As Goes Apple, So Goes the Market? And a Chart of the Week That..Went Nowhere? 8/4/23

0:02Right now on Fast, a late day sell-off on Wall Street, sending stocks to the lows of the week. The Dow and S &P is snapping three-week winning streaks. What caused the reversal? And what's it mean as we head even deeper into earnings season? Plus, an energized trade. The oil services ETF hitting its highest level in more than four years. The sector's biggest names far outpacing the broader markets this week. But is there more fuel left in this rally? The chart master is on the case. And later, our chart of the week, a group that had a lot of downs, a lot of ups, and ended up almost where it started.

0:31Why these moves, though, caught our traders' eyes. I'm Melissa Lee. This is Fast Money. We're live at the Nasdaq MarketSite on the desk tonight. Bono and Eisen, Courtney Garcia, Guy Adami, and Steve Grasso. And we start off with stocks sliding into the weekend, dropping sharply midday to close near their lows of the session. The sell-offs seemed to be sparked by Apple, which took a big leg lower at about 2 o 'clock. The world's biggest company closing the day down nearly 5%, its biggest loss since last September for the week. The Dow was down over a percent. The S &P 500 and Nasdaq both more than 2%.

1:02These indices each posted their worst weekly performances since March. Meantime, the VIX, it rocketed higher. The FIRA index bouncing on the week, closing above 17 for the first time since May. So is this a case of as goes Apple, so goes the market? What can investors expect as we head into another week of a busy sort of consumer-based earnings report? Courtney, what do you think? Yeah, well, I think when it comes to Apple today, you saw Apple traded lower around 2 o 'clock and so did the markets. And when you look at like the S &P 500, Apple is the largest holding. What's happening today is Apple was not doing well.

1:34Amazon actually was doing fantastic. But Apple's about more than twice the weighting of Amazon, which is why the markets are going to take the lead there. That's not even to mention the fact that Berkshire Hathaway, which is also one of the largest holdings, also owns Apple. So the markets are really overexposed to this, and that's what you're seeing a trade on. I think that's something we're always cautioning advisors. Make sure you know what you own because Apple is such a large holding in many different mutual funds and exchange traded funds. The markets are going to trade lower on that news.

2:02Clearly, investors are not liking what they saw with Apple yesterday. And so it's taking the markets down with it. Yeah, I tend to agree. I mean, we've spoken ad nauseum about the concentration of these big five names. And to your point, Amazon, while it's half of the waiting, had twice the move to the upside. Right. So you expect that to you expect to find a little bit more equilibrium there. But there's a few other things that I think are kind of like undertones of the market. Just look at the rate volatility that we've had, like from four to four and a quarter, back to around four. I think any time you're starting to see those type of oscillations in the fixed income market, it's just a matter of time before you start to see them translate either into equity moves or implied equity moves, which is why we saw the move in the VIX.

2:39Were you surprised, Guy, by this move in Apple here? Well, I mean, it's going to sound somewhat, I don't know. No, I wasn't surprised by it. I'm surprised it's not lower given the run we've had. I mean, now it's three quarters in a row. They told you next quarter is not going to be particularly good. It's a stock that's been trading mid to high single digits, both EPS growth and revenue growth. It's afforded a huge valuation, maybe deservedly so. It's also a company that's clearly slowing. It's not an indictment. It just happens to be fact. And given the run that it's had, you know, I thought it could have actually been worse today.

3:16So let's break it down a little bit. 179-ish was that prior all-time high from, I think, December of 2021. But the real level, I think you've got to start to flag, is sort of 161, which would be a 50 % retracement of this all-time high we made seemingly a week or so ago, right to Steve's level at 200-ish. And that low we saw a few months ago, sort of that 124 low. That makes sense, and that would be healthy, given us. And to Bonham's point and Courtney's point, Apple is in 347 ETFs. Apple's one of the top 15 holdings. So it's great on the way up. It ain't great on the way down. Yeah. And if guidance holds for the current quarter that Apple gave last night, then it would be the longest streak of revenue declines in two decades.

4:00So for a stock like that, Grasso, do you want to pay 30 times forward? No, but, you know, to give you the bullish part of this, because, you know, Guy laid out the levels pretty well. The 50-day moving average is 187. We already blew through that. Look for the 100 day, which is 176. And I think guys, right, you could you could have this thing retrace pretty far down, maybe even to the 150 level, because everyone's looking for September. Remember, let's look at the new products. Let's look at what it is going into Christmas and how that ramp starts for the next iPhone. The glimmer of hope for the stock, or I should say the silver lining, is services.

4:46That's growth. That's where growth should be. So you want to see, in a perfect world, you want to see the stock migrate from a hardware company to a services company, and they've been doing that. But unfortunately, the stock. Go ahead. Go ahead. I'm sorry. You finish. Does it retrace? And I guess it's a question for you or Guy, but since I'm talking to you right now, Steve, does it retrace independent of what the broader markets do? It is the broader markets. As Courtney Bono and Guy said, the weighting is significant. And Guy brought up the interesting point of how many ETFs that Apple takes the place in.

5:27So it triggers buying and selling. So if it does retrace, if Apple retrace, it drags the market down lower. But I will tell you that with all the things that the market has been fed this week, the performance has actually been pretty good, in my opinion. Yeah, and the performance of an Amazon may look even better. I mean, that 8 % pop in today's session, this is in spite of rates that have gone above 4%, right? I mean, what we thought would be kryptonite to these particularly high multiple stocks like an Amazon, Courtney, still didn't deter Amazon from gaining. Yeah, and I think that's where what you're seeing with investors is they're really assuming that rates are probably going to start to come down here at some point in time.

6:10So, yes, we saw this spike this week with what's happening with the U.S. government. But I think realistically, at some point in time, you're going to see rates stabilize if not coming down, which is a good thing for risk assets. And that's why you're seeing this risk appetite is increasing here. But Amazon, I mean, they just pure and simple. They had good numbers, too, which is definitely going to help the case. Yeah. Was it overall good price action or I mean, how do you assess the markets given all that we've gone through this week, Bono? Let me try to be even keel here. I mean, you know, I have a slightly bearish bent.

6:41I think that given what we got from Fitch, I think that's kind of being swept under the rug. And they came out and kind of elaborated and essentially said, listen, this isn't about economic soft landing, which I think tends to be the focal point of investors right now. This is about is governance in place that allows the U.S., which is the prime credit rating, to operate as it has been into the next three to five years. And I think that that's actually worth mentioning. I mean, you kind of look at that. I mentioned the rate volatility and I mentioned VIX. you are starting to see undercurrents of volatility.

7:13And to me, that is like the first trickle that you see before you start to see more exacerbated market moves. So yes, I think on the margins, earnings have been quite positive, but I would also argue that expectations have been wretcheded down quite significantly. You see a move like Amazon, I would argue out of the big five or seven names, that was probably the name that people thought was the most susceptible to a downturn. And that's why the price action was the way that it was. You have a name like Coinbase. Again, a lot of negative news. Anything that's like moderately positive, you start to see that name kind of trade higher.

7:43But the rest of the market, I think there's been a lot of positive news baked in and a lot of things around the macroeconomic situation that I think have come out positive. Now, I think once we get through these earnings season, once we get through these earnings season, it starts to be another focus on the macroeconomic situation. And while it seems that we have kind of come to a Goldilocks event, if the Fed pivots, if you look at Fed Fund Futures, I think they're implying like an 85 percent chance that they don't do anything. What happens if the Fed comes out hawkish in September? I think we might be in for a not so pretty back half of the year.

8:16Right. And just quickly, Guy, I mean, the jobs report today, it's sort of like it was in the eye of the beholder. There's certainly enough information. There's a wage growth, wages being solid that could give, you know, a factor into the argument for the Fed to be hawkish here. You see what you want to see? I mean, depending on your dogma, depending on your stance, I mean, you could view this as very bullish or very bearish. I get it. I think you bring up a great point. And I think Bono hit a nail on the head. I mean, this is a Federal Reserve that I think sees what's going on. And we're going to talk about energy in a second.

8:46So I don't want to sort of skip to that. But inflationary inputs are on their way back up. And I'm one of these people that think inflation is going to start to reaccelerate in the back half of this year, which we're on the precipice of, which, again, makes the Fed's job more difficult. To answer your other question about the price action, I guess you could say it was OK. But the reversals today were pretty significant. And again, you know, in terms of Amazon, which basically held everything up in terms of just proportionally, stock traded three times the normal volume. As we pointed out last night, it traded up to the level that we broke down from last August, 141-ish.

9:22So just something to keep in consideration as we head into next week. All right. Meantime, heading into next week, we've got a lot of earnings on deck. And maybe the one that we'll focus on tonight is Disney. That's going to be a big one. Steve Grasso, how do you think we set up for this? yeah i mean this trade has been so telegraphed and and you're waiting for you you know how how traffic has been a little lackluster to say the least they've had their network issues i'm not currently long the name i feel like everyone had the chance to you know sort of play that bottom i was one of them and it didn't work out parks are not coming back anytime soon they were at the pandemic or at or around the pandemic low.

10:04This stock is priced for another pandemic. I can't see a worse scenario or setup in the stock price where it should be bouncing and it never seems to bounce. So maybe, maybe expectations are so low that they're good, but I'm not in the name right now. So that's my indication. We got Tom Sachs and Kevin Mayer back in as consultants, Courtney. I I mean, you think that maybe this could pave the way for some decent news or maybe at least the clearing of the decks in terms of the bad? Yeah. Yeah. And I think this is when it comes to Disney, we're going to have to really see how things play out. But especially, too, they're really going to have to see what's happening with streaming.

10:43Specifically, ESPN, I think, has been a big hot spot for them. And if they can further monetize that, I think that's going to help them out. And I think if they can do anything in earnings there that's going to help them, that's going to be great. But I think we're really going to have to see how they report. All right. Meantime, let's get to oil because it does seem like it's on the mend. The OAH oil services ETF up more than 17 percent in the past month, touching a level today it has not seen since April 2019. But can the sector pump higher? Let's bring in the chart master, Carter Braxton Worth of Worth Charting.

11:12Carter, what's your take here? Yeah, pump higher. I guess I'm in that camp. Let's look at a few charts and figure it out together. So first, let's look at crude. We know that we have the Ukraine invasion crude prints 130 a barrel. And remarkably, Wall Street puts out price targets of highest 250. It's a classic example of go the other way. We dropped 50 percent. And just two months ago, we're down at 65. And Wall Street started saying recession. We're going to 40. Well, take a look at the next chart. That level that we dropped to, look how precise those lows are. 63, 63, 60, over and over. And rather than dropping to 40, of course, it ricocheted, moved above the downtrend line.

11:55And I have an arrow there for a reason, because I think it's got more room to run. But as to energy stocks, two charts coming up, the first is a ratio chart. And this is simply XLE divided by SPY. And what it depicts is a relative strength line. And that line is turning to my eye. And I think we have more relative outperformance to come. In terms of XLE itself, final chart, well, that's a pretty straightforward uptrend. It's bounced off that uptrend line to the penny over and over. And now, more importantly, it's just about to move above that downtrend line since the peak. Converging trend lines, I think we move higher.

12:38What's the next level you see in WTI higher, Carter? Yeah, why not? We're sort of mid-80s. Why can't we get into the high 80s? At some point, of course, you'll be stretched and you will need to check back. But note this, that crude adjusted for inflation is the same level, essentially, it was 25, almost 30 years ago. Carter, thanks. We'll see you in a few minutes on Options Action. Carter Braxton, worth charting. Guy, you like these oil stocks here? Yeah, well, yeah, you know that I do. I mean, as I've mentioned in my mojo, two of the O's are energy stocks, one the OIH, the other Oxy. And I'm with Carter on this.

13:16You know, OIH made a multi-year high today. I mean, these things have this stealth rally that we're starting to talk about correctly. Valuations are still compelling, and they just better run companies. So oil can go sideways in this environment. I think they still go higher. And we're not even talking about potential weather in the back half of this year that are going to unfortunately help the refiners, names like Valero, when we start getting into hurricane season. So yeah, I think in the back half of this year, energy is going to surprise to the upside. I mean, there's potential weather and there's a potential big stimulus out of China, which we haven't seen.

13:50Not sure if oil has captured that. It certainly has captured, though, Steve, the notion of the soft landing or the no recession sort of view that Wall Street has increasingly adopted. Definitely. This year for me is I think that crude, to Carter's point, could probably rally to$100 a barrel. So that's a big move. I don't think the equities, the equities, I think we've seen the biggest move that we will see in those names. In the OIH, Schlumberger and Halliburton are an outsized percentage of that. XLE, Exxon Mobil and Chevron are an outsized percentage of that index. We haven't really heard spectacular fundamentals out of Chevron or Exxon Mobil.

14:35So I'm more bullish on the actual commodity than I am on the stocks this year. All right. Coming up, the UAW has laid out its demands for the big three automakers as the two sides try to hammer out a new labor contract. What the workers are asking for and what it could mean for the manufacturers. That's next. And later on options action, a consumer health check. We're digging into what the markets are expecting from Disney, Ralph Lauren and more. More Fast Money is back right after this.

15:07Welcome back to Fast Money. The UAW ramping up its demands from automakers, pressing for a 40 % pay increase ahead of the September 14th contract negotiation deadline and meeting resistance from the big three for more on the likelihood of a labor deal. Let's get to Phil LeBeau. Phil. Melissa, this is a starting point, but boy, what a starting point for the UAW. You mentioned a 40 % increase in pay. Here's how it would shake out a 20 % signing bonus when the contract would be ratified, and then the UAW wants a 5 % raise per year over the four-year life of the contract. They also would like the members to work 32 hours instead of 40 hours a week.

15:46Make the adjustment on the hours comes out to a 46 % pay increase. In justifying the request or the demand for a 40 % increase, the UAW said the CEOs of the big three saw their pay rise 40 % on average over Over the last four years, we believe UAW members deserve the same, if not more. As you can imagine, the big three don't exactly agree to this. In fact, when I've talked with a few people, they've said, this is nuts. It's not going to start at that. By the way, if there is a strike, this is what it would cost an estimate of what it would cost each of the big three per week. Up to$770 million for General Motors,$470 million for Stellantis.

16:27By the way, that comes to us from Bank of America. as you take a look at shares of GM Ford and Stellantis. Keep in mind that the contract, it goes through periods like this where you will see a big demand from the union and then pushback from the automakers. We know that they're not going to get a 40 % raise, Melissa. But compared to where I've seen them start in the past, this is way up there, which tells you it's going to be a costly and it's going to be a contentious negotiation, which is what we've been expecting for some time. Phil, just to clarify, though, they get a 20 % signing bonus, which is a one-time payment.

16:59And then the 20 percent increase is the recurring part of the of the picture. So it's really not a 40 percent increase. Yeah. Yeah. It's not 40 percent overall. But but that's how you get to the 40 percent. Right. Got it. Phil, thank you. And just so you know, Melissa, real quick, just so you know, Melissa, there are signing bonuses in the past, but they're not 20 percent. They're usually 10, 11,$12 ,000. Yeah, it's quite a starting point there. Phil, thank you. Phil LeBeau. Guy Dami, even if they meet in the middle here, right off the bat, it's still a big increase. Exactly. And it speaks to, I mean, we can talk about the individual stocks.

17:38It's not necessarily about that, I don't think. It's more about the problem. Think about this. How inflationary is that? Now, this is just sort of anecdotal. But we've seen this now across a swath of different industries and different unions. And it speaks to this sticky wage growth that the Fed is clearly trying to combat. They're swimming uphill, which, again, is one of the reasons I think they're as hawkish as they are. And I think one of the reasons people are underestimating how sticky inflation is. Teamsters, auto workers, writers, actors. It goes on and on, Bonoan. Yeah, I mean, to kind of take a page out of Guy's book, you know, you're talking about like the wage growth.

18:19We saw it come in. I think it was about 10 basis points higher, I think, in census. And then this just speaks to that. So, again, I think that we are kind of putting the cart before the horse in terms of saying definitively that the Fed is done with this inflation fight. With that said, you know what, I think if I have to pick one of the names that I think this actually bodes positively well for, it's Tesla because they still have that pricing pressure. And that's the lever they've been using. So until they're able to kind of deal with this, I think that Tesla still kind of ends up winning in the short innings.

18:53All right. Coming up, it is Friday, so you know we've got a chart of the week for you. And the move in this group over the last five days seems a bit surprising, given how the rest of the market has played out, what it means and how you should play it. That's next. You're watching Fast Money live from the Nasdaq MarketSite in Times Square. We'll be back in two.

19:16Welcome back to Fast Money in our chart of the week. Now, we usually pick a stock or sector that had a big move, either higher or lower, during the week. But today, we're looking at a group that's basically been flat since last Friday. It is the homebuilders, up more than 0.5 % today, but down less than 0.5 % since Monday. The action intrigued us, especially given how much higher rates have moved over the same period. The 10-year yield topping 4.2 % today for the first time since November before pulling back here. Mortgage rates, by the way, also went to a record 7.2 % on the 30-year fixed. Guy, you flagged this one.

19:52Yeah, which is why I think the sector is so confused. Typically, you see price action like this at bottoms or tops. So you saw outsized moves in Pulte Homes, Toll Brothers, DHI all week long. And we've been bullish collectively on the home builders. But weeks like this, when you see that type of action, has to give you pause. So I'm not going to make a huge deal out of it. But I think next week, directionally, is going to tell you where the next six months are going to go, Mel. Oh, see, it's funny because I didn't I wasn't on the call in the afternoon because I was on the halftime report. But I would have thought you would have said this actually shows good price action because the stocks held their own despite the rises in rates that we saw.

20:34Fair. And I could you can make that argument. Sorry, I'm going to jump in again, but I'll say this. You know, we saw at least three times this week, five to eight percent move in these underlying stocks, both up and down. And again, historically, you know, that that is so a bit of a bottom on the downside or a bit of a top on the upside. Just something to watch in the next week. Yeah. Quickly, do you like homebuilders? I absolutely do. Yeah. And I think the higher that rates go intuitively, we would think that that's a bad thing for homebuilders. But really what's happening is everybody who owns an existing home, it's more and more people who aren't going to sell their homes.

21:06And so it's making the supply and demand issue worse and worse, the higher that interest rates go. which to put this in perspective since 2012 there's been five million more households created than homes built now nobody's selling their existing home so the higher rates go yeah the better it is for home builders especially some of your lower like entry point ones like a dr horn all right it's time for final trade on this friday let's go around the horn steve grasso amd out of earnings extremely volatile price action i think the back half of the year is going to be incredible for them i am long once again amd guy dami we're all wishing courtney and her family the best as she goes on maternity leave.

21:42OXY, Melms. Yes. Courtney. Thank you, guys. I'll see everyone here in December. I'm leaving for maternity leave. But in the meantime, Caterpillar is my final trade. I think a lot of the fundamentals here, when you look at the bigger picture economy, are leading up to help Caterpillar. I think it's going to continue to do well. Monowen. That's up to Courtney and her family. Yeah, I still think EM has room to run. We've talked about crude. I think if that actually goes positively, emerging markets are where you want to be. All right. That does it for us. Good life. Courtney, options, actions up next.

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