An Apple-Led Rally, and Trading Berkshire’s Bets 5/5/23

0:01Right now in fast a rally on the street to close out the week. The Nasdaq powering higher by more than 2 % led by Apple, which added nearly$130 billion to its market cap just today. But is this just a one-stock rally, or is there broader strength here? In more trouble from First Republic, the SEC reportedly now looking into how company execs traded stock in the shuttered bank. We've got the details on what they're looking for. Plus, getting energized. Oil stocks are some of the worst performers in the S &P this week. But the chartmaster says the space is about to turn a corner to lay out his case.

0:33I'm Melissa Lee. This is Fast Money. We're live at the NASDAQ Market Sight. on the desk tonight. Bono and Eisen, Guy Adami, Tim Seymour and Jeff Mills. And we start off with Apple's big post earnings pop. The stock rallying more than four and a half percent today for its best stay since November. Shares now up 34 percent this year. They closed just three percent from their all time high hit in January of 2022. Apple's move helping power the broader markets higher. The Nasdaq surging more than two percent. The Dow posting its best gain in four months. But is the rally all about Apple? Seems that way, Guy.

1:07Yeah, well, I mean, if you listen, the quarter is fine, but declining revenues, again, it's what you're willing to pay for a stock that seems to be slowing down in terms of growth, which makes a lot of sense. It's not an indictment on Apple. It's just in terms of valuation, probably trading close to 27 times next year's numbers. I think the stock buyback helped now that there are bank clear that help. And I think the fact that as much of a disastrous Qualcomm was, people said, wait a second, Apple's going to fall victim. They probably got themselves off sides. Apple proved to be resilient. And that's what we're seeing today.

1:39Traded two times normal volume. It's a great reaction. It's a wonderful company. It's an expensive company in this environment. But maybe it should trade at a premium because it is a defensive nature that it has in this kind of market where people are looking for relative safety. We mentioned this last night. Would you rather pay? This is not a would you rather. But would you rather, for instance, pay 27 times forward for Procter & Gamble or about the same for Apple? in this market environment, Bono. And that's the kind of choice investors are making right now. Yeah, I mean, I think there's a lot going on, right?

2:11So there's one thing that actually was a flag to me. You saw that there was a bit of a challenge in the mobile gaming and digital advertising, and that speaks to the services revenue. And that's really what you point to when you say that this company deserves a premium multiple or a re-rating, if you will. But aside from that, I think, you know, 3 % declining revenue that they've been pretty transparent about, it's not necessarily about their quarter. It's about what their quarter is and the moves that they're making vis-a-vis what's going on in the macroeconomic environment. Guy mentioned them essentially being a bank now.

2:41They're offering, what is it, four, four and a quarter, four and a half percent. When you're seeing deposits flow out of regional banks, I think some of that is just circumstantial margin of safety. And they are still showing resiliency in that iPhone. If it's not here, it's international. So you have all of that breadth coupled with what's going on here that gives you concern. And it's a flight to safety trade. Yeah, they're talking about growth. Can you imagine in this environment, Tim, they are talking about growth in the emerging markets and developing countries, places like India, Indonesia, Latin America.

3:13I mean, that's all they're finding growth somewhere in this world. Well, and Tim Cook had a big, you know, India discussion and trip recently, and a lot of analysts got on board and there were upgrades on that alone. So Guy's right to point out, I just think the offsides nature of the Qualcomm, who's going to be down 20 percent in the March to June quarter, and Apple's going to be flat. So part of it is that. Part of it is their pricing power. Part of it is they are taking market share in growth markets, and they're taking market share in all markets. And don't underappreciate the financials of the company and the dwindling share count.

3:48And don't underestimate the fact that this also is is coming on a day when. OK, so those are their numbers. A day when we have a payroll number, hourly hourly earnings are better than expected. You have a Fed that largely told you they're on hold. They're not cutting anytime soon. But this is a backdrop for a market that now has leadership from Apple and Microsoft and NVIDIA. These are the biggest companies in the world. And so it's market friendly as well. I think part of this move today is not just Apple. It's obviously the entire market went higher. But but I think there's yeah, we had a day one we had even the first post Fed.

4:24And then the next day we we digested that and markets arguably were concerned there's not enough cut language in there. The Fed's on hold. Rates have probably peaked. Inflation has probably peaked and people are underinvested, underpositioned. And sentiment is still not good. That's why you got what you got this week. I don't know. Barclay said something yesterday in a note, or maybe it was the day before after the Fed met, to the effect of, you know, if the banking crisis seems to subside just a touch, if earnings continue to come in decently, if things are sort of settling down and the economic data come in a little bit better than expected, that could really pave the way for a June hike.

4:59So when I saw the numbers out this morning, Jeff, I didn't necessarily think that this would be market friendly if the perception is another hike would be bad for the markets. Yeah, I think, and we've talked about this a number of times, but we should be in a mode right now where good news is good news. If we're looking at a rate cut in July or sometime in the fall, this is a problem. Obviously, we don't want the Fed to run too far too fast. But at the same time, I would rather see good labor market data than not. And I know maybe people might say, well, you're just looking for places to be negative about the labor market.

5:35but I am looking at certain leading indicators as far as the employment picture goes, whether it's small business hiring plans, whether it's the challenger job cut survey, whether it's temp worker employment, which is a nice leading indicator, which was a little bit weak. So my guess is the labor market does continue to weaken. We see claims continue to rise and the Fed is able to pause. But my question is, does that matter at this point? Has the Fed already done too much? Is it too late? And are we going to see that weakening economy as we move through the rest of the year? And then what does it do to some of these earnings that have looked fairly positive?

6:07I'm looking at the leadership, the complexion of what's going on right now in the market. I've talked about some of the industrials, CAT, URI sort of breaking down, copper versus gold, so gold perking up again. And then this two-year yield that is now well below the Fed funds rate, and you usually see defensive leadership when that happens. The bond market starts to anticipate a cut. So look, this is all good. Apple's earnings were solid, but I still see things under the surface that make me think that the equity market's going to have a hard time moving significantly higher from where we are today.

6:38This is my interpretation of today. And we play this game from time to time. If I had told you... So you're so in my head because I actually was thinking the same exactly... No, you were not. You're lying like a rug. Like five minutes ago, I was thinking the same thing, but laying out the game. Okay, go ahead. No, no, you go ahead. It's your show. No, no, no. If I told you that Apple was going to report these earnings, and the jobs numbers were going to come in where they were. What would you think the market would have done? S &P is down 60 handles. Without question, what was the number? 250 ,000 jobs, people on a 170 handle.

7:10Unemployment rate stays the same. I'd be like, what are you, the market's going to get crushed here. I mean, we're setting up for a move to the downside because the Fed's still behind the eight ball. That clearly would have been wrong. What's the interpretation? Try to figure out what the market says. The market says, wait a second, Fed's done. Employment market looks great. Maybe we're going to navigate our way through this entire thing. Soft landing. Oh, please. No, I was in such a good mood today. I know. Please don't do that to me because I can't play that game right now. Maybe on Monday you can do it.

7:38On a Friday you can't. But that's clearly the market interpretation. I am not in that camp, but that's what the camp was today. All right. Meantime, the SEC reportedly opening a probe into executives of failed First Republic Bank. Eamon Javers joins us with the very latest. Eamon. Hey there, Melissa. That's right. Bloomberg out with that report this afternoon, citing two sources familiar with the matter. According to the report, the regulatory agency is investigating whether any of the executive team members at First Republic traded on inside information prior to regulators seizing the bank and selling it to J.P.

8:08Morgan back on Monday. Now, the news comes after Senator Elizabeth Warren sent a letter last night to the former CEO, Michael Roffler, demanding answers about the bank's mismanagement prior to its collapse. Senator Warren telling the CEO, you owe your customers and the public an explanation for the decisions that resulted in the costly failure of your bank, the extent to which you lobbied against rules that could have prevented this failure, and the extent to which you and other bank executives profited even as the bank teetered toward collapse. Now, despite the attention on First Republic, regional bank stocks did manage to rally today after this tumultuous week.

8:45shares of PacWest, Zions and KeyCorp all ending the day with double digit gains. Melissa, back over to you. Eamon, thanks. And we'll see you tonight. You're hosting Last Call tonight, 7 p.m. Eastern time right here on CNBC. I'll be watching, that's for sure. What'd you make of this bank rally, Bonoan? I think it's just honestly a gut reaction or reflex reaction to yesterday. You know, if you really look at the market and you look at all of the economically sensitive type of stocks, whether it's transports, Russell 2000, energy, banking, it all kind of bounce today on a lot of the reasons that Guy kind of pointed out.

9:19And if you kind of couple that with yesterday's move, it makes sense that you might see people try to step in and, you know, like scalp a little bit on intraday type of trading. With that said, I think that's very different than what's going on with First Republic. I'm not one to kick people when they're down. I think you should wait until the information comes out before kind of pointing fingers and rushing to judgments there. We should also note that J.P. Morgan upgraded Western Alliance, Comerica, as well as Zion to an overweight, saying that so many people are on one side of the boat. It's only going to take just a tiny bit.

9:50We say this all the time, Tim, right? It just takes a little bit to move from a really terrible situation to a bad situation. That could mean tremendous upside for these stocks. Is that the case, do you think, here? Do you see that window of opportunity? I think you have to be careful. I think you should manage your downside. I think you should understand what risk you're taking. But PacWest up over 80 percent today. There you go. I think a lot of this move this week has been technical. Actually, we got earnings from banks. We got deposit reports that said the March to April period in the Q1 was actually stable on deposits.

10:23Deposits could leave at any time. And so that's the problem here. That's why I can't tell you that it's over. I can tell you that I think regulators are going to come up with something. But I think on a valuation basis and on a positioning basis, maybe this is a slightly more struck something a little stronger than what Bono just said. Hey, you kind of had to see a bounce here. I actually think that one time's price to tangible book is a covid bottom is a GFC bottom for these banks. And while I can't tell you that tomorrow there couldn't be a headline that triggers another run, I do think that this is not necessarily fundamental.

11:06And therefore, I think you've had a week where you've had a chance to listen to a lot of these banks. And I think PNC is a good example of a lot of strength where I'm not necessarily saying you have to race in and buy that. I'm not worried about that bank. All right. Coming up, Perkshire's bets. We're digging into the biggest names in Warren Buffett's company portfolio. Is the desk siding with the Oracle of Omaha, or is it time to shed these stocks? And later on in Options Action, silver linings, a precious metal hitting its highs of the year this week. How you should play this run. Fast Money's back in two.

11:42Welcome back to Fast Money. You're looking live at the event known as Woodstock for Capitalists. Berkshire Hathaway's annual shareholders meeting is underway out in Omaha, Nebraska. The company will report earnings around 8 a.m. tomorrow morning, and we are bringing you special coverage of the results in all this weekend's events, including insights from Warren Buffett and Charlie Munger. Tune in to CNBC and CNBC.com beginning at 9.45 a.m. Eastern Time tomorrow for wall-to-wall coverage. And speaking of, here's a look at some of Berkshire Hathaway's top holdings, Apple, Bank of America, Chevron, and, of course, Occidental Petroleum.

12:14Should you be betting with Berkshire on any of these names? Jeff Mills, what do you say? So I talked about this during my final trade yesterday. I said I was capitulating on energy here a little bit. Looks sort of dumb today. But if you look at the charts of Oxy, Chevron, to me, they don't look great. We'll hear from Carter in a little bit. But if you look at the oil futures curve, sort of pointing to additional pressure on the commodity, maybe that's pricing in some of these mistakes by global central banks, the deteriorating demand picture. I'm not totally sure. But I mentioned Exxon yesterday.

12:46sort of the last chart standing there, Chenier holding on for dear life. So I'm just looking across the energy complex, you know, Oxy and Chevron included, and I'm just not feeling great right now. But, you know, potentially I'm giving up at exactly the wrong time. It wouldn't be the first time, but not feeling good about those particular holdings at the moment. Yeah, Tim. American Express is the one that I think, first of all, if you look at those names up there, that leaderboard, he's had a great year and he's had a great couple of years on some level, especially because how right he got the energy sector.

13:19Now, maybe that's yesterday's trade. American Express has not really been yesterday's trade. In fact, around 145 on the chart, it's a pretty interesting level. I just think global spend is very resilient here. If you look at what they missed, they reported, and some of that was just a one-off OPEX provision. But I think the revenue momentum continues very strong there. So that's one of those names that I think has actually lagged and underperformed and is one that looks very well positioned here. What do you think is going on with the Bank of America? Well, I mean, it's two year lows. It's yeah.

13:50Multi-year lows in Bank of America has not traded well, trades at a trough multiple compared to some of its rivals. Clearly, I think they're concerned about the consumer, what's going on in the real estate market, all those different things. Can they compete in this environment? And who knows? I mean, where there's smoke, there's fire, because it's been an underperformer for quite some time. So I understand why Warren Buffett would own it. On valuation alone, it's worth it. It's an incredible franchise. but the stock hasn't traded well. Occidental Petroleum, my other hand, I think they own now 22 percent of the company.

14:19You know that stake's going to continue to increase. The stock has been flatlining for a while, but I do think it's pretty interesting here. All right, let's dig into that holding, Occidental Petroleum, one of Berkshire's biggest holdings, in fact, pumping more than 3 percent higher today, along with the rest of the sector. But even with today's gains, energy is the worst performing S &P sector this week. So where does oil go from here? Let's bring in Chartmaster Carter Worth of Worth Charting. Carter. Well, that's right. I mean, think today, sector-wise, energy was the best, but did very little to repair what is a bad week.

14:50I think Jeff really hit on it. We've got a circumstance on a near-term basis where many of these charts have a rollover characteristic. But first, let's start with crude. Crude has had this sort of epic bull-bear period. We know of two years ago, it was a trend late trading at$65 a barrel. It doubled, obviously related to the Ukraine invasion, and it gave it all back. But the important thing is where we're sort of now in relation to where we've been. Look at the next chart, which is the same thing, but the annotations are different. These are well-defined lows, and energy probed those lows. Energy collapsed this week.

15:28Oil went right to those, and we got a vigorous bounce. I think that's intraday, very bullish price action. My hunch is to be long WTI crude here. But energy stocks, final chart, this is the XLE. And so this is the circumstance. We do have a lot of, again, stocks that have taken on a rollover cast, just as Jeff is intimating. And that is worrisome day to day. What offsets that to some extent is that we are down to a well-defined trend line that's been in effect since the COVID low. My hunch is that they're a little overdone and that we will get a bounce, generally speaking, in the energy complex.

16:06Carter, thanks. We'll see you in just a few on Options Action. Carter, Braxton, Worth are worth charting. Bonman, where do you stand on energy stocks? Yeah, so listen, I think that's an interesting setup. And Jeff and Carter both bring up some interesting points in terms of short term. And that speaks to the trading aspect of it. I want to jump to Oxy because I think that's very interesting from an investment standpoint. That is very much a deleveraging recapitalization story. So from an investor standpoint, I think that in particular makes a lot of sense. And I can understand why Berkshire has continued to deploy capital there.

16:35Is this the first or the second O? Does it matter? But actually, if you want to play that game, I believe it's the second O. I believe in Mojo, it was metals, occidental, and then J would be JCI. We determine whether it's. And then the last O, of course, the OIH. I'm with the icebreaker. And I don't want to get too wonky here. Remember, we used to play that other game, Contango or Backwardation. We had the music. Remember that whole thing? We had the video of the people tangoing, and then we would play it backwards for backwardation. Absolutely genius. I mean, if our crack staff in EC, if it wasn't a Friday, maybe they would put it a little too much.

17:12But I'll say this. As crude oil has come lower, you would think the contango would get steeper. The exact opposite is taking place without making your eyes glaze over, which is actually very bullish there, Melms. All right. Coming up, we've got yet another big week of earnings on deck. From Airbnb to Robinhood, the names of traders are watching. We come right back. And throughout May, CNBC is celebrating Asian American and Pacific Islander heritage. Here's a co-founder of Glow Recipe.

17:39It's been incredibly rewarding to build Glow Recipe together with Sarah, my co-founder. We know that female co-founder duos are unique in the industry. and it's been an honor for us to leverage our heritage and be able to storytell around how skincare should be this beautiful, joyful, sensorial self-care experience. My advice for other AAPI founders would be to take up space. Don't minimize your achievements. Don't be afraid to ask for more. Ask often and advocate for your achievements. You deserve to shine.

18:18Welcome back to Fast Money. Earnings season rolls on next week with 29 S &P 500 companies and one Dow component, Disney, reporting results. So which names are our traders watching? Jeff, let's start with you. Yeah, so I am watching Disney. I think it'll be an interesting one. Iger, back at the helm, this will be the first full quarter. So people will be listening pretty intently to what they have to say. I think the chart is interesting, sort of battling at that$100 level. It's really been a battleground for many, many years for the stock. But I think people want to hear about growth relative to profitability.

18:50We saw what happened to Paramount yesterday, talking about spending on additional content. So I think you might start to see a really clear divergence between the companies like Netflix, the companies like Disney, who are able to rationalize that content spend versus all the rest. So I'll be very interested to hear that. And I actually think looking ahead, looking at the earnings growth profile, I think it's a pretty good long-term value here. Bonoan, how about you? What are you watching? Yeah, so I think the employment data today and the price action that we got on the back of that tells you all you need to know in terms of people looking at the consumer and the employment situation.

19:21So PayPal and Affirm are two names that I'm focused on because it kind of will give me some insight into consumer and merchant trends. Affirm particularly, I think that one really is going to be about what interest rates and where interest rates are and how they've impacted demand for the loans from that company, which I think might come under a little pressure here. Tim, I know you're watching Disney as a shareholder. What are you looking for there and which other ones are you watching? Well, on Disney, I think we've gotten a glimpse and a whisper on the profitability on the streaming side that's very important.

19:55I think Disney has more catalyst than people appreciate in terms of their asset base. I'm not saying they're going to be spinning off ESPN. In fact, I think Iger's indicating he does not want to do that. I think they have more than enough cards in a very interesting deck, but I just think the overall strength of the parks business is starting to come to light. I do think that the chart's interesting. I think it's held off some really important levels. Back to energy on Devin. They've been such a big underperformer even before this pullback. Some of this was a very CapEx inefficient guide. Some of this is, I think, related to their asset base.

20:28And I actually think the worst is over there. So I like that. All right. Guy, were you watching? I know you were in Omaha, Nebraska yesterday. I was. It's beautiful this time. Were you watching the show yesterday, and did you catch the final trades? Because the name that you were watching was Dan's... Stop it. Was it Dan's final trade? But he didn't mention it in the show. So it's bad if I say I wasn't watching the show, but I should caveat that by saying I was indisposed. In other words, I was doing something at the time. Not that I wouldn't want to watch the show. Robin Hood! Yes. And you say to yourself, what Robinhood?

21:00You hate Robinhood. I do, actually. But if you look at Robinhood over the last few quarters, revenue is about the same, but they're losing less money each time to the point where they could actually be profitable this time next year. So you have a little bit of an option here in Robinhood. That's what I'm watching on the 10th. Time for the final trade. Let's go around the horn. Tim Seymour. Back to mega cap tech. Cisco has not performed. It's certainly yesterday's mega cap tech. But, again, they report in two weeks. I do think enterprise and spend there is better than people have been expecting.

21:30They price that down and their software business grows. Jeff Mills. Disney, I do think there's value at these levels. And like Tim said, the chart is interesting. Bono and Eisen. I mean, the multiples have already gotten bludgeoned. So I know that there's a tendency to want to step in. But I still think the buy now, pay later space is going to be under some pressure. Affirm, I think it's going to be a challenging quarter. Lockheed Martin has sold enough where you can get back in, Melms. All right, that does it for us. Have a great weekend. Don't go anywhere, though, yet. Not yet. Options, actions, up next.