A year-end rally in the works? And how to play stocks ahead of earnings. 10/16/23

0:01Thank you very much. And indeed, it does live from the Nasdaq market site in the heart of New York City's Times Square. This is fast money. And here's what's on tap. Melt up Monday. stocks roaring higher to as transports retail banks and even beaten down staples rally is this the start of a lasting rebound or maybe just another head fake plus an earnings edition of traded or faded will break down at &t procter and gamble tesla netflix ahead of their results later this weekend later why lulu is rebounding from its downward dog days of late and bitcoin's big bounce, what's driving the crypto climb, and a serious snapback for snap.

0:41Will the surge last? There have been grunts and hmms here on the table. I haven't even gotten to you guys yet. Is it a surge or just poop? Just disappear like that. Welcome, everybody. I'm Tyler Matheson. In from Melissa Lee. Coming to you live from Studio B at the NASDAQ. On the desk tonight, the hmm of Tim Seymour, Bonwin Eisen, and Dan Nathan, and Guy Adami who went harum at some point there a moment ago. We start with a market jump today that up 314 points. Blue chip index now up six of the last seven days. NASDAQ and S &P 500 bouncing more than one percent. Wall Street embracing earnings season optimism and shrugging off those rising treasury yields, which were higher today.

1:25Among today's biggest winners, retail, the S &P retail ETF rallying almost three percent. Solid rebounds since it's been down nearly eight percent over the past three months. A lot of those names are really limping. Another encouraging move higher in transports. The group rising 2 % today. Transports struggling since hitting 52-week highs over the summer. And these gains today came even as yields ticked higher. So could this be the start of a season-ending melt-up for the markets? What do we say here? Tim, take it away. Head faker. Look, it was an interesting day. If you look at the 10-year, essentially yields back up again.

2:03And we're, you know, 15 bips off those scary heights. But if you think about what today was, it was strange. You had a day when equities probably should have responded to higher rates. You had a day when or a day after big moves in oil and things that have been rolling the markets. But if you look at the S &P, I continue to think the market dynamics are very interesting coming off that reversal that we made on that payroll low about seven sessions ago. And again, it was a day when it looked like yields were going to go higher and that was going to sell off equities and equities have responded.

2:35I still think there are reasons why equities should be having problems with higher yields. But I think the dynamics around a more benign Fed, again, we've had a lot of Fed speak. The reality is we know higher for longer. We also are hearing from banks and we're not hearing about a deterioration in credit yet. It's enough for equities in a seasonal dynamic that I think works. But again, we're almost 4 percent off those lows. Dan, if a year ago someone had said to you the 10-year is going to be at 4.7 and stocks are going to be where they are, would you believe them? No, not really. And the other point I'd just add to that is, you know, you have crude oil at 87 bucks.

3:08You have the U.S. dollar index at 106. You have, again, you know, a lot of inflationary inputs that are kind of, and Guy's been hinting at this for months and months, that are just really staying pat. So the idea that the Fed is going to get inflation down to 2 percent anytime soon or whatever that target is, however you measure it, it doesn't seem likely to me. So again, that's why I think stocks here in and around this 43, 50 range are kind of curious to me, especially when you consider the fact that two years ago they were basically trading at the exact same spot when interest rates were far lower.

3:37The last point I'll just make is over the weekend, every time I open the Wall Street Journal, at least.com, I saw this article just kind of pointing at me. It said a recession is no longer the consensus. We have quarterly survey they do economists. It's fallen below 50%. So I just think the lower that that probability of a recession gets is the higher likelihood that we're probably. Yeah, and that stocks are kind of topping out. But Tim has been on this trade for the last couple of weeks thinking that just seasonally, like, you know, the kind of natural progression might be higher. A two handle move lower in the VIX to me suggests that the market was waiting for something cataclysmic to happen over the weekend.

4:14I want to be clear what's happening is cataclysmic. But in terms of what we look at, the market, nothing happened to sort of suggest the market should cascade lower. So I think that was part of it. Again, I want to be careful with my words because we all understand what's happening is awful. So that move to me, it speaks to what I think what people were positioned for. I think it's a positioning thing. But with that said, you can't underestimate the strength and the resilience of this market. We're 4 ,400 in the S &P. And to answer your question, absolutely not, I didn't think the S &P would be.

4:44I would have thought it would be pushing down towards at least 3 ,800, if not lower. Yet here we are within whisper, well, within 10 percent or so of an all-time high. Yeah, you're with 10 percent of an all-time high and very close to 5 percent on the 10-year bond. Yeah, absolutely. I think we've all kind of been speaking to the dynamics between yields and equities, and, like, that doesn't really seem to hold up. I think really what happened was we saw at least the preliminary bank earnings come out. Those came out positive. And we tend to kind of extrapolate what's going on with the banks and extrapolate that to the economy.

5:17So that's why you saw more or less the economically more sensitive pockets of the market rally like you did today. I would argue that we should probably rethink that line of reasoning. I think now with the banks are. With the banks essentially being, you know, a barometer of economic strength. I just think there's a lot of things that have changed. We've spoken about some of the geopolitical risks. But I think the situation that we have here is that we are starting to see higher credit card balances, likely deteriorating credit. So this Goldilocks situation, not to mention, when's the last time that we've had rates of this situation?

5:50Like, you can't remember it. We've had free money. Not in a career for many people. We've had free money for the better part of 15 years. So with QT, and you're also seeing what's happening on the back end of the Treasury in terms of the issuance that we continue to have, you know, I just think it's a matter of time before you start to see this trickle down effect. And the fact that we've accepted higher for longer, I would argue that that's more of a recent phenomenon, which is why you've seen rates move. We've fought the Fed all the way here, and we're finally starting to sing and dance together.

6:18And I think it's just a matter of time before that song and dance changes the tune of what the market is doing. Tyler, I know you asked the questions, and you said something really interesting, Bono, and I want to pose a question to you, Tim. So the reversal that you've seen in J.P. Morgan from its highs on Friday morning in Bank America and in Citi, how does that make you feel in the context that Bonwin just laid that out? Because I know that you're kind of, you know, you're bullish of the bank stocks. Does that make sense to you? And do you worry about how those stocks, you could say, well, look at Wells Fargo.

6:45It's traded pretty well. You know, I'm just curious how you're putting that in the context of this early earnings season. I think banks are behaving a lot like some of the beaten up retail. I mean, retail's underperformed the S &P by 7 % since August. Banks have had a horrible run into these third quarter numbers. Look at Staples. They've had a horrible run, a lot of discretionary. So I guess I'm not doing cartwheels over banks. I do think that J.P. Morgan has proven their profitability in this environment is unparalleled, that their premium probably deserved. But when you talk about Citibank trading at 0.5 times price to tangible book, I think there's some opportunities there.

7:21But I guess I am concerned about some of the things you're talking about. I'm waiting to hear the banks tell me that things are starting to trickle. Maybe it's too late at that point to the downside on credit. But a lot of the market outside of Google and Facebook and all those other ones that we know their names, Guy, I won't mention them. We've seen a lot of pain in the market. This is a market that if you remove those seven stocks, a lot of these stocks are 52 week lows or near it. So I'm not terribly shocked that we're getting a bounce here because also I think we've had a chance to look at somewhat into the best.

7:52So what got into retail today? I just think to it. Well, I think you have a case here where you're starting to get some preview into whether this is holiday season or not. But, you know, I look at names like Dick's Sporting Good or Children's Place or I'm just looking at my screens here. And a lot of the Abercrombie and some of these either apparel retailers. We're talking about stocks that are down 30, 40, 50 percent. Seeing a bounce today, you say credit is getting more distressed, right? Well, I think the undertone of credit is getting more distressed. Credit hasn't wiped out, which is the part that's a bit scary, particularly when you have banks that are going to continue to ratchet up provisions for write-offs.

8:31So, you know, until you start to see the actual portfolio of holdings at banks really starting to get written down, that's what's going to be there. We did this thing before where the banks started to take additional provisioning, and then release that provisioning. You're going to have to see some follow-through there. I think that's going to be the canary in the coal mine that essentially says, listen, like, behind the scenes, there is this swoon coming. You're not going to have a trillion-plus dollars of credit card debt. You're not going to see delinquencies, crime, and have it not translate into credit.

8:58And we just haven't seen that last turn of events yet. What is the big earnings report that you guys are going to watch for the rest of this week? What are the two or three? Big one this week? Yeah. That's a great question. I mean, maybe Dan can answer that because I don't have anything on my radar. I'm actually really interested in that. I'm interested in American Express after what we heard from LVMH. And really, as we're talking about credit, we know that we've been hearing some lower end retailers talk about, you know, kind of some warning signs. We've seen that over the last month and a half or so.

9:26The other one, we saw that the apartment stores talk about increased charge offs, that sort of thing. So let's see what American Express has to say about maybe a higher end consumer, because I think that speaks to what Bonham just mentioned. Yeah. Well, you know, we're going to we're going to do a one of our famous traded or faded segments. on earnings coming up in the week. But I think the companies that are probably the most interesting are some of the ones that have the most interest rate sensitivities and those that have also been the greatest beneficiaries for years over lower rates. I'm going right at Staples.

9:55I'm going right at some of the telecom stocks, things that have been largely dogs. They're going to give you some read on also the strength or the lack thereof of the consumer. I think from a stock picker's perspective, I think there's probably a lot to do in here. All righty. Our next guest calls this the most complex market of his career. Julian Emanuel has been on Wall Street for more than three decades, so it's a long career. He's the senior managing director at Evercore ISI. Julian, good to have you with us. Great to be here. Why is this the most complex market of your career? Well, you actually set the table the last few minutes, and I just want to pose this question.

10:30If a year ago you knew we were going to be at 5-plus percent at this point on Fed funds, could you have with any confidence said the economy would be doing 3 %? And even more importantly, could you have said that weekly jobless claims would be hugging 200 ,000 week after week after week, showing that there really is just this unbelievable resilience? So how do you explain that? I mean, how do you explain what you just described? So the way we explain it is to acknowledge that the kind of stimulus that we saw in 2020 and 2021 and the Fed was still buying bonds during a portion of 2022 is unlike anything that we know except for World War I and World War II.

11:16And it was so much that, in fact, all this tightening is still really only working off the residual effects of the stimulus. There's still a trillion dollars worth of excess savings out there that's keeping the consumer going. Stimulus versus the tightening that is taking place now. And the bond market is everything. So I thought, again, maybe it's through my lens, but the move lowering yields on Friday, it seemed to me people were positioning for something over the weekend. Flight to quality in the form of bonds, selling the market off in anticipation of something. That unwound today, which says to me yields want to go higher.

11:50Yields should be higher, but they haven't impacted the broader market. What's the line of, you know, the point of diminishing marginal returns when things start to get dicey? So I think we've seen it to a certain extent, OK, because if you go back to the peak in July, it really got to a point where all the hype around AI, a lot of which we think is justified in the long term. But all the good news was priced in. The wall of worry was beaten. Stocks and yields were rising the same. And then that stopped. Now, with the 10 year yield sort of, you know, trying to go to 5 percent and staying below there, it's OK.

12:25And in our mind, sets up the precondition for what we think is a fourth quarter rally to 44-50. But I think if you get materially over 5 percent, it's sort of that roundophobia. The psychology changes. So you said that the reason we're probably at where we are in the market today is the sort of pile up of all the stimulus. Are we still getting stimulus in the economy today from the IRA or from monies that are being appropriated to defense to replenish Ukrainian stocks and now maybe money that will go into the Israel-Hamas war? So there's certainly an argument to be made for that. And I think one of the challenges in this dysfunctional place that's known as Washington is whether all of these bills are presented, can be passed, you know, increasing the deficit further.

13:21But by and large, you're really just at this point where the stock of the excess saving, the stock of that accumulated stimulus is still large enough so that it's only being worked off as opposed to tightening, as opposed to more stimulus. So, Julian, when you mentioned this deficits, and again, so the question about further fiscal stimulus and the like here, you know, like some of the smartest minds out there, they're really concerned about these deficits, right, that just keep expanding. Pre-pandemic, you know, the Fed balance sheet was at, what,$4.5 trillion. It got up to$9 trillion. It's worked off down to like$8 trillion or so.

13:54So when you think about this, okay, so fine, a consumer has excess savings of a trillion dollars. It's just been shifted from one place to the other. So consumers might hold up this time around, but is there a concern about these fiscal deficits? Because I keep hearing, you know, the big dogs here keep mentioning this. You know, when Paul Tudor Jones, I think, was on the air the other morning, they keep mentioning this. And sooner or later, chicken's got to come home to roost. So we in our collective investing lifetimes have probably been focused on this issue as a question of when, not if, for probably 20 years.

14:29And frankly, if you had shorted bonds in response to that trade, you were a consistent money loser. That's no longer the case. And I think when you look at the past 30 days in particular with the gridlock and the dysfunction in Washington, that's part of the bond market saying that deficits matter now. All right, Julian, thank you very much for your perspective. A complicated time, to be sure. Appreciate it. All right, let's trade what Julian just said. You go first. How do you take what he said and apply it in a portfolio? Well, let's see. You've got the push-pull between stimulus, and then you've got essentially the quantitative tightening that's essentially trying to work off.

15:08And I think it's a matter of time, as I've said before. So I'd report that that QT is going to flow in. I actually think bonds, at least intermittently, you can probably short those and expect to make money on the long end of the curve. I would also probably be looking at still trading the short intermediate portion of the Treasury curve. And then I think in terms of the more economically sensitive pockets of the market, where we've continued to see things hold up, we've had that consumer excess savings, I would probably expect that to roll over. And so I'd probably be at least neutral to short those areas of the market.

15:43Julian says 44.50 on the S &P by year end. Does that sound reasonable to you? Right there. I mean, we're 70 points away. I mean, it could happen tomorrow, quite frankly, and we've seen that before. It's counterintuitive to everything sort of I was taught and raised on in terms of the market. but the market has a way of making and putting on the most impact, the most pain for the most amount of people. And it feels like the upside is that. But you can't deny that everything going on in the bond market, everything going on with the credit markets, HYG now not trading particularly well, at some point has an impact on the broader market.

16:15All right, let's take a quick break here. And coming up, oh, snap, the social stock surging after a sneak peek at next year's user targets. The numbers in Guy Adami's snap score, whatever that means, next. Plus, is a crypto comeback in the work? Is it already happening? Bitcoin hitting its highest level since August's crypto bulls. I, a potential ETF approval. What ARK Invest's Kathy Wood had to say about it all. Don't go anywhere. Fast Money will be back in two.

16:49All right, everybody. Welcome back to Fast Money. Snap gone viral. Shares of the social media company surging almost 12 % today after a leaked internal report that the company's target for its 2024 daily active users will be higher than Wall Street expected. CNBC's Julia Boorstin has the details. Leaks, leaks, leaks. Wow. Well, Tyler, SnapShare surged today, going up 12 percent after The Verge published the company's internal growth targets. The company confirming to us that these are what they call, quote, stretch internal goals only, and that the memo circulated internally last month. Now, these goals include aiming for 20 % year-over-year advertising growth, 14 million Snapchat plus subscribers by the end of the year, and$500 million in non-ad revenue.

17:39They're also targeting 475 million daily active users in the fourth quarter of 2024. Now, take a look at Snap's stock chart. It has been a roller coaster 12 months. Now, the stock is down about 5 % in the past 12 months. The company does report a week from tomorrow, so it'll be interesting to see what comes out there. But, Tyler, it's worth noting that last year around this time, a similar memo leaked. CEO Evan Spiegel saying back then that the company aimed to grow to 450 million users by the end of this year. As of their last earnings, they were at less than 400 million. So it looks like they will likely come up short from last year's goals.

18:17All right, let's move on. We'll talk a little snap in just a minute. But, Julia, the Taylor Swift Eras Tour movie premiered this past weekend. Did you see it? And did the Swifties pull through? I did not see it. I want to see it. I'm going to have to wait until it's a little bit less crowded. They pulled through in that this was the biggest concert movie of all time, around$93 million opening weekend just in the U.S. alone. That makes it the seventh biggest opening weekend for domestic film so far this year. So, yes, huge. But I feel like people got maybe a little bit overexcited and the estimates on Friday were inching up.

18:54And I was hearing even$130 million opening weekend. So not quite as high as some were hoping, but still a record setter for sure. But it was a good weekend for Taylor. She was all over the place. She was in New York. Didn't she do Saturday Night Live? She had an appearance on SNL. This film is going to be in theaters for another three weekends. And also remember, they already pre-sold$100 million in ticket sales. That was as of a week before it opened. So a lot of that is for the theaters in the coming weeks. Yeah, Travis Kelsey got the door for her. It was very nice. It was all very nice. Young love is a nice thing.

19:32Julia, thank you very much. It says let's trade it, Dan. I don't know what we're supposed to trade here. Are we going to trade Kelsey? I'm a Swifty. There's no doubt about it. My daughter, Ellie, she's all over it. She converted Alex. My other daughter. No, I'm all in on it. Let's talk Snap for a second. Let's talk Snap. So I think it's important. Okay. So these are Evan Spiegel's stretch goals. Okay. And I think there was a lot of analysts who were out by saying that, you know, the stretch goals that he put out last year at this time, they didn't achieve too many of them. I do think, you know, again, it's aspirational to get near of a half a billion daily active users.

20:06There aren't too many other platforms that have that right there. And so, you know, listen, the stock is hated by the street. Just look at the way it's traded. OK, look at how many analysts rate the stock a buy. I think less than 20 percent or so. There's short interest nearing 10 percent or so. So, again, if any closer to like kind of, you know, profitability and they hit more of these goals, it's a cheap. It's a 16 billion dollar enterprise value. You know, so if you believe in some of the stuff that Elon's been saying about what he's going to be able to do with Twitter, X advertising. That's really the key here.

20:36And Julia just mentioned we're talking about a half a billion dollars of revenue next year. That's X advertising. That would be a good sign for this company. It will shock all of you that I'm not a Snap user. I'm sure just looking at me, you would say, that guy's a Snap dude right there. Oh, Snap. Totally Snap. Oh, Snap, yeah. What is the non-advertising revenue that they have? I don't— Subscriptions. Subscriptions to what? Well, I mean, to news, there's a whole— They have their spotlight. You know, they're trying to monetize spotlight. They've had this DR ad tech upgrade. I mean, look, the story here is that analysts have been downgrading this company into whatever this whisper was.

21:13By the way, these whispers sometimes are not an accident. But, you know, the point is that the stock trades under three times price to sales. And at its peak, I don't know, how high was it, Dan? Over 10. Yeah. And so, I mean, you're out of place. But it's about profitability. They didn't make money. They lost a little bit of money this year. So, you know, where are we going to be on EBITDA in 24? I mean, those are numbers that, you know, the street, I think, is probably taking the pessimistic road. And obviously the stock reflects that. Folks at Snap should be calling you any minute now because they if you're on that platform, they need the influence.

21:45And I don't know who Katie is, but they need the influence. Pinterest, as you know, because you visit, I have a page. I was an early Pinterest user, but they report, I think, on October 30th. They their analyst day, the end of September, it went very well. The stock was higher. a bunch of upgrades in the name. Piper Jaffray or Piper Sandler just did channel checks suggesting things would be pretty good. You know, you're talking about 30 %-ish EPS growth for a company trading at 25 times. It's not outrageous. And you also have some activists sort of snooping around. So I like Pinterest in earnings on the 30th.

22:17All right. All right. Snap, I'm here. Call me. All right. There's a lot more fast to come. Here's what's coming up next. Could crypto winter finally be thawing? The big move in Bitcoin. and what Kathy Wood had to say about a potential ETF. The details ahead. Plus, yearning for earnings? We've got you covered. Banks, streamers, and more. How traders are playing the names on deck. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

22:52Many people think the fact that the Fed, I mean, the Fed, the SEC chose to ask questions is a change in behavior. And therefore, I do think hopes are rising that a or a number of Bitcoin ETFs will be approved. That was ARK Invest CEO and CIO Kathy Wood earlier today on the SEC, potentially approving a Bitcoin ETF. The cryptocurrency surging almost 6 % today after unconfirmed reports that the commission had approved BlackRock's application for a spot Bitcoin ETF. This is driving Bitcoin, Bono. It is. And another leak. It seemed to be a leak that was taken down. But yes, I mean, I think it's a matter of time before you're not only able to trade futures and options on this thing, but you're also able to trade the spot.