 % to 1 % next year. And look at lumber. Remember the chart on lumber? It looked like Mount Everest. It was$1 ,600. Now it's got a$500 handle on it. So there are pockets of deflation, strong pockets of deflation that the average person cares about. So that's where and if you listen to Janet Yellen, she said there's still a cash hoard. I don't know about that, but people still have their jobs.

8:31The job market is still strong. Yeah, I would argue that we're seeing some disinflation of pockets. I can't quite get on the deflation boat now. Well, I will say, is the Fed going to cut because of economic weakness, possible recession? They're saying no. But you still see retail spending strong. You still see GDP resilience, which means that if they're cutting, it is to continue to spur growth, which I believe by definition is inflationary. So that back to back to Steve and both Tim's point, that is where the sticky and I believe your point as well. That's where the sticky inflation might rear its head.

9:03And I think that is the wild card that is not being priced in. That they start cutting and inflation comes back. Absolutely. Yeah. That's why that's why you get the rhetoric we had today. I mean, they're in no position to really be dialing back. They're in no position to be cutting right now, even though we know what the market's done. We had a composite PMI today, so you have services and manufacturing. Manufacturing gets worse and worse every month, it seems. I know we're not a manufacturing economy, but those are some of the ingredients that, at least I think people point to, the services side of it wasn't that robust.

9:36So you're getting prints. Look, leading indicators continue to tell us that the market's going to go to a recession. And if you look at history, this is where it is. So back to, I think, Bono, where you're kind of trying to surmise, is the Fed moving to offset significant weakness? Are they moving because they feel that inflation is back to their target? And I think the reality is that it's going to be because of weaker growth. If anything, that's what's going to be driving the Fed to pull back. Yeah. What are you hearing from your clients in terms of the ones that have been sitting in bonds? Is there any willingness, is there any desire at this point to put that money into markets?

10:11Not a ton. What I'm hearing more so, and I think probably get into this more, is the cash that people have on hand. People are finally getting on board with, okay, maybe we should start looking into some intermediate bonds, because as great as the money market rate is that you're getting right now, I think people forget, oh, but you pay tax on that money, and it's probably going to go down next year. And so everybody's finally rising. You have to do something with it. I'm getting a lot more interest in bonds and equities, whether that's my recommendation always or not, but people are definitely still conservative right now, to say the least.

10:37Well, actually, investors are stashing nearly$6 trillion in money market funds as high interest rates gave those instruments better returns in the stock market. But if borrowing costs fall in 2024, will that hoard of cash make its way back into equities and push the markets higher? Our next guest says history could be telling otherwise. Let's bring in Adam Turnquist, chief technical strategist at LPL Financial. Adam, great to have you with us. You actually wrote about this in August. I thought this was really interesting, the chart, because you find that it's not now. People aren't going to be cycling back into equities right now.

11:09That's the message history has told us. When you look at the previous four major peaks in money market assets, they really did not start to roll over until we are well into the rate cutting cycle. I'm still getting used to saying rate cuts after the last year here. But that's really been the trend in history. And I don't see any slowdown. If you look just at November fund flows into money market assets, you had$200 billion going into money market assets despite rates coming down. So that trend is still up for now. I do think that you'll have some flows coming into equity markets, of course, and support the market, especially a lot of offsides positioning.

11:47There's confidence in this market as well. And I think we've seen the highs for interest rates. So supportive for the market, but I don't think it's worth holding your breath for an imminent trend change here with fund flows into money markets. But, Adam, I agree with you. I see it with my clients. I think you also, though, have a dynamic. How do folks feeling about having, do they feel like they've missed a move in the markets? And if you think about the intensity of where and how quick the velocity of the move higher, which got a lot of people off the sidelines, and as Courtney referenced, too, it's great to earn, you know, 3 % to 5 % in the front end of the Treasury curve.

12:20But at some point, equities outperform over time. And so when you see this kind of a move in markets, it's hard to feel great here if, in fact, you've been cashed up. Yeah. And the other opportunity cost is not locking in some of these yields right now that you're seeing in the market. So if you're missing on both ends, if you're missing that equity market rally and some of this rally that we've seen in treasuries, we think and we've been telling our investors and clients to really lock in some rates. You don't need to go far out on the curve. You don't need to take additional credit risk into high yield.

12:52Lock some of these rates in now. We think, again, that the upside in yields is likely capped as we look ahead to 2024. Is there data, Adam, on where that money actually goes when it goes from a money market or treasury bonds? I mean, I'm sure not a lot of it goes straight into equities. Some of it must go elsewhere, like maybe corporate, some sort of intermediate step. I think if you think about fund flows, fixed income is probably going to be first downstream coming out of money markets. If you think about the investors that are sitting in money markets, I think from a comfortable standpoint, point, I think, you know, again, they're probably going to move into more of a fixed income, safer security versus chasing this equity market rally.

13:33In terms of data, we did see some pretty good evidence of fund flows coming back into U.S. equities just over the last week, of course, powering this rally that we've seen broaden out significantly over the last several weeks. All right, Adam, we're going to leave it there. Thanks so much for joining us. Appreciate it. Bono, when you were mentioning before that you're finding ways to get constructive in these markets, although it's tough for you to do that mentally. Are you using the fact that the volatility is so low to use options positions instead of going all out in equities? I definitely think that's the way to play it.

14:03It gives you that downside protection. You're able to take advantage of very subdued volatility. And if you do get outsized moves, you're participating at a very large clip. You're paying like very little in terms of market participation without taking on risk. I think we all agree the risk reward as we continue to march higher. is more skewed to the downside. I guess my question against that or my argument against that would be that we're finally seeing this earnings recession is probably turning a corner here. And I think that's hopefully what we'll see the early next year. But if that turns around, I mean, does that change your opinion at all of where the markets are going long term?

14:39It also depends on rates. The thing is, like rates historically, I mean, sorry, risk-free rates historically are the last 20 years are still quite high. So I would argue being long options, which still gives you that upside and still continuing to earn risk free. That pairing is pretty compelling to me. If we think about what pushed all that money into money markets, it was the failure of the regional banks. People got nervous. They wanted a return on their money. They never had it before. For years, we haven't been earning anything. Now they have a 5 percent or a 4 percent or whatever the case might be.

15:10So you're going to your point. You're going to have people go out and say, I want to own the 10 year now. So not all of it's going to come back. Maybe some of it stays where it's at right now. A lot of corporations keep it there just like cash and they're earning something. But markets on average are up 10 percent a year. So stop picking whether you're getting in at the lows, getting out the highs, wherever you are on your time horizon, you can pull the money back and go safety. But markets are up on average 10 percent a year. You're still beating that. All right. We've got a news alert here on Apple shares modestly lower after reports China is accelerating its iPhone ban across government and state firms.

15:48Reports say this broader, more coordinated effort is part of Beijing's push to wean itself off of American technology. We knew about some level of ban, shadow ban within the government, within the Chinese government. But this does seem to be widening in terms of geographic reach and in terms of the kinds of firms being asked to dial back from American technology. Yeah, it's not just American technology, too. It's also Samsung that's in the crossfire here. And it also coincides with kind of a resurgent Huawei, you know, and where they actually have been able to put products out there that have been wildly popular.

16:21So the local national champion is now a competitive force. Look, this also comes a week after Gina Raimondo was out there basically saying China is our enemy. And this is after all of these, you know, the summit with Xi and Biden on the West Coast, but also multiple trips that, including, you know, the secretary to go to Beijing. So I just think that some of this is China pushing back. And look, when Apple was 30 points lower, we talked about how this was a threat to Apple. So now that Apple's effectively at all time highs, it should seemingly for the stock be a bigger threat. And look, I was one of the people that I said I thought Apple could go lower.

17:02I think it can go lower. I think we're in a period where the market has gone higher. It's all about five or six or seven stocks. Apple is the biggest holding in the world. But I do think that Apple is vulnerable, and I think it's vulnerable on multiple and less about China. But this isn't news that helps. What do you think of Apple here? I mean, on a relative basis, it really hasn't had that great of a week. I think it's up 2%, 3 % for the week when everything has seemingly levitated and the higher beta stuff has really taken a jump. You know, you look at the regional banks or you look at some of the solar companies.

17:31I mean, all around, you've really seen things flow in. And so to Tim's point, Apple has kind of moved higher with the market, if you want to argue Apple, in fact, is the market. But I don't think you've seen outperformance by any stretch of the imagination, even if you look at the equal weighted S &P. All right. Up next, we're taking a trip around the world from Mexico to Brazil and beyond. If you're worried that the rally in the U.S. is running out of steam, should you be sending your money on an international voyage? Plus, could this high-flying semi actually be the cheapest chip around? One of the street's top analysts set to join us to make his case on why NVIDIA is a budget buy.

18:06This is Fast Money with Melissa Lee, right here on CNBC.

18:18Welcome back to Fast Money. Emerging markets emerging as a serious opportunity into year-end. Mexico and India with particularly strong showings. Both the EWW and INDA ETFs hitting new 52-week highs, outpacing the S &P in December. So if domestic markets slow, are there more attractive alternatives overseas? Part of the equation, too, is the dollar, I would imagine, Tim. But what do you think about overseas versus U.S.? Well, overseas, there's developed and then there's emerging and then there's some hybrid. And, you know, I advise on an ETF that's some hybrid of both. I actually think the opportunities right now are everywhere.

18:53And I look at Japan. Japan this week had a tank-hand report. This is kind of like their state of the economy. And if you saw consumption trends, they're at 32 year highs. You've got forced corporate governance from the T the TSX. You've got reflation end of YCC. Japan's booming. It's going to boom. The DAX all time highs. And again, companies like Siemens, they are a digital company. They are a tech company. They are on top of everything. But back to Brazil, they cut rates this week. The sleek rate was cut. If you have an environment in the U.S. where you don't have a growth scare and yet you've got falling rates and falling inflation, This is a sweet spot for emerging.

19:26Remember, if the Fed starts cutting out of weakness, emerging is going to sell. But the currencies are usually where you make a lot of money. As you said, I think the dollar I'm arguing and I have the dollar's been in a 13 year bear market. It peaked last summer since that time, by the way, since the dollar peaked at the end of last summer. The euro stocks 50 is outperformed the S &P by 21 percent. So you do get that tailwind from the currency. And I think I think we have it. Your nickname on the show is Ambassador for a reason, because your expertise in emerging markets. What is your favorite right now?

19:59I'll tell you what, overweight Brazil, overweight Mexico, like India. And again, I really I mean, so and then in the developed world, love Japan, love the energy super cycle as it pertains to European integrators. I think they actually break even at cheaper levels than the U.S. integrators do. But again, Latin America right now, you don't have to own China. And that's why the EEM or the VWO have really underperformed because that's 45 percent China. Yeah. Courtney, you like emerging markets, right? Absolutely. Yeah. And China has been the big story. It's almost when we talk about emerging markets, we talk about China because, to your point, it's such a large part of the index.

20:33That's where I think India probably is going to be that next conversation. I mean, they just surpassed China with the largest population. Now, the fifth largest economy in the world. They were only the 10th about a decade ago. Their average age there is like 28, which is a decade about 10 years younger than the average age in China. When you're looking at where is the money going, where is the economy going, they're going to be a huge economy. And even you were talking about Apple and how China might be banning iPhones. They've already realized this. They're not only moving production to India, but they're expecting that that's going to be a big part of their revenue going forward, is that part of the world.

21:08And I think that's something you definitely want to take advantage of. I think Mexico makes a pretty strong, compelling case in terms of GDP growth. I think it's about 4.5%, 5%. I think their risk-free rates are around, or prime rates are around 11.25%. So all compelling dynamics here, particularly if you're looking for some alternative to the U.S. With that said, I just have to put out the disclaimer. There has been over the course of history a value trap when it comes to IFA or European spread versus the U.S. market. There are times where that looks cheap. But over the long run, there is always an issue and a dynamic where the U.S.

21:39trades at a premium. And that's for a reason because of a leveraged technology versus banking and old industry. So there is a lot more fast money to come. Here's what's coming up next. Earnings options, a number of key names gearing up to report next week, and Professor Koh has the down low on one delivery name. The transport trade is next. Plus, it may be trading near all-time highs, but one chip stock may actually be cheaper than its cheap peers. Trust us, you won't believe what it is. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.